Document:

Exhibit 10.3

 

THE ISSUANCE
AND SALE OF THE SECURITIES REPRESENTED BY THIS NOTE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
APPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE
OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN
OPINION OF COUNSEL TO THE HOLDER (IF REQUESTED BY THE COMPANY), IN A FORM REASONABLY ACCEPTABLE TO THE COMPANY, THAT REGISTRATION
IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD OR ELIGIBLE TO BE SOLD PURSUANT TO AN EXEMPTION. NOTWITHSTANDING THE FOREGOING,
THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY
THE SECURITIES. ANY TRANSFEREE OF THIS NOTE SHOULD CAREFULLY REVIEW THE TERMS OF THIS NOTE, INCLUDING SECTION 8 HEREOF.

 

Pacific
Ethanol, Inc.

 

Senior
Secured Note

 

Note No.: J17-[_]

 

	Issuance Date: June 30, 2017	$[__________]

 

FOR VALUE
RECEIVED, Pacific Ethanol, Inc., a Delaware corporation (the “Company”), hereby promises to pay to the
order of [____________________] or its registered assigns (“Holder”) the amount set out above (as reduced
pursuant to the terms hereof pursuant to redemption or otherwise, the “Principal”) when due, whether upon the
Maturity Date, acceleration, redemption or otherwise (in each case in accordance with the terms hereof) and to pay interest (“Interest”)
on any outstanding Principal (as defined above) at the applicable Interest Rate (as defined below) from the date set out above
as the Issuance Date (the “Issuance Date”) until the same becomes due and payable, whether upon the Maturity
Date, acceleration, redemption or otherwise (in each case in accordance with the terms hereof). This Senior Secured Note (including
all Senior Secured Notes issued in exchange, transfer or replacement hereof, this “Note”) is one of an issue
of Senior Secured Notes issued pursuant to the Additional Purchase Agreement (as defined below) on the Issuance Date (collectively,
the “Additional Notes”, and together with the Initial Notes (as defined below), the “Notes”,
and such other Senior Secured Notes issued pursuant to the Additional Purchase Agreement on the Issuance Date, together with the
Initial Notes, the “Other Notes”). Certain capitalized terms used herein are defined in Section 19.

 

THE OBLIGATIONS
DUE UNDER THIS SENIOR SECURED NOTE ARE SECURED BY A SECURITY AGREEMENT (AS AMENDED, THE “SECURITY AGREEMENT”) DATED
AS OF DECEMBER 15, 2016 AND EXECUTED BY THE COMPANY FOR THE BENEFIT OF THE HOLDER. ADDITIONAL RIGHTS OF THE HOLDER ARE SET FORTH
IN THE SECURITY AGREEMENT. 

 

 

 

 

 

 

 

 

 

 

    	 	1	 

     

    

 

1.          
 PAYMENTS OF PRINCIPAL.

 

1.1             
On the Maturity Date, the Company shall pay to the Holder an amount in cash representing all outstanding Principal, all
accrued and unpaid Interest and accrued and all other unpaid amounts hereunder. Any such payment shall be applied pro rata
to the Note and the Other Notes in accordance with the respective Principal amounts thereof.

 

1.2             
The Company may, at its sole option, at any time prepay this Note, without premium or penalty, in whole or in part, on
one (1) Business Day’s prior written notice to the Holder, at a prepayment price equal to the amount of outstanding Principal
so to be prepaid, together with accrued and unpaid Interest on such Principal, if any, through the date of such prepayment. Any
such payment shall be applied pro rata to the Note and the Other Notes in accordance with the respective Principal amounts
thereof.

 

2.          
INTEREST; INTEREST RATE. Interest on this Note shall accrue at the applicable Interest Rate and shall commence accruing
on the Issuance Date and Interest shall be computed on the basis of a 360-day year and twelve 30-day months and shall be payable
in cash to the record Holder in arrears on March 15, June 15, September 15 and December 15 of each calendar year, beginning with
September 15, 2017 and ending on the repayment of the Note. From and after the occurrence and during the continuance of any
Event of Default, the applicable Interest Rate shall automatically be increased by two percent (2%) per annum above the Interest
Rate otherwise applicable in accordance with the terms hereof, and all such interest shall be payable on demand. In the event
that such Event of Default is subsequently cured, the adjustment referred to in the preceding sentence shall cease to be effective
as of the date of such cure, provided that the Interest as calculated and unpaid at such increased rate during the continuance
of such Event of Default shall continue to apply to the extent relating to the days after the occurrence of such Event of Default
through and including the date of such cure of such Event of Default.

 

3.          
 RIGHTS UPON EVENT OF DEFAULT.

 

3.1             
Event of Default. Each of the following events shall constitute an “Event of Default”:

 

(a)              
the Company’s failure to pay to the Holder any amount of Principal, Interest, or other amounts when and as due under
this Note, the Security Agreement or the Additional Purchase Agreement, except, in the case of a failure to pay Interest or other
non-Principal amounts when and as due, in which case only if such failure remains uncured for a period of at least five (5) days;

 

(b)              
bankruptcy, insolvency, reorganization or liquidation proceedings or other proceedings for the relief of debtors shall
be instituted by or against the Company or any Subsidiary and, if instituted against the Company or any Subsidiary by a third
party, shall not be dismissed within sixty (60) days of their initiation;

 

(c)              
the commencement by the Company or any Subsidiary of a voluntary case or proceeding under any applicable federal, state
or foreign bankruptcy, insolvency, reorganization or other similar law or of any other case or proceeding to be adjudicated a
bankrupt or insolvent, or the consent by it to the entry of a decree, order, judgment or other similar document in respect of
the Company or any Subsidiary in an involuntary case or proceeding under any applicable federal, state or foreign bankruptcy,
insolvency, reorganization or other similar law or to the commencement of any bankruptcy or insolvency case or proceeding against
it, or the filing by it of a petition or answer or consent seeking reorganization or relief under any applicable federal, state
or foreign law, or the consent by it to the filing of such petition or to the appointment of or taking possession by a custodian,
receiver, liquidator, assignee, trustee, sequestrator or other similar official of the Company or any Subsidiary or of any substantial
part of its property, or the making by it of an assignment for the benefit of creditors, or the execution of a composition of
debts, or the occurrence of any other similar federal, state or foreign proceeding, or the admission by it in writing of its inability
to pay its debts generally as they become due, the taking of corporate action by the Company or any Subsidiary in furtherance
of any such action or the taking of any action by any Person to commence a UCC foreclosure sale or any other similar action under
federal, state or foreign law or of any substantial part of the Company’s property or any substantial part of any Subsidiary’s
property;

 

(d)              
the entry by a court of (i) a decree, order, judgment or other similar document in respect of the Company or any Subsidiary
of a voluntary or involuntary case or proceeding under any applicable federal, state or foreign bankruptcy, insolvency, reorganization
or other similar law or (ii) a decree, order, judgment or other similar document adjudging the Company or any Subsidiary
as bankrupt or insolvent, or approving as properly filed a petition seeking liquidation, reorganization, arrangement, adjustment
or composition of or in respect of the Company or any Subsidiary under any applicable federal, state or foreign law or (iii) a
decree, order, judgment or other similar document appointing a custodian, receiver, liquidator, assignee, trustee, sequestrator
or other similar official of the Company or any Subsidiary or of any substantial part of its property, or ordering the winding
up or liquidation of its affairs, and the continuance of any such decree, order, judgment or other similar document or any such
other decree, order, judgment or other similar document unstayed and in effect for a period of thirty (30) consecutive days;

 

 

 

    	 	2	 

     

    

 

(e)                a
final judgment, judgments, any arbitration or mediation award or any settlement of any litigation or any other satisfaction of
any claim made by any Person pursuant to any litigation, as applicable, (each a “Judgment”, and collectively,
the “Judgments”) with respect to the payment of cash, securities and/or other assets with an aggregate fair
market value in excess of $2,000,000 are rendered against, agreed to or otherwise accepted by, the Company and/or any of its Subsidiaries
and which Judgments are not, within thirty (30) days after the entry thereof, bonded, discharged or stayed pending appeal,
or are not discharged within thirty (30) days after the expiration of such stay; provided, however, that any
Judgment which is covered by insurance or an indemnity from a credit worthy party shall not be included in calculating the $2,000,000
amount set forth above so long as the Company provides the Holder written evidence of such insurance coverage or indemnity (which
evidence shall be reasonably satisfactory to the Holder) to the effect that such Judgment is covered by insurance or an indemnity
and the Company or such Subsidiary (as the case may be) will receive the proceeds of such insurance or indemnity prior to the
later of (i) thirty (30) days after the issuance of such Judgment or (ii) any requirement to pay such Judgment;

 

(f)               
the Company and/or any Subsidiary, individually or in the aggregate, fails to pay, when due, or within any applicable grace
period, any payment with respect to any Indebtedness in excess of $2,000,000 due to any third party or is otherwise in breach
or violation of any agreement for monies owed or owing in an amount in excess of $2,000,000, which breach or violation results
in the acceleration of amounts due thereunder or permits the other party thereto to accelerate amounts due thereunder;

 

(g)              
any breach or failure in any respect by the Company to comply with any provision of this Note or any other Transaction
Document for thirty (30) days after delivery to the Company of notice of such breach or failure by or on behalf of a Secured
Party (as defined in the Security Agreement) or the Agent (as defined in the Security Agreement) or thirty (30) days after an
officer of the Company has knowledge of such breach or failure, unless such default is capable of cure but cannot be cured within
such time frame and the Company is using best efforts to cure the same in a timely manner;

 

(h)              
any Material Adverse Change occurs (other than any Excluded Event) and is not otherwise cured within thirty (30) days
of written notice thereof by the Required Holders;

 

(i)                
any provision of any Transaction Document (shall at any time for any reason (other than pursuant to the express terms thereof)
cease to be valid and binding on or enforceable against the parties thereto, or the validity or enforceability thereof shall be
contested by any party thereto, or a proceeding shall be commenced by the Company or any Subsidiary or any governmental authority
having jurisdiction over any of them, seeking to establish the invalidity or unenforceability thereof, or the Company or any Subsidiary
shall deny in writing that it has any liability or obligation purported to be created under any Transaction Document to which
it is a party, or any Lien created by the Security Agreement ceases to be enforceable and of the same effect and priority purported
to be created thereby, other than as expressly permitted thereunder or thereunder;

 

(j)                
any Fundamental Transaction occurs without the written consent of the Required Holders;

 

(k)              
any Event of Default (as defined in the Security Agreement) occurs with respect to the Security Agreement;

 

(l)                
any Event of Default (as defined in the Other Notes) occurs with respect to any Other Notes;

 

(m)            
any representation, warranty, certification or other statement of fact made or deemed made by or on behalf of the Company
herein or in any other Transaction Document proves to have been false or misleading in any material respect on or as of the date
made or deemed made; or

 

(n)              
any Subordinated Indebtedness cease for any reason to be validly subordinated to the Indebtedness evidenced by this Note,
or the Company, any Subsidiary or any holder thereof (or its trustee or agent) so asserts.

Upon the occurrence
of an Event of Default with respect to this Note or any Other Note, the Company shall promptly deliver written notice thereof
via facsimile and overnight courier (with next day delivery specified) (an “Event of Default Notice”) to the
Holder.

 

Notwithstanding
anything to the contrary set forth above or elsewhere herein, the following Indebtedness and obligations, and any defaults with
respect thereto, shall not constitute an Event of Default under Section 3.1(f) above: (i) any payments contested by
the Company and/or such Subsidiary (as the case may be) in good faith by proper proceedings and with respect to which adequate
reserves have been set aside for the payment thereof in accordance with GAAP and, with respect to any subsidiary, such default
is otherwise resolved in a manner which does not result in a Material Adverse Change; and (ii) with respect to any Subsidiary,
any default with respect to a non-recourse obligation and such default does not otherwise result in a Material Adverse Change.

 

 

 

    	 	3	 

     

    

 

3.2             
If an Event of Default (other than an Event of Default specified in Section 3.1(b), (c) or (d) above) occurs,
then the Holder may, by written notice to the Company, declare this Note to be forthwith due and payable, as to Principal, Interest
and any other amounts due hereunder, whereupon this Note shall become forthwith due and payable, without presentment, demand,
protest or other notice of any kind, all of which are hereby expressly waived by the Company. If any Event of Default specified
in Section 3.1(b), (c) or (d) above occurs, the Principal of and accrued Interest on this Note shall automatically forthwith
become due and payable without presentment, demand, protest or notice of any kind, all of which are hereby expressly waived by
the Company.

 

3.3             
If any Event of Default occurs and is continuing, the Holder may pursue any available remedy to collect the payment of
Principal, Interest and any other amounts due under this Note or to enforce the performance of any provision of this Note. If
an Event of Default occurs and is continuing, the holder of this Note may proceed to protect and enforce its rights by an action
at law, suit in equity or other appropriate proceeding. No course of dealing and no delay on the part of the holder of this Note
in exercising any right, power or remedy shall operate as a waiver thereof or otherwise prejudice such holder’s rights,
powers or remedies. No right, power or remedy conferred by this Note upon the holder hereof shall be exclusive of any other right,
power or remedy referred to herein or now or hereafter available at law, in equity, by statute or otherwise.

 

4.          
NONCIRCUMVENTION. The Company hereby covenants and agrees that the Company will not, by amendment of its certificate of
incorporation, bylaws or through any reorganization, transfer of assets, consolidation, merger, scheme of arrangement, dissolution,
issue or sale of securities, or any other voluntary action, avoid or seek to avoid the observance or performance of any of the
terms of this Note, and will at all times in good faith carry out all of the provisions of this Note and take all action as may
be required to protect the rights of the Holder of this Note.

 

5.          
 COVENANTS. Until all of the Notes have been redeemed or otherwise satisfied in accordance with their terms:

 

5.1             
Rank. All payments due under this Note (a) shall rank pari passu with all Other Notes and (b) shall
be senior to all other Indebtedness of the Company (excluding any other Permitted Indebtedness of the Company).

 

5.2             
Incurrence of Indebtedness. The Company shall not, and the Company shall cause each of its Subsidiaries to not,
directly or indirectly, incur or guarantee, assume or suffer to exist any Indebtedness (other than (i) the Indebtedness evidenced
by this Note and the Other Notes and (ii) Permitted Indebtedness).

 

5.3             
Existence of Liens. The Company shall not, and the Company shall cause each of its Subsidiaries to not, directly
or indirectly, allow or suffer to exist any mortgage, lien, pledge, charge, security interest or other encumbrance upon or in
any property or assets owned by the Company or any of its Subsidiaries (collectively, “Liens”) other than Permitted
Liens.

 

5.4             
Restricted Payments. The Company shall not, and the Company shall cause each of its Subsidiaries to not, directly
or indirectly, redeem, defease, repurchase, repay or make any payments in respect of, by the payment of cash or cash equivalents
(in whole or in part, whether by way of open market purchases, tender offers, private transactions or otherwise), all or any portion
of any Indebtedness (other than Permitted Payments with respect to any Permitted Indebtedness), whether by way of payment in respect
of principal of (or premium, if any) or interest on, such Indebtedness if at the time such payment is due or is otherwise made
or, after giving effect to such payment, (i) an event constituting an Event of Default has occurred and is continuing or
(ii) an event that with the passage of time and without being cured would constitute an Event of Default has occurred and
is continuing.

 

5.5             
Restriction on Redemption and Cash Dividends. Except for any Permitted Distributions, the Company shall not, and
the Company shall cause each of its Subsidiaries to not, directly or indirectly, redeem, repurchase or pay any cash dividend or
distribution on any of its capital stock without the prior express written consent of the Required Holders.

 

5.6             
Restriction on Transfer of Assets. The Company shall not, and the Company shall cause each of its Subsidiaries to
not, directly or indirectly, sell, lease, license, assign, transfer, convey or otherwise dispose of any assets or rights of the
Company or any Subsidiary owned or hereafter acquired whether in a single transaction or a series of related transactions, other
than (i) sales, leases, licenses, assignments, transfers, conveyances and other dispositions of such assets or rights by
the Company and its Subsidiaries that are in the ordinary course of their respective businesses and, after giving effect thereto,
would not result in a Material Adverse Change, (ii) sales of product, inventory or receivables in the ordinary course of
business, or (iii) Permitted Payments.

 

 

 

    	 	4	 

     

    

 

5.7             
Change in Nature of Business. The Company shall not, and the Company shall cause each of its Subsidiaries to not,
directly or indirectly, engage in any material line of business substantially different from those lines of business conducted
by the Company and each of its Subsidiaries on the Issuance Date or any business substantially related or incidental thereto.
The Company shall not, and the Company shall cause each of its Subsidiaries to not, directly or indirectly, modify its or their
corporate structure or purpose in any material respect.

 

5.8             
Preservation of Existence, Etc. The Company shall maintain and preserve, and cause each of its Subsidiaries to maintain
and preserve, its existence, rights and privileges, and become or remain, and cause each of its Subsidiaries to become or remain,
duly qualified and in good standing in each jurisdiction in which the character of the properties owned or leased by it or in
which the transaction of its business makes such qualification necessary.

 

5.9             
Maintenance of Properties, Etc. The Company shall maintain and preserve in all material respects, and cause each
of its Subsidiaries to maintain and preserve in all material respects, all of its properties which are necessary or useful in
the proper conduct of its business in good working order and condition, ordinary wear and tear excepted, and comply, and cause
each of its Subsidiaries to comply, at all times with the provisions of all material leases to which it is a party as lessee or
under which it occupies property, so as to prevent any material loss or forfeiture thereof or thereunder.

 

5.10            Maintenance
of Insurance. The Company shall maintain, and cause each of its Subsidiaries to maintain, insurance with responsible and reputable
insurance companies or associations (including, without limitation, comprehensive general liability, hazard, rent and business
interruption insurance) with respect to its properties (including all real properties leased or owned by it) and business, in
such amounts and covering such risks as is required by any governmental authority having jurisdiction with respect thereto or
as is carried generally in accordance with sound business practice by companies in similar businesses similarly situated.

 

5.11            Equity
Issuances. The Company shall not, and the Company shall cause each of its applicable Subsidiaries to not, issue additional
capital stock or membership interests, as the case may be, for any purpose other than (i) to pay down a portion or all of the
amounts owned under the Notes, and (ii) shares of the Company’s Common Stock issued to directors, officers or employees
of the Company or its Subsidiaries (including the Excluded Subsidiaries) in their capacity as such pursuant to the Company’s
stock incentive plans.

 

5.12            Investments
in Subsidiaries. Except for any Permitted Investments, the Company shall not, and the Company shall cause each of its Subsidiaries
to not, directly or indirectly, lend money or credit (by way of guarantee or otherwise) or make advances to any Excluded Subsidiary.

 

5.13            Delivery
of Financial Statements; Information. If the Company is no longer required to file with the Securities and Exchange Commission
(the “SEC”) quarterly and annual reports, including financial information that would be required to be contained
in a filing with the SEC on Forms 10-Q and 10-K, so long as any Principal or Interest is outstanding under this Note, the Company
shall furnish to the Holder such reports within 15 days after it would be required to file them with the SEC in substantially
the form as would be required to file with the SEC if it were required to do so. The Company shall furnish such other information
respecting the business, condition (financial or otherwise), operations, performance, properties or prospects of the Company and
its subsidiaries as the Holder may reasonably request.

 

5.14            Transactions
with Affiliates. The Company shall not, and the Company shall cause each of its Subsidiaries not to, directly or indirectly,
enter into or be a party to any transaction, including any purchase, sale, lease, exchange or transfer of property, the rendering
of any service or the payment of any management, advisory or similar fees, with any Affiliate (other than the Holder or holders
of any Other Notes and their respective Affiliates) unless such transaction is on fair and reasonable terms and conditions no
less favorable to Company or the relevant Subsidiary, as the case may be, than those that would have been obtained in a comparable
transaction on an arm’s length basis from an unrelated Person.

 

6.          
 AMENDING THE TERMS OF THIS NOTE. No provision of this Note may be modified or amended without the prior written consent
of the Required Holders and the Company and upon such due modification or amendment, such modification or amendment shall apply
to the Note and all of the Other Notes; provided, however, that (a) no such modification or amendment shall,
without the consent of the Holder hereunder, change the stated maturity date of this Note, or reduce the principal amount hereof,
or reduce the rate or extend the time of payment of any interest hereon, or reduce any amount payable on redemption or prepayment
hereof, impair or affect the right of the Holder to receive payment of principal of, and interest on, the Notes or to institute
suit for payment thereof, or impair or affect the right of the Holder to receive any other payment provided for under this Note,
or change the definition of Required Holders, or change the pro rata sharing provisions of this Note and (b) the Holder hereunder
may waive, reduce or excuse, or forbear from the exercise of any rights and remedies with respect to, any Event of Default under
this Note without notice to or the consent of any holder of any of the Other Notes.

 

 

 

    	 	5	 

     

    

 

7.          
 TRANSFER. This Note may be offered, sold, assigned or transferred by the Holder in whole or in part, subject only to the
provisions of the restrictive legend set forth at the top of the first page of this Note; provided that, so long as no
Event of Default has occurred and is continuing, any such sale, assignment or transfer shall be subject to the prior written consent
of the Company, which consent shall not be unreasonably withheld, delayed or conditioned; provided, further, that
any partial offer, sale, assignment or transfer of this Note shall be in a principal amount not less than $500,000.

 

8.          
 REISSUANCE OF THIS NOTE.

 

8.1             
Transfer. If this Note is to be transferred as permitted under Section 7 above, the Holder shall surrender
this Note to the Company, whereupon the Company will forthwith issue and deliver upon the order of the Holder a new Note (in accordance
with Section 8.3), registered as the Holder may request.

 

8.2             
Lost, Stolen or Mutilated Note. Upon receipt by the Company of evidence reasonably satisfactory to the Company of
the loss, theft, destruction or mutilation of this Note (as to which a written certification and the indemnification contemplated
below shall suffice as such evidence), and, in the case of loss, theft or destruction, of any indemnification undertaking by the
Holder to the Company in customary and reasonable form and, in the case of mutilation, upon surrender and cancellation of this
Note, the Company shall execute and deliver to the Holder a new Note (in accordance with Section 8.3) representing the outstanding
Principal.

 

8.3             
Issuance of New Notes. Whenever the Company is required to issue a new Note pursuant to the terms of this Note,
such new Note (i) shall be of like tenor with this Note, (ii) shall represent, as indicated on the face of such new
Note, the Principal remaining outstanding, (iii) shall have an issuance date, as indicated on the face of such new Note,
which is the same as the Issuance Date of this Note, (iv) shall have the same rights and conditions as this Note, and (v) shall
represent accrued and unpaid Interest on the Principal and Interest of this Note, from the Issuance Date.

 

9.          
 REMEDIES, CHARACTERIZATIONS, OTHER OBLIGATIONS, BREACHES AND INJUNCTIVE RELIEF. The remedies provided in this Note shall
be cumulative and in addition to all other remedies available under this Note, under the Security Agreement, at law or in equity
(including a decree of specific performance and/or other injunctive relief), and nothing herein shall limit the Holder’s
right to pursue actual and consequential damages for any failure by the Company to comply with the terms of this Note or any other
Transaction Document. The Company covenants to the Holder that there shall be no characterization concerning this instrument other
than as expressly provided herein. Amounts set forth or provided for herein with respect to payments, conversion and the like
(and the computation thereof) shall be the amounts to be received by the Holder and shall not, except as expressly provided herein,
be subject to any other obligation of the Company (or the performance thereof). The Company acknowledges that a breach by it of
its obligations hereunder will cause irreparable harm to the Holder and that the remedy at law for any such breach may be inadequate.
The Company therefore agrees that, in the event of any such breach or threatened breach, the Holder shall be entitled, in addition
to all other available remedies, to an injunction restraining any breach, without the necessity of showing economic loss and without
any bond or other security being required. The Company shall provide all information and documentation to the Holder that is requested
by the Holder to enable the Holder to confirm the Company’s compliance with the terms and conditions of this Note (including,
without limitation, compliance with Section 5).

 

10.             
PAYMENT OF COLLECTION, ENFORCEMENT AND OTHER COSTS. If (a) this Note is placed in the hands of an attorney for collection
or enforcement or is collected or enforced through any legal proceeding or the Holder otherwise takes action to collect amounts
due under this Note or to enforce the provisions of this Note or (b) there occurs any bankruptcy, reorganization, receivership
of the Company or other proceedings affecting Company creditors’ rights and involving a claim under this Note, then the
Company shall pay the costs incurred by the Holder for such collection, enforcement or action or in connection with such bankruptcy,
reorganization, receivership or other proceeding, including, without limitation, attorneys’ fees and disbursements.

 

11.             
CONSTRUCTION; HEADINGS. This Note shall be deemed to be jointly drafted by the Company and the Holder and shall not be
construed against any Person as the drafter hereof. The headings of this Note are for convenience of reference and shall not form
part of, or affect the interpretation of, this Note. Terms used in this Note but defined in the other Transaction Documents shall
have the meanings ascribed to such terms on the Issuance Date in such other Transaction Documents unless otherwise consented to
in writing by the Holder.

 

12.             
FAILURE OR INDULGENCE NOT WAIVER. No failure or delay on the part of the Holder 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. No waiver shall be effective unless it is
in writing and signed by an authorized representative of the waiving party.

 

 

 

    	 	6	 

     

    

 

13.             
NOTICES; CURRENCY; PAYMENTS.

 

13.1         
Notices. Whenever notice is required to be given under this Note, unless otherwise provided herein, such notice
shall be given in accordance with Section 6.5 of the Additional Purchase Agreement. The Company shall provide the Holder
with prompt written notice of all actions taken pursuant to this Note, including in reasonable detail a description of such action
and the reason therefore.

 

13.2         
Currency. All principal, interest and other amounts owing under this Note that, in accordance with the terms hereof,
are paid in cash shall be paid in U.S. dollars. All amounts denominated in other currencies shall be converted to the U.S. dollar
equivalent amount in accordance with the Exchange Rate on the date of calculation. “Exchange Rate” means, in
relation to any amount of currency to be converted into U.S. dollars pursuant to this Note, the U.S. dollar exchange
rate as published in The Wall Street Journal on the relevant date of calculation (it being understood and agreed that where
an amount is calculated with reference to, or over, a period of time, the date of calculation shall be the final date of such
period of time).

 

13.3         
Payments. Whenever any payment of cash is to be made by the Company to any Person pursuant to this Note, unless
otherwise expressly set forth herein, such payment shall be made in lawful money of the United States of America by wire transfer
of immediately available funds in accordance with the Holder’s wire transfer instructions. Whenever any amount expressed
to be due by the terms of this Note is due on any day which is not a Business Day, the same shall instead be due on the next succeeding
day which is a Business Day, with interest accruing until paid.

 

14.             
DISCLOSURE.

 

14.1         
In connection with information that is either required or permitted to be disclosed to the Holder in such Holder’s
capacity as the holder of this Note, on the date such information is to be disclosed, the Company may provide the Holder with
such information; provided either that (i) such information does not contain Non-Public Information, or (ii) if such information
does contain Non-Public Information, such information is Consented Information (as defined below).

 

14.2         
If any such information to be disclosed contains Non-Public Information, the Company shall provide to the Holder a written
notice (which notice shall, for the avoidance of doubt, not contain or constitute Non-Public Information), containing the following
information: (A) a statement as to whether the information is required to be disclosed under the terms of this Note, (B)
if the information is not so required to be disclosed, a statement that the Company or other applicable Person desires voluntarily
to disclose such information, (C) a general description of such information (which description shall not include, and shall
not constitute, Non-Public Information), (D) a statement as to whether the Holder is required or permitted to take some specific
action as a lender under this Note, (E) a statement that such information contains Non-Public Information, and (F) a
statement seeking the consent of the Holder to receive such Non-Public Information. Within two (2) Business Days of the date of
the notice contemplated in the preceding sentence, the Holder shall advise the Company in writing whether it consents to the receipt
of such Non-Public Information (any information for which such consent is provided, “Consented Information”).

 

14.3         
In the event any Non-Public Information is provided to the Holder by the Company, the Company shall promptly and in compliance
with applicable law publicly disclose such Non-Public Information on a Current Report on Form 8-K or otherwise, within four (4)
Business Days of (or such other period of time as may be expressly agreed to in writing by the Investor and the Company in connection
with such disclosure) the disclosure thereof to the Holder (provided that the Company shall provide the Holder a draft
of each such Form 8-K at least two (2) Business Days prior to filing thereof). If the Company fails to disclose any Non-Public
Information in accordance with the immediately preceding sentence, the Holder may publicly disclose such information by issuing
a press release containing such information, or otherwise, within one Business Day of providing Notice to the Company of such
intended disclosure. The Holder shall have no liability to the Company, any of its Subsidiaries, or any of its or their respective
officers, directors, employees, stockholders or agents, for any such disclosure.

 

14.4         
In no event shall the Company intentionally provide the Holder with any Non-Public Information without the prior written
consent of the Holder. In the absence of any written notice that information provided by the Company contains Non-Public Information,
the Holder may presume that such information (including the notice of such information) does not constitute Non-Public Information.

 

15.             
CANCELLATION. After all Principal, accrued Interest and other amounts at any time owed on this Note have been paid in full
(a) this Note shall automatically be deemed canceled without any action by or notice to Holder or Company and (b) the
Holder shall promptly mark this Note as cancelled, shall promptly surrender this Note to the Company and this Note shall not be
reissued.

 

 

 

    	 	7	 

     

    

 

16.             
WAIVER OF NOTICE. Except for the notices specifically required by this Note or any other Transaction Document, to the extent
permitted by applicable law, the Company hereby irrevocably waives demand, notice, presentment, protest and all other demands
and notices in connection with the delivery, acceptance, performance, default or enforcement of this Note and the Additional Purchase
Agreement.

 

17.             
GOVERNING LAW. This Note shall be construed and enforced in accordance with, and all questions concerning the construction,
validity, interpretation and performance of this Note shall be governed by, the internal laws of the State of New York, without
giving effect to any choice of law or conflict of law provision or rule (whether of the State of New York or any other jurisdictions)
that would cause the application of the laws of any jurisdictions other than the State of New York. The Company hereby irrevocably
submits to the exclusive jurisdiction of the state and federal courts sitting in The City of New York, Borough of Manhattan, for
the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein,
and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally
subject to the jurisdiction of any such court, that such suit, action or proceeding is brought in an inconvenient forum or that
the venue of such suit, action or proceeding is improper. Nothing contained herein shall be deemed to limit in any way any right
to serve process in any manner permitted by law. In the event that any provision of this Note is invalid or unenforceable under
any applicable statute or rule of law, then such provision shall be deemed inoperative to the extent that it may conflict therewith
and shall be deemed modified to conform with such statute or rule of law. Any such provision which may prove invalid or unenforceable
under any law shall not affect the validity or enforceability of any other provision of this Note. Nothing contained herein shall
be deemed or operate to preclude the Holder from bringing suit or taking other legal action against the Company in any other jurisdiction
to collect on the Company’s obligations to the Holder, to realize on any collateral or any other security for such obligations,
or to enforce a judgment or other court ruling in favor of the Holder. THE COMPANY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY
HAVE TO, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION WITH OR ARISING
OUT OF THIS NOTE OR ANY TRANSACTION CONTEMPLATED HEREBY.

 

18.             
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 Company to the Holder and thus refunded to the Company.

 

19.             
CERTAIN DEFINITIONS. For purposes of this Note, the following terms shall have the following meanings:

 

19.1         
“Additional Purchase Agreement” means the Note Purchase Agreement, dated as of June 26, 2017, by and
among the Company, the Holder, and each other “Investor” (as defined therein) as amended, restated or otherwise modified
from time to time.

 

19.2         
“Business Day” means any day other than Saturday, Sunday or other day on which commercial banks in The
City of New York are authorized or required by law to remain closed.

 

19.3         
“Common Stock” means (i) the Company’s shares of common stock, $0.001 par value per share,
and (ii) any capital stock into which such common stock shall have been changed or any share capital resulting from a reclassification
of such common stock.

 

19.4         
“Contingent Obligation” means, as to any Person, any direct or indirect liability, contingent or otherwise,
of that Person with respect to any indebtedness, lease, dividend or other obligation of another Person if the primary purpose
or intent of the Person incurring such liability, or the primary effect thereof, is to provide assurance to the obligee of such
liability that such liability will be paid or discharged, or that any agreements relating thereto will be complied with, or that
the holders of such liability will be protected (in whole or in part) against loss with respect thereto.

 

19.5         
“Excluded Events” means (i) changes in the national or world economy or financial markets as a
whole, (ii) changes in general economic conditions taken as a whole that affect the industries in which the Company and its
Subsidiaries conduct their business, (iii) acts of terrorism or war, including the engagement by the United States of America
or any other country in hostilities, and whether or not pursuant to the declaration of a national emergency or war, or any earthquakes,
hurricanes or other natural disasters, and (iv) any financial statement impact of the transactions contemplated by the Transaction
Documents.

 

 

 

    	 	8	 

     

    

 

19.6         
“Excluded Subsidiaries” means Kinergy Marketing LLC, Pacific Ag. Products, LLC, Pacific Ethanol Development,
LLC, Pacific Ethanol Central, LLC, Pacific Ethanol Pekin, Inc., Pacific Ethanol Canton, LLC, Pacific Ethanol Aurora West, LLC,
Pacific Ethanol Aurora East, LLC and Pacific Aurora, LLC and each of their respective direct or indirect subsidiaries.

 

19.7         
“Fundamental Transaction” means that (A) the Company or any of its Subsidiaries shall, directly
or indirectly, in one or more related transactions, (i) consolidate or merge with or into (whether or not the Company or
any of its Subsidiaries is the surviving corporation) another Person or Persons, or (ii) sell, assign, transfer, convey or
otherwise dispose of all or substantially all of the properties or assets of the Company or any of its Subsidiaries to another
Person, or (iii) allow another Person to make a purchase, tender or exchange offer that is accepted by the holders of more
than 50% of the outstanding shares of Voting Stock of the Company (not including any shares of Voting Stock of the Company held
by the Person or Persons making or party to, or associated or affiliated with the Persons making or party to, such purchase, tender
or exchange offer), or (iv) consummate a securities purchase or business combination (including, without limitation, a reorganization,
recapitalization, spin-off or scheme of arrangement) with another Person whereby such other Person acquires more than the 50%
of the outstanding shares of Voting Stock of the Company (not including any shares of Voting Stock of the Company held by the
other Person or other Persons making or party to, or associated or affiliated with the other Persons making or party to, such
securities purchase agreement or other business combination), or (v) reorganize, recapitalize or reclassify the Voting Stock
of the Company or (B) any “person” or “group” (as these terms are used for purposes of Sections 13(d)
and 14(d) of the Exchange Act) is or shall become the “beneficial owner” (as defined in Rule 13d-3 under the
Exchange Act), directly or indirectly, of 50% of the aggregate Voting Stock of the Company.

 

19.8         
“GAAP” means United States generally accepted accounting principles, consistently applied.

 

19.9         
“Indebtedness” of any Person means, without duplication (A) all indebtedness for borrowed money,
(B) all obligations issued, undertaken or assumed as the deferred purchase price of property or services (including, without
limitation, “capital leases” in accordance with generally accepted accounting principles) (other than trade payables
entered into in the ordinary course of business), (C) all reimbursement or payment obligations with respect to letters of
credit, surety bonds and other similar instruments, (D) all obligations evidenced by notes, bonds, debentures or similar
instruments, including obligations so evidenced incurred in connection with the acquisition of property, assets or businesses,
(E) all indebtedness created or arising under any conditional sale or other title retention agreement, or incurred as financing,
in either case with respect to any property or assets acquired with the proceeds of such indebtedness (even though the rights
and remedies of the seller or bank under such agreement in the event of default are limited to repossession or sale of such property),
(F) all monetary obligations under any leasing or similar arrangement which, in connection with generally accepted accounting
principles, consistently applied for the periods covered thereby, is classified as a capital lease, (G) all obligations of such
Person to purchase, redeem, retire, defease or otherwise make any payment in respect of any equity interests in such Person or
any other Person or any warrants, rights or options to acquire such equity interests, valued, in the case of redeemable preferred
interests, at the greater of its voluntary or involuntary liquidation preference plus accrued and unpaid dividends, (H) all
indebtedness referred to in clauses (A) through (G) above secured by (or for which the holder of such Indebtedness has an
existing right, contingent or otherwise, to be secured by) any mortgage, claim, lien, tax, right of first refusal, encumbrance,
pledge, charge, security interest or other encumbrance upon or in any property or assets (including accounts and contract rights)
owned by any Person, even though the Person which owns such assets or property has not assumed or become liable for the payment
of such indebtedness, and (I) all Contingent Obligations in respect of indebtedness or obligations of others of the kinds
referred to in clauses (A) through (H) above.

 

19.10     
“Initial Notes” means those certain Senior Secured Notes in the aggregate principal amount of $55,000,000
issued pursuant to the Initial Purchase Agreement on December 15, 2016.

 

19.11     
“Initial Purchase Agreement” means the Note Purchase Agreement, dated as of December 12, 2016, by and
among the Company and each “Investor” (as defined therein) as amended, restated or otherwise modified from time to
time.

 

19.12     
“Interest Rate” means a rate per annum equal to the 3-month London Interbank Offered Rate (“LIBOR”),
plus 7.0% (the “Interest Rate Spread”); provided, however, that on December 15, 2017 and December
15, 2018, the “Interest Rate Spread” shall be increased to 9.0% and 11.0%, respectively, and; provided, further,
that if at any time during the term of this Note LIBOR is less than 1.0% per annum, the “Interest Rate” shall equal
1.0% plus the amount of the then current “Interest Rate Spread.” The “Interest Rate” shall in all cases
be subject to adjustment as set forth in Section 2.

 

19.13     
“Material Adverse Change” shall mean any set of circumstances or events which occur, arise or otherwise
take place from and after the Issuance Date which (a) has or could reasonably be expected to have any material adverse effect
whatsoever upon the validity or enforceability of this Note or any other Transaction Document, (b) is or could reasonably
be expected to be material and adverse to the business properties, assets, financial condition, results of operations or prospects
of the Company or the Company and any of Subsidiaries on a collective basis, (c) impairs materially or could reasonably be
expected to impair materially the ability of the Company to duly and punctually pay or perform any its obligations under this
Note or any other Transaction Document, or (d) materially impairs or could reasonably be expected to materially impair the
ability of Holder or, in the case of the Security Agreement, the Agent (as defined therein), to the extent permitted, to enforce
its legal rights and remedies pursuant to this Note or any other Transaction Document.

 

 

 

    	 	9	 

     

    

 

19.14     
“Maturity Date” shall mean December 15, 2019.

 

19.15     
“Non-Public Information” means material, non-public information relating to the Company.

 

19.16     
“Permitted Distributions” means (a) dividends by Subsidiaries of the Company to the Company or
other Subsidiaries of the Company, and (b) current quarterly dividends required to be paid by the Company with respect to
the Company’s Series B Cumulative Convertible Preferred Stock pursuant to the organizational documents of the Company
as in effect as of the Issuance Date on the Company. For the avoidance of doubt, to the extent that payment thereof is in the
form of Common Stock, payment of previously accrued and unpaid dividends with respect to the Company’s Series B Cumulative
Convertible Preferred Stock outstanding as of the Issuance Date shall be deemed to be “Permitted Distributions”.

 

19.17     
“Permitted Indebtedness” means (i) Indebtedness evidenced by this Note and the Other Notes; (ii) Indebtedness
of any Excluded Subsidiary, (iii) any Indebtedness secured by a Permitted Lien (other than Indebtedness referred to in clause
(iv) of the definition of “Permitted Lien”), (iv) Indebtedness incurred by the Company that is made expressly subordinate
in right of payment to the Indebtedness evidenced by this Note, as reflected in a written agreement acceptable to the Holder and
approved by the Holder in writing, and which Indebtedness does not provide at any time for (1) the payment, prepayment, repayment,
repurchase or defeasance, directly or indirectly, of any principal or premium, if any, thereon until ninety-one (91) days
after the Maturity Date or later and (2) total interest and fees at a rate in excess of ten percent (10%) per annum
(collectively, the “Subordinated Indebtedness”); provided, that in the aggregate outstanding at any
time, such Subordinated Indebtedness does not exceed $30,000,000, (v) Indebtedness of the Company or any of its Subsidiaries
and Excluded Subsidiaries existing on the Issuance Date, (vi) such other trade and operating Indebtedness incurred in the
ordinary course of business by the Company (including any of the Company’s Subsidiaries and Excluded Subsidiaries), including
without limitation, unsecured trade debt, financing with respect to the acquisition or lease of equipment and financing of insurance
premiums; provided that in the aggregate outstanding at any time, such Indebtedness does not exceed the greater of $2,000,000
or three-quarters of one percent (0.75%) of total assets as reported in the Company’s most recent publicly filed Form 10-K
or 10-Q reports, (vii) the Company’s Series B Cumulative Convertible Preferred Stock outstanding on the date hereof,
and (viii) additional Indebtedness of the Company in an amount up to $15,000,000 that may arise from an increase in the credit
facility of Kinergy Marketing LLC by an equivalent amount and resulting from the Company’s Contingent Obligations as a guarantor
of the obligations arising under that facility, with the foregoing to be accomplished through an amendment and restatement of
the facility. Notwithstanding anything to the contrary, Permitted Indebtedness of ICP Merger Sub, LLC, a Delaware limited liability
company (as the surviving entity in the merger contemplated under the ICP Agreement, which is to be renamed as “Illinois
Corn Processing, LLC” upon closing thereof, hereinafter “ICP”) and ICP’s direct and indirect subsidiaries
(collectively, the “ICP Entities”) shall not include any Indebtedness secured by a second priority security interest
in any equity or assets of the ICP Entities; provided, however, that the foregoing shall not prohibit any such Indebtedness (a)
issued by ICP to the sellers under the ICP Agreement to the extent preexisting liens result in a second priority security interest
in certain assets of ICP in favor of the sellers, or (b) resulting from equipment leases. For the avoidance of doubt, any first
priority security interest in any equity or assets of the ICP Entities is expressly permitted.

 

19.18     
“Permitted Investments” means (i) investments existing on the date hereof (inclusive of (a) the investment
in the Excluded Subsidiaries in the amount of $25,000,000 made in part with the proceeds of the Initial Notes, and (b) the investment
in the Excluded Subsidiaries in the amount of $30,000,000 being made in part with the proceeds of the Additional Notes issued
pursuant to the Additional Purchase Agreement on the Issuance Date), and (ii) additional investments in the Excluded Subsidiaries
that in the aggregate outstanding at any time do not exceed $20,000,000.

 

19.19     
“Permitted Liens” means (i) any Lien for taxes not yet due or delinquent or being contested in
good faith by appropriate proceedings for which adequate reserves have been established in accordance with GAAP, (ii) any
statutory Lien arising in the ordinary course of business by operation of law with respect to a liability that is not yet due
or delinquent, (iii) any Lien created by operation of law, such as materialmen’s liens, mechanics’ liens and
other similar liens, arising in the ordinary course of business with respect to a liability that is not yet due or delinquent
or that are being contested in good faith by appropriate proceedings, (iv) Liens securing financing obtained in the ordinary
course of the Company's operations, including financing with respect to the acquisition or lease of equipment and financing of
insurance premiums; provided, that (A) such Liens are solely upon and confined solely to the equipment, unearned insurance
premiums or other asset or assets being acquired by such financing and (B) in the aggregate, the Indebtedness secured by such
liens does not exceed the greater of $2,000,000 or three-quarters of one percent (0.75%) of total assets as reported in the Company's
most recent publicly filed Form 10-K or 10-Q reports, (v) Liens incurred in connection with the extension, renewal or refinancing
of the indebtedness secured by Liens of the type described in clause (iv) above, provided that any extension, renewal
or replacement Lien shall be limited to the property encumbered by the existing Lien and the principal amount of the Indebtedness
being extended, renewed or refinanced does not increase, and (vi) any Lien on the assets or properties of the Excluded Subsidiaries.

 

 

 

    	 	10	 

     

    

 

19.20     
“Permitted Payments” means any payments, distributions or transfers with respect to (i) any Permitted
Indebtedness (in the case of Subordinated Indebtedness, to the extent permitted by the relevant subordination or intercreditor
agreement) and (ii) any Permitted Distributions.

 

19.21     
“Person” means an individual, a limited liability company, a partnership, a joint venture, a corporation,
a trust, an unincorporated organization, any other entity or a government or any department or agency thereof.

 

19.22     
“Required Holders” means the holders of Notes representing at least 66 2/3% of the aggregate principal
amount of the Notes then outstanding (excluding any Notes held by the Company or any of its Subsidiaries).

 

19.23     
“Subsidiary” means any Person in which the Company, directly or indirectly, (I) owns any of the
outstanding capital stock or holds any equity or similar interest of such Person or (II) controls or operates all or any
part of the business, operations or administration of such Person; provided that, for purposes of this Note, the term “Subsidiary”
shall expressly exclude the Excluded Subsidiaries.

 

19.24     
“Transaction Documents” means this Note, the Other Notes, the Security Agreement, the Initial Purchase
Agreement and the Additional Purchase Agreement, together with any amendments, restatements, extensions or other modification
thereto.

 

19.25     
“Voting Stock” means voting equity interests.

 

FOR
PURPOSES OF SECTIONS 1272, 1273 AND 1275 OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED, THIS NOTE IS BEING ISSUED WITH ORIGINAL
ISSUE DISCOUNT ON THE ISSUANCE DATE OF THIS NOTE. THE COMPANY AGREES TO PROVIDE PROMPTLY TO EACH HOLDER OF THIS NOTE, UPON WRITTEN
REQUEST (1) THE ISSUE PRICE, (2) THE AMOUNT OF ORIGINAL ISSUE DISCOUNT AND (3) THE YIELD TO MATURITY OF THIS NOTE.
ANY SUCH WRITTEN REQUEST SHOULD BE SENT TO THE COMPANY AT THE FOLLOWING ADDRESS: 400 CAPITOL MALL, SUITE 2060, SACRAMENTO, CA
95814, ATTN: BRYON T. MCGREGOR, CFO.

 

[signature
page follows]

 

 

 

 

 

 

 

 

 

 

    	 	11	 

     

    

 

IN WITNESS WHEREOF,
the Company has caused this Note to be duly executed as of the first date set forth above.

 

 

 

	 	PACIFIC ETHANOL, INC.
	 	 
	 	By: 	 
	 	 	Name: Bryon T. McGregor
Title:
    Chief Financial Officer

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

[Signature
Page to Senior Secured Note]

 

    	 	12	 

     

    

 

 

 

 

AGREED AND ACCEPTED:

HOLDER”

 

 

|____________________|

 

By: _______________________

Name:

Title:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

[Holder
Acknowledgment of Senior Secured Note]

 

 

 

    	 	13Exhibit 10.5

 

FIRST AMENDMENT TO
SECURITY AGREEMENT

 

THIS FIRST AMENDMENT
TO SECURITY AGREEMENT (this “Amendment”) is entered into effective as of June 30, 2017 by and among Pacific
Ethanol, Inc., a Delaware corporation (the “Company”), each Holder and Cortland Capital Market Services LLC,
as collateral agent for itself and the Secured Parties (in such capacity, together with its successors and assigns in such capacity,
the “Agent”). All capitalized terms not otherwise defined herein shall have the meanings attributed to them
in that certain Security Agreement dated effective as of December 15, 2016 by and among the Company, each Holder and the Agent
(the “Security Agreement”).

 

RECITALS

 

WHEREAS, the Company
issued certain Secured Promissory Notes in the aggregate principal amount of $55,000,000 on December 15, 2016 (the “Initial
Notes”) pursuant to a Note Purchase Agreement dated as of December 12, 2016 by and among the Company and the Investors
identified therein (the “Initial Purchase Agreement”), the obligations arising under which, among other obligations,
are secured pursuant to the Security Agreement.

 

WHEREAS, the Company
and certain Holders (including certain Holders that hold Initial Notes and certain Holders that do not hold Initial Notes) are
parties to a Note Purchase Agreement dated as of June 26, 2017 (as amended, restated, supplemented or otherwise modified from time
to time, including amendments and restatements thereof in its entirety, the “Additional Purchase Agreement”),
pursuant to which the Company will issue or has issued, and such Holders will purchase or have purchased on a several basis, $13,948,078
in aggregate principal amount of senior secured notes due December 15, 2019 (as amended, restated, supplemented or otherwise modified
from time to time, the “Additional Notes”).

 

WHEREAS, as a condition
to the closing under the Additional Purchase Agreement with the Company, the Holders of the Additional Notes have required, among
other things, that the Company shall enter into this Amendment by which the parties intend that this Amendment expand the obligations
secured pursuant to the Security Agreement to additionally cover the obligations under the Additional Notes and the Additional
Purchase Agreement, among other obligations, as set forth herein.

 

AGREEMENT

 

NOW, THEREFORE, in
consideration of the agreements herein contained and for other good and valuable consideration, the receipt and sufficiency of
which is hereby acknowledged, the parties hereto hereby agree as follows:

 

1.       Certain
Definitions. The following defined terms are added to Section 1 of the Security Agreement, or to the extent already defined
in the Security Agreement, are amended and restated to read in their entireties as follows:

 

“Agent Fee
Letter” means that certain Amended and Restated Agent Fee Letter, dated as of June 30, 2017, made by and between the
Company and the Agent, as further amended, restated, supplemented or otherwise modified from time to time.

 

“First Amendment”
means the First Amendment to Security Agreement, dated as of June 30, 2017, among the Company, each Holder and the Agent.

 

“Holders”
means (x) each Person that is (i) a signatory to the Initial Purchase Agreement or the Additional Purchase Agreement and identified
as an “Investor” on Exhibit A to the Initial Purchase Agreement or Exhibit A to the Additional Purchase Agreement,
respectively, (ii) a holder of any of the Notes, and (iii) a signatory to the First Amendment and identified as a “Secured
Party” on the signature pages to the First Amendment, and (y) any other Person that becomes (i) a holder of any of the Notes
pursuant to any permitted assignment or transfer and (ii) a “Secured Party” under this Agreement pursuant to a Security
Agreement Joinder, other than any such Person that ceases to be a party hereto pursuant to an assignment of all of its Notes and
its rights and obligations under the Transaction Documents.

 

 

 

 

    	 	1	 

     

    

 

“Obligations”
means all of the liabilities and obligations (primary, secondary, direct, contingent, sole, joint or several) due or to become
due, or that are now or may be hereafter contracted or acquired, or owing to, of the Company to the Agent or to the Secured Parties,
including, without limitation, all obligations under this Agreement, the Initial Purchase Agreement, the Additional Purchase Agreement,
the Notes, the Agent Fee Letter and any other instruments, agreements or other documents executed and/or delivered in connection
herewith or therewith, in each case, whether now or hereafter existing, voluntary or involuntary, direct or indirect, absolute
or contingent, liquidated or unliquidated, whether or not jointly owed with others, and whether or not from time to time decreased
or extinguished and later increased, created or incurred, and all or any portion of such obligations or liabilities that are paid,
to the extent all or any part of such payment is avoided or recovered directly or indirectly from Agent or any of the Secured Parties
as a preference, fraudulent transfer or otherwise as such obligations may be amended, supplemented, converted, extended or modified
from time to time. Without limiting the generality of the foregoing, the term “Obligations” shall include, without
limitation: (i) the principal amount of, and interest on the Notes and the loans extended pursuant thereto; (ii) any and all other
fees, indemnities, costs, obligations and liabilities of the Company from time to time under or in connection with this Agreement,
the Initial Purchase Agreement, the Additional Purchase Agreement, the Notes, the Agent Fee Letter and any other instruments, agreements
or other documents executed and/or delivered in connection herewith or therewith; and (iii) all amounts (including but not limited
to post-petition interest) in respect of the foregoing that would be payable but for the fact that the obligations to pay such
amounts are unenforceable or not allowable due to the existence of a bankruptcy, reorganization or similar proceeding involving
the Company.

 

The term “Notes”
referred to in Recital A of the Security Agreement, and the term “Notes” used throughout the body of the Security
Agreement, shall include the Initial Notes and the Additional Notes, collectively.

 

The term “Purchase
Agreement” referred to in Recital A of the Security Agreement, and the term “Purchase Agreement” used
throughout the body of the Security Agreement, shall include the Initial Purchase Agreement and the Additional Purchase Agreement,
collectively.

 

“Required
Holders” means the holders of Notes representing at least 66 2/3% of the aggregate principal amount of the Notes then
outstanding (excluding Notes held by the Company or any of its Subsidiaries).

 

The term “Transaction
Document” means the Initial Notes, the Additional Notes, this Security Agreement, the Initial Purchase Agreement and
the Additional Purchase Agreement, together with any amendments, restatements, extensions or other modification thereto.

 

2.       Section
18(f) of the Security Agreement is hereby amended by adding the following sentence at the end thereof: “Promptly following
a request made by the Agent to a Holder, such Holder shall notify the Agent of the outstanding principal amount of the Notes held
by such Holder at such time.”

 

3.       Exhibit
1 to the Security Agreement is hereby amended by deleting the reference to “Section 17(f)” therein and substituting
“Section 17(i) therefor.

 

4.       Effectiveness.
This Amendment will become effective upon the date on which the Agent has received (a) a counterpart hereof duly executed by each
of the Investors (as defined in each of the Initial Purchase Agreement and the Additional Purchase Agreement), (b) a copy of the
Agent Fee Letter duly executed by each of the parties thereto, (c) a copy of the Additional Purchase Agreement duly executed by
each of the parties thereto, and (d) payment from the Company of (i) all fees required to be paid on or prior to the effective
date of this Amendment pursuant to the Agent Fee Letter and (ii) all reasonable third-party fees and expenses incurred by the Agent
in connection with this Amendment and the transactions contemplated hereby, including, without limitation, attorneys’ fees
and expenses.

 

5.       Representations
and Warranties; Covenants. In order to induce the Agent and the Holders to enter into this Amendment and for the applicable
Holders to purchase the Additional Notes under the Additional Purchase Agreement, the Company hereby remakes all of the representations
and warranties contained in Section 6 of the Security Agreement as of the date of this Amendment (except to the extent such representation
or warranty relates to an earlier date, in which case, it is true, correct and complete as of such earlier date). The Company’s
representations and warranties in Sections 6(b) and (c) of the Security Agreement shall apply, mutatis mutandis, to this
Amendment.

 

 

 

    	 	2	 

     

    

 

6.       Note
Holdings. Each Secured Party signatory to this Amendment on the date hereof hereby represents and warrants to the Agent (solely
as to itself, and not as to any other Secured Party) that (x) as of the date hereof, the outstanding principal amount of the Notes
held by such Secured Party is set forth on Schedule A hereto, and (y) on or prior to the date of this Amendment, it has not assigned
all or any portion of its Notes to any Person, except any Person that is listed on Schedule A attached hereto.

 

7.       Joinder.
Each of the undersigned Holders that will be receiving Additional Notes but does not hold any Initial Notes hereby (i) agrees to
be a “Secured Party” under the Security Agreement (as amended by this Amendment), (ii) unconditionally and irrevocably
expressly assumes, confirms and agrees to perform and observe as a Secured Party all terms, conditions, agreements, covenants,
obligations, duties and provisions applicable to a “Secured Party” under the Security Agreement, as so amended (including,
without limitation, those set forth in Section 17(i) of the Security Agreement) as if it were an original signatory thereto, and
(iii) agrees that its address for notices under the Security Agreement is as set forth on Schedule B hereto.

 

8.       Interpretation.
Except as expressly modified by this Amendment, all terms and provisions of the Security Agreement shall remain unchanged and in
full force and effect and are ratified and affirmed on the date hereof. In the event of any inconsistency between the terms of
this Amendment and the terms of the Security Agreement prior to its amendment, the terms of this Amendment shall control.

 

9.       Counterparts.
This Amendment may be executed in any number of counterparts, all of which taken together shall constitute one and the same instrument
and either of the parties hereto may execute this Amendment by signing any such counterpart.

 

[Signature Pages Follow]

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    	 	3	 

     

    

 

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

	 	COMPANY:
	 	 
	 	PACIFIC ETHANOL, INC., a Delaware corporation
	 	 
	 	 
	 	By:	/s/ Neil M. Koehler
	 	Name:	Neil M. Koehler
	 	Title:	President and Chief Executive Officer

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Signature Page to First
Amendment to Security Agreement

 

    	 	4	 

     

    

 

	 	AGENT:
	 	 
	 	cortland capital market services llc, 

as Agent
	 	 
	 	 
	 	By:	/s/ Polina Arsentyeva
	 	Name:	Polina Arsentyeva
	 	Title:	Associate Counsel
	 	 	 
	 	 	 
	 	Address:
	 	 	Cortland
Capital Market Services LLC
	 	 	225 W.
Washington Street, 21st Floor
	 	 	Chicago,
IL 60606
	 	 	Attention:
Ryan Morick and Legal Department
	 	 	Telecopy
no.: (312) 562-5072
	 	 	E-mail:
ryan.morick@cortlandglobal.com;
	 	 	legal@cortlandglobal.com
	 	 	 
	 	 	with
a copy (which copy shall not constitute notice) to:
	 	 	 
	 	 	Kaye Scholer
LLP
	 	 	250 W.
55th Street
	 	 	New York,
NY 10019
	 	 	Attention:
Alan Glantz
	 	 	Telecopy
no.: (212) 836-6763
	 	 	E-mail:
alan.glantz@kayescholer.com
	 	 	 

 

 

 

 

 

 

 

 

 

 

Signature Page to First
Amendment to Security Agreement

 

 

 

    	 	5	 

     

    

 

 

	 	
	 	 
	 	CWD Summit, LLC,
	 	acting for and on behalf of
	 	Candlewood Renewable Energy Series I
	 	 
	 	 
	 	By:	/s/ Janet Miller
	 	 	Name: Janet Miller
	 	 	Title: Authorized Person

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Signature Page to First
Amendment to Security Agreement

 

    	 	6	 

     

    

 

 

	 	
	 	 
	 	Flagler Master Fund SPC Ltd,
	 	acting for and on behalf of
	 	the class A segregated portfolio
	 	 
	 	 
	 	By:	/s/ Janet Miller
	 	 	Name: Janet Miller
	 	 	Title: Authorized Person

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Signature Page to First
Amendment to Security Agreement

 

 

    	 	7	 

     

    

 

	 	
	 	 
	 	Flagler Master Fund SPC Ltd,
	 	acting for and on behalf of
	 	the class B segregated portfolio
	 	 
	 	 
	 	By:	/s/ Janet Miller
	 	 	Name: Janet Miller
	 	 	Title: Authorized Person

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Signature Page to First
Amendment to Security Agreement

 

 

 

    	 	8	 

     

    

 

 

	 	
	 	 
	 	Candlewood Special Situations Master Fund II, L.P.
	 	 
	 	 
	 	 
	 	 
	 	By:	/s/ Janet Miller
	 	 	Name: Janet Miller
	 	 	Title: Authorized Person

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Signature Page to First
Amendment to Security Agreement

 

 

 

 

    	 	9	 

     

    

 

 

	 	
	 	 
	 	CIF-Income Partners (A), LLC
	 	By: BlackRock Financial Management, Inc.
	 	Its investment manager
	 	 
	 	 
	 	By:	/s/ J. David Matter
	 	 	Name: J. David Matter
	 	 	Title: Managing Director

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Signature Page to First
Amendment to Security Agreement

 

 

 

    	 	10	 

     

    

	 	
	 	 
	 	Orange 2015 DisloCredit Fund, L.P.
	 	By: BlackRock Financial Management, Inc.
	 	Its investment manager
	 	 
	 	 
	 	By:	/s/ J. David Matter
	 	 	Name: J. David Matter
	 	 	Title: Managing Director

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Signature Page to First
Amendment to Security Agreement

 

 

 

    	 	11	 

     

    

 

 

	 	
	 	 
	 	Orange 2015 DisloCredit Fund, L.P.
	 	By: BlackRock Financial Management, Inc.
	 	Its investment manager
	 	 
	 	 
	 	By:	/s/ J. David Matter
	 	 	Name: J. David Matter
	 	 	Title: Managing Director

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Signature Page to First
Amendment to Security Agreement

 

 

    	 	12	 

     

    

 

 

	 	
	 	 
	 	Sainsbury’s Credit Opportunities Fund, Ltd. 
	 	By: BlackRock Financial Management, Inc.
	 	Its investment manager
	 	 
	 	 
	 	By:	/s/ J. David Matter
	 	 	Name: J. David Matter
	 	 	Title: Managing Director

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Signature Page to First
Amendment to Security Agreement

 

 

    	 	13	 

     

    

 

 

 

	 	
	 	 
	 	Co-Investment Income Fund, L.P. - US Tax-Exempt Series
	 	By: BlackRock Financial Management, Inc.
	 	Its investment manager
	 	 
	 	 
	 	By:	/s/ J. David Matter
	 	 	Name: J. David Matter
	 	 	Title: Managing Director

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Signature Page to First
Amendment to Security Agreement

 

 

    	 	14	 

     

    

 

 

	 	
	 	 
	 	Co-Investment Income Fund, L.P. - US Taxable Series
	 	By: BlackRock Financial Management, Inc.
	 	Its investment manager
	 	 
	 	 
	 	By:	/s/ J. David Matter
	 	 	Name: J. David Matter
	 	 	Title: Managing Director

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Signature Page to First
Amendment to Security Agreement

 

 

    	 	15	 

     

    

 

SCHEDULE A

 

TO FIRST AMENDMENT TO SECURITY AGREEMENT

 

	Holder	
        “Initial Notes”

        Principal Amount
	
        “Additional Notes”

        Principal Amount
	
        Percentage

        of Total Notes

	
        CWD Summit, LLC - acting for and on behalf of

        Candlewood Renewable Energy Series I
	$ 22,438,545	$ 4,669,728	39.3169%
	
        Flagler Master Fund SPC Ltd - acting for and on

        behalf of the class A segregated portfolio
	$ 7,001,507	$−	10.1548%
	
        Flagler Master Fund SPC Ltd - acting for and on

        behalf of the class B segregated portfolio
	$ 4,000,000	$−	5.8015%
	Candlewood Special Situations Master Fund II, L.P.	$−	$ 2,061,856	2.9904%
	CIF Income Partners (A), LLC	$ 9,962,010	$−	14.4486%
	Orange 2015 DisloCredit Fund, L.P.	$ 10,309,278	$ 5,154,639	22.4284%
	Sainsbury’s Credit Opportunities Fund, Ltd.	$ 1,288,660	$−	1.8690%
	Co-Investment Income Fund, L.P. - US Tax-Exempt Series	$−	$ 1,697,479	2.4620%
	Co-Investment Income Fund, L.P. - US Taxable Series	$−	$ 364,376	0.5285%
	 Total	$ 55,000,000	$ 13,948,078	100.0000%

 

 

 

 

 

    	 	16	 

     

    

 

SCHEDULE B

 

TO FIRST AMENDMENT TO SECURITY AGREEMENT

 

NOTICE INFORMATION FOR NEWLY SECURED PARTIES

 

Candlewood Special Situations Master Fund II, L.P.

 

c/o Candlewood Investment Group, LP

555 Theodore Fremd Avenue, Suite C-303

Rye, NY 10580

Email: compliance@candlewoodgroup.com

ATTN: Legal and Compliance

 

 

Co-Investment Income Fund, L.P. - US Tax-Exempt Series

 

BlackRock Alternative Advisors

40 East 52nd Street, 16th Floor

New York, NY 10022

Email: BAA-QBCo-InvestmentFundLP@blackrock.com

 

With a copy (which shall not constitute notice):

BlackRock, Inc. – Office of the General Counsel

40 East 52nd Street, 16th Floor

New York, NY 10022

ATTN: Michelle Galvez, David Maryles &Larry Gail

Email: legaltransactions@blackrock.com;

Larry.gail@blackrock.com

 

 

 

Co-Investment Income Fund, L.P. - US Taxable Series

 

BlackRock Alternative Advisors

40 East 52nd Street, 16th Floor

New York, NY 10022

Email: BAA-QBCo-InvestmentFundLP@blackrock.com

 

With a copy (which shall not constitute notice):

BlackRock, Inc. – Office of the General Counsel

40 East 52nd Street, 16th Floor

New York, NY 10022

ATTN: Michelle Galvez, David Maryles &Larry Gail

Email: legaltransactions@blackrock.com;

Larry.gail@blackrock.com

 

 

 

 

    	 	17

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00272-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00272-of-00352.parquet"}]]