Document:

exv10w1

 

Exhibit 10.1

SECOND AMENDMENT TO FINANCING AGREEMENT

AND DEPOSITARY AND DISBURSEMENT AGREEMENT

     This SECOND AMENDMENT TO FINANCING AGREEMENT AND DEPOSITARY AND DISBURSEMENT AGREEMENT (this
“Amendment”), dated as of April 2, 2008, is made by and among PANDA HEREFORD ETHANOL, L.P.,
as Borrower, SOCIÉTÉ GÉNÉRALE, as Administrative Agent, Disbursement Agent and a Lender, and the
LENDERS (collectively, the “Parties”). Capitalized terms not defined in this Amendment
shall have the meanings given in the Financing Agreement, dated as of July 28, 2006 (as amended,
the “Financing Agreement”), by and among Borrower, the Agents, the Lenders from time to
time party thereto, the LC Fronting Bank and the Lead Arranger.

RECITALS

     WHEREAS, Borrower, the Lenders and Société Générale, as the Administrative Agent (in such
capacity, the “Administrative Agent”), have previously entered into the Financing
Agreement;

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

     WHEREAS, the Financing Agreement requires the Administrative Agent to obtain the approval of
the Majority Lenders with respect to the amendment of any provision of any Financing Document;

     WHEREAS, in light of unforeseen delays in the construction of the Project, the Project is not
in compliance with the Construction and Draw Schedule and Construction Budget and is not expected
to meet the Substantial Completion date;

     WHEREAS, Borrower and the EPC Contractor have prepared a revised Construction and Draw
Schedule acceptable to the Administrative Agent, in consultation with the Engineer, attached hereto
as Exhibit A; and

     WHEREAS, in connection with the delays in the construction of the Project, the Parties wish to
amend the Financing Agreement, on the terms and conditions set forth herein;

     NOW, THEREFORE, in consideration of the premises and the mutual covenants contained herein,
and other good and valuable consideration, the receipt and adequacy of which is hereby
acknowledged, the Parties agree as follows:

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     1. Amendment of Financing Agreement.

     (a) Section 3.5(g) is hereby deleted in its entirety and replaced with the following:

     (g) If the Funding Date is not the first Funding Date for the Tranche
A Loans, and such Loan is a Term Loan, the Administrative Agent has
received a certificate of the Engineer, substantially in the form of
Exhibit 3.5(g), dated the applicable Term Loan Funding Date, certifying
that (i) the progress of construction of the Project is substantially in
accordance with the Construction and Draw Schedule and in conformity and
compliance with the Construction Budget and the Construction Contracts,
(ii) the Project is reasonably expected to achieve Substantial Completion
by September 30, 2008, (iii) the Project is reasonably expected to achieve
Final Acceptance on or before February 15, 2009, and (iv) Borrower has
sufficient funds necessary to achieve Completion without violating the
Minimum Contingency Covenant.

     (b) Section 4.1(z) is hereby deleted in its entirety and replaced with the following:

     (z) Scheduled Substantial Completion. As of the Closing
Date, consistent with the Construction Budget and the Construction and
Draw Schedule, Substantial Completion is achievable on or before September
30, 2008.

     (c) The first three sentences of Section 5.1(g) shall be deleted and replaced with the
following:

     (g) Operating Plan and Budget. Not later than July 31, 2008,
and not later than November 1 of each year thereafter, commencing November
1, 2009, Borrower will submit to the Administrative Agent for approval,
such approval not to be unreasonably withheld or delayed, a proposed
Operating Plan and Budget for the next calendar year and a forecast of the
operating profit of the Project for the next three (3) calendar years.
Each proposed Operating Plan and Budget shall be subject to the reasonable
approval of Administrative Agent acting in consultation with the Engineer.
Failure by the Administrative Agent to approve or disapprove such
proposed Operating Plan and Budget within sixty (60) days after receipt
thereof (or, in the case of the first Operating Plan and Budget, thirty
(30) days prior to the Completion Date) shall be deemed to be an approval
by the

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Administrative Agent of such proposed Operating Plan and Budget as
the final Operating Plan and Budget.

     (d) New clauses (x) and (y) shall be added to Section 5.1, as follows:

     (x) Construction Event Insurance Payment. On or before July
15, 2008, Borrower shall have received proceeds of at least two million
Dollars ($2,000,000) from Factory Mutual Insurance Company as a result of
Borrower’s claims under its insurance policy or policies in respect of the
Construction Event.

     (y) Setoff Rights. Borrower shall use its best commercial
efforts to resist any efforts (if any) by the EPC Contractor to render
unenforceable Borrower’s setoff rights under the EPC Contract, and such
efforts may include defending such rights in any litigation brought by
the EPC Contractor.

     (e) Section 5.2(g)(ii) shall be deleted in its entirety and replaced with the
following: “(ii) Indebtedness not exceeding forty-five million Dollars ($45,000,000) owed
to the Sub-Debt Provider and subject to the Intercreditor Agreement;”

     (f) A new Section 5.2(s) shall be added, as follows:

     (s) Minimum Contingency Covenant. Borrower shall not,
directly or indirectly, cause or permit (through the submission of a
Construction Draw Request, the disbursement of a Construction Loan or
otherwise) the amount in the Budget Line Item labeled “Contingency” in the
Construction Budget to be less than one million Dollars ($1,000,000) at
any time (the “Minimum Contingency Covenant”).

     (g) Section 6.1(d) is hereby deleted in its entirety and replaced with the following:

     (d) Borrower fails to observe the covenants set forth in Section
5.1(a), (d), (l), (n), (r), (s) or (t), Section 5.2 or any covenant in the
Disbursement Agreement; provided, that Borrower shall have three
(3) Business Days to cure any failure to observe the Minimum Contingency
Covenant in Section 5.2(s).

     (h) Section 6.1(r) is hereby deleted in its entirety and replaced with the following:
“(r) Completion has not occurred on or before November 15, 2008.”

     (i) New clauses (t), (u) and (v) shall be added to Section 6.1, as follows:

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     (t) Substantial Completion has not occurred on or before September 30, 2008.

     (u) Sponsor fails to perform or observe any term, covenant or agreement
contained in the Sponsor Support Agreement.

     (v) A final judgment or order not subject to appeal is rendered against
Borrower, ordering it to cease setting-off the liquidated damages owed by the EPC
Contractor to Borrower under the EPC Contract against Borrower’s payment
obligations to the EPC Contractor, or declaring that such setoffs are
unenforceable.

     (j) Paragraphs (D), (E) and (F) in Exhibit 3.5(g) of the Financing Agreement are
hereby deleted and replaced with the following (D), (E) and (F), respectively:

     (D) We expect the Project to achieve Substantial Completion on or before
September 30, 2008.

     (E) We expect the Project to achieve Final Acceptance on or before February
15, 2009.

     (F) Borrower has sufficient funds to achieve Completion without violating the
Minimum Contingency Covenant.

     (k) Schedule X of the Financing Agreement is hereby amended as follows:

     (i) The following definitions shall be added, in alphabetical order, as
follows:

“Construction Event” means the sudden soil settling that has
occurred under certain Project tank foundations, the remediation of which
has caused a substantial delay in the completion and start-up of the
Project.

“Minimum Contingency Covenant” has the meaning set forth in
Section 5.2(s).

“Sponsor” means Panda Ethanol, Inc., a Nevada corporation.

“Sponsor Support Agreement” means the Sponsor Support Agreement,
in the form attached hereto as Exhibit B, by and among Sponsor,
Borrower and the Administrative Agent.

     (ii) The definition of “Panda Parties” is hereby deleted and the
following inserted in place thereof: “Panda Parties” means, collectively,
Borrower, Sponsor, the Borrower Partners and Operator.”

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     (iii) The definition of “Qualified Project Expenses” is hereby amended
by (A) inserting an “and” immediately prior to subclause “(ix)” therein and
inserting a period immediately after such subclause “(ix)” therein, (B) deleting
subclause “(x)” and the last sentence therein and replacing them with the
following: “None of the Arbitrage Bonus, the Benchmark Bonus or any bonuses paid
pursuant to the Construction Contracts are Qualified Project Expenses.”

     (iv) The definition of “Security Documents” is hereby amended by
adding “, Sponsor Support Agreement” immediately following the words “Retainage LC
Consent” therein.

     2. Amendment of Disbursement Agreement. The Disbursement Agreement is hereby amended
as follows:

     (a) Section 3.3(c) is amended by deleting the clause beginning with “FIRST” therein
and replacing such clause with the following:

“FIRST transfer, as requested by Borrower, to Borrower to pay the
Construction Fee to the Operator, an amount equal to the lesser of (i)
$2,000,000 or (ii) the difference of (A) the amount then remaining in the
Construction Draw Account, and (B) any amounts transferred by the
Disbursement Agent from the Loss Proceeds Account to the Construction Draw
Account pursuant to Section 4.6(ii) and

     (b) Section 4.6(ii) is amended by adding the following at the end thereof:

Notwithstanding the foregoing, insurance proceeds from the Construction
Event shall be held in the Loss Proceeds Account or, upon the request of
Borrower and with the consent of the Administrative Agent (not to be
unreasonably withheld), certain amounts therein may be transferred by the
Disbursement Agent to the Construction Draw Account for the purpose of
Borrower’s compliance with the Minimum Contingency Covenant. Any
remaining insurance proceeds from the Construction Event shall be
transferred to the Project Revenues Account at the time the Construction
Draw Account is closed pursuant to Section 3.3(c).

     (c) Paragraph C(8) of Exhibit 1.2(c) of the Disbursement Agreement is hereby deleted
and replaced with the following: “Borrower expects the Project to achieve Substantial
Completion by September 30, 2008 and Final Acceptance on or before February 15, 2009.”

     3. No Other Changes. Except as explicitly amended by this Amendment, all of the terms
and conditions of the Financing Agreement, the Disbursement Agreement and the Financing Documents
remain unmodified and in full force and effect.

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     4. Representations and Warranties. Borrower hereby represents and warrants to the
Administrative Agent as follows:

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

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

     (c) No Default or Event of Default exists under the Financing Documents (as amended
hereby) on and as of the date hereof; and

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

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

     (a) this Amendment duly executed by Borrowers, the Administrative Agent and the
Majority Lenders;

     (b) the Sponsor Support Agreement duly executed by Borrower, Sponsor and the
Administrative Agent;

     (c) a favorable legal opinion addressed to the Lenders and the Agents, in form and
substance satisfactory to the Administrative Agent, from Chadbourne and Parke LLP with
respect to the enforceability of the Sponsor Support Agreement;

     (d) a certificate of the secretary of Sponsor, certifying as to (i) the Organizational
Documents of Sponsor; (ii) the incumbency of the signatories of

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Sponsor, and (iii) and resolutions of Sponsor, approving the Sponsor Support Agreement
and the transactions contemplated thereby;

     (e) a certificate of good standing of Sponsor issued by the State of Nevada; and

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

     6. Post Effective Date Condition. Borrower shall deliver to the Administrative Agent
not later than April 9, 2008, a favorable legal opinion addressed to the Lenders and the Agents, in
form and substance reasonably satisfactory to the Administrative Agent and addressing customary
corporate opinions on corporate existence and authority, due authorization and no conflicts with
organizational documents, from Nevada counsel to Sponsor. Failure to provide such opinion by such
date will result in an immediate Event of Default.

     7. Miscellaneous.

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

     (b) Each reference in the Disbursement Agreement to “this Agreement” and each reference in
each of the Financing Documents to the “Disbursement Agreement” shall be deemed to refer to the
Disbursement Agreement as amended by this Amendment.

     (c) This Amendment will be a Financing Document for all purposes of the Financing Agreement.

     (d) This Amendment shall be governed by and construed in accordance with the laws of the State
of New York, without regard to the conflict of law provisions thereof (other than Section 5.1401 of
the General Obligations Law and any successor statute thereto).

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

     (f) This Amendment shall not constitute a waiver or modification of any of the Lenders’ or
Agents’ rights and remedies or of any of the terms, conditions, warranties, representations, or
covenants contained in the Financing Documents, except as specifically set forth above, and the
Lenders and the Agents hereby reserve all of their rights and remedies pursuant to the Financing
Documents and applicable law.

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

[Signatures follow]

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

	 	 	 	 	 
	 	PANDA HEREFORD ETHANOL, L.P., as Borrower

 	 
	 	By:  	PHE I, LLC, its sole general partner
 	 
	 	 	 
	 	By:  	     /s/ Darol Lindloff
 	 
	 	 	Name:  	Darol Lindloff 	 
	 	 	Title:  	President and CEO 	 

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

	 	 	 	 	 
	 	SOCIÉTÉ GÉNÉRALE, as Administrative Agent

 	 
	 	By:  	/s/ Robert Preminger 	 
	 	 	Name:  	Robert Preminger 	 
	 	 	Title:  	Managing Director 	 

10

 

	 	 	 	 	 

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

	 	 	 	 	 
	 	AMMC CLO III, LIMITED, as Lender

 	 
	 	By:  	American Money Management Corp.,
as Collateral Manager
 	 
	 	 	 
	 	By:  	     /s/ Kenneth J. Bushman
 	 
	 	 	Name:  	Kenneth J. Bushman 	 
	 	 	Title:  	Vice President 	 

11

 

	 	 	 	 	 

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

	 	 	 	 	 
	 	AMMC CLO IV, LIMITED, as Lender

 	 
	 	By:  	American Money Management Corp.,
as Collateral Manager
 	 
	 	 	 
	 	By:  	     /s/ Kenneth J. Bushman
 	 
	 	 	Name:  	Kenneth J. Bushman 	 
	 	 	Title:  	Vice President 	 

12

 

	 	 	 	 	 

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

	 	 	 	 	 
	 	AMMC CLO V, LIMITED, as Lender

 	 
	 	By:  	American Money Management Corp.,
as Collateral Manager
 	 
	 	 	 
	 	By:  	     /s/ Kenneth J. Bushman
 	 
	 	 	Name:  	Kenneth J. Bushman 	 
	 	 	Title:  	Vice President 	 

13

 

	 	 	 	 	 

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

	 	 	 	 	 
	 	AMMC CLO VI, LIMITED, as Lender

 	 
	 	By:  	American Money Management Corp.,
as Collateral Manager
 	 
	 	 	 
	 	By:  	     /s/ Kenneth J. Bushman
 	 
	 	 	Name:  	Kenneth J. Bushman 	 
	 	 	Title:  	Vice President 	 

14

 

	 	 	 	 	 

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

	 	 	 	 	 
	 	BANCO BILBAO VIZCAYA ARGENTARIA S.A., 

as Lender

 	 
	 	By:  	/s/ Rodolfo Hare
 	 
	 	 	Name:  	Rodolfo Hare 	 
	 	 	Title:  	Vice President

Global Corporate Banking 	 
	 
	 	 	 
	 	By:  	     /s/ John Martini
 	 
	 	 	Name:  	John Martini 	 
	 	 	Title:  	Vice President

Corporate Banking 	 

15

 

	 	 	 	 	 

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

	 	 	 	 	 
	 	BANK OF AMERICA, N.A., as Lender

 	 
	 	By:  	/s/Peter Sherman
 	 
	 	 	Name:  	Peter Sherman 	 
	 	 	Title:  	Managing Director 	 

16

 

	 	 	 	 	 

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

	 	 	 	 	 
	 	GREAT AMERICAN INSURANCE COMPANY, as Lender

 	 
	 	By:  	American Money Management Corp.,
as Collateral Manager
 	 
	 	 	 
	 	By:  	     /s/ Kenneth J. Bushman
 	 
	 	 	Name:  	Kenneth J. Bushman 	 
	 	 	Title:  	Vice President 	 

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

	 	 	 	 	 
	 	GREAT AMERICAN LIFE INSURANCE COMPANY, as Lender

 	 
	 	By:  	American Money Management Corp.,
as Collateral Manager
 	 
	 	 	 
	 	By:  	     /s/ Kenneth J. Bushman
 	 
	 	 	Name:  	Kenneth J. Bushman 	 
	 	 	Title:  	Vice President 	 

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

	 	 	 	 	 
	 	GREENSTONE FARM CREDIT SERVICES ACA/FCLA, as Lender

 	 
	 	By:  	/s/Alfred S. Compton, Jr.
 	 
	 	 	Name:  	Alfred S. Compton, Jr. 	 
	 	 	Title:  	Vice President/Managing Director 	 

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

	 	 	 	 	 
	 	KFW IPEX-BANK GMBH, as Lender

 	 
	 	By:  	/s/Friedrich Weigmann
 	 
	 	 	Name:  	Friedrich Weigmann 	 
	 	 	Title:  	Senior Project Manager 	 
	 
	 	 	 
	 	By:  	     /s/Matthias Krisch
 	 
	 	 	Name:  	Matthias Krisch 	 
	 	 	Title:  	Vice President 	 

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

	 	 	 	 	 
	 	NEDBANK LIMITED, as Lender

 	 
	 	By:  	/s/Darren McDonnell
 	 
	 	 	Name:  	Darren McDonnell 	 
	 	 	Title:  	Authorized Officer 	 
	 
	 	 	 
	 	By:  	     /s/Stuart Orton
 	 
	 	 	Name:  	Stuart Orton 	 
	 	 	Title:  	Authorized Officer 	 
	 

21exv10w2

 

Exhibit 10.2

 

 

SPONSOR SUPPORT AGREEMENT

dated as of April 2, 2008

by and among

PANDA ETHANOL, INC., as Sponsor,

PANDA HEREFORD ETHANOL, L.P.,

as Borrower,

and

SOCIÉTÉ GÉNÉRALE,

as the Administrative Agent

 

 

 

 

SPONSOR SUPPORT AGREEMENT

     This SPONSOR SUPPORT AGREEMENT, dated as of April 2, 2008 (as may be amended, modified or
supplemented, from time to time, this “Sponsor Support Agreement”), is by and among PANDA
ETHANOL, INC., a Nevada corporation (the “Sponsor”), PANDA HEREFORD ETHANOL, L.P., a
Delaware limited partnership (“Borrower”), and SOCIÉTÉ GÉNÉRALE, a bank organized and
existing under the laws of France and acting through its New York Branch, in its capacity as
administrative agent (together with its permitted successors and assigns in such capacity, the
“Administrative Agent”) for the Lenders under the Financing Agreement, dated as of July 28,
2006 (as amended, modified or supplemented from time to time, the “Financing Agreement”),
by and among Borrower, the Agents thereunder, the Lenders from time to time party thereto, the LC
Fronting Bank thereunder and the Lead Arranger thereunder.

RECITALS

     WHEREAS, Borrower, the Lenders and the Administrative Agent are parties to the Financing
Agreement;

     WHEREAS, in connection with certain delays in construction of the Project, Borrower has
requested, and the Agents and the Lenders have agreed, to enter into a Second Amendment to
Financing Agreement and Depositary and Disbursement Agreement, of even date herewith (the
“Second Amendment”), pursuant to which, among other things, the Lenders have agreed to
extend the required completion dates for construction of the Project, on the terms and conditions
set forth therein;

     WHEREAS, the execution and delivery of this Sponsor Support Agreement by Sponsor is a
condition precedent to the effectiveness of the Second Amendment and a material inducement for the
Lenders to agree thereto; and

     WHEREAS, Sponsor owns 100% of PHE I, LLC (d/b/a Panda Hereford Ethanol I, LLC), a Delaware
limited liability company, the sole general partner of Borrower (“Borrower GP”), and 100%
of PHE II, LLC, a Delaware limited liability company, the sole limited partner of Borrower
(“Borrower LP” and, together with Borrower GP, the “Borrower Partners”), and it is
in Sponsor’s best interest to enter into this Sponsor Support Agreement;

     NOW, THEREFORE, in consideration of the premises and the mutual covenants contained herein,
and other good and valuable consideration, the receipt and adequacy of which is hereby
acknowledged, the parties hereto agree as follows:

ARTICLE I

DEFINITIONS AND RULES OF CONSTRUCTION

     Section 1.1 Financing Document. For purposes of clarity, this Sponsor Support
Agreement and any additional documents that may be executed in connection herewith are expressly
designated as “Financing Documents” within the meaning of the Financing Agreement.

 

 

     Section 1.2 Defined Terms. Capitalized terms used but not otherwise defined herein
have the meanings given them in Schedule X of the Financing Agreement.

     Section 1.3 Rules of Construction. The rules of construction set forth in
Schedule X of the Financing Agreement apply equally to this Sponsor Support Agreement as if
set forth herein.

ARTICLE II

SUPPORT, FUNDING AND RELATED COVENANTS

     Section 2.1 Maintenance of Minimum Contingency Covenant. Sponsor hereby irrevocably
agrees that it will cause Borrower to comply with the Minimum Contingency Covenant at all times,
and further agrees that it will timely make or cause to be made through the Borrower Partners, a
capital contribution to Borrower in an aggregate amount not less than the amount necessary to cause
Borrower to be in compliance with the Minimum Contingency Covenant at all times.

     Section 2.2 Term. This Sponsor Support Agreement is, and will remain, in full force
and effect from the date hereof until the first Business Day after the earlier of (a) or (b) of
this Section 2.2 (the “Sponsor Support Release Date”):

          (a) the day on which all of the following are true:

     (i) Completion has occurred; and

     (ii) no Default or Event of Default has occurred and is continuing; or

          (b) the day on which all Obligations have been paid in full in accordance with the Financing
Documents and no further Commitments are outstanding thereunder.

     Section 2.3 Automatic Termination. This Sponsor Support Agreement will terminate
automatically on the Sponsor Support Release Date.

     Section 2.4 Equity Characterization. All contributions by Sponsor contemplated by
Section 2.1 of this Sponsor Support Agreement will be deemed to constitute contributions of
capital by Sponsor (directly or indirectly) to Borrower and not indebtedness of Borrower to Sponsor
or any Affiliate thereof.

ARTICLE III

BINDING EFFECT

     Section 3.1 Obligations Absolute and Unconditional.

          (a) The obligations of Sponsor to make capital contributions pursuant to Section 2.1 hereof
hereunder are in no way conditioned on or contingent upon any attempt to enforce in whole or in
part Borrower’s liabilities and obligations to the

2

 

Administrative Agent or any other Senior Secured Party. Each failure to maintain the Minimum
Contingency Amount during the effectiveness of this Sponsor Support Agreement will give rise to a
separate cause of action hereunder and separate suits may be brought hereunder as each cause of
action arises.

          (b) The obligations of Sponsor to make capital contributions pursuant to Section 2.1 hereof
shall not be affected by (i) any lack of capacity of Borrower or Sponsor and (ii) any invalidity,
irregularity or unenforceability of any Financing Document or any Obligation. No such incapacity,
invalidity, irregularity or unenforceability will affect, impair or be a defense to this Sponsor
Support Agreement or to any obligations of Sponsor hereunder.

          (c) The obligations of Sponsor to make capital contributions pursuant to Section 2.1 hereof
will not be altered, limited or affected by (i) any Default or Event of Default, (ii) any
Bankruptcy Event with respect to Borrower, (iii) any defense that Borrower may have by reason of
any order, decree or decision of any Government Instrumentality relating to a Bankruptcy Event,
(iv) any change in Law except to the extent such change in Law would make it illegal for Sponsor to
comply with such obligations, or (v) any other event or circumstance that might otherwise
constitute a discharge or defense of a surety whether by Law or otherwise.

          (d) The obligations of Sponsor to make capital contributions pursuant to Section 2.1 hereof
will not be affected by any change of ownership of Borrower or any other Panda Party.

     Section 3.2 Waiver. Sponsor hereby unconditionally and irrevocably waives, and agrees
not to assert or take advantage of, (a) any right to require a Secured Party to proceed against
Borrower or any other Person or to proceed against or exhaust any Collateral held by a Secured
Party at any time or to pursue any other remedy in its power before proceeding against Sponsor
under the Sponsor Support Agreement, (b) any defense that may arise by reason of the incapacity,
lack of power or authority, dissolution, merger or termination of Sponsor or the failure of a
Secured Party to file or enforce a Claim against the estate (in administration, bankruptcy or any
other proceeding) of Borrower or any other Person, (c) promptness, diligence, demand, presentment,
protest and notice of any kind with respect to the Obligations and with respect to any action taken
in respect of any Collateral provided from time to time for the Obligations (d) promptness,
diligence, demand, presentment, protest and notice of any kind with respect to Sponsor’s
obligations hereunder, (e) any defense based upon an election of remedies by a Secured Party,
including an election to proceed by non-judicial rather than judicial foreclosure, that destroys or
otherwise impairs the subrogation rights of Sponsor or the right of Sponsor to proceed against
Borrower or any other Person for reimbursement, (f) any defense based on any offset against any
amounts that may be owed by any Person to Sponsor for any reason whatsoever, (g) any defense based
on any act, failure to act, delay or omission whatsoever on the part of Borrower or the failure by
Borrower to do any act or thing or to observe or perform any covenant, condition or agreement to be
observed or performed by it under any contract to which it is a party, (h) any defense, setoff or
counterclaim that may at any time be available to or asserted by

3

 

Borrower or its Affiliates
against a Secured Party, (i) any duty on the part of a Secured Party to disclose to Sponsor
any facts it may now or hereafter know about Borrower, regardless of whether it has reason to
believe that any such facts materially increase the risk beyond that which Sponsor intends to
assume, or has reason to believe that such facts are unknown to Sponsor, or has a reasonable
opportunity to communicate such facts to Sponsor, since Sponsor acknowledges that it is fully
responsible for being informed of the financial condition of Borrower and of all circumstances
bearing on the risk of non-performance of the Obligations by Borrower, (j) the fact that Sponsor
may at any time in the future dispense of all or part of its indirect interest in Borrower, (k) any
defense based on any amendment, modification, renewal, extension, acceleration, compromise or
waiver of or any consent or departure from the terms of any contract to which Borrower is a party,
(l) any defense arising because of a Secured Party’s election, in any proceeding instituted under
Title 11, United States Code, of the application of Section 1111(b)(2) thereof, (m) any defense
based upon any borrowing or grant of a security interest under Section 364 of Title 11, United
States Code, and (n) any other circumstance (including any statute of limitations) or any existence
of or reliance on any representation by a Secured Party that might otherwise constitute a defense
available to, or discharge of, any guarantor or surety (other than the defense of performance).

     Section 3.3 Subrogation. For so long as this Sponsor Support Agreement is in effect,
Sponsor (a) will have no right of subrogation and waives all rights to enforce any remedy that it
now has or may hereafter have against Borrower in respect of any obligation hereunder, and waives
the benefit of, and all rights to participate in, any Collateral now or hereafter held by or for
the benefit of any Secured Party from Borrower and (b) waives any Claim, right or remedy that it
may now have or hereafter acquire against Borrower that arises hereunder, from the existence or
enforcement of this Sponsor Support Agreement and/or from the performance by Sponsor hereunder,
including any Claim, remedy or right of subrogation, reimbursement, exoneration, contribution,
indemnification or participation in any Claim, right or remedy of a Secured Party against Borrower,
or any security that a Secured Party may now have or hereafter acquire, whether or not such Claim,
right or remedy arises in equity, under contract, under Law or otherwise. Any amount paid to
Sponsor on account of any such subrogation rights will be held in trust for the benefit of the
Senior Secured Parties.

ARTICLE IV

REPRESENTATIONS AND WARRANTIES

     Sponsor hereby represents and warrants to and in favor of the Administrative Agent and
Borrower that:

     Section 4.1 Organization; Powers; It (a) is a corporation, duly organized, validly
existing and in good standing under the laws of the State of Nevada, (b) has all requisite
corporate power and authority to carry on its business as now being conducted and as proposed to be
conducted and to enter into this Sponsor Support Agreement and carry out the transactions
contemplated hereby, (c) is duly authorized to do business in its

4

 

state of incorporation and each other jurisdiction where such qualification is required,
except where the failure so to qualify would not materially and adversely affect its ability to
perform its obligations under this Sponsor Support Agreement, and (d) has all requisite corporate
power and authority to execute and deliver this Sponsor Support Agreement and perform its
obligations hereunder.

     Section 4.2 Authorization and No Legal Bar. The execution and delivery by it of this
Sponsor Support Agreement and its performance of its obligations hereunder and the consummation of
any of the transactions contemplated hereby:

          (a) have been duly authorized by all requisite corporate action, and

          (b) will not (i) violate, result in the breach of or constitute a default under any Law
applicable to or binding on it, (ii) be in conflict with or result in a breach of its governing
documents, or (iii) result in or require the creation or imposition of any Lien (other than a
Permitted Lien) upon or with respect to any of the Collateral.

     Section 4.3 Enforceability. This Sponsor Support Agreement has been duly executed and
delivered by it and constitutes its legal, valid and binding obligation enforceable against it in
accordance with this Sponsor Support Agreement’s terms, except as such enforceability (a) may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium and similar Laws affecting
the enforcement of creditors’ rights and remedies generally and (b) is subject to general
principles of equity (regardless of whether enforceability is considered in a proceeding in equity
or at law).

     Section 4.4 Consents. No consent or other action by any other Person under any Law
applicable to or binding on it is or will be required by it in connection with the execution and
delivery by it of this Sponsor Support Agreement and its performance of its obligations hereunder,
except (a) such as have been obtained or taken and are in full force and effect or (b) such as to
which the failure to obtain or take, as applicable, could not reasonably be expected to have a
Material Adverse Effect.

     Section 4.5 Financial and Other Information. It has established adequate means of
obtaining financial and other information pertaining to the businesses, operations and condition
(financial and otherwise) of Borrower and the Project on a continuing basis and it now is and
hereafter will have sole responsibility for maintaining familiarity with the businesses, operations
and condition (financial and otherwise) of Borrower and the Project.

ARTICLE V

OTHER COVENANTS

     Sponsor hereby covenants and agrees for the benefit of the Administrative Agent and Borrower
that:

     Section 5.1 Existence; Indirect Ownership of Borrower, Services and Technologies. It
will maintain and preserve its existence in good standing in the state of its incorporation and its
qualification to do business in each other jurisdiction where such

5

 

qualification is necessary to perform its obligations hereunder and all material rights,
privileges and franchises necessary in the normal conduct of its business. It will not cause, or
allow, a Change in Control to occur with respect to Borrower, the Borrower Partners or the
Operator.

     Section 5.2 Consents, Legal Compliance. It will maintain in full force and effect all
Approvals that are required to be obtained by it in order for it to perform its obligations
hereunder and will obtain any that may become required in the future.

     Section 5.3 Compliance with Laws. It will promptly comply with all Laws, except where
the failure to comply would not reasonably be expected to (a) result in a material adverse effect
on its business, property, results of operation or financial condition or (b) materially and
adversely effect its ability to perform its obligations under this Sponsor Support Agreement.

ARTICLE VI

MISCELLANEOUS

     Section 6.1 Counterparts. This Sponsor Support Agreement may be executed in any
number of counterparts and by the parties hereto in separate counterparts, each of which when so
executed will be deemed to be an original and all of which taken together will constitute one and
the same instrument.

     Section 6.2 Integration. This Sponsor Support Agreement contains the complete
agreement among the parties hereto with respect to the matters contained herein and supersedes all
prior commitments, agreements and understandings, whether written or oral, with respect to the
matters contained herein.

     Section 6.3 Severability. Any provision of this Sponsor Support Agreement that is
invalid or prohibited in any jurisdiction will, as to such jurisdiction, be ineffective and
severable from the rest of this Sponsor Support Agreement to the extent of such invalidity or
prohibition, without impairing or affecting in any way the validity of any other provision, or of
such provision in other jurisdictions. The parties hereto agree to use their reasonable best
efforts to replace any provision that is ineffective by operation of this Section 6.3 with
an effective provision which as closely as possible corresponds to the spirit and purpose of such
ineffective provision and this Sponsor Support Agreement as a whole.

     Section 6.4 Further Assurances. At any time and from time to time upon the request of
the Administrative Agent or, for so long as no Event of Default has occurred and is continuing,
upon the request of the Borrower, Sponsor will execute and deliver such further documents and
instruments and do such other acts as such Person may reasonably request in order to effect fully
the purposes of this Sponsor Support Agreement.

     Section 6.5 Amendments and Waivers. No amendment or waiver of any provision of this
Sponsor Support Agreement, or consent to any departure by Sponsor therefrom, will be effective
unless it is in writing and signed by the

6

 

Administrative Agent and, for so long as no Event of Default has occurred and is continuing,
the Borrower.

     Section 6.6 No Implied Waiver. The waiver of any right, breach or default under this
Sponsor Support Agreement by the Administrative Agent or the Borrower must be made specifically and
in writing. No failure on the part of the Administrative Agent or the Borrower to exercise, and no
forbearance or delay in exercising, any right under this Sponsor Support Agreement will operate as
a waiver thereof, no single or partial exercise of any right under this Sponsor Support Agreement
will preclude any other or further exercise thereof or the exercise of any other right, and no
waiver of any breach of or default under any provision of this Sponsor Support Agreement will
constitute or be construed as a waiver of any subsequent breach of or default under that or any
other provision of this Sponsor Support Agreement or any other Financing Document. No notice to or
demand upon Sponsor will entitle Sponsor to any further, subsequent or other notice or demand in
similar or any other circumstances.

     Section 6.7 Certain Express Waivers. Sponsor hereby unconditionally and irrevocably
waives, to the extent it may do so under applicable Law, any defense based on the adequacy of a
remedy at law that may be asserted as a bar to the remedy of specific performance in any action
brought against it for specific performance of this Sponsor Support Agreement by Borrower, or the
Administrative Agent or any other Secured Party or for any such Person’s benefit by a receiver,
custodian or trustee appointed for it or for Borrower or in respect of all or a substantial part of
its assets, under the bankruptcy or insolvency Laws of any jurisdiction to which it or its assets
are subject.

     Section 6.8 Remedies Cumulative. Each of the rights and remedies of the
Administrative Agent and the Secured Parties under this Sponsor Support Agreement and the other
Financing Documents is cumulative and not exclusive of any other right or remedy provided or
existing by agreement or under Law.

     Section 6.9 Successors and Assigns.

          (a) This Sponsor Support Agreement will be binding upon and inure to the benefit of the
successors and permitted assigns of Borrower and the Administrative Agent, who will have, to the
extent of their interest, as applicable, the rights of Borrower and the Administrative Agent
hereunder.

          (b) This Sponsor Support Agreement is binding upon Sponsor and Sponsor may not assign any of
its rights or delegate any of its obligations under this Sponsor Support Agreement without the
prior written consent of the Administrative Agent and, for so long as no Event of Default has
occurred and is continuing, the Borrower.

     Section 6.10 No Third-Party Beneficiaries. Except as otherwise expressly stated
herein, this Sponsor Support Agreement is intended to be solely for the benefit of

7

 

the parties hereto and their respective successors and permitted assigns and is not intended
to and does not confer any right or benefit on any third party.

     Section 6.11 Governing Law. THIS SPONSOR SUPPORT AGREEMENT WILL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO THE CONFLICT OF
LAW PROVISIONS THEREOF (OTHER THAN SECTIONS 5-1401 OF THE GENERAL OBLIGATIONS LAW AND ANY SUCCESSOR
STATUTE THERETO).

     Section 6.12 Waiver of Jury Trial. BORROWER, THE ADMINISTRATIVE AGENT AND SPONSOR, AS
AMONG THEM, HEREBY WAIVE ANY RIGHTS THEY MAY HAVE TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION
BASED ON OR ARISING HEREUNDER, ANY TRANSACTION CONTEMPLATED HEREBY OR EFFECTED PURSUANT HERETO OR
ANY DEALINGS OR COURSE OF DEALING AMONG THEM RELATING IN ANY WAY TO THE SUBJECT MATTER HEREOF OR
ANY STATEMENTS OR ACTIONS OF ANY OF THEM OR THEIR AFFILIATES. Each of the parties acknowledges and
agrees that this waiver is a material inducement to enter into the business relationship
contemplated by this Sponsor Support Agreement and the other Financing Documents and that each has
relied on this waiver in entering into this Sponsor Support Agreement and other Financing Documents
to which it is a party and will continue to rely on this waiver in its future dealings with the
other parties. The scope of this waiver is intended to be all-encompassing, and this waiver will
apply to all Claims, of any nature whatsoever, whether deriving from contract, arising by Law,
based on tort or otherwise. SPONSOR, BORROWER, AND THE ADMINISTRATIVE AGENT HAVE MADE THIS WAIVER
KNOWINGLY AND VOLUNTARILY, AND THIS WAIVER WILL BE IRREVOCABLE. THIS WAIVER WILL ALSO APPLY TO ALL
AMENDMENTS, SUPPLEMENTS, RESTATEMENTS, EXTENSIONS AND MODIFICATIONS HERETO. In the event of
litigation, the relevant portions of this Sponsor Support Agreement may be filed as a written
consent to a trial by the court.

     Section 6.13 Consent to Jurisdiction. Each of Sponsor, the Administrative Agent and
Borrower hereby irrevocably submits to the jurisdiction of any New York state or, to the extent
permitted by Law, United States federal court sitting in the Borough of Manhattan over any action
or proceeding arising out of or relating to any Claim, and hereby irrevocably agrees that all
Claims in respect of such action or proceeding may be heard and determined in such New York state
or United States federal court. Each of Sponsor, the Administrative Agent and Borrower irrevocably
waives any objection that it may now or hereafter have to the laying of venue in such forums and
agrees not to plead or claim that any such action or proceeding brought in any such New York state
or United States federal court has been brought in an inconvenient forum. Each of Sponsor and
Borrower irrevocably appoints the Process Agent as its agent to receive on its behalf service of
copies of the summons and complaint and any other process that may be served in any such action or
proceeding. Such service may be made by mailing or delivering a copy of such process to Borrower
or Sponsor at the address of the Process Agent and Borrower and Sponsor hereby irrevocably
authorize and direct the Process Agent to accept such service on their behalf. In addition and as
an alternative method of

8

 

service, each of Sponsor and Borrower irrevocably consents to the service of process out of
any of the aforementioned courts in any manner permitted by Law. Any such process or summons in
connection with any such action or proceeding may also be served by mailing a copy thereof by
certified or registered mail, or any substantially similar form of mail, addressed as provided for
notices hereunder. Nothing herein will affect the right of the Administrative Agent or Borrower to
bring legal action or proceedings in any other competent jurisdiction. If for any reason the
Process Agent ceases to be available to act as Process Agent, each of Sponsor and Borrower agrees
immediately to appoint a replacement Process Agent satisfactory to the Administrative Agent.

     Section 6.14 Notices. All notices, demands, consents, certificates, waivers,
documents and other communications required or permitted to be delivered to any party under the
terms of this Sponsor Support Agreement (a) must be in writing, (b) must be personally delivered,
transmitted by a recognized courier service or transmitted by facsimile, and (c) must be directed
to such party at its address or facsimile number set forth below. All notices will be deemed to
have been duly given and received on the date of delivery if delivered personally, three (3) days
after delivery to the courier if transmitted by courier, or the date of transmission during normal
business hours with confirmation if transmitted by facsimile (or the next Business Day if after
normal business hours or not on a Business Day), whichever occurs first. Any party may change its
address or facsimile number for purposes hereof by notice to all other parties in the manner set
forth in this Section 6.14.

	 	 	 
	If to Borrower:
	 	 
	 
	 	 
	Panda Hereford Ethanol, L.P.
	 	 
	c/o PHE I LLC
	 	 
	4100 Spring Valley Road
	 	 
	Suite 1001
	 	 
	Dallas, TX 75244
	 	 
	 
	 	 
	Attention: General Counsel
	 	 
	Telephone: (972) 361-1200
	 	 
	Facsimile No: (972) 455-3890
	 	 
	If to the Administrative Agent

	 	with a copy to:
	 
	 	 
	Société Générale

	 	Baker & McKenzie LLP
	1221 Avenue of the Americas

	 	815 Connecticut Avenue, N.W.
	New York, NY 10020

	 	Washington, DC 20006
	 
	 	 
	Attention:       Robert Preminger

	 	Attention:      Chris Groobey
	Telephone:     (212) 278-5703

	 	Telephone:    (202) 835-4240
	Facsimile No: (212) 278-6136

	 	Facsimile No: (202) 452-7074
	 
	 	 
	If to Sponsor:
	 	 
	 
	 	 
	Panda Ethanol, Inc.
	 	 

9

 

	 	 	 
	4100 Spring Valley Road
	 	 
	Suite 1001
	 	 
	Dallas, TX 75244
	 	 
	 
	 	 
	Attention: General Counsel
	 	 
	Telephone: (972) 361-1200
	 	 
	Facsimile No: (972) 455-3890
	 	 

     Section 6.15 Legal Representation of the Parties. This Sponsor Support Agreement was
negotiated by the parties with the benefits of legal representation and any rule of construction or
interpretation otherwise requiring this Sponsor Support Agreement or any other Financing Document
to be construed or interpreted against any party will not apply to any construction or
interpretation hereof or thereof.

     Section 6.16 Costs. Without limiting Section 8.11 of the Financing Agreement,
Borrower agrees to pay to the Senior Secured Parties on demand all reasonable and
reasonably-documented costs, expenses and Reimbursable Taxes incurred or arising in connection with
the preparation, documentation, negotiation, execution, delivery administration or enforcement of
this Sponsor Support Agreement, the Second Amendment or the transactions contemplated hereby or
thereby or effected pursuant hereto or thereto. Such costs, expenses and Reimbursable Taxes will
include, but are not limited to, all reasonable and reasonably documented fees of, and expenses
incurred by, the Engineer, Lenders’ Counsel and all other advisers and consultants engaged by the
Administrative Agent pursuant to this Sponsor Support Agreement, the Second Amendment or the
transactions contemplated hereby or thereby.

[The remainder of this page was left blank intentionally.]

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     IN WITNESS WHEREOF, the parties have caused this Sponsor Support Agreement to be duly executed
and delivered as of the date first above written.

	 	 	 	 	 
	 	PANDA ETHANOL, INC.

 	 
	 	By:  	/s/ Darol Lindloff
 	 
	 	 	Name:  	Darol Lindloff 	 
	 	 	Title:  	Chief Executive Officer and President 	 
	 
	 	PANDA HEREFORD ETHANOL, L.P.

 	 
	 	By:  	PHE I, LLC, its sole general partner
 	 
	 	 	 
	 	By:  	/s/ Darol Lindloff
 	 
	 	 	Name:  	Darol Lindloff 	 
	 	 	Title:  	Chief Executive Officer and President 	 
	 
	 	SOCIÉTÉ GÉNÉRALE,

as the Administrative Agent

 	 
	 	By:  	/s/ Robert Preminger 	 
	 	 	Name:  	Robert Preminger 	 
	 	 	Title:  	Managing Director 	 
	 

11

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