Document:

Exhibit
10.3

GUARANTY

 

THIS GUARANTY is given as of April 16, 2013, by Twin Cities
Power Holdings, LLC, a Minnesota limited liability company, whose principal business office is located at 16233 Kenyon Avenue,
Suite 210, Lakeville, MN 55044 (“Guarantor”), to PJM Settlement, Inc (“PJM Settlement”), a Pennsylvania
Non-Profit Corporation, on behalf of itself and as agent for PJM Interconnection, L.L.C. (“PJM”), a Delaware limited
liability company, whose principal business office is located at 955 Jefferson Avenue, Valley Forge Corporate Center, Norristown,
Pennsylvania, 19403-2497.

 

RECITALS

 

WHEREAS, Twin Cities Power, LLC, whose principal business office
is located at 16233 Kenyon Avenue, Suite 210, Lakeville, MN 55044, will conduct business beginning as of the date of this Guaranty
with PJM pursuant to which Twin Cities Power, LLC may from time to time enter into power and/or related purchase and sale transactions
in the PJM Control Area; and

WHEREAS, pursuant to the PJM Open Access Transmission Tariff,
PJM Operating Agreement and/or the PJM Reliability Assurance Agreement among Load Serving Entities in the PJM Control Area, (the
“Agreements”), PJM Settlement and PJM is authorized to require Transmission Customers and PJM Members to provide and
maintain in effect appropriate creditworthiness arrangements; and

 

WHEREAS, PJM will accept Twin Cities Power, LLC as a member
or transmission customer only if payments, penalties, and other amounts owed by Twin Cities Power, LLC to PJM Settlement in connection
with the Agreements will be guaranteed by Guarantor;

 

WHEREAS, Guarantor will directly or indirectly benefit from
Twin Cities Power, LLC becoming a member or transmission customer of PJM and deems it to be in Guarantor’s best interest
to provide this guarantee to PJM Settlement; and

 

WHEREAS, Guarantor is willing to guarantee payments, penalties,
and other amounts owed by Twin Cities Power, LLC to PJM Settlement under the terms set forth below.

 

NOW THEREFORE, in consideration of the above premises and the
mutual promises and covenants contained below (which the Guarantor acknowledges constitute adequate consideration for its obligations
hereunder) the Guarantor, intending to be legally bound, agrees as follows:

 

	 	(1) 	Obligations of Guarantor.  Guarantor unconditionally guarantees to PJM Settlement the prompt and complete payment of all amounts owed to PJM Settlement by Summit Energy, LLC in regard to the Agreements (or any successor agreements).    If all or any part of such amounts is not paid by Summit Energy, LLC when due, Guarantor shall, upon the demand of PJM Settlement, immediately pay such amount.  This is a primary, absolute obligation of Guarantor enforceable by PJM Settlement, its successors and assigns, or any of its members on its behalf, regardless of Summit Energy, LLC’s ability or willingness to pay.

 

    	1

    	 

    

 

	 	(2)    	Duration.  This Guaranty shall continue in force until the entire indebtedness covered by this Guaranty is repaid in full to PJM Settlement and the Agreement is terminated.  PJM Settlement shall not be bound or obligated to exhaust its recourse against Summit Energy, LLC or other persons or take any other action before being entitled to demand performance by Guarantor hereunder.  This Guaranty shall continue to be effective even in the event of the insolvency, bankruptcy or reorganization of Summit Energy, LLC.  This Guaranty will also survive and be binding upon Guarantor following any merger, reorganization, consolidation or other change in Summit Energy, LLC's or Guarantor’s structure, personnel, business or affairs.
	 	(3)    	Remedies of PJM Settlement.  The rights and remedies of PJM Settlement under this Guaranty are cumulative and concurrent and shall not be exclusive of any other rights or remedies that PJM Settlement may have against Summit Energy, LLC or Guarantor.  No set-off, counterclaim, reduction or diminution of an obligation or any defense of any kind or nature that Guarantor has or may have against Summit Energy, LLC or PJM Settlement shall affect, modify or impair the obligations of Guarantor under this Guaranty.
	 	(4)    	Waivers.  Guarantor acknowledges that PJM Settlement will rely upon this Guaranty in accepting Summit Energy, LLC as a member or transmission customer under the Agreements.  Guarantor accordingly waives any claim or defense based upon lack of consideration.  Guarantor also irrecoverably waives presentment, demand, protest or other notice of any kind, including, without limitation, notice of acceptance of this Guaranty and notice of any claim or demand upon Summit Energy, LLC or Guarantor.  Without notice to Guarantor, PJM Settlement may extend the time for performance under any agreement with Summit Energy, LLC or modify, supplement or amend any agreement, and otherwise agree in any manner with Summit Energy, LLC without affecting Guarantor’s unconditional obligation under this Guaranty.
	 	(5)    	Effect of Bankruptcy.  In the event that, pursuant to any insolvency, bankruptcy, reorganization, receivership or other debtor relief law or any judgment, order or decision thereunder, PJM Settlement must rescind or restore any payment, or any part thereof, received by PJM Settlement, any prior release or discharge from the terms of this Agreement shall be with out effect, and this Agreement will remain in effect.
	 	(6)    	Miscellaneous.  This
Guaranty is for the benefit of PJM Settlement, its successors and assigns, and its members; and is binding upon Guarantor, its
successors and assigns, except that Guarantor may not assign or transfer any of its obligations under this Guaranty, whether by
operation of law or otherwise, without the prior written consent of PJM Settlement.  Guarantor will reimburse PJM Settlement
for any expenses incurred by PJM Settlement in enforcing this Guaranty, including reasonable legal fees.  If any provision
of this Guaranty is found by a court of competent jurisdiction to be prohibited or unenforceable, this Guaranty shall be ineffective
only to the extent of such prohibition or unenforceability and such shall not invalidate the balance of the Guaranty.  Guarantor
represents and warrants to PJM Settlement that the execution, delivery and performance of this Guaranty by Guarantor have been
duly authorized by all requisite corporate action of Guarantor.  Any Correspondence to the beneficiary should be sent
to the following address:

 

    	2

    	 

    

 

PJM Settlement, Inc.

955 Jefferson Ave

Valley Forge Corporate
Center

Norristown, Pa 19403-2497

Attn: Treasurer

 

 

IN WITNESS WHEREOF, Guarantor has caused this Guaranty to be
executed on its behalf by its duly authorized Officer as of the date shown above.

 

 

___,

 

 

	/s/Timothy Krieger	 
	(Signature)	 
	 	 
	Timothy Krieger	 
	(Printed Name)	 
	 	 
	CEO	 
	(Title)	 

 

    	3Pacific Ethanol, Inc.

400 Capitol Mall, Suite 2060

Sacramento, CA 95814

 

March 27, 2013

Holders of the Company’s

Series B Preferred Stock

Identified on Schedule 1 hereto

 

 

 

		Re:	Accrued Dividends

 

Gentlemen:

 

This letter agreement (the
“Letter Agreement”) is provided with respect to certain rights of the undersigned
holders (collectively, the “Holders”) of shares of Series B Cumulative Convertible
Preferred Stock, $.001 par value per share (the “Series B Preferred Stock”), of Pacific Ethanol, Inc. (the “Company”)
under the Company’s Certificate of Designations, Powers, Preferences, and Rights of the Series B Cumulative Convertible Preferred
Stock (the “Series B Certificate of Designations”).

 

The Series B Certificate of Designations provides
for the payment of quarterly cumulative dividends (“Cumulative Dividends”) with respect to the Series B Preferred
Stock. From January 1, 2009, through December 31, 2011, the Company did not pay Cumulative Dividends to the Holders. The Company
paid a total of $1,462,984 of the Cumulative Dividends as of December 31, 2012. Exhibit A attached sets forth the
sum of accrued and unpaid dividends with respect to each Holder as of March 13, 2013 (collectively, the “Unpaid Dividends”).

 

Notwithstanding any previous
agreement between the undersigned and the Company and subject to the terms and conditions set forth herein, each of the undersigned
Holders desires to forbear from exercising rights, if any, held by such Holder with respect to the Unpaid Dividends.

 

In consideration of each Holder’s
agreement to forbear from exercising its rights, the Company agrees to pay $731,492 of the Unpaid Dividends as provided below.

 

In consideration of the mutual
covenants herein contained, and for other valuable consideration the receipt and sufficiency of which is hereby acknowledged, the
parties hereby agree as follows:

 

    	 

    	 

    

Holders of the Company’s Series B Preferred
Stock

Page 2

 

 

1.                 
Forbearance. Subject to the delivery of the Shares in accordance with Paragraph 3, each Holder agrees
that until the earlier to occur of (i) September 30, 2014, or (ii) the occurrence of any Forbearance Default (as hereinafter defined)
(the “Forbearance Period”), each Holder will forbear from exercising any and all of its respective rights and
remedies against the Company with respect to any remaining Unpaid Dividends, including, but not limited to, demanding payment of
any Unpaid Dividends and bringing any action or claim with respect to any Unpaid Dividends.

 

2.                 
Tolling. The parties hereto stipulate, covenant, and agree that the running of any and all affirmative defenses
of the Company based on (a) any statutes of limitation, (b) the doctrine of laches, or (c) any failure of the Holders to institute
or commence litigation or other legal proceedings within some specified period, before a specified date, or before the happening
of a specified event, applicable to all claims or causes of action that any Holder may be entitled to take or bring in order to
enforce or otherwise arising out of or relating to their respective rights and remedies against the Company with respect to the
Unpaid Dividends is, to the fullest extent permitted by law, tolled and suspended during the Forbearance Period.

 

3.                 
Payment of Dividend; Delivery of Shares. The Company shall pay to each Holder the sum set opposite the Holder’s
name on the signature page hereto (the “Payment”) by issuing and delivering to each such Holder the number of shares
(collectively, the “Shares”) of the Company’s common stock (the “Common Stock”) equal
to the quotient obtained by dividing (a) the Payment, by (b) $0.35. The offering and issuance of the Shares (the “Offering”)
are being made pursuant to (a) an effective Registration Statement on Form S-3 (File No. 333-180731) (including the prospectus
contained therein), filed by the Company with the Securities and Exchange Commission (the “Commission”), and
(b) a prospectus supplement containing certain supplemental information regarding the terms of the Offering of the Shares, that
will be filed with the Commission on the date hereof and delivered to each Holder (or may available to each Holder by the filing
by the Company of an electronic version thereof with the Commission). On the day that is the third Trading Day after the date hereof,
the Company shall deliver to each Holder that number of Shares set forth opposite such Holder’s name on the signature page
hereto through the facilities of the Depository Trust Company’s DWAC system. For purposes hereof, the term “Trading
Day” shall mean any day on which the Common Stock is traded on the principal securities exchange or securities market
on which the Common Stock is then traded.

 

4.                 
Acknowledgment of Non-Payment; Non-Waiver. By executing this Letter Agreement, the Company acknowledges and
agrees that, except as expressly provided herein, (a) the Holders’ rights under the Series B Certificate of Designations
have not been waived by the Holders, and (b) no Holder has made and is not making any commitment, and there is no understanding,
explicit or implicit, relating to, or affecting, any forbearance or any other matter beyond that set forth in this Letter Agreement.

 

    	 

    	 

    

Holders of the Company’s Series B Preferred
Stock

Page 3

 

 

5.                 
Full Force and Effect. Except as otherwise provided herein, the Series B Certificate of Designations shall
remain unchanged and in full force and effect. Except as expressly set forth above, nothing in this Letter Agreement shall be construed
as a waiver of any rights of any of the parties to this Letter Agreement under the Series B Certificate of Designations.

 

6.                 
Forbearance Default. As used herein, “Forbearance Default” means any of the following:

 

a.      
The Company fails to timely perform or observe any requirement of this Letter Agreement or the documents, instruments and
agreements executed in connection herewith;

 

b.     
The Company fails to pay future Cumulative Dividends on a timely basis in accordance with the Series B Certificate of Designation;

 

c.      
The Company dissolves, liquidates, winds up, or otherwise ceases its on-going business operations; or

 

d.     
The Company (or any subsidiary): (i) makes a transfer in fraud of creditors, or makes an assignment for the benefit of creditors;
(ii) has a receiver, trustee or custodian appointed for, or take possession of, all or substantially all of the assets of the Company,
either in a proceeding brought by such party or in a proceeding brought against such party and such appointment is not discharged
or such possession is not terminated within sixty (60) calendar days after the effective date thereof or such party consents to
or acquiesces in such appointment or possession; (iii) files a petition for relief under any Insolvency Law or an involuntary petition
for relief is filed against such party under any Insolvency Law and such involuntary petition is not dismissed within sixty (60)
calendar days after the filing thereof, or an order for relief naming such party is entered under any Insolvency Law, or any composition,
rearrangement, extension, reorganization or other relief of debtors now or hereafter existing is requested or consented to by such
party; (iv) fails to have discharged within a period of thirty (30) calendar days any attachment, sequestration or similar writ
levied upon any property of such party in an amount exceeding $1,000,000; or (v) fails to pay within thirty (30) calendar days
any final money judgment against such party in an amount exceeding $1,000,000. (For purposes hereof, “Insolvency Law”
means Title 11 of the United States Code (or any successor law) or any similar applicable law providing for bankruptcy, insolvency,
conservatorship, receivership or other similar debtor’s relief.)

 

    	 

    	 

    

Holders of the Company’s Series B Preferred
Stock

Page 4

 

 

7.               Entire Agreement. This Letter Agreement constitutes the entire agreement between the parties with respect
to the subject matter hereof and supersedes any prior understandings, agreements or representations by or between the parties,
written or oral, to the extent they relate in any way to the subject matter hereof.

 

8.               Amendments and Waivers; Severability. This Letter Agreement may not be amended or modified, and no provisions
hereof may be waived, without the written consent of the Company and each of the Holders. No action taken pursuant to this Letter
Agreement shall be deemed to constitute a waiver by the party taking such action of compliance with any representation, warranty,
covenant or agreement contained herein. The waiver by any party hereto of a breach of any provision of this Letter Agreement shall
not operate or be construed as a further or continuing waiver of such breach or as a waiver of any other or subsequent breach.
No failure on the part of any party to exercise, and no delay in exercising, any right, power or remedy hereunder shall operate
as a waiver thereof, nor shall any single or partial exercise of such right, power or remedy by such party preclude any other or
further exercise thereof or the exercise of any other right, power or remedy. All remedies hereunder are cumulative and are not
exclusive of any other remedies provided by law.

 

9.               Governing
Law. This Letter Agreement shall be governed by, and construed, interpreted and enforced in accordance with, the laws
of the State of Delaware, without giving effect to the principles of conflicts of laws thereunder which would specify the application
of the law of another jurisdiction.

 

10.             Counterparts. This Letter Agreement may be executed, including by facsimile signature, in one or more counterparts,
each of which shall be deemed an original but all of which together will constitute one and the same instrument.

 

 

[Signatures Follow.]

 

 

 

    	 

    	 

    

Holders of the Company’s Series B Preferred
Stock

Page 5

 

 

In witness whereof, the
parties have executed this Letter Agreement as of the first date set forth above.

 

	 	PACIFIC ETHANOL, INC.	 
	 	 	 	 
	 	 	 	 
	 	 	 	 
		By: 	/s/ NEIL M. KOEHLER	 
	 	 	Neil M. Koehler, Chief Executive Officer	 
	 	 	 	 
	 	 	 	 

 

 

	HOLDERS:	 	PAYMENT AMOUNT:
	 	 	 
	
        Lyles United, LLC

         
	 	 
	By:  	/s/ WILL LYLES	 	$367,068
	
        Name: Will Lyles

        Title: V.P.
	 	 
	 	 	 
	 	 	 
	 	 	 
	/s/ FRANK P. GREINKE	 	$189,656
	
        Frank P. Greinke, as Trustee under

        the Greinke Personal Living Trust
	 	 
	 	 	 
	 	 	 
	/s/ ROBERT W. BOLLAR	 	$27,009
	
        Robert W. Bollar, as Trustee of the

        Bollar Living Trust
	 	 
	 	 	 
	 	 	 
	/s/ MIMI S. TAYLOR	 	$27,009
	Mimi S. Taylor	 	 
	 	 	 
	 	 	 
	/s/ NEIL M. KOEHLER	 	$105,000
	Neil M. Koehler	 	 

 

[SIGNATURES CONTINUED ON FOLLOWING PAGE]

 

    	 

    	 

    

Holders of the Company’s Series B Preferred
Stock

Page 6

 

 

	 	 	 
	/s/ BILL JONES	 	$5,250
	Bill Jones	 	 
	 	 	 
	/s/ PAUL P. KOEHLER	 	$5,250
	Paul P. Koehler	 	 
	 	 	 
	/s/ THOMAS D. KOEHLER	 	$5,250
	Thomas D. Koehler	 	 

 

 

 

 

    	 

    	 

    

Schedule
1

Holders of Series B Preferred Stock

 

William M. Lyles IV

Lyles United, LLC

1210 West Olive Avenue

Fresno, CA 93728

 

Frank P. Greinke, Trustee, Greinke Personal Living Trust

P.O. Box 4159

1800 W. Katella, Ste. 400

Orange, CA 92863

 

Robert W. Bollar, Trustee, Bollar Living Trust

P.O. Box 4159

1800 W. Katella, Ste. 400

Orange, CA 92863

 

Mimi S. Taylor

P.O. Box 4159

1800 W. Katella, Ste. 400

Orange, CA 92863

 

Neil M. Koehler

c/o Pacific Ethanol, Inc.

400 Capitol Mall, Suite 2060

Sacramento, CA 95814

 

William L. Jones

c/o Pacific Ethanol, Inc.

400 Capitol Mall, Suite 2060

Sacramento, CA 95814

 

Paul P. Koehler

c/o Pacific Ethanol, Inc.

400 Capitol Mall, Suite 2060

Sacramento, CA 95814

 

Thomas D. Koehler

c/o Pacific Ethanol, Inc.

400 Capitol Mall, Suite 2060

Sacramento, CA 95814

 

 

    	 

    	 

    

Exhibit
A

Unpaid Dividends at March 13, 2013

 

	Lyles United	 	$	2,936,547	 
	Greinke Trust	 	 	1,517,251	 
	Neil Koehler	 	 	839,999	 
	Bill Jones	 	 	41,998	 
	Paul Koehler	 	 	41,998	 
	Tom Koehler	 	 	41,998	 
	Bollar Trust	 	 	216,073	 
	Mimi S. Taylor	 	 	216,073	 
	TOTAL	 	$	5,851,937

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00217-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00217-of-00352.parquet"}]]