PART
III
|
Item
10.
|
Directors,
Executive Officers and Corporate Governance.
|
Directors
The
following table sets forth certain information regarding our directors as of April 26, 2019:
Name
|
|
Age
|
|
Position(s)
Held
|
William
L. Jones
(1)
|
|
69
|
|
Chairman
of the Board and Director
|
Neil
M. Koehler
|
|
61
|
|
Chief
Executive Officer, President and Director
|
Michael
D. Kandris
|
|
71
|
|
Chief
Operating Officer and Director
|
Terry
L. Stone
(2)
|
|
69
|
|
Director
|
John
L. Prince
(3)
|
|
76
|
|
Director
|
Douglas
L. Kieta
(4)
|
|
76
|
|
Director
|
Larry
D. Layne
(4)
|
|
78
|
|
Director
|
|
(1)
|
Member
of the Audit and Nominating and Corporate Governance Committees.
|
|
(2)
|
Member
of the Audit and Compensation Committees.
|
|
(3)
|
Member
of the Audit, Compensation and Nominating and Corporate Governance Committees.
|
|
(4)
|
Member
of the Compensation and Nominating and Corporate Governance Committees.
|
Experience
and Background
The
biographies below describe the skills, qualities and attributes and business experience of each of our directors, including the
capacities in which they served during the past five years:
William
L. Jones
has served as Chairman of the Board and as a director since March 2005. Mr. Jones is a co-founder of Pacific
Ethanol California, Inc., or PEI California, which is one of our predecessors, and served as Chairman of the Board of PEI California
since its formation in January 2003 through March 2004, when he stepped off the board of directors of PEI California to focus
on his candidacy for one of California’s United States Senate seats. Mr. Jones was California’s Secretary of State
from 1995 to 2003. Since May 2002, Mr. Jones has also been the owner of Tri-J Land & Cattle, a diversified farming and cattle
company in Fresno County, California. Mr. Jones has a B.A. degree in Agribusiness and Plant Sciences from California State University,
Fresno.
Mr.
Jones’s qualifications to serve on our Board include:
|
●
|
co-founder
of PEI California;
|
|
●
|
knowledge
gained through his extensive work as our Chairman since our inception in 2005;
|
|
●
|
extensive
knowledge of and experience in the agricultural and feed industries, as well as a deep
understanding of operations in political environments; and
|
|
●
|
background
as an owner of a farming company in California, and his previous role in the California
state government.
|
Neil
M. Koehler
has served as Chief Executive Officer, President and as a director since March 2005. Mr. Koehler is a co-founder
of PEI California and served as its Chief Executive Officer since its formation in January 2003 and as a member of its board of
directors from March 2004 until its dissolution in March 2012. Prior to his association with PEI California, Mr. Koehler was the
co-founder and General Manager of Parallel Products, one of the first ethanol production facilities in California, which was sold
to a public company in 1997. Mr. Koehler was also the sole manager and sole limited liability company member of Kinergy Marketing,
LLC, or Kinergy, which he founded in September 2000, and which is one of our wholly-owned subsidiaries. Mr. Koehler has over 30
years of experience in the ethanol production and marketing industry in the Western United States. Mr. Koehler is Chairman of
the Board of Directors of the Renewable Fuels Association and is a nationally-recognized speaker on the production and marketing
of renewable fuels. Mr. Koehler has a B.A. degree in Government from Pomona College.
Mr.
Koehler’s qualifications to serve on our Board include:
|
●
|
day-to-day
leadership experience as our current President and Chief Executive Officer provides Mr.
Koehler with intimate knowledge of our operations;
|
|
●
|
extensive
knowledge of and experience in the ethanol production and marketing industry, particularly
in the Western United States;
|
|
●
|
prior
leadership experience with other companies in the ethanol industry; and
|
|
●
|
day-to-day
leadership experience affords a deep understanding of business operations, challenges
and opportunities.
|
Michael
D. Kandris
has served as a director since June 2008 and as our Chief Operating Officer since January 6, 2013. Mr. Kandris
served as an independent contractor with supervisory responsibility for ethanol plant operations, under the direction of our Chief
Executive Officer, from January 1, 2012 to January 5, 2013. Mr. Kandris was President, Western Division of Ruan Transportation
Management Systems from November 2008 until his retirement in September 2009. From January 2000 to November 2008, Mr. Kandris
served as President and Chief Operating Officer of Ruan Transportation Management Systems, where he had overall responsibility
for all operations, finance and administrative functions. Mr. Kandris has 30 years of experience in all modes of transportation
and logistics. Mr. Kandris served on the Executive Committee of the American Trucking Association and as a board member for the
National Tank Truck Organization until his retirement from Ruan Transportation Management Systems in September 2009. Mr. Kandris
has a B.S. degree in Business from California State University, Hayward.
Mr.
Kandris’s qualifications to serve on our Board include:
|
●
|
extensive
experience in various executive leadership positions;
|
|
●
|
extensive
experience in rail and truck transportation and logistics; and
|
|
●
|
day-to-day
leadership experience affords a deep understanding of business operations, challenges
and opportunities.
|
Terry
L. Stone
has served as a director since March 2005. Mr. Stone is a Certified Public Accountant with over thirty years
of experience in accounting and taxation. He has been the owner of his own accountancy firm since 1990 and has provided accounting
and taxation services to a wide range of industries, including agriculture, manufacturing, retail, equipment leasing, professionals
and not-for-profit organizations. Mr. Stone has served as a part-time instructor at California State University, Fresno, teaching
classes in taxation, auditing and financial and management accounting. Mr. Stone is also a financial advisor and franchisee of
Ameriprise Financial Services, Inc. Mr. Stone has a B.S. degree in Accounting from California State University, Fresno.
Mr.
Stone’s qualifications to serve on our Board include:
|
●
|
extensive
experience with financial accounting and tax matters;
|
|
●
|
recognized
expertise as an instructor of taxation, auditing and financial and management accounting;
|
|
●
|
“audit
committee financial expert,” as defined by the Securities and Exchange Commission;
|
|
●
|
satisfies
the “financial sophistication” requirements of NASDAQ’s listing standards;
and
|
|
●
|
ability
to communicate and encourage discussion, together with his experience as a senior independent
director of all Board committees on which he serves make him an effective chairman of
our Audit Committee.
|
John
L. Prince
has served as a director since July 2005. Mr. Prince is retired but also works as a consultant. Mr. Prince was
an Executive Vice President with Land O’ Lakes, Inc. from July 1998 until his retirement in 2004. Prior to that time, Mr.
Prince was President and Chief Executive Officer of Dairyman’s Cooperative Creamery Association located in Tulare, California,
until its merger with Land O’ Lakes, Inc. in July 1998. Land O’ Lakes, Inc. is a farmer-owned, national branded organization
based in Minnesota with annual sales in excess of $6 billion and membership and operations in over 30 states. Prior to joining
the Dairyman’s Cooperative Creamery Association, Mr. Prince was President and Chief Executive Officer for nine years until
1994, and was Operations Manager for the preceding ten years commencing in 1975, of the Alto Dairy Cooperative in Waupun, Wisconsin.
Mr. Prince has a B.A. degree in Business Administration from the University of Northern Iowa.
Mr.
Prince’s qualifications to serve on our Board include:
|
●
|
extensive
experience in various executive leadership positions;
|
|
●
|
day-to-day
leadership experience affords a deep understanding of business operations, challenges
and opportunities; and
|
|
●
|
ability
to communicate and encourage discussion helps Mr. Prince discharge his duties effectively
as chairman of our Nominating and Corporate Governance Committee.
|
Douglas
L. Kieta
has served as a director since April 2006. Mr. Kieta is currently retired but also works as a consultant through
Century West Projects, Inc., of which he is the President and an owner, providing project and construction management services.
Prior to retirement in January 2009, Mr. Kieta was employed by BE&K, Inc., a large engineering and construction company headquartered
in Birmingham, Alabama, where he served as the Vice President of Power from May 2006 to January 2009. From April 1999 to April
2006, Mr. Kieta was employed at Calpine Corporation where he was the Senior Vice President of Construction and Engineering. Calpine
Corporation is a major North American power company which leases and operates integrated systems of fuel-efficient natural gas-fired
and renewable geothermal power plants and delivers clean, reliable and fuel-efficient electricity to customers and communities
in 21 states and three Canadian provinces. Mr. Kieta has a B.S. degree in Civil Engineering from Clarkson University and a Master’s
degree in Civil Engineering from Cornell University.
Mr.
Kieta’s qualifications to serve on our Board include:
|
●
|
extensive
experience in various leadership positions;
|
|
●
|
day-to-day
leadership experience affords a deep understanding of business operations, challenges
and opportunities; and
|
|
●
|
service
with Calpine affords a deep understanding of large-scale construction and engineering
projects as well as plant operations, which is particularly relevant to our ethanol production
facility operations.
|
Larry
D. Layne
has served as a director since December 2007. Mr. Layne joined First Western Bank in 1963 and served in various
capacities with First Western Bank and its acquiror, Lloyds Bank of California, and Lloyd’s acquiror, Sanwa Bank California,
until his retirement in 2000. Sanwa Bank California was subsequently acquired by Bank of the West. From 1999 to 2000, Mr. Layne
was Vice Chairman of Sanwa Bank California in charge of its Commercial Banking Group which encompassed all of Sanwa Bank California’s
38 commercial and business banking centers and 12 Pacific Rim branches as well as numerous internal departments. From 1997 to
2000, Mr. Layne was also Chairman of the Board of The Eureka Funds, a mutual fund family of five separate investment funds with
total assets of $900 million. From 1996 to 2000, Mr. Layne was Group Executive Vice President of the Relationship Banking Group
of Sanwa Bank California in charge of its 107 branches and 13 commercial banking centers as well as numerous internal departments.
Mr. Layne has also served in various capacities with many industry and community organizations, including as Director and Chairman
of the Board of the Agricultural Foundation at California State University, Fresno; Chairman of the Audit Committee of the Agricultural
Foundation at California State University, Fresno; board member of the Fresno Metropolitan Flood Control District; and Chairman
of the Agricultural Lending Committee of the California Bankers Association. Mr. Layne has a B.S. degree in Dairy Husbandry from
California State University, Fresno and is a graduate of the California Agriculture Leadership Program.
Mr.
Layne’s qualifications to serve on our Board include:
|
●
|
extensive
experience in various leadership positions;
|
|
●
|
day-to-day
leadership experience affords a deep understanding of business operations, challenges
and opportunities;
|
|
●
|
experience
and involvement in California industry and community organizations provides a useful
perspective; and
|
|
●
|
ability
to communicate and encourage discussion helps Mr. Layne discharge his duties effectively
as chairman of our Compensation Committee.
|
Family
Relationships
There
are no family relationships among our directors.
Corporate
Governance
Our
Board believes that good corporate governance is paramount to ensure that Pacific Ethanol is managed for the long-term benefit
of our stockholders. Our Board has adopted corporate governance guidelines that guide its actions with respect to, among other
things, the composition of the Board and its decision-making processes, Board meetings and involvement of management, the Board’s
standing committees and procedures for appointing members of the committees, and its performance evaluation of our Chief Executive
Officer.
Our
Board has adopted a Code of Ethics that applies to all of our directors, officers, employees and consultants and an additional
Code of Ethics that applies to our Chief Executive Officer and senior financial officers. The Codes of Ethics, as applied to our
principal executive officer, principal financial officer and principal accounting officer constitutes our “code of ethics”
within the meaning of Section 406 of the Sarbanes-Oxley Act of 2002 and is our “code of conduct” within the meaning
of NASDAQ’s listing standards. Our Codes of Ethics are available on our website at
http://www.pacificethanol.com/investors/governance
.
Information on our Internet website is not, and shall not be deemed to be, a part of this report or incorporated into any other
filings we make with the Securities and Exchange Commission.
Audit
Committee
Our
Audit Committee selects our independent auditors, reviews the results and scope of the audit and other services provided by our
independent auditors, reviews our financial statements for each interim period and for the full year and implements and manages
our enterprise risk management program. The Audit Committee also has the authority to retain consultants, and other advisors.
Messrs. Stone, Jones and Prince served on our Audit Committee for all of 2018. Our Board has determined that each member of the
Audit Committee is “independent” under the current NASDAQ listing standards and satisfies the other requirements under
NASDAQ listing standards and Securities and Exchange Commission rules regarding audit committee membership. Our Board has determined
that Mr. Stone qualifies as an “audit committee financial expert” under applicable Securities and Exchange Commission
rules and regulations governing the composition of the Audit Committee, and satisfies the “financial sophistication”
requirements of NASDAQ’s listing standards. During 2018, our Audit Committee held eight meetings.
Executive
Officers
The
following table sets forth certain information regarding our executive officers as of April 26, 2019:
Name
|
|
Age
|
|
Position(s)
Held
|
Neil
M. Koehler
|
|
61
|
|
Chief
Executive Officer, President and Director
|
Michael
D. Kandris
|
|
71
|
|
Chief
Operating Officer and Director
|
Bryon
T. McGregor
|
|
55
|
|
Chief
Financial Officer
|
Christopher
W. Wright
|
|
66
|
|
Vice
President, General Counsel and Secretary
|
Paul
P. Koehler
|
|
59
|
|
Vice
President, Commodities and Corporate Development
|
James
R. Sneed
|
|
52
|
|
Vice
President, Supply and Trading
|
Neil
M. Koehler
has served as Chief Executive Officer, President and as a director since March 2005. Mr. Koehler is a co-founder
of PEI California and served as its Chief Executive Officer since its formation in January 2003 and as a member of its board of
directors from March 2004 until its dissolution in March 2012. Prior to his association with PEI California, Mr. Koehler was the
co-founder and General Manager of Parallel Products, one of the first ethanol production facilities in California, which was sold
to a public company in 1997. Mr. Koehler was also the sole manager and sole limited liability company member of Kinergy, which
he founded in September 2000, and which is one of our wholly-owned subsidiaries. Mr. Koehler has over 30 years of experience in
the ethanol production and marketing industry in the Western United States. Mr. Koehler is the Chairman of the Board of Directors
of the Renewable Fuels Association and is a nationally-recognized speaker on the production and marketing of renewable fuels.
Mr. Koehler has a B.A. degree in Government from Pomona College.
Michael
D. Kandris
has served as a director since June 2008 and as our Chief Operating Officer since January 6, 2013. Mr. Kandris
served as an independent contractor with supervisory responsibility for ethanol plant operations, under the direction of our Chief
Executive Officer, from January 1, 2012 to January 5, 2013. Mr. Kandris was President, Western Division of Ruan Transportation
Management Systems from November 2008 until his retirement in September 2009. From January 2000 to November 2008, Mr. Kandris
served as President and Chief Operating Officer of Ruan Transportation Management Systems, where he had overall responsibility
for all operations, finance and administrative functions. Mr. Kandris has 30 years of experience in all modes of transportation
and logistics. Mr. Kandris served on the Executive Committee of the American Trucking Association and as a board member for the
National Tank Truck Organization until his retirement from Ruan Transportation Management Systems in September 2009. Mr. Kandris
has a B.S. degree in Business from California State University, Hayward.
Bryon
T. McGregor
has served as our Chief Financial Officer since November 19, 2009. Mr. McGregor served as Vice President,
Finance at Pacific Ethanol from September 2008 until he became Interim Chief Financial Officer in April 2009. Prior to joining
Pacific Ethanol, Mr. McGregor was employed as Senior Director for E*TRADE Financial from February 2002 to August 2008, serving
in various capacities including International Treasurer based in London, England from 2006 to 2008, Brokerage Treasurer and Director
from 2003 to 2006 and Assistant Treasurer and Director of Finance and Investor Relations from 2002 to 2003. Prior to joining E*TRADE,
Mr. McGregor served as Manager of Finance and Head of Project Finance for BP (formerly Atlantic Richfield Company – ARCO)
from 1998 to 2001. Mr. McGregor has extensive experience in banking and served as a Director of International Project Finance
for Credit Suisse from 1992 to 1998, as Assistant Vice President for Sumitomo Mitsubishi Banking Corp (formerly The Sumitomo Bank
Limited) from 1989 to 1992, and as Commercial Banking Officer for Bank of America from 1987 to 1989. Mr. McGregor has a B.S. degree
in Business Management from Brigham Young University.
Christopher
W. Wright
has served as Vice President, General Counsel and Secretary since June 2006. From April 2004 until he joined
Pacific Ethanol in June 2006, Mr. Wright operated an independent consulting practice, advising companies on complex transactions,
including acquisitions and financings. Prior to that time, from January 2003 to April 2004, Mr. Wright was a partner with Orrick,
Herrington & Sutcliffe, LLP, and from July 1998 to December 2002, Mr. Wright was a partner with Cooley Godward LLP, where
he served as Partner-in-Charge of the Pacific Northwest office. Mr. Wright has extensive experience advising boards of directors
on compliance, securities matters and strategic transactions, with a particular focus on guiding the development of rapidly growing
companies. He has acted as general counsel for numerous technology enterprises in all aspects of corporate development, including
fund-raising, business and technology acquisitions, mergers and strategic alliances. Mr. Wright has an A.B. degree in History
from Yale College and a J.D. from the University of Chicago Law School.
Paul
P. Koehler
has served as a Vice President since 2005. Mr. Koehler has over 25 years of experience in business development
and marketing in the energy industry. Prior to joining Pacific Ethanol in 2005, he served as Director of Business Development
for PPM Energy, Inc., leading PPM’s efforts to develop and acquire several wind power projects. Mr. Koehler was also a co-founder
of ReEnergy, one of the companies acquired by Pacific Ethanol. Mr. Koehler also served as a member of the board of directors of
Towerstream Corporation, a public company, from May 30, 2007 to January 31, 2018. During the 1990s he worked for Portland General
Electric and Enron in marketing and origination of long-term transactions, risk management, and energy trading. Mr. Koehler has
a B.A. degree from the Honors College at the University of Oregon.
James
R. Sneed
has served as a Vice President since September 2012. Mr. Sneed has worked for over 20 years in various senior
management and executive positions in the ethanol industry. Prior to joining Pacific Ethanol in 2012, Mr. Sneed was employed by
Hawkeye Gold, LLC from April 2010 to September 2012, ultimately serving as Vice President – Ethanol Marketing and Trading.
Prior to that time, from May 2003 to April 2010, Mr. Sneed was employed by Aventine Renewable Energy, an ethanol production and
marketing company, where he helped build its operations from two ethanol plants in two states to marketing for fifteen production
facilities in eight states, ultimately serving as Vice President, Marketing and Logistics. Mr. Sneed is a Certified Public Accountant,
has a B.S. degree in Accounting from Olivet Nazarene University, and has an MBA degree from Northwestern University, Kellogg School
of Management.
Family
Relationships
Our
officers are appointed by and serve at the discretion of our Board. Except for Neil M. Koehler and Paul P. Koehler, who are brothers,
there are no family relationships among our executive officers and directors.
Section
16(a) Beneficial Ownership Reporting Compliance
Section
16(a) of the Exchange Act requires our executive officers and directors, and persons who beneficially own more than 10% of a registered
class of our common stock, to file initial reports of ownership and reports of changes in ownership with the Securities and Exchange
Commission. These officers, directors and stockholders are required by Securities and Exchange Commission regulations to furnish
us with copies of all reports that they file.
Based
solely upon a review of copies of the reports furnished to us during the year ended December 31, 2018 and thereafter, or any written
representations received by us from directors, officers and beneficial owners of more than 10% of our common stock (“reporting
persons”) that no other reports were required, we believe that all reporting persons filed, on a timely basis, all reports
required by Section 16(a) of the Exchange Act during the year ended December 31, 2018 or prior fiscal years.
|
Item
11.
|
Executive
Compensation.
|
Summary
Compensation Table
The
following table sets forth summary information concerning the compensation of our (i) Chief Executive Officer and President,
who serves as our principal executive officer, (ii) Chief Operating Officer, and (iii) Chief Financial Officer, who serves
as our principal financial officer (collectively, the “named executive officers”), for all services rendered in all
capacities to us for the years ended December 31, 2018 and 2017.
|
|
|
|
|
|
|
|
|
|
|
Stock
|
|
|
Non-Equity
|
|
|
|
|
|
|
|
Name
and
|
|
|
|
|
Salary
|
|
|
Bonus
|
|
|
Awards
|
|
|
Incentive
Plan
|
|
|
All
Other
|
|
|
Total
|
|
Principal
Position
|
|
Year
|
|
|
($)
|
|
|
($)
(1)
|
|
|
($)
(2)
|
|
|
Compensation
|
|
|
Compensation
(3)
|
|
|
($)
|
|
Neil
M. Koehler
|
|
2018
|
|
|
$
|
484,955
|
|
|
$
|
—
|
|
|
$
|
427,775
|
|
|
$
|
—
|
|
|
$
|
18,200
|
|
|
$
|
930,930
|
|
President
and Chief Executive
Officer
|
|
2017
|
|
|
$
|
472,487
|
|
|
$
|
—
|
|
|
$
|
500,000
|
|
|
$
|
66,148
|
|
|
$
|
17,700
|
|
|
$
|
1,056,335
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Michael
D. Kandris
|
|
2018
|
|
|
$
|
347,601
|
|
|
$
|
—
|
|
|
$
|
146,325
|
|
|
$
|
—
|
|
|
$
|
16,500
|
|
|
$
|
510,426
|
|
Chief
Operating Officer
|
|
2017
|
|
|
$
|
338,621
|
|
|
$
|
|
|
|
$
|
171,025
|
|
|
$
|
33,862
|
|
|
$
|
16,200
|
|
|
$
|
559,708
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bryon
T. McGregor
|
|
2018
|
|
|
$
|
315,148
|
|
|
$
|
—
|
|
|
$
|
146,325
|
|
|
$
|
—
|
|
|
$
|
18,200
|
|
|
$
|
479,673
|
|
Chief
Financial Officer
|
|
2017
|
|
|
$
|
307,068
|
|
|
$
|
—
|
|
|
$
|
171,025
|
|
|
$
|
30,707
|
|
|
$
|
17,700
|
|
|
$
|
526,500
|
|
|
(1)
|
Bonuses
under our annual performance-based cash incentive compensation plan were made and are
reported in the “Non-Equity Incentive Plan Compensation” column.
|
|
(2)
|
The
amounts shown are the fair value of stock awards on the date of grant. The fair value
of stock awards is calculated by multiplying the number of shares of stock granted by
the closing price of our common stock on the date of grant. The shares of common stock
were issued under our 2016 Stock Incentive Plan. Information
regarding the grants of restricted stock and vesting schedules for the named executive
officers is included in the “Outstanding Equity Awards at Fiscal Year-End−2018”
table below, the footnotes to that table, and in “Item 13. Certain Relationships
and Related Transactions, and Director Independence.”
|
|
(3)
|
Except
as specifically noted, the amounts represent matching contributions under our 401(k)
plan and contributions to the executive’s health savings account. In addition,
except as specifically noted, the value of perquisites and other personal benefits was
less than $10,000 in aggregate for each of the named executive officers.
|
Executive
Employment Agreements
Neil
M. Koehler
Our
Amended and Restated Employment Agreement with Neil M. Koehler provides for at-will employment as our President and Chief Executive
Officer. Mr. Koehler’s annual base salary is $489,305. Mr. Koehler is eligible to participate in our short-term incentive
plan with a pay-out target of 70% of his base salary, to be paid based upon performance criteria set by the Compensation Committee
of our board of directors. For 2017, we paid Mr. Koehler a cash bonus under our annual cash incentive compensation program based
on his performance during that year.
Upon
termination by us without cause or resignation by Mr. Koehler for good reason, Mr. Koehler is entitled to receive (i) severance
equal to eighteen months of his base salary, (ii) 150% of his total target short-term incentive plan award, (iii) continued health
insurance coverage for eighteen months or until the earlier effective date of coverage under a subsequent employer’s plan,
and (iv) accelerated vesting of 25% of all shares or options subject to any equity awards granted to Mr. Koehler prior to Mr.
Koehler’s termination which are unvested as of the date of termination.
However,
if Mr. Koehler is terminated without cause or resigns for good reason in anticipation of or twenty-four months after a change
in control, Mr. Koehler is entitled to (i) severance equal to thirty-six months of base salary, (ii) 300% of his total target
short-term incentive plan award, (iii) continued health insurance coverage for thirty-six months or until the earlier effective
date of coverage under a subsequent employer’s plan, and (iv) accelerated vesting of 100% of all shares or options subject
to any equity awards granted to Mr. Koehler prior to Mr. Koehler’s termination that are unvested as of the date of termination.
If
we terminate Mr. Koehler’s employment upon his disability, Mr. Koehler is entitled to severance equal to twelve months of
base salary.
The
term “for good reason” is defined in the Amended and Restated Employment Agreement as (i) the assignment to Mr. Koehler
of any duties or responsibilities that result in the material diminution of Mr. Koehler’s authority, duties or responsibility,
(ii) a material reduction by us in Mr. Koehler’s annual base salary, except to the extent the base salaries of all or our
other executive officers are accordingly reduced, (iii) a relocation of Mr. Koehler’s place of work, or our principal executive
offices if Mr. Koehler’s principal office is at these offices, to a location that increases Mr. Koehler’s daily one-way
commute by more than thirty-five miles, or (iv) any material breach by us of any material provision of the Amended and Restated
Employment Agreement.
The
term “cause” is defined in the Amended and Restated Employment Agreement as (i) Mr. Koehler’s indictment or
conviction of any felony or of any crime involving dishonesty, (ii) Mr. Koehler’s participation in any fraud or other act
of willful misconduct against us, (iii) Mr. Koehler’s refusal to comply with any of our lawful directives, (iv) Mr. Koehler’s
material breach of his fiduciary, statutory, contractual, or common law duties to us, or (v) conduct by Mr. Koehler which, in
the good faith and reasonable determination of our board of directors, demonstrates gross unfitness to serve; provided, however,
that in the event that any of the foregoing events is reasonably capable of being cured, we shall, within twenty days after the
discovery of the event, provide written notice to Mr. Koehler describing the nature of the event and Mr. Koehler shall thereafter
have ten business days to cure the event.
A
“change in control” is deemed to have occurred if, in a single transaction or series of related transactions (i) any
person (as the term is used in Section 13(d) and 14(d) of the Exchange Act), or persons acting as a group, other than a trustee
or fiduciary holding securities under an employee benefit program, is or becomes a “beneficial owner” (as defined
in Rule 13-3 under the Exchange Act), directly or indirectly of securities of Pacific Ethanol, Inc. representing a majority of
the combined voting power of Pacific Ethanol, Inc., (ii) there is a merger, consolidation or other business combination transaction
of Pacific Ethanol, Inc. with or into another corporation, entity or person, other than a transaction in which the holders of
at least a majority of the shares of voting capital stock of Pacific Ethanol, Inc. outstanding immediately prior to the transaction
continue to hold (either by the shares remaining outstanding or by their being converted into shares of voting capital stock of
the surviving entity) a majority of the total voting power represented by the shares of voting capital stock of Pacific Ethanol,
Inc. (or the surviving entity) outstanding immediately after the transaction, or (iii) all or substantially all of our assets
are sold.
Michael
D. Kandris
Our
Amended and Restated Employment Agreement with Michael D. Kandris provides for at-will employment as our Chief Operating Officer.
Mr. Kandris’s annual base salary is $350,745. Mr. Kandris is eligible to participate in our short-term incentive plan with
a pay-out target of 50% of his base salary, to be paid based upon performance criteria set by the Compensation Committee of our
board of directors. For 2017, we paid Mr. Kandris a cash bonus under our annual cash incentive compensation program based on his
performance during that year.
Upon
termination by us without cause or resignation by Mr. Kandris for good reason, Mr. Kandris is entitled to receive (i) severance
equal to twelve months of his base salary, (ii) 100% of his total target short-term incentive plan award, (iii) continued health
insurance coverage for twelve months or until the earlier effective date of coverage under a subsequent employer’s plan,
and (iv) accelerated vesting of 25% of all shares or options subject to any equity awards granted to Mr. Kandris prior to Mr.
Kandris’s termination which are unvested as of the date of termination.
However,
if Mr. Kandris is terminated without cause or resigns for good reason in anticipation of or twenty-four months after a change
in control, Mr. Kandris is entitled to (i) severance equal to twenty-four months of base salary, (ii) 200% of his total target
short-term incentive plan award, (iii) continued health insurance coverage for twenty-four months or until the earlier effective
date of coverage under a subsequent employer’s plan, and (iv) accelerated vesting of 100% of all shares or options subject
to any equity awards granted to Mr. Kandris prior to Mr. Kandris’s termination that are unvested as of the date of termination.
If
we terminate Mr. Kandris’s employment upon his disability, Mr. Kandris is entitled to severance equal to twelve months of
base salary.
The
meanings given to the terms “cause,” “good reason” and “change in control” in Mr. Kandris’s
Amended and Restated Employment Agreement are the same as those contained in Mr. Koehler’s Amended and Restated Employment
Agreement described above.
Bryon
T. McGregor
Our
Amended and Restated Employment Agreement with Bryon T. McGregor provides for at-will employment as our Chief Financial Officer,
Vice President and Assistant Secretary. Mr. McGregor’s annual base salary is $317,963. Mr. McGregor is eligible to participate
in our short-term incentive plan with a pay-out target of 50% of his base salary, to be paid based upon performance criteria set
by the Compensation Committee of our board of directors. For 2017, we paid Mr. McGregor a cash bonus under our annual cash incentive
compensation program based on his performance during that year.
All
other terms and conditions of Mr. McGregor’s Amended and Restated Employment Agreement are substantially the same as those
contained in Mr. Kandris’s Amended and Restated Employment Agreement described above.
Outstanding
Equity Awards at Fiscal Year-End – 2018
The
following table sets forth information about outstanding equity awards held by our named executive officers as of December 31,
2018.
|
|
|
Option Awards
|
|
|
Stock Awards
|
|
Name
|
|
|
Number of
Securities
Underlying
Unexercised
Options (#)
Exercisable
|
|
|
Option
Exercise
Price ($)
|
|
|
Option
Expiration
Date
|
|
|
Number of
Shares or Units
of Stock That
Have Not
Vested (#)
(1)
|
|
|
Market Value
of Shares
or Units of
Stock That
Have Not
Vested($)
(2)
|
|
Neil M. Koehler
|
|
|
3,750
|
(3)
|
|
$
|
12.90
|
|
|
8/1/2021
|
|
|
34,000
|
(5)
|
|
$
|
29,240
|
|
|
|
|
113,379
|
(4)
|
|
$
|
3.74
|
|
|
6/24/2023
|
|
|
49,630
|
(6)
|
|
$
|
42,682
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
138,888
|
(7)
|
|
$
|
119,444
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Michael D. Kandris
|
|
|
31,746
|
(8)
|
|
$
|
3.74
|
|
|
6/24/2023
|
|
|
11,630
|
(9)
|
|
$
|
10,002
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
16,976
|
(10)
|
|
$
|
14,599
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
47,508
|
(11)
|
|
$
|
40,857
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bryon T. McGregor
|
|
|
1,715
|
(12)
|
|
$
|
12.90
|
|
|
8/1/2021
|
|
|
11,630
|
(9)
|
|
$
|
10,002
|
|
|
|
|
31,746
|
(8)
|
|
$
|
3.74
|
|
|
6/24/2023
|
|
|
16,976
|
(10)
|
|
$
|
14,599
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
47,508
|
(11)
|
|
$
|
40,857
|
|
|
(1)
|
The
stock awards reported in the above table represent shares of restricted stock and stock
options granted under our 2006 Stock Incentive Plan or 2016 Stock Incentive Plan.
|
|
(2)
|
Represents
the fair market value per share of our common stock of $0.86 on December 31, 2018, the
last business day of the most recently completed fiscal year, multiplied by the number
of shares that had not vested as of that date.
|
|
(3)
|
Represents
shares underlying a stock option granted on August 1, 2011. The option vested as to 1/3
rd
of the 3,750 shares underlying the option on each of April 1, 2012, 2013 and 2014.
|
|
(4)
|
Represents
shares underlying a stock option granted on June 24, 2013. The option vested as to 33%,
33% and 34% of the 113,379 shares underlying the option on April 1, 2014, 2015 and 2016,
respectively.
|
|
(5)
|
Represents
shares granted on June 16, 2016. The grant vested as to 34,000 shares on April 1, 2019.
|
|
(6)
|
Represents
shares granted on March 15, 2017. The grant vested as to 24,444 shares on April 1, 2019
and vests as to 25,186 shares on April 1, 2020.
|
|
(7)
|
Represents
shares granted on June 14, 2018. The grant vested as to 45,833 shares on April 1, 2019
and vests as to 45,833 shares on April 1, 2020 and 47,222 shares on April 1, 2021.
|
|
(8)
|
Represents
shares underlying a stock option granted on June 24, 2013. The option vested as to 33%,
33% and 34% of the 31,746 shares underlying the option on April 1, 2014, 2015 and 2016,
respectively.
|
|
(9)
|
Represents
shares granted on June 16, 2016. The grant vested as to 11,630 shares on April 1, 2019.
|
|
(10)
|
Represents
shares granted on March 15, 2017. The grant vested as to 8,361 shares on April 1, 2019
and vests as to 8,615 shares on April 1, 2020.
|
|
(11)
|
Represents
shares granted on June 14, 2018. The grant vested as to 15,677 shares on April 1, 2019
and vests as to 15,677 shares on April 1, 2020 and 16,154 shares on April 1, 2021.
|
|
(12)
|
Represents
shares underlying a stock option granted on August 1, 2011. The option vested as to 1/3
rd
of the 1,715 shares underlying the option on each of April 1, 2012, 2013 and 2014.
|
Compensation
of Directors
We
use a combination of cash and equity-based incentive compensation to attract and retain qualified candidates to serve on our Board.
In setting the compensation of directors, we consider the significant amount of time that Board members spend in fulfilling their
duties to Pacific Ethanol as well as the experience level we require to serve on our Board. The Board, through its Compensation
Committee, annually reviews the compensation and compensation policies for Board members. In recommending director compensation,
the Compensation Committee is guided by the following three goals:
|
●
|
compensation
should pay directors fairly for work required in a company of our size and scope;
|
|
●
|
compensation
should align directors’ interests with the long-term interests of our stockholders;
and
|
|
●
|
the
structure of the compensation should be clearly disclosed to our stockholders.
|
In
making compensation decisions for 2018 as to our directors, our Compensation Committee compared our cash and equity compensation
payable to directors against market data obtained by Korn Ferry Hay Group in 2015. Our Compensation Committee determined that
this data from 2015 remained relevant to its compensation decisions for 2018. The Korn Ferry Hay Group data included a survey
of 1,400 companies across 24 industries with revenues between $1 billion and $2.5 billion. For 2018, our Compensation Committee
targeted compensation for our directors at approximately the median of compensation paid to directors of the companies contained
in the Korn Ferry Hay Group data.
Cash
Compensation
Our
annual cash compensation program for directors includes the following:
|
●
|
annual
cash compensation provided to the Chairman of our Board is $112,500;
|
|
●
|
base
annual cash compensation provided to our non-employee directors, other than our Chairman,
is $50,000;
|
|
●
|
additional
annual cash compensation provided to each of our Board committee chairs is $25,000; and
|
|
●
|
additional
annual cash compensation provided to our lead independent director is $12,000.
|
These
amounts are paid in advance in bi-weekly installments. In addition, directors are reimbursed for specified reasonable and documented
expenses in connection with attendance at meetings of our Board and its committees. Employee directors do not receive director
compensation in connection with their service as directors.
Equity
Compensation
Our
Compensation Committee or our full Board typically grants equity compensation to our newly elected or reelected directors which
normally vests as to 100% of the grants at the earlier of our next annual meeting or approximately one year after the date of
grant. Vesting is typically subject to continued service on our Board during the full year.
In
determining the amount of equity compensation for 2018, the Compensation Committee determined a target value of total compensation
of approximately the median of compensation paid to directors of the companies comprising the market data provided to us by Korn
Ferry Hay Group in 2015. The Compensation Committee then determined the cash component based on this market data. The balance
of the total compensation target was then allocated to equity awards, and the number of shares to be granted to our directors
was based on the estimated value of the underlying shares on the expected grant date.
Our
annual equity compensation program for directors includes the following:
|
●
|
the
value of annual equity compensation provided to the Chairman of our Board is $142,500;
and
|
|
●
|
the
value of annual equity compensation provided to our non-employee directors, other than
our Chairman, is $95,000.
|
In
addition, our Compensation Committee may grant, and has from time to time granted, additional equity compensation to directors
at its discretion.
Compensation
of Employee Directors
Messrs.
Koehler and Kandris were compensated as full-time employees and officers and therefore received no additional compensation for
service as Board members during 2018. Information regarding the compensation awarded to Messrs. Koehler and Kandris is included
in “Executive Compensation and Related Information—Summary Compensation Table” below.
Director
Compensation Table – 2018
The
following table summarizes the compensation of our non-employee directors for the year ended December 31, 2018:
Name
|
|
Fees Earned
or Paid in Cash
($)
(1)
|
|
|
Stock
Awards
($)
|
|
|
Total
($)
(2)
|
|
William L. Jones
|
|
$
|
112,500
|
|
|
$
|
150,815
|
(3)
|
|
$
|
263,315
|
|
Terry L. Stone
|
|
$
|
75,000
|
|
|
$
|
100,898
|
(4)
|
|
$
|
175,898
|
|
John L. Prince
|
|
$
|
87,000
|
|
|
$
|
100,898
|
(5)
|
|
$
|
187,898
|
|
Douglas L. Kieta
|
|
$
|
75,000
|
|
|
$
|
100,898
|
(6)
|
|
$
|
175,898
|
|
Larry D. Layne
|
|
$
|
75,000
|
|
|
$
|
100,898
|
(7)
|
|
$
|
175,898
|
|
(1)
|
For
a description of annual director fees and fees for chair and lead independent director
positions, see the disclosure above under “Compensation of Directors—Cash
Compensation.”
|
(2)
|
The
value of perquisites and other personal benefits was less than $10,000 in aggregate for
each director.
|
(3)
|
At
December 31, 2018, Mr. Jones held 56,903 vested shares from stock awards. Mr. Jones was
granted 48,966 shares of our common stock on June 14, 2018 having an aggregate grant
date fair value of $150,815, calculated based on the fair market value of our common
stock on the applicable grant date. The shares vest on the earlier of our next annual
meeting or July 1, 2019.
|
(4)
|
At
December 31, 2018, Mr. Stone held 58,121 vested shares from stock awards. Mr. Stone was
granted 32,759 shares of our common stock on June 14, 2018 having an aggregate grant
date fair value of $100,898, calculated based on the fair market value of our common
stock on the applicable grant date. The shares vest on the earlier of our next annual
meeting or July 1, 2019.
|
(5)
|
At
December 31, 2018, Mr. Prince held 40,375 vested shares from stock awards. Mr. Prince
was granted 32,759 shares of our common stock on June 14, 2018 having an aggregate grant
date fair value of $100,898, calculated based on the fair market value of our common
stock on the applicable grant date. The shares vest on the earlier of our next annual
meeting or July 1, 2019.
|
(6)
|
At
December 31, 2018, Mr. Kieta held 70,095 vested shares from stock awards. Mr. Kieta was
granted 32,759 shares of our common stock on June 14, 2018 having an aggregate grant
date fair value of $100,898, calculated based on the fair market value of our common
stock on the applicable grant date. The shares vest on the earlier of our next annual
meeting or July 1, 2019.
|
(7)
|
At
December 31, 2018, Mr. Layne held 46,758 vested shares from stock awards. Mr. Layne was
granted 32,759 shares of our common stock on June 14, 2018 having an aggregate grant
date fair value of $100,898, calculated based on the fair market value of our common
stock on the applicable grant date. The shares vest on the earlier of our next annual
meeting or July 1, 2019.
|
Indemnification
of Directors and Officers
Section
145 of the Delaware General Corporation Law permits a corporation to indemnify its directors and officers against expenses, judgments,
fines and amounts paid in settlement actually and reasonably incurred in connection with a pending or completed action, suit or
proceeding if the officer or director acted in good faith and in a manner the officer or director reasonably believed to be in
the best interests of the corporation.
Our
certificate of incorporation provides that, except in certain specified instances, our directors shall not be personally liable
to us or our stockholders for monetary damages for breach of their fiduciary duty as directors, except liability for the following:
|
●
|
any
breach of their duty of loyalty to Pacific Ethanol or our stockholders;
|
|
●
|
acts
or omissions not in good faith or which involve intentional misconduct or a knowing violation
of law;
|
|
●
|
unlawful
payments of dividends or unlawful stock repurchases or redemptions as provided in Section
174 of the Delaware General Corporation Law; and
|
|
●
|
any
transaction from which the director derived an improper personal benefit.
|
In
addition, our certificate of incorporation and bylaws obligate us to indemnify our directors and officers against expenses and
other amounts reasonably incurred in connection with any proceeding arising from the fact that such person is or was an agent
of ours. Our bylaws also authorize us to purchase and maintain insurance on behalf of any of our directors or officers against
any liability asserted against that person in that capacity, whether or not we would have the power to indemnify that person under
the provisions of the Delaware General Corporation Law. We have entered and expect to continue to enter into agreements to indemnify
our directors and officers as determined by our Board. These agreements provide for indemnification of related expenses including
attorneys’ fees, judgments, fines and settlement amounts incurred by any of these individuals in any action or proceeding.
We believe that these bylaw provisions and indemnification agreements are necessary to attract and retain qualified persons as
directors and officers. We also maintain directors’ and officers’ liability insurance.
The
limitation of liability and indemnification provisions in our certificate of incorporation and bylaws may discourage stockholders
from bringing a lawsuit against our directors for breach of their fiduciary duty. They may also reduce the likelihood of derivative
litigation against our directors and officers, even though an action, if successful, might benefit us and other stockholders.
Furthermore, a stockholder’s investment may be adversely affected to the extent that we pay the costs of settlement and
damage awards against directors and officers as required by these indemnification provisions.
Insofar
as indemnification for liabilities arising under the Securities Act of 1933, as amended (“Securities Act”), may be
permitted to our directors, officers and controlling persons under the foregoing provisions of our certificate of incorporation
or bylaws, or otherwise, we have been informed that in the opinion of the Securities and Exchange Commission, this indemnification
is against public policy as expressed in the Securities Act and is therefore unenforceable.
|
Item
12.
|
Security
Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
|
Security
Ownership of Certain Beneficial Owners and Management
The
following table sets forth information with respect to the beneficial ownership of our voting securities as of April 26, 2019,
the date of the table, by:
|
●
|
each
of our named executive officers;
|
|
●
|
all
of our executive officers and directors as a group; and
|
|
●
|
each
person known by us to beneficially own more than 5% of the outstanding shares of any
class of our voting capital stock.
|
Beneficial
ownership is determined in accordance with the rules of the Securities and Exchange Commission, and includes voting or investment
power with respect to the securities. To our knowledge, except as indicated by footnote, and subject to community property laws
where applicable, the persons named in the table below have sole voting and investment power with respect to all shares of common
stock shown as beneficially owned by them. Shares of common stock underlying derivative securities, if any, that currently are
exercisable or convertible or are scheduled to become exercisable or convertible for or into shares of common stock within 60
days after the date of the table are deemed to be outstanding in calculating the percentage ownership of each listed person or
group but are not deemed to be outstanding as to any other person or group. Except as indicated by footnote, percentage of beneficial
ownership is based on 49,870,565 shares of common stock and 926,942 shares of Series B Preferred Stock outstanding as of the date
of the table.
The
table below excludes an aggregate of 896 shares of our Non-Voting Common Stock. Our Non-Voting Common Stock is convertible on
a one-for-one basis into shares of our common stock; provided, that our Non-Voting Common Stock may not be converted:
|
●
|
to
the extent that, after giving effect to the conversion, the holder and its affiliates
would beneficially own, in the aggregate, more than 9.99% of our outstanding shares of
common stock; and
|
|
●
|
except
upon 61-days’ prior written notice of conversion to us, including surrender of
the stock certificates representing the Non-Voting Common Stock to be converted.
|
Name and Address of Beneficial Owner
(1)
|
|
Title of Class
|
|
Amount and Nature
of Beneficial
Ownership
|
|
|
Percent
of Class
|
|
William L. Jones
|
|
Common
|
|
|
114,830
|
(2)
|
|
|
*
|
|
|
|
Series B Preferred
|
|
|
12,820
|
|
|
|
1.38
|
%
|
Neil M. Koehler
|
|
Common
|
|
|
1,129,331
|
(3)
|
|
|
2.25
|
%
|
|
|
Series B Preferred
|
|
|
256,410
|
|
|
|
27.66
|
%
|
Bryon T. McGregor
|
|
Common
|
|
|
247,356
|
(4)
|
|
|
*
|
|
Terry L. Stone
|
|
Common
|
|
|
90,880
|
|
|
|
*
|
|
John L. Prince
|
|
Common
|
|
|
77,134
|
|
|
|
*
|
|
Douglas L. Kieta
|
|
Common
|
|
|
102,854
|
|
|
|
*
|
|
Larry D. Layne
|
|
Common
|
|
|
89,517
|
|
|
|
*
|
|
Michael D. Kandris
|
|
Common
|
|
|
229,654
|
(5)
|
|
|
*
|
|
Frank P. Greinke
|
|
Common
|
|
|
58,319
|
(6)
|
|
|
*
|
|
|
|
Series B Preferred
|
|
|
85,180
|
|
|
|
9.19
|
%
|
Lyles United, LLC
|
|
Common
|
|
|
354,596
|
(7)
|
|
|
*
|
|
|
|
Series B Preferred
|
|
|
512,820
|
|
|
|
55.32
|
%
|
Dimensional Fund Advisors LP
|
|
Common
|
|
|
3,278,627
|
(8)
|
|
|
6.57
|
%
|
BlackRock, Inc.
|
|
Common
|
|
|
3,065,903
|
(9)
|
|
|
6.15
|
%
|
All executive officers and directors as a group (11 persons)
|
|
Common
|
|
|
2,634,431
|
(10)
|
|
|
5.24
|
%
|
|
|
Series B Preferred
|
|
|
282,050
|
|
|
|
30.43
|
%
|
|
(1)
|
Messrs.
Jones, Koehler, Stone, Prince, Kieta, Layne and Kandris are directors of Pacific Ethanol.
Messrs. Koehler, McGregor and Kandris are executive officers of Pacific Ethanol. The
address of each of these persons is c/o Pacific Ethanol, Inc., 400 Capitol Mall, Suite
2060, Sacramento, California 95814.
|
|
(2)
|
Amount
represents 105,869 shares of common stock held by William L. Jones and Maurine Jones,
husband and wife, as community property, 184 shares of common stock underlying a warrant
issued to Mr. Jones and 8,777 shares of common stock underlying our Series B Preferred
Stock held by Mr. Jones.
|
|
(3)
|
Amount
represents 832,985 shares of common stock held directly, 3,663 shares of common stock
underlying a warrant, 175,554 shares of common stock underlying our Series B Preferred
Stock and 117,129 shares of common stock underlying options.
|
|
(4)
|
Includes
33,461 shares of common stock underlying options.
|
|
(5)
|
Includes
31,746 shares of common stock underlying options.
|
|
(6)
|
Amount
represents shares of common stock underlying our Series B Preferred Stock. The shares
are beneficially owned by Frank P. Greinke, as trustee under the Greinke Personal Living
Trust Dated April 20, 1999. The address of Frank P. Greinke is P.O. Box 4159, 1800 W.
Katella, Suite 400, Orange, California 92863.
|
|
(7)
|
Amount
includes 351,108 shares of common stock underlying our Series B Preferred Stock. In addition,
The Lyles Foundation holds 3,488 shares of common stock. The address of Lyles United,
LLC is P.O. Box 4376, Fresno, California 93744-4376.
|
|
(8)
|
The
information with respect to Dimensional Fund Advisors LP, including the information in
this footnote, is based solely on the Schedule 13G/A filed with the Securities and Exchange
Commission on February 8, 2019 by Dimensional Fund Advisors LP as the reporting person.
Dimensional Fund Advisors LP holds sole voting power over 3,143,818 shares, sole dispositive
power over 3,278,627 shares and beneficially owns 3,278,627 shares. The address of Dimensional
Fund Advisors LP is Building One, 6300 Bee Cave Road, Austin, Texas 78746.
|
|
(9)
|
The
information with respect to BlackRock, Inc., including the information in this footnote,
is based solely on the Schedule 13G/A filed with the Securities and Exchange Commission
on February 6, 2019 by BlackRock, Inc. as the reporting person. BlackRock, Inc. holds
sole voting power over 2,678,532 shares, sole dispositive power over 3,065,903 shares
and beneficially owns 3,065,903 shares. The address of BlackRock, Inc. is 55 East 52nd
Street, New York, New York 10055.
|
|
(10)
|
Amount
represents 2,210,289 shares of common stock held directly, 227,003 shares of common stock
underlying options, 4,031 shares of common stock underlying warrants and 193,108 shares
of common stock underlying our Series B Preferred Stock.
|
Equity
Compensation Plan Information
The
following table provides information about our common stock that may be issued upon the exercise of options, warrants and rights
under all of our existing equity compensation plans as of December 31, 2018.
Plan Category
|
|
Number of
Securities to be
Issued Upon Exercise of Outstanding
Options, Warrants
and Rights
|
|
|
Weighted-Average
Exercise Price of
Outstanding
Options, Warrants
and Rights
|
|
|
Number of
Securities Remaining
Available
for Future Issuance
Under Equity
Compensation Plans
(1)
|
|
Equity Compensation Plans Approved by Security Holders:
|
|
|
|
|
|
|
|
|
|
2006 Stock Incentive Plan
(1)
|
|
|
229,373
|
|
|
$
|
4.15
|
|
|
|
—
|
|
2016 Stock Incentive Plan
|
|
|
—
|
|
|
$
|
—
|
|
|
|
1,648,516
|
|
|
(1)
|
Our
2006 Stock Incentive Plan terminated on July 19, 2016 except to the extent of unvested
shares of our restricted common stock and options to purchase shares of our common stock
outstanding as of that date.
|
|
Item
13.
|
Certain
Relationships and Related Transactions, and Director Independence.
|
Director
Independence
Our
corporate governance guidelines provide that a majority of the Board and all members of our Audit, Compensation and Nominating
and Corporate Governance Committees shall be independent. On an annual basis, each director and executive officer is obligated
to complete a Director and Officer Questionnaire that requires disclosure of any transactions with Pacific Ethanol in which a
director or executive officer, or any member of his or her immediate family, have a direct or indirect material interest. Following
completion of these questionnaires, the Board, with the assistance of the Nominating and Corporate Governance Committee, makes
an annual determination as to the independence of each director using the current standards for “independence” established
by the Securities and Exchange Commission and NASDAQ, additional criteria contained in our corporate governance guidelines and
consideration of any other material relationship a director may have with Pacific Ethanol.
The
Board has determined that all of its directors are independent under these standards, except for Neil M. Koehler, who serves
as our President and Chief Executive Officer, and Michael D. Kandris, who serves as our Chief Operating Officer. Messrs. Koehler
and Kandris are deemed not to be independent due to their employment relationships with Pacific Ethanol, Inc.
Certain
Relationships and Related Transactions
Other
than as described below or elsewhere in this report, since January 1, 2017, there has not been a transaction or series of related
transactions to which Pacific Ethanol was or is a party involving an amount in excess of $120,000 and in which any director, executive
officer, holder of more than 5% of any class of our voting securities, or any member of the immediate family of any of the foregoing
persons, had or will have a direct or indirect material interest. All of the below transactions were separately ratified and/or
approved by our Board or an appropriate independent committee of our Board.
Miscellaneous
We
are or have been a party to employment and compensation arrangements with related parties, as more particularly described above
in “Executive Compensation and Related Information.” In addition, we have entered into an indemnification agreement
with each of our directors and executive officers. The indemnification agreements and our certificate of incorporation and bylaws
require us to indemnify our directors and officers to the fullest extent permitted by Delaware law.
Neil
M. Koehler
Series
B Preferred Stock
On
May 20, 2008, we sold to Neil M. Koehler, who is our President and Chief Executive Officer and one of our directors, 256,410 shares
of our Series B Preferred Stock, all of which were initially convertible into an aggregate of 7,326 shares of our common stock
based on an initial preferred-to-common stock conversion ratio of approximately 1-for-0.03, and warrants to purchase an aggregate
of 3,663 shares of our common stock at a split-adjusted exercise price of $735 per share, for an aggregate purchase price of $5,000,000.
As a result of various anti-dilution adjustments, the conversion ratio of the Series B Preferred Stock has increased to approximately
1-for-0.68.
For
the quarter ended March 31, 2019, we accrued and paid cash dividends in the amount of $86,301 in respect of shares of Series B
Preferred Stock held by Mr. Koehler.
For
each of the years ended December 31, 2018 and 2017, we accrued and paid cash dividends in the amount of $350,000 in respect of
shares of Series B Preferred Stock held by Mr. Koehler.
Restricted
Stock Grants
On
April 22, 2019, we granted 167,000 shares of our restricted common stock to Mr. Koehler in consideration of services to be provided.
The value of the common stock was determined to be $187,040. The shares vest 50% on April 1, 2020 and vest 50% on April 1, 2021.
On
June 14, 2018, we granted 138,888 shares of our restricted common stock to Mr. Koehler in consideration of services to be provided.
The value of the common stock was determined to be $427,775. The shares vested 33% on April 1, 2019 and vest 33% and 34% on April
1, 2020 and 2021, respectively.
On
March 15, 2017, we granted 74,074 shares of our restricted common stock to Mr. Koehler in consideration of services to be provided.
The value of the common stock was determined to be $500,000. The shares vested 33% on each of April 1, 2018 and 2019 and vest
34% on April 1, 2020.
Paul
P. Koehler
Paul
P. Koehler, a brother of Neil M. Koehler, who is our President and Chief Executive Officer and one of our directors, is employed
by us as Vice President of Commodities and Corporate Development. Mr. Koehler’s base salary rate was $252,916 per year at
the end of 2017 and was increased to $260,504 per year effective April 15, 2018. In addition, Mr. Koehler received compensation
of $4,349 for 2018 in perquisites or personal benefits relating to payment or reimbursement of commuting expenses from Mr. Koehler’s
home to our corporate offices in Sacramento, California, and housing and other living expenses.
Series
B Preferred Stock
On
May 20, 2008, we sold to Mr. Koehler 12,820 shares of our Series B Preferred Stock, all of which were initially convertible into
an aggregate of 366 shares of our common stock based on an initial preferred-to-common conversion ratio of approximately 1-for-0.03,
and warrants to purchase an aggregate of 184 shares of our common stock at a split-adjusted exercise price of $735 per share,
for an aggregate purchase price of $250,000. As a result of various anti-dilution adjustments, the conversion ratio of the Series
B Preferred Stock has increased to approximately 1-for-0.68.
For
the quarter ended March 31, 2019, we accrued and paid cash dividends in the amount of $4,315 in respect of shares of Series B
Preferred Stock held by Mr. Koehler.
For
each of the years ended December 31, 2018 and 2017, we accrued and paid cash dividends in the amount of $17,500 in respect of
shares of Series B Preferred Stock held by Mr. Koehler.
Restricted
Stock Grants
On
April 22, 2019, we granted 42,000 shares of our restricted common stock to Mr. Koehler in consideration of services to be provided.
The value of the common stock was determined to be $47,040. The shares vest 50% on April 1, 2020 and vest 50% on April 1, 2021.
On
June 14, 2018, we granted 34,722 shares of our restricted common stock to Mr. Koehler in consideration of services to be provided.
The value of the common stock was determined to be $106,944. The shares vested 33% on April 1, 2019 and vest 33% and 34% on April
1, 2020 and 2021, respectively.
On
March 15, 2017, we granted 18,518 shares of our restricted common stock to Mr. Koehler in consideration of services to be provided.
The value of the common stock was determined to be $124,997. The shares vested 33% on each of April 1, 2018 and 2019 and vest
34% on April 1, 2020.
Annual
Cash Incentive Compensation
In
April 2018, we paid Mr. Koehler annual performance-based cash incentive compensation of $20,120 based on his 2017 performance.
In
March 2017, we paid Mr. Koehler annual performance-based cash incentive compensation of $19,534 based on his 2016 performance
and a special discretionary cash bonus of $25,000.
Thomas
D. Koehler
Series
B Preferred Stock
On
May 20, 2008, we sold to Thomas D. Koehler, a brother of Neil M. Koehler, who is our President and Chief Executive Officer and
one of our directors, 12,820 shares of our Series B Preferred Stock, all of which were initially convertible into an aggregate
of 366 shares of our common stock based on an initial preferred-to-common conversion ratio of approximately 1-for-0.03, and warrants
to purchase an aggregate of 184 shares of our common stock at a split-adjusted exercise price of $735 per share, for an aggregate
purchase price of $250,000. As a result of various anti-dilution adjustments, the conversion ratio of the Series B Preferred Stock
has increased to approximately 1-for-0.68.
For
the quarter ended March 31, 2019, we accrued and paid cash dividends in the amount of $4,315 in respect of shares of Series B
Preferred Stock held by Mr. Koehler.
For
each of the years ended December 31, 2018 and 2017, we accrued and paid cash dividends in the amount of $17,500 in respect of
shares of Series B Preferred Stock held by Mr. Koehler.
Independent
Contractor Services Agreement
On
April 1, 2008, we entered into an Independent Contractor Services Agreement with Mr. Koehler for the provision of strategic consulting
services, including in connection with promoting Pacific Ethanol, and ethanol as a fuel additive and transportation fuel, with
governmental agencies. Mr. Koehler was compensated at a rate of $7,500 per month under this arrangement during 2018 and 2017 and
through the filing of this report.
William
L. Jones
On
May 20, 2008, we sold to William L. Jones, who is our Chairman of the Board and one of our directors, 12,820 shares of our Series
B Preferred Stock, all of which were initially convertible into an aggregate of 366 shares of our common stock based on an initial
preferred-to-common conversion ratio of approximately 1-for-0.03, and warrants to purchase an aggregate of 184 shares of our common
stock at a split-adjusted exercise price of $735 per share, for an aggregate purchase price of $250,000. As a result of various
anti-dilution adjustments, the conversion ratio of the Series B Preferred Stock has increased to approximately 1-for-0.68.
For
the quarter ended March 31, 2019, we accrued and paid cash dividends in the amount of $4,315 in respect of shares of Series B
Preferred Stock held by Mr. Jones.
For
each of the years ended December 31, 2018 and 2017, we accrued and paid cash dividends in the amount of $17,500 in respect of
shares of Series B Preferred Stock held by Mr. Jones.
Restricted
Stock Grants
On
June 14, 2018, we granted 48,966 shares of our restricted common stock to Mr. Jones in consideration of services to be provided.
The value of the common stock was determined to be $150,815. The shares vest on the earlier of our next annual meeting or July
1, 2019.
On
June 15, 2017, we granted 23,279 shares of our restricted common stock to Mr. Jones in consideration of services to be provided.
The value of the common stock was determined to be $139,674. The shares vested on June 14, 2018.
Michael
D. Kandris and Bryon T. McGregor
Restricted
Stock Grants
On
April 22, 2019, we granted 57,500 shares of our restricted common stock to each of Messrs. Kandris and McGregor in consideration
of services to be provided. The value of the common stock granted to each of Messrs. Kandris and McGregor was determined to be
$64,400. The shares vest 50% on April 1, 2020 and vest 50% on April 1, 2021.
On
June 14, 2018, we granted 47,508 shares of our restricted common stock to each of Messrs. Kandris and McGregor in consideration
of services to be provided. The value of the common stock granted to each of Messrs. Kandris and McGregor was determined to be
$146,325. The shares vested 33% on April 1, 2019 and vest 33% and 34% on April 1, 2020 and 2021, respectively.
On
June 15, 2017, we granted 25,337 shares of our restricted common stock to each of Messrs. Kandris and McGregor in consideration
of services to be provided. The value of the common stock granted to each of Messrs. Kandris and McGregor was determined to be
approximately $171,030. The shares vested 33% on each of April 1, 2018 and 2019 and vest 34% on April 1, 2020.
Christopher
W. Wright
Christopher
W. Wright is employed by us as Vice President, General Counsel and Secretary. Mr Wright’s base salary rate was $298,093
per year at the end of 2017 and was increased to $307,036 per year effective April 15, 2018. In addition, Mr. Wright received
compensation of $21,816 for 2018 and $23,220 for 2017 in perquisites or personal benefits relating to payment or reimbursement
of commuting expenses from Mr. Wright’s home to our corporate offices in Sacramento, California, and housing and other living
expenses.
Restricted
Stock Grants
On
April 22, 2019, we granted 57,500 shares of our restricted common stock to Mr. Wright in consideration of services to be provided.
The value of the common stock was determined to be $64,400. The shares vest 50% on April 1, 2020 and vest 50% on April 1, 2021.
On
June 14, 2018, we granted 47,508 shares of our restricted common stock to Mr. Wright in consideration of services to be provided.
The value of the common stock granted was determined to be $146,325. The shares vested 33% on April 1, 2019 and vest 33% and 34%
on April 1, 2020 and 2021, respectively.
On
June 15, 2017, we granted 25,337 shares of our restricted common stock to Mr. Wright in consideration of services to be provided.
The value of the common stock granted was determined to be approximately $171,030. The shares vested 33% on each of April 1, 2018
and 2019 and vest 34% on April 1, 2020.
Annual
Cash Incentive Compensation
In
April 2018, we paid Mr. Wright annual performance-based cash incentive compensation of $29,642 based on his 2017 performance.
In
March 2017, we paid Mr. Wright annual performance-based cash incentive compensation of $28,779 based on his 2016 performance and
a special discretionary cash bonus of $50,000.
James
R. Sneed
James
R. Sneed is employed by us as Vice President of Supply and Trading. Mr Sneed’s base salary rate was $252,916 per year at
the end of 2017 and was increased to $260,504 per year effective April 15, 2018.
Restricted
Stock Grants
On
April 22, 2019, we granted 42,000 shares of our restricted common stock to Mr. Sneed in consideration of services to be provided.
The value of the common stock was determined to be $47,040. The shares vest 50% on April 1, 2020 and vest 50% on April 1, 2021.
On
June 14, 2018, we granted 34,722 shares of our restricted common stock to Mr. Sneed in consideration of services to be provided.
The value of the common stock was determined to be $106,944. The shares vested 33% on April 1, 2019 and vest 33% and 34% on April
1, 2020 and 2021, respectively.
On
March 15, 2017, we granted 18,518 shares of our restricted common stock to Mr. Sneed in consideration of services to be provided.
The value of the common stock was determined to be $124,997. The shares vested 33% on each of April 1, 2018 and 2019 and vest
34% on April 1, 2020.
Annual
Cash Incentive Compensation
In
April 2018, we paid Mr. Sneed annual performance-based cash incentive compensation of $20,121 based on his 2017 performance.
In
March 2017, we paid Mr. Sneed annual performance-based cash incentive compensation of $19,534 based on his 2016 performance and
a special discretionary cash bonus of $25,000.
Terry
L. Stone, John L. Prince, Douglas L. Kieta and Larry D. Layne
Restricted
Stock Grants
On
June 14, 2018, we granted 32,759 shares of our restricted common stock to each of our non-employee directors (except for the Chairman
of our Board, Mr. Jones) in consideration of services to be provided. The value of the common stock granted to each of Messrs.
Stone, Prince, Kieta and Layne was determined to be $100,898. The shares vest on the earlier of our next annual meeting or July
1, 2019.
On
June 15, 2017, we granted 15,574 shares of our restricted common stock to each of our non-employee directors (except for the Chairman
of our Board, Mr. Jones) in consideration of services to be provided. The value of the common stock granted to each of Messrs.
Stone, Prince, Kieta and Layne was determined to be $93,444. The shares vested on June 14, 2018.
Lyles
United, LLC
On
March 27, 2008, we sold to Lyles United, LLC an aggregate of 2,051,282 shares of our Series B Preferred Stock, all of which
were initially convertible into an aggregate of 58,608 shares of our common stock based on an initial
preferred-to-common conversion ratio of approximately 1-for-0.03, and warrants to purchase an aggregate of 29,304 shares of
our common stock at a split-adjusted exercise price of $735 per share, for an aggregate purchase price of $40,000,000. As a
result of various anti-dilution adjustments, the conversion ratio of the Series B Preferred Stock has increased to
approximately 1-for-0.68.
For
the quarter ended March 31, 2019, we accrued and paid cash dividends in the amount of $172,603 in respect of shares of Series
B Preferred Stock held by Lyles United, LLC.
For
each of the years ended December 31, 2018 and 2017, we accrued and paid cash dividends in the amount of $700,000 in respect of
shares of Series B Preferred Stock held by Lyles United, LLC.
Frank
P. Greinke
For
the quarter ended March 31, 2019, we accrued and paid cash dividends in the amount of $28,669 in respect of 85,180 shares of Series
B Preferred Stock held by the Greinke Personal Living Trust Dated April 20, 1999 (“Greinke Trust”).
For
each of the years ended December 31, 2018 and 2017, we accrued and paid cash dividends in the amount of $86,964 in respect of
shares of Series B Preferred Stock held by the Greinke Trust.
Frank
P. Greinke is one of our former directors and the trustee of the Greinke Trust. The Greinke Trust acquired its shares of Series
B Preferred Stock from Lyles United, LLC in December 2009. The preferred-to-common conversion ratio of the Series B Preferred
Stock is approximately 1-for-0.68.
Black
Rock, Inc.
On
June 26, 2017, we entered into a Note Purchase Agreement with five accredited investors. On June 30, 2017, under the terms of
the Note Purchase Agreement, we sold $13.9 million in aggregate principal amount of our senior secured notes to the investors
in a private offering for aggregate gross proceeds of 97% of the principal amount of the notes sold.
The
notes mature on December 15, 2019. Interest on the notes accrues at an annual rate equal to (i) the greater of 1% and the three-month
LIBOR, plus 7.0% from the closing through December 14, 2017, (ii) the greater of 1% and LIBOR, plus 9% between December 15, 2017
and December 14, 2018, and (iii) the greater of 1% and LIBOR plus 11% between December 15, 2018 and the maturity date. The interest
rate increases by an additional 2% per annum above the interest rate otherwise applicable upon the occurrence and during the continuance
of an event of default until cured. Interest is payable in cash in arrears on the 15th calendar day of each March, June, September
and December. We are required to pay all outstanding principal and any accrued and unpaid interest on the notes on the maturity
date. We may, at our option, prepay the outstanding principal amount of the notes at any time without premium or penalty. Pacific
Ethanol, Inc. issued the notes, which are secured by a first-priority security interest in the equity interest held by Pacific
Ethanol, Inc. in its wholly-owned subsidiary, PE Op. Co., which indirectly owns our plants located on the West Coast.
The
five accredited investors include Orange 2015 DisloCredit Fund, L.P., which purchased $5,154,639 in principal amount of the notes,
adding to its existing $10,309,278 in principal amount of notes of the same terms and maturity acquired in a prior transaction
that closed in December 2016; Co-Investment Income Fund, L.P. - US Tax-Exempt Series, which purchased $1,697,479 in principal
amount of the notes; and Co-Investment Income Fund, L.P. - US Taxable Series, which purchased $364,376 in principal amount of
the notes.
In
addition, in a prior transaction that closed in December 2016, CIF Income Partners (A), LLC purchased $9,962,010 in principal
amount of notes and Sainsbury’s Credit Opportunities Fund, Ltd. purchased $1,288,660 in principal amount of notes, in each
case of the same terms and maturity as the notes issued in the June 2017 transaction.
We
believe these investors are affiliates of BlackRock, Inc. BlackRock, Inc. is reported as beneficially owning more than 5% of the
outstanding shares of our common stock.
|
Item
14.
|
Principal
Accounting Fees and Services.
|
The
following table presents fees for professional audit services rendered by RSM US LLP for the years ended December 31, 2018 and
2017.
|
|
2018
|
|
|
2017
|
|
Audit Fees
|
|
$
|
656,618
|
|
|
$
|
654,093
|
|
Audit-Related Fees
|
|
|
29,676
|
|
|
|
58,275
|
|
Tax Fees
|
|
|
525
|
|
|
|
1,575
|
|
All Other Fees
|
|
|
—
|
|
|
|
—
|
|
Total
|
|
$
|
686,819
|
|
|
$
|
713,943
|
|
Audit
Fees
. Consist of amounts billed for professional services rendered for the audit of our annual consolidated financial statements
included in our Annual Reports on Form 10-K, reviews of our interim consolidated financial statements included in our Quarterly
Reports on Form 10-Q and our Registration Statements on Form S-3 and S-8, and the review of our internal accounting and reporting
controls as required under Section 404 of the Sarbanes-Oxley Act of 2002.
Audit-Related
Fees
. Audit-Related Fees consist of fees billed for professional services that are reasonably related to the performance of
the audit or review of our consolidated financial statements but are not reported under “Audit Fees.” Such fees would
include amounts billed for professional services performed in connection with mergers and acquisitions, audits of 401(k) plans,
pension plans and RIN audits.
Tax
Fees.
Tax Fees consist of fees for professional services for tax compliance activities, including the preparation of federal
and state tax returns and related compliance matters.
All
Other Fees
. Consists of amounts billed for services other than those noted above.
Our
Audit Committee considered all non-audit services provided by RSM US LLP and determined that the provision of such services was
compatible with maintaining such firm’s audit independence.
Audit
Committee Pre-Approval Policy
Our
Audit Committee is responsible for approving all audit, audit-related, tax and other services. The Audit Committee pre-approves
all auditing services and permitted non-audit services, including all fees and terms to be performed for us by our independent
auditor at the beginning of the fiscal year. Non-audit services are reviewed and pre-approved by project at the beginning of the
fiscal year. Any additional non-audit services contemplated by us after the beginning of the fiscal year are submitted to the
Chairman of our Audit Committee for pre-approval prior to engaging our independent auditor for such services. These interim pre-approvals
are reviewed with the full Audit Committee at its next meeting for ratification. During 2018 and 2017, all services performed
by RSM US LLP were pre-approved by our Audit Committee in accordance with these policies and applicable Securities and Exchange
Commission regulations.