Document:

EX10.3 Exchange Agreement

Execution Copy

EXCHANGE AGREEMENT
by and between
CARVER BANCORP, INC.
and
THE UNITED STATES DEPARTMENT OF THE TREASURY
Dated as of June 29, 2011

    

	
						
	 
	TABLE OF CONTENTS
	 

	 
	 
	 
	 
	Page
	

	ARTICLE I  THE CLOSING; CONDITIONS TO THE CLOSING
	 

	 
	 
	 
	 
	 

	Section 1.1
	The Closing.
	 
	 
	2
	

	Section 1.2
	Interpretation.
	 
	 
	5
	

	 
	 
	 
	 
	 

	 
	ARTICLE II EXCHANGE
	 

	 
	 
	 
	 
	 

	Section 2.1
	Exchange.
	 
	 
	5
	

	Section 2.2
	Exchange Documentation.
	 
	6
	

	Section 2.3
	Status of CDCI Preferred Shares after Closing.
	6
	

	 
	 
	 
	 
	 

	ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY

	 
	 
	 
	 
	 

	Section 3.1
	Existence and Power.
	 
	6
	

	Section 3.2
	Authorization and Enforceability.
	 
	7
	

	Section 3.3
	Exchange Shares.
	 
	7
	

	Section 3.4
	Community Development Financial Institution Status;
	8
	

	 
	Domestic Ownership.
	 
	 

	Section 3.5
	Non-Contravention.
	 
	8
	

	Section 3.6
	Anti-Takeover Provisions.
	 
	9
	

	Section 3.7
	No Company Material Adverse Effect.
	9
	

	Section 3.8
	Offering of Securities.    
	 
	10
	

	Section 3.9
	Brokers and Finders.
	 
	10
	

	Section 3.10
	CDCI Preferred Shares.
	 
	10
	

	 
	 
	 
	 
	 

	 
	ARTICLE IV COVENANTS
	 

	 
	 
	 
	 
	 

	Section 4.1
	Commercially Reasonable Efforts.
	 
	10
	

	Section 4.2
	Expenses and Further Assurances.
	 
	11
	

	Section 4.3
	Exchange Listing.
	 
	11
	

	Section 4.4
	Access, Information and Confidentiality.
	12
	

	Section 4.5
	CDFI Requirements.    
	 
	14
	

	Section 4.6
	Executive Compensation.    
	 
	15
	

	Section 4.7
	Certain Notifications Until Closing.    
	16
	

	Section 4.8
	Equity Investments.    
	17
	

	Section 4.9
	Amendment of Agreements Relating to the Equity
	17
	

	 
	Investments.
	 
	 
	 

	Section 4.10
	Predominantly Financial.
	17
	

	Section 4.11
	Capital Covenant.    
	 
	18
	

	Section 4.12
	Control by Foreign Bank or Company.
	18
	

	 
	 
	 
	 
	 

	 
	ARTICLE V ADDITIONAL AGREEMENTS
	 

	 
	 
	 
	 
	 

	Section 5.1
	Unregistered Exchange Shares.
	 
	18
	

	Section 5.2
	Legend.
	 
	 
	18
	

	Section 5.3
	Certain Transactions
	 
	19
	

	Section 5.4
	Transfer of Exchange Shares.
	 
	19
	

	
						
	Section 5.5
	Registration Rights.
	 
	19
	

	Section 5.6
	Voting Matters.
	 
	 
	22
	

	Section 5.7
	Restriction on Dividends and Repurchases.
	22
	

	Section 5.8
	Repurchase of Investor Securities.    
	24
	

	Section 5.9
	Savings and Loan Holding Company Status.    
	24
	

	Section 5.10
	Compliance with Employ American Workers Act.
	24
	

	Section 5.11
	Observer to the Board of Directors.
	24
	

	 
	 
	 
	 
	 

	 
	ARTICLE VI MISCELLANEOUS
	 

	 
	 
	 
	 
	 

	Section 6.1
	Termination.
	 
	 
	25
	

	Section 6.2
	Survival of Representations and Warranties.
	25
	

	Section 6.3
	Amendment.    
	 
	 
	25
	

	Section 6.4
	Waiver of Conditions.    
	25
	

	Section 6.5
	Governing Law; Submission to Jurisdiction, etc.
	26
	

	Section 6.6
	Notices.
	 
	 
	26
	

	Section 6.7
	Definitions
	 
	 
	27
	

	Section 6.8
	Assignment.
	 
	 
	30
	

	Section 6.9
	Severability.
	 
	 
	30
	

	Section 6.10
	No Third-Party Beneficiaries.
	 
	30
	

	Section 6.11
	Entire Agreement, etc. 
	 
	30
	

	Section 6.12
	Counterparts and Facsimile.
	 
	30
	

	Section 6.13
	Specific Performance.
	 
	31
	

	 
	 
	 
	 
	 

	 
	LIST OF ANNEXES
	 

	 
	 
	 
	 
	 

	ANNEX A:
	FORM OF OFFICER'S CERTIFICATE
	 

	ANNEX B:
	FORM OF OPINION
	 

	ANNEX C:
	FORM OF OFFICER'S CERTIFICATE (CDFI REQUIREMENTS)

	ANNEX D:
	FORM OF WAIVER
	 
	 

	
					
	 
	LIST OF SCHEDULES
	 
	 

	 
	 
	 
	 
	 

	SCHEDULE 3.1(b):
	CAPITALIZATION
	 
	 
	 

	SCHEDULE 3.5(c):
	NON-CONTRAVENTION
	 
	 
	 

	SCHEDULE 3.7:
	COMPANY MATERIAL ADVERSE EFFECT
	 
	 

	SCHEDULE 3.10:
	CDCI PREFERRED SHARES
	 
	 

	 
	 
	 
	 
	 

	 
	LIST OF EXHIBITS
	 
	 

	 
	 
	 
	 
	 

	EXHIBIT A: 
	CERTIFICATE OF DESIGNATIONS FOR SERIES C AND SERIES D
	 

	 
	PREFERRED STOCK
	 
	 
	 

	EXHIBIT B: 
	FORM OF CHARTER AMENDMENT
	 

	
		
	Defined Terms
	 

	 
	 

	Affiliate
	Section 6.7(b)

	Agreement
	Preamble

	Benefit Plans
	Section 1.1(d)(x)

	Business Combination
	Section 6.7(c)

	Capitalization Date
	Section 3.1(b)

	CDCI Preferred Shares
	Recitals

	CDFI
	Section 3.4(b)

	CDFI Application
	Section 1.1(d)(ix)

	CDFI Application Update
	Section 1.1(d)(ix)

	Certificate of Designations
	Section 6.7(f)

	Certificate of Incorporation
	Section 1.1(d)(i)

	Charter Amendment
	Section 1.1(d)(ii)

	Closing
	Section 1.1(a)

	Closing Date
	Section 1.1(a)

	Closing Price
	Section 6.7(d)

	Code
	Section 3.5(c)

	Common Stock
	Recitals

	Common Stock Authorization
	Section 1.1(d)(i)

	Company
	Preamble

	Company Material Adverse Effect
	Section 6.7(e)

	Company Subsidiary
	Section 3.5(a)

	Company Subsidiaries
	Section 3.5(a)

	Compensation Regulations
	Section 1.1(d)(x)

	Conversion Price
	Section 6.7(f)

	CPP Preferred Shares
	Recitals

	Designated Matters
	Section 6.7(g)

	EAWA
	Section 6.7(h)

	EESA
	Section 1.1(d)(x)

	Equity Investments
	Recitals

	Equity Investors
	Recitals

	Exchange
	Recitals

	Exchange Act
	Section 5.3(b)

	Exchange Agreement
	Recitals

	Exchange Shares
	Recitals

	Fund
	Section 1.1(d)(ix)

	GAAP
	Section 5.7(a)(ii)

	Governmental Entities
	Section 1.1(c)

	Holders
	Section 5.5(b)

	Indemnitee
	Section 5.5(c)

	Information
	Section 4.4(d)

	Investor
	Preamble

	Junior Stock
	Section 6.7(i)

	Meeting
	Section 4.1(b)

	NASDAQ
	Section 1.1(d)(viii)

	Observer
	Section 5.11

	Parity Stock
	Section 6.7(j)

	Preferred Stock
	Section 6.7(k)

	
		
	Preferred Stock Purchase Price
	Recitals

	Previously Disclosed
	Section 6.7(l)

	Private Placement
	Recitals

	Relevant Period
	Section 1.1(d)(x)

	SEC
	Section 3.5(b)

	Section 4.6 Employee
	Section 4.6(b)

	Securities Act
	Recitals

	Securities Purchase Agreement
	Recitals

	Senior Executive Officers
	Section 1.1(d)(x)

	Series C Conversion
	Recitals

	Series C Preferred Stock
	Recitals

	Series D Preferred Stock
	Recitals

	Share Dilution Amount
	Section 5.7(a)(ii)

	Status Report
	Section 4.8

	Stock Purchase Agreements
	Recitals

	Stockholder Approval
	Section 1.1(d)(i)

	Stockholder Proposals
	Section 1.1(d)(i)

	subsidiary
	Section 6.7(a)

	Targeted Completion Date
	Section 4.8

	Trading Day
	Section 6.7(m)

	Transfer
	Section 5.4

	Voting Authorization
	Section 1.1(d)(i)

EXCHANGE AGREEMENT, dated as of June 29, 2011 (this “Agreement”) by and between Carver Bancorp, Inc., a Delaware corporation (the “Company”), and the United States Department of the Treasury (the “Investor”).  All capitalized terms used herein and not otherwise defined shall have the respective meanings ascribed to them in the Exchange Agreement.
BACKGROUND
WHEREAS, on January 16, 2009, the Company and the Investor entered into that certain Securities Purchase Agreement - Standard Terms incorporated into a Letter Agreement, as amended from time to time (the “Securities Purchase Agreement”), pursuant to which the Company issued to the Investor 18,980 shares of the Company's preferred stock designated as “Fixed Rate Cumulative Perpetual Preferred Stock, Series A,” having a liquidation amount of $1,000 per share (the “CPP Preferred Shares”);
WHEREAS, on August 27, 2010, the Company and the Investor entered into that certain Exchange Agreement - Standard Terms incorporated into a Letter Agreement, as amended from time to time (the “Exchange Agreement”), pursuant to which the Company issued to the Investor in exchange for the CPP Preferred Shares, and the Investor is, as of the date hereof, the beneficial owner of, 18,980 shares of the Company's preferred stock designated as “Fixed Rate Cumulative Perpetual Preferred Stock, Series B,” having a liquidation amount of $1,000 per share (the “CDCI Preferred Shares”);
WHEREAS, on or about June 28, 2011, the Company entered into stock purchase agreements (the “Stock Purchase Agreements”) with certain qualified institutional investors and accredited investors (the “Equity Investors”), pursuant to which those investors agreed, subject to certain conditions, to purchase from the Company an aggregate of 55,000 shares of Series C mandatorily convertible non-voting participating preferred stock, the designations for which are attached hereto as Exhibit A (the “Series C Preferred Stock”), at a price of $1,000 per share (the “Preferred Stock Purchase Price”), yielding aggregate gross proceeds to the Company that will equal no less than $55,000,000 (the “Equity Investments”) in a private placement (the “Private Placement”) exempt from registration under the Securities Act of 1933, as amended (the “Securities Act”); 
WHEREAS, upon receipt of the Stockholder Approval and filing of the Charter Amendment, each share of Series C Preferred Stock will be converted (the “Series C Conversion”) into shares of common stock, par value $0.01 per share, of the Company (the “Common Stock”), subject to certain ownership limitations, and Series D convertible non-cumulative, non-voting participating preferred stock, the designations for which are attached hereto as Exhibit A (the “Series D Preferred Stock”); and
WHEREAS, the Company and the Investor desire, in connection with the Series C Conversion, and subject to the conditions set forth herein, to exchange (the “Exchange”) all of the CDCI Preferred Shares beneficially owned and held by the Investor, including all accrued and unpaid dividends on the CDCI Preferred Shares as of the Closing Date, for shares of Common Stock (such shares of Common Stock, the “Exchange Shares”).
NOW, THEREFORE, in consideration of the mutual covenants and agreements contained in this Agreement, the receipt and sufficiency of which are hereby acknowledged, and intending to be legally bound, the parties hereby agree as follows:

1

ARTICLE I
THE CLOSING; CONDITIONS TO THE CLOSING

Section 1.1 The Closing.

(a)The closing of the Exchange (the “Closing”) will take place at the offices of Alston & Bird LLP, 950 F Street NW, Washington, DC 20004, or remotely via the electronic or other exchange of documents and signature pages, as the parties may agree.  The Closing shall take place on the same day as the date on which the Series C Conversion becomes effective; provided that the conditions set forth in Section 1.1(c) and (d) shall have been satisfied or waived, or at such other place, time and date as shall be agreed between the Company and the Investor.  The time and date on which the Closing occurs is referred to in this Agreement as the “Closing Date”.

(b)Subject to the fulfillment or waiver of the conditions to the Closing in this Section 1.1, at the Closing (i) the Company will deliver the Exchange Shares to the Investor, as evidenced by one or more certificates dated the Closing Date and registered in the name of the Investor or its designee(s) (or if shares of Common Stock are uncertificated, cause the transfer agent for the Common Stock to register the Exchange Shares in the name of the Investor and deliver reasonably satisfactory evidence of such registration to the Investor) and (ii) the Investor will deliver the certificate representing the CDCI Preferred Shares to the Company.

(c)The respective obligations of each of the Investor and the Company to consummate the Exchange are subject to the fulfillment (or waiver by the Company and the Investor, as applicable) prior to the Closing of the conditions that (i) any approvals or authorizations of all United States and other governmental, regulatory or judicial authorities (collectively, “Governmental Entities”) required for the consummation of the Exchange shall have been obtained or made in form and substance reasonably satisfactory to each party and shall be in full force and effect and all waiting periods required by United States and other applicable law, if any, shall have expired and (ii) no provision of any applicable United States or other law and no judgment, injunction, order or decree of any Governmental Entity shall prohibit consummation of the Exchange as contemplated by this Agreement.

(d)The obligation of the Investor to consummate the Exchange is also subject to the fulfillment (or waiver by the Investor) at or prior to the Closing of each of the following conditions:

(i)the Company shall have obtained the necessary approval of the Company's stockholders (the “Stockholder Approval”) authorizing (i) an amendment to the Company's certificate of incorporation (the “Certificate of Incorporation”) increasing the authorized Common Stock to a number at least sufficient to support the issuance of the Exchange Shares and the issuance of Common Stock upon conversion of the Series C Preferred Stock and Series D Preferred Stock issuable only upon the receipt of the Stockholder Approval and mandatory conversion of the Series C Preferred Stock (the “Common Stock Authorization”), (ii) an amendment to the Certificate of Incorporation that would permit the Investor to vote the shares of Common Stock the Investor will hold following the Closing in excess of 9.9% of the outstanding shares of Common Stock (the “Voting Authorization”), (iii) the conversion of the Series C Preferred Stock, (iv) the issuance and conversion of Series D Preferred Stock, and (v) the exchange of the CDCI Preferred Shares for Exchange Shares (collectively, clauses (i) through (v) shall be the “Stockholder Proposals”);

2

(ii)the Company shall have duly adopted and filed with the State of Delaware an amendment to the Certificate of Incorporation (the “Charter Amendment”), in substantially the form attached hereto as Exhibit B, reflecting the Common Stock Authorization and the Voting Authorization, and the Company shall have delivered to the Investor a copy of the filed Charter Amendment with appropriate evidence from the Secretary of State that the filing has been accepted; 

(iii)the Company shall have issued Series C Preferred Stock to the Equity Investors in the Private Placement for aggregate gross proceeds to the Company of not less than $55,000,000, and all conditions, if any, to the effectiveness of the Series C Conversion shall have been satisfied or waived;

(iv)(A) the representations and warranties of the Company set forth in Article III of this Agreement shall be true and correct in all respects as though made on and as of the Closing Date (other than representations and warranties that by their terms speak as of another date, which representations and warranties shall be true and correct in all respects as of such other date) and (B) the Company shall have performed in all material respects all obligations required to be performed by it under this Agreement at or prior to the Closing;

(v)             the Investor shall have received a certificate, in substantially the form attached hereto as Annex A, signed on behalf of the Company by a Senior Executive Officer certifying to the effect that the conditions set forth in Section 1.1(d)(iv) have been satisfied;

(vi)the Company shall have delivered certificates in proper form or, with the prior consent of the Investor, evidence in book-entry form, evidencing the Exchange Shares to the Investor or its designee(s);

(vii)the Company shall have delivered to the Investor written opinions from counsel to the Company, addressed to the Investor and dated as of the Closing Date, in substantially the form attached hereto as Annex B; 

(viii)the Exchange Shares shall have been authorized for listing on the NASDAQ Stock Market, LLC (“NASDAQ”); 

(ix)the Company shall have delivered to the Investor prior to the date hereof either (i) a true, complete and correct certified copy of each CDFI Certification Application that each Certified Entity submitted to the Community Development Financial Institution Fund (the “Fund”) in connection with its certification as a CDFI along with any updates to the CDFI Certification Application necessary to make it true, complete and correct as of the date hereof or (ii), to the extent a copy of the CDFI Certification Application that any Certified Entity submitted to the Fund in connection with its certification as a CDFI is not available, a newly completed CDFI Certification Application with respect to such Certified Entity that is true, complete and correct as of the date hereof (the CDFI Certification Application delivered to the Investor pursuant to this Section 1.1(d)(ix), the “CDFI Application”), and, to the extent any information set forth in the CDFI Application is not true, complete and correct as of the Closing Date, the Company shall have delivered to the Investor an update to the CDFI Application (the “CDFI Application Update”), setting forth any information necessary to make the information set forth in the CDFI Application true, correct and complete as of the Closing Date; 

3

(x)(A) the Company shall have effected such changes to its compensation, bonus, incentive and other benefit plans, arrangements and agreements (including golden parachute, severance and employment agreements) (collectively, “Benefit Plans”) with respect to its Senior Executive Officers and any other employee of the Company or its Affiliates subject to Section 111 of the Emergency Economic Stabilization Act of 2008, as amended by the American Recovery and Reinvestment Act of 2009, or otherwise from time to time (“EESA”), as implemented by any guidance, rule or regulation thereunder, as the same shall be in effect from time to time (collectively, the “Compensation Regulations”) (and to the extent necessary for such changes to be legally enforceable, each of its Senior Executive Officers and other employees shall have duly consented in writing to such changes), as may be necessary, during the period in which any obligation of the Company arising from financial assistance under the Troubled Asset Relief Program remains outstanding (such period, as it may be further described in the Compensation Regulations, the “Relevant Period”), in order to comply with Section 111 of EESA or the Compensation Regulations; (B) the Investor shall have received a certificate signed on behalf of the Company by a Senior Executive Officer certifying to the effect that the condition set forth in Section 1.1(d)(x)(A) has been satisfied; “Senior Executive Officers” means the Company's “senior executive officers” as defined in Section 111 of the EESA and the Compensation Regulations; and (C) the Company shall have obtained waivers from all relevant directors, officers and employees of the Company necessary to ensure that the consummation of the transactions contemplated by this Agreement will not accelerate the vesting, payment or distribution of any equity-based awards, deferred cash awards or any nonqualified deferred compensation payable by the Company or any of its Affiliates; and

(xi)the Company shall have paid to Investor all accrued and unpaid dividends and/or interest due on the CDCI Preferred Shares as of the Closing Date.

(e)Within two (2) business days following the receipt by the Company of the Stockholder Approval, the Company shall provide a notice of the Exchange to the Investor, which shall state (i) the Closing Date (which date shall not be earlier than the later of (x) two (2) business days after the notice of the Exchange is delivered to the Investor and (y) the Mandatory Conversion Date (as defined in the Certificate of Designations), (ii) the Conversion Price and (iii) the number of Exchange Shares to be issued upon the exchange for each CDCI Preferred Share held by the Investor.

4

Section 1.2 Interpretation.
  When a reference is made in this Agreement to “Recitals,” “Articles,” “Sections,” “Annexes” or “Schedules” such reference shall be to a Recital, Article or Section of, or Annex or Schedule to, this Agreement, unless otherwise indicated.  The terms defined in the singular have a comparable meaning when used in the plural, and vice versa.  References to “herein,” “hereof,” “hereunder” and the like refer to this Agreement as a whole and not to any particular section or provision, unless the context requires otherwise.  The table of contents and headings contained in this Agreement are for reference purposes only and are not part of this Agreement.  Whenever the words “include,” “includes” or “including” are used in this Agreement, they shall be deemed followed by the words “without limitation.” No rule of construction against the draftsperson shall be applied in connection with the interpretation or enforcement of this Agreement, as this Agreement is the product of negotiation between sophisticated parties advised by counsel.  All references to “$” or “dollars” mean the lawful currency of the United States of America.  Except as expressly stated in this Agreement, all references to any statute, rule or regulation are to the statute, rule or regulation as amended, modified, supplemented or replaced from time to time (and, in the case of statutes, include any rules and regulations promulgated under the statute) and to any section of any statute, rule or regulation include any successor to the section.  References to a “business day” shall mean any day except Saturday, Sunday and any day on which banking institutions in the State of New York generally are authorized or required by law or other governmental actions to close.

ARTICLE II
             EXCHANGE

Section 2.1 Exchange.
  
(a) On the terms and subject to the conditions set forth in this Agreement, upon the Closing (i) the Company agrees to issue to the Investor, in exchange for its 18,980 CDCI Preferred Shares, a number of Exchange Shares equal to 18,980 multiplied by the quotient of which (x) the numerator is $1,000 and (y) the denominator is the Conversion Price and (ii) the Investor agrees to deliver to the Company the CDCI Preferred Shares in exchange for such number of Exchange Shares.  In lieu of any fractional Exchange Share otherwise issuable to the Investor pursuant to this Section 2.1(a), the Company shall pay an amount in cash (computed to the nearest cent) equal to the same fraction of the Closing Price of the Common Stock determined as of the second Trading Day immediately preceding the Closing Date.

(b) Following consummation of the Exchange, no further cash dividends shall be payable in respect of the CDCI Preferred Shares outstanding immediately prior to the Closing Date.

5

Section 2.2 Exchange Documentation.
      Settlement of the Exchange will take place on the Closing Date, at which time the Investor will cause delivery of the CDCI Preferred Shares to the Company or its designated agent and the Company will cause delivery of the Exchange Shares (together with cash in lieu of any fractional shares) to the Investor or its designated agent.

Section 2.3 Status of CDCI Preferred Shares after Closing.
The CDCI Preferred Shares exchanged for the Exchange Shares pursuant to this Article II are being reacquired by the Company and shall have the status of authorized but unissued shares of Preferred Stock of the Company undesignated as to series and may be designated or redesignated and issued or reissued, as the case may be, as part of any series of preferred stock of the Company; provided that such shares shall not be reissued as CPP Preferred Shares or CDCI Preferred Shares.

ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as Previously Disclosed, the Company represents and warrants to the Investor as of the date hereof and as of the Closing Date that:  

Section 3.1 Existence and Power.

(a) Organization, Authority and Significant Subsidiaries.  The Company is duly organized, validly existing and in good standing under the laws of the State of Delaware and has all necessary power and authority to own, operate and lease its properties and to carry on its business in all material respects as it is being currently conducted, and except as has not, individually or in the aggregate, had and would not reasonably be expected to have a Company Material Adverse Effect, has been duly qualified as a foreign corporation for the transaction of business and is in good standing under the laws of each other jurisdiction in which it owns or leases properties or conducts any business so as to require such qualification; each subsidiary of the Company that is a “significant subsidiary” within the meaning of Rule 1-02(w) of Regulation S-X under the Securities Act, including, without limitation, Carver Federal Savings Bank, has been duly organized and is validly existing in good standing under the laws of the jurisdiction of its respective incorporation or organization.  The Certificate of Incorporation and bylaws of the Company, copies of which have been provided to the Investor prior to the date hereof, are true, complete and correct copies of such documents as in full force and effect as of the date hereof.

(b) Capitalization.  The authorized capital stock of the Company, and the outstanding capital stock of the Company (including securities convertible into, or exercisable or exchangeable for, capital stock of the Company), as of the most recent fiscal month end preceding the date hereof (the “Capitalization Date”) is set forth on Schedule 3.1(b).  The outstanding shares of capital stock of the Company have been duly authorized and are validly issued and outstanding, fully paid and nonassessable, and subject to no preemptive rights (and were not issued in violation of any preemptive rights).  As of the date hereof, the Company does not have outstanding any securities or other obligations providing the holder the right to acquire Common Stock that is not reserved for issuance as specified on Schedule 3.1(b), and, except as disclosed on Schedule 3.1(b), the Company has not made any other commitment to authorize, issue or sell any Common Stock except pursuant to this Agreement and the Stock Purchase Agreements.  Since the Capitalization Date, except pursuant to this Agreement and the Stock Purchase Agreements, the Company has not issued any shares of Common Stock other than (i) shares issued upon the exercise of stock options or delivered under other equity-based awards or other convertible securities or warrants which were issued and outstanding on the Capitalization Date and disclosed on Schedule 3.1(b) and (ii) shares disclosed on Schedule 3.1(b).
6

Section 3.2 Authorization and Enforceability.

(a) The Company has the corporate power and authority to execute and deliver this Agreement and to carry out its obligations hereunder (which, following receipt of the Stockholder Approval and filing of the Charter Amendment, includes the issuance of the Exchange Shares).

(b) The execution, delivery and performance by the Company of this Agreement and the consummation of the transactions contemplated hereby have been duly authorized by all necessary corporate action on the part of the Company, subject to receipt of the Stockholder Approval, and no further approval or authorization is required on the part of the Company or its stockholders, other than the Stockholder Approval.  This Agreement is a valid and binding obligation of the Company enforceable against the Company in accordance with its terms, subject to the Bankruptcy Exceptions.

(c) The Stock Purchase Agreements entered into with the Equity Investors, copies of which have been provided to the Investor prior to the date hereof, are true, complete and correct copies of such documents as in full force and effect as of the date hereof.

Section 3.3 Exchange Shares.
When issued and delivered pursuant to this Agreement, the Exchange Shares will be duly and validly authorized by all necessary action, will be duly and validly issued and fully paid and nonassessable, will not be issued in violation of any preemptive rights, and will not subject the holder thereof to personal liability.

        

7

Section 3.4 Community Development Financial Institution Status; Domestic Ownership.

(a) The Company, collectively with all of its “Affiliates” (within the meaning of 12 C.F.R. 1805.104), satisfies the requirements of 12 C.F.R. 1805.200(b).

(b) Each Certified Entity (A) is a regulated community development financial institution (a “CDFI”) currently certified by the Fund of the United States Department of the Treasury pursuant to 12 C.F.R. 1805.201(a) as having satisfied the eligibility requirements of the Fund's Community Development Financial Institutions Program and (B) satisfies the eligibility requirements for a CDFI set forth in 12 C.F.R. 1805.201(b)(1) - (6).

(c) The Company is not a Bank Holding Company, Savings and Loan Holding Company, bank or savings association controlled (within the meaning of the Bank Holding Company Act of 1956 (12 U.S.C. 1841(a)(2)) and 12 C.F.R. 225(a)(i) in the case of Bank Holding Companies and banks and the Home Owners' Loan Act of 1933 (12 U.S.C. 1467a (a)(2)) and 12 C.F.R. 583.7 in the case of Savings and Loan Holding Companies and savings associations) by a foreign bank or company.

Section 3.5 Non-Contravention.

(a) The execution, delivery and performance by the Company of this Agreement and the consummation of the transactions contemplated hereby, and compliance by the Company with the provisions hereof, will not (A) violate, conflict with, or result in a breach of any provision of, or constitute a default (or an event which, with notice or lapse of time or both, would constitute a default) under, or result in the termination of, or accelerate the performance required by, or result in a right of termination or acceleration of, or result in the creation of, any lien, security interest, charge or encumbrance upon any of the properties or assets of the Company or any subsidiary of the Company (each, a “Company Subsidiary” and collectively, the “Company Subsidiaries”) under any of the terms, conditions or provisions of (i) its organizational documents or (ii) any note, bond, mortgage, indenture, deed of trust, license, lease, agreement or other instrument or obligation to which the Company or any Company Subsidiary is a party or by which it or any Company Subsidiary may be bound, or to which the Company or any Company Subsidiary or any of the properties or assets of the Company or any Company Subsidiary may be subject, or (B) subject to compliance with the statutes and regulations referred to in the next paragraph, violate any statute, rule or regulation or any judgment, ruling, order, writ, injunction or decree applicable to the Company or any Company Subsidiary or any of their respective properties or assets except, in the case of clauses (A)(ii) and (B), for those occurrences that, individually or in the aggregate, have not had and would not reasonably be expected to have a Company Material Adverse Effect.

(b) Other than the filing of the Charter Amendment with the State of Delaware, any current report on Form 8-K required to be filed with the Securities and Exchange Commission (“SEC”), and the filing of the Notification for Listing of Additional Shares with NASDAQ, such filings and approvals as are required to be made or obtained under any state “blue sky” laws and such consents and approvals that have been made or obtained, no notice to, filing with or review by, or authorization, consent or approval of, any Governmental Entity is required to be made or obtained by the Company in connection with the consummation by the Company of the Exchange, except for any such notices, filings, reviews, authorizations, consents and approvals the failure of which to make or obtain would not, individually or in the aggregate, reasonably be expected to have a Company Material Adverse Effect.

        

8

(c) Except as would not, individually or in the aggregate, reasonably be expected to have a Company Material Adverse Effect, (A) the execution, delivery and performance by the Company of this Agreement and the consummation of the transactions contemplated hereby (including for this purpose the consummation of the Exchange) and compliance by the Company with the provisions hereof will not (1) result in any payment (including any severance payment, payment of unemployment compensation, “excess parachute payment” (within the meaning of the Internal Revenue Code of 1986, as amended (the “Code”)), “golden parachute payment” (as defined in the EESA, as implemented by the Compensation Regulations) or forgiveness of indebtedness or otherwise) becoming due to any current or former employee, officer or director of the Company or any Company Subsidiary from the Company or any Company Subsidiary under any benefit plan or otherwise, (2) increase any benefits otherwise payable under any benefit plan, (3) except as disclosed on Schedule 3.5(c), result in any acceleration of the time of payment or vesting of any such benefits, (4) require the funding or increase in the funding of any such benefits or (5) result in any limitation on the right of the Company or any Company Subsidiary to amend, merge, terminate or receive a reversion of assets from any benefit plan or related trust and (B) neither the Company nor any Company Subsidiary has taken, or permitted to be taken, any action that required, and no circumstances exist that will require the funding, or increase in the funding, of any benefits or resulted, or will result, in any limitation on the right of the Company or any Company Subsidiary to amend, merge, terminate or receive a reversion of assets from any benefit plan or related trust.

Section 3.6 Anti-Takeover Provisions.
The Board of Directors has taken all necessary action to ensure that the transactions contemplated by this Agreement and the consummation of the transactions contemplated hereby will be exempt from any anti-takeover or similar provisions of the Company's Certificate of Incorporation and bylaws, and any other provisions of any applicable “moratorium”, “control share”, “fair price”, “interested stockholder” or other anti-takeover laws and regulations of any jurisdiction.  The Company has not adopted any stockholder rights plan or similar arrangement relating to accumulations of beneficial ownership of Common Stock or a change in control of the Company.

Section 3.7 No Company Material Adverse Effect.
Since August 27, 2010, no fact, circumstance, event, change, occurrence, condition or development has occurred that, individually or in the aggregate, has had or would reasonably be likely to have a Company Material Adverse Effect, except as disclosed on Schedule 3.7.

9

Section 3.8 Offering of Securities.
Neither the Company nor any person acting on its behalf has taken any action (including any offering of any securities of the Company under circumstances which would require the integration of such offering with the offering of the Exchange Shares under the Securities Act and the rules and regulations of the SEC promulgated thereunder), which might subject the offering, issuance or sale of the Exchange Shares to the Investor pursuant to this Agreement to the registration requirements of the Securities Act.

Section 3.9 Brokers and Finders.
No broker, finder or investment banker is entitled to any financial advisory, brokerage, finder's or other fee or commission in connection with this Agreement or the transactions contemplated hereby based upon arrangements made by or on behalf of the Company or any Company Subsidiary for which the Investor could have any liability.

Section 3.10 CDCI Preferred Shares.
      Except as disclosed on Schedule 3.10, the Company has not breached any representation, warranty or covenant set forth in the Exchange Agreement or any of the other documents governing the CDCI Preferred Shares.
ARTICLE IV        
COVENANTS

Section 4.1 Commercially Reasonable Efforts.
  
      (a) Subject to the terms and conditions of this Agreement, each of the parties will use its commercially reasonable efforts in good faith to take, or cause to be taken, all actions, and to do, or cause to be done, all things necessary, proper or desirable, or advisable under applicable laws, so as to permit consummation of the Exchange, including the consummation of the investments contemplated by the Stock Purchase Agreements and the transactions contemplated thereby, as promptly as practicable and otherwise to enable consummation of the transactions contemplated hereby and shall use commercially reasonable efforts to cooperate with the other party to that end.

(b) The Company shall call a meeting (the “Meeting”) of its stockholders, to be held no later than five months following the closing date of the Equity Investments, to vote on the Stockholder Proposals.  The Company's Board of Directors shall recommend to the Company's stockholders that such stockholders vote in favor of the Stockholder Proposals. In connection with the Meeting, the Company shall prepare and file with the SEC, not more than forty-five (45) days following the closing date of the Equity Investments, a preliminary proxy statement, shall use its reasonable best efforts to respond to any comments of the SEC or its staff thereon and to cause a definitive proxy statement related to the Meeting to be mailed to the Company's stockholders not more than five business days after clearance thereof by the SEC, and shall use its reasonable best efforts to solicit proxies for such stockholder approval of the Stockholder Proposals. If at any time prior to the Meeting there shall occur any event that is required to be set forth in an amendment or supplement to the proxy statement, the Company shall as promptly as practicable prepare and mail to its stockholders such an amendment or supplement.  In the event that the approval of any of the Stockholder Proposals is not obtained at the Meeting, the Company shall include a proposal to approve (and the Company's Board of Directors shall recommend approval of) each such proposal at a meeting of its stockholders, to be held no less than once in each subsequent four-month period following the date on which the Meeting is held, until all such approvals are obtained or made.
10

        

(c) None of the information supplied by the Company or any of the Company Subsidiaries for inclusion in any proxy statement in connection with the Meeting, or any subsequent special stockholders' meetings referenced in Section 4.1(b), will, at the date it is filed with the SEC, when first mailed to the Company's stockholders and at the time of any stockholders' meeting, and at the time of any amendment or supplement thereof, contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements therein, in light of the circumstances under which they are made, not misleading.

(d) Within five business days following the receipt of the Stockholder Approval, the Company shall have duly executed and filed the Charter Amendment with the State of Delaware.

Section 4.2 Expenses and Further Assurances.
  
(a) If requested by the Investor, the Company shall pay all reasonable out of pocket and documented costs and expenses associated with the Exchange, including, but not limited to, the reasonable fees, disbursements and other charges of the Investor's legal counsel and financial advisors.

(b) The Company shall, at the Company's sole cost and expense, (i) furnish to the Investor all instruments, documents and other agreements required to be furnished by the Company pursuant to the terms of this Agreement, including, without limitation, any documents required to be delivered pursuant to Section 5.5 below, or which are reasonably requested by the Investor in connection therewith, (ii) execute and deliver to the Investor such documents, instruments, certificates, assignments and other writings, and do such other acts necessary or desirable, to evidence, preserve and/or protect the Exchange Shares purchased by the Investor, as the Investor may reasonably require, and (iii) do and execute all and such further lawful and reasonable acts, conveyances and assurances for the better and more effective carrying out of the intents and purposes of this Agreement, as the Investor shall reasonably require from time to time.

Section 4.3 Exchange Listing.
  The Company shall, at its expense, use its reasonable best efforts to list the Exchange Shares on the NASDAQ Global Market or, if the Company is unable to maintain such listing despite its reasonable best efforts to do so, then on the NASDAQ Capital Market, and, if such listing is approved, shall, at its expense, use its reasonable best efforts to maintain such listing of the Exchange Shares on the NASDAQ Global Market or the NASDAQ Capital Market.

11

Section 4.4 Access, Information and Confidentiality.

(a) From the date hereof until the date when the Investor no longer holds any debt or equity securities of the Company or an Affiliate of the Company acquired pursuant to this Agreement, the Exchange Agreement or the Securities Purchase Agreement (including, for the avoidance of doubt, the Exchange Shares, the CDCI Preferred Shares and the CPP Preferred Shares), the Company will permit the Investor and its agents, consultants, contractors and advisors (i) acting through the Company's Appropriate Federal Banking Agency, or otherwise to the extent necessary to evaluate, manage or transfer its investment in the Company, to examine the corporate books, Tax returns (including all schedules and attachments thereto) and other information reasonably requested by the Investor relating to Taxes and make copies thereof and to discuss the affairs, finances and accounts of the Company and the Company Subsidiaries with the principal officers of the Company, all upon reasonable notice and at such reasonable times and as often as the Investor may reasonably request and (ii) to review any information material to the Investor's investment in the Company provided by the Company to its Appropriate Federal Banking Agency.

(b) From the date hereof until the date when the Investor no longer holds any debt or equity securities of the Company or an Affiliate of the Company acquired pursuant to this Agreement, the Exchange Agreement or the Securities Purchase Agreement (including, for the avoidance of doubt, the Exchange Shares, the CDCI Preferred Shares and the CPP Preferred Shares), the Company shall permit, and shall cause each of the Company's Subsidiaries to permit (A) the Investor and its agents, consultants, contractors, (B) the Special Inspector General of the Troubled Asset Relief Program, and (C) the Comptroller General of the United States access to personnel and any books, papers, records or other data, in each case, to the extent relevant to ascertaining compliance with the financing terms and conditions; provided that prior to disclosing any information pursuant to clause (B) or (C), the Special Inspector General of the Troubled Asset Relief Program and the Comptroller General of the United States shall have agreed, with respect to documents obtained under this Agreement in furtherance of its function, to follow applicable law and regulation (and the applicable customary policies and procedures) regarding the dissemination of confidential materials, including redacting confidential information from the public version of its reports and soliciting the input from the Company as to information that should be afforded confidentiality, as appropriate.

(c) From the date hereof until the date when the Investor no longer holds any debt or equity securities of the Company or an Affiliate of the Company acquired pursuant to this Agreement, the Exchange Agreement or the Securities Purchase Agreement (including, for the avoidance of doubt, the Exchange Shares, the CDCI Preferred Shares and the CPP Preferred Shares), the Company will deliver, or cause to be delivered, to the Investor:

(i)as soon as available after the end of each fiscal year of the Company, and in any event within 90 days thereafter, a consolidated balance sheet of the Company as of the end of such fiscal year, and consolidated statements of income, retained earnings and cash flows of the Company for such year, in each case prepared in accordance with GAAP and setting forth in each case in comparative form the figures for the previous fiscal year of the Company, and which shall be audited to the extent audited financial statements are available;

(ii)as soon as available after the end of the first, second and third quarterly periods in each fiscal year of the Company, a copy of any quarterly reports provided to other stockholders of the Company or Company management by the Company;

12

(iii)as soon as available after the Company receives any assessment of the Company's internal controls, a copy of such assessment;
       
(iv)annually on a date specified by the Investor, a completed survey, in a form specified by the Investor, providing, among other things, a description of how the Company has utilized the funds the Company received in connection with the sale of the CPP Preferred Shares and the effects of such funds on the operations and status of the Company;

(v)as soon as such items become effective, any amendments to the Certificate of Incorporation, bylaws or other organizational documents of the Company; and

(vi)at the same time as such items are sent to any stockholders of the Company, copies of any information or documents sent by the Company to its stockholders.

(d) The Investor will use reasonable best efforts to hold, and will use reasonable best efforts to cause its agents, consultants, contractors, advisors, and United States executive branch officials and employees, to hold, in confidence all non-public records, books, contracts, instruments, computer data and other data and information (collectively, “Information”) concerning the Company furnished or made available to it by the Company or its representatives pursuant to this Agreement (except to the extent that such information can be shown to have been (i) previously known by such party on a non-confidential basis, (ii) in the public domain through no fault of such party or (iii) later lawfully acquired from other sources by the party to which it was furnished (and without violation of any other confidentiality obligation)); provided that nothing herein shall prevent the Investor from disclosing any Information to the extent required by applicable laws or regulations or by any subpoena or similar legal process.  The Investor understands that the Information may contain commercially sensitive confidential information entitled to an exception from a Freedom of Information Act request.

(e) Nothing in this Section shall be construed to limit the authority that the Special Inspector General of the Troubled Asset Relief Program, the Comptroller General of the United States or any other applicable regulatory authority has under law.

(f) The Investor's information rights pursuant to Sections 4.4(c)(i), (ii), (iii), (v) and (vi) and the Investor's right to receive certifications from the Company pursuant to Section 4.5(b) may be assigned by the Investor to a transferee or assignee holding at least 2% of the Exchange Shares.

13

Section 4.5 CDFI Requirements.

(a) From the date hereof until the date when the Investor no longer holds any debt or equity securities of the Company or an Affiliate of the Company acquired pursuant to this Agreement, the Exchange Agreement or the Securities Purchase Agreement (including, for the avoidance of doubt, the Exchange Shares, the CDCI Preferred Shares and the CPP Preferred Shares), each Certified Entity shall (i) be certified by the Fund as a CDFI; (ii) together with its Affiliates, collectively meet the eligibility requirements of 12 C.F.R. 1805.200(b); (iii) have a primary mission of promoting community development, as may be determined by the Investor from time to time, based on criteria set forth in 12 C.F.R. 1805.201(b)(l); (iv) provide Financial Products, Development Services, and/or other similar financing as a predominant business activity in arm's-length transactions; (v) serve a Target Market by serving one or more Investment Areas and/or Targeted Populations as may be determined by the Investor from time to time, substantially in the manner set forth in 12 C.F.R. 1805.201(b)(3); (vi) provide Development Services in conjunction with its Financial Products, directly, through an Affiliate or through a contract with a third-party provider; (vii) maintain accountability to residents of the applicable Investment Area(s) or Targeted Population(s) through representation on its governing Board of Directors or otherwise; and (viii) remain a non-governmental entity which is not an agency or instrumentality of the United States of America, or any State or political subdivision thereof, as described in 12 C.F.R. 1805.201(b)(6) and within the meaning of any supplemental regulations or interpretations of 12 C.F.R. 1805.201(b)(6) or such supplemental regulations published by the Fund. Notwithstanding any other provision hereof, as used in this Section 4.5(a), the terms “Affiliates”; “Financial Products”; “Development Services”; “Target Market”; “Investment Areas”; and “Targeted Populations” have the meanings ascribed to such terms in 12 C.F.R. 1805.104.

(b) From the date hereof until the date when the Investor no longer holds any debt or equity securities of the Company or an Affiliate of the Company acquired pursuant to this Agreement, the Exchange Agreement or the Securities Purchase Agreement (including, for the avoidance of doubt, the Exchange Shares, the CDCI Preferred Shares and the CPP Preferred Shares), the Company shall deliver to the Investor (i)(x) on the date that is 180 days after the Closing Date and (y) annually on the same date on which the Company delivers the documentation required under Section 4.4(c)(i) to the Investor, a certificate signed on behalf of the Company by a Senior Executive Officer, in substantially the form attached hereto as Annex C, certifying (A) that the Company and each Certified Entity remains in compliance with the covenants set forth in Section 4.5(a); (B) that the information in the CDFI Application, as modified by any updates to the CDFI Application provided by the Company to the Investor on or prior to the date of such certificate, with respect to the covenants set forth in Section 4.5(a)(ii) and Section 4.5(a)(iv) remains true, correct and complete as of such date or, to the extent any information set forth in the CDFI Application, as modified by any updates to the CDFI Application provided by the Company to the Investor on or prior to the date of such certificate, with respect to such covenants needs to be updated or supplanted to make it true, complete and correct as of such date, that an updated narrative to the CDFI Application setting forth any information necessary to make the information set forth in the CDFI Application true, complete and correct as of such date; (C) either (a) that the contracts and material agreements entered into by each Certified Entity with respect to Development Services previously disclosed to the Investor remain in effect or (b) that attached are any new contracts and material agreements entered into by the Certified Entity with respect to Development Services; 

14

(D) a list of the names and addresses of the individuals which comprise the board of directors of each Certified Entity as of such date and, to the extent any of such individuals was not a member of the board of directors of such Certified Entity as of the last certification to the Investor, a narrative describing such individual's relationship to the applicable Investment Area(s) and Targeted Population(s) or, if such Certified Entity maintains accountability to residents of the applicable Investment Area(s) or Target Population(s) through means other than representation on its governing board of directors and such means have changed since the date of the last certification to the Investor, a narrative describing such change; (E) that each Certified Entity is not an agency of the United States of America, or any State or political subdivision thereof, as described in 12 C.F.R. 1805.201(b)(6) and within the meaning of any supplemental regulations or interpretations of 12 C.F.R. 1805.201(b)(6) or such supplemental regulations published by the Fund and (F) that the Company remains in compliance with the covenants set forth in Section 5.9 and Section 4.12 and (ii) within five (5) business days of receipt, copies of any notices, correspondence or other written communication between each Certified Entity and the Fund, including any form that such Certified Entity is required to provide to the Fund due to the occurrence of a “Material Event” within the meaning of the Fund's CDFI Certification Procedures.

(c) The Company shall immediately notify the Investor upon the occurrence of any breach of any of the covenants set forth in this Section 4.5.

Section 4.6 Executive Compensation.

(a) Benefit Plans.  During the Relevant Period, the Company shall take all necessary action to ensure that the Benefit Plans of the Company and its Affiliates comply in all respects with, and shall take all other actions necessary to comply with, Section 111 of the EESA, as implemented by the Compensation Regulations, and neither the Company nor any Affiliate shall adopt any new Benefit Plan (i) that does not comply therewith or (ii) that does not expressly state and require that such Benefit Plan and any compensation thereunder shall be subject to any relevant Compensation Regulations adopted, issued or released on or after the date any such Benefit Plan is adopted.  To the extent that EESA and/or the Compensation Regulations are amended or otherwise change during the Relevant Period in a manner that requires changes to then-existing Benefit Plans, or that requires other actions, the Company and its Affiliates shall effect such changes to its or their Benefit Plans, and take such other actions, as promptly as practicable after it has actual knowledge of such amendments or changes in order to be in compliance with this Section 4.6(a) (and shall be deemed to be in compliance for a reasonable period to effect such changes).  In addition, the Company and its Affiliates shall take all necessary action, other than to the extent prohibited by applicable law or regulation applicable outside of the United States, to ensure that the consummation of the transactions contemplated by this Agreement will not accelerate the vesting, payment or distribution of any equity-based awards, deferred cash awards or any nonqualified deferred compensation payable by the Company or any of its Affiliates.

(b) Additional Waivers.  After the Closing Date, in connection with the hiring or promotion of a Section 4.6 Employee and/or the promulgation of applicable Compensation Regulations or otherwise, to the extent any Section 4.6 Employee shall not have executed a waiver with respect to the application to such Section 4.6 Employee of the Compensation Regulations, the Company shall use its best efforts to (i) obtain from such Section 4.6 Employee a waiver in substantially the form attached hereto as Annex D and (ii) deliver such waiver to the Investor as promptly as possible, in each case, within sixty days of the Closing Date or, if later, within sixty days of such Section 4.6 Employee becoming subject to the requirements of this Section.  “Section 4.6 Employee” means (A) each Senior Executive Officer and (B) any other employee of the Company or its Affiliates determined at any time to be subject to Section 111 of EESA and the Compensation Regulations.

15

(c) Clawback.  In the event that any Section 4.6 Employee receives a payment in contravention of the provisions of this Section 4.6, the Company shall promptly provide such individual with written notice that the amount of such payment must be repaid to the Company in full within fifteen business days following receipt of such notice or such earlier time as may be required by the Compensation Regulations and shall promptly inform the Investor (i) upon discovering that a payment in contravention of this Section 4.6 has been made and (ii) following the repayment to the Company of such amount and shall take such other actions as may be necessary to comply with the Compensation Regulations.

(d) Limitation on Deductions.  During the Relevant Period, the Company agrees that it shall not claim a deduction for remuneration for federal income tax purposes in excess of $500,000 for each Senior Executive Officer that would not be deductible if Section 162(m)(5) of the Code applied to the Company.

(e) Amendment to Prior Agreement.  The parties agree that, effective as of the date hereof, Section 4.1(e) of the Exchange Agreement shall be amended in its entirety by replacing such Section 4.1(e) with the provisions set forth in this Section 4.6 and any terms included in this Section 4.6 that are not otherwise defined in the Exchange Agreement shall have the meanings ascribed to such terms in this Agreement.
       

Section 4.7 Certain Notifications Until Closing.
      From the date hereof until the Closing, the Company shall promptly notify the Investor of (i) any fact, event or circumstance of which it is aware and which would reasonably be likely to cause any representation or warranty of the Company contained in this Agreement to be untrue or inaccurate in any material respect or to cause any covenant or agreement of the Company contained in this Agreement not to be complied with or satisfied in any material respect and (ii) except as Previously Disclosed, any fact, circumstance, event, change, occurrence, condition or development of which the Company is aware and which, individually or in the aggregate, has had or would reasonably be likely to have a Company Material Adverse Effect; provided, however, that delivery of any notice pursuant to this Section 4.7 shall not limit or affect any rights of or remedies available to the Investor; provided, further, that a failure to comply with this Section 4.7 shall not constitute a breach of this Agreement or the failure of any condition set forth in Section 1.1 to be satisfied unless the underlying Company Material Adverse Effect or material breach would independently result in the failure of a condition set forth in Section 1.1 to be satisfied.

16
            

Section 4.8 Equity Investments.
      The Company has informed the Investor that the Company intends to pursue the closings of the Equity Investments by June 7, 2011 (the “Targeted Completion Date”).  The Company will use its commercially reasonable efforts to consummate the Equity Investments by the Targeted Completion Date.  Until the Equity Investments have been consummated (or the Company and the Investor agree that the Equity Investments are no longer susceptible to consummation on terms and conditions that are in the Company's best interest), the Company shall provide the Investor with a reasonably detailed written report regarding the status of the Equity Investments at least once every two weeks and more frequently if reasonably requested by the Investor; provided, however, that if the Equity Investments are not consummated by the time of its Targeted Completion Date, the Company shall, with respect to the non-consummated Equity Investments, (x) within five business days after the Targeted Completion Date provide to the Investor a reasonably detailed written description of the status of such Equity Investments including the Company's best estimate of the steps and timeline to complete such Equity Investments (the “Status Report”) and (y) thereafter, no less frequently than monthly and more frequently if reasonably requested by the Investor until such Equity Investments have been consummated, provide to the Investor an updated version of the Status Report.

Section 4.9 Amendment of Agreements Relating to the Equity Investments.
      The Company will not, without the prior written consent of the Investor, (i) agree to any amendment, waiver or modification of the Stock Purchase Agreements or any other documents governing the terms of the Equity Investments (other than corrections of obvious errors, if any, or other ministerial amendments) or (ii) enter into any new agreements relating to the Equity Investments, in each case to the extent such amendment, waiver, modification or new agreement is adverse to the Investor's interests under this Agreement.

Section 4.10 Predominantly Financial.
     From the date hereof until the date when the Investor no longer holds any debt or equity securities of the Company or an Affiliate of the Company acquired pursuant to this Agreement, the Exchange Agreement or the Securities Purchase Agreement (including, for the avoidance of doubt, the Exchange Shares, the CDCI Preferred Shares and the CPP Preferred Shares), the Company, to the extent it is not itself an insured depository institution, agrees to remain predominantly engaged in financial activities. A company is predominantly engaged in financial activities if the annual gross revenues derived by the company and all subsidiaries of the company (excluding revenues derived from subsidiary depository institutions), on a consolidated basis, from engaging in activities that are financial in nature or are incidental to a financial activity under subsection (k) of Section 4 of the Bank Holding Company Act of 1956 (12 U.S.C. 1843(k)) represent at least 85 percent of the consolidated annual gross revenues of the company.

17

Section 4.11 Capital Covenant.
      From the date hereof until the date when the Investor no longer holds any debt or equity securities of the Company or an Affiliate of the Company acquired pursuant to this Agreement, the Exchange Agreement or the Securities Purchase Agreement (including, for the avoidance of doubt, the Exchange Shares, the CDCI Preferred Shares and the CPP Preferred Shares), the Company and the Company Subsidiaries shall maintain such capital as may be necessary to meet the minimum capital requirements of the Appropriate Federal Banking Agency, as in effect from time to time.

       
Section 4.12 Control by Foreign Bank or Company.
      From the date hereof until the date when the Investor no longer holds any debt or equity securities of the Company or an Affiliate of the Company acquired pursuant to this Agreement, the Exchange Agreement or the Securities Purchase Agreement (including, for the avoidance of doubt, the Exchange Shares, the CDCI Preferred Shares and the CPP Preferred Shares), the Company shall not be controlled (within the meaning of the Bank Holding Company Act of 1956 (12 U.S.C. 1841(a)(2)) and 12 C.F.R. 225(a)(i) in the case of Bank Holding Companies and banks and the Home Owners' Loan Act of 1933 (12 U.S.C. 1467a (a)(2)) and 12 C.F.R. 583.7 in the case of Savings and Loan Holding Companies and savings associations) by a foreign bank or company.

ARTICLE V
ADDITIONAL AGREEMENTS

Section 5.1 Unregistered Exchange Shares.
  The Investor acknowledges that the Exchange Shares have not been registered under the Securities Act or under any state securities laws.  The Investor (a) is acquiring the Exchange Shares pursuant to an exemption from registration under the Securities Act solely for investment with no present intention to distribute them to any person in violation of the Securities Act or any applicable U.S. state securities laws, (b) will not sell or otherwise dispose of any of the Exchange Shares, except in compliance with the registration requirements or exemption provisions of the Securities Act and any applicable U.S. state securities laws, and (c) has such knowledge and experience in financial and business matters and in investments of this type that it is capable of evaluating the merits and risks of the Exchange and of making an informed investment decision.
Section 5.2 Legend.

(a) The Investor agrees that all certificates or other instruments representing the Exchange Shares will bear a legend substantially to the following effect:
“THE SECURITIES REPRESENTED BY THIS INSTRUMENT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE TRANSFERRED, SOLD OR OTHERWISE DISPOSED OF EXCEPT WHILE A REGISTRATION STATEMENT RELATING THERETO IS IN EFFECT UNDER SUCH ACT AND APPLICABLE STATE SECURITIES LAWS OR PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER SUCH ACT OR SUCH LAWS.”
18

(b) In the event that any Exchange Shares (i) become registered under the Securities Act or (ii) are eligible to be transferred without restriction in accordance with Rule 144 or another exemption from registration under the Securities Act (other than Rule 144A), the Company shall issue new certificates or other instruments representing such Exchange Shares, which shall not contain the applicable legend in Section 5.2(a) above; provided that the Investor surrenders to the Company the previously issued certificates or other instruments.

Section 5.3 Certain Transactions.

(a) The Company will not merge or consolidate with, or sell, transfer or lease all or substantially all of its property or assets to, any other party unless the successor, transferee or lessee party (or its ultimate parent entity), as the case may be (if not the Company), expressly assumes the due and punctual performance and observance of each and every covenant, agreement and condition of this Agreement to be performed and observed by the Company.

(b) Without the prior written consent of the Investor, until such time as the Investor shall cease to own any securities of the Company acquired pursuant to this Agreement, the Exchange Agreement or the Securities Purchase Agreement (including, for the avoidance of doubt, the Exchange Shares, the CDCI Preferred Shares and the CPP Preferred Shares), the Company shall not permit any of its “significant subsidiaries” (as such term is defined in Rule 12b-2 promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) to (i) engage in any merger, consolidation, statutory share exchange or similar transaction following the consummation of which such significant subsidiary is not wholly-owned by the Company, (ii) dissolve or sell all or substantially all of its assets or property other than in connection with an internal reorganization or consolidation involving wholly-owned subsidiaries of the Company or (iii) issue or sell any shares of its capital stock or any securities convertible or exercisable for any such shares, other than issuances or sales in connection with an internal reorganization or consolidation involving wholly-owned subsidiaries of the Company.

Section 5.4 Transfer of Exchange Shares.
Subject to compliance with applicable securities laws, the Investor shall be permitted to transfer, sell, assign or otherwise dispose of (“Transfer”) all or a portion of the Exchange Shares at any time, and the Company shall take all steps as may be reasonably requested by the Investor to facilitate the Transfer of the Exchange Shares.

Section 5.5 Registration Rights.

(a) The Exchange Shares shall be Registrable Securities under the Exchange Agreement and, upon their issuance, the provisions of Section 4.1(j) and Annex E of the Exchange Agreement shall be applicable to them, including with the benefit, to the extent available, of the tacking of any holding period from the date of issuance of the CDCI Preferred Shares and the CPP Preferred Shares; provided, that, notwithstanding anything to the contrary in Section 1.3 of Annex E of the Exchange Agreement, all Selling Expenses incurred by the Investor or any other Holder in connection with any registration thereunder or any other sale or other transfer of Exchange Shares under this Section 5.5 shall be borne by the Company.  From and after the Closing Date, all references in Section 1.10 of Annex E of the Exchange Agreement to “preferred stock” shall mean and refer to Common Stock (as defined herein) and, with respect to any underwritten offering of Registrable Securities (as defined in Annex E of the Exchange Agreement) by the Investor or other Holders (as defined in Annex E of the Exchange Agreement) pursuant to Annex E of the Exchange Agreement, 
19

the Company further agrees to cause any of its stockholders holding in excess of 4.0% of its Common Stock (assuming full exercise of any rights to convert or exchange any other securities into or for shares of Common Stock, in each case without regard for the limitations (i) set forth in Section 8 of the Certificate of Designations or in Article V of the Certificate of Incorporation or (ii) imposed by any regulatory requirement, rule, or regulation, including any commitment, arrangement or agreement made by any such stockholder pursuant to any regulatory requirement, rule, regulation, order or filing) to execute and deliver customary lock-up agreements in such form and for such time period up to 90 days as may be requested by the managing underwriter.  From and after the Closing Date, Section 1.2(f) of Annex E shall be deleted in its entirety and restated as follows: “If either (x) the Company grants “piggyback” registration rights to one or more third parties to include their securities in an underwritten offering under the Shelf Registration Statement pursuant to Section 1.2(b) of this Annex E or (y) a Piggyback Registration under Section 1.2(d) of this Annex E relates to an underwritten offering, and in either case, following consultations with the Investor, the managing underwriters advise the Company and the Investor that in their reasonable opinion the number of securities requested to be included in such offering exceeds the number which can be sold without adversely affecting the marketability of such offering (including an adverse effect on the per share offering price), the Company will include in such offering only such number of securities that in the reasonable opinion of such managing underwriters can be sold without adversely affecting the marketability of the offering (including an adverse effect on the per share offering price), which securities will be so included in the following order of priority: (A) first, in either case, the Registrable Securities of the Investor, (B) second, in the case of a Piggyback Registration under Section 1.2(d) of this Annex E, the securities the Company proposes to sell, (C) third, the Registrable Securities of all other Holders who have requested inclusion of Registrable Securities pursuant to Section 1.2(b) or Section 1.2(d) of this Annex E, as applicable, pro rata on the basis of the aggregate number of such securities or shares owned by each such person and (D) fourth, any other securities of the Company that have been requested to be so included, subject to the terms of this Agreement.”  The Investor acknowledges that, on the date hereof, the Company is not eligible to file a registration statement on Form S-3 covering the Exchange Shares, and the Company shall not be obligated to file a Shelf Registration Statement (as defined in Annex E of the Exchange Agreement) unless and until requested to do so in writing by the Investor.

(b) At all times after the Closing, the Company covenants that (1) it will, upon the request of the Investor or any subsequent holders of the Exchange Shares (“Holders”), use its reasonable best efforts to (x), to the extent any Holder is relying on Rule 144 under the Securities Act to sell any of the Exchange Shares, make “current public information” available, as provided in Section (c)(1) of Rule 144 (if the Company is a “Reporting Issuer” within the meaning of Rule 144) or in Section (c)(2) of Rule 144 (if the Company is a “Non-Reporting Issuer” within the meaning of Rule 144), in either case for such time period as necessary to permit sales pursuant to Rule 144, or (y), to the extent any Holder is relying on the so-called “Section 4(11⁄2)” exemption to sell any of its Exchange Shares, prepare and provide to such Holder such information, including the preparation of private offering memoranda or circulars or financial information, as the Holder may reasonably request to enable the sale of the Exchange Shares pursuant to such exemption, and (2) it will take such further action as any Holder may reasonably request from time to time to enable such Holder to sell the Exchange Shares without registration under the Securities Act within the limitations of the exemptions provided by (i) the provisions of the Securities Act or any interpretations thereof or related thereto by the SEC, including transactions based on the so-called “Section 4(11⁄2)” and other similar transactions, (ii) Rule 144 under the Securities Act, as such rule may be amended from time to time, or (iii) any similar rule or regulation hereafter adopted by the SEC; provided that the Company shall not be required to take any action described in this Section 5.5(b) that would cause the Company to become subject to the reporting requirements of Section 13 or 15(d) of the Exchange Act if the Company was not subject to such requirements prior to taking such action. 

20

Upon the request of any Holder, the Company will deliver to such Holder a written statement as to whether it has complied with such requirements and, if not, the specifics thereof.

(c) The Company agrees to indemnify the Investor, the Investor's officers, directors, employees, agents, representatives and Affiliates, and each person, if any, that controls the Investor within the meaning of the Securities Act (each, an “Indemnitee”), against any and all losses, claims, damages, actions, liabilities, costs and expenses (including reasonable fees, expenses and disbursements of attorneys and other professionals incurred in connection with investigating, defending, settling, compromising or paying any such losses, claims, damages, actions, liabilities, costs and expenses), joint or several, arising out of or based upon any untrue statement or alleged untrue statement of material fact contained in any document or report provided by the Company pursuant to this Section 5.5 or any omission to state therein a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading.

(d) If the indemnification provided for in Section 5.5(c) is unavailable to an Indemnitee with respect to any losses, claims, damages, actions, liabilities, costs or expenses referred to therein or is insufficient to hold the Indemnitee harmless as contemplated therein, then the Company, in lieu of indemnifying such Indemnitee, shall contribute to the amount paid or payable by such Indemnitee as a result of such losses, claims, damages, actions, liabilities, costs or expenses in such proportion as is appropriate to reflect the relative fault of the Indemnitee, on the one hand, and the Company, on the other hand, in connection with the statements or omissions which resulted in such losses, claims, damages, actions, liabilities, costs or expenses as well as any other relevant equitable considerations. The relative fault of the Company, on the one hand, and of the Indemnitee, on the other hand, shall be determined by reference to, among other factors, whether the untrue statement of a material fact or omission to state a material fact relates to information supplied by the Company or by the Indemnitee and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission; the Company and Investor agree that it would not be just and equitable if contribution pursuant to this Section 5.5(d) were determined by pro rata allocation or by any other method of allocation that does not take account of the equitable considerations referred to in Section 5.5(c). No Indemnitee guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from the Company if the Company was not guilty of such fraudulent misrepresentation.

21

Section 5.6 Voting Matters.

(a) The Investor agrees that it will vote, or cause to be voted, or exercise its right to consent (or cause its right to consent to be exercised) with respect to, all Exchange Shares beneficially owned by it and its controlled Affiliates (and which are entitled to vote on such matter) with respect to each matter on which holders of Common Stock are entitled to vote or consent, other than a Designated Matter, in the same proportion (for, against or abstain) as all other shares of the Company's Common Stock are voted or consents are given with respect to each such matter.  The Investor agrees to attend all meetings of the Company's stockholders in person or by proxy for purposes of obtaining a quorum.  In order to effectuate the foregoing agreements, to the maximum extent permitted by applicable law, the Investor hereby grants a proxy appointing each of the Chairman of the Board and General Counsel of the Company attorney-in-fact and proxy for it and its controlled Affiliates with full power of substitution, for and in the name of it and its controlled Affiliates, to vote, express consent or dissent, or otherwise to utilize such voting power in the manner and solely on the terms provided by this Section 5.6 with respect to the Exchange Shares and the Investor hereby revokes any and all previous proxies granted with respect to the Exchange Shares for purposes of the matters contemplated in this Section 5.6; provided that such proxy may only be exercised if the Investor fails to comply with the terms of this Section 5.6.  The proxy granted hereby is irrevocable prior to the termination of this Agreement, is coupled with an interest and is granted in consideration of the Company entering into this Agreement and issuing the Exchange Shares to the Investor.

(b) The Investor shall retain the right to vote in its sole discretion all Exchange Shares beneficially owned by it and its controlled Affiliates (and which are entitled to vote on such matter) on any Designated Matter.

Section 5.7 Restriction on Dividends and Repurchases.

(a) Until the earlier of (i) January 16, 2012, or (ii) such time as the Investor ceases to own any debt or equity securities of the Company or an Affiliate of the Company acquired pursuant to this Agreement, the Exchange Agreement or the Securities Purchase Agreement (including, for the avoidance of doubt, the Exchange Shares, the CDCI Preferred Shares and the CPP Preferred Shares), neither the Company nor any Company Subsidiary shall, without the consent of the Investor:

(i) declare or pay any dividend or make any distribution on the Common Stock (other than (A) regular quarterly cash dividends of not more than the amount of the last quarterly cash dividend per share declared or, if lower, publicly announced an intention to declare, on the Common Stock prior to October 14, 2008, as adjusted for any stock split, stock dividend, reverse stock split, reclassification or similar transaction, (B) dividends payable solely in shares of Common Stock and (C) dividends or distributions of rights or Junior Stock in connection with a stockholders' rights plan); or

(ii) redeem, purchase or acquire any shares of Common Stock or other capital stock or other equity securities of any kind of the Company, or any trust preferred securities issued by the Company or any Affiliate of the Company, other than (A) redemptions, purchases or other acquisitions of shares of Common Stock or other Junior Stock, in each case in this clause (A) in connection with the administration of any employee benefit plan in the ordinary course of business (including purchases to offset the Share Dilution Amount (as defined below) pursuant to a publicly announced repurchase plan) and consistent with past practice; provided that any purchases to offset the Share Dilution Amount shall in no event exceed the Share Dilution Amount, 
22

(B) purchases or other acquisitions by a broker-dealer subsidiary of the Company solely for the purpose of market-making, stabilization or customer facilitation transactions in trust preferred securities of the Company or an Affiliate of the Company, Junior Stock or Parity Stock in the ordinary course of its business, (C) purchases by a broker-dealer subsidiary of the Company of trust preferred securities or capital stock of the Company or an Affiliate of the Company for resale pursuant to an offering by the Company of such trust preferred securities or capital stock underwritten by such broker-dealer subsidiary, (D) any redemption or repurchase of rights pursuant to any stockholders' rights plan, (E) the acquisition by the Company or any of the Company Subsidiaries of record ownership in Junior Stock, Parity Stock or trust preferred securities of the Company or an Affiliate of the Company for the beneficial ownership of any other persons (other than the Company or any other Company Subsidiary), including as trustees or custodians, and (F) the exchange or conversion of Junior Stock for or into other Junior Stock or of Parity Stock or of trust preferred securities of the Company or an Affiliate of the Company for or into other Parity Stock (with the same or lesser aggregate liquidation amount) or Junior Stock, in each case set forth in this clause (F), solely to the extent required pursuant to binding contractual agreements entered into prior to January 16, 2009, or any subsequent agreement for the accelerated exercise, settlement or exchange thereof for Common Stock.  “Share Dilution Amount” means the increase in the number of diluted shares outstanding (determined in accordance with United States generally accepted accounting principles (“GAAP”), and as measured from the date of the Company's most recently filed consolidated financial statements prior to the Closing Date) resulting from the grant, vesting or exercise of equity-based compensation to employees and equitably adjusted for any stock split, stock dividend, reverse stock split, reclassification or similar transaction.

(b) The parties agree that, effective as of the Closing Date, Section 4.2(b) of the Exchange Agreement shall be amended in its entirety by replacing such Section 4.2(b) with the provisions set forth in this Section 5.7 and any terms included in this Section 5.7 that are not otherwise defined in the Exchange Agreement shall have the meanings ascribed to such terms in this Agreement.

23

Section 5.8 Repurchase of Investor Securities.
     From and after the date of this Agreement, the agreements set forth in Section 5.7 of the Exchange Agreement shall be applicable following the Transfer by the Investor of all of the Exchange Shares held by the Investor to one or more third parties not affiliated with the Investor.  For the avoidance of doubt, the Exchange Shares may not be repurchased by the Company pursuant to this Section 5.8 or Section 5.7 of the Exchange Agreement.

Section 5.9 Savings and Loan Holding Company Status.
      The Company shall maintain its status as a Savings and Loan Holding Company for as long as the Investor owns any debt or equity securities of the Company or an Affiliate of the Company acquired pursuant to this Agreement, the Exchange Agreement or the Securities Purchase Agreement (including, for the avoidance of doubt, the Exchange Shares, the CDCI Preferred Shares and the CPP Preferred Shares).

Section 5.10 Compliance with Employ American Workers Act.
Until the Company is no longer deemed a recipient of funding under Title I of EESA or Section 13 of the Federal Reserve Act for purposes of the EAWA, as the same may be determined pursuant to any regulations or other legally binding guidance promulgated under EAWA, the Company shall comply, and the Company shall take all necessary action to ensure that its Subsidiaries comply, in all respects with the provisions of the EAWA and any regulations or other legally binding guidance promulgated under the EAWA.

Section 5.11 Observer to the Board of Directors.
      So long as the Investor and its Affiliates beneficially own at least 5% of the issued and outstanding Common Stock (treating all securities beneficially owned by the Investor and its Affiliates that are convertible into or exchangeable or exercisable for Common Stock as converted, exchanged or exercised), the Investor shall be entitled to designate one individual to serve as an observer (the “Observer”) to the Board of Directors of the Company, which designation may be changed from time to time in the sole discretion of the Investor.  The Observer shall be entitled to (i) attend all meetings of the Board of Directors of the Company and the board of directors of each subsidiary of the Company, including any committee meetings of such boards of directors, (ii) receive notices of such meetings concurrently with the members of the Board of Directors of the Company or such boards of directors or committees thereof and (iii) receive all information provided to members of the Board of Directors of the Company or such boards of directors or committees thereof at such meetings.
The Observer shall have no voting rights and his or her presence shall not be required for determining a quorum at any meeting he or she is entitled to attend pursuant to this Section 5.11.

24

ARTICLE VI
MISCELLANEOUS

SECTION 6.1 Termination.
  This Agreement may be terminated at any time prior to the Closing:

(a) by either the Investor or the Company if the Closing shall not have occurred by November 7, 2011; provided, however, that in the event the Closing has not occurred by such date, the parties will consult in good faith to determine whether to extend the term of this Agreement, it being understood that the parties shall be required to consult only until the fifth day after such date and not be under any obligation to extend the term of this Agreement thereafter; provided, further, that the right to terminate this Agreement under this Section 6.1(a) shall not be available to any party whose breach of any representation or warranty or failure to perform any obligation under this Agreement shall have caused or resulted in the failure of the Closing to occur on or prior to such date;

(b) by either the Investor or the Company in the event that any Governmental Entity shall have issued an order, decree or ruling or taken any other action restraining, enjoining or otherwise prohibiting the transactions contemplated by this Agreement and such order, decree, ruling or other action shall have become final and nonappealable; or

(c) by the mutual written consent of the Investor and the Company.
In the event of termination of this Agreement as provided in this Section 6.1, this Agreement shall forthwith become void and there shall be no liability on the part of either party hereto except that nothing herein shall relieve either party from liability for any breach of this Agreement.

Section 6.2 Survival of Representations and Warranties.
The representations and warranties of the Company made herein or in any certificates delivered in connection with the Closing shall survive the Closing without limitation.

Section 6.3 Amendment.
No amendment of any provision of this Agreement will be effective unless made in writing and signed by an officer or a duly authorized representative of each of the Company and the Investor; provided that the Investor may unilaterally amend any provision of this Agreement to the extent required to comply with any changes after the date hereof in applicable federal statutes.  No failure or delay by any party in exercising any right, power or privilege hereunder shall operate as a waiver thereof nor shall any single or partial exercise thereof preclude any other or further exercise of any other right, power or privilege.  The rights and remedies herein provided shall be cumulative of any rights or remedies provided by law.

Section 6.4 Waiver of Conditions.
The conditions to each party's obligation to consummate the Exchange are for the sole benefit of such party and may be waived by such party in whole or in part to the extent permitted by applicable law.  No waiver will be effective unless it is in a writing signed by a duly authorized officer of the waiving party that makes express reference to the provision or provisions subject to such waiver.
25

Section 6.5 Governing Law; Submission to Jurisdiction, etc.
      This Agreement and any claim, controversy or dispute arising under or related to this Agreement, the relationship of the parties, and/or the interpretation and enforcement of the rights and duties of the parties shall be enforced, governed, and construed in all respects (whether in contract or in tort) in accordance with the federal law of the United States if and to the extent such law is applicable, and otherwise in accordance with the laws of the State of New York applicable to contracts made and to be performed entirely within such State.  Each of the parties hereto agrees (a) to submit to the exclusive jurisdiction and venue of the United States District Court for the District of Columbia and the United States Court of Federal Claims for any and all civil actions, suits or proceedings arising out of or relating to this Agreement or the Exchange contemplated hereby and (b) that notice may be served upon (i) the Company at the address and in the manner set forth for notices to the Company in Section 6.6 and (ii) the Investor at the address and in the manner set forth for notices to the Company in Section 6.6, but otherwise in accordance with federal law.  To the extent permitted by applicable law, each of the parties hereto hereby unconditionally waives trial by jury in any civil legal action or proceeding relating to this Agreement or the Exchange contemplated hereby.

Section 6.6 Notices.
      Any notice, request, instruction or other document to be given hereunder by any party to the other will be in writing and will be deemed to have been duly given (a) on the date of delivery if delivered personally, or by facsimile, upon confirmation of receipt, or (b) on the second business day following the date of dispatch if delivered by a recognized next day courier service.  All notices hereunder shall be delivered as set forth below or pursuant to such other instructions as may be designated in writing by the party to receive such notice.
If to the Company:

Carver Bancorp, Inc.
75 West 125th Street
New York, NY 10027
Attention:  Mark A. Ricca
Executive Vice President, Chief Risk Officer and General Counsel
Telephone: (212) 360-8820
Facsimile:  (212) 426-6213
With a copy to:
Luse Gorman Pomerenk & Schick, P.C.
5335 Wisconsin Avenue, NW 
Suite 780 
Washington, D.C. 20015
Attention: Lawrence M.F. Spaccasi
Telephone: (202) 274-2037
Facsimile: (202) 362-2902

26

If to the Investor:

United States Department of the Treasury
1500 Pennsylvania Avenue, NW
Washington, DC  20220
Attention:  Chief Counsel Office of Financial Stability
Facsimile:  (202) 927-9225
Email:  OFSChiefCounselNotices@do.treas.gov
With a copy to:

Alston & Bird LLP
950 F Street NW
Washington, DC 20004
Attention:  David E. Brown, Jr.
Telephone:  (202) 239-3345
Facsimile:  (202) 654-4945

Section 6.7 Definitions.

(a) When a reference is made in this Agreement to a subsidiary of a person, the term “subsidiary” means any corporation, partnership, joint venture, limited liability company or other entity (x) of which such person or a subsidiary of such person is a general partner or (y) of which a majority of the voting securities or other voting interests, or a majority of the securities or other interests of which having by their terms ordinary voting power to elect a majority of the board of directors or persons performing similar functions with respect to such entity, is directly or indirectly owned by such person and/or one or more subsidiaries thereof.

(b) The term “Affiliate” means, with respect to any person, any person directly or indirectly controlling, controlled by or under common control with, such other person.  For purposes of this definition, “control” (including, with correlative meanings, the terms “controlled by” and “under common control with”) when used with respect to any person, means the possession, directly or indirectly, of the power to cause the direction of management and/or policies of such person, whether through the ownership of voting securities by contract or otherwise.

(c) The term “Business Combination” means a merger, consolidation, statutory share exchange or similar transaction that requires the approval of the Company's stockholders.

(d) The term “Closing Price” means the closing sale price or, if no closing sale price is reported, the last reported sale price of the shares of the Common Stock on The NASDAQ Global Market on such date. If the Common Stock is not traded on The NASDAQ Global Market on any date of determination, the Closing Price of the Common Stock on such date of determination means the closing sale price as reported in the composite transactions for the principal U.S. national or regional securities exchange on which the Common Stock is so listed or quoted, or, if no closing sale price is reported, the last reported sale price on the principal U.S. national or regional securities exchange on which the Common Stock is so listed or quoted, 

27

or if the Common Stock is not so listed or quoted on a U.S. national or regional securities exchange, the last quoted bid price for the Common Stock in the over-the-counter market as reported by Pink OTC Markets Inc. or a similar organization, or, if that bid price is not available, the market price of the Common Stock on that date as determined by a nationally recognized independent investment banking firm retained by the Company for this purpose.
    

(e) The term “Company Material Adverse Effect” means a material adverse effect on (i) the business, results of operation or financial condition of the Company and its consolidated subsidiaries taken as a whole; provided, however, that Company Material Adverse Effect shall not be deemed to include: the effects of (A) changes after the date hereof in general business, economic or market conditions (including changes generally in prevailing interest rates, credit availability and liquidity, currency exchange rates and price levels or trading volumes in the United States or foreign securities or credit markets), or any outbreak or escalation of hostilities, declared or undeclared acts of war or terrorism, in each case generally affecting the industries or geographic areas in which the Company and its subsidiaries operate, (B) changes or proposed changes after the date hereof in GAAP or regulatory accounting requirements, or authoritative interpretations thereof, (C) changes or proposed changes after the date hereof in securities, banking and other laws of general applicability or related policies or interpretations of Governmental Entities (in the case of each of these clauses (A), (B) and (C), other than changes or occurrences to the extent that such changes or occurrences have or would reasonably be expected to have a materially disproportionate adverse effect on the Company and its consolidated subsidiaries taken as a whole relative to comparable U.S. banking or financial services organizations), (D) changes in the market price or trading volume of the Common Stock or any other equity, equity-related or debt securities of the Company or its consolidated subsidiaries (it being understood and agreed that the exception set forth in this clause (D) does not apply to the underlying reason giving rise to or contributing to any such change); or (E) actions or omissions of the Company or any Company Subsidiary expressly required by the terms of the Exchange; or (ii) the ability of the Company to consummate the Exchange and the other transactions contemplated by this Agreement and perform its obligations hereunder on a timely basis.

      (f) The term “Conversion Price” means for each CDCI Preferred Share, for purposes of calculating the Exchange into Exchange Shares, $0.5451, subject to adjustment at the same time and in the same manner as adjustments are made to the “Applicable Conversion Rate” pursuant to Section 10 of the Certificate of Designations for Series C and Series D of Preferred Stock (the “Certificate of Designations”) attached as Exhibit A hereto; provided, however, that adjustments to the Conversion Price shall be made notwithstanding the last sentence of Section 4(a)(i) of the Certificate of Designations and Section 10(d) of the Certificate of Designations. 

(g) The term “Designated Matters” means (i) the election and removal of directors, (ii) the approval of any Business Combination, (iii) the approval of a sale of all or substantially all of the assets or property of the Company, (iv) the approval of a dissolution of the Company, (v) the approval of any issuance of any securities of the Company on which holders of Common Stock are entitled to vote, (vi) the approval of any amendment to the Certificate of Incorporation or bylaws of the Company on which holders of Common Stock are entitled to vote, and (vii) the approval of any other matters reasonably incidental to the foregoing subclauses (i) through (vi) as determined by the Investor.

28

(h) The term “EAWA” means the Employ American Workers Act (Section 1611 of Division A, Title XVI of the American Recovery and Reinvestment Act of 2009), Public Law No. 111-5, effective as of February 17, 2009, as may be amended and in effect from time to time.

(i) The term “Junior Stock” means Common Stock and any other class or series of stock of the Company the terms of which expressly provide that it ranks junior to the CDCI Preferred Shares as to dividend rights and/or as to rights on liquidation, dissolution or winding up of the Company.

(j) The term “Parity Stock” means any class or series of stock of the Company the terms of which do not expressly provide that such class or series will rank senior or junior to the CDCI Preferred Shares as to dividend rights and/or as to rights on liquidation, dissolution or winding up of the Company (in each case without regard to whether dividends accrue cumulatively or non-cumulatively).

      
(k) The term “Preferred Stock” means any and all series of preferred stock of the Company.

      (l) The term “Previously Disclosed” means information set forth or incorporated in the Company's Annual Report on Form 10-K for the most recently completed fiscal year of the Company filed with the SEC prior to the date hereof or in its other reports and forms filed with or furnished to the SEC under Section 13(a), 14(a) or 15(d) of the Exchange Act on or after the last day of the most recently completed fiscal year of the Company and prior to the date hereof.

(m) The term “Trading Day” means a day on which the shares of Common Stock: (i) are not suspended from trading on any national or regional securities exchange or association or over-the-counter market at the close of business; and (ii) have traded at least once on the national or regional securities exchange or association or over-the-counter market that is the primary market for the trading of the Common Stock.

(n) To the extent any securities issued pursuant to this Agreement or the transactions contemplated hereby are registered in the name of a designee of the Investor pursuant to Section 1.1 or 6.8 or transferred to an Affiliate of the Investor, all references herein to the Investor holding or owning any debt or equity securities of the Company, Exchange Shares or Registrable Securities (and any like variations thereof) shall be deemed to refer to the Investor, together with such designees and/or Affiliates, holding or owning any debt or equity securities, Exchange Shares or Registrable Securities (and any like variations thereof), as applicable.

29

Section 6.8 Assignment.
Neither this Agreement nor any right, remedy, obligation nor liability arising hereunder or by reason hereof shall be assignable by any party hereto without the prior written consent of each other party, and any attempt to assign any right, remedy, obligation or liability hereunder without such consent shall be void, except (a) an assignment, in the case of a Business Combination where such party is not the surviving entity, or a sale of substantially all of its assets, to the entity which is the survivor of such Business Combination or the purchaser in such sale, (b) as provided in Sections 5.4 and 5.5 and (c) an assignment by the Investor of this Agreement to an Affiliate of the Investor; provided that if the Investor assigns this Agreement to an Affiliate, the Investor shall be relieved of its obligations under this Agreement but (i) all rights, remedies and obligations of the Investor hereunder shall continue and be enforceable and exercisable by such Affiliate, and (ii) the Company's obligations and liabilities hereunder shall continue to be outstanding.

Section 6.9 Severability.
      If any provision of this Agreement, or the application thereof to any person or circumstance, is determined by a court of competent jurisdiction to be invalid, void or unenforceable, the remaining provisions hereof, or the application of such provision to persons or circumstances other than those as to which it has been held invalid or unenforceable, will remain in full force and effect and shall in no way be affected, impaired or invalidated thereby, so long as the economic or legal substance of the transactions contemplated hereby is not affected in any manner materially adverse to any party.  Upon such determination, the parties shall negotiate in good faith in an effort to agree upon a suitable and equitable substitute provision to effect the original intent of the parties.

Section 6.10 No Third-Party Beneficiaries.
      Nothing contained in this Agreement, expressed or implied, is intended to confer upon any person or entity other than the Company and the Investor any benefit, right or remedies, except that (i) the provisions of Section 4.4 shall inure to the benefit of the persons referred to in that Section and (ii) the provisions of Section 5.5 shall inure to the benefit of the persons holding Exchange Shares during any tacked holding period, as contemplated by that Section.

Section 6.11 Entire Agreement, etc.
      This Agreement (including the Annexes and Schedules hereto) constitutes the entire agreement, and supersedes all other prior agreements, understandings, representations and warranties, both written and oral, between the parties, with respect to the subject matter hereof.  For the avoidance of doubt, the Exchange Agreement shall remain in full force and effect, notwithstanding Sections 6.1(b) or (c) of the Exchange Agreement, but shall be deemed amended hereby effective as of the Closing, and any provisions in this Agreement that supplement, duplicate or contradict any provision of the Exchange Agreement shall be deemed to supersede the corresponding provision of the Exchange Agreement from and after the Closing.  For the further avoidance of doubt, the Securities Purchase Agreement shall remain in full force and effect, other than as specifically modified by the Exchange Agreement and herein.

Section 6.12 Counterparts and Facsimile.
      For the convenience of the parties hereto, this Agreement may be executed in any number of separate counterparts, each such counterpart being deemed to be an original instrument, and all such counterparts will together constitute the same agreement.  Executed signature pages to this Agreement may be delivered by facsimile and such facsimiles will be deemed as sufficient as if actual signature pages had been delivered.

30    

Section 6.13 Specific Performance.
The parties agree that irreparable damage would occur in the event that any of the provisions of this Agreement were not performed in accordance with their specific terms.  It is accordingly agreed that the parties shall be entitled (without the necessity of posting a bond) to specific performance of the terms hereof, this being in addition to any other remedies to which they are entitled at law or equity.
[Remainder of Page Intentionally Left Blank]

31

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective authorized officers as of the day and year first above written.
CARVER BANCORP, INC.

             By:    /s/ Mark A. Ricca    
                   Name:  Mark A. Ricca
                   Title:   Executive Vice President, Chief Financial Officer and General Counsel
UNITED STATES DEPARTMENT OF THE TREASURY

             By:            /s/ Timothy G. Massad    
                   Name:  Timothy G. Massad
                   Title: Acting Assistant Secretary for Financial Stabilitypaceth_8k-ex1001.htm

EXHIBIT 10.1

   

SECOND AMENDED AND RESTATED

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 30, 2011

   

  

  

  

 

TABLE OF CONTENTS

   

	
Article I

	 	
DEFINITIONS

	
1

	
1.1

	 	
Definitions

	
1

	
1.2

	 	
Interpretation

	
8

	
Article II

	 	
APPOINTMENT

	
9

	
Article III

	 	
RESPONSIBILITIES OF MANAGER

	
9

	
3.1

	 	
Scope of Asset Management Services

	
9

	
3.2

	 	
Scope of Asset Preservation Services

	
11

	
3.3

	 	
Scope of O&M Services

	
12

	
3.4

	 	
Subcontracts

	
12

	
3.5

	 	
Standards for Performance of the Asset Management Services

	
13

	
3.6

	 	
Standards for Performance of the Asset Preservation Services and the O&M Services

	
13

	
3.7

	 	
Personnel Standards.

	
13

	
3.8

	 	
Training

	
13

	
3.9

	 	
Additional Obligations of Manager

	
13

	
3.10

	 	
Licenses and Permits

	
14

	
3.11

	 	
Records and Reports; Other Material Information

	
14

	
3.12

	 	
No Liens or Encumbrances

	
14

	
3.13

	 	
Emergency Action

	
14

	
3.14

	 	
Scope; Manager Authority

	
14

	
3.15

	 	
Retention of Control by Owners

	
15

	
3.16

	 	
Limitations on Performance

	
15

	
3.17

	 	
Deficiency of Funds

	
15

	
Article IV

	 	
ITEMS TO BE FURNISHED BY OWNERS

	
15

	
4.1

	 	
General

	
15

	
4.2

	 	
Information

	
15

	
4.3

	 	
Corn, Fuel and Other Materials

	
15

	
4.4

	 	
Cold Shutdown or Start Up of a Facility

	
15

	
Article V

	 	
DEVELOPMENT PROJECTS;  FACILITY SERVICES

	
16

	
5.1

	 	
Development Projects

	
16

	
Article VI

	 	
REPORTING AND PERSONNEL

	
16

	
6.1

	 	
Accounts and Reports

	
16

	
6.2

	 	
Budget

	
17

	
6.3

	 	
Manager Representative

	
17

	
Article VII

	 	
LIMITATIONS ON AUTHORITY

	
18

	
Article VIII

	 	
COMPENSATION

	
19

	
8.1

	 	
Asset Management Fee

	
19

	
8.2

	 	
Sale Incentive Fee

	
19

   

  

  

  

   

	
8.3

	 	
Lien Waivers

	
20

	
8.4

	 	
Netting

	
20

	
8.5

	 	
Intentionally Left Blank

	
20

	
Article IX

	 	
TERM

	
20

	
9.1

	 	
Term

	
20

	
9.2

	 	
Owner Defaults and Manager Remedies

	
21

	
9.3

	 	
Manager Defaults and Owner Remedies

	
21

	
9.4

	 	
Termination for Convenience

	
22

	
9.5

	 	
Facility Condition at End of Term; Successor Manager.

	
22

	
9.6

	 	
Termination Payment; Manager Payment.

	
23

	
Article X

	 	
INSURANCE

	
23

	
10.1

	 	
Manager Insurance

	
23

	
10.2

	 	
Owners Insurance

	
25

	
10.3

	 	
Manager Insurance Premiums and Deductibles

	
25

	
10.4

	 	
Subcontractor Insurance

	
25

	
Article XI

	 	
INDEMNIFICATION

	
25

	
11.1

	 	
Owners’ Indemnity

	
25

	
11.2

	 	
Manager’s Indemnity

	
25

	
Article XII

	 	
LIABILITIES OF THE PARTIES

	
26

	
12.1

	 	
Maximum Liability of Manager

	
26

	
12.2

	 	
No Consequential or Punitive Damages

	
26

	
Article XIII

	 	
CONFIDENTIALITY

	
26

	
13.1

	 	
Owner’s Confidential Information

	
26

	
13.2

	 	
Manager’s Confidential Information

	
27

	
Article XIV

	 	
TITLE, DOCUMENTS AND DATA

	
27

	
14.1

	 	
Materials and Equipment

	
27

	
14.2

	 	
Documents

	
27

	
Article XV

	 	
FORCE MAJEURE

	
28

	
15.1

	 	
Events Constituting Force Majeure

	
28

	
15.2

	 	
Effect

	
28

	
15.3

	 	
Limitations

	
28

	
Article XVI

	 	
MISCELLANEOUS PROVISIONS

	
29

	
16.1

	 	
Assignment

	
29

	
16.2

	 	
Sale of Facilities

	
29

	
16.3

	 	
Cooperation in Financing

	
29

	
16.4

	 	
Access

	
29

	
16.5

	 	
Not for Benefit of Third Parties

	
30

	
16.6

	 	
Amendments

	
30

	
16.7

	 	
Survival

	
30

	
16.8

	 	
No Waiver

	
30

    

  

  

  

   

	
16.9

	 	
Notices

	
30

	
16.10

	 	
Representations and Warranties.

	
31

	
16.11

	 	
Counterparts and Execution

	
32

	
16.12

	 	
Governing Law

	
32

	
16.13

	 	
Entire Agreement

	
32

	
16.14

	 	
Severability

	
33

	
16.15

	 	
Successors and Assigns

	
33

	
16.16

	 	
Owner Agent

	
33

	
16.17

	 	
Independent Contractor

	
33

	
16.18

	 	
Captions; Appendices

	
33

	16.19	 	No Novation	33
	 16.20	 	Several Liability	33

    

    

Appendices

   

	
Appendix A-1

	
Scope of Asset Management Services and Asset Preservation Services

	
Appendix A-2

	
Scope of O&M Services

	
Appendix B

	
Personnel Listing

	
Appendix C

	
Form of Report (Cold Shutdown)

	
Appendix D

	
Form of Report (Operating)

	
Appendix E

	
Budget

 

Exhibits

    

	
Exhibit I

	
Example Performance Bonus Calculation

	
Exhibit II

	
Example Sale Incentive Fee Calculation

	
Exhibit III

	
Example EBITDA Calculation

    

  

  

  

   

This SECOND AMENDED AND RESTATED ASSET MANAGEMENT AGREEMENT (this “Agreement”) is made and entered into as of June 30, 2011 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, the Parties hereto were previously party to that certain Amended and Restated Asset Management Agreement, dated as of October 15, 2010 (the “Prior Agreement”) pursuant to which Manager provided various services to the Owners;

 

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; and

 

WHEREAS, Manager desires to provide such management services.

 

WHEREAS, the parties to the Prior Agreement desire to amend and restate the Prior Agreement in its entirety upon the terms and conditions set forth herein.

 

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 Second Amended and Restated 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.

 

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

 

“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 a Manager Expense, 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.  For sake of clarity, with respect to costs for Manager’s obligations constituting Manager Expenses, Availability of Funds means that the Asset Management Fee has been paid, without regard to the actual costs necessary to be incurred by Manager to fulfill such obligations.

 

“Boardman Corn Supply Agreement” means the Amended and Restated Corn Procurement and Handling Agreement between Pacific AG. Products, LLC and Boardman dated as of June 30, 2011, and any other agreement relating to the procurement of corn for the Boardman Facility.

   

  

2

  

    

“Boardman Ethanol Sales and Marketing Agreement” means the Amended and Restated Ethanol Marketing Agreement between Boardman and Kinergy Marketing, LLC, dated as of June 30, 2011, and any other agreement relating to the sale of ethanol from the Boardman Facility.

 

“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.

 

“Boardman WDG Sales and Marketing Agreement” means the Amended and Restated Distillers Grains Marketing Agreement between Boardman and Pacific Ag Products, LLC, dated as of June 30, 2011, and any other agreement relating to the sale of distillers grains from the Boardman Facility.

 

“Budget” means the Budget attached hereto as Appendix E, as amended or modified from time to time in accordance with Section ‎6.2.

 

“Burley Corn Supply Agreement” means the Amended and Restated Corn Procurement and Handling Agreement between Pacific AG. Products, LLC and Burley dated as of June 30, 2011, and any other agreement relating to the procurement of corn for the Burley Facility.

 

“Burley Ethanol Sales and Marketing Agreement” means the Amended and Restated Ethanol Marketing Agreement between Burley and Kinergy Marketing, LLC, dated as of June 30, 2011, and any other agreement relating to the sale of ethanol from the Burley Facility.

 

“Burley Facility”  means the Facility owned by Burley.

 

“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 Burley Facility.

 

“Burley WDG Sales and Marketing Agreement” means the Amended and Restated Distillers Grains Marketing Agreement between Burley and Pacific Ag Products, LLC, dated as of June 30, 2011, and any other agreement relating to the sale of distillers grains from the Burley Facility.

 

 “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 Prior Agreement.

   

  

3

  

     

 “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.

 

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

 

“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 III.

 

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

 

“Effective Date” has the meaning assigned to such term in Section ‎9.1.

 

“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.

 

“Extension Notice” has the meaning assigned to such term in Section ‎9.1.

 

“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, the Burley Facility Agreements, the Madera Facility Agreements and the Stockton 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 Plant Designer.

 

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

   

  

4

  

    

“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; (c) any Material of Environmental Concern as defined in the Credit Agreement; and (d) 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.

 

“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.

 

“Madera Corn Supply Agreement” means any agreement relating to the procurement of corn for the Madera Facility.

 

“Madera Ethanol Sales and Marketing Agreement” means any agreement relating to the sale of ethanol from the Madera Facility.

 

“Madera Facility”  means the Facility owned by Madera.

 

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

   

  

5

  

    

“Madera WDG Sales and Marketing Agreement” means any agreement relating to the sale of distillers grains from the Madera 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.

 

“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 Expenses” means the expenses incurred by Manager in performing the Services that are to be for the account of Manager, as specified in the Manager Expense portion of the Budget.

 

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

 

“Manager Information” has the meaning assigned to such term in Section 13.2.

 

“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 owner on the date hereof, directly or indirectly, 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.

 

“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.

   

  

6

  

     

“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.

 

“Plant Designer” means Delta-T Corporation.

 

“Prior Agreement” has the meaning assigned to such term in the Recitals.

 

“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.

 

“Stockton Corn Supply Agreement” means the Amended and Restated Corn Procurement and Handling Agreement between Pacific AG. Products, LLC and Stockton dated as of June 30, 2011, and any other agreement relating to the procurement of corn for the Stockton Facility.

    

  

7

  

    

“Stockton Ethanol Sales and Marketing Agreement” means the Amended and Restated Ethanol Marketing Agreement between Stockton and Kinergy Marketing, LLC, dated as of June 30, 2011, and any other agreement relating to the sale of ethanol from the Stockton Facility.

 

“Stockton Facility”  means the Facility owned by Stockton.

 

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

 

“Stockton WDG Sales and Marketing Agreement” means the Amended and Restated Distillers Grains Marketing Agreement between Stockton and Pacific Ag Products, LLC, dated as of June 30, 2011, and any other agreement relating to the sale of distillers grains from the Stockton Facility.

 

“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) sixty (60) and (y) the number of days notice (fewer than sixty (60)) that Manager is given  pursuant to clause (y) of Section ‎9.4 by (ii) the quotient of (x) the Asset 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 Plant Designer, each dated as of September 6, 2006  and (ii) the License for Technology between Madera and Plant Designer, 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;

     

  

8

  

    

(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

 

(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 Effective Date 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 Effective Date, 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 and the direction of Owner Agent, Manager shall administer the Owners’ compliance with all covenants and obligations set forth in the Financing Documents, including monitoring compliance with the Financing Documents and advising Owners as to their compliance obligations thereunder and providing Owner Agent with Manager’s analysis and recommendations regarding the application of the Financing Documents.  In furtherance of the foregoing, Appendix A-1 sets forth various time and certification requirements regarding Manager’s furnishing to Owner of various reports, budgets and other submissions for review by Owner prior to the submission of same to the Administrative Agent.  For convenience, Appendix A-1 also sets forth the time and requirements for reports called for by this Agreement and the Facility Agreements.   Manager shall not take any action that would reasonably be expected to cause any Owner to contravene such Owner’s obligations under the Financing Documents.  Manager shall be authorized to deal directly with the Administrative Agent and the Collateral Agent on behalf of Owners with respect to routine matters 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.  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.

    

  

9

  

   

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.

 

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.

    

  

10

  

   

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.

 

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.

    

  

11

  

       

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 Effective Date 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;

 

(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).

    

  

12

  

    

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.

 

3.7.1   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 (but not less frequently than quarterly, if changes have occurred) by Manager in consultation with Owner Agent.

 

3.7.2   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).

    

  

13

  

   

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 Plant Designer.  Appendix A-1 details timing and certification requirements relating to certain of such reports.  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”.

 

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.

   

  

14

  

   

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 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.

 

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 applicable Facility Agreements.

 

4.4   Cold Shutdown or Start Up of a Facility.  From time to time, upon not less than sixty (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 ten (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.

    

  

15

  

 

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.

 

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.

   

  

16

  

    

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 Owner Agent a summary report in the form attached hereto as Appendix D, which report shall include, with respect to each such Facility, a numerical and narrative assessment in respect of such month of (i) each such Facility’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 the Owner of each such Facility, (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 Manager or any Affiliate with the Securities and Exchange Commission, any communications or information provided by Manager to its shareholders, and the monthly financial statements of Kinergy Marketing LLC as provided to its working capital lenders.  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.

 

6.2   Budget.  The Budget sets forth the budgeted amounts for all Operating Disbursements and Direct Reimbursement Expenses and for the Asset Management Fee.  Manager shall submit a revised Budget each quarter and each year in conjunction with the quarterly and annual budgets provided to the Lenders pursuant to the Credit Agreement.  If accepted by the Owners and the Lenders, each such quarterly budget shall serve as the Budget hereunder.  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 Asset 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 the Asset Management Fee is fixed and that any increase or decrease in the Manager Expenses shall be solely for the account of the Manager and shall not result in any increase or decrease in the amount of the Asset 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.

    

  

17

  

 

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;

 

(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 initiate, submit or respond to 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)   INTENTIONALLY LEFT BLANK

 

(f)   describe itself as an employee, agent or representative of any Owner;

 

(g)   make any warranty or representation relating to or on behalf of any Owner;

 

(h)   engage in any other transaction on behalf of Owners not permitted under this Agreement; or

    

(i)   commit to or enter into any agreement or arrangement with respect to any of the foregoing.

    

  

18

  

     

ARTICLE VIII

   

COMPENSATION

 

8.1   Asset Management Fee.  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 “Asset 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 Effective Date 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 an annualized 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 at such Facility for such six-month period 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 or an 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 six-month period; and (iii) such performance bonus shall be reduced by 25% if all Facilities then operating do not operate at a minimum average yield (in the aggregate across all operating Facilities) of 2.70 gallons of denatured ethanol per bushel of corn during such six-month period.

 

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

 

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 (for sake of clarity, a sale to Manager or any Affiliate of Manager shall not be considered a sale to a third party for this purpose), 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%.

    

  

19

  

   

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

 

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

 

8.4   Netting.  If the Parties each owe an amount to the other for obligations incurred under this Agreement, the undisputed portion(s) of such amounts shall be aggregated, and the Parties shall satisfy their payment obligations through netting, in which case the Party owing the greater aggregate undisputed amount shall pay to the other Party the difference between the undisputed amounts owed.

 

8.5   INTENTIONALLY LEFT BLANK

 

ARTICLE IX

   

TERM

 

9.1   Term.  This Agreement shall be effective as of June 30, 2011 (the “Effective Date”) and, unless earlier terminated in accordance with its terms, shall continue in effect until and including June 30, 2012; provided, that either Owner Agent or Manager may extend this Agreement for additional one year periods, in each case by written notice to the other (an “Extension Notice”) delivered not less than ninety (90) days prior to the end of the original or renewal term, provided further that this Agreement shall nonetheless terminate if the recipient of any such Extension Notice rejects such extension in a written notice delivered to the party that issued such Extension Notice not more than fifteen (15) days after receipt of the Extension 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.

    

  

20

  

 

9.2   Owner Defaults and Manager Remedies.  Upon the occurrence of any of the following events, Manager may exercise such rights and remedies as may be available to it at law or in equity, including the right to terminate this Agreement with respect to any Facility or Facilities, by written notice to the Owners:

 

(a)   the failure by an Owner to pay the Asset Management Fee required to be paid to Manager hereunder when due, and such failure continues for ten (10) days after receipt of written notice from Manager of such failure, with respect to the first such failure and within five (5) days after receipt of written notice from Manager of such failure with respect to any subsequent such failure;

 

(b)   the failure by an Owner to make any other payment, deposit or transfer required to be paid to Manager hereunder when due and such failure continues for fifteen (15) days after receipt of written notice from Manager of such failure;

 

(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 thirty (30) days after receipt of written notice from Manager of such failure; provided, that such thirty (30) day period shall be extended for up to an aggregate of ninety (90) days so long as such Owner is diligently attempting to cure such failure.

 

9.3   Manager Defaults and Owner Remedies.  Upon the occurrence of any of the following events, each Owner may exercise such rights and remedies as may be available to it at law or in equity, including the right to terminate this Agreement with respect to such Owner’s Facility or the right of the Owners to terminate this Agreement with respect to all Facilities, by written notice to the Manager, provided, that no such notice shall be required for a termination pursuant to clause (c) of this Section ‎9.3:

   

  

21

  

 

(a)   the failure by Manager to make any payment, deposit or transfer required hereunder when due and such failure continues for fifteen (15) days after receipt of written notice from such Owner of such failure;

 

(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

 

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

 

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 sixty (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).

   

  

22

  

   

(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.

 

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 Asset 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, 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:

   

  

23

  

   

(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).

 

(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.

   

  

24

  

   

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 and which are not included within the insurance coverages procured by Manager pursuant to Section ‎10.1.  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.

 

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.

   

  

25

  

    

ARTICLE XII

   

LIABILITIES OF THE PARTIES

 

12.1   Maximum Liability of Manager.  The total aggregate liability of Manager to the Owners, or of the Owners to the Manager, under this Agreement during the term of this Agreement shall not exceed two million dollars ($2,000,000).  Notwithstanding the foregoing, such limitations on liability shall not apply with respect to (i) the wrongful withholding of payments due hereunder, and (ii) any net loss, damage or liability resulting from or arising out of the gross negligence or willful misconduct of Manager or the Owners, as applicable.

 

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.

 

ARTICLE XIII

    

CONFIDENTIALITY

 

13.1   Owner’s Confidential Information.  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, agents and representatives, including accountants, legal counsel and other advisors, but only to the extent such Persons have a need to know such information for purposes of permitting Manager to perform its obligations hereunder (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 any potential equity investors in PEI, provided that such potential equity investors execute confidentiality agreements with Owner Agent that are at least as restrictive as the provisions set forth herein or (h) to the extent such Owner Information (1) becomes publicly available other than as a result of a breach of this ‎Article XIII or (2) 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.

   

  

26

  

    

13.2   Manager’s Confidential Information.  Each Owner agrees to maintain the confidentiality of the Manager Information (as defined below), except that Manager Information may be disclosed (a) to Owner’s Affiliates and its and their officers, directors, managers, employees, agents and representatives, including accountants, legal counsel and other advisors, but only to the extent such Persons have a need to know such information (it being understood that the Persons to whom such disclosure is made will be informed of the confidential nature of such Owner Information and have agreed to abide and be bound by the provisions hereof), (b) to the extent requested by any regulatory authority having jurisdiction over Owner, (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 Manager Agent, or (g) to any potential equity investors in, or acquirers or potential acquirers of, NewCo, Owner Agent, any Owner or any Facility, provided that such potential equity investors, acquirers or potential acquirers execute confidentiality agreements with Manager that are at least as restrictive as the provisions set forth herein or (h) to the extent such Manager Information (1) becomes publicly available other than as a result of a breach of this ‎Article XIII or (2) becomes available to Owner on a non confidential basis from a source other than Manager.  “Manager Information” means all information received from Manager relating to the business and operations of Manager or any of its Affiliates (other than the Owners, the Owner Agent or NewCo), including without limitation information disclosed pursuant to Section 6.1.3.  An Owner shall be considered to have complied with its obligation to maintain the confidentiality of Manager Information if Owner has exercised the same degree of care with respect to the Manager Information as Owner 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.

    

  

27

  

   

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.  Force Majeure Events may 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 the claiming Party and which otherwise satisfy the criteria set forth above for a Force Majeure Event.

 

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.

   

  

28

  

    

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 may consider a sale of one or more of 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.

 

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.

   

  

29

  

   

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

Telephone:         (916) 403-2123

Facsimile:    (916) 446-3936

	 	 	 
	 	With a copy to:	
Pacific Ethanol, Inc. 

400 Capitol Mall, Suite 2060

Sacramento, CA 95814

Attention: General Counsel

Telephone:         (916) 403-2130

Facsimile:    (916) 403-2785

   

  

30

  

    

	 	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.

   

  

31

  

    

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.

    

  

32

  

    

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.

 

16.19   No Novation.  The terms and conditions of the Prior Agreement are amended as set forth in, and restated in their entirety and superseded by, this Agreement.  Nothing in this Agreement shall be deemed to work a novation of any obligation under the Prior Agreement.

 

16.20           Several Liability.  For the avoidance of any doubt, the obligations of each Owner and the Owner Agent hereunder, shall be several not joint.

 

     

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

    

  

33

  

   

IN WITNESS WHEREOF, this Second 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: Chief Executive Officer	 
	 	 	 	 

   

	 	PACIFIC ETHANOL COLUMBIA, LLC	 
	 	 	 	 
	
 

	
By: 

	 	 
	 	 	Name:	 
	 	 	Title: 	 
	 	 	 	 

    

	 	PACIFIC ETHANOL MADERA LLC	 
	 	 	 	 
	
 

	
By: 

	 	 
	 	 	Name:	 
	 	 	Title: 	 
	 	 	 	 

      

	 	PACIFIC ETHANOL STOCKTON, LLC	 
	 	 	 	 
	
 

	
By: 

	 	 
	 	 	Name:	 
	 	 	Title: 	 
	 	 	 	 

     

	 	PACIFIC ETHANOL MAGIC VALLEY, LLC	 
	 	 	 	 
	
 

	
By: 

	 	 
	 	 	Name:	 
	 	 	Title: 	 
	 	 	 	 

     

	 	PACIFIC ETHANOL HOLDING CO. LLC	 
	 	 	 	 
	
 

	
By: 

	 	 
	 	 	Name:	 
	 	 	Title: 	 
	 	 	 	 

 

 

Signature Page to Asset Management Agreement

  

34

  

    

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

  

   

H.           Reporting Obligations and Administration of Financing Documents.

 

Without limiting the Manager’s obligations under Sections ‎3.1.1 and 3.11, the Manager shall provide Owner with the various certifications and reports, budgets and other submissions required to be provided to Owner pursuant to this Agreement or to the Administrative Agent or Lenders pursuant to the Credit Agreement as set forth below.  In all cases, Manager shall furnish drafts of the various reports, budgets and other submissions as soon as reasonably available in advance of delivery of the final report, budget or other submission, so as to keep Owner informed as to the progress and substance of the work in question.  Where certifications are required to be provided by the Owner Agent to the Administrative Agent, the Manager shall make the same such certification to the Owner, provided that with respect to items involving potential Events of Default, Environmental Claims or Pension matters, such certification need only be provided if so requested by Owner Agent.  Capitalized terms used below have their respective meanings as set forth in the Credit Agreement.

 

	  	
Frequency

	
Requirement

	
Requirement Detail of Report to Administrative Agent

	
Additional Certification/ Approval

	
Date Due to Administrative Agent

	
Reference to

Reporting Format

	
Reference to Credit Agreement

	
Date Due to Pacific Holding

	
1

	
Weekly

	
Cash Flow Forecast

	
Prepare a rolling cash flow forecast ending on the earlier of 13 weeks after the cash flow is delivered and the Maturity Date with the same level of detail as the then current budget.

	
No

	
2nd business day each week

	  	
7.03 (d)

	
As soon as reasonably possible

	
2

	
Weekly

	
Receipts and Expenses

	
Create a report setting forth, in a form and in sufficient detail satisfactory to the Administrative Agent, a comparison of actual receipts and expenses to budgeted receipts and expenses for the preceding week, within the current Budget.

	
No

	
2nd business day each week

	  	
7.03 (e)

	
As soon as reasonably possible

    

  

A-8

  

       

	 	
Frequency

	
Requirement

	
Requirement Detail of Report to Administrative Agent

	
Additional Certification/ Approval

	
Date Due to Administrative Agent

	
Reference to

Reporting Format

	
Reference to Credit Agreement

	
Date Due to Pacific Holding

	
3

	
Monthly

	
Financial Statements

	
Prepare a report setting forth, in each case in a form and in sufficient detail satisfactory to the Administrative Agent, balance sheets for each borrower for the current month and income statements, cash flows and profit and loss statements for such month and year-to-date. The report is to be certified by an Authorized Officer of the Borrowing Agent for each financial covenant set forth in Section 7.02(w) that the Borrowers are in full compliance with each such covenant (or, if any of such certifications cannot be given, state in reasonable detail the necessary qualifications to such certifications)

	
Yes, the report shall be certified as correct and complete by an Authorized Officer of the Borrowers’ Agent

	
When available and within 25 days after the end of each month

	  	
7.03 (f)

	
As soon as reasonably possible, and in any event no later than within 24 days after the end of each month

    

  

A-9

  

        

	 	
Frequency

	
Requirement

	
Requirement Detail of Report to Administrative Agent

	
Additional Certification/ Approval

	
Date Due to Administrative Agent

	Reference to 

Reporting Format

	
Reference to Credit Agreement

	
Date Due to Pacific Holding

	
4

	
Monthly

	
Operating Statements

	
Prepare and deliver to the Administrative Agent, an Operating Report certified as complete and correct by an Authorized Officer of the Borrowing Agent detailing the performance of each Plant. The report must include: line items corresponding to the Budget showing in detail all actual expenses relating to the operation and maintenance of each Plant compared to the budgeted expenses for the period; information showing the amounts of ethanol and other products produced in the period; ethanol and Distillers Grain sold per Agreements; amount of all other sales including ethanol and/or Distillers Grains, with the amount, an explanation of the sale and identification of the purchaser for each Plant.

	
Yes, the report shall be certified as correct and complete by an Authorized Officer of the Borrowers’ Agent

	
Within 25 days after the end of each month

	
Exhibit 7.03 (o)

	
7.03 (o)

	
As soon as reasonably possible, and in any event no later than within 24 days after the end of each month

    

  

A-10

  

   

	 	
Frequency

	
Requirement

	
Requirement Detail of Report to Administrative Agent

	
Additional Certification/ Approval

	
Date Due to Administrative Agent

	Reference to 

Reporting Format

	
Reference to Credit Agreement

	
Date Due to Pacific Holding

	
5

	
Quarterly

	
Budgets

	
Prepare a budget containing a rolling cash flow forecast that projects cash flows for each Plant in detail on an aggregate basis for the Project for the period starting on the current Period Start Date and ending on the earlier of 13 weeks after the current Period Start Date and the Maturity Date.  Each forecast is effective upon approval of the Administrative Agent and the Required Lenders of the Revolving Loan Class.  Also include a worksheet detailing all changes in material assumptions used while preparing the Budget with a line item for each expense category requested with amount as requested.

	
No

	
7 days before the first day of the Fiscal Quarter

	  	
7.01 (k)  (i) (ii)

	
As soon as reasonably possible, and in any event no later than 21 days before the first day of the Fiscal Quarter, with any requested revisions thereto provided no later than 14 days before the first day of the Fiscal Quarter

	
6

	
Quarterly

	
Financial Statements

	
Prepare quarterly consolidated balance sheets, income statements and cash flows of Pacific Holding for each Fiscal Quarter and year-to-date. The report is to be certified by an Authorized Officer of the Borrowing Agent that financial statements are presented in accordance with GAAP and no defaults have occurred.

	
Yes, a certificate executed by an Authorized Officer of the Applicable Loan Party

	
45 days after the end of the first three quarters of the year

	  	
7.03 (a)

7.03 (c)

	
As soon as reasonably possible, and in any event no later than 44 days after the end of the first three quarters of the year

   

  

A-11

  

    

	 	
Frequency

	
Requirement

	
Requirement Detail of Report to Administrative Agent

	
Additional Certification/ Approval

	
Date Due to Administrative Agent

	Reference to 

Reporting Format

	
Reference to Credit Agreement

	
Date Due to Pacific Holding

	
7

	
Annually

	
Budgets

	
Prepare an Initial Annual Forecast detailing projected requirements for Operation and all Maintenance and Maintenance Capital Expenses for the year on a monthly basis for each Plant.

	
No

	
60 days before each year-end

	  	
7.01 (k) (iv)

	
As soon as reasonably possible, and in any event no later than 30 days before such Budget is due to the Administrative Agent, with any requested revisions thereto provided no later than 15 days before such Budget is due to the Administrative Agent

	
8

	
Annually

	
Financial Statements

	
Prepare a copy of the annual audit report including consolidated balance sheets, income statements and cash flows of Pacific Holding with an unqualified opinion of the Auditors for the periods in conformity with GAAP.  The statements are to be certified by an Authorized Officer of the applicable Loan Party and must state no defaults have occurred.

	
Yes, a certificate executed by an Authorized Officer of the Applicable Loan Party

	
90 days after the end of each year

	  	
7.03 (b)

7.03 (c)

	
As soon as reasonably possible, and in any event no later than within 88 days after the end of each year

	
9

	
Trigger Event

	
Event of Default

	
A statement of an Authorized Officer of the Borrowers’ Agent is to be submitted that includes details of the event and the actions Borrowers have taken and propose to take.

	
Yes, a statement of an Authorized Officer of the Borrowers' agent

	
As soon as possible or within 5 days after Event of Default

	  	
7.03 (h)

	
As soon as reasonably possible

    

  

A-12

  

   

	 	
Frequency

	
Requirement

	
Requirement Detail of Report to Administrative Agent

	
Additional Certification/ Approval

	
Date Due to Administrative Agent

	Reference to 

Reporting Format

	
Reference to Credit Agreement

	
Date Due to Pacific Holding

	
10

	
Trigger Event

	
Event of Default

	
Notification is needed and detail must be sent to the Administrative Agent and is to include details of any litigation or proceeding pending against any Borrower, the Pledgor, or any Project Party that could have a Material Adverse Effect and any event under a Project Document which is expected to continue for more than 5 days or result in increased cost of $100,000.

	
Yes, a statement of an Authorized Officer of the Borrowers' Agent

	
As soon as possible or within 5 days after Borrower obtains knowledge of Event

	  	
7.03 (i)

	
As soon as reasonably possible

	
11

	
Trigger Event

	
Event of Default

	
Following receipt of a statement of an Authorized Officer of the Borrowers' Agent relating to any event of default, copies of all material notices or documents received by a Borrower relating to the Project Documents including allegations of any breach or default and any notice regarding or requesting consent to, any assignment, termination, modification, waiver or variation thereof.

	
No

	
Promptly after receipt

	  	
7.03 (j)

	
Promptly after receipt

	
12

	
Trigger Event

	
Pension - Events of Material Risk

	
A certificate of an Authorized Officer of the Borrowers’ Agent is to be issued and furnished to the Administrative Agent within 5 business days of a Borrower knowing of any adverse activity related to the pension plan. A copy of any notice or filing that is required by or has been issued by the PBGC, IRS, Dept. of Labor, or any other authority regarding the events must be included with the certificate.

	
Yes, include a duly executed certificate of an Authorized Officer of the Borrowers' Agent

	
Within 5 business days of a Borrower knowing of any adverse activity related to the pension plan

	  	
7.03 (k)

	
As soon as reasonably possible

      

  

A-13

  

        

	 	
Frequency

	
Requirement

	
Requirement Detail of Report to Administrative Agent

	
Additional Certification/ Approval

	
Date Due to Administrative Agent

	Reference to 

Reporting Format

	
Reference to Credit Agreement

	
Date Due to Pacific Holding

	
13

	
Trigger Event

	
Pension - Subsequent to an Event

	
If the Borrower receives a demand letter from the PBGC with notification of its final decision finding liability and date the liability must be paid, then a copy of the letter along with a certificate that includes any action the Borrower might take must be sent.

	
Yes, a duly executed certificate by the President or CFO of the Borrower

	
Within 5 business days of the Borrower receiving a demand letter from the PBGC with notification of a final decision

	  	
7.03 (l)

	
As soon as reasonably possible

	
14

	
Trigger Event

	
Environmental Claims

	
A certificate of an Authorized Officer of the Borrowers’ Agent must also be issued after any Borrower is aware of the following conditions: receipt of any written communication from the Government or any other Person alleging that an Environmental Affiliate is not in compliance with Environmental Laws or Approvals; knowledge of threats or pending Environmental Claims against the Borrower or Affiliate; knowledge of any release, emissions, etc. of any Material of Environmental Concern or noncompliance with any Environmental Laws as well as removal, remedies or response actions to the above concerns that could develop into a claim.

	
Yes, include a duly executed certificate of an Authorized Officer of the Borrowers' Agent

	
5 business days after any Borrower is aware of the conditions listed

	  	
7.03 (m)

	
As soon as reasonably possible

   

  

A-14

  

     

	 	
Frequency

	
Requirement

	
Requirement Detail of Report to Administrative Agent

	
Additional Certification/ Approval

	
Date Due to Administrative Agent

	Reference to 

Reporting Format

	
Reference to Credit Agreement

	
Date Due to Pacific Holding

	
15

	
At Request of Lender

	
Inspection of Records

	
Keep complete records and make available for inspection upon notice; all non-privileged correspondence, investigations, studies, sampling and testing conducted, and all remedial actions taken by any party relating to Environmental Concerns in order for Consultants, Lenders and their employees (in an Event of Default), and the Administrative Agent to review.

	
No

	
Upon request of inspection

	  	
7.03 (n)

	
Upon request of inspection

	
16

	
At Request of Lender

	
Books and Records

	
Keep books of record and accounts that are complete, true and include accurate entries in conformity with GAAP and all requirements of Law. Books also must be kept separate of any other person, Affiliate or Borrower.

	
No

	
Consistently

	  	
7.01 (i)

	
Consistently

	
17

	
Trigger Event

	
Auditor Correspondence

	
Submit upon receipt, copies of any detailed audit reports, management letters or recommendations that have been submitted to any Borrower by the Auditors.

	
No

	
Submit upon receipt

	  	
7.03 (g)

	
Submit upon receipt

	
18

	
Trigger Event

	
Other Documents

	
Provide complete copies of each Necessary Project Approval requested and all other information requested by the Administrative Agent or any Lender through the Administrative Agent.

	
No

	
Submit upon request

	  	
7.03 (p)

7.03 (q)

	
Submit 3 days prior to submission to Administrative Agent

   

  

A-15

  

    

	 	
Frequency

	
Requirement

	
Requirement Detail of Report to Administrative Agent

	
Additional Certification/ Approval

	
Date Due to Administrative Agent

	Reference to 

Reporting Format

	
Reference to Credit Agreement

	
Date Due to Pacific Holding

	
19

	
Trigger Event

	
Insurance

	
Obtain and maintain complete copies of each Plant's executed insurance policies (including insurance required pursuant to the Transaction Document), and include amounts of insurance listed and described on Schedule 7.01(h) of the Credit Agreement upon renewal on an annual basis.

	
No

	
Annually upon renewal

	
Schedule 7.01 (h)

	
7.01 (h)

	
Annually upon renewal

    

  

A-16

  

    

AMA Reporting Requirements

   

	  	
Frequency

	
Requirement

	
Requirement Detail of Report to Administrative Agent

	
Additional Certification/ Approval

	
Date Due to Administrative Agent

	
Reference to

Reporting Format

	
Reference to Credit Agreement

	
Date Due to Pacific Holding

	
1

	
Monthly

	
Cold Shutdown Report

	
 ● 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.

	
No

	
N/A

	  	
6.1.1 (a) of AMA Agreement

	
25 days following calendar month

	
2

	
Quarterly

	
Cold Shutdown Report

	
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 ‎6.1.1‎6.1.1(a) for the quarter then ended.

 

	
No

	
N/A

	  	
6.1.1 (b) of AMA Agreement

	
25 days following calendar quarter

    

  

A-17

  

 

	 	
Frequency

	
Requirement

	
Requirement Detail of Report to Administrative Agent

	
Additional Certification/ Approval

	
Date Due to Administrative Agent

	
Reference to

Reporting Format

	
Reference to Credit Agreement

	
Date Due to Pacific Holding

	
3

	
Monthly

	
Operating Report

	
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 Owner Agent a summary report in the form attached hereto as Appendix D, which report shall include, with respect to each such Facility, a numerical and narrative assessment in respect of such month of (i) each such Facility’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 the Owner of each such Facility, (ix) compliance with governmental permits, and (x) a comparison of figures to corresponding figures provided in the prior month.

	
No

	
N/A

	  	
6.1.2 of AMA Agreement

	
25 days following calendar month

    

  

A-18

  

   

Corn Procurement, Ethanol and Distillers Grains Marketing Agreements’ Reporting Requirements

 

	  	
Frequency

	
Requirement

	
Requirement Detail of Report to Administrative Agent

	
Additional Certification/ Approval

	
Date Due to Administrative Agent

	
Reference to

Reporting Format

	
Reference to Credit Agreement

	
Date Due to Pacific Holding

	
1

	
Monthly

	
Corn Transaction Report

	
Within 30 days after each Monthly Date occurring after the Effective Date, PAP shall deliver to the Owner a written summary of the Bilateral Transactions which were entered into or performed, in whole or part, during the month ending on such Monthly Date.

	
No

	
N/A

	  	
3.4 of Corn Procure- ment Agreement

	  
	
2

	
Monthly –

15 days prior to month end

	
Projected Corn Requirements

	
On or before the date that is fifteen days prior to the end of a calendar month, Owner shall provide PAP with a forecast of its projected monthly corn requirements for the following month.

	
No

	
N/A

	  	
3.5 (d) of Corn Procure- ment Agreement

	  
	
3

	
Monthly

	
Benchmarking

	
PAP shall furnish Owner on a monthly basis a report benchmarking its performance in accordance with Exhibit D to the Corn Procurement Agreement.

	
No

	
N/A

	  	
3.6 of Corn Procure- ment Agreement

	  

    

  

A-19

  

      

	 	
Frequency

	
Requirement

	
Requirement Detail of Report to Administrative Agent

	
Additional Certification/ Approval

	
Date Due to Administrative Agent

	
Reference to

Reporting Format

	
Reference to Credit Agreement

	
Date Due to Pacific Holding

	
4

	
Monthly

	
Benchmarking

	
Kinergy shall furnish Owner on a monthly basis a report benchmarking its performance in accordance with Exhibit D to the Ethanol Marketing Agreement.

	
No

	
N/A

	  	
2.7 of Ethanol Marketing Agreement

	  
	
5

	
Monthly

	
Benchmarking

	
PAP shall furnish Owner on a monthly basis a report benchmarking its performance in accordance with Exhibit C to the Distillers Grains Marketing Agreement.

	
No

	
N/A

	  	
2.7 of Distillers Grains Marketing Agreement

	  

    

  

A-20

  

      

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.

    

  

A-21

  

   

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.

 

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)

	
For each Operating Facility, inform the applicable Owner as far in advance as possible when such Owner’s Facility 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.

 

	
  

	
(c)

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

 

	
  

	
(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.

       

  

A-22

  

      

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 an Owner.

 

	
  

	
(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 any Owner’s request regarding operation and maintenance of the Facilities.

 

	
  

	
(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 the respective Owners’ independent certified public accountant to perform annual financial audits for all cost reimbursable services provided for the Facilities.

 

	
  

	
(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.

   

  

A-23

  

   

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-24

  

   

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 parts 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-25

  

     

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-26

  

    

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.

 

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.

    

  

A-27

  

    

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-28

  

    

APPENDIX B

   

	
Last Name

	
First Name

	
Division

	
Home Department

	
Job title

	
Level

	
Williamson

	
Douglas

	
PECA

	
740070 Operations Management

	
General MGR of Ops

	
DIR

	
Pagard

	
Cheryl

	
PECA

	
740070 Operations Management

	
Permitting & Compliance, Director

	
DIR

	
Jones

	
Lyndon

	
PECOL

	
690010 Plant Labor - General

	
Plant, Manager

	
DIR

	
Jundt

	
James

	
PECOL

	
690010 Plant Labor - General

	
Commodity/Ag Prod, Manager

	
MGR

	
Lambert

	
David

	
PECOL

	
690010 Plant Labor - General

	
Environmental Health & Safety Manager

	
MGR

	
Folmar

	
Matthew

	
PECOL

	
690010 Plant Labor - General

	
Lab Manager

	
MGR

	
Stark

	
William

	
PECOL

	
690010 Plant Labor - General

	
Maintenance, Manager

	
MGR

	
Trim

	
Steven

	
PECOL

	
690010 Plant Labor - General

	
Production, Manager

	
MGR

	
Powell

	
Joey

	
PECOL

	
690010 Plant Labor - General

	
Comm Operator, Lead

	
Non-ex

	
Allardin

	
Jeanette

	
PECOL

	
690010 Plant Labor - General

	
Commodity Operator

	
Non-ex

	
Hernandez

	
Arturo

	
PECOL

	
690010 Plant Labor - General

	
Commodity Operator

	
Non-ex

	
Imus

	
Jason

	
PECOL

	
690010 Plant Labor - General

	
Commodity Operator

	
Non-ex

	
Mikaelsen

	
Chance

	
PECOL

	
690010 Plant Labor - General

	
Commodity Operator

	
Non-ex

	
Sebelien

	
John

	
PECOL

	
690010 Plant Labor - General

	
Commodity Operator

	
Non-ex

	
Timpy

	
Michael

	
PECOL

	
690010 Plant Labor - General

	
Commodity Operator

	
Non-ex

	
Partlow

	
Stephen

	
PECOL

	
690010 Plant Labor - General

	
Electrician

	
Non-ex

	
Abercrombie

	
Mafe

	
PECOL

	
690010 Plant Labor - General

	
Lab Technician I

	
Non-ex

	
Putman

	
Jackie

	
PECOL

	
690010 Plant Labor - General

	
Lab Technician I

	
Non-ex

	
Braden

	
Larry

	
PECOL

	
690010 Plant Labor - General

	
Maintenance Mechanic

	
Non-ex

	
Drayton

	
Donald

	
PECOL

	
690010 Plant Labor - General

	
Maintenance Mechanic

	
Non-ex

	
Guenther

	
Marvin

	
PECOL

	
690010 Plant Labor - General

	
Maintenance Mechanic

	
Non-ex

	
Kestler

	
Randy

	
PECOL

	
690010 Plant Labor - General

	
Maintenance Mechanic

	
Non-ex

	
Richardson

	
David

	
PECOL

	
690010 Plant Labor - General

	
Maintenance Mechanic

	
Non-ex

	
Spinney

	
Peter

	
PECOL

	
690010 Plant Labor - General

	
Maintenance Mechanic

	
Non-ex

	
Richards

	
David

	
PECOL

	
690010 Plant Labor - General

	
Maintenance Supervisor

	
Non-ex

	
Bittinger

	
Wanliya

	
PECOL

	
690010 Plant Labor - General

	
Office, Manager

	
Non-ex

	
Bieren

	
John

	
PECOL

	
690010 Plant Labor - General

	
Production Operator

	
Non-ex

	
Givens

	
Frank

	
PECOL

	
690010 Plant Labor - General

	
Production Operator

	
Non-ex

	
Magallanes

	
Hector

	
PECOL

	
690010 Plant Labor - General

	
Production Operator

	
Non-ex

	
McBride

	
Ronnie

	
PECOL

	
690010 Plant Labor - General

	
Production Operator

	
Non-ex

	
Orcutt

	
Johnny

	
PECOL

	
690010 Plant Labor - General

	
Production Operator

	
Non-ex

	
Pena

	
Jose

	
PECOL

	
690010 Plant Labor - General

	
Production Operator

	
Non-ex

	
Savage

	
Cory

	
PECOL

	
690010 Plant Labor - General

	
Production Operator

	
Non-ex

	
Town

	
Mitchell

	
PECOL

	
690010 Plant Labor - General

	
Production Operator

	
Non-ex

	
White

	
Michael

	
PECOL

	
690010 Plant Labor - General

	
Production Operator

	
Non-ex

	
Reeves

	
Amanda

	
PECOL

	
690010 Plant Labor - General

	
Receptionist

	
Non-ex

	
Hedgpeth

	
Robert

	
PECOL

	
690010 Plant Labor - General

	
Utility Operator

	
Non-ex

	
Shuler

	
Michael

	
PECOL

	
690010 Plant Labor - General

	
Utility Operator

	
Non-ex

    

  

B-1

  

    

	
OPEN

	  	
PEM

	
690010 Plant Labor - General

	
Plant, Manager

	
DIR

	
Lovett

	
Michael

	
PEM

	
690010 Plant Labor - General

	
Commodity/Ag Prod, Manager

	
MGR

	
Taito

	
Talaonuupo

	
PEM

	
690010 Plant Labor - General

	
Commodity Operator

	
Non-ex

	
Ochoa

	
Bacilio

	
PEM

	
690010 Plant Labor - General

	
Maintenance Mechanic

	
Non-ex

	
Abarca

	
Jose

	
PEM

	
690010 Plant Labor - General

	
Production Operator

	
Non-ex

	
Barboza

	
Bruno

	
PEM

	
690010 Plant Labor - General

	
Production Operator

	
Non-ex

	
Valenzuela

	
Luis

	
PEM

	
690010 Plant Labor - General

	
Utility Operator

	
Non-ex

	
Wilson

	
Thomas

	
PEMV

	
690010 Plant Labor - General

	
Plant, Manager

	
DIR

	
Garza

	
Juan

	
PEMV

	
690010 Plant Labor - General

	
Commodity/Ag Prod, Manager

	
MGR

	
Rutherford

	
William

	
PEMV

	
690010 Plant Labor - General

	
Environmental Health & Safety Manager

	
MGR

	
Jensen

	
Zackery

	
PEMV

	
690010 Plant Labor - General

	
Lab Manager

	
MGR

	
Lowe

	
Alvin

	
PEMV

	
690010 Plant Labor - General

	
Maintenance, Manager

	
MGR

	
Teubner

	
Joseph

	
PEMV

	
690010 Plant Labor - General

	
Production, Manager

	
MGR

	
Cantu

	
Freddy

	
PEMV

	
690010 Plant Labor - General

	
Commodity Operator

	
Non-ex

	
Cardona

	
Crispin

	
PEMV

	
690010 Plant Labor - General

	
Commodity Operator

	
Non-ex

	
Green

	
Cecil

	
PEMV

	
690010 Plant Labor - General

	
Commodity Operator

	
Non-ex

	
Torres

	
Patrisio

	
PEMV

	
690010 Plant Labor - General

	
Commodity Operator

	
Non-ex

	
Zamora

	
Julio

	
PEMV

	
690010 Plant Labor - General

	
Commodity Operator

	
Non-ex

	
OPEN

	  	
PEMV

	
690010 Plant Labor - General

	
Commodity Operator

	
Non-ex

	
OPEN

	  	
PEMV

	
690010 Plant Labor - General

	
Commodity Operator

	
Non-ex

	
Heward

	
Scott

	
PEMV

	
690010 Plant Labor - General

	
Electrician

	
Non-ex

	
Bair

	
Monica

	
PEMV

	
690010 Plant Labor - General

	
Lab Technician I

	
Non-ex

	
Graetzer

	
Halina

	
PEMV

	
690010 Plant Labor - General

	
Lab Technician I

	
Non-ex

	
Richins

	
Paul

	
PEMV

	
690010 Plant Labor - General

	
Maint Mech, Lead

	
Non-ex

	
Crystal

	
William

	
PEMV

	
690010 Plant Labor - General

	
Maintenance Mechanic

	
Non-ex

	
Gummow

	
Eric

	
PEMV

	
690010 Plant Labor - General

	
Maintenance Mechanic

	
Non-ex

	
Hess

	
Robert

	
PEMV

	
690010 Plant Labor - General

	
Maintenance Mechanic

	
Non-ex

	
Jimenez

	
Manuel

	
PEMV

	
690010 Plant Labor - General

	
Maintenance Mechanic

	
Non-ex

	
Sibbett

	
Jim

	
PEMV

	
690010 Plant Labor - General

	
Maintenance Mechanic

	
Non-ex

	
Vela

	
Joseph

	
PEMV

	
690010 Plant Labor - General

	
Maintenance Mechanic

	
Non-ex

	
Day

	
Paula

	
PEMV

	
690010 Plant Labor - General

	
Office, Manager

	
Non-ex

	
Anderson

	
Kerry

	
PEMV

	
690010 Plant Labor - General

	
Production Operator

	
Non-ex

	
Baer

	
Mark

	
PEMV

	
690010 Plant Labor - General

	
Production Operator

	
Non-ex

	
Carper

	
Heather

	
PEMV

	
690010 Plant Labor - General

	
Production Operator

	
Non-ex

	
Davidson

	
Brett

	
PEMV

	
690010 Plant Labor - General

	
Production Operator

	
Non-ex

	
Halford

	
Dennis

	
PEMV

	
690010 Plant Labor - General

	
Production Operator

	
Non-ex

	
Kossman

	
Justin

	
PEMV

	
690010 Plant Labor - General

	
Production Operator

	
Non-ex

	
Rementeria

	
Lori

	
PEMV

	
690010 Plant Labor - General

	
Production Operator

	
Non-ex

	
Rios

	
Raul

	
PEMV

	
690010 Plant Labor - General

	
Production Operator

	
Non-ex

	
Satterwhite

	
Adam

	
PEMV

	
690010 Plant Labor - General

	
Production Operator

	
Non-ex

	
Thompson

	
Robert

	
PEMV

	
690010 Plant Labor - General

	
Production Operator

	
Non-ex

	
Craig

	
Elizabeth

	
PEMV

	
690010 Plant Labor - General

	
Receptionist

	
Non-ex

	
Koyle

	
Jared

	
PEMV

	
690010 Plant Labor - General

	
Utility Operator

	
Non-ex

     

  

B-2

  

    

	
Nelson

	
Mark

	
PEMV

	
690010 Plant Labor - General

	
Utility Operator

	
Non-ex

	
Todd

	
Royce

	
PES

	
690010 Plant Labor - General

	
Plant, Manager

	
DIR

	
Cayuela

	
Antonio

	
PES

	
690010 Plant Labor - General

	
Commodity/Ag Prod, Manager

	
MGR

	
Lund

	
Kirk

	
PES

	
690010 Plant Labor - General

	
Environmental Health & Safety Manager

	
MGR

	
Huynh

	
Thao

	
PES

	
690010 Plant Labor - General

	
Lab Manager

	
MGR

	
Lee

	
Patrick

	
PES

	
690010 Plant Labor - General

	
Maintenance, Manager

	
MGR

	
Shippy

	
Skyler

	
PES

	
690010 Plant Labor - General

	
Production, Manager

	
MGR

	
Brown

	
Paul

	
PES

	
690010 Plant Labor - General

	
Commodity Operator

	
Non-ex

	
De Los Santos

	
Juan

	
PES

	
690010 Plant Labor - General

	
Commodity Operator

	
Non-ex

	
Gallo

	
Jose

	
PES

	
690010 Plant Labor - General

	
Commodity Operator

	
Non-ex

	
Gutierrez

	
Jose

	
PES

	
690010 Plant Labor - General

	
Commodity Operator

	
Non-ex

	
Lahr

	
Dennis

	
PES

	
690010 Plant Labor - General

	
Commodity Operator

	
Non-ex

	
Machado

	
Johnny

	
PES

	
690010 Plant Labor - General

	
Commodity Operator

	
Non-ex

	
Martin

	
Bento

	
PES

	
690010 Plant Labor - General

	
Commodity Operator

	
Non-ex

	
Orosco

	
Rudy

	
PES

	
690010 Plant Labor - General

	
Commodity Operator

	
Non-ex

	
Wolford

	
Stephen

	
PES

	
690010 Plant Labor - General

	
Commodity Operator

	
Non-ex

	
Torre

	
Christopher

	
PES

	
690010 Plant Labor - General

	
Electrician

	
Non-ex

	
Kaur

	
Manpreet

	
PES

	
690010 Plant Labor - General

	
Lab Technician I

	
Non-ex

	
Teame

	
Mekonen

	
PES

	
690010 Plant Labor - General

	
Lab Technician I

	
Non-ex

	
Davis

	
John

	
PES

	
690010 Plant Labor - General

	
Maint Mech, Lead

	
Non-ex

	
Bowen

	
Michael

	
PES

	
690010 Plant Labor - General

	
Maintenance Mechanic

	
Non-ex

	
Newport

	
Brian

	
PES

	
690010 Plant Labor - General

	
Maintenance Mechanic

	
Non-ex

	
Parkinson

	
Phillip

	
PES

	
690010 Plant Labor - General

	
Maintenance Mechanic

	
Non-ex

	
Spradling

	
Lee

	
PES

	
690010 Plant Labor - General

	
Maintenance Mechanic

	
Non-ex

	
OPEN

	  	
PES

	
690010 Plant Labor - General

	
Maintenance Mechanic

	
Non-ex

	
Riker

	
Rhonda

	
PES

	
690010 Plant Labor - General

	
Office, Manager

	
Non-ex

	
Cepriano

	
Benjamin

	
PES

	
690010 Plant Labor - General

	
Production Operator

	
Non-ex

	
Deleon

	
Cheryl

	
PES

	
690010 Plant Labor - General

	
Production Operator

	
Non-ex

	
Eckerdt

	
Douglas

	
PES

	
690010 Plant Labor - General

	
Production Operator

	
Non-ex

	
Gauba

	
Sukrat

	
PES

	
690010 Plant Labor - General

	
Production Operator

	
Non-ex

	
Lombrana

	
Benjamin

	
PES

	
690010 Plant Labor - General

	
Production Operator

	
Non-ex

	
Mccullough

	
Edker

	
PES

	
690010 Plant Labor - General

	
Production Operator

	
Non-ex

	
Pagnucci

	
Nicholas

	
PES

	
690010 Plant Labor - General

	
Production Operator

	
Non-ex

	
Wells

	
Raymond

	
PES

	
690010 Plant Labor - General

	
Production Operator

	
Non-ex

	
OPEN

	  	
PES

	
690010 Plant Labor - General

	
Production Operator

	
Non-ex

	
Maxey

	
Christina

	
PES

	
690010 Plant Labor - General

	
Receptionist

	
Non-ex

	
Esteves

	
Gilbert

	
PES

	
690010 Plant Labor - General

	
Utility Operator

	
Non-ex

	
Koch

	
Kurt

	
PES

	
690010 Plant Labor - General

	
Utility Operator

	
Non-ex

	
Montez

	
Ralph

	
PES

	
690010 Plant Labor - General

	
Utility Operator

	
Non-ex

    

  

B-3

  

 

    

  

C-1

  

 

 

   

  

D-1

  

 

APPENDIX E

 

  

  E-1

  

 

Pacific Ethanol Holding Co. LLC

Quarterly Budget Chart of Accounts (Annotated)

 

	Line item	Credit agreements	 	Notes
	 	 	 	 
	Beginning Cash Balance	 	 	 
	 	 	 	 
	Cash Inflows	 	 	 
	     Revenue - Ethanol (Kinergy)	 	 	Revenue from ethanol sales
	     Revenue - WDG (PAP) and others	 	 	Revenue from co product sales, other income (such as rail incentive, refunds)
	     Revenue - CEPIP	 	 	Revenue from CEPIP
	     Others	 	 	Other special revenue
	Total Cash Inflows	 	 	 
	 	 	 	 
	Disbursements	 	 	 
	 	 	 	 
	Operating Disbursements	 	 	 
	     Corn	 	 	As approved by approved by the Owners through the budget process or by separate line item approval.
	     Natural Gas	 	 	 
	     Electricity	 	 	 
	     Insurance	 	 	
Insurance, surety bond paid directly from PEHC

	     Property Tax and other Taxes	 	 	 
	     Ethanol Freight	 	 	 
	     Co-product freight	 	 	 
	     Lease Payments	 	 	Varilease
	     Grain procurement and handling w/ PAP	 	 	 
	     Plant Supplies, Maintenance & SG&A	 	 	
Catch-all category that includes chemicals, denaturant, and other supplies, spare and replacement parts, repairs, janitorial, security and fire services, permitting fees, lab tests, water treatment and disposal, real estate and equipment leases, and SG&A (travel, training, seminars, meals, entertainment, etc.)

	 	 	 	 
	     Capital Expenditures 	 	 	 
	     Other PEHC costs:	 	 	
 

	         Professional Fees	 	 	Professionals engaged directly by PEHC (i.e., Hein, Protiviti, KMPG, legal), all to the extent approved in advance by the Owners through the budget process or a separate approval process.
	         Bank fees	 	 	Operating accounts under exit facility
	     Contingency	 	 	 
	Total Operating Disbursements	 10% compliance	 	 
	 	 	 	 
	Asset Management Agreement	 	 	 
	 	 	 	 
	    Direct Reimbursable Items under AMA	 	 	
Items can be contracted by Manager or the Plants and in either case must be approved in advance by the the Owners through the budget process or a separate approval process

	         Payroll & Benefits - Plants & Plant Operations	 	 	 
	         Other Direct Expenses	 	 	 
	         Insurance	 	 	
Insurance paid by PE-DE, with allocations to PEHC plants

	         Professional Fees	 	 	
Professionals engaged by Manager for services to PEHC, all to the extent approved in advance by the Owners through the budget process or a separate approval process.

	 	 	 	 
	         Total Direct Reimbursable Items under AMA	10% compliance	 	 
	     Asset Management Fee	 	 	
Fixed amount per AMA; currently $265K/mth

	Total Asset Management Agreement	 	 	 
	 	 	 	 
	Professional Fee	 	 	
New PE Holdco board fees and costs, plus fees and expenses for officer and advisors of PEHC

	 	 	 	 
	Interest & Fees	 	 	
Exit facility related interest and fees

	 	 	 	 
	Total Disbursements	 	 	 
	 	 	 	 
	Exit Facility Funding	 	 	 
	 	 	 	 
	Ending Cash Balance	 	 	 

 

  

  E-2  

  

 

Pacific Ethanol, Inc. (Delaware)

Detail of Selling, General & Admin Expenses

 

	Payroll and Benefits by Department	All items in this chart of accounts are "Manager Expenses" except as noted below:
	    Accounting	 	 	 
	    Corporate Development	 	 	 
	     Executive Finance	 	 	 
	     Financial Planning & Analysis	 	 	 
	     Human Resources	 	 	 
	     Legal Operations	Excludes HQ personnel dedicated to Plant management (2).
	 	 	 
	Office Expense	 	 	 
	 	 	 	 
	Corporate Development	 	 	 
	     M&A transactions	 	 	 
	     Public policy consultants	 	 	 
	     FRA membership dues	 	 	 
	     Donations and contributions - policy	 	 	 
	     Donations and contributions - general	 	 	 
	     Marketing, promotional items, Web design	 	 	 
	     Investor relations advisory	 	 	 
	     Investor relations other	 	 	 
	     Press releases	 	 	 
	     WCB development	 	 	 
	     Trade shows and seminars	 	 	 
	     Continuing education	 	 	 
	     Travel airfare	
Excludes budgeted travel expenses for the Plants under approved development project budgets.

	     Travel lodging	Excludes budgeted travel expenses for the Plants under approved development project budgets.
	     Travel car rentla	Excludes budgeted travel expenses for the Plants under approved development project budgets.
	     Meals/entertainment	Excludes budgeted travel expenses for the Plants under approved development project budgets.
	 	 	 	 
	IT Department	
Includes computers, software and systems located at the Plants to the extent they comprise part of the wide area and telephone networks. Other hardware items at Plants, such personal computers and servers belonging solely to the local area network, are excluded.

	     _Internet Services T1 Lines	 	 	 
	     _Mobile Communications	 	 	 
	     _Telephones	 	 	 
	     Conference Calling	 	 	 
	     Consulting Services - Navision	 	 	 
	     Consulting Services - Network	 	 	 
	     Consulting Services - Phone System	 	 	 
	     Consulting Services - Servers	 	 	 
	     Continuing Education	 	 	 
	     Hardware New Users	 	 	 
	     Maintenance - Environmental	 	 	 
	     Maintenance - Peripherals	 	 	 
	     _Maintenance - Phone System	 	 	 
	
     Maintenance - Server

	 	 	 
	     Maintenance - Software Licensing	 	 	 
	     Maintenance - Workstation	 	 	 
	     Remote Support	 	 	 
	     Software New Users	 	 	 
	     SOX Review/Compliance	 	 	 
	     Travel	 	 	 

 

  

  E-3  

  

 

Human Resources Department

Employee recruiting

Background checks and drug screens

Training - corporate

Travel airfare

Travel lodging

Travel car rental

Meals/entertainment

Transfer and relocation

Consulting - general

Consulting - compensation and benefits

Placement fees temp to perm convert

Temporary staffing

Dues and subscriptions

Employee events

Payroll processing fees

 

Executive Department 

Trade shows and seminars

Continuing education 

Travel airfare

Travel lodging

Travel car rental 

Meals/entertainment

 

Finance / FPBA Department

Trade shows and seminars

Annual shareholder meeting

Continuing education

Travel airfare

Travel lodging

Travel car rental

Meals/entertainment

 

Rent and Facilities - Sacramento Office Rent

Lease Terminal fee

Furniture, space planning, art, plants 

Security expense

Storage fees

Sacramento parking (reserved)

Sacramento parking (validation/guests) 

Office repairs and maintenance 

Janitorial services

 

Operations

Consulting services – engineering

Consulting services - biochemistry

Consulting services – general

Trade shows and seminars

Continuing education

	Travel - airfare	Excludes expense for the Plants.
	Travel - lodging	Excludes expense for the Plants.
	Travel - car rental 	Excludes expense for the Plants.
	Meals/entertainement	
Excludes expense for the Plants.

 

  

  E-4  

  

 

	Professional Fees - Legal	Excludes fees and expenses of outside counsel to the extent they relate soley to legal affairs of the Plants, such as legal fees incurred in connection with loans secured by the Plants.
	    SEC compliance	 
	    Corporate maintenance	 
	    Lender counsel	 
	    Borrower counsel	 
	    Project contracting	 
	    Business development support	 
	    Permitting and regulatory compliance	 
	    Human resources	 
	    Litigation	 
	    Trade shows and seminars 	 
	    Continuing education	 
	    Travel airfare	 
	    Travel lodging	 
	    Travel car rental	 
	    Meals/entertainment	 
	 	 
	Professional Fees - Accounting	
Excludes fees and expenses of outside professionals to the extent they relate soley to business of the Plants, such as accounting fees incurred for audits and preparation of tax returns of the Plant Owners.

	    Quarterly reviews	 
	    Annual audit - financial	 
	    Annual audit - SOX	 
	    SOX advisory	 
	    401K	 
	    Temporary staffing	 
	    Derivative accounting	 
	    Property tax accounting	 
	    Corporate tax prep and advisory	 
	    General advisory/special projects	 
	    Trade shows and seminars	 
	    Continuing education	 
	    Travel airfare	 
	    Travel lodging 	 
	    Travel car rental	 
	    Meals/entertainment	 
	 	 
	Director Fees and Expenses	 
	    Director fees	 
	    Director expenses	 
	    Continuing education	 
	    Non-cash director compensation	 
	 	 
	Insurance	 
	   D&O liability insurance	 
	Property casualty insurance	Excludes premiums for insurance on Plant assets.
	General liability insurance	Excludes premiums for insurance on Plant assets.
	 	 
	Licenses and Fees	 
	    Licenses and Fees	 
	    PEI DE Asset and Share Tax	 
	    Total	 
	 	 
	PEI DE Asset and Share Tax	 
	 	 
	Bank Fees	Excludes fees for accounts called for by loans secured by the Plants.
	    Bank fee	 
	         Total	 
	 	 
	Parsons note	 
	        Total other interest expense	 
	 	 
	Depreciation and Amortization	Not applicable - not a cash item.
	    Depreciation expense	 
	    Amortization expense intangibles	 
	 	 
	 	 
	 	 
	 	 

 

  

E-5

  

     

Exhibit I

    

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 calculated as follows:

   

	 	●	
The six-month EBITDA is $5 million.  Therefore, the annualized EBITDA is $10 million (2 X $5 million).

	 	 	 
	 	●	
The annualized EBITDA per Gallon of Operating Capacity is $0.25 ($10 million / 40 million).

	 	 	 
	 	●	
Therefore, the performance bonus is 0.03 x ($0.25 - $0.20) x 20 million = $30,000.

 

 

 

 

 

  

I-1

  

     

Exhibit II

 

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

    

  

II-1

  

    

Exhibit III

 

Sample EBITDA Calculation

    

PROPOSED EBlTDA

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

	  	
Current Period

	 	  
	
Description

	
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

	 	  

    

  

III-1

  

    

	
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 tees, 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)

	 	  

III-2

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00191-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00191-of-00352.parquet"}]]