PURCHASE AGREEMENT
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THIS PURCHASE AGREEMENT made and entered into as of July 30, 1999 by and
between Valor Capital Management L.P. (the "Purchaser") and Penn Octane
Corporation, a Delaware corporation (the "Company").
WHEREAS, the Company wishes to sell and the Purchaser wishes to purchase
(i) 75,000 shares (the "Shares") of common stock, par value $.01 per share, of
the Company ("Common Stock") for $2.00 per share, and (ii) a warrant,
exercisable until July 30, 2003 at $3.00 per share of Common Stock (subject to
adjustment), to purchase 37,500 shares (the "Warrant Shares") of Common Stock
substantially in the form of Exhibit 1 hereto (the "Warrant"; the Shares and the
Warrant being herein collectively referred to as the "Securities"); and
WHEREAS, the Company and the Purchaser desire to enter into a Registration
Rights Agreement with respect to the Shares and the Warrant Shares,
substantially in the form annexed as Exhibit 2 hereto (the "Registration Rights
Agreement"), all on the terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the agreements and obligations herein
contained, the Purchaser and the Company hereby agree as follows:
1. Purchase and Sale of the Securities. Subject to the terms and
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conditions set forth in this Agreement, the Company agrees to sell to the
Purchaser, and the Purchaser agrees to purchase from the Company, the Securities
for a purchase price equal to One Hundred And Fifty Thousand ($150,000.00)
Dollars.
2. The Closing. The closing (the "Closing") of the purchase and sale
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of the Securities shall take place on July 30, 1999 at 5:00 P.M. local time at
the offices of the Company in Redwood City, California, or at such other time
and place as the Company and the Purchaser shall agree. At the Closing, the
Purchaser shall deliver to the Company payment for the Securities being
purchased in immediately available funds and the Company shall deliver the
Shares and the Warrant to the Purchaser.
3. Registration Rights. The Purchaser shall have such registration
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rights with respect to the Share and the Warrant Shares as are set forth in the
Registration Rights Agreement.
4. Representations and Warranties of the Company, As of the Closing,
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the Company represents and warrants that:
(a) the Company is a corporation duly organized, validly existing
and in good standing under the laws of the State of Delaware, and has the
requisite corporate power and authority to execute and deliver this Agreement
and to perform its obligations hereunder;
(b) the execution, delivery and performance of this Agreement, and
the sale and delivery of the Securities have been duly authorized by all
necessary corporate action on the part of the Company and do not violate any
covenant contained in any agreement to which the Company is a party; and
(c) the Warrant Shares, when issued upon exercise of the Warrant
and payment therefor, will be legally and validly issued, fully paid and
nonassessable.
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5. Representations and Warranties of the Purchaser. The Purchaser
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represents and warrants as follows:
(a) General:
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(i) The Purchaser has all requisite authority to enter into
this Agreement and to perform all of the obligations required to be performed by
it hereunder.
(ii) Neither the Company nor any person acting on behalf of
the Company has offered or sold the Securities to the Purchaser by means of any
form of general solicitation or general advertising. The Purchaser has not
received, paid or given, directly or indirectly, any commission or remuneration
for or on account of any sale, or the solicitation of any sale, of the
Securities.
(b) Information Concerning the Company:
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(i) The Purchaser is familiar with the business and financial
condition, properties, operations and prospects of the Company.
(ii) The Purchaser has been given full access to all material
information concerning the condition, properties, operations and prospects of
the Company. The Purchaser and his advisors (if any) have had an opportunity to
ask questions of, and to receive information from, the Company and persons
acting on its behalf concerning the terms and conditions of the Purchaser's
investment in the Securities, and to obtain any additional information necessary
to verify the accuracy of the information and data received by the Purchaser.
The Purchaser is satisfied that there is no material information concerning the
condition, properties, operations and prospects of the Company of which
Purchaser is unaware.
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(iii) The Purchaser has made, either alone or together with
his advisors (if any), such independent investigation of the Company, its
management, and related matters as the Purchaser deems to be, or the Purchaser's
advisors (if any) have advised to be, necessary or advisable in connection with
this investment; and the Purchaser and his advisors (if any) have received all
information and data which the Purchaser and his advisors (if any) believe to be
necessary in order to reach an informed decision as to the advisability of
investing in the Securities.
(iv) The Purchaser understands that all the Purchaser's
representations and warranties contained in this Agreement will be deemed to
have been reaffirmed and confirmed as of the Closing.
(v) The Purchaser understands that the purchase of the
Securities involves various risks, including the risk that it is unlikely that
any market will exist for any resale of the Warrant and that resale of the
Shares, the Warrant and the Warrant Shares will be restricted as herein
provided.
(c) Status of Purchaser:
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(i) The Purchaser either alone or with Purchaser's advisors
(if any) has such knowledge, skill and experience in business, financial and
investment matters as to be capable of evaluating the merits and risks of an
investment in the Securities. To the extent that the Purchaser has deemed it
appropriate to do so, the Purchaser has retained at Purchaser's own expense, and
relied upon, appropriate professional advice regarding the investment, tax and
legal merits and consequences of this Agreement and owning the Shares, the
Warrant and Warrant Shares, as the case may be.
(d) Restrictions on Transfer or Sale
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(i) The Purchaser is acquiring the Securities and any shares
of Common Stock purchased upon exercise of the Warrant solely for its own
account, for investment purposes, and not with a view to, or for resale in
connection with, any distribution of the Shares, the Warrant or such shares of
Common Stock. The Purchaser understands that neither the Shares, the Warrant
nor such underlying Common Stock have been registered under the Securities Act
of 1933, as amended (the "Securities Act"), or the securities laws of any state
(collectively referred to as "State Securities Laws") by reason of specific
exemptions under the provisions thereof which depend in part upon the investment
intent of the Purchaser and of the other representations made by the Purchaser
in this Agreement. The Purchaser understands that the Company is relying upon
the representations and agreements contained in this Agreement (and any
supplemental information) for the purpose of determining whether this
transaction meets the requirements for such exemptions.
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(ii) The Purchaser understands that the Shares, the Warrant
and such underlying Common Stock are "restricted securities" under applicable
federal securities laws and that the Securities Act and the rules of the
Securities and Exchange Commission (the "Commission") provide in substance that
the Purchaser may dispose of such securities or any of them only pursuant to an
effective registration statement under the Securities Act or an exemption
therefrom, and understands that the Company has no obligations or intentions to
register any of such securities thereunder, or to take any other action so as to
permit sales pursuant to the Securities Act, except as set forth in the
Registration Rights Agreement. Accordingly, the Purchaser understands that
under the Commission's rules, unless disposed of pursuant to an effective
registration statement under the Securities Act, the Purchaser may dispose of
the Note, Warrants and underlying Common Stock only in accordance with the
provisions of Rule 144 under the Securities Act, to the extent available, or in
"private placements" which are exempt from registration under the Securities
Act, in which event the transferee will acquire "restricted securities" subject
to the same limitations as in the hands of the Purchaser. As a consequence,
absent such an effective registration statement under the Securities Act, the
Purchaser understands that it may be required to bear the economic risks of the
investment in the Securities (and the underlying Common Stock) for an indefinite
period of time.
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(iii) The Purchaser agrees that (a) it will not sell, assign,
pledge, give, transfer, of otherwise dispose of the Shares, the Warrant or such
underlying Common Stock or any interest in any thereof or therein, or make any
offer or attempt to do any of the foregoing, except pursuant to registration of
such securities under the Securities Act and any applicable State Securities
Laws or in a transaction which, in the opinion of counsel for the Purchaser
satisfactory to the Company (which requirement may be waived by the Company upon
advice of counsel), is exempt from the registration provisions of the Securities
Act and any applicable State Securities Laws; (b) the Shares, the Warrant and
any certificate(s) representing shares of Common Stock issued upon exercise of
the Warrant may bear a legend making reference to the foregoing restrictions;
and (c) the Company and any transfer agent for shares of its Common Stock shall
not be required to give effect to any purported transfer of any of such
securities except upon compliance with the foregoing restrictions.
(iv) In no event shall any sale, assignment, pledge or
transfer of the Shares, the Warrant or such underlying Common Stock by the
Purchaser to a transferee give rise to rights of any such transferee under the
Registration Rights Agreement.
6. Conditions to Obligations of Purchaser and the Company. The
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obligations of the Purchaser to purchase and pay for the Securities specified
herein and of the Company to sell and deliver such Securities are subject to the
satisfaction at or prior to the Closing of the following conditions precedent:
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(a) The representations and warranties of the Company contained in
Section 4 hereof and of the Purchaser contained in Section 5 hereof shall be
true and correct on and as of the Closing in all respects with the same effect
as though representations and warranties had been made on and as of the Closing.
(b) The Company and the Purchaser shall each have received a
certificate from an executive officer of the other party to the effect that its
representations and warranties are still valid.
(c) The Company and the Purchaser shall each have executed and
delivered the Registration Rights Agreement.
7. Fee. The Company shall be responsible for all fees required to be
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paid in connection with the Purchase Agreement.
8. Waiver, Amendment. Neither this Agreement nor any provisions hereof
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shall be modified, changed, discharged or terminated except by an instrument in
writing signed by the party against whom any waiver, change, discharge or
termination is sought.
9. Assignability. Neither this Agreement nor any right, remedy,
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obligation or liability arising hereunder or by reason hereof shall be
assignable by either the Company or the Purchaser without the prior written
consent of the other party, which consent shall not be unreasonably withheld.
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10. Applicable Law. This Agreement shall be governed by and construed
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in accordance with the law of the State of New York, regardless of the law that
might be applied under principles of conflicts of law.
11. Section and Other Headings. The section and other headings
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contained in this Agreement are for reference purposes only and shall not affect
the meaning or interpretation of this Agreement.
12. Counterparts. This Agreement may be executed in any number of
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counterparts, each of which when so executed and delivered shall be deemed to be
an original and all of which together shall be deemed to be one and the same
agreement.
13. Notices. All notices and other communications provided for herein
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shall be in writing and shall be deemed to have been duly given if delivered
personally or by facsimile (with proof of receipt) or sent by registered or
certified mail, return receipt requested, postage prepaid:
(a) If to the Company, to it at the following address:
Penn Octane Corporation
000 Xxxxxxxx Xxxxxxxxx, Xxxxx 000
Xxxxxxx Xxxx, Xxxxxxxxxx 00000
Attn: Xxxxxx X. Xxxxxxx,
President
with a copy to:
Xxxxx Xxxxx, Esq.
Xxx Xxxxxxxxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxxxxxxx, XX 00000
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(b) If to the Purchaser, at the following address:
Valor Capital Management L.P.
c/o Knoll Capital
000 Xxxx Xxxxxx
Xxxxx 0000
Xxx Xxxx, XX 00000
Attn: Xx. Xxxx Xxxxx
000 000-0000
with a copy to:
______________________
______________________
______________________
______________________
or at such other address as either party shall have specified by notice in
writing to the other.
14. Binding Effect. The provisions of this Agreement shall be binding
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upon and accrue to the benefit of the parties hereto and their respective heirs,
legal representatives, successors and permitted assigns.
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IN WITNESS WHEREOF, the Company and the undersigned have executed this
Agreement as of this 30 day of July 1999.
VALOR CAPITAL MANAGEMENT L.P.
By:
Name:
Title:
PENN OCTANE CORPORATION
By:
Name: Xxx X. Xxxxxxxx
Title: Vice President and Chief Financial
Officer
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