AMENDMENT NO. 2 TO LEASE/INSTALLMENT PURCHASE AGREEMENT
FOR TWO (2) 15-MILE PIPELINES DATED NOVEMBER 24, 1998 AND TO LEASE/INSTALLMENT
AGREEMENT FOR TWO (2) 10-KILOMETER PIPELINES
This agreement (hereinafter referred to as the "Amendment") is made and
entered into as of July ____, 1999 by and between PENN OCTANE CORPORATION, a
Delaware corporation (hereinafter referred to as "POC") and CPSC INTERNATIONAL,
a Texas corporation (hereinafter referred to as "CPSC") (collectively referred
to as the "Parties" and individually referred to as a "Party" where either POC
or CPSC could apply). This Amendment modifies that certain Lease/Installment
Purchase Agreement For Two (2) 15-Mile Pipelines, dated November 24, 1998, as
well as that certain Lease/Installment Purchase Agreement For Two (2)
10-Kilometer Pipelines, dated _________________, 1998 (hereinafter both
agreements referred to as the "Agreements").
WHEREAS, pursuant to the terms and conditions of the Agreements, the
Parties have previously agreed, among other things, that POC shall provide as
security for payments due to CPSC under the Agreements a Letter of Credit in the
total amount of $942,000 for the benefit of CPSC, and
WHEREAS, the Parties now agree to amend said security provisions in the
Agreements, and CPSC agrees to accept, and POC agrees to provide, a pledge into
escrow 500,000 shares of POC common stock currently owned and held by Xxxxxx X.
Xxxxxx (hereafter referred to as the "Shares"), as security in place of the
Letter of Credit initially contemplated and agreed to by the Parties in the
Agreements.
NOW, THEREFORE, in consideration of the mutual promises set forth herein,
the Parties hereby agree as follows:
1. Amendment. Section 3.3 of the Agreements setting forth the
---------
requirement of a Letter of Credit is hereby amended as follows:
3.3 Common Stock Pledge. POC shall provide or arrange to provide a pledge
---------------------
of 500,000 shares of common stock currently owned and held by Xxxxxx X. Xxxxxxx,
President of POC (hereinafter referred to as the "Shares"). POC agrees to have
the Shares placed into an escrow account and accessible to CPSC in the case of
default pursuant to the terms and conditions specifically set forth herein and
in that certain Escrow Agreement to be executed by the Parties. In the event of
default in payment from POC, CPSC may call on the Shares in lieu of payment for
the full amount of the payment in default, with the released Shares to be valued
as of the time of release from the escrow account. Said valuation will
determine how many Shares will be released from the escrow account to satisfy
the default.
2. Escrow. The Parties agree that the Shares shall be placed in escrow
------
upon the execution of this Amendment and maintained thereafter pursuant to the
escrow agreement to be entered into between the Parties.
3. Partial Release of Collateral. In the event that the fair market
--------------------------------
price per share of the POC common stock rises above $3.00 per share, the Parties
agree to negotiate in good faith to a partial release of said Shares as
collateral to the extent the fair market value of the Shares exceeds $942,000
and to direct such instructions to the Escrow Agent.
4. Substitution of Collateral. Upon the completion of the pipeline by
---------------------------
CPSC, POC shall at the end of every month for ten (10) months thereafter place
$100,000 into an escrow account to act as substitute security for CPSC in place
of the Escrow Shares. Immediately after the initial monthly installment is made
by POC, POC and CPSC agree to instruct the Escrow Agent to return to POC the
Escrow Shares pledged upon the execution of this Amendment up to the value of
the cash deposited. At the end of the ten (10) month period of payments, POC
shall, at its sole discretion, either maintain $942,000 from the funds
previously deposited in the account or establish a letter of credit in the
amount of $942,000 to act as substitute collateral for the remainder of the term
of Agreements. In either event, all remaining Escrow Shares will be released
back to Xxxxxx X. Xxxxxxx.
5. Additional Collateral. In the event that, during such time that all
---------------------
the Shares remain in the escrow account, the fair market value of the Shares
drops below $2.00 per share, CPSC shall have the option to request POC to
deposit additional POC common stock into the escrow account to maintain a total
fair market value of $942,000 for the Shares held in said escrow account.
IN WITNESS WHEREOF, each of the Parties have caused this Agreement to be
executed by their duly authorized representatives as of the date first written
above.
CPSC: POC:
CPSC INTERNATIONAL PENN OCTANE CORPORATION
BY:_________________________ BY:____________________________
Xxxx X. XxXxxx, President X.X. Xxxxxxx, President
Page -2-
