Document:

Filed by Bowne Pure Compliance

 

Exhibit 10.37

PLEDGE AGREEMENT

This PLEDGE AGREEMENT, made this 26th day of July, 2007, is by and between:

Rio Vista Energy Partners L.P., a Delaware limited partnership, having an office at 820
Gessner Road, Suite 1285, Houston, Texas 77024 (hereinafter referred to as the “Pledgor”), and RZB
Finance LLC, having an office at 1133 Avenue of the Americas, New York, NY 10036 (hereinafter
referred to as the “Lender”).

W I T N E S S E T H :

WHEREAS:

(A) The Pledgor and the Lender have entered into a Loan Agreement dated as of July 26, 2007
(as amended, supplemented or otherwise modified from time to time, the “Loan Agreement”) pursuant
to which the Lender will make loans to the Borrower upon and subject to the terms and conditions
set forth in the Loan Agreement;

(B) In order to induce the Lender to enter into the Loan Agreement, the Pledgor has agreed to
grant a security interest in and pledge to the Lender all of the issued and outstanding stock of
Regional Enterprises, Inc., a Virginia corporation (which is or will be the surviving corporation
in the Merger (as defined in the Loan Agreement), hereinafter referred to as “Merger Sub”), which
are now or hereafter owned by it;

(C) The execution and delivery by the Pledgor of this Pledge Agreement is a condition
precedent to the Lender making loans under the Loan Agreement; and

(D) All capitalized terms which are not defined herein but which are defined in the Loan
Agreement shall have the respective meanings given to them in the Loan Agreement.

NOW, THEREFORE, in consideration of the foregoing, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the Pledgor hereby
agrees with the Lender, as follows:

1. The term “Pledged Stock” as used herein shall mean and include all of the issued and
outstanding shares of stock of Merger Sub, whether now owned or hereafter acquired by the Pledgor,
and certificates evidencing such shares, which are set forth in Schedule A annexed hereto, and,
also, any shares, stock certificates, options or rights issued by Merger Sub as an addition to, in
substitution of, or in exchange for any such shares, all dividends and distributions thereon and
any and all proceeds thereof, now or hereafter owned or acquired by the Pledgor.

 

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2. (a) As collateral security for the due payment and performance of all Obligations, whether
now existing or hereafter arising, the Pledgor hereby pledges, assigns, hypothecates, delivers and
sets over to the Lender, all the Pledged Stock, and hereby grants to the Lender, a first priority
security interest in all such Pledged Stock, and in any and all proceeds thereof and substitutions
therefor.

(b) If the Pledgor shall become entitled to receive or shall receive any stock certificate
(including, without limitation, any certificate representing a stock dividend or a distribution in
connection with any reclassification, increase or reduction of capital), option or rights, whether
as an addition to, in substitution of, or in exchange for any shares of the Pledged Stock, or
otherwise, the Pledgor shall accept any such instruments as the Lender’s agent, shall hold them in
trust for the Lender, and shall deliver them forthwith to the Lender in the exact form received,
with the Pledgor’s endorsement when necessary and/or appropriate stock powers duly executed in
blank, to be held by the Lender, subject to the terms hereof, as further collateral security for
the Obligations. All of the foregoing property described in this Section 2(b) shall be deemed to
be Pledged Stock.

(c) (i) At any time: (A) any or all shares of the Pledged Stock held by the Lender hereunder
may, at the option of the Lender or its nominee, be registered in the name of the Lender or its
nominee, and (B) the Lender or its nominee may, without notice, exercise all voting and corporate
rights at any meeting of Merger Sub and exercise any and all rights of conversion, exchange,
subscription or any other rights, privileges or options pertaining to any shares of the Pledged
Stock as if it were the absolute owner thereof, including, without limitation, the right to receive
dividends payable thereon, and the right to exchange, at its discretion, any and all of the Pledged
Stock upon the merger, consolidation, reorganization, recapitalization or other readjustment of
Merger Sub or upon the exercise by Merger Sub of any right, privilege or option pertaining to any
shares of the Pledged Stock, and in connection therewith, to deposit and deliver any and all of the
Pledged Stock with any committee, depositary, transfer agent, registrar or other designated agency
upon such terms and conditions as it may determine, all without liability except to account for
property actually received by it, but the Lender shall have no duty to exercise any of the
aforesaid rights, privileges or options and shall not be responsible for any failure to do so or
delay in so doing.

(ii) Without limitation of the foregoing, prior to the occurrence of any Event of Default,
subject to the covenants contained in Section 4, the Pledgor shall be entitled to vote or consent
with respect to the Pledged Stock in a manner not inconsistent with this Pledge Agreement, the Loan
Agreement or any other Loan Document.

(d) All dividends and all distributions of capital payable with respect to any part of the
Pledged Stock (including, without limitation, pursuant to the recapitalization or reclassification
of the capital of Merger Sub or pursuant to the reorganization, dissolution or liquidation thereof)
shall be paid or delivered to the Lender at the Lender’s account set forth in Section 2.4(A) of the
Loan Agreement or any other account designated by Lender to be held by the Lender as additional
security hereunder until applied to the Obligations. The Pledgor shall
execute an instruction letter to Merger Sub in the form of Exhibit B hereto, and deliver a
copy to the Lender duly acknowledged and agreed to by Merger Sub.

 

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(e) At any time, the Lender without demand of performance or other demand, advertisement or
notice of any kind (except the notice specified below of time and place of public or private sale)
to or upon the Pledgor or any other person or entity (all and each of which demands, advertisements
and/or notices are, to the extent permitted by law, hereby expressly waived) may forthwith collect,
receive, appropriate and realize upon the Pledged Stock, or any part thereof, and/or may forthwith
sell, assign, give an option or options to purchase, contract to sell or otherwise dispose of and
deliver said Pledged Stock, or any part thereof, in one or more parcels at public or private sale
or sales, at any exchange, broker’s board or at any of the Lender’s offices or elsewhere at such
prices and on such terms (including, without limitation, a requirement that any purchaser of all or
any part of the Pledged Stock shall be required to purchase the shares constituting the Pledged
Stock for investment and without any intention to make a distribution thereof) as it may deem best,
for cash or on credit or for future delivery without assumption of any credit risk, with the right
of the Lender or any purchaser upon any such sale or sales, whether public or private, to purchase
the whole or any part of the Pledged Stock so sold, free of any right or equity of redemption in
the Pledgor, which right or equity is hereby expressly waived and released.

(f) The proceeds of any collection, recovery, receipt, appropriation, realization or sale as
set forth in Section 2(d) or 2(e), shall be applied as follows:

First, to the costs and expenses of every kind incurred in connection therewith or incidental
to the care, safekeeping or otherwise of any and all of the Pledged Stock or in any way relating to
the rights of the Lender hereunder or under the other Loan Documents, including reasonable
attorneys’ fees and legal expenses;

Second, to the satisfaction of the Obligations in such order as the Lender shall determine;

Third, to the payment of any other amounts required by applicable law (including, without
limitation, Section 9-608(a)(1)(C) of the New York Uniform Commercial Code); and

Fourth, to the Pledgor to the extent of the surplus proceeds, if any.

(g) The Lender need not give more than ten days’ notice of the time and place of any public
sale or of the time after which a private sale may take place and such notice shall be deemed to be
reasonable notification of such matters.

(h) In the event that the proceeds of any collection, recovery, receipt, appropriation,
realization, or sale as aforesaid are insufficient to pay all amounts to which the Lender is
legally entitled, the Pledgor will be liable for the deficiency, together with interest
thereon, at the Default Rate provided for in the Loan Agreement, and the reasonable fees and
expenses of any attorneys employed by the Lender to collect such deficiency.

 

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3. The Pledgor represents and warrants that:

(a) The Pledged Stock owned by the Pledgor is owned directly and beneficially and of record by
the Pledgor in the respective amounts set forth on Schedule A annexed hereto;

(b) The shares of the Pledged Stock constitute the percentage of all of the issued and
outstanding shares of capital stock of Merger Sub as is set forth in Schedule A annexed hereto;
Schedule A accurately lists the total authorized shares and treasury shares of the Pledged Stock;

(c) All of the shares of the Pledged Stock have been duly and validly issued, are fully paid
and non-assessable and are owned by the Pledgor free and clear of any pledge, mortgage,
hypothecation, Lien, charge, encumbrance or any security interest in such shares or the proceeds
thereof except for the security interest granted to the Lender hereunder; and

(d) Upon delivery of the Pledged Stock to the Lender or an agent for the Lender, this Pledge
Agreement creates and grants a valid first priority lien on and perfected security interest in the
shares of the Pledged Stock and the proceeds thereof, subject to no prior or equal security
interest, Lien, charge or encumbrance or to any agreement purporting to grant to any third party a
security interest in the property or assets of the Pledgor which would include the Pledged Stock.

4. (a) The Pledgor hereby covenants that so long as any Obligations shall be outstanding and
unpaid in whole or in part, or the Lender has any obligation to make credit extensions under the
Loan Agreement, the Pledgor will not:

(i) sell, convey or otherwise dispose of any shares of the Pledged Stock or any interest
therein, nor will the Pledgor create, incur or permit to exist any pledge, mortgage, Lien, charge,
encumbrance or any security interest whatsoever with respect to any of such Pledged Stock or the
proceeds thereof, other than that created hereby; or

(ii) consent to or approve the issuance of any additional shares of any class of capital stock
of Merger Sub or any option, warrant or other agreement with respect to such stock; or

(iii) vote to enable or otherwise permit Merger Sub to dissolve, liquidate, reduce its capital
or merge or consolidate with any Person.

(b) The Pledgor warrants and will defend the Lender’s right, title, special property and
security interest in and to the Pledged Stock against the claims of any person, firm, corporation
or other entity.

 

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5. (a) If the Lender shall determine to exercise its right to sell all or any part of the
Pledged Stock, and if in the opinion of counsel for the Lender it is necessary to have the Pledged
Stock, or that portion thereof to be sold, registered under the provisions of the
Securities Act of 1933, as amended (the “Securities Act”), the Pledgor will use its best efforts to cause Merger Sub
to execute and deliver, and cause the directors and officers of Merger Sub to execute and deliver,
all at the Pledgor’s expense, all such instruments and documents, and to do or cause to be done all
such other acts and things as may be necessary to register the Pledged Stock, or that portion
thereof to be sold, under the provisions of the Securities Act and to cause the registration
statement relating thereto to become effective and to remain effective for a period of one year
from the date of the first public offering of the Pledged Stock, or that portion thereof so to be
sold, and to make all amendments thereto and/or to the related prospectus which, in the opinion of
the Lender or its counsel, are necessary or advisable, all in conformity with the requirements of
the Securities Act and the rules and regulations of the Securities and Exchange Commission
applicable thereto; to cause Merger Sub to comply with the provisions of the “Blue Sky” law of any
jurisdiction which the Lender shall designate; and to cause Merger Sub to make available to its
security holders, as soon as practicable, an earnings statement (which need not be audited)
covering a period of twelve months, but not more than eighteen months, beginning with the first
month after the effective date of any such registration statement, which earnings statement will
satisfy the provisions of Section 11(a) of the Securities Act.

(b) The Pledgor acknowledges that a breach of any of the covenants contained in Section 5(a)
above will cause irreparable injury to the Lender, that the Lender shall have no adequate remedy at
law in respect of such breach and, as a consequence, the covenants of the Pledgor contained in
Section 5(a) shall be specifically enforceable against the Pledgor, and the Pledgor hereby waives,
and shall not assert, any defenses against an action for specific performance of such covenants.

(c) Notwithstanding the foregoing, the Pledgor recognizes that the Lender may be unable to
effect a public sale of all or a part of the Pledged Stock, and may be compelled to resort to one
or more private sales to a restricted group of purchasers who will be obligated to agree, among
other things, to acquire such securities for their own account, for investment and not with a view
to the distribution or resale thereof. The Pledgor acknowledges that any such private sales may be
at prices and on terms less favorable to the seller than if sold at public sales and agrees that
such private sales shall be deemed to have been made in a commercially reasonable manner, and that
the Lender has no obligation to delay sale of any such securities for the period of time necessary
to permit Merger Sub to register such securities for public sale under the Securities Act.

6. The Pledgor shall at any time and from time to time upon the written request of the
Lender, execute and deliver such further documents and do such further acts and things as the
Lender may reasonably request in order to effect the purposes of this Pledge
Agreement, including, without limitation, delivering to the Lender on the date hereof or at
any time hereafter irrevocable proxies in respect of the Pledged Stock in the form of Exhibit A
annexed hereto.

7. (a) Beyond the exercise of reasonable care to assure the safe custody of the Pledged Stock
while held hereunder, the Lender shall have no duty or liability to preserve rights pertaining
thereto, and shall be relieved of all responsibility for the Pledged Stock upon surrendering it to
the Pledgor or in accordance with the Pledgor’s instructions.

 

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(b) No course of dealing between the Pledgor or the Lender, nor any failure to exercise, nor
any delay in exercising, on the part of the Lender, any right, power or privilege hereunder or
under the Loan Agreement or other Loan Documents shall operate as a waiver thereof; nor shall any
single or partial exercise of any right, power or privilege hereunder or thereunder preclude any
other or further exercise thereof or the exercise of any other right, power or privilege.

(c) The rights and remedies herein provided, and provided in the Loan Agreement, the Loan
Documents and in all other agreements, instruments and documents delivered pursuant to the Loan
Agreement, are cumulative and are in addition to, and not exclusive of, any rights or remedies
provided by law including, without limitation, the rights and remedies of a secured party under the
New York Uniform Commercial Code as in effect from time to time.

8. All notices and other communications to the Pledgor pursuant to this Agreement shall be
given by sending the same to the Pledgor in the manner provided in the Loan Agreement.

9. This Pledge Agreement shall inure to the benefit of, and be binding upon, the successors
and assigns of the parties hereto, provided that the Pledgor may not assign any of its rights and
obligations hereunder without the prior written consent of the Lender.

10. The invalidity, illegality or unenforceability in any jurisdiction of any provision in or
obligation under this Pledge Agreement shall not affect or impair the validity, legality or
enforceability of the remaining provisions or obligations under this Pledge Agreement or of such
provision or obligation in any other jurisdiction.

11. THIS PLEDGE AGREEMENT SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN
ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO CONFLICTS OF LAWS
PRINCIPLES.

12. THE PLEDGOR HEREBY CONSENTS TO THE JURISDICTION OF ANY STATE OR FEDERAL COURT LOCATED
WITHIN THE BOROUGH OF MANHATTAN OF THE STATE OF NEW YORK AND IRREVOCABLY AGREES THAT, UNLESS
WAIVED BY THE LENDER IN WRITING, ALL
ACTIONS OR PROCEEDINGS ARISING OUT OF OR RELATING TO THIS PLEDGE AGREEMENT OR THE OTHER LOAN
DOCUMENTS, INCLUDING ALL CLAIMS AND ACTIONS AGAINST THE LENDER, SHALL BE LITIGATED IN SUCH COURTS.
THE PLEDGOR ACCEPTS FOR ITSELF AND IN CONNECTION WITH ITS PROPERTIES, GENERALLY AND
UNCONDITIONALLY, THE NON-EXCLUSIVE JURISDICTION OF THE AFORESAID COURTS AND WAIVES ANY DEFENSE OF
FORUM NON CONVENIENS, AND IRREVOCABLY AGREES TO BE BOUND BY ANY JUDGMENT
RENDERED THEREBY IN CONNECTION WITH THIS PLEDGE AGREEMENT, THE OTHER LOAN DOCUMENTS OR THE
OBLIGATIONS.

 

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13. EACH OF THE PLEDGOR AND THE LENDER HEREBY WAIVES ITS RIGHTS TO A JURY TRIAL OF ANY CLAIM
OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS PLEDGE AGREEMENT OR THE OTHER LOAN DOCUMENTS.
EACH OF THE PLEDGOR AND THE LENDER ACKNOWLEDGES THAT THIS WAIVER IS A MATERIAL INDUCEMENT TO ENTER
INTO A BUSINESS RELATIONSHIP, THAT EACH HAS ALREADY RELIED ON THE WAIVER IN ENTERING INTO THIS
PLEDGE AGREEMENT AND THE OTHER LOAN DOCUMENTS AND THAT EACH WILL CONTINUE TO RELY ON THE WAIVER IN
THEIR RELATED FUTURE DEALINGS. EACH OF THE PLEDGOR AND THE LENDER FURTHER WARRANTS AND REPRESENTS
THAT EACH HAS REVIEWED THIS WAIVER WITH ITS LEGAL COUNSEL, AND THAT EACH KNOWINGLY AND VOLUNTARILY
WAIVES ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL.

14. This Pledge Agreement and any amendments, waivers, consents, or supplements may be
executed in any number of counterparts and by different parties hereto in separate counterparts,
each of which when so executed and delivered shall be deemed an original, but all of which
counterparts together shall constitute but one and the same instrument. This Pledge Agreement shall
become effective upon the execution of a counterpart hereof by each of the parties hereto.
Delivery of an executed counterpart of a signature page to this Pledge Agreement, to any
amendments, waivers, consents or supplements, or to any other Loan Document by telecopier shall be
as effective as delivery of a manually executed counterpart thereof.

 

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IN WITNESS WHEREOF, the parties have caused this Pledge Agreement to be duly executed and
delivered the day and year first above written.

	 	 	 	 	 
	 	PLEDGOR

RIO VISTA ENERGY PARTNERS L.P.

By: Rio Vista GP LLC, as its General Partner

 	 
	 	By:  	 	 
	 	 	Name:  	Ian Bothwell 	 
	 	 	Title:  	Acting Chief Executive Officer 	 
	 

	 	 	 	 	 
	 	LENDER

RZB FINANCE LLC

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 

	 	 	 	 	 
	 	 	 
	 	By:  	
 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 

 

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SCHEDULE A

TO PLEDGE AGREEMENT

PLEDGED STOCK

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	% of	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	Outstanding	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	Shares on a	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	Fully	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	Diluted	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	Basis	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	Assuming	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	Exercise of	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	all Options,	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	Warrants	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	and	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	Securities	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	Convertible	 	 	 	 	 	 	 
	 	 	 	 	 	 	Total	 	 	or	 	 	 	 	 	 	 
	 	 	 	 	 	 	Authorized	 	 	Exchangeable	 	 	 	 	 	 	 
	 	 	 	 	 	 	Shares/	 	 	 for	 	 	 	 	 	 	 
	 	 	Number of	 	 	Treasury	 	 	Common	 	 	Certificate	 	 	 	 
	Corporation	 	Shares	 	 	Shares	 	 	Stock	 	 	Number	 	 	Class	 
	Regional
Enterprises, Inc.,
a Virginia
corporation
	 	 	1,000	 	 	 	5,000	 	 	 	100	%	 	 	1	 	 	Common

 

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EXHIBIT A

TO PLEDGE AGREEMENT

IRREVOCABLE PROXY

KNOW ALL MEN BY THESE PRESENTS that Rio Vista Energy Partners L.P. (the “Pledgor”) does hereby
make, constitute and appoint RZB FINANCE LLC (the “Lender”) and each of the Lender’s officers and
employees, its true and lawful attorneys, for it and in its name, place and stead, to act as its
proxy in respect of all of the shares of capital stock of the corporation listed below (hereinafter
referred to as the “Corporation”), which it now or hereafter may own or hold, including, without
limitation, the right, on its behalf, to demand the call by any proper officer of the Corporation
pursuant to the provisions of its Articles of Incorporation or By-Laws and as permitted by law of a
meeting of its shareholders and at any such meeting of shareholders, annual, general or special, to
vote for the transaction of any and all business that may come before such meeting, or at any
adjournment thereof, including, without limitation, the right to vote for the sale of all or any
part of the assets of the Corporation and/or the liquidation and dissolution of the Corporation;
giving and granting to its said attorneys full power and authority to do and perform each and every
act and thing whether necessary or desirable to be done in and about the premises, as fully as it
might or could do if personally present with full power of substitution, appointment and
revocation, hereby ratifying and confirming all that its said attorneys shall do or cause to be
done by virtue hereof.

Name of Corporation: Regional Enterprises, Inc., a Virginia corporation

This Proxy is given to the Lender and to its officers and employees in consideration of the
loans made by the Lender to the Pledgor, and in order to carry out the covenant of the Pledgor
contained in a certain Pledge Agreement dated as of July 26, 2007 by and between the Pledgor and
the Lender (as amended, supplemented or otherwise modified from time to time) and this Proxy shall
not be revocable or revoked by the Pledgor, shall be binding upon its successors and assigns until
the payment in full of all of the Obligations (as defined in the Loan Agreement dated as of July
26, 2007 between the Pledgor and the Lender (as amended, supplemented or otherwise modified from
time to time)) and termination of all obligations of the Lender to extend credit to the Pledgor.

 

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IN
WITNESS WHEREOF, the undersigned has executed this Irrevocable Proxy this ___ day of July,
2007.

	 	 	 	 	 
	 	RIO VISTA ENERGY PARTNERS L.P.

By: Rio Vista GP LLC, its General Partner

 	 
	 	By:  	/s/ Ian Bothwell	 
	 	 	Name:  	Ian Bothwell 	 
	 	 	Title:  	Acting Chief Executive Officer 	 
	 

 

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EXHIBIT B

TO PLEDGE AGREEMENT

[            , 2007]

Regional Enterprises, Inc.

410 Water Street

Hopewell, Virginia 23860

Reference is hereby made to the Pledge Agreement dated as of July 26, 2007 (as amended,
supplemented or otherwise modified from time to time, the “Pledge Agreement”) between Rio Vista
Energy Partners L.P. (“Pledgor”) and RZB Finance LLC (“Lender”), a copy of which is attached
hereto.

You are hereby irrevocably directed to make any and all payments of cash dividends and all
other cash distributions on the Pledged Stock (as defined in the Pledge Agreement) directly to the
Lender, without set-off or counterclaim, by wire transfer to the account set forth in Section 2.4
of the Loan Agreement dated as of July 26, 2007 between the Pledgor and the Lender (as amended,
supplemented or otherwise modified from time to time) or to such other account as Lender shall
direct from time to time.

The instructions contained herein are irrevocable and may not be amended, revoked or otherwise
modified without the prior written consent of the Lender.

Please sign this letter in the place provided below to confirm your agreement with Lender that
you will comply with the foregoing payment instructions and that you will (a) be bound by the
Pledge Agreement and comply with its terms insofar as applicable to you, and (b) notify the Lender
promptly of any of the events described in Section 2(b) of the Pledge Agreement. You also hereby
confirm and agree that Section 5(b) of the Pledge Agreement
shall apply to you, mutatis mutandis,
with respect to all actions that may be required of you under or pursuant to or arising from
Section 2(e) of the Pledge Agreement.

	 	 	 	 	 	 	 	 	 	 	 
	RIO VISTA ENERGY PARTNERS L.P.	 	RZB FINANCE LLC	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	By: Rio Vista GP LLC, its General Partner	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	By:
	 	/s/ Nancy Remini	 	 
	 

	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	Name: Nancy Remini	 	 
	 

	 	 	 	 	 	 	 	Title: Vice President	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	By:

	 	/s/ Ian Bothwell
	 	 	 	By:
	 	/s/ Pearl Geffers	 	 
	 

	 	 
	 	 	 	 	 	 	 	 
	 

	 	Name: Ian Bothwell
	 	 	 	 	 	Name: Pearl Geffers	 	 
	 

	 	Title: Acting Chief Executive Officer
	 	 	 	 	 	Title: First Vice President	 	 
	 
	 	 	 	 	 	 	 	 	 	 

 

- 12 -

 

	 	 	 	 	 	 	 	 	 	 	 
	ACKNOWLEDGED AND AGREED:	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	REGIONAL ENTERPRISES, INC.	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	By:

	 	/s/ Ian Bothwell	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	 	 	 
	 

	 	Name: Ian Bothwell	 	 	 	 	 	 	 	 
	 

	 	Title: President
	 	 	 	 	 	 	 	 

 

- 13 -Filed by Bowne Pure Compliance

 

Exhibit 10.38

FIRST AMENDMENT TO

LINE LETTER

This FIRST AMENDMENT TO LINE LETTER, dated as of July 26, 2007, is between RZB FINANCE LLC
(“RZB”) and Penn Octane Corporation (the “Borrower”).

W I T N E S S E T H:

WHEREAS, RZB and the Borrower are parties to an Amended and Restated Line Letter dated as of
September 15, 2004 (as amended, the “Line Letter”; capitalized terms used herein having the
meanings ascribed thereto in the Line Letter unless otherwise defined herein);

WHEREAS, the Borrower and RZB desire to amend the Line Letter in several respects;

NOW, THEREFORE, the parties hereto hereby agree as follows:

Section 1. Amendments.

The Line Letter is hereby amended, effective on the Effective Date referred to in Section 2
hereof, as follows:

(a) The following clause is added at the end of the first sentence of Section 1(a) of the Line
Letter after the words “at any one time outstanding”:

“provided that such amount shall be reduced by the outstanding principal amount from
time to time of the loan made by RZB to Rio Vista Energy Partners L.P. on or about July 26,
2007 in the original principal amount of $5,000,000 (the “RV Loan”). Accordingly, upon RZB
making the RV Loan, the amount of the Credit Facility will be reduced to Ten Million Dollars
($10,000,000) but such amount shall, subject to RZB’s discretion as described below, be
increased dollar for dollar by the principal amount of repayments of the RV Loan,
provided such increase shall occur only if such repayments shall be made when no
event of default under the agreements relating to the RV Loan shall have occurred and no
demand for payment of the RV Loan shall have been made.”

Section 2. Effectiveness of Amendment.

This First Amendment shall become effective on the date (the “Effective Date”) on which RZB
shall have received (a) this First Amendment duly executed by all parties hereto and (b) such
corporate authorization documents of the Borrower as RZB shall request.

 

- 1 -

 

Section 3. Effect of Amendment; Ratification; Representations; etc.

(a) On and after the date hereof, when counterparts of this First Amendment shall have been
executed by all parties hereto, this First Amendment shall be a part of the Line Letter, 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 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, is hereby ratified, approved and confirmed in all respects.

(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 of the Borrower set forth in
the Line Letter and in the other Loan Documents are true and correct, and

	 
	 	(ii)	 	no Event of Default or event or condition that, with the giving
of notice or passage of time or both, would constitute an Event of Default has
occurred and is continuing.

Section 4. New York Law.

This First Amendment shall be construed in accordance with and governed by the laws of the
State of New York applicable to agreements made and to be performed in said State.

Section 5. Severability.

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.

 

- 2 -

 

Section 6. Counterparts.

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	 	RZB FINANCE LLC
	 
	 	 	 	 	 	 
	By:

	 	/s/ Ian Bothwell
	 	By:
	 	/s/ Pearl Geffers
	 

	 	 
	 	 	 	 
	 

	 	Name: Ian Bothwell
	 	 	 	Name: Pearl Geffers
	 

	 	Title: Acting Chief Executive Officer
	 	 	 	Title: First Vice President
	 
	 	 	 	 	 	 
	 

	 	 	 	By:
	 	/s/ Nancy Remini
	 

	 	 	 	 	 	 
	 

	 	 	 	 	 	Name: Nancy Remini
	 

	 	 	 	 	 	Title: Vice President

 

- 3 -

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