DATE: OCTOBER 21, 1997
PROMISSORY NOTE
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Redwood City, California
FOR VALUE RECEIVED, PENN OCTANE CORPORATION, a Delaware corporation
("Company"), promises to pay to Donaldson, Lufkin & Jenrette Securities
Corporation Custodian SEP FBO James F. Meara IRA, or registered assigns
("Holder"), at the office of the Company in Redwood City, California or such
other place as Holder may designate in writing at least three business days
prior to the date fixed for such payment, the entire principal sum of
Seventy-Five Thousand Dollars ($75,000), together with interest thereon, on
the earlier of (i) a date determined by the Company within ten (10) business
days of the closing date of any public offering of debt or equity securities
of the Company, resulting in net proceeds to the Company in excess of
$5,000,000, and (ii) June 30, 1998, (the "Payment Date"), at which time all
principal and any accrued and unpaid interest thereon shall be due and owing.
This Note shall accrue interest from the date hereof at the rate of ten (10%)
per annum, payable quarterly on March 31, June 30, September 30 and December
31 in each year. This Note may be prepaid at any time prior to maturity
without penalty in an amount equal to the principal amount hereof plus
interest thereon to the date fixed for prepayment.
All payments of principal and interest hereunder shall be payable in
lawful money of the United States.
The Company shall be in default hereunder upon the occurrence of any of
the following events: (i) the failure by the Company to make any payment of
principal or interest when due hereunder and such failure shall have continued
for a period of ten (10) days; (ii) the commencement by the Company of a
voluntary case in a bankruptcy or insolvency proceeding or the entry of a
decree or order by a court of competent jurisdiction adjudicating the Company
a bankrupt or the appointment of a receiver or trustee of the Company upon the
application of any creditor in an insolvency or bankruptcy proceeding or other
creditor's suit; (iii) the entry of an order for relief approving a petition
for reorganization or arrangement filed against the Company under the Federal
bankruptcy laws and such order remains in force and unvacated thirty (30)
days; (iv) an assignment for the benefit of creditors by the Company; (v) the
occurrence of any event of default under the terms of any indebtedness of the
Company for borrowed money in excess of $50,000, provided that such
indebtedness has been accelerated because of such default; or (vi) the
existence of any judgment in excess of $50,000 against, or any attachment of
material property, of the Company.
At any time when an event of default hereunder shall have occurred and
shall be continuing, Holder at its option may accelerate the maturity of this
Note and declare all of the indebtedness thereof to be immediately due and
payable, together with accrued interest thereon, and payment thereof may be
enforced by suit or other process of law.
If this Note is not paid when due, whether at maturity or by
acceleration, the Company agrees to pay all reasonable costs of collection and
such costs shall include without limitation all costs, attorneys' fees and
expenses incurred by Holder hereof in connection with any insolvency,
bankruptcy, reorganization, arrangement or similar proceedings involving
Holder, or involving any endorser or guarantor hereof, which in any way
affects the exercise by Holder hereof of its rights and remedies under this
Note.
Presentment, demand, protest, notice of protest, dishonor and non-payment
of this Note and all notices of every kind are hereby waived.
The terms "Company" and "Holder" shall be construed to include their
respective heirs, personal representatives, successors, subsequent holders and
permitted assigns.
This Note shall be governed by, and construed in accordance with, the
laws of the State of New York without giving effect to such state's conflicts
of law provisions. Each of the parties hereto irrevocably consents to the
jurisdiction and venue of the federal and state courts located in the State of
New York, County of New York.
PENN OCTANE CORPORATION
By: /s/ Jerome B. Richter
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Jerome B. Richter
Chairman, President and
Chief Executive Officer