MEMBERSHIP
INTEREST PURCHASE AGREEMENT
This
Membership Interest Purchase Agreement
(together with the exhibits and schedules hereto, this “Agreement”)
is
dated as of October 17, 2006 by and among Eagle
Energy, LLC,
a South
Dakota limited liability company (“Seller”),
Pacific
Ethanol California, Inc.,
a
California corporation (“Buyer”),
and
Pacific
Ethanol, Inc., a
Delaware corporation (“Parent”).
Unless otherwise defined in this Agreement, capitalized terms used in this
Agreement are defined in Exhibit
A.
Recitals
Whereas,
Seller
owns 10,094.595 Class B Voting Units (the “Membership
Interests”)
of
Front Range Energy, LLC, a Colorado limited liability company (the “Company”),
which
represents approximately 42% of the outstanding membership interests of the
Company.
Whereas,
the
Company is engaged in the business (the “Business”)
of
operating an approximate 40 million gallon per year corn ethanol plant,
providing management services to operate the corn ethanol plant and such
other
activities related to the foregoing.
Whereas,
the
Buyer
desires to acquire from Seller, and Seller desires to sell and transfer to
Buyer, all of the Membership Interests on the terms and subject to the
conditions set forth herein.
Agreement
Therefore,
in
consideration of the foregoing and the mutual agreements and covenants set
forth
below, the Parties hereby agree as follows:
ARTICLE
1
Purchase
And Sale of Membership Interests
1.1 Acquisition.
Subject
to the terms and conditions of this Agreement, Buyer agrees to purchase,
and
Seller agrees to sell, convey, assign, transfer and deliver to Buyer, the
Membership Interests, free and clear of all Encumbrances, on the Closing
Date.
ARTICLE
2
Purchase
Price
2.1 Purchase
Price. As
consideration for the sale of the Membership Interests to Buyer:
(a) at
the
Closing, Buyer shall pay to Seller, in cash, a total of $29,750,000 (the
“Cash
Consideration”)
by
wire transfer to the Account;
(b) at
the
Closing, Buyer shall deposit the sum of $250,000 in an escrow account to
be
established as of the Closing Date pursuant to an Escrow Agreement among
Buyer,
Seller and Wells Fargo Bank, N.A., as Escrow Agent, in substantially the
form of
Exhibit
B
(the
“Escrow
Agreement”);
(c) at
the
Closing, Parent shall issue to Seller a warrant
to
purchase 693,963 shares of Parent Common Stock at an exercise price of $14.41
per share, substantially in the form attached hereto as Exhibit
C
(the
“Warrant”);
and
(d) at
the
Closing, Parent shall issue 2,081,888 shares of Parent Common Stock to Seller
(the “Shares”).
2.2 Sales
Taxes. Seller
shall bear and pay, and shall reimburse Buyer and Buyer’s affiliates for, any
sales taxes, use taxes, transfer taxes, documentary charges, recording fees
or
similar taxes, charges, fees or expenses, if any, that become due and payable
as
a result of the consummation of the Transactions.
2.3 Closing.
The
closing of the sale of the Membership Interests to Buyer (the “Closing”)
shall
take place at the offices of Cooley Godward llp
in
Broomfield, Colorado at 10:00 a.m. on the date hereof. The date on which
the
Closing takes place shall be referred to as the “Closing
Date.”
ARTICLE
3
Seller’s
Representations and Warranties
Seller
represents and warrants to and for the benefit of the Indemnified Parties
that:
3.1 Organization.
Seller
is
a limited liability company duly organized, validly existing and in good
standing under the laws of the State of South Dakota. Seller is in good standing
and qualified to do business as a foreign corporation in any state in which
it
is doing business. Seller has provided to Buyer complete and correct copies
of
the Charter Documents of Seller as currently in effect.
All
managers, members and officers of Seller are identified on Exhibit
D.
3.2 Due
Authorization; Enforceability. The
execution, delivery and performance of this Agreement and the other Transaction
Documents to which Seller is a party has been duly and validly authorized
by
Seller. Assuming the due authorization, execution and delivery of the same
by
Buyer, this Agreement and each of the other Transaction Documents to which
Seller is a party constitutes the legal, valid and binding obligation of
Seller,
enforceable against Seller in accordance with their respective terms (except
as
may be limited by bankruptcy, insolvency, reorganization and other similar
laws
and equitable principles relating to or limiting creditors’ rights
generally).
3.3 Non-Contravention;
Consents.
Seller
need not give any notice to, make any filing with, or obtain any authorization,
consent, or approval of any government or governmental agency in order to
consummate the Transactions. Neither the execution and delivery of this
Agreement and the other Transaction Documents, nor the consummation of the
Transactions, will directly or indirectly (with or without notice or lapse
of
time): (i) conflict with or result in a violation or breach of any of the
terms,
conditions or provisions of the Charter Documents of Seller; (ii) conflict
with
or violate any statute, regulation, rule, injunction, judgment, order, decree,
ruling, charge, or other restriction of any government, governmental agency,
or
court to which Seller is subject; (iii) conflict with, result in a breach
of,
constitute a default under, result in the acceleration of, create in any
party
the right to accelerate, terminate, modify or cancel, or require any notice
under any agreement, contract, lease, license, instrument or other arrangement
to which Seller is a party or by which it is bound; or (iv) result in the
imposition or creation of an Encumbrance upon the Membership
Interests.
3.4 Ownership
of Membership Interests. Seller
is
the unconditional and sole legal, beneficial, record and equitable owner
of the
Membership Interests, and Seller has full power and authority to sell and
transfer the Membership Interests, free and clear of any restrictions on
transfer or any other Encumbrances. Seller has not ever sold, assigned
transferred or otherwise disposed of all or any portion of the Membership
Interests. Seller’s ownership of the Membership Interests has been at all times
conducted in accordance with applicable Law. Seller is not a party to any
option, warrant, purchase right, or other contract or commitment (other than
this Agreement) that could require Seller to sell, transfer, or otherwise
dispose of any membership interests, or any voting or economic right therein,
of
the Company. Seller is not a party to any voting trust, proxy, or other
agreement or understanding with respect to the voting of any membership
interests of the Company.
The
Membership Interest Certificates represent all the Membership
Interests.
3.5 Distributions.
Seller
has no current outstanding obligation to return to the Company all or any
portion of any distribution previously received from the Company in respect
of
the Membership Interests.
3.6 No
Material Adverse Change. Since
June 30, 2006, Seller has not received any notice that could lead it to believe
that the Company has suffered a Material Adverse Change.
3.7 Operating
Agreement. The
Operating Agreement is a valid and binding obligation of Seller, enforceable
against Seller in accordance with its terms (except as may be limited by
bankruptcy, insolvency, reorganization and other similar laws and equitable
principles relating to or limiting creditors’ rights generally).
3.8 Securities
Representations.
(a) Seller
is
an “accredited investor” as defined in Rule 501(a) under the Securities Act of
1933, as amended (the “Securities
Act”,
and
each member of Seller is an accredited investor.
(b) Seller
understands that the Shares, the Warrant and the Exercise Shares are “restricted
securities” and that the sale of the Shares and the Warrant to Seller has not
been registered under the Securities Act.
(c) Seller
is
acquiring the Shares and the Warrant for its own account for investment only,
has no present intention of distributing the Shares or the Warrant and has
no
arrangement or understanding with any other person regarding the distribution
of
the Shares or the Warrant (this representation and warranty not limiting
Seller’s right to sell the Shares pursuant to an effective registration
statement under the Act or the Shares or the Warrant otherwise in accordance
with an exemption from registration under the Securities Act).
(d) Seller
recognizes that the Shares, the Warrant and the Exercise Shares cannot be
resold
unless they are subsequently registered under the Act or an exemption from
such
registration is available.
(e) Seller
understands and agrees that the Warrant and all certificates evidencing the
Shares to be issued to Seller and that the Exercise Shares will bear the
following legend:
THESE
SECURITIES HAVE NOT BEEN REGISTERED OR QUALIFIED UNDER THE SECURITIES ACT
OF
1933, AS AMENDED (THE “ACT”) OR APPLICABLE STATE SECURITIES LAWS. THEY MAY NOT
BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT OR LAWS OR, IF REASONABLY
REQUESTED BY THE COMPANY, AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO
THE
COMPANY THAT SUCH REGISTRATION OR QUALIFICATION IS NOT REQUIRED.
3.9 Brokers.
Seller
has not agreed or become obligated to pay, or has taken any action that might
result in any person, entity or governmental body claiming to be entitled
to
receive, any brokerage commission, finder’s fee or similar commission or fee in
connection with any of the Transactions.
3.10 Disclosure.
None
of
the representations or warranties made by Seller herein or in any other
Transaction Document or in any certificate furnished by Seller pursuant to
this
Agreement or any other Transaction Document, when all such documents are
read
together in their entirety, contains any untrue statement of a material fact
or
omits to state any material fact necessary to make the statements contained
herein or therein, in light of the circumstances under which they were made,
not
misleading. There is no fact within the knowledge of Seller that may have
an
adverse effect on Seller or may have the effect of interfering with any of
the
Transactions.
ARTICLE
4
Buyer’s
Representations and Warranties
Buyer
represents and warrants to Seller that:
4.1 Organization.
Buyer
is
a corporation duly organized, validly existing and in good standing under
the
Laws of the State of California.
4.2 Due
Authorization; Enforceability. The
execution, delivery and performance of this Agreement and the other Transaction
Documents to which Buyer is a party has been duly and validly authorized
by
Buyer. Assuming the due authorization, execution and delivery of the same
by
Seller, this Agreement and each of the other Transaction Documents to which
Buyer is a party constitutes the legal, valid and binding obligation of Buyer,
enforceable against Buyer in accordance with their respective terms (except
as
may be limited by bankruptcy, insolvency, reorganization and other similar
laws
and equitable principles relating to or limiting creditors’ rights
generally).
4.3 Brokers.
Buyer
has
not agreed or become obligated to pay, or has taken any action that might
result
in any person, entity or governmental body claiming to be entitled to receive,
any brokerage commission, finder’s fee or similar commission or fee in
connection with any of the Transactions.
ARTICLE
5
Parent’s
Representations and Warranties
Parent
represents and warrants to Seller that:
5.1 Organization.
Parent
is
a corporation duly organized, validly existing and in good standing under
the
Laws of the State of Delaware.
5.2 Due
Authorization; Enforceability. The
execution, delivery and performance of this Agreement and the other Transaction
Documents to which Parent is a party has been duly and validly authorized
by
Parent. Assuming the due authorization, execution and delivery of the same
by
Seller, this Agreement and each of the other Transaction Documents to which
Parent is a party constitutes the legal, valid and binding obligation of
Parent,
enforceable against Parent in accordance with their respective terms (except
as
may be limited by bankruptcy, insolvency, reorganization and other similar
laws
and equitable principles relating to or limiting creditors’ rights
generally).
5.3 Capitalization.
The
authorized share capital of Parent, as of the date of this Agreement, consists
of (a) 100,000,000 shares of Parent Common Stock and (b) 10,000,000 shares
of
preferred stock, $0.001 par value per share, of which 7,000,000 shares are
designated as Series A Cumulative Redeemable Convertible Preferred Stock,
of
which 5,250,000 shares are issued and outstanding. According to a certificate
from Parent’s transfer agent, 31,229,236 shares of Parent Common Stock were
issued and outstanding as of July 21, 2006.
5.4 Valid
Issuance. The
Shares will, when issued in accordance with the provisions of this Agreement,
and the Exercise Shares will, when issued in accordance with the provisions
of
the Warrant, be validly issued, fully paid and nonassessable and will be
free of
any liens or Encumbrances; provided,
however,
that the
Shares and Exercise Shares may be subject to restrictions on transfer under
state and/or federal securities laws as set forth herein or as otherwise
required by such laws at the time the transfer is proposed.
5.5 Nasdaq.
As
of the
date of this Agreement, the Parent Common Stock is registered pursuant to
the
Exchange Act and is listed on the Nasdaq Global Market (“Nasdaq”).
Parent has taken no action designed to, or likely to have the effect of,
terminating the registration of the Parent Common Stock under the Exchange
Act
or delisting or disqualifying such Parent Common Stock from Nasdaq, nor has
Parent received any notification that the SEC or Nasdaq is contemplating
terminating such registration or admission for quotation.
5.6 Brokers.
Parent
has not agreed or become obligated to pay, or has taken any action that might
result in any person, entity or governmental body claiming to be entitled
to
receive, any brokerage commission, finder’s fee or similar commission or fee in
connection with any of the Transactions.
ARTICLE
6
Closing
Deliverables
6.1 Deliverables
by Seller. At
the
Closing, Seller shall deliver the following to Buyer:
(a) a
certificate from Seller certifying that (i) each of the representations and
warranties made by Seller in this Agreement is true and correct as of the
date
of this Agreement and (ii) each of the covenants and agreement that Seller
is
required to have complied with or performed pursuant to this Agreement at
or
prior to the Closing has been duly complied with and performed in all
respects;
(b) a
certificate, validly executed by the Secretary of Seller, certifying as to
(i)
the Charter Documents of Seller; (ii) resolutions or instruments of each
of the
managers and members of Seller authorizing the execution, delivery and
performance by Seller of this Agreement and the Transactions; and (iii) an
incumbency certificate evidencing the authority and specimen signature of
each
authorized person of Seller executing this Agreement and any other certificate
provided pursuant to this Section
6.1.
Such
certificate shall state that such Charter Documents and resolutions (or other
authorizing actions or instruments) have not been amended, modified, revoked
or
rescinded and are in full force and effect on and as of the Closing Date
and
that all proceedings required to be taken on the part of Seller in connection
with the Transactions have been duly authorized and taken;
(c) a
certificate from Seller certifying that attached thereto are (i) true and
complete copies of the minutes and other records of all meetings and other
proceedings (including any actions taken by written consent or otherwise
without
a meeting) of the managers or members of Seller since its formation and (ii)
true and complete copies of each material contract, agreement or commitment
to
which Seller is party or by which it is bound as of the date thereof, including
all amendments or modifications thereto. Such certificate shall state that
there
have been no meetings or other proceedings of the managers or members of
Seller
that are not fully reflected in such minutes or other records;
(d) the
Membership Interest Certificates, duly endorsed (or accompanied by duly executed
stock powers) with a medallion signature guarantee provided by an eligible
guarantor institution;
(e) the
assignment and assumption agreement, in the form attached hereto as Exhibit
E
(the
“Assignment
and Assumption”),
executed by Seller;
(f) the
Escrow Agreement, executed by Seller;
(g) the
registration rights agreement, in the form attached hereto as Exhibit
F (the
“Registration
Rights Agreement”),
executed by Seller; and
(h) the
non-competition agreement, in the form attached hereto as Exhibit
G (the
“Non-Competition
Agreement”),
executed by Seller and each of the members, managers, directors and management
of Seller;
(i) such
instruments of assumption and other documents or instruments as Buyer reasonably
may request to effect the Transactions;
(j) an
opinion of counsel to Seller substantially in the form attached hereto as
Exhibit
H;
(k) a
non-foreign affidavit dated as of the Closing Date, in form and substance
required under the Treasury Regulations issued pursuant to Code §1445 stating
that Seller is not a “Foreign Person” as defined in Code §1445; and
(l) a
good
standing certificate from the State of South Dakota and from any other State
in
which Seller is qualified to do business, dated as of a recent date prior
to the
Closing.
6.2 Closing
Deliverables by Buyer. At
the
Closing, Buyer shall deliver the following to Seller:
(a) a
certificate from Buyer certifying that (i) each of the representations and
warranties made by Buyer in this Agreement is true and correct as of the
date of
this Agreement and (ii) each of the covenants and obligations that Buyer
is
required to have complied with or performed pursuant to this Agreement at
or
prior to the Closing has been duly complied with and performed in all
respects;
(b) the
Cash
Consideration;
(c) the
Escrow Agreement, executed by Buyer and the Escrow Agent;
(d) the
Assignment and Assumption, executed by Buyer;
(e) the
Registration Rights Agreement, executed by Buyer; and
(f) the
Non-Competition Agreement, executed by the Company and Buyer.
6.3 Closing
Deliverables by Parent. At
the
Closing, Parent shall deliver the following to Seller:
(a) a
certificate from Parent certifying that (i) each of the representations and
warranties made by Parent in this Agreement is true and correct as of the
date
of this Agreement and (ii) each of the covenants and obligations that Parent
is
required to have complied with or performed pursuant to this Agreement at
or
prior to the Closing has been duly complied with and performed in all respects;
(b) the
Common Shares;
(c) the
Warrant.
ARTICLE
7
Indemnification
7.1 Survival
of Representations and Covenants.
(a) The
covenants and agreements of each Party shall survive the Closing as of the
Transactions for the periods specified in such covenants and agreements,
or if
no period is specified, until the fourth anniversary of the
Closing.
(b) The
representations, warranties, covenants and obligations of Seller and the
rights
and remedies that may be exercised by any Indemnified Party shall not be
limited
or otherwise affected by or as a result of any information furnished to,
or any
investigation made by or any knowledge of, any of the Indemnified Parties
or any
of their Representatives.
(c) The
representations and warranties of Seller contained in this Agreement shall
remain in full force and effect and shall expire on the six month anniversary
of
the Closing; provided,
however,
that the
foregoing expiration date shall not apply to (i) claims based on fraud,
intentional misrepresentation or willful breach which shall survive for the
applicable statute of limitations and (ii) claims related to breaches of
the
representations and warranties contained in Section 3.1
(Organization), Section 3.2
(Due
Authorization; Enforceability) and Section
3.4
(Ownership of Membership Interests), which shall survive until the fourth
anniversary of the Closing;
provided
further, however, that
if
Buyer
notifies Seller of a claim specifying the factual basis of that claim in
reasonable detail to the extent then known by Buyer
on or
prior to the applicable expiration date, then such representation or warranty
shall not so expire, but rather shall remain in full force and effect until
such
time as such claim has been fully and finally resolved, either by means of
a
written settlement agreement or by means of a final, non-appealable judgment
issued by a court of competent jurisdiction.
(d) The
representations and warranties of Buyer contained in this Agreement shall
survive until the fourth anniversary of the Closing.
7.2 Indemnification
by Seller. Seller
shall hold harmless and indemnify each of the Indemnified Parties from and
against, and shall compensate and reimburse each of the Indemnified Parties
for,
any Losses that are directly or indirectly suffered or incurred by any of
the
Indemnified Parties or to which any of the Indemnified Parties may otherwise
become subject at any time (regardless of whether or not such Losses relate
to
any third-party claim) and that arise directly or indirectly from or as a
direct
or indirect result of, or are directly or indirectly connected
with:
(a) any
breach by Seller or of any representation or warranty of Seller contained
in
this Agreement, any other Transaction Document or in any certificate delivered
by pursuant to any provision of this Agreement or any other Transaction
Document;
(b) any
breach of any covenant or agreement of Seller contained in this Agreement
or any
other Transaction Document; or
(c) any
liability of Seller.
ARTICLE
8
Additional
Agreements
8.1 Further
Assurances. Each
Party agrees to execute and deliver such further documents and instruments
and
to take such further actions after the Closing as may be necessary or desirable
and reasonably requested by the other Party to give effect to the Transactions.
8.2 Expenses;
Attorneys’ Fees. Each
Party shall bear and pay all fees, costs and expenses that have been incurred
or
that are in the future incurred by, on behalf of, such Party in connection
with
the negotiation, preparation and review of this Agreement, the other Transaction
Documents and all certificates, opinions and other instruments and documents
delivered or to be delivered in connection with the Transactions, and the
consummation and performance of the Transactions. If a Party shall bring
any
action, suit, counterclaim, appeal, arbitration, or mediation for any relief
against the other Party, declaratory or otherwise, to enforce the terms hereof
or to declare rights hereunder (referred to herein as an “Action”),
the
non-prevailing party in such Action shall pay to the prevailing party in
such
Action a reasonable sum for the prevailing party’s attorneys’ fees and
expenses.
8.3 Confidentiality. Seller
shall treat and hold as confidential any information concerning the business
and
affairs of the Company that is not already generally available to the public
(the “Confidential
Information”)
and
refrain from using any of the Confidential Information except in connection
with
this Agreement. In the event that Seller is requested or required (by oral
question or request for information or documents in any legal proceeding,
interrogatory, subpoena, civil investigative demand, or similar process)
to
disclose any Confidential Information, it shall notify Buyer promptly of
the
request or requirement so that Buyer may seek an appropriate protective order
or
waive compliance with the provisions of this Section 8.3.
If, in
the absence of a protective order or the receipt of a waiver hereunder, Seller
is, on the advice of counsel, compelled to disclose any Confidential Information
to any tribunal or else stand liable for contempt, it may disclose the
Confidential Information to the tribunal; provided that it shall use its
best
efforts to obtain, at the request and expense of Buyer, an order or other
assurance that confidential treatment shall be accorded to such portion of
the
Confidential Information required to be disclosed as Buyer shall designate.
Seller acknowledges and agrees that in the event of a breach of any of the
provisions of this Section 8.3,
monetary damages may not constitute a sufficient remedy. Consequently, in
the
event of any such breach, the Company, Buyer and/or their respective successors
or assigns may, in addition to other rights and remedies existing in their
favor, apply to any court of law or equity of competent jurisdiction for
specific performance and/or injunctive or other relief in order to enforce
or
prevent any violations of the provisions hereof, in each case without the
requirement of posting a bond or proving actual damages.
8.4 Tax
Matters.
(a) Allocation
of Company Tax Items.
Buyer
and Seller shall request that the Company allocate all items of Company income,
gain, loss and deduction attributable to the Membership Interests for the
taxable year of the Closing based on a closing of the Company’s books as of the
close of business on the Closing Date; provided that Buyer and Seller shall
request that any Company tax credits attributable to the Membership Interests
for the taxable year of the Closing (including, without limitation, any small
ethanol producer credit described in Section 40(b)(4) of the Code) be allocated
ratably to each day in the entire 365-day taxable year of the Closing, so
that
Buyer and Seller both share in a ratable portion of such credits for the
entire
365-day taxable year, based on the number of days in such taxable year (i)
up to
and including the Closing Date, in the case of Seller, and (ii) after the
Closing Date, in the case of Buyer. Notwithstanding the foregoing, if it
is
determined that ratable allocation of tax credits cannot be effectuated in
tandem with a closing of the Company’s books as of the Closing Date as
contemplated in the preceding sentence, then Seller shall pay to Buyer a
dollar
amount equal to the dollar amount of such credits which would have been
allocated to the period after the Closing Date (in accordance with the preceding
sentence) had such ratable allocation been effectuated.
(b) Tax
Information. Promptly
upon request, Seller will provide to Buyer the amount of Seller’s taxable loss,
if any, recognized with respect to the sale of the Membership
Interests.
(c) Distributions
Attributable to Pre-Closing Income. Buyer
shall request that the Company provide Buyer and Seller (as soon as reasonably
practicable after the closing of the books set forth in Section
8.4(a))
with a
calculation of (i) the net taxable income (net of cumulative losses) of the
Company allocated to Seller through the Closing Date in accordance with
Section
8.4(a)
above
(“Pre-Closing
Net Income”),
and
(ii) the aggregate distributions paid to Seller by the Company through the
Closing Date (“Pre-Closing
Distributions”).
In
the event that the Pre-Closing Net Income exceeds the Pre-Closing Distributions,
Buyer shall direct that the Company pay over to Seller all distributions
otherwise payable by the Company to Buyer with respect to the Membership
Interests until the amount of such distributions paid to Seller after the
Closing Date equals the amount of such excess. Either Buyer or Seller may
challenge the calculation of Pre-Closing Net Income or Pre-Closing Distributions
by giving notice of such challenge to the Company and to the other within
ten
(10) business days after the Company’s calculation is provided to such party. If
Buyer and Seller shall not have reached agreement as to the amount of
Pre-Closing Net Income and Pre-Closing Distributions within ten (10) business
days of the date of such notice, determination of the amount of Pre-Closing
Net
Income and Pre-Closing Distributions shall be referred promptly to Ehrhardt
Keefe Steiner & Hottman PC (or other auditing firm reasonably acceptable to
Buyer and Seller) (the “Auditor”),
which
shall be engaged by Buyer and Seller to make such termination. In connection
with such engagement, Buyer and Seller each shall propose an amount of
distributions to be paid by the Company to Seller after the Closing Date.
The
determination of the Auditor shall be binding on Buyer and Seller as to the
amount of distributions to be paid by the Company to Buyer after the Closing
Date in the absence of manifest error. During the period that any challenge
to
the calculation of Pre-Closing Net Income or Pre-Closing Distributions is
pending, distributions to Buyer by the Company of any amount in dispute shall
be
withheld by the Company and paid to Buyer or Seller, as appropriate, only
upon
final determination of the amount of Pre-Closing Net Income or Pre-Closing
Distributions. The costs incurred in connection with the determination made
by
the Auditor shall be paid by the Party who proposed an amount of distributions
to be paid by the Company to Buyer after the Closing Date that varied by
a
greater amount from the amount finally determined by the Auditor than the
amount
proposed by the other Party or shall be shared equally if the amounts proposed
by Buyer and Seller varied by an equal amount.
(d) Capital
Account.
Except
as set forth in Section
8.7(c),
Seller
shall receive no further distributions from the Company. Buyer shall succeed
to
the entire Capital Account of Seller attributable to the Membership
Interests.
8.5 Disposition
of Shares, Warrant and Warrant Shares.
Seller
agrees not to make any disposition of all or any part of the Shares, the
Warrant
or the Warrant Shares unless and until:
(a) There
is
then in effect a registration statement under the Securities Act covering
such
proposed disposition, such disposition is made in accordance with such
registration statement and Seller shall have provided to Buyer reasonable
evidence of the manner of disposition and compliance with any applicable
prospectus delivery requirements; or
(b) Seller
shall have notified Buyer of the proposed disposition and shall have furnished
Buyer with a statement of the circumstances surrounding the proposed
disposition, and if reasonably requested by Buyer, Seller shall have furnished
Buyer with an opinion of counsel, reasonably satisfactory to Buyer, for Seller
to the effect that such disposition will not require registration of the
Shares,
the Warrants or the Exercise Shares under the Securities Act or applicable
state
securities laws.
ARTICLE
9
Miscellaneous
9.1 Amendment
and Waiver. This
Agreement may not be amended, modified, altered or supplemented other than
by
means of a written instrument duly executed and delivered on behalf of Buyer
and
Seller.
9.2 Notices.
All
notices, demands and other communications to be given or delivered under
or by
reason of the provisions of this Agreement shall be in writing and shall
be
deemed to have been given when personally delivered, when mailed by certified
mail, return receipt requested, when sent by facsimile with confirmation
of
receipt received, or when delivered by overnight courier with executed receipt.
Notices, demands and communications to Seller or Buyer shall, unless another
address is specified in writing in accordance herewith, be sent to the address
indicated below:
Notices
to Seller:
Eagle
Energy, LLC
c/o
David
Fick, President
2113
Pebble Beach Lane
Brandon,
SD 57005
Tel:
605-201-1087
Fax:
605-582-8850
with
a
copy to:
Dorsey
& Whitney LLP
50
South
Sixth Street, Suite 1500
Minneapolis,
MN 55402
Attn:
Robert G. Hensley
Tel:
(612) 340-2655
Fax:
(612) 340-7800
Notices
to Buyer:
Pacific
Ethanol California, Inc.
5711
N.
West Avenue
Fresno,
CA 93711
Attn:
Neil Koehler
Tel:
(559) 435-1771
Fax:
(559) 435-1478
with
copies to: Pacific
Ethanol, Inc.
5711
N.
West Avenue
Fresno,
CA 93711
Attn:
General Counsel
Tel:
(559) 435-1771
Fax:
(559) 435-1478
and
to:
Cooley
Godward LLP
380
Interlocken Crescent, Suite 900
Broomfield,
CO 80021
Attn:
Francis R. Wheeler, Esq.
Tel:
(720) 566-4231
Fax:
(720) 566-4099
9.3 Assignment.
This
Agreement and all of the provisions hereof shall be binding upon and inure
to
the benefit of the Parties and their respective successors and assigns. Neither
this Agreement nor any of the rights, interests or obligations hereunder
shall
be assignable by either Party without the prior written consent of the other
Party; provided,
however,
that
Buyer may assign in whole its right, title and interest under this Agreement
to
any Affiliate.
9.4 Captions.
The
captions used in this Agreement are for convenience of reference only and
do not
constitute a part of this Agreement and shall not be deemed to limit,
characterize or in any way affect any provision of this Agreement, and all
provisions of this Agreement shall be enforced and construed as if no caption
had been used in this Agreement.
9.5 Complete
Agreement; Schedules And Exhibits. Each
schedule and exhibit delivered pursuant to the terms of this Agreement shall
be
in writing and shall constitute a part of this Agreement, although schedules
need not be attached to each copy of this Agreement. This Agreement, together
with such schedules and exhibits, and the documents referred to herein contain
the complete agreement between the Parties and supersede any prior
understandings, agreements or representations by or between the Parties,
written
or oral, which may have related to the subject matter hereof in any
way.
9.6 Governing
Law; Venue.
(a) The
laws
of the State of Colorado, without regard to conflict of law doctrines, govern
all questions concerning the construction, validity and interpretation of
this
Agreement and the performance of the obligations imposed by this
Agreement.
(b) Any
legal
action or other legal proceeding relating to this Agreement or the enforcement
of any provision of this Agreement may be brought or otherwise commenced
in any
state or federal court located in the County of Denver, Colorado. Each party
to
this Agreement:
(i) expressly
and irrevocably consents and submits to the jurisdiction of each state and
federal court located in the County of Denver, Colorado (and each appellate
court located in the State of Colorado) in connection with any such legal
proceeding;
(ii) agrees
that each state and federal court located in the County of Denver, Colorado
shall be deemed to be a convenient forum; and
(iii) agrees
not to assert (by way of motion, as a defense or otherwise), in any such
legal
proceeding commenced in any state or federal court located in the County
of
Denver, Colorado, any claim that such party is not subject personally to
the
jurisdiction of such court, that such legal proceeding has been brought in
an
inconvenient forum, that the venue of such proceeding is improper or that
this
Agreement or the subject matter of this Agreement may not be enforced in
or by
such court.
9.7 Counterparts.
This
Agreement may be executed in two or more counterparts, each of which shall
be
deemed an original, but all of which together shall constitute one and the
same
instrument. Documents will be deemed as originals if received by facsimile
copy.
9.8 Third
Party Beneficiaries. Nothing
in this Agreement is intended or will be construed to entitle any person
or
entity, other than Buyer and Seller or their respective permitted transferees
and assigns, to any claim, cause of action, remedy or right of any
kind.
9.9 Severability.
The
validity, legality or enforceability of the remainder of this Agreement will
not
be affected even if one or more of the provisions of this Agreement will
be held
to be invalid, illegal or unenforceable in any respect.
[Signatures
Follow]
In
Witness Whereof,
each of
the parties has caused this Agreement to be duly executed by duly authorized
individuals as of the date hereof.
Buyer
Pacific
Ethanol California, Inc.,
a
California corporation
By:
/s/Neil
M.
Koehler
Name:
Neil M. Koehler
Title:
CEO
Seller
Eagle
Energy, LLC,
a
South
Dakota limited liability company
By:
/s/David
M.
Fink
Name:
David M. Fink
Title:
President
Parent
Pacific
Ethanol, Inc.,
a
Delaware corporation
By:
/s/Neil
M.
Koehler
Name:
Neil M. Koehler
Title:
CEO
Exhibit
A
Definitions
“Account”
means
account number 4581024865 held by Seller at First Farmers & Merchants
National Bank, 303 East Main, Luverne, Minnesota 56156, Attn: Cliff Boom
(telephone: 507 283 4463) (ABA# 091216007).
“Affiliate”
means
an individual or entity that directly or indirectly, through one or more
intermediaries, controls, or is controlled by, or is under common control
with,
a specified individual or entity. For purposes of this definition, “control”
shall include, without limitation, the exertion of significant influence
over an
individual or entity and shall be conclusively presumed as to any fifty percent
(50%) or greater equity interest.
“Assignment
and Assumption”
is
defined in Section
7.1.
“Business”
is
defined in the recitals hereto.
“Buyer”
is
defined in the preamble hereof and shall also include any Affiliate of Buyer
that becomes an assignee of the Agreement pursuant to the terms of Section 9.3.
“Charter
Documents”
shall
mean, as applicable, the specified entity’s (i) certificate of incorporation or
formation or other charter or organizational documents, and (ii) bylaws or
operating agreement, each as from time to time in effect.
“Closing”
is
defined in Section 2.3.
“Closing
Date”
is
defined in Section 2.3.
“Code”
means
the Internal Revenue Code of 1986, as amended.
“Company”
is
defined in the recitals hereto.
“Confidential
Information”
is
defined in Section
8.3.
“Encumbrance”
means
any
lien,
pledge, hypothecation, charge, mortgage, security interest, encumbrance,
equity,
trust, equitable interest, claim, preference, right of possession, lease,
tenancy, license, encroachment, covenant, infringement, interference, Order,
proxy, option, right of first refusal, preemptive right, community property
interest, legend, defect, impediment, exception, reservation, limitation,
impairment, imperfection of title, condition or restriction of any nature
(including any restriction on the transfer of an asset, any restriction on
the
receipt of any income derived from an asset, any restriction on the use of
any
asset and any restriction on the possession, exercise or transfer of any
other
attribute of ownership of an asset).
“Escrow
Agreement”
is
defined in Section
2.1.
“Exercise
Shares”
means
the shares of Parent Common Stock issuable upon exercise of the
Warrant.
“Indemnified
Party”
means
(a) Buyer, (b) the Company; (c) Buyer’s and the Company’s current and future
Affiliates; (d) the respective Representatives of the persons referred to
in
clauses (a), (b) and (c); and the respective successors and assigns of the
persons referred to in clauses (a), (b), (c) and (d) above.
“Loss”
shall
include any loss, damage, injury, decline in value, Liability, claim, demand,
settlement, judgment, award, fine, penalty, Tax, fee (including any legal
fee,
expert fee, accounting fee or advisory fee), charge, cost (including court
costs
and any cost of investigation) or expense of any nature.
“Material
Adverse Change”
means
any change or changes that are material and adverse to the Business, properties,
prospects, working capital, financial condition or results of operations
of the
Company.
“Membership
Interests”
is
defined in the recitals hereto.
“Membership
Interest Certificates”
means
collectively (i) Certificate of Membership of Front Range Energy, LLC #2,
representing 4,094.595 Class B Voting Units of the Company and (ii) Certificate
of Membership of Front Range Energy, LLC #3, representing 6,000 Class B Voting
Units of the Company.
“Operating
Agreement”
means
the Second Amended and Restated Operating Agreement of Front Range Energy,
LLC,
dated as of October 20, 2005.
“Parent”
is
defined in
the
preamble hereof.
“Parent
Common Stock”
means
the
common stock, par value $0.001 per share, of Parent.
“Party”
or
“Parties”
means
any of Seller and Buyer.
“Person”
means
any individual, person, limited liability company, partnership, trust,
unincorporated organization, corporation, association, joint stock company,
business, group, government, government agency or authority or other
entity.
“Registration
Rights Agreement”
is
defined in Section
6.1.
“Representatives”
shall
mean officers, directors, employees, agents, attorneys, accountants, advisors
and representatives.
“SEC”
means
the Securities and Exchange Commission.
“Securities
Act”
means
the Securities Act of 1933, as amended.
“Securities
Exchange Act”
means
the Securities Exchange Act of 1934, as amended.
“Seller”
is
defined in the preamble hereof.
“Shares”
is
defined in Section
2.1(d).
“Tax”
means
any foreign, federal, state, county or local income, sales and use, excise,
franchise, real and personal property, transfer, gross receipt, capital stock,
production, business and occupation, disability, employment, payroll, severance
or withholding tax or charge imposed by any governmental entity, any interest
and penalties (civil or criminal) related thereto or to the nonpayment thereof,
and any Loss in connection with the determination, settlement or litigation
of
any Tax liability.
“Transactions”
shall
mean (a) the execution and delivery of the respective Transaction Documents;
and
(b) all of the transactions contemplated by the respective Transaction
Documents, including (i) the sale of the Membership Interests by Seller to
Buyer
in accordance with this Agreement; (ii) the issuance of the Shares and Warrant
to Seller by Parent; and (iii) the performance by Seller and Buyer of their
respective obligations under the Transaction Documents and the exercise by
Seller and Buyer of their respective rights under the Transaction
Documents.
“Transaction
Documents”
shall
mean (a) the Agreement; (b) the Escrow Agreement; (c) the Registration Rights
Agreement; (c) the Non-Competition Agreement; (d) the Warrant; and (e) the
certificates referred to in Sections
6.1(a),
(b)
and
(c).
“Warrant”
is
defined in Section
2.1(c).
A-3