EXHIBIT 10.3


 
  


NEITHER THE ISSUANCE AND SALE OF THE
SECURITIES REPRESENTED BY THIS CERTIFICATE NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE EXERCISABLE HAVE BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE,
SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL TO THE HOLDER (IF REQUESTED BY THE COMPANY), IN A FORM REASONABLY ACCEPTABLE
TO THE COMPANY, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD OR ELIGIBLE TO BE SOLD PURSUANT TO RULE 144
OR RULE 144A UNDER SAID ACT. NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN
ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES.


 


 


PACIFIC
ETHANOL, INC.


 


[FORM
OF]


Warrant
To Purchase Common Stock


 


Warrant No.: D12-____


Number of Shares of Common Stock:___________
1


Date of Issuance: [●], 201__ (“Issuance
Date”)


 


Pacific Ethanol,
Inc. a Delaware corporation (the “Company”), hereby certifies that, for good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, [INVESTOR], the registered holder hereof or its permitted assigns (the
“Holder”), is entitled, subject to the terms set forth below, to purchase from the Company, at the Exercise
Price (as defined below) then in effect, upon exercise of this Warrant to Purchase Common Stock (including any Warrants to Purchase
Common Stock issued in exchange, transfer or replacement hereof, the “Warrant”), at any time or times on or
after the date hereof (the “Issuance Date”), but not after 11:59 p.m. New York time, on the Expiration Date
(as defined below), ______________ (_____________) fully paid nonassessable shares of Common Stock (as defined below) (the
“Warrant Shares”). Except as otherwise defined herein, capitalized terms in this Warrant shall have the meanings
set forth in Section 16. This Warrant is one of several Warrants to Purchase Common Stock (the “Warrants”) issued
pursuant to Section 2.1 of that certain Securities Purchase Agreement (the “Securities Purchase Agreement”),
dated as of December 19, 2012, by and among the Company, the Holder and certain other investors.


 


 


 






1Total of all warrants to be 25,630,286.


 


 



    	 



    	 	 



    



 


1.                 
EXERCISE OF WARRANT.


 


(a)               
Mechanics of Exercise. Subject to the terms and conditions hereof, this Warrant may be exercised by the Holder on
any day on or after the Issuance Date, but before 11:59 p.m. New York time, on the Expiration Date, in whole or in part, by delivery
of a written notice, in the form attached hereto as Exhibit A (the “Exercise Notice”), of the Holder's
election to exercise this Warrant. Within two (2) days following the Exercise Notice, the Holder shall make payment to the Company
of an amount equal to the applicable Exercise Price multiplied by the number of Warrant Shares as to which this Warrant is being
exercised (the “Aggregate Exercise Price”) in cash or by wire transfer of immediately available funds, or provided
the conditions for cashless exercise set forth in Section 1(d) are satisfied, by notifying the Company that this Warrant is being
exercised pursuant to a Cashless Exercise (as defined in Section 1(d)). The Holder shall not be required to deliver the original
Warrant in order to effect an exercise hereunder. Execution and delivery of the Exercise Notice with respect to less than all of
the Warrant Shares shall have the same effect as cancellation of the original Warrant and issuance of a new Warrant evidencing
the right to purchase the remaining number of Warrant Shares. On or before the first (1st) Business Day following the
date on which the Company has received the Exercise Notice, the Company shall transmit by facsimile or electronic mail an acknowledgment
of confirmation of receipt of the Exercise Notice to the Holder and the Company's transfer agent (the “Transfer Agent”).
On or before the third (3rd) Trading Day following the date on which the Company has received the Exercise Notice (the
“Share Delivery Date”), the Company shall (X) provided that the Transfer Agent is participating in The Depository
Trust Company (“DTC”) Fast Automated Securities Transfer Program, upon the request of the Holder, credit such
aggregate number of Warrant Shares to which the Holder is entitled pursuant to such exercise to the Holder's or its designee's
balance account with DTC through its Deposit Withdrawal At Custodian system, or (Y) if the Transfer Agent is not participating
in the DTC Fast Automated Securities Transfer Program, issue and dispatch by overnight courier to the address as specified in the
Exercise Notice, a certificate, registered in the Company's share register in the name of the Holder or its designee, for the number
of shares of Common Stock to which the Holder is entitled pursuant to such exercise. The Company shall be responsible for all fees
and expenses of the Transfer Agent and all fees and expenses with respect to the issuance of Warrant Shares via DTC, if any. Upon
delivery of the Exercise Notice, the Holder shall be deemed for all corporate purposes to have become the holder of record of the
Warrant Shares with respect to which this Warrant has been exercised, irrespective of the date such Warrant Shares are credited
to the Holder's DTC account or the date of delivery of the certificates evidencing such Warrant Shares, as the case may be. If
this Warrant is submitted in connection with any exercise pursuant to this Section 1(a) and the number of Warrant Shares represented
by this Warrant submitted for exercise is greater than the number of Warrant Shares being acquired upon an exercise, then the Company
shall as soon as practicable and in no event later than three Business Days after any exercise and at its own expense, issue a
new Warrant (in accordance with Section 7(d)) representing the right to purchase the number of Warrant Shares purchasable immediately
prior to such exercise under this Warrant, less the number of Warrant Shares with respect to which this Warrant is exercised. No
fractional shares of Common Stock are to be issued upon the exercise of this Warrant, but rather the number of shares of Common
Stock to be issued shall be rounded to the nearest whole number. The Company shall pay any and all taxes which may be payable with
respect to the issuance and delivery of Warrant Shares upon exercise of this Warrant. Notwithstanding anything to the contrary
herein, except in the case where an exercise of this Warrant is validly made pursuant to a Cashless Exercise (as defined in Section
1(d), the Company’s failure to deliver Warrant Shares to the Holder shall not be deemed to be a breach of this Warrant if
the Company has not received the Aggregate Exercise Price pursuant to the requirements of this Section 1(a).


 



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(b)               Exercise
Price. For purposes of this Warrant, “Exercise Price” means $0.52 subject
to adjustment as provided herein.


 


(c)               
Company's Failure to Timely Deliver Securities. If the Company shall fail for any reason or for no reason to issue
to the Holder on or before the Share Delivery Date in compliance with the terms of this Section 1, a certificate for the number
of shares of Common Stock to which the Holder is entitled and register such shares of Common Stock on the Company's share register
or to credit the Holder's balance account with DTC for such number of shares of Common Stock to which the Holder is entitled upon
the Holder's exercise of this Warrant, and if on or after the Share Delivery Date the Holder purchases (in an open market transaction
or otherwise) shares of Common Stock to deliver in satisfaction of a sale by the Holder of shares of Common Stock issuable upon
such exercise that the Holder anticipated receiving from the Company (a “Buy-In”), then the Company shall, within
three (3) Business Days after the Holder's request and in the Holder's discretion, either (i) pay cash to the Holder in an amount
equal to the Holder's total purchase price (including brokerage commissions, if any) for the shares of Common Stock so purchased
(the “Buy-In Price”), at which point the Company's obligation to deliver such certificate or credit the Holder’s
balance account with DTC for the number of shares of Common Stock to which the Holder is entitled upon the Holder’s exercise
hereunder (as the case may be) (and to issue such Warrant Shares) shall terminate, or (ii) promptly honor its obligation to deliver
to the Holder a certificate or certificates representing such Warrant Shares and pay cash to the Holder in an amount equal to the
excess (if any) of the Buy-In Price over the product of (A) such number of shares of Common Stock, times (B) the Closing Sale Price
on the Trading Day immediately preceding the date of the Exercise Notice.


 


(d)              
Cashless Exercise. Notwithstanding anything contained herein to the contrary, (i) if a registration statement covering
the resale by the Holder of the Warrant Shares that are the subject of the Exercise Notice (the “Unavailable Warrant Shares”)
is not available for the resale of such Unavailable Warrant Shares, or (ii) at any time after March 30, 2016, in lieu of making
the cash payment otherwise contemplated to be made to the Company upon such exercise, the Holder can elect instead to receive upon
such exercise the “Net Number” of shares of Common Stock determined according to the following formula (a “Cashless
Exercise”):


 


	 	Net Number =	(A x B) - (A x C)	 
	 	 	D	 


 


For purposes of the foregoing
formula:


 


A=
the total number of shares with respect to which this Warrant is then being exercised.


 


B=
the arithmetic average of the Closing Sale Prices of the shares of Common Stock for the five (5) consecutive Trading Days ending
on the date immediately preceding the date of the Exercise Notice.


 


C=
the Exercise Price then in effect for the applicable Warrant Shares at the time of such exercise.


 


D=
the Closing Sale Price on the date of the Exercise Notice.


 





(e)               
Rule 144. For purposes of Rule 144(d) promulgated under the Securities Act of 1933, as amended, as in effect on the
date hereof, it is intended that the Warrant Shares issued in a Cashless Exercise shall be deemed to have been acquired by the
Holder, and the holding period for the Warrant Shares shall be deemed to have commenced, on the Issuance Date.


 






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(f)               
Disputes. In the case of a dispute as to the determination of the Exercise Price or the arithmetic calculation of
the number of Warrant Shares to be issued pursuant to the terms hereof, the Company shall promptly issue to the Holder the number
of Warrant Shares that are not disputed and resolve such dispute in accordance with Section 13.


 


(g)               Beneficial
Ownership Limitation. Notwithstanding anything to the contrary contained herein, the Company shall not effect the
exercise of this Warrant, and the Holder shall not have the right to exercise this Warrant, to the extent that after giving
effect to such exercise, such Person (together with such Person’s affiliates) would beneficially own in excess of 4.99%
(the “Maximum Percentage”) of the shares of Common Stock outstanding immediately after
giving effect to such exercise. For purposes of the foregoing sentence, the aggregate number of shares of Common Stock
beneficially owned by such Person and its affiliates shall include the number of shares of Common Stock issuable upon
exercise of this Warrant with respect to which the determination of such sentence is being made, but shall exclude shares of
Common Stock which would be issuable upon (i) exercise of the remaining, unexercised portion of this Warrant
beneficially owned by such Person and its affiliates and (ii) exercise or conversion of the unexercised or unconverted
portion of any other securities of the Company beneficially owned by such Person and its affiliates (including, without
limitation, any convertible notes or convertible preferred stock or warrants) subject to a limitation on conversion or
exercise analogous to the limitation contained herein. Except as set forth in the preceding sentence, for purposes of this
paragraph, beneficial ownership shall be calculated in accordance with Section 13(d) of the Securities Exchange Act of
1934, as amended (the “1934 Act”). For purposes of this Warrant, in determining the number of outstanding
shares of Common Stock, the Holder may rely on the number of outstanding shares of Common Stock as reflected in (1) the
Company’s most recent Form 10-K, Form 10-Q, Current Report on Form 8-K or other public filing with the
Securities and Exchange Commission, as the case may be, (2) a more recent public announcement by the Company
or (3) any other notice by the Company or the Transfer Agent setting forth the number of shares of Common Stock
outstanding. For any reason at any time, upon the written or oral request of the Holder, the Company shall within one (1)
Business Day confirm orally and in writing to the Holder the number of shares of Common Stock then outstanding. In any case,
the number of outstanding shares of Common Stock shall be determined after giving effect to the conversion or exercise of
securities of the Company, including the Warrants, by the Holder and its affiliates since the date as of which such number of
outstanding shares of Common Stock was reported. By written notice to the Company, the Holder may from time to time increase
or decrease the Maximum Percentage to any other percentage not in excess of 9.99% specified in such notice; provided that (i)
any such increase will not be effective until the sixty-first (61st) day after such notice is delivered to the
Company, and (ii) any such increase or decrease will apply only to the Holder and not to any other holder of Warrants issued
pursuant to the Securities Purchase Agreement. For the avoidance of doubt, to the extent the limitation set forth in this
Section 1(g) applies, the determination (i) of whether the exercise of this Warrant may be effected (vis-a-vis other Options
or Convertible Securities owned by the Holder or any of its Affiliates) and (ii) of which such Options or Convertible
Securities shall be convertible, exercisable or exchangeable (as the case may be, as among all such securities owned by the
Holder) shall, subject to such Maximum Percentage limitation, be determined on the basis of the first submission to the
Company for conversion, exercise or exchange (as the case may be). The provisions of this paragraph shall be construed and
implemented in a manner other than in strict conformity with the terms of this Section 1(g) to correct this paragraph (or any
portion hereof) which may be defective or inconsistent with the intended beneficial ownership limitation herein contained or
to make changes or supplements necessary or desirable to properly give effect to such limitation.


 


(h)              
Insufficient Authorized Shares.  If at any time from and after the ninetieth (90th) day following the
Issuance Date and while any of the Warrants remain outstanding the Company does not have a sufficient number of authorized and
unreserved shares of Common Stock to satisfy its obligation to reserve for issuance upon exercise of the Warrants at least 100%
of the maximum number of shares of Common Stock as shall from time to time be necessary to effect the exercise of all of the Warrants
then outstanding (without regard to any limitations on exercise) (the “Required Reserve Amount”) (an “Authorized
Share Failure”), then the Company shall immediately deliver a notice to the Holder specifying the number of shares unavailable
to satisfy its obligations under this Warrant and shall take all action necessary to increase the Company’s authorized shares
of Common Stock to an amount sufficient to allow the Company to reserve the Required Reserve Amount for the Warrants then outstanding.
Without limiting the generality of the foregoing sentence, as soon as practicable after the date of the occurrence of an Authorized
Share Failure, but in no event later than ninety (90) days after the occurrence of such Authorized Share Failure (the “Authorized
Share Failure Deadline”), and assuming such Authorized Share Failure still exists, the Company shall hold a meeting
of its stockholders for the approval of an increase in the number of authorized shares of Common Stock. In connection with such
meeting, the Company shall provide each stockholder with a proxy statement and shall use its reasonable best efforts to solicit
its stockholders’ approval of such increase in authorized shares of Common Stock and to cause its board of directors to
recommend to the stockholders that they approve such proposal. In the event that upon any exercise of this Warrant at any time
from and after the Authorized Share Failure Deadline, the Company does not have sufficient authorized shares to deliver in satisfaction
of such exercise, then unless the Holder elects to void such exercise, the Company shall pay to the Holder within three (3) Trading
Days of the applicable exercise, cash in an amount equal to the product of (i) the number of Warrant Shares that the Company is
unable to deliver pursuant hereto and (ii) the Black Scholes Value.


 



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2.                 
ADJUSTMENT OF EXERCISE PRICE AND NUMBER OF WARRANT SHARES. The Exercise Price and the number of Warrant Shares shall
be adjusted from time to time as follows:


 


(a)              
Stock Dividends and Splits. Without limiting any provision of Section 2(b) or Section 4, if the Company, at any
time on or after the Issuance Date, (i) pays a stock dividend on one or more classes of its then outstanding shares of
Common Stock or otherwise makes a distribution on any class of capital stock that is payable in shares of Common Stock, (ii) subdivides
(by any stock split, stock dividend, recapitalization or otherwise) one or more classes of its then outstanding shares of Common
Stock into a larger number of shares or (iii) combines (by combination, reverse stock split or otherwise) one or more classes
of its then outstanding shares of Common Stock into a smaller number of shares (a “Stock Combination Event”),
then in each such case the Exercise Price shall be multiplied by a fraction of which the numerator shall be the number of shares
of Common Stock outstanding immediately before such event and of which the denominator shall be the number of shares of Common
Stock outstanding immediately after such event. Any adjustment made pursuant to clause (i) of this paragraph shall become effective
immediately after the record date for the determination of stockholders entitled to receive such dividend or distribution, and
any adjustment pursuant to clause (ii) or (iii) of this paragraph shall become effective immediately after the effective date
of such subdivision or combination. If any event requiring an adjustment under this paragraph occurs during the period that an
Exercise Price is calculated hereunder, then the calculation of such Exercise Price shall be adjusted appropriately to reflect
such event. Simultaneously with any adjustment to the Exercise Price pursuant to this paragraph, the number of Warrant Shares
that may be purchased upon exercise of this Warrant shall be increased or decreased proportionately, so that after such adjustment
the aggregate Exercise Price payable hereunder for the adjusted number of Warrant Shares shall be the same as the aggregate Exercise
Price in effect immediately prior to such adjustment (without regard to any limitations on exercise contained herein).


 


(b)              
Adjustment of Exercise Price Upon Issuance of Shares of Common Stock. If and whenever on or after the Issuance
Date, the Company issues or sells, or in accordance with this Section 2 is deemed to have issued or sold, any shares of Common
Stock (including the issuance or sale of shares of Common Stock owned or held by or for the account of the Company, but excluding
any Excluded Securities issued or sold or deemed to have been issued or sold) for a consideration per share (the “New
Issuance Price”) less than a price equal to the Exercise Price in effect immediately prior to such issue or sale or deemed
issuance or sale (such Exercise Price then in effect is referred to as the “Applicable Price”) (the foregoing
a “Dilutive Issuance”), then immediately after such Dilutive Issuance, the Exercise Price then in effect shall
be reduced to an amount equal to the product of (A) the Exercise Price in effect immediately prior to such Dilutive Issuance and
(B) the quotient determined by dividing (1) the sum of (I) the product derived by multiplying the Exercise Price in effect immediately
prior to such Dilutive Issuance and the number of shares of Common Stock Deemed Outstanding immediately prior to such Dilutive
Issuance plus (II) the consideration, if any, received by the Company upon such Dilutive Issuance, by (2) the product derived by
multiplying (I) the Exercise Price in effect immediately prior to such Dilutive Issuance by (II) the number of shares of Common
Stock Deemed Outstanding immediately after such Dilutive Issuance. For purposes of determining
the adjusted Exercise Price under this Section 2(b), the following shall be applicable:


 



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(i)                       
Issuance of Options. If the Company in any manner grants or sells any Options and the lowest price per share for
which one share of Common Stock is issuable upon the exercise of any such Option or upon conversion, exercise or exchange of any
Convertible Securities issuable upon exercise of any such Option is less than the Applicable Price, then such share of Common Stock
shall be deemed to be outstanding and to have been issued and sold by the Company at the time of the granting or sale of such Option
for such price per share. For purposes of this Section 2(b)(i), the “lowest price per share for which one share of Common
Stock is issuable upon the exercise of any such Options or upon conversion, exercise or exchange of any Convertible Securities
issuable upon exercise of any such Option” shall be equal to (1) the lower of (x) the sum of the lowest amounts of consideration
(if any) received or receivable by the Company with respect to any one share of Common Stock upon the granting or sale of such
Option, upon exercise of such Option and upon conversion, exercise or exchange of any Convertible Security issuable upon exercise
of such Option and (y) the lowest exercise price set forth in such Option for which one share of Common Stock is issuable upon
the exercise of any such Options or upon conversion, exercise or exchange of any Convertible Securities issuable upon exercise
of any such Option minus (2) the sum of all amounts paid or payable to the holder of such Option (or any other Person) upon the
granting or sale of such Option, upon exercise of such Option and upon conversion, exercise or exchange of any Convertible Security
issuable upon exercise of such Option plus the value of any other consideration received or receivable by, or benefit conferred
on, the holder of such Option (or any other Person). Except as contemplated below, no further adjustment of the Exercise Price
shall be made upon the actual issuance of such shares of Common Stock or of such Convertible Securities upon the exercise of such
Options or upon the actual issuance of such shares of Common Stock upon conversion, exercise or exchange of such Convertible Securities.


 


                                                                                      
(ii)                       
Issuance of Convertible Securities. If the Company in any manner issues or sells any Convertible Securities and the
lowest price per share for which one share of Common Stock is issuable upon the conversion, exercise or exchange thereof is less
than the Applicable Price, then such share of Common Stock shall be deemed to be outstanding and to have been issued and sold by
the Company at the time of the issuance or sale of such Convertible Securities for such price per share. For the purposes of this
Section 2(b)(ii), the “lowest price per share for which one share of Common Stock is issuable upon the conversion, exercise
or exchange thereof” shall be equal to (1) the lower of (x) the sum of the lowest amounts of consideration (if any) received
or receivable by the Company with respect to one share of Common Stock upon the issuance or sale of the Convertible Security and
upon conversion, exercise or exchange of such Convertible Security and (y) the lowest conversion price set forth in such Convertible
Security for which one share of Common Stock is issuable upon conversion, exercise or exchange thereof minus (2) the sum of all
amounts paid or payable to the holder of such Convertible Security (or any other Person) upon the issuance or sale of such Convertible
Security plus the value of any other consideration received or receivable by, or benefit conferred on, the holder of such Convertible
Security (or any other Person). Except as contemplated below, no further adjustment of the Exercise Price shall be made upon the
actual issuance of such shares of Common Stock upon conversion, exercise or exchange of such Convertible Securities, and if any
such issue or sale of such Convertible Securities is made upon exercise of any Options for which adjustment of this Warrant has
been or is to be made pursuant to other provisions of this Section 2(b), except as contemplated below, no further adjustment of
the Exercise Price shall be made by reason of such issue or sale.


 


 


 



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(iii)                       
Change in Option Price or Rate of Conversion. If the purchase or exercise price provided for in any Options, the
additional consideration, if any, payable upon the issue, conversion, exercise or exchange of any Convertible Securities, or the
rate at which any Convertible Securities are convertible into or exercisable or exchangeable for shares of Common Stock increases
or decreases at any time, the Exercise Price in effect at the time of such increase or decrease shall be adjusted to the Exercise
Price which would have been in effect at such time had such Options or Convertible Securities provided for such increased or decreased
purchase price, additional consideration or increased or decreased conversion rate, as the case may be, at the time initially granted,
issued or sold. For purposes of this Section 2(b)(iii), if the terms of any Option or Convertible Security that was outstanding
as of the Issuance Date are increased or decreased in the manner described in the immediately preceding sentence, then such Option
or Convertible Security and the shares of Common Stock deemed issuable upon exercise, conversion or exchange thereof shall be deemed
to have been issued as of the date of such increase or decrease. No adjustment pursuant to this Section 2(b) shall be made if such
adjustment would result in an increase of the Exercise Price then in effect.


 


                                                                                    
(iv)                       
Calculation of Consideration Received. If any Option or Convertible Security or Adjustment Right is issued in connection
with the issuance or sale or deemed issuance or sale of any other securities of the Company, together comprising one integrated
transaction, all securities issued in the integrated transaction shall be deemed to have been issued for consideration equal to
the aggregate consideration received or receivable by the Company. If any shares of Common Stock, Options or Convertible Securities
are issued or sold or deemed to have been issued or sold for cash, the consideration received therefor will be deemed to be the
net amount of consideration received by the Company therefor. If any shares of Common Stock, Options or Convertible Securities
are issued or sold for a consideration other than cash, the amount of such consideration received by the Company will be the fair
value of such consideration, except where such consideration consists of publicly traded securities, in which case the amount of
consideration received by the Company for such securities will be the arithmetic average of the “Weighted Average Price”
(as defined in the Securities Purchase Agreement) of such security for each of the five (5) Trading Days immediately preceding
the date of receipt. If any shares of Common Stock, Options or Convertible Securities are issued to the owners of the non-surviving
entity in connection with any merger in which the Company is the surviving entity, the amount of consideration therefor will be
deemed to be the fair value of such portion of the net assets and business of the non-surviving entity as is attributable to such
shares of Common Stock, Options or Convertible Securities, as the case may be. The fair value of any consideration other than cash
or publicly traded securities will be determined jointly by the Company and the Holder. If such parties are unable to reach agreement
within ten (10) days after the occurrence of an event requiring valuation (the “Valuation Event”), the fair
value of such consideration will be determined within five (5) Trading Days after the tenth (10th) day following such
Valuation Event by an independent, reputable appraiser jointly selected by the Company and the Holder. The determination of such
appraiser shall be final and binding upon all parties absent manifest error and the fees and expenses of such appraiser shall be
borne by the Company.


 


                                                                                      
(v)                       
Record Date. If the Company takes a record of the holders of shares of Common Stock for the purpose of entitling
them (A) to receive a dividend or other distribution payable in shares of Common Stock, Options or in Convertible Securities
or (B) to subscribe for or purchase shares of Common Stock, Options or Convertible Securities, then such record date will
be deemed to be the date of the issue or sale of the shares of Common Stock deemed to have been issued or sold upon the declaration
of such dividend or the making of such other distribution or the date of the granting of such right of subscription or purchase
(as the case may be).


 


 



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(c)                Other
Events. In the event that the Company (or any Subsidiary) shall take any action to which the provisions hereof are not
strictly applicable, or, if applicable, would not operate to protect the Holder from dilution or if any event occurs of the
type contemplated by the provisions of this Section 2 but not expressly provided for by such provisions (including,
without limitation, the granting of stock appreciation rights, phantom stock rights or other rights with equity features),
then the Company’s board of directors shall in good faith determine and implement an appropriate adjustment in the
Exercise Price and the number of Warrant Shares (if applicable) so as to protect the rights of the Holder, provided that no
such adjustment pursuant to this Section 2(c) will increase the Exercise Price or decrease the number of Warrant Shares as
otherwise determined pursuant to this Section 2, provided further that if the Holder does not accept such adjustments as
appropriately protecting its interests hereunder against such dilution, then the Company’s board of directors and the
Holder shall agree, in good faith, upon an independent investment bank of nationally recognized standing to make such
appropriate adjustments, whose determination shall be final and binding and whose fees and expenses shall be borne by the
Company.


 


(d)               
Calculations.
All calculations under this Section 2 shall be made by rounding to the nearest cent or the nearest 1/100th of a share,
as applicable. The number of shares of Common Stock outstanding at any given time shall not include shares owned or held by or
for the account of the Company, and the disposition of any such shares shall be considered an issue or sale of Common Stock.


 


3.     
RIGHTS UPON DISTRIBUTION OF ASSETS. In addition to any adjustments pursuant to Section 2 above, if the Company shall
declare or make any dividend or other distribution of its assets (or rights to acquire its assets) to holders of shares of Common
Stock, by way of return of capital or otherwise (including, without limitation, any distribution of cash, stock or securities (other
than stock or securities in which an adjustment is being made pursuant to Section 2(a)), property or options by way of a dividend,
spin off, reclassification, corporate rearrangement, scheme of arrangement or other similar transaction) (a “Distribution”),
at any time after the issuance of this Warrant, then, in each such case, the Holder shall be entitled to participate in such Distribution
to the same extent that the Holder would have participated therein if the Holder had held the number of shares of Common Stock
acquirable upon complete exercise of this Warrant (without regard to any limitations on exercise hereof, including without limitation,
the Maximum Percentage) immediately before the date on which a record is taken for such Distribution, or, if no such record is
taken, the date as of which the record holders of shares of Common Stock are to be determined for the participation in such Distribution
(provided, however, to the extent that the Holder’s right to participate in any such Distributions would result in the Holder
exceeding the Maximum Percentage, then the Holder shall not be entitled to participate in such Distribution to such extent (or
the beneficial ownership of any such shares of Common Stock as a result of such Distribution to such extent) and such Distribution
to such extent shall be held in abeyance for the benefit of the Holder until such time, if ever, as its right thereto would not
result in the Holder exceeding the Maximum Percentage, at which time the Holder shall be granted such right to the same extent
as if there had been no such limitation).


 


 



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4.     
PURCHASE RIGHTS; FUNDAMENTAL TRANSACTIONS.


 


(a)   
Purchase Rights. In addition to any adjustments pursuant to Section 2 above, if at any time the Company grants, issues
or sells any Options, Convertible Securities or rights to purchase stock, warrants, securities or other property pro rata to the
record holders of any class of shares of Common Stock (the “Purchase Rights”), then the Holder will be entitled
to acquire, upon the terms applicable to such Purchase Rights, the aggregate Purchase Rights which the Holder could have acquired
if the Holder had held the number of shares of Common Stock acquirable upon complete exercise of this Warrant (without regard to
any limitations on exercise hereof, including without limitation, the Maximum Percentage) immediately before the date on which
a record is taken for the grant, issuance or sale of such Purchase Rights, or, if no such record is taken, the date as of which
the record holders of shares of Common Stock are to be determined for the grant, issue or sale of such Purchase Rights (provided,
however, to the extent that the Holder’s right to participate in any such Purchase Right would result in the Holder exceeding
the Maximum Percentage, then the Holder shall not be entitled to participate in such Purchase Right to such extent (or beneficial
ownership of such shares of Common Stock as a result of such Purchase Right to such extent) and such Purchase Right to such extent
shall be held in abeyance for the Holder until such time, if ever, as its right thereto would not result in the Holder exceeding
the Maximum Percentage, at which time the Holder shall be granted such right to the same extent as if there had been no such limitation).


 


(b)  
Fundamental Transactions. The Company shall not enter into or be party to a Fundamental Transaction unless the Successor
Entity assumes in writing all of the obligations of the Company under this Warrant in accordance with the provisions of this Section 4(b),
including agreements to deliver to the Holder in exchange for this Warrant a security of the Successor Entity evidenced by a written
instrument substantially similar in form and substance to this Warrant, including, without limitation, which is exercisable for
a corresponding number of shares of capital stock equivalent to the shares of Common Stock acquirable and receivable upon exercise
of this Warrant (without regard to any limitations on the exercise of this Warrant) prior to such Fundamental Transaction, and
with an exercise price which applies the exercise price hereunder to such shares of capital stock (but taking into account the
relative value of the shares of Common Stock pursuant to such Fundamental Transaction and the value of such shares of capital stock,
such adjustments to the number of shares of capital stock and such exercise price being for the purpose of protecting the economic
value of this Warrant immediately prior to the consummation of such Fundamental Transaction. Upon the consummation of each Fundamental
Transaction, the Successor Entity shall succeed to, and be substituted for (so that from and after the date of the applicable Fundamental
Transaction, the provisions of this Warrant and the other Transaction Documents referring to the “Company” shall refer
instead to the Successor Entity), and may exercise every right and power of the Company and shall assume all of the obligations
of the Company under this Warrant with the same effect as if such Successor Entity had been named as the Company herein.


 


 


 






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Upon consummation
of each Fundamental Transaction, the Successor Entity shall deliver to the Holder confirmation that there shall be issued upon
exercise of this Warrant at any time after the consummation of the applicable Fundamental Transaction, in lieu of the shares of
Common Stock (or other securities, cash, assets or other property (except such items still issuable under Sections 3 and 4(a) above,
which shall continue to be receivable thereafter)) issuable upon the exercise of this Warrant (without regard to any limitations
on the exercise of this Warrant) prior to the applicable Fundamental Transaction, such shares of publicly traded common stock (or
its equivalent) of the Successor Entity (including its Parent Entity) which the Holder would have been entitled to receive upon
the happening of the applicable Fundamental Transaction had this Warrant been exercised immediately prior to the applicable Fundamental
Transaction (without regard to any limitations on the exercise of this Warrant), as adjusted in accordance with the provisions
of this Warrant. Notwithstanding the foregoing, and without limiting Section 1(g) hereof, the Holder may elect, at its sole option,
by delivery of written notice to the Company to waive this Section 4(b) to permit the Fundamental Transaction without the assumption
of this Warrant. In addition to and not in substitution for any other rights hereunder, prior to the consummation of each Fundamental
Transaction pursuant to which holders of shares of Common Stock are entitled to receive securities or other assets with respect
to or in exchange for shares of Common Stock (a “Corporate Event”), the Company shall make appropriate provision
to insure that the Holder will thereafter have the right to receive upon an exercise of this Warrant at any time after the consummation
of the applicable Fundamental Transaction but prior to the Expiration Date, in lieu of the shares of the Common Stock (or other
securities, cash, assets or other property (except such items still issuable under Sections 3 and 4(a) above, which shall continue
to be receivable thereafter)) issuable upon the exercise of the Warrant prior to such Fundamental Transaction (without regard to
any limitations on the exercise of this Warrant), such shares of stock, securities, cash, assets or any other property whatsoever
(including warrants or other purchase or subscription rights) which the Holder would have been entitled to receive upon the happening
of the applicable Fundamental Transaction had this Warrant been exercised immediately prior to the applicable Fundamental Transaction
(without regard to any limitations on the exercise of this Warrant). Provision made pursuant to the preceding sentence shall be
in a form and substance reasonably satisfactory to the Holder. Notwithstanding the foregoing, in the event of a Fundamental Transaction,
at the request of the Holder (which may be required by the Company if the Successor Entity is not publicly traded) delivered before
the 90th day after such Fundamental Transaction, the Company (or the Successor Entity) shall purchase this Warrant from the Holder
by paying to the Holder, within five Business Days after such request (or, if later, on the effective date of the Fundamental Transaction),
cash in an amount equal to the Black Scholes Value of the remaining unexercised portion of this Warrant on the date of such Fundamental
Transaction.


 


(c)   
Application. The provisions of this Section 4 shall apply similarly and equally to successive Fundamental Transactions
and Corporate Events and shall be applied as if this Warrant (and any such subsequent warrants) were fully exercisable and without
regard to any limitations on the exercise of this Warrant (provided that the Holder shall continue to be entitled to the benefit
of the Maximum Percentage, applied however with respect to shares of capital stock registered under the 1934 Act, and thereafter
receivable upon exercise of this Warrant (or any such other warrant)).


 


 


 



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5.     
NONCIRCUMVENTION. The Company hereby covenants and agrees that the Company will not, by amendment of its Certificate
of Incorporation, Bylaws or through any reorganization, transfer of assets, consolidation, merger, scheme of arrangement, dissolution,
issue or sale of securities, or any other voluntary action, avoid or seek to avoid the observance or performance of any of the
terms of this Warrant, and will at all times in good faith carry out all the provisions of this Warrant and take all action as
may be required to protect the rights of the Holder. Without limiting the generality of the foregoing, the Company (i) shall
not increase the par value of any shares of Common Stock receivable upon the exercise of this Warrant above the Exercise Price
then in effect, (ii) shall take all such actions as may be necessary or appropriate in order that the Company may validly
and legally issue fully paid and nonassessable shares of Common Stock upon the exercise of this Warrant, and (iii) shall, so long
as this Warrant is outstanding, take all action necessary to reserve and keep available out of its authorized and unissued shares
of Common Stock, solely for the purpose of effecting the exercise of this Warrant, 100% of the number of shares of Common Stock
issuable upon exercise of this Warrant then outstanding (without regard to any limitations on exercise).


 


6.     
WARRANT HOLDER NOT DEEMED A STOCKHOLDER. Except as otherwise specifically provided herein, the Holder, solely in
such Person's capacity as a holder of this Warrant, shall not be entitled to vote or receive dividends or be deemed the holder
of share capital of the Company for any purpose, nor shall anything contained in this Warrant be construed to confer upon the Holder,
solely in such Person's capacity as the Holder of this Warrant, any of the rights of a stockholder of the Company or any right
to vote, give or withhold consent to any corporate action (whether any reorganization, issue of stock, reclassification of stock,
consolidation, merger, conveyance or otherwise), receive notice of meetings, receive dividends or subscription rights, or otherwise,
prior to the issuance to the Holder of the Warrant Shares which such Person is then entitled to receive upon the due exercise of
this Warrant. In addition, nothing contained in this Warrant shall be construed as imposing any liabilities on the Holder to purchase
any securities (upon exercise of this Warrant or otherwise) or as a stockholder of the Company, whether such liabilities are asserted
by the Company or by creditors of the Company.


 


7.     
REISSUANCE OF WARRANTS.


 


(a)   
Transfer of Warrant. If this Warrant is to be transferred, the Holder shall surrender this Warrant to the Company,
whereupon the Company will forthwith issue and deliver upon the order of the Holder a new Warrant (in accordance with Section 7(d)),
registered as the Holder may request, representing the right to purchase the number of Warrant Shares being transferred by the
Holder and, if less than the total number of Warrant Shares then underlying this Warrant is being transferred, a new Warrant (in
accordance with Section 7(d)) to the Holder representing the right to purchase the number of Warrant Shares not being transferred.


 


(b)  
Lost, Stolen or Mutilated Warrant. Upon receipt by the Company of evidence reasonably satisfactory to the Company
of the loss, theft, destruction or mutilation of this Warrant, and, in the case of loss, theft or destruction, of any indemnification
undertaking by the Holder to the Company in customary form and, in the case of mutilation, upon surrender and cancellation of this
Warrant, the Company shall execute and deliver to the Holder a new Warrant (in accordance with Section 7(d)) representing the right
to purchase the Warrant Shares then underlying this Warrant.


 



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(c)   
Exchangeable for Multiple Warrants. This Warrant is exchangeable, upon the surrender hereof by the Holder at the
principal office of the Company, for a new Warrant or Warrants (in accordance with Section 7(d)) representing in the aggregate
the right to purchase the number of Warrant Shares then underlying this Warrant, and each such new Warrant will represent the right
to purchase such portion of such Warrant Shares as is designated by the Holder at the time of such surrender; provided, however,
that no Warrants for fractional shares of Common Stock shall be given.


 


(d)  
Issuance of New Warrants. Whenever the Company is required to issue a new Warrant pursuant to the terms of this Warrant,
such new Warrant (i) shall be of like tenor with this Warrant, (ii) shall represent, as indicated on the face of such new Warrant,
the right to purchase the Warrant Shares then underlying this Warrant (or in the case of a new Warrant being issued pursuant to
Section 7(a) or Section 7(c), the Warrant Shares designated by the Holder which, when added to the number of shares of Common Stock
underlying the other new Warrants issued in connection with such issuance, does not exceed the number of Warrant Shares then underlying
this Warrant), (iii) shall have an issuance date, as indicated on the face of such new Warrant which is the same as the Issuance
Date, and (iv) shall have the same rights and conditions as this Warrant.


 


8.      NOTICES.
Any and all notices or other communications or deliveries required or permitted to be provided hereunder shall be in
writing and shall be deemed given and effective on the earliest of (a) the date of transmission, if such notice or
communication is delivered via facsimile or email at the facsimile number or email address specified in this Section prior to
6:30 p.m. (New York City time) on a Trading Day, (b) the next Trading Day after the date of transmission, if such notice
or communication is delivered via facsimile or email at the facsimile number or email address specified in this Section on
a day that is not a Trading Day or later than 6:30 p.m. (New York City time) on any Trading Day, (c) the Trading
Day following the date of deposit with a nationally recognized overnight courier service, or (d) upon actual receipt by
the party to whom such notice is required to be given. The addresses, facsimile numbers and email addresses for such notices
and communications are those as may be designated by the Holder and the Company prior to the Issuance Date, and in writing
hereafter, in the same manner, by any such Person. The Company shall provide the Holder with prompt written notice of all
actions taken pursuant to this Warrant, including in reasonable detail a description of such action and the reason therefor.
Without limiting the generality of the foregoing, the Company will give written notice to the Holder (i) immediately upon
each adjustment of the Exercise Price and the number of Warrant Shares, setting forth in reasonable detail, and certifying,
the calculation of such adjustment(s) and (ii) at least fifteen (15) days prior to the date on which the Company closes
its books or takes a record (A) with respect to any dividend or distribution upon the shares of Common Stock, (B) with
respect to any grants, issuances or sales of any Options, Convertible Securities or rights to purchase stock, warrants,
securities or other property to holders of shares of Common Stock or (C) for determining rights to vote with respect to any
Fundamental Transaction, dissolution or liquidation, provided in each case that such information shall be made known to the
public prior to or in conjunction with such notice being provided to the Holder and (iii) at least ten (10) Trading Days
prior to the consummation of any Fundamental Transaction. To the extent that any notice provided hereunder constitutes, or
contains, material, non-public information regarding the Company or any of its Subsidiaries, the Company shall simultaneously
file such notice with the Securities and Exchange Commission pursuant to a Current Report on Form 8-K. It is expressly
understood and agreed that the time of execution specified by the Holder in each Exercise Notice shall be definitive and may
not be disputed or challenged by the Company.


 



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9.     
AMENDMENT AND WAIVER. Except as otherwise provided herein, the provisions of this Warrant may be amended and the
Company may take any action herein prohibited, or omit to perform any act herein required to be performed by it, only if the Company
has obtained the written consent of the Holder. No waiver shall be effective unless it is in writing and signed by an authorized
representative of the waiving party.


 


10. 
SEVERABILITY. If any provision of this Warrant is prohibited by law or otherwise determined to be invalid or unenforceable
by a court of competent jurisdiction, the provision that would otherwise be prohibited, invalid or unenforceable shall be deemed
amended to apply to the broadest extent that it would be valid and enforceable, and the invalidity or unenforceability of such
provision shall not affect the validity of the remaining provisions of this Warrant so long as this Warrant as so modified continues
to express, without material change, the original intentions of the parties as to the subject matter hereof and the prohibited
nature, invalidity or unenforceability of the provision(s) in question does not substantially impair the respective expectations
or reciprocal obligations of the parties or the practical realization of the benefits that would otherwise be conferred upon the
parties. The parties will endeavor in good faith negotiations to replace the prohibited, invalid or unenforceable provision(s)
with a valid provision(s), the effect of which comes as close as possible to that of the prohibited, invalid or unenforceable provision(s).


 


11. 
GOVERNING LAW. This Warrant shall be governed by and construed and enforced in accordance with, and all questions
concerning the construction, validity, interpretation and performance of this Warrant shall be governed by, the internal laws of
the State of New York, without giving effect to any choice of law or conflict of law provision or rule (whether of the State of
New York or any other jurisdictions) that would cause the application of the laws of any jurisdictions other than the State of
New York. The Company hereby irrevocably submits to the exclusive jurisdiction of the state and federal courts sitting in The City
of New York, Borough of Manhattan, for the adjudication of any dispute hereunder or in connection herewith or with any transaction
contemplated hereby or discussed herein, and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding,
any claim that it is not personally subject to the jurisdiction of any such court, that such suit, action or proceeding is brought
in an inconvenient forum or that the venue of such suit, action or proceeding is improper. Nothing contained herein shall be deemed
to limit in any way any right to serve process in any manner permitted by law. Nothing contained herein shall be deemed or operate
to preclude the Holder from bringing suit or taking other legal action against the Company in any other jurisdiction to collect
on the Company’s obligations to the Holder or to enforce a judgment or other court ruling in favor of the Holder. THE
COMPANY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE TO, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY
DISPUTE HEREUNDER OR IN CONNECTION WITH OR ARISING OUT OF THIS WARRANT OR ANY TRANSACTION CONTEMPLATED HEREBY.


 


12. 
CONSTRUCTION; HEADINGS. This Warrant shall be deemed to be jointly drafted by the Company and the Holder and shall
not be construed against any Person as the drafter hereof. The headings of this Warrant are for convenience of reference and shall
not form part of, or affect the interpretation of, this Warrant.


 


 


 


 



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13. 
DISPUTE RESOLUTION. In the case of a dispute as to the determination of the Exercise Price, the Closing Sale Price,
the Closing Bid Price or fair market value or the arithmetic calculation of the Warrant Shares (as the case may be), the Company
or the Holder (as the case may be) shall submit the disputed determinations or arithmetic calculations (as the case may be) via
facsimile (i) within two (2) Business Days after receipt of the applicable notice giving rise to such dispute to the Company or
the Holder (as the case may be) or (ii) if no notice gave rise to such dispute, at any time after the Holder learned of the circumstances
giving rise to such dispute (including, without limitation, as to whether any issuance or sale or deemed issuance or sale was an
issuance or sale or deemed issuance or sale of Excluded Securities). If the Holder and the Company are unable to agree upon such
determination or calculation (as the case may be) of the Exercise Price, the Closing Sale Price, the Closing Bid Price or fair
market value or the number of Warrant Shares (as the case may be) within three (3) Business Days of such disputed determination
or arithmetic calculation being submitted to the Company or the Holder (as the case may be), then the Company shall, within two
(2) Business Days submit via facsimile (a) the disputed determination of the Exercise Price, the Closing Sale Price, the Closing
Bid Price or fair market value (as the case may be) to an independent, reputable investment bank selected by the Holder or (b)
the disputed arithmetic calculation of the Warrant Shares to the Company’s independent, outside accountant. The Company shall
cause at its expense the investment bank or the accountant (as the case may be) to perform the determinations or calculations (as
the case may be) and notify the Company and the Holder of the results no later than ten (10) Business Days from the time it receives
such disputed determinations or calculations (as the case may be). Such investment bank’s or accountant’s determination
or calculation (as the case may be) shall be binding upon all parties absent demonstrable error.


 


14. 
REMEDIES, CHARACTERIZATION, OTHER OBLIGATIONS, BREACHES AND INJUNCTIVE RELIEF. The remedies provided in this Warrant
shall be cumulative and in addition to all other remedies available under this Warrant and the other Transaction Documents, at
law or in equity (including a decree of specific performance and/or other injunctive relief), and nothing herein shall limit the
right of the Holder to pursue actual damages for any failure by the Company to comply with the terms of this Warrant. The Company
covenants to the Holder that there shall be no characterization concerning this instrument other than as expressly provided herein.
Amounts set forth or provided for herein with respect to payments, exercises and the like (and the computation thereof) shall be
the amounts to be received by the Holder and shall not, except as expressly provided herein, be subject to any other obligation
of the Company (or the performance thereof). The Company acknowledges that a breach by it of its obligations hereunder will cause
irreparable harm to the Holder and that the remedy at law for any such breach may be inadequate. The Company therefore agrees that,
in the event of any such breach or threatened breach, the holder of this Warrant shall be entitled, in addition to all other available
remedies, to an injunction restraining any breach, without the necessity of showing economic loss and without any bond or other
security being required. The Company shall provide all information and documentation to the Holder that is requested by the Holder
to enable the Holder to confirm the Company’s compliance with the terms and conditions of this Warrant (including, without
limitation, compliance with Section 2 hereof). The issuance of shares and certificates for shares as contemplated hereby upon the
exercise of this Warrant shall be made without charge to the Holder or such shares for any issuance tax or other costs in respect
thereof, provided that the Company shall not be required to pay any tax which may be payable in respect of any transfer involved
in the issuance and delivery of any certificate in a name other than the Holder or its agent on its behalf.


 


 


 


 



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15. 
TRANSFER. This Warrant may be offered for sale, sold, transferred or assigned without the consent of the Company.


 


16. 
CERTAIN DEFINITIONS. For purposes of this Warrant, the following terms shall have the following meanings:


 


(a)               
“Adjustment Right” means any right granted with respect to any securities issued in connection with,
or with respect to, any issuance or sale (or deemed issuance or sale in accordance with Section 2) of shares of Common Stock (other
than rights of the type described in Section 3 and 4 hereof) that could result in a decrease in the net consideration received
by the Company in connection with, or with respect to, such securities (including, without limitation, any cash settlement rights,
cash adjustment or other similar rights).


 


(b)              
“Black Scholes Value” means the value of the unexercised portion of this Warrant remaining on the date
of the Holder’s request, which value is calculated using the Black Scholes Option Pricing Model obtained from the “OV”
function on Bloomberg utilizing (i) an underlying price per share equal to, in the event of an Authorized Share Failure, the VWAP
on the exercise date, or, in the event of a Fundamental Transaction, the VWAP on the Trading Day immediately preceding the consummation
of the applicable Fundamental Transaction, (ii) a strike price equal to the Exercise Price in effect on the date of the Holder’s
request, (iii) a risk-free interest rate corresponding to the U.S. Treasury rate for a period equal to the greater of (1) the remaining
term of this Warrant as of the date of the Holder’s request and (2) the remaining term of this Warrant as of the date of
consummation of the applicable Fundamental Transaction or as of the date of the Holder’s request pursuant to Section 4(c),
if such request is prior to the date of the consummation of the applicable Fundamental Transaction, (iv) an expected volatility
equal to the greater of 90% and the 30-day volatility obtained from the HVT function on Bloomberg (determined utilizing a 365-day
annualization factor) as of the Trading Day immediately following the earlier to occur of the public disclosure or consummation
of the applicable Fundamental Transaction and (v) a 0% cost of borrow.


 


(c)               
“Bloomberg” means Bloomberg, L.P.


 


(d)              
“Business Day” means any day other than Saturday, Sunday or other day on which commercial banks in The
City of New York are authorized or required by law to remain closed.


 


 



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(e)               
“Closing Bid Price” and “Closing Sale Price” means, for any security as of any date,
the last closing bid price and last closing trade price, respectively, for such security on the Principal Market, as reported by
Bloomberg, or, if the Principal Market begins to operate on an extended hours basis and does not designate the closing bid price
or the closing trade price, as the case may be, then the last bid price or the last trade price, respectively, of such security
prior to 4:00:00 p.m., New York time, as reported by Bloomberg, or, if the Principal Market is not the principal securities exchange
or trading market for such security, the last closing bid price or last trade price, respectively, of such security on the principal
securities exchange or trading market where such security is listed or traded as reported by Bloomberg, or if the foregoing do
not apply, the last closing bid price or last trade price, respectively, of such security in the over-the-counter market on the
electronic bulletin board for such security as reported by Bloomberg, or, if no closing bid price or last trade price, respectively,
is reported for such security by Bloomberg, the average of the bid prices, or the ask prices, respectively, of any market makers
for such security as reported in the “pink sheets” by Pink Sheets LLC (formerly the National Quotation Bureau, Inc.).
If the Closing Bid Price or the Closing Sale Price cannot be calculated for a security on a particular date on any of the foregoing
bases, the Closing Bid Price or the Closing Sale Price, as the case may be, of such security on such date shall be the fair market
value as mutually determined by the Company and the Holder. If the Company and the Holder are unable to agree upon the fair market
value of such security, then such dispute shall be resolved in accordance with the procedures in Section 13. All such determinations
to be appropriately adjusted for any stock dividend, stock split, stock combination or other similar transaction during the applicable
calculation period.


 


(f)               
 “Common Stock” means (i) the Company’s shares of common stock, $0.001 par value per share,
and (ii) any capital stock into which such common stock shall have been changed or any share capital resulting from a reclassification
of such common stock.


 


(g)              
“Common Stock Deemed Outstanding” means, at any given time, the number of shares of Common Stock actually
outstanding at such time.


 


(h)              
“Convertible Securities” means any capital stock or other security (other than Options) that is at any
time and under any circumstances, directly or indirectly, convertible into, exercisable or exchangeable for, or which otherwise
entitles the holder thereof to acquire, any shares of Common Stock.


 


(i)                
“Eligible Market” means The New York Stock Exchange, The NYSE Amex, The NASDAQ Global Market, The NASDAQ
Global Select Market or the Principal Market.


 



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(j)                
“Excluded Securities” means the issuance of (a) shares of Common Stock or options to employees, officers
or directors of the Company in their capacity as such pursuant to any stock or option plan or employment agreement duly adopted
for such purpose, by a majority of the non-employee members of the Board of Directors or a majority of the members of a committee
of non-employee directors established for such purpose, (b) securities upon the exercise or exchange of or conversion of securities
issued pursuant to the Transaction Documents and/or other securities exercisable or exchangeable for or convertible into shares
of Common Stock issued and outstanding on the Issuance Date, provided that such securities have not been amended since the Issuance
Date to increase the number of such securities or to decrease the exercise price, exchange price or conversion price of such securities,
(c) Interest Shares and (d) securities issued pursuant to acquisitions or strategic transactions approved by a majority of the
disinterested directors of the Company, provided that any such issuance shall only be to a Person (or to the equity holders of
a Person) which is, itself or through its subsidiaries, an operating company or an owner of an asset in a business synergistic
with the business of the Company and shall provide to the Company additional benefits in addition to the investment of funds, but
shall not include a transaction in which the Company is issuing securities primarily for the purpose of raising capital or to an
entity whose primary business is investing in securities.


 


(k)              
 “Expiration Date” means the date that is the five (5) year anniversary of the Issuance Date, if such
date falls on a day other than a Business Day or on which trading does not take place on the Principal Market (a “Holiday”),
the next date that is not a Holiday.


 


(l)                
“Fundamental Transaction” means that (i) the Company or any of its Subsidiaries shall, directly or indirectly,
in one or more related transactions, (1) consolidate or merge with or into (whether or not the Company or any of its Subsidiaries
is the surviving corporation) any other Person, or (2) sell, lease, license, assign, transfer, convey or otherwise dispose of all
or substantially all of its respective properties or assets to any other Person, or (3) allow any other Person to make a purchase,
tender or exchange offer that is accepted by the holders of more than 50% of the outstanding shares of Voting Stock of the Company
(not including any shares of Voting Stock of the Company held by the Person or Persons making or party to, or associated or affiliated
with the Persons making or party to, such purchase, tender or exchange offer), or (4) consummate a stock or share purchase agreement
or other business combination (including, without limitation, a reorganization, recapitalization, spin-off or scheme of arrangement)
with any other Person whereby such other Person acquires more than 50% of the outstanding shares of Voting Stock of the Company
(not including any shares of Voting Stock of the Company held by the other Person or other Persons making or party to, or associated
or affiliated with the other Persons making or party to, such stock or share purchase agreement or other business combination),
or (5) reorganize, recapitalize or reclassify the Common Stock, or (ii) any “person” or “group” (as these
terms are used for purposes of Sections 13(d) and 14(d) of the 1934 Act and the rules and regulations promulgated thereunder) is
or shall become the “beneficial owner” (as defined in Rule 13d-3 under the 1934 Act), directly or indirectly, of 50%
of the aggregate ordinary voting power represented by issued and outstanding Voting Stock of the Company.


 


(m)            
“Interest Shares” shall have the meaning set forth in Section 2.2 of the Form of Senior Unsecured Note
attached as Exhibit B to the Securities Purchase Agreement.


 


(n)              
“Options” means any rights, warrants or options to subscribe for or purchase shares of Common Stock or
Convertible Securities.


 



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(o)              
“Parent Entity” of a Person means an entity that, directly or indirectly, controls the applicable Person
and whose common stock or equivalent equity security is quoted or listed on an Eligible Market, or, if there is more than one such
Person or Parent Entity, the Person or Parent Entity with the largest public market capitalization as of the date of consummation
of the Fundamental Transaction.


 


(p)              
“Person” means an individual, a limited liability company, a partnership, a joint venture, a corporation,
a trust, an unincorporated organization, any other entity or a government or any department or agency thereof.


 


(q)              
“Principal Market” means The NASDAQ Capital Market.


 


(r)                
“Subsidiary” means any direct or indirect wholly-owned subsidiary of the Company.


 


(s)               
“Successor Entity” means the Person (or, if so elected by the Holder, the Parent Entity) formed by, resulting
from or surviving any Fundamental Transaction or the Person (or, if so elected by the Holder, the Parent Entity) with which such
Fundamental Transaction shall have been entered into.


 


(t)                
“Trading Day” means any day on which the Common Stock is traded on the Principal Market, or, if the Principal
Market is not the principal trading market for the Common Stock, then on the principal securities exchange or securities market
on which the Common Stock is then traded, provided that “Trading Day” shall not include any day on which the Common
Stock is scheduled to trade on such exchange or market for less than 4.5 hours or any day that the Common Stock is suspended from
trading during the final hour of trading on such exchange or market (or if such exchange or market does not designate in advance
the closing time of trading on such exchange or market, then during the hour ending at 4:00:00 p.m., New York time) unless such
day is otherwise designated as a Trading Day in writing by the Holder.


 


(u)              
“Transaction Documents” has the meaning given to such term in the Securities Purchase Agreement.


 


(v)              
“Voting Stock” of a Person means capital stock of such Person of the class or classes pursuant to which
the holders thereof have the general voting power to elect, or the general power to appoint, at least a majority of the board of
directors, managers or trustees of such Person (irrespective of whether or not at the time capital stock of any other class or
classes shall have or might have voting power by reason of the happening of any contingency).


 


[signature page follows]


 


 



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IN WITNESS WHEREOF,
the Company has caused this Warrant to Purchase Common Stock to be duly executed as of the Issuance Date set out above.


 


 


	 	Pacific Ethanol, Inc.	 
	 	 	 	 
	 	By:	 	 
	 	Name:	Neil M. Koehler	 
	 	Title:	President and Chief Executive Officer	 
	 	 	 	 


 


 


 


 


 


 


 


 


 


 


 


 



    	19



    	 



    

EXHIBIT A


 


EXERCISE NOTICE


 


TO BE EXECUTED BY THE REGISTERED HOLDER
TO EXERCISE THIS


WARRANT TO PURCHASE COMMON STOCK


 


 


PACIFIC
ETHANOL, INC.


 


The undersigned holder
hereby exercises the right to purchase _________________ of the shares of Common Stock (“Warrant Shares”) of
PACIFIC ETHANOL, INC, a Delaware
corporation (the “Company”), evidenced by the attached Warrant to Purchase Common Stock (the “Warrant”).
Capitalized terms used herein and not otherwise defined shall have the respective meanings set forth in the Warrant.


 


1.                 
Form of Exercise Price. The Holder intends that payment of the Exercise Price shall be made as:


 


			____________ a “Cash Exercise” with respect to ____________ Warrant Shares;
and/or



			____________ a “Cashless Exercise” with respect to _________ Warrant Shares.



 


2.                 
Payment of Exercise Price. In the event that the holder has elected a Cash Exercise with respect to some or all of
the Warrant Shares to be issued pursuant hereto, the holder shall pay the Aggregate Exercise Price in the sum of $___________________
to the Company in accordance with the terms of the Warrant.


 


3.                 
Representations and Warranties. By its delivery of this Exercise Notice, the undersigned represents and warrants
to the Company that in giving effect to the exercise evidenced hereby the Holder will not beneficially own in excess of the number
of shares of Common Stock permitted to be owned under Section 1(f) of this Warrant to which this notice relates.


 


4.                 
Delivery of Warrant Shares. The Company shall deliver to the holder __________ Warrant Shares in accordance with
the terms of the Warrant. Delivery shall be made to the Holder, or for its benefit, to the following address:


 





 



 


 









 


	Date:	 _______________ __, ______	 
	 	 
	 	 
	Name of Registered Holder	 
	 	 	 
	By:	 	 
	 	Name: 	 	 
	 	Title: 	 	 
	 	 	 
	 	 	 


 



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ACKNOWLEDGMENT


 


 


The Company hereby
acknowledges this Exercise Notice and hereby directs American Stock Transfer & Trust Co., LLC to issue the above indicated
number of shares of Common Stock in accordance with the Transfer Agent Instructions dated ______, 201__ from the Company and acknowledged
and agreed to by American Stock Transfer & Trust Co. LLC.


 


 


	 	PACIFIC ETHANOL, INC.	 
	 	 	 	 
	 	By:	 	 
	 	 	Name 	 	 
	 	 	Title 	 	 
			 	 


 


 


 


 


 


 


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