Document:

peix_8k-ex1001.htm

    EXHIBIT 10.1

     

    
      KINERGY
MARKETING LLC

      400
Capitol Mall, Suite 2060

      Sacramento,
California 95814

      

      

      May 17,
2009

      

      

      Wachovia
Capital Finance Corporation (Western),

        as
Agent for and on behalf of the

        Lenders
as referred to below

      251 South
Lake Avenue, Suite 900

      Pasadena,
California 91101

      

      Re:           Amendment and Waiver
Agreement

      

      Ladies
and Gentlemen:

      

      Wachovia
Capital Finance Corporation (Western) (“Wachovia”), in its capacity as agent
(“Agent”) for the Lenders from time to time party to the Loan Agreement referred
to below, the Lenders and Kinergy Marketing LLC, an Oregon limited liability
company (“Borrower”), have entered into certain financing arrangements pursuant
to the Loan and Security Agreement, dated as of July 28, 2008, by and among
Agent, Lenders and Borrower (the “Loan Agreement”), and the other agreements,
documents and instruments referred to therein or at any time executed and/or
delivered in connection therewith or related thereto, including, but not limited
to, the Letter re: Amendment and Forbearance Agreement, dated February 13, 2009
(the “Forbearance Agreement”), the Amendment No. 1 to Letter re: Amendment and
Forbearance Agreement, dated as of February 26, 2009 (the “Amendment No. 1 to
Forbearance Agreement”), the Amendment No. 2 to Letter re: Amendment and
Forbearance Agreement, dated as of March 27, 2009 (the “Amendment No. 2 to
Forbearance Agreement”), and this Letter re: Amendment and Waiver Agreement
(this “Agreement”) (all of the foregoing, together with the Loan Agreement, as
the same now exist or may hereafter be amended, modified, supplemented,
extended, renewed, restated or replaced, being collectively referred to herein
as the “Financing Agreements”).  Wachovia is currently both the Agent
and the sole Lender under the Loan Agreement and is hereinafter referred to in
this Agreement in both such capacities, as “Wachovia”.

       

      Borrower
and Pacific Ethanol, Inc., a Delaware corporation, as Guarantor (“Parent”) have
requested that Wachovia (a) waive the Specified Defaults (as defined in the
Forbearance Agreement), (b) waive the Event of Default under Section 10.1(a)(i)
of the Loan Agreement resulting from the failure of Borrower to maintain EBITDA
in the amount required by Section 9.17 for the two (2) consecutive month period
ending February 28, 2009, (c) waive the Event of Default under Section
10.1(a)(i) of the Loan Agreement resulting from the failure of Borrower to
maintain EBITDA in the amount required by Section 9.17 for the three (3)
consecutive month period ending March 31, 2009, (d) waive the Event of Default
under Section 10.1(a)(i) of the Loan Agreement resulting from the failure of
Borrower to maintain EBITDA in the amount required by Section 9.17 for the four
(4) consecutive month period ending April 30, 2009, (e) waive the Event of
Default under Section 10.1(a)(i) of the Loan Agreement resulting from the
failure of Borrower to deliver certified financial statements of Borrower and
its Subsidiaries for the fiscal month ended March 31, 2009 within the time
period specified in, and in accordance with, Section 9.6(a)(i), (f) waive the
Event of Default under Section 10.1(a)(i) of the Loan Agreement resulting from
the failure of Borrower to deliver audited financial statements of Borrower and
its Subsidiaries and Parent and its Subsidiaries for the fiscal year ended
December 31, 2008 (together with an unqualified opinion of independent certified
public accountants with respect thereto) within the time period specified in,
and in accordance with, Section 9.6(a)(iii), (g) waive the Events of Default
under Section 10.1(a)(i) of the Loan Agreement resulting from various liens
filed, and pre-judgment writs of attachment ordered, against Borrower and its
assets in connection with the action filed on January 9, 2009 by Western Ethanol
Company, LLC against Borrower in the Superior Court of California, County of
Orange (the Events of Default identified in clauses (b) through (g) hereof,
together with the Specified Defaults, collectively, the “Existing Defaults”),
(h) consent to an amendment to the Parent/Borrower Operating Agreement
substantially in the form attached hereto as Exhibit A, and (i)
make certain amendments to the Loan Agreement and other Financing Agreements as
set forth herein, which Wachovia is willing to do subject to the terms and
conditions set forth in this Agreement.

       

      
        
           

        

        
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      In
consideration of the foregoing, the mutual agreements and covenants contained
herein, and other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the parties hereto agree as
follows:

       

      1. Interpretation.  All
capitalized terms used in this Agreement shall have the meanings assigned
thereto in the Loan Agreement and the other Financing Agreements, unless
otherwise defined herein.

       

      2. Amendments to Loan
Agreement.

       

      (a) Additional
Definitions.  As used herein, the following terms shall have
the meanings given to them below, and the Loan Agreement and the other Financing
Agreements are hereby amended to include, in addition and not in limitation, the
following definitions:

       

      “Agreement
and Waiver” shall mean the Letter re: Amendment and Waiver Agreement, dated as
of May 17, 2009, by and among Borrower, Parent, Agent and the Lenders, as the
same now exists or may hereafter be amended, modified, supplemented, extended,
renewed, restated or replaced.

      

      “PE
Holding Debtors” shall mean, collectively, Pacific Ethanol Holding Company, LLC
and each of its subsidiaries that have commenced, or will commence, a case under
Chapter 11 of Title 11 of the United States Code in the United States Bankruptcy
Court for the District of Delaware.

      

      “Western
Ethanol Agreement” shall mean the Agreement, dated as of May 14, 2009, by and
among Borrower, Agent and Western Ethanol Company, LLC.

       

      
        
           

        

        
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      (b) EBITDA.  The
definition of “EBITDA” in Section 1.29 of the Loan Agreement is hereby amended
and restated in its entirety as follows:

       

      “1.29    “EBITDA”
shall mean, as to any Person, with respect to any period, an amount equal to:
(a) the Consolidated Net Income of such Person and its Subsidiaries for such
period, plus
(b) depreciation and amortization (including amortization of deferred financing
fees), non-cash impairment charges, imputed interest, deferred compensation,
non-cash inventory valuation adjustments and bank fees for such period (all to
the extent deducted in the computation of Consolidated Net Income of such
Person), all in accordance with GAAP, plus (c) Interest
Expense for such period (to the extent deducted in the computation of
Consolidated Net Income of such Person), plus (d) the
Provision for Taxes for such period (to the extent deducted in the computation
of Consolidated Net Income of such Person), plus (e) any costs
and expenses incurred, and any amounts paid in cash (whether pursuant to
settlement or a final order of a court of competent jurisdiction), in connection
with any litigation or judgment, to the extent of the amount received by
Borrower (whether by contribution or loan) from Parent to finance such costs,
expenses and payments.”

      

      (c) Material Adverse
Effect.  The definition of “Material Adverse Effect” in Section
1.73 of the Loan Agreement is hereby amended and restated in its entirety as
follows:

       

      “1.73    “Material
Adverse Effect” shall mean any condition, change, effect or circumstance that,
individually or when taken together with all such conditions, changes, effects
or circumstances, has or would reasonably be expected to have an adverse effect
on the financial condition, assets, properties, business, operations or results
of operations of the Borrower which is material to the Borrower, excluding (a)
any changes or effects that are not unique to the Borrower and do not adversely
affect the Borrower disproportionately compared to its competitors, directly
resulting from general changes in economic, financial or capital market,
regulatory, political or national security conditions (including acts of war or
terrorism), (b) any changes in conditions generally applicable to the industries
in which the Borrower is involved, (c) any changes that result from the
announcement or the consummation of the transactions contemplated hereby, (d)
any changes or effects, individually or when taken together with all such
changes or effects, that result from or could reasonably be expected to result
from the Chapter 11 cases filed, or to be filed, by the PE Holding Debtors, so
long as such changes or effects do not, in fact, have an adverse effect on the
financial condition, assets, properties, business, operations or results of
operations of the Borrower which is material to the Borrower; provided, that, the mere filing
by the PE Holding Debtors of the Chapter 11 cases shall not be deemed to have a
Material Adverse Effect as to Borrower, (e) any “going concern” or similar
qualification to the opinion of Borrower’s or Parent’s independent certified
public accountants with respect to the financial statements of Borrower or
Parent, unless such “going concern” or similar qualification to any such opinion
relates solely to Borrower (independent of Parent), and (f) any changes or
effects that have been disclosed to Agent and Lenders as of the date of the
Agreement and Waiver that has or could reasonably be expected to have a material
adverse effect on the financial condition, assets, properties, business,
operations or results of operations of Borrower (the foregoing exclusion in this
clause (f) shall not apply to any changes or effects that have not been
disclosed to Agent and Lenders as of the date of the Waiver and Amendment or any
changes or affects arising after the date of the Waiver and
Amendment).”

       

      
        
           

        

        
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      (d) Unused Line
Fee.  Section 3.2(a) of the Loan Agreement is hereby amended
and restated in its entirety as follows:

       

      “(a)   Effective
as of the date of the Amendment and Waiver, Borrower shall pay to Agent, for the
account of Lenders, monthly an unused line fee at a rate equal to one-half of
one (0.50%) percent per annum calculated upon the amount by which the Maximum
Credit exceeds the average daily principal balance of the outstanding Revolving
Loans and Letters of Credit during the immediately preceding month (or part
thereof) while this Agreement is in effect and for so long thereafter as any of
the Obligations are outstanding, which fee shall be payable on the first day of
each month in arrears.”

      

      (e) Servicing
Fee.  Section 3.2 of the Loan Agreement is hereby amended by
adding the following new Section 3.2(e) at the end thereof:

       

      “(e)   Effective
as of the date of the Amendment and Waiver, Borrower shall pay to Agent, for its
own account, a servicing fee in an amount equal to $5,000 per month in respect
of the services of Agent for each month (or part thereof) while the Loan
Agreement remains in effect and for so long thereafter as any of the Obligations
are outstanding.  Such fee shall be fully earned as of and payable in
advance on the date of the Amendment and Waiver and on the first day of each
month thereafter for so long as any of the Obligations are
outstanding.”

      

      (f) Collateral
Reporting.  Section 7.1(a)(ii) of the Loan Agreement is hereby
amended and restated in its entirety as follows:

       

      “(ii)           within
fifteen (15) Business Days after the end of each fiscal month, on a monthly
basis or more frequently as Agent may reasonably request:  (A)
perpetual inventory reports, (B) agings of accounts receivable (together with a
reconciliation to the previous month’s aging and general ledger), (C) agings of
accounts payable (and including information indicating the amounts owing to
owners and lessors of leased premises, warehouses, processors and other third
parties from time to time in possession of any Collateral) and (D) a schedule of
all ethanol purchase and sale contracts or agreements constituting a Material
Contract entered into, amended or terminated during the previous
month;”

      

      (g) Encumbrances.  Section
9.8 of the Loan Agreement is hereby amended by deleting the “and” from the end
of clause (i) thereof, replacing the period at the end of clause (j) with “;
and” and adding the following new clause (k):

       

      “(k)   liens
expressly permitted pursuant to the terms of the Western Ethanol
Agreement.”

      

      (h) Payments to
Parent.  Section 9.12(b) of the Loan Agreement is hereby
amended and restated in its entirety as follows:

       

      “(b)   make
any payments (whether by dividend, loan or otherwise) of management, consulting
or other fees for management or similar services, or of any Indebtedness owing
to any officer, employee, shareholder, director or any other Affiliate of
Borrower, except (i) reasonable
compensation to officers, employees and directors of Borrower and its affiliates
for any services rendered to Borrower in the ordinary course of business, (ii)
payment by Borrower to Parent on the date hereof of an amount not to exceed
$6,000,000 on account of intercompany Indebtedness due and owing by Borrower to
Parent as of the date hereof, and (iii) payments by Borrower to Parent for those
services provided by Parent to Borrower pursuant to the Parent/Borrower
Operating Agreement as in effect on the date hereof; provided, that, (A) such
payments (other than payments expressly provided for in clause (iii)(B) below)
under this clause (iii) shall not exceed $600,000 in the aggregate during any
three (3) consecutive month period and $2,400,000 in the aggregate during any
twelve (12) consecutive month period, and (B) with respect to any reimbursement
payment by Borrower to Parent on account of any margin call due in connection
with any hedging position created by Parent for or on behalf of Borrower
pursuant to the Parent/Borrower Operating Agreement, Borrower shall have Excess
Availability of not less than $1,000,000 after giving effect to such
payment.

       

      
        
           

        

        
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      (i) Event of
Default.  Section 10.1 of the Loan Agreement is hereby amended
as follows:

       

      (i) Section
10.1(d) of the Loan Agreement is hereby amended and restated in its entirety as
follows:

       

      “(d)  (i)
any judgment for the payment of money is rendered against Borrower or any
Obligor (other than Parent) in excess of $100,000 in any one case or in excess
of $250,000 in the aggregate (to the extent not covered by insurance where the
insurer has assumed responsibility in writing for such judgment) and shall
remain undischarged or unvacated for a period in excess of thirty (30) days or
execution shall at any time not be effectively stayed, or any judgment other
than for the payment of money, or injunction, attachment, garnishment or
execution is rendered against Borrower or any Obligor (other than Parent) or any
of the Collateral having a value in excess of $100,000 or (ii) any judgment for
the payment of money is rendered against Parent or any of its subsidiaries
(other than Borrower, Pacific Ethanol Imperial LLC or the PE Holding Debtors) in
excess of $500,000 in any one case or in excess of $1,000,000 in the aggregate
(to the extent not covered by insurance where the insurer has assumed
responsibility in writing for such judgment) and shall remain undischarged or
unvacated for a period in excess of thirty (30) days or execution shall at any
time not be effectively stayed, or any judgment other than for the payment of
money, or injunction, attachment, garnishment or execution is rendered against
Parent or any of its subsidiaries (other than Borrower, Pacific Ethanol Imperial
LLC or the PE Holding Debtors) or any of the Collateral having a value in excess
of $500,000;”

      

      (ii) Section
10.1(f) of the Loan Agreement is hereby amended and restated in its entirety as
follows:

       

      “(f)  (i)
Borrower, Parent, any Obligor or any of their respective subsidiaries (other
than Pacific Ethanol Imperial LLC and the PE Holding Debtors) makes an
assignment for the benefit of creditors or makes or sends notice of a bulk
transfer, (ii) Borrower or any Obligor (other than Parent) calls a meeting of
its creditors or principal creditors in connection with a moratorium or
adjustment of the Indebtedness due to them, or (iii) from and after the date
of the Amendment and Waiver, Parent or any of its subsidiaries (other than
Borrower, any Obligor, Pacific Ethanol Imperial LLC or the PE Holding Debtors)
calls a meeting of its creditors or principal creditors in connection with a
moratorium or adjustment of the Indebtedness due to them.”

      

      (iii) Section
10.1(g) of the Loan Agreement is hereby amended and restated in its entirety as
follows:

       

      “(g)  
a case or proceeding under the bankruptcy laws of the United States of America
now or hereafter in effect or under any insolvency, reorganization,
receivership, readjustment of debt, dissolution or liquidation law or statute of
any jurisdiction now or hereafter in effect (whether at law or in equity) is
filed against Borrower, Parent, any Obligor or any of their respective
subsidiaries (other than the PE Holding Debtors) or all or any part of its
properties (other than with respect to any interest in the PE Holding Debtors)
and such petition or application is not dismissed within forty-five (45) days
after the date of its filing, or Borrower, Parent, any Obligor or any of their
respective subsidiaries (other than the PE Holding Debtors) shall file any
answer admitting or not contesting such petition or application or indicates its
consent to, acquiescence in or approval of, any such action or proceeding or the
relief requested is granted sooner;”

      

      (iv) Section
10.1(h) of the Loan Agreement is hereby amended and restated in its entirety as
follows:

       

      “(h)    a
case or proceeding under the bankruptcy laws of the United States of America now
or hereafter in effect or under any insolvency, reorganization, receivership,
readjustment of debt, dissolution or liquidation law or statute of any
jurisdiction now or hereafter in effect (whether at a law or equity) is filed by
Borrower, Parent, any Obligor or any of their respective subsidiaries (other
than the PE Holding Debtors) or for all or any part of its property (other than
with respect to any interest in the PE Holding Debtors);”

      

      (v) Section
10.1(i) of the Loan Agreement is hereby amended and restated in its entirety as
follows:

       

      “(i)   (i)
any default in respect of any Indebtedness of Borrower or any Obligor (other
than Parent) (other than Indebtedness owing to Agent and Lenders hereunder), in
any case in an amount in excess of $100,000, which default continues for more
than the applicable cure period, if any, with respect thereto or any default by
Borrower or any Obligor (other than Parent) under any Material Contract, which
default continues for more than the applicable cure period, if any, with respect
thereto and/or is not waived in writing by the other parties thereto or (ii) any
default in respect of any Indebtedness of Parent or any of its subsidiaries
(other than Borrower and the PE Holding Debtors) (other than in connection with
the Master Lease Agreement, dated June 9, 2008, between Parent and Varilease
Finance, Inc.), in any case in an amount in excess of $500,000, which default
continues for more than the applicable cure period, if any, with respect thereto
or any default by Parent or any of its subsidiaries (other than Borrower) under
any material contract, which default continues for more than the applicable cure
period, if any, with respect thereto and/or is not waived in writing by the
other parties thereto;”

       

      
        
           

        

        
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      (vi) Section
10.1(m) of the Loan Agreement is hereby amended and restated in its entirety as
follows:

       

      “(m)   the
indictment by any Governmental Authority, or as Agent may reasonably determine,
the threatened indictment by any Governmental Authority of Borrower, Parent, any
Obligor or any of their respective subsidiaries (other than the PE Holding
Debtors) of which Borrower, Parent, any Obligor, any of their respective
subsidiaries (other than the PE Holding Debtors) or Agent receives notice, in
either case, as to which there is a reasonable possibility of an adverse
determination, in the reasonable determination of Agent, under any criminal
statute, or commencement or threatened commencement of criminal or civil
proceedings against Borrower, Parent, any Obligor or any of their respective
subsidiaries (other than the PE Holding Debtors), pursuant to which statute or
proceedings the penalties or remedies sought or available include forfeiture of
(i) any of the Collateral having a value in excess of $250,000 or (ii) any other
property of Borrower, Parent, any Obligor or any of their respective
subsidiaries (other than the PE Holding Debtors) which is necessary or material
to the conduct of its business (other than with respect to any interest in the
PE Holding Debtors);”

      

      (vii) Section
10.1(o) of the Loan Agreement is hereby amended and restated in its entirety as
follows:

       

      “(o)    there
shall have occurred a Material Adverse Effect as to Borrower, Parent, any
Obligor or any of their respective subsidiaries (other than the PE Holding
Debtors); or”

      

      (j) Maturity
Date.  Section 13.1(a) of the Loan Agreement is hereby amended
and restated in its entirety as follows:

       

      “(a)     This
Agreement and the other Financing Agreements shall become effective as of the
date set forth on the first page hereof and shall continue in full force and
effect until October 31, 2010 (the “Maturity Date”), unless sooner terminated
pursuant to the terms hereof.  Borrower may terminate this Agreement
at any time upon ten (10) days prior written notice to Agent (which notice shall
be irrevocable) and Agent may, at its option, and shall at the direction of
Required Lenders, terminate this Agreement at any time on or after an Event of
Default has occurred and is continuing.  Upon the Maturity Date or any
other effective date of termination of the Financing Agreements, Borrower shall
pay to Agent all outstanding and unpaid Obligations and shall furnish cash
collateral to Agent (or at Agent’s option, a letter of credit issued for the
account of Borrower and at Borrower’s expense, in form and substance
satisfactory to Agent, by an issuer acceptable to Agent and payable to Agent as
beneficiary) in such amounts as Agent determines are reasonably necessary to
secure Agent, Lenders and Issuing Bank from loss, cost, damage or expense,
including attorneys’ fees and expenses, in connection with any contingent
Obligations, including issued and outstanding Letter of Credit Obligations and
checks or other payments provisionally credited to the Obligations and/or as to
which Agent or any Lender has not yet received final and indefeasible payment
and any continuing obligations of Agent or any Lender pursuant to any Deposit
Account Control Agreement and for any of the Obligations arising under or in
connection with any Bank Products in such amounts as the Bank Product Provider
providing such Bank Products may require (unless such Obligations arising under
or in connection with any Bank Products are paid in full in cash and terminated
in a manner satisfactory to such Bank Product Provider).  The amount
of such cash collateral (or letter of credit, as Agent may determine) as to any
Letter of Credit Obligations shall be in the amount equal to one hundred five
(105%) percent of the amount of the Letter of Credit Obligations plus the amount
of any fees and expenses payable in connection therewith through the end of the
latest expiration date of the Letters of Credit giving rise to such Letter of
Credit Obligations.  Such payments in respect of the Obligations and
cash collateral shall be remitted by wire transfer in Federal funds to the Agent
Payment Account or such other bank account of Agent, as Agent may, in its
discretion, designate in writing to Borrower for such
purpose.  Interest shall be due until and including the next Business
Day, if the amounts so paid by Borrower to the Agent Payment Account or other
bank account designated by Agent are received in such bank account later than
12:00 noon, Los Angeles, California time.”

      

      (k) Early Termination
Fee.  Section 13.1(c) of the Loan Agreement is hereby deleted
in its entirety.

       

      (l) Schedule
9.17.  Schedule 9.17 to the Loan Agreement is hereby amended
and restated in its entirety as set forth on Exhibit B attached
hereto.

       

      (m) No Additional
Indebtedness.  From and after the date of this Agreement,
notwithstanding anything to the contrary contained in the Loan Agreement or
otherwise, Borrower shall not incur any additional Indebtedness, except for (i)
Indebtedness expressly permitted under Section 9.9(e) of the Loan Agreement and
(ii) unsecured Indebtedness to Parent in connection with any loan made by Parent
to Borrower to finance the payment by Borrower of costs and expenses incurred,
and any amounts paid in cash (whether pursuant to settlement or a final order of
a court of competent jurisdiction), in connection with any litigation or
judgment; provided, that, with respect to
such unsecured Indebtedness to Parent, Borrower shall not repay or make any
other payment on account of such unsecured Indebtedness without the prior
written consent of Agent.

       

      
        
           

        

        
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      (n) Limitation on Capital
Expenditures.  From and after the date of this Agreement,
notwithstanding anything to the contrary contained in the Loan Agreement or
otherwise, Borrower shall not make nor contract for any Capital Expenditures in
excess of $100,000 during any twelve (12) consecutive month period without the
prior written consent of Agent.

       

      3. Waiver of Existing
Defaults.

       

      (a) Pursuant
to Borrower’s request, subject to the terms and conditions contained herein,
Wachovia hereby waives the Existing Defaults.

       

      (b) Wachovia
has not waived and is not by this agreement waiving, and has no present
intention of waiving, any Default or Event of Default other than the Existing
Defaults, which may have occurred prior to the date hereof, or may be continuing
on the date hereof or any Event of Default which may occur after the date
hereof, other than the Existing Defaults, whether the same or similar to the
Existing Defaults or otherwise.  Wachovia reserves the right, in its
discretion, to exercise any or all of its rights and remedies arising under the
Financing Agreements, applicable law or otherwise, as a result of any other
Events of Default which may have occurred prior to the date hereof, or are
continuing on the date hereof, or any Event of Default which may occur after the
date hereof, whether the same or similar to the Existing Defaults or otherwise
upon or after the rescission and termination of the waiver provided for in
Section 3(a) above.  Nothing contained herein shall be construed as a
waiver of the failure of Borrower to comply with the terms of the Loan Agreement
and the other Financing Agreements after such time.

       

      4. Consent to Amendment to
Parent/Borrower Operating Agreement.

       

        Pursuant
to Borrower’s request, subject to the terms and conditions contained herein,
Wachovia hereby consents to the amendment to the Parent/Borrower Operating
Agreement substantially in the form attached hereto as Exhibit
A.

       

      5. Acknowledgment of
Obligations, Security Interests and Financing Agreements.

       

      (a) Acknowledgment of
Obligations.  Borrower and Parent hereby acknowledge, confirm
and agree that Borrower is unconditionally indebted to Wachovia as of the close
of business on May 15, 2009, in respect of the Loans and all other Obligations
in the aggregate principal amount of not less than $5,143,868.42, together with
interest accrued and accruing thereon, and all fees, costs, expenses and other
sums and charges now or hereafter payable by Borrower to Wachovia pursuant to
the Loan Agreement and the other Financing Agreements, all of which are
unconditionally owing by Borrower to Wachovia pursuant to the Financing
Agreements, in each case without offset, defense or counterclaim of any kind,
nature or description whatsoever.

       

      (b) Acknowledgment of Security
Interests.  Borrower and Parent hereby acknowledge, confirm and
agree that Wachovia has, and shall continue to have, valid, enforceable and
perfected security interests in and liens upon the Collateral heretofore granted
by Borrower to Wachovia pursuant to the Financing Agreements or otherwise
granted to or held by Wachovia.

       

      (c) Binding Effect of Financing
Agreements.  Borrower and Parent hereby acknowledge, confirm
and agree that: (i) each of the Financing Agreements to which Borrower and
Parent (as applicable) are a party has been duly executed and delivered to
Wachovia by Borrower and Parent (as applicable), and each is in full force and
effect as of the date hereof, (ii) the agreements and obligations of Borrower
and Parent (as applicable) contained in such Financing Agreements to which they
are a party and in this Agreement constitute the legal, valid and binding
Obligations of Borrower and Parent (as applicable), enforceable against them in
accordance with its terms, except as enforcement may be limited by bankruptcy,
insolvency, reorganization, moratorium or other similar laws relating to or
limiting creditors’ rights generally or by equitable principles relating to
enforceability, and Borrower and Parent (as applicable) have no valid defense to
the enforcement of such Obligations, and (iii) Wachovia is and shall be entitled
to the rights, remedies and benefits provided for in the Financing Agreements
and pursuant to applicable law, but subject to the terms and conditions of this
Agreement.

       

      
        
           

        

        
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      6. Representations, Warranties
and Covenants.

       

        Borrower
and Parent hereby represent, warrant and covenant to Wachovia the following
(which shall survive the execution and delivery of this Agreement), the truth
and accuracy of which are a continuing condition of the making of Loans to
Borrower:

       

      (a) this
Agreement and each other agreement or instrument to be executed and/or delivered
in connection herewith (collectively, together with this Agreement, the
“Amendment Documents”) have been duly authorized, executed and delivered by all
necessary action on the part of Borrower and Parent and, if necessary, their
respective stockholders and/or members, as the case may be, and the agreements
and obligations of Borrower and Parent contained herein and therein constitute
the legal, valid and binding obligations of Borrower and Parent, enforceable
against them in accordance with their terms, except as enforceability is limited
by bankruptcy, insolvency, reorganization, moratorium or other laws relating to
or affecting generally the enforcement of creditors’ rights and except to the
extent that availability of the remedy of specific performance or injunctive
relief is subject to the discretion of the court before which any proceeding
therefor may be brought;

       

      (b) the
execution, delivery and performance of the Amendment Documents (a) are all
within Borrower’s and Guarantor’s corporate or limited liability company powers
(as applicable), (b) are not in contravention of law or the terms of Borrower’s
or Guarantor’s certificate or articles of organization or formation, operating
agreement, by-laws or other organizational documentation, or any indenture,
agreement or undertaking to which Borrower or Guarantor is a party or by which
Borrower, Guarantor or its or their property is bound and (c) shall not result
in the creation or imposition of any lien, claim, charge or encumbrance upon any
of the Collateral, except in favor of Wachovia pursuant to the Loan Agreement
and the Financing Agreements as amended hereby;

       

      (c) all of
the representations and warranties set forth in the Loan Agreement and the other
Financing Agreements, each as amended hereby, are true and correct in all
material respects on and as of the date hereof, as if made on the date hereof,
except to the extent any such representation or warranty is made as of a
specified date, in which case such representation or warranty shall have been
true and correct as of such date;

       

      (d) after
giving effect to this Agreement, no Default or Event of Default exists as of the
date of this Agreement;

       

      (e) no action
of, or filing with, or consent of any governmental or public body or authority,
including, without limitation, any filing with the U.S. Patent and Trademark
Office, and no approval or consent of any other party, is required to authorize,
or is otherwise required in connection with, the execution, delivery and
performance of this Agreement;

       

      (f) Borrower
shall not amend or otherwise modify that certain Ethanol Marketing Agreement
(Boardman Project), dated as of February 27, 2007, between Borrower and Pacific
Ethanol Columbia LLC, as in effect on the date hereof; and

       

      (i)           on
or before May 31, 2009, Wachovia shall have received copies of the financing
agreements, in form and substance reasonably satisfactory to Wachovia, among
Parent, certain of its subsidiaries and Lyles United, LLC (“Lyles”), which
agreements shall provide, among other things, for (A) a credit facility
available to Parent of up to $2,500,000 over a term of eighteen (18) months (or
such shorter term but in no event prior to the Maturity Date of the Loan
Agreement (as amended hereby)), (B) the grant by Parent to Lyles of a security
interest in substantially all of Parent’s assets, including a pledge by Parent
to Lyles of the equity interest of Parent in Borrower, and (C) the use by Parent
of borrowings thereunder for general corporate and other purposes in accordance
with the terms thereof.

       

      7. Conditions
Precedent.

       

        This
Agreement shall not become effective unless all of the following conditions
precedent have been satisfied in full, as determined by Wachovia:

       

      (i) the
receipt by Wachovia of an original (or faxed or electronic copy) of this
Agreement, duly authorized, executed and delivered by Borrower and
Parent;

       

      (ii) the
receipt by Wachovia of a copy of that certain Asset Management Agreement, dated
on or about the date hereof, by and among Parent and the PE Holding Debtors,
which agreement shall be in form and substance reasonably satisfactory to
Wachovia and shall provide that Parent will provide various management services
to the PE Holding Debtors during and in connection with the Chapter 11 cases to
be filed by the PE Holding Debtors; and

       

      (iii) no
Default or Event of Default shall exist or have occurred (after giving effect to
the waivers and amendments made by Wachovia pursuant to this
Agreement).

       

      Notwithstanding
anything to the contrary herein, the documents and agreements delivered to
Wachovia pursuant to clauses (ii), (iii) and (iv) of this Section 6 shall not be
deemed to be “Financing Agreements” under the Loan Agreement.

       

      
        
           

        

        
          8

          
            

          

        

        
           

        

      

       

      8. Amendment
Fee.

       

        In
addition to all other fees, charges, interest and expenses payable by Borrower
to Wachovia under the Loan Agreement and the other Financing Agreements,
Borrower shall pay to Wachovia an amendment and waiver fee in the amount of
$200,000, which fee shall be fully earned as of and payable in advance on the
date hereof.  The foregoing fee may be charged to any loan account of
Borrower maintained by Wachovia.

       

      9. Effect of this
Agreement.

       

        Except
as modified pursuant hereto, no other changes or modifications to the Loan
Agreement and the other Financing Agreements are intended or implied and in all
other respects the Loan Agreement and the other Financing Agreements are hereby
specifically ratified, restated and confirmed by all parties hereto as of the
effective date hereof.  To the extent of any conflict between the
terms of this Agreement and the Loan Agreement or any of the other Financing
Agreements, the terms of this Agreement shall control.  The Loan
Agreement and this Agreement shall be read and construed as one
agreement.

       

      10. Further
Assurances.

       

        At
Wachovia’s request, Borrower and Parent shall execute and deliver such
additional documents and take such additional actions as Wachovia requests to
effectuate the provisions and purposes of this Agreement and to protect and/or
maintain perfection of Wachovia’s security interests in and liens upon the
Collateral.

       

      11. Governing
Law.

       

        The
validity, interpretation and enforcement of this Agreement in any dispute
arising out of the relationship between the parties hereto, whether in contract,
tort, equity or otherwise shall be governed by the internal laws of the State of
California (without giving effect to principles of conflicts of
law).

       

      12. Binding
Effect.

       

        This
Agreement shall be binding upon and inure to the benefit of each of the parties
hereto and their respective successors and assigns

       

      13. Counterparts.

       

        This
Agreement may be executed in any number of counterparts, but all of such
counterparts when executed shall together constitute one and the same
Agreement.  In making proof of this Agreement, it shall not be
necessary to produce or account for more than one counterpart thereof signed by
each of the parties hereto.

       

      [SIGNATURE
PAGE FOLLOWS]

       

      
        
           

        

        
          9

          
            

          

        

        
           

        

      

       

      
        	 
      	
                Very
      truly yours,

              
	 
      	 
      
	 
      	
                KINERGY MARKETING
      LLC,

                  as
      Borrower

                 

                By:  /s/ BRYON
      MCGREGOR        

                Name:  Bryon
      McGregor                                                                  

                Title:  Interim
      CFO                                                                  

              
	 
      	 
      
	 
      	
                PACIFIC ETHANOL,
      INC,

                  as
      Parent

                 

                By:  /s/ BRYON
      MCGREGOR        

                Name:  Bryon
      McGregor                                                                  

                Title:  Interim
      CFO                                                                  

              
	 
      	 
      
	
                AGREED
      TO:

              	 
      
	 
      	 
      
	
                WACHOVIA CAPITAL FINANCE
      CORPORATION (WESTERN),

                  as
      Agent and sole Lender

                 

                By:  /s/ CARLOS VALLES        

                Name:  Carlos
      Valles                                                                  

                Title:  Director                                                                  

              	 
      
	 
      	 
      

      

       

       

      
        
           

        

        
          10

          
            

          

        

        
           

        

      

       

      EXHIBIT
A

      TO

      LETTER
RE: AMENDMENT AND WAIVER

      

      

      Amendment to Parent/Borrower
Operating Agreement

      

      

      

      [see
attached]

       

      
        
           

        

        
          11

          
            

          

        

        
           

        

      

      

      

      EXHIBIT
B

      TO

      LETTER
RE: AMENDMENT AND WAIVER

      

      Schedule
9.17

      to

      LOAN AND
SECURITY AGREEMENT

      

      Minimum
EBITDA

      

      
        
          
            
              
                
                  
                    
                      
                        
                          
                            
                              
                                
                                  
                                    
                                      
                                        
                                          
                                            
                                              
                                                	
                                                        Fiscal Period

                                                      	
                                                        Minimum EBITDA

                                                      
	
                                                        one
      (1) month period ending May 31, 2009

                                                      	
                                                        No
      Test

                                                      
	
                                                        two
      (2) consecutive month period ending June 30, 2009

                                                      	
                                                        No
      Test

                                                      
	
                                                        three
      (3) consecutive month period ending July 31, 2009

                                                      	
                                                        $0

                                                      
	
                                                        four
      (4) consecutive month period ending August 31, 2009

                                                      	
                                                        $30,000

                                                      
	
                                                        five
      (5) consecutive month period ending September 30, 2009

                                                      	
                                                        $80,000

                                                      
	
                                                        six
      (6) consecutive month period ending October 31, 2009

                                                      	
                                                        $130,000

                                                      
	
                                                        seven
      (7) consecutive month period ending November 30, 2009

                                                      	
                                                        $180,000

                                                      
	
                                                        eight
      (8) consecutive month period ending December 31, 2009

                                                      	
                                                        $230,000

                                                      
	
                                                        one
      (1) month period ending January 31, 2010

                                                      	
                                                        $50,000

                                                      
	
                                                        two
      (2) consecutive month period ending February 28, 2010

                                                      	
                                                        $100,000

                                                      
	
                                                        three
      (3) consecutive month period ending March 31, 2010

                                                      	
                                                        $150,000

                                                      
	
                                                        four
      (4) consecutive month period ending April 30, 2010

                                                      	
                                                        $200,000

                                                      
	
                                                        five
      (5) consecutive month period ending May 31, 2010

                                                      	
                                                        $250,000

                                                      
	
                                                        six
      (6) consecutive month period ending June 30, 2010

                                                      	
                                                        $325,000

                                                      
	
                                                        seven
      (7) consecutive month period ending July 31, 2010

                                                      	
                                                        $400,000

                                                      
	
                                                        eight
      (8) consecutive month period ending August 31, 2010

                                                      	
                                                        $475,000

                                                      
	
                                                        nine
      (9) consecutive month period ending September 30, 2010

                                                      	
                                                        $550,000

                                                      
	
                                                        ten
      (10) consecutive month period ending October 31, 2010

                                                      	
                                                        $625,000

                                                      

                                              

                                            

                                          

                                        

                                      

                                    

                                  

                                

                              

                            

                          

                        

                      

                    

                  

                

              

            

          

        

      

      
 

       

       

       

      12peix_8k-ex1002.htm

    EXHIBIT 10.2

      

       

      CONFIDENTIAL
- FOR DISCUSSION PURPOSES ONLY– NOT A COMMITMENT TO LEND

       

      ____________

       

      TERM
SHEET

       

      Pacific
Ethanol Holding Co. LLC and its debtor affiliates

       

      Debtor-in-Possession
Credit Facility

       

      The
terms and conditions summarized below are intended as a summary outline of a
financing commitment which is conditioned in all respects upon completion of due
diligence, negotiation of definitive documentation and final credit approval and
do not purport to summarize all of the conditions, covenants, representations,
warranties and other provisions which would be contained in definitive
documentation.1  No
DIP Lender (as defined herein) is under any obligation to make a loan or make
any commitment to lend and any such commitment would be subject to, among other
conditions, such DIP Lender obtaining any necessary authorizations and approvals
and negotiation and execution of definitive documentation in form and substance
satisfactory to such DIP Lender.  This document is delivered to you
with the understanding that neither it nor its substance shall be disclosed to
any third party. Any provision of financial accommodations under such
debtor-in-possession credit facility shall be further subject to the terms and
conditions and Bankruptcy Court approval as set forth below.

       

      Capitalized
terms not defined herein shall have the meaning ascribed to such terms in the
Credit Agreement dated as of February 27, 2007 (as amended, supplemented or
otherwise modified from time to time, the “Prepetition Credit
Agreement”), among Pacific Ethanol Holding Co. LLC (“Holding”), Pacific
Ethanol Madera LLC (“Madera”), Pacific
Ethanol Columbia, LLC (“Columbia”), Pacific
Ethanol Stockton, LLC (“Stockton”), Pacific
Ethanol Magic Valley, LLC (“Magic Valley”),
WestLB AG, New York Branch (“WestLB”), as
administrative agent and collateral agent (collectively, the “Prepetition Agent”),
Amarillo National Bank, as accounts bank (“Accounts Bank”), and
the lenders signatory thereto (the “Prepetition
Lenders”).

       

      I.           General
Terms

       

      
        	
                Borrowers:

              	
                Holding,
      Columbia, Madera, Stockton and Magic Valley, each of which will be a
      debtor and debtor-in-possession (in such capacity, each a “Borrower” and
      collectively, the “Borrowers”) in
      cases to be commenced in the United States Bankruptcy Court for the
      District of Delaware (the “Bankruptcy
      Court”) under chapter 11 (“Chapter 11”) of
      Title 11 of the United States Code (the “Bankruptcy
      Code”)  The cases of the Borrowers are each referred to
      as a “Chapter 11
      Case” and are collectively referred to as the “Chapter 11
      Cases”, and the date the cases are commenced is referred to as the
      “Petition
      Date”.  The obligations of the Borrowers under the DIP
      Facilities shall be joint and
several.

              

      

       

      
        	
                DIP
      Lender(s):

              	
                WestLB
      and together with any person who shall become a lender under the DIP
      Facility (collectively with WestLB, the “DIP
      Lenders”).

              

      

       

      
        	
                DIP
    Agent:

              	
                WestLB,
      in such capacity as DIP Agent.

              

      

       

      
        	
                DIP
      Facility:

              	
                The
      total senior secured first priority DIP facility (the “DIP Facility”)
      shall include: (x) Loans to be advanced and made available to the
      Borrowers (the “Advances”)
      under a revolving credit facility (the “DIP Revolving
      Loans”) in the aggregate maximum principal amount of $20.0 million
      (the “Revolving
      Commitment”) and (y) a 1:50:1.00 conversion of $30.0 million (the
      “Roll-Up
      Amount” and together with the Revolving Commitment, the “DIP
      Commitment”) in respect of outstanding term loans under the
      Prepetition Credit Facility beneficially owned by the DIP Lenders (or an
      affiliate) at the Closing Date (the “Roll-Up
      Loans”).   The Roll-Up Amount will be calculated on
      a basis of one and one-half dollars of Roll-Up Loans for each dollar of
      DIP Revolving Loans provided by the DIP
Lenders.

              

      

      
        _______________ 

        
          1 Note
that to the extent the terms of a consensual restructuring of the Borrowers are
agreed upon among the parties, the terms herein may be subject to
modification.

           

        

      

       

      
        
          Pacific
Ethanol DIP Credit Facility Term Sheet 5/17/09 

           

        

        
           

          
            

          

        

        
           

        

      

       

      An amount
of approximately $10.0 million (the “Interim Advance”) of
DIP Revolving Loans, approved by the Bankruptcy Court in the interim order (the
“Interim
Order”) and acceptable to the DIP Agent and the DIP Lenders, shall be
made available 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 (the “Final Order” and
together with the Interim Order, the “DIP Orders”) by the
Bankruptcy Court approving the DIP Facility and the balance of which Revolving
Commitments shall be available after entry of the Final
Order.  Approximately $15.0 million of Roll-Up Loans shall convert
concurrently with the funding of the Interim Advance.  Pending the
entry of the Final Order, the DIP Agent and the DIP Lenders shall be afforded
all of the protections contained in the Interim Order, which order shall be in a
form and substance in all respects acceptable to the DIP Agent and the DIP
Lenders.

       

      The DIP
Commitment of each DIP Lender as of the entry date of the Interim Order will be
set forth on Annex
I hereto.

       

      
        	
                Use of
      Proceeds:

              	
                To
      fund (i) operating expenses, limited capital expenditures and other
      amounts for general corporate and ordinary course purposes of the
      Borrowers, all in accordance with the DIP Budget (as defined below),
      (ii) current interest and fees on the DIP Facility, and (iii) such
      other administrative payments, including the budgeted professional fees,
      as may be authorized and approved by the DIP Agent and the DIP Lenders
      under the DIP Orders or subsequent order of the Bankruptcy
      Court.

              

      

       

      No
portion of the DIP Facility, the DIP Collateral (as defined below), including
any cash collateral, or the Carve-Out (as defined below) is to be used to (i)
challenge the validity, perfection, priority, extent or enforceability of the
DIP Facility, the obligations under the Prepetition Credit Agreement (the “Prepetition
Obligations”), or the liens on or security interests in the assets of the
Borrowers securing the DIP Facility or the Prepetition Obligations or (ii)
assert any other claims against the DIP Agent, the DIP Lenders, the Prepetition
Lenders, or the Prepetition Agent; provided, however, nothing
herein shall be deemed to limit the use of the Advances in respect of any
determination under Section 506(a) of the Bankruptcy Code (a “Section 506(a)
Determination”).

       

      
        	
                Operating
      Budget:

              	
                The
      operating budget, subject to the approval of the DIP Agent and the DIP
      Lenders, to consist of the Borrowers’ estimated projected cash flow
      position on a rolling 13-week basis (the “DIP Budget”),
      commencing as of the Closing Date (as defined below).  Upon
      approval of DIP Agent and the DIP Lenders of the DIP Budget, any
      subsequent changes to the DIP Budget may be made only on approval of the
      DIP Agent and DIP Lenders holding a majority of the outstanding DIP
      Revolving Loans and DIP Commitments (the “Required DIP
      Lenders”).  The Borrowers will be allowed a 10% variance
      on the aggregate amounts set forth in the DIP Budget, measured on a
      rolling four-week basis.  DIP Budget shall include monthly
      reimbursement of the reasonable fees and expenses of the professionals of
      DIP Agent and DIP Lenders and the Prepetition
  Agent.

              

      

       

      
        	
                Maturity:

              	
                The
      Borrowers shall repay any outstanding advances and loans under the DIP
      Facility in full in immediately available funds on the Maturity Date, to
      be defined as the earliest of (i) six (6) months after the Closing Date;
      (ii) the date of acceleration of any outstanding Extensions of Credit (as
      defined below) under the DIP Facility; (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) conversion of any of the Chapter 11 Cases to a case under chapter 7
      of the Bankruptcy Code (“Chapter 7”)
      unless otherwise consented to in writing by the DIP Agent and the DIP
      Lenders; (v) dismissal of any of the Chapter 11 Cases unless otherwise
      consented to in writing by the DIP Agent and the DIP Lenders; and (vi) the
      effective date of any Borrower’s plan of reorganization confirmed in the
      Chapter 11 Cases.

              

      

       

      
        	
                Interest:

              	
                Interest
      shall be payable monthly in arrears in cash on the outstanding amount of
      the DIP Revolving Loans on the first business day of each month at a rate
      equal to LIBOR + 10 % per annum.  LIBOR shall be defined as the
      greater of (i) 4% per annum and (ii) the offered rate on the applicable
      page of the Telerate screen (or any successor thereto) that displays an
      average British Bankers Association Interest Rate Settlement Rate for
      deposits in U.S. Dollars and shall contain appropriate protection to
      ensure that such rate is not less than a DIP Lender’s cost of
      funds.

              

      

       

       

      
        
          Pacific
Ethanol DIP Credit Facility Term Sheet 5/17/09 

           

        

        
          -2-

          
            

          

        

        
           

        

      

       

      
        Interest
on the Roll-Up Loans shall accrue interest at the predefault rate applicable to
the base rate term loans under the Prepetition Credit
Agreement.

      

       

      
        	
                Default
      Interest:

              	
                Upon
      the occurrence and during the continuance of any event of default under
      the DIP Facility and at the election of the DIP Lenders, interest to be
      payable on all outstanding principal or any other obligation under the DIP
      Facility at 2.0% above the then applicable interest
  rate.

              

      

       

      
        	
                Closing
      Date:

              	
                A
      date on or before May 22, 2009 upon which all Conditions Precedent have
      been satisfied (the “Closing
      Date”).

              

      

       

      
        	
                Facility
      Fee:

              	
                A
      fee of 2.0% of the Revolving Commitment payable to the DIP Lenders on the
      Closing Date.

              

      

       

      
        	
                Structuring
      Fee:

              	
                A
      fee of 1.0% of the Revolving Commitment payable to the DIP Agent on the
      Closing Date.

              

      

       

      
        	
                Unused Commitment
      Fee:

              	
                A
      fee on the unused portion of the Revolving Commitment of 2.0% per annum,
      payable monthly.

              

      

       

      
        	
                II.

              	
                Additional
      Terms

              

      

       

      
        	
                Mandatory
      Prepayments:

              	
                Mandatory
      prepayments (including but not limited to net proceeds from Section 363
      asset sales of the Borrowers’ assets outside of the ordinary course of
      business, if any, approved by the DIP Agent and the DIP Lenders and
      authorized by the Bankruptcy Court and insurance proceeds received by any
      Borrower as a result of any casualty event) shall be used to prepay all
      amounts outstanding under the DIP Facility.  Unless agreed to
      otherwise by the DIP Lenders, prepayments of principal outstanding under
      the DIP Facility shall permanently reduce the DIP
    Commitment.

              

      

       

      Mandatory
prepayments shall be applied, first to the payment
of all costs, fees, expenses and indemnities then due and payable to the DIP
Lenders (including attorney’s and professional’s fees); second, to the
payment of any accrued and unpaid interest due and payable on the DIP Revolving
Loans pro rata among
the DIP Lenders (other than any DIP Lender that has defaulted on its obligations
to advance DIP Revolving Loans (a “Defaulting Lender”))
with respect to their respective outstanding principal amounts; third, to the
repayment of principal of DIP Revolving Loans (and permanent reduction of the
Revolving Commitments associated therewith) pro rata among the DIP
Lenders (other than the Defaulting Lenders) with respect to their respective
outstanding principal amounts until repaid in full; fourth, to the
payment of all accrued and unpaid interest then due and payable on the DIP
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 DIP 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 due and payable on the Roll-Up Loans pro rata
among the DIP Lenders (other than the Defaulting Lenders); seventh, to the
payment of the principal of the Roll-Up Loans pro rata among the DIP
Lenders (other than the Defaulting Lenders) based on their respective
outstanding principal amounts on the date of such prepayment and a corresponding
reduction in the Roll-Up Loan Commitment; 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.

       

       

      
        
          Pacific
Ethanol DIP Credit Facility Term Sheet 5/17/09 

           

        

        
          -3-

          
            

          

        

        
           

        

      

       

      
        	
                Security:

              	
                All
      obligations of Borrowers under and with respect to the DIP Facility (the
      “DIP
      Obligations”) to enjoy superpriority administrative expense status
      under Section 364(c)(1) with 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), 726, 1113, 1114 or any other
      provisions of the Bankruptcy Code, subject to the
    Carve-Out.

              

      

       

      To secure
all of the DIP Obligations, DIP Agent, for the benefit of the DIP Lenders, to
receive, pursuant to Sections 364(c)(2), 364(c)(3) and 364(d)(1) of the
Bankruptcy Code, the DIP Orders and the definitive DIP Facility loan documents,
valid, enforceable, and fully perfected security interests in and liens upon all
prepetition and postpetition assets of the Borrowers, whether now existing or
hereafter acquired or arising (collectively, the “DIP Collateral”),
which liens shall have the priority set forth below.  DIP Collateral
to include all rights, claims and other causes of action of each Borrower’s
estate and any other avoidance actions under Chapter 5 of the Bankruptcy Code
and the proceeds thereof and property received thereby whether by judgment,
settlement or otherwise (collectively, “Avoidance
Actions”).

       

      “DIP
Collateral” shall also include any and all rents, issues, products, offspring,
proceeds and profits generated by any item of DIP Collateral, without the
necessity of any further action of any kind or nature by the DIP Lenders or the
DIP Agent in order to claim or perfect such rents, issues, products, offspring,
proceeds and/or profits.

       

      Liens and
security interests with respect to DIP Collateral (the “DIP Liens”) not to be
subject to challenge and to attach and become valid and perfected upon entry of
the Interim Order without the requirement of any further action by DIP Agent or
DIP Lenders.  DIP Collateral to be free and clear of other liens,
claims and encumbrances, except valid, perfected, enforceable and unavoidable
liens in existence as of the petition date, if any, and any other Permitted
Liens (as defined in the Prepetition Credit Agreement).

       

      The DIP
Liens granted to the DIP Lenders with respect to the Roll-Up Loans will be pari passu (on a pro rata
basis) to the DIP Liens granted to the DIP Lenders with respect to the DIP
Revolving Loans.

       

      As used
in this Term Sheet, the term “Carve-Out” shall mean
the sum of (i) the aggregate amount of any budgeted, accrued but unpaid,
professional fees and expenses existing as of the Carve-Out Date (as defined
below) of the Borrowers and of the Committee, which fees and expenses are
approved by the Bankruptcy Court and in compliance with the DIP Budget, plus (ii) those
professional fees and expenses of the Borrowers and the Committee incurred after
the Carve-Out Date and subsequently allowed by the Bankruptcy Court and in
compliance with the DIP Budget in an amount not to exceed $250,000 in the
aggregate, plus
(iii) all fees required to be paid to the Clerk of the Bankruptcy Court and to
the Office of the United States Trustee pursuant to 28 U.S.C. §
1930.  Prior to the Carve-Out Date, subject to entry of an appropriate
order of the Bankruptcy Court (in form and substance acceptable to the DIP Agent
and the DIP Lenders), the Borrowers shall be permitted to use Advances under the
DIP Facility to pay compensation and reimbursement of expenses 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
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; provided, further 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; and provided, further, 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 Borrowers or any statutory committee in the
Chapter 11 Cases.

       

      “Carve-Out Date” means
the date that is the earlier of any Borrower’s receipt of a notice of default
under the DIP Facility or the Maturity Date.

       

       

      
        
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      Neither
the Advances under the DIP Facility nor the Carve-Out may be used to challenge
the amount, validity, perfection, priority or enforceability of, or assert any
defense, counterclaim or offset to the DIP Facility or the Prepetition Credit
Agreement, or the security interests and liens securing the DIP Obligations or
the Prepetition Obligations with respect thereto or otherwise to litigate
against the DIP Agent, the DIP Lenders, the Prepetition Agent or the Prepetition
Lenders; provided, however, the
foregoing shall not apply to any Advances or Carve-Out that are used for
purposes of seeking a Section 506(a) Determination.  Notwithstanding
the foregoing, the Committee may spend up to an aggregate maximum of $15,000
under the DIP Facility and the Carve-Out to investigate potential claims arising
out of, or in connection with, the Prepetition Credit Agreement or the security
interests and liens securing the Prepetition Obligations.

       

      
        
        

      

      
        
          	      
                  Special Provisions for Roll-Up
      Loans:

                	      
                  The
      Roll-Up Loans may not be required to be repaid in cash on the Maturity
      Date.  Any repayment of a DIP Revolving Loan will not reduce the
      amount of outstanding Roll-Up Loans.  Upon the vote of the
      Roll-Up Loan class to accept a Chapter 11 Plan in accordance with section
      1126 of the Bankruptcy Code, the Borrowers’ plan of reorganization may
      require that 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 the plan; provided that
      the relative lien position of the DIP Lenders under the DIP Revolving
      Loans in respect of the Roll-Up Loans is maintained, and provided
      further the relative lien position of the DIP Lenders under the
      Roll-Up Loans in respect of the Prepetition Obligations is
      maintained.  Upon conversion of the Roll-Up Loans in connection
      with the funding of the DIP Revolving Loans, the Roll-Up Loans shall cease
      to be indebtedness under the Prepetition Credit Agreement and shall be
      deemed DIP Obligations in all respects including for purposes of having
      the benefit of Section 364(e) of the Bankruptcy
    Code.

                
	 	 
	 	      
                  The
      Interim Order and the Final Order shall contain provisions prohibiting the
      Borrowers from incurring any indebtedness which (x) ranks pari passu with or
      senior to the loans under the DIP Facility or (y) benefits from a first or
      second priority lien under section 364 of the Bankruptcy
      Code.

                
	 	 
	
                  Adequate
      Protection:

                	
                  As
      adequate protection to the Prepetition Lenders for any diminution in the
      value of their interests in the Borrowers’ property resulting from (i) the
      priming liens granted in favor of the DIP Agent and the DIP Lenders under
      the DIP Facility pursuant to section 364(d)(1) of the Bankruptcy Code,
      (ii) the use, sale or lease of the Borrowers’ property (including any cash
      collateral) pursuant to section 363(c) of the Bankruptcy Code and (iii)
      the imposition of the automatic stay pursuant to section 362(a) of the
      Bankruptcy Code:

                

        

         

      

      (a) The
Prepetition Lenders will, subject to the terms of any DIP Order, maintain any of
their liens in existence on the Petition Date (the “Prepetition Liens”)
on the DIP Collateral, which liens shall be junior and subordinate to the DIP
Liens and the Carve-Out;

       

      (b) The
Prepetition Agent, on behalf of the Prepetition Lenders, shall be granted
replacement liens on, and security interests in, all of the DIP Collateral (the
“Lien Replacement
Liens”), which replacement liens shall be subject only to (1) the liens
on, and security interests in, the DIP Collateral granted to the DIP Agent and
the DIP Lenders under the DIP Facility and the DIP Orders, as the case may be,
(2) any Permitted Liens (as defined in the Prepetition Credit Agreement) and (3)
the Carve-Out;

       

       

      
        
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      (c)
Pursuant to Section 507(b) of the Bankruptcy Code, the Prepetition Agent, on
behalf of the Prepetition Lenders, shall be granted an administrative claim with
priority over all administrative expense claims and unsecured claims against the
Borrowers (the “507(b)
Claim”), subject only to (1) the super-priority claims granted to the DIP
Agent and the DIP Lenders under the DIP Facility and the DIP Orders, as the case
may be, and (2) the Carve-Out; and

       

      (d) As
additional adequate protection, the Borrowers shall reimburse the Prepetition
Lenders on a monthly basis for the reasonable professional fees and expenses of
the Prepetition Agent otherwise permitted under the Prepetition Credit Agreement
arising (i) before the Petition Date and (ii) after the Petition Date to the
extent such amounts arise in connection with the enforcement of the protections
granted to the Prepetition Lenders pursuant to the DIP Orders; provided, however, if and to
the extent that any payment(s) is challenged by a party in interest under
section 506(b) of the Bankruptcy Code and ultimately not allowed under such
provision, such payment(s) may be recharacterized as a payment of principal on
the Prepetition Obligations.

       

      Notwithstanding
the foregoing, the Prepetition Agent and the Prepetition Lenders shall be
granted adequate protection as provided herein to the extent the Prepetition
Liens are valid, enforceable, perfected and non-avoidable.

       

      
        	      
                Representations and
      Warranties:

              	      
                The
      documentation for the DIP Facility and related collateral matters shall
      contain such representations and warranties as are customary for DIP loan
      transactions and investments of a similar size and nature consistent with
      the Prepetition Credit Agreement.

              
	 	 
	
                Financial
      Covenants:

              	
                Amounts
      disbursed pursuant to category of DIP Budget entitled “Asset Management
      Agreement” (excluding the line item entitled “Asset Management Fee”) in
      any monthly budget period not to exceed the amounts set forth in the line
      item therefor (excluding “Asset Management Fee”) in the Initial DIP Budget
      by more than ten percent (10%) for such monthly budget
    period.

              

      

       

      Professional
fees (other than fees and expenses of the advisors and consultants working on
behalf of the DIP Agent and DIP Lenders)  in any period of time
measured from the Petition Date not 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 ($e00,000).

       

      Amounts
disbursed pursuant to the category in the DIP Budget entitled “Operating
Disbursements” in any monthly budget period not exceed the amounts set forth in
the line item “Total Operating Disbursements” for such monthly budget period in
the then applicable DIP Budget by more than ten percent (10%).

       

      
        	
                Negative
      Covenants:

              	
                The
      documentation for the DIP Facility shall contain negative covenants of
      each Borrower customary for DIP loan transactions and investments of a
      similar size and nature consistent with the Prepetition Credit
      Agreement.

              

      

       

       

      
        
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                Affirmative
      Covenants:

              	
                The
      documentation for the DIP Facility shall include affirmative covenants of
      each Borrower, customary for DIP loan transactions and investments of a
      similar size and nature consistent with the Prepetition Credit Agreement,
      including, but not limited to, covenants requiring each
      Borrower:

              

      

       

      
      

      
        
          	
                   
      

                	
                  1.

                	
                  To
      provide or cause to be provided to the DIP Agent and the DIP Lenders with
      a weekly line-by-line variance report comparing actual cash receipts and
      disbursements on a consolidated basis to amounts projected in the DIP
      Budget and a weekly reconciliation report which compares the actual cash
      flow results (receipts and disbursements) against the prior week’s cash
      flow projections (receipts and disbursements), indicating the cumulative
      percentage variance, if any, of actual results versus projections for such
      week as set forth therein, together with management’s explanation for such
      variance; such variance not to exceed 10% in the aggregate;
      and

                

        

         

        
          	
                   
      

                	
                  2.

                	
                  To
      comply at all times with the DIP Budget (subject  to expense
      variances no greater than 10% in the
aggregate).

                

        

         

        
          	
                   
      

                	
                  3.

                	
                  To
      maintain its existence and take all necessary and appropriate actions to
      preserve all assets of such Borrower (except as contemplated by the
      documentation for the DIP Facility.

                

        

         

      

      
        	
                Events
      of Default:

              	
                The
      DIP Facility shall include Events of Default customary for DIP loan
      transactions and investments of a similar size and nature consistent with
      the Prepetition Credit Agreement, including, but not limited
      to:

              

      

       

      
        
          	
                   
      

                	
                  1.

                	
                  The
      use of proceeds inconsistent with the DIP Budget,
    including;

                

        

         

        
          	
                   
      

                	
                  2.

                	
                  The
      payment of claims existing prior to the Petition Date or prior to a
      confirmed plan of reorganization (other than as set forth in the DIP
      Budget or payment is approved by the DIP Agent and authorized by an Order
      of the Court);

                

        

         

        
          	
                   
      

                	
                  3.

                	
                  The
      Asset Management Agreement shall be terminated because of a breach by
      Pacific Ethanol, Inc. (“PEI”);

                

        

         

        
          	
                   
      

                	
                  4.

                	
                  Dismissal
      or conversion to Chapter 7 of any of the Chapter 11 Cases without the
      written consent of the DIP Agent and the DIP Lenders or the appointment of
      a trustee or examiner in any of the Chapter 11 Cases with any powers to
      operate or manage the financial affairs of any
  Borrower;

                

        

         

        
          	
                   
      

                	
                  5.

                	
                  The
      entry of a final order that, in the sole determination of the DIP Agent
      and the DIP Lenders, in any way modifies, stays, reverses, or vacates the
      DIP Orders or the DIP Facility in each case in a manner adverse to the DIP
      Agent and the DIP Lenders without the written consent of DIP Agent and the
      DIP Lenders or either of the DIP Orders or the DIP Facility ceases to be
      in full force and effect;

                

        

         

         

        
          
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                  6.

                	
                  The
      entry of the Interim Order shall not have occurred within 10 days after
      the Petition Date;

                

        

         

        
          	
                   
      

                	
                  7.

                	
                  The
      entry of the Final Order shall not have occurred within 45 days after the
      date of entry of the Interim Order;

                

        

         

        
          	
                   
      

                	
                  8.

                	
                  Any
      Borrower petitions the Bankruptcy Court to obtain additional financing
      pari passu or
      senior to DIP Facility;

                

        

         

        
          	
                   
      

                	
                  9.

                	
                  The
      entry of an order granting any other super-priority claim or lien equal or
      superior to that granted to the DIP Agent or the DIP Lenders on the assets
      of the Borrowers;

                

        

         

        
          	
                   
      

                	
                  10.

                	
                  The
      entry of an order granting relief from the automatic stay so as to allow a
      third party to proceed against any material assets of the
      Borrowers;

                

        

         

        
          	
                   
      

                	
                  11.

                	
                  The
      entry of any order of the Bankruptcy Court confirming any plan of
      reorganization that does not contain a provision for termination of the
      DIP Facility and repayment in full in cash of all of the DIP Obligations
      under the DIP Facility on or before the effective date of such
      plan;

                

        

         

        
          	
                   
      

                	
                  12.

                	
                  Any
      Borrower violates or breaches the any DIP Order or files any pleadings
      seeking, joining in, or otherwise consenting to any violation or breach of
      any DIP Order in each case in a manner adverse to the DIP Agent and the
      DIP Lenders in the sole determination of the DIP Agent and the DIP
      Lenders;

                

        

         

        
          	
                   
      

                	
                  13.

                	
                  (A)
      The Borrowers engage in or support any challenge to the validity,
      perfection, priority, extent or enforceability of the DIP Facility or the
      Prepetition Obligations or the liens on or security interests in the
      assets of the Borrowers securing the DIP Facility or the Prepetition
      Obligations, including without limitation seeking to equitably subordinate
      or avoid the liens securing the Prepetition Obligations, or (B) the
      Borrowers engage in or support any investigation or their assertion of any
      claims or causes of action (or supporting the assertion of the same)
      against the DIP Agent, the DIP Lenders, the Prepetition Agent or the
      Prepetition Lenders; provided, however, it
      shall not constitute an Event of Default if the Borrowers provides basic
      loan information with respect to the Prepetition Obligations to a party in
      interest or is compelled to provide information by an Order of the Court
      and provides prior written notice to the DIP Agent and the DIP Lenders of
      the intention or requirement to do
so;

                

        

         

        
          	
                   
      

                	
                  14.

                	
                  Any
      person shall seek a Section 506(a) Determination with respect to the
      Prepetition Obligations that is unacceptable to the Prepetition Agent and
      the Prepetition Lenders;

                

        

         

         

        
          
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                  15.

                	
                  The
      allowance of any claim or claims under Section 506(c) or 552(b) of the
      Bankruptcy Code against or with respect to any of the collateral securing
      the DIP Facility;

                

        

         

        
          	
                   
      

                	
                  16.

                	
                  The
      entry of an order extending any exclusive right that any of the Borrowers
      may have to propose a plan that is 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 DIP Agent and the DIP
Lenders;

                

        

         

        
          	
                   
      

                	
                  17.

                	
                  The
      use of cash collateral other than as expressly contemplated by the DIP
      Orders and the DIP Budget prior to the indefeasible payment in full of the
      DIP Obligations and termination of the DIP Commitments
      thereunder;

                

        

         

        
          	
                   
      

                	
                  18.

                	
                  The
      consummation of the sale of any material portion of the Borrowers’ assets
      unless consented to by the DIP Agent and the DIP Lenders;
    and

                

        

         

        
          	
                   
      

                	
                  19.

                	
                  Breach
      of any covenants or representations and warranties in the DIP financing
      documents or the DIP Orders, including without limitation, failure to make
      any Mandatory Prepayments.

                

        

         

      

      
        	
                Remedies
      On Default:

              	
                The
      DIP Orders and the DIP Facility loan documentation to provide that, upon
      the occurrence and during the continuation of an Event of Default under
      the DIP Facility, the DIP Agent, at the direction of the DIP Lenders,
      shall have customary remedies, including, without limitation, the
      automatic stay under section 362 of the Bankruptcy Code shall be deemed
      automatically terminated without further order of the Bankruptcy Court and
      without the need for filing any motion for relief from the automatic stay
      or any other pleading, to: (i) declare the principal of and accrued
      interest on the outstanding borrowings to be immediately due and payable,
      (ii) accelerate the DIP Obligations and terminate, as applicable, any
      further commitment to lend to the Borrowers, and (iii) charge the default
      rate of interest on the DIP
Facility.

              

      

       

      In
addition, upon three business days’ written notice (the “Notice Period”) to
the Borrowers and counsel to any official committees and the Office of the U.S.
Trustee, the automatic stay shall be deemed automatically terminated, without
further order of the Bankruptcy Court and without the need for filing any motion
for relief from the automatic stay or any other pleading, to permit the DIP
Agent to realize on all Collateral and to exercise any and all remedies under
the DIP Orders and the DIP Facility with respect to the Collateral or any part
thereof and to set off or seize amounts in any accounts maintained with or under
the control of the DIP Agent or any DIP Lender; provided, however, during the
Notice Period, Borrowers and/or the Committee may seek relief from the
Bankruptcy Court to re-impose or continue the automatic stay; provided, further, in any
hearing after the giving of the aforementioned notice, the only issue that may
be raised by any party in opposition thereto being whether, in fact, an Event of
Default has occurred and is continuing.

       

       

      
        
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                Voting:

              	
                Matters
      requiring the approval of the DIP Lenders, including amendments and
      waivers of the definitive credit documentation, will require the approval
      of the DIP Lenders holding, in the aggregate, greater than 50% of the
      outstanding loan exposure (balances and commitments) under the DIP
      Facility, subject to exceptions to be set forth in the definitive credit
      documentation.

              

      

       

       

      III.           Other
Terms

       

      
        	
                Conditions
      Precedent:

              	
                The
      closing and the making of any Interim Advance shall be subject to various
      conditions precedent customary for DIP loan transactions and investments
      of a similar size and nature consistent with the Prepetition Credit
      Agreement, including but not limited
to:

              

      

       

      
        
          	
                   
      

                	
                  1.

                	
                  Satisfactory
      completion of legal and collateral due diligence and transaction
      structuring, including due diligence concerning the Borrowers’ bankruptcy
      process and the receipt of all required court approvals for the DIP
      Facility;

                

        

         

        
          	
                   
      

                	
                  2.

                	
                  Execution
      of definitive agreements, instruments, and documents related to the DIP
      Facility (including, without limitation, the DIP Orders), each
      satisfactory in form and substance to the DIP Lenders in their sole and
      absolute discretion, including a satisfactory cash management system
      consistent with the existing cash management system and subject to the
      existing tri-party account control
agreements;

                

        

         

        
          	
                   
      

                	
                  3.

                	
                  Delivery
      of the DIP Budget approved by the DIP Lenders and to be attached to the
      Interim Order and the Final Order entered by the Bankruptcy
      Court;

                

        

         

        
          	
                   
      

                	
                  4.

                	
                  Entry
      of the Final Order or Interim Order, as the case may be, by the Bankruptcy
      Court, after notice given and a hearing conducted in accordance with Rule
      4001(c) of the Federal Rules of Bankruptcy Procedure (and any applicable
      local bankruptcy rules), authorizing and approving the transactions
      contemplated by the documents evidencing the DIP Facility and finding that
      the DIP Lenders are extending credit to the Borrowers in good faith within
      the meaning of Bankruptcy Code section 364(e) and containing the
      terms provided in the Section entitled “DIP Orders”
  herein;

                

        

         

        
          	
                   
      

                	
                  5.

                	
                  All
      of the “first day orders” shall have been entered at the commencement of
      the Borrowers’ Chapter 11 Cases and shall be in form and substance
      reasonably satisfactory to the DIP Agent and the DIP
    Lenders.

                

        

         

        
          	
                   
      

                	
                  6.

                	
                  Reimbursement
      in full in cash of the fees, costs and expenses of the DIP Agent, the DIP
      Lenders and the Prepetition Agent;
and

                

        

         

        
          	
                   
      

                	
                  7.

                	
                  No
      litigation commenced which has not been stayed by the Bankruptcy Court and
      which, if successful, would have a material adverse impact on any
      Borrower, its business or ability to repay the DIP Facility, or which
      would challenge the transactions under
  consideration.

                

        

         

         

        
          
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                  8.

                	
                  PEI
      and the Borrowers will enter into an Asset Management Agreement (the
      “Asset
      Management Agreement”) in a form acceptable to the DIP
      Agent.

                

        

         

      

      
        The
documents evidencing the DIP Facility shall contain the following conditions
precedent to each Advance (collectively, “Extensions of
Credit”):

         

        (i)                 No
Default or Event of Default shall have occurred and be continuing;

         

        (ii)                 Representations
and warranties shall be true and correct as of the date of each Extension of
Credit;

         

        (iii)                 (A)
The Interim Order shall be in full force and effect or (B) if (x) the date of
such requested Extension of Credit is more than 45 days after the Closing Date
or (y) the amount of such requested Extension of Credit, together with the
amount of all Extensions of Credit then outstanding, shall exceed the maximum
amount authorized pursuant to the Interim Order, the Final Order shall have been
entered, which Final Order shall be in form and substance satisfactory to the
DIP Agent and the DIP Lenders, and shall be in full force and effect and shall
not have been appealed, stayed, reversed, vacated or otherwise modified in a
manner adverse to the DIP Agent and the DIP Lenders;

         

        (iv)                 Receipt
by the DIP Agent and the DIP Lenders of a borrowing request in the form to be
set out in the documents evidencing the DIP Facility executed by each
Borrower.  The Borrowers’ request for each Extension of Credit shall
constitute a representation and warranty that the conditions to the making of
such Extension of Credit shall have been satisfied; and

         

        (v)                 Payment
of all fees and other amounts then due and payable.

         

      

       

      
        	
                DIP
      Orders:

              	
                The
      DIP Orders shall be in form and substance reasonably acceptable in all
      respects to DIP Agent and DIP Lenders and to include, without limitation,
      provisions (i) approving in all respects the definitive documentation
      evidencing the DIP Facility, and authorizing and directing the Borrowers
      to execute and become bound by such definitive documentation; (ii)
      modifying the automatic stay to the extent necessary to permit or
      effectuate the terms of the DIP Orders and documents evidencing the DIP
      Facility, including, without limitation, to permit the creation and
      perfection of the DIP Agent’s liens on the DIP Collateral; (iii) providing
      for the automatic relief of such stay to permit the enforcement of DIP
      Agent’s and the DIP Lenders’ remedies under the DIP Facility, subject to
      the right of the Borrowers and/or the Committee to re-impose or continue
      the automatic stay; and (iv) providing that the Borrowers acknowledge (a)
      the validity and enforceability of the Prepetition Obligations, without
      defense, offset or counterclaim of any kind, (b) the validity, perfection
      and priority of the liens securing the Prepetition Obligations, and that
      the Borrowers waive any right to challenge or contest such claims and
      liens and (c) that they have no valid claims or causes of action, whether
      based in contract, tort or otherwise against the Prepetition Agent or any
      Prepetition Lender with respect to the Prepetition Credit Agreement or the
      related documents or transactions.

              

      

       

       

      
        
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                Expenses:

              	
                All
      reasonable out-of-pocket fees, costs and expenses of the DIP Agent, the
      DIP Lenders, the Prepetition Agent and the Prepetition
      Lenders  (including, without limitation, reasonable
      out-of-pocket prepetition and postpetition fees, costs, expenses and
      disbursements of legal counsel, financial advisors and third-party
      appraisers, advisors and consultants advising the DIP Agent, the DIP
      Lenders, the Prepetition Agent and the Prepetition Lenders) to be payable
      by the Borrowers under the DIP Facility on demand whether or not the
      transactions contemplated hereby are consummated; provided, however, the
      Borrowers shall only be required to pay to the Prepetition Agent and the
      Prepetition Lenders such amounts that have accrued and are outstanding on
      or prior to the Petition Date, except as otherwise permitted in the
      Interim Order.

              

      

       

      
        	
                Termination:

              	
                Upon
      the occurrence of an Event of Default, the DIP Lenders may terminate the
      DIP Commitments, declare the DIP Obligations to be immediately due and
      payable and exercise all rights and remedies under the documents
      evidencing the DIP Facility and the DIP Orders, as
    applicable.

              

      

       

      
        	
                Indemnification:

              	
                Borrowers
      shall agree to indemnify and hold harmless the DIP Agent and the DIP
      Lenders and each of their respective affiliates and each of their
      respective officers, directors, employees, agents, advisors and
      representatives (each, an “Indemnified
      Party”) from and against any and all claims, damages, losses,
      liabilities and expenses (including, without limitation, fees and
      disbursements of counsel), that may be incurred by or asserted or awarded
      against any Indemnified Party (including, without limitation, in
      connection with any investigation, litigation or proceeding or the
      preparation of a defense in connection therewith), arising out of or in
      connection with or by reason of the transactions contemplated hereby,
      except to the extent arising from an Indemnified Party’s gross negligence
      or willful misconduct.  In the case of an investigation,
      litigation or other proceeding to which the indemnity in this paragraph
      applies, such indemnity shall be effective whether or not such
      investigation, litigation or proceeding is brought by any of the
      Borrowers, any of their respective directors, security holders or
      creditors, an Indemnified Party or any other person or an Indemnified
      Party is otherwise a party thereto and whether or not the transactions
      contemplated hereby are
consummated.

              

      

       

      
        	
                Confidentiality:

              	
                Except
      as required by law or in connection with the implementation of this Term
      Sheet, the terms hereof will be kept strictly confidential by each of the
      Borrowers and may only be disclosed to such Borrower’s affiliates, legal
      counsel, financial advisors, financing sources and consultants who have
      been informed of, and agree to abide by, the confidentiality of this Term
      Sheet.  To the extent that any disclosure becomes legally
      required, the DIP Agent and the DIP Lenders shall be notified promptly and
      before the required disclosure is
made.

              

      

       

      
        	
                Governing
      Law:

              	
                New
      York law except as governed by the Bankruptcy
  Code.

              

      

       

      
        	
                Miscellaneous:

              	
                This
      summary of terms and conditions does not purport to summarize all of the
      conditions, covenants, representations, warranties and other provisions
      which would be contained in definitive credit documentation for the DIP
      Facility contemplated hereby, all of which shall be acceptable to the DIP
      Agent and the DIP Lenders.

              

      

       

      
        
          
             

          

          Pacific
Ethanol DIP Credit Facility Term Sheet 5/17/09 

           

        

        
          -12-

          
            

          

        

        
           

        

      

      ANNEX I

       

      Commitments

       

      
        	
                REVOLVING
      LENDER

              	
                REVOLVING
      LOAN 
COMMITMENT

              	
                ROLL
      UP LOAN 
COMMITMENT

              
	 	 	 
	
                WestLB
      AG, New York Branch

              	
                $1,485,606.38

              	
                $2,228,409.53

              
	 	 	 
	
                Amarillo
      National Bank

              	
                $805,589.60

              	
                $1,208,384.41

              
	 	 	 
	
                CIFC
      Funding 2007-III Ltd.;

                CIFC
      Funding 2007-IV, Ltd.

              	
                $1,044,473.15

              	
                $1,566,709.73

              
	 	 	 
	
                CIT
      Capital USA Inc.

              	
                $3,300,137.73

              	
                $4,950,206.60

              
	 	 	 
	
                Credit
      Suisse Candlewood Special Situations Master Fund, Ltd.

              	
                $4,864,148.59

              	
                $7,296,222.89

              
	 	 	 
	
                Coöperatieve
      Centrale Raiffeisen-Boerenleenbank B.A., “Rabobank

                Nederland,”
      New York Branch

              	
                $1,989,529.19

              	
                $2,984,293.78

              
	 	 	 
	
                Metropolitan
      Life Insurance Company

              	
                $1,701,944.26

              	
                $2,552,916.40

              
	 	 	 
	
                Norddeutsche
      Landesbank Girozentrale New York Branch and/or Cayman Island
      Branch

              	
                $1,871,279,73

              	
                $2,806,919.60

              
	 	 	 
	
                GreenStone
      Farm Credit Services, ACA/FLCA

              	
                $547,061.33

              	
                $820,591.99

              
	 	 	 
	
                Nordkap
      Bank AG

              	
                $1,588,972.09

              	
                $2,383,458.14

              
	 	 	 
	
                Northwest
      Farm Credit Services, FLCA

              	
                $547,061.33

              	
                $820,591.99

              
	 	 	 
	
                ShoreBank
      Pacific

              	
                $254,196.62

              	
                $381,294.94

              
	 	 	 
	
                Total  
      

              	
                $20,000,000.00

              	
                $30,000,000.00

              

      

      

       

      Pacific
Ethanol DIP Credit Facility Term
Sheet 5/17/09 

         

         

         

        -13-

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