pacificethanol_8k-ex1003.htm


    Exhibit
10.3

     

    FORBEARANCE
AGREEMENT (LYLES UNITED, LLC)

    


     

    This
FORBEARANCE AGREEMENT (LYLES UNITED) (“this Agreement”) is entered into as of
February 26, 2009, by and among PACIFIC ETHANOL, INC., a Delaware corporation
(the “Company”), PACIFIC AG. PRODUCTS, LLC (“PAP”), PACIFIC ETHANOL CALIFORNIA,
INC. (“PECA”; together with PAP and the Company, the “PE Parties”, and each
a “PE Party”) and LYLES UNITED, LLC, a Delaware limited liability company (the
“Lender”), as parties to the Loan Documents (defined below).  The
Company, PAP, PECA and Lender are sometimes referred to individually as a
“Party” and collectively as the “Parties” herein.  Capitalized terms
used in this Agreement which are not otherwise defined herein shall have the
meanings given such terms in the Loan Documents.

     

    RECITALS:

     

    WHEREAS,
Lender is the holder of that certain Amended and Restated Promissory Note, dated
November 7, 2008, in the principal amount of $30.0 million by the Company in
favor of Lender (the “Note”), which without acceleration is due and payable on
March 15, 2009 (the “Maturity Date”);

     

    WHEREAS,
Lender is the beneficiary under that certain Unconditional Guaranty, dated
November 7, 2008, from PAP with respect to the indebtedness under the Note (the
“PAP Guaranty”), and Lender is also the Secured Party under that certain
Security Agreement, dated November 7, 2008, by and between PAP and Lender, with
respect to the indebtedness under the Note (the “PAP Security
Agreement”);

     

    WHEREAS,
Lender is the beneficiary under that certain Limited Recourse Guaranty, dated
November 7, 2008, from PECA with respect to the indebtedness under the Note (the
“PECA Guaranty”; together with the PAP Guaranty, the “Guarantees”), and Lender
is a party to that certain Joint Instruction Letter, dated November 7, 2008,
from the Company and Lender to PECA (the “Joint Instruction
Letter”);

     

    WHEREAS,
Lender is a party to that certain Loan Restructuring Agreement, dated as of
November 7, 2008, by and among the PE Parties, Pacific Ethanol Imperial, LLC, a
Delaware limited liability company, and Lender (the “Restructuring Agreement”;
together with the Note, the Guarantees, the PAP Security Agreement, and the
Joint Instruction Letter, the “Loan Documents”);

     

    WHEREAS,
the PE Parties have advised Lender that Company will be unable to pay the
interest payment under the Note due and payable on March 1, 2009, which
nonpayment will constitute an Event of Default under the Note if payment shall
not have been made within five days of the Company’s receipt of Lender’s written
notice to the Company of such nonpayment, and the nonpayment of such obligation
by the Company and by PAP and PECA under the Guarantees will also constitute a
default or event of default in accordance with the terms of each of the other
Loan Documents (the “Anticipated Interest Payment Default”);

     

    WHEREAS,
the PE Parties have advised Lender that the Company will be unable to pay
accrued interest and the $30.0 million principal balance of the Note due on the
Maturity Date, which nonpayment will constitute an Event of Default under the
Note, and the nonpayment of such obligation by the Company and by PAP and PECA
under the Guarantees will also constitute a default or event of default in
accordance with the terms of each of the other Loan Documents (the “Anticipated
Maturity Date Payment Default”) (collectively, with the Anticipated Interest
Payment Default, the “Anticipated Defaults”);

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    WHEREAS,
Lender will have various rights and remedies after the occurrence of each of the
Anticipated Defaults;

     

    WHEREAS,
certain indirect subsidiaries of the Company, consisting of the owners of four
ethanol plants (collectively, the “Plant Entities”) and a holding company for
those Plant Entities (“PEHC”) are parties to that certain Credit Agreement dated
as of February 27, 2007 (as amended from time to time thereafter) by and among
the Plant Entities, PEHC, WestLB AG, New York Branch (“WestLB”), and certain
other parties (the “West LB Credit Agreement”), and the Company is a party to
that certain Sponsor Support Agreement, dated as of February 27, 2007 (as
amended thereafter), among the Company, PEHC and WestLB (collectively, with the
West LB Credit Agreement, the “WestLB Obligations”);

     

    WHEREAS,
a direct subsidiary of the Company, Kinergy Marketing LLC, an Oregon limited
liability company (“Kinergy”) is a party to that certain Loan and Security
Agreement, dated as of July 28, 2008, by and among Kinergy, Wachovia Capital
Finance Corporation (Western) (“Wachovia”) and certain other parties (the
“Wachovia Loan Agreement”), and the Company has issued a Guarantee, dated July
28, 2008, in favor of Wachovia with respect to the indebtedness under the
Wachovia Loan Agreement (collectively, with the Wachovia Loan Agreement, the
“Wachovia Obligations”);

     

    WHEREAS,
the PE Parties have requested that Lender agree and, subject to the terms and
conditions of this Agreement, Lender has agreed, during (and only during) the
Forbearance Period as defined below in this paragraph, (a) with respect to
respect to each of the Anticipated Defaults, to forbear from any demand for
immediate payment of any amounts due under the Note or the other Loan Documents,
and from any exercise of rights to foreclose on any or all of the property of
any PE Party in which Lender has been granted a security interest under any of
the Loan Documents, or to enforce the Guarantees, until the earliest to occur of
(i) March 31, 2009; (ii) the date of termination of the Forbearance Period
pursuant to Section
5 hereof; and (iii) the date on which all of the obligations under the
Note and under any of the other Loan Documents have been paid and discharged in
full and the Note has been canceled (the “Forbearance Period”);

     

    NOW,
THEREFORE, in consideration of the premises set forth above, the terms and
conditions contained herein, and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the PE Parties and
Lender hereby agree as follows:

     

    1.           Incorporation
of Preliminary Statements.  The preliminary statements set
forth above are hereby incorporated into this Agreement as accurate and complete
statements of fact.  Without limiting the foregoing, each PE Party
hereby acknowledges and agrees that (a) the Note is valid, outstanding and
enforceable in accordance with its terms; (b) Lender has, and shall
continue to have, valid, enforceable and perfected security interests in and
liens upon the property of any PE Party in which Lender has been granted a
security interest under any of the Loan Documents; (c) the Guarantees are
valid and enforceable in accordance with their terms; (d) absent the
effectiveness of this Agreement, Lender has, upon the occurrence of any event of
default under any of the Loan Documents, the right to enforce its security
interest in, and liens on, the property of any PE Party in which Lender has been
granted a security interest under any of the Loan Documents, enforce the
obligations of PAP and PECA under the Guarantees, and enforce its other rights
and pursue its other remedies under the Loan Documents; (e) absent the
effectiveness of this Agreement, the Note is payable in full on the Maturity
Date, and all obligations under the Note and the Loan Documents are payable in
accordance with the terms thereof, without defense, dispute, offset,
withholding, recoupment, counterclaim or deduction of any kind; and (f) after
giving effect to this Agreement, the Note will be payable in full on the earlier
to occur of March 31, 2009 and the termination of the Forbearance Period, and
all obligations under the Note and any other Loan Documents shall be payable on
such date without defense, dispute, offset, withholding,
recoupment,  counterclaim or deduction of any kind.

     

    
      
         

      

      
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    2.           Forbearance

     

    Provided that no Forbearance Default
(as defined below) occurs, and subject in all respects to the terms and
conditions of this Agreement including satisfaction of the conditions precedent
to the effectiveness of this Agreement set forth in Section 3 below,
during the Forbearance Period Lender agrees that it shall not (i) declare to be
due and payable or seek to collect all or any portion of the outstanding
principal amount of the Note or interest thereon, or any other obligations under
the Loan Documents, or (ii) exercise any remedies provided for under the Note or
the other Loan Documents or applicable law on account of the Anticipated
Defaults.   Upon termination of the Forbearance Period, Lender
shall have the right to enforce any and all remedies with respect to any
default, including any event of default then outstanding under the Note or any
of the other Loan Documents (including, without limitation, any Anticipated
Default).   Under all events and circumstances, the entire
principal balance and all accrued and unpaid interest under the Note and any
obligations under any of the other Loan Documents shall be due and payable
immediately and in full upon expiration of the Forbearance Period without any
further notice or demand of any kind or nature whatsoever.

     

    3.           Conditions
of Effectiveness of this Agreement.   This Agreement shall
become effective as of the date hereof (the “Effective Date”) when, and only
when:

     

    (a)           Lender
shall have received counterparts of this Agreement duly executed and delivered
by the PE Parties, and Lender shall have executed this Agreement;

     

    (b)           Lender
shall have received a copy of the final form of a forbearance agreement as
executed by WestLB, in form and substance satisfactory to Lender, regarding the
WestLB Credit Agreement (the “WestLB Forbearance Agreement”), providing for a
forbearance period co-terminous with the Forbearance Period hereunder, and such
forbearance shall be in full force and effect;

     

    
      
         

      

      
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    (c)           Lender
shall have received a copy of a final form of a notice or agreement executed by
Wachovia for extension of the forbearance period through March 31, 2009 pursuant
to that certain Amendment and Forbearance Agreement, dated February 13, 2009,
regarding the Wachovia Loan Agreement (the “Wachovia Forbearance Agreement”), in
form and substance satisfactory to Lender, providing for a forbearance period
co-terminous with the Forbearance Period hereunder, and such forbearance shall
be in full force and effect; and

     

    (d)           All
of the representations and warranties of the PE Parties contained in this
Agreement shall be true and correct on and as of the Effective Date (unless
stated to relate solely to an earlier date, in which case such representations
and warranties shall be true and correct as of such earlier date).

     

    4.          Representations
and Warranties.  To induce Lender to enter into this Agreement,
each of the PE Parties represents and warrants to Lender (which representations
and warranties also shall be deemed made on and as of the Effective
Date):

     

    (a)          Other
than the Anticipated Defaults, there is no default presently outstanding nor any
presently existing condition that will, with the passage of time, constitute a
default during the Forbearance Period;

     

    (b)          Such
PE Party has the requisite corporate power and authority and the legal right to
execute and deliver this Agreement, and to perform the transactions contemplated
hereby.  The execution, delivery and performance by such PE Party of
this Agreement, (i) are within the PE Party’s corporate power; (ii) have been
duly authorized by all necessary corporate or other action; (iii) do not
contravene or cause the PE Party or any other PE Party to be in default under
(x) any provision of the PE Party’s or other PE Party’s formation documents or
bylaws, (y) any contractual restriction contained in any indenture, loan or
credit agreement, lease, mortgage, security agreement, bond, note or other
agreement or instrument binding on or affecting the PE Party or other PE Party
or its property, or (z) any law, rule, regulation, order, license requirement,
writ, judgment, award, injunction, or decree applicable to, binding on or
affecting the PE Party or other PE Party or its property; (iv) will not result
in the creation or imposition of any lien or encumbrance upon any of the
property of the PE Party or other PE Party or any subsidiary thereof other than
those in favor of Lender, all pursuant to the Loan Documents; and (e) do not
require the consent or approval of any governmental authority or any other
person or entity, other than those which have been duly obtained, made or
complied with and which are in full force and effect.

     

    (c)           This
Agreement has been duly executed and delivered by such PE Party.  Each
of this Agreement, the Note (as modified hereby) and the Loan Documents (as
modified hereby) to which each PE Party is a party is the legal, valid and
binding obligation of such PE Party, enforceable against such PE Party in
accordance with its terms, subject, as to enforceability, to (A) any applicable
bankruptcy, insolvency, reorganization, moratorium or other similar laws now or
hereafter in effect relating to or affecting the enforceability of creditors’
rights generally and (B) general equitable principles, whether applied in a
proceeding at law or in equity, and is in full force and effect.

     

    
      
         

      

      
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    (d)          Except
as may be expressly stated to the contrary elsewhere in this Agreement, the
representations and warranties of each PE Party contained in each Loan Document
(other than any such representations or warranties that, by their terms, are
specifically made as of a date other than the date hereof) are true and correct
in all material respects on and as of the date hereof as though made on and as
of the date hereof.

     

    (e)           No
default or event of default under the Note or Loan Documents arising other than
as a result of the Anticipated Defaults shall have occurred and be continuing or
would result after giving effect to any of the transactions contemplated on the
date hereof.

     

    (f)           No
Forbearance Default (as defined below) has occurred.

     

    5.           Forbearance
Defaults:  The following events shall constitute “Forbearance
Defaults”:

     

    (a)           any
PE Party shall fail to observe or perform any term, covenant, or agreement
binding on it contained in this Agreement, or any other agreement, instrument,
or document executed in connection with this Agreement; or

    


    (b)           the
occurrence of a default or event of default under the Note or any of the Loan
Documents, other than the Anticipated Defaults; or

    


    (c)           any
instrument, document, report, schedule, agreement, representation or warranty,
oral or written, made or delivered to Lender by any  PE Party shall be
false or misleading in any material respect when made, or deemed made, or
delivered; or

    


    (d)           any
event of default has occurred and is outstanding under the WestLB Forbearance
Agreement, or the Wachovia Forbearance Agreement, or both, or either such
forbearance agreement has terminated.

     

    Upon the
occurrence of any Forbearance Default, Lender may by notice to the PE Parties
immediately terminate the Forbearance Period and/or declare all of the
obligations under the Loan Documents immediately due and payable; provided, however, that upon
the occurrence of any event of default described in sub-paragraph (c) or (d) of
Section 4 of the Note, the Forbearance Period shall automatically terminate and
all obligations under the Note or under any other Loan Document shall
automatically become immediately due and payable, without notice or demand of
any kind.  Upon the termination or expiration of the Forbearance
Period, if at such time the outstanding amount of the obligations under the Loan
Documents have not been paid in full, Lender shall be entitled to exercise all
of its rights and remedies under the Note, the Loan Documents and applicable
law, including, without limitation, the right to declare all of the obligations
thereunder to be immediately due and payable and to enforce its liens on, and
security interests in, the property of any PE Party in which Lender has been
granted a security interest under any of the Loan Documents and enforce the PAP
Guaranty and the PECA Guaranty.  The occurrence of any Forbearance
Default shall constitute an additional Event of Default under the Note and the
other Loan Documents, and the Note each of the other Loan Documents is hereby
deemed amended to incorporate such additional Event of Default.

     

    
      
         

      

      
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    6.           Forbearance
Period Covenants.  In order to induce Lender to enter into this
Agreement and forbear during the Forbearance Period from exercising Lender’s
rights and remedies with respect to the Anticipated Defaults, each PE Party
covenants that (i) within two business days after the PE Parties or any of them
provide any report to WestLB called for by Section 8 of the WestLB Forbearance
Agreement, the PE Parties shall provide a copy of such report to Lender, (ii)
each of the PE Parties shall supply to Lender any financial information or other
report or data reasonably requested by Lender during the Forbearance
Period.

     

    7.           Status of Credit Agreement
and Other Financing Documents; No Novation; Reservation of Rights and
Remedies

    


    (a)           Upon
the Effective Date, each reference any Loan Document to “this Agreement”,
“hereunder”, “hereof” or words of like import, shall mean and be a reference to
such Loan Document as modified and supplemented hereby.

    


    (b)           This
Agreement shall be limited solely to the matters expressly set forth herein and,
except as expressly provided herein, shall not (i) constitute an amendment or
waiver of, or a forbearance with respect to, any term or condition of the Note
or any other Loan Document, (ii) prejudice any right or rights which Lender may
now have or may have in the future under or in connection with the Note or any
other Loan Document, or (iii) require Lender to agree to any additional or
future forbearance or to any other transaction of any type or nature
whatsoever;

    


    (c)           Except
to the extent specifically provided herein, the respective provisions of the
Note and the other Loan Documents shall not be amended, modified, waived,
impaired or otherwise affected hereby, and such documents and the obligations
under each of them are hereby confirmed as being in full force and
effect.

    


    (d)           This
Agreement is not a novation nor is it to be construed as a release, waiver or
modification of any of the terms, conditions, representations, warranties,
covenants, rights or remedies set forth in the Note, or any of the other Loan
Documents, except as specifically set forth herein.

    


    (e)           Except
as expressly provided herein, Lender expressly reserves all rights, claims and
remedies that it has or may have against the PE Parties or any of
them.

    


    8.           Acknowledgment
of Validity and Enforceability of the Note and other Loan
Documents.  Each of the PE Parties expressly acknowledges and
agrees that the Loan Documents to which it is a party are valid and enforceable
by Lender against such PE Party, and except as expressly modified pursuant to
this Agreement, expressly reaffirms each of its obligations under each Loan
Document to which it is a party.  Each of the PE Parties that has
granted Lender a security interest in any such PE Party’s property further
expressly acknowledges and agrees that Lender has a valid, duly perfected, first
priority and fully enforceable security interest in and lien against such
property.  Each of the PE Parties agrees that it shall not dispute the
validity or enforceability of the Note or any of the other Loan Documents or any
of its obligations thereunder, or the validity, priority, enforceability or
extent of any security interest of Lender in or against any property of such PE
Party, either during or following the expiration of the Forbearance
Period.

     

    
      
         

      

      
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    9.           Release; Covenant Not to
Sue.

    


    (a)           Each
of the PE Parties acknowledges that Lender would not enter into this Agreement
without the PE Parties’ assurance that each PE Party has no claim against Lender
or any of its parent corporations, subsidiaries, affiliates, officers,
directors, shareholders, employees, attorneys, agents, professionals and
servants, or any of their respective predecessors, successors, heirs and assigns
(collectively, the “Lender-Related Parties” and each, a “Lender-Related Party”)
arising out of the Loan Documents or the transactions contemplated
thereby.  Each of the PE Parties, for itself and on behalf of its
officers and directors, and its respective predecessors, successors and assigns
(collectively, the “Releasors”) releases each Lender-Related Party from any
known or unknown claims which any PE Party now has against any Lender-Related
Party of any nature, including any claims that any Releasor, or any Releasor’s
successors, counsel and advisors may in the future discover they would have had
now if they had known facts not now known to them, whether founded in contract,
in tort or pursuant to any other theory of liability, arising out of or related
to the Loan Documents or the transactions contemplated thereby (individually, a
“Claim” and collectively, “Claims”).

    


    (b)           Except
as expressly provided herein, the Releasors each expressly waive any statutory
or other limitation on the enforceability of a general release of unknown claims
which, if known, would have materially affected this Agreement.  EACH
RELEASOR HEREBY EXPLICITLY WAIVES ALL RIGHTS UNDER AND ANY BENEFITS OF ANY
COMMON LAW OR STATUTORY RULE OR PRINCIPLE WITH RESPECT TO THE RELEASE OF SUCH
CLAIMS, INCLUDING, WITHOUT LIMITATION, SECTION 1542 OF THE CALIFORNIA CIVIL
CODE, WHICH PROVIDES AS FOLLOWS:

     

    ·           A
GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR
SUSPECT TO EXIST IN HIS OR HER FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH
IF KNOWN BY HIM OR HER MUST HAVE MATERIALLY AFFECTED HIS OR HER SETTLEMENT WITH
THE DEBTOR.

     

    EACH
RELEASOR AGREES THAT NO SUCH COMMON LAW OR STATUTORY RULE OR PRINCIPLE,
INCLUDING SECTION 1542 OF THE CALIFORNIA CIVIL CODE OR SIMILAR LAW IN ANOTHER
JURISDICTION, SHALL AFFECT THE VALIDITY OR SCOPE OR ANY OTHER ASPECT OF THIS
AGREEMENT.

     

    (c)           The
provisions, waivers and releases set forth in this Section 9 are binding
upon each Releasor.  The provisions, waivers and releases of this
Section 9 shall
inure to the benefit of each Lender-Related Party.

    


    (d)           The
provisions of this Section 9 shall
survive payment in full of the obligations, full performance of all of the terms
of this Agreement, the Note and the other Loan Documents and/or any action by
Lender to exercise any remedy available under any of the Loan Documents or
applicable law.

     

    
      
         

      

      
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    (e)           Each
Releasor represents and warrants that each such Releasor is the sole and lawful
owner of all right, title and interest in and to all of the claims released
hereby and each such Releasor has not heretofore voluntarily, by operation of
law or otherwise, assigned or transferred or purported to assign or transfer to
any person any such claim or any portion thereof.  Each Releasor shall
jointly and severally indemnify and hold harmless each Lender-Related Party from
and against any claim, demand, damage, debt, liability (including payment of
reasonable attorneys’ fees and costs actually incurred whether or not litigation
is commenced) based on or arising out of any such assignment or
transfer.

    


    (f)           Each
Releasor, on behalf of themselves and their successors, assigns, and other legal
representatives, hereby absolutely, unconditionally covenant and agree with each
Lender-Related Party that they will not sue (at law, in equity, in any
regulatory proceeding or otherwise) any Lender-Related Party on the basis of any
Claim released, remised and discharged pursuant to Section 9(a)
above.  If any Releasor violates the foregoing covenant, such Releasor
agrees to pay, in addition to such other damages as any Lender-Related Party may
sustain as a result of such violation, all attorneys’ fees and costs incurred by
any Lender-Related Party as a result of such violation.

    


    10.           No
Waiver.  Each of the PE Parties hereby acknowledges and agrees
that Lender’s failure, at any time or times hereafter, to require strict
performance by any PE Party of any provision or term of this Agreement, the Note
or any other Loan Document shall not waive, affect or diminish any right of
Lender thereafter to demand strict compliance and performance
therewith.  Any suspension or waiver by Lender of a Forbearance
Default or of an event of default shall not, except as may be expressly set
forth herein, suspend, waive or affect any other Forbearance Default or any
other event of default, whether the same is prior or subsequent thereto and
whether of the same or of a different kind or character.

     

    11.           Sole
Benefit of Parties.  This Agreement is solely for the benefit
of the parties hereto and their respective successors and assigns, and no other
person or entity shall have any right, benefit or interest under or because of
the existence of this Agreement.

     

    12.           Limitation
on Relationship Between Parties.  The relationship of Lender
and the PE Parties has been and shall continue to be, at all times, that of
creditor and debtor with respect to the loan outstanding under the Loan
Documents.  Nothing contained in this Agreement, any instrument,
document or agreement delivered in connection herewith or in the Note or any of
the other Loan Documents shall be deemed or construed to create a fiduciary
relationship between the parties.

    


    13.           No
Assignment.  This Agreement shall not be assignable by any PE
Party without the written consent of Lender.

    


    14.           Miscellaneous.  The
section and subsection titles contained in this Agreement are included for the
sake of convenience only, and shall not affect the meaning or interpretation of
this Agreement, the Note or any other Loan Document or any provisions hereof or
thereof.

     

    
      
         

      

      
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    15.           Governing
Law. THIS AGREEMENT
SHALL BE DEEMED TO BE A CONTRACT MADE UNDER AND GOVERNED BY THE INTERNAL LAWS OF
THE STATE OF CALIFORNIA (OTHER THAN THE CHOICE OF LAW PROVISIONS THEREOF),
APPLICABLE TO CONTRACTS MADE AND PERFORMED IN SUCH STATE AND ANY APPLICABLE LAWS
OF THE UNITED STATES OF AMERICA.

    


    16.           Consultation
with Counsel.  Each of the PE Parties represents to Lender that
it has discussed this Agreement, including the provisions of Sections 9, 12 and 15 hereof, with its
attorneys.

    


    17.          
Counterparts.
This Agreement may be executed in any number of counterparts, each of which
shall be deemed an original but all of which together shall constitute one and
the same instrument. Delivery of an executed counterpart of a signature page to
this Agreement by facsimile or by “PDF” attachment to an email to the recipient
Party shall be effective as delivery of a manually executed counterpart of this
Agreement.

    


    18.           Headings.   Section
headings in this Agreement are included herein for convenience of reference only
and shall not constitute a part of this Agreement for any other
purpose.  

     

    19.           No Course
of Dealing.  The Lender has entered into this Agreement on the
express understanding with the PE Parties that in entering into this Agreement
Lender is not establishing any course of dealing with the PE
Parties.  The Lender’s rights to require strict performance with all
the terms and conditions of the Loan Documents as modified by this Agreement
shall not in any way be impaired by the execution of this
Agreement.   The Lender shall not be obligated in any manner to
execute any amendments or further waivers, and if any such amendments or further
waivers are requested in the future, assuming the terms and conditions thereof
are acceptable to Lender, Lender may require the payment of fees in connection
therewith.

     

    20.           Expenses.  Each
of the PE Parties hereby acknowledges and agrees that all fees, costs and
expenses of Lender (including the reasonable and documented fees, costs and
expenses of counsel or other advisors, if any) incurred in connection with the
transactions contemplated by this Agreement shall be payable by the Company in
accordance with the Note.

     

    21.           Further
Assurances.  At Lender’s request, each of the PE Parties shall
execute and deliver such additional documents and take such additional actions
as Lender requests to effectuate the provisions and purposes of this Agreement
and to protect and/or maintain perfection of Lender’s security interests in and
liens upon any property of any PE Party in which Lender has been granted a
security interest.

     

    
      
         


      

      
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    IN
WITNESS WHEREOF, this Agreement has been duly executed as of the day and year
first above written.

    
    

     

     

    
      	 	PACIFIC ETHANOL,
      INC.
	 	 
	 	By: /s/ NEIL M.
      KOEHLER 
	 	
              Name:  Neil
      M. Koehler

              Title:    President
      & CEO

               

            
	 	
              PACIFIC
      AG. PRODUCTS, LLC

               

            
	 	By:/s/ NEIL M.
      KOEHLER
	 	
              Name:  Neil
      M. Koehler

              Title:    President
      & CEO

               

            
	 	
              PACIFIC
      ETHANOL CALIFORNIA, INC.

               

            
	 	By:/s/ NEIL M.
      KOEHLER 
	 	
              Name:  Neil
      M. Koehler

              Title:    President
      & CEO

               

            
	 	
              LYLES
      UNITED, LLC

               

            
	 	By:/s/ MICHAEL F.
      ELKINS
	 	
              Name:  Michael
      F. Elkins

              Title:    Vice
      President

            


    

     

    10