<PAGE>
EXHIBIT 10.3
DEPOSIT AGREEMENT
BETWEEN
PACIFIC ETHANOL, INC.
AND
[ ], AS TRUSTEE
DATED [_________ __], 200_
<PAGE>
<TABLE>
<S> <C>
TABLE OF CONTENTS
-----------------
PAGE
ARTICLE I.
APPOINTMENT OF TRUSTEE; ESTABLISHMENT OF RESTRICTED CASH
ACCOUNT............................1
SECTION 1.01
Appointment of
Trustee.................................................................1
SECTION 1.02
Establishment of Restricted Cash
Account...............................................1
SECTION 1.03
Investment and Liquidation of Deposit
Fund.............................................2
ARTICLE II.
REPRESENTATIONS, WARRANTIES AND
COVENANTS...................................................2
SECTION 2.01
Representations and Warranties of the
Company..........................................2
SECTION 2.02
Covenant of the
Company................................................................2
ARTICLE III.
DISBURSEMENT FROM THE RESTRICTED CASH
ACCOUNT...............................................2
SECTION 3.01
Disbursements for Payment of Construction
Costs........................................2
SECTION 3.02
Disbursements for Payment of Acquisition
Costs.........................................3
SECTION 3.03
Disbursements upon Redemption of Preferred
Shares......................................3
SECTION 3.04
Trustee's Reliance on
Requisitions.....................................................3
SECTION 3.05
Records of
Disbursements...............................................................4
ARTICLE IV.
RIGHTS AND DUTIES OF TRUSTEE;
RESIGNATION...................................................4
SECTION 4.01
Rights and Duties of
Trustee...........................................................4
SECTION 4.02
Resignation or
Removal.................................................................4
SECTION 4.03
Compensation of
Trustee................................................................4
SECTION 4.04
Indemnity..............................................................................5
ARTICLE V.
MISCELLANEOUS...............................................................................5
SECTION 5.01
No
Assignment..........................................................................5
SECTION 5.02
Further
Assurances.....................................................................5
SECTION 5.03
Notices................................................................................5
SECTION 5.04
Governing
Law..........................................................................5
SECTION 5.05
Submission to Jurisdiction; Consent to Service of
Process..............................6
SECTION 5.06
Third Party
Beneficiary................................................................6
SECTION 5.07
Entire
Agreement.......................................................................6
SECTION 5.08
Counterparts...........................................................................6
SECTION 5.09
Amendments and
Termination.............................................................6
SECTION 5.10
Severability...........................................................................7
SECTION 5.11
Titles and Subtitles; Interpretive
Matters.............................................7
SECTION 5.12
Facsimile
Signatures...................................................................7
SECTION 5.13
Certain Defined
Terms..................................................................7
INDEX TO EXHIBITS
-----------------
EXHIBIT A
Trustee Wire Instructions
EXHIBIT B
Form of Construction Cost Requisition
EXHIBIT C
Form of Acquisition Cost Requisition
i
</TABLE>
<PAGE>
PACIFIC ETHANOL, INC.
DEPOSIT AGREEMENT
THIS DEPOSIT AGREEMENT is made on the [__] day of [__], 200_
(the
"AGREEMENT"), by and between Pacific
Ethanol, Inc., a Delaware corporation (the
"COMPANY"), and [ ], a [ ], in its capacity
as trustee (the "TRUSTEE"). Certain
capitalized terms used herein are defined
in Section 5.13 of this Agreement.
WHEREAS,
the Company and Cascade Investment, L.L.C., a Washington
limited liability company (the "PURCHASER")
have entered into a Purchase
Agreement, dated as of November 14, 2005
(the "PURCHASE AGREEMENT"), pursuant to
which the Purchaser has purchased from the
Company, and the Company has sold to
the Purchaser, the Preferred Shares (as
defined in the Purchase Agreement);
WHEREAS, pursuant to the terms of the Purchase Agreement,
$80,000,000
of the purchase price paid by the Purchaser
to the Company in consideration of
the Preferred Shares is to be deposited
into a restricted cash account (the
"RESTRICTED CASH ACCOUNT") to be held by
the Trustee and applied in the manner
provided in this Agreement;
WHEREAS, to induce the Purchaser to acquire the Preferred Shares,
the
Company has agreed to enter into this
Agreement, establish the Restricted Cash
Account and utilize the amounts maintained
in the Restricted Cash Account in
accordance with this Agreement; and
WHEREAS, the parties hereto desire to set forth the terms of
the
Restricted Cash Account and to appoint the
Trustee to act in accordance with the
terms of this Agreement.
NOW, THEREFORE, in consideration of the premises,
representations,
warranties and the mutual covenants
contained in this Agreement and the Purchase
Agreement, and for good and valuable
consideration, the receipt and sufficiency
of which are hereby acknowledged, the
parties agree as follows:
ARTICLE I.
APPOINTMENT OF TRUSTEE; ESTABLISHMENT OF RESTRICTED CASH
ACCOUNT
SECTION 1.01 APPOINTMENT OF TRUSTEE. The Company hereby appoints
the
Trustee as the trustee under this
Agreement, and the Trustee accepts this
appointment in accordance with the terms
and conditions set forth in this
Agreement and agrees to assume and perform
the duties of the trustee pursuant to
this Agreement.
SECTION 1.02 ESTABLISHMENT OF RESTRICTED CASH ACCOUNT. Subject to
the
terms and conditions set forth in this
Agreement, on the date hereof the
Purchaser has deposited with the Trustee an
amount equal to $80,000,000 (the
"DEPOSIT AMOUNT") by wire transfer of
immediately available funds to the account
of the Trustee referenced on EXHIBIT A
attached hereto. The Deposit Amount,
together with any and all interest, income
and other earnings thereon, is
referred to as the "DEPOSIT FUND." The
Trustee shall hold, invest, manage,
administer, distribute and dispose of the
Deposit Fund in accordance with the
terms and conditions of this Agreement.
<PAGE>
SECTION 1.03 INVESTMENT AND LIQUIDATION OF DEPOSIT FUND.
(a) Pending disbursement, the Trustee shall invest and reinvest
the
Deposit Fund in Permitted Investments, and
liquidate such Permitted Investments,
pursuant to and in accordance with the
written instructions of an Authorized
Officer of the Company as provided to the
Trustee from time to time. Interest,
income and other earnings, if any, earned
on the investment of any Deposit Fund
moneys shall be credited to the Restricted
Cash Account. The Trustee shall not
be liable for any loss resulting from any
investment made, or any sale or
redemption of any investment made, in
accordance with instructions received from
an Authorized Officer of the Company or in
accordance with paragraph (b) of this
Section 1.03.
(b) If and when cash is required to be disbursed in accordance
with
this Agreement, and cash is not otherwise
available in the Restricted Cash
Account, the Trustee is authorized, without
instructions from an Authorized
Officer of the Company, to cause Permitted
Investments to be sold or otherwise
liquidated into cash (without regard to
maturity) in such manner as the Trustee
shall direct; provided that the Trustee
shall attempt to liquidate any and all
investments as so needed in such manner as
will minimize, to the extent
reasonably practicable, the costs,
penalties and losses associated with any such
liquidation.
ARTICLE II.
REPRESENTATIONS, WARRANTIES AND COVENANTS
SECTION 2.01 REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
Each
submission of a requisition to the Trustee
shall constitute a representation and
warranty by the Company that all of the
information contained in such
requisition is true and correct.
SECTION 2.02 COVENANT OF THE COMPANY. The Company covenants and
agrees
that it shall not withdraw moneys from the
Restricted Cash Account or utilize
any moneys that have been withdrawn from
the Restricted Cash Account except in
accordance with the terms and provisions of
this Agreement and the applicable
requisition under which such moneys are to
be withdrawn.
ARTICLE III.
DISBURSEMENT FROM THE RESTRICTED CASH ACCOUNT
SECTION 3.01 DISBURSEMENTS FOR PAYMENT OF CONSTRUCTION COSTS.
The
Trustee is hereby authorized and directed
to disburse moneys in the Restricted
Cash Account to or upon the order of the
Company, from time to time, upon
receipt by it of a requisition signed by
two Authorized Officers of the Company,
which requisition shall state with respect
to each payment to be made: (1) the
requisition number, (2) identify the
ethanol production facility in respect of
which such requisition is being made, (3)
the name and address of the Person to
whom payment is due or has been made, (4)
the aggregate amount paid or to be
paid to such Person, (5) an accurate
description of the work performed, services
rendered, materials, equipment or supplies
delivered or any other purpose for
which such payment was or is to be made,
with invoices with respect thereto
2
<PAGE>
attached, (6) the proposed date of payment
and the payment or wire instructions
for the payment or transfer of such amounts
by the Trustee to such Person, (7)
that each obligation, item of cost or
expense mentioned therein has been
properly incurred and has been paid or is
then due and payable (or is required
to be deposited at this time as equity in a
Subsidiary project financing under a
binding agreement with a third party which
is not an Affiliate) as an item of
the Cost of Construction, is a proper
charge against the Restricted Cash
Account, and has not been the basis of any
previous payment therefrom, (8) all
amounts previously drawn from the
Restricted Cash Account under Construction
Cost Requisitions (i) have been applied to
pay the Costs of Construction listed
on the applicable Construction Cost
Requisition with respect to which such
amounts were drawn or (ii) have not yet
been expended and are still available to
the Company or a Subsidiary of the Company
for the payment of Costs of
Construction, (9) that the amount of such
requisition, together with all amounts
previously drawn from the Restricted Cash
Account under Construction Cost
Requisitions relating to the ethanol
production facility in respect of which the
drawing is being made, does not exceed the
Project Limit, and (10) that the
Purchaser shall have approved, in writing,
the terms of the debt, if any,
incurred by the Company or a Subsidiary of
the Company to finance a portion of
the Costs of Construction of the ethanol
production facility in respect of which
the drawing is being made . A form of
Construction Cost Requisition is attached
hereto as EXHIBIT B.
SECTION 3.02 DISBURSEMENTS FOR PAYMENT OF ACQUISITION COSTS.
The
Trustee is hereby authorized and directed
to disburse moneys in the Restricted
Cash Account to or upon the order of the
Company and consented to by the
Purchaser, from time to time, upon receipt
by it of a requisition signed by two
Authorized Officers of the Company, with a
consent thereto signed by an officer
of the Purchaser, which requisition shall
state with respect to each payment to
be made: (1) the requisition number, (2)
the name and address of the Person to
whom payment is due or has been made, (3)
the aggregate amount paid or to be
paid to such Person, (4) the proposed date
of payment and the payment or wire
instructions for the payment or transfer of
such amounts by the Trustee to such
Person, and (5) that such payment
obligation has been incurred in connection
with the acquisition of an ethanol
production facility by the Company or a
Subsidiary of the Company and is currently
payable, is a proper charge against
the Restricted Cash Account, and has not
been the basis of any previous payment
therefrom. A form of Acquisition Cost
Requisition is attached hereto as EXHIBIT
C.
SECTION 3.03 DISBURSEMENTS UPON REDEMPTION OF PREFERRED SHARES.
The
Trustee is hereby authorized and directed
to disburse all moneys in the
Restricted Cash Account to or upon the
order of the Company upon receipt by it
of a written requisition signed by two
Authorized Officers of the Company, which
instrument shall state (1) the name and
address of the Person to whom payment
shall be made, (2) the aggregate amount to
be paid to such Person, (3) the
proposed date of payment and the payment or
wire instructions for the payment or
transfer of such amounts by the Trustee to
such Person, and (4) that such
payment is being made to fund the payment
of the redemption price of the
Preferred Shares on the date that the
Preferred Shares are being redeemed in
accordance with the terms and provisions
thereof, is a proper charge against the
Restricted Cash Account, and has not been
the basis of any previous payment
therefrom.
SECTION 3.04 TRUSTEE'S RELIANCE ON REQUISITIONS. In paying any
requisition under this Article III, the
Trustee may rely as to the completeness
and accuracy of all statements in such
requisition upon the approval of such
requisition by an Authorized Officer of the
Company, execution thereof to be
conclusive evidence of such approval, and
the Company hereby covenants and
agrees to indemnify and save harmless the
Trustee from any liability incurred in
connection with the payment of any
requisition so executed by an Authorized
Officer of the Company.
3
<PAGE>
SECTION 3.05 RECORDS OF DISBURSEMENTS. The Trustee shall keep
and
maintain adequate records pertaining to all
requisitions and disbursements from
the Restricted Cash Account and, if
requested by the Company or the Purchaser,
shall promptly provide such requestor with
a copy of each such requisition
submitted to the Trustee for payment under
this Article III.
ARTICLE IV.
RIGHTS AND DUTIES OF TRUSTEE; RESIGNATION
SECTION 4.01 RIGHTS AND DUTIES OF TRUSTEE. It is understood and
agreed
that the Trustee:
(a) undertakes to perform only those duties as are expressly set
forth
in this Agreement;
(b) shall not be required to take any action which is contrary to
this
Agreement or applicable law;
(c) shall not be liable for any action taken or omitted to be taken
in
good faith by it hereunder, except to the
extent that any loss or damage results
from the Trustee's gross negligence or
willful misconduct; and
(d) shall be protected in acting upon any document, instrument
or
signature believed by it to be genuine, and
it may be assumed that any person
purp
