Document:

technest_8ka-ex1001.htm

    Exhibit 10.1

    

 

    SECURITIES
PURCHASE AGREEMENT

     

     

    THIS
SECURITIES PURCHASE AGREEMENT is made as of the 20th day of May, 2009, by and
between Technest Holdings, Inc. (the “Company”), a Nevada
corporation, and each of the persons whose names are set forth on the Schedule
of Purchasers attached hereto as Exhibit A (the “Purchasers” and each
individually as a “Purchaser”).

     

    WHEREAS, each Purchaser wishes to
purchase from the Company, and the Company wishes to sell to each Purchaser,
certain shares (the “Shares”) of the
Company’s Series D 5% Convertible Preferred Stock, par value $0.0001 per share
(“Series D
Preferred”) a copy of whose certificate of designation is set forth below
in Exhibit B;

     

    NOW,
THEREFORE, in consideration of the mutual covenants contained in this Agreement,
the parties agree as follows:

     

    SECTION
1  Sale of
Securities.

     

    1.1  Authorization of Sale of the
Securities.  Subject to the terms and conditions of this
Agreement, the Company has authorized the sale and issuance to the Purchasers of
the number of Shares set forth next to each Purchaser’s name on Exhibit A
hereof.

     

    1.2  Agreement to Sell and
Purchase the Shares.  At the Closing (as defined below), the
Company will issue and sell the Shares to each Purchaser, severally and not
jointly, and each Purchaser will buy the Shares from the Company set forth
opposite such Purchaser’s name on Exhibit A, upon the
terms and conditions hereinafter set forth, at the purchase price set forth on
Exhibit
A.

     

    1.3  Several and not Joint
Obligations.  The representations, warranties, covenants,
agreements and obligations of the Purchasers under this Agreement are several
and not joint.

    

    1.4  Time of the
Essence.  Time is of the essence in this
Agreement.  If no Closing (as hereinafter defined) has take place by
May 20, 2009, the Company may unilaterally and in its sole discretion terminate
this Agreement as to any or all Purchasers, in which case no terminated party
shall have any liability to or claim against the Company under or in connection
with this Agreement or the transactions contemplated by this
Agreement.

    

    1.5  Closing.  Subject
to and in reliance upon all of the representations, warranties, covenants, terms
and conditions of this Agreement, the closing shall take place at the offices of
the Company located in Bethesda, Maryland at 10:00 a.m., local time, on May 20,
2009, or at such other location, date and time as many be agreed upon between
the applicable Purchasers and Company (such closing being called the “Closing”).

    

    SECTION
2  Representations, Warranties
and Covenants of the Company.

     

    The Company hereby represents and
warrants to, and covenants with, the Purchasers as follows:

     

    3.1  Organization and
Qualification.  The Company is a corporation, validly existing
and in good standing under the laws of the State of Nevada; and the Company is
duly qualified to do business as a foreign corporation and is in good standing
in each other jurisdiction in which qualification is required, except where the
failure to be so qualified will not have a material adverse effect.

     

    
      
         

      

      
        
        

        
          

        

      

      
         

      

    

    3.2  Issuance, Sale and Delivery
of the Shares.  Both the Shares being purchased hereunder, and
the underlying shares of the Company’s common stock into which the Shares may
convert are duly authorized and, when issued, delivered and paid for in the
manner set forth in this Agreement, will be duly authorized, validly issued,
fully paid and nonassessable, and will be free of any liens or encumbrances
other than liens or encumbrances created or imposed upon the
Purchasers.

     

    3.3  Due Execution, Delivery and
Performance of the Agreements.  The Company has full corporate
power and authority to enter into this Agreement, to issue and sell the Shares,
and perform the transactions contemplated by this Agreement.  The
execution, delivery and performance of this Agreement by the Company and the
consummation by the Company of the transactions therein contemplated will not
violate any provision of the Restated Articles of Incorporation or by-laws of
the Company.

     

    3.4  SEC
Filings.  Each report, schedule, registration statement and
definitive proxy statement filed by the Company with the Securities and Exchange
Commission (the “Commission”) under
the Securities Exchange Act of 1934, as amended (the “Exchange Act”), since
December 31, 2007 is available on EDGAR (as such documents have since the time
of their filing been amended, the “Information
Documents”), which are all the documents (other than preliminary
material) that the Company was required to file with the Commission since such
date.  Except as disclosed to the Purchasers, as of their respective
dates, the Information Documents complied in all material respects
with  the requirements of the Exchange Act and the rules and
regulations of the Commission thereunder applicable to the Information
Documents, and none of the Information Documents contained at the time they were
filed, any untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not
misleading.

     

    3.5 Authorized
Shares.  The authorized
capital stock of the Company consists of (i) 495,000,000 shares of Common Stock,
$.001 par value per share, of which  20,676,739 shares have been
issued and are outstanding as of the date hereof and (ii) 5,000,000 of Preferred
Stock, of which 150 shares have been designated as Series A Preferred Stock,
64.631  shares of which have been issued and are
outstanding;  1,149,425 shares have been designated as Series B
Preferred Stock, none of which are outstanding;  1,149,425 shares have
been designated as Series C Preferred Stock,  402,294 shares of which
have been issued and are outstanding; 3,000 shares have been designated as
Series D Preferred Stock, 1,300 shares of which have been issued and are
outstanding as of the date hereof.  All issued and outstanding shares
of Common Stock and Preferred Stock have been duly authorized and validly issued
and are fully paid and nonassessable.

     

    3.6 Brokers, Finders.  The Company has
taken no action which would give rise to any claim by any person for brokerage
commission, finder's fees or similar payments by Investor relating to this
Agreement or the transactions contemplated hereby.  Investor shall
have no obligation with respect to such fees or with respect to any claims made
by or on behalf of other persons for fees of a type contemplated in this Section
that may be due in connection with the transactions contemplated
hereby.  The Company shall indemnify and hold harmless each of
Investor, its employees, officers, directors, agents, and partners, and their
respective affiliates, from and against all claims, losses, damages, costs
(including the costs of preparation and attorney's fees) and expenses suffered
in respect of any such claimed or existing fees, as and when
incurred.

    
      
         

      

      
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    3.7 Amendments, Modification or
Waivers.  The Company shall pay all reasonable fees and
expenses incurred by the Investor in connection with any amendments,
modifications or waivers of this Agreement incurred in connection with the
enforcement of this Agreement, including, without limitation, all reasonable
attorneys’ fees and expenses. The Company shall pay all stamp or other similar
taxes and duties levied in connection with issuance of the Shares pursuant
hereto.

     

    SECTION 4  Representations, Warranties
and Covenants of the Purchasers

     

    4.1  Experience; Accredited
Investor Status.  Each Purchaser, individually and not jointly,
represents and warrants to, and covenants with, the Company that: (i) he is an
“accredited investor” within the meaning of Rule 501 of Regulation D promulgated
under the Securities Act, (ii) he is knowledgeable, sophisticated and
experienced in making, and is qualified to make, decisions with respect to
investments in securities representing an investment decision like that involved
in the purchase of the Shares, including investments in securities issued by the
Company, and has requested, received, reviewed and understood all information he
deems relevant in making an informed decision to purchase the Shares; (iii) he
acknowledges that the offering of the Shares pursuant to this Agreement has not
been reviewed by the Securities and Exchange Commission or any state regulatory
authority; (iv) it is acquiring the Shares set forth next to his name on Exhibit A hereto, for
his own account for investment only and with no intention of effecting a
distribution any of such Shares or any arrangement or understanding with any
other persons regarding the distribution of such Shares; (v) he will not,
directly or indirectly, offer, sell, pledge, transfer or otherwise dispose of
(or solicit any offers to buy, purchase or otherwise acquire or take a pledge
of) any of the Shares except in compliance with the Securities Act of 1933, as
amended (the “Securities Act”),
rules and regulations promulgated under the Securities Act and any applicable
state securities or blue sky laws; (vi) he understands that the securities are
“restricted securities” as such term is defined in Rule 144(a)(3) promulgated
under the Securities Act, and that the Shares are illiquid in that they may not
readily be resold and that the Company has no obligation or plan to register the
resale of the Shares by the Purchaser under the Securities Act; (vii) he has, in
connection with his decision to purchase Shares, not relied upon any
representations or other information (whether oral or written) other than as set
forth in the representations and warranties of the Company contained herein;
(viii) he has had an opportunity to discuss this investment with representatives
of the Company and ask questions of them and such questions have been answered
to his full satisfaction.

     

    4.2  Acknowledgement of
Risk.  Each Purchaser, individually and not jointly, recognizes
that an investment in the Shares is speculative and involves a high degree of
risk, including a risk of total loss of the Purchaser’s
investment.  Each Purchaser, individually and not jointly,
acknowledges that they have been afforded an opportunity to ask questions and to
review any documents that might be necessary to evaluate the degree of risk
involved in the transactions contemplated by this Agreement.

     

    
      
         

      

      
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    4.3  Acknowledgement of Company’s
Reliance.  Each Purchaser, individually and not jointly,
represents and warrants that all of the information provided to the Company or
its agents or representatives concerning such Purchaser’s suitability to invest
in the Company and the representations and warranties contained herein, are
complete, true, and correct as of the date hereof, and understands that the
Company is relying on the statements contained herein to establish an exemption
from registration under U.S. federal and state securities laws.  Each
Purchaser, individually and not jointly, represents and warrants that the
address set forth in the signature page hereto is such Purchaser’s true and
correct domicile.

     

    4.4  Restrictions on
Transfer.  Each Purchaser agrees to not, without the prior
written consent of the Company, directly or indirectly, make any offer, sale,
assignment, transfer, encumbrance, contract to sell, grant of an option to
purchase or other disposition of any Shares beneficially owned (within the
meaning of Rule 13d-3 under the Securities Exchange Act of 1934, as amended) by
the Purchaser on the date hereof or hereafter acquired for a period of six
months subsequent to the date hereof.  Each Purchaser agrees and
consents to the entry of stop transfer instructions with the Company’s transfer
agent against the transfer of Shares except in compliance with this
agreement.

    

    SECTION 5.  Certain Covenants of the
Company

    

    5.1 Filings.  (i)  The
Company undertakes and agrees to promptly and timely make all necessary filings
and other applications in connection with the sale of the Shares to the
Purchaser under any United States laws and regulations applicable to the
Company, or by any domestic securities exchange or trading market, and to
provide a copy thereof to the Investor promptly after such filing.

    

    5.2 Reporting
Status.  So long as the Purchaser beneficially owns any of the
Shares, the Company shall file all reports required to be filed with the SEC
pursuant to Section 13 or 15(d) of the 1934 Act, and the Company shall not
terminate its status as an issuer required to file reports under the 1934 Act
even if the 1934 Act or the rules and regulations thereunder would permit such
termination.  The Company will take all reasonable action under its
control to obtain and to continue the listing and trading of its Common Stock
(including, without limitation, all Converted Shares) on the principal exchange
where its common stock is traded.

    

    5.3 Available
Shares.  The Company shall have at all times hereafter
authorized and reserved for issuance, free from preemptive rights, shares of
Common Stock sufficient to issue one hundred percent (100%) of the number of
shares of Common Stock as may be required to satisfy the conversion rights of
the Purchaser pursuant to the terms and conditions of the Certificate of
Designation.

    

    5.4 Negative
Covenants.  So long as any of
the Shares are outstanding, the Company shall not and shall not cause its
subsidiaries to, without the affirmative vote of seventy five percent (75%) of
the holders of the Shares then outstanding, (a) alter or adversely change the
powers, preferences or rights given to the Shares, (b) alter or amend the
Certificate of Designation associated with the Shares, (c) authorize or create
any class of stock ranking as to dividends or distribution of assets upon a
liquidation or otherwise senior to or pari passu with the Shares, (d) amend its
certificate of incorporation, bylaws or other charter documents so as to
adversely affect any rights of any holders of the Shares, (e) increase the
authorized or designated number of the Shares, (f) allow for the creation of a
corporate obligation other than in the ordinary course of business, (g) allow
the creation of any lien on any of its assets or the assets of any subsidiary,
(h) issue any additional Shares (including the reissuance of any Shares
previously converted into common stock) or (i) enter into any agreement with
respect to the foregoing.

    

    
      
         

      

      
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    SECTION 6  Expenses.  Each
party hereto will pay its own expenses in connection with the transactions
contemplated hereby, whether or not such transactions shall be
consummated.

     

    SECTION 7  Notices.  All
notices, requests, consents, and other communications under this Agreement shall
be in writing and shall be delivered by hand, sent via overnight courier, sent
by facsimile, or mailed by first class certified or registered mail, return
receipt requested, postage prepaid:

     

    if to the
Company, to:

     

    Technest
Holdings, Inc.

    10411
Motor City Drive, Suite 650

    Bethesda,
MD 20817

    

    or to
such other person at such other place as the Company shall designate to the
Purchasers in writing; and if to the Purchasers, at the address as set forth on
Exhibit A, or
at such other address or addresses as may have been furnished to the Company in
writing pursuant to this Section
7.

     

    SECTION 8  Severability.  In
case any provision contained in this Agreement should be invalid, illegal or
unenforceable in any respect, the validity, legality and enforceability of the
remaining provisions contained herein shall not in any way be affected or
impaired thereby.

     

    SECTION 9  Governing
Law.  This Agreement shall be governed by and interpreted in
accordance with the laws of the State of New York for contracts to be wholly
performed in such state and without giving effect to the principles thereof
regarding the conflict of laws. Each of the parties consents to the exclusive
jurisdiction of the federal courts whose districts encompass any part of the
County of New York or the state courts of the State of New York sitting in the
County of New York in connection with any dispute arising under this Agreement
and hereby waives, to the maximum extent permitted by law, any objection,
including any objection based on forum non conveniens, to the
bringing of any such proceeding in such jurisdictions.  Each party
hereto agrees to waive its right to a trial by jury in any proceeding in
connection with any dispute associated with this Agreement.

    

    SECTION 10  Entire
Agreement.  This Agreement contains the entire agreement of the
parties with respect to the subject matter hereof and supersedes and is in full
substitution for any and all prior oral or written agreements and understandings
between them related to such subject matter, and neither party hereto shall be
liable or bound to the other party hereto in any manner with respect to such
subject matter by any representations, indemnities, covenants or agreements
except as specifically set forth herein.

     

    
      
         

      

      
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    IN
WITNESS WHEREOF, the parties hereto have caused this Securities Purchase
Agreement to be executed as of the date first above written by their duly
authorized representatives shown below:

    
 

     

    
      	 	

              TECHNEST
      HOLDINGS, INC.

               

              By: /s/ Gino M.
      Pereira                                           

               

              Name:     
      Gino M. Pereira

               

              Title:       
      Chief Executive Officer

               

              

              SOUTHRIDGE
      CAPITAL MANAGEMENT LLC

               

               

              By: /s/ Stephen
      Hicks                                            
      

               

              Name:     
      Stephen Hicks

               

              Title:       
      President of General Partner

            

    

     

     

    
    

    

     

    
      
         

      

      
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     Exhibit
A

     

    Schedule
of Purchasers

     

     

    
      
        
          
            
              	
                      Name and Address:

                    	
                      Shares:

                    	
                      Purchase Price:

                    
	 	 	 
	
                      Southridge Capital
      Management LLC

                      90
      Grove Street,

                      Ridgefield
      CT

                    	
                      140

                    	
                      $70,000

                    
	 
      	 
      	 
      

            

          

        

      

    

    

     

    

     

    

     

     

     

     

     

     

     

     

     

     

    
      
         

      

      
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    Exhibit
B

     

    

     

    Certificate
of Designation

     

     

     

     

     

     

     

     

     

     

     

    
 

    
      
         

      

      
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    CERTIFICATE
OF DESIGNATION OF RIGHTS AND PREFERENCES

    FOR
SERIES D 5% CONVERTIBLE PREFERRED STOCK

    OF

    TECHNEST
HOLDINGS, INC.

    

    Pursuant
to Section 78.1955 of the Nevada Revised Statutes, Technest Holdings, Inc., a
Nevada corporation (the "Company"), does hereby certify:

    

    FIRST:
That pursuant to authority expressly vested in it by the Restated Articles of
Incorporation, as amended, of the Company, the Board of Directors of the Company
has adopted the following resolution establishing a new series of Preferred
Stock of the Company, consisting of Three Thousand (3,000) shares designated
"Series D 5% Convertible Preferred Stock," with such powers, designations,
preferences, and relative participating, optional, or other rights, if any, and
the qualifications, limitations, or restrictions thereof, as are set forth in
the resolutions:

    

    RESOLVED,
that the Company's Board of Directors hereby approves the designation and
issuance of the Series D 5% Convertible Preferred Stock according to the terms
and conditions as set forth in Exhibit A and authorizes and instructs the
Company's Executive Officers to proceed in filing the Certificate of Designation
with the State of Nevada and to take such other action as shall be appropriate
in connection with the issuance of the Series D 5% Convertible Preferred
Stock.

    

    SECOND:
That said resolutions of the directors of the Company were duly adopted in
accordance with the provisions of Sections 78.315 and 78.1955 of the Nevada
Revised Statutes.

    

    IN
WITNESS WHEREOF, the undersigned hereby affirms, under penalties of perjury,
that the foregoing instrument is the act and deed of the Company and that the
facts stated therein are true.  Dated as of the 1st day of October,
2008.

     

    
    

     

    
      	 	

              TECHNEST
      HOLDINGS, INC.,

              a
      Nevada corporation,

              

              By:/s/ Gino
      Pereira                                
      

              Name:  Gino
      Pereira

              Title:    President

            

    

     

     

     

     

     

    

    
      
        
           

        

        
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    EXHIBIT

     

     

    SECTION
1.                                SERIES
D 5% CONVERTIBLE PREFERRED STOCK TERMS

     

    Section
1.                      Designation, Amount and Par
Value.  The series of preferred stock shall be designated as
the Series D 5% Convertible Preferred Stock (the "Preferred Stock"),
and the number of shares so designated and authorized shall be Three Thousand
(3,000).  Each share of Preferred Stock shall have a par value of
$0.0001 per share and a stated value of $1,000 per share (the "Stated
Value").

    

    Section
2.                      Dividends.

    

    (a)           Holders
of Preferred Stock shall be entitled to receive, when and as declared by the
Board of Directors either out of funds legally available therefor or through the
issuance of shares of the Company’s
common stock, and the Company shall accrue, quarterly in arrears on March 31,
June 30, September 30, and December 31 of each year, commencing on the earlier
of December 31, 2008, or any Conversion Date (as defined below), cumulative
dividends on the Preferred Stock at the rate per share (as a percentage of the
Stated Value per share) equal to five percent (5%) per annum, payable in cash or
shares of Common Stock (as defined in Section 7) at the option of the
Holders.  The Company may pay, at its option, accrued dividends at any
time while the Preferred Stock remains outstanding.  The Company shall
pay all accrued and unpaid dividends within five (5) days following either (a)
the conversion of any or all of the Preferred Stock or (b) the redemption by the
Company of any or all of the remaining outstanding shares of Preferred
Stock.  The number of shares of Common Stock issuable as payment of
dividends hereunder shall equal the aggregate dollar amount of dividends then
being paid, divided by the Conversion Price (as defined in Section 5(c)) then in
effect.  Dividends on the Preferred Stock shall be calculated on the
basis of a 360-day year, shall accrue daily commencing the Issuance Date (as
defined in Section 7), and shall be deemed to accrue on such date whether or not
earned or declared and whether or not there are profits, surplus or other funds
of the Company legally available for the payment of dividends.  The
party that holds the Preferred Stock on an applicable record date for any
dividend payment will be entitled to receive such dividend payment and any other
accrued and unpaid dividends which accrued prior to such dividend payment date,
without regard to any sale or disposition of such Preferred Stock subsequent to
the applicable record date but prior to the applicable dividend payment
date.  Except as otherwise provided herein, if at any time the Company
pays less than the total amount of dividends then accrued on account of the
Preferred Stock, such payment shall be distributed ratably among the Holders of
the Preferred Stock based upon the number of shares then held by each Holder in
proportion to the total number of shares of Preferred Stock then
outstanding.  In order for the Holders to exercise the right to have
dividends paid in cash on any Conversion Date, the Holders must indicate such
intention in the Conversion Notice, which notice will remain in effect for
subsequent Conversion Notices until rescinded by the Holder in a written notice
to such effect that is addressed to the Company.

    
      
         

      

      
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    (b)  Notwithstanding
anything to the contrary contained herein, the Company may not issue shares of
Common Stock in payment of dividends on the Preferred Stock (and must deliver
cash in respect thereof) if:  (i)  the number of shares of
Common Stock at the time authorized, unissued and unreserved for all purposes,
or held as treasury stock, is either insufficient to issue such dividends in
shares of Common Stock or the Company has not duly reserved for issuance in
respect of such dividends a sufficient number of shares of Common Stock, (ii)
such shares are not listed for trading on the Nasdaq SmallCap Market or the OTC
Bulletin Board ("OTC BB")(and any other exchange, market or trading facility in
which the Common Stock is then listed for trading). Payment of dividends in
shares of Common Stock is further subject to the provisions of Section
5.

    

    (c)  So
long as any shares of Preferred Stock remain outstanding, neither the Company
nor any subsidiary thereof shall, without the consent of the Holders of seventy
five percent (75%) of the shares of Preferred Stock then outstanding, redeem,
repurchase or otherwise acquire directly or indirectly any Junior Securities (as
defined in Section 7), nor shall the Company directly or indirectly pay or
declare any dividend or make any distribution upon, nor shall any distribution
be made in respect of, any Junior Securities, nor shall any monies be set aside
for or applied to the purchase or redemption (through a sinking fund or
otherwise) of any Junior Securities.

    

    Section
3.                      Voting Rights; Negative
Covenants.  The Preferred Stock shall have the right to vote on
an as converted basis on any matter that may from time to time be submitted to
the Company’s shareholders for a vote, either by written consent or by
proxy.  So long as any shares of Preferred Stock are outstanding, the
Company shall not and shall cause its subsidiaries not to, without the
affirmative vote of seventy five percent (75%) of the holders of the Preferred
Stock then outstanding, (a) alter or change adversely the powers, preferences or
rights given to the Preferred Stock, (b) alter or amend this Certificate of
Designation, (c) authorize or create any class of stock ranking as to dividends
or distribution of assets upon a Liquidation (as defined in Section 4) or
otherwise senior to or pari passu with the Preferred Stock, (d) amend its
certificate of incorporation, bylaws or other charter documents so as to affect
adversely any rights of any holders of the Preferred Stock, (e) increase the
authorized or designated number of shares of Preferred Stock, (f) allow for the
creation of a corporate obligation other than in the ordinary course of
business, (g) allow the creation of any lien on any of its assets or the assets
of any subsidiary, (h) issue any additional shares of Preferred Stock (including
the reissuance of any shares of Preferred Stock converted for Common Stock) or
(i) enter into any agreement with respect to the foregoing.

    

    Section
4.                      Liquidation.  Upon
any liquidation, dissolution or winding-up of the Company, whether voluntary or
involuntary (a "Liquidation"), and
subject to the rights of the holders of the Company’s Series A Convertible
Preferred Stock and Series C Convertible Preferred Stock then outstanding, the
holders of the Preferred Stock shall be entitled to receive out of the assets of
the Company, whether such assets are capital or surplus, for each share of
Preferred Stock an amount equal to the Stated Value plus all accrued but unpaid
dividends per share, whether declared or not, and all other amounts in respect
thereof (including liquidated damages, if any) then due and payable prior to any
distribution or payment shall be made to the holders of any Junior Securities,
and if the assets of the Company shall be insufficient to pay in full such
amounts, then the entire assets to be distributed to the holders of Preferred
Stock shall be distributed among the holders of Preferred Stock ratably in
accordance with the respective amounts that would be payable on such shares if
all amounts payable thereon were paid in full.  The Company shall mail
written notice of any such Liquidation, not less than 45 days prior to the
payment date stated therein, to each record holder of Preferred
Stock.

    

    
      
         

      

      
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    Section
5.                      Conversion.

    

    (a)  Conversions at Option of
Holder.  Each share of Preferred Stock shall be convertible
into shares of Common Stock at the Conversion Ratio (as defined in Section 7) at
the option of a Holder, at any time and from time to time, from and after the
issuance of the Preferred Stock.  A Holder shall effect conversions by
surrendering to the Company the certificate or certificates representing the
shares of Preferred Stock to be converted to the Company, together with a
completed form of conversion notice attached hereto as Exhibit A (the "Conversion
Notice").  Each Conversion Notice shall specify the number of
shares of Preferred Stock to be converted, the date on which such conversion is
to be effected, which date may not be prior to the date the holder delivers such
Conversion Notice by facsimile (the "Conversion Date") and
the Conversion Price determined as specified in Section 5(c)
hereof.  If no Conversion Date is specified in a Conversion Notice,
the Conversion Date shall be the date that the Conversion Notice is deemed
delivered pursuant to this Section 5(a).  Subject to Section 5(b)
hereof, each Conversion Notice, once given, shall be irrevocable.

    

    (b)   Not
later than five (5) Trading Days after a Conversion Date, the Company will
deliver to the holder (i) a certificate or certificates representing the number
of shares of Common Stock being issued upon the conversion of shares of
Preferred Stock, (ii) one or more certificates representing the number of shares
of Preferred Stock not converted, (iii) a bank check in the amount of accrued
and unpaid dividends (if the Holder has elected to pay accrued and unpaid
dividends in cash) and (iv) if the Holder has elected and is permitted hereunder
to pay accrued dividends in shares of Common Stock, certificates representing
such number of shares of Common Stock as are issuable on account of accrued
dividends in such number as determined in accordance with Section
2(a).  The Company shall, upon request of the Holder, use reasonable
efforts to deliver any certificate or certificates required to be delivered by
the Company under this Section electronically through the Depository Trust
Company or another established clearing corporation performing similar
functions.  If in the case of any Conversion Notice such certificate
or certificates, including for purposes hereof, any shares of Common Stock to be
issued on the Conversion Date on account of accrued but unpaid dividends
hereunder as specifically determined by the Company, are not delivered to or as
directed by the applicable holder by the third Trading Day after the Conversion
Date, the holder shall be entitled by written notice to the Company at any time
on or before its receipt of such certificate or certificates, to rescind such
conversion, in which event the Company shall immediately return the certificates
representing the shares of Preferred Stock tendered for conversion.

    

    
      
         

      

      
        - 12
-

        
          

        

      

      
         

      

    

    (c) The
conversion price for each share of Preferred Stock (the “Conversion Price”) on
any Conversion Date shall be twenty cents ($0.20), subject to Section 5(d) and
Section 6 below.  All calculations under this Section 5 shall be made
to the nearest whole share of common stock.

    

    (d)  If
at any time conditions shall arise by reason of action taken by the Company
which in the opinion of the Board of Directors are not adequately covered by the
other provisions hereof and which might materially and adversely affect the
rights of the holders of Preferred Stock (different than or distinguished from
the effect generally on rights of holders of any class of the Company's capital
stock) or if at any time any such conditions are expected to arise by reason of
any action contemplated by the Company, the Company shall mail a written notice
briefly describing the action contemplated and the material adverse effects of
such action on the rights of the holders of Preferred Stock at least 30 calendar
days prior to the effective date of such action, and an Appraiser selected by
the holders of majority in interest of the Preferred Stock shall give its
opinion as to the adjustment, if any (not inconsistent with the standards
established in this Section 5), of the Conversion Price (including, if
necessary, any adjustment as to the securities into which shares of Preferred
Stock may thereafter be convertible) and any distribution which is or would be
required to preserve without diluting the rights of the holders of shares of
Preferred Stock; provided, however, that the
Company, after receipt of the determination by such Appraiser, shall have the
right to select an additional Appraiser, in good faith, in which case the
adjustment shall be equal to the average of the adjustments recommended by each
such Appraiser.  The Board of Directors shall make the adjustment
recommended forthwith upon the receipt of such opinion or opinions or the taking
of any such action contemplated, as the case may be; provided, however, that no such
adjustment of the Conversion Price shall be made which in the opinion of the
Appraiser(s) giving the aforesaid opinion or opinions would result in an
increase of the Conversion Price to more than the Conversion Price then in
effect.

    

    (e)  The
Company covenants that it will at all times reserve and keep available out of
its authorized and unissued Common Stock solely for the purpose of issuance upon
conversion of Preferred Stock and payment of dividends on Preferred Stock, each
as herein provided, free from preemptive rights or any other actual or
contingent purchase rights of persons other than the holders of Preferred Stock,
not less than 150% of such number of shares of Common Stock as shall be issuable
(taking into account the adjustments and restrictions of Section 5(d)) upon the
conversion of all outstanding shares of Preferred Stock and payment of dividends
hereunder.  The Company covenants that all shares of Common Stock that
shall be so issuable shall, upon issue, be duly and validly authorized, issued
and fully paid and nonassessable.

    

    (f)  Upon
a conversion hereunder the Company shall not be required to issue stock
certificates representing fractions of shares of Common Stock, but may if
otherwise permitted and unless waived by the holder of the Preferred Stock, make
a cash payment in respect of any final fraction of a share based on the Per
Share Market Value at such time.  If the Company elects not, or is
unable, to make such a cash payment, the holder of a share of Preferred Stock
shall be entitled to receive, in lieu of the final fraction of a share, one
whole share of Common Stock.

    

    
      
         

      

      
        - 13
-

        
          

        

      

      
         

      

    

    (g)  The
issuance of certificates for shares of Common Stock on conversion of Preferred
Stock shall be made without charge to the Holders thereof for any documentary
stamp or similar taxes that may be payable in respect of the issue or delivery
of such certificate, provided that the
Company shall not be required to pay any tax that may be payable in respect of
any transfer involved in the issuance and delivery of any such certificate upon
conversion in a name other than that of the holder of such shares of Preferred
Stock so converted and the Company shall not be required to issue or deliver
such certificates unless or until the person or persons requesting the issuance
thereof shall have paid to the Company the amount of such tax or shall have
established to the satisfaction of the Company that such tax has been
paid.

    

    (h)  Shares
of Preferred Stock converted into Common Stock shall be canceled and shall have
the status of authorized but unissued shares of undesignated preferred
stock.

    

    (i)  Any
and all notices or other communications or deliveries to be provided by the
Holders of the Preferred Stock hereunder, including, without limitation, any
Conversion Notice, shall be in writing and delivered by facsimile, sent by a
nationally recognized overnight courier service, or sent by certified or
registered mail, postage prepaid, addressed to the attention of the President of
the Company at the facsimile telephone number or address of the principal place
of business of the Company.  Any and all notices or other
communications or deliveries to be provided by the Company hereunder shall be in
writing and delivered by facsimile, sent by a nationally recognized overnight
courier service or sent by certified or registered mail, postage prepaid,
addressed to each holder of Preferred Stock at the facsimile telephone number or
address of such holder appearing on the books of the Company, or if no such
facsimile telephone number or address appears, at the principal place of
business of the Holder.  Any notice or other communication or
deliveries hereunder shall be deemed given and effective on the earliest of (i)
the date of transmission, if such notice or communication is delivered via
facsimile at the facsimile telephone number specified in this Section prior to
5:00 p.m. (New York time), (ii) the date after the date of transmission, if such
notice or communication is delivered via facsimile at the facsimile telephone
number specified in this Section later than 5:00 p.m. (New York time) on any
date and earlier than 11:59 p.m. (New York time) on such date, (iii) four days
after deposit in the United States mails, (iv) the Business Day following the
date of mailing, if send by nationally recognized overnight courier service, or
(v) upon actual receipt by the party to whom such notice is required to be
given.

    

    Section
6.  Redemption; Adjustments to
Conversion Price.

    

    (a)           Redemption.

    

    
      	
               
      

            	
              (i)

            	
              The
      Company shall have the obligation, subject to the Holder’s right of
      conversion under Section 5, to redeem from funds legally available
      therefor all or any portion of the then-outstanding and unconverted shares
      of the Preferred Stock at a price equal to the Redemption Price (defined
      below), at such time as the Company has received proceeds from the sale of
      EOIR, or if no such proceeds become available, as such time as the Company
      has funds legally available for redemption.  Any redemption
      pursuant to this Section 6(a)(i) shall be effected by the delivery of a
      notice to each holder of Preferred Stock to be redeemed, which notice
      shall indicate the number of shares of Preferred Stock of each holder to
      be redeemed and the date that such redemption is to be effected, which
      shall be the tenth (10th)
      day after the date such notice is deemed delivered (the "Redemption
      Date").  All redeemed shares of Preferred Stock shall
      cease to be outstanding and shall have the status of authorized but
      unissued preferred stock.

            

    

    

    

    
      
         

      

      
        - 14
-

        
          

        

      

      
         

      

    

    

    (b)  The Conversion Price
shall be subject to adjustment from time to time as follows:

    

    (i).           Sale.   If,
for as long as any shares of Preferred Stock remain outstanding, the Company
enters into a merger (other than where the Company is the surviving entity) or
consolidation with another corporation or other entity (collectively, a “Sale”),
the Company will require, in the agreements reflecting such transaction, that
the surviving entity and, if an entity different from the successor or surviving
entity, the entity whose capital stock or assets the holders of Common Stock of
the Company are entitled to receive as a result of such
transaction,  expressly assume the obligations of the Company
hereunder.  Notwithstanding the foregoing, if the Company enters into
a Sale and the holders of the Common Stock are entitled to receive stock,
securities or property in respect of or in exchange for Common Stock, then as a
condition of such Sale, the Company and any such successor, purchaser or
transferee will agree that the  Preferred Stock may thereafter be
converted on the terms and subject to the conditions set forth above into the
kind and amount of stock, securities or property receivable upon such merger,
consolidation or transfer by a Holder of the number of shares of Common Stock
into which then outstanding shares of Preferred Stock might have been converted
immediately before such merger, consolidation or transfer, subject to
adjustments which shall be as nearly equivalent as may be
practicable.  In the event of any such proposed Sale, the Holder
hereof shall have the right to either (i) convert all of any of the outstanding
Preferred Stock by delivering a Notice of Conversion to the Company within 10
days of receipt of notice of such Sale from the Company or (ii) if the surviving
entity in the transaction is not a publicly traded entity listed on a Principal
Trading Market, demand a redemption of all or any of the
outstanding  Preferred Stock at the  Redemption Price by
delivering a notice to such effect  to the Company within ten (10)
days of receipt of notice of such Sale from the Company.

    

    (ii).           Spin
Off.  If, for as long as any shares of Preferred Stock remain
outstanding  the Company consummates a  spin off or
otherwise divests itself of a part of its business or operations or disposes of
all or of a part of its assets in a transaction (the “Spin Off”) in which the
Company, in addition to or in lieu of any other compensation received by the
Company  for such business, operations or assets, causes securities of
another entity (the “Spin Off Securities”) to be issued to security holders of
the Company, then the Company shall cause (i) to be reserved Spin Off Securities
equal to the number thereof which would have been issued to the Holder had all
of the Holder’s shares of Preferred Stock outstanding on the record date (the
“Record Date”) for determining the amount and number of Spin Off Securities to
be issued to security holders of the Company (the “Outstanding Preferred Stock”)
been converted as of the close of business on the Trading Day immediately before
the Record Date (the “Reserved Spin Off Securities”), and (ii) to be issued to
the Holder upon the conversion of all or any of the Outstanding Preferred Stock,
such amount of the Reserved Spin Off Securities equal to (x) the Reserved Spin
Off Securities multiplied by (y) a fraction, of which (a) the numerator is the
principal amount of the Outstanding Preferred Stock  then being
converted, and (b) the denominator is the principal amount of the Outstanding
Preferred Stock.

    
      
         

      

      
        - 15
-

        
          

        

      

      
         

      

    

    

    (iii).           Stock
Splits, etc.  If, at any time while any shares of Preferred Stock
remain outstanding, the Company effectuates a stock split or reverse stock split
of its Common Stock or issues a dividend on its Common Stock consisting of
shares of Common Stock, the Conversion Price and any other amounts calculated as
contemplated by this Certificate of Designations shall be equitably adjusted to
reflect such action.  By way of illustration, and not in limitation,
of the foregoing (i) if the Company effectuates a 2:1 split of its Common Stock,
thereafter, with respect to any conversion for which the Company issues shares
after the record date of such split, the Conversion Price shall be deemed to be
one-half of what it had been calculated to be immediately prior to such split;
(ii) if the Company effectuates a 1:10 reverse split of its Common Stock,
thereafter, with respect to any conversion for which the Company issues shares
after the record date of such reverse split, the Conversion Price shall be
deemed to be ten times what it had been calculated to be immediately prior to
such split; and (iii) if the Company declares a stock dividend of one share of
Common Stock for every 10 shares outstanding, thereafter, with respect to any
conversion for which the Company issues shares after the record date of such
dividend, the Conversion Price shall be deemed to be such amount multiplied by a
fraction, of which the numerator is the number of shares (10 in the example) for
which a dividend share will be issued and the denominator is such number of
shares plus the dividend share(s) issuable or issued thereon (11 in the
example).

    

    (iv).           Notice
of Adjustments.  Upon the occurrence of each adjustment or
readjustment of the Conversion Price pursuant to this Article 6, the Company, at
its expense, shall promptly compute such adjustment or readjustment and prepare
and furnish to each Holder of Preferred Stock a certificate setting forth such
adjustment or readjustment and showing in detail the facts upon which such
adjustment or readjustment is based.  The Company shall, upon the
written request at any time of any Holder of Preferred Stock, furnish to such
Holder a like certificate setting forth (i) such adjustment or readjustment,
(ii) the Conversion Price in effect at the time and (iii) the number of shares
of Common Stock and the amount, if any, of other securities or property which at
the time would be received upon conversion of a share of Designated Preferred
Stock.

    

    Section
7.  Definitions.  For
the purposes hereof, the following terms shall have the following
meanings:

    

    "Business Day" means
any day except Saturday, Sunday and any day which shall be a legal holiday or a
day on which banking institutions in the State of Delaware are authorized or
required by law or other government action to close.

    
      
         

      

      
        - 16
-

        
          

        

      

      
         

      

    

    

    "Closing Bid Price"
shall mean the closing bid price (as reported by Bloomberg L.P.) of the Common
Stock on the OTC Bulletin Board or such other exchange or trading facility on
which the common stock is traded.

    

    "Common Stock" means
the common stock, $.001 par value per share, of the Company, and stock of any
other class into which such shares may hereafter have been reclassified or
changed.

    

    "Conversion Ratio"
means, at any time, a fraction, the numerator of which is Stated Value plus
accrued but unpaid dividends to the extent to be paid in shares of Common Stock
and the denominator of which is the Conversion Price at such time.

    

    “Issuance Date" means
the earliest date on which a Holder receives shares of the Preferred Stock,
regardless of the number of certificates which may be issued to evidence such
Preferred Stock.

    

    "Junior Securities"
means the Common Stock and all other equity securities of the Company except for
the Company’s
Series A Convertible Preferred Stock and Series C Convertible Preferred
Stock.

    

    "Per Share Market
Value" means on any particular date (a) the closing bid price per share
of the Common Stock on such date on the OTC BB or other principal stock exchange
or quotation system on which the Common Stock is then listed or quoted or if
there is no such price on such date, then the closing bid price on such exchange
or quotation system on the date nearest preceding such date, or (b) if the
Common Stock is not listed then on the OTC BB or any stock exchange or quotation
system, the closing bid price for a share of Common Stock in such other
over-the-counter market, as reported by the Nasdaq Stock Market or in the
National Quotation Bureau Incorporated or similar organization or agency
succeeding to its functions of reporting prices at the close of business on such
date, or (c) if the Common Stock is not then reported by the National Quotation
Bureau Incorporated or similar organization or agency succeeding to its
functions of reporting prices, then the average of the "Pink Sheet" quotes for
the relevant conversion period, as determined in good faith by the holder, or
(d) if the Common Stock is not then publicly traded the fair market value of a
share of Common Stock as determined by an Appraiser selected in good faith by
the holders of a majority in interest of the shares of the Preferred Stock;
provided, however, that the
Company, after receipt of the determination by such Appraiser, shall have the
right to select an additional Appraiser, in which case, the fair market value
shall be equal to the average of the determinations by each such
Appraiser.

    

    "Person" means an
individual or a corporation, partnership, trust, incorporated or unincorporated
association, joint venture, limited liability company, joint stock company,
government (or an agency or political subdivision thereof) or other entity of
any kind.

    
      
         

      

      
        - 17
-

        
          

        

      

      
         

      

    

    

    "Redemption Price"
shall be equal to the Stated Value of such shares of Preferred Stock plus all
accrued dividends thereon.

    

    "Trading Day" means
(a) a day on which the Common Stock is traded on the OTC BB or other stock
exchange or market on which the Common Stock has been listed, or (b) if the
Common Stock is not quoted on the OTC Bulletin Board, a day on which the Common
Stock is quoted in the over-the-counter market as reported by the National
Quotation Bureau Incorporated (or any similar organization or agency succeeding
its functions of reporting prices).

    

    

    
      
         

      

      
        - 18
-

        
          

        

      

      
         

      

    

    

    EXHIBIT
B

    

    NOTICE
OF CONVERSION

    

    (To be
executed by the registered holder

    to
convert shares of Preferred Stock)

    

    The
undersigned hereby elects to convert the number of shares of Series D 5%
Convertible Preferred Stock indicated below, into shares of Common Stock, par
value $.001 per share (the "Common Stock"), of Technest Holdings, Inc. (the
"Company") according to the conditions hereof, as of the date written
below.  If shares are to be issued in the name of a person other than
undersigned, the undersigned will pay all transfer taxes payable with respect
thereto and is delivering herewith such certificates and opinions as reasonably
requested by the Company in accordance therewith.  No fee will be
charged to the holder for any conversion, except for such transfer taxes, if
any.

    

    Conversion
calculations:

    ______________________________________________________

    Date to
effect conversion

    

    ______________________________________________________

    Number of
shares of Preferred Stock to be converted

    

    ______________________________________________________

    Number of
shares of Common Stock to be issued

    

    ______________________________________________________

    Applicable
conversion price

    

    ______________________________________________________

    Name of
Holder

    ______________________________________________________

    

    ______________________________________________________

    Address
of Holder

    

    __________________________________

    Authorized
Signature

    

    

    - 19 -pei_8k-ex1001.htm

    EXHIBIT
10.1

     

     

    
      Execution
Copy

    

     

    

    
      
        

        

      

       

      DEBTOR-IN-POSSESSION
CREDIT AGREEMENT

       

      

    

    dated
as of May 19, 2009

     

    among

     

    PACIFIC
ETHANOL HOLDING CO. LLC,

     

    PACIFIC
ETHANOL MADERA LLC,

     

    PACIFIC
ETHANOL COLUMBIA, LLC,

     

    PACIFIC
ETHANOL STOCKTON, LLC, and

     

    PACIFIC
ETHANOL MAGIC VALLEY, LLC,

     

    as
Borrowers,

     

    PACIFIC
ETHANOL HOLDING CO. LLC,

     

    as
Borrower Agent,

     

    THE
LENDERS REFERRED TO HEREIN,

     

    WESTLB
AG, NEW YORK BRANCH,

     

    as
Administrative Agent for the Lenders,

     

    WESTLB
AG, NEW YORK BRANCH,

     

    as
Collateral Agent for the Senior Secured Parties,

     

    and

     

    AMARILLO
NATIONAL BANK,

     

    as
Accounts Bank

     

    
      

       

      
        

        

      

       

    

    
      
        
           

        

        
           

          
          

        

        
           

        

      

    

    

    TABLE OF
CONTENTS

     

    Page

     

    
      	
              ARTICLE
      I

            	
              DEFINITIONS
      AND INTERPRETATION

            	
              2

            
	
              Section
      1.01

            	
              Defined
      Terms

            	
              2

            
	
              Section
      1.02

            	
              Principles
      of Interpretation

            	
              2

            
	
              Section
      1.03

            	
              UCC
      Terms

            	
              3

            
	
              Section
      1.04

            	
              Accounting
      and Financial Determinations

            	
              3

            
	
              Section
      1.05

            	
              Joint
      and Several

            	
              3

            
	
              ARTICLE
      II

            	
              COMMITMENTS
      AND BORROWING

            	
              3

            
	
              Section
      2.01

            	
              Revolving
      Loans

            	
              3

            
	
              Section
      2.02

            	
              Roll
      Up Loans

            	
              4

            
	
              Section
      2.03

            	
              Notice
      of Fundings

            	
              4

            
	
              Section
      2.04

            	
              Funding
      of Loans

            	
              4

            
	
              Section
      2.05

            	
              Evidence
      of Indebtedness

            	
              5

            
	
              Section
      2.06

            	
              Termination
      or Reduction of Commitments

            	
              6

            
	
              Section
      2.07

            	
              Defaulting
      Lenders

            	
              6

            
	
              Section
      2.08

            	
              Security
      Interest

            	
              7

            
	
              Section
      2.09

            	
              Super-Priority
      Nature of Obligations.

            	
              7

            
	
              Section
      2.10

            	
              Payment
      of Obligations.

            	
              8

            
	
              Section
      2.11

            	
              Liens.

            	
              8

            
	
              Section
      2.12

            	
              No
      Discharge; Survival of Claims.

            	
              8

            
	
              Section
      2.13

            	
              Release.

            	
              9

            
	
              Section
      2.14

            	
              Waiver
      of Priming Rights.

            	
              9

            
	
              Section
      2.15

            	
              Priority
      of Claim.

            	
              9

            
	
              ARTICLE
      III

            	
              REPAYMENTS,
      PREPAYMENTS, INTEREST AND FEES

            	
              10

            
	
              Section
      3.01

            	
              Repayment
      of Loans

            	
              10

            
	
              Section
      3.02

            	
              Interest
      Payment Dates

            	
              10

            
	
              Section
      3.03

            	
              Interest
      Rates

            	
              10

            
	
              Section
      3.04

            	
              Default
      Interest Rate

            	
              11

            
	
              Section
      3.05

            	
              Interest
      Rate Determination

            	
              12

            
	
              Section
      3.06

            	
              Computation
      of Interest and Fees

            	
              12

            
	
              Section
      3.07

            	
              Optional
      Prepayment

            	
              12

            
	
              Section
      3.08

            	
              Mandatory
      Prepayment

            	
              13

            
	
              Section
      3.09

            	
              Time
      and Place of Payments

            	
              14

            
	
              Section
      3.10

            	
              Fundings
      and Payments Generally

            	
              15

            
	
              Section
      3.11

            	
              Fees

            	
              15

            
	
              Section
      3.12

            	
              Pro
      rata Treatment

            	
              15

            
	
              Section
      3.13

            	
              Sharing
      of Payments

            	
              16

            
	
              ARTICLE
      IV

            	
              EURODOLLAR
      RATE AND TAX PROVISIONS

            	
              16

            
	
              Section
      4.01

            	
              Eurodollar
      Rate Lending Unlawful

            	
              16

            
	
              Section
      4.02

            	
              Inability
      to Determine Eurodollar Rates

            	
              17

            
	
              Section
      4.03

            	
              Increased
      Eurodollar Loan Costs

            	
              17

            
	
              Section
      4.04

            	
              Obligation
      to Mitigate

            	
              18

            
	
              Section
      4.05

            	
              Funding
      Losses

            	
              18

            
	
              Section
      4.06

            	
              Increased
      Capital Costs

            	
              19

            
	
              Section
      4.07

            	
              Taxes

            	
              19

            

    

    

    
      
        
           

        

        
          -i-

          
            

          

        

        
           

        

      

    

    

    

    
      	
              ARTICLE
      V

            	
              REPRESENTATIONS
      AND WARRANTIES

            	
              20

            
	
              Section
      5.01

            	
              Organization;
      Power and Compliance with Law

            	
              21

            
	
              Section
      5.02

            	
              Due
      Authorization; Non-Contravention

            	
              21

            
	
              Section
      5.03

            	
              Governmental
      Approvals.

            	
              21

            
	
              Section
      5.04

            	
              Investment
      Company Act

            	
              22

            
	
              Section
      5.05

            	
              Validity
      of Financing Documents

            	
              22

            
	
              Section
      5.06

            	
              Financial
      Information

            	
              22

            
	
              Section
      5.07

            	
              Project
      Compliance

            	
              22

            
	
              Section
      5.08

            	
              Litigation

            	
              22

            
	
              Section
      5.09

            	
              Sole
      Purpose Nature; Business

            	
              23

            
	
              Section
      5.10

            	
              Contracts.

            	
              23

            
	
              Section
      5.11

            	
              Collateral

            	
              23

            
	
              Section
      5.12

            	
              Ownership
      of Properties

            	
              24

            
	
              Section
      5.13

            	
              Taxes

            	
              24

            
	
              Section
      5.14

            	
              Patents,
      Trademarks, Etc

            	
              25

            
	
              Section
      5.15

            	
              ERISA
      Plans

            	
              25

            
	
              Section
      5.16

            	
              Property
      Rights, Utilities, Supplies Etc

            	
              25

            
	
              Section
      5.17

            	
              No
      Defaults

            	
              25

            
	
              Section
      5.18

            	
              Environmental
      Warranties.

            	
              25

            
	
              Section
      5.19

            	
              Regulations
      T, U and X

            	
              26

            
	
              Section
      5.20

            	
              Accuracy
      of Information

            	
              26

            
	
              Section
      5.21

            	
              Indebtedness

            	
              27

            
	
              Section
      5.22

            	
              Required
      LLC Provisions

            	
              27

            
	
              Section
      5.23

            	
              Subsidiaries

            	
              27

            
	
              Section
      5.24

            	
              Foreign
      Assets Control Regulations, Etc

            	
              27

            
	
              Section
      5.25

            	
              Employment
      Matters

            	
              27

            
	
              Section
      5.26

            	
              Legal
      Name and Place of Business

            	
              27

            
	
              Section
      5.27

            	
              No
      Brokers

            	
              28

            
	
              Section
      5.28

            	
              Insurance

            	
              28

            
	
              Section
      5.29

            	
              Accounts

            	
              28

            
	
              Section
      5.30

            	
              SEC
      Compliance

            	
              29

            
	
              Section
      5.31

            	
              Reorganization
      Matters.

            	
              29

            
	
              ARTICLE
      VI

            	
              CONDITIONS
      PRECEDENT

            	
              29

            
	
              Section
      6.01

            	
              Conditions
      to Closing

            	
              29

            
	
              Section
      6.02

            	
              Conditions
      to All Fundings

            	
              33

            
	
              ARTICLE
      VII

            	
              COVENANTS

            	
              35

            
	
              Section
      7.01

            	
              Affirmative
      Covenants

            	
              35

            
	
              Section
      7.02

            	
              Negative
      Covenants

            	
              40

            
	
              Section
      7.03

            	
              Reporting
      Requirements

            	
              47

            
	
              ARTICLE
      VIII

            	
              [INTENTIONALLY
      OMITTED]

            	
              51

            

    

    

    
      
        
           

        

        
          -ii-

          
            

          

        

        
           

        

      

    

    

    

    
      	
              ARTICLE
      IX

            	
              DEFAULT
      AND ENFORCEMENT

            	
              51

            
	
              Section
      9.01

            	
              Events
      of Default

            	
              51

            
	
              Section
      9.02

            	
              Action
      Upon Event of Default.

            	
              57

            
	
              Section
      9.03

            	
              Remedies

            	
              58

            
	
              Section
      9.04

            	
              Minimum
      Notice Period

            	
              60

            
	
              Section
      9.05

            	
              Sale
      of Collateral

            	
              60

            
	
              Section
      9.06

            	
              Actions
      Taken by Collateral Agent

            	
              61

            
	
              Section
      9.07

            	
              Private
      Sales

            	
              61

            
	
              Section
      9.08

            	
              Access
      to Land

            	
              61

            
	
              Section
      9.09

            	
              Compliance
      With Limitations and Restrictions

            	
              61

            
	
              Section
      9.10

            	
              No
      Impairment of Remedies

            	
              62

            
	
              Section
      9.11

            	
              Attorney-In-Fact

            	
              62

            
	
              Section
      9.12

            	
              Application
      of Proceeds

            	
              63

            
	
              ARTICLE
      X

            	
              THE
      AGENTS

            	
              63

            
	
              Section
      10.01

            	
              Appointment
      and Authority

            	
              63

            
	
              Section
      10.02

            	
              Rights
      as a Lender

            	
              65

            
	
              Section
      10.03

            	
              Exculpatory
      Provisions

            	
              65

            
	
              Section
      10.04

            	
              Reliance
      by Agents

            	
              66

            
	
              Section
      10.05

            	
              Delegation
      of Duties

            	
              66

            
	
              Section
      10.06

            	
              Resignation
      or Removal of Agent

            	
              66

            
	
              Section
      10.07

            	
              No
      Amendment to Duties of Agent Without Consent

            	
              67

            
	
              Section
      10.08

            	
              Non-Reliance
      on Agent and Other Lenders

            	
              68

            
	
              Section
      10.09

            	
              Collateral
      Agent May File Proofs of Claim

            	
              68

            
	
              Section
      10.10

            	
              Collateral
      Matters

            	
              69

            
	
              Section
      10.11

            	
              Copies

            	
              69

            
	
              ARTICLE
      XI

            	
              MISCELLANEOUS
      PROVISIONS

            	
              69

            
	
              Section
      11.01

            	
              Amendments,
      Etc

            	
              69

            
	
              Section
      11.02

            	
              Applicable
      Law; Jurisdiction; Etc

            	
              71

            
	
              Section
      11.03

            	
              Assignments

            	
              72

            
	
              Section
      11.04

            	
              Benefits
      of Agreement

            	
              75

            
	
              Section
      11.05

            	
              Borrower
      Agent

            	
              75

            
	
              Section
      11.06

            	
              Consultants

            	
              76

            
	
              Section
      11.07

            	
              Costs
      and Expenses

            	
              76

            
	
              Section
      11.08

            	
              Counterparts;
      Effectiveness

            	
              76

            
	
              Section
      11.09

            	
              Indemnification
      by the Borrowers

            	
              77

            
	
              Section
      11.10

            	
              Interest
      Rate Limitation

            	
              78

            
	
              Section
      11.11

            	
              No
      Waiver; Cumulative Remedies

            	
              78

            
	
              Section
      11.12

            	
              Notices
      and Other Communications

            	
              78

            
	
              Section
      11.13

            	
              Patriot
      Act Notice

            	
              81

            
	
              Section
      11.14

            	
              Marshalling;
      Payments Set Aside

            	
              81

            
	
              Section
      11.15

            	
              Right
      of Setoff

            	
              82

            
	
              Section
      11.16

            	
              Severability

            	
              82

            
	
              Section
      11.17

            	
              Survival

            	
              82

            
	
              Section
      11.18

            	
              Treatment
      of Certain Information; Confidentiality

            	
              82

            
	
              Section
      11.19

            	
              Waiver
      of Consequential Damages, Etc

            	
              83

            
	
              Section
      11.20

            	
              Waiver
      of Litigation Payments

            	
              84

            
	
              Section
      11.21

            	
              Section
      552(b)

            	
              84

            

    

     

    
      
        
           

        

        
          -iii-

          
            

          

        

        
           

        

      

    

    

    SCHEDULES

    

    Schedule
1.01 – Commitments

    Schedule
2.01 – Form of Interim Order

    Schedule
5.07 – Project Compliance

    Schedule
5.08 – Litigation

    Schedule
5.10 – Contracts

    Schedule
5.18(a)(i) – Environmental Warranties

    Schedule
5.18(d)(ii) – Underground Storage Tanks

    Schedule
5.26 – Legal Names and Places of Business

    Schedule
5.27 – Broker Fees

    Schedule
5.29 – Local Accounts

    Schedule
6.01(n) – Initial DIP Budget

    Schedule
7.01(h) – Insurance

    Schedule
11.12 – Notice Information

    

    EXHIBITS

    

    Exhibit A
– Defined Terms

    Exhibit
2.03 – Form of Funding Notice

    Exhibit
2.05 – Form of Note

    Exhibit
3.03 – Form of Interest Period Notice

    Exhibit
4.07 – Form of Non-U.S. Lender Statement

    Exhibit
11.03  – Form of Lender Assignment Agreement

    

    

    
      
        
           

        

        
          -iv-

          
            

          

        

        
           

        

      

    

    

    This
DEBTOR-IN-POSSESSION CREDIT AGREEMENT (this “Agreement”), dated as
of May 19, 2009, is by and among Pacific Ethanol Holding Co. LLC, a Delaware
limited liability company and a debtor-in-possession under Chapter 11 of the
Bankruptcy Code (as defined below) (“Pacific Holding”),
Pacific Ethanol Madera LLC, a Delaware limited liability company and a
debtor-in-possession under Chapter 11 of the Bankruptcy Code (“Madera”), Pacific
Ethanol Columbia, LLC, a Delaware limited liability company and a
debtor-in-possession under Chapter 11 of the Bankruptcy Code (“Boardman”), Pacific
Ethanol Stockton, LLC, a Delaware limited liability company and a
debtor-in-possession under Chapter 11 of the Bankruptcy Code (“Stockton”), and
Pacific Ethanol Magic Valley, LLC, a Delaware limited liability company and a
debtor-in-possession under Chapter 11 of the Bankruptcy Code (“Burley” and, together
with Pacific Holding, Madera, Boardman and Stockton, the “Borrowers”), Pacific
Holding, as Borrower Agent, each of the Lenders from time to time party hereto,
WESTLB AG, NEW YORK BRANCH, as administrative agent for the Lenders, WESTLB AG,
NEW YORK BRANCH as collateral agent for the Senior Secured Parties and AMARILLO
NATIONAL BANK, as accounts bank.

     

    RECITALS

     

    WHEREAS, on May 17, 2009
(the “Petition
Date”), each Borrower (collectively, the “Debtors”) commenced
Chapter 11 Case Nos. 09-11713 through 09-11717 (each a “Chapter 11 Case” or a
“Case” and collectively, the “Chapter 11 Cases” or
the “Cases”) by filing voluntary petitions for reorganization under the
Bankruptcy Code with the United States Bankruptcy Court for the District of
Delaware (the “Bankruptcy
Court”).  The Borrowers continue to operate their businesses
and manage their properties as debtors and debtors-in-possession pursuant to
Sections 1107(a) and 1108 of the Bankruptcy Code;

     

    WHEREAS, prior to the Petition
Date, certain Lenders provided financing to each Borrower pursuant to the Credit
Agreement, dated as of February 27, 2007, among each Borrower, the other parties
signatory thereto, and each such Lender (as amended, modified or supplemented
through the Petition Date, the “Pre-Petition Credit
Agreement”);

     

    WHEREAS, each Borrower has
requested that the Lenders provide a senior secured, superpriority credit
facility to the Borrowers to fund the working capital requirements of the
Borrowers and for other purposes permitted under this Agreement during the
pendency of the Chapter 11 Cases;

     

    WHEREAS, each Lender is
willing to make certain Post-Petition (as defined below) loans and other
extensions of credit to each Borrower of up to such amount upon the terms and
conditions set forth herein;

     

    WHEREAS, each Debtor has
agreed to secure all the Obligations by granting to the Collateral Agent a
security interest in and Lien upon substantially all its existing and
after-acquired personal and real property; and

     

    WHEREAS, each Borrower
acknowledges that they each will receive substantial direct and indirect
benefits by reason of the making of loans and other financial accommodations to
the Borrowers as provided in this Agreement;

     

    

    
      
        
           

        

        
          
          

          
            

          

        

        
           

        

      

    

    

    NOW, THEREFORE, the parties
hereto agree as follows:

     

    ARTICLE
I

     

    DEFINITIONS
AND INTERPRETATION

     

    Section
1.01 Defined
Terms.  Capitalized terms used in this Agreement, including its
preamble and recitals, shall, except as otherwise defined herein or where the
context otherwise requires, have the meanings provided in Exhibit
A.

     

    Section
1.02 Principles of
Interpretation.  (a)  Unless otherwise defined or the
context otherwise requires, terms for which meanings are provided in this
Agreement shall have the same meanings when used in each Financing Document,
notice and other communication delivered from time to time in connection with
any Financing Document.

     

    (b) Unless
the context requires otherwise, any reference in this Agreement to any
Transaction Document shall mean such Transaction Document and all schedules,
exhibits and attachments thereto.

     

    (c) All the
agreements, contracts or documents defined or referred to herein shall mean such
agreements, contracts or documents as the same may from time to time be
supplemented or amended or the terms thereof waived or modified to the extent
permitted by, and in accordance with, the terms thereof and this Agreement, and
shall disregard any supplement, amendment or waiver made in breach of this
Agreement.

     

    (d) Any
reference in any Financing Document relating to a Default or an Event of Default
that has occurred and is continuing (or words of similar effect) shall be
understood to mean that (i) in the case of a Default only, such Default has not
been cured or remedied, or has not been waived by the Required Lenders, before
becoming an Event of Default and (ii) in the case of an Event of Default, such
Event of Default has not been cured or remedied or has not been waived by the
Required Lenders.

     

    (e) The term
“knowledge” in relation to a Borrower, and any other similar expressions, shall
mean knowledge of such Borrower after due inquiry.

     

    (f) Defined
terms in this Agreement shall include in the singular number the plural and in
the plural number the singular.

     

    (g) The words
“herein,” “hereof” and “hereunder” and words of similar import when used in this
Agreement shall, unless otherwise expressly specified, refer to this Agreement
as a whole and not to any particular provision of this Agreement and all
references to Articles, Sections, Exhibits and Schedules shall be references to
Articles, Sections, Exhibits and Schedules of this Agreement, unless otherwise
specified.

     

    (h) The words
“include,” “includes” and “including” are not limiting.

     

    (i) The word
“or” is not exclusive.

    

    
      
        
           

        

        
          -2-

          
            

          

        

        
           

        

      

    

    

    (j) Any
reference to any Person shall include its permitted successors and permitted
assigns in the capacity indicated, and in the case of any Governmental
Authority, any Person succeeding to its functions and capacities.

     

    Section
1.03 UCC
Terms.  Unless otherwise defined herein, terms used herein that
are defined in the UCC shall have the respective meanings given to those terms
in the UCC.

     

    Section
1.04 Accounting and Financial
Determinations.  Unless otherwise specified, all accounting
terms used in any Financing Document shall be interpreted, all accounting
determinations and computations hereunder or thereunder shall be made, and all
financial statements required to be delivered hereunder or thereunder shall be
prepared, in accordance with GAAP.

     

    Section
1.05 Joint and
Several.    The Obligations of each Borrower under
this Agreement and each other Financing Document to which any Borrower is a
party shall constitute the joint and several obligations of all Borrowers. All
representations, warranties, undertakings, agreements and obligations of each
Borrower expressed or implied in this Agreement or any other Financing Document
shall, unless the context requires otherwise, be deemed to be made, given or
assumed by the Borrowers jointly and severally.

     

    ARTICLE
II

     

    COMMITMENTS
AND BORROWING

     

    On the
terms, subject to the conditions and relying upon the representations and
warranties herein set forth:

     

    Section
2.01 Revolving
Loans.  (a)  Each Revolving Lender agrees, severally
and not jointly, on the terms and conditions of this Agreement, to make loans
(each such loan, a “Revolving Loan”) to
the Borrowers, from time to time but not more frequently than six (6) times each
calendar month, until the last Business Day immediately preceding the Maturity
Date, in an aggregate principal amount from time to time outstanding not in
excess of (i) during the period from the date of entry of the Interim Order by
the Bankruptcy Court through the date of entry of the Final Order by the
Bankruptcy Court, the product of (A) seven million Dollars ($7,000,000) and (B)
the Revolving Loan Commitment Percentage of such Revolving Lender and (ii) from
the date of entry of the Final Order by the Bankruptcy Court to the Maturity
Date, the Revolving Loan Commitment of such Revolving Lender.

     

    (b) Each
Funding of Revolving Loans shall be in the minimum amount of one hundred
thousand Dollars ($100,000).

     

    (c) Proceeds
of each Revolving Loan shall be deposited into the Revenue Account (or as
otherwise agreed by the Administrative Agent and specified in the relevant
Funding Notice) and applied solely in accordance with this Agreement and shall
be used solely in accordance with the then-current DIP Budget.

     

    (d) Within
the limits set forth in Section 2.01(a), the
Borrowers may pay or prepay and reborrow Revolving Loans.

    

    
      
        
           

        

        
          -3-

          
            

          

        

        
           

        

      

    

    

    Section
2.02 Roll Up
Loans.  (a)  Concurrent with the funding by a
Revolving Lender of a Revolving Loan, an amount of such Lender's (or an
Affiliate of such Lender) Pre-Petition Term Loan equal to 150% of the amount of
such Revolving Loan will be converted into a roll up loan (each  a
“Roll Up
Loan”); provided that (i)
repayment of a Revolving Loan will not reduce the amount of the outstanding Roll
Up Loans and (ii) the aggregate Roll Up Loans will not exceed the Aggregate Roll
Up Commitment.

     

    (b) Each
party hereto acknowledges that pursuant to Section 2.02(b) the
amount of Pre-Petition Term Loans held by each Roll Up Lender (or Affiliate of
such Roll Up Lender) shall be reduced by an amount equal to the amount of Roll
Up Loans made by such Roll Up Lender.

     

    (c) All Roll
Up Loans shall have the benefit of Section 364(e) of the Bankruptcy
Code.

     

    (d) Roll Up
Loans paid or prepaid may not be reborrowed.

     

    Section
2.03 Notice of
Fundings.  (a)  From time to time, but not more
frequently than six (6) times each calendar month, the Borrowers may propose a
Funding by delivering to the Administrative Agent a properly completed Funding
Notice not later than 12:00 noon, New York City time, five (5) Business Days
prior to the proposed Funding Date; provided, however, that such
prior notice period shall not apply to the initial Funding.  Each
Funding Notice delivered pursuant to this Section 2.03 shall be
irrevocable and shall refer to this Agreement and specify (i) whether such
Funding is requested to be of Eurodollar Loans and/or Base Rate Loans, (ii) the
requested Funding Date (which shall be a Business Day), and (iii) the amount of
such requested Funding.

     

    (b) The
Administrative Agent shall promptly advise each Lender of any Funding Notice
given pursuant to this Section 2.03, and of
each such Lender’s portion of the requested Funding.

     

    Section
2.04 Funding of
Loans.  (a)  Subject to Section 2.04(d), each
Funding shall consist of Revolving Loans made by the Lenders ratably in
accordance with their respective applicable Commitment Percentages and shall
consist of Eurodollar Loans or Base Rate Loans as the Borrowers may request
pursuant to Section
2.03 (Notice
of Fundings); provided, however, that the
failure of any Lender to make any Revolving Loan shall not in itself relieve any
other Lender of its obligation to lend hereunder (it being understood, however,
that no Lender shall be responsible for the failure of any other Lender to make
any Revolving Loan required to be made by such other Lender).

     

    (b) Subject
to Section 4.04
(Obligation
to Mitigate), each Lender may
(without relieving any Borrower of its obligation to repay a Revolving Loan in
accordance with the terms of this Agreement and the Notes) at its option fulfill
its Commitment with respect to any such Revolving Loan by causing any domestic
or foreign branch or Affiliate of such Lender to make such Revolving Loan; provided that the use
of such domestic or foreign branch does not result in any increased costs
payable by any of the Borrowers hereunder.

    

    
      
        
           

        

        
          -4-

          
            

          

        

        
           

        

      

    

    

    (c) Subject
to Section
2.04(d), each Lender shall make a Revolving Loan in the amount of its
applicable Commitment Percentage of each Funding hereunder on the proposed
Funding Date by wire transfer of immediately available funds to the
Administrative Agent, not later than 11:00 a.m. New York City time, and the
Administrative Agent shall deposit the amounts so received into the Revenue
Account; provided, that
if a Funding does not occur on the proposed Funding Date because any condition
precedent to such requested Funding herein specified has not been met, the
Administrative Agent shall return the amounts so received to the respective
Lenders without interest.

     

    (d) Unless
the Administrative Agent has been notified in writing by any Lender prior to a
proposed Funding Date that such Lender will not make available to the
Administrative Agent its portion of the Funding proposed to be made on such
date, the Administrative Agent may assume that such Lender has made such amounts
available to the Administrative Agent on such date and the Administrative Agent
in its sole discretion may, in reliance upon such assumption, make available to
the Borrowers a corresponding amount.  If such corresponding amount is
not in fact made available to the Administrative Agent by such Lender and the
Administrative Agent has made such amount available to the Borrowers, the
Administrative Agent shall be entitled to recover such corresponding amount on
demand from such Lender and, if such Lender pays such amount (together with the
interest noted below), then the amount so paid shall constitute such Lender’s
Revolving Loan included in such Funding.  If such Lender does not pay
such corresponding amount forthwith upon the Administrative Agent’s demand, the
Administrative Agent shall promptly notify the Borrowers and the Borrowers shall
immediately repay such corresponding amount to the Administrative
Agent.  The Administrative Agent shall also be entitled to recover
from such Lender or the Borrowers, as the case may be, interest on such
corresponding amount in respect of each day from the date such corresponding
amount was made available by the Administrative Agent to the Borrowers to the
date such corresponding amount is recovered by the Administrative Agent, at an
interest rate per annum
equal to (i) in the case of a payment made by such Lender, the greater of the
Federal Funds Effective Rate and a rate determined by the Administrative Agent
in accordance with banking industry rules on interbank compensation and (ii) in
the case of a payment made by the Borrowers, the Base Rate plus the Applicable
Margin.  Nothing herein shall be deemed to relieve any Lender from its
obligation to fulfill its commitment hereunder.  Notwithstanding
anything to the contrary in this Agreement or any other Financing Document, the
Administrative Agent may, with prior notice to the Borrowers, apply all funds
and proceeds of Collateral available for the payment of any Obligation to repay
any amount owing by any Lender to the Administrative Agent as a result of such
Lender’s failure to fund its applicable share of any Funding
hereunder.  A notice of the Administrative Agent to any Lender or the
Borrowers with respect to any amounts owing under this Section 2.04(d) shall
be conclusive, absent manifest error.

     

    Section
2.05 Evidence of
Indebtedness.  (a)  Each Loan made by each Lender
shall be evidenced by one or more accounts or records maintained by such Lender
and by the Administrative Agent in the ordinary course of business, including
the Register for the recordation of the Loans maintained by the Administrative
Agent in accordance with the provisions of Section 11.03(c)
(Assignments).  The
accounts or records maintained by the Administrative Agent and each Lender shall
be conclusive evidence, absent manifest error, of the amount of the Loans made
by the Lenders to the Borrowers and the interest and payments
thereon.  Any failure to so record or any error in doing so shall not,
however, limit or otherwise affect the obligation of the Borrowers hereunder to
pay any amount owing with respect to the Obligations.  In the event of
any conflict between the accounts and records maintained by any Lender and the
accounts and records of the Administrative Agent in respect of such matters, the
accounts and records of the Administrative Agent shall control in the absence of
manifest error.

    

    
      
        
           

        

        
          -5-

          
            

          

        

        
           

        

      

    

    

    (b) The
Borrowers agree that in addition to the Register, the Loans made by each Lender
shall be evidenced, in each case when requested by a Lender, by a Note or Notes
duly executed on behalf of each Borrower, dated the Closing Date (or, if later,
the date of any such request) payable to the order of such Lender in a principal
amount equal to such Lender’s Revolving Loan Commitment or Roll Up Loan
Commitment, as applicable.  Each Lender may attach schedules to its
Note and endorse thereon the date, amount and maturity of its Loan and payments
with respect thereto.

     

    Section
2.06 Termination or Reduction of
Commitments.  (a)  Any Commitments shall be
automatically and permanently terminated on the Maturity Date.

     

    (b) Any
unused Commitments shall be terminated upon the occurrence of an Event of
Default if and to the extent required pursuant to Section 9.02 (Action
Upon Event of Default) in accordance with
the terms thereof.

     

    (c)           The
Aggregate Commitment shall be automatically reduced to the extent and in the
amount of any prepayment of the Loans pursuant to Section 3.08
(Mandatory Prepayment).

     

    Section
2.07 Defaulting
Lenders.  Anything contained herein to the contrary
notwithstanding, in the event that any Lender, other than at the direction or
request of any regulatory agency or authority or due to a temporary disruption
in the financial markets generally, defaults (a “Defaulting Lender”)
in its obligation to fund (a “Funding Default”) any
Loan (in each case, a “Defaulted Loan”),
then (i) during any Default Period with respect to such Defaulting Lender, such
Defaulting Lender shall be a Non-Voting Lender; and (ii) to the extent permitted
by applicable law, during any Default Period and until such time as the Default
Excess with respect to such Defaulting Lender shall have been reduced to zero,
(A) any voluntary prepayment of the Loans shall be applied to the outstanding
Loans of Lenders other than Defaulting Lenders prior to the outstanding Loans of
the Defaulting Lenders, (B) any mandatory prepayment of the Loans shall be
applied to the outstanding Loans of Lenders other than Defaulting Lenders prior
to the outstanding Loans of the Defaulting Lenders, (C) such Defaulting Lender
shall not be entitled to receive any Commitment Fee pursuant to Section 3.11 (Fees) with respect to
such Defaulting Lender’s Commitment; and (D) availability of Loans pursuant to
Section 2.01(a)
(Loans) shall, as at any
date of determination, be calculated as if such Defaulting Lender had funded all
Defaulted Loans of such Defaulting Lender. No Commitment of any Lender shall be
increased or otherwise affected, and, except as otherwise expressly provided in
this Section
2.07, performance by the Borrowers of their obligations hereunder and the
other Financing Documents shall not be excused or otherwise modified as a result
of any Funding Default or the operation of this Section 2.07. The
rights and remedies against a Defaulting Lender under this Section 2.07 are in
addition to other rights and remedies which the Borrowers may have against such
Defaulting Lender with respect to any Funding Default and which the
Administrative Agent or any Lender may have against such Defaulting Lender with
respect to any Funding Default.

    

    
      
        
           

        

        
          -6-

          
            

          

        

        
           

        

      

    

    

    Section
2.08 Security
Interest.  (a)  In order to supplement the Orders
without in any way diminishing or limiting the effect of the Orders or the
security interest, pledge, lien, mortgage or deed of trust granted thereunder,
to secure the timely payment in full when due (whether at stated maturity, upon
acceleration or optional or mandatory prepayment) in cash and performance in
full of all the Obligations, each Debtor does hereby collaterally assign, grant
and pledge to the Collateral Agent, for the benefit of the Collateral Agent,
each other Agent and each Lender, all the estate, right, title and interest of
such Debtor in, to and under, whether now owned or hereafter existing or
acquired, and howsoever its interest therein may arise or appear, the
Collateral.

     

    (b) The Liens
and security interests granted hereunder shall continue to be valid and
perfected and with the specified priority without the necessity that financing
statements be filed or that any other action be taken or document or instrument
registered or delivered, under applicable non-bankruptcy law.

     

    (c) Notwithstanding
any failure on the part of any Debtor or the Collateral Agent to perfect,
maintain, protect or enforce the Liens and security interests in the Collateral
granted hereunder, the Orders shall automatically, and without further action by
any Person, perfect such Liens and security interests against the
Collateral.

     

    Section
2.09 Super-Priority Nature of
Obligations.

     

    (a) All
Obligations shall constitute administrative expenses of the Borrowers in the
Chapter 11 Cases, with administrative priority and senior secured status
under Sections 364(c) and 364(d) of the Bankruptcy Code.  Subject
to the Carve-Out, such administrative claim shall have priority over all other
costs and expenses of the kinds specified in, or ordered pursuant to,
Sections 105, 326, 328, 330, 331, 503(b), 506(c), 507(a), 507(b), 546(c),
726, 1113, 1114 or any other provision of the Bankruptcy Code or otherwise, and
shall at all times be senior to the rights of the Borrowers, the estates of
the Borrowers, and any successor trustee or estate representative in the
Chapter 11 Cases or any subsequent proceeding or case under the Bankruptcy
Code.

     

    (b) All
Obligations shall at all times, subject to the Carve-Out, (i) subject to Section
364(d)(1) of the Bankruptcy Code, be secured by fully perfected first priority,
valid, binding, enforceable, non-avoidable and automatically perfected priming
security interest in and Liens upon (the “Priming Liens”) the
Collateral (as such term is defined in the Pre-Petition Credit Agreement) and
(ii) pursuant to Section 364(c)(2) of the Bankruptcy Code, be secured by fully
perfected first priority, valid, binding, enforceable, non-avoidable and
automatically perfected security interest in and liens upon the Collateral
(other than Collateral referenced in clause (i)) whether created, existing or
acquired prior or subsequent to the commencement of the Cases (the “First Liens” and,
together with the Priming Liens, the “DIP
Liens”).  The DIP Liens, and the priorities accorded to the
Obligations, shall have the priority and senior secured status afforded by
Sections 364(c) and 364(d)(l) of the Bankruptcy Code, all as more fully set
forth in the Interim Order and Final Order.

     

    

    
      
        
           

        

        
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    (c) The DIP
Liens under Sections 364(c)(2),(c)(3) and (d) of the Bankruptcy Code, and
the administrative claims under Section 364(c)(1) of the Bankruptcy Code,
in each case afforded the Obligations, shall also have priority over any claims
arising under Section 506(c) of the Bankruptcy Code subject and subordinate
only to the Carve-Out.

     

    Section
2.10 Payment of
Obligations.

     

    On the
Maturity Date, the Senior Secured Parties shall be entitled to immediate payment
of all outstanding Obligations without further application to or order of the
Bankruptcy Court.

     

    Section
2.11 Liens.

     

    (a) The
Debtors covenant and agree that the DIP Facility and all Obligations will at all
times be secured by the DIP Liens as set forth in the Interim Order and the
Final Order, as applicable.

     

    (b) The DIP
Liens on Collateral of the Debtors will not be subject to challenge and will
attach and become valid and perfected upon entry of the Interim Order without
any requirement of any further action by the Collateral Agent.  Other
than the DIP Liens, the Collateral will be free and clear of all Liens, claims
and encumbrances other than Permitted Liens.

     

    (c) The
Orders are sufficient and conclusive evidence of the creation, validity,
perfection and priority of the DIP Liens without the necessity of filing,
recording or delivering any financing statement or other instrument or document
that may otherwise be required under the law of any jurisdiction or the taking
of any action (including entering into any deposit control agreement or
delivering original certificates representing pledged Equity Interests that
constitute “Certificated Securities” under the UCC) to validate or perfect the
DIP Liens or to entitle the Collateral Agent to the priorities granted by or
pursuant to this Agreement, any Financing Document or any of the
Orders.  Notwithstanding the foregoing, the Collateral Agent may take
any and all actions without further order of the Bankruptcy Court, and shall be
granted relief from the automatic stay, to evidence, confirm, validate or
perfect or to insure the contemplated priority of, the DIP Liens granted to the
Collateral Agent for the benefit of the Senior Secured Parties and each Debtor
shall execute and deliver to the Collateral Agent all such financing statements,
mortgages, notices or other documents and instruments as the Collateral Agent
may request in connection therewith.

     

    Section
2.12 No Discharge; Survival of
Claims.

     

    The
Borrowers agree that (i) the Obligations hereunder shall not be discharged
by the entry of an order confirming a plan of reorganization in any
Chapter 11 Case (and the Borrowers, pursuant to Section 1141(d)(4) of
the Bankruptcy Code, hereby waive any such discharge) and (ii) the
super-priority administrative claim granted pursuant to the Interim Order and
Final Order and described in Section 2.09
(Super-Priority
Nature of Obligations) and the Liens granted to the Collateral Agent
pursuant to the Interim Order and Final Order and described in Section 2.09
(Super-Priority
Nature of Obligations) shall not be affected in any manner by the entry
of an order confirming a plan of reorganization in any Chapter 11
Case.

     

    

    
      
        
           

        

        
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    Section
2.13 Release.

     

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

     

    Section
2.14 Waiver of Priming
Rights.

     

    Upon the
Closing Date, and on behalf of themselves and their estates, and for so long as
any Obligations shall be outstanding, the Borrowers hereby irrevocably waive any
right, pursuant to Sections 364(c) and 364(d) of the Bankruptcy Code or
otherwise, to grant any Lien of equal or greater priority than the Liens
securing the Obligations, or to approve a claim of equal or greater priority
than the Obligations, other than with respect to adequate protection Liens
approved by order of the Bankruptcy Court in the Interim Order or the Final
Order.

     

    Section
2.15 Priority of
Claim.

     

    The
Debtors covenant and agree that the Obligations at all times will
constitute DIP Administrative Claims, subject only to the
Carve-Out.

     

    

    
      
        
           

        

        
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    ARTICLE
III

     

    REPAYMENTS,
PREPAYMENTS, INTEREST AND FEES

     

    Section
3.01 Repayment of
Loans.  The Borrowers unconditionally and irrevocably promise
to pay in full to the Administrative Agent, for the ratable account of each
Lender, the aggregate outstanding principal amount of the Loans on the Maturity
Date; provided,
that upon the effectiveness of an Approved Plan the aggregate outstanding
principal amount of the Roll Up Loans shall be payable in accordance with the
terms of such Approved Plan.

     

    Section
3.02 Interest Payment
Dates.  (a)  Interest accrued on each Revolving Loan
shall be payable, without duplication:

     

    
      	
              (i)  

            	
              on
      the Maturity Date;

            

    

     

    
      	
              (ii)  

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

            

    

     

    
      	
              (iii)  

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

            

    

     

    
      	
              (iv)  

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

            

    

     

    (b) Interest
accrued on each Roll Up Loan shall be payable on the Maturity Date; provided,
however, that upon the effectiveness of an Approved Plan the interest accrued on
each Roll Up Loan shall be payable in accordance with the terms of such Approved
Plan.

     

    (c) Interest
accrued on the Loans or other monetary Obligations after the date such amount is
due and payable (whether on the Maturity Date for such Loan, any Monthly Payment
Date, any Interest Payment Date, upon acceleration or otherwise) shall be
payable upon demand.

     

    (d) Interest
hereunder shall be due and payable in accordance with the terms hereof, before
and after judgment, regardless of whether an insolvency proceeding exists in
respect of any Borrower, and to the fullest extent permitted by law, the Lenders
shall be entitled to receive post-petition interest during the pendency of an
insolvency proceeding.

     

    Section
3.03 Interest
Rates.  (a)  Pursuant to each properly delivered
Funding Notice, (i) the Eurodollar Loans shall accrue interest at a rate per annum during each
Interest Period applicable thereto equal to the sum of the Eurodollar Rate for
such Interest Period plus the Applicable Margin, (ii) each Base Rate Loan shall
accrue interest at a rate per
annum during each Monthly Period equal to the sum of the Base Rate for
such Monthly Period plus the Applicable Margin and (iii) the Roll Up Loans shall
accrue interest in accordance with the terms of the Pre-Petition Credit
Agreement applicable to the Pre-Petition Term Loans that are Base Rate Loans (as
such term is defined therein) without giving effect to any Event of Default (as
such term is defined therein).

     

    

    
      
        
           

        

        
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    (b) On or
before 12:00 noon, New York City time, at least four (4) Business Days prior to
the end of each Interest Period for each Eurodollar Loan, the Borrowers shall,
and at least four (4) Business Days prior to the end of any Monthly Period for
any Base Rate Loans, the Borrowers may, deliver to the Administrative Agent an
Interest Period Notice setting forth the Borrowers’ election (i) to continue any
such Eurodollar Loan as (or convert any such Base Rate Loan to) a Eurodollar
Loan or (ii) to convert any such Eurodollar Loan to a Base Rate Loan at the end
of the then-current Interest Period; provided, that if an Event of
Default has occurred and is continuing, all Eurodollar Loans shall automatically
convert into Base Rate Loans at the end of the then-current Interest
Periods.  Upon the waiver or cure of such Event of Default, the
Borrowers shall have the option to continue such Loans as Base Rate Loans and/or
to convert such Loans to Eurodollar Loans (by delivery of an Interest Period
Notice), subject to the notice periods set forth
above.  Notwithstanding anything to the contrary, any portion of the
Loans maturing in less than one month may not be continued as, or converted to,
Eurodollar Loans and will automatically convert to Base Rate Loans at the end of
the then-current Interest Period.

     

    (c) If the
Borrowers fail to deliver an Interest Period Notice in accordance with Section 3.03(b) with
respect to any Eurodollar Loan, such Eurodollar Loan shall automatically
continue as a Eurodollar Loan.

     

    (d) All
Eurodollar Loans shall bear interest from and including the first day of the
applicable Interest Period to (and excluding) the last day of such Interest
Period at the interest rate determined as applicable to such Eurodollar
Loan.

     

    (e) Notwithstanding
anything to the contrary, the Borrowers shall have, in the aggregate, no more
than  eight (8) separate Eurodollar Loans outstanding at any one
time.  For purposes of the foregoing, all Eurodollar Loans commencing
on the same day of a month (notwithstanding that such Eurodollar Loans commence
in different months) shall be considered a single Eurodollar Loan.

     

    (f) All Base
Rate Loans shall bear interest from and including the first day of each Monthly
Period (or the day on which Eurodollar Loans are converted to Base Rate Loans as
required under Section
3.03(b) or under Article IV (Eurodollar
Rate and Tax Provisions)) to (and including)
the next succeeding Monthly Payment Date at the interest rate determined as
applicable to such Base Rate Loan.

     

    Section
3.04 Default Interest
Rate.  (a) If all or a portion of (i) the principal amount of
any Loan is not paid when due (whether on the Maturity Date, by acceleration or
otherwise), such overdue amount shall bear interest at a rate per annum equal to the rate
that would otherwise be applicable thereto plus two percent (2%)
or (ii) any Obligation (other than principal on the Loans) is not paid when due
(whether on the Maturity Date, by acceleration or otherwise), such overdue
amount shall bear interest at a rate per annum equal to the rate
then applicable to Base Rate Loans plus two percent (2%)
(the applicable rate in effect plus such two percent (2%) per annum, the “Default Rate”), in
each case, with respect to clauses (i) and (ii) above, from the date of such
non-payment until such amount is paid in full (after as well as before
judgment).

     

    

    
      
        
           

        

        
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    (b) Upon
the occurrence and during the continuance of any Event of Default (other than an
Event of Default specified in Section 3.04(a)), the
Borrowers shall pay interest (after as well as before judgment) on the Loans at
a rate per annum equal to the rate then applicable to Base Rate Loans plus two percent (2%)
until such Event of Default is cured or waived.

     

    Section
3.05 Interest Rate
Determination.  The Administrative Agent shall determine the
interest rate applicable to the Loans in accordance with the terms of this
Agreement, and shall give prompt notice to the Borrowers and the Lenders of such
determination, and its determination thereof shall be conclusive in the absence
of manifest error.

     

    Section
3.06 Computation of Interest and
Fees.  (a)  All computations of interest for Base
Rate Loans when the Base Rate is determined by WestLB’s “prime rate” shall be
made on the basis of a year of 365 or 366 days, as the case may be, and actual
days elapsed.  All computations of interest for Eurodollar Loans and
for Base Rate Loans when the Base Rate is determined by the Federal Funds
Effective Rate shall be made on the basis of a 360-day year and actual days
elapsed.

     

    (b) Interest
shall accrue on each Loan for the day on which the Loan is made, and shall not
accrue on a Loan, or any portion thereof, for the day on which the Loan or such
portion is paid; provided, that any Loan that
is repaid on the same day on which it is made shall bear interest for one (1)
day.

     

    (c) Each
determination by the Administrative Agent of an interest rate or fee hereunder
shall be conclusive and binding for all purposes, absent manifest
error.

     

    Section
3.07 Optional
Prepayment.  (a)  The Borrowers shall have the right
at any time, and from time to time, to prepay the Revolving Loans, in whole or
in part, upon not fewer than three (3) Business Days’ prior written notice to
the Administrative Agent.

     

    (b) Each
notice of prepayment given by the Borrowers under this Section 3.07 shall
specify the prepayment date and the portion of the principal amount of the
Revolving Loans to be prepaid.  All prepayments under this Section 3.07 shall be
made by the Borrowers to the Administrative Agent for the account of the
applicable Revolving Lenders and shall be accompanied by accrued interest on the
principal amount being prepaid to but excluding the date of payment and by any
additional amounts required to be paid under Section 4.05 (Funding
Losses).

     

    (c) Amounts
of principal prepaid under this Section 3.07 shall be
allocated by the Administrative Agent first, to the payment of all
costs, fees, expenses and indemnities then due and payable to the Senior Secured
Parties, including fees and expenses of attorneys and Consultants reimbursable
hereunder; second, to the
payment of all accrued and unpaid interest then due and payable on the Revolving
Loans pro rata among
the Lenders (other than any Defaulting Lender) based on their respective
outstanding principal amounts on the date of such prepayment; third, to the payment
of principal of Revolving Loans pro rata among the Lenders
(other than any Defaulting Lender) based on their respective outstanding
principal amounts on the date of such prepayment but without a reduction in the
Commitments; fourth, to the
payment of all accrued and unpaid interest then due and payable on the Revolving
Loans pro rata among the Defaulting Lenders based on their respective
outstanding principal amounts on the date of such prepayment; and fifth, to the payment
of principal of Revolving Loans pro rata among the Defaulting Lenders based on
their respective outstanding principal amounts on the date of such
prepayment.

     

    

    
      
        
           

        

        
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    (d) Subject
to Section 3.7 (c) first, amounts
prepaid pursuant to this Section
3.07  may be reborrowed.

     

    Section
3.08 Mandatory
Prepayment.  (a)  The Borrowers shall be required to
prepay the Loans:

     

    
      	
              (i)  

            	
              within
      three (3) Business Days of  receipt by any Borrower of any
      Project Document Termination Payments, an amount equal to such Project
      Document Termination Payments;

            

    

     

    
      	
              (ii)  

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

            

    

     

    
      	
              (iii)  

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

            

    

     

    
      	
              (iv)  

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

            

    

     

    
      	
              (v)  

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

            

    

     

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

     

    

    
      
        
           

        

        
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    (c) Amounts
of principal prepaid under this Section
3.08  shall be allocated by the Administrative Agent first, to the payment of all
costs, fees, expenses and indemnities then due and payable to the Senior Secured
Parties, including fees and expenses of attorneys and Consultants reimbursable
hereunder; second, to the
payment of all accrued and unpaid interest then due and payable on the Revolving
Loans pro rata among
the Lenders (other than any Defaulting Lender) based on their respective
outstanding principal amounts on the date of such prepayment; third, to the payment
of principal of Revolving Loans pro rata among the Lenders
(other than any Defaulting Lender) based on their respective outstanding
principal amounts on the date of such prepayment and a corresponding reduction
in the Revolving Loan Commitments; fourth, to the
payment of all accrued and unpaid interest then due and payable on the Revolving
Loans pro rata among
the Defaulting Lenders based on their respective outstanding principal amounts
on the date of such prepayment; fifth, to the payment
of principal of Revolving Loans pro rata among the Defaulting
Lenders based on their respective outstanding principal amounts on the date of
such prepayment; sixth, to the payment of all
accrued and unpaid interest then due and payable on the Roll Up Loans pro rata among the Lenders
(other than any Defaulting Lender) based on their respective outstanding
principal amounts on the date of such prepayment; seventh, to the
payment of principal of the Roll Up Loans pro rata among the Lenders
(other than any Defaulting Lender) based on their respective outstanding
principal amounts on the date of such prepayment and a corresponding reduction
in the Roll Up Loan Commitments; eighth, to the payment of all
accrued and unpaid interest then due and payable on the Roll Up Loans pro rata among the Defaulting
Lenders based on their respective outstanding principal amounts on the date of
such prepayment; and ninth, to the payment
of principal of the Roll Up Loans pro rata among the Defaulting
Lenders based on their respective outstanding principal amounts on the date of
such prepayment.

     

    (d) Amounts
prepaid pursuant to this Section
3.08  may not be reborrowed.

     

    Section
3.09 Time and Place of
Payments.  (a)  The Borrowers shall make each payment
(including any payment of principal of or interest on any Loan or any Fees or
other Obligations) hereunder and under any other Financing Document without
setoff, deduction or counterclaim not later than 12:00 noon New York City time
on the date when due in Dollars in immediately available funds to the
Administrative Agent at the following account:  JPMorgan Chase Bank -
NY, Acct. #920-1-060663, for the Account of WestLB AG-NY Branch, ABA
#021-000-021, Ref: Pacific Ethanol DIP Loan, Attention: Andrea Bailey, or at
such other office or account as may from time to time be specified by the
Administrative Agent to the Borrowers.  Funds received after 12:00
noon New York City time shall be deemed to have been received by the
Administrative Agent on the next succeeding Business Day.

     

    (b) The
Administrative Agent shall promptly remit in immediately available funds to each
Senior Secured Party its share, if any, of any payments received by the
Administrative Agent for the account of such Senior Secured Party.

     

    (c) Whenever
any payment (including any payment of principal of or interest on any Loan or
any Fees or other Obligations) hereunder or under any other Financing Document
shall become due, or otherwise would occur, on a day that is not a Business Day,
such payment shall (except as otherwise required by the proviso to the
definition of “Interest Period” with respect to Eurodollar Loans) be made on the
immediately succeeding Business Day, and such increase of time shall in such
case be included in the computation of interest or Fees, if
applicable.

     

    

    
      
        
           

        

        
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    Section
3.10 Fundings and Payments
Generally.  (a)  Unless the Administrative Agent has
received notice from the Borrowers prior to the date on which any payment is due
to the Administrative Agent for the account of the Lenders hereunder that the
Borrowers will not make such payment, the Administrative Agent may assume that
the Borrowers have made such payment on such date in accordance with this
Agreement and may, in reliance upon such assumption, distribute to the Lenders
the amount due.  If the Borrowers have not in fact made such payment,
then each of the Lenders severally agrees to repay to the Administrative Agent
forthwith on demand the amount so distributed to such Lender in immediately
available funds with interest thereon, for each day from and including the date
such amount is distributed to it to but excluding the date of payment to the
Administrative Agent, at the greater of (i) the Federal Funds Effective Rate and
(ii) a rate determined by the Administrative Agent in accordance with banking
industry rules on interbank compensation.  A notice of the
Administrative Agent to any Lender with respect to any amount owing under this
Section 3.10(a)
shall be conclusive, absent manifest error.

     

    (b) Nothing
herein shall be deemed to obligate any Lender to obtain funds for any Loan in
any particular place or manner or to constitute a representation by any Lender
that it has obtained or will obtain funds for any Loan in any particular place
or manner.

     

    Section
3.11 Fees.  (a)  On
the date of the first Funding, the Borrowers shall pay to the Administrative
Agent, for the account of the Lenders, a facility fee equal to two percent
(2.0%) of the Aggregate Revolving Loan Commitment.

     

    (b) On the
date of the first Funding, the Borrowers shall pay to the Administrative Agent,
for the account of the Administrative Agent, a structuring fee equal to one
percent (1.0%) of the Aggregate Revolving Loan Commitment.

     

    (c) From and
including the date hereof until the Maturity Date, the Borrowers agree to pay to
the Administrative Agent, for the account of the Lenders, on each Monthly
Payment Date, a commitment fee (the “Commitment Fee”)
equal to two percent (2.0%) per annum on the average
daily amount by which the Aggregate Revolving Loan Commitment exceeds the
outstanding amount of the Revolving Loans during the immediately preceding
month.  All Commitment Fees shall be computed on the basis of the
actual number of days elapsed in a year of 365 or 366 days, as pro-rated for any
partial month, as applicable.

     

    (d) All Fees
shall be paid on the dates due, in immediately available funds.  Once
paid, none of the Fees shall be refundable under any circumstances.

     

    Section
3.12 Pro rata
Treatment.  (a)  Except as otherwise expressly
provided herein (including Section 4.01 (Eurodollar
Rate Lending Unlawful) and Section 2.07 (Defaulting
Lenders)), each Funding of
Revolving Loans, making of Roll Up Loans and reduction of commitments of any
type shall be allocated by the Administrative Agent pro rata among the Lenders in
accordance with their respective applicable Commitment Percentages.

     

    

    
      
        
           

        

        
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    (b) Except as
required under Section
2.07 (Defaulting
Lenders),
Section 3.07 (Optional
Prepayment), Section 3.08
(Mandatory
Prepayment) or Article IV (Eurodollar
Rate and Tax Provisions), each payment or
prepayment of principal of the Loans shall be allocated by the Administrative
Agent pro rata among
the applicable Lenders in accordance with the respective principal amounts of
their outstanding Loans of the type being repaid, each payment of interest on
the Loans shall be allocated by the Administrative Agent pro rata among the applicable
Lenders in accordance with the respective interest amounts outstanding on their
outstanding Loans of the type in respect of which interest is being paid, and
each payment of fees on the Commitments shall be allocated by the Administrative
Agent pro rata among
the applicable Lenders in accordance with their respective Commitments of the
type to which such fees relate.

     

    (c) Each
Lender agrees that in computing such Lender’s portion of any Funding to be made
hereunder, the Administrative Agent may, in its discretion, round each Lender’s
percentage of such Funding to the next higher or lower whole Dollar
amount.

     

    Section
3.13 Sharing of
Payments.  (a)  If any Lender shall obtain any
payment or other recovery (whether voluntary, involuntary, by application of
setoff or otherwise) on account of any Loan (other than pursuant to the terms of
Article IV
(Eurodollar
Rate and Tax Provisions)) in excess of its
pro rata share of
payments then or therewith obtained by all Lenders holding Loans of such type,
such Lender shall purchase from the other Lenders such participations in Loans
made by them as shall be necessary to cause such purchasing Lender to share the
excess payment or other recovery ratably with each of them; provided, however, that if
all or any portion of the excess payment or other recovery is thereafter
recovered from such purchasing Lender, the purchase shall be rescinded and each
Lender that has sold a participation to the purchasing Lender shall repay to the
purchasing Lender the purchase price to the ratable extent of such recovery
together with an amount equal to such selling Lender’s ratable share (according
to the proportion of (x) the amount of such selling Lender’s required repayment
to the purchasing Lender to (y) the total amount so recovered from the
purchasing Lender) of any interest or other amount paid or payable by the
purchasing Lender in respect of the total amount so recovered.  Each
Borrower agrees that any Lender so purchasing a participation from another
Lender pursuant to this Section 3.13 may, to
the fullest extent permitted by law, exercise all its rights of payment
(including pursuant to Section 11.15 (Right of
Setoff)) with respect to such participation as fully as if such Lender
were the direct creditor of the Borrowers in the amount of such
participation.

     

    (b) If under
any applicable bankruptcy, insolvency or other similar law, any Lender receives
a secured claim in lieu of a setoff to which this Section 3.13 applies,
such Lender shall, to the extent practicable, exercise its rights in respect of
such secured claim in a manner consistent with the rights of the Lenders
entitled under this Section 3.13 to share
in the benefits of any recovery on such secured claim.

     

    

    
      
        
           

        

        
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    ARTICLE
IV

     

    EURODOLLAR
RATE AND TAX PROVISIONS

     

    Section
4.01 Eurodollar Rate Lending
Unlawful.  (a)  If any Lender reasonably determines
(which determination shall, upon notice thereof to the Borrowers and the
Administrative Agent, be conclusive and binding on the Borrowers absent manifest
error) that the introduction of or any change in or in the interpretation of any
Law after the date hereof makes it unlawful, or any central bank or other
Governmental Authority asserts after the date hereof that it is unlawful, for
such Lender to make, maintain or fund any Loan as a Eurodollar Loan, the
obligations of such Lender to make, maintain or fund any Loan as a Eurodollar
Loan shall, upon such determination, forthwith be suspended until such Lender
shall notify the Administrative Agent that the circumstances causing such
suspension no longer exist, and all Eurodollar Loans of such Lender shall
automatically convert into Base Rate Loans at the end of the then-current
Interest Periods with respect thereto or sooner, if required by such Law or
assertion.  Upon any such conversion the Borrowers shall pay any
accrued interest on the amount so converted and, if such conversion occurs on a
day other than the last day of the then-current Interest Period for such
affected Eurodollar Loans, such Lender shall be entitled to make a request for,
and the Borrowers shall pay, compensation for breakage costs under Section 4.05 (Funding
Losses).

     

    (b) If such
Lender notifies the Borrowers that the circumstances giving rise to the
suspension described in Section 4.01(a) no
longer apply, the Borrowers may elect (by delivering an Interest Period Notice)
to convert the principal amount of any such Base Rate Loan to a Eurodollar Loans
in accordance with this Agreement.

     

    Section
4.02 Inability to Determine
Eurodollar Rates.  (a)  In the event, and on each
occasion, that on or before the day that is three (3) Business Days prior to the
commencement of any Interest Period for any Eurodollar Loan, the Administrative
Agent shall have determined in good faith that (i) Dollar deposits in the amount
of such Loan and with an Interest Period similar to such Interest Period are not
generally available in the London interbank market, or (ii) the rate at which
such Dollar deposits are being offered will not adequately and fairly reflect
the cost to any Lender of making, maintaining or funding the principal amount of
such Loan during such Interest Period, or (iii) adequate and reasonable means do
not exist for ascertaining LIBOR, the Administrative Agent shall forthwith
notify the Borrowers and the Lenders of such determination, whereupon each such
Eurodollar Loan will automatically, on the last day of the then-existing
Interest Period for such Eurodollar Loan, convert into a Base Rate
Loan.  In the event of any such determination pursuant to Section 4.02(a)(i) or
(iii), any
Funding Notice delivered by the Borrowers shall be deemed to be a request for a
Base Rate Loan until the Administrative Agent determines that the circumstances
giving rise to such notice no longer exist.  In the event of any
determination pursuant to Section 4.02(a)(ii),
each affected Lender shall, and is hereby authorized by the Borrowers to, fund
its portion of the Loans as a Base Rate Loan.  Each determination by
the Administrative Agent hereunder shall be conclusive absent manifest
error.

     

    

    
      
        
           

        

        
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    (b) Upon the
Administrative Agent’s determination that the condition that was the subject of
a notice under Section
4.02(a) has ceased, the Administrative Agent shall forthwith notify the
Borrower and the Lenders of such determination, whereupon the Borrowers may
elect (by delivering an Interest Period Notice) to convert any such Base Rate
Loan to a Eurodollar Loan on the last day of the then-current Monthly Period in
accordance with this Agreement.

     

    Section
4.03 Increased Eurodollar Loan
Costs.  If after the date hereof, the adoption of any
applicable Law or any change therein, or any change in the interpretation or
administration thereof by any Governmental Authority charged with the
interpretation or administration thereof, or compliance by any Lender (or its
Eurodollar Office) with any request or directive (whether or not having the
force of law) of any Governmental Authority would increase the cost (other than
with respect to Taxes, which are addressed in Section 4.07 (Taxes)) to such Lender of,
or result in any reduction in the amount of any sum receivable by such Lender
(whether of principal, interest or any other amount) in respect of, making,
maintaining or funding (or of its obligation to make, maintain or fund) the
Loans as Eurodollar Loans, then the Borrowers agree to pay to the Administrative
Agent for the account of such Lender the amount of any such increase or
reduction.  Such Lender shall promptly notify the Administrative Agent
and the Borrowers in writing of the occurrence of any such event, such notice to
state in reasonable detail the reasons (including the basis for determination)
therefor and the additional amount required to compensate fully such Lender for
such increased cost or reduced amount.  Such additional amounts shall
be payable by the Borrowers directly to such Lender within thirty (30) days of
delivery of such notice, and such notice shall be binding on the Borrowers
absent manifest error.

     

    Section
4.04 Obligation to
Mitigate.  (a)  Each Lender agrees after it becomes
aware of the occurrence of an event that would entitle it to give notice
pursuant to Section
4.01 (Eurodollar
Rate Lending Unlawful), 4.03 (Increased
Eurodollar Loan Costs), or 4.06 (Increased
Capital Costs) or to receive
additional amounts pursuant to Section 4.07 (Taxes), such Lender shall
use reasonable efforts to make, fund or maintain its affected Loan through
another lending office if as a result thereof the increased costs would be
avoided or materially reduced or the illegality would thereby cease to exist and
if, in the opinion of such Lender, the making, funding or maintaining of such
Loan through such other lending office would not be disadvantageous to such
Lender, contrary to such Lender’s normal banking practices or violate any
applicable Law.

     

    (b) No change
by a Lender in its Domestic Office or Eurodollar Office made for such Lender’s
convenience shall result in any increased cost to the Borrowers.

     

    (c) If any
Lender demands compensation pursuant to Section 4.03 (Increased
Eurodollar Loan Costs) or 4.06 (Increased
Capital Costs) with respect to any
Eurodollar Loan, the Borrowers may, at any time upon at least three (3) Business
Day’s prior notice to such Lender through the Administrative Agent, elect to
convert such Loan into a Base Rate Loan.  Thereafter, unless and until
such Lender notifies the Borrowers that the circumstances giving rise to such
notice no longer apply, all such Eurodollar Loans by such Lender shall bear
interest as Base Rate Loans.  If such Lender notifies the Borrowers
that the circumstances giving rise to such notice no longer apply, the Borrowers
may elect (by delivering an Interest Period Notice) to convert the principal
amount of each such Base Rate Loan to a Eurodollar Loans in accordance with this
Agreement.

     

    

    
      
        
           

        

        
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    Section
4.05 Funding
Losses.  In the event that any Lender incurs any loss or
expense (including any loss or expense incurred by reason of the liquidation or
redeployment of deposits or other funds acquired by such Lender to make,
continue or maintain any portion of the principal amount of any Loan as a
Eurodollar Loan, and any customary administrative fees charged by such Lender in
connection with the foregoing, but excluding any lost profits) as a result of
(a) any conversion or repayment or prepayment of the principal amount of any
Loans on a date other than the scheduled last day of the Interest Period
applicable thereto, whether pursuant to Section 3.07 (Optional
Prepayment), 3.08 (Mandatory
Prepayment), 4.01(a) (Eurodollar
Rate Lending Unlawful) or otherwise or (b)
the Borrowers failing to make a Funding in accordance with any Funding Notice;
then, upon the written notice (including the basis for determination) of such
Lender to the Borrowers (with a copy to the Administrative Agent), the Borrowers
shall, within thirty (30) days of receipt thereof, pay to the Administrative
Agent for the account of such Lender such amount as will (in the reasonable
determination of such Lender) reimburse such Lender for such loss or
expense.  Such written notice shall be binding on the Borrowers absent
manifest error.

     

    Section
4.06 Increased Capital
Costs.  If after the date hereof any change in, or the
introduction, adoption, effectiveness, interpretation, reinterpretation or
phase-in of, any applicable Law or guideline, or request (whether or not having
the force of law) of any Governmental Authority affects the amount of capital
required to be maintained by any Lender, and such Lender reasonably determines
that the rate of return on its capital as a consequence of its Loan is reduced
to a level below that which such Lender could have achieved but for the
occurrence of any such circumstance then, in any such case upon notice from time
to time by such Lender to the Borrowers, the Borrowers shall pay within thirty
(30) days after such demand directly to such Lender additional amounts
sufficient to compensate such Lender for such reduction in rate of
return.  A statement of such Lender as to any such additional amount
or amounts (including the basis for determination) shall be binding on the
Borrowers absent manifest error.

     

    Section
4.07 Taxes.

     

    (a) Payments Free of
Taxes.  Any and all payments by or on account of any
Obligations shall be made free and clear of, and without deduction for, any
Taxes, unless required by Law; provided that if any
Borrower shall be required to deduct any Indemnified Taxes from any such
payment, then (i) the sum payable shall be increased as necessary so that after
making all required deductions (including deductions applicable to additional
sums payable under this Section 4.07) the
Agent or Lender (as the case may be) receives an amount equal to the sum it
would have received had no such deductions been made, (ii) the Borrowers shall
make such deductions and (iii) the Borrowers shall pay the full amount deducted
to the relevant Governmental Authority in accordance with applicable
Law.

     

    (b) Payment of Other Taxes by
the Borrowers.  In addition, the Borrowers shall timely pay any
Indemnified Taxes arising from any payment made under any Financing Document or
from the execution, delivery or enforcement of, or otherwise with respect to,
any Financing Document and not collected by withholding at the source as
contemplated by Section 4.07(a)
to the relevant Governmental Authority in accordance with applicable
Law.

     

    

    
      
        
           

        

        
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    (c) Indemnification by the
Borrowers.  The Borrowers shall indemnify each Agent and each
Lender, within thirty (30) days after written demand therefor, for the full
amount of any Indemnified Taxes (including Indemnified Taxes imposed or asserted
on or attributable to amounts payable under this Section 4.07) paid by
such Agent or Lender, as the case may be, and any penalties, interest, additions
to tax and reasonable expenses arising therefrom or with respect thereto (other
than those resulting from the gross negligence or willful misconduct of such
Agent or Lender), whether or not such Indemnified Taxes were correctly or
legally imposed or asserted by the relevant Governmental Authority.  A
certificate as to the amount of such payment or liability (including the basis
of determination) delivered to the Borrowers by a Lender or Agent, as the case
may be, shall be conclusive absent manifest error.

     

    (d) Evidence of
Payments.  As soon as reasonably practicable after any payment
of Indemnified Taxes by any Borrower to a Governmental Authority, such Borrower
shall deliver to the Administrative Agent the original or a certified copy of a
receipt issued by such Governmental Authority evidencing such payment, a copy of
the return reporting such payment or other evidence of such payment reasonably
satisfactory to the Administrative Agent.

     

    (e) Foreign
Lenders.  Each Lender (including any Participant and any other
Person to which any Lender transfers its interests in this Agreement as provided
under Section 11.03
(Assignments)) that is not a
United States Person (a “Non-U.S. Lender”)
shall deliver to the Borrowers and the Administrative Agent two (2) copies of
U.S. Internal Revenue Service Form W-8ECI, Form W-8BEN or Form W 8IMY (with
supporting documentation), or any subsequent versions thereof or successors
thereto, properly completed and duly executed by such Non-U.S. Lender claiming
complete exemption from, or a reduced rate of, U.S. federal withholding tax on
all payments of interest by the Borrowers under the Financing Documents,
together with, in the case of a Non-U.S. Lender that is relying on an exemption
pursuant to Section 871(h) or 881(c) of the Code, a statement substantially in
the form of Exhibit
4.07 certifying that such Lender is not a bank described in Section
881(c)(3)(A) of the Code.  Such forms shall be delivered by each
Non-U.S. Lender on or before the date it becomes a party to this
Agreement.  In addition, each Non-U.S. Lender shall deliver such forms
promptly upon the obsolescence or invalidity of any form previously delivered by
such Non-U.S. Lender.  Each Non-U.S. Lender shall promptly notify the
Borrowers and the Administrative Agent at any time it determines that it is no
longer in a position to provide any previously delivered certificate to the
Borrowers (or any other form of certification adopted by U.S. taxing authorities
for such purpose).  The Borrowers shall not be obligated to pay any
additional amounts in respect of U.S. federal income taxes pursuant to this
Section 4.07
(or make an indemnification payment pursuant to this Section 4.07) to any
Lender (or any Participant or other Person to which any Lender transfers its
interests in this Agreement as provided under Section 11.03 (Assignments)) if the obligation
to pay such additional amounts (or such indemnification) would not have arisen
but for a failure by such Lender to comply with this Section
4.07(e).

     

    

    
      
        
           

        

        
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    ARTICLE
V

     

    REPRESENTATIONS
AND WARRANTIES

     

    In order
to induce each Agent, each Lender and each other party hereto (other than the
Borrowers) to enter into this Agreement and to induce each Lender to make the
Loans hereunder, each Borrower represents and warrants to each Agent and each
Lender as set forth in this Article V on the date
hereof, on the Closing Date, on the date of each Funding Notice and on each
Funding Date (in each case, except to the extent such representations and
warranties expressly relate to a future date or as otherwise provided in Article VI (Conditions
Precedent)).

     

    Section
5.01 Organization; Power and
Compliance with Law.  Each Borrower (a) is a duly formed,
validly existing and in good standing under the laws of its jurisdiction of
organization, (b) is duly qualified to do business as is now being conducted and
as is proposed to be conducted by such Borrower and is in good standing in each
jurisdiction where the nature of its business requires such qualification (other
than any such failure to be so qualified or in good standing that could not
reasonably be expected to have a Material Adverse Effect) and (c) subject to the
entry of the Orders, has all requisite entity power and authority required as of
the date this representation is made or deemed repeated to enter into and
perform its obligations under each Transaction Document to which it is a party
and to conduct its business as currently conducted by it.

     

    Section
5.02 Due Authorization;
Non-Contravention.  Subject to the entry of the Orders, the
execution, delivery and performance by each Borrower of each Transaction
Document to which it is a party are within such Borrower’s organizational
powers, have been duly authorized by all necessary action, and do
not:

     

    (a) contravene
such Borrower’s Organic Documents;

     

    (b) contravene
in any material respect any Law binding on or affecting such
Borrower;

     

    (c) contravene
any Contractual Obligation binding on or affecting such Borrower;

     

    (d) require
any consent or approval under such Borrower’s Organic Documents that has not
been obtained;

     

    (e) require
any consent or approval under any Contractual Obligations binding on or
affecting such Borrower other than any approvals or consents which have been
obtained; or

     

    (f) result
in, or require the creation or imposition of, any Lien on any of such Borrower’s
properties other than Permitted Liens.

     

    

    
      
        
           

        

        
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    Section
5.03 Governmental
Approvals.

     

    (a) Subject
to the entry of the Orders, all material Governmental Approvals that are
required to be obtained by any Borrower in connection with (i) the due
execution, delivery and performance by such Borrower of the Financing Documents
to which it is a party and (ii) the grant by the Debtors of the DIP Liens and
the validity, perfection and enforceability thereof have been obtained, are in
full force and effect, are properly in the name of the appropriate Person, and
are final and Non-Appealable.

     

    (b) All
Necessary Project Approvals are in full force and effect, are properly in the
name of the appropriate Person, and are final and Non-Appealable except as a
result of the Cold Shutdown of the Madera Plant, the Magic Valley Plant, the
Stockton Plant and, after the Boardman CS Date, the Boardman
Plant.  There is no action, suit, investigation or proceeding pending
or to the knowledge of each Borrower, threatened that could reasonably be
expected to result in the modification, rescission, termination or suspension of
any Necessary Project Approval that could reasonably be expected to have a
Material Adverse Effect.

     

    (c) The
information set forth in each application (including any updates or supplements
thereto) submitted by or on behalf of any Borrower in connection with each
Necessary Project Approval was accurate and complete in all material respects at
the time of submission and continues to be accurate in all material respects and
complete in all respects to the extent required for the continued effectiveness
of such Necessary Project Approval.

     

    Section
5.04 Investment Company
Act.  No Borrower is, and after giving effect to the Loans and
the application of the proceeds of the Loans as described herein no Borrower
will be, an “investment company” or a company “controlled” by an “investment
company,” within the meaning of the Investment Company Act of 1940, as
amended.

     

    Section
5.05 Validity of Financing
Documents.  Each Financing Document to which any Borrower is a
party has been duly authorized, validly executed and delivered, and constitutes
the legal, valid and binding obligations of such Borrower enforceable in
accordance with its respective terms.

     

    Section
5.06 Financial
Information.  Each of the financial statements of Pacific
Ethanol delivered pursuant to Section 6.01(g)
(Conditions
to Closing – Financial Statements) and Sections 7.03(a) and (b)
(Reporting
Requirements) has been prepared
in accordance with GAAP, and fairly presents in all material respects the
consolidated financial condition of the Borrowers as at the dates thereof and
the results of their operations for the period then ended (subject, in the case
of unaudited financial statements, to changes resulting from audit and normal
year-end adjustments and the absence of footnotes).

     

    Section
5.07 Project
Compliance.  (a)  Except as set forth on Schedule 5.07, Each
Plant conforms in all material respects to and complies in material respects
with all federal, state and local zoning, environmental, land use and other
applicable Laws and the requirements of all Necessary Project
Approvals.  Each Plant is and will continue to be owned and maintained
in material compliance  with all applicable Laws and the requirements
of all Necessary Project Approvals.

     

    

    
      
        
           

        

        
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    (b) Each
Plant is and will continue to be owned and maintained in compliance in all
material respects with all of the Borrowers’ Contractual Obligations (including
the Project Documents applicable to such Plant, taking into account any cure or
grace periods thereunder) (except, (i) in the case of Contractual Obligations
other than Project Documents, to the extent such failure to comply could not
reasonably be expected to result in a Material Adverse Effect with respect to
such Plant or Borrower and (ii) the cessation of operations and Cold Shutdown of
the Madera Plant, the Magic Valley Plant, the Stockton Plant and, after the
Boardman CS Date, the Boardman Plant).

     

    Section
5.08 Litigation.  (a)   Except
as set forth on Schedule 5.08, no
action, suit, proceeding or investigation has been instituted and not stayed
pursuant to the Bankruptcy Code or threatened against any Borrower (including in
connection with any Necessary Project Approval) that, individually or in the
aggregate, has had or could reasonably be expected to have a Material Adverse
Effect on any Plant or any Borrower;

     

    (b) Except as
set forth on Schedule
5.08, no action, suit, proceeding or investigation has been instituted
and not stayed pursuant to the Bankruptcy Code or threatened against any Major
Project Party that is an Affiliate of a Borrower and that is party to any
Project Document with Pacific Holding or that relates to any Borrower or Plant
that, individually or in the aggregate, has had or could reasonably be expected
to have a Material Adverse Effect; and

     

    (c) to the
knowledge of each Borrower, no action, suit, proceeding or investigation has
been instituted and not stayed pursuant to the Bankruptcy Code or threatened
against any Major Project Party that is not an Affiliate of a Borrower and that
is party to any Project Document with Pacific Holding or that relates to any
Borrower or Plant that, individually or in the aggregate, has had or could
reasonably be expected to have a Material Adverse Effect.

     

    Section
5.09 Sole Purpose Nature;
Business.  None of the Borrowers has conducted nor is
conducting any business or activities other than businesses and activities
relating to the ownership, development, testing, financing, construction,
operation and maintenance of the Project as contemplated by the Transaction
Documents.

     

    Section
5.10 Contracts.

     

    (a) All
contracts, agreements, instruments, letters, understandings, or other
documentation to which any Borrower is a party or by which it or any of its
properties is bound as of the date hereof (other than the Financing Documents),
including the Project Documents (including all documents amending,
supplementing, interpreting or otherwise modifying or clarifying such agreements
and instruments) are listed in Schedule
5.10.

     

    (b) All
Necessary Project Contracts are in full force and effect except such Necessary
Projects Contracts the invalidity of which could not reasonably be expected to
have a Material Adverse Effect.

     

    (c) As of any
date (after the date hereof) on which this representation is made or deemed
repeated, there are no material contracts, agreements, instruments, or documents
between any Borrower and any other Person relating to any Borrower or the
Project other than (i) the Transaction Documents, (ii) the agreements listed in
Schedule 5.10,
and (iii) any other agreements permitted by this Agreement.

     

    

    
      
        
           

        

        
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    Section
5.11 Collateral.  (a)  The
Collateral includes all of the Equity Interests owned by and all of the tangible
and intangible assets of each Debtor (except as otherwise provided in this
Agreement).

     

    (b) The
respective Liens and security interests (i) granted to the Collateral Agent (for
the benefit of the Senior Secured Parties) pursuant to the Bankruptcy Code
constitute, as to personal property included in the Collateral, a valid
first-priority security interest in such personal property and (ii) as to the
Mortgaged Property, constitute a valid first-priority Lien of record in the
Mortgaged Property, in each case subject only to Permitted Liens.

     

    (c) The
security interest granted to the Collateral Agent (for the benefit of the Senior
Secured Parties) pursuant hereto will be perfected upon entry of the Interim
Order without any requirement of any further action by the Collateral
Agent.

     

    Section
5.12 Ownership of
Properties.  (a)  Madera has a good and valid fee
ownership interest in the Site for the Madera Plant.  Boardman has a
good and valid leasehold interest or valid fee ownership in the Site for the
Boardman Plant.  Burley has a good and valid fee ownership interest in
the Site for the Burley Plant.  Stockton has a good and valid
leasehold interest or valid fee ownership in the Site for the Stockton
Plant.

     

    (b) The
Borrowers have a good and valid ownership interest, leasehold interest, license
interest or other right of use in all their property and assets (tangible and
intangible) included in the Collateral except for any such rights the absence of
which in the aggregate would not be material.  Such ownership
interests, leasehold interest, license interest or other rights of
use  are and will be sufficient to permit operation of the Plants
substantially in accordance with the Project Documents applicable to each such
Plant.  None of said properties or assets are subject to any Liens or,
to the knowledge of each Borrower, any other claims of any Person, including any
easements, rights of way or similar agreements affecting the use or occupancy of
the Project, any Plant or any Site, other than Permitted Liens and, with respect
to claims, to the extent permitted by Section 5.08 (Litigation).

     

    (c) All
Equity Interests in each of Madera, Boardman, Stockton and Burley are owned by
Pacific Holding.

     

    (d) All
Equity Interests in Pacific Holding are owned by PEC.

     

    (e) The
properties and assets of each of the Borrowers are separately identifiable and
are not commingled with the properties and assets of any other Person and are
readily distinguishable from one another.

     

    (f) None of
Pacific Holding or any other Borrower has any leasehold interest in, and none of
the Borrowers is lessee of, any real property other than the Leased Premises or
other leasehold interests acquired by the Borrowers in accordance with the
Pre-Petition Credit Agreement.

     

    

    
      
        
           

        

        
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    Section
5.13 Taxes.  (a)  Each
Borrower has (i) filed all Tax Returns required by law to have been filed by it
and (ii) has paid all Taxes thereby shown to be owing, as and when the same are
due and payable, other than in the case of this Section 5.13(a)(ii),
(A) Taxes that are subject to a Contest or (B) the nonpayment of immaterial
Taxes in an aggregate amount not in excess of twenty-five thousand Dollars
($25,000) at any one time outstanding (taking into account any interest and
penalties that could accrue or be applicable to such past-due Taxes), and
provided that such Taxes are no more than forty-five (45) days past
due.

     

    (b) No
Borrower is or will be taxable as a corporation for federal, state or local tax
purposes.

     

    (c) No
Borrower is a party to any tax sharing agreement with any Person.

     

    Section
5.14 Patents, Trademarks,
Etc.  Pacific Holding and each other Borrower has obtained and
holds in full force and effect all material patents, trademarks, copyrights and
other such material rights or adequate licenses therein, free from unduly
burdensome restrictions, that are necessary for the ownership, operation and
maintenance of the Project.

     

    Section
5.15 ERISA
Plans.  None of the Borrowers nor any ERISA Affiliate has (or
within the five year period immediately preceding the date hereof had) any
liability in respect of any Plan or Multiemployer Plan.  None of the
Borrowers has any contingent liability with respect to any post-retirement
benefit under any “welfare plan” (as defined in Section 3(1) of ERISA), other
than liability for continuation coverage under Part 6 of Title I of
ERISA.

     

    Section
5.16 Property Rights, Utilities,
Supplies Etc.  (a)  All material property interests,
utility services, means of transportation, facilities and other materials
necessary for the use and operation of the Project (including, as necessary,
gas, roads, rail transport, electrical, water and sewage services and
facilities) are available to each Plant.

     

    (b) There are
no material materials, supplies or equipment necessary for operation or
maintenance of each Plant that are not available at the relevant Site on
commercially reasonable terms consistent with the DIP Budget.

     

    Section
5.17 No
Defaults.  (a)  No Event of Default has occurred and
is continuing.

     

    (b) None of
Pacific Holding or any other Borrower is in any breach of, or in any default
under, any of such Borrower’s Contractual Obligations (other than a breach
resulting from the Cases or the Cold Shutdown of the Madera Plant, the Magic
Valley Plant, the Stockton Plant and, after the Boardman CS Date, the Boardman
Plant) that has had or could reasonably be expected to have a Material Adverse
Effect with respect to such Borrower, in each case with respect to which
enforcement of remedies is not stayed by means of the Chapter 11
Cases.

     

    

    
      
        
           

        

        
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    Section
5.18 Environmental
Warranties.

     

    (a) (i)
Except as set forth on Schedule 5.18(a)(i),
each Borrower is in compliance in all material respects with all applicable
Environmental Laws, (ii) each Borrower has all Environmental Approvals required
to operate its business as presently conducted or as reasonably anticipated to
be conducted and is in compliance in all material respects with the terms and
conditions thereof, (iii) no Borrower nor any of its Environmental Affiliates
has received any written communication from a Governmental Authority that
alleges that any Borrower or any Environmental Affiliate is not in compliance in
all material respects with all Environmental Laws and Environmental Approvals,
and (iv) there are no circumstances that may prevent or interfere in the future
with any Borrower’s compliance in all material respects with all applicable
Environmental Laws and Environmental Approvals.

     

    (b) There is
no Environmental Claim pending, or to the knowledge of each Borrower,
threatened  against any Borrower.  No Environmental
Affiliate has taken any action or violated any Environmental Law that to the
knowledge of a Borrower could reasonably be expected to result in an
Environmental Claim.

     

    (c) There are
no present or past actions, activities, circumstances, conditions, events or
incidents, including the release, emission, discharge, presence or disposal of
any Material of Environmental Concern, that could reasonably be expected to form
the basis of any Environmental Claim against any Borrower or any Environmental
Affiliate.

     

    (d) Without
in any way limiting the generality of the foregoing, (i) there are no on-site or
off-site locations in which any Borrower or, to the knowledge of a Borrower, any
Environmental Affiliate has stored, disposed or arranged for the disposal of
Materials of Environmental Concern that could reasonably be expected to form the
basis of an Environmental Claim, (ii) no Borrower knows of any underground
storage tanks located or to be located on property owned or leased by any
Borrower except as identified on Schedule 5.18(d)(ii)
(as the same may be updated in writing by the Borrower Agent with the written
approval of the Administrative Agent), (iii) there is no asbestos or lead paint
contained in or forming part of any building, building component, structure or
office space owned or leased by any Borrower except in such form, condition and
quantity as could not reasonably be expected to result in an Environmental
Claim, and (iv) no polychlorinated biphenyls (PCBs) are or will be used or
stored at any property owned or leased by any Borrower, except in such form,
condition and quantity as could not reasonably be expected to result in an
Environmental Claim.

     

    (e) No
Borrower has received any letter or request for information under Section 104 of
the CERCLA, or comparable state laws, and to the knowledge of each Borrower,
none of the operations of each Borrower is the subject of any investigation by a
Governmental Authority evaluating whether any remedial action is needed to
respond to a release or threatened release of any Material of Environmental
Concern at any Plant or Site or at any other location, including any location to
which any Borrower has transported, or arranged for the transportation of, any
Material of Environmental Concern with respect to the Project.

     

    

    
      
        
           

        

        
          -26-

          
            

          

        

        
           

        

      

    

    

    Section
5.19 Regulations T, U and
X.  None of the Borrowers is engaged in the business of
extending credit for the purpose of purchasing or carrying margin stock, and no
proceeds of any Loan will be used for any purpose that violates, or would be
inconsistent with, F.R.S. Board Regulation T, U or X.  Terms for which
meanings are provided in F.R.S. Board Regulation T, U or X or any regulations
substituted therefore, as from time to time in effect, are used in this Section 5.22 with
such meanings.

     

    Section
5.20 Accuracy of
Information.  (a)  All factual information heretofore
or contemporaneously furnished by or on behalf of any Borrower in this
Agreement, in any other Transaction Document or otherwise in writing to any
Senior Secured Party, any Consultant, or counsel for purposes of or in
connection with this Agreement and the other Financing Documents or any
transaction contemplated hereby or thereby (other than projections, budgets and
other “forward-looking” information all of which has been prepared on a
reasonable basis and in good faith) was, as of the date furnished, when taken as
a whole (and after giving effect to any supplement of such information) (i) true
and accurate in every material respect and (ii) not incomplete by omitting to
state any material fact necessary to make such information not misleading in any
material respect.

     

    (b) The
assumptions constituting the basis on which the Borrowers prepared the DIP
Budget that is in effect on each date this representation is made or deemed
repeated and the numbers set forth therein were developed and consistently
utilized in good faith and are reasonable and represent each Borrower’s best
judgment as of the date prepared as to the matters contained therein, based on
all information known to the Borrowers.

     

    (c) The
Borrowers reasonably believe that the use, ownership, operation and maintenance
of the Project are technically feasible and, except for factors effecting the
ethanol industry in general and not relating specifically to the Project,
economically feasible.

     

    Section
5.21 Indebtedness.  The
Obligations are, after giving effect to the Financing Documents and the
transactions contemplated thereby, the only outstanding Indebtedness of the
Borrowers other than Permitted Indebtedness.  The Obligations have the
ranking given to them in Section 2.09 (Super-Priority
Nature of Objectives).

     

    Section
5.22 Required LLC
Provisions.  Each limited liability company interest of each
Borrower that is a limited liability company is a security governed by Article 8
of the Uniform Commercial Code and is evidenced by a certificate.  The
certificated interests are in registered form within the meaning of Article 8 of
the Uniform Commercial Code

     

    Section
5.23 Subsidiaries.  Madera,
Boardman, Stockton and Burley have no Subsidiaries.  Pacific Holding
has no Subsidiaries other than Madera, Boardman, Stockton and
Burley.

     

    Section
5.24 Foreign Assets Control
Regulations, Etc.  (a)  The use of the proceeds of
the Loan by the Borrowers will not violate the Trading with the Enemy Act, as
amended, or any of the foreign assets control regulations of the United States
Treasury Department (31 C.F.R., Subtitle B, Chapter V, as amended) or any
enabling legislation or executive order relating thereto.

     

    

    
      
        
           

        

        
          -27-

          
            

          

        

        
           

        

      

    

    

    (b) No
Borrower:

     

    
      	
              (i)  
        

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

            

    

     

    
      	
              (ii)   
       

            	
              is
      in violation of the Patriot Act.

            

    

     

    Section
5.25 Employment
Matters.  None of the Borrowers has or has had any employee or
former employees.

     

    Section
5.26 Legal Name and Place of
Business.  (a)  The exact legal name and jurisdiction
of formation of each Borrower is as set forth below, and no Borrower has had any
other legal names in the previous five (5) years except as set forth on Schedule
5.26:

     

    
      	
              (i)   
       

            	
              Pacific
      Holding:  Pacific Ethanol Holding Co. LLC, a limited liability
      company organized and existing under the laws of the State of
      Delaware;

            

    

     

    
      	
              (ii)  
        

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

            

    

     

    
      	
              (iii)  
        

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

            

    

     

    
      	
              (iv)  
        

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

            

    

     

    
      	
              (v)  
        

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

            

    

     

    (b) The sole
place of business and chief executive office of each Borrower is as set forth on
Schedule
5.26.

     

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

     

    

    
      
        
           

        

        
          -28-

          
            

          

        

        
           

        

      

    

    

    Section
5.27 No
Brokers.  No Borrower has any obligation to pay any finder’s,
advisory, brokers or investment banking fee, except for the fees payable
pursuant to Section
3.11 (Fees) and those
identified on Schedule
5.27.

     

    Section
5.28 Insurance.  All
insurance required to be obtained and maintained pursuant to the Transaction
Documents by Pacific Holding and each other Borrower is in full force and effect
as of each date this representation is made or deemed repeated and complies with
the insurance requirements set forth on Schedule
7.01(h).  All premiums then due and payable on all such
insurance have been paid.  To the knowledge of each Borrower, all
insurance required to be obtained and maintained by any Major Project Party, to
protect, directly or indirectly, against loss or liability to any Borrower, any
Plant or any Senior Secured Party, as of the date this representation is made or
deemed repeated, pursuant to any Project Document has been obtained, is in full
force and effect and complies with the insurance requirements set forth on Schedule 7.01(h)
(where applicable) and is otherwise in all material respects in accordance with
such Project Document.

     

    Section
5.29 Accounts.  The
Project Accounts exist at the Account Bank in accordance with the terms of the
Pre-Petition Credit Agreement.  No Borrower has, nor is the
beneficiary of, any bank account other than the Project Accounts and any Local
Account set forth on Schedule 5.29 with
respect to which a Blocked Account Agreement has been duly executed and
delivered.

     

    Section
5.30 SEC
Compliance.  Pacific Ethanol has made all filings required to
be made by Pacific Ethanol pursuant to the Securities Exchange Act of 1934 and
all factual information heretofore or contemporaneously furnished by Pacific
Ethanol in any such filing (other than projections, budgets and other
“forward-looking” information all of which has been prepared on a reasonable
basis and in good faith by Pacific Ethanol) is, when taken as a whole (and after
giving effect to any supplement of such information) and as of the date
furnished, true and accurate in every material respect and such information is
not, when taken as a whole (and after giving effect to any supplement of such
information) as of the date furnished, incomplete by omitting to state any
material fact necessary to make such information not misleading in any material
respect.

     

    Section
5.31 Reorganization
Matters.

     

    (a) The
Chapter 11 Cases were commenced on the Petition Date in accordance with
applicable law and proper notice thereof and the proper notice for (i) the
motion seeking approval of the Financing Documents and the Interim Order and
Final Order, (ii) the hearing for the approval of the Interim Order, and
(iii) the hearing for the approval of the Final Order.

     

    (b) After the
entry of the Interim Order, and pursuant to and solely to the extent permitted
in the Interim Order and the Final Order, the Obligations will constitute
allowed administrative expense claims in the Chapter 11 Cases having
priority over all administrative expense claims and unsecured claims against the
Borrowers now existing or hereafter arising, of any kind whatsoever, including,
without limitation, all administrative expense claims of the kind specified in
Sections 105, 326, 330, 331, 503(b), 506(c), 507(a), 507(b), 546(c), 726,
1113, 1114 or any other provision of the Bankruptcy Code or otherwise, as
provided under Section 364(c)(l) of the Bankruptcy Code, subject, as to
priority only, to the Carve-Out.

     

    

    
      
        
           

        

        
          -29-

          
            

          

        

        
           

        

      

    

    

    (c) After the
entry of the Interim Order and pursuant to and to the extent provided in the
Interim Order and the Final Order, the Obligations will be secured by a valid
and perfected Lien having the priority described in the Orders.

     

    (d) The
Interim Order (with respect to the period prior to entry of the Final Order) or
the Final Order (with respect to the period on and after entry of the Final
Order), as the case may be, is in full force and effect and has not been
modified or amended without the consent of the Administrative Agent and the
Lenders, or reversed or stayed.

     

    ARTICLE
VI

     

    CONDITIONS
PRECEDENT

     

    Section
6.01 Conditions to
Closing.  The occurrence of the Closing Date is subject to the
satisfaction of each of the following conditions precedent.

     

    (a) Delivery of Financing
Documents and Orders.  The Administrative Agent shall have
received each of the following fully executed documents, each of which shall be
originals, portable document format (“pdf”) or facsimiles
(followed promptly by originals), duly executed and delivered by each party
thereto and each in form and substance satisfactory to each Lender:

     

    
      	
              (i) 
        

            	
              this
      Agreement;

            

    

     

    
      	
              (ii) 
        

            	
              the
      New Mortgages;

            

    

     

    
      	
              (iii) 
        

            	
              the
      PEC Pledge Agreement;

            

    

     

    
      	
              (iv) 
        

            	
              the
      Asset Management Agreement;

            

    

     

    
      	
              (v) 
        

            	
              the
      AMA Consent;

            

    

     

    
      	
              (vi)  
       

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

            

    

     

    
      	
              (vii)  
       

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

            

    

     

    
      	
              (viii) 
        

            	
              the
      Interim Order; and

            

    

     

    
      	
              (ix) 
        

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

            

    

     

    

    
      
        
           

        

        
          -30-

          
            

          

        

        
           

        

      

    

    

    (b) Delivery of Other
Documents.  The Administrative Agent shall have received true,
correct and complete copies of each agreement identified on Schedule
5.10  reasonably requested by the Administrative
Agent.

     

    (c) Officer’s
Certificates.  The Administrative Agent shall have received a
duly executed certificate of an Authorized Officer of the Borrower Agent, dated
as of the Closing Date, upon which the Administrative Agent and each Lender may
conclusively rely certifying that (A) all conditions set forth in this Section 6.01 have
been satisfied on and as of the Closing Date and (B) all representations and
warranties made by any Borrower in this Agreement and each other Financing
Document to which any Borrower is a party are true and correct in all material
respects on and as of the Closing Date

     

    (d) Resolutions, Incumbency,
Organic Documents.  The Administrative Agent shall have
received from each Borrower a certificate of an Authorized Officer dated as of
the Closing Date, upon which the Administrative Agent and each Lender may
conclusively rely, as to:

     

    
      	
              (i) 
        

            	
              reasonably
      satisfactory resolutions of its members, managers or directors, as the
      case may be, then in full force and effect authorizing the execution,
      delivery and performance of each Financing Document to which it is party
      and the consummation of the transactions contemplated therein (including
      the appointment of the Borrower
Agent);

            

    

     

    
      	
              (ii)  
       

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

            

    

     

    
      	
              (iii)  
       

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

            

    

     

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

     

    

    
      
        
           

        

        
          -31-

          
            

          

        

        
           

        

      

    

    

    (f) Lien Search; Protection of
Security.  The Administrative Agent shall have received
satisfactory copies or evidence, as the case may be, of the following actions in
connection with the perfection of the DIP Liens:

     

    
      	
              (i) 
        

            	
              completed
      requests for information or lien search reports, dated no more than five
      (5) Business Days before the date of such Funding or such longer period
      satisfactory to the Administrative Agent, listing all effective UCC
      financing statements, fixture filings or other filings evidencing a
      security interest filed in such jurisdictions reasonably requested by the
      Administrative Agent that name any Borrower as a debtor, together with
      copies of each such UCC financing statement, fixture filing or other
      filings; and

            

    

     

    
      	
              (ii)  
       

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

            

    

     

    (g) Financial
Statements.  The Administrative Agent shall have received
accurate and complete copies of the audited annual financial statements of
Pacific Ethanol for the 2008 Fiscal Year.  Such financial statements
shall be on a consolidated basis.

     

    (h) Third Party
Approvals.  The Administrative Agent shall have received
reasonably satisfactory documentation of any approval by any Person required in
connection with any transaction contemplated by this Agreement or any other
Financing Document that the Administrative Agent has reasonably requested in
connection herewith.

     

    (i) Insurance.  The
Administrative Agent shall have received reasonably satisfactory evidence that
the insurance requirements set forth on Schedule 7.01(h) with
respect to the Borrowers and the Plants have been satisfied, including binders
or certificates evidencing the commitment of insurers to provide each insurance
policy required by Schedule 7.01(h),
evidence of the payment of all premiums then due and owing in respect of such
insurance policies and a certificate of the Borrowers’ insurance broker (or
insurance carrier) certifying that all such insurance policies are in full force
and effect.

     

    (j) Bank Regulatory
Requirements.  The Administrative Agent shall have received all
documentation and other information required by bank regulatory authorities
under applicable “know your customer” and anti-money-laundering rules and
regulations, including the Patriot Act.

     

    

    
      
        
           

        

        
          -32-

          
            

          

        

        
           

        

      

    

    

    (k) Closing Fees;
Expenses.  The Administrative Agent shall have received for its
own account, or for the account of each Lender and Agent entitled thereto, all
fees due and payable pursuant to Section 3.11 (Fees) and all reasonable
costs and expenses (including reasonable and documented legal fees and expenses)
for which invoices have been presented, in each case, required to be paid on or
before the Closing Date.  The Pre-Petition Administrative Agent shall
have received all fees due and payable to it pursuant to the Pre-Petition Credit
Agreement and all reasonable costs and expenses (including reasonable and
documented legal fees and expenses) for which invoices have been presented, in
each case, required to be paid on or before the Closing Date.

     

    (l) Certain
Orders.   The entry of all “first day orders,” including
all employee-related orders and critical vendor orders entered at or about
the time of the commencements of the Chapter 11 Cases each in form and
substance reasonably satisfactory to the Administrative Agent and each
Lender.

     

    (m) Rating.  The
Borrowers shall have obtained a rating of the Loans from S&P or
Moody’s.

     

    (n)           Other
Information.  The Lenders shall have received the Initial DIP
Budget and all other information reasonably requested from the
Borrowers.

     

    Section
6.02 Conditions to All
Fundings.  The obligation of each Lender to make available each
Funding of its Revolving Loans shall be subject to the fulfillment of the
following conditions precedent.

     

    (a) Funding
Notice.  The Administrative Agent shall have received a duly
executed Funding Notice as required by and in accordance with Section 2.03 (Notice
of Fundings), which shall
certify that:

     

    
      	
              (i) 
        

            	
              the
      Borrowers are in compliance with all conditions set forth in this Section 6.02,
      and each other applicable Section of this Article VI,
      on and as of the proposed Funding Date, before and after giving effect to
      such Funding and to the application of the proceeds therefrom (provided
      that, to the extent reasonably acceptable to the Administrative Agent,
      such compliance may be demonstrated by delivery of evidence of
      satisfaction of certain conditions to the relevant Funding, as identified
      in such Funding Notice, to the Administrative Agent to be held in escrow
      until the Funding Date);

            

    

     

    
      	
              (ii) 
        

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

            

    

     

    

    
      
        
           

        

        
          -33-

          
            

          

        

        
           

        

      

    

    

    
      	
              (iii) 
        

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

            

    

     

    (b) Certain
Orders.

     

    
      	
              (i)  
       

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

            

    

     

    
      	
              (ii)  
       

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

            

    

     

    (c) Government
Approvals.  Each Borrower shall have all Necessary Project
Approvals required as of the date of such requested Funding, and the
Administrative Agent shall have received a duly executed certificate of an
Authorized Officer of the relevant Borrowers certifying that each such Necessary
Project Approval is in full force and effect and is final and
Non-Appealable.

     

    (d) No Default or Event of
Default.  No Default or Event of Default has occurred and is
continuing, or would result from such Funding.

     

    (e) No
Litigation.

     

    
      	
              (i)  
       

            	
              Except
      as set forth on Schedule 5.08, no action, suit, proceeding or
      investigation shall have been instituted and not stayed pursuant to the
      Bankruptcy Code or threatened against any Borrower that, individually or
      in the aggregate, has had or could reasonably be expected to have a
      Material Adverse Effect; and

            

    

     

    
      	
              (ii) 
        

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

            

    

     

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

     

    (g) Closing
Date.  The Closing Date shall have occurred.

     

    

    
      
        
           

        

        
          -34-

          
            

          

        

        
           

        

      

    

    

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

     

    (i) Fees;
Expenses.  The Administrative Agent shall have received for its
own account, or for the account of each Lender and Agent entitled thereto, all
fees due and payable as of the date of such Funding pursuant to Section 3.11 (Fees), and all costs and
expenses (including reasonable and documented costs, fees and expenses of legal
counsel) for which invoices have been presented.  The Pre-Petition
Administrative Agent shall have received all fees due and payable to it pursuant
to the Pre-Petition Credit Agreement and all reasonable costs and expenses
(including reasonable and documented legal fees and expenses) for which invoices
have been presented.

     

    (j)           Additional
Information.  The Lenders shall have received all information
reasonably requested from the Borrowers.

    

     

    ARTICLE
VII

     

    COVENANTS

     

    Section
7.01 Affirmative
Covenants.  Each Borrower agrees with each Agent and each
Lender that, until the Discharge Date, each Borrower will perform the
obligations set forth in this Section 7.01
applicable to it.

     

    (a) Compliance with
Laws.  Each Borrower shall comply in all material respects with
all Laws (other than Environmental Laws) applicable to it or to its business or
property.

     

    (b) Environmental
Matters.

     

    
      	
              (i) 
        

            	
              The
      Borrowers shall (A) comply in all material respects with all Environmental
      Laws, (B) keep the Project free of any Lien imposed pursuant to any
      Environmental Law, (C) pay or cause to be paid when due and payable by any
      Borrower any and all costs required in connection with any Environmental
      Laws, including the cost of identifying the nature and extent of the
      presence of any Materials of Environmental Concern in, on or about the
      Project or on any real property owned or leased by any Borrower or on the
      Mortgaged Property, and the cost of delineation, management, remediation,
      removal, treatment and disposal of any such Materials of Environmental
      Concern, and (D) use their best efforts to ensure that no Environmental
      Affiliate takes any action or violates any Environmental Law that could
      reasonably be expected to result in an Environmental
  Claim.

            

    

     

    

    
      
        
           

        

        
          -35-

          
            

          

        

        
           

        

      

    

    

    
      	
              (ii) 
        

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

            

    

     

    (c) Operations and Maintenance;
Conduct of Business.  Each Borrower owing a Plant shall own,
operate and maintain (or cause to be operated and maintained) such Plant in all
material respects in accordance with (i) the terms and provisions of the
Transaction Documents except as a result of the Cases, the Cold Shutdown of the
Madera Plant, the Magic Valley Plant, the Stockton Plant and, after the Boardman
CS Date, the Boardman Plant, (ii) all applicable Governmental Approvals and Laws
and (iii) Prudent Ethanol Operating Practice.  Pacific Holding shall
conduct its business in all material respects in accordance with all applicable
Governmental Approvals and Laws.

     

    (d) Maintenance of
Properties.

     

    
      	
              (i) 
        

            	
              Each
      Borrower shall keep, or cause to be kept, in good working order and
      condition, ordinary wear and tear excepted, all of its material properties
      and equipment that are necessary or useful in the proper conduct of its
      business.

            

    

     

    
      	
              (ii) 
        

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

            

    

     

    
      	
              (iii)  
       

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

            

    

     

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

     

    (f) Governmental
Approvals.  Pacific Holding and each other Borrower shall
maintain in full force and effect, in the name of the relevant Borrower, all
Necessary Project Approvals (other than any such failure to maintain that could
not reasonably be expected to have a Material Adverse Effect on the relevant
Borrower or Plant).

     

    

    
      
        
           

        

        
          -36-

          
            

          

        

        
           

        

      

    

    

    (g) Use of
Proceeds.

     

    
      	
              (i) 
        

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

            

    

     

    
      	
              (ii) 
        

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

            

    

     

    
      	
              (iii) 
        

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

            

    

     

    
      	
              (iv) 
        

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

            

    

     

    

    
      
        
           

        

        
          -37-

          
            

          

        

        
           

        

      

    

    

    (h) Insurance.  Without
cost to any Senior Secured Party, the applicable Borrower shall at all times
obtain and maintain, or cause to be obtained and maintained, the types and
amounts of insurance listed and described on Schedule 7.01(h), in
accordance with the terms and provisions set forth therein for each such Plant
and the applicable Borrower, and shall obtain and maintain in all material
respects such other insurance as may be required pursuant to the terms of any
Transaction Document.   If the Borrowers fail to take out or
maintain the full insurance coverage required by this Section 7.01(h), the
Administrative Agent may (but shall not be obligated to) take out the required
policies of insurance and pay the premiums on the same.  All amounts
so advanced by the Administrative Agent shall become an Obligation and the
Borrowers shall forthwith pay such amounts to the Administrative Agent, together
with interest from the date of payment by the Administrative Agent at the
Default Rate.

     

    (i) Books and Records;
Inspections.  Each Borrower shall keep proper books of record
and account in which complete, true and accurate entries in conformity with GAAP
and all requirements of Law shall be made of all financial transactions and
matters involving the assets and business of such Borrower, and shall maintain
such books of record and account in material conformity with applicable
requirements of any Governmental Authority having regulatory jurisdiction over
such Borrower.  Each Borrower shall keep books and records separate
from the books and records of any other Person (including any Affiliates of such
Borrower) that accurately reflect all of its business affairs, transactions and
the documents and other instruments that underlie or authorize all of its
actions. Each Borrower shall permit officers and designated representatives of
the Administrative Agent or Consultant to visit and inspect any of the
properties of such Borrower (including the Plants), to examine its financial and
operating records, and make copies thereof or abstracts therefrom, and to
discuss its affairs, finances and accounts with its members, managers,
directors, officers and independent public accountants, all at the expense of
the Borrowers at any time during normal business hours and without advance
notice.

     

    (j) Project
Documents.  Each Borrower shall use its reasonable best efforts
to preserve, protect and defend its rights under each Project Document to which
it is a party except where the failure to do so (i) results from the Effect of
Bankruptcy, the Cold Shutdown of the Madera Plant, the Magic Valley Plant, the
Stockton Plant and, after the Boardman CS Date, the Boardman Plant or (ii) could
not reasonably be expected to have a Material Adverse Effect. Each Borrower
shall use its reasonable best efforts to exercise all material rights,
discretion and remedies under each Project Document in accordance with its terms
and in a manner consistent with and subject to such Borrower’s obligations under
the Financing Documents except where the failure to do so exercise such rights,
discretion or remedies results from the Cases, the Cold Shutdown of the Madera
Plant, the Magic Valley Plant, the Stockton Plant and, after the Boardman CS
Date, the Boardman Plant.

     

    (k) Maintenance of
Existence. Each Borrower will continue to preserve, renew and keep in
full force and effect its entity status in the jurisdiction of its formation and
take all actions to maintain its rights, privileges and franchises necessary or
desirable in the normal course of its business.

     

    

    
      
        
           

        

        
          -38-

          
            

          

        

        
           

        

      

    

    

    (l) DIP
Budgets.

     

    
      	
              (i) 
        

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

            

    

     

    
      	
              (ii) 
        

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

            

    

     

    
      	
              (iii) 
        

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

            

    

     

    (m) Preservation of Title;
Acquisition of Additional Property.

     

    
      	
              (i) 
        

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

            

    

     

    

    
      
        
           

        

        
          -39-

          
            

          

        

        
           

        

      

    

    

    
      	
              (ii) 
        

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

            

    

     

    (n) Maintenance of Liens;
Creation of Liens. 

     

    (i) The
Borrowers shall take or cause to be taken all actions necessary or reasonably
requested by the Administrative Agent for the Collateral Agent to maintain and
preserve the DIP Liens and the priority thereof.

     

    (ii) The Borrowers shall take promptly
all actions reasonably requested by the Administrative Agent to cause each
Additional Project Document to become subject to the DIP Liens, shall deliver
certified copies of such Additional Project Document to the Administrative Agent
and, if requested by the Administrative Agent, shall deliver any Ancillary
Documents related thereto.

     

    (o) Reorganization
Matters.  The Borrowers shall give, on a timely basis as
specified in the Interim Order or the Final Order all notices required to be
given to all parties specified in the Interim Order or Final
Order.  The Borrowers shall provide to the Administrative Agent copies
of all pleadings, motions, applications and other documents or information (i)
filed by or on behalf of any Borrower with the Bankruptcy Court or (ii) provided
to any creditors’ committee appointed in the Chapter 11 Cases.  The
Borrowers shall provide the Administrative Agent with drafts of all pleadings,
motions and applications to be filed by or on behalf of any Borrower at least
three (3) Business Days in advance of such filing.

     

    (p) Professional
Fees.  Promptly following receipt thereof, the Borrowers shall
deliver to the Administrative Agent all monthly fee statements detailing the
fees of all its professionals (including counsel and financial advisors) for
such month delivered in accordance with the interim compensation procedures
approved by the Bankruptcy Court.

     

    (q) Bank
Accounts.  Each bank account of a Borrower shall at all times
be (i) held as Collateral to secure the repayment and/or performance of the
Obligations, (ii) held at a financial institution at which such Borrower
maintains its bank accounts on the Petition Date under the terms of the
Pre-Petition Financing Documents, or otherwise as selected by such Borrower from
a list of approved financial institutions approved by the Required Lenders and
(iii) subject to a perfected Priming Lien in favor of the Collateral Agent on
behalf of the Senior Secured Parties, with all rights and remedies in respect
thereto as set forth in the Orders and the other Financing Documents. No
Borrower may open a new bank account or any other account at a financial
institution without the prior written consent of the Required Lenders, which
approval may be withheld in their sole discretion.

     

    (r) Monthly
Meetings.  At least once per calendar month, upon request of
the Administrative Agent, at mutually acceptable times (and with telephonic
conferences being acceptable), the Borrower Agent shall, and shall procure that
representatives of the Borrower’s professionals (including counsel and financial
advisors) as may be requested by the Administrative Agent, meet together with
the Administrative Agent to update the Administrative Agent on the status of the
Cases and to discuss any other issues in connection therewith as may be
requested by the Administrative Agent.

     

    

    
      
        
           

        

        
          -40-

          
            

          

        

        
           

        

      

    

    

    (s) Further
Assurances.  Upon written request of the Administrative Agent,
each Borrower shall promptly perform or cause to be performed any and all acts
and execute or cause to be executed any and all documents (including UCC
financing statements and UCC continuation statements) reasonably requested by
the Administrative Agent for the purposes of ensuring the validity and legality
of this Agreement or any other Financing Document and the rights of the Lenders
and the Agents hereunder or thereunder and facilitating the proper exercise of
rights and powers granted to the Lenders or the Agents under this Agreement or
any other Financing Document.

     

    Section
7.02 Negative
Covenants.  Each Borrower agrees with each Agent and each
Lender that, until the Discharge Date, each Borrower will perform the
obligations set forth in this Section 7.02
applicable to it.

     

    (a) Restrictions on
Indebtedness.  The Borrowers will not create, incur, assume or
suffer to exist any Indebtedness except:

     

    
      	
              (i) 
        

            	
              the
      Obligations;

            

    

     

    
      	
              (ii) 
        

            	
              the
      Pre-Petition Obligations;

            

    

     

    
      	
              (iii) 
        

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

            

    

     

    
      	
              (iv) 
        

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

            

    

     

    
      	
              (v) 
        

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

            

    

     

    
      	
              (vi) 
        

            	
              the
      PE Imperial Leases; and

            

    

     

    
      	
              (vii)  
       

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

            

    

     

    

    
      
        
           

        

        
          -41-

          
            

          

        

        
           

        

      

    

    

    (b) Liens.  No
Borrower shall create, incur, assume or suffer to exist any Lien upon any of its
property, revenues or assets (including its Equity Interests), whether now owned
or hereafter acquired, except:

     

    
      	
              (i) 
        

            	
              Liens
      in favor, or for the benefit, of the Collateral Agent and the Senior
      Secured Parties;

            

    

     

    
      	
              (ii)  
       

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

            

    

     

    
      	
              (iii) 
        

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

            

    

     

    
      	
              (iv) 
        

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

            

    

     

    
      	
              (v)  
       

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

            

    

     

    
      	
              (vi)  
       

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

            

    

     

    
      	
              (vii) 
        

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

            

    

     

    
      	
              (viii) 
        

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

            

    

     

    

    
      
        
           

        

        
          -42-

          
            

          

        

        
           

        

      

    

    

    
      	
              (A) 
        

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

            

    

     

    
      	
              (B)  
       

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

            

    

     

    
      	
              (C)  
       

            	
              such
      easement has been approved by the Administrative
  Agent;

            

    

     

    
      	
              (ix)  
        

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

            

    

     

    
      	
              (x) 
        

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

            

    

     

    
      	
              (xi) 
        

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

            

    

     

    
      	
              (xii) 
        

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

            

    

     

    (c) Permitted
Investments.  The Borrowers shall not make any investments,
loans or advances (whether by purchase of stocks, bonds, notes or other
securities, loans, extensions of credit, advances or otherwise) except for
investments (i) in Cash Equivalents, (ii) in connection with the bankruptcy of
suppliers or customers of the Borrowers (provided that such investments are
subject to a first priority perfected Lien in favor of the Collateral Agent) and
(iii) existing on the date hereof in Subsidiaries. The Borrowers shall select
Cash Equivalents having such maturities as shall cause the Project Accounts to
have a cash balance as of any day sufficient to cover the transfers made from
the Project Accounts on such day in accordance with this Agreement, the other
Financing Documents, the Project Documents and any Additional Project
Documents.

     

    (d) Change in
Business.  No Borrower shall (i) enter into or engage in any
business other than the ownership, operation (including the Cold Shutdown of the
Madera Plant, the Magic Valley Plant, the Stockton Plant and, after the Boardman
CS Date, the Boardman Plant), maintenance, use and financing of the Plants or
the Project and all activities related thereto or (ii) change in any material
respect the scope of any Plant or the Project from that which exists as of the
date hereof.

     

    

    
      
        
           

        

        
          -43-

          
            

          

        

        
           

        

      

    

    

    (e) Equity
Issuances.  No Borrower shall issue any Equity Interests unless
such Equity Interests are immediately pledged to the Collateral Agent (for the
benefit of the Senior Secured Parties) on a first priority perfected
basis.

     

    (f) Asset
Dispositions.   No Borrower shall sell, lease, assign,
transfer or otherwise dispose of any assets (other than Products), whether now
owned or hereafter acquired, except:

     

    
      	
              (i) 
        

            	
              disposal
      of assets that are promptly replaced in accordance with the then-current
      DIP Budget;

            

    

     

    
      	
              (ii) 
        

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

            

    

     

    
      	
              (iii) 
        

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

            

    

     

    
      	
              (iv) 
        

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

            

    

     

    
      	
              (v)  
       

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

            

    

     

    
      	
              (vi) 
        

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

            

    

     

    (g) Consolidation,
Merger.  No Borrower will (i) directly or indirectly liquidate,
wind up, terminate, reorganize (except for the Cases or pursuant to an order of
the Bankruptcy Court) or dissolve (or suffer any liquidation, winding up,
termination, reorganization (except for the Cases or pursuant to an order of the
Bankruptcy Court) or dissolution) or otherwise wind up; or (ii) acquire (in one
transaction or a series of related transactions) all or any substantial part of
the assets, property or business of, or any assets that constitute a division or
operating unit of, the business of any Person or otherwise merge or consolidate
with or into any other Person.

     

    (h) Transactions with
Affiliates.  No Borrower shall enter into or cause, suffer or
permit to exist any arrangement or contract with any of its Affiliates or any
other Person that owns, directly or indirectly, any Equity Interest in such
Borrower except Affiliated Project Documents.

     

    

    
      
        
           

        

        
          -44-

          
            

          

        

        
           

        

      

    

    

    (i) Accounts.  The
Borrowers shall not maintain, establish or use any deposit account, securities
account (as each such term is defined in the UCC) or other banking account other
than the Project Accounts and any Local Account set forth on Schedule 5.29, each
of which shall be subject to a Blocked Account Agreement.  The
Borrowers shall not change the name or account number of any of the Project
Accounts or Local Accounts without the prior written consent of the
Administrative Agent.

     

    (j) Subsidiaries.  Pacific
Holding shall not create or acquire any Subsidiary other than Madera, Boardman,
Stockton or Burley nor enter into any partnership or joint
venture.  Each of Madera, Boardman, Stockton and Burley shall not
create or acquire any Subsidiary or enter into any partnership or joint
venture.

     

    (k) ERISA.  No
Borrower will engage in any prohibited transactions under Section 406 of ERISA
or under Section 4975 of the Code.  No Borrower will incur any
obligation or liability in respect of any Plan, Multiemployer Plan or employee
welfare benefit plan providing post-retirement welfare benefits (other than a
plan providing continue coverage under Part 6 of Title I of ERISA) in each such
case without the prior written consent of the Administrative Agent (unless the
aggregate total obligations or liabilities of the Borrowers that could
reasonably be expected to arise, due to no fault of the Borrowers, in connection
therewith would not exceed five hundred thousand Dollars
($500,000)).

     

    (l) Taxes.  No
Borrower shall make any election to be treated as an association taxable as a
corporation for federal, state or local tax purposes.

     

    (m) Project
Documents.  Other than changes that individually and in the
aggregate could not reasonably be expected to have a Material Adverse Effect, no
Borrower shall direct or consent or agree to (i) any amendment, modification,
supplement, or waiver to, or (ii) any termination, repudiation, cancellation or
rejection of, any Project Document to which it is a party and that is
contemplated by the then-current DIP Budget without the prior written consent of
the Required Lenders.  Except for collateral assignments to the
Collateral Agent, no Borrower shall assign any of its rights under any Project
Document to which it is a party to any Person, or consent to the assignment of
any obligations under any such Project Document by any other party
thereto.

     

    (n) Accounting
Changes.  No Borrower shall make any change in (i) its
accounting policies or reporting practices, except as required by GAAP or as
otherwise notified to the Administrative Agent in writing (provided that the
Borrowers shall provide an historical reconciliation for the prior audited
period addressing any such change in accounting practices), or (ii) its Fiscal
Year without the prior written consent of the Administrative Agent.

     

    (o) Additional Project
Documents.  None of Pacific Holding or any other Borrower shall
enter into any Additional Project Document that is not contemplated by the
then-current DIP Budget except with the prior written approval of the
Administrative Agent.

     

    (p) Suspension or
Abandonment.  No Borrower owning a Plant shall (i) permit or
suffer to exist an Event of Abandonment relating to such Plant or (ii) order or
consent to any suspension of work in excess of sixty (60) days under any Project
Document relating to such Plant, in each such case without the prior written
approval of the Required Lenders.

     

    

    
      
        
           

        

        
          -45-

          
            

          

        

        
           

        

      

    

    

    (q) Use of Proceeds; Margin
Regulations.  No Borrower shall use any proceeds of any Loan
other than in accordance with the provisions of Article II (Commitments
and Borrowing) and Section 7.01(g)
(Affirmative
Covenants – Use of Proceeds).  No
Borrower shall use any part of the proceeds of any Loan to purchase or carry any
Margin Stock (as defined in Regulation U) or to extend credit to others for the
purpose of purchasing or carrying any Margin Stock.  No Borrower shall
use the proceeds of any Loan in a manner that could violate or be inconsistent
with the provisions of Regulations T, U or X.

     

    (r) Environmental
Matters.  Except to the extent not reasonably expected to
result in an Environmental Claim and in compliance with all applicable Laws, the
Borrowers shall not permit (i) any underground storage tanks to be located on
any property owned or leased by any Borrower, (ii) any asbestos to be contained
in or form part of any building, building component, structure or office space
owned by any Borrower, (iii) any polychlorinated biphenyls (PCBs) to be used or
stored at any property owned by any Borrower, (iv) any other Materials of
Environmental Concern to be used, stored or otherwise be present at any property
owned by any Borrower, other than Materials of Environmental Concern necessary
for the operation of the Project and used in accordance with Prudent Ethanol
Operating Practice or (v) any other Materials of Environmental Concern to be
used, stored or otherwise be present at any property owned or leased by any
Borrower.

     

    (s) Restricted
Payments.  The Borrowers shall not make any Restricted Payments
except for Restricted Payments (i) among Debtors solely in accordance with the
then-current DIP Budget or (ii) with the prior consent of the Required
Lenders.

     

    (t) Commodity Hedging
Arrangements.  The Borrowers shall not enter into any Commodity
Hedging Arrangements.

     

    (u) Chapter 11
Claims.  Except for the Carve-Out, no Debtor shall incur,
create, assume, suffer to exist or permit any super-priority administrative
claim against such Debtor which is pari passu with or
senior to the claims of the Senior Secured Parties against the Debtors, except
as set forth in Section 2.09
(Super-Priority
Nature of Obligations).

     

    (v) DIP
Budgets.  No Borrower shall make any change in the DIP Budget
without the prior written consent of the Administrative Agent and the Required
Lenders.

     

    (w) Financial
Covenants.

     

    
      	
              (i) 
        

            	
              The
      Borrowers shall not permit amounts disbursed pursuant to the category in
      the DIP Budget entitled “Asset Management Agreement” (excluding the line
      item entitled “Asset Management Fee”) in any Monthly Budget Period to
      exceed the amounts set forth in the line item entitled “Total Asset
      Management Agreement” (excluding “Asset Management Fee”) for such Monthly
      Budget Period in the Initial DIP Budget by more than ten percent
      (10%).

            

    

     

    

    
      
        
           

        

        
          -46-

          
            

          

        

        
           

        

      

    

    

    
      	
              (ii)  
       

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

            

    

     

    
      	
              (iii) 
        

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

            

    

     

    Section
7.03 Reporting
Requirements.  The Borrowers will furnish to the Administrative
Agent, who shall distribute copies of the following to each Lender:

     

    (a) on the
second Business Day of each week after the date of this Agreement, an updated
rolling cash flow forecast ending on the earlier of (i) thirteen (13) weeks
after the week in which such cash flow forecast is delivered and (ii) the
scheduled Maturity Date (each such forecast, a “Weekly Cash Flow
Forecast”), in the same form and with the same level of detail as the
then-current DIP Budget (it being understood, however, that approval of the DIP
Budget by the Required Lenders shall only be required once a month in accordance
with Section 7.01(l)
(Affirmative
Covenants – DIP Budgets));

     

    (b) on the
second Business Day of each week following the date hereof, a report setting
forth, in a form and in sufficient detail satisfactory to the Administrative
Agent, a comparison of actual receipts and expenses to budgeted receipts and
expenses in the then-current DIP Budget for the preceding week;

     

    (c) as soon
as available and in any event within twenty-five (25) days after the end of each
calendar month, a report setting forth, in each case in a form and in sufficient
detail satisfactory to the Administrative Agent, (x) balance sheets of each
Borrower as of the end of such month, (y) statements of income and cash flows of
each Borrower for such month, and for the period commencing at the end of the
previous Fiscal Year and ending with the end of such month and (z) profit and
loss statements of each Borrower for such month and for the period commencing at
the end of the previous Fiscal Year and ending with the end of such month, in
each case, prepared in accordance with GAAP (subject to the absence of footnote
disclosures and to normal year-end adjustments). Such report shall be certified
as complete and correct by an Authorized Officer of the Borrower Agent, who also
shall certify for each financial covenant set forth in Section 7.02(w)
(Negative
Covenants - Financial Covenants) that the Borrowers
are in full compliance with each such covenant or, if any of such certifications
cannot be given, stating in reasonable detail the necessary qualifications to
such certifications;

     

    

    
      
        
           

        

        
          -47-

          
            

          

        

        
           

        

      

    

    

    (d) promptly
upon receipt, copies of any detailed audit reports, management letters or
recommendations submitted to any Borrower (or the audit or finance committee of
any Borrower) by the Auditors in connection with the accounts or books of any
Borrower, or any audit of any Borrower;

     

    (e) as soon
as possible and in any event within five (5) days after the occurrence of any
Default or Event of Default, a statement of an Authorized Officer of the
Borrower Agent setting forth details of such Default or Event of Default and the
action that the Borrowers have taken and propose to take with respect
thereto;

     

    (f) within
five (5) days after any Borrower obtains knowledge thereof a statement of an
Authorized Officer of the Borrower Agent setting forth details of:

     

    
      	
              (i)
        

            	
              any
      litigation or governmental proceeding pending or threatened in writing
      against any Borrower;

            

    

     

    
      	
              (ii)
        

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

            

    

     

    
      	
              (iii)
        

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

            

    

     

    
      	
              (iv)
        

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

            

    

     

    (g) promptly
after delivery or receipt thereof, copies of all material notices or documents
given or received by any Borrower, pursuant to any of the Project Documents
including:

     

    
      	
              (i) 
       

            	
              any
      written notice alleging any breach or default thereunder;
    and

            

    

     

    
      	
              (ii) 
       

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

            

    

     

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

     

    

    
      
        
           

        

        
          -48-

          
            

          

        

        
           

        

      

    

    

    
      	
              (i)
        

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

            

    

     

    
      	
              (ii)
        

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

            

    

     

    
      	
              (iii) 
       

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

            

    

     

    
      	
              (iv)
        

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

            

    

     

    
      	
              (v)
        

            	
              there
      exists any Unfunded Benefit Liabilities under any ERISA
    Plan;

            

    

     

    
      	
              (vi)
        

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

            

    

     

    
      	
              (vii)
        

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

            

    

     

    
      	
              (viii)
        

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

            

    

     

    
      	
              (ix)
        

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

            

    

     

    
      	
              (x)
        

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

            

    

     

    

    
      
        
           

        

        
          -49-

          
            

          

        

        
           

        

      

    

    

    (i) as soon
as possible and in any event within five (5) Business Days after the receipt by
any Borrower of a demand letter from the PBGC notifying such Borrower of its
final decision finding liability and the date by which such liability must be
paid, a copy of such letter, together with a duly executed certificate of the
president or chief financial officer of such Borrower setting forth the action
that such Borrower proposes to take with respect thereto;

     

    (j) promptly
and in any event within five (5) Business Days after the existence of any of the
following conditions, a duly executed certificate of an Authorized Officer of
the Borrower Agent specifying in detail the nature of such condition and, if
applicable, the proposed response of the Borrowers thereto:

     

    
      	
              (i) 
       

            	
              receipt
      by any Borrower of any written communication from a Governmental Authority
      or any written communication from any other Person or other source of
      written information, including (to the extent not privileged) reports
      prepared by any Borrower, that alleges or indicates that any Borrower or
      an Environmental Affiliate is not in compliance in all material respects
      with applicable Environmental Laws or Environmental
    Approvals;

            

    

     

    
      	
              (ii) 
       

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

            

    

     

    
      	
              (iii)
        

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

            

    

     

    
      	
              (iv)
        

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

            

    

     

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

     

    

    
      
        
           

        

        
          -50-

          
            

          

        

        
           

        

      

    

    

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

     

    (m) other
information reasonably requested by the Administrative Agent or any Lender,
through the Administrative Agent.

     

    

     

    ARTICLE
VIII

     

    [INTENTIONALLY
OMITTED]

     

    

     

    ARTICLE
IX

     

    DEFAULT
AND ENFORCEMENT

     

    Section
9.01 Events of
Default.  Notwithstanding the provisions of Section 362 of
the Bankruptcy Code and without notice, application or motion to, hearing
before, or order of the Bankruptcy Court or any notice to any Borrower, each of
the following events or occurrences described in this Section 9.01 shall
constitute an Event of Default.

     

    (a) Nonpayment.  Any
Borrower fails to pay (i) any amount of principal of any Loan when the same
becomes due and payable or (ii) any interest on any Loan or any fee or other
Obligation or amount payable hereunder or under any other Financing Document
within three (3) Business Days after the same becomes due and
payable.

     

    (b) Breach of
Warranty.  Any representation or warranty of any Borrower made
or deemed to be restated or remade in any Financing Document is or shall be
incorrect or misleading in any material respect when made or deemed made; provided that (i) if
such Borrower was not aware that such representation or warranty was incorrect
or misleading at the time such representation or warranty was made or deemed
repeated, (ii) the fact, event or circumstance resulting in such incorrect or
misleading representation or warranty is capable of being cured, corrected or
otherwise remedied, (iii) such fact, event or circumstance resulting in such
incorrect or misleading representation or warranty is cured, corrected or
otherwise remedied within thirty (30) days from the date any Borrower obtains,
or should have obtained, knowledge thereof, and (iv) no Material Adverse Effect
shall have occurred as a result of such representation or warranty being
incorrect or misleading, then such incorrect representation or warranty shall
not constitute an Event of Default.

     

    

    
      
        
           

        

        
          -51-

          
            

          

        

        
           

        

      

    

    

    (c) Non-Performance of Certain
Covenants and Obligations.  Any Borrower defaults in the due
performance and observance of any of its obligations under any of Sections 7.01(g) (Affirmative
Covenants – Use of Proceeds), 7.01(h) (Affirmative
Covenants – Insurance), 7.02 (Negative
Covenants) and 7.03 (Reporting
Requirements) of this
Agreement.

     

    (d) Non-Performance of Other
Covenants and Obligations.  Any Borrower defaults in the due
performance and observance of any covenant or agreement (other than covenants
and agreements referred to in Section 9.01(a) or
9.01(c))
contained in any Financing Document, and such default shall continue unremedied
for a period of thirty (30) days after any Borrower obtains, or should have
obtained, knowledge thereof.

     

    (e) Cross
Defaults.  Any one of the following occurs with respect to any
Borrower (with respect to any Indebtedness entered into (x) Pre-Petition
and which is assumed after the Petition Date or is not subject to the automatic
stay provisions of Section 362 of the Bankruptcy Code or
(y) Post-Petition) in the amount greater than $100,000:

     

    
      	
              (i) 
       

            	
              a
      default occurs in the payment when due (subject to any applicable grace
      period and notice requirements), whether by acceleration or otherwise, of
      such Indebtedness; or

            

    

     

    
      	
              (ii) 
       

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

            

    

     

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

     

    

    
      
        
           

        

        
          -52-

          
            

          

        

        
           

        

      

    

    

    (g) ERISA
Events.  (i) Any Termination Event occurs, (ii) any Plan incurs
an “accumulated funding deficiency” (as defined in Section 412 of the Code or
Section 302 of ERISA), (iii) any Borrower or member of any Borrower’s ERISA
Controlled Group engages in a transaction that is prohibited under Section 4975
of the Code or Section 406 of ERISA, (iv) any Borrower or any ERISA Affiliate
fails to pay when due any amount it has become liable to pay to the PBGC, any
Plan or a trust established under Title IV of ERISA, (v) a condition exists by
reason of which the PBGC would be entitled to obtain a decree adjudicating that
an ERISA Plan must be terminated or have a trustee appointed to administer it,
(vi) any Borrower or any ERISA Affiliate suffers a partial or complete
withdrawal from a Multiemployer Plan or is in “default” (as defined in Section
4219(c)(5) of ERISA) with respect to payments to a Multiemployer Plan, (vii) a
proceeding is instituted against any Borrower to enforce Section 515 of ERISA,
(viii) the aggregate amount of the then “current liability” (as defined in
Section 412(l)(7) of the Code, as amended) of all accrued benefits under such
Plan or Plans exceeds the then current value of the assets allocable to such
benefits by more than two million Dollars ($2,000,000) at such time, or (ix) any
other event or condition occurs or exists with respect to any Plan that would
subject any Borrower to any tax, penalty or other liability.

     

    (h) Project Document Defaults;
Termination.

     

    
      	
              (i) 
       

            	
              Any
      Borrower or any other Major Project Party shall be in material breach of
      or otherwise in material default under any Project Document (other than as
      a result of the Cases, the Cold Shutdown of the Madera Plant, the Magic
      Valley Plant, the Stockton Plant and, after the Boardman CS Date, the
      Boardman Plant or any breach or default that has not had and could not
      reasonably be expected to have a Material Adverse Effect) and such breach
      or default has continued beyond any applicable grace period expressly
      provided for in such Project Document (or if no cure period is provided,
      thirty (30) days).

            

    

     

    
      	
              (ii)
        

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

            

    

     

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

     

    

    
      
        
           

        

        
          -53-

          
            

          

        

        
           

        

      

    

    

    (j) Unenforceability of
Pre-Petition Documentation.  Except as a result of an Effect of
Bankruptcy:

     

    
      	
              (i)
        

            	
              any
      material provision of any Pre-Petition Financing Document shall cease to
      be in full force and effect;

            

    

     

    
      	
              (ii) 
       

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

            

    

     

    
      	
              (iii)
        

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

            

    

     

    (k) Unenforceability of
Documentation.  At any time after the execution and delivery
thereof:

     

    
      	
              (i)
        

            	
              any
      material provision of any Financing Document shall cease to be in full
      force and effect;

            

    

     

    
      	
              (ii) 
       

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

            

    

     

    
      	
              (iii) 
       

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

            

    

     

    
      	
              (iv) 
       

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

            

    

     

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

     

    

    
      
        
           

        

        
          -54-

          
            

          

        

        
           

        

      

    

    

    (m) Loss of
Collateral.  Any portion of the Collateral (other than a
portion that is immaterial) is damaged, seized or appropriated; provided, that such an
occurrence shall not constitute an Event of Default if the applicable Borrowers
repair, replace, rebuild or refurbish such damaged, seized or appropriated
Collateral with the approval of the Required Lenders, in consultation with the
Independent Engineer.

     

    (n) Event of
Abandonment.  An Event of Abandonment occurs.

     

    (o) Taking or Total
Loss.  An Event of Taking with respect to all or a material
portion of any Plant or any Equity Interests comprising the Collateral occurs,
or an Event of Total Loss occurs.

     

    (p) Reorganization
Matters.  Any of the following occurs in any Chapter 11
Case:

     

    
      	
              (i) 
       

            	
              the
      bringing of a motion or taking of any action by a
      Debtor:  (w) to obtain additional financing under
      Section 364(c) or (d) of the Bankruptcy Code not otherwise
      permitted pursuant to this Agreement; (x) to grant any Lien other
      than Permitted Lien upon or affecting any Collateral; (y) except as
      provided in the Interim Order, Final Order or DIP Budget, as the case may
      be, to use cash collateral under Section 363(c) of the Bankruptcy
      Code without the prior written consent of the Administrative Agent and the
      Lenders; or

            

    

     

    
      	
              (ii)
        

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

            

    

     

    
      	
              (iii)
        

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

            

    

     

    
      	
              (iv)
        

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

            

    

     

    
      	
              (v)
        

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

            

    

     

    
      	
              (vi)
        

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

            

    

     

    

    
      
        
           

        

        
          -55-

          
            

          

        

        
           

        

      

    

    

    
      	
              (vii) 
       

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

            

    

     

    
      	
              (viii) 
       

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

            

    

     

    
      	
              (ix)
        

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

            

    

     

    
      	
              (x) 
       

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

            

    

     

    
      	
              (xi) 
       

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

            

    

     

    
      	
              (xii)
        

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

            

    

     

    
      	
              (xiii)
        

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

            

    

     

    
      	
              (xiv)
        

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

            

    

     

    
      	
              (xv) 
       

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

            

    

     

    

    
      
        
           

        

        
          -56-

          
            

          

        

        
           

        

      

    

    

    
      	
              (xvi) 
       

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

            

    

     

    
      	
              (xvii) 
       

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

            

    

     

    
      	
              (xviii) 
       

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

            

    

     

    
      	
              (xix)
        

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

            

    

     

    
      	
              (xx)
        

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

            

    

     

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

     

    (r) Change of
Control.  A Change of Control occurs.

     

    

    
      
        
           

        

        
          -57-

          
            

          

        

        
           

        

      

    

    

    Section
9.02 Action Upon Event of
Default.

     

    (a) If any
Event of Default has occurred and is continuing, the Administrative Agent shall,
upon the direction of the Required Lenders, notwithstanding the provisions of
Section 362 of the Bankruptcy Code (the automatic stay of Section 362
of the Bankruptcy Code shall be deemed modified and vacated to permit the Senior
Secured Parties to exercise their remedies under this Agreement and the
Financing Documents), without any application, motion or notice to, hearing
before, or order from, the Bankruptcy Court: (i) terminate the DIP
Facility; (ii) reduce the Commitment from time to time; (iii) declare
all or any portion of the Obligations due and payable; (iv) increase the
rate of interest applicable to the Obligations to the Default Rate; (v) direct
any or all of the Borrowers to sell or otherwise dispose of any or all of the
Collateral on terms and conditions acceptable to the Administrative Agent and
the Lenders pursuant to Sections 363, 365 and other applicable provisions
of the Bankruptcy Code (and, without limiting the foregoing, direct any Borrower
to assume and assign any lease or executory contract included in the Collateral
to the Collateral Agent’s designees in accordance with and subject to
Section 365 of the Bankruptcy Code), (vi) enter onto the premises of
any Borrower in connection with an orderly liquidation of the Collateral, and
(vii) exercise any rights and remedies provided to the Senior Secured
Parties under the Financing Documents or at law or equity, including all
remedies provided under the UCC and pursuant to the Interim Order and the Final
Order.

     

    (b) Notwithstanding
anything to the contrary contained herein, the Senior Secured Parties shall not
be permitted to exercise any remedy (other than those described in
clauses (i), (ii), (iii) and (iv) of Section 9.02(a) (Action
Upon Event of Default))  unless the Administrative Agent shall
have given three (3) Business Days written notice (the “Notice Period”) to
the Debtors, counsel to the Committee and the Office of the U.S. Trustee during
which Notice Period the Debtors and the Committee may seek relief from the
Bankruptcy Court to re-impose or continue the automatic stay with respect to any
remedy other than those described in clauses (i), (ii), (iii) and (iv) of
Section
9.02(a) (Action
Upon Event of Default); provided, that in any
hearing after the giving of the aforementioned notice, the only issue that may
be raised by the Debtors and the Committee being whether, in fact, an Event of
Default has occurred and is continuing. 

     

    Section
9.03 Remedies.  Upon
the occurrence and during the continuation of an Event of Default, the
Collateral Agent shall have the right, but not the obligation, subject to the
Orders, to do any of the following:

     

    (a)           vote
or exercise any and all of any Borrower's rights or powers incident to its
ownership of Equity Interests in any Borrower, including any rights or powers to
manage or control such Borrower;

     

    (b)           demand,
sue for, collect or receive any money or property at any time payable to or
receivable by any Borrower on account of or in exchange for all or part of the
Equity Interests pledged by it pursuant to the Orders;

     

    (c)           amend,
terminate, supplement or modify all or any of the Organic Documents of the
Borrowers;

     

    

    
      
        
           

        

        
          -58-

          
            

          

        

        
           

        

      

    

    

    (d)           proceed
to protect and enforce the rights vested in it hereunder and under the
UCC;

     

    (e)           cause
all revenues and all other moneys and other property forming part of the
Collateral to be paid and/or delivered directly to it, and demand, sue for,
collect and receive any such moneys and property;

     

    (f)           cause
any action at law or in equity or other proceeding to be instituted and
prosecuted to collect or enforce any of the Obligations, or rights hereunder or
included in the Collateral, or for specific enforcement of any covenant or
agreement contained herein or in any Project Documents or other agreements
forming part of the Collateral, or in aid of the exercise of any power herein or
therein granted, or for any foreclosure hereunder and sale under a judgment or
decree in any judicial proceeding, or to enforce any other legal or equitable
right vested in it by this Agreement or by Law;

     

    (g)           foreclose
or enforce any other agreement or other instrument by or under or pursuant to
which the Obligations are issued or secured;

     

    (h)           incur
expenses, including attorneys' fees, consultants' fees, and other costs in
connection with the exercise of any right or power under this Agreement or any
other Financing Document;

     

    (i)           perform
any obligation of any Borrower hereunder or under any other Financing Document
or any Project Document or other agreement forming part of the Collateral,
submit renewal notices or exercise any purchase options under leases, and make
payments, purchase, contest or compromise any encumbrance, charge, or lien, and
pay taxes and expenses and insure, process and preserve the Collateral without,
however, any obligation to do so;

     

    (j)           take
possession of the Collateral and of any and all books of account and records of
the Borrowers relating to any of the Collateral and render it usable and repair
and renovate the same without, however, any obligation to do so, and enter upon,
or authorize its designated agent to enter upon, any location where the same may
be located for that purpose (including the right of the Collateral Agent to
exclude the Borrowers and all Persons claiming access through any of the
Borrowers from any access to the Collateral or to any part thereof) and the
Collateral Agent and its representatives are hereby granted an irrevocable
license to enter upon such premises for such purpose, control, manage, operate,
rent and lease the Collateral, either separately or in conjunction with the
Project, collect all rents and income from the Collateral and apply the same to
reimburse the Senior Secured Parties for any reasonable cost or expenses
incurred hereunder or under any of the Financing Documents and to the payment or
performance of any of the Obligations, and apply the balance to the Obligations
as provided herein and any remaining excess balance to whomsoever is legally
entitled thereto;

     

    (k)           make
any reasonable compromise or settlement deemed desirable with respect to any of
the Collateral and extend the time of payment, arrange for payment installments,
or otherwise modify the terms of, any Collateral;

     

    

    
      
        
           

        

        
          -59-

          
            

          

        

        
           

        

      

    

    

    (1)           secure
the appointment of a receiver of the Collateral or any part thereof, whether
incidental to a proposed sale of the Collateral or otherwise, and all
disbursements made by such receiver and the expenses of such receivership shall
be added to and be made a part of the Obligations and, whether or not said
principal sum, including such disbursements and expenses, exceeds the
indebtedness originally intended to be secured hereby, the entire amount of said
sum, including such disbursements and expenses, shall be secured by the DIP
Liens and shall be due and payable upon demand therefor and thereafter shall
bear interest at the Default Rate or the maximum rate permitted by applicable
Law, whichever is less;

     

    (m)           enter
into any extension, reorganization, deposit, merger, consolidation or other
agreement pertaining to, or deposit, surrender, accept, hold or apply other
property in exchange for, the Collateral or any part thereof;

     

    (n)           transfer
the Collateral or any part thereof to the name of the Collateral Agent or to the
name of a Collateral Agent's nominee;

     

    (o)           take
possession of and endorse in the name of any Borrower or in the name of the
Collateral Agent, for the account of any Borrower, any bills of exchange,
checks, drafts, money orders, notes or any other chattel paper, documents or
instruments constituting all or any part of the Collateral or received as
interest, rent or other payment on or on account of the Collateral or any part
thereof or on account of its sale or lease;

     

    (p)           appoint
another Person (who may be an employee, officer or other representative of the
Collateral Agent) to do any of the foregoing, or take any other action permitted
hereunder, on behalf of the Collateral Agent;

     

    (q)           execute
(in the name, place and stead of any Borrower) endorsements, assignments and
other instruments of conveyance or transfer with respect to all or any of the
Collateral;

     

    (r)           take
any other action which the Collateral Agent deems necessary or desirable to
protect or realize upon its security interest in the Collateral or any part
thereof;

     

    (s)           require
each Borrower to assemble the Collateral or any part thereof and to make the
same (to the extent the same is reasonably moveable) available to the Collateral
Agent at a place to be designated by the Collateral Agent which is reasonably
convenient to the Borrowers and the Collateral Agent;

     

    (t)           make
formal application for the transfer of all or any Governmental Approvals of any
Borrower to the Collateral Agent or to any assignee of the Collateral Agent or
to any purchaser of any of the Collateral to the extent the same are assignable
in accordance with their terms and applicable Laws;

     

    (u)           bring
an action or proceeding to foreclose or proceed to sell any real property
pursuant to a power of sale; and/or

     

    

    
      
        
           

        

        
          -60-

          
            

          

        

        
           

        

      

    

    

    (v)           exercise
any other or additional rights or remedies granted to the Collateral Agent under
any other provision of this Agreement or any other Financing Document, or
exercisable by a secured party under the UCC or under any other applicable Law
and without limiting the generality of the foregoing and without notice except
as specified below, sell the Collateral or any part thereof in one or more
parcels at public or private sale, at any exchange or broker's board or
elsewhere, at such price or prices and on such other terms as the Collateral
Agent may deem commercially reasonable in accordance with the UCC.

     

    Section
9.04 Minimum Notice
Period.  If, pursuant to applicable Laws, prior notice of any
action described in Section 9.03 (Remedies) is required to be
given to any Borrower, each Borrower hereby acknowledges that the minimum time
required by such applicable Laws, or, if no minimum time is specified, ten (10)
days shall be deemed a reasonable notice period.

     

    Section
9.05 Sale of
Collateral.  In addition to exercising the foregoing rights,
the Collateral Agent may, to the extent permitted by applicable Laws and subject
to the Orders, arrange for and conduct the sale of the Collateral at a public or
private sale (as the Collateral Agent may elect) which sale may be conducted by
an employee or representative of the Collateral Agent, and any such sale shall
be conducted in a commercially reasonable manner.  The Collateral
Agent may release, temporarily or otherwise, to the applicable Borrower any item
of Collateral of which the Collateral Agent has taken possession pursuant to any
right granted to the Collateral Agent by this Agreement without waiving any
rights granted to the Collateral Agent under this Agreement, the other Financing
Documents or any other agreement related hereto or thereto.  Each
Borrower, in dealing with or disposing of the Collateral or any part thereof,
hereby waives all rights, legal and equitable, it may now or hereafter have to
require marshaling of assets or to require, upon foreclosure, sales of assets in
a particular order.  Each successor of any Borrower under the
Financing Documents agrees that it shall be bound by the above waiver, to the
same extent as if such successor gave the waiver itself.  Each
Borrower also hereby waives, to the full extent it may lawfully do so, the
benefit of all laws providing for rights of appraisal, valuation, stay,
extension or redemption after foreclosure now or hereafter in
force.  If the Collateral Agent sells any of the Collateral upon
credit, the Borrower in respect of such Collateral will be credited only with
payments actually made by the purchaser and received by the Collateral
Agent.  In the event the purchaser fails to pay for the Collateral,
the Collateral Agent may resell the Collateral and the relevant Borrower shall
be credited with the proceeds of the sale in excess of the amounts required to
pay the Obligations in full.  In the event the Collateral Agent bids
at any foreclosure or trustee's sale or at any private sale permitted by Law and
this Agreement or any other Financing Document, the Collateral Agent may bid all
or less than the amount of the Obligations.  The Collateral Agent
shall not be obligated to make any sale of Collateral regardless of whether or
not notice of sale has been given.  The Collateral Agent may adjourn
any public or private sale from time to time by announcement at the time and
place fixed therefor, and such sale may, without further notice, be made at the
time and place to which it was so adjourned.  Each Borrower further
acknowledges and agrees that any offer to sell any part of the Collateral that
has been (i) publicly advertised on a bona fide basis in a newspaper or
other publication of general circulation or (ii) made privately in the
manner described herein to not less than fifteen (15) bona fide offerees shall
be deemed to involve a "public disposition" for the purposes of Section 9-610(c)
of the UCC.

     

    

    
      
        
           

        

        
          -61-

          
            

          

        

        
           

        

      

    

    

    Section
9.06 Actions Taken by Collateral
Agent.  Any action or proceeding to enforce this Agreement or
any Project Document or other agreement forming part of the Collateral may be
taken by the Collateral Agent either in the name of the applicable Borrower or
in the Collateral Agent's name, as the Collateral Agent may deem
necessary.

     

    Section
9.07 Private
Sales.  The Collateral Agent shall incur no liability as a
result of the sale of the Collateral, or any part thereof, at any private sale
made in good faith by Collateral Agent pursuant to Section 9.03 (Remedies) or Section 9.05 (Sale of
Collateral) conducted in a
commercially reasonable manner and in accordance with the requirements of
applicable Laws.  Each Borrower hereby waives any claims against the
Collateral Agent and the other Senior Secured Parties arising by reason of the
fact that the price at which the Collateral may have been sold at such a private
sale was less than the price that might have been obtained at a public sale or
was less than the aggregate amount of the Obligations, even if the Collateral
Agent accepts the first offer received and does not offer the Collateral to more
than one offeree, provided that such private sale is conducted in a commercially
reasonable manner and in accordance with applicable Laws.

     

    Section
9.08 Access to
Land.  In exercising its right to take possession of the
Collateral upon the occurrence and during the continuation of an Event of
Default hereunder, the Collateral Agent, personally or by its agents or
attorneys, and subject to the rights of any tenant under any lease or sublease
of the Collateral and subject to the Orders, to the fullest extent permitted by
Law, may enter upon any land owned or leased by any Borrower without being
guilty of trespass or any wrongdoing, and without liability to such Borrower for
damages thereby occasioned.

     

    Section
9.09 Compliance With Limitations
and Restrictions.  Each Borrower hereby agrees that in respect
of any sale of any of the Collateral pursuant to the terms hereof, the
Collateral Agent is hereby authorized to comply with any limitation or
restriction in connection with such sale as it may be advised by counsel is
necessary in order to avoid any violation of applicable Laws, or in order to
obtain any required approval of the sale or of the purchaser by any Governmental
Authority or official, and each Borrower further agrees that such compliance
shall not result in such sale being considered or deemed not to have been made
in a commercially reasonable manner, nor shall the Collateral Agent be liable or
accountable to such Borrower for any discount allowed by reason of the fact that
such Collateral is sold in compliance with any such limitation or
restriction.

     

    Section
9.10 No Impairment of
Remedies.  If, in the exercise of any of its rights and
remedies hereunder, the Collateral Agent forfeits any of its rights or remedies,
including any right to enter a deficiency judgment against any Borrower or any
other Person, whether because of any applicable Law pertaining to "election of
remedies" or otherwise, each Borrower hereby consents to such action by the
Collateral Agent and, to the extent permitted by applicable Law, waives any
claim based upon such action, even if such action by the Collateral Agent would
result in a full or partial loss of any rights of subrogation, indemnification
or reimbursement which such Borrower might otherwise have had but for such
action by the Collateral Agent or the terms herein.  Any election of
remedies which results in the denial or impairment of the right of the
Collateral Agent to seek a deficiency judgment against any of the parties to any
of the Financing Documents shall not, to the extent permitted by applicable
Laws, impair any Borrower's obligations hereunder.

     

    

    
      
        
           

        

        
          -62-

          
            

          

        

        
           

        

      

    

    

    Section
9.11 Attorney-In-Fact.  (a)
Each Borrower hereby constitutes and appoints the Collateral Agent, acting for
and on behalf of itself and the other Senior Secured Parties and each successor
or permitted assign of the Collateral Agent and the other Senior Secured
Parties, the true and lawful attorney-in-fact of such Borrower, with full power
and authority in the place and stead of such Borrower and in the name of such
Borrower, Collateral Agent or otherwise to enforce all rights, interests and
remedies of such Borrower with respect to the Collateral or enforce all rights,
interests and remedies of the Collateral Agent under this Agreement (including
the rights set forth in this Article IX); provided, however,
that Collateral Agent shall not exercise any of the aforementioned rights unless
an Event of Default has occurred and is continuing and has not been waived or
cured in accordance with this Agreement and the other Financing Documents and
delivery of notice as set forth in Section 9.02(b) and
the Orders.  This power of attorney is a power coupled with an
interest and shall be irrevocable; provided further, however,
that nothing in this Agreement shall prevent any Borrower from, prior to the
exercise by Collateral Agent of any of the aforementioned rights, undertaking
such Borrower's operations in the ordinary course of business in accordance with
the Collateral and the Financing Documents.

     

    (b)           If
any Borrower fails to perform any agreement or obligation contained herein, and
such failure continues for ten (10) days following delivery of written notice by
the Collateral Agent to such Borrower, and subject to the Orders, the Collateral
Agent itself may perform, or cause performance of, such agreement or obligation,
and the reasonable expenses of the Collateral Agent incurred in connection
therewith shall be payable by such Borrower and shall be secured by the
Collateral.

     

    Section
9.12 Application of
Proceeds.  Any moneys received by the Collateral Agent after
the occurrence and during the continuance of an Event of Default may be held by
the Collateral Agent on account of the Obligations without prejudice to any
claim by any Senior Secured Party for any deficiency after such moneys are
received by the Senior Secured Parties, and each Debtor shall remain liable for
any such deficiency.  All such moneys may be applied to such part of
the Obligations as the Senior Secured Parties may direct.  The Senior
Secured Parties may at any time change any such appropriation of any such
moneys received by the Senior Secured Parties and may reapply the same to any
other part of the Obligations as the Senior Secured Parties may from time to
time see fit, notwithstanding any previous application.

     

    

     

    ARTICLE
X

     

    THE
AGENTS

     

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

     

    

    
      
        
           

        

        
          -63-

          
            

          

        

        
           

        

      

    

    

    (b) Each
Lender hereby appoints WestLB as its Administrative Agent under and for purposes
of each Financing Document to which it is a party.  WestLB hereby
accepts this appointment and agrees to act as the Administrative Agent for the
Lenders in accordance with the terms of this Agreement.  Each Lender
appoints and authorizes the Administrative Agent to act on behalf of such Lender
under each Financing Document to which it is a party and, in the absence of
other written instructions from the Required Lenders received from time to time
by the Administrative Agent (with respect to which the Administrative Agent
agrees that it will comply, except as otherwise provided in this Section 10.01 or as
otherwise advised by counsel), to exercise such powers hereunder and thereunder
as are specifically delegated to or required of the Administrative Agent by the
terms hereof and thereof, together with such powers as may be reasonably
incidental thereto.  Notwithstanding any provision to the contrary
contained elsewhere in any Financing Document, the Administrative Agent shall
not have any duties or responsibilities, except those expressly set forth
herein, nor shall the Administrative Agent have or be deemed to have any
fiduciary relationship with any Lender, and no implied covenants, functions,
responsibilities, duties, obligations or liabilities shall be read into any
Financing Document or otherwise exist against the Administrative
Agent.  Without limiting the generality of the foregoing sentence, the
use of the term “agent” in this Agreement with reference to the Administrative
Agent is not intended to connote any fiduciary or other implied (or express)
obligations arising under agency doctrine of any applicable
Law.  Instead, such term is used merely as a matter of market custom,
and is intended to create or reflect only an administrative relationship between
independent contracting parties.

     

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

     

    

    
      
        
           

        

        
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    (d) Each
Lender hereby appoints and authorizes the Accounts Bank to act as depository for
the Collateral Agent, on behalf of the Senior Secured Parties, and as the
securities intermediary or bank with respect to the Project Accounts for the
benefit of the Collateral Agent, on behalf of the Senior Secured Parties, with
such powers as are expressly delegated to the Accounts Bank by the terms of this
Agreement, together with such other powers as are reasonably incidental
thereto.  The Accounts Bank hereby accepts this appointment and agrees
to act as the depository for the Collateral Agent, on behalf of the Senior
Secured Parties, and as the securities intermediary or bank with respect to the
Project Accounts, for the benefit of the Collateral Agent, on behalf of the
Senior Secured Parties, in accordance with the terms of this
Agreement.  The Accounts Bank further agrees to accept and hold, as
securities intermediary or as a bank, in its custody and in accordance with the
terms of this Agreement, for the Collateral Agent, on behalf of the Senior
Secured Parties, the Project Accounts and the Accounts Property.  Each
Lender also appoints and authorizes the Accounts Bank to act on its behalf for
the purpose of the creation and perfection of a first priority security interest
in favor of the Collateral Agent, on behalf of the Senior Secured Parties, in
the Project Accounts to the extent that they are deemed under applicable Law not
to constitute securities accounts or deposit accounts and in any Accounts
Property that is deemed under applicable Law not to constitute a Financial
Asset.  The Accounts Bank accepts this appointment and agrees to act
as the Accounts Bank for the Collateral Agent, on behalf and for the benefit of
the Senior Secured Parties, for such purpose and to hold and maintain exclusive
dominion and control over the Project Accounts and any such Accounts Property on
behalf of the Collateral Agent, acting on behalf of the Senior Secured
Parties.  Notwithstanding any provision to the contrary contained
elsewhere in any Financing Document, the Accounts Bank shall not have any duties
or responsibilities, except those expressly set forth herein, nor shall the
Accounts Bank have or be deemed to have any fiduciary relationship with any
Lender, and no implied covenants, functions, responsibilities, duties,
obligations or liabilities shall be read into any Financing Document or
otherwise exist against the Accounts Bank.  Without limiting the
generality of the foregoing sentence, the use of the term “agent” in this
Agreement with reference to the Accounts Bank is not intended to connote any
fiduciary or other implied (or express) obligations arising under agency
doctrine of any applicable Law.  Instead, such term is used merely as
a matter of market custom, and is intended to create or reflect only an
administrative relationship between independent contracting
parties.

     

    Section
10.02 Rights as a
Lender.  Each Person serving as Agent hereunder or under any
other Financing Document shall have the same rights and powers in its capacity
as a Lender as any other Lender and may exercise the same as though it were not
an Agent.  Each such Person and its Affiliates may accept deposits
from, lend money to, act as the financial advisor or in any other advisory
capacity for and generally engage in any kind of business with any Borrower or
Affiliate thereof as if such Person were not an Agent hereunder and without any
duty to account therefor to the Lenders or any other Agent.

     

    Section
10.03 Exculpatory
Provisions.  (a)  No Agent shall have any duties or
obligations except those expressly set forth herein and in the other Financing
Documents.  Without limiting the generality of the foregoing, no Agent
shall:

     

    
      	
              (i)  
       

            	
              be
      subject to any fiduciary or other implied duties, regardless of whether a
      Default or Event of Default has occurred and is
  continuing;

            

    

     

    

    
      
        
           

        

        
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              (ii) 
        

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

            

    

     

    
      	
              (iii)
        

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

            

    

     

    (b) No Agent
shall be liable for any action taken or not taken by it (i) with the prior
written consent or at the request of the Required Lenders (or such other number
or percentage of the Lenders as may be necessary, or as such Agent may believe
in good faith to be necessary, under the circumstances as provided in Section 10.01 (Appointment
and Authority)), (ii) in
connection with any amendment, consent, approval or waiver which it is permitted
under the Financing Documents to enter into, agree to or grant or (iii) in the
absence of its own gross negligence or willful misconduct.  Each Agent
shall be deemed not to have knowledge of any Default or Event of Default unless
and until notice describing such Default or Event of Default is given to such
Agent in writing by a Borrower or a Lender.

     

    (c) No Agent
shall be responsible for or have any duty to ascertain or inquire into (i) any
statement, warranty or representation made in or in connection with this
Agreement or any other Financing Document, (ii) the contents of any certificate,
report or other document delivered hereunder or thereunder or in connection
herewith or therewith, (iii) the performance or observance of any of the
covenants, agreements or other terms or conditions set forth herein or therein
or the occurrence or continuance of any Default or Event of Default, (iv) the
validity, enforceability, effectiveness or genuineness of this Agreement, any
other Financing Document or any other agreement, instrument or document, or the
perfection or priority of any Lien or security interest, or (v) the satisfaction
of any condition set forth in Article VI (Conditions
Precedent) or elsewhere
herein, other than to confirm receipt of items expressly required to be
delivered to any such Agent.

     

    

    
      
        
           

        

        
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    Section
10.04 Reliance by
Agents.  Each Agent shall be entitled to rely upon, and shall
not incur any liability for relying upon, any notice, request, certificate,
consent, statement, instrument, document or other writing (including any
electronic message, internet or intranet website posting or other distribution)
believed by it to be genuine and to have been signed, sent or otherwise
authenticated by the proper Person.  Each Agent also may rely upon any
statement made to it orally or by telephone and believed by it to have been made
by the proper Person, and shall not incur any liability for relying
thereon.  In determining compliance with any condition hereunder to
the making of a Loan that by its terms must be fulfilled to the satisfaction of
a Lender, each Agent may presume that such condition is satisfactory to such
Lender unless such Agent shall have received notice to the contrary from such
Lender prior to the making of such Loan.  Each Agent may consult with
legal counsel (who may be counsel for a Borrower), independent accountants and
other experts selected by it, and shall not be liable for any action taken or
not taken by it in accordance with the advice of any such counsel, accountants
or experts.

     

    Section
10.05 Delegation of
Duties.  Each Agent may perform any and all of its duties and
exercise any and all its rights and powers hereunder or under any other
Financing Document by or through any one or more sub agents appointed by such
Agent.  Each Agent and any such sub agent may perform any and all of
its duties and exercise its rights and powers by or through their respective
Related Parties.  The exculpatory provisions of this Article X shall apply
to any such sub agent and to the Related Parties of such Agent and any such sub
agent, and shall apply to their respective activities in connection with their
acting as Agent.

     

    Section
10.06 Resignation or Removal of
Agent.  (a)  Any Agent may resign from the
performance of all its functions and duties hereunder and/or under the other
Financing Documents at any time by giving thirty (30) days’ prior notice to the
Borrowers and the Lenders.  Any Agent may be removed at any time by
the Required Lenders.  Such resignation or removal shall take effect
upon the appointment of a successor Agent, in accordance with this Section
10.06.

     

    (b) Upon any
notice of resignation by any Agent or upon the removal of any Agent by the
Required Lenders, the Required Lenders shall appoint a successor Agent hereunder
and under each other Financing Document who shall be a commercial bank having a
combined capital and surplus of at least two hundred fifty million Dollars
($250,000,000).

     

    (c) If no
successor Agent has been appointed within thirty (30) days after the date such
notice of resignation was given by such Agent or the Required Lenders elected to
remove such Agent, any Senior Secured Party may petition any court of competent
jurisdiction for the appointment of a successor Agent.  Such court may
thereupon, after such notice, if any, as it may deem proper, appoint a successor
Agent, as applicable, who shall serve as Agent, hereunder and under each other
Financing Document until such time, if any, as the Required Lenders appoint a
successor Agent, as provided above.

     

    

    
      
        
           

        

        
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    (d) Upon the
acceptance of a successor’s appointment as Agent hereunder, such successor shall
succeed to and become vested with all of the rights, powers, privileges and
duties of the retiring (or removed) Agent, and the retiring (or removed) Agent
shall be discharged from all of its duties and obligations hereunder or under
the other Financing Documents.  After the retirement or removal of any
Agent hereunder and under the other Financing Documents, the provisions of this
Article X shall
continue in effect for the benefit of such retiring (or removed) Agent, its sub
agents and their respective Related Parties in respect of any actions taken or
omitted to be taken by any of them while the retiring Agent was acting as
Agent.

     

    (e) If a
retiring or removed Agent is the Accounts Bank, such Accounts Bank will promptly
transfer all of the Project Accounts and the Accounts Property to the possession
or control of the successor Accounts Bank and will execute and deliver such
notices, instructions and assignments as may be reasonably necessary or
desirable to transfer the rights of the Accounts Bank with respect to the
Project Accounts and the Accounts Property to the successor Accounts
Bank.

     

    (f) If a
retiring or removed Agent is the Collateral Agent, such Collateral Agent will
promptly transfer any Collateral in the possession or control of such Collateral
Agent to the successor Collateral Agent and will execute and deliver such
notices, instructions and assignments as may be reasonably necessary or
desirable to transfer the rights of the Collateral Agent with respect to such
Collateral property to the successor Collateral Agent.

     

    Section
10.07 No Amendment to Duties of
Agent Without Consent.  No Agent shall be bound by any waiver,
amendment, supplement or modification of this Agreement or any other Financing
Document that affects its rights or duties hereunder or thereunder unless such
Agent shall have given its prior written consent, in its capacity as Agent,
thereto.

     

    Section
10.08 Non-Reliance on Agent and
Other Lenders.  Each Lender acknowledges that it has,
independently and without reliance upon any Agent or any other Lender or any of
their Related Parties and based on such documents and information as it has
deemed appropriate, made its own credit analysis and decision to enter into this
Agreement and make its Loans.  Each Lender also acknowledges that it
will, independently and without reliance upon any Agent or any other Lender or
any of their Related Parties and based on such documents and information as it
shall from time to time deem appropriate, continue to make its own decisions in
taking or not taking action under or based upon this Agreement, any other
Financing Document or any related agreement or any document furnished hereunder
or thereunder.

     

    Section
10.09 Collateral Agent May File
Proofs of Claim.  (a)  In case of the pendency of any
bankruptcy or insolvency proceeding relative to any Borrower, the Collateral
Agent (irrespective of whether the principal of any Loan shall then be due and
payable as herein expressed or by declaration or otherwise and irrespective of
whether the Collateral Agent or any other Senior Secured Party shall have made
any demand on any Borrower) shall be entitled and empowered, but shall not be
obligated to, by intervention in such proceeding or otherwise:

     

    

    
      
        
           

        

        
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              (i) 
       

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

            

    

     

    
      	
              (ii)
        

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

            

    

     

    Any custodian, receiver, assignee,
trustee, liquidator, sequestrator or other similar official in any such judicial
proceeding is hereby authorized by each Lender to make such payments to the
Collateral Agent and, in the event that the Collateral Agent may consent to the
making of such payments directly to the Lenders, to pay to the Collateral Agent
any amount due for the reasonable compensation, expenses, disbursements and
advances of the Agents and their respective agents and counsel, and any other
amounts due the Agents under Sections 3.11 (Fees), 11.07 (Costs
and Expenses) and 11.09 (Indemnification
by the Borrowers).

     

    (b) Nothing
contained herein shall be deemed to authorize the Collateral Agent to authorize
or consent to or accept or adopt on behalf of any Lender any plan of
reorganization, arrangement, adjustment or composition affecting the Obligations
or the rights of any Lender or to authorize the Collateral Agent to vote in
respect of the claim of any Lender in any such proceeding.

     

    Section
10.10 Collateral
Matters.  (a)  The Lenders irrevocably authorize the
Collateral Agent to release any Lien on any property granted to or held by the
Collateral Agent under any Financing Document (i) upon the occurrence of the
Discharge Date, (ii) if approved, authorized or ratified in writing in
accordance with Section 11.01 (Amendments,
Etc.) or
(iii) as permitted pursuant to the terms of the Financing Documents (including
as contemplated by Sections 7.02(f)
(Negative
Covenants-Asset Dispositions).

     

    (b) Upon
request by the Collateral Agent at any time, the Lenders will confirm in writing
the Collateral Agent’s authority to release its interest in particular types or
items of property pursuant to this Section
10.10.  In each case as specified in this Section 10.10, the
Collateral Agent will, at the Borrowers’ expense, execute and deliver to the
applicable Borrower such documents as such Person may reasonably request to
evidence the release of such item of Collateral in accordance with the terms of
the Financing Documents and this Section
10.10.

     

    

    
      
        
           

        

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

     

    ARTICLE
XI

     

    MISCELLANEOUS
PROVISIONS

     

    Section
11.01 Amendments,
Etc.  No amendment or waiver of any provision of this Agreement
or any other Financing Document, and no consent to any departure by any Borrower
or Borrower Agent therefrom, shall be effective unless in writing signed by the
Required Lenders (or, if expressly contemplated hereby, the Administrative
Agent) and, in the case of an amendment, the Borrowers and Borrower Agent, and
in each such case acknowledged by the Administrative Agent, and each such waiver
or consent shall be effective only in the specific instance and for the specific
purpose for which given; provided that no such
amendment, waiver or consent shall:

     

    (a) waive any
condition set forth in Section 6.01 (Conditions
to Closing) without the prior consent of all the Lenders (other than the
Non-Voting Lenders);

     

    (b) extend or
increase the Commitment of any Lender (or reinstate any Commitment terminated
pursuant to Section
9.02 (Action
Upon Event of Default) without the prior
written consent of such Lender (other than any Non-Voting Lender);

     

    (c) postpone
any date scheduled for any payment of principal or interest under Section 3.01 (Repayment
of Loans) or 3.02 (Interest
Payment Dates), or any date fixed
by the Administrative Agent for the payment of fees or other amounts due to the
Lenders (or any of them) hereunder or under any other Financing Document without
the prior written consent of each Lender affected thereby (other than any
Non-Voting Lender);

     

    (d) reduce
the principal of, or the rate of interest specified herein on, any Loan, or any
Fees or other amounts (including any mandatory prepayments under Section 3.08 (Mandatory
Prepayment) payable hereunder
or under any other Financing Document to any Lender without the prior written
consent of each Lender directly affected thereby (other than any Non-Voting
Lender); provided that
only the prior written consent of the Required Lenders shall be necessary to
amend the definition of Default Rate or to waive any obligation of the Borrowers
to pay interest at the Default Rate;

     

    (e) change
the order of application of any reduction in the Commitments or any prepayment
of Loans from the application thereof set forth in the applicable provisions of
Section 2.06
(Termination
or Reduction of Commitment), Section 3.07 (Optional
Prepayment) or 3.08 (Mandatory
Prepayment), respectively, in
any manner without the prior written consent of each Lender affected thereby
(other than any Non-Voting Lender);

     

    

    
      
        
           

        

        
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    (f) change
any provision of this Section 11.01, the
definition of Required Lenders or any other provision of any Financing Document
specifying the number or percentage of Lenders required to amend, waive or
otherwise modify any rights under any Financing Document (including any such
provision specifying the number or percentage of Lenders required to waive any
Event of Default or forbear from taking any action or pursuing any remedy with
respect to any Event of Default), or make any determination or grant any consent
under any Financing Document, without the prior written consent of each Lender
(other than any Non-Voting Lender); or

     

    (g) release
(i) any Borrower from all or substantially all of its obligations under any
Financing Document, or (ii) all or substantially all of the Collateral in any
transaction or series of related transactions, without the prior written consent
of each Lender (other than any Non-Voting Lender);

     

    and provided further that (i) no
amendment, waiver or consent shall, unless in writing and signed by an Agent in
addition to the Lenders required above, affect the rights or duties of, or any
fees or other amounts payable to, such Agent under this Agreement or any other
Financing Document; and (ii) Section 11.03(h)
(Assignments) may not be amended,
waived or otherwise modified without the prior written consent of each Granting
Lender all or any part of whose Loan is being funded by an SPV at the time of
such amendment, waiver or other modification.

     

    Notwithstanding
the other provisions of this Section 11.01, the
Borrowers, the Borrower Agent, the Collateral Agent and the Administrative Agent
may (but shall have no obligation to) amend or supplement the Financing
Documents without the consent of any Lender: (i) to cure any ambiguity, defect
or inconsistency; (ii) to make any change that would provide any additional
rights or benefits to the Lenders; or (iii) to make, complete or confirm any
grant of Collateral permitted or required by this Agreement or any release of
any Collateral that is otherwise permitted under the terms of this Agreement or
the Orders.  Notwithstanding anything to the contrary herein, no
Defaulting Lender shall have any right to approve or disapprove any amendment,
waiver or consent hereunder, except that the Commitment of such Lender may not
be increased or extended without the consent of such Lender.

     

    Section
11.02 Applicable Law;
Jurisdiction; Etc.  (a)  GOVERNING
LAW.  THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, UNITED STATES OF AMERICA,
WITHOUT REFERENCE TO CONFLICTS OF LAWS (OTHER THAN SECTION 5-1401 OF THE NEW
YORK GENERAL OBLIGATIONS LAW).

     

    (b) All
judicial proceedings brought against any Borrower or Borrower Agent arising out
of or relating to this Agreement or any other Financing Document, or nay
Obligations hereunder or thereunder, must be brought in the Bankruptcy Court
and, if the Bankruptcy Court does not have (or abstains from) jurisdiction, such
proceeding may be brought in the courts of the State of New York, the courts of
the Unites States of America for the Southern District of New York and appellate
court of any thereof.

     

    

    
      
        
           

        

        
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    (c) SUBMISSION TO
JURISDICTION.  EACH BORROWER AND THE BORROWER AGENT IRREVOCABLY
AND UNCONDITIONALLY CONSENTS AND AGREES THAT THE BANKRUPTCY COURT SHALL HAVE
EXCLUSIVE JURISDICTION TO HEAR AND DETERMINE ANY CLAIMS OR DISPUTES BETWEEN EACH
BORROWER AND THE BORROWER AGENT, ON THE ONE HAND, AND EACH LENDER AND EACH
AGENT, ON THE OTHER HAND, PERTAINING TO THIS AGREEMENT OR ANY OF THE OTHER
FINANCING DOCUMENTS OR TO ANY MATTER ARISING OUT OF OR RELATING TO THIS
AGREEMENT OR ANY OF THE OTHER FINANCING DOCUMENTS; PROVIDED, THAT EACH
BORROWER AND THE BORROWER AGENT ACKNOWLEDGE THAT ANY APPEALS FROM THE BANKRUPTCY
COURT MAY HAVE TO BE HEARD BY A COURT OTHER THAN THE BANKRUPTCY COURT; PROVIDED, FURTHER, THAT,
SUBJECT TO RECEIVING PRIOR APPROVAL FROM THE BANKRUPTCY COURT AUTHORIZING SUCH
ACTION, NOTHING IN THIS AGREEMENT SHALL BE DEEMED OR OPERATE TO PRECLUDE EACH
LENDER AND EACH AGENT BRINGING SUIT OR TAKING OTHER LEGAL ACTION IN ANY OTHER
JURISDICTION TO REALIZE ON THE COLLATERAL OR ANY OTHER SECURITY FOR THE
OBLIGATIONS, OR TO ENFORCE A JUDGMENT OR OTHER COURT ORDER.

     

    (d) WAIVER OF
VENUE.  EACH BORROWER AND THE BORROWER AGENT IRREVOCABLY AND
UNCONDITIONALLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY
OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY ACTION
OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER
FINANCING DOCUMENT IN ANY COURT REFERRED TO IN SECTION
11.02(b).  EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY
WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, THE DEFENSE OF AN
INCONVENIENT FORUM TO THE MAINTENANCE OF SUCH ACTION OR PROCEEDING IN ANY SUCH
COURT.

     

    (e) Immunity.  To
the extent that any Borrower or the Borrower Agent has or hereafter may acquire
any immunity from jurisdiction of any court or from any legal process (whether
through service or notice, attachment prior to judgment, attachment in aid of
execution, execution or otherwise) with respect to itself or its property, each
Borrower and the Borrower Agent hereby irrevocably and unconditionally waives
such immunity in respect of its obligations under the Financing Documents and,
without limiting the generality of the foregoing, agrees that the waivers set
forth in this Section
11.02(e) shall have the fullest scope permitted under the Foreign
Sovereign Immunities Act of 1976 of the United States and are intended to be
irrevocable for purposes of such Act.

     

    (f) WAIVER OF JURY
TRIAL.  EACH PARTY HERETO HEREBY IRREVOCABLY WAIVES, TO THE
FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY
JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING
TO THIS AGREEMENT OR ANY OTHER FINANCING DOCUMENT OR THE TRANSACTIONS
CONTEMPLATED HEREBY OR THEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER
THEORY).  EACH PARTY HERETO (i) CERTIFIES THAT NO REPRESENTATIVE,
AGENT OR ATTORNEY OF ANY OTHER PERSON HAS REPRESENTED, EXPRESSLY OR OTHERWISE,
THAT SUCH OTHER PERSON WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE
THE FOREGOING WAIVER AND (ii) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO
HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT AND THE OTHER FINANCING DOCUMENTS
BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION
11.02.

     

    

    
      
        
           

        

        
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    Section
11.03 Assignments.  (a)   The
provisions of this Agreement shall be binding upon and inure to the benefit of
the parties hereto and their respective successors and assigns permitted hereby,
except that neither any Borrower nor the Borrower Agent may assign or otherwise
transfer any of its rights or obligations hereunder without the prior written
consent of each Agent and Lender, and no Lender may assign or otherwise transfer
any of its rights or obligations hereunder except (i) to an Eligible Assignee in
accordance with Section 11.03(b),
(ii) by way of participation in accordance with Section 11.03(d),
(iii) by way of pledge or assignment of a security interest subject to the
restrictions of Section 11.03(f), or
(iv) to an SPV in accordance with the provisions of Section 11.03(h) (and
any other attempted assignment or transfer by any party hereto shall be null and
void).  Nothing in this Agreement, express or implied, shall be
construed to confer upon any Person (other than the parties hereto, their
respective successors and assigns permitted hereby, Participants to the extent
provided in this Section 11.03 and, to
the extent expressly contemplated hereby, the Related Parties of each Agent and
Lender) any legal or equitable right, remedy or claim under or by reason of this
Agreement.

     

    (b) Any
Lender may at any time after the date hereof assign to one or more Eligible
Assignees all or a portion of its rights and obligations under this Agreement
(including all or a portion of its Commitment and the Loans at the time owing to
it); provided
that (i) except in the case of an assignment of the entire remaining amount of
the assigning Lender’s Commitment and the Loans at the time owing to it or in
the case of an assignment to a Lender or an Affiliate of a Lender or an Approved
Fund with respect to a Lender, the Commitment (which for this purpose includes
the Loans outstanding thereunder) or, if the applicable Commitment is not then
in effect, the principal outstanding balance of the Loans of the assigning
Lender subject to each such assignment, determined as of the date the Lender
Assignment Agreement with respect to such assignment is delivered to the
Administrative Agent or, if “Trade Date” is specified in
the Lender Assignment Agreement, as of the Trade Date, shall not be less than
one million Dollars ($1,000,000) and such assigning Lender’s entire Commitment,
unless the Administrative Agent otherwise consents in writing; (ii) each partial
assignment shall be made as an assignment of a proportionate part of all the
assigning Lender’s rights and obligations under this Agreement with respect to
the Loan or the Commitment assigned; (iii) the parties to each assignment shall
execute and deliver to the Administrative Agent a Lender Assignment Agreement,
together with a processing and recordation fee of two thousand five hundred
Dollars ($2,500); provided that (A) no
such fee shall be payable in the case of an assignment to a Lender, an Affiliate
of a Lender or an Approved Fund with respect to a Lender and (B) in the case of
contemporaneous assignments by a Lender to one or more Funds managed by the same
investment advisor (which Funds are not then Lenders hereunder), only a single
such two thousand five hundred Dollars ($2,500) fee shall be payable for all
such contemporaneous assignments; (iv) the Eligible Assignee, if it is not a
Lender prior to such assignment, shall deliver to the Administrative Agent an
administrative questionnaire and (v) the assignor shall provide notice of such
assignment to the Borrower Agent.  Subject to acceptance and recording
thereof by the Administrative Agent pursuant to Section 11.03(c), on
and after the effective date specified in each Lender Assignment Agreement, the
Eligible Assignee thereunder shall be a party to this Agreement and, to the
extent of the interest assigned by such Lender Assignment Agreement, have the
rights and obligations of a Lender under this Agreement, and the assigning
Lender thereunder shall, to the extent of the interest assigned by such Lender
Assignment Agreement, be released from its obligations under this Agreement
(and, in the case of a Lender Assignment Agreement covering all of the assigning
Lender’s rights and obligations under this Agreement, such Lender shall cease to
be a party hereto but shall continue to be entitled to the benefits of Sections 4.01 (Eurodollar
Rate Lending Unlawful), 4.03 (Increased
Eurodollar Loan Costs), 4.05 (Funding
Losses),
11.07 (Costs
and Expenses) and 11.09 (Indemnification
by the Borrowers) with respect to
facts and circumstances occurring prior to the effective date of such
assignment).  Upon request, the Borrowers (at their expense) shall
execute and deliver a Note to the assignee Lender.  Any assignment or
transfer by a Lender of rights or obligations under this Agreement that does not
comply with this Section 11.03(b)
shall be treated for purposes of this Agreement as a sale by such Lender of a
participation in such rights and obligations in accordance with Section
11.03(d).

     

    

    
      
        
           

        

        
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    (c) The
Administrative Agent, acting solely for this purpose as an agent of the
Borrowers, shall maintain at the Administrative Agent’s office a copy of each
Lender Assignment Agreement delivered to it and a register for the recordation
of the names and addresses of the Lenders, and the Commitment of, and principal
amount of the Loans owing to, each Lender pursuant to the terms hereof from time
to time (the “Register”).  The
entries in the Register shall be conclusive, and the Borrowers, the Agents and
the Lenders may treat each Person whose name is recorded in the Register
pursuant to the terms hereof as a Lender hereunder for all purposes of this
Agreement, notwithstanding notice to the contrary.  The Register shall
be available for inspection by the Borrowers at any reasonable time and from
time to time upon reasonable prior notice.  In addition, at any time
that a request for a consent for a material or other substantive change to the
Financing Documents is pending, any Lender may request and receive from the
Administrative Agent a copy of the Register.

     

    (d) Any
Lender may at any time, without the consent of, or notice to, the Borrowers, the
Borrower Agent or any Agent, sell participations to any Person (each, a “Participant”) in all
or a portion of such Lender’s rights and/or obligations under this Agreement
(including all or a portion of its Commitment and/or the Loans owing to it);
provided that
(i) such Lender’s obligations under this Agreement shall remain unchanged, (ii)
such Lender shall remain solely responsible to the other parties hereto for the
performance of such obligations and (iii) the Borrowers, the Borrower Agent, the
Agents and the other Lenders shall continue to deal solely and directly with
such Lender in connection with such Lender’s rights and obligations under this
Agreement.  Any agreement or instrument pursuant to which a Lender
sells such a participation shall provide that such Lender shall retain the sole
right to enforce this Agreement and to approve any amendment, modification or
waiver of any provision of this Agreement; provided that such agreement
or instrument may provide that such Lender will not, without the consent of the
Participant, agree to any amendment, waiver or other modification described in
the first proviso to Section 11.01 (Amendments,
Etc.)
that directly affects such Participant.  Subject to Section 11.03(e), the
Borrowers agree that each Participant shall be entitled to the benefits of Sections 4.01 (Eurodollar
Rate Lending Unlawful), 4.03 (Increased
Eurodollar Loan Costs) and 4.05 (Funding
Losses),
to the same extent as if it were a Lender and had acquired its interest by
assignment pursuant to Section
11.03(b).  To the extent permitted by law, each Participant
also shall be entitled to the benefits of Section 11.15 (Right of
Setoff)
as though it were a Lender; provided such Participant agrees to be subject to
Section 3.13
(Sharing
of Payments) as though it were a
Lender.

     

    (e) A
Participant shall not be entitled to receive any greater payment under Section 4.01 (Eurodollar
Rate Lending Unlawful) or 4.03 (Increased
Eurodollar Loan Costs) than the applicable
Lender would have been entitled to receive with respect to the participation
sold to such Participant, unless the sale of the participation to such
Participant is made with the prior written consent of the Borrower
Agent.

     

    (f) Any
Lender may at any time pledge or assign a security interest in all or any
portion of its rights under this Agreement (including under its Notes, if any)
to secure obligations of such Lender, including any pledge or assignment to
secure obligations to a Federal Reserve Bank; provided that no such
pledge or assignment shall release such Lender from any of its obligations
hereunder or substitute any such pledgee or assignee for such Lender as a party
hereto.

     

    

    
      
        
           

        

        
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    (g) The words
“execution,” “signed,” “signature,” and words of like
import in any Lender Assignment Agreement shall be deemed to include electronic
signatures or the keeping of records in electronic form, each of which shall be
of the same legal effect, validity or enforceability as a manually executed
signature or the use of a paper-based recordkeeping system, as the case may be,
to the extent and as provided for in any applicable Law, including the Federal
Electronic Signatures in Global and National Commerce Act, the New York State
Electronic Signatures and Records Act, or any other similar state laws based on
the Uniform Electronic Transactions Act.

     

    (h) Notwithstanding
anything to the contrary contained herein, any Lender (a “Granting Lender”) may
grant to a special purpose funding vehicle identified as such in writing from
time to time by the Granting Lender to the Administrative Agent and the
Borrowers (an “SPV”) the option to
provide all or any part of any Loan that such Granting Lender would otherwise be
obligated to make pursuant to this Agreement; provided that (i)
nothing herein shall constitute a commitment by any SPV to fund any Loan, and
(ii) if an SPV elects not to exercise such option or otherwise fails to make all
or any part of such Loan, the Granting Lender shall be obligated to make such
Loan pursuant to the terms hereof or, if it fails to do so, to make such payment
to the Administrative Agent as is required under Section 3.13 (Sharing
of Payments).  Each
party hereto hereby agrees that (A) neither the grant to any SPV nor the
exercise by any SPV of such option shall increase the costs or expenses or
otherwise increase or change the obligations of the Borrowers under this
Agreement (including their obligations under Section 4.03
(Increased
Eurodollar Loan Costs), (B) no SPV shall
be liable for any indemnity or similar payment obligation under this Agreement
for which a Lender would be liable, and (C) the Granting Lender shall for all
purposes, including the approval of any amendment, waiver or other modification
of any provision of any Financing Document, remain the lender of record
hereunder.  The making of a Loan by an SPV hereunder shall utilize the
Commitment of the Granting Lender to the same extent, and as if, such Loan were
made by such Granting Lender.  In furtherance of the foregoing, each
party hereto hereby agrees (which agreement shall survive the termination of
this Agreement) that, prior to the date that is one (1) year and one (1) day
after the payment in full of all outstanding commercial paper or other senior
debt of any SPV, it will not institute against, or join any other Person in
instituting against, such SPV any bankruptcy, reorganization, arrangement,
insolvency, or liquidation proceeding under the laws of the United States or any
State thereof.  Notwithstanding anything to the contrary contained
herein, any SPV may (1) with notice to, but without prior consent of the
Borrowers and the Administrative Agent and without paying any processing fee
therefor, assign all or any portion of its right to receive payment with respect
to any Loan to the Granting Lender and (2) disclose on a confidential basis any
non-public information relating to its funding of any Loan to any rating agency,
commercial paper dealer or provider of any surety or Guarantee or credit or
liquidity enhancement to such SPV.

     

    Section
11.04 Benefits of
Agreement.  Nothing in this Agreement or any other Financing
Document, express or implied, shall give to any Person, other than the parties
hereto, and each of their successors and permitted assigns under this Agreement
or any other Financing Document, any benefit or any legal or equitable right or
remedy under this Agreement.

     

    

    
      
        
           

        

        
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    Section
11.05 Borrower
Agent.  Each Borrower hereby appoints and authorizes Pacific
Holding, and Pacific Holding hereby accepts such appointment, as such Borrower’s
Borrower Agent to act as agent on such Borrower’s behalf and to make any
representations or certifications, deliver and receive any notices or other
communications, and otherwise represent and act on behalf of such Borrower under
the Financing Documents, and to comply with all covenants, conditions and other
provisions of the Financing Documents required to be satisfied by the Borrower
Agent.  Each Borrower hereby acknowledges and agrees that it will be
bound by any action or inaction taken by the Borrower Agent as if such action or
inaction had been taken by such Borrower.

     

    Section
11.06 Consultants.  (a)  The
Required Lenders or the Administrative Agent may, in their sole discretion,
appoint any Consultant for the purposes specified herein.  If any of
the Consultants is removed or resigns and thereby ceases to act for purposes of
this Agreement and the other Financing Documents, the Required Lenders or the
Administrative Agent, as the case may be, shall designate a Consultant in
replacement.

     

    (b) The
Borrowers shall reimburse each Consultant appointed hereunder for the reasonable
fees and reasonable and documented out-of-pocket expenses of such Consultant
retained on behalf of the Lenders pursuant to this Section
11.06.

     

    (c) In all
cases in which this Agreement provides for any Consultant to “agree,” “approve,” “certify” or “confirm” any report or other
document or any fact or circumstance, such Consultant may make the
determinations and evaluations required in connection therewith based upon
information provided by the Borrowers, the Borrower Agent or other sources
reasonably believed by such Consultant to be knowledgeable and responsible,
without independently verifying such information; provided that,
notwithstanding the foregoing, such Consultant shall engage in such independent
investigations or findings as it may from time to time deem necessary in its
reasonable discretion to support the determinations and evaluations required of
it.

     

    Section
11.07 Costs and
Expenses.  Each Borrower shall pay (a) all reasonable and
documented out of pocket expenses incurred by the Agents or any Lender
(including all reasonable fees, costs and expenses of counsel for any Senior
Secured Party and a financial advisor for the Administrative Agent), in
connection with (i) the preparation, negotiation, syndication, execution and
delivery of this Agreement and the other Financing Documents (whether or not the
transactions contemplated hereby or thereby are consummated), (ii) the
negotiation, preparation and filing and recordation of the Financing Documents,
the Interim Order and the Final Order, (iii) any amendments, modifications or
waivers of the provisions of this Agreement, the other Financing Documents, the
Interim Order and the Final Order, (iv) the administration of this Agreement,
the other Financing Documents, the Interim Order and the Final Order, (v) the
obtaining of approval of the Financing Documents by the Bankruptcy Court, (vi)
the preparation and review of pleadings, documents and reports related to any
Chapter 11 Case or any subsequent case under Chapter 7 of the Bankruptcy Code,
attendance at meetings, court hearings or conferences related to any
Chapter 11 Case or any subsequent case under Chapter 7 of the Bankruptcy
Code and (vii) general monitoring of any Chapter 11 Case or any subsequent case
under Chapter 7 of the Bankruptcy Code and (b) all out-of-pocket expenses
incurred by the Agents or any Lender (including all fees, costs and expenses of
counsel for any Senior Secured Party), in connection with the enforcement or
protection of its rights in connection with this Agreement and the other
Financing Documents, including its rights under this Section 11.07,
including in connection with any workout, restructuring or negotiations in
respect of the Obligations.

     

    

    
      
        
           

        

        
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    Section
11.08 Counterparts;
Effectiveness.  This Agreement may be executed in counterparts
(and by different parties hereto in different counterparts), each of which shall
constitute an original, but all of which when taken together shall constitute a
single contract.  This Agreement shall become effective when it has
been executed by the Administrative Agent and when the Administrative Agent has
received counterparts hereof that, when taken together, bear the signatures of
each of the other parties hereto.  Delivery of an executed counterpart
of a signature page of this Agreement by telecopy or portable document format
(“pdf”) shall
be effective as delivery of a manually executed counterpart of this
Agreement.

     

    Section
11.09 Indemnification by the
Borrowers.  (a)  Each Borrower hereby agrees to
indemnify each Agent (and any sub-agent thereof), each Lender and each Related
Party of any of the foregoing Persons (each such Person being called an “Indemnitee”) against,
and hold each Indemnitee harmless from, any and all losses, claims, damages,
liabilities and related expenses (including all reasonable and documented fees,
costs and out-of-pocket expenses of counsel for any Indemnitee), incurred by any
Indemnitee or asserted against any Indemnitee by any third party or by any
Borrower arising out of, in connection with, or as a result of:

     

    
      	
              (i) 
       

            	
              the
      execution or delivery of this Agreement, any other Transaction Document or
      any agreement or instrument contemplated hereby or thereby, the
      performance by the parties hereto or thereto of their respective
      obligations hereunder or thereunder or the consummation of the
      transactions contemplated hereby or
thereby;

            

    

     

    
      	
              (ii) 
       

            	
              any
      Loan or the use or proposed use of the proceeds
  therefrom;

            

    

     

    
      	
              (iii)
        

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

            

    

     

    
      	
              (iv)
        

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

            

    

     

    
      	
              (v)
        

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

            

    

     

    

    
      
        
           

        

        
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    provided that such
indemnity shall not, as to any Indemnitee, be available to the extent that such
losses, claims, damages, liabilities or related expenses are determined by a
court of competent jurisdiction by final and Non-Appealable judgment to have
resulted from the gross negligence or willful misconduct of such
Indemnitee.

     

    (b) To the
extent that any Borrower for any reason fails to indefeasibly pay any amount
required under Section
11.09(a) to be paid by it to any Agent (or any sub-agent thereof) or any
Related Party of any of the foregoing, each Lender severally agrees to pay to
such Agent (or any such sub-agent), or such Related Party, as the case may be,
such Lender’s ratable share (determined as of the time that the applicable
unreimbursed expense or indemnity payment is sought) of such unpaid amount;
provided that
the unreimbursed expense or indemnified loss, claim, damage, liability or
related expense, as the case may be, was incurred by or asserted against such
Agent (or any sub-agent thereof) in its capacity as such, or against any Related
Party of any of the foregoing acting for such Agent (or any sub-agent thereof)
in connection with such capacity.  The obligations of the Lenders
under this Section
11.09(b) are subject to the provisions of Section 2.04(d)
(Funding
of Loans).  The
obligations of the Lenders to make payments pursuant to this Section 11.09(b) are
several and not joint and shall survive the payment in full of the Obligations
and the termination of this Agreement.  The failure of any Lender to
make payments on any date required hereunder shall not relieve any other Lender
of its corresponding obligation to do so on such date, and no Lender shall be
responsible for the failure of any other Lender to do so.

     

    (c) Except as
otherwise provided in Article VI (Conditions
Precedent), all amounts due
under this Section
11.09 shall be payable not later than ten (10) Business Days after demand
therefor.

     

    Section
11.10 Interest Rate
Limitation.  Notwithstanding anything to the contrary contained
in any Financing Document, the interest paid or agreed to be paid under the
Financing Documents shall not exceed the maximum rate of non-usurious interest
permitted by applicable Law (the “Maximum
Rate”).  If any Agent or any Lender shall receive interest in
an amount that exceeds the Maximum Rate, the excess interest shall be applied to
the principal of the Loans or, if it exceeds such unpaid principal, refunded to
the Borrowers.  In determining whether the interest contracted for,
charged, or received by any Senior Secured Party exceeds the Maximum Rate, such
Person may, to the extent permitted by applicable Law, (a) characterize any
payment that is not principal as an expense, fee, or premium rather than
interest, (b) exclude prepayments and the effects thereof, and (c) amortize,
prorate, allocate, and spread in equal or unequal parts the total amount of
interest throughout the contemplated term of the Obligations
hereunder.

     

    Section
11.11 No Waiver; Cumulative
Remedies.  No failure by any Senior Secured Party to exercise,
and no delay by any such Person in exercising, any right, remedy, power or
privilege hereunder or under any other Financing Document shall operate as a
waiver thereof; nor shall any single or partial exercise of any right, remedy,
power or privilege hereunder preclude any other or further exercise thereof or
the exercise of any other right, remedy, power or privilege.  The
rights, remedies, powers and privileges herein provided, and provided under each
other Financing Document, are cumulative and not exclusive of any rights,
remedies, powers and privileges provided by law.

     

    

    
      
        
           

        

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

     

    
      	
              (i)
        

            	
              if
      to a Borrower, the Borrower Agent or any Agent, to the address, telecopier
      number, electronic mail address or telephone number specified for such
      Person on Schedule 11.12;
      and

            

    

     

    
      	
              (ii) 
       

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

            

    

     

    (b) Notices
sent by hand or overnight courier service, or mailed by certified or registered
mail, shall be deemed to have been given when received; notices sent by
telecopier shall be deemed to have been given when sent (except that, if not
given during normal business hours for the recipient, shall be deemed to have
been given at the opening of business on the next Business Day for the
recipient).  Notices delivered through electronic communications to
the extent provided in Section 11.12(d)
shall be effective as provided in Section
11.12(d).  Any notice sent to the Borrower Agent shall be
deemed to have been given to each Borrower.

     

    (c) Notices
and other communications to the Senior Secured Parties hereunder may be
delivered or furnished by electronic communication (including e mail and
internet or intranet websites) pursuant to procedures approved by the
Administrative Agent; provided that the
foregoing shall not apply to notices to any Lender pursuant to Article II (Commitments
and Funding) if such Lender has
notified the Administrative Agent that it is incapable of receiving notices
under such Article II
(Commitments
and Funding) by electronic
communication.  Each of the Administrative Agent or a Borrower may, in
its discretion, agree to accept notices and other communications to it hereunder
by electronic communications pursuant to procedures approved by it; provided that approval of
such procedures may be limited to particular notices or
communications.

     

    (d) Unless
the Administrative Agent otherwise prescribes, (i) notices and other
communications sent to an e-mail address shall be deemed received upon the
sender’s receipt of an acknowledgement from the intended recipient (such as by
the “return receipt
requested” function, as available, return e-mail or other written
acknowledgement); provided that if such
notice or other communication is not received during the normal business hours
of the recipient, such notice or communication shall be deemed to have been
received at the opening of business on the next Business Day for the recipient,
and (ii) notices or communications posted to an internet or intranet website
shall be deemed received upon the deemed receipt by the intended recipient at
its e-mail address as described in Section 11.12(d)(i)
of notification that such notice or communication is available and identifying
the website address therefor.

     

    

    
      
        
           

        

        
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    (e) Each
Borrower, the Borrower Agent and the Agents may change its address, telecopier
or telephone number for notices and other communications hereunder by notice to
the other parties hereto.  Each Lender may change its address,
telecopier or telephone number for notices and other communications hereunder by
notice to the Borrowers, the Borrower Agent and each Agent.

     

    (f) The
Senior Secured Parties shall be entitled to rely and act upon any written
notices purportedly given by or on behalf of a Borrower or the Borrower Agent
even if (i) such notices were not made in a manner specified herein, were
incomplete or were not preceded or followed by any other form of notice
specified herein, or (ii) the terms thereof, as understood by the recipient,
varied from any confirmation thereof.  Each Borrower shall indemnify
each Senior Secured Party and the Related Parties of each of them from all
losses, costs, expenses and liabilities resulting from the reliance by such
Person on each notice purportedly given by or on behalf of a Borrower or the
Borrower Agent.  All telephonic notices to and other telephonic
communications with any Agent may be recorded by such Agent, and each of the
parties hereto hereby consents to such recording.

     

    (g) So long
as WestLB is the Administrative Agent, each Borrower and the Borrower Agent
hereby agrees that it will provide to the Administrative Agent all information,
documents and other materials that it is obligated to furnish to the
Administrative Agent pursuant to the Financing Documents, including all notices,
requests, financial statements, financial and other reports, certificates and
other information materials, but excluding any such communication that (i)
relates to the Funding, (ii) relates to the payment of any principal or other
amount due under this Agreement prior to the scheduled date therefor, (iii)
provides notice of any Default or Event of Default or (iv) is required to be
delivered to satisfy any condition precedent to Funding (all such non-excluded
communications being referred to herein collectively as “Communications”), by
transmitting the Communications in an electronic/soft medium in a format
acceptable to the Administrative Agent to ny_agency
services@westlb.com.  In addition, each Borrower and the Borrower
Agent agrees to continue to provide the Communications to the Administrative
Agent in the manner specified in the Financing Documents but only to the extent
requested by the Administrative Agent.

     

    (h) So long
as WestLB is the Administrative Agent, each Borrower and the Borrower Agent
further agrees that the Administrative Agent may make the Communications
available to the Lenders by posting the Communications on http:
www.intralinks.com (or any replacement or successor thereto) or a substantially
similar electronic transmission systems (the “Platform”).

     

    

    
      
        
           

        

        
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    (i) THE
PLATFORM IS PROVIDED “AS IS” AND “AS AVAILABLE”.  THE AGENTS DO NOT
WARRANT THE ACCURACY OR COMPLETENESS OF THE COMMUNICATIONS, OR THE ADEQUACY OF
THE PLATFORM AND EXPRESSLY DISCLAIM LIABILITY FOR ERRORS OR OMISSIONS IN THE
COMMUNICATIONS.  NO WARRANTY OF ANY KIND, EXPRESS, IMPLIED OR
STATUTORY, INCLUDING ANY WARRANTY OF MERCHANTABILITY, FITNESS FOR A PARTICULAR
PURPOSE, NON-INFRINGEMENT OF THIRD PARTY RIGHTS OR FREEDOM FROM VIRUSES OR OTHER
CODE DEFECTS, IS MADE BY THE AGENTS IN CONNECTION WITH THE COMMUNICATIONS OR THE
PLATFORM.  IN NO EVENT SHALL THE ADMINISTRATIVE AGENT OR ANY OF ITS
AFFILIATES OR ANY OF THEIR RESPECTIVE OFFICERS, DIRECTORS, EMPLOYEES, AGENTS,
ADVISORS OR REPRESENTATIVES (COLLECTIVELY, “AGENT PARTIES”) HAVE
ANY LIABILITY TO ANY BORROWER, THE BORROWER AGENT, ANY LENDER OR ANY OTHER
PERSON OR ENTITY FOR DAMAGES OF ANY KIND, INCLUDING DIRECT OR INDIRECT, SPECIAL,
INCIDENTAL OR CONSEQUENTIAL DAMAGES, LOSSES OR EXPENSES (WHETHER IN TORT,
CONTRACT OR OTHERWISE) ARISING OUT OF THE BORROWER’S, THE BORROWER AGENT’S OR
THE ADMINISTRATIVE AGENT’S TRANSMISSION OF COMMUNICATIONS THROUGH THE INTERNET,
EXCEPT TO THE EXTENT THE LIABILITY OF ANY AGENT PARTY IS FOUND IN A FINAL
NON-APPEALABLE JUDGMENT BY A COURT OF COMPETENT JURISDICTION TO HAVE RESULTED
PRIMARILY FROM SUCH AGENT PARTY’S GROSS NEGLIGENCE OR WILLFUL
MISCONDUCT.

     

    (j) The
Administrative Agent agrees that the receipt of the Communications by the
Administrative Agent at its e-mail address set forth in Schedule 11.12 shall
constitute effective delivery of the Communications to the Administrative Agent
for purposes of the Financing Documents.  Each Lender agrees that
notice to it (as provided in the next sentence) specifying that the
Communications have been posted to the Platform shall constitute effective
delivery of the Communications to such Lender for purposes of the Financing
Documents.  Each Lender agrees to notify the Administrative Agent in
writing (including by electronic communication) from time to time of such
Lender’s e-mail address to which the foregoing notice may be sent by electronic
transmission and that the foregoing notice may be sent to such e-mail
address.

     

    (k) Notwithstanding
clauses (g) to
(j) above, nothing herein shall prejudice the right of any Senior Secured
Party to give any notice or other communication pursuant to any Financing
Document in any other manner specified in such Financing Document.

     

    Section
11.13 Patriot Act
Notice.  Each Senior Secured Party (for itself and not on
behalf of any Lender) hereby notifies the Borrowers that pursuant to the
requirements of the Patriot Act, it is required to obtain, verify and record
information that identifies the Borrowers, which information includes the name
and address of the Borrowers and other information that will allow such Senior
Secured Party to identify the Borrowers in accordance with the Patriot
Act.

     

    

    
      
        
           

        

        
          -81-

          
            

          

        

        
           

        

      

    

    

    Section
11.14 Marshalling; Payments Set
Aside.  Neither any Agent nor any Lender shall be under any
obligation to marshal any assets in favor of any Borrower or any other Person or
against or in payment of any or all the Obligations. To the extent that any
payment by or on behalf of any Borrower is made to any Agent or Lender, or any
Agent or Lender exercises its right of setoff, and such payment or the proceeds
of such setoff or any part thereof is subsequently invalidated, declared to be
fraudulent or preferential, set aside or required (including pursuant to any
settlement entered into by such Agent or Lender in its discretion) to be repaid
to a trustee, receiver or any other party, in connection with any bankruptcy or
insolvency proceeding or otherwise, then (a) to the extent of such recovery, the
Obligation or part thereof originally intended to be satisfied shall be revived
and continued in full force and effect as if such payment had not been made or
such setoff had not occurred, and (b) each Lender severally agrees to pay to
each Agent upon demand its applicable share (without duplication) of any amount
so recovered from or repaid by such Agent, plus interest thereon from the date
of such demand to the date such payment is made at a rate per annum equal to the
Federal Funds Effective Rate from time to time in effect.  The
obligations of the Lenders under Section 11.14(b)
shall survive the payment in full of the Obligations and the termination of this
Agreement.

     

    Section
11.15 Right of
Setoff.  Each Lender and each of its respective Affiliates is
hereby authorized at any time and from time to time during the continuance of an
Event of Default, to the fullest extent permitted by applicable Law, to set off
and apply any and all deposits (general or special, time or demand, provisional
or final, in whatever currency) at any time held and other obligations (in
whatever currency) at any time owing by such Lender or any such Affiliate to or
for the credit or the account of any Borrower against any and all of the
obligations of each Borrower now or hereafter existing under this Agreement or
any other Financing Document to such Lender, irrespective of whether or not such
Lender shall have made any demand under this Agreement or any other Financing
Document and although such obligations of the Borrowers may be contingent or
unmatured or are owed to a branch or office of such Lender different from the
branch or office holding such deposit or obligated on such
indebtedness.  The rights of each Lender and their respective
Affiliates under this Section 11.15 are in
addition to other rights and remedies (including other rights of setoff) that
such Lender or their respective Affiliates may have.  Each Lender
agrees to notify the Borrower Agent and the Administrative Agent promptly after
any such setoff and application; provided that the
failure to give such notice shall not affect the validity of such setoff and
application.

     

    Section
11.16 Severability.  If
any provision of this Agreement or any other Financing Document is held to be
illegal, invalid or unenforceable, (a) the legality, validity and enforceability
of the remaining provisions of this Agreement and the other Financing Documents
shall not be affected or impaired thereby and (b) the parties shall endeavor in
good faith negotiations to replace the illegal, invalid or unenforceable
provisions with valid provisions the economic effect of which comes as close as
possible to that of the illegal, invalid or unenforceable
provisions.  The invalidity of a provision in a particular
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.

     

    

    
      
        
           

        

        
          -82-

          
            

          

        

        
           

        

      

    

    

    Section
11.17 Survival.  Notwithstanding
anything in this Agreement to the contrary, Section 11.07 (Costs
and Expenses) and 11.09 (Indemnification
by the Borrowers) shall survive any
termination of this Agreement.  In addition, each representation and
warranty made hereunder and in any other Financing Document or other document
delivered pursuant hereto or thereto or in connection herewith or therewith
shall survive the execution and delivery hereof and thereof.  Such
representations and warranties have been or will be relied upon by each Senior
Secured Party, regardless of any investigation made by any Senior Secured Party
or on their behalf and notwithstanding that any Senior Secured Party may have
had notice or knowledge of any Default or Event of Default at the time of the
Funding, and shall continue in full force and effect as long as any Loan or any
other Obligation hereunder or under any other Financing Document shall remain
unpaid or unsatisfied.

     

    Section
11.18 Treatment of Certain
Information; Confidentiality.  Each of the Agents and the
Lenders agrees to maintain the confidentiality of the Information, except that
Information may be disclosed (a) to its Affiliates and to its Affiliates’
respective partners, directors, officers, employees, agents, advisors and
representatives (it being understood that the Persons to whom such disclosure is
made will be informed of the confidential nature of such Information and
instructed to keep such Information confidential); (b) to the extent requested
or required by any regulatory authority purporting to have jurisdiction over it;
(c) to the extent required by applicable Law or regulations or by any subpoena
or similar legal process; (d) to any other party to this Agreement; (e) in
connection with the exercise of any remedies hereunder or any suit, action or
proceeding relating to this Agreement or the enforcement of rights hereunder
(including any actual or prospective purchaser of Collateral); (f) subject to an
agreement containing provisions substantially the same as those of this Section 11.18, to (i)
any Eligible Assignee of or Participant in, or any prospective Eligible Assignee
of or Participant in, any of its rights or obligations under this Agreement,
(ii) any direct or indirect contractual counterparty or prospective counterparty
(or such contractual counterparty’s or prospective counterparty’s professional
advisor) to any credit derivative transaction relating to the Obligations or
(iii) any Person (and any of its officers, directors, employees, agents or
advisors) that may enter into or support, directly or indirectly, or that may be
considering entering into or supporting, directly or indirectly, either (A)
contractual arrangements with such Agent or Lender, or any Affiliates thereof,
pursuant to which all or any portion of the risks, rights, benefits or
obligations under or with respect to any Loan or Financing Document is
transferred to such Person or (B) an actual or proposed securitization or
collateralization of, or similar transaction relating to, all or a part of any
amounts payable to or for the benefit of any Lender under any Financing Document
(including any rating agency); (g) with the consent of any Borrower; (h) to the
extent such Information (i) becomes publicly available other than as a result of
a breach of this Section 11.18 or (ii)
becomes available to any Agent, any Lender or any of their respective Affiliates
on a nonconfidential basis from a source other than a Borrower; (i) to any
state, federal or foreign authority or examiner (including the National
Association of Insurance Commissioners or any other similar organization)
regulating any Lender; or (j) to any rating agency when required by it (it being
understood that, prior to any such disclosure, such rating agency shall
undertake to preserve the confidentiality of any Information relating to a
Borrower received by it from such Lender).

     

    

    
      
        
           

        

        
          -83-

          
            

          

        

        
           

        

      

    

    

    In
addition, any Agent and the Lenders may disclose the existence of this Agreement
and information about this Agreement to market data collectors, similar service
providers to the lending industry, and service providers to the Agents and the
Lenders in connection with the administration and management of this Agreement,
the other Financing Documents, the Commitments, and the Funding.  For
the purposes of this Section 11.18, “Information” means
written information that any Borrower furnishes to any Agent or Lender after the
date hereof (and designated at the time of delivery thereof in writing as
confidential) pursuant to or in connection with any Financing Document, relating
to the assets and business of such Borrower, but does not include any such
information that (i) is or becomes generally available to the public other than
as a result of a breach by such Agent or Lender of its obligations hereunder,
(ii) is or becomes available to such Agent or Lender from a source other than a
Borrower that is not, to the knowledge of such Agent or Lender, acting in
violation of a confidentiality obligation with such Borrower or (iii) is
independently compiled by any Agent or Lender, as evidenced by their records,
without the use of the Information.  Any Person required to maintain
the confidentiality of Information as provided in this Section 11.18 shall
be considered to have complied with its obligation to do so if such Person has
exercised the same degree of care to maintain the confidentiality of such
Information as such Person would accord to its own confidential
information.

     

    Section
11.19 Waiver of Consequential
Damages, Etc.  Except as otherwise provided in Section 11.09 (Indemnification
by the Borrowers) for the benefit of
any Indemnitee, to the fullest extent permitted by applicable Law, no party
hereto shall assert, and each party hereto hereby waives, any claim, on any
theory of liability, for special, indirect, consequential or punitive damages
(as opposed to direct or actual damages) arising out of, in connection with, or
as a result of, this Agreement, any other Financing Document or any agreement or
instrument contemplated hereby, the transactions contemplated hereby or thereby,
any Loan or the use of the proceeds thereof.  No Indemnitee shall be
liable for any damages arising from the use by unintended recipients of any
information or other materials distributed by it through telecommunications,
electronic or other information transmission systems in connection with this
Agreement or the other Financing Documents or the transactions contemplated
hereby or thereby.

     

    Section
11.20 Waiver of Litigation
Payments.  To the extent that any Borrower or the Borrower
Agent may, in any action, suit or proceeding brought in any of the courts
referred to in Section
11.02(b) (Applicable
Law; Jurisdiction) or elsewhere
arising out of or in connection with this Agreement or any other Financing
Document to which it is a party, be entitled to the benefit of any provision of
law requiring any Senior Secured Party in such action, suit or proceeding to
post security for the costs of such Person or to post a bond or to take similar
action, each such Person hereby irrevocably waives such benefit, in each case to
the fullest extent now or in the future permitted under the laws of New York or,
as the case may be, the jurisdiction in which such court is
located.

     

    Section
11.21 Section
552(b).  The Lenders and the Agents shall be entitled to all of
the rights and benefits of section 552(b) of the Bankruptcy Code, and the
“equities of the case” exception under section 552(b) of the Bankruptcy Code
shall not apply to the Lenders or the Agents with respect to proceeds, products,
offspring or profits of any of the Collateral.

     

    [Remainder
of page intentionally blank.  Next page is signature
page.]

     

    

    
      
        
           

        

        
          -84-

          
            

          

        

        
           

        

      

    

    

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

     

    
    

     

    
      	 	      
              PACIFIC
      ETHANOL HOLDING CO. LLC,

              as
      Borrower

               

               

              By:/s/ JOHN T.
      MILLER                                  

              Name:  John
      T. Miller

              Title:  COO

               

              PACIFIC
      ETHANOL MADERA LLC,

              as
      Borrower

               

               

              By:/s/ JOHN T.
      MILLER                                                                      

              Name:  John
      T. Miller

              Title:  COO

               

              PACIFIC
      ETHANOL COLUMBIA, LLC,

              as
      Borrower

               

               

              By:/s/ JOHN T.
      MILLER                                                                      

              Name:  John
      T. Miller

              Title:  COO

               

              PACIFIC
      ETHANOL STOCKTON, LLC,

              as
      Borrower

               

               

              By:/s/ JOHN T.
      MILLER                                                                      

              Name:  John
      T. Miller

              Title:  COO

               

              PACIFIC
      ETHANOL MAGIC VALLEY, LLC,

              as
      Borrower

               

               

              By:/s/ JOHN T.
      MILLER                                                                      

              Name:  John
      T. Miller

              Title:  COO
 

    

     

     

    

    
      
        
           

        

        
          -85-

          
            

          

        

        
           

        

      

    

     

    

     

    
      	 	      
              PACIFIC
      ETHANOL HOLDING CO. LLC,

              as
      Borrower Agent

               

               

              By:/s/ JOHN T.
      MILLER                                                                      

              Name:  John
      T. Miller

              Title:  COO
 

    

     

     

    

    
      
        
           

        

        
          -86-

          
            

          

        

        
           

        

      

    

    

    
    

     

    
      	 	      
              WESTLB
      AG, NEW YORK BRANCH,

              as
      Administrative Agent

               

               

              By:/s/ RONALD
      SPITZER                                                                      

              Name:  Ronald
      Spitzer

              Title:  Executive
      Director

               

               

              By:/s/ DOMINICK
      D’ASCOLI                                                                      

              Name:  Dominick
      D’Ascoli

              Title:  Director 

            

    

     

    

    

    

    
      
        
           

        

        
          -87-

          
            

          

        

        
           

        

      

    

     

    

     

    
      	 	      
              WESTLB
      AG, NEW YORK BRANCH,

              as
      Lender

               

               

              By:/s/ RONALD
      SPITZER                                                                      

              Name:  Ronald
      Spitzer

              Title:  Executive
      Director

               

               

              By:/s/ DOMINICK
      D’ASCOLI                                                                      

              Name:  Dominick
      D’Ascoli

              Title:  Director

               

               

              WESTLB
      AG, NEW YORK BRANCH,

              as
      Collateral Agent

               

               

              By:/s/ RONALD
      SPITZER                                                                      

              Name:  Ronald
      Spitzer

              Title:  Executive
      Director

               

               

              By:/s/ DOMINICK
      D’ASCOLI                                                                      

              Name:  Dominick
      D’Ascoli

              Title:  Director 

            

    

     

    

    

    

    
      
        
           

        

        
          -88-

          
            

          

        

        
           

        

      

    

     

    

     

    
      	 	      
              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 

            

    

     

    

    

    

    
      
        
           

        

        
          -89-

          
            

          

        

        
           

        

      

    

     

    

     

    
      	 	      
              CIFC
      FUNDING 2007-III LTD.,

              as
      Senior Secured Party

               

              By:
      Signature
      Illegible                                                                           

              Name:

              Title:

               

              CIFC
      FUNDING 2007-IV LTD.,

              as
      Senior Secured Party

               

              By:
      Signature
      Illegible                                                                           

              Name:

              Title:
 

    

     

     

    

    
      
        
           

        

        
          -90-

          
            

          

        

        
           

        

      

    

     

    

     

    
      	 	      
              CIT
      CAPITAL SECURITIES LLC,

              as
      Lead Arranger and Co-Syndication Agent Senior Secured Party

              

              

              By:
      DREW
      CARLETON                                                                           

              Name:
      Drew Carleton

              Title:  Vice
      President

               

              CIT
      CAPITAL USA INC.,

              as
      Senior Secured Party

              

              

              By:
      JASON B.
      STEWART                                                                           

              Name:
      Jason B. Stewart

              Title:  Managing
      Director 

            

    

     

    
      

    
      
        
           

        

        
          -91-

          
            

          

        

        
           

        

      

    

    

    
    

     

    
      	 	      
              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 

            

    

     

    
      

    
      
        
           

        

        
          -92-

          
            

          

        

        
           

        

      

    

    

    
    

     

    
      	 	      
              GREENSTONE
      FARM CREDIT SERVICES, ACA/FLCA,

              as
      Senior Secured Party

               

              By:
      ALFRED S.
      COMPTON,
      JR.                                                                           

               

              Name:
      Alfred S. Compton, Jr.

               

              Title:  Sr.
      Vice President/Managing
Director 

            

    

     

    
      

    
      
        
           

        

        
          -93-

          
            

          

        

        
           

        

      

    

    

    
    

     

    
      	 	      
              METROPOLITAN
      LIFE INSURANCE COMPANY,

              as
      Senior Secured Party

               

              By:
      /s/ DAVID
      YU                                                                           

              Name:
      David Yu

              Title:
 

    

     

    

    
      
        
           

        

        
          -94-

          
            

          

        

        
           

        

      

    

    

    
    

     

    
      	 	      
              NORDKAP
      BANK AG,

              as
      Senior Secured Party

               

              By:
      /s/ ERIC W.
      SIEVERS                                                                           

              Name:
      Eric W. Sievers

              Title:  SVP

               

              By:
      /s/ STEFAN
      GERIG                                                                           

              Name:
      Stefan GERIG

              Title:  CIO
 

    

     

    

    
      
        
           

        

        
          -95-

          
            

          

        

        
           

        

      

    

    

    
    

     

    
      	 	      
              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 

            

    

     

    
      

    
      
        
           

        

        
          -96-

          
            

          

        

        
           

        

      

    

    

    
    

     

    
      	 	      
              NORTHWEST
      FARM CREDIT SERVICES, FLCA,

              as
      Senior Secured Party

               

              

               

              By:
      /s/ CASEY
      KINZER                                                                           

              Name:
      Casey Kinzer

              Title:  Account
      Manager
 

    

     

    

    
      
        
           

        

        
          -97-

          
            

          

        

        
           

        

      

    

    

    
    

     

    
      	 	      
              COOPERATIEVE
      CENTRALE

              RAIFFEISEN-BOERENLEENBANK
      B.A.,

              “RABOBANK
      NEDERLAND”, NEW YORK BRANCH,

              as
      Senior Secured Party

               

              By:
      /s/ ANDREW
      SHERMAN                                                                           

              Name:
      Andrew Sherman

              Title:  Executive
      Director

               

              

               

              By:
      /s/ JOHN
      MCMAHON                                                                           

              Name:
      John McMahon

              Title:  Managing
      Director 

            

    

     

    
      

    
      
        
           

        

        
          -98-

          
            

          

        

        
           

        

      

    

    

    
    

     

    
      	 	      
              SHOREBANK
      PACIFIC,

              as
      Senior Secured Party

               

              

               

              By:
      /s/ MATTHEW
      MYLET                                                                           

              Name:
      Matthew Mylet

              Title:  Assistant
      Vice President
 

    

     

     

     

    
      
        
           

        

        
          -99- 

          
            

          

        

        
           

          
            Exhibit
A

            

          

        

      

    

    

    “Accounts” has the
meaning set forth in Section 9-102 of the UCC.

     

    “Accounts Bank” means
Amarillo National Bank, not in its individual capacity, but solely as depositary
bank, bank and securities intermediary hereunder, and each other Person that
may, from time to time, be appointed as successor Accounts Bank pursuant to
Section 10.06
(Resignation
or Removal of Agent).

     

    “Accounts Property”
means any funds, instruments, securities, financial assets or other assets from
time to time held in any of the Project Accounts or credited thereto or
otherwise in possession or control of the Accounts Bank pursuant to this
Agreement.

     

    “Additional Project
Document” means each contract, agreement, letter agreement or other
instrument to which any Borrower becomes a party after the date hereof, other
than (a) any document which does not extend beyond the six-month anniversary of
the date hereof (i) under which any Borrower would not reasonably be expected to
have obligations or liabilities in the aggregate in excess of five hundred
thousand Dollars ($500,000), or be entitled to receive revenues in the aggregate
in excess of one million Dollars ($1,000,000), in either case in value during
such period and (ii) a termination of which would not reasonably be expected to
result in a Material Adverse Effect, or (b) any agreement for the sale of all or
substantially all the assets of the Borrowers entered into in connection with
the sale process set forth in Section 7.02(f) (Sale of
Substantially All Assets); provided, that for
the purposes of this definition, (i) (A) purchase orders under existing Project
Documents relating to the sale of Products or the purchase of corn and (B)
purchases of natural gas, water or electricity pursuant to standard user
agreements, shall not constitute Additional Project Documents and (ii) any
series of related transactions (other than transactions, including hedging
transactions, relating to the sale of Products or the purchase of corn and
natural gas) shall be considered as one transaction, and all contracts,
agreements, letter agreements or other instruments in respect of such
transactions shall be considered as one contract, agreement, letter agreement or
other instrument, as applicable.

     

    “Administrative Agent”
means WestLB, in its capacity as administrative agent for the Lenders hereunder,
and includes each other Person that may, from time to time, be appointed as
successor Administrative Agent pursuant to Section 10.06
(Resignation
or Removal of Agent).

     

    “Affiliate” of any
Person means any other Person that, directly or indirectly, controls, is
controlled by or is under common control with such Person.  A Person
shall be deemed to be “controlled by” any other Person if such other Person (a)
possesses, directly or indirectly, power to direct or cause the direction of the
management and policies of such Person whether by contract or otherwise or (b)
owns at least ten percent (10%) of the Equity Interests in such
Person.  Notwithstanding the foregoing, Pacific Ethanol Imperial LLC
shall not be an Affiliate of any Borrower.

     

    “Affiliated Project
Documents” means those Project Documents listed in Schedule 5.10
and identified as Affiliate agreements.

     

    “Agents” means,
collectively, the Administrative Agent, the Collateral Agent, and the Accounts
Bank.

     

    

    
      
        
           

        

        
          A-1

          
            

          

        

        
           

        

      

    

    

    “Aggregate Commitment”
means fifty million Dollars ($50,000,000), as the same may be reduced in
accordance with Section 2.06
(Termination
or Reduction of Commitments).

     

    “Aggregate Revolving Loan
Commitment” means twenty million Dollars ($20,000,000), as the same may
be reduced in accordance with Section 2.06
(Termination
or Reduction of Commitments).

     

    “Aggregate Roll Up Loan
Commitment” means thirty million Dollars ($30,000,000), as the same may
be reduced in accordance with Section 2.06
(Termination
or Reduction of Commitments).

     

    “AMA Consent” means a
Consent and Agreement regarding the Asset Management Agreement entered into
among Pacific Ethanol, the Borrowers, and the Pre-Petition Collateral Agent, in
form and substance reasonably satisfactory to the Administrative Agent and the
Collateral Agent.

     

    “Agreement” has the
meaning set forth in the Preamble.

     

    “Ancillary Documents”
means, with respect to each Additional Project Document, the following, each of
which shall be in form and substance reasonably satisfactory to the
Administrative Agent and, in the case of items (i), (ii) and (iv), the
Collateral Agent:

     

    
      	
               
      

            	
              (i)

            	
              each
      security instrument and agreement necessary or desirable to grant to the
      Collateral Agent a first priority perfected Lien (subject only to
      Permitted Liens) in such Additional Project Document and all property
      interests received by any Borrower in connection
  therewith;

            

    

     

    
      	
               
      

            	
              (ii)

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

            

    

     

    
      	
               
      

            	
              (iii)

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

            

    

     

    
      	
               
      

            	
              (iv)

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

            

    

     

    

    
      
        
           

        

        
          A-2

          
            

          

        

        
           

        

      

    

    

    
      	
               
      

            	
              (v)

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

            

    

     

    “Applicable Margin”
means ten percent (10%).

     

    “Approved Fund” means,
with respect to any Lender that is a fund that invests in commercial loans, any
other fund that invests in commercial loans and is managed or advised by the
same investment advisor as such Lender or by an Affiliate of such investment
advisor.

     

    “Approved Plan” means
a plan of reorganization of the Debtors approved by the Roll Up Lenders in
accordance with section 1126 of the Bankruptcy Code providing that the Roll Up
Loans be refinanced or otherwise replaced with other securities or financial
instruments with a present value equal to the accrued principal and interest due
in respect of the Roll Up Loans as of the effective date of such plan; provided that under
such plan (i) the relative lien position of the Revolving Lenders in respect of
the Roll Up Loans is maintained and (ii) the relative lien position of the Roll
Up Lenders in respect of the Pre-Petition Obligations is
maintained.

     

    “Asset Management
Agreement” means the Asset Management Agreement, dated on or about the
date hereof, among Pacific Ethanol and the Borrowers.

     

    “Auditors” means those
nationally recognized independent auditors selected by the Borrowers (including
Hein & Associates) and approved by the Administrative Agent.

     

    “Authorized Officer”
means (i) with respect to any Person that is a corporation, the president, any
vice president, the treasurer, the chief financial officer or chief
restructuring officer of such Person, (ii) with respect to any Person that is a
partnership, an Authorized Officer of a general partner of such Person, (iii)
with respect to any Person that is a limited liability company, any manager, the
president, any vice president, the treasurer, the chief financial officer or
chief restructuring officer of such Person, or any person who serves in such
capacity in respect of the managing member of such Person, or (iv) with respect
to any Person, such other representative of such Person that is approved by the
Administrative Agent in writing who, in each such case, has been named as an
“Authorized Officer” on a certificate of incumbency of such Person delivered to
the Administrative Agent and the Accounts Bank on or after the date
hereof.

     

    “Bankruptcy Code”
means Title 11 of the United States Code entitled “Bankruptcy” or any successor
statute, and all rules promulgated thereunder.

     

    “Bankruptcy Court” has
the meaning set forth in the Recitals.

     

    “Bankruptcy Rules”
means the Federal Rules of Bankruptcy Procedure and local rules of the
Bankruptcy Court, each as amended, and applicable to the Cases.

     

    

    
      
        
           

        

        
          A-3

          
            

          

        

        
           

        

      

    

    

    “Base Rate” means, for
any day, a fluctuating rate per annum equal to the highest of (i) the Federal
Funds Effective Rate plus one-half of one percent (0.50%), (ii) the rate of
interest in effect for such day as publicly announced from time to time by
WestLB as its “prime rate” and (iii) LIBOR plus one percent (1%). The “prime
rate” is a rate set by WestLB based upon various factors including WestLB’s
costs and desired return, general economic conditions and other factors, and is
used as a reference point for pricing some loans, which may be priced at, above,
or below such announced rate.  Any change in such rate announced by
WestLB shall take effect at the opening of business on the day specified in the
public announcement of such change.

     

    “Base Rate Loan” means
any Revolving Loan bearing interest at a rate determined by reference to the
Base Rate and the provisions of Article II (Commitments
and Borrowing).

     

    “Blocked Account
Agreement” means an agreement, in substantially the form attached to the
Pre-Petition Credit Agreement as Exhibit 7.02(i)
(or, if requested by the Borrowers, such other form reasonably satisfactory to
the Administrative Agent and the Collateral Agent), with respect to a Local
Account among the Borrower in whose name such Local Account has been opened, the
bank with whom such Local Account was opened and the Collateral Agent or the
Pre-Petition Collateral Agent.

     

    “Boardman” has the
meaning set forth in the Preamble.

     

    “Boardman CS Date”
means the first to occur of (i) September 30, 2009 and (ii) such earlier date as
may be agreed to by Boardman and the Administrative Agent.

     

    “Boardman Deed of
Trust” means the Leasehold Trust Deed, Security Agreement, Financing
Agreement, Fixture Filing and Assignment of Leases, Rents and Security Deposits
made by Boardman to Stewart Title Guaranty Company, as trustee, for the benefit
of the Pre-Petition Collateral Agent, as beneficiary.

     

    “Boardman Lease” means
the lease dated April 20, 2006 between the Port of Morrow and
Boardman.

     

    “Boardman Plant” means
the ethanol production facility located at Boardman, Oregon, with an expected
capacity of approximately forty (40) million gallons-per-year of denatured
ethanol, including the Site on which such facility is located, and all
buildings, structures, improvements, easements and other property related
thereto.

     

    “Boardman Pledge
Agreement” means the Pledge and Security Agreement, dated on or about the
date of the Pre-Petition Credit Agreement, among Pacific Holding, Boardman and
the Pre-Petition Collateral Agent.

     

    “Boardman Security
Agreement” means the Assignment and Security Agreement,  dated
on or about the date of the Pre-Petition Credit Agreement, made by Boardman in
favor of the Pre-Petition Collateral Agent.

     

    

    
      
        
           

        

        
          A-4

          
            

          

        

        
           

        

      

    

    

    “Borrower Agent” means
Pacific Holding, in its capacity as agent for the Borrowers in accordance with
Section 11.05
(Borrower
Party Agent).

     

    “Borrower LLC
Agreements” means, collectively, the Pacific Holding LLC Agreement, the
Madera LLC Agreement, the Boardman LLC Agreement, the Stockton LLC Agreement and
the Burley LLC Agreement.

     

    “Borrowers” has the
meaning set forth in the Preamble.

     

    “Burley” has the
meaning set forth in the Preamble.

     

    “Burley Deed of Trust”
means the Mortgage, Security Agreement, Financing Statement, Fixture Filing and
Assignment of Leases, Rents and Security Deposits, in substantially the form of
Exhibit 6.04(g)-A
to the Pre-Petition Credit Agreement.

     

    “Burley Plant” means
the ethanol production facility located at Burley, Idaho, with a design basis
capacity of approximately fifty (50) million gallons-per-year of denatured
ethanol, including the Site on which such facility is located, and all
buildings, structures, improvements, easements and other property related
thereto.

     

    “Burley Pledge
Agreement” means the Pledge and Security Agreement, in substantially the
form of Exhibit 6.04(g)-B
to the Pre-Petition Credit Agreement.

     

    “Burley Security
Agreement” means the Assignment and Security Agreement, in substantially
the form of Exhibit 6.04(g)-C
to the Pre-Petition Credit Agreement.

     

    “Business Day”
means:

     

    
      	
               
      

            	
              (i)

            	
              any
      day that is neither a Saturday or Sunday nor a day on which commercial
      banks are authorized or required to be closed in Sacramento, California or
      New York, New York; and

            

    

     

    
      	
               
      

            	
              (ii)

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

            

    

     

    “Business Interruption
Insurance Proceeds” means all proceeds of any insurance policies required
pursuant to this Agreement or otherwise obtained with respect to any Borrower,
any Plant or the Project relating to business interruption or delayed
start-up.

     

    “Capitalized Lease
Liabilities” of any Person means all monetary obligations of such Person
under any leasing or similar arrangement that, in accordance with GAAP, would be
classified as capitalized leases on a balance sheet of such Person or otherwise
disclosed as such in a note to such balance sheet and, for purposes of the
Financing Documents, the amount of such obligations shall be the capitalized
amount thereof, determined in accordance with GAAP.

     

    

    
      
        
           

        

        
          A-5

          
            

          

        

        
           

        

      

    

    

    “Carve-Out” means the
sum of (i) the aggregate amount of any budgeted and unpaid fees, costs and
expenses that were accrued or incurred prior to the Carve-Out Date by the
professionals retained by the Debtors or any professionals retained by the
Committee (collectively, the “Professionals”) to
the extent allowed by an order of the Bankruptcy Court, plus (ii) those fees,
costs and expenses incurred by Professionals after the Carve-Out Date and
subsequently allowed by order of the Bankruptcy Court and in compliance with the
DIP Budget in an amount not to exceed $250,000 in the aggregate, plus (iii) fees
required to be paid to the Clerk of the Bankruptcy Court and to the U.S. Trustee
pursuant to 28 U.S.C. § 1930; provided that
following the Carve-Out Date any amounts paid to Professionals by any means will
reduce the Carve-Out on a dollar-for-dollar basis.

     

    “Carve-Out Date” means
the earlier of (i) the date on which any Event of Default occurs and (ii) the
Maturity Date.

     

    “Cash Equivalents”
means:

     

    (a)           readily
marketable direct obligations of the government of the United States or any
agency or instrumentality thereof, or obligations unconditionally guaranteed by
the full faith and credit of the government of the United States, in each case
maturing within one (1) year from the date of acquisition thereof;

     

    (b)           securities
issued by any state of the United States of America or any political subdivision
of any such state or any public instrumentality thereof having maturities of not
more than one (1) year from the date of acquisition thereof and, at the time of
acquisition, having a rating of AA- or higher from S&P or Aa3 or higher from
Moody’s (or, if at any time neither S&P nor Moody’s shall be rating such
obligations, an equivalent rating from another nationally recognized rating
service);

     

    (c)           investments
in commercial paper maturing within 270 days from the date of acquisition
thereof and having, at such date of acquisition, a rating of at least A-1 or P-1
from either S&P or Moody’s (or, if at any time neither S&P nor Moody’s
shall be rating such obligations, an equivalent rating from another nationally
recognized rating service);

     

    (d)           investments
in certificates of deposit, banker’s acceptances and time deposits maturing
within 270 days from the date of acquisition thereof issued or guaranteed by or
placed with, and money market deposit accounts issued or offered by, the
Administrative Agent or any domestic office of any commercial bank organized
under the laws of the United States of America, any State thereof, any country
that is a member of the Organisation for Economic Co-Operation and Development
or any political subdivision thereof, that has a combined capital and surplus
and undivided profits of not less than $500,000,000;

     

    (e)           fully
collateralized repurchase agreements with a term of not more than 30 days for
securities described in clause (a) above and entered into with a financial
institution satisfying the criteria of clause (d) of this definition;
and

     

    (f)           investments
in “money market funds” within the meaning of Rule 2a-7 of the Investment
Company Act of 1940, as amended, substantially all of whose assets are invested
in investments of the type described in clauses (a) through (e) of this
definition.

     

    

    
      
        
           

        

        
          A-6

          
            

          

        

        
           

        

      

    

    

    “Casualty Event” means
an event that causes any Plant, or any material portion thereof, to be damaged,
destroyed or rendered unfit for normal use for any reason
whatsoever.

     

    “CERCLA” means the
Comprehensive Environmental Response, Compensation and Liability Act (42 U.S.C.
§ 9604, et seq.), as amended, and rules, regulations, standards guidelines and
publications issued thereunder.

     

    “Change of Control”
means any transaction or series of related transactions (including any merger or
consolidation) consummated without the prior written consent of the
Administrative Agent the result of which is that:

     

    (A)           (i)
Pacific Holding fails to maintain, directly, legally or beneficially, one
hundred percent (100%) of the Equity Interests of any of Madera, Boardman,
Stockton, or Burley, (ii) PEC fails to maintain directly, legally or
beneficially, one hundred percent (100%) of the Equity Interests of Pacific
Holding (other than any Equity Interest held by an Independent Member), (iii)
Pacific Ethanol fails to maintain, directly or indirectly, legally or
beneficially, one hundred percent (100%) of the Equity Interests of PEC or
fifty-one percent (51%) of the Equity Interests of each of the Borrowers, or
(iv) twenty percent (20%) or more of the Equity Interests of any Borrower are
indirectly, legally or beneficially owned by, or under common control of, any
Person other than those identified in clauses (i) through (iii) above;
or

     

    (B)           any
Person becomes a member of the board of directors of Pacific
Ethanol.

     

    “Chapter 11 Case” or
“Case” has the meaning set forth in the Recitals.

     

    “Chattel Paper” has
the meaning set forth in Section 9-102 of the UCC.

     

    “Closing Date” means
the date on which all the conditions set forth in Section 6.01
(Conditions
to Closing)  and Section 6.02 (Conditions
to All Fundings)
have been satisfied or waived.

     

    “CMSA” means each
Construction Management Services Agreement between any Borrower and the
Construction Manager.

     

    “Code” means the
Internal Revenue Code of 1986, as amended.

     

    “Cold Shutdown” means,
in respect of a Plant, the maintenance of such Plant in a state in which the
Plant facilities are not producing ethanol, ethanol work in process has been
completed, and wherein (i) Plant systems and equipment preservation are being
managed in accordance with manufacturer recommendations and (ii) Plant
facilities operate with a reduced headcount.  “Cold Shutdown”
contemplates minimized usage of a Plant’s utility systems but does not
contemplate any cessation of compliance monitoring with respect to Necessary
Project Approvals.

     

    

    
      
        
           

        

        
          A-7

          
            

          

        

        
           

        

      

    

    

    “Collateral” means all
Accounts, Chattel Paper, Commercial Tort Claims, Documents, Equipment, Fixtures,
Goods, General Intangibles, Instruments, Inventory, Investment Property
(including Equity Interests in Subsidiaries), Pledged Deposits, Supporting
Obligations, collateral referenced in the Interim Order, all rights, claims and
other causes of action of each Debtor’s estate and any other avoidance actions
under Chapter 5 of the Bankruptcy Code and the property received thereby whether
by judgment, settlement or otherwise and Other Collateral, wherever located, in
which a Debtor now has or hereafter acquires any right or interest, and the
proceeds (including Stock Rights), insurance proceeds and products thereof,
together with all books and records, customer lists, credit files, computer
files, programs, printouts and other computer materials and records related
thereto.  Notwithstanding anything to the contrary contained in this
definition, Collateral shall not include (i) rights under governmental
licenses, authorizations or any other asset of a Debtor to the extent and for so
long as the grant of a security interest therein is prohibited by applicable Law
and (ii) any intent-to-use trademark or service mark application prior to
the filing of a statement or use or amendment to allege use, or any other
intellectual property, to the extent that applicable Law prohibits the creation
of a security interest or would otherwise result in the loss of rights from the
creation of such security interest or from the assignment of such rights upon
the occurrence and continuance of an Event of Default.

     

    “Commercial Tort
Claims” means any currently existing commercial tort claims of a
Debtor.

     

    “Collateral Agent”
means WestLB AG, New York Branch, in its capacity as collateral agent for the
Senior Secured Parties under the Financing Documents, and includes each other
Person that may, from time to time be appointed as successor Collateral Agent
pursuant to Section 10.06
(Resignation
or Removal of Agent).

     

    “Commitment Fee” has
the meaning provided in Section 3.11
(Fees).

     

    “Commitment
Percentage” means, as to any Lender at any time, such Lender’s Revolving
Loan Commitment Percentage or Roll Up Loan Commitment Percentage, as the context
may require.

     

    “Commitment” means,
with respect to each Lender, as applicable, such Lender’s Revolving Loan
Commitment or Roll Up Loan Commitment, as the context may require.

     

    “Committee” means the
statutory committee appointed in the Chapter 11 Cases.

     

    “Commodity Hedging
Arrangements” means any arrangement to hedge the price of corn purchases,
ethanol sales, Distillers Grains sales or natural gas purchases.

     

    “Condemnation
Proceeds” means any Net Cash Proceeds payable in respect of any Event of
Taking.

     

    “Consents” means each
Consent and Agreement entered into among a Project Party, the Borrowers, and the
Collateral Agent, each in form and substance reasonably satisfactory to the
Administrative Agent and the Collateral Agent.

     

    

    
      
        
           

        

        
          A-8

          
            

          

        

        
           

        

      

    

    

    “Construction
Contracts” means collectively, (i) the construction contracts identified
on Schedule 5.10
and (ii) each CMSA.

     

    “Construction Manager”
means PEC or any successor pursuant to a CMSA (or any replacement
thereof).

     

     “Consultants” means
the Financial Advisor and any other consultants appointed by or on behalf of the
Lenders.

     

    “Contest” means, with
respect to any matter or claim involving any Person, that such Person is
contesting such matter or claim in good faith and by appropriate proceedings
timely instituted; provided, that the
following conditions are satisfied:  (a) such Person has posted a bond
or other security (which may include funds reserved in an appropriate Project
Account) reasonably acceptable to the Administrative Agent; (b) during the
period of such contest, the enforcement of any contested item is effectively
stayed; (c) none of such Person or any of its officers, directors or employees,
or any Senior Secured Party or its respective officers, directors or employees,
is or could reasonably be expected to become subject to any criminal liability
or sanction in connection with such contested items; and (d) such contest and
any resultant failure to pay or discharge the claimed or assessed amount does
not, and would not reasonably be expected to (i) result in a Material Adverse
Effect or (ii) involve a material risk of the sale, forfeiture or loss of, or
the creation, existence or imposition of any Lien (other than a Permitted Lien)
on, any of the Collateral.

     

    “Contingent
Liabilities” means any agreement, undertaking or arrangement by which any
Person guarantees, endorses or otherwise becomes or is contingently liable upon
(by direct or indirect agreement, contingent or otherwise, to provide funds for
payment, to supply funds to, or otherwise to invest in, a debtor, or otherwise
to assure a creditor against loss) the indebtedness, obligation or any other
liability of any other Person (other than by endorsements of instruments in the
course of collection), or guarantees the payment of dividends or other
distributions upon the shares of any other Person.  The amount of any
Person’s obligation under any contingent liabilities shall (subject to any
limitation set forth therein) be deemed for purposes of this Agreement to be the
outstanding principal amount of the debt, obligation or other liability
guaranteed thereby; provided, however, that if the
maximum amount of the debt, obligation or other liability guaranteed thereby has
not been established, the amount of such contingent liability shall be the
maximum reasonably anticipated amount of the debt, obligation or other
liability; provided, further, that any
agreement to limit the maximum amount of such Person’s obligation under such
contingent liability shall not, of and by itself, be deemed to establish the
maximum reasonably anticipated amount of such debt, obligation or other
liability.

     

    “Contractual
Obligation” means, as to any Person, any provision of any security issued
by such Person or of any agreement, instrument or other undertaking to which
such Person is a party or by which it or any of its property is
bound.

     

    “Corn Supplier” means
Pacific Ag Products or any other counterparty to a Grain Supply
Agreement.

     

    

    
      
        
           

        

        
          A-9

          
            

          

        

        
           

        

      

    

    

    “DDG” means dried
distillers grains (if any) produced by the Borrowers at the
Project.

     

    “Debtors” has the
meaning set forth in the Recitals.

     

    “Default” means any
condition, occurrence or event that, after notice or passage of time or both,
would be an Event of Default.

     

    “Default Excess”
means, with respect to any Defaulting Lender, the excess, if any, of such
Defaulting Lender’s pro rata share of the aggregate outstanding principal amount
of all Loans of all Lenders (calculated as if all Defaulting Lenders (including
such Defaulting Lender) had funded all of their respective Defaulted Loans) over
the aggregate outstanding principal amount of all Loans of such Defaulting
Lender.

     

    “Default Period”
means, with respect to any Defaulting Lender, the period commencing on the date
of the applicable Funding Default and ending on the earliest of the following
dates:  (i) the date on which all Commitments are cancelled or
terminated and/or the Obligations are declared or become immediately due and
payable, (ii) the date on which (a) the Default Excess with respect to such
Defaulting Lender shall have been reduced to zero (whether by the funding by
such Defaulting Lender of any Defaulted Loans of such Defaulting Lender or by
the non pro rata application of any voluntary or mandatory prepayments of the
Loans pursuant to the terms hereof) and (b) such Defaulting Lender shall have
delivered to the Borrowers and the Administrative Agent a written reaffirmation
of its intention to honor its obligations hereunder with respect to its
Commitments, and (iii) the date on which the Borrowers, the Administrative Agent
and Required Lenders waive all Funding Defaults of such Defaulting Lender in
writing.

     

    “Default Rate” has the
meaning set forth in Section 3.04
(Default
Interest Rate).

     

    “Defaulted Loan” has
the meaning provided in Section 2.07 (Defaulting
Lenders).

     

    “Defaulting Lender”
has the meaning provided in Section 2.07 (Defaulting
Lenders).

     

    “Delta-T” Delta-T
Corporation, a Virginia corporation.

     

    “Deposit Accounts” has
the meaning set forth in Section 9-102 of the UCC.

     

    “DG Offtake
Agreements” means any agreement relating to the sale or Distillers Grains
by any Borrower with a scheduled term in excess of six months and with payments
thereunder expected to be in excess of one million Dollars ($1,000,000),
including the Madera DG Agreement and each agreement between any Borrower and
Pacific Ag Products relating to the sale or marketing of Distillers
Grains.

     

    “DIP Administrative
Claim” means an allowed superpriority administrative expense claim under
Section 364(c)(1) of the Bankruptcy Code, having priority over all
administrative expenses of the kind specified in, or ordered pursuant to,
Sections 105, 326, 328, 330, 331, 503(b), 506(c), 507(a), 507(b), 726,
1113, 1114 or any other provisions of the Bankruptcy Code.

     

    

    
      
        
           

        

        
          A-10

          
            

          

        

        
           

        

      

    

    

    “DIP Budget” has the
meaning set forth in Section 7.01 (l)
(Affirmative
Covenants-DIP Budget).

     

    “DIP Facility” means
the credit facility provided to the Debtors pursuant to the Financing
Documents.

     

    “DIP Liens” has the
meaning set forth in Section 2.09(b)
(Super-Priority
Nature of Obligations) and shall include
Interim DIP Liens under and as defined in the Interim Order.

     

    “Discharge Date” means
the date on which (a) all outstanding Commitments have been terminated and (b)
all amounts payable in respect of the Obligations have been irrevocably paid in
full in cash (other than obligations under the Financing Documents that by their
terms survive and with respect to which no claim has been made by the Senior
Secured Parties).

     

    “Disposition” means,
with respect to any Property, any sale, lease (or sublease), sale and leaseback,
assignment, conveyance, transfer or other dispositions thereof (other than a
Recovery Event); and the terms “Dispose” and “Disposed of” shall have
correlative meanings, excluding any sales or dispositions of Products or Cash
Equivalents, in each case, in the ordinary course of business.

     

    “Distillers Grains”
means DDG, WDG, and any other form of distillers grain products (including
syrup) marketed by any Borrower from time to time.

     

    “Documents” has the
meaning set forth in Section 9-102 of the UCC.

     

    “Dollar” and the sign
“$” mean lawful
money of the United States.

     

    “Domestic Office”
means, relative to any Lender, the office of such Lender designated on Schedule 1.01 or
designated in the Lender Assignment Agreement pursuant to which such Lender
became a Lender hereunder or such other office of a Lender (or any successor or
assign of such Lender) within the United States as may be designated from time
to time by written notice from such Lender, as the case may be, to the Borrower
Agent and the Administrative Agent.

     

    “Effect of Bankruptcy”
means, with respect to any contractual obligation, contract, lease or agreement
to which a Debtor is a party, any default or other legal consequences arising on
account of the commencement or the filing of the Chapter 11 Cases, as
applicable (including the implementation of any stay), or the rejection of any
such contractual obligation, contract or agreement with the approval of the
Bankruptcy Court if required under applicable Law.

     

    “Eligible Assignee”
means (a) any Lender, (b) an Affiliate of any Lender, (c) an Approved Fund, and
(d) any other Person (other than a natural person) approved by the
Administrative Agent.

     

    “Environmental
Affiliate” means any Person, only to the extent of, and only with respect
to matters or actions of such Person for which, any Borrower could reasonably be
expected to have liability as a result of such Borrower retaining, assuming,
accepting or otherwise being subject to liability for Environmental Claims
relating to such Person, whether the source of such Borrower’s obligation is by
contract or operation of Law.

     

    

    
      
        
           

        

        
          A-11

          
            

          

        

        
           

        

      

    

    

    “Environmental
Approvals” means any Governmental Approvals required under applicable
Environmental Laws.

     

    “Environmental Claim”
means any written notice, claim, demand or similar written communication by any
Person alleging potential liability or requiring or demanding remedial or
responsive measures (including potential liability for investigatory costs,
cleanup, remediation and mitigation costs, governmental response costs, natural
resources damages, property damages, personal injuries, fines or penalties) in
each such case (x) either (i) with respect to environmental
contamination-related liabilities or obligations with respect to which any
Borrower could reasonably be expected to be responsible that are, or could
reasonably be expected to be, in excess of two hundred thousand Dollars
($200,000) in the aggregate, or (ii) that has or could reasonably be expected to
result in a Material Adverse Effect and (y) arising out of, based on or
resulting from (i) the presence, release or threatened release into the
environment, of any Materials of Environmental Concern at any location, whether
or not owned by such Person; (ii) circumstances forming the basis of any
violation, or alleged violation, of any Environmental Laws or Environmental
Approvals; or (iii) exposure to Materials of Environmental Concern.

     

    “Environmental Laws”
means all Laws applicable to the Project relating to pollution or protection of
human health, safety or the environment (including ambient air, surface water,
ground water, land surface or subsurface strata), including Laws relating to
emissions, discharges, releases or threatened releases of Materials of
Environmental Concern, or otherwise applicable to the Project relating to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of Materials of Environmental Concern.

     

    “Equipment” has the
meaning set forth in Section 9-102 of the UCC.

     

    “Equity Interests”
means, with respect to any Person, all of the shares of capital stock of (or
other ownership or profit interests in) such Person, all of the warrants,
options or other rights for the purchase or acquisition from such Person of
shares of capital stock of (or other ownership or profit interests in) such
Person, all of the securities convertible into or exchangeable for shares of
capital stock of (or other ownership or profit interests in) such Person or
warrants, rights or options for the purchase or acquisition from such Person of
such shares (or such other interests), and all of the other ownership or profit
interests in such Person (including partnership, member or trust interests
therein), whether voting or nonvoting, and whether or not such shares, warrants,
options, rights or other interests are outstanding on any date of determination,
in each such case including all voting rights and economic rights related
thereto.

     

    “ERISA” means the
Employee Retirement Income Security Act of 1974, as amended, and any successor
statute of similar import, together with the regulations thereunder, in each
case as in effect from time to time.  References to sections of ERISA
also refer to any successor sections.

     

    “ERISA Affiliate”
means any Person, trade or business that, together with any Borrower, is or was
treated as a single employer under Section 414 of the Code or
Section 4001 of ERISA.

     

    

    
      
        
           

        

        
          A-12

          
            

          

        

        
           

        

      

    

    

    “ERISA Plan” means any
Plan that is not a Multiemployer Plan.

     

    “Ethanol Offtake
Agreements” means any agreement relating to the sale of ethanol by any
Borrower with a scheduled term in excess of six months and with payments
thereunder expected to be in excess of one million Dollars ($1,000,000),
including each agreement between any Borrower and Kinergy relating to the sale
or marketing of ethanol.

     

    “Eurodollar Loan”
means any Revolving Loan bearing interest at a rate determined by reference to
the Eurodollar Rate and the provisions of Article II (Commitments
and Borrowing) and Article III (Repayments,
Prepayments, Interest and Fees).

     

    “Eurodollar Office”
means, relative to any Lender, the office of such Lender designated as such on
Schedule 1.01 or
designated in the Lender Assignment Agreement pursuant to which such Lender
became a Lender hereunder or such other office of a Lender as designated from
time to time by notice from such Lender to the Borrower Agent and the
Administrative Agent pursuant to Section 4.04
(Obligation
to Mitigate) that shall be
making or maintaining Eurodollar Loans of such Lender hereunder.

     

    “Eurodollar Rate”
means, for any Interest Period with respect to any Eurodollar Loan, an interest
rate per annum equal to the rate per annum obtained by dividing (x) LIBOR for
such Interest Period and such Eurodollar Loan, by (y) a percentage equal to (i)
100% minus (ii) the Eurodollar Reserve Percentage for such Interest
Period.

     

    “Eurodollar Reserve
Percentage” means, for any day during any Interest Period, the reserve
percentage (expressed as a decimal, carried out to five decimal places) in
effect on such day, whether or not applicable to any Lender, under regulations
issued from time to time by the F.R.S. Board for determining the maximum reserve
requirement (including any emergency, supplemental or other marginal reserve
requirement) with respect to eurocurrency funding (currently referred to as
“Eurocurrency Liabilities”).  The Eurodollar Rate for each outstanding
Eurodollar Loan shall be adjusted automatically as of the effective date of any
change in the Eurodollar Reserve Percentage.

     

    “Event of Abandonment”
means with respect to any Plant any of the following shall have occurred: (i)
the abandonment by the applicable Borrower of the development, operation or
maintenance of such Plant for a period of more than ten (10) consecutive days
(other than as a result of force majeure, an Event of Taking or a Casualty
Event), (ii) the suspension of all or substantially all of any Borrower’s
activities with respect to such Plant, other than as the result of a force
majeure, Event of Taking or Casualty Event, for a period of more than ten (10)
consecutive days, or (iii) any written acknowledgement by any Borrower of a
final decision to take any of the foregoing actions; provided that Cold
Shutdown shall not constitute an Event of Abandonment under any of clauses (i),
(ii) or (iii).

     

    “Event of Default”
means any one of the events specified in Section 9.01
(Events
of Default).

     

    “Event of Taking”
means any taking, exercise of rights of eminent domain, public improvement,
inverse condemnation, condemnation or similar action of or proceeding by any
Governmental Authority relating to any material part of any Plant, the Project,
any Equity Interests of any Borrower or any other assets thereof.

     

    

    
      
        
           

        

        
          A-13

          
            

          

        

        
           

        

      

    

    

    “Event of Total Loss”
means the occurrence of a Casualty Event affecting all or substantially all of
any Plant, the Project or the assets of Pacific Holding or any
Borrower.

     

    “Excluded Taxes”
means, with respect to any Agent or any Lender or any other recipient of any
payment to be made by or on account of any Obligation hereunder, (a) income or
franchise Taxes imposed on (or measured by) its net income levied as a result of
a present or former connection between such Agent, such Lender or such other
recipient and the jurisdiction of the Governmental Authority imposing such Tax
or any political subdivision or taxing Authority thereof or their (other than
such Agent’s, such Lender’s or such other recipient’s having executed, delivered
or preformed its obligations or recovered a payment under, or enforced, this
Agreement), (b) any branch profits Tax imposed by the United States, or any
similar Tax imposed by any other jurisdiction described in clause (a) above, or
(c) any United States withholding Tax to the extent that is imposed on amounts
payable to such Agent or such Lender at the time such Agent or such Lender
becomes a party to this Agreement.

     

    “F.R.S. Board” means
the Board of Governors of the Federal Reserve System or any successor
thereto.

     

    “Federal Funds Effective
Rate” means, for any day, the rate per annum (rounded upwards, if
necessary, to the nearest 1/100 of 1%) equal to the weighted average of the
rates on overnight federal funds transactions with members of the Federal
Reserve System arranged by federal funds brokers on such day, as published on
the next succeeding Business Day by the Federal Reserve Bank of New York, or, if
such rate is not so published for any day that is a Business Day, the average of
the quotations for such day for such transactions received by the Administrative
Agent from three federal funds brokers of recognized standing selected by the
Administrative Agent.

     

    “Fees” means,
collectively, each of the fees payable by the Borrowers for the account of any
Lender or Agent pursuant to Section 3.11
(Fees).

     

    “Final Order” means
the order of the Bankruptcy Court entered in the Chapter 11 Cases after a
final hearing under Bankruptcy Rule 4001(c)(2) or such other procedures as
approved by the Bankruptcy Court, which order shall be substantially in the form
of the Interim Order or otherwise satisfactory in form and substance to the
Lenders and the Administrative Agent, and from which no appeal or motion to
reconsider has been timely filed, or if timely filed, such appeal has been
stayed, dismissed or denied unless the Lenders and the Administrative Agent
waive such requirement, together with all extensions, modifications and
amendments thereto, in form and substance satisfactory to the Lenders and the
Administrative Agent.  The Final Order shall authorize and approve the
transactions contemplated by the Financing Documents and find that the Lenders
are extending credit to the Debtors in good faith within the meaning of
Bankruptcy Code section 364(e) and shall set forth provisions (i) approving
in all respects the Financing Documents, and authorizing and directing the
Debtors to execute and become bound by the Financing Documents; (ii) modifying
the automatic stay to the extent necessary to permit or effectuate the terms of
the Final Order and the Financing Documents, including to permit the creation
and perfection of the Collateral Agent’s Liens on the Collateral; (iii)
providing for the automatic relief of such stay to permit the enforcement of the
Administrative Agent’s and the Lenders’ remedies under the DIP Facility, subject
to the right of the Debtors and/or the Committee to re-impose or continue the
automatic stay; and (iv) providing that the Debtors acknowledge (a) the validity
and enforceability of the Pre-Petition Obligations, without defense, offset or
counterclaim of any kind, (b) the validity, perfection and priority of the Liens
securing the Pre-Petition Obligations, and that the Debtors waive any right to
challenge or contest such claims and liens and (c) that the Debtors have no
valid claims or causes of action, whether based in contract, tort or otherwise
against the Pre-Petition Administrative Agent or any Pre-Petition Senior Secured
Party with respect to the Pre-Petition Credit Agreement or the related documents
or transactions.

     

    

    
      
        
           

        

        
          A-14

          
            

          

        

        
           

        

      

    

    

    “Financial Asset” has
the meaning set forth in Section 8-102(9) of the UCC.

     

    “Financial Officer”
means, with respect to any Person, the controller, treasurer or chief financial
officer of such Person.

     

    “Financial Advisor”
means Capstone or a replacement appointed by the Required Lenders.

     

    “Financing Documents”
means:

     

    
      	
               
      

            	
              (i)

            	
              this
      Agreement;

            

    

     

    
      	
               
      

            	
              (ii)

            	
              the
      Notes;

            

    

     

    
      	
               
      

            	
              (iii)

            	
              the
      New Mortgages;

            

    

     

    
      	
               
      

            	
              (iv)

            	
              the
      PEC Pledge Agreement;

            

    

     

    
      	
               
      

            	
              (v)

            	
              the
      AMA Consent;

            

    

     

    
      	
               
      

            	
              (vi)

            	
              the
      Sponsor Support Agreement;

            

    

     

    
      	
               
      

            	
              (vii)

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

            

    

     

    
      	
               
      

            	
              (viii)

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

            

    

     

    “First Liens” has the
meaning set forth in Section 2.09 (b)
(Super-Priority
Nature of Obligations).

     

    “Fiscal Quarter” means
any quarter of a Fiscal Year.

     

    “Fiscal Year” means
any period of twelve (12) consecutive calendar months ending on December
31.

     

    “Fixtures” has the
meaning set forth in Section 9-102 of the UCC.

     

    “Funding” means the
incurrence of each Revolving Loan made by the Lenders on a single
date.

     

    “Funding Date” means,
with respect to each Revolving Loan, the date on which funds are disbursed by
the Administrative Agent, on behalf of the Lenders, to the Borrowers in
accordance with Section 2.04
(Funding
of Loans).

     

    “Funding Default” has
the meaning specified in Section 2.07 (Defaulting
Lenders).

     

    

    
      
        
           

        

        
          A-15

          
            

          

        

        
           

        

      

    

    

    “Funding Notice” means
each request for Funding in the form of Exhibit 2.03
delivered in accordance with Section 2.03
(Notice
of Fundings).

     

    “GAAP” means generally
accepted accounting principles in effect from time to time in the United States,
applied on a consistent basis.

     

    “General Intangibles”
has the meaning set forth in Section 9-102 of the UCC.

     

    “Goods” has the
meaning set forth in Section 9-102 of the UCC.

     

    “Governmental
Approval” means any authorization, consent, approval, license, lease,
ruling, permit, certification, exemption, filing for registration by or with any
Governmental Authority.

     

    “Governmental
Authority” means any nation, state, sovereign, or government, any
federal, regional, state, local or political subdivision and any entity
exercising executive, legislative, judicial, regulatory or administrative
functions of or pertaining to government.

     

    “Grain Supply
Agreements” means any agreement relating to the purchase or supply of
grain to any Borrower with a scheduled term in excess of six months and with
payments thereunder expected to be in excess of five hundred thousand Dollars
($500,000), including the Corn Procurement and Handling Agreement between
Pacific Holding and Pacific Ag Products, dated on or about the date of the
Pre-Petition Credit Agreement.

     

    “Granting Lender” has
the meaning provided in Section 11.03(h)
(Assignments).

     

     “Guarantee” means, as
to any Person, (a) any obligation, contingent or otherwise, of such Person
guaranteeing or having the economic effect of guaranteeing any Indebtedness or
other obligation payable or performable by another Person (the “primary
obligor”) in any manner, whether directly or indirectly, and including any
obligation of such Person, direct or indirect, (i) to purchase or pay (or
advance or supply funds for the purchase or payment of) such Indebtedness or
other obligation, (ii) to purchase or lease property, securities or services for
the purpose of assuring the obligee in respect of such Indebtedness or other
obligation of the payment or performance of such Indebtedness or other
obligation, (iii) to maintain working capital, equity capital or any other
financial statement condition or liquidity or level of income or cash flow of
the primary obligor so as to enable the primary obligor to pay such Indebtedness
or other obligation, or (iv) entered into for the purpose of assuring in any
other manner the obligee in respect of such Indebtedness or other obligation of
the payment or performance thereof or to protect such obligee against loss in
respect thereof (in whole or in part), or (b) any Lien on any assets of such
Person securing any Indebtedness or other obligation of any other Person,
whether or not such Indebtedness or other obligation is assumed by such Person
(or any right, contingent or otherwise, of any holder of such Indebtedness to
obtain any such Lien).

     

    

    
      
        
           

        

        
          A-16

          
            

          

        

        
           

        

      

    

    

    “Indebtedness” means,
as to any Person at a particular time, without duplication, all of the
following, whether or not included as indebtedness or liabilities in accordance
with GAAP:

     

    (a)           all
obligations of such Person for or in respect of moneys borrowed or raised,
whether or not for cash by whatever means (including acceptances, deposits,
discounting, letters of credit, factoring, and any other form of financing which
is recognized in accordance with GAAP in such Person’s financial statements as
being in the nature of a borrowing or is treated as “off-balance sheet”
financing);

     

    (b)           all
obligations of such Person evidenced by bonds, debentures, notes, loan
agreements or other similar instruments;

     

    (c)           all
obligations of such Person for the deferred purchase price of property or
services;

     

    (d)           all
obligations of such Person under conditional sale or other title retention
agreements relating to property or assets acquired by such Person (even though
the rights and remedies of the seller or lender under such agreement in the
event of default are limited to repossession or sale of such property or are
otherwise limited in recourse);

     

    (e)           the
maximum amount of all direct or contingent obligations of such Person arising
under letters of credit (including standby and commercial), bankers’
acceptances, bank guaranties, surety bonds and similar instruments;

     

    (f)           all
Capitalized Lease Liabilities;

     

    (g)           net
obligations of such Person under any Swap Contract;

     

    (h)           all
obligations of such Person to purchase, redeem, retire, defease or otherwise
make any payment in respect of any Equity Interests in such Person or any other
Person or any warrants, rights or options to acquire such Equity Interests,
valued, in the case of redeemable preferred interests, at the greater of its
voluntary or involuntary liquidation preference plus accrued and unpaid
dividends; and

     

    (i)       
    all Guarantees of such Person in respect of any of the
foregoing.

     

    For all
purposes hereof, the Indebtedness of any Person shall include the Indebtedness
of any partnership or joint venture (other than a joint venture that is itself a
corporation or limited liability company) in which such Person is a general
partner or a joint venturer, unless such Indebtedness is expressly made
non-recourse to such Person.  The amount of any net obligation under
any Swap Contract on any date shall be deemed to be the Swap Termination Value
thereof as of such date.

     

    “Indemnified Taxes”
means Taxes other than Excluded Taxes.

     

    “Indemnitee” has the
meaning provided in Section 11.09
(Indemnification
by the Borrowers).

     

    

    
      
        
           

        

        
          A-17

          
            

          

        

        
           

        

      

    

    

    “Information” has the
meaning provided in Section 11.18
(Treatment
of Certain Information; Confidentiality).

     

    “Initial DIP Budget”
means the initial budget reflecting projected cash flow , operating
disbursements, payroll disbursements, non-operating disbursements and cash
balances, prepared by the Borrowers and attached hereto as Schedule
6.01(n).

     

    “Instruments” has the
meaning set forth in Section 9-102 of the UCC.

     

    “Insurance Consultant”
means Moore-McNeil, LLC, or any replacement insurance consultant appointed by
the Administrative Agent with the prior consent of the Required
Lenders.

     

     “Insurance Proceeds”
means all Net Cash Proceeds of any insurance policies required pursuant to this
Agreement or otherwise obtained with respect to any Borrower, any Plant or the
Project that are paid or payable to or for the account of any Borrower, or the
Collateral Agent as loss payee, or additional insured (other than Business
Interruption Insurance Proceeds and proceeds of insurance policies relating to
third party liability).

     

    “Interest Payment
Date” means, with respect to a Revolving Loan, the last day of each
Interest Period applicable to such Revolving Loan.

     

    “Interest Period”
means, with respect to any Eurodollar Loan, the period beginning on (and
including) the date on which such Eurodollar Loan is made pursuant to Section 2.04
(Funding
of Loans) or the date on
which each successive interest period for each such Eurodollar Loan is
determined pursuant to Section 3.03
(Interest
Rates)
and ending on (and including) the day that numerically corresponds to such date
one (1) month thereafter; provided, however, that (i) if
such Interest Period would otherwise end on a day that is not a Business Day,
such Interest Period shall end on the next following Business Day (unless such
next following Business Day is in a different a calendar month, in which case
such Interest Period shall end on the next preceding Business Day), (ii) any
Interest Period that begins on the last Business Day of a month (or on a day for
which there is no numerically corresponding day in the month at the end of such
Interest Period) shall end on the last Business Day of the month at the end of
such Interest Period, (iii) no Interest Period shall end after any Monthly
Payment Date unless the aggregate outstanding principal amount of Eurodollar
Loans having Interest Periods which end on or prior to such Monthly Payment Date
shall be at least equal to the aggregate principal amount of Eurodollar Loans
due and payable on or prior to such Monthly Payment Date, and (iv) no Interest
Period may end later than the Maturity Date.

     

    “Interest Period
Notice” means a notice in substantially the form attached hereto as Exhibit 3.03,
executed by an Authorized Officer of the Borrower Agent.

     

    

    
      
        
           

        

        
          A-18

          
            

          

        

        
           

        

      

    

    

    “Interim Order” means
the order of the Bankruptcy Court entered in the Chapter 11 Cases after an
interim hearing, substantially in the form attached hereto as Schedule 2.01 or
such other form satisfactory to the Lenders and the Administrative Agent
together with all extensions, modifications, and amendments thereto that are
satisfactory to the Lenders and the Administrative Agent. The Interim Order
shall authorize and approve the transactions contemplated by the Financing
Documents and find that the Lenders are extending credit to the Debtors in good
faith within the meaning of Bankruptcy Code section 364(e) and shall set
forth provisions (i) approving in all respects the Financing Documents, and
authorizing and directing the Debtors to execute and become bound by the
Financing Documents; (ii) modifying the automatic stay to the extent necessary
to permit or effectuate the terms of the Interim Order and the Financing
Documents, including to permit the creation and perfection of the Collateral
Agent’s Liens on the Collateral; (iii) providing for the automatic relief of
such stay to permit the enforcement of the Administrative Agent’s and the
Lenders’ remedies under the DIP Facility, subject to the right of the Debtors
and/or the Committee to re-impose or continue the automatic stay; and (iv)
providing that the Debtors acknowledge (a) the validity and enforceability of
the Pre-Petition Obligations, without defense, offset or counterclaim of any
kind, (b) the validity, perfection and priority of the Liens securing the
Pre-Petition Obligations, and that the Debtors waive any right to challenge or
contest such claims and liens and (c) that the Debtors have no valid claims or
causes of action, whether based in contract, tort or otherwise against the
Pre-Petition Administrative Agent or any Pre-Petition Senior Secured Party with
respect to the Pre-Petition Credit Agreement or the related documents or
transactions.

     

    “Inventory” has the
meaning set forth in Section 9-102 of the UCC.

     

    “Investment Property”
has the meaning set forth in Section 9-102 of the UCC.

     

    “Kinergy” means
Kinergy Marketing, LLC, an Oregon limited liability company.

     

    “Law” means, with
respect to any Governmental Authority, any constitutional provision, law,
statute, rule, regulation, ordinance, treaty, order, decree, judgment, decision,
common law, holding, injunction, Governmental Approval or requirement of such
Governmental Authority.  Unless the context clearly requires
otherwise, the term “Law” shall include
each of the foregoing (and each provision thereof) as in effect at the time in
question, including any amendments, supplements, replacements, or other
modifications thereto or thereof, and whether or not in effect as of the date of
this Agreement.

     

    “Leased Premises”
means, with respect to the Boardman Plant, the Premises, as defined in the
Boardman Lease and, with respect to the Stockton Plant, the Premises, as defined
in the Stockton Lease.

     

    “Leases” means,
collectively, the Boardman Lease and the Stockton Lease.

     

    “Lender Assignment
Agreement” means a Lender Assignment Agreement, substantially in the form
of Exhibit 11.03.

     

    “Lenders” means the
persons identified as “Lenders” and listed on the signature pages of this
Agreement and each other Person that acquires the rights and obligations of a
Lender hereunder pursuant to Section 11.03
(Assignments).

     

    

    
      
        
           

        

        
          A-19

          
            

          

        

        
           

        

      

    

    

    “LIBOR” means, for any
Interest Period for any Eurodollar Loan:

     

    (a)           the
rate per annum equal to the rate determined by the Administrative Agent to be
the offered rate that appears on the page of the Telerate Screen (or any
successor thereto) that displays an average British Bankers Association Interest
Settlement Rate for deposits in Dollars (for delivery on the first day of such
Interest Period) with a term equivalent to such Interest Period, determined as
of approximately 11:00 a.m. (London time) two (2) Business Days prior to the
first day of such Interest Period; or

     

    (b)           if
the rate referenced in the preceding clause (a) does not appear on such page or
service or such page or service is not available, the rate per annum equal to
the rate determined by the Administrative Agent to be the offered rate on such
other page or other service that displays an average British Bankers Association
Interest Settlement Rate for deposits in Dollars (for delivery on the first day
of such Interest Period) with a term equivalent to such Interest Period,
determined as of approximately 11:00 a.m. (London time) two (2) Business Days
prior to the first day of such Interest Period; or

     

    (c)           if
the rates referenced in the preceding clauses (a) and (b) are not available, the
rate per annum determined by the Administrative Agent as the rate of interest at
which deposits in Dollars for delivery on the first day of such Interest Period
in same day funds in the approximate amount of the Eurodollar Loan being made,
continued or converted and with a term equivalent to such Interest Period would
be offered by WestLB to major banks in the London interbank eurodollar market at
their request at approximately 4:00 p.m. (London time) two (2) Business Days
prior to the first day of such Interest Period.

     

    Notwithstanding
the foregoing, in no event shall LIBOR be less than a rate per annum equal to
four percent (4%).

     

    “Lien” means any
security interest, mortgage, pledge, hypothecation, assignment, deposit
arrangement, encumbrance, bailment, conditional sales or title retention
agreement, lien (statutory or otherwise), charge against or interest in
property, in each case of any kind, to secure payment of a debt or performance
of an obligation.

     

    “Loans” means,
collectively, the Revolving Loans and the Roll Up Loans.

     

    “Local Account” means
any local bank account (other than the Project Accounts) in the name of any
Borrower.

     

    “Madera” has the
meaning set forth in the Preamble.

     

    “Madera Deed of Trust”
means the Deed of Trust, Security Agreement, Financing Statement, Fixture Filing
and Assignment of Leases, Rents and Security Deposits, dated on or about the
date of the Pre-Petition Credit Agreement, made by Madera to Stewart Title
Guaranty Company, as trustee, for the benefit of the Pre-Petition Collateral
Agent, as beneficiary.

     

    “Madera DG Agreement”
the WDG Marketing and Services Agreement, dated March 4, 2005, among Madera,
Phoenix Bio Industries and Western Milling, LLC.

     

    

    
      
        
           

        

        
          A-20

          
            

          

        

        
           

        

      

    

    

    “Madera Plant” means
the ethanol production facility located at Madera, California, with an expected
capacity of approximately forty (40) million gallons-per-year of denatured
ethanol, including the Site on which such facility is located, and all
buildings, structures, improvements, easements and other property related
thereto.

     

    “Madera Pledge
Agreement” means the Pledge and Security Agreement, dated on or about the
date of the Pre-Petition Credit Agreement, among, Pacific Holding, Madera and
the Pre-Petition Collateral Agent, pursuant to which Pacific Holding pledges one
hundred percent (100%) of the Equity Interests in Madera to the Pre-Petition
Collateral Agent.

     

    “Madera Security
Agreement” means the Assignment and Security Agreement, dated on or about
the date of the Pre-Petition Credit Agreement, made by Madera in favor of the
Pre-Petition Collateral Agent.

     

    “Maintenance Capital
Expenses” means all expenditures by the Borrowers for regularly scheduled
(or reasonably anticipated) major maintenance of the Project, Prudent Ethanol
Operating Practice and vendor and supplier requirements constituting major
maintenance (including teardowns, overhauls, capital improvements, replacements
and/or refurbishments of major components of the Project).

     

    “Major Project Party”
means each of Delta-T, Pacific Ethanol, the Operator, the landlord under each
Lease, the guarantor guarantying the obligations of any other Major Project
Party and any other Project Party designated as a Major Project Party by the
Administrative Agent and the Borrower Agent.

     

    “Mandatory Prepayment”
means a prepayment in accordance with Section 3.08
(Mandatory
Prepayment).

     

    “Material Adverse
Effect” means any event, development or circumstance that has had or
could reasonably be expected to have a material adverse effect in respect of any
Plant or the Project on (i) the business, assets, property, condition (financial
or otherwise) or operations (as applicable) of any Debtor, (ii) the ability of
Pacific Holding or any other Borrower or any Project Party to perform its
material obligations under any Transaction Document to which it is a party,
(iii) creation, perfection or priority of the Liens granted, or purported to be
granted, in favor, or for the benefit, of the Collateral Agent or (iv) the
rights or remedies of any Senior Secured Party under any Financing Document;
provided that clauses (i) or (ii) of this definition shall not be a Material
Adverse Effect with respect to any Borrower if such event, development or
circumstance is an Effect of Bankruptcy or results from the Cold Shutdown of a
Plant.

     

    “Materials of Environmental
Concern” means chemicals, pollutants, contaminants, wastes, toxic
substances and hazardous substances, any toxic mold, radon gas or other
naturally occurring toxic or hazardous substance or organism and any material
that is regulated in any way, or for which liability is imposed, pursuant to an
Environmental Law.

     

    

    
      
        
           

        

        
          A-21

          
            

          

        

        
           

        

      

    

    

    “Maturity Date” means
the earliest of (i) six (6) months after the Closing Date; (ii) the
acceleration of all or any portion of the Obligations; (iii) the first Business
Day on which the Interim Order expires by its terms or is terminated, unless the
Final Order shall have been entered and become effective prior thereto; (iv) the
conversion of any of the Chapter 11 Cases to a case under chapter 7 of the
Bankruptcy Code unless otherwise consented to in writing by the Administrative
Agent and the Lenders; (v) the dismissal of any of the Chapter 11 Cases unless
otherwise consented to in writing by the Administrative Agent and the Lenders;
and (vi) the effective date of any Debtor’s plan of reorganization confirmed in
the Chapter 11 Cases.

     

    “Maximum Rate” has the
meaning provided in Section 11.10
(Interest
Rate Limitation).

     

    “Monthly Budget
Period” means the period of four (4) consecutive weeks starting on the
first day of the period covered by the Initial DIP Budget in effect as of the
date hereof, and each successive period of four (4) consecutive weeks thereafter
starting on the 2nd week of
the initial (4) consecutive week period.

     

    “Monthly Date” means
the last Business Day of each calendar month.

     

    “Monthly Payment Date”
means the first Business Day of each calendar month.

     

    “Monthly Period” means
each one (1) month period beginning on (and including) the day immediately
following a Monthly Payment Date and ending on (and including) the next Monthly
Payment Date.

     

    “Moody’s” means
Moody’s Investors Service Inc., and any successor thereto that is a nationally
recognized rating agency.

     

    “Mortgaged Property”
means all real property right, title and interest of each Borrower that is
subject to the relevant New Mortgage in favor of the Collateral
Agent.

     

    “Mortgages” means,
together, the Madera Deed of Trust, the Boardman Deed of Trust, the Stockton
Deed of Trust and the Burley Deed of Trust.

     

    “Multiemployer Plan”
means a Plan that is a “multiemployer plan” as defined in
Section 4001(a)(3) of ERISA.

     

    “Necessary Project
Approvals”  means (i) all material Governmental Approvals that
are required under applicable Law to be obtained by any Borrower in connection
with the construction and operation of a Plant at its full nameplate capacity as
contemplated by the Transaction Documents and (ii) the Governmental Approvals
described in Section 5.03(a)
(Governmental
Approvals).

     

    “Necessary Project
Contracts”  means all material contracts, agreements,
instruments, letters, understandings, or other documentation that are required
under to be obtained by any Borrower in connection with the operation of the
applicable Plant as contemplated by the Transaction Documents.

     

    

    
      
        
           

        

        
          A-22

          
            

          

        

        
           

        

      

    

    

    “Net Cash Proceeds”
means with respect to any receipt of Insurance Proceeds, Condemnation Proceeds,
or Project Document Termination Payments, or any Disposition of any Property or
assets, or the incurrence of any Indebtedness, including pursuant to section
364(b), 364(c) or 364(d) of the Bankruptcy Code in violation of the terms of the
Final Order or this Agreement, as the case may be, the aggregate amount of cash
received from time to time (whether as initial consideration or through payment
or disposition of deferred consideration) by or on behalf of such Person for its
own account in connection with any such transaction, after deducting therefrom
only:

     

    (a)           related
expenses, including reasonable and customary brokerage commissions, underwriting
fees and discounts, legal fees, finder’s fees and other fees, costs and
commissions that, in each case, are actually paid or required to be paid to a
Person that is not a Subsidiary or Affiliate of any of the Borrowers or any of
their respective Subsidiaries or Affiliates;

     

    (b)           the
amount of taxes payable in connection with or as a result of such transaction
that, in each case, are actually paid at the time of receipt of such cash to the
applicable taxation authority or other Governmental Authority or, so long as
such Person is not otherwise indemnified therefor, are reserved for in
accordance with GAAP, as in effect at the time of receipt of such cash, based
upon such Person’s reasonable estimate of such taxes payable. to the applicable
taxation authority or other Governmental Authority; and

     

    (c)           reasonable
amounts (without duplication) provided as a reserve, in accordance with GAAP,
against (i) any liabilities under any indemnification obligations associated
with such transaction or (ii) in the case of any Disposition of any Property or
asset, any other liabilities retained by any Borrower associated with the
Property or assets sold in such Disposition;

     

    provided that, any
and all amounts so deducted by any such Person pursuant to clauses
(a) through (c) of this definition shall be properly attributable to such
transaction or to the Property or asset that is the subject thereof; provided, further, that if, at
the time any of the amounts referred to in clauses (b) or (c) are actually paid
or otherwise satisfied, the reserve therefor exceeds the amount paid or
otherwise satisfied, then the amount of such excess reserve shall constitute
“Net Cash Proceeds” on and as of the date of such payment or other satisfaction
for all purposes of this Agreement and, to the extent required under Section 3.08 (Mandatory
Prepayment), the Borrowers
shall, within three (3) Business Days of such date, prepay the Loans in
accordance with the terms of Section 3.08 (Mandatory
Prepayment), in an amount equal
to the amount of such excess reserve.

     

    “New Boardman Deed of
Trust” means the Leasehold Trust Deed, Security Agreement, Financing
Agreement, Fixture Filing and Assignment of Leases, Rents and Security Deposits,
dated on or about the date hereof, made by Boardman to Stewart Title Guaranty
Company, as trustee, for the benefit of the Collateral Agent, as
beneficiary.

     

    “New Burley Deed of
Trust” means the Mortgage, Security Agreement, Financing Statement,
Fixture Filing and Assignment of Leases, Rents and Security Deposits, dated on
or about the date hereof, made by Burley to Stewart Title Guaranty Company, as
trustee, for the benefit of the Collateral Agent, as beneficiary.

     

    

    
      
        
           

        

        
          A-23

          
            

          

        

        
           

        

      

    

    

    “New Madera Deed of
Trust” means the Deed of Trust, Security Agreement, Financing Statement,
Fixture Filing and Assignment of Leases, Rents and Security Deposits, dated on
or about the date hereof, made by Madera to Stewart Title Guaranty Company, as
trustee, for the benefit of the Collateral Agent, as beneficiary.

     

    “New Stockton Deed of
Trust” means the Deed of Trust, Security Agreement, Financing Statement,
Fixture Filing and Assignment of Leases, Rents and Security Deposits, dated on
or about the date hereof, made by Stockton to Stewart Title Guaranty Company, as
trustee, for the benefit of the Collateral Agent, as beneficiary.

     

    “Non-Appealable”
means, with respect to any specified time period allowing an appeal of any
ruling under any constitutional provision, Law, statute, rule, regulation,
ordinance, treaty, order, decree, judgment, decision, certificate, holding or
injunction that such specified time period has elapsed without an appeal having
been brought.

     

    “Non-Voting Lender”
means any Lender who (a) is a Defaulting Lender, (b) is also a Borrower, a
Project Party or any Affiliate or Subsidiary thereof or (c) has sold a
participation in the Loan held by it to any such Person.

     

    “Non-U.S. Lender” has
the meaning set forth in Section 4.07(e)
(Taxes -
Foreign Lenders).

     

    “Notes” means the
Revolving Notes and the Roll Up Notes, including any promissory notes issued by
any Borrower in connection with assignments of any Loan of a Lender, in each
case substantially in the form of Exhibit 2.05, as
they may be amended, restated, supplemented or otherwise modified from time to
time.

     

    “O&M Agreements”
means each Operation and Maintenance Agreement between any Borrower and the
Operator.

     

    “Obligations” means
and includes all loans, advances, debts, liabilities, Indebtedness and
obligations of the Borrowers and PEC, howsoever arising, owed to the Agents, the
Lenders or any other Senior Secured Party of every kind and description (whether
or not evidenced by any note or instrument and whether or not for the payment of
money), direct or indirect (including those acquired by assumption), absolute or
contingent, due or to become due, now existing or hereafter arising, including
the Revolving Loans and the Roll Up Loans and including interest and fees that
accrue after the commencement by or against any Borrower of any insolvency
proceeding naming such Borrower as the debtor in such proceeding, regardless of
whether such interest and fees are allowed claims in such proceeding, pursuant
to the terms of this Agreement or any of the other Financing Documents,
including all principal, interest, fees, charges, expenses, attorneys’ fees,
costs and expenses, accountants’ fees and Consultants’ fees payable by the
Borrowers hereunder or thereunder.

     

    “Offtaker” means each
counterparty to each DG Offtake Agreement and each Ethanol Offtake
Agreement.

     

    “Operating Statement”
means an operating statement with respect to each Plant  substantially
in the form of Exhibit 7.03(p)
to the Pre-Petition Credit Agreement.

     

    

    
      
        
           

        

        
          A-24

          
            

          

        

        
           

        

      

    

    

    “Operator” means PEC
or any successor pursuant to an O&M Agreement (or any replacement
thereof).

     

    “Orders” means,
collectively, the Final Order and the Interim Order.

     

    “Organic Documents”
means, with respect to any Person that is a corporation, its certificate of
incorporation, its by-laws and all shareholder agreements, voting trusts and
similar arrangements applicable to any of its authorized shares of capital stock
and, with respect to any Person that is a limited liability company, its
certificate of formation or articles of organization and its limited liability
agreement.

     

    “Other Collateral”
means any property of a Debtor not (i) included within the defined terms
Accounts, Chattel Paper, Commercial Tort Claims, Documents, Equipment, Fixtures,
General Intangibles, Instruments, Inventory, Investment Property and Pledged
Deposits, including all cash on hand, letter-of-credit rights, letters of
credit, Stock Rights and Deposit Accounts or other deposits (general or special,
time or demand, provisional or final) with any bank or other financial
institution and (ii) excluded from the defined term Collateral.

     

    “Pacific Ag Products”
means Pacific Ag Products, LLC, a California limited liability
company.

     

    “Pacific Ethanol”
means Pacific Ethanol, Inc., a Delaware corporation.

     

    “Pacific Ethanol
Guarantees” means each guaranty to be made by Pacific Ethanol,
guaranteeing the performance and payment of the obligations of Kinergy or
Pacific Ag Products, as the case may be, under each of the Ethanol Offtake
Agreements, DG Offtake Agreements, and Grain Supply Agreements to which Kinergy
or Pacific Ag Products are party.

     

    “Pacific Holding” has
the meaning set forth in the Preamble.

     

    “Pacific Holding Pledge
Agreement” means the Pledge and Security Agreement, dated on or about the
date of the Pre-Petition Credit Agreement, among Pacific Holding, PEC and the
Pre-Petition Collateral Agent.

     

    “Pacific Holding Security
Agreement” means the Assignment and Security Agreement, dated on or about
the date of the Pre-Petition Credit Agreement, made by Pacific Holding in favor
of the Pre-Petition Collateral Agent.

     

    “Participant” has the
meaning provided in Section 11.03(d)
(Assignments).

     

    “Patriot Act” means
United States Public Law 107-56, Uniting and Strengthening America by Providing
Appropriate Tools Required to Intercept and Obstruct Terrorism (USA PATRIOT ACT)
of 2001, and the rules and regulations promulgated thereunder from time to time
in effect.

     

    “PBGC” means the
Pension Benefit Guaranty Corporation and any entity succeeding to any or all of
its functions under ERISA.

     

    

    
      
        
           

        

        
          A-25

          
            

          

        

        
           

        

      

    

    

    “PE Leases” means, in
each case as in effect on the date hereof, (i) the Equipment Lease Agreement,
dated as of October 1, 2007, between Pacific Ethanol Imperial, LLC and Burley,
(ii) the Equipment Lease Agreement, dated as of July 22, 2008, between Pacific
Ethanol Imperial, LLC and Boardman, (iii) the Equipment Lease Agreement, dated
as of February 1, 2008, between Pacific Ethanol Imperial, LLC and Madera and
(iv) the Equipment Lease Agreement, dated as of April 15, 2008, between Pacific
Ethanol Imperial, LLC and Stockton.

     

    “PEC” means Pacific
Ethanol California, Inc., a California corporation.

     

    “PEC Pledge Agreement”
means the Pledge and Security Agreement, dated on or about the date hereof,
among PEC, Pacific Holding and the Collateral Agent.

     

     “Period Start Date”
has the meaning set forth in Section 7.01(l) (DIP
Budget).

     

    “Permitted
Indebtedness” means Indebtedness identified in Section 7.02(a)
(Negative
Covenants - Restrictions on Indebtedness).

     

    “Permitted Liens”
means Liens identified in Section 7.02(b)
(Negative
Covenants - Liens).

     

    “Permitted Variance”
means, for each Monthly Budget Period, the product of (x) the aggregate
amount of the DIP Budget for such Monthly Budget Period and
(y) 10%.

     

    “Person” means any
natural person, corporation, partnership, limited liability company, firm,
association, trust, government, governmental agency or any other entity, whether
acting in an individual, fiduciary or other capacity.

     

    “Petition Date” has
the meaning set forth in the Recitals.

     

    “Plan” means an
employee pension benefit plan (as defined in Section 3(3) of ERISA) subject
to Title IV of ERISA or Section 412 of the Code that is sponsored or
maintained by any Borrower or any ERISA Affiliate, or in respect of which any
Borrower or any ERISA Affiliate has any obligation to contribution or
Liability.

     

    “Plants” means,
collectively, the Madera Plant, the Boardman Plant, the Stockton Plant and the
Burley Plant.

     

    “Pledge Agreements”
means, collectively, the Madera Pledge Agreement, the Boardman Pledge Agreement,
the Stockton Pledge Agreement, the Burley Pledge Agreement  and the
Pacific Holding Pledge Agreement.

     

    “Pledged Deposits”
means all time deposits of money (other than Deposit Accounts and Instruments),
whether or not evidenced by certificates, pledged by any Debtor as security for
any Obligations, and all rights to receive interest on such
deposits.

     

    “Post-Petition” means
the time period beginning immediately upon the filing of the Chapter 11
Cases.

     

    

    
      
        
           

        

        
          A-26

          
            

          

        

        
           

        

      

    

    

    “Pre-Petition” means
the time period ending immediately prior to the filing of the Chapter 11
Cases.

     

    “Pre-Petition Administrative
Agent” has the meaning assigned to the term “Administrative Agent” in the
Pre-Petition Credit Agreement.

     

    “Pre-Petition Collateral
Agent” has the meaning assigned to the term “Collateral Agent” in the
Pre-Petition Credit Agreement.

     

    “Pre-Petition Credit
Agreement” has the meaning set forth in the Recitals.

     

    “Pre-Petition Financing
Documents” has the meaning assigned to the term “Financing Documents” in
the Pre-Petition Credit Agreement.

     

    “Pre-Petition
Obligations” has the meaning assigned to the term “Obligations” in the
Pre-Petition Credit Agreement.

     

    “Pre-Petition Senior Secured
Parties” has the meaning assigned to the term “Senior Secured Parties” in
the Pre-Petition Credit Agreement.

     

    “Pre-Petition Term
Loans” has the meaning assigned to the term “Term Loans” in the
Pre-Petition Credit Agreement.

     

    “Priming Liens” has
the meaning set forth in Section 2.09 (b)
(Super-Priority
Nature of Obligations).

     

    “Products” means
ethanol, Distillers Grains, carbon dioxide, and any other co product or
by-product produced in connection with the production of ethanol at the
Plants.

     

    “Project” means each
Plant and all auxiliary and other facilities constructed or to be constructed by
or on behalf of the applicable Borrowers pursuant to the Project Documents
relating to each such Plant or otherwise, together with all fixtures and
improvements thereto and each Site and all other real property, easements and
rights-of-way held by or on behalf of the applicable Borrowers and all rights to
use easements and rights-of-way of others.

     

    “Project Accounts” has
the meaning provided in the Pre-Petition Credit Agreement.

     

     “Project Document
Guarantees” means each guarantee (by an Affiliate or otherwise) of the
performance of any Project Party’s obligations under a Project Document,
including the Pacific Ethanol Guarantees and any other such guarantee required
as a condition to approval of any Project Document in accordance with this
Agreement.

     

    “Project Document Termination
Payments” means all Net Cash Proceeds of payments that are required to be
paid to or for the account of any Borrower as a result of the termination of any
Project Document or any Additional Project Document.

     

    

    
      
        
           

        

        
          A-27

          
            

          

        

        
           

        

      

    

    

    “Project Documents”
means:

     

    
      	
               
      

            	
              (i)

            	
              the
      Construction Contracts;

            

    

     

    
      	
               
      

            	
              (ii)

            	
              the
      Leases;

            

    

     

    
      	
               
      

            	
              (iii)

            	
              the
      Grain Supply Agreements;

            

    

     

    
      	
               
      

            	
              (iv)

            	
              the
      Asset Management Agreement;

            

    

     

    
      	
               
      

            	
              (v)

            	
              the
      Ethanol Offtake Agreements;

            

    

     

    
      	
               
      

            	
              (vi)

            	
              the
      DG Offtake Agreements;

            

    

     

    
      	
               
      

            	
              (vii)

            	
              the
      O&M Agreements;

            

    

     

    
      	
               
      

            	
              (viii)

            	
              the
      Borrower LLC Agreements;

            

    

     

    
      	
               
      

            	
              (ix)

            	
              the
      Project Document Guarantees;

            

    

     

    
      	
               
      

            	
              (x)

            	
              each
      Additional Project Document; and

            

    

     

    
      	
               
      

            	
              (xi)

            	
              any
      replacement agreement for any of such
  agreements.

            

    

     

    “Project Party” means
each Person (other than the Borrowers) who is a party to a Project
Document.

     

    “Property” means any
right or interest in or to property of any kind whatsoever, whether real,
personal or mixed and whether tangible or intangible, including without
limitation, Equity Interests.

     

    “Prudent Ethanol Operating
Practice” means those reasonable practices, methods and acts that (i) are
commonly used in the regions where the Plants are located to manage, operate and
maintain ethanol production, distribution, equipment and associated facilities
of the size and type that comprise the Project safely, reliably, and efficiently
and in compliance with applicable Laws, manufacturers’ warranties and
manufacturers’ and licensor’s recommendations and guidelines, and (ii) in the
exercise of reasonable judgment, skill, diligence, foresight and care are
expected of an ethanol plant operator, in order to efficiently accomplish the
desired result consistent with safety standards, applicable Laws, manufacturers’
warranties, manufacturers’ recommendations and, in the case of the Project, the
Project Documents.  Prudent Ethanol Operating Practice does not
necessarily mean one particular practice, method, equipment specifications or
standard in all cases, but is instead intended to encompass a broad range of
acceptable practices, methods, equipment specifications and
standards.

     

    “RCRA” means the
Resource Conservation and Recovery Act (42 U.S.C. § 6901 et seq.), as amended,
and all rules, regulations, standards, guidelines, and publications issued
thereunder.

     

    

    
      
        
           

        

        
          A-28

          
            

          

        

        
           

        

      

    

    

    “Recovery Event” means
(i) any settlement of or payments in respect of any insurance policies required
pursuant to the Transaction Documents or otherwise obtained with respect to any
Borrower, any Plant or the Project or (ii) any Event of Taking.

     

    “Register” has the
meaning set forth in Section 11.03(c)
(Assignments).

     

    “Related Parties”
means, with respect to any Person, such Person’s Affiliates and the partners,
directors, officers, employees, agents and advisors of such Person and of such
Person’s Affiliates.

     

    “Removal,” “Remedial” and “Response” actions
shall include the types of activities covered by CERCLA, RCRA, and other
comparable Environmental Laws, and whether the activities are those which might
be taken by a Governmental Authority or those which a Governmental Authority or
any other Person might seek to require of waste generators, handlers,
distributors, processors, users, storers, treaters, owners, operators,
transporters, recyclers, reusers, disposers, or other Persons under “removal,”
“remedial,” or other “response” actions.

     

    “Reportable Event”
means a “reportable event” within the meaning of Section 4043(c) of
ERISA.

     

    “Required Lenders”
means Lenders (excluding all Non-Voting Lenders) holding in excess of fifty
percent (50.00%) of an amount equal to (x) the then aggregate outstanding
principal amount of the Loans plus (y) the undisbursed amount of the Aggregate
Revolving Loan Commitment plus (z) the undisbursed amount of the Aggregate Roll
Up Loan Commitment (excluding the principal amounts of any Loans made by, and
any Revolving Loan Commitments and Roll Up Loan Commitments of, any Non-Voting
Lenders); provided that the
undisbursed Revolving Loan Commitment and Roll Up Loan Commitment of, and the
portion of the outstanding principal amount of the Loans held by, any Defaulting
Lender shall be excluded for purposes of making a determination of Required
Lenders.

     

    “Restricted Payments”
means any (a) dividend or other distribution (whether in cash, securities or
other property), or any payment (whether in cash, securities or other property),
including any sinking fund or similar deposit, on account of the purchase,
redemption, retirement, defeasance, acquisition, cancellation or termination of
any Equity Interests of any Borrower, or on account of any return of capital to
any holder of any such Equity Interest in, or any other Affiliate of, any
Borrower, or any option, warrant or other right to acquire any such dividend or
other distribution or payment and (b) any payment of any management,
consultancy, administrative, services, or other similar payments to any Person
who owns, directly or indirectly, any Equity Interest in any Borrower, or any
Affiliate of any such Person except to the extent provided in the then-current
DIP Budget.

     

    “Revenue Account”
means a special, segregated, Dollar-denominated account established at the
Accounts Bank entitled “Amarillo Control - Pacific Ethanol Holding Co. LLC
Revenue Account”, Account No. 128864.

     

    “Revolving Lenders”
means those Lenders of Revolving Loans, as identified on Schedule 1.01,
and each other Person that acquires the rights and obligations of any such
Lender pursuant to Section 11.03
(Assignments).

     

    

    
      
        
           

        

        
          A-29

          
            

          

        

        
           

        

      

    

    

    “Revolving Loan
Commitment” means, with respect to each Lender, the commitment of such
Lender to make Revolving Loans, as set forth opposite the name of
such  Lender in Schedule 1.01,
as the same may be reduced in accordance with Section 2.06
(Termination
of Commitments).

     

    “Revolving Loan Commitment
Percentage” means, as to any Lender at any time, the percentage that such
Lender’s Revolving Loan Commitment then constitutes of the Aggregate Revolving
Loan Commitment.

     

    “Revolving Loans” has
the meaning provided in Section 2.01(a)
(Revolving
Loans).

     

    “Revolving Notes”
means the promissory notes of each Borrower evidencing Revolving
Loans.

     

    “Roll Up Lenders”
means those Lenders of Roll Up Loans, as identified on Schedule 1.01,
and each other Person that acquires the rights and obligations of any such
Lender pursuant to Section 11.03
(Assignments).

     

    “Roll Up Loan
Commitment” means, with respect to each Lender, the commitment of such
Lender to make Roll Up Loans, as set forth opposite the name of
such  Lender in Schedule 1.01,
as the same may be reduced in accordance with Section 2.06
(Termination
of Commitments).

     

    “Roll Up Loan Commitment
Percentage” means, as to any Lender at any time, the percentage that such
Lender’s Roll Up Loan Commitment then constitutes of the Aggregate Roll Up Loan
Commitment.

     

    “Roll Up Loans” has
the meaning provided in Section 2.02(a)
(Roll Up
Loans).

     

    “Roll Up Notes” means
the promissory notes of each Borrower evidencing Roll Up Loans.

     

    “S&P” means
Standard & Poor’s Ratings Services, a division of The McGraw Hill Companies,
Inc., and any successor thereto that is a nationally recognized rating
agency.

     

    “Section 506(a)
Determination”  means a determination under Section 506(a) of
the Bankruptcy Code.

     

    “Security Agreements”
means, collectively, the Madera Security Agreement, the Boardman Security
Agreement, the Stockton Security Agreement, the Burley Security Agreement and
the Pacific Holding Security Agreement.

     

    “Senior Secured
Parties” means the Lenders, the Agents and each of their respective
successors, transferees and assigns.

     

    “Site” means, with
respect to each Plant, those certain parcels described on Schedule 5.13(a)
to the Pre-Petition Credit Agreement with respect to such Plant.

     

    

    
      
        
           

        

        
          A-30

          
            

          

        

        
           

        

      

    

    

    “Sponsor Support
Agreement” means the Sponsor Support Agreement, dated on or about the
date of the Pre-Petition Credit Agreement, pursuant to which Pacific Ethanol
agrees to provide support for the Project on the terms and conditions set forth
therein.

     

    “SPV” has the meaning
provided in Section 11.03(h)
(Assignments).

     

    “Stock Rights” means
any securities, dividends or other distributions and any other right or property
which a Debtor shall receive or shall become entitled to receive for any reason
whatsoever with respect to, in substitution for or in exchange for any
securities or other ownership interests in a corporation, partnership, joint
venture or limited liability company constituting Collateral and any securities,
any right to receive securities and any right to receive earnings, in which a
Debtor now has or hereafter acquires any right, issued by an issuer of such
securities.

     

    “Stockton” has the
meaning set forth in the Preamble.

     

    “Stockton Deed of
Trust” means the Deed of Trust, Security Agreement, Financing Statement,
Fixture Filing and Assignment of Leases, Rents and Security Deposits, in
substantially the form of Exhibit 6.04(g)-A
to the Pre-Petition Credit Agreement.

     

    “Stockton Lease” means
the lease between the Stockton Port District and Stockton.

     

    “Stockton Plant” means
the ethanol production facility located at Stockton, California, with a design
basis capacity of approximately fifty (50) million gallons-per-year of denatured
ethanol, including the Site on which such facility is located, and all
buildings, structures, improvements, easements and other property related
thereto.

     

    “Stockton Pledge
Agreement” means the Pledge and Security Agreement, in substantially the
form of Exhibit 6.04(g)-B
to the Pre-Petition Credit Agreement, entered into among Pacific Holding,
Stockton and the Pre-Petition Collateral Agent.

     

    “Stockton Security
Agreement” means the Assignment and Security Agreement, in substantially
the form of Exhibit 6.04(g)-C
to the Pre-Petition Credit Agreement entered into by Stockton in favor of the
Pre-Petition Collateral Agent.

     

    “Subsidiary” of any
Person means a corporation, partnership, joint venture, limited liability
company or other business entity of which a majority of the shares of securities
or other Equity Interests having ordinary voting power for the election of
directors or other governing body (other than securities or interests having
such power only by reason of the happening of a contingency) are at the time
beneficially owned, or the management of which is otherwise controlled,
directly, or indirectly through one or more intermediaries, or both, by such
Person.

     

    “Supporting
Obligation” has the meaning set forth in Section 9-102 of the
UCC.

     

    

    
      
        
           

        

        
          A-31

          
            

          

        

        
           

        

      

    

    

    “Swap Contract” means
(a) any and all rate swap transactions, basis swaps, credit derivative
transactions, forward rate transactions, commodity swaps, commodity options,
forward commodity contracts, equity or equity index swaps or options, bond or
bond price or bond index swaps or options or forward bond or forward bond price
or forward bond index transactions, interest rate options, forward foreign
exchange transactions, cap transactions, floor transactions, collar
transactions, currency swap transactions, cross-currency rate swap transactions,
currency options, spot contracts, or any other similar transactions or any
combination of any of the foregoing (including any options to enter into any of
the foregoing), whether or not any such transaction is governed by or subject to
any master agreement, (b) any and all transactions of any kind, and the related
confirmations, which are subject to the terms and conditions of, or governed by,
any form of master agreement published by the International Swaps and
Derivatives Association, Inc., any International Foreign Exchange Master
Agreement, or any other master agreement, including any such obligations or
liabilities under any such master agreement and (c) for the avoidance of doubt,
excludes any contract for the physical sale or purchase of any
commodity.

     

    “Swap Termination
Value” means, in respect of any one or more Swap Contracts, after taking
into account the effect of any legally enforceable netting agreement relating to
such Swap Contracts, (a) for any date on or after the date such Swap Contracts
have been closed out and termination value(s) determined in accordance
therewith, such termination value(s), and (b) for any date prior to the date
referenced in clause (a), the amount(s) determined as the mark-to-market
value(s) for such Swap Contracts, in accordance with the terms of the applicable
Swap Contract, or, if no provision is made therein, as determined based upon one
or more mid-market or other readily available quotations provided by any
recognized dealer in such Swap Contracts (which may include a Lender or any
Affiliate of a Lender).

     

    “Tax” or “Taxes” means any
present or future taxes (including income, gross receipts, license, payroll,
employment, excise, severance, stamp, documentary, occupation, premium, windfall
profits, environmental, capital stock, franchise, profits, withholding, social
security (or similar), unemployment, disability, real property, personal
property, sales, use, transfer, registration, value-added, ad valorem,
alternative or add-on minimum, estimated, or other tax of any kind whatsoever),
levies, imposts, duties, fees or charges (including any interest, penalty, or
addition thereof) imposed by any government or any governmental agency or
instrumentality or any international or multinational agency or
commission.

     

    “Tax Return” means all
returns, declarations, reports, claims for refund and information returns and
statements of any Person required to be filed with respect to, or in respect of,
any Taxes, including any schedule or attachment thereto and any amendment
thereof.

     

    “Termination Event”
means (i) a Reportable Event with respect to any ERISA Plan, (ii) the initiation
of any action by any Borrower, any ERISA Affiliate or any ERISA Plan fiduciary
to terminate an ERISA Plan (other than a standard termination under
Section 4041(b) of ERISA) or the treatment of an amendment to an ERISA Plan
as a termination under Section 4041(e) of ERISA, (iii) the institution of
proceedings by the PBGC under Section 4042 of ERISA to terminate an ERISA
Plan or to appoint a trustee to administer any ERISA Plan, (iv) the withdrawal
of any Borrower or any ERISA Affiliate from a Multiemployer Plan during a plan
year in which such Borrower or such ERISA Affiliate was a “substantial employer”
as defined in Section 4001(a)(2) of ERISA or the cessation of operations
which results in the termination of employment of twenty percent (20%) of
Multiemployer Plan participants who are employees of any Borrower or any ERISA
Affiliate, (v) the partial or complete withdrawal of any Borrower or any ERISA
Affiliate from a Multiemployer Plan, or (vi) any Borrower or any ERISA Affiliate
is in default (as defined in Section 4219(c)(5) of ERISA) with respect to
payments to a Multiemployer Plan.

     

    

    
      
        
           

        

        
          A-32

          
            

          

        

        
           

        

      

    

    

    “Transaction
Documents” means, collectively, the Financing Documents and the Project
Documents.

     

    “Unfunded Benefit
Liabilities” means, with respect to any ERISA Plan at any time, the
amount (if any) by which (i) the present value of all accrued benefits
calculated on an accumulated benefit obligation basis and based upon the
actuarial assumptions used for accounting purposes (i.e., those determined in accordance with FASB
statement No. 35 and used in preparing the ERISA Plan’s financial statements)
exceeds (ii) the fair market value of all ERISA Plan assets allocable to such
benefits, determined as of the then most recent actuarial valuation report for
such ERISA Plan.

     

    “Uniform Commercial
Code” or “UCC” means the
Uniform Commercial Code as in effect from time to time in the State of New York;
provided, however, in the event
that, by reason of mandatory provisions of law, any or all of the perfection or
priority of the security interest in any Collateral is governed by the Uniform
Commercial Code as in effect in a jurisdiction other than the State of New York,
the term “UCC”
shall mean the Uniform Commercial Code as in effect in such other jurisdiction
for purposes of provisions relating to such perfection or priority and for
purposes of definitions related to such provisions.

     

    “United States” or
“U.S.” means
the United States of America, its fifty States and the District of
Columbia.

     

    “United States Person”
means a “United States person” as defined in Section 7701(a)(30) of the
Code.

     

    “WDG” means wet
distillers grains produced by the Borrowers at the Plants.

     

    “WestLB” means WestLB
AG, New York Branch.

     

     

     

     

     

    A-33

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