<SEC-DOCUMENT>0001019687-13-001041.txt : 20130328
<SEC-HEADER>0001019687-13-001041.hdr.sgml : 20130328
<ACCEPTANCE-DATETIME>20130328172233
ACCESSION NUMBER:		0001019687-13-001041
CONFORMED SUBMISSION TYPE:	424B5
PUBLIC DOCUMENT COUNT:		3
FILED AS OF DATE:		20130328
DATE AS OF CHANGE:		20130328

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:		424B5
		SEC ACT:		1933 Act
		SEC FILE NUMBER:	333-180731
		FILM NUMBER:		13725102

	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>424B5
<SEQUENCE>1
<FILENAME>peix_424b5.htm
<DESCRIPTION>RULE 424(B)(5) PROSPECTUS SUPPLEMENT
<TEXT>
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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: right">Filed Pursuant to Rule 424(b)(5)<BR>
Registration No. 333-180731</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">PROSPECTUS SUPPLEMENT<BR>
(To Prospectus dated May 17, 2012)</P>

<P STYLE="font: bold 15pt Times New Roman, Times, Serif; margin: 0; text-align: center">$6,000,000</P>

<P STYLE="font: bold 15pt Times New Roman, Times, Serif; margin: 0; text-align: center">PACIFIC ETHANOL, INC.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; text-align: center; margin-bottom: 0">&nbsp;<IMG SRC="image_001.gif" ALT=""></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"></P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">6,000 Units With Each Unit Consisting of<BR>
$1,000 of Series A Subordinated Convertible Notes,<BR>
a Series A Warrant to Purchase 1,971 Shares of Common Stock and<BR>
a Series B Warrant to Purchase 2,628 Shares of Common Stock</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 12pt 0 0; text-indent: 0.5in">We are offering 6,000 units (&ldquo;Units&rdquo;),
with each Unit consisting of $1,000 of our Series A Subordinated Convertible Notes (collectively, &ldquo;Series A Notes&rdquo;),
a Series A Warrant (collectively, &ldquo;Series A Warrants&rdquo;) to purchase up to 1,971 shares of our common stock for a term
of two years and a Series B Warrant (collectively, &ldquo;Series B Warrants&rdquo; and together with the Series A Warrants, the
&ldquo;Warrants&rdquo;) to purchase up to 2,628 shares of our common stock for a term of two years after the closing of the Series
B Note Offering (as defined below), in this offering. This prospectus also covers up to<B> </B>35,333,173<B> </B>shares of common
stock issuable from time to time upon conversion or otherwise under the Series A Notes (including shares of common stock that
may be issued as interest in lieu of cash payments). This prospectus does not cover the shares of common stock issuable from time
to time upon exercise of the Warrants, or Warrant Shares. We may file a registration statement covering the issuance of Warrant
Shares prior to the exercisability of the Warrants. Each unit will be sold at an offering price of $1,000 per unit. Units will
not be issued or certificated. The Series A Notes and Warrants are immediately separable and will be issued separately, but will
be purchased together as a unit in this offering.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">Concurrently with this offering, we will be
offering $8.0 million of Series B Subordinated Convertible Notes, or Series B Notes, pursuant to a separate prospectus supplement,
or Series B Note Offering. The Series A Notes and Series B Notes are collectively referred to as the &ldquo;Convertible Notes&rdquo;
in this prospectus supplement. The closing of the Series B Note Offering is subject to various closing conditions, including, without
limitation, the requirement that we obtain stockholder approval for this offering and the Series B Note Offering. Further, we have
insufficient shares of authorized common stock to issue the shares of common stock issuable under the Series B Notes. The Series
B Note Offering will not be consummated unless our stockholder&rsquo;s vote to approve an increase in the number of authorized
shares of common stock through a reverse split of our issued and outstanding shares. We can provide no assurance that we will be
able to satisfy the forgoing conditions and close the Series B Note Offering.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">The Series A Notes will be the subordinated
unsecured obligations of Pacific Ethanol, Inc. and not the obligations of our subsidiaries. The Series A Notes will be effectively
subordinated to our future secured debt, if any, to the extent of the value of the collateral securing such future debt; subordinated
in right of payment to our existing senior unsecured debt; equal in right of payment with the Series B Notes, certain current and
future debt not to exceed $750,000 and any future unsecured debt that does not expressly provide that it is subordinated to the
Series A Notes; senior to all other indebtedness of Pacific Ethanol; and senior to any future debt that expressly provides that
it is subordinated to the Series A Notes.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">Our common stock is listed on The NASDAQ Capital
Market under the symbol &ldquo;PEIX.&rdquo; On March 27, 2013, the last reported sales price of our common stock on The NASDAQ
Capital Market was $0.346 per share. There is no established public trading market for the Series A Notes or the Warrants and we
do not expect any such market to develop. In addition, we do not intend to list the Series A Notes or the Warrants on The NASDAQ
Capital Market, any other national securities exchange or any other nationally recognized trading system.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">We have retained Lazard Capital Markets LLC
as our exclusive placement agent to use its reasonable best efforts to solicit offers to purchase our securities in this offering.
See &ldquo;Plan of Distribution&rdquo; beginning on page S-15 of this prospectus supplement for more information regarding these
arrangements.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"><B>Investing in our securities involves certain
risks. Before purchasing our Series A Notes and Warrants, please review the information, including the information incorporated
by reference, under the heading &ldquo;<U>Risk Factors</U>&rdquo; beginning on Page S-15 of this prospectus supplement and page
4 of the accompanying prospectus.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"><B>Neither the Securities and Exchange Commission
nor any state securities commission has approved or disapproved of these securities or passed upon the adequacy or accuracy of
this prospectus supplement or the accompanying prospectus. Any representation to the contrary is a criminal offense.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"><B>&nbsp;</B></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="padding-left: 5.4pt">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: center"><B>Per Unit</B></TD><TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: center"><B>&nbsp;&nbsp;&nbsp;&nbsp;Total</B></TD><TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="width: 80%; padding-left: 5.4pt">Offering price (1)</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 7%; text-align: right">1,000</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 7%; text-align: right">6,000,000</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="text-align: left; padding-left: 5.4pt">Placement agent&rsquo;s fees (2)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">59.16</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">355,000</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="text-align: left; padding-left: 5.4pt">Proceeds, before payment of other expenses, to us (3)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">940.84</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">5,645,000</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">(1)&nbsp;The offering price is $999.98 per Series A Note and $0.01
per Warrant.<BR>
(2) Does not include any placement fees related to the Series B Note Offering</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 13.5pt; text-indent: -13.5pt">(3) We estimate the total expenses
of this offering, excluding placement agent fees, will be approximately $500,000, which expenses will be paid out of the proceeds
of the Series B Note Offering, if any, or out of our cash reserve if the Series B Note Offering is not consummated.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">Delivery of the Series A Notes and Warrants
by Pacific Ethanol will be in certificated form and are expected to be made on or about March 28, 2013, subject to customary closing
conditions.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center; text-indent: 0in"><FONT STYLE="font-size: 12pt"><B>Lazard
Capital Markets</B></FONT>&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center; text-indent: 0in">The date of this prospectus supplement is March 27, 2013.</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>TABLE OF CONTENTS</B></P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">PROSPECTUS SUPPLEMENT</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>&nbsp;</B></P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 91%; padding-right: 5.4pt; padding-left: 5.4pt">&nbsp;</TD>
    <TD STYLE="width: 9%; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"><FONT STYLE="font-size: 10pt">Page</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(238,238,238)">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt"><FONT STYLE="font-size: 10pt">ABOUT THIS PROSPECTUS SUPPLEMENT</FONT></TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"><FONT STYLE="font-size: 10pt">S-1</FONT></TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt"><FONT STYLE="font-size: 10pt">PROSPECTUS SUMMARY</FONT></TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"><FONT STYLE="font-size: 10pt">S-2</FONT></TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(238,238,238)">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt"><FONT STYLE="font-size: 10pt">THE OFFERING</FONT></TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"><FONT STYLE="font-size: 10pt">S-10</FONT></TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt"><FONT STYLE="font-size: 10pt">RISK FACTORS</FONT></TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"><FONT STYLE="font-size: 10pt">S-15</FONT></TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(238,238,238)">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt"><FONT STYLE="font-size: 10pt">FORWARD&ndash;LOOKING STATEMENTS</FONT></TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"><FONT STYLE="font-size: 10pt">S-30</FONT></TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt"><FONT STYLE="font-size: 10pt">DESCRIPTION OF EXISTING INDEBTEDNESS</FONT></TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"><FONT STYLE="font-size: 10pt">S-31</FONT></TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(238,238,238)">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt"><FONT STYLE="font-size: 10pt">USE OF PROCEEDS</FONT></TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"><FONT STYLE="font-size: 10pt">S-39</FONT></TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt"><FONT STYLE="font-size: 10pt">CAPITALIZATION</FONT></TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"><FONT STYLE="font-size: 10pt">S-40</FONT></TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(238,238,238)">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt"><FONT STYLE="font-size: 10pt">DESCRIPTION OF SECURITIES BEING OFFERED</FONT></TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"><FONT STYLE="font-size: 10pt">S-42</FONT></TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt"><FONT STYLE="font-size: 10pt">DIVIDEND POLICY</FONT></TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"><FONT STYLE="font-size: 10pt">S-55</FONT></TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(238,238,238)">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt"><FONT STYLE="font-size: 10pt">CERTAIN U.S. FEDERAL INCOME TAX CONSIDERATIONS</FONT></TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"><FONT STYLE="font-size: 10pt">S-55</FONT></TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt"><FONT STYLE="font-size: 10pt">PLAN OF DISTRIBUTION</FONT></TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"><FONT STYLE="font-size: 10pt">S-59</FONT></TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(238,238,238)">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt"><FONT STYLE="font-size: 10pt">LEGAL MATTERS</FONT></TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"><FONT STYLE="font-size: 10pt">S-61</FONT></TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt"><FONT STYLE="font-size: 10pt">EXPERTS</FONT></TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"><FONT STYLE="font-size: 10pt">S-61</FONT></TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(238,238,238)">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt"><FONT STYLE="font-size: 10pt">INCORPORATION OF DOCUMENTS BY REFERENCE</FONT></TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"><FONT STYLE="font-size: 10pt">S-61</FONT></TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt"><FONT STYLE="font-size: 10pt">WHERE YOU CAN FIND MORE INFORMATION</FONT></TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"><FONT STYLE="font-size: 10pt">S-62</FONT></TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(238,238,238)">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(238,238,238)">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt"><FONT STYLE="font-size: 10pt">ABOUT THIS PROSPECTUS</FONT></TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"><FONT STYLE="font-size: 10pt">1</FONT></TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(238,238,238)">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt"><FONT STYLE="font-size: 10pt">CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS</FONT></TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"><FONT STYLE="font-size: 10pt">2</FONT></TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt"><FONT STYLE="font-size: 10pt">PACIFIC ETHANOL, INC</FONT></TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"><FONT STYLE="font-size: 10pt">3</FONT></TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(238,238,238)">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt"><FONT STYLE="font-size: 10pt">RISK FACTORS</FONT></TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"><FONT STYLE="font-size: 10pt">4</FONT></TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt"><FONT STYLE="font-size: 10pt">USE OF PROCEEDS</FONT></TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"><FONT STYLE="font-size: 10pt">5</FONT></TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(238,238,238)">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt"><FONT STYLE="font-size: 10pt">RATIO OF EARNINGS TO FIXED CHARGES</FONT></TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"><FONT STYLE="font-size: 10pt">5</FONT></TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt"><FONT STYLE="font-size: 10pt">DESCRIPTION OF DEBT SECURITIES</FONT></TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"><FONT STYLE="font-size: 10pt">6</FONT></TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(238,238,238)">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt"><FONT STYLE="font-size: 10pt">DESCRIPTION OF CAPITAL STOCK</FONT></TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"><FONT STYLE="font-size: 10pt">18</FONT></TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt"><FONT STYLE="font-size: 10pt">DESCRIPTION OF PREFERRED STOCK</FONT></TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"><FONT STYLE="font-size: 10pt">25</FONT></TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(238,238,238)">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt"><FONT STYLE="font-size: 10pt">DESCRIPTION OF WARRANTS</FONT></TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"><FONT STYLE="font-size: 10pt">28</FONT></TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt"><FONT STYLE="font-size: 10pt">DESCRIPTION OF UNITS</FONT></TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"><FONT STYLE="font-size: 10pt">29</FONT></TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(238,238,238)">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt"><FONT STYLE="font-size: 10pt">GLOBAL SECURITIES</FONT></TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"><FONT STYLE="font-size: 10pt">31</FONT></TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt"><FONT STYLE="font-size: 10pt">PLAN OF DISTRIBUTION</FONT></TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"><FONT STYLE="font-size: 10pt">33</FONT></TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(238,238,238)">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt"><FONT STYLE="font-size: 10pt">DISCLOSURE OF COMMISSION POSITION ON INDEMNIFICATION FOR SECURITIES ACT LIABILITIES</FONT></TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"><FONT STYLE="font-size: 10pt">35</FONT></TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt"><FONT STYLE="font-size: 10pt">LEGAL MATTERS</FONT></TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"><FONT STYLE="font-size: 10pt">35</FONT></TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(238,238,238)">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt"><FONT STYLE="font-size: 10pt">EXPERTS</FONT></TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"><FONT STYLE="font-size: 10pt">35</FONT></TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt"><FONT STYLE="font-size: 10pt">WHERE YOU CAN FIND MORE INFORMATION</FONT></TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"><FONT STYLE="font-size: 10pt">35</FONT></TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(238,238,238)">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt"><FONT STYLE="font-size: 10pt">INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE</FONT></TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"><FONT STYLE="font-size: 10pt">36</FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="color: blue; font: bold 10pt Times New Roman, Times, Serif; margin: 0; text-align: center; text-indent: 0in">&nbsp;</P>

<P STYLE="color: blue; font: bold 10pt Times New Roman, Times, Serif; margin: 0; text-align: center; text-indent: 0in">ABOUT THIS
PROSPECTUS SUPPLEMENT</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">This document consists of two parts. The first
part is this prospectus supplement, which describes the specific terms of this offering. The second part, the accompanying prospectus,
gives more general information, some of which may not apply to this offering. Generally, when we refer only to the &ldquo;prospectus,&rdquo;
we are referring to both parts combined. This prospectus supplement may add to, update or change information in the accompanying
prospectus and the documents incorporated by reference into this prospectus supplement or the accompanying prospectus.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">If information in this prospectus supplement
is inconsistent with the accompanying prospectus, on the one hand, and the information contained in the accompanying prospectus
or in any document incorporated by reference that was filed with the Securities and Exchange Commission before the date of this
prospectus supplement, on the other hand, you should rely on this prospectus supplement. If any statement in one of these documents
is inconsistent with a statement in another document having a later date &ndash; for example, a document incorporated by reference
in the accompanying prospectus &ndash; the statement in the document having the later date modifies or supersedes the earlier statement.
This prospectus supplement, the accompanying prospectus and the documents incorporated into each by reference include important
information about us, the shares of common stock being offered and other information you should know before investing in the securities
offered hereby. Before you invest, you should carefully read this prospectus supplement, the accompanying prospectus, all information
incorporated by reference herein and therein, as well as the additional information described under &ldquo;Where You Can Find More
Information&rdquo; on page S-62 of this prospectus supplement.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">You should rely only on this prospectus supplement,
the accompanying prospectus and the information incorporated or deemed to be incorporated by reference in this prospectus supplement
and the accompanying prospectus. We have not authorized anyone to provide you with information that is in addition to, or different
from, that contained or incorporated by reference in this prospectus supplement and the accompanying prospectus. If anyone provides
you with different or inconsistent information, you should not rely on it. We are not offering to sell securities in any jurisdiction
where the offer or sale is not permitted. You should not assume that the information contained or incorporated by reference in
this prospectus supplement or the accompanying prospectus is accurate as of any date other than as of the date of this prospectus
supplement or the accompanying prospectus, as the case may be, or in the case of the documents incorporated by reference, the date
of such documents regardless of the time of delivery of this prospectus supplement and the accompanying prospectus or any sale
of shares of common stock. Our business, financial condition, liquidity, results of operations, and prospects may have changed
since those dates.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">When used in this prospectus, the terms &ldquo;Pacific
Ethanol,&rdquo; &ldquo;we,&rdquo; &ldquo;our&rdquo; and &ldquo;us&rdquo; refer to Pacific Ethanol, Inc. and its consolidated subsidiaries,
unless otherwise specified.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; color: blue"><B>&nbsp;</B></P>

<P STYLE="color: blue; font: bold 10pt Times New Roman, Times, Serif; margin: 0; text-align: center; text-indent: 0in">PROSPECTUS
SUMMARY</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"><I>&nbsp;</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"><I>The following summary of our business highlights
some of the information contained elsewhere in or incorporated by reference into the accompanying prospectus. Because this is only
a summary, however, it does not contain all of the information that may be important to you. You should carefully read this prospectus
supplement and the accompanying prospectus, including the documents incorporated by reference, which are described under &ldquo;Where
You Can Find More Information&rdquo; and &ldquo;Incorporation of Certain Information by Reference&rdquo; in this prospectus supplement.
You should also carefully consider the matters discussed in the section in this prospectus supplement entitled &ldquo;Risk Factors&rdquo;
and in the accompanying prospectus and in other periodic reports incorporated herein by reference.</I></P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">Pacific Ethanol</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"><B>Overview</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">We are the leading marketer and producer of
low-carbon renewable fuels in the Western United States.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">We market all the ethanol produced by four ethanol
production facilities located in California, Idaho and Oregon, or Pacific Ethanol Plants, all the ethanol produced by three other
ethanol producers in the Western United States and ethanol purchased from other third-party suppliers throughout the United States.
We also market ethanol co-products, including wet distillers grains and syrup, or WDG, for the Pacific Ethanol Plants.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">We have extensive customer relationships throughout
the Western United States. Our ethanol customers are integrated oil companies and gasoline marketers who blend ethanol into gasoline.
We arrange for transportation, storage and delivery of ethanol purchased by our customers through our agreements with third-party
service providers in the Western United States, primarily in California, Arizona, Nevada, Utah, Oregon, Colorado, Idaho and Washington.
Our WDG customers are dairies and feedlots located near the Pacific Ethanol Plants.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">We have extensive supplier relationships throughout
the Western and Midwestern United States. In some cases, we have marketing agreements with suppliers to market all of the output
of their facilities.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">We hold an 80% ownership interest in New PE
Holdco LLC, or New PE Holdco, the owner of each of the plant holding companies, or Plant Owners, that collectively own the Pacific
Ethanol Plants. We operate and maintain the Pacific Ethanol Plants under the terms of an asset management agreement with New PE
Holdco and the Plant Owners, including supplying all goods and materials necessary to operate and maintain each Pacific Ethanol
Plant. In operating the Pacific Ethanol Plants, we direct the production process to obtain optimal production yields, lower costs
by leveraging our infrastructure, enter into risk management agreements such as insurance policies and manage commodity risk practices.
We are also in complete charge of, and have care and custody over, each Pacific Ethanol Plant that is not operational, and provide
recommendations as to when a Pacific Ethanol Plant should become operational. We perform all activities necessary to support a
cost effective return of any idled Pacific Ethanol Plant to operational status once New PE Holdco approves our recommendation to
re-start an idled Pacific Ethanol Plant. We market ethanol and WDG produced by the Pacific Ethanol Plants under the terms of separate
marketing agreements with the Plant Owners whose facilities are operational. The marketing agreements provide us with the absolute
discretion to solicit, negotiate, administer (including payment collection), enforce and execute ethanol and co-product sales agreements
with any third party.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">After the closing of this offering, we anticipate
that we will hold an 83% ownership interest in New PE Holdco. See &ldquo;Use of Proceeds.&rdquo; We can provide no assurance that
we will be able to close the offering contemplated in this prospectus.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">The Pacific Ethanol Plants are comprised of
the four facilities described immediately below and have an aggregate annual production capacity of up to 200 million gallons.
Three of the facilities are currently operational and one of the facilities is currently idle. As market conditions change, we
may increase, decrease or idle production at one or more operational facilities or resume operations at any idled facility.</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="width: 34%; padding-right: 0.05in; padding-left: 0.05in">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; border-bottom: Black 0.5pt solid"><B>Facility Name</B></P></TD>
    <TD STYLE="width: 21%; padding-right: 0.05in; padding-left: 0.05in">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center; border-bottom: Black 0.5pt solid"><B>Facility
        Location</B></P></TD>
    <TD STYLE="width: 27%; padding-right: 0.05in; padding-left: 0.05in">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center; border-bottom: Black 0.5pt solid"><B>Estimated
        Annual Capacity<BR>
        (gallons)</B></P></TD>
    <TD STYLE="width: 18%">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center; border-bottom: Black 0.5pt solid"><B>Current
        Operating Status</B></P></TD></TR>
<TR>
    <TD STYLE="vertical-align: top; padding-right: 0.05in; padding-left: 5.8pt; text-indent: -5.8pt"><FONT STYLE="font-size: 10pt">Magic Valley</FONT></TD>
    <TD STYLE="vertical-align: bottom; padding-right: 0.05in; padding-left: 0.05in; text-align: center"><FONT STYLE="font-size: 10pt">Burley, ID</FONT></TD>
    <TD NOWRAP STYLE="vertical-align: bottom; padding-right: 0.05in; padding-left: 0.05in; text-align: center"><FONT STYLE="font-size: 10pt">60,000,000</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: center"><FONT STYLE="font-size: 10pt">Operating</FONT></TD></TR>
<TR>
    <TD STYLE="vertical-align: top; padding-right: 0.05in; padding-left: 5.8pt; text-indent: -5.8pt"><FONT STYLE="font-size: 10pt">Columbia</FONT></TD>
    <TD STYLE="vertical-align: bottom; padding-right: 0.05in; padding-left: 0.05in; text-align: center"><FONT STYLE="font-size: 10pt">Boardman, OR</FONT></TD>
    <TD NOWRAP STYLE="vertical-align: bottom; padding-right: 0.05in; padding-left: 0.05in; text-align: center"><FONT STYLE="font-size: 10pt">40,000,000</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: center"><FONT STYLE="font-size: 10pt">Operating</FONT></TD></TR>
<TR>
    <TD STYLE="vertical-align: top; padding-right: 0.05in; padding-left: 5.8pt; text-indent: -5.8pt"><FONT STYLE="font-size: 10pt">Stockton</FONT></TD>
    <TD STYLE="vertical-align: bottom; padding-right: 0.05in; padding-left: 0.05in; text-align: center"><FONT STYLE="font-size: 10pt">Stockton, CA</FONT></TD>
    <TD NOWRAP STYLE="vertical-align: bottom; padding-right: 0.05in; padding-left: 0.05in; text-align: center"><FONT STYLE="font-size: 10pt">60,000,000</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: center"><FONT STYLE="font-size: 10pt">Operating</FONT></TD></TR>
<TR>
    <TD STYLE="vertical-align: top; padding-right: 0.05in; padding-left: 5.8pt; text-indent: -5.8pt"><FONT STYLE="font-size: 10pt">Madera</FONT></TD>
    <TD STYLE="vertical-align: bottom; padding-right: 0.05in; padding-left: 0.05in; text-align: center"><FONT STYLE="font-size: 10pt">Madera, CA</FONT></TD>
    <TD NOWRAP STYLE="vertical-align: bottom; padding-right: 0.05in; padding-left: 0.05in; text-align: center"><FONT STYLE="font-size: 10pt">40,000,000</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: center"><FONT STYLE="font-size: 10pt">Idled</FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 38.15pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 38.15pt">We earn fees as follows under our asset management
and other agreements with New PE Holdco and the Plant Owners:</P>

<P STYLE="font: 10pt Symbol; margin: 0 0 0 74.15pt; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
<TD STYLE="width: 56.15pt"></TD><TD STYLE="width: 18pt"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>ethanol marketing fees of approximately 1% of the net sales price, but not less than $0.015 per gallon and not more than $0.0225
per gallon;</TD></TR></TABLE>

<P STYLE="font: 10pt Symbol; margin: 0 0 0 74.15pt; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
<TD STYLE="width: 56.15pt"></TD><TD STYLE="width: 18pt"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>corn procurement and handling fees of $0.045 per bushel;</TD></TR></TABLE>

<P STYLE="font: 10pt Symbol; margin: 0 0 0 74.15pt; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
<TD STYLE="width: 56.15pt"></TD><TD STYLE="width: 18pt"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>WDG fees of 5% of the third-party purchase price, but not less than $2.00 per ton and not more than $3.50 per ton; and</TD></TR></TABLE>

<P STYLE="font: 10pt Symbol; margin: 0 0 0 74.15pt; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
<TD STYLE="width: 56.15pt"></TD><TD STYLE="width: 18pt"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>asset management fees of $75,000 per month for each operating facility and $40,000 per month for each idled facility.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">We also provide operations, maintenance and
accounting services for a 250,000 gallon per year cellulosic integrated biorefinery owned by ZeaChem Inc. in Boardman, Oregon,
which is adjacent to the Pacific Ethanol Columbia plant.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"><B>Recent Financial Information - Unaudited</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">The following financial information is a summary
of our unaudited financial information for the three months and year ended December 31, 2012.&nbsp; We have not yet finalized our
consolidated financial results for the year ended December 31, 2012. The summary financial information presented below is unaudited
and may differ materially from our audited financial statements for the year ended December 31, 2012 when such audited financial
statements are available.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.25in"><I>&nbsp;</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.25in"><I>Financial Information for the Three Months
Ended December 31, 2012</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">Net sales were $197.0 million for the fourth
quarter of 2012, compared to $241.8 million for the fourth quarter of 2011. The decline in net sales is attributable to both a
reduction in total gallons sold and lower average price per gallon of ethanol sold. Total gallons sold were 102.0 million for the
fourth quarter of 2012, compared to 116.3 million gallons in the fourth quarter of 2011. Average price per gallon of ethanol sold
was $2.52 for the fourth quarter of 2012, compared to $2.80 in the fourth quarter of 2011.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">Gross loss was $4.7 million for the fourth quarter
of 2012, compared to gross profit of $7.4 million in the fourth quarter of 2011. The decrease is attributable to unfavorable industry
production margins.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">Selling, general and administrative, or SG&amp;A,
expenses were $2.7 million in the fourth quarter of 2012, compared to $3.7 million for the fourth quarter of 2011. The decrease
is attributable to lower professional fees and lower overhead costs associated with New PE Holdco, LLC.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">Loss available to common stockholders for the
fourth quarter of 2012 was $5.8 million, compared to $2.4 million for the fourth quarter of 2011. Adjusted EBITDA was negative
$2.6 million for the fourth quarter of 2012, compared to negative $0.3 million in the fourth quarter of 2011.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">Our cash balance was $7.6 million at December
31, 2012, compared to a cash balance of $8.9 million at December 31, 2011.</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.25in"><I>Financial Results for the Year Ended December
31, 2012</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">For the year ended December 31, 2012, net sales
were $816.0 million, compared to $901.2 million for the same period in 2011. The decrease in net sales for 2012 was primarily due
to a decline in production gallons sold and lower ethanol sales prices. During 2012, we reduced production volumes due to lower
industry-wide corn crush margins resulting from an oversupply of ethanol in relation to demand. Corn crush margins are determined
by the difference between ethanol and corn prices. Average ethanol sales price for 2012 was $2.45 per gallon, a decrease of 12%
from $2.79 per gallon in 2011.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">Our 2012 gross margin declined to negative 2.4%
from positive 2.2% for 2011. The decline in gross margin was primarily the result of negative corn crush margins at the Pacific
Ethanol Plants for most of the year due to an oversupply of ethanol in relation to demand.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">SG&amp;A expenses for 2012 were $12.1 million,
a decrease of $3.3 million as compared to $15.4 million for 2011. The decline is primarily due to lower legal and noncash compensation
expenses.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">We issued warrants and senior unsecured convertible
notes that were recorded at fair value, with quarterly adjustments for changes in their fair value, resulting in income of $2.0
million for 2012 as compared to $7.6 million for 2011. This decrease is primarily due to the retirement of the senior convertible
notes in 2011 upon their conversion.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">Interest expense for 2012 was $13.0 million,
a decrease of $1.8 million from $14.8 million for 2011. This decrease is primarily due to decreased average debt balances under
our convertible notes and credit facilities.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">Loss available to common stockholders for the
year ended December 31, 2012 was $20.3 million, compared to income available to common stockholders of $1.8 million for the same
period in 2011. Adjusted EBITDA for the year ended December 31, 2012 was negative $7.5 million, compared to Adjusted EBITDA of
positive $5.3 million for the same period in 2011.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.25in"><I>&nbsp;</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.25in"><I>Reconciliation of Adjusted EBITDA to Net
Income (Loss)</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">Management believes that certain financial measures
not in accordance with generally accepted accounting principles, or GAAP, are useful measures of operations. We define Adjusted
EBITDA as unaudited earnings before interest, taxes, depreciation and amortization and fair value adjustments. The table below
provides a reconciliation of Adjusted EBITDA to net income (loss) attributed to Pacific Ethanol. Management provides an Adjusted
EBITDA measure so that investors will have the same financial information that management uses, which may assist investors in properly
assessing our performance on a period-over-period basis. Adjusted EBITDA is not a measure of financial performance under GAAP,
and should not be considered an alternative to net income (loss) or any other measure of performance under GAAP, or to cash flows
from operating, investing or financing activities as an indicator of cash flows or as a measure of liquidity. Adjusted EBITDA has
limitations as an analytical tool and you should not consider it in isolation or as a substitute for analysis of our results as
reported under GAAP.</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>PACIFIC ETHANOL, INC.<BR>
CONSOLIDATED STATEMENTS OF OPERATIONS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>(unaudited, in thousands, except per share
data)</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>&nbsp;</B></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="text-align: justify">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="6" STYLE="text-align: center; border-bottom: Black 1pt solid">Three Months Ended <BR>December 31,</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="6" STYLE="text-align: center; border-bottom: Black 1pt solid">Years Ended <BR>December 31,</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="text-align: justify">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">2012</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">2011</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">2012</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">2011</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2">&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2">&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2">&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: right">&nbsp;</TD><TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="width: 48%; text-align: left; text-indent: -9pt; padding-left: 9pt">Net sales</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 9%; text-align: right">197,018</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 9%; text-align: right">241,798</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 9%; text-align: right">816,044</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 9%; text-align: right">901,188</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt; text-indent: -9pt; padding-left: 9pt">Cost of goods sold</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">201,725</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">234,434</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">835,568</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">881,789</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; text-indent: -9pt; padding-left: 9pt">Gross profit (loss)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(4,707</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">7,364</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(19,524</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">19,399</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt; text-indent: -9pt; padding-left: 9pt">Selling, general and administrative expenses</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">2,741</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">3,685</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">12,141</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">15,427</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; text-indent: -22.5pt; padding-left: 22.5pt">Income (loss) from operations</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(7,448</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">3,679</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(31,665</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">3,972</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-indent: -22.5pt; padding-left: 22.5pt">Fair value adjustments</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,602</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">591</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,954</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">7,559</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; text-indent: -22.5pt; padding-left: 22.5pt">Interest expense, net</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(3,669</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(3,476</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(13,049</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(14,813</TD><TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt; text-indent: -9pt; padding-left: 9pt">Other expense, net</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(96</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(32</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(595</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(741</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; text-indent: -9pt; padding-left: 9pt">Income (loss) before provision for income taxes</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(9,611</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">762</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(43,355</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(4,023</TD><TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt; text-indent: -9pt; padding-left: 9pt">Provision for income taxes</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">&ndash;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">&ndash;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">&ndash;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">&ndash;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; text-indent: -9pt; padding-left: 9pt">Consolidated net income (loss)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(9,611</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">762</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(43,355</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(4,023</TD><TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt; text-indent: -9pt; padding-left: 9pt">Net (income) loss attributed to noncontrolling interest in variable interest entity</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">4,107</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(2,808</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">24,298</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">7,097</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; padding-bottom: 2.5pt; text-indent: -9pt; padding-left: 9pt">Net income (loss) attributed to Pacific Ethanol</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">(5,504</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">)</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">(2,046</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">)</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">(19,057</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">)</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">3,074</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt; text-indent: -9pt; padding-left: 9pt">Preferred stock dividends</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">$</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(319</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">$</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(319</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">$</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(1,268</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">$</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(1,265</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; padding-bottom: 2.5pt; text-indent: -9pt; padding-left: 9pt">Income (loss) available to common stockholders</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">(5,823</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">)</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">(2,365</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">)</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">(20,325</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">)</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">1,809</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 2.5pt; text-indent: -9pt; padding-left: 9pt">Net income (loss) per share, basic and diluted</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">(0.04</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">)</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">(0.03</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">)</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">(0.19</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">)</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">0.05</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; padding-bottom: 2.5pt; text-indent: -9pt; padding-left: 9pt">Weighted-average shares outstanding, basic and diluted</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">144,428</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">70,946</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">108,358</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">33,733</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 2.5pt; text-indent: -9pt; padding-left: 9pt">Weighted-average shares outstanding, basic and diluted</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">144,428</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">70,946</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">108,358</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">33,984</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>


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    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
    <!-- Field: /Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center; color: red"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>PACIFIC ETHANOL, INC.<BR>
CONSOLIDATED BALANCE SHEETS<BR>
(unaudited, in thousands, except par value)</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="text-align: center">&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="6" STYLE="text-align: center">December 31,</TD><TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-weight: bold; text-align: center"><U>ASSETS</U></TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">2012</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">2011</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="font-weight: bold; text-align: justify">Current Assets:</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="width: 70%; text-align: justify; padding-left: 10pt">Cash and cash equivalents</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 11%; text-align: right">7,586</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 11%; text-align: right">8,914</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: justify; padding-left: 10pt">Accounts receivable, net</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">26,051</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">28,140</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: justify; padding-left: 10pt">Inventories</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">16,244</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">16,131</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: justify; padding-left: 10pt">Prepaid inventory</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">5,422</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">9,239</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: justify; padding-bottom: 1pt; padding-left: 10pt">Other current assets</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">2,129</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">3,994</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: justify; padding-bottom: 1pt; padding-left: 20pt">Total current assets</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">57,432</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">66,418</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: justify; padding-bottom: 1pt">Property and equipment, net</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">150,409</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">159,617</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="font-weight: bold; text-align: justify">Other Assets:</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: justify; padding-left: 10pt">Intangible assets, net</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">3,734</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">4,458</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: justify; padding-bottom: 1pt; padding-left: 10pt">Other assets</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">3,388</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">1,983</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: justify; padding-bottom: 1pt; padding-left: 20pt">Total other assets</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">7,122</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">6,441</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="font-weight: bold; text-align: justify; padding-bottom: 2.5pt">Total Assets</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">214,963</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">232,476</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>PACIFIC ETHANOL, INC.<BR>
CONSOLIDATED BALANCE SHEETS (CONTINUED)<BR>
(unaudited, in thousands, except par value)</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="text-align: center">&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="6" STYLE="text-align: center">December 31,</TD><TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-weight: bold; text-align: center; padding-bottom: 1pt"><U>LIABILITIES AND STOCKHOLDERS&rsquo; EQUITY</U></TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">2012</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">2011</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="text-align: center">&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">&nbsp;</TD><TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="font-weight: bold; text-align: justify; text-indent: -1.3pt; padding-left: 1.3pt">Current Liabilities:</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="width: 70%; text-align: justify; padding-left: 9pt">Accounts payable</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 11%; text-align: right">5,104</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 11%; text-align: right">5,519</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: justify; padding-left: 9pt">Accrued liabilities</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">3,282</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">2,713</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: justify; padding-left: 5.75pt">&nbsp;&nbsp;&nbsp;Accrued preferred dividends</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">7,315</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: justify; padding-bottom: 1pt; padding-left: 9pt">Current portion &ndash; long-term debt</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">4,029</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">750</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: justify; padding-left: 0.25in">Total current liabilities</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">12,415</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">16,297</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: justify; padding-left: 5.75pt">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: justify; padding-left: 5.75pt">Long-term debt, net of current portion</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">117,253</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">93,689</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: justify; padding-left: 5.75pt">Accrued preferred dividends</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">5,852</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: justify; padding-left: 5.75pt">Warrant liabilities</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">4,892</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,921</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: justify; padding-bottom: 1pt; padding-left: 5.75pt">Other liabilities</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">1,644</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">1,305</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: bold; text-align: justify; padding-bottom: 1pt; padding-left: 5.75pt">Total Liabilities</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">142,056</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">113,212</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: justify; padding-left: 5.75pt">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: bold; text-align: justify; padding-left: 5.75pt">Stockholders&rsquo; Equity:</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; text-indent: -9pt; padding-left: 0.25in">Preferred stock, $0.001 par value; 10,000 shares authorized; Series A: 0 shares issued and outstanding as of December&nbsp;31, 2012 and 2011 Series B: 927 shares issued and outstanding as of December 31, 2012 and 2011</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; text-indent: -9pt; padding-left: 0.25in">Common stock, $0.001 par value; 300,000 shares authorized; 146,841 and 86,632 shares issued and outstanding as of December&nbsp;31, 2012 and 2011, respectively</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">147</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">87</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: justify; padding-left: 9pt">Additional paid-in capital</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">582,724</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">556,871</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: justify; padding-bottom: 1pt; padding-left: 9pt">Accumulated deficit</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(530,310</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(509,985</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: justify; padding-bottom: 1pt; padding-left: 0.25in">Total Pacific Ethanol, Inc. stockholders&rsquo; equity</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">52,562</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">46,974</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: justify; padding-bottom: 1pt; padding-left: 5.75pt">Noncontrolling interest in variable interest entity</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">20,345</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">72,290</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: justify; padding-bottom: 1pt; padding-left: 0.25in">Total stockholders&rsquo; equity</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">72,907</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">119,264</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: bold; text-align: justify; padding-bottom: 2.5pt; padding-left: 5.75pt">Total Liabilities and Stockholders&rsquo; Equity</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">214,963</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">232,476</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
</TABLE>


<!-- Field: Page; Sequence: 9; Value: 1 -->
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    <!-- Field: /Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center; color: red"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.25in"><I>Reconciliation of Adjusted EBITDA to Net
Income (Loss)</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"><B>&nbsp;</B></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="text-align: justify">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="6" STYLE="text-align: center; border-bottom: Black 1pt solid">Three Months Ended <BR>December 31,</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="6" STYLE="text-align: center; border-bottom: Black 1pt solid">Years Ended <BR>December 31,</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-style: italic; text-align: justify; border-bottom: Black 1pt solid">(in thousands) (unaudited)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">2012</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">2011</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">2012</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">2011</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="width: 48%; text-align: left; padding-left: 0">Net income (loss) attributed to Pacific Ethanol</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 9%; text-align: right">(5,504</TD><TD STYLE="width: 1%; text-align: left">)</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 9%; text-align: right">(2,046</TD><TD STYLE="width: 1%; text-align: left">)</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 9%; text-align: right">(19,057</TD><TD STYLE="width: 1%; text-align: left">)</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 9%; text-align: right">3,074</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-indent: -9pt; padding-left: 9pt">Adjustments:</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; padding-left: 10pt">Interest expense*</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">2,480</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,381</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">7,045</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">6,136</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 10pt">Interest income*</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(8</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(3</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(9</TD><TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; padding-left: 10pt">Fair value adjustments</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(1,602</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(591</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(1,954</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(7,559</TD><TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt; padding-left: 10pt">Depreciation and amortization expense*</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">2,074</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">962</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">6,463</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">3,611</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; padding-bottom: 1pt; text-indent: -9pt; padding-left: 9pt">&nbsp;&nbsp;&nbsp;&nbsp;Total adjustments</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">2,952</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">1,744</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">11,551</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">2,179</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt; text-indent: 0; padding-left: 20pt">Adjusted EBITDA</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">$</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(2,552</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">$</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(302</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">$</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(7,506</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">$</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">5,253</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">________________</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">* Adjusted for noncontrolling interest in variable interest entity.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.25in"><I>Commodity Price Performance</I></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="text-align: center; padding-bottom: 1pt"></TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="6" STYLE="text-align: center; border-bottom: Black 1pt solid">Three Months Ended <BR>December 31,</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="6" STYLE="text-align: center; border-bottom: Black 1pt solid">Years Ended <BR>December 31,</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-style: italic; text-align: justify; border-bottom: Black 1pt solid">(unaudited)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">2012</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">2011</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">2012</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">2011</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="width: 48%; text-align: left; text-indent: -9pt; padding-left: 9pt">&nbsp;Ethanol production gallons sold (in millions)</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 9%; text-align: right">34.6</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 9%; text-align: right">37.8</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 9%; text-align: right">140.6</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 9%; text-align: right">150.8</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt; text-indent: -9pt; padding-left: 9pt">&nbsp;Ethanol third party gallons sold (in millions)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">67.4</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">78.5</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">300.2</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">273.3</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; text-indent: -9pt; padding-left: 9pt">&nbsp;Total ethanol gallons sold (in millions)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">102.0</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">116.3</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">440.8</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">424.1</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-indent: -9pt; padding-left: 9pt">&nbsp;Ethanol average sales price per gallon</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">2.52</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">2.80</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">2.45</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">2.79</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; text-indent: -9pt; padding-left: 9pt">&nbsp;Corn cost &ndash; CBOT equivalent</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">7.39</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">6.22</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">6.89</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">6.76</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 0.05in">&nbsp;Total co-product tons sold (in thousands)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">310.9</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">362.0</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,253.6</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,401.5</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-indent: -9pt; padding-left: 9pt">&nbsp;Co-product return % (1)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">28.8</TD><TD STYLE="text-align: left">%</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">26.2</TD><TD STYLE="text-align: left">%</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">26.8</TD><TD STYLE="text-align: left">%</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">23.6</TD><TD STYLE="text-align: left">%</TD></TR>
</TABLE>


<P STYLE="margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><FONT STYLE="font-size: 10pt">________________</FONT> &nbsp; &nbsp; &nbsp; &nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt">&nbsp; <FONT STYLE="font-size: 10pt">&nbsp;(1) Co-product revenue as a percentage of delivered cost of corn.</FONT> &nbsp; &nbsp; &nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt">&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;</P>



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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"><B>Recent Developments</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.25in"><I>&nbsp;</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.25in"><I>NASDAQ Listing Standards</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">On June 6, 2012, we received a letter from The
NASDAQ Stock Market, or NASDAQ, indicating that the bid price of our common stock for the last 30 consecutive business days had
closed below the minimum $1.00 per share required for continued listing. We were provided an initial period of 180 calendar days,
or until December 3, 2012, in which to regain compliance. On December 5, 2012, we received a letter from NASDAQ granting us a 180-day
extension period, or until June 3, 2013, in which to regain compliance by meeting the minimum closing bid price of $1.00 per share
for ten consecutive business days. If we do not regain compliance by June 3, 2013, the NASDAQ staff will provide written notice
that our common stock is subject to delisting. We have filed a definitive proxy statement with the Securities and Exchange Commission
to solicit proxies from our stockholders to effect a reverse split of our common stock that we believe will result in us regaining
compliance with the closing bid price requirement by June 3, 2013. We can provide no assurance that the stockholders will approve
the reverse split or that a reverse split will result in us regaining compliance with the closing bid price requirement. In addition,
given the general market volatility, we may be unable to regain compliance with the closing bid price requirement by June 3, 2013.
A delisting of our common stock is likely to reduce the liquidity of our common stock and may inhibit or preclude our ability to
raise additional financing and may also materially and adversely impact our credit terms with our vendors. See &ldquo;Risk Factors.&rdquo;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.25in"><I>&nbsp;</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.25in"><I>Private Placement of Senior Notes and Warrants</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">On January 11, 2013, we raised $22.2 million
in gross proceeds from the sale of $22.2 million in senior unsecured notes, or Senior Notes, and warrants to purchase an aggregate
of 25,630,286 shares of our common stock at an exercise price of $0.52 per share for a term of five years, or Senior Note Offering.
Using $21.5 million of the gross proceeds of the Senior Note Offering, we purchased $21.5 million of the Plant Owners&rsquo; term
debt on January 11, 2013. On January 11, 2013, we also purchased an additional 13% ownership interest in New PE Holdco, using $653,895
of the gross proceeds of the Senior Note Offering and $654,135 in cash, bringing our ownership interest in New PE Holdco to 80%.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.25in"><I>&nbsp;</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.25in"><I>Extension of Maturity of Note</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">On March 30, 2009, we entered into an unsecured
promissory note in favor of Mr. Koehler. The promissory note was for the principal amount of $1,000,000. Interest on the unpaid
principal amount of the promissory note accrues at a rate per annum of 8.00%. As of December 31, 2012, we had paid all accrued
interest under the promissory note. As of December 31, 2012, the remaining principal amount of $750,000 was due and payable on
the extended maturity date of March 31, 2013. On February 7, 2013, the maturity date was further extended to March 31, 2014.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"><B>Corporate Information</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">We are a Delaware corporation that was incorporated
in February 2005. Our principal executive offices are located at 400 Capitol Mall, Suite 2060, Sacramento, California 95814. Our
telephone number is (916) 403-2123 and our Internet website is <FONT STYLE="color: windowtext">www.pacificethanol.net</FONT>. The
content of our Internet website does not constitute a part of this prospectus.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>


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<P STYLE="color: blue; font: bold 10pt Times New Roman, Times, Serif; margin: 0; text-align: center; text-indent: 0in">THE OFFERING</P>

<P STYLE="color: blue; font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 1in; text-align: justify; text-indent: 0in">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-left: 4.3pt">Issuer</TD>
    <TD STYLE="padding-left: 0">Pacific Ethanol, Inc.</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-left: 4.3pt">&nbsp;</TD>
    <TD STYLE="padding-left: 0">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 45%; padding-left: 4.3pt">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Units&#9;</P></TD>
    <TD STYLE="width: 55%; padding-left: 0">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><FONT STYLE="font-size: 10pt">6,000
units (&ldquo;Units&rdquo;), with each Unit consisting of $1,000 of our Series A Notes, a Series A Warrant to purchase 1,971 shares
of our common stock and a Series B Warrant to purchase 2,628 shares of our common stock. We are also offering up to 35,333,173
shares of common stock issuable from time to time upon conversion or otherwise under the Series A Notes (including shares of common
stock that may be issued as interest in lieu of cash payments).</FONT></P></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-left: 4.3pt; text-align: justify">&nbsp;</TD>
    <TD STYLE="padding-left: 0.2pt; text-align: justify">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-left: 4.3pt; text-align: justify"><FONT STYLE="font-size: 10pt">Offering Price&#9;</FONT></TD>
    <TD STYLE="padding-left: 0.2pt; text-align: justify"><FONT STYLE="font-size: 10pt">$1,000 per Unit</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-left: 4.3pt; text-align: justify">&nbsp;</TD>
    <TD STYLE="padding-left: 0.2pt; text-align: justify">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-left: 4.3pt; text-align: justify"><FONT STYLE="font-size: 10pt">Concurrent Offering&#9;</FONT></TD>
    <TD STYLE="padding-left: 0.2pt; text-align: justify"><FONT STYLE="font-size: 10pt">Concurrently with this offering, we will be offering $8.0 million of Series B Notes, pursuant to a separate prospectus supplement in the Series B Note Offering.&nbsp;&nbsp;The closing of the Series B Note Offering is subject to various closing conditions, including, without limitation, the requirement that we obtain stockholder approval for this offering and the Series B Note Offering.&nbsp;&nbsp;We can provide no assurance that our stockholders will approve this offering and the Series B Note offering or that we will be able to close the Series B Note Offering.</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-left: 4.3pt; text-align: justify">&nbsp;</TD>
    <TD STYLE="padding-left: 0.2pt; text-align: justify">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-left: 4.3pt; text-align: justify"><FONT STYLE="font-size: 10pt">Series A Notes: Maturity Date&#9;</FONT></TD>
    <TD STYLE="padding-left: 0.2pt; text-align: justify"><FONT STYLE="font-size: 10pt">The Series A Notes will mature on the first anniversary of the closing date of this offering, or Maturity Date, unless earlier converted or redeemed, subject to the right of the investors to extend the date under certain circumstances.</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-left: 4.3pt; text-align: justify">&nbsp;</TD>
    <TD STYLE="padding-left: 0.2pt; text-align: justify">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-left: 4.3pt; text-align: justify"><FONT STYLE="font-size: 10pt">Series A Notes: Interest Rate&#9;</FONT></TD>
    <TD STYLE="padding-left: 4.3pt; text-align: justify; text-indent: 0.2pt"><FONT STYLE="font-size: 10pt">Interest on the Series A Notes will accrue at 5% per annum on the principal amount of the Series A Notes.&nbsp;&nbsp;The interest rate will increase to 15% per annum upon the occurrence of and during the continuance of any event of default pursuant to the Series A Notes.&nbsp;&nbsp;Interest on the Series A Notes is payable in arrears on each Installment Date (as defined below).</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-left: 4.3pt; text-align: justify">&nbsp;</TD>
    <TD STYLE="padding-left: 4.3pt; text-align: justify; text-indent: 0.2pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-left: 4.3pt; text-align: justify"><FONT STYLE="font-size: 10pt">Series A Notes: Amortization and Payment Dates&#9;</FONT></TD>
    <TD STYLE="padding-left: 4.3pt; text-align: justify; text-indent: 0.2pt"><FONT STYLE="font-size: 10pt">We will make monthly payments consisting of amortization payments with respect to the principal amount of each Series A Note and accrued and unpaid interest and late payments on the Series A Notes, with each such payment date (including the Maturity Date) being referred to herein as an &ldquo;Installment Date.&rdquo;</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-left: 4.3pt; text-align: justify">&nbsp;</TD>
    <TD STYLE="padding-left: 4.3pt; text-align: justify; text-indent: 0.2pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-left: 4.3pt"><FONT STYLE="font-size: 10pt">Series A Notes: </FONT><BR>
<FONT STYLE="font-size: 10pt">Acceleration and Deferral of Installment Payments&#9;</FONT></TD>
    <TD STYLE="padding-left: 4.3pt">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><BR>
        The holder of a Series A Note may defer the payment of the amount due on any Installment Dates to another Installment Date, in
        which case the amount deferred will become part of such subsequent Installment Date and will continue to accrue interest.</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0in">&nbsp;</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0in">On any day during the period
        starting on an Installment Date and ending on the trading day immediately prior to the next Installment Date, the holder of a Series
        A Note may accelerate the amounts due on up to four future Installment Dates at the Company Conversion Price (as defined below),
        provided that the holder may only accelerate amounts due on three future Installment Dates if we had elected to convert the amount
        due on the preceding Installment Date.</P></TD></TR>
</TABLE>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 45%; padding-left: 4.3pt">&nbsp;</TD>
    <TD STYLE="width: 55%; padding-left: 4.3pt; text-align: justify">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-left: 4.3pt"><FONT STYLE="font-size: 10pt">Series A Notes: Payment in </FONT><BR>
<FONT STYLE="font-size: 10pt">Shares of Common Stock&#9;</FONT></TD>
    <TD STYLE="padding-left: 4.3pt">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.2pt">&nbsp;</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0in">We may pay the applicable
        principal and interest amounts due on an Installment Date in shares of our common stock, subject to the satisfaction of certain
        conditions, or elect to pay in cash. If we are not permitted to deliver shares of common stock with respect to an Installment Date
        due to a failure to satisfy any of the conditions, we must pay the applicable portion of the principal and interest amounts in
        cash, unless the conditions are waived by the holder of the Series A Note. If the applicable conditions are satisfied, we currently
        intend to repay the Series A Notes through the issuance of shares of our common stock. However, this intention may change depending
        on our finances at the time of the applicable Installment Date and our stock price on the applicable Installment Date.</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.2pt">&nbsp;</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.2pt">If we make a payment due
        on any Installment Date in shares of our common stock, the amount due on the Installment Date will be converted into shares of
        our common stock at a price per share equal to the Company Conversion Price. The <FONT STYLE="font-family: Times New Roman, Times, Serif">&ldquo;</FONT>Company
        Conversion Price<FONT STYLE="font-family: Times New Roman, Times, Serif">&rdquo;</FONT> is the lesser of the Conversion Price then
        in effect (as described below) and 85% of the Market Price on the Installment Date. The <FONT STYLE="font-family: Times New Roman, Times, Serif">&ldquo;</FONT>Market
        Price<FONT STYLE="font-family: Times New Roman, Times, Serif">&rdquo;</FONT> for any given date is the lesser of (i) the volume
        weighted average price of our common stock on the trading day immediately preceding such date, and (ii) the arithmetic average
        of the three lowest volume-weighted average prices of our common stock during the ten consecutive trading days ending on the trading
        day immediately preceding such date.</P></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-left: 4.3pt">&nbsp;</TD>
    <TD STYLE="padding-left: 4.3pt; text-align: justify; text-indent: 0.2pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-left: 4.3pt; text-align: justify"><FONT STYLE="font-size: 10pt">Series A Notes: Ranking&#9;</FONT></TD>
    <TD STYLE="padding-left: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-size: 10pt">The Series A Notes will be the subordinated unsecured obligations of Pacific Ethanol and not the obligations of our subsidiaries.&nbsp;&nbsp;The Series A Notes will be effectively subordinated to our future secured debt, if any, to the extent of the value of the collateral securing such future debt; subordinated in right of payment to our existing senior unsecured debt; equal in right of payment with the Series B Notes, certain current and future debt not to exceed $750,000 and any future unsecured debt that does not expressly provide that it is subordinated to the Series A Notes; senior to all other indebtedness of Pacific Ethanol; and senior to any future debt that expressly provides that it is subordinated to the Series A Notes. In addition, the ability of a holder of Series A Notes to be paid in cash while the Senior Notes remain outstanding is limited.</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-left: 4.3pt; text-align: justify">&nbsp;</TD>
    <TD STYLE="padding-left: 4.3pt; text-align: justify; text-indent: 0.2pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-left: 4.3pt; text-align: justify"><FONT STYLE="font-size: 10pt">Series A Notes: Conversion&#9;</FONT></TD>
    <TD STYLE="padding-left: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-size: 10pt">All amounts due under the Series A Notes are convertible at any time, in whole or in part, at your option, into shares of our common stock at a price per share equal to $1.00, subject to certain adjustments, or the Fixed Conversion Price.&nbsp;&nbsp;</FONT></TD></TR>
</TABLE>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 45%; padding-left: 4.3pt; text-align: justify"><FONT STYLE="font-size: 10pt">Series A Notes: Events of Default&#9;</FONT></TD>
    <TD STYLE="width: 55%; padding-left: 0.2pt; text-align: justify"><FONT STYLE="font-size: 10pt">If an event of default on the Series A Notes has occurred and is continuing, the principal amount of the Series A Notes, plus any accrued and unpaid interest and late payments, may become immediately due and payable.</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-left: 4.3pt; text-align: justify">&nbsp;</TD>
    <TD STYLE="padding-left: 0.2pt; text-align: justify">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-left: 4.3pt; text-align: justify"><FONT STYLE="font-size: 10pt">Series A Notes: Certain Covenants&#9;</FONT></TD>
    <TD STYLE="padding-left: 0.2pt; text-align: justify"><FONT STYLE="font-size: 10pt">The Series A Notes and the indenture governing the Series A Notes will contain covenants limiting our ability and the ability of our subsidiaries to take certain actions.</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-left: 4.3pt; text-align: justify">&nbsp;</TD>
    <TD STYLE="padding-left: 0.2pt; text-align: justify">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-left: 4.3pt; text-align: justify"><FONT STYLE="font-size: 10pt">Series A Notes: Governing Law&#9;</FONT></TD>
    <TD STYLE="padding-left: 0; text-align: justify"><FONT STYLE="font-size: 10pt">The Series A Notes will be governed by, and construed in accordance with, the laws of the State of New York without regard to its conflicts of law principles.</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-left: 4.3pt; text-align: justify">&nbsp;</TD>
    <TD STYLE="padding-left: 4.3pt; text-align: justify">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-left: 4.3pt; text-align: justify"><FONT STYLE="font-size: 10pt">Series A Notes: Trustee&#9;</FONT></TD>
    <TD STYLE="padding-left: 0.2pt; text-align: justify"><FONT STYLE="font-size: 10pt">We have appointed U.S. Bank National Association as the trustee under the indenture.</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-left: 4.3pt; text-align: justify">&nbsp;</TD>
    <TD STYLE="padding-left: 0.2pt; text-align: justify">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-left: 4.3pt; text-align: justify"><FONT STYLE="font-size: 10pt">Series A Warrants&#9;</FONT></TD>
    <TD STYLE="padding-left: 0.2pt; text-align: justify"><FONT STYLE="font-size: 10pt">The Series A Warrants will entitle the holders of the Series A Warrants to purchase, in aggregate, up to 11,826,000 shares of our common stock.&nbsp;&nbsp;The Series A Warrants will not be exercisable until the first anniversary of the date of their issuance and will expire 2 years from the date of their issuance.&nbsp;&nbsp;The Series A Warrants will initially be exercisable at an exercise price equal to $0.52, subject to certain adjustments including an adjustment on the first anniversary of their issuance date. The exercise price of the Series A Warrants will be reduced on the first anniversary of their issuance date to equal 115% of the market price of our common stock on the first anniversary of the issuance date of the Series A Warrants (to the extent such exercise price is less than the then applicable exercise price).</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-left: 4.3pt; text-align: justify">&nbsp;</TD>
    <TD STYLE="padding-left: 0.2pt; text-align: justify">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-left: 4.3pt; text-align: justify"><FONT STYLE="font-size: 10pt">Series B Warrants&#9;</FONT></TD>
    <TD STYLE="padding-left: 0.2pt; text-align: justify"><FONT STYLE="font-size: 10pt">The Series B Warrants will entitle the holders of the Series B Warrants to purchase, in aggregate, up to 15,768,000 shares of our common stock.&nbsp;&nbsp;The Series B Warrants will not be exercisable unless there is a closing of the Series B Note Offering by no later than July 1, 2013. In the event of such closing, the Series B Warrants will not be exercisable until the first anniversary of the closing and will expire on the second anniversary of the closing of the Series B Note Offering. The Series B Warrants will initially be exercisable at an exercise price equal to $0.52, subject to certain adjustments including an adjustment on the first anniversary of the closing of the Series B Note Offering. The exercise price of the Series B Warrants will be reduced on the first anniversary of the closing of the Series B Note Offering to equal 115% of the market price of our common stock on the first anniversary of the closing of the Series B Note Offering (to the extent such exercise price is less than the then applicable exercise price).</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-left: 4.3pt; text-align: justify">&nbsp;</TD>
    <TD STYLE="padding-left: 0.2pt; text-align: justify">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-left: 4.3pt; text-align: justify"><FONT STYLE="font-size: 10pt">Warrant Shares&#9;</FONT></TD>
    <TD STYLE="padding-left: 0.2pt; text-align: justify"><FONT STYLE="font-size: 10pt">This prospectus does not cover the shares of common stock issuable from time to time upon exercise of the Warrants.&nbsp;&nbsp;We anticipate that we will file a registration statement covering the shares of common stock issuable upon the exercise of the Warrants prior to the time the Warrants become exercisable.&nbsp;&nbsp;If a registration statement covering the exercise of the Warrants is not available, the Warrants will be exercisable on a cashless basis.</FONT></TD></TR>
</TABLE>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 45%; padding-left: 4.3pt; text-align: justify"><FONT STYLE="font-size: 10pt">Limitations on Conversion, Exercise and Issuance&#9;</FONT></TD>
    <TD STYLE="width: 55%; padding-left: 0">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Shares of our common stock may not be issued
        under the Convertible Notes or Warrants if, after giving effect to the issuance, the holder of the Convertible Note or Warrant
        together with its affiliates will beneficially own in excess of 9.99% of the outstanding shares of our common stock, or the Maximum
        Percentage, or the issuance of the shares would violate NASDAQ rules and regulations (including applicable stockholder approval
        requirements). The Maximum Percentage may be raised or lowered to any other percentage not in excess of 9.99%, upon notice to us,
        provided that any increase will not be effective until the 61st day after we receive notice of an increase.</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">We cannot issue more than 28,920,013 shares
        of our common stock issued under the Convertible Notes or Warrants unless we have obtained either (i) stockholder approval pursuant
        to NASDAQ Listing Rule 5635(d) for the issuance of more than 28,920,013 shares of our common stock under the Convertible Notes
        and Warrants or (ii) an opinion from legal counsel that more than 28,920,013 shares of our common stock may be issued under the
        Convertible Notes and Warrants under Rule 5635(d).</P></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-left: 4.3pt; text-align: justify">&nbsp;</TD>
    <TD STYLE="padding-left: 4.3pt; text-align: justify">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-left: 4.3pt; text-align: justify"><FONT STYLE="font-size: 10pt">Certain U.S. federal income tax considerations&#9;</FONT></TD>
    <TD STYLE="padding-left: 0.2pt; text-align: justify"><FONT STYLE="font-size: 10pt">You should consult your tax advisor with respect to the U.S. federal income tax consequences of the holding, disposition or conversion of the Series A Notes, the holding, disposition, exercise or lapse of the Warrants, and with respect to any tax consequences arising under the laws of any state, local, foreign or other taxing jurisdiction. See &lsquo;&lsquo;Certain U.S. Federal Income Tax Considerations&rsquo;&rsquo;.</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-left: 4.3pt; text-align: justify">&nbsp;</TD>
    <TD STYLE="padding-left: 0.2pt; text-align: justify">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-left: 4.3pt; text-align: justify"><FONT STYLE="font-size: 10pt">No Market&#9;</FONT></TD>
    <TD STYLE="padding-left: 0.2pt; text-align: justify"><FONT STYLE="font-size: 10pt">The Series A Notes and the Warrants are new securities for which there is currently no market. We do not expect a market to develop or be maintained for the Series A Notes or the Warrants. </FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-left: 4.3pt; text-align: justify">&nbsp;</TD>
    <TD STYLE="padding-left: 0.2pt; text-align: justify">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-left: 4.3pt; text-align: justify"><FONT STYLE="font-size: 10pt">Trading&#9;</FONT></TD>
    <TD STYLE="padding-left: 0; text-align: justify"><FONT STYLE="font-size: 10pt">The Series A Notes and Warrants will not be listed on any securities exchange or quoted through any automated quotation system.</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-left: 4.3pt; text-align: justify">&nbsp;</TD>
    <TD STYLE="padding-left: 4.3pt; text-align: justify">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-left: 4.3pt; text-align: justify"><FONT STYLE="font-size: 10pt">Use of Proceeds&#9;</FONT></TD>
    <TD STYLE="padding-left: 0.2pt; text-align: justify"><FONT STYLE="font-size: 10pt">We intend to use the net proceeds from this offering, after deducting our placement agent&rsquo;s fee, together with a portion of our cash reserves, to (i) purchase $2.6 million of June Indebtedness (as defined below) from the existing lenders under the Plant Owners&rsquo; credit facilities and limited liability company interests of New PE Holdco held by the holders of the June Indebtedness being purchased; and, we anticipate that, immediately prior to such purchase, the credit facilities in respect of the June Indebtedness will be amended to extend the maturity date applicable to the portion of the June Indebtedness that we will purchase from June 25, 2013 to June 30, 2016, and (ii) purchase approximately $3.5 million of Revolving Loans from the existing lenders under the Plant Owners&rsquo; credit facilities.&nbsp;&nbsp;</FONT></TD></TR>
</TABLE>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 45%; padding-left: 4.3pt; text-align: justify"><FONT STYLE="font-size: 10pt">Risk factors&#9;</FONT></TD>
    <TD STYLE="width: 55%; padding-left: 0.2pt; text-align: justify"><FONT STYLE="font-size: 10pt">In analyzing an investment in the Series A Notes and Warrants we are offering pursuant to this prospectus supplement, you should carefully consider, along with other matters included or incorporated by reference in this prospectus supplement, the information set forth under &ldquo;Risk Factors&rdquo; beginning on page S-15 of this prospectus supplement and page 4 of the accompanying prospectus.</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-left: 4.3pt; text-align: justify">&nbsp;</TD>
    <TD STYLE="padding-left: 0.2pt; text-align: justify">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-left: 4.3pt; text-align: justify"><FONT STYLE="font-size: 10pt">Common Stock&#9;</FONT></TD>
    <TD STYLE="padding-left: 0">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Our shares of common stock are listed on The
        NASDAQ Capital Market under the symbol &ldquo;PEIX&rdquo;.</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">For a more complete description of the terms of the Series A Notes,
Warrants and our common stock, see &ldquo;Description of Securities Being Offered.&rdquo;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; color: blue"><B>&nbsp;</B></P>

<P STYLE="color: blue; font: bold 10pt Times New Roman, Times, Serif; margin: 0; text-align: center; text-indent: 0in">&nbsp;</P>

<P STYLE="color: blue; font: bold 10pt Times New Roman, Times, Serif; margin: 0; text-align: center; text-indent: 0in">RISK FACTORS</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"><I>&nbsp;</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"><I>Investing in the securities offered hereby
involves a high degree of risk. You should carefully consider the following risks factors and the risk factors incorporated by
reference to our filings with the Securities and Exchange Commission pursuant to Sections&nbsp;13(a), 13(c), 14 or 15(d) of the
Securities Exchange Act of 1934, as amended, or Exchange Act, and all other information contained or incorporated by reference
in this prospectus supplement and the accompanying prospectus, including our consolidated financial statements and the related
notes, before investing in our securities. If any of these risks materialize, our business, financial condition or results of operations
could be materially harmed. In that case, the trading price of our common stock could decline, and you may lose some or all of
your investment. The risks and uncertainties we describe are not the only ones facing us. Additional risks not presently known
to us, or that we currently deem immaterial, may also impair our business operations. If any of these risks were to occur, our
business, financial condition, or results of operations would likely suffer. In that event, the trading price of our common stock
and the value of the Series A Notes and Warrants could decline, and you could lose all or part of your investment.</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"><B>Risks Related to our Business</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.25in"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.25in"><B><I>We have incurred significant losses and
negative operating cash flow in the past and we may incur significant losses and negative operating cash flow in the foreseeable
future. Continued losses and negative operating cash flow will hamper our operations and prevent us from expanding our business.
</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">We have incurred significant losses and negative
operating cash flow in the past. For 2012 and 2011, we incurred consolidated net losses of approximately $43.4 million (unaudited)
and $4.0 million and negative operating cash flows of approximately $20.8 million (unaudited) and $4.0 million, respectively. We
believe that we may incur significant losses and negative operating cash flows in the foreseeable future. We expect to rely on
cash on hand, cash, if any, generated from our operations and cash, if any, generated from future financing activities, to fund
all of the cash requirements of our business. Continued losses and negative operating cash flow may hamper our operations and impede
us from expanding our business. Continued losses and negative operating cash flows are also likely to make our capital raising
needs more acute while limiting our ability to raise additional financing on favorable terms.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.25in"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.25in"><B><I>We may be unable to restructure or repay
the Plant Owners&rsquo; term and revolving debt in the aggregate amount of $6.7 million prior to its June 25, 2013 maturity date.
Our inability to timely restructure or repay the debt will likely result in material adverse effects on us and our direct and indirect
subsidiaries, including Kinergy Marketing, LLC, or Kinergy, and the Plant Owners.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">As of the date of this prospectus, of the Plant
Owners&rsquo; up to $104.8 million in term and revolving debt, $6.7 million in combined term and revolving debt is due on June
25, 2013, or June Indebtedness. Of the Plant Owner&rsquo;s remaining debt, up to $10.0 million in revolving debt (or up to $15.0
million in revolving debt if our request to increase availability under our new revolving credit facility is approved) is due on
June 25, 2015 and $88.1 million in combined revolving and term debt is due on June, 30, 2016. The Plant Owners do not and will
likely not have sufficient funds to repay the $6.7 million in debt on or prior to its maturity on June 25, 2013. We are therefore
attempting to restructure the debt and/or raise additional capital. If we are unable to raise sufficient capital to repay the debt,
we will be in default on that debt and in cross-default on the $88.1 million in revolving and term debt due on June 30, 2016 plus
up to an additional $10.0 million in revolving debt (or up to $15.0 million in revolving debt if our request to increase availability
under our new revolving credit facility is approved) due June 25, 2015, all of which may be accelerated and become immediately
due and payable on June 25, 2013. Our inability to restructure or repay the $6.7 million of debt due on June 25, 2013 prior to
its maturity will likely have a material adverse effect on us and our direct and indirect subsidiaries, including Kinergy and the
Plant Owners. A material adverse effect on the Plant Owners would likewise materially and adversely harm our business, results
of operations and future prospects. See &ldquo;Use of Proceeds&rdquo; and &ldquo;Description of Existing Indebtedness.&rdquo;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">We will use $2.1 million of the net proceeds
of this offering, after deducting our placement agent&rsquo;s fee, to purchase $2.6 million of June Indebtedness and, anticipate
that immediately prior to such purchase, the Plant Owners&rsquo; credit facilities will be amended to extend the maturity date
applicable to such June Indebtedness from June 25, 2013 to June 30, 2016. The closing of this offering is, however, subject to
various conditions. We can provide no assurance that we will be able to close the offering contemplated in this prospectus.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">Concurrently with this offering, we will be
offering $8.0 million of Series B Notes pursuant to a separate prospectus supplement in the Series B Note Offering, a portion of
the net proceeds of which we anticipate using to purchase the $4.0 million of June Indebtedness that remains after the closing
of this offering. Immediately prior to our purchase of the remaining June Indebtedness with the proceeds of the Series B Note Offering,
we anticipate that the credit facilities will be amended to extend the maturity date applicable to such remaining June Indebtedness
from June 25, 2013 to June 30, 2016. After the closing of this offering and the Series B Note Offering, we anticipate that we would
have purchased all of the June Indebtedness and that all such June Indebtedness would have been amended to extend the maturity
date from June 25, 2013 to June 30, 2016.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">The closing of this offering and the Series
B Note Offering are, however, subject to various closing conditions, including, the closing of the Series B Note Offering being
subject to the requirement that we obtain stockholder approval for this offering and the Series B Note Offering. We can provide
you no assurance that our stockholders will approve this offering and the Series B Note Offering or that we will be able to close
this offering or the Series B Note Offering</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.25in"><B><I>There are material limitations with making
estimates of our results for current or prior periods prior to the completion of our and our auditors&rsquo; normal review procedures
for such periods.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"><FONT STYLE="font-size: 10pt">The estimated
results contained in &ldquo;Prospectus Summary&mdash;Recent Financial Information - Unaudited&rdquo; are not a comprehensive statement
of our financial<FONT STYLE="color: black">&nbsp;</FONT>results for the quarter and year ended December 31, 2012, and have not
been reviewed or audited by our independent registered public accounting firm. Our consolidated financial statements for the quarter
and year ended December 31, 2012, will not be available until after this offering is completed and, consequently, will not be available
to you prior to investing in this offering. The final financial<FONT STYLE="color: black">&nbsp;</FONT>results for the quarter
and year ended December 31, 2012, may vary from our expectations and may be materially different from the preliminary financial<FONT STYLE="color: black">
</FONT>estimates we have provided due to completion of quarterly and annual closing procedures, final adjustments and other developments
that may arise between now, the end of such quarterly and annual period and the time the financial<FONT STYLE="color: black">&nbsp;</FONT>results
for this period are finalized. Accordingly, investors should not place undue reliance on such financial<FONT STYLE="color: black">&nbsp;</FONT>information</FONT>.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.25in"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.25in"><B><I>The results of our operations and our
ability to operate at a profit is largely dependent on managing the prices of corn, natural gas, ethanol and WDG, all of which
are subject to significant volatility and uncertainty. </I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">Our results of operations are highly impacted
by commodity prices, including the cost of corn and natural gas that we must purchase, and the prices of ethanol and WDG that we
sell. Prices and supplies are subject to and determined by market forces over which we have no control, such as weather, domestic
and global demand, shortages, export prices and various governmental policies in the United States and around the world. For example,
over a period of four weeks at the end of 2011, the market price of ethanol declined by approximately 28%, which substantially
reduced our profitability during the fourth quarter and full year of 2011.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">As a result of price volatility of corn, natural
gas, ethanol and WDG, our results of operations may fluctuate substantially. In addition, increases in corn or natural gas prices
or decreases in ethanol or WDG prices may make it unprofitable to operate. In fact, some of our marketing activities will likely
be unprofitable in a market of generally declining ethanol prices due to the nature of our business. For example, to satisfy customer
demands, we must maintain certain quantities of ethanol inventory for subsequent resale. Moreover, we procure much of our inventory
outside the context of a marketing arrangement and therefore must buy ethanol at a price established at the time of purchase and
sell ethanol at an index price established later at the time of sale that is generally reflective of movements in the market price
of ethanol. As a result, our margins for ethanol sold in these transactions generally decline and may turn negative as the market
price of ethanol declines.</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">No assurance can be given that corn or natural
gas can be purchased at, or near, current or any particular prices or that ethanol or WDG will sell at, or near, current or any
particular prices. Consequently, our results of operations and financial position may be adversely affected by increases in the
price of corn or natural gas or decreases in the price of ethanol or WDG.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">Over the past several years, the spread between
ethanol and corn prices has fluctuated widely and narrowed significantly. Fluctuations are likely to continue to occur. A sustained
narrow spread or any further reduction in the spread between ethanol and corn prices, whether as a result of sustained high or
increased corn prices or sustained low or decreased ethanol prices, would adversely affect our results of operations and financial
position. Further, combined revenues from sales of ethanol and WDG could decline below the marginal cost of production, which could
cause us to suspend production of ethanol and WDG at some or all of the Pacific Ethanol Plants.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.25in"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.25in"><B><I>We are currently a member of New PE Holdco
with limited control over certain business decisions. As a result, our interests may not be as well served as if we were in control
of all aspects of the business of New PE Holdco, which could adversely affect its contribution to our results of operations and
our business prospects related to that entity.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">New PE Holdco owns, and we operate, the Pacific
Ethanol Plants. We currently have an 80% ownership interest in New PE Holdco. While this represents the single largest ownership
position in New PE Holdco and although we have the power to make decisions regarding the activities of New PE Holdco that most
significantly impact New PE Holdco&rsquo;s economic performance by virtue of the terms of the asset management agreement we have
with New PE Holdco and the Plant Owners and by virtue of the fact that Neil Koehler, our President and Chief Executive Officer,
is the sole manager of New PE Holdco, the consent of the other owners is required to approve certain actions, including restarting
an idle plant.<B> </B>Some actions require the consent of holders of 100% of the ownership interests and other actions require
the consent of holders of 85% of the ownership interests. In addition, we are precluded from voting on matters in which we have
a direct financial interest, such as the amendment or extension of the asset management agreement we have with New PE Holdco and
the Plant Owners and/or the marketing agreements we have with the Plant Owners whose facilities are operational.<B> </B>As a result
of these limitations, we are dependent on the business judgment of the other owners of New PE Holdco in respect of a number of
significant matters bearing on the operations of the Pacific Ethanol Plants. Consequently, our interests may not be as well served
as if we were in complete control of New PE Holdco, and the contribution by New PE Holdco to our results of operations and our
business prospects related to that entity may be adversely affected by our lack of control over that entity.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.25in"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.25in"><B><I>Increased ethanol production may cause
a decline in ethanol prices or prevent ethanol prices from rising, and may have other negative effects, adversely impacting our
results of operations, cash flows and financial condition.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">We believe that the most significant factor
influencing the price of ethanol has been the substantial increase in ethanol production in recent years. Domestic ethanol production
capacity has increased steadily from an annualized rate of 1.5 billion gallons per year in January 1999 to 14.9 billion gallons
in 2012 according to the Renewable Fuels Association. However, increases in the demand for ethanol may not be commensurate with
increases in the supply of ethanol, thus leading to lower ethanol prices. Demand for ethanol could be impaired due to a number
of factors, including regulatory developments and reduced United States gasoline consumption. Reduced gasoline consumption has
occurred in the past and could occur in the future as a result of increased gasoline or oil prices.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.25in"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.25in"><B><I>The market price of ethanol is volatile
and subject to large fluctuations, which may cause our profitability or losses to fluctuate significantly.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">The market price of ethanol is volatile and
subject to large fluctuations. The market price of ethanol is dependent upon many factors, including the supply of ethanol and
the price of gasoline, which is in turn dependent upon the price of petroleum which is highly volatile and difficult to forecast.
For example, although the market price of ethanol increased by approximately 42% for the year ended December 31, 2011 as compared
to 2010, during a period of four weeks at the end of 2011, the market price of ethanol declined by approximately 28%, which substantially
reduced our profitability during the fourth quarter and full year of 2011. Fluctuations in the market price of ethanol may cause
our profitability or losses to fluctuate significantly.</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.25in"><B><I>Some of our marketing activities will
likely be unprofitable in a market of generally declining ethanol prices due to the nature of our business.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">Some of our marketing activities will likely
be unprofitable in a market of generally declining ethanol prices due to the nature of our business. For example, to satisfy customer
demands, we must maintain certain quantities of ethanol inventory for subsequent resale. Moreover, we procure much of our inventory
outside the context of a marketing arrangement and therefore must buy ethanol at a price established at the time of purchase and
sell ethanol at an index price established later at the time of sale that is generally reflective of movements in the market price
of ethanol. As a result, our margins for ethanol sold in these transactions generally decline and may turn negative as the market
price of ethanol declines.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.25in"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.25in"><B><I>Disruptions in ethanol production infrastructure
may adversely affect our business, results of operations and financial condition.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">Our business depends on the continuing availability
of rail, road, port, storage and distribution infrastructure. In particular, due to limited storage capacity at the Pacific Ethanol
Plants and other considerations related to production efficiencies, the Pacific Ethanol Plants depend on just-in-time delivery
of corn. The production of ethanol also requires a significant and uninterrupted supply of other raw materials and energy, primarily
water, electricity and natural gas. The prices of electricity and natural gas have fluctuated significantly in the past and may
fluctuate significantly in the future. Local water, electricity and gas utilities may not be able to reliably supply the water,
electricity and natural gas that the Pacific Ethanol Plants will need or may not be able to supply those resources on acceptable
terms. Any disruptions in the ethanol production infrastructure, whether caused by labor difficulties, earthquakes, storms, other
natural disasters or human error or malfeasance or other reasons, could prevent timely deliveries of corn or other raw materials
and energy and may require the Pacific Ethanol Plants to halt production which could have a material adverse effect on our business,
results of operations and financial condition.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.25in"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.25in"><B><I>We and the Pacific Ethanol Plants may
engage in hedging transactions and other risk mitigation strategies that could harm our results of operations.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">In an attempt to partially offset the effects
of volatility of ethanol prices and corn and natural gas costs, the Pacific Ethanol Plants may enter into contracts to fix the
price of a portion of their ethanol production or purchase a portion of their corn or natural gas requirements on a forward basis.
In addition, we may engage in other hedging transactions involving exchange-traded futures contracts for corn, natural gas and
unleaded gasoline from time to time. The financial statement impact of these activities is dependent upon, among other things,
the prices involved and our ability to sell sufficient products to use all of the corn and natural gas for which forward commitments
have been made. Hedging arrangements also expose us to the risk of financial loss in situations where the other party to the hedging
contract defaults on its contract or, in the case of exchange-traded contracts, where there is a change in the expected differential
between the underlying price in the hedging agreement and the actual prices paid or received by us. As a result, our results of
operations and financial position may be adversely affected by fluctuations in the price of corn, natural gas, ethanol and unleaded
gasoline.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.25in"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.25in"><B><I>Operational difficulties at the Pacific
Ethanol Plants could negatively impact sales volumes and could cause us to incur substantial losses.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">Operations at the Pacific Ethanol Plants are
subject to labor disruptions, unscheduled downtimes and other operational hazards inherent in the ethanol production industry,
including equipment failures, fires, explosions, abnormal pressures, blowouts, pipeline ruptures, transportation accidents and
natural disasters. Some of these operational hazards may cause personal injury or loss of life, severe damage to or destruction
of property and equipment or environmental damage, and may result in suspension of operations and the imposition of civil or criminal
penalties. Insurance obtained by the Pacific Ethanol Plants may not be adequate to fully cover the potential operational hazards
described above or the Pacific Ethanol Plants may not be able to renew this insurance on commercially reasonable terms or at all.</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">Moreover, the production facilities at the Pacific
Ethanol Plants may not operate as planned or expected. All of these facilities are designed to operate at or above a specified
production capacity. The operation of these facilities is and will be, however, subject to various uncertainties. As a result,
these facilities may not produce ethanol and its co-products at expected levels. In the event any of these facilities do not run
at their expected capacity levels, our business, results of operations and financial condition may be materially and adversely
affected.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.25in"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.25in"><B><I>The United States ethanol industry is
highly dependent upon myriad federal and state legislation and regulation and any changes in legislation or regulation could have
a material adverse effect on our results of operations and financial condition.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.5in"><I>&nbsp;</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.5in"><I>Various studies have criticized the efficiency of ethanol
in general, and corn-based ethanol in particular, which could lead to the reduction or repeal of mandates that require the use
and domestic production of ethanol or otherwise negatively impact public perception and acceptance of ethanol as an alternative
fuel.</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">Although many trade groups, academics and governmental
agencies have supported ethanol as a fuel additive that promotes a cleaner environment, others have criticized ethanol production
as consuming considerably more energy and emitting more greenhouse gases than other biofuels and as potentially depleting water
resources. Other studies have suggested that ethanol negatively impacts consumers by causing higher prices for dairy, meat and
other foodstuffs from livestock that consume corn. If these views gain acceptance, support for existing measures requiring the
use and domestic production of corn-based ethanol could decline, leading to a reduction or repeal of these measures. These views
could also negatively impact public perception of the ethanol industry and acceptance of ethanol as a component for blending in
transportation fuel.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.5in"><I>&nbsp;</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.5in"><I>Waivers or repeal of the national Renewable Fuel Standard&rsquo;s
minimum levels of renewable fuels included in gasoline could have a material adverse effect on our results of operations.</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">Shortly after passage of the Energy Independence
and Security Act of 2007, which increased the minimum mandated required usage of ethanol, a Congressional sub-committee held hearings
on the potential impact of the national Renewable Fuel Standard, or national RFS, on commodity prices. While no action was taken
by the sub-committee towards repeal of the national RFS, any attempt by Congress to re-visit, repeal or grant waivers of the national
RFS could adversely affect demand for ethanol and could have a material adverse effect on our results of operations and financial
condition.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.25in"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.25in"><B><I>The ethanol production and marketing
industry is extremely competitive. Many of our significant competitors have greater production and financial resources and one
or more of these competitors could use their greater resources to gain market share at our expense. In addition, a number of Kinergy&rsquo;s
suppliers may circumvent the marketing services we provide, causing our sales and profitability to decline. </I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">The ethanol production and marketing industry
is extremely competitive. Many of our significant competitors in the ethanol production and marketing industry, including Archer
Daniels Midland Company and Valero Energy Corporation, have substantially greater production and/or financial resources. As a result,
our competitors may be able to compete more aggressively and sustain that competition over a longer period of time. Successful
competition will require a continued high level of investment in marketing and customer service and support. Our limited resources
relative to many significant competitors may cause us to fail to anticipate or respond adequately to new developments and other
competitive pressures. This failure could reduce our competitiveness and cause a decline in market share, sales and profitability.
Even if sufficient funds are available, we may not be able to make the modifications and improvements necessary to compete successfully.</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">We also face increasing competition from international
suppliers. Currently, international suppliers produce ethanol primarily from sugar cane and have cost structures that are generally
substantially lower than the cost structures of the Pacific Ethanol Plants. Any increase in domestic or foreign competition could
cause the Pacific Ethanol Plants to reduce their prices and take other steps to compete effectively, which could adversely affect
their and our results of operations and financial condition.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">In addition, some of our suppliers are potential
competitors and, especially if the price of ethanol reaches historically high levels, they may seek to capture additional profits
by circumventing our marketing services in favor of selling directly to our customers. If one or more of our major suppliers, or
numerous smaller suppliers, circumvent our marketing services, our sales and profitability may decline.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.25in"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.25in"><B><I>If Kinergy fails to satisfy its financial
covenants under its credit facility, it may experience a loss or reduction of that facility, which would have a material adverse
effect on our financial condition and results of operations.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">We are substantially dependent on Kinergy&rsquo;s
credit facility, to help finance its operations. Kinergy must satisfy quarterly financial covenants under its credit facility,
including covenants regarding its quarterly EBITDA and fixed coverage ratios. Kinergy will be in default under its credit facility
if it fails to satisfy any financial covenant. A default may result in the loss or reduction of the credit facility. The loss of
Kinergy&rsquo;s credit facility, or a significant reduction in Kinergy&rsquo;s borrowing capacity under the facility, would result
in Kinergy&rsquo;s inability to finance a significant portion of its business and would have a material adverse effect on our financial
condition and results of operations.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.25in"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.25in"><B><I>The high concentration of our sales within
the ethanol marketing and production industry could result in a significant reduction in sales and negatively affect our profitability
if demand for ethanol declines. </I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">We expect to be completely focused on the marketing
and production of ethanol and its co-products for the foreseeable future. We may be unable to shift our business focus away from
the marketing and production of ethanol to other renewable fuels or competing products. Accordingly, an industry shift away from
ethanol or the emergence of new competing products may reduce the demand for ethanol. A downturn in the demand for ethanol would
likely materially and adversely affect our sales and profitability.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.25in"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.25in"><B><I>In addition to ethanol produced by the
Pacific Ethanol Plants, we also depend on a small number of third-party suppliers for a significant portion of the ethanol we sell.
If any of these suppliers does not continue to supply us with ethanol in adequate amounts, we may be unable to satisfy the demands
of our customers and our sales, profitability and relationships with our customers will be adversely affected.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">In addition to the ethanol produced by the Pacific
Ethanol Plants, we also depend, and expect to continue to depend for the foreseeable future, on a small number of third-party suppliers
for a significant portion of the total amount of ethanol that we sell. Our third-party suppliers are primarily located in the Midwestern
United States. The delivery of ethanol from these suppliers is therefore subject to delays resulting from inclement weather and
other conditions. If any of these suppliers is unable or declines for any reason to continue to supply us with ethanol in adequate
amounts, we may be unable to replace that supplier and source other supplies of ethanol in a timely manner, or at all, to satisfy
the demands of our customers. If this occurs, our sales, profitability and our relationships with our customers will be adversely
affected.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.25in"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.25in"><B><I>We may be adversely affected by environmental,
health and safety laws, regulations and liabilities.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">We are subject to various federal, state and
local environmental laws and regulations, including those relating to the discharge of materials into the air, water and ground,
the generation, storage, handling, use, transportation and disposal of hazardous materials, and the health and safety of our employees.
In addition, some of these laws and regulations require us to operate under permits that are subject to renewal or modification.
These laws, regulations and permits can often require expensive pollution control equipment or operational changes to limit actual
or potential impacts to the environment. A violation of these laws and regulations or permit conditions can result in substantial
fines, natural resource damages, criminal sanctions, permit revocations and/or facility shutdowns. In addition, we have made, and
expect to make, significant capital expenditures on an ongoing basis to comply with increasingly stringent environmental laws,
regulations and permits.</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">We may be liable for the investigation and cleanup
of environmental contamination at each of the Pacific Ethanol Plants or other third-party plants that we operate and at off-site
locations where we arrange for the disposal of hazardous substances. If these substances have been or are disposed of or released
at sites that undergo investigation and/or remediation by regulatory agencies, we may be responsible under the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, or other environmental laws for all or part of the costs of investigation and/or
remediation, and for damages to natural resources. We may also be subject to related claims by private parties alleging property
damage and personal injury due to exposure to hazardous or other materials at or from those properties. Some of these matters may
require us to expend significant amounts for investigation, cleanup or other costs.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">In addition, new laws, new interpretations of
existing laws, increased governmental enforcement of environmental laws or other developments could require us to make significant
additional expenditures. Continued government and public emphasis on environmental issues can be expected to result in increased
future investments for environmental controls at the Pacific Ethanol Plants. Present and future environmental laws and regulations,
and interpretations of those laws and regulations, applicable to our operations, more vigorous enforcement policies and discovery
of currently unknown conditions may require substantial expenditures that could have a material adverse effect on our results of
operations and financial condition.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">The hazards and risks associated with producing
and transporting our products (including fires, natural disasters, explosions and abnormal pressures and blowouts) may also result
in personal injury claims or damage to property and third parties. As protection against operating hazards, we maintain insurance
coverage against some, but not all, potential losses. However, we could sustain losses for uninsurable or uninsured risks, or in
amounts in excess of existing insurance coverage. Events that result in significant personal injury or damage to our property or
third parties or other losses that are not fully covered by insurance could have a material adverse effect on our results of operations
and financial condition.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.25in"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.25in"><B><I>If we are unable to attract and retain
key personnel, our ability to operate effectively may be impaired.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">Our ability to operate our business and implement
strategies depends, in part, on the efforts of our executive officers and other key employees.&nbsp;Our future success will depend
on, among other factors, our ability to retain our current key personnel and attract and retain qualified future key personnel,
particularly executive management. Failure to attract or retain key personnel could have a material adverse effect on our business
and results of operations.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.25in"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.25in"><B><I>We depend on a small number of customers
for the majority of our sales. A reduction in business from any of these customers could cause a significant decline in our overall
sales and profitability.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">The majority of our sales are generated from
a small number of customers. During 2012 and 2011, three customers accounted for an aggregate of approximately 49% and 38% of our
net sales, respectively. We expect that we will continue to depend for the foreseeable future upon a small number of customers
for a significant portion of our sales. Our agreements with these customers generally do not require them to purchase any specified
amount of ethanol or dollar amount of sales or to make any purchases whatsoever. Therefore, in any future period, our sales generated
from these customers, individually or in the aggregate, may not equal or exceed historical levels. If sales to any of these customers
cease or decline, we may be unable to replace these sales with sales to either existing or new customers in a timely manner, or
at all. A cessation or reduction of sales to one or more of these customers could cause a significant decline in our overall sales
and profitability.</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.25in"><B><I>Our lack of long-term ethanol orders
and commitments by our customers could lead to a rapid decline in our sales and profitability.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">We cannot rely on long-term ethanol orders or
commitments by our customers for protection from the negative financial effects of a decline in the demand for ethanol or a decline
in the demand for our marketing services. The limited certainty of ethanol orders can make it difficult for us to forecast our
sales and allocate our resources in a manner consistent with our actual sales. Moreover, our expense levels are based in part on
our expectations of future sales and, if our expectations regarding future sales are inaccurate, we may be unable to reduce costs
in a timely manner to adjust for sales shortfalls. Furthermore, because we depend on a small number of customers for a significant
portion of our sales, the magnitude of the ramifications of these risks is greater than if our sales were less concentrated. As
a result of our lack of long-term ethanol orders and commitments, we may experience a rapid decline in our sales and profitability.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"><B>Risks Related to this Offering</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in"><B><I>We will incur significant indebtedness when we
sell the Series A Notes and we may incur additional indebtedness in the future. The indebtedness created by the sale of the Series
A Notes and any future indebtedness we incur exposes us to risks that could adversely affect our business, financial condition
and results of operations. </I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">As of the date of this prospectus, approximately
$20.5<B> </B>million in principal of our Senior Notes, are outstanding. We will incur $6.0 million of subordinated unsecured indebtedness
when we sell the Series A Notes and anticipate issuing an additional $8.0 million of subordinated unsecured indebtedness if we
issue the Series B Notes at the closing of the Series B Note Offering. In addition, we owe $750,000 of subordinated unsecured indebtedness
to our Chief Executive Officer. Additionally, our subsidiaries have incurred significant outstanding indebtedness. Subject to the
terms of our Senior Notes and the Convertible Notes, we may also incur additional long-term indebtedness or obtain additional working
capital lines of credit to meet future financing needs. Our indebtedness could have significant negative consequences for our business,
results of operations and financial condition, including:</P>

<P STYLE="font: 10pt Symbol; margin: 0 0 0 74.15pt; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
<TD STYLE="width: 56.15pt"></TD><TD STYLE="width: 18pt"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>increasing our vulnerability to adverse economic and industry conditions;</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
<TD STYLE="width: 56.15pt"></TD><TD STYLE="width: 18pt"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>limiting our ability to obtain additional financing;</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
<TD STYLE="width: 56.15pt"></TD><TD STYLE="width: 18pt"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>requiring the dedication of a substantial portion of our cash flow from operations to service our indebtedness, thereby reducing
the amount of our cash flow available for other purposes;</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
<TD STYLE="width: 56.15pt"></TD><TD STYLE="width: 18pt"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>limiting our flexibility in planning for, or reacting to, changes in our business; and</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
<TD STYLE="width: 56.15pt"></TD><TD STYLE="width: 18pt"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>placing us at a possible competitive disadvantage with less leveraged competitors and competitors that may have better access
to capital resources.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">We cannot assure you that we will continue to
maintain sufficient cash reserves or that our business will generate cash flow from operations at levels sufficient to permit us
to pay principal, premium, if any, and interest on our indebtedness, or that our cash needs will not increase. If we are unable
to generate sufficient cash flow or otherwise obtain funds necessary to make required payments, or if we fail to comply with the
various requirements of our existing indebtedness, the Series A Notes or any indebtedness which we may incur in the future, we
would be in default, which would permit the holders of the Series A Notes and such other indebtedness to accelerate the maturity
of the Series A Notes and such other indebtedness and could cause defaults under the Series A Notes and such other indebtedness.
Any default under the Series A Notes or such other indebtedness could have a material adverse effect on our business, results of
operations and financial condition.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in"><B><I>The Series A Notes will be unsecured and will be
effectively subordinated to our Senior Notes and effectively subordinated to all liabilities of our subsidiaries from time to time
outstanding. </I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">The Series A Notes will be obligations only
of Pacific Ethanol and will not be guaranteed by our subsidiaries or secured by any of our or their properties or assets. The Series
A Notes will be effectively subordinated to the Senior Notes<B> </B>and effectively subordinated to all existing and future liabilities
of our subsidiaries, including trade payables. Our subsidiaries are separate legal entities and have no obligation to pay any amounts
due pursuant to the Series A Notes. Our subsidiaries conduct a significant amount of our business, and may incur significant liabilities
in connection with such business. As of December 31, 2012, our subsidiaries had indebtedness and other obligations in the principal
amount of approximately $120.5 million. In addition, as of December 31, 2012, we had approximately $0.8 million of outstanding
indebtedness. These amounts of indebtedness will structurally rank senior to the Series A Notes. See &ldquo;Description of Existing
Indebtedness.&rdquo;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in"><B><I>We may not have the ability to pay interest on
the Series A Notes or to redeem the Series A Notes. </I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">The Series A Notes bear interest at a rate of
5.0% per year, and amortization payments with respect to the principal amount of the Series A Notes and accrued and unpaid interest
due are payable monthly. If we are unable to satisfy certain equity conditions, we will be required to pay all amounts due on any
Installment Date in cash. If a change of control occurs, holders of the Series A Notes may require us to repurchase, for cash,
all or a portion of their Series A Notes. See &ldquo;Description of Series A Notes&mdash;Fundamental Transactions.&rdquo; Our ability
to pay amortization payments and interest on the Series A Notes, to repurchase the Series A Notes and to fund working capital needs
and planned capital expenditures depends on our ability to generate cash flow in the future. To some extent, this is subject to
general economic, financial, competitive, legislative and regulatory factors and other factors that are beyond our control. We
cannot assure you that we will continue to maintain sufficient cash reserves or that our business will continue to generate cash
flow from operations at levels sufficient to permit us to pay the interest on the Series A Notes or to repurchase or redeem the
Series A Notes, or that our cash needs will not increase.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">The holder of a Series A Note can defer the
Installment Amount due on any Installment Date to another Installment Date and may, on any Installment Date, accelerate the payment
of amounts due on up to four future Installment Dates. Therefore, we may be required to repay the entire principal amount of and
accrued and unpaid interest on the Series A Notes in three payments over three consecutive Installment Dates or in one lump sum
payment on the maturity date of the Series A Note. If we are unable to satisfy certain equity conditions, we will be required to
pay all amounts due on any Installment Date, whether by deferral or acceleration, in cash. We may not have sufficient funds to
repay the Series A Notes under such circumstances.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">Our failure to make required payments on the
Series A Notes would permit holders of the Series A Notes to accelerate our obligations under the Series A Notes. Such default
may also lead to a default under the agreements governing any of our current and future indebtedness, including the Senior Notes.
If the repayment of the related indebtedness were to be accelerated after any applicable notice or grace periods, we may not have
sufficient funds to repay such indebtedness.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">If we are unable to generate sufficient cash
flow from operations in the future to service our indebtedness and meet our other needs, we may have to refinance all or a portion
of our indebtedness, obtain additional financing, reduce expenditures or sell assets that we deem necessary to our business. We
cannot assure you that any of these measures would be possible or that any additional financing could be obtained on favorable
terms, or at all. The inability to obtain additional financing on commercially reasonable terms could have a material adverse effect
on our financial condition and on our ability to meet our obligations to you under the Series A Notes.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in"><B><I>We may not be permitted, by the agreements governing
our Senior Notes to repay or repurchase the Series A Notes offered hereby. </I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">Under the Senior Notes, we will be prohibited
from repaying or repurchasing the Series A Notes if an event of default has occurred under the Senior Notes and has not been cured.
Further, the Senior Notes restrict the use of proceeds obtained from certain capital raising activities, which restrictions would
prevent us from using such proceeds to repay the Series A Notes. If we cannot, or elect not to, make Installment Payments in shares
of our common stock, we will be required to make such Installment Payments in cash. If a change of control occurs, holders of the
Series A Notes may require us to repurchase, for cash, all or a portion of their Series A Notes. See &ldquo;Description of Series
A Notes&mdash;Fundamental Transactions.&rdquo; Further, if we are unable to satisfy certain equity conditions, we will be required
to pay all amounts due on any Installment Date in cash. In the event that we are required to make payments due on any Installment
Date in cash or a change of control occurs at a time when we are prohibited from repurchasing the Series A Notes under the Senior
Notes, we would need to seek the consent of the holders of our Senior Notes to repurchase the Series A Notes from the holders or
we would otherwise be risking an event of default under the Senior Notes. If we were to not obtain such a consent, compliance with
the terms of the Series A Notes would trigger an event of default under the Senior Notes.</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in"><B><I>Holders of Series A Notes will be entitled to limited
rights with respect to our common stock, but will be subject to all changes made with respect to such rights. </I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">Holders of Series A Notes will not be entitled
to any rights with respect to our common stock (including, without limitation, voting rights) other than the right to receive any
dividends or other distributions on our common stock on an &ldquo;as if converted to common stock&rdquo; basis. Holders of Series
A Notes will be subject to all changes affecting our common stock. For example, if an amendment is proposed to our certificate
of incorporation or bylaws requiring stockholder approval and the record date for determining the stockholders of record entitled
to vote on the amendment occurs prior to a holder&rsquo;s conversion of its Series A Notes, such holder will not be entitled to
vote on the amendment, although such holder will nevertheless be subject to any changes affecting our common stock that result
from such amendment.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in"><B><I>There is no existing trading market for the Series
A Notes.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">There is no existing trading market for the
Series A Notes. We do not intend to apply for listing of the Series A Notes on any securities exchange or to arrange for quotation
on any interdealer quotation system. It is unlikely that an active trading market will develop for the Series A Notes. Unless an
active trading market develops, you may not be able to sell the Series A Notes at a particular time or at a favorable price.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in"><B><I>You may be deemed to receive a taxable distribution
without the receipt of any cash or property.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">The conversion rate of the Series A Notes will
be adjusted in certain circumstances. See &lsquo;&lsquo;Description of the Series A Notes&mdash;Conversion&rsquo;&rsquo;. Adjustments
to the conversion rate of the Series A Notes that have the effect of increasing your proportionate interest in our assets or &ldquo;earnings
and profits&rdquo; may in some circumstances result in a taxable constructive distribution to you for U.S. federal income tax purposes,
even if you do not receive an actual distribution of cash or property. You are urged to consult your tax advisors with respect
to the U.S. federal income tax consequences resulting from an adjustment to the conversion rate of the Series A Notes. See &lsquo;&lsquo;Certain
U.S. Federal Income Tax Considerations&mdash;Taxation of the Series A Notes&mdash;Certain Adjustments to the Series A Notes&rsquo;&rsquo;.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">Similarly, any adjustment to the number of shares
that will be issued on the exercise of a Warrant, or an adjustment to the exercise price of a Warrant, may be treated as a constructive
distribution to you if, and to the extent that, such adjustment has the effect of increasing your proportionate interest in our
assets or &ldquo;earnings and profits&rdquo;. An adjustment can be treated as a constructive distribution regardless of whether
you ever exercise the Warrant or receive any cash or property as a result of the adjustment (or, in certain circumstances, a failure
to adjust). You are urged to consult your tax advisors with respect to the U.S. federal income tax consequences resulting from
an adjustment to the number of shares that will be issued on the exercise of a Warrant, or an adjustment to the exercise price
of a Warrant. See the discussions under the headings &lsquo;&lsquo;Certain U.S. Federal Income Tax Considerations&mdash;Taxation
of the Warrants&mdash;Certain Adjustments to the Warrants&rsquo;&rsquo;.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in"><B><I>Provisions in the indenture for the Series A Notes
may deter or prevent a business combination that may be favorable to you. </I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">If a change of control occurs prior to the maturity
date of the Series A Notes, holders of the Series A Notes will have the right, at their option, to require us to repurchase all
or a portion of their Series A Notes. In addition, the under the terms of the Series A Notes we are prohibited from engaging in
certain mergers or acquisitions unless, among other things, the surviving entity assumes our obligations under the Series A Notes.
These and other provisions could prevent or deter a third party from acquiring us, even where the acquisition could be beneficial
to you.</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"><B>Risks Related to Ownership of Our Common Stock</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in"><B><I>We have received a delisting notice from The NASDAQ
Stock Market. Our common stock may be involuntarily delisted from trading on The NASDAQ Capital Market if we fail to regain compliance
with the minimum closing bid price requirement of $1.00 per share. A delisting of our common stock is likely to reduce the liquidity
of our common stock and may inhibit or preclude our ability to raise additional financing and may also materially and adversely
impact our credit terms with our vendors.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">The quantitative listing standards of The NASDAQ
Stock Market, or NASDAQ, require, among other things, that listed companies maintain a minimum closing bid price of $1.00 per share.
We failed to satisfy this threshold for 30 consecutive trading days and on June 6, 2012, we received a letter from NASDAQ indicating
that we have been provided an initial period of 180 calendar days, or until December 3, 2012, in which to regain compliance. On
December 5, 2012, we received a letter from NASDAQ granting us a 180-day extension period, or until June 3, 2013, in which to regain
compliance by meeting the minimum closing bid price of $1.00 per share for ten consecutive business days. If we do not regain compliance
by June 3, 2013, the NASDAQ staff will provide written notice that our common stock is subject to delisting. We have filed a definitive
proxy statement with the Securities and Exchange Commission to solicit proxies from our stockholders to effect a reverse split
of our common stock that we believe will result in us regaining compliance with the closing bid price requirement by June 3, 2013.
We can provide no assurance that the stockholders will approve the reverse split or that a reverse split will result in us regaining
compliance with the closing bid price requirement. In addition, given the increased market volatility arising in part from economic
turmoil resulting from the ongoing credit crisis, the challenging environment in the biofuels industry and our lack of liquidity,
we may be unable to regain compliance with the closing bid price requirement by June 3, 2013. A delisting of our common stock is
likely to reduce the liquidity of our common stock and may inhibit or preclude our ability to raise additional financing and may
also materially and adversely impact our credit terms with our vendors.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in"><B><I>In order to raise any financing from the sale of
equity securities, we need to increase our authorized capital stock.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">We are presently authorized to issue 300,000,000
shares of common stock, all of which are issued or reserved for issuance to cover the potential exercise of outstanding options
and warrants (including the Warrants) and the issuance of shares upon conversion or otherwise under the Series A Notes. We may
not have sufficient shares of authorized common stock to issue upon conversion or otherwise under the Series A Notes. Further,
we presently do not have sufficient available authorized capital stock to close the Series B Note Offering or to make raising additional
funding through the sale of our common stock or securities convertible into shares of our common stock a viable option. Accordingly,
we may not have sufficient authorized capital available to permit the issuance of the 35,333,173 shares of common stock issuable
under the Series A Notes that are covered by this prospectus, the 27,594,000 shares of common stock issuable upon exercise of the
Warrants or any other material issuance of securities, including the issuance of common stock upon conversion or otherwise under
the Series B Notes. We have filed a definitive proxy statement with the Securities and Exchange Commission to solicit proxies from
our stockholders to effect a reverse split of our common stock that will result in increasing the authorized shares of our common
stock. We can provide no assurance that our stockholders will approve the reverse stock split, and thereby an increase in the authorized
number of shares of our common stock. The Series B Note Offering will not be consummated if our stockholders do not approve the
reverse stock split.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in"><B><I>Our future ability to raise capital may be limited
by applicable laws and regulations.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">Our capital raising activities have benefited
from using a &ldquo;shelf&rdquo; registration on Form S-3, which typically enables an issuer to raise additional capital on a more
timely and cost effective basis than through other means, such as registration of a securities offering under a Form S-1 registration
statement. Our future ability to raise additional capital through the sale and issuance of our equity securities may be limited
by, among other things, current Securities and Exchange Commission rules and regulations. Under current Securities and Exchange
Commission rules and regulations, to be eligible to use a Form S-3 registration statement for primary offerings without restriction
as to the amount of securities to be sold and issued, the aggregate market value of our common equity held by non-affiliates (i.e.,
our &ldquo;public float&rdquo;) must be at least $75 million at the time we file the Form S-3 (calculated pursuant to the General
Instructions to Form S-3). Furthermore, with respect to our effective Form S-3 registration statement, the Securities and Exchange
Commission&rsquo;s rules and regulations require that we periodically re-evaluate the value of our public float (typically when
we file our Annual Report on Form 10-K) to determine whether we continue to satisfy the foregoing public float requirement. We
expect that at the next re-evaluation date (i.e., the filing of our next Annual Report which is anticipated to be filed on April
1, 2013), we will not satisfy the $75 million public float requirement. If we do not meet the $75 million public float requirement
at that time, the amount we could raise through primary offerings of our securities in any 12-month period using a Form S-3 registration
statement would be limited to an aggregate of one-third of our public float. Moreover, the market value of all securities sold
by us under our Form S-3 registration statements during the 12-month period prior to any intended sale will be subtracted from
that amount to determine the amount we can then raise under our Form S-3 registration statements. If after we become subject to
the foregoing one-third limitation our public float increases to $75 million or more, such limitation would cease to apply until
we conduct our next re-evaluation.</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in"><B><I>The conversion of convertible securities (including
our Series B Cumulative Convertible Preferred Stock), the issuance of the shares of our Common Stock in payment of principal and
interest on the Series A Notes, and the exercise of outstanding options and warrants (including the Warrants) to purchase our common
stock could substantially dilute your investment, impede our ability to obtain additional financing, and cause us to incur additional
expenses.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">Under the terms of our Series B Cumulative Convertible
Preferred Stock, or Series B Preferred Stock, that are convertible into our common stock, warrants (including the Warrants) to
purchase our common stock, and outstanding options to acquire our common stock issued to employees, directors and others, the holders
of these securities are given an opportunity to profit from a rise in the market price of our common stock such that, conversion
of the Series B Preferred Stock or the exercise of these warrants (including the Warrants) and/or options, will result in dilution
in the interests of our other stockholders. In addition, the issuance of shares of our common stock, at our election in payment
of amortization payments, interest and other amounts on the Series A Notes, will result in dilution in the interests of our other
stockholders. The terms on which we may obtain additional financing may be adversely affected by the existence and potentially
dilutive impact of the Series A Notes, Series B Preferred Stock, options and warrants (including the Warrants).</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in"><B><I>The voting power and value of your investment could
decline if the Convertible Notes are converted and Warrants are exercised at a reduced price due to our issuance of lower-priced
shares or market declines which trigger rights of the holders of the Convertible Notes to receive additional shares of our common
stock.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">We anticipate issuing a significant amount of
Convertible Notes and Warrants, the conversion or exercise of which could have a substantial negative impact on the price of our
common stock and could result in a dramatic decrease in the value of your investment. The conversion price applicable if we elect
to pay principal and interest due on the Convertible Notes in shares of common stock is subject to market-price protection that
may cause such conversion price to be reduced in the event of a decline in the market price of our common stock. In addition, the
conversion price of the Convertible Notes and the exercise price of the Warrants will be subject to downward anti-dilution adjustments
in most cases, from time to time, if we issue securities at a purchase, exercise or conversion price that is less than the then-applicable
conversion price of our outstanding Convertible Notes or exercise price of the Warrants. Consequently, the voting power and value
of your investment in each of these events would decline if the Convertible Notes or the Warrants are converted or exercised for
shares of our common stock at lower prices as a result of the declining market-price or sales of our securities are made below
the conversion price of the Convertible Notes and/or the exercise price of the Warrants.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">The market-price protection features of the
Series A Notes, including the ability of the holders of the Series A Notes to defer and accelerate payments due under the Series
A Notes, could also allow the Series A Notes to become convertible into a greatly increased number of additional shares of our
common stock, particularly if a holder of the Series A Notes sequentially converts portions of the Series A Notes into shares of
our common stock at alternate conversion prices and resells those shares into the market. If a holder of the Series A Notes sequentially
converts portions of the Series A Notes into shares of our common stock or if we issue shares of common stock in lieu of cash payments
of principal and interest on the Series A Notes, each at alternate conversion prices, and the holder of the Series A Notes resells
those shares into the market, then the market price of our common stock could decline due to the additional shares available in
the market, particularly in the event of any thin trading volume of our common stock. Consequently, if a holder of the Series A
Notes repeatedly converts portions of the Series A Notes or we repeatedly issue shares of common stock in lieu of cash payments
of principal and interest on the Series A Notes at alternate conversion prices and then the holder resells those underlying shares
into the market, a continuous downward spiral of the market price of our common stock could occur that would benefit a holder of
the Series A Notes at the expense of other existing or potential holders of our common stock, potentially creating a divergence
of interests between a holder of the Series A Notes and investors who purchase the shares of common stock resold by a holder of
the Series A Notes following conversion of the Series A Notes.</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in"><B><I>The market price of our common stock and the value
of your investment could substantially decline if the Convertible Notes or Series B Preferred Stock are converted into shares of
our common stock, if we issue shares of our common stock in payment of principal and interest on the Convertible and if our options
and warrants (including the Warrants) are exercised for shares of our common stock and all of these shares of common stock are
resold into the market, or if a perception exists that a substantial number of shares will be issued upon conversion of the Convertible
Notes or Series B Preferred Stock, upon the payment of principal and interest on the Convertible Notes or upon exercise of our
warrants (including the Warrants) or options and then resold into the market.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">If the conversion prices at which the Series
B Preferred Stock is converted, the conversion prices at which shares of common stock in payment of principal and interest on the
Convertible Notes are issued, and the exercise prices at which our warrants (including the Warrants) and options are exercised
are lower than the price at which you made your investment, immediate dilution of the value of your investment will occur. In addition,
sales of a substantial number of shares of common stock issued upon conversion of Series B Preferred Stock, in lieu of cash payments
of interest on the Convertible Notes and upon exercise of our warrants (including the Warrants) and options, or even the perception
that these sales could occur, could adversely affect the market price of our common stock. As a result, you could experience a
substantial decline in the value of your investment as a result of both the actual and potential conversion of our outstanding
shares of Series B Preferred Stock, issuance of shares of common stock in lieu of cash payments of interest on the Convertible
Notes and exercise of our outstanding warrants (including the Warrants) or options.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in"><B><I>The issuance of shares upon conversion of the Convertible
Notes or the conversion of Series B Preferred Stock, upon the payment of principal and interest on the Convertible Notes and upon
the exercise of outstanding options and warrants (including the Warrants) could result in a change of control of Pacific Ethanol.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">As of March 27, 2013, we had outstanding options,
warrants and Series B Preferred Stock that were exercisable for or convertible into approximately 104.0 million shares of common
stock based on conversion and exercise prices as of that date.&nbsp; After the closing of this offering, we could issue up to an
additional 27.6 million shares of common stock upon exercise of the Warrants and an estimated 35.3 million shares of common stock
in payment of principal and interest upon the Series A Notes (with interest calculated at an interest rate of 5.00% per annum,
compounded monthly, from an assumed issuance date of March 28, 2013 through an assumed Maturity Date of March 28, 2014, assuming
amounts due on all Installment Dates prior to the Maturity Date are deferred to the assumed Maturity Date and assuming a Company
Conversion Price on the assumed Maturity Date of $0.18). Further, after the closing of the Series B Note Offering, we could issue
an additional 46.7 million shares of common stock in payment of principal and interest upon the Series B Notes (with interest calculated
at an interest rate of 5.00% per annum, compounded monthly, from an assumed issuance date of May 28, 2013 through an assumed Maturity
Date of March 28, 2014, assuming amounts due on all Installment Dates prior to the Maturity Date are deferred to the assumed Maturity
Date and assuming a Company Conversion Price on the assumed Maturity Date of $0.18).</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">A change of control of Pacific Ethanol could
occur if a significant number of shares of our common stock are issued to the holders of our outstanding options, warrants (including
the Warrants), Convertible Notes or shares of Series B Preferred Stock.&nbsp; If a change of control occurs, then the stockholders
who historically have controlled our company would no longer have the ability to exert significant control over matters that could
include the election of our directors, changes in the size and composition of our board of directors, and mergers and other business
combinations involving Pacific Ethanol. Instead, one or more other stockholders could gain the ability to exert this type of control
and may also, through control of our board of directors and voting power, be able to control a number of decisions, including decisions
regarding the qualification and appointment of officers, dividend policy, access to capital (including borrowing from third-party
lenders and the issuance of additional equity securities), and the acquisition or disposition of our assets.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.25in"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.25in"><B><I>Future sales of substantial amounts of
our common stock could adversely affect the market price of our common stock.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">Future sales of substantial amounts of our common
stock, or securities convertible or exchangeable into shares of our common stock, into the public market, including shares of our
common stock issued upon exercise of options and warrants (including the Warrants), or perceptions that those sales could occur,
could adversely affect the prevailing market price of our common stock and our ability to raise capital in the future. Resales
of substantial amounts of the shares of our common stock issued under the Convertible Notes and Warrants could have a negative
effect on our stock price.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.25in"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.25in"><B><I>As a result of our issuance of shares
of Series B Preferred Stock, our common stockholders may experience numerous negative effects and most of the rights of our common
stockholders will be subordinate to the rights of the holders of our Series B Preferred Stock.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">As a result of our issuance of shares of Series
B Preferred Stock, our common stockholders may experience numerous negative effects, including dilution from any dividends paid
in preferred stock and anti-dilution adjustments. In addition, rights in favor of the holders of our Series B Preferred Stock include
seniority in liquidation and dividend preferences; substantial voting rights; and numerous protective provisions. Also, our outstanding
Series B Preferred Stock could have the effect of delaying, deferring and discouraging another party from acquiring control of
Pacific Ethanol.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.25in"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.25in"><B><I>Our stock price is highly volatile, which
could result in substantial losses for investors purchasing shares of our common stock and in litigation against us.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">The market price of our common stock has fluctuated
significantly in the past and may continue to fluctuate significantly in the future. The market price of our common stock may continue
to fluctuate in response to one or more of the following factors, many of which are beyond our control:</P>

<P STYLE="font: 10pt Symbol; margin: 0 0 0 74.15pt; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
<TD STYLE="width: 56.15pt"></TD><TD STYLE="width: 18pt"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>a reverse split of our common stock anticipated to be effected prior to June 3, 2013 to attain a minimum closing bid price
of at least $1.00 per share and maintain the listing of our common stock on The NASDAQ Capital Market;</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
<TD STYLE="width: 56.15pt"></TD><TD STYLE="width: 18pt"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>our ability to maintain contracts that are critical to our operations, including the asset management agreement with the Plant
Owners that provide us with the ability to operate the Pacific Ethanol Plants and the marketing agreements with the Plant Owners
whose facilities are operational that provide us with the ability to market all ethanol and co-products produced by the Pacific
Ethanol Plants;</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
<TD STYLE="width: 56.15pt"></TD><TD STYLE="width: 18pt"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>fluctuations in the market price of ethanol and its co-products;</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
<TD STYLE="width: 56.15pt"></TD><TD STYLE="width: 18pt"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>the cost of key inputs to the production of ethanol, including corn and natural gas;</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
<TD STYLE="width: 56.15pt"></TD><TD STYLE="width: 18pt"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>the volume and timing of the receipt of orders for ethanol from major customers;</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
<TD STYLE="width: 56.15pt"></TD><TD STYLE="width: 18pt"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>competitive pricing pressures;</TD></TR></TABLE>


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<P STYLE="font: 10pt Symbol; margin: 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
<TD STYLE="width: 56.15pt"></TD><TD STYLE="width: 18pt"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>our ability to produce, sell and deliver ethanol on a cost-effective and timely basis;</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
<TD STYLE="width: 56.15pt"></TD><TD STYLE="width: 18pt"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>the introduction and announcement of one or more new alternatives to ethanol by our competitors;</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
<TD STYLE="width: 56.15pt"></TD><TD STYLE="width: 18pt"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>changes in market valuations of similar companies;</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
<TD STYLE="width: 56.15pt"></TD><TD STYLE="width: 18pt"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>stock market price and volume fluctuations generally;</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
<TD STYLE="width: 56.15pt"></TD><TD STYLE="width: 18pt"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>regulatory developments or increased enforcement;</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
<TD STYLE="width: 56.15pt"></TD><TD STYLE="width: 18pt"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>fluctuations in our quarterly or annual operating results;</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
<TD STYLE="width: 56.15pt"></TD><TD STYLE="width: 18pt"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>additions or departures of key personnel;</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
<TD STYLE="width: 56.15pt"></TD><TD STYLE="width: 18pt"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>our inability to obtain financing; and</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
<TD STYLE="width: 56.15pt"></TD><TD STYLE="width: 18pt"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>our financing activities and future sales of our common stock or other securities.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">Furthermore, we believe that the economic conditions
in California and other Western states, as well as the United States as a whole, could have a negative impact on our results of
operations. Demand for ethanol could also be adversely affected by a slow-down in overall demand for oxygenate and gasoline additive
products. The levels of our ethanol production and purchases for resale will be based upon forecasted demand. Accordingly, any
inaccuracy in forecasting anticipated revenues and expenses could adversely affect our business. The failure to receive anticipated
orders or to complete delivery in any quarterly period could adversely affect our results of operations for that period. Quarterly
results are not necessarily indicative of future performance for any particular period, and we may not experience revenue growth
or profitability on a quarterly or an annual basis.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">The price at which you purchase shares of our
common stock may not be indicative of the price that will prevail in the trading market. You may be unable to sell your shares
of common stock at or above your purchase price, which may result in substantial losses to you and which may include the complete
loss of your investment. In the past, securities class action litigation has often been brought against a company following periods
of high stock price volatility. We may be the target of similar litigation in the future. Securities litigation could result in
substantial costs and divert management&rsquo;s attention and our resources away from our business.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">Any of the risks described above could have
a material adverse effect on our results of operations, the price of our common stock, or both.</P>


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<P STYLE="color: blue; font: bold 10pt Times New Roman, Times, Serif; margin: 0; text-align: center; text-indent: 0in">FORWARD&ndash;LOOKING
STATEMENTS</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">This prospectus and the documents incorporated
by reference into this prospectus contain &ldquo;forward-looking statements&rdquo; and are intended to be covered by the safe harbor
provided for under Section 27A of the Securities Act of 1933, as amended, or Securities Act, and Section 21E of the Exchange Act.
These forward-looking statements include our current expectations and projections about future results, performance, business strategy,
recent and pending acquisitions, budgets, objectives of management for future operations, legal strategies, prospects and opportunities.
We have tried to identify these forward-looking statements by using words like &ldquo;believe,&rdquo; &ldquo;expect,&rdquo; &ldquo;may,&rdquo;
&ldquo;will,&rdquo; &ldquo;would,&rdquo; &ldquo;could,&rdquo; &ldquo;seek,&rdquo; &ldquo;estimate,&rdquo; &ldquo;continue,&rdquo;
&ldquo;anticipate,&rdquo; &ldquo;intend,&rdquo; &ldquo;future,&rdquo; &ldquo;plan&rdquo; or variations of those terms and other
similar expressions, including their use in the negative. You should not place undue reliance on these forward-looking statements,
which speak only as to our expectations, as of the date of this prospectus and any applicable prospectus supplement. These forward-looking
statements are subject to a number of risks, uncertainties and other factors that could cause our actual results, performance,
prospects or opportunities to differ materially from those expressed in, or implied by, these forward-looking statements. We claim
the protection of the safe harbor for forward&ndash;looking statements contained in the Private Securities Litigation Reform Act
of 1995 for all forward&ndash;looking statements.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">Forward&ndash;looking statements may be made
regarding our business, operations, financial performance and condition, earnings, our prospects, as well as regarding our industry
generally. Forward&ndash;looking statements are not guarantees of performance. You should understand that these factors, in addition
to those discussed in &ldquo;Risk Factors&rdquo; above and elsewhere in this prospectus, and in the documents that are incorporated
by reference into this prospectus, could affect our future results and could cause those results or other outcomes to differ materially
from those expressed or implied in any forward&ndash;looking statement</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">Given these risks and uncertainties, readers
are cautioned not to place undue reliance on our forward-looking statements. Projections included in such risk factors have been
prepared based on assumptions, which we believe to be reasonable, but not in accordance with United States generally accepted accounting
principles or any guidelines of the Securities and Exchange Commission. Actual results will vary, perhaps materially, and we undertake
no obligation to update the projections at any future date. You are strongly cautioned not to place undue reliance on such projections.
All subsequent written and oral forward-looking statements attributable to Pacific Ethanol or to persons acting on our behalf are
expressly qualified in their entirety by these cautionary statements. Except as required by federal securities laws, we do not
intend to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>


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<P STYLE="color: blue; font: bold 10pt Times New Roman, Times, Serif; margin: 0; text-align: center; text-indent: 0in">DESCRIPTION
OF EXISTING INDEBTEDNESS</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 24.5pt"><I>&nbsp;</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 24.5pt"><I>The following is a summary of provisions
relating to our material indebtedness, other than the Series A Notes, that will be outstanding after the offering of the Series
A Notes. The following summary does not purport to be complete and is subject to, and qualified in its entirety by reference to,
all the provisions of the corresponding agreements, including the definitions of certain terms that are not otherwise defined in
this prospectus supplement.</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"><B>Senior Unsecured Notes</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">On January 11, 2013, we issued $22.2 million
in our Senior Notes. Substantially concurrent with the closing of this offering, the Senior Notes will be amended, or Senior Note
Amendments. The closing of the Senior Note Amendments is conditioned on the closing of the offering contemplated in this prospectus.
If the offering contemplated by this prospectus is closed, the Senior Note Amendments will be consummated. As the closing of this
offering is subject to various conditions, we can provide no assurance that we will be able to close the offering contemplated
in this prospectus or consummate the Senior Note Amendments.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">The Senior Notes mature on March 30, 2016, or
Senior Note Maturity Date. The Senior Notes bear interest at the rate of 5.0% per annum, subject to adjustment.&nbsp;&nbsp;If the
aggregate outstanding principal balance of the Senior Notes is not less than $10,769,298 by January 15, 2014, the interest rate
will increase commencing on January 15, 2014 by 1% per annum on each calendar January 15, April 15, July 15 and October 15 until
the aggregate outstanding principal balance of the Senior Notes is less than $10,769,298, or Rate Increases. If the Senior Note
Amendments are consummated, the Rate Increases will be revised such that if the aggregate outstanding principal balance of the
Senior Notes is not less than $10,769,298 plus any amount we use to purchase Revolving Loans (as defined below) using the net proceeds
of this offering and/or the Series B Note Offering by January 15, 2014, the interest rate will increase commencing on January 15,
2014 by 1% per annum on each calendar January 15, April 15, July 15 and October 15 until the aggregate outstanding principal balance
of the Senior Notes is less than $10,769,298 plus any amount we use to purchase Revolving Loans (as defined below) using the net
proceeds of this offering and/or the Series B Note Offering. The interest rate will also increase by an additional 2% per annum
above the interest rate otherwise applicable upon the occurrence, and during the continuance, of an event of default (as described
below) until such event of default has been cured.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.25in"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.25in"><B><I>Payment of Principal and Optional Prepayment</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">We are required to pay all outstanding principal
and any accrued and unpaid interest on the Senior Notes on the Senior Note Maturity Date. We may, at our option, prepay the Senior
Notes at any time without premium or penalty. However, we will be prohibited from prepaying the Senior Notes, other than for mandatory
prepayments, under the terms of the Convertible Notes.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.25in"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.25in"><B><I>Mandatory Prepayment</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">If at any time we receive net cash proceeds
from an issuance of our equity or equity linked securities, certain sales of our assets or any of the assets of our wholly or partially
owned subsidiaries or as a result of us or any of our wholly or partially owned subsidiaries incurring certain indebtedness, then
we will be obligated to prepay the Senior Notes using 100% of all such net cash proceeds, provided that in connection with proceeds
received in connection with an equity linked security, we will be obligated to use all such net cash proceeds to either prepay
the Senior Notes or purchase outstanding debt issued by indirectly partially owned subsidiaries under the Plant Owners amended
and restated credit facility. See &ldquo;&mdash;Amended and Restated Credit Facility&rdquo; below. If the Senior Note Amendments
are consummated, the Senior Notes will be amended to allow for the proceeds of this offering and the Series B Note Offering to
be used as described under the heading &ldquo;Use of Proceeds.&rdquo;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.25in"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.25in"><B><I>Payments of Interest &ndash; Interest
Shares</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">Interest on the Senior Notes is payable in cash
in arrears on the 15th calendar day of each month, or Senior Note Interest Payment Date, beginning on March 15, 2013. Subject to
the satisfaction of the Senior Note Equity Conditions (as defined below), at our option, we may elect to pay interest due and payable
on any Senior Note Interest Payment Date in shares of our common stock, or Senior Note Interest Shares, provided that the interest
rate applicable to any outstanding amounts that we pay in Senior Note Interest Shares shall increase by 2% per annum from the then
applicable interest rate for the period for which such interest is paid. The number of Senior Note Interest Shares to be issued,
at our election, on any particular Senior Note Interest Payment Date shall be equal to the quotient of (x) the amount of interest
payable on such Senior Note Interest Payment Date (assuming full payment in Senior Note Interest Shares) divided by (y) the product
of (i) the weighted average price of our common stock for 30 trading days immediately preceding (but excluding) the Senior Note
Interest Payment Date and (ii) 0.95.</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">For any Senior Note Interest Payment Date on
which we elect to pay interest in Senior Note Interest Shares in lieu of in cash, we are required to deliver a written notice,
or Senior Note Interest Notice, to each holder of the Senior Notes on or prior to the third trading day prior to the Senior Note
Interest Payment Date, or the Senior Note Interest Notice Date. If all of the Senior Note Equity Conditions (as defined below)
have not been satisfied as of the Senior Note Interest Notice Date, then unless the holder of the Senior Note waives such failure,
interest must be paid in cash. If we elect to pay the applicable interest in Senior Note Interest Shares and if the Senior Note
Equity Conditions were satisfied as of the applicable Senior Note Interest Notice Date but are not satisfied as of the Senior Note
Interest Payment Date, then, unless the holder of the Senior Note waives such failure, interest must be paid in cash.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">In order for the interest to be paid in Senior
Note Interest Shares, all of the following conditions must be satisfied (or waived by the holders) during the five trading days
prior to the applicable date (collectively, the &ldquo;Senior Note Equity Conditions&rdquo;):</P>

<P STYLE="font: 10pt Symbol; margin: 0 0 0 0.75in; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>The Senior Note Interest Shares are either (i) covered by an effective registration statement and the prospectus contained
therein shall be available for the resale of the Senior Note Interest Shares and we shall not have had knowledge of any fact that
would cause such registration statement not to be effective and available for the resale of the Senior Note Interest Shares or
(ii) are eligible for resale without restriction under Rule&nbsp;144 of the Securities Act and without the need for registration
under any applicable federal or state securities laws and we shall not have had knowledge of any fact that would cause the Interest
Shares not to be eligible for sale pursuant to Rule 144 of the Securities Act and any applicable state securities laws;</TD></TR></TABLE>

<P STYLE="font: 10pt Symbol; margin: 0 0 0 0.75in; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>Our common stock shall have been listed or designated for quotation on an exchange or market permitted by the Senior Notes
(including The NASDAQ Capital Market) and shall not have been suspended from trading on such exchange or market (other than suspensions
of not more than two days due to business announcements by us), nor shall delisting or suspension by such exchange or market been
threatened or pending either in writing by such exchange or market (provided, that, until June 3, 2013, the pending or threatened
delisting of our common stock as a result of the failure to maintain a $1.00 minimum share price shall be disregarded);</TD></TR></TABLE>

<P STYLE="font: 10pt Symbol; margin: 0 0 0 0.75in; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>The Senior Note Interest Shares may be issued without violating the regulations of the eligible exchange or market on which
our common stock is then listed or designated for quotation, including NASDAQ Listing Rule 5635(d);</TD></TR></TABLE>

<P STYLE="font: 10pt Symbol; margin: 0 0 0 0.75in; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>There shall not have been (i) a public announcement of a proposed fundamental transaction, (ii) an event of default under the
Senior Notes or (iii) an event that after the passage of time would constitute a event of default under the Senior Notes;</TD></TR></TABLE>

<P STYLE="font: 10pt Symbol; margin: 0 0 0 0.75in; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>The issuance of the Senior Note Interest Shares will not result in the holder of the Senior Note beneficially owning in excess
of 4.99% of our outstanding shares of common stock (which limit may be raised to an amount not in excess of 9.99%, at the option
of the holder with prior notice to Pacific Ethanol);</TD></TR></TABLE>


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<P STYLE="font: 10pt Symbol; margin: 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>We shall have delivered Senior Note Interest Shares on a timely basis;</TD></TR></TABLE>

<P STYLE="font: 10pt Symbol; margin: 0 0 0 0.75in; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>We shall not have publicly announced that certain types of transactions involving a change of control are pending, proposed
or intended that have not been abandoned, terminated or consummated;</TD></TR></TABLE>

<P STYLE="font: 10pt Symbol; margin: 0 0 0 0.75in; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>No event shall have occurred that constitutes, or with the passage of time or giving of notice would constitute, an event of
default under the Senior Notes; and</TD></TR></TABLE>

<P STYLE="font: 10pt Symbol; margin: 0 0 0 0.75in; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>We shall be in compliance with and shall not have breached any provision, covenant, representation or warranty of any transaction
document to which we became party in connection with the issuance of the Senior Notes;</TD></TR></TABLE>

<P STYLE="font: 10pt Symbol; margin: 0 0 0 0.75in; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>The Senior Note Interest Shares shall be duly authorized; and</TD></TR></TABLE>

<P STYLE="font: 10pt Symbol; margin: 0 0 0 0.75in; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>The holder of the Senior Note must not be in possession of any material, non-public information relating to us (other than
certain material, non-public information relating to Pacific Ethanol provided to the holder of the Senior Note in accordance with
the terms of the Senior Note).</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">If we cannot make an interest payment in shares
of common stock because one of the conditions described above is not satisfied, we must make the interest payment in cash.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">We have agreed not to issue more than 3,289,727
Senior Note Interest Shares unless we have obtained either (i) stockholder approval pursuant to NASDAQ Listing Rule 5635(d) for
the issuance of more than 28,920,013 shares of our common stock upon exercise of the warrants issued in connection with the issuance
of the Senior Notes and in payment of interest on the Senior Notes or (ii) a waiver from NASDAQ of compliance with Rule 5635(d).
If the Senior Note Amendments are consummated, however, we will agree (a) not to issue Senior Note Interest Shares unless (i) we
have obtained stockholder approval pursuant to NASDAQ Listing Rule 5635(d) for the issuance of more than 28,920,013 shares of our
common stock under the Convertible Notes and the Warrants or (ii) none of the Convertible Notes and Warrants are outstanding, (b)
if we have obtained stockholder approval pursuant to NASDAQ Listing Rule 5635(d) for the issuance of more than 28,920,013 shares
of our common stock under the Convertible Notes and the Warrants, not to issue more than 3,289,727 Senior Note Interest Shares
unless we have obtained either (i) stockholder approval pursuant to NASDAQ Listing Rule 5635(d) for the issuance of more than 28,920,013
shares of our common stock upon exercise of the warrants issued in connection with the issuance of the Senior Notes and in payment
of interest on the Senior Notes or (ii) a waiver from NASDAQ of compliance with Rule 5635(d) and (c) if none of the Convertible
Notes and Warrants are outstanding and we have not obtained stockholder approval pursuant to NASDAQ Listing Rule 5635(d) for the
issuance of more than 28,920,013 shares of our common stock under the Convertible Notes and the Warrants, not to issue Senior Note
Interest Shares to the extent that the number of Senior Note Interest Shares to be issued plus the number of shares issued or issuable
under the warrants issued in connection with the issuance of the Senior Notes plus the number of shares of issued pursuant to the
Convertible Notes and Warrants exceeds 28,920,013 unless we have obtained either (i) stockholder approval pursuant to NASDAQ Listing
Rule 5635(d) for the issuance of more than 28,920,013 shares of our common stock upon exercise of the warrants issued in connection
with the issuance of the Senior Notes and in payment of interest on the Senior Notes or (ii) a waiver from NASDAQ of compliance
with Rule 5635(d).</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.25in"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.25in"><B><I>Events of Default</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">The Senior Notes contain a variety of events
of default which are typical for transactions of this type. A holder of a Senior Note may declare all amounts owed under the holder&rsquo;s
Senior Note due and payable if there is an event of default; in addition, all the amounts owed the Senior Notes will become immediately
due and payable upon certain events of default. An event of default under the Convertible Notes that results in our failure to
pay when due, or within any applicable grace period, amounts in excess of $2 million, or if we are otherwise in breach or violation
of a payment obligation under the Convertible Notes in an amount in excess of $2 million, which breach or violation permits the
holders of the Convertible Notes to accelerate amounts due under the Convertible Notes, will trigger an event of default under
the Senior Notes.</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.25in"><B><I>Covenants</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">The Senior Notes contain a variety of obligations
on the part of Pacific Ethanol not to engage in certain activities, which are typical for transactions of this type, as well as
the following covenants:</P>

<P STYLE="font: 10pt Symbol; margin: 0 0 0 0.75in; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>The payments due under the Senior Notes will rank senior to all of our other indebtedness and the indebtedness of our subsidiaries,
other than permitted senior indebtedness;</TD></TR></TABLE>

<P STYLE="font: 10pt Symbol; margin: 0 0 0 0.75in; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>We and our wholly-owned subsidiaries will not incur other indebtedness, except for certain permitted indebtedness (if the Senior
Notes Amendments are consummated, the Convertible Notes will be deemed permitted indebtedness under the Senior Notes);</TD></TR></TABLE>

<P STYLE="font: 10pt Symbol; margin: 0 0 0 0.75in; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>We and our wholly-owned subsidiaries will not incur any liens, except for certain permitted liens;</TD></TR></TABLE>

<P STYLE="font: 10pt Symbol; margin: 0 0 0 0.75in; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>We and our wholly-owned subsidiaries will not, directly or indirectly, redeem or repay all or any portion of any indebtedness
(except for certain permitted indebtedness) if at the time such payment is due or is made or, after giving effect to such payment,
an event constituting, or that with the passage of time and without being cured would constitute, an event of default has occurred
and is continuing;</TD></TR></TABLE>

<P STYLE="font: 10pt Symbol; margin: 0 0 0 0.75in; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>We and our wholly-owned subsidiaries will not redeem, repurchase or pay any dividend or distribution on our or its respective
capital stock without the prior consent of the holders of the Senior Notes, other than certain permitted distributions; and</TD></TR></TABLE>

<P STYLE="font: 10pt Symbol; margin: 0 0 0 0.75in; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>We and our wholly-owned subsidiaries will not sell, lease, assign, transfer or otherwise dispose of any assets of Pacific Ethanol
or any of its wholly-owned subsidiaries, except for certain permitted dispositions (including the sales of inventory or receivables
in the ordinary course of business).</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"><B>Kinergy Operating Line of Credit</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">Kinergy maintains an operating line of credit
for an aggregate amount of up to $30.0 million, with an optional accordion feature for up to an additional $10.0 million. The credit
facility expires on December 31, 2015. Interest accrues under the credit facility at a rate equal to (i)&nbsp;the three-month London
Interbank Offered Rate, or LIBOR, plus (ii) a specified applicable margin ranging between 2.50% and 3.50%. The credit facility&rsquo;s
monthly unused line fee is 0.50% of the amount by which the maximum credit under the facility exceeds the average daily principal
balance. Payments that may be made by Kinergy to Pacific Ethanol as reimbursement for management and other services provided by
Pacific Ethanol to Kinergy are limited under the terms of the credit facility to $800,000 per fiscal quarter in 2012, $900,000
per fiscal quarter in 2013, $1,000,000 per fiscal quarter in 2014 and $1,100,000 per fiscal quarter in 2015.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">The credit facility also includes the accounts
receivable of Pacific Ag. Products, LLC, or PAP, as additional collateral. Payments that may be made by PAP to Pacific Ethanol
as reimbursement for management and other services provided by Pacific Ethanol to PAP are limited under the terms of the credit
facility to the extent that quarterly payments would result in PAP recording less than $100,000 of net income in the quarter.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">For the fiscal quarter ending June 30, 2012
and each fiscal quarter thereafter, Kinergy and PAP are collectively required to generate aggregate earnings before interest, taxes,
depreciation and amortization, or EBITDA, of $450,000 for the quarter and aggregate EBITDA of $1,100,000 for each two consecutive
quarters. These amounts are required through December 31, 2013. In 2014, the required EBITDA amounts increase to $500,000 per quarter
and $1,300,000 for each two consecutive quarters. Further, for all monthly periods, Kinergy and PAP must collectively maintain
a fixed charge coverage ratio (calculated as a twelve-month rolling EBITDA divided by the sum of interest expense, capital expenditures,
principal payments of indebtedness, indebtedness from capital leases and taxes paid during such twelve-month rolling period) of
at least 2.0 and are prohibited from incurring any additional indebtedness (other than specific intercompany indebtedness) or making
any capital expenditures in excess of $100,000 absent the lender&rsquo;s prior consent. Kinergy and PAP&rsquo;s obligations under
the credit facility are secured by a first-priority security interest in all of their assets in favor of the lender.</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">The following table summarizes Kinergy&rsquo;s
financial covenants and actual results for the periods presented (dollars in thousands):</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 80%; margin-left: 0.5in">
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="6" STYLE="text-align: center; border-bottom: Black 1pt solid">Years Ended<BR> December 31,</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">2012</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">2011</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">&nbsp;</TD><TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="width: 54%">EBITDA Requirement &ndash; Three Months</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 9%; text-align: right">450</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 9%; text-align: right"><FONT STYLE="font-size: 10pt">N/A</FONT></TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>Actual</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">1,165</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">N/A</FONT></TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD>Excess</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">715</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">N/A</FONT></TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left">EBITDA Requirement &ndash; Six Months</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">1,100</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">800</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>Actual</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">3,282</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">858</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD>Excess</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">2,182</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">58</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left">Fixed Charge Coverage Ratio Requirement</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">2.00</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">2.00</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>Actual</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">8.84</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">4.26</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD>Excess</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">6.84</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">2.26</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">Pacific Ethanol has guaranteed all of Kinergy&rsquo;s
obligations under the credit facility. As of December 31, 2012, Kinergy had an available borrowing base under the credit facility
of $27.0 million and an outstanding balance of $19.7 million.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"><B>Plant Owners&rsquo; Credit Facilities</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.25in"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.25in"><B><I>Amended and Restated Credit Facility</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">On October 29, 2012, the Plant Owners amended
and restated their existing credit facilities with their lenders to provide for a revolving credit facility of up to $40.0 million,
or Revolving Loan, a term loan of $25.0 million, or Tranche A-1 Loan, and a term loan of $26.3 million, or Tranche A-2 Loan. On
January 11, 2013, we purchased $21.5 million of the Tranche A-2 Loan from the existing lenders under the credit facilities and
the credit facilities were amended to extend the maturity date applicable to $21.5 million of the Tranche A-2 Loan from June 25,
2013 to June 30, 2016. Under these credit facilities, $6.7 million of the combined revolving loans and term loans has a maturity
date of June 25, 2013, or June Indebtedness, and $88.1 million of the combined revolving loans and term loans has a maturity date
of June 30, 2016.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">We will use $2.1 million of the net proceeds
from this offering, after deducting our placement agent&rsquo;s fee, to purchase $2.6 million the June Indebtedness and, anticipate
that immediately prior to such purchase, the credit facilities will be amended to extend the maturity date applicable to such June
Indebtedness from June 25, 2013 to June 30, 2016. Additionally, we will use $3.5 million of the net proceeds from this offering,
after deducting our placement agent&rsquo;s fee, to purchase and immediately retire approximately $3.5 million of the Revolving
Loan. After the closing of this offering, we anticipate that $4.0 million of June Indebtedness will remain due on June 25, 2013
and $87.3 million of the combined revolving loans and term loans will have a maturity date of June 30, 2016. The closing of this
offering is, however, subject to various conditions. We can provide no assurance that we will be able to close the offering contemplated
in this prospectus.</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">We continue to have communications with holders
of the June Indebtedness to restructure the existing loans. Concurrently with this offering, we will be offering $8.0 million of
Series B Notes pursuant to a separate prospectus supplement in the Series B Note Offering, up to $4.0 million of the net proceeds
of which we anticipate using to purchase the $4.0 million of June Indebtedness that remains after the closing of this offering.
Immediately prior to our purchase of the remaining $4.0 million of June Indebtedness with the proceeds of the Series B Note Offering,
we anticipate that the credit facilities will be amended to extend the maturity date applicable to such remaining June Indebtedness
from June 25, 2013 to June 30, 2016. After the closing of this offering and the Series B Note Offering, we anticipate that we would
have purchased all of the June Indebtedness and that all such June Indebtedness would have been amended to extend the maturity
date from June 25, 2013 to June 30, 2016. After the closing of this offering and the Series B Note Offering, all $91.3 million
of the combined revolving loans and term loans will have a maturity date of June 30, 2016 and we will own $28.2 million of the
Plant Owners&rsquo; $91.3 million combined revolving loans and term loans. The closing of this offering and the Series B Note Offering
are, however, subject to various closing conditions, including, the closing of the Series B Note Offering being subject to the
requirement that we obtain stockholder approval for this offering and the Series B Note Offering. We can provide you no assurance
that our stockholders will approve this offering and the Series B Note Offering or that we will be able to close this offering
or the Series B Note Offering.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">We also continue to explore other capital raising
alternatives. We believe that we will be able to successfully restructure the June Indebtedness or raise additional capital, or
both, prior to the June 25, 2013 maturity date. However, we can provide no assurances that we will be able to do so, or what the
terms of any restructuring or capital raising transaction might be. If we are unable to timely restructure the $6.7 million in
debt due June 25, 2013 or raise sufficient capital to repay the debt, we will be in default on that debt and in cross-default on
the $88.1 million in debt extended to June 30, 2016, all of which, totaling 94.8 million plus up to an additional $10.0 million
under the new credit facility (or up to $15 million if our request to increase this availability under the new credit facility
is approved), may be accelerated and become immediately due and payable on June 25, 2013. As a result, we and our direct and indirect
subsidiaries, including Kinergy and the Plant Owners, will likely experience material adverse effects. See &ldquo;Risk Factors.&rdquo;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">The Plant Owners may elect to receive Eurodollar
loans and/or base rate loans. The per annum interest rate on Eurodollar loans is equal to (a) the rate obtained by dividing (i)
the one-month LIBOR for the relevant interest period (but in no event less than 4%) by (ii) a percentage equal to (1) 100% minus
(2) the Eurodollar Reserve Percentage (as determined by the Board of Governors of the Federal Reserve System) for the relevant
period, plus (b) the applicable margin of 10%. The per annum interest rate on base rate loans is equal to (A) the higher of (x)
the Federal Funds Effective Rate (equal to the weighted average of the rates on overnight federal funds transactions with members
of the Federal Reserve System) plus 0.50%, (y) the rate of interest as publicly announced by Wells Fargo Bank as its &ldquo;prime
rate&rdquo; or (z) the one-month LIBOR plus 1.0%, plus the applicable margin of 10%.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">Interest under the loans is payable monthly
in cash, but as long as no default or event of default has occurred or is continuing, interest payments due to certain lenders
for any period prior to June 25, 2013, may, at the option of the Plant Owners, be deferred and added to the principal balance of
the Tranche A-1 Loan due June 30, 2016. The Plant Owners are also required to pay an unused line fee of 2.0% per annum and other
customary fees and expenses associated with the credit facility.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">The Plant Owners&rsquo; obligations are secured
by a security interest in their assets and equity interests in favor of the lenders.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">The amended and restated credit facility contains
numerous customary representations, warranties, affirmative and negative covenants and other customary terms and conditions, including
events of default (including upon the occurrence of an event of default with respect to any indebtedness owed by Pacific Ethanol)
and remedies in favor of the lenders. The facility also contains restrictions on the creation or incurrence of additional indebtedness
(other than pursuant to the new credit facility described below) and on distributions of funds from the Plant Owners to any affiliates
of the Plant Owners, including Pacific Ethanol.</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">The amended and restated credit facility also
contains financial covenants concerning certain of the Plant Owners&rsquo; budgeted expenses. Specifically, the Plant Owners shall
not permit amounts disbursed pursuant to the categories in the budget related to the asset management agreement among the Plant
Owners and Pacific Ethanol and operating disbursements to exceed their respective budgeted amounts by more than 10%.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">The Plant Owners have the right at any time,
and from time to time, but subject to limitations imposed by an intercreditor agreement (described below), to prepay in whole or
in part the revolving loans and Tranche A-1 Loans (and the Tranche A-2 Loans following the payment in full of the revolving loans
and Tranche A-1 Loans). However, in the event of any prepayment of the Tranche A-1 Loans that have a maturity date of June 30,
2016, the Plant Owners must pay a premium equal to the present value of all interest payments which would have accrued from the
date of such payment through June 30, 2016, calculated using a discount rate, applied quarterly, equal to the Treasury Rate as
of such prepayment date plus 50 basis points. The amended and restated credit facility also provides for mandatory prepayments
in connection with certain customary events, including any sale of material assets; however, certain mandatory prepayments are
not subject to the prepayment premium.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.25in"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.25in"><B><I>New Credit Facility</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">On October 29, 2012, the Plant Owners also secured
a new revolving credit facility of up to $10.0 million with the ability to request incremental increases of up to a maximum aggregate
amount of $5.0 million. We have requested that the revolving credit facility be increased by $5.0 million to $15.0 million, or
Accordion Increase, and anticipate that such increase will become effective substantially concurrently with the closing of this
offering. The closing of this offering is, however, subject to various conditions. We can provide no assurance that we will be
able to close the offering contemplated in this prospectus and therefore can provide no assurance that the revolving facility will
be increased by $5.0 million.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">As of December 31, 2012, the Plant Owners had
unused availability under the new revolving credit facility of $4.0 million. Effective as of January 11, 2013, the new credit facility
was amended to extend its maturity date from June&nbsp;25, 2013 to June 25, 2015. See &ldquo;Risk Factors.&rdquo;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">The Plant Owners may elect to receive Eurodollar
loans and/or base rate loans under the new credit facility. The per annum interest rate on the loans is the same as under the amended
and restated credit facility described above; however, the applicable margin under the new credit facility is 5.5% per annum instead
of 10%; provided that for any loans for which interest is paid as capitalized interest, the applicable margin is 8.0% per annum
for the period for which interest is so paid.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">The timing of interest payments, the Plant Owners&rsquo;
ability to capitalize interest, the unused line fees and other customary fees and expenses associated with the new credit facility
are the same as for the amended and restated credit facility described above. The Plant Owners&rsquo; obligations under the new
credit facility are secured by a security interest in their assets and equity interests in favor of the lenders. The new credit
facility contains representations and warranties, events of default and financial covenants identical to those contained in the
amended and restated credit facility. The Plant Owners have the right at any time, and from time to time, but subject to limitations
imposed by an intercreditor agreement, to prepay the revolving loans under the new credit facility. The credit facility requires
mandatory prepayments in connection with certain customary events, including any sale of material assets.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.25in"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.25in"><B><I>Intercreditor Agreement</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">In connection with entering into the amended
and restated credit facility and the new credit facility, the Plant Owners entered into an Intercreditor Agreement with Wells Fargo
Bank, as collateral agent. The Intercreditor Agreement generally provides, among other things, that the amounts owed by the Plant
Owners under the new credit facility shall be senior in right and payment to the payment of amounts owed by the Plant Owners under
the amended and restated credit facility.</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"><B>Note Payable to Related Party</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">On March 31, 2009, our Chief Executive Officer
provided funds in an aggregate amount of $1.0 million for general working capital purposes, in exchange for an unsecured promissory
note issued by us. Interest on the unpaid principal amount accrues at a rate of 8.00% per annum. As of December 31, 2012, we had
paid all accrued interest under the promissory note. As of December 31, 2012, the remaining principal amount of $750,000 was due
and payable on the extended maturity date of March 31, 2013. On February 7, 2013, the maturity date was further extended to March
31, 2014.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"><B>&nbsp;</B></P>


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<P STYLE="color: blue; font: bold 10pt Times New Roman, Times, Serif; margin: 0; text-align: center; text-indent: 0in">USE OF PROCEEDS</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">We will receive approximately $5.6 million in
net proceeds from this offering, after deducting our placement agent&rsquo;s fee. Our other offering expenses, other than our placement
agent&rsquo;s fee, will be approximately $500,000, which expenses will be paid out of the proceeds the Series B Note Offering,
if any, or out of our cash reserve if the Series B Note Offering is not consummated.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">We intend to use (i) $2.1 million of the net
proceeds from this offering, after deducting our placement agent&rsquo;s fee, to purchase $2.6 million the June Indebtedness from
the existing lenders under the Plant Owners&rsquo; credit facilities and limited liability company interests of New PE Holdco held
by the holders of the June Indebtedness being purchased; and, we anticipate that, immediately prior to such purchase, the credit
facilities will be amended to extend the maturity date applicable to such June Indebtedness that we will purchase from June 25,
2013 to June 30, 2016, and (ii) $3.5 million of the net proceeds from this offering, after deducting our placement agent&rsquo;s
fee, to purchase and immediately retire approximately $3.5 million of the Revolving Loan from the existing lenders under the Plant
Owners&rsquo; credit facilities. See &ldquo;Description of Other Indebtedness&mdash;Amended and Restated Credit Facility.&rdquo;
After the closing of this offering, we will retire the $3.5 million of Revolving Loans that we expect to purchase using the net
proceeds of this offering. After the closing of this offering, we anticipate that we will hold an 83% ownership interest in New
PE Holdco.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">Concurrently with this offering, we will be
offering $8.0 million of Series B Notes pursuant to a separate prospectus supplement in the Series B Note Offering. We anticipate
that we will receive approximately $6.5 million dollars in net proceeds at the closing of the Series B Note Offering after paying
our placement agent&rsquo;s fee and other offering expenses incurred in connection with this offering and the Series A Offering.
We intend to use (i) up to $4.0 million of the net proceeds from the Series B Note Offering to purchase the remaining $4.0 million
of June Indebtedness and limited liability company interests of New PE Holdco held by the holders of the June Indebtedness being
purchased; and, anticipate that, immediately prior to such purchase, the credit facilities will be amended to extend the maturity
date applicable to the remaining June Indebtedness that we anticipate purchasing from June 25, 2013 to June 30, 2016, (ii) $2.0
million of the net proceeds from the Series B Note Offering to fund a reserve to service our subordinated debt obligations and
(iii) the remainder of the net proceeds from the Series B Note Offering to repay our Senior Notes and/or Revolving Loans.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">After the closing of this offering and the Series
B Note Offering, we anticipate that we would have purchased all of the June Indebtedness and that all such June Indebtedness would
have been amended to extend the maturity date from June 25, 2013 to June 30, 2016 After the closing of this offering, the substantially
concurrent closing of Accordion Increase and the closing of the Series B Note Offering, of the Plant Owners&rsquo; up to $106.3
million in term and revolving debt, up to $15.0 million in revolving debt will be due on June 25, 2015 and $91.3 million in combined
revolving and term debt will be due on June, 30, 2016. After the closing of this offering and the Series B Note Offering, we will
own $28.2 million of the Plant Owners&rsquo; $91.3 combined revolving loans and term loans due June 30, 2016.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">The closing of this offering is subject to various
conditions. We can provide no assurance that we will be able to close the offering contemplated in this prospectus. The closing
of the Accordion Increase is subject to the closing of this offering; therefore, we can provide no assurance that we will be able
to close the Accordion Increase. The closing of the Series B Note Offering is subject to various closing conditions, including,
without limitation, the requirement that we obtain stockholder approval for this offering and the Series B Note Offering. Therefore,
we can provide no assurance that we will be able to close the Series B Note Offering.</P>


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<P STYLE="color: blue; font: bold 10pt Times New Roman, Times, Serif; margin: 0; text-align: center; text-indent: 0in">CAPITALIZATION</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"><B>Cash and Cash Equivalents</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">The following table sets forth:</P>

<P STYLE="font: 10pt Symbol; margin: 0 0 0 1in; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.75in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>our cash and cash equivalents as of December 31, 2012 on an actual basis;</TD></TR></TABLE>

<P STYLE="font: 10pt Symbol; margin: 0 0 0 1in; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.75in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>the impact on our cash and cash equivalents of the $22.2 million in gross proceeds from the sale of our Senior Notes and warrants
on January 11, 2013 and the use of $21.5 million of the proceeds of that offering to purchase $21.5 million in principal of Tranche
A-2 Loans;</TD></TR></TABLE>

<P STYLE="font: 10pt Symbol; margin: 0 0 0 1in; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.75in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>the impact on our cash and cash equivalents of the estimated $5.6 million in net proceeds of this offering, after deducting
our placement agent&rsquo;s fees, and the application of the net proceeds therefrom as described under the heading &ldquo;Use of
proceeds&rdquo;;</TD></TR></TABLE>

<P STYLE="font: 10pt Symbol; margin: 0 0 0 1in; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.75in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>the impact on our cash and cash equivalents of the estimated net proceeds of $6.5 million from the concurrent Series B Note
Offering, after deducting placement agent fees and commissions and estimated offering expenses incurred in the Series B Note Offering
and this offering that are payable by us, and the application of the net proceeds therefrom as described under the heading &ldquo;Use
of proceeds&rdquo;; and</TD></TR></TABLE>

<P STYLE="font: 10pt Symbol; margin: 0 0 0 1in; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.75in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>our cash and cash equivalents as of December 31, 2012 as adjusted for the issuances and uses described above.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">The following table should be read in conjunction
with our consolidated financial statements and related notes, which will be incorporated by reference into this prospectus supplement.
We can provide no assurance that we will be able to close the offering contemplated in this prospectus or the Series B Note Offering.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="18" STYLE="text-align: center; border-bottom: Black 1pt solid">As of<BR> December 31, 2012 <BR>(in thousands)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">Actual</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">Impact of Senior Note Offering</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">Impact <BR>of <BR>This Offering</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">Impact <BR>of <BR>Series B Note Offering</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">As Adjusted</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">&nbsp;</TD><TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="width: 35%; text-align: left">Cash and cash equivalents</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 9%; text-align: right">7,586</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 9%; text-align: right">653</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 9%; text-align: right">&ndash;</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 9%; text-align: right">2,000</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 9%; text-align: right">10,239</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD>Debt:</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="color: black; text-align: left; padding-left: 10pt">Kinergy operating line of credit</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">19,711</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">19,711</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="color: black; text-align: left; padding-left: 10pt">Note payable to related party</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">750</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">750</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="color: black; text-align: left; padding-left: 10pt">Plant Owners&rsquo; term debt</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">54,821</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">54,821</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="color: black; text-align: left; padding-left: 10pt">Plant Owners&rsquo; operating lines of credit</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">46,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">(3,500</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">42,500</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="color: black; text-align: left; padding-left: 10pt">Senior Notes</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">22,192</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">22,192</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="color: black; text-align: left; padding-left: 10pt">Series A Notes</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">6,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">6,000</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="color: black; text-align: left; padding-left: 10pt">Series B Notes</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">8,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">8,000</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="color: black; text-align: left; padding-bottom: 1pt; padding-left: 20pt; text-indent: -10pt">Elimination of Plant Owners&rsquo; debt purchased by
    Pacific Ethanol, Inc.</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">&ndash;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">$</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(21,539</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">$</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(2,636</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">$</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(4,029</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">$</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(28,204</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="color: black; font-weight: bold; text-align: left; padding-bottom: 1pt; padding-left: 20pt">Consolidated Total Debt</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-weight: bold; text-align: left">$</TD><TD STYLE="border-bottom: Black 1pt solid; font-weight: bold; text-align: right">121,282</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-weight: bold; text-align: left">$</TD><TD STYLE="border-bottom: Black 1pt solid; font-weight: bold; text-align: right">653</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-weight: bold; text-align: left">$</TD><TD STYLE="border-bottom: Black 1pt solid; font-weight: bold; text-align: right">(136</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold; text-align: left">)</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-weight: bold; text-align: left">$</TD><TD STYLE="border-bottom: Black 1pt solid; font-weight: bold; text-align: right">3,971</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-weight: bold; text-align: left">$</TD><TD STYLE="border-bottom: Black 1pt solid; font-weight: bold; text-align: right">125,770</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"><B>&nbsp;</B></P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"><B>Approximate Number of Shares of Common Stock Issuable under Convertible
Notes and Warrants</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">The number of shares of common stock issuable
under the Convertible Notes depends, in part, on the market price of our shares of Common Stock. Assuming that amounts due on all
Installment Dates prior to the Maturity Date are deferred to the Maturity Date and we make the payment due on the Maturity Date
in shares of our common stock, with interest calculated at an interest rate of 5.00% per annum, compounded monthly, from an assumed
issuance date of March 28, 2013 for the Series A Notes and an assumed issuance date of May 28, 2013 for the Series B Notes through
an assumed maturity date of March 28, 2014, we will issue the following number of shares of common stock on the Maturity Date:</P>

<P STYLE="font: 10pt Symbol; margin: 0 0 0 1in; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.75in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>assuming a Company Conversion Price on the Maturity Date of $0.40, 15,767,428 shares of common stock under the Series A Notes
and 20,849,133 shares of common stock under the Series B Notes;</TD></TR></TABLE>

<P STYLE="font: 10pt Symbol; margin: 0 0 0 1in; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.75in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>assuming a Company Conversion Price on the Maturity Date of $0.34, 18,549,916 shares of common stock under the Series A Notes
and 24,528,392 shares of common stock under the Series B Notes; and</TD></TR></TABLE>

<P STYLE="font: 10pt Symbol; margin: 0 0 0 1in; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.75in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>assuming a Company Conversion Price on the Maturity Date of $0.18, 35,333,173 shares of common stock under the Series A Notes
and 46,720,747 shares of common stock under the Series B Notes.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">In addition, we may issue up to 27,594,000 shares
of common stock upon exercise of the Warrants.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">On March 27, 2013, the number of shares of our
common stock that outstanding is 155,415,594, and excludes the following:</P>

<P STYLE="font: 10pt Symbol; margin: 0 0 0 0.75in; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>985,230 shares of common stock reserved for issuance under our 2006 Stock Incentive Plan, or 2006 Plan, of which options to
purchase 183,345 shares were outstanding as of that date, at a weighted average exercise price of $0.86 per share;</TD></TR></TABLE>

<P STYLE="font: 10pt Symbol; margin: 0 0 0 0.75in; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>11,429 shares of common stock reserved for issuance under outstanding options issued under our 2004 Stock Option Plan, or 2004
Plan, at a weighted average exercise price of $57.82 per share;</TD></TR></TABLE>

<P STYLE="font: 10pt Symbol; margin: 0 0 0 0.75in; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>71,321,268 shares of common stock reserved for issuance under certain warrants to purchase common stock outstanding as of that
date, at a weighted average exercise price of $1.00 per share;</TD></TR></TABLE>

<P STYLE="font: 10pt Symbol; margin: 0 0 0 0.75in; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>33,000,000<B> </B>shares of common stock reserved for issuance under the Senior Notes and warrants issued on January 11, 2013
(which shares will be unreserved substantially concurrently with the closing of this offering pursuant to the terms of the Senior
Note Amendments);</TD></TR></TABLE>

<P STYLE="font: 10pt Symbol; margin: 0 0 0 0.75in; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>6,741,080 shares of common stock reserved for issuance upon conversion of our Series B Preferred Stock; and</TD></TR></TABLE>

<P STYLE="font: 10pt Symbol; margin: 0 0 0 0.75in; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>any additional shares of common stock we may issue from time to time after that date.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">As a result of the issuance of securities in
this offering, the exercise price of certain of our outstanding warrants will be adjusted downward as a result of weighted-average
anti-dilution price protection provisions contained in the agreements governing such securities.</P>


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<P STYLE="color: blue; font: bold 10pt Times New Roman, Times, Serif; margin: 0; text-align: center; text-indent: 0in">DESCRIPTION
OF SECURITIES BEING OFFERED</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">We are offering 6,000 units (&ldquo;Units&rdquo;),
with each Unit consisting of $1,000 of our Series A Subordinated Convertible Notes (&ldquo;Series A Notes&rdquo;), a Series A Warrant
(collectively, &ldquo;Series A Warrants&rdquo;) to purchase 1,971 shares of our common stock for a term of two years and a Series
B Warrant (collectively, &ldquo;Series B Warrants&rdquo; and together with the Series A Warrants, the &ldquo;Warrants&rdquo;) to
purchase 2,628 shares of our common stock for a term of two years after the closing of the Series B Note Offering, in this offering.
The Series A Notes and Warrants are being sold pursuant to the terms of a Securities Purchase Agreement to be dated on or about
March 28, 2013 between us and each investor in connection with this offering. This prospectus also covers 35,333,173 shares of
common stock issuable from time to time upon conversion or otherwise under the Series A Notes (including shares of common stock
that may be issued as interest in lieu of cash payments). To obtain the number of shares of common stock issuable from time to
time upon conversion or otherwise under the Series A Notes that are covered under this prospectus, we have assumed that all payments
under the Series A Notes will be made in shares of common stock, with interest calculated at an interest rate of 5.00% per annum,
compounded monthly, from March 29, 2013 through an assumed Maturity Date of March 29, 2014, assuming amounts due on all Installment
Dates prior to the Maturity Date are deferred to the Maturity Date and assuming a Company Conversion Price on the Maturity Date
of $0.18 (which is 85% of the lowest possible closing price of our common stock that may exist in order for us to make payments
under the Series A Notes in shares of our common stock).<FONT STYLE="color: red"> </FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">The following is a description of the material
terms of the Series A Notes, the indenture, the Warrants and our common stock. It does not purport to be complete. This summary
is subject to and is qualified by reference to all the provisions of the Series A Notes, the indenture and the Warrants, including
the definitions of certain terms used therein. We urge you to read these documents and the Securities Purchase Agreement because
they, and not this description, define your rights as a holder of the Series A Notes and Warrants. You may request copies of the
Series A Notes, indenture, Warrants and Securities Purchase Agreement as set forth under the caption &ldquo;Where You Can Find
More Information.&rdquo;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">In this section, the words &ldquo;we,&rdquo;
&ldquo;us,&rdquo; &ldquo;our,&rdquo; &ldquo;Pacific Ethanol&rdquo; or &ldquo;the Company&rdquo; do not include any current or future
subsidiary of Pacific Ethanol, Inc., unless we specify otherwise.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"><B>Description of Series A Notes</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">We will issue the Series A Notes under an indenture
to be dated as of the closing date of this offering, between us and U.S. Bank National Association, as trustee, as supplemented
by a first supplemental indenture thereto, to be dated as of the closing date of this offering, relating to the Series A Notes.
We refer to the indenture without supplement as the &ldquo;base indenture.&rdquo; We refer to the supplement to the base indenture
as the &ldquo;first supplemental indenture.&rdquo; We refer to the base indenture as supplemented by the first supplemental indenture
as the &ldquo;indenture.&rdquo; The terms of the Series A Notes include those provided in the indenture and those made part of
the indenture by reference to the Trust Indenture Act.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">The following description of the particular
terms of the Series A Notes supplements and, to the extent inconsistent therewith, replaces the description of the general terms
and provisions of the debt securities set forth in the accompanying prospectus, to which reference is hereby made. Terms not defined
in this description have the meanings given to them in the indenture.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">The Series A Notes will not be issued with an
original issue discount and are not subject to defeasance. The Series A Notes will be issued in certificated form and not as global
securities.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.25in"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.25in"><B><I>Ranking</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">The Series A Notes will be the subordinated
unsecured obligations of Pacific Ethanol and not the obligations of our subsidiaries. The Series A Notes will be effectively subordinated
to our future secured debt, if any, to the extent of the value of the collateral securing such future debt; subordinated in right
of payment to our existing senior unsecured debt; equal in right of payment with the Series B Notes, certain current and future
debt not to exceed $750,000 and any future unsecured debt that does not expressly provide that it is subordinated to the Series
A Notes; senior to all other indebtedness of Pacific Ethanol; and senior to any future debt that expressly provides that it is
subordinated to the Series A Notes. In addition, the ability of a holder of Series A Notes to be paid in cash while the Senior
Notes remain outstanding is limited.</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.25in"><B><I>Maturity Date</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">Unless earlier converted or redeemed, the Series
A Notes will mature on the first anniversary of their issuance date, or Maturity Date, subject to the right of the investors to
extend the date (i) if an event of default under the Series A Notes has occurred and is continuing or any event shall have occurred
and be continuing that with the passage of time and the failure to cure would result in an event of default under the Series A
Notes and (ii) for a period of 20 business days after the consummation of a fundamental transaction if certain events occur.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.25in"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.25in"><B><I>Interest </I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">The Series A Notes bear interest at the rate
of 5%&nbsp;per annum and are compounded monthly, on the first calendar day of each calendar month. The interest rate will increase
to 15% per annum upon the occurrence of an event of default (as described below).</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">Interest on the Series A Notes is payable in
arrears on each Installment Date (as defined below). If a holder elects to convert or redeem all or any portion of a Series A Note
prior to the Maturity Date, all accrued and unpaid interest on the amount being converted or redeemed will also be payable. If
we elects to redeem all or any portion of a Series A Note prior to the Maturity Date, all accrued and unpaid interest on the amount
being redeemed will also be payable.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.25in"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.25in"><B><I>Late Charge</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">We are required to pay a late charge of 15%
on any amount of principal or other amounts due which are not paid when due. Late charges are payable in arrears on each Installment
Date. If a holder elects to convert or redeem all or any portion of a Series A Note prior to the Maturity Date, all accrued and
unpaid late charges on the amount being converted or redeemed will also be payable. If we elect to redeem all or any portion of
a Series A Note prior to the Maturity Date, all accrued and unpaid late charges on the amount being redeemed will also be payable.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.25in"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.25in"><B><I>Conversion</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">All amounts due under the Series A Notes are
convertible at any time, in whole or in part, at the option of the holders into shares of our common stock at a conversion price,
or Fixed Conversion Price, which is subject to adjustment as described below. If a holder elects to convert all or any portion
of a Series A Note prior to the Maturity Date, all accrued and unpaid interest and accrued and unpaid late charges on the principal
amount being converted will also be converted at the Fixed Conversion Price.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">The Series A Notes are initially convertible
into shares of our common stock at the initial Fixed Conversion Price of $1.00 per share. The Fixed Conversion Price is subject
to adjustment for stock splits, combinations or similar events. If we sell or issue any securities with &ldquo;floating&rdquo;
conversion prices based on the market price of our common stock, a holder of a Series A Note will have the right thereafter to
substitute the &ldquo;floating&rdquo; conversion price for the Fixed Conversion Price upon conversion of all or part of the Series
A Note.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">If we fail to timely deliver common stock upon
conversion of the Series A Notes, we have agreed to pay &ldquo;buy-in&rdquo; damages of the converting holder.</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.25in"><B><I>Payment of Principal and Interest </I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">We have agreed to make amortization payments
with respect to the principal amount of each Series A Note on each of the following dates, collectively, the Installment Dates:</P>

<P STYLE="font: 10pt Symbol; margin: 0 0 0 1in; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.75in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>the 11<SUP>th</SUP> trading day immediately following the date the Series A Notes are issued;</TD></TR></TABLE>

<P STYLE="font: 10pt Symbol; margin: 0 0 0 1in; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.75in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>the first trading day of the calendar month at least eleven trading days after the date described immediately above;</TD></TR></TABLE>

<P STYLE="font: 10pt Symbol; margin: 0 0 0 1in; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.75in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>the first trading day of each calendar month thereafter; and</TD></TR></TABLE>

<P STYLE="font: 10pt Symbol; margin: 0 0 0 1in; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.75in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>the Maturity Date.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">The amortizing portion of the principal of each
Series A Note, or Amortization Amount, will equal (i) for all Installment Dates prior to the closing of the Series B Note Offering
other than the Maturity Date, the lesser of (x) the holder&rsquo;s pro-rata share of $1,166,667 and (y) the principal amount then
outstanding under the Series A Note, (ii) for all Installment Dates on or after the closing of the Series B Note Offering other
than the Maturity Date, the lesser of (x) the greater of (a) the holder&rsquo;s pro-rata share of $500,000 and (b) the fraction
of each Series A Note with the numerator of which is equal to the outstanding principal amount of the Series A Note due on the
date of the closing of the Series B Note Offering and the denominator of which is equal to the number of Installment Dates occurring
on or after the closing of the Series B Note Offering until and including the Maturity Date and (y) the principal amount then outstanding
under the Series A Note and (iii) on the Maturity Date, the principal amount then outstanding under the Series A Note.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">We may pay the Amortization Amount, all accrued
and unpaid interest and accrued and unpaid late charges, or collectively the Installment Amount, in cash or shares of our common
stock, at our election, subject to the satisfaction of the Equity Conditions (as defined below) as described below if we elect
to pay in shares of common stock.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.25in"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.25in"><B><I>Acceleration and Deferral of Amortization
Amounts</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">The holder of a Series A Note may, at the holder&rsquo;s
election by giving notice to us, defer the payment of the Installment Amount due on any Installment Dates to another Installment
Date, in which case the amount deferred will become part of such subsequent Installment Date and will continue to accrue interest.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">On any day during the period commencing on an
Installment Date, or Current Installment Date, and ending on the trading day prior to prior to the next Installment Date, the holder
of a Series A Note may, at its election, convert the Installment Amounts due on up to four future Installment Dates at the Company
Conversion Price (as defined below) in effect on the Current Installment Date, provided that if we had elected to convert the Installment
Amount due on such Current Installment Date, the holder may only convert up to three future Installment Amounts. Upon the occurrence
of certain events of default, there will be no limitation on the number of Installment Amounts that the holder may accelerate and
the Company Conversion Price applicable to conversions made pursuant to this acceleration feature will equal the lesser of (i)
the Company Conversion Price on the Current Installment Date, (ii) 85% of the Market Price (as defined below) and (iii) the Fixed
Conversion Price then in effect.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">The &ldquo;Market Price&rdquo; on any given
date is equal to the lesser of (i) the volume weighted average price on the trading day immediately preceding the date of determination
and (ii) the average of the 3 lowest volume weighted average prices during the 10 trading day period ending on the trading day
immediately prior to the date of determination.</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.25in"><B><I>Monthly Amortization Payment Procedures</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"><I>&nbsp;</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"><I>Installment Notices</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">On or prior to the 10<SUP>th</SUP> calendar
day prior to each Installment Date, or Installment Notice Due Date, we are required to deliver a notice electing to effect a redemption
in cash or a conversion of the Installment Amount due on such Installment Date (a failure to deliver a notice is deemed to be a
delivery of a conversion notice in full).</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">On the applicable Installment Date, we are required
to deliver to the holders of Series A Notes an amount of shares of common stock equal to that portion of the Installment Amount
being converted divided by the lesser of the then existing Fixed Conversion Price and 85% of the Market Price on the Installment
Date, which we refer to in this prospectus as the Company Conversion Price.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"><I>&nbsp;</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"><I>Blocker Deferral Rights</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">If any holder of Series A Notes is unable to
receive shares of common stock due to the Series A Note Blocker (as defined below), the portion of the applicable Installment Amount
will become payable on the immediately subsequent Installment Date.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"><I>&nbsp;</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"><I>Equity Conditions Failure Rights</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">If we are not permitted to deliver shares of
common stock with respect to an Installment Date due to our failure to satisfy any of the Equity Conditions (as defined below),
the holder of a Series A Note, at the holder&rsquo;s option at any time may (x) require us to pay a cash payment of 115% of all
or part of the Installment Amount subject to conversion and/or (y) declare the conversion null and void with respect to all or
part of the Installment Amount, provided that the Fixed Conversion Price applicable to any such amount is adjusted to equal the
lesser of (i) the Company Conversion Price in effect on the date the holder voided the conversion and (ii) the Company Conversion
Price in effect on the date the holder converts such amount.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"><I>&nbsp;</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"><I>Equity Conditions</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">We will have the option to pay a Installment
Amount in shares of common stock only if all of the following equity conditions are satisfied (or waived by the holders of the
Series A Notes), which we refer to in this prospectus as the Equity Conditions:</P>

<P STYLE="font: 10pt Symbol; margin: 0 0 0 1in; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.75in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>during the 15 trading day period immediately before the date of determination, our common stock shall have been listed or designated
for quotation on an exchange or market permitted by the Series A Notes, and shall not have been suspended from trading on the exchange
or market (other than suspensions of not more than two days due to business announcements by us) nor shall delisting or suspension
by the exchange or market been threatened or pending either in writing by the exchange or market (excluding the requirement that
we maintain a minimum closing bid price of $1.00 per share until June 3, 2013);</TD></TR></TABLE>

<P STYLE="font: 10pt Symbol; margin: 0 0 0 1in; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.75in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>during the 15 trading day period immediately before the date of determination, we shall have delivered shares of common stock
upon conversion of the Convertible Notes and upon exercise of the Warrants on a timely basis;</TD></TR></TABLE>

<P STYLE="font: 10pt Symbol; margin: 0 0 0 1in; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.75in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>the common stock used to make the payment may be issued without violating the Series A Note Blocker (as defined below);</TD></TR></TABLE>

<P STYLE="font: 10pt Symbol; margin: 0 0 0 1in; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.75in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>the common stock used to make the payment may be issued without violating the NASDAQ Blocker (as defined below) and other applicable
NASDAQ rules;</TD></TR></TABLE>


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<P STYLE="font: 10pt Symbol; margin: 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.75in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>the common stock used to make the payment may be issued without violating the regulations of the eligible exchange or market
on which the common stock is listed or designated for quotation;</TD></TR></TABLE>

<P STYLE="font: 10pt Symbol; margin: 0 0 0 1in; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.75in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>during the 15 trading day period immediately before the date of determination, we shall not have publicly announced that specified
types of transactions involving a change of control of Pacific Ethanol are pending, proposed or intended that have not been abandoned,
terminated or consummated;</TD></TR></TABLE>

<P STYLE="font: 10pt Symbol; margin: 0 0 0 1in; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.75in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>the holder must not be in possession of any material, non-public information provided by us;</TD></TR></TABLE>

<P STYLE="font: 10pt Symbol; margin: 0 0 0 1in; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.75in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>during the 15 trading day period immediately before the payment date, no event shall have occurred that constitutes, or with
the passage of time or giving of notice would constitute, an event of default under the Series A Notes;</TD></TR></TABLE>

<P STYLE="font: 10pt Symbol; margin: 0 0 0 1in; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.75in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>the volume weighted average of volume weighted average price of our common stock during the 15 consecutive trading day period
ending on the trading day immediately preceding the date of determination is not less than $0.20 (as adjusted for stock splits,
stock dividends, stock combinations and other similar transactions), provided that if we effect a reverse stock split prior to
the Maturity Date, such price is not less than $0.15 (as adjusted by such stock split); and</TD></TR></TABLE>

<P STYLE="font: 10pt Symbol; margin: 0 0 0 1in; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.75in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>the quotient of (x) the sum of the daily dollar trading volume (as reported by Bloomberg) on each trading day over the 15 consecutive
trading days ending on the trading day immediately preceding the date of determination, divided by (y) 15, is not less than $500,000.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">If we have elected to pay a Installment Amount
in shares of our common stock and we cannot make such payment in shares of common stock because any of the Equity Conditions described
above is not satisfied and the holders of the Series A Notes do not elect to exercise their rights described under the heading
&ldquo;Equity Conditions Failure Rights&rdquo; above, we must make the payment in cash.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.25in"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.25in"><B><I>Events of Default </I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">Under the terms of the first supplemental indenture,
the events of default contained in the base indenture shall not apply to the Series A Notes. Rather, each of the following events
contained in the Series A Notes will constitute an event of default with respect to the Series A Notes:</P>

<P STYLE="font: 10pt Symbol; margin: 0 0 0 1in; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.75in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>our common stock is not trading or listed on an eligible market or exchange for more than 5&nbsp;consecutive trading days;</TD></TR></TABLE>

<P STYLE="font: 10pt Symbol; margin: 0 0 0 1in; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.75in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>we have not issued shares of common stock due upon conversion of a Convertible Note or exercise of a Warrant for more than
5 trading days;</TD></TR></TABLE>

<P STYLE="font: 10pt Symbol; margin: 0 0 0 1in; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.75in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>we have failed to pay to a holder of a Series A Note any amount of principal, interest, late charges or other amounts when
and as due (including the failure to pay any redemption payments), except, in the case of a failure to pay interest and late charges
when and as due, in which case only if such failure remains uncured for a period of at least 5 days;</TD></TR></TABLE>

<P STYLE="font: 10pt Symbol; margin: 0 0 0 1in; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.75in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>we have not removed a restrictive legend on any certificate or any shares of common stock issued upon conversion or exercise
within five days of a request for the removal when required by the terms of the Securities Purchase Agreement;</TD></TR></TABLE>

<P STYLE="font: 10pt Symbol; margin: 0 0 0 1in; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.75in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>we have notified a holder of a Series A Note of our intention not to comply with a request for conversion or exercise;</TD></TR></TABLE>
<P STYLE="font: 10pt Symbol; margin: 0 0 0 1in; text-indent: -0.25in">&nbsp;</P>
<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.75in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>we default on any of our other indebtedness, in the aggregate, in excess of $500,000;</TD></TR></TABLE>


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    <!-- Field: /Page -->

<P STYLE="font: 10pt Symbol; margin: 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.75in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>bankruptcy, insolvency, reorganization or liquidation proceedings or other proceedings for the relief of debtors shall be instituted
by or against us or certain of our subsidiaries and, if instituted against us or any such subsidiary by a third party, shall not
be dismissed within 30 days of their initiation;</TD></TR></TABLE>

<P STYLE="font: 10pt Symbol; margin: 0 0 0 1in; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.75in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>the commencement by us or certain of our subsidiaries of a voluntary case or proceeding under any applicable federal, state
or foreign bankruptcy, insolvency, reorganization or other similar law or of any other case or proceeding to be adjudicated a bankrupt
or insolvent, or the consent by it to the entry of a decree, order, judgment or other similar document in respect of us or any
such subsidiary in an involuntary case or proceeding under any applicable federal, state or foreign bankruptcy, insolvency, reorganization
or other similar law or to the commencement of any bankruptcy or insolvency case or proceeding against it, or the filing by it
of a petition or answer or consent seeking reorganization or relief under any applicable federal, state or foreign law, or the
consent by it to the filing of such petition or to the appointment of or taking possession by a custodian, receiver, liquidator,
assignee, trustee, sequestrator or other similar official of Pacific Ethanol or any such subsidiary or of any substantial part
of its property, or the making by it of an assignment for the benefit of creditors, or the execution of a composition of debts,
or the occurrence of any other similar federal, state or foreign proceeding, or the admission by it in writing of its inability
to pay its debts generally as they become due, the taking of corporate action by us or any such subsidiary in furtherance of any
such action or the taking of any action by any person to commence a Uniform Commercial Code foreclosure sale or any other similar
action under federal, state or foreign law;</TD></TR></TABLE>

<P STYLE="font: 10pt Symbol; margin: 0 0 0 1in; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.75in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>the entry by a court of (i) a decree, order, judgment or other similar document in respect of Pacific Ethanol or certain of
our subsidiaries of a voluntary or involuntary case or proceeding under any applicable federal, state or foreign bankruptcy, insolvency,
reorganization or other similar law or (ii) a decree, order, judgment or other similar document adjudging us or any such subsidiary
as bankrupt or insolvent, or approving as properly filed a petition seeking liquidation, reorganization, arrangement, adjustment
or composition of or in respect of us or any such subsidiary under any applicable federal, state or foreign law or (iii) a decree,
order, judgment or other similar document appointing a custodian, receiver, liquidator, assignee, trustee, sequestrator or other
similar official of Pacific Ethanol or any such subsidiary or of any substantial part of its property, or ordering the winding
up or liquidation of its affairs, and, the continuance of any such decree, order, judgment or other similar document or any such
other decree, order, judgment or other similar document unstayed and in effect for a period of 30 consecutive days;</TD></TR></TABLE>

<P STYLE="font: 10pt Symbol; margin: 0 0 0 1in; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.75in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>a final judgment, judgments, any arbitration or mediation award or any settlement of any litigation or any other satisfaction
of any claim made by any person pursuant to any litigation, as applicable, or Judgment(s), with respect to the payment of cash,
securities and/or other assets with an aggregate fair value in excess of $300,000 are rendered against, agreed to or otherwise
accepted by, us and/or certain of our subsidiaries and which Judgments are not, within 30 days after the entry thereof, bonded,
discharged or stayed pending appeal, or are not discharged within 30 days after the expiration of such stay; provided, however,
any Judgment which is covered by insurance or an indemnity from a credit worthy party shall not be included in calculating the
$300,000 amount set forth above so long as we provide a Holder of a Series A Note a written statement from such insurer or indemnity
provider to the effect that such Judgment is covered by insurance or an indemnity and we or such subsidiary (as the case may be)
will receive the proceeds of such insurance or indemnity within 30 days of the issuance of such Judgment;</TD></TR></TABLE>

<P STYLE="font: 10pt Symbol; margin: 0 0 0 1in; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.75in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>we and/or certain of our subsidiaries, individually or in the aggregate, either (i) fail to pay, when due, or within any applicable
grace period, any payment with respect to any indebtedness in excess of $300,000 due to any third party (other than, with respect
to unsecured indebtedness only, payments contested by us and/or such subsidiary (as the case may be) in good faith by proper proceedings
and with respect to which adequate reserves have been set aside for the payment thereof in accordance with GAAP) or is otherwise
in breach or violation of any agreement for monies owed or owing in an amount in excess of $300,000, which breach or violation
permits the other party thereto to declare a default or otherwise accelerate amounts due thereunder, or (ii) suffer to exist any
other circumstance or event that would, with or without the passage of time or the giving of notice, result in a default or event
of default under any agreement binding us or any such subsidiary, which default or event of default would or is likely to have
a material adverse effect on the business, assets, operations (including results thereof), liabilities, properties, condition (including
financial condition) or prospects of Pacific Ethanol or any such subsidiaries, individually or in the aggregate;</TD></TR></TABLE>


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    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
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<P STYLE="font: 10pt Symbol; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Symbol; margin: 0 0 0 1in; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.75in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>other than as specifically set forth in this list of events of default, we or certain of our subsidiaries breach any representation,
warranty, covenant or other term or condition of any document related to the purchase of the Units, and only in the case of a breach
of a covenant or other term or condition that is curable, only if such breach remains uncured for a period of 10 consecutive trading
days;</TD></TR></TABLE>

<P STYLE="font: 10pt Symbol; margin: 0 0 0 1in; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.75in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>any breach or failure in any respect by us or any of our subsidiaries to comply with the provisions of the Series A Notes regarding
the reservation of authorized shares or specified covenants;</TD></TR></TABLE>

<P STYLE="font: 10pt Symbol; margin: 0 0 0 1in; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.75in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>any breach or failure in any respect by us or any of our subsidiaries to comply with the amendment to the terms of our Senior
Notes;</TD></TR></TABLE>

<P STYLE="font: 10pt Symbol; margin: 0 0 0 1in; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.75in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font: 10pt Symbol">&middot;</FONT></TD><TD><FONT STYLE="font-size: 10pt">any provision of any transaction document executed in connection with the purchase of Units shall
at any time for any reason cease to be valid; or </FONT></TD></TR></TABLE>

<P STYLE="font: 10pt Symbol; margin: 0 0 0 1in; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.75in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font: 10pt Symbol">&middot;</FONT></TD><TD><FONT STYLE="font-size: 10pt">any event of default occurs with respect to any of the Series A Notes</FONT>.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">If an event of default occurs, holders of at
least 20% of the outstanding principal amount of the Series A Notes may force us to redeem all or any portion of the Series A Notes
(including all accrued and unpaid interest thereon), in cash, at a price equal to the greater of (i) up to 125% of the amount being
redeemed, depending on the nature of the default, and (ii) the product of the following: (a) the Conversion Rate (as defined below)
multiplied (b) up to 125% of the amount being redeemed, depending on the nature of the default, multiplied by the highest closing
sale price of our common stock during the period beginning on the date immediately before the event of default and ending on the
date of redemption. The &ldquo;Conversion Rate&rdquo; is determined by dividing the amount being converted or redeemed by the Fixed
Conversion Price. If we fail to make the cash redemption payment, the conversion price of the Series A Notes shall be automatically
adjusted with respect to each conversion effected thereafter to the lowest of (x) the lowest company conversion price during the
period between the date when the holder notified us of the holder&rsquo;s demand for redemption and the date that the redemption
notice is voided by the holder and (y) 85% of the lowest closing bid price of our common stock during such period.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.25in"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.25in"><B><I>Fundamental Transactions</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">The Series A Notes prohibit us from entering
into specified transactions involving a change of control, unless the successor entity assumes in writing all of our obligations
under the Series A Notes under a written agreement.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">In the event of transactions involving a change
of control, the holder of a Series A Note will have the right to force us to redeem all or any portion of the Series A Note it
holds (including all accrued and unpaid thereon) at a price equal to the greater of (i)&nbsp;125% of the amount being redeemed,
(ii) the product of (m) 125% of the amount being redeemed multiplied by (n) the quotient of (A) the highest closing sale price
of our common stock during the period beginning on the date immediately before the earlier to occur of (q) the completion of the
change of control and (r) the public announcement of the change of control and ending on the trading day immediately before the
trading day on which we pay the redemption price divided by (B) the Fixed Conversion Price then in effect on a Installment Date
during the period beginning on the date immediately before the earlier to occur of (s) the completion of the change of control
and (t) the public announcement of the change of control and ending on the trading day immediately before the trading day on which
we pay the redemption price, or (iii) the product of (x) 125% of the amount being redeemed multiplied by (y) the quotient of (M)
the aggregate cash consideration and the aggregate cash value of any non-cash consideration per share of our common stock to be
paid to the holders of the shares of common stock upon the completion of the change of control divided by (N) the Fixed Conversion
Price then in effect.</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.25in"><B><I>Covenants</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">The Series A Notes contain a variety of obligations
on our part not to engage in specified activities, which are typical for transactions of this type, as well as the following covenants:</P>

<P STYLE="font: 10pt Symbol; margin: 0 0 0 1in; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.75in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>we will initially reserve out of our authorized and unissued common stock an aggregate of 30,000,000 shares for issuance under
the Series A Notes;</TD></TR></TABLE>

<P STYLE="font: 10pt Symbol; margin: 0 0 0 1in; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.75in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>we will, after the earlier to occur of June 25, 2013 and the closing of the Series B Note Offering, reserve out of our authorized
and unissued common stock a number of shares equal to 125% of the number of shares of common stock issuable under the Series A
Notes;</TD></TR></TABLE>

<P STYLE="font: 10pt Symbol; margin: 0 0 0 1in; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.75in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>we will take all action reasonably necessary to reserve the required number of shares of common stock, including holding a
meeting of our stockholders for the approval of an increase in the number of shares of common stock within 90 days after the date
on which we do not have the required number authorized and unissued shares reserved for issuance;</TD></TR></TABLE>

<P STYLE="font: 10pt Symbol; margin: 0 0 0 1in; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.75in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>the payments due under the Series A Notes will rank <I>pari passu</I> with any obligations arising under the Kinergy credit
facility incurred by us in order for any of our subsidiaries to obtain any bonds or letters of credit required in connection with
the continued operations of such subsidiary&rsquo;s business up to $750,000 any given time and senior to all of Pacific Ethanol&rsquo;s
other indebtedness, other than the Senior Notes;</TD></TR></TABLE>

<P STYLE="font: 10pt Symbol; margin: 0 0 0 1in; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.75in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>we and certain of our subsidiaries will not incur other indebtedness, except for permitted indebtedness;</TD></TR></TABLE>

<P STYLE="font: 10pt Symbol; margin: 0 0 0 1in; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.75in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>we and certain of our subsidiaries will not incur any liens, except for permitted liens;</TD></TR></TABLE>

<P STYLE="font: 10pt Symbol; margin: 0 0 0 1in; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.75in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>we and certain of our subsidiaries will not, directly or indirectly, redeem or repay all or any portion of any indebtedness
(except for certain permitted indebtedness) if at the time the payment is due or is made or, after giving effect to the payment,
an event constituting, or that with the passage of time and without being cured would constitute, an event of default has occurred
and is continuing;</TD></TR></TABLE>

<P STYLE="font: 10pt Symbol; margin: 0 0 0 1in; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.75in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>we and certain of our subsidiaries will not redeem, repurchase or pay any dividend or distribution on our respective capital
stock without the prior consent of the holders, other than the permitted distributions;</TD></TR></TABLE>

<P STYLE="font: 10pt Symbol; margin: 0 0 0 1in; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.75in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>we and our certain of our subsidiaries will not redeem, repurchase, or prepay any indebtedness, except for certain permitted
payments;</TD></TR></TABLE>

<P STYLE="font: 10pt Symbol; margin: 0 0 0 1in; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.75in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>we and certain of our subsidiaries will not lend money or credit or make any advances to any of our subsidiaries, or purchase
any obligations or securities of, or any other interest in, or make any capital contribution to any of our subsidiaries, except
for certain permitted investments; and</TD></TR></TABLE>


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    <!-- Field: /Page -->

<P STYLE="font: 10pt Symbol; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Symbol; margin: 0 0 0 1in; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.75in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>we and our subsidiaries will not sell, lease, assign, transfer or otherwise dispose of any of our assets or any assets of any
subsidiary, except for permitted dispositions (including sales of assets in the ordinary course of business).</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.25in"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.25in"><B><I>Participation Rights </I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">The holders of the Series A Notes are entitled
to receive any dividends paid or distributions made to the holders of our common stock on an &ldquo;as if converted to common stock&rdquo;
basis.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.25in"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.25in"><B><I>Limitations on Conversion and Issuance</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">A Series A Note may not be converted and shares
of common stock may not be issued under the Series A Notes if, after giving effect to the conversion or issuance, the holder together
with its affiliates would beneficially own in excess of 9.99% of our outstanding shares of common stock, or Series A Note Blocker.
The Series A Note Blocker may be raised or lowered to any other percentage not in excess of 9.99% at the option of the selling
security holder, except that any raise will only be effective upon 61-days&rsquo; prior notice to us.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">A Series A Note may not be converted and shares
of common stock may not be issued under the Series A Note if the sum of the number of shares of common stock to be issued plus
the number of shares of common stock issued under all of the Series A Notes, the Warrants and the Series B Notes would exceed 28,920,013
shares of our common stock unless we have obtained either (i) stockholder approval pursuant to NASDAQ Listing Rule 5635(d) for
the issuance of more than 28,920,013 shares of our common stock under the Series A Notes, the Series B Notes and the Warrants or
(ii) an opinion from legal counsel that more than 28,920,013 shares of our common stock may be issued under the Series A Notes,
the Series B Notes and the Warrants under Rule 5635(d), or the NASDAQ Blocker.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.25in"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.25in"><B><I>Changes to the Base Indenture </I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">We and the trustee may amend or supplement the
base indenture with the consent of each holder of Series A Notes then outstanding (excluding any Series A Notes held by us or any
of our subsidiaries).&nbsp; However, any such amendment, waiver or supplement may not amend or waive the subordination provisions
contained in the base indenture or in the first supplemental indenture in any manner adverse to the holders of the Series A Notes
then outstanding.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.25in"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.25in"><B><I>Changes to the First Supplemental Indenture
</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">Subject to the provisions in the first supplemental
indenture requiring that none of the securities issued under the indenture, including the Series A Notes, shall be represented
by global securities and the rights of the holders of the Senior Notes, the first supplemental indenture may be amended by the
written consent of Pacific Ethanol and the holders of a majority of the aggregate principal amount of the Series A Notes then outstanding.
Subject to the provisions in the first supplemental indenture requiring that none of the securities issued under the indenture,
including the Series A Notes, shall be represented by global securities and the rights of the holders of the Senior Notes, no provision
of the first supplemental indenture may be waived other than in writing signed by the party against whom enforcement is sought.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.25in"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.25in"><B><I>Changes to the Series A Notes</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">Each Series A Note may not be changed or amended
without the prior written consent of the Holder of such Series A Note.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.25in"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.25in"><B><I>Information Concerning the Trustee </I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">We have appointed U.S. Bank National Association,
the trustee under the indenture. The sole duty of the trustee is to act as the Series A Notes registrar. We will act as payment
agent under the Series A Notes. The trustee or its affiliates may also provide other services to us in the ordinary course of their
business. The indenture provides that if and when the trustee becomes our creditor (or any other obligor under the Series A Notes),
the trustee shall be subject to the provisions of the Trust Indenture Act regarding collection of claims against us (or any obligor).</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.25in"><B><I>Reports</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"><FONT STYLE="font-size: 10pt">So long as any
Series A Notes are outstanding, we will be required to deliver to the trustee, within 15 calendar days after have filed with the
Securities and Exchange Commission, copies of our annual reports and of the information, documents and other reports (or copies
of such portions of any of the foregoing as the Securities and Exchange Commission may from time to time by rules and regulations
prescribe) which we are required to file with the Securities and Exchange Commission pursuant to Section 13 or Section 15(d) of
the Exchange Act. Documents filed by us with the Securities and Exchange Commission via its EDGAR system (or any successor thereto)
will be deemed to be filed with the trustee as of the time such documents are so filed. In the event we are at any time no longer
subject to the reporting requirements of Section 13 or 15(d) of the Exchange Act, so long as any of the Series A Notes are outstanding
we must continue to file with the Securities and Exchange Commission, in accordance with the rules and regulations prescribed from
time to time by the Securities and Exchange Commission, such of the supplementary and periodic information, documents and reports
which may be required under Section 13 of the Exchange Act in respect of a security listed and registered on a national securities
exchange as may be prescribed from time to time in such rules and regulations (unless the Securities and Exchange Commission will
not accept such a filing) and make such information available to the trustee, the holders of the Series A Notes, securities analysts
and prospective investors</FONT>.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.25in"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.25in"><B><I>Calculations in Respect of the Series
A Notes</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"><FONT STYLE="font-size: 10pt">We will be responsible
for making all calculations called for under the Series A Notes. These calculations include, but are not limited to, determinations
of the prices of our common stock, the conversion price of the Series A Notes, accrued interest payable on the Series A Notes,
the number of shares of our common stock issuable in connection with payments of principal and interest under the Series A Notes.
We will make all these calculations in good faith and, absent manifest error, our calculations will be final and binding on holders
of Series A Notes. We will provide a schedule of our calculations to the trustee, and the trustee is entitled to rely conclusively
upon the accuracy of our calculations without independent verification</FONT>.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.25in"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.25in"><B><I>Certain Stockholder Rights for Holders
of Series A Notes</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">Holders of Series A Notes will be entitled to
receive such dividends paid and distributions made to the holders of our common stock to the same extent as if the holders of the
Series A Notes had converted the Series A Notes into common stock (without regard to any limitations on conversion contained in
the Series A Notes) and had held such shares of common stock on the record date for such dividends and distributions. To the extent
a holder&rsquo;s right to participate in any such dividend or distribution would result in the holder beneficially owning more
than the Series A Note Blocker, then the holder will not be entitled to participate in such dividend or distribution to such extent
and such dividend or distribution to such extent will be held in abeyance for the benefit of the holder until such time, if ever,
as its right thereto would not result in the holder exceeding the Series A Note Blocker.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.25in"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.25in"><B><I>Form, Denomination and Registration</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">The Series A Notes will be issued: (i) in certificated
form; (ii) without interest coupons; and (iii) in minimum denominations of $1,000 principal amount and whole multiples of $1,000.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.25in"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.25in"><B><I>Governing Law</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">The indenture provides that it and the Series
A Notes will be governed by, and construed in accordance with, the laws of the State of New York without regard to its conflicts
of law principles.</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.25in"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.25in"><B><I>Excluded Provisions of the Base Indenture</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">We have elected, through the first supplemental
indenture, that none of the following provisions of the base indenture shall be applicable to the Series A Notes and any analogous
provisions (including definitions related thereto) of the first supplemental indenture shall govern:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.75in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">Definition of &ldquo;Senior Debt&rdquo; in Section 1.1;</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 1in; text-align: justify; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.75in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">Section 1.14 (Legal Holidays);</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 1in; text-align: justify; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.75in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">Section 3.7 (Payment of Interest; Interest Rights Preserved);</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 1in; text-align: justify; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.75in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">Section 4.1 (Satisfaction and Discharge of Indenture);</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 1in; text-align: justify; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.75in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">Section 4.2 (Application of Trust Money);</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 1in; text-align: justify; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.75in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">Section 5.2 (Acceleration of Maturity; Rescission and Annulment);</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 1in; text-align: justify; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.75in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">Section 5.7 (Limitation on Suits);</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 1in; text-align: justify; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.75in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">Section 5.12 (Control by Holders);</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 1in; text-align: justify; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.75in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">Section 5.13 (Waiver of Past Defaults);</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 1in; text-align: justify; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.75in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">Section 6.2 (Notice of Defaults);</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 1in; text-align: justify; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.75in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">Section 9.1 (Without Consent of Holders);</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 1in; text-align: justify; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.75in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">Article VIII (Consolidation, Amalgamation, Merger and Sale);</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 1in; text-align: justify; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.75in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">Article XI (Redemption of Securities); and</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 1in; text-align: justify; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.75in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">Article XIII (Defeasance).</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">Only the events of default
contained in the Series A Notes shall be applicable to the Series A Notes. In addition, the subordination provisions contained
in the base indenture will be qualified by the subordination provisions contained in the first supplemental indenture.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"><B>Series A Warrants and Series B Warrants</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">We are offering Series A Warrants that will
entitle the holders of the Series A Warrants to purchase, in aggregate, up to 11,826,000 shares of our common stock. The Series
A Warrants will not be exercisable until the first anniversary of the date of their issuance and will expire 2 years from the date
of their issuance. The Series A Warrants will initially be exercisable at an exercise price equal to $0.52, subject to certain
adjustments including an adjustment on the first anniversary of their issuance date. The exercise price of the Series A Warrants
will be reduced on the first anniversary of their issuance date to equal 115% of the market price of our common stock on the first
anniversary of the issuance date of the Series A Warrants (to the extent such exercise price is less than the then applicable exercise
price).</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">We are offering Series B Warrants that will
entitle the holders of the Series B Warrants to purchase, in aggregate, up to 15,768,000 shares of our common stock. The Series
B Warrants will not be exercisable unless there is a closing of the Series B Note Offering by no later than July 1, 2013. In the
event of such closing, the Series B Warrants will not be exercisable until the first anniversary of the closing and will expire
on the second anniversary of the closing of the Series B Note Offering. The Series B Warrants will initially be exercisable at
an exercise price equal to $0.52, subject to certain adjustments including an adjustment on the first anniversary of the closing
of the Series B Note Offering. The exercise price of the Series B Warrants will be reduced on the first anniversary of the closing
of the Series B Note Offering to equal 115% of the market price of our common stock on the first anniversary of the closing of
the Series B Note Offering (to the extent such exercise price is less than the then applicable exercise price).</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">The Warrants may be exercised for cash, provided
that, if there is no effective registration statement available registering the exercise of the Warrants, the Warrants may be exercised
on a cashless basis. This prospectus does not cover the shares of common stock issuable from time to time upon exercise of the
Warrants. We anticipate that we will file a registration statement covering the shares of common stock issuable upon the exercise
of the Warrants prior to the time the Warrants become exercisable.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">The exercise price of the Warrants is subject
to adjustment for stock splits, combinations or similar events, and, in this event, the number of shares issuable upon the exercise
of the Warrant will also be adjusted so that the aggregate exercise price shall be the same immediately before and immediately
after the adjustment. In addition, the exercise price is also subject to a &ldquo;weighted-average&rdquo; anti-dilution adjustment
where if we issue or are deemed to have issued securities at a price lower than the then applicable exercise price.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">If we sell or issue any securities with &ldquo;floating&rdquo;
conversion prices based on the market price of our common stock, a holder of a Warrant will have the right thereafter to substitute
the &ldquo;floating&rdquo; conversion price for the exercise price upon exercise of all or part the Warrant.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">Similar to the Series A Notes, the Warrants
require &ldquo;buy-in&rdquo; payments to be made by us for failure to deliver the shares of common stock issuable upon exercise.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.25in"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.25in"><B><I>Limitations on Exercise</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">The Warrants may not be exercised if, after
giving effect to the exercise, the holder of the Warrant together with its affiliates would beneficially own in excess of 9.99%
of our outstanding shares of common stock, or Warrant Blocker. The Warrant Blocker applicable to the exercise of the Warrants may
be raised or lowered to any other percentage not in excess of 9.99%, except that any increase will only be effective upon 61-days&rsquo;
prior notice to us.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">A Warrant may not be exercised if the sum of
the number of shares of common stock to be issued plus the number of shares of common stock issued under all of the Series A Notes,
the Series B Notes and the Warrants would exceed 28,920,013 shares of our common stock unless we have obtained either (i) stockholder
approval pursuant to NASDAQ Listing Rule 5635(d) for the issuance of more than 28,920,013 shares of our common stock under the
Series A Notes, the Series B Notes and the Warrants or (ii) an opinion from legal counsel that more than 28,920,013 shares of our
common stock may be issued under the Series A Notes, the Series B Notes and the Warrants under Rule 5635(d).</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.25in"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.25in"><B><I>Participation Rights </I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">The holders of the Warrants are entitled to
receive any dividends paid or distributions made to the holders of our common stock on an &ldquo;as if converted to common stock&rdquo;
basis.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.25in"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.25in"><B><I>Purchase Rights </I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">If we issue options, convertible securities,
warrants, stock, or similar securities to holders of our common stock, each holder of a Warrant has the right to acquire the same
as if the holder had exercised its Warrant.</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.25in"><B><I>Fundamental Transactions </I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">The Warrants prohibit us from entering into
specified transactions involving a change of control, unless the successor entity assumes all of our obligations under the Warrants
under a written agreement before the transaction is completed. When there is a transaction involving a permitted change of control,
a holder of a Warrant a will have the right to force us to repurchase the holder&rsquo;s Warrant for a purchase price in cash equal
to the Black Scholes value (as calculated under the Warrants) of the then unexercised portion of the Warrant.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"><B>Description of Common Stock</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.25in"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.25in"><B><I>Authorized and Outstanding Capital Stock</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">Our authorized capital stock consists of 300,000,000
shares of common stock, $0.001 par value per share, and 10,000,000 shares of preferred stock, $0.001 par value per share, of which
1,684,375 shares are designated as Series&nbsp;A Preferred Stock and 1,580,790 shares are designated as Series&nbsp;B Preferred
Stock. As of March 27, 2013, there were 155,415,594 shares of common stock, no shares of Series A Preferred Stock and 926,942 shares
of Series B Preferred Stock issued and outstanding. On June 8, 2011, we effected a one-for-seven reverse split of our common stock.
All share information contained in this prospectus reflects the effect of this reverse stock split. The following description of
our common stock does not purport to be complete and should be reviewed in conjunction with our certificate of incorporation and
our bylaws. Information regarding our Series A Preferred Stock may be found in our Certificate of Designations, Powers, Preferences
and Rights of the Series&nbsp;A Preferred Stock and information regarding our Series B Preferred Stock may be found in our Certificate
of Designations, Powers, Preferences and Rights of the Series&nbsp;B Preferred Stock.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.25in"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.25in"><B><I>Common Stock</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">All outstanding shares of common stock are fully
paid and nonassessable. The following summarizes the rights of holders of our common stock:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.75in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>each holder of common stock is entitled to one vote per share on all matters to be voted upon generally by the stockholders;</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 1in; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.75in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>subject to preferences that may apply to shares of preferred stock outstanding, the holders of common stock are entitled to
receive lawful dividends as may be declared by our board of directors, or Board;</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 1in; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.75in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>upon our liquidation, dissolution or winding up, the holders of shares of common stock are entitled to receive a pro rata portion
of all our assets remaining for distribution after satisfaction of all our liabilities and the payment of any liquidation preference
of any outstanding preferred stock;</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 1in; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.75in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>there are no redemption or sinking fund provisions applicable to our common stock; and</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 1in; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.75in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>there are no preemptive or conversion rights applicable to our common stock.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 1in; text-indent: -0.25in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.25in"><B><I>Transfer Agent and Registrar</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">Our shares of common stock are traded on The
NASDAQ Capital Market under the symbol &ldquo;PEIX.&rdquo; The transfer agent and registrar for our common stock is American Stock
Transfer &amp; Trust Company, LLC. Its telephone number is (718) 921-8200.</P>


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<P STYLE="color: blue; font: bold 10pt Times New Roman, Times, Serif; margin: 0; text-align: center; text-indent: 0in">DIVIDEND
POLICY</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">We have never paid cash dividends on our common
stock and do not intend to pay cash dividends on our common stock in the foreseeable future. We anticipate that we will retain
any earnings for use in the continued development of our business.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">Our current and future debt financing arrangements
may limit or prevent cash distributions from our subsidiaries to us, depending upon the achievement of certain financial and other
operating conditions and our ability to properly service our debt, thereby limiting or preventing us from paying cash dividends.
In addition, the holders of our outstanding Series B Preferred Stock are entitled to dividends of 7% per annum, payable quarterly,
none of which have been paid for the years ended December 31, 2011, 2010 and 2009. Although there are approximately $5.9<B> </B>million
of accrued and unpaid dividends on the outstanding shares of Series B Preferred Stock from prior periods through December 31, 2011,
we declared and paid $0.3 million in dividends on our Series B Preferred Stock for each of the three months ended March 31, 2012,
the three months ended June 30, 2012, the three months ended September 30, 2012 and the three months ended December 31, 2012 and
intend to continue to declare and pay the quarterly dividends that accrue on our Series B Preferred Stock in upcoming quarters.
Accumulated and unpaid dividends in respect of our preferred stock must be paid prior to the payment of any dividends to our common
stockholders.</P>

<P STYLE="color: blue; font: bold 10pt Times New Roman, Times, Serif; margin: 0; text-align: center; text-indent: 0in">&nbsp;</P>

<P STYLE="color: blue; font: bold 10pt Times New Roman, Times, Serif; margin: 0; text-align: center; text-indent: 0in">CERTAIN
U.S. FEDERAL INCOME TAX CONSIDERATIONS</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"><B>TO ENSURE COMPLIANCE WITH TREASURY DEPARTMENT
CIRCULAR 230, YOU ARE HEREBY NOTIFIED THAT: (A) ANY DISCUSSION OF FEDERAL TAX ISSUES IN THIS PROSPECTUS SUPPLEMENT IS NOT INTENDED
OR WRITTEN TO BE RELIED UPON, AND CANNOT BE RELIED UPON, BY YOU FOR THE PURPOSE OF AVOIDING PENALTIES THAT MAY BE IMPOSED ON YOU
UNDER THE INTERNAL REVENUE CODE OF 1986, AS AMENDED; (B) SUCH DISCUSSION IS BEING USED IN CONNECTION WITH THE PROMOTION OR MARKETING
(WITHIN THE MEANING OF CIRCULAR 230) BY THE ISSUERS OF THE TRANSACTION OR MATTERS ADDRESSED HEREIN; AND (C) YOU SHOULD SEEK ADVICE
BASED ON YOUR PARTICULAR CIRCUMSTANCES FROM AN INDEPENDENT TAX ADVISOR.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">The following is a summary of certain U.S. federal
income tax consequences of the acquisition, ownership, and disposition of the Units, Series A Notes, Warrants and shares of our
common stock, or Shares, received upon conversion of the Series A Notes or exercise of the Warrants. This discussion is based upon
the Internal Revenue Code of 1986, as amended, or Code, Treasury Regulations promulgated thereunder and judicial decisions and
administrative interpretations thereof, all as of the date hereof and all of which are subject to change or differing interpretations,
possibly with retroactive effect. No ruling from the Internal Revenue Service (&ldquo;IRS&rdquo;) has been or will be sought regarding
any matter discussed herein. No assurance can be given that the IRS would not assert, or that a court would not sustain, a position
contrary to any of the tax aspects set forth below.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">This discussion applies only to a U.S. Holder
(as defined below) of Units that acquires the Units pursuant to this offering at the initial offering price and who holds the Units
as a capital asset (generally, property held for investment) under the Code. This discussion does not address any U.S. federal
estate or gift tax consequences or any state, local or non-U.S. tax consequences. In addition, this discussion does not address
all aspects of U.S. federal income taxation that may be applicable to investors in light of their particular circumstances or to
investors subject to special treatment under U.S. federal income tax law, including, but not limited to:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.75in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>banks, insurance companies or other financial institutions;</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 1in; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.75in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>persons subject to the alternative minimum tax;</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 1in; text-indent: -0.25in">&nbsp;</P>


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<P STYLE="font: 10pt Symbol; margin: 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.75in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>cooperatives;</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 1in; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.75in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>tax-exempt organizations;</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 1in; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.75in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>dealers in securities;</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 1in; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.75in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>expatriates;</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 1in; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.75in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>foreign persons or entities;</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 1in; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.75in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>persons deemed to sell the Series A Notes or our Shares under the constructive sale provisions of the Code; or</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 1in; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.75in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>persons that hold the Series A Notes, Warrants or our Shares as part of a straddle, hedge, conversion transaction or other
integrated investment.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 1in; text-indent: -0.25in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">If a partnership (including any entity or arrangement
treated as a partnership for U.S. federal income tax purposes) owns Units, Series A Notes, Warrants or Shares, the tax treatment
of a partner in the partnership will depend upon the status of the partner and the activities of the partnership. Partners in a
partnership that owns the Units, Series A Notes, Warrants or Shares should consult their tax advisors as to the particular U.S.
federal income tax consequences applicable to them.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">We encourage investors to consult their tax
advisors regarding the specific consequences of an investment in our Series A Notes, Warrants or ownership of our Shares, including
tax reporting requirements, the applicability of U.S. federal, state, local and foreign tax laws, eligibility for the benefits
of any applicable tax treaty and the effect of any possible changes in the tax laws.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">For purposes of this summary, the term &ldquo;U.S.
Holder&rdquo; means a beneficial owner of a Series A Note, a Warrant or a Share (as applicable) that is, for U.S. federal income
tax purposes (i) an individual who is a citizen or resident of the U.S., (ii) a corporation, or other entity treated as a corporation
for U.S. federal income tax purposes, that is created or organized under the laws of the U.S., any of the States or the District
of Columbia, (iii) an estate the income of which is subject to U.S. federal income taxation regardless of its source, or (iv) a
trust (A) if a court within the U.S. is able to exercise primary supervision over its administration and one or more U.S. persons
have the authority to control all substantial decisions of such trust, or (B) that has made a valid election to be treated as a
U.S. person for U.S. federal income tax purposes.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"><B>Characterization of the Units </B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">We intend to treat each Unit as an &ldquo;investment
unit&rdquo; for U.S. federal income tax purposes, consisting of a Series A Note, a Series A Warrant and a Series B Warrant. The
&ldquo;issue price&rdquo; of a Unit will be the first price at which a substantial amount of the Units are sold for cash, excluding
sales to bond houses, brokers or similar persons acting as underwriters, placement agents or wholesalers. The U.S. Treasury Regulations
applicable to an investment unit require a U.S. Holder to allocate the issue price of the Unit between the Series A Note and the
Warrants that comprise the Unit based on the relative fair market values of each element of the Unit at the time of purchase. After
allocating to the Warrants an amount of the Unit&rsquo;s issue price equal to the Warrants&rsquo; fair market value, the remaining
portion of the issue price will be allocated to the Series A Note. Such allocation will establish a U.S. Holder&rsquo;s initial
tax basis in a Series A Note and the Warrants.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">We intend to take the position that the fair
market value of each Warrant is zero and, therefore, will not allocate any portion of the issue price of the Unit to a Warrant
and will allocate the entire issue price of the Unit to the Series A Note. Our allocation of the Unit&rsquo;s issue price between
the Series A Notes and the Warrants will be binding on the holder of a Unit, unless the holder explicitly discloses to the IRS
(in a statement attached to the holder&rsquo;s timely filed U.S. federal income tax return for the taxable year that includes the
acquisition date of the Unit) that the holder&rsquo;s allocation of the issue price between the Series A Note and the Warrants
is different from our allocation. There can be no assurance, however, that the IRS will respect our determination of the relative
fair market values of the Series A Notes and the Warrants. If our determination were successfully challenged by the IRS, the amount,
timing and character of income on a Series A Note or Warrant could be different from that resulting under our allocation.</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"><B>Taxation of the Series A Notes</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.25in"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.25in"><B><I>Stated Interest on the Series A Notes</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">A U.S. Holder generally will be required to
recognize interest as ordinary income at the time it is paid or accrued on the Series A Notes in accordance with its regular method
of accounting for U.S. federal income tax purposes.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.25in"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.25in"><B><I>Sale, Exchange, Redemption or other Taxable
Disposition of the Series A Notes</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">Except as provided below under &ldquo;The Series
A Notes&mdash;Conversion of the Series A Notes&rdquo;, upon the sale, exchange, redemption or other taxable disposition of a Series
A Note, a U.S. Holder generally will recognize capital gain or loss in an amount equal to the difference between (1) the sum of
cash plus the fair market value of all other property received on such disposition (except to the extent such cash or property
is attributable to accrued but unpaid interest, which, to the extent not previously included in income, generally will be taxable
as ordinary income) and (2) its adjusted tax basis in the Series A Note. A U.S. Holder&rsquo;s adjusted tax basis in a Series A
Note generally will equal the price the U.S. Holder paid for the Series A Note. Such capital gain or loss will be long-term capital
gain or loss if, at the time of such taxable disposition, the U.S. Holder has held the Series A Note for more than one year. The
deductibility of capital losses is subject to limitations.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.25in"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.25in"><B><I>Conversion of the Series A Notes</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">A U.S. Holder generally will not recognize any
gain or loss upon the conversion of the Series A Notes (other than upon the receipt of Shares attributable to accrued but unpaid
interest, which will be taxable as such). The U.S. Holder&rsquo;s adjusted tax basis in the Shares received in such a conversion
(excluding any Shares attributable to accrued interest) generally will be the same as its adjusted tax basis in the Series A Notes
surrendered. The U.S. Holder&rsquo;s holding period for such Shares (other than Shares attributable to accrued interest) will include
its holding period for the Series A Notes that were converted.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">The value of any portion of the Shares that
is attributable to accrued interest on the Series A Notes not previously recognized in income will be taxed as ordinary income.
The tax basis in any Shares attributable to accrued interest will equal the fair market value of such Shares when received. The
holding period for any Shares attributable to accrued interest will begin the day after the date of conversion.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.25in"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.25in"><B><I>Certain Adjustments to the Series A Notes</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">The conversion rate of the Series A Notes will
be adjusted in certain circumstances. Under Section 305(c) of the Code, an adjustment (or the failure to make an adjustment) that
has the effect of increasing a U.S. Holder&rsquo;s proportionate interest in our assets or earnings may in some circumstances result
in a deemed distribution to such U.S. Holder for U.S. federal income tax purposes. Adjustments to the conversion rate made pursuant
to a bona fide reasonable adjustment formula that has the effect of preventing the dilution of the interest of the U.S. Holders
of the Series A Notes, however, generally will not be deemed to result in such a distribution.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">Certain of the possible conversion rate adjustments
provided in the Series A Notes will not qualify as being pursuant to such a bona fide reasonable adjustment formula. If such adjustments
occur, a U.S. Holder will be deemed to have received a distribution even though it has not received any cash or property as a result
of such adjustments. Generally, deemed distributions on the Series A Notes would constitute dividends (and would be included in
income as ordinary dividend income) to the extent made out of our current and accumulated earnings and profits, as determined under
U.S. federal income tax rules. It is unclear whether such dividends would be eligible for the dividends-received deduction or the
reduced maximum rate applicable to qualified dividend income. Distributions in excess of our current and accumulated earnings and
profits first will reduce a U.S. Holder&rsquo;s adjusted tax basis in the Series A Notes and, after the adjusted basis is reduced
to zero, will constitute capital gains to such U.S. Holder. U.S. Holders are urged to consult their tax advisors concerning the
tax treatment of such constructive dividends.</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"><B>Taxation of the Warrants</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.25in"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.25in"><B><I>Exercise of the Warrants</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">A U.S. Holder will not recognize gain or loss
on the exercise of a Warrant. A U.S. Holder&rsquo;s initial tax basis in a Share received on the exercise of a Warrant will be
equal to the sum of (i)&nbsp;such U.S. Holder&rsquo;s tax basis in such Warrant plus (ii)&nbsp;the exercise price paid by such
U.S. Holder on the exercise of such Warrant. Generally, a U.S. Holder&rsquo;s holding period for a Share received upon the exercise
of a Warrant should begin on the date of exercise (or possibly on the day following the date of exercise) and will not include
the period during which the U.S. Holder held the Warrant.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.25in"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.25in"><B><I>Sale, Exchange or Other Disposition of
Warrants</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">Upon the sale, exchange or other disposition
of a Warrant, a U.S. Holder generally will recognize capital gain or loss with respect to the Warrant in an amount equal to the
difference between (a)&nbsp;the amount realized on the sale, exchange or other disposition and (b)&nbsp;the U.S. Holder&rsquo;s
tax basis in such Warrant. Such capital gain or loss will be long-term capital gain or loss if the Warrant is held for more than
one year at the time of the sale, exchange or other disposition. The deductibility of capital losses is subject to limitations.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.25in"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.25in"><B><I>Expiration of Warrants Without Exercise</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">Upon the expiration of a Warrant, a U.S. Holder
will recognize a loss in an amount equal to such U.S. Holder&rsquo;s tax basis in the Warrant. Any such loss generally will be
a capital loss if the U.S. Holder&rsquo;s holding period in the Warrant is deemed to be greater than one year. The deductibility
of capital losses is subject to limitations.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.25in"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.25in"><B><I>Certain Adjustments to the Warrants</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">Any adjustment to the number of Shares that
will be issued on the exercise of a Warrant, or an adjustment to the exercise price of a Warrant, may be treated as a constructive
distribution to a U.S. Holder of the Warrants if, and to the extent that, such adjustment has the effect of increasing such U.S.
Holder&rsquo;s proportionate interest in the &ldquo;earnings and profits&rdquo; or assets of Pacific Ethanol. An adjustment can
be treated as a constructive distribution regardless of whether the U.S. Holder ever exercises the Warrant or receives any cash
or property as a result of the adjustment (or, in certain circumstances, a failure to adjust).</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"><B>Taxation of the Shares Received Upon Conversion of the Series
A Notes and Exercise of Warrants</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.25in"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.25in"><B><I>Distributions on the Shares</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">The gross amount of any distribution made to
a U.S. Holder on the Shares generally will be includible in income on the day on which the distributions are actually or constructively
received by a U.S. Holder as dividend income to the extent such distributions are paid out of our current or accumulated earnings
and profits, as determined under U.S. federal income tax principles. To the extent that the amount of any distribution exceeds
such current and accumulated earnings and profits for a taxable year, the distribution will first be treated as a tax-free return
of capital, causing a reduction in the adjusted basis of the Shares, and to the extent the amount of the distribution exceeds such
tax basis, the excess will be taxed as capital gain recognized on a sale or exchange.</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.25in"><B><I>Sale, Exchange or Other Disposition of
the Shares</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">A U.S. Holder generally will recognize capital
gain or loss on the sale, exchange or other disposition of the Shares equal to the difference between the amount realized on such
sale or exchange and the U.S. Holder&rsquo;s adjusted tax basis in the Shares. Such capital gain or loss will be long-term capital
gain or loss if the Shares are held for more than one year at the time of disposition. Please note, a U.S. Holder&rsquo;s holding
period for Shares issued upon conversion of the Series A Notes (other than Shares attributable to accrued interest) will include
its holding period for the Series A Notes that were converted. The deductibility of capital losses is subject to limitations.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"><B>Medicare Tax</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">Certain U.S. Holders who are individuals, estates
or trusts are required to pay a 3.8 percent tax on, among other things, dividends and capital gains from the sale or other disposition
of Series A Notes, Warrants and Shares for taxable years beginning January 1, 2013.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"><B>Information Reporting and Backup Withholding</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">Payments of stated interest or dividends, including
deemed payments of constructive dividends, or the proceeds of the sale or other taxable disposition of a Series A Note, a Warrant
or a Share generally are subject to information reporting unless the U.S. Holder is an exempt recipient. Such payments may also
be subject to U.S. federal backup withholding at the applicable rate if the recipient of such payment fails to supply a taxpayer
identification number and otherwise comply with the rules for establishing an exemption from backup withholding. Backup withholding
is not an additional tax, and any amounts withheld under the backup withholding rules generally will be allowed as a refund or
credit against the U.S. Holder&rsquo;s U.S. federal income tax liability, provided that certain information is timely provided
to the IRS.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="color: blue; font: bold 10pt Times New Roman, Times, Serif; margin: 0; text-align: center; text-indent: 0in">PLAN OF
DISTRIBUTION</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"><B>Placement Agent Agreement </B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">We are offering the Units, consisting of Series
A Notes, Warrants and the shares of common stock issuable under the Series A Notes (upon conversion, in lieu of interest payments
or otherwise), in a proposed takedown from our shelf registration statement pursuant to this prospectus supplement and the accompanying
prospectus. Subject to the terms and conditions of a placement agent agreement to be dated on or about March 28, 2013, Lazard Capital
Markets&nbsp;LLC has agreed to act as the sole placement agent for the sale of the Units. The placement agent is not purchasing
or selling any Units subject to this prospectus supplement or the accompanying prospectus, nor is the placement agent required
to arrange for the purchase or sale of any specific number or dollar amount of Units. The placement agent has agreed to use its
reasonable best efforts to arrange for the sale of Units subject to this prospectus supplement.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">The placement agent agreement provides that
the obligations of the placement agent and the investors are subject to certain conditions precedent, including the absence of
any material adverse change in our business and the receipt of customary legal opinions, letters and certificates addressed to
the placement agent. In addition, each of the investors is entering into a securities purchase agreement directly with us containing
certain conditions precedent, including the absence of any material adverse change in our business and the receipt of customary
legal opinions, letters and certificates addressed to the investors.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">Confirmations and definitive prospectus supplements
will be distributed to all investors who agree to purchase the Units, informing the investors of the closing date as to the purchase
and sale of such Units. We currently anticipate that closing of the purchase and sale of the Units will take place on or about
March 29, 2013. Investors will also be informed of the date and manner in which they must transmit the purchase price for their
Units.</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">On the scheduled closing date, the following
will occur:</P>

<P STYLE="font: 10pt Symbol; margin: 0 0 0 1in; text-indent: -0.25in"><FONT STYLE="letter-spacing: -0.1pt">&nbsp;</FONT></P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.75in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol; letter-spacing: -0.1pt">&middot;</FONT></TD><TD><FONT STYLE="font-family: Times New Roman, Times, Serif">we will receive funds in the amount of the aggregate purchase price
directly from the investors; and </FONT></TD></TR></TABLE>

<P STYLE="font: 10pt Symbol; margin: 0 0 0 1in; text-indent: -0.25in"><FONT STYLE="letter-spacing: -0.1pt">&nbsp;</FONT></P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.75in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol; letter-spacing: -0.1pt">&middot;</FONT></TD><TD><FONT STYLE="font-family: Times New Roman, Times, Serif">Lazard Capital Markets&nbsp;LLC will receive the placement agent fee
in accordance with the terms of the placement agent agreement. </FONT></TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">We will pay the placement agent an aggregate
placement agent&rsquo;s fee equal to $355,000. We will also reimburse the placement agent for certain fees and legal expenses incurred
by it. In no event will the total amount of compensation paid to the placement agent and other securities brokers and dealers upon
completion of this offering exceed 8% of the gross proceeds of the offering. The estimated offering expenses payable by us, in
addition to the placement agent&rsquo;s fee, are approximately $855,000, which includes legal, accounting and printing costs and
various other fees associated with registering the securities. After deducting certain fees due to the placement agent&rsquo;s
and our estimated offering expenses, we expect the net proceeds from this offering to be approximately $5.1&nbsp;million. We will
pay approximately $500,000 of our offering expenses out of the proceeds the Series B Note Offering, if any, or out of our cash
reserve if the Series B Note Offering is not consummated.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">Pursuant to such agreement, Lazard Fr&egrave;res
&amp; Co. LLC referred this transaction to Lazard Capital Markets LLC and will receive a referral fee from Lazard Capital Markets
LLC in connection therewith; however, such referral fee is not in addition to the fee paid by us to Lazard Capital Markets LLC
described above.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">We have agreed to indemnify the placement agent
and Lazard Fr&egrave;res&nbsp;&amp;&nbsp;Co.&nbsp;LLC against certain liabilities, including liabilities under the Securities Act
of 1933, as amended, and liabilities arising from breaches of representations and warranties contained in the placement agent agreement.
We have also agreed to contribute to payments the placement agent and Lazard Fr&egrave;res&nbsp;&amp;&nbsp;Co.&nbsp;LLC may be
required to make in respect of such liabilities.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"><B>Lock-Up Agreements </B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">As set forth in the placement agent agreement,
we, along with certain executive officers, directors and security holders, have agreed to certain lock-up provisions with regard
to future sales of our common stock and other securities convertible into or exercisable or exchangeable for common stock for a
period of 45&nbsp;days after the date of this prospectus supplement.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"><B>NASDAQ Listing </B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">Our shares of common stock are listed on The
NASDAQ Capital Market under the symbol &ldquo;PEIX.&rdquo; The transfer agent and registrar for our common stock is American Stock
Transfer &amp; Trust Company, LLC. Its telephone number is (718) 921-8200.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"><B>New Issue of Series A Notes </B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">The Series A Notes and Warrants subject to this
prospectus are new issues with no established market. We do not intend to apply for the Series A Notes or the Warrants to be listed
on any securities exchange or to arrange for the Series A Notes and Warrants to be quoted on any quotations system. No assurance
can be given as to the liquidity of the trading market, if any, for the Series A Notes and Warrants.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"><B>Electronic Distribution</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">A prospectus in electronic format may be made
available on Internet sites or through other online services maintained by the placement agent or its affiliates. In those cases,
investors may view offering terms online. Other than the prospectus in electronic format, the information on the placement agent&rsquo;s
Internet site and any information contained in any other Internet site maintained by the placement agent is not part of the prospectus
or the registration statement of which this prospectus supplement and the accompanying prospectus forms&nbsp;a part, has not been
approved and/or endorsed by us or the placement agent and should not be relied upon by investors</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; color: blue"><B>&nbsp;</B></P>

<P STYLE="color: blue; font: bold 10pt Times New Roman, Times, Serif; margin: 0; text-align: center; text-indent: 0in">LEGAL MATTERS</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">The validity of the securities being offered
by this prospectus will be passed upon by our counsel, Troutman Sanders LLP, Irvine, California. Certain legal matters will be
passed upon for the placement agent by Proskauer Rose LLP, New York, New York.</P>

<P STYLE="color: blue; font: bold 10pt Times New Roman, Times, Serif; margin: 0; text-align: center; text-indent: 0in">&nbsp;</P>

<P STYLE="color: blue; font: bold 10pt Times New Roman, Times, Serif; margin: 0; text-align: center; text-indent: 0in">EXPERTS</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">The consolidated financial statements as of
and for the years ended December 31, 2011 and 2010 incorporated by reference in this prospectus and registration statement have
been audited by Hein &amp; Associates LLP, an independent registered public accounting firm, as stated in their report (which report
expresses an unqualified opinion) and are incorporated by reference in reliance upon such report and upon the authority of such
firm as experts in accounting and auditing.</P>

<P STYLE="color: blue; font: bold 10pt Times New Roman, Times, Serif; margin: 0; text-align: center; text-indent: 0in">&nbsp;</P>

<P STYLE="color: blue; font: bold 10pt Times New Roman, Times, Serif; margin: 0; text-align: center; text-indent: 0in">INCORPORATION
OF DOCUMENTS BY REFERENCE</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">The Securities and Exchange Commission allows
us to &ldquo;incorporate by reference&rdquo; information in documents we file with them, which means that we can disclose important
information to you by referring you to those documents. The information we incorporate by reference is considered to be part of
this prospectus supplement and information that we file later with the Securities and Exchange Commission automatically will update
and supersede such information. We hereby incorporate by reference the documents listed below and any future filings we make with
the Securities and Exchange Commission under Sections&nbsp;13(a), 13(c), 14 or 15(d) of the Exchange Act, prior to the termination
of the offering of the securities covered by this prospectus supplement, as amended:</P>

<P STYLE="font: 10pt Symbol; margin: 0 0 0 1in; text-align: justify; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.75in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">Current Reports on Form 8-K filed with the Securities and Exchange Commission on January 5, 2012,
January 31, 2012, February 27, 2012, May 8, 2012, May&nbsp;10, 2012, June&nbsp;8, 2012, June&nbsp;27, 2012, June 28, 2012, July
19, 2012, August 14, 2012, August 24, 2012, September 21, 2012, November 2, 2012, November 13, 2012, December 5, 2012, December
13, 2012, December 19, 2012, December 31, 2012, January 10, 2013 and January 15, 2013;</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 1in; text-align: justify; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.75in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">Quarterly Report on Form 10-Q for the fiscal quarter ended September 30, 2012 filed with the Securities
and Exchange Commission on November 14, 2012;</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 1in; text-align: justify; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.75in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 2012 filed with the Securities
and Exchange Commission on August 14, 2012;</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 1in; text-align: justify; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.75in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 2012 filed with the Securities
and Exchange Commission on May&nbsp;11, 2012;</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 1in; text-align: justify; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.75in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">Definitive Proxy Statement for the 2012 Annual Meeting of Stockholders, which we filed with the
Securities and Exchange Commission on October 18, 2012;</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 1in; text-align: justify; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.75in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">Annual Report on Form 10-K/A for the fiscal year ended December 31, 2011, which we filed with the
Securities and Exchange Commission on April&nbsp;13, 2012;</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 1in; text-align: justify; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.75in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">Annual Report on Form 10-K for the fiscal year ended December&nbsp;31, 2011, which we filed with
the Securities and Exchange Commission on March&nbsp;8, 2012; and</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 1in; text-align: justify; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.75in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">The description of our capital stock contained in our Current Report on Form&nbsp;8-K filed with
the Securities and Exchange Commission on June&nbsp;8, 2007.</TD></TR></TABLE>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 1in; text-align: justify; text-indent: -0.25in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">We will provide a copy of the documents we
incorporate by reference (including exhibits to such filings that we have specifically incorporated by reference in such filings),
at no cost, to any person who received this prospectus. To request a copy of any or all of these documents, you should write or
telephone us at: Investor Relations, Pacific Ethanol, Inc., 400 Capitol Mall, Suite 2060, Sacramento, California 95814, (916)
403-2123. In addition, each document incorporated by reference is readily accessible on our website at <U>www.pacificethanol.net</U>.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">You should rely only on the information provided
or incorporated by reference in this prospectus supplement. We have not authorized anyone else to provide you with different information.
You should not assume that the information in this prospectus supplement is accurate as of any date other than the date on the
cover page of such documents.</P>

<P STYLE="color: blue; font: bold 10pt Times New Roman, Times, Serif; margin: 0; text-align: center; text-indent: 0in">&nbsp;</P>

<P STYLE="color: blue; font: bold 10pt Times New Roman, Times, Serif; margin: 0; text-align: center; text-indent: 0in">WHERE YOU
CAN FIND MORE INFORMATION</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">We are subject to the informational requirements
of the Exchange Act and in accordance therewith file reports, proxy statements and other information with the Securities and Exchange
Commission. Our filings are available to the public over the Internet at the Securities and Exchange Commission&rsquo;s website
at <I><U>www.sec.gov</U></I>. You may also read and copy, at prescribed rates, any document we file with the Securities and Exchange
Commission at the Public Reference Room of the Securities and Exchange Commission located at 100 F Street, N.E., Washington, D.C.
20549. Please call the Securities and Exchange Commission at (800)&nbsp;SEC-0330 for further information on the Securities and
Exchange Commission&rsquo;s Public Reference Rooms.</P>



<P STYLE="margin: 0">&nbsp;</P>

<P STYLE="margin: 0">&nbsp;</P>

<P STYLE="margin: 0"></P>

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<P STYLE="margin: 0">&nbsp;&nbsp;</P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0; font: 10pt Times New Roman, Times, Serif"><B>PROSPECTUS</B></P>

<P STYLE="margin: 0pt">&nbsp;</P>

<P STYLE="text-align: center; text-indent: 0pt; margin: 0"><IMG SRC="image_001.jpg" ALT=""></P>

<P STYLE="margin: 0pt">&nbsp;</P>

<P STYLE="margin: 0pt">&nbsp;</P>

<P STYLE="text-align: center; text-indent: 0pt; margin: 0; font: 10pt Times New Roman, Times, Serif"><B>PACIFIC ETHANOL, INC.</B></P>

<P STYLE="margin: 0pt">&nbsp;</P>

<P STYLE="text-align: center; text-indent: 0pt; margin: 0; font: 10pt Times New Roman, Times, Serif"><B>$100,000,000</B></P>

<P STYLE="margin: 0pt">&nbsp;</P>

<P STYLE="text-align: center; text-indent: 0pt; margin: 0; font: 10pt Times New Roman, Times, Serif"><B>Debt Securities</B></P>

<P STYLE="text-align: center; text-indent: 0pt; margin: 0; font: 10pt Times New Roman, Times, Serif"><B>Common Stock</B></P>

<P STYLE="text-align: center; text-indent: 0pt; margin: 0; font: 10pt Times New Roman, Times, Serif"><B>Preferred Stock</B></P>

<P STYLE="text-align: center; text-indent: 0pt; margin: 0; font: 10pt Times New Roman, Times, Serif"><B>Warrants</B></P>

<P STYLE="text-align: center; text-indent: 0pt; margin: 0; font: 10pt Times New Roman, Times, Serif"><B>Units</B></P>

<P STYLE="margin: 0pt">&nbsp;</P>

<P STYLE="text-align: justify; text-indent: 36pt; margin: 0; font: 10pt Times New Roman, Times, Serif">This prospectus relates
to the sale from time to time in one or more offerings of up to $100,000,000 of:</P>

<P STYLE="margin: 0pt">&nbsp;</P>

<TABLE BORDER="0" CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 36pt">&nbsp;</TD>
    <TD STYLE="text-align: left; width: 36pt; text-indent: 0pt">&bull;&#160;</TD>
    <TD STYLE="text-align: left; text-indent: 0pt">debt securities, which we may issue in one or more series;</TD></TR>
</TABLE>
<P STYLE="margin: 0pt">&nbsp;</P>

<TABLE BORDER="0" CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 36pt">&nbsp;</TD>
    <TD STYLE="text-align: left; width: 36pt; text-indent: 0pt">&bull;</TD>
    <TD STYLE="text-align: left; text-indent: 0pt">shares of our common stock;</TD></TR>
</TABLE>
<P STYLE="margin: 0pt">&nbsp;</P>

<TABLE BORDER="0" CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 36pt">&nbsp;</TD>
    <TD STYLE="text-align: left; width: 36pt; text-indent: 0pt">&bull;</TD>
    <TD STYLE="text-align: left; text-indent: 0pt">shares of our preferred stock, which we may issue in one or more series or classes;</TD></TR>
</TABLE>
<P STYLE="margin: 0pt">&nbsp;</P>

<TABLE BORDER="0" CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 36pt">&nbsp;</TD>
    <TD STYLE="text-align: left; width: 36pt; text-indent: 0pt">&bull;</TD>
    <TD STYLE="text-align: left; text-indent: 0pt">warrants to purchase our debt securities, common stock or preferred stock; and</TD></TR>
</TABLE>
<P STYLE="margin: 0pt">&nbsp;</P>

<TABLE BORDER="0" CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 36pt">&nbsp;</TD>
    <TD STYLE="text-align: left; width: 36pt; text-indent: 0pt">&bull;</TD>
    <TD STYLE="text-align: left; text-indent: 0pt">units.</TD></TR>
</TABLE>
<P STYLE="margin: 0pt">&nbsp;</P>

<P STYLE="text-align: justify; text-indent: 36pt; margin: 0; font: 10pt Times New Roman, Times, Serif">We will provide the specific
terms of any securities to be offered in one or more supplements to this prospectus. The prospectus supplements may also add, update
or change information contained in this prospectus. This prospectus may not be used to offer and sell securities unless accompanied
by a prospectus supplement.</P>

<P STYLE="margin: 0pt">&nbsp;</P>

<P STYLE="text-align: justify; text-indent: 36pt; margin: 0; font: 10pt Times New Roman, Times, Serif">When securities are offered
under this prospectus, we will provide you with a prospectus supplement describing the specific securities being offered, the manner
in which they are being offered, the offering price of the securities and the net proceeds from the sale of those securities. The
securities may be offered separately or together in any combination or as a separate series. You should carefully read this prospectus
and any accompanying prospectus supplement, together with any documents incorporated by reference herein and therein, before you
invest in our securities. We may sell these securities to or through underwriters, to other purchasers, through dealers or agents
or through any combination of these methods, on a continuous or delayed basis. See &#8220;Plan of Distribution.&#8221; The names
of the underwriters, dealers and agents, if any, will be set forth in the accompanying prospectus supplement. If any underwriters,
dealers or agents are involved in the sale of any securities, the applicable prospectus supplement will also set forth any applicable
commissions or discounts payable to them.</P>

<P STYLE="margin: 0pt">&nbsp;</P>

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<P STYLE="margin: 0pt">&nbsp;</P>

<P STYLE="margin: 0pt">&nbsp;</P>

<P STYLE="text-align: left; text-indent: 36pt; margin: 0; font: 10pt Times New Roman, Times, Serif">Our common stock is traded
on The NASDAQ Capital Market under the symbol &#8220;PEIX.&#8221;&#160;&#160;On&#160;May 10, 2012, the last reported sale price
of our common stock on The NASDAQ Capital Market was $0.94.</P>

<P STYLE="margin: 0pt">&nbsp;</P>

<P STYLE="text-align: center; text-indent: 0pt; margin: 0; font: 10pt Times New Roman, Times, Serif"><B>_______________</B></P>

<P STYLE="margin: 0pt">&nbsp;</P>

<P STYLE="text-align: justify; text-indent: 36pt; margin: 0; font: 10pt Times New Roman, Times, Serif"><B>Investing in our securities
involves substantial risks.&#160;&#160;See &#8220;Risk Factors&#8221; beginning on page 4 of this prospectus and in the applicable
prospectus supplement, and in any other document incorporated by reference herein or therein, for factors you should consider before
buying any of our securities.</B></P>

<P STYLE="margin: 0pt">&nbsp;</P>

<P STYLE="text-align: center; text-indent: 0pt; margin: 0; font: 10pt Times New Roman, Times, Serif"><B>_______________</B></P>

<P STYLE="margin: 0pt">&nbsp;</P>

<P STYLE="text-align: justify; text-indent: 36pt; margin: 0; font: 10pt Times New Roman, Times, Serif"><B>This prospectus may not
be used to consummate a sale of any securities unless accompanied by a prospectus supplement.</B></P>

<P STYLE="margin: 0pt">&nbsp;</P>

<P STYLE="text-align: justify; text-indent: 36pt; margin: 0; font: 10pt Times New Roman, Times, Serif">The securities may be sold
directly by us to investors, through agents designated from time to time or to or through underwriters or dealers, on a continuous
or delayed basis.&#160;&#160;For additional information on the methods of sale, you should refer to the section entitled &#8220;Plan
of Distribution&#8221; in this prospectus.&#160;&#160;If any agents or underwriters are involved in the sale of any securities
with respect to which this prospectus is being delivered, the names of such agents or underwriters and any applicable fees, commissions,
discounts and over-allotment options will be set forth in a prospectus supplement.&#160;&#160;The price to the public of such securities
and the net proceeds that we expect to receive from such sale will also be set forth in a prospectus supplement.</P>

<P STYLE="margin: 0pt">&nbsp;</P>

<P STYLE="text-align: justify; text-indent: 36pt; margin: 0; font: 10pt Times New Roman, Times, Serif"><B>Neither the Securities
and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this
prospectus is truthful or complete.&#160;&#160;Any representation to the contrary is a criminal offense.</B></P>

<P STYLE="margin: 0pt">&nbsp;</P>

<P STYLE="text-align: center; text-indent: 0pt; margin: 0; font: 10pt Times New Roman, Times, Serif">The date of this prospectus
is May 17, 2012.</P>

<P STYLE="margin: 0pt">&nbsp;</P>

<P STYLE="margin: 0pt">&nbsp;</P>

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<P STYLE="margin: 0pt">&nbsp;</P>

<P STYLE="text-align: center; text-indent: 0pt; margin: 0; font: 10pt Times New Roman, Times, Serif"><B>TABLE OF CONTENTS</B></P>

<P STYLE="margin: 0pt">&nbsp;</P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0; font: 10pt Times New Roman, Times, Serif"><B>&#160;</B></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 66%">&nbsp;</TD>
    <TD STYLE="text-align: right; width: 14%; text-indent: 0pt">Page</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: left; text-indent: 0pt">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="background-color: #eeeeee; vertical-align: top">
    <TD STYLE="text-align: left; text-indent: 0pt">ABOUT THIS PROSPECTUS</TD>
    <TD STYLE="text-align: right; text-indent: 0pt">1</TD></TR>
<TR STYLE="background-color: white; vertical-align: top">
    <TD STYLE="text-align: left; text-indent: 0pt">CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS</TD>
    <TD STYLE="text-align: right; text-indent: 0pt">2</TD></TR>
<TR STYLE="background-color: #eeeeee; vertical-align: top">
    <TD STYLE="text-align: left; text-indent: 0pt">PACIFIC ETHANOL, INC</TD>
    <TD STYLE="text-align: right; text-indent: 0pt">3</TD></TR>
<TR STYLE="background-color: white; vertical-align: top">
    <TD STYLE="text-align: left; text-indent: 0pt">RISK FACTORS</TD>
    <TD STYLE="text-align: right; text-indent: 0pt">4</TD></TR>
<TR STYLE="background-color: #eeeeee; vertical-align: top">
    <TD STYLE="text-align: left; text-indent: 0pt">USE OF PROCEEDS</TD>
    <TD STYLE="text-align: right; text-indent: 0pt">5</TD></TR>
<TR STYLE="background-color: white; vertical-align: top">
    <TD STYLE="text-align: left; text-indent: 0pt">RATIO OF EARNINGS TO FIXED CHARGES</TD>
    <TD STYLE="text-align: right; text-indent: 0pt">5</TD></TR>
<TR STYLE="background-color: #eeeeee; vertical-align: top">
    <TD STYLE="text-align: left; text-indent: 0pt">DESCRIPTION OF DEBT SECURITIES</TD>
    <TD STYLE="text-align: right; text-indent: 0pt">6</TD></TR>
<TR STYLE="background-color: white; vertical-align: top">
    <TD STYLE="text-align: left; text-indent: 0pt">DESCRIPTION OF CAPITAL STOCK</TD>
    <TD STYLE="text-align: right; text-indent: 0pt">18</TD></TR>
<TR STYLE="background-color: #eeeeee; vertical-align: top">
    <TD STYLE="text-align: left; text-indent: 0pt">DESCRIPTION OF PREFERRED STOCK</TD>
    <TD STYLE="text-align: right; text-indent: 0pt">25</TD></TR>
<TR STYLE="background-color: white; vertical-align: top">
    <TD STYLE="text-align: left; text-indent: 0pt">DESCRIPTION OF WARRANTS</TD>
    <TD STYLE="text-align: right; text-indent: 0pt">28</TD></TR>
<TR STYLE="background-color: #eeeeee; vertical-align: top">
    <TD STYLE="text-align: left; text-indent: 0pt">DESCRIPTION OF UNITS</TD>
    <TD STYLE="text-align: right; text-indent: 0pt">29</TD></TR>
<TR STYLE="background-color: white; vertical-align: top">
    <TD STYLE="text-align: left; text-indent: 0pt">GLOBAL SECURITIES</TD>
    <TD STYLE="text-align: right; text-indent: 0pt">31</TD></TR>
<TR STYLE="background-color: #eeeeee; vertical-align: top">
    <TD STYLE="text-align: left; text-indent: 0pt">PLAN OF DISTRIBUTION</TD>
    <TD STYLE="text-align: right; text-indent: 0pt">33</TD></TR>
<TR STYLE="background-color: white; vertical-align: top">
    <TD STYLE="text-align: left; text-indent: 0pt">DISCLOSURE OF COMMISSION POSITION ON INDEMNIFICATION FOR SECURITIES ACT LIABILITIES</TD>
    <TD STYLE="text-align: right; text-indent: 0pt">35</TD></TR>
<TR STYLE="background-color: #eeeeee; vertical-align: top">
    <TD STYLE="text-align: left; text-indent: 0pt">LEGAL MATTERS</TD>
    <TD STYLE="text-align: right; text-indent: 0pt">35</TD></TR>
<TR STYLE="background-color: white; vertical-align: top">
    <TD STYLE="text-align: left; text-indent: 0pt">EXPERTS</TD>
    <TD STYLE="text-align: right; text-indent: 0pt">35</TD></TR>
<TR STYLE="background-color: #eeeeee; vertical-align: top">
    <TD STYLE="text-align: left; text-indent: 0pt">WHERE YOU CAN FIND MORE INFORMATION</TD>
    <TD STYLE="text-align: right; text-indent: 0pt">35</TD></TR>
<TR STYLE="background-color: white; vertical-align: top">
    <TD STYLE="text-align: left; text-indent: 0pt">INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE</TD>
    <TD STYLE="text-align: right; text-indent: 0pt">36</TD></TR>
</TABLE>
<P STYLE="margin: 0pt">&nbsp;</P>

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<P STYLE="text-align: center; text-indent: 0pt; margin: 0; font: 10pt Times New Roman, Times, Serif">&#160;&#160;&#160;</P>

<P STYLE="text-align: center; text-indent: 0pt; margin: 0; font: 10pt Times New Roman, Times, Serif"><B>ABOUT THIS PROSPECTUS</B></P>

<P STYLE="margin: 0pt">&nbsp;</P>

<P STYLE="text-align: justify; text-indent: 36pt; margin: 0; font: 10pt Times New Roman, Times, Serif">This prospectus is part
of a &#8220;shelf&#8221; registration statement that we have filed with the Securities and Exchange Commission. By using a shelf
registration statement, we may sell, at any time and from time to time in one or more offerings, any combination of the securities
described in this prospectus, up to a total dollar amount of $100,000,000.&#160;&#160;This prospectus provides you with a general
description of the securities that we may offer. Each time we sell securities, we will provide a prospectus supplement and attach
it to this prospectus. The prospectus supplement will contain more specific information about the terms of that offering, including
the specific amounts, prices and terms of the securities offered. The prospectus supplements may also add, update or change information
contained or incorporated by reference in this prospectus. Any statement that we make in this prospectus will be modified or superseded
by any inconsistent statement made by us in a prospectus supplement. If there is any inconsistency between the information in this
prospectus and the information in the prospectus supplement, you should rely on the information in the prospectus supplement.&#160;&#160;THIS
PROSPECTUS MAY NOT BE USED TO CONSUMMATE A SALE OF SECURITIES UNLESS IT IS ACCOMPANIED BY A PROSPECTUS SUPPLEMENT.</P>

<P STYLE="margin: 0pt">&nbsp;</P>

<P STYLE="text-align: justify; text-indent: 36pt; margin: 0; font: 10pt Times New Roman, Times, Serif">The exhibits to the registration
statement of which this prospectus is a part contain the full text of certain contracts and other important documents we have summarized
in this prospectus. Because these summaries may not contain all the information that you may find important in deciding whether
to purchase the securities we may offer, you should review the full text of these documents. The registration statement and the
exhibits can be obtained from the Securities and Exchange Commission as indicated under the heading &#8220;Where You Can Find Additional
Information&#8221; below.</P>

<P STYLE="margin: 0pt">&nbsp;</P>

<P STYLE="text-align: justify; text-indent: 36pt; margin: 0; font: 10pt Times New Roman, Times, Serif">You should rely only on
the information contained or incorporated by reference in this prospectus or any applicable prospectus supplements filed with the
Securities and Exchange Commission. We have not authorized anyone to provide you with different information and, if you are given
any information or representation about these matters that is not contained or incorporated by reference in this prospectus or
a prospectus supplement, you must not rely on that information. We are not making an offer to sell securities in any jurisdiction
where the offer or sale of such securities is not permitted.</P>

<P STYLE="margin: 0pt">&nbsp;</P>

<P STYLE="text-align: justify; text-indent: 36pt; margin: 0; font: 10pt Times New Roman, Times, Serif"><B>Neither the delivery
of this prospectus or any applicable prospectus supplement</B> <B>nor any sale made using this prospectus or any applicable prospectus
supplement implies that there has been no change in our affairs or that the information in this prospectus or in any applicable
prospectus supplement is correct as of any date after their respective dates. You should not assume that the information in or
incorporated by reference in this prospectus or any applicable prospectus supplement prepared by us, is accurate as of any date
other than the date(s) on the front covers of those documents. Our business, financial condition, results of operations and prospects
may have changed since those dates.</B></P>

<P STYLE="margin: 0pt">&nbsp;</P>

<P STYLE="text-align: justify; text-indent: 36pt; margin: 0; font: 10pt Times New Roman, Times, Serif">When used in this prospectus,
the terms &#8220;Pacific Ethanol,&#8221; &#8220;we,&#8221; &#8220;our&#8221; and &#8220;us&#8221; refer to Pacific Ethanol, Inc.
and its consolidated subsidiaries, unless otherwise specified.&#160;&#160;Unless otherwise stated or indicated by context, the
phrase &#8220;this prospectus&#8221; refers to the prospectus and any applicable prospectus supplement.</P>

<P STYLE="margin: 0pt">&nbsp;</P>

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<P STYLE="margin: 0pt">&nbsp;</P>

<P STYLE="text-align: center; text-indent: 0pt; margin: 0; font: 10pt Times New Roman, Times, Serif"><B>CAUTIONARY NOTE REGARDING
FORWARD-LOOKING STATEMENTS</B></P>

<P STYLE="margin: 0pt">&nbsp;</P>

<P STYLE="text-align: justify; text-indent: 36pt; margin: 0; font: 10pt Times New Roman, Times, Serif">This prospectus and the
documents incorporated by reference into this prospectus contain &#8220;forward-looking statements&#8221; and are intended to be
covered by the safe harbor provided for under Section 27A of the Securities Act of 1933, as amended, or Securities Act, and Section
21E of the Securities Exchange Act of 1934, as amended, or Exchange Act.&#160;&#160;These forward-looking statements include our
current expectations and projections about future results, performance, prospects and opportunities. We have tried to identify
these forward-looking statements by using words like &#8220;believe,&#8221; &#8220;expect,&#8221; &#8220;may,&#8221; &#8220;will,&#8221;
&#8220;could,&#8221; &#8220;seek,&#8221; &#8220;estimate,&#8221; &#8220;continue,&#8221; &#8220;anticipate,&#8221; &#8220;intend,&#8221;
&#8220;future,&#8221; &#8220;plan&#8221; or variations of those terms and other similar expressions, including their use in the
negative. You should not place undue reliance on these forward-looking statements, which speak only as to our expectations, as
of the date of this prospectus and any applicable prospectus supplement. These forward-looking statements are subject to a number
of risks, uncertainties and other factors that could cause our actual results, performance, prospects or opportunities to differ
materially from those expressed in, or implied by, these forward-looking statements.</P>

<P STYLE="margin: 0pt">&nbsp;</P>

<P STYLE="text-align: justify; text-indent: 36pt; margin: 0; font: 10pt Times New Roman, Times, Serif">These risks, uncertainties
and other factors include, but are not limited to, those set forth under &#8220;Risk Factors&#8221; included in our most recent
Annual Report on Form 10-K or any updates in our Quarterly Reports on Form 10-Q, together with all of the other information appearing
in or incorporated by reference into this prospectus and any applicable prospectus supplement.&#160;&#160;Given these risks and
uncertainties, readers are cautioned not to place undue reliance on our forward-looking statements.&#160;&#160;Projections included
in such risk factors have been prepared based on assumptions, which we believe to be reasonable, but not in accordance with United
States generally accepted accounting principles or any guidelines of the Securities and Exchange Commission.&#160;&#160;Actual
results will vary, perhaps materially, and we undertake no obligation to update the projections at any future date.&#160;&#160;You
are strongly cautioned not to place undue reliance on such projections.&#160;&#160;All subsequent written and oral forward-looking
statements attributable to Pacific Ethanol or to persons acting on our behalf are expressly qualified in their entirety by these
cautionary statements.&#160;&#160;Except as required by federal securities laws, we do not intend to update or revise any forward-looking
statements, whether as a result of new information, future events or otherwise.</P>

<P STYLE="margin: 0pt">&nbsp;</P>

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<P STYLE="margin: 0pt">&nbsp;</P>

<P STYLE="text-align: center; text-indent: 0pt; margin: 0; font: 10pt Times New Roman, Times, Serif"><B>PACIFIC ETHANOL, INC.</B></P>

<P STYLE="margin: 0pt">&nbsp;</P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0; font: 10pt Times New Roman, Times, Serif"><B>Overview</B></P>

<P STYLE="margin: 0pt">&nbsp;</P>

<P STYLE="text-align: justify; text-indent: 36pt; margin: 0; font: 10pt Times New Roman, Times, Serif">We are the leading marketer
and producer of low-carbon renewable fuels in the Western United States.</P>

<P STYLE="margin: 0pt">&nbsp;</P>

<P STYLE="text-align: justify; text-indent: 36pt; margin: 0; font: 10pt Times New Roman, Times, Serif">We market all the ethanol
produced by four ethanol production facilities located in California, Idaho and Oregon, or Pacific Ethanol Plants, all the ethanol
produced by three other ethanol producers in the Western United States and ethanol purchased from other third-party suppliers throughout
the United States. We also market ethanol co-products, including wet distillers grains and syrup, or WDG, for the Pacific Ethanol
Plants.</P>

<P STYLE="margin: 0pt">&nbsp;</P>

<P STYLE="text-align: justify; text-indent: 36pt; margin: 0; font: 10pt Times New Roman, Times, Serif">We have extensive customer
relationships throughout the Western United States. Our ethanol customers are integrated oil companies and gasoline marketers who
blend ethanol into gasoline. We arrange for transportation, storage and delivery of ethanol purchased by our customers through
our agreements with third-party service providers in the Western United States, primarily in California,&#160;&#160;Arizona, Nevada,
Utah, Oregon, Colorado, Idaho and Washington. Our WDG customers are dairies and feedlots located near the Pacific Ethanol Plants.</P>

<P STYLE="margin: 0pt">&nbsp;</P>

<P STYLE="text-align: justify; text-indent: 36pt; margin: 0; font: 10pt Times New Roman, Times, Serif">We have extensive supplier
relationships throughout the Western and Midwestern United States. In some cases, we have marketing agreements with suppliers to
market all of the output of their facilities.</P>

<P STYLE="margin: 0pt">&nbsp;</P>

<P STYLE="text-align: justify; text-indent: 36pt; margin: 0; font: 10pt Times New Roman, Times, Serif">We hold a 34% ownership
interest in New PE Holdco LLC, or New PE Holdco, the owner of each of the plant holding companies, or the Plant Owners, that collectively
own the Pacific Ethanol Plants. We operate and maintain the Pacific Ethanol Plants under the terms of an asset management agreement
with New PE Holdco and the Plant Owners, including supplying all goods and materials necessary to operate and maintain each Pacific
Ethanol Plant. In operating the Pacific Ethanol Plants, we direct the production process to obtain optimal production yields, lower
costs by leveraging our infrastructure, enter into risk management agreements such as insurance policies and manage commodity risk
practices. We are also in complete charge of, and have care and custody over, each Pacific Ethanol Plant that is not operational,
and provide recommendations as to when a Pacific Ethanol Plant should become operational. We perform all activities necessary to
support a cost effective return of any idled Pacific Ethanol Plant to operational status once New PE Holdco approves our recommendation
to re-start an idled Pacific Ethanol Plant.</P>

<P STYLE="margin: 0pt">&nbsp;</P>

<P STYLE="text-align: justify; text-indent: 36pt; margin: 0; font: 10pt Times New Roman, Times, Serif">We market ethanol and WDG
produced by the Pacific Ethanol Plants under the terms of separate marketing agreements with the Plant Owners whose facilities
are operational. The marketing agreements provide us with the absolute discretion to solicit, negotiate, administer (including
payment collection), enforce and execute ethanol and co-product sales agreements with any third party.</P>

<P STYLE="margin: 0pt">&nbsp;</P>

<P STYLE="text-align: justify; text-indent: 36pt; margin: 0; font: 10pt Times New Roman, Times, Serif">The Pacific Ethanol Plants
are comprised of the four facilities described immediately below, three of which are currently operational. When market conditions
permit, and with approval of New PE Holdco, we intend to resume operations at the Madera, California facility.</P>

<P STYLE="text-align: justify; text-indent: 36pt; margin: 0">&#160;&#160;&#160;&#160;&#160;&#160;</P>

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<P STYLE="margin: 0pt">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="width: 30%; border-bottom: black 2px solid">
        <P STYLE="margin: 0">&#160;</P>
        <P STYLE="margin: 0">Facility Name</P></TD>
    <TD STYLE="width: 20%; border-bottom: black 2px solid">
        <P STYLE="margin: 0">&#160;</P>
        <P STYLE="margin-top: 0; text-align: center; margin-bottom: 0">Facility Location</P></TD>
    <TD STYLE="width: 20%; border-bottom: black 2px solid; text-align: center">
        <P STYLE="margin-top: 0; text-align: center; margin-bottom: 0">Estimated Annual Capacity</P>
        <P STYLE="margin-top: 0; text-align: center; margin-bottom: 0">(gallons)</P></TD>
    <TD STYLE="width: 20%; border-bottom: black 2px solid; text-align: center">
        <P STYLE="margin-top: 0; text-align: center; margin-bottom: 0">&#160;</P>
        <P STYLE="margin-top: 0; text-align: center; margin-bottom: 0">Current Operating Status</P></TD></TR>
<TR STYLE="background-color: #eeeeee">
    <TD STYLE="text-align: left; vertical-align: top; padding-left: 9pt; text-indent: -9pt">Magic Valley</TD>
    <TD STYLE="vertical-align: bottom; text-align: center; text-indent: 0pt">Burley, ID</TD>
    <TD STYLE="vertical-align: bottom; text-align: center; text-indent: 0pt">60,000,000</TD>
    <TD STYLE="vertical-align: bottom; text-align: center; text-indent: 0pt">Operating</TD></TR>
<TR STYLE="background-color: white">
    <TD STYLE="text-align: left; vertical-align: top; padding-left: 9pt; text-indent: -9pt">Columbia</TD>
    <TD STYLE="vertical-align: bottom; text-align: center; text-indent: 0pt">Boardman, OR</TD>
    <TD STYLE="vertical-align: bottom; text-align: center; text-indent: 0pt">40,000,000</TD>
    <TD STYLE="vertical-align: bottom; text-align: center; text-indent: 0pt">Operating</TD></TR>
<TR STYLE="background-color: #eeeeee">
    <TD STYLE="text-align: left; vertical-align: top; padding-left: 9pt; text-indent: -9pt">Stockton</TD>
    <TD STYLE="vertical-align: bottom; text-align: center; text-indent: 0pt">Stockton, CA</TD>
    <TD STYLE="vertical-align: bottom; text-align: center; text-indent: 0pt">60,000,000</TD>
    <TD STYLE="vertical-align: bottom; text-align: center; text-indent: 0pt">Operating</TD></TR>
<TR STYLE="background-color: white">
    <TD STYLE="text-align: left; vertical-align: top; padding-left: 9pt; text-indent: -9pt">Madera</TD>
    <TD STYLE="vertical-align: bottom; text-align: center; text-indent: 0pt">Madera, CA</TD>
    <TD STYLE="vertical-align: bottom; text-align: center; text-indent: 0pt">40,000,000</TD>
    <TD STYLE="vertical-align: bottom; text-align: center; text-indent: 0pt">Idled</TD></TR>
</TABLE>
<P STYLE="margin: 0pt">&nbsp;</P>

<P STYLE="text-align: justify; text-indent: 36pt; margin: 0; font: 10pt Times New Roman, Times, Serif">We also provide operations,
maintenance and accounting services for a 250,000 gallon per year cellulosic integrated biorefinery owned by ZeaChem Inc. in Boardman,
Oregon, which is adjacent to the Pacific Ethanol Columbia plant.</P>

<P STYLE="text-indent: 0pt; margin: 0; font: 10pt Times New Roman, Times, Serif"><B>&nbsp;</B></P>

<P STYLE="text-indent: 0pt; margin: 0; font: 10pt Times New Roman, Times, Serif"><B>Corporate Information</B></P>

<P STYLE="margin: 0pt">&nbsp;</P>

<P STYLE="text-align: justify; text-indent: 36pt; margin: 0; font: 10pt Times New Roman, Times, Serif">We are a Delaware corporation
that was incorporated in February 2005.&#160;&#160;Our principal executive offices are located at 400 Capitol Mall, Suite 2060,
Sacramento, California 95814.&#160;&#160;Our telephone number is (916) 403-2123 and our Internet website is <FONT STYLE="color: #0000ff"><U>www.pacificethanol.net</U></FONT>.&#160;&#160;The
content of our Internet website does not constitute a part of this prospectus.</P>

<P STYLE="margin: 0pt">&nbsp;</P>

<P STYLE="text-align: justify; text-indent: 36pt; margin: 0; font: 10pt Times New Roman, Times, Serif">In 2006, we began constructing
the first of the four Pacific Ethanol Plants and were continuously engaged in plant construction until the fourth facility was
completed in 2008. In late 2008 and early 2009, we idled production at three of the Pacific Ethanol Plants due to adverse market
conditions and lack of adequate working capital. On May 17, 2009, each of the Plant Owners filed voluntary petitions for relief
under chapter 11 of Title 11 of the United States Bankruptcy Code, or Bankruptcy Code, in the United States Bankruptcy Court for
the District of Delaware, or Bankruptcy Court, in an effort to restructure their indebtedness. On April 16, 2010, the Plant Owners
filed a joint plan of reorganization, or Plan, with the Bankruptcy Court, which was structured in cooperation with a number of
the Plant Owners&#8217; secured lenders. The Bankruptcy Court confirmed the Plan at a hearing on June 8, 2010. On June 29, 2010,
or Effective Date, the Plant Owners emerged from bankruptcy under the terms of the Plan. Under the Plan, on the Effective Date,
all of the ownership interests in the Plant Owners were transferred to New PE Holdco, which was wholly-owned as of that date by
some of the prepetition lenders to the Plant Owners and new lenders to the Plant Owners. As a result, the Pacific Ethanol Plants
became wholly-owned by New PE Holdco as of the Effective Date.</P>

<P STYLE="margin: 0pt">&nbsp;</P>

<P STYLE="text-align: center; text-indent: 0pt; margin: 0; font: 10pt Times New Roman, Times, Serif"><B>RISK FACTORS</B></P>

<P STYLE="margin: 0pt">&nbsp;</P>

<P STYLE="text-align: justify; text-indent: 36pt; margin: 0; font: 10pt Times New Roman, Times, Serif">Investing in our securities
involves significant risks.&#160;&#160;Before making an investment decision, you should consider carefully the risks, uncertainties
and other factors described in our most recent Annual Report on Form 10-K, as supplemented and updated by subsequent quarterly
reports on Form 10-Q and current reports on Form 8-K that we have filed or will file with the Securities and Exchange Commission,
and in documents which are incorporated by reference into this prospectus, as well as the risk factors and other information contained
in or incorporated by reference into the applicable prospectus supplement.</P>

<P STYLE="margin: 0pt">&nbsp;</P>

<P STYLE="text-align: justify; text-indent: 36pt; margin: 0; font: 10pt Times New Roman, Times, Serif">If any of these risks were
to occur, our business, affairs, prospects, assets, financial condition, results of operations and cash flow could be materially
and adversely affected.&#160;&#160;If this occurs, the market or trading price of our securities could decline, and you could lose
all or part of your investment.&#160;&#160;In addition, please read &#8220;Cautionary Note Regarding Forward-Looking Statements&#8221;
in this prospectus, where we describe additional uncertainties associated with our business and the forward-looking statements
included or incorporated by reference into this prospectus.</P>

<P STYLE="text-align: justify; text-indent: 36pt; margin: 0">&#160;&#160;&#160;</P>

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<P STYLE="text-align: justify; text-indent: 0pt; margin: 0">&#160;&#160;</P>

<P STYLE="text-align: center; text-indent: 0pt; margin: 0; font: 10pt Times New Roman, Times, Serif"><B>USE OF PROCEEDS</B></P>

<P STYLE="margin: 0pt">&nbsp;</P>

<P STYLE="text-align: justify; text-indent: 36pt; margin: 0; font: 10pt Times New Roman, Times, Serif">We will retain broad discretion
over the use of the net proceeds from the sale of the securities offered by this prospectus. Unless otherwise specified in the
applicable prospectus supplement, we currently expect to use the net proceeds of our sale of securities for general corporate purposes,
which may include, among other things, working capital requirements, capital expenditures, acquisitions, acquisitions of additional
ownership interests in New PE Holdco, and the repayment of outstanding indebetedness.&#160;&#160;Pending these uses, we expect
to invest the net proceeds in demand deposit accounts or short-term, investment-grade securities.</P>

<P STYLE="margin: 0pt">&nbsp;</P>

<P STYLE="text-align: center; text-indent: 0pt; margin: 0; font: 10pt Times New Roman, Times, Serif"><B>RATIO OF EARNINGS TO FIXED
CHARGES</B></P>

<P STYLE="margin: 0pt">&nbsp;</P>

<P STYLE="text-align: justify; text-indent: 36pt; margin: 0; font: 10pt Times New Roman, Times, Serif">The following summary is
qualified by the more detailed information appearing in the computation table found in Exhibit 12.1 to the registration statement
of which this prospectus is part and the historical financial statements, including the notes to those financial statements, incorporated
by reference in this prospectus.</P>

<P STYLE="margin: 0pt">&nbsp;</P>

<P STYLE="text-align: justify; text-indent: 36pt; margin: 0; font: 10pt Times New Roman, Times, Serif">Our earnings are inadequate
to cover fixed charges.&#160;&#160;The following table sets forth the dollar amount of the coverage deficiency for all periods
(in thousands):</P>

<P STYLE="margin: 0pt">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="padding-bottom: 2px">&nbsp;</TD>
    <TD STYLE="padding-bottom: 2px">&nbsp;</TD>
    <TD COLSPAN="18" STYLE="border-bottom: black 2px solid">
        <P STYLE="margin-top: 0; text-align: center; margin-bottom: 0">Year Ended December 31,</P></TD>
    <TD NOWRAP STYLE="text-align: center; padding-bottom: 2px">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="padding-bottom: 2px; text-align: center">&nbsp;</TD>
    <TD STYLE="padding-bottom: 2px; text-align: center">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: black 2px solid; text-align: center">
        <P STYLE="margin-top: 0; text-align: center; margin-bottom: 0">2011</P></TD>
    <TD NOWRAP STYLE="text-align: center; padding-bottom: 2px">&nbsp;</TD>
    <TD STYLE="padding-bottom: 2px; text-align: center">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: black 2px solid; text-align: center">
        <P STYLE="margin-top: 0; text-align: center; margin-bottom: 0">2010</P></TD>
    <TD NOWRAP STYLE="text-align: center; padding-bottom: 2px">&nbsp;</TD>
    <TD STYLE="padding-bottom: 2px; text-align: center">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: black 2px solid; text-align: center">
        <P STYLE="margin-top: 0; text-align: center; margin-bottom: 0">2009</P></TD>
    <TD NOWRAP STYLE="text-align: center; padding-bottom: 2px">&nbsp;</TD>
    <TD STYLE="padding-bottom: 2px; text-align: center">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: black 2px solid; text-align: center">
        <P STYLE="margin-top: 0; text-align: center; margin-bottom: 0">2008</P></TD>
    <TD NOWRAP STYLE="text-align: center; padding-bottom: 2px">&nbsp;</TD>
    <TD STYLE="padding-bottom: 2px; text-align: center">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: black 2px solid; text-align: center">
        <P STYLE="margin-top: 0; text-align: center; margin-bottom: 0">2007</P></TD>
    <TD NOWRAP STYLE="text-align: left; padding-bottom: 2px">&nbsp;</TD></TR>
<TR STYLE="background-color: #eeeeee; vertical-align: bottom">
    <TD STYLE="text-align: left; width: 30%; text-indent: 0pt">Ratio of Earnings to Fixed Charges</TD>
    <TD STYLE="text-align: left; width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD>
    <TD STYLE="width: 11%; text-align: right">1.12x</TD>
    <TD NOWRAP STYLE="width: 1%; text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: left; width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD>
    <TD STYLE="width: 11%; text-align: right">7.46x</TD>
    <TD NOWRAP STYLE="width: 1%; text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: left; width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD>
    <TD STYLE="width: 11%; text-align: right">&#8212;</TD>
    <TD NOWRAP STYLE="width: 1%; text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: left; width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD>
    <TD STYLE="width: 11%; text-align: right">&#8212;</TD>
    <TD NOWRAP STYLE="width: 1%; text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: left; width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD>
    <TD STYLE="width: 11%; text-align: right">0.3x</TD>
    <TD NOWRAP STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="background-color: white; vertical-align: bottom">
    <TD STYLE="text-align: left; padding-left: 9pt; text-indent: -9pt">Excess (Deficiency) of Earnings Available to Cover Fixed Charges</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD>
    <TD STYLE="text-align: right">1,985</TD>
    <TD NOWRAP STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD>
    <TD STYLE="text-align: right">72,121</TD>
    <TD NOWRAP STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD>
    <TD STYLE="text-align: right">(310,948</TD>
    <TD NOWRAP STYLE="text-align: left">)</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD>
    <TD STYLE="text-align: right">(160,371</TD>
    <TD NOWRAP STYLE="text-align: left">)</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD>
    <TD STYLE="text-align: right">(27,101</TD>
    <TD NOWRAP STYLE="text-align: left">)</TD></TR>
</TABLE>
<P STYLE="margin: 0pt">&nbsp;</P>

<P STYLE="margin: 0pt">&nbsp;</P>

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<P STYLE="text-align: center; text-indent: 0pt; margin: 0; font: 10pt Times New Roman, Times, Serif">&#160;&#160;</P>

<P STYLE="text-align: center; text-indent: 0pt; margin: 0; font: 10pt Times New Roman, Times, Serif"><B>DESCRIPTION OF DEBT SECURITIES</B></P>

<P STYLE="margin: 0pt">&nbsp;</P>

<P STYLE="text-align: justify; text-indent: 36pt; margin: 0; font: 10pt Times New Roman, Times, Serif">The complete terms of the
debt securities will be contained in the indenture and supplemental indenture applicable to the debt securities. These documents
have been or will be included or incorporated by reference as exhibits to the registration statement of which this prospectus is
a part. You should read the indenture and supplemental indenture. You should also read the prospectus supplement, which will contain
additional information and which may update or change some of the information below.</P>

<P STYLE="margin: 0pt">&nbsp;</P>

<P STYLE="text-align: justify; text-indent: 36pt; margin: 0; font: 10pt Times New Roman, Times, Serif">This section describes the
general terms of the debt securities that we may offer using this prospectus. Further terms of the debt securities will be stated
in the applicable prospectus supplement. The following description and any description of the debt securities in a prospectus supplement
may not be complete and is subject to and qualified in its entirety by reference to the terms of the applicable indenture, supplemental
indenture and form of debt security.</P>

<P STYLE="margin: 0pt">&nbsp;</P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0; font: 10pt Times New Roman, Times, Serif"><B>General</B></P>

<P STYLE="margin: 0pt">&nbsp;</P>

<P STYLE="text-align: justify; text-indent: 36pt; margin: 0; font: 10pt Times New Roman, Times, Serif">We may issue debt securities,
in one or more series, as either senior or subordinated debt or as senior or subordinated convertible or exchangeable debt. The
senior debt securities will rank equally with any other unsubordinated debt that we may have and may be secured or unsecured. The
subordinated debt securities will be subordinate and junior in right of payment, to the extent and in the manner described in the
instrument governing the debt, to all or some portion of our senior indebtedness. Any convertible debt securities that we may issue
will be convertible into or exchangeable for common stock or other securities of Pacific Ethanol. Conversion may be mandatory or
at your option and would be at prescribed conversion rates.</P>

<P STYLE="margin: 0pt">&nbsp;</P>

<P STYLE="text-align: justify; text-indent: 36pt; margin: 0; font: 10pt Times New Roman, Times, Serif">The debt securities will
be issued under one or more indentures, which are contracts between us and an eligible banking institution or other eligible party,
as trustee. While the terms we have summarized below will apply generally to any debt securities that we may offer under this prospectus,
we will describe the particular terms of any debt securities that we may offer in more detail in a prospectus supplement.</P>

<P STYLE="margin: 0pt">&nbsp;</P>

<P STYLE="text-align: justify; text-indent: 36pt; margin: 0; font: 10pt Times New Roman, Times, Serif">We will issue the senior
debt securities under the senior indenture that we will enter into with the trustee named in the senior indenture. We will issue
the subordinated debt securities under the subordinated indenture that we will enter into with the trustee named in the subordinated
indenture. We have filed forms of these documents as exhibits to the registration statement of which this prospectus is a part.
We use the term &#8220;indentures&#8221; to refer to both the senior indenture and the subordinated indenture.</P>

<P STYLE="margin: 0pt">&nbsp;</P>

<P STYLE="text-align: justify; text-indent: 36pt; margin: 0; font: 10pt Times New Roman, Times, Serif">The following summaries
of the material provisions of the senior debt securities, the subordinated debt securities and the indentures are not complete
and are qualified in their entirety by reference to all of the provisions of the indenture applicable to a particular series of
debt securities. You should read the applicable prospectus supplement that we may authorize to be provided to you related to the
series of debt securities being offered, as well as the complete indentures that contain the terms of the debt securities. Forms
of indentures have been filed as exhibits to the registration statement of which this prospectus is a part, and we will file supplemental
indentures and forms of debt securities containing the terms of the debt securities being offered as exhibits to the registration
statement of which this prospectus is a part or such supplemental indentures will be incorporated by reference to reports that
we file with the Securities and Exchange Commission. Except as we may otherwise indicate, the terms of the senior indenture and
the subordinated indenture are identical.</P>

<P STYLE="text-align: justify; text-indent: 0pt; margin: 0">&#160;&#160;</P>

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<P STYLE="text-align: justify; text-indent: 0pt; margin: 0">&#160;&#160;</P>

<P STYLE="text-align: justify; text-indent: 36pt; margin: 0; font: 10pt Times New Roman, Times, Serif">The indentures will be qualified
under the Trust Indenture Act of 1939, as amended. We use the term &#8220;indenture trustee&#8221; to refer to either the senior
trustee or the subordinated trustee, as applicable.</P>

<P STYLE="margin: 0pt">&nbsp;</P>

<P STYLE="text-align: justify; text-indent: 36pt; margin: 0; font: 10pt Times New Roman, Times, Serif">The indentures do not limit
the amount of other debt that we may incur and do not contain financial or similar restrictive covenants. The indentures do not
contain any provision to protect holders of debt securities against a sudden or dramatic decline in our ability to pay our debt.</P>

<P STYLE="margin: 0pt">&nbsp;</P>

<P STYLE="text-align: justify; text-indent: 36pt; margin: 0; font: 10pt Times New Roman, Times, Serif">The prospectus supplement
will describe the debt securities offered and the price or prices at which we will offer the debt securities. The description will
include:</P>

<P STYLE="margin: 0pt">&nbsp;</P>

<TABLE BORDER="0" CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: top; text-align: justify">
    <TD STYLE="text-align: justify; width: 36pt">&nbsp;</TD>
    <TD STYLE="text-align: justify; width: 36pt; text-indent: 0pt">&bull;&#160;</TD>
    <TD STYLE="text-align: justify; text-indent: 0pt">the title of the debt securities;</TD></TR>
</TABLE>
<P STYLE="margin: 0pt">&nbsp;</P>

<TABLE BORDER="0" CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: top; text-align: justify">
    <TD STYLE="text-align: justify; width: 36pt">&nbsp;</TD>
    <TD STYLE="text-align: justify; width: 36pt; text-indent: 0pt">&bull;&#160;</TD>
    <TD STYLE="text-align: justify; text-indent: 0pt">whether the debt securities are senior debt securities or subordinated debt securities and, if subordinated debt securities, the related subordination terms;</TD></TR>
</TABLE>
<P STYLE="margin: 0pt">&nbsp;</P>

<TABLE BORDER="0" CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: top; text-align: justify">
    <TD STYLE="text-align: justify; width: 36pt">&nbsp;</TD>
    <TD STYLE="text-align: justify; width: 36pt; text-indent: 0pt">&bull;&#160;</TD>
    <TD STYLE="text-align: justify; text-indent: 0pt">principal amount being offered, and, if a series, the total amount authorized and the total amount outstanding;</TD></TR>
</TABLE>
<P STYLE="margin: 0pt">&nbsp;</P>

<TABLE BORDER="0" CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: top; text-align: justify">
    <TD STYLE="text-align: justify; width: 36pt">&nbsp;</TD>
    <TD STYLE="text-align: justify; width: 36pt; text-indent: 0pt">&bull;&#160;</TD>
    <TD STYLE="text-align: justify; text-indent: 0pt">any limit on the aggregate principal amount of the debt securities or the series of which they are a part;</TD></TR>
</TABLE>
<P STYLE="margin: 0pt">&nbsp;</P>

<TABLE BORDER="0" CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: top; text-align: justify">
    <TD STYLE="text-align: justify; width: 36pt">&nbsp;</TD>
    <TD STYLE="text-align: justify; width: 36pt; text-indent: 0pt">&bull;&#160;</TD>
    <TD STYLE="text-align: justify; text-indent: 0pt">the date or dates on which we must pay the principal;</TD></TR>
</TABLE>
<P STYLE="margin: 0pt">&nbsp;</P>

<TABLE BORDER="0" CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: top; text-align: justify">
    <TD STYLE="text-align: justify; width: 36pt">&nbsp;</TD>
    <TD STYLE="text-align: justify; width: 36pt; text-indent: 0pt">&bull;&#160;</TD>
    <TD STYLE="text-align: justify; text-indent: 0pt">whether the debt securities will be issued with any original issue discount;</TD></TR>
</TABLE>
<P STYLE="margin: 0pt">&nbsp;</P>

<TABLE BORDER="0" CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: top; text-align: justify">
    <TD STYLE="text-align: justify; width: 36pt">&nbsp;</TD>
    <TD STYLE="text-align: justify; width: 36pt; text-indent: 0pt">&bull;&#160;</TD>
    <TD STYLE="text-align: justify; text-indent: 0pt">whether the debt securities are convertible into common stock or other securities or property and, if so, the terms and conditions upon which conversion will be effected, including the initial conversion price or conversion rate and any adjustments thereto and the conversion period;</TD></TR>
</TABLE>
<P STYLE="margin: 0pt">&nbsp;</P>

<TABLE BORDER="0" CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: top; text-align: justify">
    <TD STYLE="text-align: justify; width: 36pt">&nbsp;</TD>
    <TD STYLE="text-align: justify; width: 36pt; text-indent: 0pt">&bull;&#160;</TD>
    <TD STYLE="text-align: justify; text-indent: 0pt">the rate or rates at which the debt securities will bear interest, if any, the date or dates from which interest will accrue, and the dates on which we must pay interest;</TD></TR>
</TABLE>
<P STYLE="margin: 0pt">&nbsp;</P>

<TABLE BORDER="0" CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: top; text-align: justify">
    <TD STYLE="text-align: justify; width: 36pt">&nbsp;</TD>
    <TD STYLE="text-align: justify; width: 36pt; text-indent: 0pt">&bull;&#160;</TD>
    <TD STYLE="text-align: justify; text-indent: 0pt">whether and under what circumstances, if any, we will pay a premium or additional amounts on any debt securities;</TD></TR>
</TABLE>
<P STYLE="margin: 0pt">&nbsp;</P>

<TABLE BORDER="0" CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: top; text-align: justify">
    <TD STYLE="text-align: justify; width: 36pt">&nbsp;</TD>
    <TD STYLE="text-align: justify; width: 36pt; text-indent: 0pt">&bull;&#160;</TD>
    <TD STYLE="text-align: justify; text-indent: 0pt">the place or places where we must pay the principal and any premium or interest on the debt securities;</TD></TR>
</TABLE>
<P STYLE="margin: 0pt">&nbsp;</P>

<TABLE BORDER="0" CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: top; text-align: justify">
    <TD STYLE="text-align: justify; width: 36pt">&nbsp;</TD>
    <TD STYLE="text-align: justify; width: 36pt; text-indent: 0pt">&bull;&#160;</TD>
    <TD STYLE="text-align: justify; text-indent: 0pt">the terms and conditions on which we may redeem or retire any debt security, if at all;</TD></TR>
</TABLE>
<P STYLE="margin: 0pt">&nbsp;</P>

<TABLE BORDER="0" CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: top; text-align: justify">
    <TD STYLE="text-align: justify; width: 36pt">&nbsp;</TD>
    <TD STYLE="text-align: justify; width: 36pt; text-indent: 0pt">&bull;&#160;</TD>
    <TD STYLE="text-align: justify; text-indent: 0pt">any obligation to redeem or repurchase any debt securities, and the terms and conditions on which we must do so;</TD></TR>
</TABLE>
<P STYLE="margin: 0pt">&nbsp;</P>

<TABLE BORDER="0" CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: top; text-align: justify">
    <TD STYLE="text-align: justify; width: 36pt">&nbsp;</TD>
    <TD STYLE="text-align: justify; width: 36pt; text-indent: 0pt">&bull;&#160;</TD>
    <TD STYLE="text-align: justify; text-indent: 0pt">the denominations in which we may issue the debt securities if other than denominations of $1,000 and any integral multiple thereof;</TD></TR>
</TABLE>
<P STYLE="margin: 0pt">&nbsp;</P>

<TABLE BORDER="0" CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: top; text-align: justify">
    <TD STYLE="text-align: justify; width: 36pt">&nbsp;</TD>
    <TD STYLE="text-align: justify; width: 36pt; text-indent: 0pt">&bull;&#160;</TD>
    <TD STYLE="text-align: justify; text-indent: 0pt">the manner in which we will determine the amount of principal of or any premium or interest or additional amounts on the debt securities;</TD></TR>
</TABLE>
<P STYLE="text-align: justify; text-indent: 0pt; margin: 0">&#160;&#160;</P>

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<P STYLE="text-align: justify; text-indent: 0pt; margin: 0">&#160;&#160;&#160;</P>

<TABLE BORDER="0" CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: top; text-align: justify">
    <TD STYLE="text-align: justify; width: 36pt">&nbsp;</TD>
    <TD STYLE="text-align: justify; width: 36pt; text-indent: 0pt">&bull;&#160;</TD>
    <TD STYLE="text-align: justify; text-indent: 0pt">the principal amount of the debt securities that we will pay upon declaration of acceleration of their maturity if other than 100%;</TD></TR>
</TABLE>
<P STYLE="margin: 0pt">&nbsp;</P>

<TABLE BORDER="0" CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: top; text-align: justify">
    <TD STYLE="text-align: justify; width: 36pt">&nbsp;</TD>
    <TD STYLE="text-align: justify; width: 36pt; text-indent: 0pt">&bull;&#160;</TD>
    <TD STYLE="text-align: justify; text-indent: 0pt">the amount that will be deemed to be the principal amount for any purpose, including the principal amount that will be due and payable upon any maturity or that will be deemed to be outstanding as of any date;</TD></TR>
</TABLE>
<P STYLE="margin: 0pt">&nbsp;</P>

<TABLE BORDER="0" CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: top; text-align: justify">
    <TD STYLE="text-align: justify; width: 36pt">&nbsp;</TD>
    <TD STYLE="text-align: justify; width: 36pt; text-indent: 0pt">&bull;&#160;</TD>
    <TD STYLE="text-align: justify; text-indent: 0pt">whether the debt securities will be secured or unsecured, and the terms of any secured debt;</TD></TR>
</TABLE>
<P STYLE="margin: 0pt">&nbsp;</P>

<TABLE BORDER="0" CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: top; text-align: justify">
    <TD STYLE="text-align: justify; width: 36pt">&nbsp;</TD>
    <TD STYLE="text-align: justify; width: 36pt; text-indent: 0pt">&bull;&#160;</TD>
    <TD STYLE="text-align: justify; text-indent: 0pt">whether the debt securities are defeasible;</TD></TR>
</TABLE>
<P STYLE="margin: 0pt">&nbsp;</P>

<TABLE BORDER="0" CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: top; text-align: justify">
    <TD STYLE="text-align: justify; width: 36pt">&nbsp;</TD>
    <TD STYLE="text-align: justify; width: 36pt; text-indent: 0pt">&bull;&#160;</TD>
    <TD STYLE="text-align: justify; text-indent: 0pt">if applicable, the terms of any right to convert debt securities into, or exchange debt securities for, shares of common stock or other securities or property;</TD></TR>
</TABLE>
<P STYLE="margin: 0pt">&nbsp;</P>

<TABLE BORDER="0" CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: top; text-align: justify">
    <TD STYLE="text-align: justify; width: 36pt">&nbsp;</TD>
    <TD STYLE="text-align: justify; width: 36pt; text-indent: 0pt">&bull;&#160;</TD>
    <TD STYLE="text-align: justify; text-indent: 0pt">restrictions on transfer, sale or other assignment, if any;</TD></TR>
</TABLE>
<P STYLE="margin: 0pt">&nbsp;</P>

<TABLE BORDER="0" CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: top; text-align: justify">
    <TD STYLE="text-align: justify; width: 36pt">&nbsp;</TD>
    <TD STYLE="text-align: justify; width: 36pt; text-indent: 0pt">&bull;&#160;</TD>
    <TD STYLE="text-align: justify; text-indent: 0pt">our right, if any, to defer payment of interest and the maximum length of any such deferral period;</TD></TR>
</TABLE>
<P STYLE="margin: 0pt">&nbsp;</P>

<TABLE BORDER="0" CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: top; text-align: justify">
    <TD STYLE="text-align: justify; width: 36pt">&nbsp;</TD>
    <TD STYLE="text-align: justify; width: 36pt; text-indent: 0pt">&bull;&#160;</TD>
    <TD STYLE="text-align: justify; text-indent: 0pt">provisions for a sinking fund, purchase or other analogous fund, if any;</TD></TR>
</TABLE>
<P STYLE="margin: 0pt">&nbsp;</P>

<TABLE BORDER="0" CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: top; text-align: justify">
    <TD STYLE="text-align: justify; width: 36pt">&nbsp;</TD>
    <TD STYLE="text-align: justify; width: 36pt; text-indent: 0pt">&bull;&#160;</TD>
    <TD STYLE="text-align: justify; text-indent: 0pt">whether we will issue the debt securities in the form of one or more global securities and, if so, the respective depositaries for the global securities and the terms of the global securities;</TD></TR>
</TABLE>
<P STYLE="margin: 0pt">&nbsp;</P>

<TABLE BORDER="0" CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: top; text-align: justify">
    <TD STYLE="text-align: justify; width: 36pt">&nbsp;</TD>
    <TD STYLE="text-align: justify; width: 36pt; text-indent: 0pt">&bull;&#160;</TD>
    <TD STYLE="text-align: justify; text-indent: 0pt">any addition to or change in the events of default applicable to the debt securities and any change in the right of the trustee or the holders to declare the principal amount of any of the debt securities due and payable;</TD></TR>
</TABLE>
<P STYLE="margin: 0pt">&nbsp;</P>

<TABLE BORDER="0" CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: top; text-align: justify">
    <TD STYLE="text-align: justify; width: 36pt">&nbsp;</TD>
    <TD STYLE="text-align: justify; width: 36pt; text-indent: 0pt">&bull;&#160;</TD>
    <TD STYLE="text-align: justify; text-indent: 0pt">any addition to or change in the covenants in the indentures, including whether the indenture will restrict our ability or the ability of our subsidiaries to:</TD></TR>
</TABLE>
<P STYLE="margin: 0pt">&nbsp;</P>

<TABLE BORDER="0" CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 72pt">&nbsp;</TD>
    <TD STYLE="text-align: left; width: 36pt; text-indent: 0pt">o&#160;</TD>
    <TD STYLE="text-align: left; text-indent: 0pt">incur additional indebtedness;</TD></TR>
</TABLE>
<P STYLE="margin: 0pt">&nbsp;</P>

<TABLE BORDER="0" CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: top; text-align: justify">
    <TD STYLE="text-align: justify; width: 72pt">&nbsp;</TD>
    <TD STYLE="text-align: justify; width: 36pt; text-indent: 0pt">o&#160;</TD>
    <TD STYLE="text-align: justify; text-indent: 0pt">issue additional securities;</TD></TR>
</TABLE>
<P STYLE="margin: 0pt">&nbsp;</P>

<TABLE BORDER="0" CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: top; text-align: justify">
    <TD STYLE="text-align: justify; width: 72pt">&nbsp;</TD>
    <TD STYLE="text-align: justify; width: 36pt; text-indent: 0pt">o&#160;</TD>
    <TD STYLE="text-align: justify; text-indent: 0pt">create liens;</TD></TR>
</TABLE>
<P STYLE="margin: 0pt">&nbsp;</P>

<TABLE BORDER="0" CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: top; text-align: justify">
    <TD STYLE="text-align: justify; width: 72pt">&nbsp;</TD>
    <TD STYLE="text-align: justify; width: 36pt; text-indent: 0pt">o&#160;</TD>
    <TD STYLE="text-align: justify; text-indent: 0pt">pay dividends or make distributions in respect of our capital shares or the capital shares of our subsidiaries;</TD></TR>
</TABLE>
<P STYLE="margin: 0pt">&nbsp;</P>

<TABLE BORDER="0" CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: top; text-align: justify">
    <TD STYLE="text-align: justify; width: 72pt">&nbsp;</TD>
    <TD STYLE="text-align: justify; width: 36pt; text-indent: 0pt">o&#160;</TD>
    <TD STYLE="text-align: justify; text-indent: 0pt">redeem capital shares;</TD></TR>
</TABLE>
<P STYLE="margin: 0pt">&nbsp;</P>

<TABLE BORDER="0" CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: top; text-align: justify">
    <TD STYLE="text-align: justify; width: 72pt">&nbsp;</TD>
    <TD STYLE="text-align: justify; width: 36pt; text-indent: 0pt">o&#160;</TD>
    <TD STYLE="text-align: justify; text-indent: 0pt">place restrictions on our subsidiaries&#8217; ability to pay dividends, make distributions or transfer assets;</TD></TR>
</TABLE>
<P STYLE="margin: 0pt">&nbsp;</P>

<TABLE BORDER="0" CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: top; text-align: justify">
    <TD STYLE="text-align: justify; width: 72pt">&nbsp;</TD>
    <TD STYLE="text-align: justify; width: 36pt; text-indent: 0pt">o&#160;</TD>
    <TD STYLE="text-align: justify; text-indent: 0pt">make investments or other restricted payments;</TD></TR>
</TABLE>
<P STYLE="margin: 0pt">&nbsp;</P>

<TABLE BORDER="0" CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: top; text-align: justify">
    <TD STYLE="text-align: justify; width: 72pt">&nbsp;</TD>
    <TD STYLE="text-align: justify; width: 36pt; text-indent: 0pt">o&#160;</TD>
    <TD STYLE="text-align: justify; text-indent: 0pt">sell or otherwise dispose of assets;</TD></TR>
</TABLE>
<P STYLE="text-align: justify; text-indent: 0pt; margin: 0">&#160;&#160;</P>

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<P STYLE="text-align: justify; text-indent: 0pt; margin: 0">&#160;&#160;&#160;</P>

<TABLE BORDER="0" CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: top; text-align: justify">
    <TD STYLE="text-align: justify; width: 72pt">&nbsp;</TD>
    <TD STYLE="text-align: justify; width: 36pt; text-indent: 0pt">o&#160;</TD>
    <TD STYLE="text-align: justify; text-indent: 0pt">enter into sale-leaseback transactions;</TD></TR>
</TABLE>
<P STYLE="margin: 0pt">&nbsp;</P>

<TABLE BORDER="0" CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: top; text-align: justify">
    <TD STYLE="text-align: justify; width: 72pt">&nbsp;</TD>
    <TD STYLE="text-align: justify; width: 36pt; text-indent: 0pt">o&#160;</TD>
    <TD STYLE="text-align: justify; text-indent: 0pt">engage in transactions with stockholders or affiliates;</TD></TR>
</TABLE>
<P STYLE="margin: 0pt">&nbsp;</P>

<TABLE BORDER="0" CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: top; text-align: justify">
    <TD STYLE="text-align: justify; width: 72pt">&nbsp;</TD>
    <TD STYLE="text-align: justify; width: 36pt; text-indent: 0pt">o&#160;</TD>
    <TD STYLE="text-align: justify; text-indent: 0pt">issue or sell shares of our subsidiaries; or</TD></TR>
</TABLE>
<P STYLE="margin: 0pt">&nbsp;</P>

<TABLE BORDER="0" CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: top; text-align: justify">
    <TD STYLE="text-align: justify; width: 72pt">&nbsp;</TD>
    <TD STYLE="text-align: justify; width: 36pt; text-indent: 0pt">o&#160;</TD>
    <TD STYLE="text-align: justify; text-indent: 0pt">effect a consolidation or merger;</TD></TR>
</TABLE>
<P STYLE="margin: 0pt">&nbsp;</P>

<TABLE BORDER="0" CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 36pt">&nbsp;</TD>
    <TD STYLE="text-align: left; width: 36pt; text-indent: 0pt">&bull;&#160;</TD>
    <TD STYLE="text-align: justify; text-indent: 0pt">whether the indenture will require us to maintain any interest coverage, fixed charge, cash flow-based, asset-based or other financial ratios;</TD></TR>
</TABLE>
<P STYLE="margin: 0pt">&nbsp;</P>

<TABLE BORDER="0" CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: top; text-align: justify">
    <TD STYLE="text-align: justify; width: 36pt">&nbsp;</TD>
    <TD STYLE="text-align: justify; width: 36pt; text-indent: 0pt">&bull;&#160;</TD>
    <TD STYLE="text-align: justify; text-indent: 0pt">a discussion of any material United States federal income tax considerations applicable to the debt securities;</TD></TR>
</TABLE>
<P STYLE="margin: 0pt">&nbsp;</P>

<TABLE BORDER="0" CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: top; text-align: justify">
    <TD STYLE="text-align: justify; width: 36pt">&nbsp;</TD>
    <TD STYLE="text-align: justify; width: 36pt; text-indent: 0pt">&bull;&#160;</TD>
    <TD STYLE="text-align: justify; text-indent: 0pt">information describing any book-entry features;</TD></TR>
</TABLE>
<P STYLE="margin: 0pt">&nbsp;</P>

<TABLE BORDER="0" CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: top; text-align: justify">
    <TD STYLE="text-align: justify; width: 36pt">&nbsp;</TD>
    <TD STYLE="text-align: justify; width: 36pt; text-indent: 0pt">&bull;&#160;</TD>
    <TD STYLE="text-align: justify; text-indent: 0pt">procedures for any auction or remarketing, if any; and</TD></TR>
</TABLE>
<P STYLE="margin: 0pt">&nbsp;</P>

<TABLE BORDER="0" CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: top; text-align: justify">
    <TD STYLE="text-align: justify; width: 36pt">&nbsp;</TD>
    <TD STYLE="text-align: justify; width: 36pt; text-indent: 0pt">&bull;&#160;</TD>
    <TD STYLE="text-align: justify; text-indent: 0pt">any other specific terms, preferences, rights or limitations of, or restrictions on, the debt securities, including any events of default that are in addition to those described in this prospectus or any covenants provided with respect to the debt securities that are in addition to those described above, and any terms that may be required by us or advisable under applicable laws or regulations or advisable in connection with the marketing of the debt securities.</TD></TR>
</TABLE>
<P STYLE="margin: 0pt">&nbsp;</P>

<P STYLE="text-align: justify; text-indent: 36pt; margin: 0; font: 10pt Times New Roman, Times, Serif">We may sell the debt securities
at a substantial discount below their stated principal amount. We will describe United States federal income tax considerations,
if any, applicable to debt securities sold at an original issue discount in the prospectus supplement. An &#8220;original issue
discount security&#8221; is any debt security that provides for an amount less than the principal amount to be due and payable
upon the declaration of acceleration of the maturity under the terms of the applicable indenture. The prospectus supplement relating
to any original issue discount securities will describe the particular provisions relating to acceleration of the maturity upon
the occurrence of an event of default. In addition, we will describe United States federal income tax or other considerations applicable
to any debt securities that are denominated in a currency or unit other than United States dollars in the prospectus supplement.</P>

<P STYLE="margin: 0pt">&nbsp;</P>

<P STYLE="text-align: justify; text-indent: 0pt; margin: 0; font: 10pt Times New Roman, Times, Serif"><B>Conversion and Exchange
Rights</B></P>

<P STYLE="margin: 0pt">&nbsp;</P>

<P STYLE="text-align: justify; text-indent: 36pt; margin: 0; font: 10pt Times New Roman, Times, Serif">The applicable prospectus
supplement will describe, if applicable, the terms on which you may convert debt securities into or exchange them for common stock
or other securities or property of ours. The conversion or exchange may be mandatory or may be at your option. The prospectus supplement
will describe how the number of shares of common stock or other securities or property to be received upon conversion or exchange
would be calculated.</P>

<P STYLE="margin: 0pt">&nbsp;</P>

<P STYLE="text-align: justify; text-indent: 0pt; margin: 0; font: 10pt Times New Roman, Times, Serif"><B>Subordination of Subordinated
Debt Securities</B></P>

<P STYLE="margin: 0pt">&nbsp;</P>

<P STYLE="text-align: justify; text-indent: 36pt; margin: 0; font: 10pt Times New Roman, Times, Serif">Unless the prospectus supplement
indicates otherwise, the following provisions will apply to the subordinated debt securities. The indebtedness underlying the subordinated
debt securities will be payable only if all payments due under our senior indebtedness, including any outstanding senior debt securities,
have been made. If we distribute our assets to creditors upon any dissolution, winding-up, liquidation or reorganization or in
bankruptcy, insolvency, receivership or similar proceedings, we must first pay all amounts due or to become due on all senior indebtedness
before we pay the principal of, or any premium or interest on, the subordinated debt securities. In the event the subordinated
debt securities are accelerated because of an event of default, we may not make any payment on the subordinated debt securities
until we have paid all senior indebtedness or the acceleration is rescinded. If the payment of subordinated debt securities accelerates
because of an event of default, we must promptly notify holders of senior indebtedness of the acceleration.</P>

<P STYLE="text-align: justify; text-indent: 0pt; margin: 0">&#160;&#160;</P>

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<P STYLE="margin: 0pt">&nbsp;</P>

<P STYLE="text-align: justify; text-indent: 36pt; margin: 0; font: 10pt Times New Roman, Times, Serif">Unless otherwise indicated
in a prospectus supplement, we may not make any payment on the subordinated debt securities if a default in the payment of the
principal of, premium, if any, interest or other obligations, including a default under any repurchase or redemption obligation,
in respect of senior indebtedness occurs and continues beyond any applicable grace period. We may not make any payment on the subordinated
debt securities if any other default occurs and continues with respect to senior indebtedness that permits holders of the senior
indebtedness to accelerate its maturity and the trustee receives a notice of such default from us, a holder of such senior indebtedness
or other person permitted to give such notice. We may not resume payments on the subordinated debt securities until the defaults
are cured or certain periods pass.</P>

<P STYLE="margin: 0pt">&nbsp;</P>

<P STYLE="text-align: justify; text-indent: 36pt; margin: 0; font: 10pt Times New Roman, Times, Serif">If we experience a bankruptcy,
dissolution or reorganization, holders of senior indebtedness may receive more, ratably, and holders of subordinated debt securities
may receive less, ratably, than our other creditors.</P>

<P STYLE="margin: 0pt">&nbsp;</P>

<P STYLE="text-align: justify; text-indent: 36pt; margin: 0; font: 10pt Times New Roman, Times, Serif">The indentures in the forms
initially filed as exhibits to the registration statement of which this prospectus is a part do not limit the amount of indebtedness
which we may incur, including senior indebtedness or subordinated indebtedness, and do not limit us from issuing any other debt,
including secured debt or unsecured debt.</P>

<P STYLE="margin: 0pt">&nbsp;</P>

<P STYLE="text-align: justify; text-indent: 0pt; margin: 0; font: 10pt Times New Roman, Times, Serif"><B>Form, Exchange and Transfer</B></P>

<P STYLE="margin: 0pt">&nbsp;</P>

<P STYLE="text-align: justify; text-indent: 36pt; margin: 0; font: 10pt Times New Roman, Times, Serif">We will issue debt securities
only in fully registered form, without coupons, and, unless otherwise specified in the prospectus supplement, only in denominations
of $1,000 and any integral multiple thereof. The indentures provide that we may issue debt securities of a series in temporary
or permanent global form and as book-entry securities that will be deposited with, or on behalf of, The Depository Trust Company,
or DTC, or another depositary named by us and identified in a prospectus supplement with respect to that series. We currently anticipate
that the debt securities of each series offered and sold pursuant to this prospectus will be issued as global debt securities as
described under &#8220;Global Securities&#8221; and will trade in book-entry form only.</P>

<P STYLE="margin: 0pt">&nbsp;</P>

<P STYLE="text-align: justify; text-indent: 36pt; margin: 0; font: 10pt Times New Roman, Times, Serif">At the option of the holder,
subject to the terms of the indentures and the limitations applicable to global securities described in the applicable prospectus
supplement, the holder of the debt securities of any series can exchange the debt securities for other debt securities of the same
series, in any authorized denomination and of like tenor and aggregate principal amount.</P>

<P STYLE="margin: 0pt">&nbsp;</P>

<P STYLE="text-align: justify; text-indent: 36pt; margin: 0; font: 10pt Times New Roman, Times, Serif">Subject to the terms of
the indentures and the limitations applicable to global securities set forth in the applicable prospectus supplement, holders of
the debt securities may present the debt securities for exchange or for registration of transfer, duly endorsed or with the form
of transfer endorsed thereon duly executed if so required by us or the security registrar, at the office of the security registrar
or at the office of any transfer agent designated by us for this purpose. Unless otherwise provided in the debt securities that
the holder presents for transfer or exchange, we will make no service charge for any registration of transfer or exchange, but
we may require payment of any taxes or other governmental charges.</P>

<P STYLE="margin: 0pt">&nbsp;</P>

<P STYLE="text-align: justify; text-indent: 36pt; margin: 0; font: 10pt Times New Roman, Times, Serif">We will name in the applicable
prospectus supplement the security registrar, and any transfer agent in addition to the security registrar, that we initially designate
for any debt securities. We may at any time designate additional transfer agents or rescind the designation of any transfer agent
or approve a change in the office through which any transfer agent acts, except that we will be required to maintain a transfer
agent in each place of payment for the debt securities of each series.</P>

<P STYLE="text-align: justify; text-indent: 0pt; margin: 0">&#160;&#160;</P>

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<P STYLE="text-align: justify; text-indent: 0pt; margin: 0">&#160;&#160;</P>

<P STYLE="text-align: justify; text-indent: 36pt; margin: 0; font: 10pt Times New Roman, Times, Serif">If we elect to redeem the
debt securities of any series, we will not be required to:</P>

<P STYLE="margin: 0pt">&nbsp;</P>

<TABLE BORDER="0" CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 36pt">&nbsp;</TD>
    <TD STYLE="text-align: left; width: 36pt; text-indent: 0pt">&bull;&#160;</TD>
    <TD STYLE="text-align: justify; text-indent: 0pt">issue, register the transfer or exchange of any debt securities of any series being redeemed in part during a period beginning at the opening of business 15 days before the day of mailing of a notice of redemption of any debt securities that may be selected for redemption and ending at the close of business on the day of the mailing; or</TD></TR>
</TABLE>
<P STYLE="margin: 0pt">&nbsp;</P>

<TABLE BORDER="0" CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: top; text-align: justify">
    <TD STYLE="text-align: justify; width: 36pt">&nbsp;</TD>
    <TD STYLE="text-align: justify; width: 36pt; text-indent: 0pt">&bull;&#160;</TD>
    <TD STYLE="text-align: justify; text-indent: 0pt">register the transfer of or exchange any debt securities so selected for redemption, in whole or in part, except the unredeemed portion of any debt securities we are redeeming in part.</TD></TR>
</TABLE>
<P STYLE="margin: 0pt">&nbsp;</P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0; font: 10pt Times New Roman, Times, Serif"><B>Consolidation, Merger and
Sale of Assets</B></P>

<P STYLE="margin: 0pt">&nbsp;</P>

<P STYLE="text-align: justify; text-indent: 36pt; margin: 0; font: 10pt Times New Roman, Times, Serif">Unless otherwise specified
in the prospectus supplement, we may not consolidate with or merge into, or sell, convey, transfer, lease or otherwise dispose
of all or substantially all of our properties and assets to, any person, and shall not permit any other person to consolidate with
or merge into us, unless:</P>

<P STYLE="margin: 0pt">&nbsp;</P>

<TABLE BORDER="0" CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 36pt">&nbsp;</TD>
    <TD STYLE="text-align: left; width: 36pt; text-indent: 0pt">&bull;&#160;</TD>
    <TD STYLE="text-align: justify; text-indent: 0pt">either: (i) we are the surviving corporation or (ii) the person formed by or surviving any consolidation, amalgamation or merger or resulting from such conversion (if other than Pacific Ethanol) or to which such sale, assignment, transfer, conveyance or other disposition has been made, is a corporation, limited liability company or limited partnership organized and validly existing under the laws of the United States, any state of the United States or the District of Columbia and assumes our obligations under the debt securities and under the indentures pursuant to agreements reasonably satisfactory to the indenture trustee;</TD></TR>
</TABLE>
<P STYLE="margin: 0pt">&nbsp;</P>

<TABLE BORDER="0" CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: top; text-align: justify">
    <TD STYLE="text-align: justify; width: 36pt">&nbsp;</TD>
    <TD STYLE="text-align: justify; width: 36pt; text-indent: 0pt">&bull;&#160;</TD>
    <TD STYLE="text-align: justify; text-indent: 0pt">immediately before and after giving pro forma effect to such transaction, no event of default, and no event which, after notice or lapse of time or both, would become an event of default, has occurred and is continuing; and</TD></TR>
</TABLE>
<P STYLE="margin: 0pt">&nbsp;</P>

<TABLE BORDER="0" CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: top; text-align: justify">
    <TD STYLE="text-align: justify; width: 36pt">&nbsp;</TD>
    <TD STYLE="text-align: justify; width: 36pt; text-indent: 0pt">&bull;&#160;</TD>
    <TD STYLE="text-align: justify; text-indent: 0pt">several other conditions, including any additional conditions with respect to any particular debt securities specified in the applicable prospectus supplement, are met.</TD></TR>
</TABLE>
<P STYLE="margin: 0pt">&nbsp;</P>

<P STYLE="text-align: justify; text-indent: 36pt; margin: 0; font: 10pt Times New Roman, Times, Serif">The terms of any securities
that we may offer pursuant to this prospectus may limit our ability to merge or consolidate or otherwise sell, convey, transfer
or otherwise dispose of all or substantially all of our assets, which terms would be set forth in the applicable prospectus supplement
and supplemental indenture.</P>

<P STYLE="margin: 0pt">&nbsp;</P>

<P STYLE="text-align: justify; text-indent: 0pt; margin: 0; font: 10pt Times New Roman, Times, Serif"><B>Events of Default</B></P>

<P STYLE="margin: 0pt">&nbsp;</P>

<P STYLE="text-align: justify; text-indent: 36pt; margin: 0; font: 10pt Times New Roman, Times, Serif">Unless otherwise specified
in the applicable prospectus supplement, it is anticipated that each of the following will constitute an event of default under
the applicable indenture with respect to debt securities of any series:</P>

<P STYLE="margin: 0pt">&nbsp;</P>

<TABLE BORDER="0" CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 36pt">&nbsp;</TD>
    <TD STYLE="text-align: left; width: 36pt; text-indent: 0pt">&bull;&#160;</TD>
    <TD STYLE="text-align: justify; text-indent: 0pt">failure to pay principal of or any premium on any debt security of that series when due, whether or not, in the case of subordinated debt securities, such payment is prohibited by the subordination provisions of the subordinated indenture;</TD></TR>
</TABLE>
<P STYLE="margin: 0pt">&nbsp;</P>

<TABLE BORDER="0" CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 36pt">&nbsp;</TD>
    <TD STYLE="text-align: left; width: 36pt; text-indent: 0pt">&bull;&#160;</TD>
    <TD STYLE="text-align: justify; text-indent: 0pt">failure to pay any interest on any debt securities of that series when due, continued for 30 days, whether or not, in the case of subordinated debt securities, such payment is prohibited by the subordination provisions of the subordinated indenture;</TD></TR>
</TABLE>
<P STYLE="text-align: justify; text-indent: 0pt; margin: 0">&#160;&#160;</P>

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    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
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<P STYLE="text-align: justify; text-indent: 0pt; margin: 0">&#160;&#160;&#160;</P>

<TABLE BORDER="0" CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 36pt">&nbsp;</TD>
    <TD STYLE="text-align: left; width: 36pt; text-indent: 0pt">&bull;&#160;</TD>
    <TD STYLE="text-align: justify; text-indent: 0pt">failure to deposit any sinking fund payment, when due, in respect of any debt security of that series, whether or not, in the case of subordinated debt securities, such deposit is prohibited by the subordination provisions of the subordinated indenture;</TD></TR>
</TABLE>
<P STYLE="margin: 0pt">&nbsp;</P>

<TABLE BORDER="0" CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 36pt">&nbsp;</TD>
    <TD STYLE="text-align: left; width: 36pt; text-indent: 0pt">&bull;&#160;</TD>
    <TD STYLE="text-align: justify; text-indent: 0pt">failure to perform or comply with the provisions described under &#8220;&#8212;Consolidation, Merger and Sale of Assets&#8221;;</TD></TR>
</TABLE>
<P STYLE="margin: 0pt">&nbsp;</P>

<TABLE BORDER="0" CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 36pt">&nbsp;</TD>
    <TD STYLE="text-align: left; width: 36pt; text-indent: 0pt">&bull;&#160;</TD>
    <TD STYLE="text-align: justify; text-indent: 0pt">failure to perform any of our other covenants in such indenture (other than a covenant included in such indenture solely for the benefit of a series other than that series), continued for 60 days after written notice has been given to us by the applicable indenture trustee, or the holders of at least 25% in principal amount of the outstanding debt securities of that series, as provided in such indenture; and</TD></TR>
</TABLE>
<P STYLE="margin: 0pt">&nbsp;</P>

<TABLE BORDER="0" CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 36pt">&nbsp;</TD>
    <TD STYLE="text-align: left; width: 36pt; text-indent: 0pt">&bull;&#160;</TD>
    <TD STYLE="text-align: justify; text-indent: 0pt">certain events of bankruptcy, insolvency or reorganization affecting us or any significant subsidiary.</TD></TR>
</TABLE>
<P STYLE="margin: 0pt">&nbsp;</P>

<P STYLE="text-align: justify; text-indent: 36pt; margin: 0; font: 10pt Times New Roman, Times, Serif">If an event of default (other
than an event of default with respect to Pacific Ethanol described in the last item listed above) with respect to the debt securities
of any series at the time outstanding occurs and is continuing, either the applicable trustee or the holders of at least 25% in
principal amount of the outstanding debt securities of that series by notice as provided in the applicable indenture may declare
the principal amount of the debt securities of that series (or, in the case of any debt security that is an original issue discount
debt security, such portion of the principal amount of such debt security as may be specified in the terms of such debt security)
to be due and payable immediately, together with any accrued and unpaid interest thereon. If an event of default with respect to
Pacific Ethanol described in the last item listed above with respect to the debt securities of any series at the time outstanding
occurs, the principal amount of all the debt securities of that series (or, in the case of any such original issue discount security,
such specified amount) will automatically, and without any action by the applicable trustee or any holder, become immediately due
and payable, together with any accrued and unpaid interest thereon. After any such acceleration, but before a judgment or decree
based on acceleration, the holders of a majority in principal amount of the outstanding debt securities of that series may, under
certain circumstances, rescind and annul such acceleration if all events of default, other than the non-payment of accelerated
principal (or other specified amount), have been cured or waived as provided in the applicable Indenture. For information as to
waiver of defaults, see &#8220;&#8212;Modification and Waiver&#8221; below.</P>

<P STYLE="margin: 0pt">&nbsp;</P>

<P STYLE="text-align: justify; text-indent: 36pt; margin: 0; font: 10pt Times New Roman, Times, Serif">Subject to the provisions
in the indentures relating to the duties of the trustees in case an event of default has occurred and is continuing, each trustee
will be under no obligation to exercise any of its rights or powers under the applicable indenture at the request or direction
of any of the holders, unless such holders have offered to such trustee reasonable security or indemnity. Subject to such provisions
for the indemnification of the trustees, the holders of a majority in principal amount of the outstanding debt securities of any
series will have the right to direct the time, method and place of conducting any proceeding for any remedy available to the trustee
or exercising any trust or power conferred on the trustee with respect to the debt securities of that series.</P>

<P STYLE="margin: 0pt">&nbsp;</P>

<P STYLE="text-align: justify; text-indent: 36pt; margin: 0; font: 10pt Times New Roman, Times, Serif">No holder of a debt security
of any series will have any right to institute any proceeding with respect to the applicable indenture, or for the appointment
of a receiver or a trustee, or for any other remedy thereunder, unless:</P>

<P STYLE="margin: 0pt">&nbsp;</P>

<TABLE BORDER="0" CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 36pt">&nbsp;</TD>
    <TD STYLE="text-align: left; width: 36pt; text-indent: 0pt">&bull;&#160;</TD>
    <TD STYLE="text-align: justify; text-indent: 0pt">such holder has previously given to the trustee under the applicable indenture written notice of a continuing event of default with respect to the debt securities of that series;</TD></TR>
</TABLE>
<P STYLE="margin: 0pt">&nbsp;</P>

<TABLE BORDER="0" CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 36pt">&nbsp;</TD>
    <TD STYLE="text-align: left; width: 36pt; text-indent: 0pt">&bull;&#160;</TD>
    <TD STYLE="text-align: justify; text-indent: 0pt">the holders of not less than 25% in principal amount of the outstanding debt securities of that series have made written request, and such holder or holders have offered reasonable indemnity, to the trustee to institute such proceeding as trustee; and</TD></TR>
</TABLE>
<P STYLE="margin: 0pt">&nbsp;</P>

<TABLE BORDER="0" CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 36pt">&nbsp;</TD>
    <TD STYLE="text-align: left; width: 36pt; text-indent: 0pt">&bull;&#160;</TD>
    <TD STYLE="text-align: justify; text-indent: 0pt">the trustee has failed to institute such proceeding, and has not received from the holders of a majority in principal amount of the outstanding debt securities of that series a direction inconsistent with such request, within 60 days after such notice, request and offer.</TD></TR>
</TABLE>
<P STYLE="text-align: justify; text-indent: 0pt; margin: 0">&#160;&#160;</P>

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<P STYLE="text-align: justify; text-indent: 0pt; margin: 0">&#160;&#160;</P>

<P STYLE="text-align: justify; text-indent: 36pt; margin: 0; font: 10pt Times New Roman, Times, Serif">However, such limitations
do not apply to a suit instituted by a holder of a debt security for the enforcement of payment of the principal of or any premium
or interest on such debt security on or after the applicable due date specified in such debt security.</P>

<P STYLE="margin: 0pt">&nbsp;</P>

<P STYLE="text-align: justify; text-indent: 36pt; margin: 0; font: 10pt Times New Roman, Times, Serif">We will be required to furnish
to each trustee annually, within 150 days after the end of each fiscal year, a certificate by certain of our officers as to whether
or not we, to their knowledge, are in default in the performance or observance of any of the terms, provisions and conditions of
the applicable indenture and, if so, specifying all such known defaults.</P>

<P STYLE="margin: 0pt">&nbsp;</P>

<P STYLE="text-align: justify; text-indent: 0pt; margin: 0; font: 10pt Times New Roman, Times, Serif"><B>Modification and Waiver</B></P>

<P STYLE="margin: 0pt">&nbsp;</P>

<P STYLE="text-align: justify; text-indent: 36pt; margin: 0; font: 10pt Times New Roman, Times, Serif">Unless otherwise specified
in the prospectus supplement, modifications and amendments of an indenture may be made by us and the applicable trustee with the
consent of the holders of a majority in principal amount of the outstanding debt securities of each series affected by such modification
or amendment.&#160;&#160;However, no such modification or amendment may, without the consent of the holder of each outstanding
debt security affected thereby:</P>

<P STYLE="margin: 0pt">&nbsp;</P>

<TABLE BORDER="0" CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 36pt">&nbsp;</TD>
    <TD STYLE="text-align: left; width: 36pt; text-indent: 0pt">&bull;&#160;</TD>
    <TD STYLE="text-align: justify; text-indent: 0pt">change the stated maturity of the principal of, or time for payment of any installment of principal of or interest on, any debt security;</TD></TR>
</TABLE>
<P STYLE="margin: 0pt">&nbsp;</P>

<TABLE BORDER="0" CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 36pt">&nbsp;</TD>
    <TD STYLE="text-align: left; width: 36pt; text-indent: 0pt">&bull;&#160;</TD>
    <TD STYLE="text-align: justify; text-indent: 0pt">reduce the principal amount of, or any premium or the rate of interest on, any debt security;</TD></TR>
</TABLE>
<P STYLE="margin: 0pt">&nbsp;</P>

<TABLE BORDER="0" CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 36pt">&nbsp;</TD>
    <TD STYLE="text-align: left; width: 36pt; text-indent: 0pt">&bull;&#160;</TD>
    <TD STYLE="text-align: justify; text-indent: 0pt">reduce the amount of principal of an original issue discount security or any other debt security payable upon acceleration of the maturity thereof;</TD></TR>
</TABLE>
<P STYLE="margin: 0pt">&nbsp;</P>

<TABLE BORDER="0" CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 36pt">&nbsp;</TD>
    <TD STYLE="text-align: left; width: 36pt; text-indent: 0pt">&bull;&#160;</TD>
    <TD STYLE="text-align: justify; text-indent: 0pt">change the place or the coin or currency of payment of principal of, or any premium or interest on, any debt security;</TD></TR>
</TABLE>
<P STYLE="margin: 0pt">&nbsp;</P>

<TABLE BORDER="0" CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 36pt">&nbsp;</TD>
    <TD STYLE="text-align: left; width: 36pt; text-indent: 0pt">&bull;&#160;</TD>
    <TD STYLE="text-align: justify; text-indent: 0pt">impair the right to institute suit for the enforcement of any payment due on any debt security;</TD></TR>
</TABLE>
<P STYLE="margin: 0pt">&nbsp;</P>

<TABLE BORDER="0" CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 36pt">&nbsp;</TD>
    <TD STYLE="text-align: left; width: 36pt; text-indent: 0pt">&bull;&#160;</TD>
    <TD STYLE="text-align: justify; text-indent: 0pt">modify the subordination provisions in the case of subordinated debt securities;</TD></TR>
</TABLE>
<P STYLE="margin: 0pt">&nbsp;</P>

<TABLE BORDER="0" CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 36pt">&nbsp;</TD>
    <TD STYLE="text-align: left; width: 36pt; text-indent: 0pt">&bull;&#160;</TD>
    <TD STYLE="text-align: justify; text-indent: 0pt">reduce the percentage in principal amount of outstanding debt securities of any series, the consent of whose holders is required for modification or amendment of the indenture;</TD></TR>
</TABLE>
<P STYLE="margin: 0pt">&nbsp;</P>

<TABLE BORDER="0" CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 36pt">&nbsp;</TD>
    <TD STYLE="text-align: left; width: 36pt; text-indent: 0pt">&bull;&#160;</TD>
    <TD STYLE="text-align: justify; text-indent: 0pt">reduce the percentage in principal amount of outstanding debt securities of any series necessary for waiver of compliance with certain provisions of the indenture or for waiver of certain defaults; or</TD></TR>
</TABLE>
<P STYLE="margin: 0pt">&nbsp;</P>

<TABLE BORDER="0" CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 36pt">&nbsp;</TD>
    <TD STYLE="text-align: left; width: 36pt; text-indent: 0pt">&bull;&#160;</TD>
    <TD STYLE="text-align: justify; text-indent: 0pt">modify such provisions with respect to modification, amendment or waiver, except to increase any such percentage or to provide that certain other provisions of the indenture cannot be modified or waived without the consent of the holder of each outstanding debt security affected thereby.</TD></TR>
</TABLE>
<P STYLE="text-align: justify; text-indent: 0pt; margin: 0">&#160;&#160;</P>

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<P STYLE="text-align: justify; text-indent: 0pt; margin: 0">&#160;&#160;</P>

<P STYLE="text-align: justify; text-indent: 36pt; margin: 0; font: 10pt Times New Roman, Times, Serif">The holders of a majority
in principal amount of the outstanding debt securities of any series may waive compliance by us with certain restrictive provisions
of the applicable indenture. The holders of a majority in principal amount of the outstanding debt securities of any series may
waive any past default under the applicable indenture, except a default in the payment of principal, premium or interest and certain
covenants and provisions of the indenture which cannot be amended without the consent of the holder of each outstanding debt security
of such series.</P>

<P STYLE="margin: 0pt">&nbsp;</P>

<P STYLE="text-align: justify; text-indent: 36pt; margin: 0; font: 10pt Times New Roman, Times, Serif">Each of the indentures provides
that in determining whether the holders of the requisite principal amount of the outstanding debt securities have given or taken
any direction, notice, consent, waiver or other action under such indenture as of any date:</P>

<P STYLE="margin: 0pt">&nbsp;</P>

<TABLE BORDER="0" CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 36pt">&nbsp;</TD>
    <TD STYLE="text-align: left; width: 36pt; text-indent: 0pt">&bull;&#160;</TD>
    <TD STYLE="text-align: justify; text-indent: 0pt">the principal amount of an original issue discount security that will be deemed to be outstanding will be the amount of the principal that would be due and payable as of such date upon acceleration of maturity to such date;</TD></TR>
</TABLE>
<P STYLE="margin: 0pt">&nbsp;</P>

<TABLE BORDER="0" CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 36pt">&nbsp;</TD>
    <TD STYLE="text-align: left; width: 36pt; text-indent: 0pt">&bull;&#160;</TD>
    <TD STYLE="text-align: justify; text-indent: 0pt">the principal amount of a debt security denominated in one or more foreign currencies or currency units that will he deemed to be outstanding will be the United States-dollar equivalent, determined as of such date in the manner prescribed for such debt security, of the principal amount of such debt security (or, in the case of an original issue discount security the United States dollar equivalent on the date of original issuance of such security of the amount determined as provided immediately above); and</TD></TR>
</TABLE>
<P STYLE="margin: 0pt">&nbsp;</P>

<TABLE BORDER="0" CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 36pt">&nbsp;</TD>
    <TD STYLE="text-align: left; width: 36pt; text-indent: 0pt">&bull;&#160;</TD>
    <TD STYLE="text-align: justify; text-indent: 0pt">certain debt securities, including those owned by us or any of our other affiliates, will not be deemed to be outstanding.</TD></TR>
</TABLE>
<P STYLE="margin: 0pt">&nbsp;</P>

<P STYLE="text-align: justify; text-indent: 36pt; margin: 0; font: 10pt Times New Roman, Times, Serif">Except in certain limited
circumstances, we will be entitled to set any day as a record date for the purpose of determining the holders of outstanding debt
securities of any series entitled to give or take any direction, notice, consent, waiver or other action under the applicable indenture,
in the manner and subject to the limitations provided in the indenture. In certain limited circumstances, the trustee will be entitled
to set a record date for action by holders. If a record date is set for any action to be taken by holders of a particular series,
only persons who are holders of outstanding debt securities of that series on the record date may take such action.</P>

<P STYLE="margin: 0pt">&nbsp;</P>

<P STYLE="text-align: justify; text-indent: 0pt; margin: 0; font: 10pt Times New Roman, Times, Serif"><B>Optional Redemption</B></P>

<P STYLE="margin: 0pt">&nbsp;</P>

<P STYLE="text-align: justify; text-indent: 36pt; margin: 0; font: 10pt Times New Roman, Times, Serif">If specified in the applicable
prospectus supplement, we may elect to redeem all or part of the outstanding debt securities of a series from time to time before
the maturity date of the debt securities of that series. Upon such election, we will notify the indenture trustee of the redemption
date and the principal amount of debt securities of the series to be redeemed. If less than all the debt securities of the series
are to be redeemed, the particular debt securities of that series to be redeemed will be selected by the depositary in accordance
with its procedures. The applicable prospectus supplement will specify the redemption price for the debt securities to be redeemed
(or the method of calculating such price), in each case in accordance with the terms and conditions of those debt securities.</P>

<P STYLE="text-align: justify; text-indent: 0pt; margin: 0">&#160;&#160;</P>

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<P STYLE="text-align: justify; text-indent: 0pt; margin: 0">&#160;&#160;</P>

<P STYLE="text-align: justify; text-indent: 36pt; margin: 0; font: 10pt Times New Roman, Times, Serif">Notice of redemption will
be given to each holder of the debt securities to be redeemed not less than 30 nor more than 60 days prior to the date set for
such redemption. This notice will include the following information, as applicable: the redemption date; the redemption price (or
the method of calculating such price); if less than all of the outstanding debt securities of such series are to be redeemed, the
identification (and, in the case of partial redemption, the respective principal amounts) of the particular debt securities to
be redeemed; that on the redemption date the redemption price will become due and payable upon each security to be redeemed and,
if applicable, that interest thereon will cease to accrue after such date; the place or places where such debt securities are to
be surrendered for payment of the redemption price; and that the redemption is for a sinking fund, if such is the case.</P>

<P STYLE="margin: 0pt">&nbsp;</P>

<P STYLE="text-align: justify; text-indent: 36pt; margin: 0; font: 10pt Times New Roman, Times, Serif">Prior to any redemption
date, we will deposit or cause to be deposited with the indenture trustee or with a paying agent (or, if we are acting as our own
paying agent with respect to the debt securities being redeemed, we will segregate and hold in trust as provided in the applicable
indenture) an amount of money sufficient to pay the aggregate redemption price of, and (except if the redemption date shall be
an interest payment date or the debt securities of such series provide otherwise) accrued interest on, all of the debt securities
or the part thereof to be redeemed on that date. On the redemption date, the redemption price will become due and payable upon
all of the debt securities to be redeemed, and interest, if any, on the debt securities to be redeemed will cease to accrue from
and after that date. Upon surrender of any such debt securities for redemption, we will pay those debt securities surrendered at
the redemption price together, if applicable, with accrued interest to the redemption date.</P>

<P STYLE="margin: 0pt">&nbsp;</P>

<P STYLE="text-align: justify; text-indent: 36pt; margin: 0; font: 10pt Times New Roman, Times, Serif">Any debt securities to be
redeemed only in part must be surrendered at the office or agency established by us for such purpose, and we will execute, and
the indenture trustee will authenticate and deliver to a holder without service charge, new debt securities of the same series
and of like tenor, of any authorized denominations as requested by that holder, in a principal amount equal to and in exchange
for the unredeemed portion of the debt securities that holder surrenders.</P>

<P STYLE="margin: 0pt">&nbsp;</P>

<P STYLE="text-align: justify; text-indent: 0pt; margin: 0; font: 10pt Times New Roman, Times, Serif"><B>Satisfaction and Discharge</B></P>

<P STYLE="margin: 0pt">&nbsp;</P>

<P STYLE="text-align: justify; text-indent: 36pt; margin: 0; font: 10pt Times New Roman, Times, Serif">Each indenture will be discharged
and will cease to be of further effect as to all outstanding debt securities of any series issued thereunder, when:</P>

<P STYLE="margin: 0pt">&nbsp;</P>

<TABLE BORDER="0" CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 36pt">&nbsp;</TD>
    <TD STYLE="text-align: left; width: 36pt; text-indent: 0pt">&bull;&#160;</TD>
    <TD STYLE="text-align: left; text-indent: 0pt">either:</TD></TR>
</TABLE>
<P STYLE="margin: 0pt">&nbsp;</P>

<TABLE BORDER="0" CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 72pt">&nbsp;</TD>
    <TD STYLE="text-align: left; width: 36pt; text-indent: 0pt">o&#160;</TD>
    <TD STYLE="text-align: justify; text-indent: 0pt">all outstanding debt securities of that series that have been authenticated (except lost, stolen or destroyed debt securities that have been replaced or paid and debt securities for whose payment money has theretofore been deposited in trust and thereafter repaid to us or discharged from such trust) have been delivered to the trustee for cancellation; or</TD></TR>
</TABLE>
<P STYLE="margin: 0pt">&nbsp;</P>

<TABLE BORDER="0" CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 72pt">&nbsp;</TD>
    <TD STYLE="text-align: left; width: 36pt; text-indent: 0pt">o&#160;</TD>
    <TD STYLE="text-align: justify; text-indent: 0pt">all outstanding debt securities of that series that have not been delivered to the trustee for cancellation have become due and payable or will become due and payable at their stated maturity within one year or are to be called for redemption within one year under arrangements satisfactory to the trustee;</TD></TR>
</TABLE>
<P STYLE="margin: 0pt">&nbsp;</P>

<P STYLE="text-align: justify; text-indent: 0pt; margin: 0 0 0 72pt; font: 10pt Times New Roman, Times, Serif">and in either case
we have irrevocably deposited with the trustee as trust funds for such purpose money in an amount sufficient, without consideration
of any reinvestment of interest, to pay and discharge the entire indebtedness of such debt securities not delivered to the trustee
for cancellation, for principal, premium, if any, and accrued interest to the date of such deposit (in the case of debt securities
that have become due and payable) or to the stated maturity or redemption date;</P>

<P STYLE="text-align: justify; text-indent: 0pt; margin: 0">&#160;&#160;&#160;</P>

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<P STYLE="text-align: justify; text-indent: 0pt; margin: 0">&#160;&#160;</P>

<TABLE BORDER="0" CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 36pt">&nbsp;</TD>
    <TD STYLE="text-align: left; width: 36pt; text-indent: 0pt">&bull;&#160;</TD>
    <TD STYLE="text-align: justify; text-indent: 0pt">we have paid or caused to be paid all other sums payable by us under the indenture with respect to the debt securities of that series; and</TD></TR>
</TABLE>
<P STYLE="margin: 0pt">&nbsp;</P>

<TABLE BORDER="0" CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 36pt">&nbsp;</TD>
    <TD STYLE="text-align: left; width: 36pt; text-indent: 0pt">&bull;&#160;</TD>
    <TD STYLE="text-align: justify; text-indent: 0pt">we have delivered an officer&#8217;s certificate and an opinion of counsel to the trustee stating that all conditions precedent to satisfaction and discharge of the indenture with respect to the debt securities of that series have been complied with.</TD></TR>
</TABLE>
<P STYLE="margin: 0pt">&nbsp;</P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0; font: 10pt Times New Roman, Times, Serif"><B>Legal Defeasance and Covenant
Defeasance</B></P>

<P STYLE="margin: 0pt">&nbsp;</P>

<P STYLE="text-align: justify; text-indent: 36pt; margin: 0; font: 10pt Times New Roman, Times, Serif">If and to the extent indicated
in the applicable prospectus supplement, we may elect, at our option at any time, to have provisions of the indentures relating
to defeasance and discharge of indebtedness, which we call &#8220;legal defeasance,&#8221; relating to defeasance of certain restrictive
covenants applied to the debt securities of any series, or to any specified part of a series, which we call &#8220;covenant defeasance.&#8221;</P>

<P STYLE="margin: 0pt">&nbsp;</P>

<P STYLE="text-align: justify; text-indent: 36pt; margin: 0; font: 10pt Times New Roman, Times, Serif"><I>Legal Defeasance</I>.&#160;&#160;The
indentures provide that, upon our exercise of our option (if any) to have the provisions relating to legal defeasance applied to
any debt securities, we will be discharged from all our obligations, and, if such debt securities are subordinated debt securities,
the provisions of the subordinated indenture relating to subordination will cease to be effective, with respect to such debt securities
(except for certain obligations to convert, exchange or register the transfer of debt securities, to replace stolen, lost or mutilated
debt securities, to maintain paying agencies and to hold moneys for payment in trust) upon the deposit in trust for the benefit
of the holders of such debt securities of money or United States government obligations, or both, which, through the payment of
principal and interest in respect thereof in accordance with their terms, will provide money in an amount sufficient to pay the
principal of and any premium and interest on such debt securities on the respective stated maturities in accordance with the terms
of the applicable indenture and such debt securities. Such defeasance or discharge may occur only if, among other things:</P>

<P STYLE="margin: 0pt">&nbsp;</P>

<TABLE BORDER="0" CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 36pt">&nbsp;</TD>
    <TD STYLE="text-align: left; width: 36pt; text-indent: 0pt">&bull;&#160;</TD>
    <TD STYLE="text-align: justify; text-indent: 0pt">we have delivered to the applicable trustee an opinion of counsel to the effect that we have received from, or there has been published by, the United States Internal Revenue Service a ruling, or there has been a change in tax law, in either case to the effect that holders of such debt securities will not recognize gain or loss for federal income tax purposes as a result of such deposit and legal defeasance and will be subject to federal income tax on the same amount, in the same manner and at the same times as would have been the case if such deposit and legal defeasance were not to occur;</TD></TR>
</TABLE>
<P STYLE="margin: 0pt">&nbsp;</P>

<TABLE BORDER="0" CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 36pt">&nbsp;</TD>
    <TD STYLE="text-align: left; width: 36pt; text-indent: 0pt">&bull;&#160;</TD>
    <TD STYLE="text-align: justify; text-indent: 0pt">no event of default or event that with the passing of time or the giving of notice, or both, shall constitute an event of default shall have occurred and be continuing at the time of such deposit;</TD></TR>
</TABLE>
<P STYLE="margin: 0pt">&nbsp;</P>

<TABLE BORDER="0" CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 36pt">&nbsp;</TD>
    <TD STYLE="text-align: left; width: 36pt; text-indent: 0pt">&bull;&#160;</TD>
    <TD STYLE="text-align: justify; text-indent: 0pt">such deposit and legal defeasance will not result in a breach or violation of, or constitute a default under, any agreement or instrument (other than the applicable indenture) to which we are a party or by which we are bound;</TD></TR>
</TABLE>
<P STYLE="margin: 0pt">&nbsp;</P>

<TABLE BORDER="0" CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 36pt">&nbsp;</TD>
    <TD STYLE="text-align: left; width: 36pt; text-indent: 0pt">&bull;&#160;</TD>
    <TD STYLE="text-align: justify; text-indent: 0pt">we must deliver to the trustee an officer&#8217;s certificate stating that the deposit was not made by us with the intent of preferring the holders of the debt securities over any of our other creditors or with the intent of defeating, hindering, delaying or defrauding any of our other creditors or others;</TD></TR>
</TABLE>
<P STYLE="text-align: justify; text-indent: 0pt; margin: 0 0 0 27pt">&#160;&#160;</P>

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<P STYLE="text-align: justify; text-indent: 0pt; margin: 0 0 0 27pt">&#160;&#160;</P>

<TABLE BORDER="0" CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 36pt">&nbsp;</TD>
    <TD STYLE="text-align: left; width: 36pt; text-indent: 0pt">&bull;&#160;</TD>
    <TD STYLE="text-align: justify; text-indent: 0pt">we must deliver to the trustee an officer&#8217;s certificate stating that all conditions precedent set forth in the items set forth immediately above and the item set forth immediately below, as applicable, have been complied with;</TD></TR>
</TABLE>
<P STYLE="margin: 0pt">&nbsp;</P>

<TABLE BORDER="0" CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 36pt">&nbsp;</TD>
    <TD STYLE="text-align: left; width: 36pt; text-indent: 0pt">&bull;&#160;</TD>
    <TD STYLE="text-align: justify; text-indent: 0pt">in the case of subordinated debt securities, at the time of such deposit, no default in the payment of all or a portion of principal of (or premium, if any) or interest on any of our senior debt shall have occurred and be continuing, no event of default shall have resulted in the acceleration of any of our senior debt and no other event of default with respect to any of our senior debt shall have occurred and be continuing permitting after notice or the lapse of time, or both, the acceleration thereof: and</TD></TR>
</TABLE>
<P STYLE="margin: 0pt">&nbsp;</P>

<TABLE BORDER="0" CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 36pt">&nbsp;</TD>
    <TD STYLE="text-align: left; width: 36pt; text-indent: 0pt">&bull;&#160;</TD>
    <TD STYLE="text-align: justify; text-indent: 0pt">we have delivered to the trustee an opinion of counsel to the effect that all conditions precedent set forth in first, third or fourth item above have been complied with.</TD></TR>
</TABLE>
<P STYLE="margin: 0pt">&nbsp;</P>

<P STYLE="text-align: justify; text-indent: 36pt; margin: 0; font: 10pt Times New Roman, Times, Serif"><I>Covenant Defeasance</I>.&#160;&#160;The
indentures provide that, upon our exercise of our option (if any) to have the covenant defeasance provisions applied to any debt
securities, we may omit to comply with certain restrictive covenants (but not to conversion, if applicable), including those that
may be described in the applicable prospectus supplement, the occurrence of certain events of default, which are described above
in the fifth item listed under &#8220;Events of Default&#8221; above and any that may be described in the applicable prospectus
supplement, will not be deemed to either be or result in an event of default and, if such debt securities are subordinated debt
securities, the provisions of the subordinated indenture relating to subordination will cease to be effective, in each case with
respect to such debt securities. In order to exercise such option, we must deposit, in trust for the benefit of the holders of
such debt securities, money or United States government obligations, or both, which, through the payment of principal and interest
in respect thereof in accordance with their terms, will provide money in an amount sufficient to pay the principal of and any premium
and interest on such debt securities on the respective stated maturities in accordance with the terms of the applicable indenture
and such debt securities. Such covenant defeasance may occur only if we have delivered to the applicable trustee an opinion of
counsel that in effect says that holders of such debt securities will not recognize gain or loss for federal income tax purposes
as a result of such deposit and covenant defeasance and will be subject to federal income tax on the same amount, in the same manner
and at the same times as would have been the case if such deposit and covenant defeasance were not to occur, and the requirements
set forth in the second, third, fourth, fifth, sixth and seventh items above are satisfied. If we exercise this option with respect
to any debt securities and such debt securities were declared due and payable because of the occurrence of any event of default,
the amount of money and United States government obligations so deposited in trust would be sufficient to pay amounts due on such
debt securities at the time of their respective stated maturities but may not be sufficient to pay amounts due on such debt securities
upon any acceleration resulting from such event of default. In such case, we would remain liable for such payments.</P>

<P STYLE="margin: 0pt">&nbsp;</P>

<P STYLE="text-align: justify; text-indent: 0pt; margin: 0; font: 10pt Times New Roman, Times, Serif"><B>Notices</B></P>

<P STYLE="margin: 0pt">&nbsp;</P>

<P STYLE="text-align: justify; text-indent: 36pt; margin: 0; font: 10pt Times New Roman, Times, Serif">We will mail notices to
holders of debt securities at the addresses that appear in the security register.</P>

<P STYLE="margin: 0pt">&nbsp;</P>

<P STYLE="text-align: justify; text-indent: 0pt; margin: 0; font: 10pt Times New Roman, Times, Serif"><B>Title</B></P>

<P STYLE="margin: 0pt">&nbsp;</P>

<P STYLE="text-align: justify; text-indent: 36pt; margin: 0; font: 10pt Times New Roman, Times, Serif">We may treat the person
in whose name a debt security is registered as the absolute owner, whether or not such debt security may be overdue, for the purpose
of making payment and for all other purposes.</P>

<P STYLE="text-align: justify; text-indent: 0pt; margin: 0">&#160;&#160;</P>

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<P STYLE="text-align: justify; text-indent: 0pt; margin: 0">&#160;&#160;</P>

<P STYLE="text-align: justify; text-indent: 0pt; margin: 0; font: 10pt Times New Roman, Times, Serif"><B>Information Concerning
the Indenture Trustee</B></P>

<P STYLE="margin: 0pt">&nbsp;</P>

<P STYLE="text-align: justify; text-indent: 36pt; margin: 0; font: 10pt Times New Roman, Times, Serif">The indenture trustee undertakes
to perform only those duties as are specifically set forth in the applicable indenture. The indenture trustee must use the same
degree of care as a prudent person would exercise or use in the conduct of his or her own affairs. The indenture trustee shall
be under no obligation to exercise any of the rights or powers vested in it by an indenture at the request or direction of any
of the applicable holders pursuant to such indenture unless such holders shall have offered to the indenture trustee security or
indemnity satisfactory to the trustee against the costs, expenses and liabilities which might be incurred by it in compliance with
such request or direction.</P>

<P STYLE="margin: 0pt">&nbsp;</P>

<P STYLE="text-align: justify; text-indent: 0pt; margin: 0; font: 10pt Times New Roman, Times, Serif"><B>Payment and Paying Agents</B></P>

<P STYLE="margin: 0pt">&nbsp;</P>

<P STYLE="text-align: justify; text-indent: 36pt; margin: 0; font: 10pt Times New Roman, Times, Serif">Unless otherwise indicated
in the applicable prospectus supplement, payment of interest on a debt security on any interest payment date will be made to the
person in whose name such debt security (or one or more predecessor securities) is registered at the close of business on the regular
record date for such interest.</P>

<P STYLE="margin: 0pt">&nbsp;</P>

<P STYLE="text-align: justify; text-indent: 36pt; margin: 0; font: 10pt Times New Roman, Times, Serif">Unless otherwise indicated
in the applicable prospectus supplement, principal of and any premium and interest on the debt securities of a particular series
will be payable at the office of such paying agent or paying agents as we may designate for such purpose from time to time, except
that at our option payment of any interest on debt securities in certificated loan may be made by check mailed to the address of
the person entitled thereto as such address appears in the security register. Unless otherwise indicated in the applicable prospectus
supplement, the corporate trust office of the trustee under the senior indenture in The City of New York will be designated as
sole paying agent for payments with respect to senior debt securities of each series, and the corporate trust office of the trustee
under the subordinated indenture in The City of New York will be designated as the sole paying agent for payment with respect to
subordinated debt securities of each series. Any other paying agents initially designated by us for the debt securities of a particular
series will be named in the applicable prospectus supplement. We may at any time designate additional paying agents or rescind
the designation of any paying agent or approve a change in the office through which any paying agent acts, except that we will
be required to maintain a paying agent in each place of payment for the debt securities of a particular series.</P>

<P STYLE="margin: 0pt">&nbsp;</P>

<P STYLE="text-align: justify; text-indent: 36pt; margin: 0; font: 10pt Times New Roman, Times, Serif">All money paid by us to
a paying agent for the payment of the principal of or any premium or interest on any debt security which remain unclaimed at the
end of two years after such principal, premium or interest has become due and payable will be repaid to us, and the holder of such
debt security thereafter may look only to us for payment.</P>

<P STYLE="margin: 0pt">&nbsp;</P>

<P STYLE="text-align: justify; text-indent: 0pt; margin: 0; font: 10pt Times New Roman, Times, Serif"><B>Governing Law</B></P>

<P STYLE="margin: 0pt">&nbsp;</P>

<P STYLE="text-align: justify; text-indent: 36pt; margin: 0; font: 10pt Times New Roman, Times, Serif">The indentures and the
debt securities will be governed by and construed in accordance with the laws of the state of New York.&nbsp;</P>

<P STYLE="margin: 0pt">&nbsp;</P>

<P STYLE="margin: 0pt">&nbsp;</P>

<P STYLE="margin-top: 0pt; text-align: center; margin-bottom: 0pt"><B>DESCRIPTION OF CAPITAL STOCK</B></P>

<P STYLE="margin: 0pt">&nbsp;</P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0; font: 10pt Times New Roman, Times, Serif"><B>Authorized and Outstanding
Capital Stock</B></P>

<P STYLE="margin: 0pt">&nbsp;</P>

<P STYLE="text-align: justify; text-indent: 36pt; margin: 0; font: 10pt Times New Roman, Times, Serif">Our authorized capital stock
consists of 300,000,000 shares of common stock, $0.001 par value per share, and 10,000,000 shares of preferred stock, $0.001 par
value per share, of which 1,684,375 shares are designated as Series&#160;A Preferred Stock and 1,580,790 shares are designated
as Series&#160;B Preferred Stock.&#160;&#160;As of May 10, 2012, there were 86,801,993 shares of common stock, no shares of Series
A Preferred Stock and 926,942 shares of Series B Preferred Stock issued and outstanding.&#160;&#160;On June 8, 2011, we effected
a one-for-seven reverse split of our common stock.&#160;&#160;All share information contained in this prospectus reflects the effect
of this reverse stock split.&#160;&#160;The following description of our capital stock does not purport to be complete and should
be reviewed in conjunction with our certificate of incorporation, including our Certificate of Designations, Powers, Preferences
and Rights of the Series&#160;A Preferred Stock, or Series A Certificate of Designations, our Certificate of Designations, Powers,
Preferences and Rights of the Series&#160;B Preferred Stock, or Series&#160;B Certificate of Designations, and our bylaws.</P>

<P STYLE="text-align: justify; text-indent: 0pt; margin: 0">&#160;&#160;</P>

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<P STYLE="text-align: justify; text-indent: 0pt; margin: 0">&#160;&#160;</P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0; font: 10pt Times New Roman, Times, Serif"><B>Common Stock</B></P>

<P STYLE="margin: 0pt">&nbsp;</P>

<P STYLE="text-align: justify; text-indent: 36pt; margin: 0; font: 10pt Times New Roman, Times, Serif">All outstanding shares of
common stock are fully paid and nonassessable.&#160;&#160;The following summarizes the rights of holders of our common stock:</P>

<P STYLE="margin: 0pt">&nbsp;</P>

<TABLE BORDER="0" CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 36pt">&nbsp;</TD>
    <TD STYLE="text-align: left; width: 36pt; text-indent: 0pt">&bull;&#160;</TD>
    <TD STYLE="text-align: justify; text-indent: 0pt">each holder of common stock is entitled to one vote per share on all matters to be voted upon generally by the stockholders;</TD></TR>
</TABLE>
<P STYLE="margin: 0pt">&nbsp;</P>

<TABLE BORDER="0" CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 36pt">&nbsp;</TD>
    <TD STYLE="text-align: left; width: 36pt; text-indent: 0pt">&bull;&#160;</TD>
    <TD STYLE="text-align: justify; text-indent: 0pt">subject to preferences that may apply to shares of preferred stock outstanding, the holders of common stock are entitled to receive lawful dividends as may be declared by our board of directors, or Board;</TD></TR>
</TABLE>
<P STYLE="margin: 0pt">&nbsp;</P>

<TABLE BORDER="0" CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 36pt">&nbsp;</TD>
    <TD STYLE="text-align: left; width: 36pt; text-indent: 0pt">&bull;&#160;</TD>
    <TD STYLE="text-align: justify; text-indent: 0pt">upon our liquidation, dissolution or winding up, the holders of shares of common stock are entitled to receive a pro rata portion of all our assets remaining for distribution after satisfaction of all our liabilities and the payment of any liquidation preference of any outstanding preferred stock;</TD></TR>
</TABLE>
<P STYLE="margin: 0pt">&nbsp;</P>

<TABLE BORDER="0" CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 36pt">&nbsp;</TD>
    <TD STYLE="text-align: left; width: 36pt; text-indent: 0pt">&bull;&#160;</TD>
    <TD STYLE="text-align: justify; text-indent: 0pt">there are no redemption or sinking fund provisions applicable to our common stock; and</TD></TR>
</TABLE>
<P STYLE="margin: 0pt">&nbsp;</P>

<TABLE BORDER="0" CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 36pt">&nbsp;</TD>
    <TD STYLE="text-align: left; width: 36pt; text-indent: 0pt">&bull;&#160;</TD>
    <TD STYLE="text-align: justify; text-indent: 0pt">there are no preemptive or conversion rights applicable to our common stock.</TD></TR>
</TABLE>
<P STYLE="margin: 0pt">&nbsp;</P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0; font: 10pt Times New Roman, Times, Serif"><B>Preferred Stock</B></P>

<P STYLE="margin: 0pt">&nbsp;</P>

<P STYLE="text-align: justify; text-indent: 36pt; margin: 0; font: 10pt Times New Roman, Times, Serif">Our Board is authorized
to issue from time to time, in one or more designated series, any or all of our authorized but unissued shares of preferred stock
with dividend, redemption, conversion, exchange, voting and other provisions as may be provided in that particular series.&#160;&#160;The
issuance need not be approved by our common stockholders and need only be approved by holders, if any, of our Series A Preferred
Stock and Series B Preferred Stock if, as described below, the shares of preferred stock to be issued have preferences that are
senior to or on parity with those of our Series A Preferred Stock and Series B Preferred Stock.</P>

<P STYLE="margin: 0pt">&nbsp;</P>

<P STYLE="text-align: justify; text-indent: 36pt; margin: 0; font: 10pt Times New Roman, Times, Serif">The rights of the holders
of our common stock, Series A Preferred Stock and Series B Preferred Stock will be subject to, and may be adversely affected by,
the rights of the holders of any preferred stock that may be issued in the future.&#160;&#160;Issuance of a new series of preferred
stock, while providing desirable flexibility in connection with possible acquisitions and other corporate purposes, could have
the effect of entrenching our Board and making it more difficult for a third-party to acquire, or discourage a third-party from
acquiring, a majority of our outstanding voting stock.&#160;&#160;The following is a summary of the terms of the Series A Preferred
Stock and the Series B Preferred Stock.</P>

<P STYLE="margin: 0pt">&nbsp;</P>

<P STYLE="text-align: justify; text-indent: 0pt; margin: 0; font: 10pt Times New Roman, Times, Serif"><B>Series B Preferred Stock</B></P>

<P STYLE="margin: 0pt">&nbsp;</P>

<P STYLE="text-align: justify; text-indent: 36pt; margin: 0; font: 10pt Times New Roman, Times, Serif">As of May 10, 2012, 926,942
shares of Series B Preferred Stock were issued and outstanding and an aggregate of 1,419,210 shares of Series B Preferred Stock
had been converted into shares of our common stock.&#160;&#160;The converted shares of Series B Preferred Stock have been returned
to undesignated preferred stock.&#160;&#160;A balance of 653,848 shares of Series B Preferred Stock remain authorized for issuance.</P>

<P STYLE="text-align: justify; text-indent: 0pt; margin: 0">&#160;&#160;</P>

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<P STYLE="margin: 0pt">&nbsp;</P>

<P STYLE="text-align: justify; text-indent: 18pt; margin: 0; font: 10pt Times New Roman, Times, Serif"><B><I>Rank and Liquidation
Preference</I></B></P>

<P STYLE="margin: 0pt">&nbsp;</P>

<P STYLE="text-align: justify; text-indent: 36pt; margin: 0; font: 10pt Times New Roman, Times, Serif">Shares of Series B Preferred
Stock rank prior to our common stock as to distribution of assets upon liquidation events, which include a liquidation, dissolution
or winding up of Pacific Ethanol, whether voluntary or involuntary. The liquidation preference of each share of Series B Preferred
Stock is equal to $19.50, or Series B Issue Price, plus any accrued but unpaid dividends on the Series B Preferred Stock. If assets
remain after the amounts are distributed to the holders of Series B Preferred Stock, the assets shall be distributed pro rata,
on an as-converted to common stock basis, to the holders of our common stock and Series B Preferred Stock. The written consent
of a majority of the outstanding shares of Series B Preferred Stock is required before we can authorize the issuance of any class
or series of capital stock that ranks senior to or on parity with shares of Series B Preferred Stock.</P>

<P STYLE="margin: 0pt">&nbsp;</P>

<P STYLE="text-align: justify; text-indent: 18pt; margin: 0; font: 10pt Times New Roman, Times, Serif"><B><I>Dividend Rights</I></B></P>

<P STYLE="margin: 0pt">&nbsp;</P>

<P STYLE="text-align: justify; text-indent: 36pt; margin: 0; font: 10pt Times New Roman, Times, Serif">As long as shares of Series
B Preferred Stock remain outstanding, each holder of shares of Series B Preferred Stock are entitled to receive, and shall be paid
quarterly in arrears, in cash out of funds legally available therefor, cumulative dividends, in an amount equal to 7.0% of the
Series B Issue Price per share per annum with respect to each share of Series B Preferred Stock.&#160;&#160;The dividends may,
at our option, be paid in shares of Series B Preferred Stock valued at the Series B Issue Price.&#160;&#160;In the event we declare,
order, pay or make a dividend or other distribution on our common stock, other than a dividend or distribution made in common stock,
the holders of the Series B Preferred Stock shall be entitled to receive with respect to each share of Series B Preferred Stock
held, any dividend or distribution that would be received by a holder of the number of shares of our common stock into which the
Series B Preferred Stock is convertible on the record date for the dividend or distribution.</P>

<P STYLE="margin: 0pt">&nbsp;</P>

<P STYLE="text-align: justify; text-indent: 36pt; margin: 0; font: 10pt Times New Roman, Times, Serif">The Series B Preferred Stock
ranks pari passu with respect to dividends and liquidation rights with the Series A Preferred Stock and pari passu with respect
to any class or series of capital stock specifically ranking on parity with the Series B Preferred Stock.</P>

<P STYLE="margin: 0pt">&nbsp;</P>

<P STYLE="text-align: justify; text-indent: 18pt; margin: 0; font: 10pt Times New Roman, Times, Serif"><B><I>Optional Conversion
Rights</I></B></P>

<P STYLE="margin: 0pt">&nbsp;</P>

<P STYLE="text-align: justify; text-indent: 36pt; margin: 0; font: 10pt Times New Roman, Times, Serif">Each share of Series B Preferred
Stock is convertible at the option of the holder into shares of our common stock at any time.&#160;&#160;Each share of Series B
Preferred Stock is convertible into the number of shares of common stock as calculated by multiplying the number of shares of Series
B Preferred Stock to be converted by the Series B Issue Price, and dividing the result thereof by the Conversion Price.&#160;&#160;The
&#8220;Conversion Price&#8221; was initially $45.50 per share of Series B Preferred Stock, subject to adjustment; therefore, each
share of Series B Preferred Stock was initially convertible into 0.43 shares of common stock, which number is equal to the quotient
of the Series B Issue Price of $19.50 divided by the initial Conversion Price of $45.50 per share of Series B Preferred Stock.&#160;&#160;Accrued
and unpaid dividends are to be paid in cash upon any conversion.</P>

<P STYLE="margin: 0pt">&nbsp;</P>

<P STYLE="text-align: justify; text-indent: 18pt; margin: 0; font: 10pt Times New Roman, Times, Serif"><B><I>Mandatory Conversion
Rights</I></B></P>

<P STYLE="margin: 0pt">&nbsp;</P>

<P STYLE="text-align: justify; text-indent: 36pt; margin: 0; font: 10pt Times New Roman, Times, Serif">In the event of a Transaction
which will result in an internal rate of return to holders of Series B Preferred Stock of 25% or more, each share of Series B Preferred
Stock shall, concurrently with the closing of the Transaction, be converted into shares of common stock. A &#8220;Transaction&#8221;
is defined as a sale, lease, conveyance or disposition of all or substantially all of our capital stock or assets or a merger,
consolidation, share exchange, reorganization or other transaction or series of related transactions (whether involving us or a
subsidiary) in which the stockholders immediately prior to the transaction do not retain a majority of the voting power in the
surviving entity.&#160;&#160;Any mandatory conversion will be made into the number of shares of common stock determined on the
same basis as the optional conversion rights above.&#160;&#160;Accrued and unpaid dividends are to be paid in cash upon any conversion.</P>

<P STYLE="text-align: justify; text-indent: 0pt; margin: 0">&#160;&#160;</P>

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<P STYLE="text-align: justify; text-indent: 0pt; margin: 0">&#160;&#160;</P>

<P STYLE="text-align: justify; text-indent: 36pt; margin: 0; font: 10pt Times New Roman, Times, Serif">No shares of Series B Preferred
Stock will be converted into common stock on a mandatory basis unless at the time of the proposed conversion we have on file with
the Securities and Exchange Commission an effective registration statement with respect to the shares of common stock issued or
issuable to the holders on conversion of the Series B Preferred Stock then issued or issuable to the holders and the shares of
common stock are eligible for trading on The NASDAQ Stock Market (or approved by and listed on a stock exchange approved by the
holders of 66 2/3% of the then outstanding shares of Series B Preferred Stock).</P>

<P STYLE="margin: 0pt">&nbsp;</P>

<P STYLE="text-align: justify; text-indent: 18pt; margin: 0; font: 10pt Times New Roman, Times, Serif"><B><I>Conversion Price Adjustments</I></B></P>

<P STYLE="margin: 0pt">&nbsp;</P>

<P STYLE="text-align: justify; text-indent: 36pt; margin: 0; font: 10pt Times New Roman, Times, Serif">The Conversion Price is
subject to customary adjustment for stock splits, stock combinations, stock dividends, mergers, consolidations, reorganizations,
share exchanges, reclassifications, distributions of assets and issuances of convertible securities, and the like. The Conversion
Price is also subject to downward adjustments if we issue shares of common stock or securities convertible into or exercisable
for shares of common stock, other than specified excluded securities, at per share prices less than the then effective Conversion
Price. In this event, the Conversion Price shall be reduced to the price determined by dividing (i) an amount equal to the sum
of (a) the number of shares of common stock outstanding immediately prior to the issue or sale multiplied by the then existing
Conversion Price, and (b) the consideration, if any, received by us upon such issue or sale, by (ii) the total number of shares
of common stock outstanding immediately after the issue or sale.&#160;&#160;For purposes of determining the number of shares of
common stock outstanding as provided in clauses (i) and (ii) above, the number of shares of common stock issuable upon conversion
of all outstanding shares of Series B Preferred Stock, and the exercise of all outstanding securities convertible into or exercisable
for shares of common stock, will be deemed to be outstanding.</P>

<P STYLE="margin: 0pt">&nbsp;</P>

<P STYLE="text-align: justify; text-indent: 36pt; margin: 0; font: 10pt Times New Roman, Times, Serif">The Conversion Price will
not be adjusted in the case of the issuance or sale of the following: (i) securities issued to our employees, officers or directors
or options to purchase common stock granted by us to our employees, officers or directors under any option plan, agreement or other
arrangement duly adopted by us and the grant of which is approved by the compensation committee of our Board; (ii) the Series B
Preferred Stock and any common stock issued upon conversion of the Series B Preferred Stock; (iii) securities issued on the conversion
of any convertible securities, in each case, outstanding on the date of the filing of the Series B Certificate of Designations;
and (iv) securities issued in connection with a stock split, stock dividend, combination, reorganization, recapitalization or other
similar event for which adjustment is made in accordance with the foregoing.</P>

<P STYLE="margin: 0pt">&nbsp;</P>

<P STYLE="text-align: justify; text-indent: 18pt; margin: 0; font: 10pt Times New Roman, Times, Serif"><B><I>Voting Rights and
Protective Provisions</I></B></P>

<P STYLE="margin: 0pt">&nbsp;</P>

<P STYLE="text-align: justify; text-indent: 36pt; margin: 0; font: 10pt Times New Roman, Times, Serif">The Series B Preferred Stock
votes together with all other classes and series of our voting stock as a single class on all actions to be taken by our stockholders.&#160;&#160;Each
share of Series B Preferred Stock entitles the holder thereof to the number of votes equal to the number of shares of common stock
into which each share of Series B Preferred Stock is convertible on all matters to be voted on by our stockholders, however, the
number of votes for each share of Series B Preferred Stock may not exceed the number of shares of common stock into which each
share of Series B Preferred Stock would be convertible if the applicable Conversion Price were $45.50 (subject to appropriate adjustment
for stock splits, stock dividends, combinations and other similar recapitalizations affecting the shares).</P>

<P STYLE="text-align: justify; text-indent: 0pt; margin: 0">&#160;&#160;</P>

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<P STYLE="text-align: justify; text-indent: 0pt; margin: 0">&#160;&#160;</P>

<P STYLE="text-align: justify; text-indent: 36pt; margin: 0; font: 10pt Times New Roman, Times, Serif">We are not permitted, without
first obtaining the written consent of the holders of at least a majority of the then outstanding shares of Series B Preferred
Stock voting as a separate class, to:</P>

<P STYLE="margin: 0pt">&nbsp;</P>

<TABLE BORDER="0" CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 36pt">&nbsp;</TD>
    <TD STYLE="text-align: left; width: 36pt; text-indent: 0pt">&bull;&#160;</TD>
    <TD STYLE="text-align: justify; text-indent: 0pt">increase or decrease the total number of authorized shares of Series B Preferred Stock or the authorized shares of our common stock reserved for issuance upon conversion of the Series B Preferred Stock (except as otherwise required by our certificate of incorporation or the Series B Certificate of Designations);</TD></TR>
</TABLE>
<P STYLE="margin: 0pt">&nbsp;</P>

<TABLE BORDER="0" CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 36pt">&nbsp;</TD>
    <TD STYLE="text-align: justify; width: 36pt; text-indent: 0pt">&bull;&#160;</TD>
    <TD STYLE="text-align: justify; text-indent: 0pt">increase or decrease the number of authorized shares of preferred stock or common stock (except as otherwise required by our certificate of incorporation or the Series B Certificate of Designations);</TD></TR>
</TABLE>
<P STYLE="margin: 0pt">&nbsp;</P>

<TABLE BORDER="0" CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 36pt">&nbsp;</TD>
    <TD STYLE="text-align: justify; width: 36pt; text-indent: 0pt">&bull;&#160;</TD>
    <TD STYLE="text-align: justify; text-indent: 0pt">alter, amend, repeal, substitute or waive any provision of our certificate of incorporation or our bylaws, so as to affect adversely the voting powers, preferences or other rights, including the liquidation preferences, dividend rights, conversion rights, redemption rights or any reduction in the stated value of the Series B Preferred Stock, whether by merger, consolidation or otherwise;</TD></TR>
</TABLE>
<P STYLE="margin: 0pt">&nbsp;</P>

<TABLE BORDER="0" CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 36pt">&nbsp;</TD>
    <TD STYLE="text-align: justify; width: 36pt; text-indent: 0pt">&bull;&#160;</TD>
    <TD STYLE="text-align: justify; text-indent: 0pt">authorize, create, issue or sell any securities senior to or on parity with the Series B Preferred Stock or securities that are convertible into securities senior to or on parity the Series B Preferred Stock with respect to voting, dividend, liquidation or redemption rights, including subordinated debt;</TD></TR>
</TABLE>
<P STYLE="margin: 0pt">&nbsp;</P>

<TABLE BORDER="0" CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 36pt">&nbsp;</TD>
    <TD STYLE="text-align: justify; width: 36pt; text-indent: 0pt">&bull;&#160;</TD>
    <TD STYLE="text-align: justify; text-indent: 0pt">authorize, create, issue or sell any securities junior to the Series B Preferred Stock other than common stock or securities that are convertible into securities junior to Series B Preferred Stock other than common stock with respect to voting, dividend, liquidation or redemption rights, including subordinated debt;</TD></TR>
</TABLE>
<P STYLE="margin: 0pt">&nbsp;</P>

<TABLE BORDER="0" CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 36pt">&nbsp;</TD>
    <TD STYLE="text-align: justify; width: 36pt; text-indent: 0pt">&bull;&#160;</TD>
    <TD STYLE="text-align: justify; text-indent: 0pt">authorize, create, issue or sell any additional shares of Series B Preferred Stock other than the Series B Preferred Stock initially authorized, created, issued and sold, Series B Preferred Stock issued as payment of dividends and Series B Preferred Stock issued in replacement or exchange therefore;</TD></TR>
</TABLE>
<P STYLE="margin: 0pt">&nbsp;</P>

<TABLE BORDER="0" CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 36pt">&nbsp;</TD>
    <TD STYLE="text-align: justify; width: 36pt; text-indent: 0pt">&bull;&#160;</TD>
    <TD STYLE="text-align: justify; text-indent: 0pt">engage in a Transaction that would result in an internal rate of return to holders of Series B Preferred Stock of less than 25%;</TD></TR>
</TABLE>
<P STYLE="margin: 0pt">&nbsp;</P>

<TABLE BORDER="0" CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 36pt">&nbsp;</TD>
    <TD STYLE="text-align: justify; width: 36pt; text-indent: 0pt">&bull;&#160;</TD>
    <TD STYLE="text-align: justify; text-indent: 0pt">declare or pay any dividends or distributions on our capital stock in a cumulative amount in excess of the dividends and distributions paid on the Series B Preferred Stock in accordance with the Series B Certificate of Designations;</TD></TR>
</TABLE>
<P STYLE="margin: 0pt">&nbsp;</P>

<TABLE BORDER="0" CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 36pt">&nbsp;</TD>
    <TD STYLE="text-align: justify; width: 36pt; text-indent: 0pt">&bull;&#160;</TD>
    <TD STYLE="text-align: justify; text-indent: 0pt">authorize or effect the voluntary liquidation, dissolution, recapitalization, reorganization or winding up of our business; or</TD></TR>
</TABLE>
<P STYLE="margin: 0pt">&nbsp;</P>

<TABLE BORDER="0" CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 36pt">&nbsp;</TD>
    <TD STYLE="text-align: justify; width: 36pt; text-indent: 0pt">&bull;&#160;</TD>
    <TD STYLE="text-align: justify; text-indent: 0pt">purchase, redeem or otherwise acquire any of our capital stock other than Series B Preferred Stock, or any warrants or other rights to subscribe for or to purchase, or any options for the purchase of, our capital stock or securities convertible into or exchangeable for our capital stock.</TD></TR>
</TABLE>
<P STYLE="text-align: justify; text-indent: 0pt; margin: 0">&#160;&#160;</P>

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<P STYLE="text-align: justify; text-indent: 0pt; margin: 0">&#160;&#160;</P>

<P STYLE="text-align: justify; text-indent: 18pt; margin: 0; font: 10pt Times New Roman, Times, Serif"><B><I>Reservation of Shares</I></B></P>

<P STYLE="margin: 0pt">&nbsp;</P>

<P STYLE="text-align: justify; text-indent: 36pt; margin: 0; font: 10pt Times New Roman, Times, Serif">We initially were required
to reserve 3,000,000 shares of common stock for issuance upon conversion of shares of Series B Preferred Stock and are required
to maintain a sufficient number of reserved shares of common stock to allow for the conversion of all shares of Series B Preferred
Stock.</P>

<P STYLE="margin: 0pt">&nbsp;</P>

<P STYLE="text-align: justify; text-indent: 0pt; margin: 0; font: 10pt Times New Roman, Times, Serif"><B>Series A Preferred Stock</B></P>

<P STYLE="margin: 0pt">&nbsp;</P>

<P STYLE="text-align: justify; text-indent: 36pt; margin: 0; font: 10pt Times New Roman, Times, Serif">As of May 10, 2012, no shares
of Series A Preferred Stock were issued and outstanding and an aggregate of 5,315,625 shares of Series A Preferred Stock had been
converted into shares of our common stock and returned to undesignated preferred stock.&#160;&#160;A balance of 1,684,375 shares
of Series A Preferred Stock remain authorized for issuance.&#160;&#160;The rights and preferences of the Series A Preferred Stock
are substantially the same as the Series B Preferred Stock, except as follows:</P>

<P STYLE="margin: 0pt">&nbsp;</P>

<TABLE BORDER="0" CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 36pt">&nbsp;</TD>
    <TD STYLE="text-align: justify; width: 36pt; text-indent: 0pt">&bull;&#160;</TD>
    <TD STYLE="text-align: justify; text-indent: 0pt">the Series A Issue Price, on which the Series A Preferred Stock liquidation preference is based, is $16.00 per share;</TD></TR>
</TABLE>
<P STYLE="margin: 0pt">&nbsp;</P>

<TABLE BORDER="0" CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 36pt">&nbsp;</TD>
    <TD STYLE="text-align: justify; width: 36pt; text-indent: 0pt">&bull;&#160;</TD>
    <TD STYLE="text-align: justify; text-indent: 0pt">dividends accrue and are payable at a rate per annum of 5.0% of the Series A Issue Price per share;</TD></TR>
</TABLE>
<P STYLE="margin: 0pt">&nbsp;</P>

<TABLE BORDER="0" CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 36pt">&nbsp;</TD>
    <TD STYLE="text-align: justify; width: 36pt; text-indent: 0pt">&bull;&#160;</TD>
    <TD STYLE="text-align: justify; text-indent: 0pt">each share of Series A Preferred Stock is convertible at a rate equal to the Series A Issue Price divided by an initial Conversion Price of $56.00 per share;</TD></TR>
</TABLE>
<P STYLE="margin: 0pt">&nbsp;</P>

<TABLE BORDER="0" CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 36pt">&nbsp;</TD>
    <TD STYLE="text-align: justify; width: 36pt; text-indent: 0pt">&bull;&#160;</TD>
    <TD STYLE="text-align: justify; text-indent: 0pt">holders of the Series A Preferred Stock have a number of votes equal to the number of shares of common stock into which each share of Series A Preferred Stock is convertible on all matters to be voted on by our stockholders, voting together as a single class; provided, however, that the number of votes for each share of Series A Preferred Stock shall not exceed the number of shares of common stock into which each share of Series A Preferred Stock would be convertible if the applicable Conversion Price were $62.93 (subject to appropriate adjustment for stock splits, stock dividends, combinations and other similar recapitalizations affecting the shares); and</TD></TR>
</TABLE>
<P STYLE="margin: 0pt">&nbsp;</P>

<TABLE BORDER="0" CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 36pt">&nbsp;</TD>
    <TD STYLE="text-align: justify; width: 36pt; text-indent: 0pt">&bull;&#160;</TD>
    <TD STYLE="text-align: justify; text-indent: 0pt">we are not permitted, without first obtaining the written consent of the holders of at least a majority of the then outstanding shares of Series A Preferred Stock voting as a separate class, to:</TD></TR>
</TABLE>
<P STYLE="margin: 0pt">&nbsp;</P>

<TABLE BORDER="0" CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 72pt">&nbsp;</TD>
    <TD STYLE="text-align: justify; width: 36pt; text-indent: 0pt">o&#160;</TD>
    <TD STYLE="text-align: justify; text-indent: 0pt">change the number of members of our Board to be more than nine members or less than seven members;</TD></TR>
</TABLE>
<P STYLE="margin: 0pt">&nbsp;</P>

<TABLE BORDER="0" CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 72pt">&nbsp;</TD>
    <TD STYLE="text-align: justify; width: 36pt; text-indent: 0pt">o&#160;</TD>
    <TD STYLE="text-align: justify; text-indent: 0pt">effect any material change in our industry focus or that of our subsidiaries, considered on a consolidated basis;</TD></TR>
</TABLE>
<P STYLE="margin: 0pt">&nbsp;</P>

<TABLE BORDER="0" CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 72pt">&nbsp;</TD>
    <TD STYLE="text-align: justify; width: 36pt; text-indent: 0pt">o&#160;</TD>
    <TD STYLE="text-align: justify; text-indent: 0pt">authorize or engage in, or permit any subsidiary to authorize or engage in, any transaction or series of transactions with one of our or our subsidiaries&#8217; current or former officers, directors or members with value in excess of $100,000, excluding compensation or the grant of options approved by our Board; or</TD></TR>
</TABLE>
<P STYLE="margin: 0pt">&nbsp;</P>

<TABLE BORDER="0" CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 72pt">&nbsp;</TD>
    <TD STYLE="text-align: justify; width: 36pt; text-indent: 0pt">o&#160;</TD>
    <TD STYLE="text-align: justify; text-indent: 0pt">authorize or engage in, or permit any subsidiary to authorize or engage in, any transaction with any entity or person that is affiliated with any of our or our subsidiaries&#8217; current or former directors, officers or members, excluding any director nominated by the initial holder of the Series B Preferred Stock.</TD></TR>
</TABLE>
<P STYLE="text-align: justify; text-indent: 0pt; margin: 0">&#160;&#160;</P>

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<P STYLE="text-align: justify; text-indent: 18pt; margin: 0; font: 10pt Times New Roman, Times, Serif"><B><I>Preemptive Rights</I></B></P>

<P STYLE="margin: 0pt">&nbsp;</P>

<P STYLE="text-align: justify; text-indent: 36pt; margin: 0; font: 10pt Times New Roman, Times, Serif">Holders of our Series A
Preferred Stock have preemptive rights to purchase a pro rata portion of all capital stock or securities convertible into capital
stock that we issue, sell or exchange, or agree to issue, sell or exchange, or reserve or set aside for issuance, sale or exchange.&#160;&#160;We
must deliver each holder of our Series A Preferred Stock a written notice of any proposed or intended issuance, sale or exchange
of capital stock or securities convertible into capital stock which must include a description of the securities and the price
and other terms upon which they are to be issued, sold or exchanged together with the identity of the persons or entities (if known)
to which or with which the securities are to be issued, sold or exchanged, and an offer to issue and sell to or exchange with the
holder of the Series A Preferred Stock the holder&#8217;s pro rata portion of the securities, and any additional amount of the
securities should the other holders of Series A Preferred Stock subscribe for less than the full amounts for which they are entitled
to subscribe. In the case of a public offering of our common stock for a purchase price of at least $12.00 per share and a total
gross offering price of at least $50 million, the preemptive rights of the holders of the Series A Preferred Stock shall be limited
to 50% of the securities.&#160;&#160;Holders of our Series A Preferred Stock have a 30 day period during which to accept the offer.&#160;&#160;We
will have 90 days from the expiration of this 30 day period to issue, sell or exchange all or any part of the securities as to
which the offer has not been accepted by the holders of the Series A Preferred Stock, but only as to the offerees or purchasers
described in the offer and only upon the terms and conditions that are not more favorable, in the aggregate, to the offerees or
purchasers or less favorable to us than those contained in the offer.</P>

<P STYLE="margin: 0pt">&nbsp;</P>

<P STYLE="text-align: justify; text-indent: 36pt; margin: 0; font: 10pt Times New Roman, Times, Serif">The preemptive rights of
the holders of the Series A Preferred Stock shall not apply to any of the following securities: (i) securities issued to our employees,
officers or directors or options to purchase common stock granted by us to our employees, officers or directors under any option
plan, agreement or other arrangement duly adopted by us and the grant of which is approved by the compensation committee of our
Board; (ii) the Series A Preferred Stock and any common stock issued upon conversion of the Series A Preferred Stock; (iii) securities
issued on the conversion of any convertible securities, in each case, outstanding on the date of the filing of the Series A Certificate
of Designations; (iv) securities issued in connection with a stock split, stock dividend, combination, reorganization, recapitalization
or other similar event for which adjustment is made in accordance with the Series A Certificate of Designations; and (v) the issuance
of our securities issued for consideration other than cash as a result of a merger, consolidation, acquisition or similar business
combination by us approved by our Board.</P>

<P STYLE="margin: 0pt">&nbsp;</P>

<P STYLE="text-align: justify; text-indent: 0pt; margin: 0; font: 10pt Times New Roman, Times, Serif"><B>Anti-Takeover Effects
of Delaware Law and Our Certificate of Incorporation and Bylaws</B></P>

<P STYLE="margin: 0pt">&nbsp;</P>

<P STYLE="text-align: justify; text-indent: 36pt; margin: 0; font: 10pt Times New Roman, Times, Serif">A number of provisions of
Delaware law, our certificate of incorporation and our bylaws contain provisions that could have the effect of delaying, deferring
and discouraging another party from acquiring control of us.&#160;&#160;These provisions, which are summarized below, are expected
to discourage coercive takeover practices and inadequate takeover bids.&#160;&#160;These provisions are also designed to encourage
persons seeking to acquire control of us to first negotiate with our board of directors.&#160;&#160;We believe that the benefits
of increased protection of our potential ability to negotiate with an unfriendly or unsolicited acquiror outweigh the disadvantages
of discouraging a proposal to acquire us because negotiation of these proposals could result in an improvement of their terms.</P>

<P STYLE="margin: 0pt">&nbsp;</P>

<P STYLE="text-align: justify; text-indent: 18pt; margin: 0; font: 10pt Times New Roman, Times, Serif"><B><I>Undesignated Preferred
Stock</I></B></P>

<P STYLE="margin: 0pt">&nbsp;</P>

<P STYLE="text-align: justify; text-indent: 36pt; margin: 0; font: 10pt Times New Roman, Times, Serif">The ability to authorize
undesignated preferred stock makes it possible for our Board to issue preferred stock with voting or other rights or preferences
that could impede the success of any attempt to acquire us.&#160;&#160;These and other provisions may have the effect of deferring
hostile takeovers or delaying changes in control or management of Pacific Ethanol.</P>

<P STYLE="text-align: justify; text-indent: 0pt; margin: 0">&#160;&#160;</P>

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<P STYLE="text-align: justify; text-indent: 0pt; margin: 0">&#160;&#160;</P>

<P STYLE="text-align: justify; text-indent: 18pt; margin: 0; font: 10pt Times New Roman, Times, Serif"><B><I>Delaware Anti-Takeover
Statute</I></B></P>

<P STYLE="margin: 0pt">&nbsp;</P>

<P STYLE="text-align: justify; text-indent: 36pt; margin: 0; font: 10pt Times New Roman, Times, Serif">We are subject to the provisions
of Section 203 of the Delaware General Corporation Law, or DGCL, regulating corporate takeovers.&#160;&#160;In general, Section
203 prohibits a publicly-held Delaware corporation from engaging, under specified circumstances, in a business combination with
an interested stockholder for a period of three years following the date the person became an interested stockholder unless:</P>

<P STYLE="margin: 0pt">&nbsp;</P>

<TABLE BORDER="0" CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 36pt">&nbsp;</TD>
    <TD STYLE="text-align: justify; width: 36pt; text-indent: 0pt">&bull;&#160;</TD>
    <TD STYLE="text-align: justify; text-indent: 0pt">prior to the date of the transaction, the board of directors of the corporation approved either the business combination or the transaction which resulted in the stockholder becoming an interested stockholder;</TD></TR>
</TABLE>
<P STYLE="margin: 0pt">&nbsp;</P>

<TABLE BORDER="0" CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 36pt">&nbsp;</TD>
    <TD STYLE="text-align: justify; width: 36pt; text-indent: 0pt">&bull;&#160;</TD>
    <TD STYLE="text-align: justify; text-indent: 0pt">upon consummation of the transaction that resulted in the stockholder becoming an interested stockholder, the stockholder owned at least 85% of the voting stock of the corporation outstanding at the time the transaction commenced, excluding for purposes of determining the number of shares of voting stock outstanding (but not the outstanding voting stock owned by the stockholder) (1) shares owned by persons who are directors and also officers and (2) shares owned by employee stock plans in which employee participants do not have the right to determine confidentially whether shares held subject to the plan will be tendered in a tender or exchange offer; or</TD></TR>
</TABLE>
<P STYLE="margin: 0pt">&nbsp;</P>

<TABLE BORDER="0" CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 36pt">&nbsp;</TD>
    <TD STYLE="text-align: justify; width: 36pt; text-indent: 0pt">&bull;&#160;</TD>
    <TD STYLE="text-align: justify; text-indent: 0pt">on or subsequent to the date of the transaction, the business combination is approved by the board and authorized at an annual or special meeting of stockholders, and not by written consent, by the affirmative vote of at least 66&#8532;% of the outstanding voting stock that is not owned by the interested stockholder.</TD></TR>
</TABLE>
<P STYLE="margin: 0pt">&nbsp;</P>

<P STYLE="text-align: justify; text-indent: 36pt; margin: 0; font: 10pt Times New Roman, Times, Serif">Generally, a business combination
includes a merger, asset or stock sale, or other transaction resulting in a financial benefit to the interested stockholder.&#160;&#160;An
interested stockholder is a person who, together with affiliates and associates, owns or, within three years prior to the determination
of interested stockholder status, did own 15% or more of a corporation&#8217;s outstanding voting securities.&#160;&#160;We expect
the existence of its provision to have an anti-takeover effect with respect to transactions our Board does not approve in advance.&#160;&#160;We
also anticipate that Section 203 of the DGCL may also discourage attempts that might result in a premium over the market price
for the shares of common stock held by stockholders.</P>

<P STYLE="margin: 0pt">&nbsp;</P>

<P STYLE="text-align: justify; text-indent: 36pt; margin: 0; font: 10pt Times New Roman, Times, Serif">The provisions of Delaware
law, our certificate of incorporation and our bylaws could have the effect of discouraging others from attempting hostile takeovers
and, as a consequence, they may also inhibit temporary fluctuations in the market price of our common stock that often result from
actual or rumored hostile takeover attempts.&#160;&#160;These provisions may also have the effect of preventing changes in our
management.&#160;&#160;It is possible that these provisions could make it more difficult to accomplish transactions that stockholders
may otherwise deem to be in their best interests.</P>

<P STYLE="margin: 0pt">&nbsp;</P>

<P STYLE="text-align: center; text-indent: 0pt; margin: 0; font: 10pt Times New Roman, Times, Serif"><B>DESCRIPTION OF PREFERRED
STOCK</B></P>

<P STYLE="margin: 0pt">&nbsp;</P>

<P STYLE="text-align: justify; text-indent: 36pt; margin: 0; font: 10pt Times New Roman, Times, Serif">We may issue up to 6,734,835
shares of preferred stock, par value $0.001 per share, from time to time in one or more classes or series, with the exact terms
of each series or class established by our Board. Without seeking stockholder approval, our Board may issue preferred stock with
voting and other rights that are greater than the rights of our common stock and could adversely affect the voting power of the
holders of our common stock.</P>

<P STYLE="margin: 0pt">&nbsp;</P>

<P STYLE="text-align: justify; text-indent: 36pt; margin: 0; font: 10pt Times New Roman, Times, Serif">The rights, preferences,
privileges and restrictions of the preferred stock of each series or class will be determined by our Board and set forth in a certificate
of designations relating to such series or class that will amend our Certificate of Incorporation. We will include each certificate
of designations as an exhibit to the registration statement that includes this prospectus, or as an exhibit to a filing with the
Securities and Exchange Commission that is incorporated by reference into this prospectus. The description of preferred stock in
any prospectus supplement will not necessarily describe all of the terms of the preferred stock in detail. You should read the
applicable certificate of designations for a complete description of all of the terms.</P>

<P STYLE="text-align: justify; text-indent: 0pt; margin: 0">&#160;&#160;</P>

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<P STYLE="text-align: justify; text-indent: 36pt; margin: 0; font: 10pt Times New Roman, Times, Serif">This section describes the
general terms of the preferred stock that we may offer using this prospectus. Further terms of the preferred stock will be stated
in the applicable prospectus supplement. The following description and any description of the preferred stock in a prospectus supplement
may not be complete and is subject to and qualified in its entirety by reference to the terms of the certificate of designations.</P>

<P STYLE="margin: 0pt">&nbsp;</P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0; font: 10pt Times New Roman, Times, Serif"><B>Terms</B></P>

<P STYLE="margin: 0pt">&nbsp;</P>

<P STYLE="text-align: justify; text-indent: 36pt; margin: 0; font: 10pt Times New Roman, Times, Serif">You should refer to the
applicable prospectus supplement relating to the offering of any series of preferred stock for specific terms of the shares, including
the following terms:</P>

<P STYLE="margin: 0pt">&nbsp;</P>

<TABLE BORDER="0" CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 36pt">&nbsp;</TD>
    <TD STYLE="text-align: justify; width: 36pt; text-indent: 0pt">&bull;&#160;</TD>
    <TD STYLE="text-align: justify; text-indent: 0pt">the maximum number of shares in the series or class and the distinctive designation;</TD></TR>
</TABLE>
<P STYLE="margin: 0pt">&nbsp;</P>

<TABLE BORDER="0" CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 36pt">&nbsp;</TD>
    <TD STYLE="text-align: justify; width: 36pt; text-indent: 0pt">&bull;&#160;</TD>
    <TD STYLE="text-align: justify; text-indent: 0pt">number of shares offered and initial offering price;</TD></TR>
</TABLE>
<P STYLE="margin: 0pt">&nbsp;</P>

<TABLE BORDER="0" CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 36pt">&nbsp;</TD>
    <TD STYLE="text-align: justify; width: 36pt; text-indent: 0pt">&bull;&#160;</TD>
    <TD STYLE="text-align: justify; text-indent: 0pt">the terms on which dividends, if any, will be paid;</TD></TR>
</TABLE>
<P STYLE="margin: 0pt">&nbsp;</P>

<TABLE BORDER="0" CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 36pt">&nbsp;</TD>
    <TD STYLE="text-align: justify; width: 36pt; text-indent: 0pt">&bull;&#160;</TD>
    <TD STYLE="text-align: justify; text-indent: 0pt">the terms of any preemptive rights;</TD></TR>
</TABLE>
<P STYLE="margin: 0pt">&nbsp;</P>

<TABLE BORDER="0" CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 36pt">&nbsp;</TD>
    <TD STYLE="text-align: justify; width: 36pt; text-indent: 0pt">&bull;&#160;</TD>
    <TD STYLE="text-align: justify; text-indent: 0pt">the terms on which the shares may be redeemed, if at all;</TD></TR>
</TABLE>
<P STYLE="margin: 0pt">&nbsp;</P>

<TABLE BORDER="0" CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 36pt">&nbsp;</TD>
    <TD STYLE="text-align: justify; width: 36pt; text-indent: 0pt">&bull;&#160;</TD>
    <TD STYLE="text-align: justify; text-indent: 0pt">the liquidation preference, if any;</TD></TR>
</TABLE>
<P STYLE="margin: 0pt">&nbsp;</P>

<TABLE BORDER="0" CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 36pt">&nbsp;</TD>
    <TD STYLE="text-align: justify; width: 36pt; text-indent: 0pt">&bull;&#160;</TD>
    <TD STYLE="text-align: justify; text-indent: 0pt">the terms of any retirement or sinking fund for the repurchase or redemption of the shares of the series;</TD></TR>
</TABLE>
<P STYLE="margin: 0pt">&nbsp;</P>

<TABLE BORDER="0" CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 36pt">&nbsp;</TD>
    <TD STYLE="text-align: justify; width: 36pt; text-indent: 0pt">&bull;&#160;</TD>
    <TD STYLE="text-align: justify; text-indent: 0pt">the terms and conditions, if any, on which the shares of the series shall be convertible into, or exchangeable for, shares of any other class or classes of capital stock, including the conversion price, rate or other manner of calculation, conversion period and anti-dilution provisions, if applicable;</TD></TR>
</TABLE>
<P STYLE="margin: 0pt">&nbsp;</P>

<TABLE BORDER="0" CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 36pt">&nbsp;</TD>
    <TD STYLE="text-align: justify; width: 36pt; text-indent: 0pt">&bull;&#160;</TD>
    <TD STYLE="text-align: justify; text-indent: 0pt">terms and conditions upon which shares will be exchangeable into debt securities or any other securities, including the exchange price, rate or other manner of calculation, exchange period and any anti-dilution provisions, if applicable;</TD></TR>
</TABLE>
<P STYLE="margin: 0pt">&nbsp;</P>

<TABLE BORDER="0" CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 36pt">&nbsp;</TD>
    <TD STYLE="text-align: justify; width: 36pt; text-indent: 0pt">&bull;&#160;</TD>
    <TD STYLE="text-align: justify; text-indent: 0pt">the relative ranking and preference as to dividend rights and rights upon liquidation, dissolution or the winding up of our affairs, including liquidation preference amount;</TD></TR>
</TABLE>
<P STYLE="margin: 0pt">&nbsp;</P>

<TABLE BORDER="0" CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 36pt">&nbsp;</TD>
    <TD STYLE="text-align: justify; width: 36pt; text-indent: 0pt">&bull;&#160;</TD>
    <TD STYLE="text-align: justify; text-indent: 0pt">any limitation on issuance of any series of preferred stock ranking senior to or on a parity with that series of preferred stock as to dividend rights and rights upon liquidation, dissolution or the winding up of our affairs;</TD></TR>
</TABLE>
<P STYLE="margin: 0pt">&nbsp;</P>

<TABLE BORDER="0" CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 36pt">&nbsp;</TD>
    <TD STYLE="text-align: justify; width: 36pt; text-indent: 0pt">&bull;&#160;</TD>
    <TD STYLE="text-align: justify; text-indent: 0pt">the voting rights, if any, on the shares of the series;</TD></TR>
</TABLE>
<P STYLE="margin: 0pt">&nbsp;</P>

<TABLE BORDER="0" CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 36pt">&nbsp;</TD>
    <TD STYLE="text-align: justify; width: 36pt; text-indent: 0pt">&bull;&#160;</TD>
    <TD STYLE="text-align: justify; text-indent: 0pt">any or all other preferences and relative, participating, operational or other special rights or qualifications, limitations or restrictions of the shares; and</TD></TR>
</TABLE>
<P STYLE="margin: 0pt">&nbsp;</P>

<TABLE BORDER="0" CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 36pt">&nbsp;</TD>
    <TD STYLE="text-align: justify; width: 36pt; text-indent: 0pt">&bull;&#160;</TD>
    <TD STYLE="text-align: justify; text-indent: 0pt">any material United States federal income tax consequences.</TD></TR>
</TABLE>
<P STYLE="margin: 0pt">&nbsp;</P>

<P STYLE="text-align: left; text-indent: 36pt; margin: 0; font: 10pt Times New Roman, Times, Serif">The issuance of preferred stock
may delay, deter or prevent a change in control.</P>

<P STYLE="text-align: justify; text-indent: 0pt; margin: 0">&#160;&#160;</P>

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<P STYLE="text-align: justify; text-indent: 0pt; margin: 0">&#160;&#160;</P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0; font: 10pt Times New Roman, Times, Serif"><B>Ranking</B></P>

<P STYLE="margin: 0pt">&nbsp;</P>

<P STYLE="text-align: justify; text-indent: 36pt; margin: 0; font: 10pt Times New Roman, Times, Serif">Unless we provide otherwise
in an applicable prospectus supplement, the preferred stock offered through that supplement will, with respect to dividend rights
and rights upon our liquidation, dissolution or winding up, rank:</P>

<P STYLE="margin: 0pt">&nbsp;</P>

<TABLE BORDER="0" CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 36pt">&nbsp;</TD>
    <TD STYLE="text-align: justify; width: 36pt; text-indent: 0pt">&bull;&#160;</TD>
    <TD STYLE="text-align: justify; text-indent: 0pt">senior to all classes or series of our common stock, and to all other equity securities ranking junior to the offered preferred stock;</TD></TR>
</TABLE>
<P STYLE="margin: 0pt">&nbsp;</P>

<TABLE BORDER="0" CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 36pt">&nbsp;</TD>
    <TD STYLE="text-align: justify; width: 36pt; text-indent: 0pt">&bull;&#160;</TD>
    <TD STYLE="text-align: justify; text-indent: 0pt">on a parity with all of our equity securities ranking on a parity with the offered preferred stock; and</TD></TR>
</TABLE>
<P STYLE="margin: 0pt">&nbsp;</P>

<TABLE BORDER="0" CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 36pt">&nbsp;</TD>
    <TD STYLE="text-align: justify; width: 36pt; text-indent: 0pt">&bull;&#160;</TD>
    <TD STYLE="text-align: justify; text-indent: 0pt">junior to all of our equity securities ranking senior to the offered preferred stock.</TD></TR>
</TABLE>
<P STYLE="margin: 0pt">&nbsp;</P>

<P STYLE="text-align: justify; text-indent: 36pt; margin: 0; font: 10pt Times New Roman, Times, Serif">As used herein, the term
&#8220;equity securities&#8221; does not include convertible debt securities.</P>

<P STYLE="margin: 0pt">&nbsp;</P>

<P STYLE="text-align: justify; text-indent: 0pt; margin: 0; font: 10pt Times New Roman, Times, Serif"><B>Voting Rights</B></P>

<P STYLE="margin: 0pt">&nbsp;</P>

<P STYLE="text-align: justify; text-indent: 36pt; margin: 0; font: 10pt Times New Roman, Times, Serif">Unless otherwise indicated
in the applicable prospectus supplement, holders of our preferred stock will not have any voting rights, except as may be required
by applicable law.</P>

<P STYLE="margin: 0pt">&nbsp;</P>

<P STYLE="text-align: justify; text-indent: 0pt; margin: 0; font: 10pt Times New Roman, Times, Serif"><B>Dividends</B></P>

<P STYLE="margin: 0pt">&nbsp;</P>

<P STYLE="text-align: justify; text-indent: 36pt; margin: 0; font: 10pt Times New Roman, Times, Serif">Subject to any preferential
rights of any outstanding shares or series of shares, our preferred stockholders are entitled to receive dividends, if any, when
and as authorized by our Board, out of legally available funds, as specified in the applicable prospectus supplement.</P>

<P STYLE="margin: 0pt">&nbsp;</P>

<P STYLE="text-align: justify; text-indent: 0pt; margin: 0; font: 10pt Times New Roman, Times, Serif"><B>Redemption</B></P>

<P STYLE="margin: 0pt">&nbsp;</P>

<P STYLE="text-align: justify; text-indent: 36pt; margin: 0; font: 10pt Times New Roman, Times, Serif">If we provide for a redemption
right in a prospectus supplement, the preferred stock offered through that supplement will be subject to mandatory redemption or
redemption at our option, in whole or in part, in each case upon the terms, at the times and at the redemption prices set forth
in that prospectus supplement.</P>

<P STYLE="margin: 0pt">&nbsp;</P>

<P STYLE="text-align: justify; text-indent: 0pt; margin: 0; font: 10pt Times New Roman, Times, Serif"><B>Liquidation Preference</B></P>

<P STYLE="margin: 0pt">&nbsp;</P>

<P STYLE="text-align: justify; text-indent: 36pt; margin: 0; font: 10pt Times New Roman, Times, Serif">In the event of our voluntary
or involuntary dissolution, liquidation, or winding up, the holders of any series of our preferred stock will be entitled to receive,
after distributions to holders of any series or class of our capital shares ranking senior, an amount equal to the stated or liquidation
value of the series plus, if applicable, an amount equal to accrued and unpaid dividends. If the assets and funds to be distributed
among the holders of our preferred stock will be insufficient to permit full payment to the holders, then the holders of our preferred
stock will share ratably in any distribution of our assets in proportion to the amounts that they otherwise would receive on their
our preferred stock if the shares were paid in full.</P>

<P STYLE="text-align: justify; text-indent: 0pt; margin: 0">&#160;&#160;</P>

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<P STYLE="text-align: justify; text-indent: 0pt; margin: 0">&#160;&#160;</P>

<P STYLE="text-align: justify; text-indent: 0pt; margin: 0; font: 10pt Times New Roman, Times, Serif"><B>Conversion Rights</B></P>

<P STYLE="margin: 0pt">&nbsp;</P>

<P STYLE="text-align: justify; text-indent: 36pt; margin: 0; font: 10pt Times New Roman, Times, Serif">The terms and conditions,
if any, upon which any series of preferred stock is convertible into common stock or other securities will be set forth in the
prospectus supplement relating to the offering of those preferred stock. These terms typically will include number of shares of
common stock or other securities into which the preferred stock is convertible; conversion price (or manner of calculation); conversion
period; provisions as to whether conversion will be at the option of the holders of the preferred stock or at our option; events,
if any, requiring an adjustment of the conversion price; and provisions affecting conversion in the event of the redemption of
that series of preferred stock.</P>

<P STYLE="margin: 0pt">&nbsp;</P>

<P STYLE="text-align: justify; text-indent: 0pt; margin: 0; font: 10pt Times New Roman, Times, Serif"><B>Transfer Agent and Registrar</B></P>

<P STYLE="margin: 0pt">&nbsp;</P>

<P STYLE="text-align: justify; text-indent: 36pt; margin: 0; font: 10pt Times New Roman, Times, Serif">We will identify in a prospectus
supplement the transfer agent and registrar for any series of preferred stock offered by this prospectus.</P>

<P STYLE="margin: 0pt">&nbsp;</P>

<P STYLE="text-align: center; text-indent: 0pt; margin: 0; font: 10pt Times New Roman, Times, Serif"><B>DESCRIPTION OF WARRANTS</B></P>

<P STYLE="margin: 0pt">&nbsp;</P>

<P STYLE="text-align: justify; text-indent: 36pt; margin: 0; font: 10pt Times New Roman, Times, Serif">The complete terms of the
warrants will be contained in the applicable warrant agreement and warrant. These documents will be included or incorporated by
reference as exhibits to the registration statement of which this prospectus is a part. You should read the warrant and warrant
agreement. You should also read the prospectus supplement, which will contain additional information and which may update or change
some of the information below.</P>

<P STYLE="margin: 0pt">&nbsp;</P>

<P STYLE="text-align: justify; text-indent: 36pt; margin: 0; font: 10pt Times New Roman, Times, Serif">This section describes the
general terms of the warrants to purchase common stock, preferred stock and/or debt securities that we may offer using this prospectus.
Further terms of the warrants will be stated in the applicable prospectus supplement. The following description and any description
of the rights in a prospectus supplement may not be complete and is subject to and qualified in its entirety by reference to the
terms of the warrant and warrant agreement.</P>

<P STYLE="margin: 0pt">&nbsp;</P>

<P STYLE="text-align: justify; text-indent: 0pt; margin: 0; font: 10pt Times New Roman, Times, Serif"><B>General</B></P>

<P STYLE="margin: 0pt">&nbsp;</P>

<P STYLE="text-align: justify; text-indent: 36pt; margin: 0; font: 10pt Times New Roman, Times, Serif">We may issue additional
warrants for the purchase of common stock, preferred stock and/or debt securities in one or more series. If we offer warrants,
we will describe the terms in a prospectus supplement. Warrants may be offered independently, together with other securities offered
by any prospectus supplement, or through a dividend or other distribution to stockholders and may be attached to or separate from
other securities. Warrants may be issued under a written warrant agreement to be entered into between us and the holder or beneficial
owner, or under a written warrant agreement with a warrant agent specified in a prospectus supplement. A warrant agent would act
solely as our agent in connection with the warrants of a particular series and would not assume any obligation or relationship
of agency or trust for or with any holders or beneficial owners of those warrants.</P>

<P STYLE="margin: 0pt">&nbsp;</P>

<P STYLE="text-align: justify; text-indent: 36pt; margin: 0; font: 10pt Times New Roman, Times, Serif">The following are some of
the terms relating to a series of warrants that could be described in a prospectus supplement:</P>

<P STYLE="margin: 0pt">&nbsp;</P>

<TABLE BORDER="0" CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 36pt">&nbsp;</TD>
    <TD STYLE="text-align: justify; width: 36pt; text-indent: 0pt">&bull;&#160;</TD>
    <TD STYLE="text-align: justify; text-indent: 0pt">title of the warrants;</TD></TR>
</TABLE>
<P STYLE="margin: 0pt">&nbsp;</P>

<TABLE BORDER="0" CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 36pt">&nbsp;</TD>
    <TD STYLE="text-align: justify; width: 36pt; text-indent: 0pt">&bull;&#160;</TD>
    <TD STYLE="text-align: justify; text-indent: 0pt">aggregate number of warrants;</TD></TR>
</TABLE>
<P STYLE="margin: 0pt">&nbsp;</P>

<TABLE BORDER="0" CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 36pt">&nbsp;</TD>
    <TD STYLE="text-align: justify; width: 36pt; text-indent: 0pt">&bull;&#160;</TD>
    <TD STYLE="text-align: justify; text-indent: 0pt">price or prices at which the warrants will be issued;</TD></TR>
</TABLE>
<P STYLE="text-align: justify; text-indent: 0pt; margin: 0">&#160;&#160;</P>

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<P STYLE="text-align: justify; text-indent: 0pt; margin: 0">&#160;&#160;</P>

<TABLE BORDER="0" CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 36pt">&nbsp;</TD>
    <TD STYLE="text-align: justify; width: 36pt; text-indent: 0pt">&bull;&#160;</TD>
    <TD STYLE="text-align: justify; text-indent: 0pt">designation, number, aggregate principal amount, denominations and terms of the securities that may be purchased on exercise of the warrants;</TD></TR>
</TABLE>
<P STYLE="margin: 0pt">&nbsp;</P>

<TABLE BORDER="0" CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 36pt">&nbsp;</TD>
    <TD STYLE="text-align: justify; width: 36pt; text-indent: 0pt">&bull;&#160;</TD>
    <TD STYLE="text-align: justify; text-indent: 0pt">date, if any, on and after which the warrants and the debt securities offered with the warrants, if any, will be separately transferable;</TD></TR>
</TABLE>
<P STYLE="margin: 0pt">&nbsp;</P>

<TABLE BORDER="0" CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 36pt">&nbsp;</TD>
    <TD STYLE="text-align: justify; width: 36pt; text-indent: 0pt">&bull;&#160;</TD>
    <TD STYLE="text-align: justify; text-indent: 0pt">purchase price for each security purchasable on exercise of the warrants;</TD></TR>
</TABLE>
<P STYLE="margin: 0pt">&nbsp;</P>

<TABLE BORDER="0" CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 36pt">&nbsp;</TD>
    <TD STYLE="text-align: justify; width: 36pt; text-indent: 0pt">&bull;&#160;</TD>
    <TD STYLE="text-align: justify; text-indent: 0pt">the terms for changes to or adjustments in the exercise price, if any;</TD></TR>
</TABLE>
<P STYLE="margin: 0pt">&nbsp;</P>

<TABLE BORDER="0" CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 36pt">&nbsp;</TD>
    <TD STYLE="text-align: justify; width: 36pt; text-indent: 0pt">&bull;&#160;</TD>
    <TD STYLE="text-align: justify; text-indent: 0pt">dates on which the right to purchase certain securities upon exercise of the warrants will begin and end;</TD></TR>
</TABLE>
<P STYLE="margin: 0pt">&nbsp;</P>

<TABLE BORDER="0" CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 36pt">&nbsp;</TD>
    <TD STYLE="text-align: justify; width: 36pt; text-indent: 0pt">&bull;&#160;</TD>
    <TD STYLE="text-align: justify; text-indent: 0pt">minimum or maximum number of securities that may be purchased at any one time upon exercise of the warrants;</TD></TR>
</TABLE>
<P STYLE="margin: 0pt">&nbsp;</P>

<TABLE BORDER="0" CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 36pt">&nbsp;</TD>
    <TD STYLE="text-align: justify; width: 36pt; text-indent: 0pt">&bull;&#160;</TD>
    <TD STYLE="text-align: justify; text-indent: 0pt">anti-dilution provisions or other adjustments to the exercise price of the warrants;</TD></TR>
</TABLE>
<P STYLE="margin: 0pt">&nbsp;</P>

<TABLE BORDER="0" CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 36pt">&nbsp;</TD>
    <TD STYLE="text-align: justify; width: 36pt; text-indent: 0pt">&bull;&#160;</TD>
    <TD STYLE="text-align: justify; text-indent: 0pt">terms of any right that we may have to redeem the warrants;</TD></TR>
</TABLE>
<P STYLE="margin: 0pt">&nbsp;</P>

<TABLE BORDER="0" CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 36pt">&nbsp;</TD>
    <TD STYLE="text-align: justify; width: 36pt; text-indent: 0pt">&bull;&#160;</TD>
    <TD STYLE="text-align: justify; text-indent: 0pt">effect of any merger, consolidation, sale or other transfer of our business on the warrants and the applicable warrant agreement;</TD></TR>
</TABLE>
<P STYLE="margin: 0pt">&nbsp;</P>

<TABLE BORDER="0" CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 36pt">&nbsp;</TD>
    <TD STYLE="text-align: justify; width: 36pt; text-indent: 0pt">&bull;&#160;</TD>
    <TD STYLE="text-align: justify; text-indent: 0pt">name and address of the warrant agent, if any;</TD></TR>
</TABLE>
<P STYLE="margin: 0pt">&nbsp;</P>

<TABLE BORDER="0" CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 36pt">&nbsp;</TD>
    <TD STYLE="text-align: justify; width: 36pt; text-indent: 0pt">&bull;&#160;</TD>
    <TD STYLE="text-align: justify; text-indent: 0pt">information with respect to book-entry procedures;</TD></TR>
</TABLE>
<P STYLE="margin: 0pt">&nbsp;</P>

<TABLE BORDER="0" CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 36pt">&nbsp;</TD>
    <TD STYLE="text-align: justify; width: 36pt; text-indent: 0pt">&bull;&#160;</TD>
    <TD STYLE="text-align: justify; text-indent: 0pt">any material United States federal income tax considerations; and</TD></TR>
</TABLE>
<P STYLE="margin: 0pt">&nbsp;</P>

<TABLE BORDER="0" CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 36pt">&nbsp;</TD>
    <TD STYLE="text-align: justify; width: 36pt; text-indent: 0pt">&bull;&#160;</TD>
    <TD STYLE="text-align: justify; text-indent: 0pt">other material terms, including terms relating to transferability, exchange, exercise or amendments of the warrants.</TD></TR>
</TABLE>
<P STYLE="margin: 0pt">&nbsp;</P>

<P STYLE="text-align: justify; text-indent: 36pt; margin: 0; font: 10pt Times New Roman, Times, Serif">Until any warrants to purchase
our securities are exercised, holders of the warrants will not have any rights of holders of the underlying securities.</P>

<P STYLE="margin: 0pt">&nbsp;</P>

<P STYLE="text-align: justify; text-indent: 0pt; margin: 0; font: 10pt Times New Roman, Times, Serif"><B>Outstanding Warrants</B></P>

<P STYLE="margin: 0pt">&nbsp;</P>

<P STYLE="text-align: justify; text-indent: 36pt; margin: 0; font: 10pt Times New Roman, Times, Serif">As of May 10, 2012, we had
outstanding warrants to purchase 6,139,674 shares of our common stock at exercise prices ranging from $0.45 to $49.70 per share.&#160;&#160;These
outstanding warrants consist of warrants to purchase an aggregate of 252,101 shares of common stock at an exercise price of $0.45
per share expiring in 2017, warrants to purchase an aggregate of 4,956,250 shares of common stock at an exercise price of $1.50
per share expiring in 2016, warrants to purchase an aggregate of 502,750 shares of common stock at an exercise price of $49.00
per share expiring in 2018, and warrants to purchase an aggregate of 428,573 shares of common stock at an exercise price of $49.70
per share expiring in 2013.</P>

<P STYLE="margin: 0pt">&nbsp;</P>

<P STYLE="text-align: center; text-indent: 0pt; margin: 0; font: 10pt Times New Roman, Times, Serif"><B>DESCRIPTION OF UNITS</B></P>

<P STYLE="margin: 0pt">&nbsp;</P>

<P STYLE="text-align: justify; text-indent: 36pt; margin: 0; font: 10pt Times New Roman, Times, Serif">The complete terms of the
units will be contained in the unit agreement and any document applicable to the securities comprising the units. These documents
will be included or incorporated by reference as exhibits to the registration statement of which this prospectus is a part. You
should read the unit agreement and any related documents. You also should read the prospectus supplement, which will contain additional
information and which may update or change some of the information below.</P>

<P STYLE="text-align: justify; text-indent: 0pt; margin: 0">&#160;&#160;</P>

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<P STYLE="text-align: justify; text-indent: 0pt; margin: 0">&#160;&#160;</P>

<P STYLE="text-align: justify; text-indent: 36pt; margin: 0; font: 10pt Times New Roman, Times, Serif">This section describes the
general terms of the units that we may offer using this prospectus. Further terms of the units will be stated in the applicable
prospectus supplement. The following description and any description of the units in a prospectus supplement may not be complete
and is subject to and qualified in its entirety by reference to the terms of any agreement relating to the units and the related
documents applicable to the securities constituting the units.</P>

<P STYLE="margin: 0pt">&nbsp;</P>

<P STYLE="text-align: justify; text-indent: 36pt; margin: 0; font: 10pt Times New Roman, Times, Serif">We may issue units, in one
or more series, consisting of any combination of one or more of the other securities described in this prospectus. If we offer
units, we will describe the terms in a prospectus supplement. Units may be issued under a written unit agreement to be entered
into between us and the holder or beneficial owner, or we could issue units under a written unit agreement with a unit agent specified
in a prospectus supplement. A unit agent would act solely as our agent in connection with the units of a particular series and
would not assume any obligation or relationship of agency or trust for or with any holders or beneficial owners of those units.</P>

<P STYLE="margin: 0pt">&nbsp;</P>

<P STYLE="text-align: justify; text-indent: 36pt; margin: 0; font: 10pt Times New Roman, Times, Serif">Each unit will be issued
so that the holder of the unit is also the holder of each security included in the unit. Thus, the holder of a unit will have the
rights and obligations of a holder of each included security.</P>

<P STYLE="margin: 0pt">&nbsp;</P>

<P STYLE="text-align: justify; text-indent: 36pt; margin: 0; font: 10pt Times New Roman, Times, Serif">The following are some of
the unit terms that could be described in a prospectus supplement:</P>

<P STYLE="margin: 0pt">&nbsp;</P>

<TABLE BORDER="0" CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 36pt">&nbsp;</TD>
    <TD STYLE="text-align: justify; width: 36pt; text-indent: 0pt">&bull;&#160;</TD>
    <TD STYLE="text-align: justify; text-indent: 0pt">title of the units;</TD></TR>
</TABLE>
<P STYLE="margin: 0pt">&nbsp;</P>

<TABLE BORDER="0" CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 36pt">&nbsp;</TD>
    <TD STYLE="text-align: justify; width: 36pt; text-indent: 0pt">&bull;&#160;</TD>
    <TD STYLE="text-align: justify; text-indent: 0pt">aggregate number of units;</TD></TR>
</TABLE>
<P STYLE="margin: 0pt">&nbsp;</P>

<TABLE BORDER="0" CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 36pt">&nbsp;</TD>
    <TD STYLE="text-align: justify; width: 36pt; text-indent: 0pt">&bull;&#160;</TD>
    <TD STYLE="text-align: justify; text-indent: 0pt">price or prices at which the units will be issued;</TD></TR>
</TABLE>
<P STYLE="margin: 0pt">&nbsp;</P>

<TABLE BORDER="0" CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 36pt">&nbsp;</TD>
    <TD STYLE="text-align: justify; width: 36pt; text-indent: 0pt">&bull;&#160;</TD>
    <TD STYLE="text-align: justify; text-indent: 0pt">designation and terms of the units and of the securities comprising the units, including whether and under what circumstances those securities may be held or transferred separately;</TD></TR>
</TABLE>
<P STYLE="margin: 0pt">&nbsp;</P>

<TABLE BORDER="0" CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 36pt">&nbsp;</TD>
    <TD STYLE="text-align: justify; width: 36pt; text-indent: 0pt">&bull;&#160;</TD>
    <TD STYLE="text-align: justify; text-indent: 0pt">effect of any merger, consolidation, sale or other transfer of our business on the units and the applicable unit agreement;</TD></TR>
</TABLE>
<P STYLE="margin: 0pt">&nbsp;</P>

<TABLE BORDER="0" CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 36pt">&nbsp;</TD>
    <TD STYLE="text-align: justify; width: 36pt; text-indent: 0pt">&bull;&#160;</TD>
    <TD STYLE="text-align: justify; text-indent: 0pt">name and address of the unit agent;</TD></TR>
</TABLE>
<P STYLE="margin: 0pt">&nbsp;</P>

<TABLE BORDER="0" CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 36pt">&nbsp;</TD>
    <TD STYLE="text-align: justify; width: 36pt; text-indent: 0pt">&bull;&#160;</TD>
    <TD STYLE="text-align: justify; text-indent: 0pt">information with respect to book-entry procedures;</TD></TR>
</TABLE>
<P STYLE="margin: 0pt">&nbsp;</P>

<TABLE BORDER="0" CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 36pt">&nbsp;</TD>
    <TD STYLE="text-align: justify; width: 36pt; text-indent: 0pt">&bull;&#160;</TD>
    <TD STYLE="text-align: justify; text-indent: 0pt">any material United States federal income tax considerations; and</TD></TR>
</TABLE>
<P STYLE="margin: 0pt">&nbsp;</P>

<TABLE BORDER="0" CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 36pt">&nbsp;</TD>
    <TD STYLE="text-align: justify; width: 36pt; text-indent: 0pt">&bull;&#160;</TD>
    <TD STYLE="text-align: justify; text-indent: 0pt">other material terms, including terms relating to transferability, exchange, exercise or amendments of the units.</TD></TR>
</TABLE>
<P STYLE="margin: 0pt">&nbsp;</P>

<P STYLE="text-align: justify; text-indent: 36pt; margin: 0; font: 10pt Times New Roman, Times, Serif">The provisions described
in this section, as well as those described under &#8220;Description of Capital Stock,&#8221; &#8220;Description of Preferred Stock,&#8221;
&#8220;Description of Debt Securities,&#8221; and &#8220;Description of Warrants,&#8221; will apply to each unit and to any common
stock, preferred stock, debt security or warrant included in each unit, respectively.</P>

<P STYLE="text-align: justify; text-indent: 0pt; margin: 0">&#160;&#160;</P>

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<P STYLE="text-align: justify; text-indent: 0pt; margin: 0">&#160;&#160;</P>

<P STYLE="text-align: justify; text-indent: 36pt; margin: 0; font: 10pt Times New Roman, Times, Serif">Unless otherwise provided
in the applicable prospectus supplement, the unit agreements will be governed by the laws of the State of New York. The unit agreement
under which a unit is issued may provide that the securities included in the unit may not be held or transferred separately, at
any time or at any time before a specified date. We will file as an exhibit to a filing with the Securities and Exchange Commission
that is incorporated by reference into this prospectus the forms of the unit agreements containing the terms of the units being
offered. The description of units in any prospectus supplement will not necessarily describe all of the terms of the units in detail.
You should read the applicable unit agreements for a complete description of all of the terms.</P>

<P STYLE="margin: 0pt">&nbsp;</P>

<P STYLE="text-align: center; text-indent: 0pt; margin: 0; font: 10pt Times New Roman, Times, Serif"><B>GLOBAL SECURITIES</B></P>

<P STYLE="margin: 0pt">&nbsp;</P>

<P STYLE="text-align: justify; text-indent: 36pt; margin: 0; font: 10pt Times New Roman, Times, Serif">Unless otherwise indicated
in the applicable prospectus supplement, securities other than common stock will be issued in the form of one or more global certificates,
or &#8220;global securities,&#8221; registered in the name of a depositary or its nominee. Unless otherwise indicated in the applicable
prospectus supplement, the depositary will be The Depository Trust Company, commonly referred to as DTC. We expect that DTC&#8217;s
nominee will be Cede &amp; Co. Accordingly, we expect Cede &amp; Co. to be the initial registered holder of all securities that
are issued in global form. No person that acquires a beneficial interest in those securities will be entitled to receive a certificate
representing that person&#8217;s interest in the securities except as described herein or in the applicable prospectus supplement.
Unless and until definitive securities are issued under the limited circumstances described below, all references to actions by
holders of securities issued in global form will refer to actions taken by DTC upon instructions from its participants, and all
references to payments and notices to holders will refer to payments and notices to DTC or Cede &amp; Co., as the registered holder
of these securities.</P>

<P STYLE="margin: 0pt">&nbsp;</P>

<P STYLE="text-align: justify; text-indent: 36pt; margin: 0; font: 10pt Times New Roman, Times, Serif">DTC is a limited-purpose
trust company organized under the New York Banking Law, a &#8220;banking organization&#8221; within the meaning of the New York
Banking Law, a member of the Federal Reserve System, a &#8220;clearing corporation&#8221; within the meaning of the New York Uniform
Commercial Code, and a &#8220;clearing agency&#8221; registered pursuant to the provisions of Section 17A of the Exchange Act.
DTC holds securities that DTC participants deposit with DTC. DTC also facilitates the settlement among DTC participants of securities
transactions, such as transfers and pledges, in deposited securities through electronic computerized book-entry changes in DTC
participants&#8217; accounts, thereby eliminating the need for physical movement of certificates. DTC participants include securities
brokers and dealers, banks, trust companies and clearing corporations, and may include other organizations. DTC is a wholly owned
subsidiary of the Depository Trust &amp; Clearing Company, or DTCC. DTCC, in turn, is owned by a number of DTC&#8217;s participants
and subsidiaries of DTCC as well as by other financial companies, including the New York Stock Exchange, Inc. and the Financial
Industry Regulatory Authority, Inc. Indirect access to the DTC system also is available to others such as banks, brokers, dealers
and trust companies that clear through or maintain a custodial relationship with a participant, either directly or indirectly.
The rules applicable to DTC and DTC participants are on file with the Securities and Exchange Commission.</P>

<P STYLE="margin: 0pt">&nbsp;</P>

<P STYLE="text-align: justify; text-indent: 36pt; margin: 0; font: 10pt Times New Roman, Times, Serif">Persons that are not participants
or indirect participants but desire to purchase, sell or otherwise transfer ownership of, or other interests in, securities may
do so only through participants and indirect participants. Under a book-entry format, holders may experience some delay in their
receipt of payments, as such payments will be forwarded by our designated agent to Cede &amp; Co., as nominee for DTC. DTC will
forward such payments to its participants, who will then forward them to indirect participants or holders. Holders will not be
recognized by the relevant registrar, transfer agent, trustee or warrant agent as registered holders of the securities entitled
to the benefits of our Certificate of Incorporation or the applicable indenture, warrant agreement, trust agreement or guarantee.
Beneficial owners that are not participants will be permitted to exercise their rights only indirectly through and according to
the procedures of participants and, if applicable, indirect participants.</P>

<P STYLE="text-align: justify; text-indent: 0pt; margin: 0">&#160;&#160;</P>

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<P STYLE="text-align: justify; text-indent: 0pt; margin: 0">&#160;&#160;</P>

<P STYLE="text-align: justify; text-indent: 36pt; margin: 0; font: 10pt Times New Roman, Times, Serif">Under the rules, regulations
and procedures creating and affecting DTC and its operations as currently in effect, DTC will be required to make book-entry transfers
of securities among participants and to receive and transmit payments to participants. DTC rules require participants and indirect
participants with which beneficial securities owners have accounts to make book-entry transfers and receive and transmit payments
on behalf of their respective account holders.</P>

<P STYLE="margin: 0pt">&nbsp;</P>

<P STYLE="text-align: justify; text-indent: 36pt; margin: 0; font: 10pt Times New Roman, Times, Serif">Because DTC can act only
on behalf of participants, who in turn act only on behalf of participants or indirect participants, and certain banks, trust companies
and other persons approved by it, the ability of a beneficial owner of securities issued in global form to pledge such securities
to persons or entities that do not participate in the DTC system may be limited due to the unavailability of physical certificates
for these securities.</P>

<P STYLE="margin: 0pt">&nbsp;</P>

<P STYLE="text-align: justify; text-indent: 36pt; margin: 0; font: 10pt Times New Roman, Times, Serif">We expect DTC to advise
us that DTC will take any action permitted to be taken by a registered holder of any securities under our Certificate of Incorporation
or the relevant indenture, warrant agreement, trust agreement or guarantee only at the direction of one or more participants to
whose accounts with DTC such securities are credited.</P>

<P STYLE="margin: 0pt">&nbsp;</P>

<P STYLE="text-align: justify; text-indent: 36pt; margin: 0; font: 10pt Times New Roman, Times, Serif">Unless otherwise indicated
in the applicable prospectus supplement, a global security will be exchangeable for the relevant definitive securities registered
in the names of persons other than DTC or its nominee only if:</P>

<P STYLE="margin: 0pt">&nbsp;</P>

<TABLE BORDER="0" CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 36pt">&nbsp;</TD>
    <TD STYLE="text-align: justify; width: 36pt; text-indent: 0pt">&bull;&#160;</TD>
    <TD STYLE="text-align: justify; text-indent: 0pt">DTC notifies us that it is unwilling or unable to continue as depositary for that global security or if DTC ceases to be a clearing agency registered under the Exchange Act when DTC is required to be so registered;</TD></TR>
</TABLE>
<P STYLE="margin: 0pt">&nbsp;</P>

<TABLE BORDER="0" CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 36pt">&nbsp;</TD>
    <TD STYLE="text-align: justify; width: 36pt; text-indent: 0pt">&bull;&#160;</TD>
    <TD STYLE="text-align: justify; text-indent: 0pt">we execute and deliver to the relevant registrar, transfer agent, trustee and/or warrant agent an order complying with the requirements of the applicable indenture, trust agreement or warrant agreement that the global security will be exchangeable for definitive securities in registered form; or</TD></TR>
</TABLE>
<P STYLE="margin: 0pt">&nbsp;</P>

<TABLE BORDER="0" CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 36pt">&nbsp;</TD>
    <TD STYLE="text-align: justify; width: 36pt; text-indent: 0pt">&bull;&#160;</TD>
    <TD STYLE="text-align: justify; text-indent: 0pt">there has occurred and is continuing a default in the payment of any amount due in respect of the securities or, in the case of debt securities, an event of default or an event that, with the giving of notice or lapse of time, or both, would constitute an event of default with respect to these debt securities.</TD></TR>
</TABLE>
<P STYLE="margin: 0pt">&nbsp;</P>

<P STYLE="text-align: justify; text-indent: 36pt; margin: 0; font: 10pt Times New Roman, Times, Serif">Any global security that
is exchangeable under the preceding sentence will be exchangeable for securities registered in such names as DTC directs.</P>

<P STYLE="margin: 0pt">&nbsp;</P>

<P STYLE="text-align: justify; text-indent: 36pt; margin: 0; font: 10pt Times New Roman, Times, Serif">Upon the occurrence of any
event described in the preceding paragraph, DTC is generally required to notify all participants of the availability of definitive
securities. Upon DTC surrendering the global security representing the securities and delivery of instructions for re-registration,
the registrar, transfer agent, trustee or warrant agent, as the case may be, will reissue the securities as definitive securities,
and then such persons will recognize the holders of such definitive securities as registered holders of securities entitled to
the benefits of our articles or the relevant indenture trust agreement and/or warrant agreement.</P>

<P STYLE="margin: 0pt">&nbsp;</P>

<P STYLE="text-align: justify; text-indent: 36pt; margin: 0; font: 10pt Times New Roman, Times, Serif">Redemption notices will
be sent to Cede &amp; Co. as the registered holder of the global securities. If less than all of a series of securities are being
redeemed, DTC will determine the amount of the interest of each direct participant to be redeemed in accordance with its then current
procedures.</P>

<P STYLE="text-align: justify; text-indent: 0pt; margin: 0">&#160;&#160;</P>

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<P STYLE="text-align: justify; text-indent: 0pt; margin: 0">&#160;&#160;</P>

<P STYLE="text-align: justify; text-indent: 36pt; margin: 0; font: 10pt Times New Roman, Times, Serif">Except as described above,
the global security may not be transferred except as a whole by DTC to a nominee of DTC or by a nominee of DTC to DTC or another
nominee of DTC or to a successor depositary we appoint. Except as described above, DTC may not sell, assign, transfer or otherwise
convey any beneficial interest in a global security evidencing all or part of any securities unless the beneficial interest is
in an amount equal to an authorized denomination for these securities.</P>

<P STYLE="margin: 0pt">&nbsp;</P>

<P STYLE="text-align: justify; text-indent: 36pt; margin: 0; font: 10pt Times New Roman, Times, Serif">The information in this
section concerning DTC and DTC&#8217;s book-entry system has been obtained from sources that we believe to be accurate, but we
assume no responsibility for the accuracy thereof. None of us, any indenture trustee, any depositary, any rights agent, any registrar
and transfer agent or any warrant agent, or any agent of any of them, will have any responsibility or liability for any aspect
of DTC&#8217;s or any participant&#8217;s records relating to, or for payments made on account of, beneficial interests in a global
security, or for maintaining, supervising or reviewing any records relating to such beneficial interests.</P>

<P STYLE="margin: 0pt">&nbsp;</P>

<P STYLE="text-align: justify; text-indent: 36pt; margin: 0; font: 10pt Times New Roman, Times, Serif">Secondary trading in notes
and debentures of corporate issuers is generally settled in clearing-house or next-day funds. In contrast, beneficial interests
in a global security, in some cases, may trade in the DTC&#8217;s same-day funds settlement system, in which secondary market trading
activity in those beneficial interests would be required by DTC to settle in immediately available funds. There is no assurance
as to the effect, if any, that settlement in immediately available funds would have on trading activity in such beneficial interests.
Also, settlement for purchases of beneficial interests in a global security upon the original issuance of this security may be
required to be made in immediately available funds.</P>

<P STYLE="margin: 0pt">&nbsp;</P>

<P STYLE="text-align: center; text-indent: 0pt; margin: 0; font: 10pt Times New Roman, Times, Serif"><B>PLAN OF DISTRIBUTION</B></P>

<P STYLE="margin: 0pt">&nbsp;</P>

<P STYLE="text-align: justify; text-indent: 36pt; margin: 0; font: 10pt Times New Roman, Times, Serif">We may sell or distribute
the securities included in this prospectus through underwriters, through agents, dealers, in private transactions, at market prices
prevailing at the time of sale, at prices related to the prevailing market prices, or at negotiated prices.</P>

<P STYLE="margin: 0pt">&nbsp;</P>

<P STYLE="text-align: justify; text-indent: 36pt; margin: 0; font: 10pt Times New Roman, Times, Serif">In addition, we may sell
some or all of the securities included in this prospectus through:</P>

<P STYLE="margin: 0pt">&nbsp;</P>

<TABLE BORDER="0" CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 36pt">&nbsp;</TD>
    <TD STYLE="text-align: justify; width: 36pt; text-indent: 0pt">&bull;&#160;</TD>
    <TD STYLE="text-align: justify; text-indent: 0pt">a block trade in which a broker-dealer may resell a portion of the block, as principal, in order to facilitate the transaction;</TD></TR>
</TABLE>
<P STYLE="margin: 0pt">&nbsp;</P>

<TABLE BORDER="0" CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 36pt">&nbsp;</TD>
    <TD STYLE="text-align: justify; width: 36pt; text-indent: 0pt">&bull;&#160;</TD>
    <TD STYLE="text-align: justify; text-indent: 0pt">purchases by a broker-dealer, as principal, and resale by the broker-dealer for its account; or</TD></TR>
</TABLE>
<P STYLE="margin: 0pt">&nbsp;</P>

<TABLE BORDER="0" CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 36pt">&nbsp;</TD>
    <TD STYLE="text-align: justify; width: 36pt; text-indent: 0pt">&bull;&#160;</TD>
    <TD STYLE="text-align: justify; text-indent: 0pt">ordinary brokerage transactions and transactions in which a broker solicits purchasers.</TD></TR>
</TABLE>
<P STYLE="margin: 0pt">&nbsp;</P>

<P STYLE="text-align: justify; text-indent: 36pt; margin: 0; font: 10pt Times New Roman, Times, Serif">In addition, we may enter
into option or other types of transactions that require us to deliver common shares to a broker-dealer, who will then resell or
transfer the common shares under this prospectus. We may enter into hedging transactions with respect to our securities. For example,
we may:</P>

<P STYLE="margin: 0pt">&nbsp;</P>

<TABLE BORDER="0" CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 36pt">&nbsp;</TD>
    <TD STYLE="text-align: justify; width: 36pt; text-indent: 0pt">&bull;&#160;</TD>
    <TD STYLE="text-align: justify; text-indent: 0pt">enter into transactions involving short sales of the common shares by broker-dealers;</TD></TR>
</TABLE>
<P STYLE="margin: 0pt">&nbsp;</P>

<TABLE BORDER="0" CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 36pt">&nbsp;</TD>
    <TD STYLE="text-align: justify; width: 36pt; text-indent: 0pt">&bull;&#160;</TD>
    <TD STYLE="text-align: justify; text-indent: 0pt">sell common shares short themselves and deliver the shares to close out short positions;</TD></TR>
</TABLE>
<P STYLE="margin: 0pt">&nbsp;</P>

<TABLE BORDER="0" CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 36pt">&nbsp;</TD>
    <TD STYLE="text-align: justify; width: 36pt; text-indent: 0pt">&bull;&#160;</TD>
    <TD STYLE="text-align: justify; text-indent: 0pt">enter into option or other types of transactions that require us to deliver common shares to a broker-dealer, who will then resell or transfer the common shares under this prospectus; or</TD></TR>
</TABLE>
<P STYLE="margin: 0pt">&nbsp;</P>

<TABLE BORDER="0" CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 36pt">&nbsp;</TD>
    <TD STYLE="text-align: justify; width: 36pt; text-indent: 0pt">&bull;&#160;</TD>
    <TD STYLE="text-align: justify; text-indent: 0pt">loan or pledge the common shares to a broker-dealer, who may sell the loaned shares or, in the event of default, sell the pledged shares.</TD></TR>
</TABLE>
<P STYLE="text-align: justify; text-indent: 0pt; margin: 0">&#160;&#160;</P>

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<P STYLE="text-align: justify; text-indent: 0pt; margin: 0">&#160;&#160;&#160;</P>

<P STYLE="text-align: justify; text-indent: 36pt; margin: 0; font: 10pt Times New Roman, Times, Serif">We may enter into derivative
transactions with third parties, or sell securities not covered by this prospectus to third parties in privately negotiated transactions.
If the applicable prospectus supplement indicates, in connection with those derivatives, the third parties may sell securities
covered by this prospectus and the applicable prospectus supplement, including in short sale transactions. If so, the third party
may use securities pledged by us or borrowed from us or others to settle those sales or to close out any related open borrowings
of stock, and may use securities received from us in settlement of those derivatives to close out any related open borrowings of
stock. The third party in such sale transactions will be an underwriter and, if not identified in this prospectus, will be identified
in the applicable prospectus supplement (or a post-effective amendment). In addition, we may otherwise loan or pledge securities
to a financial institution or other third party that in turn may sell the securities short using this prospectus. Such financial
institution or other third party may transfer its economic short position to investors in our securities or in connection with
a concurrent offering of other securities.</P>

<P STYLE="margin: 0pt">&nbsp;</P>

<P STYLE="text-align: justify; text-indent: 36pt; margin: 0; font: 10pt Times New Roman, Times, Serif">There is currently no market
for any of the securities, other than the shares of common stock listed on The NASDAQ Capital Market. If the securities are traded
after their initial issuance, they may trade at a discount from their initial offering price, depending on prevailing interest
rates, the market for similar securities and other factors. While it is possible that an underwriter could inform us that it intends
to make a market in the securities, such underwriter would not be obligated to do so, and any such market making could he discontinued
at any time without notice. Therefore, we cannot assure you as to whether an active trading market will develop for these other
securities. We have no current plans for listing the debt securities on any securities exchange; any such listing with respect
to any particular debt securities will be described in the applicable prospectus supplement.</P>

<P STYLE="margin: 0pt">&nbsp;</P>

<P STYLE="text-align: justify; text-indent: 36pt; margin: 0; font: 10pt Times New Roman, Times, Serif">Any broker-dealers or other
persons acting on our behalf that participate with us in the distribution of the shares may be deemed to be underwriters and any
commissions received or profit realized by them on the resale of the shares may be deemed to be underwriting discounts and commissions
under the Securities Act. As of the date of this prospectus, we are not a party to any agreement, arrangement or understanding
between any broker or dealer and us with respect to the offer or sale of the securities pursuant to this prospectus.</P>

<P STYLE="margin: 0pt">&nbsp;</P>

<P STYLE="text-align: justify; text-indent: 36pt; margin: 0; font: 10pt Times New Roman, Times, Serif">We may have agreements with
agents, underwriters, dealers and remarketing firms to indemnify them or their controlling persons against certain civil liabilities,
including liabilities under the Securities Act. Agents, underwriters, dealers and remarketing firms, and their affiliates, may
engage in transactions with, or perform services for, us in the ordinary course of business. This includes commercial banking and
investment banking transactions.</P>

<P STYLE="margin: 0pt">&nbsp;</P>

<P STYLE="text-align: justify; text-indent: 36pt; margin: 0; font: 10pt Times New Roman, Times, Serif">At the time that any particular
offering of securities is made, to the extent required by the Securities Act, a prospectus supplement will be distributed setting
forth the terms of the offering, including the aggregate number of securities being offered, the purchase price of the securities,
the initial offering price of the securities, the names of and the respective amounts underwritten by any underwriters, dealers
or agents, nature of the underwriters&#8217; obligation to purchase the securities, any discounts, commissions and other items
constituting compensation from us and any discounts, commissions or concessions allowed or reallowed or paid to dealers. The nature
and amount of discounts and commissions to underwriters for each security and in total will be provided in tabular format.</P>

<P STYLE="margin: 0pt">&nbsp;</P>

<P STYLE="text-align: justify; text-indent: 36pt; margin: 0; font: 10pt Times New Roman, Times, Serif">Pursuant to a requirement
by the Financial Industry Regulatory Authority, or FINRA, the maximum commission or discount to be received by any FINRA member
or independent broker/dealer may not exceed 8% of the gross proceeds received by us for the sale of any securities offered pursuant
to this prospectus and any applicable prospectus supplement.</P>

<P STYLE="text-align: justify; text-indent: 0pt; margin: 0">&#160;&#160;</P>

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<P STYLE="text-align: justify; text-indent: 0pt; margin: 0">&#160;&#160;</P>

<P STYLE="text-align: center; text-indent: 0pt; margin: 0; font: 10pt Times New Roman, Times, Serif"><B>DISCLOSURE OF COMMISSION
POSITION ON INDEMNIFICATION</B></P>

<P STYLE="text-align: center; text-indent: 0pt; margin: 0; font: 10pt Times New Roman, Times, Serif"><B>FOR SECURITIES ACT LIABILITIES</B></P>

<P STYLE="margin: 0pt">&nbsp;</P>

<P STYLE="text-align: justify; text-indent: 36pt; margin: 0; font: 10pt Times New Roman, Times, Serif">Insofar as indemnification
for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding)
is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant
will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed
by the final adjudication of such issue.</P>

<P STYLE="margin: 0pt">&nbsp;</P>

<P STYLE="text-align: center; text-indent: 0pt; margin: 0; font: 10pt Times New Roman, Times, Serif"><B>LEGAL MATTERS</B></P>

<P STYLE="margin: 0pt">&nbsp;</P>

<P STYLE="text-align: justify; text-indent: 36pt; margin: 0; font: 10pt Times New Roman, Times, Serif">Unless otherwise indicated
in the applicable prospectus supplement, the validity of the securities being offered by this prospectus will be passed upon by
Rutan &amp; Tucker, LLP.</P>

<P STYLE="margin: 0pt">&nbsp;</P>

<P STYLE="text-align: center; text-indent: 0pt; margin: 0; font: 10pt Times New Roman, Times, Serif"><B>EXPERTS</B></P>

<P STYLE="margin: 0pt">&nbsp;</P>

<P STYLE="text-align: justify; text-indent: 36pt; margin: 0; font: 10pt Times New Roman, Times, Serif">The financial statements
incorporated by reference in this prospectus and registration statement have been audited by Hein &amp; Associates LLP, an independent
registered public accounting firm, as stated in their report (which report expresses an unqualified opinion) and are incorporated
by reference in reliance upon such report and upon the authority of such firm as experts in accounting and auditing.</P>

<P STYLE="margin: 0pt">&nbsp;</P>

<P STYLE="text-align: center; text-indent: 0pt; margin: 0; font: 10pt Times New Roman, Times, Serif"><B>WHERE YOU CAN FIND MORE
INFORMATION</B></P>

<P STYLE="margin: 0pt">&nbsp;</P>

<P STYLE="text-align: justify; text-indent: 36pt; margin: 0; font: 10pt Times New Roman, Times, Serif">We have filed with the Securities
and Exchange Commission a registration statement on Form&#160;&#160;&#160;S-3 under the Securities Act, and the rules and regulations
promulgated under the Securities Act, with respect to the securities offered under this prospectus.&#160;&#160;This prospectus,
which constitutes a part of the registration statement, does not contain all of the information contained in the registration statement
and the exhibits and schedules to the registration statement.&#160;&#160;Many of the contracts and documents described in this
prospectus are filed as exhibits to the registration statements and you may review the full text of these contracts and documents
by referring to these exhibits.</P>

<P STYLE="margin: 0pt">&nbsp;</P>

<P STYLE="text-align: justify; text-indent: 36pt; margin: 0; font: 10pt Times New Roman, Times, Serif">For further information
with respect to us and the securities offered under this prospectus, reference is made to the registration statement and its exhibits
and schedules.&#160;&#160;We file reports, including annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports
on Form 8-K with the Securities and Exchange Commission.&#160;&#160;The public may read and copy any materials we file with the
Securities and Exchange Commission at the Securities and Exchange Commission&#8217;s Public Reference Room at 100 F Street, N.E.,
Washington, DC 20549, on official business days during the hours of 10 a.m. to 3 p.m. The registration statement, including its
exhibits and schedules, may be inspected at the Public Reference Room. The public may obtain information on the operation of the
Public Reference Room by calling the Securities and Exchange Commission at 1-800-SEC-0330.</P>

<P STYLE="text-align: justify; text-indent: 0pt; margin: 0">&#160;&#160;</P>

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<P STYLE="text-align: justify; text-indent: 0pt; margin: 0">&#160;&#160;</P>

<P STYLE="text-align: justify; text-indent: 36pt; margin: 0; font: 10pt Times New Roman, Times, Serif">The Securities and Exchange
Commission maintains an Internet web site that contains reports, proxy and information statements and other information regarding
issuers, including Pacific Ethanol, that file electronically with the Securities and Exchange Commission.&#160;&#160;The Securities
and Exchange Commission&#8217;s Internet website address is <FONT STYLE="color: #0000ff"><U>http://www.sec.gov</U></FONT>. Our
Internet website address is <FONT STYLE="color: #0000ff"><U>http://www.pacificethanol.net/</U></FONT>.</P>

<P STYLE="margin: 0pt">&nbsp;</P>

<P STYLE="text-align: justify; text-indent: 36pt; margin: 0; font: 10pt Times New Roman, Times, Serif">We do not anticipate that
we will send an annual report to our stockholders until and unless we are required to do so by the rules of the Securities and
Exchange Commission.</P>

<P STYLE="margin: 0pt">&nbsp;</P>

<P STYLE="text-align: justify; text-indent: 36pt; margin: 0; font: 10pt Times New Roman, Times, Serif">All trademarks or trade
names referred to in this prospectus are the property of their respective owners.</P>

<P STYLE="margin: 0pt">&nbsp;</P>

<P STYLE="text-align: center; text-indent: 0pt; margin: 0; font: 10pt Times New Roman, Times, Serif"><B>INCORPORATION OF CERTAIN
DOCUMENTS BY REFERENCE</B></P>

<P STYLE="margin: 0pt">&nbsp;</P>

<P STYLE="text-align: justify; text-indent: 36pt; margin: 0; font: 10pt Times New Roman, Times, Serif">The Securities and Exchange
Commission allows us to &#8220;incorporate by reference&#8221; the information we file with the Securities and Exchange Commission.&#160;&#160;This
means that we can disclose important information to you by referring you to another filed document.&#160;&#160;Any information
referred to in this way is considered part of this prospectus from the date we file that document.&#160;&#160;Any reports filed
by us with the Securities and&#160;&#160;Exchange Commission after the date of this prospectus and before the date that the offering
of the securities by means of this prospectus is terminated will automatically update and, where applicable, supersede any information
contained in this prospectus or incorporated by reference in this prospectus.&#160;&#160;Accordingly, we incorporate by reference
the following documents or information filed with the Securities and Exchange Commission:</P>

<P STYLE="margin: 0pt">&nbsp;</P>


<TABLE ALIGN="CENTER" BORDER="0" CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 36pt">&nbsp;</TD>
    <TD STYLE="width: 27pt; text-indent: 0pt"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">&bull;</FONT></TD>
    <TD STYLE="text-align: left">Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 2012 filed with the Securities and Exchange Commission on May&#160;11, 2012;</TD></TR>
</TABLE>
<P STYLE="margin: 0pt">&nbsp;</P>

<TABLE ALIGN="CENTER" BORDER="0" CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 36pt">&nbsp;</TD>
    <TD STYLE="width: 27pt; text-indent: 0pt"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">&bull;</FONT></TD>
    <TD STYLE="text-align: left">Current Report on Form 8-K filed with the Securities and Exchange Commission on May&#160;10, 2012;</TD></TR>
</TABLE>
<P STYLE="margin: 0pt">&nbsp;</P>

<TABLE ALIGN="CENTER" BORDER="0" CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 36pt">&nbsp;</TD>
    <TD STYLE="width: 27pt; text-indent: 0pt"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">&bull;</FONT></TD>
    <TD STYLE="text-align: left">Current Report on Form 8-K filed with the Securities and Exchange Commission on May 8, 2012;</TD></TR>
</TABLE>
<P STYLE="margin: 0pt">&nbsp;</P>

<TABLE ALIGN="CENTER" BORDER="0" CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 36pt">&nbsp;</TD>
    <TD STYLE="width: 27pt; text-indent: 0pt"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">&bull;</FONT></TD>
    <TD STYLE="text-align: left">Annual Report on Form 10-K/A for the fiscal year ended December 31, 2011, which we filed with the Securities and Exchange Commission on April&#160;13, 2012;</TD></TR>
</TABLE>
<P STYLE="margin: 0pt">&nbsp;</P>

<TABLE ALIGN="CENTER" BORDER="0" CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 36pt">&nbsp;</TD>
    <TD STYLE="width: 27pt; text-indent: 0pt"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">&bull;</FONT></TD>
    <TD STYLE="text-align: left">Annual Report on Form 10-K for the fiscal year ended December&#160;31, 2011, which we filed with the Securities and Exchange Commission on March&#160;8, 2012;</TD></TR>
</TABLE>
<P STYLE="margin: 0pt">&nbsp;</P>

<TABLE ALIGN="CENTER" BORDER="0" CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 36pt">&nbsp;</TD>
    <TD STYLE="width: 27pt; text-indent: 0pt"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">&bull;</FONT></TD>
    <TD STYLE="text-align: left">Current Report on Form 8-K filed with the Securities and Exchange Commission on February 27, 2012;</TD></TR>
</TABLE>
<P STYLE="margin: 0pt">&nbsp;</P>

<TABLE ALIGN="CENTER" BORDER="0" CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 36pt">&nbsp;</TD>
    <TD STYLE="width: 27pt; text-indent: 0pt"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">&bull;</FONT></TD>
    <TD STYLE="text-align: left">Current Report on Form 8-K filed with the Securities and Exchange Commission on January 31, 2012;</TD></TR>
</TABLE>
<P STYLE="margin: 0pt">&nbsp;</P>

<TABLE ALIGN="CENTER" BORDER="0" CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 36pt">&nbsp;</TD>
    <TD STYLE="width: 27pt; text-indent: 0pt"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">&bull;</FONT></TD>
    <TD STYLE="text-align: left">Current Report on Form 8-K filed with the Securities and Exchange Commission on January 5, 2012;</TD></TR>
</TABLE>
<P STYLE="margin: 0pt">&nbsp;</P>

<TABLE ALIGN="CENTER" BORDER="0" CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 36pt">&nbsp;</TD>
    <TD STYLE="width: 27pt; text-indent: 0pt"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">&bull;</FONT></TD>
    <TD STYLE="text-align: left">The description of our capital stock contained in our Current Report on Form&#160;8-K filed with the Securities and Exchange Commission on June&#160;8, 2007; and</TD></TR>
</TABLE>
<P STYLE="margin: 0pt">&nbsp;</P>

<TABLE ALIGN="CENTER" BORDER="0" CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 36pt">&nbsp;</TD>
    <TD STYLE="width: 27pt; text-indent: 0pt"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">&bull;</FONT></TD>
    <TD STYLE="text-align: left">All documents filed by&#160;&#160;us in accordance with Sections&#160;13(a), 13(c), 14 or 15(d) of the Exchange Act on or after the date of this prospectus and before the termination of an offering under this prospectus, other than documents or information deemed furnished and not filed in accordance with Securities and Exchange Commission rules.</TD></TR>
</TABLE>

<P STYLE="margin: 0pt">&nbsp;</P>


<P STYLE="margin: 0pt">&nbsp;</P>


<P STYLE="margin: 0pt"></P>

<P STYLE="text-align: justify; text-indent: 36pt; margin: 0; font: 10pt Times New Roman, Times, Serif">We will provide a copy of
the documents we incorporate by reference, at no cost, to any person who received this prospectus.&#160;&#160;To request a copy
of any or all of these documents, you should write or telephone us at:&#160;&#160;Investor Relations, Pacific Ethanol, Inc., 400
Capitol Mall, Suite 2060, Sacramento, California 95814, (916) 403-2123.&#160;&#160;In addition, each document incorporated by reference
is readily accessible on our website at <FONT STYLE="color: #0000ff"><U>www.pacificethanol.net</U></FONT>.</P>

<P STYLE="text-align: justify; text-indent: 36pt; margin: 0; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<P STYLE="text-align: justify; text-indent: 0pt; margin: 0"></P>

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<P STYLE="text-align: justify; text-indent: 0pt; margin: 0">&#160;&#160;</P>

<P STYLE="margin: 0">&nbsp;</P>

<P STYLE="margin: 0">&nbsp;</P>



<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">$6,000,000<BR>
<BR>
</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">6,000 Units With Each Unit Consisting of<BR>
$1,000 of Series A Subordinated Convertible Notes,<BR>
a Series A Warrant to Purchase 1971 Shares of Common Stock and<BR>
a Series B Warrant to Purchase 2628 Shares of Common Stock</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">PACIFIC ETHANOL, INC.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 12pt 0 0; text-indent: 0.5in"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 12pt 0 0; text-indent: 0.5in"></P>

<!-- Field: Rule-Page --><DIV ALIGN="CENTER" STYLE="margin-top: 3pt; margin-bottom: 3pt"><DIV STYLE="font-size: 1pt; border-top: Black 1pt solid; width: 25%">&nbsp;</DIV></DIV><!-- Field: /Rule-Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 12pt 0 0; text-indent: 0.5in"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">PROSPECTUS SUPPLEMENT</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 12pt 0 0; text-indent: 0.5in"></P>


<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"></P>

<!-- Field: Rule-Page --><DIV ALIGN="CENTER" STYLE="margin-top: 3pt; margin-bottom: 3pt"><DIV STYLE="font-size: 1pt; border-top: Black 1pt solid; width: 25%">&nbsp;</DIV></DIV><!-- Field: /Rule-Page -->



<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>Lazard Capital Markets</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">March 27, 2013</P>



<P STYLE="margin: 0"></P>

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