EXHIBIT
10.2
THIS
WARRANT AND THE UNDERLYING SECURITIES HAVE NOT BEEN REGISTERED OR QUALIFIED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR APPLICABLE STATE
SECURITIES LAWS. THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED
IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO SUCH SECURITIES
UNDER THE ACT OR SUCH LAWS OR, IF REASONABLY REQUESTED BY THE COMPANY, AN
OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION
OR QUALIFICATION IS NOT REQUIRED.
PACIFIC
ETHANOL, INC.
WARRANT
TO PURCHASE COMMON STOCK
October
17, 2006
Void
After October 17, 2007
This
Certifies That,
for
value received, Eagle
Energy, LLC,
or
registered assigns (the “Holder”),
is
entitled to subscribe for and purchase at the Exercise Price (defined below)
from Pacific
Ethanol, Inc.,
a
Delaware corporation (the “Company”),
with
its principal office at 5711 N. West Avenue, Fresno, CA 93711, up to 693,963
shares of Common Stock of the Company (the “Common
Stock”).
1. Definitions.
As
used
herein, the following terms shall have the following respective
meanings:
(a) “Exercise
Period”
shall
mean the period commencing with the date hereof and ending at 5:00 PM, Pacific
Daylight Time, on October 17, 2007, unless sooner terminated as provided
below.
(b) “Exercise
Price”
shall
mean $14.41 per share, subject to adjustment pursuant to Section 5
below.
(c) “Exercise
Shares”
shall
mean the shares of the Company’s Common Stock issuable upon exercise of this
Warrant, subject to adjustment pursuant to the terms herein, including but
not
limited to adjustment pursuant to Section 5 below.
2. Exercise
of Warrant. The
rights represented by this Warrant may be exercised in whole or in part at
any
time during the Exercise Period, by delivery of the following to the Company
at
its address set forth above (or at such other address as it may designate by
notice in writing to the Holder):
(a) An
executed Notice of Exercise in the form attached hereto; and
(b) Payment
of the Exercise Price in immediately available funds.
The
Holder shall not be required to deliver the original Warrant in order to effect
an exercise hereunder. Execution and delivery of the Notice of Exercise by
the
Holder shall have the same effect as cancellation of the original Warrant and
issuance of a new Warrant evidencing the right to purchase the number of
Exercise Shares remaining to be purchased hereunder.
Upon
the
exercise of the rights represented by this Warrant, the
Company shall promptly (but in no event later than three trading days if a
registration statement is in effect covering the resale of the Exercise Shares)
issue and deliver, or cause to
be
issued and delivered,
a
certificate or certificates for the Exercise Shares so purchased, registered
in
the name of the Holder or, if the Holder complies with the requirements of
Section 10 and so designates in the Notice of Exercise, another name or
names.
The
person in whose name any certificate or certificates for Exercise Shares are
to
be issued upon exercise of this Warrant shall be deemed to have become the
holder of record of such shares on the date on which the Notice of Exercise
and
payment of the Exercise Price was made, irrespective of the date of delivery
of
such certificate or certificates, except that, if the date of such Notice and
payment is a date when the stock transfer books of the Company are closed,
such
person shall be deemed to have become the holder of such shares at the close
of
business on the next succeeding date on which the stock transfer books are
open.
2.1 Net
Exercise.
Notwithstanding any provisions herein to the contrary, if the fair market value
of one share of the Company’s Common Stock is greater than the Exercise Price
(at the date of calculation as set forth below), in lieu of exercising this
Warrant in whole or in part by payment of immediately available funds, the
Holder may elect to receive shares equal to the value (as determined below)
of
this Warrant (or the portion thereof being canceled) by delivery of the properly
endorsed Notice of Exercise in which event the Company shall issue to the Holder
a number of shares of Common Stock computed using the following
formula:
X
=
Y
(A-B)
A
|
|
Where
X = |
the
number of shares of Common Stock to be issued to the
Holder
|
| |
Y
=
|
the
number of shares of Common Stock purchasable under the Warrant or,
if only
a portion of the Warrant is being exercised, the portion of the Warrant
being canceled (at the date of such
calculation)
|
| |
A
=
|
the
fair market value of one share of the Company’s Common Stock (at the date
of such calculation)
|
| |
B
=
|
Exercise
Price (as adjusted to the date of such
calculation)
|
For
purposes of the above calculation, the fair market value of one share of Common
Stock shall be: If the Common Stock is traded on a national securities exchange
or admitted to unlisted trading privileges on such an exchange, the fair market
value as of a specified day shall be the last reported sale price of Common
Stock on such exchange on such date or if no such sale is made on such day,
the
mean of the closing bid and asked prices for such day on such exchange. If
the
Common Stock is not so listed or admitted to unlisted trading privileges, the
fair market value as of a specified day shall be the mean of the last bid and
asked prices reported on such date by the National Quotation Bureau
Incorporated. If the Common Stock is not so listed or admitted to unlisted
trading privileges and bid and asked prices are not reported, the fair market
value as of a specified day shall be determined in good faith by the Board
of
Directors of the Company.
3. Covenants
of the Company.
3.1 Covenants
as to Exercise Shares.
The
Company covenants and agrees that all Exercise Shares that may be issued upon
the exercise of the rights represented by this Warrant will, upon issuance,
be
validly issued and outstanding, fully paid and nonassessable, and free from
all
taxes, liens and charges with respect to the issuance thereof. The Company
further covenants and agrees that the Company will, at all times during the
Exercise Period, have authorized and reserved, free from preemptive rights,
a
sufficient number of shares of its Common Stock to provide for the exercise
of
the rights represented by this Warrant. Without limiting the liability of the
Company for breach of the foregoing covenants, if at any time during the
Exercise Period the number of authorized but unissued shares of Common Stock
shall not be sufficient to permit exercise of this Warrant, the Company will
take such corporate action as may be necessary to increase its authorized but
unissued shares of Common Stock to such number of shares as shall be sufficient
for such purposes.
3.2 Notice
of Corporate Events.
If the
Company (i) declares a dividend or any other distribution of cash, securities
or
other property in respect of its Common Stock, including without limitation
any
granting of rights or warrants to subscribe for or purchase any capital stock
of
the Company or any subsidiary, (ii) authorizes or approves, enters into any
agreement contemplating or solicits stockholder approval for any Organic
Transaction or (iii) authorizes the voluntary dissolution, liquidation or
winding up of the affairs of the Company, then the Company shall deliver to
the
Holder a notice describing the material terms and conditions of such
transaction, at least 10 calendar days prior to the applicable record or
effective date on which a person would need to hold Common Stock in order to
participate in or vote with respect to such transaction, and the Company will
take all steps reasonably necessary in order to insure that the Holder is given
the practical opportunity to exercise this Warrant prior to such time so as
to
participate in or vote with respect to such transaction; provided, however,
that
the failure to deliver such notice or any defect therein shall not affect the
validity of the corporate action required to be described in such
notice.
4. Adjustment
of Exercise Price; Effect of Organic Changes
4.1 Adjustment
of Exercise Price. In
the
event of changes in the outstanding Common Stock of the Company by reason of
stock dividends, splits, recapitalizations, reclassifications, combinations
or
exchanges of shares, separations, reorganizations, liquidations, or the like,
the number and class of shares available under the Warrant in the aggregate
and
the Exercise Price shall be correspondingly adjusted to give the Holder of
the
Warrant, on exercise for the same aggregate Exercise Price, the total number,
class, and kind of shares as the Holder would have owned had the Warrant been
exercised prior to the event and had the Holder continued to hold such shares
until after the event requiring adjustment. The form of this Warrant need not
be
changed because of any adjustment in the number of Exercise Shares subject
to
this Warrant.
4.2 Reorganization,
Reclassification, Consolidation, Merger or Sale.
If any
recapitalization, reclassification or reorganization of the capital stock of
the
Company, or any consolidation or merger of the Company with another corporation,
or the sale of all or substantially all of its assets or other transaction
shall
be effected in such a way that holders of the Company’s Common Stock shall be
entitled to receive stock, securities, or other assets or property (an
“Organic
Change”),
then,
as a condition of such Organic Change, lawful and adequate provisions shall
be
made by the Company whereby the Holder hereof shall thereafter have the right
to
purchase and receive (in lieu of the shares of the Common Stock of the
Company immediately theretofore purchasable and receivable upon the exercise
of
the rights represented hereby, which rights to purchase and receive such shares
of Common Stock shall have terminated upon the occurrence of an Organic Change
and been replaced by the rights described herein) such shares of stock,
securities or other assets or property as may be issued or payable with respect
to or in exchange for a number of outstanding shares of such Common Stock equal
to the number of shares of such stock immediately theretofore purchasable and
receivable upon the exercise of the rights represented hereby. In the event
of
any Organic Change, appropriate provision shall be made by the Company with
respect to the rights and interests of the Holder of this Warrant to the end
that the provisions hereof (including, without limitation, provisions for
adjustments of the Exercise Price and of the number of shares purchasable and
receivable upon the exercise of this Warrant) shall thereafter be applicable,
in
relation to any shares of stock, securities or assets thereafter deliverable
upon the exercise hereof. The Company will not effect any such consolidation,
merger or sale unless, prior to the consummation thereof, the successor
corporation (if other than the Company) resulting from such consolidation or
the
corporation purchasing such assets shall assume by written instrument
reasonably satisfactory in form and substance to the Holder of this Warrant,
executed and mailed or delivered to the registered Holder hereof at the last
address of such Holder appearing on the books of the Company, the obligation
to
deliver to such Holder such shares of stock, securities or assets as, in
accordance with the foregoing provisions, such Holder may be entitled to
purchase.
4.3 Notice
of Adjustments.
Upon
the occurrence of each adjustment pursuant to this Section 4, the Company at
its
expense will promptly compute such adjustment in accordance with the terms
of
this Warrant and prepare a certificate setting forth such adjustment, including
a statement of the adjusted Exercise Price and adjusted number or type of
Warrant Shares or other securities issuable upon exercise of this Warrant (as
applicable), describing the transactions giving rise to such adjustments and
showing in detail the facts upon which such adjustment is based. Upon written
request, the Company will promptly deliver a copy of each such certificate
to
the Holder.
5. Fractional
Shares. No
fractional shares shall be issued upon the exercise of this Warrant as a
consequence of any adjustment pursuant hereto. All Exercise Shares (including
fractions) issuable upon exercise of this Warrant may be aggregated for purposes
of determining whether the exercise would result in the issuance of any
fractional share. If, after aggregation, the exercise would result in the
issuance of a fractional share, the Company shall, in lieu of issuance of any
fractional share, pay the Holder otherwise entitled to such fraction a sum
in
cash equal to the product resulting from multiplying the then current fair
market value of an Exercise Share by such fraction.
6. Amendment
and Waiver.
This
Warrant may be amended, and the obligations of the Company and the rights of
the
Holder under the Warrant may be waived, with the written consent of the Company
and the Holder.
7. Limitation
on Exercise.
Notwithstanding anything to the contrary contained herein, the number of shares
of Common Stock that may be acquired by the Holder upon any exercise of this
Warrant (or otherwise in respect hereof) shall be limited to the extent
necessary to insure that, following such exercise (or other issuance), the
total
number of shares of Common Stock then beneficially owned by such Holder and
its
Affiliates and any other Persons whose beneficial ownership of Common Stock
would be aggregated with the Holder’s for purposes of Section 13(d) of the
Securities Exchange Act of 1934, as amended (the “Exchange
Act”),
does
not exceed 4.999% (the “Maximum
Percentage”)
of the
total number of issued and outstanding shares of Common Stock (including for
such purpose the shares of Common Stock issuable upon such exercise). For such
purposes, beneficial ownership shall be determined in accordance with
Section 13(d) of the Exchange Act and the rules and regulations promulgated
thereunder. Each delivery of an Exercise Notice hereunder will constitute a
representation by the Holder that it has evaluated the limitation set forth
in
this paragraph and determined that issuance of the full number of Warrant Shares
requested in such Exercise Notice is permitted under this paragraph. The
Company’s obligation to issue shares of Common Stock in excess of the limitation
referred to in this Section shall be suspended (and shall not terminate or
expire notwithstanding any contrary provisions hereof) until such time, if
any,
as such shares of Common Stock may be issued in compliance with such limitation,
but in no event later than the end of the Exercise Period. By written notice
to
the Company, the Holder may waive the provisions of this Section of increase
or
decrease the Maximum Percentage to any other percentage specified in such
notice, but (i) any such waiver or increase will not be effective until the
61st
day
after such notice is delivered to the Company, and (ii) any such waiver to
increase or decrease will apply only to the Holder and not to any other holder
of warrants to purchase shares of the Company’s Common Stock.
8. No
Stockholder Rights. This
Warrant in and of itself shall not entitle the Holder to any voting rights
or
other rights as a stockholder of the Company.
9. Transfer
of Warrant. Subject
to applicable laws and the restrictions on transfer set forth on the first
page
of this Warrant and compliance with this Section 9, this Warrant and all rights
hereunder may be transferred by the Holder, in person or by duly authorized
attorney, upon delivery of this Warrant and the form of assignment attached
hereto to a transferee designated by Holder (the “Transferee”).
It
shall be condition of such transfer and the registration of the Transferee
as
Holder hereunder that the Transferee shall sign an investment letter, which
shall include the following representations and undertakings by the Transferee
and shall otherwise be in form and substance reasonably satisfactory to the
Company:
9.1 Securities
Are Not Registered.
(a) The
Transferee understands that the Warrant and the Exercise Shares are “restricted
securities” and that transfer or sale to the Transferee has not been registered
under the Securities Act of 1933, as amended (the “Act”).
(b) The
Transferee is acquiring the Warrant for its own account for investment only,
has
no present intention of distributing the Warrant or the Exercise Shares and
has
no arrangement or understanding with any other person regarding the distribution
of the Warrant or the Exercise Shares (this representation and warranty not
limiting the Transferee’s right to sell the Exercise Shares pursuant to an
effective registration statement under the Act or otherwise in accordance with
an exemption from registration under the Act).
(c) The
Transferee recognizes that the Warrant and the Exercise Shares cannot be resold
unless they are subsequently registered under the Act or an exemption from
such
registration is available.
(d) The
Transferee is an “accredited investor,” as defined in Rule 501(a) under the
Act.
9.2 Disposition
of Warrant and Exercise Shares.
(a) The
Transferee further agrees not to make any disposition of all or any part of
the
Warrant or Exercise Shares unless and until:
(i) There
is
then in effect a registration statement under the Act covering such proposed
disposition, such disposition is made in accordance with such registration
statement and the Transferee shall have provided to the Company reasonable
evidence of the manner of disposition and compliance with any applicable
prospectus delivery requirements; or
(ii) The
Transferee shall have notified the Company of the proposed disposition and
shall
have furnished the Company with a statement of the circumstances surrounding
the
proposed disposition, and if reasonably requested by the Company, the Transferee
shall have furnished the Company with an opinion of counsel, reasonably
satisfactory to the Company, for the Transferee to the effect that such
disposition will not require registration of such Warrant or Exercise Shares
under the Act or applicable state securities laws.
(b) The
Transferee understands and agrees that all certificates evidencing the Exercise
Shares may bear the following legend:
THESE
SECURITIES HAVE NOT BEEN REGISTERED OR QUALIFIED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE “ACT”) OR APPLICABLE STATE SECURITIES LAWS. THEY MAY NOT
BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT OR LAWS OR, IF REASONABLY
REQUESTED BY THE COMPANY, AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO
THE
COMPANY THAT SUCH REGISTRATION OR QUALIFICATION IS NOT
REQUIRED.
10. Issuance
of Exercise Shares in Name Other Than Holder. The
Holder may designate that the Exercise Shares be issued in a name or names
other
than the Holder so long as the Holder shall have transferred the right to
receive such Exercise Shares in a manner consistent with the requirements of
Section 9.2(a).
11. Lost,
Stolen, Mutilated or Destroyed Warrant. If
this
Warrant is lost, stolen, mutilated or destroyed, the Company may, on such terms
as to indemnity or otherwise as it may reasonably impose (which shall, in the
case of a mutilated Warrant, include the surrender thereof), issue a new Warrant
of like denomination and tenor as the Warrant so lost, stolen, mutilated or
destroyed. Any such new Warrant shall constitute an original contractual
obligation of the Company, whether or not the allegedly lost, stolen, mutilated
or destroyed Warrant shall be at any time enforceable by anyone.
12. Notices,
etc. All
notices required or permitted hereunder shall be in writing and shall be deemed
effectively given: (a) upon personal delivery to the party to be notified,
(b) when sent by confirmed facsimile if sent during normal business hours
of the recipient, if not, then on the next business day, (c) three (3)
business days after having been sent by registered or certified mail, return
receipt requested, postage prepaid, or (d) one (1) business day after
deposit with a nationally recognized overnight courier, specifying next day
delivery, with written verification of receipt. All communications shall be
sent
to the Company at the address listed on the first page of this Warrant and
to
Holder at the address set forth on the signature page hereof, or at such other
address as the Company or Holder may designate by ten (10) days advance written
notice to the other parties hereto.
13. Acceptance.
Receipt
of this Warrant by the Holder shall constitute acceptance of and agreement
to
all of the terms and conditions contained herein.
14. Governing
Law. This
Warrant and all rights, obligations and liabilities hereunder shall be governed
by the laws of the State of California.
In
Witness Whereof,
the
Company has caused this Warrant to be executed by its duly
authorized.
Pacific
Ethanol, Inc.
By:
/s/
Neil M.
Koehler
Name:
Neil
M.
Koehler
Title:
CEO
Accepted
and Agreed:
Eagle
Energy, LLC
By:
/s/
David M.
Flick
Name:
David
M.
Flick
Title:
President
Address
for Notices:
David
Fick, President
Eagle
Energy, LLC
2113
Pebble Beach Lane
Brandon,
SD 57005
Phone:
605-201-1087
Fax:
605-582-8850
NOTICE
OF EXERCISE
TO:
Pacific Ethanol, Inc.
(1)
¨ The
undersigned (the “Holder”)
hereby
elects to purchase ________ shares of Common Stock of Pacific Ethanol, Inc.
(the
“Company”)
pursuant to the terms of the Warrant dated October __, 2006 (the “Warrant”),
and
tenders herewith payment of the exercise price in full, together with all
applicable transfer taxes, if any, due as a consequence of the issuance of
shares of Common Stock to a person other than the Holder.
¨ The
Holder hereby elects to purchase ________ shares of Common Stock of Pacific
Ethanol, Inc. (the “Company”)
pursuant to the terms of the net exercise provisions set forth in
Section 2.1 of the Warrant, and shall tender payment of all applicable
transfer taxes, if any, due as a consequence of the issuance of the shares
of
Common Stock to a person other than the Holder.
(2)
Please
issue a certificate or certificates representing said shares of Common Stock
in
the name of the undersigned or, subject to compliance by the Holder with Section
10 of the Warrant, in such other name as is specified below:
________________________
(Name)
________________________
________________________
(Address)
(3) The
Holder represents that (i) the Holder understands that the issuance of the
shares of Common Stock upon exercise of this Warrant has not been registered
under the Securities Act of 1933, as amended (the “Securities
Act”);
(ii)
the undersigned is an “accredited investor” within the definition set forth in
Rule 501(a) of the Securities Act, and (iii) the Holder understands that the
Holder must comply with the requirements of Section 9.2 of the Warrant with
respect to any transfer of shares of Common Stock issued upon exercise of the
Warrant.
|
____________________________________________
(Date)
|
______________________________________________________________
(Signature)
______________________________________________________________
(Print
name)
|
ASSIGNMENT
FORM
(To
assign the foregoing Warrant, execute this form and supply the required
information. Do not use this form to purchase shares.)
For
Value Received,
the
foregoing Warrant and all rights evidenced thereby are hereby assigned
to
Name:_______________________________________________________________________________________________________(Please
Print)
Address:_____________________________________________________________________________________________________
(Please
Print)
Dated:
__________, ____
Holder’s
Signature:________________________________________
Holder’s
Address:_________________________________________
NOTE:
The
signature to this Assignment Form must correspond with the name as it appears
on
the face of the Warrant, without alteration or enlargement or any change
whatever. Officers of corporations and those acting in a fiduciary or other
representative capacity should file proper evidence of authority to assign
the
foregoing Warrant.