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<SEC-DOCUMENT>0001019687-10-000872.txt : 20100308
<SEC-HEADER>0001019687-10-000872.hdr.sgml : 20100308
<ACCEPTANCE-DATETIME>20100308080207
ACCESSION NUMBER:		0001019687-10-000872
CONFORMED SUBMISSION TYPE:	8-K
PUBLIC DOCUMENT COUNT:		5
CONFORMED PERIOD OF REPORT:	20100304
ITEM INFORMATION:		Entry into a Material Definitive Agreement
ITEM INFORMATION:		Unregistered Sales of Equity Securities
ITEM INFORMATION:		Other Events
ITEM INFORMATION:		Financial Statements and Exhibits
FILED AS OF DATE:		20100308
DATE AS OF CHANGE:		20100308

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			Pacific Ethanol, Inc.
		CENTRAL INDEX KEY:			0000778164
		STANDARD INDUSTRIAL CLASSIFICATION:	INDUSTRIAL ORGANIC CHEMICALS [2860]
		IRS NUMBER:				412170618
		STATE OF INCORPORATION:			DE
		FISCAL YEAR END:			1231

	FILING VALUES:
		FORM TYPE:		8-K
		SEC ACT:		1934 Act
		SEC FILE NUMBER:	000-21467
		FILM NUMBER:		10662374

	BUSINESS ADDRESS:	
		STREET 1:		400 CAPITOL MALL, SUITE 2060
		CITY:			SACRAMENTO
		STATE:			CA
		ZIP:			95814
		BUSINESS PHONE:		916-403-2123

	MAIL ADDRESS:	
		STREET 1:		400 CAPITOL MALL, SUITE 2060
		CITY:			SACRAMENTO
		STATE:			CA
		ZIP:			95814

	FORMER COMPANY:	
		FORMER CONFORMED NAME:	ACCESSITY CORP
		DATE OF NAME CHANGE:	20030627

	FORMER COMPANY:	
		FORMER CONFORMED NAME:	DRIVERSSHIELD COM CORP
		DATE OF NAME CHANGE:	20001115

	FORMER COMPANY:	
		FORMER CONFORMED NAME:	FIRST PRIORITY GROUP INC
		DATE OF NAME CHANGE:	19920703
</SEC-HEADER>
<DOCUMENT>
<TYPE>8-K
<SEQUENCE>1
<FILENAME>paceth_8k-030410.htm
<DESCRIPTION>PACIFIC ETHANOL, INC.
<TEXT>
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AND EXCHANGE COMMISSION</font></div>
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D.C.&#160;&#160;20549</font></div>
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8-K</font></div>
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REPORT</font></div>
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SECURITIES EXCHANGE ACT OF 1934</font></div>
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charter)</font></div>
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appropriate box below if the Form 8-K filing is intended to simultaneously
satisfy the filing obligation of the registrant under any of the following
provisions (<font style="DISPLAY: inline; FONT-STYLE: italic">see </font>General
Instruction A.2.&#160;&#160;below):</font></div>
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communications pursuant to Rule 425 under the Securities Act (17 CFR
230.425)</font></div>
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    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 18pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline;" face="Wingdings">o</font>&#160;&#160;&#160;&#160;&#160;&#160;Soliciting
material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)</font></div>
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communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR
240.14d-2(b))</font></div>
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    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 18pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline;" face="Wingdings">o</font>&#160;&#160;&#160;&#160;&#160;&#160;Pre-commencement
communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR
240.13e-4(c))</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25">&#160;</div>
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    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt; TEXT-ALIGN: left">
      <table border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%" style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">
<tr valign="top" style="LINE-HEIGHT: 1.25;">
            <td align="right" style="WIDTH: 63pt">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt; TEXT-ALIGN: left"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Item
      1.01&#160;</font></div>
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      into a Material Definitive
Agreement.</font></div>
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    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 36pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Entry
of Order Approving Stipulation for Settlement of Claim</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">On March
4, 2010, the Superior Court of the State of California for the County of Los
Angeles (the &#8220;Court&#8221;) entered an Order Approving Stipulation for Settlement of
Claim (the &#8220;Order&#8221;) in the matter entitled <font style="DISPLAY: inline; TEXT-DECORATION: underline">Socius CG II, Ltd. v.
Pacific Ethanol, Inc</font>.&#160;&#160;The Order provides for the full and
final settlement of Socius GC II, Ltd.&#8217;s (&#8220;Socius&#8221;) $5,000,000 claim against us
(the &#8220;Claim&#8221;). Socius purchased the Claim from Lyles United, LLC (&#8220;Lyles
United&#8221;), a creditor of Pacific Ethanol, Inc., pursuant to the terms of a
Purchase and Option Agreement dated effective as of March 2, 2010 between Socius
and Lyles United (the &#8220;Lyles United Purchase Agreement&#8221;). The Claim consists of
the right to receive $5,000,000 of principal amount of and under a loan made by
Lyles United to us pursuant to the terms of an Amended and Restated Promissory
Note dated November 7, 2008 in the original principal amount of $30,000,000 (the
&#8220;Lyles United Note&#8221;).&#160;&#160;Pursuant to the terms of the Order, on March 5,
2010, we issued and delivered to Socius 5,800,000 shares of our common stock
(the &#8220;Settlement Shares&#8221;), subject to adjustment as set forth in the
Order.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
Settlement Shares represent approximately 9.99% of the total number of shares of
our common stock outstanding immediately preceding the date of the
Order.&#160;&#160;The total number of shares of our common stock to be issued to
Socius or its designee in connection with the Order will be adjusted on the 6th
trading day following the date on which the Settlement Shares are issued, as
follows: (i) if the number of VWAP Shares (as defined below) exceeds the number
of Settlement Shares initially issued, then we will issue to Socius or its
designee additional shares of our common stock equal to the difference between
the number of VWAP Shares and the number of Settlement Shares, and (ii) if the
number of VWAP Shares is less than the number of Settlement Shares, then Socius
or its designee will return to us for cancellation that number of shares as
equals the difference between the number of VWAP Shares and the number of
Settlement Shares.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
number of VWAP Shares is equal to (i) $5,000,000 plus Socius&#8217; reasonable legal
fees, expenses, and costs (ii) divided by 80% of the volume weighted average
price (&#8220;VWAP&#8221;) of our common stock over the 5-day trading period immediately
following the date on which the Settlement Shares were issued.&#160;&#160;In no
event will the number of shares of our common stock issued to Socius or its
designee in connection with the settlement of the Claim, aggregated with all
shares of our common stock then owned or beneficially owned or controlled by,
collectively, Socius and its affiliates, at any time exceed (x) 9.99% of the
total number of shares of our common stock then outstanding , or (y) without our
prior written consent, that number of shares of our common stock that would
trigger a new limitation under Internal Revenue Code Section 382.&#160;&#160;In
addition, in no event will the aggregate number of shares of our common stock
issued to Socius or its designee in connection with the settlement of the Claim,
aggregated with any other shares of our common stock issued to Socius and/or its
designees by us, at any time exceed 19.99% of the total number of shares of our
common stock outstanding immediately preceding the date of the Order unless we
have obtained either (1) stockholder approval of the issuance of more than such
number of shares of our common stock pursuant to NASDAQ Marketplace Rule 5635(d)
or (2) a waiver from NASDAQ of our compliance with Rule 5635(d).</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
description of the Order does not purport to be complete and is qualified in its
entirety by reference to the Order, which is filed as Exhibit 10.1 to this
report and incorporated herein by reference.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; TEXT-ALIGN: left">
        <table border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%" style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">
<tr valign="top">
              <td align="right" style="WIDTH: 63pt">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; TEXT-ALIGN: left"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Item
      3.02</font></div>
              </td>
              <td align="left">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; TEXT-ALIGN: left"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Unregistered
      Sale of Equity Securities.</font></div>
              </td>
            </tr></table>
      </div>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
information set forth in Item 1.01 of this report is incorporated herein by
reference.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div id="FTR">
        <div id="GLFTR" style="WIDTH: 100%" align="left">
        </div>
      </div>
      <div id="PN" style="PAGE-BREAK-AFTER: always; WIDTH: 100%">
        <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">2</font></div>
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
          <hr style="COLOR: black" noshade size="1">
        </div>
      </div>
      <div id="HDR">
        <div id="GLHDR" style="WIDTH: 100%" align="right">
        </div>
      </div>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The offer
and sale of the securities described in Item 1.01 were effected in reliance on
Section 3(a)(10) of the Securities Act of 1933, as amended.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt; TEXT-ALIGN: left">
      <table border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%" style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">
<tr valign="top" style="LINE-HEIGHT: 1.25;">
            <td align="right" style="WIDTH: 63pt">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt; TEXT-ALIGN: left"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Item
      8.01</font></div>
            </td>
            <td align="left">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt; TEXT-ALIGN: left"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Other
      Events.</font></div>
            </td>
          </tr></table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 36pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Lyles
United Purchase Agreement</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">On March
2, 2010, Socius and Lyles United entered into the Lyles United Purchase
Agreement described in Item 1.01 above.&#160;&#160;We are a party to the Lyles
United Purchase Agreement through our execution of an acknowledgment contained
therein.&#160;&#160;The Lyles United Purchase Agreement provides for the sale by
Lyles United to Socius of Lyles United&#8217;s right to receive payment on a portion
of the total amount of our indebtedness to Lyles United, namely $5.0 million
principal amount of and under an Amended and Restated Promissory Note dated
November 7, 2008 in the principal amount of $30,000,000 (the &#8220;Lyles United
Note&#8221;).&#160;&#160;The Lyles United Purchase Agreement also provides that if
certain conditions are met with respect to the sale and purchase of the $5.0
million portion of the total indebtedness owed to Lyles United, then Lyles
United will have successive options, to be exercised at the sole and absolute
discretion of Lyles United, if at all, to sell, transfer and assign to Socius
one or more additional claims (which may include any combination of principal,
interest or reimbursable fees or expenses comprising part of the
then-outstanding indebtedness) in the amount of $5.0 million each.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">In the
acknowledgment, we acknowledged and agreed with Socius and Lyles United (i) that
certain of the recitals in the Lyles United Purchase Agreement are true and
correct, (ii) that the sale of the $5.0 million claim to Socius covers only such
amount, that Lyles United reserves and preserves all of its other claims and
interests under the Lyles United Note and that Lyles United&#8217;s sale of the $5.0
million claim does not in any way prejudice or have any adverse effect on such
other claims and interests of Lyles United under the Lyles United Note (iii)
that the execution, delivery and performance of the Lyles United Purchase
Agreement does not and will not conflict with the terms of the Lyles United Note
(or any credit enhancement documents that have been executed in connection with
the Lyles United Note) nor will it require any waiver or consent, (iv) that the
Lyles United Note is valid, outstanding and enforceable in accordance with its
terms and is not subject to any defense or offset and that Lyles United
continues to have a valid, enforceable and perfected security interest in
certain of our assets pursuant to certain credit enhancement documents entered
into by us and Lyles United in connection with the Lyles United Note, and (v)
that Socius and Lyles United are relying on our acknowledgments and agreements
in entering into the Lyles United Purchase Agreement.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
description of the Lyles United Purchase Agreement does not purport to be
complete and is qualified in its entirety by reference to the Lyles United
Purchase Agreement, which is filed as Exhibit 99.1 to this report and
incorporated herein by reference.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 36pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Lyles
Mechanical Co. Option/Purchase Agreement</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">On March
2, 2010, Socius and Lyles Mechanical Co. (&#8220;Lyles Mechanical&#8221;) entered into an
Option/Purchase Agreement (the &#8220;Option Agreement&#8221;).&#160;&#160;We are a party to
the Option Agreement through our execution of an acknowledgment contained
therein.&#160;&#160;The Option Agreement grants Lyles Mechanical an option in
the future, to be exercised at the sole and absolute discretion of Lyles
Mechanical, if at all, to sell, transfer and assign to Socius the right of Lyles
Mechanical to receive payment of all amounts due Lyles Mechanical by us pursuant
to the terms of a Promissory Note (Final Payment) dated October 20, 2008 in the
principal amount of $1.5 million (the &#8220;Lyles Mechanical Note&#8221;).</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">In the
acknowledgment, we acknowledged and agreed with Socius and Lyles Mechanical (i)
that certain of the recitals in the Option Agreement are true and correct, (ii)
that the sale of the claim to Socius does cover any rights of Lyles Mechanical
against us that do not arise under the Lyles Mechanical Note and that entering
into the Option Agreement wil<a name="Verdatum"><!--EFPlaceholder-->
 </a>l not in
any way prejudice or have any adverse effect on any other rights of Lyles
Mechanical, (iii) that the execution, delivery and performance of the Lyles
United Purchase Agreement does not and will not conflict with the terms of the
Lyles Mechanical Note nor will it require any waiver or consent, (iv) that the
Lyles Mechanical Note is valid, outstanding and enforceable in accordance with
its terms and is not subject to any defense or offset and (v) that Socius and
Lyles Mechanical are relying on our acknowledgments and agreements in entering
into the Option Agreement.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div id="FTR">
        <div id="GLFTR" style="WIDTH: 100%" align="left">
        </div>
      </div>
      <div id="PN" style="PAGE-BREAK-AFTER: always; WIDTH: 100%">
        <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">3</font></div>
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
          <hr style="COLOR: black" noshade size="1">
        </div>
      </div>
      <div id="HDR">
        <div id="GLHDR" style="WIDTH: 100%" align="right">
        </div>
      </div>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
description of the Option Agreement does not purport to be complete and is
qualified in its entirety by reference to the Option Agreement, which is filed
as Exhibit 99.2 to this report and incorporated herein by
reference.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; TEXT-ALIGN: left">
        <table border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%" style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">
<tr valign="top">
              <td align="right" style="WIDTH: 63pt">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; TEXT-ALIGN: left"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Item
      9.01.</font></div>
              </td>
              <td align="left">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; TEXT-ALIGN: left"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Financial
      Statements and Exhibits.</font></div>
              </td>
            </tr></table>
      </div>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%" style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">
<tr valign="top" style="LINE-HEIGHT: 1.25;">
            <td style="WIDTH: 36pt">
            </td>
            <td style="WIDTH: 72pt">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; TEXT-DECORATION: underline">Exhibit
      No.</font></font></div>
            </td>
            <td>
              <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; TEXT-DECORATION: underline">Description</font></font></div>
            </td>
          </tr></table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div>
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<tr valign="top" style="LINE-HEIGHT: 1.25;">
            <td style="WIDTH: 36pt">
              <div><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#160;
      </font></div>
            </td>
            <td style="WIDTH: 72pt">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">10.1</font></div>
            </td>
            <td>
              <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Order
      Approving Stipulation for Settlement of Claim
  (*)</font></div>
            </td>
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    </div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%" style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">
<tr valign="top" style="LINE-HEIGHT: 1.25;">
            <td style="WIDTH: 36pt">
              <div><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#160;
      </font></div>
            </td>
            <td style="WIDTH: 72pt">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">99.1</font></div>
            </td>
            <td>
              <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Purchase
      and Option Agreement dated March 2, 2010 by and between Lyles United, LLC
      and Socius CG II, Ltd. containing an Acknowledgment by Pacific Ethanol,
      Inc. (*)</font></div>
            </td>
          </tr></table>
    </div>
    <div>
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<tr valign="top" style="LINE-HEIGHT: 1.25;">
            <td style="WIDTH: 36pt">
              <div><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#160;
      </font></div>
            </td>
            <td style="WIDTH: 72pt">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">99.2</font></div>
            </td>
            <td>
              <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Option/Purchase
      Agreement dated March 2, 2010 by and between Lyles Mechanical Co. and
      Socius CG II, Ltd. containing an Acknowledgment by Pacific Ethanol, Inc.
      (*)</font></div>
            </td>
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<tr valign="top" style="LINE-HEIGHT: 1.25;">
            <td width="0%" style="WIDTH: 36pt"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td>
              <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">_______________</font></div>
            </td>
          </tr></table>
    </div>
    <div>
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<tr valign="top" style="LINE-HEIGHT: 1.25;">
            <td style="WIDTH: 36pt">
              <div><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#160;
      </font></div>
            </td>
            <td style="WIDTH: 36pt">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">*</font></div>
            </td>
            <td>
              <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Filed
      herewith</font></div>
            </td>
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    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div id="FTR">
        <div id="GLFTR" style="WIDTH: 100%" align="left">
        </div>
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        <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">4</font></div>
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
          <hr style="COLOR: black" noshade size="1">
        </div>
      </div>
      <div id="HDR">
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        </div>
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    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#160;</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">SIGNATURES</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Pursuant
to the requirements of the Securities Exchange Act of 1934, the Registrant has
duly caused this report to be signed on its behalf by the undersigned hereunto
duly authorized.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%" style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">
<tr valign="top" style="LINE-HEIGHT: 1.25;">
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              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Date:&#160;&#160;March
      8, 2010</font></div>
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            <td>
              <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">PACIFIC
      ETHANOL, INC.</font></div>
            </td>
          </tr></table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
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    <div style="DISPLAY: block; MARGIN-LEFT: 216pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">By: <font style="DISPLAY: inline; TEXT-DECORATION: underline">/S/ CHRISTOPHER
W.&#160;&#160;WRIGHT&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;
</font></font></div>
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W.&#160;&#160;Wright,</font></div>
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Secretary</font></div>
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        <div style="WIDTH: 100%; TEXT-ALIGN: center">
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</font><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">EXHIBITS
FILED WITH THIS REPORT</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; TEXT-ALIGN: center">&#160;</div>
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            </td>
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              <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Order
      Approving Stipulation for Settlement of
Claim</font></div>
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      </font></div>
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            </td>
            <td>
              <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Purchase
      and Option Agreement dated March 2, 2010 by and between Lyles United, LLC
      and Socius CG II, Ltd. containing an Acknowledgment by Pacific Ethanol,
      Inc.</font></div>
            </td>
          </tr></table>
    </div>
    <div>
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      </font></div>
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            </td>
            <td>
              <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Option/Purchase
      Agreement dated March 2, 2010 by and between Lyles Mechanical Co. and
      Socius CG II, Ltd. containing an Acknowledgment by Pacific Ethanol,
      Inc.</font></div>
            </td>
          </tr></table>
    </div>
    <div>&#160;</div>
    <div>&#160;</div>
    <div>&#160;</div>
    <div>&#160;</div>
    <div>&#160;</div>
    <div style="TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#160;6</font>

      <div><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#160;</font>

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<DOCUMENT>
<TYPE>EX-10.1
<SEQUENCE>2
<FILENAME>paceth_8k-ex1001.htm
<DESCRIPTION>ORDER APPROVING STIPULATION FOR SETTLEMENT OF CLAIM
<TEXT>
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      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 1.8pt; TEXT-ALIGN: left"><font style="FONT-WEIGHT: bold">EXHIBIT 10.1</font></div>
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COURT OF THE STATE OF CALIFORNIA</font></div>
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COUNTY OF LOS ANGELES, CENTRAL DISTRICT</font></div>
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<tr>
              <td width="50%" style="BORDER-RIGHT: black 1px solid; PADDING-LEFT: 0pt; MARGIN-LEFT: 9pt">
                <div><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman">Socius CG
      II, Ltd.,</font></div>
                <div>&#160;</div>
                <div><font id="TAB2" style="LETTER-SPACING: 9pt">&#160;&#160;&#160;</font>&#160;Plaintiff</div>
              </td>
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                <div><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;&#160;&#160;
      Case No. BC432829</font></div>
                <div>&#160;</div>
                <div>&#160;&#160;&#160; Assigned For All Purposes To:</div>
              </td>
            </tr><tr>
              <td width="50%" style="BORDER-RIGHT: black 1px solid"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
              <td width="50%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;&#160;&#160;
      Hon. Edward A. Ferns, Dept. 69</font></td>
            </tr><tr>
              <td width="50%" style="BORDER-RIGHT: black 1px solid"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman">v.</font></td>
              <td width="50%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
            </tr><tr>
              <td width="50%" style="BORDER-RIGHT: black 1px solid">&#160;</td>
              <td width="50%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
            </tr><tr>
              <td valign="top" width="50%" style="BORDER-RIGHT: black 1px solid">
                <div><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman">Pacific
      Ethanol, Inc. and Does 1-10 Inclusive,</font></div>
                <div>&#160;</div>
                <div><font id="TAB2" style="LETTER-SPACING: 9pt">&#160;&#160;&#160;</font>&#160;Defendents.</div>
              </td>
              <td width="50%">
                <div><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;&#160;&#160;
      <font style="FONT-WEIGHT: bold">ORDER APPROVING
      STIPULATION</font></font></div>
                <div><font style="FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;&#160;&#160; FOR SETTLEMENT OF
      CLAIM</font></div>
                <div>&#160;</div>
                <div>&#160;&#160;&#160; Date:&#160;&#160;&#160; March 4, 2010</div>
                <div>&#160;&#160;&#160; Time:&#160;&#160;&#160; 8:30 a.m.</div>
                <div>&#160;&#160;&#160; Dept.:&#160;&#160; 69</div>
              </td>
            </tr><tr>
              <td width="50%" style="BORDER-RIGHT: black 1px solid; BORDER-BOTTOM: black 1px solid; TEXT-ALIGN: left"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
              <td width="50%">
                <div><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></div>
                <div>&#160;&#160;&#160; Complaint Filed&#160;&#160;&#160;&#160; March 3,
      2010</div>
                <div>&#160;&#160;&#160;&#160;Trial
      Date:&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;
      None Set</div>
              </td>
            </tr></table>
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      <div><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#160;</font></div>
      <div style="TEXT-INDENT: 36pt; TEXT-ALIGN: justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The Joint
Ex Parte Application For Court Order Approving Stipulation for Settlement of
Claim ("Application"), filed by Plaintiff Socius CG II, Ltd. ("Socius") and
joined by Defendant Pacific Ethanol, Inc. ( "PEI" or the "Company"), came on for
hearing on March 4, 2010 at 8:30 a.m. in Department 69 of the above-entitled
court, the Honorable Edward A. Ferns, Judge presiding.</font></div>
      <div style="TEXT-INDENT: 36pt; TEXT-ALIGN: justify">&#160;</div>
      <div style="TEXT-INDENT: 36pt; TEXT-ALIGN: justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
Court, having reviewed the Application, having been presented with a Stipulation
for Settlement of Claim (the "Stipulation"), a copy of which is attached as
<font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; TEXT-DECORATION: underline">Exhibit A</font> to the Application, and after a hearing
upon the fairness, adequacy and reasonableness of the terms and conditions of
the&#160;issuance of shares of the common stock of PEI (the "Common Stock") to
Socius in exchange for the extinguishment of said claims,
<font style="FONT-WEIGHT: bold">IT IS THEREFORE
ORDERED AS FOLLOWS:</font></font></div>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
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        <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">1</font></div>
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
          <hr style="COLOR: black" noshade size="1">
          ORDER APPROVING SETTLEMENT OF CLAIM</div>
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    </div>
    <div><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></div>
    <div style="TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; TEXT-ALIGN: justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">1.<font id="TAB2" style="LETTER-SPACING: 9pt">&#160;&#160;&#160;</font></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">The
Stipulation is approved in it entirety;</font></div>
    <div style="TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; TEXT-ALIGN: justify">&#160;</div>
    <div style="TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; TEXT-ALIGN: justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">2.<font id="TAB2" style="LETTER-SPACING: 9pt">&#160;&#160;&#160;</font></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">In full
and final settlement of Socius' claim against PEI in the total amount of
$5,000,000 (the "Claim"), which Claim Socius purchased from a creditor of PEI,
Lyles United, LLC ("Lyles United") pursuant to a Purchase and Option Agreement
between Socius and Lyles United, dated March 2, 2010 (the "Purchase Agreement"),
and which Claim comprises a portion of the principal amount due and payable
under a loan made from Lyles United to PEI in aggregate principal amount of
$30,000,000, PEI will issue and deliver to Socius or its designee 5,800,000
shares of Common Stock, being approximately equal to (but under no circumstance
whatsoever more than) 9.99% of the total number of shares of Common Stock
outstanding on the date of this stipulation (the "Settlement Shares"), subject
to adjustment as set forth in paragraph 4 below to reflect the intention of the
parties that the total number of shares issued be based upon an average trading
price of the Common Stock for a specified period of time subsequent to entry of
this Order.</font></div>
    <div style="TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; TEXT-ALIGN: justify">&#160;</div>
    <div style="TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; TEXT-ALIGN: justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">3.<font id="TAB2" style="LETTER-SPACING: 9pt">&#160;&#160;&#160;</font></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">No later
than the first business day following the date that the Court enters this Order
</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">approving
the Stipulation, PEI shall: (i) immediately issue the number of shares of Common
Stock required by paragraph 2 above to Socius' or its designee's balance account
with The Depository Trust Company (DTC) through the Fast Automated Securities
Transfer (FAST) Program of DTC's Deposit/Withdrawal Agent Commission (DWAC)
system, without any restriction on transfer, time being of the essence, by
transmitting by facsimile and overnight delivery such irrevocable and
unconditional instruction to PEI's stock transfer agent, and (ii) cause its
legal counsel to issue an opinion to PEI's transfer agent, in form and substance
acceptable to both parties and such transfer agent, that the shares may be so
issued.</font></div>
    <div style="TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; TEXT-ALIGN: justify">&#160;</div>
    <div style="TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; TEXT-ALIGN: justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">4.<font id="TAB2" style="LETTER-SPACING: 9pt">&#160;&#160;&#160;</font></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">The total
number of shares of Common Stock to be issued to Socius or its designee in
</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">connection
with the Stipulation and this Order shall be adjusted on the 6th trading day
following the date on which the Settlement Shares are delivered to Socius or its
designee as DWAC shares in compliance with paragraph 3 above, as follows: (i) if
the number of VWAP Shares (as defined below) exceeds the number of Settlement
Shares initially issued, then PEI will issue and deliver to Socius or
</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">its
designee, as DWAC shares in accordance with paragraph 3 above, additional shares
of Common Stock equal to the difference between the number of VWAP Shares and
the number of Settlement Shares, and (ii) if the number of VWAP Shares is less
than the number of Settlement Shares, then Socius or its designee will return to
PEI for cancellation that number of shares as equals the difference between the
number of VWAP Shares and the number of Settlement Shares issued pursuant to
paragraph 2 above.</font></div>
    <div style="TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; TEXT-ALIGN: justify">
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
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            ORDER APPROVING SETTLEMENT OF CLAIM</div>
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      <div><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#160;</font></div>
      <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt; TEXT-ALIGN: justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">a.<font id="TAB2" style="LETTER-SPACING: 9pt">&#160;&#160;&#160;</font></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
number of VWAP Shares is equal to (i) $5,000,000 plus Socius' reasonable
</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">legal
fees, expenses, and costs, (ii) divided by 80% of the volume weighted average
price ("VWAP") of the Common Stock over the 5-day trading period immediately
following the date on which the Settlement Shares are delivered to Socius or its
designee as DWAC shares in compliance with paragraph 3 above.</font></div>
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event shall the number of shares of Common Stock issued to Socius or its
</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">designee
in connection with the settlement of the Claim, aggregated with all shares of
Common Stock then owned or beneficially owned or controlled by, collectively,
Socius and its affiliates, at any time exceed (i) 9.99% of the total number of
shares of Common Stock then outstanding, or (ii) without the prior written
consent of PEI, that number of shares of Common Stock that would trigger a new
limitation under IRS Code Section 382.</font></div>
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event shall the aggregate number of shares of Common Stock issued to
</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Socius or
its designee in connection with the settlement of the Claim, aggregated with any
other shares of Common Stock issued to Socius and/or its designees by PEI, at
any time exceed 19.99% of the total number of shares of Common Stock outstanding
immediately preceding the date the Court enters the Order approving this
stipulation unless PEI has obtained either (i) stockholder approval for the
issuance of more than such number of shares of Common Stock pursuant to NASDAQ
Marketplace Rule 5635(d) or (ii) a waiver from NASDAQ of compliance with Rule
5635(d).</font></div>
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            ORDER APPROVING SETTLEMENT OF CLAIM</div>
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as Socius or any of its affiliates hold any shares of Common Stock of PEI,
</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">neither
Socius nor any of its affiliates will: (i) vote any shares of Common Stock owned
or controlled </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">by it, or
solicit any proxies or seek to advise or influence any person with respect to
any voting </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">securities
of PEI; or (ii) engage or participate in any actions, plans or proposals which
relate to or </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">would
result in (a) Socius or any of its affiliates acquiring additional securities of
PEI, alone or together with any other person, which would result in Socius and
its affiliates collectively beneficially owning or controlling more than 9.99%
of the total outstanding Common Stock or other voting securities of PEI, (b) an
extraordinary corporate transaction, such as a merger, reorganization or
liquidation, involving PEI or any of its subsidiaries, (c) a sale or transfer of
a material amount of assets of PEI or any of its subsidiaries, (d) any change in
the present board of directors or management of PEI, including any plans or
proposals to change the number or term of directors or to fill any existing
vacancies on the board, (e) any material change in the present capitalization or
dividend policy of PEI, (f) any other material change in PEI's business or
corporate structure, including but not limited to, if PEI is a registered
closed-end investment company, any plans or proposals to make any changes in its
investment policy for which a vote is required by Section 13 of the Investment
Company Act of 1940, (g) changes in PEI's charter, bylaws or instruments
corresponding thereto or other actions which may impede the acquisition of
control of PEI by any Person, (h) causing a class of securities of PEI to be
delisted from a national securities exchange or to cease to be authorized to be
quoted in an inter-dealer quotation system of a registered national securities
association, (i) causing a class of equity securities of PEI to become eligible
for termination of registration pursuant to Section 12(g)(4) of the Act, or (j)
taking any action, intention, plan or arrangement similar to any of those
enumerated above. The provisions of this paragraph 5 may not be modified or
waived without further order of the Court.</font></div>
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            ORDER APPROVING SETTLEMENT OF CLAIM</div>
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    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt; TEXT-ALIGN: justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">6.<font id="TAB2" style="LETTER-SPACING: 9pt">&#160;&#160;&#160;</font>&#160;For the
period of one year from the date that the final number of Settlement Shares are
</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">delivered
to Socius or its designee as DWAC shares in compliance with paragraph 3 above,
and regardless of whether Socius or its affiliates then hold any debt or equity
securities of PEI, Socius and its affiliates shall have the exclusive right to
enter into transactions with PEI whereby PEI directly or indirectly issues
common stock or common stock equivalents to a party (including without
limitation Lyles United or its affiliates) in exchange for outstanding
securities, claims or property interests, or partly in such exchange and partly
for cash, including without limitation any such financing or transaction carried
out pursuant to Section 3(a)(9) or Section 3(a)(10) of the Securities Act of
1933, as amended; <font style="DISPLAY: inline; TEXT-DECORATION: underline">provided, however,</font>
that the foregoing exclusivity provision shall not apply to (i) such
</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">transactions
between PEI and any entity that is a creditor of any PEI subsidiary on the date
hereof, or (ii) a convertible note financing (including later conversion of the
notes to common stock) in a maximum amount of $5 million with the creditor with
whom PEI is currently in negotiations regarding such financing, or (iii) such
transactions between PEI and two of its directors in respect of an aggregate of
$2 million in principal amount of notes issued by PEI to such directors provided
that the securities issued in exchange for such notes cannot be sold by such
directors for at least six months subsequent to the issuance date.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt; TEXT-ALIGN: justify">&#160;</div>
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Order ends, finally and forever (i) any claims to payment or compensation of any
</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">kind or
nature which Socius had, now has, or may assert in the future against PEI
arising out of the Claim, and (ii) any claims, including without limitation for
offset or counterclaim, which PEI had, now has, or may assert in the future
against Socius arising out of the Claim. In this regard, and subject to
compliance with this Order, effective upon the execution of this Order, each
party hereby releases and forever discharges the other party, including all of
the other party's employees, officers, directors, affiliates and attorneys, from
any and all claims, demands, obligations (fiduciary or otherwise), and causes of
action, whether known or unknown, suspected or unsuspected, arising out of,
connected with, or incidental to the Claim.</font></div>
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action is hereby dismissed with prejudice, provided that the court shall retain
</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">jurisdiction
with regard to the Claim to enforce the terms of this Order.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt; TEXT-ALIGN: justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt; TEXT-ALIGN: justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">8.</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; FONT-SIZE: 10pt">The Stipulation and this Order may be
enforced by any party to the Stipulation by </font><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman">a </font></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">motion
under California Code of Civil Procedure section 664.6, or by any procedure
permitted by law in the Superior Court of Los Angeles County. Pursuant to the
Stipulation, each party thereto further waives a statement of decision, and the
right to appeal from this Order after entry. Except as expressly provided in
Paragraph 4 above, each party shall bear its own attorney's fees, expenses and
costs with regard to the Stipulation and this Order.</font></div>
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    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt; TEXT-ALIGN: justify"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">IT
IS SO ORDERED.</font></div>
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<tr>
              <td width="50%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; FONT-WEIGHT: bold"><font style="FONT-WEIGHT: normal">DATED</font><font style="FONT-WEIGHT: normal">:</font> MAR 4,
      2010</font></font></td>
              <td width="50%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; TEXT-DECORATION: underline">/s/ Edward A.
      Ferns&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;</font></td>
            </tr><tr>
              <td width="50%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#160;</font></td>
              <td width="50%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">JUDGE OF THE
      SUPERIOR COURT</font></td>
            </tr><tr>
              <td width="50%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#160;</font></td>
              <td width="50%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#160;</font></td>
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              ORDER APPROVING SETTLEMENT OF CLAIM</div>
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<DOCUMENT>
<TYPE>EX-99.1
<SEQUENCE>3
<FILENAME>paceth_8k-ex9901.htm
<DESCRIPTION>PURCHASE AND OPTION AGREEMENT - LYLES UNITED, LLC AND SOCIUS CG II, LTD.
<TEXT>
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    <title>paceth_8k-ex9901.htm</title>
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    <div style="LINE-HEIGHT: 1.25; TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="right">
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        <hr style="COLOR: black" align="center" noshade size="1" width="100%">
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    <div style="TEXT-ALIGN: left; LINE-HEIGHT: 1.25; TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt; FONT-WEIGHT: bold">EXHIBIT
99.1</font></div>
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    <div style="LINE-HEIGHT: 1.25; TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt"><font style="DISPLAY: inline; TEXT-DECORATION: underline">PURCHASE AND OPTION
AGREEMENT</font></font></div>
    <div style="LINE-HEIGHT: 1.25; TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="TEXT-ALIGN: justify; LINE-HEIGHT: 1.25; TEXT-INDENT: 36pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">This
Purchase and Option Agreement (&#8220;<font style="DISPLAY: inline; TEXT-DECORATION: underline">Agreement</font>&#8221;) is
entered into as of March 2, 2010, by and between Socius CG II, Ltd., a Bermuda
exempted company (&#8220;<font style="DISPLAY: inline; TEXT-DECORATION: underline">Purchaser</font>&#8221;), and
Lyles United, LLC, a Delaware limited liability company (&#8220;<font style="DISPLAY: inline; TEXT-DECORATION: underline">Creditor</font>&#8221;), and, as
to the Acknowledgment at the end of this Agreement, by Pacific Ethanol, Inc., a
Delaware corporation (&#8220;<font style="DISPLAY: inline; TEXT-DECORATION: underline">PEI</font>&#8221;).</font></div>
    <div style="LINE-HEIGHT: 1.25; TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="LINE-HEIGHT: 1.25; TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">RECITALS</font></div>
    <div style="LINE-HEIGHT: 1.25; TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="TEXT-ALIGN: justify; LINE-HEIGHT: 1.25; TEXT-INDENT: 36pt; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">A.<font id="TAB2" style="LETTER-SPACING: 9pt">&#160;&#160;&#160;</font></font><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">PEI is
indebted to Creditor pursuant to the terms of that certain Amended and Restated
Promissory Note, payable to Creditor, dated November 7, 2008, in the principal
amount of $30,000,000 (the &#8220;<font style="DISPLAY: inline; TEXT-DECORATION: underline">Note</font>&#8221;).</font></div>
    <div style="TEXT-ALIGN: justify; LINE-HEIGHT: 1.25; TEXT-INDENT: 36pt; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt">&#160;</div>
    <div style="TEXT-ALIGN: justify; LINE-HEIGHT: 1.25; TEXT-INDENT: 36pt; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">B.<font id="TAB2" style="LETTER-SPACING: 9pt">&#160;&#160;&#160;</font></font><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">The
obligations of PEI to Creditor under the Note are secured and/or credit enhanced
by the terms of (i) that certain Security Agreement dated as of November 7, 2008
between Pacific Ag. Products, LLC, a California limited liability company and
indirectly wholly-owned subsidiary of PEI, and Creditor (the &#8220;<font style="DISPLAY: inline; TEXT-DECORATION: underline">Security Agreement</font>&#8221;),
(ii) that certain Irrevocable Joint Instruction Letter dated November 7, 2008
among PEI, Pacific Ethanol California, Inc., a California corporation and
wholly-owned subsidiary of PEI, and Creditor (the &#8220;<font style="DISPLAY: inline; TEXT-DECORATION: underline">Instruction Letter</font>&#8221;),
(iii) that certain Unconditional Guaranty dated November 7, 2008 by Pacific Ag.
Products, LLC in favor of Creditor (the &#8220;<font style="DISPLAY: inline; TEXT-DECORATION: underline">PacAg Guaranty</font>&#8221;), and
(iv)&#160;that certain Limited Recourse Guaranty dated November 7, 2008 by
Pacific Ethanol California, Inc. in favor of Creditor (the &#8220;<font style="DISPLAY: inline; TEXT-DECORATION: underline">PEC Guaranty</font>&#8221;) (the
Security Agreement, Instruction Letter, PacAg Guaranty and PEC Guaranty
hereinafter are collectively referred to as the &#8220;<font style="DISPLAY: inline; TEXT-DECORATION: underline">Credit Enhancement
Documents</font>&#8221;).</font></div>
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date of this Agreement, PEI is in default under the Note.&#160;&#160;PEI is also
indebted to Creditor for accrued and unpaid interest, late fees and costs, and
reimbursable fees or expenses related to the Note and the defaults thereunder,
for a total amount due and payable by PEI to Creditor of&#160;&#160;$33,345,009
(consisting of $30,000,000 principal amount, plus $2,945,009 in unpaid interest
accrued through February 28, 2010, plus $400,000 in reimbursable fees or
expenses) as of the date hereof (such total amount, plus all additional interest
that accrues on the unpaid principal balance under the Note on and after
February 28, 2010, plus any additional reimbursable fees or expenses incurred or
arising after February 28, 2010, being collectively referred to herein as the
&#8220;Indebtedness&#8221;).</font></div>
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desires to sell, transfer and assign to Purchaser its right to receive payment
on a portion of the Indebtedness, namely $5 million of principal amount of and
under the Note (the &#8220;<font style="DISPLAY: inline; TEXT-DECORATION: underline">Subject $5 Million
Claim</font>&#8221;), and Purchaser desires to purchase the Subject $5 Million Claim,
all subject to the terms and conditions set forth below.</font></div>
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and Purchaser desire Creditor to have the option in the future, to be exercised
at the sole and absolute discretion of Creditor, if at all, to sell, transfer
and assign to Purchaser the right of Creditor to receive payment on additional
portions of Creditor&#8217;s claim against PEI&#160;&#160;in respect of the
Indebtedness, in tranches of $5 million each except as otherwise set forth
herein (each such tranche, an &#8220;<font style="DISPLAY: inline; TEXT-DECORATION: underline">Additional Claim</font>&#8221;),
up to the full amount of the then-outstanding Indebtedness, or such lesser
amount as may be determined by Creditor in its sole and absolute
discretion.&#160;&#160;If any such option is exercised by Creditor in its sole
and absolute discretion with respect to one or more Additional Claims, then
Purchaser desires to purchase such Additional Claims, all subject to the terms
and conditions set forth below.</font></div>
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THEREFORE, in consideration of the agreements contained herein and for other
good and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto hereby agree as follows:</font></div>
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$5 Million Claim; Excluded Rights: Purchase Price</font>.&#160;</font></div>
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terms of this Agreement and subject only to the conditions subsequent set forth
in Section 2 below, Purchaser hereby purchases from Creditor, and Creditor
hereby sells, transfers, conveys and assigns to Purchaser, for the consideration
specified below, all right, title and interest in and to the Subject $5 Million
Claim.&#160;&#160;It is expressly understood and agreed by the parties that the
Subject $5 Million Claim does not include, and the Purchaser under this
Agreement is not purchasing or otherwise obtaining, (i) any rights under the
Credit Enhancement Documents, which Creditor hereby expressly retains and
preserves for its own benefit, (ii) any and all claims for accrued and unpaid
interest owing to Creditor by PEI as of the date hereof under or in connection
with the Note, including, without limitation, all accrued and unpaid interest on
the Subject $5 Million Claim as of the date hereof, all of which claims are
expressly retained and preserved by Creditor for its own benefit, and (iii) any
and all claims of Creditor against PEI for reimbursable fees or expenses under
or in connection with the Note, which are expressly retained and preserved by
Creditor for its own benefit.</font></div>
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consideration to be paid by Purchaser to Creditor for the Subject $5 Million
Claim shall be Five Million Dollars ($5,000,000)&#160;&#160;(the &#8220;<font style="DISPLAY: inline; TEXT-DECORATION: underline">Purchase
Price</font>&#8221;).&#160;&#160;The Purchase Price shall be due and payable by
Purchaser to Creditor by wire transfer on the date set forth in sub-paragraph
(b) of Section 2 below.</font></div>
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Subsequent</font>.</font></div>
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and Settlement Motion</font>.&#160;&#160;&#160;No later than close of business
on the third business day after the date of this Agreement, Purchaser shall
provide written notice to Creditor that (i) Purchaser has filed an action (the
&#8220;<font style="DISPLAY: inline; TEXT-DECORATION: underline">Action</font>&#8221;)
against PEI in the Superior Court of the State of California for the County of
Los Angeles (the &#8220;<font style="DISPLAY: inline; TEXT-DECORATION: underline">Court</font>&#8221;) for
collection of the Subject $5 Million Claim, specifying the date that the Action
was commenced (the &#8220;<font style="DISPLAY: inline; TEXT-DECORATION: underline">Action Commencement
Date</font>&#8221;), and (ii)&#160;a motion in the Action has been filed seeking Court
approval of the settlement of the Action on terms acceptable to Purchaser and in
accordance with Section 3(a)(10) of the Securities Act of 1933, as amended (the
&#8220;<font style="DISPLAY: inline; TEXT-DECORATION: underline">Settlement</font>&#8221;).&#160;&#160;&#160;If
such written notice is not provided by Purchaser to Creditor by the close of
business on the third business day after the date of this Agreement, then this
Agreement&#160;&#160;(including, without limitation, the provisions in the
remainder of this Section 2) shall be deemed void <font style="DISPLAY: inline; TEXT-DECORATION: underline">ab initio</font> and of no
further force or effect, and no sale or assignment of the Subject $5 Million
Claim shall have occurred or be deemed to have occurred.</font></div>
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Notice</font>.&#160;&#160;Purchaser shall provide written notice to Creditor
reasonably promptly after the Court has entered an order in form and substance
acceptable to Purchaser approving the Settlement (such written notice being
hereinafter referred to as the &#8220;<font style="DISPLAY: inline; TEXT-DECORATION: underline">Court Approval
Notice</font>&#8221;).&#160;&#160;In all events and circumstances,
if&#160;&#160;Purchaser has not provided the Court Approval Notice by the close
of business on the tenth business day after the Action Commencement Date
(regardless of whether Purchaser has simply overlooked providing such notice by
such tenth business day, is not in a position to provide such notice by such
tenth business day because the Court has not entered an order approving the
Settlement by such tenth business day, or for any other reason
in&#160;&#160;Purchaser&#8217;s sole discretion Purchase has failed to timely provide
the Court Approval Notice), then Creditor shall have the right to terminate and
cancel this Agreement by providing written notice of termination to Purchaser at
any time prior to receiving the Court Approval Notice from
Purchaser.&#160;&#160;If such termination is so effected by Creditor, then this
Agreement shall be deemed void <font style="DISPLAY: inline; TEXT-DECORATION: underline">ab initio</font> and of no
further force or effect, and no sale or assignment of the Subject $5 Million
Claim shall have occurred or be deemed to have occurred.</font></div>
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Price</font>.&#160;&#160;If the Court Approval Notice is provided by Purchaser
to Creditor before Creditor has exercised any termination right set forth in
sub-paragraph (b) immediately above, then no later than close of business on the
second business day after the date the Court Approval Notice is provided by
Purchaser to Creditor, Purchaser shall pay the Purchase Price to Creditor by
wire transfer to Creditor pursuant to the following wire transfer instructions
(the date upon which the Purchase Price has been so timely paid by Purchaser to
Creditor being hereinafter referred to as the &#8220;<font style="DISPLAY: inline; TEXT-DECORATION: underline">Payment
Date</font>&#8221;):</font></div>
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        <div style="TEXT-ALIGN: center; WIDTH: 100%">
          <hr style="COLOR: black" noshade size="1">
        </div>
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      <div id="HDR">
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        </div>
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    </div>
    <div style="TEXT-ALIGN: justify; LINE-HEIGHT: 1.25; TEXT-INDENT: 72pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt">&#160;</div>
    <div style="TEXT-ALIGN: justify; LINE-HEIGHT: 1.25; TEXT-INDENT: 108pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt">
      <div>&#160;</div>
      <div align="center">
        <table bgcolor="white" cellpadding="0" cellspacing="0" width="100%" style="FONT-FAMILY: times new roman; FONT-SIZE: 10pt; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">
<tr>
              <td width="15%"><font style="FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;</font></td>
              <td width="7%"><font style="FONT-FAMILY: times new roman; FONT-SIZE: 10pt">Wire To:</font></td>
              <td width="78%"><font style="FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;</font></td>
            </tr><tr>
              <td width="15%"><font style="FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;</font></td>
              <td width="7%"><font style="FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;</font></td>
              <td width="78%"><font style="FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;</font></td>
            </tr><tr>
              <td width="15%"><font style="FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;</font></td>
              <td colspan="2" width="85%">

                <div style="TEXT-ALIGN: left; LINE-HEIGHT: 1.25; TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">Bank
      of New York Mellon</font></div>
                <div style="TEXT-ALIGN: left; LINE-HEIGHT: 1.25; TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">One
      Wall St.</font></div>
                <div style="TEXT-ALIGN: left; LINE-HEIGHT: 1.25; TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">New
      York, NY&#160;&#160;10286</font></div>
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      495-1784</font></div>
              </td>
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              <td width="15%"><font style="FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;</font></td>
              <td width="7%"><font style="FONT-FAMILY: times new roman; FONT-SIZE: 10pt">ABA:&#160;
</font></td>
              <td width="78%"><font style="FONT-FAMILY: times new roman; FONT-SIZE: 10pt">xxx-xxx-xxx</font></td>
            </tr><tr>
              <td width="15%"><font style="FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;</font></td>
              <td width="7%"><font style="FONT-FAMILY: times new roman; FONT-SIZE: 10pt">F/C/O:&#160;<font id="TAB2" style="LETTER-SPACING: 9pt">&#160;</font></font></td>
              <td width="78%"><font style="FONT-FAMILY: times new roman; FONT-SIZE: 10pt">Pershing
    LLC</font></td>
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              <td width="15%"><font style="FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;</font></td>
              <td width="7%"><font style="FONT-FAMILY: times new roman; FONT-SIZE: 10pt">F/A/O:&#160;<font id="TAB2" style="LETTER-SPACING: 9pt">&#160;</font></font></td>
              <td width="78%"><font style="FONT-FAMILY: times new roman; FONT-SIZE: 10pt">xxx-xxxxxx-x</font></td>
            </tr><tr>
              <td width="15%"><font style="FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;</font></td>
              <td width="7%"><font style="FONT-FAMILY: times new roman; FONT-SIZE: 10pt">F/F/C:&#160;
    </font></td>
              <td width="78%"><font style="FONT-FAMILY: times new roman; FONT-SIZE: 10pt">Lyles United,
      LLC</font></td>
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              <td width="15%"><font style="FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;</font></td>
              <td width="7%"><font style="FONT-FAMILY: times new roman; FONT-SIZE: 10pt">F/F/A:&#160;<font id="TAB2" style="LETTER-SPACING: 9pt">&#160;</font></font></td>
              <td width="78%"><font style="FONT-FAMILY: times new roman; FONT-SIZE: 10pt">xxx-xxxxxx</font></td>
            </tr></table>
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    <div style="LINE-HEIGHT: 1.25; TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="TEXT-ALIGN: justify; LINE-HEIGHT: 1.25; TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">If
payment of the Purchase Price is not so timely made by Purchaser to Creditor on
the Payment Date, then Creditor shall have the right to terminate and cancel
this Agreement by providing written notice of termination to Purchaser at any
time prior to payment of the Purchase Price.&#160;&#160;If such termination is
so effected by Creditor, then this Agreement shall be deemed void <font style="DISPLAY: inline; TEXT-DECORATION: underline">ab initio</font> and of no
further force or effect, and no sale or assignment of the Subject $5 Million
Claim shall have occurred or be deemed to have occurred.</font></div>
    <div style="LINE-HEIGHT: 1.25; TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="TEXT-ALIGN: justify; LINE-HEIGHT: 1.25; TEXT-INDENT: 36pt; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">3.<font id="TAB2" style="LETTER-SPACING: 9pt">&#160;&#160;&#160;</font></font><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">Upon (and
only upon) the occurrence of the following three conditions
subsequent:&#160;&#160;(i) the written notice of the Action Commencement Date
and of the filing of the motion for Court approval of the Settlement having been
timely provided to Creditor by Purchaser pursuant to sub-paragraph (a) of
Section 2 above, (ii) the Court Approval Notice having been provided by
Purchaser to Creditor before Creditor has exercised any termination right
pursuant to sub-paragraph (b) of Section 2 above, and (iii) the payment of the
Purchase Price to Creditor before Creditor has exercised any termination right
pursuant to sub-paragraph (c) of Paragraph 2 above,</font></div>
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    <div style="TEXT-ALIGN: justify; LINE-HEIGHT: 1.25; TEXT-INDENT: 72pt; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">(a)<font id="TAB2" style="LETTER-SPACING: 9pt">&#160;&#160;&#160;</font></font><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">All
conditions subsequent shall have been satisfied and the sale and assignment of
the Subject $5 Million Claim shall be complete and indefeasible;
and</font></div>
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    <div style="TEXT-ALIGN: justify; LINE-HEIGHT: 1.25; TEXT-INDENT: 72pt; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">(b)<font id="TAB2" style="LETTER-SPACING: 9pt">&#160;&#160;&#160;</font></font><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">Prior to
the close of business on the second business day after the occurrence of the
three conditions subsequent described above in this Section 3, Creditor shall
execute for the benefit of PEI and attach to the Note an Allonge/Amendment No. 1
to the Note, in the form of <font style="DISPLAY: inline; TEXT-DECORATION: underline">Exhibit 1</font> hereto,
attesting to the reduction of the principal amount of the Note by $5,000,000 on
and as of the Payment Date (but preserving all claims to accrued and unpaid
interest, including, without limitation, all accrued and unpaid interest on such
$5,000,000 up to the Payment Date).&#160;&#160;&#160;Creditor agrees that this
sub-paragraph (b) is for the protection and benefit of PEI, and accordingly
agrees that in the event that the conditions subsequent described above in this
Section 3 are satisfied (including that the Purchase Price is timely paid on the
Payment Date), (i) Creditor will supply a copy of the executed Allonge/Amendment
No. 1 to PEI promptly following its execution, and (ii)&#160;Creditor&#8217;s
obligation to execute the Allonge/Amendment No. 1 and supply a copy thereof to
PEI shall be enforceable by PEI as a third-party beneficiary of this
provision.</font></div>
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Warranties of Creditor</font>.&#160; Creditor hereby represents and warrants to
Purchaser as follows:</font></div>
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is the owner of the Subject $5 Million Claim, free and clear of all liens and
encumbrances.&#160; Creditor has not previously transferred, encumbered or
released all or any part of the Subject $5 Million Claim.</font></div>
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        <div style="TEXT-ALIGN: center; WIDTH: 100%">
          <hr style="COLOR: black" noshade size="1">
        </div>
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        </div>
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    <div style="TEXT-ALIGN: justify; LINE-HEIGHT: 1.25; TEXT-INDENT: 72pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt">&#160;</div>
    <div style="TEXT-ALIGN: justify; LINE-HEIGHT: 1.25; TEXT-INDENT: 72pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">(b)<font id="TAB2" style="LETTER-SPACING: 9pt">&#160;&#160;&#160;</font></font><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">Creditor
will at all times promptly withhold and pay any federal, state, local or foreign
taxes legally due and payable by Creditor as a result of payment of the Purchase
Price, including without limitation all income taxes, self employment taxes and
foreign entity withholding taxes.</font></div>
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    <div style="TEXT-ALIGN: justify; LINE-HEIGHT: 1.25; TEXT-INDENT: 72pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">(c)<font id="TAB2" style="LETTER-SPACING: 9pt">&#160;&#160;&#160;</font></font><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">Creditor
has all necessary power and authority to (i) execute, deliver and perform all of
its obligations under this Agreement, and (ii) sell and transfer the Subject $5
Million Claim.&#160; Creditor has such knowledge and experience in business and
financial matters that it is able to protect its own interests and evaluate the
risks and benefits of entering into this Agreement.&#160;&#160;Creditor
acknowledges and agrees that it has had an opportunity to conducts its own due
diligence and consult with its own counsel, tax and financial advisors, and that
Creditor is not relying in that regard on Purchaser.&#160;&#160;Creditor
acknowledges that except as expressly set forth in Section 5 below, Purchaser is
not making any representations or warranties, including, without limitation,
about PEI.</font></div>
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execution, delivery and performance of this Agreement by Creditor has been duly
authorized by all requisite action on the part of Creditor, and has been duly
executed and delivered by Creditor.</font></div>
    <div style="TEXT-ALIGN: justify; LINE-HEIGHT: 1.25; TEXT-INDENT: 72pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt">&#160;</div>
    <div style="TEXT-ALIGN: justify; LINE-HEIGHT: 1.25; TEXT-INDENT: 72pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">(e)<font id="TAB2" style="LETTER-SPACING: 9pt">&#160;&#160;&#160;</font></font><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">Except as
expressly stated herein, Creditor is not, directly or indirectly, receiving any
consideration from or being compensated in any manner by, and will not at any
time in the future accept any consideration or compensation from, PEI, any
affiliate of PEI, or any other person for entering into this Agreement or
selling the Subject $5 Million Claim.</font></div>
    <div style="TEXT-ALIGN: justify; LINE-HEIGHT: 1.25; TEXT-INDENT: 72pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt">&#160;</div>
    <div style="TEXT-ALIGN: justify; LINE-HEIGHT: 1.25; TEXT-INDENT: 72pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">(f)<font id="TAB2" style="LETTER-SPACING: 9pt">&#160;&#160;&#160;</font></font><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">As to any
Option that is exercised by Creditor, the representations and warranties of
Creditor contained in sub-paragraphs (a) through (e) of this Section 4 shall be
deemed to apply to the Additional Claim that is covered by the applicable Option
Exercise Notice and to speak as of the date and time immediately before the
purchase of such Additional Claim by Purchaser is consummated (so that, with
respect to such Additional Claim, each reference to the &#8220;Subject $5 Million
Claim&#8221; in sub-paragraphs (a) through (e) of this Section 4 instead shall be read
as a reference to such Additional Claim).</font></div>
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    <div style="TEXT-ALIGN: justify; LINE-HEIGHT: 1.25; TEXT-INDENT: 36pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">5.<font id="TAB2" style="LETTER-SPACING: 9pt">&#160;&#160;&#160;</font></font><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt"><font style="DISPLAY: inline; TEXT-DECORATION: underline">Representations and
Warranties of Purchaser</font>.&#160; Purchaser hereby represents and warrants
to Creditor as follows:</font></div>
    <div style="TEXT-ALIGN: justify; LINE-HEIGHT: 1.25; TEXT-INDENT: 36pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt">&#160;</div>
    <div style="TEXT-ALIGN: justify; LINE-HEIGHT: 1.25; TEXT-INDENT: 72pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">(a)<font id="TAB2" style="LETTER-SPACING: 9pt">&#160;&#160;&#160;</font>&#160;Purchaser has
all necessary power and authority to execute, deliver and perform all of its
obligations under this Agreement.&#160;</font></div>
    <div style="TEXT-ALIGN: justify; LINE-HEIGHT: 1.25; TEXT-INDENT: 72pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt">&#160;</div>
    <div style="TEXT-ALIGN: justify; LINE-HEIGHT: 1.25; TEXT-INDENT: 72pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">(b)<font id="TAB2" style="LETTER-SPACING: 9pt">&#160;&#160;&#160;</font>&#160;The
execution, delivery and performance of this Agreement by Purchaser has been duly
authorized by all requisite action on the part of Purchaser, and has been duly
executed and delivered by Purchaser.</font></div>
    <div style="TEXT-ALIGN: justify; LINE-HEIGHT: 1.25; TEXT-INDENT: 72pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt">&#160;</div>
    <div style="TEXT-ALIGN: justify; LINE-HEIGHT: 1.25; TEXT-INDENT: 72pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">(c)<font id="TAB2" style="LETTER-SPACING: 9pt">&#160;&#160;&#160;</font>&#160;Purchaser is
an &#8220;accredited investor&#8221; as defined in Rule 501(a) of Regulation D of the
Securities Act and has such knowledge and experience in business and financial
matters that it is able to protect its own interests and evaluate the risks and
benefits of entering into this Agreement and purchasing the Subject $5 Million
Claim.&#160;&#160;Purchaser acknowledges and agrees that it has had an
opportunity to conducts its own due diligence and consult with its own counsel,
tax and financial advisors, and that Purchaser is not relying in that regard on
Creditor.&#160;&#160;Purchaser acknowledges that (i)&#160;except as expressly
set forth in Section 4 above, Creditor is not making any representations or
warranties about the Claim, and (ii) Creditor is not making any representations
or warranties about PEI.</font></div>
    <div style="TEXT-ALIGN: justify; LINE-HEIGHT: 1.25; TEXT-INDENT: 72pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt">&#160;</div>
    <div style="TEXT-ALIGN: justify; LINE-HEIGHT: 1.25; TEXT-INDENT: 72pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">(d)<font id="TAB2" style="LETTER-SPACING: 9pt">&#160;&#160;&#160;</font>&#160;With respect
to any Additional Claim that is purchased by Purchaser from Creditor following
the exercise of an Option by Purchaser, the representations and warranties of
Purchaser contained in sub-paragraphs (a) through (c) of this Section 5 shall be
deemed to apply to the Additional Claim that is covered by the applicable Option
Exercise Notice and to speak as of the date and time immediately before the
purchase of such Additional Claim by Purchaser is consummated (so that, with
respect to such Additional Claim, each reference to the &#8220;Subject $5 Million
Claim&#8221; in sub-paragraphs (a) through (c) of this Section 5 instead shall be read
as a reference to such Additional Claim).</font></div>
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    <div style="LINE-HEIGHT: 1.25; TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="TEXT-ALIGN: justify; LINE-HEIGHT: 1.25; TEXT-INDENT: 36pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">6.<font id="TAB2" style="LETTER-SPACING: 9pt">&#160;&#160;&#160;</font></font><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt"><font style="DISPLAY: inline; TEXT-DECORATION: underline">Options to Sell Additional
Claims</font></font></div>
    <div style="TEXT-ALIGN: justify; LINE-HEIGHT: 1.25; TEXT-INDENT: 36pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt">&#160;</div>
    <div style="TEXT-ALIGN: justify; LINE-HEIGHT: 1.25; TEXT-INDENT: 72pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">(a)<font id="TAB2" style="LETTER-SPACING: 9pt">&#160;&#160;&#160;</font></font><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt"><font style="DISPLAY: inline; TEXT-DECORATION: underline">Options; Exercise of
Options</font>.&#160;&#160;If (and only if) all of the conditions subsequent set
forth in Section 2 above are met with respect to the Subject $5 Million Claim,
then Creditor shall have successive options (each an &#8220;<font style="DISPLAY: inline; TEXT-DECORATION: underline">Option</font>&#8221;), to be
exercised at the sole and absolute discretion of Creditor, if at all, to sell,
transfer and assign to Purchaser one or more Additional Claims (which may
include any combination of principal, interest or reimbursable fees or expenses
comprising part of the then-outstanding Indebtedness) in the amount
of&#160;&#160;$5 million each (or, with respect to any Option exercise as to the
last tranche after the outstanding Indebtedness has been paid down to below $5
million, the remaining amount of the outstanding
Indebtedness).&#160;&#160;&#160;In order to exercise an Option, Creditor shall
provide Purchaser with (i) written notice of its exercise of&#160;&#160;such
Option, substantially in the form attached as <font style="DISPLAY: inline; TEXT-DECORATION: underline">Exhibit 2</font> (an &#8220;<font style="DISPLAY: inline; TEXT-DECORATION: underline">Option Exercise
Notice</font>&#8221;), specifically identifying the dollar amount of the Additional
Claim covered by the Option Exercise Notice and specifically identifying what
portion of such Additional Claim constitutes principal, what portion constitutes
accrued and unpaid interest, and what portion constitutes reimbursable fees or
expenses, and (ii) a new Purchase Agreement, substantially in the form attached
as <font style="DISPLAY: inline; TEXT-DECORATION: underline">Exhibit 3</font> (a
&#8220;<font style="DISPLAY: inline; TEXT-DECORATION: underline">New Purchase
Agreement</font>&#8221;), pertaining to such Additional Claim covered by such Option
Exercise Notice (each of which can be provided by email or fax pursuant to
Section 10 below).</font></div>
    <div style="TEXT-ALIGN: justify; LINE-HEIGHT: 1.25; TEXT-INDENT: 72pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt">&#160;</div>
    <div style="TEXT-ALIGN: justify; LINE-HEIGHT: 1.25; TEXT-INDENT: 72pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">(b)<font id="TAB2" style="LETTER-SPACING: 9pt">&#160;&#160;&#160;</font></font><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt"><font style="DISPLAY: inline; TEXT-DECORATION: underline">Purchase of One or More
Additional Claims; Excluded Rights; Purchase Price</font>.&#160;&#160;Upon any
exercise of an Option by Creditor, Purchaser shall purchase from Creditor, and
Creditor shall sell, transfer, convey and assign to Purchaser, for the
consideration specified in the last sentence of this sub-paragraph (b), all
right, title and interest in and to the Additional Claim covered by the
applicable Option Exercise Notice, subject only to the conditions subsequent set
forth in sub-paragraph (f) of this Section 1.&#160;&#160;It is expressly
understood and agreed by the parties that such Additional Claim shall not
include, and the Purchaser under this Agreement shall not be purchasing or
otherwise obtaining, <font style="DISPLAY: inline; TEXT-DECORATION: underline">unless expressly included in
such Additional Claim as described in the applicable Option Exercise
Notice:</font> (i)&#160;any rights under the Credit Enhancement Documents, which
Creditor hereby expressly retains and preserves for its own benefit, (ii) any
and all claims for accrued and unpaid interest owing to Creditor by PEI as of
the date hereof under or in connection with the Note,&#160;&#160;including,
without limitation, all accrued and unpaid interest on the Additional Claim as
of the date of Purchaser&#8217;s purchase of the Additional Claim, all of which claims
are expressly retained and preserved by Creditor for its own benefit, and
(iii)&#160;any and all claims of Creditor against PEI for reimbursable fees or
expenses under or in connection with the Note, which are expressly retained and
preserved by Creditor for its own benefit.&#160;&#160;As to each Additional
Claim, the purchase price (the &#8220;<font style="DISPLAY: inline; TEXT-DECORATION: underline">New Purchase Price</font>&#8221;)
shall be $5,000,000 or such lesser amount as may be specified&#160;&#160;in the
applicable Option Exercise Notice.</font></div>
    <div style="TEXT-ALIGN: justify; LINE-HEIGHT: 1.25; TEXT-INDENT: 72pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt">&#160;</div>
    <div style="TEXT-ALIGN: justify; LINE-HEIGHT: 1.25; TEXT-INDENT: 72pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">(c)<font id="TAB2" style="LETTER-SPACING: 9pt">&#160;&#160;&#160;</font></font><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt"><font style="DISPLAY: inline; TEXT-DECORATION: underline">Counterpart Signatures on
New Purchase Agreement; Notice of Filing of Action and Settlement
Motion</font>.&#160;&#160;&#160;With respect to any Additional Claim, no later
than close of business on the third business day after Creditor has provided to
Purchaser the Option Exercise Notice and New Purchase Agreement pertaining to
such Additional Claim,</font></div>
    <div style="TEXT-ALIGN: justify; LINE-HEIGHT: 1.25; TEXT-INDENT: 72pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt">&#160;</div>
    <div style="TEXT-ALIGN: justify; LINE-HEIGHT: 1.25; TEXT-INDENT: 108pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">(i)<font id="TAB2" style="LETTER-SPACING: 9pt">&#160;&#160;&#160;</font>&#160;Purchaser
shall provide to Creditor such New Purchase Agreement executed by Purchaser as a
party thereto (which can be provided by email or fax pursuant to Section 10
below),</font></div>
    <div style="TEXT-ALIGN: justify; LINE-HEIGHT: 1.25; TEXT-INDENT: 108pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt">&#160;</div>
    <div style="TEXT-ALIGN: justify; LINE-HEIGHT: 1.25; TEXT-INDENT: 108pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">(ii)<font id="TAB2" style="LETTER-SPACING: 9pt">&#160;&#160;&#160;</font>&#160;Purchaser
shall provide to Creditor a new &#8220;Acknowledgment by PEI&#8221; executed by PEI (which
can be provided by email or fax pursuant to Section 10 below), similar in form
to the &#8220;Acknowledgment by PEI&#8221; at the end of this Agreement but modified to
refer to and reflect such Additional Claim and expressly stating that it is made
and effective as of the Option Exercise Date and the New Payment Date with
respect to such Additional Claim; and</font></div>
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    <div style="TEXT-ALIGN: justify; LINE-HEIGHT: 1.25; TEXT-INDENT: 108pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt">&#160;</div>
    <div style="TEXT-ALIGN: justify; LINE-HEIGHT: 1.25; TEXT-INDENT: 108pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">(iii)<font id="TAB2" style="LETTER-SPACING: 9pt">&#160;&#160;&#160;</font>&#160;Purchaser
shall provide written notice to Creditor that (i) Purchaser has filed an action
(the &#8220;<font style="DISPLAY: inline; TEXT-DECORATION: underline">New
Action</font>&#8221;) against PEI in the Court for collection of such Additional
Claim, specifying the date that the New Action was commenced (the &#8220;<font style="DISPLAY: inline; TEXT-DECORATION: underline">New Action Commencement
Date</font>&#8221;), and (ii) a motion in the New Action has been filed seeking Court
approval of the settlement of the New Action on terms acceptable to Purchaser
and in accordance with Section 3(a)(10) of the Securities Act of 1933, as
amended (the &#8220;<font style="DISPLAY: inline; TEXT-DECORATION: underline">Applicable
Settlement</font>&#8221;).</font></div>
    <div style="LINE-HEIGHT: 1.25; TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="TEXT-ALIGN: justify; LINE-HEIGHT: 1.25; TEXT-INDENT: 0pt; DISPLAY: block"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">If the
foregoing three items have not been provided by Purchaser to Creditor by the
close of business on the third business day after the date Creditor has provided
to Purchaser the Option Exercise Notice and New Purchase Agreement pertaining to
such Additional Claim, then this Agreement&#160;&#160;shall be deemed void <font style="DISPLAY: inline; TEXT-DECORATION: underline">ab initio</font> and of no
further force or effect as to such Additional Claim, and no Option exercise with
respect to such Additional Claim, or sale or assignment of such Additional
Claim, shall have occurred or be deemed to have occurred.</font></div>
    <div style="LINE-HEIGHT: 1.25; TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="TEXT-ALIGN: justify; LINE-HEIGHT: 1.25; TEXT-INDENT: 72pt; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">(d)<font id="TAB2" style="LETTER-SPACING: 9pt">&#160;&#160;&#160;</font></font><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt"><font style="DISPLAY: inline; TEXT-DECORATION: underline">Court Approval
Notice</font>.&#160;&#160;With respect to any Additional Claim, Purchaser shall
provide written notice to Creditor reasonably promptly after the Court has
entered an order in form and substance acceptable to Purchaser approving the
Applicable Settlement (such written notice being hereinafter referred to as the
&#8220;<font style="DISPLAY: inline; TEXT-DECORATION: underline">New Court Approval
Notice</font>&#8221;).&#160;&#160;In all events and circumstances,
if&#160;&#160;Purchaser has not provided the New Court Approval Notice by the
close of business on the tenth business day after the New Action Commencement
Date pertaining to such Additional Claim (regardless of whether Purchaser has
simply overlooked providing such notice by such tenth business day, is not in a
position to provide such notice by such tenth business day because the Court has
not entered an order approving the Applicable Settlement by such tenth business
day, or for any other reason in&#160;&#160;Purchaser&#8217;s sole discretion Purchase
has failed to timely provide the Court Approval Notice ), then Creditor shall
have the right to terminate and cancel this Agreement as to such Additional
Claim by providing written notice of termination to Purchaser at any time prior
to receiving the New Court Approval Notice from Purchaser.&#160;&#160;&#160;If
such termination is so effected by Creditor, then this Agreement shall be deemed
void <font style="DISPLAY: inline; TEXT-DECORATION: underline">ab initio</font>
and of no further force or effect as to such Additional Claim, and no Option
exercise with respect to such Additional Claim, or sale or assignment of such
Additional Claim, shall have occurred or be deemed to have
occurred.</font></div>
    <div style="TEXT-ALIGN: justify; LINE-HEIGHT: 1.25; TEXT-INDENT: 72pt; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt">&#160;</div>
    <div style="TEXT-ALIGN: justify; LINE-HEIGHT: 1.25; TEXT-INDENT: 72pt; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">(e)<font id="TAB2" style="LETTER-SPACING: 9pt">&#160;&#160;&#160;</font></font><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt"><font style="DISPLAY: inline; TEXT-DECORATION: underline">Payment of&#160;&#160;New
Purchase Price</font>.&#160;&#160;As to any Additional Claim, if the applicable
New Court Approval Notice is provided by Purchaser to Creditor before Creditor
has exercised any termination right set forth in sub-paragraph (d) immediately
above pertaining to such new Additional Claim, then no later than close of
business on the second business day after the date such New Court Approval
Notice is provided by Purchaser to Creditor,&#160;&#160;Purchaser shall pay the
New Purchase Price to Creditor by wire transfer to Creditor pursuant to the same
wire transfer instructions set forth in sub-paragraph (c) of Section 3 above
(the date upon which the New Purchase Price has been so timely paid by Purchaser
to Creditor being hereinafter referred to as the &#8220;<font style="DISPLAY: inline; TEXT-DECORATION: underline">New Payment
Date</font>&#8221;).&#160;&#160;If payment of the New Purchase Price is not so timely
made by Purchaser to Creditor on the New Payment Date applicable to such
Additional Claim, then Creditor shall have the right to terminate and cancel
this Agreement as to such Additional Claim by providing written notice of
termination to Purchaser at any time prior to payment of the New Purchase Price
pertaining to such Additional Claim.&#160;&#160;If such termination is so
effected by Creditor, then this Agreement shall be deemed void <font style="DISPLAY: inline; TEXT-DECORATION: underline">ab initio</font> and of no
further force or effect as to such Additional Claim, and no Option exercise with
respect to such Additional Claim, or sale or assignment of such Additional
Claim, shall have occurred or be deemed to have occurred.</font></div>
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    <div style="TEXT-ALIGN: justify; LINE-HEIGHT: 1.25; TEXT-INDENT: 72pt; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt">&#160;</div>
    <div style="TEXT-ALIGN: justify; LINE-HEIGHT: 1.25; TEXT-INDENT: 72pt; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">(f)<font id="TAB2" style="LETTER-SPACING: 9pt">&#160;&#160;&#160;</font></font><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">With
respect to any Additional Claim, upon (and only upon) the occurrence of the
following three conditions subsequent:&#160;&#160;(i) the three items specified
in sub-paragraphs (i) through (iii) of sub-paragraph (c) of this Section 6
having been timely provided to Creditor by Purchaser pursuant to such
sub-paragraph (c), (ii) the New Court Approval Notice pertaining to such
Additional Claim having been provided by Purchaser to Creditor before Creditor
has exercised any termination right pursuant to sub-paragraph (d) of this
Section 6,&#160;&#160;and (iii) the payment to Creditor of the New Purchase
Price for such Additional Claim before Creditor has exercised any termination
right pursuant to sub-paragraph (e) of this Section 6,</font></div>
    <div style="TEXT-ALIGN: justify; LINE-HEIGHT: 1.25; TEXT-INDENT: 72pt; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt">&#160;</div>
    <div style="TEXT-ALIGN: justify; LINE-HEIGHT: 1.25; TEXT-INDENT: 108pt; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">(x)<font id="TAB2" style="LETTER-SPACING: 9pt">&#160;&#160;&#160;</font>&#160;All
conditions subsequent shall have been satisfied and the sale and assignment of
such Additional Claim shall be complete and indefeasible; and</font></div>
    <div style="TEXT-ALIGN: justify; LINE-HEIGHT: 1.25; TEXT-INDENT: 108pt; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt">&#160;</div>
    <div style="TEXT-ALIGN: justify; LINE-HEIGHT: 1.25; TEXT-INDENT: 108pt; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">(y)<font id="TAB2" style="LETTER-SPACING: 9pt">&#160;&#160;&#160;</font>&#160;Prior to the
close of business on the second business day after the occurrence of the four
conditions subsequent (as applied to such Additional Claim) described above in
this sub-paragraph (f) of this Section 6, Creditor shall execute for the benefit
of PEI and attach to the Note a new Allonge/Amendment to the Note, similar to
the form of <font style="DISPLAY: inline; TEXT-DECORATION: underline">Exhibit
1</font> hereto but modified to reflect the correct principal reduction of the
Note corresponding to the principal component of such Additional Claim as
specified in the applicable Option Exercise Notice (a&#160;&#160;&#8220;<font style="DISPLAY: inline; TEXT-DECORATION: underline">New
Allonge/Amendment</font>&#8221;), attesting to the reduction of the principal amount
of the Note by such amount on and as of the Payment Date, acknowledging the
payment of any interest and reimbursable fees or expenses that were included in
such Additional Claim (as specified in the applicable Option Exercise
Notice),&#160;&#160;and preserving all other claims to accrued and unpaid
interest and reimbursable fees or expenses.&#160;&#160;Creditor agrees that this
sub-paragraph (y) is for the protection and benefit of PEI, and accordingly
agrees that in the event that the conditions subsequent described above in this
sub-paragraph (y) are satisfied with respect to an Additional Claim (including
that the New Purchase Price for such Additional Claim is timely paid on the New
Payment Date applicable to such Additional Claim), (A) Creditor will supply a
copy of the executed New Allonge/Amendment to PEI promptly following its
execution, and (B)&#160;Creditor&#8217;s obligation to execute the New
Allonge/Amendment&#160;&#160;and supply a copy thereof to PEI shall be
enforceable by PEI as a third-party beneficiary of this provision.</font></div>
    <div style="LINE-HEIGHT: 1.25; TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="TEXT-ALIGN: justify; LINE-HEIGHT: 1.25; TEXT-INDENT: 72pt; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">(g)<font id="TAB2" style="LETTER-SPACING: 9pt">&#160;&#160;&#160;</font></font><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">Creditor
shall have no obligation whatsoever to exercise any Option, including, without
limitation, any obligation to exercise any further Option after exercising one
or more Options.&#160;&#160;The provisions of&#160;&#160;this Section 6 apply to
any Additional Claim as to which an Option has been exercised by Creditor, in
Creditor&#8217;s sole and absolute discretion.&#160;&#160;Creditor has not agreed (and
does not anywhere in this Agreement agree) to exercise any Option or any number
of Options.&#160;&#160;Unless and until Creditor exercises an Option with
respect to an Additional Claim by providing an Option Exercise Notice with
respect to such Additional Claim, Creditor has in no way restricted itself from
taking any action with respect to, or dealing with and treating with, such
Additional Claim as Creditor sees fit in Creditor&#8217;s sole
discretion.&#160;&#160;In addition, Creditor&#8217;s exercise of an option with
respect to an Additional Claim shall in no way restrict Creditor from taking any
action with respect to, or dealing with and treating with, all or any portion of
the remainder of the outstanding the outstanding Indebtedness.</font></div>
    <div style="LINE-HEIGHT: 1.25; TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="TEXT-ALIGN: justify; LINE-HEIGHT: 1.25; TEXT-INDENT: 36pt; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">7.<font id="TAB2" style="LETTER-SPACING: 9pt">&#160;&#160;&#160;</font></font><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt"><font style="DISPLAY: inline; TEXT-DECORATION: underline">Fees and
Expenses</font>.&#160; Each&#160;&#160;of Creditor and Purchaser shall pay the
fees and expenses of its own advisers, counsel, accountants and other experts,
if any, and all other expenses incurred by such party incident to the
negotiation, preparation, execution, delivery and performance of this
Agreement.&#160; Creditor understands that Purchaser shall not be liable for any
commissions, selling expenses, orders, purchases, contracts, taxes, withholding,
or obligations of any kind resulting from any of Creditor&#8217;s
transactions.&#160;&#160;Creditor agrees to satisfy any and all of its tax
withholding and other obligations from the Purchase Price,&#160;&#160;and will
indemnify, defend and hold Purchaser and its affiliates harmless with respect to
all such obligations.</font></div>
    <div style="TEXT-ALIGN: justify; LINE-HEIGHT: 1.25; TEXT-INDENT: 36pt; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt">&#160;</div>
    <div id="PGBRK" style="TEXT-INDENT: 0pt; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt">
      <div id="FTR">
        <div id="GLFTR" style="WIDTH: 100%" align="left">
        </div>
      </div>
      <div id="PN" style="PAGE-BREAK-AFTER: always; WIDTH: 100%">
        <div style="TEXT-ALIGN: center; WIDTH: 100%"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">-7-</font></div>
        <div style="TEXT-ALIGN: center; WIDTH: 100%">
          <hr style="COLOR: black" noshade size="1">
        </div>
      </div>
      <div id="HDR">
        <div id="GLHDR" style="WIDTH: 100%" align="right">
        </div>
      </div>
    </div>
    <div style="TEXT-ALIGN: justify; LINE-HEIGHT: 1.25; TEXT-INDENT: 36pt; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt">&#160;</div>
    <div style="TEXT-ALIGN: justify; LINE-HEIGHT: 1.25; TEXT-INDENT: 36pt; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">8.<font id="TAB2" style="LETTER-SPACING: 9pt">&#160;&#160;&#160;</font></font><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt"><font style="DISPLAY: inline; TEXT-DECORATION: underline">Choice of Law</font>.&#160;
This Agreement shall be governed by and construed according to the laws of the
State of California, without giving effect to its choice of law
principles.&#160; Creditor agrees that all actions and proceedings arising out
of or relating directly or indirectly to this Agreement or any ancillary
agreement or any other obligations shall be litigated solely and exclusively in
the state or federal courts located in Los Angeles, California, that such courts
are convenient forums, and that Creditor submits to the personal jurisdiction of
such courts for purposes of any such actions or proceedings.</font></div>
    <div style="TEXT-ALIGN: justify; LINE-HEIGHT: 1.25; TEXT-INDENT: 36pt; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt">&#160;</div>
    <div style="TEXT-ALIGN: justify; LINE-HEIGHT: 1.25; TEXT-INDENT: 36pt; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">9.<font id="TAB2" style="LETTER-SPACING: 9pt">&#160;&#160;&#160;</font></font><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt"><font style="DISPLAY: inline; TEXT-DECORATION: underline">Limitation of
Damages</font>.&#160; Each of the parties hereby waives any right which it may
have to claim or recover any incidental, special, exemplary, punitive or
consequential damages or any damages other than, or in addition to, actual
damages.&#160; Purchaser shall have no liability hereunder for any delay in or
failure to obtain Court Approval or any New Court Approval, or for any other
causes beyond Purchaser&#8217;s control.</font></div>
    <div style="TEXT-ALIGN: justify; LINE-HEIGHT: 1.25; TEXT-INDENT: 36pt; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt">&#160;</div>
    <div style="TEXT-ALIGN: justify; LINE-HEIGHT: 1.25; TEXT-INDENT: 36pt; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">10.<font id="TAB2" style="LETTER-SPACING: 9pt">&#160;&#160;&#160;</font></font><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt"><font style="DISPLAY: inline; TEXT-DECORATION: underline">Notices</font>.&#160;&#160;All
notices and other communications shall be in writing and shall be provided by
the transmitting party to the recipient party by overnight delivery, facsimile
transmission, e-mail or U.S. mail, as follows:</font></div>
    <div style="LINE-HEIGHT: 1.25; TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify">
    </div>
    <div>&#160;</div>
    <div align="center">
      <table bgcolor="white" cellpadding="0" cellspacing="0" width="100%" style="FONT-FAMILY: times new roman; FONT-SIZE: 10pt; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">
<tr>
            <td width="10%"><font style="FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;</font></td>
            <td valign="top" width="23%"><font style="FONT-FAMILY: times new roman; FONT-SIZE: 10pt">If to
      Purchaser:</font></td>
            <td width="67%">
              <div><font style="FONT-FAMILY: times new roman; FONT-SIZE: 10pt">Socius CG
      II, Ltd. </font></div>
              <div><font style="FONT-FAMILY: times new roman; FONT-SIZE: 10pt"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt; FONT-WEIGHT: bold">11150
      Santa Monica Blvd., Suite 1500</font></font></div>
              <div><font style="FONT-FAMILY: times new roman; FONT-SIZE: 10pt"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">Los
      Angeles, CA&#160;&#160;90025</font></font></div>
              <div><font style="FONT-FAMILY: times new roman; FONT-SIZE: 10pt"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">Att&#8217;n:&#160;&#160;Terren
      Peizer</font></font></div>
              <div><font style="FONT-FAMILY: times new roman; FONT-SIZE: 10pt"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">Fax
      No.:&#160;&#160;(310) 444-5300</font></font></div>
              <div><font style="FONT-FAMILY: times new roman; FONT-SIZE: 10pt"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">Email:&#160;&#160;info@sociuscg.com</font></font></div>
              <div style="LINE-HEIGHT: 1.25; TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;</font></div>
              <div style="LINE-HEIGHT: 1.25; TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">with
      a copy to:</font></div>
              <div style="LINE-HEIGHT: 1.25; TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;</font></div>
              <div style="LINE-HEIGHT: 1.25; TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">Luce
      Forward Hamilton &amp; Scripps LLP</font></div>
              <div style="LINE-HEIGHT: 1.25; TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">601
      South Figueroa St., Suite 3900</font></div>
              <div style="LINE-HEIGHT: 1.25; TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">Los
      Angeles, CA&#160;&#160;90017</font></div>
              <div style="LINE-HEIGHT: 1.25; TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">Att&#8217;n:&#160;&#160;John
      C. Kirkland, Esq.</font></div>
              <div style="LINE-HEIGHT: 1.25; TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">Fax
      No.:&#160;&#160;(213) 452-8035</font></div>
              <div style="LINE-HEIGHT: 1.25; TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">Email:&#160;&#160;jkirkland@luce.com</font></div>
            </td>
          </tr><tr>
            <td width="10%"><font style="FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;</font></td>
            <td width="23%"><font style="FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;</font></td>
            <td width="67%"><font style="FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;</font></td>
          </tr><tr>
            <td width="10%"><font style="FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;</font></td>
            <td valign="top" width="23%"><font style="FONT-FAMILY: times new roman; FONT-SIZE: 10pt">If to
      Creditor:</font></td>
            <td width="67%">
              <div><font style="FONT-FAMILY: times new roman; FONT-SIZE: 10pt">Lyles
      United, LLC </font></div>
              <div><font style="FONT-FAMILY: times new roman; FONT-SIZE: 10pt"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">1210
      W. Olive Ave.</font></font></div>
              <div><font style="FONT-FAMILY: times new roman; FONT-SIZE: 10pt"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">Fresno,
      CA&#160;&#160;93728</font></font></div>
              <div><font style="FONT-FAMILY: times new roman; FONT-SIZE: 10pt"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">Att&#8217;n:&#160;&#160;Will
      Lyles</font></font></div>
              <div><font style="FONT-FAMILY: times new roman; FONT-SIZE: 10pt"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">Fax
      No.:&#160;&#160;(559) 441-1290</font></font></div>
              <div><font style="FONT-FAMILY: times new roman; FONT-SIZE: 10pt"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">Email:&#160;&#160;wlyles@ldico.com</font></font></div>
              <div style="LINE-HEIGHT: 1.25; TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;</font></div>
              <div style="LINE-HEIGHT: 1.25; TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">with
      a copy to:</font></div>
              <div style="LINE-HEIGHT: 1.25; TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;</font></div>
              <div style="LINE-HEIGHT: 1.25; TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">Howard
      Rice Nemerovski Canady Falk &amp; Rabkin, P.C.</font></div>
              <div style="LINE-HEIGHT: 1.25; TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">Three
      Embarcadero Center, 7th Floor</font></div>
              <div style="LINE-HEIGHT: 1.25; TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">San
      Francisco, CA&#160;&#160;94111</font></div>
              <div style="LINE-HEIGHT: 1.25; TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">Att&#8217;n:&#160;&#160;Jeffrey
      L. Schaffer, Esq.</font></div>
              <div style="LINE-HEIGHT: 1.25; TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">Fax
      No.:&#160;&#160;(415) 677-6262</font></div>
              <div style="LINE-HEIGHT: 1.25; TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">Email:&#160;&#160;jschaffer@howardrice.com</font></div>
            </td>
          </tr></table>
    </div>
    <div>&#160;</div>
    <div id="PGBRK" style="TEXT-INDENT: 0pt; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt">
      <div id="FTR">
        <div id="GLFTR" style="WIDTH: 100%" align="left">
        </div>
      </div>
      <div id="PN" style="PAGE-BREAK-AFTER: always; WIDTH: 100%">
        <div style="TEXT-ALIGN: center; WIDTH: 100%"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">-8-</font></div>
        <div style="TEXT-ALIGN: center; WIDTH: 100%">
          <hr style="COLOR: black" noshade size="1">
        </div>
      </div>
      <div id="HDR">
        <div id="GLHDR" style="WIDTH: 100%" align="right">
        </div>
      </div>
    </div>
    <div>&#160;</div>
    <div style="TEXT-ALIGN: justify; LINE-HEIGHT: 1.25; TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">All
notices and communications shall be deemed made and effective as
follows:&#160;&#160;(i) if transmitted for overnight (next-day) delivery via a
nationally recognized overnight delivery service, the first business day after
being delivered by the transmitting party to such overnight delivery service,
provided that the overnight delivery service maintains a tracking number and can
confirm to the transmitting party that delivery to the recipient party has
occurred (and otherwise upon delivery to the recipient party), (ii) if faxed,
when transmitted in legible form by facsimile machine to the recipient party&#8217;s
correct facsimile machine number (provided that the transmitting party has
retained its facsimile machine-generated confirmation of the receipt of such fax
by the recipient party&#8217;s facsimile machine), (iii) if by email, when transmitted
by e-mail (provided that the e-mail was sent to the recipient party&#8217;s correct
e-mail address and that the e-mail was not returned to the transmitting party as
undeliverable), or (iv) if mailed via regular U.S. mail, upon delivery to the
recipient party.&#160;&#160;Either party may designate a superseding notice
contact name, street address, e-mail address or fax number by providing the
other party with written notice pursuant to the provisions of this Section
10.</font></div>
    <div style="LINE-HEIGHT: 1.25; TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="TEXT-ALIGN: justify; LINE-HEIGHT: 1.25; TEXT-INDENT: 36pt; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">11.<font id="TAB2" style="LETTER-SPACING: 9pt">&#160;&#160;&#160;</font></font><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt"><font style="DISPLAY: inline; TEXT-DECORATION: underline">General</font>.&#160; The
headings herein are for convenience only, do not constitute a part of this
Agreement and shall not be deemed to limit or affect any of the provisions
hereof.&#160; The language used in this Agreement will be deemed to be the
language chosen by the parties to express their mutual intent, and no rules of
strict construction will be applied against any party.&#160; This Agreement is
intended for the benefit of Creditor and Purchaser and their respective
successors and permitted assigns and is not for the benefit of, nor may any
provision hereof be enforced by, any other person (except for the provision in
sub-paragraph (b) of Section 3 above and in subparagraph (y) of subparagraph (f)
of Section 6 above that is expressly stated to be for the benefit of, and
enforceable by, PEI).&#160;&#160;The representations and warranties contained
herein shall survive the closing of the transaction contemplated herein and the
assignment of the Subject $5 Million Claim or any Additional Claim, as
applicable.&#160; This Agreement may be executed in two or more counterparts, by
facsimile or electronic transmission, all of which when taken together shall be
considered one original.&#160;</font></div>
    <div style="TEXT-ALIGN: justify; LINE-HEIGHT: 1.25; TEXT-INDENT: 36pt; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt">&#160;</div>
    <div style="TEXT-ALIGN: justify; LINE-HEIGHT: 1.25; TEXT-INDENT: 36pt; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">12.<font id="TAB2" style="LETTER-SPACING: 9pt">&#160;&#160;&#160;</font></font><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt"><font style="DISPLAY: inline; TEXT-DECORATION: underline">Amendments and
Waivers</font>.&#160; No provision of this Agreement may be waived or amended
except in a written instrument signed, in the case of an amendment, by both
Creditor and Purchaser, or, in the case of a waiver, by the party against whom
enforcement of any such waiver is sought.&#160; No waiver of any default with
respect to any provision, condition or requirement of this Agreement shall be
deemed to be a continuing waiver in the future or a waiver of any subsequent
default or a waiver of any other provision, condition or requirement hereof, nor
shall any delay or omission of either Creditor or Purchaser to exercise any
right hereunder in any manner impair the exercise of any such
right.</font></div>
    <div style="TEXT-ALIGN: justify; LINE-HEIGHT: 1.25; TEXT-INDENT: 36pt; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt">&#160;</div>
    <div style="TEXT-ALIGN: justify; LINE-HEIGHT: 1.25; TEXT-INDENT: 36pt; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">13.<font id="TAB2" style="LETTER-SPACING: 9pt">&#160;&#160;&#160;</font></font><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt"><font style="DISPLAY: inline; TEXT-DECORATION: underline">Entire
Agreement</font>.&#160; This Agreement, together with the exhibits&#160;hereto,
contains the entire agreement and understanding between Creditor and Purchaser,
and supersedes all prior and contemporaneous agreements, term sheets, letters,
discussions, communications and understandings, both oral and written, between
Creditor and Purchaser concerning the sale and assignment of the Subject $5
Million Claim and any Additional Claim, as applicable, which Creditor and
Purchaser acknowledge have been merged into this Agreement.&#160; No party,
representative, attorney or agent has relied upon any collateral contract,
agreement, assurance, promise, understanding or representation not expressly set
forth hereinabove.&#160; The parties hereby expressly waive all rights and
remedies, at law and in equity, directly or indirectly arising out of or
relating to, or which may arise as a result of, any person or entity&#8217;s reliance
on any such assurance.&#160;</font></div>
    <div style="TEXT-ALIGN: justify; LINE-HEIGHT: 1.25; TEXT-INDENT: 36pt; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt">&#160;</div>
    <div id="PGBRK" style="TEXT-INDENT: 0pt; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt">
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        <div id="GLFTR" style="WIDTH: 100%" align="left">
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WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed on the day and year first above written.</font></div>
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              <div align="left"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">LYLES
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                <div align="left"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">a
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      IV</font></font></div>
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        <div style="TEXT-ALIGN: center; WIDTH: 100%"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">-10-</font></div>
        <div style="TEXT-ALIGN: center; WIDTH: 100%">
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PEI</font></font></div>
    <div style="LINE-HEIGHT: 1.25; TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="LINE-HEIGHT: 1.25; TEXT-INDENT: 0pt; DISPLAY: block"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">&#160;</font></div>
    <div style="TEXT-ALIGN: justify; LINE-HEIGHT: 1.25; TEXT-INDENT: 36pt; DISPLAY: block"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">PEI
hereby acknowledges and agrees as follows:</font></div>
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    <div style="TEXT-ALIGN: justify; LINE-HEIGHT: 1.25; TEXT-INDENT: 36pt; DISPLAY: block"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">(1)<font id="TAB2" style="LETTER-SPACING: 9pt">&#160;&#160;&#160;</font>&#160;The recitals
in Recital Paragraphs A, B and C on the first page of the foregoing Agreement
are true and correct;</font></div>
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assignment of the Subject $5 Million Claim only covers and includes $5,000,000
of principal amount of the Note, Creditor reserves and preserves all of its
other claims and interests under or in connection with the Note (including,
without limitation, all interest on such $5,000,000 principal amount that is
accrued and unpaid as of immediately before the sale and assignment of the
Subject $5 Million Claim pursuant to the foregoing Agreement), and Creditor&#8217;s
sale and assignment of the Subject $5 Million Claim does not and shall not in
any way prejudice or have any adverse effect on such other claims and interests
of Creditor under or in connection with the Note;</font></div>
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execution, delivery and performance of the foregoing Agreement by Creditor and
Purchaser does not and will not (a) conflict with, violate or cause a breach or
default under the Note, any of the Credit Enhancement Documents, or any other
agreement or document related to the debt comprising the Subject $5 Million
Claim, or (b) require any waiver, consent or other action of PEI or any
affiliate of PEI;</font></div>
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valid, outstanding and enforceable in accordance with its terms, and is not
subject to any defense or offset, and shall not become subject to any defense or
offset (other than reduction of the principal amount of the Note by $5 million
when and as provided in sub-paragraph (b) of Paragraph 3 of the foregoing
Agreement) by virtue of the consummation of the sale and assignment under the
foregoing Agreement; and Creditor has, and shall continue to have after the
consummation of the sale and assignment under the foregoing Agreement, a valid,
enforceable and perfected security interest in and liens upon the property of
PEI or any of its affiliates in which Creditor has been granted a security
interest pursuant to any of the Credit Enhancement Documents to secure all
outstanding obligations under the Note or any of the Credit Enhancement
Documents; and</font></div>
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    <div style="TEXT-ALIGN: justify; LINE-HEIGHT: 1.25; TEXT-INDENT: 36pt; DISPLAY: block"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">(5)<font id="TAB2" style="LETTER-SPACING: 9pt">&#160;&#160;&#160;</font>&#160;Creditor is
relying on the foregoing acknowledgments and agreements by PEI in entering into
this Agreement and in selling and assigning the Subject $5 Million Claim, and
Purchaser is relying on the foregoing acknowledgments and agreements by PEI in
entering into this Agreement and in purchasing and taking assignment of the
Subject $5 Million Claim.</font></div>
    <div style="LINE-HEIGHT: 1.25; TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="LINE-HEIGHT: 1.25; TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify">
    </div>
    <div>&#160;</div>
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<tr>
            <td width="50%"><font style="FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;</font></td>
            <td width="50%">
              <div align="left"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">PACIFIC
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              <div align="left">
                <div align="left"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">a
      Delaware corporation</font></div>
                <div align="left"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;</font></div>
                <div align="left"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">By:
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      KOEHLER</font><font id="TAB2" style="LETTER-SPACING: 3pt; COLOR: black">&#160;</font></font></div>
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      Neil M. Koehler, Chief Executive
Officer</font></div>
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    <div style="TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt"><font style="DISPLAY: inline; FONT-WEIGHT: bold">EXHIBIT 1 (FORM OF ALLONGE/AMENDMENT
NO. 1)</font></font></div>
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    <div style="TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt; FONT-WEIGHT: bold">ALLONGE/AMENDMENT
NO. 1 TO AMENDED AND RESTATED </font><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt; FONT-WEIGHT: bold">PROMISSORY
NOTE</font></div>
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    <div style="LINE-HEIGHT: 1.25; TEXT-INDENT: 0pt; DISPLAY: block"><br></div>
    <div style="TEXT-ALIGN: justify; LINE-HEIGHT: 1.25; TEXT-INDENT: 36pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">This
Allonge/Amendment No. 1 To Amended And Restated Promissory Note (&#8220;this
Allonge/Amendment&#8221;) is made and entered into on and effective as
of&#160;&#160;[fill in the Payment Date, as defined in the foregoing Purchase
and Option Agreement] (the &#8220;Operative Date&#8221;) with reference to the following
facts:</font></div>
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    <div style="TEXT-ALIGN: justify; LINE-HEIGHT: 1.25; TEXT-INDENT: 36pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">A<font id="TAB2" style="LETTER-SPACING: 9pt">&#160;&#160;&#160;</font>&#160;Pacific
Ethanol, Inc., a Delaware corporation (&#8220;PEI&#8221;), is the maker of and Borrower
under that certain Amended And Restated Promissory Note dated as of November 7,
2008 in the face principal amount of $30,000,000 (the &#8220;Note&#8221;) payable to Lyles
United, LLC, a Delaware limited liability company (the &#8220;Lender&#8221;);
and</font></div>
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its receipt of $5,000,000 from Socius CG II, Ltd., a Bermuda exempted company
&#8220;the &#8220;Purchaser&#8221;), has consummated the sale and assignment to Purchaser of a
claim for $5,000,000 of the $30,000,000 principal amount of the Note on and as
of the Operative Date, and therefore enters into this Allonge/Amendment to
evidence the reduction of the outstanding principal amount of the Note owing by
PEI to Lender by $5,000,000,&#160;&#160;thereby reducing the outstanding
principal amount of the Note owing by PEI to Lender from $30,000,000 to
$25,000,000.&#160;&#160;&#160;Such sale and assignment by Lender to Purchaser
expressly excluded (i) any accrued and unpaid interest, or any reimbursable fees
or expenses owing under the Note as of immediately before the Operative Date,
and accordingly all such accrued and unpaid interest and any such fees or
expenses are unaffected by such sale/assignment to Purchaser, and remain owing
to Lender under the Note, and (ii) any and all security interests or other
credit enhancements in favor of Lender in connection with the Note, and
accordingly all such security interests and any other credit enhancements
granted to Lender in connection with the Note are unaffected by such
sale/assignment to Purchaser and remain the sole property rights and interests
of Lender.</font></div>
    <div style="TEXT-ALIGN: justify; LINE-HEIGHT: 1.25; TEXT-INDENT: 36pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt">&#160;</div>
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THEREFORE, for good and valuable consideration, the adequacy and receipt of
which are hereby acknowledged, Borrower and Lender hereby agree as
follows:</font></div>
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Operative Date, the outstanding principal balance of the Note owing from PEI to
Lender is reduced from Thirty Million Dollars ($30,000,000) to Twenty-Five
Million Dollars ($25,000,000).</font></div>
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accrued and unpaid interest and any reimbursable fees or expenses under the Note
as of immediately before the Operative
Date&#160;&#160;(including&#160;&#160;accrued and unpaid interest on the full
$30,000,000 original face principal amount of the Note) remains due and
payable&#160;&#160;to Lender under the Note and is not affected by (i) the
above-described assignment and sale, or (ii) the reduction of the principal
amount of the Note to $25,000,000 as of the Operative
Date.&#160;&#160;&#160;From on and after the Operative Date, interest on and
under the Note in favor of Lender shall accrue on the reduced (i.e.,
$25,000,000) principal amount of the Note in favor of Lender.</font></div>
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expressly set forth in this Allonge/Amendment, all terms and conditions of the
Note shall remain in full force and effect.&#160;&#160;&#160;Without limiting
the generality of the foregoing, this Allonge/Amendment does not encompass or
constitute a waiver of any outstanding default under the Note or any type of
extension of the maturity date or any payment due date under the
Note.</font></div>
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effective as of the Operative Date, this Allonge/Amendment shall be attached to
the Note and shall be deemed an integral part of the Note.</font></div>
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    <div style="LINE-HEIGHT: 1.25; TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify">
      <div>&#160;</div>
      <div align="center">
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<tr>
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                <div style="TEXT-INDENT: 0pt; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">BORROWER:</font></div>&#160;</td>
              <td width="50%">
                <div align="left"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">PACIFIC
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                <div align="left">
                  <div align="left"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">a
      Delaware corporation</font></div>
                  <div align="left"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;</font></div>
                  <div align="left"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">By:&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;</font></font></div>
                  <div align="left"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">Its:___________________________________________</font></font></div>
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              <td width="50%"><font style="FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;</font></td>
            </tr><tr>
              <td width="50%"><font style="FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;</font></td>
              <td width="50%"><font style="FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;</font></td>
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              </td>
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                <div align="left"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">LYLES
      UNITED, LLC,</font></div>
                <div align="left">
                  <div align="left"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">a
      Delaware limited liability company</font></div>
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              <td width="50%"><font style="FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;</font></td>
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              <td width="50%"><font style="FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;</font></td>
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                <div align="left"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">Its:___________________________________________</font></font></div>
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      <div><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">&#160;</font></div>
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          </div>
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        <div id="PN" style="PAGE-BREAK-AFTER: always; WIDTH: 100%">
          <div style="TEXT-ALIGN: center; WIDTH: 100%"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">-13-</font></div>
          <div style="TEXT-ALIGN: center; WIDTH: 100%">
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          </div>
        </div>
        <div id="HDR">
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          </div>
        </div>
      </div>
      <div><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt; FONT-WEIGHT: bold">&#160;</font></div>
      <div style="TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt; FONT-WEIGHT: bold">EXHIBIT
2 (FORM OF OPTION EXERCISE NOTICE)</font></div>
      <div style="TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">OPTION
EXERCISE&#160;&#160;NOTICE</font></div>
    </div>
    <div style="LINE-HEIGHT: 1.25; TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">&#160;</font></div>
    <div style="TEXT-ALIGN: justify; LINE-HEIGHT: 1.25; TEXT-INDENT: 36pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">Reference
is made to that certain Purchase and Option Agreement by and between Socius CG
II, Ltd., a Bermuda exempted company (&#8220;Purchaser&#8221;) and Lyles United, LLC, a
Delaware limited liability company (&#8220;Creditor&#8221;), dated as of March 2, 2010 (the
&#8220;Agreement&#8221;).&#160;&#160;All capitalized words and terms used herein shall have
the meanings ascribed to them in the Purchase Agreement.</font></div>
    <div style="TEXT-ALIGN: justify; LINE-HEIGHT: 1.25; TEXT-INDENT: 36pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt">&#160;</div>
    <div style="TEXT-ALIGN: justify; LINE-HEIGHT: 1.25; TEXT-INDENT: 36pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">1.<font id="TAB2" style="LETTER-SPACING: 9pt">&#160;&#160;&#160;</font>&#160;This Option
Exercise Notice is made and executed by Creditor
on&#160;&#160;&#160;______________&#160;&#160;pursuant to Section 6 of the
Agreement.</font></div>
    <div style="TEXT-ALIGN: justify; LINE-HEIGHT: 1.25; TEXT-INDENT: 36pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt">&#160;</div>
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hereby exercises an Option with respect to the following portion
of&#160;&#160;the Indebtedness outstanding as of the date hereof:</font></div>
    <div style="TEXT-ALIGN: left; LINE-HEIGHT: 1.25; TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt">
    </div>
    <div>&#160;</div>
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      <table bgcolor="white" cellpadding="0" cellspacing="0" width="100%" style="FONT-FAMILY: times new roman; FONT-SIZE: 10pt; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">
<tr>
            <td width="5%"><font style="FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;</font></td>
            <td width="5%"><font style="FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;</font></td>
            <td width="5%"><font style="FONT-FAMILY: times new roman; FONT-SIZE: 10pt">a.</font></td>
            <td width="24%"><font style="FONT-FAMILY: times new roman; FONT-SIZE: 10pt">Principal:</font></td>
            <td width="60%"><font style="FONT-FAMILY: times new roman; FONT-SIZE: 10pt">$
      __________________</font></td>
          </tr><tr>
            <td width="5%"><font style="FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;</font></td>
            <td width="5%"><font style="FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;</font></td>
            <td width="5%"><font style="FONT-FAMILY: times new roman; FONT-SIZE: 10pt">b.</font></td>
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      Interest:</font></td>
            <td width="60%"><font style="FONT-FAMILY: times new roman; FONT-SIZE: 10pt">$
      __________________</font></td>
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            <td width="5%"><font style="FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;</font></td>
            <td width="5%"><font style="FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;</font></td>
            <td width="5%"><font style="FONT-FAMILY: times new roman; FONT-SIZE: 10pt">c.</font></td>
            <td width="24%"><font style="FONT-FAMILY: times new roman; FONT-SIZE: 10pt">Reimbursable Fees or
      Expenses:</font></td>
            <td width="60%"><font style="FONT-FAMILY: times new roman; FONT-SIZE: 10pt">$
      __________________</font></td>
          </tr><tr>
            <td width="5%"><font style="FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;</font></td>
            <td width="5%"><font style="FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;</font></td>
            <td width="5%"><font style="FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;</font></td>
            <td width="24%"><font style="FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;</font></td>
            <td width="60%"><font style="FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;</font></td>
          </tr><tr>
            <td width="5%"><font style="FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;</font></td>
            <td width="5%"><font style="FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;</font></td>
            <td width="5%"><font style="FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;</font></td>
            <td width="24%"><font style="FONT-FAMILY: times new roman; FONT-SIZE: 10pt">TOTAL:</font></td>
            <td width="60%"><font style="FONT-FAMILY: times new roman; FONT-SIZE: 10pt">$ <font style="DISPLAY: inline; TEXT-DECORATION: underline">5,000,000.00</font><font style="FONT-SIZE: 70%; VERTICAL-ALIGN: text-top"><a href="#ref.id0eubbi">*</a></font></font></td>
          </tr></table>
    </div>
    <div><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;</font></div>
    <div style="TEXT-ALIGN: justify; LINE-HEIGHT: 1.25; TEXT-INDENT: 36pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">3.<font id="TAB2" style="LETTER-SPACING: 9pt">&#160;&#160;&#160;</font>&#160;The portion
of the outstanding Indebtedness set forth in Section 2 above is the Additional
Claim that is the subject of and covered by this Option Exercise Notice (&#8220;the
Subject Claim&#8221;).</font></div>
    <div style="TEXT-ALIGN: justify; LINE-HEIGHT: 1.25; TEXT-INDENT: 36pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt">&#160;</div>
    <div style="TEXT-ALIGN: justify; LINE-HEIGHT: 1.25; TEXT-INDENT: 36pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">4.<font id="TAB2" style="LETTER-SPACING: 9pt">&#160;&#160;&#160;</font>&#160;By this
Option Exercise Notice, Creditor hereby elects and exercises its option to sell,
transfer, convey and assign to Purchaser all of Creditor&#8217;s right, title and
interest to the Subject Claim (subject to the satisfaction of the conditions
subsequent set forth in Section 6 of the Purchase Agreement), and provides to
Purchaser herewith a New Purchase Agreement pertaining to the Subject
Claim.</font></div>
    <div style="LINE-HEIGHT: 1.25; TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify">
      <div>&#160;</div>
      <div align="center">
        <table bgcolor="white" cellpadding="0" cellspacing="0" width="100%" style="FONT-FAMILY: times new roman; FONT-SIZE: 10pt; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">
<tr>
              <td valign="top" width="50%">
                <div style="TEXT-INDENT: 0pt; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;</font></div>&#160;</td>
              <td width="50%">
                <div align="left"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">LYLES
      UNITED, LLC,</font></div>
                <div align="left">
                  <div align="left"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">a
      Delaware limited liability company</font></div>
                  <div align="left"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;</font></div>
                  <div align="left"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">By:&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;</font></font></div>
                  <div align="left"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">Its:___________________________________________</font></font></div>
                </div>
              </td>
            </tr></table>
      </div>
      <div><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">&#160;</font></div>
    </div>
    <div style="LINE-HEIGHT: 1.25; TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="LINE-HEIGHT: 1.25; TEXT-INDENT: 36pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div>&#160;</div>
    <div>&#160;</div>
    <div><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">&#160;</font>

      <div>
        <hr style="COLOR: black" align="left" noshade size="1" width="15%">
      </div>
    </div>
    <div><a name="ref.ID0EUBBI"><!--EFPlaceholder-->
</a>
      <div style="LINE-HEIGHT: 1.25; TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt"><font style="DISPLAY: inline; FONT-SIZE: 10pt">* The Additional Claim covered by each
Option and corresponding Option Exercise Notice will be $5,000,000 except for
the final Option that may be exercised and corresponding Option Exercise Notice
that may be generated when the then-outstanding Indebtedness is less than
$5,000,000, in which final case the amount of the Additional Claim will be the
amount of the then-outstanding Indebtedness.</font></font></div>
    </div>
    <div>&#160;</div>
    <div id="PGBRK" style="TEXT-INDENT: 0pt; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt">
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      <div id="PN" style="PAGE-BREAK-AFTER: always; WIDTH: 100%">
        <div style="TEXT-ALIGN: center; WIDTH: 100%"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">-14-</font></div>
        <div style="TEXT-ALIGN: center; WIDTH: 100%">
          <hr style="COLOR: black" noshade size="1">
        </div>
      </div>
      <div id="HDR">
        <div id="GLHDR" style="WIDTH: 100%" align="right">
        </div>
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    <div>&#160;</div>
    <div style="TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt"><font style="DISPLAY: inline; FONT-WEIGHT: bold">EXHIBIT 3 (FORM OF NEW PURCHASE
AGREEMENT)</font></font></div>
    <div style="LINE-HEIGHT: 1.25; TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="LINE-HEIGHT: 1.25; TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt"><font style="DISPLAY: inline; TEXT-DECORATION: underline">PURCHASE
AGREEMENT</font></font></div>
    <div style="LINE-HEIGHT: 1.25; TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="TEXT-ALIGN: justify; LINE-HEIGHT: 1.25; TEXT-INDENT: 36pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">This
Purchase Agreement (&#8220;<font style="DISPLAY: inline; TEXT-DECORATION: underline">Agreement</font>&#8221;) is
entered into as of
[&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;],
2010, by and between Socius CG II, Ltd., a Bermuda exempted company (&#8220;<font style="DISPLAY: inline; TEXT-DECORATION: underline">Purchaser</font>&#8221;), and
Lyles United, LLC, a Delaware limited liability company (&#8220;<font style="DISPLAY: inline; TEXT-DECORATION: underline">Creditor</font>&#8221;), and, as
to the Acknowledgment at the end of this Agreement, by Pacific Ethanol, Inc., a
Delaware corporation (&#8220;<font style="DISPLAY: inline; TEXT-DECORATION: underline">PEI</font>&#8221;).</font></div>
    <div style="LINE-HEIGHT: 1.25; TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="LINE-HEIGHT: 1.25; TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">RECITALS</font></div>
    <div style="LINE-HEIGHT: 1.25; TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="TEXT-ALIGN: justify; LINE-HEIGHT: 1.25; TEXT-INDENT: 36pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">A.<font id="TAB2" style="LETTER-SPACING: 9pt">&#160;&#160;&#160;</font>&#160;Purchaser and
Creditor are parties to (and PEI has executed the &#8220;Acknowledgment By PEI&#8221; with
respect to) that certain Purchase and Option Agreement dated as of March 2, 2010
(the &#8220;<font style="DISPLAY: inline; TEXT-DECORATION: underline">Master
Agreement</font>&#8221;); except as otherwise expressly stated herein, all capitalized
words and terms used herein have the meanings ascribed to them in the Master
Agreement;</font></div>
    <div style="TEXT-ALIGN: justify; LINE-HEIGHT: 1.25; TEXT-INDENT: 36pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt">&#160;</div>
    <div style="TEXT-ALIGN: justify; LINE-HEIGHT: 1.25; TEXT-INDENT: 36pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">B.<font id="TAB2" style="LETTER-SPACING: 9pt">&#160;&#160;&#160;</font>&#160;PEI is
indebted to Creditor pursuant to the terms of that certain Amended and Restated
Promissory Note, payable to Creditor, dated November 7, 2008, in the principal
amount of $30,000,000 (the &#8220;<font style="DISPLAY: inline; TEXT-DECORATION: underline">Note</font>&#8221;).</font></div>
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    <div style="TEXT-ALIGN: justify; LINE-HEIGHT: 1.25; TEXT-INDENT: 36pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">C.<font id="TAB2" style="LETTER-SPACING: 9pt">&#160;&#160;&#160;</font>&#160;The
obligations of PEI to Creditor under the Note are secured and/or credit enhanced
by the terms of (i) that certain Security Agreement dated as of November 7, 2008
between Pacific Ag. Products, LLC, a California limited liability company and
indirectly wholly-owned subsidiary of PEI, and Creditor (the &#8220;<font style="DISPLAY: inline; TEXT-DECORATION: underline">Security Agreement</font>&#8221;),
(ii) that certain Irrevocable Joint Instruction Letter dated November 7, 2008
among PEI, Pacific Ethanol California, Inc., a California corporation and
wholly-owned subsidiary of PEI, and Creditor (the &#8220;<font style="DISPLAY: inline; TEXT-DECORATION: underline">Instruction Letter</font>&#8221;),
(iii) that certain Unconditional Guaranty dated November 7, 2008 by Pacific Ag.
Products, LLC in favor of Creditor (the &#8220;<font style="DISPLAY: inline; TEXT-DECORATION: underline">PacAg Guaranty</font>&#8221;), and
(iv)&#160;that certain Limited Recourse Guaranty dated November 7, 2008 by
Pacific Ethanol California, Inc. in favor of Creditor (the &#8220;<font style="DISPLAY: inline; TEXT-DECORATION: underline">PEC Guaranty</font>&#8221;) (the
Security Agreement, Instruction Letter, PacAg Guaranty and PEC Guaranty
hereinafter are collectively referred to as the &#8220;<font style="DISPLAY: inline; TEXT-DECORATION: underline">Credit Enhancement
Documents</font>&#8221;).</font></div>
    <div style="TEXT-ALIGN: justify; LINE-HEIGHT: 1.25; TEXT-INDENT: 36pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt">&#160;</div>
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date of this Agreement, PEI is in default under the Note, and is indebted to
Creditor for unpaid principal in the amount of $________________.&#160;&#160;PEI
is also indebted to Creditor for accrued and unpaid interest, late fees and
costs, and reimbursable fees or expenses related to the Note and the defaults
thereunder, for a total amount due and payable by PEI to Creditor
of&#160;&#160;$______________ (consisting of
$__________________&#160;&#160;principal amount, plus $______________in unpaid
interest accrued through ________________, plus ______________ in reimbursable
fees or expenses as of the date hereof (such total amount, plus all additional
interest that accrues on the unpaid principal balance under the Note on and
after _____________________,&#160;&#160;being collectively referred to herein as
the &#8220;<font style="DISPLAY: inline; TEXT-DECORATION: underline">Indebtedness</font>&#8221;).</font></div>
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    <div style="TEXT-ALIGN: justify; LINE-HEIGHT: 1.25; TEXT-INDENT: 36pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">E.<font id="TAB2" style="LETTER-SPACING: 9pt">&#160;&#160;&#160;</font>&#160;Pursuant to
Section 6 of the Master Agreement, Creditor has exercised an Option to sell,
transfer and assign to Purchaser its right to receive payment on a portion of
the Indebtedness, which portion is specified in the Option Exercise Notice
provided by Creditor to Purchaser herewith&#160;&#160;(such portion of the
Indebtedness&#160;&#160;being hereinafter referred to as the &#8220;<font style="DISPLAY: inline; TEXT-DECORATION: underline">Subject
Claim</font>&#8221;).&#160;&#160;Pursuant to such exercise by
Creditor,&#160;&#160;Purchaser desires to purchase the Subject Claim, all
subject to the terms and conditions set forth below.</font></div>
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    <div style="TEXT-ALIGN: justify; LINE-HEIGHT: 1.25; TEXT-INDENT: 36pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt">&#160;</div>
    <div style="TEXT-ALIGN: justify; LINE-HEIGHT: 1.25; TEXT-INDENT: 36pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">NOW,
THEREFORE, in consideration of the agreements contained herein and for other
good and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto hereby agree as follows:</font></div>
    <div style="TEXT-ALIGN: justify; LINE-HEIGHT: 1.25; TEXT-INDENT: 36pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt">&#160;</div>
    <div style="TEXT-ALIGN: justify; LINE-HEIGHT: 1.25; TEXT-INDENT: 36pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">1.<font id="TAB2" style="LETTER-SPACING: 9pt">&#160;&#160;&#160;</font><font style="DISPLAY: inline; TEXT-DECORATION: underline">Purchase and Sale of Subject
Claim; Excluded Rights: Purchase Price</font>.&#160;</font></div>
    <div style="TEXT-ALIGN: justify; LINE-HEIGHT: 1.25; TEXT-INDENT: 36pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt">&#160;</div>
    <div style="TEXT-ALIGN: justify; LINE-HEIGHT: 1.25; TEXT-INDENT: 72pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">(a)&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Upon
the terms of this Agreement and subject only to the conditions subsequent set
forth in Section 2 below, Purchaser hereby purchases from Creditor, and Creditor
hereby sells, transfers, conveys and assigns to Purchaser, for the consideration
specified below, all right, title and interest in and to the Subject
Claim.&#160;&#160;It is expressly understood and agreed by the parties that the
Subject Claim does not include, and the Purchaser under this Agreement is not
purchasing or otherwise obtaining, (i) any rights under the Credit Enhancement
Documents, which Creditor hereby expressly retains and preserves for its own
benefit, (ii) except to the extent (if at all) expressly made part of the
Subject Claim pursuant to the specific described components of the Subject Claim
set forth in the Option Exercise Notice, any and all claims for accrued and
unpaid interest owing to Creditor by PEI as of the date hereof under or in
connection with the Note, including, without limitation, all accrued and unpaid
interest on the Subject Claim as of the date hereof, all of which claims are
expressly retained and preserved by Creditor for its own benefit, and (iii)
except to the extent (if at all) expressly made part of the Subject Claim
pursuant to the specific described components of the Subject Claim set forth in
the Option Exercise Notice, any and all claims of Creditor against PEI for
reimbursable fees or expenses under or in connection with the Note, which are
expressly retained and preserved by Creditor for its own benefit.</font></div>
    <div style="TEXT-ALIGN: justify; LINE-HEIGHT: 1.25; TEXT-INDENT: 72pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt">&#160;</div>
    <div style="TEXT-ALIGN: justify; LINE-HEIGHT: 1.25; TEXT-INDENT: 72pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">(b)<font id="TAB2" style="LETTER-SPACING: 9pt">&#160;&#160;&#160;</font>&#160;The total
consideration to be paid by Purchaser to Creditor for the Subject Claim shall be
[Five Million Dollars ($5,000,000)]<font style="FONT-SIZE: 70%; VERTICAL-ALIGN: text-top"><a href="#ref.ID0EJPBI">1</a></font> (the &#8220;<font style="DISPLAY: inline; TEXT-DECORATION: underline">Purchase
Price</font>&#8221;).&#160;&#160;The Purchase Price shall be due and payable by
Purchaser to Creditor by wire transfer on the date set forth in sub-paragraph
(b) of Section 2 below.</font></div>
    <div style="LINE-HEIGHT: 1.25; TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">&#160;</font></div>
    <div style="TEXT-ALIGN: justify; LINE-HEIGHT: 1.25; TEXT-INDENT: 36pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">2.<font id="TAB2" style="LETTER-SPACING: 9pt">&#160;&#160;&#160;</font><font style="DISPLAY: inline; TEXT-DECORATION: underline">Conditions
Subsequent</font>.</font></div>
    <div style="TEXT-ALIGN: justify; LINE-HEIGHT: 1.25; TEXT-INDENT: 36pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt">&#160;</div>
    <div style="TEXT-ALIGN: justify; LINE-HEIGHT: 1.25; TEXT-INDENT: 72pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">(a)<font id="TAB2" style="LETTER-SPACING: 9pt">&#160;&#160;&#160;</font><font style="DISPLAY: inline; TEXT-DECORATION: underline">Notice of Filing of Action
and Settlement Motion</font>.&#160;&#160;&#160;No later than close of business
on the third business day after the date of this Agreement, Purchaser shall
provide written notice to Creditor that (i) Purchaser has filed an action (the
&#8220;<font style="DISPLAY: inline; TEXT-DECORATION: underline">Action</font>&#8221;)
against PEI in the Superior Court of the State of California for the County of
Los Angeles (the &#8220;<font style="DISPLAY: inline; TEXT-DECORATION: underline">Court</font>&#8221;) for
collection of the Subject Claim, specifying the date that the Action was
commenced (the &#8220;<font style="DISPLAY: inline; TEXT-DECORATION: underline">Action
Commencement Date</font>&#8221;), and (ii)&#160;a motion in the Action has been filed
seeking Court approval of the settlement of the Action on terms acceptable to
Purchaser and in accordance with Section 3(a)(10) of the Securities Act of 1933,
as amended (the &#8220;<font style="DISPLAY: inline; TEXT-DECORATION: underline">Settlement</font>&#8221;).&#160;&#160;&#160;If
such written notice is not provided by Purchaser to Creditor by the close of
business on the third business day after the date of this Agreement, then this
Agreement&#160;&#160;(including, without limitation, the provisions in the
remainder of this Section 2) shall be deemed void <font style="DISPLAY: inline; TEXT-DECORATION: underline">ab initio</font> and of no
further force or effect, and no sale or assignment of the Subject Claim shall
have occurred or be deemed to have occurred.</font></div>
    <div style="TEXT-ALIGN: justify; LINE-HEIGHT: 1.25; TEXT-INDENT: 72pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt">&#160;</div>
    <div style="TEXT-ALIGN: justify; LINE-HEIGHT: 1.25; TEXT-INDENT: 72pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">(b)<font id="TAB2" style="LETTER-SPACING: 9pt">&#160;&#160;&#160;</font><font style="DISPLAY: inline; TEXT-DECORATION: underline">Court Approval
Notice</font>.&#160;&#160;Purchaser shall provide written notice to Creditor
reasonably promptly after the Court has entered an order in form and substance
acceptable to Purchaser approving the Settlement (such written notice being
hereinafter referred to as the &#8220;<font style="DISPLAY: inline; TEXT-DECORATION: underline">Court Approval
Notice</font>&#8221;).&#160;&#160;In all events and circumstances,
if&#160;&#160;Purchaser has not provided the Court Approval Notice by the close
of business on the tenth business day after the Action Commencement Date
(regardless of whether Purchaser has simply overlooked providing such notice by
such tenth business day, is not in a position to provide such notice by such
tenth business day because the Court has not entered an order approving the
Settlement by such tenth business day, or for any other reason
in&#160;&#160;Purchaser&#8217;s sole discretion Purchase has failed to timely provide
the Court Approval Notice), then Creditor shall have the right to terminate and
cancel this Agreement by providing written notice of termination to Purchaser at
any time prior to receiving the Court Approval Notice from
Purchaser.&#160;&#160;If such termination is so effected by Creditor, then this
Agreement shall be deemed void <font style="DISPLAY: inline; TEXT-DECORATION: underline">ab initio</font> and of no
further force or effect, and no sale or assignment of the Subject Claim shall
have occurred or be deemed to have occurred.</font></div>
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    <div style="LINE-HEIGHT: 1.25; TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font size="1">1</font> The Subject Claim and the Purchase Price
thereof will be $5,000,000 except for the final Option that may be exercised and
corresponding Option Exercise Notice that may be generated when the
then-outstanding Indebtedness is less than $5,000,000, in which final case the
amount of the Subject Claim and the Purchase Price thereof will be the amount of
the then-outstanding Indebtedness.</div>
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        <div style="TEXT-ALIGN: center; WIDTH: 100%"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">-16-</font></div>
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    <div style="LINE-HEIGHT: 1.25; TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="TEXT-ALIGN: justify; LINE-HEIGHT: 1.25; TEXT-INDENT: 72pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">(c)<font id="TAB2" style="LETTER-SPACING: 9pt">&#160;&#160;&#160;</font><font style="DISPLAY: inline; TEXT-DECORATION: underline">Payment of Purchase
Price</font>.&#160;&#160;If the Court Approval Notice is provided by Purchaser
to Creditor before Creditor has exercised any termination right set forth in
sub-paragraph (b) immediately above, then no later than close of business on the
second business day after the date the Court Approval Notice is provided by
Purchaser to Creditor, Purchaser shall pay the Purchase Price to Creditor by
wire transfer pursuant to the wire transfer instructions set forth in
sub-paragraph (c) of Section 2 of the Master Agreement, as the same may be
amended or superseded by Creditor from time to time by written notice pursuant
to Section 10 of the Master Agreement (the date upon which the Purchase Price
has been so timely paid by Purchaser to Creditor being hereinafter referred to
as the &#8220;<font style="DISPLAY: inline; TEXT-DECORATION: underline">Payment
Date</font>&#8221;).</font></div>
    <div style="LINE-HEIGHT: 1.25; TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="TEXT-ALIGN: justify; LINE-HEIGHT: 1.25; TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">If
payment of the Purchase Price is not so timely made by Purchaser to Creditor on
the Payment Date, then Creditor shall have the right to terminate and cancel
this Agreement by providing written notice of termination to Purchaser at any
time prior to payment of the Purchase Price.&#160;&#160;If such termination is
so effected by Creditor, then this Agreement shall be deemed void <font style="DISPLAY: inline; TEXT-DECORATION: underline">ab initio</font> and of no
further force or effect, and no sale or assignment of the Subject Claim shall
have occurred or be deemed to have occurred.</font></div>
    <div style="LINE-HEIGHT: 1.25; TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="TEXT-ALIGN: justify; LINE-HEIGHT: 1.25; TEXT-INDENT: 36pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">3.<font id="TAB2" style="LETTER-SPACING: 9pt">&#160;&#160;&#160;</font>&#160;Upon (<font style="DISPLAY: inline; TEXT-DECORATION: underline">and</font> only upon) the
occurrence of the following four conditions subsequent:&#160;&#160;(i)&#160;the
items specified in sub-paragraphs (i) and (ii) of subparagraph (c) of Section 6
of the Master Agreement, as such items pertain to this Agreement, having been
timely provided by Purchaser to Creditor, (ii)&#160;written notice of the Action
Commencement Date and of the filing of the motion for Court approval of the
Settlement having been timely provided to Creditor by Purchaser pursuant to
sub-paragraph (a) of Section 2 above, (iii) the Court Approval Notice having
been provided by Purchaser to Creditor before Creditor has exercised any
termination right pursuant to sub-paragraph (b) of Section 2 above, and (iv) the
payment of the Purchase Price to Creditor before Creditor has exercised any
termination right pursuant to sub-paragraph (c) of Paragraph 2
above,</font></div>
    <div style="TEXT-ALIGN: justify; LINE-HEIGHT: 1.25; TEXT-INDENT: 36pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt">&#160;</div>
    <div style="TEXT-ALIGN: justify; LINE-HEIGHT: 1.25; TEXT-INDENT: 72pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">(a)<font id="TAB2" style="LETTER-SPACING: 9pt">&#160;&#160;&#160;</font></font><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">All
conditions subsequent shall have been satisfied and the sale and assignment of
the Subject Claim shall be complete and indefeasible, and</font></div>
    <div style="TEXT-ALIGN: justify; LINE-HEIGHT: 1.25; TEXT-INDENT: 72pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt">&#160;</div>
    <div style="TEXT-ALIGN: justify; LINE-HEIGHT: 1.25; TEXT-INDENT: 72pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">(b)<font id="TAB2" style="LETTER-SPACING: 9pt">&#160;&#160;&#160;</font></font><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">Prior to
the close of business on the second business day after the occurrence of the
four conditions subsequent described above in this Section 3, Creditor shall
take the actions set forth in sub-paragraph (y) of sub-paragraph (f) of Section
6 of the Master Agreement with respect to a New Allonge/Amendment that gives
effect to the consummation of the sale and assignment of the Subject Claim to
Purchaser.</font></div>
    <div style="LINE-HEIGHT: 1.25; TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">&#160;</font></div>
    <div style="TEXT-ALIGN: justify; LINE-HEIGHT: 1.25; TEXT-INDENT: 36pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">4.<font id="TAB2" style="LETTER-SPACING: 9pt">&#160;&#160;&#160;</font><font style="DISPLAY: inline; TEXT-DECORATION: underline">Representations and
Warranties of Creditor</font>.&#160; The representations and warranties made by
Creditor to Purchaser in Section 4 of the Master Agreement shall apply to this
Agreement as set forth in sub-paragraph (f) of Section 4 of the Master
Agreement.</font></div>
    <div style="TEXT-ALIGN: justify; LINE-HEIGHT: 1.25; TEXT-INDENT: 36pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt">&#160;</div>
    <div style="TEXT-ALIGN: justify; LINE-HEIGHT: 1.25; TEXT-INDENT: 36pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">5.<font id="TAB2" style="LETTER-SPACING: 9pt">&#160;&#160;&#160;</font><font style="DISPLAY: inline; TEXT-DECORATION: underline">Representations and
Warranties of Purchaser</font>.&#160; The representations and warranties made by
Purchaser to Creditor in Section 5 of the Master Agreement shall apply to this
Agreement as set forth in sub-paragraph (d) of Section 5 of the Master
Agreement.</font></div>
    <div style="TEXT-ALIGN: justify; LINE-HEIGHT: 1.25; TEXT-INDENT: 36pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt">&#160;</div>
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    <div style="TEXT-ALIGN: justify; LINE-HEIGHT: 1.25; TEXT-INDENT: 36pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt">&#160;</div>
    <div style="TEXT-ALIGN: justify; LINE-HEIGHT: 1.25; TEXT-INDENT: 36pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">6.<font id="TAB2" style="LETTER-SPACING: 9pt">&#160;&#160;&#160;</font><font style="DISPLAY: inline; TEXT-DECORATION: underline">Fees and
Expenses</font>.&#160; Each&#160;&#160;of Creditor and Purchaser shall pay the
fees and expenses of its own advisers, counsel, accountants and other experts,
if any, and all other expenses incurred by such party incident to the
negotiation, preparation, execution, delivery and performance of this
Agreement.&#160; Creditor understands that Purchaser shall not be liable for any
commissions, selling expenses, orders, purchases, contracts, taxes, withholding,
or obligations of any kind resulting from any of Creditor&#8217;s
transactions.&#160;&#160;Creditor agrees to satisfy any and all of its tax
withholding and other obligations from the Purchase Price,&#160;&#160;and will
indemnify, defend and hold Purchaser and its affiliates harmless with respect to
all such obligations.</font></div>
    <div style="TEXT-ALIGN: justify; LINE-HEIGHT: 1.25; TEXT-INDENT: 36pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt">&#160;</div>
    <div style="TEXT-ALIGN: justify; LINE-HEIGHT: 1.25; TEXT-INDENT: 36pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">7.<font id="TAB2" style="LETTER-SPACING: 9pt">&#160;&#160;&#160;</font><font style="DISPLAY: inline; TEXT-DECORATION: underline">Choice of Law</font>.&#160;
This Agreement shall be governed by and construed according to the laws of the
State of California, without giving effect to its choice of law
principles.&#160; Creditor agrees that all actions and proceedings arising out
of or relating directly or indirectly to this Agreement or any ancillary
agreement or any other obligations shall be litigated solely and exclusively in
the state or federal courts located in Los Angeles, California, that such courts
are convenient forums, and that Creditor submits to the personal jurisdiction of
such courts for purposes of any such actions or proceedings.</font></div>
    <div style="TEXT-ALIGN: justify; LINE-HEIGHT: 1.25; TEXT-INDENT: 36pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt">&#160;</div>
    <div style="TEXT-ALIGN: justify; LINE-HEIGHT: 1.25; TEXT-INDENT: 36pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">8.<font id="TAB2" style="LETTER-SPACING: 9pt">&#160;&#160;&#160;</font><font style="DISPLAY: inline; TEXT-DECORATION: underline">Limitation of
Damages</font>.&#160; Each of the parties hereby waives any right which it may
have to claim or recover any incidental, special, exemplary, punitive or
consequential damages or any damages other than, or in addition to, actual
damages.&#160; Purchaser shall have no liability hereunder for any delay in or
failure to obtain Court Approval or for any other causes beyond Purchaser&#8217;s
control.</font></div>
    <div style="TEXT-ALIGN: justify; LINE-HEIGHT: 1.25; TEXT-INDENT: 36pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt">&#160;</div>
    <div style="TEXT-ALIGN: justify; LINE-HEIGHT: 1.25; TEXT-INDENT: 36pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">9.<font id="TAB2" style="LETTER-SPACING: 9pt">&#160;&#160;&#160;</font><font style="DISPLAY: inline; TEXT-DECORATION: underline">Notices</font>.&#160;&#160;All
notices and other communications under this Agreement shall be provided as set
forth in Section 10 of the Master Agreement.</font></div>
    <div style="TEXT-ALIGN: justify; LINE-HEIGHT: 1.25; TEXT-INDENT: 36pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt">&#160;</div>
    <div style="TEXT-ALIGN: justify; LINE-HEIGHT: 1.25; TEXT-INDENT: 36pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">10.<font id="TAB2" style="LETTER-SPACING: 9pt">&#160;&#160;&#160;</font><font style="DISPLAY: inline; TEXT-DECORATION: underline">General</font>.&#160; The
headings herein are for convenience only, do not constitute a part of this
Agreement and shall not be deemed to limit or affect any of the provisions
hereof.&#160; The language used in this Agreement will be deemed to be the
language chosen by the parties to express their mutual intent, and no rules of
strict construction will be applied against any party.&#160; This Agreement is
intended for the benefit of Creditor and Purchaser and their respective
successors and permitted assigns and is not for the benefit of, nor may any
provision hereof be enforced by, any other person (except for the provision in
sub-paragraph (b) of Section 3 above that is expressly stated to be for the
benefit of, and enforceable by, PEI).&#160;&#160;The representations and
warranties contained herein shall survive the closing of the transaction
contemplated herein and the assignment of the Subject Claim.&#160; This
Agreement may be executed in two or more counterparts, by facsimile or
electronic transmission, all of which when taken together shall be considered
one original.&#160;</font></div>
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Creditor and Purchaser, or, in the case of a waiver, by the party against whom
enforcement of any such waiver is sought.&#160; No waiver of any default with
respect to any provision, condition or requirement of this Agreement shall be
deemed to be a continuing waiver in the future or a waiver of any subsequent
default or a waiver of any other provision, condition or requirement hereof, nor
shall any delay or omission of either Creditor or Purchaser to exercise any
right hereunder in any manner impair the exercise of any such
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the exhibits hereto and thereto, contain the entire agreement and understanding
between Creditor and Purchaser, and supersede all prior and contemporaneous
agreements, term sheets, letters, discussions, communications and
understandings, both oral and written, between Creditor and Purchaser concerning
the sale and assignment of the Subject Claim, which Creditor and Purchaser
acknowledge have been merged herein and therein.&#160;(To avoid any unintended
ambiguity, the parties expressly acknowledge and agreement that this Agreement,
although later in point in time than the Master Agreement, does not supersede
the Master Agreement.)&#160;&#160;No party, representative, attorney or agent
has relied upon any collateral contract, agreement, assurance, promise,
understanding or representation not expressly set forth hereinabove.&#160; The
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directly or indirectly arising out of or relating to, or which may arise as a
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WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
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Acknowledgment By PEI for New Purchase Agreement)</font></div>
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PEI</font></font></div>
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hereby acknowledges and agrees as follows as of the Action Commencement Date (as
defined in the foregoing Agreement) and as of the Payment Date (as defined in
the foregoing Agreement):</font></div>
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recitals in Recital Paragraphs A, B, C and D on the first page of the foregoing
Agreement are true and correct;</font></div>
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sale and assignment of the Subject Claim only covers and includes
$________________, Creditor reserves and preserves all of its other claims and
interests under or in connection with the Note, and Creditor&#8217;s sale and
assignment of the Subject Claim does not and shall not in any way prejudice or
have any adverse effect on such other claims and interests of Creditor under or
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execution, delivery and performance of the foregoing Agreement by Creditor and
Purchaser does not and will not (a) conflict with, violate or cause a breach or
default under the Note, any of the Credit Enhancement Documents, or any other
agreement or document related to the debt comprising the Subject Claim, or (b)
require any waiver, consent or other action of PEI or any affiliate of
PEI;</font></div>
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Note is valid, outstanding and enforceable in accordance with its terms, and is
not subject to any defense or offset, and shall not become subject to any
defense or offset (other than reduction of&#160;&#160;the Indebtedness by the
amount of the Subject Claim when and as provided in sub-paragraph (b) of
Paragraph 3 of the foregoing Agreement) by virtue of the consummation of the
sale and assignment under the foregoing Agreement; and Creditor has, and shall
continue to have after the consummation of the sale and assignment under the
foregoing Agreement, a valid, enforceable and perfected security interest in and
liens upon the property of PEI or any of its affiliates in which Creditor has
been granted a security interest pursuant to any of the Credit Enhancement
Documents to secure all outstanding obligations under the Note or any of the
Credit Enhancement Documents; and</font></div>
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is relying on the foregoing acknowledgments and agreements by PEI in entering
into the foregoing Agreement and in selling and assigning the Subject Claim, and
Purchaser is relying on the foregoing acknowledgments and agreements by PEI in
entering into the foregoing Agreement and in purchasing and taking assignment of
the Subject Claim.</font></div>
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<DOCUMENT>
<TYPE>EX-99.2
<SEQUENCE>4
<FILENAME>paceth_8k-ex9902.htm
<DESCRIPTION>OPTION/PURCHASE AGREEMENT - LYLES MECHANICAL CO. AND SOCIUS CG II, LTD.
<TEXT>
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    <div style="TEXT-ALIGN: left"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt; FONT-WEIGHT: bold">EXHIBIT
99.2</font></div>
    <div style="LINE-HEIGHT: 1.25; TEXT-INDENT: 0pt; DISPLAY: block"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">&#160;</font></div>
    <div style="TEXT-ALIGN: center; LINE-HEIGHT: 1.25; TEXT-INDENT: 0pt; DISPLAY: block"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt"><font style="DISPLAY: inline; TEXT-DECORATION: underline">OPTION/PURCHASE
AGREEMENT</font></font></div>
    <div style="LINE-HEIGHT: 1.25; TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="TEXT-ALIGN: justify; LINE-HEIGHT: 1.25; TEXT-INDENT: 36pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">This
Option/Purchase Agreement (&#8220;<font style="DISPLAY: inline; TEXT-DECORATION: underline">Agreement</font>&#8221;) is
entered into as of March 2, 2010, by and between Socius CG II, Ltd., a Bermuda
exempted company (&#8220;<font style="DISPLAY: inline; TEXT-DECORATION: underline">Purchaser</font>&#8221;), and
Lyles Mechanical Co., a California corporation (&#8220;<font style="DISPLAY: inline; TEXT-DECORATION: underline">Creditor</font>&#8221;), and, as
to the Acknowledgment at the end of this Agreement, by Pacific Ethanol, Inc., a
Delaware corporation (&#8220;<font style="DISPLAY: inline; TEXT-DECORATION: underline">PEI</font>&#8221;).</font></div>
    <div style="LINE-HEIGHT: 1.25; TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="LINE-HEIGHT: 1.25; TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">RECITALS</font></div>
    <div style="LINE-HEIGHT: 1.25; TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="TEXT-ALIGN: justify; LINE-HEIGHT: 1.25; TEXT-INDENT: 36pt; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">F.<font id="TAB2" style="LETTER-SPACING: 9pt">&#160;&#160;&#160;</font></font><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">PEI is
indebted to Creditor pursuant to the terms of that certain Promissory Note
(Final Payment), payable to Creditor, dated&#160;&#160;October 20, 2008. in the
principal amount of $1,500,000 (the &#8220;<font style="DISPLAY: inline; TEXT-DECORATION: underline">Note</font>&#8221;).</font></div>
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date of this Agreement, PEI is in default under the Note.&#160;&#160;PEI is also
indebted to Creditor for accrued and unpaid interest, for a total amount due and
payable by PEI to Creditor of&#160;&#160;$1,733,920 (consisting of $1,500,000
principal amount, plus $233,920 in unpaid interest accrued through February 28,
2010) as of the date hereof (such total amount, plus all additional interest
that accrues on the unpaid principal balance under the Note on and after
February 28, 2010, being collectively referred to herein as the
&#8220;Indebtedness&#8221;).</font></div>
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and Purchase desire Creditor to have the option in the future, to be exercised
at the sole and absolute discretion of Creditor, if at all, to sell, transfer
and assign to Purchaser the right of Creditor to receive payment of all of the
Indebtedness (the &#8220;<font style="DISPLAY: inline; TEXT-DECORATION: underline">Indebtedness Claim</font>&#8221;)
for a purchase price equal to the full amount of the Indebtedness Claim (the
&#8220;<font style="DISPLAY: inline; TEXT-DECORATION: underline">Purchase
Price</font>&#8221;).&#160;&#160;If such option is exercised by Creditor in its sole
and absolute discretion,&#160;&#160;then Purchaser desires to purchase the
Indebtedness Claim, all subject to the terms and conditions set forth
below.</font></div>
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    <div style="TEXT-ALIGN: justify; LINE-HEIGHT: 1.25; TEXT-INDENT: 36pt; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">NOW,
THEREFORE, in consideration of the agreements contained herein and for other
good and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto hereby agree as follows:</font></div>
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Claim</font></font></div>
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Option</font>.&#160;&#160;Creditor shall have the option (the &#8220;<font style="DISPLAY: inline; TEXT-DECORATION: underline">Option</font>&#8221;), to be
exercised at the sole and absolute discretion of Creditor, if at all, to sell,
transfer and assign to Purchaser the Indebtedness Claim.&#160;&#160;In order to
exercise the Option, Creditor shall provide Purchaser with written notice of its
exercise of&#160;&#160;such Option, substantially in the form attached as <font style="DISPLAY: inline; TEXT-DECORATION: underline">Exhibit 1</font> (the &#8220;<font style="DISPLAY: inline; TEXT-DECORATION: underline">Option Exercise
Notice</font>&#8221;), specifically identifying the dollar amount of the principal and
accrued and unpaid interest constituting the Indebtedness Claim as of the Option
Exercise Notice date.</font></div>
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Indebtedness Claim; Excluded Rights; Purchase Price</font>.&#160;&#160;Upon the
exercise of the Option by Creditor, Purchaser shall purchase from Creditor, and
Creditor shall sell, transfer, convey and assign to Purchaser, for the
consideration specified in the last sentence of this sub-paragraph (b), all
right, title and interest in and to the Indebtedness Claim as specified in the
Option Exercise Notice, subject to the conditions subsequent set forth
below.&#160;&#160;It is expressly understood and agreed by the parties that the
Indebtedness Claim shall not include, and the Purchaser under this Agreement
shall not be purchasing or otherwise obtaining, <font style="DISPLAY: inline; TEXT-DECORATION: underline">unless expressly included in
the Indebtedness Claim as described in the Option Exercise Notice, </font>any
rights of Creditor against PEI that do not arise under the Note, which Creditor
hereby expressly retains and preserves for its own benefit.</font></div>
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and Settlement Motion</font>.&#160;&#160;&#160;No later than close of business
on the third business day after Creditor has provided to Purchaser the Option
Exercise Notice, Purchaser shall provide written notice to Creditor that (i)
Purchaser has filed an action (the &#8220;<font style="DISPLAY: inline; TEXT-DECORATION: underline">Action</font>&#8221;) against PEI
in the Superior Court of the State of California in and for the County of Los
Angeles (the &#8220;<font style="DISPLAY: inline; TEXT-DECORATION: underline">Court</font>&#8221;) for
collection of the Indebtedness Claim, specifying the date that the Action was
commenced (the &#8220;<font style="DISPLAY: inline; TEXT-DECORATION: underline">Action
Commencement Date</font>&#8221;), and (ii) a motion in the Action has been filed
seeking Court approval of the settlement of the Action on terms acceptable to
Purchaser and in accordance with Section 3(a)(10) of the Securities Act of 1933,
as amended (the &#8220;<font style="DISPLAY: inline; TEXT-DECORATION: underline">Settlement</font>&#8221;).&#160;&#160;&#160;If
such written notice is not provided by Purchaser to Creditor by the close of
business on the third business day after the date Creditor has provided to
Purchaser the Option Exercise Notice,&#160;&#160;then this Agreement shall be
deemed void <font style="DISPLAY: inline; TEXT-DECORATION: underline">ab
initio</font> and of no further force or effect, and no Option exercise with
respect to the Indebtedness Claim, or sale or assignment of the Indebtedness
Claim, shall have occurred or be deemed to have occurred.</font></div>
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Notice</font>.&#160;&#160;Purchaser shall provide written notice to Creditor
reasonably promptly after the Court has entered an order in form and substance
acceptable to Purchaser approving the Settlement (such written notice being
hereinafter referred to as the &#8220;<font style="DISPLAY: inline; TEXT-DECORATION: underline">Court Approval
Notice</font>&#8221;).&#160;&#160;In all events and circumstances,
if&#160;&#160;Purchaser has not provided the Court Approval Notice by the close
of business on the tenth business day after the Action Commencement
Date&#160;&#160;pertaining to the Indebtedness Claim (regardless of whether
Purchaser has simply overlooked providing such notice by such tenth business
day, is not in a position to provide such notice by such tenth business day
because the Court has not entered an order approving the Applicable Settlement
by such tenth business day, or for any other reason in Purchaser&#8217;s sole
discretion Purchaser has failed to timely provide the Court Approval
Notice),&#160;&#160;then Creditor shall have the right to terminate and cancel
this Agreement by providing written notice of termination to Purchaser at any
time prior to receiving the Court Approval Notice from
Purchaser.&#160;&#160;&#160;If such termination is so effected by Creditor, then
this Agreement shall be deemed void <font style="DISPLAY: inline; TEXT-DECORATION: underline">ab initio</font> and of no
further force or effect, and no Option exercise with respect to the Indebtedness
Claim, or sale or assignment of the Indebtedness Claim, shall have occurred or
be deemed to have occurred.</font></div>
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of&#160;&#160;Purchase Price</font>.&#160;&#160;If the Court Approval Notice is
provided by Purchaser to Creditor before Creditor has exercised any termination
right set forth in sub-paragraph (d) immediately above, then no later than close
of business on the second business day after the date the Court Approval Notice
is provided by Purchaser to Creditor,&#160;&#160;Purchaser shall pay the
Purchase Price to Creditor by wire transfer to Creditor pursuant to the
following wire transfer instructions (the date upon which the Purchase Price has
been so timely paid by Purchaser to Creditor being hereinafter referred to as
the &#8220;<font style="DISPLAY: inline; TEXT-DECORATION: underline">Payment
Date</font>&#8221;);</font></div>
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    <div>&#160;</div>
    <div align="center">
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<tr>
            <td width="20%"><font style="FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;</font></td>
            <td width="15%">
              <div><font style="FONT-FAMILY: times new roman; FONT-SIZE: 10pt">Wire
      To:</font></div>
              <div><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;</font></div>
              <div><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">Citibank
      (West) FSB</font></div>
              <div><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">2303
      Kern St.</font></div>
              <div><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">Fresno,
      CA&#160;&#160;93721</font></div>
            </td>
            <td width="65%"><font style="FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;</font></td>
          </tr><tr>
            <td width="20%"><font style="FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;</font></td>
            <td width="15%"><font style="FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;</font></td>
            <td width="65%"><font style="FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;</font></td>
          </tr><tr>
            <td width="20%"><font style="FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;</font></td>
            <td width="15%"><font style="FONT-FAMILY: times new roman; FONT-SIZE: 10pt">ABA #:</font></td>
            <td width="65%"><font style="FONT-FAMILY: times new roman; FONT-SIZE: 10pt">xxx xxx
  xxx</font></td>
          </tr></table>
      <div>&#160;</div>
      <div id="PGBRK" style="TEXT-INDENT: 0pt; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt">
        <div id="FTR">
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          <div style="TEXT-ALIGN: center; WIDTH: 100%"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">-2-</font></div>
          <div style="TEXT-ALIGN: center; WIDTH: 100%">
            <hr style="COLOR: black" noshade size="1">
          </div>
        </div>
        <div id="HDR">
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          </div>
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      <div>&#160;</div>
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<tr>
              <td width="20%"><font style="FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;</font></td>
              <td valign="top" width="15%"><font style="FONT-FAMILY: times new roman; FONT-SIZE: 10pt">Account
    Party:</font></td>
              <td width="65%">
                <div><font style="FONT-FAMILY: times new roman; FONT-SIZE: 10pt">Lyles
      Mechanical Co.</font></div>
                <div><font style="FONT-FAMILY: times new roman; FONT-SIZE: 10pt"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">1210
      W. Olive Ave.</font></font></div>
                <div><font style="FONT-FAMILY: times new roman; FONT-SIZE: 10pt"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">Fresno,
      CA&#160;&#160;93744</font></font></div>
              </td>
            </tr><tr>
              <td width="20%"><font style="FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;</font></td>
              <td width="15%">
                <div><font style="FONT-FAMILY: times new roman; FONT-SIZE: 10pt">Account
      #:</font></div>
                <div><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">Contact:</font></div>
                <div><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">Phone
      #:</font></div>
              </td>
              <td width="65%">
                <div><font style="FONT-FAMILY: times new roman; FONT-SIZE: 10pt">xxxx
      xxxxx</font></div>
                <div>Ponnie Davis</div>
                <div>(559) 447-7420</div>
              </td>
            </tr></table>
      </div>
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    <div>&#160;</div>
    <div style="TEXT-ALIGN: justify; LINE-HEIGHT: 1.25; TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">If
payment of the Purchase Price is not so timely made by Purchaser to Creditor on
the Payment Date, then Creditor shall have the right to terminate and cancel
this Agreement by providing written notice of termination to Purchaser at any
time prior to payment of the Purchase Price.&#160;&#160;&#160;&#160;&#160;If
such termination is so effected by Creditor, then this Agreement shall be deemed
void <font style="DISPLAY: inline; TEXT-DECORATION: underline">ab initio</font>
and of no further force or effect, and no Option exercise with respect to the
Indebtedness Claim, or sale or assignment of the Indebtedness Claim, shall have
occurred or be deemed to have occurred.</font></div>
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    <div style="TEXT-ALIGN: justify; LINE-HEIGHT: 1.25; TEXT-INDENT: 72pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">(f)<font id="TAB2" style="LETTER-SPACING: 9pt">&#160;&#160;&#160;</font></font><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt"><font style="DISPLAY: inline; TEXT-DECORATION: underline">Satisfaction of Conditions
Subsequent</font>.&#160;&#160;Upon (and only upon) the occurrence of the
following four conditions subsequent:&#160;&#160;(i) the written notice of the
Action Commencement Date and of the filing of the motion for Court approval of
the Settlement having been timely provided to Creditor by Purchaser pursuant to
sub-paragraph (c) of this Section 1, (ii) the Court Approval Notice having been
provided by Purchaser to Creditor before Creditor has exercised any termination
right pursuant to sub-paragraph (d) of this Section 1, (iii) PEI has provided to
Creditor a new executed &#8220;Acknowledgment by PEI,&#8221; similar to the &#8220;Acknowledgment
by PEI&#8221; at the end of this Agreement but updated to speak as of the Option
Exercise Date and the date that the conditions subsequent described in this
sub-paragraph (f) are satisfied; and (iv) the payment to Creditor of the
Purchase Price before Creditor has exercised any termination right pursuant to
sub-paragraph (e) of this Section 1,</font></div>
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    <div style="TEXT-ALIGN: justify; LINE-HEIGHT: 1.25; TEXT-INDENT: 108pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">(x)<font id="TAB2" style="LETTER-SPACING: 9pt">&#160;&#160;&#160;</font>&#160;All
conditions subsequent shall have been satisfied and the sale and assignment of
the Indebtedness Claim shall be complete and indefeasible; and</font></div>
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    <div style="TEXT-ALIGN: justify; LINE-HEIGHT: 1.25; TEXT-INDENT: 108pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">(y)<font id="TAB2" style="LETTER-SPACING: 9pt">&#160;&#160;&#160;</font>&#160;Prior to the
close of business on the second business day after the occurrence of the four
conditions subsequent described above in this sub-paragraph (f) of this Section
1, Creditor shall deliver the Note to Purchaser endorsed over to Purchaser along
with a signed legend that &#8220;All claims to principal and interest and any other
amount hereunder have been sold and assigned to Purchaser&#8221;; and Purchaser, prior
to the close of business on the second business day after its receipt of the
Note, shall deliver the Note to PEI marked &#8220;CANCELLED; PAID IN FULL
PURSUANT&#160;&#160;TO CONSUMMATION OF SETTLEMENT WITH
PEI&#8221;.&#160;&#160;&#160;Each of Creditor and Purchaser agrees that its respective
obligation under sub-paragraph (y) is for the protection and benefit of PEI, and
accordingly agrees that in the event that the conditions subsequent described
above in this sub-paragraph (y) are satisfied with respect to the Indebtedness
Claim including that the Purchase Price is timely paid on the Payment Date),
(A)&#160;Creditor&#8217;s obligation to deliver the Note to Purchaser with the
above-specified legend shall be enforceable by PEI as a third-party beneficiary
of this provision, and (B) Purchaser&#8217;s obligation to deliver the Note to
Purchaser with the above-specified cancellation marking shall be enforceable by
PEI as a third-party beneficiary of this provision.</font></div>
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shall have no obligation whatsoever to exercise the Option.&#160;&#160;This
Agreement applies only to the Indebtedness Claim if and when the Option is ever
exercised, in Creditor&#8217;s sole and absolute discretion.&#160;&#160;Creditor has
not agreed (and does not anywhere in this Agreement agree) to exercise the
Option, and unless and until Creditor exercises the Option, Creditor has in no
way restricted itself from taking any action with respect to, or dealing with
and treating with, the Indebtedness and/or the Note as Creditor sees fit in
Creditor&#8217;s sole and absolute discretion.</font></div>
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        <div id="GLFTR" style="WIDTH: 100%" align="left">
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    <div style="TEXT-ALIGN: justify; LINE-HEIGHT: 1.25; TEXT-INDENT: 36pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">2.<font id="TAB2" style="LETTER-SPACING: 9pt">&#160;&#160;&#160;</font></font><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt"><font style="DISPLAY: inline; TEXT-DECORATION: underline">Representations and
Warranties of Creditor</font>.&#160; Upon any exercise of the Option by Creditor
in Creditor&#8217;s sole and absolute discretion by Creditor providing the Option
Exercise Notice to Purchaser, Creditor automatically shall be deemed to
represent and warrant to Purchaser as follows as of the date of the Option
Exercise Notice:</font></div>
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    <div style="TEXT-ALIGN: justify; LINE-HEIGHT: 1.25; TEXT-INDENT: 72pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">(a)<font id="TAB2" style="LETTER-SPACING: 9pt">&#160;&#160;&#160;</font></font><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">Creditor
is the owner of the Indebtedness Claim, free and clear of all liens and
encumbrances.&#160; Creditor has not previously transferred, encumbered or
released all or any part of the Indebtedness Claim.</font></div>
    <div style="TEXT-ALIGN: justify; LINE-HEIGHT: 1.25; TEXT-INDENT: 72pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt">&#160;</div>
    <div style="TEXT-ALIGN: justify; LINE-HEIGHT: 1.25; TEXT-INDENT: 72pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">(b)<font id="TAB2" style="LETTER-SPACING: 9pt">&#160;&#160;&#160;</font></font><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">Creditor
will at all times promptly withhold and pay any federal, state, local or foreign
taxes legally due and payable by Creditor as a result of payment of the Purchase
Price, including without limitation all income taxes, self employment taxes and
foreign entity withholding taxes.</font></div>
    <div style="TEXT-ALIGN: justify; LINE-HEIGHT: 1.25; TEXT-INDENT: 72pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt">&#160;</div>
    <div style="TEXT-ALIGN: justify; LINE-HEIGHT: 1.25; TEXT-INDENT: 72pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">(c)<font id="TAB2" style="LETTER-SPACING: 9pt">&#160;&#160;&#160;</font></font><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">Creditor
has all necessary power and authority to (i) execute, deliver and perform all of
its obligations under this Agreement, and (ii) sell and transfer the
Indebtedness Claim.&#160; Creditor has such knowledge and experience in business
and financial matters that it is able to protect its own interests and evaluate
the risks and benefits of entering into this Agreement.&#160;&#160;Creditor
acknowledges and agrees that it has had an opportunity to conducts its own due
diligence and consult with its own counsel, tax and financial advisors, and that
Creditor is not relying in that regard on Purchaser.&#160;&#160;Creditor
acknowledges that except as expressly set forth in Section 3 below, Purchaser is
not making any representations or warranties, including, without limitation,
about PEI.</font></div>
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execution, delivery and performance of this Agreement by Creditor has been duly
authorized by all requisite action on the part of Creditor, and has been duly
executed and delivered by Creditor.</font></div>
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expressly stated herein, Creditor is not, directly or indirectly, receiving any
consideration from or being compensated in any manner by, and will not at any
time in the future accept any consideration or compensation from, PEI, any
affiliate of PEI, or any other person for entering into this Agreement or
selling the Indebtedness Claim.</font></div>
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Warranties of Purchaser</font>.&#160; Upon any exercise of the Option by
Creditor in Creditor&#8217;s sole and absolute discretion by Creditor providing the
Option Exercise Notice to Purchase, Purchaser automatically shall be deemed to
represent and warrant to Creditor as follows as of the date of the Option
Exercise Notice:</font></div>
    <div style="TEXT-ALIGN: justify; LINE-HEIGHT: 1.25; TEXT-INDENT: 36pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt">&#160;</div>
    <div style="TEXT-ALIGN: justify; LINE-HEIGHT: 1.25; TEXT-INDENT: 72pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">(a)<font id="TAB2" style="LETTER-SPACING: 9pt">&#160;&#160;&#160;</font>&#160;Purchaser has
all necessary power and authority to execute, deliver and perform all of its
obligations under this Agreement.&#160;</font></div>
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    <div style="TEXT-ALIGN: justify; LINE-HEIGHT: 1.25; TEXT-INDENT: 72pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">(b)<font id="TAB2" style="LETTER-SPACING: 9pt">&#160;&#160;&#160;</font>&#160;The
execution, delivery and performance of this Agreement by Purchaser has been duly
authorized by all requisite action on the part of Purchaser, and has been duly
executed and delivered by Purchaser.</font></div>
    <div style="TEXT-ALIGN: justify; LINE-HEIGHT: 1.25; TEXT-INDENT: 72pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt">&#160;</div>
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an &#8220;accredited investor&#8221; as defined in Rule 501(a) of Regulation D of the
Securities Act and has such knowledge and experience in business and financial
matters that it is able to protect its own interests and evaluate the risks and
benefits of entering into this Agreement and purchasing the Indebtedness
Claim.&#160;&#160;Purchaser acknowledges and agrees that it has had an
opportunity to conducts its own due diligence and consult with its own counsel,
tax and financial advisors, and that Purchaser is not relying in that regard on
Creditor.&#160;&#160;Purchaser acknowledges that (i)&#160;except as expressly
set forth in Section 2 above, Creditor is not making any representations or
warranties about the Indebtedness Claim, and (ii) Creditor is not making any
representations or warranties about PEI.</font></div>
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        <div style="TEXT-ALIGN: center; WIDTH: 100%">
          <hr style="COLOR: black" noshade size="1">
        </div>
      </div>
      <div id="HDR">
        <div id="GLHDR" style="WIDTH: 100%" align="right">
        </div>
      </div>
    </div>
    <div style="LINE-HEIGHT: 1.25; TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="TEXT-ALIGN: justify; LINE-HEIGHT: 1.25; TEXT-INDENT: 36pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">4.<font id="TAB2" style="LETTER-SPACING: 9pt">&#160;&#160;&#160;</font></font><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt"><font style="DISPLAY: inline; TEXT-DECORATION: underline">Fees and
Expenses</font>.&#160; Each&#160;&#160;of Creditor and Purchaser shall pay the
fees and expenses of its own advisers, counsel, accountants and other experts,
if any, and all other expenses incurred by such party incident to the
negotiation, preparation, execution, delivery and performance of this
Agreement.&#160; Creditor understands that Purchaser shall not be liable for any
commissions, selling expenses, orders, purchases, contracts, taxes, withholding,
or obligations of any kind resulting from any of Creditor&#8217;s
transactions.&#160;&#160;Creditor agrees to satisfy any and all of its tax
withholding and other obligations from the Purchase Price,&#160;&#160;and will
indemnify, defend and hold Purchaser and its affiliates harmless with respect to
all such obligations.</font></div>
    <div style="TEXT-ALIGN: justify; LINE-HEIGHT: 1.25; TEXT-INDENT: 36pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt">&#160;</div>
    <div style="TEXT-ALIGN: justify; LINE-HEIGHT: 1.25; TEXT-INDENT: 36pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">5.<font id="TAB2" style="LETTER-SPACING: 9pt">&#160;&#160;&#160;</font></font><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt"><font style="DISPLAY: inline; TEXT-DECORATION: underline">Choice of Law</font>.&#160;
This Agreement shall be governed by and construed according to the laws of the
State of California, without giving effect to its choice of law
principles.&#160; Creditor agrees that all actions and proceedings arising out
of or relating directly or indirectly to this Agreement or any ancillary
agreement or any other obligations shall be litigated solely and exclusively in
the state or federal courts located in Los Angeles, California, that such courts
are convenient forums, and that Creditor submits to the personal jurisdiction of
such courts for purposes of any such actions or proceedings.</font></div>
    <div style="TEXT-ALIGN: justify; LINE-HEIGHT: 1.25; TEXT-INDENT: 36pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt">&#160;</div>
    <div style="TEXT-ALIGN: justify; LINE-HEIGHT: 1.25; TEXT-INDENT: 36pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">6.<font id="TAB2" style="LETTER-SPACING: 9pt">&#160;&#160;&#160;</font></font><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt"><font style="DISPLAY: inline; TEXT-DECORATION: underline">Limitation of
Damages</font>.&#160; Each of the parties hereby waives any right which it may
have to claim or recover any incidental, special, exemplary, punitive or
consequential damages or any damages other than, or in addition to, actual
damages.&#160; Purchaser shall have no liability hereunder for any delay in or
failure to obtain Court Approval, or for any other causes beyond Purchaser&#8217;s
control.</font></div>
    <div style="TEXT-ALIGN: justify; LINE-HEIGHT: 1.25; TEXT-INDENT: 36pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt">&#160;</div>
    <div style="TEXT-ALIGN: justify; LINE-HEIGHT: 1.25; TEXT-INDENT: 36pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">7.<font id="TAB2" style="LETTER-SPACING: 9pt">&#160;&#160;&#160;</font></font><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt"><font style="DISPLAY: inline; TEXT-DECORATION: underline">Notices</font>.&#160;&#160;All
notices and other communications shall be in writing and shall be provided by
the transmitting party to the recipient party by overnight delivery, facsimile
transmission, e-mail or U.S. mail, as follows:</font></div>
    <div style="LINE-HEIGHT: 1.25; TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="LINE-HEIGHT: 1.25; TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify">
      <div>&#160;</div>
      <div align="center">
        <table align="center" bgcolor="white" cellpadding="0" cellspacing="0" width="100%" style="FONT-FAMILY: times new roman; FONT-SIZE: 10pt; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">
<tr>
              <td width="10%"><font style="FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;</font></td>
              <td valign="top" width="23%"><font style="FONT-FAMILY: times new roman; FONT-SIZE: 10pt">If to
      Purchaser:</font></td>
              <td width="67%">
                <div><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">Socius
      CG II, Ltd.</font></div>
                <div><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">11150
      Santa Monica Blvd., Suite 1500</font></font></div>
                <div><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">Los
      Angeles, CA&#160;&#160;90025</font></font></div>
                <div><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">Att&#8217;n:&#160;&#160;Terren
      Peizer</font></font></div>
                <div><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">Fax
      No.:&#160;&#160;(310) 444-5300</font></font></div>
                <div><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">Email:&#160;&#160;info@sociuscg.com</font></font></div>
                <div><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;</font></div>
                <div><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">with
      a copy to:</font></font></div>
                <div>
                  <div style="LINE-HEIGHT: 1.25; TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;</font></div>
                  <div style="LINE-HEIGHT: 1.25; TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">Luce
      Forward Hamilton &amp; Scripps LLP</font></div>
                  <div style="LINE-HEIGHT: 1.25; TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">601
      South Figueroa St., Suite 3900</font></div>
                  <div style="LINE-HEIGHT: 1.25; TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">Los
      Angeles, CA&#160;&#160;90017</font></div>
                  <div style="LINE-HEIGHT: 1.25; TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">Att&#8217;n:&#160;&#160;John
      C. Kirkland, Esq.</font></div>
                  <div style="LINE-HEIGHT: 1.25; TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">Fax
      No.:&#160;&#160;(213) 452-8035</font></div>
                  <div style="LINE-HEIGHT: 1.25; TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">Email:&#160;&#160;jkirkland@luce.com</font></div>
                </div>
              </td>
            </tr><tr>
              <td width="10%"><font style="FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;</font></td>
              <td width="23%"><font style="FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;</font></td>
              <td width="67%"><font style="FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;</font></td>
            </tr><tr>
              <td width="10%"><font style="FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;</font></td>
              <td valign="top" width="23%"><font style="FONT-FAMILY: times new roman; FONT-SIZE: 10pt">If to
      Creditor:</font></td>
              <td width="67%">
                <div><font style="FONT-FAMILY: times new roman; FONT-SIZE: 10pt">Lyles
      Mechanical Co.</font></div>
                <div><font style="FONT-FAMILY: times new roman; FONT-SIZE: 10pt"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">1210
      W. Olive Ave.</font></font></div>
                <div><font style="FONT-FAMILY: times new roman; FONT-SIZE: 10pt"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">Fresno,
      CA&#160;&#160;93728</font></font></div>
                <div><font style="FONT-FAMILY: times new roman; FONT-SIZE: 10pt"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">Att&#8217;n:&#160;&#160;Will
      Lyles</font></font></div>
                <div><font style="FONT-FAMILY: times new roman; FONT-SIZE: 10pt"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">Fax
      No.:&#160;&#160;(559) 441-1290</font></font></div>
                <div><font style="FONT-FAMILY: times new roman; FONT-SIZE: 10pt"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">Email:&#160;&#160;wlyles@ldico.com</font></font></div>
              </td>
            </tr></table>
        <div>&#160;</div>
        <div id="PGBRK" style="TEXT-INDENT: 0pt; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt">
          <div id="FTR">
            <div id="GLFTR" style="WIDTH: 100%" align="left">
            </div>
          </div>
          <div id="PN" style="PAGE-BREAK-AFTER: always; WIDTH: 100%">
            <div style="TEXT-ALIGN: center; WIDTH: 100%"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">-5-</font></div>
            <div style="TEXT-ALIGN: center; WIDTH: 100%">
              <hr style="COLOR: black" noshade size="1">
            </div>
          </div>
          <div id="HDR">
            <div id="GLHDR" style="WIDTH: 100%" align="right">
            </div>
          </div>
        </div>
        <div>&#160;</div>
        <table align="center" bgcolor="white" cellpadding="0" cellspacing="0" width="100%" style="FONT-FAMILY: times new roman; FONT-SIZE: 10pt; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">
<tr>
              <td width="10%"><font style="FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;</font></td>
              <td valign="top" width="23%"><font style="FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;</font></td>
              <td width="67%">
                <div style="LINE-HEIGHT: 1.25; TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">with
      a copy to:</font></div>
                <div style="LINE-HEIGHT: 1.25; TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;</font></div>
                <div style="LINE-HEIGHT: 1.25; TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">Howard
      Rice Nemerovski Canady Falk &amp; Rabkin, P.C.</font></div>
                <div style="LINE-HEIGHT: 1.25; TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">Three
      Embarcadero Center, 7th Floor</font></div>
                <div style="LINE-HEIGHT: 1.25; TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">San
      Francisco, CA&#160;&#160;94111</font></div>
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      L. Schaffer, Esq.</font></div>
                <div style="LINE-HEIGHT: 1.25; TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">Fax
      No.:&#160;&#160;(415) 677-6262</font></div>
                <div style="LINE-HEIGHT: 1.25; TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">Email:&#160;&#160;jschaffer@howardrice.com</font></div>
              </td>
            </tr></table>
      </div>
      <div><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">&#160;</font></div>
      <div style="TEXT-ALIGN: justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">All
notices and communications shall be deemed made and effective as
follows:&#160;&#160;(i) if transmitted for overnight (next-day) delivery via a
nationally recognized overnight delivery service, the first business day after
being delivered by the transmitting party to such overnight delivery service,
provided that the overnight delivery service maintains a tracking number and can
confirm to the transmitting party that delivery to the recipient party has
occurred (and otherwise upon delivery to the recipient party), (ii) if faxed,
when transmitted in legible form by facsimile machine to the recipient party&#8217;s
correct facsimile machine number (provided that the transmitting party has
retained its facsimile machine-generated confirmation of the receipt of such fax
by the recipient party&#8217;s facsimile machine), (iii) if by email, when transmitted
by e-mail (provided that the e-mail was sent to the recipient party&#8217;s correct
e-mail address and that the e-mail was not returned to the transmitting party as
undeliverable), or (iv) if mailed via regular U.S. mail, upon delivery to the
recipient party.&#160;&#160;Either party may designate a superseding notice
contact name, street address, e-mail address or fax number by providing the
other party with written notice pursuant to the provisions of this Section
7.</font></div>
    </div>
    <div style="LINE-HEIGHT: 1.25; TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">&#160;</font></div>
    <div style="TEXT-ALIGN: justify; LINE-HEIGHT: 1.25; TEXT-INDENT: 36pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">8.<font id="TAB2" style="LETTER-SPACING: 9pt">&#160;&#160;&#160;</font></font><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt"><font style="DISPLAY: inline; TEXT-DECORATION: underline">General</font>.&#160; The
headings herein are for convenience only, do not constitute a part of this
Agreement and shall not be deemed to limit or affect any of the provisions
hereof.&#160; The language used in this Agreement will be deemed to be the
language chosen by the parties to express their mutual intent, and no rules of
strict construction will be applied against any party.&#160; This Agreement is
intended for the benefit of Creditor and Purchaser and their respective
successors and permitted assigns and is not for the benefit of, nor may any
provision hereof be enforced by, any other person (except for the provisions in
subparagraph (y) of subparagraph (f) of Section 1 above that are expressly
stated to be for the benefit of, and enforceable by, PEI).&#160;&#160;&#160;If
the Option is exercised by Creditor in its sole and absolute discretion, the
representations and warranties contained herein shall survive.&#160;&#160;This
Agreement may be executed in two or more counterparts, by facsimile or
electronic transmission, all of which when taken together shall be considered
one original.&#160;</font></div>
    <div style="TEXT-ALIGN: justify; LINE-HEIGHT: 1.25; TEXT-INDENT: 36pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt">&#160;</div>
    <div style="TEXT-ALIGN: justify; LINE-HEIGHT: 1.25; TEXT-INDENT: 36pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">9.<font id="TAB2" style="LETTER-SPACING: 9pt">&#160;&#160;&#160;</font></font><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt"><font style="DISPLAY: inline; TEXT-DECORATION: underline">Amendments and
Waivers</font>.&#160; No provision of this Agreement may be waived or amended
except in a written instrument signed, in the case of an amendment, by both
Creditor and Purchaser, or, in the case of a waiver, by the party against whom
enforcement of any such waiver is sought.&#160; No waiver of any default with
respect to any provision, condition or requirement of this Agreement shall be
deemed to be a continuing waiver in the future or a waiver of any subsequent
default or a waiver of any other provision, condition or requirement hereof, nor
shall any delay or omission of either Creditor or Purchaser to exercise any
right hereunder in any manner impair the exercise of any such
right.</font></div>
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Agreement</font>.&#160; This Agreement, together with the exhibits hereto,
contains the entire agreement and understanding between Creditor and Purchaser,
and supersedes all prior and contemporaneous agreements, term sheets, letters,
discussions, communications and understandings, both oral and written, between
Creditor and Purchaser concerning the Indebtedness claim, which Creditor and
Purchaser acknowledge have been merged into this Agreement.&#160; No party,
representative, attorney or agent has relied upon any collateral contract,
agreement, assurance, promise, understanding or representation not expressly set
forth hereinabove.&#160; The parties hereby expressly waive all rights and
remedies, at law and in equity, directly or indirectly arising out of or
relating to, or which may arise as a result of, any person or entity&#8217;s reliance
on any such assurance.&#160;</font></div>
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PEI</font></font></div>
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hereby acknowledges and agrees as follows:</font></div>
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recitals in Recital Paragraphs A and B on the first page of the foregoing
Agreement are true and correct;</font></div>
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sale and assignment of the Indebtedness Claim does not cover any rights of
Creditor against PEI that do not arise under the Note, and neither Creditor&#8217;s
entering into the foregoing Agreement nor possible future sale and assignment of
the Indebtedness Claim hereunder shall in any way prejudice or have any adverse
effect on any such other rights of Creditor;</font></div>
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execution, delivery and performance of the foregoing Agreement by Creditor and
Purchaser does not and will not (a) conflict with, violate or cause a breach or
default under the Note, or any other agreement or document related to the debt
comprising the&#160;&#160;Indebtedness Claim, or (b) require any waiver, consent
or other action of PEI or any of affiliate of PEI;</font></div>
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Note is valid, outstanding and enforceable in accordance with its terms, and is
not subject to any defense or offset, and shall not become subject to any
defense or offset (other than repayment and cancellation of the Note by if, when
and as provided in sub-paragraph (y) of sub-paragraph (f) of foregoing
Agreement) by virtue of the consummation of the sale and assignment of the
Indebtedness Claim under the foregoing Agreement; and</font></div>
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of Creditor and Purchaser is relying on the foregoing acknowledgments and
agreements by PEI in entering into the foregoing Agreement.</font></div>
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end
</TEXT>
</DOCUMENT>
</SEC-DOCUMENT>
-----END PRIVACY-ENHANCED MESSAGE-----
