8-K

                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 8-K

                                 CURRENT REPORT
                       PURSUANT TO SECTION 13 OR 15(d) OF
                       THE SECURITIES EXCHANGE ACT OF 1934


Date of Report (Date of earliest event reported)  JULY 26, 2005

                              PACIFIC ETHANOL, INC.
- --------------------------------------------------------------------------------
             (Exact name of registrant as specified in its charter)

         DELAWARE                                                41-2170618
         --------                                                ----------
(State or other jurisdiction                                   (IRS Employer
     of incorporation)                                      Identification No.)

                                    000-21467
                                    ---------
                            (Commission File Number)


5711 N. WEST AVENUE, FRESNO, CALIFORNIA                            93711
- ---------------------------------------                            -----
(Address of principal executive offices)                         (Zip Code)


Registrant's telephone number, including area code: (559) 435-1771

          -------------------------------------------------------------
          (Former name or former address, if changed since last report)


     Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions (SEE General Instruction A.2. below):

     |_| Written communications pursuant to Rule 425 under the Securities Act
(17 CFR 230.425)

     |_| Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17
CFR 240.14a-12)

     |_| Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR 240.14d-2(b))

     |_| Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR 240.13e-4(c))







ITEM 1.01.        ENTRY INTO A MATERIAL DEFINITIVE AGREEMENT.

         On July 26, 2005, the Compensation Committee and the Board of Directors
of Pacific Ethanol, Inc. (the "Company") adopted resolutions approving various
matters relating to compensation of non-employee directors, as described below.
On July 28, 2005, the Board of Directors of the Company appointed two new
members to serve as directors of the Company, one of whom was also appointed to
serve as a member of the Audit Committee of the Company. In connection with
their appointment, the Company entered into Indemnification Agreements with each
of those two directors, as described below.

     COMPENSATION OF NON-EMPLOYEE DIRECTORS

         On July 26, 2005, and effective as of May 18, 2005, compensation for
non-employee directors was established as described in Exhibit 10.1 to this Form
8-K and incorporated herein by reference. In addition, in connection with their
appointment to the Board of Directors of the Company on July 28, 2005, Charles
W. Bader and John L. Prince were each granted options to purchase 15,000 shares
of common stock of the Company on the same terms and conditions as provided in
Exhibit 10.1 to this Form 8-K.

     INDEMNIFICATION AGREEMENTS

         Effective as of July 28, 2005, the Company entered into Indemnification
Agreements with each of Charles W. Bader and John L. Prince (each, an
"Indemnitee") in connection with service by Messrs. Bader and Prince as members
of the Board of Directors of the Company. Messrs. Bader and Prince were
appointed as members of the Board of Directors of the Company on July 28, 2005.
The form of Indemnification Agreement is included as Exhibit 10.1 to this Report
on Form 8-K.

         Under the Indemnification Agreement, the Company has agreed to
indemnify the Indemnitee in connection with any third-party proceeding or
threatened proceeding against the Indemnitee or in connection with a proceeding
or threatened proceeding by or in the right of the Company, such as a
stockholder derivative suit, by reason of the fact that the Indemnitee is or was
an officer and/or director of the Company, or is or was serving at the request
of the Company as a director, officer, employee or agent of another enterprise,
against all expenses, damages, judgments, amounts paid in settlement, fines,
penalties and ERISA excise taxes actually and reasonably incurred by the
Indemnitee in connection with the defense or settlement of any such proceeding,
to the fullest extent permitted by the Delaware General Corporation Law, whether
or not the Indemnitee was the successful party in any such proceeding; provided,
however, that any settlement of a third-party proceeding must be approved in
writing by the Company, and any settlement of a proceeding by or in the right of
the Company is settled with the approval of a court of competent jurisdiction or
indemnification of such amounts is otherwise ordered by a court of competent
jurisdiction in connection with such proceeding.

         In addition, the Company is required to advance expenses on behalf of
the Indemnitee in connection with Indemnitee's defense in any such proceeding;
provided, that the Indemnitee undertakes in writing to repay such amounts to the
extent that it is ultimately determined that the Indemnitee is not entitled to
indemnification by the Company.


                                      -2-


         No indemnification payments or payments for expenses may be made by the
Company under the agreements (i) to indemnify or advance expenses to the
Indemnitee with respect to actions initiated or brought voluntarily by the
Indemnitee and not by way of defense, except with respect to actions brought to
establish or enforce a right to indemnification or advancement of expenses under
the agreement or any other statute or law or otherwise as required under the
Delaware General Corporation Law, but such indemnification or advancement of
expenses may be provided by the Company in specific cases if approved by the
Board of Directors by a majority vote of a quorum thereof consisting of
directors who are not parties to such action, (ii) to indemnify the Indemnitee
for any expenses, damages, judgments, amounts paid in settlement, fines,
penalties or ERISA excise taxes for which payment is actually made to the
Indemnitee under a valid and collectible insurance policy, except in respect of
any excess beyond the amount paid under such insurance, (iii) to indemnify the
Indemnitee for any expenses, damages, judgments, amounts paid in settlement,
fines, penalties or ERISA excise taxes for which the Indemnitee has been or is
indemnified by the Company or any other party otherwise than pursuant to the
agreement, or (iv) to indemnify the Indemnitee for any expenses, damages,
judgments, fines or penalties sustained in any proceeding for an accounting of
profits made from the purchase or sale by Indemnitee of securities of the
Company pursuant to the provisions of Section 16(b) of the Securities Exchange
Act of 1934 and the rules and regulations promulgated thereunder or similar
provisions of any federal, state or local statutory law.

         The Company is also required under the agreement, at the Indemnitee's
request, to maintain in full force and effect, at its sole cost and expense,
directors' and officers' liability insurance by an insurer, in an amount and
with a deductible reasonably acceptable to the Indemnitee covering the period
during which the Indemnitee is serving in any one or more of the capacities
covered by the agreement and for so long thereafter as the Indemnitee shall be
subject to any possible claim or threatened, pending or completed proceeding by
reason of the fact that the Indemnitee is serving in any of the capacities
covered by the agreement; provided, that the Company shall have no obligation to
maintain such insurance if the Company determines, in good faith, that (i) such
insurance cannot be obtained on terms which are commercially reasonable, (ii)
the premium costs for such insurance is significantly disproportionate to the
amount of coverage provided, (iii) the coverage provided by such insurance is
limited by exclusions so as to provide an insufficient benefit, or (iv) the
Company, after using best efforts, is otherwise unable to obtain such insurance.

ITEM 5.02.        DEPARTURE OF DIRECTORS OR PRINCIPAL OFFICERS; ELECTION OF
                  DIRECTORS; APPOINTMENT OF PRINCIPAL OFFICERS.

         (a) Not applicable.

         (b) On July 28, 2005, Ryan W. Turner and John Pimentel each resigned as
members of the Board of Directors of the Company.

         (c) Not applicable.

         (d) On July 28, 2005, the Board of Directors of the Company appointed
Charles W. Bader and John L. Prince as members of the Board of Directors of the
Company. In addition, on July 28, 2005, the Board of Directors of the Company
appointed Mr. Prince as a member of the Audit Committee of the Company.


                                      -3-


ITEM 9.01.        FINANCIAL STATEMENTS AND EXHIBITS.

         (a) Financial Statements of Businesses Acquired.

                  Not applicable.

         (b) Pro Forma Financial Information.

                  Not applicable.

         (c) Exhibits.

             Number     Description
             ------     -----------

             10.1       Description of Non-Employee Director Compensation (*)

             10.2       2004 Stock Option Plan (1)

             10.3       Form of Non-Qualified Stock Option Agreement between
                        Pacific Ethanol, Inc. and each non-employee director (*)

             10.4       Form of Indemnification Agreement between Pacific
                        Ethanol, Inc. and each of its Executive Officers and
                        Directors (2)
             _______________
             (*)    Filed herewith.
             (1)    Filed with the Securities and Exchange Commission on March
                    24, 2005 as an exhibit to the Company's Registration
                    Statement on Form S-8 (Reg. No. 333-123538) and incorporated
                    herein by reference.
             (2)    Filed with the Securities and Exchange Commission on March
                    29, 2005 as an exhibit to the Company's Report on Form 8-K
                    and incorporated herein by reference.



                                      -4-




                                    SIGNATURE

         Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.

Date: August 1, 2005                         PACIFIC ETHANOL, INC.


                                             By: /S/ RYAN W. TURNER
                                                 -------------------------------
                                                 Ryan W. Turner
                                                 Chief Operating Officer




                                      -5-





                         EXHIBITS FILED WITH THIS REPORT

Number            Description
- ------            -----------

10.1              Description of Non-Employee Director Compensation

10.3              Form of Non-Qualified Stock Option Agreement between Pacific
                  Ethanol, Inc. and each non-employee director

EX-10.1

EXHIBIT 10.1

                DESCRIPTION OF NON-EMPLOYEE DIRECTOR COMPENSATION

         Effective as of May 18, 2005, non-employee directors of Pacific
Ethanol, Inc. (the "Company") receive $1,500 per board or committee meeting
attended, in person or via telephone, in consideration for their services as
members of the Board of Directors of the Company and its committees. Effective
as of May 18, 2005, the Chairman of the Board of Directors of the Company
receives $80,000 annually for his services as Chairman of the Board of Directors
of the Company. In addition, effective as of May 18, 2005, the Chairman of the
Audit Committee of the Company receives, in lieu of the $1,500 standard
compensation described above, $3,500 per Audit Committee meeting attended, in
person or via telephone, in consideration for his services as Chairman of the
Audit Committee of the Company.

         Non-employee directors are reimbursed for certain reasonable and
documented expenses in connection with attendance at meetings of the Board of
Directors and committees of the Company.

         Non-employee directors may also receive options from time to time under
the Company's stock option plans and otherwise.

         The following non-employee directors received grants of non-qualified
stock options in the following amounts to purchase shares of common stock of the
Company:

                    DIRECTOR                        NO. OF SHARES
                    --------                        -------------

                    William L. Jones                      50,000

                    Terry L. Stone                        20,000

                    Kenneth J. Friedman                   15,000

                    Frank P. Greinke                      15,000

                    John Pimentel                         15,000

         In addition, new directors, upon their appointment, are to receive
grants of non-qualified stock options to purchase 15,000 shares of common stock
of the Company.

         The options granted or to be granted shall include the following terms:

         o        The options shall be granted under the Company's 2004 Stock
                  Option Plan (the "2004 Plan") to the extent shares are then
                  available under the 2004 Plan and the grant under the 2004
                  Plan can be made in compliance with applicable securities
                  laws.

         o        The exercise price of the options shall be equal to the Fair
                  Market Value of a share of the Company's common stock as
                  defined in the 2004 Plan.

         o        The expiration date of the options shall be ten years after
                  their date of grant or such earlier date as is provided in the
                  2004 Plan or in the applicable stock option agreements.

         o        The options shall fully vest and become exercisable one year
                  following their date of grant.

EX-10.3

EXHIBIT 10.3


                              PACIFIC ETHANOL, INC.
                             2004 STOCK OPTION PLAN
                      NON-QUALIFIED STOCK OPTION AGREEMENT

         This Non-Qualified Stock Option Agreement (this "Agreement") is made
and entered into by and between Pacific Ethanol, Inc., a Delaware corporation
("Company"), and ______________ ("Optionee"), as of __________, 200_ ("Date of
Grant"). If the Optionee is presently or subsequently becomes employed by a
subsidiary of the Company, the term "Company" shall be deemed to refer
collectively to Pacific Ethanol, Inc. and the subsidiary or subsidiaries that
employs the Optionee.

                                    RECITALS

         A. The Board of Directors and the stockholders of the Company have
adopted a 2004 Stock Option Plan ("Plan") as an incentive to retain employees,
officers, directors and consultants of the Company and to enhance the ability of
the Company to attract new employees, officers, directors, and consultants whose
services are considered valuable by providing an opportunity to have a
proprietary interest in the success of the Company.

         B. The entire Board of Directors or the committee established to
administer the Plan ("Committee") has approved the granting of an option to the
Optionee pursuant to the Plan to provide an incentive to the Optionee to focus
on the long-term growth of the Company.

         NOW, THEREFORE, in consideration of the mutual covenants and conditions
hereinafter set forth and for other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, the Company and the Optionee
agree as follows:

         1. GRANT OF OPTION. The Company hereby grants to the Optionee the right
and option ("Option") to purchase up to an aggregate of _____________ (_____)
shares (such number being subject to adjustment as provided in paragraph 10
below and Section 13 of the Plan) of the Common Stock of Pacific Ethanol, Inc.
("Stock") on the terms and conditions herein set forth. This Option may be
exercised in whole or in part and from time to time as hereinafter provided. The
Option granted under this Agreement is not intended to be an "incentive stock
option" as set forth in Section 422 of the Internal Revenue Code of 1986, as
amended ("Code").

         2. VESTING OF OPTION. Subject to paragraph 8 below, the Option shall
vest and become exercisable in accordance with the schedule below:

                  _____ percent (___%) shall vest and become exercisable on the
                  Date of Grant and an additional _____ percent (__%) shall vest
                  and become exercisable on each ________, of each year
                  commencing on _________ and ending on _________, whereupon the
                  Option shall have become vested and exercisable as to one
                  hundred percent (100%) of the Stock covered by the Option.

         3. PURCHASE PRICE. The price at which the Optionee shall be entitled to
purchase the Stock covered by the Option shall be $____ per share, which price
is 100% of the Fair Market Value (as defined in the Plan) of the Stock on the
Date of Grant.




         4. TERM OF OPTION. The Option granted under this Agreement shall
expire, unless otherwise exercised, ten years from the Date of Grant, through
and including the normal close of business of the Company on _____________, 20__
("Expiration Date"), subject to earlier termination as provided in paragraph 8
below.

         5. EXERCISE OF OPTION. The Option may be exercised by the Optionee as
to all or any part of the Stock then vested by delivery to the Company of
written notice of exercise and payment of the purchase price as provided in
paragraphs 6 and 7 below.

         6. METHOD OF EXERCISING OPTION. Subject to the terms and conditions of
this Agreement, the Option may be exercised by timely delivery to the Company of
written notice, which notice shall be effective on the date received by the
Company ("Effective Date"). The notice shall state the Optionee's election to
exercise the Option, the number of shares in respect of which an election to
exercise has been made, the method of payment elected (see paragraph 7 below),
the exact name or names in which the shares will be registered and the taxpayer
identification number of the Optionee. The notice shall be signed by the
Optionee and shall be accompanied by payment of the purchase price of such
shares. If the Option is exercised by a person or persons other than Optionee
pursuant to paragraph 8 below, the notice shall be signed by the other person or
persons and shall be accompanied by proof acceptable to the Company of the legal
right of the person or persons to exercise the Option. All shares delivered by
the Company upon exercise of the Option shall be fully paid and nonassessable
upon delivery.

         7. METHOD OF PAYMENT FOR OPTIONS. Payment for shares purchased upon the
exercise of the Option shall be made by the Optionee in cash or such other
method permitted by the Plan and the Committee and communicated to the Optionee
in writing prior to the date the Optionee exercises all or any portion of the
Option.

         8. DEATH OR DISABILITY OF OPTIONEE. In the event of the death or the
disability (as that term is defined in the Plan, referred to herein as
"Disability") of the Optionee within a period during which the Option, or any
part thereof, could have been exercised by the Optionee ("Option Period"), the
Option shall lapse unless it is exercised within the Option Period, and in no
event later than twelve (12) months after the date of the Optionee's death or
Disability, by the Optionee or the Optionee's legal representative or
representatives in the case of a Disability or, in the case of death, by the
person or persons entitled to do so under the Optionee's last will and testament
or if the Optionee fails to make a testamentary disposition of the Option or
shall die intestate, by the person or persons entitled to receive the Option
under the applicable laws of descent and distribution. An Option may be
exercised following the death or Disability of the Optionee only if the Option
was exercisable by the Optionee immediately prior to his death or Disability. In
no event shall the Option be exercisable after the Expiration Date. The
Committee shall have the right to require evidence satisfactory to it of the
rights of any person or persons seeking to exercise the Option under this
paragraph 8 to exercise the Option.


                                      -2-


         9. NONTRANSFERABILITY. The Option granted by this Agreement shall be
exercisable only during the term of the Option provided in paragraph 4 above
and, except as provided in paragraph 8 above, only by the Optionee during his
lifetime and while an Optionee of the Company. This Option shall not be
transferable by the Optionee or any other person claiming through the Optionee,
either voluntarily or involuntarily, except by will or the laws of descent and
distribution or such other events as are set forth in the Plan.

         10. ADJUSTMENTS IN NUMBER OF SHARES AND OPTION PRICE. In the event of a
stock dividend, or if the Stock is changed into or exchanged for a different
number or class of shares of stock of the Company or of another corporation,
whether through reorganization, recapitalization, stock split-up, combination of
shares, merger or consolidation, there shall be substituted for each remaining
share of Stock then subject to this Option the number and class of shares of
stock into which each outstanding share of Stock is to be so exchanged, all
without any change in the aggregate purchase price for the shares then subject
to the Option, all as set forth in Section 13 of the Plan.

         11. DELIVERY OF SHARES. No shares of Stock shall be delivered upon
exercise of the Option until (i) the purchase price has been paid in full in the
manner herein provided; (ii) applicable taxes required to be withheld have been
paid or withheld in full; (iii) approval of any governmental authority required
in connection with the Option, or the issuance of shares thereunder, has been
received by the Company; and (iv) if required by the Committee, the Optionee has
delivered to the Committee an Investment Letter in form and content satisfactory
to the Company as provided in paragraph 12 below.

         12. SECURITIES ACT. The Company shall not be required to deliver any
shares of Stock pursuant to the exercise of all or any part of the Option if, in
the opinion of counsel for the Company, the issuance would violate the
Securities Act of 1933, as amended ("Securities Act"), or any other applicable
federal or state securities laws or regulations. The Committee may require that
the Optionee, prior to the issuance of any shares pursuant to exercise of the
Option, sign and deliver to the Company a written statement ("Investment
Letter") stating (i) that the Optionee is purchasing the shares for investment
and not with a view to the sale or distribution thereof; (ii) that the Optionee
will not sell any shares received upon exercise of the Option or any other
shares of the Company that the Optionee may then own or thereafter acquire
except either (a) through a broker on a national securities exchange or (b) with
the prior written approval of the Company; and (iii) containing such other terms
and conditions as counsel for the Company may reasonably require to assure
compliance with the Securities Act or other applicable federal or state
securities laws and regulations. The Investment Letter shall be in form and
content acceptable to the Committee in its sole discretion.

         13. FEDERAL AND STATE TAXES. Upon exercise of the Option, or any part
thereof, the Optionee may incur certain liabilities for federal, state or local
taxes, and the Company may be required by law to withhold taxes for payment to
taxing authorities. Upon determination by the Company of the amount of taxes
required to be withheld, if any, with respect to the shares to be issued
pursuant to the exercise of the Option, the Optionee shall pay all federal,
state and local tax withholding requirements to the Company.

         14. DEFINITIONS; COPY OF PLAN. To the extent not specifically provided
herein, all capitalized terms used in this Agreement have the same meanings
ascribed to them in the Plan. By the execution of this Agreement, the Optionee
acknowledges receipt of a copy of the Plan.



                                      -3-


         15. ADMINISTRATION. This Agreement shall at all times be subject to the
terms and conditions of the Plan, and the Plan shall in all respects be
administered by the Committee in accordance with the terms of and as provided in
the Plan. The Committee shall have the sole and complete discretion with respect
to all matters reserved to it by the Plan, and decisions of the majority of the
Committee with respect thereto and to this Agreement shall be final and binding
upon the Optionee and the Company. In the event of any conflict between the
terms and conditions of this Agreement and the Plan, the provisions of the Plan
shall control.

         16. CONTINUATION OF SERVICES. This Agreement shall not be construed to
confer upon the Optionee any right to continue as a director of the Company and
shall not limit the right of the Company, in its sole discretion, to terminate
the services of the Optionee at any time.

         17. OBLIGATION TO EXERCISE. The Optionee shall have no obligation to
exercise the Option evidenced by this Agreement.

         18. GOVERNING LAW. The corporate laws of the State of Delaware shall
govern all issues concerning the relative rights of the Company and the Optionee
under the Option. All other questions and obligations under the Option shall be
construed and enforced in accordance with the internal laws of the State of
California, without giving effect to any choice of law or conflict of law
provision or rule (whether of the State of California or any other jurisdiction)
that would cause the application of the laws of any jurisdiction other than the
State of California. The Company and the Optionee hereby consent, in any
dispute, action, litigation or other proceeding concerning the Option (including
arbitration) to the jurisdiction of the courts of the State of California, with
the County of Orange being the sole venue for the bringing of the action or
proceeding.

         19. AMENDMENTS. This Agreement may be amended only by a written
agreement executed by the Company and the Optionee. The Company and the Optionee
acknowledge that changes in federal tax laws enacted subsequent to the Date of
Grant, and applicable to stock options, may provide for tax benefits to the
Company or the Optionee. In that event, the Company and the Optionee agree that
this Agreement may be amended as necessary to secure for the Company and the
Optionee any benefits that may result from that legislation. Any amendment shall
be made only upon the mutual consent of the parties, which consent (of either
party) may be withheld for any reason.

         IN WITNESS WHEREOF, the Company has caused this Agreement to be duly
executed by its officer thereunto duly authorized, and the Optionee has hereunto
set his or her hand as of the date first written above.

PACIFIC ETHANOL, INC.                        OPTIONEE


By: _________________________________        ___________________________________
     _______________, _______________        [INSERT NAME]



                                      -4-