SECOND AMNDMENT
---------------
OF THE
------
INTERIM OPERATING AGREEMENT
---------------------------
This Second Amendment of the Interim Operating Agreement (this "Second
Amendment") is made and entered into effective as of the __ day of December,
1998, by and among ▇▇▇▇▇▇ Technologies Incorporated, a California corporation
("WTI"), a wholly-owned subsidiary of ▇▇▇▇▇▇▇▇▇ Holding, Inc., a California
corporation ("ZHI"), and ZHI, on the one hand, and ▇▇▇▇▇▇ Acquisition
Corporation, a Delaware corporation ("WAC"), a wholly-owned subsidiary of Penn
Octane Corporation, a Delaware corporation ("POC"), and POC, on the other hand.
A. The above-named parties to this Second Amendment (the "Parties") are
parties to that certain Amendment of the Interim Operating Agreement dated as of
March 21, 1997 (the "First Amendment").
B. Pursuant to the First Amendment, the Parties terminated (i) that certain
Purchase Agreement dated March 7, 1997 among the Parties, and (ii) that certain
Interim Operating Agreement dated March 7, 1997 among the Parties, except to the
extent set forth in the First Amendment and in Paragraph 15 of the Purchase
Agreement.
C. Pursuant to Section 1 of the First Amendment WTI was to receive $xxxxxx
in the form of a note payable 20% per year with interest at the prime rate with
the first payment due June 5, 1998 (the "Note Payments"), and pursuant to
Section 6 of the First Amendment, WTI was to receive royalties as set forth in
such Section 6 (the "Royalty Payments").
D. The Parties desire to further amend the First Amendment and the Interim
Operating Agreement and to resolve all payment obligations between the Parties
in connection with the Note Payments and the Royalty Payments.
AGREEMENT
---------
THEREFORE, in consideration of the Recitals and the mutual covenants and
agreements contained herein, and contingent upon ZHI's timely receipt of the
"Stock" has hereinafter defined, it is agreed by and between the Parties that
the First Amendment and the Interim Operating Agreement, and further amended as
follows:
1. Modifications of First Amendment. Within ten (10) business day after the
--------------------------------
execution of this Second Amendment, WAC and POC shall deliver to ZHI 53,884 Rule
144 Shares of POC common stock issued in the name of ZHI (the "Stock") which
shall be accepted by ZHI and WTI in the full satisfaction and payment of the
following:
(a) The Note Payments now due or payable in the future, so that no
further payments shall be due or payable by WAC and/or POC and Section 1 of
-----
the First Amendment is modified to such extent; and
(b) The Royalty Payments now due or payable in the future by WAC
and/or POC after giving effect and taking into consideration any and all
offsets to such Royalty Payments made through the date of this Second
Amendment, so that no further payments shall be due or payable and Section
6 of the First Amendment is modified to such extent.
It is acknowledged by the Parties that upon receipt of the Stock by ZHI,
the note Payments and the Royalty Payments will be deemed satisfied and pay
in full and WAC an/or POC shall not have any obligation to make any further
payments in connection with either the Note Payment or the Royalty Payments
and WAC and/or POC are not required to make any further payments in
connection with any agreement described herein. It is further acknowledged
that the determining the amount of the Stock the Parties have taken into
account the offsets made against the Royalty Payment up to the date of this
Second Amendment as set forth in Section 6 of the First Amendment and that
no payment or reimbursement for such offset shall be required because the
amount of the Stock is based upon the amounts due under the Note Payment
and the net amount currently due and payable under the Royalty Payment. The
Parties agree that, upon the execution of this Second Amendment by both
Parties, neither Party has any obligation to make any further payments to
the other Party.
2. Miscellaneous.
-------------
2.1 Attorneys' Fees. If any legal action or any arbitration or other
-----------------
proceeding is brought for the enforcement of this Second Amendment, or because
of an alleged dispute, breach, default or misrepresentation in connection with
any of the provisions of this Second Amendment, the successful or prevailing
Party shall be entitled to recover reasonable attorneys' fees and other costs
incurred in that action or proceeding, in addition to any other relief to which
the Party may be entitled.
2.2 Successors and Assigns. This Second Amendment shall be binding on
----------------------
and shall inure to the benefit of the heirs, administrators, representatives,
executors, successors and assigns of the Parties.
2.3 Time is of the Essence. Time is of the essence in the performance
----------------------
of each and every obligations to be performed by the Parties as set forth
herein.
2.4 Choice of Law. This Second Amendment shall be governed by and
-------------
construed in accordance with the laws of the State of California (without regard
to conflicts of law principles).
2.5 Headings. The subject headings of the Section of this Second
--------
Amendment are included for purposes of convenience only and shall not affect the
construction or interpretation of any of this Second Amendment's provisions.
2
2.6 Amendment. This Second Amendment shall not be amended or modified
---------
in any way without the written consent of all the Parties.
2.7 Counterparts. This Second Amendment may be executed in any number
------------
of counterparts, each of which shall be deemed an original, but all of which
shall together constitute a single agreement.
IN WITNESS WHEREOF, the Parties have caused this Second Amendment to be
executed effective as of the date first set forth above.
WAC
---
▇▇▇▇▇▇ ACQUISITION CORPORATION, a Delaware corporation
By:
Title:
POC
---
PENN OCTANE CORPORATION,
A Delaware corporation
By:
Title:
WTI
---
▇▇▇▇▇▇ TECHNOLOGIES INCORPORATED, a
California corporation
By:
Title:
[Signatures continued on next page]
3
ZHI
---
▇▇▇▇▇▇▇▇▇ HOLDINGS, INC., a
California corporation
By:
Title:
4