EXHIBIT A
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COLLATERAL AGREEMENT
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THIS COLLATERAL AGREEMENT ("Collateral Agreement") is entered into this 1st
day of December 1998, by and among (i) Penn Octane Corporation, a Delaware
corporation, (the "Borrower"); (ii) each of the individual lenders identified on
the signature pages hereto (each a "Lender", and collectively, the "Lenders");
and Castle Energy Corporation, as collateral agent (the "Collateral Agent").
W I T N E S S E T H:
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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 000xx Xxxxxxxx
Xxxxx xx Xxxxxxx Xxxxxx, Xxxxx 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
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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
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v. International Energy Development Corp., Appellee, such Opinion and Order
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confirmed the original arbitral award in all respects; and IBC has filed a
motion for rehearing with the Corps Christi Court of Appeals;
WHEREAS, Borrower has represented to Lenders that International Energy
Development Corp. changed its name to Penn Octane Corporation but the caption of
the Judgment (as defined in the Assignment) continues to reflect the prior name.
WHEREAS, pursuant to a Rollover and Assignment Agreement by and among the
Borrower and the Lenders of even date herewith ("Rollover Agreement") and an
Assignment of Judgment Agreement between Borrower and Castle Energy Corporation
for itself and as Collateral Agent for Lenders dated as of even date herewith
(the "Assignment") the Borrower has assigned in trust to Castle Energy
Corporation for itself and as Collateral Agent for the Lenders all of its right,
title and interest in and to the Judgment and the Proceeds (as defined in the
Assignment);
WHEREAS, in furtherance of the Assignment, the Borrower has agreed to
execute and deliver to Collateral Agent at Closing (as defined in the Rollover
Agreement) a letter to IBC, substantially in the form attached hereto as Annex 1
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(the "Payment Instruction Letter") instructing IBC to deliver the Proceeds in
trust to the Collateral Agent for deposit in the Collateral Account (as
hereinafter defined);
WHEREAS, the Borrower and the Lenders wish to appoint the Collateral Agent,
and the Collateral Agent has agreed to establish a deposit account in trust (the
"Collateral Account") and to act, as an administrator of the Collateral Account
upon the terms, conditions and provisions hereinafter set forth; and
WHEREAS, the Borrower and the Lenders desire to set forth the terms and
conditions pursuant to which the Collateral Agent shall pay out any Proceeds
delivered to the Collateral Agent and/or deposited into the Collateral Account
during the term of this Agreement.
NOW, THEREFORE, in consideration of the mutual promises and covenants
contained herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, and intending to be legally bound
hereby, it is hereby agreed among the parties hereto as follows:
1. Defined Terms
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All capitalized terms used herein, unless otherwise defined herein, shall
have the respective meanings ascribed to them in the Rollover Agreement and are
incorporated herein by reference.
2. Appointment of the Collateral Agent
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2.1 The Borrower and the Lenders hereby designate the Collateral Agent, and
the Collateral Agent hereby agrees to act, as an administrator of the Collateral
Account in trust, upon the terms and conditions set forth herein.
2.2 The Collateral Agent's duties and responsibilities, in its capacity as
such, shall be limited to those expressly set forth in this Collateral
Agreement, and the Collateral Agent shall not be subject to, nor obliged to
recognize, any other agreement between any or all of the parties hereto even
though reference thereto may be made herein, except to the extent that
definitions contained in the Rollover Agreement are incorporated in this
Collateral Agreement. This Collateral Agreement may not be amended at any time
in such a way as to affect the rights, responsibilities, obligations,
liabilities or fees of the Collateral Agent except with the Collateral Agent's
prior written consent, as evidenced by an instrument in writing signed by all
the parties hereto.
2.3 The Collateral Agent, in its capacity as such, shall disregard any and
all notices or directions given by any of the Borrower, the Lenders or by any
other person, firm or corporation, except (i) such notices, directions and
instructions as are specifically provided for herein, (ii) joint instructions
received in writing from the Borrower and the Lenders and (iii) a Final Order
(as hereinafter defined) of a court of competent jurisdiction. If any property
subject hereto is at any time attached, garnished or levied upon under a Final
Order of a court of competent jurisdiction, or in case the payment, assignment,
transfer, conveyance or delivery of any such property shall be stayed or
enjoined by a Final Order of a court of competent jurisdiction, or in case a
Final Order of a court of competent jurisdiction shall be made or entered
affecting such property or any part thereof, then and in any of such events the
Collateral Agent is authorized to rely upon and comply with any such order,
writ, judgment or decree of any court which is not subject to further review or
appeal (a "Final Order").
2.4 In the event that the Collateral Agent shall be uncertain as to its
duties or actions hereunder, or shall receive instructions from the Borrower or
the Lenders which, in the opinion of the Collateral Agent, are in conflict with
any of the provisions of this Collateral Agreement, it shall be entitled to
maintain the Collateral Account and may decline to take any further action until
the Collateral Agent receives joint written instructions from the Borrower and
the Lenders directing the disbursement of all or any portion of such Collateral
Account, in which case the Collateral Agent shall then make such disbursement in
accordance with such instructions. Should any dispute arise with respect to the
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payment, ownership or right of possession of any proposed disbursement, the
Collateral Agent is authorized and directed to retain in its possession, without
liability to anyone, all or any part of such proposed disbursement until such
dispute shall have been settled either by mutual agreement of the parties
concerned or by a Final Order, provided that the Collateral Agent shall be under
no duty whatsoever to institute or defend any such proceedings, and, provided
further, that if any such dispute continues for more than one hundred twenty
(120) days, the Collateral Agent may, in its discretion, upon written notice to
the Borrower and the Lenders, interplead the Collateral Account (or that portion
thereof which is the subject of such dispute) to a court of competent
jurisdiction (subject to the provisions of Section 7.4 hereof).
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2.5 It is understood and agreed that the Collateral Agent shall:
(a) be under no duty to accept notices or instructions from any person
other than as expressly provided for in this Collateral Agreement;
(b) be protected in acting upon any notice, opinion, request,
certificate, approval, consent or other document reasonably believed by it
to be genuine and what it purports to be;
(c) be deemed conclusively to have given and delivered any notice
required to be given or delivered hereunder if the same is in writing,
signed by any one of its authorized officers and (i) mailed, by registered
or certified mail, return receipt requested, postage prepaid, (ii) sent via
expedited courier service that regularly requires signed receipts
evidencing delivery, or (iii) hand delivered, in a sealed wrapper, manually
receipted for by the addressee, in each case to the Borrower or the Lenders
at the addresses set forth in Section 7.3 hereof;
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(d) be protected, indemnified and held harmless jointly and severally
by the Borrower and the Lenders (other than Castle Energy Corporation) from
and against any claim made against it by reason of its acting or failing to
act in connection with any of the transactions contemplated hereby and
against any loss, liability or expense, including attorneys' fees and other
reasonable expenses of defending itself against any claim of liability it
may sustain in carrying out the terms of this Collateral Agreement, except
for claims which are successfully asserted against the Collateral Agent
based upon the Collateral Agent's failure to comply with the terms and
conditions of this Collateral Agreement or the bad faith, gross negligence
or willful misconduct of the Collateral Agent; provided, however, that (i)
promptly after the receipt by the Collateral Agent of notice of any demand
or claim or the commencement of any such action, suit or proceeding, the
Collateral Agent shall notify all parties hereto in writing of the
existence of such demand, claim, action, suit or proceeding; (ii) the other
parties hereto shall be entitled, jointly or severally and at their own
expense, to participate in and assume the defense of any such action, suit
or proceeding; and (iii) the aforesaid indemnity obligations shall survive
the termination of this Collateral Agreement or the resignation of the
Collateral Agent;
(e) have no liability in respect of or duty to inquire into the terms
and conditions of the Rollover Agreement (except to the extent that any of
the defined terms contained in the Rollover Agreement are incorporated in
this Collateral Agreement) or any other document or agreement executed in
connection with or pursuant to the Rollover Agreement, its duties under
this Collateral Agreement being understood by the parties to be ministerial
in nature;
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(f) be permitted to consult with counsel of its choice which is
experienced in legal matters of a nature similar to those arising under
this Collateral Agreement, and shall not be liable for any action taken,
suffered or omitted by it in good faith in accordance with the advice of
such counsel; provided, however, that nothing contained in this subsection
(f), nor any action taken by the Collateral Agent or by such counsel, shall
relieve the Collateral Agent from liability for any claims which are
occasioned by its failure to comply with the terms and conditions of this
Collateral Agreement or the bad faith, gross negligence or willful
misconduct of the Collateral Agent, as provided in subparagraph (d) above;
(g) not be bound by any modification, amendment, termination,
cancellation, rescission or supersession of this Collateral Agreement,
unless the same shall be in writing and signed by the Borrower and each of
the Lenders and notice thereof is provided to the Collateral Agent, except
to the extent that any such modification, amendment, termination,
cancellation, rescission or supersession affects the rights,
responsibilities, obligations, liabilities or fees of the Collateral Agent
hereunder, in which case any document or instrument reflecting such changes
shall also be signed by the Collateral Agent;
(h) be entitled to refrain from taking any action other than to keep
the Proceeds received by it in escrow until disbursement thereof pursuant
to Section 4.1 of this Agreement, or it shall be directed otherwise in
writing by the Borrower and the Lenders, or by a Final Order; and
(i) be granted a security interest in and lien on the Collateral
Account for the benefit of itself and the Lenders in its capacity as
Collateral Agent hereunder. This paragraph shall survive notwithstanding
any termination of this Collateral Agreement or the resignation of the
Collateral Agent.
2.6 From time to time on or after the date hereof, the Borrower and the
Lenders shall deliver or cause to be delivered to the Collateral Agent such
further documents and instruments, or cause to be done such further acts, as the
Collateral Agent may request in order to enable the Collateral Agent to carry
out more effectively the provisions and purposes of this Collateral Agreement,
to evidence compliance with this Collateral Agreement or to assure itself that
it is reasonably protected in acting under this Collateral Agreement.
(a) For its services hereunder, the Collateral Agent shall be entitled
to be paid by the Borrower a one-time acceptance fee in an amount equal to
One Dollar ($1.00), payable in advance, commencing with the execution of
this Collateral Agreement.
(b) The foregoing fee, together with the reasonable out-of-pocket
expenses incurred by the Collateral Agent in performing its duties under
this Collateral Agreement, shall be borne by the Borrower. The Borrower
hereby agrees to indemnify and hold the Lenders harmless, from and against
all losses or damages arising out of a breach by the Borrower of its
obligations under this Section 2.7.
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3. Establishment of Collateral Account
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3.1 Simultaneously with the execution of this Collateral Agreement, the
Borrower will deliver to the Collateral Agent Ten Dollars ($10.00) which is to
be deposited into a separate interest bearing deposit account in the name of the
Collateral Agent as the sole signatory (as so constituted and as the amount of
such Collateral Account may increase or be supplemented by any Proceeds or
interest thereon or pursuant to the Payment Instruction Letter or pursuant to
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the provisions hereof, the "Collateral Account"). Collateral Agent shall
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disburse funds from the Collateral Account in accordance with the terms of this
Collateral Agreement. Borrower agrees to execute, deliver and cause to be filed
any and all documents that may be required to evidence, perfect or continue the
perfection of the Collateral Agent's security interest in and lien on the
Collateral Account and the funds therein.
4. Disposition of Collateral Account
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4.1 As promptly as possible after the deposit and clearance of any Proceeds
into the Collateral Account pursuant to the Payment Instruction Letter, the
Collateral Agent shall disburse such Proceeds from the Collateral Account, in
the following amounts and according to the following priority:
(a) First, to the law firm of Xxxxxx Xxxxx, L.L.P. ("Xxxxxx Xxxxx")
for fees and expenses incurred in connection with the Judgment, a
particular amount not to exceed One Million Two Hundred Thousand Dollars
($1,200,000.00) as such particular amount shall be directed by the Borrower
in writing to the Collateral Agent (the "Xxxxxx Xxxxx Payment");
(b) Second, to Xxxxxx X. Xxxxxxx, an amount equal to five percent (5%)
of the Judgment net of the Xxxxxx Xxxxx Payment, as such amount shall be
directed by the Borrower in writing to the Collateral Agent;
(c) Third, to Castle Energy Corporation for payment of its legal fees,
costs and expenses (which Borrower hereby agrees to pay) incurred in
connection with the negotiation, preparation, documentation of and/or
exercise of rights under the Rollover Agreement, this Collateral Agreement,
the Assignment, the Amended Notes, the Warrants and the Registration Rights
Agreement provided, however, that the amount so paid in connection with
such negotiation, preparation and/or documentation shall not exceed
$30,000.
(d) Fourth, to each of the Lenders in the respective principal amounts
set forth on Schedule I hereto plus all interest accrued thereon as
provided in each Lender's Amended Note; provided that if the Proceeds are
not sufficient to pay the Loans in full, then pro rata to each of the
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Lenders based upon the outstanding amount of their respective Loans at the
time of payment;
(e) Fifth, to the Collateral Agent, any amounts owing to the
Collateral Agent pursuant to this Collateral Agreement other than as
specified in subsection (c) above; and
(f) Sixth, to the Borrower, such amount as is remaining in the
Collateral Account after payment in full of each Lender's Amended Note and
amounts owing under Sections 4.1 hereof or as otherwise provided in this
Collateral Agreement (the "Termination Date Escrow Balance").
4.2 The Collateral Agent shall provide written notice pursuant to Section
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7.3 hereof to each of the Lenders and the Borrower of the amount, date and payee
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of any distributions to be made hereunder at least ten (10) days before making
any such disbursement pursuant to Section 4.1. For purposes of the ten-day
notice periods pursuant to this Section 4.2, each such period shall commence on
the date of such notice and shall terminate at midnight on the tenth day
thereafter.
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4.3 The party or parties receiving a disbursement from the Collateral
Account shall, upon request, furnish to the Collateral Agent concurrently with
its receipt of such disbursement, a signed receipt for the amount of such
disbursement and, if applicable, documentary evidence reasonably satisfactory to
the Collateral Agent of such party's appointment, incumbency and authority.
4.4 For purposes of determining the amount of interest owing to any Lender,
the Collateral Agent shall be entitled to rely on a copy of the Amended Note and
a sworn affidavit signed by the Borrower and such Lender.
5. Lenders' Rights
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The Borrower and each of the Lenders hereby acknowledge that neither this
Collateral Agreement nor the Assignment shall in any way prejudice any of the
Lenders' rights to payment under the Rollover Agreement or the Amended Notes, or
any other amounts owing pursuant to any other agreement, note, or arrangement by
and among any of the Borrower and the Lenders, as the case may be, whatsoever.
The Borrower specifically acknowledges that this Collateral Agreement has been
established for purposes of effecting the equitable distribution of any
Proceeds, and that this Collateral Agreement shall not be construed in any way
as a settlement, compromise or adjustment by any of the Lenders of any amounts
owed to them by the Borrower. The Borrower hereby confirms, and the parties
hereto acknowledge, the Borrower's assignment to the Collateral Agent for the
benefit of itself and the Lenders of all of Borrower's right, title and interest
in and to the Judgment and the Proceeds.
6. Term
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This Collateral Agreement shall continue until the earlier of (i) the
payment in full of all amounts owing to the Lenders under the Amended Notes, and
(ii) payment into and disbursement out of the Collateral Account, in accordance
with the terms of this Collateral Agreement, of all Proceeds; in each case, as
evidenced by written notice to such effect signed by each of the Lenders in the
form requested by the Collateral Agent; whereupon this Collateral Agreement and
the collateral arrangements created hereunder shall terminate (the "Termination
Date"), and the Collateral Agent shall be released and discharged from all
further duties and obligations hereunder, but without prejudice to any liability
of the Collateral Agent for its failure to comply with the terms and conditions
of this Collateral Agreement or its bad faith, gross negligence or willful
misconduct hereunder. Each of the Lenders agrees that, upon the occurrence of
either of the events specified in clause (i) or (ii) of this Section 6, such
Lender shall execute a written notice in the form requested by the Collateral
Agent.
7. Miscellaneous
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7.1 (a) The Borrower and the Lenders may, upon at least thirty (30) days'
prior written notice to the Collateral Agent executed by all of them,
dismiss the Collateral Agent hereunder and appoint a successor. In such
event, the Collateral Agent shall promptly account for and deliver to the
successor collateral agent named in such notice the then balance of the
Collateral Account. Upon acceptance thereof and of such accounting by such
successor collateral agent, and upon reimbursement to the Collateral Agent
of all expenses due to it hereunder through the date of such accounting and
delivery, the Collateral Agent, in its capacity as such, shall be released
and discharged from all of its duties and obligations hereunder, but
without prejudice to any liability of the Collateral Agent for failure to
comply with the terms and conditions of this Collateral Agreement or its
bad faith, gross negligence or willful misconduct hereunder.
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(b) (i) Without limiting the foregoing, the Collateral Agent (and any
successor collateral agent hereunder) shall have the right, as provided in
Subsection (ii) below, at any time to resign as such by delivering the
Collateral Account to any successor collateral agent jointly designated by
the Borrower and all Lenders in writing, or to any court of competent
jurisdiction, whereupon the Collateral Agent shall be discharged of and
from any and all further obligations arising in connection with this
Collateral Agreement, but without prejudice to any liability of the
Collateral Agent for its bad faith, gross negligence or willful misconduct
hereunder.
(ii) The resignation of the Collateral Agent will take effect
upon the appointment of a successor collateral agent by the Borrower and
all Lenders and delivery of the Collateral Account to such successor.
7.2 This Collateral Agreement shall inure to the benefit of, and shall be
binding upon, the parties hereto and their respective successors, heirs,
remaindermen, assigns, executors, administrators, personal representatives,
trustees and fiduciaries. The Collateral Agent shall have the right to rely upon
any proper evidence of the authority of any such successors, heirs,
remaindermen, assigns, executors, administrators, personal representatives,
trustees and fiduciaries. Notwithstanding anything to the contrary herein
contained, no beneficial interest of any person in the Collateral Account shall
be subject to anticipation or assignment by such person, nor shall the
Collateral Account be subject to interference or control of any creditor of such
person, or be taken or reached by any legal or equitable process in satisfaction
of any debt or other liability of such person prior to disbursement, and each
party hereby agrees to indemnify the other parties in connection with any loss
or diminution of such party's interest in the Collateral Account as a result of
any such matter.
7.3 Any notice, direction, instruction or other communication required or
permitted hereunder shall be given in writing by hand delivery, by registered or
certified first class mail, return receipt requested, postage prepaid, or by
expedited courier service that regularly requires signed receipts evidencing
delivery, in each case addressed to the party to receive the same at its
respective address set forth below, or to such other address as such party may
have designated by notice to the others in accordance with the provisions of
this Section 7.3.
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(i) To the Borrower:
Penn Octane Corporation
000 Xxxxxxxx Xxxxxxxxx, Xxxxx 000
Xxxxxxx Xxxx, Xxxxxxxxxx 00000
Attn: Xxxxxx X. Xxxxxxx,
President
with a copy to:
Coudert Brothers
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxx X. Xxxxxxx, Esq.
(ii) If to a Lender, at the address set forth beneath such Lender's
name on Schedule I hereto; -----------
(iii) To the Collateral Agent:
Castle Energy Corporation
One Radnor Corp. Center
000 Xxxxxxxxxx Xxxx, Xxxxx 000
Xxxxxx, Xxxxxxxxxxxx 00000
Attn: Xxxxxx Xxxxxx, President
or at such other address as any party shall have specified by notice in writing
to the other parties.
Copies of any written communications sent by the Borrower or the Lenders to
the Collateral Agent relating to this Collateral Agreement shall be sent to the
other parties hereto, and copies of any written communications sent by the
Collateral Agent relating to this Collateral Agreement shall be sent to the
Borrower and the Lenders. Notwithstanding the foregoing, the Borrower and the
Lenders shall have the right to engage in direct written communications among
themselves relating to this Collateral Agreement without providing copies
thereof to the Collateral Agent, except to the extent otherwise required under
the terms of this Collateral Agreement.
All notices, directions, instructions and communications hereunder shall be
effective, and deemed given, if hand delivered, on and as of the date of receipt
thereof, as evidenced by a written receipt by or on behalf of the party to which
the same is so delivered, and, if mailed or sent by expedited courier, on and as
of the date of delivery, as evidenced by the acknowledgement of delivery issued
with respect thereto by the applicable postal authorities or by the confirmation
of delivery issued by the applicable courier service.
7.4 (a) The parties agree that this Collateral Agreement, and the
respective rights, duties and obligations of the parties hereunder, shall be
governed by, and interpreted in accordance with, the laws of the State of New
York, without giving effect to principles of conflicts of law thereunder.
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(b) Each of the parties hereby (i) irrevocably consents and agrees
that any legal or equitable action or proceeding arising under or in
connection with this Collateral Agreement shall be brought exclusively in
any Federal or state court within the county of New York, New York, and any
court to which an appeal may be taken in any such litigation, and (ii) by
execution and delivery of this Collateral Agreement, irrevocably submits to
and accepts with respect to any such action or proceeding, for such party's
heirs, beneficiaries remaindermen, personal representatives, executors,
administrators, fiduciaries and permitted assigns and in respect of such
party's properties and assets, generally and unconditionally, the
jurisdiction of the aforesaid courts, and irrevocably waives any and all
rights such party may now or hereafter have to object to such jurisdiction
under the constitution or laws of the State of New York or the Constitution
or laws of the United States of America or otherwise. Each of the parties
hereby irrevocably waives any right it may have to a jury trial in
connection with this Collateral Agreement.
7.5 This Collateral Agreement, and any notice, direction or other document
or instrument delivered in connection herewith, may be executed in counterparts,
each of which shall constitute an original instrument, but all of which together
shall constitute a single agreement, notice, direction, document or instrument
as the case may be. The Borrower and each of the Lenders agree to cooperate with
each other in good faith in joining in any notices or written instructions that
are required to be delivered to the Collateral Agent jointly by the Borrower and
the Lenders.
7.6 The provisions of this Collateral Agreement shall not be altered or
terminated by operation of law or by the occurrence of any event (except as
otherwise specified herein), including, without limitation, the death or
incapacity or the termination of the legal existence of any party hereto.
7.7 This Collateral Agreement shall not be assignable, in whole or in part,
by any party without the prior written consent of the other parties, and any
attempted assignment without such prior written consent shall be void except
that each Lender may assign its rights under this Collateral Agreement to any of
its affiliates or subsidiaries without the consent of any other party.
7.8 This Collateral Agreement, and any notice, direction or other document
or instrument delivered in connection herewith, may be executed in counterparts,
each of which shall constitute an original instrument, but all of which together
shall constitute a single agreement, notice, direction, document or instrument,
as the case may be.
7.9 This Collateral Agreement may not be amended or modified nor any
provision hereof waived except by an instrument in writing signed by the party
against whom any amendment or modification or waiver is sought to be enforced.
7.10 Any provision in this Collateral Agreement 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 of this Collateral Agreement.
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IN WITNESS WHEREOF, the Company and the undersigned have executed this
Collateral Agreement as of this 1st day of December, 1998.
THE BORROWER:
PENN OCTANE CORPORATION
By:
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Name: Xxxxxx X. Xxxxxxx
Title: Chairman, President and Chief
Executive Officer
CASTLE ENERGY CORPORATION,
as Collateral Agent
By: _____________________________
Name:
Title:
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IN WITNESS WHEREOF, the Company and the undersigned have executed this
Collateral Agreement as of this 1st day of December, 1998.
LENDER:
______________________________________
Xxxxx Xxxxxx
SOUTHWEST CONCEPT INC.,
as Lender
By: ______________________________________
Name:
Title:
CASTLE ENERGY CORPORATION,
as Lender
By: _____________________________________
Name:
Title:
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IN WITNESS WHEREOF, the Company and the undersigned have executed this
Collateral Agreement as of this 1st day of December, 1998.
LENDER:
___________________________________________
Xxxxx X. Xxxxx, Xx.
SEP FBO XXXXX X. XXXXX XXX,
as Lender
By: Xxxxxxxxx, Lufkin & Xxxxxxxx as
Securities Corporation Custodian
By: ________________________________
Name:
Title:
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IN WITNESS WHEREOF, the Company and the undersigned have executed this
Collateral Agreement as of this 1st day of December, 1998.
LENDER:
LINCOLN TRUST COMPANY FBO XXXXX X. XXXXXXX XXX,
as Lender
By:__________________________________
Name:
Title:
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SCHEDULE I
Lenders and Addresses
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Castle Energy Corporation Principal amount of Amended Note: $1,000,000
c/o CEC, Inc. Accrued interest thereon at 10% per annum
One Radnor Corporate Center prior to an Event of Default, and 12% per annum
000 Xxxxxxxxxx Xxxx, Xxxxx 000 subsequent to an Event of Default
Xxxxxx, Xxxxxxxxxxxx 00000
(000) 000-0000
Attention: Xx. Xxxxxx Xxxxxx
with a copy to:
Xxx Xxxxxxx, Esq.
Xxxxx Xxxxxx & Xxxxxxxx LLP
Xxx Xxxxxxx Xxxxx, 00xx xxxxx
Xxxxxxxxxxxx, Xxxxxxxxxxxx 00000-0000
1
SCHEDULE I
Lenders and Addresses
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Xxxxx Xxxxxx Principal amount of Amended Note: $90,000
0000 Xxxxxx Xxxxxxx, Xxxxx 000 Accrued interest thereon at 10% per annum
Xxxxxx, Xxxxx 00000 prior to an Event of Default, and 12% per annum
(000) 000-0000 subsequent to an Event of Default
Southwest Concept Inc. Principal amount of Amended Note: $60,000
00000 Xxxxxx Xxxxxxx, Xxxxx 000 Accrued interest thereon at 10% per annum
Xxxxxx, Xxxxx 00000 prior to an Event of Default, and 12% per annum
Attn: Xxxxx Xxxxxx subsequent to an Event of Default
(000) 000-0000
2
SCHEDULE I
Lenders and Addresses
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Xxxxx X. Xxxxx, Xx. Principal amount of Amended Note: $75,000
0000 X. Xxxxxxx Xxxxxxxxxx,#000 Accrued interest thereon at 10% per annum
Xxxxxx, Xxxxx 00000 prior to an Event of Default, and 12% per
annum
(000) 000-0000 subsequent to an Event of Default
Xxxxxxxxx Xxxxxx Xxxxxxxx Principal amount of Amended Note: $75,000
Securities Corporation Custodian Accrued interest thereon at 10% per annum
SEP FBO Xxxxx X. Xxxxx XXX prior to an Event of Default, and 12% per
annum
Pershing Division of Xxxxxxxxx subsequent to an Event of Default
Lufkin & Xxxxxxxx Securities
Corporation
X.X. Xxx 0000
Xxxxxx Xxxx, Xxx Xxxxxx 00000
(000) 000-0000
3
SCHEDULE I
Lenders and Addresses
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Lincoln Trust Company Principal amount of Amended Note: $200,000
FBO Xxxxx X. Xxxxxxx XXX Accrued interest thereon at 10% per annum
X.X. Xxx 0000 prior to an Event of Default, and 12% per annum
Xxxxxx, Xxxxxxxx 00000 subsequent to an Event of Default
Attn: Xxxxxxx Xxxx
(000) 000-0000
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ANNEX 1
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PAYMENT INSTRUCTION LETTER
[Penn Octane Corporation letterhead]
December 1, 1998
International Bank of Commerce-Brownsville
000 Xxxx Xxxxxxxxx Xxxxxx
Xxxxxxxxxxx, Xxxxx 00000
Re: Payment Instructions
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Ladies and Gentlemen:
We refer you to the judgment confirming the arbitral award for $3,246,754
entered against the International Bank of Commerce-Brownsville in favor of the
Penn Octane Corporation (the "Company") on February 28, 1996 by the 000xx
Xxxxxxxx Xxxxx in and for Cameron County, Texas, which judgment was upheld by
the Texas Court of Appeals on June 18, 1998, (the "Judgment").
We note that IBC-Brownsville has filed for a rehearing of the case
underlying the Judgment by the Texas Court of Appeals, and that as of the date
set forth above, the Texas Court of Appeals has not ruled on the IBC-Brownsville
request for rehearing.
The Company hereby notifies IBC-Brownsville that the Company has assigned
the Judgment and the proceeds thereof to Castle Energy Corporation ("CEC") for
itself and on behalf of certain other lenders as more particularly described in
the enclosed Assignment of Judgment.
In the event the Judgment becomes final and non-appealable, or is otherwise
settled by the Company and IBC-Brownsville, IBC-Brownsville is hereby instructed
to remit by wire transfer any and all proceeds of the Judgment or from such
settlement, as the case may be, in immediately available funds to the account of
CEC set forth below:
Account Number: 8612486589
ABA Number: 000000000
Bank: PNC Bank
Contact: Xxxx Xxxxxx
Phone: (000) 000-0000
If you have any questions regarding this matter, please contact Xxx X.
Xxxxxxxx, Chief Financial Officer and Treasurer, Penn Octane Corporation, at
(562) 929-6789 ext. 101.
PENN OCTANE CORPORATION
By:_______________________
Name:
Title:
