EXHIBIT 10.1
 
 
Execution Copy
 

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DEBTOR-IN-POSSESSION CREDIT AGREEMENT
 

dated as of May 19, 2009
 
among
 
PACIFIC ETHANOL HOLDING CO. LLC,
 
PACIFIC ETHANOL MADERA LLC,
 
PACIFIC ETHANOL COLUMBIA, LLC,
 
PACIFIC ETHANOL STOCKTON, LLC, and
 
PACIFIC ETHANOL MAGIC VALLEY, LLC,
 
as Borrowers,
 
PACIFIC ETHANOL HOLDING CO. LLC,
 
as Borrower Agent,
 
THE LENDERS REFERRED TO HEREIN,
 
WESTLB AG, NEW YORK BRANCH,
 
as Administrative Agent for the Lenders,
 
WESTLB AG, NEW YORK BRANCH,
 
as Collateral Agent for the Senior Secured Parties,
 
and
 
AMARILLO NATIONAL BANK,
 
as Accounts Bank
 

 

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TABLE OF CONTENTS
 
Page
 
ARTICLE I
DEFINITIONS AND INTERPRETATION
2
Section 1.01
Defined Terms
2
Section 1.02
Principles of Interpretation
2
Section 1.03
UCC Terms
3
Section 1.04
Accounting and Financial Determinations
3
Section 1.05
Joint and Several
3
ARTICLE II
COMMITMENTS AND BORROWING
3
Section 2.01
Revolving Loans
3
Section 2.02
Roll Up Loans
4
Section 2.03
Notice of Fundings
4
Section 2.04
Funding of Loans
4
Section 2.05
Evidence of Indebtedness
5
Section 2.06
Termination or Reduction of Commitments
6
Section 2.07
Defaulting Lenders
6
Section 2.08
Security Interest
7
Section 2.09
Super-Priority Nature of Obligations.
7
Section 2.10
Payment of Obligations.
8
Section 2.11
Liens.
8
Section 2.12
No Discharge; Survival of Claims.
8
Section 2.13
Release.
9
Section 2.14
Waiver of Priming Rights.
9
Section 2.15
Priority of Claim.
9
ARTICLE III
REPAYMENTS, PREPAYMENTS, INTEREST AND FEES
10
Section 3.01
Repayment of Loans
10
Section 3.02
Interest Payment Dates
10
Section 3.03
Interest Rates
10
Section 3.04
Default Interest Rate
11
Section 3.05
Interest Rate Determination
12
Section 3.06
Computation of Interest and Fees
12
Section 3.07
Optional Prepayment
12
Section 3.08
Mandatory Prepayment
13
Section 3.09
Time and Place of Payments
14
Section 3.10
Fundings and Payments Generally
15
Section 3.11
Fees
15
Section 3.12
Pro rata Treatment
15
Section 3.13
Sharing of Payments
16
ARTICLE IV
EURODOLLAR RATE AND TAX PROVISIONS
16
Section 4.01
Eurodollar Rate Lending Unlawful
16
Section 4.02
Inability to Determine Eurodollar Rates
17
Section 4.03
Increased Eurodollar Loan Costs
17
Section 4.04
Obligation to Mitigate
18
Section 4.05
Funding Losses
18
Section 4.06
Increased Capital Costs
19
Section 4.07
Taxes
19

 
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ARTICLE V
REPRESENTATIONS AND WARRANTIES
20
Section 5.01
Organization; Power and Compliance with Law
21
Section 5.02
Due Authorization; Non-Contravention
21
Section 5.03
Governmental Approvals.
21
Section 5.04
Investment Company Act
22
Section 5.05
Validity of Financing Documents
22
Section 5.06
Financial Information
22
Section 5.07
Project Compliance
22
Section 5.08
Litigation
22
Section 5.09
Sole Purpose Nature; Business
23
Section 5.10
Contracts.
23
Section 5.11
Collateral
23
Section 5.12
Ownership of Properties
24
Section 5.13
Taxes
24
Section 5.14
Patents, Trademarks, Etc
25
Section 5.15
ERISA Plans
25
Section 5.16
Property Rights, Utilities, Supplies Etc
25
Section 5.17
No Defaults
25
Section 5.18
Environmental Warranties.
25
Section 5.19
Regulations T, U and X
26
Section 5.20
Accuracy of Information
26
Section 5.21
Indebtedness
27
Section 5.22
Required LLC Provisions
27
Section 5.23
Subsidiaries
27
Section 5.24
Foreign Assets Control Regulations, Etc
27
Section 5.25
Employment Matters
27
Section 5.26
Legal Name and Place of Business
27
Section 5.27
No Brokers
28
Section 5.28
Insurance
28
Section 5.29
Accounts
28
Section 5.30
SEC Compliance
29
Section 5.31
Reorganization Matters.
29
ARTICLE VI
CONDITIONS PRECEDENT
29
Section 6.01
Conditions to Closing
29
Section 6.02
Conditions to All Fundings
33
ARTICLE VII
COVENANTS
35
Section 7.01
Affirmative Covenants
35
Section 7.02
Negative Covenants
40
Section 7.03
Reporting Requirements
47
ARTICLE VIII
[INTENTIONALLY OMITTED]
51

 
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ARTICLE IX
DEFAULT AND ENFORCEMENT
51
Section 9.01
Events of Default
51
Section 9.02
Action Upon Event of Default.
57
Section 9.03
Remedies
58
Section 9.04
Minimum Notice Period
60
Section 9.05
Sale of Collateral
60
Section 9.06
Actions Taken by Collateral Agent
61
Section 9.07
Private Sales
61
Section 9.08
Access to Land
61
Section 9.09
Compliance With Limitations and Restrictions
61
Section 9.10
No Impairment of Remedies
62
Section 9.11
Attorney-In-Fact
62
Section 9.12
Application of Proceeds
63
ARTICLE X
THE AGENTS
63
Section 10.01
Appointment and Authority
63
Section 10.02
Rights as a Lender
65
Section 10.03
Exculpatory Provisions
65
Section 10.04
Reliance by Agents
66
Section 10.05
Delegation of Duties
66
Section 10.06
Resignation or Removal of Agent
66
Section 10.07
No Amendment to Duties of Agent Without Consent
67
Section 10.08
Non-Reliance on Agent and Other Lenders
68
Section 10.09
Collateral Agent May File Proofs of Claim
68
Section 10.10
Collateral Matters
69
Section 10.11
Copies
69
ARTICLE XI
MISCELLANEOUS PROVISIONS
69
Section 11.01
Amendments, Etc
69
Section 11.02
Applicable Law; Jurisdiction; Etc
71
Section 11.03
Assignments
72
Section 11.04
Benefits of Agreement
75
Section 11.05
Borrower Agent
75
Section 11.06
Consultants
76
Section 11.07
Costs and Expenses
76
Section 11.08
Counterparts; Effectiveness
76
Section 11.09
Indemnification by the Borrowers
77
Section 11.10
Interest Rate Limitation
78
Section 11.11
No Waiver; Cumulative Remedies
78
Section 11.12
Notices and Other Communications
78
Section 11.13
Patriot Act Notice
81
Section 11.14
Marshalling; Payments Set Aside
81
Section 11.15
Right of Setoff
82
Section 11.16
Severability
82
Section 11.17
Survival
82
Section 11.18
Treatment of Certain Information; Confidentiality
82
Section 11.19
Waiver of Consequential Damages, Etc
83
Section 11.20
Waiver of Litigation Payments
84
Section 11.21
Section 552(b)
84

 
 
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SCHEDULES

Schedule 1.01 – Commitments
Schedule 2.01 – Form of Interim Order
Schedule 5.07 – Project Compliance
Schedule 5.08 – Litigation
Schedule 5.10 – Contracts
Schedule 5.18(a)(i) – Environmental Warranties
Schedule 5.18(d)(ii) – Underground Storage Tanks
Schedule 5.26 – Legal Names and Places of Business
Schedule 5.27 – Broker Fees
Schedule 5.29 – Local Accounts
Schedule 6.01(n) – Initial DIP Budget
Schedule 7.01(h) – Insurance
Schedule 11.12 – Notice Information

EXHIBITS

Exhibit A – Defined Terms
Exhibit 2.03 – Form of Funding Notice
Exhibit 2.05 – Form of Note
Exhibit 3.03 – Form of Interest Period Notice
Exhibit 4.07 – Form of Non-U.S. Lender Statement
Exhibit 11.03  – Form of Lender Assignment Agreement

 
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This DEBTOR-IN-POSSESSION CREDIT AGREEMENT (this “Agreement”), dated as of May
19, 2009, is by and among Pacific Ethanol Holding Co. LLC, a Delaware limited
liability company and a debtor-in-possession under Chapter 11 of the Bankruptcy
Code (as defined below) (“Pacific Holding”), Pacific Ethanol Madera LLC, a
Delaware limited liability company and a debtor-in-possession under Chapter 11
of the Bankruptcy Code (“Madera”), Pacific Ethanol Columbia, LLC, a Delaware
limited liability company and a debtor-in-possession under Chapter 11 of the
Bankruptcy Code (“Boardman”), Pacific Ethanol Stockton, LLC, a Delaware limited
liability company and a debtor-in-possession under Chapter 11 of the Bankruptcy
Code (“Stockton”), and Pacific Ethanol Magic Valley, LLC, a Delaware limited
liability company and a debtor-in-possession under Chapter 11 of the Bankruptcy
Code (“Burley” and, together with Pacific Holding, Madera, Boardman and
Stockton, the “Borrowers”), Pacific Holding, as Borrower Agent, each of the
Lenders from time to time party hereto, WESTLB AG, NEW YORK BRANCH, as
administrative agent for the Lenders, WESTLB AG, NEW YORK BRANCH as collateral
agent for the Senior Secured Parties and AMARILLO NATIONAL BANK, as accounts
bank.
 
RECITALS
 
WHEREAS, on May 17, 2009 (the “Petition Date”), each Borrower (collectively, the
“Debtors”) commenced Chapter 11 Case Nos. 09-11713 through 09-11717 (each a
“Chapter 11 Case” or a “Case” and collectively, the “Chapter 11 Cases” or the
“Cases”) by filing voluntary petitions for reorganization under the Bankruptcy
Code with the United States Bankruptcy Court for the District of Delaware (the
“Bankruptcy Court”).  The Borrowers continue to operate their businesses and
manage their properties as debtors and debtors-in-possession pursuant to
Sections 1107(a) and 1108 of the Bankruptcy Code;
 
WHEREAS, prior to the Petition Date, certain Lenders provided financing to each
Borrower pursuant to the Credit Agreement, dated as of February 27, 2007, among
each Borrower, the other parties signatory thereto, and each such Lender (as
amended, modified or supplemented through the Petition Date, the “Pre-Petition
Credit Agreement”);
 
WHEREAS, each Borrower has requested that the Lenders provide a senior secured,
superpriority credit facility to the Borrowers to fund the working capital
requirements of the Borrowers and for other purposes permitted under this
Agreement during the pendency of the Chapter 11 Cases;
 
WHEREAS, each Lender is willing to make certain Post-Petition (as defined below)
loans and other extensions of credit to each Borrower of up to such amount upon
the terms and conditions set forth herein;
 
WHEREAS, each Debtor has agreed to secure all the Obligations by granting to the
Collateral Agent a security interest in and Lien upon substantially all its
existing and after-acquired personal and real property; and
 
WHEREAS, each Borrower acknowledges that they each will receive substantial
direct and indirect benefits by reason of the making of loans and other
financial accommodations to the Borrowers as provided in this Agreement;
 

 

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NOW, THEREFORE, the parties hereto agree as follows:
 
ARTICLE I
 
DEFINITIONS AND INTERPRETATION
 
Section 1.01 Defined Terms.  Capitalized terms used in this Agreement, including
its preamble and recitals, shall, except as otherwise defined herein or where
the context otherwise requires, have the meanings provided in Exhibit A.
 
Section 1.02 Principles of Interpretation.  (a)  Unless otherwise defined or the
context otherwise requires, terms for which meanings are provided in this
Agreement shall have the same meanings when used in each Financing Document,
notice and other communication delivered from time to time in connection with
any Financing Document.
 
(b) Unless the context requires otherwise, any reference in this Agreement to
any Transaction Document shall mean such Transaction Document and all schedules,
exhibits and attachments thereto.
 
(c) All the agreements, contracts or documents defined or referred to herein
shall mean such agreements, contracts or documents as the same may from time to
time be supplemented or amended or the terms thereof waived or modified to the
extent permitted by, and in accordance with, the terms thereof and this
Agreement, and shall disregard any supplement, amendment or waiver made in
breach of this Agreement.
 
(d) Any reference in any Financing Document relating to a Default or an Event of
Default that has occurred and is continuing (or words of similar effect) shall
be understood to mean that (i) in the case of a Default only, such Default has
not been cured or remedied, or has not been waived by the Required Lenders,
before becoming an Event of Default and (ii) in the case of an Event of Default,
such Event of Default has not been cured or remedied or has not been waived by
the Required Lenders.
 
(e) The term “knowledge” in relation to a Borrower, and any other similar
expressions, shall mean knowledge of such Borrower after due inquiry.
 
(f) Defined terms in this Agreement shall include in the singular number the
plural and in the plural number the singular.
 
(g) The words “herein,” “hereof” and “hereunder” and words of similar import
when used in this Agreement shall, unless otherwise expressly specified, refer
to this Agreement as a whole and not to any particular provision of this
Agreement and all references to Articles, Sections, Exhibits and Schedules shall
be references to Articles, Sections, Exhibits and Schedules of this Agreement,
unless otherwise specified.
 
(h) The words “include,” “includes” and “including” are not limiting.
 
(i) The word “or” is not exclusive.

 
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(j) Any reference to any Person shall include its permitted successors and
permitted assigns in the capacity indicated, and in the case of any Governmental
Authority, any Person succeeding to its functions and capacities.
 
Section 1.03 UCC Terms.  Unless otherwise defined herein, terms used herein that
are defined in the UCC shall have the respective meanings given to those terms
in the UCC.
 
Section 1.04 Accounting and Financial Determinations.  Unless otherwise
specified, all accounting terms used in any Financing Document shall be
interpreted, all accounting determinations and computations hereunder or
thereunder shall be made, and all financial statements required to be delivered
hereunder or thereunder shall be prepared, in accordance with GAAP.
 
Section 1.05 Joint and Several.    The Obligations of each Borrower under this
Agreement and each other Financing Document to which any Borrower is a party
shall constitute the joint and several obligations of all Borrowers. All
representations, warranties, undertakings, agreements and obligations of each
Borrower expressed or implied in this Agreement or any other Financing Document
shall, unless the context requires otherwise, be deemed to be made, given or
assumed by the Borrowers jointly and severally.
 
ARTICLE II
 
COMMITMENTS AND BORROWING
 
On the terms, subject to the conditions and relying upon the representations and
warranties herein set forth:
 
Section 2.01 Revolving Loans.  (a)  Each Revolving Lender agrees, severally and
not jointly, on the terms and conditions of this Agreement, to make loans (each
such loan, a “Revolving Loan”) to the Borrowers, from time to time but not more
frequently than six (6) times each calendar month, until the last Business Day
immediately preceding the Maturity Date, in an aggregate principal amount from
time to time outstanding not in excess of (i) during the period from the date of
entry of the Interim Order by the Bankruptcy Court through the date of entry of
the Final Order by the Bankruptcy Court, the product of (A) seven million
Dollars ($7,000,000) and (B) the Revolving Loan Commitment Percentage of such
Revolving Lender and (ii) from the date of entry of the Final Order by the
Bankruptcy Court to the Maturity Date, the Revolving Loan Commitment of such
Revolving Lender.
 
(b) Each Funding of Revolving Loans shall be in the minimum amount of one
hundred thousand Dollars ($100,000).
 
(c) Proceeds of each Revolving Loan shall be deposited into the Revenue Account
(or as otherwise agreed by the Administrative Agent and specified in the
relevant Funding Notice) and applied solely in accordance with this Agreement
and shall be used solely in accordance with the then-current DIP Budget.
 
(d) Within the limits set forth in Section 2.01(a), the Borrowers may pay or
prepay and reborrow Revolving Loans.

 
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Section 2.02 Roll Up Loans.  (a)  Concurrent with the funding by a Revolving
Lender of a Revolving Loan, an amount of such Lender's (or an Affiliate of such
Lender) Pre-Petition Term Loan equal to 150% of the amount of such Revolving
Loan will be converted into a roll up loan (each  a “Roll Up Loan”); provided
that (i) repayment of a Revolving Loan will not reduce the amount of the
outstanding Roll Up Loans and (ii) the aggregate Roll Up Loans will not exceed
the Aggregate Roll Up Commitment.
 
(b) Each party hereto acknowledges that pursuant to Section 2.02(b) the amount
of Pre-Petition Term Loans held by each Roll Up Lender (or Affiliate of such
Roll Up Lender) shall be reduced by an amount equal to the amount of Roll Up
Loans made by such Roll Up Lender.
 
(c) All Roll Up Loans shall have the benefit of Section 364(e) of the Bankruptcy
Code.
 
(d) Roll Up Loans paid or prepaid may not be reborrowed.
 
Section 2.03 Notice of Fundings.  (a)  From time to time, but not more
frequently than six (6) times each calendar month, the Borrowers may propose a
Funding by delivering to the Administrative Agent a properly completed Funding
Notice not later than 12:00 noon, New York City time, five (5) Business Days
prior to the proposed Funding Date; provided, however, that such prior notice
period shall not apply to the initial Funding.  Each Funding Notice delivered
pursuant to this Section 2.03 shall be irrevocable and shall refer to this
Agreement and specify (i) whether such Funding is requested to be of Eurodollar
Loans and/or Base Rate Loans, (ii) the requested Funding Date (which shall be a
Business Day), and (iii) the amount of such requested Funding.
 
(b) The Administrative Agent shall promptly advise each Lender of any Funding
Notice given pursuant to this Section 2.03, and of each such Lender’s portion of
the requested Funding.
 
Section 2.04 Funding of Loans.  (a)  Subject to Section 2.04(d), each Funding
shall consist of Revolving Loans made by the Lenders ratably in accordance with
their respective applicable Commitment Percentages and shall consist of
Eurodollar Loans or Base Rate Loans as the Borrowers may request pursuant to
Section 2.03 (Notice of Fundings); provided, however, that the failure of any
Lender to make any Revolving Loan shall not in itself relieve any other Lender
of its obligation to lend hereunder (it being understood, however, that no
Lender shall be responsible for the failure of any other Lender to make any
Revolving Loan required to be made by such other Lender).
 
(b) Subject to Section 4.04 (Obligation to Mitigate), each Lender may (without
relieving any Borrower of its obligation to repay a Revolving Loan in accordance
with the terms of this Agreement and the Notes) at its option fulfill its
Commitment with respect to any such Revolving Loan by causing any domestic or
foreign branch or Affiliate of such Lender to make such Revolving Loan; provided
that the use of such domestic or foreign branch does not result in any increased
costs payable by any of the Borrowers hereunder.

 
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(c) Subject to Section 2.04(d), each Lender shall make a Revolving Loan in the
amount of its applicable Commitment Percentage of each Funding hereunder on the
proposed Funding Date by wire transfer of immediately available funds to the
Administrative Agent, not later than 11:00 a.m. New York City time, and the
Administrative Agent shall deposit the amounts so received into the Revenue
Account; provided, that if a Funding does not occur on the proposed Funding Date
because any condition precedent to such requested Funding herein specified has
not been met, the Administrative Agent shall return the amounts so received to
the respective Lenders without interest.
 
(d) Unless the Administrative Agent has been notified in writing by any Lender
prior to a proposed Funding Date that such Lender will not make available to the
Administrative Agent its portion of the Funding proposed to be made on such
date, the Administrative Agent may assume that such Lender has made such amounts
available to the Administrative Agent on such date and the Administrative Agent
in its sole discretion may, in reliance upon such assumption, make available to
the Borrowers a corresponding amount.  If such corresponding amount is not in
fact made available to the Administrative Agent by such Lender and the
Administrative Agent has made such amount available to the Borrowers, the
Administrative Agent shall be entitled to recover such corresponding amount on
demand from such Lender and, if such Lender pays such amount (together with the
interest noted below), then the amount so paid shall constitute such Lender’s
Revolving Loan included in such Funding.  If such Lender does not pay such
corresponding amount forthwith upon the Administrative Agent’s demand, the
Administrative Agent shall promptly notify the Borrowers and the Borrowers shall
immediately repay such corresponding amount to the Administrative Agent.  The
Administrative Agent shall also be entitled to recover from such Lender or the
Borrowers, as the case may be, interest on such corresponding amount in respect
of each day from the date such corresponding amount was made available by the
Administrative Agent to the Borrowers to the date such corresponding amount is
recovered by the Administrative Agent, at an interest rate per annum equal to
(i) in the case of a payment made by such Lender, the greater of the Federal
Funds Effective Rate and a rate determined by the Administrative Agent in
accordance with banking industry rules on interbank compensation and (ii) in the
case of a payment made by the Borrowers, the Base Rate plus the Applicable
Margin.  Nothing herein shall be deemed to relieve any Lender from its
obligation to fulfill its commitment hereunder.  Notwithstanding anything to the
contrary in this Agreement or any other Financing Document, the Administrative
Agent may, with prior notice to the Borrowers, apply all funds and proceeds of
Collateral available for the payment of any Obligation to repay any amount owing
by any Lender to the Administrative Agent as a result of such Lender’s failure
to fund its applicable share of any Funding hereunder.  A notice of the
Administrative Agent to any Lender or the Borrowers with respect to any amounts
owing under this Section 2.04(d) shall be conclusive, absent manifest error.
 
Section 2.05 Evidence of Indebtedness.  (a)  Each Loan made by each Lender shall
be evidenced by one or more accounts or records maintained by such Lender and by
the Administrative Agent in the ordinary course of business, including the
Register for the recordation of the Loans maintained by the Administrative Agent
in accordance with the provisions of Section 11.03(c) (Assignments).  The
accounts or records maintained by the Administrative Agent and each Lender shall
be conclusive evidence, absent manifest error, of the amount of the Loans made
by the Lenders to the Borrowers and the interest and payments thereon.  Any
failure to so record or any error in doing so shall not, however, limit or
otherwise affect the obligation of the Borrowers hereunder to pay any amount
owing with respect to the Obligations.  In the event of any conflict between the
accounts and records maintained by any Lender and the accounts and records of
the Administrative Agent in respect of such matters, the accounts and records of
the Administrative Agent shall control in the absence of manifest error.

 
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(b) The Borrowers agree that in addition to the Register, the Loans made by each
Lender shall be evidenced, in each case when requested by a Lender, by a Note or
Notes duly executed on behalf of each Borrower, dated the Closing Date (or, if
later, the date of any such request) payable to the order of such Lender in a
principal amount equal to such Lender’s Revolving Loan Commitment or Roll Up
Loan Commitment, as applicable.  Each Lender may attach schedules to its Note
and endorse thereon the date, amount and maturity of its Loan and payments with
respect thereto.
 
Section 2.06 Termination or Reduction of Commitments.  (a)  Any Commitments
shall be automatically and permanently terminated on the Maturity Date.
 
(b) Any unused Commitments shall be terminated upon the occurrence of an Event
of Default if and to the extent required pursuant to Section 9.02 (Action Upon
Event of Default) in accordance with the terms thereof.
 
(c)           The Aggregate Commitment shall be automatically reduced to the
extent and in the amount of any prepayment of the Loans pursuant to Section 3.08
(Mandatory Prepayment).
 
Section 2.07 Defaulting Lenders.  Anything contained herein to the contrary
notwithstanding, in the event that any Lender, other than at the direction or
request of any regulatory agency or authority or due to a temporary disruption
in the financial markets generally, defaults (a “Defaulting Lender”) in its
obligation to fund (a “Funding Default”) any Loan (in each case, a “Defaulted
Loan”), then (i) during any Default Period with respect to such Defaulting
Lender, such Defaulting Lender shall be a Non-Voting Lender; and (ii) to the
extent permitted by applicable law, during any Default Period and until such
time as the Default Excess with respect to such Defaulting Lender shall have
been reduced to zero, (A) any voluntary prepayment of the Loans shall be applied
to the outstanding Loans of Lenders other than Defaulting Lenders prior to the
outstanding Loans of the Defaulting Lenders, (B) any mandatory prepayment of the
Loans shall be applied to the outstanding Loans of Lenders other than Defaulting
Lenders prior to the outstanding Loans of the Defaulting Lenders, (C) such
Defaulting Lender shall not be entitled to receive any Commitment Fee pursuant
to Section 3.11 (Fees) with respect to such Defaulting Lender’s Commitment; and
(D) availability of Loans pursuant to Section 2.01(a) (Loans) shall, as at any
date of determination, be calculated as if such Defaulting Lender had funded all
Defaulted Loans of such Defaulting Lender. No Commitment of any Lender shall be
increased or otherwise affected, and, except as otherwise expressly provided in
this Section 2.07, performance by the Borrowers of their obligations hereunder
and the other Financing Documents shall not be excused or otherwise modified as
a result of any Funding Default or the operation of this Section 2.07. The
rights and remedies against a Defaulting Lender under this Section 2.07 are in
addition to other rights and remedies which the Borrowers may have against such
Defaulting Lender with respect to any Funding Default and which the
Administrative Agent or any Lender may have against such Defaulting Lender with
respect to any Funding Default.

 
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Section 2.08 Security Interest.  (a)  In order to supplement the Orders without
in any way diminishing or limiting the effect of the Orders or the security
interest, pledge, lien, mortgage or deed of trust granted thereunder, to secure
the timely payment in full when due (whether at stated maturity, upon
acceleration or optional or mandatory prepayment) in cash and performance in
full of all the Obligations, each Debtor does hereby collaterally assign, grant
and pledge to the Collateral Agent, for the benefit of the Collateral Agent,
each other Agent and each Lender, all the estate, right, title and interest of
such Debtor in, to and under, whether now owned or hereafter existing or
acquired, and howsoever its interest therein may arise or appear, the
Collateral.
 
(b) The Liens and security interests granted hereunder shall continue to be
valid and perfected and with the specified priority without the necessity that
financing statements be filed or that any other action be taken or document or
instrument registered or delivered, under applicable non-bankruptcy law.
 
(c) Notwithstanding any failure on the part of any Debtor or the Collateral
Agent to perfect, maintain, protect or enforce the Liens and security interests
in the Collateral granted hereunder, the Orders shall automatically, and without
further action by any Person, perfect such Liens and security interests against
the Collateral.
 
Section 2.09 Super-Priority Nature of Obligations.
 
(a) All Obligations shall constitute administrative expenses of the Borrowers in
the Chapter 11 Cases, with administrative priority and senior secured status
under Sections 364(c) and 364(d) of the Bankruptcy Code.  Subject to the
Carve-Out, such administrative claim shall have priority over all other costs
and expenses of the kinds specified in, or ordered pursuant to, Sections 105,
326, 328, 330, 331, 503(b), 506(c), 507(a), 507(b), 546(c), 726, 1113, 1114 or
any other provision of the Bankruptcy Code or otherwise, and shall at all times
be senior to the rights of the Borrowers, the estates of the Borrowers, and any
successor trustee or estate representative in the Chapter 11 Cases or any
subsequent proceeding or case under the Bankruptcy Code.
 
(b) All Obligations shall at all times, subject to the Carve-Out, (i) subject to
Section 364(d)(1) of the Bankruptcy Code, be secured by fully perfected first
priority, valid, binding, enforceable, non-avoidable and automatically perfected
priming security interest in and Liens upon (the “Priming Liens”) the Collateral
(as such term is defined in the Pre-Petition Credit Agreement) and (ii) pursuant
to Section 364(c)(2) of the Bankruptcy Code, be secured by fully perfected first
priority, valid, binding, enforceable, non-avoidable and automatically perfected
security interest in and liens upon the Collateral (other than Collateral
referenced in clause (i)) whether created, existing or acquired prior or
subsequent to the commencement of the Cases (the “First Liens” and, together
with the Priming Liens, the “DIP Liens”).  The DIP Liens, and the priorities
accorded to the Obligations, shall have the priority and senior secured status
afforded by Sections 364(c) and 364(d)(l) of the Bankruptcy Code, all as more
fully set forth in the Interim Order and Final Order.
 

 
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(c) The DIP Liens under Sections 364(c)(2),(c)(3) and (d) of the Bankruptcy
Code, and the administrative claims under Section 364(c)(1) of the Bankruptcy
Code, in each case afforded the Obligations, shall also have priority over any
claims arising under Section 506(c) of the Bankruptcy Code subject and
subordinate only to the Carve-Out.
 
Section 2.10 Payment of Obligations.
 
On the Maturity Date, the Senior Secured Parties shall be entitled to immediate
payment of all outstanding Obligations without further application to or order
of the Bankruptcy Court.
 
Section 2.11 Liens.
 
(a) The Debtors covenant and agree that the DIP Facility and all Obligations
will at all times be secured by the DIP Liens as set forth in the Interim Order
and the Final Order, as applicable.
 
(b) The DIP Liens on Collateral of the Debtors will not be subject to challenge
and will attach and become valid and perfected upon entry of the Interim Order
without any requirement of any further action by the Collateral Agent.  Other
than the DIP Liens, the Collateral will be free and clear of all Liens, claims
and encumbrances other than Permitted Liens.
 
(c) The Orders are sufficient and conclusive evidence of the creation, validity,
perfection and priority of the DIP Liens without the necessity of filing,
recording or delivering any financing statement or other instrument or document
that may otherwise be required under the law of any jurisdiction or the taking
of any action (including entering into any deposit control agreement or
delivering original certificates representing pledged Equity Interests that
constitute “Certificated Securities” under the UCC) to validate or perfect the
DIP Liens or to entitle the Collateral Agent to the priorities granted by or
pursuant to this Agreement, any Financing Document or any of the
Orders.  Notwithstanding the foregoing, the Collateral Agent may take any and
all actions without further order of the Bankruptcy Court, and shall be granted
relief from the automatic stay, to evidence, confirm, validate or perfect or to
insure the contemplated priority of, the DIP Liens granted to the Collateral
Agent for the benefit of the Senior Secured Parties and each Debtor shall
execute and deliver to the Collateral Agent all such financing statements,
mortgages, notices or other documents and instruments as the Collateral Agent
may request in connection therewith.
 
Section 2.12 No Discharge; Survival of Claims.
 
The Borrowers agree that (i) the Obligations hereunder shall not be discharged
by the entry of an order confirming a plan of reorganization in any Chapter 11
Case (and the Borrowers, pursuant to Section 1141(d)(4) of the Bankruptcy Code,
hereby waive any such discharge) and (ii) the super-priority administrative
claim granted pursuant to the Interim Order and Final Order and described in
Section 2.09 (Super-Priority Nature of Obligations) and the Liens granted to the
Collateral Agent pursuant to the Interim Order and Final Order and described in
Section 2.09 (Super-Priority Nature of Obligations) shall not be affected in any
manner by the entry of an order confirming a plan of reorganization in any
Chapter 11 Case.
 

 
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Section 2.13 Release.
 
The Borrowers hereby acknowledge, effective upon entry of the Interim Order and
subject to the terms thereof, that the Borrowers have no defense, counterclaim,
offset, recoupment, cross-complaint, claim or demand of any kind or nature
whatsoever that can be asserted to reduce or eliminate all or any part of the
Borrowers’ liability to repay the Senior Secured Parties as provided in this
Agreement or any other Financing Document or to seek affirmative relief or
damages of any kind or nature from any Senior Secured Party.  Subject to the
Orders, the Borrowers, each in their own right on behalf of their bankruptcy
estates, and on behalf of all their successors, assigns, and any Affiliates and
any Person acting for and on behalf of, or claiming through them, (collectively,
the “Releasing Parties”), hereby fully, finally and forever release and
discharge  each Senior Secured Party, its Affiliates, and their respective past
and present officers, directors, servants, agents, attorneys, assigns, heirs,
parents, subsidiaries, and each Person acting for or on behalf of any of them
(collectively, the “Released Parties”) of and from any and all past and present
actions, causes of action, demands, suits, claims, liabilities, Liens, lawsuits,
adverse consequences, amounts paid in settlement, costs, damages, debts,
deficiencies, diminution in value, disbursements, expenses, losses and other
obligations of any kind or nature whatsoever (the “Released Claims”), whether in
law, equity or otherwise (including, without limitation, those arising under
Sections 541 through 550 of the Bankruptcy Code and interest or other carrying
costs, penalties, legal, accounting and other professional fees and expenses,
and incidental, consequential and punitive damages, including, without
limitation, those payable to third parties), whether known or unknown, fixed or
contingent, direct, indirect, or derivative, asserted or unasserted, foreseen or
unforeseen, suspected or unsuspected, now existing or which may heretofore
accrue against any of the Released Parties, whether held in a personal or
representative capacity, and which are based on any act, fact, event or omission
or other matter, cause or thing occurring at or from any time prior to and
including the date hereof in any way, directly or indirectly arising out of,
connected with or relating to this Agreement, any other Financing Document, the
Interim Order, the Final Order or the transactions contemplated hereby, and all
other agreements, certificates, instruments and other documents and statements
(whether written or oral) related to any of the foregoing.
 
Section 2.14 Waiver of Priming Rights.
 
Upon the Closing Date, and on behalf of themselves and their estates, and for so
long as any Obligations shall be outstanding, the Borrowers hereby irrevocably
waive any right, pursuant to Sections 364(c) and 364(d) of the Bankruptcy Code
or otherwise, to grant any Lien of equal or greater priority than the Liens
securing the Obligations, or to approve a claim of equal or greater priority
than the Obligations, other than with respect to adequate protection Liens
approved by order of the Bankruptcy Court in the Interim Order or the Final
Order.
 
Section 2.15 Priority of Claim.
 
The Debtors covenant and agree that the Obligations at all times will constitute
DIP Administrative Claims, subject only to the Carve-Out.
 

 
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ARTICLE III

 
REPAYMENTS, PREPAYMENTS, INTEREST AND FEES
 
Section 3.01 Repayment of Loans.  The Borrowers unconditionally and irrevocably
promise to pay in full to the Administrative Agent, for the ratable account of
each Lender, the aggregate outstanding principal amount of the Loans on the
Maturity Date; provided, that upon the effectiveness of an Approved Plan the
aggregate outstanding principal amount of the Roll Up Loans shall be payable in
accordance with the terms of such Approved Plan.
 
Section 3.02 Interest Payment Dates.  (a)  Interest accrued on each Revolving
Loan shall be payable, without duplication:
 
(i)  
on the Maturity Date;

 
(ii)  
with respect to Eurodollar Loans, the last day of each applicable Interest
Period or, if applicable, any date on which such Eurodollar Loan is converted to
a Base Rate Loan;

 
(iii)  
with respect to Base Rate Loans, on each Monthly Payment Date or, if applicable,
any date on which such Base Rate Loan is converted to a Eurodollar Loan; and

 
(iv)  
with respect to any Revolving Loan, on any date when such Revolving Loan is
prepaid hereunder.

 
(b) Interest accrued on each Roll Up Loan shall be payable on the Maturity Date;
provided, however, that upon the effectiveness of an Approved Plan the interest
accrued on each Roll Up Loan shall be payable in accordance with the terms of
such Approved Plan.
 
(c) Interest accrued on the Loans or other monetary Obligations after the date
such amount is due and payable (whether on the Maturity Date for such Loan, any
Monthly Payment Date, any Interest Payment Date, upon acceleration or otherwise)
shall be payable upon demand.
 
(d) Interest hereunder shall be due and payable in accordance with the terms
hereof, before and after judgment, regardless of whether an insolvency
proceeding exists in respect of any Borrower, and to the fullest extent
permitted by law, the Lenders shall be entitled to receive post-petition
interest during the pendency of an insolvency proceeding.
 
Section 3.03 Interest Rates.  (a)  Pursuant to each properly delivered Funding
Notice, (i) the Eurodollar Loans shall accrue interest at a rate per annum
during each Interest Period applicable thereto equal to the sum of the
Eurodollar Rate for such Interest Period plus the Applicable Margin, (ii) each
Base Rate Loan shall accrue interest at a rate per annum during each Monthly
Period equal to the sum of the Base Rate for such Monthly Period plus the
Applicable Margin and (iii) the Roll Up Loans shall accrue interest in
accordance with the terms of the Pre-Petition Credit Agreement applicable to the
Pre-Petition Term Loans that are Base Rate Loans (as such term is defined
therein) without giving effect to any Event of Default (as such term is defined
therein).
 

 
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(b) On or before 12:00 noon, New York City time, at least four (4) Business Days
prior to the end of each Interest Period for each Eurodollar Loan, the Borrowers
shall, and at least four (4) Business Days prior to the end of any Monthly
Period for any Base Rate Loans, the Borrowers may, deliver to the Administrative
Agent an Interest Period Notice setting forth the Borrowers’ election (i) to
continue any such Eurodollar Loan as (or convert any such Base Rate Loan to) a
Eurodollar Loan or (ii) to convert any such Eurodollar Loan to a Base Rate Loan
at the end of the then-current Interest Period; provided, that if an Event of
Default has occurred and is continuing, all Eurodollar Loans shall automatically
convert into Base Rate Loans at the end of the then-current Interest
Periods.  Upon the waiver or cure of such Event of Default, the Borrowers shall
have the option to continue such Loans as Base Rate Loans and/or to convert such
Loans to Eurodollar Loans (by delivery of an Interest Period Notice), subject to
the notice periods set forth above.  Notwithstanding anything to the contrary,
any portion of the Loans maturing in less than one month may not be continued
as, or converted to, Eurodollar Loans and will automatically convert to Base
Rate Loans at the end of the then-current Interest Period.
 
(c) If the Borrowers fail to deliver an Interest Period Notice in accordance
with Section 3.03(b) with respect to any Eurodollar Loan, such Eurodollar Loan
shall automatically continue as a Eurodollar Loan.
 
(d) All Eurodollar Loans shall bear interest from and including the first day of
the applicable Interest Period to (and excluding) the last day of such Interest
Period at the interest rate determined as applicable to such Eurodollar Loan.
 
(e) Notwithstanding anything to the contrary, the Borrowers shall have, in the
aggregate, no more than  eight (8) separate Eurodollar Loans outstanding at any
one time.  For purposes of the foregoing, all Eurodollar Loans commencing on the
same day of a month (notwithstanding that such Eurodollar Loans commence in
different months) shall be considered a single Eurodollar Loan.
 
(f) All Base Rate Loans shall bear interest from and including the first day of
each Monthly Period (or the day on which Eurodollar Loans are converted to Base
Rate Loans as required under Section 3.03(b) or under Article IV (Eurodollar
Rate and Tax Provisions)) to (and including) the next succeeding Monthly Payment
Date at the interest rate determined as applicable to such Base Rate Loan.
 
Section 3.04 Default Interest Rate.  (a) If all or a portion of (i) the
principal amount of any Loan is not paid when due (whether on the Maturity Date,
by acceleration or otherwise), such overdue amount shall bear interest at a rate
per annum equal to the rate that would otherwise be applicable thereto plus two
percent (2%) or (ii) any Obligation (other than principal on the Loans) is not
paid when due (whether on the Maturity Date, by acceleration or otherwise), such
overdue amount shall bear interest at a rate per annum equal to the rate then
applicable to Base Rate Loans plus two percent (2%) (the applicable rate in
effect plus such two percent (2%) per annum, the “Default Rate”), in each case,
with respect to clauses (i) and (ii) above, from the date of such non-payment
until such amount is paid in full (after as well as before judgment).
 

 
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(b) Upon the occurrence and during the continuance of any Event of Default
(other than an Event of Default specified in Section 3.04(a)), the Borrowers
shall pay interest (after as well as before judgment) on the Loans at a rate per
annum equal to the rate then applicable to Base Rate Loans plus two percent (2%)
until such Event of Default is cured or waived.
 
Section 3.05 Interest Rate Determination.  The Administrative Agent shall
determine the interest rate applicable to the Loans in accordance with the terms
of this Agreement, and shall give prompt notice to the Borrowers and the Lenders
of such determination, and its determination thereof shall be conclusive in the
absence of manifest error.
 
Section 3.06 Computation of Interest and Fees.  (a)  All computations of
interest for Base Rate Loans when the Base Rate is determined by WestLB’s “prime
rate” shall be made on the basis of a year of 365 or 366 days, as the case may
be, and actual days elapsed.  All computations of interest for Eurodollar Loans
and for Base Rate Loans when the Base Rate is determined by the Federal Funds
Effective Rate shall be made on the basis of a 360-day year and actual days
elapsed.
 
(b) Interest shall accrue on each Loan for the day on which the Loan is made,
and shall not accrue on a Loan, or any portion thereof, for the day on which the
Loan or such portion is paid; provided, that any Loan that is repaid on the same
day on which it is made shall bear interest for one (1) day.
 
(c) Each determination by the Administrative Agent of an interest rate or fee
hereunder shall be conclusive and binding for all purposes, absent manifest
error.
 
Section 3.07 Optional Prepayment.  (a)  The Borrowers shall have the right at
any time, and from time to time, to prepay the Revolving Loans, in whole or in
part, upon not fewer than three (3) Business Days’ prior written notice to the
Administrative Agent.
 
(b) Each notice of prepayment given by the Borrowers under this Section 3.07
shall specify the prepayment date and the portion of the principal amount of the
Revolving Loans to be prepaid.  All prepayments under this Section 3.07 shall be
made by the Borrowers to the Administrative Agent for the account of the
applicable Revolving Lenders and shall be accompanied by accrued interest on the
principal amount being prepaid to but excluding the date of payment and by any
additional amounts required to be paid under Section 4.05 (Funding Losses).
 
(c) Amounts of principal prepaid under this Section 3.07 shall be allocated by
the Administrative Agent first, to the payment of all costs, fees, expenses and
indemnities then due and payable to the Senior Secured Parties, including fees
and expenses of attorneys and Consultants reimbursable hereunder; second, to the
payment of all accrued and unpaid interest then due and payable on the Revolving
Loans pro rata among the Lenders (other than any Defaulting Lender) based on
their respective outstanding principal amounts on the date of such prepayment;
third, to the payment of principal of Revolving Loans pro rata among the Lenders
(other than any Defaulting Lender) based on their respective outstanding
principal amounts on the date of such prepayment but without a reduction in the
Commitments; fourth, to the payment of all accrued and unpaid interest then due
and payable on the Revolving Loans pro rata among the Defaulting Lenders based
on their respective outstanding principal amounts on the date of such
prepayment; and fifth, to the payment of principal of Revolving Loans pro rata
among the Defaulting Lenders based on their respective outstanding principal
amounts on the date of such prepayment.
 

 
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(d) Subject to Section 3.7 (c) first, amounts prepaid pursuant to this Section
3.07  may be reborrowed.
 
Section 3.08 Mandatory Prepayment.  (a)  The Borrowers shall be required to
prepay the Loans:
 
(i)  
within three (3) Business Days of  receipt by any Borrower of any Project
Document Termination Payments, an amount equal to such Project Document
Termination Payments;

 
(ii)  
within three (3) Business Days of receipt by any Borrower of any Condemnation
Proceeds, an amount equal to such Condemnation Proceeds;

 
(iii)  
within three (3) Business Days of receipt by any Borrower of any Insurance
Proceeds,  an amount equal to such Insurance Proceeds;

 
(iv)  
within three (3) Business Days of receipt by any Borrower of any Net Cash
Proceeds (not constituting Insurance Proceeds or Condemnation Proceeds) of any
Disposition (including the sale of all or substantially all the assets of the
Debtors) an amount equal to such Net Cash Proceeds; and

 
(v)  
within one (1) Business Day of receipt of the Net Cash Proceeds derived  from
the following occurrence, if at any time prior to the repayment in full of all
Obligations, including subsequent to the confirmation of any reorganization
plan, any of the Debtors, any trustee, any examiner with enlarged powers or any
responsible officer subsequently appointed, shall incur Indebtedness in
violation of the terms of the Interim Order, the Final Order or this Agreement.

 
(b) All prepayments under this Section 3.08 shall be made by the Borrowers to
the Administrative Agent for the account of the Lenders and shall be accompanied
by accrued interest on the principal amount being prepaid to but excluding the
date of payment and by any additional amounts required to be paid under Section
4.05 (Funding Losses).
 

 
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(c) Amounts of principal prepaid under this Section 3.08  shall be allocated by
the Administrative Agent first, to the payment of all costs, fees, expenses and
indemnities then due and payable to the Senior Secured Parties, including fees
and expenses of attorneys and Consultants reimbursable hereunder; second, to the
payment of all accrued and unpaid interest then due and payable on the Revolving
Loans pro rata among the Lenders (other than any Defaulting Lender) based on
their respective outstanding principal amounts on the date of such prepayment;
third, to the payment of principal of Revolving Loans pro rata among the Lenders
(other than any Defaulting Lender) based on their respective outstanding
principal amounts on the date of such prepayment and a corresponding reduction
in the Revolving Loan Commitments; fourth, to the payment of all accrued and
unpaid interest then due and payable on the Revolving Loans pro rata among the
Defaulting Lenders based on their respective outstanding principal amounts on
the date of such prepayment; fifth, to the payment of principal of Revolving
Loans pro rata among the Defaulting Lenders based on their respective
outstanding principal amounts on the date of such prepayment; sixth, to the
payment of all accrued and unpaid interest then due and payable on the Roll Up
Loans pro rata among the Lenders (other than any Defaulting Lender) based on
their respective outstanding principal amounts on the date of such prepayment;
seventh, to the payment of principal of the Roll Up Loans pro rata among the
Lenders (other than any Defaulting Lender) based on their respective outstanding
principal amounts on the date of such prepayment and a corresponding reduction
in the Roll Up Loan Commitments; eighth, to the payment of all accrued and
unpaid interest then due and payable on the Roll Up Loans pro rata among the
Defaulting Lenders based on their respective outstanding principal amounts on
the date of such prepayment; and ninth, to the payment of principal of the Roll
Up Loans pro rata among the Defaulting Lenders based on their respective
outstanding principal amounts on the date of such prepayment.
 
(d) Amounts prepaid pursuant to this Section 3.08  may not be reborrowed.
 
Section 3.09 Time and Place of Payments.  (a)  The Borrowers shall make each
payment (including any payment of principal of or interest on any Loan or any
Fees or other Obligations) hereunder and under any other Financing Document
without setoff, deduction or counterclaim not later than 12:00 noon New York
City time on the date when due in Dollars in immediately available funds to the
Administrative Agent at the following account:  JPMorgan Chase Bank - NY, Acct.
#920-1-060663, for the Account of WestLB AG-NY Branch, ABA #021-000-021, Ref:
Pacific Ethanol DIP Loan, Attention: Andrea Bailey, or at such other office or
account as may from time to time be specified by the Administrative Agent to the
Borrowers.  Funds received after 12:00 noon New York City time shall be deemed
to have been received by the Administrative Agent on the next succeeding
Business Day.
 
(b) The Administrative Agent shall promptly remit in immediately available funds
to each Senior Secured Party its share, if any, of any payments received by the
Administrative Agent for the account of such Senior Secured Party.
 
(c) Whenever any payment (including any payment of principal of or interest on
any Loan or any Fees or other Obligations) hereunder or under any other
Financing Document shall become due, or otherwise would occur, on a day that is
not a Business Day, such payment shall (except as otherwise required by the
proviso to the definition of “Interest Period” with respect to Eurodollar Loans)
be made on the immediately succeeding Business Day, and such increase of time
shall in such case be included in the computation of interest or Fees, if
applicable.
 

 
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Section 3.10 Fundings and Payments Generally.  (a)  Unless the Administrative
Agent has received notice from the Borrowers prior to the date on which any
payment is due to the Administrative Agent for the account of the Lenders
hereunder that the Borrowers will not make such payment, the Administrative
Agent may assume that the Borrowers have made such payment on such date in
accordance with this Agreement and may, in reliance upon such assumption,
distribute to the Lenders the amount due.  If the Borrowers have not in fact
made such payment, then each of the Lenders severally agrees to repay to the
Administrative Agent forthwith on demand the amount so distributed to such
Lender in immediately available funds with interest thereon, for each day from
and including the date such amount is distributed to it to but excluding the
date of payment to the Administrative Agent, at the greater of (i) the Federal
Funds Effective Rate and (ii) a rate determined by the Administrative Agent in
accordance with banking industry rules on interbank compensation.  A notice of
the Administrative Agent to any Lender with respect to any amount owing under
this Section 3.10(a) shall be conclusive, absent manifest error.
 
(b) Nothing herein shall be deemed to obligate any Lender to obtain funds for
any Loan in any particular place or manner or to constitute a representation by
any Lender that it has obtained or will obtain funds for any Loan in any
particular place or manner.
 
Section 3.11 Fees.  (a)  On the date of the first Funding, the Borrowers shall
pay to the Administrative Agent, for the account of the Lenders, a facility fee
equal to two percent (2.0%) of the Aggregate Revolving Loan Commitment.
 
(b) On the date of the first Funding, the Borrowers shall pay to the
Administrative Agent, for the account of the Administrative Agent, a structuring
fee equal to one percent (1.0%) of the Aggregate Revolving Loan Commitment.
 
(c) From and including the date hereof until the Maturity Date, the Borrowers
agree to pay to the Administrative Agent, for the account of the Lenders, on
each Monthly Payment Date, a commitment fee (the “Commitment Fee”) equal to two
percent (2.0%) per annum on the average daily amount by which the Aggregate
Revolving Loan Commitment exceeds the outstanding amount of the Revolving Loans
during the immediately preceding month.  All Commitment Fees shall be computed
on the basis of the actual number of days elapsed in a year of 365 or 366 days,
as pro-rated for any partial month, as applicable.
 
(d) All Fees shall be paid on the dates due, in immediately available
funds.  Once paid, none of the Fees shall be refundable under any circumstances.
 
Section 3.12 Pro rata Treatment.  (a)  Except as otherwise expressly provided
herein (including Section 4.01 (Eurodollar Rate Lending Unlawful) and Section
2.07 (Defaulting Lenders)), each Funding of Revolving Loans, making of Roll Up
Loans and reduction of commitments of any type shall be allocated by the
Administrative Agent pro rata among the Lenders in accordance with their
respective applicable Commitment Percentages.
 

 
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(b) Except as required under Section 2.07 (Defaulting Lenders), Section 3.07
(Optional Prepayment), Section 3.08 (Mandatory Prepayment) or Article IV
(Eurodollar Rate and Tax Provisions), each payment or prepayment of principal of
the Loans shall be allocated by the Administrative Agent pro rata among the
applicable Lenders in accordance with the respective principal amounts of their
outstanding Loans of the type being repaid, each payment of interest on the
Loans shall be allocated by the Administrative Agent pro rata among the
applicable Lenders in accordance with the respective interest amounts
outstanding on their outstanding Loans of the type in respect of which interest
is being paid, and each payment of fees on the Commitments shall be allocated by
the Administrative Agent pro rata among the applicable Lenders in accordance
with their respective Commitments of the type to which such fees relate.
 
(c) Each Lender agrees that in computing such Lender’s portion of any Funding to
be made hereunder, the Administrative Agent may, in its discretion, round each
Lender’s percentage of such Funding to the next higher or lower whole Dollar
amount.
 
Section 3.13 Sharing of Payments.  (a)  If any Lender shall obtain any payment
or other recovery (whether voluntary, involuntary, by application of setoff or
otherwise) on account of any Loan (other than pursuant to the terms of Article
IV (Eurodollar Rate and Tax Provisions)) in excess of its pro rata share of
payments then or therewith obtained by all Lenders holding Loans of such type,
such Lender shall purchase from the other Lenders such participations in Loans
made by them as shall be necessary to cause such purchasing Lender to share the
excess payment or other recovery ratably with each of them; provided, however,
that if all or any portion of the excess payment or other recovery is thereafter
recovered from such purchasing Lender, the purchase shall be rescinded and each
Lender that has sold a participation to the purchasing Lender shall repay to the
purchasing Lender the purchase price to the ratable extent of such recovery
together with an amount equal to such selling Lender’s ratable share (according
to the proportion of (x) the amount of such selling Lender’s required repayment
to the purchasing Lender to (y) the total amount so recovered from the
purchasing Lender) of any interest or other amount paid or payable by the
purchasing Lender in respect of the total amount so recovered.  Each Borrower
agrees that any Lender so purchasing a participation from another Lender
pursuant to this Section 3.13 may, to the fullest extent permitted by law,
exercise all its rights of payment (including pursuant to Section 11.15 (Right
of Setoff)) with respect to such participation as fully as if such Lender were
the direct creditor of the Borrowers in the amount of such participation.
 
(b) If under any applicable bankruptcy, insolvency or other similar law, any
Lender receives a secured claim in lieu of a setoff to which this Section 3.13
applies, such Lender shall, to the extent practicable, exercise its rights in
respect of such secured claim in a manner consistent with the rights of the
Lenders entitled under this Section 3.13 to share in the benefits of any
recovery on such secured claim.
 

 
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ARTICLE IV

 
EURODOLLAR RATE AND TAX PROVISIONS
 
Section 4.01 Eurodollar Rate Lending Unlawful.  (a)  If any Lender reasonably
determines (which determination shall, upon notice thereof to the Borrowers and
the Administrative Agent, be conclusive and binding on the Borrowers absent
manifest error) that the introduction of or any change in or in the
interpretation of any Law after the date hereof makes it unlawful, or any
central bank or other Governmental Authority asserts after the date hereof that
it is unlawful, for such Lender to make, maintain or fund any Loan as a
Eurodollar Loan, the obligations of such Lender to make, maintain or fund any
Loan as a Eurodollar Loan shall, upon such determination, forthwith be suspended
until such Lender shall notify the Administrative Agent that the circumstances
causing such suspension no longer exist, and all Eurodollar Loans of such Lender
shall automatically convert into Base Rate Loans at the end of the then-current
Interest Periods with respect thereto or sooner, if required by such Law or
assertion.  Upon any such conversion the Borrowers shall pay any accrued
interest on the amount so converted and, if such conversion occurs on a day
other than the last day of the then-current Interest Period for such affected
Eurodollar Loans, such Lender shall be entitled to make a request for, and the
Borrowers shall pay, compensation for breakage costs under Section 4.05 (Funding
Losses).
 
(b) If such Lender notifies the Borrowers that the circumstances giving rise to
the suspension described in Section 4.01(a) no longer apply, the Borrowers may
elect (by delivering an Interest Period Notice) to convert the principal amount
of any such Base Rate Loan to a Eurodollar Loans in accordance with this
Agreement.
 
Section 4.02 Inability to Determine Eurodollar Rates.  (a)  In the event, and on
each occasion, that on or before the day that is three (3) Business Days prior
to the commencement of any Interest Period for any Eurodollar Loan, the
Administrative Agent shall have determined in good faith that (i) Dollar
deposits in the amount of such Loan and with an Interest Period similar to such
Interest Period are not generally available in the London interbank market, or
(ii) the rate at which such Dollar deposits are being offered will not
adequately and fairly reflect the cost to any Lender of making, maintaining or
funding the principal amount of such Loan during such Interest Period, or (iii)
adequate and reasonable means do not exist for ascertaining LIBOR, the
Administrative Agent shall forthwith notify the Borrowers and the Lenders of
such determination, whereupon each such Eurodollar Loan will automatically, on
the last day of the then-existing Interest Period for such Eurodollar Loan,
convert into a Base Rate Loan.  In the event of any such determination pursuant
to Section 4.02(a)(i) or (iii), any Funding Notice delivered by the Borrowers
shall be deemed to be a request for a Base Rate Loan until the Administrative
Agent determines that the circumstances giving rise to such notice no longer
exist.  In the event of any determination pursuant to Section 4.02(a)(ii), each
affected Lender shall, and is hereby authorized by the Borrowers to, fund its
portion of the Loans as a Base Rate Loan.  Each determination by the
Administrative Agent hereunder shall be conclusive absent manifest error.
 

 
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(b) Upon the Administrative Agent’s determination that the condition that was
the subject of a notice under Section 4.02(a) has ceased, the Administrative
Agent shall forthwith notify the Borrower and the Lenders of such determination,
whereupon the Borrowers may elect (by delivering an Interest Period Notice) to
convert any such Base Rate Loan to a Eurodollar Loan on the last day of the
then-current Monthly Period in accordance with this Agreement.
 
Section 4.03 Increased Eurodollar Loan Costs.  If after the date hereof, the
adoption of any applicable Law or any change therein, or any change in the
interpretation or administration thereof by any Governmental Authority charged
with the interpretation or administration thereof, or compliance by any Lender
(or its Eurodollar Office) with any request or directive (whether or not having
the force of law) of any Governmental Authority would increase the cost (other
than with respect to Taxes, which are addressed in Section 4.07 (Taxes)) to such
Lender of, or result in any reduction in the amount of any sum receivable by
such Lender (whether of principal, interest or any other amount) in respect of,
making, maintaining or funding (or of its obligation to make, maintain or fund)
the Loans as Eurodollar Loans, then the Borrowers agree to pay to the
Administrative Agent for the account of such Lender the amount of any such
increase or reduction.  Such Lender shall promptly notify the Administrative
Agent and the Borrowers in writing of the occurrence of any such event, such
notice to state in reasonable detail the reasons (including the basis for
determination) therefor and the additional amount required to compensate fully
such Lender for such increased cost or reduced amount.  Such additional amounts
shall be payable by the Borrowers directly to such Lender within thirty (30)
days of delivery of such notice, and such notice shall be binding on the
Borrowers absent manifest error.
 
Section 4.04 Obligation to Mitigate.  (a)  Each Lender agrees after it becomes
aware of the occurrence of an event that would entitle it to give notice
pursuant to Section 4.01 (Eurodollar Rate Lending Unlawful), 4.03 (Increased
Eurodollar Loan Costs), or 4.06 (Increased Capital Costs) or to receive
additional amounts pursuant to Section 4.07 (Taxes), such Lender shall use
reasonable efforts to make, fund or maintain its affected Loan through another
lending office if as a result thereof the increased costs would be avoided or
materially reduced or the illegality would thereby cease to exist and if, in the
opinion of such Lender, the making, funding or maintaining of such Loan through
such other lending office would not be disadvantageous to such Lender, contrary
to such Lender’s normal banking practices or violate any applicable Law.
 
(b) No change by a Lender in its Domestic Office or Eurodollar Office made for
such Lender’s convenience shall result in any increased cost to the Borrowers.
 
(c) If any Lender demands compensation pursuant to Section 4.03 (Increased
Eurodollar Loan Costs) or 4.06 (Increased Capital Costs) with respect to any
Eurodollar Loan, the Borrowers may, at any time upon at least three (3) Business
Day’s prior notice to such Lender through the Administrative Agent, elect to
convert such Loan into a Base Rate Loan.  Thereafter, unless and until such
Lender notifies the Borrowers that the circumstances giving rise to such notice
no longer apply, all such Eurodollar Loans by such Lender shall bear interest as
Base Rate Loans.  If such Lender notifies the Borrowers that the circumstances
giving rise to such notice no longer apply, the Borrowers may elect (by
delivering an Interest Period Notice) to convert the principal amount of each
such Base Rate Loan to a Eurodollar Loans in accordance with this Agreement.
 

 
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Section 4.05 Funding Losses.  In the event that any Lender incurs any loss or
expense (including any loss or expense incurred by reason of the liquidation or
redeployment of deposits or other funds acquired by such Lender to make,
continue or maintain any portion of the principal amount of any Loan as a
Eurodollar Loan, and any customary administrative fees charged by such Lender in
connection with the foregoing, but excluding any lost profits) as a result of
(a) any conversion or repayment or prepayment of the principal amount of any
Loans on a date other than the scheduled last day of the Interest Period
applicable thereto, whether pursuant to Section 3.07 (Optional Prepayment), 3.08
(Mandatory Prepayment), 4.01(a) (Eurodollar Rate Lending Unlawful) or otherwise
or (b) the Borrowers failing to make a Funding in accordance with any Funding
Notice; then, upon the written notice (including the basis for determination) of
such Lender to the Borrowers (with a copy to the Administrative Agent), the
Borrowers shall, within thirty (30) days of receipt thereof, pay to the
Administrative Agent for the account of such Lender such amount as will (in the
reasonable determination of such Lender) reimburse such Lender for such loss or
expense.  Such written notice shall be binding on the Borrowers absent manifest
error.
 
Section 4.06 Increased Capital Costs.  If after the date hereof any change in,
or the introduction, adoption, effectiveness, interpretation, reinterpretation
or phase-in of, any applicable Law or guideline, or request (whether or not
having the force of law) of any Governmental Authority affects the amount of
capital required to be maintained by any Lender, and such Lender reasonably
determines that the rate of return on its capital as a consequence of its Loan
is reduced to a level below that which such Lender could have achieved but for
the occurrence of any such circumstance then, in any such case upon notice from
time to time by such Lender to the Borrowers, the Borrowers shall pay within
thirty (30) days after such demand directly to such Lender additional amounts
sufficient to compensate such Lender for such reduction in rate of return.  A
statement of such Lender as to any such additional amount or amounts (including
the basis for determination) shall be binding on the Borrowers absent manifest
error.
 
Section 4.07 Taxes.
 
(a) Payments Free of Taxes.  Any and all payments by or on account of any
Obligations shall be made free and clear of, and without deduction for, any
Taxes, unless required by Law; provided that if any Borrower shall be required
to deduct any Indemnified Taxes from any such payment, then (i) the sum payable
shall be increased as necessary so that after making all required deductions
(including deductions applicable to additional sums payable under this Section
4.07) the Agent or Lender (as the case may be) receives an amount equal to the
sum it would have received had no such deductions been made, (ii) the Borrowers
shall make such deductions and (iii) the Borrowers shall pay the full amount
deducted to the relevant Governmental Authority in accordance with applicable
Law.
 
(b) Payment of Other Taxes by the Borrowers.  In addition, the Borrowers shall
timely pay any Indemnified Taxes arising from any payment made under any
Financing Document or from the execution, delivery or enforcement of, or
otherwise with respect to, any Financing Document and not collected by
withholding at the source as contemplated by Section 4.07(a) to the relevant
Governmental Authority in accordance with applicable Law.
 

 
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(c) Indemnification by the Borrowers.  The Borrowers shall indemnify each Agent
and each Lender, within thirty (30) days after written demand therefor, for the
full amount of any Indemnified Taxes (including Indemnified Taxes imposed or
asserted on or attributable to amounts payable under this Section 4.07) paid by
such Agent or Lender, as the case may be, and any penalties, interest, additions
to tax and reasonable expenses arising therefrom or with respect thereto (other
than those resulting from the gross negligence or willful misconduct of such
Agent or Lender), whether or not such Indemnified Taxes were correctly or
legally imposed or asserted by the relevant Governmental Authority.  A
certificate as to the amount of such payment or liability (including the basis
of determination) delivered to the Borrowers by a Lender or Agent, as the case
may be, shall be conclusive absent manifest error.
 
(d) Evidence of Payments.  As soon as reasonably practicable after any payment
of Indemnified Taxes by any Borrower to a Governmental Authority, such Borrower
shall deliver to the Administrative Agent the original or a certified copy of a
receipt issued by such Governmental Authority evidencing such payment, a copy of
the return reporting such payment or other evidence of such payment reasonably
satisfactory to the Administrative Agent.
 
(e) Foreign Lenders.  Each Lender (including any Participant and any other
Person to which any Lender transfers its interests in this Agreement as provided
under Section 11.03 (Assignments)) that is not a United States Person (a
“Non-U.S. Lender”) shall deliver to the Borrowers and the Administrative Agent
two (2) copies of U.S. Internal Revenue Service Form W-8ECI, Form W-8BEN or Form
W 8IMY (with supporting documentation), or any subsequent versions thereof or
successors thereto, properly completed and duly executed by such Non-U.S. Lender
claiming complete exemption from, or a reduced rate of, U.S. federal withholding
tax on all payments of interest by the Borrowers under the Financing Documents,
together with, in the case of a Non-U.S. Lender that is relying on an exemption
pursuant to Section 871(h) or 881(c) of the Code, a statement substantially in
the form of Exhibit 4.07 certifying that such Lender is not a bank described in
Section 881(c)(3)(A) of the Code.  Such forms shall be delivered by each
Non-U.S. Lender on or before the date it becomes a party to this Agreement.  In
addition, each Non-U.S. Lender shall deliver such forms promptly upon the
obsolescence or invalidity of any form previously delivered by such Non-U.S.
Lender.  Each Non-U.S. Lender shall promptly notify the Borrowers and the
Administrative Agent at any time it determines that it is no longer in a
position to provide any previously delivered certificate to the Borrowers (or
any other form of certification adopted by U.S. taxing authorities for such
purpose).  The Borrowers shall not be obligated to pay any additional amounts in
respect of U.S. federal income taxes pursuant to this Section 4.07 (or make an
indemnification payment pursuant to this Section 4.07) to any Lender (or any
Participant or other Person to which any Lender transfers its interests in this
Agreement as provided under Section 11.03 (Assignments)) if the obligation to
pay such additional amounts (or such indemnification) would not have arisen but
for a failure by such Lender to comply with this Section 4.07(e).
 

 
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ARTICLE V

 
REPRESENTATIONS AND WARRANTIES
 
In order to induce each Agent, each Lender and each other party hereto (other
than the Borrowers) to enter into this Agreement and to induce each Lender to
make the Loans hereunder, each Borrower represents and warrants to each Agent
and each Lender as set forth in this Article V on the date hereof, on the
Closing Date, on the date of each Funding Notice and on each Funding Date (in
each case, except to the extent such representations and warranties expressly
relate to a future date or as otherwise provided in Article VI (Conditions
Precedent)).
 
Section 5.01 Organization; Power and Compliance with Law.  Each Borrower (a) is
a duly formed, validly existing and in good standing under the laws of its
jurisdiction of organization, (b) is duly qualified to do business as is now
being conducted and as is proposed to be conducted by such Borrower and is in
good standing in each jurisdiction where the nature of its business requires
such qualification (other than any such failure to be so qualified or in good
standing that could not reasonably be expected to have a Material Adverse
Effect) and (c) subject to the entry of the Orders, has all requisite entity
power and authority required as of the date this representation is made or
deemed repeated to enter into and perform its obligations under each Transaction
Document to which it is a party and to conduct its business as currently
conducted by it.
 
Section 5.02 Due Authorization; Non-Contravention.  Subject to the entry of the
Orders, the execution, delivery and performance by each Borrower of each
Transaction Document to which it is a party are within such Borrower’s
organizational powers, have been duly authorized by all necessary action, and do
not:
 
(a) contravene such Borrower’s Organic Documents;
 
(b) contravene in any material respect any Law binding on or affecting such
Borrower;
 
(c) contravene any Contractual Obligation binding on or affecting such Borrower;
 
(d) require any consent or approval under such Borrower’s Organic Documents that
has not been obtained;
 
(e) require any consent or approval under any Contractual Obligations binding on
or affecting such Borrower other than any approvals or consents which have been
obtained; or
 
(f) result in, or require the creation or imposition of, any Lien on any of such
Borrower’s properties other than Permitted Liens.
 

 
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Section 5.03 Governmental Approvals.
 
(a) Subject to the entry of the Orders, all material Governmental Approvals that
are required to be obtained by any Borrower in connection with (i) the due
execution, delivery and performance by such Borrower of the Financing Documents
to which it is a party and (ii) the grant by the Debtors of the DIP Liens and
the validity, perfection and enforceability thereof have been obtained, are in
full force and effect, are properly in the name of the appropriate Person, and
are final and Non-Appealable.
 
(b) All Necessary Project Approvals are in full force and effect, are properly
in the name of the appropriate Person, and are final and Non-Appealable except
as a result of the Cold Shutdown of the Madera Plant, the Magic Valley Plant,
the Stockton Plant and, after the Boardman CS Date, the Boardman Plant.  There
is no action, suit, investigation or proceeding pending or to the knowledge of
each Borrower, threatened that could reasonably be expected to result in the
modification, rescission, termination or suspension of any Necessary Project
Approval that could reasonably be expected to have a Material Adverse Effect.
 
(c) The information set forth in each application (including any updates or
supplements thereto) submitted by or on behalf of any Borrower in connection
with each Necessary Project Approval was accurate and complete in all material
respects at the time of submission and continues to be accurate in all material
respects and complete in all respects to the extent required for the continued
effectiveness of such Necessary Project Approval.
 
Section 5.04 Investment Company Act.  No Borrower is, and after giving effect to
the Loans and the application of the proceeds of the Loans as described herein
no Borrower will be, an “investment company” or a company “controlled” by an
“investment company,” within the meaning of the Investment Company Act of 1940,
as amended.
 
Section 5.05 Validity of Financing Documents.  Each Financing Document to which
any Borrower is a party has been duly authorized, validly executed and
delivered, and constitutes the legal, valid and binding obligations of such
Borrower enforceable in accordance with its respective terms.
 
Section 5.06 Financial Information.  Each of the financial statements of Pacific
Ethanol delivered pursuant to Section 6.01(g) (Conditions to Closing – Financial
Statements) and Sections 7.03(a) and (b) (Reporting Requirements) has been
prepared in accordance with GAAP, and fairly presents in all material respects
the consolidated financial condition of the Borrowers as at the dates thereof
and the results of their operations for the period then ended (subject, in the
case of unaudited financial statements, to changes resulting from audit and
normal year-end adjustments and the absence of footnotes).
 
Section 5.07 Project Compliance.  (a)  Except as set forth on Schedule 5.07,
Each Plant conforms in all material respects to and complies in material
respects with all federal, state and local zoning, environmental, land use and
other applicable Laws and the requirements of all Necessary Project
Approvals.  Each Plant is and will continue to be owned and maintained in
material compliance  with all applicable Laws and the requirements of all
Necessary Project Approvals.
 

 
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(b) Each Plant is and will continue to be owned and maintained in compliance in
all material respects with all of the Borrowers’ Contractual Obligations
(including the Project Documents applicable to such Plant, taking into account
any cure or grace periods thereunder) (except, (i) in the case of Contractual
Obligations other than Project Documents, to the extent such failure to comply
could not reasonably be expected to result in a Material Adverse Effect with
respect to such Plant or Borrower and (ii) the cessation of operations and Cold
Shutdown of the Madera Plant, the Magic Valley Plant, the Stockton Plant and,
after the Boardman CS Date, the Boardman Plant).
 
Section 5.08 Litigation.  (a)   Except as set forth on Schedule 5.08, no action,
suit, proceeding or investigation has been instituted and not stayed pursuant to
the Bankruptcy Code or threatened against any Borrower (including in connection
with any Necessary Project Approval) that, individually or in the aggregate, has
had or could reasonably be expected to have a Material Adverse Effect on any
Plant or any Borrower;
 
(b) Except as set forth on Schedule 5.08, no action, suit, proceeding or
investigation has been instituted and not stayed pursuant to the Bankruptcy Code
or threatened against any Major Project Party that is an Affiliate of a Borrower
and that is party to any Project Document with Pacific Holding or that relates
to any Borrower or Plant that, individually or in the aggregate, has had or
could reasonably be expected to have a Material Adverse Effect; and
 
(c) to the knowledge of each Borrower, no action, suit, proceeding or
investigation has been instituted and not stayed pursuant to the Bankruptcy Code
or threatened against any Major Project Party that is not an Affiliate of a
Borrower and that is party to any Project Document with Pacific Holding or that
relates to any Borrower or Plant that, individually or in the aggregate, has had
or could reasonably be expected to have a Material Adverse Effect.
 
Section 5.09 Sole Purpose Nature; Business.  None of the Borrowers has conducted
nor is conducting any business or activities other than businesses and
activities relating to the ownership, development, testing, financing,
construction, operation and maintenance of the Project as contemplated by the
Transaction Documents.
 
Section 5.10 Contracts.
 
(a) All contracts, agreements, instruments, letters, understandings, or other
documentation to which any Borrower is a party or by which it or any of its
properties is bound as of the date hereof (other than the Financing Documents),
including the Project Documents (including all documents amending,
supplementing, interpreting or otherwise modifying or clarifying such agreements
and instruments) are listed in Schedule 5.10.
 
(b) All Necessary Project Contracts are in full force and effect except such
Necessary Projects Contracts the invalidity of which could not reasonably be
expected to have a Material Adverse Effect.
 
(c) As of any date (after the date hereof) on which this representation is made
or deemed repeated, there are no material contracts, agreements, instruments, or
documents between any Borrower and any other Person relating to any Borrower or
the Project other than (i) the Transaction Documents, (ii) the agreements listed
in Schedule 5.10, and (iii) any other agreements permitted by this Agreement.
 

 
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Section 5.11 Collateral.  (a)  The Collateral includes all of the Equity
Interests owned by and all of the tangible and intangible assets of each Debtor
(except as otherwise provided in this Agreement).
 
(b) The respective Liens and security interests (i) granted to the Collateral
Agent (for the benefit of the Senior Secured Parties) pursuant to the Bankruptcy
Code constitute, as to personal property included in the Collateral, a valid
first-priority security interest in such personal property and (ii) as to the
Mortgaged Property, constitute a valid first-priority Lien of record in the
Mortgaged Property, in each case subject only to Permitted Liens.
 
(c) The security interest granted to the Collateral Agent (for the benefit of
the Senior Secured Parties) pursuant hereto will be perfected upon entry of the
Interim Order without any requirement of any further action by the Collateral
Agent.
 
Section 5.12 Ownership of Properties.  (a)  Madera has a good and valid fee
ownership interest in the Site for the Madera Plant.  Boardman has a good and
valid leasehold interest or valid fee ownership in the Site for the Boardman
Plant.  Burley has a good and valid fee ownership interest in the Site for the
Burley Plant.  Stockton has a good and valid leasehold interest or valid fee
ownership in the Site for the Stockton Plant.
 
(b) The Borrowers have a good and valid ownership interest, leasehold interest,
license interest or other right of use in all their property and assets
(tangible and intangible) included in the Collateral except for any such rights
the absence of which in the aggregate would not be material.  Such ownership
interests, leasehold interest, license interest or other rights of use  are and
will be sufficient to permit operation of the Plants substantially in accordance
with the Project Documents applicable to each such Plant.  None of said
properties or assets are subject to any Liens or, to the knowledge of each
Borrower, any other claims of any Person, including any easements, rights of way
or similar agreements affecting the use or occupancy of the Project, any Plant
or any Site, other than Permitted Liens and, with respect to claims, to the
extent permitted by Section 5.08 (Litigation).
 
(c) All Equity Interests in each of Madera, Boardman, Stockton and Burley are
owned by Pacific Holding.
 
(d) All Equity Interests in Pacific Holding are owned by PEC.
 
(e) The properties and assets of each of the Borrowers are separately
identifiable and are not commingled with the properties and assets of any other
Person and are readily distinguishable from one another.
 
(f) None of Pacific Holding or any other Borrower has any leasehold interest in,
and none of the Borrowers is lessee of, any real property other than the Leased
Premises or other leasehold interests acquired by the Borrowers in accordance
with the Pre-Petition Credit Agreement.
 

 
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Section 5.13 Taxes.  (a)  Each Borrower has (i) filed all Tax Returns required
by law to have been filed by it and (ii) has paid all Taxes thereby shown to be
owing, as and when the same are due and payable, other than in the case of this
Section 5.13(a)(ii), (A) Taxes that are subject to a Contest or (B) the
nonpayment of immaterial Taxes in an aggregate amount not in excess of
twenty-five thousand Dollars ($25,000) at any one time outstanding (taking into
account any interest and penalties that could accrue or be applicable to such
past-due Taxes), and provided that such Taxes are no more than forty-five (45)
days past due.
 
(b) No Borrower is or will be taxable as a corporation for federal, state or
local tax purposes.
 
(c) No Borrower is a party to any tax sharing agreement with any Person.
 
Section 5.14 Patents, Trademarks, Etc.  Pacific Holding and each other Borrower
has obtained and holds in full force and effect all material patents,
trademarks, copyrights and other such material rights or adequate licenses
therein, free from unduly burdensome restrictions, that are necessary for the
ownership, operation and maintenance of the Project.
 
Section 5.15 ERISA Plans.  None of the Borrowers nor any ERISA Affiliate has (or
within the five year period immediately preceding the date hereof had) any
liability in respect of any Plan or Multiemployer Plan.  None of the Borrowers
has any contingent liability with respect to any post-retirement benefit under
any “welfare plan” (as defined in Section 3(1) of ERISA), other than liability
for continuation coverage under Part 6 of Title I of ERISA.
 
Section 5.16 Property Rights, Utilities, Supplies Etc.  (a)  All material
property interests, utility services, means of transportation, facilities and
other materials necessary for the use and operation of the Project (including,
as necessary, gas, roads, rail transport, electrical, water and sewage services
and facilities) are available to each Plant.
 
(b) There are no material materials, supplies or equipment necessary for
operation or maintenance of each Plant that are not available at the relevant
Site on commercially reasonable terms consistent with the DIP Budget.
 
Section 5.17 No Defaults.  (a)  No Event of Default has occurred and is
continuing.
 
(b) None of Pacific Holding or any other Borrower is in any breach of, or in any
default under, any of such Borrower’s Contractual Obligations (other than a
breach resulting from the Cases or the Cold Shutdown of the Madera Plant, the
Magic Valley Plant, the Stockton Plant and, after the Boardman CS Date, the
Boardman Plant) that has had or could reasonably be expected to have a Material
Adverse Effect with respect to such Borrower, in each case with respect to which
enforcement of remedies is not stayed by means of the Chapter 11 Cases.
 

 
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Section 5.18 Environmental Warranties.
 
(a) (i) Except as set forth on Schedule 5.18(a)(i), each Borrower is in
compliance in all material respects with all applicable Environmental Laws, (ii)
each Borrower has all Environmental Approvals required to operate its business
as presently conducted or as reasonably anticipated to be conducted and is in
compliance in all material respects with the terms and conditions thereof, (iii)
no Borrower nor any of its Environmental Affiliates has received any written
communication from a Governmental Authority that alleges that any Borrower or
any Environmental Affiliate is not in compliance in all material respects with
all Environmental Laws and Environmental Approvals, and (iv) there are no
circumstances that may prevent or interfere in the future with any Borrower’s
compliance in all material respects with all applicable Environmental Laws and
Environmental Approvals.
 
(b) There is no Environmental Claim pending, or to the knowledge of each
Borrower, threatened  against any Borrower.  No Environmental Affiliate has
taken any action or violated any Environmental Law that to the knowledge of a
Borrower could reasonably be expected to result in an Environmental Claim.
 
(c) There are no present or past actions, activities, circumstances, conditions,
events or incidents, including the release, emission, discharge, presence or
disposal of any Material of Environmental Concern, that could reasonably be
expected to form the basis of any Environmental Claim against any Borrower or
any Environmental Affiliate.
 
(d) Without in any way limiting the generality of the foregoing, (i) there are
no on-site or off-site locations in which any Borrower or, to the knowledge of a
Borrower, any Environmental Affiliate has stored, disposed or arranged for the
disposal of Materials of Environmental Concern that could reasonably be expected
to form the basis of an Environmental Claim, (ii) no Borrower knows of any
underground storage tanks located or to be located on property owned or leased
by any Borrower except as identified on Schedule 5.18(d)(ii) (as the same may be
updated in writing by the Borrower Agent with the written approval of the
Administrative Agent), (iii) there is no asbestos or lead paint contained in or
forming part of any building, building component, structure or office space
owned or leased by any Borrower except in such form, condition and quantity as
could not reasonably be expected to result in an Environmental Claim, and (iv)
no polychlorinated biphenyls (PCBs) are or will be used or stored at any
property owned or leased by any Borrower, except in such form, condition and
quantity as could not reasonably be expected to result in an Environmental
Claim.
 
(e) No Borrower has received any letter or request for information under Section
104 of the CERCLA, or comparable state laws, and to the knowledge of each
Borrower, none of the operations of each Borrower is the subject of any
investigation by a Governmental Authority evaluating whether any remedial action
is needed to respond to a release or threatened release of any Material of
Environmental Concern at any Plant or Site or at any other location, including
any location to which any Borrower has transported, or arranged for the
transportation of, any Material of Environmental Concern with respect to the
Project.
 

 
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Section 5.19 Regulations T, U and X.  None of the Borrowers is engaged in the
business of extending credit for the purpose of purchasing or carrying margin
stock, and no proceeds of any Loan will be used for any purpose that violates,
or would be inconsistent with, F.R.S. Board Regulation T, U or X.  Terms for
which meanings are provided in F.R.S. Board Regulation T, U or X or any
regulations substituted therefore, as from time to time in effect, are used in
this Section 5.22 with such meanings.
 
Section 5.20 Accuracy of Information.  (a)  All factual information heretofore
or contemporaneously furnished by or on behalf of any Borrower in this
Agreement, in any other Transaction Document or otherwise in writing to any
Senior Secured Party, any Consultant, or counsel for purposes of or in
connection with this Agreement and the other Financing Documents or any
transaction contemplated hereby or thereby (other than projections, budgets and
other “forward-looking” information all of which has been prepared on a
reasonable basis and in good faith) was, as of the date furnished, when taken as
a whole (and after giving effect to any supplement of such information) (i) true
and accurate in every material respect and (ii) not incomplete by omitting to
state any material fact necessary to make such information not misleading in any
material respect.
 
(b) The assumptions constituting the basis on which the Borrowers prepared the
DIP Budget that is in effect on each date this representation is made or deemed
repeated and the numbers set forth therein were developed and consistently
utilized in good faith and are reasonable and represent each Borrower’s best
judgment as of the date prepared as to the matters contained therein, based on
all information known to the Borrowers.
 
(c) The Borrowers reasonably believe that the use, ownership, operation and
maintenance of the Project are technically feasible and, except for factors
effecting the ethanol industry in general and not relating specifically to the
Project, economically feasible.
 
Section 5.21 Indebtedness.  The Obligations are, after giving effect to the
Financing Documents and the transactions contemplated thereby, the only
outstanding Indebtedness of the Borrowers other than Permitted
Indebtedness.  The Obligations have the ranking given to them in Section 2.09
(Super-Priority Nature of Objectives).
 
Section 5.22 Required LLC Provisions.  Each limited liability company interest
of each Borrower that is a limited liability company is a security governed by
Article 8 of the Uniform Commercial Code and is evidenced by a certificate.  The
certificated interests are in registered form within the meaning of Article 8 of
the Uniform Commercial Code
 
Section 5.23 Subsidiaries.  Madera, Boardman, Stockton and Burley have no
Subsidiaries.  Pacific Holding has no Subsidiaries other than Madera, Boardman,
Stockton and Burley.
 
Section 5.24 Foreign Assets Control Regulations, Etc.  (a)  The use of the
proceeds of the Loan by the Borrowers will not violate the Trading with the
Enemy Act, as amended, or any of the foreign assets control regulations of the
United States Treasury Department (31 C.F.R., Subtitle B, Chapter V, as amended)
or any enabling legislation or executive order relating thereto.
 

 
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(b) No Borrower:
 
(i)     
is or will become a Person or entity described by section 1 of Executive Order
13224 of September 24, 2001 Blocking Property and Prohibiting Transactions With
Persons Who Commit, Threaten to Commit, or Support Terrorism (12 C.F.R. 595),
and no Borrower engages in dealings or transactions with any such Persons or
entities; or

 
(ii)     
is in violation of the Patriot Act.

 
Section 5.25 Employment Matters.  None of the Borrowers has or has had any
employee or former employees.
 
Section 5.26 Legal Name and Place of Business.  (a)  The exact legal name and
jurisdiction of formation of each Borrower is as set forth below, and no
Borrower has had any other legal names in the previous five (5) years except as
set forth on Schedule 5.26:
 
(i)     
Pacific Holding:  Pacific Ethanol Holding Co. LLC, a limited liability company
organized and existing under the laws of the State of Delaware;

 
(ii)     
Madera:  Pacific Ethanol Madera LLC, a limited liability company organized and
existing under the laws of the State of Delaware;

 
(iii)     
Boardman:  Pacific Ethanol Columbia, LLC, a limited liability company organized
and existing under the laws of the State of Delaware;

 
(iv)     
Stockton:  Pacific Ethanol Stockton, LLC, a limited liability company organized
and existing under the laws of the State of Delaware; and

 
(v)     
Burley:  Pacific Ethanol Magic Valley, LLC, a limited liability company
organized and existing under the laws of the State of Delaware.

 
(b) The sole place of business and chief executive office of each Borrower is as
set forth on Schedule 5.26.
 
The information set forth in Sections 5.26(a) and (b) and on Schedule 5.26 may
be changed from time to time by the Borrowers upon thirty (30) days’ prior
written notice to the Administrative Agent and the Collateral Agent, subject in
each case to the obligations of the Borrowers hereunder to provide the
Collateral Agent with a perfected first-priority Lien on the Collateral (subject
to Permitted Liens).
 

 
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Section 5.27 No Brokers.  No Borrower has any obligation to pay any finder’s,
advisory, brokers or investment banking fee, except for the fees payable
pursuant to Section 3.11 (Fees) and those identified on Schedule 5.27.
 
Section 5.28 Insurance.  All insurance required to be obtained and maintained
pursuant to the Transaction Documents by Pacific Holding and each other Borrower
is in full force and effect as of each date this representation is made or
deemed repeated and complies with the insurance requirements set forth on
Schedule 7.01(h).  All premiums then due and payable on all such insurance have
been paid.  To the knowledge of each Borrower, all insurance required to be
obtained and maintained by any Major Project Party, to protect, directly or
indirectly, against loss or liability to any Borrower, any Plant or any Senior
Secured Party, as of the date this representation is made or deemed repeated,
pursuant to any Project Document has been obtained, is in full force and effect
and complies with the insurance requirements set forth on Schedule 7.01(h)
(where applicable) and is otherwise in all material respects in accordance with
such Project Document.
 
Section 5.29 Accounts.  The Project Accounts exist at the Account Bank in
accordance with the terms of the Pre-Petition Credit Agreement.  No Borrower
has, nor is the beneficiary of, any bank account other than the Project Accounts
and any Local Account set forth on Schedule 5.29 with respect to which a Blocked
Account Agreement has been duly executed and delivered.
 
Section 5.30 SEC Compliance.  Pacific Ethanol has made all filings required to
be made by Pacific Ethanol pursuant to the Securities Exchange Act of 1934 and
all factual information heretofore or contemporaneously furnished by Pacific
Ethanol in any such filing (other than projections, budgets and other
“forward-looking” information all of which has been prepared on a reasonable
basis and in good faith by Pacific Ethanol) is, when taken as a whole (and after
giving effect to any supplement of such information) and as of the date
furnished, true and accurate in every material respect and such information is
not, when taken as a whole (and after giving effect to any supplement of such
information) as of the date furnished, incomplete by omitting to state any
material fact necessary to make such information not misleading in any material
respect.
 
Section 5.31 Reorganization Matters.
 
(a) The Chapter 11 Cases were commenced on the Petition Date in accordance with
applicable law and proper notice thereof and the proper notice for (i) the
motion seeking approval of the Financing Documents and the Interim Order and
Final Order, (ii) the hearing for the approval of the Interim Order, and
(iii) the hearing for the approval of the Final Order.
 
(b) After the entry of the Interim Order, and pursuant to and solely to the
extent permitted in the Interim Order and the Final Order, the Obligations will
constitute allowed administrative expense claims in the Chapter 11 Cases having
priority over all administrative expense claims and unsecured claims against the
Borrowers now existing or hereafter arising, of any kind whatsoever, including,
without limitation, all administrative expense claims of the kind specified in
Sections 105, 326, 330, 331, 503(b), 506(c), 507(a), 507(b), 546(c), 726, 1113,
1114 or any other provision of the Bankruptcy Code or otherwise, as provided
under Section 364(c)(l) of the Bankruptcy Code, subject, as to priority only, to
the Carve-Out.
 

 
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(c) After the entry of the Interim Order and pursuant to and to the extent
provided in the Interim Order and the Final Order, the Obligations will be
secured by a valid and perfected Lien having the priority described in the
Orders.
 
(d) The Interim Order (with respect to the period prior to entry of the Final
Order) or the Final Order (with respect to the period on and after entry of the
Final Order), as the case may be, is in full force and effect and has not been
modified or amended without the consent of the Administrative Agent and the
Lenders, or reversed or stayed.
 
ARTICLE VI

 
CONDITIONS PRECEDENT
 
Section 6.01 Conditions to Closing.  The occurrence of the Closing Date is
subject to the satisfaction of each of the following conditions precedent.
 
(a) Delivery of Financing Documents and Orders.  The Administrative Agent shall
have received each of the following fully executed documents, each of which
shall be originals, portable document format (“pdf”) or facsimiles (followed
promptly by originals), duly executed and delivered by each party thereto and
each in form and substance satisfactory to each Lender:
 
(i)    
this Agreement;

 
(ii)    
the New Mortgages;

 
(iii)    
the PEC Pledge Agreement;

 
(iv)    
the Asset Management Agreement;

 
(v)    
the AMA Consent;

 
(vi)    
the original Revolving Notes, duly executed and delivered by an Authorized
Officer of each Borrower in favor of each requesting Lender;

 
(vii)    
the original Roll Up Notes, duly executed and delivered by an Authorized Officer
of each Borrower in favor of each requesting Lender;

 
(viii)    
the Interim Order; and

 
(ix)    
a document setting forth a cash management system for the Debtors consistent
with the existing cash management system of the Debtors and subject to the
existing account control agreements to which the Debtors are party.

 

 
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(b) Delivery of Other Documents.  The Administrative Agent shall have received
true, correct and complete copies of each agreement identified on Schedule
5.10  reasonably requested by the Administrative Agent.
 
(c) Officer’s Certificates.  The Administrative Agent shall have received a duly
executed certificate of an Authorized Officer of the Borrower Agent, dated as of
the Closing Date, upon which the Administrative Agent and each Lender may
conclusively rely certifying that (A) all conditions set forth in this Section
6.01 have been satisfied on and as of the Closing Date and (B) all
representations and warranties made by any Borrower in this Agreement and each
other Financing Document to which any Borrower is a party are true and correct
in all material respects on and as of the Closing Date
 
(d) Resolutions, Incumbency, Organic Documents.  The Administrative Agent shall
have received from each Borrower a certificate of an Authorized Officer dated as
of the Closing Date, upon which the Administrative Agent and each Lender may
conclusively rely, as to:
 
(i)    
reasonably satisfactory resolutions of its members, managers or directors, as
the case may be, then in full force and effect authorizing the execution,
delivery and performance of each Financing Document to which it is party and the
consummation of the transactions contemplated therein (including the appointment
of the Borrower Agent);

 
(ii)    
the incumbency and signatures of those of its officers and representatives duly
authorized to execute and otherwise act with respect to each Financing Document
to which it is party; and

 
(iii)    
such Person’s Organic Documents which shall be in form and substance reasonably
satisfactory to the Administrative Agent and in every case certifying that (A)
such documents are in full force and effect and no term or condition thereof has
been amended from the form thereof delivered to the Administrative Agent and (B)
no material breach, material default or material violation thereunder has
occurred and is continuing.

 
(e) Authority to Conduct Business.  The Administrative Agent shall have received
satisfactory evidence, including certificates of good standing from the
Secretaries of State of each relevant jurisdiction, dated no more than eight (8)
days (or such other time period reasonably acceptable to the Administrative
Agent) prior to the Closing Date, that each Borrower is duly authorized to carry
on its business, and is duly formed, validly existing and in good standing in
each jurisdiction (including, in the case of Madera and Stockton, the State of
California, in the case of Boardman, the State of Oregon, and in the case of
Burley, the State of Idaho) in which it is required to be so authorized.
 

 
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(f) Lien Search; Protection of Security.  The Administrative Agent shall have
received satisfactory copies or evidence, as the case may be, of the following
actions in connection with the perfection of the DIP Liens:
 
(i)    
completed requests for information or lien search reports, dated no more than
five (5) Business Days before the date of such Funding or such longer period
satisfactory to the Administrative Agent, listing all effective UCC financing
statements, fixture filings or other filings evidencing a security interest
filed in such jurisdictions reasonably requested by the Administrative Agent
that name any Borrower as a debtor, together with copies of each such UCC
financing statement, fixture filing or other filings; and

 
(ii)    
acknowledgment copies or stamped receipt copies or confirmation of submission
for filing of proper UCC financing statements, fixture filings and other filings
and recordations, each in form and substance satisfactory to the Administrative
Agent and the Collateral Agent, duly filed in all jurisdictions that the
Administrative Agent and the Collateral Agent may deem necessary, or that are
reasonably requested by the Collateral Agent or the Administrative Agent, in
order to perfect or protect the DIP Liens created hereunder and pursuant to the
Orders and the priority thereof.

 
(g) Financial Statements.  The Administrative Agent shall have received accurate
and complete copies of the audited annual financial statements of Pacific
Ethanol for the 2008 Fiscal Year.  Such financial statements shall be on a
consolidated basis.
 
(h) Third Party Approvals.  The Administrative Agent shall have received
reasonably satisfactory documentation of any approval by any Person required in
connection with any transaction contemplated by this Agreement or any other
Financing Document that the Administrative Agent has reasonably requested in
connection herewith.
 
(i) Insurance.  The Administrative Agent shall have received reasonably
satisfactory evidence that the insurance requirements set forth on Schedule
7.01(h) with respect to the Borrowers and the Plants have been satisfied,
including binders or certificates evidencing the commitment of insurers to
provide each insurance policy required by Schedule 7.01(h), evidence of the
payment of all premiums then due and owing in respect of such insurance policies
and a certificate of the Borrowers’ insurance broker (or insurance carrier)
certifying that all such insurance policies are in full force and effect.
 
(j) Bank Regulatory Requirements.  The Administrative Agent shall have received
all documentation and other information required by bank regulatory authorities
under applicable “know your customer” and anti-money-laundering rules and
regulations, including the Patriot Act.
 

 
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(k) Closing Fees; Expenses.  The Administrative Agent shall have received for
its own account, or for the account of each Lender and Agent entitled thereto,
all fees due and payable pursuant to Section 3.11 (Fees) and all reasonable
costs and expenses (including reasonable and documented legal fees and expenses)
for which invoices have been presented, in each case, required to be paid on or
before the Closing Date.  The Pre-Petition Administrative Agent shall have
received all fees due and payable to it pursuant to the Pre-Petition Credit
Agreement and all reasonable costs and expenses (including reasonable and
documented legal fees and expenses) for which invoices have been presented, in
each case, required to be paid on or before the Closing Date.
 
(l) Certain Orders.   The entry of all “first day orders,” including all
employee-related orders and critical vendor orders entered at or about the time
of the commencements of the Chapter 11 Cases each in form and substance
reasonably satisfactory to the Administrative Agent and each Lender.
 
(m) Rating.  The Borrowers shall have obtained a rating of the Loans from S&P or
Moody’s.
 
(n)           Other Information.  The Lenders shall have received the Initial
DIP Budget and all other information reasonably requested from the Borrowers.
 
Section 6.02 Conditions to All Fundings.  The obligation of each Lender to make
available each Funding of its Revolving Loans shall be subject to the
fulfillment of the following conditions precedent.
 
(a) Funding Notice.  The Administrative Agent shall have received a duly
executed Funding Notice as required by and in accordance with Section 2.03
(Notice of Fundings), which shall certify that:
 
(i)    
the Borrowers are in compliance with all conditions set forth in this Section
6.02, and each other applicable Section of this Article VI, on and as of the
proposed Funding Date, before and after giving effect to such Funding and to the
application of the proceeds therefrom (provided that, to the extent reasonably
acceptable to the Administrative Agent, such compliance may be demonstrated by
delivery of evidence of satisfaction of certain conditions to the relevant
Funding, as identified in such Funding Notice, to the Administrative Agent to be
held in escrow until the Funding Date);

 
(ii)    
all representations and warranties made by each Borrower in this Agreement and
each of the Financing Documents to which it is a party are true and correct in
all material respects on and as of such Funding Date (except with respect to
representations and warranties that expressly refer to an earlier date), before
and after giving effect to such Funding and to the application of the proceeds
therefrom; and

 

 
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(iii)    
no Default or Event of Default has occurred and is continuing or would result
from such Borrowing.

 
(b) Certain Orders.
 
(i)    
The Interim Order shall be entered and in full force and effect and shall not
have been appealed, stayed, reversed, vacated or otherwise modified without the
consent of the Administrative Agent and the Lenders; or

 
(ii)    
If (x) the date of such requested Funding is more than 45 days after the Closing
Date or (y) the amount of such requested Funding, together with the outstanding
principal amount of the Revolving Loans, shall exceed the maximum amount
authorized pursuant to the Interim Order, the Final Order shall be entered and
in full force and effect and shall not have been appealed, stayed, reversed,
vacated or otherwise modified without the consent of the Administrative Agent
and the Lenders.

 
(c) Government Approvals.  Each Borrower shall have all Necessary Project
Approvals required as of the date of such requested Funding, and the
Administrative Agent shall have received a duly executed certificate of an
Authorized Officer of the relevant Borrowers certifying that each such Necessary
Project Approval is in full force and effect and is final and Non-Appealable.
 
(d) No Default or Event of Default.  No Default or Event of Default has occurred
and is continuing, or would result from such Funding.
 
(e) No Litigation.
 
(i)    
Except as set forth on Schedule 5.08, no action, suit, proceeding or
investigation shall have been instituted and not stayed pursuant to the
Bankruptcy Code or threatened against any Borrower that, individually or in the
aggregate, has had or could reasonably be expected to have a Material Adverse
Effect; and

 
(ii)    
Except as set forth on Schedule 5.08, no action, suit, proceeding or
investigation shall have been instituted or threatened against any Project Party
that, individually or in the aggregate, has had or could reasonably be expected
to have a Material Adverse Effect.

 
(f) Abandonment, Taking, Total Loss.  (i) No Event of Abandonment or Event of
Total Loss shall have occurred and be continuing with respect to any Plant, (ii)
no Event of Taking relating to any Equity Interests comprising Collateral shall
have occurred and be continuing, or (iii) no Event of Taking with respect to a
material part of any Plant shall have occurred.
 
(g) Closing Date.  The Closing Date shall have occurred.
 

 
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(h) Representations and Warranties.   Each representation and warranty made by
each Borrower in this Agreement and each of the Financing Documents to which it
is a party shall be true and correct in all material respects on and as of such
Funding Date (except with respect to representations and warranties that
expressly refer to an earlier date), before and after giving effect to such
Funding and to the application of the proceeds therefrom.
 
(i) Fees; Expenses.  The Administrative Agent shall have received for its own
account, or for the account of each Lender and Agent entitled thereto, all fees
due and payable as of the date of such Funding pursuant to Section 3.11 (Fees),
and all costs and expenses (including reasonable and documented costs, fees and
expenses of legal counsel) for which invoices have been presented.  The
Pre-Petition Administrative Agent shall have received all fees due and payable
to it pursuant to the Pre-Petition Credit Agreement and all reasonable costs and
expenses (including reasonable and documented legal fees and expenses) for which
invoices have been presented.
 
(j)           Additional Information.  The Lenders shall have received all
information reasonably requested from the Borrowers.

 
ARTICLE VII
 
COVENANTS
 
Section 7.01 Affirmative Covenants.  Each Borrower agrees with each Agent and
each Lender that, until the Discharge Date, each Borrower will perform the
obligations set forth in this Section 7.01 applicable to it.
 
(a) Compliance with Laws.  Each Borrower shall comply in all material respects
with all Laws (other than Environmental Laws) applicable to it or to its
business or property.
 
(b) Environmental Matters.
 
(i)    
The Borrowers shall (A) comply in all material respects with all Environmental
Laws, (B) keep the Project free of any Lien imposed pursuant to any
Environmental Law, (C) pay or cause to be paid when due and payable by any
Borrower any and all costs required in connection with any Environmental Laws,
including the cost of identifying the nature and extent of the presence of any
Materials of Environmental Concern in, on or about the Project or on any real
property owned or leased by any Borrower or on the Mortgaged Property, and the
cost of delineation, management, remediation, removal, treatment and disposal of
any such Materials of Environmental Concern, and (D) use their best efforts to
ensure that no Environmental Affiliate takes any action or violates any
Environmental Law that could reasonably be expected to result in an
Environmental Claim.

 

 
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(ii)    
The Borrowers shall not use or allow the Project to generate, manufacture,
refine, produce, treat, store, handle, dispose of, transfer, process or
transport Materials of Environmental Concern other than in compliance in all
material respects with Environmental Laws.

 
(c) Operations and Maintenance; Conduct of Business.  Each Borrower owing a
Plant shall own, operate and maintain (or cause to be operated and maintained)
such Plant in all material respects in accordance with (i) the terms and
provisions of the Transaction Documents except as a result of the Cases, the
Cold Shutdown of the Madera Plant, the Magic Valley Plant, the Stockton Plant
and, after the Boardman CS Date, the Boardman Plant, (ii) all applicable
Governmental Approvals and Laws and (iii) Prudent Ethanol Operating
Practice.  Pacific Holding shall conduct its business in all material respects
in accordance with all applicable Governmental Approvals and Laws.
 
(d) Maintenance of Properties.
 
(i)    
Each Borrower shall keep, or cause to be kept, in good working order and
condition, ordinary wear and tear excepted, all of its material properties and
equipment that are necessary or useful in the proper conduct of its business.

 
(ii)    
The Borrowers shall not permit any Plant or any material portion thereof to be
removed, demolished or materially altered, unless such material portion that has
been removed, demolished or materially altered has been replaced or repaired as
permitted under this Agreement.

 
(iii)    
Each Borrower shall do or cause to be done all things necessary to preserve and
keep in full force and effect (A) its existence and (B) its material patents,
trademarks, trade names, copyrights, franchises and similar rights.

 
(e) Payment of Obligations.  Each Borrower shall pay and discharge as the same
shall become due and payable all its Post-Petition obligations and liabilities
of whatever nature except (i) where such payment, discharge or satisfaction is
prohibited by the Bankruptcy Code, the Bankruptcy Rules or an order of the
Bankruptcy Court, or by this Agreement or the then-current DIP Budget, (ii)
where any such failure could not reasonably be expected to have a Material
Adverse Effect and would not otherwise result in an Event of Default or (iii)
where the amount or validity is subject to a Contest.
 
(f) Governmental Approvals.  Pacific Holding and each other Borrower shall
maintain in full force and effect, in the name of the relevant Borrower, all
Necessary Project Approvals (other than any such failure to maintain that could
not reasonably be expected to have a Material Adverse Effect on the relevant
Borrower or Plant).
 

 
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(g) Use of Proceeds.
 
(i)    
All proceeds of the Loans shall be used solely to fund, in each case only to the
extent specified in the DIP Budget (subject to the Permitted Variance), (a)
operating expenses, limited capital expenditures and other amounts for general
and ordinary course purposes of the Debtors, (b) current interest and fees
payable pursuant to the Financing Documents and (c) such other administrative
payments, including the budgeted professional fees, as may be authorized and
approved by the Administrative Agent and the Lenders under the Interim Order,
the Final Order or any subsequent order of the Bankruptcy Court.

 
(ii)    
No portion of the proceeds of the Loans, the Collateral or the Carve-Out shall
be used to (a) challenge the validity, perfection, priority, extent or
enforceability of the DIP Facility, the Pre-Petition Obligations, or the Liens
on the assets of the Debtors securing the DIP Facility or the Pre-Petition
Obligations or (b) assert any claim against the Administrative Agent, the
Lenders or the Pre-Petition Senior Secured Parties; provided, however, that (x)
the proceeds of the Loans may be used to seek a Section 506(a) Determination and
(y) up to $15,000 of the proceeds of the Loans may be used by the Committee to
investigate potential claims arising out of, or in connection with, the
Pre-Petition Credit Agreement or the security interests and liens securing the
Pre-Petition Obligations.  The Carve-Out shall be reduced by an amount equal to
all proceeds of the Loans used pursuant to the foregoing proviso.

 
(iii)    
Prior to the Carve-Out Date, subject to entry of an appropriate order of the
Bankruptcy Court (in form and substance acceptable to the Administrative Agent
and the Lenders), proceeds of the Loans may be used to pay professional fees and
expenses of the Debtors and of the Committee allowed and payable under sections
330 and 331 of the Bankruptcy Code in accordance with the DIP Budget and the
Carve-Out shall not be reduced by the amount of any such compensation and
reimbursement of expenses paid or incurred (to the extent ultimately allowed by
the Bankruptcy Court) prior to the occurrence of the Carve-Out Date.

 
(iv)    
On and after the Carve-Out Date, any amounts paid to professionals of the
Debtors and of the Committee by any means will reduce the Carve-Out on a
dollar-for-dollar basis and the Carve-Out will be limited to the maximum amount
of $250,000; provided, that nothing herein shall be construed to impair the
ability of any party to object to any of the fees, expenses, reimbursement, or
compensation sought by the professionals retained by the Debtors or any
statutory committee in the Chapter 11 Cases.

 

 
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(h) Insurance.  Without cost to any Senior Secured Party, the applicable
Borrower shall at all times obtain and maintain, or cause to be obtained and
maintained, the types and amounts of insurance listed and described on Schedule
7.01(h), in accordance with the terms and provisions set forth therein for each
such Plant and the applicable Borrower, and shall obtain and maintain in all
material respects such other insurance as may be required pursuant to the terms
of any Transaction Document.   If the Borrowers fail to take out or maintain the
full insurance coverage required by this Section 7.01(h), the Administrative
Agent may (but shall not be obligated to) take out the required policies of
insurance and pay the premiums on the same.  All amounts so advanced by the
Administrative Agent shall become an Obligation and the Borrowers shall
forthwith pay such amounts to the Administrative Agent, together with interest
from the date of payment by the Administrative Agent at the Default Rate.
 
(i) Books and Records; Inspections.  Each Borrower shall keep proper books of
record and account in which complete, true and accurate entries in conformity
with GAAP and all requirements of Law shall be made of all financial
transactions and matters involving the assets and business of such Borrower, and
shall maintain such books of record and account in material conformity with
applicable requirements of any Governmental Authority having regulatory
jurisdiction over such Borrower.  Each Borrower shall keep books and records
separate from the books and records of any other Person (including any
Affiliates of such Borrower) that accurately reflect all of its business
affairs, transactions and the documents and other instruments that underlie or
authorize all of its actions. Each Borrower shall permit officers and designated
representatives of the Administrative Agent or Consultant to visit and inspect
any of the properties of such Borrower (including the Plants), to examine its
financial and operating records, and make copies thereof or abstracts therefrom,
and to discuss its affairs, finances and accounts with its members, managers,
directors, officers and independent public accountants, all at the expense of
the Borrowers at any time during normal business hours and without advance
notice.
 
(j) Project Documents.  Each Borrower shall use its reasonable best efforts to
preserve, protect and defend its rights under each Project Document to which it
is a party except where the failure to do so (i) results from the Effect of
Bankruptcy, the Cold Shutdown of the Madera Plant, the Magic Valley Plant, the
Stockton Plant and, after the Boardman CS Date, the Boardman Plant or (ii) could
not reasonably be expected to have a Material Adverse Effect. Each Borrower
shall use its reasonable best efforts to exercise all material rights,
discretion and remedies under each Project Document in accordance with its terms
and in a manner consistent with and subject to such Borrower’s obligations under
the Financing Documents except where the failure to do so exercise such rights,
discretion or remedies results from the Cases, the Cold Shutdown of the Madera
Plant, the Magic Valley Plant, the Stockton Plant and, after the Boardman CS
Date, the Boardman Plant.
 
(k) Maintenance of Existence. Each Borrower will continue to preserve, renew and
keep in full force and effect its entity status in the jurisdiction of its
formation and take all actions to maintain its rights, privileges and franchises
necessary or desirable in the normal course of its business.
 

 
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(l) DIP Budgets.
 
(i)    
The Borrowers, not later than seven (7) days before the date that is the first
day of the fifth week covered by the DIP budget and each date falling every
twenty-eighth (28th) day thereafter (each such date, a “Period Start Date”),
shall adopt a budget containing, among other things, rolling cash flow forecast,
setting forth in reasonable detail the projected cash flow for each Plant and on
an aggregate basis for the Project for the period starting on the then current
Period Start Date and ending on the earlier of (A) thirteen (13) weeks after the
then current Period Start Date and (B) the scheduled Maturity Date, and provide
a copy of such forecast at such time to the Administrative Agent.  Each such
forecast shall become effective upon approval of the Administrative Agent and
the Required Lenders (acting in consultation with the Financial Advisor) (each
such approved forecast, and the Initial DIP Budget, a “DIP Budget).”

 
(ii)    
Each DIP budget delivered to the Administrative Agent pursuant to this Section
7.01(l) shall be accompanied by a memorandum or worksheet detailing all changes
in material assumptions used in the preparation of such Budget, shall contain a
line item for each expense category reasonably requested by the Administrative
Agent or the Required Lenders (provided that items on the DIP Budget that are
subject to Bankruptcy Court approval shall not be funded until approved by the
Bankruptcy Court, and inclusion and acceptance of any such item is not a waiver
of any party’s objection thereto), shall specify for each week and for each such
expense category the amount budgeted for such category for such week.

 
(iii)    
Subject to Section 7.02(w), the Borrowers shall comply with the DIP Budget
subject to the Permitted Variance.

 
(m) Preservation of Title; Acquisition of Additional Property.
 
(i)    
The Borrowers shall preserve and maintain (A) good, marketable and insurable fee
interest in each Site (excluding the Leased Premises) and valid easement
interest to its easement interest in each Site (excluding the Leased Premises),
(B) a good, legal and valid leasehold interest in the Leased Premises, and (C)
good, legal and valid title to all of its other respective material properties
and assets, in each case free and clear of all Liens other than Permitted Liens.

 

 
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(ii)    
No Borrower shall acquire or commence to lease any real property interests
without the prior written consent of the Lenders and the Administrative Agent.

 
(n) Maintenance of Liens; Creation of Liens.
 
(i) The Borrowers shall take or cause to be taken all actions necessary or
reasonably requested by the Administrative Agent for the Collateral Agent to
maintain and preserve the DIP Liens and the priority thereof.
 
(ii) The Borrowers shall take promptly all actions reasonably requested by the
Administrative Agent to cause each Additional Project Document to become subject
to the DIP Liens, shall deliver certified copies of such Additional Project
Document to the Administrative Agent and, if requested by the Administrative
Agent, shall deliver any Ancillary Documents related thereto.
 
(o) Reorganization Matters.  The Borrowers shall give, on a timely basis as
specified in the Interim Order or the Final Order all notices required to be
given to all parties specified in the Interim Order or Final Order.  The
Borrowers shall provide to the Administrative Agent copies of all pleadings,
motions, applications and other documents or information (i) filed by or on
behalf of any Borrower with the Bankruptcy Court or (ii) provided to any
creditors’ committee appointed in the Chapter 11 Cases.  The Borrowers shall
provide the Administrative Agent with drafts of all pleadings, motions and
applications to be filed by or on behalf of any Borrower at least three (3)
Business Days in advance of such filing.
 
(p) Professional Fees.  Promptly following receipt thereof, the Borrowers shall
deliver to the Administrative Agent all monthly fee statements detailing the
fees of all its professionals (including counsel and financial advisors) for
such month delivered in accordance with the interim compensation procedures
approved by the Bankruptcy Court.
 
(q) Bank Accounts.  Each bank account of a Borrower shall at all times be (i)
held as Collateral to secure the repayment and/or performance of the
Obligations, (ii) held at a financial institution at which such Borrower
maintains its bank accounts on the Petition Date under the terms of the
Pre-Petition Financing Documents, or otherwise as selected by such Borrower from
a list of approved financial institutions approved by the Required Lenders and
(iii) subject to a perfected Priming Lien in favor of the Collateral Agent on
behalf of the Senior Secured Parties, with all rights and remedies in respect
thereto as set forth in the Orders and the other Financing Documents. No
Borrower may open a new bank account or any other account at a financial
institution without the prior written consent of the Required Lenders, which
approval may be withheld in their sole discretion.
 
(r) Monthly Meetings.  At least once per calendar month, upon request of the
Administrative Agent, at mutually acceptable times (and with telephonic
conferences being acceptable), the Borrower Agent shall, and shall procure that
representatives of the Borrower’s professionals (including counsel and financial
advisors) as may be requested by the Administrative Agent, meet together with
the Administrative Agent to update the Administrative Agent on the status of the
Cases and to discuss any other issues in connection therewith as may be
requested by the Administrative Agent.
 

 
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(s) Further Assurances.  Upon written request of the Administrative Agent, each
Borrower shall promptly perform or cause to be performed any and all acts and
execute or cause to be executed any and all documents (including UCC financing
statements and UCC continuation statements) reasonably requested by the
Administrative Agent for the purposes of ensuring the validity and legality of
this Agreement or any other Financing Document and the rights of the Lenders and
the Agents hereunder or thereunder and facilitating the proper exercise of
rights and powers granted to the Lenders or the Agents under this Agreement or
any other Financing Document.
 
Section 7.02 Negative Covenants.  Each Borrower agrees with each Agent and each
Lender that, until the Discharge Date, each Borrower will perform the
obligations set forth in this Section 7.02 applicable to it.
 
(a) Restrictions on Indebtedness.  The Borrowers will not create, incur, assume
or suffer to exist any Indebtedness except:
 
(i)    
the Obligations;

 
(ii)    
the Pre-Petition Obligations;

 
(iii)    
to the extent constituting Indebtedness, contingent obligations under or in
respect of performance bonds, bid bonds, appeal bonds, indemnification
obligations, obligations to pay insurance premiums, take or pay obligations and
similar obligations in each case incurred in the ordinary course of business and
otherwise permitted under this Agreement and not in connection with Indebtedness
for borrowed money, with respect to bonds, in an aggregate amount not to exceed
$50,000 at any one time outstanding;

 
(iv)    
to the extent constituting Indebtedness, Indebtedness arising from the honoring
by a bank or other financial institution of a check, draft or similar instrument
drawn against insufficient funds in the ordinary course of business; provided
that such Indebtedness is extinguished within ten (10) Business Days of its
incurrence and the aggregate amount of all such Indebtedness does not exceed, at
any time, one hundred thousand Dollars ($100,000);

 
(v)    
Capitalized Lease Liabilities with respect to office equipment with payments in
any Fiscal Year, taken in the aggregate for the Project, in an amount not to
exceed one hundred thousand Dollars ($100,000);

 
(vi)    
the PE Imperial Leases; and

 
(vii)    
Pre-Petition Indebtedness existing on the Petition Date to the extent not
prohibited by the Pre-Petition Credit Agreement.

 

 
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(b) Liens.  No Borrower shall create, incur, assume or suffer to exist any Lien
upon any of its property, revenues or assets (including its Equity Interests),
whether now owned or hereafter acquired, except:
 
(i)    
Liens in favor, or for the benefit, of the Collateral Agent and the Senior
Secured Parties;

 
(ii)    
Liens in favor, or for the benefit, of the Pre-Petition Collateral Agent and the
Pre-Petition Senior Secured Parties;

 
(iii)    
Liens for taxes, assessments and other governmental charges that are not yet due
or the payment of which is the subject of a Contest or taxes that are otherwise
not yet delinquent or for taxes as to which payment and enforcement is stayed
under the Bankruptcy Code or pursuant to orders of the Bankruptcy Court;

 
(iv)    
Liens of carriers, warehousemen, mechanics and materialmen incurred in the
ordinary course of business for sums not yet due or the payment of which is the
subject of a Contest or for amounts as to which payment and enforcement is
stayed under the Bankruptcy Code or pursuant to orders of the Bankruptcy Court;

 
(v)    
minor defects or irregularities in title and similar matters if the same do not
materially detract from the operation or use of such property in the ordinary
conduct of the business of the applicable Borrower, including any such
exceptions and encumbrances which are approved by the Administrative Agent;

 
(vi)    
cash collateral for bonds permitted under Section 7.02(a)(iii) (Negative
Covenants – Restrictions on Indebtedness) or otherwise provided that such cash
collateral does not exceed $50,000 in the aggregate;

 
(vii)    
Liens arising with respect to a Local Account for which a Blocked Account
Agreement has been entered into or otherwise arising by virtue of any statutory
or common law provisions relating to banker’s liens, rights of set-off or
similar rights; provided that such Liens either (A) are subordinated to the
Liens of the Senior Secured Parties or (B) with respect only to Local Accounts
for which a Blocked Account Agreement has been entered into, are in an aggregate
total amount not in excess of one hundred thousand Dollars ($100,000);

 
(viii)    
easements existing on the date hereof and previously disclosed to the
Pre-Petition Administrative Agent or granted by any Borrower to any utility
serving such Borrower’s Plant as required for the operation of such Plant;
provided, that in each such case:

 

 
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(A)    
such easement will not adversely affect the costs under the then-current DIP
Budget

 
(B)    
such easement will not adversely affect the operations of any Plant; and

 
(C)    
such easement has been approved by the Administrative Agent;

 
(ix)     
with the prior written approval of the Independent Engineer and the
Administrative Agent, licenses or leases of a portion of the Site for any Plant;
provided, that such license or lease could not reasonably be expected to have
any adverse impact on the operations of such Plant or its related transportation
plans and facilities;

 
(x)    
Liens in respect of Capitalized Lease Liabilities with respect to office
equipment permitted by Section 7.02(a)(v)(Negative Covenants-Restrictions on
Indebtedness);

 
(xi)    
purported Liens evidenced by the filing of precautionary UCC financing
statements relating solely to operating leases of personal property entered into
in the ordinary course of business and otherwise permitted under this Agreement;
and

 
(xii)    
Liens in respect of Pre-Petition Indebtedness existing on the Petition Date to
the extent not prohibited by the Pre-Petition Credit Agreement.

 
(c) Permitted Investments.  The Borrowers shall not make any investments, loans
or advances (whether by purchase of stocks, bonds, notes or other securities,
loans, extensions of credit, advances or otherwise) except for investments (i)
in Cash Equivalents, (ii) in connection with the bankruptcy of suppliers or
customers of the Borrowers (provided that such investments are subject to a
first priority perfected Lien in favor of the Collateral Agent) and (iii)
existing on the date hereof in Subsidiaries. The Borrowers shall select Cash
Equivalents having such maturities as shall cause the Project Accounts to have a
cash balance as of any day sufficient to cover the transfers made from the
Project Accounts on such day in accordance with this Agreement, the other
Financing Documents, the Project Documents and any Additional Project Documents.
 
(d) Change in Business.  No Borrower shall (i) enter into or engage in any
business other than the ownership, operation (including the Cold Shutdown of the
Madera Plant, the Magic Valley Plant, the Stockton Plant and, after the Boardman
CS Date, the Boardman Plant), maintenance, use and financing of the Plants or
the Project and all activities related thereto or (ii) change in any material
respect the scope of any Plant or the Project from that which exists as of the
date hereof.
 

 
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(e) Equity Issuances.  No Borrower shall issue any Equity Interests unless such
Equity Interests are immediately pledged to the Collateral Agent (for the
benefit of the Senior Secured Parties) on a first priority perfected basis.
 
(f) Asset Dispositions.   No Borrower shall sell, lease, assign, transfer or
otherwise dispose of any assets (other than Products), whether now owned or
hereafter acquired, except:
 
(i)    
disposal of assets that are promptly replaced in accordance with the
then-current DIP Budget;

 
(ii)    
to the extent that such assets are uneconomical, obsolete or no longer useful or
no longer usable in connection with the operation or maintenance of the Project;

 
(iii)    
disposal of assets with a fair market value of, or, if greater, at a disposal
price of, less than fifty thousand Dollars ($50,000) in the aggregate during any
Fiscal year; provided, that such disposal does not, and would not reasonably be
expected to, adversely effect the operation or maintenance of any Plant;

 
(iv)    
transfers of assets among the Plants; provided, that (A) the aggregate total
fair market value of all such transferred assets does not exceed five hundred
thousand Dollars ($500,000) in any Fiscal Year, and (B) each such transfer does
not, and would not reasonably be expected to, adversely affect the operations of
the Plant from which such assets are transferred;

 
(v)    
the transfer or other Disposition by any Borrower in settlement of any amount
owed by such Borrower effected in the ordinary course of business and approved
by the Bankruptcy Court; or

 
(vi)    
as permitted by Section 7.02(c) (Negative Covenants-Permitted Investments).

 
(g) Consolidation, Merger.  No Borrower will (i) directly or indirectly
liquidate, wind up, terminate, reorganize (except for the Cases or pursuant to
an order of the Bankruptcy Court) or dissolve (or suffer any liquidation,
winding up, termination, reorganization (except for the Cases or pursuant to an
order of the Bankruptcy Court) or dissolution) or otherwise wind up; or (ii)
acquire (in one transaction or a series of related transactions) all or any
substantial part of the assets, property or business of, or any assets that
constitute a division or operating unit of, the business of any Person or
otherwise merge or consolidate with or into any other Person.
 
(h) Transactions with Affiliates.  No Borrower shall enter into or cause, suffer
or permit to exist any arrangement or contract with any of its Affiliates or any
other Person that owns, directly or indirectly, any Equity Interest in such
Borrower except Affiliated Project Documents.
 

 
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(i) Accounts.  The Borrowers shall not maintain, establish or use any deposit
account, securities account (as each such term is defined in the UCC) or other
banking account other than the Project Accounts and any Local Account set forth
on Schedule 5.29, each of which shall be subject to a Blocked Account
Agreement.  The Borrowers shall not change the name or account number of any of
the Project Accounts or Local Accounts without the prior written consent of the
Administrative Agent.
 
(j) Subsidiaries.  Pacific Holding shall not create or acquire any Subsidiary
other than Madera, Boardman, Stockton or Burley nor enter into any partnership
or joint venture.  Each of Madera, Boardman, Stockton and Burley shall not
create or acquire any Subsidiary or enter into any partnership or joint venture.
 
(k) ERISA.  No Borrower will engage in any prohibited transactions under Section
406 of ERISA or under Section 4975 of the Code.  No Borrower will incur any
obligation or liability in respect of any Plan, Multiemployer Plan or employee
welfare benefit plan providing post-retirement welfare benefits (other than a
plan providing continue coverage under Part 6 of Title I of ERISA) in each such
case without the prior written consent of the Administrative Agent (unless the
aggregate total obligations or liabilities of the Borrowers that could
reasonably be expected to arise, due to no fault of the Borrowers, in connection
therewith would not exceed five hundred thousand Dollars ($500,000)).
 
(l) Taxes.  No Borrower shall make any election to be treated as an association
taxable as a corporation for federal, state or local tax purposes.
 
(m) Project Documents.  Other than changes that individually and in the
aggregate could not reasonably be expected to have a Material Adverse Effect, no
Borrower shall direct or consent or agree to (i) any amendment, modification,
supplement, or waiver to, or (ii) any termination, repudiation, cancellation or
rejection of, any Project Document to which it is a party and that is
contemplated by the then-current DIP Budget without the prior written consent of
the Required Lenders.  Except for collateral assignments to the Collateral
Agent, no Borrower shall assign any of its rights under any Project Document to
which it is a party to any Person, or consent to the assignment of any
obligations under any such Project Document by any other party thereto.
 
(n) Accounting Changes.  No Borrower shall make any change in (i) its accounting
policies or reporting practices, except as required by GAAP or as otherwise
notified to the Administrative Agent in writing (provided that the Borrowers
shall provide an historical reconciliation for the prior audited period
addressing any such change in accounting practices), or (ii) its Fiscal Year
without the prior written consent of the Administrative Agent.
 
(o) Additional Project Documents.  None of Pacific Holding or any other Borrower
shall enter into any Additional Project Document that is not contemplated by the
then-current DIP Budget except with the prior written approval of the
Administrative Agent.
 
(p) Suspension or Abandonment.  No Borrower owning a Plant shall (i) permit or
suffer to exist an Event of Abandonment relating to such Plant or (ii) order or
consent to any suspension of work in excess of sixty (60) days under any Project
Document relating to such Plant, in each such case without the prior written
approval of the Required Lenders.
 

 
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(q) Use of Proceeds; Margin Regulations.  No Borrower shall use any proceeds of
any Loan other than in accordance with the provisions of Article II (Commitments
and Borrowing) and Section 7.01(g) (Affirmative Covenants – Use of
Proceeds).  No Borrower shall use any part of the proceeds of any Loan to
purchase or carry any Margin Stock (as defined in Regulation U) or to extend
credit to others for the purpose of purchasing or carrying any Margin Stock.  No
Borrower shall use the proceeds of any Loan in a manner that could violate or be
inconsistent with the provisions of Regulations T, U or X.
 
(r) Environmental Matters.  Except to the extent not reasonably expected to
result in an Environmental Claim and in compliance with all applicable Laws, the
Borrowers shall not permit (i) any underground storage tanks to be located on
any property owned or leased by any Borrower, (ii) any asbestos to be contained
in or form part of any building, building component, structure or office space
owned by any Borrower, (iii) any polychlorinated biphenyls (PCBs) to be used or
stored at any property owned by any Borrower, (iv) any other Materials of
Environmental Concern to be used, stored or otherwise be present at any property
owned by any Borrower, other than Materials of Environmental Concern necessary
for the operation of the Project and used in accordance with Prudent Ethanol
Operating Practice or (v) any other Materials of Environmental Concern to be
used, stored or otherwise be present at any property owned or leased by any
Borrower.
 
(s) Restricted Payments.  The Borrowers shall not make any Restricted Payments
except for Restricted Payments (i) among Debtors solely in accordance with the
then-current DIP Budget or (ii) with the prior consent of the Required Lenders.
 
(t) Commodity Hedging Arrangements.  The Borrowers shall not enter into any
Commodity Hedging Arrangements.
 
(u) Chapter 11 Claims.  Except for the Carve-Out, no Debtor shall incur, create,
assume, suffer to exist or permit any super-priority administrative claim
against such Debtor which is pari passu with or senior to the claims of the
Senior Secured Parties against the Debtors, except as set forth in Section 2.09
(Super-Priority Nature of Obligations).
 
(v) DIP Budgets.  No Borrower shall make any change in the DIP Budget without
the prior written consent of the Administrative Agent and the Required Lenders.
 
(w) Financial Covenants.
 
(i)    
The Borrowers shall not permit amounts disbursed pursuant to the category in the
DIP Budget entitled “Asset Management Agreement” (excluding the line item
entitled “Asset Management Fee”) in any Monthly Budget Period to exceed the
amounts set forth in the line item entitled “Total Asset Management Agreement”
(excluding “Asset Management Fee”) for such Monthly Budget Period in the Initial
DIP Budget by more than ten percent (10%).

 

 
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(ii)    
The Borrowers shall not permit professional fees (other than the fees and
expenses of the advisors and consultants working on behalf of the Senior Secured
Parties) in any period of time measured from the Petition Date to exceed the
amounts set forth in the line item entitled “Total Professional Fees &
Administrative Expenses” (excluding “Legal Advisors – DIP Lenders” and
“Financial Advisors – DIP Lenders”) for such period of time in the Initial DIP
Budget by more than three hundred thousand Dollars ($300,000).

 
(iii)    
The Borrowers shall not permit amounts disbursed pursuant to the category in the
DIP Budget entitled “Operating Disbursements” in any Monthly Budget Period to
exceed the amounts set forth in the line item entitled “Total Operating
Disbursements” for such Monthly Budget Period in the then applicable DIP Budget
by more than ten percent (10%).

 
Section 7.03 Reporting Requirements.  The Borrowers will furnish to the
Administrative Agent, who shall distribute copies of the following to each
Lender:
 
(a) on the second Business Day of each week after the date of this Agreement, an
updated rolling cash flow forecast ending on the earlier of (i) thirteen (13)
weeks after the week in which such cash flow forecast is delivered and (ii) the
scheduled Maturity Date (each such forecast, a “Weekly Cash Flow Forecast”), in
the same form and with the same level of detail as the then-current DIP Budget
(it being understood, however, that approval of the DIP Budget by the Required
Lenders shall only be required once a month in accordance with Section 7.01(l)
(Affirmative Covenants – DIP Budgets));
 
(b) on the second Business Day of each week following the date hereof, a report
setting forth, in a form and in sufficient detail satisfactory to the
Administrative Agent, a comparison of actual receipts and expenses to budgeted
receipts and expenses in the then-current DIP Budget for the preceding week;
 
(c) as soon as available and in any event within twenty-five (25) days after the
end of each calendar month, a report setting forth, in each case in a form and
in sufficient detail satisfactory to the Administrative Agent, (x) balance
sheets of each Borrower as of the end of such month, (y) statements of income
and cash flows of each Borrower for such month, and for the period commencing at
the end of the previous Fiscal Year and ending with the end of such month and
(z) profit and loss statements of each Borrower for such month and for the
period commencing at the end of the previous Fiscal Year and ending with the end
of such month, in each case, prepared in accordance with GAAP (subject to the
absence of footnote disclosures and to normal year-end adjustments). Such report
shall be certified as complete and correct by an Authorized Officer of the
Borrower Agent, who also shall certify for each financial covenant set forth in
Section 7.02(w) (Negative Covenants - Financial Covenants) that the Borrowers
are in full compliance with each such covenant or, if any of such certifications
cannot be given, stating in reasonable detail the necessary qualifications to
such certifications;
 

 
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(d) promptly upon receipt, copies of any detailed audit reports, management
letters or recommendations submitted to any Borrower (or the audit or finance
committee of any Borrower) by the Auditors in connection with the accounts or
books of any Borrower, or any audit of any Borrower;
 
(e) as soon as possible and in any event within five (5) days after the
occurrence of any Default or Event of Default, a statement of an Authorized
Officer of the Borrower Agent setting forth details of such Default or Event of
Default and the action that the Borrowers have taken and propose to take with
respect thereto;
 
(f) within five (5) days after any Borrower obtains knowledge thereof a
statement of an Authorized Officer of the Borrower Agent setting forth details
of:
 
(i)   
any litigation or governmental proceeding pending or threatened in writing
against any Borrower;

 
(ii)   
any litigation or governmental proceeding pending or threatened in writing
against any Project Party that has or could reasonably be expected to have a
Material Adverse Effect;

 
(iii)   
any other event, act or condition that has or could reasonably be expected to
have a Material Adverse Effect; or

 
(iv)   
notification of any event of force majeure or similar event under a Project
Document which is expected to continue for more than five (5) days or, to the
knowledge of a Borrower, result in increased costs of at least one hundred
thousand Dollars ($100,000);

 
(g) promptly after delivery or receipt thereof, copies of all material notices
or documents given or received by any Borrower, pursuant to any of the Project
Documents including:
 
(i)   
any written notice alleging any breach or default thereunder; and

 
(ii)   
any written notice regarding, or request for consent to, any assignment,
termination, modification, waiver or variation thereof;

 
(h) as soon as possible and in any event within five (5) Business Days after any
Borrower knows, or has reason to know, that any of the events described below
have occurred, a duly executed certificate of an Authorized Officer of the
Borrower Agent setting forth the details of each such event and the action that
the Borrowers propose to take with respect thereto, together with a copy of any
notice or filing from the PBGC, Internal Revenue Service, Department of Labor or
that may be required by the PBGC or other U.S. Governmental Authority with
respect to each such event:
 

 
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(i)   
any Termination Event with respect to an ERISA Plan or a Multiemployer Plan has
occurred or will occur that could reasonably be expected to result in any
material liability to any Borrower;

 
(ii)   
any condition exists with respect to a Plan that presents a material risk of
termination of a Plan (other than a standard termination under Section 4041(b)
of ERISA) or imposition of an excise tax or other material liability on any
Borrower;

 
(iii)   
an application has been filed for a waiver of the minimum funding standard under
Section 412 of the Code or Section 302 of ERISA under any Plan;

 
(iv)   
any Borrower or any Plan fiduciary has engaged in a “prohibited transaction,” as
defined in Section 4975 of the Code or as described in Section 406 of ERISA,
that is not exempt under Section 4975 of the Code and Section 408 of ERISA that
could reasonably be expected to result in material liability to any Borrower;

 
(v)   
there exists any Unfunded Benefit Liabilities under any ERISA Plan;

 
(vi)   
any condition exists with respect to a Multiemployer Plan that presents a risk
of a partial or complete withdrawal (as described in Section 4203 or 4205 of
ERISA) from a Multiemployer Plan that could reasonably be expected to result in
any liability to any Borrower;

 
(vii)   
a “default” (as defined in Section 4219(c)(5) of ERISA) occurs with respect to
payments to a Multiemployer Plan and such default could reasonably be expected
to result in any liability to any Borrower;

 
(viii)   
a Multiemployer Plan is in “reorganization” (as defined in Section 418 of the
Code or Section 4241 of ERISA) or is “insolvent” (as defined in Section 4245 of
ERISA);

 
(ix)   
any Borrower and/or any ERISA Affiliate has incurred any potential withdrawal
liability (as defined in accordance with Title IV of ERISA); or

 
(x)   
there is an action brought against any Borrower or any ERISA Affiliate under
Section 502 of ERISA with respect to its failure to comply with Section 515 of
ERISA;

 

 
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(i) as soon as possible and in any event within five (5) Business Days after the
receipt by any Borrower of a demand letter from the PBGC notifying such Borrower
of its final decision finding liability and the date by which such liability
must be paid, a copy of such letter, together with a duly executed certificate
of the president or chief financial officer of such Borrower setting forth the
action that such Borrower proposes to take with respect thereto;
 
(j) promptly and in any event within five (5) Business Days after the existence
of any of the following conditions, a duly executed certificate of an Authorized
Officer of the Borrower Agent specifying in detail the nature of such condition
and, if applicable, the proposed response of the Borrowers thereto:
 
(i)   
receipt by any Borrower of any written communication from a Governmental
Authority or any written communication from any other Person or other source of
written information, including (to the extent not privileged) reports prepared
by any Borrower, that alleges or indicates that any Borrower or an Environmental
Affiliate is not in compliance in all material respects with applicable
Environmental Laws or Environmental Approvals;

 
(ii)   
any Borrower obtains knowledge that there exists any Environmental Claim pending
or threatened in writing against any Borrower or an Environmental Affiliate;

 
(iii)   
any Borrower obtains knowledge of any release, threatened release, emission,
discharge or disposal of any Material of Environmental Concern or obtains
knowledge of any material non-compliance with any Environmental Law that, in
either such case, could reasonably be expected to form the basis of an
Environmental Claim against any Borrower or any Environmental Affiliate; or

 
(iv)   
any Removal, Remedial or Response action taken by any Borrower or any other
person in response to any Material of Environmental Concern in, at, on or under,
a part of or about the  properties of a Borrower or any other property or any
notice, claim or other information that any Borrower might be subject to an
Environmental Claim;

 
(k) on reasonable notice during regular business hours, accurate and complete
records of all non-privileged correspondence, investigations, studies, sampling
and testing conducted, and any and all remedial actions taken, by any Borrower
or, to the best of any Borrower’s knowledge and to the extent obtained by any
Borrower, by any Governmental Authority or other Person in respect of Materials
of Environmental Concern that could reasonably be expected to form the basis of
an Environmental Claim on or affecting any Plant or the Project;
 

 
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(l) within twenty-five (25) days after the end of each calendar month, an
Operating Statement certified as complete and correct by an Authorized Officer
of the Borrower Agent regarding the operation and performance of each Plant for
such month.  Such Operating Statements shall contain (i) line items
corresponding to the DIP Budget showing in reasonable detail all actual expenses
related to the operation and maintenance of each Plant compared to the budgeted
expenses for such period, (ii) information showing the amount of ethanol and
other Products produced by each Plant during such period and (iii) information
showing (A) the amount of ethanol sold by the Borrowers from each Plant to
pursuant to the Ethanol Offtake Agreements, (B) the amount of Distillers Grains
sold by the Borrowers from each Plant pursuant to the DG Offtake Agreements, and
(C) the amount, if any, of other sales of ethanol and/or Distillers Grains,
together with an explanation of any such sale and identification of the
purchaser, and (D) the amount, if any, of other Products sold by the Borrowers
from the Plants, together with an explanation of any such sale and
identification of the purchaser; and
 
(m) other information reasonably requested by the Administrative Agent or any
Lender, through the Administrative Agent.
 

 
ARTICLE VIII

 
[INTENTIONALLY OMITTED]
 

 
ARTICLE IX

 
DEFAULT AND ENFORCEMENT
 
Section 9.01 Events of Default.  Notwithstanding the provisions of Section 362
of the Bankruptcy Code and without notice, application or motion to, hearing
before, or order of the Bankruptcy Court or any notice to any Borrower, each of
the following events or occurrences described in this Section 9.01 shall
constitute an Event of Default.
 
(a) Nonpayment.  Any Borrower fails to pay (i) any amount of principal of any
Loan when the same becomes due and payable or (ii) any interest on any Loan or
any fee or other Obligation or amount payable hereunder or under any other
Financing Document within three (3) Business Days after the same becomes due and
payable.
 
(b) Breach of Warranty.  Any representation or warranty of any Borrower made or
deemed to be restated or remade in any Financing Document is or shall be
incorrect or misleading in any material respect when made or deemed made;
provided that (i) if such Borrower was not aware that such representation or
warranty was incorrect or misleading at the time such representation or warranty
was made or deemed repeated, (ii) the fact, event or circumstance resulting in
such incorrect or misleading representation or warranty is capable of being
cured, corrected or otherwise remedied, (iii) such fact, event or circumstance
resulting in such incorrect or misleading representation or warranty is cured,
corrected or otherwise remedied within thirty (30) days from the date any
Borrower obtains, or should have obtained, knowledge thereof, and (iv) no
Material Adverse Effect shall have occurred as a result of such representation
or warranty being incorrect or misleading, then such incorrect representation or
warranty shall not constitute an Event of Default.
 

 
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(c) Non-Performance of Certain Covenants and Obligations.  Any Borrower defaults
in the due performance and observance of any of its obligations under any of
Sections 7.01(g) (Affirmative Covenants – Use of Proceeds), 7.01(h) (Affirmative
Covenants – Insurance), 7.02 (Negative Covenants) and 7.03 (Reporting
Requirements) of this Agreement.
 
(d) Non-Performance of Other Covenants and Obligations.  Any Borrower defaults
in the due performance and observance of any covenant or agreement (other than
covenants and agreements referred to in Section 9.01(a) or 9.01(c)) contained in
any Financing Document, and such default shall continue unremedied for a period
of thirty (30) days after any Borrower obtains, or should have obtained,
knowledge thereof.
 
(e) Cross Defaults.  Any one of the following occurs with respect to any
Borrower (with respect to any Indebtedness entered into (x) Pre-Petition and
which is assumed after the Petition Date or is not subject to the automatic stay
provisions of Section 362 of the Bankruptcy Code or (y) Post-Petition) in the
amount greater than $100,000:
 
(i)   
a default occurs in the payment when due (subject to any applicable grace period
and notice requirements), whether by acceleration or otherwise, of such
Indebtedness; or

 
(ii)   
such Person fails to observe or perform (subject to any applicable grace periods
and notice requirements) any other agreement or condition relating to any such
Indebtedness or contained in any instrument or agreement evidencing, securing or
relating thereto, or any other event occurs, the effect of which default or
other event is to cause, or to permit the holder or holders of such Indebtedness
or the beneficiary or beneficiaries of any Guarantee (or a trustee or agent on
behalf of such holder or holders or beneficiary or beneficiaries) to cause, with
the giving of notice if required, such Indebtedness to be demanded or to become
due or to be repurchased, prepaid, defeased or redeemed (automatically or
otherwise), or an offer to repurchase, prepay, defease or redeem such
Indebtedness to be made, prior to its stated maturity, or such Guarantee to
become payable or cash collateral in respect thereof to be demanded;

 
(f) Judgments.  (i) Any judgment or order that has or could reasonably be
expected to have a Material Adverse Effect is rendered against any Borrower or
any Major Project Party, or (ii) any judgment or order is rendered against any
or all of the Borrowers, in an amount in excess of two hundred and fifty
thousand Dollars ($250,000) in the aggregate.
 

 
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(g) ERISA Events.  (i) Any Termination Event occurs, (ii) any Plan incurs an
“accumulated funding deficiency” (as defined in Section 412 of the Code or
Section 302 of ERISA), (iii) any Borrower or member of any Borrower’s ERISA
Controlled Group engages in a transaction that is prohibited under Section 4975
of the Code or Section 406 of ERISA, (iv) any Borrower or any ERISA Affiliate
fails to pay when due any amount it has become liable to pay to the PBGC, any
Plan or a trust established under Title IV of ERISA, (v) a condition exists by
reason of which the PBGC would be entitled to obtain a decree adjudicating that
an ERISA Plan must be terminated or have a trustee appointed to administer it,
(vi) any Borrower or any ERISA Affiliate suffers a partial or complete
withdrawal from a Multiemployer Plan or is in “default” (as defined in Section
4219(c)(5) of ERISA) with respect to payments to a Multiemployer Plan, (vii) a
proceeding is instituted against any Borrower to enforce Section 515 of ERISA,
(viii) the aggregate amount of the then “current liability” (as defined in
Section 412(l)(7) of the Code, as amended) of all accrued benefits under such
Plan or Plans exceeds the then current value of the assets allocable to such
benefits by more than two million Dollars ($2,000,000) at such time, or (ix) any
other event or condition occurs or exists with respect to any Plan that would
subject any Borrower to any tax, penalty or other liability.
 
(h) Project Document Defaults; Termination.
 
(i)   
Any Borrower or any other Major Project Party shall be in material breach of or
otherwise in material default under any Project Document (other than as a result
of the Cases, the Cold Shutdown of the Madera Plant, the Magic Valley Plant, the
Stockton Plant and, after the Boardman CS Date, the Boardman Plant or any breach
or default that has not had and could not reasonably be expected to have a
Material Adverse Effect) and such breach or default has continued beyond any
applicable grace period expressly provided for in such Project Document (or if
no cure period is provided, thirty (30) days).

 
(ii)   
Any Project Document ceases to be in full force and effect prior to its
scheduled expiration, is repudiated, or its enforceability is challenged or
disaffirmed by or on behalf of any Borrower or any Project Party thereto, except
for any Project Document the invalidity of which could not reasonably be
expected to have a Material Adverse Effect.

 
(i) Governmental Approvals.  Any Borrower fails to obtain, renew, maintain or
comply in all material respects with any Necessary Project Approval or any
Necessary Project Approval is revoked, canceled, terminated, withdrawn or
otherwise ceases to be in full force and effect, or any Necessary Project
Approval is modified without the consent of the Required Lenders in a manner
that, in each case, has, or could reasonably be expected to result in, a
Material Adverse Effect on such Borrower or its Plant.
 

 
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(j) Unenforceability of Pre-Petition Documentation.  Except as a result of an
Effect of Bankruptcy:
 
(i)   
any material provision of any Pre-Petition Financing Document shall cease to be
in full force and effect;

 
(ii)   
any Pre-Petition Financing Document is revoked or terminated, becomes unlawful
or is declared null and void by a Governmental Authority of competent
jurisdiction; and

 
(iii)   
any Pre-Petition Financing Document becomes unenforceable, is repudiated or the
enforceability thereof is contested or disaffirmed by or on behalf of any party
thereto other than the Pre-Petition Senior Secured Parties.

 
(k) Unenforceability of Documentation.  At any time after the execution and
delivery thereof:
 
(i)   
any material provision of any Financing Document shall cease to be in full force
and effect;

 
(ii)   
any Financing Document is revoked or terminated, becomes unlawful or is declared
null and void by a Governmental Authority of competent jurisdiction;

 
(iii)   
any Financing Document becomes unenforceable, is repudiated or the
enforceability thereof is contested or disaffirmed by or on behalf of any party
thereto other than the Senior Secured Parties or the Pre-Petition Senior Secured
Parties; and

 
(iv)   
any Liens against any of the Collateral cease to be a first priority, perfected
security interest in favor of the Collateral Agent, or the enforceability
thereof is contested by any Borrower, or any of this Agreement or the Orders
ceases to provide the security intended to be created thereby with the priority
purported to be created thereby.

 
(l) Environmental Matters.  (i) Any Environmental Claim has occurred with
respect to any Borrower, any Plant or any Environmental Affiliate, (ii) any
release, emission, discharge or disposal of any Material of Environmental
Concern occurs, and such event could reasonably be expected to form the basis of
an Environmental Claim against any Borrower, any Plant or any Environmental
Affiliate, or (iii) any violation or alleged violation of any Environmental Law
or Environmental Approval occurs that would reasonably result in an
Environmental Claim against any Borrower or any Plant or, to the extent any
Borrower may have liability, any Environmental Affiliate, that, in the case of
any of Sections 9.01(m)(i), (ii) or (iii), could reasonably be expected to
result in liability for any Borrower (or the Borrowers on an aggregate basis) in
an amount greater than two hundred thousand Dollars ($200,000) for any single
claim or two hundred and fifty thousand Dollars ($250,000) for all such claims
during  any twelve (12) month period or could otherwise reasonably be expected
to result in a Material Adverse Effect.
 

 
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(m) Loss of Collateral.  Any portion of the Collateral (other than a portion
that is immaterial) is damaged, seized or appropriated; provided, that such an
occurrence shall not constitute an Event of Default if the applicable Borrowers
repair, replace, rebuild or refurbish such damaged, seized or appropriated
Collateral with the approval of the Required Lenders, in consultation with the
Independent Engineer.
 
(n) Event of Abandonment.  An Event of Abandonment occurs.
 
(o) Taking or Total Loss.  An Event of Taking with respect to all or a material
portion of any Plant or any Equity Interests comprising the Collateral occurs,
or an Event of Total Loss occurs.
 
(p) Reorganization Matters.  Any of the following occurs in any Chapter 11 Case:
 
(i)   
the bringing of a motion or taking of any action by a Debtor:  (w) to obtain
additional financing under Section 364(c) or (d) of the Bankruptcy Code not
otherwise permitted pursuant to this Agreement; (x) to grant any Lien other than
Permitted Lien upon or affecting any Collateral; (y) except as provided in the
Interim Order, Final Order or DIP Budget, as the case may be, to use cash
collateral under Section 363(c) of the Bankruptcy Code without the prior written
consent of the Administrative Agent and the Lenders; or

 
(ii)   
the entry of an order in any of the Chapter 11 Cases confirming a plan or plans
of reorganization that does not contain a provision for termination of the DIP
Facility and repayment in full in cash of all the Obligations on or before the
effective date of such plan or plans; or

 
(iii)   
the entry of an order amending, supplementing, staying, vacating or otherwise
modifying the Financing Documents or the Interim Order or the Final Order
without the written consent of the Administrative Agent and the Lenders or the
filing by a Debtor of a motion for reconsideration with respect to the Interim
Order or the Final Order; or

 
(iv)   
the Interim Order is not entered on or before the date that is 10 days after the
Petition Date; or

 
(v)   
the Final Order is not entered on or before the date that is 45 days after the
date of entry of the Interim Order; or

 
(vi)   
the payment of any Pre-Petition claim unless (i) reflected in the DIP Budget or
(ii) authorized pursuant to an order approved by the Bankruptcy Court and made
with the written consent of the Administrative Agent and the Lenders; or

 

 
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(vii)   
the allowance of any claim or claims under Sections 506(c) or 552(b) of the
Bankruptcy Code or otherwise against the Collateral; or

 
(viii)   
the appointment of an interim or permanent trustee in any Chapter 11 Case or the
appointment of a receiver or an examiner in any Chapter 11 Case with expanded
powers to operate or manage the financial affairs, the business, or
reorganization of a Debtor; or

 
(ix)   
the sale, without the written consent of the Administrative Agent and the
Lenders, of all or substantially all of a Debtor’s assets either through a sale
under Section 363 of the Bankruptcy Code, through a confirmed plan of
reorganization in the Chapter 11 Cases, or otherwise that does not provide for
payment in full in cash of the Obligations; or

 
(x)   
the dismissal of any Chapter 11 Case, or the conversion of any Chapter 11 Case
from one under Chapter 11 to one under Chapter 7 of the Bankruptcy Code or a
Debtor shall file a motion or other pleading seeking the dismissal of any
Chapter 11 Case under Section 1112 of the Bankruptcy Code or otherwise; or

 
(xi)   
the entry of an order by the Bankruptcy Court granting relief from or modifying
the automatic stay of Section 362 of the Bankruptcy Code to allow any creditor
other than a Senior Secured Party to proceed against any material asset of a
Debtor; or

 
(xii)   
the entry of an order in any Chapter 11 Case avoiding or requiring repayment of
any portion of the payments made on account of the Obligations; or

 
(xiii)   
the failure of a Debtor to perform any of its obligations under the Interim
Order or the Final Order; or

 
(xiv)   
the entry of an order in any of the Chapter 11 Cases granting any other
super-priority claim or Lien equal or superior to the Lien of the Collateral
Agent other than adequate protection Liens approved by the Bankruptcy Court in
the Interim Order or the Final Order; or

 
(xv)   
a Debtor engages in or supports any challenge to the validity, perfection,
priority, extent or enforceability of the DIP Facility or the Pre-Petition
Obligations or the liens on or security interests in the assets of such Debtor
securing the DIP Facility or the Pre-Petition Obligations, including seeking to
equitably subordinate or avoid the liens securing the Pre-Petition Obligations;
or

 

 
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(xvi)   
a Debtor engages in or supports any investigation or asserts any claim or cause
of action (or supports the assertion of the same) against the Administrative
Agent, the  Lenders, the Pre-Petition Administrative Agent or the Pre-Petition
Senior Secured Parties; provided, however, it shall not constitute an Event of
Default if a Debtor provides basic loan information with respect to the
Pre-Petition Obligations to a party in interest or pursuant to an order of the
Bankruptcy Court and provides prior written notice to the Administrative Agent
and the Lenders of its intention or obligation to do so; or

 
(xvii)   
any Person shall seek a Section 506(a) Determination with respect to the
Pre-Petition Obligations that is unacceptable to the Pre-Petition Administrative
Agent and the Pre-Petition Senior Secured Parties; or

 
(xviii)   
the entry of an order extending any exclusive right that any Debtor may have to
propose a plan more than 120 days after the Petition Date, or to solicit votes
or to seek confirmation of plan on a date more than 180 days after the Petition
Date, in either case without the written consent of the Administrative Agent and
the Lenders; or

 
(xix)   
Lyles United, LLC (or any Affiliate thereof) or Pacific Ethanol (or any
Affiliate thereof) shall assert any claim (actual or contingent) (except any
claim asserted by Pacific Ethanol arising out of the Asset Management Agreement)
in any Case or shall challenge, contest or interfere, directly or indirectly,
with any claim of any Senior Secured Party or any Pre-Petition Senior Secured
Party in any Case; or

 
(xx)   
any Project Document is rejected in any of the Cases without the prior consent
of the Required Lenders.

 
(q) Asset Management Agreement.  The Asset Management Agreement shall be
terminated as a result of a breach thereunder by Pacific Ethanol or Pacific
Ethanol or any Affiliate of Pacific Ethanol shall challenge the validity or
enforceability of any performance guaranty of the obligations of Pacific Ethanol
under the Asset Management Agreement.
 
(r) Change of Control.  A Change of Control occurs.
 

 
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Section 9.02 Action Upon Event of Default.
 
(a) If any Event of Default has occurred and is continuing, the Administrative
Agent shall, upon the direction of the Required Lenders, notwithstanding the
provisions of Section 362 of the Bankruptcy Code (the automatic stay of
Section 362 of the Bankruptcy Code shall be deemed modified and vacated to
permit the Senior Secured Parties to exercise their remedies under this
Agreement and the Financing Documents), without any application, motion or
notice to, hearing before, or order from, the Bankruptcy Court: (i) terminate
the DIP Facility; (ii) reduce the Commitment from time to time; (iii) declare
all or any portion of the Obligations due and payable; (iv) increase the rate of
interest applicable to the Obligations to the Default Rate; (v) direct any or
all of the Borrowers to sell or otherwise dispose of any or all of the
Collateral on terms and conditions acceptable to the Administrative Agent and
the Lenders pursuant to Sections 363, 365 and other applicable provisions of the
Bankruptcy Code (and, without limiting the foregoing, direct any Borrower to
assume and assign any lease or executory contract included in the Collateral to
the Collateral Agent’s designees in accordance with and subject to Section 365
of the Bankruptcy Code), (vi) enter onto the premises of any Borrower in
connection with an orderly liquidation of the Collateral, and (vii) exercise any
rights and remedies provided to the Senior Secured Parties under the Financing
Documents or at law or equity, including all remedies provided under the UCC and
pursuant to the Interim Order and the Final Order.
 
(b) Notwithstanding anything to the contrary contained herein, the Senior
Secured Parties shall not be permitted to exercise any remedy (other than those
described in clauses (i), (ii), (iii) and (iv) of Section 9.02(a) (Action Upon
Event of Default))  unless the Administrative Agent shall have given three (3)
Business Days written notice (the “Notice Period”) to the Debtors, counsel to
the Committee and the Office of the U.S. Trustee during which Notice Period the
Debtors and the Committee may seek relief from the Bankruptcy Court to re-impose
or continue the automatic stay with respect to any remedy other than those
described in clauses (i), (ii), (iii) and (iv) of Section 9.02(a) (Action Upon
Event of Default); provided, that in any hearing after the giving of the
aforementioned notice, the only issue that may be raised by the Debtors and the
Committee being whether, in fact, an Event of Default has occurred and is
continuing.
 
Section 9.03 Remedies.  Upon the occurrence and during the continuation of an
Event of Default, the Collateral Agent shall have the right, but not the
obligation, subject to the Orders, to do any of the following:
 
(a)           vote or exercise any and all of any Borrower's rights or powers
incident to its ownership of Equity Interests in any Borrower, including any
rights or powers to manage or control such Borrower;
 
(b)           demand, sue for, collect or receive any money or property at any
time payable to or receivable by any Borrower on account of or in exchange for
all or part of the Equity Interests pledged by it pursuant to the Orders;
 
(c)           amend, terminate, supplement or modify all or any of the Organic
Documents of the Borrowers;
 

 
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(d)           proceed to protect and enforce the rights vested in it hereunder
and under the UCC;
 
(e)           cause all revenues and all other moneys and other property forming
part of the Collateral to be paid and/or delivered directly to it, and demand,
sue for, collect and receive any such moneys and property;
 
(f)           cause any action at law or in equity or other proceeding to be
instituted and prosecuted to collect or enforce any of the Obligations, or
rights hereunder or included in the Collateral, or for specific enforcement of
any covenant or agreement contained herein or in any Project Documents or other
agreements forming part of the Collateral, or in aid of the exercise of any
power herein or therein granted, or for any foreclosure hereunder and sale under
a judgment or decree in any judicial proceeding, or to enforce any other legal
or equitable right vested in it by this Agreement or by Law;
 
(g)           foreclose or enforce any other agreement or other instrument by or
under or pursuant to which the Obligations are issued or secured;
 
(h)           incur expenses, including attorneys' fees, consultants' fees, and
other costs in connection with the exercise of any right or power under this
Agreement or any other Financing Document;
 
(i)           perform any obligation of any Borrower hereunder or under any
other Financing Document or any Project Document or other agreement forming part
of the Collateral, submit renewal notices or exercise any purchase options under
leases, and make payments, purchase, contest or compromise any encumbrance,
charge, or lien, and pay taxes and expenses and insure, process and preserve the
Collateral without, however, any obligation to do so;
 
(j)           take possession of the Collateral and of any and all books of
account and records of the Borrowers relating to any of the Collateral and
render it usable and repair and renovate the same without, however, any
obligation to do so, and enter upon, or authorize its designated agent to enter
upon, any location where the same may be located for that purpose (including the
right of the Collateral Agent to exclude the Borrowers and all Persons claiming
access through any of the Borrowers from any access to the Collateral or to any
part thereof) and the Collateral Agent and its representatives are hereby
granted an irrevocable license to enter upon such premises for such purpose,
control, manage, operate, rent and lease the Collateral, either separately or in
conjunction with the Project, collect all rents and income from the Collateral
and apply the same to reimburse the Senior Secured Parties for any reasonable
cost or expenses incurred hereunder or under any of the Financing Documents and
to the payment or performance of any of the Obligations, and apply the balance
to the Obligations as provided herein and any remaining excess balance to
whomsoever is legally entitled thereto;
 
(k)           make any reasonable compromise or settlement deemed desirable with
respect to any of the Collateral and extend the time of payment, arrange for
payment installments, or otherwise modify the terms of, any Collateral;
 

 
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(1)           secure the appointment of a receiver of the Collateral or any part
thereof, whether incidental to a proposed sale of the Collateral or otherwise,
and all disbursements made by such receiver and the expenses of such
receivership shall be added to and be made a part of the Obligations and,
whether or not said principal sum, including such disbursements and expenses,
exceeds the indebtedness originally intended to be secured hereby, the entire
amount of said sum, including such disbursements and expenses, shall be secured
by the DIP Liens and shall be due and payable upon demand therefor and
thereafter shall bear interest at the Default Rate or the maximum rate permitted
by applicable Law, whichever is less;
 
(m)           enter into any extension, reorganization, deposit, merger,
consolidation or other agreement pertaining to, or deposit, surrender, accept,
hold or apply other property in exchange for, the Collateral or any part
thereof;
 
(n)           transfer the Collateral or any part thereof to the name of the
Collateral Agent or to the name of a Collateral Agent's nominee;
 
(o)           take possession of and endorse in the name of any Borrower or in
the name of the Collateral Agent, for the account of any Borrower, any bills of
exchange, checks, drafts, money orders, notes or any other chattel paper,
documents or instruments constituting all or any part of the Collateral or
received as interest, rent or other payment on or on account of the Collateral
or any part thereof or on account of its sale or lease;
 
(p)           appoint another Person (who may be an employee, officer or other
representative of the Collateral Agent) to do any of the foregoing, or take any
other action permitted hereunder, on behalf of the Collateral Agent;
 
(q)           execute (in the name, place and stead of any Borrower)
endorsements, assignments and other instruments of conveyance or transfer with
respect to all or any of the Collateral;
 
(r)           take any other action which the Collateral Agent deems necessary
or desirable to protect or realize upon its security interest in the Collateral
or any part thereof;
 
(s)           require each Borrower to assemble the Collateral or any part
thereof and to make the same (to the extent the same is reasonably moveable)
available to the Collateral Agent at a place to be designated by the Collateral
Agent which is reasonably convenient to the Borrowers and the Collateral Agent;
 
(t)           make formal application for the transfer of all or any
Governmental Approvals of any Borrower to the Collateral Agent or to any
assignee of the Collateral Agent or to any purchaser of any of the Collateral to
the extent the same are assignable in accordance with their terms and applicable
Laws;
 
(u)           bring an action or proceeding to foreclose or proceed to sell any
real property pursuant to a power of sale; and/or
 

 
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(v)           exercise any other or additional rights or remedies granted to the
Collateral Agent under any other provision of this Agreement or any other
Financing Document, or exercisable by a secured party under the UCC or under any
other applicable Law and without limiting the generality of the foregoing and
without notice except as specified below, sell the Collateral or any part
thereof in one or more parcels at public or private sale, at any exchange or
broker's board or elsewhere, at such price or prices and on such other terms as
the Collateral Agent may deem commercially reasonable in accordance with the
UCC.
 
Section 9.04 Minimum Notice Period.  If, pursuant to applicable Laws, prior
notice of any action described in Section 9.03 (Remedies) is required to be
given to any Borrower, each Borrower hereby acknowledges that the minimum time
required by such applicable Laws, or, if no minimum time is specified, ten (10)
days shall be deemed a reasonable notice period.
 
Section 9.05 Sale of Collateral.  In addition to exercising the foregoing
rights, the Collateral Agent may, to the extent permitted by applicable Laws and
subject to the Orders, arrange for and conduct the sale of the Collateral at a
public or private sale (as the Collateral Agent may elect) which sale may be
conducted by an employee or representative of the Collateral Agent, and any such
sale shall be conducted in a commercially reasonable manner.  The Collateral
Agent may release, temporarily or otherwise, to the applicable Borrower any item
of Collateral of which the Collateral Agent has taken possession pursuant to any
right granted to the Collateral Agent by this Agreement without waiving any
rights granted to the Collateral Agent under this Agreement, the other Financing
Documents or any other agreement related hereto or thereto.  Each Borrower, in
dealing with or disposing of the Collateral or any part thereof, hereby waives
all rights, legal and equitable, it may now or hereafter have to require
marshaling of assets or to require, upon foreclosure, sales of assets in a
particular order.  Each successor of any Borrower under the Financing Documents
agrees that it shall be bound by the above waiver, to the same extent as if such
successor gave the waiver itself.  Each Borrower also hereby waives, to the full
extent it may lawfully do so, the benefit of all laws providing for rights of
appraisal, valuation, stay, extension or redemption after foreclosure now or
hereafter in force.  If the Collateral Agent sells any of the Collateral upon
credit, the Borrower in respect of such Collateral will be credited only with
payments actually made by the purchaser and received by the Collateral
Agent.  In the event the purchaser fails to pay for the Collateral, the
Collateral Agent may resell the Collateral and the relevant Borrower shall be
credited with the proceeds of the sale in excess of the amounts required to pay
the Obligations in full.  In the event the Collateral Agent bids at any
foreclosure or trustee's sale or at any private sale permitted by Law and this
Agreement or any other Financing Document, the Collateral Agent may bid all or
less than the amount of the Obligations.  The Collateral Agent shall not be
obligated to make any sale of Collateral regardless of whether or not notice of
sale has been given.  The Collateral Agent may adjourn any public or private
sale from time to time by announcement at the time and place fixed therefor, and
such sale may, without further notice, be made at the time and place to which it
was so adjourned.  Each Borrower further acknowledges and agrees that any offer
to sell any part of the Collateral that has been (i) publicly advertised on a
bona fide basis in a newspaper or other publication of general circulation or
(ii) made privately in the manner described herein to not less than fifteen (15)
bona fide offerees shall be deemed to involve a "public disposition" for the
purposes of Section 9-610(c) of the UCC.
 

 
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Section 9.06 Actions Taken by Collateral Agent.  Any action or proceeding to
enforce this Agreement or any Project Document or other agreement forming part
of the Collateral may be taken by the Collateral Agent either in the name of the
applicable Borrower or in the Collateral Agent's name, as the Collateral Agent
may deem necessary.
 
Section 9.07 Private Sales.  The Collateral Agent shall incur no liability as a
result of the sale of the Collateral, or any part thereof, at any private sale
made in good faith by Collateral Agent pursuant to Section 9.03 (Remedies) or
Section 9.05 (Sale of Collateral) conducted in a commercially reasonable manner
and in accordance with the requirements of applicable Laws.  Each Borrower
hereby waives any claims against the Collateral Agent and the other Senior
Secured Parties arising by reason of the fact that the price at which the
Collateral may have been sold at such a private sale was less than the price
that might have been obtained at a public sale or was less than the aggregate
amount of the Obligations, even if the Collateral Agent accepts the first offer
received and does not offer the Collateral to more than one offeree, provided
that such private sale is conducted in a commercially reasonable manner and in
accordance with applicable Laws.
 
Section 9.08 Access to Land.  In exercising its right to take possession of the
Collateral upon the occurrence and during the continuation of an Event of
Default hereunder, the Collateral Agent, personally or by its agents or
attorneys, and subject to the rights of any tenant under any lease or sublease
of the Collateral and subject to the Orders, to the fullest extent permitted by
Law, may enter upon any land owned or leased by any Borrower without being
guilty of trespass or any wrongdoing, and without liability to such Borrower for
damages thereby occasioned.
 
Section 9.09 Compliance With Limitations and Restrictions.  Each Borrower hereby
agrees that in respect of any sale of any of the Collateral pursuant to the
terms hereof, the Collateral Agent is hereby authorized to comply with any
limitation or restriction in connection with such sale as it may be advised by
counsel is necessary in order to avoid any violation of applicable Laws, or in
order to obtain any required approval of the sale or of the purchaser by any
Governmental Authority or official, and each Borrower further agrees that such
compliance shall not result in such sale being considered or deemed not to have
been made in a commercially reasonable manner, nor shall the Collateral Agent be
liable or accountable to such Borrower for any discount allowed by reason of the
fact that such Collateral is sold in compliance with any such limitation or
restriction.
 
Section 9.10 No Impairment of Remedies.  If, in the exercise of any of its
rights and remedies hereunder, the Collateral Agent forfeits any of its rights
or remedies, including any right to enter a deficiency judgment against any
Borrower or any other Person, whether because of any applicable Law pertaining
to "election of remedies" or otherwise, each Borrower hereby consents to such
action by the Collateral Agent and, to the extent permitted by applicable Law,
waives any claim based upon such action, even if such action by the Collateral
Agent would result in a full or partial loss of any rights of subrogation,
indemnification or reimbursement which such Borrower might otherwise have had
but for such action by the Collateral Agent or the terms herein.  Any election
of remedies which results in the denial or impairment of the right of the
Collateral Agent to seek a deficiency judgment against any of the parties to any
of the Financing Documents shall not, to the extent permitted by applicable
Laws, impair any Borrower's obligations hereunder.
 

 
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Section 9.11 Attorney-In-Fact.  (a) Each Borrower hereby constitutes and
appoints the Collateral Agent, acting for and on behalf of itself and the other
Senior Secured Parties and each successor or permitted assign of the Collateral
Agent and the other Senior Secured Parties, the true and lawful attorney-in-fact
of such Borrower, with full power and authority in the place and stead of such
Borrower and in the name of such Borrower, Collateral Agent or otherwise to
enforce all rights, interests and remedies of such Borrower with respect to the
Collateral or enforce all rights, interests and remedies of the Collateral Agent
under this Agreement (including the rights set forth in this Article IX);
provided, however, that Collateral Agent shall not exercise any of the
aforementioned rights unless an Event of Default has occurred and is continuing
and has not been waived or cured in accordance with this Agreement and the other
Financing Documents and delivery of notice as set forth in Section 9.02(b) and
the Orders.  This power of attorney is a power coupled with an interest and
shall be irrevocable; provided further, however, that nothing in this Agreement
shall prevent any Borrower from, prior to the exercise by Collateral Agent of
any of the aforementioned rights, undertaking such Borrower's operations in the
ordinary course of business in accordance with the Collateral and the Financing
Documents.
 
(b)           If any Borrower fails to perform any agreement or obligation
contained herein, and such failure continues for ten (10) days following
delivery of written notice by the Collateral Agent to such Borrower, and subject
to the Orders, the Collateral Agent itself may perform, or cause performance of,
such agreement or obligation, and the reasonable expenses of the Collateral
Agent incurred in connection therewith shall be payable by such Borrower and
shall be secured by the Collateral.
 
Section 9.12 Application of Proceeds.  Any moneys received by the Collateral
Agent after the occurrence and during the continuance of an Event of Default may
be held by the Collateral Agent on account of the Obligations without prejudice
to any claim by any Senior Secured Party for any deficiency after such moneys
are received by the Senior Secured Parties, and each Debtor shall remain liable
for any such deficiency.  All such moneys may be applied to such part of the
Obligations as the Senior Secured Parties may direct.  The Senior Secured
Parties may at any time change any such appropriation of any such moneys
received by the Senior Secured Parties and may reapply the same to any other
part of the Obligations as the Senior Secured Parties may from time to time see
fit, notwithstanding any previous application.
 

 
ARTICLE X

 
THE AGENTS
 
Section 10.01 Appointment and Authority.  (a)  Each of the Lenders hereby
irrevocably appoints, designates and authorizes each Agent to take such action
on its behalf under the provisions of this Agreement and each other Financing
Document and to exercise such powers and perform such duties as are expressly
delegated to such Agent by the terms of this Agreement or any other Financing
Document, together with such actions as are reasonably incidental thereto.  The
provisions of this Article X are solely for the benefit of the Agents and the
Lenders, and neither the Borrowers nor any other Person shall have rights as a
third party beneficiary of any of such provisions.
 

 
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(b) Each Lender hereby appoints WestLB as its Administrative Agent under and for
purposes of each Financing Document to which it is a party.  WestLB hereby
accepts this appointment and agrees to act as the Administrative Agent for the
Lenders in accordance with the terms of this Agreement.  Each Lender appoints
and authorizes the Administrative Agent to act on behalf of such Lender under
each Financing Document to which it is a party and, in the absence of other
written instructions from the Required Lenders received from time to time by the
Administrative Agent (with respect to which the Administrative Agent agrees that
it will comply, except as otherwise provided in this Section 10.01 or as
otherwise advised by counsel), to exercise such powers hereunder and thereunder
as are specifically delegated to or required of the Administrative Agent by the
terms hereof and thereof, together with such powers as may be reasonably
incidental thereto.  Notwithstanding any provision to the contrary contained
elsewhere in any Financing Document, the Administrative Agent shall not have any
duties or responsibilities, except those expressly set forth herein, nor shall
the Administrative Agent have or be deemed to have any fiduciary relationship
with any Lender, and no implied covenants, functions, responsibilities, duties,
obligations or liabilities shall be read into any Financing Document or
otherwise exist against the Administrative Agent.  Without limiting the
generality of the foregoing sentence, the use of the term “agent” in this
Agreement with reference to the Administrative Agent is not intended to connote
any fiduciary or other implied (or express) obligations arising under agency
doctrine of any applicable Law.  Instead, such term is used merely as a matter
of market custom, and is intended to create or reflect only an administrative
relationship between independent contracting parties.
 
(c) Each Lender hereby appoints WestLB as its Collateral Agent under and for
purposes of each Financing Document to which it is a party.  WestLB hereby
accepts this appointment and agrees to act as the Collateral Agent for the
Lenders in accordance with the terms of this Agreement.  Each of the Lenders
hereby irrevocably appoints and authorizes the Collateral Agent to act as the
agent of such Lender for purposes of acquiring, holding and enforcing any and
all Liens on Collateral granted by any Borrower to the Collateral Agent in order
to secure any of the Obligations, together with such powers and discretion as
are reasonably incidental thereto.  In this connection the Collateral Agent, and
any co-agents, sub-agents and attorneys-in-fact appointed by the Collateral
Agent, as the case may be, pursuant to Section 10.05 (Delegation of Duties) for
purposes of holding or enforcing any Lien on the Collateral (or any portion
thereof), or for exercising any rights and remedies thereunder at the direction
of the Collateral Agent, as the case may be, shall be entitled to the benefits
of all provisions of this Article X and Article XI (Miscellaneous Provisions)
(including Section 11.09 (Indemnification by the Borrowers), as though such
co-agents, sub-agents and attorneys-in-fact were the Collateral Agent under the
Financing Documents) as if set forth in full herein with respect
thereto.  Notwithstanding any provision to the contrary contained elsewhere in
any Financing Document, the Collateral Agent shall not have any duties or
responsibilities, except those expressly set forth herein or in the other
Financing Documents, nor shall the Collateral Agent have or be deemed to have
any fiduciary relationship with any Lender, and no implied covenants, functions,
responsibilities, duties, obligations or liabilities shall be read into any
Financing Document or otherwise exist against the Collateral Agent.  Without
limiting the generality of the foregoing sentence, the use of the term “agent”
in this Agreement with reference to the Collateral Agent is not intended to
connote any fiduciary or other implied (or express) obligations arising under
agency doctrine of any applicable Law.  Instead, such term is used merely as a
matter of market custom, and is intended to create or reflect only an
administrative relationship between independent contracting parties.
 

 
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(d) Each Lender hereby appoints and authorizes the Accounts Bank to act as
depository for the Collateral Agent, on behalf of the Senior Secured Parties,
and as the securities intermediary or bank with respect to the Project Accounts
for the benefit of the Collateral Agent, on behalf of the Senior Secured
Parties, with such powers as are expressly delegated to the Accounts Bank by the
terms of this Agreement, together with such other powers as are reasonably
incidental thereto.  The Accounts Bank hereby accepts this appointment and
agrees to act as the depository for the Collateral Agent, on behalf of the
Senior Secured Parties, and as the securities intermediary or bank with respect
to the Project Accounts, for the benefit of the Collateral Agent, on behalf of
the Senior Secured Parties, in accordance with the terms of this Agreement.  The
Accounts Bank further agrees to accept and hold, as securities intermediary or
as a bank, in its custody and in accordance with the terms of this Agreement,
for the Collateral Agent, on behalf of the Senior Secured Parties, the Project
Accounts and the Accounts Property.  Each Lender also appoints and authorizes
the Accounts Bank to act on its behalf for the purpose of the creation and
perfection of a first priority security interest in favor of the Collateral
Agent, on behalf of the Senior Secured Parties, in the Project Accounts to the
extent that they are deemed under applicable Law not to constitute securities
accounts or deposit accounts and in any Accounts Property that is deemed under
applicable Law not to constitute a Financial Asset.  The Accounts Bank accepts
this appointment and agrees to act as the Accounts Bank for the Collateral
Agent, on behalf and for the benefit of the Senior Secured Parties, for such
purpose and to hold and maintain exclusive dominion and control over the Project
Accounts and any such Accounts Property on behalf of the Collateral Agent,
acting on behalf of the Senior Secured Parties.  Notwithstanding any provision
to the contrary contained elsewhere in any Financing Document, the Accounts Bank
shall not have any duties or responsibilities, except those expressly set forth
herein, nor shall the Accounts Bank have or be deemed to have any fiduciary
relationship with any Lender, and no implied covenants, functions,
responsibilities, duties, obligations or liabilities shall be read into any
Financing Document or otherwise exist against the Accounts Bank.  Without
limiting the generality of the foregoing sentence, the use of the term “agent”
in this Agreement with reference to the Accounts Bank is not intended to connote
any fiduciary or other implied (or express) obligations arising under agency
doctrine of any applicable Law.  Instead, such term is used merely as a matter
of market custom, and is intended to create or reflect only an administrative
relationship between independent contracting parties.
 
Section 10.02 Rights as a Lender.  Each Person serving as Agent hereunder or
under any other Financing Document shall have the same rights and powers in its
capacity as a Lender as any other Lender and may exercise the same as though it
were not an Agent.  Each such Person and its Affiliates may accept deposits
from, lend money to, act as the financial advisor or in any other advisory
capacity for and generally engage in any kind of business with any Borrower or
Affiliate thereof as if such Person were not an Agent hereunder and without any
duty to account therefor to the Lenders or any other Agent.
 
Section 10.03 Exculpatory Provisions.  (a)  No Agent shall have any duties or
obligations except those expressly set forth herein and in the other Financing
Documents.  Without limiting the generality of the foregoing, no Agent shall:
 
(i)    
be subject to any fiduciary or other implied duties, regardless of whether a
Default or Event of Default has occurred and is continuing;

 

 
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(ii)    
have any duty to take any discretionary action or exercise any discretionary
powers, except discretionary rights and powers expressly contemplated hereby or
by the other Financing Documents that such Agent is required to exercise as
directed in writing by the Required Lenders (or such other number or percentage
of the Lenders as shall be expressly provided for herein or in the other
Financing Documents); provided that such Agent shall not be required to take any
action that, in its opinion or the opinion of its counsel, may expose the Agent
to liability or that is contrary to any Financing Document or applicable Law; or

 
(iii)   
except as expressly set forth herein and in the other Financing Documents, have
any duty to disclose, nor shall any Agent be liable for any failure to disclose,
any information relating to any Borrower or any of its Affiliates that is
communicated to or obtained by the Person serving as an Agent or any of its
Affiliates in any capacity.

 
(b) No Agent shall be liable for any action taken or not taken by it (i) with
the prior written consent or at the request of the Required Lenders (or such
other number or percentage of the Lenders as may be necessary, or as such Agent
may believe in good faith to be necessary, under the circumstances as provided
in Section 10.01 (Appointment and Authority)), (ii) in connection with any
amendment, consent, approval or waiver which it is permitted under the Financing
Documents to enter into, agree to or grant or (iii) in the absence of its own
gross negligence or willful misconduct.  Each Agent shall be deemed not to have
knowledge of any Default or Event of Default unless and until notice describing
such Default or Event of Default is given to such Agent in writing by a Borrower
or a Lender.
 
(c) No Agent shall be responsible for or have any duty to ascertain or inquire
into (i) any statement, warranty or representation made in or in connection with
this Agreement or any other Financing Document, (ii) the contents of any
certificate, report or other document delivered hereunder or thereunder or in
connection herewith or therewith, (iii) the performance or observance of any of
the covenants, agreements or other terms or conditions set forth herein or
therein or the occurrence or continuance of any Default or Event of Default,
(iv) the validity, enforceability, effectiveness or genuineness of this
Agreement, any other Financing Document or any other agreement, instrument or
document, or the perfection or priority of any Lien or security interest, or (v)
the satisfaction of any condition set forth in Article VI (Conditions Precedent)
or elsewhere herein, other than to confirm receipt of items expressly required
to be delivered to any such Agent.
 

 
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Section 10.04 Reliance by Agents.  Each Agent shall be entitled to rely upon,
and shall not incur any liability for relying upon, any notice, request,
certificate, consent, statement, instrument, document or other writing
(including any electronic message, internet or intranet website posting or other
distribution) believed by it to be genuine and to have been signed, sent or
otherwise authenticated by the proper Person.  Each Agent also may rely upon any
statement made to it orally or by telephone and believed by it to have been made
by the proper Person, and shall not incur any liability for relying thereon.  In
determining compliance with any condition hereunder to the making of a Loan that
by its terms must be fulfilled to the satisfaction of a Lender, each Agent may
presume that such condition is satisfactory to such Lender unless such Agent
shall have received notice to the contrary from such Lender prior to the making
of such Loan.  Each Agent may consult with legal counsel (who may be counsel for
a Borrower), independent accountants and other experts selected by it, and shall
not be liable for any action taken or not taken by it in accordance with the
advice of any such counsel, accountants or experts.
 
Section 10.05 Delegation of Duties.  Each Agent may perform any and all of its
duties and exercise any and all its rights and powers hereunder or under any
other Financing Document by or through any one or more sub agents appointed by
such Agent.  Each Agent and any such sub agent may perform any and all of its
duties and exercise its rights and powers by or through their respective Related
Parties.  The exculpatory provisions of this Article X shall apply to any such
sub agent and to the Related Parties of such Agent and any such sub agent, and
shall apply to their respective activities in connection with their acting as
Agent.
 
Section 10.06 Resignation or Removal of Agent.  (a)  Any Agent may resign from
the performance of all its functions and duties hereunder and/or under the other
Financing Documents at any time by giving thirty (30) days’ prior notice to the
Borrowers and the Lenders.  Any Agent may be removed at any time by the Required
Lenders.  Such resignation or removal shall take effect upon the appointment of
a successor Agent, in accordance with this Section 10.06.
 
(b) Upon any notice of resignation by any Agent or upon the removal of any Agent
by the Required Lenders, the Required Lenders shall appoint a successor Agent
hereunder and under each other Financing Document who shall be a commercial bank
having a combined capital and surplus of at least two hundred fifty million
Dollars ($250,000,000).
 
(c) If no successor Agent has been appointed within thirty (30) days after the
date such notice of resignation was given by such Agent or the Required Lenders
elected to remove such Agent, any Senior Secured Party may petition any court of
competent jurisdiction for the appointment of a successor Agent.  Such court may
thereupon, after such notice, if any, as it may deem proper, appoint a successor
Agent, as applicable, who shall serve as Agent, hereunder and under each other
Financing Document until such time, if any, as the Required Lenders appoint a
successor Agent, as provided above.
 

 
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(d) Upon the acceptance of a successor’s appointment as Agent hereunder, such
successor shall succeed to and become vested with all of the rights, powers,
privileges and duties of the retiring (or removed) Agent, and the retiring (or
removed) Agent shall be discharged from all of its duties and obligations
hereunder or under the other Financing Documents.  After the retirement or
removal of any Agent hereunder and under the other Financing Documents, the
provisions of this Article X shall continue in effect for the benefit of such
retiring (or removed) Agent, its sub agents and their respective Related Parties
in respect of any actions taken or omitted to be taken by any of them while the
retiring Agent was acting as Agent.
 
(e) If a retiring or removed Agent is the Accounts Bank, such Accounts Bank will
promptly transfer all of the Project Accounts and the Accounts Property to the
possession or control of the successor Accounts Bank and will execute and
deliver such notices, instructions and assignments as may be reasonably
necessary or desirable to transfer the rights of the Accounts Bank with respect
to the Project Accounts and the Accounts Property to the successor Accounts
Bank.
 
(f) If a retiring or removed Agent is the Collateral Agent, such Collateral
Agent will promptly transfer any Collateral in the possession or control of such
Collateral Agent to the successor Collateral Agent and will execute and deliver
such notices, instructions and assignments as may be reasonably necessary or
desirable to transfer the rights of the Collateral Agent with respect to such
Collateral property to the successor Collateral Agent.
 
Section 10.07 No Amendment to Duties of Agent Without Consent.  No Agent shall
be bound by any waiver, amendment, supplement or modification of this Agreement
or any other Financing Document that affects its rights or duties hereunder or
thereunder unless such Agent shall have given its prior written consent, in its
capacity as Agent, thereto.
 
Section 10.08 Non-Reliance on Agent and Other Lenders.  Each Lender acknowledges
that it has, independently and without reliance upon any Agent or any other
Lender or any of their Related Parties and based on such documents and
information as it has deemed appropriate, made its own credit analysis and
decision to enter into this Agreement and make its Loans.  Each Lender also
acknowledges that it will, independently and without reliance upon any Agent or
any other Lender or any of their Related Parties and based on such documents and
information as it shall from time to time deem appropriate, continue to make its
own decisions in taking or not taking action under or based upon this Agreement,
any other Financing Document or any related agreement or any document furnished
hereunder or thereunder.
 
Section 10.09 Collateral Agent May File Proofs of Claim.  (a)  In case of the
pendency of any bankruptcy or insolvency proceeding relative to any Borrower,
the Collateral Agent (irrespective of whether the principal of any Loan shall
then be due and payable as herein expressed or by declaration or otherwise and
irrespective of whether the Collateral Agent or any other Senior Secured Party
shall have made any demand on any Borrower) shall be entitled and empowered, but
shall not be obligated to, by intervention in such proceeding or otherwise:
 

 
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(i)   
to file and prove a claim for the whole amount of the principal and interest
owing and unpaid in respect of the Loans and all other Obligations that are
owing and unpaid and to file such other documents as may be necessary or
advisable in order to have the claims of the Senior Secured Parties (including
any claim for the reasonable compensation, expenses, disbursements and advances
of the Senior Secured Parties and their respective agents and counsel and all
other amounts due the Senior Secured Parties under Sections 3.11 (Fees), 11.07
(Costs and Expenses) and 11.09 (Indemnification by the Borrowers)) allowed in
such judicial proceeding; and

 
(ii)   
to collect and receive any monies or other property payable or deliverable on
any such claims and to distribute the same.

 
Any custodian, receiver, assignee, trustee, liquidator, sequestrator or other
similar official in any such judicial proceeding is hereby authorized by each
Lender to make such payments to the Collateral Agent and, in the event that the
Collateral Agent may consent to the making of such payments directly to the
Lenders, to pay to the Collateral Agent any amount due for the reasonable
compensation, expenses, disbursements and advances of the Agents and their
respective agents and counsel, and any other amounts due the Agents under
Sections 3.11 (Fees), 11.07 (Costs and Expenses) and 11.09 (Indemnification by
the Borrowers).
 
(b) Nothing contained herein shall be deemed to authorize the Collateral Agent
to authorize or consent to or accept or adopt on behalf of any Lender any plan
of reorganization, arrangement, adjustment or composition affecting the
Obligations or the rights of any Lender or to authorize the Collateral Agent to
vote in respect of the claim of any Lender in any such proceeding.
 
Section 10.10 Collateral Matters.  (a)  The Lenders irrevocably authorize the
Collateral Agent to release any Lien on any property granted to or held by the
Collateral Agent under any Financing Document (i) upon the occurrence of the
Discharge Date, (ii) if approved, authorized or ratified in writing in
accordance with Section 11.01 (Amendments, Etc.) or (iii) as permitted pursuant
to the terms of the Financing Documents (including as contemplated by Sections
7.02(f) (Negative Covenants-Asset Dispositions).
 
(b) Upon request by the Collateral Agent at any time, the Lenders will confirm
in writing the Collateral Agent’s authority to release its interest in
particular types or items of property pursuant to this Section 10.10.  In each
case as specified in this Section 10.10, the Collateral Agent will, at the
Borrowers’ expense, execute and deliver to the applicable Borrower such
documents as such Person may reasonably request to evidence the release of such
item of Collateral in accordance with the terms of the Financing Documents and
this Section 10.10.
 

 
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Section 10.11 Copies.  Each Agent shall give prompt notice to each Lender of
each material notice or request required or permitted to be given to such Agent
by the Borrowers pursuant to the terms of this Agreement or any other Financing
Document (unless concurrently delivered to the Lenders by the Borrowers).  Each
Agent will distribute to each Lender each document or instrument (including each
document or instrument delivered by any Borrower to such Agent pursuant to
Article V (Representations and Warranties), Article VI (Conditions Precedent)
and Article VII (Covenants)) received for its account and copies of all other
communications received by such Agent from the Borrowers for distribution to the
Lenders by such Agent in accordance with the terms of this Agreement or any
other Financing Document.
 
ARTICLE XI

 
MISCELLANEOUS PROVISIONS
 
Section 11.01 Amendments, Etc.  No amendment or waiver of any provision of this
Agreement or any other Financing Document, and no consent to any departure by
any Borrower or Borrower Agent therefrom, shall be effective unless in writing
signed by the Required Lenders (or, if expressly contemplated hereby, the
Administrative Agent) and, in the case of an amendment, the Borrowers and
Borrower Agent, and in each such case acknowledged by the Administrative Agent,
and each such waiver or consent shall be effective only in the specific instance
and for the specific purpose for which given; provided that no such amendment,
waiver or consent shall:
 
(a) waive any condition set forth in Section 6.01 (Conditions to Closing)
without the prior consent of all the Lenders (other than the Non-Voting
Lenders);
 
(b) extend or increase the Commitment of any Lender (or reinstate any Commitment
terminated pursuant to Section 9.02 (Action Upon Event of Default) without the
prior written consent of such Lender (other than any Non-Voting Lender);
 
(c) postpone any date scheduled for any payment of principal or interest under
Section 3.01 (Repayment of Loans) or 3.02 (Interest Payment Dates), or any date
fixed by the Administrative Agent for the payment of fees or other amounts due
to the Lenders (or any of them) hereunder or under any other Financing Document
without the prior written consent of each Lender affected thereby (other than
any Non-Voting Lender);
 
(d) reduce the principal of, or the rate of interest specified herein on, any
Loan, or any Fees or other amounts (including any mandatory prepayments under
Section 3.08 (Mandatory Prepayment) payable hereunder or under any other
Financing Document to any Lender without the prior written consent of each
Lender directly affected thereby (other than any Non-Voting Lender); provided
that only the prior written consent of the Required Lenders shall be necessary
to amend the definition of Default Rate or to waive any obligation of the
Borrowers to pay interest at the Default Rate;
 
(e) change the order of application of any reduction in the Commitments or any
prepayment of Loans from the application thereof set forth in the applicable
provisions of Section 2.06 (Termination or Reduction of Commitment), Section
3.07 (Optional Prepayment) or 3.08 (Mandatory Prepayment), respectively, in any
manner without the prior written consent of each Lender affected thereby (other
than any Non-Voting Lender);
 

 
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(f) change any provision of this Section 11.01, the definition of Required
Lenders or any other provision of any Financing Document specifying the number
or percentage of Lenders required to amend, waive or otherwise modify any rights
under any Financing Document (including any such provision specifying the number
or percentage of Lenders required to waive any Event of Default or forbear from
taking any action or pursuing any remedy with respect to any Event of Default),
or make any determination or grant any consent under any Financing Document,
without the prior written consent of each Lender (other than any Non-Voting
Lender); or
 
(g) release (i) any Borrower from all or substantially all of its obligations
under any Financing Document, or (ii) all or substantially all of the Collateral
in any transaction or series of related transactions, without the prior written
consent of each Lender (other than any Non-Voting Lender);
 
and provided further that (i) no amendment, waiver or consent shall, unless in
writing and signed by an Agent in addition to the Lenders required above, affect
the rights or duties of, or any fees or other amounts payable to, such Agent
under this Agreement or any other Financing Document; and (ii) Section 11.03(h)
(Assignments) may not be amended, waived or otherwise modified without the prior
written consent of each Granting Lender all or any part of whose Loan is being
funded by an SPV at the time of such amendment, waiver or other modification.
 
Notwithstanding the other provisions of this Section 11.01, the Borrowers, the
Borrower Agent, the Collateral Agent and the Administrative Agent may (but shall
have no obligation to) amend or supplement the Financing Documents without the
consent of any Lender: (i) to cure any ambiguity, defect or inconsistency; (ii)
to make any change that would provide any additional rights or benefits to the
Lenders; or (iii) to make, complete or confirm any grant of Collateral permitted
or required by this Agreement or any release of any Collateral that is otherwise
permitted under the terms of this Agreement or the Orders.  Notwithstanding
anything to the contrary herein, no Defaulting Lender shall have any right to
approve or disapprove any amendment, waiver or consent hereunder, except that
the Commitment of such Lender may not be increased or extended without the
consent of such Lender.
 
Section 11.02 Applicable Law; Jurisdiction; Etc.  (a)  GOVERNING LAW.  THIS
AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF
THE STATE OF NEW YORK, UNITED STATES OF AMERICA, WITHOUT REFERENCE TO CONFLICTS
OF LAWS (OTHER THAN SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW).
 
(b) All judicial proceedings brought against any Borrower or Borrower Agent
arising out of or relating to this Agreement or any other Financing Document, or
nay Obligations hereunder or thereunder, must be brought in the Bankruptcy Court
and, if the Bankruptcy Court does not have (or abstains from) jurisdiction, such
proceeding may be brought in the courts of the State of New York, the courts of
the Unites States of America for the Southern District of New York and appellate
court of any thereof.
 

 
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(c) SUBMISSION TO JURISDICTION.  EACH BORROWER AND THE BORROWER AGENT
IRREVOCABLY AND UNCONDITIONALLY CONSENTS AND AGREES THAT THE BANKRUPTCY COURT
SHALL HAVE EXCLUSIVE JURISDICTION TO HEAR AND DETERMINE ANY CLAIMS OR DISPUTES
BETWEEN EACH BORROWER AND THE BORROWER AGENT, ON THE ONE HAND, AND EACH LENDER
AND EACH AGENT, ON THE OTHER HAND, PERTAINING TO THIS AGREEMENT OR ANY OF THE
OTHER FINANCING DOCUMENTS OR TO ANY MATTER ARISING OUT OF OR RELATING TO THIS
AGREEMENT OR ANY OF THE OTHER FINANCING DOCUMENTS; PROVIDED, THAT EACH BORROWER
AND THE BORROWER AGENT ACKNOWLEDGE THAT ANY APPEALS FROM THE BANKRUPTCY COURT
MAY HAVE TO BE HEARD BY A COURT OTHER THAN THE BANKRUPTCY COURT; PROVIDED,
FURTHER, THAT, SUBJECT TO RECEIVING PRIOR APPROVAL FROM THE BANKRUPTCY COURT
AUTHORIZING SUCH ACTION, NOTHING IN THIS AGREEMENT SHALL BE DEEMED OR OPERATE TO
PRECLUDE EACH LENDER AND EACH AGENT BRINGING SUIT OR TAKING OTHER LEGAL ACTION
IN ANY OTHER JURISDICTION TO REALIZE ON THE COLLATERAL OR ANY OTHER SECURITY FOR
THE OBLIGATIONS, OR TO ENFORCE A JUDGMENT OR OTHER COURT ORDER.
 
(d) WAIVER OF VENUE.  EACH BORROWER AND THE BORROWER AGENT IRREVOCABLY AND
UNCONDITIONALLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY
OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY ACTION
OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER
FINANCING DOCUMENT IN ANY COURT REFERRED TO IN SECTION 11.02(b).  EACH OF THE
PARTIES HERETO HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY
APPLICABLE LAW, THE DEFENSE OF AN INCONVENIENT FORUM TO THE MAINTENANCE OF SUCH
ACTION OR PROCEEDING IN ANY SUCH COURT.
 
(e) Immunity.  To the extent that any Borrower or the Borrower Agent has or
hereafter may acquire any immunity from jurisdiction of any court or from any
legal process (whether through service or notice, attachment prior to judgment,
attachment in aid of execution, execution or otherwise) with respect to itself
or its property, each Borrower and the Borrower Agent hereby irrevocably and
unconditionally waives such immunity in respect of its obligations under the
Financing Documents and, without limiting the generality of the foregoing,
agrees that the waivers set forth in this Section 11.02(e) shall have the
fullest scope permitted under the Foreign Sovereign Immunities Act of 1976 of
the United States and are intended to be irrevocable for purposes of such Act.
 
(f) WAIVER OF JURY TRIAL.  EACH PARTY HERETO HEREBY IRREVOCABLY WAIVES, TO THE
FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY
JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING
TO THIS AGREEMENT OR ANY OTHER FINANCING DOCUMENT OR THE TRANSACTIONS
CONTEMPLATED HEREBY OR THEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER
THEORY).  EACH PARTY HERETO (i) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR
ATTORNEY OF ANY OTHER PERSON HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH
OTHER PERSON WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE
FOREGOING WAIVER AND (ii) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE
BEEN INDUCED TO ENTER INTO THIS AGREEMENT AND THE OTHER FINANCING DOCUMENTS BY,
AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 11.02.
 

 
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Section 11.03 Assignments.  (a)   The provisions of this Agreement shall be
binding upon and inure to the benefit of the parties hereto and their respective
successors and assigns permitted hereby, except that neither any Borrower nor
the Borrower Agent may assign or otherwise transfer any of its rights or
obligations hereunder without the prior written consent of each Agent and
Lender, and no Lender may assign or otherwise transfer any of its rights or
obligations hereunder except (i) to an Eligible Assignee in accordance with
Section 11.03(b), (ii) by way of participation in accordance with Section
11.03(d), (iii) by way of pledge or assignment of a security interest subject to
the restrictions of Section 11.03(f), or (iv) to an SPV in accordance with the
provisions of Section 11.03(h) (and any other attempted assignment or transfer
by any party hereto shall be null and void).  Nothing in this Agreement, express
or implied, shall be construed to confer upon any Person (other than the parties
hereto, their respective successors and assigns permitted hereby, Participants
to the extent provided in this Section 11.03 and, to the extent expressly
contemplated hereby, the Related Parties of each Agent and Lender) any legal or
equitable right, remedy or claim under or by reason of this Agreement.
 
(b) Any Lender may at any time after the date hereof assign to one or more
Eligible Assignees all or a portion of its rights and obligations under this
Agreement (including all or a portion of its Commitment and the Loans at the
time owing to it); provided that (i) except in the case of an assignment of the
entire remaining amount of the assigning Lender’s Commitment and the Loans at
the time owing to it or in the case of an assignment to a Lender or an Affiliate
of a Lender or an Approved Fund with respect to a Lender, the Commitment (which
for this purpose includes the Loans outstanding thereunder) or, if the
applicable Commitment is not then in effect, the principal outstanding balance
of the Loans of the assigning Lender subject to each such assignment, determined
as of the date the Lender Assignment Agreement with respect to such assignment
is delivered to the Administrative Agent or, if “Trade Date” is specified in the
Lender Assignment Agreement, as of the Trade Date, shall not be less than one
million Dollars ($1,000,000) and such assigning Lender’s entire Commitment,
unless the Administrative Agent otherwise consents in writing; (ii) each partial
assignment shall be made as an assignment of a proportionate part of all the
assigning Lender’s rights and obligations under this Agreement with respect to
the Loan or the Commitment assigned; (iii) the parties to each assignment shall
execute and deliver to the Administrative Agent a Lender Assignment Agreement,
together with a processing and recordation fee of two thousand five hundred
Dollars ($2,500); provided that (A) no such fee shall be payable in the case of
an assignment to a Lender, an Affiliate of a Lender or an Approved Fund with
respect to a Lender and (B) in the case of contemporaneous assignments by a
Lender to one or more Funds managed by the same investment advisor (which Funds
are not then Lenders hereunder), only a single such two thousand five hundred
Dollars ($2,500) fee shall be payable for all such contemporaneous assignments;
(iv) the Eligible Assignee, if it is not a Lender prior to such assignment,
shall deliver to the Administrative Agent an administrative questionnaire and
(v) the assignor shall provide notice of such assignment to the Borrower
Agent.  Subject to acceptance and recording thereof by the Administrative Agent
pursuant to Section 11.03(c), on and after the effective date specified in each
Lender Assignment Agreement, the Eligible Assignee thereunder shall be a party
to this Agreement and, to the extent of the interest assigned by such Lender
Assignment Agreement, have the rights and obligations of a Lender under this
Agreement, and the assigning Lender thereunder shall, to the extent of the
interest assigned by such Lender Assignment Agreement, be released from its
obligations under this Agreement (and, in the case of a Lender Assignment
Agreement covering all of the assigning Lender’s rights and obligations under
this Agreement, such Lender shall cease to be a party hereto but shall continue
to be entitled to the benefits of Sections 4.01 (Eurodollar Rate Lending
Unlawful), 4.03 (Increased Eurodollar Loan Costs), 4.05 (Funding Losses), 11.07
(Costs and Expenses) and 11.09 (Indemnification by the Borrowers) with respect
to facts and circumstances occurring prior to the effective date of such
assignment).  Upon request, the Borrowers (at their expense) shall execute and
deliver a Note to the assignee Lender.  Any assignment or transfer by a Lender
of rights or obligations under this Agreement that does not comply with this
Section 11.03(b) shall be treated for purposes of this Agreement as a sale by
such Lender of a participation in such rights and obligations in accordance with
Section 11.03(d).
 

 
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(c) The Administrative Agent, acting solely for this purpose as an agent of the
Borrowers, shall maintain at the Administrative Agent’s office a copy of each
Lender Assignment Agreement delivered to it and a register for the recordation
of the names and addresses of the Lenders, and the Commitment of, and principal
amount of the Loans owing to, each Lender pursuant to the terms hereof from time
to time (the “Register”).  The entries in the Register shall be conclusive, and
the Borrowers, the Agents and the Lenders may treat each Person whose name is
recorded in the Register pursuant to the terms hereof as a Lender hereunder for
all purposes of this Agreement, notwithstanding notice to the contrary.  The
Register shall be available for inspection by the Borrowers at any reasonable
time and from time to time upon reasonable prior notice.  In addition, at any
time that a request for a consent for a material or other substantive change to
the Financing Documents is pending, any Lender may request and receive from the
Administrative Agent a copy of the Register.
 
(d) Any Lender may at any time, without the consent of, or notice to, the
Borrowers, the Borrower Agent or any Agent, sell participations to any Person
(each, a “Participant”) in all or a portion of such Lender’s rights and/or
obligations under this Agreement (including all or a portion of its Commitment
and/or the Loans owing to it); provided that (i) such Lender’s obligations under
this Agreement shall remain unchanged, (ii) such Lender shall remain solely
responsible to the other parties hereto for the performance of such obligations
and (iii) the Borrowers, the Borrower Agent, the Agents and the other Lenders
shall continue to deal solely and directly with such Lender in connection with
such Lender’s rights and obligations under this Agreement.  Any agreement or
instrument pursuant to which a Lender sells such a participation shall provide
that such Lender shall retain the sole right to enforce this Agreement and to
approve any amendment, modification or waiver of any provision of this
Agreement; provided that such agreement or instrument may provide that such
Lender will not, without the consent of the Participant, agree to any amendment,
waiver or other modification described in the first proviso to Section 11.01
(Amendments, Etc.) that directly affects such Participant.  Subject to Section
11.03(e), the Borrowers agree that each Participant shall be entitled to the
benefits of Sections 4.01 (Eurodollar Rate Lending Unlawful), 4.03 (Increased
Eurodollar Loan Costs) and 4.05 (Funding Losses), to the same extent as if it
were a Lender and had acquired its interest by assignment pursuant to Section
11.03(b).  To the extent permitted by law, each Participant also shall be
entitled to the benefits of Section 11.15 (Right of Setoff) as though it were a
Lender; provided such Participant agrees to be subject to Section 3.13 (Sharing
of Payments) as though it were a Lender.
 
(e) A Participant shall not be entitled to receive any greater payment under
Section 4.01 (Eurodollar Rate Lending Unlawful) or 4.03 (Increased Eurodollar
Loan Costs) than the applicable Lender would have been entitled to receive with
respect to the participation sold to such Participant, unless the sale of the
participation to such Participant is made with the prior written consent of the
Borrower Agent.
 
(f) Any Lender may at any time pledge or assign a security interest in all or
any portion of its rights under this Agreement (including under its Notes, if
any) to secure obligations of such Lender, including any pledge or assignment to
secure obligations to a Federal Reserve Bank; provided that no such pledge or
assignment shall release such Lender from any of its obligations hereunder or
substitute any such pledgee or assignee for such Lender as a party hereto.
 

 
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(g) The words “execution,” “signed,” “signature,” and words of like import in
any Lender Assignment Agreement shall be deemed to include electronic signatures
or the keeping of records in electronic form, each of which shall be of the same
legal effect, validity or enforceability as a manually executed signature or the
use of a paper-based recordkeeping system, as the case may be, to the extent and
as provided for in any applicable Law, including the Federal Electronic
Signatures in Global and National Commerce Act, the New York State Electronic
Signatures and Records Act, or any other similar state laws based on the Uniform
Electronic Transactions Act.
 
(h) Notwithstanding anything to the contrary contained herein, any Lender (a
“Granting Lender”) may grant to a special purpose funding vehicle identified as
such in writing from time to time by the Granting Lender to the Administrative
Agent and the Borrowers (an “SPV”) the option to provide all or any part of any
Loan that such Granting Lender would otherwise be obligated to make pursuant to
this Agreement; provided that (i) nothing herein shall constitute a commitment
by any SPV to fund any Loan, and (ii) if an SPV elects not to exercise such
option or otherwise fails to make all or any part of such Loan, the Granting
Lender shall be obligated to make such Loan pursuant to the terms hereof or, if
it fails to do so, to make such payment to the Administrative Agent as is
required under Section 3.13 (Sharing of Payments).  Each party hereto hereby
agrees that (A) neither the grant to any SPV nor the exercise by any SPV of such
option shall increase the costs or expenses or otherwise increase or change the
obligations of the Borrowers under this Agreement (including their obligations
under Section 4.03 (Increased Eurodollar Loan Costs), (B) no SPV shall be liable
for any indemnity or similar payment obligation under this Agreement for which a
Lender would be liable, and (C) the Granting Lender shall for all purposes,
including the approval of any amendment, waiver or other modification of any
provision of any Financing Document, remain the lender of record hereunder.  The
making of a Loan by an SPV hereunder shall utilize the Commitment of the
Granting Lender to the same extent, and as if, such Loan were made by such
Granting Lender.  In furtherance of the foregoing, each party hereto hereby
agrees (which agreement shall survive the termination of this Agreement) that,
prior to the date that is one (1) year and one (1) day after the payment in full
of all outstanding commercial paper or other senior debt of any SPV, it will not
institute against, or join any other Person in instituting against, such SPV any
bankruptcy, reorganization, arrangement, insolvency, or liquidation proceeding
under the laws of the United States or any State thereof.  Notwithstanding
anything to the contrary contained herein, any SPV may (1) with notice to, but
without prior consent of the Borrowers and the Administrative Agent and without
paying any processing fee therefor, assign all or any portion of its right to
receive payment with respect to any Loan to the Granting Lender and (2) disclose
on a confidential basis any non-public information relating to its funding of
any Loan to any rating agency, commercial paper dealer or provider of any surety
or Guarantee or credit or liquidity enhancement to such SPV.
 
Section 11.04 Benefits of Agreement.  Nothing in this Agreement or any other
Financing Document, express or implied, shall give to any Person, other than the
parties hereto, and each of their successors and permitted assigns under this
Agreement or any other Financing Document, any benefit or any legal or equitable
right or remedy under this Agreement.
 

 
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Section 11.05 Borrower Agent.  Each Borrower hereby appoints and authorizes
Pacific Holding, and Pacific Holding hereby accepts such appointment, as such
Borrower’s Borrower Agent to act as agent on such Borrower’s behalf and to make
any representations or certifications, deliver and receive any notices or other
communications, and otherwise represent and act on behalf of such Borrower under
the Financing Documents, and to comply with all covenants, conditions and other
provisions of the Financing Documents required to be satisfied by the Borrower
Agent.  Each Borrower hereby acknowledges and agrees that it will be bound by
any action or inaction taken by the Borrower Agent as if such action or inaction
had been taken by such Borrower.
 
Section 11.06 Consultants.  (a)  The Required Lenders or the Administrative
Agent may, in their sole discretion, appoint any Consultant for the purposes
specified herein.  If any of the Consultants is removed or resigns and thereby
ceases to act for purposes of this Agreement and the other Financing Documents,
the Required Lenders or the Administrative Agent, as the case may be, shall
designate a Consultant in replacement.
 
(b) The Borrowers shall reimburse each Consultant appointed hereunder for the
reasonable fees and reasonable and documented out-of-pocket expenses of such
Consultant retained on behalf of the Lenders pursuant to this Section 11.06.
 
(c) In all cases in which this Agreement provides for any Consultant to “agree,”
“approve,” “certify” or “confirm” any report or other document or any fact or
circumstance, such Consultant may make the determinations and evaluations
required in connection therewith based upon information provided by the
Borrowers, the Borrower Agent or other sources reasonably believed by such
Consultant to be knowledgeable and responsible, without independently verifying
such information; provided that, notwithstanding the foregoing, such Consultant
shall engage in such independent investigations or findings as it may from time
to time deem necessary in its reasonable discretion to support the
determinations and evaluations required of it.
 
Section 11.07 Costs and Expenses.  Each Borrower shall pay (a) all reasonable
and documented out of pocket expenses incurred by the Agents or any Lender
(including all reasonable fees, costs and expenses of counsel for any Senior
Secured Party and a financial advisor for the Administrative Agent), in
connection with (i) the preparation, negotiation, syndication, execution and
delivery of this Agreement and the other Financing Documents (whether or not the
transactions contemplated hereby or thereby are consummated), (ii) the
negotiation, preparation and filing and recordation of the Financing Documents,
the Interim Order and the Final Order, (iii) any amendments, modifications or
waivers of the provisions of this Agreement, the other Financing Documents, the
Interim Order and the Final Order, (iv) the administration of this Agreement,
the other Financing Documents, the Interim Order and the Final Order, (v) the
obtaining of approval of the Financing Documents by the Bankruptcy Court, (vi)
the preparation and review of pleadings, documents and reports related to any
Chapter 11 Case or any subsequent case under Chapter 7 of the Bankruptcy Code,
attendance at meetings, court hearings or conferences related to any Chapter 11
Case or any subsequent case under Chapter 7 of the Bankruptcy Code and (vii)
general monitoring of any Chapter 11 Case or any subsequent case under Chapter 7
of the Bankruptcy Code and (b) all out-of-pocket expenses incurred by the Agents
or any Lender (including all fees, costs and expenses of counsel for any Senior
Secured Party), in connection with the enforcement or protection of its rights
in connection with this Agreement and the other Financing Documents, including
its rights under this Section 11.07, including in connection with any workout,
restructuring or negotiations in respect of the Obligations.
 

 
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Section 11.08 Counterparts; Effectiveness.  This Agreement may be executed in
counterparts (and by different parties hereto in different counterparts), each
of which shall constitute an original, but all of which when taken together
shall constitute a single contract.  This Agreement shall become effective when
it has been executed by the Administrative Agent and when the Administrative
Agent has received counterparts hereof that, when taken together, bear the
signatures of each of the other parties hereto.  Delivery of an executed
counterpart of a signature page of this Agreement by telecopy or portable
document format (“pdf”) shall be effective as delivery of a manually executed
counterpart of this Agreement.
 
Section 11.09 Indemnification by the Borrowers.  (a)  Each Borrower hereby
agrees to indemnify each Agent (and any sub-agent thereof), each Lender and each
Related Party of any of the foregoing Persons (each such Person being called an
“Indemnitee”) against, and hold each Indemnitee harmless from, any and all
losses, claims, damages, liabilities and related expenses (including all
reasonable and documented fees, costs and out-of-pocket expenses of counsel for
any Indemnitee), incurred by any Indemnitee or asserted against any Indemnitee
by any third party or by any Borrower arising out of, in connection with, or as
a result of:
 
(i)   
the execution or delivery of this Agreement, any other Transaction Document or
any agreement or instrument contemplated hereby or thereby, the performance by
the parties hereto or thereto of their respective obligations hereunder or
thereunder or the consummation of the transactions contemplated hereby or
thereby;

 
(ii)   
any Loan or the use or proposed use of the proceeds therefrom;

 
(iii)   
any actual or alleged presence, release or threatened release of Materials of
Environmental Concern on or from any Plant or any property owned, leased or
operated by any Borrower, or any liability pursuant to an Environmental Law
related in any way to any Plant, any Site or the Borrowers;

 
(iv)   
any actual or prospective claim, litigation, investigation or proceeding
relating to any of the foregoing, whether based on contract, tort or any other
theory, whether brought by a third party or by any Borrower or any of its
shareholders, members, managers or creditors, and regardless of whether any
Indemnitee is a party thereto and whether or not any of the transactions
contemplated hereunder or under any of the other Financing Documents is
consummated, in all cases, whether or not caused by or arising, in whole or in
part, out of the comparative, contributory or sole negligence of the Indemnitee;
and/or

 
(v)   
any claim, demand or liability for broker’s or finder’s or placement fees or
similar commissions, whether or not payable by a Borrower, alleged to have been
incurred in connection with such transactions, other than any broker’s or
finder’s fees payable to Persons engaged by the Lenders or the Agents without
the knowledge of the Borrowers;

 

 
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provided that such indemnity shall not, as to any Indemnitee, be available to
the extent that such losses, claims, damages, liabilities or related expenses
are determined by a court of competent jurisdiction by final and Non-Appealable
judgment to have resulted from the gross negligence or willful misconduct of
such Indemnitee.
 
(b) To the extent that any Borrower for any reason fails to indefeasibly pay any
amount required under Section 11.09(a) to be paid by it to any Agent (or any
sub-agent thereof) or any Related Party of any of the foregoing, each Lender
severally agrees to pay to such Agent (or any such sub-agent), or such Related
Party, as the case may be, such Lender’s ratable share (determined as of the
time that the applicable unreimbursed expense or indemnity payment is sought) of
such unpaid amount; provided that the unreimbursed expense or indemnified loss,
claim, damage, liability or related expense, as the case may be, was incurred by
or asserted against such Agent (or any sub-agent thereof) in its capacity as
such, or against any Related Party of any of the foregoing acting for such Agent
(or any sub-agent thereof) in connection with such capacity.  The obligations of
the Lenders under this Section 11.09(b) are subject to the provisions of Section
2.04(d) (Funding of Loans).  The obligations of the Lenders to make payments
pursuant to this Section 11.09(b) are several and not joint and shall survive
the payment in full of the Obligations and the termination of this
Agreement.  The failure of any Lender to make payments on any date required
hereunder shall not relieve any other Lender of its corresponding obligation to
do so on such date, and no Lender shall be responsible for the failure of any
other Lender to do so.
 
(c) Except as otherwise provided in Article VI (Conditions Precedent), all
amounts due under this Section 11.09 shall be payable not later than ten (10)
Business Days after demand therefor.
 
Section 11.10 Interest Rate Limitation.  Notwithstanding anything to the
contrary contained in any Financing Document, the interest paid or agreed to be
paid under the Financing Documents shall not exceed the maximum rate of
non-usurious interest permitted by applicable Law (the “Maximum Rate”).  If any
Agent or any Lender shall receive interest in an amount that exceeds the Maximum
Rate, the excess interest shall be applied to the principal of the Loans or, if
it exceeds such unpaid principal, refunded to the Borrowers.  In determining
whether the interest contracted for, charged, or received by any Senior Secured
Party exceeds the Maximum Rate, such Person may, to the extent permitted by
applicable Law, (a) characterize any payment that is not principal as an
expense, fee, or premium rather than interest, (b) exclude prepayments and the
effects thereof, and (c) amortize, prorate, allocate, and spread in equal or
unequal parts the total amount of interest throughout the contemplated term of
the Obligations hereunder.
 
Section 11.11 No Waiver; Cumulative Remedies.  No failure by any Senior Secured
Party to exercise, and no delay by any such Person in exercising, any right,
remedy, power or privilege hereunder or under any other Financing Document shall
operate as a waiver thereof; nor shall any single or partial exercise of any
right, remedy, power or privilege hereunder preclude any other or further
exercise thereof or the exercise of any other right, remedy, power or
privilege.  The rights, remedies, powers and privileges herein provided, and
provided under each other Financing Document, are cumulative and not exclusive
of any rights, remedies, powers and privileges provided by law.
 

 
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Section 11.12 Notices and Other Communications.  (a)  Except in the case of
notices and other communications expressly permitted to be given by telephone
(and except as provided in Section 11.12(b)), all notices and other
communications provided for herein shall be in writing and shall be delivered by
hand or overnight courier service, mailed by certified or registered mail or
sent by telecopier or electronic mail as follows, and all notices and other
communications expressly permitted hereunder to be given by telephone shall be
made to the applicable telephone number, as follows:
 
(i)   
if to a Borrower, the Borrower Agent or any Agent, to the address, telecopier
number, electronic mail address or telephone number specified for such Person on
Schedule 11.12; and

 
(ii)   
if to any Lender, to the address, telecopier number, electronic mail address or
telephone number specified in its administrative questionnaire.

 
(b) Notices sent by hand or overnight courier service, or mailed by certified or
registered mail, shall be deemed to have been given when received; notices sent
by telecopier shall be deemed to have been given when sent (except that, if not
given during normal business hours for the recipient, shall be deemed to have
been given at the opening of business on the next Business Day for the
recipient).  Notices delivered through electronic communications to the extent
provided in Section 11.12(d) shall be effective as provided in Section
11.12(d).  Any notice sent to the Borrower Agent shall be deemed to have been
given to each Borrower.
 
(c) Notices and other communications to the Senior Secured Parties hereunder may
be delivered or furnished by electronic communication (including e mail and
internet or intranet websites) pursuant to procedures approved by the
Administrative Agent; provided that the foregoing shall not apply to notices to
any Lender pursuant to Article II (Commitments and Funding) if such Lender has
notified the Administrative Agent that it is incapable of receiving notices
under such Article II (Commitments and Funding) by electronic
communication.  Each of the Administrative Agent or a Borrower may, in its
discretion, agree to accept notices and other communications to it hereunder by
electronic communications pursuant to procedures approved by it; provided that
approval of such procedures may be limited to particular notices or
communications.
 
(d) Unless the Administrative Agent otherwise prescribes, (i) notices and other
communications sent to an e-mail address shall be deemed received upon the
sender’s receipt of an acknowledgement from the intended recipient (such as by
the “return receipt requested” function, as available, return e-mail or other
written acknowledgement); provided that if such notice or other communication is
not received during the normal business hours of the recipient, such notice or
communication shall be deemed to have been received at the opening of business
on the next Business Day for the recipient, and (ii) notices or communications
posted to an internet or intranet website shall be deemed received upon the
deemed receipt by the intended recipient at its e-mail address as described in
Section 11.12(d)(i) of notification that such notice or communication is
available and identifying the website address therefor.
 

 
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(e) Each Borrower, the Borrower Agent and the Agents may change its address,
telecopier or telephone number for notices and other communications hereunder by
notice to the other parties hereto.  Each Lender may change its address,
telecopier or telephone number for notices and other communications hereunder by
notice to the Borrowers, the Borrower Agent and each Agent.
 
(f) The Senior Secured Parties shall be entitled to rely and act upon any
written notices purportedly given by or on behalf of a Borrower or the Borrower
Agent even if (i) such notices were not made in a manner specified herein, were
incomplete or were not preceded or followed by any other form of notice
specified herein, or (ii) the terms thereof, as understood by the recipient,
varied from any confirmation thereof.  Each Borrower shall indemnify each Senior
Secured Party and the Related Parties of each of them from all losses, costs,
expenses and liabilities resulting from the reliance by such Person on each
notice purportedly given by or on behalf of a Borrower or the Borrower
Agent.  All telephonic notices to and other telephonic communications with any
Agent may be recorded by such Agent, and each of the parties hereto hereby
consents to such recording.
 
(g) So long as WestLB is the Administrative Agent, each Borrower and the
Borrower Agent hereby agrees that it will provide to the Administrative Agent
all information, documents and other materials that it is obligated to furnish
to the Administrative Agent pursuant to the Financing Documents, including all
notices, requests, financial statements, financial and other reports,
certificates and other information materials, but excluding any such
communication that (i) relates to the Funding, (ii) relates to the payment of
any principal or other amount due under this Agreement prior to the scheduled
date therefor, (iii) provides notice of any Default or Event of Default or (iv)
is required to be delivered to satisfy any condition precedent to Funding (all
such non-excluded communications being referred to herein collectively as
“Communications”), by transmitting the Communications in an electronic/soft
medium in a format acceptable to the Administrative Agent to ny_agency
services@westlb.com.  In addition, each Borrower and the Borrower Agent agrees
to continue to provide the Communications to the Administrative Agent in the
manner specified in the Financing Documents but only to the extent requested by
the Administrative Agent.
 
(h) So long as WestLB is the Administrative Agent, each Borrower and the
Borrower Agent further agrees that the Administrative Agent may make the
Communications available to the Lenders by posting the Communications on http:
www.intralinks.com (or any replacement or successor thereto) or a substantially
similar electronic transmission systems (the “Platform”).
 

 
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(i) THE PLATFORM IS PROVIDED “AS IS” AND “AS AVAILABLE”.  THE AGENTS DO NOT
WARRANT THE ACCURACY OR COMPLETENESS OF THE COMMUNICATIONS, OR THE ADEQUACY OF
THE PLATFORM AND EXPRESSLY DISCLAIM LIABILITY FOR ERRORS OR OMISSIONS IN THE
COMMUNICATIONS.  NO WARRANTY OF ANY KIND, EXPRESS, IMPLIED OR STATUTORY,
INCLUDING ANY WARRANTY OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE,
NON-INFRINGEMENT OF THIRD PARTY RIGHTS OR FREEDOM FROM VIRUSES OR OTHER CODE
DEFECTS, IS MADE BY THE AGENTS IN CONNECTION WITH THE COMMUNICATIONS OR THE
PLATFORM.  IN NO EVENT SHALL THE ADMINISTRATIVE AGENT OR ANY OF ITS AFFILIATES
OR ANY OF THEIR RESPECTIVE OFFICERS, DIRECTORS, EMPLOYEES, AGENTS, ADVISORS OR
REPRESENTATIVES (COLLECTIVELY, “AGENT PARTIES”) HAVE ANY LIABILITY TO ANY
BORROWER, THE BORROWER AGENT, ANY LENDER OR ANY OTHER PERSON OR ENTITY FOR
DAMAGES OF ANY KIND, INCLUDING DIRECT OR INDIRECT, SPECIAL, INCIDENTAL OR
CONSEQUENTIAL DAMAGES, LOSSES OR EXPENSES (WHETHER IN TORT, CONTRACT OR
OTHERWISE) ARISING OUT OF THE BORROWER’S, THE BORROWER AGENT’S OR THE
ADMINISTRATIVE AGENT’S TRANSMISSION OF COMMUNICATIONS THROUGH THE INTERNET,
EXCEPT TO THE EXTENT THE LIABILITY OF ANY AGENT PARTY IS FOUND IN A FINAL
NON-APPEALABLE JUDGMENT BY A COURT OF COMPETENT JURISDICTION TO HAVE RESULTED
PRIMARILY FROM SUCH AGENT PARTY’S GROSS NEGLIGENCE OR WILLFUL MISCONDUCT.
 
(j) The Administrative Agent agrees that the receipt of the Communications by
the Administrative Agent at its e-mail address set forth in Schedule 11.12 shall
constitute effective delivery of the Communications to the Administrative Agent
for purposes of the Financing Documents.  Each Lender agrees that notice to it
(as provided in the next sentence) specifying that the Communications have been
posted to the Platform shall constitute effective delivery of the Communications
to such Lender for purposes of the Financing Documents.  Each Lender agrees to
notify the Administrative Agent in writing (including by electronic
communication) from time to time of such Lender’s e-mail address to which the
foregoing notice may be sent by electronic transmission and that the foregoing
notice may be sent to such e-mail address.
 
(k) Notwithstanding clauses (g) to (j) above, nothing herein shall prejudice the
right of any Senior Secured Party to give any notice or other communication
pursuant to any Financing Document in any other manner specified in such
Financing Document.
 
Section 11.13 Patriot Act Notice.  Each Senior Secured Party (for itself and not
on behalf of any Lender) hereby notifies the Borrowers that pursuant to the
requirements of the Patriot Act, it is required to obtain, verify and record
information that identifies the Borrowers, which information includes the name
and address of the Borrowers and other information that will allow such Senior
Secured Party to identify the Borrowers in accordance with the Patriot Act.
 

 
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Section 11.14 Marshalling; Payments Set Aside.  Neither any Agent nor any Lender
shall be under any obligation to marshal any assets in favor of any Borrower or
any other Person or against or in payment of any or all the Obligations. To the
extent that any payment by or on behalf of any Borrower is made to any Agent or
Lender, or any Agent or Lender exercises its right of setoff, and such payment
or the proceeds of such setoff or any part thereof is subsequently invalidated,
declared to be fraudulent or preferential, set aside or required (including
pursuant to any settlement entered into by such Agent or Lender in its
discretion) to be repaid to a trustee, receiver or any other party, in
connection with any bankruptcy or insolvency proceeding or otherwise, then (a)
to the extent of such recovery, the Obligation or part thereof originally
intended to be satisfied shall be revived and continued in full force and effect
as if such payment had not been made or such setoff had not occurred, and (b)
each Lender severally agrees to pay to each Agent upon demand its applicable
share (without duplication) of any amount so recovered from or repaid by such
Agent, plus interest thereon from the date of such demand to the date such
payment is made at a rate per annum equal to the Federal Funds Effective Rate
from time to time in effect.  The obligations of the Lenders under
Section 11.14(b) shall survive the payment in full of the Obligations and the
termination of this Agreement.
 
Section 11.15 Right of Setoff.  Each Lender and each of its respective
Affiliates is hereby authorized at any time and from time to time during the
continuance of an Event of Default, to the fullest extent permitted by
applicable Law, to set off and apply any and all deposits (general or special,
time or demand, provisional or final, in whatever currency) at any time held and
other obligations (in whatever currency) at any time owing by such Lender or any
such Affiliate to or for the credit or the account of any Borrower against any
and all of the obligations of each Borrower now or hereafter existing under this
Agreement or any other Financing Document to such Lender, irrespective of
whether or not such Lender shall have made any demand under this Agreement or
any other Financing Document and although such obligations of the Borrowers may
be contingent or unmatured or are owed to a branch or office of such Lender
different from the branch or office holding such deposit or obligated on such
indebtedness.  The rights of each Lender and their respective Affiliates under
this Section 11.15 are in addition to other rights and remedies (including other
rights of setoff) that such Lender or their respective Affiliates may
have.  Each Lender agrees to notify the Borrower Agent and the Administrative
Agent promptly after any such setoff and application; provided that the failure
to give such notice shall not affect the validity of such setoff and
application.
 
Section 11.16 Severability.  If any provision of this Agreement or any other
Financing Document is held to be illegal, invalid or unenforceable, (a) the
legality, validity and enforceability of the remaining provisions of this
Agreement and the other Financing Documents shall not be affected or impaired
thereby and (b) the parties shall endeavor in good faith negotiations to replace
the illegal, invalid or unenforceable provisions with valid provisions the
economic effect of which comes as close as possible to that of the illegal,
invalid or unenforceable provisions.  The invalidity of a provision in a
particular jurisdiction shall not invalidate or render unenforceable such
provision in any other jurisdiction.
 

 
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Section 11.17 Survival.  Notwithstanding anything in this Agreement to the
contrary, Section 11.07 (Costs and Expenses) and 11.09 (Indemnification by the
Borrowers) shall survive any termination of this Agreement.  In addition, each
representation and warranty made hereunder and in any other Financing Document
or other document delivered pursuant hereto or thereto or in connection herewith
or therewith shall survive the execution and delivery hereof and thereof.  Such
representations and warranties have been or will be relied upon by each Senior
Secured Party, regardless of any investigation made by any Senior Secured Party
or on their behalf and notwithstanding that any Senior Secured Party may have
had notice or knowledge of any Default or Event of Default at the time of the
Funding, and shall continue in full force and effect as long as any Loan or any
other Obligation hereunder or under any other Financing Document shall remain
unpaid or unsatisfied.
 
Section 11.18 Treatment of Certain Information; Confidentiality.  Each of the
Agents and the Lenders agrees to maintain the confidentiality of the
Information, except that Information may be disclosed (a) to its Affiliates and
to its Affiliates’ respective partners, directors, officers, employees, agents,
advisors and representatives (it being understood that the Persons to whom such
disclosure is made will be informed of the confidential nature of such
Information and instructed to keep such Information confidential); (b) to the
extent requested or required by any regulatory authority purporting to have
jurisdiction over it; (c) to the extent required by applicable Law or
regulations or by any subpoena or similar legal process; (d) to any other party
to this Agreement; (e) in connection with the exercise of any remedies hereunder
or any suit, action or proceeding relating to this Agreement or the enforcement
of rights hereunder (including any actual or prospective purchaser of
Collateral); (f) subject to an agreement containing provisions substantially the
same as those of this Section 11.18, to (i) any Eligible Assignee of or
Participant in, or any prospective Eligible Assignee of or Participant in, any
of its rights or obligations under this Agreement, (ii) any direct or indirect
contractual counterparty or prospective counterparty (or such contractual
counterparty’s or prospective counterparty’s professional advisor) to any credit
derivative transaction relating to the Obligations or (iii) any Person (and any
of its officers, directors, employees, agents or advisors) that may enter into
or support, directly or indirectly, or that may be considering entering into or
supporting, directly or indirectly, either (A) contractual arrangements with
such Agent or Lender, or any Affiliates thereof, pursuant to which all or any
portion of the risks, rights, benefits or obligations under or with respect to
any Loan or Financing Document is transferred to such Person or (B) an actual or
proposed securitization or collateralization of, or similar transaction relating
to, all or a part of any amounts payable to or for the benefit of any Lender
under any Financing Document (including any rating agency); (g) with the consent
of any Borrower; (h) to the extent such Information (i) becomes publicly
available other than as a result of a breach of this Section 11.18 or (ii)
becomes available to any Agent, any Lender or any of their respective Affiliates
on a nonconfidential basis from a source other than a Borrower; (i) to any
state, federal or foreign authority or examiner (including the National
Association of Insurance Commissioners or any other similar organization)
regulating any Lender; or (j) to any rating agency when required by it (it being
understood that, prior to any such disclosure, such rating agency shall
undertake to preserve the confidentiality of any Information relating to a
Borrower received by it from such Lender).
 

 
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In addition, any Agent and the Lenders may disclose the existence of this
Agreement and information about this Agreement to market data collectors,
similar service providers to the lending industry, and service providers to the
Agents and the Lenders in connection with the administration and management of
this Agreement, the other Financing Documents, the Commitments, and the
Funding.  For the purposes of this Section 11.18, “Information” means written
information that any Borrower furnishes to any Agent or Lender after the date
hereof (and designated at the time of delivery thereof in writing as
confidential) pursuant to or in connection with any Financing Document, relating
to the assets and business of such Borrower, but does not include any such
information that (i) is or becomes generally available to the public other than
as a result of a breach by such Agent or Lender of its obligations hereunder,
(ii) is or becomes available to such Agent or Lender from a source other than a
Borrower that is not, to the knowledge of such Agent or Lender, acting in
violation of a confidentiality obligation with such Borrower or (iii) is
independently compiled by any Agent or Lender, as evidenced by their records,
without the use of the Information.  Any Person required to maintain the
confidentiality of Information as provided in this Section 11.18 shall be
considered to have complied with its obligation to do so if such Person has
exercised the same degree of care to maintain the confidentiality of such
Information as such Person would accord to its own confidential information.
 
Section 11.19 Waiver of Consequential Damages, Etc.  Except as otherwise
provided in Section 11.09 (Indemnification by the Borrowers) for the benefit of
any Indemnitee, to the fullest extent permitted by applicable Law, no party
hereto shall assert, and each party hereto hereby waives, any claim, on any
theory of liability, for special, indirect, consequential or punitive damages
(as opposed to direct or actual damages) arising out of, in connection with, or
as a result of, this Agreement, any other Financing Document or any agreement or
instrument contemplated hereby, the transactions contemplated hereby or thereby,
any Loan or the use of the proceeds thereof.  No Indemnitee shall be liable for
any damages arising from the use by unintended recipients of any information or
other materials distributed by it through telecommunications, electronic or
other information transmission systems in connection with this Agreement or the
other Financing Documents or the transactions contemplated hereby or thereby.
 
Section 11.20 Waiver of Litigation Payments.  To the extent that any Borrower or
the Borrower Agent may, in any action, suit or proceeding brought in any of the
courts referred to in Section 11.02(b) (Applicable Law; Jurisdiction) or
elsewhere arising out of or in connection with this Agreement or any other
Financing Document to which it is a party, be entitled to the benefit of any
provision of law requiring any Senior Secured Party in such action, suit or
proceeding to post security for the costs of such Person or to post a bond or to
take similar action, each such Person hereby irrevocably waives such benefit, in
each case to the fullest extent now or in the future permitted under the laws of
New York or, as the case may be, the jurisdiction in which such court is
located.
 
Section 11.21 Section 552(b).  The Lenders and the Agents shall be entitled to
all of the rights and benefits of section 552(b) of the Bankruptcy Code, and the
“equities of the case” exception under section 552(b) of the Bankruptcy Code
shall not apply to the Lenders or the Agents with respect to proceeds, products,
offspring or profits of any of the Collateral.
 
[Remainder of page intentionally blank.  Next page is signature page.]
 

 
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IN WITNESS WHEREOF, the parties hereto have caused this Debtor-In-Possession
Credit Agreement to be executed by their respective officers as of the day and
year first above written.
 

 

 
PACIFIC ETHANOL HOLDING CO. LLC,
as Borrower
 
 
By:/s/ JOHN T. MILLER                                  
Name:  John T. Miller
Title:  COO
 
PACIFIC ETHANOL MADERA LLC,
as Borrower
 
 
By:/s/ JOHN T.
MILLER                                                                      
Name:  John T. Miller
Title:  COO
 
PACIFIC ETHANOL COLUMBIA, LLC,
as Borrower
 
 
By:/s/ JOHN T.
MILLER                                                                      
Name:  John T. Miller
Title:  COO
 
PACIFIC ETHANOL STOCKTON, LLC,
as Borrower
 
 
By:/s/ JOHN T.
MILLER                                                                      
Name:  John T. Miller
Title:  COO
 
PACIFIC ETHANOL MAGIC VALLEY, LLC,
as Borrower
 
 
By:/s/ JOHN T.
MILLER                                                                      
Name:  John T. Miller
Title:  COO
 

 
 

 
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PACIFIC ETHANOL HOLDING CO. LLC,
as Borrower Agent
 
 
By:/s/ JOHN T.
MILLER                                                                      
Name:  John T. Miller
Title:  COO
 

 
 

 
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WESTLB AG, NEW YORK BRANCH,
as Administrative Agent
 
 
By:/s/ RONALD
SPITZER                                                                      
Name:  Ronald Spitzer
Title:  Executive Director
 
 
By:/s/ DOMINICK
D’ASCOLI                                                                      
Name:  Dominick D’Ascoli
Title:  Director 

 

 
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WESTLB AG, NEW YORK BRANCH,
as Lender
 
 
By:/s/ RONALD
SPITZER                                                                      
Name:  Ronald Spitzer
Title:  Executive Director
 
 
By:/s/ DOMINICK
D’ASCOLI                                                                      
Name:  Dominick D’Ascoli
Title:  Director
 
 
WESTLB AG, NEW YORK BRANCH,
as Collateral Agent
 
 
By:/s/ RONALD
SPITZER                                                                      
Name:  Ronald Spitzer
Title:  Executive Director
 
 
By:/s/ DOMINICK
D’ASCOLI                                                                      
Name:  Dominick D’Ascoli
Title:  Director 

 

 
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AMARILLO NATIONAL BANK,
as Accounts Bank
 
 
By:/s/ CRAIG L.
SANDERS                                                                      
Name:  Craig L. Sanders
Title:  Executive Vice President
 
AMARILLO NATIONAL BANK,
as Senior Secured Party
 
 
By:/s/ CRAIG L.
SANDERS                                                                      
Name:  Craig L. Sanders
Title:  Executive Vice President 

 

 
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CIFC FUNDING 2007-III LTD.,
as Senior Secured Party
 
By: Signature
Illegible                                                                           
Name:
Title:
 
CIFC FUNDING 2007-IV LTD.,
as Senior Secured Party
 
By: Signature
Illegible                                                                           
Name:
Title:
 

 
 

 
-90-

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CIT CAPITAL SECURITIES LLC,
as Lead Arranger and Co-Syndication Agent Senior Secured Party

By: DREW
CARLETON                                                                           
Name: Drew Carleton
Title:  Vice President
 
CIT CAPITAL USA INC.,
as Senior Secured Party

By: JASON B.
STEWART                                                                           
Name: Jason B. Stewart
Title:  Managing Director 

 

 
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CREDIT SUISSE CANDLEWOOD SPECIAL SITUATIONS MASTER FUND, LTD.
By: Credit Suisse Alternative Capital, Inc. as investment manager
 
By: /s/ DAVID
KOENIG                                                                           
 
Name: David Koenig
 
Title:  Authorized Signatory 

 

 
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GREENSTONE FARM CREDIT SERVICES, ACA/FLCA,
as Senior Secured Party
 
By: ALFRED S. COMPTON,
JR.                                                                           
 
Name: Alfred S. Compton, Jr.
 
Title:  Sr. Vice President/Managing Director 

 

 
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METROPOLITAN LIFE INSURANCE COMPANY,
as Senior Secured Party
 
By: /s/ DAVID
YU                                                                           
Name: David Yu
Title:
 

 

 
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NORDKAP BANK AG,
as Senior Secured Party
 
By: /s/ ERIC W.
SIEVERS                                                                           
Name: Eric W. Sievers
Title:  SVP
 
By: /s/ STEFAN
GERIG                                                                           
Name: Stefan GERIG
Title:  CIO
 

 

 
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NORDDEUTSCHE LANDESBANK
GIROZENTRALE NEW YORK BRANCH,
as Senior Secured Party
 

 
By: /s/ JOSEF
HAAS                                                                           
Name: Josef Haas
Title:  Senior Director
 

 
By: /s/ STEFANIE
SCHOLZ                                                                           
Name: Stefanie Scholz
Title:  Managing Director 

 

 
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NORTHWEST FARM CREDIT SERVICES, FLCA,
as Senior Secured Party
 

 
By: /s/ CASEY
KINZER                                                                           
Name: Casey Kinzer
Title:  Account Manager
 

 

 
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COOPERATIEVE CENTRALE
RAIFFEISEN-BOERENLEENBANK B.A.,
“RABOBANK NEDERLAND”, NEW YORK BRANCH,
as Senior Secured Party
 
By: /s/ ANDREW
SHERMAN                                                                           
Name: Andrew Sherman
Title:  Executive Director
 

 
By: /s/ JOHN
MCMAHON                                                                           
Name: John McMahon
Title:  Managing Director 

 

 
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SHOREBANK PACIFIC,
as Senior Secured Party
 

 
By: /s/ MATTHEW
MYLET                                                                           
Name: Matthew Mylet
Title:  Assistant Vice President
 

 
 
 
 
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Exhibit A

“Accounts” has the meaning set forth in Section 9-102 of the UCC.
 
“Accounts Bank” means Amarillo National Bank, not in its individual capacity,
but solely as depositary bank, bank and securities intermediary hereunder, and
each other Person that may, from time to time, be appointed as successor
Accounts Bank pursuant to Section 10.06 (Resignation or Removal of Agent).
 
“Accounts Property” means any funds, instruments, securities, financial assets
or other assets from time to time held in any of the Project Accounts or
credited thereto or otherwise in possession or control of the Accounts Bank
pursuant to this Agreement.
 
“Additional Project Document” means each contract, agreement, letter agreement
or other instrument to which any Borrower becomes a party after the date hereof,
other than (a) any document which does not extend beyond the six-month
anniversary of the date hereof (i) under which any Borrower would not reasonably
be expected to have obligations or liabilities in the aggregate in excess of
five hundred thousand Dollars ($500,000), or be entitled to receive revenues in
the aggregate in excess of one million Dollars ($1,000,000), in either case in
value during such period and (ii) a termination of which would not reasonably be
expected to result in a Material Adverse Effect, or (b) any agreement for the
sale of all or substantially all the assets of the Borrowers entered into in
connection with the sale process set forth in Section 7.02(f) (Sale of
Substantially All Assets); provided, that for the purposes of this definition,
(i) (A) purchase orders under existing Project Documents relating to the sale of
Products or the purchase of corn and (B) purchases of natural gas, water or
electricity pursuant to standard user agreements, shall not constitute
Additional Project Documents and (ii) any series of related transactions (other
than transactions, including hedging transactions, relating to the sale of
Products or the purchase of corn and natural gas) shall be considered as one
transaction, and all contracts, agreements, letter agreements or other
instruments in respect of such transactions shall be considered as one contract,
agreement, letter agreement or other instrument, as applicable.
 
“Administrative Agent” means WestLB, in its capacity as administrative agent for
the Lenders hereunder, and includes each other Person that may, from time to
time, be appointed as successor Administrative Agent pursuant to Section 10.06
(Resignation or Removal of Agent).
 
“Affiliate” of any Person means any other Person that, directly or indirectly,
controls, is controlled by or is under common control with such Person.  A
Person shall be deemed to be “controlled by” any other Person if such other
Person (a) possesses, directly or indirectly, power to direct or cause the
direction of the management and policies of such Person whether by contract or
otherwise or (b) owns at least ten percent (10%) of the Equity Interests in such
Person.  Notwithstanding the foregoing, Pacific Ethanol Imperial LLC shall not
be an Affiliate of any Borrower.
 
“Affiliated Project Documents” means those Project Documents listed in
Schedule 5.10 and identified as Affiliate agreements.
 
“Agents” means, collectively, the Administrative Agent, the Collateral Agent,
and the Accounts Bank.
 

 
A-1

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“Aggregate Commitment” means fifty million Dollars ($50,000,000), as the same
may be reduced in accordance with Section 2.06 (Termination or Reduction of
Commitments).
 
“Aggregate Revolving Loan Commitment” means twenty million Dollars
($20,000,000), as the same may be reduced in accordance with Section 2.06
(Termination or Reduction of Commitments).
 
“Aggregate Roll Up Loan Commitment” means thirty million Dollars ($30,000,000),
as the same may be reduced in accordance with Section 2.06 (Termination or
Reduction of Commitments).
 
“AMA Consent” means a Consent and Agreement regarding the Asset Management
Agreement entered into among Pacific Ethanol, the Borrowers, and the
Pre-Petition Collateral Agent, in form and substance reasonably satisfactory to
the Administrative Agent and the Collateral Agent.
 
“Agreement” has the meaning set forth in the Preamble.
 
“Ancillary Documents” means, with respect to each Additional Project Document,
the following, each of which shall be in form and substance reasonably
satisfactory to the Administrative Agent and, in the case of items (i), (ii) and
(iv), the Collateral Agent:
 
 
(i)
each security instrument and agreement necessary or desirable to grant to the
Collateral Agent a first priority perfected Lien (subject only to Permitted
Liens) in such Additional Project Document and all property interests received
by any Borrower in connection therewith;

 
 
(ii)
all recorded UCC financing statements and other filings required to perfect such
Lien;

 
 
(iii)
if reasonably requested by the Administrative Agent, opinions of counsel for the
Borrowers addressing such matters relating to such document, as the
Administrative Agent may reasonably request;

 
 
(iv)
if reasonably requested by the Administrative Agent, the Borrowers shall use
their best efforts to obtain a Consent with respect to such Additional Project
Document from each Project Party, and shall use their best efforts to obtain an
opinion of counsel to such Project Party addressing matters relating to such
Additional Project Document and such Consent as the Administrative Agent may
reasonably request; provided, that if such Consent cannot be obtained, the
relevant Additional Project Document shall be freely assignable by the
applicable Borrower to the Collateral Agent and to a transferee in foreclosure,
in each such case without any consent or approval of such Project Party; and

 

 
A-2

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(v)
if reasonably requested by the Administrative Agent, certified evidence of the
authorization of such Additional Project Document by each Borrower that is a
party thereto.

 
“Applicable Margin” means ten percent (10%).
 
“Approved Fund” means, with respect to any Lender that is a fund that invests in
commercial loans, any other fund that invests in commercial loans and is managed
or advised by the same investment advisor as such Lender or by an Affiliate of
such investment advisor.
 
“Approved Plan” means a plan of reorganization of the Debtors approved by the
Roll Up Lenders in accordance with section 1126 of the Bankruptcy Code providing
that the Roll Up Loans be refinanced or otherwise replaced with other securities
or financial instruments with a present value equal to the accrued principal and
interest due in respect of the Roll Up Loans as of the effective date of such
plan; provided that under such plan (i) the relative lien position of the
Revolving Lenders in respect of the Roll Up Loans is maintained and (ii) the
relative lien position of the Roll Up Lenders in respect of the Pre-Petition
Obligations is maintained.
 
“Asset Management Agreement” means the Asset Management Agreement, dated on or
about the date hereof, among Pacific Ethanol and the Borrowers.
 
“Auditors” means those nationally recognized independent auditors selected by
the Borrowers (including Hein & Associates) and approved by the Administrative
Agent.
 
“Authorized Officer” means (i) with respect to any Person that is a corporation,
the president, any vice president, the treasurer, the chief financial officer or
chief restructuring officer of such Person, (ii) with respect to any Person that
is a partnership, an Authorized Officer of a general partner of such Person,
(iii) with respect to any Person that is a limited liability company, any
manager, the president, any vice president, the treasurer, the chief financial
officer or chief restructuring officer of such Person, or any person who serves
in such capacity in respect of the managing member of such Person, or (iv) with
respect to any Person, such other representative of such Person that is approved
by the Administrative Agent in writing who, in each such case, has been named as
an “Authorized Officer” on a certificate of incumbency of such Person delivered
to the Administrative Agent and the Accounts Bank on or after the date hereof.
 
“Bankruptcy Code” means Title 11 of the United States Code entitled “Bankruptcy”
or any successor statute, and all rules promulgated thereunder.
 
“Bankruptcy Court” has the meaning set forth in the Recitals.
 
“Bankruptcy Rules” means the Federal Rules of Bankruptcy Procedure and local
rules of the Bankruptcy Court, each as amended, and applicable to the Cases.
 

 
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“Base Rate” means, for any day, a fluctuating rate per annum equal to the
highest of (i) the Federal Funds Effective Rate plus one-half of one percent
(0.50%), (ii) the rate of interest in effect for such day as publicly announced
from time to time by WestLB as its “prime rate” and (iii) LIBOR plus one percent
(1%). The “prime rate” is a rate set by WestLB based upon various factors
including WestLB’s costs and desired return, general economic conditions and
other factors, and is used as a reference point for pricing some loans, which
may be priced at, above, or below such announced rate.  Any change in such rate
announced by WestLB shall take effect at the opening of business on the day
specified in the public announcement of such change.
 
“Base Rate Loan” means any Revolving Loan bearing interest at a rate determined
by reference to the Base Rate and the provisions of Article II (Commitments and
Borrowing).
 
“Blocked Account Agreement” means an agreement, in substantially the form
attached to the Pre-Petition Credit Agreement as Exhibit 7.02(i) (or, if
requested by the Borrowers, such other form reasonably satisfactory to the
Administrative Agent and the Collateral Agent), with respect to a Local Account
among the Borrower in whose name such Local Account has been opened, the bank
with whom such Local Account was opened and the Collateral Agent or the
Pre-Petition Collateral Agent.
 
“Boardman” has the meaning set forth in the Preamble.
 
“Boardman CS Date” means the first to occur of (i) September 30, 2009 and (ii)
such earlier date as may be agreed to by Boardman and the Administrative Agent.
 
“Boardman Deed of Trust” means the Leasehold Trust Deed, Security Agreement,
Financing Agreement, Fixture Filing and Assignment of Leases, Rents and Security
Deposits made by Boardman to Stewart Title Guaranty Company, as trustee, for the
benefit of the Pre-Petition Collateral Agent, as beneficiary.
 
“Boardman Lease” means the lease dated April 20, 2006 between the Port of Morrow
and Boardman.
 
“Boardman Plant” means the ethanol production facility located at Boardman,
Oregon, with an expected capacity of approximately forty (40) million
gallons-per-year of denatured ethanol, including the Site on which such facility
is located, and all buildings, structures, improvements, easements and other
property related thereto.
 
“Boardman Pledge Agreement” means the Pledge and Security Agreement, dated on or
about the date of the Pre-Petition Credit Agreement, among Pacific Holding,
Boardman and the Pre-Petition Collateral Agent.
 
“Boardman Security Agreement” means the Assignment and Security
Agreement,  dated on or about the date of the Pre-Petition Credit Agreement,
made by Boardman in favor of the Pre-Petition Collateral Agent.
 

 
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“Borrower Agent” means Pacific Holding, in its capacity as agent for the
Borrowers in accordance with Section 11.05 (Borrower Party Agent).
 
“Borrower LLC Agreements” means, collectively, the Pacific Holding LLC
Agreement, the Madera LLC Agreement, the Boardman LLC Agreement, the Stockton
LLC Agreement and the Burley LLC Agreement.
 
“Borrowers” has the meaning set forth in the Preamble.
 
“Burley” has the meaning set forth in the Preamble.
 
“Burley Deed of Trust” means the Mortgage, Security Agreement, Financing
Statement, Fixture Filing and Assignment of Leases, Rents and Security Deposits,
in substantially the form of Exhibit 6.04(g)-A to the Pre-Petition Credit
Agreement.
 
“Burley Plant” means the ethanol production facility located at Burley, Idaho,
with a design basis capacity of approximately fifty (50) million
gallons-per-year of denatured ethanol, including the Site on which such facility
is located, and all buildings, structures, improvements, easements and other
property related thereto.
 
“Burley Pledge Agreement” means the Pledge and Security Agreement, in
substantially the form of Exhibit 6.04(g)-B to the Pre-Petition Credit
Agreement.
 
“Burley Security Agreement” means the Assignment and Security Agreement, in
substantially the form of Exhibit 6.04(g)-C to the Pre-Petition Credit
Agreement.
 
“Business Day” means:
 
 
(i)
any day that is neither a Saturday or Sunday nor a day on which commercial banks
are authorized or required to be closed in Sacramento, California or New York,
New York; and

 
 
(ii)
relative to the making, continuing, prepaying or repaying of any Eurodollar
Loans, any day on which dealings in Dollars are carried on in the London
interbank market.

 
“Business Interruption Insurance Proceeds” means all proceeds of any insurance
policies required pursuant to this Agreement or otherwise obtained with respect
to any Borrower, any Plant or the Project relating to business interruption or
delayed start-up.
 
“Capitalized Lease Liabilities” of any Person means all monetary obligations of
such Person under any leasing or similar arrangement that, in accordance with
GAAP, would be classified as capitalized leases on a balance sheet of such
Person or otherwise disclosed as such in a note to such balance sheet and, for
purposes of the Financing Documents, the amount of such obligations shall be the
capitalized amount thereof, determined in accordance with GAAP.
 

 
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“Carve-Out” means the sum of (i) the aggregate amount of any budgeted and unpaid
fees, costs and expenses that were accrued or incurred prior to the Carve-Out
Date by the professionals retained by the Debtors or any professionals retained
by the Committee (collectively, the “Professionals”) to the extent allowed by an
order of the Bankruptcy Court, plus (ii) those fees, costs and expenses incurred
by Professionals after the Carve-Out Date and subsequently allowed by order of
the Bankruptcy Court and in compliance with the DIP Budget in an amount not to
exceed $250,000 in the aggregate, plus (iii) fees required to be paid to the
Clerk of the Bankruptcy Court and to the U.S. Trustee pursuant to 28 U.S.C.
§ 1930; provided that following the Carve-Out Date any amounts paid to
Professionals by any means will reduce the Carve-Out on a dollar-for-dollar
basis.
 
“Carve-Out Date” means the earlier of (i) the date on which any Event of Default
occurs and (ii) the Maturity Date.
 
“Cash Equivalents” means:
 
(a)           readily marketable direct obligations of the government of the
United States or any agency or instrumentality thereof, or obligations
unconditionally guaranteed by the full faith and credit of the government of the
United States, in each case maturing within one (1) year from the date of
acquisition thereof;
 
(b)           securities issued by any state of the United States of America or
any political subdivision of any such state or any public instrumentality
thereof having maturities of not more than one (1) year from the date of
acquisition thereof and, at the time of acquisition, having a rating of AA- or
higher from S&P or Aa3 or higher from Moody’s (or, if at any time neither S&P
nor Moody’s shall be rating such obligations, an equivalent rating from another
nationally recognized rating service);
 
(c)           investments in commercial paper maturing within 270 days from the
date of acquisition thereof and having, at such date of acquisition, a rating of
at least A-1 or P-1 from either S&P or Moody’s (or, if at any time neither S&P
nor Moody’s shall be rating such obligations, an equivalent rating from another
nationally recognized rating service);
 
(d)           investments in certificates of deposit, banker’s acceptances and
time deposits maturing within 270 days from the date of acquisition thereof
issued or guaranteed by or placed with, and money market deposit accounts issued
or offered by, the Administrative Agent or any domestic office of any commercial
bank organized under the laws of the United States of America, any State
thereof, any country that is a member of the Organisation for Economic
Co-Operation and Development or any political subdivision thereof, that has a
combined capital and surplus and undivided profits of not less than
$500,000,000;
 
(e)           fully collateralized repurchase agreements with a term of not more
than 30 days for securities described in clause (a) above and entered into with
a financial institution satisfying the criteria of clause (d) of this
definition; and
 
(f)           investments in “money market funds” within the meaning of Rule
2a-7 of the Investment Company Act of 1940, as amended, substantially all of
whose assets are invested in investments of the type described in clauses (a)
through (e) of this definition.
 

 
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“Casualty Event” means an event that causes any Plant, or any material portion
thereof, to be damaged, destroyed or rendered unfit for normal use for any
reason whatsoever.
 
“CERCLA” means the Comprehensive Environmental Response, Compensation and
Liability Act (42 U.S.C. § 9604, et seq.), as amended, and rules, regulations,
standards guidelines and publications issued thereunder.
 
“Change of Control” means any transaction or series of related transactions
(including any merger or consolidation) consummated without the prior written
consent of the Administrative Agent the result of which is that:
 
(A)           (i) Pacific Holding fails to maintain, directly, legally or
beneficially, one hundred percent (100%) of the Equity Interests of any of
Madera, Boardman, Stockton, or Burley, (ii) PEC fails to maintain directly,
legally or beneficially, one hundred percent (100%) of the Equity Interests of
Pacific Holding (other than any Equity Interest held by an Independent Member),
(iii) Pacific Ethanol fails to maintain, directly or indirectly, legally or
beneficially, one hundred percent (100%) of the Equity Interests of PEC or
fifty-one percent (51%) of the Equity Interests of each of the Borrowers, or
(iv) twenty percent (20%) or more of the Equity Interests of any Borrower are
indirectly, legally or beneficially owned by, or under common control of, any
Person other than those identified in clauses (i) through (iii) above; or
 
(B)           any Person becomes a member of the board of directors of Pacific
Ethanol.
 
“Chapter 11 Case” or “Case” has the meaning set forth in the Recitals.
 
“Chattel Paper” has the meaning set forth in Section 9-102 of the UCC.
 
“Closing Date” means the date on which all the conditions set forth in
Section 6.01 (Conditions to Closing)  and Section 6.02 (Conditions to All
Fundings) have been satisfied or waived.
 
“CMSA” means each Construction Management Services Agreement between any
Borrower and the Construction Manager.
 
“Code” means the Internal Revenue Code of 1986, as amended.
 
“Cold Shutdown” means, in respect of a Plant, the maintenance of such Plant in a
state in which the Plant facilities are not producing ethanol, ethanol work in
process has been completed, and wherein (i) Plant systems and equipment
preservation are being managed in accordance with manufacturer recommendations
and (ii) Plant facilities operate with a reduced headcount.  “Cold Shutdown”
contemplates minimized usage of a Plant’s utility systems but does not
contemplate any cessation of compliance monitoring with respect to Necessary
Project Approvals.
 

 
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“Collateral” means all Accounts, Chattel Paper, Commercial Tort Claims,
Documents, Equipment, Fixtures, Goods, General Intangibles, Instruments,
Inventory, Investment Property (including Equity Interests in Subsidiaries),
Pledged Deposits, Supporting Obligations, collateral referenced in the Interim
Order, all rights, claims and other causes of action of each Debtor’s estate and
any other avoidance actions under Chapter 5 of the Bankruptcy Code and the
property received thereby whether by judgment, settlement or otherwise and Other
Collateral, wherever located, in which a Debtor now has or hereafter acquires
any right or interest, and the proceeds (including Stock Rights), insurance
proceeds and products thereof, together with all books and records, customer
lists, credit files, computer files, programs, printouts and other computer
materials and records related thereto.  Notwithstanding anything to the contrary
contained in this definition, Collateral shall not include (i) rights under
governmental licenses, authorizations or any other asset of a Debtor to the
extent and for so long as the grant of a security interest therein is prohibited
by applicable Law and (ii) any intent-to-use trademark or service mark
application prior to the filing of a statement or use or amendment to allege
use, or any other intellectual property, to the extent that applicable Law
prohibits the creation of a security interest or would otherwise result in the
loss of rights from the creation of such security interest or from the
assignment of such rights upon the occurrence and continuance of an Event of
Default.
 
“Commercial Tort Claims” means any currently existing commercial tort claims of
a Debtor.
 
“Collateral Agent” means WestLB AG, New York Branch, in its capacity as
collateral agent for the Senior Secured Parties under the Financing Documents,
and includes each other Person that may, from time to time be appointed as
successor Collateral Agent pursuant to Section 10.06 (Resignation or Removal of
Agent).
 
“Commitment Fee” has the meaning provided in Section 3.11 (Fees).
 
“Commitment Percentage” means, as to any Lender at any time, such Lender’s
Revolving Loan Commitment Percentage or Roll Up Loan Commitment Percentage, as
the context may require.
 
“Commitment” means, with respect to each Lender, as applicable, such Lender’s
Revolving Loan Commitment or Roll Up Loan Commitment, as the context may
require.
 
“Committee” means the statutory committee appointed in the Chapter 11 Cases.
 
“Commodity Hedging Arrangements” means any arrangement to hedge the price of
corn purchases, ethanol sales, Distillers Grains sales or natural gas purchases.
 
“Condemnation Proceeds” means any Net Cash Proceeds payable in respect of any
Event of Taking.
 
“Consents” means each Consent and Agreement entered into among a Project Party,
the Borrowers, and the Collateral Agent, each in form and substance reasonably
satisfactory to the Administrative Agent and the Collateral Agent.
 

 
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“Construction Contracts” means collectively, (i) the construction contracts
identified on Schedule 5.10 and (ii) each CMSA.
 
“Construction Manager” means PEC or any successor pursuant to a CMSA (or any
replacement thereof).
 
 “Consultants” means the Financial Advisor and any other consultants appointed
by or on behalf of the Lenders.
 
“Contest” means, with respect to any matter or claim involving any Person, that
such Person is contesting such matter or claim in good faith and by appropriate
proceedings timely instituted; provided, that the following conditions are
satisfied:  (a) such Person has posted a bond or other security (which may
include funds reserved in an appropriate Project Account) reasonably acceptable
to the Administrative Agent; (b) during the period of such contest, the
enforcement of any contested item is effectively stayed; (c) none of such Person
or any of its officers, directors or employees, or any Senior Secured Party or
its respective officers, directors or employees, is or could reasonably be
expected to become subject to any criminal liability or sanction in connection
with such contested items; and (d) such contest and any resultant failure to pay
or discharge the claimed or assessed amount does not, and would not reasonably
be expected to (i) result in a Material Adverse Effect or (ii) involve a
material risk of the sale, forfeiture or loss of, or the creation, existence or
imposition of any Lien (other than a Permitted Lien) on, any of the Collateral.
 
“Contingent Liabilities” means any agreement, undertaking or arrangement by
which any Person guarantees, endorses or otherwise becomes or is contingently
liable upon (by direct or indirect agreement, contingent or otherwise, to
provide funds for payment, to supply funds to, or otherwise to invest in, a
debtor, or otherwise to assure a creditor against loss) the indebtedness,
obligation or any other liability of any other Person (other than by
endorsements of instruments in the course of collection), or guarantees the
payment of dividends or other distributions upon the shares of any other
Person.  The amount of any Person’s obligation under any contingent liabilities
shall (subject to any limitation set forth therein) be deemed for purposes of
this Agreement to be the outstanding principal amount of the debt, obligation or
other liability guaranteed thereby; provided, however, that if the maximum
amount of the debt, obligation or other liability guaranteed thereby has not
been established, the amount of such contingent liability shall be the maximum
reasonably anticipated amount of the debt, obligation or other liability;
provided, further, that any agreement to limit the maximum amount of such
Person’s obligation under such contingent liability shall not, of and by itself,
be deemed to establish the maximum reasonably anticipated amount of such debt,
obligation or other liability.
 
“Contractual Obligation” means, as to any Person, any provision of any security
issued by such Person or of any agreement, instrument or other undertaking to
which such Person is a party or by which it or any of its property is bound.
 
“Corn Supplier” means Pacific Ag Products or any other counterparty to a Grain
Supply Agreement.
 

 
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“DDG” means dried distillers grains (if any) produced by the Borrowers at the
Project.
 
“Debtors” has the meaning set forth in the Recitals.
 
“Default” means any condition, occurrence or event that, after notice or passage
of time or both, would be an Event of Default.
 
“Default Excess” means, with respect to any Defaulting Lender, the excess, if
any, of such Defaulting Lender’s pro rata share of the aggregate outstanding
principal amount of all Loans of all Lenders (calculated as if all Defaulting
Lenders (including such Defaulting Lender) had funded all of their respective
Defaulted Loans) over the aggregate outstanding principal amount of all Loans of
such Defaulting Lender.
 
“Default Period” means, with respect to any Defaulting Lender, the period
commencing on the date of the applicable Funding Default and ending on the
earliest of the following dates:  (i) the date on which all Commitments are
cancelled or terminated and/or the Obligations are declared or become
immediately due and payable, (ii) the date on which (a) the Default Excess with
respect to such Defaulting Lender shall have been reduced to zero (whether by
the funding by such Defaulting Lender of any Defaulted Loans of such Defaulting
Lender or by the non pro rata application of any voluntary or mandatory
prepayments of the Loans pursuant to the terms hereof) and (b) such Defaulting
Lender shall have delivered to the Borrowers and the Administrative Agent a
written reaffirmation of its intention to honor its obligations hereunder with
respect to its Commitments, and (iii) the date on which the Borrowers, the
Administrative Agent and Required Lenders waive all Funding Defaults of such
Defaulting Lender in writing.
 
“Default Rate” has the meaning set forth in Section 3.04 (Default Interest
Rate).
 
“Defaulted Loan” has the meaning provided in Section 2.07 (Defaulting Lenders).
 
“Defaulting Lender” has the meaning provided in Section 2.07 (Defaulting
Lenders).
 
“Delta-T” Delta-T Corporation, a Virginia corporation.
 
“Deposit Accounts” has the meaning set forth in Section 9-102 of the UCC.
 
“DG Offtake Agreements” means any agreement relating to the sale or Distillers
Grains by any Borrower with a scheduled term in excess of six months and with
payments thereunder expected to be in excess of one million Dollars
($1,000,000), including the Madera DG Agreement and each agreement between any
Borrower and Pacific Ag Products relating to the sale or marketing of Distillers
Grains.
 
“DIP Administrative Claim” means an allowed superpriority administrative expense
claim under Section 364(c)(1) of the Bankruptcy Code, having priority over all
administrative expenses of the kind specified in, or ordered pursuant to,
Sections 105, 326, 328, 330, 331, 503(b), 506(c), 507(a), 507(b), 726, 1113,
1114 or any other provisions of the Bankruptcy Code.
 

 
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“DIP Budget” has the meaning set forth in Section 7.01 (l) (Affirmative
Covenants-DIP Budget).
 
“DIP Facility” means the credit facility provided to the Debtors pursuant to the
Financing Documents.
 
“DIP Liens” has the meaning set forth in Section 2.09(b) (Super-Priority Nature
of Obligations) and shall include Interim DIP Liens under and as defined in the
Interim Order.
 
“Discharge Date” means the date on which (a) all outstanding Commitments have
been terminated and (b) all amounts payable in respect of the Obligations have
been irrevocably paid in full in cash (other than obligations under the
Financing Documents that by their terms survive and with respect to which no
claim has been made by the Senior Secured Parties).
 
“Disposition” means, with respect to any Property, any sale, lease (or
sublease), sale and leaseback, assignment, conveyance, transfer or other
dispositions thereof (other than a Recovery Event); and the terms “Dispose” and
“Disposed of” shall have correlative meanings, excluding any sales or
dispositions of Products or Cash Equivalents, in each case, in the ordinary
course of business.
 
“Distillers Grains” means DDG, WDG, and any other form of distillers grain
products (including syrup) marketed by any Borrower from time to time.
 
“Documents” has the meaning set forth in Section 9-102 of the UCC.
 
“Dollar” and the sign “$” mean lawful money of the United States.
 
“Domestic Office” means, relative to any Lender, the office of such Lender
designated on Schedule 1.01 or designated in the Lender Assignment Agreement
pursuant to which such Lender became a Lender hereunder or such other office of
a Lender (or any successor or assign of such Lender) within the United States as
may be designated from time to time by written notice from such Lender, as the
case may be, to the Borrower Agent and the Administrative Agent.
 
“Effect of Bankruptcy” means, with respect to any contractual obligation,
contract, lease or agreement to which a Debtor is a party, any default or other
legal consequences arising on account of the commencement or the filing of the
Chapter 11 Cases, as applicable (including the implementation of any stay), or
the rejection of any such contractual obligation, contract or agreement with the
approval of the Bankruptcy Court if required under applicable Law.
 
“Eligible Assignee” means (a) any Lender, (b) an Affiliate of any Lender, (c) an
Approved Fund, and (d) any other Person (other than a natural person) approved
by the Administrative Agent.
 
“Environmental Affiliate” means any Person, only to the extent of, and only with
respect to matters or actions of such Person for which, any Borrower could
reasonably be expected to have liability as a result of such Borrower retaining,
assuming, accepting or otherwise being subject to liability for Environmental
Claims relating to such Person, whether the source of such Borrower’s obligation
is by contract or operation of Law.
 

 
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“Environmental Approvals” means any Governmental Approvals required under
applicable Environmental Laws.
 
“Environmental Claim” means any written notice, claim, demand or similar written
communication by any Person alleging potential liability or requiring or
demanding remedial or responsive measures (including potential liability for
investigatory costs, cleanup, remediation and mitigation costs, governmental
response costs, natural resources damages, property damages, personal injuries,
fines or penalties) in each such case (x) either (i) with respect to
environmental contamination-related liabilities or obligations with respect to
which any Borrower could reasonably be expected to be responsible that are, or
could reasonably be expected to be, in excess of two hundred thousand Dollars
($200,000) in the aggregate, or (ii) that has or could reasonably be expected to
result in a Material Adverse Effect and (y) arising out of, based on or
resulting from (i) the presence, release or threatened release into the
environment, of any Materials of Environmental Concern at any location, whether
or not owned by such Person; (ii) circumstances forming the basis of any
violation, or alleged violation, of any Environmental Laws or Environmental
Approvals; or (iii) exposure to Materials of Environmental Concern.
 
“Environmental Laws” means all Laws applicable to the Project relating to
pollution or protection of human health, safety or the environment (including
ambient air, surface water, ground water, land surface or subsurface strata),
including Laws relating to emissions, discharges, releases or threatened
releases of Materials of Environmental Concern, or otherwise applicable to the
Project relating to the manufacture, processing, distribution, use, treatment,
storage, disposal, transport or handling of Materials of Environmental Concern.
 
“Equipment” has the meaning set forth in Section 9-102 of the UCC.
 
“Equity Interests” means, with respect to any Person, all of the shares of
capital stock of (or other ownership or profit interests in) such Person, all of
the warrants, options or other rights for the purchase or acquisition from such
Person of shares of capital stock of (or other ownership or profit interests in)
such Person, all of the securities convertible into or exchangeable for shares
of capital stock of (or other ownership or profit interests in) such Person or
warrants, rights or options for the purchase or acquisition from such Person of
such shares (or such other interests), and all of the other ownership or profit
interests in such Person (including partnership, member or trust interests
therein), whether voting or nonvoting, and whether or not such shares, warrants,
options, rights or other interests are outstanding on any date of determination,
in each such case including all voting rights and economic rights related
thereto.
 
“ERISA” means the Employee Retirement Income Security Act of 1974, as amended,
and any successor statute of similar import, together with the regulations
thereunder, in each case as in effect from time to time.  References to sections
of ERISA also refer to any successor sections.
 
“ERISA Affiliate” means any Person, trade or business that, together with any
Borrower, is or was treated as a single employer under Section 414 of the Code
or Section 4001 of ERISA.
 

 
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“ERISA Plan” means any Plan that is not a Multiemployer Plan.
 
“Ethanol Offtake Agreements” means any agreement relating to the sale of ethanol
by any Borrower with a scheduled term in excess of six months and with payments
thereunder expected to be in excess of one million Dollars ($1,000,000),
including each agreement between any Borrower and Kinergy relating to the sale
or marketing of ethanol.
 
“Eurodollar Loan” means any Revolving Loan bearing interest at a rate determined
by reference to the Eurodollar Rate and the provisions of Article II
(Commitments and Borrowing) and Article III (Repayments, Prepayments, Interest
and Fees).
 
“Eurodollar Office” means, relative to any Lender, the office of such Lender
designated as such on Schedule 1.01 or designated in the Lender Assignment
Agreement pursuant to which such Lender became a Lender hereunder or such other
office of a Lender as designated from time to time by notice from such Lender to
the Borrower Agent and the Administrative Agent pursuant to Section 4.04
(Obligation to Mitigate) that shall be making or maintaining Eurodollar Loans of
such Lender hereunder.
 
“Eurodollar Rate” means, for any Interest Period with respect to any Eurodollar
Loan, an interest rate per annum equal to the rate per annum obtained by
dividing (x) LIBOR for such Interest Period and such Eurodollar Loan, by (y) a
percentage equal to (i) 100% minus (ii) the Eurodollar Reserve Percentage for
such Interest Period.
 
“Eurodollar Reserve Percentage” means, for any day during any Interest Period,
the reserve percentage (expressed as a decimal, carried out to five decimal
places) in effect on such day, whether or not applicable to any Lender, under
regulations issued from time to time by the F.R.S. Board for determining the
maximum reserve requirement (including any emergency, supplemental or other
marginal reserve requirement) with respect to eurocurrency funding (currently
referred to as “Eurocurrency Liabilities”).  The Eurodollar Rate for each
outstanding Eurodollar Loan shall be adjusted automatically as of the effective
date of any change in the Eurodollar Reserve Percentage.
 
“Event of Abandonment” means with respect to any Plant any of the following
shall have occurred: (i) the abandonment by the applicable Borrower of the
development, operation or maintenance of such Plant for a period of more than
ten (10) consecutive days (other than as a result of force majeure, an Event of
Taking or a Casualty Event), (ii) the suspension of all or substantially all of
any Borrower’s activities with respect to such Plant, other than as the result
of a force majeure, Event of Taking or Casualty Event, for a period of more than
ten (10) consecutive days, or (iii) any written acknowledgement by any Borrower
of a final decision to take any of the foregoing actions; provided that Cold
Shutdown shall not constitute an Event of Abandonment under any of clauses (i),
(ii) or (iii).
 
“Event of Default” means any one of the events specified in Section 9.01 (Events
of Default).
 
“Event of Taking” means any taking, exercise of rights of eminent domain, public
improvement, inverse condemnation, condemnation or similar action of or
proceeding by any Governmental Authority relating to any material part of any
Plant, the Project, any Equity Interests of any Borrower or any other assets
thereof.
 

 
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“Event of Total Loss” means the occurrence of a Casualty Event affecting all or
substantially all of any Plant, the Project or the assets of Pacific Holding or
any Borrower.
 
“Excluded Taxes” means, with respect to any Agent or any Lender or any other
recipient of any payment to be made by or on account of any Obligation
hereunder, (a) income or franchise Taxes imposed on (or measured by) its net
income levied as a result of a present or former connection between such Agent,
such Lender or such other recipient and the jurisdiction of the Governmental
Authority imposing such Tax or any political subdivision or taxing Authority
thereof or their (other than such Agent’s, such Lender’s or such other
recipient’s having executed, delivered or preformed its obligations or recovered
a payment under, or enforced, this Agreement), (b) any branch profits Tax
imposed by the United States, or any similar Tax imposed by any other
jurisdiction described in clause (a) above, or (c) any United States withholding
Tax to the extent that is imposed on amounts payable to such Agent or such
Lender at the time such Agent or such Lender becomes a party to this Agreement.
 
“F.R.S. Board” means the Board of Governors of the Federal Reserve System or any
successor thereto.
 
“Federal Funds Effective Rate” means, for any day, the rate per annum (rounded
upwards, if necessary, to the nearest 1/100 of 1%) equal to the weighted average
of the rates on overnight federal funds transactions with members of the Federal
Reserve System arranged by federal funds brokers on such day, as published on
the next succeeding Business Day by the Federal Reserve Bank of New York, or, if
such rate is not so published for any day that is a Business Day, the average of
the quotations for such day for such transactions received by the Administrative
Agent from three federal funds brokers of recognized standing selected by the
Administrative Agent.
 
“Fees” means, collectively, each of the fees payable by the Borrowers for the
account of any Lender or Agent pursuant to Section 3.11 (Fees).
 
“Final Order” means the order of the Bankruptcy Court entered in the Chapter 11
Cases after a final hearing under Bankruptcy Rule 4001(c)(2) or such other
procedures as approved by the Bankruptcy Court, which order shall be
substantially in the form of the Interim Order or otherwise satisfactory in form
and substance to the Lenders and the Administrative Agent, and from which no
appeal or motion to reconsider has been timely filed, or if timely filed, such
appeal has been stayed, dismissed or denied unless the Lenders and the
Administrative Agent waive such requirement, together with all extensions,
modifications and amendments thereto, in form and substance satisfactory to the
Lenders and the Administrative Agent.  The Final Order shall authorize and
approve the transactions contemplated by the Financing Documents and find that
the Lenders are extending credit to the Debtors in good faith within the meaning
of Bankruptcy Code section 364(e) and shall set forth provisions (i) approving
in all respects the Financing Documents, and authorizing and directing the
Debtors to execute and become bound by the Financing Documents; (ii) modifying
the automatic stay to the extent necessary to permit or effectuate the terms of
the Final Order and the Financing Documents, including to permit the creation
and perfection of the Collateral Agent’s Liens on the Collateral; (iii)
providing for the automatic relief of such stay to permit the enforcement of the
Administrative Agent’s and the Lenders’ remedies under the DIP Facility, subject
to the right of the Debtors and/or the Committee to re-impose or continue the
automatic stay; and (iv) providing that the Debtors acknowledge (a) the validity
and enforceability of the Pre-Petition Obligations, without defense, offset or
counterclaim of any kind, (b) the validity, perfection and priority of the Liens
securing the Pre-Petition Obligations, and that the Debtors waive any right to
challenge or contest such claims and liens and (c) that the Debtors have no
valid claims or causes of action, whether based in contract, tort or otherwise
against the Pre-Petition Administrative Agent or any Pre-Petition Senior Secured
Party with respect to the Pre-Petition Credit Agreement or the related documents
or transactions.
 

 
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“Financial Asset” has the meaning set forth in Section 8-102(9) of the UCC.
 
“Financial Officer” means, with respect to any Person, the controller, treasurer
or chief financial officer of such Person.
 
“Financial Advisor” means Capstone or a replacement appointed by the Required
Lenders.
 
“Financing Documents” means:
 
 
(i)
this Agreement;

 
 
(ii)
the Notes;

 
 
(iii)
the New Mortgages;

 
 
(iv)
the PEC Pledge Agreement;

 
 
(v)
the AMA Consent;

 
 
(vi)
the Sponsor Support Agreement;

 
 
(vii)
the other financing and security agreements, documents and instruments delivered
by the Borrowers or PEC in connection with this Agreement; and

 
 
(viii)
each other document entered into by a Borrower after the date hereof in
accordance with the terms hereof and designated as a Financing Document by the
Administrative Agent.

 
“First Liens” has the meaning set forth in Section 2.09 (b) (Super-Priority
Nature of Obligations).
 
“Fiscal Quarter” means any quarter of a Fiscal Year.
 
“Fiscal Year” means any period of twelve (12) consecutive calendar months ending
on December 31.
 
“Fixtures” has the meaning set forth in Section 9-102 of the UCC.
 
“Funding” means the incurrence of each Revolving Loan made by the Lenders on a
single date.
 
“Funding Date” means, with respect to each Revolving Loan, the date on which
funds are disbursed by the Administrative Agent, on behalf of the Lenders, to
the Borrowers in accordance with Section 2.04 (Funding of Loans).
 
“Funding Default” has the meaning specified in Section 2.07 (Defaulting
Lenders).
 

 
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“Funding Notice” means each request for Funding in the form of Exhibit 2.03
delivered in accordance with Section 2.03 (Notice of Fundings).
 
“GAAP” means generally accepted accounting principles in effect from time to
time in the United States, applied on a consistent basis.
 
“General Intangibles” has the meaning set forth in Section 9-102 of the UCC.
 
“Goods” has the meaning set forth in Section 9-102 of the UCC.
 
“Governmental Approval” means any authorization, consent, approval, license,
lease, ruling, permit, certification, exemption, filing for registration by or
with any Governmental Authority.
 
“Governmental Authority” means any nation, state, sovereign, or government, any
federal, regional, state, local or political subdivision and any entity
exercising executive, legislative, judicial, regulatory or administrative
functions of or pertaining to government.
 
“Grain Supply Agreements” means any agreement relating to the purchase or supply
of grain to any Borrower with a scheduled term in excess of six months and with
payments thereunder expected to be in excess of five hundred thousand Dollars
($500,000), including the Corn Procurement and Handling Agreement between
Pacific Holding and Pacific Ag Products, dated on or about the date of the
Pre-Petition Credit Agreement.
 
“Granting Lender” has the meaning provided in Section 11.03(h) (Assignments).
 
 “Guarantee” means, as to any Person, (a) any obligation, contingent or
otherwise, of such Person guaranteeing or having the economic effect of
guaranteeing any Indebtedness or other obligation payable or performable by
another Person (the “primary obligor”) in any manner, whether directly or
indirectly, and including any obligation of such Person, direct or indirect, (i)
to purchase or pay (or advance or supply funds for the purchase or payment of)
such Indebtedness or other obligation, (ii) to purchase or lease property,
securities or services for the purpose of assuring the obligee in respect of
such Indebtedness or other obligation of the payment or performance of such
Indebtedness or other obligation, (iii) to maintain working capital, equity
capital or any other financial statement condition or liquidity or level of
income or cash flow of the primary obligor so as to enable the primary obligor
to pay such Indebtedness or other obligation, or (iv) entered into for the
purpose of assuring in any other manner the obligee in respect of such
Indebtedness or other obligation of the payment or performance thereof or to
protect such obligee against loss in respect thereof (in whole or in part), or
(b) any Lien on any assets of such Person securing any Indebtedness or other
obligation of any other Person, whether or not such Indebtedness or other
obligation is assumed by such Person (or any right, contingent or otherwise, of
any holder of such Indebtedness to obtain any such Lien).
 

 
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“Indebtedness” means, as to any Person at a particular time, without
duplication, all of the following, whether or not included as indebtedness or
liabilities in accordance with GAAP:
 
(a)           all obligations of such Person for or in respect of moneys
borrowed or raised, whether or not for cash by whatever means (including
acceptances, deposits, discounting, letters of credit, factoring, and any other
form of financing which is recognized in accordance with GAAP in such Person’s
financial statements as being in the nature of a borrowing or is treated as
“off-balance sheet” financing);
 
(b)           all obligations of such Person evidenced by bonds, debentures,
notes, loan agreements or other similar instruments;
 
(c)           all obligations of such Person for the deferred purchase price of
property or services;
 
(d)           all obligations of such Person under conditional sale or other
title retention agreements relating to property or assets acquired by such
Person (even though the rights and remedies of the seller or lender under such
agreement in the event of default are limited to repossession or sale of such
property or are otherwise limited in recourse);
 
(e)           the maximum amount of all direct or contingent obligations of such
Person arising under letters of credit (including standby and commercial),
bankers’ acceptances, bank guaranties, surety bonds and similar instruments;
 
(f)           all Capitalized Lease Liabilities;
 
(g)           net obligations of such Person under any Swap Contract;
 
(h)           all obligations of such Person to purchase, redeem, retire,
defease or otherwise make any payment in respect of any Equity Interests in such
Person or any other Person or any warrants, rights or options to acquire such
Equity Interests, valued, in the case of redeemable preferred interests, at the
greater of its voluntary or involuntary liquidation preference plus accrued and
unpaid dividends; and
 
(i)            all Guarantees of such Person in respect of any of the foregoing.
 
For all purposes hereof, the Indebtedness of any Person shall include the
Indebtedness of any partnership or joint venture (other than a joint venture
that is itself a corporation or limited liability company) in which such Person
is a general partner or a joint venturer, unless such Indebtedness is expressly
made non-recourse to such Person.  The amount of any net obligation under any
Swap Contract on any date shall be deemed to be the Swap Termination Value
thereof as of such date.
 
“Indemnified Taxes” means Taxes other than Excluded Taxes.
 
“Indemnitee” has the meaning provided in Section 11.09 (Indemnification by the
Borrowers).
 

 
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“Information” has the meaning provided in Section 11.18 (Treatment of Certain
Information; Confidentiality).
 
“Initial DIP Budget” means the initial budget reflecting projected cash flow ,
operating disbursements, payroll disbursements, non-operating disbursements and
cash balances, prepared by the Borrowers and attached hereto as Schedule
6.01(n).
 
“Instruments” has the meaning set forth in Section 9-102 of the UCC.
 
“Insurance Consultant” means Moore-McNeil, LLC, or any replacement insurance
consultant appointed by the Administrative Agent with the prior consent of the
Required Lenders.
 
 “Insurance Proceeds” means all Net Cash Proceeds of any insurance policies
required pursuant to this Agreement or otherwise obtained with respect to any
Borrower, any Plant or the Project that are paid or payable to or for the
account of any Borrower, or the Collateral Agent as loss payee, or additional
insured (other than Business Interruption Insurance Proceeds and proceeds of
insurance policies relating to third party liability).
 
“Interest Payment Date” means, with respect to a Revolving Loan, the last day of
each Interest Period applicable to such Revolving Loan.
 
“Interest Period” means, with respect to any Eurodollar Loan, the period
beginning on (and including) the date on which such Eurodollar Loan is made
pursuant to Section 2.04 (Funding of Loans) or the date on which each successive
interest period for each such Eurodollar Loan is determined pursuant to
Section 3.03 (Interest Rates) and ending on (and including) the day that
numerically corresponds to such date one (1) month thereafter; provided,
however, that (i) if such Interest Period would otherwise end on a day that is
not a Business Day, such Interest Period shall end on the next following
Business Day (unless such next following Business Day is in a different a
calendar month, in which case such Interest Period shall end on the next
preceding Business Day), (ii) any Interest Period that begins on the last
Business Day of a month (or on a day for which there is no numerically
corresponding day in the month at the end of such Interest Period) shall end on
the last Business Day of the month at the end of such Interest Period, (iii) no
Interest Period shall end after any Monthly Payment Date unless the aggregate
outstanding principal amount of Eurodollar Loans having Interest Periods which
end on or prior to such Monthly Payment Date shall be at least equal to the
aggregate principal amount of Eurodollar Loans due and payable on or prior to
such Monthly Payment Date, and (iv) no Interest Period may end later than the
Maturity Date.
 
“Interest Period Notice” means a notice in substantially the form attached
hereto as Exhibit 3.03, executed by an Authorized Officer of the Borrower Agent.
 

 
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“Interim Order” means the order of the Bankruptcy Court entered in the
Chapter 11 Cases after an interim hearing, substantially in the form attached
hereto as Schedule 2.01 or such other form satisfactory to the Lenders and the
Administrative Agent together with all extensions, modifications, and amendments
thereto that are satisfactory to the Lenders and the Administrative Agent. The
Interim Order shall authorize and approve the transactions contemplated by the
Financing Documents and find that the Lenders are extending credit to the
Debtors in good faith within the meaning of Bankruptcy Code section 364(e) and
shall set forth provisions (i) approving in all respects the Financing
Documents, and authorizing and directing the Debtors to execute and become bound
by the Financing Documents; (ii) modifying the automatic stay to the extent
necessary to permit or effectuate the terms of the Interim Order and the
Financing Documents, including to permit the creation and perfection of the
Collateral Agent’s Liens on the Collateral; (iii) providing for the automatic
relief of such stay to permit the enforcement of the Administrative Agent’s and
the Lenders’ remedies under the DIP Facility, subject to the right of the
Debtors and/or the Committee to re-impose or continue the automatic stay; and
(iv) providing that the Debtors acknowledge (a) the validity and enforceability
of the Pre-Petition Obligations, without defense, offset or counterclaim of any
kind, (b) the validity, perfection and priority of the Liens securing the
Pre-Petition Obligations, and that the Debtors waive any right to challenge or
contest such claims and liens and (c) that the Debtors have no valid claims or
causes of action, whether based in contract, tort or otherwise against the
Pre-Petition Administrative Agent or any Pre-Petition Senior Secured Party with
respect to the Pre-Petition Credit Agreement or the related documents or
transactions.
 
“Inventory” has the meaning set forth in Section 9-102 of the UCC.
 
“Investment Property” has the meaning set forth in Section 9-102 of the UCC.
 
“Kinergy” means Kinergy Marketing, LLC, an Oregon limited liability company.
 
“Law” means, with respect to any Governmental Authority, any constitutional
provision, law, statute, rule, regulation, ordinance, treaty, order, decree,
judgment, decision, common law, holding, injunction, Governmental Approval or
requirement of such Governmental Authority.  Unless the context clearly requires
otherwise, the term “Law” shall include each of the foregoing (and each
provision thereof) as in effect at the time in question, including any
amendments, supplements, replacements, or other modifications thereto or
thereof, and whether or not in effect as of the date of this Agreement.
 
“Leased Premises” means, with respect to the Boardman Plant, the Premises, as
defined in the Boardman Lease and, with respect to the Stockton Plant, the
Premises, as defined in the Stockton Lease.
 
“Leases” means, collectively, the Boardman Lease and the Stockton Lease.
 
“Lender Assignment Agreement” means a Lender Assignment Agreement, substantially
in the form of Exhibit 11.03.
 
“Lenders” means the persons identified as “Lenders” and listed on the signature
pages of this Agreement and each other Person that acquires the rights and
obligations of a Lender hereunder pursuant to Section 11.03 (Assignments).
 

 
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“LIBOR” means, for any Interest Period for any Eurodollar Loan:
 
(a)           the rate per annum equal to the rate determined by the
Administrative Agent to be the offered rate that appears on the page of the
Telerate Screen (or any successor thereto) that displays an average British
Bankers Association Interest Settlement Rate for deposits in Dollars (for
delivery on the first day of such Interest Period) with a term equivalent to
such Interest Period, determined as of approximately 11:00 a.m. (London time)
two (2) Business Days prior to the first day of such Interest Period; or
 
(b)           if the rate referenced in the preceding clause (a) does not appear
on such page or service or such page or service is not available, the rate per
annum equal to the rate determined by the Administrative Agent to be the offered
rate on such other page or other service that displays an average British
Bankers Association Interest Settlement Rate for deposits in Dollars (for
delivery on the first day of such Interest Period) with a term equivalent to
such Interest Period, determined as of approximately 11:00 a.m. (London time)
two (2) Business Days prior to the first day of such Interest Period; or
 
(c)           if the rates referenced in the preceding clauses (a) and (b) are
not available, the rate per annum determined by the Administrative Agent as the
rate of interest at which deposits in Dollars for delivery on the first day of
such Interest Period in same day funds in the approximate amount of the
Eurodollar Loan being made, continued or converted and with a term equivalent to
such Interest Period would be offered by WestLB to major banks in the London
interbank eurodollar market at their request at approximately 4:00 p.m. (London
time) two (2) Business Days prior to the first day of such Interest Period.
 
Notwithstanding the foregoing, in no event shall LIBOR be less than a rate per
annum equal to four percent (4%).
 
“Lien” means any security interest, mortgage, pledge, hypothecation, assignment,
deposit arrangement, encumbrance, bailment, conditional sales or title retention
agreement, lien (statutory or otherwise), charge against or interest in
property, in each case of any kind, to secure payment of a debt or performance
of an obligation.
 
“Loans” means, collectively, the Revolving Loans and the Roll Up Loans.
 
“Local Account” means any local bank account (other than the Project Accounts)
in the name of any Borrower.
 
“Madera” has the meaning set forth in the Preamble.
 
“Madera Deed of Trust” means the Deed of Trust, Security Agreement, Financing
Statement, Fixture Filing and Assignment of Leases, Rents and Security Deposits,
dated on or about the date of the Pre-Petition Credit Agreement, made by Madera
to Stewart Title Guaranty Company, as trustee, for the benefit of the
Pre-Petition Collateral Agent, as beneficiary.
 
“Madera DG Agreement” the WDG Marketing and Services Agreement, dated March 4,
2005, among Madera, Phoenix Bio Industries and Western Milling, LLC.
 

 
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“Madera Plant” means the ethanol production facility located at Madera,
California, with an expected capacity of approximately forty (40) million
gallons-per-year of denatured ethanol, including the Site on which such facility
is located, and all buildings, structures, improvements, easements and other
property related thereto.
 
“Madera Pledge Agreement” means the Pledge and Security Agreement, dated on or
about the date of the Pre-Petition Credit Agreement, among, Pacific Holding,
Madera and the Pre-Petition Collateral Agent, pursuant to which Pacific Holding
pledges one hundred percent (100%) of the Equity Interests in Madera to the
Pre-Petition Collateral Agent.
 
“Madera Security Agreement” means the Assignment and Security Agreement, dated
on or about the date of the Pre-Petition Credit Agreement, made by Madera in
favor of the Pre-Petition Collateral Agent.
 
“Maintenance Capital Expenses” means all expenditures by the Borrowers for
regularly scheduled (or reasonably anticipated) major maintenance of the
Project, Prudent Ethanol Operating Practice and vendor and supplier requirements
constituting major maintenance (including teardowns, overhauls, capital
improvements, replacements and/or refurbishments of major components of the
Project).
 
“Major Project Party” means each of Delta-T, Pacific Ethanol, the Operator, the
landlord under each Lease, the guarantor guarantying the obligations of any
other Major Project Party and any other Project Party designated as a Major
Project Party by the Administrative Agent and the Borrower Agent.
 
“Mandatory Prepayment” means a prepayment in accordance with Section 3.08
(Mandatory Prepayment).
 
“Material Adverse Effect” means any event, development or circumstance that has
had or could reasonably be expected to have a material adverse effect in respect
of any Plant or the Project on (i) the business, assets, property, condition
(financial or otherwise) or operations (as applicable) of any Debtor, (ii) the
ability of Pacific Holding or any other Borrower or any Project Party to perform
its material obligations under any Transaction Document to which it is a party,
(iii) creation, perfection or priority of the Liens granted, or purported to be
granted, in favor, or for the benefit, of the Collateral Agent or (iv) the
rights or remedies of any Senior Secured Party under any Financing Document;
provided that clauses (i) or (ii) of this definition shall not be a Material
Adverse Effect with respect to any Borrower if such event, development or
circumstance is an Effect of Bankruptcy or results from the Cold Shutdown of a
Plant.
 
“Materials of Environmental Concern” means chemicals, pollutants, contaminants,
wastes, toxic substances and hazardous substances, any toxic mold, radon gas or
other naturally occurring toxic or hazardous substance or organism and any
material that is regulated in any way, or for which liability is imposed,
pursuant to an Environmental Law.
 

 
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“Maturity Date” means the earliest of (i) six (6) months after the Closing Date;
(ii) the acceleration of all or any portion of the Obligations; (iii) the first
Business Day on which the Interim Order expires by its terms or is terminated,
unless the Final Order shall have been entered and become effective prior
thereto; (iv) the conversion of any of the Chapter 11 Cases to a case under
chapter 7 of the Bankruptcy Code unless otherwise consented to in writing by the
Administrative Agent and the Lenders; (v) the dismissal of any of the Chapter 11
Cases unless otherwise consented to in writing by the Administrative Agent and
the Lenders; and (vi) the effective date of any Debtor’s plan of reorganization
confirmed in the Chapter 11 Cases.
 
“Maximum Rate” has the meaning provided in Section 11.10 (Interest Rate
Limitation).
 
“Monthly Budget Period” means the period of four (4) consecutive weeks starting
on the first day of the period covered by the Initial DIP Budget in effect as of
the date hereof, and each successive period of four (4) consecutive weeks
thereafter starting on the 2nd week of the initial (4) consecutive week period.
 
“Monthly Date” means the last Business Day of each calendar month.
 
“Monthly Payment Date” means the first Business Day of each calendar month.
 
“Monthly Period” means each one (1) month period beginning on (and including)
the day immediately following a Monthly Payment Date and ending on (and
including) the next Monthly Payment Date.
 
“Moody’s” means Moody’s Investors Service Inc., and any successor thereto that
is a nationally recognized rating agency.
 
“Mortgaged Property” means all real property right, title and interest of each
Borrower that is subject to the relevant New Mortgage in favor of the Collateral
Agent.
 
“Mortgages” means, together, the Madera Deed of Trust, the Boardman Deed of
Trust, the Stockton Deed of Trust and the Burley Deed of Trust.
 
“Multiemployer Plan” means a Plan that is a “multiemployer plan” as defined in
Section 4001(a)(3) of ERISA.
 
“Necessary Project Approvals”  means (i) all material Governmental Approvals
that are required under applicable Law to be obtained by any Borrower in
connection with the construction and operation of a Plant at its full nameplate
capacity as contemplated by the Transaction Documents and (ii) the Governmental
Approvals described in Section 5.03(a) (Governmental Approvals).
 
“Necessary Project Contracts”  means all material contracts, agreements,
instruments, letters, understandings, or other documentation that are required
under to be obtained by any Borrower in connection with the operation of the
applicable Plant as contemplated by the Transaction Documents.
 

 
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“Net Cash Proceeds” means with respect to any receipt of Insurance Proceeds,
Condemnation Proceeds, or Project Document Termination Payments, or any
Disposition of any Property or assets, or the incurrence of any Indebtedness,
including pursuant to section 364(b), 364(c) or 364(d) of the Bankruptcy Code in
violation of the terms of the Final Order or this Agreement, as the case may be,
the aggregate amount of cash received from time to time (whether as initial
consideration or through payment or disposition of deferred consideration) by or
on behalf of such Person for its own account in connection with any such
transaction, after deducting therefrom only:
 
(a)           related expenses, including reasonable and customary brokerage
commissions, underwriting fees and discounts, legal fees, finder’s fees and
other fees, costs and commissions that, in each case, are actually paid or
required to be paid to a Person that is not a Subsidiary or Affiliate of any of
the Borrowers or any of their respective Subsidiaries or Affiliates;
 
(b)           the amount of taxes payable in connection with or as a result of
such transaction that, in each case, are actually paid at the time of receipt of
such cash to the applicable taxation authority or other Governmental Authority
or, so long as such Person is not otherwise indemnified therefor, are reserved
for in accordance with GAAP, as in effect at the time of receipt of such cash,
based upon such Person’s reasonable estimate of such taxes payable. to the
applicable taxation authority or other Governmental Authority; and
 
(c)           reasonable amounts (without duplication) provided as a reserve, in
accordance with GAAP, against (i) any liabilities under any indemnification
obligations associated with such transaction or (ii) in the case of any
Disposition of any Property or asset, any other liabilities retained by any
Borrower associated with the Property or assets sold in such Disposition;
 
provided that, any and all amounts so deducted by any such Person pursuant to
clauses (a) through (c) of this definition shall be properly attributable to
such transaction or to the Property or asset that is the subject thereof;
provided, further, that if, at the time any of the amounts referred to in
clauses (b) or (c) are actually paid or otherwise satisfied, the reserve
therefor exceeds the amount paid or otherwise satisfied, then the amount of such
excess reserve shall constitute “Net Cash Proceeds” on and as of the date of
such payment or other satisfaction for all purposes of this Agreement and, to
the extent required under Section 3.08 (Mandatory Prepayment), the Borrowers
shall, within three (3) Business Days of such date, prepay the Loans in
accordance with the terms of Section 3.08 (Mandatory Prepayment), in an amount
equal to the amount of such excess reserve.
 
“New Boardman Deed of Trust” means the Leasehold Trust Deed, Security Agreement,
Financing Agreement, Fixture Filing and Assignment of Leases, Rents and Security
Deposits, dated on or about the date hereof, made by Boardman to Stewart Title
Guaranty Company, as trustee, for the benefit of the Collateral Agent, as
beneficiary.
 
“New Burley Deed of Trust” means the Mortgage, Security Agreement, Financing
Statement, Fixture Filing and Assignment of Leases, Rents and Security Deposits,
dated on or about the date hereof, made by Burley to Stewart Title Guaranty
Company, as trustee, for the benefit of the Collateral Agent, as beneficiary.
 

 
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“New Madera Deed of Trust” means the Deed of Trust, Security Agreement,
Financing Statement, Fixture Filing and Assignment of Leases, Rents and Security
Deposits, dated on or about the date hereof, made by Madera to Stewart Title
Guaranty Company, as trustee, for the benefit of the Collateral Agent, as
beneficiary.
 
“New Stockton Deed of Trust” means the Deed of Trust, Security Agreement,
Financing Statement, Fixture Filing and Assignment of Leases, Rents and Security
Deposits, dated on or about the date hereof, made by Stockton to Stewart Title
Guaranty Company, as trustee, for the benefit of the Collateral Agent, as
beneficiary.
 
“Non-Appealable” means, with respect to any specified time period allowing an
appeal of any ruling under any constitutional provision, Law, statute, rule,
regulation, ordinance, treaty, order, decree, judgment, decision, certificate,
holding or injunction that such specified time period has elapsed without an
appeal having been brought.
 
“Non-Voting Lender” means any Lender who (a) is a Defaulting Lender, (b) is also
a Borrower, a Project Party or any Affiliate or Subsidiary thereof or (c) has
sold a participation in the Loan held by it to any such Person.
 
“Non-U.S. Lender” has the meaning set forth in Section 4.07(e) (Taxes - Foreign
Lenders).
 
“Notes” means the Revolving Notes and the Roll Up Notes, including any
promissory notes issued by any Borrower in connection with assignments of any
Loan of a Lender, in each case substantially in the form of Exhibit 2.05, as
they may be amended, restated, supplemented or otherwise modified from time to
time.
 
“O&M Agreements” means each Operation and Maintenance Agreement between any
Borrower and the Operator.
 
“Obligations” means and includes all loans, advances, debts, liabilities,
Indebtedness and obligations of the Borrowers and PEC, howsoever arising, owed
to the Agents, the Lenders or any other Senior Secured Party of every kind and
description (whether or not evidenced by any note or instrument and whether or
not for the payment of money), direct or indirect (including those acquired by
assumption), absolute or contingent, due or to become due, now existing or
hereafter arising, including the Revolving Loans and the Roll Up Loans and
including interest and fees that accrue after the commencement by or against any
Borrower of any insolvency proceeding naming such Borrower as the debtor in such
proceeding, regardless of whether such interest and fees are allowed claims in
such proceeding, pursuant to the terms of this Agreement or any of the other
Financing Documents, including all principal, interest, fees, charges, expenses,
attorneys’ fees, costs and expenses, accountants’ fees and Consultants’ fees
payable by the Borrowers hereunder or thereunder.
 
“Offtaker” means each counterparty to each DG Offtake Agreement and each Ethanol
Offtake Agreement.
 
“Operating Statement” means an operating statement with respect to each
Plant  substantially in the form of Exhibit 7.03(p) to the Pre-Petition Credit
Agreement.
 

 
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“Operator” means PEC or any successor pursuant to an O&M Agreement (or any
replacement thereof).
 
“Orders” means, collectively, the Final Order and the Interim Order.
 
“Organic Documents” means, with respect to any Person that is a corporation, its
certificate of incorporation, its by-laws and all shareholder agreements, voting
trusts and similar arrangements applicable to any of its authorized shares of
capital stock and, with respect to any Person that is a limited liability
company, its certificate of formation or articles of organization and its
limited liability agreement.
 
“Other Collateral” means any property of a Debtor not (i) included within the
defined terms Accounts, Chattel Paper, Commercial Tort Claims, Documents,
Equipment, Fixtures, General Intangibles, Instruments, Inventory, Investment
Property and Pledged Deposits, including all cash on hand, letter-of-credit
rights, letters of credit, Stock Rights and Deposit Accounts or other deposits
(general or special, time or demand, provisional or final) with any bank or
other financial institution and (ii) excluded from the defined term Collateral.
 
“Pacific Ag Products” means Pacific Ag Products, LLC, a California limited
liability company.
 
“Pacific Ethanol” means Pacific Ethanol, Inc., a Delaware corporation.
 
“Pacific Ethanol Guarantees” means each guaranty to be made by Pacific Ethanol,
guaranteeing the performance and payment of the obligations of Kinergy or
Pacific Ag Products, as the case may be, under each of the Ethanol Offtake
Agreements, DG Offtake Agreements, and Grain Supply Agreements to which Kinergy
or Pacific Ag Products are party.
 
“Pacific Holding” has the meaning set forth in the Preamble.
 
“Pacific Holding Pledge Agreement” means the Pledge and Security Agreement,
dated on or about the date of the Pre-Petition Credit Agreement, among Pacific
Holding, PEC and the Pre-Petition Collateral Agent.
 
“Pacific Holding Security Agreement” means the Assignment and Security
Agreement, dated on or about the date of the Pre-Petition Credit Agreement, made
by Pacific Holding in favor of the Pre-Petition Collateral Agent.
 
“Participant” has the meaning provided in Section 11.03(d) (Assignments).
 
“Patriot Act” means United States Public Law 107-56, Uniting and Strengthening
America by Providing Appropriate Tools Required to Intercept and Obstruct
Terrorism (USA PATRIOT ACT) of 2001, and the rules and regulations promulgated
thereunder from time to time in effect.
 
“PBGC” means the Pension Benefit Guaranty Corporation and any entity succeeding
to any or all of its functions under ERISA.
 

 
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“PE Leases” means, in each case as in effect on the date hereof, (i) the
Equipment Lease Agreement, dated as of October 1, 2007, between Pacific Ethanol
Imperial, LLC and Burley, (ii) the Equipment Lease Agreement, dated as of July
22, 2008, between Pacific Ethanol Imperial, LLC and Boardman, (iii) the
Equipment Lease Agreement, dated as of February 1, 2008, between Pacific Ethanol
Imperial, LLC and Madera and (iv) the Equipment Lease Agreement, dated as of
April 15, 2008, between Pacific Ethanol Imperial, LLC and Stockton.
 
“PEC” means Pacific Ethanol California, Inc., a California corporation.
 
“PEC Pledge Agreement” means the Pledge and Security Agreement, dated on or
about the date hereof, among PEC, Pacific Holding and the Collateral Agent.
 
 “Period Start Date” has the meaning set forth in Section 7.01(l) (DIP Budget).
 
“Permitted Indebtedness” means Indebtedness identified in Section 7.02(a)
(Negative Covenants - Restrictions on Indebtedness).
 
“Permitted Liens” means Liens identified in Section 7.02(b) (Negative Covenants
- Liens).
 
“Permitted Variance” means, for each Monthly Budget Period, the product of
(x) the aggregate amount of the DIP Budget for such Monthly Budget Period and
(y) 10%.
 
“Person” means any natural person, corporation, partnership, limited liability
company, firm, association, trust, government, governmental agency or any other
entity, whether acting in an individual, fiduciary or other capacity.
 
“Petition Date” has the meaning set forth in the Recitals.
 
“Plan” means an employee pension benefit plan (as defined in Section 3(3) of
ERISA) subject to Title IV of ERISA or Section 412 of the Code that is sponsored
or maintained by any Borrower or any ERISA Affiliate, or in respect of which any
Borrower or any ERISA Affiliate has any obligation to contribution or Liability.
 
“Plants” means, collectively, the Madera Plant, the Boardman Plant, the Stockton
Plant and the Burley Plant.
 
“Pledge Agreements” means, collectively, the Madera Pledge Agreement, the
Boardman Pledge Agreement, the Stockton Pledge Agreement, the Burley Pledge
Agreement  and the Pacific Holding Pledge Agreement.
 
“Pledged Deposits” means all time deposits of money (other than Deposit Accounts
and Instruments), whether or not evidenced by certificates, pledged by any
Debtor as security for any Obligations, and all rights to receive interest on
such deposits.
 
“Post-Petition” means the time period beginning immediately upon the filing of
the Chapter 11 Cases.
 

 
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“Pre-Petition” means the time period ending immediately prior to the filing of
the Chapter 11 Cases.
 
“Pre-Petition Administrative Agent” has the meaning assigned to the term
“Administrative Agent” in the Pre-Petition Credit Agreement.
 
“Pre-Petition Collateral Agent” has the meaning assigned to the term “Collateral
Agent” in the Pre-Petition Credit Agreement.
 
“Pre-Petition Credit Agreement” has the meaning set forth in the Recitals.
 
“Pre-Petition Financing Documents” has the meaning assigned to the term
“Financing Documents” in the Pre-Petition Credit Agreement.
 
“Pre-Petition Obligations” has the meaning assigned to the term “Obligations” in
the Pre-Petition Credit Agreement.
 
“Pre-Petition Senior Secured Parties” has the meaning assigned to the term
“Senior Secured Parties” in the Pre-Petition Credit Agreement.
 
“Pre-Petition Term Loans” has the meaning assigned to the term “Term Loans” in
the Pre-Petition Credit Agreement.
 
“Priming Liens” has the meaning set forth in Section 2.09 (b) (Super-Priority
Nature of Obligations).
 
“Products” means ethanol, Distillers Grains, carbon dioxide, and any other co
product or by-product produced in connection with the production of ethanol at
the Plants.
 
“Project” means each Plant and all auxiliary and other facilities constructed or
to be constructed by or on behalf of the applicable Borrowers pursuant to the
Project Documents relating to each such Plant or otherwise, together with all
fixtures and improvements thereto and each Site and all other real property,
easements and rights-of-way held by or on behalf of the applicable Borrowers and
all rights to use easements and rights-of-way of others.
 
“Project Accounts” has the meaning provided in the Pre-Petition Credit
Agreement.
 
 “Project Document Guarantees” means each guarantee (by an Affiliate or
otherwise) of the performance of any Project Party’s obligations under a Project
Document, including the Pacific Ethanol Guarantees and any other such guarantee
required as a condition to approval of any Project Document in accordance with
this Agreement.
 
“Project Document Termination Payments” means all Net Cash Proceeds of payments
that are required to be paid to or for the account of any Borrower as a result
of the termination of any Project Document or any Additional Project Document.
 

 
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“Project Documents” means:
 
 
(i)
the Construction Contracts;

 
 
(ii)
the Leases;

 
 
(iii)
the Grain Supply Agreements;

 
 
(iv)
the Asset Management Agreement;

 
 
(v)
the Ethanol Offtake Agreements;

 
 
(vi)
the DG Offtake Agreements;

 
 
(vii)
the O&M Agreements;

 
 
(viii)
the Borrower LLC Agreements;

 
 
(ix)
the Project Document Guarantees;

 
 
(x)
each Additional Project Document; and

 
 
(xi)
any replacement agreement for any of such agreements.

 
“Project Party” means each Person (other than the Borrowers) who is a party to a
Project Document.
 
“Property” means any right or interest in or to property of any kind whatsoever,
whether real, personal or mixed and whether tangible or intangible, including
without limitation, Equity Interests.
 
“Prudent Ethanol Operating Practice” means those reasonable practices, methods
and acts that (i) are commonly used in the regions where the Plants are located
to manage, operate and maintain ethanol production, distribution, equipment and
associated facilities of the size and type that comprise the Project safely,
reliably, and efficiently and in compliance with applicable Laws, manufacturers’
warranties and manufacturers’ and licensor’s recommendations and guidelines, and
(ii) in the exercise of reasonable judgment, skill, diligence, foresight and
care are expected of an ethanol plant operator, in order to efficiently
accomplish the desired result consistent with safety standards, applicable Laws,
manufacturers’ warranties, manufacturers’ recommendations and, in the case of
the Project, the Project Documents.  Prudent Ethanol Operating Practice does not
necessarily mean one particular practice, method, equipment specifications or
standard in all cases, but is instead intended to encompass a broad range of
acceptable practices, methods, equipment specifications and standards.
 
“RCRA” means the Resource Conservation and Recovery Act (42 U.S.C. § 6901 et
seq.), as amended, and all rules, regulations, standards, guidelines, and
publications issued thereunder.
 

 
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“Recovery Event” means (i) any settlement of or payments in respect of any
insurance policies required pursuant to the Transaction Documents or otherwise
obtained with respect to any Borrower, any Plant or the Project or (ii) any
Event of Taking.
 
“Register” has the meaning set forth in Section 11.03(c) (Assignments).
 
“Related Parties” means, with respect to any Person, such Person’s Affiliates
and the partners, directors, officers, employees, agents and advisors of such
Person and of such Person’s Affiliates.
 
“Removal,” “Remedial” and “Response” actions shall include the types of
activities covered by CERCLA, RCRA, and other comparable Environmental Laws, and
whether the activities are those which might be taken by a Governmental
Authority or those which a Governmental Authority or any other Person might seek
to require of waste generators, handlers, distributors, processors, users,
storers, treaters, owners, operators, transporters, recyclers, reusers,
disposers, or other Persons under “removal,” “remedial,” or other “response”
actions.
 
“Reportable Event” means a “reportable event” within the meaning of
Section 4043(c) of ERISA.
 
“Required Lenders” means Lenders (excluding all Non-Voting Lenders) holding in
excess of fifty percent (50.00%) of an amount equal to (x) the then aggregate
outstanding principal amount of the Loans plus (y) the undisbursed amount of the
Aggregate Revolving Loan Commitment plus (z) the undisbursed amount of the
Aggregate Roll Up Loan Commitment (excluding the principal amounts of any Loans
made by, and any Revolving Loan Commitments and Roll Up Loan Commitments of, any
Non-Voting Lenders); provided that the undisbursed Revolving Loan Commitment and
Roll Up Loan Commitment of, and the portion of the outstanding principal amount
of the Loans held by, any Defaulting Lender shall be excluded for purposes of
making a determination of Required Lenders.
 
“Restricted Payments” means any (a) dividend or other distribution (whether in
cash, securities or other property), or any payment (whether in cash, securities
or other property), including any sinking fund or similar deposit, on account of
the purchase, redemption, retirement, defeasance, acquisition, cancellation or
termination of any Equity Interests of any Borrower, or on account of any return
of capital to any holder of any such Equity Interest in, or any other Affiliate
of, any Borrower, or any option, warrant or other right to acquire any such
dividend or other distribution or payment and (b) any payment of any management,
consultancy, administrative, services, or other similar payments to any Person
who owns, directly or indirectly, any Equity Interest in any Borrower, or any
Affiliate of any such Person except to the extent provided in the then-current
DIP Budget.
 
“Revenue Account” means a special, segregated, Dollar-denominated account
established at the Accounts Bank entitled “Amarillo Control - Pacific Ethanol
Holding Co. LLC Revenue Account”, Account No. 128864.
 
“Revolving Lenders” means those Lenders of Revolving Loans, as identified on
Schedule 1.01, and each other Person that acquires the rights and obligations of
any such Lender pursuant to Section 11.03 (Assignments).
 

 
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“Revolving Loan Commitment” means, with respect to each Lender, the commitment
of such Lender to make Revolving Loans, as set forth opposite the name of
such  Lender in Schedule 1.01, as the same may be reduced in accordance with
Section 2.06 (Termination of Commitments).
 
“Revolving Loan Commitment Percentage” means, as to any Lender at any time, the
percentage that such Lender’s Revolving Loan Commitment then constitutes of the
Aggregate Revolving Loan Commitment.
 
“Revolving Loans” has the meaning provided in Section 2.01(a) (Revolving Loans).
 
“Revolving Notes” means the promissory notes of each Borrower evidencing
Revolving Loans.
 
“Roll Up Lenders” means those Lenders of Roll Up Loans, as identified on
Schedule 1.01, and each other Person that acquires the rights and obligations of
any such Lender pursuant to Section 11.03 (Assignments).
 
“Roll Up Loan Commitment” means, with respect to each Lender, the commitment of
such Lender to make Roll Up Loans, as set forth opposite the name of
such  Lender in Schedule 1.01, as the same may be reduced in accordance with
Section 2.06 (Termination of Commitments).
 
“Roll Up Loan Commitment Percentage” means, as to any Lender at any time, the
percentage that such Lender’s Roll Up Loan Commitment then constitutes of the
Aggregate Roll Up Loan Commitment.
 
“Roll Up Loans” has the meaning provided in Section 2.02(a) (Roll Up Loans).
 
“Roll Up Notes” means the promissory notes of each Borrower evidencing Roll Up
Loans.
 
“S&P” means Standard & Poor’s Ratings Services, a division of The McGraw Hill
Companies, Inc., and any successor thereto that is a nationally recognized
rating agency.
 
“Section 506(a) Determination”  means a determination under Section 506(a) of
the Bankruptcy Code.
 
“Security Agreements” means, collectively, the Madera Security Agreement, the
Boardman Security Agreement, the Stockton Security Agreement, the Burley
Security Agreement and the Pacific Holding Security Agreement.
 
“Senior Secured Parties” means the Lenders, the Agents and each of their
respective successors, transferees and assigns.
 
“Site” means, with respect to each Plant, those certain parcels described on
Schedule 5.13(a) to the Pre-Petition Credit Agreement with respect to such
Plant.
 

 
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“Sponsor Support Agreement” means the Sponsor Support Agreement, dated on or
about the date of the Pre-Petition Credit Agreement, pursuant to which Pacific
Ethanol agrees to provide support for the Project on the terms and conditions
set forth therein.
 
“SPV” has the meaning provided in Section 11.03(h) (Assignments).
 
“Stock Rights” means any securities, dividends or other distributions and any
other right or property which a Debtor shall receive or shall become entitled to
receive for any reason whatsoever with respect to, in substitution for or in
exchange for any securities or other ownership interests in a corporation,
partnership, joint venture or limited liability company constituting Collateral
and any securities, any right to receive securities and any right to receive
earnings, in which a Debtor now has or hereafter acquires any right, issued by
an issuer of such securities.
 
“Stockton” has the meaning set forth in the Preamble.
 
“Stockton Deed of Trust” means the Deed of Trust, Security Agreement, Financing
Statement, Fixture Filing and Assignment of Leases, Rents and Security Deposits,
in substantially the form of Exhibit 6.04(g)-A to the Pre-Petition Credit
Agreement.
 
“Stockton Lease” means the lease between the Stockton Port District and
Stockton.
 
“Stockton Plant” means the ethanol production facility located at Stockton,
California, with a design basis capacity of approximately fifty (50) million
gallons-per-year of denatured ethanol, including the Site on which such facility
is located, and all buildings, structures, improvements, easements and other
property related thereto.
 
“Stockton Pledge Agreement” means the Pledge and Security Agreement, in
substantially the form of Exhibit 6.04(g)-B to the Pre-Petition Credit
Agreement, entered into among Pacific Holding, Stockton and the Pre-Petition
Collateral Agent.
 
“Stockton Security Agreement” means the Assignment and Security Agreement, in
substantially the form of Exhibit 6.04(g)-C to the Pre-Petition Credit Agreement
entered into by Stockton in favor of the Pre-Petition Collateral Agent.
 
“Subsidiary” of any Person means a corporation, partnership, joint venture,
limited liability company or other business entity of which a majority of the
shares of securities or other Equity Interests having ordinary voting power for
the election of directors or other governing body (other than securities or
interests having such power only by reason of the happening of a contingency)
are at the time beneficially owned, or the management of which is otherwise
controlled, directly, or indirectly through one or more intermediaries, or both,
by such Person.
 
“Supporting Obligation” has the meaning set forth in Section 9-102 of the UCC.
 

 
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“Swap Contract” means (a) any and all rate swap transactions, basis swaps,
credit derivative transactions, forward rate transactions, commodity swaps,
commodity options, forward commodity contracts, equity or equity index swaps or
options, bond or bond price or bond index swaps or options or forward bond or
forward bond price or forward bond index transactions, interest rate options,
forward foreign exchange transactions, cap transactions, floor transactions,
collar transactions, currency swap transactions, cross-currency rate swap
transactions, currency options, spot contracts, or any other similar
transactions or any combination of any of the foregoing (including any options
to enter into any of the foregoing), whether or not any such transaction is
governed by or subject to any master agreement, (b) any and all transactions of
any kind, and the related confirmations, which are subject to the terms and
conditions of, or governed by, any form of master agreement published by the
International Swaps and Derivatives Association, Inc., any International Foreign
Exchange Master Agreement, or any other master agreement, including any such
obligations or liabilities under any such master agreement and (c) for the
avoidance of doubt, excludes any contract for the physical sale or purchase of
any commodity.
 
“Swap Termination Value” means, in respect of any one or more Swap Contracts,
after taking into account the effect of any legally enforceable netting
agreement relating to such Swap Contracts, (a) for any date on or after the date
such Swap Contracts have been closed out and termination value(s) determined in
accordance therewith, such termination value(s), and (b) for any date prior to
the date referenced in clause (a), the amount(s) determined as the
mark-to-market value(s) for such Swap Contracts, in accordance with the terms of
the applicable Swap Contract, or, if no provision is made therein, as determined
based upon one or more mid-market or other readily available quotations provided
by any recognized dealer in such Swap Contracts (which may include a Lender or
any Affiliate of a Lender).
 
“Tax” or “Taxes” means any present or future taxes (including income, gross
receipts, license, payroll, employment, excise, severance, stamp, documentary,
occupation, premium, windfall profits, environmental, capital stock, franchise,
profits, withholding, social security (or similar), unemployment, disability,
real property, personal property, sales, use, transfer, registration,
value-added, ad valorem, alternative or add-on minimum, estimated, or other tax
of any kind whatsoever), levies, imposts, duties, fees or charges (including any
interest, penalty, or addition thereof) imposed by any government or any
governmental agency or instrumentality or any international or multinational
agency or commission.
 
“Tax Return” means all returns, declarations, reports, claims for refund and
information returns and statements of any Person required to be filed with
respect to, or in respect of, any Taxes, including any schedule or attachment
thereto and any amendment thereof.
 
“Termination Event” means (i) a Reportable Event with respect to any ERISA Plan,
(ii) the initiation of any action by any Borrower, any ERISA Affiliate or any
ERISA Plan fiduciary to terminate an ERISA Plan (other than a standard
termination under Section 4041(b) of ERISA) or the treatment of an amendment to
an ERISA Plan as a termination under Section 4041(e) of ERISA, (iii) the
institution of proceedings by the PBGC under Section 4042 of ERISA to terminate
an ERISA Plan or to appoint a trustee to administer any ERISA Plan, (iv) the
withdrawal of any Borrower or any ERISA Affiliate from a Multiemployer Plan
during a plan year in which such Borrower or such ERISA Affiliate was a
“substantial employer” as defined in Section 4001(a)(2) of ERISA or the
cessation of operations which results in the termination of employment of twenty
percent (20%) of Multiemployer Plan participants who are employees of any
Borrower or any ERISA Affiliate, (v) the partial or complete withdrawal of any
Borrower or any ERISA Affiliate from a Multiemployer Plan, or (vi) any Borrower
or any ERISA Affiliate is in default (as defined in Section 4219(c)(5) of ERISA)
with respect to payments to a Multiemployer Plan.
 

 
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“Transaction Documents” means, collectively, the Financing Documents and the
Project Documents.
 
“Unfunded Benefit Liabilities” means, with respect to any ERISA Plan at any
time, the amount (if any) by which (i) the present value of all accrued benefits
calculated on an accumulated benefit obligation basis and based upon the
actuarial assumptions used for accounting purposes (i.e., those determined in
accordance with FASB statement No. 35 and used in preparing the ERISA Plan’s
financial statements) exceeds (ii) the fair market value of all ERISA Plan
assets allocable to such benefits, determined as of the then most recent
actuarial valuation report for such ERISA Plan.
 
“Uniform Commercial Code” or “UCC” means the Uniform Commercial Code as in
effect from time to time in the State of New York; provided, however, in the
event that, by reason of mandatory provisions of law, any or all of the
perfection or priority of the security interest in any Collateral is governed by
the Uniform Commercial Code as in effect in a jurisdiction other than the State
of New York, the term “UCC” shall mean the Uniform Commercial Code as in effect
in such other jurisdiction for purposes of provisions relating to such
perfection or priority and for purposes of definitions related to such
provisions.
 
“United States” or “U.S.” means the United States of America, its fifty States
and the District of Columbia.
 
“United States Person” means a “United States person” as defined in
Section 7701(a)(30) of the Code.
 
“WDG” means wet distillers grains produced by the Borrowers at the Plants.
 
“WestLB” means WestLB AG, New York Branch.
 
 
 
 
 
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