SERIES A PREFERRED STOCKHOLDER CONSENT AND WAIVER
Exhibit 10.6
SERIES
A PREFERRED STOCKHOLDER
CONSENT
AND WAIVER
THIS
SERIES A PREFERRED STOCKHOLDER CONSENT AND WAIVER (the “Consent and Waiver”) is
entered into as of March 27, 2008 (the “Effective Date”) by and
between Pacific Ethanol, Inc., a
Delaware corporation (the “Company”), and Cascade Investment, L.L.C., a
Washington limited liability company (the “Cascade”). Reference is hereby made to
the Company’s Certificate of Designations, Powers, Preferences and Rights of the
Series A Cumulative Redeemable Convertible Preferred Stock (the “Series A Certificate of
Designations”) with respect to the Company’s Series A Cumulative
Redeemable Convertible Preferred Stock, $.001 par value per share (the “Series A Preferred Stock”), a
copy of which is attached hereto as Exhibit A. All
capitalized terms used but not defined herein shall have the meanings set forth
in the Series A Certificate of Designations.
R E C I T A L
S
A. Pursuant
to that certain Securities Purchase Agreement dated March 18, 2008 (the “Securities Purchase
Agreement”) by and between the Company and Xxxxx United, LLC, a Delaware
limited liability company (“Xxxxx United”), a copy of
which is attached hereto as Exhibit B, the
Company proposes to sell and issue to Xxxxx United the following: (i) 2,051,282 shares
(the “Preferred Shares”)
of the Company’s Series B Cumulative Convertible Preferred
Stock, par value $.001 per share (the “Series B Preferred Stock”),
and (ii) a warrant to be dated March 27, 2008 (the “Preferred Warrant”) to
acquire up to 3,076,923 shares
(the “Preferred Warrant
Shares”) of the Company’s common stock, $0.001 par value per share (“Common Stock”), for the
aggregate purchase price of $40,000,000.
B. Pursuant
to that certain Secured Promissory Note dated November 28, 2007 by and between
Pacific Ethanol Imperial, LLC, a Delaware limited liability company, and Xxxxx
United, the Company proposes to issue to Xxxxx United a warrant (the “Note Warrant”) to acquire
100,000 shares of Common Stock (the “Note Warrant Shares”), a copy
of which Note Warrant is attached hereto as Exhibit
C. The Preferred Shares, Preferred Warrant, Preferred Warrant
Shares, Note Warrant, and the Note Warrant Shares are collectively referred to
herein as the “Offered
Securities”.
C. Pursuant
to that certain Registration Rights Agreement dated March 27, 2008 by and
between the Company and Xxxxx United (the “Xxxxx United Registration Rights
Agreement”), a copy of which is attached hereto as Exhibit D, the
Company proposes to provide to Xxxxx United certain registration and other
rights with respect to the Registrable Securities (as that term is defined in
the Xxxxx United Registration Rights Agreement).
D. Pursuant
to Section 9 of the Series A Certificate of Designations, Cascade, as holder of
all of the issued and outstanding shares of Series A Preferred Stock, is
afforded certain preemptive rights (the “Preemptive Rights”) with
respect to the offer and sale by the Company of certain securities of the
Company, including the Offered Securities.
E. Pursuant
to Section 7 of the Series A Certificate of Designations, Cascade is afforded
certain consent and approval rights with respect to certain actions that may be
undertaken by the Company including (i) authorizing, creating, issuing or
selling any securities ranking as to dividend rights and liquidation
preferences, among other rights, on parity with the Series A Preferred Stock,
(ii) altering, amending, repealing, substituting or waiving provisions of the
Charter to provide for the creation of the Series B Preferred Stock, and (iii)
authorizing or engaging in, or permitting any subsidiary to authorize or engage
in, a transaction with any entity or person that is affiliated with a current or
former director, officer or member of the Company or any of its subsidiaries
(collectively, the “Protected
Actions”).
F. The
Company has engaged in certain transactions with affiliates of former directors
of the Company and/or its subsidiaries, as more particularly described on Exhibit E attached
hereto (collectively, the “Prior Transactions”), which
Prior Transactions consisted of certain actions that are Protected Actions and
which required the consent of Cascade.
G. The
Company proposes to take certain current actions in connection with the
transactions contemplated by the Securities Purchase Agreement and the issuance
by the Company of the Note Warrant to Xxxxx United, which consist of the
creation of the Series B Preferred Stock pursuant to the terms and conditions of
the Series B Certificate of Designations, as well as any of the Prior
Transactions that are currently continuing (collectively, the “Current Transactions”), and
which are Protected Actions that require the consent of Cascade.
H. The
Company anticipates that it will engage in certain future transactions with
affiliates of former directors of the Company and/or its subsidiaries, as more
particularly described on Exhibit F attached
hereto (collectively, the “Future Transactions”), which
Future Transactions are expected to consist of certain actions that are
Protected Actions requiring the consent of Cascade.
I. Pursuant
to Section 13(k) of that certain Registration Rights and Stockholders Agreement
dated as of April 13, 2006 (the “Cascade Registration Rights
Agreement”) between the Company and Cascade, a copy of which is attached
hereto as Exhibit
G, the Company shall not, except with the prior written consent of
Cascade, enter into any agreement with respect to its securities that shall
grant to any person registration rights that in any way conflict with or are
prior to or equal in right to the rights provided under the Cascade Registration
Rights Agreement. Certain of the rights provided to Xxxxx United
under the Xxxxx United Registration Rights Agreement are equal in right to
rights provided to Cascade under the Cascade Registration Rights
Agreement.
J. In
connection with the transactions contemplated by the Securities Purchase
Agreement, (i) the Company proposes to waive the rights held by the Company to
pay dividends on the Series B Preferred Stock in shares of the Series B
Preferred Stock as set forth in the Series B Certificate of Designations (as
defined below) in favor of Xxxxx United, in its capacity as the sole holder of
all of the Company’s outstanding shares of Series B Preferred Stock, (ii) the
Company desires to waive the rights held by the Company to pay dividends on the
Series A Preferred Stock in shares of the Series A Preferred Stock as set forth
in the Series A Certificate of Designations in favor of Cascade, in its capacity
as the sole holder of all of the Company’s outstanding shares of Series A Preferred Stock and (iii) the Company
and Cascade desire to waive the adjustment of the conversion price of the Series
A Preferred Stock set forth in Section 5(d) of the Series A Certificate of
Designations, but only with respect to the sale and issuance of the Offered
Securities (and any shares of Common Stock issuable upon the conversion of the
Series B Preferred Stock and any shares of Series B Preferred Stock payable as a
dividend on the Series B Preferred Stock) to Xxxxx United pursuant to the terms
of the Securities Purchase Agreement and the Note Warrant.
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K. Cascade
agrees to (i) waive its Preemptive Rights with respect to the Offered
Securities, (ii) consent to the Protected Actions that the Company has taken in
connection with the Prior Transactions, (iii) consent to the Protected Actions
that the Company proposes to take in connection with the Current Transactions,
(iv) consent to the Protected Actions that the Company proposes to take in
connection with the Future Transactions, and (v) consent to the Company entering
into the Xxxxx United Registration Rights Agreement.
L. The
Company desires to (i) confirm to Cascade its intention to file a registration
statement on Form S-3MEF with the Securities and Exchange Commission covering
shares of Common Stock issuable upon conversion of the shares of Series A
Preferred Stock issued to Cascade as a dividend payment in kind for dividends
accrued on the Series A Preferred Stock for the quarter ended December 31, 2007
(the “Underlying Dividend
Shares”) by no later than the date on which the Company files its Form
10-K for the year ended December 31, 2007 with the Securities and Exchange
Commission, (ii) confirm to Cascade that no Redemption Event, as defined in the
Series A Preferred Stock Certificate of Designations has occurred, and (iii)
waive the rights held by the Company to pay dividends on the Series A Preferred
Stock in shares of Series A Preferred Stock.
NOW THEREFORE, in consideration of the foregoing
recitals, the mutual covenants and agreements set forth in this Consent and
Waiver, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
1. Waiver of
Preemptive Rights. Cascade hereby waives its Preemptive Rights
as to any and all of the Offered Securities, and hereby further waives any
notice period and any information delivery requirements set forth in
Section 9(a) of the Series A Certificate of Designations with respect to
such Preemptive Rights and the Offered Securities. Cascade hereby
acknowledges that, upon the execution of this Consent and Waiver, the Company
shall have no further notice or information delivery requirements with respect
to Cascade’s Preemptive Rights as they relate to the Offered Securities (and any shares of Common Stock issuable
upon the conversion of the Series B Preferred Stock and any shares of Series B
Preferred Stock payable as a dividend on the Series B Preferred
Stock).
2. Consent
to Issuance of Series B Preferred Stock. Cascade hereby
consents to the authorization, creation, issuance and sale of a class of
securities to be designated Series B Preferred Stock pursuant to the terms
and conditions contained in that certain Certificate of Designations, Powers,
Preferences and Rights of the Series B Cumulative Convertible Preferred Stock
(the “Series B Certificate
of Designations”), a copy
of which is attached hereto as Exhibit
H. Cascade
acknowledges that the Series B Preferred Stock shall be pari
passu with the Series A
Preferred Stock with respect to dividend and liquidation
rights.
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3. Waiver
of Conversion Price Adjustment. Each of Cascade and the Company hereby
waives the conversion price adjustment of the Series A Preferred Stock set forth
in Section 5(d) of the Series A Certificate of Designations, but only with
respect to the sale and issuance of the Offered Securities (and any shares of Common Stock issuable
upon the conversion of the Series B Preferred Stock and any shares of Series B
Preferred Stock payable as a dividend on the Series B Preferred Stock)
to Xxxxx United pursuant to
the terms of the Securities Purchase Agreement and the Note
Warrant.
4. Consent
to Xxxxx United Registration Rights Agreement. Cascade hereby
consents to the Company entering into the Xxxxx United Registration Rights
Agreement.
5. Consent
to Protected Actions. Cascade hereby consents to:
(a) the
Prior Transactions;
(b) the
Current Transactions; and
(c) the
Future Transactions.
6. Agreement
to File Registration Statement. The Company hereby agrees to
file with the Securities and Exchange Commission a registration statement on
Form S-3MEF covering the Underlying Dividend Shares by no later than the date on
which the Company files its Form 10-K for the year ended December 31, 2007 with
the Securities and Exchange Commission, and further covenants that with respect
to any subsequent request by Cascade for registration of Registrable Securities
(as defined in the Cascade Registration Rights Agreement), the Company shall
file such Registration Statement (as defined in the Cascade Registration Rights
Agreement) with the Securities and Exchange Commission within thirty (30) days
of receipt of such request.
7. Redemption
Rights. The Company hereby acknowledges and confirms to
Cascade that, as of the Effective Date, no Redemption Event has occurred
pursuant to the terms of the Series A Certificate of Designations.
8. Waiver of
Series A PIK Right. The Company hereby expressly waives its
rights under Section 3(a) of the Series A Certificate of Designations to pay any
dividends due and payable to Cascade as a holder of Series A Preferred Stock in
shares of the Series A Preferred Stock (the “Series A PIK
Right”). The
Company hereby covenants that it shall not, without the prior written consent of
Cascade, exercise or attempt to exercise the Series A PIK Right provided for in
Section 3(a) of the Series A Certificate of Designations at any time following
the date of this Consent and Waiver. The Company further confirms and
covenants that the dividends payable to Cascade on March 31, 2008 shall be paid
in cash.
9. Miscellaneous.
(a) Entire
Agreement. This
Consent and Waiver constitutes the entire agreement between the parties with
respect to the subject matter hereof and supersedes any prior understandings,
agreements or representations by or between the parties, written or oral, to the
extent they relate in any way to the subject matter hereof.
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(b) Amendments
and Waivers; Severability. This Consent and Waiver may not be
amended or modified, and no provisions hereof may be waived, without the written
consent of the Company and Cascade. No action taken pursuant to this
Consent and Waiver shall be deemed to constitute a waiver by the party taking
such action of compliance with any representation, warranty, covenant or
agreement contained herein. The waiver by any party hereto of a
breach of any provision of this Consent and Waiver shall not operate or be
construed as a further or continuing waiver of such breach or as a waiver of any
other or subsequent breach. No failure on the part of any party to
exercise, and no delay in exercising, any right, power or remedy hereunder shall
operate as a waiver thereof, nor shall any single or partial exercise of such
right, power or remedy by such party preclude any other or further exercise
thereof or the exercise of any other right, power or remedy. All
remedies hereunder are cumulative and are not exclusive of any other remedies
provided by law.
(c) Governing
Law. This Consent and Waiver shall be
governed by, and construed, interpreted and enforced in accordance with, the
laws of the State of Washington, without giving effect to the principles of
conflicts of laws thereunder which would specify the application of the law of
another jurisdiction.
(d) Counterparts. This Consent and Waiver may
be executed, including by facsimile signature, in one or more counterparts, each
of which shall be deemed an original but all of which together will constitute
one and the same instrument.
[signature page
follows]
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IN
WITNESS WHEREOF, the undersigned has executed this Consent and Waiver as of
March 27, 2008.
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CASCADE
INVESTMENT, L.L.C.
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By: /s/ XXXXXXX
XXXXXX
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Name: Xxxxxxx Xxxxxx
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Title: Business
Manager
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By: /s/ XXXX X.
XXXXXXX
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Name: Xxxx X. Xxxxxxx
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Title:
CEO
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EXHIBIT
A
SERIES
A CERTIFICATE OF DESIGNATIONS
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EXHIBIT
B
SECURITIES
PURCHASE AGREEMENT
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EXHIBIT
C
NOTE
WARRANT
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EXHIBIT
X
XXXXX
UNITED REGISTRATION RIGHTS AGREEMENT
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EXHIBIT
E
PRIOR
TRANSACTIONS
Xxxxxxx
X. Xxxxx XX is an officer and director of Xxxxx United LLC, a Delaware limited
liability company (“Xxxxx
United”), X.X. Xxxxx Co., a California corporation (“X.X. Xxxxx”) and Xxxxx
Mechanical Co., a California corporation (“Xxxxx Mechanical”), and is a
former member of the Board of Directors of the Company’s wholly-owned
subsidiary, Pacific Ethanol California, Inc., a California corporation (“PECA”). The
Company or a subsidiary of the Company entered into the following transactions
with Xxxxx United, X.X Xxxxx and Xxxxx Mechanical:
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1.
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Prior
to the adoption of the Series A Certificate of Designations, Pacific
Ethanol Madera, LLC (“PEM”), and X.X Xxxxx
entered into that certain Design-Build Agreement dated July 7, 2003 (the
“Agreement”),
pursuant to which X.X Xxxxx constructed the Madera ethanol
plant. PEM and X.X Xxxxx subsequently adopted several
amendments of the Agreement and a final settlement of all issues under the
Agreement. A number of such amendments and the final settlement
were approved subsequent to the adoption of the Series A Certificate of
Designations and involved sums exceeding
$100,000.
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2.
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Pacific
Ethanol Stockton, LLC (“PES”) and X.X. Xxxxx
entered into the certain Construction Agreement for the Stockton Project
dated September 14, 2007 (the “Stockton Agreement”),
pursuant to which X.X. Xxxxx agreed to perform construction services
related to the construction of Stockton ethanol plant. PES and
X.X. Xxxxx subsequently entered into that certain Assignment and Agreement
dated December 21, 2007, pursuant to which the obligations of X.X. Xxxxx
under the Stockton Agreement were assumed by Xxxxx
Mechanical. PES and Xxxxx Mechanical subsequently adopted
several change orders to the Stockton
Agreement.
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3.
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The
Company, Pacific Ethanol Imperial, LLC (“PE Imperial”), and
Xxxxx United entered into two loan transactions involving a total
principal amount of $30 million, represented by the following instruments
(the “Loan
Instruments”):
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a.
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Secured
Promissory Note dated as of November 28, 2007 (as amended on December 27,
2007), including the attached Form of
Warrant;
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b.
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Security
Agreement dated as of November 28, 2007 (as amended on December 27,
2007);
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c.
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Unconditional
Guaranty dated as of November 28,
2007;
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d.
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Letter
Agreement dated as of November 28, 2007, pertaining to the construction of
the Imperial ethanol plant;
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e.
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Secured
Promissory Note dated as of December 27, 2007;
and
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f.
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Unconditional
Guaranty dated as of December 27,
2007.
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Matters pertaining to
Southern Counties Oil Co.:
Xxxxx
Xxxxxxx is an officer, director and owner of Southern Counties Oil Co. (“SCOC”)
and is a former member of the Board of Directors of the Company and
PECA. SCOC is a customer of the Company’s subsidiary, Kinergy
Marketing, LLC (“Kinergy”), and since prior to the adoption of the Series A
Certificate of Designations and to the present time, Kinergy has from time to
time sold ethanol to SCOC at prevailing market prices.
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EXHIBIT
F
FUTURE
TRANSACTIONS
Matters pertaining to Xxxxx
United and its affiliates:
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1.
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PES
and Xxxxx Mechanical may adopt amendments and change orders to the
Stockton Agreement.
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2.
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The
Company, PE Imperial, and Xxxxx United may extend any or all of the Loan
Instruments.
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3.
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Pursuant
to the Letter Agreement dated as of November 28, 2007 by and between PE
Imperial and Xxxxx United, if PE Imperial proceeds with the construction
of the Imperial ethanol plan, it will award the primary construction and
mechanical contract for this project to Xxxxx United or an affiliate of
Xxxxx United.
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Matters pertaining to
Southern Counties Oil Co.:
Kinergy
will from time to time sell ethanol to SCOC at prevailing market prices on
arms-length terms that are no more favorable to SCOC than would be available in
an arms-length transaction.
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EXHIBIT
G
CASCADE
REGISTRATION RIGHTS AGREEMENT
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EXHIBIT
H
SERIES
B CERTIFICATE OF DESIGNATIONS
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