Separation Agr


    Exhibit
      10.1

    

    

      July
        19, 2007

       

      Douglas
        Jeffries 

      Pacific
        Ethanol, Inc.

      400
        Capitol Mall, Suite 2060

      Sacramento,
        CA 95814

      


      Dear
        Doug:

       

      This
        letter sets forth the terms and conditions of the separation agreement (the
        “Agreement”)
        that Pacific Ethanol, Inc. (the “Company”)
        is offering to you to aid in your employment transition. 

       

      1. Separation
        Date. Your
        last
        day of employment shall be July 19, 2007 (the “Separation
        Date”).
        

       

      2. Accrued
        Salary and Vacation Pay.
        On the
        Separation Date, the Company will pay you all accrued salary and all accrued
        and
        unused vacation (if any) earned by you through the Separation Date, less
        standard payroll deductions and withholdings. You are entitled to these payments
        by law. 

       

      3. Severance
        Health Insurance Benefits.
        To the
        extent provided by the federal COBRA law or, if applicable, state insurance
        laws, and by the Company’s current group health insurance policies, you will be
        eligible to continue your group health insurance benefits at your own expense.
        Later, you may be able to convert to an individual policy through the provider
        of the Company’s health insurance, if you wish. Although you are not entitled to
        any severance compensation or benefits under your Executive Employment Agreement
        with the Company (the “Employment
        Agreement”),
        if
        you sign this Agreement and allow the Release contained herein to become
        effective, and if you timely elect continued coverage under COBRA, then the
        Company will pay your COBRA premiums necessary to continue your current group
        health insurance coverage through September 30, 2007. 

       

      4. Return
        of Restricted Stock.
        Pursuant
        to Section 2.4 of your Employment Agreement, you were granted 57,500 shares
        of
        restricted Company stock (the “Restricted Stock”), of which 7,500 shares were
        deemed vested as of your first date of employment. As part of this Agreement,
        you agree to return the 7,500 vested shares of Restricted Stock to the Company
        and hereby relinquish and waive any and all rights you may have to the
        Restricted Stock or any portion thereof. The Company shall reimburse you
        for any
        federal or state tax liability you incur as a direct result of your return
        of
        these vested shares of Restricted Stock, with the calculation of such
        reimbursement to be performed by the public accounting firm engaged by the
        Company for tax advisory purposes, whose calculations shall be final and
        binding
        in the absence of manifest error. You
        acknowledge and agree that the vesting of any Restricted Stock shall cease
        as of
        your Separation Date. 

       

      
        
           

        

        
           

          
            

          

        

        
           

        

      

       

      5. No
        Other Compensation or Benefits. You
        acknowledge that, except as expressly provided in this Agreement, you have
        not
        earned and will not receive from the Company any additional compensation,
        severance, or benefits relating to or arising from your employment with the
        Company (or the termination thereof), after the Separation Date. You acknowledge
        and agree that you are not and shall not be entitled to any severance
        compensation or benefits set forth in your Employment Agreement, including
        but
        not limited to any compensation or benefits set forth in Section 5 of the
        Employment Agreement. 

       

      6. Expense
        Reimbursement.
        You
        agree that, within ten (10) days after the Separation Date, you will submit
        your
        final documented expense reimbursement statement reflecting all business
        expenses you incurred through the last day of your employment, if any, for
        which
        you seek reimbursement. The Company will reimburse you for such expenses
        pursuant to its regular business practice. 

       

      7. Return
        of Company Property.
        Within
        ten (10) days after the Separation Date, you agree to return to the Company
        all
        Company documents (and all copies thereof) and other Company property in
        your
        possession or control. You agree that you will make a diligent search to
        locate
        any such documents, property and information. In addition, if you have used
        any
        personal computer, server, or e-mail system to receive, store, prepare or
        transmit any Company confidential or proprietary data, materials or information,
        you agree to immediately provide the Company with a computer-useable copy
        of all
        such information, and once you have done so you agree to permanently delete
        and
        expunge all Company confidential or proprietary information and data from
        those
        systems; and you agree to provide the Company access to your system as
        reasonably requested to verify that the necessary copying and/or deletion
        is
        completed. Your timely return of all such Company documents and other property
        is a precondition to your receipt of the benefits provided under this Agreement.
        

       

      8. Proprietary
        Information Obligations.
        You
        acknowledge that during your employment with the Company you had access to
        and
        obtained proprietary information and trade secrets of the Company. You
        acknowledge and agree that you shall continue to be bound by the Proprietary
        Information and Inventions Agreement attached hereto as Exhibit A.

       

      9. Nondisparagement.
        You
        agree
        not to disparage the Company or its officers, directors, employees, shareholders
        and agents, in any manner likely to be harmful to them or their business,
        business reputations or personal reputations; and the Company (through its
        officers and directors) agrees not to disparage you in any manner likely
        to be
        harmful to you or your business, business reputation or personal reputation;
        provided that you and the Company may respond accurately and fully to any
        inquiry or request for information if required by legal process. 

       

      10. No
        Voluntary Adverse Action.
        You
        agree that you will not voluntarily (except in response to legal compulsion)
        assist any third party in bringing or pursuing any proposed or pending
        litigation, arbitration, administrative claim or other formal proceeding
        against
        the Company, its parent or subsidiary entities, affiliates, officers, directors,
        employees or agents. 

       

      
        
           

        

        
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      11. Cooperation.
        You
        agree to cooperate fully with the Company in connection with its actual or
        contemplated defense, prosecution, or investigation of any claims or demands
        by
        or against third parties, or other matters arising from events, acts, or
        failures to act that occurred during the period of your employment by the
        Company. Such cooperation includes, without limitation, making yourself
        available to the Company upon reasonable notice, without subpoena, to provide
        complete, truthful and accurate information in witness interviews, depositions
        and trial testimony. The Company will reimburse you for reasonable out-of-pocket
        expenses you incur in connection with any such cooperation (excluding forgone
        wages, salary, or other compensation) and will make reasonable efforts to
        accommodate your scheduling needs. In addition, you agree to execute all
        documents (if any) necessary to carry out the terms of this
        Agreement. 

       

      12. Release
        of Claims. 

       

      (a) General
        Release.
        In
        exchange for the consideration under this Agreement to which you would not
        otherwise be entitled, you hereby generally and completely release the Company
        and its parent, subsidiary, and affiliated entities (along with their
        predecessors and successors) and their directors, officers, employees,
        shareholders, partners, agents, attorneys, insurers, affiliates and assigns,
        from any and all claims, liabilities and obligations, both known and unknown,
        that arise from or are in any way related to events, acts, conduct, or omissions
        occurring at any time prior to and including the date that you sign this
        Agreement. 

       

      (b) Claims
        Released.
        This
        general release includes, but is not limited to: (i) all claims arising out
        of
        or in any way related to your employment with the Company or the termination
        of
        that employment; (ii) all claims related to your compensation or benefits
        from the Company, including salary, bonuses, commissions, vacation pay, expense
        reimbursements, severance payments, fringe benefits, stock, stock options,
        or
        any other ownership or equity interests in the Company; (iii) all claims
        for breach of contract, wrongful termination, and breach of the implied covenant
        of good faith and fair dealing; (iv) all tort claims, including but not
        limited to claims for fraud, defamation, emotional distress, and discharge
        in
        violation of public policy; and (v) all federal, state, and local statutory
        claims, including but not limited to claims for discrimination, harassment,
        retaliation, attorneys’ fees, or other claims arising under the federal Civil
        Rights Act of 1964 (as amended), the federal Americans with Disabilities
        Act of
        1990 (as amended), the federal Age Discrimination in Employment Act of 1967
        (as
        amended) (the “ADEA”),
        the
        California Family Rights Act, the California Labor Code (as amended), and
        the
        California Fair Employment and Housing Act. 

       

      (c) Excluded
        Claims. Notwithstanding
        anything in this Section 12, you are not hereby releasing the Company from:
        (i)
        any obligation it may otherwise have to indemnify you for your acts within
        the
        course and scope of your employment with the Company (including any obligations
        set forth in your May 29, 2007 Indemnity Agreement with the Company (the
        “Indemnity
        Agreement”));
        (ii)
        any obligations undertaken by the Company in this Agreement (including the
        obligation to reimburse you for tax liabilities associated with your return
        of
        Restricted Stock as set forth in Section 4 herein); or (iii) any rights which
        are not waivable as a matter of law. In addition, you understand that nothing
        in
        this release prevents you from filing, cooperating with, or participating
        in any
        proceeding before the Equal Employment Opportunity Commission, the Department
        of
        Labor, or the California Department of Fair Employment and Housing, except
        that
        you acknowledge and agree that you shall not recover any monetary benefits
        in
        connection with any such claim, charge or proceeding with regard to any claim
        released herein. You represent that you have no lawsuits, claims or actions
        pending in your name, or on behalf of any other person or entity, against
        the
        Company or any other person or entity subject to the release granted in this
        paragraph. 

       

      
        
           

        

        
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      13. ADEA
        Waiver.
        You
        hereby acknowledge that you are knowingly and voluntarily waiving and releasing
        any rights you may have under the ADEA and that the consideration given for
        the
        waiver and release in the preceding paragraph is in addition to anything
        of
        value to which you were already entitled. You further acknowledge that you
        have
        been advised, as required by the ADEA, that: (i) your waiver and release
        do not
        apply to any rights or claims that may arise after the date that you sign
        this
        Agreement; (ii) you should consult with an attorney prior to signing this
        Agreement (although you may voluntarily decide not to do so); (iii) you have
        twenty-one (21) days within which to consider this Agreement (although
        you may choose voluntarily to sign this Agreement earlier);
        (iv) you have seven (7) days following the date that you sign this
        Agreement to
        revoke
        this Agreement (in a written revocation received by the Company’s Chief
        Executive Officer); and (v) this Agreement will not be effective until the
        eighth day after this Agreement has been signed both by you and by the Company
        (the “Effective
        Date”).

       

      14. Section
        1542 Waiver.
        In
        giving the releases set forth in this Agreement, which include claims which
        may
        be unknown to you at present, you acknowledge that you have read and understand
        Section 1542 of the California Civil Code which reads as follows: “A
        general release does not extend to claims which the creditor does not know
        or
        suspect to exist in his favor at the time of executing the release, which
        if
        known by him must have materially affected his settlement with the
        debtor.”
        You
        hereby expressly waive and relinquish all rights and benefits under that
        section
        and any law or legal principle of similar effect in any jurisdiction with
        respect to the releases granted herein, including but not limited to the
        release
        of unknown and unsuspected claims granted in this Agreement. 

       

      15. Representations.
         You
        hereby represent that, except for the payments required by this Agreement,
        you
        have been paid all compensation owed and for all hours worked, have received
        all
        the leave and leave benefits and protections for which you are eligible,
        pursuant to the Family and Medical Leave Act or otherwise, and have not suffered
        any on-the-job injury for which you have not already filed a claim. 

       

      16. Dispute
        Resolution. To
        aid in
        the rapid and economical resolution of any disputes which may arise under
        this
        Agreement, you and the Company agree that any and all claims, disputes or
        controversies of any nature whatsoever arising from or regarding the
        interpretation, performance, negotiation, execution, enforcement or breach
        of
        this Agreement shall be resolved by confidential, final and binding arbitration
        conducted before a single arbitrator with Judicial Arbitration and Mediation
        Services, Inc. (“JAMS”) in Sacramento, California, under JAMS’ then-applicable
        arbitration rules. The
        parties acknowledge that by agreeing to this arbitration procedure, they
        waive
        the right to resolve any such dispute through a trial by jury, judge or
        administrative proceeding. You
        will
        have the right to be represented by legal counsel at any arbitration proceeding.
        The arbitrator shall: (i) have the authority to compel adequate discovery
        for
        the resolution of the dispute and to award such relief as would otherwise
        be
        available under applicable law in a court proceeding; and (ii) issue a written
        statement signed by the arbitrator regarding the disposition of each claim
        and
        the relief, if any, awarded as to each claim, the reasons for the award,
        and the
        arbitrator’s essential findings and conclusions on which the award is based. The
        Company shall bear the JAMS arbitration fees and administrative costs. Nothing
        in this Agreement shall prevent either you or the Company from obtaining
        injunctive relief in court to prevent irreparable harm pending the conclusion
        of
        any such arbitration. 

       

      
        
           

        

        
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      17. Miscellaneous.
        This
        Agreement, including
        Exhibit A, and your Indemnity Agreement constitutes the complete, final and
        exclusive embodiment of the entire agreement between you and the Company
        with
        regard to this subject matter. It is entered into without reliance on any
        promise or representation, written or oral, other than those expressly contained
        herein, and it supersedes any other such promises, warranties or representations
        (including but not limited to any promises set forth in the Employment
        Agreement). This Agreement may not be modified or amended except in a writing
        signed by both you and a duly authorized officer of the Company. This Agreement
        will bind the heirs, personal representatives, successors and assigns of
        both
        you and the Company, and inure to the benefit of both you and the Company,
        their
        heirs, successors and assigns. If any provision of this Agreement is determined
        to be invalid or unenforceable, in whole or in part, this determination will
        not
        affect any other provision of this Agreement and the provision in question
        will
        be modified by the court so as to be rendered enforceable. This Agreement
        will
        be deemed to have been entered into and will be construed and enforced in
        accordance with the laws of the State of California without regard to conflicts
        of law principles. This Agreement may be executed in counterparts, each of
        which
        shall be deemed to part of one original, and facsimile signatures shall be
        equivalent to original signatures. 

       


      
        
           

           

        

        
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      If
        this Agreement is acceptable to you, please sign below on or within twenty-one
        (21) days after the Separation Date and return the signed original to me.
        If I
        do not receive the fully executed Agreement from you by such date, the Company’s
        offer contained herein will expire. 

       

      Sincerely,

       

      Pacific
        Ethanol, Inc.  

       

      By:
        /s/
        NEIL M. KOEHLER 

      Neil
        M. Koehler 

      Chief
        Executive Officer

      


      


       

      Understood
        and Agreed:

       

      /s/
        DOUGLAS JEFFRIES 

      Douglas
        Jeffries

       

      


      Date:
        July
        19, 2007 

      


      


      Exhibit
        A -Proprietary Information and Inventions Agreement

       

       

       

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