ROLLOVER AND ASSIGNMENT AGREEMENT
THIS ROLLOVER AND ASSIGNMENT AGREEMENT ("Rollover Agreement") is made as of
December 3, 1998 between Penn Octane Corporation, a Delaware corporation having
its principal office at ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ (the "Borrower") and the six Lenders set forth on Schedule I
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hereto (each a "Lender", collectively, the "Lenders").
WHEREAS, pursuant to that certain Purchase Agreement dated October 21, 1997
(the "Purchase Agreement"), the Borrower issued to each Lender a promissory note
(with respect to each Lender, the "Original Note" and collectively, the
"Original Notes") bearing interest at the rate of 10% per annum, dated as of
October 21, 1997 in the aggregate principal amount of One Million Five Hundred
Thousand Dollars ($1,500,000), pursuant to which the Borrower is obligated to
repay to each Lender the stated principal amount of such Lender's Original Note
(which amount is set forth opposite such Lender's name on Schedule I hereto)
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plus any accrued and unpaid interest thereon at the rate of 10% per annum (such
amount with respect to each Lender, the "Loan");
WHEREAS, Borrower has represented to Lenders that: an arbitral award was
rendered against International Bank of Commerce-Brownsville ("IBC") in favor of
Borrower; the value of the arbitral award as of July 31, 1998 was approximately
$3.4 million; a judgment was entered on February 28, 1996 by the ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ in Civil Action No. 94-08-4008-C, known as
International Energy Development Corp. v. International Bank of
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Commerce-Brownsville; such judgment modified the arbitral award in certain
--------------------
respects; an appeal was taken to the Court of Appeals for the Thirteenth
District of Texas (the "Corpus Christi Court of Appeals"); on June 18, 1998, the
Corpus Christi Court of Appeals rendered an Opinion and Order in No.
13-96-298-CV, known as International Bank of Commerce - Brownsville, Appellant
-------------------------------------------------------
v. International Energy Development Corp., Appellee, such Opinion and Order
--------------------------------------------------------
confirmed the original arbitral award in all respects; and IBC has filed a
motion for rehearing with the Corpus Christi Court of Appeals;
WHEREAS, the Borrower has requested each of the Lenders to continue to lend
the original principal amount of its respective Loan, and the Borrower intends
to effect the equitable distribution to the Lenders of any payment, realization
or proceeds relating to or arising out of the Judgment (as defined in the
Assignment);
WHEREAS, simultaneously upon the execution of this Rollover Agreement, the
Borrower and the Lenders have executed a Collateral Agreement substantially in
the form attached hereto as Exhibit A, and the Borrower and Castle Energy
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Corporation for itself and as Collateral Agent for the Lenders have executed an
Assignment of Judgment Agreement substantially in the form attached hereto as
Exhibit B (respectively, the "Collateral Agreement" and the "Assignment")
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pursuant to which (i) Castle Energy Corporation has been appointed as Collateral
Agent by the Borrower and Lenders (the "Collateral Agent"), and a collateral
account has been established by the Collateral Agent (the "Collateral Account");
(ii) Borrower has agreed to instruct IBC in writing (as attached as Annex 1 to
the Collateral Agreement, the "Payment Instruction Letter") to make any payment
of Proceeds (as defined in the Assignment) into the Collateral Account; and
(iii) Borrower has assigned in trust to the Collateral Agent as assignee for
itself and on behalf of all the Lenders all of Borrower's right, title and
interest in and to the Judgment (as defined in the Assignment) and the Proceeds;
and (iv) the Collateral Agent shall distribute any Proceeds paid into the
Collateral Account solely as set forth in the Collateral Agreement;
WHEREAS, each of the Lenders has agreed to continue to lend the original
principal amounts of its respective Loan subject to the terms and conditions of
this Agreement, and to amend and restate its Original Note in consideration for
which the Borrower shall execute and deliver: (i) to the Collateral Agent, the
Assignment, (ii) to each Lender, an amended and restated Original Note (with
respect to each Lender, the "Amended Note", collectively, the "Amended Notes")
substantially in the form of Exhibit C hereto in such principal amount as is set
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forth opposite such Lender's name on Schedule I attached hereto, and (iii) to
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each Lender, warrants issued by the Borrower to such Lender to purchase shares
of Common Stock, $.01 par value ("Common Stock") of the Borrower at an exercise
price of $1.75 per share, pursuant to Section 2(c) hereof (the "Warrants",
together with the Amended Notes, the "Securities"), substantially in the form of
Exhibit D hereto; and
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WHEREAS, the Borrower and each of the Lenders desire to enter into a
Registration Rights Agreement with respect to the shares of Common Stock
underlying the Warrants (the "Warrant Shares") and the Conversion Shares (as
defined below), substantially in the form of Exhibit E hereto (the "Registration
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Rights Agreement"), all on the terms and conditions set forth therein.
NOW, THEREFORE, in consideration of the mutual covenants of the parties
contained herein, and for other good and valuable consideration, the receipt of
which is hereby acknowledged, and intending to be legally bound hereby, the
parties hereto agree as follows:
1. Continuation of Loans. Subject to the terms and conditions stated
----------------------
herein, each Lender hereby agrees to continue to lend the original principal
amount of its respective Loan until the Maturity Date (as defined in this
Agreement).
2. Assignment.
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a. In consideration of the Lenders' agreement to continue to lend the
original principal amount of their respective Loans subject to the terms
and conditions stated herein, the Borrower hereby (i) agrees to execute and
deliver to each of the Lenders at the Closing (as defined below) an Amended
Note in such amount as is set forth opposite such Lender's name on Schedule
--------
I hereto and (ii) agrees to execute and deliver to the Collateral Agent at
-
the Closing the Assignment and (iii) agrees to execute and deliver to the
Lenders at the Closing the Collateral Agreement. Borrower hereby
acknowledges that the Assignment and the Collateral Agreement are executed
as collateral security and the execution and delivery thereof shall not in
any way impair or diminish the obligations of Borrower to Lenders. Any
Proceeds paid into the Collateral Account shall be paid in trust to the
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Collateral Agent, shall be subject to the liens of the Collateral Agent for
the benefit of itself and the Lenders, and shall be distributed by the
Collateral Agent in accordance with the terms and conditions of the
Collateral Agreement.
b. Borrower hereby agrees to execute and deliver to the Collateral
Agent at the Closing the Payment Instruction Letter, in the form attached
hereto as Annex 1 to the Collateral Agreement which Collateral Agent shall
send to IBC.
c. In further consideration of the Lenders' agreement to continue to
lend the principal amount of their respective Loans subject to the terms
and conditions stated herein, the Borrower shall execute and deliver to
each Lender at the Closing, all Warrants to purchase shares of Common Stock
expiring three years from the date hereof with an exercise price of $1.75
per share, in such numbers as are set forth opposite such Lender's name
on Schedule I hereto.
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d. The number of Warrants to be issued to the Lenders at the Closing
pursuant to Section 3(c) is subject to adjustment as set forth in Section 6
of each Warrant.
3. The Closing. The execution and delivery of this Rollover Agreement shall
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take place on December 3, 1998, or at such other date as the Borrower and the
Lenders shall agree (the "Closing").
4. Amendment of the Original Notes. Each Lender hereby agrees that upon
--------------------------------
delivery at the Closing by the Borrower of an Amended Note in such principal
amount set forth opposite such Lender's name on Schedule I hereto, such Lender
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shall ▇▇▇▇ its Original Note "amended and restated"; and, the Original Note
shall be deemed to be amended and restated in its entirety by the Amended Note.
5. Registration Rights. The Lenders shall have such registration rights
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with respect to the Warrant Shares and the Conversion Shares as are set forth in
the Registration Rights Agreement.
6. Interest Rate; Default Interest Rate; Remedies. The Borrower and each of
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the Lenders agree that the Amended Notes shall accrue interest at the rate of
ten percent (10%) per annum, payable on December 31, 1998, March 31 and June 30,
1999 (or the Maturity Date if earlier). Upon the occurrence of any Event of
Default (as set forth in the Amended Note) under any one of the Amended Notes,
the indebtedness owing under each Amended Note shall become immediately due and
payable in full and shall accrue interest at the rate of twelve percent (12%)
per cent per annum until the entire remaining principal balance of each Amended
Note shall have been paid in full together with all interest accrued thereon;
and the holder of each Amended Note may exercise all of its rights and remedies
under the Rollover Agreement and all other documents executed or delivered in
connection therewith and/or applicable law.
3
7. Maturity. All outstanding principal of, and accrued and unpaid interest
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on, each Amended Note shall be due and payable on the earlier to occur of any
one of the following dates or events (the "Maturity Date"):
a. June 30, 1999;
b. a date determined by the Borrower within ten (10) business days of
the closing date of any raising of debt or equity financing of the
Borrower, resulting in net proceeds to the Borrower in excess of
$2,250,000; or
c. an Event of Default (as defined in the Amended Notes).
7A. Conversion of Indebtedness. Any outstanding principal and/or
----------------------------
accrued and unpaid interest which remains due and payable in respect of any
Amended Notes after June 30, 1999 (with respect to each Amended Note, the
"Overdue Indebtedness") shall, upon the written request (with respect to each
Amended Note, a "Conversion Notice") of the holder of such Amended Notes, be
converted by the Company, in whole but not in part, into such number of
newly-issued shares of Common Stock of the Company (with respect to each Amended
Note, the "Conversion Shares") equal to the quotient of the Overdue Indebtedness
at the time of receipt by the Company of the Conversion Notice divided by $1.50.
The Company hereby agrees to deliver any Conversion Shares to the relevant
holder of an Amended Note as soon as practicable after receipt of a Conversion
Notice and upon surrender of the Amended Note being so converted to the Company
by the holder thereof but in no event later than ten (10) business days after
receipt of the Conversion Notice (the "Issuance Deadline"). Upon the issuance
of the Conversion Shares in respect of an Amended Note, such Amended Note shall,
from the date of receipt by the Company of the Conversion Notice, cease to
accrue any interest, and all of the Company's obligations in respect of such
Amended Note shall be deemed satisfied in full upon the issuance and delivery to
the holder of such Amended Note of the Conversion Shares. In addition, any
Conversion Shares issued pursuant to this Agreement shall be entitled to the
registration rights provided for in the Registration Rights Agreement.
8. Pro Rata Payments. Any payment by the Borrower of any amounts under the
-----------------
Amended Notes shall be made to each Lender pro rata in proportion to the
principal amount outstanding under such Lender's Amended Note over the total
amount outstanding under all the Amended Notes calculated as of the date of
payment. Each payment made by the Borrower relating to the Amended Notes shall
be applied first to accrued and unpaid interest on, and second to outstanding
principal of, the Amended Notes.
9. Representations, Warranties and Covenants of the Borrower. The Borrower
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represents, warrants and covenants that as of the Closing, and at all times
thereafter until the Amended Notes are paid and satisfied in full:
4
a. The Borrower is and shall be a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware, and
has and will have the requisite corporate power and authority to execute
and deliver this Rollover Agreement and to perform its obligations
hereunder.
b. The execution, delivery and performance of this Rollover Agreement
have been and will continue to be duly authorized by all necessary
corporate action on the part of the Borrower and do not violate any
covenant contained in any agreement to which the Borrower is a party.
c. The Warrant Shares and the Conversion Shares, when issued upon
exercise of the Warrants and payment therefor or upon conversion of Amended
Notes, as the case may be, will be legally and validly issued, fully paid
and nonassessable.
d. The Borrower owns all right title and interest in and to the
Judgment and the Proceeds; and except as otherwise set forth in this
Rollover Agreement and the Collateral Agreement, the Borrower has not
created or suffered to exist and will not create or suffer to exist with
respect to the Judgment or the Proceeds any security interest, pledge,
assignment, encumbrance, lien (statutory or otherwise) or other security
agreement or preferential arrangement or transfer of any kind or nature
whatsoever.
e. The Borrower has not received any payment or Proceeds nor realized
all or any part of the Judgment; and if the Borrower hereafter receives any
payment or Proceeds or realizes all or any part of the Judgment, it shall
hold the same in trust for the benefit of the Lenders and deliver the same
to the Collateral Agent in the form received immediately upon the
Borrower's receipt thereof.
f. The Judgment has not been reversed, dismissed, modified or vacated
by any court; and the Borrower will notify the Lenders immediately of any
such reversal, dismissal, modification or vacation.
g. The Borrower will notify the Lenders immediately of any raising of
debt or equity financing that has or potentially may result in proceeds to
the Borrower in excess of $2,250,000, net of transaction expenses related
to such offering and any such excess shall be paid to Lenders, pro rata,
--- ----
immediately upon Borrower's receipt thereof.
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10. Representations and Warranties of the Lenders. Each of the Lenders,
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severally and not jointly, represents and warrants to the Borrower, as to
itself, as follows:
a. General:
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(i) The Lender has all requisite authority to enter into this
Rollover Agreement and to perform all of the obligations required to
be performed by it hereunder.
(ii) Neither the Borrower nor any person acting on behalf of the
Borrower has offered or sold the Securities to the Lender by means of
any form of general solicitation or general advertising. The Lender
has not received, paid or given, directly or indirectly, any
commission or remuneration for or on account of any sale, or the
solicitation of any sale, of the Securities.
b. Information Concerning the Borrower: Solely for the purpose of this
-----------------------------------
Rollover Agreement and the Warrants, and not for any other purpose
whatsoever:
(i) The Lender is familiar with the business and financial
condition, properties, operations and prospects of the Borrower.
(ii) The Lender has been given full access to all material
information concerning the condition, properties, operations and
prospects of the Borrower. The Lender and its advisors (if any) have
had an opportunity to ask questions of, and to receive information
from, the Borrower and persons acting on its behalf concerning the
terms and conditions of the Lender's investment in the Securities, and
to obtain any additional information necessary to verify the accuracy
of the information and data received by the Lender. The Lender is
satisfied that there is no material information concerning the
condition, properties, operations and prospects of the Borrower of
which the Lender is unaware.
(iii) The Lender has made, either alone or together with its
advisors (if any), such independent investigation of the Borrower, its
management, and related matters as the Lender deems to be, or the
Lender's advisors (if any) have advised to be, necessary or advisable
in connection with this investment; and the Lender and its advisors
(if any) have received all information and data which the Lender and
its advisors (if any) believe to be necessary in order to reach an
informed decision as to the advisability of investing in the
Securities.
(iv) The Lender understands that all the Lender's representations
and warranties contained in this Rollover Agreement will be deemed to
have been reaffirmed and confirmed as of the Closing.
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(v) The Lender understands that acceptance of the Securities
involves various risks, including the risk that it is unlikely that
any market will exist for any resale of the Securities, the Warrant
Shares or the Conversion Shares and that resale of the Securities, the
Warrant Shares or the Conversion Shares will be restricted as herein
provided.
c. Status of Lender:
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(i) The Lender either alone or with its advisors (if any) has
such knowledge, skill and experience in business, financial and
investment matters as to be capable of evaluating the merits and risks
of an investment in the Securities. To the extent that the Lender has
deemed it appropriate to do so, the Lender has retained and relied
upon, appropriate professional advice regarding the investment, tax
and legal merits and consequences of this Rollover Agreement and
owning the Securities, the Warrant Shares and the Conversion Shares,
as the case may be.
d. Restrictions on Transfer or Sale:
------------------------------------
(i) The Lender is acquiring the Securities and any Warrant Shares
purchased upon exercise of the Warrants or Conversion Shares upon
conversion of Amended Notes solely for its own account, for investment
purposes, and not with a view to, or for resale in connection with,
any distribution of the Amended Note, the Warrants or such Warrant
Shares or Conversion Shares. The Lender understands that neither the
Amended Note, the Warrants nor such underlying Warrant Shares or
Conversion Shares have been registered under the Securities Act of
1933, as amended (the "Securities Act"), or the securities laws of any
state (collectively referred to as "State Securities Laws") by reason
of specific exemptions under the provisions thereof which depend in
part upon the investment intent of the Lender and on the other
representations made by the Lender in this Rollover Agreement. The
Lender understands that the Borrower is relying upon the
representations and agreements contained in this Rollover Agreement
(and any supplemental information) for the purpose of determining
whether this transaction meets the requirements for such exemptions.
(ii) The Lender understands that the Amended Note, the Warrants
and such underlying Warrant Shares and Conversion Shares are
"restricted securities" under applicable federal securities laws and
that the Securities Act and the rules of the Securities and Exchange
Commission (the "Commission") provide in substance that the Lender may
dispose of such securities or any of them only pursuant to an
effective registration statement under the Securities Act or an
exemption therefrom, and understands that the Borrower has no
obligations or intentions to register any of such securities
thereunder, or to take any other action so as to permit sales pursuant
to the Securities Act, except as set forth in the Registration Rights
Agreement. Accordingly, the Lender understands that under the
Commission's rules, unless disposed of pursuant to an effective
registration statement under the
7
Securities Act, the Lender may dispose of the Amended Note, Warrants,
underlying Warrant Shares and Conversion Shares only in accordance
with the provisions of Rule 144 under the Securities Act, to the
extent available, or in "private placements" which are exempt from
registration under the Securities Act, or pursuant to such other
exemptions as may be available in which event the transferee will
acquire "restricted securities" subject to the same limitations as in
the hands of the Lender. As a consequence, absent such an effective
registration statement under the Securities Act, the Lender
understands that it may be required to bear the economic risks of the
investment in the Securities (and the underlying Warrant Shares and
Conversion Shares) for an indefinite period of time.
(iii) The Lender agrees that (a) it will not sell, assign,
pledge, give, transfer, of otherwise dispose of the Amended Note, the
Warrants or such underlying Warrant Shares or Conversion Shares or any
interest in any thereof or therein, or make any offer or attempt to do
any of the foregoing, except pursuant to registration of such
securities under the Securities Act and any applicable State
Securities Laws or in a transaction which, in the opinion of counsel
for the Lender satisfactory to the Borrower (which requirement may be
waived by the Borrower upon advice of counsel), is exempt from the
registration provisions of the Securities Act and any applicable State
Securities Laws; (b) the Amended Note and the Warrants and any
certificate(s) representing shares of Common Stock issued upon
exercise of the Warrants may bear a legend making reference to the
foregoing restrictions; and (c) the Borrower and any transfer agent
for shares of its Common Stock shall not be required to give effect to
any purported transfer of any of such securities except upon
compliance with the foregoing restrictions.
(iv) The registration rights granted to the Lender in the
Registration Rights Agreement are not assignable or otherwise
transferrable by the Lender except for assignment to affiliates and/or
subsidiaries of the Lenders. In no event shall any sale, assignment,
pledge or transfer of the Warrants, Warrant Shares or Conversion
Shares by the Lender to a transferee give rise to any rights under the
Registration Rights Agreement except for assignment to affiliates
and/or subsidiaries of the Lenders.
11. Conditions to Obligations of Lender and the Borrower. The obligations
----------------------------------------------------
of each of the Lenders and the Borrower under this Rollover Agreement are
subject to the satisfaction at or prior to the Closing of the following
conditions precedent:
a. The representations and warranties of the Borrower contained in
Section 9 hereof and of each Lender contained in Section 10 hereof shall be
true and correct on and as of the Closing in all respects with the same
effect as though representations and warranties had been made on and as of
the Closing.
8
b. The Borrower and the Lenders shall have executed and delivered the
Registration Rights Agreement.
c. Each Lender shall have received a duly executed Amended Note in
such principal amount set forth opposite such Lender's name on Schedule I
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hereto.
d. The Borrower and the Lenders shall have executed and delivered the
Collateral Agreement.
e. The Borrower and the Collateral Agent shall have executed and
delivered the Assignment.
f. The Borrower shall have executed and delivered to the Lenders with
respect to the Judgment and the Proceeds such documentation as Lenders and
any of their respective legal counsel may require to effect or perfect the
assignment of and security interests in the Judgment, including, without
limitation, UCC-1 Financing Statements.
g. No Event of Default (as defined in the Amended Notes) shall have
occurred.
12. Waiver, Amendment. Neither this Rollover Agreement, the Collateral
------------------
Agreement, the Amended Notes, the Assignment nor any provisions hereof or
thereof shall be modified, changed, discharged or terminated except by an
instrument in writing signed by the party against whom any waiver, change,
discharge or termination is sought.
13. Assignability. Except as otherwise provided in this Rollover Agreement
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and the Collateral Agreement, neither this Rollover Agreement nor any right,
remedy, obligation or liability arising hereunder or by reason hereof shall be
assignable by either the Borrower or any Lender hereunder without the prior
written consent of the other party, which consent shall not be unreasonably
withheld, except for Assignments to affiliates and/or subsidiaries of Lender.
14. Applicable Law. This Rollover Agreement shall be governed by and
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construed in accordance with the law of the State of New York, regardless of the
law that might be applied under principles of conflicts of law.
15. Submission to Jurisdiction. The Borrower and each Lender hereby
----------------------------
irrevocably agrees that any legal action or proceedings brought against it or
any of its property with respect to this Rollover Agreement or the Amended Notes
may be brought in any state or Federal court located in the City of New York, or
both, and by execution and delivery of this Rollover Agreement each hereby
submits to and accepts with regard to any such action or proceeding, for itself
and in respect of its property, generally and uncon-ditionally, the jurisdiction
of the aforesaid courts. The Borrower and each Lender irrevocably consents to
the service of process in any such action or proceeding by the mailing of copies
9
thereof by registered or certified airmail, postage prepaid, to the Borrower at
its address set forth in Section 19.
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16. WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO HEREBY WAIVES, TO THE
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FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY
JURY IN RESPECT OF ANY LITIGATION ARISING DIRECTLY OR INDIRECTLY UNDER OR IN
CONNECTION WITH THIS ROLLOVER AGREEMENT OR THE AMENDED NOTES.
17. Section and Other Headings. The section and other headings contained in
--------------------------
this Rollover Agreement are for reference purposes only and shall not affect the
meaning or interpretation of this Rollover Agreement.
18. Counterparts. This Rollover Agreement may be executed in any number of
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counterparts, each of which when so executed and delivered shall be deemed to be
an original and all of which together shall be deemed to be one and the same
agreement.
19. Notices. All notices and other communications provided for herein shall
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be in writing and shall be deemed to have been duly given if delivered
personally or by facsimile (with proof of receipt) or sent by registered or
certified mail, return receipt requested, postage prepaid:
a. To the Borrower:
Penn Octane Corporation
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇,
President
b. If to a Lender, at the address set forth beneath such Lender's name
on Schedule I hereto; or at such other address as any party shall have
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specified by notice in writing to the other parties.
20. Binding Effect. The provisions of this Rollover Agreement shall be
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binding upon and accrue to the benefit of the parties hereto and their
respective heirs, legal representatives, successors and permitted assigns.
21. Severability. Any provision in this Rollover Agreement that is held to
------------
be inoperative, unenforceable, voidable or invalid in any jurisdiction shall, as
to that jurisdiction, be ineffective, unenforceable, void or invalid without
affecting the remaining provisions in any other jurisdiction, and to this end
the provisions of this Rollover Agreement are declared to be several.
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IN WITNESS WHEREOF, the Company and the undersigned have executed this
Agreement as of this 1st day of December, 1998.
PENN OCTANE CORPORATION
By:
----------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Chairman, President and Chief
Executive Officer
11
IN WITNESS WHEREOF, the Company and the undersigned have executed this
Agreement as of this 1st day of December, 1998.
CASTLE ENERGY CORPORATION
By:
----------------------------------
Name:
----------------------------------
Title:
----------------------------------
12
IN WITNESS WHEREOF, the Company and the undersigned have executed this
Agreement as of this 1st day of December, 1998.
______________________________________
▇▇▇▇▇ ▇▇▇▇▇▇
SOUTHWEST CONCEPT INC.
By:
---------------------------------
Name:
Title:
13
IN WITNESS WHEREOF, the Company and the undersigned have executed this
Agreement as of this 1st day of December, 1998.
___________________________________________
▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇.
SEP FBO ▇▇▇▇▇ ▇. ▇▇▇▇▇ ▇▇▇
By: ▇▇▇▇▇▇▇▇▇, Lufkin & ▇▇▇▇▇▇▇▇ as
Securities Corporation Custodian
By:
---------------------------------
Name:
Title:
14
IN WITNESS WHEREOF, the Company and the undersigned have executed this
Agreement as of this 1st day of December, 1998.
LINCOLN TRUST COMPANY FBO ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ ▇▇▇
By:
--------------------------------
Name:
Title:
15
SCHEDULE I
Lenders and Addresses
-----------------------
Castle Energy Corporation Principal amount of promissory note: $1,000,000
c/o CEC, Inc.
One Radnor Corporate Center Warrants: 225,000
▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
(▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇. ▇▇▇▇▇▇ ▇▇▇▇▇▇
with a copy to:
▇▇▇ ▇▇▇▇▇▇▇, Esq.
▇▇▇▇▇ ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
1
SCHEDULE I
Lenders and Addresses
-----------------------
▇▇▇▇▇ ▇▇▇▇▇▇ Principal amount of promissory note: $90,000
▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇ Warrants: 20,250
(▇▇▇) ▇▇▇-▇▇▇▇
Southwest Concept Inc. Principal amount of promissory note: $60,000
▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇ Warrants: 13,500
Attn: ▇▇▇▇▇ ▇▇▇▇▇▇
(▇▇▇) ▇▇▇-▇▇▇▇
2
SCHEDULE I
Lenders and Addresses
-----------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇. Principal amount of promissory note:
$75,000
▇▇▇▇ ▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, #▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇ Warrants: 16,875
(▇▇▇) ▇▇▇-▇▇▇▇
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ Principal amount of promissory note:
$75,000
Securities Corporation Custodian
SEP FBO ▇▇▇▇▇ ▇. ▇▇▇▇▇ ▇▇▇ Warrants: 16,875
Pershing Division of ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ &
▇▇▇▇▇▇▇▇ Securities Corporation
▇.▇. ▇▇▇ ▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
(▇▇▇) ▇▇▇-▇▇▇▇
3
SCHEDULE I
Lenders and Addresses
-----------------------
Lincoln Trust Company Principal amount of promissory note: $200,000
FBO ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ ▇▇▇
▇.▇. ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇: 45,000
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇▇▇▇
(▇▇▇) ▇▇▇-▇▇▇▇
4
EXHIBIT A
---------
COLLATERAL AGREEMENT
--------------------
EXHIBIT B
---------
ASSIGNMENT OF JUDGMENT
----------------------
DECEMBER 1, 1998 EXHIBIT C
---------
AMENDED PROMISSORY NOTE
-----------------------
Redwood City, California
FOR VALUE RECEIVED, PENN OCTANE CORPORATION, a Delaware corporation (the
"Borrower"), promises to pay to the order of _____________________, a
__________________, or its assigns ("Holder"), at the office of the Borrower in
Redwood City, California or such other place as Holder may designate in writing
at least three business days prior to the date fixed for such payment, the
entire principal sum of _____________________($_________), together with
interest thereon, on the earlier of (i) June 30, 1999, (ii) a date determined by
the Borrower within ten (10) business days of the closing date of any raising of
debt or equity financing of the Borrower, resulting in net proceeds to the
Borrower in excess of $2,250,000 or (iii) the occurrence of an Event of Default
hereunder (collectively, the "Maturity Date"), at which time all principal and
any accrued and unpaid interest thereon shall be due and owing.
This Amended Note was issued under and is entitled to the benefits of that
certain Rollover and Assignment Agreement dated as of December 1, 1998 (the
"Rollover Agreement") dated the date hereof by and among the Borrower and the
Lenders as set forth in Schedule I of the Agreement. All capitalized terms used
----------
herein and not defined shall have the meanings ascribed to them in the Rollover
Agreement.
This Amended Note shall accrue interest from the date hereof at the rate of
ten percent (10%) per annum, payable on December 31, 1998, March 31 and June 30,
1999 (or the Maturity Date, if earlier). Upon the occurrence of an Event of
Default (as defined herein), all amounts owing under this Amended Note shall
become immediately due and payable and interest shall accrue thereon at the
default interest rate of twelve percent (12%) per annum until the entire
principal balance of this Amended Note and all interest accrued hereon shall
have been paid in full and the Holder may exercise all of its rights and
remedies under the Rollover Agreement and all other documents executed or
delivered in connection therewith and/or applicable law. Payment of this
Amended Note may be enforced by suit or other process of law. This Amended Note
may be prepaid at any time prior to maturity without penalty in an amount equal
to the principal amount hereof plus interest thereon to the date of prepayment.
The Borrower shall pay the sum of $__________ to the holder on December 11,
1998 which sum represents accrued and unpaid interest to December 1, 1998 on the
Original Note (the "Original Note Interest).
All payments hereunder shall be payable in lawful money of the United
States.
The Borrower shall be in default hereunder upon the occurrence of any of
the following events of default ("Events of Default"): (i) the failure by the
Borrower to pay the Original Note Interest when due hereunder; (ii) the failure
by the Borrower to make any payment (other than the Original Note Interest) when
due hereunder and such failure shall have continued for a period of ten (10)
days; (iii) the commencement by the Borrower of a voluntary case in a bankruptcy
or insolvency proceeding or the entry of a decree or order by a court of
competent jurisdiction adjudicating the Borrower a bankrupt or the appointment
of a receiver or trustee of the Borrower upon the application of any creditor in
an insolvency or bankruptcy proceeding or other creditor's suit; (iv) a petition
for reorganization, liquidation or arrangement filed against the Borrower under
the Federal bankruptcy laws and such petition shall not have been dismissed
within thirty (30) days after it was filed; (v) an assignment for the benefit of
creditors by the Borrower; (vi) the occurrence of any event of default under the
terms of any indebtedness of the Borrower for borrowed money in excess of
$50,000; (vii) the existence of any final, non-appealable judgment on any
Amended Note or any final, non-appealable judgment in excess of $50,000 against,
or any attachment of material property, of the Borrower; or (viii) the breach of
any representation, warranty or covenant (other than as described in the
preceding clauses (i) through (vii)) of Borrower in the Rollover Agreement, the
Assignment of Judgment or Collateral Agreement, and, if such breach is capable
of cure, the failure of Borrower to cure such breach within a period of fifteen
(15) days, provided that such breach is capable of cure.
If any payment owing under this Amended Note is not paid when due, whether
at maturity or by acceleration or otherwise, the Borrower agrees to pay all
reasonable costs of collection and such costs shall include, without limitation,
all costs, attorneys' fees and expenses incurred by Holder hereof in connection
with any insolvency, bankruptcy, reorganization, arrangement or similar
proceedings involving Borrower, or involving any endorser or guarantor hereof,
which in any way affects the exercise by Holder hereof of its rights and
remedies under this Amended Note.
If any payment remains owing under this Amended Note after June 30, 1999,
the Holder hereof shall have certain conversion rights in respect of such
Amended Note as set forth in Section 7A of the Rollover Agreement.
Presentment, demand, protest, notice of protest, dishonor and non-payment
of this Amended Note and all notices of every kind are hereby waived.
The terms "Borrower" and "Holder" shall be construed to include their
respective heirs, personal representatives, successors, subsequent holders and
permitted assigns.
No delay on the part of the Holder in the exercise of any right or remedy
shall operate as a waiver thereto, and no single or partial exercise by Holder
of any right or remedy shall preclude the further exercise thereof or the
exercise of any other right or remedy.
Any provision in this Amended Note that is held to be inoperative,
unenforceable, voidable or invalid in any jurisdiction shall, as to that
jurisdiction, be ineffective, unenforceable, void or invalid without affecting
the remaining provisions in any other jurisdiction, and to this end the
provisions of this Amended Note are declared to be severable.
This Amended Note shall be governed by, and construed in accordance with,
the laws of the State of New York without giving effect to such state's
conflicts of law provisions. Each of the parties hereto irrevocably consents to
the jurisdiction and venue of the federal and state courts located in the State
of New York, County of New York.
IN WITNESS WHEREOF, and intending to be legally bound hereby, the Borrower
has caused this Amended Note to be executed by its duly authorized officer as of
the date first above written.
PENN OCTANE CORPORATION
Attest: By:
------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
______________________________________ Chairman, President and
Title: ______________________________ Chief Executive Officer
EXHIBIT D
---------
NEITHER THIS WARRANT NOR THE SHARES OF
COMMON STOCK ISSUABLE UPON EXERCISE
HEREOF HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED (THE "ACT"), OR THE SECURITIES LAWS OF ANY STATE.
NEITHER THIS WARRANT NOR THE SHARES OF COMMON STOCK ISSUABLE
UPON EXERCISE HEREOF MAY BE SOLD OR OTHERWISE TRANSFERRED IN
THE ABSENCE OF REGISTRATION OR QUALIFICATION OR AN EXEMPTION
THEREFROM UNDER APPLICABLE LAW.
COMMON STOCK PURCHASE WARRANT
Void after November 30, 2001
Warrant to Purchase ______ Shares
of Common Stock, $.01 par value
of Penn Octane Corporation
PENN OCTANE CORPORATION (POCC)
This is to Certify That, FOR VALUE RECEIVED,
[Name of Purchaser]
or registered assign(s) (herein referred to as the "Holder") is entitled to
purchase, subject to the provisions hereof, from PENN OCTANE CORPORATION, a
Delaware corporation (the "Company"), but not later than 5:00 p.m., California
time, on November 30, 2001 (or, if such date is not a Business Day in Redwood
City, California, then on the next succeeding day which shall be a Business
Day), _______ shares of Common Stock, $.01 par value, of the Company (the
"Common Stock") at an exercise price of $1.75 per share, subject to adjustment
as to number of shares and purchase price as set forth in Section 6 below. The
exercise price of a share of Common Stock in effect at any time and as adjusted
from time to time is hereinafter sometimes referred to as the "Exercise Price".
For purposes of this Warrant, a "Business Day" shall mean any day other than a
Saturday, a Sunday or a day on which banking institutions in New York, New York,
or in Redwood City, California, are authorized by law or regulation to close.
The shares of Common Stock issuable upon exercise of the Warrants are sometimes
herein called the "Warrant Stock."
1. Exercise of Warrant. This Warrant may be exercised in whole or in part
-------------------
at any time and from time to time by presentation and surrender hereof to the
Company at its principal office with the Purchase Form annexed hereto duly
executed and accompanied by payment of the Exercise Price in immediately
available funds for the number of shares specified in such form. If this Warrant
is exercised in part only, the Company shall, upon surrender of this
Warrant for cancellation, execute and deliver a new Warrant evidencing the right
of the Holder to purchase the balance of the shares purchasable hereunder. Upon
receipt by the Company of this Warrant at the office of the Company, in proper
form for exercise, accompanied by payment of the Exercise Price, the Holder
shall be deemed to be the holder of record of the shares of Common Stock
issuable upon such exercise, notwithstanding that certificates representing such
shares of Common Stock shall not then be actually delivered to the Holder. The
issuance of certificates for shares of Common Stock upon the exercise of this
Warrant shall be made without charge to the Holder for any issuance tax in
respect thereof (with the exception of any federal or state income taxes
applicable thereto), all such taxes to be paid by the Company, it being
understood however that the Holder shall be required to pay any tax which may be
payable in respect of any transfer involved in the issuance and delivery of any
certificate in a name other than that of the Holder. The Company will at no
time close its transfer books against the transfer of this Warrant or the
issuance of any shares of Common Stock issuable upon the exercise of this
Warrant in any manner which interferes with the timely exercise of this Warrant.
2. Reservation of Shares; Stock Fully Paid. The Company agrees that at all
----------------------------------------
times there shall be authorized and reserved for issuance upon exercise of this
Warrant such number of shares of its Common Stock as shall be required for
issuance or delivery upon exercise of this Warrant. All shares which may be
issued upon exercise hereof will, upon issuance, and receipt of payment
therefor, be duly authorized, validly issued, fully paid and non-assessable.
3. Fractional Shares. This Warrant shall not be exercisable in such manner
-----------------
as to require the issuance of fractional shares. If, as a result of adjustment
in the Exercise Price or the number of shares of Common Stock to be received
upon exercise of this Warrant, fractional shares would be issuable, no such
fractional shares shall be issued. In lieu thereof, the Company shall pay the
Holder an amount in cash equal to such fraction multiplied by the Fair Market
Value of a share of Common Stock. The term "Fair Market Value" shall mean, as of
a particular date, the market price on such date.
For purposes of this Warrant, the market price on any day shall be the
last sale price on such day on the NASDAQ Stock Market, or, if the Common Stock
is not then listed or admitted to trading on the NASDAQ Stock Market, on such
other principal stock exchange on which such stock is then listed or admitted
to trading, or, if no sale takes place on such day on any such exchange, the
average of the closing bid and asked prices on such day as officially quoted on
any such exchange, or, if the Common Stock is not then listed or admitted to
trading on any stock exchange, the average of the reported closing bid and asked
prices on such day in the over-the-counter market as quoted on the National
Association of Securities Dealers Automated Quotation System or, if not so
quoted, then as furnished by any member of the National Association of
Securities Dealers, Inc. selected by the Company. If there shall be no
meaningful over-the-counter market, then Fair Market Value shall be such amount,
not less than book value, as may be determined by the Board of Directors of the
Company.
4. Exchange or Assignment of Warrant. This Warrant is exchangeable without
---------------------------------
expense (other than applicable transfer taxes) at the option of the Holder, upon
presentation and surrender hereof to the Company for any other Warrants of
different denominations entitling the holder thereof to purchase in the
aggregate the same number of shares of Common Stock purchasable hereunder.
Subject to the provisions of Section 12 below and any restriction on transfer
applicable hereto pursuant to the securities laws of the United States or any
State, upon surrender of this Warrant to the Company with an assignment form
duly executed, and funds sufficient to pay any transfer tax, the Company shall,
without charge, execute and deliver a new Warrant in the name of the assignee
named in such instrument of assignment, and this Warrant shall promptly be
cancelled. This Warrant may be divided or combined with other Warrants which
carry the same rights upon presentation hereof at the principal office of the
Company, together with a written notice specifying the names and denominations
in which new Warrants are to be issued signed by the Holder hereof. The term
"Warrant" as used herein includes any Warrants into which this Warrant may be
divided or exchanged, and the term "Holder" as used herein includes any holder
of any Warrant into which this Warrant may be divided or for which this Warrant
may be exchanged.
5. Rights of the Holder. The Holder shall not, by virtue hereof, be
---------------------
entitled to any rights of a stockholder in the Company, either at law or in
equity, and the rights of the Holder are limited to those expressed in this
Warrant.
6. Adjustment of Exercise Price and Number of Shares. The number and kind
-------------------------------------------------
of securities purchasable upon the exercise or exchange of this Warrant and the
Exercise Price shall be subject to adjustment from time to time upon the
occurrence of certain events, as follows:
(a) Adjustment for Change in Capital Stock. If at any time after the date
---------------------------------------
hereof, the Company:
(A) pays a dividend or makes a distribution on its Common Stock in
shares of its Common Stock;
(B) subdivides its outstanding shares of Common Stock into a greater
number of shares;
(C) combines its outstanding shares of Common Stock into a smaller
number of shares;
(D) makes a distribution on its Common Stock in shares of its capital
stock other than Common Stock; or
(E) issues by reclassification of its Common Stock any shares of its
capital stock;
then the number and kind of securities purchasable upon exercise or exchange of
this Warrant and the Exercise Price in effect immediately prior to such action
shall each be adjusted so that the Holder may receive upon exercise or exchange
of this Warrant and payment of the same aggregate consideration, the number of
shares of capital stock of the Company which the Holder would have owned
immediately following such action if the Holder had exercised or exchanged the
Warrant immediately prior to such action.
The adjustment shall become effective immediately after the record date in
the case of a dividend or distribution and immediately after the effective date
in the case of a subdivision, combination or reclassification.
(b) Adjustment for Other Distributions. If at any time after the date
-------------------------------------
hereof, the Company distributes to all holders of its Common Stock any of its
assets or debt securities, the Exercise Price following the record date shall be
adjusted in accordance with the following formula:
E' = E x M-F
---
M
where: E' = the adjusted Exercise Price.
E = the Exercise Price immediately prior to the adjustment.
M = the current market price (as defined in (e) below) per
share of Common Stock on the record date of the
distribution.
F = the aggregate fair market value (as conclusively determined
by the Board of Directors of the Company) on the record date
of the assets or debt securities to be distributed divided
by the number of outstanding shares of Common Stock.
The adjustment shall be made successively whenever any such distribution is
made and shall become effective immediately after the record date for the
determination of shareholders entitled to receive the distribution. In the
event that such distribution is not actually made, the Exercise Price shall
again be adjusted to the Exercise Price as determined without giving effect to
the calculation provided hereby. In no event shall the Exercise Price be
adjusted to an amount less than zero.
This subsection does not apply to cash dividends or cash distributions paid
out of consolidated current or retained earnings as shown on the books of the
Company and paid in the ordinary course of business.
(c) Deferral of Issuance or Payment. In any case in which an event
-----------------------------------
covered by this Section 6 shall require that an adjustment in the Exercise Price
be made effective as of a record date, the Company may elect to defer making
such adjustment until the occurrence of such event. If the Company so defers
making any such adjustment and if this Warrant is exercised after such record
date but before the occurrence of such event, the shares of Common Stock and
other capital stock of the Company, if any, issuable upon such exercise, had
such adjustment been made as of the record date, over and above the shares of
Common Stock or other capital stock of the Company, if any, issuable upon such
exercise on the basis of the Exercise Price as unadjusted, shall be issued
promptly upon the occurrence of such event and the Company shall pay to the
Holder by check any amount in lieu of the issuance of fractional shares pursuant
to Section 3.
(d) When No Adjustment Required. No adjustment need be made for a
------------------------------
change in the par value or no par value of the Common Stock.
(e) Statement of Adjustments. Whenever the Exercise Price and number
--------------------------
of shares of Common Stock purchasable hereunder is required to be adjusted as
provided herein, the Company shall promptly prepare a certificate signed by its
President or any Vice President and its Treasurer or Assistant Treasurer,
setting forth, in reasonable detail, the event requiring the adjustment, the
amount of the adjustment, the method by which such adjustment was calculated
(including a description hereunder), and the Exercise Price and number of shares
of Common Stock purchasable hereunder after giving effect to such adjustment,
and shall promptly cause copies of such certificates to be mailed to the Holder.
(f) No Adjustment Upon Exercise of Warrants. No adjustments shall be
-----------------------------------------
made under any Section herein in connection with the issuance of Warrant Stock
upon exercise or exchange of the Warrants.
(g) No adjustment for Small Amounts. Anything herein to the contrary
---------------------------------
notwithstanding, no adjustment of the Exercise Price shall be made if the amount
of such adjustment shall be less than $.05 per share, but in such case, any
adjustment that would otherwise be required then to be made shall be carried
forward and shall be made at the time and together with the next subsequent
adjustment which, together with any adjustment so carried forward, shall amount
to $.05 per share or more.
(h) Common Stock Defined. Subject to the provisions of Section 7
----------------------
hereof, shares issuable upon exercise or exchange hereof shall include only
shares of the class designated as Common Stock of the Company as of the date
hereof or shares of any class or classes resulting from any reclassification or
reclassifications thereof or as a result of any corporate reorganization as
provided for in Section 7 hereof.
7. Reclassification, Reorganization, Consolidation or Merger. In the event
----------------------------------------------------------
of any reclassification, capital reorganization or other change of outstanding
shares of Common Stock of the Company (other than a subdivision or combination
of the outstanding Common Stock and other than a change in the par value of the
Common Stock) or in the event of any consolidation or merger of the Company with
or into another corporation (other than a merger in which merger the Company is
the continuing corporation and that does not result in any reclassification,
capital reorganization or other change of outstanding shares of Common Stock of
the class issuable upon exercise or exchange of this Warrant) or in the event of
any sale, lease, transfer or conveyance to another corporation of the property
and assets of the Company as an entirety or substantially as an entirety, the
Company shall, as a condition precedent to such transaction, cause effective
provisions to be made so that the Holder shall have the right thereafter, by
exercising this Warrant, to purchase the kind and amount of shares of stock and
other securities and property (including cash) receivable upon such
reclassification, capital reorganization and other change, consolidation,
merger, sale or conveyance by a holder of the number of shares of Common Stock
that might have been received upon exercise or exchange of this Warrant
immediately prior to such reclassification, capital reorganization, change,
consolidation, merger, sale or conveyance. Any such provision shall include
provisions for adjustments in respect of such shares of stock and other
securities and property that shall be as nearly equivalent as may be practicable
to the adjustments provided for in this Warrant. The foregoing provisions of
this Section 7 shall similarly apply to successive reclassifications, capital
reorganizations and changes of shares of Common Stock and to successive
consolidations, mergers, sales or conveyances. In the event that in connection
with any such capital reorganization or classification, consolidation, merger,
sale or conveyance, additional shares of Common Stock shall be issued in
exchange, conversion, substitution or payment, in whole or in part, for, or of,
a security of the Company other than Common Stock, any such issue shall be
treated as an issue of Common Stock covered by the provisions of subsection (a)
of Section 6.
8. Notice to Warrant Holders. So long as this Warrant shall be outstanding,
-------------------------
(i) if the Company shall pay any dividend or make any distribution upon its
Common Stock, or (ii) if the Company shall offer to the holders of Common Stock
for subscription or purchase by them any shares of stock or securities of any
class or any other rights, or (iii) if any capital reorganization of the
Company, reclassification of the capital stock of the Company, consolidation or
merger of the Company with or into another corporation, or any conveyance of all
or substantially all of the assets of the Company, or voluntary or involuntary
dissolution or liquidation of the Company shall be effected, then, in any such
case, the Company shall cause to be mailed to the Holder, at least thirty (30)
days prior to the date specified in (x) or (y) below, as the case may be, a
notice containing a brief description of the proposed action and stating the
date on which (x) a record is to be taken for the purpose of such dividend,
distribution or rights, or (y) such reclassification, reorganization,
consolidation, merger, conveyance, dissolution or liquidation is to take place
and the date, if any is to be fixed, as of which the holders of Common Stock of
record shall be entitled to exchange their shares of Common Stock for securities
or other property deliverable upon such reclassification, reorganization,
consolidation, merger, conveyance, dissolution or liquidation.
9. Certain Obligations of the Company. The Company agrees that it will not
----------------------------------
increase the par value of the shares of Warrant Stock issuable upon exercise of
this Warrant above the prevailing and currently applicable Exercise Price
hereunder, and that before taking any action that would cause an adjustment
reducing the prevailing and current applicable Exercise Price
hereunder below the then par value of the Warrant Stock at the time issuable
upon exercise of this Warrant, the Company will take such corporate action, as
in the opinion of its counsel, may be necessary in order that the Company may
validly issue fully paid, nonassessable shares of such Warrant Stock. The
Company will maintain an office or agency (which shall initially be the
Company's principal office in Redwood City, California) where presentations and
demands to or upon the Company in respect of this Warrant may be made and will
give notice in writing to the registered holders of the then outstanding
Warrants, at their addresses as shown on the books of the Company, of each
change of location thereof.
10. Repurchase Right. Notwithstanding any other provisions of this Warrant,
----------------
the Company may, in the event that the average trading price of the Company's
Common Stock, as reported on the NASDAQ SmallCap Market or such other exchange
on which the Company's Common Stock may then be quoted, exceeds $10.00 for a
period of twenty (20) consecutive trading days, upon not less than thirty (30)
days' notice in writing to the Holder, repurchase all or any portion of this
Warrant at a purchase price equal to $.10 per share of Common Stock covered
hereby, such purchase price to be proportionally adjusted each time the Exercise
Price is adjusted pursuant to Section 6 hereof. During such thirty (30) day
period, the Holder may exercise such Warrants or a portion thereof in accordance
with the terms hereof. The closing on such repurchase shall occur on the date
and at the time set forth in such notice at the office of the Company in Redwood
City, California or at such other place as shall be agreed upon by the Company
and the Holder. At the Closing, the Company shall deliver to the Holder an
amount equal to the purchase price in immediately available funds and the Holder
will deliver this Warrant to the Company for cancellation. To the extent any
repurchase hereunder is of less than all of the rights represented by this
Warrant, the Company will deliver to the Holder a new Warrant covering the
rights not so purchased.
11. Determination by Board of Directors. All determinations by the Board of
-----------------------------------
Directors of the Company under the provisions of this Warrant will be made in
good faith with due regard to the interest of the Holder and in accordance with
sound financial practices.
12. Notice. All notices to the Holder shall be in writing, and all notices
------
and certificates given to the Holder shall be sent registered or certified mail,
return receipt requested, to such Holder at his address appearing on the records
of the Company.
13. Replacement of Lost, Stolen, Destroyed or Mutilated 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 any indemnity bond in such reasonable
amount as the Company may determine in the case of any such mutilation, upon the
surrender of such Warrant for cancellation, the Company at its expense, will
execute and deliver, in lieu of such lost, stolen, destroyed or mutilated
Warrant, a new Warrant of like tenor.
14. Number and Gender. Whenever the singular number is used herein, the
------------------
same shall include the plural where appropriate, and words of any gender shall
include each other gender where appropriate.
15. Applicable Law. This Warrant shall be governed by, and construed in
---------------
accordance with, the laws of the State of New York, without regard to its
conflict of laws principles.
PENN OCTANE CORPORATION
By:
---------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Chairman, President and
Chief Executive Officer
Dated as of December 1, 1998
PURCHASE FORM
-------------
Dated __________ , ____
The undersigned hereby irrevocably elects to exercise the within
Warrant to purchase ___________ shares of Common Stock and hereby makes payment
of $____________ in payment of the exercise price thereof.
Signature______________________________