DISTRIBUTION AGREEMENT
BY AND BETWEEN
PENN OCTANE CORPORATION
AND
RIO VISTA ENERGY PARTNERS L.P. AND SUBSIDIARIES
SEPTEMBER 16, 2004
DISTRIBUTION AGREEMENT
THIS DISTRIBUTION AGREEMENT (this "Agreement") is dated September 16, 2004,
by and among PENN OCTANE CORPORATION., a Delaware corporation ("POC"), RIO VISTA
ENERGY PARTNERS L.P., a Delaware limited partnership ("RVP"), and the Tax
Subsidiaries (as defined in Article 1) of RVP.
WITNESSETH:
WHEREAS, POC is the sole limited partner of RVP and owner of common units
representing a 98% limited partner interest in RVP (the "RVP Common Units"); and
WHEREAS, POC desires to distribute to its stockholders all of the RVP
Common Units;
NOW, THEREFORE, in consideration of the premises and the mutual terms,
covenants and conditions herein contained, and intending to be legally bound
hereby, the parties hereto hereby agree as follows:
ARTICLE 1
CERTAIN DEFINITIONS
As used in this Agreement, the following terms have the following
respective meanings:
1.1 "Affiliate" shall mean, with respect to POC or RVP, any Person, that
directly or indirectly, is in control of, is controlled by, controls or is under
common control of POC or RVP, as the case may be. For purposes of this
definition, control shall include the ownership of 50% or more of the legal or
beneficial interest in any Person or the power to direct or cause the direction
of the management and policies of such Person, whether through the ownership of
voting securities, by contract or otherwise. A Person who is an Affiliate shall
only be considered an Affiliate for so long as that Person meets the definition
of an Affiliate. An officer, director, general partner, managing member or
trustee of a Person or Affiliate of such Person shall not be considered to be an
Affiliate unless such Person is under the direct or indirect control or common
control of POC or RVP, as the case may be. For purposes of clarity, POC and RVP
shall not be considered to be an Affiliate of the other, nor shall any other
company in which a director or officer of POC or RVP is also a director, officer
or stockholder be considered an Affiliate of POC or RVP unless POC or RVP, as
the case may be, itself controls such company.
1.2 "Agreement" shall have the meaning specified in the preamble.
1.3 "Business Day" shall mean any day other than Saturday, Sunday or a
day on which commercial banks located in Houston, Texas are required or
authorized by law to close.
1.4 "Code" shall mean the Internal Revenue Code of 1986, as amended.
1.5 "Common Unit" shall mean the common units of RVP as defined in the
RVP First Amended and Restated Agreement of Limited Partnership.
1
1.6 "Distribution" shall mean the distribution by POC to its stockholders
of the RVP Common Units.
1.7 "Distribution Agent" shall mean Computershare Investor Services.
1.8 "Distribution Date" shall mean the time and date as of which the
Distribution is effective.
1.9 "Liability" shall mean any and all claims, demands, liabilities,
responsibilities, disputes, causes of action, losses, damages, assessments,
costs and expenses (including interest, awards, judgments, penalties,
settlements, fines, costs of remediation, diminutions in value, costs and
expenses incurred in connection with investigating and defending any claims or
causes of action (including, without limitation, attorneys' fees and expenses
and all fees and expenses of consultants and other professionals)) and
obligations of every nature whatsoever, liquidated or unliquidated, known or
unknown, matured or unmatured, or fixed or contingent.
1.10 "Nasdaq" shall mean The Nasdaq Stock Market, Inc.
1.11 "POC" shall mean Penn Octane Corporation, a Delaware corporation.
1.12 "POC Common Stock" shall mean POC's common stock, $.01 par value.
1.13 "Person" shall mean an individual, partnership, corporation, business
trust, limited liability company, limited liability partnership, joint stock
company, trust, unincorporated association, joint venture, governmental
authority or other entity of whatever nature.
1.14 "RVP" for purposes of the assumption and indemnification provisions of
this Agreement, shall include Rio Vista Energy Partners L.P. and any and all
predecessors or successors thereto, whether by merger, purchase or other
acquisition of substantially all of the assets or otherwise, and any and all
predecessors or successors to such entities.
1.15 "RVP Assets" shall mean, collectively, all the property, assets and
rights, tangible and intangible, owned or operated by the RVP Companies on,
before or after the Distribution Date.
1.16 "RVP Common Units" shall have the meaning specified in the
introduction to this Agreement.
1.17 "RVP Company" shall mean any Subsidiary of RVP.
1.18 "RVP First Amended and Restated Agreement of Limited Partnership"
shall mean that certain limited partnership agreement of RVP dated September 16,
2004.
1.19 "RVP Properties" shall mean the properties currently or previously
owned or operated by any RVP Company.
1.20 "Record Date" shall have the meaning specified in Section 2.1 hereof.
1.21 "SEC" shall mean the United States Securities and Exchange Commission.
1.22 "Subsidiary" shall mean, with respect to any Person, (i) a corporation
a majority of whose Voting Stock is at the time, directly or indirectly, owned
by such Person, by one or more wholly owned subsidiaries of such Person or by
such Person and one or more wholly owned subsidiaries of such Person, (ii) a
partnership in which such Person or a wholly owned subsidiary of such Person is,
at the date of determination, a general or limited partner of such partnership,
but only if such Person or its wholly owned subsidiary is entitled to receive
more than fifty percent of the assets of such partnership upon its dissolution
or (iii) any other Person (other than a corporation or partnership) in which
such Person, a wholly owned subsidiary of such Person or such Person and one or
more wholly owned subsidiaries of such Person, directly or indirectly, at the
date of determination thereof, has (x) at least a majority ownership interest or
(y) the power to elect or direct the election of a majority of the directors or
other governing body of such Person.
1.23 "Tax Subsidiary" shall mean, with respect to POC or RVP as the context
may require, (i) any corporation or association taxable as a corporation that is
connected in an unbroken chain of stock ownership satisfying the requirements of
Section 1504(a) of the Code beginning with POC or RVP as the case may be
(provided that, for this purpose, after the Distribution Date, RVP shall be
regarded as a corporation that is the common parent of the RVP Group); (ii) any
entity not a corporation that is a "disregarded" entity for federal income tax
purposes pursuant to Treasury Regulations Sections 301.7701-3 and that is owned
by POC, RVP or any Tax Subsidiary of either (determined after application of
clause (i) above) and (iii) any "disregarded" entity owned by POC, RVP or any
Tax Subsidiary of either (determined after application of clauses (i) and (ii)
above).
1.24 "Transfer Agent" shall mean Computershare Investor Services.
1.25 "Voting Stock" shall mean, with respect to any Person, securities of
any class or classes of capital stock in such Person entitling the holders
thereof (whether at all times or only so long as no senior class of stock has
voting power by reason of any contingency) to vote in the election of the
members of the board of directors or other governing body of such Person.
ARTICLE 2
MECHANICS OF DISTRIBUTION
2.1 Mechanics of RVP Distribution. The Distribution shall be effected by
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the distribution to each holder of record of POC Common Stock, as of the record
date designated for the Distribution by or pursuant to the authorization of the
Board of Directors of POC (the "Record Date"), of one Common Unit for every
eight shares of POC Common Stock held by such holder. No fraction of a Common
Unit shall be issued, but in lieu thereof POC shall cause the Distribution Agent
to aggregate all fractional shares that would be issued but for this Section 2.1
and sell such aggregated fractional shares in the public market and the
aggregate net cash proceeds of those sales shall be distributed ratably to those
POC stockholders who would otherwise have received the fractional interests.
2.2 Timing of Distribution. The Board of Directors of POC shall formally
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or waiver of the conditions set forth in Article 3, by delivery of certificates
for RVP Common Units to the Transfer Agent for delivery of Common Units to the
holders entitled thereto. The Distribution shall be deemed to be effective upon
notification by POC to the Transfer Agent that the Distribution has been
declared and that the Transfer Agent is authorized to proceed with the
distribution of the Common Units.
ARTICLE 3
CONDITIONS TO OBLIGATIONS OF POC
The obligations of POC to consummate the Distribution hereunder shall be
subject to the fulfillment of each of the following conditions:
(a) The Board of Directors of POC and the Independent Committee of the
Board of Directors of POC shall be satisfied that, after giving effect to the
Distribution and the transactions contemplated under the Contribution,
Conveyance and Assumption Agreement dated September 16, 2004 (the "Contribution
Agreement") by and among POC, RVP, the GP (as defined therein), the Operating GP
(as defined therein) and the Operating Partnership (as defined therein), (i) POC
will not be insolvent and will not have unreasonably small capital with which to
engage in its businesses and (ii) the POC surplus (as such term is defined by
Delaware General Corporation Law) will be sufficient to permit, without
violation of Delaware law, the Distribution.
(b) POC and RVP (or its Subsidiary) shall have executed the Purchase
Contract for the sale of liquified petroleum gas by POC to RVP (or its
Subsidiary).
(c) POC and RVP shall have executed the Omnibus Agreement, which is to
govern the business relationship between POC and RVP following the Distribution.
(d) The transactions contemplated under the Contribution Agreement
shall have been effected.
(e) The Common Units shall have been approved for trading on the
National Market System of the Nasdaq Stock Market or on such other public market
acceptable to the Board of Directors of POC, and the Nasdaq Stock Market or such
other public market shall not have (i) withdrawn its certification filed with
the SEC that the Common Units have been approved for listing, (ii) suspended
trading in either the Common Units or the POC Common Stock or (iii) filed with
the SEC a Form 25 to strike either the Common Units or the POC Common Stock from
listing and registration thereof.
(f) RVP's Registration Statement on Form 10 shall have become
effective pursuant to Section 12 of the Securities Exchange Act of 1934, as
amended, and the SEC shall not have commenced any action to prohibit or restrict
the Distribution in any way.
(g) All material governmental and third party approvals and consents
necessary to consummate the transactions contemplated under this Agreement and
the Contribution Agreement shall have been obtained.
(h) No order, injunction or decree issued by any court or agency of
competent jurisdiction or other legal restraint or prohibition preventing the
Distribution or any of the other transactions contemplated by this Agreement and
the other agreements relating to the Distribution may be in effect.
(i) The Board of Directors of POC and the Independent Committee of the
Board of Directors of POC shall have received a copy of an independent appraisal
of the assets to be transferred pursuant to the Contribution Agreement, and each
of the Board of Directors of POC and the Independent Committee of the Board of
Directors of POC have determined in their sole discretion that, based on such
independent appraisal, the estimated tax liabilities to be incurred by POC as a
result of the Distribution are acceptable.
(j) The Board of Directors of POC and the Independent Committee of the
Board of Directors of POC shall not have determined, in their sole discretion,
to abandon, defer or modify the Distribution or the terms thereof.
ARTICLE 4
MISCELLANEOUS
4.1 RVP Covenants. To assure the performance of the obligations of RVP
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under this Agreement, RVP hereby covenants and agrees that it will not, and will
cause its respective Subsidiaries not to, merge, convert into another entity,
engage in a share exchange for a majority of its units, liquidate or transfer,
assign or otherwise convey or allocate, directly or indirectly, in one or more
transactions, whether or not related, a majority of its assets (determined in
good faith by a board resolution prior to the transaction on a fair value and
consolidated basis) to any Person unless the acquiring Person (i) expressly
assumes the obligations of it hereunder, (ii) executes and delivers to POC an
agreement, in form and substance satisfactory to POC, agreeing to be bound by
each and every provision of this Agreement as if it were RVP and (iii) has a net
worth on a pro forma basis after giving effect to the acquisition or business
combination equal to or greater than that of RVP (on a consolidated basis) and
RVP's compliance with the provisions Article 3 of this Agreement. Any such
assumption of liability by the acquiring Person shall not release RVP from its
obligations under this Agreement.
4.2 Governing Law. All questions arising out of this Agreement and the
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rights and obligations created herein, or its validity, existence,
interpretation, performance or breach, shall be governed by and construed in
accordance with the internals laws of the State of Texas, without regard to or
the application of the rules of conflicts of laws set forth in such laws.
4.3 Notices. All notices and other communications to be given or made
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hereunder shall be in writing and shall be (a) personally delivered with signed
receipt obtained acknowledging delivery; (b) transmitted by postage prepaid
registered mail, return receipt requested (air mail if international); or (c)
transmitted by facsimile; to a party at the address set
out below (or at such other address as it may have provided notification for the
purposes hereof to the other party hereto in accordance with this Section).
If to RVP or to any of the Rio Vista GP LLC
Tax Subsidiaries of RVP: ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Fax number: (713) _________
Attention: President
With a copy to:
Fulbright & ▇▇▇▇▇▇▇▇ L.L.P.
▇▇▇ ▇▇▇▇▇▇▇ ▇▇., ▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Fax number: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
If to POC: Penn Octane Corporation
▇▇-▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇
▇▇▇▇ ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Fax number: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: President
With a copy to:
Fulbright & ▇▇▇▇▇▇▇▇ L.L.P.
▇▇▇ ▇▇▇▇▇▇▇ ▇▇., ▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Fax number: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
4.4 Expenses. Except as otherwise set forth herein or in any agreement
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executed in connection herewith all costs and expenses related to the
Distribution and the transactions contemplated hereby shall be borne by POC.
4.5 Entire Agreement. This Agreement, including the Schedules, Annexes and
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other writings referred to herein or delivered pursuant hereto, the Omnibus
Agreement dated of even date herewith between POC and RVP and the Contribution
Agreement constitute the entire agreement between POC, RVP and the Tax
Subsidiaries of RVP with respect to the subject matter hereof and supersede all
other agreements, representations, warranties, statements, promises and
understandings, whether oral or written, with respect to the subject matter
hereof. This Agreement may not be amended, altered or modified except by a
writing signed by duly authorized officers of POC, RVP and the Tax Subsidiaries
of RVP.
4.6 Waiver. No consent or waiver, express or implied, by a party hereto to
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or of any breach or default by the other party hereto in the performance by such
other party of its
obligations hereunder will be deemed or construed to be a consent or waiver to
or of any other breach or default in the performance by such other party of the
same or any other obligations of such other party hereunder. Failure on the part
of a party to complain of any act or failure to act of the other party or to
declare the other party in default, irrespective of how long such failure
continues, will not constitute a waiver by such party of its rights hereunder.
The giving of consent by a party in any one instance will not limit or waive the
necessity to obtain such party's consent in any future instance.
4.7 Binding Effect; Assignment; No Third Party Benefit.
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(a) This Agreement will be binding upon and inure to the benefit of
and be enforceable by the parties hereto and their respective successors and
permitted assigns. None of the parties to this Agreement may assign its rights
under this Agreement without the prior written consent of all of the other
parties; provided, however, POC may assign any of its rights and obligations
under this Agreement to any Subsidiary of POC, without the consent of any other
party to this Agreement.
(b) Nothing in this Agreement, express or implied, is intended to or
shall confer upon any person other than RVP, POC, the RVP Indemnified Parties
and the Tax Subsidiaries of RVP any rights, benefits or remedies of any nature
whatsoever under or by reason of this Agreement.
4.8 Counterparts. This Agreement may be executed simultaneously in two or
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more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same agreement.
4.9 References. All references in this Agreement to Articles, Sections and
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other subdivisions refer to the Articles, Sections and other subdivisions of
this Agreement unless expressly provided otherwise. The words "this Agreement",
"herein", "hereof", "hereby", "hereunder" and words of similar import refer to
this Agreement as a whole and not to any particular subdivision unless expressly
so limited.
4.10 Terminology. All personal pronouns used in this Agreement, whether
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used in the masculine, feminine or neuter gender, will include all other
genders; and the singular will include the plural and vice versa. The headings
of the Articles and Sections of this Agreement are included for convenience only
and will not be deemed to constitute part of this Agreement or to affect the
construction hereof or thereof.
4.11 Severability. Any provision of this Agreement that is determined by
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arbitration as provided herein or a court of competent jurisdiction to be
invalid, illegal or unenforceable shall be ineffective to the extent of such
invalidity, illegality or unenforceability, without affecting in any way the
remaining provisions hereof in such jurisdiction or rendering that or any other
provision of this Agreement invalid, illegal or unenforceable, so long as the
material purposes of this Agreement can be determined and effectuated. Should
any provision of this Agreement be so declared invalid, illegal or
unenforceable, the parties shall agree on a valid provision to substitute for
it.
4.12 Further Assurances. Each party hereto agrees to do all acts and things
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and to make, execute and deliver such written instruments, as will from time to
time be reasonably required to carry out the terms and provisions of this
Agreement.
4.13 Amendments. Any term of this Agreement may be amended and the
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observance of any term of this Agreement may be waived, only by a written
instrument executed by POC, RVP and the Tax Subsidiaries of RVP.
[SIGNATURES ON FOLLOWING PAGE]
IN WITNESS WHEREOF, the parties hereto have executed this Distribution
Agreement as of the date first set forth in the introduction to this Agreement.
PENN OCTANE CORPORATION
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇, Jr.
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▇▇▇▇▇▇▇ ▇▇▇▇▇, Jr.,
President
RIO VISTA ENERGY PARTNERS L.P.
By: RIO VISTA GP LLC,
its General Partner
By:/s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇, Jr.
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▇▇▇▇▇▇▇ ▇▇▇▇▇, Jr.,
President