LIMITED WAIVER AND FORBEARANCE AGREEMENT

THIS LIMITED WAIVER AND FORBEARANCE AGREEMENT (this “ Agreement ”) is entered into as of February 17, 2009, by and among Pacific Ethanol Holding Co. LLC (“ Holding ”), Pacific Ethanol Madera LLC (“ Madera ”), Pacific Ethanol Columbia, LLC (“ Columbia ”), Pacific Ethanol Stockton, LLC (“ Stockton ”) and Pacific Ethanol Magic Valley, LLC (“ Magic Valley ” and together with Holding, Madera, Columbia and Stockton, the “ Borrowers ”), WestLB AG, New York Branch, as administrative agent for the Lenders (in such capacity, the “ Administrative Agent ”), WestLB AG New York Branch, as collateral agent for the Senior Secured Parties (in such capacity, the “ Collateral Agent ” and, collectively with the Administrative Agent, the “ Agent ”) and Amarillo National Bank, as accounts bank for the Lenders (the “ Accounts Bank ”), as parties to the Credit Agreement (defined below).  Capitalized terms used in this Agreement which are not otherwise defined herein, shall have the meanings given such terms in the Credit Agreement.

WHEREAS, the Borrowers, Administrative Agent, Collateral Agent, Accounts Bank and the lenders party thereto from time to time are parties to that certain Credit Agreement dated as of February 27, 2007 (as amended by that certain Successor Accounts Bank and Amendment Agreement dated as of August 27, 2007, as further amended by that certain Waiver and Third Amendment to Credit Agreement dated as of March 25, 2008, as further amended by that certain Fourth Amendment to Credit Agreement dated as of April 24, 2008, as further amended by that certain Fifth Amendment to Credit Agreement dated as of October 24, 2008 and as further amended by that certain Sixth Amendment to Credit Agreement dated as of December 30, 2008, the “ Credit Agreement ”);

WHEREAS, the Defaults and Events of Default set forth on Schedule I attached hereto have occurred and are continuing under the Credit Agreement (collectively, the “ Existing Events of Default ”);

WHEREAS, the Borrowers have advised Administrative Agent that, in the future, it may not be in compliance with certain provisions of the Credit Agreement which would give rise to the events of default set forth on Schedule II attached hereto (collectively the “ Anticipated Defaults ”);

WHEREAS, as a result of the occurrence of the Existing Events of Default and pursuant to the Credit Agreement and other Financing Documents, (i) the Senior Secured Parties are under no further obligation to make Loans or other financial accommodations to Borrowers under the Credit Agreement and (ii) the Agent and the Senior Secured Parties are entitled, among other things, to enforce their rights and remedies against the Borrowers and the Collateral, including, without limitation, accrual of default interest, the right to accelerate and immediately demand payment in full of the Obligations and foreclose on the Collateral;

WHEREAS, the Borrowers have requested that the Senior Secured Parties waive the provisions set forth in Sections 6.07(h) , 6.08 , and 8.05 , solely to permit the Borrowers (i) to withdraw the funds otherwise required to be reserved in the Stockton Construction Account and (ii) use such funds, pursuant to and in accordance with the Initial 13-Week Cash Flow Forecast (as hereinafter defined) attached hereto as Exhibit 1 (the “ Limited Waivers ”);

WHEREAS, the Borrowers have requested that the Agent and the Senior Secured Parties agree and, subject to the terms and conditions of this Agreement, the Agent and the Senior Secured Parties have agreed, to forbear from demanding immediate payment of certain amounts and exercising their right to foreclose on any or all of the Collateral from the date hereof through the earliest to occur of (i) February 27, 2009; (ii) the date of termination of the Forbearance Period pursuant to Section 6 hereof; and (iii) the date on which all of the Obligations have been paid in full and the Credit Agreement has been terminated (the “ Forbearance Period ”) and to provide the Limited Waivers subject to the terms and conditions set forth herein;

NOW, THEREFORE, in consideration of the premises set forth above, the terms and conditions contained herein, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Borrowers, the Agent and Senior Secured Parties hereby agree as follows:

1.   Incorporation of Preliminary Statements .  The preliminary statements set forth above are hereby incorporated into this Agreement as accurate and complete statements of fact.  Without limiting the foregoing, each Borrower hereby acknowledges and agrees that (a) the Existing Events of Default have occurred and are continuing under the terms of the Credit Agreement, and none of the Borrowers has any disputes, defenses or counterclaims of any kind with respect thereto; (b) the Senior Secured Parties are under no obligation to make Loans or other financial accommodations to the Borrowers under the Credit Agreement; (c) the Agent, on behalf of the Senior Secured Parties has, and shall continue to have, valid, enforceable and perfected security interests in and liens upon the Collateral heretofore granted by Borrowers to the Collateral Agent and Senior Secured Parties pursuant to the Financing Agreements or otherwise granted to or held by the Collateral Agent or the Senior Secured Parties; (d) absent the effectiveness of this Agreement, the Agent and Senior Secured Parties have the right to immediately enforce their security interest in, and liens on, the Collateral; and (e) the outstanding Loans and all other  Obligations are payable pursuant to the Credit Agreement, without defense, dispute, offset, withholding, recoupment, counterclaim or deduction of any kind.

2.   Forbearance .

(a)     Each Borrower agrees and acknowledges that the Existing Events of Default set forth on Schedule I have occurred and are continuing.

(b)     Each Borrower has advised the Agent that the Borrower will likely not be in compliance with certain provisions of the Credit Agreement which would give rise to the Anticipated Defaults set forth on Schedule II .

3.   Limited Waiver .   Subject to the terms and condition of this Agreement and satisfaction of the conditions precedent set forth in Section 4 , the Agent and Senior Secured Parties hereby grant the Limited Waivers.  The Agent and Senior Secured Parties agree that the Limited Waivers set forth in this Section shall be limited precisely as written and, except as set forth in this Agreement, shall not be deemed to be a consent to any amendment, waiver or modification of any other term or condition of the Credit Agreement or any other Financing Document.

4.   Conditions of Effectiveness of this Agreement .   This Agreement shall become effective as of the date hereof (the “ Effective Date ”) when, and only when:

(a)     The Agent shall have received counterparts of this Agreement duly executed and delivered by the Borrowers and the Accounts Bank;

(b)     The Agent shall have received the Initial 13-Week Cash Flow Forecast and 52-Week Cash Flow Forecast, each in a format acceptable to the Agent;

(c)     The Agent shall have received an agreement, in form and substance satisfactory to the Agent, pursuant to which Wachovia, as agent, and the other lenders have agreed to forbear from exercising their rights against Pacific Ethanol Inc. (“ PEI ”) and Kinergy Marketing, LLC (“ Kinergy ”) pursuant to the terms of their financing arrangements with PEI and Kinergy for such forbearance period and such forbearance shall be in full force and effect;

(d)     All of the representations and warranties of the Borrowers contained in this Agreement shall be true and correct on and as of the Effective Date (unless stated to relate solely to an earlier date, in which case such representations and warranties shall be true and correct as of such earlier date); and

(e)     The Agent shall have received payment in full of all fees and expenses due and payable in accordance with the terms of this Agreement and the Credit Agreement (including reasonable and documented legal fees and expenses of the Agent’s counsel and other advisors).

5.   Representations and Warranties .  To induce the Agent and the Senior Secured Parties to enter into this Agreement, each Borrower represents and warrants to the Agent and the Senior Secured Parties (which representations and warranties shall be made on and as of the Effective Date):

(a)     Such Borrower has the requisite corporate power and authority and the legal right to execute and deliver this Agreement, and to perform the transactions contemplated hereby.  The execution, delivery and performance by such Borrower of this Agreement, (i) are within the Borrower’s corporate power; (ii) have been duly authorized by all necessary corporate or other action; (iii) do not contravene or cause the Borrower or any other Loan Party to be in default under (x) any provision of the Borrower’s or other Loan Party’s formation documents or bylaws, (y) any contractual restriction contained in any indenture, loan or credit agreement, lease, mortgage, security agreement, bond, note or other agreement or instrument binding on or affecting the Borrower or other Loan Party or its property, or (z) any law, rule, regulation, order, license requirement, writ, judgment, award, injunction, or decree applicable to, binding on or affecting the Borrower or other Loan Party or its property; (iv) will not result in the creation or imposition of any Lien upon any of the property of the Borrower or other Loan Party or any Subsidiary thereof other than those in favor of the Agent or any Senior Secured Party, all pursuant to the Financing Documents; and (e) do not require the consent or approval of any Governmental Authority or any other Person, other than those which have been duly obtained, made or complied with and which are in full force and effect.

(b)     This Agreement has been duly executed and delivered by such Borrower.  Each of this Agreement, the Credit Agreement (as modified herein) and the Financing Documents (as modified hereby) to which each Borrower is a party is the legal, valid and binding obligation of such Borrower, enforceable against such Borrower in accordance with its terms, subject, as to enforceability, to (A) any applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws now or hereafter in effect relating to or affecting the enforceability of creditors’ rights generally and (B) general equitable principles, whether applied in a proceeding at law or in equity, and is in full force and effect.

(c)     Except as to those representations and warranties now made inconsistent with the terms of this Agreement or which constitute an Existing Event of Default or an Anticipated Default, the representations and warranties of each Borrower and Loan Party contained in each Financing and Project Document (other than any such representations or warranties that, by their terms, are specifically made as of a date other than the date hereof) are true and correct in all material respects on and as of the date hereof as though made on and as of the date hereof.

(d)     No Default or Event of Default under the Credit Agreement arising other than as a result of the Existing Events of Defaults or the Anticipated Defaults shall have occurred and be continuing or would result after giving effect to any of the transactions contemplated on the date hereof.

(e)     No Forbearance Default (defined below) has occurred.

6.   Forbearance Defaults :  The following events shall constitute “ Forbearance Defaults ”):