NOTE E — DEBT OBLIGATIONS

	December 31, 2011		June 30, 2012
Long-term debt obligations were as follows:
RZB Note	$	2,610,000	$	2,150,000
		2,610,000		2,150,000
Less current portion		1,000,000		1,100,000
	$	1,610,000	$	1,050,000

RZB Note

On July 26, 2007, the Partnership borrowed $5,000,000 (RZB Loan) from RB International Finance (USA) LLC, formerly known as RZB Finance LLC (RZB), the proceeds of which were used in connection with the acquisition of Regional. Through several amendments to the RZB Loan, Regional became the borrower under the RZB Loan and the associated promissory note (RZB Note), and all of Regional’s assets, as well as the outstanding capital stock of Regional, are pledged as collateral for the RZB Loan. RZB has the right to foreclose on the assets of Regional in order to recover amounts owing under the RZB Loan. The interest rate is variable and approximated 5.8% for the quarter ended June 30, 2012.

On May 25, 2010, Regional and RZB, entered into a Seventh Amendment (Seventh Amendment) in connection with the RZB Loan. Under the terms of the Seventh Amendment, the maturity date of the RZB Note was extended until May 31, 2014 and monthly principal amortization requirements were adjusted as follows:

May 2010 through April 2011		$ 50,000 Monthly amortization
May 2011 through April 2012		$ 70,000 Monthly amortization
May 2012 through April 2013		$ 90,000 Monthly amortization
May 2013 through April 2014		$ 100,000 Monthly amortization
May 2014		$ 50,000

Under the terms of the Seventh Amendment, Regional was required to provide audited financial statements of Regional for the year ended December 31, 2009 by September 30, 2010 and subsequent annual audited financial statements of Regional within 90 days after the end of each subsequent annual year end. In addition, the Seventh Amendment included additional restrictive covenants related to change in control, change in management and distributions of cash. Per the loan agreement with RZB, Regional is also required to provide certified monthly financial statements to RZB. Regional’s failure to provide the required financial statements as prescribed is an event of default and RZB may, by written notice to Regional, declare the RZB Note immediately due and payable. Regional did not provide the audited financial statements for the years ended December 31, 2009 and 2010 to RZB until April 22, 2011. At December 31, 2011 and June 30, 2012, Regional was in compliance with its obligations under the RZB Note.

On November 9, 2010, Regional and RZB entered into an Eighth Amendment (Eighth Amendment) in connection with the RZB Note. Under the terms of the Eighth Amendment, the RZB Note was amended to provide for the ability of Central Energy, LP to replace Penn Octane as the owner of the General Partner of Central upon consummation of the Securities Purchase and Sale Agreement and makes it an event of default under the RZB Note if (i) Central Energy, LP or Central Energy, LLC, the sole general partner of Central Energy, LP, ceases to own or control, directly or indirectly, at least 51% of the limited liability company interests of the General Partner, (ii) Messrs. Anbouba and Montgomery cease to own and control 100% of the membership interests of Central Energy, LLC or (iii) Central Energy, LLC ceases to be the sole general partner of Central Energy, LP and it also removed the provision that the RZB Note required to be repaid in full upon any change in control of the general partner of Central.

Restricted Cash

In connection with Regional’s Vehicle Lease Service Agreement (see Note H), Regional sold twenty seven of its owned tractors (Sold Tractors) for total proceeds of $507,000. RZB held a priority lien on the Sold Tractors. Under the terms of the RZB Loan, the net proceeds from the Sold Tractors were deposited into a restricted account controlled by RZB and are to be used to prepay the RZB Loan unless RZB at its sole discretion permitted such proceeds to be re-invested into Regional’s business. As of June 30, 2012, RZB has allowed Regional to utilize $274,000 of the proceeds for working capital requirements, including shortfalls from operations to meet ongoing debt service obligations. Regional expects to use the remaining proceeds from the sale of the Sold Tractors to make up for cash shortfalls in monthly debt service obligations, make upgrades and repairs to its storage, barge and rail facilities and/or for working capital.