AGREEMENT
Exhibit
10.10
THIS
AGREEMENT (this “Agreement”) is entered into as of this 15th day of November
2005 by and between Penn Octane Corporation, a Delaware corporation
(the “Company” or “Penn Octane”) and Xxxxxx X. Xxxxxxx (“Xxxxxxx”), as
follows:
Recitals
WHEREAS,
in April 1997, Xxxxxxx exercised warrants to purchase 2,200,000 shares of the
Company’s common stock at a price of $1.25 per share, the exercise price for
which was paid with $22,000 in cash and $2,728,000 by a promissory note, bearing
interest at the rate of 8.25% per annum, payable to the Company. Xxxxxxx pledged
certain of his Penn Octane shares to the Company to secure the original
promissory note.
WHEREAS,
in April 2000, Xxxxxxx delivered to the Company a new promissory note
(the “New Note”), in replacement of his original promissory note. The New
Note has a principal amount of $3,196,693, representing the original principal
amount and unpaid interest, and had an interest rate of 10% per annum.
WHEREAS,
under the terms of the New Note, Xxxxxxx is not required to pay interest after
September 2000 provided that he continue to provide a personal guaranty on
behalf of the Company to RZB Finance LLC. The New Note was originally due in
April 2001. Pursuant to the terms of a Pledge and Security Agreement dated
April 11, 2000 (the “Pledge and Security Agreement”), Xxxxxxx pledged
1,000,000 shares of his Penn Octane common stock to the Company in order to
secure the New Note.
WHEREAS,
the New Note was amended in November 2001 to extend the maturity date until
October 2003 and to reduce the interest rate to the prime rate.
WHEREAS,
in July 2002, the Company agreed to waive any interest due under the New Note
during any fiscal year provided that Xxxxxxx guaranty at least $2,000,000 of
the
company’s indebtedness during that fiscal year. The interest rate was increased
to prime plus 1%. The Company also agreed to extend the maturity date until
the
expiration date of Xxxxxxx’x employment agreement with the Company, July 29,
2005.
WHEREAS,
in May 2005, Xxxxxxx retired and resigned as an officer and director of the
Company and its affiliates.
WHEREAS,
in order to secure his limited recourse guaranty of $1,800,000 of the Company’s
indebtedness to certain investor noteholders (the “Noteholders”), Xxxxxxx has
pledged 2,000,000 shares (the “Pledged Shares”) of his Penn Octane common stock
(including the 1,000,000 shares pledged to the Company) and 250,000 common
units
(the “Pledged Units”) of Rio Vista Energy Partners L.P. (including 125,000 units
pledged to the Company) distributed to Xxxxxxx on September 30, 2004, by
the Company with respect to the Pledged Shares.
1
WHEREAS,
in view of Xxxxxxx’x retirement and his contributions to the Company, the
Company wishes to amend the New Note and provide for certain additional
agreements with Xxxxxxx.
NOW,
THEREFORE, in consideration of the foregoing and the covenants and agreements
contained herein, the parties agree as follows:
Section
1: Restatement of Promissory Note
1.1
Amendment
and Restatement of New Note.
The New
Note is hereby amended and restated to read, in full, as set forth in
Exhibit
A
to this
Agreement (the “Restated Note”), including without limitation the following
provisions:
1.1.1 The
maturity date of the New Note shall be extended to July 29, 2007 (the “New
Maturity Date”).
1.1.2 The
interest rate on the New Note shall be increased from prime plus one percentage
point to prime plus two percentage points.
1.1.3 The
Company will continue to waive interest provided that Xxxxxxx guarantees debt
of
the Company to any person in an amount equal to at least
$1,800,000.
1.1.4 Xxxxxxx
shall continue to guaranty up to $1,800,000 in indebtedness of the Company,
if
requested by the Company, until all obligations under the New Note are
satisfied.
1.2
Effect
of Restated Note.
The
Restated Note replaces and supersedes the New Note in its entirety.
Section
2: Additional Agreements
2.1
Delivery
of Pledged Units.
Not
later than October 28, 2005, Xxxxxxx shall deliver the Pledged Units to the
Company as security for Xxxxxxx’x obligations to the Company and for the
Company’s obligations to the Noteholders. Following receipt of the Pledged
Units, the Company shall deliver the Pledged Units to the collateral agent
for
the Noteholders.
2.2
Return
of Pledged Shares and Pledged Units.
Upon
the satisfaction of the Company’s obligations to the Noteholders and the release
of the Pledged Shares and the Pledged Units by the collateral agent for the
Noteholders, the Company shall retain not more than 1,000,000 of the Pledged
Shares and 125,000 of the Pledged Units, to be held in accordance with the
terms
of the Pledge and Security Agreement, and shall return the balance of the
Pledged Shares and the Pledged Units to Xxxxxxx.
2
2.3
Payment
Upon Foreclosure.
If and
to the extent the Noteholders foreclose on the Pledged Shares and/or the Pledged
Units due to default by the Company in its obligations to the Noteholders,
the
Company shall pay Xxxxxxx the fair market value of the Pledged Shares and the
Pledged Units. The Company may offset any payment obligation to Xxxxxxx under
this Section 2.3
against
any remaining obligation of Xxxxxxx under the Restated Note or any other payment
obligation of Xxxxxxx to the Company. The fair market value of the Pledged
Shares and the Pledged Units shall be equal to the higher of the fair market
value on the date of this Agreement and the date of any foreclosure by the
Noteholders. For purposes of this Section 2.3,
fair
market value means, as of any date, the value of Penn Octane common stock and
Rio Vista common units determined as follows:
(i)
If
the
common stock or common units are listed on any established stock exchange or
a
national market system, including without limitation The Nasdaq Stock Market,
its fair market value will be the closing sales price for such stock (or the
closing bid, if no sales were reported) as quoted on such exchange or system
for
the day of determination;
(ii) If
the
common stock or common units are regularly quoted by a recognized securities
dealer but selling prices are not reported, the fair market value of a share
of
common stock or a common unit will be the mean between the high bid and low
asked prices for the common stock or the common units for the day of
determination; or
(iii) In
the
absence of an established market for the common stock or common units, the
fair
market value will be determined in good faith by the board of directors of
Penn
Octane.
2.4
Partial
Discount.
Subject
to Xxxxxxx’x compliance with all provisions of this Agreement and the Restated
Note, the Company shall discount the principal amount of the Restated Note
by an
amount equal to $1,500,000, on the New Maturity Date, resulting in a reduced
principal amount of $1,696,693, plus accrued interest not waived pursuant to
Section 1.1.3.
Section
3: Restrictive Covenants
3.1
Conflict
of Interest.
During
any period when Xxxxxxx provides consulting services to the Company and/or
its
affiliates: (a) Xxxxxxx shall not directly or indirectly engage in any
employment, occupation, consulting, or other business activity which the Company
determines in good faith to be in competition with the Company or its
affiliates; and (b) Xxxxxxx shall not usurp or take advantage of any such
business activity without first offering the opportunity to the
Company.
3.2
Non-Solicitation
of Employees and Contractors.
For two
(2) years after the date of this Agreement, Xxxxxxx shall not, either alone
or
in concert with others, solicit, entice or divert, or attempt to solicit, entice
or divert, any of the Company’s employees or independent contractors to cease
providing services to the Company.
3.3
Non-Solicitation
of Customers and Suppliers.
For two
(2) years after the date of this Agreement, Xxxxxxx shall not, directly or
indirectly, either alone or in concert with others, solicit, entice, work for,
or in any way divert or take away any customers or suppliers of, or other third
party that engaged in negotiations with, the Company or its affiliates that
Xxxxxxx had directly worked with during the twelve (12) months preceding
termination of Xxxxxxx’x employment or consulting relationship with the Company.
Xxxxxxx acknowledges that all of the foregoing limited restrictions are intended
to protect the Company’s and its affiliates’ confidential and proprietary
information and trade secrets, and are not intended to and do not substantially
affect Xxxxxxx’x right and ability to engage in his business, trade or
profession.
3
3.4.
Equitable
Remedies.
Xxxxxxx
acknowledges that irreparable injury will result to the Company from violation
of any of the terms of this Agreement, specifically those identified under
Sections
3.1, 3.2 and 3.3.
Therefore, Xxxxxxx expressly agrees that the Company shall be entitled, in
addition to damages and any other remedies provided by law, to an injunction
(without notice and without the necessity of posting a bond) or other equitable
remedy respecting such violation or continued violation.
Section
4: Miscellaneous
4.1.
Assignment.
This
Agreement may not be assigned or otherwise transferred by Xxxxxxx, or by
operation of law, without the prior written consent of the Company. The Company
may assign or transfer this Agreement to any affiliate, without the consent
of
Xxxxxxx. The Company’s assignment of this Agreement to any affiliate shall in no
way affect Xxxxxxx’x obligations under this Agreement.
4.2
Waiver
and Agreements.
No
waiver, amendment or modification of any provision of this Agreement shall
be
effective unless consented to by both parties in writing. No failure or delay
by
either party in exercising any right, power or remedy under this Agreement
shall
operate as a waiver of any such right, power or remedy. No waiver of any breach
of any covenant or provision 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.
4.3
Notices.
Any
notice or communication provided for or required by this Agreement to be in
writing shall be: (a) hand delivered, (b) sent by certified mail with full
postage, or (c) sent by overnight courier service with proof of delivery. Any
notice so sent shall be deemed received upon the earlier of an actual receipt
or
three business days after proper posting. The addresses of the parties shall
be
as indicated below, but the parties may change their notice addresses by giving
written notice of such change to the other party at its current address in
accordance with this Section.
4
If
to Xxxxxxx:
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Xxxxxx
X. Xxxxxxx
|
000
Xxxxxxxx Xxxxx
|
|
Xxxx
Xxxxxx, Xxxxxxxxxx 00000
|
|
If
to Company:
|
Penn
Octane Corporation
|
Attn:
Chief Financial Officer
|
|
00-000
Xxxxxxx Xxxx, Xxxx. X
|
|
Xxxx
Xxxxxx, Xxxxxxxxxx 00000
|
|
With
a copy to:
|
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Xxxxx
X. Xxxxx, Esq.
|
|
Xxx
Xxxxxxxxxxx Xxxxxx, Xxxxx 0000
|
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Xxx
Xxxxxxxxx, Xxxxxxxxxx 00000
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4.4
Professional
Fees.
In the
event of the bringing of any action, suit, or arbitration 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, suit, or
arbitration, at trial, in arbitration, or on appeal, and in collection
therewith, including but not limited to, reasonable attorneys' fees, accounting,
and other professional fees resulting therefrom.
4.5
Legal
and Equitable Remedies.
Due
to
Xxxxxxx’x knowledge of and access to the Company’s proprietary information, the
Company shall have the right to enforce this Agreement and any of its provisions
by injunction, specific performance or other equitable relief, without bond,
and
without prejudice to any other rights and remedies that the Company may
otherwise have to enforce this Agreement.
4.6
Arbitration.
Any
controversy or claim arising out of or relating to this Agreement (other than
claims for preliminary injunctive relief or other prejudgment or equitable
remedies) shall be settled by binding arbitration in Los Angeles, California
(at
the election of the party commencing the action) in accordance with the
Commercial Rules of the American Arbitration Association then in effect, and
judgment upon an award rendered in such arbitration may be entered in any court
having jurisdiction thereof.
BOTH
PARTIES HAVE READ AND UNDERSTAND THIS SECTION
4.6,
WHICH
DISCUSSES ARBITRATION. THE PARTIES UNDERSTAND THAT BY SIGNING THIS AMENDMENT,
THEY AGREE TO SUBMIT ANY FUTURE CLAIMS ARISING OUT OF RELATING TO, OR IN
CONNECTION WITH THIS AMENDMENT, OR THE INTERPRETATION, VALIDITY, CONSTRUCTION,
PERFORMANCE, BREACH, OR TERMINATION THEREOF TO BINDING ARBITRATION, AND THAT
THIS ARBITRATION CLAUSE CONSTITUTES A WAIVER OF EACH PARTIES' RIGHT TO A JURY
TRIAL AND RELATES TO THE RESOLUTION OF ALL DISPUTES RELATING TO ALL ASPECTS
OF
THE RELATIONSHIP BETWEEN CONSULTANT AND THE COMPANY.
4.7
Severability.
Should
any one or more of the provisions of this Agreement be determined to be illegal
or unenforceable, all other provisions of the Agreement shall be given effect
separately from those provisions of this Agreement so determined and the other
provisions shall not be affected by the illegality or unenforceability.
5
4.8
Representation
by Counsel; Interpretation.
Each
party to this Agreement acknowledges that such party has caused this Agreement
to be reviewed and/or had the opportunity to have it approved by legal counsel
of such party’s own choice. Xxxxxxx acknowledges and agrees that the Law Offices
of Xxxxx Xxxxx have represented the Company, not Xxxxxxx, in connection with
the
preparation and execution of this Agreement and that the Law Offices of Xxxxx
Xxxxx may continue to represent the Company in matters related to this Agreement
and otherwise. Xxxxxxx has been advised to obtain independent legal counsel
in
such connection. The Company acknowledges and agrees that the Law Offices of
Xxxxx Xxxxx has represented and may continue to represent Xxxxxxx in matters
unrelated to this Agreement. The parties hereby waive any claim of conflict
of
interest based on the foregoing. The parties have negotiated the provisions
of
this Agreement, and any presumption that an ambiguity contained in this
Agreement shall be construed against the party that caused this Agreement to
be
drafted shall not apply to the interpretation of this Agreement.
4.9
Governing
Law and Venue.
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
internal laws of California. All claims, arbitrations and lawsuits in connection
with this Agreement must be brought in Los Angeles County, California. Xxxxxxx
and Company hereby agree to this jurisdiction and venue.
4.10 Entire
Agreement.
This
Agreement, and the agreements and instruments referenced herein, constitute
the
entire agreement between the parties hereto with respect to the subject matter
hereof and supersedes any and all prior or contemporaneous agreements,
understandings, discussions, and/or commitments of any kind with respect to
the
subject matter hereof. This Agreement may not be amended or supplemented, nor
may any right hereunder be waived, except in writing signed by each of the
parties.
4.11 Further
Assurances.
The
parties shall, from time to time, promptly execute and deliver such further
instruments, documents and papers and perform such further acts as may be
necessary or proper to carry out and effect the terms of this
Agreement.
4.12 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. Facsimile signatures shall have the same legal effect as original
signatures.
{Signatures
on following page}
6
IN
WITNESS WHEREOF,
the
parties have executed this Agreement as of the date first written
above.
"The
Company"
|
"Xxxxxxx"
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PENN
OCTANE CORPORATION
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||||
By:
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/s/ Xxx X. Xxxxxxxx | /s/ Xxxxxx X. Xxxxxxx | ||
Xxx
X. Xxxxxxxx,
|
Xxxxxx
X. Xxxxxxx
|
|||
Chief
Financial Officer
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7
AMENDED
AND RESTATED PROMISSORY NOTE
$3,196,693.00
|
Palm
Desert, California
|
November 15,
2005
|
This
Amended and Restated Promissory Note (this “Restated Promissory Note”) amends,
restates and replaces that certain Promissory Note of Xxxxxx X. Xxxxxxx dated
April 11, 2000 (the “Prior Promissory Note”).
FOR
VALUE
RECEIVED, Xxxxxx X. Xxxxxxx, an individual residing at 000 Xxxxxxxx Xxxxx,
Xxxx Xxxxxx, Xxxxxxxxxx 00000 (the "Borrower"), hereby promises to pay to the
order of Penn Octane Corporation, a Delaware corporation (the "Lender"), at
its
offices located at 00-000 Xxxxxxx Xxxx, Xxxx. X, Xxxx Xxxxxx, Xxxxxxxxxx 00000,
or at such other place as the Lender shall designate, the principal amount
of
Three Million One Hundred Ninety-Six Thousand Six Hundred Ninety-Three Dollars
($3,196,693.00) on or before July 29, 2007 (the “Maturity Date”). The Borrower
shall pay interest on the unpaid principal amount hereof from the date hereof
until paid, at the prime rate of Bank of America, N.A., plus two (2) percentage
points, to be paid in arrears on the Maturity Date; provided however, that
Borrower will not be required to pay or accrue interest so long as Borrower
continues to provide a personal guaranty on behalf of the Lender of debt of
the
Lender to any person in an amount equal to at least $1,800,000 (the "Guaranty").
Interest will commence immediately upon the termination of the Guaranty.
Borrower shall continue to guaranty up to $1,800,000 in indebtedness of the
Lender, if requested by the Lender, until all obligations under this Restated
Promissory Note are satisfied.
Should
the indebtedness represented by this Restated Promissory Note or any part
thereof be collected at law or in equity or in bankruptcy, receivership or
other
similar court proceedings or this Restated Promissory Note be placed in the
hands of attorneys for collection before or after maturity, the Borrower, its
successors and assigns, agree to pay, in addition to the principal and interest
due and payable hereon, reasonable attorneys' and collection fees.
If
the
Borrower shall fail to make payment of principal or interest on this Restated
Promissory Note when due, and if such default is not cured within ten (10)
days
thereafter, or if the Borrower shall become insolvent or a voluntary or
uncontroverted petition shall be filed under the Federal Bankruptcy Code or
other similar Federal or state law dealing with arrangements for the relief
of
creditors with respect to the Borrower (in each case, an "Event of Default"),
and in any such event, the holder shall have the right without notice to the
Borrower to declare this Restated Promissory Note with accrued interest hereon
to be immediately due and payable (whether or not then due by the stated terms
hereof), whereupon the same shall become and be immediately due and payable
without presentment, demand, protest or notice of any kind, all of which are
hereby expressly waived by the Borrower.
A-1
This
Note
is secured by and entitled to the benefits of a Pledge and Security Agreement
dated April 11, 2000, pursuant to which Borrower's obligations under the
Prior Promissory Note and this Restated Promissory Note are secured by one
million (1,000,000) shares of Penn Octane Corporation common stock owned by
Borrower and by one hundred twenty-five thousand (125,000) Rio Vista Energy
Partners L.P. common units owned by Borrower.
No
waiver
by the holder of any breach of any covenant of the Borrower herein contained
or
any term or condition hereof shall be construed as a waiver of any subsequent
breach of the same or of any other covenant, term or condition
herein.
This
Restated Promissory Note shall be deemed to have been made under, and in all
respects shall be governed by and construed in accordance with, the laws of
the
State of California.
Xxxxxx
X. Xxxxxxx
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A-2