Document:

Exhibit 10.7

 

AMENDMENT NO. 1

TO

SECOND AMENDED AND RESTATED CREDIT AGREEMENT

 

This
AMENDMENT NO. 1 TO SECOND AMENDED AND RESTATED CREDIT AGREEMENT (this
“Amendment”) is entered into as of March 27, 2019, by and among WELLS FARGO BANK, NATIONAL ASSOCIATION, in its capacity as administrative agent (in such capacity, “Agent”)
for each member of the Lender Group and the Bank Product Provider (as each such term is defined in the Credit Agreement referred
to below), KINERGY MARKETING LLC (“Kinergy”), and PACIFIC AG. PRODUCTS, LLC (“Pacific Ag”
and together with Kinergy, each individually, a “Borrower” and collectively, the “Borrowers”).

 

WHEREAS, Borrowers,
Agent and Lenders (as defined below) have entered into certain financing arrangements as set forth in (a) the Second Amended and
Restated Credit Agreement, dated as of August 2, 2017, by and among Agent, the financial institutions from time to time party thereto
as lenders (collectively, the “Lenders”) and Borrowers (as amended, restated, renewed, extended, supplemented,
substituted and otherwise modified from time to time, the “Credit Agreement”) and (b) the Loan Documents (as
defined in the Credit Agreement);

 

WHEREAS, Borrowers,
Agent and Lenders have agreed to amend and modify certain provisions of Credit Agreement, subject to the terms and conditions of
this Amendment.

 

NOW, THEREFORE, upon
the mutual agreements and covenants set forth herein and for other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the parties hereto agree as follows:

 

1.             Definitions.

 

(a)           Additional
Definitions. The Credit Agreement is hereby amended to add the following new definition thereto:

 

“ “Aurora
Assets” shall mean (a) the membership interests in Pacific Aurora, LLC owned by Pacific Ethanol Central, LLC and/or (b) the
assets owned by Pacific Aurora, LLC and its Subsidiaries.

 

“ “Aurora
Assets Transaction” shall mean the sale or refinance of the one or more of the Aurora Assets in an amount sufficient to satisfy
the Compliance Conditions (as that term is defined in the Pekin Amendment).

 

“ “Pekin
Amendment” shall mean that certain Amendment No. 4 to Credit Agreement and Other Loan Documents dated as of March 20, 2019
pursuant to which the Pacific Ethanol Credit Facility described in clause (a) of the definition thereof was further amended.”

 

“ “Amendment
No. 1 Effective Date” shall mean March __, 2019.”

 

“ “Special
Loan Amount” shall mean, as of any date of determination during the Special Period, the amount equal to the difference between
the Borrowing Base calculated using the advance rates applicable during the Special Period and the Borrowing Base calculated using
the advance rates applicable upon expiration of the Special Period.”

 

    

     

    

 

“ “Special
Loans” shall mean, as of any date of determination during the Special Period, outstanding Revolving Loans in the amount equal
to the Special Loan Amount. For the avoidance of doubt, during the Special Period (and terminating as of the end of such Special
Period), Revolving Loans outstanding in an amount equal to the Special Loan Amount are deemed Special Loans and such Special Loans
are deemed the first Revolving Loans outstanding and last Revolving Loans to be repaid. “

 

“ “Special
Period” shall mean the period through and including the earlier of (a) September 30, 2019 and (b) the tenth (10th)
Business Day following written notice from Agent to Administrative Borrower of the election of Agent to terminate the Special Period.”

 

(b)           Interpretation.
Capitalized terms used and not defined in this Amendment shall have the respective meanings given them in the Credit Agreement.

 

2.             Amendments.

 

(a)           Applicable
Margin. The last paragraph of the definition of “Applicable Margin” set forth in Section 1.1 of the Credit Agreement
is hereby deleted in its entirety and the following substituted therefor:

 

“The
Applicable Margin shall be re-determined as of the first day of each quarter. Notwithstanding anything to the contrary herein,
(i) during the Special Period, (A) the Applicable Margin on Special Loans outstanding shall be set at the margin in the row styled
“Level III” above plus two (2%) percent per annum, and (B) the Applicable Margin on all other Revolving Loans shall
be set at the margin in the row styled “Level III” above, and (ii) the Applicable Margin shall be the highest percentage
set forth in the grid above (or, in the case of Special Loans outstanding during the Special Period, the percentage determined
under the foregoing clause (i) of this sentence) plus two (2%) percent per annum, at Agent’s option without notice, (A) for
the period on and after the date of termination or non-renewal hereof until such time as all Obligations are indefeasibly paid
and satisfied in full in immediately available funds, (B) for the period from and after the date of the occurrence of any Event
of Default, and for so long as such Event of Default is continuing as determined by Agent, and (C) on the Revolving Loans to Borrowers
at any time outstanding in excess of the Borrowing Base (whether or not such excess(es) arise or are made with or without Agent’s
or any Lender’s knowledge or consent and whether made before or after an Event of Default). The Applicable Margin as of the
Closing Date shall be the Applicable Margin shall be set at the margin in the row styled “Level II” above.”

 

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(b)           Borrowing
Base. The definition of “Borrowing Base” set forth in Section 1.1 of the Credit Agreement is hereby deleted in
its entirety and the following substituted therefor:

 

““Borrowing
Base” means, at any time, the amount equal to:

 

(a)           the
sum of:

 

(i)       eighty-five
percent (85%) of the Eligible Accounts of Borrowers; provided that, during the Special Period, such percentage shall be
ninety percent (90%); plus

 

(ii)       the
lesser of (A) $50,000,000, (B) seventy percent (70%) multiplied by the Value of the Eligible Inventory and Eligible-In-Transit
Inventory of Borrowers, or (C) eighty-five percent (85%) of the Net Recovery Percentage multiplied by the Value of Eligible Inventory
and Eligible In-Transit Inventory of Borrowers; provided that, during the Special Period, the percentages set forth in the
foregoing clauses (B) and (C) shall be eighty percent (80%) and ninety-five percent (95%) respectively; minus

 

(b)           Reserves.”

 

(c)            Eligible
Accounts. Subsection (n) of the definition of “Eligible Accounts” set forth in Section 1.1 of the Credit Agreement
is hereby deleted in its entirety and the following substituted therefor:

 

“(n)         such
Accounts are not unpaid more than (i) in the case of Accounts of Pacific Ag, thirty (30) days after the original due date for such
Accounts or ninety (90) days after the date of the original invoice for them; provided that, with respect to Accounts due
from Proctor & Gamble, such ninety (90) day period shall be one hundred and fifty (150) days; and (ii) in the case of all other
Accounts, thirty (30) days after the original due date for such Accounts or forty-five (45) days after the date of the original
invoice for them; provided that, with respect to Accounts due from Proctor & Gamble, such forty-five (45) day period
shall be one hundred and fifty (150) days;”

 

(d)           Increased
Reporting Event. The definition of “Increased Reporting Event” set forth in Section 1.1 of the Credit Agreement
is hereby deleted in its entirety and the following substituted therefor:

 

““Increased
Reporting Event” means if at any time (a) Excess Availability is less than the greater of fifteen percent (15%) of the
Borrowing Base reflected in the Borrowing Base Certificate most recently delivered by Borrowers to Agent or $10,000,000, or (b)
a Default or Event of Default shall have occurred and be continuing.”

 

(e)           Mandatory
Prepayments. Section 2.4(e) of the Credit Agreement is hereby amended to add the following new sentence to the end thereof:

 

“In
addition but without duplication of prepayments under the preceding sentence, if at any time during the Special Period the Revolver
Usage on such date exceeds the total payments received by Borrowers in respect of their Accounts and Inventory during the thirty
(30) day period ending on the Business Day as of which was prepared the Borrowing Base reflected in the Borrowing Base Certificate
most recently delivered by Borrowers to Agent hereunder, then Borrowers shall promptly, but in any event within one Business Day,
prepay the Obligations in accordance with Section 2.4(f)(i) in an aggregate amount equal to the amount of such excess. During the
Special Period, Borrowers shall deliver to Agent, contemporaneously with each Borrowing Base Certificate delivered by Borrowers
to Agent hereunder, a report of all payments received by Borrowers in respect of their Accounts and Inventory during the thirty
(30) day period ending on the Business Day as of which was prepared the Borrowing Base reflected in such Borrowing Base Certificate.”

 

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(f)            Financial
Covenants. Article 7 to the Credit Agreement is hereby deleted in its entirety and the following substituted therefor:

 

“7.           FINANCIAL
COVENANTS.

 

Until the termination
of all of the Commitments and the payment in full of the Obligations, each Borrower covenants and agrees that:

 

(a) during
the Special Period, Borrowers will maintain a Fixed Charge Coverage Ratio of not less than 2:0 to 1.00, calculated as of the last
day of each fiscal month of Borrowers for the 12 month period then ended; and

 

(b) after
expiration of the Special Period, Borrowers will maintain a Fixed Charge Coverage Ratio of not less than 2:0 to 1.00, calculated
as of the last day of each fiscal month of Borrowers for the 12 month period then ended; provided, that, the financial
covenant under this clause (b) shall not apply to any month for which the Excess Availability was at all times during such month,
and at all times during each of the two (2) prior months, greater than twenty percent (20%) of the Maximum Revolver Amount; provided,
further, that the foregoing test metric shall be based on Liquidity and not Excess Availability during any consecutive
five (5) Business Day period that includes the last Business Day of a fiscal quarter (not to exceed five (5) total Business Days
for any quarter end).”

 

(g)           Collateral
Reporting. Schedule 5.2 to the Credit Agreement is hereby amended to delete clause (b) of the first row and substitute the
following therefor:

 

“(b) inventory
reports by location and category (and including the amounts of Inventory and the value thereof at any leased locations and at premises
of warehouses, processors or other third parties); provided that, if an Increased Reporting Period is in effect, such reports
may, with the written consent of Agent, continue to be delivered on a monthly basis as if no such Increased Reporting Period were
in effect so long as, on a weekly basis no later than two (2) Business Days after the end of each week, Borrowers deliver to Agent
estimates of such reports.”

 

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(h)           Other
Reporting.

 

(i)        Section
5.2 of the Credit Agreement is hereby amended to delete clause (a) of such Section and substitute the following therefor:

 

“(a)
Borrowers (a) will deliver to Agent (and if so requested by Agent, with copies for each Lender) each of the reports set forth on
Schedule 5.2 and on Schedule 5.3 to this Agreement at the times specified therein,”

 

(ii)       Schedule
5.3 (Other Reporting) attached hereto as Exhibit A is hereby added to the Credit Agreement as a new Schedule 5.3 thereto.

 

3.             Amendment
Fee. In addition to all other fees, costs and expenses payable by Borrowers to Agent and Lenders under the Loan Documents Borrowers
shall pay to Agent an amendment fee in the amount of $75,000 (the “Amendment Fee”). The Amendment Fee shall
be fully earned, due and payable on the date hereof, and shall not be subject to refund or rebate for any reason. Borrowers acknowledge
and agree that Agent may, in its sole and absolute discretion, allocate to itself or to any Lender all or any portion of the Amendment
Fee.

 

4.             Additional
Representation. In addition to the continuing representations, warranties and covenants at any time made by Borrowers to Agent
and Lenders pursuant to the Credit Agreement, and the other Loan Documents, Borrowers hereby jointly and severally represent, warrant
and covenant with and to Agent and Lenders that, as of the date of this Amendment and after giving effect hereto, no known Default
or Event of Default exists or has occurred and is continuing.

 

5.             Release.
In consideration of the agreements of Agent and Lenders contained herein and the making of loans by or on behalf of Agent and Lenders
to Borrowers pursuant to the Credit Agreement, and for other good and valuable consideration, the receipt and sufficiency of which
is hereby acknowledged, each Borrower on behalf of itself and its successors, assigns, and other legal representatives (the “Releasing
Parties”), hereby, jointly and severally, absolutely, unconditionally and irrevocably releases, remises and forever discharges
Agent and each Lender, and their present and former shareholders, affiliates, subsidiaries, divisions, predecessors, directors,
officers, attorneys, employees, agents and other representatives and their respective successors and assigns (Agent, each Lender
and all such other parties being hereinafter referred to collectively as the “Releasees” and individually as
a “Releasee”), of and from all demands, actions, causes of action, suits, covenants, contracts, controversies,
agreements, promises, sums of money, accounts, bills, reckonings, damages and any and all other claims, counterclaims, defenses,
rights of set-off, demands and liabilities whatsoever (individually, a “Claim” and collectively, “Claims”)
of every name and nature, known or unknown, suspected or unsuspected, both at law and in equity, whether liquidated or unliquidated,
matured or unmatured, asserted or unasserted, fixed or contingent, foreseen or unforeseen and anticipated or unanticipated, which
any Releasing Party may now or hereafter own, hold, have or claim to have against the Releasees or any of them for, upon, or by
reason of any nature, cause or thing whatsoever which arises at any time on or prior to the day and date of this Amendment, in
relation to, or in any way in connection with the Credit Agreement, as amended and supplemented through the date hereof, this Amendment
and the other Loan Documents. Each Releasing Party understands, acknowledges and agrees that the release set forth above may be
pleaded as a full and complete defense and may be used as a basis for an injunction against any action, suit or other proceeding
which may be instituted, prosecuted or attempted in breach of the provisions of such release.

 

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It is the intention of the Releasing Parties that the above
release shall be effective as a full and final release of each and every matter specifically and generally referred to above clause
(a). Each Releasing Party acknowledges and represents that it has been advised by independent legal counsel with respect to the
agreements contained herein and with respect to the provisions of California Civil Code Section 1542, which provides as follows:
“A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS THAT THE CREDITOR OR RELEASING PARTY DOES NOT KNOW OR SUSPECT TO EXIST IN HIS
OR HER FAVOR AT THE TIME OF EXECUTING THE RELEASE, AND THAT IF KNOWN BY HIM OR HER WOULD HAVE MATERIALLY AFFECTED THE SETTLEMENT
WITH THE DEBTOR OR RELEASEE.” Each Releasing Party, being aware of said code section, expressly waives on its own behalf
and on behalf of those for which such Releasing Party is giving the release, any and all rights either may have thereunder, as
well as under any other statute or common law principle of similar effect, with respect to any of the matters released herein.
This release shall act as a release of all included claims, rights and causes of action, whether such claims are currently known,
unknown, foreseen or unforeseen and regardless of any present lack of knowledge as to such claims. Each Releasing Party understands
and acknowledges the significance and consequence of this waiver of California Civil Code Section 1542, and hereby assumes full
responsibility for any injuries, damages, losses or liabilities released herein.

 

6.             Conditions
to Effectiveness. The effectiveness of this Amendment shall be subject to the receipt by Agent of (a) an original (or
electronic copy) of this Amendment duly authorized, executed and delivered by Borrowers and Lenders and (b) an amendment, in form
and substance satisfactory to Agent and executed by the Borrowers, to the Guaranty and Security Agreement.

 

7.             Effect
of this Amendment. Except as modified pursuant hereto, no other changes or modifications to the Credit Agreement are
intended or implied and in all other respects the Credit Agreement is hereby specifically ratified, restated and confirmed by all
parties hereto as of the date hereof. To the extent of conflict between the terms of this Amendment, on the one hand, and Credit
Agreement, on the other hand, the terms of this Amendment shall control. 

 

8.             Further
Assurances. Borrowers shall execute and deliver such additional documents and take such additional action as may be reasonably
requested by Agent to effectuate the provisions and purposes of this Amendment.

 

9.             Binding
Effect. This Amendment shall be binding upon and inure to the benefit of each of the parties hereto and their respective successors
and assigns.

 

10.           Governing
Law. The rights and obligations hereunder of each of the parties hereto shall be governed by and interpreted and determined
in accordance with the internal laws of the State of California (without giving effect to principles of conflict of laws).

 

11.           Counterparts.
This Amendment may be signed in counterparts, each of which shall be an original and all of which taken together constitute one
agreement. In making proof of this Amendment, it shall not be necessary to produce or account for more than one counterpart signed
by the party to be charged. Delivery of an executed counterpart of this Amendment electronically or by facsimile shall be effective
as delivery of an original executed counterpart of this Amendment.

 

[Remainder
of page intentionally left blank]

 

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IN WITNESS WHEREOF,
the parties hereto have caused this Amendment to be duly executed and delivered by their authorized officers as of the day and
year first above written.

 

BORROWERS:

 

	Kinergy Marketing LLC,	 
	   as a Borrower	 
	 	 	 
	By:	/s/ Bryon T. McGregor	 
	Name:	Bryon T. McGregor	 
	Title:	CFO	 

 

	PACIFIC AG. PRODUCTS,
        LLC,	 
	   as a Borrower	 
	 	 	 
	By:	/s/ Bryon T. McGregor	 
	Name:	Bryon T. McGregor	 
	Title:	CFO	 

 

	AGENT AND LENDER:	 
	 	 	 
	wells fargo BANK, NATIONAL ASSOCIATION, 	 
	   as Agent and sole Lender	 
	 	 	 
	By:	/s/ Carlos Valles	 
	Name:	Carlos Valles	 
	Title:	Vice President	 

 

Signature
Page to 1st Amendment to Credit Agreement

  

    

     

    

 

EXHIBIT A

 

Schedule 5.3

Other Reporting

 

At all times during
the Special Period, deliver to Agent (and if so requested by Agent, with copies for each Lender) each of the reports or other items
set forth below at the following times in form reasonably satisfactory to Agent:

 

	promptly upon becoming available to Pacific Ethanol Pekin, LLC (but in no event later than ten (10) days after receipt by such Person thereof)	copies all sale offering and marketing materials prepared by the Aurora Marketing Agent(s) (as defined in the Pekin Amendment), and all indications of interest, letters of intent, and written offers for the Aurora Assets, together with such other information regarding any proposed Aurora Assets Transaction as Agent may reasonably request.
	within five (5) Business Days after each calendar month end	a written report detailing any changes to the timeline for the marketing and sale of the Aurora Assets and including copies of all indications of interest, letters of intent, and written offers for the Aurora Assets.
	Within five (5) Business Days of the closing of any sale or other financing transaction related to any Aurora Assets Transaction	a final report summarizing the use of proceeds and including a closing statement with respect to such transaction.
	 	
        It being acknowledged and agreed that all sales reports and
        marketing information delivered under this Schedule 5.3 shall be subject to the confidentiality provisions set forth in Section
        17.9 of the Agreement.

         

 

Exhibit A to 1st Amendment to Credit AgreementExhibit
10.8

 

Pacific Ethanol, Inc. 2019 Short-Term
Incentive Plan (“Plan”) Description

 

		●	Effective Date: The Plan was adopted by the compensation committee (the “Compensation Committee”) of the
board of directors of Pacific Ethanol, Inc. (the “Company”) on April 5, 2019.

 

		●	Participants: The Company’s Chief Executive Officer, Chief Financial Officer, Chief Operating Officer, General
Counsel, Vice President of Commodities and Corporate Development and Vice President of Supply and Trading (“Executive Officers”),
and other officer, director and manager-level personnel will be eligible to participate in the Plan.

 

		●	Aggregate Plan Pool: The dollar amount of the aggregate Plan pool will be established by the Compensation Committee.

 

		●	Awards: Awards under the Plan for Executive Officers will be determined by the Compensation Committee. Awards under
the Plan for other officer, director and manager-level personnel will be determined by the Company’s executive committee,
within the limits of the Plan pool approved by the Compensation Committee.

 

		●	Individual Targets: The Plan payout targets for Executive Officers will be determined by the Compensation Committee.
The Plan payout targets for other officer, director and manager-level personnel will be set as a percentage of a participant’s
base salary in accordance with compensation policies established by the Company’s executive committee or a participant’s
employment agreement with the Company.

 

		●	Award Components: Awards under the Plan will be based on two elements: financial performance and individual performance.
Company financial performance will be an element in all participants’ awards. Each element will be assigned a weighting based
upon a participant’s role in the Company.

 

		○	The financial performance element will be based on earnings before interest, taxes, depreciation and amortization, adjusted
for certain non-cash and other adjustments, such as asset impairments, purchase accounting adjustments and fair value adjustments,
established by the Compensation Committee (“Adjusted EBITDA”). An Adjusted EBITDA goal will be established for 2019
by the Compensation Committee. The financial performance element is non-discretionary and will be funded at a rate of 0% to 200%
of the participant’s targeted payout amount for the element based on the level of actual Adjusted EBITDA compared to the
Adjusted EBITDA goal.

 

		○	The individual performance element will be based on individual participant goals based on quantitative criteria and subjective
elements established by each participant’s supervisor, in consultation with the Company’s executive committee. The
extent to which a participant will be deemed to have achieved his or her individual performance goals will be determined by the
Company’s executive committee in consultation with the participant’s supervisor; provided, however, that the extent
to which a participant who is an Executive Officer will be deemed to have achieved his or her individual performance goals will
be recommended by the Company’s Chief Executive Officer but ultimately determined by the Compensation Committee. The individual
performance element is discretionary and will be funded at a rate of 0% to 100% of the participant’s targeted payout amount
for the element, but may exceed 100% of the participant’s targeted payout amount through a reduction of amounts set aside
for other participants in the Plan pool without, however, affecting the overall amount of the Plan pool.

 

    

     

    

 

		●	Payout Limitations: The Compensation Committee may establish minimum Company cash and excess liquidity requirements
as a condition to any payout under the Plan.

 

In addition to incentive compensation payable
under the Plan, the Company’s Compensation Committee retains the authority to grant special discretionary cash and/or equity
awards.

 

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