ESCROW AGREEMENT
Exhibit
10.12
This
Escrow Agreement (this “Agreement”) dated as of September 30, 2005, is
entered into by and between Xxxxxx X. Xxxxxxx (“Xxxxxxx”), Penn Octane
Corporation (“Penn Octane”), and the undersigned holders ("Noteholders") of
promissory notes of Penn Octane due on December 15, 2005 (“Promissory Notes”),
on the one hand, and The Law Offices of Xxxxx X. Xxxxx as collateral agent
(the
"Collateral Agent"), on the other hand, with reference to the following facts
and circumstances.
RECITALS:
WHEREAS,
pursuant to that certain Pledge Agreement (“Pledge Agreement”) between Xxxxxxx
and PMG Capital Corp. (“PMG”) dated as of January, 2001, Xxxxxxx pledged a total
of 2,000,000 shares of the common stock of Penn Octane and the proceeds thereof
(together with any shares thereafter issued to Xxxxxxx by Penn Octane by way
of
a stock dividend, split or other distribution or reclassification of such shares
or proceeds thereof) (the “Pledged Securities”) as collateral to secure the
obligations of Xxxxxxx pursuant to that certain Guaranty With Recourse Limited
to Pledged Shares made by Xxxxxxx in favor of PMG; and
WHEREAS,
pursuant to that certain Letter Amendment dated January 13, 2004 and that
certain Letter Amendment dated September 30, 2005 (collectively, the “Letter
Amendments”) executed by Noteholders and Penn Octane, Noteholders consented to
the substitution of The Law Offices of Xxxxx X. Xxxxx as collateral agent in
connection with the Promissory Notes, in place of PMG and its successor,
Investec (US) Incorporated; and
WHEREAS,
on September 30, 2004, Penn Octane distributed to Xxxxxxx a total of 250,000
common units of Rio Vista Energy Partners L.P. (“Rio Vista”) with respect to the
Pledged Securities in connection with the spin-off of Rio Vista by Penn Octane
to the stockholders of Penn Octane;
WHEREAS,
the purpose of this Agreement is to set forth certain additional terms between
the parties in order to induce the Collateral Agent to accept its appointment
pursuant to the Letter Amendments.
AGREEMENT:
NOW,
THEREFORE, in consideration of the promises and of the mutual covenants herein
contained, the parties hereto agree as follows:
1.
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Acceptance
by Collateral Agent
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The
Collateral Agent hereby accepts the appointment as collateral agent under the
terms of this Agreement, the Pledge Agreement and the Letter Amendments and
agrees to act on the terms and conditions hereinafter set forth. In the event
of
any conflict between any prior agreement involving the parties (including
without limitation the Pledge Agreement and the Letter Amendments) and this
Agreement, the terms of this Agreement shall control. The Collateral Agent
shall
have no obligation with respect to any Pledged Securities that are not delivered
to him and shall have no obligation to take any action to compel such
delivery.
1
September
30, 2005
Page
2
2.
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Retention
of Pledged Securities
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Following
delivery of the Pledged Securities to the Collateral Agent, the Collateral
Agent
shall hold the Pledged Securities consistent with the terms of the Pledge
Agreement, the Letter Amendments and this Agreement. In fulfilling its
obligations and responsibilities under this Agreement, the Collateral Agent
shall not be required to look to any other agreements, understandings, or
documents between the parties other than the Pledge Agreement, the Letter
Amendments and this Agreement and shall rely exclusively upon the terms as
stated therein.
3.
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Rights
and Responsibilities of Collateral
Agent
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The
acceptance by the Collateral Agent of its duties hereunder is subject
exclusively to the terms and conditions of the Pledge Agreement, the Letter
Amendments, this Agreement and such other written instructions Xxxxxxx, Penn
Octane and Noteholders may jointly hereafter issue to the Collateral Agent.
Without limiting the foregoing:
(a)
|
The
Collateral Agent shall act hereunder as a depository only and shall
not be
responsible or liable in any manner whatsoever for the sufficiency,
correctness, genuineness, or validity of any document(s) furnished
to the
Collateral Agent or any Pledged Securities deposited with
it.
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(b)
|
The
Collateral Agent shall be protected in acting upon the Pledge Agreement,
the Letter Amendments and this Agreement as well as any additional
joint
written instructions received from Xxxxxxx, Penn Octane and Noteholders
if
Collateral Agent, in good faith, believes such instruments to be
genuine
and what they purport to be.
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(c)
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The
Collateral Agent shall not be liable for any error of judgment or
for any
action taken or omitted by it in good faith, or for any mistake of
fact or
law, or for anything which it may do or refrain from doing in connection
herewith except its own gross negligence or willful misconduct as
determined by a final and nonappealable judgment of a court of competent
jurisdiction.
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(d)
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Xxxxxxx,
Penn Octane and Noteholders agree to jointly and severally indemnify
the
Collateral Agent and hold the Collateral Agent harmless from and
against
any loss, liability, expenses (including reasonable attorneys' fees
and
expenses), claim, or demand arising out of or in connection with
the
performance of the obligations of Collateral Agent under this Agreement,
the Pledge Agreement, and the Letter Amendments, and any instructions
received pursuant thereto, except to the extent that any of the foregoing
arise from the gross negligence or willful misconduct of the Collateral
Agent as determined by a final and nonappealable judgment of a court
of
competent jurisdiction. These indemnities shall survive the resignation
of
the Collateral Agent or the termination or amendment of this
Agreement.
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2
September
30, 2005
Page
3
(e)
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The
Collateral Agent shall have no duties except those specifically set
forth
in the Pledge Agreement, the Letter Amendments and this Agreement.
This
Agreement, the Pledge Agreement and the Letter Amendments represents
the
entire understanding of the parties hereto with respect to the subject
matter contained herein and supersedes any and all other and prior
agreements between them.
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(f)
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The
Collateral Agent shall have the right at any time it deems appropriate
to
deposit the Pledged Securities with and/or seek an adjudication in
a court
of competent jurisdiction as to the respective rights of the parties
hereto and shall not be held liable by any party hereto for any delay
or
the consequences of any delay occasioned by such resort to
adjudication.
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(g)
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Subject
to the provisions of Section
3(d)
above, the fees and expenses incurred by the Collateral Agent in
connection with its services hereunder shall be paid by Penn
Octane.
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(h)
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For
purposes of this Agreement, the Pledge Agreement and the Letter
Amendments, the Collateral Agent shall be entitled to rely upon
notification or instruction from Xxxx Xxxxx, as representative of
Noteholders, as if such notification or instruction was delivered
by all
Noteholders. The Collateral Agent shall also be entitled to give
notice to
all Noteholders by giving such notice to Xxxx
Xxxxx.
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4.
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Release
of Pledged Securities
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The
Collateral Agent shall release the Pledged Securities only in accordance with
(i) the terms of the Pledge Agreement and the Letter Amendments, (ii) joint
written instructions from the other parties to this Agreement, or (iii) an
order
of a court of competent jurisdiction.
5.
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Acknowledgement
and Consent
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The
parties to this Agreement acknowledge that the Collateral Agent acts as legal
counsel to Penn Octane, Rio Vista and Xxxxxxx personally. Nothing in this
Agreement, the Pledge Agreement or the Letter Amendments shall be deemed to
create a limitation on such representation, and such representation shall not
be
deemed a conflict with Collateral Agent’s obligations under this Agreement, the
Pledge Agreement or the Letter Amendments. The parties hereto consent to the
continued representation of Penn Octane, Rio Vista and Xxxxxxx by the Law
Offices of Xxxxx X. Xxxxx. Noteholders hereby acknowledge and agree that nothing
in this Agreement, the Pledge Agreement or the Letter Amendments shall be deemed
to create an attorney-client relationship between Noteholders and the Law
Offices of Xxxxx X. Xxxxx and no such relationship exists.
3
September
30, 2005
Page
4
6.
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Amendment
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This
Agreement may not be amended or supplemented and no provision hereof may
be
modified or waived, except by an instrument in writing, signed by all of
the
parties hereto.
7.
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Termination
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The
purpose of this Agreement and the terms hereof shall terminate upon the earlier
of: Penn Octane’s full satisfaction of the Promissory Notes; joint written
instruction from Xxxxxxx, Penn Octane and Noteholders to terminate this
Agreement; or the resignation of the Collateral Agent. Upon the termination
of
this Agreement, the Collateral Agent shall be relieved of any and all further
obligations hereunder.
8.
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Resignation
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The
Collateral Agent may resign at any time by giving thirty (30) days written
notice of such resignation to Xxxxxxx and Penn Octane, with instructions to
Penn
Octane to forward such notice to Noteholders within five (5) days. If no
successor Collateral Agent has been named at the expiration of the thirty (30)
day period, the Collateral Agent shall have no further obligation hereunder
but
shall have the option of continuing to hold the Pledged Securities until receipt
of joint written instructions from the parties or seeking judicial resolution
pursuant to Section 3(f)
above.
Upon notification by Xxxxxxx, Penn Octane and Noteholders of the appointment
of
a successor, the Collateral Agent shall promptly deliver the Pledged Securities
to such successor, and the duties of the resigning Collateral Agent shall
thereupon in all respects terminate and it shall be released and discharged
from
all further obligations hereunder. Similarly, the Collateral Agent may be
discharged from its duties as Collateral Agent under this Agreement upon thirty
(30) days written notice jointly from Xxxxxxx, Penn Octane and Noteholders
and
upon payment of any and all fees and other amounts that may be due to the
Collateral Agent under this Agreement. In such event, the Collateral Agent
shall
be entitled to rely on instructions from Xxxxxxx, Penn Octane and Noteholders
as
to the disposition and delivery of the Pledged Securities.
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September
30, 2005
Page
5
9.
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Execution
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This
Agreement may be executed in several counterparts, each of which shall be deemed
an original, but such counterparts together shall constitute one and the same
instrument. Facsimile signatures shall have the same legal effect as original
signatures.
10.
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Miscellaneous
|
All
covenants and agreements contained in this Agreement by or on behalf of the
parties hereto shall bind and inure to the benefit of such parties and their
respective heirs, administrators, legal representatives, successors and assigns,
as the case may be. The headings in this Agreement are for convenience of
reference only and shall neither be considered as part of this Agreement nor
limit or otherwise affect the meaning hereof. In the event of the bringing
of
any action or suit by a party hereto against another party hereunder by reason
of any breach of any of the covenants, agreements, or provisions of this
Agreement, the prevailing party shall be entitled to have and recover all costs
and expenses of that action or suit, at trial or on appeal and in collection
of
judgment, including reasonable attorneys' fees, and any other professional
fees
resulting therefrom. This Agreement shall be construed and enforced in
accordance with the internal laws of the State of California. The state and
federal courts located in San Francisco County, California shall have sole
jurisdiction in any action or suit arising out of or relating to this Agreement.
The parties hereby consent to such jurisdiction and to venue in San Francisco
County, California.
11.
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Notices
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All
instructions, notices and other communications hereunder must be in writing
and
shall be deemed to have been duly given if delivered by hand or mailed by first
class, registered mail, return receipt requested, postage prepaid, and addressed
as follows:
(a)
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If
to Xxxxxxx:
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Xxxxxx
X. Xxxxxxx
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000
Xxxxxxxx Xxxxx
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Xxxx
Xxxxxx, XX 00000
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(b)
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If
to Penn Octane:
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Penn
Octane Corporation
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Attn:
Chief Executive Officer
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00000
Xxxxxxx Xxxx, Xxxxxxxx X
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Xxxx
Xxxxxx, XX 00000
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5
September
30, 2005
Page
6
(c)
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If
to Noteholders:
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Attn:
Xxxx Xxxxx
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(d)
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If
to Collateral Agent:
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The
Law Offices of Xxxxx X. Xxxxx
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Attn:
Xxxxx X. Xxxxx
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Xxx
Xxxxxxxxxxx Xxxxxx, Xxxxx 0000
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Xxx
Xxxxxxxxx, XX 00000
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September
30, 2005
Page
7
IN
WITNESS THEREOF, the parties hereto have duly executed this Escrow Agreement
as
of the date first indicated above.
XXXXXX
X. XXXXXXX
/s/
Xxxxxx X. Xxxxxxx
Xxxxxx
X. Xxxxxxx
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PENN
OCTANE CORPORATION
By:
/s/ Xxx X. Xxxxxxxx
Name:
Xxx X. Xxxxxxxx
Title:
Chief Financial Officer
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LAW
OFFICES OF XXXXX X. XXXXX
By:
/s/ Xxxxx X. Xxxxx
Name:
Xxxxx X. Xxxxx
Title:
Principal
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September
30, 2005
Page
8
NOTEHOLDERS
«FirstName» «LastName»
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«Company»
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||||
«Company1»
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||||
By:
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Its:
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||||
Date:
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Promissory
Note Amount:
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$
|
«NoteAmt»
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Name
and Telephone Number of Noteholder:
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||||
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