Control #: _________
REGISTRATION RIGHTS AGREEMENT
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This Registration Rights Agreement (the "RR Agreement") is made and entered
into as of the day of January, 2001, by and between Penn Octane Corporation, a
Delaware corporation (the "Company"), and, a ______________________________ (the
"Purchaser"), with reference to the following facts:
RECITALS
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A. Concurrently herewith, the Company and the Purchaser are entering
into that certain Purchase Agreement, dated as of even date herewith (the
"Agreement").
B. This RR Agreement is the Registration Rights Agreement contemplated
by the Agreement.
NOW, THEREFORE, in consideration of the premises and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties agree as follows:
1. Certain Definitions
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Unless otherwise indicated or unless the context otherwise requires, (a)
capitalized terms used herein without definition shall have the respective
meanings set forth in the Agreement; and (b) the following terms shall have the
following meanings:
Effective Date: January, 2001.
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Exchange Act: The Securities Exchange Act of 1934, as amended, and the
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rules and regulations of the Commission promulgated thereunder.
Prospectus: The prospectus included in any Registration Statement
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(including, without limitation, a prospectus that discloses information
previously omitted from a prospectus filed as part of an effective registration
statement in reliance upon Securities Act Rule 430A), as amended or supplemented
by any prospectus supplement, with respect to the terms of the offering of any
portion of the Registrable Securities covered by such Registration Statement and
all other amendments and supplements to the prospectus, including post-effective
amendments, and all material incorporated by reference or deemed to be
incorporated by reference in such prospectus.
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Registrable Securities: Subject to the other provisions hereof, all shares
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of Common Stock issued or issuable to the Investors upon exercise of the
Warrants and all shares of Common Stock issued or issuable to PMG upon exercise
of the warrant being issued to PMG (the "PMG Warrant") as contemplated by
Section 7 of the Agreement. The Warrants and the PMG Warrant are not
Registrable Securities hereunder. As to any Registrable Securities, such
securities shall cease to be Registrable Securities when (a) a registration
statement with respect to the sale of such securities shall have become
effective under the Securities Act and such securities shall have been disposed
of pursuant to such effective registration statement, (b) such securities shall
have been distributed pursuant to Rule 144 or any similar provision then in
force, under the Securities Act, (c) such securities shall have been otherwise
transferred, new certificates or other evidences of ownership for them not
bearing a legend restricting further transfer and not subject to any stop
transfer order or other restrictions on transfer shall have been delivered by
the Company and subsequent disposition of such securities shall not require
registration or qualification of such securities under the Securities Act or any
state securities laws then in force, (d) the holder thereof is eligible to sell
such securities under Rule 144 without regard to the volume limitations thereof,
or (e) the sale of such securities by the Investor (or PMG, as the case may be)
otherwise shall no longer require registration under the Securities Act or such
securities shall cease to be outstanding, or (f) to the extent that the Investor
(or PMG, or any employee of PMG to whom PMG, with the consent of the Company,
has transferred a portion of the PMG Warrant, as the case may be) is no longer
the sole record and beneficial owner of such Registrable Securities or of his
Warrant (or PMG Warrant, as the case may be) in respect of which such
Registrable Securities have not yet been issued but are issuable. Reference is
hereby made to Section 10 of the Agreement. In the sole discretion of the
Company, the Company shall be entitled to add to the foregoing definition of
Registrable Securities (a) all or any equity securities of the Company which
have been or may be issued or issuable to the Additional Fund Providers as
contemplated by Section 10 of the Agreement, or (b) all equity securities of the
Company which are issued or issuable in connection with any or any other
transaction(s) approved either by PMG or by the owners of a majority in interest
of the holders of Registrable Securities.
Registration Expenses: All expenses incurred by the Company in complying
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with Section 3 hereof, including all registration and filing fees, printing
expenses, fees and disbursements of counsel for the Company, and blue sky fees
and expenses.
Registration Statement: Any registration statement of the Company which
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covers any of the Registrable Securities pursuant to the provisions of this RR
Agreement, including the Prospectus, amendments and supplements to such
registration statement, including post-effective amendments, all exhibits, and
all material incorporated by reference or deemed to be incorporated reference in
such registration statement.
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Required Registration: Any registration occurring pursuant to Section 3(a)
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hereof.
Restricted Securities: The Warrant Shares and the shares issued upon
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exercise of the PMG Warrant, in each case upon original issuance thereof, and at
all times subsequent thereto, until, in the case of any such security, it is no
longer required to bear the legend set forth on such security pursuant to the
terms of the security, the Agreement and applicable law.
Rule 144: Rule 144 under the Securities Act, as such Rule may be amended
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from time to time, or any similar rule or regulation hereafter adopted by the
Commission (excluding Rule 144A).
2. Securities Subject to this RR Agreement
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The securities entitled to the benefits of this RR Agreement are the Registrable
Securities.
3. Registration Rights.
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(a) Required Registration
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(i) On or before March 31, 2001, or, if the Company is not then
eligible to use Form S-3 for such purposes, April 30, 2001,
the Company shall use its reasonable best efforts to file
with the Commission and have declared effective a Registration
Statement for the purpose of registering, upon the
effectiveness of such Registration Statement, the Registrable
Securities under the Securities Act.
(ii) The Company shall use its reasonable best efforts to maintain
with the Commission a Registration Statement that is effective
and causes the Warrant Shares to be registered under the
Securities Act until the date on which the Warrant Shares are
eligible for resale or other disposition under Rule 144
without regard to the volume limitations thereof.
(iii) The Purchaser agrees to include all of his Registrable
Securities in such Registration Statement, and each other
registered holder of Registrable Securities shall agree
likewise.
(b) "Piggy-Back" Registrations.
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If at any time after the Effective Date the Company shall determine to
register any of its Common Stock under the Securities Act, whether in connection
with a public offering by the Company, a public offering by shareholders, or
both, including, without limitation, by means of any shelf registration pursuant
to Rule 415 under the Securities Act or any similar rule or regulation, but
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other than a Required Registration or a registration to implement an employee
benefit or dividend reinvestment plan or effect a business combination, the
Company shall promptly give written notice thereof to the registered holders of
Registrable Securities and shall use its reasonable efforts to effect the
registration under the Securities Act of such Registrable Securities as may be
requested in a writing delivered to the Company within 30 days after such notice
by such holders as well as to include such Registrable Securities in any
notifications, registrations or qualifications under any state securities laws
which shall be made or obtained with respect to the securities being registered
by the Company; provided, however, that (a) any distribution of Registrable
Securities pursuant to such registration shall be managed by the investment
banking firm, if any, managing the distribution of the securities being offered
by the Company on the same terms as all other securities to be registered, and
(b) the Company shall not be required under this Section 3(b) to include
Registrable Securities in any registration of securities if the Company shall
have been advised by the investment banking firm managing the offering of the
securities proposed to be registered by the Company or others that the inclusion
of Registrable Securities in such offering would interfere with the orderly sale
of such securities which the Company or others propose to register; provided,
however, that in making any determination under this Section 3(b) as to the
inclusion of the Registrable Securities in any such offering, Registrable
Securities shall be registered on a pro-rata basis with any other securities as
to which the Company has granted or may in the future grant registration rights.
(c) Certain Exceptions. Notwithstanding the preceding provisions of
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this Section 3, the Company shall have no obligations under Section 3(a) or
Section 3(b) hereof in respect of any Registrable Securities that are covered by
an effective Registration Statement that has been filed by the Company pursuant
to Section 3(a) or Section 3(b) hereof; or which the Company has offered to
include in a Registration Statement but the holder has declined such inclusion.
4. Registration Procedures.
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(a) In connection with any registration pursuant to Section 3 hereof,
the Company will prepare and file with the Commission a Registration Statement
on any form for which the Company then qualifies and which the Company or
counsel for the Company shall deem appropriate, and use its reasonable best
efforts to cause such Registration Statement to become effective; provided that
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before filing with the Commission a Registration Statement or prospectus or any
amendments or supplements thereto, the Company will (i) furnish to the
registered holders of the Registrable Securities to be included in such
registration and to one counsel selected by such registered holders copies of
the Prospectus proposed to be filed as a part of the Registration Statement,
which Prospectus will be subject to the prompt review and comment by such
counsel, and (ii) notify such registered holders of any stop order issued, or
to the knowledge of the Company threatened, by the Commission and take all
reasonable actions required to prevent the entry of such stop order or to remove
it if entered. The Company will also (i) promptly notify such registered
holders and counsel of the effectiveness of such Registration Statement, (ii)
furnish to such registered holders and counsel such number of copies of such
Registration Statement, and each amendment and supplement thereto, the
Prospectus included in such Registration Statement and such other documents as
such registered holders may reasonably request; (iii) use its reasonable best
efforts to register or qualify such securities to be registered under such other
securities or blue sky laws of such states as such registered holders reasonably
request; (iv) use its reasonable best efforts to cause all such securities to be
registered to be listed on each securities exchange on which similar securities
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issued by the Company are then listed for trading and to provide a transfer
agent and registrar for such securities to be registered no later than the
effective date of such Registration Statement; and (v) use its reasonable
efforts to comply with all applicable rules and regulations of the Commission
and the states and make available to such registered holders as soon as
reasonably practicable (but not more than eighteen months) after the effective
date of the Registration Statement, an earnings statement that satisfies the
provisions of Section 11(a) of the Securities Act and the rules of the
Commission thereunder. The provisions of this Section 4 shall not require the
Company to qualify as a foreign corporation or as a dealer in securities or to
execute or file any general consent to service of process under the laws of any
such jurisdiction where it is not so subject.
(b) In connection with any effective Registration Statement filed
pursuant to this RR Agreement, the Company will promptly notify the registered
holders of Registrable Securities registered pursuant to the Registration
Statement of the happening of any event known to the Company as a result of
which the Registration Statement or any Prospectus contains an untrue statement
of a material fact or omits to state any material fact required to be stated
therein or necessary to make the statements therein not misleading in light of
the circumstances then existing, and will promptly prepare and furnish to the
holders of Registrable Securities a supplement or amendment to such prospectus
so that the Registration Statement or such Prospectus will not contain such
untrue statement of a material fact or omit to state any such material fact
required to be stated therein or necessary to make the statements therein not
misleading in light of the circumstances then existing. Notwithstanding
anything to the contrary set forth in this RR Agreement, if the Company
determines in its reasonable business judgment that a Registration Statement or
Prospectus (whether or not theretofore filed) or an amendment or supplement to a
Registration Statement or Prospectus would interfere with any material
financing, acquisition, corporate reorganization, or other material corporate
transaction or development involving the Company, the Company may delay the
preparation and filing of such Registration Statement, Prospectus amendment or
supplement, or suspend the effectiveness of any Registration Statement which
theretofore has been declared effective by the Commission, for such period as
may be reasonably required in order to complete or make a public announcement
with respect to such material transaction or development (it being understood
that the Company shall be obligated to extend the period of time it is required
to maintain in effect any such Registration Statement to take into account the
period of time that such holders of Registrable Securities are unable to offer
or sell Registrable Securities by reason of this Section 4(c)).
5. Holdback Agreements, etc.
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(a) Restrictions on Public Sale by Holders of Registrable Securities.
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The Purchaser and each other holder of Registrable Securities whose Registrable
Securities are covered by a Registration Statement filed pursuant to Section 3
hereof agrees, if requested by the managing underwriters in an underwritten
offering (to the extent timely notified in writing by the Company or the
managing underwriters), not to effect any public sale or distribution of
securities of the Company of any class, including a sale pursuant to Rule 144
(except as part of such underwritten offering), during the 10-day period prior
to and the 90-day period beginning on, the effective date of any Registration
Statement.
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(b) Exclusions by Law. The provisions of Section 5(a) hereof shall not
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apply to any holder of Registrable Securities if such holder is prevented by
applicable law from entering into any such agreement; provided, however, that
any such holder shall undertake in its request to participate in any such
underwritten offering not to effect any public sale or distribution of the class
of Registrable Securities covered by such Registration Statement (except as part
of such underwritten offering) during such period unless it has provided five
(5) business days prior written notice of such sale or distribution to the
managing underwriter or underwriters.
(c) Full Cooperation. The Purchaser and each other holder of
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Registrable Securities included or proposed to be included in any Registration
Statement shall, as a condition precedent to the Company having any obligations
to such holder hereunder, cooperate fully in all reasonable respects with the
Company in connection with the preparation and filing of the Registration
Statement, and otherwise in connection with such registration and any
underwriting thereof; and timely comply with all of such holder's obligations
hereunder.
6. Indemnification
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(a) Indemnification by Company. The Company shall indemnify and hold
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harmless, to the full extent permitted by law, each holder of Registrable
Securities, its officers, directors, agents and employees, each person who
controls such holder (within the meaning of Section 15 of the Securities Act or
Section 20 of the Exchange Act), and the partners, officers, directors, agents
or employees of any such controlling person, from and against all losses,
claims, damages, liabilities, and reasonable costs (including, without
limitation, reasonable attorneys' fees reasonably incurred in accordance with
the provisions of this Section 6, but subject to the limitations herein
provided) and expenses (collectively, "Losses"), arising out of or based upon
any untrue statement of a material fact contained in any Registration Statement,
Prospectus or preliminary prospectus, or arising out of or based upon any
omission of a material fact required to be stated therein or necessary to make
the statements therein in light of the circumstances under which they were made
(in the case of any Prospectus) not misleading, except insofar as the same are
based solely upon information furnished to the Company by such holder for use
therein; provided, however, that the Company shall not be liable in any such
case to the extent that any such Loss arises out of or is based upon an untrue
statement or omission made in any preliminary prospectus or Prospectus if (i)
such holder failed to send or deliver a copy of the Prospectus or Prospectus
supplement with or prior to the delivery of written confirmation of the sale of
Registrable Securities and (ii) the Prospectus or Prospectus supplement would
have corrected such untrue statement or omission.
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(b) Indemnification by Holder of Registrable Securities. In connection
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with any Registration Statement in which a holder of Registrable Securities is
participating, such holder of Registrable Securities shall, promptly following
the Company's request therefor, furnish to the Company in writing such
information concerning such holder and its proposed disposition of Registrable
Securities pursuant to such registration as the Company may reasonably request
for use in connection with any Registration Statement or Prospectus. Each
Investor shall indemnify and hold harmless, to the full extent permitted by law,
the Company, and its officers, directors, agents and employees, each person who
controls the Company (within the meaning of Section 15 of the Securities Act or
Section 20 of the Exchange Act) and the officers, directors, agents or employees
of any such controlling person, from and against all Losses arising out of or
based upon any untrue statement of a material fact contained in any Registration
Statement, Prospectus or preliminary prospectus, or arising out of or based upon
any omission of a material fact required to be stated therein or necessary to
make the statements therein in light of the circumstances under which they were
made (in the case of any Prospectus) not misleading, to the extent, but only to
the extent, that such untrue statement or omission is contained in any
information so furnished in writing by such holder to the Company for use in
such Registration Statement, Prospectus or preliminary prospectus. Such
indemnity shall remain in full force and effect regardless of any investigation
made by or on behalf of the Company or any holder and any of their respective
directors, officers, agents, employees or controlling persons (within the
meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act)
and shall survive the transfer of such securities by such holder.
(c) Conduct of Indemnification Proceedings. If any action or
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proceeding (including any governmental investigation or inquiry) shall be
brought or any claim shall be asserted against any person entitled to indemnity
hereunder (an "indemnified party"), such indemnified party shall promptly notify
the party from which such indemnity is sought (the "indemnifying party") in
writing, and the indemnifying party shall assume the defense thereof, including
the employment of counsel reasonably satisfactory to the indemnified party
(unless the Company is the indemnifying party, in which event it shall be
entitled to select counsel satisfactory to it in its discretion) and the payment
of all fees and expenses incurred by the indemnifying party in connection with
the defense thereof. All reasonable fees and expenses (including any fees and
expenses theretofore incurred in connection with investigating or preparing to
defend such action or proceeding) theretofore incurred by the indemnified party,
shall be paid to the indemnified party, after they are so incurred, within 60
days of written notice thereof to the indemnifying party; provided, however,
that if, in accordance with this Section 6, the indemnifying party is not liable
to the indemnified party, such fees and expenses shall be returned promptly to
the indemnifying party. Any such indemnified party shall have the right to
employ separate counsel in any such action, claim or proceeding and to
participate in the defense thereof, but the fees and expenses of such counsel
shall be the sole expense of such indemnified party unless (a) the indemnifying
party has agreed to pay such fees and expenses, (b) the indemnifying party shall
have failed promptly to assume the defense of such action, claim or proceeding
and to employ counsel reasonably satisfactory to the indemnified party in any
such action, claim or proceeding, or (c) the named parties to any such action,
claim or proceeding (including any impleaded parties) include both such
indemnified party and the indemnifying party, and such indemnified party shall
have been advised by counsel, acting reasonably, that there are one or more
legal defenses available to it which are different from or additional to those
available to the indemnifying party (in which case, if such indemnified party
notifies the indemnifying party in writing that it elects to employ separate
counsel at the expense (it being understood and agreed that the indemnifying
party shall be responsible only for reasonable such expenses) of the
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indemnifying party, the indemnifying party shall not have the right to assume
the defense of such action, claim or proceeding on behalf of such indemnified
party, it being understood, however, that the indemnifying party shall not, in
connection with any one such action, claim or proceeding or separate but
substantially similar or related actions, claims or proceedings in the same
jurisdiction arising out of the same general allegations or circumstances, be
liable for the reasonable fees and expenses of more than one separate firm of
attorneys (together with appropriate local counsel) at any time for all such
indemnified parties hereunder, unless in the reasonable opinion of counsel for
such indemnified party a bona fide conflict of interest exists between such
indemnified party and any other of such indemnified parties with respect to such
action, claim or proceeding, in which event the indemnifying party shall be
obligated to pay the reasonable fees and expenses of such additional counsel or
counsels). No indemnifying party will consent to entry of any judgment or enter
into any settlement which does not include as an unconditional term thereof the
release of such indemnified party from all liability in respect to such claim or
litigation without the written consent (which consent will not be unreasonably
withheld) of the indemnified party. No indemnified party shall consent to entry
of any judgment or enter into any set-tlement without the written consent (which
consent will not be unreasonably withheld) of the indemnifying party from which
indemnity or contribution is sought.
(d) Contribution. If the indemnification provided for in this Section
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6 from the indemnifying party is unavailable to an in-demnified party in respect
of any Losses, then each applicable indemnifying party in lieu of indemnifying
such indemnified party hereunder shall contribute to the amount paid or payable
by such indemnified party as a result of such Losses, in such proportion as is
appropriate to reflect the relative fault of the indemnifying party and
indemnified party in connection with the actions, statements or omissions which
resulted in such Losses as well as any other relevant equitable considerations.
The relative fault of such indemnifying party and the indemnified party shall be
determined by reference to, among other things, whether any action in question,
including any untrue statement of a material fact or omission of a material
fact, has been taken or made by, or relates to information supplied by, such
indemnifying party or indemnified party, and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
action, statement or omission. The amount paid or payable by a party as a
result of any Losses shall be deemed to include, subject to the limitations set
forth in this Section 6, any reasonable legal or other fees or expenses
reasonably incurred by such party in connection with any action, suit, claim,
investigation or proceeding.
The parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section 6(d) were determined by pro rata
allocation or by any other method of allocation which does not take into account
the equitable considerations referred to in the immediately preceding paragraph
of this Section 6(d). No person guilty of fraudulent misrepresentation (within
the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation.
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7. Underwritten Registrations
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Notwithstanding anything to the contrary set forth in this RR Agreement, if
any of the Registrable Securities covered by any registration are to be sold in
an underwritten offering, the investment banker or investment bankers and
manager or managers that will administer the offering will be selected by the
Company in its sole discretion. Notwithstanding anything to the contrary set
forth in this RR Agreement, no holder of Registrable Securities may participate
in any underwritten registration hereunder unless such holder (i) agrees to sell
such holder's Registrable Securities on the basis provided in the underwriting
arrangements approved by the Company, and (ii) completes and executes all
questionnaires, powers of attorney, indemnities, underwriting agreements and
other documents required under the terms of such underwriting arrangements.
8. Miscellaneous
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(a) Amendments and Waivers. Except to the extent otherwise
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contemplated by the provisions included in the definition of Registrable
Securities contained in Section 1 hereof, the provisions of this RR Agreement,
including the provisions of this sentence, may not be amended, modified or
supplemented, and waivers or consents to departures from the provisions hereof
may not be given unless the Company obtains the written consent (which consent
will not unreasonably be withheld) of holders of at least a majority of the then
outstanding Registrable Securities affected by such amendment, modification or
supplement. Notwithstanding the foregoing, a waiver or consent to depart from
the provisions hereof with respect to a matter which relates exclusively to the
rights of holders of Registrable Securities whose securities are being sold
pursuant to a Registration Statement and which does not directly or indirectly
affect the rights of holders of Registrable Securities whose securities are not
being sold pursuant to such Registration Statement may be given by holders of a
majority of the Registrable Securities being sold by such holders.
(b) Notices. All notices and other communications required or
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permitted to be made to the Purchaser or the Company hereunder shall be made as
provided in Section 14 of the Agreement.
(c) Transfer of Registration Rights. The rights granted to the
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Purchaser pursuant to this RR Agreement to cause the Company to register such
Purchaser's Registrable Securities may not be assigned or otherwise transferred
in any way.
(d) Counterparts. This RR Agreement may be executed in two or more
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counterparts, each of which when so executed shall be deemed to be an original
and all of which taken together shall constitute one and the same agreement.
(e) Headings. The headings in this RR Agreement are for convenience of
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reference only and shall not limit or otherwise affect the meaning hereof.
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(f) Governing Law. This RR Agreement shall be governed by and
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construed in accordance with the laws of the State of Delaware without regard to
principles of conflict of laws.
(g) Severability. If any term, provision, covenant or restriction of
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this RR Agreement is held by a court of competent jurisdiction to be invalid,
void or unenforceable, the remainder of the terms, provisions, covenants and
restrictions set forth herein shall remain in full force and effect and shall in
no way be affected, impaired or invalidated, and the parties hereto shall use
their best efforts to find and employ an alternative means to achieve the same
or substantially the same result as that contemplated by such term, provision,
covenant or restriction. It is hereby stipulated and declared to be the
intention of the parties that they would have executed the remaining terms,
provisions, covenants and restrictions without including any of such which may
be hereafter declared invalid, void or unenforceable.
IN WITNESS WHEREOF, the parties have executed this RR Agreement as of the
date first above written.
PURCHASER:
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__________________________________________
By:_______________________________________
Name:__________________________________
Title:_________________________________
PENN OCTANE CORPORATION
By:_______________________________________
Ian T. Bothwell, Vice President and
Chief Financial Officer
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