Amended and Restated Line Letter
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September 15, 2004
Penn Octane Corporation
77-530 Enfield Lane
Building D
Palm Desert, CA 92211
Attention: Mr. Jerome Richter
Gentlemen:
RZB FINANCE LLC ("RZB") and Penn Octane Corporation (the "Borrower") are parties
to a Line Letter dated October 14, 1997 (as heretofore amended, the "Existing
Line Letter"). The Borrower and RZB desire to amend and restate the Existing
Line Letter. Accordingly, the parties hereto agree that the Existing Line
Letter is hereby amended and restated in its entirety as hereinafter set forth
in this Agreement (as amended, modified or supplemented from time to time, "this
Agreement" or "this letter agreement"). On or after the date hereof, when
counterparts of this Agreement shall have been executed by all parties hereto,
(a) all references to the "Agreement" and words of similar import in the other
Loan Documents shall be deemed to refer to the Existing Line Letter as amended
and restated hereby, and (b) all outstanding loans and extensions of credit
under the Existing Line Letter shall be loans and extensions of credit under and
subject to the terms and conditions of this Agreement and the Loan Documents (as
hereinafter defined).
We wish to advise you of the terms and conditions upon which RZB may
in its sole discretion extend credit to the Borrower.
1. (a) Subject to the provisions hereof, the Borrower may utilize
this credit facility (the "Credit Facility") for demand loans ("Loans") and
issuance of standby and commercial letters of credit ("L/C's") in the aggregate
principal sum and face amount of up to Fifteen Million Dollars ($15,000,000) at
any one time outstanding. Notwithstanding the foregoing, and without in any way
limiting RZB's sole and absolute discretion to determine whether to make any
Loan or issue any L/C, or refrain therefrom (as more fully set forth below), and
without in any way limiting RZB's absolute right to demand payment of any Loan
at any time or to change any of the Advance Rates (as hereinafter defined), at
any time in RZB's sole discretion, the Borrower acknowledges that, with respect
to each specific transaction of the Borrower financed by RZB pursuant hereto,
the sum of (i) the Loans made by RZB in connection with such transaction, (ii)
the aggregate face amount of L/Cs issued in connection therewith, plus (iii) the
aggregate unreimbursed amount of all drawings under such L/Cs, shall not exceed
the amount obtained by applying the Advance Rates (the "Advance Rates") to the
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value of the assets of the Borrower being financed by RZB in such transaction
(as such value may be determined by RZB in its sole discretion).
Within the above Credit Facility, there shall be a sublimit not to
exceed Three Million Dollars ($3,000,000) at any time outstanding available for
the issuance of standby letters of credit from time to time for the financing of
the purchase of diesel fuel and gasoline fuel. The terms and beneficiary of
each such letter of credit shall be subject to RZB's approval in its sole
discretion. Prior to the issuance of any standby letter of credit described in
clause (i) above, the Borrower shall deposit cash collateral with RZB in an
amount equal to 15% of the maximum face amount of such letter of credit. The
Borrower hereby grants to RZB a lien on and security interest in such cash
collateral and all deposit accounts in which such cash collateral and all
proceeds thereof shall be maintained as security for all present and future
obligations of the Borrower to RZB until the letter of credit expires or is
terminated and all obligations in connection therewith shall have been satisfied
in full in cash to the sole and absolute satisfaction of RZB, provided, however,
that no lien on and security interest in cash collateral shall be released nor
shall any cash collateral be released if any Event of Default under any security
agreement delivered in connection with this Agreement shall have occurred and be
continuing (an "Event of Default") or any event that with the giving of notice
or lapse of time or both would constitute such an Event of Default (a "Default")
shall have occurred and be continuing or any demand for payment of or cash
collateral for the obligations of the Borrower under the Credit Facility shall
have been made.
Within the above Credit Facility, there shall be a sublimit not to
exceed Five Hundred Thousand Dollars ($500,000) at any time outstanding
available for the issuance of standby letters of credit from time to time (i) to
secure a performance bond with respect to Arizona and Nevada excise taxes and
(ii) in favor of Kinder Morgan to secure monthly lease obligations. The terms
and beneficiary of each such letter of credit shall be subject to RZB's approval
in its sole discretion. Prior to the issuance of any standby letter of credit
described in this paragraph, the Borrower shall deposit cash collateral with RZB
in an amount equal to 100% of the maximum face amount of such letter of credit.
The Borrower hereby grants to RZB a lien on and security interest in such cash
collateral and all deposit accounts in which such cash collateral and all
proceeds thereof shall be maintained as security for all present and future
obligations of the Borrower to RZB until the letter of credit expires or is
terminated and all obligations in connection therewith shall have been satisfied
in full in cash to the sole and absolute satisfaction of RZB, provided, however,
that no lien on and security interest in cash collateral shall be released nor
shall any cash collateral be released if any Default or Event of Default shall
have occurred and be continuing or any demand for payment of or cash collateral
for the obligations of the Borrower under the Credit Facility shall have been
made.
(b) For purposes hereof:
"Advance Rates" shall mean, with respect to each transaction
of the Borrower financed by RZB pursuant hereto, the following respective
percentages of the Borrower's accounts receivable or inventory which is the
subject of such transaction (provided, however, that RZB reserves the right to
change any or all of the following percentages or
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categories of assets in any way whatsoever, at its sole and absolute discretion,
at any time and from time to time, with or without notice to the Borrower):
100% of CIF cost of eligible inventory or 90% of the net face amount of the
Borrower's eligible accounts receivable (as such eligibility shall be determined
from time to time by RZB in its sole and absolute discretion), whichever is
lower.
(c) The Loans shall be evidenced by, and subject to the terms
and conditions contained in, a single grid promissory note (the "Note") made by
the Borrower in form and substance satisfactory to RZB. Interest on the Loans
shall be payable at the rate specified in the Note (the "Interest Rate").
(d) Each Loan hereunder shall be payable on demand, and in no
event shall any Loan be outstanding for more than 45 days.
(e) (i) Each L/C shall be in form and substance satisfactory
to RZB, and, unless otherwise agreed by RZB, shall have an expiration date not
more than 90 days after its date of issuance.
(ii) The Borrower shall pay to RZB a fee with respect to
each L/C in an amount equal to the greater of: (1) a flat fee of $500, (2) a
fee at a rate per annum equal to 2.5% of the maximum face amount of the L/C
(without regard to whether conditions to drawing may then be satisfied) or (3)
such higher amount or percentage as shall be agreed to in writing by the
Borrower and RZB with respect to L/Cs issued after the date of such agreement.
The fee provided for in clauses (1), (2) and (3) shall be payable upon issuance
of each L/C and, in the case of any L/C which as issued, amended or renewed has
an expiration date more than 90 days after its original date of issuance, on the
same day in each calendar quarter thereafter if such L/C is outstanding on such
day. After any such fee is paid it shall be non-refundable.
(f) The Borrower shall reimburse RZB for the amount of each
drawing under each L/C on demand, and shall pay interest on the unreimbursed
portion of each drawing as provided in the Continuing Agreement for Letters of
Credit between the Borrower and RZB.
(g) This credit facility may be terminated at any time at the
sole and absolute discretion of RZB.
(h) Without in any way limiting RZB's sole and absolute
discretion to make any Loan or issue any L/C, or refrain therefrom (as more
fully set forth below), and without in any way limiting RZB's right to change
the Advance Rates or demand payment of any Loan at any time in its sole and
absolute discretion, the Borrower agrees that it shall, from time to time, pay
the Loans and reimbursement obligations in respect of L/Cs and shall deliver
cash collateral in respect of outstanding L/Cs, as and when necessary to cause:
the sum of (1) the outstanding balance of all Loans, (2) the aggregate face
amount of all outstanding L/Cs, and (3) the aggregate unreimbursed amount of all
drawings under L/Cs (as
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such sum may be reduced by the amount of cash collateral maintained with RZB or
a bank designated by RZB and pledged in respect of outstanding L/Cs) not to
exceed, on any date, the amount obtained by applying the Advance Rates as then
in effect to the aggregate value as of such date (as such value shall be
determined by RZB in its sole discretion) of all of the assets then owned by the
Borrower (without double counting) which are the subject of transactions
financed by RZB pursuant hereto and are subject to a perfected first priority
security interest in favor of RZB.
(i) The Borrower shall pay to RZB a non-refundable
administration fee of $50,000 on the date hereof and thereafter on each
anniversary of the date hereof.
2. The proceeds of the Loans and the L/C's shall be used to finance
the purchase of inventory, including, within the sublimits set forth in Section
1(a) above, diesel fuel and gasoline fuel, from suppliers which is to be sold to
purchasers acceptable to RZB in its sole discretion and accounts receivable
arising from the sale of inventory and other transactions acceptable to RZB in
its sole discretion.
3. Requests for Loans under this Agreement and directions as to the
disposition of the proceeds of Loans shall be given in writing (including by
telecopy) by the Borrower to RZB, or may be given orally (including by
telephone), provided any such oral communication shall be confirmed promptly to
RZB in writing. Requests for L/C's under this Agreement shall be given in
writing (including telecopy) by the Borrower to RZB by the execution and
delivery of an application satisfactory in form and substance to RZB. Any such
Loan so made or L/C issued shall be conclusively presumed to have been made to
or for the benefit of, or for the account of, the Borrower when made in
accordance with any such request or direction. RZB may rely on any such request
or direction which it believes to be genuine, including, without limitation, any
oral request whether or not confirmed in writing, and RZB shall be fully
protected in so doing without any duty to make any further inquiry as to such
genuineness or to otherwise act in good faith in the premises.
4. THE BORROWER AGREES AND ACKNOWLEDGES THAT, NOTWITHSTANDING
ANYTHING TO THE CONTRARY CONTAINED OR IMPLIED IN THIS AGREEMENT, RZB SHALL HAVE
NO OBLIGATION TO MAKE ANY LOAN OR ISSUE ANY L/C, AND RZB SHALL HAVE THE SOLE AND
ABSOLUTE DISCRETION TO MAKE ANY LOAN OR ISSUE ANY L/C OR REFRAIN FROM MAKING ANY
LOAN OR ISSUING ANY L/C. THE BORROWER FURTHER AGREES AND ACKNOWLEDGES THAT,
NOTWITHSTANDING ANYTHING TO THE CONTRARY CONTAINED OR IMPLIED IN THIS AGREEMENT,
ALL OF THE LOANS SHALL BE PAYABLE ON DEMAND, AND RZB MAY DEMAND PAYMENT OF ANY
LOAN AND/OR MAY DEMAND CASH COLLATERAL FOR ANY OUTSTANDING L/C AT ANY TIME IN
ITS SOLE AND ABSOLUTE DISCRETION.
5. All payments of principal, interest and other sums in connection
with the Loans and L/C's shall be payable to RZB at such account as RZB shall
designate, or in the absence of such designation, to RZB at its office at 1133
Avenue of the Americas, New York, New York 10036, in lawful money of the United
States in immediately available funds and without setoff or deduction. Interest
and fees shall be computed on the basis of a 360 day year and the actual number
of days elapsed. In the event that such computation would result in a
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usurious rate, then the interest or fee shall be recalculated on a 365 or 366
day year, as the case may be.
All payments of principal, interest, and other sums in connection
with this letter agreement, the Loans and L/C's or in respect of any
participation in the Credit Facility which may be sold in RZB's discretion to
any participant acceptable to RZB (a "Participant") shall be made by the
Borrower to RZB or by RZB to the Participant, as applicable, free and clear of,
and without deduction or withholding for, any and all present and future taxes,
levies, duties or withholdings of any kind or, if any deduction or withholding
from any amount payable hereunder or under any other Loan Document or in respect
of the participation of the Participant or in connection herewith or therewith
shall be legally required, such amount shall be increased by the Borrower as may
be necessary so that after making all required deductions or withholdings
(including deductions or withholdings applicable to additional amounts payable
under this paragraph 5) RZB or the Participant shall receive an amount equal to
the amount it would have received had no such deductions or withholdings been
required. The Borrower shall pay to RZB promptly upon the Participant's request,
and RZB shall promptly pay to the Participant, any amount payable to the
Participant pursuant to the preceding sentence, but RZB shall have no liability
under this paragraph to the Participant for any amount which is not received by
RZB from the Borrower.
6. Without limiting the discretionary nature of the credit facility
hereunder, the making of each Loan and the issuance of each L/C shall be subject
to the fulfillment (to the satisfaction of RZB) of the following conditions
precedent, provided that all of the following conditions precedent to the extent
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relating to RVEP and the Operating Partnership shall be waived by RZB until RZB
withdraws such waiver and gives notice of such withdrawal to the Borrower :
(a) The Borrower shall have executed and delivered to RZB the
Note(s) evidencing the Loans and a Continuing Agreement for Letters of Credit in
form and substance satisfactory to RZB;
(b) The Borrower, Rio Vista Energy Partners L.P. ("RVEP") and
Rio Vista Operating Partnership L.P. (the "Operating Partnership") (the
Borrower, RVEP and the Operating Partnership are collectively referred to as the
"Loan Parties") shall have delivered to RZB such documents of title, and other
instruments and documents, pertaining to the transaction of the Borrower which
is being financed in connection with such Loan or L/C, as RZB shall require, and
all of the foregoing shall be in form and substance, and contain such
endorsements, as shall be satisfactory to RZB in all respects;
(c) Each Loan Party shall have complied and shall then be in
compliance with all of the terms, covenants and conditions of this Agreement and
the Loan Documents (as hereinafter defined in Section 11(c));
(d) The representations and warranties of the Loan Parties
contained in each of the Loan Documents shall be true and correct on the date of
such Loan or L/C;
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(e) RZB's continuing review of and continuing satisfaction with
the business, operations, prospects, properties, and condition, financial or
otherwise, of each of the Loan Parties;
(f) RZB shall have received (i) a copy of all corporate and
partnership action, as the case may be, taken by each of the Loan Parties to
authorize the execution and delivery of the agreements, instruments and
documents pursuant hereto or in connection herewith, and (ii) if requested by
RZB, a legal opinion of counsel to the Loan Parties, together with such opinions
of special counsel to the Loan Parties as RZB shall request, and each such
opinion shall be satisfactory in form and substance to RZB;
(g) RZB shall have received the unlimited personal guarantee by
Mr. Jerome Richter of payment of the obligations of the Borrower, in form and
substance satisfactory to RZB, and the personal financial statement of Mr.
Richter in form and substance satisfactory to RZB;
(h) RZB shall have received the unlimited guarantees by each of
RVEP and the Operating Partnership of payment of the obligations of the
Borrower, in form and substance satisfactory to RZB;
(i) (A) Each of the Loan Parties shall have executed and
delivered to RZB a general security agreement granting RZB a first priority
perfected lien on the Collateral (as defined therein) in form and substance
satisfactory to RZB; and
(B) RZB shall have obtained from the Loan Parties duly
executed Security Agreement Questionnaires and such lien search reports as RZB
shall request, all to be in form and substance satisfactory to RZB; and
(C) RZB shall have filed such UCC financing statements with
respect to the Loan Parties in such jurisdictions as RZB shall request;
(j) (A) The Borrower and the Operating Partnership shall have
executed and delivered to RZB amendments or supplements to the existing
Mortgages, Deeds of Trust and Security Agreements previously executed by the
Borrower, which shall be in form and substance satisfactory to RZB, granting RZB
a first priority mortgage lien and deed of trust on the collateral described
therein, including without limitation, the terminal in Brownsville, Texas and
all pipelines and evidencing the assumption thereof by the Operating
Partnership; and
(B) Such amendments or supplements shall have been duly
filed and recorded in all filing offices deemed necessary by RZB;
(k) The Loan Parties shall have executed and/or delivered such
agreements, instruments and documents, including, without limitation, consents
of third parties and lessor, titles insurance policy endorsements and searches
and surveys, as RZB shall request in connection with the Security Agreements and
amendments or supplements referred to in the two preceding paragraphs (i) and
(j);
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(l) The Operating Partnership shall have delivered to RZB copies
of notices to its account debtors (including without limitation PMI Trading
Limited and its affiliates), duly executed by such account debtors, directing
that payment be made directly to RZB;
(m) The Loan Parties shall have delivered such evidence of
insurance and loss payable endorsements as RZB may require;
(n) The Loan Parties shall have delivered copies of all of their
supply and sales contracts having a term exceeding 30 days, certified as true
and complete by a senior officer;
(o) The Loan Parties shall have instituted lockbox arrangements
satisfactory to RZB in its sole discretion;
(p) The Borrower shall have delivered to RZB copies, certified
as true and complete, of all agreements, instruments and documents, including,
without limitation, all registrations and filings with and notices to the SEC
and any other governmental authority, relating to the establishment,
capitalization, operation, administration and management of the Loan Parties and
their affiliates and the transfer by the Borrower of any or all of its assets
and business to any Loan Party or affiliate thereof, and all of the foregoing
shall be satisfactory in form and substance to RZB;
(q) All legal matters incident to such Loan or L/C shall be
reasonably satisfactory to counsel to RZB.
7. As long as any of the Loans or L/C's or any other obligations
hereunder shall be outstanding, the Borrower shall comply with the following
covenants, provided that until RZB notifies the Borrower in writing, the
covenants shall not apply to RVEP or the Operating Partnership:
(a) Furnish to RZB within 120 days after the end of each fiscal
year a copy of the audited financial statements of the Borrower and RVEP
prepared in conformity with generally accepted accounting principles
consistently applied and certified without qualification by the relevant Loan
Party's independent public accountants.
(b) Furnish to RZB, each certified as true and complete in all
respects by the Borrower's chief financial officer or the person acting in such
capacity, (i) on a quarterly basis not later than 60 days after the end of each
quarter, a copy of the financial statements of each Loan Party for the preceding
quarter; (ii) on a weekly basis or more frequently if required by RZB, each Loan
Party's current inventory report, and on a daily basis, each Loan Party's
loading rack tickets evidencing delivery of the commodity and resulting accounts
receivable which are the subject of any underlying financing; and (iii) on a
monthly basis not later than 30 days after the end of each month, a profit and
loss statement of each Loan Party.
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(c) Furnish, to RZB such other information concerning each Loan
Party's business, properties, condition or operations, financial or otherwise,
as RZB may from time to time reasonably request and copies of all reports filed
with the Securities and Exchange Commission from time to time.
(d) Maintain and preserve, and cause each other Loan Party to
maintain and preserve, its corporate existence, and remain in the same lines of
business as on the date hereof.
(e) Except as set forth on Schedule 7(e) hereto, the Borrower
shall not, and shall cause each other Loan Party not to, create, assume or
permit to exist any lien, security interest, mortgage, charge or other
encumbrance of any nature whatsoever on any of its properties or assets, whether
now owned or hereafter acquired, except in favor of RZB.
(f) The Borrower shall cause Rio Vista on a consolidated basis
and the Operating Partnership to maintain an excess of total assets over total
liabilities as determined in accordance with generally accepted accounting
principles of at least $9,000,000 at all times.
(g) The Borrower shall not, and shall cause each Loan Party not
to, declare or make at any time any dividend payment or other distribution of
assets, properties, cash, rights, obligations or securities on account of any
shares of any class of capital stock of the Borrower or such Loan Party, as the
case may be, or its partnership interests or other equity, or purchase, redeem
or otherwise acquire for value (or permit any of its subsidiaries to do so) any
shares of any class of capital stock or the partnership interests or other
equity of the Borrower or such other Loan Party, as the case may be, or any
warrants, rights or options to acquire such shares, partnership interests or
other equity now or hereafter outstanding, without the prior written consent of
RZB unless, before and after giving effect to the payment of any such dividends
or distributions, such Loan Party shall be in compliance with all obligations
and covenants contained in this agreement and the other Loan Documents and no
Default or Event of Default shall have occurred and be continuing. The Borrower
shall deliver to RZB a certificate from the Borrower's chief financial officer
or the person acting in such capacity on the earlier of the date of each
delivery of the quarterly financial statements under Section 7(b) hereof and the
date such quarterly financial statements are required to be delivered, setting
forth the amount of all dividends and distributions paid by each Loan Party
during the immediately preceding fiscal quarter, together with a calculation
with respect thereto showing compliance with the covenant in this Section 7(g).
8. Notwithstanding anything to the contrary contained herein or in any
other Loan Document, including without limitation the General Security Agreement
dated October 17, 1997 between the Borrower and RZB and the General Security
Agreement between the Operating Partnership and RZB:
(a) Provided that no Event of Default under any Loan Document
shall have occurred and be continuing, no event that with the giving of notice
or lapse of time or both would constitute such an Event of Default shall have
occurred and be continuing and no demand for payment of any obligations of the
Borrower shall have been made by RZB, RZB shall, upon
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request of the Borrower, execute and deliver an agreement reasonably
satisfactory to RZB subordinating RZB's mortgage lien and security interest on
the land, buildings and fixtures (but no other assets contained thereon or
therein) constituting (x) the Borrower's terminal in Brownsville, Texas and (y)
the Borrower's pipeline, to any mortgage lien and security interest of a third
party unaffiliated with the Borrower (the "New Lender") which secures financing
provided by the New Lender to the Borrower after the date hereof. Such
agreement shall contain a covenant by the New Lender to transport at no cost to
RZB from such terminal and/or through such pipeline all inventory of the
Borrower or the Operating Partnership financed by RZB. The foregoing is not a
consent by RZB to any additional financing or indebtedness of the Borrower.
(b) In the event the Borrower intends to obtain additional
financing or incur additional indebtedness, the Borrower shall notify RZB and
request RZB's consent. RZB agrees to consider such request, but the Borrower
expressly acknowledges and agrees that: (x) RZB shall have sole discretion to
grant or deny such consent or impose conditions on the grant of such consent and
(y) RZB has not committed or agreed to grant such consent, and such consent
shall be effective only if in writing and executed by RZB.
9. The Borrower represents and warrants to RZB and covenants and
agrees with RZB that, with respect to each account receivable of the Borrower
and any other Loan Party financed by RZB pursuant hereto, there is not nor will
there be at any time, any counterclaim, dispute or any other matter or
circumstance whatsoever which could give rise to a right of set-off or other
adverse claim that could be asserted by the account debtor to reduce its
obligation to pay under such account receivable.
10. The Borrower represents and warrants to RZB and covenants and
agrees with RZB that the business of RVEP is and shall be solely to be a holding
company whose sole assets are and shall be its interests in the Operating
Partnership.
11. (a) No delay on the part of RZB in exercising any of its
options, powers or rights, or partial or single exercise thereof, irrespective
of any course of dealing, shall constitute a waiver thereof. The options,
powers and rights of RZB specified in the Loan Documents (as hereinafter defined
in Section 11(c)) are in addition to those otherwise created by law or under any
other agreement between any Loan Party and RZB. No amendment, modification or
waiver of any provision of any Loan Document to which any Loan Party is a party,
nor consent to any departure by any Loan Party therefrom, shall be effective,
unless the same shall be in writing and signed by RZB. Any such waiver or
consent shall be effective only in the specific instance and for the purpose for
which given. No consent to or demand on any Loan Party in any case shall, of
itself, entitle it to any other or further notice or demand in similar or other
circumstances.
(b) This Agreement and the other Loan Documents embody the
entire agreement and understanding between RZB and Loan Parties and supersede
all prior agreements and understandings relating to the subject matter hereof.
THIS WRITTEN AGREEMENT (AND THE OTHER LOAN DOCUMENTS) REPRESENTS THE FINAL
AGREEMENT AMONG THE PARTIES HERETO AND THE OTHER LOAN PARTIES WITH RESPECT TO
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THE MATTERS COVERED HEREBY AND THEREBY AND MAY NOT BE CONTRADICTED BY EVIDENCE
OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES.
(c) The Borrower agrees to pay all costs and expenses incurred
or payable by RZB and the Participant in connection with the preparation,
administration, interpretation, enforcement or collection of this Agreement, the
Note, any Participation Agreement between RZB and the Participant (as amended
from time to time, the "Participation Agreement"), the L/C's and any
applications or other agreements pertaining to the issuance thereof, the
security agreements with and guarantees from the Loan Parties, the mortgages,
and amendments and supplements referred to herein, and all other documents
executed and delivered in connection herewith or therewith (such agreements and
documents, including all amendments, modifications and supplements of or to all
such agreements and documents are herein referred to as the "Loan Documents"),
including, without limitation, costs of examination and audit of the Loan
Parties' books and records and of the collateral security for the Loans and L/C
reimbursement obligations, and court costs and reasonable attorneys' fees and
disbursements.
(d) (i) If RZB or the Participant shall have determined that
the applicability of any law, rule, regulation or guideline (domestic or
foreign) adopted (whether before or after the date hereof) pursuant to or
arising out of the July 1988 report of the Basle Committee on Banking
Regulations and Supervisory Practices entitled "International Convergence of
Capital Measurement and Capital Standards", or the adoption after the date
hereof of any other law, rule, regulation or guideline (domestic or foreign)
regarding capital adequacy, or any change in any of the foregoing or in the
enforcement or interpretation or administration of any of the foregoing by any
court or any governmental authority, central bank or comparable agency charged
with the enforcement or interpretation or administration thereof, or compliance
by RZB or the Participant or any corporation or other entity which directly or
indirectly controls RZB or the Participant (each such corporation or other
entity is hereinafter referred to as a "Controlling Person") (or any lending
office of RZB or the Participant or any Controlling Person), with any request or
directive regarding capital adequacy (whether or not having the force of law) of
any such court, authority, central bank or comparable agency, has or would have
the effect of reducing the rate of return on RZB's or the Participant's (as the
case may be) capital or on the capital of a Controlling Person, if any, as a
consequence of its issuance or maintenance of any L/C or its obligations (if
any) under this Agreement or the Participation Agreement to a level below that
which RZB or the Participant or such Controlling Person could have achieved but
for such applicability, adoption, change or compliance (taking into
consideration RZB's or the Participant's (as the case may be) policies and the
policies of such Controlling Person with respect to capital adequacy) by an
amount deemed by RZB or the Participant to be material, then, upon demand by RZB
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or the Participant, the Borrower shall pay to RZB from time to time as specified
by RZB or the Participant such additional amount or amounts as will compensate
RZB or the Participant or such Controlling Person for any such reduction
suffered. Any such amount paid to RZB relating to the Participant or a
Controlling Person of the Participant shall be promptly paid by RZB to the
Participant pursuant to the Participation Agreement between them.
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(ii) If any change in law, rule, regulation or guideline
(domestic or foreign) or in the enforcement, interpretation or administration
thereof by any court or any governmental authority, central bank or comparable
agency charged with the interpretation or administration thereof shall at any
time (A) impose, modify or deem applicable any reserve, special deposit or
similar requirement (including, without limitation, pursuant to Regulation D of
the Board of Governors of the Federal Reserve System) against letters of credit
issued by RZB or participations therein purchased by the Participant or (B)
subject letters of credit issued by RZB or participations therein purchased by
the Participant to any assessment or other cost imposed by the Federal Deposit
Insurance Corporation or any successor thereto or (C) impose on RZB or the
Participant any other or similar condition regarding this Agreement or any L/C
or the Participation Agreement, the obligations (if any) of RZB hereunder or the
obligations of the Participant under the Participation Agreement and the result
of any event referred to in clause (A), (B) or (C) above shall be to increase
the cost to RZB or the Participant of agreeing to issue, issuing or maintaining
or confirming any L/C or making, funding or maintaining (or agreeing to fund or
maintain) drawings under any L/C or of participating in any L/C or to reduce any
accounts receivable by RZB or the Participant hereunder or by the Participant
under the Participation Agreement by an amount which RZB or the Participant
shall deem to be material (which increase in cost or reduction shall be the
result of the reasonable allocation by RZB or the Participant of the aggregate
of such cost increases or reductions resulting from such events), then, upon
----
demand by RZB or the Participant, the Borrower shall pay to RZB from time to
time as specified by RZB or the Participant (as the case may be), such
additional amount or amounts as will compensate RZB or the Participant (as the
case may be) for such increased cost from the date of such change. Any such
amount paid to RZB relating to the Participant shall be promptly paid by RZB to
the Participant pursuant to the Participation Agreement between them. The
Borrower's obligation to pay compensation contained in this subsection (ii)
shall be applicable as well to any amount RZB may be obligated to pay any
financial institution which confirms or advises any L/C and which incurs or is
subjected to any increased cost or reduction of amounts receivable as a result
of the imposition, modification or applicability of any such reserve, special
deposit or similar requirement, the subjecting of L/C's to any such assessment
or other cost, or the imposition of any such other or similar condition.
(iii) The provisions of this subsection (d) shall survive
the termination of this Agreement.
(iv) RZB or the Participant shall notify the Borrower
within 3 months after it becomes aware of its right to claim any amount under
paragraphs (d)(i) or (ii) above, provided that (A) if such lender fails to so
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notify the Borrower within such 3 month period, such lender shall not be
entitled to claim any additional amounts pursuant to this subsection for any
period ending on a date which is prior to 3 months before such notification plus
any additional period of retroactive effect of the law, rule, regulation or
guideline referred to in paragraph (d)(i) or (ii) above, and (B) neither RZB nor
the Participant shall have any right to assert a claim for any amount under
paragraphs (d)(i) or (ii) after the date which is 3 months after payment in full
of all Loans, obligations in respect of L/C's and other obligations hereunder
and the termination of this Agreement.
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(e) The Loan Documents to which the Borrower and the Loan
Parties are a party shall be binding on the Borrower and the Loan Parties and
their respective successors and assigns, and shall inure to the benefit of RZB
and its successors and assigns, provided that the Borrower shall not have the
right to assign its rights hereunder or thereunder or any interest herein or
therein without RZB's prior written consent.
(f) In addition to the rights granted to it by applicable law,
RZB has the right to set-off and apply to any of the Borrower's and Loan Parties
obligations hereunder and under the Loan Documents any amount received by it for
the Borrower or any of the Loan Parties. The Participant shall have a right of
set-off and banker's lien to the same extent as if its participation under the
Participation Agreement were a direct loan to the Borrower.
(g) THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH AND
GOVERNED BY THE LAW OF THE STATE OF NEW YORK (WITHOUT REGARD TO PRINCIPLES OF
CONFLICTS OF LAW).
CONTRARY TO THE EXPRESS AGREEMENT OF THE PARTIES IN THIS
SECTION 11(G) HEREOF, IF THE LAWS OF ANY STATE OTHER THAN NEW YORK, INCLUDING
THE LAWS OF THE STATE OF TEXAS, SHALL BE DETERMINED TO BE APPLICABLE TO THIS
AGREEMENT, THE NOTE OR THE OTHER LOAN DOCUMENTS, IT IS THE INTENT OF THE PARTIES
HERETO TO COMPLY WITH ALL APPLICABLE USURY LAWS AND TO LIMIT ALL INTEREST
CONTRACTED FOR, RESERVED, CHARGED OR RECEIVED UNDER THE LOAN DOCUMENTS TO THE
MAXIMUM NONUSURIOUS RATE OF INTEREST PERMITTED BY APPLICABLE LAW. IF THE
APPLICABLE COMMON LAW AND PRINCIPLES OF EQUITY AND CONSTITUTIONS, STATUTES,
RULES, REGULATIONS AND ORDERS OF GOVERNMENTAL BODIES AND AUTHORITIES, AND
ORDERS, WRITS, DECISIONS, INJUNCTIONS AND DECREES OF ALL COURTS, ARBITRATORS AND
GOVERNMENTAL INSTRUMENTALITIES (THE "APPLICABLE LAW") IS EVER JUDICIALLY
INTERPRETED SO AS TO RENDER USURIOUS ANY AMOUNT CALLED FOR UNDER OR IN
CONNECTION WITH THE NOTES, THIS AGREEMENT AND THE LOAN DOCUMENTS, OR CONTRACTED
FOR, CHARGED, TAKEN, RESERVED OR RECEIVED WITH RESPECT TO THE TRANSACTIONS
REFERRED TO HEREIN OR THEREIN, OR IF DEMAND OF OR ACCELERATION OF THE MATURITY
OF THE NOTE OR IF ANY PREPAYMENT BY BORROWER OR ANY OF THE LOAN PARTIES RESULTS
IN BORROWER OR LOAN PARTIES OR ANY OTHER PERSON HAVING PAID ANY INTEREST
(HOWEVER DENOMINATED) IN EXCESS OF THAT PERMITTED BY LAW FOR THE ACTUAL PERIOD
THE NOTE AND THE OBLIGATIONS OF THE BORROWER AND THE LOAN PARTIES ARE
OUTSTANDING, THEN IT IS THE BORROWER'S, THE LOAN PARTIES' AND RZB'S INTENT THAT
ALL EXCESS AMOUNTS THERETOFORE RECEIVED BY RZB SHALL BE CREDITED ON THE
PRINCIPAL BALANCE OF THE NOTE (OR, IF THE NOTE HAS BEEN OR WOULD THEREBY BE PAID
IN FULL, REFUNDED TO THE BORROWER OR THE LOAN PARTIES), AND THE PROVISIONS OF
THE NOTE AND THIS AGREEMENT IMMEDIATELY SHALL BE DEEMED REFORMED AND THE AMOUNTS
THEREAFTER COLLECTIBLE UNDER THE NOTE, THIS AGREEMENT AND THE OTHER LOAN
DOCUMENTS REDUCED, WITHOUT THE NECESSITY OF THE EXECUTION OF ANY NEW DOCUMENTS,
SO AS TO COMPLY WITH THE APPLICABLE LAW, BUT SO AS TO PERMIT THE RECOVERY OF THE
FULLEST AMOUNT OTHERWISE CALLED FOR UNDER THE NOTE, THIS AGREEMENT AND THE OTHER
LOAN DOCUMENTS FOR THE ACTUAL PERIOD THE NOTE AND OTHER OBLIGATIONS OF THE
BORROWER AND THE LOAN PARTIES ARE OUTSTANDING.
(h) THE BORROWER AND THE LOAN PARTIES HEREBY AGREE THAT ANY
LEGAL ACTION OR PROCEEDING AGAINST THE BORROWER OR ANY LOAN PARTY WITH RESPECT
TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT MAY BE BROUGHT IN THE COURTS OF THE
STATE OF NEW YORK
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IN THE CITY OF NEW YORK OR OF THE UNITED STATES OF AMERICA FOR THE SOUTHERN
DISTRICT OF NEW YORK AS RZB MAY ELECT, AND, BY EXECUTION AND DELIVERY HEREOF,
EACH OF THE BORROWER AND THE LOAN PARTIES ACCEPT AND CONSENT TO, FOR ITSELF AND
IN RESPECT TO ITS PROPERTY, GENERALLY AND UNCONDITIONALLY, THE JURISDICTION OF
THE AFORESAID COURTS AND AGREES THAT SUCH JURISDICTION SHALL BE EXCLUSIVE,
UNLESS WAIVED BY RZB IN WRITING, WITH RESPECT TO ANY ACTION, CLAIM OR PROCEEDING
BROUGHT BY IT AGAINST RZB AND ANY QUESTIONS RELATING TO USURY. NOTHING HEREIN
SHALL LIMIT THE RIGHT OF RZB TO BRING PROCEEDINGS AGAINST THE BORROWER AND THE
LOAN PARTIES IN THE COURTS OF ANY OTHER JURISDICTION. THE BORROWER AND THE LOAN
PARTIES AGREE THAT SECTIONS 5-1401 AND 5-1402 OF THE GENERAL OBLIGATIONS LAW OF
THE STATE OF NEW YORK SHALL APPLY TO THIS AGREEMENT AND, TO THE MAXIMUM EXTENT
PERMITTED BY LAW, WAIVES ANY RIGHT TO STAY OR TO DISMISS ANY ACTION OR
PROCEEDING BROUGHT BEFORE SAID COURTS ON THE BASIS OF FORUM NON CONVENIENS.
----- --- ----------
(i) AFTER REVIEWING THIS PROVISION SPECIFICALLY WITH ITS
RESPECTIVE COUNSEL, EACH OF THE BORROWER, THE LOAN PARTIES AND RZB HEREBY
KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES ANY AND ALL RIGHTS IT MAY HAVE
TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED ON, OR ARISING OUT OF,
UNDER, OR IN CONNECTION WITH, THIS AGREEMENT OR ANY COURSE OF CONDUCT, COURSE OF
DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN), OR ACTIONS OF THE BORROWER, THE
LOAN PARTIES OR RZB. THIS PROVISION IS A MATERIAL INDUCEMENT FOR RZB MAKING THE
LOANS TO THE BORROWER AND THE LOAN PARTIES.
(j) NO CLAIM MAY BE MADE BY THE BORROWER OR ANY LOAN PARTY OR
ANY OTHER PERSON AGAINST RZB OR THE PARTICIPANT OR THE OFFICERS, DIRECTORS,
EMPLOYEES OR AGENTS OF RZB OR THE PARTICIPANT FOR ANY SPECIAL, INDIRECT,
PUNITIVE OR CONSEQUENTIAL DAMAGES IN RESPECT OF ANY CLAIM FOR BREACH OF CONTRACT
OR ANY OTHER THEORY OF LIABILITY ARISING OUT OF OR RELATED TO THE TRANSACTIONS
CONTEMPLATED BY THIS AGREEMENT, ANY OBLIGATIONS OF THE BORROWER OR ANY LOAN
PARTY AND/OR ANY OF THE COLLATERAL, OR ANY ACT, OMISSION OR EVENT OCCURRING IN
CONNECTION THEREWITH, AND THE BORROWER AND EACH LOAN PARTY HEREBY WAIVES,
RELEASES AND AGREES NOT TO SUE UPON ANY CLAIM FOR ANY SUCH DAMAGES.
(k) Notwithstanding the Participation Agreement, the Borrower
shall be permitted, except as otherwise expressly provided herein, to send all
notices, requests and documents solely to RZB and not to the Participant, and to
act on instruction, requests and directions from RZB alone. The Borrower
acknowledges that pursuant to the Participation Agreement: (i) RZB shall have
no obligation to make or issue any Loan or L/C unless approved by RZB and by the
Participant in accordance with the Participation Agreement, in each case in
their respective sole and absolute discretion, and (ii) either RZB or the
Participant shall have the right to cause RZB to make any demand under Section 4
of this Agreement.
(l) The Borrower shall simultaneously deliver to the Participant
at the address provided for in written notice from RZB or the Participant to the
Borrower a copy of each request for a Loan or L/C given to RZB pursuant to
Section 3 of this Agreement and all financial statements, notices and reports
delivered to RZB pursuant to or in connection with this Agreement,
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together with all such documents and information relating to such request as the
Participant shall require. The Borrower expressly consents to RZB's delivery to
the Participant of any documents and information relating to the Borrower now or
hereafter in the possession of RZB.
(m) At any time when all Loans shall have been paid in full in
cash, all L/C's shall have expired, terminated or been cash collateralized, and
all other obligations hereunder shall have been satisfied, in each case to the
sole and absolute satisfaction of RZB, the Borrower may terminate the Loan
Documents, and RZB will take reasonable steps to release the liens in favor of
RZB; provided, however, that notwithstanding any termination of the Loan
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Documents, the provisions of Section 11 of this Agreement shall survive
termination of this Agreement.
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Very truly yours,
RZB FINANCE LLC
By: /s/ Pearl Geffers
------------------------------
Accepted and Agreed to on this 15th day of Name: Pearl Geffers
---- Title: First Vice President
September, 2004
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By: /s/ Griselda Alvizo
------------------------------
Name: Griselda Alvizo
Title: Vice President
PENN OCTANE CORPORATION
By: /s/ Jerome B. Richter
---------------------------------
Name: Jerome B. Richter
Title: Chief Executive Officer
The undersigned hereby acknowledges and consents
to the foregoing Amended and Restated Line Letter
and hereby confirms that the Guaranty and
Agreement dated as of October 14, 1997 is hereby
ratified and confirmed in all respects and shall
extend to all indebtedness, liabilities and
obligations under or in connection with the
foregoing Amended and Restated Line letter, as
amended, modified or supplemented from time to
time.
/s/ Jerome B. Richter
- -----------------------------
Jerome Richter
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Schedule 7(e)
Liens
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