SETTLEMENT AGREEMENT
BY AND BETWEEN
CPSC INTERNATIONAL, INC.,
COWBOY PIPELINE SERVICE COMPANY
AND
PENN OCTANE CORPORATION
Page 7 of 210
SETTLEMENT AGREEMENT
--------------------
THIS SETTLEMENT AGREEMENT (together with all appendices, exhibits and
schedules hereto, the "Agreement") entered into as of the ___ day of March, 2001
(the "Execution Date"), between CPSC International, Inc., a Texas corporation,
as a Debtor and Debtor in Possession ("CPSC" or "Debtor"), Cowboy Pipeline
Service Company, a Texas corporation ("Cowboy"), and Penn Octane Corporation, a
Delaware corporation ("POC").
R E C I T A L S:
- - - - - - - -
WHEREAS, on November 24, 1998, POC and CPSC entered into that certain
Lease/Installment Purchase Agreement for Two (2) 15-Mile Pipelines (said
Lease/Installment Purchase Agreement, together with all amendments thereto being
herein called the "15 Mile Agreement") for the construction of an 8" pipeline
and a 6" pipeline each approximately 15 miles in length extending from POC's
terminal in Brownsville, Texas to a prescribed location on the Mexican side of
the Rio Grande west of Matamoros, Tamaulipas, Mexico, a copy of said 15 Mile
Agreement being attached hereto as Exhibit "A" hereto (the "U.S. Pipeline");
and
WHEREAS, on February 16, 1999, POC and CPSC entered into that certain
Lease/Installment Purchase Agreement for Two (2) 7-Mile Pipelines and Transfer
Terminal (said Lease/Installment Purchase Agreement, together with all
amendments thereto being herein called the "7 Mile Agreement") for the
construction of an 8" pipeline and a 6" pipeline each approximately 7 miles in
length extending from the Mexican side of the Rio Grande to and including a
terminal in Matamoros, Tamaulipas, Mexico, a copy of said 7 Mile Agreement
being attached hereto as Exhibit "B" hereto (the "Mexico Pipeline"). The
U.S. Pipeline and the Mexico Pipeline are collectively referred to as the
"Pipelines"; and
Page 8 of 210
WHEREAS, on September 15, 1999, CPSC and POC entered into a separate
Agreement (the "Houston Agreement") providing POC three additional options to
purchase percentage interests in the Pipelines; and
WHEREAS, on September 16, 1999, POC and CPSC entered into Amendment No. 2
to Lease/Installment Purchase Agreement for Two (2) 15-Mile Pipelines Dated
November 24, 1998, and to Lease/Installment Agreement for Two (2) 10-Kilometer
Pipelines providing for the substitution of a pledge of 500,000 shares of POC
common stock owned by ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ (the "Pledged Stock") in lieu of the
letters of credit specified in section 3.3 of each of the 15 Mile Agreement and
the 7 Mile Agreement; and
WHEREAS, on December 14, 1999, POC and CPSC entered into an Addendum (the
"Addendum"). The Addendum references and incorporates the 7 Mile Agreement and
the 15 Mile Agreement, as well as the Houston Agreement. Under the Addendum,
CPSC granted POC an option to purchase 50% of the Pipelines together with the
Transfer Terminals (as hereinafter defined) and the CPSC/Cowboy Agreements(as
hereinafter defined) and a 40% interest in any revenues generated by the
Pipelines upon POC's payment of $3,000,000 into an escrow account (the "50%
Option Payment"). Also on December 14, 1999, POC and CPSC entered into an
Escrow Agreement pursuant to which the 50% Option Payment was delivered to Bank
One N.A. as escrow agent into escrow account #83-000-757-01 (the "Escrow
Account"), escrowed to pay outstanding and accumulating expenses associated with
CPSC's construction of the Pipelines; and
Page 9 of 210
WHEREAS, on February 24, 2000, Dr. Lieven Van Reit ("Van Reit") filed a
Petition in the State District Court of Cameron County, Texas, Cause No.
2000-02-843-E and moved for a temporary restraining order and preliminary
injunction to enjoin the operation of a portion of the U.S. Pipeline that was
built on his property, alleging that such construction was a trespass (the "Van
Reit Suit"). On March 14, 2000, POC, CPSC, Cowboy and Van Reit entered into a
Rule 11 settlement agreement (the "Van Reit Settlement") that provided for POC,
among other things, to purchase approximately 477 acres owned by Van Reit in
Cameron County, Texas, as more particularly described on Exhibit "C" hereto, on
which the U.S. Pipeline was built (the "Van Reit Property"). On April 17, 2000,
POC purchased the Van Reit Property in accordance with the Van Reit Settlement
and executed that certain promissory note dated April 17, 2000 payable to Van
Reit in the original principal sum of $1,908,000.00 (the "Van Reit Note); and
WHEREAS, the Estate of ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇, Deceased (the "▇▇▇▇▇▇▇ Estate")
similarly alleges that a portion of the U.S. Pipeline was built on the ▇▇▇▇▇▇▇
Estate's property and constitutes a trespass, and since, following mediation,
the ▇▇▇▇▇▇▇ Estate's dispute has been tentatively settled, subject to closing
the settlement; and
WHEREAS, on March 14, 2000, CPSC filed its voluntary petition under chapter
11 of title 11, United States Code, in the United States Bankruptcy Court for
the Southern District of Texas, Corpus Christi Division, under Case No.
00-020805-C-11 (the "Case"); and
WHEREAS, Cowboy, CPSC and POC have reached an agreement with respect to the
complete and final settlement of all claims against each other that have been
alleged or could have been alleged, whether by lawsuit or otherwise.
Page 10 of 210
NOW, THEREFORE, in consideration of the mutual promises contained herein
and other good and valuable consideration, and subject to the approval of the
Bankruptcy Court, the Parties (as hereinafter defined) agree as follows:
ARTICLE I
DEFINITIONS
As used in this Agreement, the terms defined above shall have the meanings
ascribed above. In addition, the following terms shall have the meanings set
forth below:
1.1 "Acquired Assets" shall mean the CPSC/Cowboy Agreements, the
----------------
Pipelines, the Transfer Terminals, the Facilities, the Permits and the
Easements, together with any and all assets of every type and description, real,
personal and mixed, tangible, ▇▇▇▇▇▇ or inchoate, known or unknown, fixed or
unfixed, accrued, absolute, contingent or otherwise, wheresoever located, and
whether or not specifically referred to in this Agreement, owned by CPSC or in
which CPSC has any rights, titles, interests or privileges, that are necessary
for or used in connection with the construction, ownership, operation,
maintenance, monitoring or repair of the Pipelines, the Transfer Terminals, the
Facilities and/or the Easements, including as-built drawings of the Pipelines
certified by an engineer of qualifications standard in the industry, alignment
sheets, permits, licenses, easements, plot plans and similar engineering
documents, but excluding the Retained Assets (as hereinafter defined).
"Acquired Assets" shall also include any property of whatever description that
is nominally, equitably or legally titled in Cowboy that would be Acquired
Assets under this definition if otherwise legally or equitably owned by CPSC.
Page 11 of 210
1.2 "Action" shall mean any civil, criminal, or administrative action,
------
suit, arbitration, charge, petition, complaint, inquiry, litigation, proceeding
or investigation by or before any Governmental Authority or arbitral authority,
including any class actions or investigations.
1.3 "Affiliate" shall mean, with respect to any Person, any other
---------
Person controlling, controlled by, or under common control with such Person.
For purposes of this definition, "control" shall mean the power to direct, or
-------
cause the direction of, the management or policies of any Person, whether
through ownership of securities, by contract or otherwise.
1.4 "Approval Order" shall mean the order to be entered by the
---------------
Bankruptcy Court approving this Agreement, containing the orders required in
this Agreement and providing for Closing in accordance with sections 363, 1129
and 105 of the Bankruptcy Code and Rule 9019 of the Bankruptcy Rules.
1.5 "Assumed Liabilities" means the claims of ▇▇▇▇ Equipment, ▇▇▇▇▇
--------------------
Leasing, ▇▇▇▇▇ Supply Company, ▇▇▇▇▇▇▇▇ Electric, Linco-Electric, Inc., Odessa
Pumps & Equipment, and the Mexican Entities as filed or deemed filed in the
Case, and property taxes on the Acquired Assets for the year 2000 prorated from
June 19, 2000 forward.
1.6 "Bankruptcy Code" shall mean title 11 of the United States Code,
----------------
Sec.Sec. 101, et seq., as amended and in effect on the Petition Date.
1.7 "Bankruptcy Court" shall mean the United States District Court for
-----------------
the Southern District of Texas, Corpus Christi Division, having jurisdiction
over the Case and, to the extent of any references under section 157, title 28,
United States Code, the unit of such District Court constituted under section
151, title 28, United States Code.
Page 12 of 210
1.8 "Bankruptcy Rules" shall mean the Federal Rules of Bankruptcy
-----------------
Procedure as promulgated by the United States Supreme Court under section 2075,
title 28, United States Code and any local rules of the Bankruptcy Court.
1.9 "Blue Sky Laws" shall mean the securities laws of any state having
--------------
jurisdiction over the Transactions contemplated by this Agreement.
1.10 "Brownsville Agreement" shall have the meaning described in
----------------------
Section 3.2.2.
1.11 "Business" shall mean the business and operations of CPSC
--------
currently conducted by CPSC with the Acquired Assets.
1.12 "Business Day" shall mean a day which is not a Saturday, Sunday,
-------------
or other day on which national banks in Houston, Texas are authorized or
required to be closed by Law.
1.13 "Cash Downpayment" shall have the meaning described in Section
-----------------
3.2.
1.14 "Claim" shall mean either (a) a right to payment from the Debtor,
-----
whether or not such right is reduced to judgment, liquidated, unliquidated,
fixed, contingent, matured, unmatured, disputed, undisputed, legal, equitable,
secured or unsecured, or (b) any right to an equitable remedy for breach of
performance if such breach gives rise to a right of payment from the Debtor,
whether or not such right to an equitable remedy is reduced to judgment, fixed,
contingent, matured, disputed, undisputed, secured or unsecured.
1.15 "Claimants" shall mean the holders of Claims or equity interests
---------
in the Debtor.
1.16 "Closing" shall have the meaning described in Section 5.1.
-------
1.17 "Closing Date" shall mean the first Business Day after the entry
-------------
of the Approval Order.
Page 13 of 210
1.18 "Common Stock" shall mean the authorized common capital stock,
-------------
$0.10 par value per share, of POC.
1.19 "Confirmation Order" shall mean the order to be entered by the
-------------------
Bankruptcy Court, confirming the Plan in accordance with section 1129 of the
Bankruptcy Code.
1.20 "Contracts" shall mean all contracts, agreements, indentures,
---------
notes, bonds, loans, instruments, leases, sub-leases, deeds of trust,
conditional sales contracts, mortgages, franchises, licenses, commitments and
other binding agreements, understandings and arrangements, written or oral,
expressed or implied, involving any Party, whether as a named party or third
party beneficiary to the Contract, or as a successor, or assignee of any party
to the Contract.
1.21 "Costs" shall mean all costs, expenses, fees and charges incurred,
-----
including, but not limited to attorney's fees, court costs, settlement payments,
judgment payments, investigation expenses, fines and penalties, but subject to
the limitations on, attorney's fees specified in Section 3.4 below.
1.22 "CPSC/PMG Intercreditor Agreement" shall have the meaning
----------------------------------
described in Section 3.2.2.
1.23 "CPSC/Van Reit Property Deed" shall have the meaning described in
----------------------------
Section 4.1.1.
1.24 "CPSC/Cowboy Agreements" shall mean any and all Contracts entered
-----------------------
into between CPSC and/or Cowboy and/or their respective Affiliates as a party or
parties on the one hand and POC and/or its Affiliates as a party on the other
hand, including those Contracts listed on Exhibit "D" attached hereto.
Page 14 of 210
1.25 "Debtor" shall have the meaning set forth in the introductory
------
paragraph to this Agreement.
1.26 "Debtor Note" shall have the meaning described in Section 3.2.
------------
1.27 "Debtor Security Agreement" shall have the meaning described in
---------------------------
Section 3.2.2.
1.28 "Deed of Trust" shall have the meaning described in Section 3.2.2.
-------------
1.29 "Deed of Trust to Secure Assumption" shall have the meaning
---------------------------------------
described in Section 4.3.4.
1.30 "Due on Sale Clause" shall mean a provision in the Debtor Note
------------------
and the ▇▇▇▇▇▇ Note where the entire debt becomes immediately due and payable
without demand or notice in the event that either (a) fifty-one percent (51%) or
more of the Common Stock of POC is transferred by Persons who, as of the date
hereof, own issued and outstanding Common Stock of POC to any Person who is not
a Permitted Transferee or (b) fifty-one percent (51%) or more of the Acquired
Assets are transferred to any Person, excepting (i) sales or transfers of items
of the Acquired Assets which have become obsolete or have been replaced by
adequate substitutes having a suitability, function or value equal to or greater
than the replaced items and (ii) sales or transfers of items of the Acquired
Assets which are made to one or more Affiliates of POC provided that the holder
of such note shall have given its prior consent to such sale or transfer, which
consent may not be unreasonably withheld or delayed by the holder of such note.
Notwithstanding anything herein to the contrary, CPSC's or ▇▇▇▇▇▇'▇ refusal to
consent to any such sale or transfer of the Acquired Assets or any portion
thereof on the grounds that the proposed buyer is a non-U.S. Person or
controlled or owned by a non-U.S. Person shall be deemed a reasonable
Page 15 of 210
withholding of such consent. A "Permitted Transferee" for purposes of this
definition of "Due on Sale Clause" shall mean and include (1) the spouse or a
descendant of the transferor, (2) the guardian of the transferor, the spouse or
a descendant of the transferor, (3) any trust the beneficiary of which is the
transferor, the spouse or a descendant of the transferor, and/or (4) any Person
who is an executive or director of POC. The term "descendant" or "descendants"
for purposes of this definition of "Due on Sale Clause" shall mean lawful
lineal blood descendants of the first, second or any other degree of the
ancestor designated; provided, however, that an adopted child and such adopted
child's lawful lineal descendants by blood or adoption shall be considered under
this Agreement as lawful lineal blood descendants of the adopted parent or
parents and of anyone who is by blood or adoption a lineal ancestor of the
adopting parent or of either of the adopting parents as of the Closing Date of
the Agreement. Notwithstanding anything herein to the contrary, "Permitted
Transferee" shall not include a non-U.S. Person or an entity that is controlled
or owned by a non-U.S. Person.
1.31 "Easements" means any and all rights, titles, interests,
---------
liberties, privileges and/or advantages in any real or personal property that
allows, permits or purports to allow or permit the construction, operation, use,
maintenance, monitoring repair, replacement or removal of the Pipelines, the
Facilities, the Transfer Terminals and/or any of the other Acquired Assets,
including the right of ingress and egress for the purposes of constructing,
operating, using, maintaining, monitoring, repairing, replacing or removing the
Pipelines, the Facilities, the Transfer Terminals and/or any of the other
Acquired Assets, and includes, without limitation, easements, rights of way,
licenses, and permits, together with any ancillary or related rights, agreements
or other property of whatever kind or description necessary for the full use and
enjoyment of any such right, title or interest whether acquired through
contract, condemnation, the Plan or as a matter of law. The term "Easements"
shall include, without limitation, those listed on Exhibit "E" attached hereto.
Page 16 of 210
1.32 "Encumbrance" shall mean any Lien, Claim, option, leasehold
-----------
interest, right of way, option, restriction, tax or other right of any third
party of any kind or any nature whatsoever. For purposes of this definition,
"tax" shall mean all taxes with respect to the Acquired Assets that accrue or
are attributable to the period before June 19, 2000.
1.33 "Environmental Law" shall mean any United States federal, state or
-----------------
local Law relating or applicable to pollution or protection of the Environment
("Environment" shall mean any indoor or outdoor ambient air, surface water,
ground water, drinking water, building surface, material surface, land surface
or subsurface strata or natural resources), including any of the foregoing
relating or applicable to emissions, discharges, spills, releases or threatened
releases of any Hazardous Materials into the Environment, the investigation,
removal, remediation, or other cleanup or corrective action for Hazardous
Materials, interference with the use of property caused by or resulting from
Hazardous Materials or human or natural resource exposure to any Hazardous
Materials, or otherwise relating to the manufacture, generation, processing,
distribution, use, treatment, storage, disposal, recycling, transport or
handling of any Hazardous Materials, including the Comprehensive Environmental
Response, Compensation and Liability Act (42 U.S.C. Sec.9601, et seq.), the
Resource Conservation and Recovery Act (42 U.S.C. Sec.6901, et seq.), the Clean
Air Act (42 U.S.C. Sec.7401, et seq.), the Federal Water Pollution Control Act
(13 U.S.C. Sec.12-1, et seq.), the Safe Drinking Water Act (42 U.S.C. Sec.300,
Page 17 of 210
et seq.), the Toxic Substances Control Act (15 U.S.C. Sec.2601, et seq.), the
Hazardous Materials Transportation Act (49 U.S.C. Sec.180-1 et seq.), and all
regulations issued under such statutes, and all analogous and similar state
statutes and regulations issued thereunder, and all obligations, duties, and
requirements arising from or related to Hazardous Materials under common law
(including nuisance and trespass).
1.34 "Facilities" means the vents, casings, valves, cathodic protection
---------
devices, and other items of personal property which are constructed on, affixed
to or installed on or in connection with the Pipelines, inlet flange to inlet
flange, and includes any and all equipment used in the operation and/or
monitoring of the Pipelines.
1.35 "Final Order" shall mean (i) an order of the Bankruptcy Court as
------------
to which the time to appeal, petition for certiorari or move for re-argument or
rehearing has expired and as to which no appeal, petition for certiorari or
other proceedings for re-argument or rehearing shall then be pending, or (ii) as
to an order of the Bankruptcy Court, if an appeal, writ of certiorari,
re-argument or rehearing thereof has been filed or sought, such order of the
Bankruptcy Court shall have been affirmed by the highest court to which such
order was appealed, or certiorari shall have been denied or re-argument or
rehearing shall have been denied or resulted in no modification of such order,
and the time to take any further appeal, petition for certiorari or move for
re-argument or rehearing shall have expired, provided, however, that the
possibility that a motion under Rule 60 of the Federal Rules of Civil Procedure,
or any analogous Bankruptcy Rule, may be filed with respect to such order shall
not cause such order not to be a Final Order.
Page 18 of 210
1.36 "Governmental Authority" shall mean any domestic or foreign
-----------------------
federal, state or local court, department, legislative body, commission,
council, board or other administrative or governmental Person.
1.37 "Hazardous Materials" shall mean any substance: (i) that is
--------------------
defined as "hazardous waste," "hazardous substance," "hazardous material,"
"extremely hazardous substance," "toxic substance," "pollutant," "contaminant,"
or "solid waste" under any Environmental Law; (ii) that is toxic, explosive,
corrosive, flammable, infectious, reactive, radioactive, carcinogenic, mutagenic
or otherwise hazardous and is regulated by any Governmental Authority; (iii)
that is or contains oil, petroleum products, natural gas or liquified natural
gas; or (iv) that contains PCBs, asbestos, radon gas or urea formaldehyde foam
insulation.
1.38 "Intercreditor Agreement" shall have the meaning described in
------------------------
Section 3.2.2.
1.39 "Law" shall mean any statute, law (including common law), rule,
---
regulation, ordinance, Order, decree, ruling, permit, authorization, action,
restriction, requirement or policy of any Governmental Authority (each as may be
in effect from time to time).
1.40 "Leasehold" means a lease of Real Property that is included in the
---------
Acquired Assets, including any space use agreement, license or other right to
use or occupy.
1.41 "Lenders' Intercreditor Agreement" shall have the meaning
----------------------------------
described in Section 3.2.2.
1.42 "Lien" shall mean a charge against or interest in property to
----
secure payment of a debt or performance of a liability, covenant or obligation,
whether granted voluntarily or involuntarily, including any security interest,
pledge, mortgage or charge.
Page 19 of 210
1.43 "Material Adverse Effect" shall mean any condition, change or
-------------------------
event occurring prior to Closing that, individually or in the aggregate, could
reasonably be expected to materially and adversely affect the Acquired Assets,
or the business, operations, financial condition or prospects of CPSC.
1.44 "Mexican Entities" shall mean Termatsal, S.A. de C.V., Penn Octane
----------------
de Mexico, S.A. de C.V., Consorcio Industrial Edifica, S.A. de C.V., and Tergas
S.A. de C.V., collectively.
1.45 "Monetary Consideration" shall have the meaning described in
-----------------------
Section 3.2.
1.46 "Mutual Release" shall have the meaning described in Section
---------------
5.2.3.
1.47 "Offset" shall mean a deduction, a counterclaim or a contrary
------
claim or demand by
which a given claim may be lessened or canceled.
1.48 "Order" shall mean any order, writ, judgment, injunction, decree,
-----
determination or award of a Governmental Authority.
1.49 "▇▇▇▇▇" shall mean the ▇▇▇▇▇ family, including ▇▇▇▇▇▇ ▇. ▇▇▇▇▇,
-----
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇, and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, who granted the ▇▇▇▇▇
Easement on their property to CPSC.
1.50 "▇▇▇▇▇ Easement" shall mean the Pipeline right-of-way and easement
--------------
provided by ▇▇▇▇▇ to CPSC in exchange for a payment of One Hundred Thousand
Dollars ($100,000), with a remaining balance payable in two equal annual
installment payments of Twenty Five Thousand Dollars ($25,000), which easement
is more particularly described on Exhibit "E" attached hereto.
1.51 "Outside Date" shall have the meaning described in Section 10.2.2.
------------
Page 20 of 210
1.52 "Party" shall mean Cowboy, CPSC, or POC and any Affiliate of such
-----
Party and their respective Representatives, as the context may require or allow.
"Parties" shall include all of Cowboy, CPSC, and POC and their Affiliates and
-------
their respective Representatives, collectively.
1.53 "Permits" shall mean all permits, licenses, certificates,
-------
franchises and other authorizations, consents and approvals of any Governmental
Authority, including, but without limitation, those listed on Exhibit "F"
attached hereto.
1.54 "Permitted Encumbrances" shall mean those Encumbrances described
-----------------------
on Exhibit "G" hereto.
1.55 "Person" means an individual, corporation, partnership, joint
------
venture, limited liability company, association, trust or any other entity or
organization, including, without limitation, a government or political
subdivision or any court, tribunal, agency or instrumentality thereof.
1.56 "Petition Date" shall mean March 14, 2000, the date on which the
--------------
Debtor commenced the Case in the Bankruptcy Court.
1.57 "Plan" shall mean the plan of reorganization for CPSC, if any, as
----
confirmed by the Bankruptcy Court pursuant to section 1129 of the Bankruptcy
Code.
1.58 "PMG" shall mean PMG Capital Corporation, a Delaware corporation,
---
acting as collateral agent for various holders of notes executed and issued by
POC.
1.59 "Promissory Notes" shall have the meaning described in Section
-----------------
3.2.
1.60 "Real Property" shall mean real property and interests in real
--------------
property, including buildings, structures and improvements (including
construction in progress) located thereon, fixtures contained therein and
appurtenances thereto, together with all servitudes, easements, rights of way
and other real property rights related thereto, owned by the Debtor or in which
the Debtor has any right, title or interest with respect to the Pipelines, the
Facilities and/or the Transfer Terminals.
Page 21 of 210
1.61 "Representatives" shall mean, with respect to any Party, the
---------------
directors and officers (or functional equivalent, if any), employees,
representatives or agents of such Party or its Affiliates and its accountants,
legal counsel, financial advisors and technical advisors, as the context may
require or allow.
1.62 "Retained Assets" shall mean the funds in the Escrow Account, the
----------------
right to conduct business under the name CPSC International, Inc. and all
property in which Cowboy has right, title or interest (but specifically
excluding the Acquired Assets) and any claims or causes of action CPSC may have
against any Party other than POC or its Affiliates or their Representatives, or
any Person who is listed under Assumed Liabilities.
1.63 "▇▇▇▇▇▇▇ Guaranty" shall have the meaning described in Section
-----------------
3.2.2.
1.64 "Securities Law" shall mean the Securities Act of 1933, as
---------------
amended, and the Securities and Exchange Act of 1934, as amended, and any
applicable Blue Sky Laws.
1.65 "Stock Purchase Warrant" shall have the meaning described in
------------------------
Section 4.1.3.
1.66 "T-4 Permit" and "T-4R Permit" shall mean the T-4 or T-4R permit
----------- -----------
issued by the Texas Railroad Commission, pursuant to its Statewide 70, 16 Tex.
Admin. Code 3.65, permitting the holder thereof to operate a pipeline carrying
oil, gas or liquid hydrocarbons.
1.67 "▇▇▇▇▇▇" shall mean ▇▇▇▇▇▇ Construction Co., Inc., a Louisiana
------
corporation.
1.68 "▇▇▇▇▇▇ Note" shall have the meaning described in Section 3.2.
------------
1.69 "▇▇▇▇▇▇ Security Agreement" shall have the meaning described in
---------------------------
Section 3.2.1.
Page 22 of 210
1.70 "Tax Code" shall mean the Internal Revenue Code of 1986, as
---------
amended.
1.71 "Taxes" shall mean all taxes, charges, fees, imposts, levies or
-----
other assessments, including all net income, gross receipts, sales, use, ad
valorem, value added, transfer, franchise, profits, inventory, capital stock,
license, withholding, payroll, employment, social security, unemployment,
excise, severance, stamp, occupation, and property taxes, customs duties, fees,
assessments and charges of any kind whatsoever, together with any interest and
any penalties, additions to tax or additional amounts imposed by any taxing
authority (domestic or foreign) and any interest and penalties imposed with
respect to the filing, obligation to file or failure to file any Tax Return, and
shall include any transferee liability in respect of Taxes.
1.72 "Tax Return" shall mean all returns, declarations, reports, claims
----------
for refund, estimates, information returns, statements or other similar
documents relating to Taxes, including any schedule attached thereto, and
including any amendment thereof.
1.73 "Termination Date" shall have the meaning described in Section
-----------------
10.2
1.74 "Transaction Documents" shall mean the contracts, agreements,
----------------------
documents and instruments contemplated to be entered into by the terms of this
Agreement to effect the Transactions.
1.75 "Transactions" shall mean the sales, transfers, purchase
------------
acquisitions and other transactions contemplated by this Agreement and the
Transaction Documents.
1.76 "Transfer Terminal" means the equipment of any kind affixed to the
-----------------
Pipelines for the receiving, re-distribution or storage of liquified petroleum
gas.
1.77 "Van Reit Easement" shall have the meaning described in Section
-------------------
4.2.1.
Page 23 of 210
1.78 "Warranties" shall mean any and all express or implied warranties,
----------
assurances, affirmations, statements or promises regarding the character,
quality or fitness of a particular product, service or good, but shall not
include any warranty given by CPSC or Cowboy.
1.79 "Warrants" shall have the meaning described in Section 4.1.3.
--------
ARTICLE II
CONSTRUCTION
2.1 Interpretation. In this Agreement and the other Transaction
--------------
Documents, unless a clear contrary intention appears herein or therein:
2.1.1 The singular includes the plural and vice versa;
2.1.2 Reference to any Person includes such Person's successors
and assigns unless such Person is a Party hereto in which case such reference
shall include such Person's successors and assigns only if such successors and
assigns are permitted by this Agreement, and reference to a Person in a
particular capacity excludes such Person in any other capacity or individually;
2.1.3 The masculine, feminine or neuter gender shall each be
deemed to include the others whenever the context so indicates;
2.1.4 Reference to any agreement (including this Agreement),
document or instrument means such agreement, document or instrument as amended
or modified and in effect from time to time in accordance with the terms
thereof;
2.1.5 Reference to any Law means such Law as amended, modified,
codified or reenacted, in whole or in part, and in effect from time to time, and
shall include any rules and regulations promulgated thereunder by the
Governmental Authority having jurisdiction thereunder to adopt such rules and
regulations;
Page 24 of 210
2.1.6 Reference to any Article, Section, Appendix or Schedule,
unless qualified by reference to some other document or instrument, means such
Article or Section of this Agreement or such Appendix or Schedule to this
Agreement, as the case may be, and references in any such Article or Section or
in any definition contained herein to any clause means such clause of such
Article, Section or definition;
2.1.7 "Hereunder", "hereof", "hereto" and words of similar import
shall be deemed references to this Agreement as a whole and not to any
particular Article or Section hereof;
2.1.8 "Includes" and "including" are not limiting;
2.1.9 "Or" is not exclusive;
2.1.10 Relative to the determination of any period of time, "from"
means "from and including", "to" means "to but excluding" and "through" means
"through and including;"
2.1.11 When the term "knowledge" is used herein with respect to any
Party, such term shall mean and refer to the actual and constructive knowledge
of such Party and each of its Representatives.
2.2 Conflict With Agreement or Other Transaction Documents. If there
--------------------------------------------------------
is any conflict between this Agreement and any other Transaction Document, this
Agreement and such other Transaction Document, as the case may be, shall be
interpreted and construed, if possible, so as to avoid or minimize such
conflict. To the extent (and only to such extent) of such conflict, this
Agreement shall prevail and control.
Page 25 of 210
2.3 Legal Representation of Parties. This Agreement was negotiated by
--------------------------------
the Parties with the benefit of legal representation and any rule of
construction or interpretation otherwise requiring this Agreement to be
construed or interpreted against any Party shall not apply to any construction
or interpretation hereof.
ARTICLE III
SETTLEMENT TERMS FOR CONVEYANCE OF ASSETS TO POC
3.1 Assets to be Conveyed to POC Free and Clear of Encumbrances. On
--------------------------------------------------------------
the terms and subject to the conditions set forth in this Agreement, at the
Closing, CPSC and Cowboy shall grant, convey, transfer, assign, sell and deliver
to POC, and POC shall acquire, accept and purchase, all of CPSC's and Cowboy's
rights, titles and interests in and to the Acquired Assets, if any, free and
clear of all Liens, Claims and Encumbrances (except Permitted Encumbrances)
pursuant to Bankruptcy Code sections 363(f) and/or 1123, Bankruptcy Code section
105 and any other applicable provision provided in the Approval Order. To the
extent that any Easement is an executory contract, CPSC shall assume and assign
such Easement pursuant to Bankruptcy Code section 365(a) as part of the Approval
Order. The Approval Order shall recite that POC is purchasing the Acquired
Assets in good faith and in exchange for fair consideration and reasonably
equivalent value. Further, at Closing, CPSC shall convey, transfer, assign,
sell and deliver to POC all of CPSC's rights, titles and interests in and to the
T-4 Permit and/or the T-4R Permit if and when received or granted to CPSC by the
Texas Railroad Commission with respect to the Pipelines. Any Plan confirmed
must fully incorporate and effectuate the terms of this Agreement.
Page 26 of 210
3.2 Consideration. POC shall purchase all of the Acquired Assets for a
-------------
purchase price of Five Million Eight Hundred Thousand Dollars ($5,800,000.00)
(the "Monetary Consideration"). After accounting for agreed upon Offsets and
other credits in favor of POC against the Monetary Consideration in the amount
of Three Million Two Hundred Thirty-Seven Thousand Five Hundred Dollars
($3,237,500.00), the balance of the Monetary Consideration, being the sum of
Two Million Five Hundred Sixty-Two Thousand Five Hundred Dollars
($2,562,500.00), shall be payable at the Closing (i) by POC tendering cash
payment to ▇▇▇▇▇▇ (as CPSC's designee) in the amount of Two Hundred Thousand
Dollars ($200,000.00) (the "Cash Downpayment") and (ii) POC executing and
delivering (a) to CPSC a promissory note substantially in the form and substance
attached hereto as Exhibit "H" (the "Debtor Note") and (b) to ▇▇▇▇▇▇ a
promissory note substantially in the form and substance attached hereto as
Exhibit "I" (the "▇▇▇▇▇▇ Note")(the Debtor Note and ▇▇▇▇▇▇ Note being herein
collectively referred to as the "Promissory Notes"). The ▇▇▇▇▇▇ Note shall be
payable in thirty-six (36) equal and consecutive monthly installments commencing
on the first day of the first calendar month after the Closing Date and bear
interest at the rate of nine percent (9%) per annum. The Debtor Note is payable
in thirty-six (36) monthly installments of principal and interest, the first
such installment being in the amount of Forty-Six Thousand Five Hundred Seven
and 11/100 Dollars ($46,507.11) and being due and payable upon the Closing Date,
the second such installment being in the amount of Forty-Six Thousand Five
Hundred Seven and 11/100 Dollars ($46,507.11) and being due and payable on or
before April 2, 2001 (provided, however, if the Closing date has not occurred by
April 2, 2001, then such installment shall be due and payable upon the Closing
Date), the next thirty-three (33) such monthly installments being in the amount
Page 27 of 210
of Forty-Five Thousand Seven Hundred Eighty-Two and 64/100 Dollars ($45,782.64)
each being due and payable on or before the first (1st) day of each calendar
month commencing on May 1, 2001 and continuing monthly thereafter, and one final
installment in an amount equal to then entire remaining outstanding principal
and all accrued unpaid interest shall be due and payable on February 1, 2004.
The Debtor Note and the ▇▇▇▇▇▇ Note shall contain a Due on Sale Clause.
3.2.1 The Cash Downpayment and sums evidenced by and payable under
the ▇▇▇▇▇▇ Note is consideration which would otherwise have been payable
directly to CPSC but for the direction of CPSC in this Agreement and the
agreement of CPSC in that certain letter agreement dated October 16, 2000,
between ▇▇▇▇ ▇▇▇▇▇▇▇, as attorney for CPSC, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, as attorney for
▇▇▇▇▇▇ Pipeline, and ▇▇▇ ▇▇▇▇▇, as attorney for Cowboy, which letter agreement
was approved by Agreed Order-129 signed November 14, 2000 in the Case, pursuant
to which CPSC and ▇▇▇▇▇▇ Pipeline settled certain disputes and CPSC agreed to
cause POC to execute a promissory to ▇▇▇▇▇▇ Pipeline in the principal amount of
$900,000.00. Subsequent to such agreement and Agreed Order, ▇▇▇▇▇▇ Pipeline (and
other related entities) assigned to ▇▇▇▇▇▇ its rights to the promissory note.
The ▇▇▇▇▇▇ Note shall be in the original principal amount of $900,000.00. The
▇▇▇▇▇▇ Note will be secured by a first and prior security interest granted by
POC against the U. S. Pipeline. Such security interest shall be granted by
POC's execution and delivery to ▇▇▇▇▇▇ at Closing of a Security Agreement
substantially in the form and substance attached hereto as Exhibit "J" (the
"▇▇▇▇▇▇ Security Agreement"). The ▇▇▇▇▇▇ Note shall not be subject to offset
for damages caused by CPSC's conduct.
Page 28 of 210
3.2.2 The Debtor Note shall be in the original principal amount
equal to $1,462,500.00 less all Offsets provided for under this Agreement. It
is the intent of the Parties that the Debtor Note will be secured by liens and
security interests in the U. S. Pipeline, which liens and security interests
shall be subordinate to the liens and security interests claimed by ▇▇▇▇▇▇ and
granted to ▇▇▇▇▇▇ in the ▇▇▇▇▇▇ Security Agreement and shall be of equal
priority and pari passu to the liens and security interests granted or to be
granted to PMG or the holders of certain promissory notes issued by POC for
which PMG is currently the collateral agent (the "Noteholders"). The liens and
security interests to be granted to Debtor to secure the Debtor Note shall be
evidenced by the Security Agreement attached hereto as Exhibit "K" (the "Debtor
Security Agreement") and the Deed of Trust attached hereto as Exhibit "K1" (the
"Deed of Trust"). However, as of the date hereof, POC, Debtor, ▇▇▇▇▇▇, PMG, the
Noteholders and RZB Finance, LLC (herein called "RZB"; Debtor, ▇▇▇▇▇▇, PMG, the
Noteholders and RZB herein collectively called the "Lenders") are in negotiation
as to the form and substance of certain intercreditor agreements pertaining to
the Lenders respective rights in and to certain property of POC, including the
U.S. Pipeline. Therefore, in order to consummate the Transactions, ▇▇▇▇▇ ▇▇▇▇▇▇▇
has agreed to conditionally guarantee the Debtor Note. ▇▇. ▇▇▇▇▇▇▇'▇ guaranty
shall be in the form and substance as the Conditional Guaranty Agreement
attached hereto as Exhibit "J1" (the "▇▇▇▇▇▇▇ Guaranty") and POC shall cause the
▇▇▇▇▇▇▇ Guaranty to be executed and delivered at Closing. POC and Debtor agree
that POC shall execute and deliver to Debtor the Debtor Security Agreement and
Deed of Trust, and, upon the delivery thereof, (a) the ▇▇▇▇▇▇▇ Guaranty shall
terminate and be of no further force or effect, and shall be redelivered by
Debtor (or the holder thereof) to ▇▇▇▇▇ ▇▇▇▇▇▇▇ and (b) Debtor (or the holder of
Page 29 of 210
the Debtor Note) will execute and deliver (i) an Intercreditor Agreement
substantially in form and substance attached hereto as Exhibit "L" (the
"CPSC/PMG Intercreditor Agreement"), as same may be modified and revised,
provided that such modifications and revisions do not materially alter the value
or priority of the liens and security interests of the Deed of Trust and Debtor
Security Agreement as security for the Debtor Note as compared to the value or
priority thereof as if the CPSC/PMG Intercreditor Agreement had been executed
without such modifications and revisions, (ii) an Intercreditor and
Subordination Agreement substantially in form and substance of either, at POC's
election, Exhibit "L1" or "L2" attached hereto (the "Lenders' Intercreditor
Agreement"), as same may be modified and revised, provided that such
modifications and revisions do not materially alter the value or priority of the
liens and security interests of the Deed of Trust and Debtor Security Agreement
as security for the Debtor Note as compared to the value or priority thereof as
if the Lenders' Intercreditor Agreement had been executed without such
modifications and revisions, and (iii) a Consent and Agreement of the Lessor
substantially in form and substance attached hereto as Exhibit "L3" (the
"Brownsville Agreement"), as same may be modified and revised, provided that
such modifications and revisions do not materially alter the value or priority
of the liens and security interests of the Deed of Trust and Debtor Security
Agreement as security for the Debtor Note as compared to the value or priority
thereof as if the Brownsville Agreement had been executed without such
modifications and revisions. As is set forth in Section 4.3, POC's payments
under the Debtor Note shall be reduced by those payments made by POC under the
Van Reit Note. As is set forth in Section 4.3, POC's payments under the Debtor
Note shall be reduced by those payments made by POC under the Van Reit Note.
Page 30 of 210
3.3 Liabilities Assumed by POC. As further consideration for the
-----------------------------
consummation of the Transactions, at the Closing, POC shall, subject to the
limitations set forth below in this Section 3.3, assume and agree to timely pay
thereafter when due and discharge the Assumed Liabilities. POC shall not assume
nor shall POC be liable for any liabilities, duties or obligations of CPSC or
Cowboy or their Affiliates or their Representatives other than the Assumed
Liabilities. Each of the Assumed Liabilities of the Mexican Entities will be
assumed in their full amount and each of the other Assumed Liabilities will be
assumed in full unless any such Claim as filed or deemed filed exceeds the
amount listed by the Debtor for such Claimant in Debtor's Amended Schedules
filed on April 20, 2000 by more than 5%, in which event the amount of the
Assumed Liability to be assumed by POC for such Claimant shall be limited to the
amount listed by the Debtor for such Claimant in Debtor's Amended Schedules
filed on April 20, 2000. Except as to the Assumed Liabilities assumed by POC in
this Section 3.3, POC is not a successor to any liability, duty or obligation of
or Claim against CPSC or Cowboy or their Affiliates or their Representatives,
and neither POC nor POC's Affiliates nor their Representatives shall have any
liability, duty or obligation as transferee of the Acquired Assets or otherwise,
for any liability, duty or obligation of or Claims against CPSC or Cowboy or
their Affiliates or their Representatives (whether or not currently known) as a
result of POC's purchase of the Acquired Assets or the consummation of the
Transactions.
3.4 Offsets to Promissory Notes.
------------------------------
3.4.1 The Debtor Note shall be subject to the following Offsets:
Page 31 of 210
3.4.1.1 All Costs, if any, incurred by POC or its successors
or assigns in connection with resolving the issues related to the construction
of the Pipelines on property managed by Texas Parks & Wildlife;
3.4.1.2 All Costs, if any, incurred by POC or its successors
or assigns as a result of any CPSC default of its assumption of the Van Reit
Note; and
3.4.1.3 All Costs, if any, incurred by POC or its successors
or assigns related to CPSC's promise to pay for the ▇▇▇▇▇ Easement acquired by
CPSC.
3.4.2 Such Offsets will be exercised against the Debtor Note. The
Offsets as described in Section 3.4.1 incurred prior to the Closing shall
reduce, at Closing, the principal amount of the Debtor Note. Except as provided
in Section 3.4.4 below with respect to the ▇▇▇▇▇ Easement, such Offsets arising
after the Closing will be applied against installments due under the Debtor Note
in inverse order of maturity. POC's Offsets arising after the Closing will be
subject to the continuing jurisdiction of the Bankruptcy Court.
3.4.3 As of the Effective Date, POC asserts a right of Offset
against the principal amount of the Debtor Note under Section 3.4.1.1 in the
amount of $115,000 and CPSC disputes the amount of same. In order to proceed to
the Closing, POC and CPSC have agreed to resolve this dispute as follows:
3.4.3.1 The principal amount of the Debtor Note shall not be
reduced prior to or at the Closing for said Offset asserted by POC under Section
3.4.1.
3.4.3.2 The amount of $3,657.00 out of each monthly payment due
under the Debtor Note (said amount being the monthly principal and interest due
on the $115,000.00 portion of the Debtor Note which POC claims a right of offset
Page 32 of 210
against, amortized at 9% per annum over the 36 month term of the Debtor Note)
shall be deposited by POC each month into escrow in account #83-000-757-01
established by POC and CPSC at Bank One. Such sums shall, when deposited by
POC into such escrow account, constitute a payment of and shall be credited
against the principal and interest on the Debtor Note as if such sum had been
received by CPSC.
3.4.3.3 At such time as POC, or its successors or assigns, shall
resolve all issues and disputes related to the construction of the Pipelines on
the property managed by the Texas Parks & Wildlife, then the deposits being made
by POC into the escrow account under Section 3.4.3.2 shall cease and the
following shall occur:
a. If the amount of the Costs to be Offset under Section
3.4.1. exceeds the funds deposited by POC into the escrow account (exclusive of
the interest which shall have accrued thereon while on deposit), then (i) POC
shall (A) receive all of such funds on deposit (inclusive of the interest which
shall have accrued thereon while on deposit) and (B) be entitled to an immediate
additional credit against the then outstanding principal balance of the Debtor
Note in an amount equal to the sum by which the Costs to be Offset under section
3.4.1 exceed the amounts deposited by POC into such account (interest which is
earned on the sums on deposit in the escrow account which are to be received by
POC shall not be credited or applied against the Costs to be Offset) and (ii)
the Debtor Note shall be reamortized based upon the outstanding principal
balance after such credit at 9% per annum over the then remaining term of the
Debtor Note and the monthly installments of principal and interest due
thereunder shall thereafter be such new amortized amount.
Page 33 of 210
b. If the amount of the Costs to be Offset under Section
3.4.1. is less than the funds deposited by POC into the escrow account
(exclusive of the interest which shall have accrued thereon while on deposit),
then POC shall receive out of such funds deposited by POC into the escrow
account an amount equal to the Offset plus the interest which shall have accrued
on such amount and CPSC shall receive the balance of the funds on deposit.
c. If the amount of the Costs to be Offset under Section
3.4.1. is equal to the funds deposited by POC into the escrow account (exclusive
of the interest which shall have accrued thereon while on deposit), then POC
shall receive all of the funds on deposit (inclusive of the interest which shall
have accrued thereon while on deposit).
3.4.4 The ▇▇▇▇▇ Easement payments, under the schedule previously
agreed between
CPSC and ▇▇▇▇▇, a copy of which is attached hereto as Exhibit "M", will be made
by POC per such schedule and offset in full as a credit against and shall reduce
the next maturing installment(s) due under the Debtor Note.
3.4.4 POC shall be responsible for and shall not be entitled to
offset attorneys' fees
and court costs incurred prior to the Closing.
3.5 Further Assurances. From time to time after the Closing, each
-------------------
Party shall execute and deliver or shall cause to be executed and delivered to
the requesting Party or its designee such instruments of sale, transfer,
conveyance, assignment, delivery, consent, assurance, power of attorney and
other instruments as may be reasonably requested in order to vest in POC or its
designee all right, title and interest in and to the Acquired Assets and
otherwise in order to carry out the purposes and intents of this Agreement and
the other Transaction Documents.
Page 34 of 210
3.6 Cooperation in Consummation of this Agreement and Related Matters.
------------------------------------------------------------------
Each Party will fully cooperate with the other in the consummation of this
Agreement and in connection with any Action already instituted, or which may be
instituted hereafter, against or by such Party relating to this Agreement or
which may affect the consummation of this Agreement (other than litigation
between the Parties arising out of the Transactions).
3.7 Sales Taxes. To the extent that the sale of the Acquired Assets is
-----------
subject under applicable Law to sales, transfer, use, stamp or similar taxes
that are not exempt under Bankruptcy Code section 1146, such taxes shall be
assumed and paid by POC (but specifically not excluding franchise and income
Taxes). This provision does not waive CPSC's right to contest or object to such
taxes in the Case.
3.8 Cure Payments. Except as to the Permitted Encumbrances and the
--------------
Assumed Liabilities (to the extent the Assumed Liabilities are assumed by POC
under Section 3.3), all cure payments which may be required to be made pursuant
to Bankruptcy Code section 365(b)(1) under or with respect to any of the
Easements or any Contract to which CPSC and a Person other than POC (in POC's
individual corporate capacity or in any other capacity) are parties, and all
other amounts that have become due and owing prior to the Closing under or with
respect to any of the Easements or any Contract to which CPSC and a Person other
than POC are parties shall be made by CPSC on the Closing Date. Neither POC,
its Affiliates, their successors or assigns nor their Representatives shall be
responsible for any cure payments required to be made under Bankruptcy Code
section 365(b)(1) in connection with any of the Acquired Assets or that
otherwise arise with respect to any period, or that are due and owing, prior to
the Closing, except as to the Permitted Encumbrances. Except as to the
Page 35 of 210
Permitted Encumbrances and the Assumed Liabilities (to the extent the Assumed
Liabilities are assumed by POC under Section 3.3), if a dispute exists on the
Closing Date as to the amount required under Bankruptcy Code section 365(b)(1)
to be paid to any party to an Easement or any such Contract in order for such
Easement or Contract to be assumed, pending a determination by the Bankruptcy
Court after the Closing Date of the actual amount owing, an appropriate reserve,
as determined by the Bankruptcy Court or by agreement of the parties, shall be
maintained by CPSC to cover any additional amount that the Bankruptcy Court
ultimately may determine to be due to such party in connection with such
Easement or Contract. Following assignment by CPSC to POC of the Easements and
such Contracts on the Closing Date, POC shall be responsible, as assignee of
CPSC, for the performance under such assumed and assigned Easements and
Contracts of all obligations of CPSC thereunder that first arise after the
Closing (provided, that POC shall specifically not be responsible for any
obligations, including indemnities, pertaining to events which occurred prior to
the Closing Date). Neither POC nor its Affiliates, their successors or assigns
nor their Representatives shall have any liability under any unexpired lease or
executory Contract and shall have no liability under an assumed and assigned
Easement or Contract other than for the performance of obligations first arising
and accruing after the Closing Date.
3.9 Reservation of Rights with Respect to Rents. Notwithstanding
-------------------------------------------------
anything to the contrary in this Settlement Agreement, Exhibits, and/or
related documents, the issue of whether or not the June 19, 2000 "Memorandum of
Understanding," a copy of which is attached hereto and marked Exhibit "M1,"
obligates POC to pay CPSC rent for the period of November 1, 2000 through
January 9, 2001, is hereby specifically preserved and excepted from this
Page 36 of 210
Settlement Agreement, to be later determined by the Bankruptcy Court. To the
extent the Bankruptcy Court determines, by final order, that rent or some
portion thereof is due and owing to CPSC for the same period POC shall be
liable to CPSC in the amount set out in such final order, and such liability
shall be in addition to the POC obligations created by this Settlement
Agreement. Notwithstanding anything to the contrary in this Settlement
Agreement, Exhibits and/or related documents, POC specifically reserves all
defenses and offsets to the payment of the rent specified in this paragraph,
including, but not limited to, the relative fault of CPSC in causing or
participating in causes that delayed the closing of the June 19, 2000
"Memorandum of Understanding," the extent to which payment of rent specified in
this paragraph would overcompensate CPSC for delays in closing (to the extent
caused by POC), and the extent to which the payment of rent specified in this
paragraph would overcompensate CPSC in light of the compensation paid by POC for
the purchase of the Pipelines under the terms of this Settlement Agreement as
compared to their depreciated value (without taking into account value added to
the Pipelines at POC's expense). NOTHING HEREIN SHALL BE CONTSRUED AS
ADMISSIONS OF FAULT BY CPSC.
ARTICLE IV
SETTLEMENT TERMS FOR CONVEYANCE OF ASSETS TO CPSC
4.1 Assets to be Conveyed to CPSC.
----------------------------------
4.1.1 On the terms and subject to the conditions set forth in
Section 4.4 and elsewhere in this Agreement, at the Closing, POC shall grant,
convey, transfer, assign, sell and deliver to CPSC, and CPSC shall acquire,
accept and purchase, all of POC's rights, titles, and interests in and to the
Van Reit Property, by special warranty deed with title conveyed subject to (i)
Page 37 of 210
all liens, restrictions, mineral and royalty interests, easements,
rights-of-way, encumbrances and other matters which were in force and existing
of record affecting the real property as of the time of filing that certain
Special Warranty Deed dated April 14, 2000, executed by Lieven ▇. ▇▇▇ ▇▇▇▇ and
▇▇▇▇▇▇▇ ▇. ▇▇▇ ▇▇▇▇, as grantors, to Grantor herein, as grantee, filed for
record in the Official Records of Cameron County, Texas in Volume 6238 at Page
96, and under Clerk's File No. 17408, to the extent any or all of same are now
in force and existing of record affecting the real property, (ii) those items
shown on Exhibit "B" attached to the CPSC/Van Reit Property Deed; (iii) all
laws, regulations and ordinances of all governmental and quasi-governmental
authorities, if any, affecting the real property; (iv) a vendor's lien and
superior title reserved by POC, (v) the Van Reit Easement as provided for in
Section 4.2, and (vi) the Deed of Trust to Secure Assumption as provided for in
Section 4.3.4. Such special warranty deed shall be substantially in form and
substance attached hereto as Exhibit "N" (the "CPSC/Van Reit Property Deed").
4.1.2 Pursuant to this Agreement and subject to the Van Reit
Easement and the other matters set forth in the CPSC/Van Reit Property Deed,
CPSC shall have POC's right, title and interest in and to the Van Reit Property.
If POC interferes with such right, title and interest, POC agrees to pay all
costs associated with its interference.
4.1.3 At Closing, POC shall also deliver to CPSC, and CPSC shall
acquire and accept from POC, a Stock Purchase Warrant for One Hundred Seventy
Five Thousand (175,000) shares of Common Stock at an exercise or strike price of
four dollars ($4.00) per warrant and being valid and exercisable for a period of
three (3) years commencing upon the Closing Date (the "Warrants"). Each Warrant
shall consist of one (1) fully paid and non-assessable share of Common Stock.
Page 38 of 210
The form of Stock Purchase Warrant shall be substantially in the form and
substance as that attached hereto as Exhibit "O" (the "Stock Purchase Warrant").
The strike price of the Warrants shall not be payable until the Warrants are
converted to Common Stock, unless CPSC decides to pay the strike price at an
earlier date. If, after the Closing, POC conducts a public or private
registration of additional shares of Common Stock (other than any registration
which shall have been filed or initiated or that is pending as of the Closing
Date), the Warrants will be registered at the same time and in the same manner
as such public or private registration of additional shares.
4.2 POC's Easement.
---------------
4.2.1 CPSC agrees that POC shall be entitled to retain in the
CPSC/Van Reit Property Deed in favor of itself and its successors and assigns
the exclusive right, title and interest in and to an easement upon, over,
across, above, through and under a portion of the Van Reit Property for 100
years for the purpose of constructing, maintaining, operating, repairing,
replacing, relocating, inspecting and removing, one or more pipelines and
related appurtenances for the transportation of liquids, gases, solids or
mixtures of any or all substances which can be transported through a pipeline,
including, without limitation, the Pipelines and Facilities (the "Van Reit
Easement"). The Van Reit Easement shall be subject to the same exceptions as to
title as those which POC shall convey to CPSC title to the Van Reit Property in
the CPSC/Van Reit Property Deed. The Van Reit Easement will be limited to the
space occupied by the Pipelines and a reasonable working space not to exceed 30
feet from the centerline together with all reasonable rights of ingress and
egress necessary to access the Pipelines.
Page 39 of 210
4.2.2 Pursuant to this Agreement, POC shall have all right, title
and interest in and to the Van Reit Easement, which shall not be interfered with
by CPSC or Cowboy. If CPSC interferes with such right, title and interest, CPSC
agrees to pay all costs associated with its interference. If Cowboy interferes
with such right, title and interest, Cowboy agrees to pay all costs associated
with its interference.
4.3 Consideration.
-------------
4.3.1 As consideration for POC's agreement herein to convey to
CPSC the Van Reit Property and to issue the Warrants to CPSC, at the Closing,
CPSC shall assume and bear all responsibility for payment of the Van Reit Note.
4.3.2 CPSC's payment of the Van Reit Note shall be paid, during
the term of the Debtor Note, by POC's reduction of any payments due under the
Van Reit Note so long as a balance remains on the Debtor Note and deduct such
amount from the monthly payment due under the Debtor Note. Upon payment in full
of the Debtor Note, CPSC shall make payments under the Van Reit Note directly to
POC or its designee.
4.3.3 In the event that CPSC fails to make any of the payments due
and owing under the Van Reit Note, POC and its successors and assigns shall have
the option, but not the duty or obligation, to pay or perform same. Any
payments on the Van Reit Note made by or on behalf of POC or its successors or
assigns from and after the Closing Date shall be credited against payments due
and owing by POC under the Debtor Note.
4.3.4 The assumption of the obligations, agreements, duties and
covenants under the Van Reit Note by CPSC shall be secured by a deed of trust
lien granted by CPSC in favor of POC against the Van Reit Property (the "Deed of
Trust to Secure Assumption"). The Deed of Trust to Secure Assumption shall be
substantially in form and substance attached hereto as Exhibit "P".
Page 40 of 210
4.3.5 If CPSC sells or conveys all or part of the Van Reit
Property, CPSC shall pay the proceeds of such sale to POC, to the extent that a
debt is owed under the Van Reit Documents. POC shall, upon receipt of such
proceeds, apply the proceeds to reduce the balance remaining on the Van Reit
Note. POC shall not be required to release its Deed of Trust to Secure
Assumption on the Van Reit Property unless the proceeds from any sale are
sufficient to pay the obligations under the Van Reit Note and the Deed of Trust
to Secure Assumption lien in full, or if, in POC's sole discretion, sufficient
value remains in the Van Reit Property to fully secure CPSC's assumption of and
performance under the Van Reit Note.
4.3.6 POC shall provide a monthly accounting of any reductions of
the amount due under the Debtor Note. The monthly accounting must accompany
each payment POC makes to CPSC under the Debtor Note. Without the monthly
accounting report, POC is not entitled to offset any monies due under that
particular month's payment on the Debtor's Note. CPSC shall have the right at
CPSC's cost to reasonably audit POC's records to verify such deductions.
4.3.7 In no event shall a payment by POC or its successors or
assigns on the Van Reit Note as provided herein satisfy, eliminate, or waive any
rights and remedies against CPSC that may arise or accrue in law or equity in
favor of POC or its successors or assigns for CPSC's failure to make and meet
the required payments on the Van Reit Note. Nothing herein shall make CPSC
directly liable to Van Reit under the Van Reit Note.
Page 41 of 210
ARTICLE V
CLOSING
5.1 Place of Closing. The consummation of the Transactions (the
------------------
"Closing") shall, unless another date, time or place is mutually agreed to in
writing by the Parties, take place at the offices of ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ & ▇▇▇,
▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇, at 10:00 a.m., local time, on the
Closing Date.
5.2 Actions by CPSC. At the Closing, CPSC shall deliver to POC the
------------------
following:
5.2.1 Bills of sale and assignments, in form and substance
reasonably satisfactory to counsel for POC, covering the Acquired Assets, duly
executed and acknowledged by CPSC and Cowboy, including a General Conveyance,
Assignment and ▇▇▇▇ of Sale substantially in the form and substance as that
attached hereto as Exhibit "Q".
5.2.2 The Acquired Assets.
5.2.3 A release and indemnity agreement for POC and its Affiliates
and their Representatives, including Termatsal, S.A. de C.V., Penn Octane de
Mexico, S.A. de C.V. and Tergas S.A. de C.V., substantially in the form and
substance of the Mutual Release attached hereto as Exhibit "R (the "Mutual
Release"), duly executed and acknowledged by CPSC and Cowboy.
5.2.4 The Deed of Trust to Secure Assumption duly executed and
acknowledged by CPSC.
5.2.5 The CPSC/Van Reit Property Deed duly executed and
acknowledged by CPSC and Cowboy.
5.2.6 A termination and release of the escrow pertaining to the
Escrow Account, pursuant to which CPSC and ▇▇▇▇▇ ▇▇▇▇▇ release their respective
interests in the Pledged Stock, substantially in the form and substance as the
Termination and Release of Escrow attached hereto as Exhibit "T," duly executed
and acknowledged by CPSC and ▇▇▇▇▇ ▇▇▇▇▇
Page 42 of 210
5.2.7 Special warranty deeds and other acts of sale, in authentic
form or similar forms of conveyance, in proper statutory form for recording,
duly executed and acknowledged by CPSC and Cowboy, covering the Real Property to
be conveyed to POC pursuant to this Agreement, including an assignment of the
Easements substantially in the form and substance as the Assignment of Easements
attached hereto as Exhibit "T".
5.2.8 Duly executed and acknowledged releases of all Encumbrances,
other than the Assumed Liabilities (to the extent that same are assumed by POC
under Section 3.3) and the Permitted Encumbrances, against the Acquired Assets.
5.2.9 Such further instruments of sale, transfer, conveyance,
assignment or delivery covering the Acquired Assets or any part thereof as POC
may reasonably require to assure the full and effective sale, transfer,
conveyance, assignment and delivery to it of the Acquired Assets, including
assignments and transfers of all Permits and licenses, duly executed and
acknowledged by CPSC and/or Cowboy.
5.2.10 All Warranties still in force and effect, if any, related
to construction, equipment or materials used in the construction of the Acquired
Assets.
5.2.11 Such other documents as may be specified herein or in the
Transaction Documents or as POC may reasonably request duly executed and
acknowledged.
5.2.12 The Intercreditor Agreement and such other documentation
required by PMG pursuant to Section 3.2 duly executed and acknowledged by CPSC.
Page 43 of 210
5.2.13 The Escrow Agreement duly executed and acknowledged by
CPSC.
5.2.14 Duly executed and acknowledged resolutions of the Directors
of CPSC authorizing the execution, delivery and performance of this Agreement
and the Transaction Documents by CPSC and approving the transactions
contemplated in this Agreement and in the Transaction Documents substantially in
form and substance as that attached hereto as Exhibit "V."
5.2.15 The ▇▇▇▇▇▇ Security Agreement duly executed by ▇▇▇▇▇▇.
5.2.16 The Debtor Security Agreement duly executed by CPSC.
5.3 Actions by POC. At the Closing POC shall deliver the following:
----------------
5.3.1 To ▇▇▇▇▇▇ the following:
5.3.1.1 The Cash Downpayment.
5.3.1.2 The ▇▇▇▇▇▇ Note duly executed by POC.
5.3.1.3 The ▇▇▇▇▇▇ Security Agreement duly executed by POC.
5.3.2 To CPSC the following:
5.3.2.1 The Debtor Note duly executed by POC.
5.3.2.2 The ▇▇▇▇▇▇▇ Guaranty duly executed by ▇▇▇▇▇
▇▇▇▇▇▇▇.
5.3.2.3 The CPSC/Van Reit Property Deed duly executed and
acknowledged by POC.
5.3.2.4 All documents in POC's possession, custody or
control relating to the Van Reit Property.
5.3.2.5 The Stock Warrant Purchase duly executed by POC.
Page 44 of 210
5.3.2.6 The Mutual Release duly executed and acknowledged
by POC, Termatsal, S.A. de C.V., Penn Octane de Mexico, S.A. de C.V. and Tergas
S.A. de C.V
5.3.2.7 Such documentation and form of release as may be
required by Bank One, N.A. authorizing the release of all of the funds in the
Escrow Account to CPSC, including a release letter substantially in the form and
substance as that attached hereto as Exhibit "V" duly executed by POC.
5.3.2.8 Such further instruments of sale, transfer,
conveyance, assignment or delivery covering the Van Reit Property as CPSC may
reasonably require to assure the full and effective sale, transfer, conveyance,
assignment and delivery to it of the Van Reit Property, duly executed and
acknowledged by POC.
5.3.2.9 Such other documents as may be specified herein or
in the Transaction Documents or as CPSC may reasonably request duly executed and
acknowledged by POC.
5.3.2.10 The Escrow Agreement duly executed and acknowledged
by POC.
5.3.2.11 Duly executed resolutions of the Directors of POC
authorizing the execution, delivery and performance of this Agreement and the
Transaction Documents by POC and approving the transactions contemplated in this
Agreement and the Transaction Documents substantially in form and substance as
that attached hereto as Exhibit "X."
5.3.3 To Cowboy the Mutual Release duly executed and acknowledged
by POC, Termatsal, S.A. de C.V., Penn Octane de Mexico, S.A. de C.V. and Tergas
S.A. de C.V
Page 45 of 210
5.4 Actions by Cowboy. At the Closing, Cowboy and CPSC shall deliver
-------------------
to POC the following:
5.4.1 Bills of sale and assignments, in form and substance
reasonably satisfactory to counsel for POC, covering the Acquired Assets, duly
executed and acknowledged by Cowboy and CPSC, including a General Conveyance,
Assignment and ▇▇▇▇ of Sale substantially in form and substance as that attached
hereto as Exhibit "R".
5.4.2 The Acquired Assets, if any.
5.4.3 The Mutual Release duly executed and acknowledged by Cowboy
and CPSC.
5.4.4 Special warranty deeds and other acts of sale, in authentic
form or similar forms of conveyance, in proper statutory form for recording,
duly executed and acknowledged by Cowboy and CPSC, covering the Real Property to
be conveyed to POC pursuant to this Agreement, including an assignment of the
Easements substantially in form and substance as the Assignment of Easements
attached hereto as Exhibit "U".
5.4.5 Duly executed and acknowledged releases of all Encumbrances,
other than the Assumed Liabilities (to the extent that same are assumed by POC
under Section 3.3) and the Permitted Encumbrances, against the Acquired Assets.
5.4.6 Such further instruments of sale, transfer, conveyance,
assignment or delivery covering the Acquired Assets or any part thereof as POC
may reasonably require to assure the full and effective sale, transfer,
conveyance, assignment and delivery to it of the Acquired Assets, including
assignments and transfers of all Permits and licenses, duly executed and
acknowledged by Cowboy and/or CPSC.
Page 46 of 210
5.4.7 All Warranties still in force and effect, if any, related to
construction, equipment or materials used in the construction of the Acquired
Assets.
5.4.8 Such other documents as may be specified herein or in the
Transaction Documents or as POC may reasonably request duly executed and
acknowledged.
5.4.9 Duly executed resolutions of the Directors of Cowboy
authorizing the execution, delivery and performance of this Agreement and the
Transaction Documents by Cowboy and approving the transactions contemplated in
this Agreement and in the Transaction Documents substantially in form and
substance as that attached hereto as Exhibit "Y."
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF CPSC
CPSC represents and warrants to POC as follows:
6.1 Organization and Good Standing. CPSC is a corporation duly
---------------------------------
organized, validly existing and in good standing under the Laws of the State of
Texas, with full power to carry on the Business and to convey the Acquired
Assets.
6.2 Authorization of Agreement. Subject to approval of the Bankruptcy
---------------------------
Court, CPSC has all requisite power and authority to execute and deliver this
Agreement and the Transaction Documents, to perform its obligations hereunder
and thereunder and to consummate the Transactions. Subject to approval of the
Bankruptcy Court, this Agreement and all other agreements and instruments to be
executed by CPSC in connection herewith have been (or upon execution will have
been) duly executed and delivered by CPSC, have been effectively authorized by
Page 47 of 210
all necessary action, and constitute (or upon execution will constitute) legal,
valid and binding obligations of CPSC enforceable against CPSC and the Estate
(as used herein, "Estate" shall mean the bankruptcy estate of the Debtor created
under the Bankruptcy Code section 541(a) upon commencement of the Case) in
accordance with their respective terms.
6.3 Ownership of Acquired Assets. CPSC has not placed or permitted or
-----------------------------
suffered to be placed any Encumbrances against the Acquired Assets or any right,
title or interest therein. Except as regards Permitted Encumbrances and any
Encumbrances which existed against the Real Property with respect to which an
Easement pertains at the time that CPSC acquired such Easement, CPSC has good
and indefeasible title to all of the Acquired Assets. Upon transfer to POC at
the Closing, POC will acquire good and indefeasible title to the Acquired
Assets, free and clear of all Encumbrances other than Permitted Encumbrances and
CPSC warrants and agrees to forever defend same to POC, its successors and
assigns, against every Person lawfully claiming or to claim same or any part
thereof, except as to the Permitted Encumbrances, when the claim is by, through
or under CPSC but not otherwise.
6.4 Absence of Undisclosed Liabilities. Except as otherwise provided
------------------------------------
herein, and except for liabilities and obligations set forth on the Schedule of
Assets and Liabilities on file in the Case and liabilities incurred in the
ordinary course of business since the date of the filing of such Schedule,
which, in the aggregate, are not material, there are no liabilities or
obligations of any nature, accrued, absolute, contingent or otherwise, whether
due or to become due, which relate to the Business or the Acquired Assets.
Following the Closing, no Claimants shall have any claim against or recourse to
POC, any Affiliate of POC or any of their Representatives or against any
Acquired Asset except in respect of the Assumed Liabilities and/or Permitted
Encumbrances.
Page 48 of 210
6.5 Compliance with Law; Permits and Licenses. To the extent that any
------------------------------------------
Permits and licenses currently in the name of CPSC are transferable, CPSC shall
fully and reasonably cooperate in the transfer thereof so as to permit POC to
continue to have the use and benefit thereof and the rights granted thereby
after the Closing shall have occurred. To the extent the Permits and licenses
are not transferable, CPSC shall fully and reasonably cooperate with and assist
POC in applying for and obtaining the Permits and licenses, at POC's sole cost
and expense. All of the Permits and licenses are valid and in force and all
applications for the Permits which are pending are in good standing, and all of
the Permits, licenses and applications are without challenge of any kind other
than the challenge made by Van Reit at the Texas Railroad Commission. CPSC owns
the entire right, title and interest in and to such licenses, Permits, and
applications without qualification, limitation, burden or Encumbrance of any
kind.
6.6 Environmental Matters.
----------------------
6.6.1 CPSC has not engaged in or allowed any operation (other than
POC's operations and product transportation) or activity upon, or any use or
occupancy of, any Real Property or any Leasehold for the purpose of or in any
way involving the handling, manufacture, treatment, storage, use, generation,
release, discharge, processing, recycling, refining, dumping or disposal of any
Hazardous Materials on, under, in or about any Real Property or Leasehold, or
transported or arranged for transport of any Hazardous Materials to, from or
across any Real Property or Leasehold, in each case which constitutes or
otherwise causes a material violation of or for which remediation or other
corrective action is or may be required under any Environmental Law.
Page 49 of 210
6.6.2 Other than as a result of POC's operations, no Hazardous
Materials have been used, manufactured, produced, constructed, deposited,
disposed of, stored or otherwise located on, under, in or about any Real
Property or any Leasehold, in a manner or condition which constitutes or
otherwise causes a material violation of or for which remediation or other
corrective action is or may be required under any Environmental Law.
6.6.3 Other than as a result of POC's operations, to CPSC's
knowledge, (i) no Hazardous Materials have migrated, or due to their location or
condition are threatening to migrate, from any Real Property or any Leasehold
on, under, in or about other properties, and (ii) no Hazardous Materials have
migrated, or due to their location or condition are threatening to migrate, from
other properties, on, under, in or about any Real Property or any Leasehold, in
a manner or condition which constitutes or otherwise causes a material violation
of or for which investigation, remediation or other corrective action is or may
be required under any Environmental Law.
6.6.4 To CPSC's knowledge, no underground improvement, including
any treatment, sump, storage tank or water, gas or oil well, has been installed
or located on any Real Property or any Leasehold, in a manner or condition which
constitutes or otherwise causes a material violation of any Environmental Law.
6.6.5 Except as to Permitted Encumbrances, neither the Debtor nor
any Representative thereof has received any written notice or other written
communication concerning: (i) any violation or alleged violation of
Environmental Laws with respect to the Acquired Assets or arising out of the
Page 50 of 210
conduct of the Business or with respect to any of the Acquired Assets (except
for any such violations which have been corrected to the satisfaction of the
appropriate authority); (ii) any alleged liability for environmental damages,
third party injury or property damages (including property rights or usage)
arising from a failure or alleged failure to comply with Environmental Laws in
any material respect relating to any of the Acquired Assets, Real Property or
Leasehold or arising out of the conduct of the Business; or (iii) any alleged
liability for the presence or suspected presence, or release or suspected
release of Hazardous Materials on any Real Property, Leasehold, or other
property used or held for use in connection with the Business or any property
upon which waste generated through the conduct of the Business has been disposed
or otherwise has become located. No directive, citation, notice, writ,
injunction, decree, order or judgment relating to the foregoing has been issued
or has been threatened, and CPSC is not in material default in any respect with
respect to any currently existing and effective directive, citation, notice,
writ, injunction, order or decree arising pursuant to Environmental Laws and
relating to any of the Acquired Assets or the conduct of the Business or
governing the possession or use of any Real Property or any Leasehold known to
or served upon CPSC or any of its Affiliates or any of their Representatives by
any court, arbitrator or Governmental Authority. There is no lawsuit, claim,
proceeding, citation, directive, summons or investigation pending or, to the
knowledge of CPSC, threatened pursuant to Environmental Laws concerning or
against the Debtor relating to the ownership, use, occupation, maintenance or
operation of any of the Acquired Assets, Real Property or Leasehold by and
Person, or relating to any alleged violation of any applicable Environmental
Laws relating to any of the Acquired Assets, Real Property or Leasehold or
arising out of the conduct of the Business or the suspected presence of any
Hazardous Materials on any Real Property, Leasehold or other property used or
held for use in connection with the Business or any property upon which waste
generated through the conduct of the Business has been disposed or otherwise has
become located.
Page 51 of 210
6.6.6 Subject to the use and operations by POC, to CPSC's
knowledge, CPSC has been and remains in compliance in all material respects with
the terms and conditions of each permit, license, certificate, franchise and
other authorization, consent and approval issued to it in connection with
Environmental Laws by any Governmental Authority with respect to its activity on
any Real Property or Leasehold or with respect to the Business or any of the
Acquired Assets. To CPSC's knowledge, CPSC maintains and has maintained at all
times all permits, licenses, certificates, franchises and other authorizations,
consents and approvals of any Governmental Authority required pursuant to
Environmental Laws for the Business or with respect to any Acquired Assets, Real
Property or Leasehold. Immediately prior to the Closing, each such permit,
license, certificate, franchise and other authorization, consent and approval
will be in full force and effect and shall not be subject to any pending or
threatened Action, suspension, termination or other modification.
6.6.7 Except as otherwise provided herein, CPSC is using
reasonable diligence and, to the best of its knowledge, has timely prepared and
made all necessary or desirable filings, reports, plans, applications, renewals,
modifications and other disclosures, and maintains and has maintained at all
times all books and records, required under any Environmental Law or with
respect to any Acquired Asset, Real Property or Leasehold or the Business.
Page 52 of 210
6.6.8 To CPSC's knowledge, CPSC is in compliance in all material
respects with all Environmental Laws in each jurisdiction in which any Acquired
Asset, Real Property or Leasehold is located or in which it conducts its
Business.
6.6.9 To CPSC's knowledge, there has been no exposure of any
Person or property to any Hazardous Materials in connection with the Business or
any Acquired Asset, Real Property or Leasehold which exposure could reasonably
be expected to give rise to or otherwise form the basis of a claim for damages
or compensation.
6.7 Property in Good Operating Condition. Subject to the use and
----------------------------------------
operations by POC, to the knowledge of CPSC, all buildings, Pipelines,
Facilities, Transfer Terminals, machinery, equipment, tools, fixtures, vehicles,
vessels, spare parts and other properties owned, leased or used by CPSC (whether
under its control or the control of others) are in good operating condition and
repair and are adequate and sufficient for all operations conducted by it.
6.8 No Default. Except as disclosed in CPSC's Schedules and
-----------
Statements of Affairs, in its Disclosure Statements as filed with the Bankruptcy
Court in the Case prior to the date hereof, or regarding the Assumed Liabilities
and the Permitted Encumbrances, CPSC is not, nor is it alleged to be, in default
under, or in breach of any term or provision of, any Contract, agreement, lease,
license, commitment, instrument or fiduciary or other obligation related to the
Acquired Assets. No other party to any Contract, agreement, lease, license,
commitment, instrument or fiduciary or other obligation related to the Acquired
Assets to which CPSC is a party, is in default thereunder, or in breach of any
term or provision thereof. There exists no condition or event which, after
notice or lapse of time or both, would constitute a default by any party to any
such Contract, agreement, lease, license, commitment, instrument or fiduciary or
other obligation.
Page 53 of 210
6.9 Litigation. Except as disclosed on Exhibit "Y" attached hereto,
----------
there is no Action pending or threatened against any officer, director,
shareholder, or employee of CPSC or against CPSC with respect to the Acquired
Assets or against any of the Acquired Assets.
6.10 Disclosure. No representation or warranty by CPSC in this
----------
Agreement or any statement, certificate or schedule furnished or to be furnished
pursuant hereto, or in connection with the Transactions contemplated hereby,
contains or will contain any untrue statement of material fact, or omits or will
omit a material fact necessary to make the statements contained herein or
therein not misleading.
6.11 Conduct of Business. From the date of the entry of the Approval
---------------------
Order until the Closing Date, except as permitted by the prior written consent
of POC or except to the extent that POC has been in possession of, or operating,
the Acquired Assets, (i) CPSC has not taken any action in connection with the
Acquired Assets, except in the ordinary course of business and (ii) CPSC has
used reasonable efforts (a) to preserve the Acquired Assets substantially
intact, (b) to maintain the Acquired Assets in due repair, order and condition
(subject to ordinary wear and tear), and (c) to comply with all material Laws
applicable to the Acquired Assets. By way of amplification and not limitation,
CPSC has not, between the date of the entry of the Approval Order and the
Closing Date, directly or indirectly, done, or agreed to do, any of the
following without the prior written consent of POC:
Page 54 of 210
6.11.1 Sold, assigned, pledged, disposed of or encumbered any of
the Acquired Assets, except for sales in the ordinary course of business of any
tangible personal property that have been retired from operation as a result of
the acquisition of a replacement asset of equal or greater value or utility that
is being transferred to POC at the Closing as an Acquired Asset;
6.11.2 Failed to comply with any material requirement of, or
otherwise to maintain, Easements required under applicable Law or failed to
defend or initiate any material proceeding before any Governmental Authority
necessary to protect the Acquired Assets or to ensure the continued,
uninterrupted operation of the Pipelines, except that as to Easement issues
disclosed to POC, the failure to have cured or maintained same shall not
constitute a breach of this Section 6.11.2.;
6.11.3 Failed to comply with or perform any of CPSC's contract
obligations under any Easement (except for defaults that are capable of being
cured through the payment on the Closing Date of cure payments under Bankruptcy
Code section 365(b)(1) or defaults of the kind specified in Bankruptcy Code
section 365(e)(1));
6.11.4 Terminated, replaced, amended or otherwise modified any
Easement, or waived any of the obligations of the parties to any such Easement
or CPSC's rights under any such Easement; or
6.11.5 Entered into any contract or agreement with any third party
that relates to the Acquired Assets, including any lease or other agreement for
the use of such third party of the Acquired Assets other than negotiations with
▇▇▇▇▇▇ or as necessary to comply with any Law or Order.
Page 55 of 210
6.12 Easements. The Soltex Development Easement, the ▇▇. ▇▇▇▇▇▇ ▇.
---------
▇▇▇▇▇ Easement, the ▇▇▇▇▇▇▇▇▇ Farms Partnership Easement and the ▇▇▇▇▇▇ ▇.
▇▇▇▇▇, ▇▇., Trustee Easement that are being conveyed to POC pursuant to this
Agreement are not subject to any Contract which has not been filed for public
record in the real property records of the County in which such Easement or Real
Property is located, nor to Debtor's knowledge are subject to any Claim. In the
event that such representation or warranty is untrue or incorrect in any
respect, then POC or its successors or assigns shall be entitled to Offset all
Costs incurred by POC or its successors or assigns as a result thereof.
ARTICLE VII
REPRESENTATIONS AND WARRANTIES OF POC
POC represents and warrants to CPSC and Cowboy as follows:
7.1 Organization. POC is a corporation duly incorporated, validly
------------
existing and in good standing under the Laws of the State of Delaware with all
requisite corporate power and authority to own, lease and operate its properties
and to carry on its business as it is now conducted and to issue the Warrants,
Promissory Notes, and to convey the Van Reit Property as provided in this
Agreement.
7.2 Authorization of Agreement. POC has all requisite corporate power
---------------------------
and authority to execute and deliver this Agreement and each Transaction
Document, to perform its obligations hereunder and thereunder and to consummate
the Transactions contemplated hereby or thereby. The execution and delivery by
POC of this Agreement and each Transaction Document and the performance of its
Page 56 of 210
obligations hereunder and thereunder have been duly and validly authorized by
all requisite corporate action on the part of POC. This Agreement has been duly
executed and delivered by POC and, assuming due authorization, execution and
delivery hereof by the other Parties, constitutes a legal, valid and binding
obligation of POC, enforceable against POC in accordance with its terms, except
as the same may be limited by bankruptcy, reorganization, insolvency, moratorium
and other laws affecting creditors rights generally and by legal principles of
general applicability governing the application and availability of equitable
remedies.
7.3 Disclosure. No representation or warranty by POC in this
----------
Agreement or any statement, certificate or schedule furnished or to be furnished
pursuant hereto, or in connection with the Transactions contemplated hereby,
contains or will contain any untrue statement of material fact, or omits or will
omit a material fact necessary to make the statements contained herein or
therein not misleading.
7.4 Environmental Matters.
-----------------------
7.4.1 POC has not engaged in or allowed any operation or activity
upon, or any use or occupancy of the Van Riet Property for the purpose of or in
any way involving the handling, manufacture, treatment, storage, use,
generation, release, discharge, processing, recycling, refining, dumping or
disposal of any Hazardous Materials on, under, in or about the Van Riet
Property, or transported or arranged for transport of any Hazardous Materials
to, from or across such Van Riet Property, in each case which constitutes or
otherwise causes a material violations of or for which remediation or other
corrective action is or may be required under any Environmental Law.
Page 57 of 210
7.4.2 No Hazardous Materials have been used, manufactured,
produced, constructed, deposited, disposed of, stored or otherwise located on,
under, in or about the Van Riet Property in a matter or condition which
constitutes or otherwise causes a material violation of or for which remediation
or the corrective action or may be required under any Environmental Law.
7.4.3 To POC's knowledge, (i) no Hazardous Materials have
migrated, or due to their location or condition are threatening to migrate, from
the Van Riet Property on, under, in or about other properties, and (ii) no
Hazardous Materials have migrated, or due to their location or condition are
threatening to migrate, from other properties, on under, in or about the Van
Riet Property in a matter or condition which constitutes or otherwise causes a
material violation of or for which investigation, remediation or other
corrective action is or may be required under Environmental Law.
7.4.4 To POC's knowledge, no underground improvement, including
any treatment, sump, or storage tank or water, gas or oil well, has been
installed or located on the Van Riet Property, in a manner or condition which
constitutes or otherwise causes a material violation of any Environmental Law.
7.4.5 Neither POC nor any Representative thereof has received any
written notice or other written communication concerning: (i) any violation or
alleged violation of Environmental Law arising out of the conduct of POC's
business (except for any such violations which have been corrected to the
satisfaction of the appropriate authority); (ii) any alleged liability for
environmental damages, third party injury or property damages (including
property rights or usage) arising from a failure to comply with Environmental
Laws in any material respect relating to the Van Riet Property or arising out of
Page 58 of 210
the conduct of POC's business; or (iii) any alleged liability for the presence
or suspected presence, or release or suspected release of Hazardous Materials on
the Van Riet Property. No directive, citation, notice, writ, injunction,
decree, order or judgment relating to the foregoing has been issued or has been
threatened, and POC is not in default in any material respect with respect to
any currently existing and effective directive, citation, notice writ,
injunction, order or decree arising pursuant to Environmental Laws and relating
to the conduct of POC's business or governing the possession or use of the Van
Riet Property known to POC or served upon POC by any court, arbitrator or
Governmental Authority. There is no lawsuit, claim, proceeding, citation,
directive, summons or investigation pending or, to the knowledge of POC,
threatened pursuant to Environmental Laws concerning or against POC relating to
the ownership, use, occupation, maintenance or operation of the Van Riet
Property, or relating to any alleged violation of any applicable Environmental
Laws relating to the Van Riet Property or arising out of POC's conduct of
business or the suspected presence of any Hazardous Materials on, near, or
affecting the Van Riet Property.
7.4.6 To POC's knowledge, POC has been and remains in compliance
in all material respects with the terms and conditions of all permits, licenses,
certificates, franchises and other authorizations, consents and approvals of any
Governmental Authority issued to it in connection with Environmental Laws by
any Governmental Authority with respect to its activity on the Van Riet
Property. To POC's knowledge, POC maintains and has maintained at all times all
permits, licenses, certificates, franchises and other authorizations, consents
and approvals of any Governmental Authority required pursuant to Environmental
Laws for operation of the Acquired Assets or with respect to the Van Riet
Page 59 of 210
Property. Immediately prior to the Closing, all such permits, licenses,
certificates, franchises and other authorizations, consents and approvals will
be in full force and effect and shall not be subject to any pending or
threatened Action, suspension, termination or other modification.
7.4.7 To POC's knowledge and using reasonable diligence, POC has
timely prepared and made all necessary or desirable filings, reports, plans,
applications, renewals, modifications and other disclosures, and has maintained
at all times all books and records, required under any Environmental Law or with
respect to the Van Riet Property.
7.4.8 To POC's knowledge, POC is in compliance in all material
respects with all Environmental Laws in each jurisdiction in which the Van Riet
Property is located.
7.4.9 To POC's knowledge, there has been no exposure of any Person
or property to any Hazardous Materials in connection with the Van Riet Property
which exposure could reasonably be expected to give rise to or otherwise form
the basis of a claim for damages or compensation
7.6 Litigation. Except as disclosed on Exhibit "Z" attached hereto, to
-----------
the best of the knowledge of POC, there is no Action pending or threatened
against any officer, director, shareholder, or employee of POC or against POC
with respect to the Acquired Assets or any of the Acquired Assets.
7.7 Escrow Account. POC has not transferred, assigned or pledged
---------------
the Escrow Account.
Page 60 of 210
ARTICLE VIII
REPRESENTATIONS AND WARRANTIES OF COWBOY
8.1 Organization. Cowboy is a corporation duly incorporated, validly
------------
existing and in good standing under the Laws of the State of Texas with all
requisite corporate power and authority to own, lease and operate its properties
and to carry on its business as it is now conducted.
8.2 Authorization. Cowboy has all requisite corporate power and
-------------
authority to execute and deliver this Agreement and each Transaction Document,
to perform its obligations hereunder and thereunder and to consummate the
Transactions contemplated hereby or thereby. The execution and delivery by
Cowboy of this Agreement and each Transaction Document and the performance of
its obligations hereunder and thereunder have been duly and validly authorized
by all requisite corporate action on the part of Cowboy. This Agreement has
been duly executed and delivered by Cowboy and (assuming due authorization,
execution and delivery hereof by the other party hereto) constitutes a legal,
valid and binding obligation of Cowboy, enforceable against Cowboy in accordance
with its terms, except as the same may be limited by bankruptcy, reorganization,
insolvency, moratorium and other laws affecting creditors rights generally and
by legal principles of general applicability governing the application and
availability of equitable remedies.
8.3 Disclosure. No representation or warranty by Cowboy in this
----------
Agreement or any statement, certificate or schedule furnished or to be furnished
pursuant hereto, or in connection with the Transactions contemplated hereby,
contains or will contain any untrue statement of material fact, or omits or will
omit to state a material fact necessary to make the statements contained therein
not misleading.
8.4 Truth of CPSC Representations. No representation or warranty by
-----------------------------
CPSC in this Agreement or any statement, certificate or schedule furnished or to
be furnished pursuant hereto, or in connection with the Transactions
contemplated hereby, contains any untrue statement of material fact, or omits a
material fact necessary to make the statements contained therein not misleading.
Page 61 of 210
ARTICLE IX
CONDITIONS TO THE ACQUISITION
9.1 Conditions to the Obligations of Each Party. The obligations of
---------------------------------------------
each Party to this Agreement to effect the Transactions contemplated hereby to
occur at the Closing shall be subject to the satisfaction or, to the extent
permitted by Law, written waiver approved by each Party as the case may be, of
each of the following conditions:
9.1.1 All requirements of any applicable Law or Order necessary for
the valid consummation of the Transactions contemplated herein to occur at the
Closing shall have been fulfilled by the Closing Date.
9.1.2 No Order of any nature issued by any court of competent
jurisdiction that prohibits consummation of all or any part of the Transactions
or that materially and adversely affects the validity, enforceability or binding
effect of any Transaction Document shall be in effect.
9.2 Conditions to the Obligation of POC to Consummate the Acquisition.
------------------------------------------------------------------
The obligations of POC to consummate the Transactions to occur at the Closing
shall be subject to the satisfaction or, to the extent permitted by Law, waiver
in writing by POC on or prior to the Closing Date of each of the following
conditions:
9.2.1 Representations and Warranties. Each of the representations
------------------------------
and warranties in Articles VI and VIII shall be true and correct in all material
respects as of the date of this Agreement and as of the Closing Date with the
Page 62 of 210
same effect as though such representations and warranties had been made on and
as of such dates, as provided in this Agreement, and each of the respective
covenants and agreements of CPSC and Cowboy to be performed after the date
hereof and at or prior to the Closing or such shorter period as specifically set
forth in a particular covenant or agreement shall have been duly performed by
the prescribed date or for the duration of the prescribed time period.
9.2.2 No Proceedings or Orders. Other than the Case, the Actions
-------------------------
disclosed on Exhibit "Y" attached hereto and the Permitted Encumbrances, there
shall not be any pending or threatened Action (including any investigation) to
restrain, enjoin or invalidate the Transactions.
9.2.3 Other Documents. POC shall have received from CPSC and
----------------
Cowboy the Transaction Documents and any other documents required to be
delivered by CPSC to POC pursuant to the provisions of this Agreement all in
form and substance reasonably satisfactory to POC.
9.2.4 No Adverse Changes; Other Conditions.
----------------------------------------
9.2.4.1 Between the date of this Agreement and the Closing
Date there shall not have occurred any damage, destruction or loss of any of the
Acquired Assets unless as a result of POC's operations or possession of the
Acquired Asset, whether or not covered by insurance, which has had or could
reasonably be expected to have a Material Adverse Effect, nor shall there have
occurred any other event or condition or any change from the information
available to POC on the date hereof which has had or which could reasonably be
expected to have a Material Adverse Effect.
Page 63 of 210
9.2.4.2 Unless as a result of POC's operations or possession of
the Acquired Assets, no replacement, addition or other modification to any
equipment or process used to conduct the Business which would have a Material
Adverse Effect will be necessary to comply with any additional or different
requirements which, as of the Closing Date, are existing or proposed under any
Permit but which will not become effective or otherwise applicable until after
the Closing Date.
9.2.5 The Approval Order.
--------------------
9.2.5.1 The Approval Order, in form and substance reasonably
satisfactory to POC, shall have been entered and shall not have been modified,
amended, dissolved, revoked, stayed or rescinded in any material respect
detrimental to POC and shall have become a Final Order.
9.2.5.2 All conditions precedent to the consummation of this
Agreement (other than the satisfaction or written waiver of the conditions to
the obligations of POC set forth in Section 9.2 or CPSC set forth in Section
9.3) shall have been satisfied or waived in writing as provided therein.
9.2.5.3 CPSC shall have complied in all material respects with
the Bankruptcy Code, the Bankruptcy Rules and all applicable orders of the
Bankruptcy Court entered in the Case.
9.2.6 Simultaneous Closing. Subject to the terms and conditions
---------------------
set forth in this Agreement, the closing of the Transactions contemplated to be
consummated at the Closing shall have occurred simultaneously.
9.2.7 Exercise of Rights under Liens. None of the Acquired Assets
------------------------------
shall have been sold, assigned, transferred or delivered to any Person.
Page 64 of 210
9.2.8 No Other Liabilities. POC shall not be liable for any other
--------------------
claims or Liabilities of CPSC or Cowboy, other than the Assumed Liabilities (to
the extent the Assumed Liabilities are assumed by POC under Section 3.3) and
property taxes for the year 2000 on the Acquired Assets prorated from June 19,
2000 forward.
9.3 Conditions to the Obligation of CPSC to Consummate the Acquisition.
------------------------------------------------------------------
The obligation of CPSC to consummate the Transactions to be consummated at the
Closing as contemplated by this Agreement shall be subject to the satisfaction
or waiver in writing by CPSC on or prior to the Closing Date of each of the
following conditions:
9.3.1 Representations and Warranties. Each of the representations
------------------------------
and warranties of POC contained in Article VII shall be true and correct in all
material respects as of the date hereof, and as of the Closing Date, with the
same effect as though such representations and warranties had been made on and
as of such date, and each of the covenants and agreements of POC to be performed
after the date hereof and at or prior to the Closing shall have been duly
performed by the prescribed date or for the duration of the prescribed time
period, in all material respects.
9.3.2 Entry of Approval Order. The Approval Order, in form and
--------------------------
substance reasonably satisfactory to CPSC, shall have been entered and shall not
have been modified, amended, dissolved, revoked, stayed or rescinded in any
material respect detrimental to the Estate and shall have become a Final Order.
9.3.3 No Material Adverse Affect. Between the date hereof and the
--------------------------
Closing Date there shall not have occurred any event, and no condition shall
have arisen which has had or could reasonably be expected to have a material
adverse effect on POC's ability to perform under the terms of this Agreement.
Page 65 of 210
9.3.4 No Proceedings or Orders. Other than the Case and those
---------------------------
disclosed on Exhibit "Z" attached hereto, there shall not be any pending or
threatened Actions (including any investigation) to restrain, enjoin or
invalidate the Transactions.
9.3.5 Other Documents. CPSC shall have received from POC the
----------------
Transaction Documents and any other documents required to be delivered by POC to
CPSC pursuant to the provisions of this Agreement all in form and substance
reasonably satisfactory to CPSC.
ARTICLE X
AMENDMENT, TERMINATION, EXPENSE REIMBURSEMENT,
LIQUIDATED DAMAGES
10.1 Amendment. Subject to any Bankruptcy Court approval requirement
---------
that may be applicable, this Agreement may be amended by the written agreement
(and only by the written agreement) of the Parties at any time prior to the
Closing Date.
10.2 Termination. This Agreement may be terminated prior to the
-----------
Closing as follows (the actual date on which this Agreement is terminated being
referred to herein as the "Termination Date"):
10.2.1 At any time on or prior to the Closing Date, by mutual
written consent of POC and either Cowboy or CPSC;
10.2.2 At the election of POC, if any one or more of the
conditions to the obligations of POC to close as set forth in Sections 9.1 or
9.2 has not been fulfilled by the Outside Date (as used herein, "Outside Date"
shall mean April 4, 2001);
Page 66 of 210
10.2.3 At the election of POC, if any of the following shall
occur:
10.2.3.1 If the Bankruptcy Court enters an order authorizing the
sale of all or a substantial part of the Acquired Assets to a party other than
POC;
10.2.3.2 Dismissal or conversion to Chapter 7 of the Case; or
10.2.3.3 The Bankruptcy Court shall not have signed the Approval
Order by the Outside Date;
10.2.4 By either POC, Cowboy or CPSC if the Closing has not occurred
on or before the Outside Date, time being of the essence;
10.2.5 By either POC, Cowboy or CPSC if any Governmental Authority of
competent jurisdiction shall have issued an Order or taken any other action
restraining, enjoining or otherwise prohibiting the Transaction (which the party
seeking to terminate this Agreement shall have used all reasonable efforts to
have lifted or reversed) and such Order (i) shall have become final and
nonappealable; and (ii) shall not have been sought by the party enjoined.
10.2.6 At the election of CPSC, if any one or none of the
conditions to the obligations of CPSC to close as set forth in Sections 9.1 or
9.3 have not been fulfilled by the Outside Date.
10.3 Effect of Termination. If this Agreement is terminated and the
-----------------------
Transactions are not consummated, this Agreement shall become void and of no
further force and effect.
Page 67 of 210
ARTICLE XI
MISCELLANEOUS
11.1 Expenses. Except as otherwise provided herein, the parties hereto
--------
shall bear their own respective costs and expenses (including all compensation
and expenses of counsel, financial advisors, consultants, actuaries and
independent accountants) incurred in connection with the preparation and
execution of this Agreement and the Transaction Documents and consummation of
the Transactions.
11.2 Entire Agreement, Disclosures in Writing. Except as otherwise
--------------------------------------------
provided herein, this Agreement, together with the Appendices and Schedules
hereto, and the Transaction Documents constitute the entire agreement of the
parties with respect to the subject matter hereof and supersede all prior and
contemporaneous agreements and understandings, both written and oral, among the
parties with respect to the subject matter hereof, including the Memorandum of
Understanding (except to the extent specifically provided in Section 3.9.
11.3 Counterparts. This Agreement and any amendments hereto may be
------------
executed in one or more counterparts, each of which will be deemed to be an
original by the party executing such counterpart, but all of which shall be
considered one and the same instrument.
11.4 Headings. The section and paragraph headings contained in this
--------
Agreement are for reference purposes only and shall not in any way affect the
meaning or interpretation of this Agreement.
Page 68 of 210
11.5 Notices. All notices hereunder shall be deemed given if in
-------
writing and delivered or sent by courier or by registered or certified mail
(return receipt requested) to the following addresses (or at such other
addresses as shall be specified by like notice):
if to CPSC and/or Cowboy, to:
▇▇▇▇ ▇▇▇▇▇▇
CPSC International Inc.
Two ▇▇▇▇▇ Center, Suite 2250
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
With a copy to:
▇▇▇▇▇▇ ▇▇▇▇▇▇
Jordan, Hyden, Womble, Culbreth, P.C.
▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
and to:
A.C. "▇▇▇▇▇" ▇▇▇▇▇▇
Cowboy Pipeline Service Company
Two ▇▇▇▇▇ Center, Suite 2250
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
with a copy to:
▇▇▇▇▇ ▇. ▇▇▇▇▇
The ▇▇▇▇▇ Law Firm
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Page 69 of 210
if to POC, to:
▇▇▇▇▇ ▇▇▇▇▇▇▇
Penn Octane Corporation
▇▇-▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇. ▇
▇▇▇▇ ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
With a copy to:
▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ & ▇▇▇, P.C.
▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
and to:
▇▇▇▇▇ ▇▇▇▇▇
Attorney at Law
▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Any notice given by delivery, mail or courier shall be effective when received.
Any notice given by facsimile shall be effective upon oral or machine
confirmation of transmission.
11.6 Governing Law. This Agreement shall be governed and construed in
--------------
accordance with the Laws of the State of Texas applicable to agreements made and
to be performed entirely within such state (without regard to conflict of laws
provisions of Texas law that would result in the application of the laws of
another jurisdiction) and, to the extent applicable, the Bankruptcy Code.
11.7 No Third-Party Beneficiaries. This Agreement is for the sole
------------------------------
benefit of the parties hereto and their permitted assigns, and nothing herein
express or implied shall give or be construed to give to any other Person any
legal or equitable rights hereunder.
Page 70 of 210
11.8 Survival of Representations. All statements contained in any
-----------------------------
certificate, schedule or other instrument delivered hereunder by any party to
this Agreement, shall be deemed representations and warranties by the Parties
hereunder. All representations, warranties and agreements made by any of the
Parties in this Agreement, or pursuant hereto, except as otherwise expressly
stated, shall survive the Closing and any investigation at any time made by or
on behalf of any of the Parties.
11.9 Binding, Effect, Assignment. This Agreement shall be binding upon
---------------------------
and inure to the benefit of the Parties and their respective successors and
permitted assigns, including any Person appointed for or in connection with any
chapter 11 case involving the Debtor in any subsequent case under the Bankruptcy
Code in which the Debtor may be a debtor. This Agreement and the rights and
remedies hereunder are not assignable by any Party without the prior written
consent of the remaining parties.
11.10 Further Assurances. CPSC, Cowboy and POC agree, to the extent
-------------------
necessary (and only to such extent), on or any time after the Closing Date, to
execute and deliver, or to cause to be executed and delivered, all such
instruments, and to take all such actions, as the other may reasonably request
in order to effectuate the intent and purpose of, and to otherwise carry out the
terms of, this Agreement.
11.11 Waivers and Amendments: Non-Contractual Remedies. This Agreement
------------------------------------------------
may be amended, superseded, canceled, renewed or extended, and the terms and
conditions hereof may be waived, only by a written instrument signed by the
Parties or, in the case of a waiver, the Party waiving compliance. Except as
otherwise provided herein, no delay on the part of any Party in exercising any
Page 71 of 210
right, power or privilege hereunder, nor any single or partial exercise of any
such right, power or privilege hereunder, shall preclude any other or further
exercise thereof or the exercise of any other such right, power or privilege
hereunder. The rights and remedies herein provided are cumulative and, except
as otherwise provided herein, are not exclusive of any rights or remedies that
any party may otherwise have at law or in equity.
11.12 Obligations Subject to Bankruptcy Court Approval. POC and Cowboy
------------------------------------------------
agree and acknowledge that CPSC's obligations hereunder are subject to the
approval of the Bankruptcy Court in the Case, as and to the extent required by
the applicable provisions of the Bankruptcy Code.
11.13 Confidentiality. This Agreement is confidential and the Parties
---------------
shall not disclose the terms hereof to any third party except as required by
law, including disclosure requirements under applicable Securities Law, or order
of a court of competent jurisdiction or to ▇▇▇▇▇▇.
11.14 Time of Essence. Time is of the essence.
-----------------
IN WITNESS WHEREOF, this Agreement has been signed on behalf of each of the
parties hereto by their respective duly appointed representatives thereunder
duly authorized as of the date first above written.
PENN OCTANE CORPORATION CPSC INTERNATIONAL INC.
By: By:
---------------------------------- ------------------------------
▇▇▇▇▇ ▇▇▇▇▇▇▇, Vice President ▇▇▇▇ ▇▇▇▇▇▇, President
Page 72 of 210
COWBOY PIPELINE SERVICE COMPANY
By:
----------------------------------
A.C. "▇▇▇▇▇" ▇▇▇▇▇▇
[Signature Page to Settlement Agreement between CPSC International, Inc., Cowboy
Pipeline Service Company and Penn Octane Corporation]
Page 73 of 210
LIST OF EXHIBITS
----------------
Exhibit A - 15 Mile Agreement
Exhibit B - 7 Mile Agreement
Exhibit C - Description of Van Reit Property
Exhibit D - List of CPSC Agreements
Exhibit E - List of Easements
Exhibit F - List of Permits
Exhibit G - List of Permitted Encumbrances
Exhibit H - Debtor's Note
Exhibit I - ▇▇▇▇▇▇ Note
Exhibit J - ▇▇▇▇▇▇ Security Agreement
Exhibit J1 - ▇▇▇▇▇▇▇ Guaranty
Exhibit K - Debtor Security Agreement
Exhibit K1 - Deed of Trust
Exhibit L - Intercreditor Agreement
Exhibit L1 - Lenders' Intercreditor Agreement
Exhibit L2 - Lenders' Intercreditor Agreement
Exhibit L3 - Brownsville Agreement
Exhibit M - ▇▇▇▇▇ Easement Payment Schedule
Exhibit M1 - Memorandum of Understanding
Exhibit N - CPSC/Van Reit Property Deed
Exhibit O - Stock Purchase Warrant
Exhibit P - Deed of Trust to Secure Assumption
Exhibit Q - General Conveyance, Assignment and ▇▇▇▇ of Sale
Exhibit R - Mutual Release
Exhibit S - Termination and Release of Escrow
Exhibit T - Assignment of Easements
Exhibit U - CPSC Corporate Resolutions
Exhibit V - Bank One Escrow Release Letter
Exhibit W - POC Corporate Resolutions
Exhibit X - Cowboy Corporate Resolutions
Exhibit Y - List of CPSC Litigation
Exhibit Z - List of POC Litigation
Page 74 of 210
EXHIBIT "A"
15 MILE AGREEMENT
[TO BE ATTACHED]
Page 75 of 210
EXHIBIT "B"
7 MILE AGREEMENT
[TO BE ATTACHED]
Page 76 of 210
EXHIBIT "C"
DESCRIPTION OF VAN REIT PROPERTY
Being a 477.0 acre tract, more or less, out of the Lieven ▇. ▇▇▇ ▇▇▇▇ 745.41
acre tract and out of the North part of ▇▇▇ ▇▇, ▇▇▇▇▇ ▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ as
recorded in Volume 14, Pages 49 & 49A, Map Records of Cameron County, Texas said
745.41 acre tract recorded in Volume 947, Page 931, Deed Records of Cameron
County, Texas and said 477.0 acres being the same tract of land described in
that certain Special Warranty Deed dated April 14, 2000, executed by Lieven ▇.
▇▇▇ ▇▇▇▇ and ▇▇▇▇▇▇▇ ▇. ▇▇▇ ▇▇▇▇, as grantors, to POC, as grantee, filed for
record in the Official Records of Cameron County, Texas in Volume 6238 at Page
96, and under Clerk's File No. 17408, and being more particularly located and
described as follows:
BEGINNING at the Northwest corner of the 745.41 acre tract and the Southwest
corner of the "▇▇▇▇▇ Acreage" (Volume 13, Page 71, Cameron County Map Records)
for the Northwest corner of this tract marked by an iron rod set by ▇. ▇.
▇▇▇▇▇▇▇▇, ▇▇., RPLS 3732 on April 4, 2000;
THENCE South 83 degrees 15 minutes 50 seconds East along the North line of the
745.41 acre tract same being the South line of the "▇▇▇▇▇ Acreage" (called the
North line of the ▇▇▇▇▇▇ Acreage in the above referenced deed from Lieven ▇. ▇▇▇
▇▇▇▇ and ▇▇▇▇▇▇▇ ▇. ▇▇▇ ▇▇▇▇, as grantors, to POC, as grantee), a total distance
of 3485.2 feet for the Northeast corner of this tract said corner being in a
drainage ditch;
THENCE South 06 degrees 47 minutes 46 seconds West along the East line of said
745.41 acre tract a distance of 2446.23 feet for a corner marked by a Concrete
Monument;
THENCE South 06 degrees 51 minutes 05 seconds West along the East line of said
745.41 acre tract and being the West line of Block 2, ▇▇▇▇▇▇ Tract (Volume 14,
Page 49 & 49A, Map Records and West line of Share 3 of ▇.▇. ▇▇▇▇▇▇ Estates,
▇▇▇▇▇▇ Tract), a distance of 3407.72 feet for a corner marked by a Concrete
Monument;
THENCE South 85 degrees 20 minutes 06 seconds East a distance of 15.51 feet
(South 84 degrees 55 minutes East 15.51 feet, ▇▇▇▇▇ ▇, ▇▇▇▇▇▇ ▇▇▇▇▇) for a
corner marked by a Concrete Monument;
THENCE South 05 degrees 04 minutes 41 seconds West along the West line of Block
4, ▇▇▇▇▇▇ Tract (Volume 14, Page 49 &49A Map Records) a distance of 44.77 feet
for the Southeast corner of this tract marked by an iron rod set by ▇. ▇.
▇▇▇▇▇▇▇▇, ▇▇., RPLS 3732 on April 4, 2000;
Page 77 of 210
THENCE North 85 degrees 32 minutes 12 seconds West in a Westerly direction a
distance of 3496.38 feet for the Southwest corner of this tract marked by an
iron rod set by ▇. ▇. ▇▇▇▇▇▇▇▇, ▇▇., RPLS 3732 on April 4, 2000;
THENCE North 06 degrees 44 minutes 46 seconds East along the East line of Palo
Alto ▇▇▇▇▇▇ Subdivision No. 1 (Volume 5, Page 43 Cameron County Map Records), a
distance of 6036.79 feet for the PLACE OF BEGINNING;
CONTAINING 477.0 acres of land, more or less.
Page 78 of 210
EXHIBIT "D"
LIST OF CPSC/COWBOY AGREEMENTS
1. Consulting Services Agreement between Penn Octane Corporation ("POC") and
Cowboy Pipeline Service Company ("Cowboy".)
2. Pipeline Project Management Services Agreement between POC and Cowboy.
3. Lease/Installment Purchase Agreement for Two (2) 15-Mile Pipelines dated
November 24, 1998, between POC and CPSC International, Inc. ("CPSC Intl.").
4. Letter Agreement between POC and CPSC Intl. dated November 24, 1998.
5, Letter Agreement between CPSC Intl. and POC dated January 7, 1999.
6, Letter Agreement between CPSC Intl. and POC dated January 15, 1999.
7. Letter Agreement between POC and CPSC Intl. dated January 25, 1999.
8. Lease/Installment Purchase Agreement for Two (2) 7-Mile Pipelines dated
February 1, 1999 between POC and CPSC Intl.
9. Amendment No. 2 to Lease/Installment Purchase Agreement for Two (2) 15-Mile
Pipelines dated November 24, 1998 and to Lease/Installment Agreement for
Two (2) 10-Kilometer Pipelines between CPSC Intl. and POC dated September
16, 1999.
10. Agreement dated September 16, 1999 by and between CPSC Intl. and POC.
11. Letter dated September 17, 1999 from CPSC Intl. to POC.
12. Letter Agreement between CPSC Intl. and POC dated December __, 1999.
13. Escrow Agreement dated December 14, 1999 between POC and CPSC Intl.
14. Addendum dated December 14, 1999 between POC and CPSC Intl.
15. Letter of Agreement dated February 21, 2000 between POC and CPSC Intl.
Page 79 of 210
EXHIBIT "E"
LIST OF EASEMENTS
1. International Boundary and ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇▇ ▇▇▇▇▇▇ Section, License No. LF/G-1589. (Issued to POC)
2. United States Department of State Permit Authorizing Penn Octane
Corporation to Construct Two Pipelines Crossing The International Boundary
Line Between The United States and Mexico for The Transport of Liquefied
Petroleum Gas (LPG) and Refined Product (Motor Gasoline and Diesel Fuel)
dated July 26, 1999. (Issued to POC)
3. License Agreement dated effective October 6, 1999, between Central Power
and Light Company, as Licensor, and CPSC International, an affiliate of
Cowboy Pipeline Service Company, as Licensee, recorded in Volume 5913 at
Page 1 et seq., and under Clerk's File No. 46834 of the Official Records of
Cameron County, Texas.
4. Pipeline Right of Way Easement dated August 12, 1999, between ▇▇▇▇▇▇ ▇.
▇▇▇▇▇, ▇▇., Trustee, as Grantor, and CPSC International, a Texas
corporation, as Grantee, recorded in Volume 6286 at Page 211 et. seq. , and
under Clerk's File No. 21234 of the Official Records of Cameron County,
Texas.
5. Pipeline Right of Way Easement dated August 9, 1999, between ▇▇▇▇▇▇▇▇▇
Farms Partnership, as Grantor, and CPSC International, a Texas corporation,
as Grantee, recorded in Volume 6286 at Page 194 et. seq., and under Clerk's
File No. 21232 of the Official Records of Cameron County, Texas.
6. Pipeline Right of Way Easement dated November 20, 1999, between ▇▇▇▇▇▇ ▇.
▇▇▇▇▇, ▇▇▇▇▇▇ ▇. ▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇ and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, as Grantor,
and CPSC International, a Texas corporation, as Grantee, recorded in Volume
6286 at Page 200 et. seq., and under Clerk's File No. 21233 of the Official
Records of Cameron County, Texas.
7. Easement Agreement dated April 20, 2000, between Soltex Development, Inc.,
as Grantor, and CPSC International, Inc., a Texas corporation, recorded in
Volume 6286 at Page 184 et. seq., and under Clerk's File No. 21230 of the
Official Records of Cameron County, Texas.
8. Pipeline Right of Way Easement dated August 9, 1999, between ▇▇. ▇▇▇▇▇▇ ▇.
▇▇▇▇▇, as Grantor, and CPSC International, a Texas corporation, as Grantee,
recorded in Volume 6286 at Page 189 et. seq., and under Clerk's File no.
21231 of the Official Records of Cameron County, Texas.
Page 80 of 210
9. Pipeline Crossing Agreement, Mile Post: 198.59, Santa ▇▇▇▇ Subdivision,
Location: Brownsville, Cameron County, Texas, dated July 19, 1999, between
Union Pacific Railroad Company, as Licensor, and CPSC International, a
Texas corporation, as Licensee.
10. Pipeline Crossing Agreement, Mile Post: 6.45, Brownsville Subdivision,
Location: Brownsville, Cameron County, Texas, dated July 19, 1999, between
Union Pacific Railroad Company, as Licensor, and CPSC International, a
Texas corporation, as Licensee.
11. Pipeline Crossing Agreement, Mile Post 7.50, Brownsville Subdivision,
Location: Olmito, Cameron County, Texas, dated July 20, 1999, between Union
Pacific Railroad Company, as Licensor, and CPSC International, a Texas
corporation, as Licensee.
12. Agreement For Joint Use of Right Way dated September 17, 1999, between
Cameron County Drainage District Number One and CPSC International.
13. Approval dated June 23, 1999, executed by Texas Department of
Transportation, Hwy. No. US 281, control # 220-4 to CPSC International.
14. Permission dated June 17, 1999 issued by Cameron County Engineering to ▇.
▇. ▇▇▇▇▇▇.
15. Approval dated June 23, 1999, executed by ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇
▇▇▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇. ▇▇. ▇▇ ▇▇, control # 220.7 to CPSC International.
16. Approval dated June 23, 1999, executed by Texas Department of
Transportation, Hwy. No. FM 511, control # 684-1 to CPSC International.
17. Approval dated June 22, 1999, executed by Texas Department of
Transportation, Hwy. No. US 77 & 83 Exp. control # 39-9 to CPSC
International.
18. Limited Easement Agreement for Two Underground Pipelines dated August 21,
2000, between ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, ▇▇., as Grantor, and Penn Octane
Corporation, as Grantee, recorded in Volume 6763, Page 149, Official
Records of Cameron County, Texas.
19. Easement Agreement dated November 10, 2000, between ▇▇▇▇ ▇▇▇▇▇▇, as
Grantor, and Penn Octane Corporation, as Grantee, recorded in Volume 6703,
Page 166-172, Official Records of Cameron County, Texas.
20. Easement Agreement dated December 13, 2000, between ▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇▇▇▇▇
▇. ▇▇▇▇▇▇, ▇▇▇▇▇▇▇ Van Tassel and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, as Grantors, and Penn
Octane Corporation, as Grantee, recorded in Volume 6762, Page 74-81,
Official Records of Cameron County, Texas.
Page 81 of 210
21. Easement Agreement dated July 6, 2000, between ▇▇▇▇▇▇▇▇ Family Limited
Partnership, as Grantor, and Penn Octane Corporation, as Grantee, recorded
in Volume 6522, Page 300, Official Records of Cameron County, Texas.
22. Easement Agreement dated September 13, 2000, between ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇.,
as Grantor, and Penn Octane Corporation, as Grantee, recorded in Volume
6763, Page 161-166 of the Official Records of Cameron County, Texas.
23. Easement Agreement dated June 23, 2000, between ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, as
Grantor, and Penn Octane Corporation, as Grantee, recorded in Volume 6522,
Page 307-313 of the Official Records of Cameron County, Texas.
24. Easement Agreement dated August 29, 2000, between ▇▇▇▇ ▇. ▇▇▇▇▇▇▇, as
Grantor, and Penn Octane Corporation, as Grantee, recorded in Volume 6522,
Page 267-272 of the Official Records of Cameron County, Texas.
25. Easement Agreement dated August 29, 2000, between ▇▇▇▇ ▇. ▇▇▇▇▇▇▇, as
Grantor, and Penn Octane Corporation, as Grantee, recorded in Volume 6522,
Page 273-279 of the Official Records of Cameron County, Texas.
26. Easement Agreement dated November 3, 2000, between ▇▇▇▇▇ ▇. and ▇▇▇▇▇▇▇
▇▇▇▇▇, as Grantors, and Penn Octane Corporation, as Grantee, recorded in
Volume 6703, Page 159-165 of the Official Records of Cameron County, Texas.
27. Easement Agreement dated August 28, ▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇,▇▇
Trustee for the ▇▇▇▇▇-▇▇▇▇▇▇▇ Trust, as Grantor, and Penn Octane
Corporation, as Grantee, recorded September 7, 2000 in Volume 6522, Page
261-Page 266 of the Official Records of Cameron County, Texas.
28. Limited Easement Agreement for Two Underground Pipelines dated July 28,
2000, between ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ and
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, as Grantor, and Penn Octane Corporation, as Grantee,
recorded in Volume 6763, Page 136 Official Records of Cameron County,
Texas.
29. Easement Agreement dated June 16, 2000, between ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, Jr. and
▇▇▇▇▇▇ ▇▇▇▇▇▇▇, as Grantor, and Penn Octane Corporation, as Grantee,
recorded in Volume 6522, Page 286-292, Official Records of Cameron County,
Texas.
30. Easement Agreement dated August 21, 2000, between ▇▇▇ ▇▇▇▇▇▇▇▇▇▇,
Independent Executor of the Estate of ▇▇▇▇▇▇▇ ▇. ▇▇▇▇, Deceased, as
Grantor, and Penn Octane Corporation, as Grantee, recorded in Volume 6522,
Page 280, Official Records of Cameron County, Texas.
Page 82 of 210
31. Easement Agreement dated February 12, 2001, between ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, as
Grantor, and Penn Octane Corporation, as Grantee, recorded in Volume 6842,
Page 8, Official Records of Cameron County, Texas.
Page 83 of 210
EXHIBIT "F"
LIST OF PERMITS
1. International Boundary and ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇▇ ▇▇▇▇▇▇ Section, License No. LF/G-1589.
2. United States Department of State Permit Authorizing Penn Octane
Corporation to Construct Two Pipelines Crossing The International Boundary
Line Between The United States and Mexico for The Transport of Liquefied
Petroleum Gas (LPG) and Refined Product (Motor Gasoline and Diesel Fuel)
dated July 26, 1999.
3. Approval dated June 23, 1999, executed by Texas Department of
Transportation, Hwy. No. US 281, control # 220-4 to CPSC International.
4. Permission dated June 17, 1999 issued by Cameron County Engineering to ▇.
▇. ▇▇▇▇▇▇.
5. Approval dated June 23, 1999, executed by ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇
▇▇▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇. ▇▇. ▇▇ ▇▇, control # 220.7 to CPSC International.
6. Approval dated June 23, 1999, executed by Texas Department of
Transportation, Hwy. No. FM 511, control # 684-1 to CPSC International.
7. Approval dated June 22, 1999, executed by Texas Department of
Transportation, Hwy. No. US 77 & 83 Exp. control # 39-9 to CPSC
International.
8. The T-4 and/or T-4R permit, if any, issued by the Texas Railroad
Commission, pursuant to its Statewide 70, 16 Tex. Admin. Code 3.65,
permitting the holder thereof to operate the Pipelines.
9. Agreement For Joint Use of Right Way dated September 17, 1999, between
Cameron County Drainage District Number One and CPSC International.
Page 84 of 210
EXHIBIT "G"
LIST OF PERMITTED ENCUMBRANCES
1. Brownsville Navigation District
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
2. Teofilo and ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Rout 2, ▇▇▇ ▇▇▇-▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
3. ▇▇▇▇▇ Marcheism
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
4. Texas Parks and Wildlife
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
5. Titan Wheel International, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
6. F. W. ▇▇▇▇ ▇▇▇▇▇▇▇, Trustee
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
7. ▇▇▇▇ and ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
▇.▇. ▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
8. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ Oroz
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, ▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
9. ▇▇▇▇▇ Family (but only to the extent of the remaining
85 Calle Jacaranda $50,000.00 payment due as set forth on
▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇ Exhibit "E" to this Agreement)
10. ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, ▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Page 85 of 210
11. Central Power and Light
c/o ▇▇▇▇▇▇ ▇▇▇▇▇▇
The Kleberg Law Firm
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
12. ▇▇▇▇▇▇ Construction Co., Inc. (but only to the extent of the ▇▇▇▇▇▇ Note
c/o Cavalier & Associates and Liens and security interests granted to
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇ the ▇▇▇▇▇▇ in the ▇▇▇▇▇▇ Security Agreement)
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
13. ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, ▇▇.
▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
14. ▇▇▇▇ ▇. ▇▇▇▇▇▇
▇▇ ▇▇, ▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
15. ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
#▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
16. ▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇.
#▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
17. ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
18. ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇.
▇▇▇ ▇▇▇▇ ▇▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
19. ▇▇▇▇▇▇▇▇ Family Limited Partnership
P. O. ▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Page 86 of 210
20. ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇.
▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
21. Gulf Breeze, Inc.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
22. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇ ▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
23. ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
24. ▇▇▇▇▇ ▇. and ▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
25. ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇, ▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
26. ▇▇▇▇▇▇ ▇. ▇▇▇▇▇ (Trustee)
▇▇▇▇▇ ▇▇▇▇▇▇▇ Trust
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
27. ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
28. ▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
29. Bolliver ▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇ ▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Page 87 of 210
30. ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇ ▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
31. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇ ▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
32. ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇ ▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
33. ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
Unknown Address
34. ▇▇▇▇▇▇▇ ▇▇▇▇ Van Tassel
▇▇▇ ▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
35. ▇▇▇▇▇▇▇ and ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
36. ▇▇▇▇▇▇ ▇. ▇▇▇▇
▇/▇ ▇▇▇ ▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇ ▇▇▇ ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
37. Los Fresnos CISD (but only to the extent of ad valorem taxes and
assessments against the Pipelines for the period
June 19, 2000 and after)
38. Point ▇▇▇▇▇▇ ISD (but only to the extent of ad valorem taxes and
assessments against the Pipelines for the period
June 19, 2000 and after)
39. Brownsville ISD (but only to the extent of ad valorem taxes and
assessments against the Pipelines for the period
June 19, 2000 and after)
40. Cameron County (but only to the extent of ad valorem taxes and
assessments against the Pipelines for the period
June 19, 2000 and after)
41. United States Department of Transportation
Page 88 of 210
EXHIBIT "H"
DEBTOR'S NOTE
PROMISSORY NOTE
---------------
$1,462,500.00 HOUSTON, TEXAS MARCH ____, 2001
FOR VALUE RECEIVED, the undersigned, PENN OCTANE CORPORATION, a Delaware
corporation ("Maker") promises to pay to the order of CPSC INTERNATIONAL, INC.,
a Texas corporation ("Holder"), in lawful money of the United States of America,
the sum of ONE MILLION FOUR HUNDRED SIXTY-TWO THOUSAND FIVE HUNDRED AND NO/100
DOLLARS ($1,462,500.00), together with interest on the unpaid principal balance
of this Note from day to day outstanding at the rate equal to the lesser of (a)
nine percent (9%) per annum or (b) the maximum nonusurious rate of interest
permitted by applicable law (the "Maximum Rate").
PLACE OF PAYMENT
All payments shall be made at Holder's office at Two ▇▇▇▇▇ Center, Suite
2250, ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇, or at such other location as
Holder may designate in writing to Maker. In the event that this Note is
assigned, Maker shall make all payments which become due after Maker's receipt
of written notice from the assignor-Holder and the assignee-Holder of such
assignment at such location as may be designated in writing by such
assignee-Holder.
PAYMENT TERMS
This Note is payable in thirty-six (36) monthly installments of
principal and interest as follows: (a) the first such installment being in the
amount of Forty-Six Thousand Five Hundred Seven and 11/100 Dollars ($46,507.11)
and being due and payable upon the Closing Date, (b) the second such installment
being in the amount of Forty-Six Thousand Five Hundred Seven and 11/100 Dollars
($46,507.11) and being due and payable on or before April 2, 2001 (provided,
however, if the Closing Date has not occurred by April 2, 2001, then such
installment shall be due and payable upon the Closing Date), (c) the next
thirty-three (33) such monthly installments being in the amount of Forty-Five
Thousand Seven Hundred Eighty-Two and 64/100 Dollars ($45,782.64) each being due
and payable on or before the first (1st) day of each calendar month commencing
on May 1, 2001 and continuing monthly thereafter, and (d) one final installment
in an amount equal to then entire remaining outstanding principal and all
accrued unpaid interest shall be due and payable on February 1, 2004. Maker
shall have the right and privilege from time to time to prepay, in whole or in
part, the principal of this Note, without premium or penalty, on or before
maturity at any time, and interest shall immediately cease on any amounts so
prepaid. Any prepayments shall be applied first to accrued interest and then to
the next maturing installments of principal.
Page 89 of 210
SETTLEMENT AGREEMENT
This Note is given by Maker pursuant to the terms of that certain
Settlement Agreement (the "Settlement Agreement") by and between CPSC
International, Inc., Cowboy Pipeline Service Company, Inc., and Penn Octane
Corporation dated of even date hereof.
SECURITY AGREEMENT
This Note is secured by the security interest granted in that certain
Security Agreement (the "Security Agreement") of even date herewith by and
between Maker, as Debtor therein, and Holder, as Secured Party therein.
CERTAIN OFFSETS TO DEBT EVIDENCED HEREUNDER
This Note is subject to the offsets more particularly detailed in the
Settlement Agreement.
DEFAULT AND REMEDIES
Maker shall be in default under this Note in the event of any of the
following (herein called a "default"):
a. The Maker's failure to pay any principal, accrued interest or other
amount of money owing on this Note and any such failure shall not be cured
within ten (10) days of the date of Maker's receipt of written notice from
Holder identifying the alleged default.
b. In the event that either (a) fifty-one percent (51%) or more of the
Common Stock of Maker is transferred by Persons who, as of the date hereof, own
issued and outstanding Common Stock of Maker to any Person who is not a
Permitted Transferee or (b) fifty-one percent (51%) or more of the Acquired
Assets are transferred to any Person, excepting (i) sales or transfers of items
of the Acquired Assets which have become obsolete or have been replaced by
adequate substitutes having a suitability, function or value equal to or greater
than the replaced items and (ii) sales or transfers of items of the Acquired
Assets which are made to one or more Affiliates of Maker provided that the
holder of such note shall have given its prior consent to such sale or transfer,
which consent may not be unreasonably withheld or delayed by the holder of such
note. Notwithstanding anything herein to the contrary, the Holder's refusal to
consent to any such sale or transfer of the Acquired Assets or any portion
thereof on the grounds that the proposed buyer is a non-U.S. Person or
controlled or owned by a non-U.S. Person shall be deemed a reasonable
withholding of such consent. A "Permitted Transferee" shall mean and include
Page 90 of 210
(1) the spouse or a descendant of the transferor, (2) the guardian of the
transferor, the spouse or a descendant of the transferor, (3) any trust the
beneficiary of which is the transferor, the spouse or a descendant of the
transferor, or (4) any Person who is an executive or director of Maker. The
term "descendant" or "descendants" shall mean lawful lineal blood descendants
of the first, second or any other degree of the ancestor designated; provided,
however, that an adopted child and such adopted child's lawful lineal
descendants by blood or adoption shall be considered under this Note as lawful
lineal blood descendants of the adopted parent or parents and of anyone who is
by blood or adoption a lineal ancestor of the adopting parent or of either of
the adopting parents as of the date of this Note. Notwithstanding anything
herein to the contrary, "Permitted Transferee" shall not include a non-U.S.
Person or an entity that is controlled or owned by a non-U.S. Person.
In the event of a default, the Holder shall be entitled to declare the
entire unpaid principal of and accrued interest on this Note immediately due and
payable, without notice of intent to accelerate, notice of acceleration, any
other notice whatsoever, demand, or presentment, all of which are hereby waived
(except as otherwise provided in this Note), to foreclose any liens and security
interests securing payment of this Note and to exercise all rights and remedies
provided at law or in equity, or under this Note. Each right and remedy shall
be cumulative and not exclusive.
INTEREST
Interest on the debt evidenced by this Note shall not exceed the Maximum
Rate and any interest in excess of that Maximum Rate which shall have been paid
or collected shall be credited on the principal of this Note or, if the
principal amount of this Note has been paid, any remaining excess shall be
refunded to Maker.
CHOICE OF LAW
This Agreement shall be deemed to have been made under, and shall be
governed by, the laws of the State of Texas in all respects.
NOTICE
Any notice required or which any party desires to give under this Note
shall be given and effective as provided in the Settlement Agreement.
DEFINED TERMS
Any capitalized term used and not otherwise defined in this Note shall have
the meaning assigned to such term in the Settlement Agreement.
MAKER:
PENN OCTANE CORPORATION
By:
-------------------------------
▇▇▇▇▇ ▇▇▇▇▇▇▇, Vice President
Page 91 of 210
EXHIBIT "I"
▇▇▇▇▇▇ NOTE
PROMISSORY NOTE
---------------
$ 900,000.00 HOUSTON, TEXAS MARCH ____, 2001
FOR VALUE RECEIVED, the undersigned, PENN OCTANE CORPORATION, A DELAWARE
CORPORATION ("Maker") promises to pay to the order of ▇▇▇▇▇▇ CONSTRUCTION CO.,
INC., A LOUISIANA CORPORATION ("Holder"), AS ASSIGNEE OF ▇▇▇▇▇▇ PIPELINE
COMPANY, a ______ corporation, and ▇▇▇▇▇▇ PIPELINE SERVICES, INC., a __________
corporation, in lawful money of the United States of America, the sum of NINE
HUNDRED THOUSAND AND NO/100 DOLLARS ($900,000.00), together with interest on the
unpaid principal balance of this Note from day to day outstanding at the rate
equal to the lesser of (a) nine percent (9%) per annum or (b) the maximum
nonusurious rate of interest permitted by applicable law (the "Maximum Rate").
PLACE OF PAYMENT
All payments shall be made to Holder by delivery of such payment to
____________ at_______________,_____________ or at such other location as the
Holder may designate in writing to Maker (said designation being from all of the
persons or entities which comprise the Holder in the event that there are more
than one such person or entity).
PAYMENT TERMS
This Note is payable in thirty-six (36) monthly installments of principal
and interest, the first thirty-five being in the amount of Twenty Eight Thousand
Six Hundred Nineteen and 76/100 Dollars ($28,619.76) each, with the first such
installment being due and payable on or before the first (1st) day of April ___,
2001, and continuing regularly on the first (1st) day of each month thereafter
through and including March 1, 2004, at which time the entire remaining
outstanding principal and all accrued unpaid interest shall be payable in full.
Maker shall have the right and privilege from time to time to prepay, in whole
or in part, the principal of this Note, without premium or penalty, on or before
maturity at any time, and interest shall immediately cease on any amounts so
prepaid. Any prepayments shall be applied first to accrued interest and then to
the next maturing installments of principal.
Page 92 of 210
SETTLEMENT AGREEMENT
This Note is given by Maker pursuant to the terms of (i) that certain
letter agreement (herein called the "CPSC/▇▇▇▇▇▇ Settlement Agreement") dated
October 16, 2000, between ▇▇▇▇ ▇▇▇▇▇▇▇, as attorneyl for CPSC International,
Inc., ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, attorney for ▇▇▇▇▇▇ Pipeline, and ▇▇▇ ▇▇▇▇▇, attorney for
Cowboy Pipeline Service Company, (ii) that certain Agreed Order - 129 signed
November 14, 2000, in Case No. 00-20805-C-11 (Chapter 11), In re CPSC
International, Inc., Debtor, in the United States Bankruptcy Court for the
Southern District of Texas, Corpus Christi Division, approving the CPSC/▇▇▇▇▇▇
Settlement Agreement, (iii) that certain letter of instruction dated of even
date herewith from Payee, ▇▇▇▇▇▇ Pipeline Company and ▇▇▇▇▇▇ Pipeline Services,
Inc. to Maker, CPSC International, Inc. and Cowboy Pipeline Service Company,
and (iv) that certain Settlement Agreement (the "Settlement Agreement") by and
between CPSC International, Inc., Cowboy Pipeline Service Company, and Penn
Octane Corporation dated of even date herewith.
SECURITY AGREEMENT
This Note is secured by the security interest granted in that certain
Security Agreement (the "Security Agreement") of even date herewith by and
between Maker, as Debtor therein, and Holder, as Secured Party therein.
DEFAULT AND REMEDIES
Maker shall be in default under this Note in the event of any of the
following (herein called a "default"):
a. The Maker's failure to pay any principal, accrued interest or other
amount of money owing on this Note or to perform any covenant, agreement or
condition in this Note or the Security Agreement to be observed or kept by Maker
and any such failure shall not be cured within ten (10) days of the date of
Maker's receipt of written notice from Holder identifying the alleged default.
b. In the event that either (a) fifty-one percent (51%) or more of the
Common Stock of Maker is transferred by Persons who, as of the date hereof, own
issued and outstanding Common Stock of Maker to any Person who is not a
Permitted Transferee or (b) fifty-one percent (51%) or more of the Acquired
Assets are transferred to any Person, excepting (i) sales or transfers of items
of the Acquired Assets which have become obsolete or have been replaced by
adequate substitutes having a suitability, function or value equal to or greater
than the replaced items and (ii) sales or transfers of items of the Acquired
Assets which are made to one or more Affiliates of Maker provided that the
holder of such note shall have given its prior consent to such sale or transfer,
which consent may not be unreasonably withheld or delayed by the holder of such
note. Notwithstanding anything herein to the contrary, the Holder's refusal to
Page 93 of 210
consent to any such sale or transfer of the Acquired Assets or any portion
thereof on the grounds that the proposed buyer is a non-U.S. Person or
controlled or owned by a non-U.S. Person shall be deemed a reasonable
withholding of such consent. A "Permitted Transferee" shall mean and include
(1) the spouse or a descendant of the transferor, (2) the guardian of the
transferor, the spouse or a descendant of the transferor, (3) any trust the
beneficiary of which is the transferor, the spouse or a descendant of the
transferor, or (4) any Person who is an executive or director of Maker. The
term "descendant" or "descendants" shall mean lawful lineal blood descendants
of the first, second or any other degree of the ancestor designated; provided,
however, that an adopted child and such adopted child's lawful lineal
descendants by blood or adoption shall be considered under this Note as lawful
lineal blood descendants of the adopted parent or parents and of anyone who is
by blood or adoption a lineal ancestor of the adopting parent or of either of
the adopting parents as of the date of this Note. Notwithstanding anything
herein to the contrary, "Permitted Transferee" shall not include a non-U.S.
Person or an entity that is controlled or owned by a non-U.S. Person.
In the event of a default, the Holder shall be entitled to declare the
entire unpaid principal of and accrued interest on this Note immediately due and
payable, without notice of intent to accelerate, notice of acceleration, any
other notice whatsoever, demand, or presentment, all of which are hereby waived
(except as otherwise provided in this Note or the Security Agreement), to
foreclose any liens and security interests securing payment of this Note and to
exercise all rights and remedies provided at law or in equity, or under this
Note or the Security Agreement. Each right and remedy shall be cumulative and
not exclusive.
INTEREST
Interest on the debt evidenced by this Note shall not exceed the Maximum
Rate and any interest in excess of that Maximum Rate which shall have been paid
or collected shall be credited on the principal of this Note or, if the
principal amount of this Note has been paid, any remaining excess shall be
refunded to Maker.
CHOICE OF LAW
This Agreement shall be deemed to have been made under, and shall be
governed by, the laws of the State of Texas in all respects.
NOTICE
Any notice required or which any party desires to give under this Note
shall be given and effective as provided in the Settlement Agreement.
DEFINED TERMS
Any capitalized term used and not otherwise defined in this Note shall have
the meaning assigned to such term in the Settlement Agreement.
MAKER:
PENN OCTANE CORPORATION
By:
------------------------------------
▇▇▇▇▇ ▇▇▇▇▇▇▇, Vice President
Page 94 of 210
EXHIBIT "J"
▇▇▇▇▇▇ SECURITY AGREEMENT
SECURITY AGREEMENT
------------------
THIS SECURITY AGREEMENT (herein called the "Security Agreement") is entered
into as of March ___, 2001, by PENN OCTANE CORPORATION, a Delaware
corporation, whose chief executive office, chief place of business and mailing
address is ▇▇-▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇, ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇,
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇▇, (herein called "Debtor"), and ▇▇▇▇▇▇ CONSTRUCTION CO.,
INC., a Louisiana corporation (herein called "Secured Party"), as assignee of
▇▇▇▇▇▇ Pipeline Company, a ______ corporation and ▇▇▇▇▇▇ Pipeline Services,
Inc., a ___________ corporation.
ARTICLE I
---------
SECURITY INTEREST
-----------------
Section 1.01 Grant of Security Interest. Debtor hereby grants and confirms
--------------------------
that it has granted to Secured Party a security interest in, a general lien
upon, and a right of set-off against the following described property (all of
which is herein called the "Collateral"):
(a) all of Debtor's rights, titles and interests in and to the
property described on Exhibit "A" attached hereto;
(b) the proceeds, products, additions, substitutions and accessions of
and to any and all of the foregoing.
Section 1.02 Indebtedness Secured. The security interest in, general lien
--------------------
upon, and right of set-off against the Collateral is granted to Secured Party to
secure the following (all of which is herein called the "Indebtedness"):
Page 95 of 210
(a) the prompt and unconditional payment when due of any and all
indebtedness under that certain Promissory Note dated of even date
herewith, executed by Debtor, payable to Secured Party, in the principal
amount of $900,000.00 (herein called the "Note");
(b) the reimbursement when due of all amounts which might be advanced
by Secured Party to satisfy amounts required to be paid by Debtor under
this Security Agreement, together with interest thereon to the extent
provided;
(c) the reimbursement and payment by Debtor of all advances, charges,
costs and expenses (including reasonable attorneys' fees and legal
expenses) incurred by Secured Party in connection with exercising any
right, power or remedy conferred by this Security Agreement or by law
(including, but not limited to attorneys fees and legal expenses incurred
by Secured Party in connection with the operation, maintenance or
foreclosure of any or all of the Collateral); and
(d) the performance and payment by Debtor of all its obligations in
this Security Agreement or any other document or agreement now or hereafter
executed in connection with or as security for any part of the Indebtedness
or any amount secured hereby.
ARTICLE II
----------
REPRESENTATIONS AND WARRANTIES
------------------------------
In order to induce Secured Party to accept this Security Agreement, Debtor
represents and warrants to Secured Party that:
Section 2.01 Ownership and Liens. Except for (i) the security interest
---------------------
granted in this Security Agreement in favor of Secured Party, (ii) the liens and
security interests claimed by and/or granted to RZB Finance, LLC (herein called
"RZB"), the Noteholders listed on Exhibit "B" attached hereto (herein called
the "Noteholders"), PMG Capital Corporation, acting as collateral agent for
various Noteholders (herein called "PMG"), CPSC International, Inc. (herein
called "CPSC") and Brownsville Navigation District of Cameron County (herein
called "BND"), and (iii) the security interests, liens, encumbrances, and
adverse claims subject to which CPSC sold, transferred, assigned and conveyed
the Collateral to Debtor (the security interests, liens, encumbrances, and
adverse claims identified in items (ii) and (iii) preceding being herein
collectively called the "Permitted Encumbrances"), Debtor owns title to the
Collateral same as that conveyed to Debtor by CPSC pursuant to the Settlement
Agreement free and clear of any other security interest, lien, encumbrance,
adverse claim or option created by Debtor. Subject to the terms and provisions
of (i) that certain Consent and Agreement of the Lessor by and between BND,
Secured Party, PMG, and CPSC.(herein called the "BND Agreement"), (ii) that
certain Intercreditor and Subordination Agreement between RZB, PMG, Secured
Page 96 of 210
Party, and CPSC (herein called the "Lenders' Agreement"; the BND Agreement and
Lenders' Agreement being herein collectively called the "Intercreditor
Agreements") and, with respect to the Easements, the terms of the instruments,
agreements, and understandings affecting, creating or relating to the Easements,
Debtor has authority to grant a security interest in the Collateral to Secured
Party in the manner provided herein and free and clear of any security interest,
lien, encumbrance, adverse claim or option created by the Debtor except the
Permitted Encumbrances; other than the Permitted Encumbrances, no security
interest, lien, encumbrance, adverse claim or option has been created by Debtor
with respect to any Collateral; to the best of Debtor's information and belief,
no financing statement or other security instrument is on file in any
jurisdiction covering such Collateral as a result of any security interest
created by Debtor other than those relating to the Permitted Encumbrances; and
Debtor's grant of a security interest in the Collateral to Secured Party in the
manner provided herein does not result in the creation or imposition of any
other security interest, lien, encumbrance, adverse claim or option in favor of
any individual, corporation, partnership, joint venture, association, joint
stock company, trust, trustee, unincorporated organization, government or agency
or court or political subdivision thereof, or any other form of entity (herein
called "Person") (other than Debtor) upon any Collateral except the Permitted
Encumbrances.
Section 2.02 Location. The address of Debtor's chief executive office and
--------
chief place of business is recited in the opening paragraph of this Security
Agreement.
Section 2.03 Certificate of Title. No item of Collateral is covered by a
--------------------
certificate of title.
ARTICLE III
-----------
COVENANTS
---------
Unless otherwise consented to in writing by Secured Party, Debtor will at
all times comply with the covenants contained in this Article III, from the date
hereof and for so long as any part of the Indebtedness is outstanding.
Section 3.01 Financing Statement Filings. Debtor recognizes that
-----------------------------
financing statements pertaining to the Collateral are being filed with the
office of the Secretary of State of Texas. Debtor will (a) immediately notify
Secured Party of any change to a state other than as represented in Section 2.01
of this Security Agreement in the location of Debtor's chief executive office or
chief place of business; and (b) immediately notify Secured Party of any change
in Debtor's name, identity or corporate structure.
Section 3.02 Taxes, etc. Subject to the terms of any agreements or
-----------
understandings affecting or relating to the Collateral, Debtor agrees to pay
prior to any delinquency all taxes, charges, liens and assessments against the
Collateral, and upon the failure of Debtor to do so, Secured Party, at its
option, may pay any of them and shall be the sole judge of the legality or
validity thereof and the amount necessary to discharge the same.
Page 97 of 210
Section 3.03 Maintenance of Collateral. Subject to the terms of any
---------------------------
agreements or understandings affecting or relating to the Collateral, Debtor
will (i) maintain the Collateral in good condition and will not misuse, abuse,
waste, destroy, endanger or allow the Collateral to deteriorate, except for
normal wear and tear, damage by the elements and acts of God, and (ii) as soon
as practicable, make or cause to be made all repairs, replacements or other
improvements to the Collateral as are necessary or desirable to accomplish the
foregoing.
Section 3.04 Further Assurances. Subject to the terms of the
-------------------
Intercreditor Agreements, Debtor will from time to time sign, execute, deliver
and file, alone or with Secured Party, any financing statement, security
agreements or other documents, and take all further action that may be necessary
to confirm, perfect and preserve the security interest created hereby. Subject
to the terms of the Intercreditor Agreements, Debtor shall do all such
additional and further acts, things, deeds, give such assurances and execute
such instruments as may be necessary to vest more completely in and assure to
Secured Party its rights under this Security Agreement.
Section 3.05 Filing Reproductions. At the option of Secured Party, a
---------------------
carbon, photographic or other reproduction of this Security Agreement or of a
financing statement covering the Collateral shall be sufficient as a financing
statement and may be filed as a financing statement.
Section 3.06 Title. Debtor agrees to protect the title to the Collateral
-----
which Debtor has acquired from CPSC pursuant to the Settlement Agreement but
subject to the Permitted Encumbrances.
Section 3.07 Inspection. Subject to the terms of any agreements or
----------
understandings affecting or relating to the Collateral, Debtor will, after not
less than two (2) days prior written from Secured Party, permit Secured Party to
inspect the Collateral during normal business hours.
Section 3.08 Insurance. Subject to the terms of any agreements or
---------
understandings affecting or relating to the Collateral, Debtor shall have and
maintain, with financially sound and reputable insurers, insurance covering the
goods included in the Collateral against risk of fire, theft and such other
risks as is normally insured against by owners of similar property, including
standard extended coverage, in an amount at least equal to the value thereof.
Policies evidencing any such property insurance (i) shall contain a standard
mortgagee's endorsement, (ii) shall provide for payment of any loss to Secured
Party to the extent of the Indebtedness, (iii) shall contain the agreement by
the insurer that any loss thereunder shall be payable to Secured Party
notwithstanding any action, inaction or breach of representation or warranty by
Debtor, (iv) shall provide that there shall be no recourse against Secured Party
for payment of premiums or other amounts with respect thereto and (v) shall
provide for a minimum of ten (10) days prior written notice to Secured Party of
any cancellation, modification or alteration of such insurance coverage. Debtor
Page 98 of 210
shall furnish Secured Party with certificates or other evidence of compliance
with the foregoing insurance provisions. Secured Party may apply any proceeds
of such insurance which may be received by it in payment on account of any past
due Indebtedness. If any insurance policy covering the goods included in the
Collateral expires or is canceled before the Indebtedness is paid in full, at
Secured Party's option, Secured Party may obtain replacement insurance which
may, but need not, be single interest insurance in favor of Secured Party and
Secured Party may pay the premiums thereunder.
Section 3.09 Expenses. Debtor agrees to pay to Secured Party, at Secured
--------
Party's offices, all reasonable and necessary advances, charges, costs and
expenses (including reasonable attorneys' fees and legal expenses) incurred by
Secured Party in connection with the transaction which gives rise to this
Security Agreement, in connection with confirming, perfecting and preserving the
security interest created under this Security Agreement, and in exercising any
right, power or remedy conferred by this Security Agreement or by law provided
that Secured Party shall have first notified Debtor in writing of such impending
advance, charge, cost or expense and given Debtor the opportunity to take such
steps as are necessary to confirm, perfect and/or preserve the security interest
which opportunity shall not be less than thirty (30) days. The amount of all
such advances, charges, costs and expenses shall be due and payable by Debtor to
Secured Party upon demand together with interest thereon from the date of demand
at the maximum rate of nonusurious interest allowed by law as of the date of
demand; for purposes of determining such maximum rate of nonusurious interest
under this Section, the amount of all such advances, charges, costs and expenses
shall be added to the amount of all other Indebtedness then outstanding, and the
aggregate amount shall be used.
ARTICLE IV
----------
DEFAULT; RIGHTS AND REMEDIES
----------------------------
Section 4.01 Application of Cash Sums. Prior to the happening of any
---------------------------
event of default under the Note (herein called a "Default"), all cash sums paid
to and received by Secured Party on account of the Collateral (i) shall be
promptly applied by Secured Party on the Indebtedness which shall have by its
terms matured and (ii) the balance shall be released to Debtor for use in
Debtor's business.
Section 4.02 Remedies. At any time after, and during the continuance of,
--------
a Default, subject to the terms of the Intercreditor Agreement, Secured Party
may take possession of the Collateral with or without judicial process and
apply, set-off, sell in one or more sales, lease or otherwise dispose of, any or
all of the Collateral, in its then-condition or following any commercially
reasonable preparation or processing, in such order as Secured Party may elect,
and any such sale may be made either at public or private sale at its place of
business or elsewhere, either for cash or upon credit or for future delivery, at
such price as Secured Party may deem fair, and Secured Party may be the
purchaser of any or all Collateral so sold and hold the same thereafter in its
own right free from any claim of Debtor or right of redemption. No such
purchase or holding by Secured Party shall be deemed a retention by Secured
Party in satisfaction of the Indebtedness. All demands, notices and
Page 99 of 210
advertisements, and the presentment of property at sale, are hereby waived,
except that Debtor shall be provided not less than ten (10) days prior written
notice of any sale or disposition or other action. Any sale hereunder may be
conducted by an auctioneer or any officer or agent of Secured Party. The
Collateral need not be present at any such sale.
Section 4.03 Proceeds. The proceeds of any sale or other disposition of
--------
the Collateral and all sums received or collected by Secured Party from or on
account of the Collateral shall, subject to the terms of the Intercreditor
Agreements, be applied by Secured Party in the manner set forth in Section 9.504
of the Code as presently in effect.
Section 4.04 Secured Party's Duties. The powers and remedies conferred
------------------------
upon Secured Party by this Security Agreement are solely to protect its interest
in the Collateral and shall not impose any duty upon Secured Party to exercise
any such power or remedy. Except as otherwise provided in the Note, this
Security Agreement or the Intercreditor Agreements, Secured Party shall be under
no duty whatsoever to make or give any presentment, demand for performance,
notice of nonperformance, protest, notice of protest, notice of dishonor, notice
of default, notice of intent to accelerate, notice of acceleration or other
notice or demand in connection with the Collateral or the Indebtedness, or to
take any steps necessary to preserve any rights against prior parties, all of
which are hereby waived by Debtor. Secured Party shall have no duty to comply
with any recording, filing or other legal requirements necessary to establish or
maintain the validity, priority or enforceability of, or Secured Party's rights
in or to, any of the Collateral.
Section 4.05 Secured Party's Actions. Debtor waives any right to require
-----------------------
Secured Party to proceed against any Person, exhaust any Collateral, or pursue
any other remedy in Secured Party's power; waives any and all notice of
acceptance of this Security Agreement or of creation, modification, renewal or
extension for any period of any of the Indebtedness from time to time; and
waives any defense arising by reason of any disability or other defense of any
Debtor or by reason of the cessation from any cause whatsoever of the liability
of any Debtor All dealings between Debtor and Secured Party, whether or not
resulting in the creation of Indebtedness, shall conclusively be presumed to
have been had or consummated in reliance upon this Security Agreement. Debtor
authorizes Secured Party, without notice or demand and without any reservation
of rights against Debtor and without affecting Debtor's liability hereunder or
on the Indebtedness, from time to time to (a) take and hold any other Property
as collateral, other than the Collateral, for the payment of any or all of the
Indebtedness, and exchange, enforce, waive and release any or all of the
Collateral or such other Property; (b) subject to the terms of the Intercreditor
Agreements, apply the Collateral or such other Property and direct the order or
manner of sale thereof as Secured Party in its discretion may determine; (c)
renew and/or extend for any period, accelerate, modify, compromise, settle or
release the obligation of Debtor with respect to any or all of the Indebtedness
or Collateral; and (d) release or substitute any Debtor.
Page 100 of 210
Section 4.06 Transfer of Indebtedness and Collateral. Secured Party may
----------------------------------------
transfer any or all of the Indebtedness, and upon any such transfer Secured
Party may transfer any or all of the Collateral and shall be fully discharged
thereafter from all liability with respect to the Collateral so transferred, and
the transferee shall be vested with all rights, powers and remedies of Secured
Party hereunder with respect to Collateral so transferred except as provided in
the Intercreditor Agreement; but with respect to any Collateral not so
transferred Secured Party shall retain all rights, powers and remedies hereby
given. Secured Party may at any time deliver any or all of the Collateral to
Debtor, whose receipt shall be a complete and full acquittance for the
Collateral so delivered, and Secured Party shall thereafter be discharged from
any liability therefor.
Section 4.07 Cumulative Security. The execution and delivery of this
--------------------
Security Agreement in no manner shall impair or affect any other security (by
endorsement or otherwise) for the payment of the Indebtedness. No security
taken hereafter as security for payment of the Indebtedness shall impair in any
manner or affect this Security Agreement. All such present and future
additional security is to be considered as cumulative security.
Section 4.08 Continuing Agreement. This is a continuing agreement and all
--------------------
the rights, powers and remedies of Secured Party hereunder shall continue to
exist until the Indebtedness is paid in full as the same becomes due and
payable.
Section 4.09 Cumulative Rights. The rights, powers and remedies of Secured
-----------------
Party hereunder shall be in addition to all rights, powers and remedies given by
statute or rule of law and are cumulative. The exercise of any one or more of
the rights, powers and remedies provided herein shall not be construed as a
waiver of any of the other rights, powers and remedies of Secured Party.
Furthermore, regardless of whether or not the Uniform Commercial Code is in
effect in the jurisdiction where such rights, powers and remedies are asserted,
Secured Party shall have the rights, powers and remedies of a secured party
under the Code, as amended from time to time.
Section 4.10 Exercise of Rights. Time shall be of the essence for the
--------------------
performance of any act under this Security Agreement or the Indebtedness by
Debtor, but neither Secured Party's acceptance of partial or delinquent payment
nor any forbearance, failure or delay by Secured Party in exercising any right,
power or remedy shall be deemed a waiver of any obligation of Debtor or of any
right, power or remedy of Secured Party or preclude any other or further
exercise thereof; and no single or partial exercise of any right, power or
remedy shall preclude any other or further exercise thereof, or of the exercise
of any other right, power or remedy.
Section 4.11 Remedy and Waiver. Secured Party may remedy any Default and
-----------------
may waive any Default without waiving the Default remedied or waiving any prior
or subsequent Default.
Section 4.12 Non-Judicial Remedies. Secured Party may enforce its rights
---------------------
hereunder without resort to prior judicial process or judicial hearing, and
Debtor expressly waives, renounces and knowingly relinquishes any and all legal
rights which might otherwise require Secured Party to enforce its rights by
judicial process. In so providing for non-judicial remedies, Debtor recognizes
and concedes that such remedies are consistent with the usage of the trade, are
responsive to commercial necessity and are the result of bargaining at arm's
length. Nothing herein is intended to prevent Secured Party or Debtor from
resorting to judicial process at either party's option.
Page 101 of 210
ARTICLE V
---------
MISCELLANEOUS
-------------
Section 5.01 Debtor. The term "Debtor" as used throughout this Security
------
Agreement shall (regardless of use of the singular form) mean Debtor
individually and/or collectively, and shall include the respective successors,
legal representatives, heirs and assigns of Debtor. The obligations and
agreements of Debtor hereunder are joint and several.
Section 5.02 Preservation of Liability. Neither this Security Agreement
--------------------------
nor the exercise by Secured Party (or any failure to so exercise) of any right,
power or remedy conferred herein or by law shall be construed as relieving any
Person liable on the Indebtedness from full liability on the Indebtedness and
for any deficiency thereon.
Section 5.03 Notices. Any notice or demand to Debtor under this Security
-------
Agreement or in connection with this Security Agreement may be given and shall
conclusively be deemed and considered to have been given and received upon the
deposit thereof, in writing, duly stamped and addressed to Debtor at the address
of Debtor appearing on the records of Secured Party, in the U.S. Mail, but
actual notice, however given or received, shall always be effective.
Section 5.04 Construction. This Security Agreement has been made in and
------------
the security interest granted hereby is granted in and both shall be governed by
the laws of the State of Texas (except to the extent that the laws of any other
jurisdiction govern the perfection and priority of the security interest granted
hereby) and of the United States of America, as applicable, in all respects,
including matters of construction, validity, enforcement and performance.
Section 5.05 Amendment and Waiver. This Security Agreement may not be
----------------------
amended, altered, or modified (nor may any of its terms be waived) except in
writing duly signed by an authorized officer of Secured Party and by Debtor.
Section 5.06 Invalidity. If any provision of this Security Agreement is
----------
rendered or declared invalid, illegal or unenforceable by reason of any existing
or subsequently enacted legislation or by a judicial decision which shall have
become final, Debtor and Secured Party shall promptly meet and negotiate
substitute provisions for those rendered invalid, illegal or unenforceable, but
all of the remaining provisions shall remain in full force and effect.
Page 102 of 210
Section 5.07 Successors and Assigns. The covenants, representations,
------------------------
warranties and agreements herein set forth shall be binding upon Debtor and
shall inure to the benefit of Secured Party, its successors and assigns.
Section 5.08 Survival of Agreements. All representations and warranties
-----------------------
of Debtor herein, and all covenants and agreements herein not fully performed
before the effective date of this Security Agreement, shall survive such date.
Section 5.09 Titles of Articles and Sections. All titles or headings to
--------------------------------
articles, sections or other divisions of this Security Agreement are only for
the convenience of the parties and shall not be construed to have any effect or
meaning with respect to the other content of such articles, sections or other
divisions, such other content being controlling as to the agreement between the
parties hereto.
Section 5.10 Exhibits. Any exhibits to this Security Agreement are
--------
incorporated herein by reference for all purposes.
Section 5.11 Terms Defined in Code. All terms used herein which are
------------------------
defined in the Code shall have the same meaning herein unless otherwise defined
herein or the context otherwise requires.
Section 5.12 Intercreditor Agreements. Notwithstanding anything herein to
------------------------
the contrary, the terms and conditions of this Security Agreement and the
rights, titles, interests and privileges granted or created in favor of Secured
Party herein are subject to the terms and conditions of the Intercreditor
Agreements.
Section 5.13 Counterparts. This Security Agreement and any amendments
------------
hereto may be executed in one or more counterparts, each of which will be deemed
to be an original by the party executing such counterpart, but all of which
shall be considered one and the same instrument.
Section 5.14 Settlement Agreement and Prior Claims. This Security Agreement
-------------------------------------
is executed and delivered pursuant to the terms of (i) that certain letter
agreement (herein called the "CPSC/▇▇▇▇▇▇ Settlement Agreement") dated October
16, 2000, between ▇▇▇▇ ▇▇▇▇▇▇▇, as attorney for CPSC, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, attorney
for ▇▇▇▇▇▇ Pipeline, and ▇▇▇ ▇▇▇▇▇, attorney for Cowboy Pipeline Service
Company, (ii) that certain Agreed Order - 129 signed November 14, 2000, in Case
No. 00-20805-C-11 (Chapter 11), In re CPSC International, Inc., Debtor, in the
United States Bankruptcy Court for the Southern District of Texas, Corpus
Christi Division (herein called the "Bankruptcy Proceeding"), approving the
CPSC/▇▇▇▇▇▇ Settlement Agreement, (iii) that certain letter of instruction dated
of even date herewith from Secured Party, ▇▇▇▇▇▇ Pipeline Company and ▇▇▇▇▇▇
Pipeline Services, Inc. to Debtor, CPSC and Cowboy Pipeline Service Company, and
(iv) that certain Settlement Agreement (the "Settlement Agreement") by and
between CPSC, Cowboy Pipeline Service Company, and Debtor dated of even date
Page 103 of 210
herewith. Debtor hereby acknowledges that Secured Party and/or its predecessors
have previously asserted and claimed liens against and security interests in
portions of the Acquired Assets (as such term is defined in the Settlement
Agreement) and the Collateral through the filing and recordation of oil and gas
liens against various properties and the filing of Proofs of Claim in the
Bankruptcy Proceeding. Secured Party hereby agrees that upon payment in full of
the Indebtedness, and from time to time thereafter, Secured Party will upon
request of Debtor, or its successors or assigns, execute, acknowledge, if
required, and deliver and/or cause to be executed, acknowledged, if required,
and delivered to Debtor any and all documents and instruments necessary or
desirable to Debtor, or its successors or assigns, to evidence the satisfaction
of the obligations secured by the security interests and liens of this Security
Agreement and the obligations for which such oil and gas liens were filed and
recorded and the Proofs of Claim were filed in the Bankruptcy Proceeding and for
which Secured Party and/or its predecessors have claimed any liens against or
security interests in any of the Acquired Assets and/or Collateral.
IN WITNESS WHEREOF, Debtor and Secured Party have executed this Security
Agreement as of the date set forth hereinabove.
DEBTOR:
------
PENN OCTANE CORPORATION,
a Delaware Corporation
By:
---------------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, President
SECURED PARTY:
--------------
▇▇▇▇▇▇ CONSTRUCTION CO., INC.,
a Louisiana corporation
By:_______________________________________
Name:_____________________________________
Title:____________________________________
Page 104 of 210
[Signature Page to Security Agreement between Penn Octane Corporation, as Debtor
and ▇▇▇▇▇▇ Construction Co., Inc., as Secured Party]
Page 105 of 210
EXHIBIT "A"
-----------
All of Debtor's rights, title and interest in those 2 parallel pipelines
approximately fifteen miles in length and with a nominal 8.625 outside diameter
extending from Debtor's terminal in Brownsville, Texas to a prescribed location
on the Mexican side of the Rio Grande west of Matamoros, Tamaulipas, Mexico,
more fully described in that Lease/Installment Purchase Agreement for Two(2)
15-mile Pipelines between Debtor and CPSC dated November 24, 1998 (the
"Pipelines"), the vents, casings, valves, cathodic protection devices, and other
items of personal property which are constructed on, affixed to or installed on
or in connection with the Pipelines, inlet flange to inlet flange, and includes
any and all equipment used in the operation and/or monitoring of the Pipelines
(the "Facilities"), any and all rights, titles, interests, liberties, privileges
and/or advantages in any real or personal property that allows, permits or
purports to allow or permit the construction, operation, use, maintenance or
monitoring of the Pipelines and/or the Facilities, including the right of
ingress and egress for the purposes of constructing, operating, using,
maintaining, monitoring, repairing, replacing or removing the Pipelines and/or
the Facilities, and includes, without limitation, easements, rights of way,
licenses, and permits, together with any ancillary or related rights, agreements
or other property of whatever kind or description necessary for the full use and
enjoyment of any such right, title or interest whether acquired through
contract, condemnation, or as a matter of law (the "Easements"), together with
any and all assets of every type and description, real, personal and mixed,
tangible, ▇▇▇▇▇▇ or inchoate, known or unknown, fixed or unfixed, accrued,
absolute, contingent or otherwise, wheresoever located, and whether or not
specifically referred to above, now owned or hereafter acquired by Debtor or in
which Debtor has or acquires any rights, titles, interests or privileges, that
are necessary for or used in connection with the ownership, operation,
maintenance, monitoring or repair of the Pipelines and/or the Facilities, but
excluding the Transfer Terminals (as such term is defined in the Settlement
Agreement).
Page 106 of 210
EXHIBIT "J1"
▇▇▇▇▇▇▇ GUARANTY
CONDITIONAL GUARANTY AGREEMENT
------------------------------
This Guaranty Agreement (this "Guaranty") is made effective as of the ____
--------
day of ____________, 2001, by ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ ("Guarantor"), in favor of CPSC,
---------
International, Inc., ("Debtor").
------
For good and valuable consideration, the receipt and adequacy of which are
hereby acknowledged, and as a material inducement to Debtor to enter into the
Settlement Agreement by and between Penn Octane Corporation, Debtor and Cowboy
Pipeline Services Company (the "Settlement Agreement") and the Debtor Note as
--------------------
defined in the Settlement Agreement (the "Debtor Note") issued by Penn Octane
-----------
Corporation ("Borrower"), Guarantor hereby guarantees to CPSC the punctual
--------
payment and performance when due, whether by lapse of time, by acceleration of
maturity, or otherwise, and at all times thereafter, of the Debtor Note in
accordance with the terms and conditions as set forth herein. All capitalized
terms not otherwise defined herein shall have the meanings ascribed to them in
the Settlement Agreement.
The guaranty of Guarantor is a continuing guaranty of payment and
performance and not a guaranty of collection. Guarantor shall be liable for the
payment and performance of the Debtor Note as a primary obligor. This Guaranty
shall be effective as a waiver of, and Guarantor hereby expressly waives, any
and all rights to which Guarantor may otherwise have been entitled under any
suretyship laws in effect from time to time.
This Guaranty is conditional upon Debtor's (1) entry into and performance
under the terms of the Settlement Agreement; and (2) execution and delivery of
the Intercreditor Agreement(s) in the form attached to the Settlement Agreement
as Exhibit "L." This Guaranty shall terminate and shall be of no further effect
whatsoever upon the occurrence of any of the following: (1) POC's execution and
delivery of a Debtor Deed of Trust and Debtor Security Agreement that secures
the Debtor Note as set forth in the Settlement Agreement subject to the
Intercreditor Agreement that shall have been fully executed and delivered to
Debtor; or (2) Debtor's refusal to enter into a modification of or amended
version of the Intercreditor Agreement ("Revised Intercreditor Agreement")
provided that any such modifications do not materially alter the value or
priority of the Debtor Deed of Trust and Debtor Security Agreement as security
for the Debtor Note as compared to the Intercreditor Agreement attached as
Exhibit "L" to the Settlement Agreement.
In the event of default in payment or performance of the Debtor Note, or
any part thereof, when such payment or performance becomes due, either by its
terms or as the result of the exercise of any power to accelerate, Guarantor
shall, on demand and without presentment, protest, or notice of protest,
Page 107 of 210
nonpayment, dishonor, default, nonperformance, acceleration, or intent to
accelerate, or any other notice whatsoever, all such notices being hereby waived
by Guarantor, pay the amount due thereon to Debtor or perform or observe the
agreement, covenant, term or condition, as the case may be, and it shall not be
necessary for Debtor, in order to enforce such payment or performance by
Guarantor, first to institute suit or pursue or exhaust any rights or remedies
against Borrower or any other individual or entity (hereinafter referred to as a
"Person"), or to enforce any rights against any security that shall ever have
------
been given to secure such payment or performance, or to join Borrower or any
other Person in any action to enforce this Guaranty, or to resort to any other
means of obtaining payment or performance of the Debtor Note. Any time that
Debtor is entitled to exercise its rights or remedies hereunder, it may in its
discretion elect to demand payment and/or performance. If Debtor elects to
demand performance, it shall at all times thereafter have the right to demand
payment until all of the Debtor Note have been paid and performed in full. If
Debtor elects to demand payment, it shall at all times thereafter have the right
to demand performance until all of the Debtor Note have been paid and performed
in full.
In the event any payment by Borrower or any other Person to Debtor is held
to constitute a preference, fraudulent transfer or other voidable payment under
any Law, or if for any other reason Debtor is required to refund such payment or
pay the amount thereof to any Person, such payment by Borrower or other Person
to Debtor shall not constitute a release of Guarantor from any liability
hereunder, and this Guaranty shall continue to be effective or shall be
reinstated (notwithstanding any prior release or discharge by Debtor of this
Guaranty or of Guarantor), as the case may be, with respect to, and this
Guaranty shall apply to, any and all amounts so refunded by Debtor or paid by
Debtor (which amounts shall constitute part of the Debtor Note), and any
interest paid by Debtor and any attorneys' fees, costs and expenses paid or
incurred by Debtor in connection with any such event. It is the intent of
Guarantor and Debtor that the obligations and liabilities of Guarantor hereunder
are absolute under any and all circumstances and that until the Debtor Note are
fully and finally paid and performed, and not subject to refund or disgorgement,
the obligations and liabilities of Guarantor hereunder shall not be discharged
or released, in whole or in part, by any act or occurrence that might, but for
the provisions of this Guaranty, be deemed a legal or equitable discharge or
release of a guarantor.
If acceleration of the time for payment of any of the Debtor Note is stayed
or delayed by any Law or tribunal, all such amounts shall nonetheless be payable
by Guarantor on demand by Debtor.
This Guaranty is for the benefit of Debtor and Debtor's successors and
assigns, and in the event of an assignment of the Debtor Note, or any part
thereof, the rights and benefits hereunder, to the extent applicable to the
Debtor Note so assigned, may be transferred with such Debtor Note. Guarantor
waives notice of any transfer or assignment of the Debtor Note, or any part
thereof, and agrees that failure to give notice will not affect the liabilities
of Guarantor hereunder.
This Guaranty is binding not only on Guarantor, but also on Guarantor's
heirs, personal representatives, successors and assigns. Upon the death of
Guarantor, this Guaranty shall continue against Guarantor's estate as to the
Debtor Note, including that portion incurred or arising after the death of
Guarantor and shall be provable in full against Guarantor's estate, whether or
not the Debtor Note are then due and payable.
Page 108 of 210
This Guaranty shall for all purposes be governed by and construed in
accordance with the Laws of the State of California and applicable United States
Federal Law, and is intended to be performed in accordance with, and only to the
extent permitted by, such Laws. All obligations of Guarantor hereunder are
payable and performable at the place or places where the Debtor Note are payable
and performable.
If any provision of this Guaranty or the application thereof to any Person
or circumstance shall, for any reason and to any extent, be judicially declared
to be invalid or unenforceable, neither the remaining provisions of this
Guaranty nor the application of such provision to any other Person or
circumstance shall be affected thereby, and the remaining provisions of this
Guaranty, or the applicability of such provision to other Persons or
circumstances, as applicable, shall remain in effect and be enforceable to the
maximum extent permitted by applicable Law.
All sums payable under this Guaranty shall be paid in lawful money of the
United States of America that at the time of payment is legal tender for the
payment of public and private debts.
It is not the intention of Debtor or Guarantor to obligate Guarantor to pay
interest in excess of that lawfully permitted to be paid by Guarantor under
applicable Law. Should it be determined that any portion of the Debtor Note or
any other amount payable by Guarantor under this Guaranty constitutes interest
in excess of the maximum amount of interest that Guarantor, in Guarantor's
capacity as guarantor, may lawfully be required to pay under applicable Law, the
obligation of Guarantor to pay such interest shall automatically be limited to
the payment thereof in the maximum amount so permitted under applicable Law.
The provisions of this paragraph shall override and control all other provisions
of this Guaranty and of any other agreement between Guarantor and Debtor.
Guarantor hereby represents, warrants, and covenants that (i) Guarantor is
the owner of a direct or indirect interest in Borrower, and Guarantor will
derive substantial benefit, directly or indirectly, from the entry of the
Settlement Agreement and the making of the Debtor Note and from the making of
this Guaranty by Guarantor; (ii) this Guaranty is duly authorized and valid, and
is binding upon and enforceable against Guarantor; (iii) Guarantor is not, and
the execution, delivery and performance by Guarantor of this Guaranty will not
cause Guarantor to be, in violation of or in default with respect to any Law or
in default (or at risk of acceleration of indebtedness) under any agreement or
restriction by which Guarantor is bound or affected; (iv) Guarantor has full
power and authority to enter into and perform this Guaranty; (v) there is no
Litigation pending or, to the knowledge of Guarantor, threatened before or by
any Tribunal against or affecting Guarantor;(vi) after giving effect to this
Guaranty, Guarantor is solvent, is not engaged or about to engage in business or
a transaction for which the property of Guarantor is an unreasonably small
capital, and does not intend to incur or believe that Guarantor will incur debts
Page 109 of 210
that will be beyond Guarantor's ability to pay as such debts mature; (vii)
Debtor has no duty at any time to investigate or inform Guarantor of the
financial or business condition or affairs of Borrower or any change therein,
and Guarantor will keep Guarantor fully appraised of Borrower's financial and
business condition; (ix) Guarantor acknowledges and agrees that Guarantor may be
required to pay and perform the Debtor Note in full without assistance or
support from the Borrower or any other party; and (x) Guarantor has read and
fully understands the provisions contained in the Debtor Note. Guarantor's
representations, warranties and covenants are a material inducement to Debtor to
enter into the other Debtor Note and shall survive the execution hereof and any
bankruptcy, foreclosure, transfer of security or other event affecting Borrower,
Guarantor, any other party, or any security for all or any part of the Debtor
Note.
Debtor shall have all rights, remedies and recourses afforded to Debtor by
reason of this Guaranty or by Law or equity or otherwise, and the same (i) shall
be cumulative and concurrent, (ii) may be pursued separately, successively or
concurrently against Guarantor or any other Person, or any one or more of them,
or against any security or otherwise, at the sole discretion of Debtor, (iii)
may be exercised as often as occasion therefor shall arise, it being agreed by
Guarantor that the exercise of, discontinuance of the exercise of or failure to
exercise any of such rights, remedies, or recourses shall in no event be
construed as a waiver or release thereof or of any other right, remedy, or
recourse, and (iv) are intended to be, and shall be, nonexclusive. No waiver of
any default on the part of Guarantor or of any breach of any of the provisions
of this Guaranty or of any other document shall be considered a waiver of any
other or subsequent default or breach, and no delay or omission in exercising or
enforcing the rights and powers granted herein or in any other document shall be
construed as a waiver of such rights and powers, and no exercise or enforcement
of any rights or powers hereunder or under any other document shall be held to
exhaust such rights and powers, and every such right and power may be exercised
from time to time. The granting of any consent, approval or waiver by Debtor
shall be limited to the specific instance and purpose therefor and shall not
constitute consent or approval in any other instance or for any other purpose.
No notice to or demand on Guarantor in any case shall of itself entitle
Guarantor to any other or further notice or demand in similar or other
circumstances. No provision of this Guaranty or any right, remedy or recourse
of Debtor with respect hereto, or any default or breach, can be waived, nor can
this Guaranty or Guarantor be released or discharged in any way or to any
extent, except specifically in each case by a writing intended for that purpose
(and which refers specifically to this Guaranty) executed, and delivered to
Guarantor, by Debtor.
Unless specifically provided otherwise, any notice for purposes of this
Guaranty shall be given in writing or by telex or by facsimile (fax)
transmission and shall be addressed or delivered to the respective addresses set
forth at the end of this Guaranty, or to such other address as may have been
previously designated by the intended recipient by notice given in accordance
with this paragraph. If sent by prepaid, registered or certified mail (return
receipt requested), the notice shall be deemed effective when the receipt is
signed or when the attempted initial delivery is refused or cannot be made
because of a change in address of which the sending party has not been notified;
Page 110 of 210
if transmitted by telex, the notice shall be effective when transmitted (answer
back confirmed); and if transmitted by facsimile or personal delivery, the
notice shall be effective when received. No notice of change of address shall
be effective except upon actual receipt. This paragraph shall not be construed
in any way to affect or impair any waiver of notice or demand provided in this
Guaranty or to require giving notice or demand to or upon any Person in any
situation or for any reason.
The term "Debtor" shall be deemed to include any subsequent holder(s) of
any of the Debtor Note. Whenever the context of any provisions hereof shall
require it, words in the singular shall include the plural, words in the plural
shall include the singular, and pronouns of any gender shall include the other
genders.
Time shall be of the essence in this Guaranty with respect to all of
Guarantor's obligations hereunder.
This Guaranty embodies the entire agreement between Debtor and Guarantor
with respect to the guaranty by Guarantor of the Debtor Note. This Guaranty
supersedes all prior agreements and understandings, if any, with respect to
guaranty by Guarantor of the Debtor Note. No condition or conditions precedent
to the effectiveness of this Guaranty exist. This Guaranty shall be effective
upon execution by Guarantor and delivery to Debtor.
Page 111 of 210
IN WITNESS HEREOF, Guarantor duly executed this Guaranty as of the date
first written above.
Address of Guarantor: GUARANTOR:
▇▇-▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇. ▇
▇▇▇▇ ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ --------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Page 112 of 210
EXHIBIT "K"
DEBTOR SECURITY AGREEMENT
SECURITY AGREEMENT
THIS SECURITY AGREEMENT (herein called the "Security Agreement") is entered
into as of March ___, 2001, by PENN OCTANE CORPORATION, a Delaware corporation,
whose address for notice is ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇, ▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Attention: ▇▇▇▇▇ ▇▇▇▇▇▇▇ (herein called "Debtor") and CPSC
INTERNATIONAL, INC., a Texas corporation, address for notice is Two ▇▇▇▇▇
Center, Suite 2250, ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇, Attention: ▇▇▇▇
▇▇▇▇▇▇ (herein called "Secured Party").
ARTICLE I
---------
SECURITY INTEREST
-----------------
Section 1.01 Grant of Security Interest. Debtor hereby grants and confirms
--------------------------
that it has granted to Secured Party a security interest in, a general lien
upon, and a right of set-off against the following described property (all of
which is herein called the "Collateral"):
(a) all of Debtor's rights, titles and interests in and to the
property described on Exhibit "A" attached hereto;
(b) the proceeds, products, additions, substitutions and accessions of
and to any and all of the foregoing.
Section 1.02 Indebtedness Secured. The security interest in, general lien
--------------------
upon, and right of set-off against the Collateral is granted to Secured Party to
secure the following (all of which is herein called the "Indebtedness"):
(a) the prompt and unconditional payment when due of any and all
indebtedness under that certain Promissory Note dated of even date
herewith, executed by Debtor, payable to Secured Party, in the principal
amount of $1,462,500.00 (herein called the "Note");
(b) the reimbursement when due of all amounts which might be advanced
by Secured Party to satisfy amounts required to be paid by Debtor under
this Security Agreement, together with interest thereon to the extent
provided;
Page 113 of 210
(c) the reimbursement and payment by Debtor of all advances, charges,
costs and expenses (including reasonable attorneys' fees and legal
expenses) incurred by Secured Party in connection with exercising any
right, power or remedy conferred by this Security Agreement or by law
(including, but not limited to attorneys fees and legal expenses incurred
by Secured Party in connection with the operation, maintenance or
foreclosure of any or all of the Collateral); and
(d) the performance and payment by Debtor of all its obligations in
this Security Agreement or any other document or agreement now or hereafter
executed in connection with or as security for any part of the Indebtedness
or any amount secured hereby.
ARTICLE II
----------
REPRESENTATIONS AND WARRANTIES
------------------------------
In order to induce Secured Party to accept this Security Agreement, Debtor
represents and warrants to Secured Party that:
Section 2.01 Ownership and Liens. Except for (i) the security interest
---------------------
granted in this Security Agreement in favor of Secured Party, (ii) the liens and
security interests claimed by and/or granted to ▇▇▇▇▇▇ Pipeline Services, Inc.,
▇▇▇▇▇▇ Pipeline Company, ▇▇▇▇▇▇ Pipeline Construction Co., Inc., RZB Finance,
LLC (herein called "RZB"), the Noteholders listed on Exhibit "B" attached
hereto (herein called the "Noteholders"), PMG Capital Corporation, acting as
collateral agent for various Noteholders (herein called "PMG"), and Brownsville
Navigation District of Cameron County (herein called "BND"), and (iii) the
security interests, liens, encumbrances, and adverse claims subject to which
Secured Party sold, transferred, assigned and conveyed the Collateral to Debtor
(the security interests, liens, encumbrances, and adverse claims identified in
items (ii) and (iii) preceding being herein collectively called the "Permitted
Encumbrances"), Debtor owns title to the Collateral same as that conveyed to
Debtor by Secured Party pursuant to the Settlement Agreement free and clear of
any security interest, lien, encumbrance, adverse claim or option created by
Debtor. Subject to the terms and provisions of (i) that certain Consent and
Agreement of the Lessor by and between BND, Debtor, Secured Party, PMG, ▇▇▇▇▇▇
Pipeline Services, Inc., ▇▇▇▇▇▇ Pipeline Company, ▇▇▇▇▇▇ Pipeline Construction
Co., Inc.(herein called the "BND Agreement"), (ii) that certain Intercreditor
Agreement between Secured Party and PMG (herein called the "CPSC/PMG
Agreement"), (iii) that certain Intercreditor and Subordination Agreement
between RZB, PMG, Secured Party, and ▇▇▇▇▇▇ Construction Co., Inc. (herein
called the "Lenders' Agreement"; the BND Agreement, CPSC/PMG Agreement and
Lenders' Agreement being herein collectively called the "Intercreditor
Agreements") and, with respect to the Easements, the terms of the instruments,
agreements, and understandings affecting, creating or relating to the Easements,
Debtor has authority to grant a security interest in the Collateral to Secured
Party in the manner provided herein and free and clear of any security interest,
lien, encumbrance, adverse claim or option created by Debtor except the
Page 114 of 210
Permitted Encumbrances; other than the Permitted Encumbrances, no security
interest, lien, encumbrance, adverse claim or option has been created by Debtor
with respect to any Collateral; to the best of Debtor's information and belief,
no financing statement or other security instrument is on file in any
jurisdiction covering such Collateral other than those created by Secured Party
or relating to the Permitted Encumbrances; and Debtor's grant of a security
interest in the Collateral to Secured Party in the manner provided herein does
not result in the creation or imposition of any other security interest, lien,
encumbrance, adverse claim or option in favor of any individual, corporation,
partnership, joint venture, association, joint stock company, trust, trustee,
unincorporated organization, government or agency or court or political
subdivision thereof, or any other form of entity (herein called "Person") (other
than Debtor) upon any Collateral except the Permitted Encumbrances.
Section 2.02 Location. The address of Debtor's chief executive office and
--------
chief place of business is recited in the opening paragraph of this Security
Agreement.
Section 2.03 Certificate of Title. No item of Collateral is covered by a
--------------------
certificate of title.
ARTICLE III
-----------
COVENANTS
---------
Unless otherwise consented to in writing by Secured Party, Debtor will at
all times comply with the covenants contained in this Article III, from the date
hereof and for so long as any part of the Indebtedness is outstanding.
Section 3.01 Financing Statement Filings. Debtor recognizes that
-----------------------------
financing statements pertaining to the Collateral are being filed with the
office of the Secretary of State of Texas. Debtor will (a) immediately notify
Secured Party of any change to a state other than as represented in Section 2.01
of this Security Agreement in the location of Debtor's chief executive office or
chief place of business; and (b) immediately notify Secured Party of any change
in Debtor's name, identity or corporate structure.
Section 3.02 Taxes, etc. Subject to the terms of any agreements or
-----------
understandings affecting or relating to the Collateral, Debtor agrees to pay
prior to any delinquency all taxes, charges, liens and assessments against the
Collateral, and upon the failure of Debtor to do so, Secured Party, at its
option, may pay any of them and shall be the sole judge of the legality or
validity thereof and the amount necessary to discharge the same.
Section 3.03 Maintenance of Collateral. Subject to the terms of any
---------------------------
agreements or understandings affecting or relating to the Collateral, Debtor
will (i) maintain the Collateral in good condition and will not misuse, abuse,
waste, destroy, endanger or allow the Collateral to deteriorate, except for
normal wear and tear, damage by the elements and acts of God and (ii) as soon as
practicable, make or cause to be made all repairs, replacements or other
improvements to the Collateral as are necessary or desirable to accomplish the
foregoing.
Page 115 of 210
Section 3.04 Further Assurances. Subject to the terms of the
-------------------
Intercreditor Agreements, Debtor will from time to time sign, execute, deliver
and file, alone or with Secured Party, any financing statement, security
agreements or other documents, and take all further action that may be necessary
to confirm, perfect and preserve the security interest created hereby. Subject
to the terms of the Intercreditor Agreements, Debtor shall do all such
additional and further acts, things, deeds, give such assurances and execute
such instruments as may be necessary to vest more completely in and assure to
Secured Party its rights under this Security Agreement.
Section 3.05 Filing Reproductions. At the option of Secured Party, a
---------------------
carbon, photographic or other reproduction of this Security Agreement or of a
financing statement covering the Collateral shall be sufficient as a financing
statement and may be filed as a financing statement.
Section 3.06 Title. Debtor agrees to protect the title to the Collateral
-----
which Debtor has acquired from Secured party pursuant to the Settlement
Agreement but subject to the Permitted Encumbrances.
Section 3.07 Inspection. Subject to the terms of any agreements or
----------
understandings affecting or relating to the Collateral, Debtor will, after not
less than two (2) days prior written from Secured Party, permit Secured Party to
inspect the Collateral during normal business hours.
Section 3.08 Insurance. Subject to the terms of any agreements or
---------
understandings affecting or relating to the Collateral, Debtor shall have and
maintain, with financially sound and reputable insurers, insurance covering the
goods included in the Collateral against risk of fire, theft and such other
risks as is normally insured against by owners of similar property, including
standard extended coverage, in an amount at least equal to the value thereof.
Policies evidencing any such property insurance (i) shall contain a standard
mortgagee's endorsement, (ii) shall provide for payment of any loss to Secured
Party to the extent of the Indebtedness, (iii) shall contain the agreement by
the insurer that any loss thereunder shall, except as provided in the
Intercreditor Agreements or in any agreements related to the Permitted
Encumbrances, be payable to Secured Party notwithstanding any action, inaction
or breach of representation or warranty by Debtor, (iv) shall provide that there
shall be no recourse against Secured Party for payment of premiums or other
amounts with respect thereto and (v) shall provide for a minimum of ten (10)
days prior written notice to Secured Party of any cancellation, modification or
alteration of such insurance coverage. Debtor shall furnish Secured Party with
certificates or other evidence of compliance with the foregoing insurance
provisions. Subject to the terms of the Intercreditor Agreements, Secured Party
may apply any proceeds of such insurance which may be received by it in payment
on account of any past due Indebtedness. If any insurance policy covering the
goods included in the Collateral expires or is canceled before the Indebtedness
is paid in full, at Secured Party's option, Secured Party may obtain replacement
insurance which may, but need not, be single interest insurance in favor of
Secured Party and Secured Party may pay the premiums thereunder.
Page 116 of 210
Section 3.09 Expenses. Debtor agrees to pay to Secured Party, at Secured
--------
Party's offices, all reasonable and necessary advances, charges, costs and
expenses (including reasonable attorneys' fees and legal expenses) incurred by
Secured Party in connection with preserving the security interest created under
this Security Agreement, and in exercising any right, power or remedy conferred
by this Security Agreement or by law, provided that Secured Party shall have
first notified Debtor in writing of such impending advance, charge, cost or
expense and given Debtor the opportunity to take such steps as are necessary to
preserve the security interest, which opportunity shall not be less than thirty
(30) days. The amount of all such advances, charges, costs and expenses shall
be due and payable by Debtor to Secured Party upon demand together with interest
thereon from the date of demand at the maximum rate of nonusurious interest
allowed by law as of the date of demand; for purposes of determining such
maximum rate of nonusurious interest under this Section, the amount of all such
advances, charges, costs and expenses shall be added to the amount of all other
Indebtedness then outstanding, and the aggregate amount shall be used.
ARTICLE IV
----------
DEFAULT; RIGHTS AND REMEDIES
----------------------------
Section 4.01 Application of Cash Sums. Prior to the happening of any
---------------------------
event of default under the Note (herein called a "Default"), all cash sums paid
to and received by Secured Party on account of the Collateral (i) shall be
promptly applied by Secured Party on the Indebtedness which shall have by its
terms matured and (ii) the balance shall be released to Debtor for use in
Debtor's business.
Section 4.02 Remedies. At any time after, and during the continuance of,
--------
a Default, subject to the terms of the Intercreditor Agreements, Secured Party
may take possession of the Collateral with or without judicial process and
apply, set-off, sell in one or more sales, lease or otherwise dispose of, any or
all of the Collateral, in its then-condition or following any commercially
reasonable preparation or processing, in such order as Secured Party may elect,
and any such sale may be made either at public or private sale at its place of
business or elsewhere, either for cash or upon credit or for future delivery, at
such price as Secured Party may deem fair, and Secured Party may be the
purchaser of any or all Collateral so sold and hold the same thereafter in its
own right free from any claim of Debtor or right of redemption. No such
purchase or holding by Secured Party shall be deemed a retention by Secured
Party in satisfaction of the Indebtedness. All demands, notices and
advertisements, and the presentment of property at sale, are hereby waived,
except that Debtor shall be provided not less than ten (10) days prior written
notice of any sale or disposition or other action. Any sale hereunder may be
conducted by an auctioneer or any officer or agent of Secured Party. The
Collateral need not be present at any such sale.
Page 117 of 210
Section 4.03 Proceeds. The proceeds of any sale or other disposition of
--------
the Collateral and all sums received or collected by Secured Party from or on
account of the Collateral shall, subject to the terms of the Intercreditor
Agreements, be applied by Secured Party in the manner set forth in Section 9.504
of the Code as presently in effect.
Section 4.04 Secured Party's Duties. The powers and remedies conferred
------------------------
upon Secured Party by this Security Agreement are solely to protect its interest
in the Collateral and shall not impose any duty upon Secured Party to exercise
any such power or remedy. Except as otherwise provided in the Note, this
Security Agreement or the Intercreditor Agreements, Secured Party shall be under
no duty whatsoever to make or give any presentment, demand for performance,
notice of nonperformance, protest, notice of protest, notice of dishonor, notice
of default, notice of intent to accelerate, notice of acceleration or other
notice or demand in connection with the Collateral or the Indebtedness, or to
take any steps necessary to preserve any rights against prior parties (except as
provided in the Intercreditor Agreements), all of which are hereby waived by
Debtor. Secured Party shall have no duty to comply with any recording, filing or
other legal requirements necessary to establish or maintain the validity,
priority or enforceability of, or Secured Party's rights in or to, any of the
Collateral.
Section 4.05 Secured Party's Actions. Debtor waives any right to require
-----------------------
Secured Party to proceed against any Person, exhaust any Collateral, or pursue
any other remedy in Secured Party's power; waives any and all notice of
acceptance of this Security Agreement or of creation, modification, renewal or
extension for any period of any of the Indebtedness from time to time; and
waives any defense arising by reason of any disability or other defense of any
Debtor or by reason of the cessation from any cause whatsoever of the liability
of any Debtor All dealings between Debtor and Secured Party, whether or not
resulting in the creation of Indebtedness, shall conclusively be presumed to
have been had or consummated in reliance upon this Security Agreement. Debtor
authorizes Secured Party, without notice or demand and without any reservation
of rights against Debtor and without affecting Debtor's liability hereunder or
on the Indebtedness, from time to time to (a) take and hold any other Property
as collateral, other than the Collateral, for the payment of any or all of the
Indebtedness, and exchange, enforce, waive and release any or all of the
Collateral or such other Property; (b) subject to the terms of the Intercreditor
Agreements, apply the Collateral or such other Property and direct the order or
manner of sale thereof as Secured Party in its discretion may determine; (c)
renew and/or extend for any period, accelerate, modify, compromise, settle or
release the obligation of Debtor with respect to any or all of the Indebtedness
or Collateral; and (d) release or substitute any Debtor.
Section 4.06 Transfer of Indebtedness and Collateral. Secured Party may
----------------------------------------
transfer any or all of the Indebtedness, and upon any such transfer Secured
Party may transfer any or all of the Collateral and shall be fully discharged
thereafter from all liability with respect to the Collateral so transferred, and
the transferee shall be vested with all rights, powers and remedies of Secured
Party hereunder with respect to Collateral so transferred except as provided in
the Intercreditor Agreement; but with respect to any Collateral not so
transferred Secured Party shall retain all rights, powers and remedies hereby
given. Secured Party may at any time deliver any or all of the Collateral to
Debtor, whose receipt shall be a complete and full acquittance for the
Collateral so delivered, and Secured Party shall thereafter be discharged from
any liability therefor.
Page 118 of 210
Section 4.07 Cumulative Security. The execution and delivery of this
--------------------
Security Agreement in no manner shall impair or affect any other security (by
endorsement or otherwise) for the payment of the Indebtedness. No security
taken hereafter as security for payment of the Indebtedness shall impair in any
manner or affect this Security Agreement. All such present and future
additional security is to be considered as cumulative security.
Section 4.08 Continuing Agreement. This is a continuing agreement and all
--------------------
the rights, powers and remedies of Secured Party hereunder shall continue to
exist until the Indebtedness is paid in full as the same becomes due and
payable. Secured Party hereby agrees that upon payment in full of the
Indebtedness, and from time to time thereafter, Secured Party will upon request
of Debtor, or its successors or assigns, execute, acknowledge, if required, and
deliver and/or cause to be executed, acknowledged, if required, and delivered to
Debtor any and all documents and instruments necessary or desirable to Debtor,
or its successors or assigns, to evidence the satisfaction of the obligations
secured by the security interests and liens of this Security Agreement and to
release the liens and security interests hereof.
Section 4.09 Cumulative Rights. The rights, powers and remedies of Secured
-----------------
Party hereunder shall be in addition to all rights, powers and remedies given by
statute or rule of law and are cumulative. The exercise of any one or more of
the rights, powers and remedies provided herein shall not be construed as a
waiver of any of the other rights, powers and remedies of Secured Party.
Furthermore, regardless of whether or not the Uniform Commercial Code is in
effect in the jurisdiction where such rights, powers and remedies are asserted,
Secured Party shall have the rights, powers and remedies of a secured party
under the Code, as amended from time to time.
Section 4.10 Exercise of Rights. Time shall be of the essence for the
--------------------
performance of any act under this Security Agreement or the Indebtedness by
Debtor, but neither Secured Party's acceptance of partial or delinquent payment
nor any forbearance, failure or delay by Secured Party in exercising any right,
power or remedy shall be deemed a waiver of any obligation of Debtor or of any
right, power or remedy of Secured Party or preclude any other or further
exercise thereof; and no single or partial exercise of any right, power or
remedy shall preclude any other or further exercise thereof, or of the exercise
of any other right, power or remedy.
Section 4.11 Remedy and Waiver. Secured Party may remedy any Default and
-----------------
may waive any Default without waiving the Default remedied or waiving any prior
or subsequent Default.
Section 4.12 Non-Judicial Remedies. Secured Party may enforce its rights
---------------------
hereunder without resort to prior judicial process or judicial hearing, and
Debtor expressly waives, renounces and knowingly relinquishes any and all legal
rights which might otherwise require Secured Party to enforce its rights by
judicial process. In so providing for non-judicial remedies, Debtor recognizes
and concedes that such remedies are consistent with the usage of the trade, are
responsive to commercial necessity and are the result of bargaining at arm's
length. Nothing herein is intended to prevent Secured Party or Debtor from
resorting to judicial process at either party's option.
Page 119 of 210
ARTICLE V
---------
MISCELLANEOUS
-------------
Section 5.01 Debtor. The term "Debtor" as used throughout this Security
------
Agreement shall (regardless of use of the singular form) mean Debtor
individually and/or collectively, and shall include the respective successors,
legal representatives, heirs and assigns of Debtor. The obligations and
agreements of Debtor hereunder are joint and several.
Section 5.02 Preservation of Liability. Neither this Security Agreement
--------------------------
nor the exercise by Secured Party (or any failure to so exercise) of any right,
power or remedy conferred herein or by law shall be construed as relieving any
Person liable on the Indebtedness from full liability on the Indebtedness and
for any deficiency thereon.
Section 5.03 Notices. Any notice or demand under this Security Agreement
-------
or in connection with this Security Agreement may be given and shall
conclusively be deemed and considered to have been given and received upon the
deposit thereof, in writing, registered or certified mail, return receipt
requested, postage prepaid and addressed to the party hereof to whom such notice
is intended at the address of such party set forth in the first paragraph of
this Security Agreement (or at such other address as shall be specified by like
notice), in the U.S. Mail, but actual notice, however given or received, shall
always be effective.
Section 5.04 Construction. This Security Agreement has been made in and
------------
the security interest granted hereby is granted in and both shall be governed by
the laws of the State of Texas (except to the extent that the laws of any other
jurisdiction govern the perfection and priority of the security interest granted
hereby) and of the United States of America, as applicable, in all respects,
including matters of construction, validity, enforcement and performance.
Section 5.05 Amendment and Waiver. This Security Agreement may not be
----------------------
amended, altered, or modified (nor may any of its terms be waived) except in
writing duly signed by an authorized officer of Secured Party and by Debtor.
Section 5.06 Invalidity. If any provision of this Security Agreement is
----------
rendered or declared invalid, illegal or unenforceable by reason of any existing
or subsequently enacted legislation or by a judicial decision which shall have
become final, Debtor and Secured Party shall promptly meet and negotiate
substitute provisions for those rendered invalid, illegal or unenforceable, but
all of the remaining provisions shall remain in full force and effect.
Page 120 of 210
Section 5.07 Successors and Assigns. The covenants, representations,
------------------------
warranties and agreements herein set forth shall be binding upon Debtor and
shall inure to the benefit of Secured Party, its successors and assigns.
Section 5.08 Survival of Agreements. All representations and warranties
-----------------------
of Debtor herein, and all covenants and agreements herein not fully performed
before the effective date of this Security Agreement, shall survive such date.
Section 5.09 Titles of Articles and Sections. All titles or headings to
--------------------------------
articles, sections or other divisions of this Security Agreement are only for
the convenience of the parties and shall not be construed to have any effect or
meaning with respect to the other content of such articles, sections or other
divisions, such other content being controlling as to the agreement between the
parties hereto.
Section 5.10 Exhibits. Any exhibits to this Security Agreement are
--------
incorporated herein by reference for all purposes.
Section 5.11 Terms Defined in Code. All terms used herein which are
------------------------
defined in the Code shall have the same meaning herein unless otherwise defined
herein or the context otherwise requires.
Section 5.12 Intercreditor Agreements. Notwithstanding anything herein to
------------------------
the contrary, the terms and conditions of this Security Agreement and the
rights, titles, interests and privileges granted or created in favor of Secured
Party herein are subject to the terms and conditions of the Intercreditor
Agreements.
Section 5.13 Counterparts. This Security Agreement and any amendments
------------
hereto may be executed in one or more counterparts, each of which will be deemed
to be an original by the party executing such counterpart, but all of which
shall be considered one and the same instrument.
Section 5.14 Settlement Agreement. This Security Agreement is executed and
--------------------
delivered in accordance with and pursuant to that certain Settlement Agreement
dated of even date herewith between Secured Party, Debtor and Cowboy Pipeline
Service Company (herein called the "Security Agreement"). To the extent any
conflict or inconsistency exists between the provisions of this Security
Agreement and the Settlement Agreement, the provisions of the Settlement
Agreement shall be controlling. The terms and provisions of the Settlement
Agreement (including, without limitation, the representations, warranties and
covenants therein) shall not merge, be extinguished or otherwise be affected by
the execution and delivery of this Security Agreement or any other document
executed and delivered pursuant to this Security Agreement.
Page 121 of 210
IN WITNESS WHEREOF, Debtor and Secured Party have executed this Security
Agreement as of the date set forth hereinabove.
DEBTOR:
------
PENN OCTANE CORPORATION,
a Delaware corporation
By:
----------------------------------
▇▇▇▇▇ ▇▇▇▇▇▇▇, Vice President
SECURED PARTY:
--------------
CPSC INTERNATIONAL, INC.,
a Texas corporation
By:
----------------------------------
▇▇▇▇ ▇▇▇▇▇▇, President
Page 122 of 210
EXHIBIT "A"
All of Debtor's rights, title and interest in those 2 parallel pipelines
approximately fifteen miles in length and with a nominal 8.625 outside diameter
extending from Debtor's terminal in Brownsville, Texas to a prescribed location
on the Mexican side of the Rio Grande west of Matamoros, Tamaulipas, Mexico,
more fully described in that Lease/Installment Purchase Agreement for Two(2)
15-mile Pipelines between Debtor and CPSC dated November 24, 1998 (the
"Pipelines"), the vents, casings, valves, cathodic protection devices, and other
items of personal property which are constructed on, affixed to or installed on
or in connection with the Pipelines, inlet flange to inlet flange, and includes
any and all equipment used in the operation and/or monitoring of the Pipelines
(the "Facilities"), any and all rights, titles, interests, liberties, privileges
and/or advantages in any real or personal property that allows, permits or
purports to allow or permit the construction, operation, use, maintenance or
monitoring of the Pipelines and/or the Facilities, including the right of
ingress and egress for the purposes of constructing, operating, using,
maintaining, monitoring, repairing, replacing or removing the Pipelines and/or
the Facilities, and includes, without limitation, easements, rights of way,
licenses, and permits, together with any ancillary or related rights, agreements
or other property of whatever kind or description necessary for the full use and
enjoyment of any such right, title or interest whether acquired through
contract, condemnation, or as a matter of law (the "Easements"), together with
any and all assets of every type and description, real, personal and mixed,
tangible, ▇▇▇▇▇▇ or inchoate, known or unknown, fixed or unfixed, accrued,
absolute, contingent or otherwise, wheresoever located, and whether or not
specifically referred to above, now owned or hereafter acquired by Debtor or in
which Debtor has or acquires any rights, titles, interests or privileges, that
are necessary for or used in connection with the ownership, operation,
maintenance, monitoring or repair of the Pipelines and/or the Facilities, but
excluding the Transfer Terminals (as such term is defined in the Settlement
Agreement).
Page 123 of 210
EXHIBIT "K1"
DEED OF TRUST
DEED OF TRUST
-------------
Date: _____________, 200__
Grantor: Penn Octane Corporation
▇▇-▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇. ▇
▇▇▇▇ ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Trustee: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Nueces County
Beneficiary: CPSC International, Inc.
Two ▇▇▇▇▇ Center, Suite 2250
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Note:
Date: March _____, 2001
Principal: $1,462,500.00
Payor: Penn Octane Corporation
Payee: CPSC International, Inc.
Maturity Date: February 1, 2004
Property (including any improvements thereon): See attached exhibit A.
Prior Lien(s), Other Exceptions
to Conveyance and Warranty:
Beneficiary's lien secured by this deed of trust shall
be subject to (i) the terms of the Settlement Agreement
between Penn Octane Corporation, CPSC International,
Inc., and Cowboy Pipeline Service Company executed on
Page 124 of 210
March __, 2001; (ii) the Intercreditor Agreement dated
___________, 2001, by and between CPSC International,
Inc. and the Noteholders listed Exhibit B attached
hereto; (iii) the Intercreditor and Subordination
Agreement executed dated ___________, 2001, by and
between RZB Finance Bank, LLC, Bayerishe Hypo-Und
Vereinsbank Aktiengesellschaft, PMG Capital Corp., as
collateral agent on behalf of the Noteholders listed on
Exhibit B, ▇▇▇▇▇▇ Construction Co., Inc. and CPSC
International executed on or about _______, 2001; (iv)
the Consent and Agreement of Lessor, by and between
Brownsville Navigation District of Cameron County, Penn
Octane Corporation, PMG Capital Corpas collateral agent
on behalf of the Noteholders identified on Exhibit B,
▇▇▇▇▇▇ Construction Co., Inc., and CPSC International,
Inc., the items referred to in (ii), (iii) and (iv)
being collectively referred to herein as the
"Intercreditor Agreements"; and (v) the liens and
security interests described and referenced in said
Intercreditor Agreements.
For value received and to secure payment on the Note,
Grantor (also referred to herein as Payor) conveys the
Property to Trustee in trust. Grantor warrants and
agrees to defend the title to the Property, subject to
the Prior Liens and Other Exceptions to Conveyance and
Warranty. On payment of the Note and all other amounts
secured by this deed of trust, this deed of trust will
have no further effect, and Lender will release it at
Grantor's expense.
Clauses and Covenants:
A. Grantor's Obligations
Grantor agrees to --
1. keep the Property in good repair and condition but only to the extent
Grantor herein is so required under the terms of, subject to, and in accordance
with any and all agreements creating or pertaining to the rights herein conveyed
including the Easement Agreements listed on Exhibit C.
2. pay all taxes and assessments on the Property before delinquency but only
to the extent Grantor herein is so required under the terms of, subject to, and
in accordance with any and all agreements creating or pertaining to the rights
herein conveyed including the Easement Agreements listed on Exhibit C.
;
Page 125 of 210
3. defend title to the Property subject Prior Liens and Other Exceptions to
Conveyance and Warranty and preserve the lien's priority as it is established in
this deed of trust;
4. obey all laws, ordinances, and restrictive covenants applicable to the
Property;
5. pay or cause to be paid all Prior Lien notes and abide by or cause to be
abided by all Prior Lien instruments.
B. Payee's Rights
1. Payee may appoint in writing a substitute trustee, succeeding to all rights
and responsibilities of Trustee.
2. If the proceeds of the Note are used to pay any debt secured by Prior
Liens, Payee is subrogated to all the rights and liens of the holders of any
debt so paid.
3. Payee may apply any proceeds received under the insurance policy either
to reduce the Note but only in accordance with the terms of the Intercreditor
Agreements.
4. Subject to the terns of the Intercreditor Agreements, unless applicable
law prohibits, all payments received by Payee from Grantor under the Note or
this deed of trust may, at Payee's discretion, be applied first to amounts
payable under this deed of trust and then to amounts due and payable to the
Payee under the Note, to be applied to late charges, principal, or interest in
the order Payee in its discretion determines.
5. If there is a default on the Note or if Grantor fails to perform any of
Grantor's obligations and the default continues for thirty (30) days after
Grantor's receipt of written notice from Payee specifying the alleged default or
any other required notice of the default and the time allowed to cure, Lender
may --
a. declare the unpaid principal balance and earned interest on the Note
immediately due;
b. direct Trustee to foreclose this lien, in which case Payee or Payee's
agent will cause notice of the foreclosure sale to be given as provided by the
Texas Property Code as then in effect; and
c. purchase the Property at any foreclosure sale by offering the highest
bid and then have the bid credited on the Note.
6. Payee may remedy any default without waiving it and may waive and default
without waiving any prior or subsequent default provided that Payee shall have
given the notice and opportunity to cure specified in Paragraph 5 above.
Page 126 of 210
C. Trustee's Rights and Duties
If directed by Payee to foreclose this lien, subject to the terms of the
Intercreditor Agreements, Trustee will --
1. either personally or by agent give notice of the foreclosure sale as
required by the Texas Property Code as then in effect;
2. sell and convey all or part of the Property "AS IS" to the highest bidder
for cash with a general warranty binding grantor, subject to the Prior Lien and
to the Other Exceptions to Conveyance and Warranty and without representation or
warranty, express or implied, by Trustee;
3. from the proceeds of the sale, pay, in this order --
a. expenses of foreclosure, including a reasonable commission to Trustee;
b. to Payee, the full amount of principal, interest, and attorney's fees
due and unpaid;
c. any amounts required by law to be paid before payments to grantor; and
d. to grantor, any balance; and
4. to be indemnified by Payee against all costs, expenses, and liabilities
incurred by Trustee for acting in the execution or enforcement of the trust
created by this deed of trust, which includes all court and other costs,
including attorney's fees, incurred by Trustee in defense of any action or
proceeding taken against trustee in that capacity.
D. General Provisions
1. Subject to the terms of the Intercreditor Agreements, if any of the
Property is sold under this deed of trust, Grantor must immediately surrender
possession to the purchaser. If Grantor fails to do so, grantor will become a
tenant at sufferance of the purchaser, subject to an action for forcible
detainer.
2. Recitals in any trustee's deed conveying the Property will be presumed to
be true.
3. Proceedings under this deed of trust, filing suit for foreclosure, or
pursuing any other remedy will not constitute an election of remedies.
4. Except as provided in the Intercreditor Agreements, this lien will remain
superior to liens later created even if the time of payment of all or part of
the Note is extended or part of the Property is released.
Page 127 of 210
5. If any portion of the Note cannot be lawfully secured by this deed of
trust. payments will be applied first to discharge that portion.
6. Subject to the terms of the Prior Liens and the terms and conditions of
all agreements creating or pertaining to the rights herein conveyed including
the Easement Agreements listed on Exhibit C, Grantor assigns to Payee all
amounts payable to or received by Grantor from condemnation of all or party of
the Property, from private sale in lieu of condemnation, and from damages caused
by public works or construction on or near the Property. After deducting any
reasonable and necessary expenses incurred, including attorney's fees and court
and other costs, Payee will either release any remaining amounts Grantor or
apply such amounts to reduce the Note. Payee will not be liable for failure to
collect or to exercise diligence in collection any such amounts. Grantor will
immediately give Payee notice of any actual or threatened proceedings for
condemnation of all or party of the Property.
7. Interest on the debt secured by this deed of trust will not exceed the
maximum amount of nonusurious interest that may be contracted for, taken,
reserved, charged, or received under law. Any interest in excess of that
maximum amount will be credited on the principal of the debt or , if that has
been paid, refunded. On any acceleration or required or permitted prepayment,
any such excess will be canceled automatically as of the acceleration or
prepayment or, if already paid, credited on the principal of the debt or, if the
principal of the debt has been paid, refunded. This provision overrides any
conflicting provisions in this and all other instruments concerning the debt.
8. In no event may this deed of trust secure payment of any debt subject to
chapters 342, 343, 345, or 346 of the Texas Finance Code or create a line
otherwise prohibited by law.
9. When the context requires, singular nouns and pronouns include the
plural.
10. The term Note includes all extensions and renewals of the Note and all
amounts secured by this deed of trust.
11. This deed of trust binds, benefits, and may be enforced by the
successors in interest of all parties.
12. Grantor and Payor are the same party.
13. Payee and Beneficiary are the same party.
14. Except as otherwise provided in this deed of trust and the Note, Grantor
and each surety, endorse, and guarantor of the Note waive all demand for
payment, presentation for payment, notice of intention to accelerate maturity,
notice of acceleration of maturity, protest, and notice of protest, to the
extent permitted by law.
Page 128 of 210
15. Grantor agrees to pay reasonable attorney' fees, trustee's fees, and
court and other costs of enforcing Payee's rights under this deed of trust if
this deed of trust is placed in the hands of an attorney for enforcement.
16. If any provision of this deed of trust is determined to be invalid or
unenforceable, the validity or enforceability of any other provision will not be
affected.
17. Grantor represents that this deed of trust and the Note are given in
order to implement the terms of the Settlement Agreement and Intercreditor
Agreements described above.
18. To the extent any conflict or inconsistency exists between the
provisions of this deed of trust and the Settlement Agreement, the provisions of
the Settlement Agreement shall be controlling. The terms and provisions of the
Settlement Agreement (including, without limitation, the representations,
warranties and covenants therein) shall not merge, be extinguished or otherwise
be affected by the execution and delivery of this deed of trust or any other
document executed and delivered pursuant to this deed of trust.
PENN OCTANE CORPORATION
By:_________________________
Name: _____________________
Title: ____________________
STATE OF ___________
COUNTY OF ___________
This instrument was acknowledged before me on the ____ day of __________, 200__.
___________________________________________
Notary Public, State of __________________
Notary's name (printed):_________________
Notary's commission expires:_____________
Page 129 of 210
EXHIBIT A
[List of easements including legal descriptions of real property]
Page 130 of 210
EXHBIT B
[List of Noteholders]
Page 131 of 210
EXHIBIT "L"
INTERCREDITOR AGREEMENT
Page 132 of 210
EXHIBIT "L1"
LENDER'S INTERCREDITOR AGREEMENT
Page 133 of 210
EXHIBIT "L2"
LENDERS' INTERCREDITOR AGREEMENT
Page 134 of 210
EXHIBIT "L3"
BROWNSVILLE AGREEMENT
Page 135 of 210
EXHIBIT "M"
▇▇▇▇▇ EASEMENT PAYMENT SCHEDULE
1. Twenty-Five Thousand and No/100 Dollars ($25,000.00) payable to ▇▇▇▇▇
Family on November 15, 2001.
2. Twenty-Five Thousand and No/100 Dollars ($25,000.00) payable to ▇▇▇▇▇
Family on November 15, 2002.
Page 136 of 210
EXHIBIT "M1"
MEMORANDUM OF UNDERSTANDING
Page 137 of 210
EXHIBIT "N"
CPSC/VAN REIT PROPERTY DEED
SPECIAL WARRANTY DEED
---------------------
THE STATE OF TEXAS )
) KNOW ALL MEN BY THESE PRESENTS:
COUNTY OF CAMERON )
THAT PENN OCTANE CORPORATION, a Delaware corporation ("Grantor"), for and
in consideration of the sum of Ten and No/100 Dollars ($10.00) and other good
and valuable consideration to the undersigned paid by CPSC INTERNATIONAL, INC.,
a Texas corporation ("Grantee"), whose address is Two ▇▇▇▇▇ Center, Suite 2250,
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇, the receipt of which consideration is
hereby acknowledged, and the further consideration of Grantee's assuming and
agreeing to pay, perform and discharge, as the same becomes due, (1) the unpaid
principal balance owing on that certain Promissory Note (the "Note") dated April
17, 2000, in the original principal amount of One Million Nine Hundred Eight
Thousand and No/100 Dollars ($1,908,000.00), executed by Grantor, as maker
therein, payable to the order of Lieven ▇. ▇▇▇ ▇▇▇▇ , and (2) all of the other
terms, covenants, conditions, liabilities, duties, obligations and indebtedness
owing under the Note, has GRANTED, SOLD AND CONVEYED, and by these presents does
GRANT, SELL AND CONVEY unto Grantee the real property described on Exhibit "A"
attached hereto and incorporated herein by reference for all purposes (the
foregoing is collectively referred to herein as the "Real Property").
The Real Property does not include the following and the following is
hereby specifically excluded from all conveyances under this Special Warranty
Deed and is hereby retained and reserved by Grantor, for itself, its successors
and assigns:
(1) Those two (2) pipelines with a nominal 8.625 inch outside diameter and a
nominal 6.25 inch outside diameter located on the Real Property (the
"Pipelines"), and
(2) All of the vents, casings, valves, cathodic protection devices, and other
items of personal property which are constructed on, affixed to or
installed on or in connection with the Pipelines, and includes any and all
equipment used in the operation and/or monitoring of the Pipelines (the
"Facilities").
This conveyance is made by Grantor and accepted by Grantee subject to the
following (the "Permitted Encumbrances"): (1) all liens, restrictions, mineral
and royalty interests, easements, rights-of-way, encumbrances and other matters
which were in force and existing of record affecting the Real Property as of the
time of filing that certain Special Warranty Deed dated April 14, 2000, executed
by Lieven ▇. ▇▇▇ ▇▇▇▇ and ▇▇▇▇▇▇▇ ▇. ▇▇▇ ▇▇▇▇, as grantors, to Grantor herein,
as grantee, filed for record in the Official Records of Cameron County, Texas in
Page 138 of 210
Volume 6238 at Page 96, and under Clerk's File No. 17408, to the extent any or
all of same are now in force and existing of record affecting the Real Property,
(2) those items shown on Exhibit "B" attached hereto and incorporated herein for
all purposes; (3) all laws, regulations and ordinances of all governmental and
quasi-governmental authorities, if any, affecting the Real Property; (4) the
Easement (as such term is hereinafter defined); (5) that certain Deed of Trust
to Secure Assumption dated of even date herewith, executed by Grantee herein, as
grantor therein, to ▇▇▇▇▇ ▇▇▇▇▇▇▇, Trustee; and, (6) the vendor's lien and
superior title hereinafter reserved by Grantor.
Grantor hereby reserves and retains for itself, its successors and assigns,
an exclusive right-of-way and easement (the "Easement") to construct, maintain,
operate, repair, replace, relocate, inspect and remove, one or more pipelines
and related appurtenances for the transportation of liquids, gases, solids or
mixtures of any or all substances which can be transported through a pipeline,
including, without limitation, the Pipelines and Facilities, upon, across,
above, through or under that certain portion of the Real Property more
particularly described on Exhibit "C" attached hereto and incorporated herein
for all purposes (the "Easement Tract"), together with the right of ingress,
egress and regress across the Real Property to and from the Easement Tract for
the purposes herein retained. The Easement shall terminate on the one hundredth
(100th) anniversary of the date of this Special Warranty Deed. Grantee shall
have the right to enjoy the use of the surface of the Easement Tract for any and
all uses that do not interfere with or prevent the use of same by Grantor, its
successors and assigns. Grantor, its successors and assigns shall have the
right to clear the Easement Tract, and to keep same clear, of all obstructions,
surface and subsurface, including the right to cut, remove and/or trim trees and
brush thereon, only to the extent that it is necessary for Grantor to gain
access or use of the Easement for any purpose designated herein.
GRANTEE ACKNOWLEDGES AND AGREES, BY ITS ACCEPTANCE HEREOF, THAT, EXCEPT AS
OTHERWISE PROVIDED IN THAT CERTAIN SETTLEMENT AGREEMENT DATED OF EVEN DATE
HEREWITH, BETWEEN GRANTOR, GRANTEE AND COWBOY PIPELINE SERVICE COMPANY (THE
"SETTLEMENT AGREEMENT"), THE REAL PROPERTY IS CONVEYED "AS IS", "WHERE IS" AND
IN ITS PRESENT CONDITION "WITH ALL FAULTS", AND THAT, EXCEPT AS OTHERWISE
PROVIDED IN THE SETTLEMENT AGREEMENT, GRANTOR HAS NOT MADE, DOES NOT MAKE AND
SPECIFICALLY DISCLAIMS ANY REPRESENTATIONS, WARRANTIES, PROMISES, COVENANTS,
AGREEMENTS OR GUARANTIES OF ANY KIND OR CHARACTER WHATSOEVER, WHETHER EXPRESS OR
IMPLIED, ORAL OR WRITTEN, PAST, PRESENT OR FUTURE, OF, AS TO, CONCERNING OR WITH
RESPECT TO: (A) THE NATURE, QUALITY OR CONDITION OF SUCH REAL PROPERTY,
INCLUDING, WITHOUT LIMITATION, THE WATER, SOIL AND GEOLOGY; (B) THE INCOME TO BE
DERIVED FROM THE REAL PROPERTY; (C) THE SUITABILITY OF THE REAL PROPERTY FOR ANY
AND ALL ACTIVITIES AND USES WHICH GRANTEE MAY CONDUCT THEREON; (D) THE
COMPLIANCE OF OR BY THE REAL PROPERTY OR ITS OPERATION WITH ANY LAWS, RULES,
ORDINANCES OR REGULATIONS OF ANY APPLICABLE GOVERNMENTAL AUTHORITY OR BODY,
Page 139 of 210
INCLUDING, WITHOUT LIMITATION, THE ENDANGERED SPECIES ACT ("ESA") AND ANY
FEDERAL, STATE, OR LOCAL LAWS AND/OR REGULATIONS DESIGNED TO IMPLEMENT OR
RELATED TO THE ESA; (E) THE HABITABILITY, MERCHANTABILITY OR FITNESS FOR A
PARTICULAR PURPOSE OF SUCH REAL PROPERTY; OR (F) ANY OTHER MATTER WITH RESPECT
TO THE REAL PROPERTY. WITHOUT LIMITING THE FOREGOING, GRANTOR DOES NOT AND HAS
NOT MADE ANY REPRESENTATION OR WARRANTY REGARDING THE PRESENCE OR ABSENCE OF ANY
HAZARDOUS SUBSTANCES (AS HEREINAFTER DEFINED) ON, UNDER OR ABOUT SUCH REAL
PROPERTY OR THE COMPLIANCE OR NONCOMPLIANCE OF SUCH REAL PROPERTY WITH THE
COMPREHENSIVE ENVIRONMENTAL RESPONSE, COMPENSATION AND LIABILITY ACT, THE
SUPERFUND AMENDMENT AND REAUTHORIZATION ACT, THE RESOURCE CONSERVATION RECOVERY
ACT, THE FEDERAL WATER POLLUTION CONTROL ACT, THE FEDERAL ENVIRONMENTAL
PESTICIDES ACT, THE CLEAN WATER ACT, THE CLEAN AIR ACT, THE TEXAS NATURAL
RESOURCES CODE, THE TEXAS WATER CODE, THE TEXAS SOLID WASTE DISPOSAL ACT, THE
TEXAS HAZARDOUS SUBSTANCES SPILL PREVENTION AND CONTROL ACT, ANY SO CALLED
FEDERAL, STATE OR LOCAL "SUPERFUND" OR "SUPERLIEN" STATUTE, OR ANY OTHER
STATUTE, LAW, ORDINANCE, CODE, RULE, REGULATION, ORDER OR DECREE REGULATING,
RELATING TO OR IMPOSING LIABILITY (INCLUDING, WITHOUT LIMITATION, STRICT
LIABILITY) OR STANDARDS OF CONDUCT CONCERNING ANY HAZARDOUS SUBSTANCES
(COLLECTIVELY, THE "HAZARDOUS SUBSTANCE LAWS"). FOR PURPOSES OF THIS AGREEMENT,
THE TERM "HAZARDOUS SUBSTANCES" SHALL MEAN AND INCLUDE, WITHOUT LIMITATION (A)
THOSE ELEMENTS OR COMPOUNDS WHICH ARE CONTAINED ON THE LIST OF HAZARDOUS
SUBSTANCES AND/OR HAZARDOUS WASTES ADOPTED BY THE UNITED STATES ENVIRONMENTAL
PROTECTION AGENCY, AND THE LIST OF TOXIC POLLUTANTS DESIGNATED BY CONGRESS OR
THE ENVIRONMENTAL PROTECTION AGENCY, OR DESIGNATED UNDER ANY HAZARDOUS SUBSTANCE
LAWS; (B) ASBESTOS; (C) UNDERGROUND STORAGE TANKS, WHETHER EMPTY, FILLED OR
PARTIALLY FILLED WITH ANY SUBSTANCE; (D) PETROLEUM AND PETROLEUM BASED
SUBSTANCES; AND (E) ANY OTHER SUBSTANCE WHICH BY ANY REQUIREMENT OF ANY
GOVERNMENTAL AUTHORITY REQUIRES SPECIAL HANDLING OR NOTIFICATION OF ANY
GOVERNMENTAL AUTHORITY IN THE COLLECTION, STORAGE, TREATMENT OR DISPOSAL OF SUCH
SUBSTANCE. GRANTEE FURTHER ACKNOWLEDGES AND AGREES THAT GRANTEE HAS BEEN GIVEN
THE OPPORTUNITY TO INSPECT THE REAL PROPERTY, THAT GRANTEE IS PURCHASING THE
REAL PROPERTY PURSUANT TO ITS INDEPENDENT EXAMINATION, STUDY, INSPECTION AND
KNOWLEDGE OF THE REAL PROPERTY AND GRANTEE IS RELYING UPON ITS OWN DETERMINATION
OF THE VALUE OF THE REAL PROPERTY AND USES TO WHICH THE REAL PROPERTY MAY BE
PUT, AND, EXCEPT AS OTHERWISE PROVIDED IN THE SETTLEMENT AGREEMENT, NOT ON ANY
Page 140 of 210
INFORMATION PROVIDED OR TO BE PROVIDED BY GRANTOR. EXCEPT AS OTHERWISE PROVIDED
IN THE SETTLEMENT AGREEMENT, GRANTEE FURTHER ACKNOWLEDGES AND AGREES THAT ANY
INFORMATION PROVIDED WITH RESPECT TO THE REAL PROPERTY WAS OBTAINED FROM A
VARIETY OF SOURCES AND THAT GRANTOR HAS NOT MADE AND WILL NOT BE OBLIGATED TO
MAKE ANY INDEPENDENT INVESTIGATION OR VERIFICATION OF SUCH INFORMATION AND
GRANTOR MAKES NO REPRESENTATIONS AS TO THE ACCURACY OR COMPLETENESS OF SUCH
INFORMATION.
But it is expressly agreed that the Grantor expressly reserves for itself,
its successors and assigns, a vendor's lien, as well as superior title, in and
to the Real Property until the Note and the covenants, conditions, liabilities,
duties, obligations and indebtedness herein assumed by the Grantee has been
fully paid and performed according to the face, tenor, effect and reading
thereof, when this Special Warranty Deed shall become absolute.
Taxes for the year 2000 have been prorated by the parties hereto as of June
19, 2000, and Grantee, by Grantee's acceptance of this Special Warranty Deed,
assumes payment thereof and Grantee also assumes payment of all taxes for
subsequent years associated with the Real Property.
TO HAVE AND TO HOLD the Real Property, together with all and singular the
rights and appurtenances thereto in anywise belonging unto Grantee, its
successors and assigns forever; and Grantor does hereby bind itself, its
successors and assigns to WARRANT AND FOREVER DEFEND all and singular the Real
Property unto Grantee, its successors and assigns, against every person
whomsoever lawfully claiming or to claim the same or any part thereof, except as
to the Permitted Encumbrances and the exceptions to warranty herein, when the
claim is by, through or under Grantor but not otherwise.
EXECUTED effective the _____ day of _____________, 2001.
PENN OCTANE CORPORATION,
a Delaware corporation
By:
---------------------------------
▇▇▇▇▇ ▇▇▇▇▇▇▇, Vice President
EXECUTED by Grantee to acknowledge and agree to the terms and conditions
contained herein.
CPSC INTERNATIONAL, INC., a Texas
corporation
Page 141 of 210
By:
---------------------------------
▇▇▇▇ ▇▇▇▇▇▇, President
Page ▇▇▇ ▇▇ ▇▇▇
▇▇▇▇▇ ▇▇ ▇▇▇▇▇ )
)
COUNTY OF ▇▇▇▇▇▇ )
This instrument was acknowledged before me on _________________, 2001, by ▇▇▇▇▇
▇▇▇▇▇▇▇, Vice President of Penn Octane Corporation, a Delaware corporation, on
behalf of said corporation.
[seal] _______________________________________
Notary Public, State of Texas
STATE OF TEXAS )
)
COUNTY OF ▇▇▇▇▇▇ )
This instrument was acknowledged before me on the ______ day of
_____________, 2001, by ▇▇▇▇ ▇▇▇▇▇▇, President of CPSC International, Inc., a
Texas corporation, on behalf of said corporation.
_______________________________________
Notary Public, State of Texas
Page 143 of 210
EXHIBIT "A"
REAL PROPERTY DESCRIPTION
Being a 477.0 acre tract, more or less, out of the Lieven ▇. ▇▇▇ ▇▇▇▇ 745.41
acre tract and out of the North part of ▇▇▇ ▇▇, ▇▇▇▇▇ ▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ as
recorded in Volume 14, Pages 49 & 49A, Map Records of Cameron County, Texas said
745.41 acre tract recorded in Volume 947, Page 931, Deed Records of Cameron
County, Texas and said 477.0 acres being the same tract of land described in
that certain Special Warranty Deed dated April 14, 2000, executed by Lieven ▇.
▇▇▇ ▇▇▇▇ and ▇▇▇▇▇▇▇ ▇. ▇▇▇ ▇▇▇▇, as grantors, to Grantor herein, as grantee,
filed for record in the Official Records of Cameron County, Texas in Volume 6238
at Page 96, and under Clerk's File No. 17408, and more particularly located and
described as follows:
BEGINNING at the Northwest corner of the 745.41 acre tract and the Southwest
corner of the "▇▇▇▇▇ Acreage" (Volume 13, Page 71, Cameron County Map Records)
for the Northwest corner of this tract marked by an iron rod set by ▇. ▇.
▇▇▇▇▇▇▇▇, ▇▇., RPLS 3732 on April 4, 2000;
THENCE South 83 degrees 15 minutes 50 seconds East along the North line of the
745.41 acre tract same being the South line of the "▇▇▇▇▇ Acreage" (called the
North line of the ▇▇▇▇▇▇ Acreage in the above referenced deed from Lieven ▇. ▇▇▇
▇▇▇▇ and ▇▇▇▇▇▇▇ ▇. ▇▇▇ ▇▇▇▇, as grantors, to POC, as grantee), a total distance
of 3485.2 feet for the Northeast corner of this tract said corner being in a
drainage ditch;
THENCE South 06 degrees 47 minutes 46 seconds West along the East line of said
745.41 acre tract a distance of 2446.23 feet for a corner marked by a Concrete
Monument;
THENCE South 06 degrees 51 minutes 05 seconds West along the East line of said
745.41 acre tract and being the West line of Block 2, ▇▇▇▇▇▇ Tract (Volume 14,
Page 49 & 49A, Map Records and West line of Share 3 of ▇.▇. ▇▇▇▇▇▇ Estates,
▇▇▇▇▇▇ Tract), a distance of 3407.72 feet for a corner marked by a Concrete
Monument;
THENCE South 85 degrees 20 minutes 06 seconds East a distance of 15.51 feet
(South 84 degrees 55 minutes East 15.51 feet, ▇▇▇▇▇ ▇, ▇▇▇▇▇▇ ▇▇▇▇▇) for a
corner marked by a Concrete Monument;
THENCE South 05 degrees 04 minutes 41 seconds West along the West line of Block
4, ▇▇▇▇▇▇ Tract (Volume 14, Page 49 &49A Map Records) a distance of 44.77 feet
for the Southeast corner of this tract marked by an iron rod set by ▇. ▇.
▇▇▇▇▇▇▇▇, ▇▇., RPLS 3732 on April 4, 2000;
Page 144 of 210
THENCE North 85 degrees 32 minutes 12 seconds West in a Westerly direction a
distance of 3496.38 feet for the Southwest corner of this tract marked by an
iron rod set by ▇. ▇. ▇▇▇▇▇▇▇▇, ▇▇., RPLS 3732 on April 4, 2000;
THENCE North 06 degrees 44 minutes 46 seconds East along the East line of Palo
Alto ▇▇▇▇▇▇ Subdivision No. 1 (Volume 5, Page 43 Cameron County Map Records), a
distance of 6036.79 feet for the PLACE OF BEGINNING;
CONTAINING 477.0 acres of land, more or less.
Page 145 of 210
EXHIBIT "B"
PERMITTED ENCUMBRANCES
1. Affidavit for Oil and Gas Lien filed March 23, 2000, executed by ▇▇▇▇▇▇
Pipeline Company against Penn Octane Corporation, in the amount of
$887,183.80 recorded in Volume 6182, Page 65, Official Records of Cameron
County, Texas.
2. Affidavit for Oil and Gas Lien filed March 23, 2000, executed by ▇▇▇▇▇▇
Pipeline Company against Penn Octane Corporation, in the amount of
$599,378.00 recorded in Volume 6182, Page 73, Official Records of Cameron
County, Texas.
3. Easement dated August 24, 1931, filed September 23, 1931, executed by ▇.▇.
▇▇▇▇▇ and ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇ to Central Power and Light Company, recorded in
Volume 233, Page 243, Deed Records of Cameron County, Texas.
4. Easement dated April 11, 1958, filed April 25, 1958, executed by ▇▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇ and ▇.▇. ▇▇▇▇▇ to ▇▇▇▇▇ ▇▇▇▇▇▇▇, recorded in Volume 654, Page
63, Deed Records of Cameron County, Texas (as to Roadway Easement).
5. Boundary Line Agreement dated October 13, 1972, filed December 6, 1972,
executed by ▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇▇▇▇▇ B. Nations, ▇▇▇▇ ▇.
Held, ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇ and M. ▇▇▇▇▇▇ ▇▇▇▇▇ and ▇▇▇▇▇
▇▇▇▇▇▇▇, recorded in Volume 947, Page 906, Deed Records of Cameron County,
Texas.
6. Agreement dated September 28, 1972, filed December 6, 1972, executed by
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇. and ▇▇▇▇▇ ▇▇▇▇▇▇▇, recorded in Volume 947, Page 919,
Deed Records of Cameron County, Texas.
7. Agreement dated November 14, 1972, filed December 6, 1972, executed by
▇▇▇▇▇ ▇▇▇▇▇▇▇, Trustee to ▇▇▇▇▇ ▇▇▇▇▇▇▇, recorded in Volume 947, Page 922,
Deed Records of Cameron County, Texas.
8. Easement for Drainage dated September 9, 1972, filed December 6, 1972,
executed by Cameron County Drainage District No. One recorded in Volume
947, Page 927, Deed Records of Cameron County, Texas, and as shown on
Survey dated April 4, 2000, prepared by G-E & S Engineering & Surveying,
Inc., Project No. 536-G-109.
Page 146 of 210
9. Easement and Right of Way dated July 15, 1987, filed July 29, 1987,
executed by Lieven ▇. ▇▇▇ ▇▇▇▇ to Central Power and Light Company, a Texas
Corporation, recorded in Volume 209, Page 384, Official Records of Cameron
County, Texas, and as shown on Survey dated April 4, 2000, prepared by G-E
& S Engineering & Surveying, Inc., Project No. 536-G-109.
10. Grant of Easement dated October 19, 1993, filed October 28, 1993, executed
by Lieven ▇. ▇▇▇ ▇▇▇▇ to ▇▇▇▇▇▇▇ County Drainage District No. One, recorded
in Volume 2631, Page 221, Official Records of Cameron County, Texas, and as
shown on Survey dated April 4, 2000, prepared by G-E & S Engineering &
Surveying, Inc., Project No. 536-G-109.
11. Reservation of a 1/16th mineral interest, as described in document, dated
May 22, 1946, filed June 3, 1946, executed by ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇▇▇ ▇.
▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇ Field and ▇▇▇▇▇▇ ▇. Field to ▇▇▇▇▇ ▇▇▇▇▇▇▇, recorded
in Volume 366, Page 223, of the Deed Records of Cameron County, Texas.
Title to this interest was not checked subsequent to the date of this
document (as to 414.2 acres).
12. Reservation of a 1/16th royalty interest, as described in document dated
May 16, 1955, filed May 16, 1955, executed by ▇▇▇▇▇ ▇▇▇▇▇▇▇ and ▇▇▇▇ ▇.
▇▇▇▇▇▇▇ to ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ wife of ▇. ▇. ▇▇▇▇▇, recorded in Volume
595, Page 591, of the Deed Records of Cameron County, Texas. Title to this
interest was not checked subsequent to the date of this document (as to
414.2 acres).
13. Reservation of a 1/8th royalty interest, as described in document dated
November 27, 1972, filed December 6, 1972, executed by ▇▇▇▇▇ ▇▇▇▇▇▇▇ to
Lieven ▇. ▇▇▇ ▇▇▇▇, recorded in Volume 947, Page 931, of the Deed Records
of Cameron County, Texas. Title to this interest was not checked subsequent
to the date of this document.
14. Drainage, Utility and Access Easement, One Hundred Feet (100') in width, as
reserved/conveyed in Special Warranty Deed dated April 14, 2000 filed April
18, 2000 from Lieven ▇. ▇▇▇ ▇▇▇▇ and ▇▇▇▇▇▇▇ ▇. ▇▇▇ ▇▇▇▇ to Penn Octane
Corporation, a Delaware Corporation, recorded in the Office of the County
Clerk of Cameron County, Texas in Volume 6238 at Page 96 and under Clerk's
File No. 17480.
15. Existing Six inch (6") and Eight inch (8") gas lines installed by Penn
Octane as shown on Survey dated April 4, 2000, prepared by G-E & S
Engineering & Surveying, Inc., Project No. 536-G-109.
16. Existing Drain Ditch(s) as shown on Survey dated April 4, 2000, prepared by
G-E & S Engineering & Surveying, Inc., Project No. 536-G-109.
Page 147 of 210
17. Encroachment of Drain Ditch as shown on Survey dated April 4, 2000,
prepared by G-E & S Engineering & Surveying, Inc., Project No. 536-G-109.
18. Access Easement Agreement dated April 25, 2000, between Penn Octane
Corporation and Lieven ▇. ▇▇▇ ▇▇▇▇, recorded in Volume 6252, Page 63, of
the Deed Records of Cameron County, Texas.
19. Supplemental Affidavit for Oil and Gas Lien filed June 19, 2000, between
CPSC International, Inc. and Penn Octane Corporation, recorded in Volume
6361, Page 23, Official Records of Cameron County, Texas.
20. Supplemental Affidavit for Oil and Gas Lien filed June 16, 2000, between
CPSC International, Inc. and Penn Octane Corporation, recorded in Volume
6361, Page 46, Official Records of Cameron County, Texas.
21. Affidavit in Support of Lien on Mineral Property filed July 25, 2000,
executed by National Oil-well, L.P., successor in interest to ▇▇▇▇▇ Supply
Company, against Penn Octane Corporation et al, in the amount of
$17,080.09, recorded in Volume 6433, Page 180, Official Records of Cameron
County, Texas.
22. Agreement with Brownsville Navigation District.
Page 148 of 210
EXHIBIT "C"
EASEMENT TRACT
Being a 30.00 feet wide easement crossing a 745.41 acres tract of land in
Share 22 of the ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇ County, Texas. Said tract
conveyed to Lieven ▇. ▇▇▇ ▇▇▇▇ by ▇▇▇▇▇ ▇▇▇▇▇▇▇ by a Warranty Deed recorded in
Volume 947, Page 931 of the Deed Records of Cameron County, Texas. The
centerline of said 30.00 feet wide easement is more particularly described and
located as follows:
Commencing at the northwest corner of said 745.41 acres tract, said corner
being the southwest corner of the "Vacated" ▇▇▇▇▇ Acreage subdivision as
recorded in Volume 13, Page 71 of the Map Records of Cameron County, Texas,
thence South 5 degrees 21 minutes 17 seconds West, (recorded South 6 degrees 44
minutes 10 second West) along the west line of said 342.76 acres tract, a
distance of 4,968.63 feet to an iron pin with a yellow plastic cap set for the
Place of Beginning of the centerline of this 30.00 feet wide easement;
Thence, South 86 degrees 26 minutes 01 seconds East, a distance of 3,489.31
feet to an iron pin with a yellow plastic cap set in the east line of said
745.41 acres tract and the west line of 80.09 acres tract in Share 3, of the
▇▇▇▇▇▇▇ ▇▇▇▇▇▇ Lands conveyed to ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, ▇▇. by warranty deed recorded
in Volume 201, 427 of the Official Records of Cameron County, Texas. Said iron
pin is south 5 degrees 52 minutes West, 509.23 feet from the northwest corner of
said 80.09 acres tract.
Said easement contains 2.403 acres, more or less.
(The meridian used for this survey is based on TxDot monuments and coordinates
established for the Brownsville Railroad Relocation Project)
Page 149 of 210
EXHIBIT "O"
STOCK PURCHASE WARRANT
Right to Purchase 175,000 Shares of Common Stock
STOCK PURCHASE WARRANT
----------------------
PENN OCTANE CORPORATION, a Delaware corporation (the "Company") hereby
certifies that, for value received, CPSC INTERNATIONAL, INC., a Texas
corporation or its assigns (the "Holder"), is entitled, subject to the terms set
forth below, to receive One Hundred Seventy-Five Thousand (175,000) warrants
from the Company at any time or from time to time prior to the expiration of the
term hereof, at an exercise or strike price (the "Purchase Price") of Four and
No/100 Dollars ($4.00) per warrant (the "Warrant"). Each Warrant issued or
issuable hereunder shall consist of one (1) share of fully paid and
nonassessable share of common stock, $0.10 par value per share, of the Company
(the "Common Stock"). The number and character of such shares of Common Stock
and the Purchase Price are subject to adjustment as provided herein.
This Warrant is issued pursuant to that certain Settlement Agreement dated
of even date herewith, between the Company, the original Holder hereof and
Cowboy Pipeline Service Company, Inc., a Texas corporation. This Warrant has
been issued in reliance upon the representation of the Holder that it has been
acquired for investment purposes and not with a view towards the resale or other
distribution thereof. Neither this Warrant nor the shares issuable upon
exercise of this Warrant have been registered under the Securities Act of 1933.
1. Exercise of Warrant. This Warrant may be exercised by the Holder
---------------------
hereof, in whole or in part (but not as to a fractional share of Common Stock),
by the surrender of this Warrant (properly endorsed) at the principal office of
the Company (or at such other agency or office of the Company as it may
designate by notice in writing to the Holder hereof at the address of the Holder
hereof appearing on the books of the Company), and by payment to the Company of
the Purchase Price in cash or by certified or official bank check, for each
share being purchased. In the event of any exercise of the rights represented
by this Warrant, a certificate or certificates for the shares of Common Stock so
purchased, registered in the name of the Holder hereof, shall be delivered to
the Holder hereof within a reasonable time after the rights represented by this
Warrant shall have been so exercised; and, unless this Warrant has expired, a
new Warrant representing the number of shares (except a remaining fractional
share), if any, with respect to which this Warrant shall not then have been
exercised shall also be issued to the Holder hereof within such time. With
respect to any such exercise, the Holder hereof shall for all purposes be deemed
to have become the Holder of record of the number of shares of Common Stock
evidenced by such certificate or certificates from the date on which this
Page 150 of 210
Warrant was surrendered and payment of the Purchase Price was made irrespective
of the date of delivery of such certificate, except that, if the date of such
surrender and payment is a date on which the stock transfer books of the Company
are closed, such person shall be deemed to have become the Holder of such shares
at the close of business on the next succeeding date on which the stock transfer
books are open. The Company will refund in cash to any Holder any fractional
shares based upon the Purchase Price.
2. Adjustments for Consolidation, Merger, Etc. In case the Company, after
------------------------------------------
the date of this Warrant (a) shall consolidate with or merge into any other
person and shall not be the continuing or surviving corporation of such
consolidation or merger, or (b) shall permit any other person to consolidate
with or merge into the Company and the Company shall be the continuing or
surviving person but, in connection with such consolidation or merger, the
Common Stock shall be changed into or exchanged for stock or other securities or
property of any other person, or (c) shall transfer all or substantially all of
its properties and assets to any other person, or (d) shall effect a capital
reorganization or reclassification of the Common Stock, then, and in each such
case, proper provision shall be made so that the Holder of this Warrant, upon
the exercise hereof at any time after the consummation of such consolidation,
merger, transfer, reorganization or reclassification, shall be entitled to
receive, in lieu of the Common Stock issuable upon such exercise prior to such
consummation, the stock and other securities and property to which such Holder
would have been entitled upon such consummation if such Holder had so exercised
this Warrant immediately prior thereto, and the Purchase Price shall be
appropriately adjusted by the board of directors of the Company.
3. No Impairment. The Company shall not, by amendment of its articles of
--------------
incorporation or through any reorganization, transfer of assets, consolidation,
merger, dissolution or any other voluntary action, avoid or seek to avoid the
observance or performance of any of the terms of this Warrant, but will at all
times in good faith assist in the carrying out of all such terms and in the
taking of all such action as may be necessary or appropriate in order to protect
the rights of the Holder of this Warrant against impairment. Without limiting
the generality of the foregoing, the Company (a) will not permit the par value,
if any, of any shares of stock receivable upon the exercise of this Warrant to
exceed the amount payable therefor upon such exercise, (b) will take such action
as may be necessary or appropriate in order that the Company may validly and
legally issue fully paid and nonassessable shares of stock upon the exercise of
this Warrant and (c) will not (i) transfer all or substantially all of its
properties and assets to any other person or (ii) consolidate with or merge into
any other person where the Company is not the continuing or surviving person, or
(iii) permit any other person to consolidate with or merge into the Company
where the Company is the continuing or surviving person unless, in such case,
the other person acquiring such properties and assets or continuing or surviving
after such consolidation or merger, as the case may be, shall expressly assume
in writing and be bound by all the terms of this Warrant.
Page 151 of 210
4. Company's Report as to Adjustments. In case of any adjustment or
--------------------------------------
readjustment in the shares of Common Stock issuable upon the exercise of the
Warrants or the Purchase Price, the Company at its expense will promptly (a)
compute such adjustment or readjustment in accordance with the terms of this
Warrant and prepare a report setting forth such adjustment or readjustment and
showing in detail the facts upon which such adjustment or readjustment is based,
and (b) give notice of such adjustment or readjustment, in the form of a
certificate of its president and treasurer as to the contents of such report, to
the Holder of this Warrant.
5. Reservation of Stock. The Company will at all times reserve and keep
----------------------
available, solely for issuance and delivery upon the exercise of this Warrant,
all shares of Common Stock from time to time issuable upon the exercise of this
Warrant. All such shares of Common Stock when issued shall be duly authorized,
validly issued, fully paid and nonassessable with no liability on the part of
the Holders thereof.
6. Exchange of Warrants. Upon surrender for exchange of this Warrant,
----------------------
properly endorsed, to the Company, the Company at its expense will issue and
deliver to or upon the order of the Holder thereof a new Warrant or Warrants of
like tenor, in the name of such Holder or as such Holder (upon payment by such
Holder of any applicable transfer taxes) may direct, calling in the aggregate on
the face or faces thereof for the number of shares of Common Stock called for on
the face or faces of the Warrant to be surrendered.
7. Replacement of Warrants. Upon receipt of evidence reasonably
-------------------------
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant and, in the case of any such loss, theft or destruction, upon
delivery of an indemnity bond or other indemnity arrangements reasonably
satisfactory to the Company or, in the case of any such mutilation, upon
surrender and cancellation of such Warrant, the Company at its expense will
execute and deliver, in lieu thereof, a new Warrant of like tenor.
8. Notices. All notices and other communications from the Company to the
-------
Holder of this Warrant shall be mailed by first class registered or certified
mail, postage prepaid, to such address of such Holder as appears on the books of
the Company.
9. Payment of Taxes. The Company will pay all documentary stamp taxes, if
-----------------
any, attributable to the issuance of Shares upon the exercise of Warrants;
provided, however, that the Company shall not be required to pay any tax or
taxes which may be payable in respect of any transfer involved in the issue or
delivery of any certificates for Shares in a name other than that of the Holder
of Warrants in respect of which such Shares are issued.
Page 152 of 210
10. Benefits of this Agreement. Nothing in this Agreement shall be
------------------------------
construed to give any person or corporation other than the Company and the
Holders any legal or equitable right, remedy or claim under this Agreement.
This Agreement shall be for the sole and exclusive benefit of the Company and
its Holders
11. Term. The right to exercise this Warrant shall expire three (3) years
----
from the date hereof.
12. Miscellaneous. This Warrant and any term hereof may be changed,
-------------
waived, discharged or terminated only by an instrument in writing signed by the
party against which enforcement of such change, waiver, discharge or termination
is sought. This Warrant shall be construed and enforced in accordance with and
governed by the laws of the State of Texas without regard to the principles of
conflict of laws. The headings in this Warrant are for purposes of reference
only and shall not limit or otherwise affect the meaning hereof.
Dated: _____________, 2001.
PENN OCTANE CORPORATION, a Delaware
corporation
By:______________________________________
▇▇▇▇▇ ▇▇▇▇▇▇▇, Vice President
Page 153 of 210
EXHIBIT "P"
DEED OF TRUST TO SECURE ASSUMPTION
DEED OF TRUST TO SECURE ASSUMPTION
THIS DEED OF TRUST TO SECURE ASSUMPTION (this "Mortgage") dated effective
--------
as of March ___, 2001 is executed and delivered by CPSC INTERNATIONAL, INC., a
Texas corporation ("Grantor") for good and valuable consideration, the receipt
-------
and adequacy of which are hereby acknowledged by Grantor.
ARTICLE 1 - Granting Clauses; Secured Indebtedness
--------------------------------------
Grantor does hereby GRANT, BARGAIN, SELL, CONVEY, TRANSFER, ASSIGN and SET
OVER to ▇▇▇▇▇ ▇▇▇▇▇▇▇, as Trustee, or any successor or substitute appointed and
designated as herein provided from time to time acting hereunder (a) the tract
of land (herein called the "Land") described in Exhibit A which is attached
---- ---------
hereto and incorporated herein by reference, and (i) all improvements now or
hereafter situated on the Land (herein called the "Improvements"); and (ii) all
------------
right, title and interest of Grantor in and to (1) all streets, passages, roads,
alleys, easements, rights-of-way, licenses, rights of ingress and egress,
vehicle parking rights and public places, existing or proposed, abutting,
adjacent, used in connection with or pertaining to the Land and/or the
Improvements; (2) any strips or gores between the Land and abutting or adjacent
properties; and (3) all water rights, timber, crops and mineral interests on or
pertaining to the Land (the Land, Improvements and other rights, titles and
interests referred to in this clause (a) being herein sometimes collectively
called the "Premises"); (b) all fixtures, equipment, machinery, furnishings,
--------
appliances, goods, supplies, and articles of personal property, of every kind
and character, now owned or hereafter acquired by Grantor, or in which Grantor
has or shall have an interest, which are now or hereafter attached to, located
upon, situated in, on or about, or used in connection with the Land or the
Improvements, or appurtenant thereto (the foregoing properties referred to in
this clause (b) herein sometimes collectively called the "Accessories") all of
-----------
which are hereby declared to be and deemed to constitute fixtures (herein called
the "Fixtures"), and are part of the Land; (c) all awards or payments which may
--------
hereafter be made with respect to the Premises, the Improvements, the Fixtures,
or the Accessories by means of a taking or voluntary conveyance as a result of,
or in settlement of, any condemnation or other eminent domain proceeding and all
other proceeds of the conversion, voluntary or involuntary, of the Mortgaged
Property (as hereinafter defined), or part thereof; (d) all leases, tenancies,
licenses and other agreements affecting the use, enjoyment or occupancy of the
Premises, the Improvements, the Fixtures, or the Accessories or any portion
thereof now or hereafter entered into (herein called the "Leases"), together
------
with all credits, cash or security deposits, advance rentals and payments of
similar nature and guarantees or other security held by Grantor in connection
therewith and all remainders, reversions and other rights and estates
appurtenant thereto, all modifications, extensions and renewals of the Leases
and all rights to renew or extend the term thereof, all right and privilege of
Grantor to terminate, cancel, abridge, merge, modify, surrender or amend the
Page 154 of 210
Leases and any and all possessory rights of Grantor and all rents, oil and gas
or other mineral royalties, revenues and bonuses, issues and profits from the
Premises, the Improvements, the Fixtures or the Accessories (herein called the
"Rents") and all proceeds from the sale or other disposition of the Leases and
-----
the right to receive Rents; (e) all refunds or rebates of taxes, assessments,
ground rents, water, sewer or other rents and charges, excises, levies, fees and
all other governmental charges of every character in respect to the Premises;
(f) all accounts receivable, contract rights, franchises, authorizations,
approvals, licenses, certificates, permits, variance and land use entitlements
for construction, use, occupancy and operation of the Improvements and the
Premises, together with any interests, estate or other claims, rights or
privileges, both at law and in equity, relating to the Premises, the
Improvements, the Fixtures or the Accessories; (g) all claims against any person
or entity with respect to any damage to the Premises, the Improvements, the
Fixtures or Accessories; (h) all intangible property relating to the Premises,
Improvements, the Fixtures or Accessories or its operation; (i) all advertising
material, guaranties, warranties, building permits, other permits, licenses,
plans and specifications, drawings, soil tests, appraisals and other documents,
materials and/or personal property of any kind now or hereafter existing in or
relating to the Premises, Improvements, Fixtures, and Accessories; (j) all
appurtenances and utility rights pertaining to the Premises, Improvements,
Fixtures or Accessories or any portion thereof, all zoning agreements, all
operating contracts, management agreements, service contracts, supply and
maintenance contracts, equipment leases, which affects or is used in connection
with the Premises, Improvements, Fixtures or Accessories or any part thereof;
(k) all renewals, substitutions, improvements, accessions, attachments,
additions, replacements and all proceeds to or of each of the foregoing, and all
conversions of the security constituted thereby so that the foregoing shall be
deemed a part of the Mortgaged Property and shall automatically become subject
to the lien of this Mortgage as fully and completely and with the same priority
and effect as though now owned by Grantor and specifically described herein; and
(l) all other interests of every kind and character which Grantor now has or
hereafter acquires in, to or for the benefit of the properties, rights, titles
and interests referred to above in this clauses (a) through (j) and all property
used or useful in connection therewith.
TO HAVE AND TO HOLD the foregoing rights, interests and properties, and all
rights, estates, powers and privileges appurtenant thereto (herein collectively
called the "Mortgaged Property") subject to the Permitted Encumbrances, unto
-------------------
Trustee, and his successors or substitutes in this trust, and to his or their
successors and assigns, in trust, however, upon the terms, provisions and
conditions herein set forth.
Grantor hereby grants to Beneficiary (as hereinafter defined) a security
interest in all of the Mortgaged Property which constitutes personal property or
fixtures (herein sometimes collectively called the "Collateral") subject to the
----------
Permitted Encumbrances. In addition to its rights hereunder or otherwise,
Beneficiary shall have all of the rights of a secured party under the Texas
Business and Commerce Code, or under the Uniform Commercial Code in force in any
other state to the extent the same is applicable law.
Page 155 of 210
This Mortgage is made to secure and enforce the payment and performance by
Grantor of the indebtedness, obligations and liabilities and all renewals,
extensions, and modifications approved in writing by Grantor thereof in whole or
in part from time to time (hereinafter sometimes referred to as the "secured
-------
indebtedness" or the "indebtedness secured hereby"): (a) that certain Promissory
------------ ---------------------------
Note dated April 17, 2000 executed by Penn Octane Corporation, a Delaware
corporation ("Beneficiary"), payable to the order of Lieven J. VanReit, in the
-----------
principal amount of $1,908,000.00 and all other notes given in substitution
therefor or in modification approved in writing by Grantor, renewal or extension
thereof, in whole or in part (hereinafter individually called a "Note"); and (b)
----
all indebtedness and other obligations owed by Grantor or any other individual,
corporation, limited liability company, partnership, joint venture, association,
company, trust, unincorporated organization or any other form of entity
(hereinafter called "Person") to Beneficiary now or hereafter incurred or
------
arising pursuant to or permitted by the provisions of the Note or this Mortgage.
ARTICLE 2 - Representations, Warranties and
-------------------------------
Covenants of Grantor
--------------------
Section 2.1. Grantor represents, warrants and covenants to Trustee and
Beneficiary as follows:
Grantor has good, marketable and indefeasible fee simple title to the
Mortgaged Property free and clear of all Liens whatsoever except for the
Permitted Encumbrances (hereafter defined), has not in any way encumbered the
Mortgaged Property and has the right, power and authority to mortgage and
hypothecate the same. Grantor shall forever warrant, defend and preserve such
title and the validity and priority of the liens of this Mortgage against the
claims of all Persons whomsoever. The term "Lien" or "Liens" shall mean any
---- -----
interest in property securing an obligation owed to, or a claim by, a Person
other than the owner of the property, whether such interest is based on common
law, statute or contract, and including, but not limited to the security
interest or lien arising from a mortgage, security agreement, deed of trust,
assignment, collateral mortgage, chattel mortgage, encumbrance, pledge,
conditional sale or trust receipt or a lease, consignment, bailment for security
purposes or certificate of title lien. The term "Lien" shall include
----
reservations, exceptions, encroachments, easements, rights-of-way, covenants,
conditions, restrictions, leases and other title exceptions and encumbrances
affecting property.
Grantor has duly authorized the execution, delivery and performance of this
Mortgage, has taken all requisite action and obtained all necessary and required
approvals and consents for the creation, issuance, execution and delivery of
this Mortgage and Grantor warrants that the execution, delivery and performance
of this Mortgage will not (i) violate any provision of Grantor's organizational
or operational documents, (ii) violate an provision of any indenture, agreement,
mortgage, contract or other instrument to which Grantor is a party or by which
any of its property is bound, or be in conflict with, result in an acceleration
of any obligation or a breach of or constitute (with notice or lapse of time or
both) a default under any of same, or (iii) result in the creation or imposition
of any Lien.
Page 156 of 210
Upon the timely recording of this Mortgage, and the timely filing of
financing statements pursuant to the Uniform Commercial Code, Beneficiary shall
have a valid first, prior and perfected lien and security interest in the
Mortgaged Property, free and clear of all Liens, except the Permitted
Encumbrances and except to the extent any prior Lien existed at the time
Beneficiary transferred the Mortgaged Property to Grantor by way of Exhibit K to
the Settlement Agreement (herein referred to as the "Settlement Agreement") of
even date herewith between Beneficiary, Grantor and Cowboy Pipeline Service
Company, to which this document is Exhibit L.
Grantor will, so long as it owns the Mortgaged Property, comply with all
Legal Requirements (hereafter defined) of any (domestic or foreign) federal,
state, county, municipal or other governmental or political agency, department,
commission, board, bureau, court, subdivision or instrumentality (herein called
"Governmental Authority") applicable to Grantor or to the Mortgaged Property.
-----------------------
Grantor is not a party to any lease, agreement or instrument or subject to
any restriction which may adversely affect the Mortgaged Property.
This Mortgage is the legal, valid and binding obligation of Grantor,
enforceable against Grantor in accordance with their respective terms.
Grantor will make due and punctual payment of the secured indebtedness and
will timely and properly perform and comply with all of the covenants,
agreements, and conditions imposed upon it by this Mortgage and the Note and
will not permit a default, Default, event of default or Event of Default to
occur hereunder or thereunder, except that no default, Default, event of
default, or Event of Default shall have occurred to the extent that Grantor's
non-performance results from Beneficiary's breach of the Settlement Agreement.
Grantor covenants to maintain title that is as lawful, good and
indefeasible as to the Mortgaged Property as when it was transferred by
Beneficiary to Grantor pursuant to the Settlement Agreement. Grantor further
covenants to keep the Mortgaged Property free and clear of all Liens, except for
(i) the matters, if any, set forth on Exhibit B hereto, which are Permitted
---------
Encumbrances only to the extent the same are valid and subsisting and affect the
Mortgaged Property, (ii) the liens and security interests evidenced by this
Mortgage, (iii) statutory liens for ad valorem taxes and standby fees on the
Mortgaged Property which are not yet delinquent, and (iv) other liens and
security interests (if any) in favor of Lender (the matters described in the
foregoing clauses (i), (ii), (iii) and (iv) being herein called the "Permitted
---------
Encumbrances"). Grantor, and Grantor's successors and assigns, will warrant and
------------
forever defend title to the Mortgaged Property, subject as aforesaid, against
the claims and demands of all persons claiming or to claim the same or any part
thereof. Grantor will punctually pay, perform, observe and keep all covenants,
Page 157 of 210
obligations and conditions in or pursuant to any Permitted Encumbrance and will
not modify or permit modification of any Permitted Encumbrance without the prior
written consent of Beneficiary. If any right or interest of Beneficiary in the
Mortgaged Property or any part thereof shall be endangered or questioned or
shall be attacked directly or indirectly, Beneficiary is hereby authorized and
empowered to take such steps as in its discretion may be proper for the defense
of any such legal proceedings or the protection of such right or interest of
Beneficiary.
Grantor will pay, or cause to be paid, all taxes, assessments and other
charges or levies imposed upon or against or with respect to the Mortgaged
Property as the same become due and payable, and shall deliver promptly to
Beneficiary such evidence of the payment thereof as Beneficiary may require.
Grantor shall deliver copies of all notices relating to any obligation covered
by this paragraph to Beneficiary.
Grantor shall notify Beneficiary immediately of any threatened or pending
condemnation affecting the Mortgaged Property or arising out of damage to the
Mortgaged Property, and Grantor shall, at Grantor's expense, diligently
prosecute any such proceedings. Beneficiary shall have the right (but not the
obligation) to participate in any such proceeding and to be represented by
counsel of its own choice. Beneficiary shall be entitled to receive all sums
which may be awarded or become payable to Grantor for the condemnation of the
Mortgaged Property, or any part thereof, for public or quasi-public use, or by
virtue of private sale in lieu thereof, and any sums which may be awarded or
become payable to Grantor for injury or damage to the Mortgaged Property and
shall, after deduction therefrom of all reasonable expenses actually incurred by
Beneficiary, including reasonable attorneys' fees, applied to the payment of the
secured indebtedness, whether or not due. Grantor shall promptly upon request
of Beneficiary, execute such additional assignments and other documents as may
be necessary from time to time to permit such participation and to enable
Beneficiary to collect and receipt for any such sums. Beneficiary is hereby
authorized, in the name of Grantor, to execute and deliver valid acquittance
for, and to appeal from, any such award, judgment or decree. All reasonable
costs and expenses incurred by Beneficiary in connection with any condemnation
shall be a demand obligation owing by Grantor (which Grantor promises to pay) to
Beneficiary pursuant to this Mortgage. Notwithstanding anything to the contrary
in this Mortgage, Beneficiary shall not be entitled to recover its attorneys'
fees incurred in connection with any such proceeding provided that Grantor shall
have engaged its own attorney to prosecute such proceeding and Grantor and
Grantor's attorney shall be diligently prosecuting such proceeding to
completion and Grantor shall not be in default under this Mortgage.
The Mortgaged Property and the use, operation and maintenance thereof shall
at all times comply with all applicable Legal Requirements. If Grantor receives
a notice or claim that the Mortgaged Property, or any use, activity, operation
or maintenance thereof or thereon, is not in compliance with any Legal
Requirement, Grantor will promptly furnish a copy of such notice or claim to
Beneficiary. As used in this Mortgage: (i) the term "Legal Requirement" means
-----------------
Page 158 of 210
any Law, agreement, covenant, restriction, easement or condition as any of the
same now exists or may be changed or amended or come into effect in the future;
and (ii) the term "Law" means any federal, state or local law, statute,
---
ordinance, code, rule, regulation, license, permit, authorization, decision,
order, injunction or decree.
Grantor will keep the Mortgaged Property in at least as good an order,
repair, operating condition and appearance as that existing on the date hereof,
causing all necessary repairs, renewals, replacements, additions and
improvements to be promptly made, and will not allow any of the Mortgaged
Property to be misused, abused or wasted or to deteriorate. Notwithstanding the
foregoing, Grantor will not, without the prior written consent of Beneficiary,
remove from the Mortgaged Property any fixtures covered by this Mortgage except
such as is replaced by Grantor by an article of equal suitability and value,
owned by Grantor, free and clear of any Lien or security interest (except that
created by this Mortgage), or make any structural alteration to the Mortgaged
Property or any other alteration thereto which impairs the value thereof.
Grantor will not use or occupy or conduct any activity on, or allow the use
or occupancy of or the conduct of any activity on, the Mortgaged Property in any
manner which violates any applicable Legal Requirement or which constitutes a
public or private nuisance. Grantor will not do or suffer to be done any act
whereby the value of any part of the Mortgaged Property may be lessened.
Grantor will preserve, protect and retain all material rights and privileges
granted for or applicable to the Mortgaged Property. Without the prior written
consent of Beneficiary, there shall be no drilling or exploration for or
extraction, removal or production of any mineral, hydrocarbon, gas, natural
element, compound or substance (including sand and gravel) from the surface or
subsurface of the Land regardless of the depth thereof or the method of mining
or extraction thereof.
Grantor will, promptly on request of Beneficiary, execute, acknowledge,
deliver, procure and record and/or file such further documents and do such
further acts as may be necessary, desirable or proper to carry out more
effectively the purposes of this Mortgage and to more fully identify and subject
to the liens and security interests hereof any property intended to be covered
hereby or as deemed advisable by Beneficiary to protect the lien or the security
interest hereunder against the rights or interests of third persons, or to
comply with the requirements or requests of any agency having jurisdiction over
Beneficiary, Grantor or the Mortgaged Property.
Grantor will pay, and will reimburse to Beneficiary and/or Trustee on
demand to the extent paid by Beneficiary and/or Trustee all out-of-pocket costs
and expenses of every character incurred by Beneficiary and/or Trustee in
connection with any approval, consent, waiver, release or other matter requested
or required hereunder, or otherwise attributable or chargeable to Grantor as
owner of the Mortgaged Property and all costs and expenses, including reasonable
attorneys' fees and expenses, incurred or expended in connection with the
exercise of any right or remedy, or the enforcement of any obligation of
Grantor, hereunder.
Page 159 of 210
GRANTOR WILL INDEMNIFY AND HOLD HARMLESS THE BENEFICIARY AND TRUSTEE AND
THEIR RESPECTIVE DIRECTORS, OFFICERS, PARTNERS, EMPLOYEES, AGENTS AND
REPRESENTATIVES, AND ANY PERSONS OWNED OR CONTROLLED BY, OWNING OR CONTROLLING,
OR UNDER COMMON CONTROL OR AFFILIATED WITH BENEFICIARY OR TRUSTEE AND THEIR
RESPECTIVE SUCCESSORS AND ASSIGNS (HEREINAFTER REFERRED TO INDIVIDUALLY AS AN
"INDEMNIFIED PARTY" AND COLLECTIVELY AS THE "INDEMNIFIED PARTIES") FROM AND
----------------- -------------------
AGAINST, AND REIMBURSE THEM ON DEMAND FOR, ANY AND ALL INDEMNIFIED MATTERS
(DEFINED BELOW). WITHOUT LIMITATION, THE FOREGOING INDEMNITIES SHALL APPLY TO
EACH INDEMNIFIED PARTY WITH RESPECT TO MATTERS WHICH IN WHOLE OR IN PART ARE
CAUSED BY OR ARISE OUT OF THE NEGLIGENCE OF SUCH (AND/OR ANY OTHER) INDEMNIFIED
PARTY. HOWEVER, SUCH INDEMNITIES SHALL NOT APPLY TO A PARTICULAR INDEMNIFIED
PARTY TO THE EXTENT THAT THE SUBJECT OF THE INDEMNIFICATION IS CAUSED BY OR
ARISES OUT OF THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF THAT INDEMNIFIED
PARTY. Any amount to be paid under this paragraph by any Indemnified Party
shall be a demand obligation owing by Grantor (which Grantor hereby promises to
pay) to such Indemnified Party pursuant to this Mortgage. Nothing in this
paragraph, elsewhere in this Mortgage shall limit or impair any rights or
remedies of any Indemnified Party (including without limitation any rights of
contribution or indemnification) against Grantor or any other Person under any
other provision of this Mortgage, any other agreement or any applicable Legal
Requirement. As used herein, the term "Indemnified Matters" means any and all
-------------------
claims, demands, liabilities (including strict liability), losses, damages
(including consequential damages), causes of action, judgments, penalties, costs
and expenses (including without limitation, reasonable fees and expenses of
attorneys and other professional consultants and experts, and of the
investigation and defense of any claim, whether or not such claim is ultimately
defeated, and the settlement of any claim or judgment including all value paid
or given in settlement) of every kind, known or unknown, foreseeable or
unforeseeable, which may be imposed upon, asserted against or incurred or paid
by any Indemnified Party at any time and from time to time because of, resulting
from, in connection with, or arising out of any transaction, act, omission,
event or circumstance in any way connected with the Mortgaged Property or with
this Mortgage through any cause whatsoever at any time on or before the
Transaction Date (hereafter defined), any act performed or omitted to be
performed hereunder, any breach of any representation, warranty, covenant,
agreement or condition contained in this Mortgage, or any default. The term
"Transaction Date" as used herein means the earlier of the following two dates:
-----------------
(i) the date on which the secured indebtedness has been paid and performed in
full and this Mortgage has been released, or (ii) the date on which the lien of
this Mortgage is fully and finally foreclosed or a conveyance by deed in lieu of
such foreclosure is fully and finally effective, and possession of the Mortgaged
Property has been given to the purchaser or grantor free of occupancy and claims
to occupancy by Grantor and Grantor's heirs, devisees, representatives,
successors and assigns; provided, that if such payment, performance, release,
foreclosure or conveyance is challenged, the Transaction Debtor shall be deemed
Page 160 of 210
not to have occurred until such challenge is rejected, dismissed or withdrawn
with prejudice. The indemnities in this paragraph shall not terminate upon
the Transaction Date or upon the release, foreclosure or other termination of
this Mortgage but will survive the Transaction Date, foreclosure of this
Mortgage or conveyance in lieu of foreclosure, the repayment of the secured
indebtedness, the discharge and release of this Mortgage, and any other event
whatsoever.
Section 2.2. Grantor agrees that, if Grantor fails to perform any act or
to take any action which Grantor is required to perform or take, or to pay any
money which Grantor is required to pay, and whether or not the failure then
constitutes a default hereunder, Beneficiary, in Grantor's name or its own name,
may, but shall not be obligated to, perform or cause to be performed such act or
take such action or pay such money, and any expenses so incurred by Beneficiary
and any money so paid by Beneficiary, shall be a demand obligation owing by
Grantor to Beneficiary (which obligation Grantor hereby promises to pay), shall
be a part of the indebtedness secured hereby, and Beneficiary, upon making such
payment, shall be subrogated to all of the rights of the Person, such payment.
Beneficiary and its designees shall have the right to enter upon the Mortgaged
Property at any time and from time to time for any such purposes. No such
payment or performance by Beneficiary shall waive or cure any default or waive
any right, remedy or recourse of Beneficiary. Each amount due and owing by
Grantor to Beneficiary pursuant to this Mortgage shall bear interest, from the
date such amount becomes due until paid at the maximum nonusurious amount
permitted by applicable law, which interest shall be payable to Beneficiary on
demand; and all such amounts, together with such interest thereon, shall
automatically and without notice be a part of the indebtedness secured hereby.
ARTICLE 3 - Default
-------
The occurrence of any one of the following shall be a default under this
Mortgage ("default"): (a) the failure to pay when due, the Note or any of the
-------
secured indebtedness, regardless of how such amount may have become due; (b) the
failure to perform, observe or keep any covenant, agreement or condition herein
or in the Note (other than covenants otherwise addressed in another clause of
this Article, such as covenants to pay the secured indebtedness); (c) any
statement, representation or warranty in this Mortgage or hereafter delivered to
Beneficiary in connection with the secured indebtedness is false, misleading or
erroneous in any material respect on the date hereof or on the date as of which
such statement, representation or warranty is made; (d) any sale, lease,
conveyance, assignment, pledge, encumbrance, or transfer of all or any part of
the Mortgaged Property or any interest therein, voluntarily or involuntarily,
whether by operation of law or otherwise, or any change in the ownership (legal
or beneficial) of the Mortgaged Property, or any portion thereof; (e) the liens,
mortgages or security interests of Beneficiary in any of the Mortgaged Property
become unenforceable in whole or in part, or cease to be of the priority herein
required, or the validity or enforceability thereof, in whole or in part, shall
be challenged or denied by Grantor or any person obligated to pay any part of
the secured indebtedness (including, but not limited to any guarantor, endorser
or surety); or (f) a default, Default or event of default or Event of Default
occurs under the Note.
Page 161 of 210
ARTICLE 4 - Remedies
--------
Section 4.1. If a default shall occur, Beneficiary may (but shall have no
obligation to) exercise any one or more of the following remedies, without
notice (unless notice is required by applicable statute):
(a) Trustee is authorized and empowered at the request of Beneficiary to
sell the Mortgaged Property or any part thereof situated in the State of Texas,
at the courthouse of any county in the State of Texas in which any part of the
Mortgaged Property is situated, to the highest bidder for cash between the hours
of ten o'clock a.m. and four o'clock p.m. on the first Tuesday in any month or
at such other place, time and date as provided by the Laws of the State of Texas
then in force governing sales of real estate under powers of sale conferred by
deed of trust, after having given notice of such sale in accordance with such
statutes. Any sale made by Trustee hereunder may be as an entirety or in such
parcels as Beneficiary may request. The sale by Trustee of less than the whole
of the Mortgaged Property shall not exhaust the power of sale herein granted,
and Trustee is specifically empowered to make successive sale or sales under
such power until the whole of the Mortgaged Property shall be sold; and, if the
proceeds of such sale of less than the whole of the Mortgaged Property shall be
less than the aggregate of the indebtedness secured hereby and the expense of
executing this trust as provided herein, this Mortgage and the lien hereof shall
remain in full force and effect as to the unsold portion of the Mortgaged
Property just as though no sale had been made. Trustee may, after any request
by Beneficiary, sell not only the real property but also the Collateral and
other interests which are a part of the Mortgaged Property, or any part thereof,
as a unit and as a part of a single sale, or may sell any part of the Mortgaged
Property separately from the remainder of the Mortgaged Property. It shall not
be necessary for Trustee to have taken possession of any part of the Mortgaged
Property or to have present or to exhibit at any sale any of the Collateral.
After each sale, Trustee shall make to the purchaser(s) at such sale good and
sufficient conveyances in the name of Grantor, conveying the property so sold to
the purchaser(s) with general warranty of title by Grantor, subject to the
Permitted Encumbrances and shall receive the proceeds of said sale or sales and
apply the same as herein provided. Payment of the purchase price to the Trustee
shall satisfy the obligation of purchaser at such sale therefor, and such
purchaser shall not be responsible for the application thereof. The power of
sale granted herein shall not be exhausted by any sale held hereunder by
Trustee, and such power of sale may be exercised from time to time and as many
times as Beneficiary may deem necessary until all of the Mortgaged Property has
been duly sold and all secured indebtedness has been fully paid. In the event
any sale hereunder is not completed or is defective in the opinion of
Beneficiary, such sale shall not exhaust the power of sale hereunder and
Beneficiary shall have the right to cause a subsequent sale or sales to be made
hereunder. Any and all statements of fact or other recitals made in any deed or
deeds given by Trustee shall be taken as prima facie evidence of the truth of
the facts so stated and recited. The Trustee may appoint or delegate any one or
more persons as agent to perform any act or acts necessary or incident to any
sale held by Trustee.
Page 162 of 210
(b) Without limitation of Beneficiary's rights of enforcement with respect
to the Collateral or any part thereof in accordance with the procedures for
foreclosure of real estate, Beneficiary may exercise its rights of enforcement
with respect to the Collateral or any part thereof under the Texas Business and
Commerce Code as amended (or under the Uniform Commercial Code in force in any
other state to the extent the same is applicable law) and in conjunction with,
in addition to or in substitution for those rights and remedies: (1) Beneficiary
may enter upon Grantor's premises to take possession of, assemble and collect
the Collateral or, to the extent and for those items of the Collateral permitted
under applicable law, to render it unusable; (2) Beneficiary may require Grantor
to assemble the Collateral and make it available at a place Beneficiary
designates which is mutually convenient to allow Beneficiary to take possession
or dispose of the Collateral; (3) written notice mailed to Grantor at least five
(5) days prior to the date of public sale of the Collateral or prior to the date
after which private sale of the Collateral will be made shall constitute
reasonable notice; (4) any sale made pursuant to the provisions of this
paragraph shall be deemed to have been a public sale conducted in a commercially
reasonable manner if held contemporaneously with and upon the same notice as
required for the sale of the Mortgaged Property under power of sale as provided
above; (5) in the event of a foreclosure sale, whether made by Trustee under the
terms hereof, or under judgment of a court, the Collateral and the other
Mortgaged Property may, at the option of Beneficiary, be sold as a whole; (6) it
shall not be necessary that Beneficiary take possession of the Collateral or any
part thereof prior to the time that any sale pursuant to the provisions of this
Mortgage is conducted and it shall not be necessary that the Collateral or any
part thereof be present at the location of such sale; (7) with respect to
application of proceeds of disposition of the Collateral, the costs and expenses
incident to disposition shall include the reasonable expenses of retaking,
holding, preparing for sale or lease, selling, leasing and the like and the
reasonable attorneys' fees and legal expenses incurred by Beneficiary; (8) any
and all statements of fact or other recitals made in any ▇▇▇▇ of sale or
assignment or other instrument shall be taken as prima facie evidence of the
truth of the facts so stated and recited; and (9) Beneficiary may appoint or
delegate any one or more persons as agent to perform any act or acts necessary
or incident to any sale held by Beneficiary, including the sending of notices
and the conduct of the sale, but in the name and on behalf of Beneficiary.
(c) Beneficiary may proceed by a suit or suits in equity or at law,
whether for collection of the indebtedness secured hereby, the specific
performance of any covenant or agreement herein contained or in aid of the
execution of any power herein granted, or for any foreclosure hereunder or for
the sale of the Mortgaged Property under the judgment or decree of any court or
courts of competent jurisdiction.
Page 163 of 210
(d) Beneficiary is authorized, prior or subsequent to the institution of
any foreclosure proceedings, to the fullest extent permitted by applicable law,
to enter upon the Mortgaged Property and to take possession of the Mortgaged
Property and all books and records relating thereto, and to exercise without
interference from Grantor any and all rights which Grantor has with respect to
the management, possession, operation, protection or preservation of the
Mortgaged Property. Beneficiary shall not be deemed to have taken possession of
the Mortgaged Property except upon the exercise of its right to do so, and then
only to the extent evidenced by its demand and overt act specifically for such
purpose. All costs, expenses and liabilities of every character incurred by
Beneficiary in managing, operating, maintaining, protecting or preserving the
Mortgaged Property shall constitute a demand obligation of Grantor (which
obligation Grantor hereby expressly promises to pay) to Beneficiary pursuant to
this Mortgage. If necessary to obtain the possession provided for above,
Beneficiary may invoke any and all legal remedies to dispossess Grantor. In
connection with any action taken by Beneficiary pursuant hereto, Beneficiary
shall not be liable for any loss sustained by Grantor resulting from any failure
to let the Mortgaged Property or any part thereof, or from any act or omission
of Beneficiary in managing the Mortgaged Property unless such loss is caused by
the willful misconduct and bad faith of Beneficiary, nor shall Beneficiary be
obligated to perform or discharge any obligation, duty or liability of Grantor
arising under any Lease or other agreement relating to the Mortgaged Property or
arising under any Permitted Encumbrance or otherwise arising. Grantor hereby
assents to, ratifies and confirms any and all such actions of Beneficiary with
respect to the Mortgaged Property.
(e) Beneficiary shall as a matter of right be entitled to the
appointment of a receiver or receivers for all or any part of the Mortgaged
Property, and Grantor does hereby irrevocably consent to the appointment of such
receiver or receivers, waives any and all defenses to such appointment, agrees
not to oppose any application therefor by Beneficiary, and agrees that such
appointment shall in no manner impair, prejudice or otherwise affect the rights
of Beneficiary to application of Rents as provided in this Mortgage. Nothing
herein is to be construed to deprive Beneficiary of any other right, remedy or
privilege it may have under the law to have a receiver appointed. Any money
advanced by Beneficiary in connection with any such receivership shall be a
demand obligation (which obligation Grantor hereby promises to pay) owing by
Grantor to Beneficiary pursuant to this Mortgage.
(f) Beneficiary may exercise any and all other rights and remedies which
Beneficiary may have at law or in equity or otherwise.
Section 4.2. In the event a foreclosure hereunder shall be commenced by
Trustee, Beneficiary may at any time before the sale of the Mortgaged Property
direct Trustee to abandon the sale, and may then institute suit for the
collection of the secured indebtedness, and for the foreclosure of this
Mortgage. It is agreed that if Beneficiary should institute a suit for the
collection of the secured indebtedness and for the foreclosure of this Mortgage,
Beneficiary may at any time before the entry of a final judgment in said suit
dismiss the same, and require Trustee to sell the Mortgaged Property in
accordance with the provisions of this Mortgage.
Page 164 of 210
Section 4.3. The proceeds of any sale in foreclosure of the liens and
security interests evidenced hereby shall be applied: FIRST, to the payment of
-----
all necessary costs and expenses incident to such foreclosure sale, including
but not limited to all reasonable attorneys' fees and court costs and a
reasonable fee (not exceeding five percent (5%) of the gross proceeds of such
sale) to Trustee if foreclosed by power of sale as provided herein and to the
payment of the other secured indebtedness, including specifically without
limitation the principal, accrued interest and attorneys' fees due and unpaid on
the Note and the amounts due and unpaid and owed to Beneficiary under this
Mortgage, the order and manner of application to the items in this clause FIRST
to be in Beneficiary's sole discretion; and SECOND, the remainder, if any there
------
shall be, shall be paid to Grantor, or to Grantor's heirs, devisees,
representatives, successors or assigns, or such other persons (including the
Beneficiary or beneficiary of any inferior lien) as may be entitled thereto by
law; provided, however, that if Beneficiary is uncertain which person or persons
are so entitled, Beneficiary may interplead such remainder in any court of
competent jurisdiction, and the amount of any attorneys' fees, court costs and
expenses incurred in such action shall be a part of the secured indebtedness and
shall be reimbursable from such remainder.
Section 4.4. Beneficiary shall have the right to become the purchaser at
any sale held by Trustee or by any receiver or public officer or at any public
sale, and Beneficiary shall have the right to credit upon the amount of
Beneficiary's successful bid, to the extent necessary to satisfy such bid, all
or any part of the secured indebtedness in such manner and order as Beneficiary
may elect.
Section 4.5. Upon the occurrence of a default, Beneficiary shall have the
right to proceed with foreclosure (judicial or nonjudicial) of the liens and
security interests hereunder without declaring the entire secured indebtedness
due, and in such event any such foreclosure sale may be made subject to the
unmatured part of the secured indebtedness; and any such sale shall not in any
manner affect the unmatured part of the secured indebtedness, but as to such
unmatured part this Mortgage shall remain in full force and effect just as
though no sale had been made. The proceeds of such sale shall be applied as
provided in Section 4.3 hereof except that the amount paid under clause FIRST
thereof shall be only the matured portion of the secured indebtedness and any
proceeds of such sale in excess of those provided for in clause FIRST thereof
(modified as provided above) shall be applied to the prepayment (without
penalty) of any other secured indebtedness in such manner and order and to such
extent as Beneficiary deems advisable, and the remainder, if any, shall be
applied as provided in clause SECOND of Section 4.3 hereof. Several sales may
be made hereunder without exhausting the right of sale for any unmatured part of
the secured indebtedness.
Section 4.6. All remedies provided for herein are cumulative of each other
and of any and all other remedies existing at law or in equity, and Trustee and
Beneficiary shall, in addition to the remedies provided herein, be entitled to
avail themselves of all such other remedies as may now or hereafter exist at law
or in equity, and the resort to any right or remedy provided for hereunder or
provided for by law or in equity shall not prevent the concurrent or subsequent
employment of any other appropriate right or rights or remedy or remedies.
Page 165 of 210
Section 4.7. To the full extent Grantor may do so, Grantor agrees that
Grantor will not at any time insist upon, plead, claim or take the benefit or
advantage of any law now or hereafter in force providing for any appraisement,
valuation, stay, extension or redemption, and Grantor, for Grantor, Grantor's
heirs, devisees, representatives, successors and assigns, and for any and all
persons ever claiming any interest in the Mortgaged Property, to the extent
permitted by applicable law, hereby waives and releases all rights of
redemption, valuation, appraisement, stay of execution, notice of intention to
mature or declare due the whole of the secured indebtedness, notice of election
to mature or declare due the whole of the secured indebtedness and all rights to
a marshaling of assets of Grantor, including the Mortgaged Property, or to a
sale in inverse order of alienation in the event of foreclosure of the liens
and/or security interests hereby created. Grantor shall not have or assert any
right under any statute or rule of law pertaining to the marshaling of assets,
sale in inverse order of alienation, the exemption of homestead, the
administration of estates of decedents, or other matters whatever to affect the
right of Beneficiary under the terms of this Mortgage without any prior or
different resort for collection, or the right of Beneficiary under the terms of
this Mortgage to the payment of the secured indebtedness out of the proceeds of
sale of the Mortgaged Property in preference to every other claimant whatever.
Section 4.8. In the event there is a foreclosure sale hereunder and, at
the time of such sale, Grantor or Grantor's heirs, devisees, representatives,
successors or assigns are occupying or using the Mortgaged Property, or any part
thereof, each and all shall immediately become the tenant of the purchaser at
such sale, which tenancy shall be a tenancy from day to day, terminable at the
will of either landlord or tenant, at a reasonable rental per day based upon the
value of the property occupied, such rental to be due daily to the purchaser.
In the event the tenant fails to surrender possession of said property upon
demand, the purchaser shall be entitled to institute and maintain a summary
action for possession of the property (such as an action for forcible detainer)
in any court having jurisdiction.
ARTICLE 5 - Miscellaneous
-------------
Section 5.1. This Mortgage shall be effective as a financing statement
filed as a fixture filing with respect to all fixtures included within the
Mortgaged Property and is to be filed for record in the real estate records of
each county where any part of the Mortgaged Property (including said fixtures)
is situated. This Mortgage shall also be effective as a financing statement
covering any other Mortgaged Property and may be filed in any other appropriate
filing or recording office. A carbon, photographic or other reproduction of
this Mortgage or of any financing statement relating to this Mortgage shall be
sufficient as a financing statement for any of the purposes referred to herein.
Section 5.2. Beneficiary may at any time and from time to time by a
specific writing intended for the purpose (a) waive compliance by Grantor with
any covenant herein made by Grantor to the extent and in the manner specified in
such writing; (b) consent to Grantor's doing any act which hereunder Grantor is
Page 166 of 210
prohibited from doing, or to Grantor's failing to do any act which hereunder
Grantor is required to do, to the extent and in the manner specified in such
writing; (c) release any part of the Mortgaged Property or any interest therein
from the lien and security interest of this Mortgage, without the joinder of
Trustee; or (d) release any party liable, either directly or indirectly, for the
secured indebtedness or for any covenant herein or in the Note, without
impairing or releasing the liability of any other party. No such act shall in
any way affect the rights or powers of Beneficiary or Trustee hereunder except
to the extent specifically agreed to by Beneficiary in such writing.
Section 5.3. The lien, security interest and other security rights of
Beneficiary hereunder shall not be impaired by any indulgence, moratorium or
release granted by Beneficiary with respect to any secured indebtedness, or any
surrender, compromise, release, renewal, extension, exchange or substitution
which Beneficiary may grant in respect of the Mortgaged Property, or any release
or indulgence granted to any endorser, guarantor or surety of any secured
indebtedness.
Section 5.4. Beneficiary may waive any default without waiving any other
prior or subsequent default. Beneficiary may remedy any default without waiving
the default remedied. Neither failure by Beneficiary to exercise, nor delay by
Beneficiary in exercising, nor discontinuance of the exercise of any right,
power or remedy upon or after any default shall be construed as a waiver of such
default or as a waiver of the right to exercise any such right, power or remedy
at a later date. No single or partial exercise by Beneficiary of any right,
power or remedy hereunder shall exhaust the same or shall preclude any other or
further exercise thereof, and every such right, power or remedy hereunder may be
exercised at any time and from time to time. No modification or waiver of any
provision hereof nor consent to any departure by Grantor therefrom shall in any
event be effective unless the same shall be in writing and signed by Beneficiary
and then such waiver or consent shall be effective only in the specific
instance, for the purpose for which given and to the extent therein specified.
No notice to nor demand on Grantor in any case shall of itself entitle Grantor
to any other or further notice or demand in similar or other circumstances.
Remittances in payment of any part of the secured indebtedness shall not,
regardless of any receipt or credit issued therefor, constitute payment until
the required amount is actually received by the payee thereof in immediately
available U.S. funds and shall be made and accepted subject to the condition
that any check or draft may be handled for collection in accordance with the
practice of the collecting bank or banks. Acceptance by the payee thereof of
any payment in an amount less than the amount then due on any secured
indebtedness shall be deemed an acceptance on account only and shall not in any
way excuse the existence of a default hereunder.
Section 5.5. If the ownership of the Mortgaged Property or any part
thereof becomes vested in a Person other than Grantor, Beneficiary may, without
notice to Grantor, deal with such successor or successors in interest with
reference to this Mortgage and to the indebtedness secured hereby in the same
manner as with Grantor, without in any way vitiating or discharging Grantor's
liability hereunder or for the payment of the indebtedness secured hereby or
performance of the obligations secured hereby. No transfer of the Mortgaged
Page 167 of 210
Property, no forbearance on the part of Beneficiary, and no extension of the
time for the payment of the indebtedness secured hereby given by Beneficiary
shall operate to release, discharge, modify, change or affect, in whole or in
part, the liability of Grantor hereunder for the payment of the indebtedness or
performance of the obligations secured hereby or the liability of any other
Person hereunder for the payment of the indebtedness secured hereby.
Section 5.6. Grantor hereby irrevocably submits generally and
unconditionally for itself and in respect of its property to the non-exclusive
jurisdiction of any Texas state court, or any United States federal court,
sitting in the county in which the secured indebtedness is payable, and to the
non-exclusive jurisdiction of any state or United States federal court sitting
in the state in which any of the Mortgaged Property is located, over any suit,
action or proceeding arising out of or relating to this Mortgage or the secured
indebtedness.
Section 5.7. No vendor's lien is waived; and Beneficiary shall have, and
is hereby granted, a vendor's lien on the Mortgaged Property as cumulative
additional security for the secured indebtedness. Beneficiary may foreclose
under this Mortgage or under the vendor's lien without waiving the other or may
foreclose under both.
Section 5.8. It is the intent of Grantor and Beneficiary to conform to and
contract in strict compliance with applicable usury law from time to time in
effect. In no way, nor in any event or contingency shall the interest taken,
reserved, contacted for, charged, chargeable, or received under this Mortgage or
the Note or otherwise, exceed the maximum nonusurious amount permitted by
applicable law (the "Maximum Amount"). If, from any possible construction of
--------------
any document, interest would otherwise be payable in excess of the Maximum
Amount, any such construction shall be subject to the provisions of this
paragraph and such document shall ipso facto be automatically reformed and the
interest payable shall be automatically reduced to the Maximum Amount, without
the necessity of execution of any amendment or new document. If Beneficiary
shall ever receive anything of value which is characterized as interest under
applicable law and which would apart from this provision be in excess of the
Maximum Amount, an amount equal to the amount which would have been excessive
interest shall, without penalty, be applied to the reduction of the principal
amount owing on the secured indebtedness in the inverse order of its maturity
and not to the payment of interest, or refunded to Grantor or the other payor
thereof if and to the extent such amount which would have been excessive exceeds
such unpaid principal. The right to accelerate maturity of the Note or any
other secured indebtedness does not include the right to accelerate any interest
which has not otherwise accrued on the date of such acceleration, and
Beneficiary does not intend to charge or receive any unearned interest in the
event of acceleration. All interest paid or agreed to be paid to Beneficiary
shall, to the extent permitted by applicable law, be amortized, prorated,
allocated and spread throughout the full stated term (including any renewal or
extension) of such indebtedness so that the amount of interest on account of
such indebtedness does not exceed the Maximum Amount. As used in this
paragraph, the term "applicable law" shall mean the laws of the State of Texas
--------------
or the federal laws of the United States applicable to this transaction,
whichever laws allow the greater interest, as such laws now exist or may be
changed or amended or come into effect in the future.
Page 168 of 210
Section 5.9. The Trustee may resign by an instrument in writing addressed
to Beneficiary, or Trustee may be removed at any time with or without cause by
an instrument in writing executed by Beneficiary. In case of the death,
resignation, removal, or disqualification of Trustee, or if for any reason
Beneficiary shall deem it desirable to appoint a substitute or successor trustee
to act instead of the herein named trustee or any substitute or successor
trustee, then Beneficiary shall have the right and is hereby authorized and
empowered to appoint a successor trustee, or a substitute trustee, without other
formality than appointment and designation in writing executed by Beneficiary
and the authority hereby conferred shall extend to the appointment of other
successor and substitute trustees successively until the indebtedness secured
hereby has been paid in full, or until the Mortgaged Property is fully and
finally sold hereunder. Upon the making of any such appointment and
designation, all of the estate and title of Trustee in the Mortgaged Property
shall vest in the named successor or substitute Trustee and he shall thereupon
succeed to, and shall hold, possess and execute all the rights, powers,
privileges, immunities and duties herein conferred upon Trustee. All references
herein to "Trustee" shall be deemed to refer to Trustee (including any successor
-------
or substitute appointed and designated as herein provided) from time to time
acting hereunder.
Section 5.10. The Trustee shall not be liable for any error of judgment or
act done by Trustee in good faith, or be otherwise responsible or accountable
under any circumstances whatsoever (including Trustee's negligence), except for
Trustee's gross negligence or willful misconduct. The Trustee shall have the
right to rely on any instrument, document or signature authorizing or supporting
any action taken or proposed to be taken by him hereunder, believed by him in
good faith to be genuine. All moneys received by Trustee shall, until used or
applied as herein provided, be held in trust for the purposes for which they
were received, but need not be segregated in any manner from any other moneys
(except to the extent required by law), and Trustee shall be under no liability
for interest on any moneys received by him hereunder. Grantor hereby ratifies
and confirms any and all acts which the herein named Trustee or his successor or
successors, substitute or substitutes, in this trust, shall do lawfully by
virtue hereof. Grantor will reimburse Trustee for, and save him harmless
against, any and all liability and expenses which may be incurred by him in the
performance of his duties. The foregoing indemnity shall not terminate upon
discharge of the secured indebtedness or foreclosure, or release or other
termination, of this Mortgage.
Section 5.11. If all of the secured indebtedness be paid as the same
becomes due and payable and all of the covenants, warranties, undertakings and
agreements made in this Mortgage are kept and performed, and all obligations, if
any, of Beneficiary for further advances have been terminated, then, and in that
event only, all rights under this Mortgage shall terminate (except to the extent
expressly provided herein with respect to indemnifications, representations and
warranties and other rights which are to continue following the release hereof)
and the Mortgaged Property shall become wholly clear of the liens, security
interests, conveyances and assignments evidenced hereby, and such liens and
security interests shall be released by Beneficiary in due form at Grantor's
cost. Without limitation, all provisions herein for indemnity of Beneficiary or
Trustee shall survive discharge of the secured indebtedness and any foreclosure,
release or termination of this Mortgage.
Page 169 of 210
Section 5.12. A determination that any provision of this Mortgage is
unenforceable or invalid shall not affect the enforceability or validity of any
other provision and the determination that the application of any provision of
this Mortgage to any person or circumstance is illegal or unenforceable shall
not affect the enforceability or validity of such provision as it may apply to
other persons or circumstances.
Section 5.13. The terms, provisions, covenants and conditions hereof shall
be binding upon Grantor, and the heirs, devisees, representatives, successors
and assigns of Grantor, and shall inure to the benefit of Trustee and
Beneficiary and shall constitute covenants running with the Land. All
references in this Mortgage to Grantor shall be deemed to include all such
heirs, devisees, representatives, successors, and assigns of Grantor.
Section 5.14. This Mortgage may only be modified or terminated by a written
instrument or instruments intended for that purpose and executed by the party
against which enforcement of the modification or termination is asserted. Any
alleged modification or termination which is not so documented shall not be
effective as to any party.
Section 5.15. THIS MORTGAGE, AND ITS VALIDITY, ENFORCEMENT AND
INTERPRETATION, SHALL BE GOVERNED BY TEXAS LAW (WITHOUT REGARD TO ANY CONFLICT
OF LAWS PRINCIPLES) AND APPLICABLE UNITED STATES FEDERAL LAW.
Section 5.16. This Mortgage and the Settlement Agreement constitute the
entire understanding and agreement between Grantor and Beneficiary with respect
to the transactions arising in connection with the indebtedness secured hereby
and supersede all prior written or oral understandings and agreements between
Grantor and Beneficiary with respect to the matters addressed therein.
Section 5.17. All notices, requests, consents, demands and other
communications required or which any party desires to give hereunder shall be
given in writing shall be addressed or delivered to the following respective
addresses, or to such other address as may have been previously designated by
the intended recipient by notice given in accordance with this Section:
If to Grantor: CPSC International, Inc.
Two ▇▇▇▇▇ Center, Suite 2250
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇▇▇
Page 170 of 210
If to Beneficiary: Penn Octane Corporation
▇▇-▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇
▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇▇
If sent by prepaid, registered or certified mail (return receipt
requested), the notice shall be deemed effective when the receipt is signed or
when the attempted initial delivery is refused or cannot be made because of a
change of address of which the sending party has not been notified; if sent in
any other manner, the notice shall be effective when received. Notwithstanding
anything contained in this Mortgage, service of a notice required by Texas
Property Code Section 51.002, as amended, shall be considered complete when the
requirements of that statute are met. Notwithstanding the foregoing, no notice
of change of address shall be effective except upon actual receipt. This
Section shall not be construed in any way to affect or impair any waiver of
notice or demand or to require giving of notice or demand to or upon any person
in any situation or for any reason.
THERE ARE NO UNWRITTEN AGREEMENTS BETWEEN THE PARTIES.
-----------------------------------------------------
[The remainder of this page is intentionally left blank, the next page being the
signature page]
Page 171 of 210
IN WITNESS WHEREOF, this instrument is executed by Grantor as of the date
first written on page 1 hereof.
GRANTOR:
CPSC INTERNATIONAL, INC.
a Texas corporation
By:
-------------------------------
▇▇▇▇ ▇▇▇▇▇▇, President
The federal tax identification
number of Grantor is:
Federal Tax No. _______________
THE STATE OF TEXAS )
)
COUNTY OF ▇▇▇▇▇▇ )
This instrument was acknowledged before me on the ____ day of March, 2001,
by ▇▇▇▇ ▇▇▇▇▇▇, President of CPSC INTERNATIONAL, INC., a Texas corporation, for
and on behalf of said corporation and in the capacity therein stated.
____________________________________
Notary Public, State of Texas
Page 172 of 210
[Signature Page to Deed of Trust to Secure Assumption from CPSC International,
Inc., as Grantor, to ▇▇▇▇▇ ▇▇▇▇▇▇▇, as Trustee, for the benefit of Penn Octane
Corporation, as Beneficiary]
Page 173 of 210
EXHIBIT A
to
Deed of Trust to Secure Assumption, Security Agreement
and Financing Statement
Land
----
TRACT I:
---------
Being a 477.0 acre tract, more or less, out of the Lieven ▇. ▇▇▇ ▇▇▇▇ 745.41
acre tract and out of the North part of ▇▇▇ ▇▇, ▇▇▇▇▇ ▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ as
recorded in Volume 14, Pages 49 & 49A, Map Records of Cameron County, Texas said
745.41 acre tract recorded in Volume 947, Page 931, Deed Records of Cameron
County, Texas and said 477.0 acres being the same tract of land described in
that certain Special Warranty Deed dated April 14, 2000, executed by Lieven ▇.
▇▇▇ ▇▇▇▇ and ▇▇▇▇▇▇▇ ▇. ▇▇▇ ▇▇▇▇, as grantors, to Penn Octane Corporation, as
grantee, filed for record in the Official Records of Cameron County, Texas in
Volume 6238 at Page 96, and under Clerk's File No. 17408, and more particularly
located and described as follows:
BEGINNING at the Northwest corner of the 745.41 acre tract and the Southwest
corner of the "▇▇▇▇▇ Acreage" (Volume 13, Page 71, Cameron County Map Records)
for the Northwest corner of this tract marked by a " iron rod;
THENCE South 83 degrees 15 minutes 50 seconds East along the North line of the
745.41 acre tract same being the South line of the "▇▇▇▇▇ Acreage" (called the
North line of the ▇▇▇▇▇▇ Acreage in the above referenced deed from Lieven ▇. ▇▇▇
▇▇▇▇ and ▇▇▇▇▇▇▇ ▇. ▇▇▇ ▇▇▇▇, as grantors, to POC, as grantee), at 3435.2 feet a
" iron rod, a total distance of 3485.2 feet for the Northeast corner of this
tract said corner being in a drainage ditch;
THENCE South 06 degrees 47 minutes 46 seconds West along the East line of said
745.41 acre tract a distance of 2446.23 feet for a corner marked by a concrete
monument;
THENCE South 06 degrees 51 minutes 05 seconds West along the East line of said
745.41 acre tract and being the West line of Block 2, ▇▇▇▇▇▇ Tract (Volume 14,
Page 49 & 49A, Map Records and West line of ▇.▇. ▇▇▇▇▇▇ Estates, ▇▇▇▇▇▇ Tract),
a distance of 3407.72 feet for a corner marked by a concrete monument;
Page 174 of 210
THENCE South 85 degrees 20 minutes 06 seconds East a distance of 15.51 feet
(South 84 degrees 55 minutes East 15.51 feet, ▇▇▇▇▇ ▇, ▇▇▇▇▇▇ ▇▇▇▇▇) for a
corner marked by a concrete monument;
THENCE South 05 degrees 04 minutes 41 seconds West along the West line of ▇▇▇▇▇
▇, ▇▇▇▇▇▇ ▇▇▇▇▇ a distance of 44.77 feet for the Southeast corner of this tract
marked by a concrete monument;
THENCE North 85 degrees 31 minutes 12 seconds West in a Westerly direction a
distance of 3496.38 feet for the Southwest corner of this tract marked by a
concrete monument;
THENCE North 06 degrees 44 minutes 46 seconds East along the East line of Palo
Alto ▇▇▇▇▇▇ (Volume 5, Page 43 Cameron County Map Records) and the West line of
the 745.41 acre tract, a distance of 6036.79 for the PLACE OF BEGINNING;
CONTAINING 477.0 acres of land, more or less.
TRACT II:
----------
A 50 feet Wide Temporary Access Easement being out of the Lieven Van Reit 745.41
acre tract in Share 22, of the ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇ County, Texas, and
said 50 feet Wide Access Easement being more particularly located and described
as follows:
COMMENCING at the Southeastern corner of the 745.41 acre tract and being the
Southeastern corner of this tract marked by a concrete monument;
THENCE South 57 degrees 02 minutes 46 seconds West along the South boundary line
of said 745.41 acres, a distance of 638.32 feet for a corner marked by a
concrete monument;
THENCE South 74 degrees 32 minutes 45 seconds West a distance of 144.39 feet for
a corner marked by a concrete monument;
THENCE North 89 degrees 44 minutes 10 seconds West a distance of 87.02 feet for
a corner marked by a concrete monument;
THENCE North 66 degrees 53 minutes 30 seconds West a distance of 58.0 feet for a
corner marked by a set inch iron rod;
THENCE North 06 degrees 41 minutes 27 seconds East at 50.0 feet the Southernmost
corner and Place of Beginning;
Page 175 of 210
THENCE North 06 degrees 41 minutes 27 seconds East along the centerline of said
50 feet Wide Access Easement (25.0 feet on either side) a distance of 278.9 feet
for a corner marked by a inch iron rod;
THENCE North 22 degrees 37 minutes 07 seconds East a distance of 404.78 feet for
a corner marked by a inch iron rod;
THENCE North 67 degrees 47 minutes 37 seconds West a distance of 436.8 feet for
a corner marked by a inch iron rod;
THENCE North 16 degrees 52 minutes 08 seconds East a distance of 443.10 feet for
a corner marked by a inch iron rod;
THENCE North 57 degrees 13 minutes 36 seconds West a distance of 831.11 feet for
a corner marked by a inch iron rod;
THENCE North 67 degrees 50 minutes 53 seconds a distance of 126.54 feet for a
corner marked by a inch iron rod;
THENCE North 06 degrees 38 minutes 08 seconds East a distance of 2843.18 feet
for the Northernmost and end of said 50 feet Wide Access Easement, marked by a
inch iron rod.
Page 176 of 210
Page 177 of 210
EXHIBIT B
to
Deed of Trust to Secure Assumption
Permitted Encumbrances
----------------------
(1) All liens, restrictions, mineral and royalty interests, easements,
rights-of-way, encumbrances and other matters now in force and existing of
record affecting the Land.
(2) All laws, regulations and ordinances of all governmental and
quasi-governmental authorities, if any, affecting the Land.
(3) The "Easement" as such term is defined in that certain Special Warranty Deed
dated of even date herewith from Beneficiary, as grantor therein, to Grantor, as
grantee therein (the "Deed").
(4) The vendor's lien and superior title reserved by Beneficiary in the Deed.
Page 178 of 210
EXHIBIT "Q"
GENERAL CONVEYANCE, ASSIGNMENT AND ▇▇▇▇ OF SALE
GENERAL CONVEYANCE, ASSIGNMENT,
AND ▇▇▇▇ OF SALE
This GENERAL CONVEYANCE, ASSIGNMENT, AND ▇▇▇▇ OF SALE (this "Agreement"),
is entered into on March ___, 2001, between CPSC INTERNATIONAL, INC., a Texas
corporation ("CPSC"), COWBOY PIPELINE SERVICE COMPANY, a Texas corporation
("Cowboy") and PENN OCTANE CORPORATION, a Delaware corporation ("POC").
WITNESSETH:
WHEREAS, CPSC, Cowboy and POC have entered into a Settlement Agreement
dated the date hereof (the "Settlement Agreement"), providing, among other
things, for the sale by CPSC and Cowboy to POC of certain of the assets of CPSC
and Cowboy; and
WHEREAS, pursuant to the Settlement Agreement, CPSC, Cowboy and POC are
required to execute and deliver this Agreement in connection with the
consummation of the transactions contemplated by the Settlement Agreement;
NOW, THEREFORE, in consideration of the promises and other good and
valuable consideration, including the Monetary Consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
A. Any capitalized term used and not otherwise defined in this Agreement
shall have the meaning assigned to such term in the Settlement
Agreement.
B. Subject to the terms and conditions in the Settlement Agreement, CPSC
hereby grants, conveys, assigns, transfers, bargains and delivers unto
POC and its successors and assigns, all of their rights, titles and
interests in and to the Acquired Assets, if any, including, but not
limited to,(a) the Pipelines, (b) the Transfer Terminals, (c) the
Facilities, (d) the Permits,(e) the Easements, and (f) the CPSC/Cowboy
Agreements, free and clear of all Encumbrances (except the Permitted
Encumbrances). Subject to the terms and conditions in the Settlement
Agreement, Cowboy hereby grants, conveys, assigns, transfers, bargains
and delivers unto POC and its successors and assigns, all of its
rights, titles and interests, if any, in and to the Acquired Assets,
including, but not limited to,(a) the Pipelines, (b) the Transfer
Terminals, (c) the Facilities, (d) the Permits, (e) the Easements, and
(f) the CPSC/Cowboy Agreements, free and clear of all Encumbrances
(except the Permitted Encumbrances). CPSC and Cowboy make no
representations or warranties with respect to the Acquired Assets,
except for the representations and warranties set forth in the
Settlement Agreement.
Page 179 of 210
C. The Parties acknowledge that the Acquired Assets shall specifically
exclude the Retained Assets.
D. This Agreement shall be governed by and construed and enforced in
accordance with the laws of the State of Texas, without giving effect
to choice of law principles. To the extent any conflict or
inconsistency exists between the provisions of this Agreement and the
Settlement Agreement, the provisions of the Settlement Agreement shall
be controlling. The terms and provisions of the Settlement Agreement
(including without limitation the representations, warranties and
covenants therein) shall not merge, be extinguished or otherwise be
affected by the delivery and execution of this Agreement or any other
document delivered pursuant to this Agreement. This Agreement may be
executed in any number of counterparts, each of which shall be deemed
an original, but all of which together shall constitute one and the
same instrument. This Agreement shall inure to the benefit of, be
binding upon and be enforceable against the Parties.
TO HAVE AND TO HOLD the Acquired Assets and the CPSC Agreements unto POC
and its successors and assigns forever, together with all and singular the
rights and appurtenances belonging or pertaining thereto.
[Remainder of this page has been intentionally left blank]
Page 180 of 210
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as
of the date first written above.
PENN OCTANE CORPORATION CPSC INTERNATIONAL INC.
By: By:
-------------------------------- --------------------------------
▇▇▇▇▇ ▇▇▇▇▇▇▇, Vice President ▇▇▇▇ ▇▇▇▇▇▇, President
COWBOY PIPELINE SERVICE COMPANY
By:
--------------------------------
A.C. "▇▇▇▇▇" ▇▇▇▇▇▇, President
[Signature Page to General Conveyance, Assignment, and ▇▇▇▇ of Sale between CPSC
International, Inc., Cowboy Pipeline Service Company, and Penn Octane
Corporation]
Page 181 of 210
EXHIBIT "R"
MUTUAL RELEASE
MUTUAL RELEASE
--------------
)
) KNOW ALL MEN BY THESE PRESENTS:
)
THIS MUTUAL RELEASE ("Agreement") is entered into this _______ day of
March, 2001, between PENN OCTANE CORPORATION, a Delaware corporation, and
related entities, CPSC INTERNATIONAL, INC., a Texas Corporation and COWBOY
PIPELINE SERVICE COMPANY, a Texas corporation.
RECITALS
WHEREAS, at various times POC and either, or both, CPSC and/or Cowboy have
entered into various agreements, contracts and understandings, including, but
not limited to, those related to the design, construction, licensing,
permitting, ownership, use, lease, maintenance and/or repair of the Pipelines
and Facilities, and
WHEREAS, POC, CPSC and Cowboy have entered into a Settlement Agreement (the
"Settlement Agreement") of even date herewith, which completely and finally
settles all claims alleged or that could have been alleged among and between the
Parties;
NOW, THEREFORE, in consideration of the mutual promises contained herein
and other good and valuable consideration, the Parties agree as follows:
1. CPSC and Cowboy for themselves and their respective Affiliates and
their respective Representatives and their respective successors and assigns
hereby knowingly, voluntarily and intentionally RELEASE, ACQUIT and FOREVER
DISCHARGE POC and its Affiliates and their respective shareholders, officers,
directors, employees, accountants, legal counsel, and financial advisors and
their respective successors and assigns from all Claims.
2. POC for itself and its Affiliates and their respective
Representatives and their successors and assigns hereby knowingly, voluntarily
and intentionally RELEASES, ACQUITS and FOREVER DISCHARGES CPSC and Cowboy and
their respective Affiliates and their respective shareholders, officers,
directors, employees, accountants, legal counsel, and financial advisors and
their respective successors and assigns of and from all Claims.
Page 182 of 210
3. As used herein, "Claims"mean existing claims, losses, demands,
debts, causes of action, damages, claims for relief, obligations and liabilities
of every kind, known and unknown, whether is contract or in tort, or arising
under or by virtue of any Law, including but not limited to all causes of action
asserted or which could have been asserted in the Case or in any other lawsuit
which was or which could have been filed for past and present losses, damages,
or remedies of any kind, known or unknown, that are now recognized by Law,
including without limitation by statute, regulation, or judicial decision,
including but not limited to the following: all actual damages, all exemplary
and punitive damages, all penalties of any kind, prejudgment and postjudgment
interest, including nay claim arising from the manner in which the parties
released herein handled, settled, defended, or enforced any claim, demand, or
cause of action; provided, however, the term "Claims" shall not include any of
the foregoing which arise out of the breach or default of the Settlement
Agreement.
4. As used herein, "POC" includes Penn Octane Corporation, a Delaware
corporation, and the following affiliates and/or subsidiaries: Termatsal, S.A.
de C.V.; Penn Octane de Mexico, S.A. de C.V.; and Tergas S.A. de C.V; which
affiliates and subsidiaries have duly executed this Agreement.
5. The Parties represent the following to each other: (a) before
executing this Agreement, each became fully informed of the terms, contents,
conditions, and effect of this Agreement; (b) each if legally competent or has
taken all necessary corporate action predicate to the execution of this
Agreement; (c) no promise or representation of any kind has been made except as
is expressly stated in this Agreement; (d) each has not assigned, pledged, or in
any other manner sold or transferred any right, title, interest, or claim that
such Party may have against the other Party; (e) each has had the benefit of the
advice of counsel of his own choosing and has relied solely on his own judgment
and the advice of his counsel in executing this Agreement; (f) each understands
that this Agreement is a full, complete and final release; and (g) each
understands that the consideration is all the consideration that will be
provided to the other in order to compromise, settle, satisfy, release and
discharge all Claims which the Parties have against each other.
6. Capitalized terms not specifically defined in this Agreement shall
have the meanings ascribed to them in the Settlement Agreement.
7. Each Party represents and warrants that up to and including the
terms of full performance of this Agreement no right, title or interest in their
Claims has been assigned, pledged or otherwise transferred to any Person,
including by way of subrogation or operation of law otherwise.
Page 183 of 210
8. In any action or proceeding, whether at law or in equity, or
otherwise, to enforce the terms of this Agreement, the prevailing Party shall be
entitled to recover all reasonable charges, costs, expenses and attorneys' fees.
9. This Agreement may be pleaded as a full and complete defense to, and
the Parties hereby consent that it may be used as the basis for an injunction
against any action, suit or other proceeding based on Claims released by this
Agreement.
10. This Agreement may be executed in counterparts and will be fully
binding as of all such signatures were on a single document even though such
signatures will be on separate pages from each other or from the text of this
document.
11. The laws of the State of Texas shall govern this Agreement.
12. To the extent any conflict or inconsistency exists between the
provisions of this Agreement and the Settlement Agreement, the provisions of the
Settlement Agreement shall be controlling.
[remainder of page left intentionally blank]
Page 184 of 210
EXECUTED in multiple originals on the date first set forth above.
PENN OCTANE CORPORATION, a Delaware corporation
By:
------------------------------------------------
▇▇▇▇▇ ▇▇▇▇▇▇▇, Vice President
CPSC INTERNATIONAL, INC., a Texas corporation
By:
------------------------------------------------
▇▇▇▇ ▇▇▇▇▇▇, President
COWBOY PIPELINE SERVICE COMPANY, a Texas corporation
By:
------------------------------------------------
A. C. "▇▇▇▇▇" ▇▇▇▇▇▇, President
TERMATSAL, S.A. de C.V., a corporation organized
under the laws of Mexico
By:
------------------------------------------------
Name:
----------------------------------------------
Title:
---------------------------------------------
PENN OCTANE DE MEXICO, S.A. de C.V., a corporation
organized under the laws of Mexico
By:
------------------------------------------------
Name:
----------------------------------------------
Title:
---------------------------------------------
[Signature Page to Mutual Release between Penn Octane Corporation; CPSC
International, Inc. and Cowboy Pipeline Service Company]
Page 185 of 210
TERGAS, S.A. de C.V., a corporation organized under
the laws of Mexico
By:
------------------------------------------------
Name:
----------------------------------------------
Title:
---------------------------------------------
STATE OF TEXAS )
)
COUNTY OF ▇▇▇▇▇▇ )
Before me the undersigned notary public on this day personally appeared
▇▇▇▇ ▇▇▇▇▇▇, President of CPSC International, Inc., a Texas corporation, known
to me to be the person whose name is subscribed to the foregoing instrument and
acknowledged to me that he executed the same for the purposes and consideration
therein expressed, in the capacity therein stated and as the act and deed of
said corporation .
Given under my hand and seal of office this day of March, 2001.
------
--------------------------------------
Notary Public
State of Texas
[Signature and Acknowledgment Page to Mutual Release between Penn Octane
Corporation; CPSC International, Inc., and Cowboy Pipeline Service Company]
Page ▇▇▇ ▇▇ ▇▇▇
▇▇▇▇▇ ▇▇ ▇▇▇▇▇ )
)
COUNTY OF ▇▇▇▇▇▇ )
Before me the undersigned notary public on this day personally appeared A.
C. "▇▇▇▇▇" ▇▇▇▇▇▇, President of Cowboy Pipeline Service Company, a Texas
corporation, known to me to be the person whose name is subscribed to the
foregoing instrument and acknowledged to me that he executed the same for the
purposes and consideration therein expressed, in the capacity therein stated and
as the act and deed of said corporation .
Given under my hand and seal of office this day of March, 2001.
------
--------------------------------------
Notary Public
State of Texas
STATE OF TEXAS )
)
COUNTY OF ▇▇▇▇▇▇ )
Before me the undersigned notary public on this day personally appeared
▇▇▇▇▇ ▇▇▇▇▇▇▇, Vice President of Penn Octane Corporation, a Delaware
corporation, known to me to be the person whose name is subscribed to the
foregoing instrument and acknowledged to me that he executed the same for the
purposes and consideration therein expressed, in the capacity therein stated and
as the act and deed of said corporation .
Given under my hand and seal of office this day of March, 2001.
------
--------------------------------------
Notary Public
State of Texas
[Acknowledgment Page to Mutual Release between Penn Octane Corporation; CPSC
International, Inc., and Cow
boy Pipeline Service Company]
Page 187 of 210
STATE OF ______________ )
)
COUNTY OF _____________ )
Before me the undersigned notary public on this day personally appeared,
________________________________ of Termatsal, S.A. de C.V., a corporation
organized under the laws of Mexico, known to me to be the person whose name is
subscribed to the foregoing instrument and acknowledged to me that he executed
the same for the purposes and consideration therein expressed, in the capacity
therein stated and as the act and deed of said corporation.
Given under my hand and seal of office this day of March, 2001.
------
--------------------------------------
Notary Public
State
--------------------
STATE OF ____________________ )
)
COUNTY OF __________________ )
Before me the undersigned notary public on this day personally appeared,
________________________________ of Penn Octane de Mexico, S.A. de C.V., a
corporation organized under the laws of Mexico, known to me to be the person
whose name is subscribed to the foregoing instrument and acknowledged to me that
he executed the same for the purposes and consideration therein expressed, in
the capacity therein stated and as the act and deed of said corporation .
Given under my hand and seal of office this day of March, 2001.
------
--------------------------------------
Notary Public
State
--------------------
[Acknowledgment Page to Mutual Release between Penn Octane Corporation; CPSC
International, Inc., and Cowboy Pipeline Service Company]
Page 188 of 210
STATE OF ___________________ )
)
COUNTY OF _________________ )
Before me the undersigned notary public on this day personally appeared,
________________________________ of Tergas, S.A. de C.V., a corporation
organized under the laws of Mexico, known to me to be the person whose name is
subscribed to the foregoing instrument and acknowledged to me that he executed
the same for the purposes and consideration therein expressed, in the capacity
therein stated and as the act and deed of said corporation .
Given under my hand and seal of office this day of March, 2001.
------
--------------------------------------
Notary Public
State
--------------------
Page 189 of 210
[Acknowledgment Page to Mutual Release between Penn Octane Corporation; CPSC
International, Inc., and Cowboy Pipeline Service Company]
Page 190 of 210
EXHIBIT "S"
TERMINATION AND RELEASE OF ESCROW
TERMINATION AND RELEASE OF ESCROW
---------------------------------
This TERMINATION AND RELEASE OF ESCROW ("Agreement") is made and entered
into this 28th day of March, 2001 by and CPSC International, Inc., a Texas
corporation ("CPSC") and ▇▇▇▇▇ ▇▇▇▇▇, as escrow agent, an individual residing in
Orinda, California ("▇▇▇▇▇").
WITNESSETH:
WHEREAS, reference is hereby made to that certain Amendment No. 2 to
Lease/Installment Purchase Agreement for Two (2) 15-Mile Pipelines dated
November 24, 1998 and to Lease/Installment Agreement For Two (2) 10-Kilometer
Pipelines (the "Amendment"); and
WHEREAS, pursuant to Paragraph 1 of the Amendment, Section 3.3 of the
Agreements (as such term is defined in the Amendment) was amended to provide for
a pledge of 500,000 shares of common stock owned and held by ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇,
President of POC (the "Shares") and to provided for the placement of the Shares
into an escrow account to be held pursuant to the Agreements and an Escrow
Agreement to be executed; and
WHEREAS, pursuant to the terms of the Settlement Agreement dated of even
date herewith between Penn Octane Corporation, a Delaware corporation, CPSC and
Cowboy Pipeline Service Company, Inc., a Texas corporation (the "Settlement
Agreement") CPSC has agreed to release its interest in the Shares; and
WHEREAS, conditioned upon CPSC's release of its interest in the Shares,
▇▇▇▇▇ has agreed to release his interest in the Shares, conditioned upon CPSC's
release of its interest in the Shares;
NOW THEREFORE, in consideration of the premises and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
CPSC and ▇▇▇▇▇ agree as follows:
1. CPSC hereby releases and reassigns unto ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ ("▇▇▇▇▇▇▇")
all of its rights, titles, and interest in and to the Shares.
2. CPSC hereby directs and authorizes ▇▇▇▇▇ to release and reassign unto
▇▇▇▇▇▇▇ any right, title or interest in the Shares which he may have
or claim and to redeliver to ▇▇▇▇▇▇▇ any and all share certificates,
Stock powers and other instruments, evidencing the Shares or any
rights, titles or interests which CPSC or ▇▇▇▇▇ may have in the
Shares.
Page 191 of 210
3. ▇▇▇▇▇ hereby releases and reassigns unto ▇▇▇▇▇▇▇ all of his rights,
titles, and interests in and to the Shares.
4. Contemporaneous herewith, ▇▇▇▇▇ shall redeliver or has redelivered to
▇▇▇▇▇▇▇ all of the share certificates, stock powers and other
instruments evidencing the Shares or any rights, titles or interests
which CPSC or ▇▇▇▇▇ may have in the Shares.
5. CPSC and ▇▇▇▇▇ hereby represent and warrant to ▇▇▇▇▇▇▇ that neither it
has transferred, assigned, pledged or otherwise encumbered any right,
title or interest in and to the Shares.
6. This Agreement may be executed in any number of counterparts, each of
which shall be deemed an original, but all of which together shall
constitute one and the same instrument.
7. This Agreement shall inure to the benefit of and be enforceable by
▇▇▇▇▇▇▇ and his heirs and assigns and shall be binding upon and
enforceable against CPSC and ▇▇▇▇▇ and their respective successors,
heirs and assigns.
[Remainder of this page has been intentionally left blank]
Page 192 of 210
CPSC INTERNATIONAL, INC.
a Texas corporation
By:
--------------------------
▇▇▇▇ ▇▇▇▇▇▇, President
--------------------------
▇▇▇▇▇ ▇▇▇▇▇
I hereby acknowledge that the Shares have been reassigned and delivered to me as
of the date set forth above.
__________________________
▇▇▇▇▇ ▇▇▇▇▇▇▇
[Signature Page to Termination and Release of Escrow]
Page 193 of 210
EXHIBIT "T"
ASSIGNMENT OF EASEMENTS
ASSIGNMENT OF EASEMENTS
-----------------------
THE STATE OF TEXAS )
) KNOW ALL MEN BY THESE PRESENTS:
COUNTY OF ____________ )
WHEREAS, reference is hereby made to that certain Settlement Agreement date
the date hereof (the "Settlement Agreement") between CPSC International, Inc. a
Texas corporation ("CPSC"), Cowboy Pipeline Service Company, a Texas corporation
("Cowboy") and Penn Octane Corporation, a Delaware corporation ("POC"),
providing, among other things, for the sale by CPSC and Cowboy to POC of certain
assets of CPSC and Cowboy; and
WHEREAS, pursuant to the Settlement Agreement, CPSC and Cowboy are required
to execute and deliver this Assignment in connection with the consummation of
the transaction contemplated by the Settlement Agreement;
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, including, the Monetary Consideration, the receipt and
sufficiency of which are hereby acknowledged, CPSC and Cowboy have GRANTED,
SOLD, CONVEYED, TRANSFERRED and ASSIGNED and by these presents do hereby GRANT,
SELL, CONVEY TRANSFER AND ASSIGN unto POC, and its successors and assigns, all
of each of their respective rights, titles, and interests, if any, in and to
any and all rights, titles, interests, liberties, privileges and/or advantages
in any real or personal property that allows, permits or purports to allow or
permit the construction, operation, use, maintenance, monitoring repair,
replacement or removal of the Pipelines, the Facilities, the Transfer Terminals
and/or any of the other Acquired Assets, including the right of ingress and
egress for the purposes of constructing, operating, using, maintaining,
monitoring, repairing, replacing or removing the Pipelines, the Facilities, the
Transfer Terminals and/or any of the other Acquired Assets, and includes,
without limitation, easements, rights of way, licenses, and permits, together
with any ancillary or related rights, agreements or other property of whatever
kind or description necessary for the full use and enjoyment of any such right,
title or interest whether acquired through contract, condemnation, the Plan or
as a matter of law.
The Easements shall specifically include, but shall not be limited to, the
Easements granted to CPSC in the instruments described on Exhibit "A" attached
hereto.
To the extent any conflict or inconsistency exists between the provisions
of this Assignment and the Settlement Agreement, the provisions of the
Settlement Agreement shall be controlling. The terms and provisions of the
Settlement Agreement (including, without limitation, the representations,
warranties and covenants therein) shall not merge, be extinguished or otherwise
be affected by the execution and delivery of this Assignment or any other
document executed and delivered pursuant to this Assignment.
Page 194 of 210
TO HAVE AND TO HOLD the Easements unto POC and its successors and assigns
forever, together with all and singular the rights and appurtenances belonging
or pertaining thereto.
EXECUTED this ___ day of March, 2001.
CPSC INTERNATIONAL, INC.,
a Texas corporation
By:______________________________________
▇▇▇▇ ▇▇▇▇▇▇, President
COWBOY PIPELINE SERVICE COMPANY,
a Texas corporation
By:______________________________________
A. C. "▇▇▇▇▇" ▇▇▇▇▇▇, President
STATE OF TEXAS )
)
COUNTY OF ▇▇▇▇▇▇ )
This instrument was acknowledged before me on the ______ day of March,
2001, by ▇▇▇▇ ▇▇▇▇▇▇, President of CPSC International, Inc., a Texas
corporation, on behalf of said corporation.
_______________________________________
Notary Public, State of Texas
STATE OF TEXAS )
)
COUNTY OF ▇▇▇▇▇▇ )
This instrument was acknowledged before me on the ______ day of March,
2001, by A. C. "▇▇▇▇▇" ▇▇▇▇▇▇, President of Cowboy Pipeline Service Company, a
Texas corporation, on behalf of said corporation.
_______________________________________
Notary Public, State of Texas
Page 195 of 210
EXHIBIT "A"
1. International Boundary and ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇▇ ▇▇▇▇▇▇ Section, License No. LF/G-1589. (Issued to POC)
2. United States Department of State Permit Authorizing Penn Octane
Corporation to Construct Two Pipelines Crossing The International Boundary
Line Between The United States and Mexico for The Transport of Liquefied
Petroleum Gas (LPG) and Refined Product (Motor Gasoline and Diesel Fuel)
dated July 26, 1999. (Issued to POC)
3. License Agreement dated effective October 6, 1999, between Central Power
and Light Company, as Licensor, and CPSC International, an affiliate of
Cowboy Pipeline Service Company, as Licensee, recorded in Volume 5913 at
Page 1 et seq., and under Clerk's File No. 46834 of the Official Records of
Cameron County, Texas.
4. Pipeline Right of Way Easement dated August 12, 1999, between ▇▇▇▇▇▇ ▇.
▇▇▇▇▇, ▇▇., Trustee, as Grantor, and CPSC International, a Texas
corporation, as Grantee, recorded in Volume 6286 at Page 211 et. seq. , and
under Clerk's File No. 21234 of the Official Records of Cameron County,
Texas.
5. Pipeline Right of Way Easement dated August 9, 1999, between ▇▇▇▇▇▇▇▇▇
Farms Partnership, as Grantor, and CPSC International, a Texas corporation,
as Grantee, recorded in Volume 6286 at Page 194 et. seq., and under Clerk's
File No. 21232 of the Official Records of Cameron County, Texas.
6. Pipeline Right of Way Easement dated November 20, 1999, between ▇▇▇▇▇▇ ▇.
▇▇▇▇▇, ▇▇▇▇▇▇ ▇. ▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇ and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, as Grantor,
and CPSC International, a Texas corporation, as Grantee, recorded in Volume
6286 at Page 200 et. seq., and under Clerk's File No. 21233 of the Official
Records of Cameron County, Texas.
7. Easement Agreement dated April 20, 2000, between Soltex Development, Inc.,
as Grantor, and CPSC International, Inc., a Texas corporation, recorded in
Volume 6286 at Page 184 et. seq., and under Clerk's File No. 21230 of the
Official Records of Cameron County, Texas.
Page 196 of 210
8. Pipeline Right of Way Easement dated August 9, 1999, between ▇▇. ▇▇▇▇▇▇ ▇.
▇▇▇▇▇, as Grantor, and CPSC International, a Texas corporation, as Grantee,
recorded in Volume 6286 at Page 189 et. seq., and under Clerk's File no.
21231 of the Official Records of Cameron County, Texas.
9. Pipeline Crossing Agreement, Mile Post: 198.59, Santa ▇▇▇▇ Subdivision,
Location: Brownsville, Cameron County, Texas, dated July 19, 1999, between
Union Pacific Railroad Company, as Licensor, and CPSC International, a
Texas corporation, as Licensee.
10. Pipeline Crossing Agreement, Mile Post: 6.45, Brownsville Subdivision,
Location: Brownsville, Cameron County, Texas, dated July 19, 1999, between
Union Pacific Railroad Company, as Licensor, and CPSC International, a
Texas corporation, as Licensee.
11. Pipeline Crossing Agreement, Mile Post 7.50, Brownsville Subdivision,
Location: Olmito, Cameron County, Texas, dated July 20, 1999, between Union
Pacific Railroad Company, as Licensor, and CPSC International, a Texas
corporation, as Licensee.
12. Agreement For Joint Use of Right Way dated September 17, 1999, between
Cameron County Drainage District Number One and CPSC International.
13. Approval dated June 23, 1999, executed by Texas Department of
Transportation, Hwy. No. US 281, control # 220-4 to CPSC International.
14. Permission dated June 17, 1999 issued by Cameron County Engineering to ▇.
▇. ▇▇▇▇▇▇.
15. Approval dated June 23, 1999, executed by ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇
▇▇▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇. ▇▇. ▇▇ ▇▇, control # 220.7 to CPSC International.
16. Approval dated June 23, 1999, executed by Texas Department of
Transportation, Hwy. No. FM 511, control # 684-1 to CPSC International.
17. Approval dated June 22, 1999, executed by Texas Department of
Transportation, Hwy. No. US 77 & 83 Exp. control # 39-9 to CPSC
International.
18. Limited Easement Agreement for Two Underground Pipelines dated August 21,
2000, between ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, ▇▇., as Grantor, and Penn Octane
Corporation, as Grantee, recorded in Volume 6763, Page 149, Official
Records of Cameron County, Texas.
19. Easement Agreement dated November 10, 2000, between ▇▇▇▇ ▇▇▇▇▇▇, as
Grantor, and Penn Octane Corporation, as Grantee, recorded in Volume 6703,
Page 166-172, Official Records of Cameron County, Texas.
Page 197 of 210
20. Easement Agreement dated December 13, 2000, between ▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇▇▇▇▇
▇. ▇▇▇▇▇▇, ▇▇▇▇▇▇▇ Van Tassel and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, as Grantors, and Penn
Octane Corporation, as Grantee, recorded in Volume 6762, Page 74-81,
Official Records of Cameron County, Texas.
21. Easement Agreement dated July 6, 2000, between ▇▇▇▇▇▇▇▇ Family Limited
Partnership, as Grantor, and Penn Octane Corporation, as Grantee, recorded
in Volume 6522, Page 300, Official Records of Cameron County, Texas.
22. Easement Agreement dated September 13, 2000, between ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇.,
as Grantor, and Penn Octane Corporation, as Grantee, recorded in Volume
6763, Page 161-166 of the Official Records of Cameron County, Texas.
23. Easement Agreement dated June 23, 2000, between ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, as
Grantor, and Penn Octane Corporation, as Grantee, recorded in Volume 6522,
Page 307-313 of the Official Records of Cameron County, Texas.
24. Easement Agreement dated August 29, 2000, between ▇▇▇▇ ▇. ▇▇▇▇▇▇▇, as
Grantor, and Penn Octane Corporation, as Grantee, recorded in Volume 6522,
Page 267-272 of the Official Records of Cameron County, Texas.
25. Easement Agreement dated August 29, 2000, between ▇▇▇▇ ▇. ▇▇▇▇▇▇▇, as
Grantor, and Penn Octane Corporation, as Grantee, recorded in Volume 6522,
Page 273-279 of the Official Records of Cameron County, Texas.
26. Easement Agreement dated November 3, 2000, between ▇▇▇▇▇ ▇. and ▇▇▇▇▇▇▇
▇▇▇▇▇, as Grantors, and Penn Octane Corporation, as Grantee, recorded in
Volume 6703, Page 159-165 of the Official Records of Cameron County, Texas.
27. Easement Agreement dated August 28, ▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇,▇▇
Trustee for the ▇▇▇▇▇-▇▇▇▇▇▇▇ Trust, as Grantor, and Penn Octane
Corporation, as Grantee, recorded September 7, 2000 in Volume 6522, Page
261-Page 266 of the Official Records of Cameron County, Texas.
28. Limited Easement Agreement for Two Underground Pipelines dated July 28,
2000, between ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ and
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, as Grantor, and Penn Octane Corporation, as Grantee,
recorded in Volume 6763, Page 136 Official Records of Cameron County,
Texas.
29. Easement Agreement dated June 16, 2000, between ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, Jr. and
▇▇▇▇▇▇ ▇▇▇▇▇▇▇, as Grantor, and Penn Octane Corporation, as Grantee,
recorded in Volume 6522, Page 286-292, Official Records of Cameron County,
Texas.
Page 198 of 210
30. Easement Agreement dated August 21, 2000, between ▇▇▇ ▇▇▇▇▇▇▇▇▇▇,
Independent Executor of the Estate of ▇▇▇▇▇▇▇ ▇. ▇▇▇▇, Deceased, as
Grantor, and Penn Octane Corporation, as Grantee, recorded in Volume 6522,
Page 280, Official Records of Cameron County, Texas.
31. Easement Agreement dated February 12, 2001, between ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, as
Grantor, and Penn Octane Corporation, as Grantee, recorded in Volume 6842,
Page 8, Official Records of Cameron County, Texas.
Page 199 of 210
EXHIBIT "U"
CPSC CORPORATE RESOLUTIONS
Page 200 of 210
EXHIBIT "V"
BANK ONE ESCROW RELEASE LETTER
____________, 2001
Bank One Texas, N. A.
Attn: ______________, Escrow Department
▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Re: Escrow Agreement (the "Agreement") dated December 14, 1999, among Penn
Octane Corporation ("POC"), CPSC International ("CPSC") and Bank One,
Texas, N.A. (the "Bank"); Bank Account No. 83-000-757-01
Dear _______________________:
Please let this letter serve as the Joint Written Direction of POC and CPSC
pursuant to Section 3 of the Agreement to release to CPSC all of the funds on
deposit as of the date hereof under the Agreement less any compensation, fees
and reimbursement expenses that may be due Bank under the Agreement. Bank is
hereby authorized and directed to withdraw said compensation, fees and
reimbursement expenses from the funds on deposit and to pay same to itself.
Notwithstanding such release, you should not close said account as it is
our intention to continue to use same for future deposits.
This letter may be executed in one or more counterparts, each of which,
when so executed, shall be deemed to be an original and such counterparts, taken
together, shall constitute one and the same letter.
Thank you for your services. Please feel free to contact us if you have
any questions.
PENN OCTANE CORPORATION
By:
--------------------------------------
▇▇▇▇▇ ▇▇▇▇▇▇▇, Vice President
CPSC INTERNATIONAL, INC.
By:
--------------------------------------
▇▇▇▇ ▇. ▇▇▇▇▇▇, President
Page 201 of 210
EXHIBIT "W"
POC CORPORATE RESOLUTIONS
OFFICERS' CERTIFICATE
---------------------
We, the undersigned officers (the President or a Vice President and the
Secretary or an Assistant Secretary), of PENN OCTANE CORPORATION, a Delaware
corporation,(the "Corporation"), hereby certifies to CPSC INTERNATIONAL, INC., a
-----------
Texas corporation and COWBOY PIPELINE SERVICE COMPANY, INC., a Texas
corporation, that the following are true and correct:
1. Resolutions. Attached hereto as Annex "A" is a true and correct
----------- --------
copy of resolutions relating to the matters described therein, which have
been duly and unanimously adopted at a meeting of, or by the unanimous
written consent of, the Board of Directors of the Corporation in compliance
with and not in contravention of the Articles of Incorporation and Bylaws
of the Corporation; none of such resolutions have been amended, modified,
or repealed in any respect; and all of such resolutions are in full force
and effect on the date hereof.
2. Incumbency. The following named individuals are the duly elected,
----------
qualified, and acting officers of the Corporation, and hold the offices set
forth opposite their respective names as of the date hereof, and the
signatures set opposite the respective names and titles of said officers
are their true and authentic signatures:
Name Title Specimen Signature
--------------------------------------------------------------------------------
▇▇▇▇▇ ▇▇▇▇▇▇▇ Vice President __________________
________________ Secretary __________________
3. Charter. Attached hereto as Annex "B" is a true and correct copy of
------- --------
the Articles of Incorporation of the Corporation, establishing the
Corporation as a Texas corporation, together with any and all amendments
thereto and there have been no additional amendments, filed or authorized,
to such Articles of Incorporation.
4. Bylaws. Attached hereto as Annex "C" is a true and correct copy of
------ --------
the Bylaws of the Corporation in effect on the date hereof, and there have
been no amendments or modifications thereto.
Page 202 of 210
IN WITNESS WHEREOF, we have duly executed this certificate effective as of
March __, 2001.
_____________________________________
▇▇▇▇▇ ▇▇▇▇▇▇▇, Vice President
_____________________________________
__________________________, Secretary
THE STATE OF TEXAS )
)
COUNTY OF ▇▇▇▇▇▇ )
This instrument was acknowledged before me on the ____ day of March, 2001,
by ▇▇▇▇▇ ▇▇▇▇▇▇▇, Vice President of Penn Octane Corporation, a Delaware
corporation, on behalf of said corporation.
_____________________________________
Notary Public in and for
the State of Texas
Page 203 of 210
ANNEX "A"
---------
RESOLUTIONS OF BOARD OF DIRECTORS OF
PENN OCTANE CORPORATION,
A Delaware Corporation
(the "Corporation")
-----------
The undersigned, being all of the directors of the Corporation, do hereby
waive notice of the time, place, and purpose of a special meeting of the
Corporation and consent to, approve, authorize, and adopt in all respects the
following resolutions:
RESOLVED, that the form and content of that certain Settlement Agreement
and related documents (the "Settlement Agreement") to be entered into by the
Corporation and CPSC International, Inc. ("CPSCI") and Cowboy Pipeline Service
Company, Inc. ("Cowboy") in the form of drafts exhibited to each director, with
such changes as are hereinafter authorized, and the transactions contemplated
therein, are hereby approved; and further
RESOLVED, that the President or any Vice President of the Corporation is
hereby authorized, on behalf of the Corporation, to execute the Settlement
Agreement and deliver such documents to CPSCI and Cowboy in substantially the
form approved by these resolutions, with such amendments or changes thereto as
the officer so acting may approve, such approval to be conclusively evidenced by
his execution and delivery of the same; and further
RESOLVED, that the President or any Vice President of the Corporation is
hereby authorized, on behalf of the Corporation, to execute such other
instruments and documents, and to take such other actions as the officer so
acting deems necessary or desirable to effectuate the transactions contemplated
by these resolutions; and further
RESOLVED, that the Secretary or any Assistant Secretary of the Corporation
is hereby authorized, on behalf of the Corporation, to certify and attest any
documents which he may deem necessary or appropriate to consummate the
transactions contemplated by these resolutions; provided that such attestation
shall not be required for the validity of any such documents; and further
RESOLVED, that any and all actions taken by any of the officers or
representatives of the Corporation, for and on behalf and in the name of the
Corporation, with CPSCI and Cowboy prior to the adoption of these resolutions,
including, without limitation, the negotiation of the Settlement Agreement are
hereby ratified, confirmed, are approved in all respects for all purposes.
Page 204 of 210
EXECUTED effective as of ____________, 2001.
_____________________________________
_______________, Director
____________________________________
_______________, Director
Page 205 of 210
ANNEX "B"
---------
ARTICLES OF INCORPORATION
Page 206 of 210
ANNEX "C"
---------
BYLAWS
Page 207 of 210
EXHIBIT "X"
COWBOY CORPORATE RESOLUTIONS
Page 208 of 210
EXHIBIT "Y"
LIST OF CPSC LITIGATION
EXHIBIT "Y"
In re CPSC International, Inc.; case number 00-20805, United States Bankruptcy
Court, Southern District of Texas, Corpus Christi Division
Leivan ▇. ▇▇▇ ▇▇▇▇ v. Cowboy Pipeline Services Company, Inc., CPSC
International, Inc., and Penn Octane Corporation; adversary number 00-2043,
United States Bankruptcy Court, Southern District of Texas, Corpus Christi
Division
CPSC International, Inc. ▇. ▇▇▇▇ Octane Corporation; adversary number 00-2065,
United States Bankruptcy Court, Southern District of Texas, Corpus Christi
Division
CPSC International, Inc. ▇. ▇▇▇▇▇▇ Pipeline; adversary number 00-2066, United
States Bankruptcy Court, Southern District of Texas, Corpus Christi Division
Penn Octane Corporation v. CPSC International, Inc.; adversary number 00-2073,
United States Bankruptcy Court, Southern District of Texas, Corpus Christi
Division
National Oilwell, L.P. v. Cowboy Pipeline Service Company, Penn Octane
Corporation, and CPSC International, Inc.; adversary number 00-2078, United
States Bankruptcy Court, Southern District of Texas, Corpus Christi Division
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇, Trustee of the F.W. ▇▇▇▇ ▇▇▇▇▇▇▇ Trust and the ▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇ Trust v. CPSC International, Inc.,; adversary number 00-2091, United
States Bankruptcy Court, Southern District of Texas, Corpus Christi Division
Texas Parks and Wildlife inquiry (being negotiated by Penn Octane Corporation)
into the Pipelines affect, if any, on property managed by Texas Parks and
Wildlife
Brownsville Navigation District ▇. ▇▇▇▇ Octane Corporation; cause number
2001-CCL-25-A, in the County Court of Law in Cameron County, Texas
Page 209 of 210
EXHIBIT "Z"
LIST OF POC LITIGATION
In re: CPSC International, Inc.; Case ▇▇. ▇▇-▇▇▇▇▇-▇-▇▇, ▇▇ ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
Bankruptcy Court for the Southern District of Texas, Corpus Christi Division
CPSC, International, Inc. ▇. ▇▇▇▇ Octane Corporation; Adversary ▇▇. ▇▇-▇▇▇▇-▇,
▇▇ ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ Bankruptcy Court for the Southern District of Texas, Corpus
Christi Division
CPSC International, Inc. ▇. ▇▇▇▇▇▇ Pipeline Services, Inc.; Adversary ▇▇.
▇▇-▇▇▇▇-▇, ▇▇ ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ Bankruptcy Court for the Southern District of
Texas, Corpus Christi Division
Penn Octane Corporation v. CPSC International, Inc.; Adversary ▇▇. ▇▇-▇▇▇▇-▇, ▇▇
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ Bankruptcy Court for the Southern District of Texas, Corpus
Christi Division
Lieven Van Riet v. Cowboy Pipeline Service Company, Inc., Cowboy Pipeline
Service Company International and Penn Octane Corporation; Cause No.
2000-02-843-E, In the ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇
Removed to United States Bankruptcy Court for the Southern District of Texas,
Corpus Division; Adversary No. 00-2043-C
Penn Octane Corporation v. Cowboy Pipeline Service Company and ▇.▇. ▇▇▇▇▇▇; Case
No. 2000-04-1826-A, In the 107th Judicial Distirct Court of Cameron County,
Texas
Removed to United States Bankruptcy Court for the Southern District of Texas,
Corpus Christi Division; Adversary No. 00-2088-C-11
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇, Trustee of the F.W. ▇▇▇▇ ▇▇▇▇▇▇▇ Trust and the ▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇ Trust ▇. ▇▇▇▇ Octane Corporation and Cowboy Pipeline Service Company;
Case No. 2000-06-2321-B, In the ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇
Removed to United States Bankruptcy Court for the Southern District of Texas,
Corpus Christi Division; Adversary No. 00-2091-C
National Oilwell, LP. v. Cowboy Pipeline Service Company and Penn Octane
Corporation; Cause No. 2000-26925, In the ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇;
Removed to United States Bankruptcy Court for the Southern District of Texas,
Corpus Christi Division, Adversary No. 00-2178
Brownsville Navigation District of Cameron County, Texas ▇. ▇▇▇▇ Octane
Corporation; No. 2001-CCL-00025-A, In the ▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇. ▇ ▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇
Page 210 of 210