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EXHIBIT 10.3
 
 
 
 
 
 
 
[FORM OF]
ETHANOL MARKETING AGREEMENT
([________] PROJECT)
 
by and between
 
PACIFIC ETHANOL [_________], LLC
 
and
 
KINERGY MARKETING, LLC
 
 
 
Dated as of  June 29, 2010
 
 
 
 

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TABLE OF CONTENTS
 

    Page       Article I DEFINITIONS; INTERPRETATION 1       1.1 Definitions  1
1.2 Interpretation  5       Article II MARKETING ACTIVITIES  5       2.1
Bilateral Transactions  5 2.2 Storage 6 2.3 Obligations of Project Company 6 2.4
Back-to-Back Transactions  7 2.5 Netting  7 2.6  Title; Delivery Point;
Nominations; Measurement  7       Article III PAYMENTS  8       3.1 Fees and
Payments  8 3.2 Overdue Payments; Billing Dispute  9 3.3 Audit 9       Article
IV TERM; TERMINATION 10       4.1 Term  10 4.2 Termination by Kinergy 10 4.3 
Termination by Project Company 10  4.4  Change of Control  11 4.5  Effect of
Termination  11       Article V INSURANCE 11       5.1 Kinergy Insurance  11 5.2
Kinergy Insurance Premiums and Deductibles  12       Article VI LIMITATIONS ON
LIABILITY  13       6.1 No Consequential or Punitive Damages  13       Article
VII INDEMNIFICATION  13       7.1 Project Company’s Indemnity 13 7.2  Kinergy’s
Indemnity  13

 
 
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Article VIII REPRESENTATIONS AND WARRANTIES 13       Article IX FORCE MAJEURE 14
      9.1 Definition  14 9.2 Effect 14 9.3 Limitations 14       Article X
DISPUTE RESOLUTION  15       10.1 Attempts to Settle  15 10.2 Resolution by
Expert  15 10.3 Arbitration  15 10.4 Consequential and Punitive Damages  15 10.5
Finality and Enforcement of Decision  15 10.6 Costs  16 10.7 Continuing
Performance Obligations  16       Article XI CONFIDENTIALITY  16       Article
XII ASSIGNMENT AND TRANSFER  16       Article XIII MISCELLANEOUS 16       13.1
Entire Agreement 16 13.2 Counterparts  17 13.3 Survival  17 13.4 Severability 
17 13.5 Governing Law  17 13.6 Binding Effect 17 13.7 Notices  17 13.8
Amendment  18 13.9 No Implied Waiver  18 13.10 Lines of Credit  18       Exhibit
A Form of PEI Guaranty   Exhibit B Operating Protocol   Exhibit C Certain
Customers        

 
 

 
 
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This ETHANOL MARKETING AGREEMENT (as amended, amended and restated, supplemented
or otherwise modified from time to time, this “Agreement”) is entered into by
and between PACIFIC ETHANOL [__________], LLC, a Delaware limited liability
company (“Project Company”), and KINERGY MARKETING, LLC, an Oregon limited
liability company (“Kinergy”), as of June 29, 2010.  Project Company and Kinergy
are each individually referred to herein as a “Party”, and collectively are
referred to herein as the “Parties”.
 
RECITALS
 
A.           Kinergy provides marketing services for denatured fuel ethanol
production facilities owned by subsidiaries of Pacific Ethanol, Inc., a Delaware
corporation (“PEI”).
 
B.           Project Company is the owner of an approximately [__] million
gallons-per-year denatured fuel ethanol production facility in [________],
[_______] (the “Facility”) and Project Company has requested that Kinergy
provide denatured fuel ethanol marketing services for the Facility and maintain
lines of credit available of not less than $5,000,000.
 
C.           Kinergy desires to provide such marketing services in accordance
with and subject to the terms and conditions of this Agreement.
 
AGREEMENT
 
NOW, THEREFORE, in consideration of the agreements and covenants hereinafter set
forth, and intending to be legally bound, the Parties hereto covenant and agree
as follows:
 
ARTICLE I
 
DEFINITIONS; INTERPRETATION
 
1.1   Definitions.  The following terms shall have the meanings set forth below
when used in this Agreement:
 
“Act of Insolvency” means, with respect to any Person, any of the
following:  (a) commencement by such Person of a voluntary proceeding under any
jurisdiction’s bankruptcy, insolvency or reorganization law; (b) the filing of
an involuntary proceeding against such Person under any jurisdiction’s
bankruptcy, insolvency or reorganization law which is not vacated within 60 days
after such filing; (c) the admission by such Person of the material allegations
of any petition filed against it in any proceeding under any jurisdiction’s
bankruptcy, insolvency or reorganization law; (d) the adjudication of such
Person as bankrupt or insolvent or the winding up or dissolution of such Person;
(e) the making by such Person of a general assignment for the benefit of its
creditors (assignments for a solvent financing excluded); (f) such Person fails
or admits in writing its inability to pay its debts generally as they become
due; (g) the appointment of a receiver or an administrator for all or a
substantial portion of such Person’s assets, which receiver or administrator, if
appointed without the consent of such Person, is not discharged within 60 days
after its appointment; or (h) the occurrence of any event analogous to any of
the foregoing with respect to such Person occurring in any jurisdiction.
 
 
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“Affiliate” of a specified Person means any corporation, partnership, sole
proprietorship or other Person which directly or indirectly through one or more
intermediaries controls, is controlled by or is under common control with the
Person specified.  The term “control” means the ownership, either direct or
indirect, of twenty-five percent (25%) or more of the voting securities (or
comparable equity interests) or other ownership interests of a Person, or the
possession, either direct or indirect, of the power to direct or cause the
direction of the management and policies of a Person, whether through the
ownership of voting securities, by contract or any other means whatsoever.
 
“Agreement” has the meaning given to such term in the preamble hereto.
 
“Asset Management Agreement” means the Asset Management Agreement, dated as of
June 29, 2010 among Pacific Ethanol Holding Co. LLC, Pacific Ethanol Madera LLC,
Project Company, Pacific Ethanol Stockton, LLC, and Pacific Ethanol
[__________], LLC, as Owners, Pacific Holding, as Owner Agent and Pacific
Ethanol, Inc., as Manager, as the same may be amended, supplemented or otherwise
modified from time to time.
 
“Bilateral Transaction” means a transaction entered into by Kinergy with one or
more Third Parties consisting of one or more forward sales of Ethanol, with
respect to which Ethanol produced at the Facility by Project Company is sold to
such Third Party or Third Parties.
 
“Business Day” means any day other than a Saturday, Sunday or a day on which
commercial banks in Sacramento, California or New York, New York are required or
authorized to be closed.
 
“Change of Control” has the meaning ascribed thereto in the Credit Agreement.
 
“Credit Agreement” means the Credit Agreement, dated as of June 25, 2010, by and
among Pacific Ethanol Holding Co. LLC, Pacific Ethanol Madera LLC, Project
Company, Pacific Ethanol Stockton, LLC, and Pacific Ethanol [__________], LLC,
as Borrowers, Pacific Ethanol Holding Co. LLC, as Borrowers’ Agent, WestLB AG,
New York Branch, as the administrative agent and the collateral agent, and the
lenders parties thereto from time to time, as the same may be amended,
supplemented or otherwise modified from time to time.
 
 “Dispute” means a dispute, controversy or claim.
 
“Ethanol” means denatured fuel ethanol produced by the Facility satisfying the
American Society for Testing and Materials (ASTM) D4806 specifications for
denatured fuel ethanol.
 
“Expert” means an expert having sufficient technical expertise to address the
matter subject to a Dispute.
 
“Facility” has the meaning given to such term in the recitals hereto.
 
“Financing Documents” means any and all loan agreements, credit agreements
(including the Credit Agreement), reimbursement agreements, notes, indentures,
bonds, security agreements, pledge agreements, mortgages, guarantee documents,
intercreditor agreements, subscription agreements, equity contribution
agreements and other agreements and instruments relating to the financing (or
refinancing) of the ownership, operation and maintenance of the Facility.
 
 
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“Financing Parties” means the banks, lenders, noteholders and/or other financial
institutions (or an agent or trustee thereof) party to the Financing Documents.
 
“Force Majeure Event” has the meaning set forth in Section 9.1.
 
“Good Industry Practice” means any of the practices, methods and acts engaged in
or approved by a significant portion of the ethanol production or marketing (as
the case may be) industry during the relevant time period, or any of the
practices, methods and acts which, in the exercise of reasonable judgment in
light of the facts known at the time the decision was made, could have been
expected to accomplish the desired result at a reasonable cost consistent with
good business practices, reliability, safety and expedition.  “Good Industry
Practice” is not limited to a single, optimum practice, method or act to the
exclusion of others, but rather is intended to include acceptable practices,
methods or acts generally accepted in the region.
 
“Governmental Authority” means any United States federal, state, municipal,
local, territorial, or other governmental department, commission, board, bureau,
agency, regulatory authority, instrumentality, judicial or administrative body.
 
“Incentive Fee” means, for each Bilateral Transaction, the product of 1.0%
multiplied by the aggregate amount of the Purchase Price for such Bilateral
Transaction.
 
“Incentive Fee (Estimated)” means, for each Bilateral Transaction, the product
of 1.0% multiplied by the aggregate amount of the Purchase Price (Estimated) for
such Bilateral Transaction.
 
“Kinergy” has the meaning given to such term in the preamble hereto.
 
“Kinergy Indemnified Person” has the meaning given to such term in Section 7.2.
 
“Law” means any law, statute, act, legislation, bill, enactment, policy, treaty,
international agreement, ordinance, judgment, injunction, award, decree, rule,
regulation, interpretation, determination, requirement, writ or order of any
Governmental Authority.
 
“Liabilities” has the meaning given to such term in Section 7.1.
 
“Minimum Rating Criteria”, with respect to any Person, means such Person has a
senior unsecured debt rating of at least “Baa2” by Moody’s or “BBB” by S&P or an
equivalent rating from another nationally recognized rating agency, provided
that each Person set forth on Exhibit C hereto shall be deemed to satisfy the
Minimum Rating Criteria.
 
“Monthly Date” means the last Business Day of each calendar month.
 
“Moody’s” means Moody’s Investors Service Inc., and any successor thereto that
is a nationally recognized rating agency.
 
“NewCo” means New PE Holdco LLC, a Delaware limited liability company and the
indirect owner on the date hereof  of all the equity interests in Project
Company.
 
 
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“Party” or “Parties” has the meaning given to such term in the preamble hereto.
 
“Payment Adjustment Date” has the meaning given to such term in Section 3.1 (b).
 
“PEI” has the meaning given to such term in the recitals hereto.
 
“Person” means and includes natural persons, corporations, limited liability
companies, limited partnerships, general partnerships, joint stock companies,
joint ventures, associations, companies, trusts, banks, trust companies and
other organizations, whether or not legal entities, Governmental Authorities and
any other entity.
 
“Prime Rate” means the rate per annum listed as the “Prime Rate” in the “Money
Rates” section of The Wall Street Journal from time to time.
 
“Project Company” has the meaning given to such term in the preamble hereto.
 
“Project Company Indemnified Person” has the meaning given to such term in
Section 7.1.
 
“Purchase Price” means, subject to Section 3.1 (a), (a) for each Bilateral
Transaction that is part of a “pooling” arrangement by Kinergy among Affiliate
Persons that are “Borrowers” under and as defined in the Credit Agreement, the
product of (i) the weighted average delivered price of denatured fuel ethanol
attributable to sales of denatured fuel ethanol which were brokered by Kinergy
for such Persons during the applicable calendar month multiplied by (ii) the
amount (expressed in gallons) of Ethanol delivered by Project Company to Kinergy
hereunder during such calendar month in respect of such Bilateral Transactions
or (b) for each Bilateral Transaction that is not part of any such arrangement,
the aggregate gross payments received by Kinergy (or, if the applicable Third
Party defaults in its payment obligations to Kinergy in respect of such
Bilateral Transaction, the aggregate amount of gross payments which Kinergy was
entitled to receive) for such Bilateral Transaction from the applicable Third
Party; provided that, in any event, Kinergy shall elect, in its sole discretion
at the time of entering into any Bilateral Transaction (and by notice to Project
Company), whether such Bilateral Transaction is part of any such “pooling”
arrangement.
 
“Purchase Price (Estimated)” means, with respect to each Bilateral Transaction,
the anticipated aggregate payments of Purchase Price with respect to such
Bilateral Transaction (as reasonably determined by Kinergy).
 
“S&P” means Standard & Poor’s Ratings Services, a division of The McGraw-Hill
Companies, Inc., and any successor thereto that is a nationally recognized
rating agency.
 
“Third Party” means any Person (other than PEI or a subsidiary thereof) that
enters into a Bilateral Transaction with Kinergy.
 
“Transportation Costs” means, for each Bilateral Transaction, all actual,
out-of-pocket and documented costs and other expenses incurred by or on behalf
of Kinergy in connection with the transportation of Ethanol to the applicable
Third Party, including truck, rail, barge and/or terminal costs.
 
“Transportation Costs (Estimated)” means, for each Bilateral Transaction, the
aggregate amount of Transportation Costs anticipated to be incurred by Kinergy
in connection with such Bilateral Transaction (as reasonably determined by
Kinergy).
 
 
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1.2   Interpretation.  The following interpretations and rules of construction
shall apply to this Agreement:  (a) titles and headings are for convenience only
and will not be deemed part of this Agreement for purposes of interpretation;
(b) unless otherwise stated, references in this Agreement to “Sections” or
“Articles” refer, respectively, to Sections or Articles of this Agreement;
(c) “including” means “including, but not limited to”, and “include” or
“includes” means “include, without limitation” or “includes, without
limitation”; (d) “hereunder”, “herein”, “hereto” and “hereof”, when used in this
Agreement, refer to this Agreement as a whole and not to a particular Section or
clause of this Agreement; (e) in the case of defined terms, the singular
includes the plural and vice versa; (f) unless otherwise indicated, each
reference to a particular Law is a reference to such Law as it may be amended,
modified, extended, restated or supplemented from time to time, as well as to
any successor Law thereto; (g) unless otherwise indicated, references to
agreements shall be deemed to include all subsequent amendments, supplements and
other modifications thereto; and (h) unless otherwise indicated, each reference
to any Person shall include such Person’s successors and permitted assigns.
 
ARTICLE II
 
MARKETING ACTIVITIES
 
2.1   Bilateral Transactions.
 
(a)   Subject to the terms hereof, Project Company hereby grants Kinergy the
exclusive right to market, purchase and sell all of Project Company’s Ethanol,
provided, that during the continuance of any default by Kinergy that would allow
Project Company to terminate this Agreement pursuant to Section 4.3 or during
the 30-day cure period provided in Section 4.3(c) (notwithstanding such cure
period), if Kinergy is not performing its obligations with respect to marketing
Project Company’s Ethanol or during the continuance of any Force Majeure Event
(including the effects thereof) that renders Kinergy unable to perform its
obligations under this Agreement, then Project Company shall have the right to
engage any other Person to market, purchase and sell Project Company’s Ethanol
and Kinergy shall not be entitled to any compensation (including Incentive Fees)
with respect to any replacement services provided by such Person.  Kinergy shall
use its reasonable commercial efforts to solicit, negotiate and enter into, and
Kinergy shall perform, Bilateral Transactions with Third Parties.  Kinergy shall
have absolute discretion in the solicitation, negotiation, administration
(including the collection of payments), enforcement and execution of Bilateral
Transactions and all sales of Ethanol produced by the Facility shall be
effectuated by Bilateral Transactions.  Kinergy shall not enter into any
transaction in respect of Project Company’s Ethanol that is not a Bilateral
Transaction or with a counterparty that does not satisfy the Minimum Rating
Criteria, in each case without the consent of Project Company, which consent may
be withheld by Project Company in its discretion.  Project Company hereby grants
Kinergy the power and authority necessary to perform its obligations and
exercise its rights hereunder.
 
 
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(b)   As further described in Sections 2.3, 2.4 and 2.6 below and except as
otherwise provided herein, Project Company shall provide Ethanol to Kinergy free
and clear of all liens and encumbrances.
 
(c)   Kinergy shall perform its obligations hereunder and under Bilateral
Transactions in accordance with this Agreement, applicable Laws and Good
Industry Practice and shall use commercially reasonable efforts to maximize the
proceeds generated from the sale of Ethanol.
 
(d)   Kinergy shall at all times maintain available lines of credit of not less
than $5,000,000.
 
2.2   Storage.  Kinergy acknowledges that Project Company has only limited
storage capacity and Kinergy agrees that it shall take any Ethanol requested by
Kinergy within seven days (or such longer period of time as may reasonably be
agreed by Project Company) of the time that Project Company has made such
Ethanol available to Kinergy.
 
2.3   Obligations of Project Company.
 
a)           Project Company shall provide Kinergy with all information
reasonably requested by Kinergy, and Project Company shall assist Kinergy as
reasonably requested in the solicitation, negotiation and performance of
Bilateral Transactions.
 
(b)           Notwithstanding anything to the contrary herein, Project Company
shall not be responsible for the delivery of any Ethanol to Kinergy during any
periods of scheduled Facility maintenance (unless and to the extent the
applicable Ethanol is available to be delivered to Kinergy from Project
Company’s storage facilities); provided, that, at any time that PEI or one of
its Affiliates is not the asset manager pursuant to the Asset Management
Agreement (or any successor agreement), Kinergy shall have received at least ten
Business Days prior notice of such scheduled maintenance (it being acknowledged
and agreed that if Kinergy does not receive at least ten Business Days prior
notice, then such maintenance activity shall be deemed to be a mechanical
breakdown and covered by clause (c) below for purposes hereof).
 
 (c)           If on any day, Project Company is unable to perform its
obligations to deliver Ethanol under this Agreement due to a mechanical
breakdown (including a forced outage of the Facility) that is not a Force
Majeure Event and such mechanical breakdown has continued for more than three
consecutive days, Kinergy shall, at Project Company’s option and at Project
Company’s expense, and provided that,  at any time that PEI or one of its
Affiliates is not the asset manager pursuant to the Asset Management Agreement
(or any successor agreement), Project Company provides Kinergy with prompt
notice of its intent to exercise such option, use commercially reasonable
efforts to identify and procure replacement Ethanol to be delivered to the Third
Party under the applicable Bilateral Transaction.  In such event, if and only if
the Parties reach agreement as to an alternative delivery point, Kinergy shall
acquire and deliver replacement Ethanol in a quantity sufficient to meet the
contract quantity of such Bilateral Transaction at such alternate point (and
Project Company shall be responsible for all transportation costs associated
therewith).  In all other instances, Project Company shall be responsible for
any damages incurred by Kinergy in connection with Kinergy’s failure to perform
under the applicable Bilateral Transaction as a result of such mechanical
breakdown (it being acknowledged and agreed that Kinergy shall use commercially
reasonable efforts to mitigate the effects of any such mechanical breakdown and
Project Company’s resulting inability to deliver Ethanol).
 
 
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(d)           At the request of Project Company, Kinergy will cause PEI to
execute and deliver and maintain in full force and effect a guaranty in the form
of Exhibit A hereto.
 
2.4   Back-to-Back Transactions.  Each Bilateral Transaction undertaken by
Kinergy shall immediately and automatically, without necessity of further
documentation or any action whatsoever by any of the Parties, create and cause
to be undertaken according to the terms of this Agreement an equivalent
transaction in terms of the obligation to deliver Ethanol, the quantity of
Ethanol sold and the timing for the delivery of such Ethanol by Project Company
with Kinergy (as if Kinergy were the Third Party).
 
2.5   Netting.  Netting of amounts due in respect of Bilateral Transactions
between Kinergy and a Third Party may arise in circumstances in which Kinergy
owes amounts to such Third Party in respect of Bilateral Transactions and, at
the same time, such Third Party owes amounts to Kinergy in respect of Bilateral
Transactions.  In such circumstances, the party owing the greater amount may pay
such amount to the other party as reduced by the amount owed to it and both
parties will be deemed to have satisfied their obligations thereby.  When such
netting occurs, for purposes of this Agreement, for all Bilateral Transactions
that have been subject to such netting arrangements, Kinergy shall be deemed to
have paid amounts owed by it and to have received amounts owed to it.
 
2.6   Title; Delivery Point; Nominations; Measurement.
 
(a)   Project Company shall deliver Ethanol to Kinergy in respect of Bilateral
Transactions (or corresponding back-to-back transactions under Section 2.4) at
the inlet flange of the applicable receiving truck, barge or railcar that will
remove such Ethanol from the Facility.  Title to, risk of loss with respect to
and the obligation to transport such Ethanol shall pass from Project Company to
Kinergy at such delivery point.  The Parties acknowledge that the quality and
quantity of Ethanol may degrade or shrink after such Ethanol is delivered by
Project Company to Kinergy at such delivery point, and the Parties acknowledge
that the risk of such degradation or shrinkage and all other risk of loss shall
be borne by Kinergy.
 
(b)   Kinergy and Project Company shall utilize the previously agreed upon
operating protocol, with respect to the mechanics, timing and process for
(i) Kinergy to communicate to Project Company its Ethanol requirements on a
monthly, weekly and daily basis, (ii) determining the quantity of Ethanol to be
stored by Project Company in its storage facilities, and (iii) implementing the
Ethanol sales contemplated by this Agreement.  A copy of such operating protocol
is attached hereto as Exhibit B.  By mutual agreement, such operating protocol
shall be updated from time to time thereafter.
 
 
 
 
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(c)   Project Company agrees to collect samples of each shipment of Ethanol it
delivers to Kinergy hereunder and keep such samples for 30 days.  Project
Company shall label each sample to include the customer order number and any
other information reasonably necessary to identify such Ethanol and the
applicable shipment.  Kinergy shall have the right, upon reasonable notice and
at reasonable times and at its expense, to test such samples to confirm that the
Ethanol delivered to it hereunder meets the requirements of this Agreement.  The
Parties agree that the amount of Ethanol delivered hereunder (whether measured
as net gallons, net liters or otherwise) shall be corrected to and
correspondingly adjusted by a reference temperature of 60 degrees Fahrenheit or
15.56 degrees Celsius.
 
ARTICLE III
PAYMENTS
 
3.1   Fees and Payments.
 
(a)   Within ten days after the date Project Company delivers Ethanol to Kinergy
in accordance with Section 2.6(a), Kinergy shall pay to Project Company an
amount equal to (i) the Purchase Price (Estimated) with respect to the Bilateral
Transaction to which such delivery of Ethanol relates minus (ii) the aggregate
amount of Transportation Costs (Estimated) with respect to such Bilateral
Transaction minus (iii) the aggregate amount of the Incentive Fee (Estimated)
with respect to such Bilateral Transaction (it being acknowledged that Kinergy
shall retain for its own account the amount of such Transportation Costs
(Estimated) and Incentive Fee (Estimated), and that such amount represents an
estimate of the net amounts to be paid to Project Company in connection with
such Bilateral Transaction).  In connection with each such payment, Kinergy
shall deliver to Project Company a statement detailing its calculations of the
applicable Purchase Price (Estimated), the applicable Transportation Costs
(Estimated) and the applicable Incentive Fee (Estimated).
 
(b)   Within the first five Business Days of each calendar month (each such
date, a “Payment Adjustment Date”), the Parties shall reconcile and “true-up”
the actual Purchase Price, Transportation Costs and Incentive Fees for all
Bilateral Transactions entered into since the previous Payment Adjustment Date,
with the intent of the Parties being that Kinergy shall make up the difference
of any “under estimations” and Project Company shall refund any “over
estimations”.  For example, if there are “under estimations” then Kinergy shall
pay to Project Company an amount equal to:
 
(i)   (A) the Purchase Price with respect to such Bilateral Transaction minus
(B) the Purchase Price (Estimated) with respect to such Bilateral Transaction
(to the extent actually paid by Kinergy to Project Company pursuant to
Section 3.1(a)), minus
 
(ii)   (A) the Transportation Costs with respect to each such Bilateral
Transaction minus (B) the Transportation Costs (Estimated) with respect to such
Bilateral Transaction, minus
 
 
 
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(iii)   (A) the Incentive Fee with respect to each such Bilateral Transaction
minus (B) the Incentive Fee (Estimated) with respect to such Bilateral
Transaction.
 
Each such monthly reconciliation or “true-up” payment shall be paid by Kinergy
or Project Company (as applicable) no later than five Business Days after the
applicable Payment Adjustment Date.  Each Party acknowledges that Kinergy (and
not Project Company) bears the risk of non-payment by (a) a Third Party in
connection with a Bilateral Transaction with respect to any Third Party (or an
Affiliate thereof) that does not satisfy the Minimum Rating Criteria and (b) PEI
or any Affiliate thereof that purchases Ethanol from Project Company; provided
that Project Company and Kinergy acknowledge and agree that any risk of
non-payment not borne by Kinergy shall be shared on a pro rata basis among
Project Company and each other Person with respect to which sales are brokered
by Kinergy (with such pro rata calculations based upon the amount (expressed in
gallons) of Ethanol delivered by, or on behalf of, each such Person during the
applicable period in respect of which nonpayment has occurred), all as
reasonably determined by Kinergy.
 
(c)   Notwithstanding anything to the contrary in clause (a) or (b) above, if
Project Company defaults in its obligation to provide Ethanol to Kinergy in
accordance with the terms of this Agreement (including, without limitation, as
contemplated by Section 2.3(c)), then Kinergy shall be entitled to set-off and
deduct from current and/or future payments owed to Kinergy by Project Company
(including the estimated payments pursuant to clause (a) above and the
reconciliation and “true-up” payments pursuant to clause (b) above) an amount
equal to, as applicable (i) the amount of damage payments owed by Kinergy to the
applicable Third Party for failure to provide such Ethanol or (ii) the cost of
any replacement Ethanol procured by Kinergy to satisfy the requirements of any
Bilateral Transaction, each as a result of Project Company’s failure to perform
hereunder net of any revenues received in respect of such Bilateral Transaction.
 
3.2   Overdue Payments; Billing Dispute.  If Project Company or Kinergy, in good
faith, disputes the amount of any payment received by it or to be paid by it or
set-off pursuant to Section 3.1 above, the disputing Party shall immediately
notify the other Party of the basis for the dispute.  The Parties will then meet
and use their best efforts to resolve any such dispute.  If any amount is
ultimately determined to be due to or permitted to be set-off by Project Company
or Kinergy (as the case may be), to the extent not previously paid or set-off,
(a) Kinergy (or Project Company, as the case may be) shall pay such amount to
Project Company (or Kinergy, as the case may be) within five Business Days of
such determination or (b) Kinergy (or Project Company, as the case may be) may
then set-off such amount (as the case may be).  If any Party shall fail to make
any payment when due hereunder, such overdue payment shall accrue interest at
the Prime Rate plus 2% from the date originally due until the date paid.
 
3.3   Audit.  Notwithstanding the payment of any amount pursuant to this
Article III, Project Company shall remain entitled (upon reasonable prior
notice, at reasonable times and at Kinergy’s corporate offices) and the
administrative agent under the Credit Agreement (and its consultants, as
directed by the administrative agent) shall be entitled (upon reasonable prior
notice, not more than once per calendar quarter and at Kinergy’s corporate
offices) to conduct a subsequent audit and review of (a) all Bilateral
Transactions and related records to verify the amount of gross payments,
Incentive Fees, Transportation Costs and damage payments and (b) the
determination and calculation of the Purchase Price, in each case for a period
of two years from and after the applicable Payment Adjustment Date.  If,
pursuant to such audit and review, it is determined that any amount previously
paid by Kinergy to Project Company did not constitute all of the amounts which
should have been paid to Project Company, Project Company shall advise Kinergy
indicating such amount and the reason the amount should have been paid to
Project Company and, subject to the next two sentences, Kinergy shall pay such
amount to Project Company within five Business Days of such request along with
interest accrued at the Prime Rate plus 2% from the date originally due until
the date paid.  If the Parties do not agree with respect to any item so noted,
the Parties will then meet and use their best efforts to resolve the
dispute.  If Parties are not able to resolve issues raised by such an audit and
review, any disputed items will be resolved in accordance with the provisions of
Article IX.
 
 
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ARTICLE IV
TERM; TERMINATION
 
4.1   Term.  This Agreement shall be effective on the date hereof and, unless
earlier terminated in accordance with its terms, shall continue in effect until
and including the twelve-month anniversary of the date of this Agreement,
provided, that Project Company may extend this Agreement for additional
twelve-month periods, in each case by written notice to Kinergy delivered not
less than 90 days prior to the end of the original or renewal term.
 
4.2   Termination by Kinergy.  Kinergy may terminate this Agreement by written
notice to Project Company, upon the occurrence of any of the following events,
provided, that no such notice shall be required for a termination pursuant to
clause (b) of this Section 4.2:
 
(a)   the failure by Project Company to make any payment, deposit or transfer
required hereunder within 30 Business Days after the date such payment, deposit
or transfer is required to be made;
 
(b)   the occurrence of an Act of Insolvency with respect to Project Company; or
 
(c)   the failure of Project Company to perform any of its material obligations
under this Agreement and such failure continues for 30 days after receipt of
written notice from Kinergy of such failure; provided, that such 30-day period
shall be extended for up to an aggregate of 90 days so long as Project Company
is diligently attempting to cure such failure.
 
4.3   Termination by Project Company.  Project Company may terminate this
Agreement by written notice to Kinergy, upon the occurrence of any of the
following events, provided, that no such notice shall be required for a
termination pursuant to clause (b) of this Section 4.3:
 
(a)   the failure by Kinergy to make any payment, deposit or transfer required
hereunder within fifteen Business Days after the date such payment, deposit or
transfer is required to be made;
 
(b)   the occurrence of an Act of Insolvency with respect to Kinergy; or
 
 
 
 
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(c)   the failure of Kinergy to perform any of its material obligations under
this Agreement and such failure continues for 30 days after receipt of written
notice from Project Company of such failure; provided, that such 30-day period
shall be extended for up to an aggregate of 90 days so long as Kinergy is
diligently attempting to cure such failure.
 
4.4   Change of Control.
 
(a)   This Agreement shall terminate 45 days after the occurrence of (i) any
Change of Control with respect to Project Company or any transfer, assignment,
sale or other disposition of more than a  majority of the membership interests
in Kinergy to any Person which is not an Affiliate of PEI or (ii) any transfer,
assignment, sale or other disposition of all or substantially all of the assets
comprising the Facility, unless in each case the Parties mutually agree to the
contrary.
 
(b)   In the event that this Agreement (i) terminates pursuant to
Section 4.4(a)(i) as a result of a Change of Control of Project Company or (ii)
shall be terminated by Project Company pursuant to Section 4.3 above, Kinergy
shall, if requested by Project Company, use its best efforts to assign its
interests to Project Company in the rail car lease or leases (or the applicable
portions thereof) to which Kinergy is a party and in respect of which are
dedicated to the transportation of Ethanol purchased pursuant to this Agreement.
 
4.5   Effect of Termination.  No termination under this Article IV shall release
any of the Parties from any obligations arising hereunder prior to such
termination, including payment and obligations under any Bilateral Transaction
(or such Bilateral Transaction’s corresponding back-to-back transaction arising
under Section 2.4), that are not fully performed as of the date of such
termination.  The exercise of the right of a Party to terminate this Agreement,
as provided herein, does not preclude such Party from exercising other remedies
that are provided herein or are available at law or in equity; provided,
however, that no Party shall have a right to terminate, revoke or treat this
Agreement as repudiated other than in accordance with the other provisions of
this Agreement; and provided, further, that the Parties’ respective rights upon
termination shall be subject to the liability limitations of Article V. Except
as otherwise set forth in this Agreement, remedies are cumulative, and the
exercise of, or the failure to exercise, one or more remedies by a Party shall
not, to the extent provided by Law, limit or preclude the exercise of, or
constitute a waiver of, other remedies by such Party.
 
ARTICLE V
INSURANCE
 
5.1   Kinergy Insurance.  Without limiting any of the other obligations or
liabilities of Kinergy under this Agreement, Kinergy shall at all times carry
and maintain or cause to be carried and maintained, the minimum insurance
coverage set forth in this Section:
 
(a)   Kinergy shall maintain or cause to be maintained (i) Workers’ Compensation
insurance in compliance with the workers’ compensation laws of the State of
Oregon as extended by the Broad Form All States Endorsements, the United States
Longshoreman’s and Harbor Workers’ Coverage Endorsements on an if-any-exposure
basis and the Voluntary Compensation Coverage Endorsement, and (ii) Employer’s
Liability (including Occupational Disease) coverage with limits of not less than
$1,000,000, which shall cover all of Kinergy’s employees engaged in providing
services hereunder.
 
 
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(b)   Kinergy shall maintain or cause to be maintained automobile liability
insurance for owned (if any), non-owned and hired vehicles with combined single
limits for bodily injury/property damage not less than $1,000,000 per occurrence
and containing appropriate no-fault insurance provisions wherever applicable.
 
(c)   Kinergy will maintain or cause to be maintained commercial general
liability insurance with a limit for bodily injury/property damage of not less
than $1,000,000 per occurrence and $2,000,000 in the annual aggregate.  Such
coverage shall include premises/operations, explosion, collapse and underground
property damage, broad form contractual, independent contractors,
products/completed operations (including operator errors and omissions), broad
form property damage, personal injury and incidental professional liability (if
not covered under product/completed operations and if commercially available).
 
(d)   Kinergy shall maintain or cause to be maintained umbrella liability
insurance providing coverage limits in excess of those set forth in Section (a),
(b) and (c) above.  The limits of this umbrella coverage shall not be less than
$10,000,000 per occurrence and in the annual aggregate.
 
(e)   Kinergy shall maintain or cause to be maintained pollution legal liability
for sudden and accidental pollution for physical damage and bodily injury to
third parties in an amount of $3,000,000 per occurrence and in the annual
aggregate.
 
The terms and conditions of all insurance policies (including the amount, scope
of coverage, deductibles, and self-insured retentions) shall be acceptable in
all respects as of the effective date of this Agreement.  All insurance carried
pursuant to this Section shall conform to the relevant provisions of this
Agreement and be with insurance companies which are rated “A-, X” or better by
Best’s Insurance Guide and Key Ratings, or other insurance companies of
recognized responsibility satisfactory to Project Company.  Project Company
shall be furnished with satisfactory evidence that the foregoing insurance is in
effect and Project Company shall be notified 30 calendar days prior to the
cancellation or material change of any such coverage.  Coverage for the
insurance under Section (c) and (d) above shall be written on a claims made
basis provided that if the policy is not renewed, Kinergy shall obtain for the
benefit of Project Company an extended reporting period coverage or “tail” of at
least three years past the final day of coverage of such policy.  Kinergy shall
provide Project Company with evidence that such extended reporting period
coverage or “tail” has been obtained.  Kinergy agrees to ensure that the
insurance policies outlined in this Section require the insurer to waive
subrogation against Project Company, the Financing Parties and their respective
Affiliates together with their respective officers, directors, Affiliates and
employees and all such Persons shall be an additional insured as their interests
may appear with respect to all policies procured by Kinergy.
 
5.2   Kinergy Insurance Premiums and Deductibles.  All premiums for insurance
coverage procured by Kinergy pursuant to Section 5.1 shall be reimbursed by
Project Company upon demand.  Kinergy shall be liable for the payment of all
deductibles on insurance policies obtained pursuant to Section 5.1, which
amounts shall not be reimbursed by Project Company, provided that, to the extent
that a claim under a policy described in Section 5.1 is attributable to Project
Company’s (including its employees’ or agents’) gross negligence or willful
misconduct, Project Company shall be liable for the entire amount of such
deductible.  In no event shall any premiums, deductibles or any losses in excess
of insurance coverage be reimbursed by Project Company hereunder.
 
 
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ARTICLE VI
LIMITATIONS ON LIABILITY
 
6.1   No Consequential or Punitive Damages.  In no event shall either Party be
liable to any other Party by way of indemnity or by reason of any breach of
contract or of statutory duty or by reason of tort (including negligence or
strict liability) or otherwise for any loss of profits, loss of revenue, loss of
use, loss of production, loss of contracts or for any incidental, indirect,
special or consequential or punitive damages of any other kind or nature
whatsoever that may be suffered by such other Party, including any losses for
which such other Party has insurance to the extent proceeds of insurance have
been recovered for such losses.
 
ARTICLE VII
INDEMNIFICATION
 
7.1   Project Company’s Indemnity.  Project Company shall defend, indemnify and
hold harmless Kinergy and its Affiliates (and each officer, director, employee,
shareholder, partner, member or agent of Kinergy and its Affiliates) (each, a
“Project Company Indemnified Person”) from and against any and all third party
claims, actions, damages, expenses (including reasonable and documented
attorneys’ fees and expenses), losses, settlements or liabilities (collectively,
“Liabilities”) incurred or asserted against any Project Company Indemnified
Person (a) as a result of any failure on the part of Project Company to perform
Project Company’s obligations under this Agreement (including with respect to
any back-to-back transaction under Section 2.4), or (b) arising out of or in any
way connected with the grossly negligent acts or omissions of Project Company or
its Affiliates (other than Kinergy).
 
7.2   Kinergy’s Indemnity.  Kinergy shall defend, indemnify and hold harmless
Project Company and its Affiliates (and each officer, director, employee,
shareholder, partner, member or agent of Project Company and their Affiliates)
(each, a “Kinergy Indemnified Person”) from and against any and all third party
Liabilities incurred or asserted against any Kinergy Indemnified Person (a) as a
result of any failure on the part of Kinergy to perform its obligations under
this Agreement (including with respect to any Bilateral Transaction), or
(b) arising out of or in any way connected with the grossly negligent acts or
omissions of Kinergy or its Affiliates (other than Project Company).
 
ARTICLE VIII
REPRESENTATIONS AND WARRANTIES
 
Each Party represents that (i) it is duly organized under its jurisdiction of
formation and in good standing in each jurisdiction where its failure to so
qualify could have a material adverse affect on its ability to perform its
obligations hereunder, (ii) it has all necessary power and authority to enter
into this Agreement, (iii) it has duly authorized, executed and delivered this
Agreement and (iv) this Agreement constitutes a legal, valid and binding
obligation of such Party enforceable in accordance with its terms, subject to
bankruptcy, reorganization, moratorium or other similar laws affecting the
enforcement of the rights of creditors generally and subject to general
principles of equity.
 
 
 
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ARTICLE IX
FORCE MAJEURE
 
9.1   Definition.  As used herein, “Force Majeure Event” means any cause(s)
which render(s) a Party wholly or partly unable to perform its obligations under
this Agreement (other than obligations to make payments when due), and which are
neither reasonably within the control of such Party nor the result of the fault
or negligence of such Party, and which occur despite all reasonable attempts to
avoid, mitigate or remedy, and shall include acts of God, war, riots, civil
insurrections, cyclones, hurricanes, floods, fires, explosions, earthquakes,
lightning, storms, chemical contamination, epidemics or plagues, acts or
campaigns of terrorism or sabotage, blockades, embargoes, accidents or
interruptions to transportation, trade restrictions, acts of any Governmental
Authority after the date of this Agreement, strikes and other labor difficulties
(other than with respect to its own employees), and other events or
circumstances beyond the reasonable control of such Party.  Mechanical breakdown
(including a forced outage of the Facility) that continues for more than five
consecutive days shall be deemed not to be “Force Majeure Event” unless such
mechanical breakdown resulted from or was caused by a separate “Force Majeure
Event.”
 
9.2   Effect.  A Party claiming relief as a result of a Force Majeure Event
shall give the other Parties written notice within five Business Days of
becoming aware of the occurrence of the Force Majeure Event, or as soon
thereafter as practicable, describing the particulars of the Force Majeure
Event, and will use reasonable efforts to remedy its inability to perform as
soon as possible.  If the Force Majeure Event (including the effects thereof)
continues for fifteen consecutive days, the affected Party shall report to the
other Parties the status of its efforts to resume performance and the estimated
date thereof.  If the Force Majeure Event (including the effects thereof)
continues for 180 consecutive days, either Party may terminate this Agreement
for convenience.  If the affected Party was not able to resume performance prior
to or at the time of the report to the other Party of the onset of the Force
Majeure Event, then it will report in writing to the other Party when it is
again able to perform.  If a Party fails to give timely notice, the excuse for
its non-performance shall not begin until notice is given.
 
9.3   Limitations.  Any obligation(s) of a Party (other than an obligation to
make payments when due) may be temporarily suspended during any period such
Party is unable to perform such obligation(s) by reason of the occurrence of a
Force Majeure Event, but only to the extent of such inability to perform,
provided, that:
 
(a)   the suspension of performance is of no greater scope and of no longer
duration than is reasonably required by the Force Majeure Event; and
 
(b)   the Party claiming the occurrence of the Force Majeure Event bears the
burden of proof.
 
 
 
 
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ARTICLE X
DISPUTE RESOLUTION
 
10.1   Attempts to Settle.  In the event that a Dispute between the Parties
arises under, out of or in relation to, this Agreement, the Parties shall
attempt in good faith to settle such Dispute by mutual discussions within
fifteen Business Days after the date that an aggrieved Party gives written
notice of the Dispute to the other Party.  In the event that a Dispute is not
resolved by discussion in accordance with the preceding sentence within the time
period set forth therein, the Parties shall refer the Dispute to their
respective senior officers for further consideration and attempted resolution
within fifteen Business Days after the Dispute has been referred to such
individuals (or such longer period as the Parties may agree).
 
10.2   Resolution by Expert.  If the Parties shall have failed to resolve the
Dispute within fifteen Business Days after the date that the Parties referred
the Dispute to their senior officers, then, provided the Parties shall so agree,
the Dispute may be submitted for resolution by an Expert, such Expert to be
appointed by the mutual agreement of the Parties.  Proceedings before an Expert
shall be held in Sacramento, California (or any other location agreed to by the
Parties).  The Expert shall apply to such proceedings the substantive law of the
State of New York in effect at the time of such proceedings.  The decision of
the Expert shall be final and binding upon the Parties.  In the event that
(a) the Parties cannot agree on the appointment of an Expert within ten Business
Days after the date that the Parties agreed to submit the Dispute for resolution
by the Expert or (b) the Expert fails to resolve such Dispute within 60 days
after the Parties have submitted such Dispute to the Expert, then any Party may
file a demand for arbitration in writing in accordance with Section 10.3.
 
10.3   Arbitration.  Any Dispute that has not been resolved following the
procedures set forth in Section 10.1 or 10.2 shall be settled by binding
arbitration in Sacramento, California (or any other location agreed to by the
Parties) before a panel of three arbitrators.  Such arbitration shall be
conducted in accordance with the Commercial Arbitration Rules of the American
Arbitration Association as in effect on the date of execution of this
Agreement.  Such arbitration shall be governed by the laws of the State of New
York.  If arbitration proceedings have been initiated pursuant to this
Section 10.3 and raise issues of fact or law which, in whole or in part, are
substantially the same as issues of fact or law already pending in arbitration
proceedings involving the applicable Parties, such issues shall be consolidated
with the issues in the ongoing proceedings.  THE PARTIES HEREBY AGREE THAT THE
PROCEDURES SET FORTH IN THIS ARTICLE IX SHALL BE THE EXCLUSIVE DISPUTE
RESOLUTION PROCEDURES APPLICABLE TO ANY DISPUTE, CONTROVERSY OR CLAIM UNDER THIS
AGREEMENT AND, EXCEPT AS SET FORTH IN SECTION 10.5, THE PARTIES HEREBY WAIVE ALL
RIGHTS TO A COURT TRIAL OR TRIAL BY JURY WITH RESPECT TO ANY DISPUTE,
CONTROVERSY OR CLAIM UNDER THIS AGREEMENT.
 
10.4   Consequential and Punitive Damages.  Awards of Experts and arbitral
panels shall be subject to the provisions of Article VI.
 
10.5   Finality and Enforcement of Decision.  Any decision or award of an Expert
or a majority of an arbitral panel, as applicable, shall be final and binding
upon the Parties.  Each of the Parties agrees that the arbitral award may be
enforced against it or its assets wherever they may be found and that a judgment
upon the arbitral award may be entered in any court having jurisdiction thereof.
 
 
 
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10.6   Costs.  The costs of submitting a Dispute to an Expert shall be shared
equally among the Parties involved in the Dispute, unless the arbitral panel or
the Expert determines otherwise.  The costs of arbitration shall be paid in
accordance with the decision of the arbitral panel pursuant to the Commercial
Arbitration Rules of the American Arbitration Association as in effect on the
date of execution of this Agreement.
 
10.7   Continuing Performance Obligations.  While a Dispute is pending, each
Party shall continue to perform its obligations under this Agreement, unless
such Party is otherwise entitled to suspend its performance hereunder or
terminate this Agreement in accordance with the terms hereof.
 
ARTICLE XI
CONFIDENTIALITY
 
Each Party and its Affiliates shall treat as confidential the data and
information in their possession regarding the Facility, the other Parties or any
Affiliate of any other Party, unless:  (a) the applicable other Party agrees in
writing to the release of such data or information; (b) such data or information
becomes publicly available other than through the wrongful actions of the
disclosing Party or the disclosing Party’s Affiliate; (c) such data or
information was in the possession of the receiving Party or the receiving
Party’s Affiliate prior to receipt thereof from the disclosing Party with no
corresponding confidentiality obligation; or (d) such data or information is
required by Law to be disclosed.  Notwithstanding the generality of the
foregoing, any Party may disclose data and information to (i) the officers,
directors, managers, partners, members, employees and Affiliates of such Party,
(ii) any successors in interest and permitted assigns of such Party, (iii) any
actual or potential Financing Parties or actual or potential lenders to PEI or
any subsidiary thereof, and (iv) any potential equity investors in PEI or any
acquirer of all or any of the equity interests in NewCo or any subsidiary
thereof; provided, that any Person who receives confidential data and
information pursuant to an exception contained in clauses (ii) - (iv) of this
Article agrees to similar confidentiality provisions.
 
ARTICLE XII
ASSIGNMENT AND TRANSFER
 
No Party shall assign this Agreement or any of its rights or obligations
hereunder without first obtaining the prior written consent of (a) in the case
of Project Company, Kinergy, or (b) in the case of Kinergy, Project Company,
provided, that any Party shall be entitled to assign its rights hereunder (as
collateral security or otherwise) for financing purposes (including a collateral
assignment to any Financing Parties) without the consent of any other Party.
 
ARTICLE XIII
MISCELLANEOUS
 
13.1   Entire Agreement.  This Agreement contains the entire agreement between
the Parties with respect to the subject matter hereof and supersedes all prior
agreements, negotiations and understandings among the Parties with respect to
such subject matter.  Nothing in this Agreement shall be construed as creating a
partnership or joint venture between the Parties.
 
 
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13.2   Counterparts.  This Agreement may be executed in any number of
counterparts and each such counterpart shall be deemed to be an original
instrument, but all such counterparts together shall constitute one and the same
agreement.
 
13.3   Survival.  Cancellation, expiration or earlier termination of this
Agreement shall not relieve the Parties of obligations that by their nature
should survive such cancellation, expiration or termination, including remedies,
limitations on liability, promises of indemnity and payment, and
confidentiality.  Without limiting the generality of the foregoing, the
following provisions of this Agreement shall survive:  Articles III, VI, VII, X
and XI, and Sections 13.3, 13.4, 13.5, 13.6, 13.8 and 13.9.
 
13.4   Severability.  In the event any one or more of the provisions contained
in this Agreement should be held invalid, illegal or unenforceable in any
respect, the validity, legality and enforceability of the remaining provisions
contained herein shall not in any way be affected or impaired thereby.  The
Parties shall endeavor in good-faith negotiations to replace the invalid,
illegal or unenforceable provisions with valid provisions, the economic and
practical effect of which comes as close as possible to that of the invalid,
illegal or unenforceable provisions.
 
13.5   Governing Law.  This Agreement shall be governed by and construed in
accordance with the laws of the State of New York without regard to the
principles of conflicts of laws thereof.
 
13.6   Binding Effect.  This Agreement shall be binding upon and shall inure to
the benefit of the Parties hereto and their respective successors and permitted
assigns.  This Agreement is not made for the benefit of any Person or entity not
a party hereto, and nothing in this Agreement shall be construed as giving any
Person or entity, other than the Parties and their respective successors and
permitted assigns, any right, remedy or claim under or in respect of this
Agreement or any provision hereof.
 
13.7   Notices.  All notices or other communications which are required or
permitted hereunder shall be in writing and shall be deemed sufficiently given
(a) upon delivery, if delivered personally, (b) the day the notice is received,
if it is delivered by overnight courier or certified or registered mail, postage
prepaid, or (c) upon the effective receipt of electronic transmission,
facsimile, telex or telegram (with effective receipt being deemed to occur upon
the sender’s receipt of confirmation of successful transmission of such notice
or communication), to the addresses set forth below or such other address as the
addressee may have specified in a notice duly given to sender as provided
herein:
 
If to Kinergy:
 
Kinergy Marketing, LLC
400 Capitol Mall
Suite 2060
Sacramento, California  95814
Attention:       Neil Koehler
Telephone:     (530) 750-3017
Facsimile:       (530) 309-4172
 
 
 
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with a copy to:
 
Kinergy Marketing, LLC
c/o Pacific Ethanol, Inc.
400 Capital Mall
Suite 2060
Sacramento, CA 95814
Attn:  General Counsel
Telephone:  (916) 403-2130
Facsimile:  (916) 446-3937
If to Project Company:
 
Pacific Ethanol [__________], LLC
c/o JT Miller Group LLC 
777 Campus Commons Road #200
Sacramento, CA 95825
Attn: John Miller
Telephone:      (916) 565-7422
Facsimile:         (916) 565-7423

with a copy, so long as PEI is the “Manager” under the Asset Management
Agreement, to:

Pacific Ethanol, Inc.
400 Capitol Mall, Suite 2060
Sacramento, CA 95814
Attention: General Counsel
Facsimile:  (916) 446-3936

13.8   Amendment.  No Party hereto shall be bound by any termination, amendment,
supplement, waiver or modification of any term hereof unless such Party shall
have consented thereto in writing.
 
13.9   No Implied Waiver.  No delay or failure on the part of any Party in
exercising any rights hereunder, and no partial or single exercise thereof,
shall constitute a waiver of such rights or of any other rights hereunder.
 
13.10   Lines of Credit.  Kinergy shall promptly notify Project Company if at
any time during the term of this Agreement it does not have lines of credit
available to it in an amount of not less than $5,000,000 or if an event of
default shall occur and be continuing under any agreement evidencing such lines
of credit.
 
[THE REMAINDER OF THIS PAGE HAS BEEN LEFT BLANK INTENTIONALLY]
 
 
 
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IN WITNESS WHEREOF, this Ethanol Marketing Agreement has been duly executed by
the Parties hereto as of the date first written above.
 
 

  PACIFIC ETHANOL [__________], LLC          
By:  _______________________________      Name:   Title:           KINERGY
MARKETING, LLC           By:  /s/ Neil Koehler            Name: Neil Koehler  
Title: CEO

 
 
 
 
 
 
 
 
 
 
[Signature Page to Ethanol Marketing Agreement – Boardman]
 
 
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