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EXHIBIT 10.1


                                                                  EXECUTION COPY








                     MEMBERSHIP INTEREST PURCHASE AGREEMENT








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<TABLE>
                                                TABLE OF CONTENTS
                                                -----------------

                                                                                                             PAGE
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<S>               <C>                                                                                          <C>
ARTICLE 1         PURCHASE AND SALE OF MEMBERSHIP INTERESTS.....................................................1
         1.1      Acquisition...................................................................................1
         1.2      Assignment of Membership Interests............................................................1

ARTICLE 2         PURCHASE PRICE................................................................................1
         2.1      Purchase Price................................................................................1
         2.2      Warrants......................................................................................2
         2.3      Transfer Taxes................................................................................2
         2.4      Purchase Price Adjustments....................................................................2
         2.5      Pro Rata Payments.............................................................................4

ARTICLE 3         SELLERS' REPRESENTATIONS AND WARRANTIES.......................................................4
         3.1      Organization..................................................................................4
         3.2      Power and Authority...........................................................................4
         3.3      Authorization; No Breach......................................................................5
         3.4      Absence of Undisclosed Liabilities............................................................5
         3.5      Capitalization of the Company and Title to Membership Interests...............................6
         3.6      Financial Statements..........................................................................6
         3.7      No Material Adverse Changes; Absence of Certain Changes or Events.............................6
         3.8      Real Property; Personal Property..............................................................8
         3.9      Tax Matters..................................................................................10
         3.10     Contracts and Commitments....................................................................11
         3.11     Litigation; Proceedings......................................................................13
         3.12     Brokerage....................................................................................14
         3.13     Employees....................................................................................14
         3.14     Employee Benefit Plans.......................................................................15
         3.15     Compliance with Laws.........................................................................17
         3.16     Environmental Matters........................................................................17
         3.17     Affiliate Transactions.......................................................................18
         3.18     Intellectual Property Rights.................................................................19
         3.19     Bank Accounts; Powers of Attorney............................................................19
         3.20     Fuel Volume Records..........................................................................19
         3.21     Intentionally Omitted........................................................................19
         3.22     Intentionally Omitted........................................................................19
         3.23     Accuracy of Representations..................................................................19
         3.24     Foreign Person...............................................................................19
         3.25     Securities Law Compliance....................................................................20

ARTICLE 4         BUYER'S REPRESENTATIONS AND WARRANTIES.......................................................21
         4.1      Organization.................................................................................21
         4.2      Power and Authority..........................................................................21
         4.3      Authorization; No Breach.....................................................................21
         4.4      Brokerage....................................................................................21


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         4.5      Litigation...................................................................................21
         4.6      Buyer's Investment Representation............................................................21
         4.7      Buyer's Securities Filings...................................................................22

ARTICLE 5         COVENANTS....................................................................................22
         5.1      Pre-Closing Affirmative Covenants of Sellers.................................................22
         5.2      Schedules....................................................................................23
         5.3      Intentionally Omitted........................................................................23
         5.4      Access.......................................................................................23
         5.5      Pre-Closing Negative Covenants of Sellers....................................................23
         5.6      Lot Split.  .................................................................................25

ARTICLE 6         CLOSING CONDITIONS - BUYER...................................................................25
         6.1      Buyer's Conditions to Closing................................................................25
         6.2      Waiver of Conditions.........................................................................27

ARTICLE 7         CLOSING CONDITIONS - SELLERS.................................................................27
         7.1      Conditions to Closing........................................................................27
         7.2      Waiver of Conditions.........................................................................29

ARTICLE 8         CLOSING MATTERS..............................................................................29
         8.1      The Closing..................................................................................29
         8.2      Action to Be Taken at the Closing; Payment of Purchase Price.................................29
         8.3      Closing Documents............................................................................29

ARTICLE 9         INDEMNIFICATION; SURVIVAL OF REPRESENTATIONS AND WARRANTIES; RELEASE.........................30
         9.1      Indemnification of Buyer and the Company.....................................................30
         9.2      Indemnification of Sellers...................................................................32
         9.3      Certain Tax Matters..........................................................................32
         9.4      Procedure....................................................................................33
         9.5      Survival ....................................................................................36
         9.6      Exclusive Remedy.............................................................................36
         9.7      Indemnification Limitations..................................................................36
         9.8      The Sellers' Representative..................................................................37
         9.9      Release......................................................................................39
         9.10     No Contribution..............................................................................40

ARTICLE 10        TERMINATION..................................................................................40
         10.1     Termination..................................................................................40
         10.2     Effect of Termination........................................................................40

ARTICLE 11        ADDITIONAL AGREEMENTS........................................................................40
         11.1     Press Release and Announcements..............................................................40
         11.2     Confidentiality by Buyer.....................................................................41
         11.3     Remittances..................................................................................41


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         11.4     Cooperation to Obtain Consents...............................................................41
         11.5     Tax Matters..................................................................................41
         11.6     Employee Matters.............................................................................42
         11.7     Further Assurances...........................................................................42
         11.8     Arbitration..................................................................................42
         11.9     Confidentiality, Tradenames..................................................................44
         11.10    SEC Reporting Cooperation....................................................................45
         11.11    Legend; Transfer of Member Notes.............................................................45
         11.12    No Shop.   ".................................................................................46

ARTICLE 12        MISCELLANEOUS................................................................................46
         12.1     Amendment and Waiver.........................................................................46
         12.2     Notices......................................................................................47
         12.3     Assignment...................................................................................47
         12.4     Captions.....................................................................................48
         12.5     Complete Agreement; Schedules and Exhibits...................................................48
         12.6     Governing Law................................................................................48
         12.7     Counterparts.................................................................................48
         12.8     Third Party Beneficiaries....................................................................48
         12.9     Severability.................................................................................48
         12.10    Expenses.....................................................................................48


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                                               INDEX OF DEFINITIONS
                                               --------------------
                                       OTHER THAN THOSE LIST ON EXHIBIT "A"
                                       ------------------------------------

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                                                                                                             ----

Accounting Firm.................................................................................................3
Acquisition Proposal...........................................................................................46
Action.........................................................................................................43
Agreement.......................................................................................................1
Benefit Plans..................................................................................................15
Business........................................................................................................1
Business Employees.............................................................................................14
Buyer...........................................................................................................1
Buyer Securities................................................................................................2
Closing........................................................................................................28
Closing Balance Sheet...........................................................................................3
Closing Date...................................................................................................29
Company.........................................................................................................1
Company Intellectual Property..................................................................................18
Confidential Information.......................................................................................43
Decision.......................................................................................................43
Effective Time.................................................................................................29
Financial Statements............................................................................................6
Indemnifying Party.............................................................................................33
Insurance Policies.............................................................................................12
Interim Unaudited Statements....................................................................................6
JAMS...........................................................................................................42
Lease...........................................................................................................8
Leases..........................................................................................................8
Loss...........................................................................................................31
Material Contracts.............................................................................................12
Member Notes....................................................................................................2
Membership Interests............................................................................................1
MetLife Note....................................................................................................2
Milestone Date.................................................................................................29
Monthly Unaudited Statements....................................................................................6
Net Tax Benefit................................................................................................35
Net Working Capital.............................................................................................2
Notice.........................................................................................................33
Offset.........................................................................................................31
Offset Notice..................................................................................................31
Pension Plans..................................................................................................15
Permits........................................................................................................17
Personal Property...............................................................................................9
Primary Sellers................................................................................................32
Principals......................................................................................................4
Purchase Price..................................................................................................1
Seller..........................................................................................................1


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Sellers.........................................................................................................1
Sellers' Representative....................................................................................36, 37
Tax Matters....................................................................................................32
Tax Reimbursement Amount.......................................................................................35
To the Best of Sellers' Knowledge...............................................................................4
Transaction Documents..........................................................................................29
Unaudited Statements............................................................................................6
Warrants........................................................................................................2
Welfare Plans..................................................................................................15
Western Milling.................................................................................................2
Western Milling Loan............................................................................................2


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                                                                  EXECUTION COPY

                     MEMBERSHIP INTEREST PURCHASE AGREEMENT

         THIS MEMBERSHIP INTEREST PURCHASE AGREEMENT (together with the exhibits
and schedules hereto, this "AGREEMENT") is dated as of August 1, 2005 by and
among those persons and entities listed on the attached Schedule 1 (collectively
the "Sellers" or individually the "SELLER" and PACIFIC ETHANOL, INC., a Delaware
corporation ("BUYER"). Unless otherwise defined in this Agreement, capitalized
terms used in this Agreement are defined in EXHIBIT "A".

                                 R E C I T A L S
                                 ---------------

         A. Sellers own 100% of the equity (the "MEMBERSHIP INTERESTS") of
Phoenix Bio Industries, LLC, a California limited liability Company (the
"COMPANY").

         B. The Company is engaged in the business (the "BUSINESS") of
developing and constructing an approximate 25 million gallon per year corn
ethanol plant, providing management services to operate the corn ethanol plant
and such other activities related to the foregoing.

         C. Buyer desires to acquire from Sellers, and Sellers desire to sell
and transfer to Buyer, all of the Membership Interests on the terms and subject
to the conditions set forth herein.

                                A G R E E M E N T
                                -----------------

         THEREFORE, in consideration of the foregoing and the mutual agreements
and covenants set forth below, the Parties hereby agree as follows:

                                    ARTICLE 1
                    PURCHASE AND SALE OF MEMBERSHIP INTERESTS
                    -----------------------------------------

         1.1 ACQUISITION. Subject to the terms and conditions of this Agreement,
Buyer agrees to purchase, and Sellers agree to sell, convey, assign, transfer
and deliver to Buyer, the Membership Interests, free and clear of all
Encumbrances, on the Closing Date.

         1.2 ASSIGNMENT OF MEMBERSHIP INTERESTS. The sale and transfer of the
Membership Interests will be effected by delivery by Sellers to Buyer of an
Assignment of Limited Liability Company Membership Interests in the form
attached hereto as EXHIBIT "B".

                                    ARTICLE 2
                                 PURCHASE PRICE
                                 --------------

         2.1 PURCHASE PRICE. The aggregate amount to be paid by the Buyer at the
Closing in consideration for the Membership Interests shall be Forty-Seven
Million Five Hundred Thousand Dollars ($47,500,000.00) (the "PURCHASE PRICE").
Subject to SECTION 2.4(G) of this Agreement, the Purchase Price shall be payable
as follows:

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                  (a) $39,500,000 shall be payable at the time of the Closing in
         the form of (i) the assumption by Buyer or payoff by Buyer of the
         remaining balance of the MetLife Loan to the Company in the original
         principal amount of $8,000,000 (the "METLIFE NOTE"); (ii) payment in
         the form of wire transfer, check or bank draft in the amount of
         $39,500,000 reduced by the amount of the MetLife Note assumed by or
         paid off from Sellers' proceeds paid at the time of this Closing and
         the outstanding balance of the loan made by Western Milling, LLC
         ("WESTERN MILLING") to the Company with a current principal amount
         owing of approximately $1,000,000 (the "WESTERN MILLING LOAN") which
         will be paid off from Seller's proceeds paid at the time of this
         Closing.

                  (b) Buyer shall issue an aggregate of $8,000,000 of
         convertible subordinated notes to the Sellers (the "MEMBER NOTES") in
         the form attached hereto as EXHIBIT "C" which will be secured by a
         subordinated security interest in the form of a deed of trust
         encumbering the Facility and the ground lease upon which it is located
         junior only to one or more deeds of trust securing an aggregate amount
         not to exceed $37,500,000.

         2.2 WARRANTS. As additional consideration for the acquisition of the
Membership Interests, Buyer shall issue at Closing warrants to the Sellers
("WARRANTS") in the form attached hereto as EXHIBIT "D". The Warrants and the
Member Notes are hereinafter collectively referred to as the "BUYER SECURITIES".

         2.3 TRANSFER TAXES. All transfer, registration, stamp, documentary,
recording and similar taxes, if any, that become due and payable as a result of
the consummation of the transactions set forth in this Agreement shall be paid
one-half by the Buyer and one-half by the Sellers.

         2.4 PURCHASE PRICE ADJUSTMENTS.

                  (a) As used herein, the term "NET WORKING CAPITAL" shall mean
         the aggregate current assets of the Company minus the aggregate current
         liabilities of the Company, all as determined in accordance with
         generally accepted accounting principles, consistent with past practice
         and all as determined as of the Effective Time and taking into account
         such adjustments as customary for a working capital adjustment. Current
         liabilities will not include any principal portion of the Met Life loan
         or the Western Milling Loan.

                  (b) The Purchase Price shall be adjusted by the amount of the
         Net Working Capital of the Company as of the Effective Time. The
         Sellers' Representative and the Buyers shall use commercially
         reasonable efforts to mutually agree upon the principles,
         specifications and methodologies for determining Net Working Capital
         consistent with past practice. In the event that the Parties cannot
         mutually agree on the principles, specifications and methodologies for
         determining Net Working Capital, on or before 5 business days prior to
         the Closing, then the matter shall be submitted to binding arbitration
         with a mutually agreed upon national independent certified public
         accounting firm.

                  (c) At least ten (5) business days prior to Closing, Sellers
         shall deliver to Buyer a reasonable estimate of Net Working Capital as
         of the Effective Time based on a balance sheet as of the last day of


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         the most recently ended calendar month prior to the Closing Date and
         containing reasonable detail and supporting documents showing the
         derivation of such estimate, including a projected balance sheet as of
         the Effective Time (the "CLOSING BALANCE Sheet"). The consideration
         paid by Buyer to the Sellers at the Closing shall be (x) increased by
         the excess, if any, of Net Working Capital (above zero) as of the
         Effective Time, or (y) decreased by the shortfall (below zero), if any,
         of Net Working Capital as of the Effective Time, in either case as
         reasonably agreed to by Buyer and the Sellers' Representative on or
         prior to the Closing Date.

                  (d) Within ninety (90) days after the Closing, Buyer shall
         deliver to the Sellers' Representative its determination of the actual
         Net Working Capital as of the Effective Time (following the same
         principles, specifications and methodologies used to determine the
         estimated Net Working Capital as agreed upon pursuant to SECTION
         2.3(B)). Each party shall have full access to the financial books and
         records pertaining to the Company to confirm or audit the Net Working
         Capital computations. Should the Sellers' Representative disagree with
         Buyer's determination of Net Working Capital, the Sellers'
         Representative shall notify Buyer within thirty (30) days after Buyer's
         delivery of its determination of Net Working Capital. If the Sellers'
         Representative and Buyer fail to agree within thirty (30) days after
         Sellers' Representative's delivery of notice of disagreement on the
         amount of Net Working Capital, such disagreement shall be resolved in
         accordance with the procedure set forth in SECTION 2.3(F) which shall
         be the sole and exclusive remedy for resolving such accounting disputes
         relative to the determination of Net Working Capital.

                  (e) If the actual Net Working Capital as of the Effective Time
         (determined pursuant to SECTION 2.3(D)) exceeds the estimated Net
         Working Capital as of such time (determined pursuant to SECTION 2.3(C)
         hereof), then Buyer shall, within fourteen (14) days pay such
         difference in cash to the Sellers' Representative, and the Sellers'
         Representative shall distribute the same to the Sellers in proportion
         to their ownership interests in the Company. If the actual Net Working
         Capital as of the Effective Time (determined pursuant to SECTION
         2.3(D)) is less than the estimated Net Working Capital as of such time
         (determined pursuant to SECTION 2.3(C) hereof), then the Buyer shall
         reduce the difference from the subsequent payment(s) due on the Member
         Notes.

                  (f) In the event that the Sellers' Representative and Buyer
         are not able to agree on the actual Net Working Capital as of the
         Effective Time within thirty (30) days after the Sellers'
         Representative's delivery of notice of disagreement, the Sellers'
         Representative and Buyer shall each have the right to require that such
         disputed determination be submitted to a national independent certified
         public accounting firm as the Sellers' Representative and Buyer may
         then mutually agree upon in writing (the "ACCOUNTING FIRM") for
         computation or verification in accordance with the provisions of this
         Agreement. The Accounting Firm shall review the matters in dispute and
         acting as arbitrators shall promptly decide the proper amounts of such
         disputed entries (which decision shall also include a final calculation
         of the actual Net Working Capital as of the Effective Time). The
         submission of the disputed matter to the Accounting Firm shall be the
         exclusive remedy for resolving accounting disputes relative to the
         determination of Net Working Capital. The Accounting Firm's


                                      -3-

<PAGE>

         determination shall be binding upon the Sellers, the Sellers'
         Representative and Buyer. The Accounting Firm's fees and expenses shall
         be borne equally by the Sellers and Buyer.

                  (g) Any Purchase Price Adjustment required under this SECTION
         2.3 shall be made to the cash portion of the Purchase Price which is
         payable pursuant to SECTION 2.1 of this Agreement.

         2.5 PRO RATA PAYMENTS. All payments due the Sellers under this Article
2 and the other provisions of this Agreement shall be made by the Buyer to the
Sellers according to Schedule 1 attached hereto. Schedule 1 may be adjusted up
to the Closing.

                                    ARTICLE 3
                     SELLERS' REPRESENTATIONS AND WARRANTIES
                     ---------------------------------------

         For the purposes of this Agreement, the phrase "TO THE BEST OF SELLERS'
KNOWLEDGE" shall mean (a) as to all the representations and warranties contained
in this ARTICLE 3 other than SECTIONS 3.2, 3,3(A), 3.5(A), 3.5(C) AND 3.25 to
the actual knowledge of Mark S. Wheeler, Kevin Kruse, Ejnar Knudsen and Rick
Eastman (collectively the "PRINCIPALS") and shall be deemed to exist with
respect to a particular matter if a prudent individual would be expected to
discover or otherwise become aware of it after reasonable inquiry; and (b) as to
the representations and warranties contained in SECTIONS 3.2, 3.3(A), 3.5(A),
3.5(C) AND 3.25 of this ARTICLE 3, to the actual knowledge of each Seller as
such representation or warranty relates to such Seller and shall be deemed to
exist with respect to a particular matter if a prudent individual would be
expected to discover or otherwise become aware of it after reasonable inquiry.
Subject to the foregoing and as an inducement to Buyer to enter into this
Agreement, Sellers represent and warrant to Buyer severally as to the
representations and warranties contained in SECTIONS 3.2, 3.3(A), 3.5(A), 3.5(C)
AND 3.25 and each of the Principals represents and warrants as to all other
representations and warranties in this Article 3 that:

         3.1 ORGANIZATION. The Company is a limited liability company duly
organized, validly existing and in good standing under the Laws of California.
The Company has no Subsidiaries nor does it own any equity interest in any other
entity. The Company is qualified to do business as a foreign corporation in any
state in which it is doing business and is in good standing in the State of
California. The State of California is the only jurisdiction where the Company's
activities, personnel and properties require such qualification or licensing.
Sellers have provided to Buyer complete and correct copies of the Charter
Documents for the Company as currently in effect.

         3.2 POWER AND AUTHORITY. Sellers have full power and authority to own
the Membership Interests, to execute and deliver this Agreement and the
Transaction Documents and to perform their respective obligations hereunder and
thereunder. Except as set forth in SCHEDULE 3.2, the Company has all requisite
power and authority to own and operate the Business as conducted as of the date
hereof, and to own, operate and lease the properties and assets owned, operated
or leased by the Company and used in the Business.


                                      -4-

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         3.3 AUTHORIZATION; NO BREACH.

                  (a) The execution, delivery and performance of this Agreement
         has been, and the execution, delivery and performance of the
         Transaction Documents as of the Closing will have been, duly and
         validly authorized by Sellers, and this Agreement constitutes, and each
         of the Transaction Documents as of the Closing will constitute, a valid
         and binding obligation of Sellers, enforceable against Sellers in
         accordance with their respective terms (except as may be limited by
         bankruptcy, insolvency, reorganization and other similar laws and
         equitable principles relating to or limiting creditors' rights
         generally).

                  (b) The execution, delivery and performance of this Agreement
         and the Transaction Documents by Sellers, and the consummation of the
         transactions hereunder and thereunder, will not:

                           (i) violate, conflict with, result in a breach or
                  constitute a default, or give rise to any right of amendment,
                  termination, cancellation or acceleration, under (with or
                  without due notice or lapse of time, or both) the Company's
                  Charter Documents, or, To the Best of Sellers' Knowledge, any
                  Law to which Sellers or the Company are subject or, except as
                  set forth on SCHEDULE 3.3(A), any agreement to which the
                  Company is party or otherwise bound (including the Material
                  Contracts);

                           (ii) except as set forth on SCHEDULE 3.3(B), result
                  in or give to any person any right of termination or
                  cancellation in or with respect to any Permit; or

                           (iii) except as set forth on SCHEDULE 3.3(C), require
                  or potentially require any authorization, consent or approval
                  of, or action or filing with, any person, business
                  organization, entity or any court or other governmental body.

         3.4 ABSENCE OF UNDISCLOSED LIABILITIES.

                  (a) Other than as disclosed on the Company's financial
         statement dated June 30th 2005 and updated at Closing on SCHEDULE
         3.4(A), the Company does not have any liabilities or obligations of any
         nature, whether accrued or absolute, contingent or otherwise, and
         whether due or to become due, except (i) liabilities and obligations
         under contracts described on the Leases Schedule and the Contracts
         Schedule (other than through any breach or default by the Company, (ii)
         liabilities and obligations reflected in the Unaudited Statements, and
         (iii) liabilities and obligations of the Company which have arisen
         after June 30th 2005 in the ordinary course of business, consistent
         with past practices (other than through any breach or default by the
         Company).

                  (b) Except as set forth on SCHEDULE 3.4(B), the Company does
         not have any Funded Indebtedness as of the date of this Agreement or on
         the Closing Date.

         3.5 CAPITALIZATION OF THE COMPANY AND TITLE TO MEMBERSHIP INTERESTS.

                  (a) Sellers are the unconditional and sole legal, beneficial,
         record and equitable owners of the Membership Interests, and each has
         full power and authority to sell and transfer the Membership Interests
         free and clear of all Encumbrances. SCHEDULE 1 lists the name of each
         Seller and the percentage of the Membership Interests each Seller owns
         of record.


                                      -5-

<PAGE>

                  (b) The Membership Interests constitute all of the issued and
         outstanding equity in the Company. All such Membership Interests are
         duly authorized, validly issued, fully paid and non-assessable and were
         issued in conformity with applicable Laws.

                  (c) Except as set forth in Schedule 1, there are no
         outstanding warrants, options, rights, other securities, agreements,
         subscriptions, or other commitments, arrangements or undertakings
         pursuant to which Sellers, the Company, or any other person is or may
         become obligated to issue, deliver or sell, or cause to be issued,
         delivered or sold, any additional membership interests or other
         securities of the Company.

         3.6 FINANCIAL STATEMENTS. The Company has delivered to Buyer, or, in
the case of the Interim and Monthly Unaudited Statements, will deliver to Buyer
prior to Closing, correct and complete copies of (a) unaudited financial
statements with respect to the Company and the Business prepared by the Company
for the year ended December 31, 2004 and December 31, 2003 (the "UNAUDITED
STATEMENTS"), (b) unaudited statements of income and cash flow for the Company
for the six (6) month period ending June 30, 2004 (the " INTERIM UNAUDITED
STATEMENTS") and each month-end that occurs prior to the Closing Date (the
"Monthly UNAUDITED STATEMENTS"). The Unaudited Statements, the Interim Unaudited
Statements and the Monthly Unaudited Statements are hereinafter collectively
referred to as the "FINANCIAL STATEMENTS". The Financial Statements have been
(and, with respect to the Monthly Unaudited Statements, will be) prepared in
accordance with the books and records of the Company and consistently applied
throughout the periods involved, and fairly present the financial condition and
results of operation of the Company and the Business as of such balance sheet
date or the period then ending, as the case may be. Except as set forth on
SCHEDULE 3.6, each of the Company's accounts receivable arose, and all accounts
receivable that will be outstanding as of the Closing Date shall have arisen,
from bona fide transactions in the ordinary course of business. The reserves for
accounts receivables set forth in the Financial Statements have been established
consistently with the Company's historical accounting practices. SCHEDULE 3.6
includes an accurate list, as of a date not more than five (5) business days
prior to the date hereof, of the Company's accounts receivable, showing amounts
due in 30-day aging categories.

         3.7 NO MATERIAL ADVERSE CHANGES; ABSENCE OF CERTAIN CHANGES OR EVENTS.
Since June 30th, 2005, except as set forth in SCHEDULE 3.7 or as contemplated or
permitted hereunder, (i) there has not been any Material Adverse Change, (ii)
the Business has only been operated in the ordinary course, consistent with past
practices, and (iii) there has not been, with respect to the Company, any:

                  (a) sale, assignment or transfer, other than in the ordinary
         course of business and consistent with past practice, of any assets of
         the Company;

                  (b) acquisition by merger, consolidation with, purchase of
         substantially all of the assets or capital stock of, or, other than in
         the ordinary course of business and consistent with past practice, any
         other acquisition of any material assets of, any corporation,
         partnership, association or other business organization or division
         thereof;


                                      -6-

<PAGE>

                  (c) change in accounting methods or accounting practices by
         the Company other than what is required to facilitate the Company's
         transition from construction to operating;

                  (d) termination or, other than in the ordinary course of
         business and consistent with past practice, entry into, or amendment or
         modification of, any Material Contract, Permit or material transaction
         (including, without limitation, any borrowing, capital expenditure,
         capital contribution, capital financing or factoring agreement);

                  (e) increase in salary, bonuses or other compensation payable
         or to become payable to, or any advance or loan to any officer or
         employee of the Company, except in the ordinary course of business,
         consistent with past practice, and the Company has not (i) entered into
         any Benefit Plan, employment, severance, or other agreements relating
         to compensation or fringe benefits or (ii) adopted or changed any
         existing Benefit Plan or Benefit Arrangement;

                  (f) strike, walkout, labor trouble or, To the Best of Sellers'
         Knowledge, any other new or continued labor-related event, development
         or condition of any character which has or could materially adversely
         affect the Business;

                  (g) cancellation or waiver of any right material to the
         operation of the Business or any cancellation or waiver of any debts or
         claims of substantial value or any cancellation or waiver of any debts
         or claims against any officer, manager or employee of the Company;

                  (h) payment, discharge or satisfaction of any material
         liability or obligation (whether accrued, absolute, contingent or
         otherwise), other than the payment, discharge or satisfaction of
         liabilities and obligations under contracts described in the Leases
         Schedule and the Contracts Schedule, in accordance with the terms of
         such contracts, and other than the payment, discharge or satisfaction,
         in the ordinary course of business, of liabilities or obligations shown
         or reflected on the Financial Statements or incurred in the ordinary
         course of business since June 30th, 2005;

                  (i) To the Best of Sellers' Knowledge, change or changes in
         relations with landlords, suppliers, clients or customers which,
         individually or in the aggregate, could reasonably be expected to
         result in a Material Adverse Change;

                  (j) write-offs as uncollectible of any notes or accounts
         receivable of the Company or write-downs of the value of any asset or
         inventory by the Company other than in immaterial amounts or in the
         ordinary course of business consistent with past practice;

                  (k) creation, incurrence, assumption or guarantee by the
         Company of any material obligations or liabilities (whether absolute,
         accrued, contingent or otherwise and whether due or to become due),
         except in the ordinary course of business, or any creation, incurrence,
         assumption or guarantee by the Company of any indebtedness for borrowed
         money; or


                                      -7-

<PAGE>

                  (l) agreement by the Company to do any of the foregoing.

         3.8      REAL PROPERTY; PERSONAL PROPERTY.

                  (a) The Leases Schedule, SCHEDULE 3.8(A), lists all oral or
         written leases, including the Ground Lease, subleases, licenses,
         concession agreements or other use or occupancy agreements pursuant to
         which the Company leases to or from any other party any real property,
         including all renewals, extensions, modifications or supplements to any
         of the foregoing or substitutions for any of the foregoing (each a
         "LEASE" and collectively, the "LEASES"). The Leases are in full force
         and effect, have not been assigned, modified, supplemented or amended,
         and are enforceable by and against the Company and, To the Best of
         Sellers' Knowledge, all other parties thereto. Sellers have delivered
         to Buyer complete and accurate copies of each of the Leases (including
         all amendments and supplements thereto and, To the Best of Sellers'
         Knowledge, all material correspondence related thereto). Copies of the
         Ground Lease are attached to SCHEDULE 3.8(A) hereto. Except as set
         forth on SCHEDULE 3.8(A), (i) none of Sellers, nor the Company has
         received any notice that the Company is in default under, or not in
         compliance with any material provision of, any Lease, that the Company
         may be subject to any special assessments or that there may be any
         material changes in property Tax or land use law affecting any such
         Leases, (ii) none of the Sellers or the Company has delivered any
         notice to another party alleging any default under, or failure to
         comply with any material provision of any Lease, and (iii) no event has
         occurred that, with notice, the passage of time or both would
         constitute a material default by the Company under, or failure of the
         Company to comply with a material provision of, any of the Leases, or,
         To the Best of Sellers' Knowledge, otherwise give any party a right of
         termination or material modification thereof.

                  (b) The Company's interests under the Leases are held free and
         clear of all Encumbrances other than as set forth on SCHEDULE 3.8(B).
         There are no mortgages, security interests or liens granted with
         respect to the Ground Lease other than as set forth on SCHEDULE 3.8(B).
         The Company does not own any fee interest in any real property. The
         Company has no leasehold rights in any other real property.

                           (i) None of Sellers nor the Company has received
                  written notice of any threatened condemnation proceedings,
                  lawsuits or administrative actions relating to any of the real
                  property used in the Business, or any other matters which do
                  and may have a material adverse effect on the current use or
                  occupancy thereof, and there are no pending or, To the Best of
                  Sellers' Knowledge, there are no pending or threatened
                  condemnation proceedings, lawsuits or administrative actions
                  relating to any of the real property used in the Business or
                  any other matters which do or may have a material adverse
                  effect on the current use and occupancy thereof.


                                      -8-

<PAGE>

                           (ii) All facilities, buildings, improvements and
                  other structures located on the real property used in the
                  Business and all present uses and operations of such real
                  property and the structures by the Company, comply in all
                  material respects To the Best of Sellers' Knowledge with all
                  applicable zoning, land-use, building, fire, labor, safety,
                  subdivision and other governmental requirements and all deed
                  or other title covenants or restrictions applicable thereto.
                  None of Sellers nor the Company has received any notice that
                  any of the leased real property or any of the structures used
                  in the Business, or the use, occupancy or operation thereof by
                  the Company, violate any governmental requirements or deed or
                  other title, covenants or restrictions, except for any
                  violations which do not have a material adverse effect.

                           (iii) By Closing, the Company will have obtained all
                  material approvals of governmental authorities (including
                  certificates of use and occupancy, licenses and permits)
                  required in connection with the construction, ownership, use,
                  occupation and operation of the leased real property and the
                  structures thereon used in the Business, and all equipment
                  owned or used by the Company. To the Best of Sellers'
                  Knowledge, none of the leased real property or any of the
                  structures thereon used in the Business are dependent upon or
                  benefit from any "non-conforming use" or similar zoning
                  classification.

                           (iv) Other than in the ordinary course of business or
                  as may be provided in any Lease or Material Contract, there
                  are no parties other than the Company in possession of any of
                  the leased real property or any portion thereof, and, except
                  as may be provided in any Lease or Material Contract or
                  otherwise in the ordinary course of business, there are no
                  leases, subleases, licenses, concessions or other agreements,
                  written or oral, granting to any party or parties the right of
                  use or occupancy of any of the leased real property or any
                  portion thereof.

                           (v) To the Best of the Sellers' Knowledge, all
                  structural, mechanical and other physical systems related to
                  the leased real property are in operating condition and repair
                  at Closing, reasonable wear and tear excepted, in all material
                  respects.

                  (c) Attached hereto as SCHEDULE 3.8(C) is a complete and
         accurate list of all furniture, equipment, leasehold improvements,
         motor vehicles and all other tangible personal property owned or leased
         by the Company that the Company has reflected in its books and records
         in accordance with generally accepted accounting principles (the
         "PERSONAL PROPERTY").

                  (d) The Company has good title to its Personal Property, free
         and clear of any Encumbrances except as set forth on SCHEDULE 3.8(D).

                  (e) The Personal Property has been maintained, repaired and
         replaced in the ordinary course of business consistent with past
         practices, and is in operating order except for ordinary wear and tear.


                                      -9-

<PAGE>

         The Company owns or leases all assets and properties that are used in
         or necessary to the operation of the Business it is currently
         conducted.

                  (f) At Closing, the Company's inventory consists of items of a
         quality and quantity usable and salable in the ordinary course of
         business.

         3.9 TAX MATTERS. Except as set forth on SCHEDULE 3.9:

                  (a) The Company has filed (or had filed on its behalf), all
         Tax Returns required to have been filed by it. The Company has duly
         paid (or had paid on its behalf) all Taxes required to have been paid
         by it. With respect to the Company, no claim has ever been made by a
         governmental authority in a jurisdiction where the Company does not
         file Tax Returns that the Company is or may be subject to taxation by
         that jurisdiction. The Company has not requested or obtained any
         extension of time within which to file any Tax Return, which Tax Return
         has not since been filed. There are no Liens on any of the assets of
         the Company that arose in connection with any failure (or alleged
         failure) to pay any Tax.

                  (b) The Company has complied in all material respects with all
         applicable laws, rules and regulations relating to withholding Taxes,
         and has, within the time and manner prescribed by law, withheld and
         paid, when due (or if withheld but not yet due, have made adequate
         reserves in the Unaudited Statements with for) all Taxes from payments
         made to its employees, agents, and contractors as required by Law.

                  (c) To the Best of Sellers' Knowledge, there is no proceeding
         or audit pending or threatened by any governmental authority with
         respect to any Taxes or Tax Returns of the Company. To the Best of
         Sellers' Knowledge, there are no existing circumstances which, if known
         to governmental authorities, reasonably may be expected to result in
         the assertion of any claim for Taxes against the Company by any
         governmental authority with respect to any period for which Tax Returns
         have been filed or Tax is required to have been paid by or with respect
         to the Company.

                  (d) The Company (or any Affiliate of the Company, with respect
         to the Company) has not received a written ruling from a governmental
         authority relating to any Tax or entered into a written agreement with
         a governmental authority relating to any Tax that could have a
         continuing effect with respect to any taxable period for which such
         Company has not filed a Tax Return.

                  (e) The Company (or any Affiliate of the foregoing with
         respect to the Company) has not waived any statute of limitations with
         respect to any Tax or Tax Return or agreed to any extension of time
         with respect to a Tax assessment or deficiency, which has continuing
         effect.

                  (f) The Company is not nor has it been a party to any Tax
         allocation, Tax sharing or similar agreement or arrangement, has been
         member of a group of entities required to file Tax Returns on a
         combined, consolidated or unitary basis, or has any liability for Taxes
         owing by any other person, including, without limitation, by contract
         or as a transferee or successor of such other person by merger or
         otherwise.


                                      -10-

<PAGE>

                  (g) No property of the Company is property that the Company or
         any party to this transaction is or will be required to treat as being
         owned by another person pursuant to the provisions of Section 168(f)(8)
         of the Code (as in effect prior to its amendment by the Tax Reform Act
         of 1986) or is "tax-exempt use property" within the meaning of Section
         168 of the Code.

                  (h) The Sellers have provided to the Buyer complete and
         accurate copies of all of the following materials: (i) all income Tax
         Returns of the Company, (ii) all examination reports of the Company
         relating to Taxes, (iii) all statements of Taxes assessed against or
         agreed to by the Company, (iv) all written rulings the Company (or any
         Affiliate of the foregoing with respect to the Company) received from
         any governmental authority relating to any Tax, and (v) all written
         agreements entered into by or on behalf of the Company with any
         governmental authority relating to any Tax. SCHEDULE 3.9 identifies all
         Tax Returns that the Company has filed and the taxable period covered
         by each such Tax Return, and identifies those Tax Returns or periods
         that have been audited or are currently the subject of an audit by a
         governmental authority.

                  (i) Since the date of its formation, for federal income Tax
         purposes, the Company has properly been treated as a partnership
         pursuant to Treas. Reg. Section 301.7701-3(b)(1)(i).

         3.10 CONTRACTS AND COMMITMENTS.

                  (a) Except as set forth in the Contracts Schedule, SCHEDULE
         3.10, the Company is not a party to any contract or agreement, written
         or oral:

                           (i) for a bonus, pension, profit sharing, retirement,
                  deferred compensation, medical or life insurance plan,
                  membership purchase or option or any other plans or
                  arrangements providing for benefits of any type to employees
                  (either current or former) of the Company;

                           (ii) for collective bargaining or with any labor
                  union;

                           (iii) for the borrowing of money or mortgaging,
                  pledging or encumbering any of the Company's assets;

                           (iv) for the lending or investing of funds to or in
                  other persons or entities;

                           (v) granting any power of attorney (irrevocable or
                  otherwise) to any person for any purpose relating to the
                  Business or the Company's assets, other than powers of
                  attorney given to regulatory authorities in connection with
                  routine qualifications to do business; or

                           (vi) with an Affiliate of any of Sellers or the
                  Company (other than the Company's Charter Documents).


                                      -11-

<PAGE>

                  (b) The Contracts Schedule lists each of the Material
         Contracts. For purposes of this Agreement, "MATERIAL CONTRACTS"
         includes the following:

                           (i) any and all contracts for the sale of goods or
                  services by the Company with a value in excess of $25,000
                  individually or $100,000 in the aggregate, or which is not
                  terminable without penalty by or on behalf of the Company on
                  less than ninety (90) days notice;

                           (ii) any and all contracts, agreements, licenses,
                  leases (other than the Leases), sales and purchase orders and
                  other legally binding commitments that obligate the Company to
                  pay, assume, guaranty or secure an amount of $25,000 or more
                  individually or $100,000 or more in the aggregate or that
                  cannot be terminated without penalty by or on behalf of the
                  Company on less than ninety (90) days notice;

                           (iii) any and all contracts between the Company on
                  the one hand and any Affiliate of the Company on the other
                  hand (other than the Company's Charter Documents);

                           (iv) any and all broker, distributor, dealer,
                  representative or agency agreements;

                           (v) any and all insurance policies insuring the
                  Business, the Facility or any of the Company's respective
                  assets (collectively, the "INSURANCE POLICIES");'

                           (vi) any and all employment, non-competition or
                  consulting agreement that is currently in effect;

                           (vii) each contract containing covenants purporting
                  to materially limit the freedom of the Company to compete in
                  any line of business or in any geographic area;

                           (viii) any factoring agreements;

                           (ix) each partnership, joint venture or other similar
                  agreement or arrangement to which the Company is a party; and

                           (x) any and all agreements requiring a loan, advance
                  or guaranty of any Funded Indebtedness by the Company.

                  (c) Sellers have delivered to Buyer true and complete copies
         of all written Material Contracts, together with all amendments and
         supplements thereto. A description of the principal terms and
         conditions of each oral Material Contract, if any, is set forth on the
         Contracts Schedule. The Material Contracts are in full force and effect
         and are enforceable against the Company, as applicable, and To the Best
         of Sellers' Knowledge all other parties thereto. Except as set forth on
         the Contracts Schedule, (i) none of Sellers, nor the Company has
         received any notice that it is in default under, or not in compliance
         with any material provision of, any Material Contract, (ii) none of
         Sellers nor the Company has delivered any notice to another party


                                      -12-

<PAGE>

         alleging any default under, or failure to comply with any material
         provision of, any Material Contract, and (iii) with respect to the
         Material Contracts, no event has occurred that, with notice, the
         passage of time or both would constitute (A) a default by the Company,
         or (B) a failure of the Company to comply with a material provision of
         any of the Material Contracts, or (C) To the Best of Sellers'
         Knowledge, otherwise give any party a right of termination or
         modification thereof. Except as set forth on SCHEDULE 3.10(C), To the
         Best of Seller's Knowledge, the consummation of the transactions
         contemplated by this Agreement would not give any party to a Material
         Contract the right to terminate or cancel the terms of such Material
         Contract.

                  (d) Set forth on SCHEDULE 3.10(D) is a list of the twenty-five
         (25) largest customers of the Company by gallons of fuel purchased in
         the Company's most recent 12-month period. Other than the customers set
         forth on SCHEDULE 3.10(D), no other customer accounted for more than
         five percent (5%) of the gallons of fuel purchased by customers of the
         Company in such 12-month period. None of Sellers nor the Company has
         received any notice from any of the customers listed on SCHEDULE
         3.10(D) that such customer intends to cease or reduce its buying of
         goods or services from the Company.

                  (e) Except as disclosed on SCHEDULE 3.10(E), none of Sellers
         nor the Company has received any notice from any material supplier to
         or landlord of the Company that such material supplier or landlord
         intends to terminate or materially alter its business relationship with
         the Company.

                  (f) None of the Sellers nor the Company has failed to give any
         notice or present any reasonably available claim under any of the
         Insurance Policies in a timely fashion or in the manner or detail
         required by the policy. None of the Insurance Policies is subject to
         any retroactive rate or audit adjustments or coinsurance arrangements.
         None of the Sellers nor the Company has received any notice of
         cancellation, non-renewal or material premium increase with respect to
         any Insurance Policy.

                  (g) The Company neither directly or indirectly, has any (i)
         interest in the outstanding stock or ownership interests of any
         corporation or in any partnership, joint venture or other entity, or
         (ii) agreement, understanding, contract or commitment relating to an
         interest in any such entity.

         3.11 LITIGATION; PROCEEDINGS. Except as set forth in SCHEDULE 3.11,
none of the Sellers nor the Company has received notice of service of process
regarding or, To the Best of Sellers' Knowledge, otherwise been named as a party
to any pending action, suit, proceeding, judgment, order or governmental
investigation, and, To the Best of Sellers' Knowledge, no action, suit,
proceeding or governmental investigation has been threatened against the Company
before any federal, state, municipal or other governmental court or agency. The
Company is not subject to or in violation of any judgment, decree, injunction or
order.

         3.12 BROKERAGE. No agent, broker, finder, or investment or commercial
banker engaged by or on behalf of Sellers or the Company is or will be entitled
to any brokerage commission, finders' fees or similar compensation as a result
of this Agreement or any of the transactions contemplated herein.


                                      -13-

<PAGE>

         3.13 EMPLOYEES.

                  (a) SCHEDULE 3.13(A)(I) contains a complete and correct list
         of all employees of the Company, their respective titles as of the date
         hereof (the "BUSINESS EMPLOYEES"), the common law employer of the
         employee, the 2005 compensation (excluding transaction bonuses) paid or
         payable to each such employee, the date and amount of each such
         employee's most recent salary increase, the date of employment of each
         such employee and the accrued vacation time and sick leave or other
         paid time off of each such employee. Except as set forth on SCHEDULE
         3.13(A)(II), (i) the terms of employment or engagement of all officers
         and Business Employees are such that their employment or engagement may
         be terminated at will with notice given at any time and without
         liability for payment of compensation or damages, (ii) there are no
         severance payments which are or could become payable by the Company to
         any such person under the terms of any oral or written agreement or
         commitment or any Law, custom, trade or practice, (iii) there are no
         other agreements, contracts or commitments, oral or written, between
         the Company and any such person, (iv) as of the date hereof, except as
         set forth on SCHEDULE 3.13(A)(III), To the Best of Sellers' Knowledge,
         no management level Business Employee has provided notice that he or
         she intends to terminate his or her employment or relationship with the
         Company, (v) To the Best of Sellers' Knowledge, there are no agreements
         between any Business Employee and any other Person which would
         restrict, in any manner, such Person's ability to perform services, for
         the Company, the Buyer, or any of their Affiliates or, in connection
         with the operation of the Business, or the right of any of them to
         compete with any Person.

                  (b) Except as disclosed in SCHEDULE 3.13(B), the Company is
         not and has not ever been, bound by or subject to (and none of their
         respective assets or properties are bound by or subject to) any
         arrangement with any labor union or other collective bargaining
         representative. No employee of the Company has ever been represented by
         any labor union while employed by the Company or covered by any
         collective bargaining agreement while employed by the Company and no
         campaign to establish such representation is in progress. With respect
         to the Company, there is no pending or, To the Best of Sellers'
         Knowledge, threatened (i) strike, slowdown, picketing, work stoppage or
         employee grievance process, (ii) material charge, grievance proceeding
         or other claim against or affecting the Company relating to the alleged
         violation of any law pertaining to labor relations or employment
         matters, or (iii) application for certification of a collective
         bargaining agent.

                  (c) As of the date hereof, the Company does not employ or
         otherwise engage any independent contractors, consultants or agents
         except as outlined on SCHEDULE 3.13(C); and the Company does not have
         any liability arising out of the employment or engagement of any
         independent contractors, consultants or agents.


                                      -14-

<PAGE>

                  (d) SCHEDULE 3.13(D) lists all of the Business Employees who
         are currently on leave relating to work-related injuries and/or
         receiving disability benefits under any Benefit Plan.

                  (e) Except as set forth in SCHEDULE 3.13(E), no Company
         employee plan provides, or reflects or represents any liability to
         provide retiree health benefits to any person for any reason, except as
         may be required by COBRA or other applicable statute, and the Company
         has never represented, promised or contracted (whether in oral or
         written form) to any employee (either individually or to employees as a
         group) or any other person that such employees) or other person would
         be provided with retiree health benefits, except to the extent required
         by statute.

                  (f) To the Best of the Sellers' Knowledge, the Company has
         not, prior to the Closing and in any material respect, violated any of
         the health care continuation requirements of COBRA, the requirements of
         FMLA, the requirements of the Health Insurance Portability and
         Accountability Act of 1996, the requirements of the Women's Health and
         Cancer Rights Act of 1998, the requirements of the Newborns' and
         Mothers' Health Protection Act of 1996, or any amendment to each such
         act, or any similar provisions of state law applicable to its
         Employees. The Company will make available to Buyer five (5) days prior
         to the Closing a list of former employees terminated within the last
         eighteen (18) months who are entitled to COBRA coverage and the date on
         which such COBRA coverage terminates.

         3.14     EMPLOYEE BENEFIT PLANS.

                  (a) SCHEDULE 3.14(A) lists: (i) each plan, fund, program,
         agreement or arrangement for the provision of executive compensation,
         deferred or incentive compensation, profit sharing, stock bonus, bonus,
         stock option, stock purchase, termination, salary continuation,
         employee assistance, supplemental retirement, severance, vacation,
         sickness, disability, death, fringe benefit, insurance, medical or
         other benefits (whether provided through insurance, on a funded or
         unfunded basis, or otherwise) to any current or former employee,
         director, consultant or independent contractor, or any dependent,
         survivor or beneficiary with respect to any of the foregoing, which is
         maintained, administered or contributed to by the Company, whether or
         not legally binding; (ii) each Employee Pension Benefit Plan which has
         been maintained, administered or contributed to by the Company, any
         ERISA Affiliate of the Company in the past six (6) years (the "PENSION
         PLANS"); and (iii) each Employee Welfare Benefit Plan which is
         currently maintained, administered or contributed to by the Company
         (the "WELFARE PLANS") (collectively, the "BENEFIT PLANS").

                  (b) Each Pension Plan which is intended to qualify under
         Section 401(a) of the Code so qualifies: (i) with respect to the form
         of its plan documents and (ii) in operation. Each Benefit Plan (and
         each related trust, insurance contract or fund) has been administered
         in all material aspects in accordance with its governing instruments
         and all applicable Law.


                                      -15-

<PAGE>

                  (c) There have been no Prohibited Transactions with respect to
         any Benefit Plan which could result in liability to the Company, or, To
         the Best of the Sellers' Knowledge, any of their respective employees.
         There has been no breach of fiduciary duty (including violations under
         Part 4 of Title I of ERISA) with respect to any Benefit Plan which
         could result in liability to the Company, or, To the Best of the
         Sellers' Knowledge, any of its employees.

                  (d) Neither the Company nor any or its ERISA Affiliates have
         ever maintained, contributed to, had any obligation to contribute to,
         or had any other liability under or with respect to any Employee
         Pension Benefit Plan covered by Title IV of ERISA or ERISA Section 302
         or Section 412 of the Code. Neither the Company nor any of its ERISA
         Affiliates have ever had any liability under or with respect to any
         "multiemployer plan" as defined in ERISA Section 3(37).

                  (e) The Company has not have ever sponsored, maintained,
         administered, contributed to, had any obligation to contribute to, or
         had any other liability under or with respect to any Employee Welfare
         Benefit Plan which provides health, life or other coverage for former
         directors, officers or employees (or any spouse or former spouse or
         other dependent thereof), other than benefits required by COBRA.

                  (f) Neither the Company nor any of its ERISA Affiliates have
         ever maintained a "voluntary employees beneficiary association" within
         the meaning of Section 501(c)(9) of the Code or any other "welfare
         benefit fund" as defined in Section 419(e) of the Code.

                  (g) All reports and information relating to each Benefit Plan
         required to be filed with any governmental agency or authority have
         been timely filed, or have been filed without any current liability for
         late filing, and are accurate in all material respects; all reports and
         information relating to each such Benefit Plan required to be disclosed
         or provided to participants or their beneficiaries have been timely
         disclosed or provided, and there are no restrictions on the right of
         the Company to terminate such plan or decrease (prospectively) the
         level of benefits under any Benefit Plan after the Closing Date without
         liability to any participant or beneficiary thereunder.

                  (h) There has been delivered to Buyer, with respect to each
         Benefit Plan, the following: (i) a copy of the annual report (if
         required under ERISA) with respect to each such Benefit Plan for the
         last three (3) years (including all schedules and attachments); (ii) a
         copy of the summary plan description, together with each summary of
         material modification required under ERISA with respect to such Benefit
         Plan; (iii) except as set forth in SCHEDULE 3.14(H), a true and
         complete copy of each written Benefit Plan; (iv) all trust agreements,
         insurance contracts, and similar instruments with respect to each
         funded or insured Benefit Plan and with respect to Pension Plans, each
         written plan document and all amendments thereto which have been
         adopted since the inception of such plan; (v) copies of all
         nondiscrimination and top-heavy testing reports for the last three (3)
         plan years with respect to each Benefit Plan subject to
         nondiscrimination and/or top-heavy testing; and (vi) any investment
         management agreements, administrative services contracts or similar
         agreements relating to the ongoing administration and investment of any
         Benefit Plan.


                                      -16-

<PAGE>

                  (i) Each Benefit Plan sponsored by the Company is terminable
         or amendable to decrease prospectively the level of its benefits at the
         discretion of such entity with no more than ninety (90) days advance
         notice and without material cost to such entity. The Company may,
         without material cost, withdraw its employees, directors, officers and
         consultants from any Benefit Plan which is not sponsored by such
         entity. No Benefit Plan has any provision which could increase or
         accelerate benefits or any provision which could increase liability to
         the Company as a result of the transactions contemplated hereby, alone
         or together with any other event. To the Best of Sellers' Knowledge, no
         officer, director, agent or employee of the Company or any of its ERISA
         Affiliates has made any material oral or written representation which
         is inconsistent with the terms of any Benefit Plan.

                  (j) The Company has not liability with respect to any Employee
         Welfare Benefit Plan or Employee Pension Benefit Plan.

                  (k) All employees of the Company were permitted to participate
         in the Company's 401(k) Plan after completing 12 months eligibility
         service without regard to actual hours of service or job
         classification.

         3.15 COMPLIANCE WITH LAWS. The Company has complied, and the use and
operation of the Facility is in compliance, in all material respects, with all
applicable Laws which affect the Business, and has timely filed with the proper
authorities all material statements and reports required by the Laws to which
the Business is subject. The Company holds all material permits, licenses,
certificates, approvals, registrations, franchises, rights, qualifications and
other authorizations of federal, state and local governments, agencies and
regulatory authorities required for the conduct of the Business as operated to
the date hereof (collectively, the "PERMITS"). SCHEDULE 3.15 sets forth a
complete and accurate list of each Permit. The Company does not (1) hold any
Permit issued by any state or federal agency. To the Best of Sellers' Knowledge,
there is not pending or proposed any order, notice, rule, or directive, issued
by any governmental authority against the Company, nor, To the Best of Sellers'
Knowledge, is there now pending or threatened any legal or regulatory proceeding
by any governmental authority which is likely to materially adversely affect the
Business or assets of the Company or any Permit.

         3.16 ENVIRONMENTAL MATTERS. Except as set forth in SCHEDULE 3.16,
Sellers represent and warrant that:

                  (a) To the Best of Sellers' Knowledge, the Company materially
         complies, and at all times during Sellers' ownership of the Membership
         Interests has been in material compliance, with applicable
         Environmental Laws;

                  (b) None of Sellers nor the Company has received any written
         request for information, or has been notified that it is a potentially
         responsible party, under CERCLA or any similar state or local law with
         respect to any on-site or offsite location;


                                      -17-

<PAGE>

                  (c) To the Best of Sellers' Knowledge the Company has obtained
         all required material Environmental Permits relating to the Business,
         enabling the Business to operate as of the Closing Date in the ordinary
         course of business consistent with past practices;

                  (d) None of Sellers nor the Company has received any notice,
         notification, demand, request for information, citation, summons,
         complaint or order and, To the Best of Sellers' Knowledge, there is no
         violation, claim, demand, litigation, proceeding or governmental
         investigation (whether pending or threatened) arising from applicable
         Environmental Laws by or against the Company. The Company is not
         subject to any judgment, decree, order, or consent agreement relating
         to compliance with any Environmental Laws, or the cleanup of Hazardous
         Materials under any Environmental Laws;

                  (e) Sellers have delivered true, complete and correct copies
         of any reports, or other documents possessed by or in the control of
         Sellers or the Company pertaining to the environmental condition of the
         Facility, Hazardous Materials on the Facility and regarding the
         Company's compliance with applicable Environmental Laws. Except for
         such reports or documents, at no time during Sellers' ownership of the
         Membership Interests has there been any material investigation, study,
         audit, test, review or other material analysis (including any Phase I
         environmental assessments) conducted by, for, or provided to Sellers or
         the Company in relation to the Business;

                  (f) Except as set forth in SCHEDULE 3.16, To the Best of
         Sellers' Knowledge, the Facility does not contain any underground
         storage tanks. To the best of the Sellers' knowledge, except as set
         forth in SCHEDULE 3.16, there have been no material discharges,
         emissions, spilling, leaking, pouring, emptying, or other releases of
         Hazardous Materials which are or were reportable by Sellers or the
         Company under any Environmental Laws.

                  (g) To the Best of Sellers' Knowledge, (i) the Report of Phase
         I Environmental Site Assessment prepared by CGFA Services, Inc., dated
         June 5, 2000, is accurate and, except as set forth on SCHEDULE 3.16,
         includes an investigation and assessment of all parts of the real
         property upon which the Facility is presently located.

         3.17 AFFILIATE TRANSACTIONS. Except as set forth on SCHEDULE 3.17, no
Affiliate of the Company, nor any member, manager, officer, director or equity
holder of any thereof, is party to any agreement (other than the Company's
Charter Documents), or, To the Best of Sellers' Knowledge, any transaction or
understanding, with the Company. Except as set forth on SCHEDULE 3.17, the
consummation of the transactions contemplated by this Agreement will not (either
alone, or upon the occurrence of any act or event, or with the lapse of time, or
both) result in any benefit or payment (severance or other) arising or becoming
due from the Company to any entity or person other than Sellers in accordance
with the terms of this Agreement.

         3.18 INTELLECTUAL PROPERTY RIGHTS. SCHEDULE 3.18 lists all of the
Intellectual Property owned or licensed by the Company and used in connection
with its Business (the "COMPANY INTELLECTUAL PROPERTY"). To the Best of Sellers'
Knowledge, use by Company of the Company Intellectual Property does not infringe
any rights of any third party and no activity of any third party infringes upon
the rights of the Company with respect to any of the Company Intellectual


                                      -18-

<PAGE>

Property. To the Best of Sellers' Knowledge, no claims have been asserted by any
entity or person with respect to challenging the ownership, validity,
enforceability or use of the Company Intellectual Property, nor to the best of
the Sellers' knowledge, is there any valid grounds for any such bona fide
claims. To the extent the Company uses any Intellectual Property owned by a
third party, the Company has a license with such third party for the use of such
Intellectual Property and, to the best of the Sellers' knowledge, is not in
default under any such license.

         3.19 BANK ACCOUNTS; POWERS OF ATTORNEY. SCHEDULE 3.19 lists each bank,
trust company, savings institution, brokerage firm, mutual fund or other
financial institution with which the Company has an account or safe deposit or
lock box and the names and identification of all persons authorized to draw on
it or to have access to it as of the Closing Date. Except as set forth on
SCHEDULE 3.19, neither the Company, nor any of its managers or officers, has any
power of attorney with respect to the Business outstanding.

         3.20 FUEL VOLUME RECORDS. Five (5) days prior to Closing, the Company
will provide true and correct copies of the Company's fuel volume records and
gross receipt statements for the period from startup through five (5) days prior
to the Closing, reflecting the volume of fuel sold by the Company, and revenues
on which the Company paid any fee, during such period are attached as SCHEDULE
3.20. Such statements accurately reflect the volume of fuel sold and revenues
earned by the Company during such period and were prepared in accordance with
the Company's books and records.

         3.21 INTENTIONALLY OMITTED.

         3.22 INTENTIONALLY OMITTED.

         3.23 ACCURACY OF REPRESENTATIONS. No representation, warranty,
statement or schedule furnished by the Company or any Seller to Buyer in
connection with the transactions contemplated hereby contains any untrue
statement of any material fact or omits to state any material fact necessary in
order to make the statements contained herein or therein not misleading. There
is no fact known to the Company or any Seller that has specific application to
either the Company or any Seller (other than general economic or industry
conditions) and that materially adversely affects or, as far as the Company or
any Seller can reasonably foresee, materially threatens, the assets, business,
prospectus, financial condition, or results of operations of the Company that
has not been set forth in this Agreement or the schedules hereto.

         3.24 FOREIGN PERSON. Each Seller represents and warrants that he, she,
or it is not a "foreign person" within the meaning of the Internal Revenue Code
Section 1445.

         3.25 SECURITIES LAW COMPLIANCE.

                  (a) Such Seller has a net worth sufficient to bear the
         economic risk (including the entire loss) of its investment made in the
         Member Note, Warrant and the underlying shares of Buyer;

                  (b) Such Seller is an "ACCREDITED INVESTOR," as such term is
         defined in Rule 501 of Regulation D promulgated under the rules and
         regulations of the Securities Act that is in compliance with paragraph
         (b)(2) of Rule 502 of Regulation D promulgated under the Securities
         Act;


                                      -19-

<PAGE>

                  (c) Such Seller has adequate means of providing for its
         current cash needs and personal contingencies and has no need for
         liquidity in this investment and has no reason to anticipate any change
         in its personal circumstances, financial or otherwise, which may cause
         or require any sale or distribution by such Seller or all or any part
         of the Buyer Securities acquired by it herein;

                  (d) by reason of such Seller's business or financial
         experience or the business or financial experience of such Seller's
         professional advisor(s) who are unaffiliated with and who are not
         compensated by Buyer or any affiliate or selling agent of Buyer,
         directly or indirectly, such Seller has the capacity to protect its own
         interests in connection with an investment in the Buyer Securities;

                  (e) Such Seller understands that he, she or it is acquiring
         the Buyer Securities without being furnished any prospectus or offering
         circular, other than a copy of this Agreement;

                  (f) No representations or warranties have been made to such
         Seller by Buyer or any employee or agent of Buyer and in entering into
         this Agreement, such Seller is not relying on any information, other
         than as a result of the independent investigation of Buyer by such
         Seller, and no guarantee of any profit or return on its investment made
         in the Buyer Securities has been made to such Seller;

                  (g) In evaluating the merits and risk of this investment, such
         Seller has relied on the advice of its personal tax advisor, investment
         advisor and/or legal counsel;

                  (h) Such Seller is aware that the Buyer Securities have not
         been registered or qualified, nor is registration or qualification
         contemplated, with the SEC under the Securities Act or any state
         securities law. Accordingly, the Buyer Securities may be sold or
         otherwise transferred or hypothecated only if they are subsequently
         registered or qualified under the Securities Act or applicable laws or
         if, in the opinion of counsel, an exemption from registration or
         qualification thereunder is available and the transaction will not
         jeopardize the availability of the exemptions under applicable federal
         and state securities laws relied upon by Buyer in connection with the
         offering in which such Seller acquired its Buyer Securities;

                  (i) Such Seller acknowledges that the Buyer Securities were
         not offered by means of any general solicitation or advertising;

                  (j) Such Seller is acquiring its Buyer Securities solely for
         its own account, for investment purposes only, and not with an intent
         to sell, or for resale in connection with any distribution of all or
         any portion of the Buyer Securities within the meaning of the
         Securities Act;

                  (k) The address of such Seller furnished by such Seller at the
         end of this Agreement is the principal residence of such Seller, if
         such Seller is an individual, or the principal business address of such
         Seller, if such Seller is a business or other entity, and that all
         offers to such Seller have been made only in the state specified in
         such address; and


                                      -20-

<PAGE>

                  (l) Each Seller agrees to immediately notify Buyer in writing
         if prior to Closing he, she, or it is no longer an accredited investor.

                                    ARTICLE 4
                     BUYER'S REPRESENTATIONS AND WARRANTIES
                     --------------------------------------

         As an inducement to Sellers to enter into this Agreement, Buyer
represents and warrants to Sellers that:

         4.1 ORGANIZATION. Buyer is a corporation duly organized, validly
existing and in good standing under the Laws of the State of Delaware.

         4.2 POWER AND AUTHORITY. Buyer has full power and authority to execute
and deliver this Agreement and the Transaction Documents and to perform its
obligations hereunder and thereunder.

         4.3 AUTHORIZATION; NO BREACH. The execution, delivery and performance
of this Agreement has been, and the execution, delivery and performance of the
Transaction Documents as of the Closing will have been, duly and validly
authorized by Buyer, and this Agreement constitutes, and each of the Transaction
Documents as of the Closing will constitute, a valid and binding obligation of
Buyer, enforceable against Buyer in accordance with their respective terms
(except as may be limited by bankruptcy, insolvency, reorganization and other
similar laws and equitable principles relating to or limiting creditors' rights
generally).

         4.4 BROKERAGE. No agent, broker, finder, or investment or commercial
banker engaged by or on behalf of Buyer is or will be entitled to any brokerage
commission, finders' fees or similar compensation from Sellers or any of their
respective Affiliates as a result of this Agreement or any of the transactions
contemplated herein.

         4.5 LITIGATION. There is no action, suit, proceeding, judgment or order
pending or, to the best of Buyer's knowledge, threatened against or affecting
Buyer before any federal, state, municipal or other governmental court or agency
which would have a material adverse effect on Buyer's performance under this
Agreement or the Transaction Documents or the consummation of the transactions
contemplated hereby.

         4.6 BUYER'S INVESTMENT REPRESENTATION. Buyer is acquiring the
Membership Interests for Buyer's own account for investment purposes only and
not with a view to or for sale in connection with a distribution thereof. Buyer
shall not sell the Membership Interests in a manner that violates any federal or
state securities laws. Buyer acknowledges that none of the Membership Interests
will be registered under, and therefore will be "restricted securities" under,
the Securities Act of 1933 as amended. Buyer is an "accredited investor" within
the definition set forth in Rule 501(a) of the Securities Act of 1933, as
amended.


                                      -21-

<PAGE>

         4.7 BUYER'S SECURITIES FILINGS. Since March 24, 2005, Buyer has filed
all of the relevant and applicable securities filings as required by and in
accordance with the Securities Exchange Act of 1934, as amended, and none of
such filings contained any untrue statement of a material fact or omitted to
state a material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they were
made, not misleading.

                                    ARTICLE 5
                                    COVENANTS
                                    ---------

         5.1 PRE-CLOSING AFFIRMATIVE COVENANTS OF SELLERS. Prior to the Closing,
Sellers shall cause the Company, as applicable, to:

                  (a) use commercially reasonable efforts to obtain (i) any
         Ground Lease Consent and (ii) any other consents and approvals from any
         parties that may be necessary or reasonably requested by Buyer to
         consummate the transactions contemplated by this Agreement, including
         such consents and approvals that may be necessary as a result of the
         subsequent sale or transfer of Buyer or by Buyer of its rights under
         this Agreement to an Affiliate of Buyer;

                  (b) conduct the Business only in the usual and ordinary course
         of business and consistent with past practices, including, without
         limitation, consistent with past practices in respect of managing
         working capital (including, without limitation, not accelerating the
         collection of receivables or deferring the payment of payables);

                  (c) use commercially reasonable efforts to keep in full force
         and effect the Company's corporate existence and all rights,
         franchises, Permits and Company Intellectual Property rights relating
         to or pertaining to the Business;

                  (d) use commercially reasonable efforts to retain the
         Company's employees and preserve the Company's present business
         relationships;

                  (e) use commercially reasonable efforts to maintain the
         Personal Property in customary repair, order and condition and in the
         event of any casualty, loss or damage to any of the Personal Property
         prior to Closing, use commercially reasonable efforts to either repair
         or replace such assets with assets of comparable quality or transfer to
         Buyer at Closing the proceeds of any insurance recovery with respect
         thereto;

                  (f) maintain the Company's books, accounts and records in
         accordance with past custom and practice as applied by Sellers and the
         Company, as applicable, on a consistent basis;

                  (g) use commercially reasonable efforts to maintain all
         Insurance Policies; and

                  (h) use commercially reasonable efforts not to be in material
         default under any Material Contract, Lease or Permit and to cure any
         such material default.


                                      -22-

<PAGE>

         5.2 SCHEDULES. The schedules are attached to this Agreement as of
execution of this Agreement. On or prior to five (5) Business Days before the
Closing Date, Sellers will provide to Buyer a complete set of the schedules
provided for in this Agreement, updated and revised as necessary from those
schedules attached as of execution of this Agreement. Notwithstanding the
foregoing, Sellers shall, as soon as reasonably practicable, give Buyer written
notice of the existence or occurrence of any condition which would make any
representation or warranty made by Sellers contained herein untrue as of the
date of this Agreement or any subsequent date as if made on and as of such
subsequent date (except for those representations and warranties which address
matters only as of a particular date) or which might reasonably be expected to
prevent the consummation of the transactions contemplated hereby. No such
written notification (or updated or revised disclosure schedule) related to the
existence or occurrence of any condition which would make any representation or
warranty made by Sellers contained herein untrue as of the date of this
Agreement shall (i) be deemed to cure any breach of any representation or
warranty resulting from such condition or (ii) constitute a waiver by Buyer of
any condition set forth in this Agreement, unless, in either case, Buyer
specifically agrees thereto in writing or consummates the Closing under this
Agreement after receipt of such written notification (or updated or revised
disclosure schedule). No such written notification related to the occurrence of
any condition arising after the date of this Agreement shall result in any
adjustment in the Purchase Price or give Buyer any right to claim damages under
this Agreement or to terminate this Agreement unless the condition or conditions
reported in such written notification (or updated or revised disclosure
schedule) constitute, or are reasonably likely to result in, a Material Adverse
Change. Notwithstanding any other provision of this Agreement to the contrary,
Buyer shall not be obligated to consummate the Closing if a revised or updated
schedule, disclosing a matter existing on or prior to the date of this
Agreement, is necessary to make a representation or warranty true and correct in
all material respects as of the date of this Agreement, and such schedule is not
accepted by the Buyer.

         5.3 INTENTIONALLY OMITTED.

         5.4 ACCESS. Prior to Closing, Sellers will (a) during ordinary business
hours and in a commercially reasonable manner, permit Buyer and its authorized
representatives to have access to the Facility and its respective books, records
and key personnel, (b) furnish, as soon as reasonably practicable, to Buyer or
its authorized representatives such other information in Sellers' possession
with respect to the Company as Buyer may from time to time reasonably request,
and (c) otherwise reasonably cooperate in the examination of the Company by
Buyer. No investigation or receipt of information by Buyer pursuant to this
Agreement shall diminish or obviate any of the representations, warranties,
covenants or agreements of Sellers under this Agreement or the conditions to the
obligations of Buyer under this Agreement.

         5.5 PRE-CLOSING NEGATIVE COVENANTS OF SELLERS. From the Effective Date
to the Closing Date, and except as provided in SECTION 6.1(R) and SECTION
7.1(H), Sellers shall not permit the Company to, and Sellers shall not, with
respect to the Company, without the prior written consent of Buyer, which
consent shall not be unreasonably withheld, conditioned, or delayed:

                  (a) transfer, sell or distribute any material assets;


                                      -23-

<PAGE>

                  (b) assume, guarantee, endorse or otherwise become liable or
         responsible for any indebtedness of any other person;

                  (c) incur or agree to incur any material obligation or
         liability, or make any material capital expenditures that are
         inconsistent with the most recent budgets of the Company as provided to
         Buyer on or before the date hereof, or commitments with respect
         thereto;

                  (d) make any loans, or investments in, any other person or
         entity;

                  (e) pledge or otherwise mortgage any material assets or allow
         any Encumbrance thereupon;

                  (f) terminate, amend or fail to renew any Permits other than
         in the ordinary course of business and with prior notice to Buyer;

                  (g) terminate, amend or fail to renew any Insurance Policies
         other than in the ordinary course of business and with prior notice to
         Buyer;

                  (h) materially amend, modify or terminate any Material
         Contract; provided, that, the foregoing shall not preclude the Company
         from amending or modifying any Material Contract without Buyer's prior
         written consent, so long as such amendment or modification (i) is in
         the ordinary course of business, (ii) is not adverse to the Company and
         (iii) Sellers provide Buyer with prompt written notice of such
         amendment or modification.

                  (i) increase the compensation, benefits or other remuneration
         of any of the Business's current officers or key employees, other than
         payment by Sellers at Closing of transaction bonuses, or enter into any
         employment or consulting contract or arrangement with any person which
         is not terminable at will, without penalty or continuing obligation;

                  (j) adopt a plan of complete or partial liquidation,
         dissolution, merger, consolidation, restructuring, recapitalization or
         other reorganization of the Company;

                  (k) except as provided for in Schedule 5.5k, alter through
         merger, liquidation, reorganization, restructuring or any other fashion
         the ownership of the Membership Interests by Sellers;

                  (l) except as expressly contemplated in this Agreement, take
         any action or permit to occur any event described in SECTION 3.7;

                  (m) knowingly take any action or omit to take any action which
         will result in a violation of any applicable Law or cause a breach of
         any Material Contract, Lease, Permit or representation or warranty set
         forth in ARTICLE 3;

                  (n) bill for goods or services, or take any action to collect
         any accounts receivable, or run down inventory, in any case outside the
         ordinary course of business or inconsistent with past practices, or
         defer payment of any accounts payable for a period inconsistent with
         past practices; or


                                      -24-

<PAGE>

                  (o) enter into any agreement, or otherwise commit, to do any
         of the foregoing.

         5.6 LOT SPLIT. Principals, the Company and Western Milling shall use
commercially reasonable efforts to have a separate legal parcel created that
complies with the California Subdivision Map Act for the real property which the
Facility is located on. Principals and Company shall provide Buyer with monthly
status reports as to the Principals', the Company's and Western Millings'
efforts in connection with the foregoing. If the aforesaid legal parcel is not
created prior to the Closing Date, Western Milling agrees to use commercially
reasonable efforts to complete the separate legal parcel as soon as possible.

                                    ARTICLE 6
                           CLOSING CONDITIONS - BUYER
                           --------------------------

         6.1 BUYER'S CONDITIONS TO CLOSING. The obligation of Buyer to
consummate the transactions contemplated by this Agreement is subject to the
satisfaction of the following conditions on or before the Closing Date:

                  (a) The representations and warranties set forth in ARTICLE 3
         and the information set forth in the schedules to this Agreement (as
         such schedules may have been revised and updated between the Effective
         Date and the Closing Date and accepted by Buyer, if applicable,
         pursuant to SECTION 5.2) shall be true and correct as of the Closing
         Date as though made on the Closing Date, and Sellers shall have
         delivered to Buyer a certificate to that effect;

                  (b) Sellers shall have performed or complied with all of the
         covenants and agreements required under this Agreement, and Sellers
         shall have delivered to Buyer a certificate to that effect;

                  (c) No order of any court or administrative agency shall be in
         effect which restrains or prohibits the transactions contemplated
         hereby, and there shall not have been threatened, nor shall there be
         pending, any action or proceeding by or before any court or
         governmental agency or other regulatory or administrative agency or
         commission challenging any of the transactions contemplated by this
         Agreement or seeking monetary relief by reason of the consummation of
         such transactions;

                  (d) Sellers shall have executed and delivered to Buyer
         original or facsimile counterparts of each Transaction Document to
         which it is a party (in accordance with the provision in SECTION 8.1
         permitting the use of facsimile copies) and any other closing documents
         to be delivered by Sellers at Closing to Buyer pursuant to SECTION 8.3
         of this Agreement;

                  (e) The governmental approvals and consents by third parties
         set forth on SCHEDULE 6.1(E) shall have been obtained and no such
         approval or consent shall have been conditioned upon the modification
         in any material respect, cancellation or termination of any Material
         Contract, Lease or Permit or shall impose on Buyer or the Company any


                                      -25-

<PAGE>

         material condition, provision, fee or requirement not presently imposed
         upon the Company or any condition, provision or requirement that would
         be materially more restrictive after the Closing than the conditions,
         provisions and requirements presently imposed on the Company;

                  (f) Buyer shall have received reasonable confirmation from
         Sellers of the absence of any and all deeds of trust, assignments of
         rents, security agreements, Uniform Commercial Code filings and fixture
         filings affecting the Company or its Facility or Business;

                  (g) Sellers shall have delivered an opinion of counsel, dated
         as of the Closing Date and addressed to Buyer, substantially in the
         form set forth as EXHIBIT "E", with respect to (i) the due
         authorization, execution, delivery and enforceability of the Opinion
         Documents (as said term is defined in EXHIBIT "E") and (ii) no
         conflicts between Sellers' obligations under this Agreement and the
         Company's Charter Documents;

                  (h) Buyer shall have received the resignation of such officers
         or managers of the Company as Buyer requests;

                  (i) Buyer shall have received (i) a good standing certificates
         and foreign qualification certificates, if any, for the Company, (ii)
         copies of the Charter Documents of the Company, (iii) resolutions or
         instruments of the Company authorizing the execution, delivery and
         performance by the Company of this Agreement and the transactions
         contemplated by this Agreement, (iv) any and all original documents
         relating to any meetings or actions taken by the Company's managers or
         members, and (v) an incumbency certificate evidencing the authority and
         specimen signature of each authorized person of the Company executing
         this Agreement and any other certificate provided pursuant to this
         SECTION 6.1, each in form and substance reasonably satisfactory to
         Buyer and certified by an authorized person of the Company as of the
         Closing Date. Such certification shall state that such Charter
         Documents and resolutions (or other authorizing actions or instruments)
         have not been amended, modified, revoked or rescinded and are in full
         force and effect on and as of the Closing Date and that all company
         proceedings required to be taken on the part of the Sellers and the
         Company, if any, in connection with the transactions contemplated by
         this Agreement have been duly authorized and taken;

                  (j) Sellers shall have delivered to Buyer five (5) business
         days prior to the Closing Date, a written statement setting forth the
         principal amount and the accrued interest owing under the MetLife Note,
         duly executed by Sellers' Representative;

                  (k) Buyer shall have agreed with Sellers upon the principles,
         specifications and methodologies for determining Net Working Capital;

                  (l) There has not been any Material Adverse Change;

                  (m) Buyer shall have had an opportunity to inspect the
         Facility's operations to Buyer's sole satisfaction, however, any such
         inspection shall not limit the scope of the representations and
         warranties and indemnification to be provided by Sellers pursuant to


                                      -26-

<PAGE>

         the terms of this Agreement, without limiting the scope of the
         foregoing, the Facility must be producing at a minimum rate of 25 MMGY
         of undenatured ethanol, meet industry average plan efficiencies with
         respect to corn conversion and energy efficiency and Buyer shall have
         the right to have an independent performance test run by a third party
         expert to determine if the Facility meets these standards;

                  (n) The Company shall be in compliance with all applicable
         laws and ordinances;

                  (o) Buyer shall have obtained financing necessary for payment
         in part of the Purchase Price;

                  (p) All Sellers have signed all the Transaction Documents
         which they are required to sign and Buyer will be able to acquire at
         Closing all the Membership Interests; and

                  (q) All permits necessary for the continued operation of the
         Facility following the Closing Date will be in place.

                  (r) Buyer shall have reviewed and approved contemplated
         amendments and modifications to certain Material Contracts, including
         the Development and Operations Agreement, the Supply and Output
         Agreement and Energy Agreement.

         6.2 WAIVER OF CONDITIONS. Any conditions specified in SECTION 6.1 may
be waived by Buyer in writing.

                                    ARTICLE 7
                          CLOSING CONDITIONS - SELLERS
                          ----------------------------

         7.1 CONDITIONS TO CLOSING. The obligation of Sellers to consummate the
transactions contemplated by this Agreement is subject to the satisfaction of
the following conditions on or before the Closing Date:

                  (a) Buyer shall have delivered the Purchase Price to Sellers
         in accordance with the terms of this Agreement and the issuance of
         warrants referred to in SECTION 2.1;

                  (b) The representations and warranties set forth in ARTICLE 4
         shall be true and correct as of the Closing Date as though made on the
         Closing Date, and Buyer shall have delivered to Sellers a certificate
         to that effect;

                  (c) Buyer shall have performed or complied with all of the
         covenants and agreements required under this Agreement, and Buyer shall
         have delivered to Sellers a certificate to that effect;

                  (d) No order of any court or administrative agency shall be in
         effect which restrains or prohibits the transactions contemplated
         hereby, and there shall not have been threatened, nor shall there be
         pending, any action or proceeding by or before any court or
         governmental agency or other regulatory or administrative agency or


                                      -27-

<PAGE>

         commission challenging any of the transactions contemplated by this
         Agreement or seeking monetary relief by reason of the consummation of
         such transactions;

                  (e) Buyer shall have executed and delivered to Sellers
         original or facsimile counterparts of each Transaction Document to
         which it is a party (in accordance with the provision in SECTION 8.1
         permitting the use of facsimile copies);

                  (f) Sellers shall have agreed with Buyer upon the principles,
         specifications and methodologies for determining Net Working Capital;

                  (g) Sellers shall have received a good standing certificate
         and a copy of the Charter Documents and resolutions of the Board of
         Directors (or other authorizing actions or instruments) and the
         stockholders, if necessary, of Buyer authorizing the execution,
         delivery and performance by Buyer of this Agreement and the
         transactions contemplated by this Agreement, and an incumbency
         certificate evidencing the authority and specimen signature of each
         officer of Buyer executing this Agreement and any other certificate
         provided pursuant to this SECTION 7.1, each in form and substance
         reasonably satisfactory to Sellers and certified by the secretary or an
         assistant secretary of Buyer (or another responsible officer of Buyer)
         as of the Closing Date. Such certification shall state that such
         Charter Documents and resolutions (or other authorizing actions or
         instruments) have not been amended, modified, revoked or rescinded and
         are in full force and effect on and as of the Closing Date and that all
         corporate proceedings required to be taken on the part of the Buyer in
         connection with the transactions contemplated by this Agreement have
         been duly authorized and taken; and

                  (h) If the MetLife Note is assumed then as a condition to
         closing the Buyer shall be responsible for obtaining release of all
         personal guarantees related to the Met Life Note.

                  (i) Seller shall have reviewed and approved the contemplated
         amendments and modifications to certain Material Contracts including
         the Development and Operations Agreement, the Supply and Output
         Agreement and the Energy Agreement.

                  (j) Buyer shall have confirmed to Seller in writing that the
         Facility is producing a minimum rate of undenatured ethanol
         satisfactory to Buyer, that the Facility meets plant efficiencies with
         respect to corn conversion and energy efficiency satisfactory to Buyer,
         and that the Buyer is fully satisfied with the performance of all
         operating functions and other facets of the Facility.

         7.2 WAIVER OF CONDITIONS. Any condition specified in SECTION 7.1 may be
waived by Sellers in writing.

                                    ARTICLE 8
                                 CLOSING MATTERS
                                 ---------------

         8.1 THE CLOSING. The closing of the transactions contemplated in this
Agreement (the "CLOSING") will take place at the offices of Rutan & Tucker, LLP
in Costa Mesa, California at 10:00 a.m. (local time), or at such other place as
Buyer and Sellers may mutually agree, on a Business Day selected by Buyer and


                                      -28-

<PAGE>

Sellers that is no sooner than three (3) days and no later than five (5) days
after the day on which the last of the conditions to Closing set forth in
SECTION 6.1 and SECTION 7.1 (other than those conditions which are only capable
of being satisfied contemporaneous with the Closing) have been satisfied or
waived (the "CLOSING DATE"). Notwithstanding the foregoing, the Closing shall
take place on that date which is the sooner of (i) sixty (60) days after the
date on which at least 5,000 gallons of ethanol has been produced in one day and
(ii) October 15, 2005. The actual date on which at least 5,000 gallons of
ethanol has been produced in one day is hereinafter referred to as the
"MILESTONE DATE". Sellers' Representative shall provide Buyer with written
notice of the Milestone Date within five (5) days of the date the Milestone Date
occurs. Notwithstanding the foregoing, the Closing will be extended one (1) day
for each day by which the Sellers fail to timely deliver updated Disclosure
Schedules prior to the Closing as required hereunder in SECTION 5.2. The Parties
agree that signature pages of documents required to be delivered at the Closing
may be delivered by facsimile, provided that originally executed documents must
be sent via overnight courier immediately thereafter. The Closing will be
effective as of 12:01 a.m. on the Closing Date (the "EFFECTIVE TIME").

         8.2 ACTION TO BE TAKEN AT THE CLOSING; PAYMENT OF PURCHASE PRICE. The
sale and delivery of the Membership Interests and the payment of the Purchase
Price shall take place at the Closing. The Purchase Price shall be as follows:

                  (a) the balance of the Purchase Price, to each of the Sellers
         in the percentages set forth opposite each Seller's name on SCHEDULE 1.

         8.3 CLOSING DOCUMENTS.

                  (a) Each of the Sellers shall deliver to Buyer at the Closing
         the following items and documents (collectively, the "TRANSACTION
         DOCUMENTS"), duly executed by each Seller where necessary to make them
         effective:

                           (i) Assignments of Limited Liability Company
                  Membership Interests, each in the form attached hereto as
                  EXHIBIT "B";

                           (ii) a certificate dated the Closing Date, signed by
                  the Principals, to the effect that the conditions set forth in
                  SECTIONS 6.1(A) AND (B) have been satisfied;

                           (iii) a certificate(s) dated the Closing Date, signed
                  by the Principals, as applicable, in accordance with SECTION
                  6.1(J);

                           (iv) such instruments of assumption and other
                  documents or instruments as Buyer reasonably may request to
                  effect the transaction contemplated hereby;

                           (v) an opinion from counsel to the Sellers in the
                  form attached hereto as EXHIBIT "E";

                           (vi) spousal consents from all applicable Sellers;


                                      -29-

<PAGE>

                           (vii) irrevocable powers of attorney from all Sellers
                  in such form as approved by Buyer; and

                           (viii) a Registration Rights Agreement in the form of
                  EXHIBIT "F".

                  (b) In addition to paying the Purchase Price in accordance
         with SECTION 8.2, Buyer shall deliver to Sellers at the Closing the
         following items and documents, duly executed by Buyer where necessary
         to make them effective:

                           (i) Assignments of Limited Liability Company
                  Membership Interests, each in the form attached hereto as
                  EXHIBIT "B";

                           (ii) a certificate dated the Closing Date, signed on
                  its behalf by an authorized officer, to the effect that the
                  conditions set forth in SECTIONS 7.1(B) AND (C) have been
                  satisfied;

                           (iii) a certificate dated the Closing Date, signed on
                  its behalf by an authorized officer, in accordance with
                  SECTION 7.1(G);

                           (iv) the Member Notes in the form of EXHIBIT "C";

                           (v) such instruments of assumption and other
                  documents or instruments as Sellers reasonably may request to
                  effect the transaction contemplated hereby;

                           (vi) the Warrants in the form of EXHIBIT "D".

                           (vii) a Registration Rights Agreement in the form of
                  EXHIBIT "F".

                                    ARTICLE 9
                                INDEMNIFICATION;
                                ----------------
               SURVIVAL OF REPRESENTATIONS AND WARRANTIES; RELEASE
               ---------------------------------------------------

         9.1 INDEMNIFICATION OF BUYER AND THE COMPANY. The Sellers severally
covenant and agree (except as to any inaccuracy or breach of the representations
and warranties contained In SECTIONS 3.2, 3.3(A), 3.5 AND 3.25 in which event
only the Seller making such representation and warranty shall be liable) to
indemnify, defend and hold harmless Buyer and the Company and their Affiliates,
representatives and permitted assigns from and against any and all Losses as
hereinafter described in this SECTION 9.1, directly or indirectly, as a result
of, or based upon or arising from:

                  (a) subject to SECTIONS 9.5 AND 9.7 hereof, any material
         inaccuracy in, omission from or breach or nonperformance of any of the
         representations or warranties made by Sellers or the Company in or
         pursuant to this Agreement or any other Transaction Document, other
         than the representations and warranties set forth in SECTION 3.1
         (Organization), 3.2 (Power and Authority), 3.3(A), 3.5 (Capitalization
         of the Company and Title to Membership Interest), and 3.25 (Accredited


                                      -30-

<PAGE>

         Investor Status) of this Agreement, which representations and
         warranties shall be subject to the indemnification provisions of
         SECTION 9.1(B) hereof;

                  (b) any inaccuracy in, omission from or breach or
         nonperformance of any of the representations or warranties made by
         Sellers in SECTION 3.1 (Organization), 3.2 (Power and Authority),
         3.3(A), 3.5 (Capitalization of the Company and Title to Membership
         Interest), and 3.25 (Accredited Investor Status) of this Agreement;

                  (c) the failure of the Sellers or the Company to perform or
         observe fully any covenant, provision or agreement to be performed or
         observed by it pursuant to this Agreement or any Transaction Document;
         and

                  (d) any of the specific indemnification matters referenced in
         SCHEDULE 9.1.

         For the purposes of this Agreement the term "LOSS" means on a dollar
for dollar basis any action, cost, damage, disbursement, expense, liability,
loss, deficiency, obligation, penalty or settlement of any kind or nature,
whether foreseeable or unforeseeable, whether or not arising out of third-party
claims, including, but not limited to, interest or other carrying costs,
penalties, legal, accounting, attorneys' and other professional fees and
expenses incurred in the litigation, arbitration, investigation, collection,
prosecution and defense of claims, actual or threatened, amounts paid in
settlement, that may be imposed on or otherwise incurred or suffered by the
specified person.

         If and to the extent that Buyer is entitled to payments in respect of
indemnification under this ARTICLE 9, Buyer shall be entitled to offset against
any one or more payments due and payable in respect of the Member Note dollar
for dollar, for amounts which have been determined to be due to Buyer in respect
of such indemnification on a prorata basis on each Member Note. The amount
entitled to be offset hereunder is referred to herein as the "OFFSET." At its
option, and at any time(s) that Buyer may elect, upon notice (the "OFFSET
NOTICE") to the Sellers' Representative (as hereinafter defined in SECTION 9.8),
Buyer may twenty (20) days from the date Sellers' Representative is in receipt
of the Offset Notice deduct from any payment of the Member Note due hereunder an
amount equal to all or any portion of the Member Note up to the full amount of
such Payments as of the date of such deduction, but only to the extent that
Buyer has not previously deducted such portion of the Offset from previous
payments of the Member Note due hereunder. If the Sellers' Representative gives
written notice to Buyer within twenty (20) days after receipt of any Offset
Notice that he objects to the proposed Offset, Buyer will be required to pay the
amount of such proposed Offset into a mutually agreeable neutral third-party
escrow where the funds will be held pending resolution of such dispute pursuant
to SECTION 11.8 of this Agreement. Subject to the Sellers' Representative's
right to dispute as previously set forth, the Offset shall be applied to the
next payment of the Member Note then due hereunder following the date of the
Notice, and to any payment thereafter until such time as the amount of the
Offset shall be reduced to zero.

         Notwithstanding anything to the contrary set forth herein, Sellers'
indemnification obligations pursuant to SECTIONS 9.1(B) AND 9.1(D) shall not be
subject to or limited by, in any way, any of the provisions of SECTION 9.7
hereof.


                                      -31-

<PAGE>

         9.2 INDEMNIFICATION OF SELLERS. Buyer covenants and agrees to
indemnify, defend and hold harmless Sellers and their Affiliates,
representatives and permitted assigns from and against any and all Losses of
Sellers, directly or indirectly, as a result of, or based upon or arising from:

                  (a) subject to SECTION 9.5, any inaccuracy in or breach or
         nonperformance of any of the representations, warranties, covenants or
         agreements made by Buyer in or pursuant to this Agreement; or

                  (b) the failure of Buyer to perform or observe fully any
         covenant, provision or agreement to be performed or observed by it
         pursuant to this Agreement.

         9.3 CERTAIN TAX MATTERS.

                  (a) INDEMNIFICATION OF BUYER. Goshen Ethanol, LLC, Kruse
         Investment Company, Inc., the Mark S.. and Pamela Wheeler Trust dated
         February 1, 1996 and Western Milling (collectively the "Primary
         Sellers") agree to jointly and severally indemnify, defend and hold
         harmless Buyer and the Company against the following tax matters (the
         "TAX MATTERS"): (i) any Tax payable by or on behalf of Sellers or the
         Company, for any taxable period ending on or prior to the Closing Date,
         (ii) any deficiencies in any Tax payable by or on behalf of Sellers or
         the Company arising from any audit by any taxing agency or authority
         with respect to any period ending on or prior to the Closing Date,
         (iii) any claim or demand for reimbursement or indemnification
         resulting from any transfer by Sellers prior to the Closing of any Tax
         benefits or credits to any other person, (iv) any Tax liabilities
         arising out of the transfer of the Membership Interests, and (v) with
         respect to any Taxes due for Tax periods ending after the Closing Date,
         a pro rata share of such Tax calculated as if the period ended on the
         Closing Date.

                  (b) AUDIT MATTERS. Sellers' Representative shall have the
         right, at Sellers' expense subject to the execution of a
         confidentiality agreement by Sellers and the Sellers' Representative,
         in form and substance reasonably satisfactory to Buyer, for the purpose
         of protecting the confidentiality and use of information of Buyer, and
         the Company) (i) to participate in the audit (and disposition thereof)
         of any Tax Return relating to periods ending on or prior to the Closing
         Date and to participate in the disposition of the audit of any Tax
         Return relating to the periods ending after the Closing Date if such
         audit or disposition thereof could give rise to a claim for
         indemnification hereunder, (ii) to review in advance and comment upon
         all submissions made in the course of audits or appeals thereof to any
         governmental entity relating to periods on or prior to the Closing Date
         and (iii) to approve the disposition of any audit adjustment with
         respect to such periods if such disposition will or reasonably might be
         expected to result in a claim for indemnification hereunder. However,
         Buyer shall have the right directly or through its designated
         representatives, to review in advance and comment upon all submissions
         made in the course of audits or appeals thereof to any governmental
         entity relating to periods on or prior to the Closing Date and to
         approve the disposition of any audit adjustment with respect to such
         periods if such disposition will or might be expected to result in,
         directly or indirectly, an increase in Taxes of Buyer or the Company
         for any period beginning at or after the Closing.


                                      -32-

<PAGE>

                  (c) COOPERATION ON TAX MATTERS. After the Closing Date,
         Sellers' Representative, on the one hand, and Buyer and the Company on
         the other, shall (i) provide, or cause to be provided, to each other's
         respective officers, employees, representatives and affiliates, such
         assistance as may reasonably be requested by any of them in connection
         with the preparation of any Return, or any audit of the Company in
         respect of which Sellers, on the one hand or Buyer or the Company on
         the other, as the case may be, are responsible, and (ii) retain, or
         cause to be retained, for so long as any such taxable years or audits
         shall remain open for adjustments, any records or information which may
         be relevant to any such Returns or audits. The assistance provided for
         in this SECTION 9.3(C) shall include without limitation Sellers, Buyer
         and the Company (x) making their agents and employees and the agents
         and employees of their respective Affiliates available to each other on
         a mutually convenient basis to provide such assistance as might
         reasonably be expected to be of use in connection with any such Tax
         Returns or audits and (y) providing, or causing to be provided, such
         information as might reasonably be expected to be of use in connection
         with any such Returns or audits, including without limitation records,
         returns, schedules, documents, work papers, opinions, letters or
         memoranda, or other relevant materials relating thereto.

         9.4 PROCEDURE.

                  (a) NOTICE. Any party seeking indemnification with respect to
         any Loss shall give written notice to the party required to provide
         indemnity hereunder (the "INDEMNIFYING PARTY").

                  (b) DEFENSE. In the event any person or entity not a party to
         this Agreement shall make a demand or claim or file or threaten to file
         or continue any lawsuit, which demand, claim or lawsuit may result in
         liability to an Indemnified Party in respect of matters embraced by the
         indemnity under this Agreement, or in the event that a potential loss,
         damage or expense comes to the attention of any party in respect of
         matters embraced by the indemnity under this Agreement, then the Party
         receiving notice or aware of such event shall promptly notify the other
         Party or Parties of the demand, claim or lawsuit. Within ten (10) days
         after notice by the Indemnified Party (the "NOTICE") to an Indemnifying
         Party of such demand, claim or lawsuit, except as provided in the next
         sentence, so long as the Indemnifying Party first agrees in writing
         with the Indemnified Party that the Indemnifying Party has an
         obligation to indemnify the Indemnified Party with respect to such
         demand, claim or lawsuit, the Indemnifying Party shall have the option,
         at its sole cost and expense, to retain counsel for the Indemnified
         Party, to defend any such demand, claim or lawsuit, provided that
         counsel who will conduct the defense of such demand, claim or lawsuit
         will be approved by the Indemnified Party whose approval will not
         unreasonably be withheld; provided, further, that the Indemnifying
         Party may not make such election (and for the avoidance of doubt and
         without limiting the Indemnifying Party's obligations under this
         ARTICLE 9, the Indemnifying Party shall pay for all costs and expenses
         of the Indemnified Party's defense, including expenses of the
         Indemnified Party's counsel) if (i) the Indemnifying Party is also a
         party to such demand, claim or lawsuit and the Indemnified Party
         determines in good faith that joint representation would be
         inappropriate, (ii) the Indemnifying Party both fails to provide
         reasonable assurance to the Indemnified Party of its financial capacity


                                      -33-

<PAGE>

         to defend such demand, claim or lawsuit and provide indemnification
         with respect to such demand, claim or lawsuit, (iii) the Indemnified
         Party determines in good faith that there is a reasonable probability
         that such demand, claim or lawsuit may adversely affect it or its
         Affiliates other than as a result of monetary damages for which it
         would be entitled to indemnification under this Agreement, except where
         nonmonetary relief is merely incidental to a primary claim or primary
         claims for monetary damages, or (iv) the claim involves Taxes. In the
         event Section 9.4(b)(iii) applies the Indemnifying Party will not be
         bound by any determination of such proceeding or any compromise or
         settlement effected without the Indemnifying Party's consent which
         shall not be unreasonably withheld. The Indemnified Party shall have
         the right, at its own expense, to participate in the defense of any
         suit, action or proceeding brought against it with respect to which
         indemnification may be sought hereunder; provided, however, if (x) the
         named parties to any such proceeding (including any impleaded parties)
         include both the Indemnifying Party and the Indemnified Party and
         representation of both parties by the same counsel would be
         inappropriate due to actual or potential differing interests between
         them, or (y) the employment of counsel by such Indemnified Party has
         been authorized in writing by the Indemnifying Party, or (z) the
         Indemnifying Party has not in fact employed counsel to assume the
         defense of such action within a reasonable time; then, the Indemnified
         Party shall have the right to retain its own counsel at the sole cost
         and expense of the Indemnifying Party, which costs and expenses shall
         be paid by the Indemnifying Party on a current basis. No Indemnifying
         Party, in the defense of any such demand, claim or lawsuit, will
         consent to entry of any judgment or enter into any settlement without
         the consent of the Indemnified Party. If any Indemnified Party will
         have been advised by counsel chosen by it that there may be one or more
         legal defenses available to such Indemnified Party which are different
         from or additional to those available to and which have not been
         asserted by the Indemnifying Party, the Indemnifying Party will not
         have at the election of the Indemnified Party, the right to continue
         the defense of such demand, claim or lawsuit on behalf of such
         Indemnified Party and will reimburse such Indemnified Party and any
         person controlling such Indemnified Party on a current basis for the
         reasonable fees and expenses of any counsel retained by the Indemnified
         Party to undertake the defense. In the event that the Indemnifying
         Party shall fail to respond within ten (10) days after receipt of the
         Notice, the Indemnified Party may retain counsel and conduct the
         defense of such demand, claim or lawsuit, as it may in its sole
         discretion deem proper, at the sole cost and expense of the
         Indemnifying Party, which costs and expenses shall be paid by the
         Indemnifying Party on a current basis. Except as explicitly provided in
         this SECTION 9.4(B), failure to provide Notice shall not limit the
         rights of such party to indemnification, except to the extent such
         failure is actually prejudicial to the rights and obligations of the
         Indemnifying Party.

                  (c) TAX ADJUSTMENTS. Any amounts payable by the Indemnifying
         Party to or on behalf of an Indemnified Party in respect of a Loss
         shall be adjusted as follows:

                           (i) If an Indemnified Party is liable for any
                  additional Taxes as a result of the payment of amounts in
                  respect of an Indemnifiable Claim, the Indemnifying Party will
                  pay to the Indemnified Party in addition to such amounts in
                  respect of the Loss within ten (10) days after being notified
                  by the Indemnified Party of the payment of such liability (x)
                  an amount equal to such additional Taxes (the "TAX


                                      -34-

<PAGE>

                  REIMBURSEMENT AMOUNT") plus (y) any additional amounts
                  required to pay additional Taxes imposed with respect to the
                  Tax Reimbursement Amount and with respect to amounts payable
                  under this clause (y), with the result that the Indemnified
                  Party shall have received from the Indemnifying Party, net of
                  the payment of Taxes, an amount equal to the Loss; and

                           (ii) The Indemnified Party shall reimburse the
                  Indemnifying Party an amount equal to the net reduction in any
                  year in the liability for Taxes (that are based upon or
                  measured by income) of the Indemnified Party or any member of
                  a consolidated or combined tax group of which the Indemnified
                  Party is, or was at any time, part, which reduction is
                  actually realized with respect to any period after the Closing
                  Date and which reduction would not have been realized but for
                  the amounts paid (or any audit adjustment or deficiency with
                  respect thereto, if applicable) in respect of a Loss, or
                  amounts paid by the Indemnified Party pursuant to this
                  paragraph (a "NET TAX BENEFIT"). The amount of any Net Tax
                  Benefit shall be paid not later than fifteen (15) days after
                  the date on which such Net Tax Benefit shall be realized. For
                  purposes of this SECTION 9.4(C)(II), the Net Tax Benefit shall
                  be deemed to be actually realized on the date on which such
                  Net Tax Benefit is used to compute an obligation to pay
                  installments of estimated tax or, if earlier, reported
                  earnings; provided, however, that if the amount of any Net Tax
                  Benefit is subsequently affected by reason of any event or
                  events, including, without limitation, any payment of Taxes by
                  such Indemnified Party with respect to the loss of such Net
                  Tax Benefit upon audit or litigation, appropriate adjustments
                  and payments to take into account the increase or decrease in
                  such Net Tax Benefit shall be made between the Indemnified
                  Party and the Indemnifying Party within fifteen (15) days
                  after such event or events. Any expenses associated with the
                  realization of a Net Tax Benefit or any contest or proceeding
                  with respect to a Net Tax Benefit shall be deemed to reduce
                  such Net Tax Benefit.

                           (iii) Notwithstanding clauses (i) and (ii) of this
                  SECTION 9.4(C), Buyer shall have the right to irrevocably
                  elect, in the Notice given with respect to a Loss in an
                  aggregate amount less than $25,000, not to have clauses (i)
                  and (ii) apply with respect to such Loss.

                  (d) INSURANCE MATTERS. Any Indemnified Party shall be required
         to use commercially reasonable efforts to submit and obtain coverage
         for any claim against any insurer, and any such amounts actually paid
         to the Indemnified Party shall reduce the indemnification obligations
         of the Indemnifying Party with respect to such matter.

                  (e) MITIGATION. Notwithstanding anything to the contrary in
         this Agreement, any Indemnified Party shall be required to utilize
         commercially reasonable efforts to' mitigate any damages which may be a
         Loss. Mitigation shall not be required if or to the extent it would or
         reasonably may be expected to cause the Indemnified Party to incur any
         liability, loss, cost or expense, including without limitation any Tax,
         or any increase in any of the foregoing.


                                      -35-

<PAGE>

         9.5 SURVIVAL. The representations and warranties of Sellers in SECTION
3.1 (Organization), 3.2 (Power and Authority), 3.3(A), 3.5 (Capitalization of
the Company and Title to Membership Interest), and 3.25 (Accredited Investor
Status), of this Agreement shall survive the Closing for the period of the
applicable statute of limitations. All other representations and warranties of
the Parties in this Agreement shall survive the Closing for the period ending
twenty four (24) months after the Closing Date. The covenants and the agreements
contained in this Agreement and in the other Transaction Documents, including,
without limitation, Sellers' obligation to indemnify, defend and hold harmless
Buyer and the Company and their Affiliates, Representatives and permitted
assigns pursuant to SECTIONS 9.1(B), (C) AND (D) of this Agreement, shall
survive until satisfied. Any matter as to which a claim has been asserted by
notice to the other party that is pending or unresolved at the end of any
applicable limitation period shall continue to be covered by this ARTICLE 9
notwithstanding any applicable statute of limitations (which the Parties hereby
waive) until such matter is finally terminated or otherwise resolved by the
Parties or by a court or arbitrator of competent jurisdiction and any amounts
payable hereunder are finally determined and paid.

         9.6 EXCLUSIVE REMEDY. This ARTICLE 9 shall be deemed to be the Parties'
exclusive remedy in connection with the breach of any representation and
warranty contained in this Agreement. Notwithstanding the foregoing, the Parties
may pursue other remedies available at law or in equity in the case of fraud or
a knowing and intentional misrepresentation.

         9.7 INDEMNIFICATION LIMITATIONS. The aggregate dollar amount of all
payments each Seller shall be obligated to make pursuant to SECTION 9.1(A) AND
(C) of this Agreement shall not exceed an amount equal to the balance of such
Seller's Member Note plus any accrued interest which he, she or it is to
receive, and Sellers shall only be required to make payments pursuant to SECTION
9.1(A) AND (C) of this Agreement at such time that the aggregate amount of
Losses for all Sellers exceeds $100,000, in which case the Sellers will be
severally obligated to pay for all such Losses in excess of $100,000 in a
percentage amount equal to the face amount of such Seller's Member Note divided
by $8,000,000; provided, however, that these limitations shall not apply to
Losses resulting from knowing and intentional fraud or misrepresentation,
provided, further, that notwithstanding anything to the contrary herein, these
limitations shall not apply to any other obligation of Sellers pursuant to this
ARTICLE 9, including, without limitation, the obligation of Sellers to make
payments pursuant to SECTIONS 9.1(B) AND (D) hereof.

         9.8 THE SELLERS' REPRESENTATIVE.

                  (a) The Sellers hereby authorize, direct and appoint Kevin
         Kruse or Ejnar Knudsen to act as sole and exclusive agent,
         attorney-in-fact and representative of the Sellers (the "SELLERS'
         REPRESENTATIVE"), and authorize and direct the Sellers' Representative
         to (i) take any and all actions (including without limitation executing
         and delivering any documents, incurring any costs and expenses for the
         account of the Sellers (which will constitute Loss incurred or suffered
         by Buyer within the meaning of SECTION 9.1 hereof) and making any and
         all determinations) which may be required or permitted by this
         Agreement to be taken by the Sellers or the Sellers' Representative,
         (ii) exercise such other rights, power and authority as are authorized,
         delegated and granted to the Sellers' Representative hereunder in
         connection with the transactions contemplated hereby, (iii) to receive
         all payments of the Purchase Price on behalf of the Sellers and to


                                      -36-

<PAGE>

         distribute the same to the Sellers pro rata in accordance with their
         respective Membership Interests, (iv) to take all action necessary in
         connection with the defense and/or settlement of any claims for which
         the Sellers may be required to indemnify the Buyer pursuant to ARTICLE
         9 hereof, (v) to take all action necessary in seeking indemnification
         from the Buyer pursuant to ARTICLE 9 hereof, (vi) to give and receive
         all notices required to be given under this Agreement on behalf of the
         Sellers, and (vii) to execute and deliver such instruments of
         conveyance, agreements, releases or other document and to take such
         additional actions by or on behalf of the Sellers as the Sellers'
         Representative, in its sole discretion, may determine to be necessary
         or appropriate in connection with the transactions contemplated by the
         terms and provisions of this Agreement, (viii) to take any and all
         action (including but not limited to litigation) relating to the Member
         Notes including any claim that an Event of Default has occurred or any
         waiver of an Event of Default, and (ix) exercise such rights, power and
         authority as are incidental to the foregoing. Any such actions taken,
         exercises of rights, power or authority, and any decision or
         determination made by the Sellers' Representative consistent therewith,
         shall be absolutely and irrevocably binding on the Sellers as if such
         Seller personally had taken such action, exercised such rights, power
         or authority or made such decision or determination in such Seller's
         individual capacity. Notwithstanding any other provision of this
         Agreement with respect to the matters covered by ARTICLE 9, (i) each of
         the Sellers irrevocably relinquishes such Sellers' right to act
         independently and other than through the Sellers' Representative
         including, but not limited to, any closing or waiver of any alleged
         event of default under any Member Note and the prosecution of any
         litigation relating thereto, except with respect to the removal of the
         Sellers' Representative or appointment of a successor Sellers'
         Representative as provided in SECTION 9.8(B) below, and (ii) no Sellers
         shall have any right under this Agreement or otherwise to institute any
         suit, action or proceeding against the Company or Buyer with respect to
         any such matter, any such right being irrevocably and exclusively
         delegated to the Sellers' Representative. The Sellers' Representative
         hereby acknowledges and accepts the foregoing authorization and
         appointment and agrees to serve as the Sellers' Representative in
         accordance with this Agreement.

                  (b) The Sellers' Representative shall serve as Sellers'
         Representative until his resignation, removal from office, incapacity
         or death; PROVIDED, HOWEVER, that the Sellers' Representative shall not
         have the right to resign without (A) prior written notice to the
         Sellers and (B) picking a successor reasonably satisfactory to Buyer to
         serve until a successor thereto is elected by the Sellers. The Sellers'
         Representative may be removed at any time, and a successor
         representative, reasonably satisfactory to Buyer, may be appointed,
         pursuant to written action by Sellers who, immediately prior to the
         Closing, hold Membership Interests constituting 66 2/3% or more of all
         such shares then outstanding. Any successor to the Sellers'
         Representative shall, for purposes of this Agreement, be deemed to be,
         from the time of the appointment thereof in accordance with the terms
         hereof, the Sellers' Representative, and from and after such time, the
         term "SELLERS' REPRESENTATIVE" as used herein and therein shall be
         deemed to refer to such successor. No appointment of a successor shall
         be effective unless such successor agrees in writing to be bound by the
         terms of this Agreement.


                                      -37-

<PAGE>

                  (c) The Sellers' Representative shall be permitted to retain
         counsel, consultants and other advisors. With respect to all reasonable
         fees and expenses incurred by the Sellers' Representative in conducting
         the actions set forth in this Agreement, Sellers' Representative shall
         be entitled to submit a claim and receive reimbursement from the
         Sellers. All reasonable costs and expenses incurred by Sellers'
         Representative in connection with the performance of its duties will be
         paid out of the Purchase Price received by it and deducted therefrom
         prior to the distribution thereof to the Sellers.

                  (d) The provisions or this SECTION 9.8 shall in no way impose
         any obligations on Buyer. In particular, notwithstanding any notice
         received by Buyer to the contrary (except any notice of the appointment
         of a successor Sellers' Representative approved by Buyer in accordance
         with paragraph (b) of this SECTION 9.8), Buyer (i) shall be fully
         protected in relying upon and shall be entitled to rely upon, shall
         have no liability to the Sellers with respect to, and shall be
         indemnified by the Indemnifying Parties from and against all liability
         arising out of (any such indemnifiable amounts constituting a Loss
         within the meaning of SECTION 9.1 hereof) actions, decisions and
         determinations of the Sellers' Representative and (ii) shall be
         entitled to assume that all actions, decisions and determinations of
         the Sellers' Representative are fully authorized by the Sellers. The
         appointment of the Sellers' Representative shall be deemed coupled with
         an interest and shall be irrevocable, and Buyer and any other person
         may conclusively and absolutely rely, without inquiry, upon any action
         of the Sellers' Representative on behalf of the Sellers in all matters
         in which it has been granted authority pursuant to this Section. The
         Sellers' Representative shall act for the Sellers in all matters set
         forth in this Agreement. All actions, decisions and instructions of the
         Sellers' Representative taken, made or given pursuant to the authority
         granted to the Sellers' Representative pursuant to this Section shall
         be final, conclusive and binding upon all Sellers and all actions,
         decisions and instructions of the Sellers' Representative taken, made
         or given pursuant to the authority granted to such Sellers'
         Representative pursuant to this Section shall be conclusive and binding
         upon all individual Sellers. Buyer, its officers, directors, employees,
         agents and affiliates shall be able to rely exclusively on the
         instructions, decisions and actions of the Sellers' Representative.

                  (e) The Sellers' Representative shall not be liable to the
         Sellers for the performance of any act or the failure to act so long as
         he acted or failed to act in good faith in what he reasonably believed
         to be the scope of his authority and for a purpose which he reasonably
         believed to be in the best interests of the Sellers.

                  (f) The Sellers' Representative shall have the exclusive power
         to waive any closing condition and to assert any claim of any Seller
         against Buyer alleged to arise under this Agreement, the Member Notes,
         the Warrants, or the Registration Rights Agreement or to waive any
         breach or default under the foregoing agreements. No Seller may pursue
         a remedy against Buyer or any affiliate of Buyer with respect to this
         Agreement, the transactions contemplated hereby, the Member Note, the
         Warrants, or the Registration Rights Agreement except by action of
         Sellers' Representative or on the Seller's behalf. Sellers acknowledge
         that apart from actions by Sellers' Representative on their behalf,
         they shall have no right to bring legal action against Buyer for claims


                                      -38-

<PAGE>

         arising under this Agreement or the transactions contemplated hereby or
         under the Member Note, the Warrants, or the Registration Rights
         Agreement.

         9.9 RELEASE.

                  (a) Effective upon the execution of this Agreement, Sellers
         hereby irrevocably waive, release and discharge the Company from any
         and all liabilities and obligations of Company to Sellers, whether in
         their capacity as the Sellers hereunder, as member, manager, officer,
         director or employee of the Company or otherwise, including, without
         limitation, in respect of rights of contribution or indemnification, in
         each case whether absolute or contingent, liquidated or unliquidated,
         and whether arising at law or equity, from the beginning of time until
         the Closing, and Sellers hereby covenant and agree that they will not
         seek to recover any amounts in connection therewith or thereunder from
         the Company. The Release provided herein shall in no way limit the
         obligation of the Buyer to the Sellers following Buyer's acquisition of
         the Company, however, it is understood that this sentence will in no
         way limits Buyer's indemnification rights under this Agreement.

                  (b) Sellers acknowledge that there is a risk that, subsequent
         to the execution of this Agreement or after the Closing, Sellers will
         discover, incur or suffer claims which were unknown or unanticipated at
         the time this Agreement was executed and which, if known by Sellers on
         the date of this Agreement, may have materially affected the Sellers'
         decision to enter into this Agreement. The Sellers acknowledge and
         agree that, by reason of entering into this Agreement, the Sellers, as
         the case may be, are assuming the risk of unknown or unanticipated
         claims released in this SECTION 9.9. WITH RESPECT TO SUCH MATTERS, THE
         SELLERS HEREBY EXPRESSLY WAIVE THE BENEFIT OF SECTION 1542 OF THE
         CALIFORNIA CIVIL CODE OR ANY SIMILAR STATUTE IN ANY OTHER JURISDICTION.
         SECTION 1542 OF THE CALIFORNIA CIVIL CODE PROVIDES AS FOLLOWS:

                  A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR
                  DOES NOT KNOW OR SUSPECT TO EXIST IN HIS FAVOR AT THE TIME OF
                  EXECUTING THE RELEASE, WHICH, IF KNOWN BY HIM, MUST HAVE
                  MATERIALLY AFFECTED HIS SETTLEMENT WITH THE DEBTOR.

                  (c) It is the intention of the Parties that the foregoing
         releases shall be as broad and general as the law permits and that
         these releases shall be effective as of the Closing.

         9.10 NO CONTRIBUTION. Anything to the contrary herein notwithstanding,
Sellers shall not have any right to seek any indemnification or contribution
from or remedy against the Company whether arising prior to or after the Closing
Date in respect of any breach of any representation or warranty by the Company
or the failure of the Company to comply with any covenant or agreement to be
performed by the Company on or prior to the Closing Date and Sellers hereby
waive any such claim they may have against the Company with respect thereto
whether at law, in equity or otherwise.


                                      -39-

<PAGE>

                                   ARTICLE 10
                                   TERMINATION
                                   -----------

         10.1 TERMINATION.

                  (a) This Agreement may be terminated at any time prior to the
         Closing:

                           (i) by mutual written consent of Buyer and Sellers;
                  or

                           (ii) by either Buyer or Sellers if the other Party is
                  in material breach of any representation, warranty or covenant
                  set forth in this Agreement and such breach, if capable of
                  cure, is not cured within thirty (30) days after written
                  notice thereof to such other Party.

                  (b) If the Closing has not occurred on the sooner of October
         15, 2005 and on the sixtieth (60th) day after the Milestone Date unless
         otherwise extended pursuant to SECTION 8.1 of this Agreement, this
         Agreement will be terminated.

         10.2 EFFECT OF TERMINATION. In the event of termination of this
Agreement as provided above, this Agreement shall forthwith become void, and
there shall be no liability on the part of Sellers or Buyer. Notwithstanding the
foregoing, this SECTION 10.2 shall not release (a) any party from liability
resulting from a beach by such party under this Agreement, or (b) any party from
its obligations under SECTIONS 11.1, 11.2, 11.8, 11.9(A), 11.10, 12.2, 12.3,
12.6 AND 12.10 of this Agreement.

                                   ARTICLE 11
                              ADDITIONAL AGREEMENTS
                              ---------------------

         11.1 PRESS RELEASE AND ANNOUNCEMENTS. Except to the extent required by
law, in which case prior notice shall be given to the other Party, no press
release related to this Agreement or the transaction contemplated hereby, or
other announcements to the employees, customers or suppliers of the Company
shall be issued prior to the Closing without the joint approval of Buyer and the
Sellers' Representative, which approval will not be unreasonably withheld,
conditioned or delayed.

         11.2 CONFIDENTIALITY BY BUYER. Prior to the Closing, Buyer shall not
disclose any financial or other information regarding the Company without
Sellers' Representative's express, prior written consent as to the exact
content, form, location and extent of each such disclosure, which consent will
not be unreasonably withheld, delayed or conditioned. Notwithstanding anything
to the contrary contained in this Agreement, but subject to SECTION 11.10
hereof, Buyer and its Affiliates shall have the right to use and disclose such
information required in Form 8K and such filings as may be required of Buyer in
its capacity as a public company.

         11.3 REMITTANCES. All remittances, mail and other communications
relating to the Company received by Sellers at any time after the Closing Date
shall be immediately turned over to Buyer.


                                      -40-

<PAGE>

         11.4 COOPERATION TO OBTAIN CONSENTS. From the date of this Agreement
through the Closing Date, the Parties shall consult and cooperate with each
other and use commercially reasonable efforts to (a) obtain all required
governmental and third party consents, (b) make any required filings or
submissions with governmental authorities, and (c) cause the conditions
precedent to Closing set forth in SECTION 6.1 and SECTION 7.1 to be satisfied,
all as may be necessary for the consummation of the Closing and the transactions
contemplated by this Agreement.

         11.5 TAX MATTERS.

                  (a) Sellers, Buyer, and the Company shall, unless prohibited
         by applicable law, cause the taxable period of the Company to end as of
         the date preceding the Closing Date. For purposes of this Agreement,
         Taxes incurred by the Company with respect to a taxable period that
         includes but does not end on the Closing Date, shall be allocated to
         the portion of the period ending on the date preceding the Closing Date
         (a) except as provided in (b) and (c) below, to the extent feasible, on
         a specific identification basis, according to the date of the event or
         transaction giving rise to the Tax, and (b) except as provided in (c)
         below, with respect to periodically assessed ad valorem Taxes and Taxes
         not otherwise feasibly allocable to specific transactions or events, in
         proportion to the number of days in such period occurring before the
         Closing Date compared to the total number of days in such taxable
         period, and (c) in the case of any Tax based upon or related to income
         or receipts, in an amount equal to the Tax which would be payable if
         the relevant taxable period ended on the date preceding the Closing
         Date. Any credits relating to a taxable period that begins before and
         ends after the Closing Date shall be taken into account as though the
         relevant taxable period ended on the date preceding the Closing Date.
         All determinations necessary to give effect to the foregoing
         allocations shall be made in a manner consistent with prior practices
         of the Company.

                  (b) Sellers shall prepare all Tax Returns for taxable periods
         ending on or prior to the Closing Date. After the Closing, Sellers
         shall, and shall cause their Affiliates to, cooperate fully with Buyer
         in the preparation of all Tax Returns relating to periods beginning
         before, but ending after, the Closing Date and shall provide or cause
         to be provided to Buyer any records and other information reasonably
         requested by Buyer in connection therewith as well as reasonable access
         to, and the reasonable cooperation of, Sellers' accountant. Sellers
         shall be responsible for and shall have the right to control any Tax
         investigation, audit or other proceeding related to the Company for
         periods ending on or prior to the Closing Date. Sellers shall use
         commercially reasonable efforts to resolve any such Tax investigation,
         audit or other proceeding. Buyer and the Company shall provide Sellers
         with any information or correspondence provided to Buyer and the
         Company by any taxing authority with respect to any taxable period
         ending before the Closing Date. After the Closing, Sellers shall, and
         shall cause their Affiliates to, cooperate fully with Buyer in
         connection with any Tax investigation, audit or other proceeding
         relating to either of the Business for any periods ending after the
         Closing Date. Any information obtained pursuant to this SECTION 11.5(B)
         or pursuant to any other Section hereof providing for the sharing of
         information or the review of any Tax Return or other schedule relating
         to Taxes shall be subject to the terms of the Confidentiality
         Agreement.


                                      -41-

<PAGE>

         11.6 EMPLOYEE MATTERS. Primary Sellers hereby agree that they will use
commercially reasonable efforts prior to and through Closing to keep all
employees of the Company as employees.

         11.7 FURTHER ASSURANCES. Each Party agrees to execute and deliver such
further documents and instruments and to take such further actions after the
Closing as may be necessary or desirable and reasonably requested by the other
Party to give effect to the transactions contemplated by this Agreement.

         11.8 ARBITRATION. Except as otherwise provided in this Agreement, any
controversy or claim arising out of or relating to this Agreement or the breach
thereof shall be settled by binding arbitration in Orange County, California.

                  (a) JUDICIAL ARBITRATION AND MEDIATION SERVICES. The
         arbitration shall be administered by Judicial Arbitration and Mediation
         Services ("JAMS") in its Orange County office.

                  (b) ARBITRATOR. The arbitrator shall be chosen by mutual
         agreement between Buyer and the Sellers' Representative. The arbitrator
         will agree to comply with the JAMS Comprehensive Arbitration Rules and
         Procedures (including without limitation any and all of the time
         deadlines governing the arbitrator's conduct set forth therein) and the
         term of this SECTION 11.8.

                  (c) PROVISIONAL REMEDIES AND APPEALS. Each of the Buyer and
         the Sellers' Representative reserve the right to file with a court of
         competent jurisdiction a suit for equitable relief of any sort,
         including without limitation an application for temporary or
         preliminary injunctive relief, writ of attachment, writ of possession,
         temporary protective order, reformation, rescission, specific
         performance and/or appointment of a receiver, on the grounds that the
         arbitration award to which the applicant may be entitled may be
         rendered in effectual in the absence of such relief, or in the event
         the monetary damages are insufficient to make the damaged party whole.

                  (d) ENFORCEMENT OF JUDGMENT. Judgment upon the award rendered
         by the arbitrator may be entered in any court having jurisdiction
         thereof. The award of the arbitrator shall be binding, final and
         nonappealable.

                  (e) DISCOVERY. The arbitrator shall set a limited time period
         and establish procedures designed to reduce the cost and time for
         discovery while allowing the Parties an opportunity, adequate in the
         sole judgment of the arbitrator, to discover relevant information from
         the opposing Parties about the subject matter of the dispute. The time
         periods and the procedures chosen by the arbitrator shall apply equally
         to each Party.

                  (f) CONSOLIDATION. Any arbitration hereunder may be
         consolidated by JAMS with the arbitration of any other dispute arising
         out of or relating to the same subject matter when the arbitrator
         determines that there is a common issue of law or fact creating the
         possibility of conflicting rulings by more than one arbitrator.


                                      -42-

<PAGE>

                  (g) POWER AND AUTHORITY OF ARBITRATOR. The arbitrator shall
         not have any power to alter, amend, modify or change any of the terms
         of this Agreement, nor to grant any remedy which is either prohibited
         by the terms of this Agreement, or not available in a court of law.

                  (h) GOVERNING LAW. All questions in respect of procedure to be
         followed in conducting the arbitration, as well as the enforceability
         of the agreement of the parties to arbitrate pursuant to this SECTION
         11.8 which may be resolved by state law shall be resolved according to
         the law of the State of California. Any action brought to enforce the
         provisions of this Section shall be brought in the Orange County
         Superior Court. All other questions in respect of this Agreement,
         including, but not limited to, the interpretation, enforcement of this
         Agreement (other than the right to arbitrate), and the rights, duties
         and liabilities of the parties to this Agreement shall be governed by
         the laws of the State of California.

                  (i) COSTS. The costs of the arbitration, including any JAMS
         administration fees and any arbitrator's fees, and costs of the use of
         facilities during the arbitration hearings, shall be borne equally by
         the parties.

                  (j) ATTORNEYS' FEES. If a party to this Agreement shall bring
         any action, suit, counterclaim, appeal, arbitration, or mediation for
         any relief against the other parties, declaratory or otherwise, to
         enforce the terms hereof or to declare rights hereunder (referred to
         herein as an "ACTION"), the non-prevailing party in such Action shall
         pay to the prevailing party in such Action a reasonable sum for the
         prevailing party's attorneys' fees and expenses (at the prevailing
         party's attorneys' then-current rates, as increased from time to time
         by the giving of advance written notice by such counsel to such party)
         incurred in prosecuting or defending such Action and/or enforcing any
         judgment, order, ruling or award (referred to herein as a "DECISION"),
         granted therein, all of which shall be deemed to have accrued from the
         commencement of such Action, and shall be paid whether or not such
         Action is prosecuted to a Decision. Any Decision entered into in such
         Action shall contain a specific provision providing for the recovery of
         attorneys' fees and expenses incurred in enforcing such Decision. The
         court or arbitrator may fix the amount of reasonable attorneys' fees
         and expenses upon the request of any party. For purposes of this
         Section, attorneys' fees shall include, without limitation, fees
         incurred in connection with (1) post-judgment motions and collection
         actions, (2) contempt proceedings, (3) garnishment, levy and debtor and
         third party examination, (4) discovery and (5) bankruptcy litigation.

         11.9 CONFIDENTIALITY, TRADENAMES.

                  (a) CONFIDENTIALITY BY SELLERS. Each of the Sellers shall
         treat and hold as confidential any information concerning the business
         and affairs of the Company or Buyer that is not already generally
         available to the public (the "CONFIDENTIAL INFORMATION"), refrain from
         using any of the Confidential Information except in connection with
         this Agreement. In the event that any Seller is requested or required
         (by oral question or request for information or documents in any legal
         proceeding, interrogatory, subpoena, civil investigative demand, or
         similar process) to disclose any Confidential Information, it shall


                                      -43-

<PAGE>

         notify Buyer promptly of the request or requirement so that the Buyer
         may seek an appropriate protective order or waive compliance with the
         provisions of this SECTION 11.9(A). If, in the absence of a protective
         order or the receipt of a waiver hereunder, a Seller is, on the advice
         of counsel, compelled to disclose any Confidential Information to any
         tribunal or else stand liable for contempt, it may disclose the
         Confidential Information to the tribunal; provided that it shall use
         its best efforts to obtain, at the request and expense of the Buyer, an
         order or other assurance that confidential treatment shall be accorded
         to such portion of the Confidential Information required to be
         disclosed as the Buyer shall designate. In the event of the termination
         of this Agreement, Sellers shall immediately return to Buyer any
         Confidential Information which is in the form of documentation.

                  (b) TRADE NAMES. The Sellers shall not use or permit any of
         their Affiliates to use the "Phoenix Bio Industries" name (or any other
         trademarks, service marks, trade dress, trade names, logos, or
         corporate names used by the Company) or any names or symbols
         confusingly similar thereto in any manner anywhere in the world after
         Closing.

                  (c) REMEDY FOR BREACH. The Sellers acknowledge and agree that
         in the event of a breach of any of the provisions of this SECTION 11.9,
         monetary damages may not constitute a sufficient remedy. Consequently,
         in the event of any such breach, the Company, the Buyer and/or their
         respective successors or assigns may, in addition to other rights and
         remedies existing in their favor, apply to any court of law or equity
         of competent jurisdiction for specific performance and/or injunctive or
         other relief in order to enforce or prevent any violations of the
         provisions hereof, in each case without the requirement of posting a
         bond or proving actual damages.

                  (d) NO TRADE. Each Seller agrees that, without the prior
         written consent of the Board of Directors of Buyer, until the earlier
         of such time as this transaction is terminated and this transaction is
         publicly disclosed by the Company, neither any Seller nor any of
         Sellers' affiliates (as such term is defined in Rule 12b-2 of the
         Securities Exchange Act of 1934, as amended), acting alone or as part
         of a group, will: (a) acquire, propose, or offer to acquire, or agree
         to acquire, directly or indirectly, by purchase or otherwise, any
         securities or direct or indirect rights to acquire any securities of
         Buyer, or (b) sell any securities of Buyer. It is understood and agreed
         that no failure or delay by Buyer in exercising any right, power or
         privilege hereunder shall operate as a waiver thereof, nor shall any
         single or partial exercise thereof preclude any other or further
         exercise thereof or the exercise of any other right, power or privilege
         hereunder. It is further understood and agreed that money damages would
         not be a sufficient remedy for any breach of this SECTION 11.9(D) by
         any Seller or any Seller representative and that Buyer shall be
         entitled to equitable relief, including injunction and specific
         performance, as a remedy for any such breach. Such remedies shall not
         be deemed to be the exclusive remedies for a breach of this SECTION
         11.9(D) but shall be in addition to all other remedies available at law
         or in equity. In the event of litigation relating to this SECTION
         11.9(D), if a court of competent jurisdiction determines that you or
         any of your representatives have breached this SECTION 11.9(D), then
         such Seller shall be liable and pay to Buyer the legal fees incurred by
         Buyer in connection with such litigation, including any appeal
         therefrom.


                                      -44-

<PAGE>

         11.10 SEC REPORTING COOPERATION. In connection with the reporting
requirements of Buyer, Sellers agree to assist Buyer and its Affiliates (at
Buyer's sole cost and expense) prior to the Closing Date, to enable Buyer to
prepare required disclosures (including financial statements and related notes
in compliance with federal securities Laws), and to enable the Company's
accountants to consent to the inclusion of such financial statements in filings
with the Securities and Exchange Commission including, but not limited to, a
subsequent annual, quarterly or other report, as applicable. Whether or not the
Closing occurs or this Agreement is terminated (except for a termination on
account of a default by Buyer hereunder), the Sellers shall pay up to $10,000
for all accounting fees and related expenses incurred in connection with the
preparation of SEC compliant financial statements and related notes for the
periods ending December 31, 2003, December 31, 2004 and as of the Closing Date.
The audited Financial Statements for December 31, 2003 and December 31, 2004
shall be delivered to Buyer by August 31, 2005 and the audited Statements as of
the Closing Date shall be delivered to Buyer no later than fifteen (15) days
thereafter.

         11.11 LEGEND; TRANSFER OF MEMBER NOTES. Each Member Note will be
imprinted with a legend in substantially the following form:

         PAYMENT WITH RESPECT TO THIS NOTE IS SUBJECT TO CERTAIN SUBORDINATION
         PROVISIONS SET FORTH IN SECTION ____ HEREIN, AND IS SUBJECT TO CERTAIN
         OFFSET PROVISIONS SET FORTH IN A MEMBERSHIP INTEREST PURCHASE AGREEMENT
         DATED AS OF ________________, AMONG THE ISSUER OF THIS NOTE AND THE
         PERSON TO WHOM THIS NOTE WAS ORIGINALLY ISSUED (THE "PURCHASE
         AGREEMENT"). THE TRANSFER OF THIS NOTE IS SUBJECT TO CERTAIN
         RESTRICTIONS SET FORTH IN THE PURCHASE AGREEMENT. THE ISSUER OF THIS
         NOTE WILL FURNISH A COPY OF THESE PROVISIONS TO THE HOLDER HEREOF
         WITHOUT CHARGE UPON WRITTEN REQUEST. THIS NOTE WAS ORIGINALLY ISSUED ON
         [___________________] AND HAS NOT BEEN REGISTERED UNDER THE SECURITIES
         ACT OF 1933, AS AMENDED, OR ANY COMPARABLE STATE SECURITIES LAW.

         Each holder desiring to transfer a Member Note first must furnish to
the Company a (i) written opinion from counsel reasonably satisfactory to the
company in form, substance, and by reason of such counsel's experience to the
effect that the holder may transfer such Member Note as desired without
registration under the Securities act or under any applicable state securities
laws; and (ii) written undertaking executed by the desired transferee reasonably
satisfactory to the Company in form and substance agreeing to be bound by the
offset provisions and the restrictions on transfer contained herein.

         11.12 NO SHOP. Until this Agreement is terminated by its terms, no
Seller shall (and no Seller shall cause or permit any agent or any other Person
acting on his, her or its behalf to), discuss or negotiate with any other Person
a possible sale of all or part of the Company's securities or assets (except for
dispositions of assets in the ordinary course of business), whether such
transaction takes the form of a sale of stock, merger, liquidation, dissolution,
reorganization, recapitalization, consolidation, sale of assets, or otherwise
(an "Acquisition Proposal"), or provide any information to any other Person


                                      -45-

<PAGE>

concerning the Company (other than information which the Company provides to
other Persons in the ordinary course of business). The Sellers and their agents
and other Persons acting on their behalf (a) do not have any rights,
arrangement, or understanding with respect to any Acquisition Proposal (except
this Agreement), (b) shall cease and cause to be terminated any and all
discussions with third parties regarding any Acquisition Proposal, and (c) shall
promptly notify the Buyer if any Acquisition Proposal, or any inquiry or contact
with any person or entity with respect thereto, is made. Notwithstanding the
foregoing, Sellers Representatives of the Company shall be permitted in
connection with a proposed debt or equity financing for the Company which does
not involve a sale of securities in the Company but will result in such
financing source acquiring more than a thirty percent (30%) ownership interest
by value or voting control in the Company provided Buyer is given a right of
first refusal as hereinafter set forth. If the Company desires to initiate any
such financing then three (3) days written notice shall first be given to Buyer
during which period Buyer and Company will attempt to negotiate a mutually
agreeable financing for the Company. If an agreement is reached within said
three (3) day period Buyer and Company will thereafter close such acquisition
within twelve (12) days of the date of such agreement. If an agreement is not
reached within said three (3) day period (or if the financing does not close for
a reason other than a default on the part of the Company), the Company may,
subject to the terms of this SECTION 11.12, proceed to obtain such financing
from independent third parties, but shall not be entitled to undertake such
financing with a third party for a price less than the equivalent value of the
price of refinancing which may have been offered by Buyer in writing. During the
aforesaid three (3) day period the Company shall not directly or indirectly
initiate any discussions with any third parties.

                                   ARTICLE 12
                                  MISCELLANEOUS
                                  -------------

         12.1 AMENDMENT AND WAIVER. This Agreement may be amended, and any
provision of this Agreement may be waived; provided that any such amendment or
waiver shall be binding on the Party against whom the amendment is being
asserted only if such amendment or waiver is set forth in a writing executed by
such Party against whom the amendment is being asserted and then only to the
specific purpose, extent and instance so provided. Not withstanding the
foregoing any one or more of the Principals may enter into an amendment of this
agreement, or any other agreements related to this transaction, for the purpose
to carry out the intent of the parties.

         12.2 NOTICES. All notices, demands and other communications to be given
or delivered under or by reason of the provisions of this Agreement shall be in
writing and shall be deemed to have been given when personally delivered, when
mailed by certified mail, return receipt requested, when sent by facsimile with
confirmation of receipt received, or when delivered by overnight courier with
executed receipt. Notices, demands and communications to Sellers or Buyer shall,
unless another address is specified in writing in accordance herewith, be sent
to the address indicated below:


                                      -46-

<PAGE>

         Notices to Sellers:                C/O - Western Milling
                                            Attn: Kevin Kruse or Ejnar Knudsen
                                            31120 Nutmeg Road
                                            PO Box 1029
                                            Goshen, CA 93227
                                            Tel: (559) 302-1000
                                            Fax: (559) 380-2800

         Notices to Buyer:                  Pacific Ethanol, Inc.
                                            5711 N. West Avenue
                                            Fresno, CA 93711
                                            Attn: Neil Koehler, Chairman and CEO
                                            Tel: (530) 750-3017
                                            Fax: (530) 309-4172

                                            Pacific Ethanol, Inc.
                                            5711 N. West Avenue
                                            Fresno, CA 93711
                                            Attn: Ryan Turner, Director and COO
                                            Tel: (559) 435-1771 ext. 107
                                            Fax: (559) 435-1478

         with a copy to:                    Rutan & Tucker, LLP
                                            611 Anton Blvd., Suite 1400
                                            Costa Mesa, CA 92626
                                            Attn: George J. Wall, Esq.
                                            Tel: (714) 662-4673
                                            Fax: (714) 546-9035

         12.3 ASSIGNMENT. This Agreement and all of the provisions hereof shall
be binding upon and inure to the benefit of the Parties and their respective
successors and assigns. Neither this Agreement nor any of the rights, interests
or obligations hereunder shall be assignable by either Party without the prior
written consent of the other Party; provided, however, that Buyer may assign in
whole its right, title and interest under this Agreement to any of its
Affiliates and such assignment shall release Buyer (but not such assignee) from
its indemnification and other obligations hereunder.

         12.4 CAPTIONS. The captions used in this Agreement are for convenience
of reference only and do not constitute a part of this Agreement and shall not
be deemed to limit, characterize or in any way affect any provision of this
Agreement, and all provisions of this Agreement shall be enforced and construed
as if no caption had been used in this Agreement.

         12.5 COMPLETE AGREEMENT; SCHEDULES AND EXHIBITS. Each schedule and
exhibit delivered pursuant to the terms of this Agreement shall be in writing
and shall constitute a part of this Agreement, although schedules need not be
attached to each copy of this Agreement. This Agreement, together with such
schedules and exhibits, and the documents referred to herein contain the
complete agreement between the Parties and supersede any prior understandings,
agreements or representations by or between the Parties, written or oral, which
may have related to the subject matter hereof in any way.


                                      -47-

<PAGE>

         12.6 GOVERNING LAW. The Laws of the State of California, without regard
to conflict of law doctrines, govern all questions concerning the construction,
validity and interpretation of this Agreement and the performance of the
obligations imposed by this Agreement.

         12.7 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument. Documents will be deemed
as originals if received by facsimile copy.

         12.8 THIRD PARTY BENEFICIARIES. Nothing in this Agreement is intended
or will be construed to entitle any person or entity, other than Buyer and
Sellers or their respective permitted transferees and assigns, to any claim,
cause of action, remedy or right of any kind.

         12.9 SEVERABILITY. The validity, legality or enforceability of the
remainder of this Agreement will not be affected even if one or more of the
provisions of this Agreement will be held to be invalid, illegal or
unenforceable in any respect.

         12.10 EXPENSES. Except as otherwise expressly set forth in this
Agreement, each Party shall, whether or not the transactions contemplated hereby
are consummated, pay all costs and expenses incurred by or on behalf of such
Party in connection with the negotiation, execution and Closing of this
Agreement and the transactions contemplated hereby and its investigation and
evaluation of the Membership Interests and the Company.



           IN WITNESS WHEREOF, each of the Parties have caused this Agreement to
be duly executed by duly authorized individuals as of the Effective Date.



                          Counterpart Signatures Follow


                                      -48-

<PAGE>

 Execution of Membership Interest Purchase Agreement by Counterpart Signatures
 -----------------------------------------------------------------------------


The undersigned hereby executes the Membership Interest Purchase Agreement dated
as of August 1st, 2005, between Pacific Ethanol Inc. and the members of Phoenix
Bio Industries, LLC.



                                      BUYER

                                      PACIFIC ETHANOL, INC.,
                                      a Delaware Corporation



                                      By:  ____________________________________
                                           Ryan Turner, Chief Operating Officer


                                      -49-

<PAGE>

 Execution of Membership Interest Purchase Agreement by Counterpart Signatures
 -----------------------------------------------------------------------------


I (we) hereby execute the Membership Interest Purchase Agreement dated as of
August 1st, 2005, between Pacific Ethanol Inc. and the members of Phoenix Bio
Industries, LLC.



                               Signature of Member: ___________________________


                               Print Name of Member: __________________________



                               OR


                               Signature of Member other than an Individual

                               Entity: ________________________________________


                               Signature: _____________________________________


                               Print Name: ____________________________________


                               Title: _________________________________________


                                      -50-

<PAGE>

                                   EXHIBIT "A"
                                   -----------

                                   DEFINITIONS
                                   -----------



         A. CERTAIN MATTERS OF CONSTRUCTION. For purposes of this Agreement, in
addition to the definitions referred to or set forth in this EXHIBIT "A":

                  1. Reference to a particular Section of this Agreement will
include all its subsections.

                  2. The words "PARTY" and "PARTIES" will refer to each of the
         Sellers and Buyer.

                  3. Definitions will apply to both the singular and plural
         forms of the terms defined, and references to the masculine, feminine
         or neuter gender will include each other gender.

                  4. All references in this Agreement to any Exhibit or Schedule
         will, unless the context otherwise requires, be deemed to be a
         reference to an Exhibit or Schedule, as the case may be, to this
         Agreement, all of which are made a part of this Agreement.

         B. DEFINITIONS.

                  "ACCOUNTING FIRM" is defined in SECTION 2.3(F).

                  "AFFILIATE" means an individual or entity that directly or
         indirectly, through one or more intermediaries, controls, or is
         controlled by, or is under common control with, a specified individual
         or entity. For purposes of this definition, "control" shall include,
         without limitation, the exertion of significant influence over an
         individual or entity and shall be conclusively presumed as to any fifty
         percent (50%) or greater equity interest.

                  "BENEFIT PLAN" is defined in SECTION 3.14(A).

                  "BUSINESS DAY" means any day other than a Saturday, Sunday, or
         day on which commercial banks are authorized by law to close in the
         City of Sacramento, California.

                  "BUSINESS EMPLOYEES" is defined in SECTION 3.13.

                  "BUYER" is defined in the preamble hereof and shall also
         include any Affiliate of the Buyer that becomes an assignee of the
         Agreement pursuant to the terms of SECTION 12.3.

                  "BUYER INDEMNIFIED PARTIES" is defined in SECTION 9.1.

                  "CAP" is defined in SECTION 9.4(C).


                                   EXHIBIT "A"

<PAGE>

                  "CHARTER DOCUMENTS" shall mean, as applicable, the specified
         entity's (i) certificate or articles of incorporation or formation or
         other charter or organizational documents, and (ii) bylaws or operating
         agreement, each as from time to time in effect.

                  "CLAIM" means any action or proceeding instituted by any third
         party, the liabilities for which are Indemnifiable Losses.

                  "CLOSING" is defined in SECTION 8.1.

                  "CLOSING BALANCE SHEET" is defined in SECTION 2.3(C).

                  "CLOSING DATE" is defined in SECTION 8.1.

                  "COBRA" means Section 4980B of the Code, Part 6 of Title I of
         ERISA, similar provisions of state law and applicable regulations
         relating to any of the foregoing.

                  "CODE" means the Internal Revenue Code of 1986, as amended.

                  "COMPANY INTELLECTUAL PROPERTY" is defined in SECTION 3.18.

                  "CONFIDENTIALITY AGREEMENT" is defined in SECTION 11.2.

                  "CONTRACTS SCHEDULE" means SCHEDULE 3.10.

                  "EFFECTIVE DATE" is the date on which Buyer and Seller
         exchange fully executed copies of this Agreement.

                  "EFFECTIVE TIME" is defined in SECTION 8.1.

                  "EMPLOYEE PENSION BENEFIT PLAN" has the meaning set forth in
         Section 3(2) of ERISA.

                  "EMPLOYEE WELFARE BENEFIT PLAN" has the meaning set forth in
         Section 3(1) of ERISA.

                  "ENCUMBRANCE" means any mortgage, charge, option, right to
         acquire, pledge, lien, security interest, attachment or other
         encumbrance, including any agreement to create any of the foregoing.

                  "ENVIRONMENTAL LAW" means all applicable Laws pertaining to
         the environment, Hazardous Materials, pollution or occupational safety
         and health, and includes without limitation the Comprehensive
         Environmental Response, Compensation and Liability Act of 1980, as
         amended by the Superfund Amendments and Reauthorization Act of 1986, 42
         U.S.C. Sections 9601 et. seq.

                  ("CERCLA"), Solid Waste Disposal Act, as amended by the
         Resource Conservation and Recovery Act of 1986 and Hazardous and Solid
         Waste Amendments of 1984, 42 U.S.C. Sections 6901 et seq., the Oil
         Pollution Act of 1990, 33 U.S.C. Sections 2701 et seq. and implementing
         state Laws promulgated thereunder.


                                   EXHIBIT "A"

<PAGE>

                  "ENVIRONMENTAL PERMITS" means all material permits, approvals,
         certificates and licenses required under any Environmental Law.

                  "ERISA" means the Employee Retirement Income Security Act of
         1974, as amended.

                  "ERISA AFFILIATE" means, with respect to any Person, each
         other Person which, within any time during the past six (6) years, is
         or was required to be treated as a single employer (under Section 414
         of the Code or Section 4001(b) of ERISA), or treated as a controlled
         group member or entity under common control (under Sections
         302(f)(6)(B) or 4001(a)(14) of ERISA), with such Person or its
         predecessor or any of their current or former Affiliates.

                  "EXPIRATION DATE" is defined in SECTION 9.5.

                  "FINANCIAL STATEMENTS" is defined in SECTION 3.6.

                  "FOSTER" is defined in the Preamble of this Agreement.

                  "FUNDED INDEBTEDNESS" means (i) all indebtedness for money
         borrowed from others (whether in the form of direct loans or capital
         leases) and purchase money indebtedness of the Company, (ii) interest
         expense accrued but unpaid, and all prepayment premiums, on or relating
         to any of such indebtedness, (iii) indebtedness of the type described
         in clause (i) above guaranteed by the Company, and (iv) any purchase
         money indebtedness for premiums for insurance maintained by the Company
         to the extent the outstanding balance thereof exceeds the amortized
         value of the premiums.

                  "GROUND LEASE" means Ground Lease dated as of April 15, 2004
         by and between Western Milling, LLC and Phoenix Bio Industries, LLC.

                  "HAZARDOUS MATERIAL" means any substance, pollutant,
         contaminant, radiation or chemical which has been determined under
         applicable Environmental Laws to be hazardous to human health or safety
         or the environment including, without limitation, all of those
         substances which are listed or defined as "pollutants," "contaminants,"
         "hazardous materials," "hazardous wastes," "hazardous substances,"
         "toxic substances," "radioactive materials," or other similar
         designations pursuant to Environmental Laws including, but not limited
         to, asbestos, petroleum and any petroleum products and polychlorinated
         biphenyls.

                  "INDEMNIFIED PARTY" means a Buyer Indemnified Party or a
         Seller Indemnified Party, as applicable.

                  "INDEMNIFYING PARTY" means the Party obligated to indemnify an
         Indemnified Party.

                  "INDEMNIFIABLE LOSSES" means any Loss for or against which any
         Party is entitled to indemnification under this Agreement.


                                   EXHIBIT "A"

<PAGE>

                  "INSURANCE POLICIES" is defined in SECTION 3.10(B).

                  "INTELLECTUAL PROPERTY" means all trademarks and trade names,
         trademark and trade name registrations, service marks and service mark
         registrations, copyrights and copyright registrations, patent and
         patent applications and all material licenses and other agreements and
         information relating to technology, know-how, software or processes
         used in or otherwise necessary to the Business, whether proprietary to
         the Company or licensed to or otherwise authorized for use by others.

                  "IRS" means the Internal Revenue Service or any successor
         agency thereto.

                  "JAMS" is defined in SECTION 11.8.

                  "LAW" means any federal, state or local law, statute, rule or
         regulation and any resolution, ruling, ordinance, enactment, judgment,
         order, decree, directive or other requirement having the force of law,
         including any official interpretation of any of the foregoing, of or by
         any governmental authority, as in effect from time to time.

                  "LEASE" and "LEASES" are defined in SECTION 3.8(A).

                  "LEASES SCHEDULE" means SCHEDULE 3.8.

                  "LIABILITIES SCHEDULE" means SCHEDULE 3.4(A).

                  "MATERIAL ADVERSE CHANGE" means any change or changes that are
         material and adverse to the Company, Business, operations, properties,
         assets, income, cash flow, liabilities, working capital or financial
         condition, other than: (i) any change or effect resulting from or
         relating to changes in or developments in the national or local
         economy, financial markets, insurance markets, commodity markets or
         currency markets, (ii) any change or effect resulting from general
         changes in the national or local wholesale or retail markets for
         ethanol fuel purchased or sold by Company, (iii) any change or effect
         resulting from any changes or potential changes to applicable
         governmental regulations, (iv) any change or effect resulting from or
         relating generally to the ethanol or alternative fuel industry, (v) any
         reductions in the cash flow multiple generally being paid for ethanol
         based operations in international, national or local markets.

                  "MATERIAL CONTRACTS" is defined in SECTION 3.10(B).

                  "MEMBER DEBT" is defined in SECTION 8.2(D).

                  "NET WORKING CAPITAL" is defined in SECTION 2.3(A).

                  "PARTY" or "PARTIES" means collectively the Sellers and the
Buyer.

                  "PENSION PLAN" is defined in SECTION 3.14(A).

                  "PERMITS" is defined in SECTION 3.15.


                                   EXHIBIT "A"

<PAGE>

                  "PERSON" means any individual, person, limited liability
         company, partnership, trust, unincorporated organization, corporation,
         association, joint stock company, business, group, government,
         government agency or authority or other entity.

                  "PERSONAL PROPERTY" is defined in SECTION 3.8(B).

                  "PROHIBITED TRANSACTION" has the meaning set forth in ERISA
         Section 406 and Section 4975 of the Code.

                  "PURCHASE PRICE" is defined in SECTION 2.1.

                  "SELLER INDEMNIFIED PARTIES" is defined in SECTION 9.2.

                  "SELLERS' REPRESENTATIVE" is defined in SECTION 9.8.

                  "SUBSIDIARY" means any entity of which the Company (or other
         specified entity) owns directly or indirectly through a Subsidiary, a
         nominee arrangement or otherwise at least a majority of the outstanding
         capital stock (or other shares of beneficial interest) entitled to vote
         generally.

                  "TAX" means any foreign, federal, state, county or local
         income, sales and use, excise, franchise, real and personal property,
         transfer, gross receipt, capital stock, production, business and
         occupation, disability, employment, payroll, severance or withholding
         tax or charge imposed by any governmental entity, any interest and
         penalties (civil or criminal) related thereto or to the nonpayment
         thereof, and any Loss in connection with the determination, settlement
         or litigation of any Tax liability.

                  "TAX RETURN" means a report, return or other information
         supplied to or required to be supplied to a governmental entity with
         respect to Taxes and shall be treated as a Tax Return of each entity
         included or required to be included in a return filed on a combined,
         consolidated, unitary or similar basis.

                  "TERMINATION DATE" means the date on which this Agreement is
         terminated pursuant to SECTION 10.1 hereof.

                  "THRESHOLD" is defined in SECTION 9.4(A).

                  "TRANSACTION DOCUMENTS" is defined in SECTION 8.3.

                  "WELFARE PLAN" is defined in SECTION 3.14(A).


                                   EXHIBIT "A"

<PAGE>

                                   EXHIBIT "B"
                                   -----------

                     ASSIGNMENT OF LIMITED LIABILITY COMPANY
                     ---------------------------------------
                              MEMBERSHIP INTERESTS
                              --------------------










                                   EXHIBIT "B"


<PAGE>

                                   EXHIBIT "C"
                                   -----------

                                  MEMBER NOTES
                                  ------------











                                   EXHIBIT "C"

<PAGE>

                                   EXHIBIT "D"
                                   -----------

                                    WARRANTS
                                    --------










                                   EXHIBIT "D"

<PAGE>

                                   EXHIBIT "E"
                                   -----------

                           OPINION OF SELLER'S COUNSEL
                           ---------------------------



Pacific Ethanol, Inc.
5711 N. West Avenue
Fresno, CA 93711

Ladies and Gentlemen:

         We have acted as special counsel to [Selling Members] (together,
"Sellers"), in connection with the sale of all membership interests ("Membership
Interests") of Phoenix Bio Industries, LLC (the "Company") pursuant to that
certain Membership Interest Purchase Agreement (the "Agreement") of even date
herewith. This opinion is being furnished to you pursuant to Section 8.3(a) of
the Agreement. All capitalized terms used but not otherwise defined herein shall
have the respective meanings ascribed to such terms in the Underwriting
Agreement.

         We have examined the following documents:

                  (a) the Agreement and any amendment thereto;

                  (b) the Power of Attorney;

                  (c) the Assignment of Membership Interest;

                  (d) Members' certificates (the "Certificates") executed by the
         Sellers dated the date hereof and a form of which is provided to you
         concurrently herewith, which sets forth various factual representations
         including a listing of agreements or instruments to which the Sellers
         are bound and which are material to them ("Material Agreements"); and

                  (e) such other documents, records and papers as we have deemed
         necessary and relevant as a basis for this opinion.

         Our opinions are governed by and limited to the internal laws of the
State of California and the federal laws of the United States of America,
without regard to choice of law or conflicts of law principles. We disclaim any
opinion as to the laws of any other jurisdiction. The Agreement and any
amendment thereto, the Power of Attorney, and the Assignment of Membership
Interest are hereinafter collectively referred to as the "Opinion Documents".

         In rendering our opinions set forth below, we have assumed the
authenticity of all documents submitted to us as originals, the genuineness of
all signatures, and the conformity to authentic originals of all documents
submitted to us as copies. We have also assumed the legal capacity for all
purposes relevant to this letter of all natural persons and, with respect to all


                                   EXHIBIT "E"

<PAGE>

parties to agreements or instruments relevant to this letter other than the
Sellers, that (i) such parties are duly organized, validly existing and in good
standing under the laws of their respective jurisdictions of incorporation or
association, (ii) such parties had the requisite power and authority (corporate
or otherwise) to execute, deliver and perform such agreements or instruments,
(iii) such agreements or instruments have been duly authorized by all requisite
action (corporate or otherwise) and duly executed and delivered by such parties,
(iv) such agreements or instruments are the valid, binding and enforceable
obligations of such parties, (v) each of the parties has complied with all
applicable licensing requirements and has qualified to do business, as its
activities may require, under the laws of the State of California and the laws
of the United States, (vi) the representations and warranties contained in the
Opinion Documents are true and correct, and (vii) each of the parties has
received all of the documents that each is required to receive under the Opinion
Documents. We have not independently checked or verified the accuracy or
reasonableness of any assumption made by us in this letter.

         As to matters of fact relevant to the opinions expressed in this
letter, we have relied, without further inquiry, solely on the Certificate and
all representations and warranties in the Opinion Documents. We have not
verified the validity, accuracy or reasonableness of any of the factual
representations and warranties contained in the Opinion Documents or of any of
the representations made to us in the Certificate.

         Where statements or opinions in this letter are made to or qualified by
our knowledge or our awareness, our knowledge or awareness is deemed to be
limited to the actual present knowledge of those attorneys in our firm who have
devoted substantial substantive attention to the rendering of services to the
Sellers in connection with the Opinion Documents and the transactions
contemplated thereby. Our knowledge or awareness for these purposes does not
include knowledge or awareness that might be obtained by a review of our firm's
files or a canvassing of attorneys in our firm other than those who have devoted
substantial substantive attention to the rendering of services to the Sellers in
connection with the representation described in the introductory paragraph of
this opinion letter. All references in this letter to our knowledge or awareness
are subject to this limitation. No inference concerning our knowledge of any
matters bearing on any such statement or opinion should be drawn from the fact
of our representation of the Sellers. With respect to our opinions in paragraph
1, we have not made any examination of the public records (including, without
limitation, the plaintiff or defendant indices of any state, federal or foreign
courts) or the Company's records.

         The opinion set forth in paragraph 2 below is subject to, and we render
no opinion with respect to, the effect of the following:

         [inserted by Sellers' Counsel]

         Based upon the foregoing and such consideration of matters of law as we
deemed to be relevant, and subject to the qualifications and assumptions set
forth herein, we are of the opinion that:

         1. The execution, delivery and performance by the Sellers of the
Opinion Documents, to our actual knowledge, will not violate any California or
federal statute, judgment, decree, order, rule or regulation of any court or
governmental body having jurisdiction over any Seller or any of their


                                   EXHIBIT "E"

<PAGE>

properties; to our actual knowledge no approval, authorization, order or consent
of any court, regulatory body, administrative agency or other governmental body
is required for the execution and delivery of the Opinion Documents or the
consummation by the Sellers of the transactions contemplated by the Opinion
Documents, except such as have been obtained and are in full force and effect
under the Act and such as may be required under applicable Blue Sky laws.

         2. The Opinion Documents have each been duly and validly authorized,
executed and delivered by each Seller, and each is a valid and binding agreement
of each Seller, enforceable against such Seller in accordance with its terms.

         3. The execution, delivery and performance of the Option Documents by
the Sellers will not violate, result in a breach of or constitute a default
under the terms of any Material Agreement.

         4. At the Closing the Buyer will acquire all of the rights of the
Sellers in the Membership Interests, free of any adverse claim including,
without limitation, adverse claims against the Sellers.

         The opinions set forth herein are given as of the date hereof, are
expressly limited to the matters stated herein and no opinion is implied or may
be inferred beyond what is explicitly stated in this letter. We disclaim any
obligation to notify you or any other person or entity after the date hereof if
any change in fact and/or law should change our opinion with respect to any
matter on which we are expressing an opinion herein.

         This letter is rendered solely for your benefit and may not be relied
upon by any other person or entity. Copies of this letter may not be circulated
or furnished to any person or entity and this letter may not be referred to in
any report or document furnished to any person or entity, without our prior
written consent.

                                       Respectfully submitted,


                                   EXHIBIT "E"

<PAGE>

                                  SCHEDULE 9.1
                                  ------------




                           Not applicable at this time









                                  SCHEDULE 9.1