Consent Letter
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September 15, 2004
Penn Octane Corporation
00-000 Xxxxxxx Xxxx
Xxxxxxxx X
Xxxx Xxxxxx, XX 00000
Attention: Xx. Xxxxxx Xxxxxxx
Gentlemen:
1. Reference is made to the line letter dated October 14, 1997, as amended,
between you and us, providing for extensions of credit to Penn Octane
Corporation ("Penn Octane") in the form of loans and letters of credit (the
"Line Letter"). Capitalized terms used herein and not defined herein shall have
the meanings ascribed thereto in the Line Letter.
2. You have advised us that Xxxx Xxxxxx is proposing a corporate
reorganization (the "Reorganization") as follows. Penn Octane will transfer
substantially all of its pipeline and terminal assets to Rio Vista Operating
Partnership L.P., a Delaware limited partnership (the "Operating Partnership"),
which is a wholly owned subsidiary of Rio Vista Energy Partners L.P., a
Delaware limited partnership ("Rio Vista"), which is currently a wholly owned
subsidiary of Penn Octane. Rio Vista will be spun off to Penn Octane's
stockholders by means of a pro rata distribution to them of 100% of the common
units of Rio Vista. As a result of such spin-off, Rio Vista will be an
independent public company, and Penn Octane will not directly own any units of
Rio Vista but will have an at least 50% ownership interest in, and (pursuant to
a voting agreement with other members) voting control over, the general partner
of Rio Vista, Rio Vista GP LLC, a Delaware limited liability company (the
"RVGP"). Rio Vista will own all of the limited partnership interests in the
Operating Partnership and all of the limited liability company interests in the
general partner of the Operating Partnership, Rio Vista Operating GP LLC (the
"OPGP"). Penn Octane and the Operating Partnership will enter into a purchase
contract pursuant to which the Operating Partnership will purchase LPG from Penn
Octane, and the Operating Partnership will sell the LPG to customers acceptable
to RZB.
3. RZB confirms that it approves and consents to the Reorganization subject to
the following conditions:
(a) Nothing contained herein shall modify or waive any provision of the
Line Letter providing for the uncommitted and demand nature of RZB's credit
facility (including, without limitation, Sections 1 and 4 thereof).
(b) You shall deliver to RZB copies of all documents, agreements,
instruments and SEC filings relating to the Reorganization, which must be in
form and substance satisfactory to RZB and certified as true and complete by the
chief executive officer or chief financial officer of Xxxx Xxxxxx.
(c) RZB shall receive, in form and substance satisfactory to it, all of
the agreements, instruments and documents listed in the attached closing list.
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(d) RZB shall receive, in form and substance satisfactory to it, pro forma
balance sheets of each of the parties referred to above (including Penn Octane,
Rio Vista, the Operating Partnership, RVGP and OPGP) after giving effect to the
Reorganization, certified as true and complete by the chief executive or chief
financial officer of Penn Octane.
Notwithstanding any other Loan Documents, RZB also consents to and agrees to
subordinate its liens and security interests in all of Penn Octane's and/or Rio
Vista's assets, personal property, fixtures, intangibles and property
constituting Collateral (as defined in the Loan Documents), except the following
assets of Penn Octane, Rio Vista and/or the Operating Partnership as to which
RZB shall have at all times a first priority perfected lien (i) cash held in
Penn Octane's, Rio Vista's or the Operating Partnership's accounts at RZB XX
Xxxxxx Xxxxx Bank, Service 1st Bank or any other bank which maintains accounts
subject to a control agreement in favor of RZB, (ii) inventory of every type and
description, whether raw, in process or finished and all documents, documents of
title and receipts covering any inventory and all products and proceeds thereof;
(iii) accounts, accounts receivable, contract rights, general intangibles,
payment intangibles, tax refund claims, instruments, promissory notes, chattel
paper, supporting obligations, letters of credit and letter-of-credit rights and
other rights to payment of money and all products and proceeds thereof; (iv) the
lease and other collateral described in Leasehold Deed of Trust, Security
Agreement, Financing Statement and Assignment of Rents dated October 17, 1997,
filed for record on January 14, 1998, under Cameron County Clerk's File No. 1243
and filed for record on January 20, 1998, under Kleberg County Clerk's File No.
222368, Kenedy County Clerk's File No. 5694, Willacy County Clerk's File No.
274128 and Xxx Xxxxx County Clerk's File No. 311304, as amended, modified and
supplemented from time to time , including, without limitation, Lease Agreement
dated September 1, 1993, between the Seadrift Pipeline Corporation, as Lessor,
and Borrower, as Lessee, as amended, modified and supplemented from time to
time, including, without limitation, by Agreements dated October 10, 1993 and
May 21, 1997; (v) Penn Octane's LPG supply agreements and all other agreements
providing for or relating to purchase of inventory of every type by Penn Octane,
Rio Vista and/or the Operating Partnership, all claims thereunder and all rights
and remedies relating thereto and (vi) all agreements with P.M.I. Trading
Limited or any affiliate or subsidiary thereof, as to all of the foregoing items
in clauses (i) through and including (vi), whether now owned or existing or
hereafter acquired or arising and wherever located (all such property, except
the property described in clauses (i) through and including (vi), the
"Subordinated Collateral").
Accordingly, RZB consents that the Subordinated Collateral can be pledged by
Penn Octane to its existing creditors (which shall be deemed to include those
creditors which may substitute as note holders in connection with existing
indebtedness, and the holders of any indebtedness incurred to refinance existing
indebtedness) and RZB agrees that it shall not take any action which would
prevent such creditors (the "Senior Creditors") from foreclosing and enforcing
liens superior to RZB in such Subordinated Collateral in the event Penn Octane
is in default under the related indebtedness, provided, however, that RZB's
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agreements in this paragraph 4 shall not be effective unless and until the
Senior Creditors shall have duly executed and delivered a valid and binding
agreement pursuant to which they agree that:
(w) They shall not take any action which would prevent RZB from
foreclosing and enforcing its liens on all Collateral, other than Subordinated
Collateral.
(x) They shall agree not to challenge or dispute (a) the validity,
perfection or priority of RZB's security interest in any Collateral (other than
Subordinated Collateral), or (b) any relief
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requested by RZB to protect or realize on its Collateral (other than
Subordinated Collateral) in any bankruptcy case with respect to the Company
including, without limitation, any cash collateral order or debtor-in-possession
financing.
(y) They shall agree that this paragraph 4 is solely for the benefit of
RZB and the Senior Creditors and their successors and assigns and no other
person shall have any right or benefit under or because of the existence of this
paragraph 4.
(z) They shall agree to permit use of any collateral subject to their
senior security interest (including all Subordinated Collateral) for storage,
processing, transportation or delivery of RZB's Collateral for a period of 60
days after notice from the Senior Creditors or their representative to RZB or
from RZB to Penn Octane of the beginning of such 60-day period, all without
charge, cost or expense to RZB.
4. Pursuant to the final sentence of Section 7.3(b) of the First Amended and
Restated Agreement of Limited Partnership of Rio Vista (the "Rio Vista LP
Agreement"), Penn Octane, as holder of the Unit Majority (as defined in the Rio
Vista LP Agreement) on the date hereof, approves all action taken by RVGP on
behalf of Rio Vista in connection with the authorization, execution, delivery
and/or performance of the agreements, instruments and documents listed on the
attached closing list, including all action (if any) so taken on behalf of Rio
Vista which constitutes action permitted to be taken by a partner of the
Operating Partnership within the meaning of clause (ii) of such final sentence
of Section 7.3(b) of the Rio Vista LP Agreement.
5. (a) This Consent shall be a "Loan Document" as such term is used in the
Line Letter and the other Loan Documents.
(b) 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 herein and in the other Loan Documents 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 hereof or 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.
(c) This Consent and the other Loan Documents embody the entire agreement
and understanding between RZB and the Loan Parties and supersede all prior
agreements and understandings relating to the subject matter hereof and thereof.
THIS WRITTEN AGREEMENT (AND THE OTHER LOAN DOCUMENTS) REPRESENTS THE FINAL
AGREEMENT AMONG THE PARTIES HERETO AND THE OTHER LOAN PARTIES WITH RESPECT TO
THE MATTERS COVERED HEREBY AND THEREBY AND MAY NOT BE CONTRADICTED BY EVIDENCE
OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES.
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(d) 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).
Very truly yours,
RZB FINANCE LLC
By: /s/ Xxxxx Xxxxxxx
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Name: Xxxxx Xxxxxxx
Title: First Vice President
By: /s/Xxxxxxxx Xxxxxx
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Name: Xxxxxxxx Xxxxxx
Title: Vice President
Accepted and Agreed to on this 15th day of
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September, 2004
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PENN OCTANE CORPORATION
By: /s/ Xxxxxx X. Xxxxxxx
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Name: Xxxxxx X. Xxxxxxx
Title: Chief Executive Officer
The undersigned hereby acknowledges and consents
to the foregoing Consent Letter and hereby confirms
that the Guaranty and Agreement dated as of October
14, 1997 is hereby ratified and confirmed in all
respects.
/s/ Xxxxxx X. Xxxxxxx
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Xxxxxx Xxxxxxx
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RZB FINANCE LLC
AND
PENN OCTANE CORPORATION
CLOSING LIST
1. Amended and Restated Line Letter
2. Promissory Note
3. Certificate for
x. Xxxx Octane
ii. Rio Vista Energy Partners L.P. ("RVEP")
iii. Rio Vista Operating Partnership L.P. ("Operating Partnership")
as to
(a) Certificate of incorporation (Penn Octane); certificate of formation
(RVEP and Operating Partnership)
(b) By-laws (Penn Octane); partnership agreement (RVEP and Operating
Partnership)
(c) Resolutions
(d) Incumbency
4. Opinions of counsel to Loan Parties
5. Guarantees from
(a) Xx. Xxxxxx Xxxxxxx (re-affirmation of guarantee previously delivered)
(b) RVEP
(c) Operating Partnership
6. Security Agreements from
(a) Penn Octane (previously delivered)
(a) RVEP
(b) Operating Partnership
7. Security Agreement Questionnaires from
(a) Penn Octane
(a) RVEP
(b) Operating Partnership
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8. Lien searches for
(a) Penn Octane
(b) RVEP
(c) Operating Partnership
9. UCC-1's against
(a) Penn Octane (previously filed)
(b) RVEP
(c) Operating Partnership
10. Notice to account debtors sent by the Operating Partnership (including to
PMI) duly executed by account debtors and evidence of signature authority
satisfactory to RZB
11. Evidence of insurance and loss payable endorsements
(a) Penn Octane
(b) RVEP
(c) Operating Partnership
12. Certified copies of supply and sales contracts
(a) Penn Octane
(b) Operating Partnership
13. Lockbox arrangements with respect to
(a) Penn Octane
(b) Operating Partnership
14. Certified copies of SEC filings, agreements, documents, etc., relating to
operation, etc., and transfer by Borrower of its assets
(a) Penn Octane
(b) RVEP
(c) Operating Partnership
* * *
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Real Estate Documents
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15. Certified copy of lease and all amendments
(a) Terminal
(b) Pipeline
16. Recorded notices of lease
(a) Terminal
(b) Pipeline
17. Modification Agreements for Deeds of Trust
(a) Terminal
(b) Pipeline
18. Landlord consent and agreement
(a) Terminal
(b) Pipeline
19. Mortgagee's insurance policy in the amount of $1,000,000 with revolving
loan rider
(a) Terminal
(b) Pipeline [NOTE - NOT AVAILABLE]
20. Survey certified to the Lender
(a) Terminal
(b) Pipeline [NOTE - NOT NORMALLY AVAILABLE]
21. Copies of plats and field notes for terminal, all satisfactory to RZB
22. Permits, etc.
(a) Certificate of Occupancy for Terminal
(b) T-4 Railroad Commission permit for Pipeline
certified as true and complete and as constituting all necessary permits by
appropriate officer of the Borrower
23. Re-recording of Deeds of Trust and recording of ratification by grantors
for
(a) Terminal
(b) Pipeline
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[IN FOUR YEARS] [RZB TO ADDRESS POST-CLOSING]
24. Good standing, etc.
(a) Texas good standing certificate
(b) Texas certificate of qualification
for
(c) Penn Octane
(d) RVEP
(e) Operating Partnership
25. Certified director resolutions authorizing Modification Agreements to
Deeds of Trust for
(a) Penn Octane
(b) Operating Partnership
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