STOCK PURCHASE AND SEPARATION AGREEMENT
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This Stock and Separation Agreement is made and executed this 22 day of
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July, 2003 (hereafter the "Effective Date") by and between Jorge Bracamontes
(hereafter "Employee") and Penn-Octane Corporation (hereafter "Penn-Octane");
and
WHEREAS, Penn-Octane is engaged in the sale and transportation of LPG and
other petroleum products.
WHEREAS, Penn-Octane owns and operates its Mexican related assets through
various affiliates and subsidiaries, including Penn-Octane de Mexico S.A. de
C.V., Tergas, S.A. de C.V., and Termatsal, S.A. de C.V. (hereafter referred to
as "Affiliates"); and
WHEREAS, Bracamontes has been employed by Penn-Octane as Director,
Executive Vice President and Secretary and as Director, Director General,
general manager or administrator of the Affiliates pertaining to their
operations in Mexico; and
WHEREAS, Bracamontes and Penn-Octane have agreed to the sale and transfer
by Bracamontes of all of Bracamontes's stock ownership in Tergas, S.A. DE C.V.
IN ADDITION, S.A. DE C.V. Bracamontes and Penn-Octane had previously agreed to
the sale and transfer of all of Bracamontes's stock ownership in Penn Octane de
Mexico, S.A. de C.V. and Termatsal, S.A. de C.V., which such sale and transfer
of shares may still be subject to completion; and
WHEREAS, Bracamontes and Penn-Octane have agreed to the ultimate separation
and termination of his employment relationship with Penn-Octane and the
Affiliates.
NOW, THEREFORE, in consideration of the mutual covenants herein contained,
the parties hereby mutually agree as follows:
1. Sale of Stock in Tergas, S.A. de C.V. On the Closing Date (as
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hereafter defined). Bracamontes shall transfer, assign and convey, free and
clear of all liens, claims and encumbrances, all of the stock which he owns in
Tergas, S.A. de C.V. (being 90% of the outstanding shares of stock in such
Company) to the person designated by Penn-Octane (hereafter the "Designated
Person"). Bracamontes covenants to immediately deliver copies of all of the
legal and corporate documents pertaining to Tergas, S.A. de C.V. (including all
stock transfer ledgers, minutes of all shareholder and/or directors meetings and
all documents whatsoever pertaining to Tergas, S.A., de C. V. ). On the Closing
date, Bracamontes shall execute all documents necessary to absolutely and
legally
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transfer all legal and equitable ownership of his stock in Tergas, S.A. de C.V.
to the Designated Person. The documents of transfer shall be in form and
substance acceptable to the attorneys appointed by Penn-Octane.
2. SALE OF STOCK IN TERMATSAL, S.A. DE C.V. AND PENN-OCTANE DE MEXICO,
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S.A. DE C.V. On the Closing Date, Bracamontes shall take all necessary steps
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required to immediately and effectively complete the transfer and sale of all of
his stock in Termatsal and Penn-Octane de Mexico, to the Designated Person,
Bracamontes agrees that such transfers will be free and clear of all liens,
claims and encumbrances. Bracamontes covenants to immediately deliver copies of
all of the legal and corporate documents pertaining to Termatsal, S.A. de C.V.
and Penn-Octane de Mexico (including all stock transfer ledgers, minutes of all
shareholder and/or directors meetings and all documents whatsoever pertaining to
Termatsal, S.A. de C.V. and Penn-Octane de Mexico) and to execute any documents
necessary to absolutely and legally transfer all legal and equitable ownership
of his stock in Termatsal and Penn-Octane de Mexico to Penn-Octane or its
designee. The documents of transfer shall be in form and substance acceptable to
the attorneys appointed by Penn-Octane.
3. Terms of Employment. As of the Effective Date, Bracamontes agrees to
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resign from all positions he currently holds with the Affiliates. The parties
agree that Bracamontes shall be hereafter employed as an employee of Penn-Octane
Corporation to provide services from date hereof to (i) assist in the business
development of Penn-Octane and (ii) to provide the information, documents and
assistance required of him to fully comply with the terms of this Agreement. The
term of such employment shall be from the date of this Agreement until March 31,
2004, whereupon Bracamontes shall cease to be employed by Penn-Octane. In
connection with these services, Bracamontes will receive a monthly salary as
provided for herein.
4. WINDING DOWN OF EMPLOYMENT. As of the Effective Date (but prior to
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the Closing Date) (as hereafter defined), and as a condition precedent to the
Closing and to the payment of any consideration or salary by Penn-Octane to
Bracamontes, Bracamontes shall undertake to provide or perform the following:
a. Perform all actions necessary to execute and register a transfer of
all shares owned by Bracamontes in (i) Penn-Octane de Mexico, S.A de C.V. and
Termatsal, S.A. de C.V. to Penn-Octane, and (ii) Tergas, S.A. de C.V. to the
Designated Person. Immediately subsequent to his execution of this Agreement,
Bracamontes shall deliver his resignation as an officer, employee, agent,
director, administrator (or any other
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position whatsoever of Penn-Octane de Mexico, S.A. de C.V., Tergas, S.A. de C.V.
and Termatsal, S.A. de C.V. and shall thereafter cease to have any involvement
with any of the Affiliates. Such resignations shall occur at a time and date as
designated by Penn-Octant and the documents of resignation shall be in form and
substance acceptable to the attorneys appointed by Penn-Octane.
b. Provide and deliver to such persons, attorneys or accountants as may
be appointed or designated by Penn-Octane to receive such documents the
following: (i) all original documents, including but not limited to, all
original corporate documents of and relating to Penn-Octane de Mexico, S.A. de
C.V., Tergas, S.A de C.V., and Termatsal, S.A. de C.V. (including all original
corporate books, original stock registers and transfer ledgers, all corporate
minutes, all articles or incorporation, all powers of attorney granted by any of
the Affiliates, agreements, contracts, manuals and any all other governmental
filings made by the Affiliates) and (ii) all accounting records and documents of
and relating to Penn-Octane de Mexico, S.A. de C.V., Tergas, S.A. de C.V., and
Termatsal, S.A. de C.V. (including all tax returns and other governmental
reports filed by each Affiliate). In addition, Bracamontes will perform any and
all actions required of him in order to properly dissolve or transfer ownership
in any other Mexican company created in connection with Penn-Octane's pervious
compressed natural gas business ("CNG") or any other subsidiary of any of the
Affiliates. Bracamontes will also cease to have any responsibilities related to
CNG companies as described above.
c. Execute an assignment of any all permits and authorizat5ions held in
the name of Bracamontes, which permits and authorizations pertain to (i) the
operation of all pipelines and facilities utilized by Penn-Octane de Mexico,
S.A. de C.V., Tergas, S.A. de C.V., or Termatsal, S.A. de C.V. or (ii) the
distribution of any petroleum products distributed or sold by Penn-Octane de
Mexico, S.A. de C.V., Tergas, S.A. de C.V., or Termatsal, S.A. de C.V.
d. Provide all necessary assistance and all financial information and
documentation pertaining to the Affiliates and deliver all documents pertaining
to the Affiliates to allow the persons designated by Penn-Octane to (i) review
and audit all financial records (including contracts, previous transactions and
tax returns), (ii) manage the ongoing day to day affairs of the Affiliates,
(iii) make all required filings or reports, certifications, statements, tax
declarations required of the Affiliates in connection wit5h the ongoing business
operations of the Affiliates, (iv)
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provide a complete understanding of the internal controls and systems employed
by the Affiliates (policies, employee salaries and obligations).
e. Provide all necessary assistance and information and deliver all
documents to allow the persons designated by Penn-Octane to finalize all
agreements related to Transfer Pricing Agreements to be executed by and between
Penn-Octane and any of the Affiliates.
f. Execute and deliver such documents necessary to allow Penn-Octane
and its Affiliates to immediately transfer all corporate records to a new office
to be established by the Affiliates in Mexico City, which initial office shall
be the office of the attorneys (to be designated by Penn-Octane) for the
Affiliates.
g. Assist the accountants of the Affiliates (to be designated by
Penn-octane) in undertaking and performing an audit of all of the Affiliates.
h. Provide a listing of and copies of all contracts, notes, or other
agreements which reflect any outstanding liability or contingent liability of
Penn-Octane or any Affiliates as of the date of this Agreement.
i. Assist in the smooth transition of the tax accounting and payroll
functions for the Affiliates to accountants designated by Penn-Octane, including
movement of all corporate accounting records currently maintained by the
Affiliates current tax accountant.
j. Assist Penn-Octane management in determining all current and future
responsibilities of the Affiliates in connection with existing operations (CRE,
llacienda and other agencies).
k. Execute all non-executed corporate documents which related to events
that occurred prior to the date of this agreement including audit representation
letter for the April 30, 2003 10Q, Board minutes for any board meeting prior to
the date of this agreement and written consent to allow the Designated Person to
take actions necessary for the resolution of Mexican lawsuits.
5. Compensation. Upon his complete fulfillment of all of the terms of
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this Agreement and for his agreement to fulfill his prospective duties as an
employee of Penn-Octane, Bracamontes shall receive the following compensation:
a. As an employee of Penn-Octane, Bracamontes will receive a salary of
$15,000.00 per month, which amount shall be paid through March 31, 2004, at
which time Bracamontes shall cease to have any further
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association with Penn-Octane.
b. As consideration for the purchase price of his stock in Tergas, S.A.
de C.V. (and to the extent of any previous or concurrent transfer of stock
related to Penn-Octane de Mexico and Termatsal), a loan extended by Penn-Octane
to Bracamontes in the principal amount of $498,000 and a loan extended to the
wife of Bracamontes in the principal amount of approximately $46,600, which
loans were utilized by them to purchase 215,000 common shares of Penn-Octane
stock (of which they still own 215,000 shares) shall be forgiven on the Closing
Date.
C. All existing warrants (340,000) to purchase shares in Penn-Octane
currently owned by Bracamontes shall be honored, except that the warrants (like
all other warrants issued by Penn-Octane) may be modified to comply with the
terms and conditions of the conversion of Penn-Octane to a publicly traded
partnership.
d. If Penn-Octane of its Affiliates extend the current existing
pipelines to Monterrey, Mexico, and the net revenue generated by the extension
of such pipelines results in a (i) 20% net revenue generated return (the return
being projected on the earnings measured before the imposition of taxes,
depreciation and amortization, EBITDA, as computed under generally accepted
accounting principles), and (ii) provided that a minimum seven year agreement is
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executed by Penn-Octane with Pemex Gas and Petrochemical in calendar year 2003
for the utilization of such pipelines at a rate that will generate a 20% capital
cost return, the Bracamontes shall be paid (a) a bonus of $250,000.00 on the
first day after the pipeline agreement has been executed by and between Pemex
Gas and Petrochemical and Penn-Octane Corporation and (b) an additional $250,000
bonus will be paid on the first day after full time commercial operation of the
extended pipelines begins. In order to guarantee the payment of the compensation
described in this sub-paragraph (d) Penn-Octane shall cause to be pledged
100,000 shares of its common shares to be pledged, as collateral, for the
payment of such consideration.
6. WARRANTIES, REPRESENTATIONS AND COVENANTS OF BRACAMONTES.
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Bracamontes hereby represents and warrants that the following warranties and
representation contained in this Agreement are true and correct as of the
Effective Date of this Agreement, and shall be true and correct on and as of the
Closing Date, as hereafter defined. In addition to the other representations and
warranties contained elsewhere in this Agreement, Bracamontes represents,
warrants and covenants to Penn-Octant and its Affiliates as follows:
(a) Bracamontes is the legal and lawful owner of the following
ownership interests in the Companies:
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(i) a ninety percent (90%) interest in Penn-Octane de Mexico, S.A.
de C.V.;
(ii) a ninety percent (90%) interest in Tergas, S.A. de C.V.; and
(iii) a ninety percent (90%) interest in Termatsal, S.A. de C.V.
(b) Bracamontes has full legal right, power and authority to enter into
this Agreement;
(c) Bracamontes has full legal right, power and authority to exchange,
assign and transfer to the persons designated by Penn-Octane, all of
Bracamontes's ownership interests in the Affiliates, free and clear of all
liens, encumbrances, options and claims of ever kind. The delivery by
Bracamontes of his ownership interests in the Affiliates to person(s) designated
by Penn-Octane pursuant to the provisions of this Agreement will transfer title
thereto, free and clear of all liens, encumbrances, options and claims of any
kind.
(d) The ownership interest owned by Bracamontes in the Affiliates are
duly and validly authorized and issued, fully paid and non-assessable, and were
not issued in violation of the preemptive rights of any shareholder. Other than
as identified herein, Bracamontes owns no option, warrant, call or commitment of
any kind obligating the Affiliates or Penn-Octane to issue shares in the
Affiliates or Penn-Octane to him or any other third party.
(e) This Agreement will be duly executed and delivered by the
Bracamontes and is a valid, legally binding and enforceable obligation of
Bracamontes, subject to the effects of bankruptcy, insolvency, reorganization,
moratorium, or other similar laws relating to creditor's rights generally and to
general equitable principals.
(f) Neither the execution, delivery or the consummation of all of the
transactions contemplated hereby (taken as a whole) will violate (with or
without the giving of notice or the passage of time), be in conflict with,
result in a breach or termination of any provision of, cause acceleration of the
maturity of any debt or obligation pursuant to, constitute a default under, or
result in the creation of any security interest, lien, charge or encumbrance
upon Bracamontes's ownership interests in any of the Affiliates, or any
indenture, mortgage, deed of trust or other agreement or understanding or any
other restriction of any kind or character, to which any such Bracamontes's
ownership interests in the Affiliates, or the Companies, are subject or bound.
(g) Bracamontes has not entered into any agreements on behalf of any of
the Affiliates, wherein any of the permits, licenses, franchises, certificates,
easements, real property leases, terminals, assets, trade names, or
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parents, owned or held by any of the Affiliates or Penn-Octane, have been sold,
licensed, leased, made part of any joint use or venture or subjected to any
alienations whatsoever which would not provide the Affiliates with sole and
exclusive use.
(h) As of the Effective Date, all agreements and contracts between
Bracamontes and any of the Affiliates, other than as provided in this Agreement,
or by which the Affiliates or Penn-Octane, are obligated with respect to any of
the Affiliates' or Penn-Octane's assets, including but not limited to, joint
venture or partnership agreements, consulting contracts, employment contracts,
loan agreements, bonds, mortgages, liens, pledges or other security agreements,
are terminated.
(i) No approval of any governmental authority or administrative agency
or any third party is necessary to authorize the execution of this Agreement by
Bracamontes or the consummation of the transactions contemplated hereby.
(j) As of the Effective Date, all contracts and agreements between
Bracamontes and any Affiliate or Penn-Octane, other than this Agreement, are
terminated.
(k) As of the Effective Date, there are no receivables due from
Bracamontes or any entity falling within the SEC meaning of "affiliate."
Bracamontes has not used any of the assets of the Affiliates to acquire any
assets for his personal use other than previously disclosed to Penn-Octane.
(l) Other than the payments which he will receive pursuant to this
Agreement, Bracamontes warrants that he is not owed any additional amounts on
monies or benefits of any kind whatsoever (including any severance pay
obligations or other obligations arising under Mexican law) related to his
involvement with the Affiliates.
(m) Bracamontes has complied with all provisions of the Foreign Corrupt
Practices Act and no affiliate is in violation of any provision of the Foreign
Corrupt Practices Act.
(n) Bracamontes is aware of no obligation, default or risk associated
with the Affiliates which has not been disclosed in the Financial Statements of
the Affiliates or been disclosed in writing either in such Financial Statements
or to Penn-Octane.
(o) Bracamontes is not aware of any activity, agreement or action
performed through the effective Date which has been done inaccurately or with
the risk that such activity would lead to nullification or voidance of
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any document or agreement.
(p) Bracamontes is voluntarily resigning from his positions with the
Affiliates. Such resignation is not the result of any disagreement regarding any
operation, legal matter, accounting principal or any other issue brought forward
by Bracamontes for which the Company is unwilling to address satisfactorily.
(s) There is no pending or threatened litigation in Mexico against
Penn-Octane Corporation or any of the Affiliates.
(t) Each Affiliate is in full compliance with any and all requirements
related to its business operations (including the operation of the terminals);
all necessary permits have been obtained by each Affiliate and such permits are
in full force and effect; all lands and real property on which any terminal or
other improvement is owned free and clear of all liens, claims and encumbrances
by one of the Affiliates; and all Affiliates are in full compliance with all
Mexican environmental laws rules and regulations.
(u) The Financial Statements of each Affiliate are current and fairly
present the financial position of such Affiliate as of the dates thereof and the
results or operations and changes in financial position for the periods then
ended, in conformity with generally accepted accounting principles and the
accounting records underlying the Financial Statements accurately and fairly
reflect the transactions of such Affiliates. The Affiliates do not have any
liabilities or obligations of a type which would be included in or reflected on
a balance sheet, and notes and schedules thereto, prepared in accordance with
generally accepted accounting principles, whether related to tax or non-tax
matters, accrued or contingent, due or not yet due, liquidated or unliquidated,
or otherwise, including, without limitation, any debt or liability on account of
taxes of any kind or any governmental charges or penalty, interest or fines,
excepted or reflected in the consolidated unaudited balance sheet of each
Affiliate as of the balance sheet date or liabilities incurred each Affiliate in
the ordinary course of business since the balance sheet date (none of which
have, individually or in the aggregate, materially or adversely affect the
business assets, liabilities, results or operations, condition (financial or
otherwise) or prospects of the Affiliates).
(v) All liabilities which they have incurred on behalf of each
Affiliate of any kind, character and
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description, whether accrued, absolute, contingent or otherwise, together with,
in the case of those liabilities as to which the liabilities are not fixed, an
estimate of the maximum amount which may be payable are fully reflected in the
Financial Statements of the Affiliates.
(w) All permits, licenses, franchises, certificates, trademarks, trade
names, patents, patent applications and copyrights, owned or held by any of the
Affiliates, are now valid and in good standing are fully reflected in the
Financial Statements of the Affiliates.
(x) All the fixed assets of the Companies, including true and correct
copies of leases and easements on properties on which are situated buildings,
terminals, pipelines, pumps, and other structures used in the operation of the
business have been fully accounted for in the preparation of the Financial
Statements.
7. COVENANTS PRIOR TO CLOSING. As of the Effective Date of this
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Agreement, or at any time subsequent thereto, Bracamontes shall not have voted
for or participated in any actions on behalf of any of the Affiliates which have
resulted or may result in:
(i) any declaration or payment of any dividend or distribution in
respect to the Affiliates or any direct or indirect redemption,
purchase or other acquisition or any of the ownership interest of
the Affiliates;
(ii) any increase in the compensation payable by the Affiliates to
Bracamontes or any bonus payment or arrangement made to or with
Bracamontes or any Affiliate;
(iii) any transaction by the Affiliates outside the ordinary course of
their respective business;
(iv) any amendment to the Affiliates' articles or organization,
bylaws, regulations and operating agreements of the Companies;
(v) any change in the number of shares of any of the Affiliates or
the issuance, reservation of issuance, the grant, sale or
authorization for the issuance of any shares in any of the
Affiliates or subscriptions, options, warrants, calls, rights or
commitments of any kind relating to the issuance or sale of or
conversion into shares in any of the Affiliates;
(vi) the creating of any obligation or liability on behalf of any of
the Affiliates (absolute, accrued, contingent or otherwise) other
than in the normal course of business which is reflected on the
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books and records of the Affiliates;
(vii) the creation of any mortgage, pledge, lien, security interest or
encumbrances, restrictions, or charge of any kind on behalf of
any of the Affiliates and/or the Affiliates' assets other than in
the normal course of business which is reflected on the books and
records of the Affiliates;
(viii) the cancellation of any debts owing to any of the Affiliates
other than in the normal course of business which is reflected on
the books and records of the Affiliates, waiver of any claims or
rights of value of any of the Affiliates other than in the normal
course of business which is reflected on the books and records of
the Affiliates, or the sale, transfer or other disposition of any
of the properties or assets of any of the Affiliates other than
in the normal course of business which is reflected on the books
and records of the Affiliates;
(ix) disposition or the lapse of any rights to the use of any
trademark, service mark, trade name or copyright, or disposed of
or disclosed to any person other than its Bracamontes any
material trade secret not theretofore a matter of public
knowledge;
(x) any increase in compensation or payment or agreement to pay or
accrue any bonus or like benefit to or for the credit of any
manager, shareholder, director, officer, Bracamontes or other
person (other than usual cost of living increases,) or the entry
into any employment or consulting agreement or other agreement
for personal services with any director, officer or Bracamontes;
or
(xi) the modification or amendment of any contract or commitment other
than in the ordinary course of business, consistent with prudent
business practices, which is reflected on the books and records
of the Affiliates.
(xii) Bracamontes waives any and all applicable preemptive rights,
options and restrictions on transfer of the shares in the
Affiliates.
(xiii) No related party transaction between the Affiliates and
Bracamontes and/or any of his affiliates (affiliates as defined
by the SEC), including loans, advances, purchase, or entering of
contracts.
(xiv) Cease to make any binding obligation on the part Penn-Octane or
the Affiliates from the date of the agreement.
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8. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The representations and
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warranties of the Parties contained in the Agreement shall survive the
consummation of the transactions contemplated hereby for a period of two years
following the Closing Date.
9. CLOSING DATE AND CLOSING OBLIGATIONS.
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(a) If all of the conditions required to be performed have been
accomplished by such date, the Closing shall occur at 10:00 a.m., on July 30,
2003, at the offices of Sanchez, Whittington, Janis & Zaharte, 100 North
Expressway 83, Brownsville, Texas.
(b) Prior to the Closing Date, Bracamontes shall have:
(i) executed and delivered to Penn-Octane all documents necessary
to convey, transfer and assign to the Designated Person(s), by
endorsement, assignment, bill of sale and other instruments of
transfer as may be reasonably requested by Penn-Octane.
Bracamontes' entire ownership interest sin the Affiliates, free
and clear of all third party claims, including third party lien
claims (the foregoing hereinafter referred to as "Bracamontes'
Closing Obligations"). The transfer by Bracamontes shall
therefore be subject to and contingent upon the Affiliates
receiving such documents.
(ii) performed all of the matters outlined in Paragraph 5 above
and be in full compliance with all of the warranties,
representations and covenants outlined in Paragraph 6 above and
not be in violation of any covenant outlined in Paragraph 7
above.
(c) provided that Bracamontes has fully complied with all of the
terms and conditions of this Agreement, on the Closing Date, the Affiliates and
Penn-Octane shall execute and deliver to Bracamontes all documents necessary to
release Bracamontes from the indebtedness identified in Paragraph 5 (b) above
(the foregoing execution and delivery of documents hereinafter referred to as
the "Companies' Closing Obligations").
10. TEXAS LAW TO APPLY. This Agreement shall be construed under and
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in accordance with the laws of the State of Texas, and all obligations of the
Parties created hereunder are performable in Cameron County, Texas.
11. PARTIES HEIRS. This Agreement is binding upon and inures to the
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benefit of the Parties and their
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respective heirs, executors, administrators, legal representatives, successors,
assigns, (if permitted by this Agreement), shareholders, members, directors,
managers, officers, Bracamontes and agents.
12. LEGAL CONSTRUCTION. In case any one or more of the provisions
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contained in this Agreement shall for any reason be held to be invalid, illegal,
or unenforceable in any respect, this invalidity, illegality, or
unenforceability shall not affect any other provision hereof, and this Agreement
shall be construed as if the invalid, illegal, or unenforceable provision had
never been contained herein.
13. PRIOR AGREEMENTS SUPERCEDED. This Agreement constitutes the
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sole and only agreement of the Parties with respect to all matters
mentioned in this Agreement and with respect to all matters and issues
relating or pending by and between the parties and supersedes any prior
understandings or written or oral agreements between or among the Parties
respecting the within subject matter.
14. A. RELEASE OF PENN-OCTANE. At the Closing Date, except for the
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obligations of the Parties as provided in this Agreement, in consideration
of the mutual covenants and agreements contained herein, and other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged and confessed by the Bracamontes, his heirs, assigns and legal
representatives shall RELEASE, ACQUIT and FOREVER DISCHARGE Penn-Octane and
each of the Affiliates, their assigns, legal representatives, shareholders,
members, directors, managers, officers, employees and agents, from and
against any and all claims, demands, controversies, actions and causes of
action of any and every character, whether known or unknown, past, present,
or future, accruing, or which has or may hereafter accrue, in favor of
Bracamontes, or anyone claiming by, through or under him, for any and all
liabilities, claims, damages, personal injury or death, losses, liens,
fines, penalties, costs, causes of action, suits, judgments, settlements
and expenses, of any and every kind and nature, arising out of, involving,
or in any way relating to any business dealings, past employment and
affiliation, in whatever capacity whatsoever, by Bracamontes with
Penn-Octane Corporation, Penn-Octane de Mexico, S.A. de C.V., Tergas, S.A.
de C.V., or Termatsal, S.A. de C.V.
B. RELEASE OF BRACAMONTES. At the Closing Date, except for the
----------------------
obligations of the Parties as provided in this Agreement, in consideration
of the mutual covenants and agreements contained herein, and other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged and
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confessed by the Penn-Octane, its successors and assigns shall RELEASE,
ACQUIT and FOREVER DISCHARGE Bracamontes, from any against any and all
claims, demands, controversies, actions, and causes of action of any and
every character, whether known or unknown, past, present or future,
accruing, or which has or may hereafter accrue, in favor of Penn-Octane, or
anyone claiming by, through or under it, for any and all liabilities,
claims, damages, personal injury or death, losses, liens, fines, penalties,
costs, causes of action, suits, judgments, settlements and expenses, of any
and every kind and nature, arising out of, involving, or in any way
relating to any business dealings, past employment and affiliation, in
whatever capacity whatsoever, by Bracamontes with Penn-Octane Corporation,
Penn-Octane de Mexico, S.A. de C.V., Tergas, S.A. de C.V., or Termatsal,
S.A. de C.V. This release of Bracamontes shall not apply to any action
based upon any claims for fraud which may exceed $200,000 in the aggregate.
15. A. INDEMNIFICATION OF PENN-OCTANE AND AFFILIATES. Bracamontes
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covenants and agrees that he will indemnify, defend and hold Penn-Octane and the
Affiliates harmless, from and after the Closing Date, from and against any Loss
(as hereinafter defined) asserted against, resulting to, imposed upon or
incurred or suffered by Penn-Octane or any Affiliate, directly or indirectly, as
a result of, or arising from any of the following:
(a) any inaccuracy in any of the representations and warranties made
herein or in any Schedule attached hereto or any facts or
circumstances constituting such inaccuracy;
(b) any breach or nonfulfillment by the Bracamontes of the covenants
or agreements set forth in this Agreement or any facts or
circumstances constituting such breach or nonfulfillment;
(c) any liability related to a default on or prior to the Closing
Date by Bracamontes in performance of any of his agreements.
All of the foregoing matters set forth in subsections (a) through (g) are
each an "Indemnified Claim" and, collectively, the "Indemnified Claims."
As used herein, "Loss" or "Losses" shall mean any damage, liability or loss
(including, without limitation, reasonable attorneys' fees and court costs and
reasonable costs and expenses incident to, and amounts paid by Penn-Octane or
any of the Affiliates in settlement of, any claim, suit, action or proceeding)
sustained, incurred, paid or required to be paid by Penn-Octane or any
Affiliate, plus interest thereon at an annual rate of interest equal to the
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maximum permissible rate of interest chargeable in the State of Texas from the
date of a notice of claim to the date such claim is paid. The amount of any Loss
shall be reduced by the amount off all payments to or for the account of any of
the Purchasers from insurance companies in respect of such Loss.
B. INDEMNIFICATION OF BRACAMONTES. Penn-Octane covenants and
----------------------------------
agrees that it will indemnify, defend and hold Bracamontes Penn-Octane harmless,
from and after the Closing Date, from and against and Loss (as hereinafter
defined) asserted against, resulting to, imposed upon or incurred or suffered by
Bracamontes, directly or indirectly, as a result of, or arising from any of the
following:
(a) any inaccuracy in any of the representations and warranties made
herein or in any Schedule;
(b) any breach or nonfulfillment by the Penn-Octane of the covenants
or agreements set forth in this Agreement or any facts or
circumstances constituting such breach or nonfulfillment;
(c) any liability related to a default on or prior to the Closing
Date by Penn-Octane in performance of any of his agreements;
(d) any tax liability attributable to Penn-Octane or any of the
Affiliates. The parties agree however that Penn-Octane shall not
be responsible for the payment of any personal income tax
liability or indebtedness which may be incurred by Bracamontes
which may be related to the sale and transfer of the shares.
All of the foregoing matters set forth in subsections (a) through (g) are
each an "Indemnified Claim" and collectively, the "Indemnified Claims."
As used herein, "Loss" or "Losses" shall mean any damage, liability or loss
(including, without limitation, reasonable attorneys' fees and court costs and
reasonable costs and expenses incident to, and amounts paid by Bracamontes in
settlement of, any claim, suit, action or proceeding) sustained, incurred, paid
or required to be paid by Bracamontes, plus interest thereon at an annual rate
of interest equal to the maximum permissible rate of interest chargeable in the
State of Texas from the date of a notice of claim to the date such claim is
paid. The amount of any Loss shall be reduced by the amount of all payments to
or for the account of any of the Purchasers from insurance companies in respect
of such Loss.
16. TERMINATION AND REMEDIES. This Agreement shall be terminated by
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Penn Octane, if at any time
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prior to the closing by:
(a) The mutual consent of Penn Octane and Bracamontes prior to
the Closing Date;
(b) Penn Octane, if the warranties and covenants of Bracamontes
have not been met by the Closing Date;
(c) Bracamontes if the warranties and covenants of Bracamontes
have not been met by the Closing Date.
17. TIME OF ESSENCE. TIME IS OF THE ESSENCE IN THIS AGREEMENT.
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18. NON-COMPETE AGREEMENT. To induce Penn Octane to enter into this
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Agreement, Bracamontes covenants and agrees that for a period of one year after
the Closing Date, he will not, as principal, agent, employee, consultant,
trustee or through the agency of any corporation, partnership, association or
agent or agency, engage in any lf any LPG pipeline business or any other
business currently conducted by the Affiliates and shall not be the owner of
more than 1% of the outstanding capital stock of any corporation or more than 1%
ownership interest in any limited liability company, partnership, or limited
partnership which operates LPG gas pipelines and terminals or conducts LPG
distribution activities or similar business or any other business in competition
with the Affiliates.
IN WLTNESS WHEREOF, THE PARTIES SET THEIR HANDS IN AGREEMENT this JULY,
2003.
PENN OCTANE CORPORATION
BY: ___________________________ ___________________________
JEROME RICHTER JORGE BRACAMONTES
___________________________ ___________________________
WITNESS WITNESS
ALEJANDRO GOMEZ
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