EXHIBIT 10.2
CONFIDENTIALITY, NON-COMPETITION, NON-SOLICITATION
AND CONSULTING AGREEMENT
CONFIDENTIALITY, NON-COMPETITION, NON-SOLICITATION AND CONSULTING
AGREEMENT dated March 23, 2005 ("AGREEMENT") by and between, Pacific Ethanol,
Inc., a Delaware corporation (the "COMPANY") and Philip B. Kart (the
"CONSULTANT").
RECITALS
WHEREAS, Accessity Corp., an New York corporation ("ACCESSITY") has
entered into a Share Exchange Agreement (the "SHARE EXCHANGE AGREEMENT") by and
among Accessity; Pacific Ethanol, Inc., a California corporation ("PEI");
Kinergy Marketing, LLC, an Oregon limited liability company ("KINERGY");
ReEnergy, LLC, a California limited liability company ("REENERGY," and together
with PEI and Kinergy, the "ACQUIRED COMPANIES"); each of the shareholders of PEI
(collectively, the "PEI SHAREHOLDERS"); each of the holders of options or
warrants to acquire shares of common stock of PEI (collectively, the "PEI
WARRANTHOLDERS"); each of the limited liability company members of Kinergy
identified on the signature pages hereof (collectively, the "KINERGY Members");
each of the limited liability company members of ReEnergy identified on the
signature pages hereof (collectively, the "REENERGY MEMBERS"); and
WHEREAS, immediately prior to the closing of the Share Exchange
Agreement, Accessity will merge with and into the Company; and
WHEREAS, the Consultant, pursuant to the Share Exchange Agreement, is
resigning from Accessity and the Company and relinquishing certain rights to
receive cash and benefits pursuant to his employment agreement with Accessity;
and whereas, the Consultant has the ability and background to effectively
compete in this area subsequent to his resignation, having spent extensive time,
encompassing more than 10 years, in the agricultural and corn industry which
provides the basic feedstock for ethanol and nearly all ethanol businesses are
currently owned by agricultural companies, and the Consultant has held executive
positions in agricultural corn companies that grew through acquisition with
Consultant as a key financial officer engaged in the acquisition and operational
control of such companies, having direct access to both equity and bank lending
sources, and has retained those contacts, and the Company has defined a key
strategy to acquire ethanol businesses from agricultural and other entities; and
WHEREAS, the Company is a defendant in a certain law suit which have
been brought by Gerald M. Zutler in connection with Mr. Zutler's previous
employment with Accessity (the "ZUTLER ACTION") and the events that occurred
during Consultant's period of employment with Accessity and of which the
Consultant has certain direct knowledge; and
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WHEREAS, Accessity has filed suit against Mercator Group LLC, Global
Taurus LLC, et al, for in excess of $100 million (the "MERCATOR ACTION") related
to a transaction that was contemplated by Accessity during the period of the
Consultant's employment with Accessity with the Consultant holding unique
knowledge that may be key to the successful prosecution of this suit; and
WHEREAS, the Company and the Consultant desire to enter into this
Agreement under which the Consultant will provide consulting services and
cooperation in connection with the Zutler Action and Mercator Action and any
other related litigation or disputes that may subsequently be brought arising
out of events that occurred during the period that the Consultant was employed
by Accessity; and
WHEREAS, the Consultant has many years of experience as chief financial
officer of a public company and by using this experience can assist in the
transition of the new management following the closing of the Share Exchange
Agreement by assisting with review and advice regarding press releases,
discussions with the new senior management regarding Nasdaq listing matters,
advice for structuring financings and fund raising issues, broker communications
and investor relations matters, transition and information related to the
Company's 401(k) pension plan and related procedures, issues and problems which
have occurred, information regarding the transferred account balances and
details related thereto, information and advice related to disclosure
requirements of the Securities Exchange Commission ("SEC"), Accessity's prior
SEC filings as required under the Securities Exchange Act of 1934, as amended
(the "EXCHANGE ACT") and advice regarding cash management and investments
including the strategies regarding the current invested funds; and
WHEREAS, the Company wishes to protect the confidential information of
the Company and to protect against the Consultant's skills, knowledge,
experience, ideas and influence being used for the benefit of a competitor of
the Company. Consultant is willing to enter into an agreement to provide such
protection to the Company upon the terms and conditions set forth in this
Agreement.
NOW, THEREFORE, in consideration of the foregoing and the mutual
agreements herein contained, the parties agree as follows.
1. CONFIDENTIALITY, NON-COMPETITION AND NON-SOLICITATION.
(a) Consultant acknowledges that: the business of acquiring
manufacturing, distributing, reselling and brokering Ethanol and/or other
alternative fuels (the "BUSINESS") is intensely competitive and Consultant's
former and current position with Accessity and the Company has exposed the
Consultant to knowledge of confidential information of the Company; the direct
and indirect disclosure of any such confidential information to existing or
potential competitors of the Company would place the Company at a competitive
disadvantage and would do damage, monetary or otherwise, to the Company's
Business; and the engaging by Consultant in any of the activities prohibited by
this Agreement may constitute improper appropriation and/or use of such
information and trade secrets. Consultant expressly acknowledges the trade
secret status of the confidential information and that the confidential
information constitutes a protectable business interest of the Company.
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Confidential information and trade secrets include, but are not limited to,
customer and client lists, price lists, marketing and sales strategies and
procedures, operational and equipment techniques, business plans and systems,
quality control procedures and systems, special projects and technological
research, including projects, research and reports for any entity or client or
any project, research, report or the like concerning sales or manufacturing or
new technology, employee compensation plans and any other information relating
thereto, and any other records, files, drawings, inventions, discoveries,
applications or processes which are not in the public domain (all the foregoing
shall be referred to herein as the "CONFIDENTIAL INFORMATION").
(b) For purposes of this Agreement, the term "COMPANY" shall
be construed to include the Company and its current and future subsidiaries and
affiliates engaged in the Business.
(c) From and after the Closing of the Share Exchange Agreement
(the "EFFECTIVE TIME"), Consultant shall not, directly or indirectly, whether
individually, as a director, stockholder, owner, partner, employee, principal or
agent of any business, or in any other capacity, make known, disclose, furnish,
make available or utilize any of the confidential information of the Company
other than in the proper performance of the duties contemplated thereafter, or
as required by a court of competent jurisdiction or other administrative or
legislative body; PROVIDED THAT, prior to disclosing any of the confidential
information to a court or other administrative or legislative body, Consultant
shall promptly notify the Company so that it may seek a protective order or
other appropriate remedy. Consultant agrees to return all confidential
information, including all photocopies, extracts and summaries thereof, and any
such information stored electronically on tapes, computer disks or in any other
manner to the Company at any time upon request by the Company and upon the
termination of his engagement for any reason.
(d) From the Effective Time until the fifth anniversary of the
Effective Time (the "NON-COMPETITION Period"), Consultant shall not engage in
Competition (as defined below) with the Company. For purposes of this Agreement,
"COMPETITION" by Consultant shall mean Consultant's engaging in, or otherwise
directly or indirectly being employed by or acting as a consultant or lender to,
or being a director, officer, employee, principal, licensor, trustee, broker,
agent, stockholder, member, owner, joint venturer or partner of, or permitting
his name to be used in connection with the activities of any other business or
organization which is engaged in the same business as the Business of the
Company as the same shall be constituted at any time on the date hereof;
PROVIDED THAT, it shall not be a violation of this Agreement for Consultant to
(i) become the registered or beneficial owner of less than five percent (5%) of
any class of the capital stock of a competing corporation registered under the
Exchange Act, or (ii) be employed by an entity that engages in the same business
as the Business of the Company at the date of acquisition, so long as Consultant
does not directly perform services for or work within a division or business
unit of such entity that engages in such business.
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(e) Without limiting the generality of the foregoing, during
the Non-Competition Period, Consultant agrees that he will not, directly or
indirectly, for his benefit or for the benefit of any other person, firm or
entity, do any of the following:
(i) solicit from any customer doing business with the
Company business of the same or of a similar nature to the Business conducted
between the Company and such customer;
(ii) solicit the employment or services of any person
who during the Non-competition Period is employed by or a consultant to the
Company; or
(iii) make any statements or comments of a defamatory
or disparaging nature to third parties regarding the Company or its officers,
directors, personnel, products or services.
(f) Consultant acknowledges that this Agreement is being
entered into in connection with the consummation of the transactions
contemplated by the Share Exchange Agreement, that Consultant's agreement to the
terms set forth herein are a critical inducement to the entering into the Share
Exchange Agreement by the parties thereto, that the disclosure of the
Confidential Information by the Consultant and/or breach of the non-solicitation
restrictions listed above are of a special and unique character, which gives
this Agreement a particular value to the Company, the loss of which may not be
reasonably or adequately compensated for by damages in an action at law, and
that a material breach by the Consultant of any of the provisions contained
herein will cause the Company irreparable injury. Consultant therefore agrees
that the Company shall be entitled, in addition to any other right or remedy, to
a temporary, preliminary and permanent injunction, without the necessity of
proving the inadequacy of monetary damages or the posting of any bond or
security, enjoining or restraining Consultant from any such violation.
(g) Consultant further acknowledges and agrees that due to the
uniqueness of the Confidential Information the Consultant will possess, the
covenants set forth herein are reasonable and necessary for the protection of
the business and goodwill of the Company; and it is the intent of the parties
hereto that if in the opinion of any court of competent jurisdiction any
provision set forth in this Agreement is not reasonable in any respect, such
court shall have the right, power and authority to modify any and all such
provisions as to such court shall appear not unreasonable and to enforce the
remainder of this Agreement as so modified.
2. CONSULTING DUTIES. For of period of five (5) years from the
Effective Time, the Consultant agrees as follows:
(a) In consideration for the compensation provided for in
Section 3 hereof, the Consultant shall provide all reasonable and necessary
assistance and cooperation to the Company's legal counsel and other retained
professionals (the "SERVICES") with respect to the Zutler Action, and the
Mercator Action (the "PROCEEDINGS"). The Consultant shall make himself
available, at times and places reasonably convenient for the Consultant and the
Company's counsel, for depositions, interviews, preparation and review of
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affidavits, interrogatories and discovery materials, investigative assistance,
and all such other matters as shall be necessary or in the opinion of counsel to
the Company useful to the Company in connection with the Proceedings. The
Consultant shall provide the services described herein in a good faith and
professional manner consistent with the role of an executive officer which the
Consultant held while an employee of the Company.
(b) In consideration for the compensation provided for in
Section 3 hereof, the Consultant shall provide consultation and advisory
services (the "CONSULTING SERVICES") to the Company, which shall consist of his
personal advice and counsel to the Company regarding (a) the transition of
Accessity to new management and to a new ownership structure following the
Effective Time, (b) related post-closing long-range planning, strategic
direction and integration and rationalization processes, (c) by using his
experience and background, assisting in the transition of the new management
following the Effective Time by assisting with review and advice regarding press
releases, discussions with the new senior management regarding Nasdaq listing
matters, advice for structuring financings and fund raising issues, broker
communications and investor relations matters, transition and information
related to the Company's 401(k) pension plan and related procedures, issues and
problems which have occurred, information regarding the transferred account
balances and details related thereto, information and advice related to SEC
disclosure requirements, Accessity's prior SEC filings as required under the
Exchange Act and advice regarding cash management and investments including the
strategies regarding the current invested funds; and other matters related to
the Company's business, the Consultant shall provide Consulting Services as may
be reasonably requested by the Company's Board of Directors or Chief Executive
Officer (or his designee) from time to time and at mutually agreeable times.
Consulting Services may be provided in person, telephonically, electronically or
by correspondence, to the extent appropriate under the circumstances. Subject to
the provisions of Sections 1 and 2 hereof, the Consultant will be free to spend
such portions of the Consultant's time, energy and skill in such manner and with
such persons as he sees fit. Notwithstanding anything to the contrary, the
Consulting Services are to be solely advisory and it is not the intention of the
parties that the Consultant will provide management or day-to-day operational
duties under the terms of this Agreement.
3. COMPENSATION.
(a) The Consultant and the Company agree that in exchange for
the: (i) Services, (ii) the Consulting Services, and (iii) the confidentiality
and non-competition covenants set forth in Section 1 herein, the Company agrees
to deliver 200,000 shares of the Company's common stock, par value $.001 per
share, within three (3) business days after the date of this Agreement. Such
shares will be registered under the Securities Act of 1933, as amended, on a
Form S-8 that will be filed with the SEC as soon as practicable after the date
hereof.
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(b) In addition to the consideration provided by the
Consultant above, the Company and the Consultant hereby agree as follows: (i) to
terminate the Employment Agreement dated February 22, 2002 and amended on
November 15, 2002 and March 3, 2005 (the "EMPLOYMENT AGREEMENT") between
Accessity and the Consultant effective at the Effective Time, and (b) the
Consultant hereby waives any and all rights and benefits contained in the
Employment Agreement, including without limitation those benefits set forth in
Section 23 of the Employment Agreement relating to benefits payable to the
Consultant following a Change in Control of Accessity, as that term is defined
in the Employment Agreement.
(c) The Consultant shall be reimbursed for all reasonable out
of pocket expenses incurred in the course of fulfilling his duties under this
Agreement.
4. RESIGNATION. Effective the Effective Time, the Consultant shall
resign all positions with the Company, Accessity, DriverShield CRM, Inc. and
Sentaur Corp.
5. ENTIRE AGREEMENT. This Agreement sets forth the entire agreement
between the parties with respect to its subject matter and merges and supersedes
all prior discussions, agreements and understandings of every kind and nature
between any of them and neither party shall be bound by any term or condition
other than as expressly set forth or provided for in this Agreement. This
Agreement may not be changed or modified nor may any of its provisions be
waived, except by an agreement in writing, signed by the parties hereto.
6. WAIVER. The failure of any party to this Agreement to enforce any of
its terms, provisions or covenants shall not be construed as a waiver of the
same or of the right of such party to enforce the same. Waiver by any party
hereto of any breach or default by any other party of any term or provision of
this Agreement shall not operate as a waiver of any other breach or default.
7. SEVERABILITY. In the event that any one or more of the provisions of
this Agreement shall be held to be invalid, illegal or unenforceable, the
validity, legality and enforceability of the remainder of the Agreement shall
not in any way be affected or impaired thereby. Moreover, if any one or more of
the provisions contained in this Agreement shall be held to be excessively broad
as to duration, activity or subject, such provisions shall be construed by
limiting and reducing them so as to be enforceable to the maximum extent allowed
by applicable law.
8. NOTICES. Any notice given hereunder shall be in writing and shall be
deemed to have been given when delivered by messenger or courier service
(against appropriate receipt), or mailed by registered or certified mail (return
receipt requested), addressed as follows.
If to the Company: Pacific Ethanol, Inc.
5711 N. West Avenue
Fresno, CA 93711
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with a copy to: Rutan & Tucker, LLP
611 Anton Boulevard, 14th Floor
Costa Mesa, CA 92626
Attn: Larry A. Cerutti, Esq.
If to Consultant: Philip Kart
________________________________
________________________________
with a copy to: Lawrence A. Muenz, Esq.
Meritz & Muenz LLP
2021 O Street, NW
Washington, DC 20036
or at such other address as shall be indicated to either party in writing.
Notice of change of address shall be effective only upon receipt.
9. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of California without regard to conflicts
of law principles.
10. DESCRIPTIVE HEADINGS. The section headings contained herein are for
reference purposes only and shall not in any way affect the meaning or
interpretation of this Agreement.
11. COUNTERPARTS. This Agreement may be executed in counterparts, each
of which shall be deemed an original for all purposes but which, together, shall
constitute one and the same instrument.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date written below.
PACIFIC ETHANOL, INC. CONSULTANT
By: /S/ BARRY SIEGEL By: /S/ PHILIP KART
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Name: Barry Siegel Name: Philip Kart
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Title: Chairman and Ceo
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Date: March 23, 2005 Date: March 23, 2005
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