PACIFIC ETHANOL, INC.
Warrant To Purchase Common Stock
Warrant
No.:
Number
of Shares of Common Stock: ___________
Date
of Issuance: May [___], 2008 (" Issuance Date
")
Pacific
Ethanol, Inc., a Delaware corporation (the " Company "), hereby
certifies that, for good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged,
[___________], the registered holder hereof or its permitted
assigns (the " Holder "), is
entitled, subject to the terms set forth below, to purchase
from the Company, at the Exercise Price (as defined below)
then in effect, upon surrender of this Warrant to Purchase
Common Stock (including any Warrants to Purchase Common Stock
issued in exchange, transfer or replacement hereof, the "
Warrant "), at any
time or times on or after the date six (6) months after the
date hereof (the “ Exercisability
Date”) , but not after 11:59 p.m., New York time,
on the Expiration Date (as defined below), [_________]
([_______]) fully paid nonassessable shares of Common Stock
(as defined below) (the "
Warrant
Shares "). Except as otherwise defined
herein, capitalized terms in this Warrant shall have the
meanings set forth in Section
15 . This Warrant is the Warrant to purchase
Common Stock (this " Warrant ") issued
pursuant to Section 2 of that certain Subscription Agreement
(the “ Subscription
Agreemen t”), dated as of May 22, 2008 (the "
Subscription
Date "), by and among the Company and the Holder (the "
Subscription
Agreement ") pursuant to the Company’s
Registration Statements on Form S-3 (File number 333-143617 )
(the “ Registration
Statement ”).
1.
EXERCISE OF WARRANT.
(a)
Mechanics of Exercise . Subject to the terms and
conditions hereof, this Warrant may be exercised by the Holder on
any day on or after the Exercisability Date, in whole or in part,
by delivery of a written notice, in the form attached hereto as
Exhibit
A (the " Exercise Notice "), of
the Holder's election to exercise this Warrant. The
Holder shall not be required to deliver the original Warrant in
order to effect an exercise hereunder, but shall deliver the
original Warrant within five (5) days
thereafter. Execution and delivery of the Exercise
Notice with respect to less than all of the Warrant Shares 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. On or before the
second (2nd) Business Day following the date on which the Company
has received the Exercise Notice, the Company shall transmit by
facsimile an acknowledgment of confirmation of receipt of the
Exercise Notice to the Holder and American Stock Transfer &
Trust Company, the Company's transfer Agent (" Transfer Agent
"). On or before the third (3 rd
) Business Day following the date on which the Company has received
the Exercise Notice (the " Share Delivery Date "),
the Company shall (X) provided that the Transfer Agent is
participating in The Depository Trust Company (" DTC ") Fast Automated
Securities Transfer Program, upon the request of the Holder, credit
such aggregate number of Warrant Shares to which the Holder is
entitled pursuant to such exercise to the Holder's or its
designee's
balance
account with DTC through its Deposit Withdrawal Agent Commission
system, or (Y) if the Transfer Agent is not participating in the
DTC Fast Automated Securities Transfer Program, issue and dispatch
by overnight courier to the address as specified in the Exercise
Notice, a certificate, registered in the Company's share register
in the name of the Holder or its designee, for the number of shares
of Common Stock to which the Holder is entitled pursuant to such
exercise. Upon delivery of the Exercise Notice, the
Holder shall be deemed for all corporate purposes to have become
the holder of record of the Warrant Shares with respect to which
this Warrant has been exercised, irrespective of the date such
Warrant Shares are credited to the Holder's DTC account or the date
of delivery of the certificates evidencing such Warrant Shares, as
the case may be. If this Warrant is submitted in
connection with any exercise pursuant to this Section 1(a)
and the number of Warrant Shares represented by this Warrant
submitted for exercise is greater than the number of Warrant Shares
being acquired upon an exercise, then the Company shall as soon as
practicable and in no event later than three (3) Business Days
after any exercise and at its own expense, issue a new Warrant (in
accordance with Section 7(d) )
representing the right to purchase the number of Warrant Shares
purchasable immediately prior to such exercise under this Warrant,
less the number of Warrant Shares with respect to which this
Warrant is exercised. No fractional shares of Common
Stock are to be issued upon the exercise of this Warrant, but
rather the number of shares of Common Stock to be issued shall be
rounded down to the nearest whole number. The Company
shall pay any and all taxes which may be payable with respect to
the issuance and delivery of Warrant Shares upon exercise of this
Warrant.
(b)
Exercise Price . For purposes of this Warrant, "
Exercise
Price " means $7.10, subject to adjustment as provided
herein.
(c)
Company's Failure to Timely Deliver Securities
. If the Company shall fail for any reason or for no
reason to issue to the Holder within three (3) Business Days of
receipt of the Exercise Notice in compliance with the terms of this
Section
1 , a certificate for the number of shares of Common Stock
to which the Holder is entitled and register such shares of Common
Stock on the Company's share register or to credit the Holder's
balance account with DTC for such number of shares of Common Stock
to which the Holder is entitled upon the Holder's exercise of this
Warrant, and if on or after such Trading Day the Holder purchases
(in an open market transaction or otherwise) shares of Common Stock
to deliver in satisfaction of a sale by the Holder of shares of
Common Stock issuable upon such exercise that the Holder
anticipated receiving from the Company (a "Buy-In" ), then the
Company shall, within three (3) Business Days after the Holder's
request and in the Holder's discretion, either (i) pay cash to the
Holder in an amount equal to the Holder's total purchase price
(including brokerage commissions, if any) for the shares of Common
Stock so purchased (the "Buy-In Price" ), at
which point the Company's obligation to deliver such certificate
(and to issue such Warrant Shares) shall terminate, or (ii)
promptly honor its obligation to deliver to the Holder a
certificate or certificates representing such Warrant Shares and
pay cash to the Holder in an amount equal to the excess (if any) of
the Buy-In Price over the product of (A) such number of shares of
Common Stock, times (B) the Closing Bid Price on the date of
exercise.
(d)
Payment of Exercise Price . The Holder shall pay
the Exercise Price in immediately available funds; provided, however ,
that (i) upon notice by the Company to the Holder, subject to the
sole discretion of the Company, the Holder may satisfy its
obligation to pay the Exercise Price through a “cashless
exercise”, or (ii) if at any time the on or after the
Exercisability Date the Registration Statement covering the resale
of the Warrant Shares is not effective on such exercise date, the
Holder may satisfy its obligation to pay the Exercise Price through
a “cashless exercise,” in which event the Company shall
issue to the Holder the number of Warrant Shares determined as
follows:
| |
X
= Y [(A-B)/A]
|
|
where:
|
|
| |
X
= the number of Warrant Shares to be issued to the
Holder.
|
| |
|
| |
Y
= the number of Warrant Shares with respect to which this
Warrant is being exercised.
|
| |
|
| |
A
= the average of the Closing Prices for the five Trading Days
immediately prior to (but not including) the Exercise
Date.
|
| |
|
| |
B
= the Exercise Price.
|
(e)
Rule
144 . For purposes of Rule 144(d) promulgated
under the Securities Act, as in effect on the date hereof, it is
intended that the Warrant Shares issued in a Cashless Exercise
shall be deemed to have been acquired by the Holder, and the
holding period for the Warrant Shares shall be deemed to have
commenced, on the date this Warrant was originally issued pursuant
to the Subscription Agreement.
(f)
Disputes . In the case of a dispute as to the
determination of the Exercise Price or the arithmetic calculation
of the Warrant Shares, the Company shall promptly issue to the
Holder the number of Warrant Shares that are not
disputed.
(g)
Beneficial
Ownership . The Holder shall not have the right
to exercise this Warrant, to the extent that after giving effect to
such exercise, such Person (together with such Person's affiliates)
would beneficially own in excess of 9.99% (the " Maximum Percentage ")
of the shares of Common Stock outstanding immediately after giving
effect to such exercise. The Company shall be entitled
to rely on Holder’s exercise notice as an indication that
Holder will not, pursuant to such exercise, exceed the Maximum
Percentage. For purposes of the foregoing sentence, the
aggregate number of shares of Common Stock beneficially owned by
such Person and its affiliates shall include the number of shares
of Common Stock issuable upon exercise of this Warrant with respect
to which the determination of such sentence is being made, but
shall exclude shares of Common Stock which would be issuable upon
(i) exercise of the remaining, unexercised portion of this Warrant
beneficially owned by such Person and its affiliates and (ii)
exercise or conversion of the unexercised or unconverted portion of
any other securities of the Company beneficially owned by such
Person and its affiliates (including, without limitation, any
convertible notes or convertible preferred stock or warrants)
subject to a limitation on conversion or exercise analogous to the
limitation contained herein.. Except as set forth in the
preceding sentence, for purposes of this paragraph, beneficial
ownership shall be calculated in accordance
with
Section 13(d) of the Securities Exchange Act of 1934, as
amended. For purposes of this Warrant, in determining
the number of outstanding shares of Common Stock, the Holder may
rely on the number of outstanding shares of Common Stock as
reflected in (1) the Company's most recent Form 10-K, Form 10-Q,
Current Report on Form 8-K or other public filing with the
Securities and Exchange Commission, as the case may be, (2) a more
recent public announcement by the Company or (3) any other notice
by the Company or the Transfer Agent setting forth the number of
shares of Common Stock outstanding. For any reason at
any time, upon the written or oral request of the Holder, the
Company shall within two (2) Business Days confirm orally and in
writing to the Holder the number of shares of Common Stock then
outstanding. In any case, the number of outstanding
shares of Common Stock shall be determined after giving effect to
the conversion or exercise of securities of the Company, including
this Warrant, by the Holder and its affiliates since the date as of
which such number of outstanding shares of Common Stock was
reported. By written notice to the Company, the Holder
may from time to time increase or decrease the Maximum Percentage
to any other percentage not in excess of 9.99% specified in such
notice; provided that (i) any such increase will not be effective
until the sixty-first (61 st
) day after such notice is delivered to the Company, and (ii) any
such increase or decrease will apply only to the
Holder. The provisions of this paragraph shall be
construed and implemented in a manner otherwise than in strict
conformity with the terms of this Section 1(h) to correct this
paragraph (or any portion hereof) which may be defective or
inconsistent with the intended beneficial ownership limitation
herein contained or to make changes or supplements necessary or
desirable to properly give effect to such limitation.
2.
ADJUSTMENT OF EXERCISE PRICE AND NUMBER OF WARRANT SHARES
. The Exercise Price and the number of Warrant Shares
shall be adjusted from time to time as follows:
(a)
Adjustment upon
Subdivision or Combination of Common Stock . If
the Company at any time on or after the Subscription Date
subdivides (by any stock split, stock dividend, recapitalization,
reorganization, scheme, arrangement or otherwise) one or more
classes of its outstanding shares of Common Stock into a greater
number of shares, the Exercise Price in effect immediately prior to
such subdivision will be proportionately reduced and the number of
Warrant Shares will be proportionately increased. If the
Company at any time on or after the Subscription Date combines (by
any stock split, stock dividend, recapitalization, reorganization,
scheme, arrangement or otherwise) one or more classes of its
outstanding shares of Common Stock into a smaller number of shares,
the Exercise Price in effect immediately prior to such combination
will be proportionately increased and the number of Warrant Shares
will be proportionately decreased. Any adjustment under
this Section 2(a) shall become effective at the close of business
on the date the subdivision or combination becomes
effective.
(b)
Other Events . If any event occurs of the type
contemplated by the provisions of this Section 2 but not expressly
provided for by such provisions, then the Company's Board of
Directors will make an appropriate adjustment in the Exercise Price
and the number of Warrant Shares so as to protect the rights of the
Holder; provided that no such adjustment pursuant to this Section
2(b) will increase the Exercise Price or decrease the number of
Warrant Shares as otherwise determined pursuant to this Section
2.
3.
RIGHTS UPON DISTRIBUTION OF ASSETS . If the
Company shall declare or make any dividend or other distribution of
its assets (or rights to acquire its assets) to holders of shares
of Common Stock, by way of return of capital or otherwise
(including, without limitation, any distribution of cash, stock or
other securities, property or options by way of a dividend, stock
split, spin off, subdivision, reclassification, corporate
rearrangement, scheme of arrangement or other similar transaction)
(a " Distribution "), at any
time after the issuance of this Warrant, then, in each such
case:
(a)
any
Exercise Price in effect immediately prior to the close of business
on the record date fixed for the determination of holders of shares
of Common Stock entitled to receive the Distribution shall be
reduced, effective as of the close of business on such record date,
to a price determined by multiplying such Exercise Price by a
fraction of which (i) the numerator shall be the Closing Bid Price
of the shares of Common Stock on the Trading Day immediately
preceding such record date minus the value of the Distribution (as
determined in good faith by the Company's Board of Directors)
applicable to one share of Common Stock, and (ii) the denominator
shall be the Closing Bid Price of the shares of Common Stock on the
Trading Day immediately preceding such record date;
and
(b)
the
number of Warrant Shares shall be increased or decreased to a
number of shares equal to the number of shares of Common
St
