EXHIBIT
99.2
OPTION/PURCHASE
AGREEMENT
This
Option/Purchase Agreement (“Agreement”) is
entered into as of March 2, 2010, by and between Socius CG II, Ltd., a Bermuda
exempted company (“Purchaser”), and
Lyles Mechanical Co., a California corporation (“Creditor”), and, as
to the Acknowledgment at the end of this Agreement, by Pacific Ethanol, Inc., a
Delaware corporation (“PEI”).
RECITALS
F. PEI is
indebted to Creditor pursuant to the terms of that certain Promissory Note
(Final Payment), payable to Creditor, dated October 20, 2008. in the
principal amount of $1,500,000 (the “Note”).
G. As of the
date of this Agreement, PEI is in default under the Note. PEI is also
indebted to Creditor for accrued and unpaid interest, for a total amount due and
payable by PEI to Creditor of $1,733,920 (consisting of $1,500,000
principal amount, plus $233,920 in unpaid interest accrued through February 28,
2010) as of the date hereof (such total amount, plus all additional interest
that accrues on the unpaid principal balance under the Note on and after
February 28, 2010, being collectively referred to herein as the
“Indebtedness”).
H. Creditor
and Purchase desire Creditor to have the option in the future, to be exercised
at the sole and absolute discretion of Creditor, if at all, to sell, transfer
and assign to Purchaser the right of Creditor to receive payment of all of the
Indebtedness (the “Indebtedness Claim”)
for a purchase price equal to the full amount of the Indebtedness Claim (the
“Purchase
Price”). If such option is exercised by Creditor in its sole
and absolute discretion, then Purchaser desires to purchase the
Indebtedness Claim, all subject to the terms and conditions set forth
below.
NOW,
THEREFORE, in consideration of the agreements contained herein and for other
good and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto hereby agree as follows:
1. Option to Sell Indebtedness
Claim
(a) Option; Exercise of
Option. Creditor shall have the option (the “Option”), to be
exercised at the sole and absolute discretion of Creditor, if at all, to sell,
transfer and assign to Purchaser the Indebtedness Claim. In order to
exercise the Option, Creditor shall provide Purchaser with written notice of its
exercise of such Option, substantially in the form attached as Exhibit 1 (the “Option Exercise
Notice”), specifically identifying the dollar amount of the principal and
accrued and unpaid interest constituting the Indebtedness Claim as of the Option
Exercise Notice date.
(b) Purchase of the
Indebtedness Claim; Excluded Rights; Purchase Price. Upon the
exercise of the Option by Creditor, Purchaser shall purchase from Creditor, and
Creditor shall sell, transfer, convey and assign to Purchaser, for the
consideration specified in the last sentence of this sub-paragraph (b), all
right, title and interest in and to the Indebtedness Claim as specified in the
Option Exercise Notice, subject to the conditions subsequent set forth
below. It is expressly understood and agreed by the parties that the
Indebtedness Claim shall not include, and the Purchaser under this Agreement
shall not be purchasing or otherwise obtaining, unless expressly included in
the Indebtedness Claim as described in the Option Exercise Notice, any
rights of Creditor against PEI that do not arise under the Note, which Creditor
hereby expressly retains and preserves for its own benefit.
(c) Notice of Filing of Action
and Settlement Motion. No later than close of business
on the third business day after Creditor has provided to Purchaser the Option
Exercise Notice, Purchaser shall provide written notice to Creditor that (i)
Purchaser has filed an action (the “Action”) against PEI
in the Superior Court of the State of California in and for the County of Los
Angeles (the “Court”) for
collection of the Indebtedness Claim, specifying the date that the Action was
commenced (the “Action
Commencement Date”), and (ii) a motion in the Action has been filed
seeking Court approval of the settlement of the Action on terms acceptable to
Purchaser and in accordance with Section 3(a)(10) of the Securities Act of 1933,
as amended (the “Settlement”). If
such written notice is not provided by Purchaser to Creditor by the close of
business on the third business day after the date Creditor has provided to
Purchaser the Option Exercise Notice, then this Agreement shall be
deemed void ab
initio and of no further force or effect, and no Option exercise with
respect to the Indebtedness Claim, or sale or assignment of the Indebtedness
Claim, shall have occurred or be deemed to have occurred.
(d) Court Approval
Notice. Purchaser shall provide written notice to Creditor
reasonably promptly after the Court has entered an order in form and substance
acceptable to Purchaser approving the Settlement (such written notice being
hereinafter referred to as the “Court Approval
Notice”). In all events and circumstances,
if Purchaser has not provided the Court Approval Notice by the close
of business on the tenth business day after the Action Commencement
Date pertaining to the Indebtedness Claim (regardless of whether
Purchaser has simply overlooked providing such notice by such tenth business
day, is not in a position to provide such notice by such tenth business day
because the Court has not entered an order approving the Applicable Settlement
by such tenth business day, or for any other reason in Purchaser’s sole
discretion Purchaser has failed to timely provide the Court Approval
Notice), then Creditor shall have the right to terminate and cancel
this Agreement by providing written notice of termination to Purchaser at any
time prior to receiving the Court Approval Notice from
Purchaser. If such termination is so effected by Creditor, then
this Agreement shall be deemed void ab initio and of no
further force or effect, and no Option exercise with respect to the Indebtedness
Claim, or sale or assignment of the Indebtedness Claim, shall have occurred or
be deemed to have occurred.
(e) Payment
of Purchase Price. If the Court Approval Notice is
provided by Purchaser to Creditor before Creditor has exercised any termination
right set forth in sub-paragraph (d) immediately above, then no later than close
of business on the second business day after the date the Court Approval Notice
is provided by Purchaser to Creditor, Purchaser shall pay the
Purchase Price to Creditor by wire transfer to Creditor pursuant to the
following wire transfer instructions (the date upon which the Purchase Price has
been so timely paid by Purchaser to Creditor being hereinafter referred to as
the “Payment
Date”);
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Wire
To:
Citibank
(West) FSB
2303
Kern St.
Fresno,
CA 93721
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ABA #: |
xxx xxx
xxx |
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Account
Party: |
Lyles
Mechanical Co.
1210
W. Olive Ave.
Fresno,
CA 93744
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Account
#:
Contact:
Phone
#:
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xxxx
xxxxx
Ponnie Davis
(559) 447-7420
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If
payment of the Purchase Price is not so timely made by Purchaser to Creditor on
the Payment Date, then Creditor shall have the right to terminate and cancel
this Agreement by providing written notice of termination to Purchaser at any
time prior to payment of the Purchase Price. If
such termination is so effected by Creditor, then this Agreement shall be deemed
void ab initio
and of no further force or effect, and no Option exercise with respect to the
Indebtedness Claim, or sale or assignment of the Indebtedness Claim, shall have
occurred or be deemed to have occurred.
(f) Satisfaction of Conditions
Subsequent. Upon (and only upon) the occurrence of the
following four conditions subsequent: (i) the written notice of the
Action Commencement Date and of the filing of the motion for Court approval of
the Settlement having been timely provided to Creditor by Purchaser pursuant to
sub-paragraph (c) of this Section 1, (ii) the Court Approval Notice having been
provided by Purchaser to Creditor before Creditor has exercised any termination
right pursuant to sub-paragraph (d) of this Section 1, (iii) PEI has provided to
Creditor a new executed “Acknowledgment by PEI,” similar to the “Acknowledgment
by PEI” at the end of this Agreement but updated to speak as of the Option
Exercise Date and the date that the conditions subsequent described in this
sub-paragraph (f) are satisfied; and (iv) the payment to Creditor of the
Purchase Price before Creditor has exercised any termination right pursuant to
sub-paragraph (e) of this Section 1,
(x) All
conditions subsequent shall have been satisfied and the sale and assignment of
the Indebtedness Claim shall be complete and indefeasible; and
(y) Prior to the
close of business on the second business day after the occurrence of the four
conditions subsequent described above in this sub-paragraph (f) of this Section
1, Creditor shall deliver the Note to Purchaser endorsed over to Purchaser along
with a signed legend that “All claims to principal and interest and any other
amount hereunder have been sold and assigned to Purchaser”; and Purchaser, prior
to the close of business on the second business day after its receipt of the
Note, shall deliver the Note to PEI marked “CANCELLED; PAID IN FULL
PURSUANT TO CONSUMMATION OF SETTLEMENT WITH
PEI”. Each of Creditor and Purchaser agrees that its respective
obligation under sub-paragraph (y) is for the protection and benefit of PEI, and
accordingly agrees that in the event that the conditions subsequent described
above in this sub-paragraph (y) are satisfied with respect to the Indebtedness
Claim including that the Purchase Price is timely paid on the Payment Date),
(A) Creditor’s obligation to deliver the Note to Purchaser with the
above-specified legend shall be enforceable by PEI as a third-party beneficiary
of this provision, and (B) Purchaser’s obligation to deliver the Note to
Purchaser with the above-specified cancellation marking shall be enforceable by
PEI as a third-party beneficiary of this provision.
(g) Creditor
shall have no obligation whatsoever to exercise the Option. This
Agreement applies only to the Indebtedness Claim if and when the Option is ever
exercised, in Creditor’s sole and absolute discretion. Creditor has
not agreed (and does not anywhere in this Agreement agree) to exercise the
Option, and unless and until Creditor exercises the Option, Creditor has in no
way restricted itself from taking any action with respect to, or dealing with
and treating with, the Indebtedness and/or the Note as Creditor sees fit in
Creditor’s sole and absolute discretion.
2. Representations and
Warranties of Creditor. Upon any exercise of the Option by Creditor
in Creditor’s sole and absolute discretion by Creditor providing the Option
Exercise Notice to Purchaser, Creditor automatically shall be deemed to
represent and warrant to Purchaser as follows as of the date of the Option
Exercise Notice:
(a) Creditor
is the owner of the Indebtedness Claim, free and clear of all liens and
encumbrances. Creditor has not previously transferred, encumbered or
released all or any part of the Indebtedness Claim.
(b) Creditor
will at all times promptly withhold and pay any federal, state, local or foreign
taxes legally due and payable by Creditor as a result of payment of the Purchase
Price, including without limitation all income taxes, self employment taxes and
foreign entity withholding taxes.
(c) Creditor
has all necessary power and authority to (i) execute, deliver and perform all of
its obligations under this Agreement, and (ii) sell and transfer the
Indebtedness Claim. Creditor has such knowledge and experience in business
and financial matters that it is able to protect its own interests and evaluate
the risks and benefits of entering into this Agreement. Creditor
acknowledges and agrees that it has had an opportunity to conducts its own due
diligence and consult with its own counsel, tax and financial advisors, and that
Creditor is not relying in that regard on Purchaser. Creditor
acknowledges that except as expressly set forth in Section 3 below, Purchaser is
not making any representations or warranties, including, without limitation,
about PEI.
(d) The
execution, delivery and performance of this Agreement by Creditor has been duly
authorized by all requisite action on the part of Creditor, and has been duly
executed and delivered by Creditor.
(e) Except as
expressly stated herein, Creditor is not, directly or indirectly, receiving any
consideration from or being compensated in any manner by, and will not at any
time in the future accept any consideration or compensation from, PEI, any
affiliate of PEI, or any other person for entering into this Agreement or
selling the Indebtedness Claim.
3. Representations and
Warranties of Purchaser. Upon any exercise of the Option by
Creditor in Creditor’s sole and absolute discretion by Creditor providing the
Option Exercise Notice to Purchase, Purchaser automatically shall be deemed to
represent and warrant to Creditor as follows as of the date of the Option
Exercise Notice:
(a) Purchaser has
all necessary power and authority to execute, deliver and perform all of its
obligations under this Agreement.
(b) The
execution, delivery and performance of this Agreement by Purchaser has been duly
authorized by all requisite action on the part of Purchaser, and has been duly
executed and delivered by Purchaser.
(c) Purchaser is
an “accredited investor” as defined in Rule 501(a) of Regulation D of the
Securities Act and has such knowledge and experience in business and financial
matters that it is able to protect its own interests and evaluate the risks and
benefits of entering into this Agreement and purchasing the Indebtedness
Claim. Purchaser acknowledges and agrees that it has had an
opportunity to conducts its own due diligence and consult with its own counsel,
tax and financial advisors, and that Purchaser is not relying in that regard on
Creditor. Purchaser acknowledges that (i) except as expressly
set forth in Section 2 above, Creditor is not making any representations or
warranties about the Indebtedness Claim, and (ii) Creditor is not making any
representations or warranties about PEI.
4. Fees and
Expenses. Each of Creditor and Purchaser shall pay the
fees and expenses of its own advisers, counsel, accountants and other experts,
if any, and all other expenses incurred by such party incident to the
negotiation, preparation, execution, delivery and performance of this
Agreement. Creditor understands that Purchaser shall not be liable for any
commissions, selling expenses, orders, purchases, contracts, taxes, withholding,
or obligations of any kind resulting from any of Creditor’s
transactions. Creditor agrees to satisfy any and all of its tax
withholding and other obligations from the Purchase Price, and will
indemnify, defend and hold Purchaser and its affiliates harmless with respect to
all such obligations.
5. Choice of Law.
This Agreement shall be governed by and construed according to the laws of the
State of California, without giving effect to its choice of law
principles. Creditor agrees that all actions and proceedings arising out
of or relating directly or indirectly to this Agreement or any ancillary
agreement or any other obligations shall be litigated solely and exclusively in
the state or federal courts located in Los Angeles, California, that such courts
are convenient forums, and that Creditor submits to the personal jurisdiction of
such courts for purposes of any such actions or proceedings.
6. Limitation of
Damages. Each of the parties hereby waives any right which it may
have to claim or recover any incidental, special, exemplary, punitive or
consequential damages or any damages other than, or in addition to, actual
damages. Purchaser shall have no liability hereunder for any delay in or
failure to obtain Court Approval, or for any other causes beyond Purchaser’s
control.
7. Notices. All
notices and other communications shall be in writing and shall be provided by
the transmitting party to the recipient party by overnight delivery, facsimile
transmission, e-mail or U.S. mail, as follows:
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If to
Purchaser: |
Socius
CG II, Ltd.
11150
Santa Monica Blvd., Suite 1500
Los
Angeles, CA 90025
Att’n: Terren
Peizer
Fax
No.: (310) 444-5300
Email: info@sociuscg.com
with
a copy to:
Luce
Forward Hamilton & Scripps LLP
601
South Figueroa St., Suite 3900
Los
Angeles, CA 90017
Att’n: John
C. Kirkland, Esq.
Fax
No.: (213) 452-8035
Email: jkirkland@luce.com
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If to
Creditor: |
Lyles
Mechanical Co.
1210
W. Olive Ave.
Fresno,
CA 93728
Att’n: Will
Lyles
Fax
No.: (559) 441-1290
Email: wlyles@ldico.com
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with
a copy to:
Howard
Rice Nemerovski Canady Falk & Rabkin, P.C.
Three
Embarcadero Center, 7th Floor
San
Francisco, CA 94111
Att’n: Jeffrey
L. Schaffer, Esq.
Fax
No.: (415) 677-6262
Email: jschaffer@howardrice.com
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All
notices and communications shall be deemed made and effective as
follows: (i) if transmitted for overnight (next-day) delivery via a
nationally recognized overnight delivery service, the first business day after
being delivered by the transmitting party to such overnight delivery service,
provided that the overnight delivery service maintains a tracking number and can
confirm to the transmitting party that delivery to the recipient party has
occurred (and otherwise upon delivery to the recipient party), (ii) if faxed,
when transmitted in legible form by facsimile machine to the recipient party’s
correct facsimile machine number (provided that the transmitting party has
retained its facsimile machine-generated confirmation of the receipt of such fax
by the recipient party’s facsimile machine), (iii) if by email, when transmitted
by e-mail (provided that the e-mail was sent to the recipient party’s correct
e-mail address and that the e-mail was not returned to the transmitting party as
undeliverable), or (iv) if mailed via regular U.S. mail, upon delivery to the
recipient party. Either party may designate a superseding notice
contact name, street address, e-mail address or fax number by providing the
other party with written notice pursuant to the provisions of this Section
7.
8. General. The
headings herein are for convenience only, do not constitute a part of this
Agreement and shall not be deemed to limit or affect any of the provisions
hereof. The language used in this Agreement will be deemed to be the
language chosen by the parties to express their mutual intent, and no rules of
strict construction will be applied against any party. This Agreement is
intended for the benefit of Creditor and Purchaser and their respective
successors and permitted assigns and is not for the benefit of, nor may any
provision hereof be enforced by, any other person (except for the provisions in
subparagraph (y) of subparagraph (f) of Section 1 above that are expressly
stated to be for the benefit of, and enforceable by, PEI). If
the Option is exercised by Creditor in its sole and absolute discretion, the
representations and warranties contained herein shall survive. This
Agreement may be executed in two or more counterparts, by facsimile or
electronic transmission, all of which when taken together shall be considered
one original.
9. Amendments and
Waivers. No provision of this Agreement may be waived or amended
except in a written instrument signed, in the case of an amendment, by both
Creditor and Purchaser, or, in the case of a waiver, by the party against whom
enforcement of any such waiver is sought. No waiver of any default with
respect to any provision, condition or requirement of this Agreement shall be
deemed to be a continuing waiver in the future or a waiver of any subsequent
default or a waiver of any other provision, condition or requirement hereof, nor
shall any delay or omission of either Creditor or Purchaser to exercise any
right hereunder in any manner impair the exercise of any such
right.
10. Entire
Agreement. This Agreement, together with the exhibits hereto,
contains the entire agreement and understanding between Creditor and Purchaser,
and supersedes all prior and contemporaneous agreements, term sheets, letters,
discussions, communications and understandings, both oral and written, between
Creditor and Purchaser concerning the Indebtedness claim, which Creditor and
Purchaser acknowledge have been merged into this Agreement. No party,
representative, attorney or agent has relied upon any collateral contract,
agreement, assurance, promise, understanding or representation not expressly set
forth hereinabove. The parties hereby expressly waive all rights and
remedies, at law and in equity, directly or indirectly arising out of or
relating to, or which may arise as a result of, any person or entity’s reliance
on any such assurance.
IN
WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed on the day and year first above written.
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SOCIUS CG
II, LTD.,
a
Bermuda exempted company
By:
/S/ TERRY
PEIZER
Terry Peizer, Managing
Director
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By:
/S/ JOHN
LEONARDO
John Leonardo, Assistant Treasurer and
Secretary
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ACKNOWLEDGMENT BY
PEI
PEI
hereby acknowledges and agrees as follows:
(1) The
recitals in Recital Paragraphs A and B on the first page of the foregoing
Agreement are true and correct;
(2) The
sale and assignment of the Indebtedness Claim does not cover any rights of
Creditor against PEI that do not arise under the Note, and neither Creditor’s
entering into the foregoing Agreement nor possible future sale and assignment of
the Indebtedness Claim hereunder shall in any way prejudice or have any adverse
effect on any such other rights of Creditor;
(3) The
execution, delivery and performance of the foregoing Agreement by Creditor and
Purchaser does not and will not (a) conflict with, violate or cause a breach or
default under the Note, or any other agreement or document related to the debt
comprising the Indebtedness Claim, or (b) require any waiver, consent
or other action of PEI or any of affiliate of PEI;
(4) The
Note is valid, outstanding and enforceable in accordance with its terms, and is
not subject to any defense or offset, and shall not become subject to any
defense or offset (other than repayment and cancellation of the Note by if, when
and as provided in sub-paragraph (y) of sub-paragraph (f) of foregoing
Agreement) by virtue of the consummation of the sale and assignment of the
Indebtedness Claim under the foregoing Agreement; and
(5) Each
of Creditor and Purchaser is relying on the foregoing acknowledgments and
agreements by PEI in entering into the foregoing Agreement.
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By:
/S/ NEIL M.
KOEHLER
Neil M. Koehler, Chief Executive
Officer
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