Document:

exv10w1

Exhibit 10.1

EXECUTION COPY

WAIVER TO FINANCING AGREEMENT AND

DEPOSITARY AND DISBURSEMENT AGREEMENT

     This WAIVER TO FINANCING AGREEMENT AND DEPOSITARY AND DISBURSEMENT AGREEMENT (this
“Waiver”), dated as of October 6, 2008, is made by and among PANDA HEREFORD ETHANOL, L.P.,
as Borrower, SOCIÉTÉ GÉNÉRALE, as Administrative Agent (in such capacity, the “Administrative
Agent”), Disbursement Agent and a Lender, and the party hereto (collectively, the
“Parties”). Capitalized terms not defined in this Waiver shall have the meanings given in
the Financing Agreement, dated as of July 28, 2006 (as amended, the “Financing Agreement”),
by and among Borrower, the Agents, the Lenders from time to time party thereto, the LC Fronting
Bank and the Lead Arranger.

RECITALS

     WHEREAS, Borrower, the Administrative Agent and Société Générale, as Disbursement Agent, have
previously entered into the Depositary and Disbursement Agreement, dated as of July 28, 2006 (as
amended, the “Disbursement Agreement”);

     WHEREAS, the Borrower has requested that the Majority Lenders (a) permit (i) Borrowings of
Tranche B Term Loans and (ii) disbursements of certain amounts, in each case in accordance with the
Budget (as defined below), and (b) waive certain Events of Default; and

     WHEREAS, the Financing Agreement requires the approval of the Majority Lenders with respect to
the waivers described above.

     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, the Parties agree as follows:

     1. Waiver.

     (a) Until the termination of this Waiver as described in clause (c) below, the
Administrative Agent and the undersigned Lenders hereby waive (i) the requirements of
Sections 3.5(b), (c), (d) (other than with respect to any material Financing Documents) and
(e) of the Financing Agreement and the Construction Draw Conditions set forth in Section
1.2(c) of the Disbursement Agreement to the extent such requirements cannot be met as the
result of the Defaults, Events of Default and other circumstances set forth on Schedule A
hereto solely to allow Borrowings and withdrawals from the Construction Accounts to be made
and disbursed, in each case in accordance with the Budget and subject to the other terms
and conditions hereof, and (ii) any Default or Event

 

 

of Default that has occurred and is continuing as a result of, or that may arise from,
the events and circumstances set forth on Schedule A, provided that the aggregate
amount of disbursements from the Construction Accounts made during the term of this Waiver
with the proceeds of Loans shall not exceed $31,500,000 in the aggregate.

     (b) Until the termination of this Waiver as described below, the Administrative Agent
and the Lenders party hereto agree not to exercise any rights and remedies that constitute
acceleration, foreclosure or other actions against the Collateral with respect to any
Default, Event of Default or other circumstances described on Schedule A hereto.

     (c) This Waiver shall terminate and be null and void in all respects on the earliest to
occur of (i) January 30, 2009, (ii) the Interim Completion Date, (iii) the date any Event
of Default other than those set forth on, or that arise directly from the circumstances set
forth on, Schedule A hereto occurs and (iv) the date that is two Business Days following
the Borrower’s receipt of notice that the Borrower has materially violated any of its
agreements, terms or conditions set forth herein, provided that, as used herein,
“Interim Completion Date” shall include the satisfaction by the Gasifier Vendor of the
Fluidized Bed Gasifier Steam Output Guarantee as defined in Section 9.01(c) of the Gasifier
Contract; provided further that, in the event of termination by
reason of clause (iv) above, the Lenders shall not be obligated to make any advances or
disbursements pursuant to this Waiver during the two (2) Business Day notice period.

     (d) Administrative Agent and the undersigned Lenders hereby consent to an amendment to
the Sub-Debt Documents that will (i) increase by $2,500,000 the principal amount of the
Sub-Debt (other than in accordance with the capitalized interest provisions of the Sub-Debt
Documents), and (ii) extend the term of the royalty payment to the Sub-Debt Provider under
Section 2.5(b) of the Sub-Debt Financing Agreement for a period of three years beyond its
current expiration.

     2. Agreements.

     (a) In order to induce the undersigned Lenders to execute this Waiver, the Borrower
hereby agrees:

     (i) That, if a Bankruptcy Event with respect to the Borrower occurs, (A) the
Borrower will agree that the Lenders are adequately protected by the Collateral,
(B) the Borrower will, to the extent that it has sufficient funds and is otherwise
not precluded from doing so, support any motion or other request of the
Administrative Agent and the Lenders for payment of interest, fees and expenses
with respect to the Loans and other Obligations during such Bankruptcy Event and
(C) the Borrower will have first sought debtor-in-possession financing from the
Lenders;

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     (ii) That the Borrower shall submit (A) concurrently with each Notice of
Borrowing and each Construction Draw Request, a revised Budget, which shall include
a variance report from the initial Budget, and (B) semi-monthly, an updated
Timeline (as defined below), in each case satisfactory in form and substance to the
Administrative Agent, in consultation with the Engineer, in the Administrative
Agent’s sole discretion;

     (iii) To participate in periodic conference calls with the Administrative
Agent, the Lenders and their advisors with respect to itself and the Project;

     (iv) That it will not pay in excess of $400,000 under the Services Agreement
in any calendar month, which limitation will be reflected in the Budget;

     (v) To comply in all material respects with the Budget and the Timeline; and

     (vi) That, beginning the date this Waiver becomes effective, the Applicable
Margin shall be increased to 5.75%.

     (b) Each Party further agrees that (i) interest and accrued commitment fees shall be
payable in cash on the last Business Day of each month, subject to the cure period for
interest and fee payments in the Financing Agreement, (ii) all proceeds of the additional
Sub-Debt described below shall be used in accordance with the Budget before any Borrowing
or any Construction Draw of Loan proceeds is made, (iii) if any proceeds of the insurance
described in Section 5.1(x) of the Financing Agreement are received while this Waiver is
effective, all of such proceeds (other than proceeds related to property damage for which
Lurgi, Inc. is entitled to payment) shall be used in accordance with the Budget before any
Borrowing or any Construction Draw of Loan proceeds is made and (iv), without limiting the
Borrower’s obligations to comply with the Budget and the other terms and conditions hereof,
the Borrower shall be permitted to make two additional Construction Draws per month after
giving the Administrative Agent at least three Business Days’ notice of any such additional
Construction Draw.

     3. Effectiveness. This Waiver shall be deemed effective upon the receipt by the
Administrative Agent of the following:

     (a) this Waiver duly executed by Borrower, the Administrative Agent and the Majority
Lenders;

     (b) the payment in immediately available funds of (i) all of the Administrative
Agent’s and the Lenders’ accrued fees and expenses and (ii) a waiver fee, for the account
of each Lender that delivered their executed signature page hereto on or before 3:00 p.m.,
New York City time, on October 6, 2008, in the amount of 0.50% of the Commitments and Loans
of such Lenders;

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     (c) the Borrower shall (i) enter into new documentation with the Sub-Debt Provider
under which the Sub-Debt Provider shall agree to make at least $2,500,000 in new Sub-Debt
available to the Borrower on the date this Waiver becomes effective, which documentation
shall be on terms consistent with the Sub-Debt Documents and otherwise in form and
substance satisfactory to the Administrative Agent and (ii) have deposited, or caused to be
deposited, at least $2,500,000 in additional Sub-Debt proceeds into the Sub-Debt
Construction Account;

     (d) the initial Budget attached as Schedule B hereto (as revised from time to time in
accordance herewith, the “Budget”) and an initial timeline to the Interim
Completion Date attached as Schedule C hereto (as revised from time to time in accordance
herewith, the “Timeline”), each with the written approval thereof by the Engineer,
provided that, for the avoidance of doubt, the Budget shall include, without
limitation, detailed information regarding management fees, costs by activity and other
items reasonably requested by the Administrative Agent or its advisors; and

     (e) such other instruments, documents and agreements as the Administrative Agent may
reasonably request, in form and substance reasonably satisfactory to the Administrative
Agent.

     4. Representations and Warranties. Borrower hereby represents and warrants to the
Administrative Agent and the Lenders, which representations and warranties shall survive the
termination of this Waiver under Section 1(c) or otherwise, as follows:

     (a) Borrower has all the requisite power and authority to execute this Waiver and to
perform all of its respective obligations hereunder, and this Waiver has been duly executed
and delivered by Borrower and constitutes the legal, valid and binding obligations of
Borrower, enforceable in accordance with its terms;

     (b) The execution, delivery and performance by Borrower of this Waiver have been duly
authorized by all necessary action and do not (i) require any authorization, consent or
approval by any governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign; (ii) violate any provision of any law, rule or
regulation or of any order, writ, injunction or decree presently in effect, having
applicability to Borrower or the organizational documents of Borrower; or (iii) result in a
breach or constitute a default under any loan or credit agreement or any other agreement,
lease or instrument to which Borrower is a party or by which any of its respective
properties may be bound or effected;

     (c) No Default or Event of Default exists under the Financing Documents on and as of
the date hereof except as disclosed on Schedule A;

     (d) All amounts requested listed on the Budget constitute Qualified Project
Construction Expenses;

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     (e) All of the Security Document Liens are valid, First-Priority Liens as of the date
hereof, subject to any Liens described on Schedule A; and

     (f) After giving effect to this Waiver, Borrower hereby represents that all
representations and warranties made by it to the Senior Secured Parties in the Financing
Agreement and the other Financing Documents are true and correct in all material respects
with the same force and effect as if made on and as of the date hereof (except to the
extent such statements, representations and warranties made in any such Financing Document
or writing executed prior to the date hereof related to a specific prior date).

     5. No Modification.

     Except as expressly set forth herein, the Financing Agreement, each other Financing Document
and each document executed in connection therewith shall continue to be, and shall remain, in full
force and effect in accordance with the provisions thereof. Except as expressly set forth herein,
this Agreement shall not be deemed to be an amendment or waiver of, or consent to any departure
from, any other term or condition of the Financing Agreement, any other Financing Document or any
document executed in connection therewith or to prejudice any other right or rights which the
Administrative Agent, any Lender or any other Secured Party may now have or may have in the future
under or in connection with the Financing Agreement, any other Financing Document or any document
executed in connection therewith. Except as explicitly set forth herein, this Waiver does not
create a course of conduct or an agreement to fund Borrowings, permit Construction Draws or waive
any Default or Event of Default.

     6. Miscellaneous.

     (a) Each reference in the Financing Agreement and the Disbursement Agreement to “this
Agreement” and each reference in each of the Financing Documents to the “Financing
Agreement” or the “Disbursement Agreement” shall be deemed to refer to such agreement as
modified by this Waiver.

     (b) This Waiver will be a Financing Document for all purposes of the Financing
Agreement.

     (c) This Waiver shall be governed by and construed in accordance with the laws of the
State of New York, without regard to the conflict of law provisions thereof (other than
Section 5-1401 of the General Obligations Law and any successor statute thereto).

     (d) Except as expressly modified or amended herein, the Financing Agreement and the
Disbursement Agreement shall each continue in effect and shall continue to bind the parties
thereto.

     (e) This Waiver shall not constitute a waiver or modification of any of the Lenders’
or Agents’ rights and remedies or of any of the terms, conditions, warranties,
representations, or covenants contained in the Financing Documents,

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except as specifically set forth above, and the Lenders and the Administrative Agent
hereby reserve all of their rights and remedies pursuant to the Financing Documents and
applicable law.

     (f) This Waiver may be executed in any number of counterparts and by the different
Parties hereto in separate counterparts, each of which when so executed and delivered will
be deemed an original and all of which counterparts, taken together, will constitute one
and the same instrument.

     (g) As a material part of the consideration for the Administrative Agent and the
Lenders entering into this Waiver, the Borrower, on behalf of itself and its officers,
directors, equity holders, Affiliates, successors and assigns, hereby releases and forever
discharges each of the Secured Parties and their respective predecessors, officers,
managers, directors, shareholders, employees, agents, attorneys, representatives,
subsidiaries, and Affiliates (each a “Lender Party”) from any and all Claims or
other losses or liabilities of any nature whatsoever existing on the date hereof,
including, without limitation, all Claims, losses or liabilities for or in respect of
contribution and indemnity, whether arising at law or in equity, whether liability be
direct or indirect, liquidated or unliquidated, whether absolute or contingent, foreseen or
unforeseen, and whether or not heretofore asserted, which the Borrower may have or claim to
have against any Lender Party under, arising out of, in connection with, or in any way
related to, this Waiver or any other Financing Documents. For the avoidance of doubt, the
provisions of this clause (g) shall survive any termination of this Waiver, whether under
Section 1(c) hereof or otherwise.

     (h) As of the date hereof: (i) the aggregate outstanding principal amount of
(A) Tranche A Term Loans is $63,100,000, (B) Tranche B Term Loans is $136,633, and
(C) Working Capital Loans is $0; and (ii) the aggregate undrawn face amount of the Letter
of Credit is $51,452,055. Interest and fees have accrued on the Loans and Letter of Credit
as provided in the Financing Agreement.

     (i) This Waiver and the other Financing Documents embody the entire agreement between
the parties hereto and shall supersede all prior agreements and understandings, oral or
written, if any, relating to the subject matter hereof.

[Signatures follow]

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     IN WITNESS WHEREOF, the parties hereto have caused this Waiver to Depositary and Disbursement
Agreement to be duly executed and delivered by their respective officers on the date first written
above.

	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 
	 	 	PANDA HEREFORD ETHANOL, L.P., as Borrower 

By: PHE I, LLC,
its sole general partner	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	/s/ Darol Lindloff	 	 
	 

	 	 	 	 	 	 
	 

	 	Name:	 	Darol Lindloff	 	 
	 

	 	 	 	 	 	 
	 

	 	Title:	 	President and CEO	 	 
	 

	 	 	 	 	 	 

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IN WITNESS WHEREOF, the parties hereto have caused this Waiver to Depositary and Disbursement
Agreement to be duly executed and delivered by their respective officers on the date first written
above.

	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 
	 	 	SOCIÉTÉ
GÉNÉRALE, as Administrative Agent, 

Disbursement Agent and
a Lender	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	/s/ R. Wayne Hutton	 	 
	 

	 	 	 	 	 	 
	 

	 	Name:	 	R. Wayne Hutton	 	 
	 

	 	 	 	 	 	 
	 

	 	Title:	 	Managing Director	 	 
	 

	 	 	 	 	 	 

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IN WITNESS WHEREOF, the parties hereto have caused this Waiver to Depositary and Disbursement
Agreement to be duly executed and delivered by their respective officers on the date first written
above.

	 	 	 	 	 	 	 
	 	 	AMMC CLO III, LIMITED, as Lender

By: American Money Management Corp.,

as Collateral Manager	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	/s/ Kenneth J. Bushman	 	 
	 

	 	 	 	 	 	 
	 

	 	Name:	 	Kenneth J. Bushman	 	 
	 

	 	 	 	 	 	 
	 

	 	Title:	 	Vice President	 	 
	 

	 	 	 	 	 	 

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IN WITNESS WHEREOF, the parties hereto have caused this Waiver to Depositary and Disbursement
Agreement to be duly executed and delivered by their respective officers on the date first written
above.

	 	 	 	 	 	 	 
	 	 	AMMC CLO IV, LIMITED, as Lender

By: American Money Management Corp.,

as Collateral Manager	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	/s/ Kenneth J. Bushman	 	 
	 

	 	 	 	 	 	 
	 

	 	Name:	 	Kenneth J. Bushman	 	 
	 

	 	 	 	 	 	 
	 

	 	Title:	 	Vice President	 	 
	 

	 	 	 	 	 	 

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IN WITNESS WHEREOF, the parties hereto have caused this Waiver to Depositary and Disbursement
Agreement to be duly executed and delivered by their respective officers on the date first written
above.

	 	 	 	 	 	 	 
	 	 	AMMC CLO V, LIMITED, as Lender

By: American Money Management Corp.,

as Collateral Manager	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	/s/ Kenneth J. Bushman	 	 
	 

	 	 	 	 	 	 
	 

	 	Name:	 	Kenneth J. Bushman	 	 
	 

	 	 	 	 	 	 
	 

	 	Title:	 	Vice President	 	 
	 

	 	 	 	 	 	 

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IN WITNESS WHEREOF, the parties hereto have caused this Waiver to Depositary and Disbursement
Agreement to be duly executed and delivered by their respective officers on the date first written
above.

	 	 	 	 	 	 	 
	 	 	AMMC CLO VI, LIMITED, as Lender

By: American Money Management Corp.,

as Collateral Manager	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	/s/ Kenneth J. Bushman	 	 
	 

	 	 	 	 	 	 
	 

	 	Name:	 	Kenneth J. Bushman	 	 
	 

	 	 	 	 	 	 
	 

	 	Title:	 	Vice President	 	 
	 

	 	 	 	 	 	 

12

 

IN WITNESS WHEREOF, the parties hereto have caused this Waiver to Depositary and Disbursement
Agreement to be duly executed and delivered by their respective officers on the date first written
above.

	 	 	 	 	 	 	 
	 	 	BANK OF AMERICA, N.A., as Lender	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	/s/ Christopher Mitchell	 	 
	 

	 	 	 	 	 	 
	 

	 	Name:	 	Christopher Mitchell	 	 
	 

	 	 	 	 	 	 
	 

	 	Title:	 	Principal	 	 
	 

	 	 	 	 	 	 

13

 

IN WITNESS WHEREOF, the parties hereto have caused this Waiver to Depositary and Disbursement
Agreement to be duly executed and delivered by their respective officers on the date first written
above.

	 	 	 	 	 	 	 
	 	 	BRENTWOOD CLO LTD., as Lender 

By: Highland Capital Management, L.P.,

As Collateral Manager

By: Strand Advisors, Inc., Its General Partner	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	/s/ Michael Pusateri	 	 
	 

	 	 	 	 	 	 
	 

	 	Name:	 	Michael Pusateri	 	 
	 

	 	 	 	 	 	 
	 

	 	Title:	 	Chief Operating Officer	 	 
	 

	 	 	 	 	 	 

14

 

IN WITNESS WHEREOF, the parties hereto have caused this Waiver to Depositary and Disbursement
Agreement to be duly executed and delivered by their respective officers on the date first written
above.

	 	 	 	 	 	 	 
	 	 	FIRST TRUST/HIGHLAND CAPITAL FLOATING RATE INCOME FUND, as Lender	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	/s/ M. Jason Blackbum	 	 
	 

	 	 	 	 	 	 
	 

	 	Name:	 	M. Jason Blackbum	 	 
	 

	 	 	 	 	 	 
	 

	 	Title:	 	Treasurer	 	 
	 

	 	 	 	 	 	 

15

 

IN WITNESS WHEREOF, the parties hereto have caused this Waiver to Depositary and Disbursement
Agreement to be duly executed and delivered by their respective officers on the date first written
above.

	 	 	 	 	 	 	 
	 	 	GRAND CENTRAL ASSET TRUST, HLD SERIES,	 	 
	 	 	as Lender	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	/s/ Adam Jacobs	 	 
	 

	 	 	 	 	 	 
	 

	 	Name:	 	Adam Jacobs	 	 
	 

	 	 	 	 	 	 
	 

	 	Title:	 	Attorney-in-Fact	 	 
	 

	 	 	 	 	 	 

16

 

IN WITNESS WHEREOF, the parties hereto have caused this Waiver to Depositary and Disbursement
Agreement to be duly executed and delivered by their respective officers on the date first written
above.

	 	 	 	 	 	 	 
	 	 	GRAYSON CLO, LTD., as Lender	 	 
	 

	 	By:
	 	Highland Capital Management, L.P.,	 	 
	 	 	As Collateral Manager	 	 
	 

	 	By:
	 	Strand Advisors, Inc., Its General Partner	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	/s/ Michael Pusateri	 	 
	 

	 	 	 	 	 	 
	 

	 	Name:	 	Michael Pusateri	 	 
	 

	 	 	 	 	 	 
	 

	 	Title:	 	Chief Operating Officer	 	 
	 

	 	 	 	 	 	 

17

 

IN WITNESS WHEREOF, the parties hereto have caused this Waiver to Depositary and Disbursement
Agreement to be duly executed and delivered by their respective officers on the date first written
above.

	 	 	 	 	 	 	 
	 	 	GREAT AMERICAN INSURANCE COMPANY,	 	 
	 	 	as Lender	 	 
	 

	 	By:	 	American Money Management Corp., 

as
Portfolio Manager	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	/s/ Kenneth J. Bushman	 	 
	 

	 	 	 	 	 	 
	 

	 	Name:	 	Kenneth J. Bushman	 	 
	 

	 	 	 	 	 	 
	 

	 	Title:	 	Vice President	 	 
	 

	 	 	 	 	 	 

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IN WITNESS WHEREOF, the parties hereto have caused this Waiver to Depositary and Disbursement
Agreement to be duly executed and delivered by their respective officers on the date first written
above.

	 	 	 	 	 	 	 
	 	 	GREAT AMERICAN LIFE INSURANCE COMPANY,	 	 
	 	 	as Lender	 	 
	 

	 	By:	 	American Money Management Corp., 

as Collateral Manager	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	/s/ Kenneth J. Bushman	 	 
	 

	 	 	 	 	 	 
	 

	 	Name:	 	Kenneth J. Bushman	 	 
	 

	 	 	 	 	 	 
	 

	 	Title:	 	Vice President	 	 
	 

	 	 	 	 	 	 

19

 

IN WITNESS WHEREOF, the parties hereto have caused this Waiver to Depositary and Disbursement
Agreement to be duly executed and delivered by their respective officers on the date first written
above.

	 	 	 	 	 	 	 
	 	 	HIGHLAND FLOATING RATE ADVANTAGE FUND,	 	 
	 	 	as Lender	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	/s/ M. Jason Blackbum	 	 
	 

	 	 	 	 	 	 
	 

	 	Name:	 	M. Jason Blackbum	 	 
	 

	 	 	 	 	 	 
	 

	 	Title:	 	Treasurer	 	 
	 

	 	 	 	 	 	 

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IN WITNESS WHEREOF, the parties hereto have caused this Waiver to Depositary and Disbursement
Agreement to be duly executed and delivered by their respective officers on the date first written
above.

	 	 	 	 	 	 	 
	 	 	HIGHLAND FLOATING RATE FUND, as Lender	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	/s/ M. Jason Blackbum	 	 
	 

	 	Name:
	 	M. Jason Blackbum

	 	 
	 

	 	 	 	 	 	 
	 

	 	Title:	 	Treasurer	 	 
	 

	 	 	 	 	 	 

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IN WITNESS WHEREOF, the parties hereto have caused this Waiver to Depositary and Disbursement
Agreement to be duly executed and delivered by their respective officers on the date first written
above.

	 	 	 	 	 	 	 
	 	 	ROCKWALL CDO II, LTD.	 	 
	 	 	By Highland Capital Management, L.P., As Collateral Manager
	 	 	By: Strand Advisors, Inc., Its General Partner
	 
	 	 	 	 	 	 
	 

	 	By:	 	/s/ Michael Pusateri	 	 
	 

	 	Name:
	 	Michael
Pusateri

	 	 
	 

	 	 	 	 	 	 
	 

	 	Title:	 	Chief Operating Officer	 	 
	 

	 	 	 	 	 	 

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IN WITNESS WHEREOF, the parties hereto have caused this Waiver to Depositary and Disbursement
Agreement to be duly executed and delivered by their respective officers on the date first written
above.

	 	 	 	 	 	 	 
	 	 	LOAN FUNDING VII LLC, as Lender
	 	 	By Highland Capital Management, L.P., as Collateral Manager
	 	 	By: Strand Advisors, Inc., its General Partner
	 
	 	 	 	 	 	 
	 

	 	By:	 	/s/ Michael Pusateri	 	 
	 

	 	Name:
	 	Michael
Pusateri

	 	 
	 

	 	 	 	 	 	 
	 

	 	Title:	 	Chief Operating Officer	 	 
	 

	 	 	 	 	 	 

23

 

IN WITNESS WHEREOF, the parties hereto have caused this Waiver to Depositary and Disbursement
Agreement to be duly executed and delivered by their respective officers on the date first written
above.

	 	 	 	 	 	 	 
	 	 	NEDBANK LIMITED, as Lender
	 
	 	 	 	 	 	 
	 

	 	By:	 	/s/ D. McDonnell	 	 
	 

	 	Name:
	 	D. McDonnell

	 	 
	 

	 	 	 	 	 	 
	 

	 	Title:	 	Authorized Officer	 	 
	 

	 	 	 	 	 	 

24

 

IN WITNESS WHEREOF, the parties hereto have caused this Waiver to Depositary and Disbursement
Agreement to be duly executed and delivered by their respective officers on the date first written
above.

	 	 	 	 	 	 	 
	 	 	PIONEER FLOATING RATE TRUST, as Lender
	 
	 	 	 	 	 	 
	 

	 	By:	 	/s/ M. Jason Blackbum	 	 
	 

	 	Name:
	 	M. Jason Blackbum

	 	 
	 

	 	 	 	 	 	 
	 

	 	Title:	 	Treasurer	 	 
	 

	 	 	 	 	 	 

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IN WITNESS WHEREOF, the parties hereto have caused this Waiver to Depositary and Disbursement
Agreement to be duly executed and delivered by their respective officers on the date first written
above.

	 	 	 	 	 	 	 
	 	 	WESTCHESTER CLO, LTD.
	 	 	By: Highland Capital Management, L.P.,
	 	 	As Collateral Manager
	 	 	By: Strand Advisors, Inc., Its General Partner
	 
	 	 	 	 	 	 
	 

	 	By:	 	/s/ Michael Pusateri	 	 
	 

	 	Name:
	 	Michael
Pusateri

	 	 
	 

	 	 	 	 	 	 
	 

	 	Title:	 	Chief Operating Officer	 	 
	 

	 	 	 	 	 	 

26exv10w2

Exhibit 10.2

Execution Copy     

AMENDMENT AND ADDITIONAL FUNDING AGREEMENT TO

SUBORDINATED DEBT FINANCING AGREEMENT

     This AMENDMENT AND ADDITIONAL FUNDING AGREEMENT TO SUBORDINATED DEBT FINANCING AGREEMENT (this
“Amendment”), dated as of October 6, 2008, is made by and between PANDA HEREFORD ETHANOL,
L.P., as the Borrower, and BALKAN VENTURES LLC, as the Subordinated Lender (collectively, the
“Parties”). Capitalized terms not defined in this Amendment shall have the meanings given
in that certain Subordinated Debt Financing Agreement, dated as of July 28, 2006 (as amended,
modified or supplemented, the “SDFA”), by and between Borrower and the Subordinated Lender.

RECITALS

     WHEREAS, the Borrower has previously entered into the Senior Debt Financing Agreement and the
Borrower has requested that the lenders under the Senior Debt Financing Agreement (a) permit
certain borrowings under the Senior Debt Financing, (b) permit disbursements of certain amounts in
accordance with approved budgets, (c) modify certain terms of the Senior Debt Financing Agreement,
and (d) waive certain events of default that have or may occur under the Senior Debt Financing
Agreement (such permissions, modifications and amendments to the Senior Debt Financing Agreement,
the “Senior Debt Waiver”);

     WHEREAS, as a condition to the lenders under the Senior Debt Financing Agreement agreeing to
the Senior Debt Waiver, the Company is required to obtain additional borrowings from the
Subordinated Lender, in the aggregate amount of $2.5 million; and

     WHEREAS, the Subordinated Lender has agreed to lend to the Borrower an additional $2.5
million, on the terms and conditions set forth herein.

     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, the Parties agree as follows:

     1. Additional Funding.

     (a) On the Subsequent Closing Date (as defined below), on the terms and subject to the
conditions of this Amendment and the SDFA, the Subordinated Lender agrees to extend to the
Borrower an additional term loan in the amount of $2,500,000 (the “Additional Loan
Amount”).

1

 

     (b) On the Subsequent Closing Date, the Additional Loan Amount shall be deposited into
the Sub-Debt Construction Account, and the Additional Loan Amount shall be applied solely
in accordance with the SDFA and the Disbursement Agreement and shall be used solely for the
payments made pursuant to Section 2.6 of the SDFA.

     (c) The Additional Loan Amount will mature on the Subordinated Loan Maturity Date,
unless payment thereof is due prior to such date by acceleration, mandatory prepayment or
otherwise. No portion of the Additional Loan Amount, once repaid, may be reborrowed.

     (d) On the Subsequent Closing Date, the Borrower will execute and deliver to the
Subordinated Lender an additional Subordinated Note substantially in the form attached to
this Amendment as Exhibit A.

     (e) All terms, conditions, rights, preferences and obligations contained in the SDFA
and the other Subordinated Debt Financing Documents shall apply to the Additional Loan
Amount, which Additional Loan Amount shall be included in the definition of “Subordinated
Loan” under the SDFA; provided, however, that (i) interest on the Additional Loan
Amount shall commence on the Subsequent Closing Date and the “Accrual Period” as related to
the Additional Loan Amount shall commence on the Subsequent Closing Date and end on the
First Repayment Date; and (ii) it being understood and agreed that the Additional Loan
Amount has been extended to the Borrower on the Subsequent Closing Date and not the
“Closing Date.”

     2. Amendment. In addition to an increase of the amount of the Subordinated Loan to
reflect the Additional Loan Amount pursuant to Section 1 hereof, the Parties hereby agree to the
following amendments to the SDFA:

     (a) Royalty. Subparagraph (i) of Section 2.5(b) of the SDFA is hereby amended
to read in its entirely as follows:

“(i) a seven-year term commencing on the date on which Completion has occurred, and”

     (b) Definition of Subordinated Note. The definition of “Subordinated Note” in
Schedule X to the SDFA is hereby amended to read in its entirety as follows:

““Subordinated Note” means one or more promissory notes, in the form of
Exhibit 2.4(a) to the Subordinated Debt Financing Agreement, executed and delivered
by the Borrower, payable to the order of the Subordinated Lender and collectively
evidencing the full amount of the Subordinated Loan.”

     (c) Schedule 2.8(a). Schedule 2.8(a) to the SDFA is hereby replaced in its
entirety by the attached Schedule 2.8(a) (amended).

2

 

     3. Additional Agreements. In order to induce the Subordinated Lender to fund the
Additional Loan Amount and execute this Amendment, the Borrower hereby agrees to the following
additional terms:

     (a) In addition to the obligations under Section 5.1(g) of the SDFA, the Borrower
shall provide the Subordinated Lender copies of all budgets and timelines provided to the
Administrative Agent pursuant to the Senior Debt Financing Agreement and the Senior Debt
Waiver, which budgets and timelines shall be subject to the Subordinated Lender’s approval
pursuant to Section 5.1(g) of the SDFA.

     (b) In the event a Bankruptcy Event with respect to the Borrower occurs, (i) the
Borrower will agree that the Subordinated Lender is adequately protected by the Collateral,
(ii) the Borrower will, to the extent that it has sufficient funds and is otherwise not
precluded from doing so, support any motion or other request of the Subordinated Lender for
payment of interest, fees and expenses with respect to the Subordinated Loan and other
Obligations during such Bankruptcy Event, and (iii) the Borrower will have sought
debtor-in-possession financing from the Subordinated Lender in the event the senior lenders
under the Senior Debt Financing Agreement have not provided such financing to the Borrower.

     4. Effectiveness. This Amendment shall be deemed effective (the date of such
effectiveness, the “Subsequent Closing Date”) upon the receipt by the Subordinated Lender
of the following:

     (a) this Amendment duly executed by Borrower and the Subordinated Lender;

     (b) the payment in immediately available funds, or evidence of payment, of all of the
Subordinated Lender’s accrued fees and expenses, including reasonable attorneys fees,
incurred related to this Amendment and the transactions contemplated hereby;

     (c) a Subordinated Note, duly executed by the Borrower, substantially in the form
attached to this Amendment as Exhibit A.

     (d) the Panda Ethanol, Inc. Common Stock Purchase Warrant, duly executed by Panda
Ethanol, Inc., in the form attached to this Amendment as Exhibit B;

     (e) the Senior Debt Waiver duly executed by Borrower, the Administrative Agent, a
majority of the lenders under the Senior Debt Financing Agreement, and any other parties
necessary to effect the Senior Debt Waiver, inform and substance reasonably satisfactory to
the Subordinated Lender;

     (f) the initial budget provided to the Administrative Agent pursuant to the Senior
Debt Wavier and the initial timeline provided to the Administrative

3

 

Agent pursuant to the Senior Debt Waiver, each with the written approval thereof by
the Engineer; and

     (g) such other instruments, documents and agreements as the Subordinated Lender may
reasonably request, in form and substance reasonably satisfactory to the Subordinated
Lender.

     5. Representations and Warranties. Borrower hereby represents and warrants to the
Subordinated Lender as follows:

     (a) Borrower has all the requisite power and authority to execute this Amendment and
to perform all of its respective obligations hereunder, and this Amendment has been duly
executed and delivered by Borrower and constitutes the legal, valid and binding obligations
of Borrower, enforceable in accordance with its terms;

     (b) The execution, delivery and performance by Borrower of this Amendment have been
duly authorized by all necessary action and do not (i) require any authorization, consent
or approval by any governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign; (ii) violate any provision of any law, rule or
regulation or of any order, writ, injunction or decree presently in effect, having
applicability to Borrower or the organizational documents of Borrower; or (iii) result in a
breach or constitute a default under any loan or credit agreement or any other agreement,
lease or instrument to which Borrower is a party or by which any of its respective
properties may be bound or effected;

     (c) No Event of Default exists under the Subordinated Debt Financing Documents on and
as of the date hereof except as previously disclosed to the Subordinated Lender in writing;
and

     (d) After giving effect to the Senior Debt Waiver, the Borrower hereby represents that
all representations and warranties made by it to the Subordinated Lender in the SDFA and
the other Subordinated Debt Financing Documents are true and correct in all material
respects with the same force and effect as if made on and as of the date hereof (except to
the extent such statements, representations and warranties made in any such Subordinated
Debt Financing Document or writing executed prior to the date hereof related to a specific
prior date).

     6. No Modification.

     Except as expressly set forth herein, the SDFA, each other Subordinated Debt Financing
Document and each document executed in connection therewith shall continue to be, and shall remain,
in full force and effect in accordance with the provisions thereof. Except as expressly set forth
herein, this Amendment shall not be deemed to be an amendment or waiver of, or consent to any
departure from, any other term or condition of the SDFA, any other Subordinated Debt Financing
Document or any document executed in connection therewith or to prejudice any other right or rights
which the Subordinated

4

 

Lender may now have or may have in the future under or in connection with the SDFA, any other
Subordinated Debt Financing Document or any document executed in connection therewith. Except as
explicitly set forth herein, this Amendment does not create a course of conduct or an agreement to
waive any Event of Default or other term or condition in the Subordinated Debt Financing Documents.

     7. Miscellaneous.

     (a) Each reference in the SDFA to “this Agreement” and each reference in each of the
Subordinated Debt Financing Documents to the SDFA shall be deemed to refer to the SDFA as
modified by this Amendment.

     (b) This Amendment will be a Subordinated Debt Financing Document for all purposes of
the SDFA.

     (c) This Amendment shall be governed by and construed in accordance with the laws of
the State of New York, without regard to the conflict of law provisions thereof (other than
Section 5-1401 of the General Obligations Law and any successor statute thereto).

     (d) Except as expressly modified or amended herein, the SDFA shall continue in effect
and shall continue to bind the parties thereto.

     (e) This Amendment shall not constitute a waiver or modification of any of the
Subordinated Lender’s rights and remedies or of any of the terms, conditions, warranties,
representations, or covenants contained in the Subordinated Debt Financing Documents,
except as specifically set forth above, and the Subordinated Lender hereby reserves all of
its rights and remedies pursuant to the Subordinated Debt Financing Documents and
applicable law.

     (f) This Amendment may be executed in any number of counterparts and by the different
Parties hereto in separate counterparts, each of which when so executed and delivered will
be deemed an original and all of which counterparts, taken together, will constitute one
and the same instrument.

5

 

     (g) As a material part of the consideration for the Subordinated Lender entering into
this Amendment and funding the Additional Loan Amount, the Borrower, on behalf of itself
and its officers, directors, equity holders, Affiliates, successors and assigns, hereby
releases and forever discharges each of the Subordinated Lender and its predecessors,
officers, managers, directors, shareholders, employees, agents, attorneys, representatives,
subsidiaries, and Affiliates (each a “Lender Party”) from any and all Claims of any
nature whatsoever existing on the date hereof, including, without limitation, all Claims
for contribution and indemnity, whether arising at law or in equity, whether liability be
direct or indirect, liquidated or unliquidated, whether absolute or contingent, foreseen or
unforeseen, and whether or not heretofore asserted, which the Borrower may have or claim to
have against any Lender Party in any way related to this Amendment or any other
Subordinated Debt Financing Documents.

[Signatures follow]

6

 

     IN WITNESS WHEREOF, the parties hereto have caused this AMENDMENT AND ADDITIONAL FUNDING
AGREEMENT TO SUBORDINATED DEBT FINANCING AGREEMENT to be duly executed and delivered by their
respective officers on the date first written above.

	 	 	 	 	 	 	 	 	 
	 	 	PANDA HEREFORD ETHANOL, L.P., as Borrower	 	 
	 	 	 	 	By: PHE I, LLC, its sole general partner	 	 
	 
	 	 	 	 	 	 	 	 
	 

	 	 	 	By:	 	/s/ Darol Lindloff	 	 
	 

	 	 	 	Name:
	 	Darol Lindloff

	 	 
	 

	 	 	 	 	 	 	 	 
	 

	 	 	 	Title:	 	President and CEO	 	 
	 

	 	 	 	 	 	 	 	 

	 	 	 	 	 	 	 
	 	 	BALKAN VENTURES LLC	 	 
	 	 	as the Subordinated Lender	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	/s/ Robert Kornigsberger	 	 
	 

	 	Name:
	 	Robert Kornigsberger

	 	 
	 

	 	 	 	 	 	 
	 

	 	Title:	 	Co Managing Partner	 	 
	 

	 	 	 	 	 	 

7

 

SCHEDULE 2.8(a) (AMENDED)

AMENDED TARGET AMORTIZATION AMOUNT

	 	 	 	 	 
	First Repayment Date

	 	$	1,083,333.33	 
	1st Quarter Following the First Repayment Date

	 	$	1,083,333.33	 
	2nd Quarter Following the First Repayment Date

	 	$	1,083,333.33	 
	3rd Quarter Following the First Repayment Date

	 	$	1,083,333.33	 
	4th Quarter Following the First Repayment Date

	 	$	2,166,666.67	 
	5th Quarter Following the First Repayment Date

	 	$	2,166,666.67	 
	6th Quarter Following the First Repayment Date

	 	$	2,166,666.67	 
	7th Quarter Following the First Repayment Date

	 	$	2,166,666.67	 
	8th Quarter Following the First Repayment Date

	 	$	2,166,666.67	 
	9th Quarter Following the First Repayment Date

	 	$	2,166,666.67	 
	10th Quarter Following the First Repayment Date

	 	$	2,166,666.67	 
	11th Quarter Following the First Repayment Date

	 	$	2,166,666.67	 
	12th Quarter Following the First Repayment Date

	 	$	2,166,666.67	 
	13th Quarter Following the First Repayment Date

	 	$	2,166,666.67	 
	14th Quarter Following the First Repayment Date

	 	$	2,166,666.67	 
	15th Quarter Following the First Repayment Date

	 	$	2,166,666.67	 
	16th Quarter Following the First Repayment Date

	 	$	2,166,666.67	 
	17th Quarter Following the First Repayment Date

	 	$	2,166,666.67	 
	18th Quarter Following the First Repayment Date

	 	$	2,166,666.67	 

 

 

EXHIBIT A

SUBORDINATED NOTE 

[attached]

 

 

EXHIBIT B

COMMON STOCK PURCHASE WARRANT

[attached]

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