Exhibit 10.8





 


CoBANK,
ACB


SECURITY
AGREEMENT


 


THIS
SECURITY AGREEMENT (the “Security Agreement”) is executed and delivered by pacific
AURORA, LLC, a delaware limited liability company having its place of business
(or chief executive office if more than one place of business) located at 400 Capital Mall, Suite 2060, Sacramento, California
95814 (“PAL”), PACIFIC ETHANOL AURORA EAST, LLC, a Delaware limited
liability company having its place of business (or chief executive office if more than one place of business) located at 400 Capital
Mall, Suite 2060, Sacramento, California 95814 (“AE”), and PACIFIC ETHANOL AURORA WEST, LLC, a Delaware limited
liability company having its place of business (or chief executive office if more than one place of business) located at 400 Capital
Mall, Suite 2060, Sacramento, California 95814 (“AW”) (PAL, AE and AW are hereinafter referred to individually
and collectively as the “Debtor”), to COBANK, ACB (the “Secured Party”), a federally chartered
instrumentality of the United States, whose mailing address is P.O. Box 5110, Denver, Colorado 80217.


 


SECTION
1.GRANT OF SECURITY INTEREST. For valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Debtor hereby grants to the Secured Party a security interest in all of the personal property of the
Debtor, wherever located and whether now existing or hereafter acquired, together with all accessions and additions thereto,
and all products and proceeds thereof, including:


 


accounts; inventory (including without
limitation, returned or repossessed goods); goods; as-extracted collateral; chattel paper; electronic chattel paper; instruments;
investment property (including, without limitation, certificated and uncertificated securities, security entitlements, securities
accounts, commodity contracts, and commodity accounts); letters of credit; letter-of-credit rights; documents; equipment; farm
products; fixtures; general intangibles (including, without limitation, payment intangibles, choses or things in action, litigation
rights and resulting judgments, goodwill, patents, trademarks and other intellectual property, tax refunds, miscellaneous rights
to payment, investments and other interests in entities not included in the definition of investment property (including, without
limitation, all equities and patronage rights in all cooperatives and all interests in partnerships and joint ventures), margin
accounts, computer programs, software, invoices, books, records and other information relating to or arising out of the Debtor's
business); and, to the extent not covered by the above, all other personal property of the Debtor of every type and description,
including without limitation, supporting obligations, interests or claims in or under any policy of insurance, commercial tort
claims, deposit accounts, money, and judgments (the “Collateral”).


 


Where applicable, all terms used herein
shall have the same meaning as presently and as hereafter defined in the Uniform Commercial Code (the “UCC”).


 


SECTION 2.THE
OBLIGATIONS. The security interest granted hereunder shall secure the payment of all indebtedness and the performance of all
obligations of the Debtor to the Secured Party of every type and description, whether now existing or hereafter arising, fixed
or contingent, as primary obligor or as guarantor or surety, acquired directly or by assignment or otherwise, liquidated or unliquidated,
regardless of how they arise or by what agreement or instrument they may be evidenced, including without limitation all loans,
advances and other extensions of credit and all covenants, agreements, and provisions contained in all loan and other agreements
between the parties (the “Obligations”).


 







SECTION 3.REPRESENTATIONS,
WARRANTIES AND COVENANTS. The Debtor represents, warrants and covenants as follows:


 


A.       Title
to Collateral. Except as expressly permitted under that certain Credit Agreement dated as of even date herewith between the
Secured Party and Debtor (the “Agreement”) or by any other written agreement between the parties, and except
for any security interest in favor of the Secured Party, the Debtor has clear title to all Collateral free of all adverse claims,
interests, liens, or encumbrances. Without the prior written consent of the Secured Party, the Debtor shall not create or permit
the existence of any adverse claims, interests, liens, or other encumbrances against any of the Collateral. The Debtor shall provide
prompt written notice to the Secured Party of any future adverse claims, interests, liens, or encumbrances against all Collateral,
and shall defend diligently the Debtor's and the Secured Party's interests in all Collateral.


 


B.       Validity
of Security Agreement; Authority.  This Security Agreement is the valid and binding obligation of the Debtor, enforceable in
accordance with its terms. The Debtor is duly formed, validly existing and in good standing under the laws of its jurisdiction
of formation. The Debtor has the full power to execute, deliver and carry out the terms and provisions of this Security Agreement
and all related documents and to grant to the Secured Party a security interest in, and a lien on, the Collateral, has taken all
necessary action to authorize the execution, delivery and performance of this Security Agreement and all related documents, and
such execution, delivery and performance do not and will not (i) violate any of the terms or provisions of the organizational documents
of the Debtor or any provision of any law, order, writ, judgment, injunction, decree, determination or award presently in effect
having applicability to the Debtor, (ii) result in a breach of, or constitute a default under, any indenture or loan or credit
agreement or any other agreement, document or instrument to which the Debtor is a party or by which the Debtor or any of the Debtor’s
property may be bound or affected or (iii) result in or require the creation or imposition of any lien or other encumbrance of
any nature upon or with respect to any of the property of the Debtor (except for any security interest in favor of the Secured
Party).


 


 


 






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C.       Location
of the Debtor. The Debtor’s place of business (or chief executive office if more than one place of business) is located
at the address shown above. The Debtor’s state of incorporation or formation is as shown above.


 


D.       Location
of Fixtures. All fixtures are now at the location or locations specified on Schedule A attached hereto and made a part
hereof.


 


E.       Name,
Identity, and Corporate Structure. The Debtor’s exact legal name is as set forth above. Except as set forth on Schedule
B, the Debtor has not within the past one year changed its name, identity or corporate structure through incorporation, merger,
consolidation, joint venture or otherwise.


 


F.       Change
in Name, State of Debtor’s Location, Location of Collateral, Etc. Without giving at least thirty days' prior written
notice to the Secured Party, the Debtor shall not change its name, identity or organizational structure, the location of its place
of business (or chief executive office if more than one place of business), its state of incorporation or formation, or the location
of the Collateral.


 


G.       Further
Assurances. Upon the reasonable request of the Secured Party, the Debtor shall do all acts and things as the Secured Party
may from time to time reasonably deem necessary or advisable to enable it to perfect, maintain, and continue the perfection and
priority of the security interest of the Secured Party in the Collateral, or to facilitate the exercise by the Secured Party of
any rights or remedies granted to the Secured Party hereunder or provided by law. Without limiting the foregoing, the Debtor agrees
to execute, in form and substance reasonably satisfactory to the Secured Party, such financing statements, amendments thereto,
supplemental agreements, assignments, notices of assignments, and other instruments and documents as the Secured Party may from
time to time reasonably request. In addition, in the event the Collateral or any part thereof consists of instruments, documents,
chattel paper, or money (whether or not proceeds of the Collateral), the Debtor shall, upon the request of the Secured Party, deliver
possession thereof to the Secured Party (or to an agent of the Secured Party retained for that purpose), together with any appropriate
endorsements and/or assignments. Where Collateral is in the possession of a third party, the Debtor will join with the Secured
Party in notifying the third party of the Secured Party’s security interest and obtaining an acknowledgment from the third
party that it is holding the Collateral for the benefit of the Secured Party. The Debtor will cooperate with the Secured Party
in obtaining control with respect to Collateral consisting of deposit accounts (that are not held by the Secured Party as depositary
institution), investment property, letter-of-credit rights and electronic chattel paper. The Secured Party shall use reasonable
care in the custody and preservation of such Collateral in its possession, but shall not be required to take any steps necessary
to preserve rights against prior parties. All costs and expenses incurred by the Secured Party to establish, perfect, maintain,
determine the priority of, or release the security interest granted hereunder (including the cost of all filings, recordings, and
taxes thereon and the fees and expenses of any agent retained by Secured Party) shall become part of the Obligations secured hereby
and be paid by the Debtor on demand.


 







H.       Insurance.
The Debtor shall maintain such property and casualty insurance as required under the Agreement. All such policies shall provide
for loss payable clauses or endorsements and other terms and conditions in form and content acceptable to the Secured Party. Upon
the request of the Secured Party, all policies (or such other proof of compliance with this Section as may be satisfactory to the
Secured Party) shall be delivered to the Secured Party. The Debtor shall pay all insurance premiums when due. In the event of loss,
damage, or injury to any insured Collateral, the Secured Party shall have full power to collect any and all insurance proceeds
due under any of such policies (and the Debtor hereby agrees, upon request by the Secured Party, to promptly forward to the Secured
Party all such insurance proceeds received directly by the Debtor), and may, at its option, apply such proceeds to the payment
of any of the Obligations secured hereby, or may apply such proceeds to the repair or replacement of such Collateral.


 


I.       Taxes,
Levies, Etc. The Debtor has paid and shall continue to pay when due all taxes, levies, assessments, or other charges which
may become an enforceable lien against the Collateral.


 


J.       Disposition
and Use of Collateral by the Debtor. Except as expressly permitted under the Credit Agreement, without the prior written consent
of the Secured Party, the Debtor shall not at any time sell, transfer, lease, abandon, or otherwise dispose of any Collateral,
except that, so long as the Debtor is not in default hereunder, the Debtor may sell, transfer, lease, abandon, or otherwise dispose
of any Collateral in the ordinary course of Debtor’s business. The Debtor shall not use any of the Collateral in any manner
which violates any statute, regulation, ordinance, rule, decree, order, or insurance policy.


 


 


 






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K.       Receivables.
The Debtor shall preserve, enforce, and collect all accounts, chattel paper, electronic chattel paper, instruments, documents
and general intangibles, whether now owned or hereafter acquired or arising (the “Receivables”), in a diligent
fashion and, upon the request of the Secured Party, the Debtor shall execute an agreement in form and substance satisfactory to
the Secured Party by which the Debtor shall direct all account debtors and obligors on Receivables to make payment to a lock box
deposit account under the exclusive control of the Secured Party.


 


L.       Condition
of Collateral. All tangible Collateral is now in good repair and condition (ordinary wear and tear excepted) and except as
expressly permitted under the Credit Agreement, the Debtor shall at all times hereafter, at its own expense, maintain all such
Collateral in good repair and condition (ordinary wear and tear excepted).


 


M.       Condition
of Books and Records. The Debtor has maintained and shall maintain complete, accurate and up-to-date books, records, accounts,
and other information relating to all Collateral in such form and in such detail as may be satisfactory to the Secured Party, and
shall allow the Secured Party or its representatives at any reasonable time to examine and copy such books, records, accounts,
and other information.


 


N.       Right
of Inspection. At all reasonable times upon the request of the Secured Party, the Debtor shall allow the Secured Party or its
representatives to visit any of the Debtor’s properties or locations so that the Secured Party or its representatives may
confirm, inspect and appraise any of the Collateral.


 


SECTION 4.RIGHTS
AND REMEDIES. If an Event of Default as defined under the Agreement (an “Event of Default”) shall have occurred
and be continuing, the Secured Party may exercise any and all rights and remedies of the Secured Party in the enforcement of its
security interest under the UCC, this Security Agreement, or any other applicable law. Without limiting the foregoing:


 


A.       Disposition
of Collateral. Upon and during the existence of an Event of Default, the Secured Party may sell, lease, or otherwise dispose
of all or any part of the Collateral, in its then present condition or following any commercially reasonable preparation or processing
thereof, whether by public or private sale or at any brokers' board, in lots or in bulk, for cash, on credit or otherwise, with
or without representations or warranties, and upon such other terms as may be acceptable to the Secured Party, and the Secured
Party may purchase at any public sale. At any time when advance notice of sale is required, the Debtor agrees that ten days' prior
written notice shall be reasonable. In connection with the foregoing, the Secured Party may:


 


1.       
require the Debtor to assemble the Collateral and all records pertaining thereto and make such Collateral and records available
to the Secured Party at a place to be designated by the Secured Party which is reasonably convenient to both parties;


 


2.       
enter the premises of the Debtor or premises under the Debtor's control and take possession of the Collateral;


 


3.        without
charge, use or occupy the premises of the Debtor or premises under the Debtor's control, including without limitation, warehouse
and other storage facilities;


 


4.        without
charge, use any patent, trademark, tradename, or other intellectual property or technical process used by the Debtor in connection
with any of the Collateral; and


 


5.        rely
conclusively upon the advice or instructions of any one or more brokers or other experts selected by the Secured Party to determine
the method or manner of disposition of any of the Collateral and, in such event, any disposition of the Collateral by the Secured
Party in accordance with such advice or instructions shall be deemed to be commercially reasonable.


 


B.       Collection
of Receivables. Upon and during the existence of an Event of Default, the Secured Party may, but shall not be obligated to,
take all actions reasonable or necessary to preserve, enforce or collect the Receivables, including without limitation, the right
to notify account debtors and obligors on Receivables to make direct payment to the Secured Party, to permit any extension, compromise,
or settlement of any of the Receivables for less than face value, or to sue on any Receivable, all without prior notice to the
Debtor.


 


C.       Proceeds.
Upon and during the existence of an Event of Default, the Secured Party may collect and apply all proceeds of the Collateral,
and may endorse the name of the Debtor in favor of the Secured Party on any and all checks, drafts, money orders, notes, acceptances,
or other instruments of the same or a different nature, constituting, evidencing, or relating to the Collateral. The Secured Party
may receive and open all mail addressed to the Debtor and remove therefrom any cash or non-cash items of payment constituting proceeds
of the Collateral.


 


 


 






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D.       Insurance
Adjustments. Upon and during the existence of an Event of Default, the Secured Party may adjust, settle, and cancel any and
all insurance covering any Collateral, endorse the name of the Debtor on any and all checks or drafts drawn by any insurer, whether
representing payment for a loss or a return of unearned premium, and execute any and all proofs of claim and other documents or
instruments of every kind required by any insurer in connection with any payment by such insurer.


 


The net proceeds of any disposition of
the Collateral may be applied by the Secured Party, after deducting its reasonable expenses incurred in such disposition, to the
payment in whole or in part of the Obligations in such order as the Secured Party may elect. The enumeration of the foregoing rights
and remedies is not intended to be exhaustive, and the exercise of any right and/or remedy shall not preclude the exercise of any
other rights or remedies, all of which are cumulative and non-exclusive.


 


SECTION 5.OTHER
PROVISIONS.


 


A.       Amendment,
Modification, and Waiver. Without the prior written consent of the Secured Party, no amendment, modification, or waiver of,
or consent to any departure by the Debtor from, any provision hereunder shall be effective. Any such amendment, modification, waiver,
or consent shall be effective only in the specific instance and for the specific purpose for which given. No delay or failure by
the Secured Party to exercise any remedy hereunder shall be deemed a waiver thereof or of any other remedy hereunder. A waiver
on any one occasion shall not be construed as a bar to or waiver of any remedy on any subsequent occasion.


 


B.       Costs
and Attorneys’ Fees. Except as prohibited by law, if at any time the Secured Party employs counsel in connection with
the creation, perfection, preservation, or release of the Secured Party's security interest in the Collateral or the enforcement
of any of the Secured Party's rights or remedies hereunder, all of the Secured Party's reasonable attorneys’ fees arising
from such services and all expenses, costs, or charges relating thereto shall become part of the Obligations secured hereby and
be paid by the Debtor on demand.


 


C.       No
Obligation to Make Loans. Nothing contained herein or in any financing statement or other document executed or filed in connection
herewith (other than the Agreement and the Notes, to the extent obligations arise thereunder) shall be construed to obligate the
Secured Party to make any loans or advances to the Debtor, whether pursuant to a commitment or otherwise.


 


D.       Revival
of Obligations. To the extent the Debtor or any third party makes a payment or payments to the Secured Party or the Secured
Party enforces its security interest or exercises any right of setoff, and such payment or payments or the proceeds thereof are
subsequently invalidated, declared to be fraudulent or preferential, set aside, and/or required to be repaid to a trustee, receiver,
or any other party under any bankruptcy, insolvency or other law or in equity, then, to the extent of such recovery, the Obligations
or any part thereof originally intended to be satisfied shall be revived and continued in full force and effect as if such payment
or payments had not been made, or such enforcement or setoff had not occurred.


 


E.       Performance
by the Secured Party. In the event the Debtor shall at any time fail to pay or perform punctually any of its duties hereunder,
the Secured Party may, at its option and without notice to or demand upon the Debtor, without obligation and without waiving or
diminishing any of its other rights or remedies hereunder, fully perform or discharge any of such duties. All costs and expenses
incurred by the Secured Party in connection therewith, together with interest thereon at the Secured Party's CoBank Base Rate plus
four percent per annum, shall become part of the Obligations secured hereby and be paid by the Debtor upon demand.


 


F.       Indemnification,
Etc. The Debtor hereby expressly indemnifies and holds the Secured Party harmless from any and all claims, causes of action,
or other proceedings, and from any and all liability, loss, damage, and expense of every nature, arising by reason of the Secured
Party's enforcement of its rights and remedies hereunder, or by reason of the Debtor's failure to comply with any environmental
or other law or regulation. As to any action taken by the Secured Party hereunder, the Secured Party shall not be liable for any
error of judgment or mistake of fact or law, absent gross negligence or willful misconduct on its part.


 


G.       Power
of Attorney. The Debtor hereby appoints the Secured Party or the Secured Party's designee as its attorney-in-fact, which appointment
is irrevocable, durable, and coupled with an interest, with full power of substitution, in the name of the Debtor or in the name
of the Secured Party, upon and during the existence of an Event of Default, to take any action which the Debtor is obligated to
perform hereunder or which the Secured Party may deem necessary or advisable to accomplish the purposes of this Security Agreement.
In taking any action in accordance with this Section, the Secured Party shall not be deemed to be the agent of the Debtor. The
powers conferred upon the Secured Party in this Section are solely to protect its interest in the Collateral and shall not impose
any duty upon the Secured Party to exercise any such powers.


 


H.       Continuing
Effect. This Security Agreement, the Secured Party's security interest in the Collateral, and all other documents or instruments
contemplated hereby shall continue in full force and effect until all of the Obligations have been satisfied in full, the Secured
Party has no commitment to make any further advances to the Debtor, and the Debtor has sent a valid written demand to the Secured
Party for termination of this Security Agreement.


 


 


 






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I.       Binding
Effect. This Security Agreement shall be binding upon and inure to the benefit of the Debtor and the Secured Party and their
respective successors and assigns.


 


J.       Security
Agreement as Financing Statement and Authorization to File. A photographic copy or other reproduction of this Security Agreement
may be used as a financing statement. In addition, the Debtor authorizes the Secured Party to prepare and file financing statements
describing the Collateral, amendments thereto, and continuation statements and file any financing statement, amendment thereto
or continuation statement electronically. In addition, the Debtor authorizes the Secured Party to file financing statements describing
any agricultural liens or other statutory liens held by the Secured Party.


 


K.       Governing
Law. Subject to any applicable federal law, this Security Agreement shall be construed in accordance with and governed by the
laws of the State of Colorado, except to the extent that the UCC provides for the application of the law of another state.


 


L.       Notices.
All notices, requests, demands, or other communications required or permitted hereunder shall be given as provided in Section
10.4 of the Agreement.


 


M.       Severability.
The determination that any term or provision of this Security Agreement is unenforceable or invalid shall not affect the enforceability
or validity of any other term or provision hereof.


 


IN WITNESS WHEREOF,
the Debtor has executed this Security Agreement by its duly authorized officer as of the day and year shown below.


 


	Date:	December 15, 2016	 	Debtor:	PACIFIC AURORA, LLC, a Delaware limited liability company, 
	 	 	 
	 	By:	/s/ Bryon T. McGregor
	 	 	Name:     Bryon T. McGregor
	 	 	
        Title:       Chief Financial Officer

	 	 	 
	 	 	 
	 	Debtor:	PACIFIC ETHANOL AURORA EAST, LLC, a Delaware limited liability company, 
	 	 	 
	 	By:	/s/ Bryon T. McGregor
	 	 	Name:     Bryon T. McGregor
	 	 	Title:       Chief Financial Officer
	 	 	 
	 		 
	 	Debtor:	PACIFIC ETHANOL AURORA WEST, LLC, a Delaware limited liability company, 
	 	 	 
	 	By:	/s/ Bryon T. McGregor
	 	 	Name:     Bryon T. McGregor
	 	 	Title:       Chief Financial Officer


 


 


 


 






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SCHEDULE A


 


To Security Agreement Dated December 15,
2016


 


Executed By: PACIFIC AURORA, LLC,
PACIFIC ETHANOL AURORA EAST, LLC and PACIFIC ETHANOL AURORA WEST, LLC


 





Set forth below are the present locations (by county and state)
of the Debtor’s fixtures.


 


 


 


	County:	Hamilton	State:	Nebraska


 


 


 


 


 


 


 


 


 


 






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SCHEDULE B


 


To Security Agreement Dated December 15,
2016


 


Executed By: PACIFIC AURORA, LLC,
PACIFIC ETHANOL AURORA EAST, LLC and PACIFIC ETHANOL AURORA WEST, LLC


 


 


Set forth below is an explanation of any
changes within the past one (1) year to the Debtor’s name, identity or corporate structure through incorporation, merger,
consolidation, joint venture or otherwise.


 


Pacific Aurora, LLC (“PAL”)


 


		1.	PAL was formed as a Delaware limited liability company on November 9, 2016.



 


Pacific Ethanol Aurora West, LLC (“AW”)


 


		1.	AW was formed on August 2, 2006, as a Delaware limited liability company named Aventine Renewable Energy – Aurora West,
LLC.



 


		2.	On July 15, 2015, AW filed a Certificate of Amendment with the Secretary of State of the State of Delaware, changing its name
from “Aventine Renewable Energy – Aurora West, LLC” to “Pacific Ethanol Aurora West, LLC.”



 


Pacific Ethanol Aurora East, LLC (“AE”)


 


		1.	AE was formed on November 1, 1993, as a Kansas limited liability company named Nebraska Energy, L.L.C.



 


		2.	On July 15, 2015, AE filed with the Secretary of State of the State of Delaware (a) a Certificate of Conversion from a Non-Delaware
Limited Liability Company to a Delaware Limited Liability Company, converting from Nebraska Energy, L.L.C., a Kansas limited liability
company to Pacific Ethanol Aurora East, LLC, a Delaware limited liability company and (b) a Limited Liability Company Certificate
of Formation forming Pacific Ethanol Aurora East, LLC, a Delaware limited liability company.



 


		3.	On July 15, 2015, AE filed a Certificate of Domestication to a Foreign State or Country with the Secretary of State of the
State of Kansas pursuant to its conversion from a Kansas limited liability company to a Delaware limited liability company.



 


 


 


 


 


 


 






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