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
--------
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 m
