REGISTRATION RIGHTS AGREEMENT
EXHIBIT
10.4
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT
(the “Agreement”)
dated as of March 27, 2008, is by and among Pacific Ethanol, Inc., a Delaware
corporation (the “Company”), and Xxxxx United,
LLC, a Delaware limited liability company (the “Investor”).
WHEREAS, the Company and the
Investor have entered into a Securities Purchase Agreement dated March 18, 2008
(and, as amended from time to time, the “Purchase Agreement”),
providing for the purchase by the Investor of (i) 2,051,282 shares of the
Company’s Series B Cumulative Convertible Preferred Stock (the “Series B Preferred
Stock”) (such shares, together with any additional shares of the
Company’s Series B Preferred Stock issued as a dividend thereon, the “Shares”), and (ii) a
warrant (the “Warrant”)
to acquire up to 3,076,923 shares (the “Warrant Shares”) of the
Company’s common stock, par value $0.001 per share (the “Common Stock”);
and
WHEREAS, simultaneously with,
and as a condition to, the closing of the transactions contemplated in the
Purchase Agreement, the Company and the Investor desire to enter into this
Agreement to provide certain registration and other rights with respect to the
Registrable Securities (as hereinafter defined).
NOW, THEREFORE, in
consideration of the mutual covenants and agreements contained in this Agreement
and the Purchase Agreement, and intending to be legally bound, the parties
hereto agree as follows:
“Adjustment Provisions” shall
have the meaning set forth in Section 3(a).
“Affiliate” shall have the
meaning set forth in the Purchase Agreement.
“Agreement” shall have the
meaning set forth in the recitals hereof.
“Business Day shall mean any
day other than Saturday, Sunday or other day on which commercial banks in the
State of California are authorized or required by law to remain
closed.
“Closing” shall have the
meaning set forth in the Purchase Agreement.
“Commission” shall mean the
United States Securities and Exchange Commission.
“Common Stock” shall have the
meaning set forth in the recitals hereof.
“Company” shall have the
meaning set forth in the recitals hereof.
“Conversion Shares” shall have
the meaning set forth in the Purchase Agreement.
“Demand Registration” shall
have the meaning set forth in Section 3(a).
“Exchange Act” shall
mean the Securities Exchange Act of 1934, as amended, and the rules and
regulations thereunder.
“FINRA” shall mean the
Financial Industry Regulatory Authority, Inc.
“GAAP” shall mean generally
accepted accounting principals, as in effect in the United States of America
from time to time applied on a consistent basis.
“Investor” shall have the
meaning set forth in the recitals hereof, and its successors, assigns and
transferees.
“Investor Securities” shall
mean the Shares, the Warrant Shares, the Conversion Shares and the Note Warrant
Shares.
“Majority of the Registrable
Securities” shall have the meaning set forth in Section 2(b).
“Note Warrant Shares” shall
mean 100,000 shares of Common Stock acquired upon the exercise of the warrant
issued in connection with that certain Secured Promissory Note by and between
the Company and the Investor, dated November 28, 2007.
“Person” shall have the
meaning set forth in the Purchase Agreement.
“Piggyback Registration” shall
have the meaning set forth in Section 4(a).
“Purchase Agreement” shall have the meaning set
forth in the recitals hereof.
“Registrable Securities” shall
mean: (i) the Conversion Shares; (ii) the Warrant Shares;
(iii) the Note Warrant Shares; and (iv) any securities issued or
issuable with respect to the Conversion Shares, Warrant Shares or Note Warrant
Shares by way of a stock dividend or stock split or in connection with a
combination of shares, recapitalization, merger, consolidation or other
reorganization with respect to any of the securities referenced above; provided, however, that a
Registrable Security ceases to be a Registrable Security when (a) it is
registered under the Securities Act and disposed of in accordance with the
registration statement covering it or (b) it is sold or transferred in
accordance with the requirements of Rule 144 (or similar provisions then in
effect) promulgated by the Commission under the Securities Act (“Rule 144”).
“Registration Expenses” shall
have the meaning set forth in Section 6(a).
“Registration Statement” shall
mean any registration statements contemplated by Section 3 and
any additional registration statements contemplated by Section 4,
including (in each case) the prospectus, amendments and supplements to such
registration statement or prospectus, all exhibits attached thereto, and all
material incorporated by reference or deemed to be incorporated by reference in
such registration statement.
“Representatives” of a Person
means the officers, employees, independent accountants, independent legal
counsel and other representatives of such Person.
2
“Rule 415” shall mean Rule 415
(or similar provisions then in effect) promulgated by the Commission under the
Securities Act.
“Securities Act” shall mean
the Securities Act of 1933, as amended, and the rules and regulations
thereunder.
“Shares” shall have the
meaning set forth in the recitals hereof.
“Subsidiary” shall have the
meaning set forth in the Purchase Agreement.
“Termination Date” shall mean
the date that the Investor and its Affiliates, as a group, own less than 10% of
the Investor Securities. For purposes of calculating such percentage
of ownership, each Share shall be deemed to be
equivalent to the number of shares of Common Stock into which they are
convertible.
“Warrant” shall have the
meaning set forth in the Purchase Agreement.
“Warrant Shares” shall have the
meaning set forth in the Purchase Agreement.
3
Registrable
Securities in the Demand Registration must notify the Company within ten (10)
Business Days of receiving the notice of the Demand
Registration. Except as provided in this Section 3, the
Company will include in all Demand Registrations all Registrable Securities for
which the Company receives the timely written requests for
inclusion. Any such request to be included in a Demand Registration
shall not be counted as a Demand Registration under this Section 3. All
demands or requests made pursuant to this Section 3(a)
must specify the number of Registrable Securities to be registered and the
intended method of disposing of the Registrable Securities. The
Company acknowledges that the plan of distribution contemplated by any such
Registration Statement shall include offers and sales through underwriters or
agents, offers and sales directly to investors, block trades and such other
methods of offer and sale and that offers and sales may be on a continued or
delayed basis under Rule 415. The Company will use its
commercially best efforts to cause such Registration Statement to be declared
effective by the Commission and to remain effective until
such time as all of the shares of Common Stock designated thereunder are sold or
the holders thereof are entitled to rely on Rule 144 for sales of Registrable
Securities without registration under the Securities Act and without compliance
with the public information, sales volume, manner of sale or notice requirements
of Rule 144(c), (e), (f) or (h). The Company acknowledges that at the
time the Company files any Registration Statement pursuant to this Section 3 the
number of Registrable Securities may not be fixed due to the antidilution and
other provisions related to the Shares (“Adjustment
Provisions”). Accordingly, the Company agrees that it will
register the number of Conversion Shares, Warrant Shares and Note Warrant Shares
held by or issuable to the Investor as of the date of the filing of the
Registration Statement and, to the extent permitted under the applicable rules
under the Securities Act, the additional number of shares of Common Stock
issuable pursuant to the Adjustment Provisions. The Company agrees
that, thereafter, it will file, as soon as practicable but in no event later
than thirty (30) days after the issuance of additional Registrable Securities
that are not covered by such Registration Statement (due to the effect of the
Adjustment Provisions) such amendments and/or supplements to the Registration
Statement, and such additional Registration Statements as are necessary in order
to ensure that at least 100% of the Conversion Shares, Warrant Shares and Note
Warrant Shares held by or issuable to the Investor are included in a
Registration Statement, and the Company will use its commercially best efforts
to cause such amendments, supplements and additional Registration Statements to
be declared effective within ninety (90) days following the issuance of such
additional Registrable Securities that are not otherwise covered by an effective
Registration Statement.
4
If the managing underwriter advises the
Company, in writing or otherwise, that an underwriters’ over-allotment option,
not in excess of fifteen percent (15%) of the total offering to be so effected,
is necessary or desirable for the marketing of such offering, all Registrable
Securities which are to be included in such offering pursuant to this Section 3(d) and
any other securities shall be allocated pro rata to the primary portion of such
offering and the underwriters’ over-allotment portion on the basis of the total
number of Registrable Securities and other securities requested to be included
in the registration.
Notwithstanding any other provision of
this Section 3,
if the managing underwriter advises the Company, in writing or otherwise, that
the total number or dollar amount of securities requested to be included in the
registration exceeds the number or dollar amount of securities that can be sold,
the Company will include the securities in the registration in the following
order of priority: (i) first, among all holders requesting to include
Registrable Securities in the Demand Registration (allocated pro rata among the
holders of Registrable Securities requested to be included in the registration,
on the basis of the dollar amount or number of Registrable Securities requested
to be included, as the case may be); (ii) second, any other securities (provided
they are of the same class as the securities sold by the Company) requested to
be included, allocated among the holders of such securities in such proportions
as the Company and those holders may agree; and (iii) third, to the Company for
its account.
If any holder of Registrable Securities
(other than the holder making the demand) disapproves of the terms of the
underwriting, such holder may withdraw therefrom by giving written notice to the
Company and the managing underwriter.
5
6
7
(i) prepare
and file with the Commission to permit a public offering and resale of the
Registrable Securities under the Securities Act which offering may, if so
requested, be on a delayed or continuous basis under Rule 415 a registration
statement on the appropriate form and use commercially best efforts to cause the
registration statement to become effective. At least ten (10) days
before filing a registration statement or prospectus or at least three (3)
Business Days before filing any amendments or supplements thereto, the Company
will furnish to the counsel of the holders of a Majority of the Registrable
Securities being registered copies of all documents proposed to be filed for
that counsel’s review and approval, which approval shall not be unreasonably
withheld or delayed;
(ii) immediately
notify each seller of Registrable Securities of any stop order threatened or
issued by the Commission and take all actions reasonably required to prevent the
entry of a stop order or if entered to have it rescinded or otherwise
removed;
(iii) prepare
and file with the Commission such amendments and supplements to the registration
statement and the corresponding prospectus necessary to keep the registration
statement effective, in the case of the registration required by Section 3 for
the period provided in Section 3 and in
any other case for one hundred twenty (120) days or such shorter period as may
be required to sell all Registrable Securities covered by the registration
statement; and comply with the provisions of the Securities Act with respect to
the disposition of all securities covered by the registration statement during
each period in accordance with the sellers’ intended methods of disposition as
set forth in the registration statement;
(iv) furnish
to each seller of Registrable Securities a sufficient number of copies of the
registration statement, each amendment and supplement thereto (in each case
including all exhibits), the corresponding prospectus (including each
preliminary prospectus), and such other documents as a seller may reasonably
request to facilitate the disposition of the seller’s Registrable
Securities;
(v) use
its commercially best efforts to register or qualify the Registrable Securities
under securities or blue sky laws of jurisdictions in the United States of
America as any seller requests within twenty (20) days following the original
filing of a registration statement and do any and all other reasonable acts and
things that may be necessary or advisable to enable the seller to consummate the
disposition of the seller’s Registrable Securities in such jurisdiction; provided, however, that the
Company shall not be obligated to qualify as a foreign corporation to do
business under the laws of any jurisdiction in which it is not then qualified or
to file any general consent to service of process;
8
(vi) notify
each seller of Registrable Securities, at any time when a prospectus is required
to be delivered under the Securities Act, of any event as a result of which the
prospectus or any document incorporated therein by reference contains an untrue
statement of a material fact or omits to state any material fact necessary to
make the statements therein not misleading in light of the circumstances under
which such statements were made, and use best efforts to prepare a supplement or
amendment to the prospectus or any such document incorporated therein so that
thereafter the prospectus will not contain an untrue statement of a material
fact or omit to state any material fact necessary to make the statements therein
not misleading in light of the circumstances under which such statements were
made;
(vii) cause
all registered Registrable Securities to be listed on each securities exchange,
if any, on which similar securities issued by the Company are then
listed;
(viii) provide
an institutional transfer agent and registrar and a CUSIP number for all
Registrable Securities on or before the effective date of the registration
statement;
(ix) enter
into such customary agreements, including an underwriting agreement in customary
form and take all other actions in connection with those agreements as the
holders of a Majority of the Registrable Securities being registered or the
underwriters, if any, reasonably request to expedite or facilitate the
disposition of the Registrable Securities;
(x) make
available for inspection by any seller of Registrable Securities, any
underwriter participating in any disposition pursuant to the registration
statement, and any attorney, accountant, or other agent of any seller or
underwriter, all financial and other records, pertinent corporate documents, and
properties of the Company, and cause the Company’s officers, directors and
employees to supply all information reasonably requested by any seller,
underwriter, attorney, accountant, or other agent in connection with the
registration statement; provided that an appropriate confidentiality agreement
is executed by any such seller, underwriter, attorney, accountant or other
agent;
(xi) in
connection with any underwritten offering, obtain a “comfort” letter from the
Company’s independent public accountants in customary form and covering those
matters customarily covered by “comfort” letters as the
holders of a Majority of the Registrable Securities being registered or the
managing underwriter reasonably requests, addressed to the underwriters and to
the holders of the Registrable Securities being registered;
9
(xii) in
connection with any underwritten offering, furnish an opinion of counsel
representing the Company for the purposes of the registration, in the form and
substance customarily given to underwriters in an underwritten public offering
and reasonably satisfactory to counsel representing the holders of Registrable
Securities being registered and the underwriter(s) of the offering, addressed to
the underwriters and to the holders of the Registrable Securities being
registered;
(xiii) use
its best efforts to comply with all applicable rules and regulations of the
Commission, and make available to its security holders, as soon as reasonably
practicable, an earnings statement complying with the provisions of
Section 11(a) of the Securities Act and covering the period of at least
twelve (12) months, but not more than eighteen (18) months, beginning with the
first month after the effective date of the Registration Statement;
(xiv) cooperate
with each seller of Registrable Securities and each underwriter participating in
the disposition of such Registrable Securities and their respective counsel in
connection with any filings required to be made with the FINRA; and
(xv) take
all other steps reasonably necessary to effect the registration of the
Registrable Securities contemplated hereby.
10
11
12
The
parties hereto agree that it would not be just and equitable if contribution
pursuant to this Section 7(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 the
immediately preceding paragraph. Notwithstanding anything herein to
the contrary, no participating holder of Registrable Securities acting as an
indemnifying party shall be required to contribute any amount in excess of the
amount by which the net proceeds of the offering (before deducting expenses, if
any) received by such participating holder exceeds the amount of any damages
that such participating holder has otherwise been required to pay by reason of
such untrue or alleged untrue statement or omission or alleged
omission. No Person guilty of fraudulent misrepresentation (within
the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any Person who was not guilty of such fraudulent
misrepresentation.
The
obligations of the Company and the holders of Registrable Securities under this
Section 7
shall survive the completion of any offering of Registrable Securities in a
registration statement, including the termination of this
Agreement.
(a) make
and keep public information available, as those terms are understood and defined
in Commission Rule 144 or any similar or analogous rule promulgated under the
Securities Act, at all times after the date hereof;
(b) file
with the Commission, in a timely manner, all reports and other documents
required of the Company under the Exchange Act; and
(c) so
long as a holder owns any Registrable Securities, furnish to such holder
forthwith upon request: a written statement by the Company as to its compliance
with the reporting requirements of said Rule 144 of the Securities Act, and of
the Exchange Act; a copy of the most recent annual or quarterly report of the
Company; and such other reports and documents as a holder may reasonably request
in availing itself of any rule or regulation of the Commission allowing it to
sell any such securities without registration.
13
(a) as
soon as practicable after the end of each fiscal year of the Company, and in any
event within ninety (90) days thereafter, a consolidated and consolidating
balance sheets of the Company as of the end of such fiscal year, and
consolidated and consolidating statements of income, changes in stockholders’
equity and cash flows of the Company for such year, prepared in accordance with
GAAP and setting forth in each case in comparative form the figures for the
previous fiscal year, all in reasonable detail and followed promptly thereafter
(to the extent not then available) by such financial statements accompanied by
the audit report with respect thereto of independent public accountants of
recognized national standing selected by the Company; and
(b) as
soon as practicable after the end of the first, second and third quarterly
accounting periods in each fiscal year of the Company, and in any event within
forty-five (45) days after the end of each such period, consolidated balance
sheets of the Company as of the end of each quarterly period, and consolidated
statements of income, changes in stockholders’ equity and cash flows of the
Company for such period and for the current fiscal year to date, prepared in
accordance with GAAP and setting forth in comparative form the figures for the
corresponding periods of the previous fiscal year, subject to changes resulting
form normal year-end audit adjustments, all in reasonable detail and certified
by the principal financial or accounting officer of the Company.
(i) during
normal business hours and upon reasonable advance notice, reasonable access to
the Representatives, properties, plants and other facilities and to all books
and records of the Company and each of its Subsidiaries;
(ii) all
financial, operating and other data and information regarding the Company and
its Subsidiaries as the Investor and its Representatives may reasonably request;
and
(iii) the
opportunity to discuss the affairs, finances, operations and accounts of the
Company and its Subsidiaries with the Company’s officers on a periodic
basis.
14
(a) Recapitalizations,
Exchanges, etc. The provisions of this Agreement shall apply
to the full extent set forth herein with respect to (i) the Registrable
Securities, (ii) any and all shares of voting common stock of the Company into
which the Registrable Securities are converted, exchanged or substituted in any
recapitalization or other capital reorganization by the Company and (iii) any
and all equity securities of the Company or any successor or assign of the
Company (whether by merger, consolidation, sale of assets or otherwise) which
may be issued in respect of, in conversion of, in exchange for or in
substitution of, or as a dividend upon, the Registrable Securities and shall be
appropriately adjusted for any stock dividends, splits, reverse splits,
combinations, recapitalizations and the like occurring after the date
hereof. The Company shall use its best efforts to cause any successor
or assign (whether by sale, merger or otherwise) to enter into a new
registration rights agreement with the holders of Registrable Securities on
terms substantially the same as this Agreement as a condition of any such
transaction.
15
(i) Governing
Law. The internal law of the State of California will govern
the interpretation, construction, and enforcement of this Agreement and all
transactions and agreements contemplated hereby, notwithstanding any state’s
choice of law rules to the contrary.
(j) Submission
to Jurisdiction; Consent to Service of Process. The parties
hereto hereby irrevocably submit to the exclusive jurisdiction of any federal or
state court located within Fresno County, California, over any dispute arising
out of or relating to this Agreement or any of the transactions contemplated
hereby and each party hereby irrevocably agrees that all claims in respect of
such dispute or any suit, action or proceeding related thereto shall be heard
and determined in such courts. The parties hereby irrevocably waive,
to the fullest extent permitted by applicable law, any objection which they may
now or hereafter have to the laying of venue of any such dispute brought in such
court or any defense of inconvenient forum for the maintenance of such
dispute. Each of the parties hereto agrees that a judgment in any
such dispute may be enforced in other jurisdictions by suit on the judgment or
in any other manner provided by law.
16
By:
|
/s/ XXXX X.
XXXXXXX
|
|
Xxxx
X. Xxxxxxx, President and CEO
|
|
XXXXX
UNITED, LLC
|
By:
|
/s/ XXXXXXX X. XXXXX
XX
|
|
Xxxxxxx
X. Xxxxx XX, Vice President
|
17