Exhibit 10.3
TRANSITION SERVICES
AGREEMENT
THIS AGREEMENT (the “
Agreement ”) for the performance of transition
services is effective as of June 7, 2006, between Panda Energy
Management, LP (“ PEM ”), a Delaware limited
partnership, and Panda Ethanol, Inc. (the “ Company
”), a Delaware corporation. PEM and the Company are
hereinafter sometimes referred to individually as a “
Party ” and jointly as the “ Parties.
”
WHEREAS, the Company and PEM are
currently wholly owned subsidiaries of Panda Energy International,
Inc. (“ PEII ”), a Texas corporation;
WHEREAS, PEM currently provides
administrative services on behalf of PEII to PEII and its
subsidiaries, including the Company;
WHEREAS, the Company is party to an
Agreement and Plan of Merger, dated as of May 18, 2006 (the
“ Merger Agreement ”), upon and subject to the
terms of which, at the effective time of the Merger (as defined in
the Merger Agreement), the separate existence of the Company shall
cease and the surviving corporation’s name shall thereafter
be Panda Ethanol, Inc.;
WHEREAS, in order to support the
ongoing business operations of the Company and, if necessary, to
facilitate an orderly transition following the Merger, PEM and the
Company desire that PEM provide, or coordinate the provision of,
certain administrative services (as described more fully below) to
the Company from the effective date of this Agreement until such
time that the successor of the Company, or its administrative
entity, commences provision of its administrative services on a
separate and independent basis (the “ Transition
Period ”) and as set out more specifically on Schedule 1
hereto;
WHEREAS, following consummation of
the Merger and the Transition Period, the Company may directly or
indirectly provide, or coordinate the provision of, certain
administrative services to PEM or certain of its
affiliates;
WHEREAS, following consummation of
the Merger, the Company may provide or coordinate provision of
certain administrative services (which such administrative services
shall be agreed to by the Parties and thereafter set forth more
particularly on Schedule 2 to be subsequently attached hereto) to
PEM commencing on and terminating upon mutually agreed upon dates
to be determined by the Parties; and
WHEREAS, this Agreement shall be
deemed binding upon and inure to the benefit of the successor of
the Company pursuant to the Merger;
NOW, THEREFORE, in consideration of
the mutual promises contained herein, the Parties hereto agree as
follows:
1. Description of PEM
Services . Subject to the terms and provisions of this
Agreement, PEM shall:
(a) provide the Company with, or
coordinate the provision to the Company of, general administrative
services of an employment, financial, technical, commercial,
administrative and/or advisory nature as set forth more
specifically on Schedule 1 which is attached hereto and made
a part hereof for all purposes; and
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(b) provide such other specific
services as the Company may from time to time reasonably request,
subject to PEM’s sole discretion and PEM being in a position
to provide such additional services at the time of such
request.
The services to be provided by PEM
pursuant to this Section 1 shall be referred to collectively
herein as the “ PEM Services ,” and individually
as a “ PEM Service .” It is understood and
agreed that certain of the PEM Services described on Schedule
1 hereto may not be relevant or necessary to the
Company’s business and operations. To the extent that such
PEM Services are not relevant or necessary, then PEM will not
provide, or coordinate the provision of, such PEM Services to the
Company, and the Company will not be required to pay for such PEM
Services.
All PEM Services provided to the
Company pursuant to this Agreement shall be based solely on
information and communications provided to PEM by the Company and
PEM shall not be liable for any inaccuracy, liability, loss,
damage, claim, or expense of any kind, including costs and
attorneys fees, due to or arising out of PEM’s reliance on
the information or communications provided by the
Company.
Unless otherwise specifically
provided on Schedule 1 hereof, PEM may provide or coordinate
provision of each PEM Service for the period or term specified on
each applicable Schedule 1 hereto; provided ,
however , that notwithstanding the term as specified on the
applicable Schedule 1 , the Company and PEM may mutually
agree in writing to extend the term applicable to the PEM Services,
and provided , further , that the Company may, at its
option, upon no less than thirty (30) days prior written
notice to PEM (or such other period as the Parties may mutually
agree in writing), terminate all or any specific category of such
PEM Services prior to the expiration of the term specified in the
applicable Schedule 1 . Notwithstanding anything herein to
the contrary, the aggregate amount which may be paid to PEM for
general and administrative services provided directly by PEM (and
not by any third party provider) pursuant to the terms hereof for
the first one hundred twenty (120) calendar days after the
date hereof may not exceed $5.0 million in the
aggregate.
2. Description of Company
Services . Subject to the terms and provisions of this
Agreement, the Company shall following consummation of the Merger
and the Transition Period:
(a) provide PEM with or coordinate
the provision to PEM of general administrative services of an
employment, financial, technical, commercial, administrative and/or
advisory nature in accordance with schedules to be agreed to by the
Company and PEM after the date hereof and which shall thereafter be
attached hereto as Schedule 2 and made a part hereof for all
purposes; and
(b) provide such other specific
services as PEM may from time to time reasonably request, subject
to the Company’s sole discretion and the Company being in a
position to provide such additional services at the time of such
request.
The services to be provided by the
Company pursuant to this Section 2 shall be referred to
collectively herein as the “ Company Services ,”
and individually as a “ Company Service .” It is
understood and agreed that certain of the Company Services
described on Schedule 2 hereto may not be relevant or
necessary to PEM’s business and operations. To the extent
that such Company Services are not relevant or necessary, then the
Company will not provide or coordinate the provision of such
Company Services to PEM, and PEM will not be required to pay for
such Company Services.
All Company Services provided to PEM
pursuant to this Agreement shall be based solely on information and
communications provided to the Company by PEM and the Company shall
not be liable for any inaccuracy, liability, loss, damage, claim,
or expense of any kind, including costs and attorneys fees, due to
or arising out of the Company’s reliance on the information
or communications provided by PEM.
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Unless otherwise specifically provided on
Schedule 2 hereof, the Company may provide or coordinate
provision of each Company Service for the period or term specified
on each applicable Schedule 2 hereto; provided ,
however , that notwithstanding the term as specified on the
applicable Schedule 2 , the Company and PEM may mutually
agree in writing to extend the term applicable to the Company
Services, and provided , further , that PEM may, at
its option, upon no less than thirty (30) days prior written
notice to the Company (or such other period as the Parties may
mutually agree in writing), terminate all or any category of such
Company Services prior to the expiration of the term specified in
the applicable Schedule 2 .
3. Provision of PEM Services
. PEM shall, with respect to the PEM Services provided to the
Company pursuant to this Agreement, have sole discretion with
respect to whom and what entity, including its successor or a third
party, shall provide such PEM Services. PEM may, without any
consent or approval of the Company:
(a) subcontract any PEM Service, in
whole or in part, to any individual, corporation, partnership,
trust, association, or entity of any kind or nature;
provided , however , that if in connection with any
such subcontracting of a PEM Service, it is anticipated that such
subcontract will exceed $50,000, PEM shall first obtain the prior
written consent of the Company;
(b) amend any PEM Service contract;
or
(c) cease to subcontract any PEM
Service, in whole or in part.
PEM shall, with respect to the PEM
Services provided to the Company pursuant to this Agreement, remain
responsible for the rendering to the Company of any PEM Service
that is subcontracted, in whole or in part. Also, PEM shall be
solely responsible for its obligations to the subcontractor under
each PEM Service subcontract.
4. Provision of Company
Services . The Company shall, with respect to the Company
Services provided to PEM following the consummation of the Merger
and the Transition Period, have sole discretion with respect to
whom and what entity, including its successor or a third party,
shall provide such Company Services. The Company may, without any
consent or approval of PEM:
(a) subcontract any Company Service,
in whole or in part, to any individual, corporation, partnership,
trust, association, or entity of any kind or nature;
provided , however , that if in connection with any
such subcontracting of a Company Service, it is anticipated that
such subcontract will exceed $50,000, the Company shall first
obtain the prior written consent of PEM;
(b) amend any Company Service
contract; or
(c) cease to subcontract any Company
Service, in whole or in part.
The Company shall, with respect to
the Company Services provided to PEM following the Merger and the
Transition Period, remain responsible for the rendering to PEM of
any Company Service that is subcontracted, in whole or in part.
Also, the Company shall be solely responsible for its obligations
to the subcontractor under each Company Service
subcontract.
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5. Consideration for Services . The
Company shall pay PEM in accordance with this Section 5 and
PEM shall accept as consideration for the PEM Services rendered to
the Company pursuant to Section 1(a) the charges for such PEM
Services as are set forth on each applicable Schedule 1
hereto.
For the PEM Services rendered to the
Company pursuant to Section 1(b), the Company shall be charged
certain fees to be subsequently negotiated and agreed to by the
Parties at the time such PEM Services are requested.
PEM shall pay the Company in
accordance with this Section 5 and the Company shall accept as
consideration for the Company Services rendered to PEM pursuant to
Section 2(a) the charges for such Company Services as are set
forth on each applicable Schedule 2 hereto.
For the Company Services rendered to
PEM pursuant to Section 2(b), PEM shall be charged certain
fees to be subsequently negotiated and agreed to by the Parties at
the time such Company Services are requested.
6. Terms of Payment for PEM
Services . Charges for PEM Services rendered shall accrue until
the Financial Closing Date. As used herein, “ Financial
Closing Date ” shall mean two (2) business days
following the date on which the Company closes its senior debt and
subordinated debt financing arrangements related to its
ethanol production project in Hereford, Texas, on terms
substantially similar to the terms received by the Company on or
prior to the date hereof. Prior to the Financial Closing Date and
for all PEM Services provided subsequent to the Financial Closing
Date, PEM shall submit in writing an invoice or invoices covering
its charges to the Company for PEM Services provided pursuant to
this Agreement and rendered to the Company hereunder. Such invoices
shall be submitted on a monthly basis and shall contain a summary
description of the charges and PEM Services rendered. Payment shall
be made to PEM no later than thirty (30) days after the
invoice date.
7.
