Exhibit 3
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PENN OCTANE CORPORATION
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REGISTRATION RIGHTS AGREEMENT
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REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (this "Agreement") is entered into as
of the Closing Date (as defined herein) by and among Penn Octane Corporation,
a Delaware corporation, and the persons whose signatures appear on the
execution pages of this Agreement.
This Agreement is entered into pursuant to the Purchase Agreement between
the Company and each of the Purchasers listed (the "Purchase Agreement"). In
order to induce the Purchasers to enter into the Purchase Agreement, the
Company has agreed to provide the registration rights set forth in this
Agreement. The execution of this Agreement by the Company is a condition to
the closing under the Purchase Agreement.
The parties hereby agree as follows:
1. Definitions
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Capitalized terms used herein without definition shall have the
respective meanings set forth in the Purchase Agreement. As used in this
Agreement, the following terms shall have the following meanings:
Closing Date: The date on which the Closing occurs pursuant to the
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Purchase Agreement.
Exchange Act: The Securities Exchange Act of 1934, as amended, and the
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rules and regulations of the Commission promulgated thereunder.
Losses: The term "Losses" shall have the meaning set forth in Section 6
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hereof.
Placement Agent: Pennsylvania Merchant Group Ltd, a Delaware
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corporation.
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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.
Purchase Agreement: The Purchase Agreement by and among the Company and
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the Purchasers thereunder pursuant to which the Warrants were issued.
Registrable Securities: All shares of Common Stock issuable upon
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exercise of the Warrants, plus any Common Stock issued or issuable to the
Purchasers in respect of the Warrant Shares, pursuant to any stock split,
stock dividend, recapitalization, or similar event. The Warrants are not
Registrable Securities hereunder. As to any Registrable Securities, such
securities shall cease to be Registrable Securities when (i) 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, (ii) such
securities shall have been distributed pursuant to Rule 144 or any similar
provision then in force, under the Securities Act, (iii) 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 or (iv)
the sale of such securities by a Purchaser shall no longer require
registration under the Securities Act or such securities shall cease to be
outstanding.
Registration Expenses: All reasonable expenses incurred by the Company
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in complying 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
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.
Restricted Securities: The Warrant Shares upon original issuance
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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 Purchase 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).
Shelf Registration Period: The term "Shelf Registration Period" shall
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have the meaning set forth in Section 3 hereof.
Shelf Registration Statement: The term "Shelf Registration Statement"
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shall have the meaning set forth in Section 3 hereof.
2. Securities Subject to this Agreement
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The securities entitled to the benefits of this Agreement are the
Registrable Securities.
3. Filing of Shelf Registration Statement.
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(a) If the Company shall receive from a Purchaser at any time prior
to the earlier of (i) ninety (90) days after the closing of a public offering
of debt or equity securities of the Company resulting in net proceeds to the
Company in excess of $5 million, and (ii) June 30, 1998, a written request
that the Company effect any registration on Form S-3 or another appropriate
form with respect to all or a part of the Registrable Securities, the Company
will:
(i) promptly give written notice of the proposed
registration to all other Purchasers;
(ii) as soon as practicable, use its best efforts to file
with the Commission and use its best efforts to cause to be declared effective
under the Securities Act, a shelf registration statement (the "Shelf
Registration Statement") relating to the offer and sale of the Registrable
Securities by the Purchasers from time to time and set forth in such Shelf
Registration Statement;
(iii) use its reasonable best efforts to keep the Shelf
Registration Statement continuously effective in order to permit the
Prospectus forming a part thereof to be usable by Holders for a period no
longer than three (3) years from the date of this Agreement, or such shorter
period that will terminate when (x) all the Registrable Securities covered by
the Shelf Registration Statement have been sold pursuant to the Shelf
Registration Statement or otherwise, or (y) the date on which there ceases to
be outstanding any Registrable Securities (in any such case, such period being
called the "Shelf Registration Period"). The Company shall not be deemed to
have failed to use its reasonable best efforts if such Shelf Registration
Statement shall cease to be available for sale of Registrable Securities
during the requisite period because such action is required by applicable law
or because such action is taken by the Company in good faith and for valid
business reasons (not including avoidance of the Company's obligations
hereunder), including any financing, the acquisition or divestiture of assets,
corporate reorganization or other material transaction involving the Company
so long as the Company as soon as practicable thereafter takes such action as
would again permit the sale of the Registrable Securities in accordance with
the requirements of the Securities Act; and
(iv) prepare and file with the Commission such amendments,
including post effective amendments, to the Shelf Registration Statement as
may be necessary to keep such Registration Statement continuously effective
for the applicable time period; cause the related Prospectus to be
supplemented by any required Prospectus supplement and as so supplemented to
be filed pursuant to Rule 424 (or any similar provisions then in force) under
the Securities Act; and comply with the provisions of the Securities Act and
the Exchange Act with respect to the disposition of all securities covered by
such Shelf Registration Statement during the applicable period set forth in
such Shelf Registration Statement as so amended or in such Prospectus as so
supplemented.
(b) Priority on Shelf Registration. If any of the Registrable
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Securities to be registered pursuant to Shelf Registration are to be sold in a
firm commitment underwritten offering, and if the managing underwriters advise
the Company and the holders of such Registrable Securities that in their
opinion the amount of Registrable Securities proposed to be sold by such
holders in such offering exceeds the amount of Registrable Securities which
the managing underwriters believe can be sold in such offering, there shall be
included in such firm commitment underwritten offering the amount of such
Registrable Securities requested to be included in such registration which in
the opinion of such underwriters can be sold, and such amount shall be
allocated pro rata among the holders of such Registrable Securities requested
to be included in such registration on the basis of the number shares of
Common Stock represented by Registrable Securities requested to be included
therein by such holders.
(c) One-Time Demand Registration Rights. The Company shall be
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obligated to use its best efforts to file and to cause to be declared
effective under the Securities Act with respect to the Registrable Securities
one Shelf Registration Statement. Any Purchaser whose Registrable Securities
are not covered by such Shelf Registration Statement shall have no further
demand registration rights under this Agreement.
(d) Mandatory Registration. If the Company should file a
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registration statement under which the Registrable Securities are eligible for
registration, the Company may satisfy its obligations under this Section 3 by
allowing the holders of the Registrable Securities to include the Registrable
Securities in such registration statement and complying with subclauses (i) -
(iv) of clause (a) of this Section 3.
4. Holdback Agreements.
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(a) Restrictions on Public Sale by Holders of Registrable Securities.
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Each 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 included in such Registration Statement, 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.
The foregoing provisions shall not apply to any holder of Registrable
Securities if such holder is prevented by applicable statute or regulation
from entering into any such agreement; provided, however, that any such holder
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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.
5. Expenses and Procedures.
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(a) Expenses of Registration. All Registration Expenses (exclusive
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of underwriting discounts and commissions) shall be borne by the Company.
Each holder shall bear all underwriting discounts, selling commissions, sales
concessions and similar expenses applicable to the sale of the Registrable
Securities sold by such holder.
(b) Registration Procedures. In the case of each registration,
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qualification or compliance effected by the Company pursuant to Section 3, the
Company will keep the holders advised as to the initiation of registration,
qualification and compliance and as to the completion thereof. At its
expense, the Company will furnish such number of Prospectuses and other
documents incident thereto as the holders from time to time may reasonably
request.
(c) Information. The Company may require each seller of Registrable
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Securities as to which any registration is being effected to furnish such
information regarding the distribution of such Registrable Securities as the
Company may from time to time reasonably request and the Company may exclude
from such registration the Registrable Securities of any seller who
unreasonably fails to furnish such information after receiving such request.
(d) Delay or Suspension. Notwithstanding anything herein to the
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contrary, the Company may, at any time, delay the filing of the Shelf
Registration for a period of up to 60 days following the filing date or
suspend the effectiveness of any Registration Statement for a period of up to
90 days in the aggregate in any calendar year, as appropriate (a "Suspension
Period"), by giving notice to each holder of Registrable Securities to be
included in the Registration Statement, if the Company shall have determined
that the Company may be required to disclose any material corporate
development or other event which disclosure may have a material effect on the
Company. Each holder of Registrable Securities agrees by acquisition of such
Registrable Securities that, upon receipt of any notice from the Company of a
Suspension Period, such holder shall forthwith discontinue disposition of such
Registrable Securities covered by such Registration Statement or Prospectus
until such holder (i) is advised in writing by the Company that the use of the
applicable Prospectus may be resumed, (ii) has received copies of a
supplemental or amended prospectus, if applicable, and (iii) has received
copies of any additional or supplemental filings which are incorporated or
deemed to be incorporated by reference in such Prospectus. The Company shall
prepare, file and furnish to each holder of Registrable Securities immediately
upon the expiration of any Suspension Period, appropriate supplements or
amendments, if applicable, to the Prospectus and appropriate documents, if
applicable, incorporated by reference in the Registration Statement.
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 officers, directors, agents or
employees of any such controlling person, from and against all losses, claims,
damages, liabilities, costs (including, without limitation, all reasonable
attorneys' fees) 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
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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.
(b) Indemnification by Holder of Registrable Securities. In
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connection with any Registration Statement in which a holder of Registrable
Securities is participating, such holder of Registrable Securities shall
furnish to the Company in writing such information as the Company may
reasonably request for use in connection with any Registration Statement or
Prospectus. Each Purchaser 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 and the payment of all fees and expenses incurred in
connection with the defense thereof. All such fees and expenses (including
any fees and expenses incurred in connection with investigating or preparing
to defend such action or proceeding) incurred by the indemnified party, shall
be paid to the indemnified party, as incurred, within 20 days of written
notice thereof to the indemnifying party; provided, however, that if, in
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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
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 that there may be 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 of the 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, unless in the opinion
of counsel for such indemnified party a conflict of interest may exist 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 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
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Section 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 Section 6(c), any 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. 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.
7. Rule 144
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The Company shall file the reports required to be filed by it under the
Securities Act and the Exchange Act and the rules and regulations adopted by
the Commission thereunder, and will take such further action as any holder of
Registrable Securities may reasonably request, all to the extent required from
time to time to enable such holder to sell Registrable Securities without
registration under the Securities Act within the limitation of the exemption
provided by Rule 144 or Rule 144A. Upon the request of any holder of
Registrable Securities, the Company shall deliver to such holder a written
statement as to whether the Company has complied with such information and
requirements. Notwithstanding the foregoing, nothing in this Section 7 shall
be deemed to require the Company to register any of its securities under any
section of the Exchange Act.
8. Underwritten Registrations
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If any of the Registrable Securities covered by any Shelf 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.
No person may participate in any underwritten registration hereunder
unless such person (i) agrees to sell such person's Registrable Securities on
the basis provided in any underwriting arrangements approved by the [persons
entitled hereunder to approve such arrangements], and (ii) completes and
executes all questionnaires, powers of attorney, indemnities, underwriting
agreements and other documents required under the terms of such underwriting
arrangements.
9. Miscellaneous
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(a) Amendments and Waivers. The provisions of this Agreement,
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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 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 securi-ties 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 provided for or
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permitted hereunder shall be made in writing by hand-delivery, registered
first-class mail, next day air courier, telex, or telecopy: (i) if to a holder
of Registrable Securities, at the most current address given by such holder to
the Company in accordance with the provisions of this Section 9(b), which
address initially is, with respect to each Purchaser, the address set forth on
Schedule I to the Purchase Agreement; and (ii) if to the Company, at 900
Veterans Boulevard, Suite 240, Redwood City California 94063, attention:
Secretary, and thereafter at such other address, notice of which is given in
accordance with the provisions of this Section 9(b), with a copy to Coudert
Brothers, 1114 Avenue of the Americas, New York, New York 10036, attention:
John F. Watkins.
All such notices and communications shall be deemed to have been duly
given: when delivered by hand, if personally delivered; two business days
after being deposited in the mail, postage prepaid, if mailed; one business
day after being sent by next day air courier; when answered back, if telexed;
and when receipt acknowledged, if telecopied.
(c) Transfer of Registration Rights. The rights granted to the
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holders pursuant to this Agreement to cause the Company to register securities
may not be assigned or otherwise transferred in any way.
(d) Counterparts. This Agreement may be executed in any number of
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counterparts by the parties hereto, 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 Agreement are for convenience of
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reference only and shall not limit or otherwise affect the meaning hereof.
(f) Governing Law. This Agreement shall be governed by and construed
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in accordance with the laws of the State of New York without regard to
principles of conflict of laws.
(g) Severability. If any term, provision, covenant or restriction of
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this 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.
(h) Entire Agreement. This Agreement is intended by the parties to
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be a final expression of their agreement and a complete and exclusive
statement of the agreement and understanding of the parties hereto in respect
of the subject matter contained herein. There are no restrictions, promises,
warranties nor undertakings, other than those set forth or referred to herein
with respect to the registration rights granted by the Company with respect to
the securities sold pursuant to the Purchase Agreement. This Agreement
supersedes all prior agreements and understandings between the parties with
respect to such subject matter.
(i) Attorneys' Fees. If any action or proceeding is brought to
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enforce any provision of this Agreement, or where any provision hereof is
validly asserted as a defense, the successful party shall be entitled to
recover reasonable attorneys' fees in addition to its costs and expenses and
any other available remedy.
IN WITNESS WHEREOF, the parties have executed this agreement as of
October 21, 1997.
PENN OCTANE CORPORATION
By: /s/ Jerome B. Richter
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Jerome B. Richter
Chairman, President and Chief Executive Officer
IN WITNESS WHEREOF, the parties have executed this agreement as of October 21,
1997.
CASTLE ENERGY CORPORATION
By: /s/ Joseph L. Castle
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Name: Joseph L. Castle
Title: Chairman and CEO
IN WITNESS WHEREOF, the parties have executed this agreement as of
October 21, 1997.
/s/ Clint Norton
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Clint Norton
SOUTHWEST CONCEPT INC.
By: /s/ Clint Norton
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Name: Clint Norton
Title: President
IN WITNESS WHEREOF, the parties have executed this agreement as of
October 21, 1997.
/s/ James F. Meara, Jr.
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James F. Meara, Jr.
SEP FBO JAMES F. MEARA IRA
By: Donaldson, Lufkin & Jenrette as
Securities Corporation Custodian
By: /s/ James F. Meara
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Name: James F. Meara
Title:
IN WITNESS WHEREOF, the parties have executed this agreement as of
October 21, 1997.
LINCOLN TRUST COMPANY FBO PERRY D. SNAVELY IRA
By: /s/ Perry D. Snavely
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Name: Perry D. Snavely
Title: