EXHIBIT 10.2
 
 
GUARANTEE
 
THIS GUARANTEE (“Guarantee”), dated July 28, 2008, is by Pacific Ethanol, Inc.,
a Delaware corporation (“Guarantor”), having an office at 400 Capital Mall,
Suite 2060, Sacramento, California  95814, in favor of Wachovia Capital Finance
Corporation (Western), a California corporation, in its capacity as agent
pursuant to the Loan Agreement (as hereinafter defined) acting for and on behalf
of the parties thereto as lenders (in such capacity, “Agent”), having an office
at 251 South Lake Avenue, Pasadena, California 91101.
 
W I T N E S S E T H :
 
WHEREAS, Agent and the parties to the Loan Agreement as lenders (individually,
each a “Lender” and collectively, “Lenders”) have entered into financing
arrangements pursuant to which Lenders (or Agent on behalf of Lenders) may make
loans and advances and provide other financial accommodations to Kinergy
Marketing LLC, an Oregon limited liability company (“Borrower”), as set forth in
the Loan and Security Agreement, dated of even date herewith, by and among
Borrower, Wachovia Bank, National Association, as Issuing Bank, Agent and
Lenders (as the same now exists or may hereafter be amended, modified,
supplemented, extended, renewed, restated or replaced, the “Loan Agreement”),
and the other agreements, documents and instruments  referred to therein or at
any time executed and/or delivered in connection therewith or related thereto,
including, but not limited to, this Guarantee (all of the foregoing, together
with the Loan Agreement, as the same now exist or may hereafter be amended,
modified, supplemented, extended, renewed, restated or replaced, being
collectively referred to herein as the “Financing Agreements”); and
 
WHEREAS, due to the close business and financial relationships between Borrower
and Guarantor, in consideration of the benefits which will accrue to Guarantor
and as an inducement for and in consideration of Lenders (or Agent on behalf of
Lenders) making loans and advances and providing other financial accommodations
to Borrower pursuant to the Loan Agreement and the other Financing Agreements;
 
NOW, THEREFORE, in consideration of the premises and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
Guarantor hereby agrees in favor of Agent and Lenders as follows:
 
1.           Guarantee.
 
(a)           Guarantor absolutely and unconditionally guarantees and agrees to
be liable for the full and indefeasible payment and performance when due of the
following (all of which are collectively referred to herein as the “Guaranteed
Obligations”):  all obligations, liabilities and indebtedness of any kind,
nature and description of Borrower to Agent and/or any Lender, including
principal, interest, charges, fees, costs and expenses, however evidenced,
whether as principal, surety, endorser, guarantor or otherwise, arising under
the Loan Agreement or any of the other Financing Agreements, whether now
existing or hereafter arising, whether arising before, during or after the
initial or any renewal term of the Loan Agreement or after the commencement of
any case with respect to Borrower under the United States Bankruptcy Code or any
similar statute (including, without limitation, the payment of interest and
other amounts, which would accrue and become due but for the commencement of
such case, whether or not such amounts are allowed or allowable in whole or in
part in any such case and including loans, interest, fees, charges and expenses
related thereto and all other obligations of Borrower or its successors to Agent
and any Lender arising after the commencement of such case), whether direct or
indirect, absolute or contingent, joint or several, due or not due, primary or
secondary, liquidated or unliquidated, secured or unsecured, and however
acquired by Agent or any Lender.
 

--------------------------------------------------------------------------------

(b)           This Guarantee is a guaranty of payment and not of
collection.  Guarantor agrees that Agent and Lenders need not attempt to collect
any Guaranteed Obligations from Borrower or any other Obligor (as hereinafter
defined) or to realize upon any collateral, but may require Guarantor to make
immediate payment of all of the Guaranteed Obligations to Agent when due,
whether by maturity, acceleration or otherwise, or at any time thereafter may
apply any amounts received in respect of the Guaranteed Obligations to any of
the Guaranteed Obligations, in whole or in part (including attorneys’ fees and
legal expenses incurred by Agent or any Lender with respect thereto or otherwise
chargeable to Borrower or Guarantor).
 
(c)           Payment by Guarantor shall be made to Agent at the office of Agent
from time to time on demand as Guaranteed Obligations become due.  Guarantor
shall make all payments to Agent on the Guaranteed Obligations free and clear
of, and without deduction or withholding for or on account of, any setoff,
counterclaim, defense, duties, taxes, levies, imposts, fees, deductions,
withholding restrictions or conditions of any kind.  One or more successive or
concurrent actions may be brought hereon against Guarantor either in the same
action in which Borrower or any other Obligor is sued or in separate
actions.  In the event any claim or action, or action on any judgment, based on
this Guarantee is brought against Guarantor, Guarantor agrees not to deduct,
set-off, or seek any counterclaim (other than compulsory counterclaims) for or
recoup any amounts which are or may be owed by Agent or any Lender to Guarantor.
 
(d)           Notwithstanding anything to the contrary contained herein, the
amount of the obligations payable by Guarantor under this Guarantee shall be the
aggregate amount of the Guaranteed Obligations unless a court of competent
jurisdiction adjudicates Guarantor’s obligations to be invalid, avoidable or
unenforceable for any reason (including, without limitation, because of any
applicable state, federal or other law relating to fraudulent conveyances or
transfers), in which case the amount of the Guaranteed Obligations payable by
Guarantor hereunder shall be limited to the maximum amount that could be
guaranteed by Guarantor without rendering Guarantor’s Guaranteed Obligations
under this Guarantee invalid, avoidable or unenforceable under such applicable
law.
 
2.           Waivers and Consents.
 
(a)           Notice of acceptance of this Guarantee, the making of loans and
advances and providing other financial accommodations to Borrower and
presentment, demand, protest, notice of protest, notice of nonpayment or default
and all other notices to which Borrower or Guarantor is entitled are hereby
waived by Guarantor.  Guarantor also waives notice of and hereby consents to,
(i) any amendment, modification, supplement, extension, renewal, or restatement
of the Loan Agreement and any of the other Financing Agreements, including,
without limitation, extensions of time of payment of or increase or decrease in
the amount of any of the Guaranteed Obligations, the interest rate, fees, other
charges, or any collateral, and the guarantee made herein shall apply to the
Loan Agreement and the other Financing Agreements and the Guaranteed Obligations
as so amended, modified, supplemented, renewed, restated or extended, increased
or decreased, (ii) the taking, exchange, surrender and releasing of collateral
or guarantees now or at any time held by or available to Agent for itself and
the benefit of Lenders for the obligations of Borrower or any other party at any
time liable on or in respect of the Guaranteed Obligations or who is the owner
of any property which is security for the Guaranteed Obligations (individually,
an “Obligor” and collectively, the “Obligors”), (iii) the exercise of, or
refraining from the exercise of any rights against Borrower or any other Obligor
or any collateral, (iv) the settlement, compromise or release of, or the waiver
of any default with respect to, any of the Guaranteed Obligations and (v) any
financing by Agent and/or any Lender of Borrower under Section 364 of the United
States Bankruptcy Code or consent to the use of cash collateral by Agent and/or
Lenders under Section 363 of the United States Bankruptcy Code.  Guarantor
agrees that the amount of the Guaranteed Obligations shall not be diminished and
the liability of Guarantor hereunder shall not be otherwise impaired or affected
by any of the foregoing.
 

--------------------------------------------------------------------------------

(b)           No invalidity, irregularity or unenforceability of all or any part
of the Guaranteed Obligations shall affect, impair or be a defense to this
Guarantee, nor shall any other circumstance which might otherwise constitute a
defense available to or legal or equitable discharge of Borrower in respect of
any of the Guaranteed Obligations, affect, impair or be a defense to this
Guarantee.  Without limitation of the foregoing, the liability of Guarantor
hereunder shall not be discharged or impaired in any respect by reason of any
failure by Agent or any Lender to perfect or continue perfection of any lien or
security interest in any collateral or any delay by Agent or any Lender in
perfecting any such lien or security interest.  As to interest, fees and
expenses, whether arising before or after the commencement of any case with
respect to Borrower under the United States Bankruptcy Code or any similar
statute, Guarantor shall be liable therefor, even if Borrower’s liability for
such amounts does not, or ceases to, exist by operation of law.  Guarantor
acknowledges that Agent and Lenders have not made any representations to
Guarantor with respect to Borrower, any other Obligor or otherwise in connection
with the execution and delivery by Guarantor of this Guarantee and Guarantor is
not in any respect relying upon Agent or any Lender or any statements by Agent
or any Lender in connection with this Guarantee.
 
(c)           Unless and until the indefeasible payment and satisfaction in full
of all of the Guaranteed Obligations in immediately available funds and the
termination of the financing arrangements of Agent and Lenders with Borrower,
Guarantor hereby irrevocably and unconditionally waives and relinquishes (i) all
statutory, contractual, common law, equitable and all other claims against
Borrower, any collateral for the Guaranteed Obligations or other assets of
Borrower or any other Obligor, for subrogation, reimbursement, exoneration,
contribution, indemnification, setoff or other recourse in respect to sums paid
or payable to Agent or any Lender by Guarantor hereunder and (ii) any and all
other benefits which Guarantor might otherwise directly or indirectly receive or
be entitled to receive by reason of any amounts paid by or collected or due from
Guarantor, Borrower or any other Obligor upon the Guaranteed Obligations or
realized from their property, except as expressly provided for in the Loan
Agreement.
 
3.           Additional Indebtedness; Duty of Guarantor.  Guarantor acknowledges
that Guaranteed Obligations may arise from time to time at the request of
Borrower or otherwise as provided in the Loan Agreement without further
authorization from, the consent of or notice to, Guarantor, notwithstanding any
adverse change in the condition of the business, assets or prospects of Borrower
or any other Obligor after the date hereof.  In giving Agent this Guarantee,
Guarantor is not concerned with the condition of the business, assets or
prospects of Borrower or of any other Obligor and waives the right, if any, to
require Agent to disclose to Guarantor any information Agent may now have or
hereafter acquire concerning the business, assets or prospects of Borrower or
any other Obligor.  Guarantor has established adequate means to obtain from
Borrower on a continuing basis financial and other information pertaining to
Borrower’s business, assets and prospects, and assumes the responsibility for
being and keeping informed of the financial and other conditions of Borrower and
of all circumstances bearing upon the risk of nonpayment of the Guaranteed
Obligations which diligent inquiry would reveal.  Agent need not inquire into
the powers of Borrower or the authority of its officers, directors, partners or
agents acting or purporting to act on its behalf, and any Guaranteed Obligations
created in reliance upon the purported exercise of such power or authority are
and shall be included within the Guaranteed Obligations and Guarantor shall be
liable therefor.  All Guaranteed Obligations to Agent heretofore, now or
hereafter created shall be deemed to have been granted at the specific
authorization and request of Guarantor and in consideration of and in reliance
upon this Guarantee.
 

--------------------------------------------------------------------------------

4.           Subordination.  Except for payment of amounts expressly permitted
under the Loan Agreement, payment of all amounts now or hereafter owed to
Guarantor by Borrower or any other Obligor is hereby subordinated in right of
payment to the indefeasible payment in full of the Guaranteed Obligations and
all such amounts and any security and guarantees therefor are hereby assigned to
Agent as security for the Guaranteed Obligations.
 
5.           Account Stated. The books and records of Lender showing the account
between Lender and Borrower shall be admissible in evidence in any action or
proceeding against or involving Guarantor as prima facie proof of the items
therein set forth, and the monthly statements of Lender rendered to Borrower, to
the extent to which no written objection is made within forty-five (45) days
from the date of sending thereof to Borrower, shall be deemed conclusively
correct and constitute an account stated between Lender and Borrower and be
binding on Guarantor.
 
6.           Termination.  This Guarantee is continuing, unlimited, absolute and
unconditional.  All Guaranteed Obligations shall be conclusively presumed to
have been created in reliance on this Guarantee.  Guarantor shall continue to be
liable hereunder until one of Agent’s officers actually receives a written
termination notice from Guarantor sent to Agent at its address set forth above
by certified mail, return receipt requested and thereafter as set forth
below.  Revocation or termination hereof by Guarantor shall not affect, in any
manner, the rights of Agent or any obligations or duties of Guarantor under this
Guarantee with respect to (a) Guaranteed Obligations which have been created,
contracted, assumed or incurred prior to the receipt by Agent of such written
notice of revocation or termination as provided herein, including, without
limitation, (i) all amendments, extensions, renewals and modifications of such
Guaranteed Obligations (whether or not evidenced by new or additional
agreements, documents or instruments executed on or after such notice of
revocation or termination), (ii) all interest, fees and similar charges accruing
or due on and after revocation or termination, and (iii) all attorneys’ fees and
legal expenses, costs and other reasonable expenses paid or incurred on or after
such notice of revocation or termination in attempting to collect or enforce any
of the Guaranteed Obligations against Borrower, Guarantor or any other Obligor
(whether or not suit be brought), or (b) Guaranteed Obligations which have been
created, contracted, assumed or incurred after the receipt by Agent of such
written notice of revocation or termination as provided herein pursuant to any
contract entered into by Agent or any Lender prior to receipt of such
notice.  The sole effect of such revocation or termination by Guarantor shall be
to exclude from this Guarantee the liability of Guarantor for those obligations
arising after the date of receipt by Agent of such written notice which are
unrelated to Guaranteed Obligations arising or transactions entered into prior
to such date.  Without limiting the foregoing, this Guarantee may not be
terminated and shall continue so long as the Loan Agreement shall be in effect
(whether during its original term or any renewal, substitution or extension
thereof).
 

--------------------------------------------------------------------------------

7.           Reinstatement.  If after receipt of any payment of, or proceeds of
collateral applied to the payment of, any of the Guaranteed Obligations, Agent
or any Lender is required to surrender or return such payment or proceeds to any
Person for any reason, then the Guaranteed Obligations intended to be satisfied
by such payment or proceeds shall be reinstated and continue and this Guarantee
shall continue in full force and effect as if such payment or proceeds had not
been received by Agent or such Lender.  Guarantor shall be liable to pay to
Agent and each Lender, and does indemnify and hold Agent and such Lender
harmless for the amount of any payments or proceeds surrendered or
returned.  This Section 7 shall remain effective notwithstanding any contrary
action which may be taken by Agent or any Lender in reliance upon such payment
or proceeds.  This Section 7 shall survive the termination or revocation of this
Guarantee.
 
8.           Amendments and Waivers.  Neither this Guarantee nor any provision
hereof shall be amended, modified, waived or discharged orally or by course of
conduct, but only by a written agreement signed by Agent and by the
Guarantor.  Agent shall not by any act, delay, omission or otherwise be deemed
to have expressly or impliedly waived any of its rights, powers and/or remedies
unless such waiver shall be in writing and signed by Agent.  Any such waiver
shall be enforceable only to the extent specifically set forth therein.  A
waiver by Agent of any right, power and/or remedy on any one occasion shall not
be construed as a bar to or waiver of any such right, power and/or remedy which
Agent would otherwise have on any future occasion, whether similar in kind or
otherwise.
 
9.           Corporate Existence, Power and Authority.  Guarantor is a
corporation duly organized and in good standing under the laws of its state or
other jurisdiction of incorporation and is duly qualified as a foreign
corporation and in good standing in all states or other jurisdictions where the
nature and extent of the business transacted by it or the ownership of assets
makes such qualification necessary, except for those jurisdictions in which the
failure to so qualify would not have a material adverse effect on the financial
condition, results of operation or businesses of Guarantor or the rights of
Lender hereunder or under any of the other Financing Agreements.  The execution,
delivery and performance of this Guarantee is within the corporate powers of
Guarantor, have been duly authorized and are not in contravention of law or the
terms of the certificates of incorporation, by laws, or other organizational
documentation of Guarantor, or any indenture, agreement or undertaking to which
Guarantor is a party or by which Guarantor or its property are bound.  This
Guarantee constitutes the legal, valid and binding obligation of Guarantor
enforceable in accordance with its terms.
 

--------------------------------------------------------------------------------

10.           Governing Law; Choice of Forum; Service of Process; Jury Trial
Waiver.
 
(a)           The validity, interpretation and enforcement of this Guarantee and
any dispute arising out of the relationship between Guarantor and Agent or any
Lender, whether in contract, tort, equity or otherwise, shall be governed by the
internal laws of the State of California, but excluding any principles of
conflicts of law or other rule of law that would cause the application of the
law of any jurisdiction other than the laws of the State of California.
 
(b)           Guarantor hereby irrevocably consents and submits to the
non-exclusive jurisdiction of the Circuit Court of Los Angeles County,
California and the United States District Court for the Northern District of
California, whichever Agent may elect, and waives any objection based on venue
or forum non conveniens with respect to any action instituted therein arising
under this Guarantee or any of the other Financing Agreements or in any way
connected with or related or incidental to the dealings of Guarantor and Agent
or any Lender in respect of this Guarantee or any of the other Financing
Agreements or the transactions related hereto or thereto, in each case whether
now existing or hereafter arising and whether in contract, tort, equity or
otherwise, and agrees that any dispute arising out of the relationship between
Guarantor or Borrower and Agent or any Lender or the conduct of any such persons
in connection with this Guarantee, the other Financing Agreements or otherwise
shall be heard only in the courts described above (except that Agent and Lenders
shall have the right to bring any action or proceeding against Guarantor or its
property in the courts of any other jurisdiction which Agent deems necessary or
appropriate in order to realize on any collateral at any time granted by
Borrower or Guarantor to Agent or any Lender or to otherwise enforce its rights
against Guarantor or its property).
 
(c)           Guarantor hereby waives personal service of any and all process
upon it and consents that all such service of process may be made by certified
mail (return receipt requested) directed to its address set forth below and
service so made shall be deemed to be completed five (5) days after the same
shall have been so deposited in the U.S. mails, or, at Agent’s option, by
service upon Guarantor in any other manner provided under the rules of any such
courts.  Within thirty (30) days after such service, Guarantor so served shall
appear in answer of such process, failing which Guarantor shall be deemed in
default and judgment may be entered by Agent against Guarantor for the amount of
the claim and other relief requested.
 
(d)           GUARANTOR HEREBY WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM,
DEMAND, ACTION OR CAUSE OF ACTION (i) ARISING UNDER THIS GUARANTEE OR ANY OF THE
OTHER FINANCING AGREEMENTS OR (ii) IN ANY WAY CONNECTED WITH OR RELATED OR
INCIDENTAL TO THE DEALINGS OF GUARANTOR AND AGENT OR ANY LENDER IN RESPECT OF
THIS GUARANTEE OR ANY OF THE OTHER FINANCING AGREEMENTS OR THE TRANSACTIONS
RELATED HERETO OR THERETO IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER
ARISING, AND WHETHER IN CONTRACT, TORT, EQUITY OR OTHERWISE.  GUARANTOR HEREBY
AGREES AND CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL
BE DECIDED BY COURT TRIAL WITHOUT A JURY AND THAT GUARANTOR, ANY LENDER OR AGENT
MAY FILE AN ORIGINAL COUNTERPART OF A COPY OF THIS AGREEMENT WITH ANY COURT AS
WRITTEN EVIDENCE OF THE CONSENT OF GUARANTOR, LENDERS AND AGENT TO THE WAIVER OF
THEIR RIGHT TO TRIAL BY JURY.
 

--------------------------------------------------------------------------------

(e)           Agent and Lenders shall not have any liability to Guarantor
(whether in tort, contract, equity or otherwise) for losses suffered by
Guarantor in connection with, arising out of, or in any way related to the
transactions or relationships contemplated by this Guarantee, or any act,
omission or event occurring in connection herewith, unless it is determined by a
final and non-appealable judgment or court order binding on Agent or such Lender
that the losses were the result of acts or omissions constituting gross
negligence or willful misconduct.
 
11.           Notices.  All notices, requests and demands hereunder shall be in
writing and deemed to have been given or made: if delivered in person,
immediately upon delivery; if by telex, telegram or facsimile transmission,
immediately upon sending and upon confirmation of receipt; if by nationally
recognized overnight courier service with instructions to deliver the next
business day, one (1) business day after sending; and if by certified mail,
return receipt requested, five (5) days after mailing.  All notices, requests
and demands upon the parties are to be given to the following addresses (or to
such other address as any party may designate by notice in accordance with this
Section):
 
If to Guarantor: 
Pacific Ethanol, Inc.

400 Capital Mall, Suite 2060
Sacramento, California  95814
Attention:  Chief Financial Officer
Telephone No.:  (916) 403-2123
Telecopy No.:  (916) 446-3937
 
with copy to: 
Pacific Ethanol, Inc.

400 Capital Mall, Suite 2060
Sacramento, California  95814
Attention:  General Counsel
Telephone No.:  (916) 403-2123
Telecopy No.:  (916) 446-3936
 
 
If to Agent and Lender:
Wachovia Capital Finance Corporation (Western), as Agent

 
251 South Lake Avenue

 
Pasadena, California 91101

 
Attention: Portfolio Manager

 
Telephone No.:  (626) 304-4900

 
Telecopy No.:  (626) 304-4969

 
12.           Partial Invalidity.  If any provision of this Guarantee is held to
be invalid or unenforceable, such invalidity or unenforceability shall not
invalidate this Guarantee as a whole, but this Guarantee shall be construed as
though it did not contain the particular provision held to be invalid or
unenforceable and the rights and obligations of the parties shall be construed
and enforced only to such extent as shall be permitted by applicable law.
 

--------------------------------------------------------------------------------

13.           Entire Agreement.  This Guarantee represents the entire agreement
and understanding of the parties concerning the subject matter hereof, and
supersedes all other prior agreements, understandings, negotiations and
discussions, representations, warranties, commitments, proposals, offers and
contracts concerning the subject matter hereof, whether oral or written.
 
14.           Successors and Assigns.  This Guarantee, the other Financing
Agreements and any other document referred to herein or therein shall be binding
upon Guarantor and their respective successors and assigns and shall inure to
the benefit of Agent and each Lender and their respective successors, endorsees,
transferees and assigns.  The liquidation, dissolution or termination of
Guarantor shall not terminate this Guarantee as to Guarantor.
 
15.           Construction.
 
(a)           All references to the term “Guarantor” wherever used herein shall
mean Guarantor and its respective successors and assigns (including, without
limitation, any receiver, trustee or custodian for Guarantor or any of its
respective assets or Guarantor in its capacity as debtor or debtor-in-possession
under the United States Bankruptcy Code).  All references to the term “Person”
or “person” wherever used herein shall mean any individual, sole proprietorship,
partnership, corporation (including, without limitation, any corporation which
elects subchapter S status under the Internal Revenue Code of 1986, as amended),
limited liability company, limited liability partnership, business trust,
unincorporated association, joint stock corporation, trust, joint venture or
other entity or any government or any agency or instrumentality of political
subdivision thereof.
 
(b)           Capitalized terms not otherwise defined herein shall have the
respective meanings ascribed thereto in the Loan Agreement.
 

 
[Signature Page Follows]

--------------------------------------------------------------------------------

 
IN WITNESS WHEREOF, Guarantor has executed and delivered this Guarantee as of
the day and year first above written.
 
PACIFIC ETHANOL, INC.

By:         /S/ NEIL M.
KOEHLER                                                                
Name:    Neil M. Koehler
Title:      CEO
 
 
 
 
 
 
[Signature Page to Guarantee]