Document:

pei_8k-ex1004.htm

    EXHIBIT
10.4

    

    

    

    FIRST
AMENDMENT TO LOAN AND SECURITY AGREEMENT

     

    This
FIRST AMENDMENT TO LOAN AND
SECURITY AGREEMENT (this "Amendment")
is dated as of August 29, 2007 by and between KINERGY MARKETING, LLC, an Oregon limited
liability company ("Borrower")
and COMERICA BANK, a
Michigan banking corporation, with its offices located at 333 W. Santa Clara
Street, San Jose, California 95113 ("Bank").

     

    RECITALS

     

    A.   
Borrower and Bank have previously entered into that certain Loan and Security
Agreement (Accounts and Inventory) dated August 17, 2007 (the "Loan
Agreement").

     

    AGREEMENT

     

    NOW, THEREFORE, for good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties agree as set forth below.

     

    1.        
Incorporation by
Reference. The foregoing Recitals and the Loan Documents (as defined in
the Loan Agreement) are incorporated herein by this reference as though set
forth in full herein. Capitalized terms not otherwise defined herein shall have
the meanings given such terms in the Loan Agreement.

     

    2.        
Ratification of
Indebtedness. Borrower ratifies and reaffirms the Indebtedness, without
setoff, defense, or counterclaim.

     

    3.       
Amendment to the
Loan Agreement. The Loan Agreement is hereby amended as set forth
herein.

     

    3.1.  Amendment to
Section 1.10 of the Loan Agreement. Section 1.10 of the Loan Agreement is
hereby amended by deleting it in its entirety and replacing it with the
following:

     

    "1.10
 "Borrowing
Base" means an amount equal to the sum of: (a) eighty percent (80%) of
the Net Amount of Eligible Accounts; plus (b) the sum of
(i) seventy percent (70%) of the Value of Eligible In Storage Inventory; provided that the aggregate
amount of Advances made under this Subsection 1.10(b)(i) shall not exceed Ten
Million and 00/100 Dollars ($10,000,000.00); plus (ii) seventy
percent (70%) of the Value of Eligible In Transit Inventory; provided that the aggregate
amount of Advances made under this Subsection 1,10(b)(ii) shall not exceed Four
Million and 00/100 Dollars ($4,000,000.00); further provided that the aggregate
amount of Advances made under Subsection I .10(b) for Inventory consisting of
bio-diesel shall not exceed One Million and 00/100 Dollars
($1,000,000.00)."

    
      
         

      

      
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    3.2.  Amendment to
Section 1.23 of the Loan Agreement. Section 1.23 of the Loan
Agreement is hereby amended by deleting it in its entirety and replacing it with
the following:

     

    "1.23
"Eligible
Inventory" means that portion of Borrower's Inventory
consisting of ethanol, bio-diesel and denaturant which is: (a) owned by
Borrower, free and clear of all Liens or encumbrances, except Permitted Liens;
(b) held for sale by Borrower in the ordinary course of the Borrower's business;
(c) of good and merchantable quality, free from defects for the purposes for
which it is intended; (d) as to which Bank has been able to perfect and maintain
a perfected first priority security interest; and (e) Bank, in its reasonable
judgment and in good faith, has not determined that it is unacceptable or should
be price-adjusted in any material respect."

    

    3.3.  Amendment to
Section 2.2.3 of the Loan Agreement. Section 2.2.3 of the Loan
Agreement is hereby amended by deleting the term "Two Million and 00/100 Dollars
($2,000,000.00)" and replacing it with the term "Six Million and 00/100 Dollars
($6,000,000.00)."

    

    4.         Legal
Effect.

    

    4.1.  Except as
specifically set forth in this Amendment, all of the terms and conditions
of the Loan Documents remain in full force and effect. Except as expressly set
forth herein, the execution, delivery, and performance of this Amendment shall
not operate as a waiver of, or as an amendment of, any right, power, or remedy
of Bank under the Loan Documents, as in effect prior to the date hereof.
Borrower ratifies and reaffirms the continuing effectiveness of all promissory
notes, guaranties, security agreements, mortgages, deeds of trust, environmental
agreements, and all other instruments, documents and agreements entered into in
connection with the Loan Documents.

    

    4.2.  Borrower represents
and warrants that each of the representations and warranties
contained in the Loan Documents are true and correct as of the date of this
Amendment, and that no Event of Default has occurred and is
continuing.

    

    4.3.  The effectiveness
of this Amendment and each of the documents, instruments
and agreements entered into in connection with this Amendment is conditioned
upon receipt by Bank of this Amendment and any other documents which Bank may
require to carry out the terms hereof.

    

    5.         Integration.
This Amendment, any documents executed in connection herewith
and the Loan Documents (as amended hereby and by any documents executed in
connection herewith) contain the entire agreement between the parties with
respect to the subject matter hereof and supersedes all prior agreements,
understandings, offers and negotiations, oral or written, with respect
thereto.

    
      
         

      

      
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    6.           Successors and
Assigns. This Amendment shall bind and inure to the benefit of the
respective successors and permitted assigns of each of the parties; provided,
however, that neither this Amendment nor any rights hereunder may be
assigned by Borrower. Bank shall have the right without the consent of or notice
to Borrower to sell, transfer, negotiate, or grant participation in all or any
part of, or any interest in, Bank's obligations, rights and benefits
hereunder.

     

    7.           Indemnification.
Borrower shall defend, indemnify and hold harmless Bankand its officers,
employees, and agents against: (a) all obligations, demands, claims, and
liabilities claimed or asserted by any other party in connection with the
transactions contemplated by this Amendment; and (b) all losses or Bank expenses
in any way suffered, incurred, or paid by Bank as a result of or in any way
arising out of, following, or consequential to transactions between Bank and
Borrower whether under this Amendment, or otherwise (including without
limitation reasonable attorneys' fees and expenses), except for losses caused by
Bank's gross negligence or willful misconduct.

     

    8.          Severability of
Provisions. In the event any one or more of the provisions contained
in this Amendment is held to be invalid, illegal or unenforceable in any
respect, then such provision shall be ineffective only to the extent of such
prohibition or invalidity, and the validity, legality, and enforceability of the
remaining provisions contained herein shall not in any way be affected or
impaired thereby.

     

    9.          Amendments.
Neither this Amendment nor any provisions hereof may be changed,
waived, discharged or terminated, nor may any consent to the departure from the
terms hereof be given, orally (even if supported by new consideration), but only
by an instrument in writing signed by all parties to this Amendment. Any waiver
or consent so given shall be effective only in the specific instance and for the
specific purpose for which given.

     

    10.       Waiver. No
failure to exercise and no delay in exercising any right, power, or remedy
hereunder shall impair any right, power, or remedy which Bank may have, nor
shall any such delay be construed to be a waiver of any of such rights, powers,
or remedies, or any acquiescence in any breach or default hereunder; nor shall
any waiver by Bank of any breach or default by Borrower hereunder be deemed a
waiver of any default or breach subsequently occurring. All rights and remedies
granted to Bank hereunder shall remain in full force and effect notwithstanding
any single or partial exercise of, or any discontinuance of action begun to
enforce, any such right or remedy. The rights and remedies specified herein are
cumulative and not exclusive of each other or of any rights or remedies which
Bank would otherwise have. Any waiver, permit, consent or approval by Bank of
any breach or default hereunder must be in writing and shall be effective only
to the extent set forth in such writing and only as to that specific
instance.

     

    11.       
Interpretation.
This Amendment and all agreements relating to the subject matter
hereof are the product of negotiation and preparation by and among each party
and its respective attorneys, and shall be construed accordingly. The parties
waive the provisions of California Civil Code § 1654.

     

    12.       Counterparts.
This Amendment may be signed in any number of counterparts, each of
which shall be an original, with the same effect as if all signatures were upon
the same instrument. Delivery of an executed counterpart of the signature page
to this Amendment by telefacsimile shall be effective as delivery of a manually
executed counterpart of this

    
      
         

      

      
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    Amendment,
and any party delivering such an executed counterpart of the signature page to
this Amendment by telefacsimile to any other party shall thereafter also
promptly deliver a manually executed counterpart of this Amendment to such other
party; provided; however, that the failure to deliver such manually executed
counterpart shall not affect the validity, enforceability, or binding effect of
this Amendment.

     

    13.      Attorneys' Fees
and Costs of Enforcement. In the event that any action is required
to be taken by Bank to enforce or interpret its rights under this Amendment and
any documents executed in connection therewith or the Loan Documents, whether or
not suit is brought, or in the event of any dispute arising from this Amendment
and any document executed in connection therewith or the Loan Documents Borrower
shall pay to Bank the attorneys' fees and costs incurred by Bank in connection
therewith, including, without limitation, any attorneys' fees and costs incurred
in connection with any bankruptcy proceeding of Borrower, including, without
limitation, any motion for relief from stay or dispute over or negotiation
concerning cash collateral or nondischargeability, and any expert witness
fees.

     

    IN
WITNESS WHEREOF, the parties have agreed as of the date first set forth
above.

     

    
    

     

    
      	 	

              KINERGY
      MARKETING, LLC

               

               

              /s/ Neil
      Koehler                                               
      

              By: 
      Neil Koehler

              Its: 
      President and Chief Executive Officer

               

               

              COMERICA
      BANK

               

               

              /s/ Robert
      Harlan                                             
      

              
                By: 
      Robert Harlan

                Its: 
      Vice President — Western
Market

              
 

    

     

     

    4pei_8k-ex1005.htm

    EXHIBIT
10.5

     

    

     

    
      Guaranty

      
        
          

        

      1.            PACIFIC ETHANOL, INC., a
Delaware corporation (“Guarantor”),
for value received, unconditionally
and absolutely guarantees to COMERICA BANK, a Michigan
corporation (“Bank”),
and to the Bank’s successors and assigns, payment when due, whether by stated
maturity, demand, acceleration or otherwise, of all existing and future
indebtedness to the Bank of KINERGY MARKETING LLC, an
Oregon limited liability company or any successor in interest, including without
limit any debtor-in-possession or trustee in bankruptcy which succeeds to the
interest of this party or person (jointly and severally the “Borrower”)
under (a) that certain Loan and Security Agreement, dated as of August 17, 2007
(as amended from time to time, the “Loan
Agreement”) by and between Borrower and Bank; and (b) each of the other
Loan Documents (as defined in the Loan Agreement) (the “Indebtedness”);
provided that the
Guarantor’s maximum aggregate liability under this Guaranty shall not exceed the
Liability Cap (as defined below).

      

      2.            The
Indebtedness guaranteed includes: (a) any and all direct indebtedness of the
Borrower to the
Bank under the Loan Documents, including indebtedness evidenced by any and all
promissory notes; (b) any and all obligations or liabilities of the Borrower to
the Bank arising under any Loan Document where the Borrower has guaranteed the
payment of indebtedness owing to the Bank from a third party; (c) any and all
obligations or liabilities of the Borrower to the Bank arising from applications
or agreements for the issuance of letters of credit pursuant to the Loan
Documents; (d) any and all obligations or liabilities of the Borrower to the
Bank arising out of any other Loan Document by the Borrower; (e) any and all
indebtedness, obligations or liabilities for which the Borrower would otherwise
be liable to the Bank under the Loan Documents were it not for the invalidity,
irregularity or unenforceability of them by reason of any bankruptcy, insolvency
or other law or order of any kind, or for any other reason, including liability
for interest and out-of-pocket attorneys’ fees on, or in connection with, any of
the Indebtedness from and after the filing by or against the Borrower of a
bankruptcy petition whether an involuntary or voluntary bankruptcy case,
including, without limitation, all out-of-pocket attorneys’ fees and costs
actually incurred in connection with motions for relief from stay, cash
collateral motions, nondischargeability motions, preference liability motions,
fraudulent conveyance liability motions, fraudulent transfer liability motions
and all other motions brought by Borrower, Guarantor, Bank or third parties in
any way relating to Bank’s rights under the Loan Documents with respect to such
Borrower, Guarantor, or third party and/or affecting any collateral securing any
obligation under the Loan Documents owed to Bank by Borrower, Guarantor, or any
third party, probate proceedings, on appeal or otherwise; (f) any and all
amendments, modifications, renewals and/or extensions of any of the above,
including without limit amendments, modifications, renewals and/or extensions
which are evidenced by new or additional instruments, documents or agreements;
and (g) all costs of collecting Indebtedness, including reasonable out-of-pocket
attorneys’ fees and costs.

      

      3.            If,
in any action to enforce this Guaranty or any proceeding to allow or adjudicate
a claim under
this Guaranty, a court of competent jurisdiction determines that enforcement of
this Guaranty against Guarantor for the full amount of the Indebtedness is not
lawful under, or would be subject to avoidance under, Section 548 of the
Bankruptcy Code or any applicable provision of comparable state law, the
liability of Guarantor under this Guaranty shall be limited to the maximum
amount lawful and not subject to avoidance under such law.

      

      4.            Except
as otherwise set forth herein, Guarantor waives, to the maximum extent permitted
by law,
notice of acceptance of this Guaranty and presentment, demand, protest, notice
of protest, dishonor, notice of dishonor, notice of default, notice of intent to
accelerate or demand payment of any Indebtedness, and diligence in collecting
any Indebtedness, and agrees that the Bank may modify the terms of any
Indebtedness, compromise, extend, increase, accelerate, renew or forbear to
enforce payment of any or all Indebtedness, or permit the Borrower to incur
additional Indebtedness, all without notice to Guarantor and

      
        
           

        

        
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      without
affecting in any manner the unconditional obligation of Guarantor under this
Guaranty. Except as otherwise set forth herein, Guarantor further waives, to the
maximum extent permitted by law, any and all other notices to which Guarantor
might otherwise be entitled. Guarantor acknowledges and agrees that the
liabilities created by this Guaranty are direct and are not conditioned upon
pursuit by the Bank of any remedy the Bank may have against the Borrower or any
other person or any security. No invalidity, irregularity or unenforceability of
any part or all of the Indebtedness or any documents evidencing the same, by
reason of any bankruptcy, insolvency or other law or order of any kind or for
any other reason, and no defense or setoff available at any time to the
Borrower, shall impair, affect or be a defense or setoff to the obligations of
Guarantor under this Guaranty.

      

      5.            Guarantor
delivers this Guaranty based solely on Guarantor’s independent investigation of
the
financial condition of the Borrower and is (are) not relying on any information
furnished by the Bank. Guarantor assumes full responsibility for obtaining any
further information concerning the Borrower’s financial condition, the status of
the Indebtedness or any other matter which Guarantor may deem necessary or
appropriate from time to time. Guarantor waives any duty on the part of the
Bank, and agrees that it is not relying upon nor expecting the Bank to disclose
to Guarantor any fact now or later known by the Bank, whether relating to the
operations or condition of the Borrower, the existence, liabilities or financial
condition of any co-guarantor of the Indebtedness, the occurrence of any default
with respect to the Indebtedness, or otherwise, notwithstanding any effect these
facts may have upon Guarantor’s risk under this Guaranty or Guarantor’s rights
against the Borrower. Guarantor knowingly accepts the full range of risk
encompassed in this Guaranty, which risk includes without limit the possibility
that the Borrower may incur Indebtedness to the Bank after the financial
condition of the Borrower, or its ability to pay its debts as they mature, has
deteriorated.

      

      6.            Guarantor
represents and warrants as of the date hereof that: (a) the Bank has made no
representation
to Guarantor as to the creditworthiness of the Borrower; and (b) Guarantor has
(have) established adequate means of obtaining from the Borrower on a continuing
basis financial and other information pertaining to the Borrower’s financial
condition. Guarantor agrees to keep adequately informed of any facts, events or
circumstances which might in any way affect the risks of Guarantor under this
Guaranty.

      

      7.            Guarantor
subordinates any claim of any nature that Guarantor now or later has (have)
against
the Borrower to and in favor of all Indebtedness, and upon the occurrence and
continuance of an Event of Default under the Loan Agreement, agrees not to
accept payment or satisfaction of any claim that Guarantor now or later may have
against the Borrower without the prior written consent of the Bank. Should any
payment, distribution, security, or proceeds, be received by Guarantor in
contravention of this Section 7, upon or with respect to any claim that
Guarantor now or may later have against the Borrower, Guarantor shall
immediately deliver the same to the Bank in the form received (except for
endorsement or assignment by Guarantor where required by the Bank) for
application on the Indebtedness, whether matured or unmatured, and until
delivered the same shall be held in trust by Guarantor as the property of the
Bank.

      

      8.            Guarantor
agrees that no security now or later held by the Bank for the payment of any
Indebtedness,
whether from the Borrower, any guarantor, or otherwise, and whether in the
nature of a security interest, pledge, lien, assignment, setoff, suretyship,
guaranty, indemnity, insurance or otherwise, shall affect in any manner the
unconditional obligation of Guarantor under this Guaranty, and the Bank, in its
sole discretion, without notice to Guarantor, may release, exchange, enforce and
otherwise deal with any security without affecting in any manner the
unconditional obligation of Guarantor under this Guaranty. Guarantor
acknowledges and agrees that the Bank has no obligation to acquire or perfect
any lien on or security interest in any assets, whether realty or personalty, to
secure payment of the Indebtedness, and Guarantor is not relying upon any assets
in which the Bank has or may have a lien or security interest for payment of the
Indebtedness. For the avoidance of doubt, Guarantor’s obligations hereunder are
not secured by any of the assets or property of Guarantor.

      
        
           

        

        
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      9.            Guarantor
acknowledges that the effectiveness of this Guaranty is not conditioned on any
or all of
the Indebtedness being guaranteed by anyone else.

      

      10.          Until
the Indebtedness is indefeasibly paid in full or this Guaranty is otherwise
terminated  in
accordance with the provisions hereof, Guarantor waives, to the maximum extent
permitted by law, any and all rights to be subrogated to the position of the
Bank or to have the benefit of any lien, security interest or other guaranty now
or later held by the Bank for the Indebtedness or to enforce any remedy which
the Bank now or later has against the Borrower or any other person. Until the
Indebtedness is irrevocably paid in full or this Guaranty is otherwise
terminated in accordance with the provisions hereof, Guarantor shall have no
right of reimbursement, indemnity, contribution or other right of recourse to or
with respect to the Borrower or any other person. Guarantor agrees to indemnify
and hold harmless the Bank from and against any and all claims, actions,
damages, out-of-pocket costs and expenses actually incurred, including without
limit reasonable out-of-pocket attorneys’ fees, actually incurred by the Bank in
connection with Guarantor’s exercise of any right of subrogation, contribution,
indemnification or recourse with respect to this Guaranty. The Bank has no duty
to enforce or protect any rights which Guarantor may have against the Borrower
or any other person and Guarantor assumes full responsibility for enforcing and
protecting these rights.

      

      11.            Notwithstanding
any provision of the preceding paragraph or anything else in this Guaranty
to the
contrary, until the Indebtedness is indefeasibly paid in full or this Guaranty
is otherwise terminated in accordance with the provisions hereof, if Guarantor
is or becomes “an “insider” or “affiliate” (as defined in Section 101 of the
Federal Bankruptcy Code, as it may be amended) with respect to the Borrower,
then Guarantor irrevocably and absolutely waives, to the maximum extent
permitted by law, any and all rights of subrogation, contribution,
indemnification, recourse, reimbursement and any similar rights against the
Borrower (or any other guarantor) with respect to this Guaranty, whether such
rights arise under an express or implied contract or by operation of law. It is
the intention of the parties that Guarantor shall not be (or be deemed to be) a
“creditor” (as defined in Section 101 of the Federal Bankruptcy Code, as it may
be amended) of the Borrower (or any other guarantor) by reason of the existence
of this Guaranty in the event that the Borrower becomes a debtor in any
proceeding under the Federal Bankruptcy Code. This waiver is given to induce the
Bank to enter into certain written contracts with the Borrower included in the
Indebtedness. Guarantor warrants and agrees that none of Bank’s rights, remedies
or interests shall be directly or indirectly impaired because of any of
Guarantor’s status as an “insider” or “affiliate” of the Borrower, and Guarantor
shall take any action, and shall execute any document, which the Bank may
request in order to effectuate this warranty to the Bank.

      

      12.            Guarantor
may terminate its obligation under this Guaranty as to future Indebtedness
(except
as provided below) by (and only by) delivering written notice of termination to
an officer of the Bank and receiving from an officer of the Bank written
acknowledgement of delivery; provided, the termination
shall not be effective until the opening of business on the fifth (5th) day
following written acknowledgement of delivery. Any termination shall not affect
in any way the unconditional obligations of the remaining guarantors, whether or
not the termination is known to the remaining guarantors. Any termination shall
not affect in any way the unconditional obligations of the terminating
guarantors as to any Indebtedness existing at the effective date of termination
or any Indebtedness created after that pursuant to any commitment or agreement
of the Bank or any Borrower loan with the Bank existing at the effective date of
termination (whether advances or readvances by the Bank are optional or
obligatory), or any modifications, extensions or renewals of any of this
Indebtedness, whether in whole or in part, and as to all of this Indebtedness
and modifications, extensions or renewals of it, this Guaranty shall continue
effective until the same shall have been fully paid or this Guaranty has
otherwise been terminated in accordance with the provisions hereof. The Bank has
no duty to give notice of termination by any guarantors to any remaining
guarantors. Guarantor shall indemnify the Bank against all claims, damages,
out-of-pocket costs and expenses actually incurred, including without limit
reasonable out-of-pocket attorneys’ fees and costs, actually incurred by the
Bank in connection with any suit, claim or action against the Bank arising out
of any modification or termination of a Loan Document or any refusal by the Bank
to extend additional credit in connection with the termination of this
Guaranty.

      
        
           

        

        
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      13.            This
Guaranty shall terminate upon the earlier of (a) the indefeasible payment in
full of all Indebtedness,
and the termination of all Bank commitments under the Loan Documents; or (b)
upon the indefeasible payment and performance of Guarantor’s obligations under
this Guaranty.

      

      14.            Notwithstanding
any prior revocation, termination, surrender or discharge of this Guaranty
in whole
or part, the effectiveness of this Guaranty shall automatically continue or be
reinstated, as the case may be, in the event that any payment received or credit
given by the Bank in respect of the Indebtedness is returned, disgorged or
rescinded as a preference, impermissible setoff, fraudulent conveyance,
diversion of trust funds, or otherwise under any applicable state or federal
law, including, without limitation, laws pertaining to bankruptcy or insolvency,
in which case this Guaranty shall be enforceable against Guarantor as if the
returned, disgorged or rescinded payment or credit had not been received or
given by the Bank, and whether or not the Bank relied upon this payment or
credit or changed its position as a consequence of it. In the event of
continuation or reinstatement of this Guaranty, Guarantor agrees upon demand by
the Bank to execute and deliver to the Bank those documents which the Bank
determines are appropriate to further evidence (in the public records or
otherwise) this continuation or reinstatement, although the failure of Guarantor
to do so shall not affect in any way the reinstatement or continuation. If
Guarantor does not execute and deliver to the Bank upon demand such documents,
the Bank and each Bank officer is irrevocably appointed (which appointment is
coupled with an interest) the true and lawful attorney of Guarantor (with full
power of substitution) to execute and deliver such documents in the name and on
behalf of Guarantor.

      

      15.            Although
the intent of Guarantor and the Bank is that California law shall apply to this
Guaranty,
regardless of whether California law applies, Guarantor further agrees as
follows: With respect to the Liability Cap, Guarantor agrees that the Liability
Cap shall not be a limitation on the amount of Borrower’s Indebtedness to the
Bank.

      

      16.            Guarantor
waives, to the maximum extent permitted by law, any right to require the Bank
to: (a)
proceed against any person, including without limit the Borrower; (b) proceed
against or exhaust any security held from the Borrower or any other person; (c)
pursue any other remedy in the Bank’s power; or (d) except as set forth herein,
make any presentments or demands for performance, or give any notices of
nonperformance, protests, notices of protest, or notices of dishonor in
connection with any obligations or evidences of Indebtedness held by the Bank as
security, in connection with any other obligations or evidences of indebtedness
which constitute in whole or in part Indebtedness, or in connection with the
creation of new or additional Indebtedness.

      

      17.            Guarantor
authorizes the Bank, either before or after termination of this Guaranty and
without
affecting Guarantor’s liability under this Guaranty, from time to time to: (a)
after three (3) business days prior notice to Guarantor, apply any security
provided by the Borrower and direct the order or manner of sale of it, including
without limit, a nonjudicial sale permitted by the terms of the controlling
security agreement, mortgage or deed of trust, as the Bank in its discretion may
determine; (b) without notice to or demand on Guarantor, release or substitute
any one or more of the endorsers or any other guarantors of the Indebtedness;
and (c) without notice to or demand on Guarantor and subject to the provisions
of the Loan Agreement, apply payments received by the Bank from the Borrower to
any indebtedness of the Borrower to the Bank, in such order as the Bank shall
determine in its sole discretion, whether or not this indebtedness is covered by
this Guaranty, and Guarantor waives any provision of law regarding application
of payments which specifies otherwise. The Bank may without notice assign this
Guaranty in whole or in part. Upon the Bank’s request, Guarantor agrees to
provide to the Bank copies of Guarantor’s financial statements.

      

      18.            Guarantor
waives, to the maximum extent permitted by law, any defense based upon or
arising
by reason of (a) any disability or other defense of the Borrower or any other
person; (b) the cessation or limitation from any cause whatsoever, other than
final and irrevocable payment in full, of the Indebtedness; (c) any lack of
authority of any officer, director, partner, agent or any other person acting or
purporting to act on behalf of the Borrower which is a corporation, partnership
or other type of entity, or any defect in the formation of the Borrower; (d) the
application by the Borrower of the proceeds of any Indebtedness for purposes
other than the purposes represented by the Borrower to the Bank or intended
or

      
        
           

        

        
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      understood
by the Bank or Guarantor; (e) any act or omission by the Bank which directly or
indirectly results in or aids the discharge of the Borrower or any Indebtedness
by operation of law or otherwise; or (f) any modification of the Indebtedness,
in any form whatsoever including without limit any modification made after
effective termination, and including without limit, the renewal, extension,
acceleration or other change in time for payment of the Indebtedness, or other
change in the terms of any Indebtedness, including without limit increase or
decrease of the interest rate. Guarantor understands that, absent this waiver,
Bank’s election of remedies, including but not limited to its decision to
proceed to nonjudicial foreclosure on any real property securing the
Indebtedness, could preclude Bank from obtaining a deficiency judgment against
Borrower and Guarantor pursuant to California Code of Civil Procedure sections
580a, 580b, 580d or 726 and could also destroy any subrogation rights which
Guarantor has against Borrower. Guarantor further understands that, absent this
waiver, California law, including without limitation, California Code of Civil
Procedure sections 580a, 580b, 580d or 726, could afford Guarantor one or more
affirmative defenses to any action maintained by Bank against Guarantor on this
Guaranty.

      

      19.           Guarantor
waives, to the maximum extent permitted by law, any and all rights and
provisions
of California Code of Civil Procedure sections 580a, 580b, 580d and 726,
including, but not limited to any provision thereof that: (a) may limit the time
period for Bank to commence a lawsuit against Borrower or Guarantor to collect
any Indebtedness owing by Borrower or Guarantor to Bank; (b) may entitle
Borrower or Guarantor to a judicial or nonjudicial determination of any
deficiency owed by Borrower or Guarantor to Bank, or to otherwise limit Bank’s
right to collect a deficiency based on the fair market value of such real
property security; (c) may limit Bank’s right to collect a deficiency judgment
after a sale of any real property securing the Indebtedness; (d) may require
Bank to take only one action to collect the Indebtedness or that may otherwise
limit the remedies available to Bank to collect the Indebtedness.

      

      20.            Guarantor
waives all rights and defenses arising out of an election of remedies by Bank
even
though that election of remedies, such as a nonjudicial foreclosure with respect
to security for a guaranteed obligation, has destroyed Guarantor’s rights of
subrogation and reimbursement against Borrower by the operation of Section 580d
of the Code of Civil Procedure or otherwise.

      

      21.           
Without limiting the generality of any other waiver or other provision
set forth in this Guaranty,
each undersigned Guarantor waives all rights and defenses that any such
undersigned Guarantor may have because the Indebtedness is secured by real
property. This means, among other things:

      

      (1)            Bank
may collect from any undersigned Guarantor without
first foreclosing on any real or personal property collateral pledged by any
Borrower to secure the Indebtedness.

      

      (2)            If
Bank forecloses on any real property collateral pledged
by any Borrower to secure the Indebtedness:

      

      (a)            the
amount of the Indebtedness may be reduced
only by the price for which that collateral is sold at the foreclosure sale,
even if the collateral is worth more than the sale price.

      

      (b)            Bank
may collect from any undersigned Guarantor
even if Bank, by foreclosing on the real property pledged as collateral, has
destroyed any right that Guarantor may have to collect from
Borrower.

      

      This is
an unconditional and irrevocable waiver of any rights and defenses each
undersigned Guarantor may have because the Indebtedness is secured by Real
Property. These rights and defenses include, but are not limited to, any rights
or defenses based upon Section 580a, 580b, 580d, or 726 of the California Code
of Civil Procedure.

      
        
           

        

        
          5

          
            

          

        

        
           

        

      

      22.            WITHOUT
LIMITING THE GENERALITY OF ANY OTHER WAIVER OR OTHER PROVISION SET FORTH IN THIS
GUARANTY, EACH UNDERSIGNED GUARANTOR HEREBY WAIVES, TO THE MAXIMUM EXTENT SUCH
WAIVER IS PERMITTED BY LAW, ANY AND ALL BENEFITS, DEFENSES TO PAYMENT OR
PERFORMANCE, OR ANY RIGHT TO PARTIAL OR COMPLETE EXONERATION ARISING DIRECTLY OR
INDIRECTLY UNDER ANY ONE OR MORE OF CALIFORNIA CIVIL CODE SECTIONS 2799, 2808,
2809, 2810, 2815, 2819, 2820, 2821, 2822, 2838, 2839, 2845, 2847, 2848, 2849,
AND 2850.

      

      23.            Guarantor
acknowledges and agrees that this is a knowing and informed waiver of
Guarantor’s
rights as discussed above and that Bank is relying on this waiver in extending
credit to Borrower.

      

      24.            Guarantor
acknowledges that the Bank has the right to sell, assign, transfer, negotiate,
or grant
participations in all or any part of the Indebtedness and any related
obligations, including without limit this Guaranty. In connection with that
right, the Bank may disclose any documents and information which the Bank now or
later acquires relating to Guarantor and this Guaranty, whether furnished by the
Borrower, Guarantor or otherwise. Guarantor further agrees that the Bank may
disclose these documents and information to the Borrower. Guarantor agrees that
the Bank may provide information relating to this Guaranty or to Guarantor to
the Bank’s parent, affiliates, subsidiaries and service providers.

      

      25.            Guarantor
shall pay any and all out-of-pocket costs and actual expenses, including without
limit
reasonable out-of-pocket attorneys’ fees and costs, actually incurred by the
Bank at any time for any reason in enforcing any of the duties and obligations
of Guarantor under this Guaranty or otherwise incurred by the Bank in any way
connected with this Guaranty. All of these costs and expenses shall be payable
by Guarantor within three (3) business days after written demand thereof by the
Bank and until paid shall bear interest from the third day after such written
demand at the highest per annum rate applicable to any of the Indebtedness, but
not in excess of the maximum rate permitted by law. Any reference in this
Guaranty to attorneys’ fees shall be deemed a reference to reasonable
out-of-pocket fees, charges, costs and expenses of outside counsel and
paralegals, whether or not a suit or action is instituted, and to court costs if
a suit or action is instituted, and whether attorneys’ fees or court costs are
incurred at the trial court level, on appeal, in a bankruptcy, administrative or
probate proceeding or otherwise.

      

      26.            Guarantor
unconditionally and irrevocably waives each and every defense and setoff of any
nature,
which, under principles of guaranty or otherwise, would operate to impair or
diminish in any way the obligation of Guarantor under this Guaranty and
acknowledges that as of the date of this Guaranty no such defense or setoff
exists. Guarantor acknowledges that the effectiveness of this Guaranty is
subject to no conditions of any kind.

      

      27.            This
Guaranty shall remain effective with respect to successive transactions which
shall either
continue the Indebtedness, increase or decrease it, or from time to time create
new Indebtedness after all or any prior Indebtedness has been satisfied, until
this Guaranty is terminated in the manner and to the extent provided
above.

      

      28.            Guarantor
warrants and agrees that each of the waivers set forth above are made with
Guarantor’s
full knowledge of their significance and consequences, and that under the
circumstances, the waivers are reasonable.

      

      29.            This
Guaranty constitutes the entire agreement of Guarantor and the Bank with respect
to the
subject matter of this Guaranty. No waiver, consent, modification or change of
the terms of this Guaranty shall bind any of Guarantor or the Bank unless in
writing and signed by the waiving party or an authorized officer of the waiving
party, and then this waiver, consent, modification or change shall be effective
only in the specific instance and for the specific purpose given. This Guaranty
shall inure to the benefit of the Bank and its successors and assigns. This
Guaranty shall be binding on Guarantor and Guarantor’s heirs, legal
representatives, successors and assigns including, without limit, any debtor in
possession or trustee in

      
        
           

        

        
          6

          
            

          

        

        
           

        

      

      bankruptcy
for any of Guarantor. Guarantor has (have) knowingly and voluntarily entered
into this Guaranty in good faith for the purpose of inducing the Bank to extend
credit or make other financial accommodations to the Borrower, and Guarantor
acknowledges that the terms of this Guaranty are reasonable. If any provision of
this Guaranty is unenforceable in whole or in part for any reason, the remaining
provisions shall continue to be effective. THIS GUARANTY SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE
OF CALIFORNIA.

      

      30.            Guarantor’s
aggregate liability under this Guaranty shall in no event exceed an amount
equal to
Ten Million and 00/100 Dollars ($10,000,000.00) (the “Liability
Cap”).

      

      31.            GUARANTOR
AND BANK ACKNOWLEDGE THAT THE RIGHT TO TRIAL BY JURY IS A CONSTITUTIONAL ONE,
BUT THAT IT MAY BE WAIVED UNDER CERTAIN CIRCUMSTANCES. TO THE EXTENT PERMITTED
BY LAW, EACH PARTY, AFTER CONSULTING (OR HAVING HAD THE OPPORTUNITY TO CONSULT)
WITH COUNSEL OF THEIR CHOICE, KNOWINGLY AND VOLUNTARILY, AND FOR THEIR MUTUAL
BENEFIT WAIVES ANY RIGHT TO TRIAL BY JURY IN THE EVENT OF LITIGATION REGARDING
THE PERFORMANCE OR ENFORCEMENT OF, OR IN ANY WAY RELATED TO, THIS GUARANTY OR
THE INDEBTEDNESS.

      

      32.           REFERENCE
PROVISION. In the event the
Jury Trial Waiver set forth above is not enforceable,
the parties elect to proceed under this Judicial Reference
Provision.

      

      32.1.
Mechanics.

      

      32.1.1. With the exception of
the items specified in Section 32.1.2, below, any controversy, dispute or claim
(each, a “Claim”)
between the parties arising out of or relating to this Agreement or any other
document, instrument or agreement between the undersigned parties (collectively
in this Section, the “Comerica
Documents”), will be resolved by a reference proceeding in California in
accordance with the provisions of Sections 638 et. seq. of the California
Code of Civil Procedure (“CCP”), or their successor
sections, which shall constitute the exclusive remedy for the resolution of any
Claim, including whether the Claim is subject to the reference proceeding.
Except as otherwise provided in the Comerica Documents, venue for the reference
proceeding will be in the state or federal court in the county or district where
the real property involved in the action, if any, is located or in the state or
federal court in the county or district where venue is otherwise appropriate
under applicable law (the “Court”).

      

      32.1.2. The matters that shall
not be subject to a reference are the following: (a) foreclosure of any security
interests in real or personal property; (b) exercise of self-help remedies
(including, without limitation, set-off); (c) appointment of a receiver; and (d)
temporary, provisional or ancillary remedies (including, without limitation,
writs of attachment, writs of possession, temporary restraining orders or
preliminary injunctions). This reference provision does not limit the right of
any party to exercise or oppose any of the rights and remedies described in
clauses (a) and (b) or to seek or oppose from a court of competent jurisdiction
any of the items described in clauses (c) and (d). The exercise of, or
opposition to, any of those items does not waive the right of any party to a
reference pursuant to this reference provision as provided herein.

      

      32.1.3. The referee shall be a
retired judge or justice selected by mutual written agreement of the parties. If
the parties do not agree within ten (10) days of a written request to do so by
any party, then, upon request of any party, the referee shall be selected by the
Presiding Judge of the Court (or his or her representative). A request for
appointment of a referee may be heard on an ex parte or expedited basis, and the
parties agree that irreparable harm would result if ex parte relief is not
granted. Pursuant to CCP § 170.6, each party shall have one peremptory challenge
to the referee selected by the Presiding Judge of the Court (or his or her
representative).

      
        
           

        

        
          7

          
            

          

        

        
           

        

      

      32.1.4. The parties agree that
time is of the essence in conducting the reference proceedings. Accordingly, the
referee shall be requested, subject to change in the time periods specified
herein for good cause shown, to (i) set the matter for a status and
trial-setting conference within fifteen (15) days after the date of selection of
the referee; (ii) if practicable, try all issues of law or fact within one
hundred twenty (120) days after the date of the conference; and (iii) report a
statement of decision within twenty (20) days after the matter has been
submitted for decision.

      

      32.1.5. The referee will have
power to expand or limit the amount and duration of discovery. The referee may
set or extend discovery deadlines or cutoffs for good cause, including a party’s
failure to provide requested discovery for any reason whatsoever. Unless
otherwise ordered based upon good cause shown, no party shall be entitled to
“priority” in conducting discovery, depositions may be taken by either party
upon seven (7) days written notice, and all other discovery shall be responded
to within fifteen (15) days after service. All disputes relating to discovery
which cannot be resolved by the parties shall be submitted to the referee whose
decision shall be final and binding.

      

      32.2.
Procedures. Except as expressly set forth herein, the referee shall
determine the manner in which the reference proceeding is conducted including
the time and place of hearings, the order of presentation of evidence, and all
other questions that arise with respect to the course of the reference
proceeding. All proceedings and hearings conducted before the referee, except
for trial, shall be conducted without a court reporter, except that when any
party so requests, a court reporter will be used at any hearing conducted before
the referee, and the referee will be provided a courtesy copy of the transcript.
The party making such a request shall have the obligation to arrange for and pay
the court reporter. Subject to the referee’s power to award costs to the
prevailing party, the parties will equally share the cost of the referee and the
court reporter at trial.

      

      32.3. Application of
Law. The referee shall be required to determine all issues in accordance
with existing case law and the statutory laws of the State of California. The
rules of evidence applicable to proceedings at law in the State of California
will be applicable to the reference proceeding. The referee shall be empowered
to enter equitable as well as legal relief, enter equitable orders that will be
binding on the parties and rule on any motion which would be authorized in a
court proceeding, including without limitation motions for summary judgment or
summary adjudication. The referee shall issue a decision at the close of the
reference proceeding which disposes of all claims of the parties that are the
subject of the reference. Pursuant to CCP § 644, such decision shall be entered
by the Court as a judgment or an order in the same manner as if the action had
been tried by the Court and any such decision will be final, binding and
conclusive. The parties reserve the right to appeal from the final judgment or
order or from any appealable decision or order entered by the referee. The
parties reserve the right to findings of fact, conclusions of laws, a written
statement of decision, and the right to move for a new trial or a different
judgment, which new trial, if granted, is also to be a reference proceeding
under this provision.

      

      32.4. Repeal.
If the enabling legislation which provides for appointment of a referee is
repealed (and no successor statute is enacted), any dispute between the parties
that would otherwise be determined by reference procedure will be resolved and
determined by arbitration. The arbitration will be conducted by a retired judge
or justice, in accordance with the California Arbitration Act §1280 through §
1294.2 of the CCP as amended from time to time. The limitations with respect to
discovery set forth above shall apply to any such arbitration
proceeding.

      

      32.5.
THE PARTIES RECOGNIZE AND AGREE THAT ALL CONTROVERSIES, DISPUTES AND CLAIMS
RESOLVED UNDER THIS REFERENCE PROVISION WILL BE DECIDED BY A REFEREE AND NOT BY
A JURY. AFTER CONSULTING (OR HAVING HAD THE OPPORTUNITY TO CONSULT) WITH COUNSEL
OF ITS, HIS OR HER OWN CHOICE, EACH PARTY KNOWINGLY AND VOLUNTARILY, AND FOR THE
MUTUAL BENEFIT OF ALL PARTIES, AGREES THAT THIS REFERENCE PROVISION WILL APPLY
TO ANY CONTROVERSY, DISPUTE OR CLAIM BETWEEN OR AMONG THEM ARISING OUT OF OR
IN ANY WAY RELATED TO, THIS AGREEMENT OR THE OTHER COMERICA
DOCUMENTS.

      
        
           

        

        
          8

          
            

          

        

        
           

        

      

      

      33.          
In the event that Bank elects to waive any rights or remedies hereunder,
or compliance with any of
the terms hereof, or delays or fails to pursue or enforce any term, such waiver,
delay or failure to pursue or enforce shall only be effective with respect to
that single act and shall not be construed to affect any subsequent transactions
or Bank’s right to later pursue such rights and remedies.

       

      
 

      
        
          
          

        

        
          9

          
            

          

        

        
          
          

        

      

       

      IN
WITNESS WHEREOF, Guarantor has signed this Guaranty on August 20,
2007.

       

      

       

      
        	 	
                GUARANTOR:

                

                PACIFIC
      ETHANOL, INC., 

                a
      Delaware corporation

                

                 

                
 

                By: 
      /s/ Jeff
      Manternach                                       
      

                 

                Print
      Name: Jeff Manternach

                 

                Its: 
      VP Finance

                 

                
 

                GUARANTOR'S
      ADDRESS:

                

                Pacific
      Ethanol, Inc.

                5711
      N. West Avenue

                Fresno,
      CA 83711

                Attention:
      Jeffrey Manternach

                

                with
      a copy to:

                

                Pacific
      Ethanol, Inc.

                400
      Capital Mall, Suite 2060 

                Sacramento,
      CA 95814

                Attention:
      Christopher Wright 

              

      

       

      

      BORROWER:

      

      KINERGY
MARKETING LLC

       

       

      
        [Signature
Page to Guaranty]

      

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      CERTIFICATE
OF ACKNOWLEDGMENT

      

      STATE OF
CALIFORNIA 

       

      COUNTY OF
SACRAMENTO   

      

      On August
20, 2007 before me, JOHN CONSHAFTER  personally appeared
JEFF MANTERNACH personally
known to me (or proved to me on the basis of satisfactory evidence) to be the
persons whose names is/are subscribed to within instrument and acknowledged to
me that he/she/they executed the same in his/her/their authorized capacity(ies),
and that by his/her/their signatures on the instrument the persons, or the
entity upon behalf of which the persons acted, executed the
instrument.

      

      WITNESS
my hand and official seal.

       

       

      
        	
                (SEAL)

                 

                
                  JOHN
      N. CONSHAFTER

                  COMM.
      *1460237

                  Notary
      Public-California 

                  SACRAMENTO
      COUNTY

                  My Comm. Exp. Jan 5,
      2008

                

              	
                /s/
      John N.
      Conshafter                                                   
      

                    
      (Notary Public's Signature)

                 

                 

                 

                John N.
      Conshafter                                          
      

                    (Type or Print
  Name)

              
	 
      

      

       

      [Signature
Page to Guaranty]

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