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.
|
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.
|
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.
|
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.
|
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.
|
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:
|
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.
|
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.
|
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;
|
|
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;
|
|
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.
|
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.
|
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.
|
|
8.
|
PEI
and the Borrowers will enter into an Asset Management Agreement (the
“Asset
Management Agreement”) in a form acceptable to the DIP
Agent.
|
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.
|
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.
|
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
|