FIRST AMENDMENT TO
LINE LETTER
This FIRST AMENDMENT TO LINE LETTER, dated as of May _____, 2000, is
between RZB FINANCE LLC ("RZB") and PENN OCTANE CORPORATION (the "Borrower").
W I T N E S S E T H
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WHEREAS, RZB and the Borrower are parties to a Line Letter dated as of
October 14, 1997 and modified by a letter dated October 21, 1999 (as amended,
the "Line Letter"; capitalized terms used herein having the meanings ascribed
thereto in the Line Letter unless otherwise defined herein);
WHEREAS, the Line Letter provides for a $10,000,000 uncommitted credit
facility (the "Uncommitted Credit Facility);
WHEREAS, the Borrower as requested that RZB increase the maximum
amount of the Uncommitted Credit Facility, and the Borrower and RZB desire to
amend the Line Letter in other respects;
NOW, THEREFORE, the parties hereto hereby agree as follows:
SECTION 1. AMENDMENT.
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1. The Line Letter is hereby amended, effective on the Effective
Date referred to in Section 2 hereof, as follows:
(a) Upon execution and delivery of the Participation Agreement
between RZB and Bayerische Hypo-und Vereinsbank Aktiengesellschaft, New York
Branch ("HVB") (the "Participation Agreement"), the Uncommitted Credit Facility
shall increase to Twenty Million Dollars ($20,000,000).
(b) Notwithstanding the Participation Agreement, the Borrower
shall be permitted, except as otherwise expressly provided in this First
Amendment to Line Letter, to send all notices, request and documents solely to
RZB and not to HVB, and to act on instruction, requests and directions from RZB
alone. The Borrower acknowledges that pursuant to the Participation Agreement:
(i) each Loan and L/C shall be made or issued (as the case may be) only if
approved by both RZB and HVB in accordance with the Participation Agreement, and
(ii) either RZB or HVB shall have the right to cause RZB to make any demand
under Section 4 of the Line Letter. RZB hereby agrees that if the Borrower
shall make payment to RZB in accordance with the Line Letter and the Loan
Documents of amounts payable to RZB thereunder, including, without limitation,
payments to RZB which RZB is obligated to pay to HVB under the Line Letter or
the Participation
Agreement, the Borrower shall have not further obligation to HVB even if RZB
fails to pay any such amount to HVB, provided that if any such payment to RZB
must be disgorged or returned by RZB in connection with any bankruptcy case,
similar to proceeding or otherwise, the Borrower's obligation shall be
reinstated as if such returned payment had never been paid to RZB.
(c) (i) The Borrower shall simultaneously deliver to HVB at
the following address a copy of each request for a Loan or L/C given to RZB
pursuant to Section 3 of the Line Letter and all financial statements, notices
and reports delivered to RZB pursuant to or in connection with the Line Letter:
Bayerische Hypo-und Vereinsbank
Aktiengesellschaft, New York Branch
000 Xxxx 00xx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000-0000
Attn: Xx. Xxxx Xxxxxx, Managing Director
Telecopies No. (000) 000-0000
together with all such documents and information relating to such request as HVB
shall require. The Borrower expressly consents to RZB's delivery to HVB of any
documents and information relating to the Borrower now or hereafter in the
possession of RZB.
(ii) Notwithstanding anything to the contrary contained herein, in
the Line Letter or in any other Loan Document, including, without limitation,
the General Security Agreement dated October 17, 1997 between the Borrower 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 request of the Borrower,
execute and deliver an agreement reasonable 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 line 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 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 such sole discretion after
consultation with HVB to grant or deny such consent or impose conditions on the
grant of such consent, (y) so long as the Participation Agreement is in effect,
RZB cannot grant such consent without HVB's approval and (z) neither RZB nor HVB
has committed or agreed to grant such consent, and such consent shall be
effective only if in writing and executed by RZB.
(d) The following is added after Section 5 of the Line Letter:
"All payments of principal, interest, and other sums in connection
with this letter agreement, the Loans and L/C's or in respect of the
participation of HVB shall be made by the Borrower to RZB or by RZB to HVB, 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 HVB 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 HVB shall receive an amount equal
to the amount to would have received had no such deductions or withholdings been
required. The Borrower shall pay to RZB promptly upon HVB's request, and RZB
shall promptly pay to HVB, any amount payable to HVB pursuant to the preceding
sentence, but RZB shall have no liability to pay any such increased amount to
HVB which is not received by RZB from the Borrower."
(e) Section 9 (c) of the Line Letter is amended by (i) adding in
the section line, after "RZB", the words "and HVB", and (ii) adding in the
fourth line, after "Note," the words "The Participation Agreement,".
(f) Section 9 (d) of the Line Letter is hereby amended in its
entirety to read as follows:
"(d) (i) If RZB or HVB shall have determined that the
applicability of the 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, regulations or guideline (domestic or foreign)
regarding capital adequacy, or any changes 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 HVB or any corporation or other entity which directly or indirectly
controls RZB or HVB (each such corporation or other entity is hereinafter
referred to as a "Controlling Person") (or any lending office of RZB or HVB 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 HVB'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 HVB or such Controlling Person
could have achieved but for such applicability, adoption, change or compliance
(taking into consideration RZB's or HVB'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 HVB to be material, then, upon demand by RZB or HVB, the
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Borrower shall pay to RZB from time to time as specified by RZB or HVB such
additional amount or amounts as will compensate RZB or HVB or such Controlling
Person for any such reduction suffered. Any such amount paid to RZB relating to
HVB or a Controlling Person of HVB shall be promptly paid by RZB to HVB pursuant
to the Participation Agreement between them.
(ii) If any change in law, rule, regulations 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 participation therein purchased by HVB or (B) subject letters
of credit issued by RZB or participation therein purchased by HVB to any
assessment or other cost imposed by the Federal Deposit Insurance Corporation or
any successor thereto or (C) impose on RZB or HVB 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 HVB under the
Participation Agreement and the result of any event referred to in clause (A),
(B) or (C) above shall be to increases the cost to RZB or HVB 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 HVB
hereunder or by HVB under Participation Agreement by an amount which RZB or HVB
shall deem to be material (Which increase in cost or reduction shall be the
result of the reasonable allocation by RZB or HVB of the aggregate of such cost
increases or reductions resulting from such events), then, upon demand by RZB or
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HVB, the Borrower shall pay to RZB from time to time as specified by RZB or HVB
(as the case may be), such additional amount or amounts as will compensate RZB
or HVB (as the case may be) for such increased cost from the date of such
change. Any such amount paid to RZB relating to HVB shall be promptly paid by
RZB to HVB pursuant to the Participation Agreement between them. The Borrower's
obligation to pay compensation contained in the 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
costs, 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 HVB 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 notify the Borrower within
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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 HVB 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."
(e) The following new Section 9 (j) is added to the Line Letter:
"(j) No Claim may be made by the Borrower or any other person
against RZB or HVB or the officers, directors, employees or agents of RZB or HVB
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 and/or any of the collateral, or any act, omission or event
occurring in connection therewith, and the Borrower hereby waives, releases and
agrees not to xxx upon any claim for any such damages."
(f) The following is added to the end of Section 9 (f) of the Line
Letter:
"HVB 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."
SECTION 2. EFFECTIVENESS OF AMENDMENT.
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This First amendment shall become effective on the date (the
"Effective Date") on which the following conditions precedent shall be fulfilled
to the satisfaction of RZB:
RZB shall have received this First Amendment duly executed by all
parties hereto, a replacement Promissory Note in the maximum amount of
$20,000,000, amendments to the Deeds of Trust previously executed by the
Borrower reflecting the increase in the Uncommitted Credit Facility, and such
corporate authorization documents a RZB may request.
SECTION 3. EFFECT OF AMENDMENT; RATIFICATION: REPRESENTATIONS; ETC.
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(a) On and after the date hereof, when counterparts of this First
Amendment shall have been executed by all parties hereto, (i) this First
Amendment shall be a part of the Line Letter, (ii) all references to the Line
Letter in the Line Letter and the other Loan Documents shall be deemed to refer
to the Line Letter as amended by this First Amendment, and (iii) the term "this
Agreement" and the words "hereof", "herein", "hereunder" and words of similar
import, as used in the Line Letter, shall mean the Line Letter as amended
hereby.
(b) Except as expressly set forth herein, this First
Amendment shall not constitute an amendment, waiver or consent with respect to
any provision of the Line Letter, as amended hereby, and the Line Letter, as
amended hereby, and all other Loan Documents are hereby ratified, approved and
confirmed in all respects. The Borrower expressly acknowledges and agrees that
it has no defense, counterclaim, right of setoff or the claim under or in
connection with the Line Letter or the Loan Documents as of the date hereof that
would reduce or impair its obligations thereunder.
(c) In order to induce RZB to enter into this First
Amendment, the Borrower represents and warrants to RZB that before and after
giving effect to the execution and delivery of this First Amendment:
(i) the representations and warranties set forth in section
8 of the line letter and in the other Loan Documents are
true and correct.
(ii) no Event of Default under the General Security Agreement
executed by the Borrower, event under Section 13 of the
Continuing Agreement for Letters of Credit executed by
the Borrower or event or condition that, with the Giving
of notice or passage of time or both, would constitute
such an event of Default or other event has occurred
and is continuing.
(iii) This First Amendment has been duly authorized by all
necessary corporate action of the Borrower, has been duly
executed and delivered by the Borrower and is the valid
and binding obligation of the Borrower, enforceable in
accordance with its terms.
SECTION 4. NEW YORK LAW.
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This First Amendment shall be construed in accordance with the
governed by the laws of the State of New York, with out regard to the conflicts
of laws principles of said State.
SECTION 5. SEVERABILITY.
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If any provision hereof is invalid and unenforceable in any
jurisdiction, then, to the fullest extent permitted by law, (i) the other
provisions hereof shall remain in full force and effect in such jurisdiction and
shall be liberally construed in order to carry out the intentions of the parties
hereto as nearly as may be possible, and (ii) the invalidity or unenforceability
of any provision hereof in any jurisdiction shall not affect the validity or
enforceability of such provision in any other jurisdiction.
SECTION 6. COUNTERPARTS.
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This First Amendment may be executed by the parties hereto
individually or in any combination, in one or more counterparts, each of which
shall be an original and all of which shall together constitute one and the same
amendment. Signatures of the parties may appear on separate counterparts.
IN WITNESS WHEREOF, the parties hereto have caused this First
Amendment to be duly executed as of the day and year first above written.
PENN OCTANE CORPORATION
By:
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By:
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RZB FINANCE LLC
By:
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By:
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The undersigned has executed the Guaranty and Agreement dated October
14, 1997 (the "Guaranty"). The undersigned hereby consents to the foregoing
First Amendment, ratifies the Guaranty executed by him and confirms that all of
his obligations under such Guaranty are and shall remain in full force and
effect, notwithstanding such First Amendment, and shall apply to all obligations
and liabilities under the Line Letter and the Loan Documents, as amended by such
First Amendment.
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