WAIVER TO FINANCING AGREEMENT
AND
DEPOSITARY AND DISBURSEMENT AGREEMENT
This WAIVER TO
FINANCING AGREEMENT AND DEPOSITARY AND DISBURSEMENT AGREEMENT (this
“ Waiver ”), dated as of October 6, 2008,
is made by and among PANDA HEREFORD ETHANOL, L.P., as Borrower,
SOCIÉTÉ GÉNÉRALE, as Administrative Agent (in
such capacity, the “ Administrative Agent ”),
Disbursement Agent and a Lender, and the party hereto
(collectively, the “ Parties ”). Capitalized
terms not defined in this Waiver 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.
WHEREAS, Borrower,
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
Borrower has requested that the Majority Lenders (a) permit
(i) Borrowings of Tranche B Term Loans and
(ii) disbursements of certain amounts, in each case in
accordance with the Budget (as defined below), and (b) waive
certain Events of Default; and
WHEREAS, the
Financing Agreement requires the approval of the Majority Lenders
with respect to the waivers described above.
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:
(a) Until the
termination of this Waiver as described in clause (c) below,
the Administrative Agent and the undersigned Lenders hereby waive
(i) the requirements of Sections 3.5(b), (c), (d) (other
than with respect to any material Financing Documents) and
(e) of the Financing Agreement and the Construction Draw
Conditions set forth in Section 1.2(c) of the Disbursement
Agreement to the extent such requirements cannot be met as the
result of the Defaults, Events of Default and other circumstances
set forth on Schedule A hereto solely to allow Borrowings and
withdrawals from the Construction Accounts to be made and
disbursed, in each case in accordance with the Budget and subject
to the other terms and conditions hereof, and (ii) any Default
or Event
of Default that
has occurred and is continuing as a result of, or that may arise
from, the events and circumstances set forth on Schedule A,
provided that the aggregate amount of disbursements from the
Construction Accounts made during the term of this Waiver with the
proceeds of Loans shall not exceed $31,500,000 in the
aggregate.
(b) Until the
termination of this Waiver as described below, the Administrative
Agent and the Lenders party hereto agree not to exercise any rights
and remedies that constitute acceleration, foreclosure or other
actions against the Collateral with respect to any Default, Event
of Default or other circumstances described on Schedule A
hereto.
(c) This Waiver
shall terminate and be null and void in all respects on the
earliest to occur of (i) January 30, 2009, (ii) the
Interim Completion Date, (iii) the date any Event of Default
other than those set forth on, or that arise directly from the
circumstances set forth on, Schedule A hereto occurs and
(iv) the date that is two Business Days following the
Borrower’s receipt of notice that the Borrower has materially
violated any of its agreements, terms or conditions set forth
herein, provided that, as used herein, “Interim
Completion Date” shall include the satisfaction by the
Gasifier Vendor of the Fluidized Bed Gasifier Steam Output
Guarantee as defined in Section 9.01(c) of the Gasifier
Contract; provided further that, in the event of
termination by reason of clause (iv) above, the Lenders shall
not be obligated to make any advances or disbursements pursuant to
this Waiver during the two (2) Business Day notice
period.
(d) Administrative
Agent and the undersigned Lenders hereby consent to an amendment to
the Sub-Debt Documents that will (i) increase by $2,500,000
the principal amount of the Sub-Debt (other than in accordance with
the capitalized interest provisions of the Sub-Debt Documents), and
(ii) extend the term of the royalty payment to the Sub-Debt
Provider under Section 2.5(b) of the Sub-Debt Financing
Agreement for a period of three years beyond its current
expiration.
(a) In order to
induce the undersigned Lenders to execute this Waiver, the Borrower
hereby agrees:
(i) That, if a
Bankruptcy Event with respect to the Borrower occurs, (A) the
Borrower will agree that the Lenders are adequately protected by
the Collateral, (B) the Borrower will, to the extent that it
has sufficient funds and is otherwise not precluded from doing so,
support any motion or other request of the Administrative Agent and
the Lenders for payment of interest, fees and expenses with respect
to the Loans and other Obligations during such Bankruptcy Event and
(C) the Borrower will have first sought debtor-in-possession
financing from the Lenders;
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(ii) That the
Borrower shall submit (A) concurrently with each Notice of
Borrowing and each Construction Draw Request, a revised Budget,
which shall include a variance report from the initial Budget, and
(B) semi-monthly, an updated Timeline (as defined below), in
each case satisfactory in form and substance to the Administrative
Agent, in consultation with the Engineer, in the Administrative
Agent’s sole discretion;
(iii) To
participate in periodic conference calls with the Administrative
Agent, the Lenders and their advisors with respect to itself and
the Project;
(iv) That it will
not pay in excess of $400,000 under the Services Agreement in any
calendar month, which limitation will be reflected in the
Budget;
(v) To comply in
all material respects with the Budget and the Timeline;
and
(vi) That,
beginning the date this Waiver becomes effective, the Applicable
Margin shall be increased to 5.75%.
(b) Each Party
further agrees that (i) interest and accrued commitment fees
shall be payable in cash on the last Business Day of each month,
subject to the cure period for interest and fee payments in the
Financing Agreement, (ii) all proceeds of the additional
Sub-Debt described below shall be used in accordance with the
Budget before any Borrowing or any Construction Draw of Loan
proceeds is made, (iii) if any proceeds of the insurance
described in Section 5.1(x) of the Financing Agreement are
received while this Waiver is effective, all of such proceeds
(other than proceeds related to property damage for which Lurgi,
Inc. is entitled to payment) shall be used in accordance with the
Budget before any Borrowing or any Construction Draw of Loan
proceeds is made and (iv), without limiting the Borrower’s
obligations to comply with the Budget and the other terms and
conditions hereof, the Borrower shall be permitted to make two
additional Construction Draws per month after giving the
Administrative Agent at least three Business Days’ notice of
any such additional Construction Draw.
3.
Effectiveness . This Waiver shall be deemed effective upon
the receipt by the Administrative Agent of the
following:
(a) this Waiver
duly executed by Borrower, the Administrative Agent and the
Majority Lenders;
(b) the payment in
immediately available funds of (i) all of the Administrative
Agent’s and the Lenders’ accrued fees and expenses and
(ii) a waiver fee, for the account of each Lender that
delivered their executed signature page hereto on or before 3:00
p.m., New York City time, on October 6, 2008, in the amount of
0.50% of the Commitments and Loans of such Lenders;
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(c) the Borrower
shall (i) enter into new documentation with the Sub-Debt
Provider under which the Sub-Debt Provider shall agree to make at
least $2,500,000 in new Sub-Debt available to the Borrower on the
date this Waiver becomes effective, which documentation shall be on
terms consistent with the Sub-Debt Documents and otherwise in form
and substance satisfactory to the Administrative Agent and
(ii) have deposited, or caused to be deposited, at least
$2,500,000 in additional Sub-Debt proceeds into the Sub-Debt
Construction Account;
(d) the initial
Budget attached as Schedule B hereto (as revised from time to
time in accordance herewith, the “ Budget ”) and
an initial timeline to the Interim Completion Date attached as
Schedule C hereto (as revised from time to time in accordance
herewith, the “ Timeline ”), each with the
written approval thereof by the Engineer, provided that, for
the avoidance of doubt, the Budget shall include, without
limitation, detailed information regarding management fees, costs
by activity and other items reasonably requested by the
Administrative Agent or its advisors; and
(e) such other
instruments, documents and agreements as the Administrative Agent
may reasonably request, in form and substance reasonably
satisfactory to the Administrative Agent.
4.
Representations and Warranties . Borrower hereby represents
and warrants to the Administrative Agent and the Lenders, which
representations and warranties shall survive the termination of
this Waiver under Section 1(c) or otherwise, as follows:
(a) Borrower has
all the requisite power and authority to execute this Waiver and to
perform all of its respective obligations hereunder, and this
Waiver has been duly
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