SECOND LIMITED WAIVER AND
FORBEARANCE AGREEMENT
THIS SECOND LIMITED WAIVER AND FORBEARANCE
AGREEMENT (this “Agreement”) is entered into as of
February 27, 2009, by and among Pacific Ethanol Holding Co. LLC
(“Holding”), Pacific Ethanol Madera LLC
(“Madera”), Pacific Ethanol Columbia, LLC
(“Columbia”), Pacific Ethanol Stockton, LLC
(“Stockton”) and Pacific Ethanol Magic Valley, LLC
(“Magic Valley” and together with Holding, Madera,
Columbia and Stockton, the “Borrowers”), WestLB AG, New
York Branch, as administrative agent for the Senior Secured Parties
(in such capacity, the “Administrative Agent”), WestLB
AG New York Branch, as collateral agent for the Senior Secured
Parties (in such capacity, the “Collateral Agent” and,
collectively with the Administrative Agent, the
“Agent”) and Amarillo National Bank, as accounts bank
for the Senior Secured Parties (the “Accounts Bank”),
as parties to the Credit Agreement (defined
below). Capitalized terms used in this Agreement which
are not otherwise defined herein, shall have the meanings given
such terms in the Credit Agreement.
RECITALS:
WHEREAS, the Borrowers, Administrative Agent,
Collateral Agent, Accounts Bank and the lenders party thereto from
time to time are parties to that certain Credit Agreement dated as
of February 27, 2007 (as amended by that certain Successor Accounts
Bank and Amendment Agreement dated as of August 27, 2007, as
further amended by that certain Waiver and Third Amendment to
Credit Agreement dated as of March 25, 2008, as further amended by
that certain Fourth Amendment to Credit Agreement dated as of April
24, 2008, as further amended by that certain Fifth Amendment to
Credit Agreement dated as of October 24, 2008 and as further
amended by that certain Sixth Amendment to Credit Agreement dated
as of December 30, 2008, the “ Credit Agreement
”);
WHEREAS, the Borrowers, Administrative Agent,
Collateral Agent and the Senior Secured Parties entered into that
certain Limited Waiver and Forbearance Agreement dated as of
February 17, 2009;
WHEREAS, the Borrowers have advised Agent that
they will be unable to pay the Term Loan interest payment due and
payable on the scheduled payment date in accordance with Section
9.01(a) of the Credit Agreement, which nonpayment will constitute
an Event of Default (the “ Anticipated Interest
Payment Default ”);
WHEREAS, the Defaults and Events of Default set
forth on Schedule I attached hereto have occurred and are
continuing under the Credit Agreement (collectively, the “
Existing Events of Default ”);
WHEREAS, the Borrowers have advised Agent that
they do not expect to be in compliance with certain other
provisions of the Credit Agreement which would give rise during the
Forbearance Period (as defined below) to the Events of Default set
forth on Schedule II attached hereto (collectively, the
“ Anticipated Defaults ”);
WHEREAS, as a result of the occurrence of the
Existing Events of Default and pursuant to the Credit Agreement and
other Financing Documents, (i) the Senior Secured Parties are under
no further obligation to make Loans or other financial
accommodations to Borrowers under the Credit Agreement and (ii) the
Agent and the Senior Secured Parties are entitled, among other
things, to enforce their rights and remedies against the Borrowers
and the Collateral, including, without limitation, accrual of
default interest, the right to accelerate and immediately demand
payment in full of the Obligations and foreclose on the
Collateral;
WHEREAS, the Borrowers have requested that the
Senior Secured Parties permit the Borrowers to (i) withdraw the
funds otherwise required to be maintained in the Debt Service
Reserve Account and (ii) use such funds, pursuant to and in
accordance with the Updated 13-Week Cash Flow Forecast (as
hereinafter defined) attached hereto as Exhibit 1 (the
“ Limited Waivers ”);
WHEREAS, the Borrowers have requested that the
Agent and the Senior Secured Parties agree and, subject to the
terms and conditions of this Agreement, the Agent and the Senior
Secured Parties have agreed, to forbear from demanding immediate
payment of certain amounts and exercising their right to foreclose
on any or all of the Collateral from the date hereof through the
earliest to occur of (i) March 31, 2009; (ii) the date of
termination of the Forbearance Period pursuant to Section 7
hereof; and (iii) the date on which all of the Obligations have
been paid in full and the Credit Agreement has been terminated (the
“ Forbearance Period ”) and to provide the
Limited Waivers subject to the terms and conditions set forth
herein;
WHEREAS, an Event of Default has occurred under
Sections 5(a)(vi) and 5(a)(vii)(2) (together, the “
Interest Rate Protection Agreement Events of Default
”) of the ISDA Master Agreement dated February 26, 2007 (the
“ Interest Rate Protection Agreement ”) between
Holding and WestLB, New York Branch (in such capacity, the “
Interest Rate Protection Provider ”);
WHEREAS, Holding has requested that the Interest
Rate Protection Provider agree and, subject to the terms and
conditions of this Agreement, the Interest Rate Protection Provider
has agreed, to refrain from terminating the Interest Rate
Protection Agreement from the date hereof through the Forbearance
Period subject to the terms and conditions set forth
herein;
NOW, THEREFORE, in consideration of the premises
set forth above, the terms and conditions contained herein, and
other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the Borrowers, the Agent and
Senior Secured Parties hereby agree as follows:
1. Incorporation of Preliminary
Statements . The preliminary statements set
forth above are hereby incorporated into this Agreement as accurate
and complete statements of fact. Without limiting the
foregoing, each Borrower hereby acknowledges and agrees that (a)
the Existing Events of Default have occurred and are continuing
under the terms of the Credit Agreement and the Interest Rate
Protection Agreement Events of Default have occurred and are
continuing under the terms of the Interest Rate Protection
Agreement, and none of the Borrowers has any disputes, defenses or
counterclaims of any kind with respect thereto; (b) the Senior
Secured Parties are under no obligation to make Loans or other
financial accommodations to the Borrowers under the Credit
Agreement; (c) the Interest Rate Protection Provider has the right
to terminate the Interest Rate Protection Agreement on the date
hereof; (d) the Agent, on behalf of the Senior Secured Parties has,
and shall continue to have, valid, enforceable and perfected
security interests in and liens upon the Collateral heretofore
granted by Borrowers to the Collateral Agent and Senior Secured
Parties pursuant to the Financing Agreements or otherwise granted
to or held by the Collateral Agent or the Senior Secured Parties;
(e) absent the effectiveness of this Agreement, the Agent and
Senior Secured Parties have the right to immediately enforce their
security interest in, and liens on, the Collateral; and (f) the
outstanding Loans and all other Obligations are payable pursuant to
the Credit Agreement or Interest Rate Protection Agreement, as
applicable, without defense, dispute, offset, withholding,
recoupment, counterclaim or deduction of any kind.
2. Covenant re Anticipated
Interest Payment Default .
Provided that
no Forbearance Default (as defined below) occurs, and subject in
all respects to the terms and conditions of this Agreement
including satisfaction of the conditions precedent to the
effectiveness of this Agreement set forth in Section 5
below, during the Forbearance Period each Senior Secured Party
agrees that it shall not (i) direct the Administrative Agent to
declare all or any portion of the outstanding principal amount of
the Loans and other Obligations to be due and payable or (ii)
direct the Collateral Agent to exercise any or all remedies
provided for under the Credit Agreement or the other Financing
Documents solely on account of the Anticipated Interest Payment
Default. Nothing contained herein shall limit the right
of a Senior Secured Party to exercise remedies with respect to the
obligations under its Note(s). Upon termination of the
Forbearance Period, the Senior Secured Parties shall have the right
to enforce any and all remedies with respect to the Anticipated
Interest Payment Default.
(i) Each
Borrower agrees and acknowledges that the Existing Events of
Default set forth on Schedule I have occurred and are
continuing.
(ii) Each
Borrower has advised Agent that such Borrower does not expect to be
in compliance with certain provisions of the Credit Agreement which
would give rise to the Anticipated Defaults set forth on
Schedule II .
(iii) Each
Borrower hereby agrees and acknowledges that (i) Schedule I
represents a complete and accurate list of all Existing Events of
Default which are in existence as of the Effective Date (as
hereinafter defined); and (ii) Schedule II represents a
complete and accurate list of all provisions in the Credit
Agreement which it reasonably believes may give rise to an
Anticipated Default (other than the Anticipated Interest Payment
Default).
(iv) Provided
that no Forbearance Default (as defined below) occurs, subject to
the terms and conditions of this Agreement and satisfaction of the
conditions precedent to the effectiveness of this Agreement set
forth in Section 5 below, during the Forbearance Period, the
Agent and the Senior Secured Parties hereby forbear from
exercising, on account of the Existing Events of Default and the
Anticipated Defaults, those rights and remedies afforded to them
under the Credit Agreement, the other Financing Documents and
applicable law.
(b)
Interest Rate Protection Agreement .
(i) Holding
acknowledges that the Interest Rate Protection Agreement Events of
Default have occurred and are continuing.
(ii) Holding
hereby agrees and acknowledges that the Interest Rate Protection
Agreement Events of Default completely and accurately represent all
of the Events of Default (as defined in the Interest Rate
Protection Agreement) or Termination Events (as defined in the
Interest Rate Protection Agreement) which are in existence under
the Interest Rate Protection Agreement as of the Effective
Date.
(iii) Provided
that no Forbearance Default (as defined below) occurs, subject to
the terms and conditions of this Agreement and satisfaction of the
conditions precedent to the effectiveness of this Agreement set
forth in Section 5 below, during the Forbearance Period, the
Interest Rate Protection Provider hereby agrees to not exercise, on
account of the Interest Rate Protection Agreement Events of
Default, those rights and remedies afforded it under the Interest
Rate Protection Agreement, Credit Agreement, the other Financing
Documents and applicable law; provided however ,
notwithstanding anything to the contrary set forth in the Credit
Agreement, to the extent that the Interest Rate Protection Provider
postpones or reschedules any accrued and unpaid interest payment
due and payable under the Interest Rate Protection Agreement
(whether during the term of this Agreement or at any time
hereafter), upon termination of the Interest Rate Protection
Agreement, such amounts shall be (A) excluded from the calculation
of the Swap Termination Value and (B) included in the portion of
the Obligations payable under Section 9.04(c) of the Credit
Agreement.
4. Limited Waiver
. Subject to the
terms and condition of this Agreement and satisfaction of the
conditions precedent set forth in Section 5 , the Agent and
Senior Secured Parties hereby grant the Limited
Waivers. Solely for the purposes set forth herein, the
Agent shall not provide written notice to Accounts Bank notifying
it of insufficient funds in the Debt Service Reserve Account or
exercise any other available remedies on account of the withdrawal
of such funds. Withdrawal by Borrowers of the funds in the Debt
Service Reserve Account shall be deemed to be a “Term Loan
Funding” for purposes of the Credit Agreement. The
Agent and Senior Secured Parties agree that the Limited Waivers set
forth in this Section shall be limited precisely as written and,
except as set forth in this Agreement, shall not be deemed to be a
consent to any amendment, waiver or modification of any other term
or condition of the Credit Agreement or any other Financing
Document.
5. Conditions of Effectiveness of
this Agreement . This Agreement shall become
effective as of the date hereof (the “ Effective Date
”) when, and only when:
(a) The
Agent shall have received counterparts of this Agreement duly
executed and delivered by the Borrowers and the Accounts
Bank;
(b) The
Agent shall have received the Updated 13-Week Cash Flow Forecast
(as defined below) in form and substance acceptable to the
Agent;
(c) The
Agent shall have received an agreement, in form and substance
satisfactory to the Agent, pursuant to which Wachovia, as agent,
and the other lenders party thereto have agreed to continue to
forbear from exercising their rights against Pacific Ethanol Inc.
(“ PEI ”) and Kinergy Marketing, LLC (“
Kinergy ”) pursuant to the terms of their financing
arrangements with PEI and Kinergy co-terminous with the Forbearance
Period and such forbearance shall be in full force and
effect;
(d) The
Agent shall have received an agreement, in form and substance
satisfactory to the Agent, pursuant to which Lyles United, LLC
agrees to forbear from exercising its rights against PEI, Pacific
Ethanol California, Inc., and Pacific Ag Products, LLC, pursuant to
the terms of that certain Loan Restructuring Agreement dated as of
November 7, 2008 and the other instruments referred to therein, for
a forbearance period co-terminous with the Forbearance Period and
such forbearance shall be in full force and effect;
(e) All
of the representations and warranties of the Borrowers contained in
this Agreement shall be true and correct on and as of the Effective
Date (unless stated to relate solely to an earlier date, in which
case such representations and warranties shall be true and correct
as of such earlier date); and
(f) The
Agent shall have received payment in full of all fees and expenses
due and payable in accordance with the terms of this Agreement and
the Credit Agreement (including reasonable and documented legal
fees and expenses of the Agent’s counsel and other
advisors).
6. Representations and
Warranties . To induce the Agent and the Senior
Secured Parties to enter into this Agreement, each Borrower
represents and warrants to the Agent and the Senior Secured Parties
(which representations and warranties shall be made on and as of
the Effective Date):
(a) Such
Borrower has the requisite corporate power and authority and the
legal right to execute and deliver this Agreement, and to perform
the transactions contemplated hereby. The execution,
delivery and performance by such Borrower of this Agreement, (i)
are within the Borrower’s corporate power; (ii) have been
duly authorized by all necessary corporate or other action; (iii)
do not contravene or cause the Borrower or any other Loan Party to
be in default under (x) any provision of the Borrower’s or
other Loan Party’s formation documents or bylaws, (y) any
contractual restriction contained in any indenture, loan or credit
agreement, lease, mortgage, security agreement, bond, note or other
agreement or instrument binding on or affecting the Borrower or
other Loan Party or its property, or (z) any law, rule, regulation,
order, license requirement, writ, judgment, award, injunction, or
decree applicable to, binding on or affecting the Borrower or other
Loan Party or its property; (iv) will not result in the creation or
imposition of any Lien upon any of the property of the Borrower or
other Loan Party or any Subsidiary thereof other than those in
favor of the Agent or any Senior Secured Party, all pursuant to the
Financing Documents; and (e) do not require the consent or approval
of any Governmental Authority or any other Person, other than those
which have been duly obtained, made or complied with and which are
in full force and effect.
(b) This
Agreement has been duly executed and delivered by such
Borrower. Each of this Agreement, the Credit Agreement
(as modified herein), the Interest Rate Protection Agreement (as
modified herein) and the other Financing Documents (as modified
hereby) to which each Borrower is a party is the legal, valid and
binding obligation of such Borrower, enforceable against such
Borrower in accordance with its terms, subject, as to
enforceability, to (A) any applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or hereafter
in effect relating to or affecting the enforceability of
creditors’ rights generally and (B) general equitable
principles, whether applied in a proceeding at law or in equity,
and is in full force and effect.
(c) Except
as to those representations and warranties now made inconsistent
with the terms of this Agreement or which constitute an Existing
Event of Default, an Anticipated Default or an Interest Rate
Protection Agreement Event of Default, the representations and
warranties of each Borrower and Loan Party contained in each
Financing and Project Document (other than any such representations
or warranties that, by their terms, are specifically made as of a
date other than the date hereof) are true and correct in all
material respects on and as of the date hereof as though made on
and as of the date hereof.
(d) No
Default or Event of Default under the Credit Agreement or Interest
Rate Protection Agreement arising other than as a result of the
Existing Events of Default, the Anticipated Defaults, the
Anticipated Interest Payment Default or the Interest Rate
Protection Agreement Events of Default shall have occurred and be
continuing or would result after giving effect to any of the
transactions contemplated on the date hereof.
(e) No
Forbearance Default (as defined below) has occurred.
7. Forbearance
Defaults : The following events shall
constitute “ Forbearance Defaults ”):
(a) any
failure to pay principal payments, interest payments (other than
the Anticipated Interest Payment Default) or any other payments in
accordance with the terms of the Credit Agreement or the Interest
Rate Protection Agreement; or
(b) any
Borrower or Loan Party shall fail to observe or perform any other
term, covenant, or agreement binding on it contained in this
Agreement, or any other agreement, instrument, or document executed
in connection with this Agreement; or
(c) the
occurrence of an Event of Default under the Credit Agreement, the
Interest Rate Protection Agreement or any of the other Financing
Documents or any Project Document, other than an Existing Event of
Default, an Anticipated Default, the Anticipated Interest Payment
Default or either of the Interest Rate Protection Agreement Events
of Default; or
(d) any
instrument, document, report, schedule, agreement, representation
or warranty, oral or written, made or delivered to the Agent or any
Senior Secured Parties by any Borrower or Loan Party
shall be false or misleading in any material respect when made, or
deemed made, or delivered.
Upon the occurrence of any Forbear
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