Borrower: PENN OCTANE CORPORATION Lender: Bay Area Bank
900 VETERANS BLVD. 900 Veterans Blvd.
SUITE 240 P.O. Box 2579
REDWOOD CITY, CA 94063 Redwood City, CA 94064
Principal Amount: $251,495.00 Initial Rate: 11.50% Date of Note: April 2, 1997
PROMISE TO PAY, PENN OCTANE CORPORATION ("Borrower") promises to pay to Bay
Area Bank ("Lender"), or order, in lawful money of the United States of
America, the principal amount of Two Hundred Fifty One Thousand Four Hundred
Ninety Five & 00/100 Dollars ($251,495.00), together with interest on the
unpaid principal balance from April 2, 1997, until paid in full.
PAYMENT. Subject to any payment changes resulting from changes in the Index,
Borrower will pay this loan in accordance with the following payment schedule:
STAND-BY LETTER OF CREDIT IN FAVOR OF COUNTY SANITATION DISTRICT OF
ORANGE COUNTY. PAYMENT IS ON DEMAND.
Interest on this Note is computed on a 365/365 simple interest basis; that is,
by applying the ratio of the annual interest rate over the number of days in a
year, multiplied by the outstanding principal balance, multiplied by the
actual number of days the principal balance is outstanding. Borrower will pay
Lender at Lender's address shown above or at such other place as Lender may
designate in writing. Unless otherwise agreed or required by applicable law,
payments will be applied first to any unpaid collection costs and any late
charges, then to any unpaid interest and any remaining amount to principal.
VARIABLE INTEREST RATE. The interest rate on this Note is subject to change
from time to time based on changes in an independent index which is the Rate
as listed in The Wall Street Journal "Money Rates" section, referred to as
"Prime Rate" (the "Index"). The index is not necessarily the lowest charged
by Lender on its loans. If the Index becomes unavailable during the term of
this loan, Lender may designate a substitute index after notice to Borrower.
Lender will tell Borrower the current index rate upon Borrower's request.
Borrower understands that Lender may make loans based on other rates as well.
The interest rate change will not occur more often than each month and is
based ont he published rate in effect on the first business day each month.
If more than one Prime Rate is published, the prime rate chosen shall be
solely at Bank's option. The Index currently is 8.500% per annum. The
interest rate to be applied to the unpaid principal balance of this Note will
be at a rate of 3,000 percentage points over the Index, resulting in a current
rate of 11.500% per annum. NOTICE: Under no circumstances will the interest
rate on this Note be more than the maximum rate allowed by applicable law.
Whenever increases occur in the interest rate, Lender at its option, may do
one or more of the following: (a) increase Borrower's payments to ensure
Borrower's loan will pay off by its original final maturity date, (b) increase
Borrower's payments to cover accruing interest, (c) increase the number of
Borrower's payments, and (d) continue Borrower's payments at the same amount
and increase Borrower's final payment.
DEFAULT. Borrower will be in default if any of the following happens: (a)
Borrower fails to make any payment when due. (b) Borrower breaks any promise
Borrower has made to Lender, or Borrower fails to comply with or to perform
when due any other term, obligation, covenant, or condition contained in this
Note or any agreement related to this Note, or in any other agreement or Loan
Borrower has with Lender. (c) Any representation or statement made or
furnished to Lender by Borrower or on Borrower's behalf is false or misleading
in any material respect either now or at the time made or furnished. (d)
Borrower becomes insolvent, a receiver is appointed for any part of Borrower's
property, Borrower makes an assignment for the creditor tries to take any of
Borrower's property on or in which Lender has a lien or security interest.
This includes a garnishment of any of Borrower's accounts with Lender. (f)
any guarantor dies or any of the other events described in this default
section occurs with respect to any guarantor of this Note. (g) A material
adverse change occurs in Borrower's financial condition, or Lender believes
the prospect of payment or performance of the Indebtedness is impaired.
If any default, other than a default in payment, is curable and if Borrower
has not been given a notice of a breach of the same provision of this Note
within the preceding twelve (12) months, it may be cured (and no event of
default will have occurred) if Borrower, after receiving written notice from
Lender demanding cure of such default (a) cures the default within fifteen
(15) days; or (b) if the cure requires more than fifteen (15) days immediately
initiates steps which Lender deems in Lender's sole discretion to be
sufficient to cure the default and thereafter continues and completes all
reasonable and necessary steps sufficient to produce compliance as soon as
reasonably practical.
LENDER'S RIGHTS. Upon default, Lender may declare the entire unpaid principal
balance on this Note and all accrued unpaid interest immediately due without
notice, and then Borrower will pay that amount. Upon Borrower's failure to
pay all amounts declared due pursuant to this section, including failure to
pay upon final maturity, Lender, at its option, may also, if permitted under
applicable law, increase the variable interest rate on the Note to 8,000
percentage points over the Index. Lender may hire or pay someone else to help
collect this Note if Borrower does not pay. Borrower also will pay Lender
that amount. This includes, subject to any limits under applicable law,
Lender's attorneys' fees and Lender's legal expenses whether or not there is a
lawsuit, including attorneys' fees and legal expenses for bankruptcy
proceedings (including efforts to modify or vacate any other sums provided by
law. This Note has been delivered to Lender and accepted by Lender in the
State of California. If there is a lawsuit, Borrower agrees upon Lenders
request to submit to the jurisdiction of the courts of San Mateo County, the
State of California. This Note shall be governed by and construed in
accordance with the laws of the State of California.
DISHONORED ITEM FEE. Borrower will pay a fee to Lender of $12.00 if Borrower
makes a payment on Borrower's loan and the check or preauthorized charge with
which Borrower pays is later dishonored.
ADDITIONAL PROVISIONS - GUARANTOR. AS AN INDUCEMENT TO LENDER TO EXTEND OR
CONTINUE CREDIT TO BORROWER, THE UNDERSIGNED AGREE(S) NOT TO FURTHER PLEDGE,
ENCUMBER OR SELL THE REAL PROPERTY LOCATED AT 26280 DORI LANE, LOS ALTOS
HILLS, CA. IN ADDITION, IN THE EVENT OF BORROWER'S DEFAULT UNDER THE TERMS OF
ANY NOTE OR SECURITY AGREEMENT EXECUTED IN FAVOR OF LENDER, THE UNDERSIGNED
AGREE(S) TO EXECUTE A DEED OF TRUST IN FAVOR OF LENDER COVERING THE ASSET
LISTED ABOVE.
GENERAL PROVISIONS. This Note is payable on demand. The inclusion of
specific default provisions or rights of Lender shall not preclude Lender's
right to declare payment of this Note on its demand. Lender may delay or
forgo enforcing any of its rights or remedies under this Note without losing
them. Borrower and any other person who signs, guarantees or endorses this
Note, to the extent allowed by law, waive any applicable statute of
limitations, presentment, demand for payment, protest and notice of dishonor.
Upon any change in the terms of this Note, and unless otherwise expressly
stated in writing, no party who signs this Note, whether as maker, guarantor,
accommodation maker or endorser, shall be released from liability. All such
parties agree that Lender may renew or extend (repeatedly and for any length
of time) this loan, or release any party or guarantor or collateral; or
impair, fail to realize upon or perfect Lender's security interest in the
collateral; and take any other action deemed necessary by Lender without the
consent of or notice to anyone. All such parties also agree that Lender may
modify this loan without the consent of or notice to anyone other than the
party with whom the modification is made.
PRIOR TO SIGNING THIS NOTE, BORROWER READ AND UNDERSTOOD ALL THE
PROVISIONS OF THIS NOTE, INCLUDING THE VARIABLE INTEREST RATE PROVISIONS.
BORROWER AGREES TOT HE TERMS OF THE NOTE AND ACKNOWLEDGES RECEIPT OF A
COMPLETED COPY OF THE NOTE.
BORROWER::
PENN OCTANE CORPORATION
/S/ JEROME B. RICHTER, PRESIDENT/ASSISTANT SECRETARY