EXHIBIT 4.1
CONFIDENTIALITY, NON-COMPETITION, NON-SOLICITATION
AND CONSULTING AGREEMENT
CONFIDENTIALITY, NON-COMPETITION AND NON-SOLICITATION AGREEMENT dated
March 23, 2005 by and between, Pacific Ethanol, Inc., a Delaware corporation
(the "COMPANY") and Xxxxx Xxxxxx (the "CONSULTANT").
RECITALS
WHEREAS, Accessity Corp., a New York corporation ("ACCESSITY"), has
entered into a Share Exchange Agreement (the "SHARE EXCHANGE AGREEMENT") by and
among Accessity; Pacific Ethanol, Inc., a California corporation ("PEI");
Kinergy Marketing, LLC, an Oregon limited liability company ("KINERGY");
ReEnergy, LLC, a California limited liability company ("REENERGY," and together
with PEI and Kinergy, the "ACQUIRED COMPANIES"); each of the shareholders of PEI
(collectively, the "PEI SHAREHOLDERS"); each of the holders of options or
warrants to acquire shares of common stock of PEI (collectively, the "PEI
WARRANTHOLDERS"); each of the limited liability company members of Kinergy
identified on the signature pages hereof (collectively, the "KINERGY Members");
each of the limited liability company members of ReEnergy identified on the
signature pages hereof (collectively, the "REENERGY MEMBERS"); and
WHEREAS, immediately prior to the closing of the Share Exchange
Agreement, Accessity will merge with and into the Company; and
WHEREAS, the Consultant, as a condition to and pursuant to the Share
Exchange Agreement, the parties have requested that the Consultant resign from
Accessity and the Company and relinquishing certain rights pursuant to his
employment agreement with Accessity to receive cash and benefits; and, whereas,
the Consultant has the ability and background to effectively compete with the
Company subsequent to his resignation having spent extensive time, encompassing
more than 15 years, as CEO of a public company operational control of such
companies, extensive contacts with both equity and bank lending sources; and,
whereas the Company has as a key strategy to manufacture and market ethanol and
other alternative fuels; and
WHEREAS, Accessity and Consultant are defendants in a certain law suit
which have been brought by Xxxxxx X. Xxxxxx in connection with Xx. Xxxxxx'x
previous employment with the Company (the "XXXXXX ACTION") and the events that
occurred during Consultant's period of employment with Accessity and of which
the Consultant has certain direct knowledge; and
WHEREAS, Accessity has filed suit against Mercator Group LLC, Global
Taurus LLC, et al, for in excess of $100 million (the "MERCATOR ACTION") related
to a transaction that was contemplated by Accessity during the period of the
Consultant's employment with Accessity with the Consultant holding unique
knowledge that may be key to the successful prosecution of this suit; and
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WHEREAS, the Company and the Consultant desire to enter into this
Agreement under which the Consultant will provide consulting services and
cooperation in connection with the Xxxxxx Action and Mercator Action or any
other related litigation or disputes that may subsequently be brought arising
out of events that occurred during the period that the Consultant was employed
by Accessity; and
WHEREAS, the Consultant has many years of experience as chief executive
officer of a public company and by using this experience can assist in the
transition of the new management following the closing of the Share Exchange
Agreement by assisting with review and advice regarding press releases,
discussions with the new senior management regarding Nasdaq listing matters,
management of a public company, dealings with the Securities and Exchange
Commission ("SEC"), advice for structuring debt financings, broker
communications, investor and public relations matters, strategic acquisition
evaluation and negotiation, negotiations for acquisitions, divestitures and
other contractual relationships, the search and the evaluation of management
talent, evaluation and selection of professional, marketing and sales advice;
and
WHEREAS, the Company wishes to protect the confidential information of
the Company and to protect against the Consultant's skills, knowledge,
experience, ideas and influence being used for the benefit of a competitor of
the Company. Consultant is willing to enter into an agreement to provide such
protection to the Company upon the terms and conditions set forth in this
Agreement.
NOW, THEREFORE, in consideration of the foregoing and the mutual
agreements herein contained, the parties agree as follows.
1. CONFIDENTIALITY, NON-COMPETITION AND NON-SOLICITATION.
(a) Consultant acknowledges that: the business of acquiring
manufacturing, distributing, reselling and brokering Ethanol and/or other
alternative fuels (the "BUSINESS") is intensely competitive and Consultant's
former and current position with Accessity and the Company has exposed the
Consultant to knowledge of confidential information of the Company; the direct
and indirect disclosure of any such confidential information to existing or
potential competitors of the Company would place the Company at a competitive
disadvantage and would do damage, monetary or otherwise, to the Company's
Business; and the engaging by Consultant in any of the activities prohibited by
this Agreement may constitute improper appropriation and/or use of such
information and trade secrets. Consultant expressly acknowledges the trade
secret status of the confidential information and that the confidential
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information constitutes a protectable business interest of the Company.
Confidential information and trade secrets include, but are not limited to,
customer and client lists, price lists, marketing and sales strategies and
procedures, operational and equipment techniques, business plans and systems,
quality control procedures and systems, special projects and technological
research, including projects, research and reports for any entity or client or
any project, research, report or the like concerning sales or manufacturing or
new technology, employee compensation plans and any other information relating
thereto, and any other records, files, drawings, inventions, discoveries,
applications or processes which are not in the public domain (all the foregoing
shall be referred to herein as the "CONFIDENTIAL INFORMATION").
(b) For purposes of this Agreement, the term "COMPANY" shall
be construed to include the Company and its current and future subsidiaries and
affiliates engaged in the Business.
(c) From and after the Closing of the Share Exchange Agreement
(the "EFFECTIVE TIME"), Consultant shall not, directly or indirectly, whether
individually, as a director, stockholder, owner, partner, employee, principal or
agent of any business, or in any other capacity, make known, disclose, furnish,
make available or utilize any of the confidential information of the Company
other than in the proper performance of the duties contemplated thereafter, or
as required by a court of competent jurisdiction or other administrative or
legislative body; PROVIDED THAT, prior to disclosing any of the confidential
information to a court or other administrative or legislative body, Consultant
shall promptly notify the Company so that it may seek a protective order or
other appropriate remedy. Consultant agrees to return all confidential
information, including all photocopies, extracts and summaries thereof, and any
such information stored electronically on tapes, computer disks or in any other
manner to the Company at any time upon request by the Company and upon the
termination of his engagement for any reason.
(d) From the Effective Time until the fifth anniversary of the
Effective Time (the "NON-COMPETITION Period"), Consultant shall not engage in
Competition (as defined below) with the Company. For purposes of this Agreement,
"COMPETITION" by Consultant shall mean Consultant's engaging in, or otherwise
directly or indirectly being employed by or acting as a the Consultant or lender
to, or being a director, officer, employee, principal, licensor, trustee,
broker, agent, stockholder, member, owner, joint venturer or partner of, or
permitting his name to be used in connection with the activities of any other
business or organization which is engaged in the same business as the Business
of the Company as the same shall be constituted at any time on the date hereof
or during the tenure of the Consultant's engagement with the Company in any role
as the case may be, whichever is later; PROVIDED THAT, it shall not be a
violation of this Agreement for Consultant to (i) become the registered or
beneficial owner of less than five percent (5%) of any class of the capital
stock of a competing corporation registered under the Securities Exchange Act of
1934, as amended or (ii) be employed by an entity that engages in the same
business as the Business of the Company at the date of acquisition, so long as
Consultant does not directly perform services for or work within a division or
business unit of such entity that engages in such business.
(e) Without limiting the generality of the foregoing, during
the Non-Competition Period, Consultant agrees that he will not, directly or
indirectly, for his benefit or for the benefit of any other person, firm or
entity, do any of the following:
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(i) solicit from any customer doing business with the
Company business of the same or of a similar nature to the Business conducted
between the Company and such customer;
(ii) solicit the employment or services of any person
who during the Non-competition Period is employed by or a the Consultant to the
Company; or
(iii) make any statements or comments of a defamatory
or disparaging nature to third parties regarding the Company or its officers,
directors, personnel, products or services.
(f) Consultant acknowledges that this Agreement is being
entered into in connection with the consummation of the transactions
contemplated by the Share Exchange Agreement, that Consultant's agreement to the
terms set forth herein are a critical inducement to the entering into the Share
Exchange Agreement by the parties thereto, that the disclosure of the
Confidential Information by the Consultant and/or breach of the non-solicitation
restrictions listed above are of a special and unique character, which gives
this Agreement a particular value to the Company, the loss of which may not be
reasonably or adequately compensated for by damages in an action at law, and
that a material breach by the Consultant of any of the provisions contained
herein will cause the Company irreparable injury. Consultant therefore agrees
that the Company shall be entitled, in addition to any other right or remedy, to
a temporary, preliminary and permanent injunction, without the necessity of
proving the inadequacy of monetary damages or the posting of any bond or
security, enjoining or restraining Consultant from any such violation.
(g) Consultant further acknowledges and agrees that due to the
uniqueness of the Confidential Information the Consultant will possess, the
covenants set forth herein are reasonable and necessary for the protection of
the business and goodwill of the Company; and it is the intent of the parties
hereto that if in the opinion of any court of competent jurisdiction any
provision set forth in this Agreement is not reasonable in any respect, such
court shall have the right, power and authority to modify any and all such
provisions as to such court shall appear not unreasonable and to enforce the
remainder of this Agreement as so modified.
(h) Consultant acknowledges that a condition precedent of the
initial Share Exchange Agreement dated May 14, 2004 required that all 1000
Series A Convertible Preferred Shares issued to PHH Arval (a subsidiary of the
Cendant Corporation) would be reacquired and converted to common stock prior to
closing the transaction, at the lowest possible cost. Consultant has agreed to
provide additional extensions of his non-compete arrangement with PHH related to
the automotive business in order to assure this repurchase was effected at a
reasonable cost in order to comply with the Share Exchange Agreement.
2. CONSULTING DUTIES. For of period of five (5) years from the
Effective Time, the Consultant agrees as follows:
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(a) In consideration for the compensation provided for in
Section 3 hereof, the Consultant shall provide all reasonable and necessary
assistance and cooperation to the Company's legal counsel and other retained
professionals (the "SERVICES") with respect to the Xxxxxx Action, and/or the
Mercator Action (the "Proceedings"). The Consultant shall make himself
available, at times and places reasonably convenient for the Consultant and the
Company's counsel, for depositions, interviews, preparation and review of
affidavits, interrogatories and discovery materials, investigative assistance,
and all such other matters as shall be necessary or in the opinion of counsel to
the Company useful to the Company in connection with the Proceedings. The
Consultant shall provide the services described herein in a good faith and
professional manner consistent with the role of an executive officer which the
Consultant held while an employee of Accessity and the Company.
(b) In consideration for the compensation provided for in
Section 3 hereof, the Consultant shall provide consultation and advisory
services (the "CONSULTING SERVICES") to the Company, which shall consist of his
personal advice and counsel to the Company regarding (a) the transition of
Accessity to new management and to a new ownership structure following the
Effective Time, (b) related post-closing long-range planning, strategic
direction and integration and rationalization processes, (c) the Consultant has
many years of experience as chief executive officer of a public company and by
using this experience can assist in the transition of the new management
following the closing of the Share Exchange Agreement by assisting with review
and advice regarding press releases, discussions with the new senior management
regarding Nasdaq listing matters, management of a public company, dealings with
the Securities and Exchange Commission, advice for structuring debt financings,
broker communications, investor and public relations matters, strategic
acquisition evaluation and negotiation, negotiations for acquisitions,
divestitures and other contractual relationships, the search and the evaluation
of management talent, evaluation and the selection of professionals, marketing
and sales advice and other matters related to the Company's business, the
Consultant shall provide Consulting Services as may be reasonably requested by
the Company's Board of Directors or Chief Consultant Officer (or his designee)
from time to time and at mutually agreeable times. Consulting Services may be
provided in person, telephonically, electronically or by correspondence, to the
extent appropriate under the circumstances. Subject to the provisions of
Sections 1 and 2 hereof, the Consultant will be free to spend such portions of
the Consultant's time, energy and skill in such manner and with such persons as
he sees fit. Notwithstanding anything to the contrary, the Consulting Services
are to be solely advisory and it is not the intention of the parties that the
Consultant will provide management or day-to-day operational duties under the
terms of this Agreement.
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3. COMPENSATION.
(a) The Consultant and the Company agree that in exchange for
the: (a) Services, (b) the Consulting Services, and (c) the confidentiality and
non-competition covenants set forth in Section 1 herein, the Company agrees to
(i) deliver 400,000 shares of the Company's common stock, par value $.001 per
share, within three (3) business days after the date of this Agreement, which
shares will be registered under the Securities Act of 1933, as amended, on a
Form S-8 that will be filed with the SEC as soon as practicable after the date
hereof, and (ii) transfer all of the capital stock it holds in DriverShield CRM
Corp. to the Consultant.
(b) In addition to the consideration provided by the
Consultant above, the Company and the Consultant hereby agree as follows: (i) to
terminate the Employment Agreement dated January 30, 2002 and amended on March
3, 2005 (the "EMPLOYMENT AGREEMENT") between Accessity and the Consultant
effective at the Effective Time, (ii) the Consultant hereby waives any and all
rights and benefits contained in the Employment Agreement, including, without
limitation those benefits set forth in Section 5 of the Employment Agreement
relating to benefits payable to the Consultant following a Change in Control of
Accessity, as that term is defined in the Employment Agreement.
(c) The Consultant shall be reimbursed for all reasonable out
of pocket expenses incurred in the course of fulfilling his duties under this
Agreement. 4. RESIGNATION. Upon the Effective Time, the Consultant shall resign
all positions with Accessity and the Company.
5. ENTIRE AGREEMENT. This Agreement sets forth the entire agreement
between the parties with respect to its subject matter and merges and supersedes
all prior discussions, agreements and understandings of every kind and nature
between any of them and neither party shall be bound by any term or condition
other than as expressly set forth or provided for in this Agreement. This
Agreement may not be changed or modified nor may any of its provisions be
waived, except by an agreement in writing, signed by the parties hereto.
6. WAIVER. The failure of any party to this Agreement to enforce any of
its terms, provisions or covenants shall not be construed as a waiver of the
same or of the right of such party to enforce the same. Waiver by any party
hereto of any breach or default by any other party of any term or provision of
this Agreement shall not operate as a waiver of any other breach or default.
7. SEVERABILITY. In the event that any one or more of the provisions of
this Agreement shall be held to be invalid, illegal or unenforceable, the
validity, legality and enforceability of the remainder of the Agreement shall
not in any way be affected or impaired thereby. Moreover, if any one or more of
the provisions contained in this Agreement shall be held to be excessively broad
as to duration, activity or subject, such provisions shall be construed by
limiting and reducing them so as to be enforceable to the maximum extent allowed
by applicable law.
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8. NOTICES. Any notice given hereunder shall be in writing and shall be
deemed to have been given when delivered by messenger or courier service
(against appropriate receipt), or mailed by registered or certified mail (return
receipt requested), addressed as follows.
If to the Company: Pacific Ethanol, Inc.
0000 X. Xxxx Xxxxxx
Xxxxxx, XX 00000
with a copy to: Xxxxx & Xxxxxx, LLP
000 Xxxxx Xxxxxxxxx, 00xx Xxxxx
Xxxxx Xxxx, XX 00000
Attn: Xxxxx X. Xxxxxxx, Esq.
If to Consultant: Xxxxx Xxxxxx
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with a copy to: Xxxxxxxx X. Xxxxx, Esq.
Meritz & Xxxxx LLP
0000 X Xxxxxx, XX
Xxxxxxxxxx, XX 00000
or at such other address as shall be indicated to either party in writing.
Notice of change of address shall be effective only upon receipt.
9. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Florida without regard to conflicts of
law principles.
10. DESCRIPTIVE HEADINGS. The section headings contained herein are for
reference purposes only and shall not in any way affect the meaning or
interpretation of this Agreement.
11. COUNTERPARTS. This Agreement may be executed in counterparts, each
of which shall be deemed an original for all purposes but which, together, shall
constitute one and the same instrument.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date written below.
PACIFIC ETHANOL, INC. CONSULTANT
By: Xxxxxx Kart By:/s/ Xxxxx Xxxxxx
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Name: Xxxxxx Kart Name: Xxxxx Xxxxxx
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Title: Chief Financial Officer
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Date: March 23, 2005 Date: March 23, 2005
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