peix_8k-ex1002.htm


    
      EXHIBIT
10.02

      Execution
Version

    

    THIRD
FORBEARANCE AGREEMENT

    


     

    THIS
THIRD FORBEARANCE AGREEMENT (this “Agreement”) is entered into as of March 31,
2009, by and among Pacific Ethanol Holding Co. LLC (“Holding”), Pacific Ethanol
Madera LLC (“Madera”), Pacific Ethanol Columbia, LLC (“Columbia”), Pacific
Ethanol Stockton, LLC (“Stockton”) and Pacific Ethanol Magic Valley, LLC (“Magic
Valley” and together with Holding, Madera, Columbia and Stockton, the
“Borrowers”), WestLB AG, New York Branch, as administrative agent for the Senior
Secured Parties (in such capacity, the “Administrative Agent”), WestLB AG New
York Branch, as collateral agent for the Senior Secured Parties (in such
capacity, the “Collateral Agent” and, collectively with the Administrative
Agent, the “Agent”) and Amarillo National Bank, as accounts bank for the Senior
Secured Parties (the “Accounts Bank”), as parties to the Credit Agreement
(defined below).  Capitalized terms used in this Agreement which are
not otherwise defined herein, shall have the meanings given such terms in the
Credit Agreement.

     

    RECITALS:

     

    WHEREAS,
the Borrowers, Administrative Agent, Collateral Agent, Accounts Bank and the
lenders party thereto from time to time are parties to that certain Credit
Agreement dated as of February 27, 2007 (as amended by that certain Successor
Accounts Bank and Amendment Agreement dated as of August 27, 2007, as further
amended by that certain Waiver and Third Amendment to Credit Agreement dated as
of March 25, 2008, as further amended by that certain Fourth Amendment to Credit
Agreement dated as of April 24, 2008, as further amended by that certain Fifth
Amendment to Credit Agreement dated as of October 24, 2008 and as further
amended by that certain Sixth Amendment to Credit Agreement dated as of December
30, 2008, the “Credit
Agreement”);

     

    WHEREAS,
the Borrowers, Administrative Agent, Collateral Agent and the Senior Secured
Parties entered into that certain Limited Waiver and Forbearance Agreement dated
as of February 17, 2009 and that certain Second Limited Waiver and Forbearance
Agreement dated as of February 27, 2009;

     

    WHEREAS,
the Borrowers were unable to pay the Term Loan interest payment due and payable
on the scheduled payment date in accordance with Section 9.01(a) of the Credit
Agreement, which nonpayment constituted an Event of Default (the “Interest Payment Event of
Default”);

     

    WHEREAS,
the Borrowers have advised Agent that they will be unable to pay the Term Loan
principal and interest payment due and payable on the scheduled payment date in
accordance with Section 9.01(a) of the Credit Agreement, which nonpayment will
constitute an Event of Default  (the “Anticipated Principal Payment
Default”);

     

    WHEREAS,
the Defaults and Events of Default set forth on Schedule I attached
hereto have occurred and are continuing under the Credit Agreement
(collectively, the “Existing
Events of Default”);

     

     

    
      
        
        

      

      
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    WHEREAS,
the Borrowers have advised Agent that they do not expect to be in compliance
with certain other provisions of the Credit Agreement which would give rise
during the Forbearance Period (as defined below) to the Events of Default set
forth on Schedule
II attached hereto (collectively, the “Anticipated
Defaults”);

     

    WHEREAS,
as a result of the occurrence of the Existing Events of Default and pursuant to
the Credit Agreement and other Financing Documents, (i) the Senior Secured
Parties are under no further obligation to make Loans or other financial
accommodations to Borrowers under the Credit Agreement and (ii) the Agent and
the Senior Secured Parties are entitled, among other things, to enforce their
rights and remedies against the Borrowers and the Collateral, including, without
limitation, accrual of default interest, the right to accelerate and immediately
demand payment in full of the Obligations and foreclose on the
Collateral;

     

    WHEREAS,
the Borrowers have requested that the Agent and the Senior Secured Parties agree
and, subject to the terms and conditions of this Agreement, the Agent and the
Senior Secured Parties have agreed, to forbear from demanding immediate payment
of certain amounts and exercising their right to foreclose on any or all of the
Collateral from the date hereof through the earliest to occur of (i) April 30,
2009; (ii) the date of termination of the Forbearance Period pursuant to Section 6 hereof; and
(iii) the date on which all of the Obligations have been paid in full and the
Credit Agreement has been terminated (the “Forbearance
Period”);

     

    WHEREAS,
an Event of Default has occurred under Sections 5(a)(vi) and 5(a)(vii)(2)
(together, the “Interest Rate
Protection Agreement Events of Default”) of the ISDA Master Agreement
dated February 26, 2007 (the “Interest Rate Protection
Agreement”) between Holding and WestLB, New York Branch (in such
capacity, the “Interest Rate
Protection Provider”);

     

    WHEREAS,
Holding has advised the Interest Rate Protection Provider that it will be unable
to pay the interest payment due and payable on the scheduled payment date in
accordance with Section 5(a)(i) of the Interest Rate Protection Agreement, which
nonpayment will constitute an Event of Default  (the “Anticipated Swap Interest Payment
Default”);

     

    WHEREAS,
Holding has requested that the Interest Rate Protection Provider agree and,
subject to the terms and conditions of this Agreement, the Interest Rate
Protection Provider has agreed, to refrain from terminating the Interest Rate
Protection Agreement from the date hereof through the Forbearance Period subject
to the terms and conditions set forth herein;

     

    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 Borrowers, the
Agent and Senior Secured Parties 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 Borrower
hereby acknowledges and agrees that (a) the Interest Payment Event of Default
and the Existing Events of Default have occurred and are continuing under the
terms of the Credit Agreement and the Interest Rate Protection Agreement Events
of Default have occurred and are continuing under the terms of the Interest Rate
Protection Agreement, and none of the Borrowers has any disputes, defenses or
counterclaims of any kind with respect thereto; (b) the Senior Secured Parties
are under no obligation to make Loans or other financial accommodations to the
Borrowers under the Credit Agreement; (c) the Interest Rate Protection Provider
has the right to terminate the Interest Rate Protection Agreement on the date
hereof; (d) the Agent, on behalf of the Senior Secured Parties has, and shall
continue to have, valid, enforceable and perfected security interests in and
liens upon the Collateral heretofore granted by Borrowers to the Collateral
Agent and Senior Secured Parties pursuant to the Financing Agreements or
otherwise granted to or held by the Collateral Agent or the Senior Secured
Parties; (e) absent the effectiveness of this Agreement, the Agent and Senior
Secured Parties have the right to immediately enforce their security interest
in, and liens on, the Collateral; and (f) the outstanding Loans and all other
Obligations are payable pursuant to the Credit Agreement or Interest Rate
Protection Agreement, as applicable, without defense, dispute, offset,
withholding, recoupment, counterclaim or deduction of any kind.

     

     

    
      
        
        

      

      
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    2.  Covenant
re Interest Payment Event of Default and Anticipated Principal Payment
Default.

     

    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 4 below,
during the Forbearance Period each Senior Secured Party agrees that it shall not
(i) direct the Administrative Agent to declare all or any portion of the
outstanding principal amount of the Loans and other Obligations to be due and
payable or (ii) direct the Collateral Agent to exercise any or all remedies
provided for under the Credit Agreement or the other Financing Documents solely
on account of the Interest Payment Event of Default and the Anticipated
Principal Payment Default.  Nothing contained herein shall limit the
right of a Senior Secured Party to exercise remedies with respect to the
obligations under its Note(s).  Upon termination of the Forbearance
Period, the Senior Secured Parties shall have the right to enforce any and all
remedies with respect to the Anticipated Principal Payment Default.

     

    3.  Forbearance.

     

    (a)           Credit
Agreement.

     

    (i)  Each Borrower agrees
and acknowledges that the Existing Events of Default set forth on Schedule I have
occurred and are continuing.

     

    (ii) Each Borrower has advised
Agent that such Borrower does not expect to be in compliance with certain
provisions of the Credit Agreement which would give rise to the Anticipated
Defaults set forth on Schedule
II.

     

    (iii) Each Borrower hereby agrees
and acknowledges that (A) Schedule I represents
a complete and accurate list of all Existing Events of Default (other than the
Interest Payment Event of Default) which are in existence as of the Effective
Date (as hereinafter defined); and (B) Schedule II
represents a complete and accurate list of all provisions in the Credit
Agreement which it reasonably believes may give rise to an Anticipated Default
(other than the Anticipated Principal Payment Default).

     

     

    
      
        
        

      

      
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    (iv) Provided that no Forbearance
Default (as defined below) occurs, subject to the terms and conditions of this
Agreement and satisfaction of the conditions precedent to the effectiveness of
this Agreement set forth in Section 4 below,
during the Forbearance Period, the Agent and the Senior Secured Parties hereby
forbear from exercising, on account of the Existing Events of Default and the
Anticipated Defaults, those rights and remedies afforded to them under the
Credit Agreement, the other Financing Documents and applicable law.

    


    (b)           Interest Rate Protection
Agreement.

    


    (i) Holding acknowledges that the
Interest Rate Protection Agreement Events of Default have occurred and are
continuing.

    


    (ii) Holding has advised the
Interest Rate Protection Provider that it does not expect to be in compliance
with Section 5(a)(i) of the Interest Rate Protection Agreement which would give
rise to the Anticipated Swap Interest Payment Default.

    


    (iii) Holding hereby agrees and
acknowledges that (A) the Interest Rate Protection Agreement Events of Default
completely and accurately represent all of the Events of Default (as defined in
the Interest Rate Protection Agreement) or Termination Events (as defined in the
Interest Rate Protection Agreement) which are in existence under the Interest
Rate Protection Agreement as of the Effective Date; and (B) the Anticipated Swap
Interest Payment Default completely and accurately represents all of the
provisions of the Interest Rate Protection Agreement which it reasonably
believes may give rise to an Event of Default under the Interest Rate Protection
Agreement during the Forbearance Period;

    


    (iv) Provided that no Forbearance
Default (as defined below) occurs, subject to the terms and conditions of this
Agreement and satisfaction of the conditions precedent to the effectiveness of
this Agreement set forth in Section 4 below,
during the Forbearance Period, the Interest Rate Protection Provider hereby
agrees to not exercise, on account of the Interest Rate Protection Agreement
Events of Default and the Anticipated Swap Interest Payment Default, those
rights and remedies afforded it under the Interest Rate Protection Agreement,
Credit Agreement, the other Financing Documents and applicable law; provided however,
notwithstanding anything to the contrary set forth in the Credit Agreement, to
the extent that the Interest Rate Protection Provider postpones or reschedules
any accrued and unpaid interest payment due and payable under the Interest Rate
Protection Agreement (whether during the term of this Agreement or at any time
hereafter), upon termination of the Interest Rate Protection Agreement, such
amounts shall be (A) excluded from the calculation of the Swap Termination Value
and (B) included in the portion of the Obligations payable under Section 9.04(c) of
the Credit Agreement.

    


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

     

     

    
      
        
        

      

      
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    (a)           The
Agent shall have received counterparts of this Agreement duly executed and
delivered by the Borrowers and the Accounts Bank;

     

    (b)           The
Agent shall have received the Updated 13-Week Cash Flow Forecast (as defined
below) in form and substance acceptable to the Agent;

     

    (c)           The
Agent shall have received an agreement, in form and substance satisfactory to
the Agent, pursuant to which Wachovia, as agent, and the other lenders party
thereto have agreed to continue to forbear from exercising their rights against
Pacific Ethanol Inc. (“Pacific
Ethanol”) and Kinergy Marketing, LLC (“Kinergy”) pursuant to the
terms of their financing arrangements with Pacific Ethanol and Kinergy
co-terminous with the Forbearance Period and such forbearance shall be in full
force and effect;

     

    (d)           The
Agent shall have received an agreement, in form and substance satisfactory to
the Agent, pursuant to which Lyles United, LLC agrees to forbear from exercising
its rights against Pacific Ethanol, Pacific Ethanol California, Inc., and
Pacific Ag Products, LLC, pursuant to the terms of that certain Loan
Restructuring Agreement dated as of November 7, 2008 and the other instruments
referred to therein, for a forbearance period co-terminous with the Forbearance
Period and such forbearance shall be in full force and effect;

     

    (e)           The
Agent shall have received evidence satisfactory to it that Pacific Ethanol has
received proceeds of not less than $2,000,000 from the issuance of notes (the
“Junior Notes”) which
Notes shall be satisfactory in all respects (including, without limitation, term
and ranking) to the Agent.  The Borrowers shall have concurrently
provided the Agent and the Agent’s financial and legal advisors with a Updated
13-Week Cash Flow Forecast (as defined below) satisfactory in all respects to
the Agent setting forth how Pacific Ethanol, Kinergy and the Borrowers will use
such proceeds.

     

    (f)           All
of the representations and warranties of the Borrowers 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);
and

     

    (g)           The
Agent shall have received payment in full of all fees and expenses due and
payable in accordance with the terms of this Agreement and the Credit Agreement
(including reasonable and documented legal fees and expenses of the Agent’s
counsel and other advisors).

     

    5.  Representations
and Warranties.  To induce the Agent and the Senior Secured
Parties to enter into this Agreement, each Borrower represents and warrants to
the Agent and the Senior Secured Parties (which representations and warranties
shall be made on and as of the Effective Date):

     

    (a)           Such
Borrower 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 Borrower of
this Agreement, (i) are within the Borrower’s corporate power; (ii) have been
duly authorized by all necessary corporate or other action; (iii) do not
contravene or cause the Borrower or any other Loan Party to be in default under
(x) any provision of the Borrower’s or other Loan 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 Borrower or other Loan 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 Borrower or other Loan Party or its property; (iv) will not result
in the creation or imposition of any Lien upon any of the property of the
Borrower or other Loan Party or any Subsidiary thereof other than those in favor
of the Agent or any Senior Secured Party, all pursuant to the Financing
Documents; and (e) do not require the consent or approval of any Governmental
Authority or any other Person, other than those which have been duly obtained,
made or complied with and which are in full force and effect.

     

     

    
      
        
        

      

      
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    (b)           This
Agreement has been duly executed and delivered by such Borrower.  Each
of this Agreement, the Credit Agreement (as modified herein), the Interest Rate
Protection Agreement (as modified herein) and the other Financing Documents (as
modified hereby) to which each Borrower is a party is the legal, valid and
binding obligation of such Borrower, enforceable against such Borrower 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.

     

    (c)           Except
as to those representations and warranties now made inconsistent with the terms
of this Agreement or which constitute the Interest Payment Event of Default, an
Existing Event of Default, the Anticipated Principal Payment Default, an
Anticipated Default, the Anticipated Swap Interest Payment Default or the
Interest Rate Protection Agreement Events of Default, the representations and
warranties of each Borrower and Loan Party contained in each Financing and
Project 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.

     

    (d)           No
Default or Event of Default under the Credit Agreement or Interest Rate
Protection Agreement arising other than as a result of the Interest Payment
Event of Default, Existing Events of Default, the Anticipated Defaults, the
Anticipated Principal Payment Default, the Anticipated Swap Interest Payment
Default or the Interest Rate Protection Agreement Events of Default shall have
occurred and be continuing or would result after giving effect to any of the
transactions contemplated on the date hereof.

     

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

     

    6.  Forbearance
Defaults:  The following events shall constitute “Forbearance
Defaults”):

     

    (a)           any
failure to pay principal payments (other than the Anticipated Principal Payment
Default), interest payments (other than the Interest Payment Event of Default
and the Anticipated Swap Interest Payment Default) or any other payments in
accordance with the terms of the
Credit Agreement or the Interest Rate Protection Agreement;
or

     

     

    
      
        
        

      

      
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    (b)           any
Borrower or Loan Party shall fail to observe or perform any other 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

    


    (c)           the
occurrence of an Event of Default under the Credit Agreement, the Interest Rate
Protection Agreement or any of the other Financing Documents or any Project
Document, other than an Existing Event of Default, an Anticipated Default, the
Interest Payment Event of Default, the Anticipated Principal Payment Default,
the Anticipated Swap Interest Payment Default or either of the Interest Rate
Protection Agreement Events of Default;

    


    (d)           any
instrument, document, report, schedule, agreement, representation or warranty,
oral or written, made or delivered to the Agent or any Senior Secured Parties by
any  Borrower or Loan Party shall be false or misleading in any
material respect when made, or deemed made, or delivered; or

    


    (e)           the
proceeds of the Junior Notes shall have been fully utilized by Pacific Ethanol,
Kinergy and the Borrowers on or before April 30, 2009, or for any reason Pacific
Ethanol fails to make available, or is unable to make available, to any
Borrower, funds adequate to support such Borrower’s current level of operations
(taking into account any other sources of funding available to such
Borrower).

    


    Upon the
occurrence of any Forbearance Default, the Agent, upon the direction of the
Required Senior Secured Parties, may by notice to Borrowers immediately
terminate the Forbearance Period and/or declare all of the Obligations
immediately due and payable; provided, however, that upon
the occurrence of any Event of Default described in Section 9.01(i) of the
Credit Agreement, the Forbearance Period shall automatically terminate and all
Obligations 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 have not been paid in full, the Agent and the Senior Secured Parties
shall be entitled to exercise all of their rights and remedies under the Credit
Agreement, the Interest Rate Protection Agreement, the other Financing Documents
and applicable law, including, without limitation, the right to declare all of
the Obligations to be immediately due and payable and to enforce their liens on,
and security interests in, the Collateral.  The occurrence of any
Forbearance Default shall constitute an Event of Default under the Credit
Agreement, the Interest Rate Protection Agreement and the other Financing
Documents.

    


    7.  Forbearance
Period Covenants.  In order to induce the Senior Secured
Parties to enter into this Agreement and forbear or otherwise refrain during the
Forbearance Period from exercising the Agent and Senior Secured Parties’ rights
and remedies with respect to the Interest Payment Event of Default and the
Existing Events of Default, each Borrower covenants that on or before the date
hereof, the Borrowers shall deliver to the Agent an updated thirteen (13) week
cash flow forecast of Pacific Ethanol and its Subsidiaries attached hereto as
Exhibit 1 (the
“Updated 13-Week Cash
Flow Forecast”), in form and substance satisfactory to the Agent, which
has been thoroughly reviewed by the Borrowers and its management and sets forth
for the periods covered thereby: (i) projected weekly operating cash receipts
for Pacific Ethanol and each of its Subsidiaries (on a consolidated and on an
entity by entity basis) for each week commencing with the week ending March 30,
2009, (ii) projected weekly operating cash disbursements for Pacific Ethanol and
each of its Subsidiaries (on a consolidated and on an entity by entity basis)
for each week commencing with the week ending March 30, 2009, and (iii)
projected aggregate principal amount of outstanding and available Loans for the
Borrowers each week commencing with the week ending as of March 30, 2009
(collectively, the “Projected
Information”).  In addition to the Updated 13-Week Cash Flow
Forecast, by no later than 5:00 p.m. (Pacific time) on the second Business Day
of each week commencing on March 31, 2009, Borrowers shall deliver to the Agent,
in form and substance satisfactory to the Agent, an updated thirteen (13) week
forecast for Pacific Ethanol and each of its Subsidiaries (on a consolidated and
on an entity by entity basis) prepared on a cumulative, weekly roll forward
basis, together with a report that sets forth for the immediately preceding week
a comparison of the actual cash receipts, cash disbursements, loan balance and
loan availability to the Projected Information for such weekly periods set forth
in the forecast on a cumulative, weekly roll-forward basis, duly completed and
executed by the Chief Executive Officer, Chief Financial Officer or other
financial or senior officer of the Borrowers.

     

     

    
      
        
        

      

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

    


    (a)           Upon
the Effective Date, each reference in the Credit Agreement to “this Agreement”,
“hereunder”, “hereof” or words of like import, and each reference in the
Financing Documents to the Credit Agreement, shall mean and be a reference to
the Credit Agreement as modified and supplemented hereby.

    


    (b)           This
Agreement shall be limited solely to the matters expressly set forth herein and
shall not (i) constitute an amendment or waiver of, or a forbearance with
respect to, any term or condition of the Credit Agreement, the Interest Rate
Protection Agreement or any other Financing Document, except as expressly
provided herein, (ii) prejudice any right or rights which the Agent, any Senior
Secured Party or any Lender Parties (as defined in Section 10 below) may
now have or may have in the future under or in connection with the Credit
Agreement or any other Financing Document, (iii) require the Agent or any Senior
Secured Party to agree to a similar transaction or forbearance on a future
occasion.

    


    (c)           Except
to the extent specifically provided herein, the respective provisions of the
Credit Agreement and the other Financing Documents shall not be amended,
modified, waived, impaired or otherwise affected hereby, including, without
limitation, the accrual of interest at the Default Rate on overdue amounts in
accordance with Section 3.06 of the
Credit Agreement, 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 Credit Agreement, or any of the
other Financing Documents, except as specifically set forth herein.

     

     

    
      
        
        

      

      
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    (e)           Except
as expressly provided herein, the Agent and the Senior Secured Parties expressly
reserve all rights, claims and remedies that any of them have or may have
against the Borrowers.

    


    9.  Acknowledgment
of Validity and Enforceability of the Credit Agreement and other Financing
Documents.  Each Borrower expressly acknowledges and agrees
that the Credit Agreement, the Interest Rate Protection Agreement and the other
Financing Documents to which it is a party are valid and enforceable by the
Senior Secured Parties against such Borrower and, except as expressly modified
pursuant to this Agreement, expressly reaffirms each of its Obligations under
each Financing Document to which it is a party.  Each Borrower further
expressly acknowledges and agrees that the Agent, for its own benefit and for
the benefit of the Senior Secured Parties, has a valid, duly perfected, first
priority and fully enforceable security interest in and lien against each item
of Collateral.  Each Borrower agrees that it shall not dispute the
validity or enforceability of the Credit Agreement, the Interest Rate Protection
Agreement or any of the other Financing Documents or any of its Obligations
thereunder, or the validity, priority, enforceability or extent of the Agent’s
security interest in or lien against any item of Collateral, either during or
following the expiration of the Forbearance Period.

    


    10. Release;
Covenant Not to Sue.

    


    (a)           Each
Loan Party acknowledges that the Agent and the Senior Secured Parties would not
enter into this Agreement without the Borrowers’ assurance that each Borrower
has no claim against the Agent or any Senior Secured Parties, their respective
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
Parties” and each, a “Lender Party”)
arising out of the Financing Documents or the transactions contemplated
thereby.  Each Loan Party, for itself and on behalf of its officers
and directors, and its respective predecessors, successors and assigns
(collectively, the “Releasors”) releases
each Lender Party from any known or unknown claims which any Borrower now has
against any Lender 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 Financing 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.

     

     

    
      
        
        

      

      
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    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 10 are
binding upon each Releasor.  The provisions, waivers and releases of
this Section 10
shall inure to the benefit of each Lender Party.

    


    (d) The provisions of this Section 10 shall
survive payment in full of the Obligations, full performance of all of the terms
of this Agreement, the Credit Agreement, the Interest Rate Protection Agreement
and the other financing Documents and/or any action by the Agent or any Lender
Party to exercise any remedy available under the Financing Documents or
applicable law.

    


    (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 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 Party
that they will not sue (at law, in equity, in any regulatory proceeding or
otherwise) any Lender Party on the basis of any Claim released, remised and
discharged by the Lender Parties pursuant to Section 10(a)
above.  If any Releasor violates the foregoing covenant, such Releasor
agrees to pay, in addition to such other damages as any Lender Party may sustain
as a result of such violation, all attorneys’ fees and costs incurred by any
Lender Party as a result violation.

    


    11.  No
Waiver.  Each Borrower hereby acknowledges and agrees that the
Agent’s or any Senior Secured Party’s failure, at any time or times hereafter,
to require strict performance by the Borrowers of any provision or term of this
Agreement, the Credit Agreement, the Interest Rate Protection Agreement or any
other Financing Document shall not waive, affect or diminish any right of the
Agent or any Senior Secured Party thereafter to demand strict compliance and
performance therewith.  Any suspension or waiver by the Agent or the
Senior Secured Parties 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.

     

     

    
      
        
        

      

      
        10

        
          

        

      

      
        
        

      

    

     

    12.  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 shall have any right, benefit or interest under or because of the
existence of this Agreement.

     

    13.  Limitation
on Relationship Between Parties.  The relationship of Agent and
the Senior Secured Parties, on the one hand, and the Borrowers, on the other
hand, has been and shall continue to be, at all times, that of creditor and
debtor.  Nothing contained in this Agreement, any instrument, document
or agreement delivered in connection herewith or in the Credit Agreement, the
Interest Rate Protection Agreement or any of the other Financing Documents shall
be deemed or construed to create a fiduciary relationship between the
parties.

    


    14.  No
Assignment.  This Agreement shall not be assignable by any
Borrower without the written consent of the Agent.  Each Senior
Secured Party may assign to one or more Persons all or any part of, or any
participation interest in, such Senior Secured Party’s rights and benefits
hereunder in accordance with Section 11.3 of the
Credit Agreement provided that such Person is bound by the terms and limitations
of this Agreement.

    


    15.  Miscellaneous.  This
Agreement is a Financing Document.  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 Credit
Agreement, the Interest Rate Protection Agreement or any other Financing
Documents or any provisions hereof or thereof.

    


    16. Governing
Law. THIS AGREEMENT
SHALL BE DEEMED TO BE A CONTRACT MADE UNDER AND GOVERNED BY THE INTERNAL LAWS OF
THE STATE OF NEW YORK (OTHER THAN SECTION 5-1401 OF THE GENERAL OBLIGATIONS
LAW), APPLICABLE TO CONTRACTS MADE AND PERFORMED IN SUCH STATE AND ANY
APPLICABLE LAWS OF THE UNITED STATES OF AMERICA.

    


    17. Consultation
with Counsel.  Each Borrower represents to the Agent and the
Senior Secured Parties that it has discussed this Agreement, including the
provisions of Sections
10, 13
and 16 hereof,
with its attorneys.

    


    18. 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 telecopier shall be effective as delivery of a manually
executed counterpart of this Agreement.

    


    19.  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.  

     

    20.  No Course
of Dealing.  The Senior Secured Parties have entered into this
Agreement on the express understanding with the Borrowers that in entering into
this Agreement the Senior Secured Parties are not establishing any course of
dealing with the Borrowers.  The Agent’s and the Senior Secured
Parties’ rights to require strict performance with all the terms and conditions
of the Credit Agreement and the Interest Rate Protection Agreement, each as
modified by this Agreement, and the other Financing Documents shall not in any
way be impaired by the execution of this Agreement.  Neither the Agent
nor any Senior Secured Party shall 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 them, the Agent and the Senior Secured Parties may require the
payment of fees in connection therewith.

     

     

    
      
        
        

      

      
        11

        
          

        

      

      
        
        

      

    

     

    21.  Expenses.  The
Borrowers hereby acknowledge and agree that all fees, costs and expenses of
Agent and Senior Secured Parties (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
Borrowers in accordance with the Credit Agreement.

     

    22.  Further
Assurances.  At Agent’s request, Borrowers shall execute and
deliver such additional documents and take such additional actions as the Agent
requests to effectuate the provisions and purposes of this Agreement and to
protect and/or maintain perfection of the Senior Secured Parties’ security
interests in and liens upon the Collateral.

     

    


     

    *           *           *

     

    


    


    [signature
page follows]

     

     

    
      
        
        

      

      
        12

        
          

        

      

      
        
        

      

    

     

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

     

    
    

    
    

     

    
      	 	
              PACIFIC
      ETHANOL HOLDING CO. LLC,

              as
      Borrower

              


              


              By: /s/ BRYON
      MCGREGOR                                                                

              Name: Bryon
McGregor

              Title: VP Finance

              


              PACIFIC
      ETHANOL MADERA LLC,

              as
      Borrower

              


              


              By: /s/ BRYON
      MCGREGOR                                                                

              Name: Bryon
McGregor

              Title: VP Finance

              


              PACIFIC
      ETHANOL COLUMBIA, LLC,

              as
      Borrower

              


              


              By: /s/ BRYON
      MCGREGOR                                                                

              Name: Bryon
McGregor

              Title: VP Finance

              


              PACIFIC
      ETHANOL STOCKTON, LLC,

              as
      Borrower

              


              


              By: /s/ BRYON
      MCGREGOR                                                                

              Name: Bryon
McGregor

              Title: VP Finance

              


              PACIFIC
      ETHANOL MAGIC VALLEY LLC,

              as
      Borrower

              


              


              By: /s/ BRYON
      MCGREGOR                                                                

              Name: Bryon
McGregor

              Title: VP Finance

              WESTLB
      AG, NEW YORK BRANCH, as Agent

            


    

     

     

    
      
        
        

      

      
        
          Signature
Page

          Execution
Version

        

        
          

        

      

      
        
        

      

    

     

    
    

     

    
      	 	
              By: /s/ RONALD
      SPITZER                                                                

              Name: Ronald
Spitzer

              Title:  Duly
      Authorized Signatory

              


              


              By: /s/ DOMINICK
      D’ASCOLI                                                                           

              Name: Domonick
      D’Ascoli

              Title:  Duly
      Authorized Signatory

              


              


              WESTLB
      AG, NEW YORK BRANCH,

              as Collateral Agent

              


              


              By: /s/ RONALD
      SPITZER                                                                

              Name: Ronald
Spitzer

              Title:  Duly
      Authorized Signatory

              


              


              By: /s/ DOMINICK
      D’ASCOLI                                                                           

              Name: Domonick
      D’Ascoli

              Title:  Duly
      Authorized Signatory

              


              


              


              WESTLB
      AG, NEW YORK BRANCH,

              as Senior Secured
      Party

              


              


              By: /s/ RONALD
      SPITZER                                                                

              Name: Ronald
Spitzer

              Title:  Duly
      Authorized Signatory

              


              


              By: /s/ DOMINICK
      D’ASCOLI                                                                           

              Name: Domonick
      D’Ascoli

              Title:  Duly
      Authorized Signatory

            


    

     

     

    
      
        
        

      

      
        
          Signature
Page

          Execution
Version

        

        
          

        

      

      
        
        

      

    

     

    
    

     

    
      	 	
              
                


                WESTLB
      AG, NEW YORK BRANCH,

                as Interest Rate Protection
      Provider



              By: /s/ RONALD
      SPITZER                                                                

              Name: Ronald
Spitzer

              Title:  Duly
      Authorized Signatory

              


              


              By: /s/ DOMINICK
      D’ASCOLI                                                                           

              Name: Domonick
      D’Ascoli

              Title:  Duly
      Authorized Signatory

            


    

     

     

     

    
      
        
        

      

      
        
          Signature
Page

          Execution
Version

        

        
          

        

      

      
        
        

      

    

     

     

    
      	 	
              
                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

              

            


    

     

     

    
      
        
        

      

      
        
          Signature
Page

          Execution
Version

        

        
          

        

      

      
        
        

      

    

     

     

    
      	 	
              
                 

                BANCO
      DE SABADELL,

                as
      Senior Secured Party

                


                


                By:
      /s/ A. Von
      Dincklage

                Name:
      A. Von Dincklage

                Title: 
      S.V.P.

              

            


    

     

     

     

    
      
        
        

      

      
        
          Signature
Page

          Execution
Version

        

        
          

        

      

      
        
        

      

    

     

    
      	 	
              
                CIFC
      FUNDING 2007-III LTD.,

                as
      Senior Secured Party

                


                


                By:
      ______________________________________

                Name:

                Title:

                 

                CIFC
      FUNDING 2007-IV LTD.,

                as
      Senior Secured Party

                


                


                By:
      ______________________________________

                Name:

                Title:

              

            


    

     

     

    
      
        
        

      

      
        
          Signature
Page

          Execution
Version

        

        
          

        

      

      
        
        

      

    

     

    
      	 	
              CIT
      CAPITAL SECURITIES LLC,

              as
      Lead Arranger and Co-Syndication Agent Senior Secured Party

              


              


              By:
      ______________________________________

              Name:

              Title:

               

              CIT
      CAPITAL USA INC.,

              as
      Senior Secured Party

              


              


              By:
      ______________________________________

              Name:

              Title:

            


    

     

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    
      	 	
              
                 

                CITIGROUP
      FINANCIAL PRODUCTS INC.,

                as
      Senior Secured Party

                


                


                By:
      ______________________________________

                Name:

                Title:

              

            


    

     

     

    
      
        
        

      

      
        
          Signature
Page

          Execution
Version

        

        
          

        

      

      
        
        

      

    

     

    
      	 	
               

                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

              

            


    

     

     

    
      
        
        

      

      
        
          Signature
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          Execution
Version

        

        
          

        

      

      
        
        

      

    

     

    
      	 	
              LISPENARD
      STREET CREDIT (MASTER), LTD.

              By:
      DiMaio Ahmad Capital LLC, as Investment Manager

              


              


              By:
      /s/ KULJINDER
      CHASE

              Name:
      Kuljinder Chase

              Title:  Managing
      Director

              
                
                

                 

                 

              

              POND
      VIEW CREDIT (MASTER), L.P.

              By:
      DiMaio Ahmad Capital LLC, as Investment Manager

              


              


              By:
      /s/ KULJINDER
      CHASE

              Name:
      Kuljinder Chase

              Title:  Managing
      Director

               

            


    

     

     

    
      
        
        

      

      
        
          Signature
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          Execution
Version

        

        
          

        

      

      
        
        

      

    

     

    
      	 	
              UNITED
      FCS, PCA (F/K/A FARM CREDIT 

              SERVICES
      OF MINNESOTA VALLEY, PCA), 

              D/B/A
      FCS COMMERCIAL FINANCE GROUP,

              as
      Senior Secured Party

              


              


              By:
      /s/ DANIEL J.
      BEST

              Name:
      Daniel J. Best

              Title:  Asst.
      Vice President

               

            


    

     

     

    
      
        
        

      

      
        
          Signature
Page

          Execution
Version

        

        
          

        

      

      
        
        

      

    

     

    
      	 	
              
                 

                HAF
      FUNDING 2008-1 LIMITED,

                as
      Senior Secured Party

                


                


                By:
      ______________________________________

                Name:

                Title:

              

            


    

     

     

    
      
        
        

      

      
        
          Signature
Page

          Execution
Version

        

        
          

        

      

      
        
        

      

    

     

    
      	 	
              GREENSTONE
      FARM CREDIT SERVICES, 

              ACA/FLCA,

              as
      Senior Secured Party

              


              


              By:
      /s/ ALFRED S.
      COMPTON, JR.

              Name:
      Alfred J. Compton, Jr.

              Title:  Vice
      President / Managing Director

            


    

     

     

    
      
        
        

      

      
        
          Signature
Page

          Execution
Version

        

        
          

        

      

      
        
        

      

    

     

    
      	 	
              
                METROPOLITAN
      LIFE INSURANCE COMPANY,

                as
      Senior Secured Party

                


                


                By:
      /s/ JOHN A.
      TANYERI

                Name:
      John A. Tanyeri

                Title:  Director

              

            


    

     

     

    
      
        
        

      

      
        
          Signature
Page

          Execution
Version

        

        
          

        

      

      
        
        

      

    

     

    
      	 	
              
                NORDKAP
      BANK AG,

                as
      Senior Secured Party

                


                


                By:
      /s/ JEFFREY P.
      RIOPELLE

                Name:
      Jeffrey P. Riopelle

                Title:  SVP

                 

                By:
      /s/ BATCHIMEG
      GADOLA

                Name:
      Batchimeg Gadola

                Title:  AVP

              

            


    

     

     

    
      
        
        

      

      
        
          Signature
Page

          Execution
Version

        

        
          

        

      

      
        
        

      

    

     

    
      	 	
              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

            


    

     

     

    
      
        
        

      

      
        
          Signature
Page

          Execution
Version

        

        
          

        

      

      
        
        

      

    

     

    
      	 	
              
                NORTHWEST
      FARM CREDIT SERVICES, FLCA,

                as
      Senior Secured Party

                


                


                By:
      /s/ CASEY
      KINZER

                Name:
      Casey Kinzer

                Title:  Account
      Manager

              

            


    

    
       

       

      
        
          
          

        

        
          
            Signature
Page

            Execution
Version

          

          
            

          

        

        
          
          

        

      

       

      
        	 	
                COOPERATIEVE
      CENTRALE

                RAIFFEISEN-BOERENLEENBANK
      B.A.,

                “RABOBANK
      NEDERLAND”, NEW YORK BRANCH,

                as
      Senior Secured Party

                


                


                By:
      /s/ JEFF
      BLISS

                Name:
      Jeff Bliss

                Title:  Executive
      Director

                 

                


                By:
      /s/ ANDREW
      SHERMAN

                Name:
      Andrew Sherman

                Title:  Executive
      Director

              


      

       

       

      
        
          
          

        

        
          
            Signature
Page

            Execution
Version

          

          
            

          

        

        
          
          

        

      

       

      
        	 	
                BANCO
      SANTANDER S.A.,

                NEW
      YORK BRANCH,

                as
      Senior Secured Party

                


                


                By:
      ______________________________________

                Name:

                Title:

                 

                By:
      ______________________________________

                Name:

                Title:

              


      

       

      
         

        
          
            
            

          

          
            
              Signature
Page

              Execution
Version

            

            
              

            

          

          
            
            

          

        

         

        
          	 	
                  SHOREBANK
      PACIFIC,

                  as
      Senior Secured Party

                  


                  


                  By:
      /s/ KENDALL
      LEACH

                  Name:
      Kendall Leach

                  Title:  SVP/CCO

                


        

         

         

        
          
            
            

          

          
            
              Signature
Page

              Execution
Version

            

            
              

            

          

          
            
            

          

        

         

      

      
      

    

    
      	 	
               

              CIFC
      FUNDING 2007-48, LTD.,

              as
      Senior Secured Party

              


              


              By:
      _____________________________________

              Name:

              Title:

               

              CIFC
      FUNDING 2007-50, LTD.,

              as
      Senior Secured Party

              


              


              By:
      _____________________________________

              Name:

              Title:

            


    

     

    


     

    
      
        
        

      

      
        
          Signature
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          Execution
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    SCHEDULE
I

    


     EXISTING
EVENTS OF DEFAULT

    


    (a)     Breach by
Borrowers of Section 9.01(c), which requires Borrowers to strictly comply with
the performance and observance of any of its obligations under Section
7.01(g)(vi).  Several construction expenses relating to the Stockton
Plant (estimated at $150,000) were unknowingly paid from the Operating Account
due to changes in Borrowers’ staff and inadequate plant coding of
invoices.  Also, approximately $175,000 of construction costs relating to
the Stockton Plant were initially paid out of the Stockton Construction Acct,
and will be reimbursed with equity from Pacific Ethanol.

    


    (b)     Breach by
Borrowers of Section 9.01(c), which requires Borrowers to strictly comply with
the performance and observance of any of its obligations under Section
7.02(p).  Section 7.02(p) prohibits a suspension or abandonment for
more than 60 days without the prior written approval of the Required Senior
Secured Parties and the Madera, Stockton and Burley Plants have not produced
ethanol for a period greater than 60 days as of the date hereof.

    


    (c)     Breach by
Borrowers of Section 9.01(c), which requires Borrowers to strictly comply with
the performance and observance of any of its obligations under Section
7.02(s).  Borrowers have failed to comply with the Restricted Payments
provisions set forth in Section 7.02(s) when (i) repaying amounts advanced from
Pacific Ethanol to support plant operations; (ii) transferring funds by and
among, the Borrowers, Pacific Ethanol and its Subsidiaries, Pacific Ag. Products
and Kinergy from time to time including, but not limited to, transferring funds
to Pacific Ethanol in connection with the payment of dividends to holders of
Pacific Ethanol’s Series B Preferred Shares.

    


    (d)     Breach by
Borrowers of Section 9.01(d), which requires Borrowers to comply with the
performance and observance of their obligations under Section 3.10(c) and such
failure remained unremedied for a period of thirty (30) days after any Borrowers
obtained or should have obtained, knowledge thereof.  The Borrowing
Base Certificate for December 31, 2008 is expected to demonstrate that the
then-outstanding principal amount of the Working Capital Loans exceeds the
then-effective Aggregate Working Capital Commitment or the then-applicable
Working Capital Loan Availability.  The Borrowers will not be able to repay
such excess amount as required by Section 3.10(c).

    


    (e)     Breach by
Borrowers of Section 9.01(d), which requires Borrowers to comply with the
performance and observance of its obligations under Section 7.01(s) and such
failure remained unremedied for a period of thirty (30) days after any Borrowers
obtained or should have obtained, knowledge thereof.  Borrowers failed
to prepare quarterly calculations required by Section 7.01(s).

    


    (f)     Breach by
Borrowers of Section 9.01(d), which requires Borrowers to comply with the
performance and observance of its obligations under Section 7.01(y) and such
failure remained unremedied for a period of thirty (30) days after any Borrowers
obtained or should have obtained, knowledge thereof.  Final Completion
of the Stockton Plant was not achieved by January 25, 2009, as required by
Section 7.01(y).

     

     

    
      
        
        

      

      
        Schedule
I

        
          

        

      

      
        
        

      

    

    
 

    (g)     Breach by
Borrowers of Section 9.01(d), which requires Borrowers to comply with the
performance and observance of its obligations under Section 7.03(n) and such
failure remains unremedied for a period of thirty (30) days after any Borrowers
obtains or should have obtained, knowledge thereof.  Borrowers did not
deliver the Borrowing Base Certificate for the period month ending December 31,
2008 in accordance with Section 7.03(n) by February 15, 2009.

    


    (h)     Breach by
Borrowers of Section 9.01(g), which prohibits any judgment to be rendered
against any or all of the Borrowers in an amount in excess of $2,000,000 in the
aggregate and against Kinergy in an amount in excess of $2,500,000 in the
aggregate.  Western Ethanol Company, LLC has obtained a pre-judgment
writ of attachment in the amount of $3,700,000 against Kinergy.

    


    (i)     Breach by
Borrowers of Section 9.01(f), which may impose a cross-default to the Kinergy
Marketing LLC financing arrangement with Wachovia.

    


    (j)     Breach by
Borrowers of Section 9.01(f), which may impose a cross-default to the Interest
Rate Protection Agreement with WestLB as a result of the Interest Rate
Protection Agreement Events of Default.

     

    (k)    
Breach by Borrowers of Section 9.01(d), which requires Borrowers to comply with
the performance and observance of its obligations under Section 7.03(d) and such
failure remains unremedied for a period of thirty (30) days after any Borrowers
obtains or should have obtained, knowledge thereof.  The Borrowers
have not delivered a statement of an Authorized Officer setting forth the
details of the Events of Default listed on this Schedule I within five (5) days
after the occurrence of such Events of Default, as required by Section
7.03(d).

     

     

    
      
        
        

      

      
        Schedule I

        
          

        

      

      
        
        

      

    

    SCHEDULE
II


    


    ANTICIPATED
DEFAULTS

    


    (a)     Breach by
Borrowers of Section 9.01(f), which imposes a cross-default to the Pacific
Ethanol Imperial LLC financing arrangement with Lyle.  Pacific Ethanol
expects to be in default of certain payment obligations by the first week of
March.

    


    (b)     Breach by
Borrowers of Section 9.01(o), which prohibits an Event of
Abandonment.  An Event of Abandonment will occur if any of the Plants
are placed into hot idle or cold shut down for more than 90 days.

    


    (c)     Breach by
Borrowers of Section 9.01(d), which requires Borrowers to comply with the
performance and observance of its obligations under Section 7.03(p) and such
failure remains unremedied for a period of thirty (30) days after any Borrowers
obtains or should have obtained, knowledge thereof.  Borrowers did not
deliver the Operating Statement due on February 16, 2009.

    


    (d)     Breach by
Borrowers of Section 9.01(d), which requires Borrowers to comply with the
performance and observance of its obligations under Section 7.03(n) and such
failure remains unremedied for a period of thirty (30) days after any Borrowers
obtains or should have obtained, knowledge thereof.  Borrowers have
informed the Agent that they will not deliver the Borrowing Base Certificate for
the month ending January 31, 2009 or February 28, 2009 by March 15, 2009 or
April 15, 2009, respectively, in accordance with Section 7.03(n).

    


    (e)     Breach by
Borrowers of Section 9.01(d), which requires Borrowers to comply with the
performance and observance of its obligations under Section 7.03(b) and such
failure remains unremedied for a period of thirty (30) days after any Borrowers
obtains or should have obtained, knowledge thereof.  Borrowers have
informed the Agent that they will not be able to deliver the annual audit report
for Pacific Ethanol and Holding within ninety (90) days after the end of the
Fiscal Year accompanied by an unqualified opinion of the auditors stating that
such financial statements shall not be subject to any “going concern” or like
qualification or exception as to the scope of such audit.

    


    (f)     Breach by
Borrowers of Section 9.01(d), which requires Borrowers to comply with the
performance and observance of its obligations under Section 7.03(d) and such
failure remains unremedied for a period of thirty (30) days after any Borrowers
obtains or should have obtained, knowledge thereof.  Borrowers do not
expect to deliver a statement of an Authorized Officer setting forth the details
of the Anticipated Defaults listed on this Schedule II within five (5) days
after the occurrence of such Anticipated Defaults, as required by Section
7.03(d).

     

     

    
      
        
        

      

      
        Schedule II

        
          

        

      

      
        
        

      

    

     

    EXHIBIT
1

    


    UPDATED
13-WEEK CASH FLOW FORECAST

    


    [See
Attached]

     

     

     

    
 

    


     Exhibit
1