Document:

paceth_8k-ex1001.htm

EXHIBIT 10.1

 

NEW PE HOLDCO LLC

 

CALL OPTION AGREEMENT

 

THIS CALL OPTION AGREEMENT, (“Agreement”) dated as of June 29, 2010, is made by and among New PE Holdco LLC, a Delaware limited liability company (the “Company”), Pacific Ethanol, Inc., a Delaware corporation (“PEI”) and certain members of the Company listed on Schedule A hereto (the “Granting Members”).

 

W I T N E S S E T H

 

WHEREAS, as of the date hereof the Company has issued limited liability company interests denominated as “Units” pursuant to the LLC Agreement (as defined below) to the Granting Members in connection with the consummation of that certain Amended Joint Plan of Reorganization Under Chapter 11 of the Bankruptcy Code, dated April 16, 2010, filed with the United States Bankruptcy Court for the District of Delaware by the predecessors in interest to the Company’s direct and indirect wholly-owned subsidiaries;

 

WHEREAS, as of the date hereof and in connection with the issuance of the Units, the Company and the Granting Members, among others, have executed that certain Limited Liability Company Agreement of New PE Holdco LLC (the “LLC Agreement”);

 

WHEREAS, the Granting Members have agreed with PEI that PEI will have the right to acquire the Call Option Units (as defined herein) from the Granting Members at the Call Option Price (as defined herein); and

 

WHEREAS, the parties desire hereby to provide for the terms and conditions upon which the Call Option Units may be acquired by PEI, and the Call Option Amount shall be paid.

 

NOW, THEREFORE, in consideration of the agreements and mutual covenants and based upon the representations and warranties set forth herein, the parties agree as follows:

 

1.   Definitions.

 

“Call Option Amount” has the meaning set forth in Section 2(a).

 

“Call Option Price” means $120,000 per Call Option Unit.

 

“Call Option” has the meaning set forth in Section 2(a).

 

“Call Option Units” has the meaning set forth in Section 2(a).

 

“LLC Agreement” has the meaning set forth in the recitals hereto.

 

“Exercise Notice” has the meaning set forth in Section 2(b).

 

  

  

  

 

“Person” means any individual, partnership (whether general or limited), limited liability company, corporation, trust, estate, association, nominee or other entity.

 

“Transfer” means, as a noun, any voluntary or involuntary transfer, sale, pledge or hypothecation or other disposition and, as a verb, voluntarily or involuntarily to transfer, sell, pledge or hypothecate or otherwise dispose of.

 

“Transferee” has the meaning set forth in Section 7.

 

“Units” has the meaning set forth in the recitals hereto.

 

2.   Call Option.

 

(a)   Each of the Granting Members hereby grants to PEI the right (the “Call Option”) to acquire from such Granting Member (or from its Transferee(s), if any) such number of its Units as is set forth opposite such Granting Member’s name on Schedule A hereto (as to any Granting Member, its “Call Option Units”) in exchange for payment of an amount equal to the (i) Call Option Price multiplied by (ii) the number of such Granting Member’s Call Option Units (as to each Member, such Member’s “Call Option Amount”).

 

(b)   PEI shall have the right, in its sole discretion, to exercise the Call Option by giving written notice to each of the Granting Members (the “Exercise Notice”) not earlier than five (5) Business Days after the date hereof and not later than ninety (90) days after the date hereof.  The Call Option will expire at 5:00 p.m. (Pacific time) on September 28, 2010.

 

(c)   The Exercise Notice shall include the number of Call Option Units that PEI intends to purchase in connection with its exercise of the Call Option (such Call Option Units, the “Purchase Units”) and the Call Option Amount payable to each Granting Member.  If the number of Purchase Units is less than all of the Call Option Units, then the Purchase Units shall be allocated on a pro rata basis among the Granting Members based upon the proportion each Granting Member’s Call Option Units bear to the total number of all Call Option Units. The Company shall make such allocations and deliver notice thereof, and of each Granting Member’s Call Option Amount, to PEI and each Granting Member (the “Reallocation Notice”).

 

(d)   Upon (i) notice of exercise by PEI of the Call Option with respect to all of the Call Option Units or, if for less than all Call Option Units, upon the Company’s delivery of  the Reallocation Notice and (ii) the subsequent tender of the Call Option Amount to each Granting Member, the Granting Members shall be deemed automatically, and without the need for any certificates to be delivered to PEI, to have sold and transferred to PEI its share of the Purchase Units.

 

3.   Legend.

 

Each certificate evidencing any Call Option Units shall bear a legend in substantially the following form:

 

THE SECURITIES EVIDENCED BY THIS CERTIFICATE ARE SUBJECT TO AND ENTITLED TO THE BENEFITS OF THE TERMS OF A CALL OPTION AGREEMENT, DATED AS OF JUNE 29, 2010, A COPY OF WHICH IS ON FILE WITH THE ISSUER AND WILL BE FURNISHED TO ANY HOLDER ON REQUEST TO THE ISSUER.  SUCH AGREEMENT PROVIDES, THAT THIS SECURITY IS SUBJECT (IN WHOLE OR IN PART, AS APPLICABLE) TO PURCHASE BY CERTAIN PERSONS UPON THE OCCURRENCE OF CERTAIN EVENTS.

 

  

  

  

 

4.   Granting Member Representations.  Each of the Granting Members represents that:

 

(a)   It has all requisite corporate, limited liability company, partnership or other entity power and authority to enter into this Agreement and to perform its obligations hereunder;

 

(b)   The execution, delivery and performance of this Agreement has been duly authorized by all necessary corporate, limited liability company, partnership or other entity action;

 

(c)   This Agreement has been duly authorized and validly executed by it;

 

(d)   Neither the execution, delivery nor performance of this Agreement will result in the imposition of any lien or encumbrance on any Call Option Unit in favor of any third party;

 

(e)   There is no litigation, action, suit, investigation, proceeding by or before any governmental authority or arbitrator pending or, to its knowledge, threatened against such Granting Member, which would prohibit its entering into, or that could materially and adversely affect its ability to perform its obligations under, this Agreement;

 

(f)   This Agreement is a binding agreement on the part of such Granting Member enforceable against it in accordance with its terms, subject to bankruptcy, insolvency, reorganization, moratorium or other similar laws relating to creditors’ rights and general principles of equity; and

 

(g)   Such Granting Member is the sole record and beneficial owner of its Call Option Units and owns such Call Option Units free and clear of any lien or other encumbrance created by such Granting Member, and, if such Granting Member is a Transferee, it acquired its Call Option Units as part of a Permitted Transfer pursuant to (and as defined in) the LLC Agreement.

 

5.   PEI Representations.  PEI represents that:

 

(a)   It has all requisite corporate power and authority to enter into this Agreement and to perform its obligations hereunder;

 

(b)   The execution, delivery and performance of this Agreement has been duly authorized by all necessary corporate action;

 

(c)   This Agreement has been duly authorized and validly executed by it;

 

  

  

  

 

(d)   There is no litigation, action, suit, investigation, proceeding by or before any governmental authority or arbitrator pending or, to its knowledge, threatened against it, which would prohibit its entering into, or that could materially and adversely affect its ability to perform its obligations under, this Agreement;

 

(e)   This Agreement is a binding agreement on the part of PEI enforceable against it in accordance with its terms, subject to bankruptcy, insolvency, reorganization, moratorium or other similar laws relating to creditors’ rights and general principles of equity; and

 

(f)   It is acquiring the Call Option Units for its own account for investment purposes only and not with a view to the distribution or resale thereof, in whole or in part.

 

6.   Equitable Relief.  Each party hereto agrees with the other parties hereto that the other parties would be irreparably damaged if any of the provisions of this Agreement are not performed in accordance with their specific terms and that monetary damages would not provide an adequate remedy in such event.  Accordingly, it is agreed that, to the fullest extent permitted by law, in addition to any other remedy to which the nonbreaching parties hereto may be entitled, at law or in equity, such nonbreaching parties shall be entitled to seek injunctive relief to prevent breaches of the provisions of this Agreement and specifically to enforce the terms and provisions hereof in any action instituted in any court of the United States or any state thereof having subject matter jurisdiction thereof.

 

7.   Assignment and Transfer.

 

(a)   No Granting Member may Transfer, offer to Transfer, or accept an offer from any proposed Transferee for, all or any amount of its Call Option Units to another Person (a “Transferee”) unless (i) such Transfer is a Permitted Transfer pursuant to (and as defined in) the LLC Agreement and (ii) the Transferee acknowledges and agrees in writing (y) that the Call Option Units it is acquiring are subject to the Call Option as set forth in this Agreement and (z) to be bound by this Agreement. Such acknowledgment and agreement by a Transferee shall be delivered to the Company.

 

(b)   Upon any Transfer of any Call Option Units to any Person in violation of Section 7(a), the Granting Member attempting such Transfer shall remain fully bound hereby.

 

8.   Miscellaneous.

 

(a)   Notices.  Any notice, payment, demand, or communication required or permitted to be given by any provision of this Agreement shall be in writing and shall be deemed to have been delivered, given, and received for all purposes (i) if delivered personally to the Person or to an officer of the Person to whom the same is directed, or (ii) when the same is actually received, if sent either by registered or certified mail, postage and charges prepaid, or by facsimile or electronic mail, if (y) delivery by electronic mail is permitted by such Person (which it shall be, unless otherwise indicated on such Person’s signature page hereto) and (z) either (A) telephonic or electronic confirmation of delivery is obtained or (B) such facsimile or electronic mail is followed by a hard copy of the communication sent promptly thereafter by registered or certified mail, postage and charges prepaid, in each case addressed as follows, or to such other address as such Person may from time to time specify by notice to the Company pursuant to this Section 13.1: (a) if to the Company, to c/o JT Miller Group LLC, 777 Campus Commons Road #200, Sacramento, CA, 95825, facsimile 916.565.7423, jtm@jtmillergroup.com; (b) if to PEI, to Pacific Ethanol, Inc., 400 Capitol Mall, Suite 2060, Sacramento, CA 95814 (Attention: Neil Koehler), facsimile 916.446.3937; and (c) if to any of the Granting Members, to the notice address listed on such Granting Member’s signature page to this Agreement.

 

  

  

  

 

(b)   Amendment.  No change in or modification of this Agreement shall be valid unless the same shall be in writing and signed by the Company, each Granting Member and PEI.

 

(c)   Waiver.  No failure or delay on the part of the parties or any of them in exercising any right, power or privilege hereunder, nor any course of dealing between the parties or any of them shall operate as a waiver of any such right, power or privilege nor shall any single or partial exercise of any such right, power or privilege preclude the simultaneous or later exercise of any other right, power or privilege.  The rights and remedies herein expressly provided are cumulative and are not exclusive of any rights or remedies which the parties or any of them would otherwise have.  No notice to or demand on the Company in any case shall entitle the Company to any other or further notice or demand in similar or other circumstances or constitute a waiver of the rights of the other parties or any of them to take any other or further action in any circumstances without notice or demand.

 

(d)   Counterparts.  This Agreement may be executed in any number of counterparts with the same effect as if all of the parties hereto had signed the same document.  All counterparts shall be construed together and shall constitute one agreement.  This Agreement and any amendments hereto, to the extent signed and delivered by means of a facsimile machine or electronic transmission (including a PDF file), shall be treated in all manner and respects as an original Agreement and shall be considered to have the same binding legal effect as if it were the original signed version thereof delivered in person.  No party hereto shall raise the use of a facsimile machine or electronic transmission to deliver a signature or the fact that any signature was transmitted or communicated through the use of a facsimile machine or electronic transmission as a defense to the formation of a contract and each such party forever waives any such defense.

 

(e)   On File with the Company.  A copy of this Agreement and of all amendments hereto shall be kept on file at the Company.

 

(f)   GOVERNING LAW.  THE LAWS OF THE STATE OF DELAWARE SHALL GOVERN THE VALIDITY OF THIS AGREEMENT, THE CONSTRUCTION OF ITS TERMS, AND THE INTERPRETATION OF THE RIGHTS AND DUTIES ARISING HEREUNDER, WITHOUT REGARD TO ITS CONFLICTS OF LAWS PROVISIONS.

 

(g)   Submission to Jurisdiction; Waiver of Jury Trial and Venue.

 

(1)   SUBMISSION TO JURISDICTION.  EACH PARTY HERETO IRREVOCABLY AND UNCONDITIONALLY SUBMITS, FOR ITSELF AND ITS PROPERTY, TO THE NON-EXCLUSIVE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK SITTING IN NEW YORK COUNTY AND OF THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK, AND ANY APPELLATE COURT FROM ANY THEREOF, IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT, OR FOR RECOGNITION OR ENFORCEMENT OF ANY JUDGMENT, AND EACH OF THE PARTIES HERETO IRREVOCABLY AND UNCONDITIONALLY AGREES THAT ALL CLAIMS IN RESPECT OF ANY SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN SUCH NEW YORK STATE COURT OR, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, IN SUCH FEDERAL COURT.  EACH OF THE PARTIES HERETO AGREES THAT A FINAL JUDGMENT IN ANY SUCH ACTION OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN OTHER JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY LAW.

 

  

  

  

 

(2)   WAIVER OF JURY TRIAL AND VENUE.  EACH PARTY HERETO IRREVOCABLY AND UNCONDITIONALLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, (i) ANY AND ALL RIGHTS SUCH PARTY MAY HAVE TO A JURY TRIAL WITH RESPECT TO ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR AND (ii) ANY OBJECTION THAT SUCH PARTY MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT IN ANY COURT REFERRED TO IN SECTION 8(g)(1).  EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, THE DEFENSE OF AN INCONVENIENT FORUM TO THE MAINTENANCE OF SUCH ACTION OR PROCEEDING IN ANY SUCH COURT.

 

(3)   Service of Process.  Each party hereto agrees that service of process may be effectuated by mailing a copy of the summons and complaint, or other pleading, by certified mail, return receipt requested, in accordance with Section 8(a).

 

(h)   Termination.  This Agreement may be terminated at any time by an instrument in writing signed by the Granting Members and PEI.  This Agreement shall automatically terminate (i) at 5 p.m. (Pacific time) on September 28, 2010 if the Call Option has not been exercised prior thereto, or (ii) immediately following the completion of the purchase of the Call Option Units (including payment of the Call Option Amount to each Granting Member) if the Call Option has been exercised.

 

(i)   Further Assurances.  Each party agrees to execute and deliver additional documents and take other actions that another party may reasonably request for purposes of carrying out the transactions contemplated by this Agreement.

 

(j)   Benefit and Binding Effect.  Except as otherwise provided in this Agreement, no right under this Agreement shall be assignable and any attempted assignment in violation of this provision shall be void.  Every covenant, term, and provision of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective executors, administrators, heirs, successors, Transferees, and assigns.  It is understood and agreed among the parties that this Agreement and the covenants made herein are made expressly and solely for the benefit of the parties hereto, and that no other Person, other than as expressly set forth in this Section 8(j), shall be entitled or be deemed to be entitled to any benefits or rights hereunder, nor be authorized or entitled to enforce any rights, claims or remedies hereunder or by reason hereof.

 

(k)   Severability.  Any provision of this Agreement which is prohibited, unenforceable or not authorized in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition, unenforceability or nonauthorization without invalidating the remaining provisions hereof or affecting the validity, enforceability or legality of such provision in any other jurisdiction.  The parties hereto agree to negotiate in good faith to replace any illegal, invalid or unenforceable provision of this Agreement with a legal, valid and enforceable provision that, to the extent possible, will preserve the economic bargain of this Agreement.  If any time period set forth herein is held by a court of competent jurisdiction to be unenforceable, a different time period that is determined by the court to be more reasonable shall replace the unenforceable time period.

 

 

  

  

  

 

(l)   Headings; Construction.  Section and other headings contained in this Agreement are for reference purposes only and are not intended to describe, interpret, define, or limit the scope, extent, or intent of this Agreement or any provision hereof.  Every covenant, term, and provision of this Agreement shall be construed simply according to its fair meaning and not strictly for or against any party.  Every schedule and other addendum attached to this Agreement and referred to herein is incorporated in this Agreement by reference unless this Agreement expressly otherwise provides.  All terms and any variations thereof shall be deemed to refer to masculine, feminine, or neuter, singular or plural, as the identity of the Person or Persons may require.

 

(m)   Time.  In computing any period of time pursuant to this Agreement, the day of the act, event or default from which the designated period of time begins to run shall not be included, but the time shall begin to run on the next succeeding day.  The last day of the period so computed shall be included, unless it is a Saturday, Sunday or legal holiday, in which event the period shall run until the end of the next day which is not a Saturday, Sunday or legal holiday.

 

(n)   Entire Agreement.  This Agreement contains the entire understanding and agreement among the parties hereto with respect to the subject matter hereof, and supersedes all prior agreements and all contemporaneous oral agreements.

 

 

 

 

 

 

 

 

 

 

  

  

  

 

IN WITNESS WHEREOF, the parties hereto have executed this Call Option Agreement as of the day and year first above written.

 

 

	COMPANY:	 
	 	 
	 	NEW PE HOLDCO LLC 
	 	 
	 	 
	 	By:      /s/ John T. Miller                                        
	 	John T. Miller 
	 	

 

	  	
 

	
PEI:

	  
	  	
PACIFIC ETHANOL, INC.

	 	 
	 	 
	 	By:      /s/ Neil M. Koehler                                        
	 	Name: Neil M. Koehler
	 	

Title: CEO

	 	 

 

 

 

 

 

 

 

  

  

  

 

GRANTING MEMBERS:

 

 

	 	ANB ENERGY HOLDINGS, LLC
	 	 
	 	 
	 	By:  /s/ Craig L. Sanders                                             
	 	Craig L. Sanders
	 	Vice President
	 	 
	 	Address:    P.O. Box 1
	 	Amarillo, Texas  79101
	 	 
	 	Facsimile:  (806) 345-1663
	 	 
	 	Email:  craig.sanders@anb.com

 

 

 

 

 

 

  

  

  

 

 

	 	CIFC FUNDING 2007-III ASET-V LLC
	 	 
	 	 
	 	By:   /s/ Steve Vaccaro                                                                     
	 	Name:  Steve Vaccaro
	 	Title:    Co-Chief Investment Officer
	 	 
	 	

Address:  _______________________________________

	 	_______________________________________________
	 	 
	 	

Facsimile: _______________________________________

	 	 
	 	

Email: __________________________________________

 

 

 

 

 

  

  

  

 

 

	 	

CIFC FUNDING 2007-IV ASET-IV LLC

	 	 
	 	 
	 	By:   /s/ Steve Vaccaro                                                                     
	 	Name:  Steve Vaccaro
	 	Title:    Co-Chief Investment Officer
	 	 
	 	

Address:  _______________________________________

	 	_______________________________________________
	 	 
	 	

Facsimile: _______________________________________

	 	 
	 	

Email: __________________________________________

 

 

 

 

 

 

 

 

  

  

  

 

 

	 	

CITIGROUP GLOBAL MARKETS INC.

	 	 
	 	 
	 	By:   /s/ Vincent J. Farrell                                                                 
	 	

Name:  Vincent J. Farrell

	 	

Title:     Authorized Signatory

	 	 
	 	

Address:   1615 Baett Road

	 	Newcastle, DE  19720
	 	 
	 	

Facsimile: _______________________________________

	 	 
	 	

Email:  glcorporateaction@citigroup.com

 

 

 

 

 

 

 

 

  

  

  

 

 

	 	

CREDIT SUISSE SECURITIES (USA) LLC

	 	 
	 	 
	 	By:   /s/ Michael Wotanowski                                                          
	 	

Name:  Michael Wotanowski

	 	

Title:    Authorized Signatory

	 	 
	 	

Address:   11 Madison Avenue

	 	5th Floor
	 	New York, NY  10010 
	 	 
	 	

Facsimile:  (212) 743-3560

	 	 
	 	

Email:  terri.labarbera@credit-suisse.com

 

 

 

 

 

  

  

  

 

 

	 	

CREDIT SUISSE CANDLEWOOD PRIVATE FINANCE FUND L.P.

	 	 
	 	

By:  Credit Suisse Alternative Capital, Inc., 

	 	as investment manager 
	 	 
	 	By:   /s/ Grant Pothast                                                                      
	 	

Name:  Grant Pothast

	 	

Title:    Managing Director

	 	 
	 	

Address:  _______________________________________

	 	_______________________________________________
	 	 
	 	

Facsimile: _______________________________________

	 	 
	 	

Email: __________________________________________

 

 

 

 

 

  

  

  

 

 

	 	

CIFC FUNDING 2007-48 LTD

	 	 
	 	 
	 	By:   /s/ Michio Brunner                                                        
	 	

Name:  Michio Brunner

	 	

Title:    Authorized Signatory

	 	 
	 	

Address:    383 Madison

	 	New York, NY  10179
	 	 
	 	

Facsimile: __________________________________

	 	 
	 	

Email:  CH_Structured_NY@jpmorgan.com

 

 

 

 

 

  

  

  

 

 

	 	

CIFC FUNDING 2007-50 LTD

	 	 
	 	 
	 	By:   /s/ Michio Brunner                                                        
	 	

Name:  Michio Brunner

	 	

Title:    Authorized Signatory

	 	 
	 	

Address:    383 Madison

	 	New York, NY  10179
	 	 
	 	

Facsimile: __________________________________

	 	 
	 	

Email:  CH_Structured_NY@jpmorgan.com

 

 

 

 

 

 

  

  

  

 

 

	 	

METROPOLITAN LIFE INSURANCE COMPANY

	 	 
	 	 
	 	By:   /s/ David G. Yu                                                                 
	 	

Name:  David G. Yu

	 	

Title:    Director

	 	 
	 	

Address:   10 Park Avenue

	 	Morristown, NJ  07962
	 	 
	 	

Facsimile:  (973) 355-4230

	 	 
	 	

Email:  dyu@metlife.com

 

 

 

 

 

 

  

  

  

 

 

	 	

NKPACIFIC LLC

	 	 
	 	 
	 	By:  /s/ Stefan Gerig                                                                 
	 	

Stefan Gerig

	 	

Authorized Signatory

	 	 
	 	

Address:    Thurgauerstrasse 54

	 	8050 Zurich / Switzerland
	 	 
	 	

Facsimile:  +41 44 306 49 11

	 	 
	 	

Email:   stefan.gerog@nordkapbank.com

 

 

 

 

 

 

 

  

  

  

 

 

	 	

SERIES G OF SPECIAL ASSET EQUITY HOLDINGS SERIES, LLC

	 	 
	 	 
	 	By:   /s/ Salvatore Esposito                                                      
	 	

Name:  Salvatore Esposito

	 	

Title:    Managing Director

	 	 
	 	By:   /s/ Andrew Sherman                                                        
	 	Name:  Andrew Sherman
	 	Title:    Executive Director
	 	 
	 	

Address:    245 Park Avenue

	 	New York, NY  10167
	 	 
	 	

Facsimile: ____________________________________

	 	 
	 	

Email:   salvatore.esposto@Rabobank.com

 

 

 

 

 

 

  

  

  

 

 

	 	

BANCO DE SABADELL

	 	 
	 	 
	 	By:   /s/ Maurici Llado                                                        
	 	

Name:  Maurici Llado

	 	

Title:    S.V.P.

	 	 
	 	

Address:    2 South Biscayne Blvd., Suite 3301

	 	Miami, FL  35131
	 	 
	 	

Facsimile:  (305) 350-1215

	 	 
	 	

Email:  LladoM@sabmia.com

 

 

 

 

 

 

 

  

  

  

 

 

	 	

PACIFIC ETHANOL EQUITY HOLDINGS LLC

	 	 
	 	 
	 	By:   /s/ Christian Grane                                                           
	 	

Name:  Christian Grane

	 	

Title:    Executive Director

	 	 
	 	By:   /s/ Peter Pasqua                                                               
	 	

Name:  Peter Pasqua

	 	

Title:    Director

	 	 
	 	

Address:    c/o WestLB AG, New York Branch

	 	7 World Trade Center
	 	250 Greenwich Street
	 	New York, NY  10007
	 	 
	 	

Facsimile:  +1 212 852 6320

	 	 
	 	

Email:  christian_grane@westlb.com

 

 

 

 

 

  

  

  

SCHEDULE A

 

	
Granting Member

	 	
Call Option Units

	 
	  	 	 	 
	
ANB Energy Holdings, LLC

	 	14.363	 
	 	 	 	 
	
CIFC Funding 2007-III Asset-V LLC

	 	5.691	 
	 	 	 	 
	
CIFC Funding 2007-IV Asset-IV LLC

	 	9.486	 
	 	 	 	 
	
Citigroup Global Markets Inc.

	 	39.498	 
	 	 	 	 
	
Credit Suisse Securities (USA) LLC

	 	56.347	 
	 	 	 	 
	
Credit Suisse Candlewood Private Finance Fund L.P.

	 	0.802	 
	 	 	 	 
	
CIFC Funding 2007-48 LTD

	 	10.533	 
	 	 	 	 
	
CIFC Funding 2007-50 LTD

	 	4.213	 
	 	 	 	 
	
Metropolitan Life Insurance Company

	 	28.994	 
	 	 	 	 
	
NKPacific LLC

	 	7.589	 
	 	 	 	 
	
Series G of Special Asset Equity Holdings Series, LLC

	 	23.090	 
	 	 	 	 
	
Banco De Sabadell S.A.

	 	10.779	 
	 	 	 	 
	
Pacific Ethanol Equity Holdings LLC

	 	38.616	 
	  	 	 	 
	
             Total:

	 	250.000paceth_8k-ex1002.htm

EXHIBIT 10.2

 

 

ASSET MANAGEMENT AGREEMENT

by and between

 

PACIFIC ETHANOL, INC.,

 

and

 

PACIFIC ETHANOL HOLDING CO. LLC,

PACIFIC ETHANOL MADERA LLC,

PACIFIC ETHANOL COLUMBIA, LLC,

PACIFIC ETHANOL STOCKTON, LLC and

PACIFIC ETHANOL MAGIC VALLEY, LLC

 

 

Dated as of June 29, 2010

 

 

 

 

 

  

  

  

 

This ASSET MANAGEMENT AGREEMENT (this “Agreement”) is made and entered into as of June 29, 2010 by and between Pacific Ethanol Holding Co. LLC, a Delaware limited liability company (“Pacific Holding”), Pacific Ethanol Madera LLC, a Delaware limited liability company (“Madera”), Pacific Ethanol Columbia, LLC, a Delaware limited liability company (“Boardman”), Pacific Ethanol Stockton, LLC, a Delaware limited liability company (“Stockton”), and Pacific Ethanol Magic Valley, LLC, a Delaware limited liability company (“Burley” and, together with Madera, Boardman and Stockton, an “Owner” and collectively “Owners”), Pacific Holding as Owner Agent (“Owner Agent”) and Pacific Ethanol, Inc., a Delaware corporation (“Manager”).  Owners and Manager are each individually referred to herein as a “Party” and collectively are referred to herein as the “Parties”.

 

RECITALS

 

WHEREAS, Owners have entered into the Credit Agreement (as defined below) to provide funds for the working capital requirements of Owners and for other purposes permitted under the Credit Agreement;

 

WHEREAS, as a condition precedent to the obligation of the lenders party to the Credit Agreement to make loans or other extensions of credit to Owners, Owners are required to engage Manager to provide certain management services to Owners;

 

WHEREAS, Manager desires to provide such management services.

 

NOW, THEREFORE, for good and adequate consideration, the receipt and adequacy of which are hereby acknowledged, the parties hereto, intending to be legally bound, do hereby agree as follows:

 

ARTICLE I

 

DEFINITIONS

 

1.1   Definitions.  Capitalized terms used in this Agreement but not defined herein shall have the meanings assigned thereto in the Credit Agreement.  The following terms shall have the meanings set forth below when used in this Agreement:

 

“Act of Insolvency” means, with respect to any Person, any of the following:  (a) commencement by such Person of a voluntary proceeding under any jurisdiction’s bankruptcy, insolvency or reorganization law; (b) the filing of an involuntary proceeding against such Person under any jurisdiction’s bankruptcy, insolvency or reorganization law which is not vacated within 60 days after such filing; (c) the admission by such Person of the material allegations of any petition filed against it in any proceeding under any jurisdiction’s bankruptcy, insolvency or reorganization law; (d) the adjudication of such Person as bankrupt or insolvent or the winding up or dissolution of such Person; (e) the making by such Person of a general assignment for the benefit of its creditors (assignments for a solvent financing excluded); (f) the appointment of a receiver or an administrator for all or a substantial portion of such Person’s assets, which receiver or administrator, if appointed without the consent of such Person, is not discharged within 60 days after its appointment; or (g) the occurrence of any event analogous to any of the foregoing with respect to such Person occurring in any jurisdiction.

 

  

  

  

 

“Affiliate” of a specified Person means any corporation, partnership, sole proprietorship or other Person which directly or indirectly through one or more intermediaries controls, is controlled by or is under common control with the Person specified.  The term “control” means the ownership, either direct or indirect, of twenty-five percent (25%) or more of the voting securities (or comparable equity interests) or other ownership interests of a Person, or the possession, either direct or indirect, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract or any other means whatsoever.

 

“Agreement” means this Asset Management Agreement, including all appendices hereto, as the same may be modified, supplemented or amended from time to time in accordance with the provisions hereof.

 

“Allocated Expenses and Asset Management Fee”  means the expenses and fees included in the line item of the Budget captioned Asset Management Fee.

 

“Asset Management Services” has the meaning assigned to such term in Section 3.1.

 

“Asset Preservation Services” has the meaning assigned to such term in Section 3.2.

 

“Asset Sale Proceeds” in respect of a Facility means the cash proceeds received from the sale of such Facility net of reasonable attorney’s fees, investment banking fees, accounting fees and other fees and all taxes applied or estimated (as determined in good faith by Owner of such Facility) required to be paid or that become due within the following 12 months as a result of such sale and any amounts escrowed or deferred (provided that when released such escrowed or deferred amounts shall be Asset Sale Proceeds when received).

 

“Availability of Funds” means, with respect to any obligation that constitutes an Allocated Expenses and Asset Management Fee, an Operating Disbursement or a Direct Reimbursement Expense, that sufficient funds have been provided by Owners and are available to Manager to pay such obligation.

 

“Boardman Corn Supply Agreement” means the Corn Procurement and Handling Agreement between Pacific AG. Products, LLC and Boardman dated as of June 29, 2010.

 

“Boardman Ethanol Sales and Marketing Agreement” means the Ethanol Marketing Agreement, dated as of June 29, 2010, by and between Boardman and Kinergy Marketing, LLC.

 

“Boardman Facility”  means the Facility owned by Boardman.

 

“Boardman Facility Agreements” means this Agreement, the Boardman Corn Supply Agreement, the Technology Licensing Agreement to which Boardman is a party, the Boardman Ethanol Sales and Marketing Agreement, the Boardman WDG Sales and Marketing Agreement, and such other or additional material agreements entered into by Boardman with respect to the operation and maintenance of the Boardman Facility.

 

  

2

  

 

“Boardman WDG Sales and Marketing Agreement” means the Distillers Grains Marketing Agreement, dated as of June 29, 2010, by and between Boardman and Pacific Ag Products, LLC.

 

“Budget” means the Budget attached hereto as Appendix E, as amended or modified from time to time.

 

“Burley Corn Supply Agreement” means the Corn Procurement and Handling Agreement between Pacific AG. Products, LLC and Burley dated as of June 29, 2010.

 

“Burley Ethanol Sales and Marketing Agreement” means the Ethanol Marketing Agreement, dated as of June 29, 2010, by and between Burley and Kinergy Marketing, LLC.

 

“Burley Facility Agreements” means this Agreement, the Burley Corn Supply Agreement, the Technology Licensing Agreement to which Burley is a party, the Burley Ethanol Sales and Marketing Agreement, the Burley WDG Sales and Marketing Agreement, and such other or additional material agreements entered into by Burley with respect to the operation and maintenance of the Magic Valley Facility.

 

“Burley WDG Sales and Marketing Agreement” means the Distillers Grains Marketing Agreement, dated as of June 29, 2010, by and between Burley and Pacific Ag Products, LLC.

 

“Business Day” means any day other than a Saturday, Sunday or a day on which commercial banks in Sacramento, California or New York, New York are required or authorized to be closed.

 

“Consistent with Past Practices” means consistent with those practices previously utilized by the Manager with respect to a Facility pursuant to the Amended and Restated Asset Management Agreement dated as of December 10, 2009, by and between predecessors of Owners or predecessors of Owner Agent and the Manager.

 

“Consumables” means all items consumed, or needing regular, periodic replacement or replenishment by Manager in the performance of services pursuant to this Agreement, including, but not limited to, chemicals, hand tools, catalysts, lubricants, rags, oils, filter media, ammonia, additives, anti-corrosion devices, gases (CO2, O2, halon, etc.), and other expendable materials.

 

“Credit Agreement” means the Credit Agreement, dated June 25, 2010, among Owners, Owner Agent, each of the Lenders from time to time party thereto, WestLB AG, New York Branch, as Administrative Agent and Collateral Agent, and Amarillo National Bank, as accounts bank, as the same may be amended, restated, modified or otherwise supplemented from time to time.

 

“Delta-T” means Delta-T Corporation.

 

“Direct Reimbursement Expense” means those expenses included in the line items of the Budget under the category “Asset Management Agreement-Direct Reimbursement”.

 

  

3

  

 

“EBITDA” means, with respect to an Owner, the earnings of such Owner before interest, taxes, depreciation and amortization, reorganization adjustments, financing charges and fees, current month lower cost or market inventory adjustment, and other lender related expenses calculated in accordance with Exhibit A.

 

“EBITDA per Gallon of Operating Capacity” of a Facility means the quotient obtained by dividing EBITDA by Operating Capacity.

 

“Environmental Law” means any statute, law, regulation, ordinance, rule, judgment, order, decree, legally binding directive or requirement, or any similar form of decision of or determination by, or any interpretation or administration of any of the foregoing by a Governmental Authority, relating to the environment, health or safety as affected by the environment or any Hazardous Material as now or hereinafter in effect.

 

“Facility” means an ethanol production facility owned by an Owner including (a) all equipment associated with the operation of such facility and forming part thereof, (b) the storage space for corn, ethanol and wet distillers grains, (c) administrative offices and building structures housing facility equipment, (d) site improvements such as roads, railroad spur lines, barge docks and fencing, and (e) the Loading/Unloading Facilities and (f) piping, structures and equipment for the delivery of ethanol and wet distillers grains and for water, fuel, sewer, waste water discharge and other Consumables required for facility operation and maintenance.

 

“Facility Agreements” means the Boardman Facility Agreements and the Burley Facility Agreements.

 

“Facility Manuals” means Facility equipment manuals, system descriptions, system operating instructions, equipment maintenance instructions and pertinent design documentation as developed by the construction contractor of the Facility and/or Delta-T.

 

“Facilities Records” has the meaning assigned to such term in Section 3.11.1 .

 

“Force Majeure Event” has the meaning assigned to such term in Section 15.1.

 

“Governmental Authority” means any United States federal, state, municipal, local, territorial, or other governmental department, commission, board, bureau, agency, regulatory authority, instrumentality, judicial or administrative body.

 

“Hazardous Materials” means (a) any petroleum or petroleum products, radioactive materials, asbestos in any form that is or could become friable, urea formaldehyde foam insulation, and transformers or other equipment that contain dielectric fluid containing polychlorinated biphenyls; (b) any chemicals, materials or substances which are now or hereafter become defined as or included in the definition of “hazardous substances,” “hazardous wastes,” “hazardous materials,” “extremely hazardous wastes,” “restricted hazardous wastes,” “toxic substances,” “toxic pollutants,” “pollution,” “pollutants,” “regulated substances,” or works of similar import, under the Environmental Laws, including but not limited to the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended (42 U.S.C. § 9601 et seq.); the Hazardous Material Transportation Act, as amended (49 U.S.C. §1801 et seq.); the Resource Conservation and Recovery Act, as amended (42 U.S.C. § 6901 et seq.); the Toxic Substances Control Act, as amended (42 U.S.C. § 7401 et seq.); the Clean Air Act, as amended (42 U.S.C. § 7401 et seq.); the Federal Water Pollution Control Act, as amended (33 U.S.C. § 1251 et seq.); or in the regulations promulgated pursuant to said laws; or (c) any other chemical, material, substance or waste declared to be hazardous, toxic, or polluting material by any Governmental Authority, exposure to which is now or hereafter prohibited, limited or regulated by any Governmental Authority.

 

  

4

  

 

“Law” means any law, statute, act, legislation, bill, enactment, policy, treaty, international agreement, ordinance, judgment, injunction, award, decree, rule, regulation, interpretation, determination, requirement, writ or order of any Governmental Authority.

 

“Liabilities” has the meaning assigned to such term in Section 11.1.

 

“Loading/Unloading Facilities” means the rail spurs, barge and/or truck docks located at a Facility, and all loading and unloading equipment and facilities with respect thereto located at such Facility, including, but not limited to, all conveyors, lifts and elevators used in connection with movement of materials and  products (including grain and grain products) in and out of the Storage Silos and other locations at a Facility.

 

“Magic Valley Air Permit” means a final, non-appealable air quality permit required to operate the Magic Valley Facility at not less than nameplate capacity.

 

“Magic Valley Facility” means the Facility owned by Burley.

 

“Management Fee” has the meaning assigned to such term in Section 8.1.

 

“Manager” has the meaning assigned to such term in the Preamble.

 

“Manager Account” means a depositary account designated by Manager, from time to time, which account shall be under the sole dominion and control of Manager and located in a banking institution designated by Manager.

 

“Manager Indemnified Person” has the meaning assigned to such term in Section 11.2.

 

“Manager Proprietary Property” has the meaning assigned to such term in Section 9.5(a).

 

“NewCo” means New PE Holdco LLC, a Delaware limited liability company and the indirect owner on the date hereof  of all the equity interests in Owner Agent and each Owner.

 

“Operating Capacity” means 57,142,857 un-denatured gallons annually in the case of each of the Magic Valley and the Stockton Facilities and 38,095,238 un-denatured gallons annually in the case of each of the Boardman and Madera Facilities, plus, in each case, the actual gallons of denaturant used annually with regard to any Facility not in Cold Shutdown.

 

“Operating Disbursements” means those expenses included in the line items of the Budget under the category “Operating Disbursements”.

 

“O&M Services” has the meaning assigned to such term in Section 3.3.

 

  

5

  

 

“Owner Agent” has the meaning assigned to such term in the Preamble

 

“Owners” has the meaning assigned to such term in the Preamble.

 

“Owner Indemnified Person” has the meaning assigned to such term in Section 11.1.

 

“Party” has the meaning assigned to such term in the Preamble.

 

“Permits” means all permits, authorizations, registrations, consents, approvals, waivers, exceptions, variances, orders, judgments, written interpretations, decrees, licenses, exemptions, publications, filings, notices to and declarations of or with, or required by, any Governmental Authority, or required by any Law, and shall include all environmental and operating permits and licenses that are required for the full use, occupancy, zoning and operation of each Facility.

 

“Person” means any individual, partnership, corporation, association, business, trust, government or political subdivision thereof, governmental agency or other entity.

 

“Prudent Ethanol Practices” means those reasonable practices, methods and acts that (i) are commonly used in the regions where the Facilities are located to manage and maintain ethanol production, distribution, equipment and associated facilities of the size and type that comprise the Facilities safely, reliably, and efficiently and in compliance with applicable Laws, manufacturers’ warranties and manufacturers’ and licensor’s recommendations and guidelines, and (ii) in the exercise of reasonable judgment, skill, diligence, foresight and care are expected of an ethanol plant manager, in order to efficiently accomplish the desired result consistent with safety standards, applicable Laws, manufacturers’ warranties and manufacturers’ recommendations, in each case taking into account whether a Facility is in operation or is in Cold Shutdown.  Prudent Ethanol Practices does not necessarily mean one particular practice, method, equipment specifications or standard in all cases, but is instead intended to encompass a broad range of acceptable practices, methods, equipment specifications and standards.

 

“Sale Price per Gallon” in respect of a Facility (or the equity interests in Owner of such Facility) means the quotient obtained by dividing (i) the excess of (x) Asset Sale Proceeds in respect of such Facility (or such equity interests) over (y) the pro rata portion of the Loans allocated (on the basis of relative Operating Capacities) to such Facility by (ii) the Operating Capacity of such Facility.

 

“Services” means, collectively, the Asset Management Services, the Asset Preservation Services and the O&M Services and any other services provided by or on behalf of the Manager with respect to the Facilities in accordance with this Agreement.

 

“Sponsor Support Agreement” means that certain Amended and Restated Sponsor Support Agreement, dated as of October 22, 2008, among Owner Agent, Manager and WestLB AG, New York Branch, as Administrative Agent.

 

“Stockton Completion Obligation” means those actions required to be taken to cause the Stockton Facility to achieve Final Completion (as defined in the Pre-Petition Credit Agreement) including receipt of all Permits.

 

  

6

  

 

“Stockton Facility” means the Facility owned by Stockton.

 

“Storage Silos” means Owners’ grain storage silos located at a Facility.

 

“Supplemental Termination Payment” means the product obtained by multiplying  (i) the difference between (x) 60 and (y) the number of days notice (fewer than 60) that Manager is given  pursuant to clause (y) of Section 9.4 by (ii) the quotient of (x) the Management Fee with respect to the relevant Facility divided by (y) 30.

 

“Technology Licensing Agreement” means (i) each License for Technology between an Owner of a Facility (other than Madera) and Delta-T, each dated as of September 6, 2006  and (ii) the License for Technology between Madera and Delta-T, dated as of September 1, 2005 in each case, as such agreement may from time to time be amended.

 

“Termination Payment” has the meaning assigned to such term in Section 9.6.1.

 

1.2   Interpretation.  The following interpretations and rules of construction shall apply to this Agreement:

 

(a)           titles and headings are for convenience only and will not be deemed part of this Agreement for purposes of interpretation;

 

(b)           unless otherwise stated, references in this Agreement to “Sections,” “Appendices” or “Articles” refer, respectively, to Sections, Appendices or Articles of this Agreement;

 

(c)           “including” means “including, but not limited to”, and “include” or “includes” means “include, without limitation” or “includes, without limitation”;

 

(d)            “hereunder”, “herein”, “hereto” and “hereof”, when used in this Agreement, refer to this Agreement as a whole and not to a particular Section or clause of this Agreement;

 

(e)           in the case of defined terms, the singular includes the plural and vice versa;

 

(f)           unless otherwise indicated, all accounting terms not specifically defined shall be construed in accordance with generally accepted accounting practices in the United States;

 

(g)           unless otherwise indicated, each reference to a particular Law is a reference to such Law as it may be amended, modified, extended, restated or supplemented from time to time, as well as to any successor Law thereto;

 

(h)           unless otherwise indicated, references to agreements shall be deemed to include all subsequent amendments, supplements and other modifications thereto; and

 

  

7

  

 

(i)           unless otherwise indicated, each reference to any Person shall include such Person’s successors and permitted assigns.

 

ARTICLE II

 

APPOINTMENT

 

Owners hereby appoint and retain Manager to provide the Services from the date hereof on the terms and conditions set forth in this Agreement.  Manager hereby accepts such appointment and agrees to perform the Services in accordance with the terms and conditions set forth in this Agreement.

 

ARTICLE III

 

RESPONSIBILITIES OF MANAGER

 

3.1   Scope of Asset Management Services.  With respect to each Facility, commencing on the date hereof, subject to the terms of this Agreement and the Availability of Funds, Manager shall perform, or cause to be performed, the following services with respect to such Facility (collectively, the “Asset Management Services”):

 

3.1.1  Administration of Financing Documents.  Subject to the terms of this Agreement, Manager shall administer Owners’ compliance with all covenants and obligations set forth in the Financing Documents.  Manager shall be authorized to deal directly with the Administrative Agent and the Collateral Agent on behalf of Owners and to receive notifications from the Administrative Agent and the Collateral Agent pursuant to the Financing Documents.  Manager shall reasonably cooperate with the Administrative Agent, the Collateral Agent and the Consultants.  Manager shall not cause any Owner to contravene such Owner’s obligations under the Financing Documents. The parties to this Agreement hereby agree that the terms of this Agreement shall not vary or amend the obligations of any Owner under any Financing Document to which such Owner is a party or subject Manager to any obligations under the Financing Documents.

 

3.1.2  Billing and Collection of Revenues.  Manager shall implement and maintain billing and collection procedures in respect of all accounts receivable and other amounts due Owners.

 

3.1.3  Bank Accounts and Disbursement of Funds.  Manager shall establish and/or maintain on behalf of and in the name of the applicable Owner one or more bank accounts as may be required by the applicable Owner or the Financing Documents.  Subject to availability of adequate funds in such accounts, Manager shall withdraw from such accounts such funds as may be necessary  to pay such Owner’s Operating Disbursements and Direct Reimbursement Expenses in accordance with the Budget.

 

3.1.4  Accounting and Documentation.  Manager shall provide full bookkeeping, accounting (including tax accounting), and record keeping services to Owners as required from time to time by Owners and the Financing Documents.

 

 

  

8

  

 

3.1.5  Insurance.  Manager shall implement Owners’ insurance programs, including procuring and maintaining any and all insurance required to be maintained by Owners under the Financing Documents.  Manager also shall be responsible for administering all claims, arranging for all payments, and making all collections on behalf of Owners under insurance policies covering Owners.

 

3.1.6  Licenses and Permits.  Manager shall monitor and use commercially reasonable efforts to assist each Owner with its respective obligations to maintain compliance with any required permits, licenses and governmental approvals required and obtained by or for an Owner in connection with the ownership or operation of its Facility.  Manager shall, upon request by any Owner, prepare or cause the preparation of any application, filing or notice related thereto, shall cause such materials to be submitted to, and shall represent Owner in contacts with, the appropriate governmental agency, and shall perform all ministerial or administrative acts necessary for timely issuance and the continued effectiveness thereof.  Copies of all permits, licenses and governmental approvals obtained by or for an Owner pursuant hereto shall be maintained by Manager at its offices and at the respective Facility sites.

 

3.1.7  Public Relations.  Manager shall coordinate all public and community relations matters of Owners with respect to the Facilities as directed by Owner Agent.  Notwithstanding the foregoing, the Manager shall not issue (nor have any obligation to issue) any press release regarding an Owner or a Facility without the prior written consent of such Owner.

 

3.1.8  Reports and Budgets.  Manager shall prepare and distribute, or cause to be prepared and distributed, all financial or other reports, budgets (including the Budget), estimates, tax returns and other information required to be prepared and distributed by Owners pursuant to the Financing Documents.

 

3.1.9  Dispute Resolution.  Subject to the directions of Owner Agent, Manager shall manage any litigation, arbitration, or other proceedings involving any Facility (except any litigation, arbitration, or other proceedings involving Manager).  Manager shall obtain Owner Agent’s written approval prior to commencing any litigation, arbitration or other proceeding on behalf of an Owner and Manager shall periodically advise Owner Agent on the status of each litigation, arbitration and other proceeding involving any Facility.  In addition, notwithstanding the foregoing, except as otherwise authorized by Owner Agent, Manager shall not settle any claim brought by or against an Owner without the prior written approval of Owner Agent.

 

3.1.10  Materials.  Manager shall provide all materials necessary for the performance of the Asset Management Services and shall provide appropriate office space for its personnel performing the Asset Management Services.

 

3.1.11  Sale of Facilities.  Manager shall use commercially reasonable efforts to assist Owners with the sale of the Facilities.

 

3.1.12  Offices.  Manager shall maintain the principal office of each Owner and arrange for the provision of cleaning, security and other necessary services with respect to each such office and to each Facility.

 

  

9

  

 

3.1.13  Consultation.  Manager shall consult with Owner Agent on all aspects of the preservation, operation and maintenance of each Facility, at such places and times as Owner Agent may reasonably request.

 

3.1.14  Other.  Manager shall use commercially reasonable efforts to provide any other assistance or services reasonably requested by Owners that are consistent with the foregoing services and necessary for, or materially beneficial to, the management or administration of the Facilities including the services set forth in Appendix A-1.

 

3.2   Scope of Asset Preservation Services.  With respect to each Facility that is in Cold Shutdown, subject to the terms of this Agreement and the Availability of Funds, Manager shall perform, or cause to be performed, the following services with respect to such Facility (collectively, the “Asset Preservation Services”):

 

3.2.1  Layup Services.  Manager will take all commercially reasonable steps to ensure that site security measures, equipment preservation and general site maintenance is conducted in order to support a cost effective return of each Facility to operational status once schedules therefor are established by Owners and communicated to Manager.  Manager shall:

 

(a)           be in complete charge of, and have care and custody over, each  Facility;

 

(b)           perform, or cause to be performed on behalf of Owners, all maintenance of each Facility Consistent with Past Practice; and

 

(c)           perform periodic  inspections Consistent with Past Practice.

 

3.2.2  Waste Management.  Subject to Environmental Laws and any permits maintained with respect to each Facility by its Owner or Manager, Manager shall be responsible for the onsite management of all wastes generated by or used in the preservation of each Facility.

 

3.2.3  Other.  Manager shall use commercially reasonable efforts to provide any other assistance or services reasonably requested by Owners that are consistent with the foregoing services, Consistent with Past Practices and necessary for, or materially beneficial to, the preservation of the Facilities including the services set forth in Appendix A-1.

 

3.3   Scope of O&M Services.  With respect to each Facility that is not in Cold Shutdown, commencing on the date hereof and subject to the terms of this Agreement, the Availability of Funds and Consistent with Past Practices, Manager shall perform, or cause to be performed, the following services (collectively, the “O&M Services”):

 

3.3.1  Operations and Maintenance.  Manager shall operate and maintain each such Facility.  Manager shall:

 

(a)           perform, or cause to be performed on behalf of such Facility, all operations and maintenance of such Facility;

 

(b)           supply, or cause to be supplied, all goods and materials, including spare parts, required to operate and maintain such Facility;

 

  

10

  

 

(c)           maintain, control and store such Facility’s equipment and spare parts inventory;

 

(d)           perform periodic inspections; and

 

(e)           coordinate compliance by Owner with the applicable Facility Agreements.

 

3.3.2  Waste Management.  Subject to Environmental Laws and any permits maintained with respect to such Facility by Owner of such Facility or Manager, Manager shall be responsible for the onsite management of all wastes generated by or used in the operation or maintenance of such Facility.

 

3.3.3  Other.  Manager shall use commercially reasonable efforts to provide any other assistance or services reasonably requested by Owner of such Facility, that are consistent with the foregoing services and necessary for, or materially beneficial to, the operations and maintenance of such Facility, respectively, including the services set forth in Appendix A-2.

 

3.4   Subcontracts.  Manager shall not enter into any subcontract for the services described herein without the prior written consent of Owner Agent; provided that Manager shall be permitted to subcontract certain of the Services relating to the maintenance and operation of the Facilities to Affiliates of Manager (other than Owners) Consistent with Past Practices (it being understood that Manager shall remain primarily liable for any services performed by any subcontractor).

 

3.5   Standards for Performance of the Asset Management Services. Manager shall perform the Asset Management Services in a prudent, businesslike and efficient manner in accordance with (i) all applicable Laws (including Environmental Laws) and Permits, (ii) the applicable terms and conditions of the Financing Documents and (iii) this Agreement.

 

3.6   Standards for Performance of the Asset Preservation Services and the O&M Services.  Subject to Availability of Funds and Consistent with Past Practices, Manager shall perform the Asset Preservation Services and the O&M Services in accordance with (i) the Facility Manuals, (ii) all applicable Laws (including Environmental Laws) and Permits, (iii) Prudent Ethanol Practices, (iv) the applicable Facility Agreements and (v) this Agreement.  Manager shall obtain and maintain in effect all licenses and permits required to allow Manager to do business or perform its services hereunder in the jurisdictions where such services are to be performed except where the failure to do so shall not adversely affect Manager’s ability to perform its obligations under this Agreement.

 

3.7   Personnel Standards.

 

(a)  Manager shall provide and make available as necessary, in accordance with the requirements of this Agreement, all labor and professional, supervisory and managerial personnel as are required to perform its services hereunder in accordance with the terms hereof.  Such personnel shall be qualified and experienced in the duties to which they are assigned and shall be the employees of Manager or its Affiliates, and their working hours, rates of compensation and all other matters relating to their employment shall be determined solely by Manager.  Manager shall retain sole authority, control and responsibility with respect to its employment policy in connection with the performance of its obligations hereunder.  A preliminary listing of personnel that Manager anticipates will be necessary to operate, preserve  and/or maintain each Facility in its current state of operation or Cold Shutdown as applicable as such state may change from time to time, including function, the number of such positions and the date by which such personnel should be hired, is set forth in Appendix B, it being understood that such listing is non-binding and shall be revised from time to time by Manager in consultation with Owner Agent.

 

  

11

  

 

(b)  Upon the written request of Owner Agent, Manager shall remove from each site and each Facility workforce, any employee or subcontractor.

 

3.8   Training.  Manager shall maintain regular training procedures approved by Owner Agent in the exercise of its reasonable judgment and discretion.  Such procedures shall be adequate to keep Manager’s personnel informed and knowledgeable regarding the operation and maintenance of each Facility.

 

3.9   Additional Obligations of Manager.  Anything contained herein to the contrary notwithstanding and without regard to Availability of Funds, Manager shall (i) take all actions as may be necessary to cause the Stockton Facility to satisfy the Stockton Completion Obligation and (ii) perform its obligations under Section 2.01(b) of the Sponsor Support Agreement to cause the Magic Valley Facility to obtain the Magic Valley Air Permit. This Section 3.9 shall not be deemed to make Manager a party to the Facility Agreements (other than this Agreement) or to impose any obligations on Manager under the Facility Agreements (other than this Agreement).

 

3.10   Licenses and Permits.  Manager has reviewed and shall continue to review all Laws and regulations containing or establishing compliance requirements in connection with the operation and maintenance of each Facility and applicable to Manager in connection with its obligations under this Agreement, and assist Owners in securing and complying with, as appropriate, all Permits necessary for the operation and maintenance of each Facility (and renewals or replacements of the same), including those relating to Facility operation, waste water and sewer use and treatment, chemical and other waste including Hazardous Materials; provided, however, that all such permits, licenses and approvals relating to Hazardous Materials shall be in the name of Owners except for any individual licenses or permits required under Section 3.6.  Manager shall also initiate and maintain precautions and procedures necessary to comply with applicable provisions of all such Laws (including Environmental Laws), including those related to prevention of injury to persons or damage to property at each Facility.

 

3.11   Records and Reports; Other Material Information

 

3.11.1  Records and Reports.  Manager shall prepare and maintain logs, records and reports documenting the operation and maintenance of each Facility including all information and reports required by applicable Laws or beneficial for proper operation and maintenance of each Facility in accordance with Prudent Ethanol Practices.  Manager shall also prepare reports and data related to the maintenance of Hazardous Materials onsite at each Facility in a manner complying with applicable Environmental Laws, and shall maintain current revisions of the drawings, specifications, lists, clarifications and other materials provided to Manager by Owners, construction contractors and/or Delta-T.  Copies of all such reports that may be submitted to any Governmental Authority by Manager shall be transmitted to Owner Agent. All such reports and other documents specified in this Section 3.11.1 are referred to as the “Facilities Records”

 

 

  

12

  

 

3.11.2  Other Material Information.  Manager shall promptly submit to Owner Agent any material information that it or any of its Affiliates may have concerning new or significant developments relating to any Facility and, upon Owner Agent’s reasonable request, shall promptly submit any other information that it or any of its Affiliates may have concerning any Facility or the services performed by Manager hereunder.

 

3.12   No Liens or Encumbrances.  Manager shall keep and maintain each Facility free and clear of all liens and encumbrances resulting from the action of Manager or work done at the request of or by Manager.

 

3.13   Emergency Action.  In the event of an emergency affecting the safety or protection of Persons or endangering a Facility or property located at a Facility, Manager shall promptly notify Owner Agent and, take prompt action to attempt to prevent any damage, injury or loss resulting from such emergency.

 

3.14   Scope; Manager Authority.  On at least 60 days prior written notice, Owner Agent may revoke or rescind all or any material part of the authority granted to Manager or materially reduce or materially restrict the scope of the Services.

 

3.15   Retention of Control by Owners.  Notwithstanding anything in this Agreement to the contrary, Owners and Manager expressly acknowledge and agree that:  (a) this Agreement does not convey ownership or control over the Facilities from Owners to the Manager; and (b)  Owners retain ultimate decision-making authority with respect to the Facilities, including ultimate decision-making authority relating to the operation of, and sale of products produced by, the Facilities.

 

3.16   Limitations on Performance.  Notwithstanding anything herein to the contrary, none of the following shall result in a breach of Manager’s obligations under this Agreement to the extent such breach is caused by:  (i) lack of Availability of Funds, (ii)  Force Majeure Events or (iii) any failure by Owners to perform their respective obligations under this Agreement.

 

3.17   Deficiency of Funds.  If funds shall not be sufficient to make applicable disbursements for Operating Disbursements or Direct Reimbursement Expenses, Manager shall promptly notify Owner Agent and Owner Agent shall promptly provide the required funds, subject to the terms of this Agreement.  Manager, in its sole discretion,  may elect (but shall not be obligated), to advance any such funds for the account of Owners, and Owner Agent shall promptly reimburse Manager for any such advances properly made by Manager in accordance with the terms of this Agreement.  Manager shall use commercially reasonable efforts to keep Owner Agent advised as to projected cash deficits so as to permit the orderly funding thereof by Owner Agent.

 

 

 

  

13

  

 

ARTICLE IV

 

ITEMS TO BE FURNISHED BY OWNERS

 

4.1   General.  Owners shall furnish to Manager, at Owners’ expense, the information, services, materials and other items described in this Article IV.  All such items shall be made available at such times and in such manner as may be reasonably required for the expeditious and orderly performance of the Services by Manager.

 

4.2   Information.  Owners shall provide copies of the Facility Agreements and the Facility Manuals to Manager as well as technical, operational and other Facility information reasonably available to Owners or in Owners’ possession and necessary for the performance of the Services.  Subject to the standards of performance set forth in Article III, Manager shall be entitled to rely upon such information in the performance of the Services.

 

4.3   Corn, Fuel and Other Materials.  During the period in which Manager is required to provide O&M Services to a Facility, Owner of such Facility shall be responsible for furnishing and delivering to such Facility: (a) corn, (b) water, (c) natural gas, (d) electricity, (e) denaturant, and (f) any other materials necessary for the operation of such Facility, in each case, in sufficient quantities to produce ethanol and wet distillers grains in accordance with the Boardman Ethanol Sales and Marketing Agreement and the Boardman WDG Sales and Marketing Agreement or the Burley Ethanol Sales and Marketing Agreement and the Burley WDG Sales and Marketing Agreement, as applicable.

 

4.4   Cold Shutdown or Start Up of a Facility.  From time to time, upon not less than 60 days notice to Manager, Owner Agent or Owner of a Facility may elect to recommence operations of such Facility that is then in Cold Shutdown or to place such Facility in Cold Shutdown.  Within 10 days of receipt of any such notice, Manager shall provide Owner’s Agent and Owner of such Facility with a budget for any costs to be incurred with such recommencing operation or Cold Shutdown.  Upon agreement of Manager, Owner Agent and Owner of such Facility with respect to such budget, and the concurrence therewith by the Administrative Agent, Manager shall recommence operations or place such Facility in Cold Shutdown, as applicable.  Recommencing operation of a Facility or placing a Facility in Cold Shutdown shall be done in accordance with Prudent Ethanol Practices.

 

ARTICLE V

 

DEVELOPMENT PROJECTS;  FACILITY SERVICES

 

5.1   Development Projects. If, during the term of this Agreement, Manager intends to develop or pursue any business opportunity that involves or promotes any Facility assets, properties located adjacent to the Facilities or products produced at the Facilities, then Manager shall notify Owners of such opportunity, including providing reasonable detail thereof (following Owners’ execution of a reasonable and customary confidentiality and non-intervention agreement, if required by Manager), and Manager agrees to negotiate, in good faith, Owners participating in such business opportunity on terms mutually acceptable to the parties.  Notwithstanding the foregoing, Manager (i) shall not be under any obligation to include any Owner in any transaction regarding any such opportunities and Owners shall have no right to participate in any such transaction, (ii) shall be free to pursue and engage in such opportunity with any or no party as Manager shall in its sole and absolute discretion deem appropriate, (iii) shall be free to negotiate concurrently with third parties regarding such opportunity and (iv) may cease discussions with Owners regarding any such opportunity at any time and in Manager’s sole discretion.

 

 

  

14

  

 

ARTICLE VI

 

REPORTING AND PERSONNEL

 

6.1   Accounts and Reports.  Manager shall furnish or cause to be furnished to Owner Agent (i) the reports required to be delivered to the Administrative Agent pursuant to the Financing Documents and (ii) the following reports and information:

 

6.1.1  CS Reports.  (a) With respect to each Facility that is in Cold Shutdown, as soon as available and in any event within 25 days following the end of each calendar month, Manager shall submit to Owner Agent a summary report in the form attached hereto as Appendix C, which report shall include, with respect to each Facility, a numerical and narrative assessment in respect of such month of (i) the Facility’s compliance with each category in the Budget, (ii) plant availability, (iii) cash receipts and disbursements including balances in the Accounts, (iv) major maintenance activity, (v) material casualty losses (whether or not covered by insurance), (vi) disputes with any contractor, materialman, supplier or other Person and any related claims against any Owner, (vii) compliance with governmental permits, and (viii) a comparison of figures to corresponding figures provided in the prior month.

 

(b)  With respect to each Facility that is in Cold Shutdown, as soon as practicable and in any event within 25 days following the end of each calendar quarter, Manager shall submit to Owner Agent a summary report containing the information required to be provided pursuant to Section 6.1.1(a) for the quarter then ended.

 

6.1.2  Operating Reports.  With respect to each Facility that is not in Cold Shutdown, as soon as available and in any event within 25 days following the end of each calendar month, Manager shall submit to Boardman a summary report in the form attached hereto as Appendix D, which report shall include, with respect to Boardman, a numerical and narrative assessment in respect of such month of (i) Boardman’s compliance with each category in the Budget, (ii) ethanol and WDG production and delivery, (iii) corn deliveries and use, (iv) plant availability, (v) cash receipts and disbursements including balances in the Accounts, (vi) major maintenance activity, (vii) material casualty losses (whether or not covered by insurance), (viii) disputes with any contractor, materialman, supplier or other Person and any related claims against Boardman, (ix) compliance with governmental permits, and (x) a comparison of figures to corresponding figures provided in the prior month.

 

6.1.3  Manager Report.  As soon as available and in any event within ten (10) days after the filing thereof, Manager shall submit to Owner Agent and the Administrative Agent copies of all reports filed by Manger or any Affiliate with the Securities and Exchange Commission and any communications or information provided by Manager to its shareholders or by Kinergy Marketing LLC to its working capital lenders (except daily borrowing base reports).  Each report shall be certified as complete and correct by an Authorized Officer of Manager.

 

6.1.4  Other Information.  Any other information concerning the Services, Owners or the Facilities or reasonably requested by Owner Agent regarding any Facility or the Services.

 

 

  

15

  

 

6.2   Budget. The Budget sets forth the budgeted amounts for all Operating Disbursements and Direct Reimbursement Expenses and for Allocated Expenses and Asset Management Fee.  Manager shall promptly notify Owner Agent of any actual or anticipated variance from the amounts budgeted for Operating Disbursements and Direct Reimbursement Expenses, the reasons therefor and Manager’s recommendations with respect thereto. Each Owner shall be responsible for (but shall not be obligated to fund) all Operating Disbursements and Direct Reimbursement Expenses in respect of its Facility; provided that any failure by an Owner to provide such funding shall relieve Manager of any obligation hereunder for which there is no Availability of Funds.  Each Owner agrees to pay Manager the Management Fee in respect of its Facility; provided that, except as expressly set forth herein, any such failure to fund shall relieve Manager of its obligations hereunder. Manager agrees that the amount of Allocated Expenses and Asset Management Fee is fixed and that any increase or decrease in the costs underlying such Allocated Expenses and Asset Management Fee shall be solely for the account of the Manager and shall not result in any increase or decrease in the amount of the Management Fee.

 

6.3   Manager Representative.  Manager has appointed a representative (a “Manager Representative”) authorized and empowered to act for and on behalf of Manager on all matters concerning this Agreement and the Services with respect to a Facility.  The appointment of any Manager Representative shall be subject to the reasonable approval of Owner Agent.  Such appointment shall remain in full force and effect until such Manager Representative is replaced by Manager with the reasonable approval of Owner Agent.  At any time, a Manager Representative may act through or be represented by one or more individuals appointed by Manager.

 

ARTICLE VII

 

LIMITATIONS ON AUTHORITY

 

Notwithstanding any provision in this Agreement to the contrary, unless otherwise approved in writing in advance by Owner Agent, Manager shall not (and shall not permit any of its agents or representatives to):

 

(a)           sell, lease, pledge, mortgage, encumber, convey, or make any license, exchange or other transfer or disposition of any property or assets of an Owner (other than products produced by an Owner for sale in the ordinary course of business), including any property or assets purchased by Manager hereunder;

 

(b)           make, enter into, execute, amend, terminate, modify or supplement any contract or agreement (including any labor or collective bargaining agreement) on behalf of or in the name of  an Owner;

 

 

  

16

  

 

(c)           make any expenditure or acquire any equipment, materials, assets or other items, except in substantial conformity with the Budget, or consent or agree to do any of the foregoing; provided, that in the event of an emergency affecting the safety or protection of Persons or endangering a Facility or property located at a Facility, Manager, without approval from Owner Agent, shall be authorized to take all reasonable actions to prevent damage, injury or loss;

 

(d)           settle, compromise, assign, pledge, transfer, release or consent to the compromise, assignment, pledge, transfer or release of, any claim, suit, debt, demand or judgment against or due by, Owners, or submit any such claim, dispute or controversy or arbitration or judicial process, or stipulate in respect thereof to a judgment, or consent to the same; or

 

(e)           engage in any other transaction on behalf of Owners not permitted under this Agreement.

 

ARTICLE VIII

 

COMPENSATION AND REIMBURSEMENT

 

8.1   Management Fee; Reimbursement.  As compensation to Manager for the performance of the Services in respect of a Facility, Owner of such Facility shall pay Manager a monthly management fee equal to (i) $75,000 for each calendar month during which a Facility is not in Cold Shutdown, and (ii) $40,000 for each calendar month during which a Facility is in Cold Shutdown (the “Management Fee”), payable in advance  in equal semi-monthly installments on the 1st and 11th Business Days of each month by deposit into the Manager Account (and pro rated for partial calendar months) commencing on the date hereof and continuing for the term of this Agreement with respect to such Facility.

 

In addition to the foregoing compensation, during any six-month period (measured on September 30 and March 31 of each year commencing March 31, 2011) in which any Facility shall have EBITDA Per Gallon of Operating Capacity of $.20 or greater, Owner of such Facility shall pay to Manager a performance bonus equal to the product of 3% of the amount by which annualized EBITDA Per Gallon of Operating Capacity exceeds $.20 multiplied by the number of gallons of ethanol produced at such Facility during such period; provided that (i) no performance bonus shall be paid at any time when a Default on Event of Default under the Credit Agreement as a result of Borrower’s failure to pay any amounts then due and owing shall exist and be continuing; (ii) such performance bonus shall be capped at $2.2 million for each semi-annual period; and (iii) the annual performance bonus shall be reduced by 25% if all Facilities then operating do not operate at a minimum average yield of 2.70 gallons of denatured ethanol per bushel of corn.

 

An example of this computation is set forth in Exhibit B.

 

 

 

  

17

  

 

8.2   Sale Incentive Fee.  Upon the sale of all or substantially all the assets of a Facility or all of the equity interests in an Owner of a Facility, in each case to a third party, Manager shall receive an Incentive Fee with respect to such sale, as set forth below:

 

	

“Tier”

	 	

Sale Price 

per Gallon

	 	

 

Incentive Fee

	 	 	 	 	 
	
Tier I

	 	
$.60 or less

	 	
0

	 	 	 	 	 
	
Tier II

	 	
Above $.60 up to and including $.70

	 	
The excess of Sale Price Per Gallon over $.60, to and including the lesser of the Sale Price Per Gallon and $.70, multiplied by the Operating Capacity of the Facility (in gallons), multiplied by 0.5%; plus

	 	 	 	 	 
	
Tier III

	 	
Above $.70 up to and including $.80

	 	
If the Sale Price Per Gallon exceeds $.70, the excess of the Sale Price Per Gallon over $.70, to and including the lesser of the Sale Price Per Gallon and $.80, multiplied by the Operating Capacity of the Facility (in gallons), multiplied by 1.0%; plus

	 	 	 	 	 
	
Tier IV

	 	
Above $.80

	 	
If the Sale Price Per Gallon exceeds $.80, the excess of the Sale Price Per Gallon over $.80, multiplied by the Operating Capacity of the Facility (in gallons), multiplied by 1.5%.

 

 

An example of this computation is set forth in Exhibit C.

 

8.3   Lien Waivers.  In connection with any payment of the Management Fee, Manager shall provide such releases or waivers of mechanics or other liens as any Owner may require.

 

ARTICLE IX

 

TERM

 

9.1   Term.  This Agreement shall be effective on the date hereof and, unless earlier terminated in accordance with its terms, shall continue in effect until and including the six-month anniversary of the date of this Agreement; provided, that Owner Agent may extend this Agreement for additional six-month periods, in each case by written notice to Manager (“Owner Agent Notice”) delivered not less than 60 days prior to the end of the original or renewal term, provided further that this Agreement shall nonetheless terminate if Manager rejects such extension in a written notice delivered to Owner Agent not more than 10 days after receipt of the Owner Agent Notice.  Notwithstanding anything to the contrary contained herein, the obligations set forth in Section 3.9 hereof shall survive the termination or expiration of this Agreement; provided, that (i) following the termination of this Agreement with respect to the Magic Valley Facility by Burley pursuant to Section 9.4, the total liability of Manager with respect to such obligations relating to the Magic Valley Facility hereunder and under Section 2.01(b) of the Sponsor Support Agreement shall not exceed the reasonable cost of performing such obligations as estimated by the Independent Engineer plus fifteen percent (15%) of such estimate and (ii) such obligations relating to the Stockton Facility shall survive only to the extent that Stockton pays to Manager any amounts required to perform such obligations constituting Operating Disbursements or Direct Reimbursement Expenses.

 

 

  

18

  

 

9.2   Termination by Manager.  Manager may terminate this Agreement with respect to a Facility by written notice to Owner of such Facility, upon the occurrence of any of the following events:

 

(a)           the failure by such Owner to pay the Management Fee required to be paid to Manager hereunder within 10 days after the date such payment is required to be made with respect to the first such failure and within 5 days after the date such payment is required to be made with respect to any subsequent such failure;

 

(b)           the failure by such Owner to make any other payment, deposit or transfer required to be paid to Manager hereunder within 15 Business Days after the date such payment, deposit or transfer is required to be made;

 

(c)           the failure of any statement, representation or warranty made by such Owner in this Agreement to have been correct in any material respect when made if such failure could reasonably be expected to have a material adverse effect on such Owner’s ability to perform its obligations under this Agreement; or

 

(d)           the failure of such Owner to perform any of its material obligations under this Agreement (other than with respect to the payment of money) and such failure continues for 30 days after receipt of written notice from Manager of such failure; provided, that such 30-day period shall be extended for up to an aggregate of 90 days so long as such Owner is diligently attempting to cure such failure.

 

9.3   Termination by Owners.  Each Owner may terminate this Agreement with respect to its Facility by written notice to Manager, upon the occurrence of any of the following events, provided, that no such notice shall be required for a termination pursuant to clause (c) of this Section 9.3:

 

(a)           the failure by Manager to make any payment, deposit or transfer required hereunder within 15  Business Days after the date such payment, deposit or transfer is required to be made;

 

(b)           the failure of any statement, representation or warranty made by Manager in this Agreement to have been correct in any material respect when made if such failure could reasonably be expected to have a material adverse effect on Manager’s ability to perform its obligations under this Agreement;

 

(c)           the occurrence of an Act of Insolvency with respect to Manager; or

 

(e)           the failure of Manager to perform any of its material obligations under this Agreement and such failure continues for 30 days after receipt of written notice from such Owner of such failure; provided, that such 30-day period shall be extended for up to an aggregate of 90 days so long as Manager is diligently attempting to cure such failure.

 

 

  

19

  

 

9.4   Termination for Convenience.  Each Owner may terminate this Agreement with respect to its Facility for any reason upon (x) sixty (60) days prior written notice to Manager  or (y) less than 60 days prior written notice to Manager if such Owner shall pay the Supplemental Termination Payment. Manager may terminate this Agreement with respect to the Facilities for any reason upon sixty (60) days prior written notice to Owner Agent.

 

9.5   Facility Condition at End of Term; Successor Manager.

 

(a)           Upon expiration or termination of this Agreement with respect to a Facility, Manager shall remove its personnel from such Facility. Manager shall leave such Facility in as good condition as at the date hereof subject to (i) normal wear and tear, (ii) if a Facility has suffered damages covered by insurance, the availability to Manager of the proceeds of such insurance and (iii) changes in condition resulting from Force Majeure Events; provided that Manager is otherwise in compliance with its obligations under this Agreement.  All special tools, improvements, inventory of supplies, spare parts, safety equipment (in each case as obtained by or provided by Manager and paid for by Owners during the term of this Agreement), Facilities Records, and any other items furnished under this Agreement will be left at the Facility and will remain the property of Owner without additional charge.  Owners shall also have the right, in their sole discretion, to directly assume and become liable for any contracts or obligations that Manager may have undertaken with third parties principally in connection with the Services. Manager shall execute all documents and take all other reasonable steps requested by Owner that may be required to assign to and vest in Owner all rights and obligations, benefits, interests and title in connection with such contracts or obligations. Notwithstanding the foregoing, Manager, at all times, shall be deemed the owner of and shall be permitted to retain or remove all trademarks, logos, trade names and similar proprietary rights of Manager and its Affiliates (“Manager Proprietary Property”) and shall disable all connections to Manager’s ERP System servicing the Facilities (provided that Manager shall provide hard copies of financial, operational and other information relating principally to the Facilities as reasonably requested by Owners).

 

(b)           Upon expiration or termination of this Agreement with respect to a Facility, Manager shall, at the request and expense of Owner of such Facility, assist such Owner in arranging for the future performance of the Services by such Owner or the successor to Manager (the “Successor Manager”), provided that Manager shall provide such assistance at no charge to such Owner if the Agreement is terminated pursuant to Section 9.3.  Manager shall provide such Owner and the Successor Manager full access to such Facility and to all relevant information, data and records relating thereto reasonably required for taking over the performance of Services for such Facility.

 

(c)           Promptly after expiration or termination of this Agreement with respect to a Facility, Manager shall deliver to Owner of such Facility or (if so required by such Owner by notice to Manager) to the Successor Manager all property in its possession or under its control owned by such Owner or leased or licensed to such Owner.

 

(d)           The parties agree that Manager has granted each Owner and Owner’s Agent a license to use the name “Pacific Ethanol”.  Upon expiration or termination of this Agreement, each Owner and Owner Agent as promptly as practicable shall cease using the name Pacific Ethanol and shall change its name to delete any reference to Pacific Ethanol, it being understood that Owner and Owner’s Agent may use existing letterhead and similar supplies for a period not to exceed 30 days.

 

  

20

  

 

9.6   Termination Payment; Manager Payment

 

9.6.1  Termination Payment.  Promptly after the date of any termination, Manager shall be paid on a pro rata basis (i) the Management Fee earned through the date of termination but not paid (the “Termination Payment”), (ii) if such termination is pursuant clause (y) of Section 9.4 the Supplemental Termination Payment and (iii) all other payments that it is entitled to under this Agreement for the period through the date of termination.  Except for the Termination Payment, the Supplemental Termination Payment, if applicable, and such other payments, Owners shall not be liable for any costs incident to termination.

 

9.6.2  Manager Payment.  Subject to Article XII, in the event of a termination of this Agreement by an Owner under Section 9.3 which results from the action or omission of Manager, such Owner shall be entitled to recover from Manager any damages, costs, fines or penalties such Owner suffers or incurs as a result of any such termination, including the reasonable costs of mobilizing and training a successor Manager, and such Owner hereby releases Manager from any liability in excess thereof. In calculating such reasonable costs, any savings achieved due to the retention by the successor Manager of any or part of the Facility workforce shall be taken into account.

 

ARTICLE X

 

INSURANCE

 

10.1        Manager Insurance.  Without limiting any of the other obligations or liabilities of Manager under this Agreement, Manager shall at all times carry and maintain or cause to be carried and maintained, the minimum insurance coverage set forth in this Section 10.1:

 

(a)           Manager shall maintain (i) Workers’ Compensation insurance in compliance with the workers’ compensation laws of the jurisdictions in which each Facility is located as extended by the Broad Form All States Endorsements, the United States Longshoreman’s and Harbor Workers’ Coverage Endorsements on an if-any-exposure basis and the Voluntary Compensation Coverage Endorsement, and (ii) Employer’s Liability (including Occupational Disease) coverage with limits of not less than $1,000,000, which shall cover all of Manager’s employees engaged in providing services hereunder.

 

(b)           Manager shall maintain automobile liability insurance for owned (if any), non-owned and hired vehicles with combined single limits for bodily injury/property damage not less than $1,000,000 per occurrence and containing appropriate no-fault insurance provisions wherever applicable.

 

(c)           Manager will maintain commercial general liability insurance with a limit for bodily injury/property damage of not less than $1,000,000 per occurrence and $2,000,000 in the annual aggregate.  Such coverage shall include premises/operations, explosion, collapse and underground property damage, broad form contractual, independent contractors, products/completed operations (including Manager errors and omissions), broad form property damage, sudden and accidental pollution, personal injury and incidental professional liability (if not covered under product/completed operations and if commercially available).

 

  

21

  

 

(d)           Manager shall maintain or cause to be maintained umbrella liability insurance providing coverage limits in excess of those set forth in Section (a), (b) and (c) above.  The limits of this umbrella coverage shall not be less than $10,000,000 per occurrence and in the annual aggregate.

 

The terms and conditions of all insurance policies (including the amount, scope of coverage, deductibles, and self-insured retentions) shall be acceptable in all respects to Owner Agent.  All insurance carried pursuant to this Section shall conform to the relevant provisions of this Agreement and be with insurance companies which are rated “A, IX” or better by Best’s Insurance Guide and Key Ratings, or other insurance companies of recognized responsibility satisfactory to Owner Agent.  Owner Agent shall be furnished with satisfactory evidence that the foregoing insurance is in effect and shall be notified 30 calendar days prior to the cancellation or material change of any such coverage.  Coverage for the insurance under Section (c) and (d) above shall be written on a claims made basis provided that if the policy is not renewed, Manager shall obtain for the benefit of Owners an extended reporting period coverage or “tail” of at least three years past the final day of coverage of such policy.  Manager shall provide Owner Agent with evidence that such extended reporting period coverage or “tail” has been obtained.  Manager agrees to ensure that the insurance policies outlined in this Section require the insurer to waive subrogation against Owners, the Senior Secured Parties and their respective Affiliates together with their respective officers, directors, Affiliates and employees and all such Persons shall be an additional insured as their interests may appear with respect to all policies procured by Manager.

 

10.2   Owners Insurance.  Owners shall ensure, to the extent commercially available, that Manager is named as an additional insured on each insurance policy relating to ownership, operation and maintenance of each Facility which Owners are required to take out and maintain pursuant to the Financing Documents.  Owners shall provide Manager with a certified copy of each such insurance policy and shall notify Manager in writing of any changes to such policy from time to time or, before doing so, of the cancellation of any such policy or policies.  Any obligation or liability for premiums, commissions, assessments or calls in connection with any insurance policy required under this Section shall be the sole responsibility of Owners except for claims arising from losses due to Manager error and omissions in which case Manager shall be responsible for all deductibles.  All policies procured by Owners shall require the insurer to waive subrogation against Manager and its officers, directors, Affiliates and employees and all such Persons shall be named as additional insureds to the extent of their interests; provided, that Manager shall have no interest with respect to business interruption coverage.

 

10.3   Manager Insurance Premiums and Deductibles.  All premiums for insurance coverage procured by Manager pursuant to Section 10.1 shall be for the account of Manager.  Manager shall be liable for the payment of deductibles on insurance policies obtained pursuant to Section 10.1.

 

10.4   Subcontractor Insurance.  Before permitting any Manager’s subcontractor to perform any services at a Facility, each such subcontractor must provide proof of insurance satisfactory to Owner Agent and obtain a certificate of insurance evidencing that such subcontractor has obtained insurance in such amounts and such risks as is customarily carried by Persons engaged in similar businesses in the same geographic area and from such carriers as are licensed to do business in the jurisdiction in which such Facility is located.

 

 

  

22

  

 

ARTICLE XI

 

INDEMNIFICATION

 

11.1   Owners’ Indemnity.  Each Owner shall defend, indemnify and hold harmless Manager and its Affiliates (and each officer, director, employee, shareholder, partner, member or agent of Manager and its Affiliates) (each, an “Owner Indemnified Person”) from and against (i) any and all claims, actions, damages, expenses (including reasonable and documented attorneys’ fees and expenses), losses, settlements or liabilities (collectively, “Liabilities”) incurred or asserted against any Owner Indemnified Person (a) as a result of any failure on the part of such Owner to perform its obligations under this Agreement or (b) arising out of or in any way connected with the grossly negligent acts or omissions of such Owner and (ii) Liabilities incurred by any Owner Indemnified Person to a third party or asserted against any Owner Indemnified Person by a third party as a result of Manager performing the Services in accordance with the terms of this Agreement.

 

11.2   Manager’s Indemnity.  Manager shall defend, indemnify and hold harmless each Owner and its Affiliates (and each officer, director, employee, shareholder, partner, member or agent of each Owner and its Affiliates) (each, a “Manager Indemnified Person”) from and against any and all Liabilities incurred or asserted against any Manager Indemnified Person (a) as a result of any failure on the part of Manager to perform its obligations under this Agreement, or (b) arising out of or in any way connected with the grossly negligent acts or omissions of Manager or its subcontractors and Affiliates (other than Owners) in connection with this Agreement.

 

ARTICLE XII

 

LIABILITIES OF THE PARTIES

 

12.1   Maximum Liability of Manager.  The total aggregate liability of Manager to Owners under this Agreement during the term of this Agreement shall not exceed one million dollars ($1,000,000).  Notwithstanding the foregoing, such limitations on liability shall not apply with respect to any net loss, damage or liability resulting from or arising out of the gross negligence or willful misconduct of Manager.

 

12.2   No Consequential or Punitive Damages.  In no event shall either Party be liable to any other Party by way of indemnity or by reason of any breach of contract or of statutory duty or by reason of tort (including negligence or strict liability) or otherwise for any loss of profits, loss of revenue, loss of use, loss of production, loss of contracts or for any incidental, indirect, special or consequential or punitive damages of any other kind or nature whatsoever that may be suffered by such other Party.

 

 

  

23

  

 

ARTICLE XIII

 

CONFIDENTIALITY

 

Manager agrees to maintain the confidentiality of the Owner Information (as defined below), except that Owner Information may be disclosed (a) to Manager’s Affiliates and its and their officers, directors, managers, employees, partners, shareholders, members, agents and representatives, including accountants, legal counsel and other advisors (it being understood that the Persons to whom such disclosure is made will be informed of the confidential nature of such Owner Information and instructed to keep such Owner Information confidential), (b) to the extent requested by any regulatory authority having jurisdiction over Manager, (c) to the extent required by applicable laws or regulations or by any subpoena or similar legal process, (d) in accordance with any Financing Document, (e) in connection with any suit, action or proceeding relating to this Agreement or the enforcement of rights hereunder, (f) with the consent of Owner Agent, (g) to the extent necessary or appropriate to perform its duties under this Agreement, (h) to any potential equity investors in PEI or any acquirer of all or any of the equity interests in NewCo or any subsidiary thereof, provided that such potential equity investors agree to similar confidentiality provisions or (i) to the extent such Owner Information (i) becomes publicly available other than as a result of a breach of this Article XIII or (ii) becomes available to Manager on a non-confidential basis from a source other than an Owner.  “Owner Information” means all information received from any Owner, or developed by Manager in the course of performing its obligations under this Agreement, relating to the business and operations of any Owner.  Manager shall be considered to have complied with its obligation to maintain the confidentiality of Owner Information if Manager has exercised the same degree of care with respect to the Owner Information as Manager would accord to its own confidential information.

 

ARTICLE XIV

 

TITLE, DOCUMENTS AND DATA

 

14.1   Materials and Equipment.  Title to all materials, equipment, supplies, Consumables, spare parts. and other items purchased or obtained by Manager shall pass immediately to and vest in Owners upon the passage of title from the vendor or supplier thereof, provided, however, that such transfer of title shall in no way affect Manager’s obligations as set forth in the other provisions of this Agreement.

 

14.2   Documents.  All materials and documents prepared or developed by Manager or its employees, representatives or contractors in connection with a Facility or the performance of the Services hereunder, including all manuals, data, designs, drawings, plans, specifications, reports and accounts but expressly excluding any Manager Proprietary Property, shall become or remain the property of Owners when prepared. All such materials and documents, together with any materials and documents furnished to Manager or to its contractors by Owners, and any and all copies thereof shall be delivered to Owners upon expiration or termination of this Agreement.  In addition, all such materials and documents shall be available for review by Owners at all reasonable times during development and promptly upon completion. All such materials and documents required to be submitted for the approval of Owners shall be prepared and processed in accordance in all material respects with the requirements and specifications set forth in the Facility Manuals. However, Owners’ approval of materials and documents submitted by Manager shall not relieve Manager of its responsibility to perform its obligations under this Agreement.

 

 

  

24

  

 

ARTICLE XV

 

FORCE MAJEURE

 

15.1   Events Constituting Force Majeure.  As used herein, “Force Majeure Event” means any cause(s) which render(s) a Party wholly or partly unable to perform its obligations under this Agreement (other than obligations to make payments when due), and which are neither reasonably within the control of such Party nor the result of the fault or negligence of such Party, and which occur despite all reasonable attempts to avoid, mitigate or remedy, and shall include acts of God, war, riots, civil insurrections, cyclones, hurricanes, floods, fires, explosions, earthquakes, lightning, storms, chemical contamination, epidemics or plagues, acts or campaigns of terrorism or sabotage, blockades, embargoes, accidents or interruptions to transportation, trade restrictions, acts of any Governmental Authority after the date hereof, strikes and other labor difficulties, mechanical breakdowns, and other events or circumstances beyond the reasonable control of such Party.

 

15.2   Effect.  A Party claiming relief as a result of a Force Majeure Event shall give the other Parties written notice within five Business Days of becoming aware of the occurrence of the Force Majeure Event, or as soon thereafter as practicable, describing the particulars of the Force Majeure Event, and will use reasonable efforts to remedy its inability to perform as soon as possible.  If the Force Majeure Event (including the effects thereof) continues for fifteen consecutive days, the affected Party shall report to the other Parties the status of its efforts to resume performance and the estimated date thereof.  If the affected Party was not able to resume performance prior to or at the time of the report to the other Parties of the onset of the Force Majeure Event, then it will report in writing to the other Parties when it is again able to perform.  If a Party fails to give timely notice, the excuse for its non-performance shall not begin until notice is given.

 

15.3   Limitations.  Any obligation(s) of a Party (other than an obligation to make payments when due) may be temporarily suspended during any period such Party is unable to perform such obligation(s) by reason of the occurrence of a Force Majeure Event, but only to the extent of such inability to perform, provided, that:

 

(a)           the suspension of performance is of no greater scope and of no longer duration than is reasonably required by the Force Majeure Event; and

 

(b)           the Party claiming the occurrence of the Force Majeure Event bears the burden of proof.

 

 

 

  

25

  

 

ARTICLE XVI

 

MISCELLANEOUS PROVISIONS

 

16.1   Assignment.  No Party shall assign this Agreement or any of its rights or obligations hereunder without first obtaining the prior written consent of each other Party and the Administrative Agent; provided, that each Owner shall be entitled to assign its rights hereunder (as collateral security or otherwise) for financing purposes (including a collateral assignment) without the consent of Manager.

 

16.2   Sale of Facilities.  The Parties acknowledge that Owners intend to sell the Facilities to one or more purchasers.  In connection with any sales process, if requested by Owners, Manager will make all records and other documents under its control regarding the Facilities available to potential purchasers and will provide such other services and assistance as Owners may reasonably request.  Manager will not restrict or limit its personnel who are, or have been, working on-site at any Facility from joining any company or Affiliate of a company that acquires ownership of a Facility (excluding any personnel that on the date of this Agreement are full time employees of  Manager).

 

16.3   Cooperation in Financing.  Manager shall use its reasonable efforts to execute, acknowledge and deliver any and all further documents and instruments, and to take any other actions, which may be necessary to satisfy the reasonable requests of any Senior Secured Party or prospective Senior Secured Party in connection with the financing of each Facility, including delivering to the Collateral Agent a customary consent to the assignment by Owners of its rights under this Agreement to the Collateral Agent.

 

16.4   Access

 

16.4.1  Owners.  Each Owner and its agents and representatives shall have access at all times to its Facility, all Facility operations and any documents, materials and records and accounts relating to the Facility operations. Upon request of such Owner, and its agents and representatives, Manager shall make available to such Persons on site and provide them with access to any data and all logs relating to such Facility.

 

16.4.2  Senior Secured Parties.  As and to the extent required under the Financing Documents, the Senior Secured Parties and their agents and representatives, at all reasonable times (and upon reasonable prior notice), shall have access to each Facility, all Facility operations and any documents, materials, records and accounts relating to Facility operations for purposes of inspection and review. Manager shall have the right to have its personnel accompany such Senior Secured Parties and such agents and representatives during such access.

 

16.4.3  Cooperation.  During any such inspection or review of any Facility, Owners, the Senior Secured Parties and their agents and representatives shall comply with all of Manager’s safety and security procedures, and Owners, the Senior Secured Parties and their agents and representatives shall conduct such inspection and reviews in such a manner as to cause minimum interference with Manager’s activities. Manager also shall cooperate with Owners in allowing other visitors access to each Facility under conditions as Owners shall designate.

 

  

26

  

 

16.5   Not for Benefit of Third Parties.  Except as otherwise expressly provided in Articles XI and XVI, this Agreement and each and every provision hereof are for the exclusive benefit of the Parties hereto and is not for the benefit of any third party.

 

16.6   Amendments.  No Party hereto shall be bound by any amendment, supplement, waiver or modification of any term hereof unless such Party and the Administrative Agent shall have consented thereto in writing.

 

16.7   Survival.  Cancellation, expiration or earlier termination of this Agreement shall not relieve the Parties of obligations that by their nature should survive such cancellation, expiration or termination, including remedies, limitations on liability, promises of payment, indemnity and confidentiality.  Without limiting the generality of the foregoing, the following provisions of this Agreement shall survive cancellation, expiration or earlier termination of this Agreement:  Articles V, VIII, IX, XI, XIII and XVI and the limitations on liabilities set forth in Article XII.

 

16.8   No Waiver.  No delay or failure on the part of any Party in exercising any rights hereunder, and no partial or single exercise thereof, shall constitute a waiver of such rights or of any other rights hereunder.

 

16.9   Notices.  All notices or other communications which are required or permitted hereunder shall be in writing and shall be deemed sufficiently given (a) upon delivery, if delivered personally, (b) the day the notice is received, if it is delivered by overnight courier or certified or registered mail, postage prepaid, or (c) upon the effective receipt of electronic transmission, facsimile, telex or telegram (with effective receipt being deemed to occur upon the sender’s receipt of confirmation of successful transmission of such notice or communication), to the addresses set forth below or such other address as the addressee may have specified in a notice duly given to sender as provided herein:

 

	 	
If to Manager:

	
Pacific Ethanol, Inc.

400 Capitol Mall, Suite 2060

Sacramento, CA 95814

Attention: Neil Koehler

Facsimile:   (916) 446-3937

 

	 	
With a copy to:  

	
Pacific Ethanol, Inc.

400 Capitol Mall, Suite 2060

Sacramento, CA 95814

Attention: General Counsel

Facsimile:   (916) 446-3936

  

 

  

27

  

 

 

	 	
If to Owners:

	
Pacific Ethanol Holding Co. LLC 

c/o JT Miller Group LLC

777 Campus Commons Road #200

Sacramento, CA 95825

Attention: John Miller

Telephone:    (916) 565-7422

Facsimile:       (916) 565-7423

 

16.10       Representations and Warranties.

 

16.10.1  Manager’s Representations and Warranties.  Manager represents and warrants to Owners, as of the date hereof, as follows:

 

16.10.1.1  Due Formation.  Manager (a) is a corporation duly formed and validly existing under the laws of the State of Delaware, (b) has the requisite power and authority to own its properties and carry on its business as now being conducted and currently proposed to be conducted and to execute, deliver and perform its obligations under this Agreement, and (c) is qualified to do business in every jurisdiction in which failure so to qualify could be reasonably be expected to have a material adverse effect on Manager’s ability to perform its obligations hereunder.

 

16.10.1.2  Authorization; Enforceability.  Manager has taken all action necessary to authorize it to execute, deliver and perform its obligations under this Agreement.  This Agreement constitutes a legal, valid and binding obligation of Manager enforceable in accordance with its terms.

 

16.10.1.3  No Conflict.  The execution, delivery and performance by Manager of this Agreement does not and will not (a) violate any Law applicable to Manager, (b) result in any breach of Manager’s constituent documents or (c) conflict with, violate or result in a breach of or constitute a default under any agreement or instrument to which Manager or any of its properties or assets is bound or result in the imposition or creation of any lien or security interest in or with respect to any of Manager’s property or assets, other than in each case any such violations, conflicts, breaches or impositions which could not be reasonably be expected to have a material adverse effect on Manager’s ability to perform its obligations hereunder.

 

16.10.1.4  No Authorization.  No authorization or approval or other action by, and no notice to or filing with, any Governmental Authority (other than those which have been obtained) is required for the due execution, delivery and performance by Manager of this Agreement, other than any such authorizations, approvals or actions the failure of which to obtain could not be reasonably be expected to have a material adverse effect on Manager’s ability to perform its obligations hereunder.

 

16.10.1.5  Litigation.  Manager is not a party to any legal, administrative, arbitration or other proceeding, and, to Manager’s knowledge, no such proceeding is threatened, which could be reasonably be expected to have a material adverse effect on Manager’s ability to perform its obligations hereunder.

 

 

  

28

  

 

16.10.2  Owners’ Representations and Warranties.  Each Owner represents and warrants to Manager, as of the date hereof, as follows:

 

16.10.2.1  Due Formation.  Such Owner (a) is a limited liability company duly formed and validly existing under the laws of the State of Delaware, (b) has the requisite power and authority to own its properties and carry on its business as now being conducted and currently proposed to be conducted and to execute, deliver and perform its obligations under this Agreement, and (c) is qualified to do business in every jurisdiction in which failure so to qualify could be reasonably be expected to have a material adverse effect on such Owners’ ability to perform its obligations hereunder.

 

16.10.2.2  Authorization; Enforceability.  Such Owner has taken all action necessary to authorize it to execute, deliver and perform its obligations under this Agreement.  This Agreement constitutes a legal, valid and binding obligation of such Owner enforceable in accordance with its terms.

 

16.10.2.3  No Conflict.  The execution, delivery and performance by such Owner of this Agreement does not and will not (a) violate any Law applicable to such Owner, (b) result in any breach of such Owner’s constituent documents or (c) conflict with, violate or result in a breach of or constitute a default under any agreement or instrument to which such Owner or any of its properties or assets is bound or result in the imposition or creation of any lien or security interest in or with respect to any of such Owner’s property or assets, other than in each case any such violations, conflicts, breaches or impositions which could not be reasonably be expected to have a material adverse effect on such Owner’s ability to perform its obligations hereunder.

 

16.10.2.4  No Authorization.  No authorization or approval or other action by, and no notice to or filing with, any Governmental Authority (other than those which have been obtained) is required for the due execution, delivery and performance by such Owner of this Agreement, other than any such authorizations, approvals or actions the failure of which to obtain could not be reasonably be expected to have a material adverse effect on such Owner’s ability to perform its obligations hereunder.

 

16.10.2.5  Litigation.  Such Owner is not a party to any legal, administrative, arbitration or other proceeding, and, to such Owner’s knowledge, no such proceeding is threatened, which could be reasonably be expected to have a material adverse effect on such Owner’s ability to perform its obligations hereunder.

 

16.11    Counterparts and Execution.  This Agreement may be executed in any number of counterparts and each such counterpart shall be deemed to be an original instrument, but all such counterparts together shall constitute one and the same agreement.

 

16.12    Governing Law.  This Agreement shall be governed by and construed in accordance with the laws of the State of New York without regard to the principles of conflicts of laws thereof.

 

16.13    Entire Agreement.  This Agreement contains the entire agreement among the Parties with respect to the subject matter hereof and supersedes all prior agreements, negotiations and understandings among the Parties with respect to such subject matter.  Nothing in this Agreement shall be construed as creating a partnership or joint venture among the Parties.

 

  

29

  

 

16.14    Severability.  In the event any one or more of the provisions contained in this Agreement should be held invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein shall not in any way be affected or impaired thereby.  The Parties shall endeavor in good-faith negotiations to replace the invalid, illegal or unenforceable provisions with valid provisions, the economic and practical effect of which comes as close as possible to that of the invalid, illegal or unenforceable provisions.

 

16.15    Successors and Assigns.  This Agreement shall be binding upon and shall inure to the benefit of the Parties hereto and their respective successors and permitted assigns.

 

16.16    Owner Agent.  Each Owner hereby appoints and authorizes Pacific Holding, and Pacific Holding hereby accepts such appointment, as such Owner’s Owner Agent to act as agent on such Owner’s behalf and to make any representations or certifications, deliver and receive any notices or other communications, and otherwise represent and act on behalf of such Owner under this Agreement, and to comply with all covenants, conditions and other provisions of this Agreement required to be satisfied by Owner Agent.  Each Owner hereby acknowledges and agrees that it will be bound by any action or inaction taken by Owner Agent as if such action or inaction had been taken by such Owner.

 

16.17    Independent Contractor.  Manager shall be an independent contractor with respect to the performance of the Services and its other obligations hereunder.  Neither Manager nor its employees or other agents employed in the Services shall be deemed to be agents of Owners or to have assumed any other obligations with respect to any Person, except to the extent of the obligations expressly created hereunder pursuant to the authority granted to Manager under this Agreement.

 

16.18    Captions; Appendices.  Titles or captions of sections contained in this Agreement are inserted only as a matter of convenience and for reference, and in no way define, limit, extend, describe or otherwise affect the scope of meaning of this Agreement or the intent of any provision hereof. All appendices attached hereto shall be considered a part hereof as though fully set forth herein.

 

 

[THE REMAINDER OF THIS PAGE HAS BEEN LEFT BLANK INTENTIONALLY]

 

 

  

30

  

 

IN WITNESS WHEREOF, this Amended and Restated Asset Management Agreement has been duly executed by the parties hereto as of the date first written above.

 

 

	 	
PACIFIC ETHANOL, INC.

 

By:      /s/ Neil M. Koehler                                      

            Name: Neil M. Koehler

            Title: CEO

 

PACIFIC ETHANOL COLUMBIA, LLC

 

By:      /s/ John T. Miller                                         

Name: John T. Miller

Title: COO

 

PACIFIC ETHANOL MADERA LLC

 

By:      /s/ John T. Miller                                        

Name: John T. Miller

Title: COO

 

PACIFIC ETHANOL STOCKTON, LLC

 

By:      /s/ John T. Miller                                         

Name: John T. Miller

Title: COO

 

PACIFIC ETHANOL MAGIC VALLEY, LLC

 

By:      /s/ John T. Miller                                          

Name: John T. Miller

Title: COO

 

PACIFIC ETHANOL HOLDING CO. LLC

 

By:      /s/ John T. Miller                                         

Name: John T. Miller

Title: COO

 

 

  

31

  

APPENDIX A-1

 

SCOPE OF ASSET MANAGEMENT SERVICES AND ASSET PRESERVATION SERVICES

 

A.           General Approach.

 

With respect to each Facility, Manager shall perform, or cause to be performed, all tasks necessary to manage and preserve such Facility in accordance with the Agreement, including:

 

	 	
· 

	
Staffing - Headcount, Task assignment, Scheduling

	 	
· 

	
Management - Methods, Procedures, Safety, Consumables/Materials Procurement

	 	
· 

	
Maintenance Management - Methods, Procedures, Safety

	 	
· 

	
Subcontract Management

	 	
· 

	
Administrative - Manager Payroll

	 	
· 

	
Training

	 	
· 

	
Security

	 	
· 

	
Permit Compliance

 

B.           Facility Monitoring.

 

Manager will provide usual and customary monitoring including the following:

 

	
  

	
(a)

	
Perform and record periodic operational checks and tests of equipment in accordance with the equipment manufacturer’s specifications.

 

	
  

	
(b)

	
Maintain logs, records and reports for operation of the Facility.

 

	
  

	
(c)

	
Inform Owners as far in advance as possible when the facility does not have the capability to receive corn or store Ethanol or wet distillers grains.

 

Each Facility will be monitored on a continuing basis so that data are distributed quickly and accurately to the Facility staff and to Owners.

 

C.           Layup Preservation Services.

 

Manager will provide usual and customary services including the following:

 

	
  

	
(a)

	
Adhere to all regulatory requirements including management of all applicable permits including the Facility Storm Water Pollution Plan and the Facility air permits to include leak detection and repair inspections.

 

	
  

	
(b)

	
Clean and lay-up equipment to protect from environmental factors including rust and mold.

 

	
  

	
(c)

	
Maintain a regular program for equipment preservation to include equipment rotation and inspection.

 

 

  

A-1

  

 

(d)           Monitor plant fire protection system and alarms

 

(e)           Maintain plant readiness for potential re-start or sale

 

(f)           Maintain site to include lawn and garden maintenance

 

(g)           Perform site security services to prevent theft, vandalism, etc

 

D.           Facility Restart.

 

If a Facility restart is requested by an Owner, Manager will provide usual and customary services including the following:

 

(a)           Interview, select, hire and train necessary operating personnel.

 

(b)           Make ready all equipment

 

(c)           Order necessary start-up supplies

 

(d)           Communicate re-start activities to appropriate parties including city and county officials, suppliers, vendors, etc

 

(e)           Obtain all necessary permits and conduct all testing necessary to satisfy the terms and conditions of any such permit

 

E.           Administrative Support.

 

Manager will provide usual and customary support including the following:

 

1.           General.

 

Manager will develop and implement a comprehensive and specific administrative procedures including:

 

	
  

	
(a)

	
Maintain an effective Facility work force through proper hiring, training, administration and compensation.

 

	
  

	
(b)

	
Procure labor, materials and services.

 

	
  

	
(c)

	
All replacement spare parts for those taken out of inventory with either an identical part or replacement part(s) manufactured by the original equipment manufacturers, or where practical and economical, refurbish (or have refurbished) spare parts to allow their reuse.

 

	
  

	
(d)

	
Provide information and other reasonable assistance at Owners’ request, regarding operation and maintenance of the Facility.

 

  

A-2

  

 

	
  

	
(e)

	
Maintain accurate Facility cost ledger and accounting records regarding the materials and services provided in accordance with generally accepted accounting principles, consistently applied.

 

	
  

	
(f)

	
Cooperate with Owners’ independent certified public accountant to perform annual financial audits for all cost reimbursable services provided for the Facility.

 

	
  

	
(g)

	
Communicate with: (i) the corn suppliers or transporters, as the case may be, under each Corn Supply Agreement with respect to the amount of corn Owners procures from such corn suppliers or transporters; and, (ii) Owners with respect to all other matters.

 

	
  

	
(h)

	
Procure Consumables.

 

2.           Facility Safety Program.

 

To ensure the safety of all employees and personnel working in or near the Facility, Manager will establish and implement a safety plan which conforms to federal and any state or local regulations. Key components of the plan will include:

 

	
  

	
(a)

	
Lock Out/Tag Out.  Only trained and authorized employees shall perform work on equipment that requires Lock out/tag out (LOTO).  Employees shall follow written LOTO procedures when performing such work.

 

	
  

	
(b)

	
Confined Spaced Entry.  Only trained and authorized employees shall perform work on any equipment that requires the employee to enter a permit required confined space.  Employees shall follow written confined space entry procedures.

 

	
  

	
(c)

	
Hot Work. Only trained and authorized employees shall perform work on any equipment that requires the employee to obtain a hot work permit.  Employees shall follow written hot work procedures.

 

	
  

	
(d)

	
Responsibility.  Operations and duties shall be performed only by duly authorized employees, who shall be held responsible for their actions.

 

	
  

	
(e)

	
Facility Safety Inspections.  Employees shall inspect on a routine basis; operating conditions, equipment and the general workplace to prevent a potential hazard to personnel and equipment.

 

	
  

	
(f)

	
Records.  Employees required to keep logs and records shall keep them current and accurately. Abnormal or special conditions shall be called promptly to the attention of the proper supervisor and logged. Shift employees shall familiarize themselves with all activities within their jurisdiction that have taken place during the preceding shift.

 

  

A-3

  

 

3.           Facility Security.

 

Manager will adhere to the written Facility Security Plan and Facility staff will be trained in its requirements. Facility staff and all visitors will be required to adhere to the plan to ensure security of the Facility in normal as well as emergency situations.

 

F.           Maintenance Management Program.

 

Manager will provide usual and customary services including the following:

 

The prime objective of the maintenance management program will be to maximize equipment reliability and availability and minimize maintenance costs.  The ultimate goal is to maximize Facility profitability and to maintain, as closely as possible, given normal mechanical degradation, to the original design performance of all major pieces of equipment.

 

The key elements of the maintenance program are:

 

	 	
· 

	
Preventive maintenance

	 	
· 

	
Predictive maintenance

	 	
· 

	
Corrective maintenance

	 	
· 

	
Operational downtime management

	 	
· 

	
Spare parts inventory control

 

1.           Preventive Maintenance.

 

Preventive maintenance will be done by the Facility staff, consisting of periodic inspection and adjustment of equipment, to avoid deterioration to a point at which the equipment will not start, run, or operate efficiently or reliably. Some preventive maintenance can be accomplished while the unit is shutdown or running.

 

Preventive maintenance schedules will be included in the computerized program and calibrated to an overall Facility schedule. This schedule will alert maintenance crews, providing daily, weekly, monthly and annual forecasting of preventive maintenance activities. Spare parts considerations, such as lead time, can also be correlated.

 

Preventive maintenance intervals are directed by two measures, calendar time and unit operating parameters (vibration measurements, operating temperatures, amp loading, etc). Items scheduled by calendar time will be reviewed on a daily, weekly, monthly or yearly basis. As a rule, preventive maintenance work will be scheduled to result in minimal interference with Facility operations.

 

  

A-4

  

 

2.           Predictive Maintenance.

 

A predictive maintenance program will center on Manager’s ability to track vital trend information. Observing critical variables over time will yield valuable information regarding equipment deterioration.  The preventive maintenance frequency may be increased or decreased, depending on the condition of the equipment found during a predictive maintenance inspection.

 

Use of the preventive and predictive maintenance schedules, in conjunction with the monitoring of operational data that reflect equipment condition, will result in high reliability and reduced maintenance costs.

 

3.           Corrective Maintenance.

 

The corrective maintenance activities will be aimed at avoiding repeat failures. Discussion meetings will be held to review failures which caused major repairs or shutdowns. Facility staff will review the conditions preceding the failure and, if possible, determine the exact cause, and make findings available to maintenance and operating personnel.

 

4.           Shutdown Management.

 

Shutdowns for equipment repair or replacement will be aggressively managed to minimize downtime. Advanced planning, work packages, shutdown schedules and other project management methods will be used to allocate Facility resources to produce efficient shutdowns.

 

During the pre-shutdown phase, the Facility staff and the major equipment manufacturers will cooperate closely to conduct the planned inspections in a minimum amount of time at a reasonable cost. This advance planning might begin anywhere from six months to a year before the shutdown, depending on the need for and the availability of major equipment components.

 

All pre-shutdown and shutdown related activities will be broken down into work packages or discrete elements which are more easily tracked over the course of the shutdown and provide a better means to manage the shutdown schedule.

 

A scheduling program, such as Microsoft Project, using the critical path method will itemize various work packages, organize them and calculate the effect any work package has on the overall shutdown length. This program will provide a reporting tool that allows the Facility staff to create easy-to-understand shutdown schedules and reports showing manpower and equipment resources, usage profiles and problems leading to schedule slippage.

 

 

  

A-5

  

 

5.           Spare Parts Inventory Control.

 

The Facility staff will implement a spare parts inventory control system designed to minimize tied-up capital, yet not jeopardize Facility contractual commitments by risking extended equipment downtime.

 

The Facility staff will establish an adequate spare parts inventory by studying manufacturers’ recommendations, reviewing past experience, and evaluating parts availability and delivery time from the various vendors, taking into account acceptable equipment downtime. The spares inventory will be managed so that parts are replaced when used, maintenance records are kept current, and the inventory is updated regularly to reflect changing Facility requirements.

 

Prior to outages and inspections, the Facility staff will order parts prone to normal wear and tear that are identified as needing to be replaced through the preventive/predictive maintenance programs. Furthermore, by maintaining close contact with the original equipment suppliers, the Facility staff will ensure that they purchase the latest revision parts.

 

G.           Corporate Support.

 

Manager will provide usual and customary support including the following:

 

Accounting & Finance

 

– Invoice/AR/Collection

– Purchasing/AP

– Inventory Tracking

– Hedge Accounting

– Utilize Software for Reporting

– Quarterly and Year End Reports – Audited if required by an Owner

Treasury & Cash Management

Loan Compliance

Insurance

Property Tax Preparation & Appeals

Corporate Tax Preparation

Administration Services

Human Resources

– Payroll Administration (ADP)

– Benefits Administration

– Employee Relations

– Recruit/Hire/Terminate Personnel

– Training Obligations

 

  

A-6

  

 

IT

– Operate ERP System

– Implement and Operate Communications Systems

– Maintain Desktop Equipment and Services

Facilities Management

– Lease Administration

– Office Supplies

– Administrative Support

Operations Services

Plan, monitor and report plant activities.

– Activity planning for lay-up and preservation to minimize asset risk and cost.

– Monitoring/auditing of activities to ensure compliance with regulations/loan

provisions.

– Manage personnel resources during activities.

Plan, monitor and report SH&E activities.

– Numerous regulatory issues to manage during plant layup and preservation.

– Title V activities for California plants.

– CA low NOx requirement being instituted.

– Regulatory reports management.

Licensing and Reporting

– EPA RFS program registration.

– DOT hazardous materials registration.

– DOE monthly reports.

– USDA grain warehouse operator reports.

– Others as may be required by any Permit condition or applicable law.

Legal Services

Litigation/Dispute Management

– Claims in process

Contract Management

– Documentation tracking systems

Compliance Oversight

– Operating and environmental regulatory oversight

 

 

  

A-7

  

 

APPENDIX A-2

 

SCOPE OF O&M SERVICES

 

A.           General Approach.

 

Manager shall perform all tasks necessary to operate and maintain the Facilities not in Cold Shutdown in accordance with the Agreement, including:

 

	 	
· 

	
Staffing - Headcount, Task assignment, Scheduling

	 	
· 

	
Operations Management - Methods, Procedures, Safety, Consumables/Materials Procurement

	 	
· 

	
Maintenance Management - Methods, Procedures, Safety

	 	
· 

	
Subcontract Management

	 	
· 

	
Administrative - Manager Payroll

	 	
· 

	
Training

	 	
· 

	
Security

	 	
· 

	
Permit Compliance

 

B.           Operations Management.

 

1.           Develop Schedules, Shift Routines, Manloadings.

 

In developing the staffing plan for each Facility, the continuous operational and maintenance requirements of such Facility will be analyzed. All periodic testing, inspections and maintenance activities will be identified as well as those operational and maintenance requirements that require specialized and additional assistance at specific times during the maintenance cycle of such Facility.

 

The staffing plan will provide for a permanent Facility staff that will be fully responsive to all ethanol and wet distillers grains production demands and will be responsible for the performance of all preventive maintenance and routine repairs.

 

Each Facility will be manned on a 24-hours per day, 7 days a week basis. Most operating personnel will work a rotating shift schedule. This schedule will coincide with the times of the peak production hours and provide for minimal shift changes and possible interruptions during the high production periods. Selected off-shift personnel will be used for performing maintenance tasks and when necessary, fill in for sickness, absence and vacation relief.

 

The remaining Facility staff will work a normal five-day, 40-hour week but may be rescheduled to respond to events being carried out at the Facility. Each  Facility staff will be autonomous and under the direction of the Manager Representative. In the absence of the Manager Representative, he/she will appoint a senior person to act in his/her behalf.

 

The onsite operations and maintenance staff will be supported for non-routine functions by Manager’s home office, parent, Affiliate, and available companies. Specialized vendor associated technical support will be subcontracted as needed during outage planning, inspections and overhauls.

 

During periods of high maintenance activity, qualified maintenance personnel will be made available to each Facility staff through contract support.

 

  

A-8

  

 

2.           Facilities Operations and Performance Monitoring.

 

Manager’s management duties will include the following:

 

	
  

	
(a)

	
Perform and record periodic operational checks and tests of equipment in accordance with the equipment manufacturer’s specifications.

 

	
  

	
(b)

	
Maintain operating logs, records and reports for operation of each Facility.

 

	
  

	
(c)

	
Perform all Grain Handling Services at each Facility.

 

	
  

	
(d)

	
Inform Boardman and Burley, respectively, as far in advance as possible when the Boardman Facility or the Magic Valley Facility, respectively, does not have the capability to receive corn or store ethanol or wet distillers grains.

 

Performance of each Facility will be monitored on a continuing basis so that performance data are distributed quickly and accurately to the Facility staff and to Owners.  Important parameters to be monitored include Ethanol, wet distillers grains and, if applicable, CO2 output.  These parameters are assumed to be available through the distributive control system.

 

C.           Layup and Preservation Services.

 

	
  

	
(a)

	
Adhere to all regulatory requirements including management of all applicable permits including each Facility Storm Water Pollution Prevention Plan and the Facility air permits to include leak detection and repair inspections.

 

	
  

	
(b)

	
Clean and lay-up equipment to protect from environmental factors including rust and mold.

 

	
  

	
(b)

	
Maintain a regular program for equipment preservation to include equipment rotation and inspection.

 

(c)           Monitor plant fire protection system and alarms

 

(d)           Maintain plant readiness for potential re-start or sale

 

(e)           Maintain site to include lawn and garden maintenance

 

(f)           Perform site security services to prevent theft, vandalism, etc

 

  

A-9

  

 

D.           Facility Restart.

 

If a Facility restart is requested by an Owner, Manager will provide usual and customary services including the following:

 

(a)           Interview, select, hire and train necessary operating personnel.

 

(b)           Make ready all equipment

 

(c)           Order necessary start-up supplies

 

(d)           Communicate re-start activities to appropriate parties including city and county officials, suppliers, vendors, etc

 

(e)           Obtain all necessary permits and conduct all testing necessary to satisfy the terms and conditions of any such permit

 

E.           Administrative Support.

 

1.           General.

 

Manager will develop and implement a comprehensive and specific administrative procedures including:

 

	
  

	
(a)

	
Maintain an effective Facility work force through proper hiring, training, administration and compensation.

 

	
  

	
(b)

	
Procure labor, materials and services exclusive of items which are designated the responsibility of Boardman or Burley.

 

	
  

	
(c)

	
All replacement spare parts for those taken out of inventory with either an identical part or replacement part(s) manufactured by the original equipment manufacturers, or where practical and economical, refurbish (or have refurbished), spare parts to allow their reuse.

 

	
  

	
(d)

	
Provide information and other reasonable assistance at Boardman’s and  Burley’s respective request regarding operation and maintenance of the Facilities not in Cold Shutdown.

 

	
  

	
(e)

	
Maintain accurate Facility cost ledger and accounting records regarding the materials and services provided in accordance with generally accepted accounting principles, consistently applied.

 

	
  

	
(f)

	
Cooperate with Boardman and Burley’s independent certified public accountant to perform annual financial audits for all cost reimbursable services provided for the Facilities not in Cold Shutdown.

 

  

A-10

  

 

	
  

	
(g)

	
Communicate with: (i) the corn suppliers or transporters, as the case may be, under each Corn Supply Agreement with respect to the amount of corn Owners procures from such corn suppliers or transporters; and, (ii) Owners with respect to all other matters including the amount of Ethanol, wet distillers grains and, if applicable, CO2 produced per Owners’ schedule and optimize the use of the corn.

 

	
  

	
(h)

	
Procure Consumables.

 

2.           Facility Safety Program.

 

To ensure the safety of all employees and personnel working in or near each Facility, Manager will establish and implement a safety plan which conforms to federal and any state or local regulations. Key components of the plan will include:

 

	
  

	
(a)

	
Lock Out/Tag Out.  Only trained and authorized employees shall perform work on equipment that requires Lock out/tag out (LOTO).  Employees shall follow written LOTO procedures when performing such work.

 

	
  

	
(b)

	
Confined Spaced Entry.  Only trained and authorized employees shall perform work on any equipment that requires the employee to enter a permit required confined space.  Employees shall follow written confined space entry procedures.

 

	
  

	
(c)

	
Hot Work. Only trained and authorized employees shall perform work on any equipment that requires the employee to obtain a hot work permit.  Employees shall follow written hot work procedures.

 

	
  

	
(d)

	
Responsibility.  Operations and duties shall be performed only by duly authorized employees, who shall be held responsible for their actions.

 

	
  

	
(e)

	
Facility Safety Inspections.  Employees shall inspect on a routine basis; operating conditions, equipment and the general workplace to prevent a potential hazard to personnel and equipment.

 

	
  

	
(f)

	
Records.  Employees required to keep logs and records shall keep them current and accurately. Abnormal or special conditions shall be called promptly to the attention of the proper supervisor and logged. Shift employees shall familiarize themselves with all activities within their jurisdiction that have taken place during the preceding shift.

 

3.           Facility Security.

 

Manager will adhere to each written Facility Security Plan and each Facility staff will be trained in its requirements. Each Facility staff and all visitors will be required to adhere to the plan to ensure security of such Facility in normal as well as emergency situations.

 

  

A-11

  

 

F.           Maintenance Management Program.

 

The prime objective of the maintenance management program will be to maximize equipment reliability and availability and minimize maintenance costs.  The ultimate goal is to maximize Facility profitability and to maintain, as closely as possible, given normal mechanical degradation, to the original design performance of all major pieces of equipment.

 

The key elements of the maintenance program are:

 

	 	
· 

	
Preventive maintenance

	 	
· 

	
Predictive maintenance

	 	
· 

	
Corrective maintenance

	 	
· 

	
Operational downtime management

	 	
· 

	
Spare puts inventory control

 

1.           Preventive Maintenance.

 

Preventive maintenance will be done by each Facility staff, consisting of periodic inspection and adjustment of equipment, to avoid deterioration to a point at which the equipment will not start, run, or operate efficiently or reliably. Some preventive maintenance can be accomplished while the unit is shutdown or running.

 

Preventive maintenance schedules will be included in the computerized program and calibrated to an overall Facility schedule. This schedule will alert maintenance crews, providing daily, weekly, monthly and annual forecasting of preventive maintenance activities. Spare parts considerations, such as lead time, can also be correlated.

 

Preventive maintenance intervals are directed by two measures, calendar time and unit operating parameters (vibration measurements, operating temperatures, amp loading, etc). Items scheduled by calendar time will be reviewed on a daily, weekly, monthly or yearly basis. As a rule, preventive maintenance work will be scheduled to result in minimal interference with Facility operations.

 

2.           Predictive Maintenance.

 

A predictive maintenance program will center on Manager’s ability to track vital trend information. Observing critical variables over time will yield valuable information regarding equipment deterioration.  The preventive maintenance frequency may be increased or decreased, depending on the condition of the equipment found during a predictive maintenance inspection.

 

Use of the preventive and predictive maintenance schedules, in conjunction with the monitoring of operational data that reflect equipment condition, will result in high reliability and reduced maintenance costs.

 

  

A-12

  

 

3.           Corrective Maintenance.

 

The corrective maintenance activities will be aimed at avoiding repeat failures. Discussion meetings will be held to review failures which caused major repairs or shutdowns. Each Facility staff will review the conditions preceding the failure and, if possible, determine the exact cause, and make findings available to maintenance and operating personnel.

 

4.           Shutdown Management.

 

Shutdowns for equipment repair or replacement will be aggressively managed to minimize downtime. Advanced planning, work packages, shutdown schedules and other project management methods will be used to allocate Facility resources to produce efficient shutdowns.

 

During the pre-shutdown phase, each Facility staff and the major equipment manufacturers will cooperate closely to conduct the planned inspections in a minimum amount of time at a reasonable cost. This advance planning might begin anywhere from six months to a year before the shutdown, depending on the need for and the availability of major equipment components.

 

All pre-shutdown and shutdown related activities will be broken down into work packages or discrete elements which are more easily tracked over the course of the shutdown and provide a better means to manage the shutdown schedule.

 

A scheduling program, such as Microsoft Project, using the critical path method will itemize various work packages, organize them and calculate the effect any work package has on the overall shutdown length. This program will provide a reporting tool that allows each Facility staff to create easy-to-understand shutdown schedules and reports showing manpower and equipment resources, usage profiles and problems leading to schedule slippage.

 

5.           Spare Parts Inventory Control.

 

Each Facility staff will implement a spare parts inventory control system designed to minimize tied-up capital, yet not jeopardize Facility contractual commitments by risking extended equipment downtime.

 

Each Facility staff will establish an adequate spare parts inventory by studying manufacturers’ recommendations, reviewing past experience, and evaluating parts availability and delivery time from the various vendors, taking into account acceptable equipment downtime. The spares inventory will be managed so that parts are replaced when used, maintenance records are kept current, and the inventory is updated regularly to reflect changing Facility requirements.

 

Prior to outages and inspections, each Facility staff will order parts prone to normal wear and tear that are identified as needing to be replaced through the preventive/predictive maintenance programs. Furthermore, by maintaining close contact with the original equipment suppliers, each Facility staff will ensure that they purchase the latest revision parts.

 

  

A-13

  

 

G.           Corporate Support.

 

Manager will provide usual and customary support including the following:

 

Accounting & Finance

 

– Invoice/AR/Collection

– Purchasing/AP

– Inventory Tracking

– Hedge Accounting

– Utilize Software for Reporting

– Quarterly and Year End Reports – Audited if required by an Owner

Treasury & Cash Management

Loan Compliance

Insurance

Property Tax Preparation & Appeals

Corporate Tax Preparation

Administration Services

Human Resources

– Payroll Administration (ADP)

– Benefits Administration

– Employee Relations

– Recruit/Hire/Terminate Personnel

– Training Obligations

IT

– Operate ERP System

– Implement and Operate Communications Systems

– Maintain Desktop Equipment and Services

Facilities Management

– Lease Administration

– Office Supplies

– Administrative Support

Operations Services

Plan, monitor and report plant activities.

– Activity planning for lay-up and preservation to minimize asset risk and cost.

– Monitoring/auditing of activities to ensure compliance with regulations/loan

provisions.

– Manage personnel resources during activities.

 

  

A-14

  

 

Plan, monitor and report SH&E activities.

– Numerous regulatory issues to manage during plant layup and preservation.

– Title V activities for California plants.

– CA low NOx requirement being instituted.

– Regulatory reports management.

Licensing and Reporting

– EPA RFS program registration.

– DOT hazardous materials registration.

– DOE monthly reports.

– USDA grain warehouse operator reports.

– Others as may be required by any Permit condition or applicable law.

Legal Services

Litigation/Dispute Management

– Claims in process

Contract Management

– Documentation tracking systems

Compliance Oversight

– Operating and environmental regulatory oversight

 

 

 

  

A-15

  

 

 

APPENDIX B

 

 

 

 

 

 

 

 

 

 

 

  

B-1

  

 

Appendix B to

Asset Management Agreement

 

PERSONNEL

 

	
Last Name

	
First Name

	
Division

	
Department

	
Job title

	
Level

	
Williamson

	
Douglas

	
PECA

	
740070 Operations Management

	
Contract Admin, Director

	
DIR

	
Pagard

	
Cheryl

	
PECA

	
740070 Operations Management

	
Permitting & Compliance, Director

	
DIR

	
Holthus

	
Jay

	
PECOL

	
690010 Plant Labor - General

	
Plant, Manager

	
DIR

	
Stark

	
William

	
PECOL

	
690010 Plant Labor - General

	
Maintenance, Manager

	
MGR

	
Trim

	
Steven

	
PECOL

	
690010 Plant Labor - General

	
Production, Manager

	
MGR

	
Pierce

	
David

	
PECOL

	
690010 Plant Labor - General

	
Maintenance Mechanic

	
Non-EX

	
Jundt

	
James

	
PECOL

	
690010 Plant Labor - General

	
Commodity/Ag Prod, Manager

	
MGR

	
Pierce

	
Sherri

	
PECOL

	
690010 Plant Labor - General

	
Lab Manager

	
MGR

	
Henry

	
Charlene

	
PECOL

	
690010 Plant Labor - General

	
Safety Coordinator

	
Non-EX

	
Richards

	
David

	
PECOL

	
690010 Plant Labor - General

	
Electrician

	
Non-EX

	
Richardson

	
David

	
PECOL

	
690010 Plant Labor - General

	
Maintenance Mechanic

	
Non-EX

	
Braden

	
Larry

	
PECOL

	
690010 Plant Labor - General

	
Maintenance Mechanic

	
Non-EX

	
Guenther

	
Marvin

	
PECOL

	
690010 Plant Labor - General

	
Maintenance Mechanic

	
Non-EX

	
Drayton

	
Donald

	
PECOL

	
690010 Plant Labor - General

	
Maintenance Mechanic

	
Non-EX

	
Gumbert

	
Vernon

	
PECOL

	
690010 Plant Labor - General

	
Maintenance Mechanic

	
Non-EX

	
Bittinger

	
Wanliya

	
PECOL

	
690010 Plant Labor - General

	
Office, Manager

	
Non-EX

	
Bieren

	
John

	
PECOL

	
690010 Plant Labor - General

	
Production Operator

	
Non-EX

	
Savage

	
Cory

	
PECOL

	
690010 Plant Labor - General

	
Production Operator

	
Non-EX

	
White

	
Michael

	
PECOL

	
690010 Plant Labor - General

	
Production Operator

	
Non-EX

	
Hedgpeth

	
Robert

	
PECOL

	
690010 Plant Labor - General

	
Production Operator

	
Non-EX

	
McBride

	
Ronnie

	
PECOL

	
690010 Plant Labor - General

	
Commodities Processing Clerk

	
Non-EX

	
Pena

	
Jose

	
PECOL

	
690010 Plant Labor - General

	
Production Operator

	
Non-EX

	
Shuler

	
Michael

	
PECOL

	
690010 Plant Labor - General

	
Production Operator

	
Non-EX

	
Town

	
Mitchell

	
PECOL

	
690010 Plant Labor - General

	
Production Operator

	
Non-EX

	
Orcutt

	
Johnny

	
PECOL

	
690010 Plant Labor - General

	
Production Utility Operator

	
Non-EX

	
Magallanes

	
Hector

	
PECOL

	
690010 Plant Labor - General

	
Production Operator

	
Non-EX

	
Putman

	
Jackie

	
PECOL

	
690010 Plant Labor - General

	
Lab Technician I

	
Non-EX

	
Abercrombie

	
Mafe

	
PECOL

	
690010 Plant Labor - General

	
Lab Technician I

	
Non-EX

	
Powell

	
Joey

	
PECOL

	
690010 Plant Labor - General

	
Commodities Processing Clerk

	
Non-EX

	
Fitch

	
John

	
PECOL

	
690010 Plant Labor - General

	
Commodities Processing Clerk

	
Non-EX

	
Hernandez

	
Arturo

	
PECOL

	
690010 Plant Labor - General

	
Commodities Processing Clerk

	
Non-EX

	
Timpy

	
Michael

	
PECOL

	
690010 Plant Labor - General

	
Grain Handler

	
Non-EX

	
Allardin

	
Jeanette

	
PECOL

	
690010 Plant Labor - General

	
Commodity Operator

	
Non-EX

	
Spinney

	
Peter

	
PECOL

	
690010 Plant Labor - General

	
Grain Operator

	
Non-EX

	
Open

	
Open

	
PECOL

	
690010 Plant Labor - General

	
Administrative Assistant I

	
Non-EX

	
Wilson

	
Gerald

	
PECOL

	
690010 Plant Labor - General

	
Janitor

	
Non-EX

	
Todd

	
Royce

	
PEM

	
690010 Plant Labor - General

	
Plant, Manager

	
DIR

	
Open

	
Open

	
PEM

	
690010 Plant Labor - General

	
Maintenance Mechanic

	
Non-EX

	
Lovett

	
Michael

	
PEM

	
690010 Plant Labor - General

	
Commodity/Ag Prod, Manager

	
MGR

	
Abarca

	
Jose

	
PEM

	
690010 Plant Labor - General

	
Production Operator

	
Non-EX

	
Barboza

	
Bruno

	
PEM

	
690010 Plant Labor - General

	
Maintenance Mechanic

	
Non-EX

	
Valenzuela

	
Luis

	
PEM

	
690010 Plant Labor - General

	
Operator

	
Non-EX

	
Ochoa

	
Bacilio

	
PEM

	
690010 Plant Labor - General

	
Maintenance Mechanic

	
Non-EX

	
Taito

	
Talaonuupo

	
PEM

	
690010 Plant Labor - General

	
Commodity Operator

	
Non-EX

	
Wilson

	
Thomas

	
PEMV

	
690010 Plant Labor - General

	
Plant, Manager

	
DIR

	
Lowe

	
Alvin

	
PEMV

	
690010 Plant Labor - General

	
Maintenance, Manager

	
MGR

	
Open

	
Open

	
PEMV

	
690010 Plant Labor - General

	
Lab Manager

	
MGR

	
Garza

	
Juan

	
PEMV

	
690010 Plant Labor - General

	
Commodity/Ag Prod, Manager

	
MGR

	
Open

	
Open

	
PEMV

	
690010 Plant Labor - General

	
Environmental Health & Safety Manager

	
MGR

	
Richins

	
Paul

	
PEMV

	
690010 Plant Labor - General

	
Maintenance Mechanic

	
Non-EX

	
Koyle

	
Jared

	
PEMV

	
690010 Plant Labor - General

	
Production Operator

	
Non-EX

	
Shippy

	
Skyler

	
PEMV

	
690010 Plant Labor - General

	
Production Operator

	
Non-EX

	
Jones

	
Lyndon

	
PES

	
690010 Plant Labor - General

	
Plant, Manager

	
DIR

	
Open

	
Open

	
PES

	
690010 Plant Labor - General

	
Maintenance, Manager

	
MGR

	
Montoya

	
Mark

	
PES

	
690010 Plant Labor - General

	
Production, Manager

	
MGR

	
Okoreeh

	
Emmanuel

	
PES

	
690010 Plant Labor - General

	
Lab Manager

	
MGR

	
Torre

	
Christopher

	
PES

	
690010 Plant Labor - General

	
Electrician

	
Non-EX

	
Bowen

	
Michael

	
PES

	
690010 Plant Labor - General

	
Maintenance Mechanic

	
Non-EX

	
Gauba

	
Sukrat

	
PES

	
690010 Plant Labor - General

	
Production Operator

	
Non-EX

	
Mccullough

	
Edker

	
PES

	
690010 Plant Labor - General

	
Production Operator

	
Non-EX

 

 

 

  

  

  

 

Appendix C to

Asset Management Agreement

 

Pacific Ethanol Stockton LLC 

Monthly Cold Shutdown Report

 

May 2009

 

 

	
Contents:

	  	  	  	  	  
	  	  	  	  	  	  
	
Tab

	
Title

	
Report Description

	  	  
	  	  	  	  	  	  
	
i

	
Act vs Budg

	
Budget review - actual vs. budget

	  
	
ii

	
Avail

	
Plant Availability

	  	  
	
iii

	
Cash

	
Cash receipts and disbursements including balances

	
iv

	
Major Maint

	
Major Maintenance Activities

	  
	
v

	
Losses

	
Material Casualty Losses

	  
	
vi

	
Disputes

	
Review of Disputes & Claims

	  
	
vii

	
Permits

	
Permit and Compliance Activities

	  
	
viii

	
Comparison

	
Comparison of figures for the current month vs last month

	  	  	  	  	  	  
	  	  	  	  	  	  
	  	  	  	  	  	  
	  	  	  	  	  	  
	
Prepared by Plant Manger

	  	
Lyndon Jones

	
6/10/2009

	  	  	  	  	  	  
	
Reviewed by Manager Representative

	  	
6/12/2009

 

 

 

 

  

Appendix C

  

 

Pacific Ethanol Stockton LLC 

Monthly Cold Shutdown Report 

 

 

May 2009

 

 

	  	  	  	  	  
	
Description

	
Budget

	
Actual

	
Variance

	  

 

 

 

 

 

 

  

Appendix C - i

  

 

Pacific Ethanol Stockton LLC 

Monthly Cold Shutdown Report 

 

 

May 2009

 

 

 

 

 

 

Plant Availability

The plant is currently in cold shutdown mode.  The Stockton facility is available for restart.

 

 

 

  

Appendix C - ii

  

 

Pacific Ethanol Stockton LLC 

Monthly Cold Shutdown Report 

 

 

May 2009

 

 

 

	
Cash Receipts and Disbursements

	  	  	  
	  	 	  	  	  	  
	
Date

	 	
Customer/Vendor

	
Debit

	
Credit

	
Balance

	
5/1/2009

	 	
Beginning Balance

	  	  	  
	  	 	  	  	  	  
	  	 	  	  	  	  
	  	 	  	  	  	  
	  	 	  	  	  	  
	  	 	  	  	  	  
	  	 	  	  	  	  
	  	 	  	  	  	  
	  	 	  	  	  	  
	  	 	  	  	  	  
	  	 	  	  	  	  
	  	 	  	  	  	  
	  	 	  	  	  	  
	  	 	  	  	  	  
	  	 	  	  	  	  
	  	 	  	  	  	  
	  	 	  	  	  	  
	  	 	  	  	  	  
	  	 	  	  	  	  
	  	 	  	  	  	  
	  	 	  	  	  	  
	  	 	  	  	  	  
	
5/31/2009

	 	
Ending Balance

	  	  	  

 

 

 

  

Appendix C - iii

  

 

 

Pacific Ethanol Stockton LLC 

Monthly Cold Shutdown Report 

 

 

May 2009

 

	
Major Maintenance Activities

	 	  
	  	 	  	 	  	 	  
	
Date

	 	
Cost

	 	
Remaining Cost

	 	
Activity

	
5/1/2009

	 	
 $2,800.00

	 	
0

	 	
Boiler layup chemicals

	  	 	  	 	  	 	  
	  	 	  	 	  	 	  
	  	 	  	 	  	 	  
	  	 	  	 	  	 	  
	  	 	  	 	  	 	  
	  	 	  	 	  	 	  
	  	 	  	 	  	 	  
	  	 	  	 	  	 	  
	  	 	  	 	  	 	  
	
Total

	 	
 $2,800.00

	 	  	 	  

 

 

 

 

  

Appendix C - iv

  

 

 

Pacific Ethanol Stockton LLC 

Monthly Cold Shutdown Report 

 

 

May 2009

 

 

 

 

Material Casualty Losses

No material casualty losses this month

 

 

 

 

 

  

Appendix C - v

  

 

 

 

Pacific Ethanol Stockton LLC 

Monthly Cold Shutdown Report 

 

 

May 2009

 

 

 

	
Disputes

	  	  	  
	  	  	  	  
	  	  	  	  
	
Date

	
Amount

	
Contractor

	
Issue

	  	  	  	  
	  	  	  	  
	  	  	  	  
	  	  	  	  
	  	  	  	  
	  	  	  	  
	  	  	  	  
	  	  	  	  
	  	  	  	  
	  	  	  	  
	  	  	  	  
	  	  	  	  
	  	  	  	  
	  	  	  	  
	  	  	  	  
	  	  	  	  
	  	  	  	  
	  	  	  	  
	  	  	  	  
	  	  	  	  
	
Total

	
0

	  	  

 

 

 

 

  

Appendix C - vi

  

 

 

 

 

Pacific Ethanol Stockton LLC 

Monthly Cold Shutdown Report 

 

 

May 2009

 

 

 

 

	
Permits

	  	  	  
	  	  	  	  
	
Date

	
Permit Description

	
Agency

	
Issue

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

Appendix C - vii

  

 

 

 

 

 

Pacific Ethanol Stockton LLC 

Monthly Cold Shutdown Report 

 

 

May 2009

 

 

 

Budget Comparison vs Last Month

 

 

 

 

  

Appendix C - viii

  

 

Appendix D to

Asset Management Agreement

 

Pacific Ethanol Columbia LLC 

Monthly Operations Report

 

May 2009

 

 

	
Contents:

	  	  	  	  	  	  	  
	  	  	  	  	  	  	  	  
	
Tab

	
Title

	
Report Description

	  	  	  	  
	  	  	  	  	  	  	  	  
	
i

	
Act vs Budg

	
Budget review - actual vs. budget

	  	  	  
	
ii

	
Production

	
Ethanol and WDG Production and Delivery

	  	  
	
iii

	
Corn

	
Corn Deliveries and use

	  	  	  
	
iv

	
Avail

	
Plant Availability

	  	  	  	  
	
v

	
Cash

	
Cash receipts and disbursements including balances

	  
	
vi

	
Major Maint

	
Major Maintenance Activities

	  	  	  
	
vii

	
Losses

	
Material Casulty Losses

	  	  	  
	
viii

	
Disputes

	
Review of Disputes & Claims

	  	  	  
	
ix

	
Permits

	
Permit and Compliance Activities

	  	  	  
	
x

	
Comparison

	
Comparison of figures for the current month vs last month

	  	  	  	  	  	  	  	  
	  	  	  	  	  	  	  	  
	  	  	  	  	  	  	  	  
	  	  	  	  	  	  	  	  
	
Prepared by Plant Manger

	  	
Jay Holthus

	
6/10/2009

	  
	  	  	  	  	  	  	  	  
	
Reviewed by Manager Representative

	  	  	
6/12/2009

	  

 

 

 

 

 

 

  

Appendix D

  

 

 

Pacific Ethanol Columbia LLC 

Monthly Operations Report

 

May 2009

 

 

 

 

	
Description

	
Budget

	
Actual

	
Variance

 

 

 

 

 

 

 

 

 

  

Appendix D - i

  

 

 

Pacific Ethanol Columbia LLC 

Monthly Operations Report

 

May 2009

 

 

 

 

Plant Availability

 

 

 

 

 

  

Appendix D - ii

  

 

 

 

Pacific Ethanol Columbia LLC 

Monthly Operations Report

 

May 2009

 

 

 

 

	
Corn Inventory Status and Delivery Schedule

	  
	
Starting Inventory

	  
	
Deliveries

	  
	  
	  
	
Corn Used

	  
	
Ending Inventory

 

 

 

 

 

 

  

Appendix D - iii

  

 

 

 

Pacific Ethanol Columbia LLC 

Monthly Operations Report

 

May 2009

 

 

 

 

Plant Availability

 

 

 

 

 

 

  

Appendix D - iv

  

 

 

 

Pacific Ethanol Columbia LLC 

Monthly Operations Report

 

May 2009

 

 

	
Cash Receipts and Disbursements

	  	  	  
	  	 	  	  	  	  
	
Date

	 	
Customer/Vendor

	
Debit

	
Credit

	
Balance

	
5/1/2009

	 	
Beginning Balance

	  	  	  
	  	 	  	  	  	  
	  	 	  	  	  	  
	  	 	  	  	  	  
	  	 	  	  	  	  
	  	 	  	  	  	  
	  	 	  	  	  	  
	  	 	  	  	  	  
	  	 	  	  	  	  
	  	 	  	  	  	  
	  	 	  	  	  	  
	  	 	  	  	  	  
	  	 	  	  	  	  
	  	 	  	  	  	  
	  	 	  	  	  	  
	  	 	  	  	  	  
	  	 	  	  	  	  
	  	 	  	  	  	  
	  	 	  	  	  	  
	  	 	  	  	  	  
	  	 	  	  	  	  
	  	 	  	  	  	  
	
5/31/2009

	 	
Ending Balance

	  	  	  

 

 

 

 

 

  

Appendix D - v

  

 

 

 

Pacific Ethanol Columbia LLC 

Monthly Operations Report

 

May 2009

 

 

 

 

	
Major Maintenance Activities

	  
	  	  	  	  
	
Date

	
Cost

	
Remaining Cost

	
Activity

	  	  	  	  
	  	  	  	  
	  	  	  	  
	  	  	  	  
	  	  	  	  
	  	  	  	  
	  	  	  	  
	  	  	  	  
	  	  	  	  
	  	  	  	  
	
Total

	
 $          -

	  	  

 

 

 

 

 

 

  

Appendix D - vi

  

 

 

 

Pacific Ethanol Columbia LLC 

Monthly Operations Report

 

May 2009

 

 

 

 

	
Material Casualty Losses

	  
	  	  	  
	
Description

	
Estimated Loss

	
Insurance Coverage

	  	  	  
	
No material casualty losses this month

	  

 

 

 

 

 

 

 

 

 

  

Appendix D - vii

  

 

 

Pacific Ethanol Columbia LLC 

Monthly Operations Report

 

May 2009

 

 

 

 

	
Disputes

	  	  	  
	  	  	  	  
	  	  	  	  
	
Date

	
Amount

	
Contractor

	
Issue

	  	  	  	  
	  	  	  	  
	  	  	  	  
	  	  	  	  
	  	  	  	  
	  	  	  	  
	  	  	  	  
	  	  	  	  
	  	  	  	  
	  	  	  	  
	  	  	  	  
	  	  	  	  
	  	  	  	  
	  	  	  	  
	  	  	  	  
	  	  	  	  
	  	  	  	  
	  	  	  	  
	  	  	  	  
	  	  	  	  
	
Total

	
0

	  	  

 

 

 

 

  

Appendix D - viii

  

 

 

Pacific Ethanol Columbia LLC 

Monthly Operations Report

 

May 2009

 

 

 

 

 

	
Permits

	  	  	  
	  	  	  	  
	
Date

	
Permit Description

	
Agency

	
Issue

 

 

 

 

 

  

Appendix D - ix

  

 

 

Pacific Ethanol Columbia LLC 

Monthly Operations Report

 

May 2009

 

 

 

 

Budget Comparison vs Last Month

 

 

 

 

 

  

Appendix D - x

  

 

Appendix E to

Asset Management Agreement

 

 

  

  

  

Exhibit A

 

	
PROPOSED EBITDA

	  	 	  
	
PECOL 4/1/10 - 4/30/10

	  	 	  
	
Description

	
 Current Period Actual

	 	
Notes

	  	  	 	  
	  	  	 	  
	
Sales

	  	 	
Reflects financials as currently reported in monthly AMA report

	
   Ethanol Sales

	
 $  5,456,493

	 	  
	
   Biodiesel Sales

	  	 	  
	
   E85 Sales

	  	 	  
	
   Denaturant Sales

	  	 	  
	
   RIN Sales

	  	 	  
	
   WDG Sales

	
     1,101,804

	 	  
	
   Syrup Sales

	
         270,456

	 	  
	
   Kornplex Sales

	  	 	  
	
   Grain Sales

	  	 	  
	
   Freight Handling Fees

	  	 	  
	
   Service Revenues

	  	 	  
	
   Freight Revenues

	
             8,204

	 	  
	
   Other Sales

	  	 	  
	
   Intercompany Sales

	
(189,855)

	 	  
	
Total Sales

	
     6,647,103

	 	  
	
Cost of Goods Sold

	  	 	  
	
   Ethanol

	
     5,812,345

	 	  
	
   Biodiesel

	  	 	  
	
   E85

	  	 	  
	
   Denaturant

	  	 	  
	
   RINS

	  	 	  
	
   WDG COGS

	
             2,524

	 	  
	
   Syrup COGS

	  	 	  
	
   Kornplex Incremental Costs

	  	 	  
	
   Grain

	  	 	  
	
   Labor

	
         192,806

	 	  
	
   Freight

	
         490,577

	 	  
	
   Demurrage

	
                   30

	 	  
	
   Supplies

	
           31,184

	 	  
	
   Repairs and Maint, Plant

	
           68,020

	 	  
	
   Storage

	  	 	  
	
   Equipment Rent and Lease Expense

	
           11,142

	 	  
	
   Rail Car Rental

	  	 	  
	
   Insurance, Property Tax and Other

	
           25,775

	 	  
	
   Depreciation

	
         178,852

	 	  
	
   Derivative (Gains) Losses

	  	 	  
	
   Rail Incentives

	
(30,300)

	 	  
	
   Inventory Adjustments

	  	 	  
	
   Intercompany

	  	 	  
	
Total Cost of Goods Sold

	
6,782,954

	 	  
	
   Gross Profit (Loss)

	
       (135,851)

	 	  
	  	  	 	  

 

 

  

  

  

 

	
Operating Expenses

	  	 	  
	
   Payroll, Bonus and Benefits

	  	 	  
	
   Hiring and Training

	
             4,500

	 	  
	
   Rent or Lease Expense

	  	 	  
	
   Taxes, Permits and Fees

	
                   86

	 	  
	
   Insurance

	  	 	  
	
   Professional Fees

	
             3,586

	 	  
	
   Travel and Auto Expenses

	
             4,265

	 	  
	
   Office and Supplies

	
                 741

	 	  
	
   Advertising and Promotion

	  	 	  
	
   Network, Telephone and Computer

	 	  
	
   Broker Commissions

	  	 	  
	
   Bad Debt Expense

	  	 	  
	
   Business Development

	  	 	  
	
   Non-Cash Compensation Expense

	 	  
	
   Depreciation and Amortization

	
             1,140

	 	  
	
   Plant Layup&Startup Costs

	  	 	  
	
   Donations and Contributions

	 	  
	
   Intercompany

	
90,286

	 	  
	
Total operating expenses

	
         104,603

	 	  
	  	  	 	  
	
Net operating income (loss)

	
       (240,455)

	 	  
	  	  	 	  
	
Reorganization Costs

	
         172,107

	 	  
	  	  	 	  
	
Other income (expense):

	  	 	  
	
   Interest Income

	  	 	  
	
   Interest Expense

	
         (11,140)

	 	  
	
   Interest Derivatives Gain (Loss)

	 	  
	
   Bank Fees

	
               (625)

	 	  
	
   Income Tax Expense

	  	 	  
	
   Other Income (Expense)

	  	 	  
	
   Amortization of Deferred Finance Fees

	
(3,046)

	 	  
	
Total other income (expense)

	
         (14,812)

	 	  
	  	  	 	  
	
Non-Controlling Interest VIE

	  	 	  
	  	  	 	  
	
Net Income (Loss)

	
 $    (427,373)

	 	  
	
Net Income per GL

	
         427,373

	 	  
	
Net Income does not equal gl

	  	 	  
	  	  	 	  
	
ADJUSTED EBITDA CALCULATION

	 	  
	  	  	 	  
	
Net Income (Loss)

	
 $    (427,373)

	 	  
	
Interest Expense

	
           11,140

	 	  
	
Interest Derivatives Gain (Loss)

	
                    -

	 	  
	
Income Tax Expense

	
                    -

	 	  
	
Depreciation and Amortization COGS

	
         178,852

	 	  
	
Depreciation and Amortization SG&A

	
             1,140

	 	  
	
Amortization of Deferred Finance Fees

	
             3,046

	 	
Capitalized bank fees, etc.

	
Non-amortizing finance charges

	
                 625

	 	
Bank fees, etc.

	
Other lender related expenses

	
                    -

	 	
Professional and advisory fees, plan administration fees, etc.

	
LCM

	
                    -

	 	  
	
Reorganization Adjustments & Other

	
172,107

	 	
pre-petition, pre-confirmation expenses, other material non-cash (to be itemized), etc.

	
EBITDA (NOT For External Reporting)

	
$          (60,463)

	 	  

 

 

 

 

 

  

  

  

 

 

Exhibit B

Sample Performance Incentive Fee Calculation

If six-month EBITDA for plant with a 40 million gallon Operating Capacity is $5 million and the plant produced 20 million gallons of ethanol during such period, the incentive fee would be:

0.03 x ($0.25 - $0.20) x 20 million = $30,000

 

 

 

  

B-2

  

 

Exhibit C

Sample Sale Incentive Fee Calculation

Assume (i) a Facility with an Operating Capacity of 60 million gallons is sold generating Asset Sale Proceeds of $80 million, (ii) the aggregate Operating Capacity of all of the Facilities is 200 million gallons, and (iii) the aggregate outstanding Loans are $80 million.

 

Step 1. Compute Sale Price per Gallon of $0.933333 as follows: Asset Sale Proceeds of $80 million, less $24 million pro rata portion of the Loans allocated to the Facility (i.e. 60,000,000/200,000,000 x $80 million) = $56 million.  Divide $56 million by 60 million.

 

Step 2.  Calculate Incentive Fee for each “Tier” as the product of (i) the excess of the Sale Price per Gallon over applicable tier floor (not to exceed the Tier ceiling for Tiers II and III), (ii) the Operating Capacity of the Facility, and (iii) the applicable percentage for such Tier set forth in Section 8.2, as follows:

 

	
Tier

	 	
Excess 

over Tier 

Floor

	 	 	
Operating Capacity 

(Gallons)

	 	 	
Applicable Percentage

	 	 	
Incentive 

Fee

	 
	
II - over $.60-$.70

	 	$	0.10	 	 	 	60,000,000	 	 	 	0.50	%	 	$	30,000	 
	
III -  over $.70-$.80

	 	$	0.10	 	 	 	60,000,000	 	 	 	1.00	%	 	$	60,000	 
	
IV - over $.80

	 	$	0.13333	 	 	 	60,000,000	 	 	 	1.50	%	 	$	120,000	 
	 	 	 	 	 	 
	
Step 3. Add fee for each tier to obtain total Incentive Fee:

	 	 	$	210,000	 

 

B-3

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00175-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00175-of-00352.parquet"}]]