SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
Date of Report: June 1, 1999
PENN OCTANE CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 000-24394 52-1790357
(State of (Commission (IRS Employer
Incorporation) File Number) Identification No.)
900 Veterans Boulevard, Suite 240
Redwood City, California 94063
(Address of principal executive offices) (Zip Code)
(650) 368-1501
(Registrant's telephone number, including area code)
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Item 5. Other Events
On May 25, 1999, the Registrant and the Registrants wholly owned subsidiary
(herein collectively referred as "Registrant"), completed the sale of assets
related to the CNG business to a company ("Buyer") controlled by a director and
officer of the Registrant. Under the terms of the sale, the Buyer purchased
approximately $1,200,000 of the CNG assets from the Registrant, consisting of
equipment, inventory, and intangible assets (the "Assets"). The Buyer did not
purchase any cash, accounts receivable, and did not assume any pre-existing
liabilities of the Registrants CNG business. The selling price of the Assets
were based on the book values of the Assets as of the date of closing, which
approximates the fair market value of the Assets sold as of the date of closing.
In connection with the sale, the Registrant received promissory notes
totaling $1,200,000 from the Buyer (the "Notes"), which will be paid over sixty
months or earlier, under certain conditions. Proceeds received in connection
with the sale will be used to satisfy remaining obligations related to the
Registrants CNG business and for working capital. In connection with the Notes,
the Buyer has pledged all of the Assets as additional collateral, as well as
proceeds to be received from future sales of the Assets or from the leasing of
the Assets. Under the terms of the Notes, the Buyer paid $50,000 at closing and
the officer and director was required to pledge as additional collateral all
stock held in the Buyer and 200,000 warrants to purchase 200,000 shares of
common stock of the Registrant.
As a result of the sale, the Registrant has effectively disposed of its CNG
segment and has discontinued operations of that segment. In accordance with APB
30, the results of operations related to the CNG segment will be recorded as a
discontinued operation in Registrants Form 10-Q for the quarterly period ended
April 30, 1999. As a result of the sale, the Registrant does not expect to
record any material gains or losses.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
PENN OCTANE CORPORATION
Date: June 1, 1999
By: /s/ Ian T. Bothwell
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Name: Ian T. Bothwell
Title: Vice President, Treasurer,
Assistant Secretary, and Chief
Financial Officer and
Principal Accounting Officer
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EXHIBIT INDEX
Exhibit No. Description Page No.
- ------------ ----------- ---------
1. Asset Acquisition Agreement 5-21
2. Stock Pledge and Security Agreement 22-31
3. Bill Of Sale #1 32-33
4. Bill Of Sale #2 34-35
5. Secured Promissory Note "$300,000" 36-41
6. Secured Promissory Note "$900,000" 42-48
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ASSET ACQUISITION AGREEMENT
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THIS ASSET ACQUISITION AGREEMENT (hereinafter referred to as the
"Agreement") is effective the 15th day of April, 1999 by and between PENN OCTANE
CORPORATION, INC., a California corporation (hereinafter referred to as "POC"),
PENN WILSON CNG, INC. a California corporation (hereinafter referred to as
"CNG"), on the one hand, and B&A ECO-HOLDINGS, INC., a Delaware corporation
(hereinafter referred to as "B&A" or "Buyer") and IAN T. BOTHWELL (hereinafter
referred to as "Bothwell"), on the other hand. CNG and POC are sometimes
jointly referred to herein as "Sellers".
RECITALS
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A. POC and CNG desire to sell and B&A desires to purchase those certain
assets of the business of POC and CNG as set forth in this Agreement, on the
terms and conditions provided herein. The purchase will consist of selling said
assets to B&A in exchange for two promissory notes, a stock pledge and security
agreement, a personal guaranty and other collateral.
B. The assets subject to the sale are currently owned by POC and CNG,
as more specifically designated below. The total purchase price of $1.2 million
dollars shall be apportioned between POC and CNG, with 60.204% to POC and 39.796
% belonging to CNG.
C. After several years as an officer of POC and CNG, Bothwell, the
principal of B&A, has personal knowledge and experience related to the industry
and the assets in particular which are being sold.
D. POC and CNG have knowledge and experience related to the industry
and have determined that the sale of certain POC and CNG assets is in the best
interests of POC and CNG.
NOW, THEREFORE, IN CONSIDERATION OF the mutual covenants, representations,
and warranties contained in this Agreement, and other good and valuable
consideration, the receipt and adequacy of which is hereby acknowledged, the
parties hereto agree as follows:
AGREEMENT
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SECTION 1. SALE OF ASSETS
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1.1 Agreement To Sell. Upon the terms and subject to all of the
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conditions contained herein, Seller hereby agrees to sell, assign, transfer, and
deliver to B&A on the Closing Date (as defined in Section 4 herein), and B&A
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hereby agrees to purchase and accept from Sellers on the Closing Date, the
Acquired Assets (as defined in Section 1.2 herein). POC and CNG shall each
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deliver to B&A at the Closing Date appropriate bills of sale, assignments, or
other documents of conveyance necessary to effectuate or perfect the transfer of
title to the Acquired Assets to B&A on and as of the Closing Date, and in form
and substance reasonably satisfactory to B&A and B&A's counsel.
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1.2 Description of Acquired Assets. For purposes of this Agreement, the
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term "Acquired Assets" shall mean only those business, tangible and intangible,
assets and rights of the Sellers set forth below, existing on and as of the
Closing Date with the fair market value described in the attached Exhibit A:
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1.2.1Equipment. Three compressor skid packages and related
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accessories.
1.2.2Inventory. All of the inventory and supplies as set forth in
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Exhibit B. The parties recognize that this exhibit is a close
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approximation of the assets being transferred but may be subject
to some variance as of the Closing Date.
1.2.3Property, Plant and Equipment. All of the property, plant and
--------------------------------
equipment as set forth in the attached Exhibit C. The parties
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recognize that this exhibit is a close approximation of the
assets being transferred but may be subject to some variance as
of the Closing Date.
1.2.4CNG Technology. All of the rights, title and interest in CNG
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technology (the "CNG Technology"), including but not limited to
designs, plans, inventions and related documentation currently
created, held or owned by CNG, whether registered or registerable
under the laws of copyright, patent or other intellectual
property rights.
1.2.5Contracts Related to the Mexican Project. Any and all rights,
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claims or interest held by CNG or POC to the Inaine contract
currently in effect relating to the Mexican CNG project planned
in Mexico City, Mexico (the "Mexican Project").
SECTION 2. LIABILITIES ASSUMED AND LIABILITIES NOT ASSUMED
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2.1 Liabilities Assumed. Upon the terms and subject to all of the
--------------------
conditions contained herein, Buyer hereby agrees to assume and satisfy or
perform when due the Assumed Liabilities (as defined in Section 2.2 hereof).
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2.2 Description of Assumed Liabilities. For purposes of this Agreement,
-------------------------------------
the term "Assumed Liabilities" shall mean only those liabilities, obligations,
and commitments of POC and/or CNG set forth below, existing on and as of the
Closing Date:
2.2.1Business Obligations. No CNG business obligations shall be
----------------------
assumed by Buyer with the exception of any current or ongoing
outstanding obligations relating to the Mexican Project and the
CNG Technology being transferred to B&A which have not been
disclosed, directly or indirectly, in the financial statements of
POC and/or CNG prior to the Closing Date and which either Buyer
or Bothwell had actual knowledge of or could have had actual
knowledge of upon making reasonably investigation and inquiry
prior to the Closing Date.
2.3 Excluded Liabilities. B&A does not and will not assume or be
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obligated to satisfy or perform any liabilities other than the Assumed
Liabilities. All liabilities not listed under Assumed Liabilities, whether or
not disclosed by Seller to Buyer before the Closing Date, are collectively
referred to as the "Excluded Liabilities."
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SECTION 3. PURCHASE PRICE AND OTHER ISSUES
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3.1 Purchase Price. In return for the sale of assets by Sellers to
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B&A, B&A shall pay $1.2million dollars to POC in the form described in Section
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3.2 below. POC will be responsible for delivering CNG's allocation of the
purchase price made on the promissory notes described herein, which shall be
apportioned 60.204% to POC and 39.796% to CNG.
3.2 Promissory Note. B&A shall execute two promissory notes, one in
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the amount of $300,000 and another in the amount of $900,000. Bothwell will
also be a signatory to the $300,000 note. A copy of each is attached as
Exhibits D and E, respectively, and incorporated by reference.
- ----------- -
3.3 Security Agreement. In addition, until both notes are paid in
-------------------
full, B&A and Bothwell hereby agree to provide a security agreement for POC and
CNG, to be secured by a UCC-1 financing statement on the assets being purchased,
those warrants held by Bothwell to purchase 200,000 shares of common stock in
POC, and Bothwell's pledge of all of his personal shares in B&A. Bothwell also
agrees to be jointly and severally liable with B&A on the $300,000 promissory
note. POC and CNG also agree to subordinate their UCC-1 financing statement on
the assets being purchased once the $300,000 Note has been fully satisfied
subject to the terms and conditions set forth in the Stock Pledge and Security
Agreement. A copy of the security agreement is attached as Exhibit F and all
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its terms and conditions are incorporated herein by reference.
3.4 Sales and Use Taxes, Real and Personal Property Taxes. All sales
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and use taxes imposed by California or any other state or taxing authority as a
result of the sale of the Acquired Assets hereunder shall be paid by B&A at the
Closing Date to the proper taxing authorities.
SECTION 4. CLOSING AND CLOSING DATE
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The closing of the transactions contemplated by this Agreement (hereinafter
referred to as the "Closing") shall take place at Santa Fe Springs, California
on such date and time and/or other location as shall be determined by the
parties, subject to the conditions precedent to Closing as set forth under
Sections 8, 9 and 10 of this Agreement (hereinafter referred to as the "Closing
- ---------------------
Date").
SECTION 5. SELLER'S REPRESENTATIONS AND WARRANTIES
---------------------------------------
POC and CNG, as Sellers, hereby represent and warrant to B&A as follows:
5.1 Authority. Both POC and CNG have full power and authority to enter
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into and execute this Agreement and to carry out the transactions contemplated
hereby, and no further action is required on the parts of POC and CNG to make
this Agreement binding upon each of them. At the Closing, this Agreement shall
be a valid and binding agreement of POC and CNG, enforceable in accordance with
its terms, except as such enforcement may be limited by bankruptcy, insolvency,
or similar laws affecting creditors' rights generally or by the scope of
equitable remedies which may be available.
5.2 Title To Acquired Assets. As of the Closing Date, B&A will obtain
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good title to the tangible Acquired Assets upon delivery of bill(s) of sale and
the consummation of the transactions contemplated by this Agreement.
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5.3 Consents To POC's and CNG's Assignments. To the best of POC's and
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CNG's knowledge, no consent, approval, or other action of any third party is
required to be obtained by either party in connection with the transactions
contemplated by this Agreement.
5.4 No Options. No options to acquire the Acquired Assets have been
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previously granted by Sellers to any other person or entity not a party to this
Agreement.
5.5 Material Misstatements or Omissions. To the best of Sellers'
--------------------------------------
knowledge, no representation or warranty by Sellers contained in this Agreement
or any of the attached Exhibits to this Agreement, and no document or
certificate furnished or to be furnished to B&A in connection herewith or with
the transactions contemplated by this Agreement, taken as a whole, contains an
untrue statement of a material fact or omits to state a material fact necessary
to make the statement of fact contained herein or therein not misleading.
5.6 Equipment. All Equipment is, and will be on the Closing Date, owned by
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Sellers, and will be eligible for transfer to B&A.
SECTION 6. REPRESENTATIONS AND WARRANTIES OF BUYER & BOTHWELL
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B&A, as Buyer, and Bothwell hereby represents and warrants to Sellers as
follows:
6.1 Authority. This Agreement has been adopted, its execution and
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delivery to Sellers and the performance thereof have been duly authorized by the
Board of Directors of Buyer, and no further action is necessary on the part of
Buyer to make this Agreement valid and binding upon it. At the Closing, this
Agreement shall be a valid and binding agreement of Buyer and Bothwell,
enforceable in accordance with its terms, except as such enforcement may be
limited by bankruptcy, insolvency or similar laws affecting creditors' rights
generally or by the scope of equitable remedies which may be available.
6.2 Organization and Good Standing. Buyer is and at the Closing Date will
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be a corporation, duly organized, validly existing, and in good standing under
the laws of the State of Delaware.
6.3 No Violation by Buyer. To the best of Buyer's and Bothwell's
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knowledge, neither the execution or delivery of this Agreement, nor compliance
with the terms and provisions hereof by Buyer will breach any statute or
regulation of any governmental authority regulating or affecting Buyer's
business or the Acquired Assets in any way which could materially and adversely
affect said business or assets. To the best of Buyer's and Bothwell's knowledge,
the consummation of the transactions contemplated by this Agreement will not
conflict with, or result in a breach of, or default (or an event which, with or
without due notice or lapse of time, or both, would constitute a default) under
the terms, conditions, or provisions of any agreement to which Buyer or Bothwell
is a party or by which it and/or he may be bound, or any judgment, order,
injunction, decree, law, regulation, or rule of any court, agency, or other
governmental authority, or any debt, obligation, lease, commitment, license,
permit, contract, or other agreement to which Buyer or Bothwell is a party or by
which it and/or he may be bound, or result in the creation or imposition of any
security interest, lien, or encumbrance upon the property or assets of Buyer and
Bothwell, including the Acquired Assets.
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6.4. Consents To Buyer's Assignments. To the best of Buyer's and
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Bothwell's knowledge, no consent, approval, or other action of any third party
is required to be obtained by Buyer or Bothwell in connection with the
transactions contemplated by this Agreement.
6.5 Disclosure by Buyer. Buyer and Bothwell hereby represent and warrant
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to POC and CNG that as of the Closing Date, Buyer has made full and complete
disclosure relating to any and all material corporate opportunities, favorable
to POC and/or CNG arising or existing within one hundred twenty (120) days prior
to the Closing Date of which Buyer and/or Bothwell has knowledge concerning the
Mexican Project, and the CNG business of POC and CNG by a written and separate
disclosure document contained in Exhibit G.
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6.6 Ownership. As of the Closing Date, Bothwell will be the sole
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shareholder of Buyer and there will exist no other agreements or options to sell
shares of the Buyer to any third party except those which are described below:
Hank Schwartz and Equity Investors, whose cumulative shares shall not
exceed forty-nine (49%) percent of the total outstanding shares of B&A.
SECTION 7. MUTUAL COVENANTS
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Cooperation and Other Actions. Each of the parties to this Agreement
--------------------------------
agrees to cooperate and execute and deliver such further instruments or
documents as the other party may reasonably require in order to carry out the
terms of this Agreement and consummate the transactions contemplated herein.
SECTION 8. SELLER'S OBLIGATIONS AFTER CLOSING
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8.1 Promise To Indemnify. POC and CNG hereby agree to indemnify, defend,
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and hold B&A free and harmless from and against any and all damages, losses,
liabilities, claims, demands, recoveries, deficiencies, costs, or expenses,
including without limitation, reasonable attorneys fees and costs (hereinafter
collectively referred to as a "Claim") resulting from, arising out of, suffered
or incurred in connection with a breach of any representation or warranty made
by POC an/or CNG or any breach of any covenant or agreement to be performed or
complied with by POC and/or CNG under this Agreement, and for POC or CNG's
failure to make full and accurate disclosure in this Agreement or in any of the
attached documents to this Agreement. For purposes of this Agreement, the term
"Claim Notice" shall mean a written notice which sets forth the amount of the
Claim and specifies in reasonable detail the circumstances and computation of
the Claim, accompanied by such documentation (if any is then reasonably
available to Buyer) as is reasonably required to substantiate the Claim.
Nothing contained herein shall be construed to require indemnification by POC or
CNG with regard to any and all third party claims against B&A or Bothwell
relating to the business of POC and CNG prior to the Closing Date, it being
agreed that the Sellers will have no responsibility to Buyer and/or Bothwell for
any such claims. The procedure for any indemnification claims are set forth in
Section 11 of this Agreement.
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8.2 Board of Directors Approval. Subject to its approval of all final
----------------------------
documentation, POC agrees to hold a Board of Directors meeting to approve this
Agreement and all related transactions hereto.
8.3 Assistance with Claims. POC and CNG also warrant and represent
------------------------
that they will not voluntarily provide assistance to any third party pursuing
any claims against B&A and/or Bothwell relating to the business of POC and/or
CNG.
8.4 Continued Cooperation. POC and CNG agree to cooperate and execute
----------------------
and deliver such further instruments or documents as the B&A may reasonably
require in order to carry out the terms of this Agreement and consummate the
transactions contemplated herein.
SECTION 9. BUYER'S AND BOTHWELL'S OBLIGATIONS AFTER CLOSING
------------------------------------------------
9.1 Buyer's Promise To Indemnify. B&A hereby agrees to indemnify, defend,
----------------------------
and hold POC and CNG free and harmless from and against any and all damages,
losses, liabilities, claims, demands, recoveries, deficiencies, Assumed
Liabilities, if any, costs, or expenses, including without limitation,
reasonable attorneys fees and costs (hereinafter collectively referred to as a
"Claim") resulting from, arising out of, suffered or incurred in connection with
a breach of any representation or warranty made by B&A, any breach of any
covenant or agreement to be performed or complied with by B&A under this
Agreement, or any Claim relating to any equipment, lease, or other asset sold or
transferred by POC or CNG to B&A herein which resulted from actions taken by B&A
subsequent to the Closing Date. B&A further agrees to indemnify POC and CNG for
any and all claims arising from B&A and/or Bothwell's actions after the Closing
Date. Notwithstanding the above provision, in no event shall B&A and/or
Bothwell indemnify POC and/or CNG for third parties claims relating to
pre-closing liabilities of POC or CNG unless i) B&A and/or Bothwell had actual
knowledge of said liabilities and failed to disclosure such liabilities to POC
and/or CNG, or ii) B&A and/or Bothwell are in breach of any warranties or
representations contained herein. For purposes of this Agreement, the term
"Claim Notice" shall mean a written notice which sets forth the amount of the
Claim and specifies in reasonable detail the circumstances and computation of
the Claim, accompanied by such documentation (if any is then reasonably
available to Seller) as is reasonably required to substantiate the Claim. The
procedure for indemnification is as set forth in Section 10 of this Agreement.
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9.2 Corporate Position. After the Closing Date, Bothwell agrees to
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assist and continue his employment with POC for a period of not less than ninety
(90) days from the Closing Date, and thereafter any notice of resignation shall
take effect no sooner than ninety (90) days from the date of such notice. POC
and Bothwell agree that Bothwell shall resign from his management positions at
POC when it is mutually agreed and determined that he is no longer able to
fulfill his officer responsibilities with POC. Prior to his departure from
employment with POC, Bothwell agrees that he shall notify and fully inform POC
of any and all corporate activities and transactions completed or in which
Bothwell participated during his term of employment.
9.3 Post Closing Obligations of Buyer And Bothwell. B&A and Bothwell
------------------------------------------------
hereby agree to take no voluntary action or provide any voluntary assistance to
any creditors of POC or CNG in pursing claims against either POC or CNG or any
debts or other liabilities existing or arising prior to the Closing Date. B&A
and Bothwell agree that a breach of this provision shall constitute a material
breach of this Agreement and the Stock Pledge and Security Agreement.
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9.4 Assistance with Claims. Bothwell and B&A hereby agree to make
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available Mike Jadeski and Rick Remington, as long as each is an employee of B&A
or its successor, assign or subsidiary, to provide reasonable assistance to POC
and/or CNG, upon request to CNG and/or POC, relating to the Amwest litigation
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and any claims made by A.E. Schmidt with respect to the New York Department of
Transportation College Point CNG project, as well as any third party vendor
claims, or any other disputes that may arise related to CNG's or POC's business
prior to the Closing Date, provided, however, that Mike Jadeski and Rick
Remington shall be paid for all time spent assisting POC and/or CNG, including
travel costs, at a rate which is at a minimum equal to their hourly rate earned
at B&A at the time of assistance. Bothwell will also provide similar assistance
to POC and CNG without charge, except for reimbursement of reasonable out of
pocket expenses, regardless of Bothwell's continued employment by B&A. Unless
the parties otherwise agree, such assistance shall not exceed an aggregate of
five (5) days per month for Jadeski and Remington each, and three (3) days for
Bothwell following Bothwell's departure from employment with POC and/or CNG.
The parties acknowledge that Bothwell's future assistance without charge to POC
and/or CNG pursuant to this provision is a material term of this Agreement, and
any failure by Bothwell to provide said assistance shall constitute a material
breach of this Agreement.
9.5 Continued Cooperation. B&A agrees to cooperate and execute and
----------------------
deliver such further instruments or documents as the Sellers may reasonably
require in order to carry out the terms of this Agreement and consummate the
transactions contemplated herein.
SECTION 10. PROCEDURE FOR INDEMNIFICATION
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In the event there is asserted any Claim, liability, obligation that in the
judgment of the party entitled to indemnification under this Agreement
(hereinafter referred to as the "Indemnified Party") may give rise to any
indemnified losses, or if the Indemnified Party determines the existence of the
foregoing, whether or not the same shall have been asserted, such Indemnified
Party shall give the party from whom indemnity is sought (hereinafter referred
to as the "Indemnitor") written notice within thirty (30) business days of the
assertion of any Claim, liability, or obligation, or within thirty (30) business
days of receipt of notice of the filing of any lawsuit based upon such
assertion, or, with respect to a Claim not yet asserted against the Indemnified
Party, promptly upon the determination of an executive officer of the
Indemnified Party of the existence of the same, and shall give Indemnitor a
reasonable opportunity of assuming the defense of such Claim, liability, or
obligation, using counsel reasonably acceptable to the Indemnified Party;
provided, however, that the Indemnified Party shall have the right to
participate in such defense, except that if the Indemnified Party retains
separate counsel, other than in the event of a conflict of interest requiring
the retention of separate counsel, the Indemnified Party shall assume the
expense of the separate counsel. Failure by the Indemnified Party to give timely
notice pursuant to this Section shall not relieve the Indemnitor of its
obligations, except to the extent that the Indemnitor is actually prejudiced by
such failure to give timely notice. No settlement or adjustment shall be made
without the Indemnified Party's prior written consent, which consent shall not
be unreasonably withheld. If Indemnitor fails to contest in good faith any such
Claim, liability, or obligation, the Indemnified Party shall have the right to
defend, settle, or pay the same and pursue its remedies for indemnities against
Indemnitor hereunder. The Indemnified Party shall cooperate with Indemnitor in
any such defense which Indemnitor elects to assume in the event that Indemnitor
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makes such request to the Indemnified Party and such request is reasonable,
provided the Indemnitor will hold the Indemnified Party free and harmless from
and against any and all of its reasonable out-of-pocket expenses, including
attorneys' fees, incurred in connection with the Indemnified Party's
cooperation. In the event of a disagreement among the parties as to whether any
Claim, liability, or obligation may give rise to any indemnified loss hereunder,
the Indemnified Party shall have the right to defend, settle, or pay the same,
or to pursue its remedies against Indemnitor hereunder; provided, however, that
Indemnitor shall have the right to participate in such defense, and no
settlement or adjustment shall be made without Indemnitor's prior written
consent, which consent shall not be unreasonably withheld.
SECTION 11. GENERAL PROVISIONS
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11.1 Notices. All notices, requests, demands or other communications
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required or permitted under this Note shall be in writing and shall be deemed to
have duly given or made on the date of service if served personally on the party
to whom notice is to be given, on the date of transmission if sent by facsimile,
telex, telecopier or telegraph, or on the fifth (5th) day after mailing if
mailed to the party to whom notice is to be given, by first class mail,
registered or certified, postage prepaid, properly addressed as follows:
If to POC and/or CNG: Penn Octane Corporation, Inc.
c/o Jerome Richter
900 Veterans Blvd., Suite 240
Redwood City, California 94063
With a copy to: Kevin W. Finck
Attorney at Law
Two Embarcadero Center, Suite 1670
San Francisco, California 94111
If to B&A: B&A Eco-Holdings, Inc.
12631 Imperial Highway
Suite 120A
Santa Fe Springs, California 90670
With a copy to: Robert Stemler
Keesal, Young & Logan
400 Oceangate, P.O. Box 1730
Long Beach, California 90801-1730
11.2 Invalidity. Should any term of this Agreement or the application
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thereof to any person or circumstances be held to be invalid or unenforceable by
a court of competent jurisdiction, the remainder of this Agreement, or the
application of such term or provision to persons or circumstances other than
those as to which it is held invalid or unenforceable, shall not be affected
thereby, and each such remaining term and provision shall be valid and enforced
to the fullest extent permitted by law.
11.3 No Waiver. No waiver of any breach of any covenant or provision
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contained herein shall be deemed a waiver of any preceding or succeeding breach
thereof or of any other covenant or provision. No extension of time for
performance of any obligation or act shall be deemed an extension of the time
for performance of any other obligation or act.
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11.4 Modifications. This Agreement, and the obligations contained
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herein, may not be amended, altered, or modified except in writing signed by the
parties hereto.
11.5 Incorporation By Reference. This Agreement and any Schedules
----------------------------
attached hereto are incorporated by reference and made a part hereof, such that
this Agreement and said Schedule(s) together shall constitute the entire
agreement between the parties hereto. No other agreements, representations, or
warranties other than those specifically set forth herein shall be binding upon
the parties unless set forth in writing and signed by the parties hereto.
11.6 Successors. This Agreement shall be binding upon and shall inure
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to the benefit of permitted successors and assigns of the parties hereto.
11.7 Attorneys' Fees. In the event of the bringing of any action,
----------------
proceeding, arbitration or suit by a party hereto against another party
hereunder by reason of any breach of any of the covenants, agreements, or
provisions arising out of this Agreement, the prevailing party shall be entitled
to recover all costs and expenses of that action or suit, or at trial,
arbitration or on appeal, and in collection of judgment, including reasonable
attorneys' fees, accounting, and other professional fees resulting therefrom.
11.8 Authority. The undersigned signatories, on behalf of Buyer and
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Seller, each warrants his or her authority to enter into and execute this
Agreement on behalf of the party for whom he or she is signing.
11.9 No Assignment. This Agreement shall not be assignable by either
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party hereto absent the prior written consent of the other party. Buyer hereby
consents to the dissolution of Seller and the succession of Seller's
Shareholders to the rights and obligations of Seller under this Agreement.
11.10 Construction. This Agreement has been entered into in the State
------------
of California and shall be governed by, interpreted under, and construed and
enforced in accordance with the laws of that State. All parties acknowledge that
they have had substantial input in the drafting of the final Agreement.
Consequently, the parties acknowledge that the statutory inferences referred to
in California Civil Code section 1654 shall have no effect in the event of
dispute upon interpretation.
11.11 Counterparts. This Agreement may be executed in one or more
------------
counterparts, each of which shall be deemed an original and all of which
together shall constitute one and the same instrument.
Page 13 of 48
<PAGE>
IN WITNESS WHEREOF, this Agreement is effective on the date and year first
above written.
"POC"
PENN OCTANE CORPORATION, INC.,
a Delaware corporation
_______________________________
IAN T. BOTHWELL
By:________________________________
Jerome Richter, President
By:________________________________
Jorge Bracamontes
Executive Vice President/Secretary
"CNG"
PENN WILSON CNG, INC.
a California corporation
By:_________________________________
Jerome Richter, President
By:_________________________________
Jorge Bracamontes, Vice President
"B&A"
B&A ECO-HOLDINGS, INC.
a Delaware corporation
By:________________________________
Ian T. Bothwell
Chief Executive Officer
By:________________________________
Print Name:_________________________
Title: ______________________________
"Bothwell"
Page 14 of 48
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT A
---------
ACQUIRED ASSETS AGREED TO VALUE SELLER
- --------------------------------------------------------------------- ---------------- ------
<S> <C> <C>
1. 3 compressor skid packages $ 712,444 POC
2. Inventory owned by CNG $ 109,077 CNG
3. Property, plant and equipment of CNG, including $ 168,479 CNG
skid related accessories
4. Rights, title and interest in CNG technology, including designs, $ 200,000 CNG
(Created and/or owned by CNG)
5. Inaine contract (Mexican Project) $ 10,000 POC
TOTAL AGREED TO VALUE $ 1,200,000
</TABLE>
Page 15 of 48
<PAGE>
EXHIBIT B
---------
INVENTORY AND SUPPLIES
Page 16 of 48
<PAGE>
EXHIBIT C
---------
PROPERTY, PLANT & EQUIPMENT
Page 17 of 48
<PAGE>
EXHIBIT D
---------
$300,000 PROMISSORY NOTE
Page 18 of 48
<PAGE>
EXHIBIT E
---------
$900,000 PROMISSORY NOTE
Page 19 of 48
<PAGE>
EXHIBIT F
---------
SECURITY AGREEMENT
Page 20 of 48
<PAGE>
EXHIBIT G
---------
CORPORATE OPPORTUNITIES
Page 21 of 48
<PAGE>
STOCK PLEDGE AND SECURITY AGREEMENT
-----------------------------------
THIS STOCK PLEDGE AND SECURITY AGREEMENT is made and entered into effective
the 15th day of April, 1999 by and between PENN OCTANE CORPORATION, INC., a
Delaware corporation ("POC")and PENN WILSON CNG, a Delaware corporation ("CNG")
on the one hand (POC & CNG are sometimes collectively referred to as "Secured
Party") and B&A ECO-HOLDINGS, INC., a Delaware corporation ("Debtor") and IAN T.
BOTHWELL, President of Debtor ("Bothwell") with reference to the following
facts and circumstances:
WHEREAS, Secured Party has received a $300,000 Secured Promissory Note of
even date herewith (the "$300,000 Note") pursuant to which Secured Party has
agreed to sell to Debtor certain assets contained within two Bills of Sale of
even date herewith. A copy of the $300,000 Note is attached hereto as Exhibit A
---------
and incorporated herein by reference;
WHEREAS, Secured Party has received an additional $900,000 Secured
Promissory Note of even date herewith (the "$900,000 Note") pursuant to which
Secured Party has agreed to sell to Debtor certain assets contained within two
Bills of Sale of even date herewith. A copy of the $900,000 Note is attached
hereto as Exhibit B and incorporated herein by reference. Both the $300,000
----------
Note and the $900,000 Note are collectively referred to herein as the "Notes";
AND WHEREAS, as security for Debtor's repayment of the Notes, IAN T.
Bothwell, President of Debtor and a signatory to this Agreement, has agreed to
pledge to Secured Party those warrants owned by Bothwell to purchase
approximately 200,000 shares of common stock in POC (the "Bothwell Warrants");
AND WHEREAS, as additional security for Debtor's repayment of the Notes,
Debtor has agreed to grant to Secured Party a security interest in three (3)
specified items of equipment of Debtor pursuant to two UCC-1 financing
statements of even date herewith issued by Debtor in favor of Secured Party (the
"UCC-1s"), copies of which are attached hereto as Exhibit C and incorporated
---------
herein by reference. Subject to the conditions stated herein, Secured Party has
agreed to subordinate its UCC-1 interest in the $900,000 Note as more fully
described in Section 1-B below;
------------
AND WHEREAS, as additional security for Debtor's repayment of the Notes,
Bothwell hereby agrees to pledge the stock of Debtor owned by Bothwell, his
agents, assigns, heirs or relatives, both now and in the future ("the Bothwell
Stock");
NOW, THEREFORE, in consideration of the mutual covenants and agreements of
the parties and other good and valuable consideration, the parties agrees as
follows:
1. Obligations Secured. As security for the payment of all principal and
-------------------
accrued interest due from time to time under the terms of the $300,000 Note and
the $900,000 Note (sometimes jointly referred to herein as the "Obligations"),
Secured Party is hereby granted the following collateral (collectively, the
"Collateral") from Bothwell and Debtor:
Page 22 of 48
<PAGE>
A. The Bothwell Warrants. A security interest in warrants currently owned
-----------------------
by Bothwell to purchase approximately 200,000 shares of POC stock.
B. The UCC-1s. A security interest from the Debtor in all assets sold and
-----------
purchased as referenced in the Asset Acquisition Agreement and Bills of
Sale executed between the parties hereto as specifically set forth on
Exhibit C on the two UCC-1 financing statements attached hereto and
----------
incorporated herein by reference (collectively, the "Pledged Assets"), and,
if applicable, a security interest in any notes or leases resulting from
the sale or lease of the Pledged Assets. Secured Party agrees that Debtor
shall be permitted to sell or lease the Pledged Assets at fair market value
at any time while this Agreement is in effect without first obtaining
Secured Party's consent; provided, however, that any proceeds realized from
the sale shall be promptly forwarded to Secured Party up to the amount of
the total obligation, less any payments previously made to Secured Party,
and any proceeds from a lease may stay with Debtor, for only so long as
Debtor is not in default of any terms of the Asset Acquisition Agreement,
Stock Pledge and Security Agreement or the Notes. Secured Party agrees that
once the $300,000 Note is paid in full pursuant to its terms, the Secured
Party will release its UCC-1 interests in the $300,000 Note and subordinate
its UCC-1 interests in the $900,000 Note to any and all Senior Debt,
whether then existing or created in the future. "Senior Debt", as used
herein, means:
(i) All indebtedness, whether secured or unsecured, of Debtor for
money borrowed by Debtor from any bank, insurance company, pension or
profit-sharing funds, finance company, third party individual or any
other financial institution, which is utilized by the Debtor as
working capital, which shall include among other things, CNG related
equipment purchases and/or leases and research and development
regarding control chip and related technology; or
(ii) All rental obligations of Debtor as lessee under a finance-type
lease of property.
C. The Bothwell Stock. A security interest in all shares of common stock of
-------------------
Debtor currently owned by Bothwell or acquired in the future, except those
which have been reserved for third parties as more fully described in
Section 6.6 of the Asset Acquisition Agreement.
-----------
2. Warranties of Debtor and Bothwell. Debtor and Bothwell represent,
-------------------------------------
warrant, and agree that:
A. Bothwell is the sole owner of the Bothwell Stock, Bothwell has full
right, title, and interest in and to the Bothwell Stock, and the Bothwell
Stock is and shall continue to be free and clear of all further liens,
encumbrances, and adverse claims until the Obligations are satisfied in
their entirety.
Page 23 of 48
<PAGE>
B. As represented in the Bills of Sale, Debtor is the sole owner of the
certain Pledged Assets specified therein, Debtor has full right, title, and
interest in and to the Pledged Assets, and the Pledged Assets are and shall
continue to be free and clear of all further liens, encumbrances, and
adverse claims until the Obligations are satisfied in their entirety.
C. Debtor and Bothwell each have full power and authority to enter into and
perform this Agreement, and all requisite corporate action, if applicable,
has been taken approving same.
D. Debtor and Bothwell shall, at Debtor's and Bothwell's own cost and
expense, appear in and defend any and all actions and proceedings affecting
title to the Collateral or affecting Secured Party's interest therein
pledged pursuant to the Obligations, and Debtor and Bothwell shall give
Secured Party written notice of all such actions.
E. Debtor and Bothwell hereby warrant and represent that Debtor may issue
additional shares of stock of Debtor, provided that Secured Party's
security interest will remain at no less than 51% ownership of all
outstanding shares of stock and unexercised options of Debtor. Debtor and
Bothwell further warrant and represent that any issuances of B&A shares
conducted in the future shall be for adequate consideration.
F. Debtor and Bothwell hereby warrant and represent that it and he shall
take any and all reasonable and necessary actions in the management and
operations of B&A and any other related conduct to protect Secured Party's
security interest in B&A and its shares, as well as any other Collateral
provided hereunder, and shall make all good faith efforts to maintain B&A's
fair market value and the good condition of all other Collateral during the
term of this Agreement. In addition, Debtor and Bothwell hereby warrant and
represent that it and/or he shall use its or his best efforts to provide
for reasonable and sufficient insurance coverage on the Collateral. In the
event that Debtor or Bothwell is unable to obtain said coverage, Secured
Party shall have the right to locate a policy with adequate insurance
coverage for which Debtor and/or Bothwell shall pay. To the extent that
reasonable and sufficient insurance coverage cannot be obtained, the
parties shall agree to the insurance policy with highest coverage
discovered upon reasonable investigation by the parties. Debtor and
Bothwell agree that POC and CNG shall be named insured on any and all
insurance coverage agreements relating to the Collateral.
3. Delivery of Collateral. Contemporaneously with the execution of this
------------------------
Agreement, the following items are hereby delivered to Secured Party evidencing
the Collateral and Secured Party's security interest thereto, and by executing
this Agreement Secured Party acknowledges receipt of said items: the Bothwell
Stock and the Bothwell Warrants, either represented by the stock certificates or
warrant agreements themselves or by an executed assignment, and the UCC-1
financing statements.
Page 24 of 48
<PAGE>
4. Exercise of Bothwell Warrants. Secured Party agrees that in the event
-----------------------------
Bothwell desires to exercise the Bothwell Warrants and/or sell or exchange the
Bothwell Warrants (or the resulting stock subsequently exercised) in connection
with any transaction involving the stock of POC, then Bothwell shall have the
right to take such action, however, any resulting securities, proceeds and /or
other assets issued in connection with such action (the "Assets") shall be
treated as the collateral as if it were the Bothwell Warrants. If the Bothwell
Warrants (or the resulting stock subsequently exercised) were held by the
Secured Party prior to the modification or other transaction, then upon receipt
of the Assets, Bothwell shall promptly deliver the Assets to the Secured Party.
Upon the request of Bothwell, Secured Party shall execute and deliver all
documents and instruments reasonably necessary to effectuate such transaction.
5. Modification to Bothwell Stock. Secured Party agrees that in the
---------------------------------
event Debtor modifies its capital structure, whereby the Bothwell Stock is to be
exchanged, replaced and/or re-issued, then Secured Party shall allow Bothwell to
deliver the Bothwell Stock for such exchange, replacement and/or re-issue;
however, any resulting security which is issued in place of the Bothwell Stock
shall be treated as the collateral as if it were the Bothwell Stock. If the
Bothwell Stock was held by the secured Party prior to the modification, then
upon receipt of the modified securities, Bothwell shall promptly deliver the
modified securities to Secured party. Upon the request of Bothwell, Secured
Party shall execute and deliver all documents and instruments necessary to
effectuate such transaction.
6. Voting Rights; Distributions. Except in the event of a default by
------------------------------
Debtor and/or Bothwell, Bothwell shall at all times retain the right to vote any
securities, including any securities which result from exercise or exchange,
which are pledged to Secured Party, including the Bothwell Stock and the POC
Stock. Similarly, except in the event of a default by Debtor and/or Bothwell,
Bothwell shall be entitled to receive any and all cash distributions, including
dividends which are made to holders of the Bothwell and/or POC Stock, provided
that Secured Party shall be entitled to all voting rights and be entitled to
receive all distributions in the event of a default by Debtor and/or Bothwell of
their obligations under the terms of this Agreement only to the full extent of
the outstanding obligation amount due to Secured Party.
7. Sale of Collateral. Debtor and Bothwell shall be entitled to sell any
-------------------
of the collateral pledged herein, in any transaction which will satisfy all
outstanding Obligations to Secured Party in cash or if payment is made in any
other manner, in part or whole, with prior written acceptance by Secured Party
except as otherwise set forth in this Agreement. Secured Party agrees to
execute and deliver all documents and instruments reasonably necessary to
effectuate such transaction within a reasonable time period.
8. Event of Default. At the option of Secured Party, the Obligations-
------------------
shall all become immediately due and payable in full upon the happening of any
one or more of the following events:
A. Any payment due under either Note is not paid within ten (10) days of
Debtor's receipt from Secured Party of notice of default, pursuant to the
notice provisions set forth in Section 11 hereof;
----------
Page 25 of 48
<PAGE>
B. Any performance required under this Agreement is not cured within ten
(10) days of Debtor's or Bothwell's receipt from Secured Party of notice of
default pursuant to the notice provisions set forth in Section 11 hereof;
----------
C. Debtor or Bothwell makes a general assignment for the benefit of
creditors, otherwise becomes insolvent (however such insolvency is
evidenced or stops actively engaging in business);
D. Any petition for relief under the U. S. Bankruptcy Code or similar state
insolvency or debt moratorium statute is filed by or against Debtor or
Bothwell and is not dismissed within thirty (30) days after filing;
E. Any governmental authority, court, or court appointed receiver or
officer takes possession and control of all or a substantial portion of the
assets and affairs of Debtor and such possession and control is not
relinquished within ten (10) days;
F. If Debtor or Bothwell fails within a reasonable time, not to exceed ten
(10) days unless otherwise agreed by the parties, to replace or otherwise
restore Collateral with additional or substitute collateral acceptable to
Secured Party, in its reasonable discretion, in the event of any loss.
However, Debtor or Bothwell will be given a reasonable period of time, not
to exceed thirty (30) days, to replace, or otherwise restore Collateral if
the deficiency in Collateral is due to acts of God or third party criminal
or negligent activity;
G. If Debtor or Bothwell assigns or encumbers, or agrees to assign or
encumber, any of the Collateral, or any interest of any kind therein, to
any person or entity in any manner or transaction whatsoever; or
H. If Debtor or Bothwell, without the prior written approval of Secured
Party, issues or transfers, or agrees to issue or trans-fer, any share of
stock of Secured Party.
9. Rights in the Event of Default. In the event of a default by Debtor,
--------------------------------
Secured Party shall have the rights and remedies provided in the California
Uniform Commercial Code, and, in addition thereto and without waiving any of the
same, Secured Party shall have the following remedies, at his option, upon
notice to Debtor:
A. Proceed in the foreclosure and sale of the Collateral in any manner
permitted by law; or
B. Sell, assign, or otherwise transfer all or any part of the Collateral
upon twenty (20) days' written notice to Debtor in order to satisfy any of
the Obliga-tions. At such sale, Secured Party and Debtor and Bothwell shall
be free to purchase all or any part of the Collateral. In the event the
proceeds from such sale are insufficient to cover the Obligations plus
expenses of sale, Debtor shall remain liable to Secured Party for any
deficiency.
Page 26 of 48
<PAGE>
Upon an event of default, Secured Party shall have the right to enforce any
one or more of the remedies set forth above, successively or concurrently, and
such action shall not estop Secured Party from any further remedy which he may
have hereunder or by law, nor shall such action be deemed a waiver of any such
further remedy. Upon the event of default, Debtor shall have the right to cure
any default condition within the time periods set forth in Section 8.
----------
10. Release of Collateral. Upon the satisfaction of both Obligations, the
---------------------
Bothwell Stock, the Bothwell Warrants and the Pledged Assets shall be released
by Secured Party. Upon request of Debtor, Secured Party shall execute and
deliver all documents and instruments reasonably necessary to effectuate said
release.
11. Notices. All notices, requests, demands or other communications
--------
required or permitted under this Note shall be in writing and shall be deemed to
have duly given or made on the date of service if served personally on the party
to whom notice is to be given, on the date of transmission if sent by facsimile,
telex, telecopier or telegraph, or on the fifth (5th) day after mailing if
mailed to the party to whom notice is to be given, by first class mail,
registered or certified, postage prepaid, properly addressed as follows:
To Debtor: B&A ECO-HOLDINGS, INC.
Attn: Ian Bothwell
12631 Imperial Highway, Suite 120A
Santa Fe Springs, California 90670
With a copy to: Robert Stemler
Keesal, Young & Logan
400 Oceangate, P.O. Box 1730
Long Beach, California 90801-1730
To Secured Party: PENN OCTANE CORPORATION, INC.
Attn: Jerome Richter
900 Veterans Blvd., Suite 240
Redwood City, California 94063
With a copy to: Kevin W. Finck
Attorney at Law
Two Embarcadero Ctr., Ste. 1670
San Francisco, California 94111
or to such other addresses as shall be furnished in writing from time to time.
12. Amendments and Waivers. This Agreement may not be amended, or
------------------------
compliance with any provision hereof waived, except by a written agreement duly
executed by the parties.
Page 27 of 48
<PAGE>
13. Attorneys' Fees. In the event of the bringing of any action,
----------------
proceeding, arbitration or suit by a party hereto against another party
hereunder by reason of any breach of any of the covenants, agreements, or
provisions arising out of this Agreement, the prevailing party shall be entitled
to recover all costs and expenses of that action or suit, or at trial,
arbitration or on appeal, and in collection of judgment, including reasonable
attorneys' fees, accounting, and other professional fees resulting therefrom.
14. Severability. If any section or provision of this Agreement or the
------------
application of such section or provision is held invalid, the remainder of this
Agreement shall not be affected thereby.
15. Governing Law. This Agreement and the legal relations between the
--------------
parties shall be governed by and construed in accordance with the laws of the
State of California.
IN WITNESS WHEREOF, the parties hereto have caused this Stock Pledge and
Security Agreement to be executed and delivered as of the date first above set
forth.
"Secured Party" "Debtor"
PENN OCTANE CORPORATION, INC., B&A ECO-HOLDINGS, INC.
a Delaware corporation a Delaware corporation
By:________________________________ By:________________________________
Jerome Richter Ian T. Bothwell
President Chief Executive Officer
By:________________________________
Jorge Bracamontes
Executive Vice President/Secretary
By:________________________________
Print Name:_______________________
Title: ___________________________
"Bothwell"
_______________________________
IAN T. BOTHWELL
Page 28 of 48
<PAGE>
EXHIBIT A
---------
$300,000 PROMISSORY NOTE
Page 29 of 48
<PAGE>
EXHIBIT B
---------
$900,000 PROMISSORY NOTE
Page 30 of 48
<PAGE>
EXHIBIT C
---------
UCC-1 FINANCING STATEMENTS
Page 31 of 48
<PAGE>
BILL OF SALE
For good and valuable consideration, PENN WILSON CNG, INC., a Delaware
corporation, Seller, hereby transfers to B&A ECO-HOLDINGS, INC., a Delaware
corporation, Buyer, the following assets:
(a) Inventory, property, plants, furniture, fixtures, and equipment located
at 12631 Imperial Highway, Suite 120-A, Santa Fe Springs, CA 90670, All-Cal,
15609 Valley Blvd., Fontana, CA 92335, and/or Coast Machinery Movers, 2431 Chico
Ave., South El Monte, CA 91733;
(b) All rights, title and interest in CNG technology, including designs
(created and/or owned by CNG); and
(c) All rights, title and interest in the Inaine contract related to
the Mexican Project.
Seller hereby warrants and represents that the Equipment is sold "as is"
without any warranties, express or implied, as to its condition.
Buyer hereby indemnifies Seller from the date of closing forward for any
and all claims, actions, disputes, proceedings and other legal or administrative
action relating to any actions committed by Buyer subsequent to the date of
closing related to the items sold hereunder.
IN WITNESS WHEREOF, Sellers have caused this Bill of Sale to be executed
and delivered to Buyer at Los Angeles, California effective the 15th day of
April 1999.
PENN WILSON CNG, INC., B&A ECO-HOLDINGS, INC.
a Delaware corporation a Delaware corporation
By:__________________________________ By:_____________________________________
Jerome Richter, President Ian T. Bothwell,
Chief Executive Officer
By:_____________________________________
By:__________________________________ Print Name: __________________________
Ian T. Bothwell, Vice President Title:__________________________________
Page 32 of 48
<PAGE>
ACKNOWLEDGEMENTS
STATE OF CALIFORNIA )
County of _________________ )
On ____________, 1999, before me, ________________________, personally
appeared ____________________ ____________________________, personally known to
me (or proved to me on the basis of satisfactory evidence) to be the person
whose name is subscribed to the within instrument and acknowledged to me that he
executed the same in his authorized capacity, that by his signature on the
instrument he, or the entity upon behalf of which the he acted, executed the
instrument.
WITNESS MY HAND AND OFFICIAL SEAL.
_____________________________
STATE OF CALIFORNIA )
County of _________________ )
On ____________, 1999, before me, ________________________, personally
appeared ____________________ ____________________________, personally known to
me (or proved to me on the basis of satisfactory evidence) to be the person
whose name is subscribed to the within instrument and acknowledged to me that he
executed the same in his authorized capacity, that by his signature on the
instrument he, or the entity upon behalf of which the he acted, executed the
instrument.
WITNESS MY HAND AND OFFICIAL SEAL.
_____________________________
STATE OF CALIFORNIA )
County of _________________ )
On ____________, 1999, before me, ________________________, personally
appeared ____________________ ____________________________, personally known to
me (or proved to me on the basis of satisfactory evidence) to be the person
whose name is subscribed to the within instrument and acknowledged to me that he
executed the same in his authorized capacity, that by his signature on the
instrument he, or the entity upon behalf of which the he acted, executed the
instrument.
WITNESS MY HAND AND OFFICIAL SEAL.
_____________________________
STATE OF CALIFORNIA )
County of _________________ )
On ____________, 1999, before me, ________________________, personally
appeared ____________________ ____________________________, personally known to
me (or proved to me on the basis of satisfactory evidence) to be the person
whose name is subscribed to the within instrument and acknowledged to me that he
executed the same in his authorized capacity, that by his signature on the
instrument he, or the entity upon behalf of which the he acted, executed the
instrument.
WITNESS MY HAND AND OFFICIAL SEAL.
_____________________________
Page 33 of 48
<PAGE>
BILL OF SALE
For good and valuable consideration, PENN OCTANE CORPORATION, INC., a
Delaware corporation, Seller, hereby transfers to B&A ECO-HOLDINGS, INC., a
Delaware corporation, Buyer, the following assets:
1. Three (3) compressor skid packages and related miscellaneous assets.
2. The rights to the Inaine contract
Seller hereby warrants and represents that the skids and related
miscellaneous assets are sold "as is" without any warranties, express or
implied, as to its condition. Seller acknowledges that Buyer is not acquiring
or assuming any obligations and/or liabilities of the Seller with regard to the
items herein sold.
Buyer hereby indemnifies Seller from the date of closing forward for any
and all claims, actions, disputes, proceedings and other legal or administrative
action relating to any actions committed by Buyer subsequent to the date of
closing related to the items sold hereunder.
IN WITNESS WHEREOF, Sellers have caused this Bill of Sale to be executed
and delivered to Buyer at Los Angeles, California effective the 15th day of
April 1999.
PENN OCTANE CORPORATION, INC., B&A ECO-HOLDINGS, INC.
a Delaware corporation a Delaware corporation
By:________________________________ By:________________________________
Jerome Richter Ian T. Bothwell
President Chief Executive Officer
By:________________________________
Jorge Bracamontes
Executive Vice President/Secretary
By:________________________________
Print Name:_______________________
Title: ___________________________
Page 34 of 48
<PAGE>
ACKNOWLEDGEMENTS
STATE OF CALIFORNIA )
County of _________________ )
On ____________, 1999, before me, ________________________, personally
appeared ____________________ ____________________________, personally known to
me (or proved to me on the basis of satisfactory evidence) to be the person
whose name is subscribed to the within instrument and acknowledged to me that he
executed the same in his authorized capacity, that by his signature on the
instrument he, or the entity upon behalf of which the he acted, executed the
instrument.
WITNESS MY HAND AND OFFICIAL SEAL.
_____________________________
STATE OF CALIFORNIA )
County of _________________ )
On ____________, 1999, before me, ________________________, personally
appeared ____________________ ____________________________, personally known to
me (or proved to me on the basis of satisfactory evidence) to be the person
whose name is subscribed to the within instrument and acknowledged to me that he
executed the same in his authorized capacity, that by his signature on the
instrument he, or the entity upon behalf of which the he acted, executed the
instrument.
WITNESS MY HAND AND OFFICIAL SEAL.
_____________________________
STATE OF CALIFORNIA )
County of _________________ )
On ____________, 1999, before me, ________________________, personally
appeared ____________________ ____________________________, personally known to
me (or proved to me on the basis of satisfactory evidence) to be the person
whose name is subscribed to the within instrument and acknowledged to me that he
executed the same in his authorized capacity, that by his signature on the
instrument he, or the entity upon behalf of which the he acted, executed the
instrument.
WITNESS MY HAND AND OFFICIAL SEAL.
_____________________________
STATE OF CALIFORNIA )
County of _________________ )
On ____________, 1999, before me, ________________________, personally
appeared ____________________ ____________________________, personally known to
me (or proved to me on the basis of satisfactory evidence) to be the person
whose name is subscribed to the within instrument and acknowledged to me that he
executed the same in his authorized capacity, that by his signature on the
instrument he, or the entity upon behalf of which the he acted, executed the
instrument.
WITNESS MY HAND AND OFFICIAL SEAL.
_____________________________
Page 35 of 48
<PAGE>
SECURED PROMISSORY NOTE
$300,000.00 Los Angeles, California
Effective April 15, 1999
FOR GOOD AND VALUABLE CONSIDERATION, the receipt and adequacy of which is
hereby acknowledged, B&A Eco-Holdings, Inc., a Delaware corporation and Ian T.
Bothwell, an individual (hereinafter collectively referred to as "Maker")
jointly and severally, promise to pay to Penn Octane Corporation, Inc., a
Delaware corporation (hereinafter referred to as "POC" or "Payee") on order, or
demand, in lawful money of the United States of America, the principal sum of
THREE HUNDRED THOUSAND DOLLARS AND NO CENTS ($300,000.00), with interest on the
unpaid principal balance from the date this Note is executed by Maker
(hereinafter referred to as the "Execution Date") until paid in full at the
annual compounded rate of TEN PERCENT (10%); provided, however, that if the rate
of interest so required hereunder exceeds the maximum rate permitted by law, the
rate of interest required shall be automatically reduced to the maximum
permitted by applicable law.
1. Payment Schedule. Principal and all accrued interest shall be due
-----------------
and payable as follows:
(a) $50,000 due on execution of this Note;
(b) $10,000 due beginning on the second monthly anniversary of the
Execution Date and for four consecutive months thereafter until a total of
$50,000 has been paid;
(c) the remaining principal and interest due in twenty four (24) equal
monthly installments of $9,678.96, commencing during the seventh month
anniversary from the Execution Date with all payments due at the end of each
month.
POC shall have sole responsibility to collect and remit to Penn Wilson CNG,
Inc. (hereinafter referred to as "CNG") all moneys due to CNG, if any, in
accordance with CNG's percentage ownership of the assets sold pursuant to this
Note.
In the event that Maker fails to make a designated payment, Payee agrees to
provide written notice to Maker of such default and Maker shall have ten (10)
days from the date of receipt of notice, as defined in Section 13, to make any
and all required payments due and owing to Payee pursuant to the payment
schedule set forth above. If payment becomes delinquent more than ten (10) days,
a late penalty shall be due in the amount of six percent (6%) of the installment
payment due. Should any payment due under this Note not be paid on a timely
basis, including late charges, said unpaid amount will thereafter bear interest
Bank of America prime plus 3%, adjusted annually, from the date of delinquency
forward.
Page 36 of 48
<PAGE>
2. Security; Cross-Default. This Note is secured by (1) that certain
------------------------
Stock Pledge and Security Agreement (hereinafter referred to as the "Security
Agreement") which includes as collateral a pledge by Ian Bothwell, President of
Maker (hereinafter referred to as "Bothwell") of warrants to purchase shares of
common stock of POC, (2) a separate pledge by Bothwell of all his personal
shares of stock in Maker held by Bothwell now and in the future, and (3) a UCC-1
financing statement on all the Acquired Assets of the B&A Eco-Holdings, Inc. as
set forth in that certain Asset Acquisition Agreement and Bill of Sale between
Maker and Payee (hereinafter referred to collectively as the "Collateral"). The
UCC-1 is attached hereto as Exhibit A and incorporated herein by this reference.
---------
Maker acknowledges and agrees that a default under the Asset Acquisition
Agreement and/or the Security Agreement shall also constitute a default under
this Note.
3. Prepayment. Maker may prepay this Note in whole or in part at any time
----------
without penalty. In the event that Maker pays Payee a cumulative amount of
$250,000 by the close of business, P.S.T., thirty (30) days from the Execution
Date, the Note will be deemed to have been paid in full, and Maker shall have no
further obligation for payments hereunder.
4. Default and Acceleration. The occurrence of any of the following shall
------------------------
be deemed to be an event of default (hereinafter referred to as an "Event of
Default") hereunder:
(a) Any demand for payment not paid within ten (10) days of written
notice of demand by Payee pursuant to the notice provisions set forth in section
13;
(b) Maker makes a general assignment for the benefit of creditors or
otherwise becomes insolvent (however such insolvency is evidenced);
(c) Any petition for relief under the U.S. Bankruptcy Code or similar
state insolvency or debt moratorium statute is filed by or against Maker and is
not dismissed within thirty (30) days after filing;
(d) Any performance required under the Asset Acquisition Agreement
and/or the Security Agreement which is not cured within ten (10) days of Payee's
notice of default to Maker as set forth in the notice provisions in section 13.
(e) Any governmental authority, court, or court appointed receiver or
officer takes possession and control of all or a substantial portion of the
assets and business affairs of Maker, and such possession is not relinquished
within ten (10) days; and
(f) Any prolonged work stoppage, shutdown or cessation of B&A's normal
and regular business operations.
If any Event of Default shall occur for any reason whatsoever, this
Note shall, at the election of Payee, become due and payable in full without
need for notice, demand, or other action by Payee, and Payee may exercise all
rights and remedies provided to creditors under California law.
Page 37 of 48
<PAGE>
In the event that Maker receives net proceeds from any debt and/or
equity financing transaction greater than $500,000, Maker shall make immediate
additional payments to Payee at a rate of $25,000 for each $100,000 of net
proceeds received in excess of $500,000 from such financing until all unpaid
principal and interest owing under this Note has been paid.
5. Financial Statements. Maker will be required to provide Payee with
---------------------
annual financial statements in accordance with U.S. GAAP within ninety (90) days
of Maker's year end close. Such statements shall include among other
information, annual net income and cumulative net income to date.
6. Right of First Refusal. In the event that Payee enters an agreement to
----------------------
sell, assign or transfer this Note for value, Payee shall grant Maker the right
of first refusal to purchase this Note from Payee under the same terms and
conditions as agreed to by the third party purchaser of the Note. Maker shall
notify Payee in writing within ten (10) business days of its intent to exercise
this right.
7. Amendments and Waivers. No failure on the part of Payee to exercise any
----------------------
right or remedy hereunder shall operate as a waiver hereof, nor shall any single
or partial exercise of any such right or remedy preclude further exercise
thereof or the exercise of any other right or remedy hereunder. This Note may
not be amended, or compliance with any provision hereof waived, except by a
written agreement duly executed by Payee (or any successor or assign) and Maker.
8. Waiver of Presentment, Notice of Dishonor, and Protest. Presentment,
--------------------------------------------------------
notice of dishonor, and protest are waived by all makers, sureties, guarantors,
and creditors of this Note.
9. Cumulative Rights. The remedies of Payee as provided hereunder shall
------------------
be cumulative and concurrent and may be pursued successively or concurrently
against Maker. The failure of Payee to exercise any such right or remedy shall
in no event be construed as a waiver or release of the same.
10. Attorneys' Fees. In the event of the bringing of any action,
----------------
proceeding, arbitration or suit by a party hereto against another party
hereunder by reason of any breach of any of the covenants, agreements, or
provisions arising out of this Agreement, the prevailing party shall be entitled
to recover all costs and expenses of that action or suit, or at trial,
arbitration or on appeal, and in collection of judgment, including reasonable
attorneys' fees, accounting, and other professional fees resulting therefrom.
11. Severability. If any provision of this Note, or the application
------------
thereof, is held invalid, the remainder of this Note and the application of such
provision to persons or circumstances other than those to which its application
is held invalid shall not be affected thereby.
Page 38 of 48
<PAGE>
12. Governing Law. This Note and the legal relations between Maker and
--------------
Payee shall be governed by and construed in accordance with the laws of the
State of California.
13. Notices. All notices, requests, demands or other communications
--------
required or permitted under this Note shall be in writing and shall be deemed to
have duly given or made on the date of service if served personally on the party
to whom notice is to be given, on the date of transmission if sent by facsimile,
telex, telecopier or telegraph, or on the fifth (5th) day after mailing if
mailed to the party to whom notice is to be given, by first class mail,
registered or certified, postage prepaid, properly addressed as follows:
If to POC: Penn Octane Corporation, Inc.
c/o Jerome Richter
900 Veterans Blvd., Suite 240
Redwood City, California 94063
With copy to: Kevin W. Finck
Attorney at Law
Two Embarcadero Center, Suite 1670
San Francisco, California 94111
If to B&A: B&A Eco-Holdings, Inc.
12631 Imperial Highway
Suite 120A
Santa Fe Springs, California 90670
With copy to: Robert Stemler
Keesal, Young & Logan
400 Oceangate, P.O. Box 1730
Long Beach, California 90801-1730
IN WITNESS WHEREOF, the undersigned has executed and delivered this Note
effective as of the date first written above.
Execution Date: May ___, 1999
"Maker"
B&A Eco-Holdings, Inc., Ian T. Bothwell
A Delaware corporation
By: _________________________ ___________________________
Ian T. Bothwell Ian T. Bothwell
Chief Executive Officer
By: _________________________
Print Name: __________________
Title:________________________
Page 39 of 48
<PAGE>
EXHIBIT A
---------
UCC-1
Page 40 of 48
<PAGE>
Page 41 of 48
<PAGE>
SECURED PROMISSORY NOTE
$900,000.00 Los Angeles, California
Effective April 15, 1999
FOR GOOD AND VALUABLE CONSIDERATION, the receipt and adequacy of which is
hereby acknowledged, B&A Eco-Holdings, Inc., a Delaware corporation (hereinafter
referred to as "Maker") promises to pay to Penn Octane Corporation, Inc., a
Delaware corporation (hereinafter referred to as "POC" or "Payee") on order or
demand in lawful money of the United States of America, the principal sum of
NINE HUNDRED THOUSAND DOLLARS AND NO CENTS ($900,000.00), with no interest to
accrue until the thirty first (31st) month from the date this Note is executed
by Maker (hereinafter referred to as the "Execution Date") at which time
interest will accrue at a rate of seven percent (7%), annually until the balance
is paid in full; provided, however, that if the rate of interest so required
hereunder exceeds the maximum rate permitted by law, the rate of interest
required shall be automatically reduced to the maximum permitted by applicable
law.
1. Payment Schedule. Principal and all accrued interest shall be due
-----------------
and payable as follows:
(a) $12,270.35 in equal monthly installments commencing the earlier of
thirty one (31) months after the Execution Date or the subsequent month
succeeding the month that the $300,000 promissory note executed simultaneously
with this Note by the parties herein (the "$300,000 Note") has been paid in
full;
(b) the remaining principal and interest due in one lump sum due sixty
one (61) months after the Execution Date.
POC shall have sole responsibility to collect and remit to Penn Wilson CNG,
Inc. (hereinafter referred to as "CNG") all moneys due to CNG, if any, in
accordance with CNG's percentage ownership of the assets sold pursuant to this
Note.
In the event that Maker fails to make a designated payment, Payee agrees to
provide written notice to Maker of such default and Maker shall have ten (10)
days from the date of receipt of notice, as defined in section 13, to make any
and all required payments due and owing to Payee pursuant to the payment
schedule set forth above. If payment becomes delinquent more than ten (10)
days, a late penalty shall be due in the amount of six percent (6%) of the
installment payment due. Should any payment due under this Note not be paid on
a timely basis, including late charges, said unpaid amount will thereafter bear
interest at Bank of America prime rate plus three percent (3%), adjusted
annually, from the date of delinquency forward.
Page 42 of 48
<PAGE>
2. Security; Cross-Default. This Note is secured by (1) that certain
------------------------
Stock Pledge and Security Agreement (hereinafter referred to as the "Security
Agreement") which includes as collateral a pledge by Ian T. Bothwell, President
of Maker (hereinafter referred to as "Bothwell") of warrants to purchase shares
of common stock of POC; (2) a separate pledge by Bothwell of all his personal
shares of stock in Maker held by Bothwell now and in the future; and (3) a UCC-1
financing statement on all the Acquired Assets of Maker subject to the terms of
the Stock Pledge and Security Agreement between the parties, as set forth in
that certain Asset Acquisition Agreement and a Bill of Sale between Maker and
Payee (hereinafter referred to collectively as the "Collateral"). The UCC-1
Financing Statement is attached hereto as Exhibit A and incorporated herein by
---------
this reference. Maker acknowledges and agrees that a default under the Asset
Acquisition Agreement and/or the Security Agreement shall also constitute a
default under this Note.
3. Prepayment; Discount. Maker may prepay this Note in whole or in part at
--------------------
any time without penalty. In the event that Maker prepays, it shall be entitled
to the following discount on the remaining principal to be paid hereunder:
Paid From the Execution Date: Discount:
By the 30th month $260,000
36th month $220,000
48th month $160,000
60th month $100,000
4. Default and Acceleration. The occurrence of any of the following shall
------------------------
be deemed to be an event of default (hereinafter referred to as an "Event of
Default") hereunder:
(a) Any demand for payment not paid within ten (10) days of written
notice of demand by Payee pursuant to the notice provisions set forth in section
13;
(b) Maker makes a general assignment for the benefit of creditors or
otherwise becomes insolvent (however such insolvency is evidenced);
Page 43 of 48
<PAGE>
(c) Any petition for relief under the U.S. Bankruptcy Code or similar
state insolvency or debt moratorium statute is filed by or against Maker and is
not dismissed within thirty (30) days after filing;
(d) Any performance required under the Asset Acquisition Agreement
and/or the Stock Pledge and Security Agreement which is not cured within ten
(10) days of Payee's written notice of default to Maker pursuant to the notice
provisions set forth in section 13;
(e) Any governmental authority, court, or court appointed receiver or
officer takes possession and control of all or a substantial portion of the
assets and business affairs of Maker, and such possession is not relinquished
within ten (10) days; and
(f) Any prolonged work stoppage, shutdown or cessation of B&A's normal
and regular business operations.
If any Event of Default shall occur for any reason whatsoever, this Note
shall, at the election of Payee, become due and payable in full without need for
notice, demand, or other action by Payee, and Payee may exercise all rights and
remedies provided to creditors under California law.
In the event that Maker has paid in full the $300,000 Note to Payee, prior
to the thirty first (31st) month after the Execution Date, the equal monthly
installments due hereunder of $12,270.35 shall be accelerated to commence on the
first anniversary date of the Execution Date after a thirty (30) day period has
expired following full payment of the $300,000 Note. Such monthly payments
shall continue until the sixty first (61st) month after the Execution Date. The
balloon payment shall be recalculated in accordance with the actual monthly
payments made. All other terms and conditions shall remain in effect with
regard to Paragraph 1 above.
5. Financial Statements. Maker will be required to provide Payee with
---------------------
annual financial statements in accordance with U.S. GAAP within ninety (90) days
of Maker's year end close. Such statements shall include among other
information, annual net income and cumulative net income to date.
6. Right of First Refusal. In the event that Payee enters an agreement to
----------------------
sell, assign or transfer this Note for value, Payee shall grant Maker the right
of first refusal to purchase this Note from Payee under the same terms and
conditions as agreed to by the third party purchaser of the Note. Maker shall
notify Payee in writing within ten (10) business days of its intent to exercise
this right.
Page 44 of 48
<PAGE>
7. Amendments and Waivers. No failure on the part of Payee to exercise any
----------------------
right or remedy hereunder shall operate as a waiver hereof, nor shall any single
or partial exercise of any such right or remedy preclude further exercise
thereof or the exercise of any other right or remedy hereunder. This Note may
not be amended, or compliance with any provision hereof waived, except by a
written agreement duly executed by Payee (or any successor or assign) and Maker.
8. Waiver of Presentment, Notice of Dishonor, and Protest. Presentment,
--------------------------------------------------------
notice of dishonor, and protest are waived by all makers, sureties, guarantors,
and creditors of this Note.
9. Cumulative Rights. The remedies of Payee as provided hereunder shall
------------------
be cumulative and concurrent and may be pursued successively or concurrently
against Maker. The failure of Payee to exercise any such right or remedy shall
in no event be construed as a waiver or release of the same.
10. Attorneys' Fees. In the event of the bringing of any action,
----------------
proceeding, arbitration or suit by a party hereto against another party
hereunder by reason of any breach of any of the covenants, agreements, or
provisions arising out of this Agreement, the prevailing party shall be entitled
to recover all costs and expenses of that action or suit, or at trial,
arbitration or on appeal, and in collection of judgment, including reasonable
attorneys' fees, accounting, and other professional fees resulting therefrom.
11. Severability. If any provision of this Note, or the application
------------
thereof, is held invalid, the remainder of this Note and the application of such
provision to persons or circumstances other than those to which its application
is held invalid shall not be affected thereby.
12. Governing Law. This Note and the legal relations between Maker and
--------------
Payee shall be governed by and construed in accordance with the laws of the
State of California.
13. Notices. All notices, requests, demands or other communications
--------
required or permitted under this Note shall be in writing and shall be deemed to
have duly given or made on the date of service if served personally on the party
to whom notice is to be given, on the date of transmission if sent by facsimile,
telex, telecopier or telegraph, or on the fifth (5th) day after mailing if
mailed to the party to whom notice is to be given, by first class mail,
registered or certified, postage prepaid, properly addressed as follows:
Page 45 of 48
<PAGE>
If to POC: Penn Octane Corporation, Inc.
c/o Jerome Richter
900 Veterans Blvd., Suite 240
Redwood City, California 94063
With copy to: Kevin W. Finck
Attorney at Law
Two Embarcadero Center, Suite 1670
San Francisco, California 94111
If to B&A: B&A Eco-Holdings, Inc.
12631 Imperial Highway
Suite 120A
Santa Fe Springs, California 90670
With copy to: Robert Stemler
Keesal, Young & Logan
400 Oceangate, P.O. Box 1730
Long Beach, California 90801-1730
IN WITNESS WHEREOF, the undersigned has executed and delivered this Note
effective as of the date first written above.
Execution Date: May ___, 1999
"Maker"
B&A Eco-Holdings, Inc.
a Delaware corporation
By: ________________________________________
Ian T. Bothwell
Chief Executive Officer
By: ________________________________________
Print Name: _________________________________
Title:_______________________________________
Page 46 of 48
<PAGE>
EXHIBIT A
---------
UCC-1
Page 47 of 48
<PAGE>
Page 48 of 48
<PAGE>
