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EXHIBIT 10.43
PACIFIC ETHANOL, INC.
REGISTRATION RIGHTS AND STOCKHOLDERS AGREEMENT
THIS REGISTRATION RIGHTS AND STOCKHOLDERS AGREEMENT (the
"Agreement")
dated as of April 13, 2006, is by and among PACIFIC ETHANOL, INC.,
a Delaware
corporation (the "Company") and CASCADE INVESTMENT, L.L.C., a
Washington limited
liability company (the "Investor").
WHEREAS, the Company and the Investor have entered into a
Purchase
Agreement, dated November 14, 2005 and as amended from time to time
(the
"Purchase Agreement"), providing for the purchase by the Investor
of shares of
the Company's Series A Cumulative Redeemable Convertible Preferred
Stock (such
shares, together with any additional shares of the Company's Series
A Cumulative
Redeemable Convertible Preferred Stock issued as a dividend
thereon, the
"Shares") which are convertible into shares of the Company's common
stock, $.001
par value per share (the "Common Stock"), subject to the terms and
provisions of
the Purchase Agreement;
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 Common Stock and the Shares held
by or issuable
to the Investor and to establish certain corporate governance and
other rights
of the Investor; and
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:
SECTION 1. DEFINITIONS. As used in this Agreement, the following
terms
have the meanings indicated below or in the referenced sections of
this
Agreement:
"Adjustment Provisions." As defined in SECTION 3(A).
"Affiliate." As
defined in the Purchase Agreement.
"Agreement." As
defined in the recitals hereof.
"Applicable
Boards." As defined in
SECTION 10(A)(III).
"Capital Stock." With respect to any Person at any time, means any
and
all shares, interests, participations or other equivalents (however
designated,
whether voting or non-voting) of capital stock, partnership
interests (whether
general or limited), member interests or equivalent ownership
interests in or
issued by such Person, including, in the case of the Company, any
and all shares
of Common Stock and Shares.
"Closing." As defined
in the Purchase Agreement.
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"Common Stock." As
defined in the recitals hereof.
"Company." As defined
in the recitals hereof.
"Company Board." The
board of directors of the Company.
"Demand Registration." As defined in SECTION
3(A).
"Director." Any member
or any of the Applicable Boards.
"Equity Securities." Any and all shares of Capital Stock of the
Company, securities of the Company convertible into, or
exchangeable or
exerciseable for, such shares, and options, warrants or other
rights to acquire
such shares.
"Exchange Act." The Securities Exchange Act of 1934, as amended,
and
the rules and regulations thereunder.
"GAAP." Generally accepted accounting principals, as in effect in
the
United States of America from time to time applied on a consistent
basis.
"Investor." As defined in the recitals hereof, and its
successors,
assigns and transferees.
"Investor Designees."
As defined in SECTION 10(A)(III).
"Investor Directors."
As defined in SECTION 10(A)(I) hereof.
"Investor Securities." The Shares issued pursuant to the
Purchase
Agreement and the Common Stock issued upon the conversion
thereof.
"Majority of the Registrable Securities." As defined in SECTION 2(B).
"NASD." The National
Association of Securities Dealers, Inc.
"Person." An individual, a partnership, a corporation, a
limited
liability company or partnership, an association, a joint stock
company, a
trust, a business trust, a joint venture, an unincorporated
organization or a
government entity or any department, agency, or political
subdivision thereof.
"Piggyback Registration." As defined in SECTION 4(A)
hereof.
"Proportional." When
used to determine the number of individuals that
the Investor is entitled to nominate to any board of directors at
any particular
time, means the number (rounded to the nearest whole number)
determined by
multiplying the aggregate number of members of such board by a
fraction, the
numerator of which shall be the number of Investor Directors that
the Investor
is entitled to designate to the Company Board pursuant to
subsection (a) of
SECTION 10 at such time and the denominator of which shall be the
total number
of directors constituting the entire Company Board at such time;
PROVIDED,
HOWEVER, that, notwithstanding the foregoing, in no event shall
such number be
less than one (1).
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"Purchase
Agreement." As defined in the recitals hereof.
"Registrable Securities." Any Common Stock issued or issuable
upon
conversion or exercise of the Shares or deriving therefrom, and all
other shares
of Common Stock of the Company or any successor owned from time to
time by the
Investor; PROVIDED, that a Registrable Security ceases to be a
Registrable
Security when (i) it is registered under the Securities Act and
disposed of in
accordance with the registration statement covering it or (ii) it
is sold or
transferred in accordance with the requirements of Rule 144 (or
similar
provisions then in effect) promulgated by the SEC under the
Securities Act
("Rule 144").
"Registration Expenses." As defined in SECTION 6(A)
hereof.
"Registration
Statement." 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.
"Rule 415." Rule 415 (or similar provisions then in effect)
promulgated
by the SEC under the Securities Act.
"SEC." The United
States Securities and Exchange Commission.
"Securities Act." The Securities Act of 1933, as amended, and the
rules
and regulations thereunder.
"Shares." As defined
in the recitals hereof.
"Stockholder." As
defined in the recitals hereof.
"Subsequent Shares."
As defined in SECTION 3(A).
"Subsidiary." Of a Person means any corporation or other entity
(including a limited liability company, partnership or other
business entity) in
which such Person, directly or indirectly, owns outstanding Capital
Stock or
other Voting Securities having the power, under ordinary
circumstances, to elect
a majority of the directors or members of the governing body of
such corporation
or other entity or with respect to which such Person otherwise has
the power to
direct the management and policies of such corporation or other
entity.
"Subsidiary Boards."
As defined in SECTION 10(A)(III).
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"Termination Date." 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.
"Voting Letter." As
defined in SECTION 10(A)(VI).
"Voting Securities." At any time, shares of any class of Equity
Securities that are ordinarily entitled to vote (without regard to
the
occurrence of any additional event or contingency) generally in the
election of
directors.
SECTION 2. Securities
Subject to this Agreement.
(a) HOLDERS OF REGISTRABLE SECURITIES. A Person is deemed to be
a
holder of Registrable Securities whenever that Person owns,
directly or
beneficially, or has the right to acquire, Registrable Securities,
disregarding
any legal restrictions upon the exercise of that right.
(b) MAJORITY OF REGISTRABLE SECURITIES. As used in this Agreement,
the
term "Majority of the Registrable Securities" means more than 50%
of the
Registrable Securities being registered or, where the context
requires, a
majority in interest of the Registrable Securities.
SECTION 3. DEMAND REGISTRATION.
(a) REQUEST FOR REGISTRATION. Subject to the provisions of
SECTION
3(B), at any time after the first anniversary of the Closing, (A)
one or more
holders of Shares or Common Stock representing a Majority of the
Registrable
Securities may demand that the Company register all or part of its
Registrable
Securities under the Securities Act (a "DEMAND REGISTRATION") on
Form S-1 (or a
similar form then in effect) promulgated by the SEC under the
Securities Act,
provided that the Company shall not be obligated to effect a Demand
Registration
(i) during the one hundred eighty (180) days period commencing with
the date of
any secondary public offering or (ii) if the Company delivers
notice to the
holders of Registrable Securities within thirty (30) days of any
registration
request of its intent to file a registration statement for a
secondary public
offering within sixty (60) days and (B) one or more holders Shares
or Common
Stock representing a Majority of the Registrable Securities may
request a Demand
Registration on Form S-3 (or a similar form then in effect),
provided that the
Registrable Securities to be covered by any such Form S-3 shall be
expected to
result in aggregate gross proceeds of not less than $1,000,000.
Within ten (10)
days after receipt of a demand, the Company will notify in writing
all holders
of Registrable Securities of the demand. Any holder who wants to
include its
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
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that offers and sales may be on a continued or delayed basis under
Rule 415. The
Company will cause such Registration Statement 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(k) 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") and due
to possible
future issuances of Shares as dividends on the Shares ("Subsequent
Shares").
Accordingly, the Company agrees that it will register the number of
shares of
Common Stock issuable upon conversion of 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 and the
Subsequent
Shares) 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 number of shares of Common Stock issuable on
conversion of
the Shares held by or issuable to the Investor are included in a
Registration
Statement, and the Company will use its reasonable 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.
(b) NUMBER OF DEMANDS. The holders of Registrable Securities shall
have
the right to three (3) Demand Registrations on Form S-1 (or a
similar form then
in effect) and shall have the right to an unlimited number of
Demand
Registrations on Form S-3 (or a similar form then in effect);
PROVIDED, that the
Company shall not be obligated to effect more than two (2) Demand
Registrations
on Form S-3 in any twelve (12) month period.
(c) REGISTRATION EXPENSES. The Company shall pay or reimburse to
the
holders of the Registrable Securities included in a Demand
Registration all
Registration Expenses of those holders in connection with any
Demand
Registration (including the reasonable fees and disbursements of
one counsel for
such holders in connection with each such Demand Registration not
to exceed
$25,000 per registration, as described in SECTION 6).
(d) SELECTION OF UNDERWRITERS. The holders of the Registrable
Securities initiating a Demand Registration shall, after
consultation with the
Company, select the investment banker(s) and manager(s) that will
administer the
offering; PROVIDED, that the Company shall have given its prior
written consent
to such selection. The Company and the holders of Registrable
Securities whose
shares are being registered shall enter into a customary
underwriting agreement
with such investment banker(s) and manager(s).
(e) PRIORITY ON DEMAND RESTRICTIONS. If the managing underwriter
shall
advise 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
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offering, all Registrable Securities which are to be included in
such offering
pursuant to this SECTION 3(E) 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. 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.
(f) DELAY IN
FILING. Notwithstanding the foregoing, the Company may
delay in filing a registration statement in connection with a
Demand
Registration and may withhold efforts to cause the registration
statement to
become effective, if the Company determines in good faith that such
registration
might involve initial or continuing disclosure obligations that the
Board of
Directors of the Company determines, in good faith, will not be in
the best
interest of the Company's stockholders. The Company may exercise
such right to
delay or withhold efforts not more than once in any twelve (12)
month period and
for not more than ninety (90) days at a time. If, after a
registration statement
becomes effective, the Company advises the holders of registered
shares that the
Company considers it appropriate for the registration statement to
be amended,
the Company shall use its best efforts to amend such registration
statement, and
the holders of such shares shall suspend any further sales of their
registered
shares until the Company advises them that the amended registration
statement
has been declared effective.
(g) EFFECTIVE DEMAND REGISTRATION. A registration shall not
constitute
a Demand Registration until it has become effective and remains
continuously
effective for the lesser of (i) the period during which all
Registrable
Securities registered in the Demand Registration are sold and (ii)
three hundred
sixty (360) days; PROVIDED, HOWEVER, that a registration shall not
constitute a
Demand Registration if (x) after such Demand Registration has
become effective,
such registration or the related offer, sale or distribution of
Registrable
Securities thereunder is interfered with by any stop order,
injunction or other
order or requirement of the SEC or other governmental agency or
court for any
reason not attributable to the holder requesting the Demand
Registration and
such interference is not thereafter eliminated, or (y) the
conditions specified
in the underwriting agreement, if any, entered into in connection
with such
Demand Registration are not satisfied or waived, other than by
reason of a
failure on the part of the holder requesting the Demand
Registration.
SECTION 4. PIGGYBACK
REGISTRATIONS.
(a) RIGHT TO PIGGYBACK. Whenever the Company proposes to register
any
of its securities in an underwritten offering under the Securities
Act, whether
for its own account or for the account of another stockholder
(except for the
registration of securities to be offered pursuant to an employee
benefit plan on
Form S-8, pursuant to a registration made on Form S-4 or any
successor forms
then in effect) at any time other than pursuant to a Demand
Registration and the
registration form to be used may be used for the registration of
the Registrable
Securities (a "Piggyback Registration"), it will so notify in
writing all
holders of Registrable Securities no later than the earlier to
occur of (i) the
tenth (10th) day following the Company's receipt of notice of
exercise of other
demand registration rights, or (ii) forty-five (45) days prior to
the
anticipated filing date. Subject to the provisions of SECTION 4(C),
the Company
will include in the Piggyback Registration all Registrable
Securities with
respect to which the Company has received written requests for
inclusion within
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fifteen (15) days after the issuance of the Company's notice. Such
Registrable
Securities may be made subject to an underwriters' over-allotment
option, if so
requested by the managing underwriter. The holders of Registrable
Securities may
withdraw all or any part of the Registrable Securities from a
Piggyback
Registration at any time before ten (10) business days prior to the
effective
date of the Piggyback Registration. In any Piggyback Registration,
the Company,
the holders of Registrable Securities and any Person who hereafter
becomes
entitled to register its securities in a registration initiated by
the Company
must sell their securities on the same terms and conditions. A
registration of
Registrable Securities pursuant to this SECTION 4 shall not be
counted as a
Demand Registration pursuant to SECTION 3.
(b) PIGGYBACK EXPENSES. The Company shall pay or reimburse to
the
holders of the Registrable Securities included in a Piggyback
Registration all
Registration Expenses of those holders in connection with the
Piggyback
Registration (including the reasonable fees and disbursements of
one counsel for
such holders in connection with each such Piggyback Registration
not to exceed
$25,000 per Piggyback Registration, as described in SECTION 6).
(c) UNDERWRITING; PRIORITY ON PIGGYBACK REGISTRATIONS. The right of
any
such holder to be included in an underwritten registration pursuant
to this
SECTION 4 shall be conditioned upon such holder's participation in
such
underwriting and the inclusion of such holder's Registrable
Securities in the
underwriting to the extent provided herein. All holders proposing
to distribute
their Registrable Securities through such underwriting shall enter
into an
underwriting agreement in customary form with the underwriter or
underwriters
selected for such underwriting by the Company. If the managing
underwriter gives
the Company its written opinion 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,
subject to the first proviso below, all securities the Company or
the
stockholder, if any, on whose account securities are being
registered proposes
to sell; (ii) second, subject to the first proviso below, up to the
full number
or dollar amount of Registrable Securities requested to be included
in the
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); and (iii) third, 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; PROVIDED, that at least twenty-five percent
(25%) of the
Registrable Securities requested to be included in such
registration shall be
included in the offering; PROVIDED, FURTHER, that, (i) the holders
of
Registrable Securities shall not be subject to any cutback in the
amount of
Registrable Securities requested to be included in the registration
unless all
other holders of securities requesting to be included in such
registration other
than the stockholder, if any, on whose account securities are being
registered
have been excluded from such registration. In the event that the
managing
underwriter advises the Company that an underwriters'
over-allotment option is
necessary or advisable, the allocation provided for in this SECTION
4(C) shall
apply to the determination of which securities are to be included
in the
registration of such shares. Except with the prior written consent
of each
holder of Registrable Securities, the Company shall not grant to
any holder of
the Company's securities any right to Piggyback Registration which
would reduce
the amount of Registrable Securities includable in such
registration.
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(d) SELECTION OF UNDERWRITERS. If any Piggyback Registration is
an
underwritten offering, the Company will select as the investment
banker(s) and
manager(s) that will administer the offering a nationally
recognized investment
banker(s) and manager(s) with demonstrable industry-specific
expertise and
experience. The Company and the holders of Registrable Securities
whose shares
are being registered shall enter into a customary underwriting
agreement with
such investment banker(s) and manager(s), PROVIDED, that the
liability of any
holder of Registrable Securities shall be limited to such holder's
net proceeds
received from the sale of its Registrable Securities in such
offering and such
limitation shall not be amended by an underwriting agreement or
arrangement.
(e) RIGHT TO TERMINATE REGISTRATION. The Company shall have the
right
to terminate or withdraw any registration initiated by it under
this SECTION 4
prior to the effectiveness of such registration whether or not any
holder has
elected to include securities in such registration. The
Registration Expenses of
such withdrawn registration shall be borne by the Company in
accordance with
SECTION 7 hereof.
(f) OTHER REGISTRATIONS. The Company agrees that after filing a
registration statement with respect to Registrable Securities
pursuant to
SECTION 3 or this SECTION 4 that has not been withdrawn or
abandoned, the
Company will not register any of its equity securities or
securities convertible
or exchangeable into or exercisable for its equity securities under
the
Securities Act, whether on its own behalf or at the request of any
holder of
those securities until the earlier of (i) the sale of all such
Registrable
Securities subject to such registration statement and (ii) one
hundred eighty
(180) days from the effective date of the previous registration,
and the parties
hereto agree that the Company will not be required to effect any
such
registration notwithstanding the other provisions of this
Agreement. This
180-day hiatus does not apply to registrations of securities (i) to
be issued in
connection with employee benefit plans, (ii) to permit exercise or
conversions
of previously issued options, warrants, or other convertible
securities, (iii)
in connection with a Demand Registration or (iv) made on Form S-4
(or any
successor form).
SECTION 5.
REGISTRATION PROCEDURES.
(a) OBLIGATIONS OF THE COMPANY. Whenever required to register
any
Registrable Securities, the Company shall as expeditiously as
practicable:
(1) prepare and file with the SEC 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
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;
(2) immediately notify each seller of Registrable Securities
of any stop order threatened or issued by the SEC and take all
actions
reasonably required to prevent the entry of a stop order or if
entered
to have it rescinded or otherwise removed;
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(3) prepare
