WAIVER AND THIRD AMENDMENTTO CREDIT AGREEMENT

 

2.1

 

2.1.1

Subject to the conditions set forth in Section 4 of this Agreement, the Lenders hereby waive any Defaults or Events of Default that may have occurred as a result of or in connection with (a) the inaccuracy of any representations and warranties made or deemed repeated under Sections 5.07 (No Material Adverse Effect), 5.12 (Collateral), 5.13(e) (Ownership of Properties), 5.18 (No Defaults), 5.21 (Accuracy of Information), 5.23 (Separateness), and 5.32 (Accounts), and 7.01(g) (Use of Proceeds and Cash Flow) of the Credit Agreement, (b) the Borrowers' failure to comply with the requirements of Sections 7.01(c)(i) (Operations and Maintenance), 7.01(e) (Payment of Obligations), 7.01(g) (Use of Proceeds and Cash Flow), 7.01(n) (Maintenance of Liens; Creation of Liens on Newly Acquired Property), 7.01(p) (Separateness), 7.02(b)(vi) (Liens), 7.02(i) (Accounts), 7.02(q) - (Use of Proceeds; Margin Regulations), 7.02(s) (Restricted Payments), 7.03 (Reporting Requirements), 8.02(a) (Deposits into and Withdrawals from Project Accounts) and 8.08 (Revenue Account) of the Credit Agreement and/or (c) the Borrowers' and the Sponsor's failure to comply with any other provisions of any of the Financing Documents that may have been breached, defaulted or violated, in each case only as a result of the Cash Management Weakness (as defined in the Request Letter).

 

2.2

 

2.2.1

Subject to the conditions set forth in Section 4 of this Agreement, the Lenders hereby waive any Defaults or Events of Default that may have occurred as a result of or in connection with (a) the inaccuracy of any representations and warranties made or deemed repeated under Sections 5.18 (No Defaults) and 7.01(g) (Use of Proceeds and Cash Flow) of the Credit Agreement, (b) the Borrowers' failure to comply with the requirements of Sections 8.12 (Debt Service Reserve Account), 7.01(g) (Use of Proceeds and Cash Flow) and 7.03 (Reporting Requirements) of the Credit Agreement, and/or (c) the Borrowers' failure to comply with any other provisions of any of the Financing Documents that may have been breached, defaulted or violated, in each case only as a result of the DSR Shortfall (as defined in the Request Letter).

 

2.3

 

2.3.1

Subject to the conditions set forth in Section 4 of this Agreement and solely with respect to the Accounting Weakness (as defined in the Request Letter and which shall be deemed to include any "material weaknesses" that may have occurred as a result of or in connection with the Cash Management Weakness), the Lenders hereby (i) waive the requirement that the Sponsor comply with Section 5.05(c) of the Sponsor Support Agreement with respect only to the Accounting Weakness and (ii) waive any Default or Event of Default that has occurred or might occur under the Credit Agreement or any other Financing Document as a result of the Sponsor's failure to comply with Section 5.05(c) of the Sponsor Support Agreement as a result solely of the Accounting Weakness.

 

2.4

 

2.4.1

With respect to the requirement in Section 3.05(e) - (Interest Rates) of the Credit Agreement that the Borrowers may not have more than seven (7) separate Eurodollar Loans at any time prior to the Conversion Date, the Lenders hereby waive any Default or Event of Default that may have occurred as a result of the Borrowers having more than seven (7) separate Eurodollar Loans outstanding.

 

2.5

 

2.5.1

Subject to the terms of the amendment in Section 3.3 of this Agreement, with respect to the requirement in Section 7.01(y) - (Affirmative Covenants - Final Completion) of the Credit Agreement that the Borrowers shall cause Final Completion for the Boardman Plant and the Madera Plant to occur on or before the date that is one hundred twenty (120) days after such Plant has achieved its Commercial Operation Date, the Lenders hereby waive such requirement and any Default or Event of Default resulting from the failure of Final Completion to have occurred for such Plants within such time period.

 

3.1

 

3.1.1

Section 8.08(b)(i) (Revenue Account) of the Credit Agreement is hereby deleted and replaced with the following:

 

"(i)

first:

 

(a)

on each Monthly Date, (A) to Pacific Ethanol as payment of any Sponsor Support Reimbursements then due and owing in accordance with the Sponsor Support Agreement and (B) to the Operating Account, the amount certified by the Borrowers' Agent in such Revenue Account Withdrawal Certificate as required to pay Operation and Maintenance Expenses (other than Operation and Maintenance Expenses related to corn, natural gas, electricity, insurance premiums and/or Borrower Taxes) that, in each such case, are or will become due and payable during the immediately succeeding calendar month; provided, that the aggregate amount of such transfer of funds pursuant to clause (B) of this priority first (a) for all calendar months in such Fiscal Year, including amounts proposed to be drawn on such Monthly Date for the immediately succeeding calendar month, does not exceed the Permitted Operating Budget Deviation Levels for such immediately succeeding calendar month, as certified by the Borrower in such Revenue Account Withdrawal Certificate; and

 

(b)

no more than once each calendar week, to the Operating Account, the amount certified by the Borrowers' Agent in such Revenue Account Withdrawal Certificate as required to pay some or all of the cost of corn, natural gas, electricity, insurance premiums and/or Borrower Taxes that, in each such case, are or will become due and payable during the current calendar month (provided that after giving effect to such transfer the amounts on deposit in or standing to the credit of the Operating Account for payment of such expenses shall not exceed the amounts anticipated to be due and payable for such expenses during the current calendar month)."

 

3.1.2

Section 8.08(c)(i) (Revenue Account) of the Credit Agreement is hereby deleted and replaced with the following:

 

"(i)

first:

 

(a)

on each Monthly Date, (A) to Pacific Ethanol, as payment of any Sponsor Support Reimbursements then due and owing in accordance with the Sponsor Support Agreement and (B) to the Operating Account, the amount certified by the Borrowers' Agent in such Revenue Account Withdrawal Certificate as required to pay Operation and Maintenance Expenses (other than Operation and Maintenance Expenses related to corn, natural gas, electricity, insurance premiums and/or Borrower Taxes) that, in each such case, are or will become due and payable during the immediately succeeding calendar month; provided, that the aggregate amount of such transfer of funds pursuant to clause (B) of this priority first (a) for all calendar months in such Fiscal Year, including amounts proposed to be drawn on such Monthly Date for the immediately succeeding calendar month, does not exceed the Permitted Operating Budget Deviation Levels for such immediately succeeding calendar month, as certified by the Borrower in such Revenue Account Withdrawal Certificate; and

 

(b)

no more than once each calendar week, to the Operating Account, the amount certified by the Borrowers' Agent in such Revenue Account Withdrawal Certificate as required to pay some or all of the cost of corn, natural gas, electricity, insurance premiums and/or Borrower Taxes that, in each such case, are or will become due and payable during the current calendar month (provided that after giving effect to such transfer the amounts on deposit in or standing to the credit of the Operating Account for payment of such expenses shall not exceed the amounts anticipated to be due and payable for such expenses during the current calendar month)."

 

3.1.3

Paragraph (i) of Exhibit 8.08-A of the Credit Agreement is hereby amended by adding the following at the end thereof:

 

3.1.4

Paragraph (i) of Exhibit 8.08-B of the Credit Agreement is hereby amended by adding the following at the end thereof:

 

3.1.5

Footnote 1 of Exhibit 8.08-A is hereby deleted and replaced with the following:

 

3.1.6

Footnote 1 of Exhibit 8.08-B is hereby deleted and replaced with the following:

 

3.2

 

3.2.1

Section 3.05(e) - (Interest Rates) of the Credit Agreement is hereby amended by deleting the words "seven (7)" and replacing them with "ten (10)".

 

3.3

 

3.3.1

Section 7.01(y) - (Final Completion) of the Credit Agreement is hereby deleted and replaced with the following:

 

4.1

 

4.1.1

In consideration for each Lender's execution and delivery of this Agreement, the Sponsor hereby agrees to pay a waiver/amendment fee (the "Waiver/Amendment Fee") to each Lender who approves the amendments, modifications and waivers described in Sections 2 and 3 above (the "Waivers and Amendments") by returning an executed counterpart of this Agreement to the Administrative Agent, subject to the following:

 

4.2

 

4.3

 

4.3.1

With respect to the accounts in the name of the Borrowers' Agent, Madera, Boardman or Burley held by Comerica Bank described in the Request Letter, the Borrowers hereby agree, on or before March 25, 2008, to (a) (i) enter into a Blocked Account Agreement with respect to each such Comerica account and (ii) comply with the limitations on the amounts which may be on deposit in a Local Account, as set forth in Section 7.02(b)(vi) of the Credit Agreement, or (b) (i) with respect to Madera and Boardman, transfer all funds held in such Comerica accounts into the Revenue Account or apply such funds to the payment of Operation and Maintenance Expenses and (ii) with respect to the Borrowers' Agent and Burley, transfer all funds held in such Comerica accounts into the Burley Construction Account or apply such funds to the payment of Burley Project Costs, and in the case of this clause (b) only, thereafter, permanently close each such Comerica account.  The Borrowers further agree that the failure to timely satisfy this condition shall immediately void and terminate the effectiveness of this Agreement.

 

4.4

 

4.4.1

With respect to the DSR Shortfall, the Sponsor hereby agrees to deposit three million four hundred thousand Dollars ($3,400,000) into the Debt Service Reserve Account on or before 4:00 p.m. New York City time on March 24, 2008.  The Sponsor further agrees that the failure to timely satisfy this condition shall immediately void and terminate the effectiveness of this Agreement.

 

4.5

 

4.5.1

Each Borrower hereby represents and warrants to each Agent and each Lender as of the date hereof, that all factual information contained in the Request Letter was, when taken as a whole (and after giving effect to any supplement of such information, including the Supporting Documentation) and as of the date furnished, true and accurate in every material respect and such factual information was not, when taken as a whole (and after giving effect to any supplement of such information, including the Supporting Documentation) and as of the date furnished, incomplete by omitting to state any material fact necessary to make such information not misleading in any material respect.  The Borrowers further agree that any breach of this representation and warranty shall be subject to the provisions of Section 9.01(b) of the Credit Agreement (and shall be or become an Event of Default if not cured in accordance with the terms of such Section 9.01(b)).

 

4.6

 

4.6.1

With respect to the Shortfall, the Sponsor hereby agrees to deposit two million six hundred fifty thousand eight hundred thirty-two Dollars ($2,650,832) into the Revenue Account and fifty-two thousand five hundred sixty-four Dollars ($52,564) into the Burley Construction Account on or before 4:00 p.m. New York City time on March 24, 2008.  The Sponsor and the Borrowers further agree that the failure to timely satisfy this condition shall immediately void and terminate the effectiveness of this Agreement.

 

4.6.2

In addition, with respect to the Shortfall, the Sponsor hereby agrees to deposit an additional five hundred eighty-five thousand Dollars ($585,000) into the Revenue Account on or before 4:00 p.m. New York City time on March 26, 2008.  The Sponsor and the Borrowers further agree that the failure to timely satisfy this condition shall immediately void and terminate the effectiveness of this Agreement.

 

5.1

 

5.2

 

5.3

 

5.3.1

Except as expressly amended, modified or waived hereby or otherwise provided herein, all of the terms and conditions of the Credit Agreement and all other Financing Documents remain in full force and effect, and none of such terms and conditions are, or shall be construed as, otherwise amended, modified or waived.  The Credit Agreement shall, together with the Waivers and Amendments, be read and construed as a single agreement.  The Sponsor Support Agreement shall, together with the Waiver and Amendment referred to in Section 2.3 above, be read and construed as a single agreement.  All references in the Credit Agreement, the Sponsor Support Agreement and any related documents, instruments and agreements (including the Financing Documents) shall hereafter refer to the Credit Agreement or the Sponsor Support Agreement or such related documents, instruments and agreements (as applicable), as amended hereby.

 

5.3.2

Notwithstanding anything contained herein, the Waivers and Amendments granted hereunder (a) are limited amendments, modifications and waivers, (b) are effective only with respect to the transactions described herein for the specific instance and the specific purpose for which they are given, (c) shall not be effective for any other purpose or transaction, and (d) do not constitute a basis for a subsequent waiver or consent of any of the provisions of the Credit Agreement.  Except for the Waivers and Amendments in Section 2 of this Agreement, nothing herein shall constitute a waiver by the Lenders of any Default or Event of Default or a waiver by the Lenders of any right, power or remedy available to the Lenders or the other Senior Secured Parties under the Credit Agreement, whether any such defaults, rights, powers or remedies presently exist or arise in the future.

 

5.3.3

The parties acknowledge that, as of each date the Waivers and Amendments become effective pursuant to Section 5.4 below, no Material Adverse Effect, Default or Event of Default shall have occurred and be continuing as a result of or in connection with the Cash Management Weakness, the Accounting Weakness, the DSR Shortfall, or the matters referred to in Sections 2.4, 2.5 and 4.3 of this Agreement, and the Required Lenders direct the Administrative Agent and the Collateral Agent to not exercise any rights or remedies against the Sponsor or any of the Borrowers as a result of or in connection with the Cash Management Weakness, the Accounting Weakness, the Shortfall, the DSR Shortfall, or the matters referred to in Sections 2.4, 2.5 or 4.3 of this Agreement.

 

5.4

 

5.4.1

This Agreement shall not become effective, and shall be of no force or effect, if the Required Lenders, Borrowers, Borrowers' Agent, Sponsor, Administrative Agent, Collateral Agent and Accounts Bank have not executed this Agreement on or before March 28, 2008.

 

5.4.2

The Waivers and Amendments (other than the Waiver and Amendment under Section 2.3.1(i) of this Agreement) shall become effective upon the later to occur of (a) the execution of this Agreement by each of the Required Lenders and (b) the payment in full by the Sponsor of the Waiver/Amendment Fee in the manner set forth in Section 4.1(d) above.

 

5.4.3

The Waiver and Amendment under Section 2.3.1(i) of this Agreement shall become effective upon the later to occur of (a) the execution of this Agreement by the Lenders (other than any Non-Voting Lender) holding an amount in excess of sixty-six and two-thirds percent (66.66%) of the Construction Loan Commitments and the Working Capital Loan Commitments (excluding the Construction Loan Commitments and the Working Capital Loan Commitments of all Non-Voting Lenders) (the "Supermajority Lenders") and (b) the payment in full by the Sponsor of the Waiver/Amendment Fee in the manner set forth in Section 4.1(e) above.

 

5.4.4

Once effective, the applicable Waivers and Amendments shall be binding on the Borrowers, the Sponsor, the Administrative Agent, the Collateral Agent, the Accounts Bank, the Lenders and their respective successors and assigns.

 

5.5

 

5.6

as Borrower

 

By: ___________________________________

Name:

Title:

 

as Borrower

 

By: ___________________________________

Name:

Title:

 

as Borrower

 

Name:

Title:

 

as Borrower

 

By: ___________________________________

Name:

Title:

 

 

as Borrower

 

Name:

Title:

as Borrowers' Agent

 

Name:

Title:

 

as Sponsor

 

Name:

 

Name:

Title:

 

 

 

Name:

Title:

 

 

Title