Exhibit 99.3
LOCK-UP AGREEMENT
THIS LOCK-UP AGREEMENT (this “Agreement”),
dated as of April 13, 2006, is by and among Pacific Ethanol, Inc., a
Delaware corporation (the “Company”), Cascade Investment, L.L.C., a Washington
limited liability company (the “Purchaser”), and each of the persons listed on Schedule I
hereto (each a “Stockholder”, and, collectively, the “Stockholders”).
WHEREAS, the Purchaser and the Company have entered into a Purchase Agreement dated as of November 14,
2005 (the “Purchase Agreement”) providing for the purchase by the Purchaser of certain
cumulative redeemable convertible preferred stock of the Company (the transactions
contemplated by the Purchase Agreement, including without limitation the issuance
and sale of securities thereunder, the “Transactions”);
WHEREAS, in order to induce the
Purchaser to consummate the Transactions, the Stockholders desire to enter into
this Lock-Up Agreement (the “Agreement”), to take the applicable actions set
forth in this Agreement, and to be bound by the obligations and restrictions
contained herein; and
WHEREAS, each Stockholder is the record and beneficial
owner, or the trustee of a trust whose
beneficiaries are the beneficial owners, of such number of shares of common stock, par value $.001 per share, of
the Company (the “Common Stock”) set forth opposite such Stockholder’s name on Schedule I
hereto (such shares of Common Stock, as such shares may be adjusted by
stock dividend, stock split, recapitalization, combination or exchange of
shares, merger, consolidation, reorganization or other change or transaction,
together with shares of Common Stock that may be acquired after the date
hereof by such Stockholder, including shares of Common Stock issued upon the
exercise of options or warrants to purchase Common Stock (as the same may be
adjusted as aforesaid), being collectively referred to herein as the “Shares”).
NOW, THEREFORE, in consideration
of the premises and the representations, warranties and agreements contained
herein, each of the parties hereto agrees as follows:
1. Representations and Warranties of the Stockholders. Each Stockholder hereby, severally and not
jointly, represents and warrants as follows:
(a) Authority. The Stockholder
has all requisite power and authority to execute and deliver this Agreement and
to consummate the transactions contemplated hereby. The execution, delivery and
performance of this Agreement and the consummation of the transactions
contemplated hereby have been duly authorized by the Stockholder. This Agreement
has been duly executed and delivered by the Stockholder and constitutes a valid
and binding obligation of the Stockholder enforceable against the Stockholder
in accordance with its terms. Neither the execution, delivery or performance of
this Agreement by the Stockholder nor the consummation by the Stockholder of
the transactions contemplated hereby will (i) require any filing with, or
permit, authorization, consent or approval of, any
federal, state, local or
municipal foreign or other government or subdivision, branch, department or
agency thereof or any governmental or quasi-governmental authority of any
nature, including any court or other tribunal, (a “Governmental Entity”), (ii) result
in a violation or breach of, or constitute (with or without due notice or lapse
of time or both) a default under, or give rise to any right of termination,
amendment, cancellation or acceleration under, or result in the creation of any
pledge, claim, lien, option, charge, encumbrance or security interest of any
kind or nature whatsoever (a “Lien”) upon any of the properties or assets of
the Stockholder under, any of the terms, conditions or provisions of any note,
bond, mortgage, indenture, lease, license, permit, concession, franchise,
contract, agreement or other instrument or obligation (a “Contract”) to which
the Stockholder is a party or by which the Stockholder or any of the Stockholder’s
properties or assets, including the Stockholder’s Shares, may be bound or (iii) violate
any judgment, order, writ, preliminary or permanent injunction or decree (an “Order”)
or any statute, law, ordinance, rule or regulation of any Governmental
Entity (a “Law”) applicable to the Stockholder or any of the Stockholder’s
properties or assets, including the Stockholder’s Shares.
(b) The Shares. Subject to the
terms of this Agreement, the Stockholder’s Shares and the certificates
representing such Shares are now, and at all times during the term hereof will
be, held by such Stockholder, or by a nominee or custodian for the benefit of
such Stockholder. The Stockholder has good and marketable title to such Shares,
free and clear of any Liens, proxies, voting trusts or agreements,
understandings or arrangements, except, in the case of certain of the
Stockholders, as set forth in Schedule I hereto. The Stockholder
owns of record or beneficially no Common Stock or other voting interest in the
Company, or holds any right to acquire any additional shares of Company Common
Stock or any interest therein, other than such Stockholder’s Shares and shares
of Company Common Stock issuable upon the exercise of options and warrants, in
each case as set forth on Schedule I hereto.
(c) Reliance by Purchaser. Each
Stockholder understands and acknowledges that the Purchaser is relying upon
such Stockholder’s execution and delivery of this Agreement, such Stockholder’s
performance of the Stockholder’s obligations under this Agreement, and the
accuracy of the Stockholders’ representations and warranties set forth in this
Agreement, in making its determination with respect to the consummation of the
Transactions.
2. Agreements of All Stockholders. Each Stockholder hereby, severally and not
jointly, agrees as follows:
(a) Lock-Up on Transfer of Shares. During the one (1) year period commencing on the date hereof and
continuing through April 13, 2007 (the “Lock-Up Period”), he shall not,
directly or indirectly, offer, sell, transfer, pledge, assign or otherwise
dispose of, or enter into any contract, option or other arrangement (including
any profit sharing arrangement) or understanding with respect to the offer,
sale, transfer, pledge, assignment or other disposition of (collectively, “Transfer”),
the Shares or any securities convertible into or exercisable or exchangeable
for Company Common Stock, to any person; provided, however, that
during the Lock-Up Period, each Stockholder may Transfer shares of Company
Common Stock such that the number of shares being then Transferred, together
with all shares previously
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Transferred during the Lock-Up
Period, does not exceed the number set forth in the column labeled “Transferable
Shares” on Schedule I for such Stockholder.
(b) No Hedging or Similar Transactions. The transfer restrictions contained in this
Agreement preclude the Stockholders from engaging in any hedging or other
transaction during the Lock-Up Period that is designed to or reasonably
expected to lead to or result in a Transfer of the Shares, even if such Shares
would be disposed of by someone other than a Stockholder. Such prohibited
hedging and/or hypothecation or other transaction would include, without
limitation, any short sale (whether or not against the box) or any purchase,
sale, or grant of any right (including, without limitation, any put or call
option) with respect to the Shares or with respect to any security (other than
a broad-based market basket or index) that includes, relates to or derives any
significant part of its value from the Shares.
(c) Permitted
Transfers. Notwithstanding the foregoing, a Stockholder may Transfer
any or all of his Shares in a private transaction (i.e. a transaction that is
not effected through the Over-the Counter Bulletin Board, any stock exchange,
quotation system or other public marketplace) to a Family Member (as defined
below); provided, however, that the transferee of such Shares
first agrees in writing, pursuant to an agreement in form acceptable to
the Purchaser, to be bound by the provisions of this Agreement in a manner
which would treat any proposed Transfers by such transferee as being a Transfer
by such Stockholder. For purposes of this paragraph, “Family Member” of a
Stockholder shall mean a spouse, lineal descendants, stepchildren, father,
mother, brother or sister of the Stockholder, or a trust for which the
Stockholder is grantor and the beneficiary if the Stockholder or a Family
Member.
(d) Involuntary
Transfers. If any Shares are subject to any involuntary transfer, whether
by reason of death, bankruptcy or divorce proceedings or otherwise, the
transferee of such Shares shall take such Shares subject to this Agreement.
(e) Stop
Transfer Order. The Stockholders authorize the Company, during the Lock-Up
Period, to cause its transfer agent and registrar to decline to transfer and/or
to note stop transfer restrictions on the transfer books and records of the
Company with respect to the Transfer of any Shares, except to the extent that
such Transfers are in compliance with the terms and conditions of this
Agreement.
(f) Invalid
Transfers. Any purported transfer of Shares that is not in accordance with
this Agreement shall be null and void, and shall not operate to transfer any
right, title or interest in such Shares to the purported transferee.
(g) Legend.
To implement the restrictions set forth in this Agreement, the Company may imprint
the following legend on the reverse side of the certificates evidencing the
Shares:
TRANSFER
OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE IS RESTRICTED BY THE TERMS OF
A LOCK-UP AGREEMENT, DATED APRIL 13, 2006, BETWEEN THE HOLDER OF
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THIS
CERTIFICATE AND THE ISSUER OF THIS CERTIFICATE. A COPY OF THAT AGREEMENT IS ON
FILE AT THE PRINCIPAL OFFICES OF THE ISSUER OF THIS CERTIFICATE. NO SALE,
TRANSFER, ASSIGNMENT, PLEDGE OR OTHER DISPOSITION SHALL BE EFFECTIVE UNLESS AND
UNTIL THE TERMS AND CONDITIONS OF THE LOCK-UP AGREEMENT SHALL HAVE BEEN
COMPLIED WITH IN FULL.
3. Further Assurances. Each Stockholder will, from time to time,
execute and deliver, or cause to be executed and delivered, such additional or
further transfers, assignments, endorsements, consents and other instruments as
the Company or the Purchaser may reasonably request for the purpose of
effectively carrying out the transactions contemplated by this Agreement.
4. Termination. This Agreement, and all rights and obligations of the parties
hereunder, shall terminate upon the expiration of the Lock-Up Period. In the
event that a Stockholder ceases to be a director, officer or employee of the
Company or any of its affiliates, as the result of a termination, resignation
or otherwise, prior to the expiration of the Lock-Up Period, then this
Agreement, and all rights and obligations of the Stockholder hereunder, shall
immediately terminate with respect to such Stockholder.
5. General.
(a) Counterparts. This
Agreement may be executed in two or more counterparts, all of which shall
be considered one and the same agreement and shall become effective when two or
more counterparts have been signed by each of the parties and delivered to the
other parties, it being understood that all parties need not sign the same
counterpart.
(b) Entire Agreement. Each
party hereby acknowledges that no other party or any other person or entity has
made any promises, warranties, understandings or representations whatsoever,
express or implied, not contained in this Agreement and acknowledges that it
has not executed this Agreement in reliance upon any such promises,
representations, understandings or warranties not contained herein and that
this Agreement supersedes all prior agreements and understandings between the
parties with respect thereto. There are no promises, covenants or undertakings
other than those expressly set forth or provided for in this Agreement.
(c) Governing Law. This
Agreement shall be governed and construed in accordance with the laws of the
State of Delaware without regard to any applicable conflicts of
law.
(d) Titles
and Subtitles. The titles and subtitles used in this Agreement are used for
convenience only and are not to be considered in construing or interpreting
this Agreement.
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(e) Notices.
All notices and other communications required or permitted hereunder shall be
in writing. Notices shall be delivered personally, via recognized overnight
courier (such as Federal Express, DHL or Airborne Express) or via certified or registered
mail. Notices may be delivered via facsimile or e-mail, provided that by
no later than two days thereafter such notice is confirmed in writing and sent
via one of the methods described in the previous sentence. Notices shall be
addressed to the address of each Stockholder as is set forth on the books and
records of the Company, or at such other address or facsimile number as such Stockholder
shall have furnished in writing to the other parties hereto. All notices shall
be effective upon receipt.
(f) Severability Whenever possible, each provision of this
Agreement will be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be invalid,
illegal or unenforceable in any respect under any applicable law or rule in
any jurisdiction, such invalidity, illegality or unenforceability will not
affect any other provision or any other jurisdiction, but this Agreement will
be reformed, construed and enforced in such jurisdiction to the greatest extent
possible to carry out the intentions of the parties hereto.
(g) Delays
or Omissions. No delay or omission to exercise any right, power or remedy
accruing to any party under this Agreement, upon any breach or default of any
other party under this Agreement, shall impair any such right, power or remedy
of such nonbreaching or nondefaulting party nor shall it be construed to be a
waiver of any such breach or default, or an acquiescence therein, or of or in
any similar breach or default thereafter occurring; nor shall any waiver of any
single breach or default be deemed a waiver of any other breach or default
theretofore or thereafter occurring.
(h) Facsimile
Signatures. Any signature page delivered by a fax machine shall be
binding to the same extent as an original signature page, with regard to any
agreement subject to the terms hereof or any amendment thereto.
(i) Amendment
and Waiver. This Agreement may not be amended, modified, altered or
supplemented except upon the execution and delivery of an instrument in writing
signed by all parties hereto. Any action, extension or waiver by any party of
any provision hereto shall be valid only if set forth in an instrument in
writing signed on behalf of such party.
6. Enforcement. The parties agree that irreparable damage would occur in the event that
any of the provisions of this Agreement were not performed in accordance with their
specific terms or were otherwise breached. It is accordingly agreed that the
parties shall be entitled to an injunction or injunctions to prevent breaches
of this Agreement and to enforce specifically the terms and provisions of this
Agreement in a court of the United States. This being in addition to any other
remedy to which they are entitled at law or in equity. In addition, each of the
parties hereto waives any right to trial by jury with respect to any claim or
proceeding related to or arising out of this Agreement or any of the transactions
contemplated hereby.
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7. Notification Requirement. Each Stockholder hereby agrees, while this
Agreement is in effect, to promptly notify the Company and the Purchaser of the
number of Shares acquired by, or Transferred by, such Stockholder, if any,
after the date hereof.
IN
WITNESS WHEREOF, each party hereto has signed this Agreement as of the date
first written above.
Counterpart Signatures Follow
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Execution
of Lock-Up Agreement by Counterpart Signatures
The
undersigned hereby executes the Lock-Up Agreement, dated as of April 13,
2006, by and among Pacific Ethanol, Inc., Cascade Investment, L.L.C. and
the Stockholders listed on Schedule I hereto.
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PACIFIC ETHANOL, INC.
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By:
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Name:
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Title:
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Execution
of Lock-Up Agreement by Counterpart Signatures
The
undersigned hereby executes the Lock-Up Agreement, dated as of April 13,
2006, by and among Pacific Ethanol, Inc., Cascade Investment, L.L.C. and
the Stockholders listed on Schedule I hereto.
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CASCADE
INVESTMENT, L.L.C.
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By:
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Name:
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Title:
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Execution
of Lock-Up Agreement by Counterpart Signatures
The
undersigned hereby executes the Lock-Up Agreement, dated as of April 13,
2006, by and among Pacific Ethanol, Inc., Cascade Investment, L.L.C. and
the Stockholders listed on Schedule I hereto.
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STOCKHOLDERS
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By:
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William L. Jones
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By:
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Neil M. Koehler
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By:
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Ryan W. Turner
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SCHEDULE I
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STOCKHOLDER
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COMMON
STOCK
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OPTIONS/WARRANTS
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TRANSFERABLE
SHARES
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William L. Jones(1)
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2,500,000
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50,000
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1,000,000
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Neil M. Koehler
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4,188,139
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—
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1,675,256
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Ryan W. Turner(1)
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914,166
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—
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365,666
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Total
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7,602,305
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50,000
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3,040,922
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(1) See
Voting Agreement, dated as of October 27, 2003, among Southern Counties
Oil Co., William C. Jones and Maurine Jones, Ryan W. Turner and Wendy Turner
and Andrea Jones.
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