Lauren Constructors, Inc.
June 16, 1995
Penn Octane
0000 Xxxxxxxxxx
Xxxxx 000
Xxxxxxx, XX 00000
Attention: Xx. Xxxx Xxxxxxxx
In accordance with recent negotiation between Penn Octane
and Xxxxxx and Xxxxx, the following settlement agreement
is reached.
1. Xxxxxx and Xxxxx agree to stay its pending lawsuit so
long as Penn Octane does not breach this settlement agreement.
2. Xxxxxx and Xxxxx agrees to resume work at the terminal
to address the items referenced in Xxxxx Xxxxx'x letter of
May 8, 1995. Both Xxxx Xxxxxx and Xxxxxx and Xxxxx agree
that resumption of work at the terminal will be scheduled
within a reasonable period of time after Xxxx Xxxxxx provides
written notification to Xxxxxx and Xxxxx to resume work on a
time and material basis. Prior to the resumption of any work,
Penn Octane must reach an agreement with all remaining material
suppliers for resumption of Linco, and Penn Octane will
either advance to Xxxxxx and Xxxxx, or place into an
escrow account, $35,000 to be drawn against by Xxxxxx and
Xxxxx as costs are incurred. If Penn Octane elects to place
the necessary funds in an escrow account, Xxxx Xxxxxx agrees
to maintain the account balance at $35,000 until all work is
completed.
Penn Octane further agrees that Xxxxxx and Xxxxx are not responsible
for the costs to replace material components previously purchased
by Penn Octane or the costs to purchase new equipment requested
to enhance the facility.
3. The parties agree that the amount due, exclusive of amount
to be incurred under item 2, to both Xxxxxx and Xxxxx as of
May 31, 1995, including all principal, interest, costs, and
attorney's fees, and including offsets for Penn Octane's claim
for damages for lost income and other damages, shall be
$1,308,000 (hereinafter referred to as the "Amount Due").
The Amount Due shall be allocated between Xxxxxx and Xxxxx
as they deem appropriate.
4. An interest rate of 12% per annum will be used for all
amounts paid over time.
5. Xxxxxx and Xxxxx agree to the use of a four-year monthly
amortization of the amount due with an occuring interest
rate of 12 percent per annum and a one-year balloon payment.
Monthly payments are calculated to be $34,445 --- $28,283
to Xxxxxx and $6162.00 to Xxxxx. The first payment is to
be made on or before July 14, 1995.
6. Penn Octane will make additional monthly payments as follows:
a. for any month that Penn Octane sells 6 million
gallons or more through its terminal, Penn Octane
will pay Lauren and Xxxxx, jointly, $20,000 in
addition to the base monthly payment; or
b. for any month that Penn Octane sells at least
7 million gallons through its terminal, Penn Octane
will pay Lauren and Xxxxx, jointly, $40,000 in
addition to the base monthly payment; or
c. for any month that Penn Octane sells at least
8 million gallons through its terminal, Penn Octane
will pay Lauren and Xxxxx, jointly, $60,000 in
addition to the base monthly payment; or
d. for any month that Penn Octane sells at least
9 million gallons through its terminal, Penn
Octane will pay Lauren and Xxxxx, jointly, $80,000
in addition to the base monthly payment.
e. for any month that Penn Octane sells
10 million gallons or more through its terminal,
Penn Octane will pay Lauren and Xxxxx, jointly,
$100,000 in addition to the base monthly payment.
7. Assignment of Funds: As security for the payout agreement,
Xxxx Xxxxxx will agree to execute and deliver any assignment
conveying and assigning all of Penn Xxxxxx's interest
in any and all funds received from the following sources until
the Amount Due is paid in full:
a. IBC Litigation, Arbitration and/or, Settlement,
less attorneys' fees, costs and expenses, and any
amounts due IBC, and
b. National Power Exchange Group sales proceeds
received after the date of settlement of this
matter, less the amount of accrued interest
previously pledged to Allstate.
8. As additional security for the payout arrangement, and as
an additional provision of this agreement, Xxxx Xxxxxx agrees
that if and when it receives the gross sum of $1,500,000 from
any secondary offering, private placement, or any other capital
infusion or investment in Penn Octane from any source, Penn
Octane will then pay the amount due to Xxxxxx and Xxxxx, in
full, within three (3) business days of the receipt of these
funds by Xxxx Xxxxxx. This immediate payment will be made
by Penn Octane to Laur
been paid to Xxxxxx and Xxxxx.
9. Additional Collateral: As additional collateral for this
Payout and Note Agreement, Penn Octane will arrange to place in
ascrow, for the benefit of Lauren and Xxxxx, an amount of its
free-trading common stock equal to the number of shares
necessary to approximate two times the anticipated monthly
payment of $34,445 due Lauren and Xxxxx, plus brokerage costs,
to be used only in the event that Penn Octane's actual monthly
payment is past due in excess of 15 days. If it becomes necessary
for Xxxxxx and J
this agreement.
10. Penn Octane specifically acknowledges that it is in breach
of this agreement if the entire amount due is not paid in full
on or before August 15, 1996 and agrees to pay Xxxxxx and Xxxxx
interest at the rate of 18% per annum, or interest at the highest
rate allowed by law, whichever is less, until the entire amount
due is paid in full.
11. Xxxxxx and Xxxxx maintain that Xxxxxxxx's and Materialman's
Liens previously filed by each of them are valid. Penn Octane
has maintained and continues to maintain and assert that these
Mechanic's and Materialman's Liens are invalid and unenforceable.
12. All payments made by Xxxx Xxxxxx to Xxxxxx and Xxxxx under
any payout arrangement would be applied first toward interest,
court costs, and attorney's fees, and then to the reduction of
principal. Xxxxxx and Xxxxx will provide written documentation
of exact amounts for interest, court costs, and attorney's fees
through payment dates. To the extent that any lump sum payments
are made by Penn Octane to Xxxxxx and Xxxxx during the time of a
payout arrangement prior to the one-year balloon, then these xxx
sts, and principal in the xxxxxx described in this paragraph but
would not substitute for regular and periodic installment payments.
13. Under this payout arrangement, xxxxxx and Xxxxx would have
the right to audit the sales volumes by examining the original
load tickets and weight tickets evergy thirty days. These sales
volumes would form the basis of the payments per gallon described herein.
If you are in agreement with the above please have an authorized
representative of Penn Octane sign and return this letter.
Sincerely,
LAUREN CONSTRUCTORS, INC. Xxxxxx X. Xxxxx & Associates, Inc.
X. Xxxxx Xxxxxxxx Xxxxxx X. Xxxxx
C. Xxxxx Xxxxxxxx Xxxxxx X. Xxxxx
President President
Accepted:
Penn Octane Corporation
By: Xxxx X. Xxxxxxx
Date: June 21, 1995
Xx. Xxx Xxxxxxx
Penn Octane
0000 Xxx Xxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxx 00000
Re: Agreed Partial Payment Under
June 16, 1995 Payout Agreement
Dear Xxx:
As you know, Xxxx Xxxxxx has been making monthly payments to
Lauren Constructors, Inc. and Xxx Xxxxx and Associates, Inc.
between June 30, 1995 and July 1, 1996, pursuant to that certain
payout agreement of June 16, 1995 executed by Xxxxxx, Xxxxx and
Xxxx Xxxxxx. All principal and accrued interest under that
payout agreement became fully due and payable on or before
August 14, 1996 by balloon payment. That payment, in full,
was not made by Xxxx Xxxxxx.
Subsequently, Xxxxxx, Xxxxx and Xxxx Octane have been negotiating
a modification of this payout agreement whereby continuing
installment payemnts will be made by Xxxx Xxxxxx with additional
collateral provided to Xxxxxx and Xxxxx as new consideration for
this arrangement including, without limitation, a first lien
position on the improvements for the plant on the premises leased
from the "port authority" further secured by a mortgagees title
polidy in favor of Xxxxxx and Xxxxx for the full amount of principal
and accrued interest remaining on the indebtedness. In that regard, Xxxx
Octane fully acknowledges and ratifies that the current remaining balance of
principal and
accrued interest on the amount due to Xxxxxx and Xxxxx is
$449,613.03 through October 10, 1996.
Xxxxxx, Xxxxx and Xxxx Xxxxxx intend to execute all documents
necessary to complete this payout modification involving the
first lien position on the leased premises and the
mortgagee's title policy in the next few days. In
anticipation of the execution of those documents, and as
further consideration for Xxxxxx and Xxxxx'x willingness to
renew and extend the installment payout of this indebtedness
rather than requireing the immediate payment of all principal
and accrued interest, all parties agree that Penn Octane
will make an immediate lump sum interim payment in the amount of
$41,555 to Xxxxxx and $8,945 with regular monthly payments
resuming November 14, 1996 and all unpaid amounts coming due
April 14, 1997.
Xxxx Octane acknowledges that neither Xxxxxx nor Xxxxx are
waiving any of their rights to enforce the provisions of the
June 16, 1995 payout agreement of the terms and provisions of
previously filed mechanic's or materialmen's liens, but instead
this is a good faith expression between the parties to allow
Penn Octane to continue partial paymetns of the overall amount
due while the documentation for the first lien position and
mortgagee's title policy are being completed. Consistent with
the June 16, 1995 p
payout arrangement will be applied first toward interest,
court costs and attorney's fees, and then to the reduction of
principal. Likewise, to the extent that any lump sum payments
are made by Penn Octane to Xxxxxx and Xxxxx during the time of
any payout arrangement, then these lump sum payments would be
applied to the overall outstanding balance of the amount due,
with application being made first to interest, attorney's fees,
court costs, and then to principal, but these lump sums would
not substitute
All parties signing this document are authorized representatives
for their respective organizations. If this agreement meets
with your approval, please execute it and return it to my
office at your earliest convenience.
Sincerely yours,
LAUREN CONSTRUCTORS, INC.
By: X. Xxxxx Xxxxxxxx
X. Xxxxx Xxxxxxxx, President
XXXXXX X. XXXXX & ASSOCIATES, INC.
By: Xxxxxx X. Xxxxx
Xxxxxx X. Xxxxx, President
ACCEPTED:
PENN OCTANE CORPORATION
By: Xxxxxx X. Xxxxxxx, Executive Vice President
Date: 10/10/96
