EXHIBIT 10.1
 
KINERGY MARKETING LLC
400 Capitol Mall, Suite 2060
Sacramento, California 95814

May 17, 2009

Wachovia Capital Finance Corporation (Western),
  as Agent for and on behalf of the
  Lenders as referred to below
251 South Lake Avenue, Suite 900
Pasadena, California 91101

Re:           Amendment and Waiver Agreement

Ladies and Gentlemen:

Wachovia Capital Finance Corporation (Western) (“Wachovia”), in its capacity as
agent (“Agent”) for the Lenders from time to time party to the Loan Agreement
referred to below, the Lenders and Kinergy Marketing LLC, an Oregon limited
liability company (“Borrower”), have entered into certain financing arrangements
pursuant to the Loan and Security Agreement, dated as of July 28, 2008, by and
among Agent, Lenders and Borrower (the “Loan Agreement”), and the other
agreements, documents and instruments referred to therein or at any time
executed and/or delivered in connection therewith or related thereto, including,
but not limited to, the Letter re: Amendment and Forbearance Agreement, dated
February 13, 2009 (the “Forbearance Agreement”), the Amendment No. 1 to Letter
re: Amendment and Forbearance Agreement, dated as of February 26, 2009 (the
“Amendment No. 1 to Forbearance Agreement”), the Amendment No. 2 to Letter re:
Amendment and Forbearance Agreement, dated as of March 27, 2009 (the “Amendment
No. 2 to Forbearance Agreement”), and this Letter re: Amendment and Waiver
Agreement (this “Agreement”) (all of the foregoing, together with the Loan
Agreement, as the same now exist or may hereafter be amended, modified,
supplemented, extended, renewed, restated or replaced, being collectively
referred to herein as the “Financing Agreements”).  Wachovia is currently both
the Agent and the sole Lender under the Loan Agreement and is hereinafter
referred to in this Agreement in both such capacities, as “Wachovia”.
 
Borrower and Pacific Ethanol, Inc., a Delaware corporation, as Guarantor
(“Parent”) have requested that Wachovia (a) waive the Specified Defaults (as
defined in the Forbearance Agreement), (b) waive the Event of Default under
Section 10.1(a)(i) of the Loan Agreement resulting from the failure of Borrower
to maintain EBITDA in the amount required by Section 9.17 for the two (2)
consecutive month period ending February 28, 2009, (c) waive the Event of
Default under Section 10.1(a)(i) of the Loan Agreement resulting from the
failure of Borrower to maintain EBITDA in the amount required by Section 9.17
for the three (3) consecutive month period ending March 31, 2009, (d) waive the
Event of Default under Section 10.1(a)(i) of the Loan Agreement resulting from
the failure of Borrower to maintain EBITDA in the amount required by Section
9.17 for the four (4) consecutive month period ending April 30, 2009, (e) waive
the Event of Default under Section 10.1(a)(i) of the Loan Agreement resulting
from the failure of Borrower to deliver certified financial statements of
Borrower and its Subsidiaries for the fiscal month ended March 31, 2009 within
the time period specified in, and in accordance with, Section 9.6(a)(i), (f)
waive the Event of Default under Section 10.1(a)(i) of the Loan Agreement
resulting from the failure of Borrower to deliver audited financial statements
of Borrower and its Subsidiaries and Parent and its Subsidiaries for the fiscal
year ended December 31, 2008 (together with an unqualified opinion of
independent certified public accountants with respect thereto) within the time
period specified in, and in accordance with, Section 9.6(a)(iii), (g) waive the
Events of Default under Section 10.1(a)(i) of the Loan Agreement resulting from
various liens filed, and pre-judgment writs of attachment ordered, against
Borrower and its assets in connection with the action filed on January 9, 2009
by Western Ethanol Company, LLC against Borrower in the Superior Court of
California, County of Orange (the Events of Default identified in clauses (b)
through (g) hereof, together with the Specified Defaults, collectively, the
“Existing Defaults”), (h) consent to an amendment to the Parent/Borrower
Operating Agreement substantially in the form attached hereto as Exhibit A, and
(i) make certain amendments to the Loan Agreement and other Financing Agreements
as set forth herein, which Wachovia is willing to do subject to the terms and
conditions set forth in this Agreement.
 
 
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In consideration of the foregoing, the mutual agreements and covenants contained
herein, and other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the parties hereto agree as follows:
 
1. Interpretation.  All capitalized terms used in this Agreement shall have the
meanings assigned thereto in the Loan Agreement and the other Financing
Agreements, unless otherwise defined herein.
 
2. Amendments to Loan Agreement.
 
(a) Additional Definitions.  As used herein, the following terms shall have the
meanings given to them below, and the Loan Agreement and the other Financing
Agreements are hereby amended to include, in addition and not in limitation, the
following definitions:
 
“Agreement and Waiver” shall mean the Letter re: Amendment and Waiver Agreement,
dated as of May 17, 2009, by and among Borrower, Parent, Agent and the Lenders,
as the same now exists or may hereafter be amended, modified, supplemented,
extended, renewed, restated or replaced.

“PE Holding Debtors” shall mean, collectively, Pacific Ethanol Holding Company,
LLC and each of its subsidiaries that have commenced, or will commence, a case
under Chapter 11 of Title 11 of the United States Code in the United States
Bankruptcy Court for the District of Delaware.

“Western Ethanol Agreement” shall mean the Agreement, dated as of May 14, 2009,
by and among Borrower, Agent and Western Ethanol Company, LLC.
 
 
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(b) EBITDA.  The definition of “EBITDA” in Section 1.29 of the Loan Agreement is
hereby amended and restated in its entirety as follows:
 
“1.29    “EBITDA” shall mean, as to any Person, with respect to any period, an
amount equal to: (a) the Consolidated Net Income of such Person and its
Subsidiaries for such period, plus (b) depreciation and amortization (including
amortization of deferred financing fees), non-cash impairment charges, imputed
interest, deferred compensation, non-cash inventory valuation adjustments and
bank fees for such period (all to the extent deducted in the computation of
Consolidated Net Income of such Person), all in accordance with GAAP, plus (c)
Interest Expense for such period (to the extent deducted in the computation of
Consolidated Net Income of such Person), plus (d) the Provision for Taxes for
such period (to the extent deducted in the computation of Consolidated Net
Income of such Person), plus (e) any costs and expenses incurred, and any
amounts paid in cash (whether pursuant to settlement or a final order of a court
of competent jurisdiction), in connection with any litigation or judgment, to
the extent of the amount received by Borrower (whether by contribution or loan)
from Parent to finance such costs, expenses and payments.”

(c) Material Adverse Effect.  The definition of “Material Adverse Effect” in
Section 1.73 of the Loan Agreement is hereby amended and restated in its
entirety as follows:
 
“1.73    “Material Adverse Effect” shall mean any condition, change, effect or
circumstance that, individually or when taken together with all such conditions,
changes, effects or circumstances, has or would reasonably be expected to have
an adverse effect on the financial condition, assets, properties, business,
operations or results of operations of the Borrower which is material to the
Borrower, excluding (a) any changes or effects that are not unique to the
Borrower and do not adversely affect the Borrower disproportionately compared to
its competitors, directly resulting from general changes in economic, financial
or capital market, regulatory, political or national security conditions
(including acts of war or terrorism), (b) any changes in conditions generally
applicable to the industries in which the Borrower is involved, (c) any changes
that result from the announcement or the consummation of the transactions
contemplated hereby, (d) any changes or effects, individually or when taken
together with all such changes or effects, that result from or could reasonably
be expected to result from the Chapter 11 cases filed, or to be filed, by the PE
Holding Debtors, so long as such changes or effects do not, in fact, have an
adverse effect on the financial condition, assets, properties, business,
operations or results of operations of the Borrower which is material to the
Borrower; provided, that, the mere filing by the PE Holding Debtors of the
Chapter 11 cases shall not be deemed to have a Material Adverse Effect as to
Borrower, (e) any “going concern” or similar qualification to the opinion of
Borrower’s or Parent’s independent certified public accountants with respect to
the financial statements of Borrower or Parent, unless such “going concern” or
similar qualification to any such opinion relates solely to Borrower
(independent of Parent), and (f) any changes or effects that have been disclosed
to Agent and Lenders as of the date of the Agreement and Waiver that has or
could reasonably be expected to have a material adverse effect on the financial
condition, assets, properties, business, operations or results of operations of
Borrower (the foregoing exclusion in this clause (f) shall not apply to any
changes or effects that have not been disclosed to Agent and Lenders as of the
date of the Waiver and Amendment or any changes or affects arising after the
date of the Waiver and Amendment).”
 
 
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(d) Unused Line Fee.  Section 3.2(a) of the Loan Agreement is hereby amended and
restated in its entirety as follows:
 
“(a)   Effective as of the date of the Amendment and Waiver, Borrower shall pay
to Agent, for the account of Lenders, monthly an unused line fee at a rate equal
to one-half of one (0.50%) percent per annum calculated upon the amount by which
the Maximum Credit exceeds the average daily principal balance of the
outstanding Revolving Loans and Letters of Credit during the immediately
preceding month (or part thereof) while this Agreement is in effect and for so
long thereafter as any of the Obligations are outstanding, which fee shall be
payable on the first day of each month in arrears.”

(e) Servicing Fee.  Section 3.2 of the Loan Agreement is hereby amended by
adding the following new Section 3.2(e) at the end thereof:
 
“(e)   Effective as of the date of the Amendment and Waiver, Borrower shall pay
to Agent, for its own account, a servicing fee in an amount equal to $5,000 per
month in respect of the services of Agent for each month (or part thereof) while
the Loan Agreement remains in effect and for so long thereafter as any of the
Obligations are outstanding.  Such fee shall be fully earned as of and payable
in advance on the date of the Amendment and Waiver and on the first day of each
month thereafter for so long as any of the Obligations are outstanding.”

(f) Collateral Reporting.  Section 7.1(a)(ii) of the Loan Agreement is hereby
amended and restated in its entirety as follows:
 
“(ii)           within fifteen (15) Business Days after the end of each fiscal
month, on a monthly basis or more frequently as Agent may reasonably
request:  (A) perpetual inventory reports, (B) agings of accounts receivable
(together with a reconciliation to the previous month’s aging and general
ledger), (C) agings of accounts payable (and including information indicating
the amounts owing to owners and lessors of leased premises, warehouses,
processors and other third parties from time to time in possession of any
Collateral) and (D) a schedule of all ethanol purchase and sale contracts or
agreements constituting a Material Contract entered into, amended or terminated
during the previous month;”

(g) Encumbrances.  Section 9.8 of the Loan Agreement is hereby amended by
deleting the “and” from the end of clause (i) thereof, replacing the period at
the end of clause (j) with “; and” and adding the following new clause (k):
 
“(k)   liens expressly permitted pursuant to the terms of the Western Ethanol
Agreement.”

(h) Payments to Parent.  Section 9.12(b) of the Loan Agreement is hereby amended
and restated in its entirety as follows:
 
“(b)   make any payments (whether by dividend, loan or otherwise) of management,
consulting or other fees for management or similar services, or of any
Indebtedness owing to any officer, employee, shareholder, director or any other
Affiliate of Borrower, except (i) reasonable compensation to officers, employees
and directors of Borrower and its affiliates for any services rendered to
Borrower in the ordinary course of business, (ii) payment by Borrower to Parent
on the date hereof of an amount not to exceed $6,000,000 on account of
intercompany Indebtedness due and owing by Borrower to Parent as of the date
hereof, and (iii) payments by Borrower to Parent for those services provided by
Parent to Borrower pursuant to the Parent/Borrower Operating Agreement as in
effect on the date hereof; provided, that, (A) such payments (other than
payments expressly provided for in clause (iii)(B) below) under this clause
(iii) shall not exceed $600,000 in the aggregate during any three (3)
consecutive month period and $2,400,000 in the aggregate during any twelve (12)
consecutive month period, and (B) with respect to any reimbursement payment by
Borrower to Parent on account of any margin call due in connection with any
hedging position created by Parent for or on behalf of Borrower pursuant to the
Parent/Borrower Operating Agreement, Borrower shall have Excess Availability of
not less than $1,000,000 after giving effect to such payment.
 
 
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(i) Event of Default.  Section 10.1 of the Loan Agreement is hereby amended as
follows:
 
(i) Section 10.1(d) of the Loan Agreement is hereby amended and restated in its
entirety as follows:
 
“(d)  (i) any judgment for the payment of money is rendered against Borrower or
any Obligor (other than Parent) in excess of $100,000 in any one case or in
excess of $250,000 in the aggregate (to the extent not covered by insurance
where the insurer has assumed responsibility in writing for such judgment) and
shall remain undischarged or unvacated for a period in excess of thirty (30)
days or execution shall at any time not be effectively stayed, or any judgment
other than for the payment of money, or injunction, attachment, garnishment or
execution is rendered against Borrower or any Obligor (other than Parent) or any
of the Collateral having a value in excess of $100,000 or (ii) any judgment for
the payment of money is rendered against Parent or any of its subsidiaries
(other than Borrower, Pacific Ethanol Imperial LLC or the PE Holding Debtors) in
excess of $500,000 in any one case or in excess of $1,000,000 in the aggregate
(to the extent not covered by insurance where the insurer has assumed
responsibility in writing for such judgment) and shall remain undischarged or
unvacated for a period in excess of thirty (30) days or execution shall at any
time not be effectively stayed, or any judgment other than for the payment of
money, or injunction, attachment, garnishment or execution is rendered against
Parent or any of its subsidiaries (other than Borrower, Pacific Ethanol Imperial
LLC or the PE Holding Debtors) or any of the Collateral having a value in excess
of $500,000;”

(ii) Section 10.1(f) of the Loan Agreement is hereby amended and restated in its
entirety as follows:
 
“(f)  (i) Borrower, Parent, any Obligor or any of their respective subsidiaries
(other than Pacific Ethanol Imperial LLC and the PE Holding Debtors) makes an
assignment for the benefit of creditors or makes or sends notice of a bulk
transfer, (ii) Borrower or any Obligor (other than Parent) calls a meeting of
its creditors or principal creditors in connection with a moratorium or
adjustment of the Indebtedness due to them, or (iii) from and after the date of
the Amendment and Waiver, Parent or any of its subsidiaries (other than
Borrower, any Obligor, Pacific Ethanol Imperial LLC or the PE Holding Debtors)
calls a meeting of its creditors or principal creditors in connection with a
moratorium or adjustment of the Indebtedness due to them.”

(iii) Section 10.1(g) of the Loan Agreement is hereby amended and restated in
its entirety as follows:
 
“(g)   a case or proceeding under the bankruptcy laws of the United States of
America now or hereafter in effect or under any insolvency, reorganization,
receivership, readjustment of debt, dissolution or liquidation law or statute of
any jurisdiction now or hereafter in effect (whether at law or in equity) is
filed against Borrower, Parent, any Obligor or any of their respective
subsidiaries (other than the PE Holding Debtors) or all or any part of its
properties (other than with respect to any interest in the PE Holding Debtors)
and such petition or application is not dismissed within forty-five (45) days
after the date of its filing, or Borrower, Parent, any Obligor or any of their
respective subsidiaries (other than the PE Holding Debtors) shall file any
answer admitting or not contesting such petition or application or indicates its
consent to, acquiescence in or approval of, any such action or proceeding or the
relief requested is granted sooner;”

(iv) Section 10.1(h) of the Loan Agreement is hereby amended and restated in its
entirety as follows:
 
“(h)    a case or proceeding under the bankruptcy laws of the United States of
America now or hereafter in effect or under any insolvency, reorganization,
receivership, readjustment of debt, dissolution or liquidation law or statute of
any jurisdiction now or hereafter in effect (whether at a law or equity) is
filed by Borrower, Parent, any Obligor or any of their respective subsidiaries
(other than the PE Holding Debtors) or for all or any part of its property
(other than with respect to any interest in the PE Holding Debtors);”

(v) Section 10.1(i) of the Loan Agreement is hereby amended and restated in its
entirety as follows:
 
“(i)   (i) any default in respect of any Indebtedness of Borrower or any Obligor
(other than Parent) (other than Indebtedness owing to Agent and Lenders
hereunder), in any case in an amount in excess of $100,000, which default
continues for more than the applicable cure period, if any, with respect thereto
or any default by Borrower or any Obligor (other than Parent) under any Material
Contract, which default continues for more than the applicable cure period, if
any, with respect thereto and/or is not waived in writing by the other parties
thereto or (ii) any default in respect of any Indebtedness of Parent or any of
its subsidiaries (other than Borrower and the PE Holding Debtors) (other than in
connection with the Master Lease Agreement, dated June 9, 2008, between Parent
and Varilease Finance, Inc.), in any case in an amount in excess of $500,000,
which default continues for more than the applicable cure period, if any, with
respect thereto or any default by Parent or any of its subsidiaries (other than
Borrower) under any material contract, which default continues for more than the
applicable cure period, if any, with respect thereto and/or is not waived in
writing by the other parties thereto;”
 
 
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(vi) Section 10.1(m) of the Loan Agreement is hereby amended and restated in its
entirety as follows:
 
“(m)   the indictment by any Governmental Authority, or as Agent may reasonably
determine, the threatened indictment by any Governmental Authority of Borrower,
Parent, any Obligor or any of their respective subsidiaries (other than the PE
Holding Debtors) of which Borrower, Parent, any Obligor, any of their respective
subsidiaries (other than the PE Holding Debtors) or Agent receives notice, in
either case, as to which there is a reasonable possibility of an adverse
determination, in the reasonable determination of Agent, under any criminal
statute, or commencement or threatened commencement of criminal or civil
proceedings against Borrower, Parent, any Obligor or any of their respective
subsidiaries (other than the PE Holding Debtors), pursuant to which statute or
proceedings the penalties or remedies sought or available include forfeiture of
(i) any of the Collateral having a value in excess of $250,000 or (ii) any other
property of Borrower, Parent, any Obligor or any of their respective
subsidiaries (other than the PE Holding Debtors) which is necessary or material
to the conduct of its business (other than with respect to any interest in the
PE Holding Debtors);”

(vii) Section 10.1(o) of the Loan Agreement is hereby amended and restated in
its entirety as follows:
 
“(o)    there shall have occurred a Material Adverse Effect as to Borrower,
Parent, any Obligor or any of their respective subsidiaries (other than the PE
Holding Debtors); or”

(j) Maturity Date.  Section 13.1(a) of the Loan Agreement is hereby amended and
restated in its entirety as follows:
 
“(a)     This Agreement and the other Financing Agreements shall become
effective as of the date set forth on the first page hereof and shall continue
in full force and effect until October 31, 2010 (the “Maturity Date”), unless
sooner terminated pursuant to the terms hereof.  Borrower may terminate this
Agreement at any time upon ten (10) days prior written notice to Agent (which
notice shall be irrevocable) and Agent may, at its option, and shall at the
direction of Required Lenders, terminate this Agreement at any time on or after
an Event of Default has occurred and is continuing.  Upon the Maturity Date or
any other effective date of termination of the Financing Agreements, Borrower
shall pay to Agent all outstanding and unpaid Obligations and shall furnish cash
collateral to Agent (or at Agent’s option, a letter of credit issued for the
account of Borrower and at Borrower’s expense, in form and substance
satisfactory to Agent, by an issuer acceptable to Agent and payable to Agent as
beneficiary) in such amounts as Agent determines are reasonably necessary to
secure Agent, Lenders and Issuing Bank from loss, cost, damage or expense,
including attorneys’ fees and expenses, in connection with any contingent
Obligations, including issued and outstanding Letter of Credit Obligations and
checks or other payments provisionally credited to the Obligations and/or as to
which Agent or any Lender has not yet received final and indefeasible payment
and any continuing obligations of Agent or any Lender pursuant to any Deposit
Account Control Agreement and for any of the Obligations arising under or in
connection with any Bank Products in such amounts as the Bank Product Provider
providing such Bank Products may require (unless such Obligations arising under
or in connection with any Bank Products are paid in full in cash and terminated
in a manner satisfactory to such Bank Product Provider).  The amount of such
cash collateral (or letter of credit, as Agent may determine) as to any Letter
of Credit Obligations shall be in the amount equal to one hundred five (105%)
percent of the amount of the Letter of Credit Obligations plus the amount of any
fees and expenses payable in connection therewith through the end of the latest
expiration date of the Letters of Credit giving rise to such Letter of Credit
Obligations.  Such payments in respect of the Obligations and cash collateral
shall be remitted by wire transfer in Federal funds to the Agent Payment Account
or such other bank account of Agent, as Agent may, in its discretion, designate
in writing to Borrower for such purpose.  Interest shall be due until and
including the next Business Day, if the amounts so paid by Borrower to the Agent
Payment Account or other bank account designated by Agent are received in such
bank account later than 12:00 noon, Los Angeles, California time.”

(k) Early Termination Fee.  Section 13.1(c) of the Loan Agreement is hereby
deleted in its entirety.
 
(l) Schedule 9.17.  Schedule 9.17 to the Loan Agreement is hereby amended and
restated in its entirety as set forth on Exhibit B attached hereto.
 
(m) No Additional Indebtedness.  From and after the date of this Agreement,
notwithstanding anything to the contrary contained in the Loan Agreement or
otherwise, Borrower shall not incur any additional Indebtedness, except for (i)
Indebtedness expressly permitted under Section 9.9(e) of the Loan Agreement and
(ii) unsecured Indebtedness to Parent in connection with any loan made by Parent
to Borrower to finance the payment by Borrower of costs and expenses incurred,
and any amounts paid in cash (whether pursuant to settlement or a final order of
a court of competent jurisdiction), in connection with any litigation or
judgment; provided, that, with respect to such unsecured Indebtedness to Parent,
Borrower shall not repay or make any other payment on account of such unsecured
Indebtedness without the prior written consent of Agent.
 
 
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(n) Limitation on Capital Expenditures.  From and after the date of this
Agreement, notwithstanding anything to the contrary contained in the Loan
Agreement or otherwise, Borrower shall not make nor contract for any Capital
Expenditures in excess of $100,000 during any twelve (12) consecutive month
period without the prior written consent of Agent.
 
3. Waiver of Existing Defaults.
 
(a) Pursuant to Borrower’s request, subject to the terms and conditions
contained herein, Wachovia hereby waives the Existing Defaults.
 
(b) Wachovia has not waived and is not by this agreement waiving, and has no
present intention of waiving, any Default or Event of Default other than the
Existing Defaults, which may have occurred prior to the date hereof, or may be
continuing on the date hereof or any Event of Default which may occur after the
date hereof, other than the Existing Defaults, whether the same or similar to
the Existing Defaults or otherwise.  Wachovia reserves the right, in its
discretion, to exercise any or all of its rights and remedies arising under the
Financing Agreements, applicable law or otherwise, as a result of any other
Events of Default which may have occurred prior to the date hereof, or are
continuing on the date hereof, or any Event of Default which may occur after the
date hereof, whether the same or similar to the Existing Defaults or otherwise
upon or after the rescission and termination of the waiver provided for in
Section 3(a) above.  Nothing contained herein shall be construed as a waiver of
the failure of Borrower to comply with the terms of the Loan Agreement and the
other Financing Agreements after such time.
 
4. Consent to Amendment to Parent/Borrower Operating Agreement.
 
  Pursuant to Borrower’s request, subject to the terms and conditions contained
herein, Wachovia hereby consents to the amendment to the Parent/Borrower
Operating Agreement substantially in the form attached hereto as Exhibit A.
 
5. Acknowledgment of Obligations, Security Interests and Financing Agreements.
 
(a) Acknowledgment of Obligations.  Borrower and Parent hereby acknowledge,
confirm and agree that Borrower is unconditionally indebted to Wachovia as of
the close of business on May 15, 2009, in respect of the Loans and all other
Obligations in the aggregate principal amount of not less than $5,143,868.42,
together with interest accrued and accruing thereon, and all fees, costs,
expenses and other sums and charges now or hereafter payable by Borrower to
Wachovia pursuant to the Loan Agreement and the other Financing Agreements, all
of which are unconditionally owing by Borrower to Wachovia pursuant to the
Financing Agreements, in each case without offset, defense or counterclaim of
any kind, nature or description whatsoever.
 
(b) Acknowledgment of Security Interests.  Borrower and Parent hereby
acknowledge, confirm and agree that Wachovia has, and shall continue to have,
valid, enforceable and perfected security interests in and liens upon the
Collateral heretofore granted by Borrower to Wachovia pursuant to the Financing
Agreements or otherwise granted to or held by Wachovia.
 
(c) Binding Effect of Financing Agreements.  Borrower and Parent hereby
acknowledge, confirm and agree that: (i) each of the Financing Agreements to
which Borrower and Parent (as applicable) are a party has been duly executed and
delivered to Wachovia by Borrower and Parent (as applicable), and each is in
full force and effect as of the date hereof, (ii) the agreements and obligations
of Borrower and Parent (as applicable) contained in such Financing Agreements to
which they are a party and in this Agreement constitute the legal, valid and
binding Obligations of Borrower and Parent (as applicable), enforceable against
them in accordance with its terms, except as enforcement may be limited by
bankruptcy, insolvency, reorganization, moratorium or other similar laws
relating to or limiting creditors’ rights generally or by equitable principles
relating to enforceability, and Borrower and Parent (as applicable) have no
valid defense to the enforcement of such Obligations, and (iii) Wachovia is and
shall be entitled to the rights, remedies and benefits provided for in the
Financing Agreements and pursuant to applicable law, but subject to the terms
and conditions of this Agreement.
 
 
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6. Representations, Warranties and Covenants.
 
  Borrower and Parent hereby represent, warrant and covenant to Wachovia the
following (which shall survive the execution and delivery of this Agreement),
the truth and accuracy of which are a continuing condition of the making of
Loans to Borrower:
 
(a) this Agreement and each other agreement or instrument to be executed and/or
delivered in connection herewith (collectively, together with this Agreement,
the “Amendment Documents”) have been duly authorized, executed and delivered by
all necessary action on the part of Borrower and Parent and, if necessary, their
respective stockholders and/or members, as the case may be, and the agreements
and obligations of Borrower and Parent contained herein and therein constitute
the legal, valid and binding obligations of Borrower and Parent, enforceable
against them in accordance with their terms, except as enforceability is limited
by bankruptcy, insolvency, reorganization, moratorium or other laws relating to
or affecting generally the enforcement of creditors’ rights and except to the
extent that availability of the remedy of specific performance or injunctive
relief is subject to the discretion of the court before which any proceeding
therefor may be brought;
 
(b) the execution, delivery and performance of the Amendment Documents (a) are
all within Borrower’s and Guarantor’s corporate or limited liability company
powers (as applicable), (b) are not in contravention of law or the terms of
Borrower’s or Guarantor’s certificate or articles of organization or formation,
operating agreement, by-laws or other organizational documentation, or any
indenture, agreement or undertaking to which Borrower or Guarantor is a party or
by which Borrower, Guarantor or its or their property is bound and (c) shall not
result in the creation or imposition of any lien, claim, charge or encumbrance
upon any of the Collateral, except in favor of Wachovia pursuant to the Loan
Agreement and the Financing Agreements as amended hereby;
 
(c) all of the representations and warranties set forth in the Loan Agreement
and the other Financing Agreements, each as amended hereby, are true and correct
in all material respects on and as of the date hereof, as if made on the date
hereof, except to the extent any such representation or warranty is made as of a
specified date, in which case such representation or warranty shall have been
true and correct as of such date;
 
(d) after giving effect to this Agreement, no Default or Event of Default exists
as of the date of this Agreement;
 
(e) no action of, or filing with, or consent of any governmental or public body
or authority, including, without limitation, any filing with the U.S. Patent and
Trademark Office, and no approval or consent of any other party, is required to
authorize, or is otherwise required in connection with, the execution, delivery
and performance of this Agreement;
 
(f) Borrower shall not amend or otherwise modify that certain Ethanol Marketing
Agreement (Boardman Project), dated as of February 27, 2007, between Borrower
and Pacific Ethanol Columbia LLC, as in effect on the date hereof; and
 
(i)           on or before May 31, 2009, Wachovia shall have received copies of
the financing agreements, in form and substance reasonably satisfactory to
Wachovia, among Parent, certain of its subsidiaries and Lyles United, LLC
(“Lyles”), which agreements shall provide, among other things, for (A) a credit
facility available to Parent of up to $2,500,000 over a term of eighteen (18)
months (or such shorter term but in no event prior to the Maturity Date of the
Loan Agreement (as amended hereby)), (B) the grant by Parent to Lyles of a
security interest in substantially all of Parent’s assets, including a pledge by
Parent to Lyles of the equity interest of Parent in Borrower, and (C) the use by
Parent of borrowings thereunder for general corporate and other purposes in
accordance with the terms thereof.
 
7. Conditions Precedent.
 
  This Agreement shall not become effective unless all of the following
conditions precedent have been satisfied in full, as determined by Wachovia:
 
(i) the receipt by Wachovia of an original (or faxed or electronic copy) of this
Agreement, duly authorized, executed and delivered by Borrower and Parent;
 
(ii) the receipt by Wachovia of a copy of that certain Asset Management
Agreement, dated on or about the date hereof, by and among Parent and the PE
Holding Debtors, which agreement shall be in form and substance reasonably
satisfactory to Wachovia and shall provide that Parent will provide various
management services to the PE Holding Debtors during and in connection with the
Chapter 11 cases to be filed by the PE Holding Debtors; and
 
(iii) no Default or Event of Default shall exist or have occurred (after giving
effect to the waivers and amendments made by Wachovia pursuant to this
Agreement).
 
Notwithstanding anything to the contrary herein, the documents and agreements
delivered to Wachovia pursuant to clauses (ii), (iii) and (iv) of this Section 6
shall not be deemed to be “Financing Agreements” under the Loan Agreement.
 
 
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8. Amendment Fee.
 
  In addition to all other fees, charges, interest and expenses payable by
Borrower to Wachovia under the Loan Agreement and the other Financing
Agreements, Borrower shall pay to Wachovia an amendment and waiver fee in the
amount of $200,000, which fee shall be fully earned as of and payable in advance
on the date hereof.  The foregoing fee may be charged to any loan account of
Borrower maintained by Wachovia.
 
9. Effect of this Agreement.
 
  Except as modified pursuant hereto, no other changes or modifications to the
Loan Agreement and the other Financing Agreements are intended or implied and in
all other respects the Loan Agreement and the other Financing Agreements are
hereby specifically ratified, restated and confirmed by all parties hereto as of
the effective date hereof.  To the extent of any conflict between the terms of
this Agreement and the Loan Agreement or any of the other Financing Agreements,
the terms of this Agreement shall control.  The Loan Agreement and this
Agreement shall be read and construed as one agreement.
 
10. Further Assurances.
 
  At Wachovia’s request, Borrower and Parent shall execute and deliver such
additional documents and take such additional actions as Wachovia requests to
effectuate the provisions and purposes of this Agreement and to protect and/or
maintain perfection of Wachovia’s security interests in and liens upon the
Collateral.
 
11. Governing Law.
 
  The validity, interpretation and enforcement of this Agreement in any dispute
arising out of the relationship between the parties hereto, whether in contract,
tort, equity or otherwise shall be governed by the internal laws of the State of
California (without giving effect to principles of conflicts of law).
 
12. Binding Effect.
 
  This Agreement shall be binding upon and inure to the benefit of each of the
parties hereto and their respective successors and assigns
 
13. Counterparts.
 
  This Agreement may be executed in any number of counterparts, but all of such
counterparts when executed shall together constitute one and the same
Agreement.  In making proof of this Agreement, it shall not be necessary to
produce or account for more than one counterpart thereof signed by each of the
parties hereto.
 
[SIGNATURE PAGE FOLLOWS]
 
 
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Very truly yours,
     
KINERGY MARKETING LLC,
  as Borrower
 
By:  /s/ BRYON MCGREGOR        
Name:  Bryon
McGregor                                                                  
Title:  Interim
CFO                                                                  
     
PACIFIC ETHANOL, INC,
  as Parent
 
By:  /s/ BRYON MCGREGOR        
Name:  Bryon
McGregor                                                                  
Title:  Interim
CFO                                                                  
   
AGREED TO:
     
WACHOVIA CAPITAL FINANCE CORPORATION (WESTERN),
  as Agent and sole Lender
 
By:  /s/ CARLOS VALLES        
Name:  Carlos
Valles                                                                  
Title:  Director                                                                  
     

 
 
 
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EXHIBIT A
TO
LETTER RE: AMENDMENT AND WAIVER

Amendment to Parent/Borrower Operating Agreement

[see attached]
 
 
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EXHIBIT B
TO
LETTER RE: AMENDMENT AND WAIVER

Schedule 9.17
to
LOAN AND SECURITY AGREEMENT

Minimum EBITDA

Fiscal Period
Minimum EBITDA
one (1) month period ending May 31, 2009
No Test
two (2) consecutive month period ending June 30, 2009
No Test
three (3) consecutive month period ending July 31, 2009
$0
four (4) consecutive month period ending August 31, 2009
$30,000
five (5) consecutive month period ending September 30, 2009
$80,000
six (6) consecutive month period ending October 31, 2009
$130,000
seven (7) consecutive month period ending November 30, 2009
$180,000
eight (8) consecutive month period ending December 31, 2009
$230,000
one (1) month period ending January 31, 2010
$50,000
two (2) consecutive month period ending February 28, 2010
$100,000
three (3) consecutive month period ending March 31, 2010
$150,000
four (4) consecutive month period ending April 30, 2010
$200,000
five (5) consecutive month period ending May 31, 2010
$250,000
six (6) consecutive month period ending June 30, 2010
$325,000
seven (7) consecutive month period ending July 31, 2010
$400,000
eight (8) consecutive month period ending August 31, 2010
$475,000
nine (9) consecutive month period ending September 30, 2010
$550,000
ten (10) consecutive month period ending October 31, 2010
$625,000

 
 
 
 
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