exv10w2





EXHIBIT 10.2




AMENDED AND RESTATED LOAN AGREEMENT




     This Amended and Restated Loan Agreement (this “Agreement”), dated July 29, 2008, is entered
into by and between Panda Ethanol, Inc. (“Borrower”), a corporation duly organized, existing and in
good standing under the laws of the State of Nevada, and Panda Energy International, Inc.
(“Lender”).



     WHEREAS, Borrower and Lender are parties to the Loan Agreement, originally executed and
delivered November 9, 2007, by which Lender agreed to provide Borrower a term loan in the aggregate
maximum principal amount not to exceed $1,000,000, upon the terms and subject to the conditions set
forth therein;



     WHEREAS, Borrower and Lender desire to amend the Loan Agreement to increase the principal
amount of the term loan to an aggregate maximum amount not to exceed $1,700,000 (the “Loan”), to
extend the maturity date of the Loan and to require its earlier repayment in the event of a
qualified offering of the Borrower’s equity securities, among other things;



     NOW, THEREFORE, in consideration of the premises and the mutual covenants contained herein,
and other good and valuable consideration, the receipt and adequacy of which is hereby
acknowledged, Borrower and Lender agree as follows:



     1. Loan.



     (a) Subject to the conditions set forth herein, Lender agrees to extend to Borrower, from the
date hereof through the Advance Termination Date (as defined below), one (1) or more Advances (as
defined below) which, in the aggregate, shall not exceed at any one time $1,700,000, no portion of
which may be repaid and then reborrowed. Borrower may request an Advance under this Agreement by
submitting a Notice of Borrowing, which is irrevocable and binding upon Borrower. Such Notice of
Borrowing shall be received by Lender on or before 10:00 a.m. (Dallas, Texas time) ten (10)
Business Days prior to such Advance. Each Advance under this Agreement shall be in the minimum
amount of $100,000 or a greater integral multiple thereof. Subject to the terms and conditions in
this Agreement, by not later than 2:00 p.m., Dallas, Texas time, on the date of such Advance,
Lender shall make available to Borrower, at an account designated by Borrower, the amount of a
requested Advance under this Agreement in immediately available funds.



     (b) Each Notice of Borrowing shall be irrevocable and binding on Borrower and Borrower shall
indemnify Lender against any loss, cost, or expense incurred or suffered by Lender as a result of
(i) any failure to fulfill, on or before the date specified for such Advance, any condition to such
Advance set forth in this Agreement, or (ii) Borrower’s request that an Advance not be made on the
date specified for such Advance in the Notice of Borrowing. A certificate of Lender establishing
the amount due from Borrower according to the preceding sentence, together with a description in
reasonable detail of the manner in which such amount has been calculated, shall be conclusive in
the absence of manifest error.



     (c) The obligation of Lender to make any Advance (including the initial Advance) under this
Agreement shall be subject to the conditions precedent that, as of the date of such Advance and
after giving effect thereto: (a) all representations and warranties made by Borrower to Lender are
true and correct, as if made on such date; (b) no condition or event exists which constitutes an
Event of Default (as hereinafter defined) or which, with the lapse of time and/or giving of notice,
would constitute an Event of Default; (c) Lender shall have received from Borrower a Notice of
Borrowing and all of the statements contained in such Notice of Borrowing shall be true and
correct; and (d) the representations and warranties contained in each of the Loan Documents (as
defined below) shall be true in all respects as though made on the date of such Advance.



     (d) As used herein, the following terms have the meaning ascribed to them below:




     (i) “Advance” means the disbursement by Lender of a sum or sums lent to Borrower
pursuant to this Agreement.




     (ii) “Advance Termination Date” means January 1, 2009.



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     (iii) “Business Day” means for all purposes, any day other than a Saturday, Sunday, or
day on which national banks are authorized to be closed under the laws of the State of
Texas.




     (iv) “Notice of Borrowing” means a notice substantially in the form of Exhibit A.



     2. Promissory Note. The Loan shall be evidenced by a promissory note in the form of
Exhibit B attached hereto, duly executed by Borrower (herein called, together with any
renewals and extensions thereof, the “Note”), dated of even date herewith, in the principal amount
of $1,700,000, and made payable to the order of Lender. Principal and interest on the Note shall
be due and payable in the manner and at the times set forth below with final maturity of the Note
being on or before November 1, 2010 (the “Maturity Date”). Should the principal of, or any
installment of interest on, the Note become due and payable on any day other than a Business Day,
the maturity thereof shall be extended to the next succeeding business day, and interest shall be
payable with respect to such extension.



     All payments on the Note shall be made to Lender at its principal office in Dallas, Texas in
federal or other immediately available funds, and payments shall be applied first to accrued
interest and then to principal.



     The principal balance of, and interest on, the Note shall be due and payable as follows:




     (a) Interest, computed as provided in the Note, shall accrue monthly, commencing on the
date of the first Advance, and thereafter, on the 1st day of each
succeeding calendar month during the term of the Note, and all such accrued and unpaid
interest shall be due and payable on the Maturity Date; and




     (b) Principal shall be due and payable in one (1) final installment, on the Maturity
Date, in the amount of the unpaid principal balance of the Note as of such date.


In addition to the foregoing, Borrower shall make mandatory prepayments of the principal of the
Note: (a) on or before the last day of each March, June, September, and December (such dates being
referred to as a “Cash Flow Payment Date”), equal to the Cash Flow Payment (hereafter defined) due
on such date; provided that Cash Flow (as defined below) sufficient to satisfy selling, general,
and operating expenses (as determined by a budget of Borrower as acceptable to Lender in Lender’s
sole discretion) for the calendar quarter immediately following the applicable Cash Flow Payment
Date, in a minimum amount of $2,500,000 per fiscal quarter, on an annualized basis, shall be set
aside in a separate account in the name of Borrower each calendar quarter prior to any prepayments
in respect of the Loan, (b) immediately upon the receipt of Net Proceeds in an amount in any single
transaction or series of transactions exceeding $150,000, of any sale, liquidation or disposition
(other than in the ordinary course of Borrower’s business) of any assets of Borrower (and after
giving effect to clause (a) immediately above), in the amount of such Net Proceeds (as defined
below), and (c) within five days of the closing of an offering of any class of equity securities of
Borrower, in which Borrower receives aggregate gross proceeds of at least $1,700,000, in an amount
equal to the proceeds received from Lender as a purchaser in such equity offering. Such mandatory
prepayments shall be applied to the principal balance of the Note in the inverse order of maturity.




     In the event Borrower fails to make payment of the outstanding principal balance of, and
interest on, the Note due and payable on the Maturity Date, Lender shall have the right,
exercisable at its option and upon notice to Borrower, to exchange the Note for shares of common
stock, par value $0.001 per share, of Borrower (the “Common Stock”). The number of shares of
Common Stock issuable on conversion of the Note shall be equal to (x) the amount of the outstanding
obligations on the Note due and payable, divided by (y) the Fair Market Value of the Common Stock
on the Maturity Date. No fractional shares shall be issued.



     As used herein: (a) the term “Cash Flow Payment” means, for any Cash Flow Payment Date, an
amount equal to fifty percent (50%) of Borrower’s Cash Flow for the fiscal quarter ending as of
such Cash Flow Payment Date; (b) the term “Cash Flow” means, for any period, the net earnings (or
loss) after taxes of Borrower for such period determined in accordance with GAAP (“Net Income”),
plus all non-cash items reducing Net Income, minus all non-cash items increasing
Net Income; provided, however, that if, for any period, such amount is less than zero, then
Cash Flow for such period shall be equal to zero; (c) the term “Fair Market Value” means, as of a
particular date, (i) if the Common Stock is traded on a national securities exchange, the average
closing sales price reported for the immediately preceding ten days, (ii) if the Common Stock is
traded on the OTC Bulletin Board, the mean of the average closing bid price and the average closing
ask price reported for the immediately preceding ten days, or (iii)



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if the Common Stock is not publicly traded, the amount as determined in good faith by the
Board of Directors of Borrower; and (d) the term “Net Proceeds” means with respect to any sale or
disposition of property or assets (tangible or intangible) (an “asset disposition”), the gross
proceeds, whether received in cash or otherwise, received, on or after the date of consummation of
such asset disposition, by Borrower from such asset disposition, after payment of all usual and
customary brokerage commissions and all other reasonable fees and expenses related to such asset
disposition (including, without limitation, reasonable attorneys’ fees and closing costs and
reasonable environmental remediation costs incurred in connection with such asset disposition).



     3. Collateral. The Loan shall be secured by a perfected, first priority, security
interest in and to the Collateral as set forth in the Pledge and Security Agreement dated November
9, 2007, executed by Borrower for the benefit of Lender (as amended, modified, renewed, extended,
revised, restated, or replaced, the “Security Agreement”).



     4. Conditions Precedent. The obligation of Lender to make the Loan to Borrower is
subject to the conditions precedent that, as of the date of the initial Advance of the Loan: (a)
Lender shall have received duly executed copies of each document listed on Exhibit C
attached hereto, in form and substance acceptable to Lender and its legal counsel (such documents
and any modifications thereof, to be hereinafter collectively referred to as the “Loan Documents”);
(b) all representations and warranties made by Borrower to Lender are true and correct, as if made
on such date, and no condition or event exists which constitutes an Event of Default (as
hereinafter defined) or which, with the lapse of time and/or giving of notice, would constitute an
Event of Default; and (d) Borrower shall have paid to Lender on the earlier date of the first draw
hereunder or the retirement of the Loan if no draw is made, as consideration for the making of the
Loan, an origination fee equal to $10,000.



     5. Representations and Warranties. In order to induce Lender to make the Loan
hereunder, Borrower represents and warrants to Lender that:




     (a) Borrower is a corporation, duly organized and in good standing, under the laws of
the State of Nevada and has the power to own its property and to carry on its business in
each jurisdiction in which Borrower operates;




     (b) Borrower has full power and authority to enter into this Agreement, to make the
borrowing hereunder, to execute and deliver the Loan Documents and to incur the obligations
provided for in the Loan Documents, all of which has been duly authorized by all necessary
corporate action;




     (c) The Loan Documents are the legal and binding obligations of Borrower, enforceable
in accordance with their respective terms, except as limited by bankruptcy, insolvency or
other laws of general application relating to the enforcement of creditors’ rights;




     (d) Neither the execution and delivery of this Agreement and the other Loan Documents,
nor consummation of any of the transactions herein or therein contemplated, nor compliance
with the terms and provisions hereof or thereof, will contravene or conflict with any
provision of law, statute or regulation to which Borrower is subject or any judgment,
license, order or permit applicable to Borrower or any indenture, mortgage, deed of trust or
other instrument to which Borrower may be subject; no consent, approval, authorization or
order of any court, governmental authority or third party is required in connection with the
execution and delivery by Borrower of this Agreement or any of the other Loan Documents or
to consummate the transactions contemplated herein or therein;




     (e) All financial statements delivered by Borrower to Lender prior to the date hereof
are true and correct, fairly present the financial condition of such person and have been
prepared in accordance with generally accepted accounting principles, consistently applied,
and no material adverse changes have occurred in the financial condition or business of
Borrower since the date of the most recent financial statements which Borrower has delivered
to Lender;




     (f) No litigation, investigation, or governmental proceeding is pending, or, to the
knowledge of any of Borrower’s officers, threatened against or affecting Borrower, which may
result in any material adverse change in Borrower’s business, properties or operations;



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     (g) There is no fact known to Borrower that Borrower has not disclosed to Lender in
writing which may result in any material adverse change in Borrower’s business, properties
or operations;




     (h) Borrower owns all of the assets reflected on its most recent balance sheet free and
clear of all liens, security interests or other encumbrances, except as previously disclosed
in writing to Lender;




     (i) The principal office, chief executive office and principal place of business of
Borrower is in Dallas, Texas;




     (j) All taxes required to be paid by Borrower have in fact been paid;




     (k) Borrower is not in violation of any law, ordinance, governmental rule or regulation
to which it is subject, and is not in default under any material agreement, contract or
understanding to which it is a party;




     (l) Borrower and any properties or assets owned by Borrower are not in violation of, in
any material respect, any environmental laws, nor is there existing, pending or threatened
any investigation or inquiry by any governmental authority pursuant to any environmental
laws, nor is there existing or pending any remedial obligations under any environmental
laws; and




     (m) Borrower shall use the proceeds of all Advances solely to (i) finance the monthly
corporate overhead expenses of Borrower and its Subsidiaries (as defined below) in an amount
not to exceed $1,000,000 per month on an annualized basis, (ii) pay up to $3,000,000 in
breakage fees and other deal-related expenses associated with the aborted 144A and debt
financing of the Yuma project, and (iii) pay transaction fees associated with the Loan.



     6. Affirmative Covenants. Until payment in full of the Note and all other obligations
and liabilities of Borrower hereunder, Borrower agrees and covenants that (unless Lender shall
otherwise consent in writing):




     (a) Borrower shall, and shall cause each of its Subsidiaries to, conduct its business
in an orderly and efficient manner consistent with good business practices and in accordance
with all valid regulations, laws and orders of any governmental authority and will act in
accordance with customary industry standards in maintaining and operating its assets,
properties and investments;




     (b) Borrower shall, and shall cause each of its Subsidiaries to, maintain complete and
accurate books and records of its transactions in accordance with generally accepted
accounting principles, and will give Lender access during business hours to all books,
records and documents of Borrower and permit Lender to make and take away copies thereof;




     (c) Borrower shall furnish to Lender as soon as available and in any event within
forty-five (45) days after the end of each quarterly fiscal period (except the last) of each
fiscal year of Borrower, copies of the balance sheet of Borrower and its Subsidiaries, on a
consolidated basis, as of the end of such fiscal period, and statements of income and
retained earnings and changes in cash flow of Borrower and its Subsidiaries, on a
consolidated basis, for that quarterly fiscal period and for the portion of the fiscal year
ending with such period, all in reasonable detail, and certified by the chief financial
officer of Borrower as being true and correct and as having been prepared in accordance with
generally accepted accounting principles, consistently applied, subject to year-end
adjustments;




     (d) Borrower shall furnish to Lender as soon as available and in any event within
ninety (90) days after the close of each fiscal year of Borrower, copies of the balance
sheet of Borrower and its Subsidiaries, on a consolidated basis, as of the close of such
fiscal year, and statements of income and retained earnings and changes in cash flow of
Borrower and its Subsidiaries, on a consolidated basis, for such fiscal year, in each case
setting forth in comparative form the figures for the preceding fiscal year, all in
reasonable detail and accompanied by an opinion thereon (which shall not be qualified by
reason of any limitation imposed by Borrower) of independent public accountants of
recognized national standings selected by Borrower and satisfactory to Lender, to the effect
that (i) such financial statements have been prepared in accordance with generally accepted
accounting principles (except for changes in which such



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accountants concur), (ii) the examination of such accounts in connection with such
financial statements has been made in accordance with generally accepted auditing standards,
and, accordingly, includes such tests of the accounting records and such other auditing
procedures as were considered necessary in the circumstances, and (iii) in making their
audit, such accountants have not become aware of any condition or event which would
constitute a default or an Event of Default under any of the terms or provisions of this
Agreement (insofar as any such terms or provisions pertain to accounting matters) and, if
any such condition or event then exists, specifying in the nature and period of existence
thereof;




     (e) Borrower shall furnish to Lender, immediately upon becoming aware of the existence
of any condition or event constituting an Event of Default or event which, with the lapse of
time and/or giving of notice would constitute an Event of Default, written notice specifying
the nature and period of existence thereof and any action which Borrower is taking or
proposes to take with respect thereto;




     (f) Borrower shall promptly notify Lender of (i) any material adverse change in its
financial condition or business; (ii) any default under any material agreement, contract or
other instrument to which Borrower or any Subsidiary is a party or by which any of such
Persons properties are bound, or any acceleration of any maturity of any indebtedness owing
by Borrower or any Subsidiary, (iii) any material adverse claim against or affecting
Borrower, any Subsidiary, or any of their respective properties; and (iv) any litigation, or
any claim or controversy which might become the subject of litigation, against Borrower or
any Subsidiary or affecting any of Borrower’s or such Subsidiary’s property, if such
litigation or potential litigation might, in the event of an unfavorable outcome, have a
material adverse effect on Borrower’s or such Subsidiary’s financial condition or business
or might cause an Event of Default;




     (g) Borrower shall promptly furnish to Lender, at Lender’s request, such additional
financial or other information concerning assets, liabilities, operations and transactions
of Borrower and its Subsidiaries as Lender may from time to time reasonably request;




     (h) Borrower shall, and shall cause each of its Subsidiaries to, promptly pay all
lawful claims, whether for labor, materials or otherwise, which might or could, if unpaid,
become a lien or charge on any property or assets of Borrower or any Subsidiary, unless and
to the extent only that the same are being contested in good faith by appropriate
proceedings and reserves have been established therefor;




     (i) Borrower shall, and shall cause each of its Subsidiaries to, maintain on their
respective properties insurance of responsible and reputable companies in such amounts and
covering such risks as is prudent and is usually carried by companies engaged in businesses
similar to that of Borrower or such Subsidiary; Borrower shall, and shall cause each of its
Subsidiaries to, furnish Lender, on request, with certified copies of insurance policies or
other appropriate evidence of compliance with the foregoing covenant;




     (j) Borrower shall, and shall cause each of its Subsidiaries to, preserve and maintain
all licenses, privileges, franchises, certificates and the like necessary for the operation
of its business; and




     (k) Borrower shall pay to Lender an unused facility fee on the daily average unused
amount of the Loan for the period from and including the date of this Agreement to and
including the Maturity Date, at the rate of one half of one percent (0.50%) per annum based
on a 360 day year and the actual number of days elapsed. For the purpose of calculating the
unused facility fee hereunder, the Loan shall be deemed utilized by the amount of all
outstanding Advances. Accrued unused facility fees shall be payable in arrears on the last
day of each calendar month, and on the Maturity Date.




     (l) As used herein: (i) “Subsidiary” means (A) any corporation of which at least a
majority of the outstanding shares of stock having by the terms thereof ordinary voting
power to elect a majority of the board of directors of such corporation (irrespective of
whether or not at the time stock of any other class or classes of such corporation shall
have or might have voting power by reason of the happening of any contingency) is at the
time directly or indirectly owned or controlled by Borrower or one or more of its
Subsidiaries or by any Borrower and one or more of such Subsidiaries, and (B) any other
entity (x) of which at least a majority of the ownership, equity or voting interest is at
the time directly or indirectly owned or controlled by one or more of Borrower and its
Subsidiaries and (y) which is treated as a



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subsidiary in accordance with GAAP; (ii) “Person” means any individual, corporation,
limited liability company, business trust, association, company, partnership, joint venture,
governmental authority, or other entity, and shall include such Person’s heirs,
administrators, personal representatives, executors, successors and assigns; and (iii)
“GAAP” means generally accepted accounting principles, applied on a consistent basis, as set
forth in Opinions of the Accounting Principles Board of the American Institute of Certified
Public Accountants and/or in statements of the Financial Accounting Standards Board and/or
their respective successors and which are applicable in the circumstances as of the date in
question.



     7. Negative Covenants. Until payment in full of the Note and all other obligations
and liabilities of Borrower hereunder, Borrower covenants that it shall not, nor shall it permit
any Subsidiary to (unless Lender shall otherwise consent in writing):




     (a) create, incur or assume any indebtedness or borrow money, except for (i) the Loan,
(ii) trade debt incurred in the ordinary course of Borrower’s or such Subsidiary’s business,
(iii) debt reflected on Borrower’s most recent consolidated balance sheet, and (iv) debt
that is subordinated to the obligations and liabilities of Borrower represented by this
Agreement, on terms and conditions acceptable to Lender in its sole discretion;




     (b) endorse, guarantee, or otherwise become liable for the obligations of any person,
firm or corporation except for endorsements of negotiable instruments by Borrower or a
Subsidiary in the ordinary course of business;




     (c) mortgage, assign, encumber, hypothecate or grant a security interest in any of
Borrower’s or any Subsidiary’s assets, except (i) to Lender and (ii) liens securing the
indebtedness permitted in Section 7(a)(v) above (provided, however, that the foregoing shall
not apply to inchoate liens for taxes which are not delinquent or which are being contested
in good faith and liens resulting from deposits to secure the payments of workmen’s
compensation or social security or to secure the performance of bids or contracts in the
ordinary course of business);




     (d) liquidate, dissolve or reorganize; or merge or consolidate with, or acquire all or
substantially all of the assets of, any other company, firm or association; or make any
other substantial change in its capitalization or its business;




     (e) pay any dividends on any of its outstanding stock, or purchase, redeem or
repurchase any of its stock;




     (f) sell any of its assets used or useful in its business, except in the ordinary
course of business; or sell any of its assets to any other person, firm or corporation with
the agreement that such assets shall be leased back to Borrower or such Subsidiary;




     (g) own, purchase or acquire, directly or indirectly, any promissory notes, stock or
securities of any other person, firm or corporation, other than ownership interests of
Borrower and its Subsidiaries in each of their respective Subsidiaries and securities
guaranteed as to the principal and interest by the United States government (it being
understood by the Parties that Borrower has previously invested in certain preferred equity
securities but will no longer invest in such securities); or make any loans or advances to
any other person;




     (h) permit any substantial change in its present executive management;




     (i) enter into any transaction, including, without limitation, the purchase, sale, or
exchange of property or the rendering of any service, with any Affiliate of Borrower or any
Subsidiary, except (a) in the ordinary course of and pursuant to the reasonable requirements
of Borrower’s or such Subsidiary’s business and upon fair and reasonable terms no less
favorable to Borrower or such Subsidiary than would be obtained in a comparable arm’s-length
transaction with a Person not an Affiliate (as defined below) of Borrower, (b) customary
indemnification agreements and insurance arrangements entered into for the benefit of
Borrower’s or such Subsidiary’s directors or officers, (c) customary employment arrangements
with employees and benefit programs (including, without limitation, arrangement with former
employees



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such as equity redemption or severance programs), in each case on reasonable terms
consistent with the other provisions of this Agreement (as in effect from time to time), and
(d) agreements with Lender; or




     (j) As used herein, “Affiliate” means, as to any Person, any other Person (i) that
directly or indirectly, through one or more intermediaries, controls or is controlled by, or
is under common control with, such Person; (ii) that directly or indirectly beneficially
owns or holds five percent (5%) or more of any class of voting stock of such Person; or
(iii) five percent (5%) or more of the voting stock of which is directly or indirectly
beneficially owned or held by such Person. The term “control” means the possession,
directly or indirectly, of the power to direct or cause direction of the management and
policies of a Person, whether through the ownership of voting securities, by contract, or
otherwise; provided, however, in no event shall Lender be deemed an Affiliate of Borrower or
any of its Subsidiaries or Affiliates.



     8. Default. An Event of Default shall exist if any one or more of the following
events (individually, an “Event of Default” and collectively, “Events of Default”) shall occur:




     (a) Borrower shall fail to pay when due any principal of, or interest on, the Note or
any other fee or payment due hereunder or under any of the Loan Documents;




     (b) any representation or warranty made in any of the Loan Documents shall prove to be
untrue or inaccurate in any respect as of the date on which such representation or warranty
is made and such untruth or inaccuracy remains for greater than five (5) business days;




     (c) default shall occur in the performance of any of the covenants or agreements of
Borrower or any Subsidiary contained herein or in any of the other Loan Documents and such
untruth or inaccuracy remains for greater than five (5) business days ;




     (d) Borrower shall (i) apply for or consent to the appointment of a receiver,
custodian, trustee, intervenor or liquidator of such party or of all or a substantial part
of such party’s assets, (ii) voluntarily become the subject of a bankruptcy, reorganization
or insolvency proceeding or be insolvent or admit in writing that such party is unable to
pay its debts as they become due or generally not pay such party’s debts as they become due,
(iii) make a general assignment for the benefit of creditors (iv) file a petition or answer
seeking reorganization or an arrangement with creditors or to take advantage of any
bankruptcy or insolvency laws, (v) file an answer admitting the material allegations of, or
consent to, or default in answering, a petition filed against such party in any bankruptcy,
reorganization or insolvency proceeding, (vi) become the subject of an order for relief
under any bankruptcy, reorganization or insolvency proceeding, or (vii) fail to pay any
money judgment against such party before the expiration of thirty days after such judgment
becomes final and no longer subject to appeal;




     (e) an order, judgment or decree shall be entered by any court of competent
jurisdiction or other competent authority approving a petition appointing a receiver,
custodian, trustee, intervenor or liquidator of Borrower or of all or substantially all of
Borrower’s assets, and such order, judgment or decree shall continue unstayed and in effect
for a period of thirty (30) days; or a complaint or petition shall be filed against Borrower
seeking or instituting a bankruptcy, insolvency, reorganization, rehabilitation or
receivership proceeding of Borrower, and such petition or complaint shall not have been
dismissed within thirty (30) days;




     (f) Borrower shall default in the payment of any material indebtedness of Borrower or
in the performance of any of Borrower’s material obligations and such default shall continue
for more than any applicable period of grace or any affiliate of the Borrower shall default
in the payment of any material indebtedness or in the performance of any of its material
obligations that has a material adverse effect on the Borrower and such default shall
continue for more than thirty days; or




     (g) Any final judgment(s) for the payment of money in excess of the sum of $
100,000, individually or in the aggregate, shall be rendered against Borrower and such
judgment(s) shall not be satisfied or discharged at least ten (10) days prior to the date on
which any of Borrower’s assets could be lawfully sold to satisfy such judgment(s).



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     9. Remedies Upon Event of Default. If an Event of Default shall have occurred and be
continuing, then Lender at its option may (a) declare the entire unpaid balance of principal and
accrued interest of the Obligation (as defined in the Note) to be immediately due and payable
without presentment or notice of any kind which Borrower hereby waives, (b) reduce any claim to
judgment, and/or (c) pursue and enforce any of Lender’s rights and remedies available pursuant to
any applicable law or agreement including, without limitation, foreclosing all liens and security
interests securing payment thereof or any part thereof; provided, however, in the case of any Event
of Default specified in (d) or (e) of Section 8 above with respect to Borrower, without any notice
to Borrower or any other act by Lender, the Obligations shall become immediately due and payable
without presentment, demand, protest, or other notice of any kind, all of which are hereby waived
by Borrower.



     10. Miscellaneous.




     (a) Waiver. No failure to exercise, and no delay in exercising, on the part of
Lender, any right hereunder shall operate as a waiver thereof, nor shall any single or
partial exercise thereof preclude any other or further exercise thereof or the exercise of
any other right. The rights of Lender hereunder and under the other Loan Documents shall be
in addition to all other rights provided by law. No notice or demand given in any case
shall constitute a waiver of the right to take other action in the same, similar or other
instances without such notice or demand.




     (b) Notices. Any notices or other communications required or permitted to be
given by any of the Loan Documents must be given in writing and must be personally delivered
or mailed by prepaid certified or registered mail to the party to whom such notice or
communication is directed at the address of such party as follows: (i) Borrower: 4100
Spring Valley, Suite 1002, Dallas, Texas 75244, (ii) Lender: 4100 Spring Valley, Suite 1001,
Dallas, Texas 75244. Any such notice or other communication shall be deemed to have been
given (whether actually received or not) on the day it is personally delivered as aforesaid
or, if mailed, on the third day after it is mailed as aforesaid. Any party may change its
address for purposes of this Agreement by giving notice of such change to all other parties
pursuant to this Section 10(b).




     (c) Governing Law. This Agreement and the other Loan Documents are being
executed and delivered, and are intended to be performed, in the State of Texas, and the
substantive laws of Texas shall govern the validity, construction, enforcement and
interpretation of this Agreement and all other Loan Documents, except to the extent: (i)
otherwise specified therein; or (ii) federal laws governing maximum interest rates shall
provide for rates of interest higher than those permitted under the laws of the State of New
York.




     (d) Invalid Provisions. If any provision of this Agreement is held to be
illegal, invalid or unenforceable by a court of competent jurisdiction, then such provision
shall be severed from this Agreement and the remaining provisions shall remain in full force
and effect and shall not be affected by the illegal, invalid or unenforceable provision or
by its severance from this Agreement.




     (e) Maximum Interest Rate. Regardless of any provisions contained in this
Agreement, the Note or in any of the other Loan Documents, Lender shall never be deemed to
have contracted for or be entitled to receive, collect or apply as interest (whether termed
interest in the Loan Documents or deemed to be interest by judicial determination or
operation of law) on the Note, any amount in excess of the maximum rate of interest
permitted to be charged by applicable law, and, in the event Lender ever receives, collects
or applies as interest any such excess, such amount which would be excessive interest shall
be deemed to be a partial prepayment of principal and treated hereunder as such, and, if the
principal balance of the Note is paid in full, any remaining excess shall forthwith be paid
to Borrower. In determining whether or not the interest paid or payable under any specific
contingency exceeds the highest lawful rate, Borrower, and Lender shall, to the maximum
extent permitted under applicable law, (i) characterize any non-principal payment (other
than payments which are expressly designated as interest payments hereunder) as an expense,
fee, or premium, rather than as interest, (ii) exclude voluntary prepayments and the effect
thereof, and (iii) spread the total amount of interest throughout the entire contemplated
term of the Note so that the interest rate is uniform throughout such term.



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     (f) Entirety and Amendments. The Loan Documents embody the entire agreement
between the parties and supersede all prior agreements and understandings, if any, relating
to the subject matter hereof and thereof, and this Agreement and the other Loan Documents
may be amended only by an instrument in writing executed by the party, or an authorized
officer of the party, against whom such amendment is sought to be enforced.




     (g) Parties Bound. This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective successors, assigns and legal
representatives; provided, however, that Borrower may not, without the prior written consent
of Lender, assign any rights, powers, duties or obligations hereunder.




     (h) Expenses. Borrower will promptly pay all reasonable costs, fees and
expenses paid or incurred by Lender incident to this Agreement or incident to the collection
of the Loan hereunder (including the fees and expenses of counsel to Lender) provided no
more than $25,000 shall be paid for such costs, fees and expenses occurring prior to the
execution date of this Agreement.




     (i) Headings. Section headings are for convenience of reference only and shall
in no way affect the interpretation of this Agreement.




     (j) Successors and Assigns. This Agreement is binding upon and shall inure to
the benefit of Lender and Borrower and their respective successors and assigns, except that
Borrower may not assign or transfer any of its rights, duties, or obligations under this
Agreement or the other Loan Documents without the prior written consent of Lender. Lender
may assign or transfer any of its rights, duties, or obligations under this Agreement or the
other Loan Documents; provided however that, prior to the occurrence of an Event of Default,
Lender shall obtain the consent of Borrower (which consent shall not be unreasonably
withheld or delayed) prior to any such assignment or transfer.




     (k) Indemnification. Borrower will indemnify and hold Lender harmless from any
loss, liability, damages, judgments, and costs of any kind relating to or arising directly
or indirectly out of (a) this Agreement or any document required hereunder, (b) any credit
extended or committed by Lender to Borrower hereunder, and (c) any litigation or proceeding
related to or arising out of this Agreement, any such document, or any such credit. This
indemnity includes but is not limited to attorneys’ fees (including the allocated cost of
in-house counsel). This indemnity extends to Lender and all of its directors, officers,
employees, agents, successors, attorneys, and assigns. This indemnity will survive
repayment of the Borrower’s obligations to Lender. All sums due to Lender hereunder shall
be obligations of Borrower, due and payable immediately without demand.



     THIS WRITTEN LOAN AGREEMENT REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT
BE CONTRADICTED OR PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENT OF THE PARTIES.



     THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.



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     IN WITNESS WHEREOF, the parties hereto have executed and delivered this Agreement as of the
date first above written.



	 	 	 	 	 
	 	BORROWER:



PANDA ETHANOL, INC., a Nevada corporation

 	 
	 	By:  	/s/ Darol Lindloff
 	 
	 	 	Name:  	Darol Lindloff 	 
	 	 	Title:  	President and Chief Executive Officer 	 
	 
	 	LENDER:



PANDA ENERGY INTERNATIONAL, INC.

 	 
	 	By:  	/s/ Robert K. Simmons
 	 
	 	 	Name:  	Robert K. Simmons 	 
	 	 	Title:  	Chief Financial Officer 	 
	 




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