Document:

Exhibit

EMPLOYMENT AGREEMENT

This EMPLOYMENT AGREEMENT, by and between CEC Entertainment, Inc., a Kansas corporation (the “Company”), and David McKillips (“Executive”) (collectively the “Parties”) is made as of January 4, 2020. 
WHEREAS, the Parties desire to enter into this employment agreement (the “Agreement”) pursuant to the terms, provisions and conditions set forth herein. 
NOW, THEREFORE, in consideration of the premises and of the mutual covenants, understandings, representations, warranties, undertakings and promises hereinafter set forth, intending to be legally bound thereby, the Parties agree as follows: 
1.Employment Period. 
Subject to earlier termination in accordance with Section 3 of this Agreement, the Executive shall be employed by the Company for a period commencing on  January 21, 2020 (the “Commencement Date”) and ending on the second anniversary of the Commencement Date (the “Employment Period”); provided that, on such second anniversary of the Commencement Date and each annual anniversary thereafter (such date and each annual anniversary thereof, a “Renewal Date”), the Employment Period shall be deemed to be automatically extended, upon the same terms and conditions, for successive periods of one year, unless either party provides written notice of its intention not to extend the term of the Agreement at least 60 days prior to the applicable Renewal Date (a “Notice of Non-Extension”). Upon Executive’s termination of employment with the Company for any reason, Executive shall immediately resign all positions with the Company or any of its subsidiaries or affiliates, including any position as a member of the Company’s Board of Directors (the “Board”) and the Board of Directors of Queso Holdings Inc., a Delaware corporation (“Holdings”).
2.    Terms of Employment. 
(a)    Position. During the Employment Period, Executive shall serve as Chief Executive Officer of the Company and will perform such duties and exercise such supervision with regard to the business of the Company as are associated with such position, including such duties as may be prescribed from time to time by the Board. Executive shall report directly to the Board and if reasonably requested by the Board, Executive hereby agrees to serve (without additional compensation) as an officer and director of the Company or any affiliate or subsidiary thereof. During the Employment Period, Executive shall be appointed as, and agrees to serve as, a member of the Board (without additional compensation).  No other officer or employee of the Company shall report directly to the Board, unless special circumstances warrant otherwise. 
(b)    Duties. During the Employment Period, Executive shall have such responsibilities, duties, and authority that are customary for Executive’s position, subject at all times to the control of the Board, and shall perform such services as customarily are provided by an executive of a corporation with Executive’s position and such other services consistent with Executive’s position, as shall be assigned to Executive from time to time by the Board. During the Employment Period, and excluding any periods of vacation and sick leave to which Executive is entitled, Executive agrees to devote all of Executive’s business time to the business and affairs of the Company. Executive shall be entitled to engage in charitable and educational activities and to manage Executive’s personal and family investments, to the extent such activities are not competitive with the business of the Company, do not materially interfere with the performance of Executive’s duties for the Company and are otherwise consistent with the Company’s governance policies. 
(c)    Compensation. 
(i)    Base Salary. During the Employment Period, Executive shall receive an initial annual base salary in an amount equal to $600,000, less all applicable withholdings, which shall be paid in accordance with the customary payroll practices of the Company and prorated for partial calendar years of employment (as in effect from time to time, the “Annual Base Salary”). The Annual Base Salary shall be subject to annual review by the Board, in its sole discretion, for possible merit increase and any such increased Annual Base Salary shall constitute “Annual Base Salary” for purposes of this Agreement.
(ii)    Signing Bonus. Upon or as soon as practicable after the Commencement Date, Executive shall receive a one-time signing bonus in an amount equal to $375,000, less all applicable withholdings (the “Signing Bonus”); provided that upon termination of Executive’s employment for Cause (as defined below) or resignation by the Executive for Good Reason (as defined below) within one year of the Commencement Date, Executive shall promptly repay to the Company the full amount of the Signing Bonus.   
(iii)    Annual Bonus. For each fiscal year of the Company that ends during the Employment Period, Executive shall be awarded the opportunity to earn a bonus (the “Bonus”) based on the extent to which performance goals, as set by the Board at the beginning of each fiscal year, are achieved.  Achievement of targeted level of performance will result in the entitlement to a Bonus of 100% of Annual Base Salary, and achievement of superior performance will result in the entitlement to a Bonus of up to 150% of Annual Base Salary.  The Bonus, if any, shall be paid during the year following the fiscal year to which the Bonus relates, less all applicable withholdings, as soon as practicable after the Company’s audited financial statements are delivered to the Company by the Company’s accountants, but no later than thirty (30) days of such date.  For the fiscal year commencing in 2020, the performance goals shall be as set on Exhibit A.  
(iv)    Automobile Allowance. During the Employment Period, Executive shall be entitled to an automobile allowance of $24,000 per year, less all applicable withholdings, which shall cover the cost of an automobile and all reasonable related expenses, including maintenance, insurance, fuel, tolls, and parking/garage fees. 
(v)    Equity. 
(A)    Investment Equity. Within 30 days following the Commencement Date, Executive shall invest $1,000,004 in the common stock of Holdings (“Common Stock”) at a price of $8.71 per share pursuant to the terms of the Management Investor Subscription Agreement attached as Exhibit B.  
(B)    Options. As soon as practicable following the Commencement Date, Executive shall be granted an option to purchase 750,000 shares of Common Stock with an exercise price of $8.71 per share pursuant to the terms of the Stock Option Agreement attached as Exhibit C. 
(vi)    Benefits. During the Employment Period, Executive shall be eligible to participate in all retirement, compensation and employee benefit plans, practices, policies and programs provided by the Company to the extent applicable generally to other executives of the Company (except severance plans, policies, practices, or programs) subject to the eligibility criteria set forth therein, as such may be amended or terminated from time to time. 
(vii)    Expenses. During the Employment Period, Executive shall be entitled to receive reimbursement for all reasonable business expenses incurred by Executive in the performance of Executive’s duties hereunder, provided that Executive provides all necessary documentation in accordance with the Company’s policies. 
(viii)    Business Travel.  The Company shall provide Executive with business class travel and accommodations on all business trips of more than two hours, at Executive’s discretion.  
3.    Termination of Employment. 
(a)    Death or Disability. Executive’s employment shall terminate automatically upon Executive’s death. If Executive becomes subject to a Disability (as defined below) during the Employment Period, the Company may give Executive written notice in accordance with Sections 3(g) and 10(g) of its intention to terminate Executive’s employment. For purposes of this Agreement, “Disability” means Executive’s inability to perform Executive’s duties hereunder by reason of any medically determinable physical or mental impairment for a period of three months or more in any 12-month period. 
(b)    Cause. Executive’s employment may be terminated at any time by the Company for Cause (as defined below). For purposes of this Agreement, “Cause” shall mean Executive’s (i) conviction, plea of no contest to, plea of nolo contendere to, or imposition of unadjudicated probation for any felony or a crime of moral turpitude, (ii) commission of an act of fraud or embezzlement, (iii) commission of an act of gross negligence or willful gross misconduct that results or could reasonably be expected to result in harm to the Company’s business or reputation, (iv) breach of any terms of this Agreement (including, without limitation, the failure of Executive to make the investment contemplated by Section 2(c)(v)(A)) or any other agreement between Executive and the Company or Holdings, or (v) continued willful failure to substantially perform Executive’s material duties under this Agreement. Executive’s employment shall not be terminated for Cause within the meaning of clauses (iv) or (v) above unless Executive has been given written notice by the Company stating the basis for such termination and Executive is given 30 days to cure, to the extent curable, the neglect or conduct that is the basis of any such claim. Notwithstanding anything to the contrary above, Executive may not be terminated for Cause for any acts occurring prior to his employment with the Company, provided such acts have been disclosed to the Company prior to Executive’s employment.
(c)    Termination Without Cause. The Company may terminate Executive’s employment hereunder without Cause at any time. 
(d)    Good Reason. Executive’s employment may be terminated at any time by Executive for Good Reason (as defined below). For purposes of this Agreement, “Good Reason” shall mean (i) without Executive’s written consent, any reduction approved by the Board in the amount of Executive’s annual Base Salary or Maximum Bonus Opportunity, (ii) the assignment of duties to Executive that are materially inconsistent with the duties set forth in Section 2(b), (iii) any material breach by the Company of this Agreement, (iv) the requirement that Executive be based in an office that is located more than 50 miles from Executive’s principal place of business as of the date of this Agreement, or (v) any requirement that the Executive report to anyone other than the Board.  In order for Executive to terminate his employment for Good Reason, (A) Executive must provide written notice of any alleged violation of clauses (i) through (v) above stating the basis for such termination within 30 days following any such alleged violation, (B) the Company shall have 30 days following receipt of the written notice described in clause (A) to cure the alleged violation (the “Cure Period”), and (C) if the Company fails to cure the alleged violation, Executive must terminate his employment with the Company during the 30-day period following the Cure Period. 
(e)    Voluntary Termination. Executive’s employment may be terminated at any time by Executive without Good Reason upon 30 days’ prior written notice. 
(f)    Termination as a Result of Expiration of the Employment Period. Unless otherwise agreed between the Parties, following a Notice of Non-Extension by either Party, Executive’s employment shall automatically terminate upon the expiration of the Employment Period following a Notice of Non-Extension provided by either Party. 
(g)    Notice of Termination. Any termination by the Company for Cause or without Cause, or by Executive for Good Reason or without Good Reason, shall be communicated by Notice of Termination to the other Party hereto given in accordance with Section 10(g). For purposes of this Agreement, a “Notice of Termination” means a written notice that (i) indicates the specific termination provision in this Agreement relied upon, (ii) to the extent applicable, sets forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of Executive’s employment under the provision so indicated, and (iii) if the Date of Termination (as defined below) is other than the date of receipt of such notice, specifies the termination date. The failure by Executive or the Company to set forth in the Notice of Termination any fact or circumstance that contributes to a showing of Good Reason or Cause shall not waive any right of Executive or the Company hereunder or preclude Executive or the Company from asserting such fact or circumstance in enforcing Executive’s or the Company’s rights hereunder. 
(h)    Date of Termination. For purposes of this Agreement, “Date of Termination” shall mean (i) if Executive’s employment is terminated by the Company for Cause, without Cause or by reason of Disability, or by Executive for Good Reason or without Good Reason, the date of receipt of the Notice of Termination, provided such Date of Termination is in accordance with Section 3(b), Section 3(d) or Section 3(e) or any later date specified therein pursuant to Section 3(g), as the case may be, (ii) if Executive’s employment is terminated by reason of death, the date of death, and (iii) if Executive’s employment is terminated by reason of the expiration of the Employment Period, the date of such expiration. 
4.    Obligations of the Company upon Termination. 
(a)    Resignation for Good Reason; Termination without Cause; Expiration of the Employment Period. If during the Employment Period, the Company shall terminate Executive’s employment without Cause (other than as a result of death or Disability), Executive shall terminate Executive’s employment for Good Reason, or upon the expiration of the Employment Period following a Notice of Non-Extension provided by the Company, then the Company will provide Executive with the following payments and/or benefits: 
(i)    the Company shall pay to Executive as soon as reasonably practicable but no later than the 60th day following the Date of Termination the following in a lump sum, to the extent not previously paid, (A) the Annual Base Salary through the Date of Termination, (B) the Bonus earned for any fiscal year ended prior to the year in which the Date of Termination occurs, provided that Executive was employed on the last day of such fiscal year, (C) the amount of any unpaid expense reimbursements to which Executive may be entitled pursuant to Section 2(c)(vii) of this Agreement, and (D) any other vested payments or benefits to which Executive or Executive’s estate may be entitled to receive under any of the Company’s benefit plans or applicable law, in accordance with the terms of such plans or law (clauses (A)–(D), the “Accrued Obligations”); and 
(ii)    subject to Sections 4(d) and (e) of this Agreement, the Company will pay Executive an amount equal to one times the sum of (x) Executive’s Annual Base Salary as in effect as of the Date of Termination and (y) the annual Bonus paid or to be paid, if any, with respect to the fiscal year completed most recently prior to the Date of Termination, payable pursuant to the Company’s normal payroll over the 12-month period following the Date of Termination (the “Severance Payments”). 
(b)    Death or Disability. If Executive’s employment shall be terminated by reason of Executive’s death or Disability, then the Company will provide Executive with the Accrued Obligations. Thereafter, the Company shall have no further obligation to Executive or Executive’s legal representatives.
(c)    Termination for Cause; Resignation without Good Reason; Expiration of the Employment Period.  If Executive’s employment shall be terminated by the Company for Cause, by Executive without Good Reason, or upon expiration of the Employment Period following a Notice of Non-Extension provided by Executive, the Company shall have no further obligations to Executive other than for payment of the Accrued Obligations. 
(d)    Separation Agreement and General Release. The Company’s obligation to make the Severance Payments is conditioned on Executive or Executive’s legal representatives executing a separation agreement and general release of claims related to or arising from Executive’s employment with the Company or the termination of employment against the Company and its affiliates (and their respective officers and directors) in a form reasonably determined by the Company, which shall be provided by the Company to Executive within five days following the Date of Termination; provided that, if Executive should fail to execute (or revokes) such release within 45 days following the Date of Termination, the Company shall not have any obligation to provide the Severance Payments, further provided that Executive shall not be bound by any employment restrictions or covenants should the Company not provide the full Severance Payments in breach of this Agreement.   If Executive executes the release within such 45-day period and does not revoke the release within seven days following the execution of the release, the Severance Payment will be made in accordance with Section 4(a)(ii). 
(e)    The Company’s obligations to make Severance Payments is conditioned on Executive’s compliance with Sections 5, 6, 7 and 8 of this Agreement.  Upon Executive’s breach of any of the provisions of Section 5, 6, 7 or 8 of this Agreement, the Company shall not have any further obligations to provide Severance Payments and Executive shall promptly repay to the Company the full amount of any Severance Payments received through the date of breach. Likewise, Executive’s obligations in Sections 5, 6, 7 and 8 of this Agreement are contingent upon the Company’s timely payment of Severance Payments in compliance with this Agreement.  Upon the Company’s failure to make Severance Payments in breach of this Agreement or abide by its obligations under Sections 6, 7 or 8 of this Agreement in breach of this Agreement, Executive is not bound to abide by Executive’s obligations in Sections 5, 6, 7 and 8 of this Agreement.
5.    Restrictive Covenants. 
(a)    Nonsolicitation. In consideration of Executive’s employment and receipt of payments hereunder, including, without limitation, the grant of options under Section 2(c), during the period commencing on the Commencement Date and ending 12 months after the Date of Termination (the “Restricted Period”), Executive shall not directly, or indirectly through another person, (i) induce or attempt to induce any employee, representative, agent or consultant of the Company or any of its affiliates or subsidiaries to leave the employ or services of the Company or any of its affiliates or subsidiaries, or interfere with the relationship between the Company or any of its affiliates or subsidiaries and any employee, representative, agent or consultant thereof, provided that Executive shall not be restricted from engaging in general solicitations not directed at any such persons described in this clause (i), (ii) hire any person who was an employee, representative, agent or consultant of the Company or any of its affiliates or subsidiaries at any time during the 6 month period immediately prior to the date on which such hiring would take place, or (iii) directly or indirectly induce or attempt to induce any customer, supplier, licensee, licensor, representative, agent or other business relation of the Company or any of its affiliates or subsidiaries to cease doing business with, or reduce the amount of business conducted with, the Company or any of its affiliates or subsidiaries, or interfere with the relationship between any such customer, supplier, licensee, licensor, representative, agent or business relation. 
(b)    Noncompetition. Executive hereby acknowledges that Executive is familiar with the Confidential Information (as defined below) of the Company and its subsidiaries. Executive agrees that during the Restricted Period, Executive shall not (and shall cause each of Executive’s affiliates not to), directly or indirectly, own any interest in, manage, control, participate in (whether as an officer, director, manager, employee, partner, equity holder, member, agent, representative or otherwise), consult with, render services for, or in any other manner engage, directly or indirectly, in the family entertainment business (which shall exclude any fine dining restaurant business, and with respect to any period following Executive’s termination of employment described in Section 4(a) shall include only a casual dining restaurant business with an entertainment center primarily targeted to children under the age of 13) in the Geographic Area (as defined below); provided that nothing herein shall prohibit Executive from (i) owning or operating a restaurant with a single location or (ii) being a passive owner of not more than 2% of the outstanding stock of any class of a corporation that is publicly traded so long as none of such persons has any active participation in the business of such corporation. Executive acknowledges and agrees that the Company would be irreparably damaged if Executive were to engage in the prohibited activities described in the preceding sentence and that such prohibited activities would result in a significant loss of goodwill by the Company. For purposes of this Agreement, the “Geographic Area” shall mean any location within twenty-five (25) miles of a location in which the Company or its subsidiaries is conducting or has taken material steps to conduct business as of the Date of Termination. 
(c)    Nondisclosure; Confidential Information. Executive shall not disclose or use at any time, either during Executive’s employment with the Company or at any time thereafter, any Confidential Information of which Executive is or becomes aware, whether or not such information is developed by Executive, except (i) to the extent that such disclosure or use is directly related to and required by Executive’s performance in good faith of duties assigned to Executive by the Company , or (ii) as may be required by an order of a court of competent jurisdiction; provided that (A) prior to any such disclosure pursuant to clause (ii), to the extent legally permissible and reasonably possible, Executive shall notify the Company as promptly as practicable, and in any event prior to any disclosure, of such requirement so that the Company may seek an appropriate protective order or waive compliance with the provisions of this Section 5(c), and (B) in the absence of such a protective order or the receipt of a waiver hereunder, Executive may disclose only such Confidential Information to the extent necessary to comply with such requirement. Executive will take all appropriate steps to safeguard Confidential Information in Executive’s possession and to protect it against disclosure, misuse, espionage, loss and theft. Executive shall deliver to the Company at the termination of Executive’s employment with the Company, or at any time the Company may request, all memoranda, notes, plans, records, reports, computer tapes and software and other documents and data (and copies thereof) relating to the Confidential Information or the Work Product (as defined below) of the business of the Company and its affiliates (the “Company Group”) that Executive may then possess or have under Executive’s control. 
(d)    Proprietary Rights. Executive recognizes that the Company Group possesses a proprietary interest in all Confidential Information and Work Product and has the exclusive right and privilege to use, protect by copyright, patent or trademark, or otherwise exploit the processes, ideas and concepts described therein to the exclusion of Executive, except as otherwise agreed between the Company Group and Executive in writing. Executive expressly agrees that any Work Product made or developed by Executive or Executive’s agents during the course of Executive’s employment, including any Work Product that is based on or arises out of Work Product, shall be the property of and inure to the exclusive benefit of the Company Group. Executive further agrees that all Work Product developed by Executive (whether or not able to be protected by copyright, patent or trademark) during the course of Executive’s employment with the Company, or involving the use of the time, materials or other resources of the Company Group, shall be promptly disclosed to the Company Group and shall become the exclusive property of the Company Group, and Executive shall execute and deliver any and all documents necessary or appropriate to implement the foregoing.
(e)    Certain Definitions. 
(i)    As used herein, the term “Confidential Information” means information that is not generally known to the public (but for purposes of clarity, Confidential Information shall never exclude any such information that becomes known to the public because of Executive’s unauthorized disclosure) and that is used, developed or obtained by the Company Group in connection with its business, including, but not limited to, information, observations and data obtained by Executive while employed by the Company Group concerning (A) the business or affairs of the Company Group, (B) products or services, (C) fees, costs and pricing structures, (D) designs, (E) analyses, (F) drawings, photographs and reports, (G) computer software, including operating systems, applications and program listings, (H) flow charts, manuals and documentation, (I) databases, (J) accounting and business methods, (K) inventions, devices, new developments, methods and processes, whether patentable or unpatentable and whether or not reduced to practice, (L) customers and clients and customer or client lists, (M) other copyrightable works, (N) all production methods, processes, technology and trade secrets, and (O) all similar and related information in whatever form. Confidential Information will not include any information that has been published in a form generally available to the public (except as a result of Executive’s unauthorized disclosure) prior to the date Executive proposes to disclose or use such information. Confidential Information will not be deemed to have been published or otherwise disclosed merely because individual portions of the information have been separately published, but only if all material features comprising such information have been published in combination.
(ii)    As used herein, the term “Work Product” means all inventions, innovations, improvements, technical information, systems, software developments, methods, designs, analyses, drawings, reports, service marks, trademarks, trade names, logos, all nonpublic financial materials (including debt and equity related marketing materials), sales documentation, financial projections, and all similar or related information (whether patentable or unpatentable) that relates to the Company Group’s actual or anticipated business, research and development or existing or future products or services and that are conceived, developed or made by Executive (whether or not during usual business hours and whether or not alone or in conjunction with any other person) while employed by the Company together with all patent applications, letters patent, trademark, trade name and service mark applications or registrations, copyrights and reissues thereof that may be granted for or upon any of the foregoing.  
6.    Cooperation. Executive agrees that upon the Company’s reasonable request following the Date of Termination and provided such cooperation is not adverse to Executive’s legal interests, Executive will use reasonable efforts to assist and cooperate with the Company in connection with (i) the transition of his duties and requests for information on activities of the Company during your employment, and (ii) the defense or prosecution of any claim with respect to which he may have knowledge that may be helpful to the Company that is made against or by the Company or its affiliates (other than by or against Executive), or in connection with any ongoing or future investigation by, or any proceeding before, any arbitral, administrative, regulatory, self-regulatory, judicial, legislative, or other body or agency involving the Company or any affiliate.  Likewise, the Company agrees that upon Executive’s reasonable request following his Date of Termination, provided that such cooperation is not adverse to its legal interests, the Company will use reasonable efforts to assist and cooperate with Executive in connection with the verification of employment history and compensation to third parties upon request.
7.    Nondisparagement. During the Employment Period and at all times thereafter, neither Executive nor Executive’s agents, on the one hand, nor the Company formally, or its executives or board of directors, on the other hand, shall directly or indirectly issue or communicate any public statement, or statement likely to become public, that maligns, denigrates or disparages the other (including, in the case of communications by Executive or Executive’s agents, the Company Group, any of the Company Group’s officers, directors or employees, Apollo Global Management, LLC or any affiliate thereof). The foregoing shall not be violated by truthful responses to legal process or governmental inquiry.
8.    Confidentiality of Agreement. The Parties agree that, except as may be required by law or judicial process or in connection with Executive’s enforcement of his rights under this Agreement or any other agreement entered into by Executive with the Company or Holdings, the discussions and correspondence that led to this Agreement, and the terms and conditions of this Agreement are private and confidential. Except as may be required by applicable law, regulation, or stock exchange requirement, neither Party may disclose the above information to any other person or entity (other than to such Party’s advisors, attorneys, consultants, or, in the case of Executive, immediate family members) without the prior written approval of the other. 
9.    Executive’s Representations, Warranties and Covenants. 
(a)    Executive hereby represents and warrants to the Company that: 
(i)    Executive has all requisite power and authority to execute and deliver this Agreement and to consummate the transactions contemplated hereby, and this Agreement has been duly executed by Executive; 
(ii)    the execution, delivery and performance of this Agreement by Executive does not and will not, with or without notice or the passage of time, conflict with, breach, violate or cause a default under any agreement, contract or instrument to which Executive is a party or any judgment, order or decree to which Executive is subject; 
(iii)    Executive is not a party to or bound by any employment agreement, consulting agreement, noncompetition agreement, fee for services agreement, confidentiality agreement or similar agreement with any other person that would prevent Executive from entering into this Agreement or performing his duties hereunder. 
(iv)    upon the execution and delivery of this Agreement by the Company and Executive, this Agreement will be a legal, valid and binding obligation of Executive, enforceable in accordance with its terms; 
(v)    Executive understands that the Company will rely upon the accuracy and truth of the representations and warranties of Executive set forth herein and Executive consents to such reliance; and 
(vi)    as of the Commencement Date of this Agreement, Executive is not in breach of any of its terms, including having committed any acts that would form the basis for a Cause termination if such act had occurred after the Commencement Date. 
(b)    The Company hereby represents and warrants to Executive that: 
(i)    the Company has all requisite power and authority to execute and deliver this Agreement and to consummate the transactions contemplated hereby, and this Agreement has been duly executed by the Company; 
(ii)    the execution, delivery and performance of this Agreement by the Company does not and will not, with or without notice or the passage of time, conflict with, breach, violate or cause a default under any agreement, contract or instrument to which the Company is a party or any judgment, order or decree to which the Company is subject; 
(iii)    upon the execution and delivery of this Agreement by the Company and Executive, this Agreement will be a legal, valid and binding obligation of the Company, enforceable in accordance with its terms; and 
(iv)    the Company understands that Executive will rely upon the accuracy and truth of the representations and warranties of the Company set forth herein and the Company consents to such reliance. 
10.    General Provisions. 
(a)    Severability. It is the desire and intent of the Parties hereto that the provisions of this Agreement be enforced to the fullest extent permissible under the laws and public policies applied in each jurisdiction in which enforcement is sought. Accordingly, if any particular provision of this Agreement shall be adjudicated by a court of competent jurisdiction to be invalid, prohibited or unenforceable under any present or future law, and if the rights and obligations of any Party under this Agreement will not be materially and adversely affected thereby, such provision, as to such jurisdiction, shall be ineffective, without invalidating the remaining provisions of this Agreement or affecting the validity or enforceability of such provision in any other jurisdiction; furthermore, in lieu of such invalid or unenforceable provision there will be added automatically as a part of this Agreement, a legal, valid and enforceable provision as similar in terms to such invalid or unenforceable provision as may be possible. Notwithstanding the foregoing, if such provision could be more narrowly drawn so as not to be invalid, prohibited or unenforceable in such jurisdiction, it shall, as to such jurisdiction, be so narrowly drawn, without invalidating the remaining provisions of this Agreement or affecting the validity or enforceability of such provision in any other jurisdiction. 
(b)    Entire Agreement and Effectiveness. Effective as of the Commencement Date, this Agreement embodies the complete agreement and understanding among the Parties hereto with respect to the subject matter hereof and supersedes and preempts any prior understandings, agreements or representations by or among the Parties, written or oral, which may have related to the subject matter hereof in any way. 
(c)    Successors and Assigns. 
(i)    This Agreement is personal to Executive and without the prior written consent of the Company shall not be assignable by Executive otherwise than by will or the laws of descent and distribution. This Agreement shall inure to the benefit of and be enforceable by Executive’s legal representatives. 
(ii)    This Agreement shall inure to the benefit of and be binding upon the Company and its successors and assigns. As used in this Agreement, “Company” shall mean the Company as hereinbefore defined and any successor to its business and/or assets as aforesaid that assumes and agrees to perform this Agreement by operation of law, or otherwise. 
(d)    Governing Law. This Agreement will be governed by and construed in accordance with the laws of the State of Delaware, without giving effect to any choice of law or conflicting provision or rule that would cause the laws of any jurisdiction other than the State of Delaware to be applied. In furtherance of the foregoing, the internal law of the State of Delaware will control the interpretation and construction of this Agreement, even if under such jurisdiction’s choice of law or conflict of law analysis, the substantive law of some other jurisdiction would ordinarily apply. 
(e)    Enforcement. 
(i)    Arbitration. Except for disputes arising under Sections 5 and 7 of this Agreement (including, without limitation, any claim for injunctive relief), any controversy, dispute or claim arising out of or relating to this Agreement, or its interpretation, application, implementation, breach or enforcement that the Parties are unable to resolve by mutual agreement, shall be settled by submission by either Executive or the Company of the controversy, claim or dispute to binding arbitration in Dallas County, Texas (unless the Parties agree in writing to a different location), before a single arbitrator in accordance with the Employment Dispute Resolution Rules of the American Arbitration Association then in effect. In any such arbitration proceeding, the Parties agree to provide all discovery deemed necessary by the arbitrator. The decision and award made by the arbitrator shall be accompanied by a reasoned opinion, and shall be final, binding and conclusive on all Parties hereto for all purposes, and judgment may be entered thereon in any court having jurisdiction thereof. The Company will bear the totality of the arbitrator’s and administrative fees and costs. Each Party shall bear its litigation costs and expenses; provided, however, that the arbitrator shall have the discretion to award the prevailing Party reimbursement of its or his or her reasonable attorney’s fees and costs. Upon the request of any of the Parties, at any time prior to the beginning of the arbitration hearing, the Parties may attempt in good faith to settle the dispute by mediation administered by the American Arbitration Association. The Company will pay the costs of the mediator’s fees and costs and any administrative fees and costs. 
(ii)    Executive acknowledges that the Company would be irreparably injured by a violation of Section 5 or Section 7 of this Agreement and that it is impossible to measure in money the damages that will accrue to the Company by reason of a failure by Executive to perform any of Executive’s obligations under Section 5 or Section 7 of this Agreement. Accordingly, if the Company institutes any action or proceeding to enforce any of the provisions of Section 5 or Section 7 of this Agreement, to the extent permitted by applicable law, Executive hereby waives the claim or defense that the Company has an adequate remedy at law, and Executive shall not urge in any such action or proceeding the defense that any such remedy exists at law. Furthermore, in addition to other remedies that may be available, the Company shall be entitled to specific performance and other injunctive relief, without the requirement to post bond. 
(iii)    Remedies. All remedies hereunder are cumulative, are in addition to any other remedies provided for by law and may, to the extent permitted by law, be exercised concurrently or separately, and the exercise of any one remedy shall not be deemed to be an election of such remedy or to preclude the exercise of any other remedy. 
(iv)    Waiver of Jury Trial. EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS AGREEMENT. 
(f)    Amendment and Waiver. The provisions of this Agreement may be amended and waived only with the prior written consent of the Company and Executive and no course of conduct or failure or delay in enforcing the provisions of this Agreement shall be construed as a waiver of such provisions or affect the validity, binding effect or enforceability of this Agreement or any provision hereof. 
(g)    Notices. Any notice provided for in this Agreement must be in writing and must be either personally delivered, transmitted via facsimile, mailed by first class mail (postage prepaid and return receipt requested) or sent by reputable overnight courier service (charges prepaid) to the recipient at the address below indicated or at such other address or to the attention of such other person as the recipient Party has specified by prior written notice to the sending Party. Notices will be deemed to have been given hereunder and received when delivered personally, when received if transmitted via facsimile, five days after deposit in the U.S. mail and one day after deposit for overnight delivery with a reputable overnight courier service.

If to the Company, to:
CEC Entertainment, Inc.
1707 Market Place Blvd., Suite 200
Irving, Texas 75063
Attention: Chief Legal Officer or General Counsel

with a copy (which shall not constitute notice) to:
AP VIII CEC Holdings L.P.
2000 Avenue of the Stars, Suite 510 North Los Angeles, CA 90067
Attention: Andrew Jhawar
Telephone: (310) 843-1919 

If to Executive, to:

Executive’s home address most recently on file with the Company.

with a copy (which shall not constitute notice) to:

Fayer Gipson LLP
2029 Century Park East, Suite 3535
Los Angeles, CA 90067
Attention: Elliot Gipson
Telephone: (310) 557-3558
egipson@fayergipson.com

(h)    Withholdings Taxes. The Company may withhold from any amounts payable under this Agreement such federal, state and local taxes as may be required to be withheld pursuant to any applicable law or regulation. 
(i)    Survival of Representations, Warranties and Agreements. All representations, warranties and agreements contained herein shall survive the consummation of the transactions contemplated hereby indefinitely. 
(j)    Descriptive Headings. The descriptive headings of this Agreement are inserted for convenience only and do not constitute a part of this Agreement. All references to a “Section” in this Agreement are to a section of this Agreement unless otherwise noted. 
(k)    Construction. Where specific language is used to clarify by example a general statement contained herein, such specific language shall not be deemed to modify, limit or restrict in any manner the construction of the general statement to which it relates. The language used in this Agreement shall be deemed to be the language chosen by the Parties to express their mutual intent, and no rule of strict construction shall be applied against any Party. 
(l)    Counterparts. This Agreement may be executed in separate counterparts, each of which is deemed to be an original and all of which taken together constitute one and the same agreement. 
(m)    Section 409A. Notwithstanding anything herein to the contrary, this Agreement is intended to be interpreted and applied so that the payment of the benefits set forth herein shall either be exempt from the requirements of Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”), or shall comply with the requirements of such provision. Notwithstanding anything in this Agreement or elsewhere to the contrary, distributions upon termination of Executive’s employment may only be made upon a “separation from service” as determined under Section 409A of the Code. Each payment under this Agreement or otherwise shall be treated as a separate payment for purposes of Section 409A of the Code. In no event may Executive, directly or indirectly, designate the calendar year of any payment to be made under this Agreement or otherwise that constitutes a “deferral of compensation” within the meaning of Section 409A of the Code. All reimbursements and in-kind benefits provided under this Agreement shall be made or provided in accordance with the requirements of Section 409A of the Code. To the extent that any reimbursements pursuant to this Agreement or otherwise are taxable to Executive, any reimbursement payment due to Executive shall be paid to Executive on or before the last day of Executive’s taxable year following the taxable year in which the related expense was incurred; provided that Executive has provided the Company written documentation of such expenses in a timely fashion and such expenses otherwise satisfy the Company’s expense reimbursement policies. Reimbursements pursuant to this Agreement or otherwise are not subject to liquidation or exchange for another benefit and the amount of such reimbursements that Executive receives in one taxable year shall not affect the amount of such reimbursements that Executive receives in any other taxable year. Notwithstanding any provision in this Agreement to the contrary, if on the Date of Termination Executive is deemed to be a “specified employee” within the meaning of Section 409A of the Code and the Treasury Regulations using the identification methodology selected by the Company from time to time, or if none, the default methodology under Section 409A of the Code, any payments or benefits due upon a termination of Executive’s employment under any arrangement that constitutes a “deferral of compensation” within the meaning of Section 409A of the Code shall be delayed and paid or provided (or commence, in the case of installments) on the first payroll date on or following the earlier of (i) the date that is six months and one day after Executive’s termination of employment for any reason other than death, and (ii) the date of Executive’s death, and any remaining payments and benefits shall be paid or provided in accordance with the normal payment dates specified for such payment or benefit. Notwithstanding any of the foregoing to the contrary, the Company and its respective officers, directors, employees, or agents make no guarantee that the terms of this Agreement as written comply with, or are exempt from, the provisions of Section 409A of the Code, and none of the foregoing shall have any liability for the failure of the terms of this Agreement as written to comply with, or be exempt from, the provisions of Section 409A of the Code. 

[Signature Page Follows] 

IN WITNESS WHEREOF, the Parties hereto have executed and this Agreement as of the date first written above. 

CEC ENTERTAINMENT, INC. 
  
By:________________________
       Name: Andrew Jhawar 
       Title: Director 

EXECUTIVE 
  
By:________________________
       David McKillips
 

Exhibit A

Fiscal 2020 Bonus Opportunity

Executive is eligible to receive a 2020 Bonus of up to 150% Annual Base Salary, or $900,000 in the aggregate based upon the following performance goals: 

	
		
	Goal
	Weighting

	Adjusted EBITDA*
	50%

	Comparable Venue Sales**
	25%

	Cash Flow***
	25%

The actual goals will be determined by the Board in connection with the establishment of the budget for the 2020 fiscal year; provided that in no event will any Bonus be payable with respect to the 2020 fiscal year if the Company achieves less than $200,000,000 in Adjusted EBITDA, 3% in Comparable Venue Sales or $160,000,000 in Cash Flow.  In no event will the percentage of the target earned with respect to Comparable Venue Sales and Cash Flow exceed the percentage of the target earned with respect to Adjusted EBITDA.  

*As reported in the Company’s public filings with the Securities and Exchange Commission for 2020, measured after payment of all the Company bonuses 

** As reported in the Company’s public filings with the Securities and Exchange Commission for 2020

***Adjusted EBITDA less capital expenditures 

Exhibit B

[Form of Management Investor Subscription Agreement]

Exhibit C

[Form of Stock Option Agreement]Exhibit 10.49

 

Execution Version

 

AMENDMENT NO. 1 TO CREDIT AGREEMENT
AND WAIVER

 

THIS AMENDMENT NO.
1 TO CREDIT AGREEMENT AND WAIVER, dated as of December 20, 2019 (this “Agreement”), is entered into by and between
ILLINOIS CORN PROCESSING, LLC, a limited liability company organized and existing under the laws of Delaware (“Company”),
COMPEER FINANCIAL, PCA, a federally-chartered instrumentality of the United States, successor by merger to 1st Farm
Credit Services, PCA (“Lender”), and COBANK, ACB, a federally-chartered instrumentality of the United States
(“Agent”). Capitalized terms not defined herein shall have the meanings set forth in the Credit Agreement.

 

BACKGROUND:

 

WHEREAS, the
Company, Lender and Agent have entered into that certain Credit Agreement dated as of September 15, 2017 (as amended, restated,
modified or otherwise supplemented from time to time, collectively the “Credit Agreement”) and the other Loan
Documents;

 

WHEREAS, the
Company failed to be in compliance with the financial covenant set forth in Section 8.1 of the Credit Agreement for the months
of September and October 2019 (the ‘Specified Defaults”);

 

WHEREAS, the
Company has requested that, as of the Effective Date, the Credit Agreement and certain other Loan Documents be amended as herein
provided; and

 

WHEREAS, Agent
and Lender are willing, subject to the terms and conditions hereinafter set forth, to make such amendments;

 

NOW, THEREFORE,
in consideration of the agreements herein contained, the parties hereby agree as follows:

 

ARTICLE
1 Amendments.

 

Effective on (and subject to the occurrence
of) the Effective Date, the Credit Agreement is amended as follows:

 

1.1 New
Section 2.8 of the Credit Agreement. The following new 2.8 is hereby added to the Credit Agreement:

 

2.8 Payment
and Allocation of Paydown Amount.

 

(a) On
or before September 30, 2020, the Pekin Lenders and the ICP Lenders shall receive payment of $40,000,000 (the “Paydown
Amount”) to reduce the outstanding balances of the Term Loan and the “Term Loan” under Pekin Credit Agreement,
as such amount shall be allocated between the Pekin Lenders and the ICP Lenders; pursuant to the CoBank Intercreditor Agreement,
and of any other amounts received pursuant to Section 2.8(c) below.

 

(b) The
Paydown Amount will be paid from one or more of the following sources; provided that amounts arising from each such payment source
will each be distributed (x) 80% to the Pekin Lenders and the ICP Lender, collectively, and (y) 20% to PEI:

 

(i)  one
or more of the following sources:

 

(A) net
cash sale proceeds received from the sale of any assets of PEC, whether arising pursuant to an ownership sale or an asset sale
by any of its Subsidiaries, including ICP, Pekin and Aurora, and including any cash proceeds from any seller financing promissory
note in connection with any such sale (any such sale, being, a “PEC Asset Sale”); provided that, with respect
to any such promissory note:

 

(I) any such
seller financing promissory shall be assigned in writing by such Seller to the Agent for the benefit of the Lender as additional
collateral,

 

     

     

    

 

(I) such assignment
shall be acknowledged in writing by the beneficiary of such seller financing promissory note, and

 

(III) the payments
under such seller financing promissory shall be directed by the seller to the Agent for the benefit of the Lender provided that
at such time the Paydown Amount has been paid in full, the security interests in such note shall be terminated, such note will
be delivered to the Company and all payments will be directed to the Company, for distribution in accordance with the splits identified
below in Section 2.8(c);

 

(B)  any
net cash proceeds from the payment of any award, judgment or settlement with respect to the Indeck Litigation (the “Indeck
Proceeds”); provided, however, that the lesser of (I) 20% of the Indeck Proceeds or (II) $1,500,000 of the Indeck Proceeds
shall first be contributed to the Pekin Contingency Amount.

 

With regard to any proceeds to
be allocated for distribution to PEI set forth in this clause 2.8(b)(i), such amount shall be reduced on a dollar-for-dollar basis
equal to 50% of the amount of the Allocated Affiliate Fees (as defined below) incurred and paid in cash to PEI by PEC or ICP after
January 1, 2020 pursuant to that certain Affiliated Company Agreement (collectively, the “PEI Reduced Amount”).
The PEI Reduced Amount shall be reallocated to the Pekin Lenders and the ICP Lenders and applied to the amounts outstanding under
the respective loan facilities pursuant to the terms of the CoBank Intercreditor Agreement. As used herein, the “Allocated
Affiliate Fees” means the direct and indirect fees and expenses incurred and paid in cash to PEI by PEC or ICP for the
benefit of PEC, PEI or any of their respective Affiliates (and excluding any fees and expenses paid to PEC which are for the benefit
of and paid to any unrelated third parties, including without limitation, any insurance premiums.)

 

(ii)  with
respect to net cash sales proceeds of any sale of the facilities owned directly or indirectly by PE Op Co. and/or Pacific Ethanol
West, LLC (the “Western Assets”) (including any ownership interests therein of PEI, each a “Western
Asset Sale”), after payment to the holders of the Senior Note Documents of the first $20,000,000 from any such sale(s),
then a 33/34/33% split among (x) the Pekin Lenders and the ICP Lenders collectively, (y) the holders of the Senior Note Documents
and (z) PEI; and

 

(iii) at
the election of PEI, from funds contributed to Pekin and/or ICP from PEI or PEC for payment to the Pekin Lenders and the ICP Lenders.

 

(c) Following
the receipt by the Pekin Lenders and the ICP Lenders of the Paydown Amount in full, any additional proceeds arising from the payments
sources listed in paragraphs 2.8(b)(i)(A) or 2.8(b)(i)(B) above shall be allocated pursuant to a 33/34/33% split among (x) Pekin
Lenders and the ICP Lenders collectively, (y) the holders of the Senior Note Documents and (z) PEI.

 

The foregoing payment obligations
shall be made in connection with the CoBank Intercreditor Agreement. The intention of the forgoing payment scenario is to effectuate
the repayment of the amounts outstanding under the respective loan facilities of the Pekin Lenders and the ICP Lenders.

 

    2

     

    

 

1.2 Amendment
to Section 6.1(e) of the Credit Agreement. Section 6.1(e) of the Credit Agreement is hereby amended by adding a new clauses
(ix), (x) and (xi) as follows:

 

(ix) Notices
of Material Events. Until the Pekin Lenders and the ICP Lenders have received the Paydown Amount in full, the Company shall
promptly notify Agent and the Agent under the Pekin Credit Agreement within three (3) Business Days of the occurrence of any of
the following:

 

(1) Any
outage at the operating facilities of the Company and Pekin (collectively, the “Pekin Campus”) (including any
process island therein, e.g., grain section, boilers, fermentation, dryers and distillation, dehydration and evaporation) for a
period of greater than 24 hours;

 

(2) Any
suspension of barge shipments from the Pekin Campus for a period of greater than 24 hours;

 

(3) Any
unbudgeted capital expenditure at the Pekin Campus in an amount of greater than $100,000; or

 

(4) Prepayment
or Cash-on-Delivery credit terms from (x) any utility or (y) greater than 10% by volume of the Company’s corn suppliers.

 

(x) Notices
of Offer of PAL Equity. On or before December 31, 2019, the Company shall cause PEC to deliver a right of first offer notice
to Aurora Cooperative Elevator Company (“ACEC”) pursuant to Section 3.6 of the Limited Liability Agreement of
PAL, which notice shall offer PEC’s equity interest in PAL to ACEC in an all-cash transaction in an amount not less than
the “Purchase Price” (as such term is defined in that certain letter of intent between PEC and ACEC dated December
19, 2019 (the “Aurora LOI”)) and applied under terms substantially the same as reflected in the Aurora LOI.

 

1.3 New
to Sections 6.1(f) and 6.1(g) of the Credit Agreement. Section 6.1(f) of the Credit Agreement is hereby amended by adding new
clauses (f) and (g) as follows:

 

(f) Rolling
13-Week Cash Flow Forecasts. Until the Pekin Lenders and the ICP Lenders have received the Paydown Amount in full, by no later
than 9:00 p.m. Mountain time on the third Business Day of each week, a rolling 13-week cash flow forecast prepared by the Company
covering the 13-week period commencing with the immediately preceding week and detailing (i) projected cash receipts, (ii) projected
disbursements, (iii) net cash flow, and (iv) such other items set forth therein and other information reasonably requested by Agent
for such 13-week period, together with a comparison to the immediately preceding forecast and accompanied by a management narrative
explaining results of operations and variances to the immediately preceding forecast and a reconciliation to cash balances held
in the Company’s accounts (all in form and substance reasonably acceptable to Agent).

 

(g) Financial
Accommodation Agreements. Until the Pekin Lenders and the ICP Lenders have received the Paydown Amount in full, by no later
than 9:00 p.m. Mountain time on the third Business Day of each week, an operations report for the Pekin Campus, which reports shall
include, at a minimum.

 

		(i)	Production volume of product meeting minimum product specifications based on industry standards
of either the Company or Pekin volumes;

 

		(ii)	Shipment volumes;

 

		(iii)	Product yields;

 

		(iv)	Energy consumption per gallon (based on monthly reporting);
and

 

		(v)	Material health, safety and environmental matters.

 

    3

     

    

 

1.4 Amendment
to Section 6.3 of the Credit Agreement. Section 6.3 of the Credit Agreement is hereby amended and restated in its entirety
to read as follows:

 

6.3 Collateral
Security. Payment and performance of the Obligations shall be secured by first priority perfected Liens on:

 

		(i)	all personal property of the Company;

 

		(ii)	until the Pekin Lenders and the ICP Lenders have received the Paydown Amount in full, all personal property of Pekin (the “Pekin
Personal Property Collateral”);

 

		(iii)	all personal property of PEC pursuant to the PEC Pledge Agreement and the PEC Security Agreement (collectively, the assets
referenced in clauses (i), (ii) and (iii) of this Section 6.3 are referred to herein as the “Personal Property Collateral”);

 

		(iv)	all real property and improvements of the Company;

 

		(v)	until the Pekin Lenders and the ICP Lenders have received the Paydown Amount in full, all real property and improvements of
Pekin (the “Pekin Real Property Collateral” and together with the Pekin Personal Property Collateral, the “Pekin
Collateral” and collectively, the assets referenced in clauses (iv) and (v) of this Section 6.3 are referred to herein
as the “Real Property Collateral”).

 

In each case, whether now owned
or hereafter acquired (the Personal Property Collateral and the Real Property Collateral are collectively referred to as the “Collateral”),
subject only to Permitted Liens or other exceptions approved in writing by Agent. Prior to or substantially contemporaneously with
the date of this Agreement and at such other times as Agent may request (including each time the Company, Pekin or PEC acquires
any real property or any personal property not already subject to the Liens required herein), the Company shall execute and deliver
(or shall cause to be delivered) to Agent such security agreements, pledge agreements, assignments, mortgages, deeds of trust,
and other documents and agreements requested by Agent for the purpose of creating, perfecting, and maintaining a perfected Lien
on the Collateral, subject only to Permitted Liens or other exceptions approved in writing by Agent. The Company hereby authorizes
Agent to file such Uniform Commercial Code financing statements to record such mortgages, deeds of trust, and other documents in
the applicable real property records as Agent reasonably determines are necessary or advisable to perfect the security interests
in and Liens on the Collateral. Payment and performance of the Obligations shall also be guaranteed by PEC pursuant to the PEC
Guaranty. Upon receipt of the Paydown Amount, Agent shall immediately release its security interests in and to the Pekin Collateral.

 

1.5 New
Section 6.12(e) of the Credit Agreement. Section 6.12 of the Credit Agreement is hereby amended by adding new Sections 6.12(e)
as follows:

 

(e) Until
the Pekin Lenders and the ICP Lenders have received the Paydown Amount in full, the Company and/or its financial advisors shall
provide to the Pekin Lenders and the ICP Lenders each of the following in form reasonably acceptable to the Pekin Lenders and the
ICP Lenders (the “Strategic Alternatives Process”):

 

		(i)	Robust list of parties to be contacted as part of the Strategic Alternatives
Process;

		(ii)	Marketing materials utilized for the Strategic Alternatives Process;

		(iii)	Weekly updates on outbound calls completed, inbound calls received, feedback received from prospects,
any indications of interest or letters of intent received, and required diligence and steps to consummation of Strategic Alternatives
Process.

 

    4

     

    

 

1.6 New
Sections 7.2(j) and 7.2(k) of the Credit Agreement. Section 7.2 of the Credit Agreement is hereby amended by adding new Sections
7.2(j) and 7.2(k) as follows:

 

(j) Liens
granted in favor of the Pekin Lenders to secure the obligations of Pekin under the Pekin Credit Agreement.

 

(k) Subordinated
liens granted in favor of the holders of the Senior Note Documents to secure the obligations of the Pacific Ethanol, Inc. under
the Senior Note Documents.

 

1.7 Amendment
to Section 7.6 of the Credit Agreement. Section 7.6 of the Credit Agreement is hereby amended in its entirety to read as follows:

 

7.6 Dispositions
of Assets or Subsidiaries. PEC, Pekin and the Company shall not, and shall not permit any Subsidiary to, sell, convey, assign,
lease, abandon or otherwise transfer or dispose of, voluntarily or involuntarily, any of their properties or assets, tangible or
intangible assignment, (including sale assignment discount or other disposition of accounts, contract rights, chattel paper, equipment
or general intangibles with or without recourse or of capital stock, shares of beneficial interest, partnership interests or limited
liability company interests of a Subsidiary), except for transactions in the ordinary course of business. PEC and PEI shall not,
and shall not permit any of their subsidiaries to, sell, convey, assign, lease, abandon or otherwise transfer or dispose of, voluntarily
or involuntarily, any of its capital stock, shares of beneficial interest, partnership interests or limited liability company interests
as part of any transaction that contains a “put right” in favor of the purchaser of such transaction that enables the
purchaser to require a repurchase of such interests, unless (i) the Term Loan has been repaid in full or (ii) payment in full of
the Term Loan is a condition to the effectiveness of such transaction (collectively, the “Put Restriction”).
Notwithstanding anything to the contrary set forth herein or in any other Loan Document, but subject to the Put Restriction:

 

(a) PEI
and its applicable Subsidiaries shall be entitled to litigate, settle and otherwise resolve the Indeck Litigation without the prior
written consent of Agent, the ICP Lenders or the Pekin Lender so long as any proceeds thereof to be paid to PEI or such Subsidiaries
shall be distributed in accordance with Section 2.8 of this Agreement and the CoBank Intercreditor Agreement;

 

(b)  Until
such time as the Paydown Amount has been paid in full, any PEC Asset Sale shall be subject to the consent of each of the Pekin
Lenders and the ICP Lenders, in each case not to be unreasonably withheld, conditioned or delayed; and

 

(c) Any Western
Asset Sale shall not require the consent of the ICP Lenders or the Pekin Lenders so long as such sale is to an unrelated purchaser,
is entered into in good faith and is for reasonable market value, and the net proceeds of such sale are distributed in accordance
with Section 2.8 and in the Senior Intercreditor Agreement and, as between the ICP Lenders and the Pekin Lenders, pursuant to the
CoBank Intercreditor Agreement.

 

To the extent the consent of
the ICP Lenders the Pekin Lenders is required pursuant to Section 7.6(b) above, so long as no Event of Default then exists, the
Pekin Lenders and the ICP Lenders hereby agree to reasonably cooperate with PEC and the proposed purchaser with respect to any
PEC Asset Sale involving PEC’s membership interests in ICP to an unrelated third party, including further amendment to the
respective Loan Documents of the ICP Lenders to eliminate any cross-defaults to any Affiliates of ICP.

 

    5

     

    

 

1.8 Amendment
to Sections 8.1 and 8.2 of the Credit Agreement. Sections 8.1 and 8.2 of the Credit Agreement are hereby amended and restated
in their entirety to read as follows:

 

8.1 Adjusted
EBITDA. Adjusted EBITDA negative variance of either the Company or Pekin shall be no greater than 20% (tested against agreed
upon budget; calculated based on trailing 3-month Adjusted EBITDA as of the end of each calendar month); provided that, notwithstanding
anything to the contrary set forth elsewhere herein, including Section 9.1(c), the failure of this covenant shall not constitute
an Event of Default unless such failure continues for two (2) consecutive calendar months.

 

8.2 Weekly
Production Volume. Negative variance in weekly production volume of product meeting minimum product specifications based on
industry standards of either the Company or Pekin shall be no greater than 20% (tested against agreed upon budget; updated weekly);
provided that, notwithstanding anything to the contrary set forth elsewhere herein, including Section 9.1(c), the failure of this
covenant shall not constitute an Event of Default unless such failure continues for two (2) consecutive calendar weeks.

 

1.9 Amendment
to Section 9.1 of the Credit Agreement. Section 9.1 of the Credit Agreement is hereby amended by adding the following new Section
9.1(o) as follows:

 

(o) Defaults
under the Pekin Credit Agreement. A default or event of default shall occur at any time under the terms of the Pekin Credit
Agreement or related document, and such breach, default, or event of default consists of the failure to pay (beyond any period
of grace permitted with respect thereto, whether waived or not), any Indebtedness when due (whether at stated maturity, by acceleration,
or otherwise) or if such breach or default permits or causes the acceleration of any Indebtedness (whether or not such right shall
have been exercised or waived).

 

1.10 Replacement
of Compliance Certificate. Exhibit C (Compliance Certificate) to the Credit Agreement is hereby replaced with Exhibit C attached
hereto.

 

1.11 Amendments
to Annex A to Credit Agreement.

 

(a) Annex
A to the Credit Agreement is hereby amended by adding the following definitions as new definitions in the correct alphabetical
order:

 

“80/20
Minimum Allocation Requirement” means, with respect to any payments made to the Pekin Lenders and/or the ICP Lenders
with respect to the Paydown Amount and any other amounts received on account of any Western Asset Sales or any PEC Asset Sales,
the requirement that the Pekin Lenders shall receive not less than 80% thereof for application to the principal paydown of the
“Term Loan” under Pekin Credit Agreement until paid in full and then to the “Revolving Term Loan” under
Pekin Credit Agreement.

 

“CoBank
Intercreditor Agreement” an intercreditor agreement by and between (x) the Pekin Lenders, and (y) the ICP Lenders on
one hand, on the other hand, to be executed on or before January 7, 2019, but subject to the 80/20 Minimum Allocation Requirement.
The Company will be provided with a copy of the CoBank Intercreditor Agreement immediately upon execution thereof.

 

“ICP
Lenders” means those entities party to this Agreement as Lenders from time to time.

 

“Indeck
Litigation” means the legal proceeding styled Case No. 2015-L-006405 in the Circuit Court of Cook County, Illinois, Law
Division.

 

    6

     

    

 

“First
Amendment” means Amendment No. 1 to Credit Agreement dated December 20, 2019, executed by the Company, Agent, and Lender.

 

“Loan Parties”
means, collectively, the Company and PEC.

 

“PAL”
means Pacific Aurora, LLC, a Delaware limited liability company.

 

“PEC
Guaranty” means the guaranty executed by PEC dated as of March 20, 2019, as amended.

 

“PEC
Pledge Agreement” means the pledge agreement executed by PEC dated as of March 20, 2019, as amended.

 

“PEC
Security Agreement” means the pledge agreement executed by PEC dated as of March 20, 2019, as amended.

 

“Pekin”
means Pacific Ethanol Pekin, LLC, a Delaware limited liability company

 

“Pekin
Amendment” means that certain Amendment No. 7 to Credit Agreement and Waiver dated December 20, 2019 by and among Pekin,
the Pekin Lenders and the Agent thereto.

 

“Pekin
Contingency Account” means a deposit account controlled by the Pekin Lenders established for the purpose of satisfying
the Obligations of the Company under this Agreement or of Pekin under the Peking Credit Agreement as the Pekin Lenders and the
ICP Lenders may jointly determine from time to time.

 

“Pekin
Credit Agreement” means that certain Credit Agreement by and among Pacific Ethanol Pekin, LLC, a Delaware limited liability
company as Borrower, Compeer Financial, PCA, a federally-chartered instrumentality of the United States as a Lender, and CoBank,
ACB, as Agent, dated as of December 15, 2016, as amended, restated, supplemented or otherwise modified from time to time.

 

“Pekin
Lenders” means those entities party to the Pekin Credit Agreement as Lenders from time to time.

 

“Senior
Lender Intercreditor Agreement” an intercreditor agreement by and between (x) the Pekin Lenders, and the ICP Lenders
on one hand, (y) the holders of the Senior Note Documents, on the other hand, and (z) ICP, PEC and Pekin, to be executed on or
before January 17, 2020 as such date may be extended by agreement between the foregoing parties.

 

ARTICLE
2 Waiver of Specified Defaults. Agent and Lender hereby agree that effective upon the effectiveness of
this Agreement, each of the Specified Defaults shall be deemed to have been waived by Agent and Lender, provided, however,
that such waiver pertains only to Specified Defaults set forth above for periods specified, and not to any other Default or
Event of Default which may exist under, or any other matters arising in connection with, the Credit Agreement, any other
agreements existing between the Company and the Lender or the Agent, or to any rights which the Lender or the Agent may have
arising by virtue of any other actions or matters. The effectiveness of such waiver is subject satisfaction of the conditions
set forth in Section 4 hereof.

 

    7

     

    

 

ARTICLE
3 Representations and Warranties; Acknowledgments.

 

3.1 In
order to induce Agent and Lender make the amendments provided for in Article 1, the Company hereby represents and warrants to Agent
and the Lender as of the Effective Date that:

 

(a) The
recitals set forth above are true, complete, accurate, and correct in all material respects (unless qualified by materiality, in
which case they shall be true and correct in all respects) and are part of this Agreement, and such recitals are incorporated herein
by this reference;

 

(b) All
representations and warranties made and given by the Loan Parties in the Loan Documents are true, complete, accurate, and correct
in all material respects (unless qualified by materiality, in which case they shall be true and correct in all respects), as if
given on the Effective Date (or, as to representations and warranties that specifically refer to an earlier date, as of such earlier
date) after giving effect to this Agreement;

 

(c) The
Loan Parties have no claims, offsets, rights of recoupment, counterclaims, or defenses (other than payment) with respect to: (a)
the payment of any amount due under the Loans and the Loan Documents; (b) the performance of the Loan Parties’ obligations
under the Loan Documents; or (c) the liability of the Loan Parties under the Loan Documents;

 

(d) Agent
and the Lending Parties: (i) have not breached any duty to the Loan Parties in connection with the Loans or the Loan Documents;
and (ii) have fully performed all obligations they may have had or now have to the Loan Parties;

 

(e) The
Loan Parties have had the assistance of independent counsel of their own choice, or have had the opportunity to retain such independent
counsel, in reviewing, discussing, and considering all the terms of this Agreement. Before execution of this Agreement, the Loan
Parties have had adequate opportunity to make whatever investigation or inquiry it may deem necessary or desirable in connection
with the subject matter of this Agreement;

 

(f) The
Loan Parties are not acting in reliance on any representation, understanding, or agreement from or with Agent or the Lending Parties
not expressly set forth herein. The Loan Parties acknowledge that none of Agent or the Lending Parties has made any representation
with respect to the subject of this Agreement except as expressly set forth herein. The Company has executed this Agreement as
its free and voluntary act, without any duress, coercion, or undue influence exerted by or on behalf of any Person;

 

(g) All
interest or other fees or charges which have been imposed, accrued or collected by Agent under the Loan Documents or in connection
with the Loans through the date of this Agreement, and the method of computing the same, were and are proper and agreed to by the
Loan Parties, and were properly computed and collected;

 

(h) This
Agreement is not intended by the parties to be a novation of the Loan Documents and, except as expressly waived, deferred or otherwise
modified herein, all terms, conditions, rights, and obligations as set out in the Loan Documents are hereby reaffirmed and shall
otherwise remain in full force and effect as originally written and agreed;

 

(i) Notwithstanding
anything to the contrary in this Agreement, except as waived, deferred or modified herein, the Loan Documents are in full force
and effect in accordance with their respective terms, remain legal, valid and binding obligations of the Loan Parties that are
enforceable in accordance with their respective terms, have not been modified or amended (except in written amendments executed
by the parties), and are hereby reaffirmed and ratified by the Loan Parties;

 

(j) All
information provided by the Loan Parties (or any of its agents or representatives) to Agent or the Lending Parties prior to the
Effective Date is true, correct and complete in all material respects as of the date provided and does not contain any untrue statements
of fact or omit to state a fact necessary to make the statements made not misleading in any material respect;

 

    8

     

    

 

(k) All
financial statements delivered by the Loan Parties (or any of its agents or representatives) to Agent or the Lending Parties prior
to the Effective Date are true and correct in all material respects and fairly present the financial condition of the Loan Parties;

 

(l) As
of the Effective Date, the Company has delivered to Agent all statements, notices, certificates, projections, updates, and other
information required under Article 6 of the Credit Agreement;

 

(m) The
execution and delivery of this Agreement and the performance by the Company of its obligations hereunder are within the corporate
or company powers and authority of the Company, have been duly authorized by all necessary corporate action, and do not and will
not contravene or conflict with the charter or by-laws of the Company;

 

(n) This
Agreement has been duly executed and delivered by the Company and constitutes the legal, valid and binding obligation of the Company,
enforceable against the Company in accordance with its terms, covenants, and conditions; and

 

(o) After
giving effect to this Agreement, no Default or Event of Default (other than related to any Excluded Event) has occurred and is
continuing.

 

3.2 In
order to induce Agent and Lender make the amendments provided for in Article 1, the Company hereby ratifies and confirms all of
the terms, covenants and conditions set forth in the Loan Documents as modified herein and hereby agrees, acknowledges and reaffirms
that (a) the Loan Documents as modified herein constitute legal, valid and binding obligations of the Company, enforceable against
the Company in accordance with their respective terms, covenants, and conditions, (b) the Company remains unconditionally liable
to Agent and the Lending Parties in accordance with the respective terms, covenants, and conditions set forth in the Loan Documents
as modified herein, (c) Agent and Lender have valid, duly perfected, fully enforceable Liens on the Collateral, (d) all Liens heretofore
granted to Agent and Lender in the Collateral continue in full force and effect and secure the Obligations, (e) the Company shall
execute and deliver to Agent and the Lending Parties any and all agreements and other documentation and to take any and all actions
reasonably requested by Agent and the Lending Parties at any time to assure the perfection, protection, priority, and enforcement
of Agent’s and Lender’s rights under the Loan Documents (including this Agreement) with respect to all such Liens (but
without any increase to the obligations or liabilities of the Company under the Loan Documents), and (f) as of December 20, 2019,
the amount of the Obligations owing under the Loan Documents (exclusive of attorneys’ fees and other fees, expenses, advances,
and costs) $30,086,575.00, consisting of (i) unpaid principal of $12,000,000.00 and accrued, unpaid interest of $34,630.00 on the
Term Loan, and (ii) unpaid principal of $18,000,000.00 and accrued, unpaid interest of $51,945 00 on the Revolving Term Loan, together
with (iii) third party costs and expenses, including attorney and advisor fees and costs.

 

3.3 The
ICP Lenders agree that, upon the payment of the Paydown Amount, the ICP Lenders will re-evaluate the existing interest rates set
forth in the Notes and consider in good faith any request by ICP to a reduction thereto.

 

ARTICLE
4 Conditions to Effectiveness.

 

This Agreement shall become effective on
such date (the “Effective Date”) when each of the following conditions has been satisfied:

 

4.1 Representations
and Warranties. All covenants, representations and warranties made by the Company pursuant to Article 3 shall be true and correct.

 

4.2 Delivery
of Closing Documents. Agent shall have received each of the documents set forth on Schedule I hereto in form and content acceptable
to the Agent.

 

4.3 Updated
Schedules. Agent shall have received updated schedules to the Credit Agreement in accordance with Section 6.11 of the Credit
Agreement.

 

    9

     

    

 

4.4 Reimbursement
of Fees/Expenses. The Company shall have paid all out-of-pocket fees and expenses of Agent and the Lending Parties (including
legal, advisory, and audit fees) that accrued in relation to the Loan Documents, including, without limitation, all out-of-pocket
fees and expenses incurred in connection with the preparation, drafting, negotiation, implementation of this Agreement.

 

4.5 Amendment
Fee. The Company and Pekin shall pay to Agent upon the closing of the first Asset Sale an agent fee of $50,000 and an amendment
fee of $200,000 for a total fee in the amount of $250,000 in cash (for both the Pekin Amendment and this Amendment).

 

4.6 Required
Consents, etc. The Company shall have delivered to Agent all consents, authorizations and amendments determined by Agent to
be necessary to ensure the enforceability of the Loan Documents, including a certificate of the secretary or other appropriate
officer of each Loan Party certifying (i) that the execution, delivery and performance of this Agreement, the Credit Agreement
as amended hereby and the other Loan Documents have been duly approved by all necessary action of the governing board of such Loan
Party, and attaching true and correct copies of the applicable resolutions granting such approval; (ii) that the organizational
document of such Loan Party, which were certified and delivered to the Agent pursuant to the most recent certificate of secretary
or other appropriate officer of such Loan Party, continue in full force and effect and have not been amended or otherwise modified
except as set forth in the certificate to be delivered as of the date hereof; and (iii) that the officers and agents of such Loan
Party who have been certified to the Agent, pursuant to the most recent certificate of secretary or other appropriate officer given
by such Loan Party, as being authorized to sign and to act on behalf of such Loan Party continue to be so authorized or setting
forth the sample signatures of each of the officers and agents of such Loan Party authorized as of the date hereof to execute and
deliver this Agreement, the other Loan Documents and all other documents, agreements and certificates on behalf of such Loan Party.

 

Upon the delivery by Agent of a fully executed
copy of this Agreement to the Company, the conditions set forth above shall be deemed satisfied and the Effective Date shall be
deemed to have occurred as of the date so delivered.

 

4.7 Post-closing
Deliveries. The Company shall cause each of the documents listed below (collectively, the “Post-Closing Deliveries”)
to be delivered to the Agent on or before (i) December 29, 2019, each of the documents set forth on Schedule II hereto, with the
additional Loan Documents listed thereon being prepared by the ICP Lenders and the Pekin Lenders, subject only to revision thereto
reasonably acceptable to the ICP Lenders and the Pekin Lenders and (ii) January 17, 2019, including the Senior Intercreditor Agreement
and each of the documents necessary to effect the cross collateralization liens to be addressed in the Senior Intercreditor Agreement;
provided that with respect to the date set forth in (ii) above only, such date may be extended up to an additional fifteen (15)
days so long as the parties are diligently working toward finalization and execution of same. The Post-Closing Deliveries that
constitute additional Loan Documents will be in form and content consistent in all material terms with this Amendment and the Pekin
Amendment, including all consent, termination and release provisions. The ICP Lenders and the Pekin Lenders agree to reasonably
cooperate with respect to the negotiation and finalization of the Senior Intercreditor Agreement and related documents. The Company
acknowledges and agrees that failure to deliver the Post-Closing Deliveries as required under this Agreement shall constitute an
automatic Event of Default under this Agreement and the Pekin Credit Agreement, without notice to the Company or any further action
required on the part of the Lender or the Agent.

 

ARTICLE
5 Release.

 

As a material part of
the consideration for Agent and Lender entering into this Agreement, the Company agrees as follows (the “Release Provision”)

 

5.1 The
Company hereby releases and forever discharges Agent and the Lending Parties and each such parties’ respective predecessors,
successors, assigns, participants, officers, managers, directors, shareholders, employees, agents, advisors, attorneys, representatives,
parent corporations, subsidiaries, and affiliates (hereinafter all of the above collectively referred to as “Released
Group”), jointly and severally, from any and all claims, counterclaims, demands, damages, debts, agreements, covenants,
suits, contracts, obligations, liabilities, accounts, offsets, rights, actions, and causes of action of any nature whatsoever,
including, without limitation, all claims, demands, and causes of action for contribution and indemnity, whether arising at law
or in equity, whether presently possessed or possessed in the future, whether known or unknown, whether liability be direct or
indirect, liquidated or unliquidated, whether presently accrued or to accrue hereafter, whether absolute or contingent, foreseen
or unforeseen, and whether or not heretofore asserted, and including whether arising from the negligence (but not the gross negligence
or willful misconduct) of any of the Released Group, which the Company may have or claim to have against any of the Released Group,
in each case only to the extent arising or accruing prior to and including the Effective Date.

 

    10

     

    

 

5.2 The
Company agrees not to sue any of the Released Group or in any way assist any other person or entity in suing any of the Released
Group with respect to any claim released herein. This Release Provision may be pleaded as a full and complete defense to, and may
be used as the basis for an injunction against, any action, suit, or other proceeding which may be instituted, prosecuted, or attempted
in breach of the release contained herein.

 

5.3 The
Company is the sole owner of the claims released by the Release Provision, and the Company has not heretofore conveyed or assigned
any interest in any such claims to any other person or entity. The Company understands that the Release Provision was a material
consideration in the agreement of Agent and Lender to enter into this Agreement.

 

5.4 It
is the express intent of the Company that the release and discharge set forth in the Release Provision be construed as broadly
as possible in favor of the Released Group so as to foreclose forever the assertion by the Company of any claims released hereby
against any of the Released Group. If any term, provision, covenant, or condition of the Release Provision is held by a court of
competent jurisdiction to be invalid, illegal, or unenforceable, the remainder of the provisions shall remain in full force and
effect.

 

ARTICLE
6 Miscellaneous.

 

6.1 Loan
Document Pursuant to Credit Agreement. This Agreement is a Loan Document executed pursuant to the Credit Agreement. Except
as expressly amended hereby, all of the representations, warranties, terms, covenants and conditions contained in the Credit Agreement
and each other Loan Document shall remain unamended and otherwise unmodified and in full force and effect.

 

6.2 Limitation
of Amendments. The temporary waivers and deferrals granted in Article 2 and the amendments provided in Article 3 shall be limited
precisely as provided for therein and shall not be deemed to be a waiver of, amendment of, consent to or modification of any other
term or provision of the Credit Agreement or any term or provision of any other Loan Document or of any transaction or further
or future action on the part of the Loan Parties which would require the consent of Agent or the Lending Parties under the Credit
Agreement or any other Loan Document.

 

6.3 Collateral.
To the extent any Collateral is personal property, the Loan Parties hereby renounce and waive all rights that are waivable under
Article 9 of the Uniform Commercial Code (the “UCC”) of any jurisdiction in which any Collateral may now or
hereafter be located. The Loan Parties also hereby acknowledge and agree that a public sale shall constitute a commercially reasonable
manner for the disposition of the Collateral.

 

6.4 Counterparts;
Effectiveness. This Agreement may be executed in counterparts (and by different parties hereto in different counterparts),
each of which shall constitute an original, but all of which when taken together shall constitute a single contract. This Agreement
shall become effective when it shall have been executed by Agent and when Agent shall have received counterparts hereof that, when
taken together, bear the signatures of each of the other parties hereto. Delivery of an executed counterpart of a signature page
of this Agreement by telecopy or email shall be as effective as delivery of a manually executed counterpart of this Agreement.

 

6.5 Incorporation
of Credit Agreement Provisions. The provisions of Article 11 of the Credit Agreement shall apply to this Agreement, mutatis
mutandis.

 

[Signature
Pages Follow]

 

    11

     

    

 

[SIGNATURE PAGE TO AMENDMENT NO. 1]

 

IN WITNESS WHEREOF,
the parties hereto, by their Authorized Officers, have executed this Agreement as of the date first set forth above.

 

	 	COMPANY:
	 	 
	 	ILLINOIS CORN PROCESSING, LLC
	 	 
	 	By: 	/s/ Bryon T. McGregor 
	 	Name: 	Bryon T. McGregor
	 	Title: 	Chief Financial Officer

 

     

     

    

 

[SIGNATURE PAGE TO AMENDMENT NO. 1]

 

IN WITNESS WHEREOF,
the parties hereto, by their Authorized Officers, have executed this Agreement as of the date first set forth above.

 

	 	LENDER:
	 	 
	 	COMPEER FINANCIAL, PCA
	 	 
	 	By:	 /s/ Kevin Buente 
	 	Name: 	Kevin Buente
	 	Title: 	Principal Credit Officer

 

     

     

    

 

[SIGNATURE PAGE TO AMENDMENT NO. 7]

 

IN WITNESS WHEREOF,
the parties hereto, by their Authorized Officers, have executed this Agreement as of the date first set forth above.

 

	 	COBANK, ACB
	 	 
	 	By:	/s/ Janet Downs
	 	Name:	Janet Downs
	 	Title:	Vice President

 

     

     

    

 

Schedule I

 

Closing Deliveries

 

		1.	This Agreement

 

		2.	Updated schedules to the Credit Agreement

 

		3.	Amended and Restated Revolving Note executed by the Company

 

		4.	Amended and Restated Term Note executed by the Company

 

		5.	Amendment to Pekin Credit Agreement executed by Pekin

 

		6.	Updated schedules to Pekin Credit Agreement

 

		7.	Amended and Restated Revolving Note executed by Pekin

 

		8.	Amended and Restated Term Note executed by Pekin

 

     

     

    

  

Schedule II

 

Post-Closing Deliveries

 

		1.	Guaranty executed by the Company in favor of the Pekin Lenders

 

		2.	First Amendment to Security Agreement executed by the Company

 

		3.	First Amendment to Mortgage executed by the Company

 

		4.	Guaranty of Pekin executed by Pekin in favor of the ICP Lenders

 

		5.	First Amendment to Security Agreement executed by Pekin

 

		6.	Third Amendment to Mortgage executed by Pekin

 

		7.	Amended and Restated Guaranty and Contribution Agreement executed by PEC

 

		8.	First Amendment to Security Agreement executed by PEC

 

		9.	Pledge Agreement executed by PEC pledging its interest in the Company and an Acknowledgment from the
Company

 

		10.	Pledge Agreement executed by PEC pledging its interest in Pekin with an Acknowledgment from Pekin

 

		11.	Executed certificates of secretary for each Loan Party certifying that no changes have been made to
the organizational documents since last delivered to the Agent

 

		12.	Approved resolutions authorizing this Agreement and the actions contemplated herein

 

		13.	Legal opinion of counsel
to the Company, Pekin and PEC

 

     

     

    

 

SCHEDULE 5.2

 

Subsidiaries

 

This is Schedule 5.2 to that certain Credit Agreement dated
as of September 15, 2017 by and between Illinois Com Processing, LLC, Compeer Financial, PCA and CoBank, ACB (as amended, restated,
modified or supplemented from time to time, the “Credit Agreement”). Capitalized terms defined in the Credit
Agreement and not defined in this Schedule 5.2 shall have the respective meanings ascribed to them by the Credit Agreement.

  

	Legal Name of the Company	Jurisdiction of organization and type of entity 

[for example, Delaware limited liability company, Colorado corporation, etc.]
	Illinois Com Processing, LLC	Delaware limited liability company

 

	Legal Name of Subsidiary	Is the

 Subsidiary a 

Guarantor?

[Yes or No]	Jurisdiction of organization and

 type of entity
	 	 	 

 

    
Schedules updated as of December 20, 2019

     

    

  

SCHEDULE 5.12

 

Environmental Matters

 

On March 14, 2018, IEPA issued a Violation Notice regarding
air emissions violations at Illinois Corn Processing, LLC (“ICP”). A Compliance Commitment Agreement was agreed on
July 19, 2018. The CCA calls for the plant to develop certain compliance programs and certify compliance. ICP is working with an
environmental consultant to prepare certifications of compliance.

 

On March 13, 2018, the manager of environmental compliance at
the Pekin facility discovered irregularities in the record keeping and reporting at the ICP facility. ICP subsequently engaged
an independent expert to investigate the history of record keeping and environmental compliance at ICP. Based upon the expert’s
findings, there appears to have been a pattern of inaccurate and untruthful reporting which could lead to the imposition of civil
penalties, and, if the conduct is found to have been intentional, criminal sanctions. ICP reported what was known to the EPA on
April 2, 2018 pursuant to EPA Audit Policy (April 2000) 65 FR 19,618 (04/11/00), formally titled “Incentives for Self- Policing:
Discovery, Disclosure, Correction and Prevention of Violation.” On July 26, ICP submitted letters stating that corrective
measures have been complete regarding all violations reported on April 2. ICP also reported that an expert assessment had been
completed and that further violations had been identified. On July 27, ICP self-reported additional violations, including 2 categories
of potential criminal violations. On January 23, 2019, ICP submitted its final report on these matters and certified final remediation
of the self-reported water permit violations. In the meanwhile, counsel for ICP met with the EPA investigators looking into the
potential criminal matters, and were apprised of EPA’s plans for further investigation. After interviewing the former ICP
employees who were implicated in the falsification of reports, EPA notified ICP on December 16, 2019, that EPA had closed the criminal
investigation with no further action. The decision does not affect any review by EPA Region V’s civil enforcement program.

 

On October 1 and 4, 2018, the ICP and Pekin plants respectively
received Findings of Violations from US EPA citing the plants for a number of Clean Air Act violations. These were not unexpected
as EPA had previously made Section 114 information requests of both plants. EPA’s principal finding in the citations is that
the plants “failed to demonstrate compliance with the [Miscellaneous Organic NESHAP (MON) at the Facility’s [Fiber,
Germ, and Gluten Dryers], in violation of 40 C.F.R. § 63.2450(a).” The legal and technical experts the PE Pekin and
ICP disagree with this finding. EPA, PE Pekin and ICP have entered into tolling agreements to allow for technical analysis and
continued discussion of the interpretive questions. The tolling agreements now expire on June 30, 2020.

 

    
Schedules updated as of December 20, 2019

     

    

  

SCHEDULE 6.12(b)

 

Collateral Assignments of Material Agreements

 

Com Procurement and Supply Agreement between the Company and
Pacific Ag. Products, LLC dated July 3, 2017

 

Co-Product Marketing Agreement between the Company and Pacific
Ag. Products, LLC dated July 3, 2017

 

Alcohol Product Marketing Agreement between the Company and
Kinergy Marketing LLC dated July 3, 2017

 

Affiliated Company Agreement between Pacific Ethanol, Inc. and
the Subsidiaries from time to time party thereto, including the Company, dated July 1, 2015, as amended by Amendment No. 1 to Affiliated
Company Agreement dated January 1, 2017 and Amendment No. 2 to Affiliated Company Agreement dated July 3, 2017.

 

 

Schedules updated as of December 20, 2019

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