Our assumptions of the sales arrangements Pacific has with its suppliers may be all wrong!
Pacific as we know it is really a production operator with its subsidary Kinergy acting as its sales agent.
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ARTICLE II
PAYMENTS
2.1 Pool Price, Fees and Payments.
(a) The per gallon sale price AEAFK shall receive for the Ethanol sold to Kinergy under this Agreement shall be the Net Pool Price (as defined below), as it may be adjusted each month by the Pool True-Up.
(b) The “Net Pool Price” shall be, with respect to any month:
(i) the weighted average gross price per gallon received by Kinergy for all Ethanol that was sold by Kinergy during such month and delivered to Third Parties within the Pool Area (as defined below), whether produced by Affiliates of Kinergy or imported into the Pool Area from producers outside the Pool Area (“Gross Pool Price”); minus
(ii) the weighted average of all costs (on a per gallon basis) incurred by Kinergy in conjunction with the handling, movement and sale of Ethanol for Pool Producers (as defined below) during such month (“Pool Expenses”), including but not limited to terminal lease charges, throughput charges, terminal shrinkage costs, freight charges, tariffs, costs of leasing railcars and trucks, government taxes and assessments (other than taxes on net income, business taxes paid by Kinergy, or tax on the sale of Ethanol (such sales taxes to be paid directly by AEAFK for Ethanol from the Facility), but including all other taxes and governmental charges and assessments), costs to cover of the type described in Section 1.2(c) and any other similar costs; minus
(iii) a marketing fee (the “Marketing Fee”) equal to one percent (1%) of the product of the number of gallons of Ethanol sold to Kinergy multiplied by (i) the Gross Pool Price, less (ii) the Pool Expenses.
(c) The “Pool Area” shall be defined by the set of Ethanol delivery points set forth in Exhibit C, all of which are located in that portion of the Central Valley of California extending north from Grapevine (south of Bakersfield, California). A “Pool Producer” shall be any Ethanol producers located within the Pool Area with whom Kinergy has a marketing agreement, including specifically Calgren Renewables, Pacific Ethanol Madera, LLC; Pacific Ethanol Stockton, LLC, and AE Advanced Fuels Keyes, Inc.
(d) In the event that the actual Net Pool Price for a given month is different from the estimated Net Pool Price used in calculating payments under Section 2.1(f), then an adjustment to the Net Pool Price in a later month shall be made by as provided in Section 2.1(f). Such adjustment is the “Pool True-Up.”
(e) For all quantities of Ethanol purchased by Kinergy within the first thirty days of production from AEAFK and shipped from the Facility, Kinergy shall pay an estimated Net Pool Price to AEAFK by ACH or wire no later than one (1) business day following delivery to Kinergy. For all quantities purchased and shipped from the Facility thereafter, Kinergy shall pay an estimated Net Pool Price to AEAFK by ACH or wire no later than three (3) business days following delivery to Kinergy. If at calendar month’s end, the actual Net Pool Price for that month’s deliveries exceeds the estimated Net Pool Price for that month’s deliveries, Kinergy shall pay AEAFK on or before the 15th business day of the following calendar month an amount equal to the product of (x) the difference between the actual and estimated Net Pool Price and (y) the aggregate quantity of Ethanol purchased by Kinergy from AEAFK and shipped from the Facility under this Agreement during the prior calendar month. If the actual Net Pool Price for that month’s deliveries is less than the estimated Net Pool Price for that month’s deliveries, AEAFK shall pay Kinergy and Kinergy shall have the right to withhold and set off from future payments to AEAFK on the 15th business day of the following calendar month, an amount equal to the product of (x) the difference between the actual and estimated Net Pool Price and (y) the aggregate quantity of Ethanol purchased by Kinergy from AEAFK and shipped from the Facility under this Agreement during such month. Kinergy shall provide AEAFK a parent guaranty of Kinergy’s payment obligations hereunder
