Pacific
Ethanol, Inc.
400
Capitol Mall, Suite 2060
Neil M.
Koehler
Bill
Jones
Paul P.
Koehler
Thomas D.
Koehler
c/o
Pacific Ethanol, Inc.
400
Capitol Mall, Suite 2060
Gentlemen:
This side
letter agreement (the “Letter
Agreement”) is provided with reference to that certain Securities
Purchase Agreement (the “Securities Purchase
Agreement”) dated May 20, 2008, by and between Pacific Ethanol, Inc., a
Delaware corporation (the “Company”), Neil M. Koehler, Bill
Jones, Paul P. Koehler and Thomas D. Koehler (each, a “Purchaser” and collectively,
the “Purchasers”), with
reference to the Company’s Certificate of Designations, Powers, Preferences, and
Rights of the Series B Cumulative Convertible Preferred Stock (the “Series B Certificate of
Designations”) with respect to its Series B Cumulative Convertible
Preferred Stock, $.001 par value per share (the “Series B Preferred
Stock”). Capitalized terms not defined herein shall have the
respective meanings given to such terms in the Securities Purchase
Agreement.
In
connection with the closing of the transactions contemplated by the Securities
Purchase Agreement and in furtherance thereof, the Company desires to waive
certain rights held by the Company and set forth in the Series B Certificate of
Designations in favor of the Purchasers, in their capacities as holders of
shares of the Company’s Series B Preferred Stock.
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. Waiver of
Series B PIK Right. The Company hereby expressly waives its
right under Section 3(a) of the Series B Certificate of Designations to pay any
dividends due and payable to any Purchaser as a holder of Series B Preferred
Stock in shares of Series B Preferred Stock (the “Series B PIK
Right”). The Company hereby covenants that it shall not,
without the prior written consent of the Purchaser, exercise or attempt to
exercise as to such Purchaser the Series B PIK Right provided for in Section
3(a) of the Series B Certificate of Designations at any time following the date
of this Letter Agreement.
Neil M.
Koehler
Bill
Jones
Paul P.
Koehler
Thomas D.
Koehler
Page 2
2. 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.
In
witness whereof, the parties have executed this Letter Agreement as of May 22,
2008.
PACIFIC
ETHANOL, INC.
John T.
Miller, COO
INVESTORS:
Neil M.
Koehler
Bill
Jones
Paul P.
Koehler
Thomas D.
Koehler
2
