Exhibit 10.1


 





Pacific Ethanol, Inc.


400 Capitol Mall, Suite 2060


Sacramento, CA 95814


 


August 21, 2012


Holders of the Company’s

Series B Preferred Stock


Identified on Schedule 1 hereto


 


 


		Re:	Accrued Dividends



Gentlemen:


This letter agreement
(the “Letter Agreement”) is provided with respect to certain rights of the undersigned
holders (collectively, the “Holders”) of shares of Series B Cumulative Convertible
Preferred Stock, $.001 par value per share (the “Series B Preferred Stock”), of Pacific Ethanol, Inc. (the “Company”)
under the Company’s Certificate of Designations, Powers, Preferences, and Rights of the Series B Cumulative Convertible Preferred
Stock (the “Series B Certificate of Designations”).


 


The Series B Certificate of Designations provides
for the payment of quarterly cumulative dividends (“Cumulative Dividends”) with respect to the Series B Preferred
Stock. From January 1, 2009, through December 31, 2011, the Company did not pay Cumulative Dividends to the Holders. Exhibit
A attached sets forth the sum of accrued and unpaid dividends with respect to each Holder as of December 31, 2011 (collectively,
the “Unpaid Dividends”).


Notwithstanding any
previous agreement between the undersigned and the Company and subject to the terms and conditions set forth herein, each of the
undersigned Holders desires to forbear from exercising rights, if any, held by such Holder with respect to the Unpaid Dividends.


In consideration of
each Holder’s agreement to forbear from exercising its rights, the Company agrees to pay 10% of the Unpaid Dividends of each
such Holder.


In consideration of
the mutual covenants herein contained, and for other valuable consideration the receipt and sufficiency of which is hereby acknowledged,
the parties hereby agree as follows:


1.Forbearance.
Subject to the delivery of the Shares in accordance with Paragraph 3, each Holder agrees that until the earlier to occur of
(i) January 1, 2014, or (ii) the occurrence of any Forbearance Default (as hereinafter defined) (the “Forbearance Period”),
each Holder will forbear from exercising any and all of its respective rights and remedies against the Company with respect to
any remaining Unpaid Dividends, including, but not limited to, demanding payment of any Unpaid Dividends and bringing any action
or claim with respect to any Unpaid Dividends.



    	 



    	 



    




Holders of the Company’s Series B Preferred
Stock

Page 2 


 


2.Tolling.
The parties hereto stipulate, covenant, and agree that the running of any and all affirmative defenses of the Company based on
(a) any statutes of limitation, (b) the doctrine of laches, or (c) any failure of the Holders to institute or commence litigation
or other legal proceedings within some specified period, before a specified date, or before the happening of a specified event,
applicable to all claims or causes of action that any Holder may be entitled to take or bring in order to enforce or otherwise
arising out of or relating to their respective rights and remedies against the Company with respect to the Unpaid Dividends is,
to the fullest extent permitted by law, tolled and suspended during the Forbearance Period.


3.Payment
of Dividend; Delivery of Shares. The Company shall pay to each Holder 10% of the Unpaid Dividends owed to each such Holder
as of December 31, 2011 by issuing and delivering to each such Holder the number of shares (collectively, the “Shares”)
of the Company’s common stock (the “Common Stock”) equal to the quotient obtained by dividing (a) the
amount that is 10% of the Unpaid Dividends owed to such Holder as of December 31, 2011, by (b) $0.31 and set forth opposite each
Holder’s name on the signature page below. The offering and issuance of the Shares (the “Offering”) are
being made pursuant to (a) an effective Registration Statement on Form S-3 (File No. 333-180731) (including the prospectus contained
therein), filed by the Company with the Securities and Exchange Commission (the “Commission”), and (b) a prospectus
supplement containing certain supplemental information regarding the terms of the Offering of the Shares, that will be filed with
the Commission on the date hereof and delivered to each Holder (or may available to each Holder by the filing by the Company of
an electronic version thereof with the Commission). On the day that is the third Trading Day after the date hereof, the Company
shall deliver to each Holder that number of Shares set forth opposite such Holder’s name on the signature page hereto through
the facilities of the Depository Trust Company’s DWAC system. For purposes hereof, the term “Trading Day”
shall mean any day on which the Common Stock is traded on the principal securities exchange or securities market on which the Common
Stock is then traded.


4.Acknowledgment
of Non-Payment; Non-Waiver. By executing this Letter Agreement, the Company acknowledges and agrees that, except as expressly
provided herein, (a) the Holders’ rights under the Series B Certificate of Designations have not been waived by the Holders,
and (b) no Holder has made and is not making any commitment, and there is no understanding, explicit or implicit, relating to,
or affecting, any forbearance or any other matter beyond that set forth in this Letter Agreement.


5.Full
Force and Effect. Except as otherwise provided herein, the Series B Certificate of Designations shall remain unchanged
and in full force and effect. Except as expressly set forth above, nothing in this Letter Agreement shall be construed as a waiver
of any rights of any of the parties to this Letter Agreement under the Series B Certificate of Designations.


6.Forbearance
Default. As used herein, “Forbearance Default” means any of the following:



    	 



    	 



    




Holders of the Company’s Series B Preferred
Stock

Page 3







a.The
Company fails to timely perform or observe any requirement of this Letter Agreement or the documents, instruments and agreements
executed in connection herewith;


b.The
Company fails to pay future Cumulative Dividends on a timely basis in accordance with the Series B Certificate of Designation;


c.The
Company dissolves, liquidates, winds up, or otherwise ceases its on-going business operations; or


d.The
Company (or any subsidiary): (i) makes a transfer in fraud of creditors, or makes an assignment for the benefit of creditors; (ii)
has a receiver, trustee or custodian appointed for, or take possession of, all or substantially all of the assets of the Company,
either in a proceeding brought by such party or in a proceeding brought against such party and such appointment is not discharged
or such possession is not terminated within sixty (60) calendar days after the effective date thereof or such party consents to
or acquiesces in such appointment or possession; (iii) files a petition for relief under any Insolvency Law or an involuntary petition
for relief is filed against such party under any Insolvency Law and such involuntary petition is not dismissed within sixty (60)
calendar days after the filing thereof, or an order for relief naming such party is entered under any Insolvency Law, or any composition,
rearrangement, extension, reorganization or other relief of debtors now or hereafter existing is requested or consented to by such
party; (iv) fails to have discharged within a period of thirty (30) calendar days any attachment, sequestration or similar writ
levied upon any property of such party in an amount exceeding $1,000,000; or (v) fails to pay within thirty (30) calendar days
any final money judgment against such party in an amount exceeding $1,000,000. (For purposes hereof, “Insolvency Law”
means Title 11 of the United States Code (or any successor law) or any similar applicable law providing for bankruptcy, insolvency,
conservatorship, receivership or other similar debtor’s relief.)


7.Entire
Agreement. This Letter Agreement constitutes the entire agreement between the parties with respect to the subject matter
hereof and supersedes any prior understandings, agreements or representations by or between the parties, written or oral, to the
extent they relate in any way to the subject matter hereof.


8.Amendments
and Waivers; Severability. This Letter Agreement may not be amended or modified, and no provisions hereof may be waived,
without the written consent of the Company and each of the Holders. No action taken pursuant to this Letter Agreement shall be
deemed to constitute a waiver by the party taking such action of compliance with any representation, warranty, covenant or agreement
contained herein. The waiver by any party hereto of a breach of any provision of this Letter Agreement shall not operate or be
construed as a further or continuing waiver of such breach or as a waiver of any other or subsequent breach. No failure on the
part of any party to exercise, and no delay in exercising, any right, power or remedy hereunder shall operate as a waiver thereof,
nor shall any single or partial exercise of such right, power or remedy by such party preclude any other or further exercise thereof
or the exercise of any other right, power or remedy. All remedies hereunder are cumulative and are not exclusive of any other remedies
provided by law.



    	 



    	 



    




Holders of the Company’s Series B Preferred
Stock

Page 4







9.Governing
Law. This Letter Agreement shall be governed by, and construed, interpreted and enforced in accordance with, the laws of
the State of Delaware, without giving effect to the principles of conflicts of laws thereunder which would specify the application
of the law of another jurisdiction.


10.Counterparts.
This Letter Agreement may be executed, including by facsimile signature, in one or more counterparts, each of which shall be deemed
an original but all of which together will constitute one and the same instrument.


[Signatures Follow.]


 


 


 


 


 


 


 


 


 


 



    	 



    	 



    




Holders of the Company’s Series B Preferred
Stock

Page 5







In witness whereof,
the parties have executed this Letter Agreement as of the first date set forth above.





	 	PACIFIC ETHANOL, INC.
	 	 
	 	 
	 	 
	 	By:/s/ Neil M. Koehler
	 	       Neil M. Koehler, Chief Executive Officer










 


HOLDERS:NUMBER OF SHARES:


 


	
        Lyles United, LLC

        By: /s/ William Lyles

               Name: William Lyles

               Title: V.P.
	
         

        1,184,091

	
         

        /s/ Frank P. Greinke.

        Frank P. Greinke, as Trustee under

        the Greinke Personal Living Trust
	
         

        611,795

	
         

        /s/ Robert W. Bollar

        Robert W. Bollar, as Trustee of the

        Bollar Living Trust
	
         

        87,126

	
         

        /s/ Mimi S. Taylor

        Mimi S. Taylor
	
         

        87,126

	
         

        /s/ Neil M. Koehler

        Neil M. Koehler
	
         

        338,709

	[SIGNATURES CONTINUED ON FOLLOWING PAGE]



 


 


 






    	 



    	 



    
 


Holders of the Company’s Series B Preferred
Stock

Page 6 


 


 


	
         

        /s/ Bill Jones

        Bill Jones
	
         

        16,935

	
         

        /s/ Paul P. Koehler

        Paul P. Koehler
	
         

        16,935

	
         

        /s/ Thomas D. Koehler

        Thomas D. Koehler
	
         

        16,935



 


 


 


 



    	 



    	 



    

 


Schedule
1


Holders of Series B Preferred Stock


William M. Lyles IV


Lyles United, LLC


1210 West Olive Avenue


Fresno, CA 93728


Frank P. Greinke, Trustee, Greinke Personal Living Trust


P.O. Box 4159


1800 W. Katella, Ste. 400


Orange, CA 92863


Robert W. Bollar, Trustee, Bollar Living Trust


P.O. Box 4159


1800 W. Katella, Ste. 400


Orange, CA 92863


Mimi S. Taylor


P.O. Box 4159


1800 W. Katella, Ste. 400


Orange, CA 92863


Neil M. Koehler


c/o Pacific Ethanol, Inc.


400 Capitol Mall, Suite 2060


Sacramento, CA 95814


William L. Jones


c/o Pacific Ethanol, Inc.


400 Capitol Mall, Suite 2060


Sacramento, CA 95814


Paul P. Koehler


c/o Pacific Ethanol, Inc.


400 Capitol Mall, Suite 2060


Sacramento, CA 95814


Thomas D. Koehler


c/o Pacific Ethanol, Inc.


400 Capitol Mall, Suite 2060


Sacramento, CA 95814


 



    	 



    	 



    

 


Exhibit
A


Unpaid Dividends


 


	Lyles United	$3,670,683
	Greinke Trust	  1,896,563
	Neil Koehler	  1,049,999
	Bill Jones	       52,498
	Paul Koehler	       52,498
	Tom Koehler	       52,498
	Bollar Trust	     270,091
	Mimi S. Taylor	     270,091
	TOTAL	$7,314,921