REPLACEMENT PROMISSORY NOTE
PROMISSORY NOTE (the "Note") of the Borrower named below delivered to RZB
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Finance LLC ("RZB") dated September 15, 2004.
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1. SPECIAL TERMS
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The following terms and provisions shall apply to this Note; definitions of
terms in this or other sections of this Note expressed in the singular
shall include the plural and vice versa.
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Borrower: Penn Octane Corporation
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a Delaware Corporation
(jurisdiction of incorporation)
Principal Amount of this Note:
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Fifteen Million Dollars
($15,000,000)
Margin: 2.5% p.a.
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Loan Documents: Amended and Restated Line Letter dated September 15, 2004,
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between the Borrower and RZB, General Security Agreement dated February 13,
2002, between the Borrower and RZB, Continuing Agreement for Letters of
Credit dated October 14, 1997, between the Borrower and RZB, Guaranty and
Agreement dated October 14, 1997 between Jerome Richter and RZB, Guaranty
and Agreement dated September 15, 2004 between Rio Vista Energy Partners
L.P. and RZB and Guaranty and Agreement dated September 15, 2004 between
Rio Vista Operating Partnership L.P. and RZB, and all other agreements from
time to time executed by the Borrower or any of the guarantors for the
benefit of RZB, in each case as amended, modified or supplemented from time
to time.
Minimum Repayment Amount: N/A
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2. PRINCIPAL AND INTEREST
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FOR VALUE RECEIVED, the Borrower promises to pay to the order of RZB, ON
DEMAND, the Principal Amount of this Note specified in Section 1 or, if
less, the then-outstanding principal amount of all loans (each a "Loan" and
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collectively, the "Loans") made to the Borrower by RZB pursuant to the Loan
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Documents. In no event shall the maturity date of any Loan be more than 30
days after the date such Loan is made.
The Borrower promises also to pay interest on the unpaid principal amount
of each Loan (after as well as before judgment) from the date thereof until
maturity (whether on demand, by acceleration or otherwise) at a rate per
annum equal to the Margin specified in Section 1 plus the Base Lending Rate
from time to time in effect, such interest to be payable on the last
Business Day of each calendar month and at such maturity.
Notwithstanding the preceding sentence, the Borrower shall also pay
interest at a rate per annum equal to 2% plus the Margin plus the Base
Lending Rate from time to time in effect, on any principal of the Loan and,
to the extent permitted by law, on any interest or other amount payable by
the Borrower hereunder which shall not be paid in full when due (whether on
demand, by acceleration or otherwise) from such due date until paid in full
(after as well as before judgment), such interest to be payable on demand.
All interest shall be computed on the basis of the number of days actually
elapsed in a 360-day year.
Definitions
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The term "Business Day" means any day other than a Saturday, Sunday, or any
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day which shall be in New York City a legal holiday or a day on which
banking institutions are authorized by law to close.
The term "Base Lending Rate" means, for any day, the higher of (i) the rate
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announced by The Chase Manhattan Bank (the "Bank") from time to time at its
principal office in New York, New York as its prime rate for domestic
(United States) commercial loans in effect on such day and (ii) the Federal
Funds Rate in effect on such day plus 1/2%. (Such Base Lending Rate is not
necessarily intended to be the lowest rate of interest charged by the Bank
in connection with extensions of credit.) Each change in the Base Lending
Rate shall result in a corresponding change in the interest rate and such
change shall be effective on the effective date of such change in the Base
Lending Rate.
The term "Federal Funds Rate" means, for any day, the overnight federal
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funds rate in New York City, as published for such day (or, if such day is
not a Business Day, for the next preceding Business Day) in the Federal
Reserve Statistical Release H.15 (519) or any successor publication, or if
such rate is not so published for any day which is a Business Day, the
average of the quotations for such day on overnight federal funds
transactions in New York City received by the Bank from three federal funds
brokers of recognized standing selected by the Bank.
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3. ALL PAYMENTS
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Each payment by the Borrower pursuant to this Note shall be made prior to
1:00 P.M. (New York time) on the date due and shall be made without set-off
or counterclaim to RZB at such account as RZB shall designate, or in the
absence of such designation, to RZB at its office, presently located at
1133 Avenue of the Americas, New York, NY 10036, or as RZB may otherwise
direct and in such amounts as may be necessary in order that all such
payments (after withholding for or on account of any present or future
taxes, levies, imposts, duties or other similar charges of whatsoever
nature imposed by any government or any political subdivision or taxing
authority thereof, other than any tax on or measured by the net income of
RZB pursuant to the income tax laws of the jurisdiction where RZB's
principal or lending office is located) shall not be less than the amounts
otherwise specified to be paid under this Note. Each such payment shall be
made in lawful currency of the United States of America and in immediately
available funds. If the stated due date of any payment required hereunder
is other than a Business Day, such payment shall be made on the next
succeeding Business Day and interest at the applicable rate shall accrue
thereon during such extension.
The Borrower will have the right to repay all or any portion of a Loan
prior to demand only if RZB has been notified prior to 10:00 a.m. (New York
time) on the day of any repayment, provided that each partial repayment
shall not be less than the Minimum Repayment Amount. All repayments
pursuant to this paragraph shall be accompanied by the payment of all
accrued interest on the principal amount so paid.
4. REPRESENTATIONS AND WARRANTIES
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The Borrower represents and warrants that all acts, filings, conditions and
things required to be done and performed and to have happened (including,
without limitation, the obtaining of necessary governmental approvals)
precedent to the issuance of this Note to constitute this Note the duly
authorized, legal, valid and binding obligation of the Borrower,
enforceable in accordance with its terms, have been done, performed and
have happened in due and strict compliance with all applicable laws.
5. DEFAULT
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Without limiting the right of RZB to demand payment of the Loans evidenced
hereby at any time in its sole discretion, if any of the following events
shall occur: default in payment of any amount due hereunder to the holder
hereof, whether on demand or otherwise; suspension or liquidation by the
Borrower of its usual business or suspension or expulsion of the Borrower
from any exchange; calling of a meeting of creditors; assignment by the
Borrower for the benefit of creditors; dissolution, bulk sale or notice
thereof effected or given by the Borrower; creation of a security interest
in any assets of the Borrower which are or shall be subject to liens
granted to the holder hereof by the Borrower without consent of the holder
hereof; insolvency of any kind, attachment, distraint, garnishment, levy,
execution, judgment, application for or appointment of a receiver or
custodian, filing of a voluntary or involuntary petition under any
provision of the U.S. Bankruptcy Code or amendments thereto, of, by or
against the Borrower or any property or rights of the Borrower; filing of
a petition or institution of any proceeding by or against the Borrower for
any relief under any bankruptcy or insolvency laws or any laws relating to
the relief of debtors, readjustment of indebtedness, reorganizations,
compositions or extensions; any governmental authority or any court at the
instance of any governmental authority shall take possession of any
substantial part of the property of the Borrower or shall assume control
over the affairs or operations of the Borrower; any statement,
representation or warranty made by the Borrower in any document, agreement
or financial statement delivered to RZB shall prove to be false in any
material respect when made; failure of the Borrower or any other party
thereto to comply with any term of any of the Loan Documents; failure of
the Borrower, on request, to furnish to RZB any financial information, or
to permit inspection by RZB of any books or records; any change in, or
discovery with regard to, the condition or affairs of the Borrower which,
in RZB's opinion, increases its credit risk; or if RZB for any other
reason deems itself insecure; then, the indebtedness evidenced by this
Note, and all accrued interest thereon shall become absolute, due and
payable without demand or notice to the Borrower. Upon default in the due
payment of this Note, or whenever the same or any installment of principal
or interest hereof shall become due in accordance with any of the
provisions hereof (whether on demand or otherwise), RZB may, but shall not
be required to, exercise any or all of its rights and remedies, whether
existing by contract, law or otherwise, with respect to any collateral
security delivered in respect of the indebtedness evidenced hereby.
6. MISCELLANEOUS
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This Note is delivered pursuant to, and entitled to the benefits of, the
Loan Documents.
The Loans and principal repayments thereof may be recorded on the records
of RZB and, prior to any transfer of, or any action to collect, this Note,
the outstanding principal amount of each Loan shall be endorsed on this
Note, together with the date of such endorsement. Any such recordation or
endorsement shall constitute prima facie evidence of the accuracy of the
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information so recorded or endorsed (provided, however, that the failure of
RZB to record any of the foregoing shall not limit or otherwise affect the
obligation of the Borrower to repay all the Loans (including interest
thereon) and its other obligations hereunder and under the Loan Documents).
The Bank may charge any account of the Borrower with the Bank for amounts
payable under this Note.
Each payment of principal of, or interest on, the Loans shall constitute an
acknowledgment of the indebtedness of the Borrower under the Loan Documents
and this Note. The Borrower:
a. waives presentment, demand, protest and other notice of any kind in
connection with this Note, and
b. agrees to pay to the holder hereof, on demand, all costs and expenses
(including reasonable legal fees) incurred in connection with the
enforcement and collection of this Note.
THIS NOTE 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),
BUT THIS SHALL NOT LIMIT THE RATE OF INTEREST WHICH MAY BE CHARGED BY RZB
UNDER OTHER APPLICABLE LAW.
The Borrower hereby agrees that ANY LEGAL ACTION OR PROCEEDING AGAINST THE
BORROWER WITH
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RESPECT TO THIS NOTE MAY BE BROUGHT IN THE COURTS OF THE STATE OF NEW YORK
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, the Borrower accepts and consents 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 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 in the courts of any other jurisdiction. Service of process out of
any such courts may be made by mailing copies thereof by registered or
certified mail, postage prepaid, to the Borrower at its address for notices
as specified herein and will become effective 30 days after such mailing.
The Borrower agrees that Sections 5-1401 and 5-1402 of the General
Obligations Law of the State of New York shall apply to this Note 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
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non conveniens.
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AFTER REVIEWING THIS PROVISION SPECIFICALLY WITH ITS RESPECTIVE COUNSEL,
EACH OF THE BORROWER 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 NOTE OR ANY COURSE OF CONDUCT, COURSE OF DEALING,
STATEMENTS (WHETHER VERBAL OR WRITTEN), OR ACTIONS OF THE BORROWER OR RZB.
THIS PROVISION IS A MATERIAL INDUCEMENT FOR RZB MAKING THE LOANS TO THE
BORROWER.
Nothing contained in this Note shall be deemed to establish or require the
payment of a rate of interest in excess of the maximum rate permitted by
applicable law (the "Maximum Rate"). If the amount of interest payable for
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any interest payment period ending on any interest payment date calculated
in accordance with the provisions of this Note (said amount, the
"Calculated Interest") exceeds the amount of interest that would be payable
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for such interest payment period had interest for such interest payment
period been calculated at the Maximum Rate, there shall be paid on such
interest payment date an amount of interest calculated on the basis of the
Maximum Rate for such interest payment period. If on any subsequent
interest payment date, (i) the Calculated Interest for the interest payment
period ending on such subsequent interest payment date (the "Current
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Interest Period") is less than the amount of interest that would be payable
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for such Current Interest Period had interest for such Current Interest
Period been calculated on the basis of the Maximum Rate and (ii) any
portion of the excess (if any) of Calculated Interest for any prior
interest payment period over interest calculated at the Maximum Rate for
such prior interest payment period (the "Outstanding Interest Amount")
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remains unpaid, then on such subsequent interest payment date there shall
be paid, as provided herein, additional interest for such Current Interest
Period in an amount equal to the lesser of (i) the theretofore unpaid
Outstanding Interest Amounts for all prior interest payment periods or (ii)
an amount that, when added to the amount of Calculated Interest payable for
such Current Interest Period, results in the payment of interest for such
Current Interest Period at the Maximum Rate.
This Note replaces but does not constitute payment or satisfaction of or a
novation of the Promissory Note dated May 19, 2000 executed by the
undersigned to the order of RZB.
IN WITNESS WHEREOF, the undersigned has caused this Note to be duly
executed and delivered by its duly authorized officer(s).
PENN OCTANE CORPORATION
By /s/ Jerome B. Richter
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Name: Jerome B. Richter
Title: Chief Executive Officer
Address of Borrower for Notices:
77-530 Enfield Lane
Building D
Palm Desert, CA 92211
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