NEITHER
THESE SECURITIES NOR THE SECURITIES FOR WHICH THESE SECURITIES ARE EXERCISABLE
HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE
SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES
ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN
AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE
SECURITIES LAWS.
PACIFIC
ETHANOL, INC.
WARRANT
| Warrant No.
W7-1 |
Dated: March 27,
2008
|
Pacific
Ethanol, Inc., a Delaware corporation (the “Company”), hereby certifies
that, for value received, LYLES UNITED, LLC or its registered assigns (the
“Holder”), is entitled
to purchase from the Company up to a total of 3,076,923 shares of common stock,
$0.001 par value per share (the “Common Stock”), of the Company
(each such share, a “Warrant
Share” and all such shares, the “Warrant Shares”) at an
exercise price equal to $7.00 per share (as adjusted from time to time as
provided in Section 8, the
“Exercise Price”),
subject to the terms and conditions contained herein. This Warrant (this “Warrant”) is issued in
connection with the purchase by Lyles United, LLC of shares of the Company’s
Series B Cumulative Convertible Preferred Stock (the “Series B Preferred Stock”)
pursuant to the terms and conditions of that certain Securities Purchase
Agreement dated March 18, 2008 between the Company and Lyles United, LLC (the
“Purchase
Agreement”). Capitalized terms not otherwise defined herein
shall have their respective meanings as set forth in the Purchase
Agreement.
1. Registration
of Warrant. The Company shall register this Warrant, upon
records to be maintained by the Company for that purpose (the “Warrant Register”), in the
name of the record Holder hereof from time to time. The Company may
deem and treat the registered Holder of this Warrant as the absolute owner
hereof for the purpose of any exercise hereof or any distribution to the Holder,
and for all other purposes, absent actual notice to the contrary.
2. Registration
of Transfers. The Company shall register the transfer of any
portion of this Warrant in the Warrant Register, upon surrender of this Warrant,
with the Form of Assignment attached hereto duly completed and signed, to the
Company at its address specified herein. Upon any such registration
or transfer, a new warrant to purchase Common Stock, in substantially the form
of this Warrant (any such new warrant, a “New Warrant”), evidencing the
portion of this Warrant so transferred shall be issued to the transferee and a
New Warrant evidencing the remaining portion of this Warrant not so transferred,
if any, shall be issued to the transferring Holder. The acceptance of
the New Warrant by the transferee thereof shall be deemed the acceptance by such
transferee of all of the rights and obligations of a holder of a
Warrant.
3. Exercise
and Duration of Warrants.
(a) This
Warrant shall be exercisable by the registered Holder from time to time during
the term commencing on the date that is six (6) months and one (1) day from the
date hereof and ending on the date that is ten (10) years from the date hereof
(the “Expiration Date”).
At 5:00 P.M., California time on the Expiration Date, the portion of this
Warrant not exercised prior thereto shall be and become void and of no
value.
(b) A
Holder may exercise this Warrant by delivering to the Company (i) an exercise
notice, in the form attached hereto (the “Exercise Notice”),
appropriately completed and duly signed, and (ii) payment of the Exercise
Price for the number of Warrant Shares as to which this Warrant is being
exercised, and the date such items are delivered to the Company (as determined
in accordance with the notice provisions hereof) is an “Exercise Date.” The
Holder shall not be required to deliver the original Warrant in order to effect
an exercise hereunder. Execution and delivery of the Exercise Notice
shall have the same effect as cancellation of the original Warrant and issuance
of a New Warrant evidencing the right to purchase the remaining number of
Warrant Shares.
4. Delivery
of Warrant Shares.
(a) Upon
exercise of this Warrant, the Company shall promptly (but in no event later than
five (5) Business Days after the Exercise Date) issue or cause to be issued and
cause to be delivered to or upon the written order of the Holder and in such
name or names as the Holder may designate, a certificate for the Warrant Shares
issuable upon such exercise. For purposes of this Warrant, “Business Day” means any day
other than Saturday, Sunday or other day on which commercial banks in the State
of California are authorized or required by law to remain closed. The
Holder, or any person so designated by the Holder to receive Warrant Shares,
shall be deemed to have become holder of record of such Warrant Shares as of the
Exercise Date. It is acknowledged and agreed that certificates
evidencing such Warrant Shares may bear a restrictive legend in substantially
the following form:
THESE
SECURITIES HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION
OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES
ACT”), OR ANY APPLICABLE STATE SECURITIES LAWS AND, ACCORDINGLY, MAY NOT BE
OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION
NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN
COMPLIANCE WITH APPLICABLE STATE SECURITIES LAWS OR BLUE SKY LAWS.
(b) This
Warrant is exercisable, either in its entirety or, from time to time, for a
portion of the number of Warrant Shares. Upon surrender of this
Warrant following one or more partial exercises, the Company shall issue or
cause to be issued, at its expense, a New Warrant evidencing the right to
purchase the remaining number of Warrant Shares.
5. Charges,
Taxes and Expenses. Issuance and delivery of certificates for
shares of Common Stock upon exercise of this Warrant shall be made without
charge to the Holder for any issue or transfer tax, transfer agent fee or other
incidental tax or expense in respect of the issuance of such certificates, all
of which taxes and expenses shall be paid by the Company; provided, however,
that the Company shall not be required to pay any tax which may be payable in
respect of any transfer involved in the registration of any certificates for
Warrant Shares or Warrants in a name other than that of the
Holder. The Holder shall be responsible for all other tax liability
that may arise as a result of holding or transferring this Warrant or receiving
Warrant Shares upon exercise hereof.
6. Replacement
of Warrant. If this Warrant is mutilated, lost, stolen or
destroyed, the Company shall issue or cause to be issued in exchange and
substitution for and upon cancellation hereof, or in lieu of and substitution
for this Warrant, a New Warrant, but only upon receipt of evidence reasonably
satisfactory to the Company of such loss, theft or destruction and customary and
reasonable bond or indemnity, if requested. Applicants for a New
Warrant under such circumstances shall also comply with such other reasonable
regulations and procedures and pay such other reasonable third-party costs as
the Company may prescribe.
7. Reservation
of Warrant Shares. The Company covenants that it will at all
times reserve and keep available out of the aggregate of its authorized but
unissued and otherwise unreserved Common Stock, solely for the purpose of
enabling it to issue Warrant Shares upon exercise of this Warrant as herein
provided, the number of Warrant Shares which are then issuable and deliverable
upon the exercise of this entire Warrant, free from preemptive rights or any
other contingent purchase rights of persons other than the Holder (after giving
effect to the adjustments and restrictions of Section 8, if
any). The Company covenants that all Warrant Shares so issuable and deliverable
shall, upon the due exercise of this Warrant, and upon issuance of such Warrant
Shares and the payment of the applicable Exercise Price in accordance with the
terms hereof, be duly and validly authorized, issued and fully paid and
nonassessable.
8. Certain
Adjustments. The Exercise Price and number of Warrant Shares
issuable upon exercise of this Warrant are subject to adjustment from time to
time as set forth in this Section 8.
(a) Stock
Dividends and Splits. If the Company, at any time while this
Warrant is outstanding, (i) pays a stock dividend on its Common Stock or
otherwise makes a distribution on any class of capital stock that is payable in
shares of Common Stock, (ii) subdivides outstanding shares of Common Stock into
a larger number of shares, or (iii) combines outstanding shares of Common Stock
into a smaller number of shares, then in each such case the Exercise Price shall
be multiplied by a fraction of which the numerator shall be the number of shares
of Common Stock outstanding immediately before such event and of which the
denominator shall be the number of shares of Common Stock outstanding
immediately after such event. Any adjustment made pursuant to clause
(i) of this subsection shall become effective immediately after the record date
for the determination of stockholders entitled to receive such dividend or
distribution, and any adjustment pursuant to clause (ii) or (iii) of this
subsection shall become effective immediately after the effective date of such
subdivision or combination.
(b) Number of
Warrant Shares. Simultaneously with any adjustment to the
Exercise Price pursuant to subsection (a) of this Section 8, the
number of Warrant Shares that may be purchased upon exercise of this Warrant
shall be adjusted proportionately, so that after such adjustment the aggregate
Exercise Price payable hereunder for the adjusted number of Warrant Shares shall
be the same as the aggregate Exercise Price in effect immediately prior to such
adjustment.
(c) Reclassification,
Reorganization and Consolidation. In case of any merger,
consolidation, share exchange, reclassification, reorganization, or change in
the capital stock of the Company (other than as a result of a subdivision,
combination, or stock dividend provided for in Section 8(a)
above) (each, a “Change of
Control”), then the Company shall make appropriate provisions so that the
Holder of this Warrant shall have the right at any time prior to the expiration
of this Warrant to purchase, at a total price equal to that payable upon the
exercise of this Warrant, the kind and amount of shares of stock and other
securities and property receivable in connection with such Change of Control by
a holder of the same number of Warrant Shares as were purchasable by the Holder
of this Warrant immediately prior to such Change of Control. In any
such case appropriate provisions shall be made with respect to the rights and
interest of the Holder of this Warrant so that the provisions hereof shall
thereafter be applicable with respect to any shares of stock or other securities
and property deliverable upon exercise hereof, and appropriate adjustments shall
be made to the purchase price per share payable hereunder, provided the
aggregate purchase price shall remain the same. The Company will use
commercially best efforts, upon the consummation of any such Change of Control,
to ensure that the successor entity, if any (if other than the Company),
resulting from such Change of Control agrees by written instrument, executed and
mailed or delivered to the registered Holder hereof at the last address of such
Holder appearing on the books of the Company, to assume the obligations of the
Company under this Warrant.
(d) Calculations. All
calculations under this Section 8 shall
be made to the nearest cent or the nearest 1/100th of a share, as
applicable. The number of shares of Common Stock outstanding at any
given time shall not include shares owned or held by or for the account of the
Company, and the disposition of any such shares shall be considered an issue or
sale of Common Stock.
(e) Notice of
Adjustment. When any adjustment is required to be made in the
number or kind of shares purchasable upon exercise of this Warrant, or in the
Exercise Price, the Company shall promptly notify the Holder of such event and
of the number of Warrant Shares or other securities or property thereafter
purchasable upon exercise of this Warrant.
9. Payment
of Exercise Price. The Holder shall pay the Exercise Price in
immediately available funds.
10. Fractional
Shares. The Company shall not be required to issue or cause to
be issued fractional Warrant Shares on the exercise of this
Warrant. If any fraction of a Warrant Share would, except for the
provisions of this Section 10, be
issuable upon exercise of this Warrant, the number of Warrant Shares to be
issued will be rounded up to the nearest whole share.
11. Notices. Any
and all notices or other communications or deliveries hereunder (including
without limitation any Exercise Notice) shall be in writing and shall be deemed
given and effective on the earliest of (i) the date of transmission, if such
notice or communication is delivered via facsimile at the facsimile number
specified below prior to 5:00 p.m. (California time) on a Business Day, (ii) the
next Business Day after the date of transmission, if such notice or
communication is delivered via facsimile at the facsimile number specified below
on a day that is not a Business Day or later than 5:00 p.m. (California time) on
any Business Day, (iii) the Business Day following the date of mailing, if sent
by nationally recognized overnight courier service, or (iv) upon actual receipt
by the party to whom such notice is required to be given. The address
and facsimile number for such notices or communications shall be as
follows:
|
|
If
to the Company:
|
Pacific
Ethanol, Inc.
|
|
|
400
Capitol Mall, Suite 2060
|
|
|
Sacramento,
California 95814
|
|
|
Attn: Chief
Financial Officer
|
|
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If
to Holder:
|
Lyles
United, LLC
|
|
|
Attn: Will
Lyles, Vice President
|
|
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With
a copy to:
|
Howard
Rice Nemerovski Canady Falk & Rabkin, A Professional
Corporation
|
|
|
San
Francisco, California 94111
|
or such
other address or facsimile number as either party may designate to the other
party hereto in accordance with the aforesaid procedure. Each party shall
provide notice to the other party of any change in address or facsimile
number.
12. Warrant
Agent. The Company shall serve as warrant agent under this
Warrant. Upon thirty (30) days’ prior notice to the Holder, the
Company may appoint a new warrant agent. Any corporation into which
the Company or any new warrant agent may be merged or any corporation resulting
from any consolidation to which the Company or any new warrant agent shall be a
party or any corporation to which the Company or any new warrant agent transfers
substantially all of its corporate trust or stockholders services business shall
be a successor warrant agent under this Warrant without any further
act. Any such successor warrant agent shall promptly cause notice of
its succession as warrant agent to be mailed (by first class mail, postage
prepaid) to the Holder at the Holder's last address as shown on the Warrant
Register.
13. Miscellaneous.
(a) Subject
to the restrictions on transfer set forth on the first page hereof, this Warrant
may be assigned by the Holder. This Warrant may not be assigned by
the Company except to a successor. This Warrant shall be binding on
and inure to the benefit of the parties hereto and their respective successors
and assigns. Subject to the preceding sentence, nothing in this
Warrant shall be construed to give to any person other than the Company and the
Holder any legal or equitable right, remedy or cause of action under this
Warrant. This Warrant may be amended only in writing signed by the
Company and the Holder and their successors and assigns.
(b) The
Company will not, by amendment of its governing documents or through any
reorganization, transfer of assets, consolidation, merger, 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 Warrant, but will at all
times in good faith assist in the carrying out of all such terms and in the
taking of all such action as may be necessary or appropriate in order to protect
the rights of the Holder against impairment.
(c) Governing Law; Venue; Waiver
Of Jury Trial. ALL QUESTIONS CONCERNING THE CONSTRUCTION,
VALIDITY, ENFORCEMENT AND INTERPRETATION OF THIS WARRANT SHALL BE GOVERNED BY
AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
CALIFORNIA. EACH PARTY HEREBY IRREVOCABLY SUBMITS TO THE EXCLUSIVE
JURISDICTION OF THE STATE AND FEDERAL COURTS SITTING IN THE COUNTY OF FRESNO,
CALIFORNIA, FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION
HEREWITH OR WITH ANY TRANSACTION CONTEMPLATED HEREBY OR DISCUSSED HEREIN
(INCLUDING WITH RESPECT TO THE ENFORCEMENT OF ANY OF THE TRANSACTION DOCUMENTS),
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
IMPROPER. EACH PARTY HEREBY IRREVOCABLY WAIVES PERSONAL SERVICE OF
PROCESS AND CONSENTS TO PROCESS BEING SERVED IN ANY SUCH SUIT, ACTION OR
PROCEEDING BY MAILING A COPY THEREOF VIA REGISTERED OR CERTIFIED MAIL OR
OVERNIGHT DELIVERY (WITH EVIDENCE OF DELIVERY) TO SUCH PARTY AT THE ADDRESS IN
EFFECT FOR NOTICES TO IT UNDER THIS AGREEMENT AND AGREES THAT SUCH SERVICE SHALL
CONSTITUTE GOOD AND SUFFICIENT SERVICE OF PROCESS AND NOTICE THEREOF. NOTHING
CONTAINED HEREIN SHALL BE DEEMED TO LIMIT IN ANY WAY ANY RIGHT TO SERVE PROCESS
IN ANY MANNER PERMITTED BY LAW. THE COMPANY HEREBY WAIVES ALL RIGHTS
TO A TRIAL BY JURY.
(d) The
headings herein are for convenience only, do not constitute a part of this
Warrant and shall not be deemed to limit or affect any of the provisions
hereof.
(e) In
case any one or more of the provisions of this Warrant shall be invalid or
unenforceable in any respect, the validity and enforceability of the remaining
terms and provisions of this Warrant shall not in any way be affected or
impaired thereby and the parties will attempt in good faith to agree upon a
valid and enforceable provision which shall be a commercially reasonable
substitute therefor, and upon so agreeing, shall incorporate such substitute
provision in this Warrant.
IN
WITNESS WHEREOF, the Company has caused this Warrant to be duly executed by its
authorized officer as of the date first indicated above.
FORM OF
EXERCISE NOTICE
(To be
executed by the Holder to exercise the right to purchase shares of Common Stock
under the foregoing Warrant)
To: PACIFIC
ETHANOL, INC.
The
undersigned is the Holder of Warrant No. W7-1 (the “Warrant”) issued by Pacific
Ethanol, Inc., a Delaware corporation (the “Company”). Capitalized
terms used herein and not otherwise defined have the respective meanings set
forth in the Warrant.
|
1.
|
The
Warrant is currently exercisable to purchase a total of __________ Warrant
Shares.
|
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2.
|
The
undersigned Holder hereby exercises its right to purchase __________
Warrant Shares pursuant to the
Warrant.
|
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3.
|
The
Holder shall pay the sum of $__________ to the Company in accordance with
the terms of the Warrant.
|
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4.
|
Pursuant
to this exercise, the Company shall deliver to the holder __________
Warrant Shares in accordance with the terms of the
Warrant.
|
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5.
|
Following
this exercise, the Warrant shall be exercisable to purchase a total of
__________ Warrant Shares.
|
|
Dated:
_____________________
|
Name
of Holder:
|
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|
(Print)___________________________
|
|
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By:______________________________
|
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Name:
___________________________
|
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Title:
____________________________
|
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(Signature
must conform in all respects to name of holder as specified on the face of
the Warrant)
|
FORM OF
ASSIGNMENT
[To be
completed and signed only upon transfer of Warrant]
FOR VALUE
RECEIVED, the undersigned hereby sells, assigns and transfers unto __________
the right represented by the within Warrant to purchase __________ shares of
Common Stock of Pacific Ethanol, Inc. to which the within Warrant relates and
appoints __________ attorney to transfer said right on the books of Pacific
Ethanol, Inc. with full power of substitution in the premises.
|
Dated:
___________, ____
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___________________________________
By:_________________________________
(Signature
must conform in all respects to name
of holder as
specified on the face of the Warrant)
Print:________________________________
Address
of transferee:
____________________________________
____________________________________
Fax: (___)
____________________________
Attn:________________________________
In
the presence of:
_____________________________________
Print:_________________________________
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