Exhibit 4.1


 


Description of Registrant’s Securities



Registered Pursuant to Section 12 of
the 


Securities Exchange Act of 1934


 


The following is a description of the common
stock of Pacific Ethanol, Inc., our only class of securities registered under Section 12 of the Securities Exchange Act of 1934,
as amended. The description is a summary, does not purport to be complete and is subject to and qualified in its entirety by reference
to Delaware law and to our certificate of incorporation, including our Certificate of Designations, Powers, Preferences and Rights
of the Series A Preferred Stock, or Series A Certificate of Designations, our Certificate of Designations, Powers, Preferences
and Rights of the Series B Preferred Stock, or Series B Certificate of Designations, and our bylaws, as amended, copies of which
are filed as exhibits to our Annual Report on Form 10-K for the fiscal year ended December 31, 2019 and are incorporated by reference
herein.


 


References to the following discussion
to “we”, “our” and “us” and similar references mean Pacific Ethanol, Inc., a Delaware corporation.


 


Authorized Capital Stock 


 


Our authorized capital stock consists of
300,000,000 shares of common stock, $0.001 par value per share, 3,553,000 shares of non-voting common stock, $0.001 par value per
share, and 10,000,000 shares of preferred stock, $0.001 par value per share, of which 1,684,375 shares are designated as Series
A Cumulative Redeemable Convertible Preferred Stock, or Series A Preferred Stock, and 1,580,790 shares are designated as Series
B Cumulative Convertible Preferred Stock, or Series B Preferred Stock.


 


Common Stock


 


All outstanding shares of our common stock
are fully paid and nonassessable. The following summarizes the rights of holders of our common stock:


 


		●	a holder of common stock is entitled to one vote per share on all matters to be voted upon generally
by the stockholders;



 


		●	subject to preferences that may apply to shares of preferred stock outstanding, the holders of
common stock are entitled to receive lawful dividends as may be declared by our board;



 


		●	upon our liquidation, dissolution or winding up, the holders of shares of common stock are entitled
to receive a pro rata portion of all our assets remaining for distribution after satisfaction of all our liabilities and the payment
of any liquidation preference of any outstanding preferred stock;



 


		●	there are no redemption or sinking fund provisions applicable to our common stock; and



 


		●	there are no preemptive or conversion rights applicable to our common stock.



 


Non-Voting Common Stock


 


The rights and preferences of shares
of our non-voting common are substantially the same in all respects to the rights and preferences of shares of our common
stock, except that (i) the holders of shares of non-voting common stock are not be entitled to vote, (ii) shares of
non-voting common stock are convertible into shares of common stock, and (iii) shares of non-voting common stock are not
listed on any stock exchange, including The Nasdaq Capital Market.


 






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The following summarizes the rights of
holders of our non-voting common stock:


 


		●	a holder of non-voting common stock is not entitled to vote on any matter submitted to a vote of
the stockholders, however such holders are entitled to prior notice of, and to attend and observe, all meetings of the stockholders;



 


		●	subject to preferences that may apply to shares of preferred stock issued and outstanding, the
holders of non-voting common stock are entitled to receive lawful dividends as may be declared by the board on parity in all respects
with the holders of common stock, provided that if the holders of common stock become entitled to receive a divided or distribution
of shares of common stock, holders of non-voting common stock shall receive, in lieu of the shares of common stock, an equal number
of shares of non-voting common stock;



 


		●	upon liquidation, dissolution or winding up Pacific Ethanol, the holders of shares of common stock
and non-voting common stock will be entitled to receive a pro rata portion of all of our assets remaining for distribution after
satisfaction of all our liabilities and the payment of any liquidation preference of any outstanding preferred stock;



 


		●	there are no redemption or sinking fund provisions applicable to our non-voting common stock; and



 


		●	there are no preemptive rights applicable to our non-voting common stock.



 


Conversion


 


Each share of non-voting common stock is
convertible at the option of the holder into one share of our common stock at any time. The conversion price is subject to customary
adjustment for stock splits, stock combinations, stock dividends, mergers, consolidations, reorganizations, share exchanges, reclassifications,
distributions of assets and issuances of convertible securities, and the like.


 


No shares of non-voting common stock may
be converted into common stock if the holder of such shares or any of its affiliates would, after such conversion, beneficially
own in excess of 9.99% of our outstanding shares of common stock (sometimes referred to as the Blocker). The Blocker applicable
to the conversion of shares of non-voting common stock may be raised or lowered at the option of the holder to any percentage not
in excess of 9.99%, except that any increase will only be effective upon 61-days’ prior notice to us.


 


When shares of non-voting common stock
cease to be held by the initial holder or an affiliate of an initial holder of such shares, such shares shall automatically convert
into one share of our common stock.


 


Preferred Stock


 


Our board is authorized to issue from
time to time, in one or more designated series, any or all of our authorized but unissued shares of preferred stock with
dividend, redemption, conversion, exchange, voting and other provisions as may be provided in that particular series. The
issuance need not be approved by our common stockholders and need only be approved by holders, if any, of our Series A
Preferred Stock and Series B Preferred Stock if, as described below, the shares of preferred stock to be issued have
preferences that are senior to or on parity with those of our Series A Preferred Stock and Series B Preferred Stock.


 






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The rights of the holders of our common
stock, Series A Preferred Stock and Series B Preferred Stock will be subject to, and may be adversely affected by, the rights of
the holders of any preferred stock that may be issued in the future. Issuance of a new series of preferred stock, while providing
desirable flexibility in connection with possible acquisitions and other corporate purposes, could have the effect of entrenching
our board and making it more difficult for a third-party to acquire, or discourage a third-party from acquiring, a majority of
our outstanding voting stock. The following is a summary of the terms of the Series A Preferred Stock and the Series B Preferred
Stock.


 


Series B Preferred Stock


 


The rights and preferences of the Series
B Preferred Stock are outlined below.


 


Rank and Liquidation Preference


 


Shares of Series B Preferred Stock rank
prior to our common stock as to distribution of assets upon liquidation events, which include a liquidation, dissolution or winding
up of Pacific Ethanol, whether voluntary or involuntary. The liquidation preference of each share of Series B Preferred Stock is
equal to $19.50, or the Series B Issue Price, plus any accrued but unpaid dividends on the Series B Preferred Stock. If assets
remain after the amounts are distributed to the holders of Series B Preferred Stock, the assets shall be distributed pro rata,
on an as-converted to common stock basis, to the holders of our common stock and Series B Preferred Stock. The written consent
of a majority of the outstanding shares of Series B Preferred Stock is required before we can authorize the issuance of any class
or series of capital stock that ranks senior to or on parity with shares of Series B Preferred Stock.


 


Dividend Rights


 


As long as shares of Series B Preferred
Stock remain outstanding, each holder of shares of Series B Preferred Stock are entitled to receive, and shall be paid quarterly
in arrears, in cash out of funds legally available therefor, cumulative dividends, in an amount equal to 7.0% of the Series B Issue
Price per share per annum with respect to each share of Series B Preferred Stock. The dividends may, at our option, be paid in
shares of Series B Preferred Stock valued at the Series B Issue Price. In the event we declare, order, pay or make a dividend or
other distribution on our common stock, other than a dividend or distribution made in common stock, the holders of the Series B
Preferred Stock shall be entitled to receive with respect to each share of Series B Preferred Stock held, any dividend or distribution
that would be received by a holder of the number of shares of our common stock into which the Series B Preferred Stock is convertible
on the record date for the dividend or distribution.


 


The Series B Preferred Stock ranks pari
passu with respect to dividends and liquidation rights with the Series A Preferred Stock and pari passu with respect to any class
or series of capital stock specifically ranking on parity with the Series B Preferred Stock.


 


Optional Conversion Rights


 


Each share of Series B Preferred
Stock is convertible at the option of the holder into shares of our common stock at any time. Each share of Series B
Preferred Stock is convertible into the number of shares of common stock as calculated by multiplying the number of shares of
Series B Preferred Stock to be converted by the Series B Issue Price, and dividing the result thereof by the conversion
price. The conversion price was initially $682.50 per share of Series B Preferred Stock, subject to adjustment; therefore,
each share of Series B Preferred Stock was initially convertible into approximately 0.03 shares of common stock, which number
is equal to the quotient of the Series B Issue Price of $19.50 divided by the initial conversion price of $682.50 per share
of Series B Preferred Stock. Accrued and unpaid dividends are to be paid in cash upon any conversion.


 






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Mandatory Conversion Rights


 


In the event of a transaction which will
result in an internal rate of return to holders of Series B Preferred Stock of 25% or more, each share of Series B Preferred Stock
shall, concurrently with the closing of the Transaction, be converted into shares of common stock. A “Transaction”
is defined as a sale, lease, conveyance or disposition of all or substantially all of our capital stock or assets or a merger,
consolidation, share exchange, reorganization or other transaction or series of related transactions (whether involving us or a
subsidiary) in which the stockholders immediately prior to the transaction do not retain a majority of the voting power in the
surviving entity. Any mandatory conversion will be made into the number of shares of common stock determined on the same basis
as the optional conversion rights above. Accrued and unpaid dividends are to be paid in cash upon any conversion.


 


No shares of Series B Preferred Stock will
be converted into common stock on a mandatory basis unless at the time of the proposed conversion we have on file with the SEC
an effective registration statement with respect to the shares of common stock issued or issuable to the holders on conversion
of the Series B Preferred Stock then issued or issuable to the holders and the shares of common stock are eligible for trading
on The Nasdaq Stock Market (or approved by and listed on a stock exchange approved by the holders of 66 2/3% of the then outstanding
shares of Series B Preferred Stock).


 


Conversion Price Adjustments


 


The conversion price is subject to customary
adjustment for stock splits, stock combinations, stock dividends, mergers, consolidations, reorganizations, share exchanges, reclassifications,
distributions of assets and issuances of convertible securities, and the like. The conversion price is also subject to downward
adjustments if we issue shares of common stock or securities convertible into or exercisable for shares of common stock, other
than specified excluded securities, at per share prices less than the then effective conversion price. In this event, the conversion
price shall be reduced to the price determined by dividing (i) an amount equal to the sum of (a) the number of shares of common
stock outstanding immediately prior to the issue or sale multiplied by the then existing conversion price, and (b) the consideration,
if any, received by us upon such issue or sale, by (ii) the total number of shares of common stock outstanding immediately after
the issue or sale. For purposes of determining the number of shares of common stock outstanding as provided in clauses (i) and
(ii) above, the number of shares of common stock issuable upon conversion of all outstanding shares of Series B Preferred Stock,
and the exercise of all outstanding securities convertible into or exercisable for shares of common stock, will be deemed to be
outstanding.


 


The conversion price will not be adjusted
in the case of the issuance or sale of the following: (i) securities issued to our employees, officers or directors or options
to purchase common stock granted by us to our employees, officers or directors under any option plan, agreement or other arrangement
duly adopted by us and the grant of which is approved by the compensation committee of our board; (ii) the Series B Preferred Stock
and any common stock issued upon conversion of the Series B Preferred Stock; (iii) securities issued on the conversion of any convertible
securities, in each case, outstanding on the date of the filing of the Series B Certificate of Designations; and (iv) securities
issued in connection with a stock split, stock dividend, combination, reorganization, recapitalization or other similar event for
which adjustment is made in accordance with the foregoing.


 






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Voting Rights and Protective Provisions


 


The Series B Preferred Stock votes together
with all other classes and series of our voting stock as a single class on all actions to be taken by our stockholders. Each share
of Series B Preferred Stock entitles the holder thereof to the number of votes equal to the number of shares of common stock into
which each share of Series B Preferred Stock is convertible on all matters to be voted on by our stockholders, however, the number
of votes for each share of Series B Preferred Stock may not exceed the number of shares of common stock into which each share of
Series B Preferred Stock would be convertible if the applicable conversion price were $682.50 (subject to appropriate adjustment
for stock splits, stock dividends, combinations and other similar recapitalizations affecting the shares).


 


We are not permitted, without first obtaining
the written consent of the holders of at least a majority of the then outstanding shares of Series B Preferred Stock voting as
a separate class, to:


 


		●	increase or decrease the total number of authorized shares of Series B Preferred Stock or the authorized
shares of our common stock reserved for issuance upon conversion of the Series B Preferred Stock (except as otherwise required
by our certificate of incorporation or the Series B Certificate of Designations);



 


		●	increase or decrease the number of authorized shares of preferred stock or common stock (except
as otherwise required by our certificate of incorporation or the Series B Certificate of Designations);



 


		●	alter, amend, repeal, substitute or waive any provision of our certificate of incorporation or
our bylaws, so as to affect adversely the voting powers, preferences or other rights, including the liquidation preferences, dividend
rights, conversion rights, redemption rights or any reduction in the stated value of the Series B Preferred Stock, whether by merger,
consolidation or otherwise;



 


		●	authorize, create, issue or sell any securities senior to or on parity with the Series B Preferred
Stock or securities that are convertible into securities senior to or on parity the Series B Preferred Stock with respect to voting,
dividend, liquidation or redemption rights, including subordinated debt;



 


		●	authorize, create, issue or sell any securities junior to the Series B Preferred Stock other than
common stock or securities that are convertible into securities junior to Series B Preferred Stock other than common stock with
respect to voting, dividend, liquidation or redemption rights, including subordinated debt;



 


		●	authorize, create, issue or sell any additional shares of Series B Preferred Stock other than the
Series B Preferred Stock initially authorized, created, issued and sold, Series B Preferred Stock issued as payment of dividends
and Series B Preferred Stock issued in replacement or exchange therefore;



 


		●	engage in a Transaction that would result in an internal rate of return to holders of Series B
Preferred Stock of less than 25%;



 


		●	declare or pay any dividends or distributions on our capital stock in a cumulative amount in excess
of the dividends and distributions paid on the Series B Preferred Stock in accordance with the Series B Certificate of Designations;



 


		●	authorize or effect the voluntary liquidation, dissolution, recapitalization, reorganization or
winding up of our business; or



 


		●	purchase, redeem or otherwise acquire any of our capital stock other than Series B Preferred Stock,
or any warrants or other rights to subscribe for or to purchase, or any options for the purchase of, our capital stock or securities
convertible into or exchangeable for our capital stock.



 






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Reservation of Shares


 


We initially were required to reserve 3,000,000
shares of common stock for issuance upon conversion of shares of Series B Preferred Stock and are required to maintain a sufficient
number of reserved shares of common stock to allow for the conversion of all shares of Series B Preferred Stock.


 


Series A Preferred Stock


 


The rights and preferences of the Series
A Preferred Stock are substantially the same as the Series B Preferred Stock, except as follows:


 


		●	the Series A Issue Price, on which the Series A Preferred Stock liquidation preference is based,
is $16.00 per share;



 


		●	dividends accrue and are payable at a rate per annum of 5.0% of the Series A Issue Price per share;



 


		●	each share of Series A Preferred Stock is convertible at a rate equal to the Series A Issue Price
divided by an initial conversion price of $840.00 per share;



 


		●	holders of the Series A Preferred Stock have a number of votes equal to the number of shares of
common stock into which each share of Series A Preferred Stock is convertible on all matters to be voted on by our stockholders,
voting together as a single class; provided, however, that the number of votes for each share of Series A Preferred Stock shall
not exceed the number of shares of common stock into which each share of Series A Preferred Stock would be convertible if the applicable
conversion price were $943.95 (subject to appropriate adjustment for stock splits, stock dividends, combinations and other similar
recapitalizations affecting the shares); and



 


		●	we are not permitted, without first obtaining the written consent of the holders of at least a
majority of the then outstanding shares of Series A Preferred Stock voting as a separate class, to:



 


		●	change the number of members of our board to be more than nine members or less than seven members;



 


		●	effect any material change in our industry focus or that of our subsidiaries, considered on a consolidated
basis;



 


		●	authorize or engage in, or permit any subsidiary to authorize or engage in, any transaction or
series of transactions with one of our or our subsidiaries’ current or former officers, directors or members with value in
excess of $100,000, excluding compensation or the grant of options approved by our board; or



 


		●	authorize or engage in, or permit any subsidiary to authorize or engage in, any transaction with
any entity or person that is affiliated with any of our or our subsidiaries’ current or former directors, officers or members,
excluding any director nominated by the initial holder of the Series B Preferred Stock.



 






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Preemptive Rights


 


Holders of our Series A Preferred Stock
have preemptive rights to purchase a pro rata portion of all capital stock or securities convertible into capital stock that we
issue, sell or exchange, or agree to issue, sell or exchange, or reserve or set aside for issuance, sale or exchange. We must deliver
each holder of our Series A Preferred Stock a written notice of any proposed or intended issuance, sale or exchange of capital
stock or securities convertible into capital stock which must include a description of the securities and the price and other terms
upon which they are to be issued, sold or exchanged together with the identity of the persons or entities (if known) to which or
with which the securities are to be issued, sold or exchanged, and an offer to issue and sell to or exchange with the holder of
the Series A Preferred Stock the holder’s pro rata portion of the securities, and any additional amount of the securities
should the other holders of Series A Preferred Stock subscribe for less than the full amounts for which they are entitled to subscribe.
In the case of a public offering of our common stock for a purchase price of at least $12.00 per share and a total gross offering
price of at least $50 million, the preemptive rights of the holders of the Series A Preferred Stock shall be limited to 50% of
the securities. Holders of our Series A Preferred Stock have a 30 day period during which to accept the offer. We will have 90
days from the expiration of this 30 day period to issue, sell or exchange all or any part of the securities as to which the offer
has not been accepted by the holders of the Series A Preferred Stock, but only as to the offerees or purchasers described in the
offer and only upon the terms and conditions that are not more favorable, in the aggregate, to the offerees or purchasers or less
favorable to us than those contained in the offer.


 


The preemptive rights of the holders of
the Series A Preferred Stock do not apply to any of the following securities: (i) securities issued to our employees, officers
or directors or options to purchase common stock granted by us to our employees, officers or directors under any option plan, agreement
or other arrangement duly adopted by us and the grant of which is approved by the compensation committee of our board; (ii) the
Series A Preferred Stock and any common stock issued upon conversion of the Series A Preferred Stock; (iii) securities issued on
the conversion of any convertible securities, in each case, outstanding on the date of the filing of the Series A Certificate of
Designations; (iv) securities issued in connection with a stock split, stock dividend, combination, reorganization, recapitalization
or other similar event for which adjustment is made in accordance with the Series A Certificate of Designations; and (v) the issuance
of our securities issued for consideration other than cash as a result of a merger, consolidation, acquisition or similar business
combination by us approved by our board.


 


Anti-Takeover Effects of Delaware Law
and Our Certificate of Incorporation and Bylaws


 


A number of provisions of Delaware law,
our certificate of incorporation and our bylaws contain provisions that could have the effect of delaying, deferring and discouraging
another party from acquiring control of Pacific Ethanol. These provisions, which are summarized below, are expected to discourage
coercive takeover practices and inadequate takeover bids. These provisions are also designed to encourage persons seeking to acquire
control of Pacific Ethanol to first negotiate with our board. We believe that the benefits of increased protection of our potential
ability to negotiate with an unfriendly or unsolicited acquiror outweigh the disadvantages of discouraging a proposal to acquire
Pacific Ethanol because negotiation of these proposals could result in an improvement of their terms. However, the existence of
these provisions also could limit the price that investors might be willing to pay for our securities.


 






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Undesignated Preferred Stock


 


The ability to authorize undesignated
preferred stock makes it possible for our board to issue preferred stock with voting or other rights or preferences that
could impede the success of any attempt to acquire us. These and other provisions may have the effect of deferring hostile
takeovers or delaying changes in control or management of Pacific Ethanol.


 


Advance Notice Requirements for Stockholder
Proposals and Director Nominations


 


Our bylaws provide that a stockholder seeking
to bring business before an annual meeting of stockholders, or to nominate candidates for election as directors, must provide timely
notice of such stockholder’s intention in writing. To be timely, a stockholder nominating individuals for election to the
board or proposing business must provide advanced notice to Pacific Ethanol (a) not later than the close of business on the 90th
day, nor earlier than the close of business on the 120th day in advance of the anniversary of the previous year’s annual
meeting if such meeting is to be held on a day which is not more than thirty (30) days in advance of the anniversary of the previous
year’s annual meeting or not later than seventy (70) days after the anniversary of the previous year’s annual meeting,
and (b) with respect to any other annual meeting of stockholders, the close of business on the 10th day following the date of public
disclosure of the date of such meeting. In the event we call a special meeting of stockholders for the purpose of electing one
or more directors to the board, any stockholder entitled to vote in such election of directors may nominate a person or persons
(as the case may be) for election to such position(s) as specified in our notice of meeting, if the stockholder’s notice
is delivered to us not later than the close of business on the 90th day prior to such special meeting and not earlier than the
close of business on the later of the 120th day prior to such special meeting or the 10th day following the date of public disclosure
of the date of the special meeting and of the nominees proposed by the board to be elected at such meeting.


 


Delaware Anti-Takeover Statute


 


We are subject to the provisions of Section
203 of the Delaware General Corporation Law (sometimes referred to as Section 203) regulating corporate takeovers. In general,
Section 203 prohibits a publicly-held Delaware corporation from engaging, under specified circumstances, in a business combination
with an interested stockholder for a period of three years following the date the person became an interested stockholder unless:


 


		●	prior to the date of the transaction, the board of directors of the corporation approved either
the business combination or the transaction which resulted in the stockholder becoming an interested stockholder;



 


		●	upon consummation of the transaction that resulted in the stockholder becoming an interested stockholder,
the stockholder owned at least 85% of the voting stock of the corporation outstanding at the time the transaction commenced, excluding
for purposes of determining the number of shares of voting stock outstanding (but not the outstanding voting stock owned by the
stockholder) (1) shares owned by persons who are directors and also officers and (2) shares owned by employee stock plans in which
employee participants do not have the right to determine confidentially whether shares held subject to the plan will be tendered
in a tender or exchange offer; or



 


		●	on or subsequent to the date of the transaction, the business combination is approved by the board
and authorized at an annual or special meeting of stockholders, and not by written consent, by the affirmative vote of at least
66-2/3% of the outstanding voting stock that is not owned by the interested stockholder.



 






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Generally, a business combination
includes a merger, asset or stock sale, or other transaction resulting in a financial benefit to the interested stockholder.
An interested stockholder is a person who, together with affiliates and associates, owns or, within three years prior to the
determination of interested stockholder status, did own 15% or more of a corporation’s outstanding voting securities.
We expect the existence of this provision to have an anti-takeover effect with respect to transactions the board does not
approve in advance. We also anticipate that Section 203 may also discourage attempts that might result in a premium over the
market price for the shares of our common stock held by stockholders.


 


The provisions of Delaware law, our certificate
of incorporation and our bylaws could have the effect of discouraging others from attempting hostile takeovers and, as a consequence,
they may also inhibit temporary fluctuations in the market price of our common stock that often result from actual or rumored hostile
takeover attempts. These provisions may also have the effect of preventing changes in our management. It is possible that these
provisions could make it more difficult to accomplish transactions that stockholders may otherwise deem to be in their best interests.


 


Choice of Forum 


 


Our bylaws provides that, unless we consent
in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware shall be the sole and exclusive
forum for (i) any derivative action or proceeding brought on behalf of the corporation (ii) any action asserting a claim of breach
of a fiduciary duty owed by any of director, officer or other employee of the corporation to the corporation or the corporation’s
stockholders, (iii) any action asserting a claim arising pursuant to any provision of the Delaware General Corporation Law, or
(iv) any action asserting a claim governed by the internal affairs doctrine.


 


Transfer Agent and Registrar 


 


American Stock Transfer & Trust Company,
LLC serves as the transfer agent and registrar for our common stock.


 


Listing


 


Our common stock is listed on The Nasdaq Capital Market under
the symbol “PEIX.”


 


 


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