Document:

Indemnification Agreement

     

    Exhibit
      10.2

     

    

      PACIFIC
        ETHANOL, INC.

       

      INDEMNITY
        AGREEMENT

       

      This
        Indemnity Agreement (this
        “Agreement”)
        dated
        as of May 29, 2007, is made by and between Pacific
        Ethanol, Inc., a
        Delaware corporation (the “Company”),
        and
Douglas
        Jeffries (“Indemnitee”).

       

      Recitals

       

      A.     The
        Company desires to attract and retain the services of highly qualified
        individuals as directors, officers, employees and agents. 

       

      B.     The
        Company’s bylaws (the “Bylaws”)
        require that the Company indemnify its directors, and empowers the Company
        to
        indemnify its officers,
        employees and agents, as authorized by the Delaware General Corporation Law,
        as
        amended (the “Code”),
        under
        which the Company is organized and such Bylaws expressly provide that the
        indemnification provided therein is not exclusive and contemplates that the
        Company may enter into separate agreements with its directors, officers and
        other persons to set forth specific indemnification provisions.

       

      C.     Indemnitee
        does not regard the protection currently provided by applicable law, the
        Company’s governing documents and available insurance as adequate under the
        present circumstances, and the Company has determined that Indemnitee and
        other
        directors, officers, employees and agents of the Company may not be willing
        to
        serve or continue to serve in such capacities without additional
        protection.

       

      D.     The
        Company desires and has requested Indemnitee to serve or continue to serve
        as a
        director, officer, employee or agent of the Company, as the case may be,
        and has
        proferred this Agreement to Indemnitee as an additional inducement to serve
        in
        such capacity.

       

      E.     Indemnitee
        is willing to serve, or to continue to serve, as a director, officer, employee
        or agent of the Company, as the case may be, if Indemnitee is furnished the
        indemnity provided for herein by the Company.

       

      Agreement

       

      Now
        Therefore,
        in
        consideration of the mutual covenants and agreements set forth herein, the
        parties hereto, intending to be legally bound, hereby agree as
        follows:

       

      1.     Definitions.

       

      (a) Agent.
        For
        purposes of this Agreement, the term “agent” of the Company means any person
        who: (i) is or was a director,
        officer,
        employee or other fiduciary of the Company or a subsidiary of the Company;
        or
        (ii) is or was serving at the request or for the convenience of, or
        representing the interests of, the Company or a subsidiary of the Company,
        as a
        director, officer, employee or other fiduciary of a foreign or domestic
        corporation, partnership, joint venture, trust or other enterprise.

       

      
        
           

        

        
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      (b) Expenses.
        For
        purposes of this Agreement, the term “expenses” shall be broadly construed and
        shall include, without limitation, all direct and indirect costs of any type
        or
        nature whatsoever (including, without limitation, all attorneys’, witness, or
        other professional fees and related disbursements, and other out-of-pocket
        costs
        of whatever nature), actually and reasonably incurred by Indemnitee in
        connection with the investigation, defense or appeal of a proceeding or
        establishing or enforcing a right to indemnification under this Agreement,
        the
        Code or otherwise, and amounts paid in settlement by or on behalf of Indemnitee,
        but shall not include any judgments, fines or penalties actually levied against
        Indemnitee for such individual’s violations of law. The term “expenses” shall
        also include reasonable compensation for time spent by Indemnitee for which
        he
        is not compensated by the Company or any subsidiary or third party (i) for
        any
        period during which Indemnitee is not an agent, in the employment of, or
        providing services for compensation to, the Company or any subsidiary; and
        (ii)
        if the rate of compensation and estimated time involved is approved by the
        directors of the Company who are not parties to any action with respect to
        which
        expenses are incurred, for Indemnitee while an agent of, employed by, or
        providing services for compensation to, the Company or any
        subsidiary.

       

      (c) Proceedings.
        For
        purposes of this Agreement, the term “proceeding” shall be broadly construed and
        shall include, without limitation, any threatened, pending, or completed
        action,
        suit, arbitration, alternate dispute resolution mechanism, investigation,
        inquiry, administrative hearing or any other actual, threatened or completed
        proceeding, whether brought in the right of the Company or otherwise and
        whether
        of a civil, criminal, administrative or investigative nature, and whether
        formal
        or informal in any case, in which Indemnitee was, is or will be involved
        as a
        party or otherwise by reason of: (i) the fact that Indemnitee is or was a
        director or officer of the Company; (ii) the fact that any action taken by
        Indemnitee or of any action on Indemnitee’s part while acting as director,
        officer, employee or agent of the Company; or (iii) the fact that Indemnitee
        is
        or was serving at the request of the Company as a director, officer, employee
        or
        agent of another corporation, partnership, joint venture, trust, employee
        benefit plan or other enterprise, and in any such case described above, whether
        or not serving in any such capacity at the time any liability or expense
        is
        incurred for which indemnification, reimbursement, or advancement of expenses
        may be provided under this Agreement.

       

      (d) Subsidiary.
        For
        purposes of this Agreement, the term “subsidiary” means any corporation or
        limited liability company of which more than 50% of the outstanding voting
        securities or equity interests are owned, directly or indirectly, by the
        Company
        and one or more of its subsidiaries, and any other corporation, limited
        liability company, partnership, joint venture, trust, employee benefit plan
        or
        other enterprise of which Indemnitee is or was serving at the request of
        the
        Company as a director, officer, employee, agent or fiduciary.

       

      (e) Independent
        Counsel.
        For
        purposes of this Agreement, the term “independent counsel” means a law firm, or
        a partner (or, if applicable, member) of such a law firm, that is experienced
        in
        matters of corporation law and neither presently is, nor in the past five
        (5) years
        has
        been, retained to represent: (i) the Company or Indemnitee in any matter
        material to either such party, or (ii) any other party to the proceeding
        giving
        rise to a claim for indemnification hereunder. Notwithstanding the foregoing,
        the term “independent counsel” shall not include any person who, under the
        applicable standards of professional conduct then prevailing, would have
        a
        conflict of interest in representing either the Company or Indemnitee in
        an
        action to determine Indemnitee’s rights under this Agreement.

       

      
        
           

        

        
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      2.     Agreement
        to Serve.
        Indemnitee will serve, or continue to serve, as a director, officer, employee
        or
        agent of the Company or any subsidiary, as the case may be, faithfully and
        to
        the best of his or her ability, at the will of such corporation (or under
        separate agreement, if such agreement exists), in the capacity Indemnitee
        currently serves as an agent of such corporation, so long as Indemnitee is
        duly
        appointed or elected and qualified in accordance with the applicable provisions
        of the bylaws or other applicable charter documents of such corporation,
        or
        until such time as Indemnitee tenders his or her resignation in writing;
        provided, however, that nothing contained in this Agreement is intended as
        an
        employment agreement between Indemnitee and the Company or any of its
        subsidiaries or to create any right to continued employment of Indemnitee
        with
        the Company or any of its subsidiaries in any capacity.

       

      The
        Company acknowledges that it has entered into this Agreement and assumes
        the
        obligations imposed on it hereby, in addition to and separate from its
        obligations to Indemnitee under the Bylaws, to induce Indemnitee to serve,
        or
        continue to serve, as a director, officer,
        employee or agent of the Company, and the Company acknowledges that Indemnitee
        is relying upon this Agreement in serving as a director, officer, employee
        or
        agent of the Company.

       

      3.     Indemnification.

       

      (a) Indemnification
        in Third Party Proceedings.
        Subject
        to Section 10 below, the Company shall indemnify Indemnitee to the fullest
        extent permitted by the Code, as the same may be amended from time to time
        (but,
        only to the extent that such amendment permits Indemnitee to broader
        indemnification rights than the Code permitted prior to adoption of such
        amendment), if Indemnitee is a party to or threatened to be made a party
        to or
        otherwise involved in any proceeding, for any and all expenses, actually
        and
        reasonably incurred by Indemnitee in connection with the investigation, defense,
        settlement or appeal of such proceeding.

       

      (b) Indemnification
        in Derivative Actions and Direct Actions by the Company.
        Subject
        to Section 10 below, the Company shall indemnify Indemnitee to the fullest
        extent permitted by the Code, as the same may be amended from time to time
        (but,
        only to the extent that such amendment permits Indemnitee to broader
        indemnification rights than the Code permitted prior to adoption of such
        amendment), if Indemnitee is a party to or threatened to be made a party
        to or
        otherwise involved in any proceeding by or in the right of the Company to
        procure a judgment in its favor, against any and all expenses actually and
        reasonably incurred by Indemnitee in connection with the investigation, defense,
        settlement, or appeal of such proceedings.

       

      4.     Indemnification
        of Expenses of Successful Party.
        Notwithstanding any other provision of this Agreement, to the extent that
        Indemnitee has been successful on the merits or otherwise in defense of any
        proceeding or in defense of any claim, issue or matter therein, including
        the
        dismissal of any action without prejudice, the Company shall indemnify
        Indemnitee against all expenses actually and reasonably incurred in connection
        with the investigation, defense or appeal of such proceeding.

       

      
        
           

        

        
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      5.     Partial
        Indemnification.
        If
        Indemnitee is entitled under any provision of this Agreement to indemnification
        by the Company for some or a portion of any expenses actually and reasonably
        incurred by Indemnitee in the investigation, defense, settlement or appeal
        of a
        proceeding, but is precluded by applicable law or the specific terms of this
        Agreement to indemnification for the total amount thereof, the Company shall
        nevertheless indemnify Indemnitee for the portion thereof to which Indemnitee
        is
        entitled.

       

      6.     Advancement
        of Expenses.
        To the
        extent not prohibited by law, the Company shall advance the expenses incurred
        by
        Indemnitee in connection with any proceeding, and such advancement shall
        be made
        within twenty (20) days after the receipt by the Company of a statement or
        statements requesting such advances (which shall include invoices received
        by
        Indemnitee in connection with such expenses but, in the case of invoices
        in
        connection with legal services, any references to legal work performed or
        to
        expenditures made that would cause Indemnitee to waive any privilege accorded
        by
        applicable law shall not be included with the invoice) and upon request of
        the
        Company, an undertaking to repay the advancement of expenses if and to the
        extent that it is ultimately determined by a court of competent jurisdiction
        in
        a final judgment, not subject to appeal, that Indemnitee is not entitled
        to be
        indemnified by the Company. Advances shall be unsecured, interest free and
        without regard to Indemnitee’s ability to repay the expenses. Advances shall
        include any and all expenses actually and reasonably incurred by Indemnitee
        pursuing an action to enforce Indemnitee’s right to indemnification under this
        Agreement, or otherwise and this right of advancement, including expenses
        incurred preparing and forwarding statements to the Company to support the
        advances claimed. Indemnitee acknowledges that the execution and delivery
        of
        this Agreement shall constitute an undertaking providing that Indemnitee
        shall,
        to the fullest extent required by law, repay the advance if and to the extent
        that it is ultimately determined by a court of competent jurisdiction in
        a final
        judgment, not subject to appeal, that Indemnitee is not entitled to be
        indemnified by the Company. The right to advances under this Section shall
        continue until final disposition of any proceeding, including any appeal
        therein. This Section 6 shall not apply to any claim made by Indemnitee for
        which indemnity is excluded pursuant to Section 10(b).

       

      7.     Notice
        and Other Indemnification Procedures.

       

      (a) Notification
        of Proceeding.
        Indemnitee will notify the Company in writing promptly upon being served
        with
        any summons, citation, subpoena, complaint, indictment, information or other
        document relating to any proceeding or matter which may be subject to
        indemnification or advancement of expenses covered hereunder. The failure
        of
        Indemnitee to so notify the Company shall not relieve the Company of any
        obligation which it may have to Indemnitee under this Agreement or
        otherwise.

       

      (b) Request
        for Indemnification and Indemnification Payments.
        Indemnitee shall notify the Company promptly in writing upon receiving notice
        of
        nay demand, judgment or other requirement for payment that Indemnitee reasonably
        believes to the subject to indemnification under the terms of this Agreement,
        and shall request payment thereof by the Company. Indemnification payments
        requested by Indemnitee under Section 3 hereof shall be made by the Company
        no later than sixty (60) days after receipt of the written request of
        Indemnitee. Claims for advancement of expenses shall be made under the
        provisions of Section 6 herein.

       

      
        
           

        

        
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      (c) Application
        for Enforcement.
        In the
        event the Company fails to make timely payments as set forth in Sections
        6 or
        7(b) above, Indemnitee shall have the right to apply to any court of competent
        jurisdiction for the purpose of enforcing Indemnitee’s right to indemnification
        or advancement of expenses pursuant to this Agreement. In such an enforcement
        hearing or proceeding, the burden of proof shall be on the Company to prove
        by
        that indemnification or advancement of expenses to Indemnitee is not required
        under this Agreement or permitted by applicable law. Any determination by
        the
        Company (including its Board of Directors, stockholders or independent counsel)
        that Indemnitee is not entitled to indemnification hereunder, shall not be
        a
        defense by the Company to the action nor create any presumption that Indemnitee
        is not entitled to indemnification or advancement of expenses
        hereunder.

       

      (d) Indemnification
        of Certain Expenses.
        The
        Company shall indemnify Indemnitee against all expenses incurred in connection
        with any hearing or proceeding under this Section 7 unless the Company
        prevails in such hearing or proceeding on the merits in all material
        respects.

       

      8.     Assumption
        of Defense.
        In the
        event the Company shall be requested by Indemnitee to pay the expenses of
        any
        proceeding, the Company, if appropriate, shall be entitled to assume the
        defense
        of such proceeding, or to participate to the extent permissible in such
        proceeding, with counsel reasonably acceptable to Indemnitee. Upon assumption
        of
        the defense by the Company and the retention of such counsel by the Company,
        the
        Company shall not be liable to Indemnitee under this Agreement for any fees
        of
        counsel subsequently incurred by Indemnitee with respect to the same proceeding,
        provided that Indemnitee shall have the right to employ separate counsel
        in such
        proceeding at Indemnitee’s sole cost and expense. Notwithstanding the foregoing,
        if Indemnitee’s counsel delivers a written notice to the Company stating that
        such counsel has reasonably concluded that there may be a conflict of interest
        between the Company and Indemnitee in the conduct of any such defense or
        the
        Company shall not, in fact, have employed counsel or otherwise actively pursued
        the defense of such proceeding within a reasonable time, then in any such
        event
        the fees and expenses of Indemnitee’s counsel to defend such proceeding shall be
        subject to the indemnification and advancement of expenses provisions of
        this
        Agreement.

       

      9.     Insurance.
        To
        the
        extent that the Company maintains an insurance policy or policies providing
        liability insurance for directors, officers, employees, or agents of the
        Company
        or of any subsidiary (“D&O Insurance”), Indemnitee shall be covered by such
        policy or policies in accordance with its or their terms to the maximum extent
        of the coverage available for any such director, officer, employee or agent
        under such policy or policies. If, at the time of the receipt of a notice
        of a
        claim pursuant to the terms hereof, the Company has D&O Insurance in effect,
        the Company shall give prompt notice of the commencement of such proceeding
        to
        the insurers in accordance with the procedures set forth in the respective
        policies. The Company shall thereafter take all necessary or desirable action
        to
        cause such insurers to pay, on behalf of Indemnitee, all amounts payable
        as a
        result of such proceeding in accordance with the terms of such
        policies.

       

      
        
           

        

        
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      10.   Exceptions.

       

      (a) Certain
        Matters.
        Any
        provision herein to the contrary notwithstanding, the Company shall not be
        obligated pursuant to the terms of this Agreement to indemnify Indemnitee
        on
        account of any proceeding with respect to (i) remuneration paid to
        Indemnitee if it is determined by final judgment or other final adjudication
        that such remuneration was in violation of law (and, in this respect, both
        the
        Company and Indemnitee have been advised that the Securities and Exchange
        Commission believes that indemnification for liabilities arising under the
        federal securities laws is against public policy and is, therefore,
        unenforceable and that claims for indemnification should be submitted to
        appropriate courts for adjudication, as indicated in Section 10(d) below);
        (ii) a final judgment rendered against Indemnitee for an accounting,
        disgorgement or repayment of profits made from the purchase or sale by
        Indemnitee of securities of the Company against Indemnitee or in connection
        with
        a settlement by or on behalf of Indemnitee to the extent it is acknowledged
        by
        Indemnitee and the Company that such amount paid in settlement resulted from
        Indemnitee's conduct from which Indemnitee received monetary personal profit,
        pursuant to the provisions of Section 16(b) of the Securities Exchange Act
        of 1934, as amended, or other provisions of any federal, state or local statute
        or rules and regulations thereunder; (iii) a final judgment or other final
        adjudication that Indemnitee’s conduct was in bad faith, knowingly fraudulent or
        deliberately dishonest or constituted willful misconduct (but only to the
        extent
        of such specific determination); or (iv) on account of conduct that is
        established by a final judgment as constituting a breach of Indemnitee’s duty of
        loyalty to the Company or resulting in any personal profit or advantage to
        which
        Indemnitee is not legally entitled. For purposes of the foregoing sentence,
        a
        final judgment or other adjudication may be reached in either the underlying
        proceeding or action in connection with which indemnification is sought or
        a
        separate proceeding or action to establish rights and liabilities under this
        Agreement. 

       

      (b) Claims
        Initiated by Indemnitee.
        Any
        provision herein to the contrary notwithstanding, the Company shall not be
        obligated to indemnify or advance expenses to Indemnitee with respect to
        proceedings or claims initiated or brought by Indemnitee against the Company
        or
        its directors, officers, employees or other agents and not by way of defense,
        except (i) with respect to proceedings brought to establish or enforce a
        right
        to indemnification under this Agreement or under any other agreement, provision
        in the Bylaws or Certificate of
        Incorporation or applicable law, or (ii) with respect to any other proceeding
        initiated by Indemnitee that is either approved by the Board of Directors
        or
        Indemnitee’s participation is required by applicable law. However,
        indemnification or advancement of expenses may be provided by the Company
        in
        specific cases if the Board of Directors determines it to be
        appropriate.

       

      (c) Unauthorized
        Settlements.
        Any
        provision herein to the contrary notwithstanding, the Company shall not be
        obligated pursuant to the terms of this Agreement to indemnify Indemnitee
        under
        this Agreement for any amounts paid in settlement of a proceeding effected
        without the Company’s written consent. Neither the Company nor Indemnitee shall
        unreasonably withhold consent to any proposed settlement; provided, however,
        that the Company may in any event decline to consent to (or to otherwise
        admit
        or agree to any liability for indemnification hereunder in respect of) any
        proposed settlement if the Company is also a party in such proceeding and
        determines in good faith that such settlement is not in the best interests
        of
        the Company and its stockholders.

       

      
        
           

        

        
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      (d) Securities
        Act Liabilities.
        Any
        provision herein to the contrary notwithstanding, the Company shall not be
        obligated pursuant to the terms of this Agreement to indemnify Indemnitee
        or
        otherwise act in violation of any undertaking appearing in and required by
        the
        rules and regulations promulgated under the Securities Act of 1933, as amended
        (the “Act”), or in any registration statement filed with the SEC under the Act.
        Indemnitee acknowledges that paragraph (h) of Item 512 of Regulation S-K
        currently generally requires the Company to undertake in connection with
        any
        registration statement filed under the Act to submit the issue of the
        enforceability of Indemnitee’s rights under this Agreement in connection with
        any liability under the Act on public policy grounds to a court of appropriate
        jurisdiction and to be governed by any final adjudication of such issue.
        Indemnitee specifically agrees that any such undertaking shall supersede
        the
        provisions of this Agreement and to be bound by any such
        undertaking.

       

      11.   Nonexclusivity
        and Survival of Rights.
        The
        provisions for indemnification and advancement of expenses set forth in this
        Agreement shall not be deemed exclusive of any other rights which Indemnitee
        may
        at any time be entitled under any provision of applicable law, the Company’s
Certificate
        of
        Incorporation, Bylaws or other agreements, both as to action in Indemnitee’s
        official capacity and Indemnitee’s action as an agent of the Company, in any
        court in which a proceeding is brought, and Indemnitee’s rights hereunder shall
        continue after Indemnitee has ceased acting as an agent of the Company and
        shall
        inure to the benefit of the heirs, executors, administrators and assigns
        of
        Indemnitee. The obligations and duties of the Company to Indemnitee under
        this
        Agreement shall be binding on the Company and its successors and assigns
        until
        terminated in accordance with its terms. The Company shall require any successor
        (whether direct or indirect, by purchase, merger, consolidation or otherwise)
        to
        all or substantially all of the business or assets of the Company, expressly
        to
        assume and agree to perform this Agreement in the same manner and to the
        same
        extent that the Company would be required to perform if no such succession
        had
        taken place.

       

      No
        amendment, alteration or repeal of this Agreement or of any provision hereof
        shall limit or restrict any right of Indemnitee under this Agreement in respect
        of any action taken or omitted by such Indemnitee in his or her corporate
        status
        prior to such amendment, alteration or repeal. To the extent that a change
        in
        the Code, whether by statute or judicial decision, permits greater
        indemnification or advancement of expenses than would be afforded currently
        under the Company’s Certificate of
        Incorporation, Bylaws and this Agreement, it is the intent of the parties
        hereto
        that Indemnitee shall enjoy by this Agreement the greater benefits so afforded
        by such change. No right or remedy herein conferred is intended to be exclusive
        of any other right or remedy, and every other right and remedy shall be
        cumulative and in addition to every other right and remedy given hereunder
        or
        now or hereafter existing at law or in equity or otherwise. The assertion
        or
        employment of any right or remedy hereunder, or otherwise, by Indemnitee
        shall
        not prevent the concurrent assertion or employment of any other right or
        remedy
        by Indemnitee. 

       

      12.   Term.
        This
        Agreement shall continue until and terminate upon the later of: (a) five
        (5)
        years after the date that Indemnitee shall have ceased to serve as a director
        or
        and/or officer, employee or agent of the Company; or (b) one (1) year after
        the
        final termination of any proceeding, including any appeal then pending, in
        respect to which Indemnitee was granted rights of indemnification or advancement
        of expenses hereunder. 

       

      
        
           

        

        
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      No
        legal
        action shall be brought and no cause of action shall be asserted by or in
        the
        right of the Company against an Indemnitee or an Indemnitee's estate, spouse,
        heirs, executors or personal or legal representatives after the expiration
        of
        five (5) years from the date of accrual of such cause of action, and any
        claim
        or cause of action of the Company shall be extinguished and deemed released
        unless asserted by the timely filing of a legal action within such five-year
        period; provided, however, that if any shorter period of limitations is
        otherwise applicable to such cause of action, such shorter period shall
        govern.

       

      13.   Subrogation.
        In the
        event of payment under this Agreement, the Company shall be subrogated to
        the
        extent of such payment to all of the rights of recovery of Indemnitee, who,
        at
        the request and expense of the Company, shall execute all papers required
        and
        shall do everything that may be reasonably necessary to secure such rights,
        including the execution of such documents necessary to enable the Company
        effectively to bring suit to enforce such rights.

       

      14.   Interpretation
        of Agreement.
        It is
        understood that the parties hereto intend this Agreement to be interpreted
        and
        enforced so as to provide indemnification to Indemnitee to the fullest extent
        now or hereafter permitted by law.

       

      15.   Severability.
        If any
        provision of this Agreement shall be held to be invalid, illegal or
        unenforceable for any reason whatsoever, (a) the validity, legality and
        enforceability of the remaining provisions of the Agreement (including without
        limitation, all portions of any paragraphs of this Agreement containing any
        such
        provision held to be invalid, illegal or unenforceable, that are not themselves
        invalid, illegal or unenforceable) shall not in any way be affected or impaired
        thereby; and (b) to the fullest extent possible, the provisions of this
        Agreement (including, without limitation, all portions of any paragraph of
        this
        Agreement containing any such provision held to be invalid, illegal or
        unenforceable, that are not themselves invalid, illegal or unenforceable)
        shall
        be construed so as to give effect to the intent manifested by the provision
        held
        invalid, illegal or unenforceable and to give effect to Section 14
        hereof.

       

      16.   Amendment
        and Waiver.
        No
        supplement, modification, amendment, or cancellation of this Agreement shall
        be
        binding unless executed in writing by the parties hereto. No waiver of any
        of
        the provisions of this Agreement shall be deemed or shall constitute a waiver
        of
        any other provision hereof (whether or not similar) nor shall such waiver
        constitute a continuing waiver. 

       

      17.   Notice.
        Except
        as otherwise provided herein, any notice or demand which, by the provisions
        hereof, is required or which may be given to or served upon the parties hereto
        shall be in writing and, if by telegram, telecopy or telex, shall be deemed
        to
        have been validly served, given or delivered when sent, if by overnight
        delivery, courier or personal delivery, shall be deemed to have been validly
        served, given or delivered upon actual delivery and, if mailed, shall be
        deemed
        to have been validly served, given or delivered three (3) business days after
        deposit in the United States mail, as registered or certified mail, with
        proper
        postage prepaid and addressed to the party or parties to be notified at the
        addresses set forth on the signature page of this Agreement (or such other
        address(es) as a party may designate for itself by like notice). If to the
        Company, notices and demands shall be delivered to the attention of the
        Secretary of the Company.

       

      
        
           

        

        
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      18.   Governing
        Law.
        This
        Agreement shall be governed exclusively by and construed according to the
        laws
        of the State of California, as applied to contracts between California residents
        entered into and to be performed entirely within California.

       

      19.   Counterparts.
        This
        Agreement may be executed in one or more counterparts, each of which shall
        for
        all purposes be deemed to be an original but all of which together shall
        constitute but one and the same Agreement. Only one such counterpart need
        be
        produced to evidence the existence of this Agreement.

       

      20.   Headings.
        The
        headings of the sections of this Agreement are inserted for convenience only
        and
        shall not be deemed to constitute part of this Agreement or to affect the
        construction hereof.

       

      21.   Entire
        Agreement.
        This
        Agreement constitutes the entire agreement between the parties with respect
        to
        the subject matter hereof and supersedes all prior agreements, understandings
        and negotiations, written and oral, between the parties with respect to the
        subject matter of this Agreement; provided, however, that this Agreement
        is a
        supplement to and in furtherance of the Company’s Certificate of
        Incorporation, Bylaws, the Code and any other applicable law, and shall not
        be
        deemed a substitute therefor, and does not diminish or abrogate any
        rights of Indemnitee thereunder. 

       

      

      
        
           

        

        
          9

          
            

          

        

        
           

        

      

       

      In
        Witness Whereof,
        the
        parties hereto have entered into this Agreement effective as of the date
        first
        above written.

       

      
        	 	
                PACIFIC
                  ETHANOL, INC.

                 

                By:
                  /s/
                  NEIL M. KOEHLER

                Neil
                  M. Koehler

                President
                  and Chief Executive Officer

              
	 	 
	 	 
	 	
                INDEMNITEE

                 

                /s/
                  DOUGLAS JEFFRIES

                Signature
                  of Indemnitee

                 

                Douglas
                  Jeffries

                Print
                  or Type Name of Indemnitee<PAGE>

EXHIBIT 10.59

                  THIS NOTE AND THE COMMON SHARES ISSUABLE UPON CONVERSION OF
         THIS NOTE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
         AMENDED. THIS NOTE AND THE COMMON SHARES ISSUABLE UPON CONVERSION OF
         THIS NOTE MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN
         THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THIS NOTE
         UNDER SAID ACT OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO
         DIAMOND ENTERTAINMENT CORPORATION THAT SUCH REGISTRATION IS NOT
         REQUIRED.

PRINCIPAL AMOUNT $250,000.00                             ISSUE DATE: MAY 4, 2007

                            SECURED CONVERTIBLE NOTE
                            ------------------------

         FOR VALUE RECEIVED, DIAMOND ENTERTAINMENT CORPORATION, a New Jersey
corporation (hereinafter called "Borrower"), hereby promises to pay to ALPHA
CAPITAL ANSTALT, Pradafant 7, 9490 Furstentums, Vaduz, Lichtenstein, Fax:
011-42-32323196 (the "Holder") or order, without demand, the sum of Two Hundred
and Fifty Thousand Dollars ($250,000.00), with interest accruing thereon, on
November 30, 2008 (the "Maturity Date"), if not retired sooner.

         This Note has been entered into pursuant to the terms of a subscription
agreement between the Borrower and the Holder, dated of even date herewith (the
"Subscription Agreement"), and shall be governed by the terms of such
Subscription Agreement. Unless otherwise separately defined herein, all
capitalized terms used in this Note shall have the same meaning as is set forth
in the Subscription Agreement. The following terms shall apply to this Note:

                                    ARTICLE I

                               GENERAL PROVISIONS

         1.1 INTEREST RATE. Interest payable on this Note shall accrue at the
annual rate of twelve percent (12%) and be payable on the 90th day after the
Issue Date and on the last day of each calendar quarter thereafter and on the
Maturity Date, accelerated or otherwise, when the principal and remaining
accrued but unpaid interest shall be due and payable, or sooner as described
below.

         1.2 PAYMENT GRACE PERIOD. The Borrower shall have a five (5) day grace
period to pay any monetary amounts due under this Note, after which grace period
a default interest rate of fifteen percent (15%) per annum.

         1.3 CONVERSION PRIVILEGES. The Conversion Privileges set forth in
Article II shall remain in full force and effect immediately from the date
hereof and until the Note is paid in full regardless of the occurrence of an
Event of Default. The Note shall be payable in full on the Maturity Date, unless
previously converted into Common Stock in accordance with Article II hereof;
provided, that if an Event of Default has occurred, the Borrower may not pay
this Note, without the consent of the Holder, until one year after the later of
the date the Event of Default has been cured or one year after the Maturity
Date.

                                       1
<PAGE>

                                   ARTICLE II

                                CONVERSION RIGHTS

         The Holder shall have the right to convert the principal and any
interest due under this Note into Shares of the Borrower's Common Stock, no par
value per share ("Common Stock") as set forth below.

                  2.1. CONVERSION INTO THE BORROWER'S COMMON STOCK.

                  (a) The Holder shall have the right from and after the date of
the issuance of this Note and then at any time until this Note is fully paid, to
convert any outstanding and unpaid principal portion of this Note, and accrued
interest, at the election of the Holder (the date of giving of such notice of
conversion being a "Conversion Date") into fully paid and nonassessable shares
of Common Stock as such stock exists on the date of issuance of this Note, or
any shares of capital stock of Borrower into which such Common Stock shall
hereafter be changed or reclassified, at the conversion price as defined in
Section 2.1(b) hereof (the "Conversion Price"), determined as provided herein.
The Borrower shall have the option from and after the date of issuance of this
Note and then at any time until this Note is fully paid, to convert any accrued
interest into fully paid non-assessable registered shares of Common Stock valued
at 85% of the average of the daily volume weighted average price ("VWAP") during
the five trading days ending the day prior to a payment date. Upon delivery to
the Borrower of a completed Notice of Conversion, a form of which is annexed
hereto, Borrower shall issue and deliver to the Holder within three (3) business
days after the Conversion Date (such third day being the "Delivery Date") that
number of shares of Common Stock for the portion of the Note converted in
accordance with the foregoing. At the election of the Holder, the Borrower will
deliver accrued but unpaid interest on the Note, if any, through the Conversion
Date directly to the Holder on or before the Delivery Date (as defined in the
Subscription Agreement). The number of shares of Common Stock to be issued upon
each conversion of this Note shall be determined by dividing that portion of the
principal of the Note and interest, if any, to be converted, by the Conversion
Price.

                  (b) Subject to adjustment as provided in Section 2.1(c)
hereof, the Conversion Price per share shall be equal to $0.015.

                  (c) The Conversion Price and number and kind of shares or
other securities to be issued upon conversion determined pursuant to Section
2.1(a), shall be subject to adjustment from time to time upon the happening of
certain events while this conversion right remains outstanding, as follows:

                           A. Merger, Sale of Assets, etc. If the Borrower at
any time shall consolidate with or merge into or sell or convey all or
substantially all its assets to any other corporation, this Note, as to the
unpaid principal portion thereof and accrued interest thereon, shall thereafter
be deemed to evidence the right to purchase such number and kind of shares or
other securities and property as would have been issuable or distributable on
account of such consolidation, merger, sale or conveyance, upon or with respect
to the securities subject to the conversion or purchase right immediately prior
to such consolidation, merger, sale or conveyance. The foregoing provision shall
similarly apply to successive transactions of a similar nature by any such
successor or purchaser. Without limiting the generality of the foregoing, the
anti-dilution provisions of this Section shall apply to such securities of such
successor or purchaser after any such consolidation, merger, sale or conveyance.

                           B. Reclassification, etc. If the Borrower at any time
shall, by reclassification or otherwise, change the Common Stock into the same
or a different number of securities of any class or classes that may be issued
or outstanding, this Note, as to the unpaid principal portion thereof and
accrued interest thereon, shall thereafter be deemed to evidence the right to
purchase an adjusted number of such securities and kind of securities as would
have been issuable as the result of such change with respect to the Common Stock
immediately prior to such reclassification or other change.

                                       2
<PAGE>

                           C. Stock Splits, Combinations and Dividends. If the
shares of Common Stock are subdivided or combined into a greater or smaller
number of shares of Common Stock, or if a dividend is paid on the Common Stock
in shares of Common Stock, the Conversion Price shall be proportionately reduced
in case of subdivision of shares or stock dividend or proportionately increased
in the case of combination of shares, in each such case by the ratio which the
total number of shares of Common Stock outstanding immediately after such event
bears to the total number of shares of Common Stock outstanding immediately
prior to such event..

                           D. Share Issuance. So long as this Note is
outstanding, if the Borrower shall issue or agree to issue any shares of Common
Stock except for the Excepted Issuances (as defined in the Subscription
Agreement) for a consideration less than the Conversion Price in effect at the
time of such issue, then, and thereafter successively upon each such issue, the
Conversion Price shall be reduced to such other lower issue price. For purposes
of this adjustment, the issuance of any security carrying the right to convert
such security into shares of Common Stock or of any warrant, right or option to
purchase Common Stock shall result in an adjustment to the Conversion Price upon
the issuance of the above-described security and again upon the issuance of
shares of Common Stock upon exercise of such conversion or purchase rights if
such issuance is at a price lower than the then applicable Conversion Price. The
reduction of the Conversion Price described in this paragraph is in addition to
other rights of the Holder described in this Note and the Subscription
Agreement.

                  (d) Whenever the Conversion Price is adjusted pursuant to
Section 2.1(c) above, the Borrower shall promptly mail to the Holder a notice
setting forth the Conversion Price after such adjustment and setting forth a
statement of the facts requiring such adjustment.

                  (e) During the period the conversion right exists, Borrower
will reserve from its authorized and unissued Common Stock not less than an
amount of Common Stock equal to 150% of the amount of shares of Common Stock
issuable upon the full conversion of this Note. Borrower represents that upon
issuance, such shares will be duly and validly issued, fully paid and
non-assessable. Borrower agrees that its issuance of this Note shall constitute
full authority to its officers, agents, and transfer agents who are charged with
the duty of executing and issuing stock certificates to execute and issue the
necessary certificates for shares of Common Stock upon the conversion of this
Note.

                  2.2 METHOD OF CONVERSION. This Note may be converted by the
Holder in whole or in part as described in Section 2.1(a) hereof and the
Subscription Agreement. Upon partial conversion of this Note, a new Note
containing the same date and provisions of this Note shall, at the request of
the Holder, be issued by the Borrower to the Holder for the principal balance of
this Note and interest which shall not have been converted or paid.

                  2.3 OPTIONAL REDEMPTION OF PRINCIPAL AMOUNT. Provided an Event
of Default or an event which with the passage of time or the giving of notice
could become an Event of Default has not occurred, whether or not such Event of
Default has been cured, the Borrower will have the option of prepaying the
outstanding Principal amount of this Note ("Optional Redemption"), in whole or
in part, by paying to the Holder a sum of money equal to one hundred and twenty
percent (120%) of the Principal amount to be redeemed, together with accrued but
unpaid interest thereon and any and all other sums due, accrued or payable to
the Holder arising under this Note or any Transaction Document through the
Redemption Payment Date as defined below (the "Redemption Amount"). Borrower's
election to exercise its right to prepay must be by notice in writing ("Notice
of Redemption"). The Notice of Redemption shall specify the date for such
Optional Redemption (the "Redemption Payment Date"), which date shall be thirty
(30) business days after the date of the Notice of Redemption (the "Redemption
Period"). Conversions will not be permitted if the Redemption Payment Date is

                                       3
<PAGE>

fewer than five business days after notice by the Company. A Notice of
Redemption shall not be effective with respect to any portion of the Principal
Amount for which the Holder has a pending election to convert, or for
conversions initiated or made by the Holder during the Redemption Period. On the
Redemption Payment Date, the Redemption Amount, less any portion of the
Redemption Amount against which the Holder has exercised its conversion rights,
shall be paid in good funds to the Holder. In the event the Borrower fails to
pay the Redemption Amount on the Redemption Payment Date as set forth herein,
then (i) such Notice of Redemption will be null and void, (ii) Borrower will
have no right to deliver another Notice of Redemption, and (iii) Borrower's
failure may be deemed by Holder to be a non-curable Event of Default. A
Redemption Notice may be given only at a time a Registration Statement is
effective. A Notice of Redemption may not be given nor may the Borrower
effectuate a Redemption without the consent of the Holder, if at any time during
the Redemption Period an Event of Default or an Event which with the passage of
time or giving of notice could become an Event of Default (whether or not such
Event of Default has been cured), has occurred or the Registration Statement
registering the Registrable Securities is not effective each day during the
Redemption Period.

                  2.4 MAXIMUM CONVERSION. The Holder shall not be entitled to
convert on a Conversion Date that amount of the Note in connection with that
number of shares of Common Stock which would be in excess of the sum of (i) the
number of shares of Common Stock beneficially owned by the Holder and its
affiliates on a Conversion Date, (ii) any Common Stock issuable in connection
with the unconverted portion of the Note, and (iii) the number of shares of
Common Stock issuable upon the conversion of the Note with respect to which the
determination of this provision is being made on a Conversion Date, which would
result in beneficial ownership by the Holder and its affiliates of more than
4.99% of the outstanding shares of Common Stock of the Borrower on such
Conversion Date. For the purposes of the provision to the immediately preceding
sentence, beneficial ownership shall be determined in accordance with Section
13(d) of the Securities Exchange Act of 1934, as amended, and Regulation 13d-3
thereunder. Subject to the foregoing, the Holder shall be limited to aggregate
conversions of only 4.99% and aggregate conversion by the Holder may not exceed
4.99%. The Holder shall have the authority and obligation to determine whether
the restriction contained in this Section 2.3 will limit any conversion
hereunder and to the extent that the Holder determines that the limitation
contained in this Section applies, the determination of which portion of the
Notes are convertible shall be the responsibility and obligation of the Holder.

                                   ARTICLE III

                                EVENT OF DEFAULT

                  The occurrence of any of the following events of default
("Event of Default") shall, at the option of the Holder hereof, make all sums of
principal and interest then remaining unpaid hereon and all other amounts
payable hereunder immediately due and payable, upon demand, without presentment,
or grace period, all of which hereby are expressly waived, except as set forth
below:

                  3.1 FAILURE TO PAY PRINCIPAL OR INTEREST. The Borrower fails
to pay any installment of principal, interest or other sum due under this Note
when due and such failure continues for a period of five (5) days after the due
date. The five (5) day period described in this Section 3.1 is the same five (5)
day period described in Section 1.2 hereof.

                  3.2 BREACH OF COVENANT. The Borrower breaches any material
covenant or other term or condition of the Subscription Agreement or this Note
in any material respect and such breach, if subject to cure, continues for a
period of ten (10) business days after written notice to the Borrower from the
Holder.

                  3.3 BREACH OF REPRESENTATIONS AND WARRANTIES. Any material
representation or warranty of the Borrower made herein, in the Subscription
Agreement, Transaction Documents, or in any agreement, statement or certificate
given in writing pursuant hereto or in connection therewith shall be false or
misleading in any material respect as of the date made and the Closing Date.

                                       4
<PAGE>

                  3.4 RECEIVER OR TRUSTEE. The Borrower shall make an assignment
for the benefit of creditors, or apply for or consent to the appointment of a
receiver or trustee for it or for a substantial part of its property or
business; or such a receiver or trustee shall otherwise be appointed.

                  3.5 JUDGMENTS. Any money judgment, writ or similar final
process shall be entered or filed against Borrower or any of its property or
other assets for more than $50,000, and shall remain unvacated, unbonded or
unstayed for a period of forty-five (45) days.

                  3.6 BANKRUPTCY. Bankruptcy, insolvency, reorganization or
liquidation proceedings or other proceedings or relief under any bankruptcy law
or any law, or the issuance of any notice in relation to such event, for the
relief of debtors shall be instituted by or against the Borrower and if
instituted against Borrower are not dismissed within 45 days of initiation.

                  3.7 DELISTING. Delisting of the Common Stock from any
Principal Market; failure to comply with the requirements for continued listing
on a Principal Market for a period of seven consecutive trading days; or
notification from a Principal Market that the Borrower is not in compliance with
the conditions for such continued listing on such Principal Market.

                  3.8 NON-PAYMENT. A default by the Borrower under any one or
more obligations in an aggregate monetary amount in excess of $100,000 for more
than twenty days after the due date, unless the Borrower is contesting the
validity of such obligation in good faith.

                  3.9 STOP TRADE. An SEC or judicial stop trade order or
Principal Market trading suspension that lasts for five or more consecutive
trading days.

                  3.10 FAILURE TO DELIVER COMMON STOCK OR REPLACEMENT NOTE.
Borrower's failure to timely deliver Common Stock to the Holder pursuant to and
in the form required by this Note and Sections 7 and 11 of the Subscription
Agreement, or, if required, a replacement Note.

                  3.11 NON-REGISTRATION EVENT. The occurrence of a
Non-Registration Event as described in Section 11.4 of the Subscription
Agreement.

                  3.12 RESERVATION DEFAULT. Failure by the Borrower to have
reserved for issuance upon conversion of the Note the amount of Common stock as
set forth in this Note and the Subscription Agreement.

                   3.13 ABANDONMENT OF ACQUISITION. Abandonment of the
transaction with RX for Africa or it becoming impracticable to consummate such
transaction.

                  3.14 FAILURE TO DELIVER FINANCIAL STATEMENT. Failure by the
Borrower to deliver the financial statements as more fully described in Section
1(d) of the Subscription Agreement on or before January 31, 2007.

                  3.15 CROSS DEFAULT. A default by the Borrower of a material
term, covenant, warranty or undertaking of any other agreement to which the
Borrower and Holder are parties, or the occurrence of a material event of
default under any such other agreement which is not cured after any required
notice and/or cure period.

                                   ARTICLE IV

                                SECURITY INTEREST

                                       5
<PAGE>

                   4. SECURITY INTEREST/WAIVER OF AUTOMATIC STAY. This Note is
secured by a security interest granted to the Collateral Agent for the benefit
of the Holder pursuant to a Security Agreement, as delivered by Borrower to
Holder. The Borrower acknowledges and agrees that should a proceeding under any
bankruptcy or insolvency law be commenced by or against the Borrower, or if any
of the Collateral (as defined in the Security Agreement) should become the
subject of any bankruptcy or insolvency proceeding, then the Holder should be
entitled to, among other relief to which the Holder may be entitled under the
Transaction Documents and any other agreement to which the Borrower and Holder
are parties (collectively, "Loan Documents") and/or applicable law, an order
from the court granting immediate relief from the automatic stay pursuant to 11
U.S.C. Section 362 to permit the Holder to exercise all of its rights and
remedies pursuant to the Loan Documents and/or applicable law. THE BORROWER
EXPRESSLY WAIVES THE BENEFIT OF THE AUTOMATIC STAY IMPOSED BY 11 U.S.C. SECTION
362. FURTHERMORE, THE BORROWER EXPRESSLY ACKNOWLEDGES AND AGREES THAT NEITHER 11
U.S.C. SECTION 362 NOR ANY OTHER SECTION OF THE BANKRUPTCY CODE OR OTHER STATUTE
OR RULE (INCLUDING, WITHOUT LIMITATION, 11 U.S.C. SECTION 105) SHALL STAY,
INTERDICT, CONDITION, REDUCE OR INHIBIT IN ANY WAY THE ABILITY OF THE HOLDER TO
ENFORCE ANY OF ITS RIGHTS AND REMEDIES UNDER THE LOAN DOCUMENTS AND/OR
APPLICABLE LAW. The Borrower hereby consents to any motion for relief from stay
that may be filed by the Holder in any bankruptcy or insolvency proceeding
initiated by or against the Borrower and, further, agrees not to file any
opposition to any motion for relief from stay filed by the Holder. The Borrower
represents, acknowledges and agrees that this provision is a specific and
material aspect of the Loan Documents, and that the Holder would not agree to
the terms of the Loan Documents if this waiver were not a part of this Note. The
Borrower further represents, acknowledges and agrees that this waiver is
knowingly, intelligently and voluntarily made, that neither the Holder nor any
person acting on behalf of the Holder has made any representations to induce
this waiver, that the Borrower has been represented (or has had the opportunity
to he represented) in the signing of this Note and the Loan Documents and in the
making of this waiver by independent legal counsel selected by the Borrower and
that the Borrower has discussed this waiver with counsel.

                                    ARTICLE V

                                  MISCELLANEOUS

                  5.1 FAILURE OR INDULGENCE NOT WAIVER. No failure or delay on
the part of Holder hereof in the exercise of any power, right or privilege
hereunder shall operate as a waiver thereof, nor shall any single or partial
exercise of any such power, right or privilege preclude other or further
exercise thereof or of any other right, power or privilege. All rights and
remedies existing hereunder are cumulative to, and not exclusive of, any rights
or remedies otherwise available.

                  5.2 Unconditional Obligation. This Note shall be deemed an
unconditional obligation of Borrower for the payment of money and, without
limitation to any other remedies Holder may have, may be enforced against
Borrower by summary proceeding pursuant to N.Y. Civil Procedure Law and Rules
Section 3213 or any similar rule or statute in the jurisdiction where
enforcement is sought.

                  5.3 NOTICES. All notices, demands, requests, consents,
approvals, and other communications required or permitted hereunder shall be in
writing and, unless otherwise specified herein, shall be (i) personally served,
(ii) deposited in the mail, registered or certified, return receipt requested,
postage prepaid, (iii) delivered by reputable air courier service with charges
prepaid, or (iv) transmitted by hand delivery, telegram, or facsimile, addressed
as set forth below or to such other address as such party shall have specified
most recently by written notice. Any notice or other communication required or
permitted to be given hereunder shall be deemed effective (a) upon hand delivery
or delivery by facsimile, with accurate confirmation generated by the

                                       6
<PAGE>

transmitting facsimile machine, at the address or number designated below (if
delivered on a business day during normal business hours where such notice is to
be received), or the first business day following such delivery (if delivered
other than on a business day during normal business hours where such notice is
to be received) or (b) on the second business day following the date of mailing
by express courier service, fully prepaid, addressed to such address, or upon
actual receipt of such mailing, whichever shall first occur. The addresses for
such communications shall be: (i) if to the Borrower to: Diamond Entertainment
Corporation, 800 Tucker Lane, Walnut, California 91789, Attn: _______________,
CEO, telecopier: (909) 869-1990, with a copy by telecopier only to: Owen M.
Naccarato, Esq., Naccarato & Associates, 18301 Von Karman Avenue, Suite 430,
Irvine, CA 92612, telecopier: (949) 851-9262, and (ii) if to the Holder, to the
name, address and telecopy number set forth on the front page of this Note, with
a copy by telecopier only to Grushko & Mittman, P.C., 551 Fifth Avenue, Suite
1601, New York, New York 10176, telecopier: (212) 697-3575.

                  5.4 AMENDMENT PROVISION. The term "Note" and all reference
thereto, as used throughout this instrument, shall mean this instrument as
originally executed, or if later amended or supplemented, then as so amended or
supplemented.

                  5.5 ASSIGNABILITY. This Note shall be binding upon the
Borrower and its successors and assigns, and shall inure to the benefit of the
Holder and its successors and assigns.

                  5.6 COST OF COLLECTION. If default is made in the payment of
this Note, Borrower shall pay the Holder hereof reasonable costs of collection,
including reasonable attorneys' fees.

                  5.7 GOVERNING LAW. This Note shall be governed by and
construed in accordance with the laws of the State of New York. Any action
brought by either party against the other concerning the transactions
contemplated by this Agreement shall be brought only in the state courts of New
York or in the federal courts located in the state of New York. Both parties and
the individual signing this Agreement on behalf of the Borrower agree to submit
to the jurisdiction of such courts. The prevailing party shall be entitled to
recover from the other party its reasonable attorney's fees and costs.

                  5.8 MAXIMUM PAYMENTS. Nothing contained herein shall be deemed
to establish or require the payment of a rate of interest or other charges in
excess of the maximum permitted by applicable law. In the event that the rate of
interest required to be paid or other charges hereunder exceed the maximum
permitted by such law, any payments in excess of such maximum shall be credited
against amounts owed by the Borrower to the Holder and thus refunded to the
Borrower.

                  5.9 SHAREHOLDER STATUS. The Holder shall not have rights as a
shareholder of the Borrower with respect to unconverted portions of this Note.
However, the Holder will have all the rights of a shareholder of the Borrower
with respect to the shares of Common Stock to be received by Holder after
delivery by the Holder of a Conversion Notice to the Borrower.

         IN WITNESS WHEREOF, Borrower has caused this Note to be signed in its
name by an authorized officer as of the 4th day of May, 2007.

                                        DIAMOND ENTERTAINMENT CORPORATION

                                        By: /S/ Fred Odaka
                                            --------------------------------
                                        Name: Fred Odaka
                                        Title: Chief Financial Officer

WITNESS:

/S/ Katie Yu
--------------------------
Katie Yu

                                       7
<PAGE>

NOTICE OF CONVERSION
--------------------

(To be executed by the Registered Holder in order to convert the Note)

         The undersigned hereby elects to convert $_________ of the principal
and $_________ of the interest due on the Note issued by Diamond Entertainment
Corporation on May 4th, 2007 into Shares of Common Stock of Diamond
Entertainment Corporation (the "Borrower") according to the conditions set forth
in such Note, as of the date written below.

Date of Conversion:_____________________________________________________________

Conversion Price:_______________________________________________________________

Shares To Be Delivered:_________________________________________________________

Signature:______________________________________________________________________

Print Name:_____________________________________________________________________

Address:________________________________________________________________________

            ____________________________________________________________________

                                       8

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