Document:

Exhibit 10.2

EMPLOYMENT AGREEMENT

          AGREEMENT (this “Agreement”) made as of April 25, 2007, between USS Vessel Management LLC, a Delaware limited liability company with an office at 399 Thornall Street, Edison, New Jersey 08837 (the “Company”), and Jan Ziobro residing at 569 Park St., Montclair, NJ 07403 (the “Executive”).

W I T N E S S E T H:

          WHEREAS, the Company desires to employ Executive, and Executive desires to be employed by the Company, on the terms hereinafter set forth;

          NOW, THEREFORE, in consideration of the premises and of the mutual promises, representations and covenants herein contained, the parties hereto agree as follows:

          1.          EMPLOYMENT.

          
The Company hereby employs Executive and Executive hereby accepts such
employment, subject to the terms and conditions herein set forth. 
Executive shall hold the office of Vice President, New Construction reporting to
the President of the Company.

          2.          TERM.

          The initial term of employment under this Agreement shall begin on the Effective Date and shall continue until April 24, 2010, subject to prior termination in accordance with the terms hereof (the “Initial Term”).  The Initial Term shall be automatically extended for successive additional periods of one (1) year commencing on the third anniversary of the Effective Date and each anniversary thereof (each such period, an “Additional Term”) unless either party shall have given written notice to the other party of non-extension at least sixty (60) days’ prior to the end of the then applicable Initial Term or Additional Term (the Initial Term and any Additional Term collectively, the “Employment Term”).  Notice of non-extension by the Company shall be deemed a termination without justifiable cause (as defined herein) at the end of the then
current Employment Term and notice of non-extension by Executive shall be deemed a termination without good reason (as defined herein) at the end of the then current Employment Term.

          3.          COMPENSATION.

          As compensation for the employment services to be rendered by Executive hereunder, including all services as an officer or director of U.S. Shipping Partners L.P. (the “Partnership”), US Shipping General Partner LLC, the general partner of the Partnership and the sole member of the Company (the “General Partner”), and any of their respective subsidiaries (collectively, the “US Shipping Group”), the Company agrees to pay, or cause to be paid, to Executive, and Executive agrees to accept, payable in equal installments in accordance with Company practice, an initial annual salary of $230,000.  Executive’s annual salary hereunder for the remaining years of employment shall be determined by the Board of Directors of the General Partner (the “GP Board”) in its sole discretion; provided, however, that in no event shall Executive’s
salary in any year be reduced below the rate for the previous year.  In addition, Executive shall be eligible for bonuses from time to time in such amounts as may be determined by the GP Board in its sole discretion, it being agreed that the target bonus for 2007 shall be 60% of salary, divided equally between the Partnership’s performance and personal performance.

          The Company acknowledges that Executive will forfeit 975 shares of Overseas ShipHolding Group (OSG) as a result of terminating his employment with OSG.  The Company agrees to pay the Executive, on each date that the shares would have vested and forfeiture obligation would have lapsed with respect to the forfeited OSG shares, an amount equal to the product determined by multiplying (i) the number of OSG shares which became vested on such date by (ii) the closing price of OSG stock on the date Executive commences employment with the Company, less any applicable withholding taxes; provided however that the Company’s obligation hereunder with respect to unvested shares shall terminate upon Executive terminating his employment with the Company for other than good reason (as defined below) or the Company terminating Executive’s employment for justifiable cause (as defined below).

          4.          EXPENSES.

          The Company shall pay or reimburse Executive, upon presentment of suitable vouchers, for all reasonable business and travel expenses which may be incurred or paid by Executive in connection with his employment hereunder in accordance with Company policy as established from time to time by the Board of Directors.  Executive shall comply with such restrictions and shall keep such records as the Company may reasonably deem necessary to meet the requirements of the Internal Revenue Code of 1986, as amended from time to time (the “Code”), and regulations promulgated thereunder.

          5.          OTHER BENEFITS.

          Executive shall be entitled to four (4) weeks paid vacation per year and to participate in such benefit plans and arrangements and receive any other benefits customarily provided by the Company to its senior management personnel (including any profit sharing, pension, short- and long-term disability insurance, hospital, major medical insurance and group life insurance plans in accordance with the terms of such plans) and including stock option and/or stock purchase plans, all as determined from time to time by the GP Board, on a level commensurate with Executive’s seniority (the “Benefit Plans”).  The Company shall indemnify Executive to the fullest extent permitted by Delaware law, including the advancement of legal expenses and costs.

          6.          DUTIES.

          (a)          Executive shall perform such reasonable duties and functions as the President of the Company may lawfully assign to him, such duties being commensurate with the duties customarily performed by executives responsible for new vessel construction at companies, and Executive shall comply in the performance of his duties with the policies of the Chief Executive Officer, the Board of Directors of the Company (the “Company Board”) and the GP Board, and be subject to the direction of the Chief Executive Officer, President, the Company Board and the GP Board.  Executive shall also serve, without additional compensation, as Vice President, New Construction of the General Partner, Parent, the Partnership and each subsidiary of the Partnership and the General Partner.  At the request of the GP Board, Executive shall serve as an
executive officer, director and manager of any other member of the US Shipping Group without additional compensation and, in the performance of such duties, Executive shall comply with the policies of the board of directors or board of managers of each such entity.

          (b)          Executive shall devote all of his business time and attention, reasonable vacation time and absences for sickness excepted, to the business of the Company, as necessary to fulfill his duties.  Executive shall perform the duties assigned to him with fidelity and to the best of his ability.

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          (c)          Nothing contained in this Section 6 or elsewhere in this Agreement shall be construed to prevent Executive from investing or trading in non-competing investments as he sees fit for his own account, including real estate, stocks, bonds, securities, commodities or other forms of investments.

          7.          TERMINATION OF EMPLOYMENT; EFFECT OF TERMINATION.

          (a)          Executive’s employment hereunder shall terminate upon the first to occur of the following:

	
  
 
  	
  
              (i)          upon   thirty (30) days’ prior written notice to Executive upon the determination by   the GP Board that Executive’s performance of his duties has not been fully   satisfactory for any reason which would not constitute “justifiable cause”   (as hereinafter defined);
  
	
   
  	
  
 
  
	
  
 
  	
  
                 (ii)        upon three (3) days’   prior written notice to Executive upon the determination by the GP Board that   there is justifiable cause for such termination;
  
	
  
 
  	
  
 
  
	
  
 
  	
  
                 (iii)       automatically and without   notice upon the death of Executive;
  
	
  
 
  	
  
 
  
	
  
 
  	
  
                 (iv)       in accordance with the terms of   subsection (d) hereof upon the “disability” (as hereinafter defined) of   Executive;
  
	
  
 
  	
  
 
  
	
  
 
  	
  
                 (v)        upon written notice by the   Executive to the Company of a termination for good reason (as hereinafter   defined) within ninety (90) days after the event that constitutes good   reason; or
  
	
   
  	
  
 
  
	
  
 
  	
  
                 (vi)       upon 30 days’ prior written   notice by Executive to the Company of the Executive’s voluntary termination   of employment without good reason.
  

           (b)          For the purposes of this Agreement, the term:

	
  
 
  	
  
                 (i)          “disability”   shall mean the inability of Executive, due to illness, accident or any other   physical or mental incapacity, substantially to perform the material   functions of his duties for a period of six (6) consecutive months or for a   total of eight (8) months (whether or not consecutive) in any twelve (12)   month period during the term of this Agreement, as reasonably determined by   the GP Board, in good faith, after examination of Executive by an independent   physician reasonably acceptable to Executive.
  
	
  
 
  	
  
 
  
	
  
 
  	
  
                 (ii)         “change of   control” shall mean (A) the occurrence of any transaction the result of   which is that any person (other than United States Shipping Master LLC (“Parent”),   any entity controlled by Sterling Investment Partners L.P. or its affiliates,   or any entity in which Executive is an executive officer and/or equity holder   that is formed for the purpose of effecting the transaction that would   constitute a change of control and that, prior to effecting such transaction,   does not have any equity securities that are publicly traded) acquires more   than 50% of the outstanding equity of, or otherwise obtains the right to   appoint a majority of, the directors (or equivalent) of (x) the General   Partner or (y) Parent or (B) the sale of all or substantially all the assets   of the
General Partner or Parent to any person other than an affiliate of   Parent, any entity controlled by Sterling Investment Partners L.P. or its affiliates   or any entity in which Executive is an executive officer and/or equity holder   that is formed for the purpose of effecting the transaction that would   constitute a change of control and that, prior to effecting such transaction,   does not have any equity securities that are publicly traded);
  

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                 (iii)         “good reason”   shall mean (i) any material diminution of Executive’s duties, (ii) any change   in Executive’s reporting relationship that removes the Executive from   reporting directly to the President of the Company, (iii) any change in   Executive’s or another person’s duties that provides such other person with   substantially all the duties then being performed by Executive, or (iv)   requiring Executive to be physically present during a substantial portion of   the working hours he is required to devote to the Company at a location that   is not within a 50 mile radius of Metro Park, New Jersey, in each case that   has not been remedied within thirty days after written notice from Executive   to the GP Board; and
  
	
  
 
  	
  
 
  
	
  
 
  	
  
                 (iv)        “justifiable cause”   shall mean:  (i) Executive’s repeated   failure or refusal to attempt to perform his duties pursuant to, or   Executive’s breach of, this Agreement where such conduct or breach shall not   have ceased or been remedied within 15 days following written warning from   the Company; (ii) Executive’s performance of any act or his failure to act,   for which if Executive were prosecuted and convicted, a crime or offense   involving money or property of the US Shipping Group, or which would   constitute a felony in the jurisdiction involved, would have occurred; (iii)   Executive’s performance of any act or his failure to act which constitutes,   in the reasonable good faith determination of the GP Board, dishonesty, fraud   or a breach of a fiduciary trust, including
without limitation   misappropriation of funds; (iv) any intentional unauthorized disclosure by   Executive to any person, firm or corporation other than the members of the US   Shipping Group and their respective directors, managers, officers and   employees, of any confidential information or trade secret of the US Shipping   Group; (v) any attempt by Executive to secure any personal profit in   connection with the business of the US Shipping Group (for example, without   limitation, using US Shipping Group assets to pursue other interests,   diverting any business opportunity belonging to US Shipping Group to himself   or to a third party, insider trading or taking bribes or kickbacks); (vi)   Executive’s engagement in a fraudulent act to the material damage of the US   Shipping Group; (vii) Executive’s engagement in conduct or activities   materially damaging to the property, business or reputation of the US   Shipping Group, as determined in reasonable good faith by the Board of
Directors; (viii) Executive’s illegal use of controlled substances; (ix) any   act or omission by Executive involving malfeasance or gross negligence in the   performance of Executive’s duties to the material detriment of the US Shipping   Group, as determined in reasonable good faith by the GP Board; or (x) the   entry of any order of a court that remains in effect and is not discharged   for a period of at least sixty (60) days, which enjoins or otherwise limits   or restricts the performance by Executive under this Agreement, relating to   any contract, agreement or commitment made by or applicable to Executive in   favor of any former employer or any other person.  Upon termination of Executive’s employment for justifiable   cause, Executive shall not be entitled to any amounts or benefits hereunder   other than such portion of Executive’s annual salary and reimbursement of   expenses pursuant to Section 4 hereof as has been accrued through the date of   his termination of
employment.
  

          (c)          If Executive should die during the term of his employment hereunder, this Agreement shall terminate immediately.  In such event, the estate of Executive shall thereupon be entitled to receive such portion of Executive’s annual salary and reimbursement of expenses pursuant to Section 4 as has been accrued through the date of his death.  Executive shall also be entitled to any amounts or benefits payable under the terms of the Benefit Plans.

          (d)          Upon a finding by the GP Board of Executive’s disability in accordance with Section 7(b) hereof, the Company shall have the right to terminate Executive’s employment.  Notwithstanding any inability to perform his duties, Executive shall be entitled to receive his compensation (including bonus, if any) pursuant to Section 3 and reimbursement of expenses pursuant to Section 4 as provided herein until he begins to receive long-term disability insurance benefits under the policy provided by the Company 

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pursuant to Section 5 hereof.  In the event that payments received from such long-term disability insurance policy do not equal the Executive’s rate of salary at the time of the disability, then for a period of 12 months following termination the Company shall continue to pay to Executive the difference between the policy benefit and such rate of salary, subject to any applicable tax withholding.  Any termination pursuant to this subsection (e) shall be effective on the later of (i) the date 30 days after which Executive shall have received written notice of the Company’s election to terminate or (ii) the date Executive begins to receive long-term disability insurance benefits under the policy provided by the Company pursuant to Section 5 hereof. Executive shall also be entitled to receive any amounts or benefits payable under the terms of the Benefit Plans.

          (e)          Notwithstanding any provision to the contrary contained herein, in the event that Executive’s employment is terminated by the Company without justifiable cause or by the Executive for good reason, the Company shall (i) pay Executive, for a period of one year following the date of termination (such period being hereinafter referred to as the “Severance Period”), a monthly payment (subject to applicable tax withholding) equal to one-twelfth of his then annual salary and one-twelfth of his target bonus for the year in which termination of employment occurs, as established by the compensation committee of the GP Board (provided that if the compensation committee has not established a target bonus for such year, then for purposes of this Section 7(e) such target bonus shall be 50% of Executive’s then current salary),
which amount shall be in lieu of any and all other payments due and owing to Executive under the terms of this Agreement (other than any payments constituting reimbursement of expenses pursuant to Section 4 hereof and any payments or benefits payable under the Benefit Plans), and (ii) continue to allow Executive to participate, at the Company’s expense (to the same extent the Company bears such expense at the time of termination), in the Company’s health insurance program, to the extent permitted under such programs, until the earlier of (1) the end of the Severance Period or (2) the date Executive begins employment with another entity which provides substantially similar benefits to the Executive (collectively, the “Severance Payments”); provided, however, that the Company’s obligation to make the Severance Payments shall be conditional upon Executive executing a general release in favor of the Company and Executive’s compliance with his obligations under Sections
9, 10, 11 and 12 hereof; and provided further, that in the event that Executive’s employment is terminated by the Company without justifiable cause (including by reason of non-renewal of this Agreement) or by the Executive for good reason within two years following the effective date of a change of control, then the Company shall pay to Executive, in lieu of the amounts to be paid pursuant to clause (i) of the first sentence of this Section 7(e), an amount equal to the product determined by multiplying (x) the sum of his then annual salary and his target bonus for the year in which termination of employment occurs, as established by the compensation committee of the GP Board (provided that if the compensation committee has not established a target bonus for such year, then for purposes of this Section 7(e) such target bonus shall be 50% of Executive’s then current salary), by (y) two, such payment to be made within ten business days following such termination of employment.  If
Executive’s employment is terminated by the Company without justifiable cause (including by reason of non-renewal of this Agreement) or by the Executive for good reason at a time when the Partnership, the General Partner or Parent is in negotiations regarding a transaction that would, if consummated, constitute a change of control and such transaction is consummated within one year following Executive’s termination of employment, then Executive’s severance shall be calculated and paid as if such termination had occurred within two years following a change of control, and the Company shall, upon consummation of such transaction, pay to Executive an amount equal to the difference between the amount he would be entitled to pursuant to this sentence and the amount of severance payments Executive has received through such date.

          (f)          Upon Executive’s termination of his employment hereunder or his election not to renew this Agreement, this Agreement (other than Sections 5, 9, 10, 11, 12 and 15 which shall survive in accordance with their terms) shall terminate.  In such event, Executive shall be entitled to receive such portion of Executive’s annual salary and bonus, if any, as has been accrued to date.  Executive shall be 

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entitled to reimbursement of expenses pursuant to Section 4 hereof and to continue to participate in the  Benefit Plans to the extent participation by former employees is required by law or permitted by such plans, with the expense of such participation to be as specified in such plans for former employees.  Executive shall also be entitled to any amounts or benefits payable under the terms of the Benefit Plans.

          8.          REPRESENTATIONS AND AGREEMENTS OF EXECUTIVE.

          (a)          Executive represents and warrants that he is free to enter into this Agreement and to perform the duties required hereunder, and that there are no employment contracts or understandings, restrictive covenants or other restrictions, whether written or oral, preventing the performance of his duties hereunder.

          (b)          Executive agrees to submit to a medical examination and to cooperate and supply such other information and documents as may be reasonably required by any insurance company in connection with the Company’s obtaining life insurance on the life of Executive, and any other type of insurance or fringe benefit as the Company shall determine from time to time to obtain.

          9.          NON-COMPETITION.

          (a)          In view of the unique and valuable services expected to be rendered by Executive to the US Shipping Group, Executive’s knowledge of the trade secrets and other proprietary information relating to the business and in consideration of the compensation to be received hereunder, Executive agrees that during his employment by the Company and, following the termination of Executive’s employment hereunder, during the Non-Competition Period (as defined below), Executive shall not, directly or indirectly, as owner, partner, joint venturer, stockholder, employee, broker, agent, principal, trustee, corporate officer, director, licensor, or in any capacity whatsoever engage in, become financially interested in, be employed by, render any consultation or business advice with respect to, or have any connection with, (i) any business which is
competitive with products or services of the US Shipping Group in the United States of America or (ii) any business conducted under any corporate or trade name utilized by the US Shipping Group or any name similar thereto without the prior written consent of the Company; provided, however, that Executive may own any securities of any corporation which is engaged in such business and is publicly owned and traded but in an amount not to exceed at any one time one percent (1%) of any class of stock or securities of such corporation.  The Company agrees that the following activities shall not be deemed to be a business competitive with the business of the US Shipping Group during the Non-Competition Period:

	
  
 
  	
  
                 (i)          employment,   following termination of employment hereunder, by any entity that is not   engaged in the ownership and operation of vessels engaged in the coastwise   trade under the Jones Act; or
  
	
   
  	
  
 
  
	
  
 
  	
  
                 (ii)         employment,   following termination of employment hereunder, by an entity that has   divisions or affiliates engaged in the ownership and operation of vessels   engaged in the coastwise trade under the Jones Act as long as Executive is   employed in, or otherwise only provides services to, a division or affiliate   of such entity that does not, directly or indirectly, engage in the ownership   and operation of vessels engaged in the coastwide trade under the Jones Act   and Executive does not share information, directly or indirectly, with those   divisions and/or affiliates of such entity engaged in the ownership and   operation of vessels engaged in the coastwise trade under the Jones Act.
  

In addition, Executive shall not, directly or indirectly, during the Non-Competition Period, request or cause any suppliers or customers with whom the US Shipping Group has a business relationship to cancel 

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or terminate any such business relationship with any member of the US Shipping Group or solicit, interfere with or entice from the Parent or any of its subsidiaries any employee (or former employee) of the Parent or any of its subsidiaries.  For purposes hereof, the “Non-Competition Period” shall mean:  (i) if Executive’s employment is terminated by the Company for justifiable cause (as defined in Section 7(b)) or disability (as defined in Section 7(b)), or if Executive voluntarily terminates his employment hereunder (including by electing not to renew this Agreement), a period of two (2) years following such termination of employment; and (ii) if Executive’s employment is terminated by the Company for other than justifiable cause or disability, by the Executive for good reason, or as a result of the Company’s election not to renew the employment agreement, the Severance Period, provided, however, that in the case of this
clause (ii) if the Company breaches its obligation to make the Severance Payments or to comply with its obligations under Section 4 hereof, and such breach is not cured within thirty (30) days after written notice of such breach is provided to the Company by Executive, Executive shall be released from his obligations under this Section 9.

          (b)          If any portion of the restrictions set forth in this Section 9 should, for any reason whatsoever, be declared invalid by a court of competent jurisdiction, the validity or enforceability of the remainder of such restrictions shall not thereby be adversely affected.

          (c)          Executive acknowledges that the US Shipping Group has invested substantial monies in connection with the development of its business and that the provisions of this Section 9 were a material inducement to the US Shipping Group to the employment of Executive hereunder, and that the US Shipping Group would not have employed Executive but for the agreements and covenants contained herein.  Executive further acknowledges that the territorial and time limitations set forth in this Section 9 are reasonable and properly required for the adequate protection of the business of the US Shipping Group.  Executive hereby waives, to the extent permitted by law, any and all right to contest the validity of this Section 9 on the ground of breadth of its geographic or product and service coverage or length of term.  In the event any such
territorial or time limitation is deemed to be unreasonable by a court of competent jurisdiction, Executive agrees to the reduction of the territorial or time limitation to the area or period which such court shall deem reasonable.

          (d)          The existence of any claim or cause of action by Executive against the Company or any other member of the US Shipping Group shall not constitute a defense to the enforcement by the US Shipping Group of the foregoing restrictive covenants, but such claim or cause of action shall be litigated separately.

          10.          INVENTIONS AND DISCOVERIES.

          (a)          Executive shall promptly and fully disclose to the Company, with all necessary detail for a complete understanding of the same, all developments, know-how, discoveries, inventions, improvements, concepts, ideas, writings, formulae, processes and methods (whether copyrightable, patentable or otherwise) made, received, conceived, developed, acquired or written during working hours, or otherwise, by Executive (whether or not at the request or upon the suggestion of the Company) during the period of his employment with the Company, solely or jointly with others, using the US Shipping Group’s resources, or relating to any current or proposed business or activities of the US Shipping Group known to him as a consequence of his employment or the rendering of advisory and consulting services hereunder (collectively, the “Subject
Matter”).

          (b)          Executive hereby assigns and transfers, and agrees to assign and transfer, to the Company all his rights, title and interest in and to the Subject Matter, and Executive further agrees to deliver to the Company any and all drawings, notes, specifications and data relating to the Subject Matter, and to execute, acknowledge and deliver all such further papers, including applications for trademarks, 

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copyrights or patents, as may be necessary to obtain trademarks, copyrights and patents for any thereof in any and all countries and to vest title thereto in the Company.  Executive shall assist the Company in obtaining such trademarks, copyrights or patents during the term of this Agreement, and any time thereafter on reasonable notice and at mutually convenient times, and Executive agrees to testify in any prosecution or litigation involving any of the Subject Matter; provided, however, that following termination of employment Executive shall be reasonably compensated for his time and reimbursed his reasonable out-of-pocket expenses incurred in rendering such assistance or giving or preparing to give such testimony if it is required after the Non-Competition Period.

          11.          NON-DISCLOSURE OF CONFIDENTIAL INFORMATION.

          (a)          Executive shall not, during the term of this Agreement, or at any time following expiration or termination of this Agreement, directly or indirectly, disclose or permit to be known (other than as is required in the regular course of his duties (including without limitation disclosures to the Company’s advisors and consultants) or as is required by law (in which case Executive shall give the Company prior written notice of such required disclosure) or with the prior written consent of the Company’s Chief Executive Officer), to any person, firm or corporation, any confidential information acquired by him during the course of, or as an incident to, his employment hereunder, relating to the US Shipping Group, any client of the US Shipping Group, or any corporation, partnership or other entity owned or controlled, directly or indirectly,
by any of the foregoing, or in which any of the foregoing has a beneficial interest, including, but not limited to, the business affairs of each of the foregoing.  Such confidential information shall include, but shall not be limited to, proprietary technology, trade secrets, patented processes, research and development data, know-how, market studies and forecasts, competitive analyses, pricing policies, employee lists, personnel policies, the substance of agreements with customers, suppliers and others, marketing or dealership arrangements, servicing and training programs and arrangements, customer lists and any other documents embodying such confidential information.  This confidentiality obligation shall not apply to any confidential information which becomes publicly available from sources unrelated to the US Shipping Group.

          (b)          All information and documents relating to the US Shipping Group as hereinabove described (or other business affairs) shall be the exclusive property of the Company, and Executive shall use commercially reasonable best efforts to prevent any publication or disclosure thereof.  Upon termination of Executive’s employment with the Company, all documents, records, reports, writings and other similar documents containing confidential information, including copies thereof, then in Executive’s possession or control shall be returned and left with the Company.

          12.          SPECIFIC PERFORMANCE.

          Executive agrees that if he breaches, or threatens to commit a breach of, any of the provisions of Sections 9, 10 or 11 (the “Restrictive Covenants”), the Company shall have, in addition to, and not in lieu of, any other rights and remedies available to the Company under law and in equity, the right to injunctive relief and/or to have the Restrictive Covenants specifically enforced by a court of competent jurisdiction, without the posting of any bond or other security, it being agreed that any breach or threatened breach of the Restrictive Covenants would cause irreparable injury to the US Shipping Group and that money damages would not provide an adequate remedy to the Company.  Notwithstanding the foregoing, nothing herein shall constitute a waiver by Executive of his right to contest whether a breach or threatened breach of any Restrictive Covenant has occurred.

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          13.          AMENDMENT OR ALTERATION.

          No amendment or alteration of the terms of this Agreement shall be valid unless made in writing and signed by both of the parties hereto.

          14.          GOVERNING LAW.

          This Agreement shall be governed by and construed in accordance with the laws of the State of New Jersey, including choice of law rules, applicable to agreements made and to be performed therein. 

          15.          ALTERNATIVE DISPUTE RESOLUTION.

          Any controversy or claim arising out of or relating to this Agreement, or the breach thereof, shall be settled by arbitration in New York City by one (1) arbitrator in accordance with the Commercial Arbitration Rules of the American Arbitration Association, and judgment upon the award rendered by the arbitrator may be entered in any court having jurisdiction thereof.  Each party shall bear its own costs (including legal fees and expenses) in the arbitration unless the arbitrator determines otherwise.  Nothing in this paragraph shall preclude any party from seeking a preliminary injunction or other provisional relief, either prior to, during or after invoking the procedures in this paragraph, if in its judgment such action is necessary to avoid irreparable damage or to preserve the status quo.

          16.          SEVERABILITY.

          The holding of any provision of this Agreement to be invalid or unenforceable by a court of competent jurisdiction shall not affect any other provision of this Agreement, which shall remain in full force and effect.

          17.          WITHHOLDING.

          The Company may deduct and withhold from the payments to be made to Executive hereunder any amounts required to be deducted and withheld by the Company under the provisions of any applicable statute, law, regulation or ordinance now or hereafter enacted.

          18.          NOTICES.

          Any notices required or permitted to be given hereunder shall be sufficient if in writing, and if delivered by hand or courier, or sent by certified mail, return receipt requested, to the addresses set forth above or such other address as either party may from time to time designate in writing to the other, and shall be deemed given as of the date of the delivery or at the expiration of three days in the event of a mailing.

          19.          COUNTERPARTS AND FACSIMILE SIGNATURES.

          This Agreement may be signed in counterparts with the same effect as if the signatures to each counterpart were upon a single instrument, and all such counterparts together shall be deemed an original of this Agreement.  For purposes of this Agreement, a facsimile copy of a party’s signature shall be sufficient to bind such party.

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          20.          WAIVER OR BREACH.

          It is agreed that a waiver by either party of a breach of any provision of this Agreement shall not operate, or be construed, as a waiver of any subsequent breach by that same party.

          21.          ENTIRE AGREEMENT AND BINDING EFFECT.

          This Agreement contains the entire agreement of the parties with respect to the subject matter hereof, supersedes all prior and contemporaneous agreements, both written and oral, between the parties with respect to the subject matter hereof, and may be modified only by a written instrument signed by each of the parties hereto.  This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective legal representatives, heirs, distributors, successors and assigns, provided, however, that Executive shall not be entitled to assign or delegate any of his  rights or obligations hereunder without the prior written consent of the Company.  It is intended that Sections 9, 10, 11 and 12 benefit each of the Company and each other member of the US Shipping Group, each of which is entitled to enforce the provisions of Sections 9, 10, 11 and 12.

          22.          SURVIVAL.

          Except as otherwise expressly provided herein, the termination of Executive’s employment hereunder or the expiration of this Agreement shall not affect the enforceability of Sections  9, 10, 11 and 12 hereof.

          23.          FURTHER ASSURANCES.

          The parties agree to execute and deliver all such further documents, agreements and instruments and take such other and further action as may be necessary or appropriate to carry out the purposes and intent of this Agreement.

          24.          CONSTRUCTION OF AGREEMENT.

          No provision of this Agreement or any related document shall be construed against or interpreted to the disadvantage of any party hereto by any court or other governmental or judicial authority by reason of such party having or being deemed to have structured or drafted such provision.

          25.          HEADINGS.

          The Section headings appearing in this Agreement are for the purposes of easy reference and shall not be considered a part of this Agreement or in any way modify, demand or affect its provisions.

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          IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date and year first above written.

	
  
 
  	
  
USS VESSEL   MANAGEMENT LLC
  
	
  
 
  	
  
 
  
	
  
 
  	
  
 
  
	
  
 
  	
  
By:
  	
  
/s/ Joseph   P. Gehegan
  
	
  
 
  	
  
 
  	
  

  
	
  
 
  	
  
Name:
  	
  
Joseph Paul   Gehegan, Jr.
  
	
  
 
  	
  
Title:
  	
  
President   and Chief Operating Officer
  
	
   
  	
   
  	
   
  
	
   
  	
   
  	
  /s/ Jan   Ziobro
  
	
   
  	
   
  	
  

  
	
   
  	
   
  	
  Jan Ziobro
  

-11-Executive Employment Agreement

     

    Exhibit
      10.1

     

    

      Pacific
        Ethanol, Inc. 

       

      EXECUTIVE
        EMPLOYMENT AGREEMENT

      for

      DOUGLAS
        JEFFRIES

       

      This
        Executive Employment Agreement (“Agreement”) by and between Douglas Jeffries
        (“Executive”) and Pacific Ethanol, Inc. (the “Company”) (collectively, the
“Parties”) is effective as of the last date signed by the Parties.

       

      Whereas,
        the
        Company desires to employ Executive to provide personal services to the Company,
        and wishes to provide Executive with certain compensation and benefits in
        return
        for his services; 

       

      Whereas,
        Executive wishes to be employed by the Company and to provide personal services
        to the Company in return for certain compensation and benefits; and

       

      Whereas,
        the
        Parties entered into an offer letter agreement on or about April 25, 2007
        setting forth certain terms of Executive’s employment with the Company (the
“Offer Letter”) and now seek to supersede and replace the Offer Letter with this
        Agreement; 

       

      Now,
        Therefore,
        in
        consideration of the mutual promises and covenants contained herein, it is
        hereby agreed by and between the parties hereto as follows:

       

      1.     Employment
        by the Company.

       

      1.1 Position.
        Subject
        to terms and conditions set forth herein, the Company agrees to employ Executive
        in the position of Chief Financial Officer and Executive hereby accepts such
        employment. During the term of Executive’s employment with the Company,
        Executive will devote Executive’s best efforts and substantially all of
        Executive’s business time and attention to the business of the Company, except
        for vacation periods as set forth herein and reasonable periods of illness
        or
        other incapacities permitted by the Company’s general employment policies.
        Executive’s first date of employment shall be May 29, 2007.

       

      1.2 Duties
        and Location.
        Executive shall serve in an executive capacity and shall perform such duties
        as
        are customarily associated with Executive’s then current title, consistent with
        the bylaws of the Company and as required by the Company’s Board of Directors
        (the “Board”) and Chief Executive Officer. Executive shall report to the
        Company’s Chief Executive Officer. Executive’s primary office location shall be
        a location mutually acceptable to both the Executive and the Company. The
        Company reserves the right to reasonably require Executive to perform
        Executive’s duties at places other than Executive’s primary office location from
        time to time as agreed to by Executive, and to require reasonable business
        travel.

       

      1.3 Policies
        and Procedures.
        The
        employment relationship between the parties shall be governed by the general
        employment policies and practices of the Company, except that when the terms
        of
        this Agreement differ from or are in conflict with the Company’s general
        employment policies or practices, this Agreement shall control.

       

      
        
           

        

        
           

          
            

          

        

        
           

        

      

      
        	 	
                2.

              	
                Compensation.

              

      

       

      2.1 Salary.
        For
        services to be rendered hereunder, Executive shall receive an annual salary
        at
        the rate of $240,000.00, paid bi-weekly in the amount of $9,230.77 (the “Base
        Salary”), subject to standard payroll deductions and withholdings and payable in
        accordance with the Company’s regular payroll schedule. Executive’s Base Salary
        shall be reviewed annually and may be increased as approved by the Board
        in its
        sole discretion. 

       

      2.2 Annual
        Bonus.
        Executive will be eligible for an annual discretionary bonus of up to fifty
        percent (50%) of his Base Salary (the “Annual Bonus”); provided that for
        calendar year 2007, this potential bonus amount shall be prorated based upon
        Executive’s actual length of service with the Company in 2007 Whether any
        Annual Bonus will be awarded, and the amount of the Annual Bonus awarded
        to
        Executive, shall be determined by the Board in its sole discretion based
        upon
        its consideration of both the Company’s performance and Executive’s performance.
        Since the Annual Bonus is intended both to reward past Company and Executive
        performance and to provide an incentive for Executive to remain with the
        Company, Executive must remain an active employee through the date that any
        such
        bonus is awarded to him in order to earn any such bonus. Executive will not
        earn
        any Annual Bonus (including a prorated bonus) if Executive’s employment
        terminates for any reason before the Annual Bonus is awarded to him Any
        Annual
        Bonus awarded by the Board shall be paid within the first quarter after the
        end
        of the calendar year.

       

      2.3 Standard
        Company Benefits.
        Executive shall be entitled to participate in all employee benefit programs
        for
        which Executive is eligible under the terms and conditions of the benefit
        plans
        which may be in effect from time to time and provided by the Company to its
        employees generally; provided,
        however,
        that
        Executive shall not be entitled to accrued vacation pay.

       

      2.4 Restricted
        Stock; Options. Subject
        to the approval of the Board, Executive shall be granted 57,500 shares of
        restricted Company stock (the “Restricted Stock”). The Restricted Stock shall
        vest according to a vesting schedule set forth in the governing restricted
        stock
        purchase agreement which shall be: 7,500 shares will be deemed vested as
        of
        Executive’s first date of employment and the remaining 50,000 shares shall vest
        at the rate of 10,000 shares each October 4, beginning on October 4, 2007
        and
        continuing thereafter, provided
        that
        Executive remains employed by the Company. Executive shall also be eligible
        for
        additional grants of restricted stock and/or stock options from time to time
        as
        shall be determined by the Compensation Committee of the Board in its sole
        discretion, and shall be subject to such vesting, exercisability, and other
        provisions as the Board may determine in its discretion, after reviewing
        the
        performance of both Executive and the Company. Both the Restricted Stock
        and any
        stock options shall be governed in all respects by the terms of the applicable
        restricted stock purchase agreement, stock option agreement, grant notice
        and
        plan documents.

       

      
        
           

        

        
           

          
            

          

        

        
           

        

      

      
        	 	
                3.

              	
                Confidential
                  Information Obligations.

              

      

       

      3.1 Confidential
        Information Agreement.
        As a
        condition of employment, Executive agrees to execute and abide by the Employee
        Confidential Information and Inventions Agreement attached hereto as
        Exhibit A.

       

      3.2 Third
        Party Agreements and Information.
        Executive represents and warrants that Executive’s employment by the Company
        will not conflict with any prior employment or consulting agreement or other
        agreement with any third party, and that Executive will perform Executive’s
        duties to the Company without violating any such agreement. Executive represents
        and warrants that Executive does not possess confidential information arising
        out of prior employment, consulting, or other third party relationships,
        which
        would be used in connection with Executive’s employment by the Company, except
        as expressly authorized by that third party. During Executive’s employment by
        the Company, Executive will use in the performance of Executive’s duties only
        information which is generally known and used by persons with training and
        experience comparable to Executive’s own, common knowledge in the industry,
        otherwise legally in the public domain, or obtained or developed by the Company
        or by Executive in the course of Executive’s work for the Company. 

       

      
        	 	
                4.

              	
                Outside
                  Activities During
                  Employment.

              

      

       

      4.1 Non-Company
        Business. Except
        with the prior written consent of the Chief Executive Officer (in consultation
        with the General Counsel), Executive will not during the term of Executive’s
        employment with the Company undertake
        or engage in any other employment, occupation or business enterprise, other
        than
        ones in which Executive is a passive investor. Executive may engage in civic
        and
        not-for-profit activities so long as such activities do not materially interfere
        with the performance of Executive’s
        duties
        hereunder. 

       

      4.2 No
        Adverse Interests. Executive
        agrees
        not to acquire, assume or participate in, directly or indirectly, any position,
        investment or interest known by him to be adverse or antagonistic to the
        Company, its business or prospects, financial or otherwise, except as a passive
        investor in mutual or exchange traded funds.

       

      
        	 	
                5.

              	
                Termination
                  Of Employment.

              

      

       

      5.1 At-Will
        Relationship.
        Executive’s employment relationship is at-will. Either Executive or the Company
        may terminate the employment relationship at any time, with or without Cause
        or
        advance notice. 

       

      5.2 Termination
        without Cause; Resignation for Good Reason. If,
        at
        any time, the Company terminates Executive’s employment without Cause (as
        defined herein), or Executive resigns with Good Reason (as defined herein),
        and
        Executive executes and delivers the Separation Date Release of all claims
        set
        forth as Exhibit B hereto and allows such release to become effective, then
        the
        Company will provide Executive with the following severance
        benefits:

       

      
        
           

        

        
           

          
            

          

        

        
           

        

      

      (a) Cash
        Severance.
        The
        Company shall pay Executive severance in the form of continuation of Executive’s
        Base Salary in effect on Executive’s last day of employment for a period of
        twelve (12) months after Executive’s termination, subject to standard payroll
        deductions and withholdings and payable on the Company’s regular payroll
        schedule; provided,
        however,
        that in
        the event the Company terminates Executive’s employment without Cause, or
        Executive resigns with Good Reason, within three (3) months before or otherwise
        in anticipation of, or within twelve (12) months after, a Change in Control
        (as
        defined below), then the Company shall pay Executive severance in the form
        of
        continuation of Executive’s Base Salary in effect on Executive’s last day of
        employment for a period of eighteen (18) months after Executive’s termination,
        subject to standard payroll deductions and withholdings and payable on the
        Company’s regular payroll schedule. Each payment made pursuant to this Section
        5.2(a) is intended to be a separate payment (as defined in Treasury Regulations
        Section 1.409A-2(b)(2)) from any other payments made pursuant to this Section
        5.2(a) for purposes of the “short term deferral rule” under Treasury Regulations
        Section 1.409A-1(b)(4).

       

      (b) Continued
        Health Insurance Coverage.
        To the
        extent provided by the federal COBRA law or, if applicable, state insurance
        laws, and by the Company’s then-current group health insurance policies,
        Executive may be eligible to continue Executive’s then-current group health
        insurance benefits after termination of Employment. If eligible and if Executive
        timely elects continued health insurance coverage, then the Company shall
        pay
        the Company’s portion of any premiums necessary to provide coverage for a period
        of twelve (12) months after the termination date; provided,
        however,
        that no
        such premium payments shall be made following the effective date of Executive’s
        coverage by a medical, dental or vision insurance plan of a subsequent employer.
        Executive shall notify the Company immediately if he becomes covered by a
        medical, dental or vision insurance plan of a subsequent employer.
        Notwithstanding the foregoing, in the event the Company terminates Executive’s
        employment without Cause, or Executive resigns with Good Reason, within three
        (3) months before or otherwise in anticipation of, or within twelve (12)
        months
        after, a Change in Control (as defined below), then (if eligible and coverage
        elected) the Company shall pay the Company’s portion of any premiums necessary
        to provide coverage for a period of eighteen (18) months after the termination
        date; provided,
        however, that
        no
        such premium payments shall be made following the effective date of Executive’s
        coverage by a medical, dental or vision insurance plan of a subsequent employer
        and Executive agrees to immediately notify the Company of any such
        coverage.

       

      (c) Accelerated
        Vesting.
        If
        Executive has been employed by the Company for one full year or longer, then
        the
        Company will accelerate the vesting of any equity awards granted to Executive
        prior to Executive’s employment termination such that twenty-five percent (25%)
        of all shares or options subject to such awards which are unvested as of
        the
        employment termination date shall be accelerated and deemed fully vested
        as of
        Executive’s last day of employment; provided,
        however,
        that in
        the event, and without the requirement that Executive be employed for one
        full
        year or longer, the Company terminates Executive’s employment without Cause, or
        Executive resigns with Good Reason, within three (3) months before or otherwise
        in anticipation of, or within twelve (12) months after, a Change in Control
        (as
        defined below), then the Company will accelerate the vesting of any equity
        awards granted to Executive prior to Executive’s employment termination such
        that one hundred percent (100%) of all shares or options subject to such
        awards
        which are unvested as of the employment termination date shall be accelerated
        and deemed fully vested as of Executive’s last day of employment. 

       

      
        
           

        

        
           

          
            

          

        

        
           

        

      

      5.3 Termination
        for Cause; Resignation Without Good Reason.
        If the
        Company terminates Executive’s employment with the Company for Cause, or
        Executive resigns without Good Reason, then Executive will not be entitled
        to
        any further compensation from the Company (other than accrued salary, and
        accrued and unused vacation, through Executive’s last day of employment),
        including severance pay, pay in lieu of notice or any other such
        compensation.

       

      5.4 Termination
        Due to Death or Disability.
        

       

      (a) Death.
        This
        Agreement shall terminated immediately upon Executive’s death and Executive’s
        estate shall not be entitled to any further compensation from the Company
        (other
        than accrued salary, and accrued and unused vacation, through Executive’s last
        day of employment), including severance pay, pay in lieu of notice or any
        other
        such compensation.

       

      (b) Disability.
        If
        Executive is incapacitated by accident, sickness or otherwise such that
        Executive is incapable of performing the services set forth in Section 1.1
        herein, and such incapacity is certified by a qualified medical doctor, then
        this Agreement shall terminate. In such an event, and if Executive or someone
        authorized to act on his behalf executes and delivers the Separation Date
        Release of all claims set forth as Exhibit B hereto and allows such release
        to
        become effective, then the Company will provide Executive with the following
        severance benefits; provided,
        however,
        that
        these severance benefits shall be reduced by any amounts provided to Executive
        by any federal or state disability insurance payments or benefits, and any
        private insurance disability payments or benefits, provided to
        Executive:

       

      (i) Cash
        Severance.
        The
        Company shall pay Executive severance in the form of continuation of Executive’s
        Base Salary in effect on Executive’s last day of employment for a period of
        twelve (12) months after Executive’s termination, subject to standard payroll
        deductions and withholdings and payable on the Company’s regular payroll
        schedule.

       

      (ii) Continued
        Health Insurance Coverage.
        To the
        extent provided by the federal COBRA law or, if applicable, state insurance
        laws, and by the Company’s then-current group health insurance policies,
        Executive may be eligible to continue Executive’s then-current group health
        insurance benefits after termination of Employment. If eligible and if Executive
        timely elects continued health insurance coverage, then the Company shall
        pay
        the Company’s portion of any premiums necessary to provide coverage for a period
        of twelve (12) months after the termination date; provided,
        however,
        that no
        such premium payments shall be made following the effective date of Executive’s
        coverage by a medical, dental or vision insurance plan of a subsequent employer.
        Executive shall notify the Company immediately if he becomes covered by a
        medical, dental or vision insurance plan of a subsequent employer. 

       

      (iii) Accelerated
        Vesting.
        If
        Executive has been employed by the Company for one full year or longer, then
        the
        Company will accelerate the vesting of any equity awards granted to Executive
        prior to Executive’s employment termination such that twenty-five percent (25%)
        of all shares or options subject to such awards which are unvested as of
        the
        employment termination date shall be accelerated and deemed fully vested
        as of
        Executive’s last day of employment.

       

      
        
           

        

        
           

          
            

          

        

        
           

        

      

      5.5 Deferred
        Compensation. If
        the
        Company determines that any of the severance benefit payments fail to satisfy
        the distribution requirement of Section 409A(a)(2)(A) of the Internal Revenue
        Code as a result of Section 409A(a)(2)(B)(i) of the Internal Revenue Code,
        the
        payment of such benefit shall be accelerated to the minimum extent necessary
        so
        that the benefit is not subject to the provisions of Section 409A(a)(1) of
        the
        Internal Revenue Code. (It is the intention of the preceding sentence to
        apply
        the short-term deferral provisions of Section 409A of the Internal Revenue
        Code,
        and the regulations and other guidance thereunder, to the severance benefit
        payments, and the payment schedule as revised after the application of the
        preceding sentence shall be referred to as the “Revised Payment Schedule.”)
        However, if there is no Revised Payment Schedule that would avoid the
        application of Section 409A(a)(1) of the Internal Revenue Code, the payment
        of
        such benefits shall not be paid pursuant to a Revised Payment Schedule and
        instead shall be delayed to the minimum extent necessary so that such benefits
        are not subject to the provisions of Section 409A(a)(1) of the Internal Revenue
        Code. The Board may attach conditions to or adjust the amounts paid pursuant
        to
        this Section 5.5 to preserve, as closely as possible, the economic consequences
        that would have applied in the absence of this Section 5.5; provided,
        however,
        that no
        such condition or adjustment shall result in the payments being subject to
        Section 409A(a)(1) of the Internal Revenue Code.

       

      5.6 Limitation
        on Payments.
        In the
        event that the payments or other benefits provided for in this Agreement
        or
        otherwise payable to Executive (i) constitute “parachute payments” within the
        meaning of Section 280G of the Code, and (ii) would be subject to the excise
        tax
        imposed by Section 4999 of the Code (the “Excise Tax”), then Executive’s
        benefits under this Agreement shall be either (a) delivered in full, or (b)
        delivered to such lesser extent which would result in no portion of such
        benefits being subject to the Excise Tax, whichever of the foregoing amounts,
        taking into account the applicable federal, state and local income taxes
        and the
        Excise Tax, results in the receipt by Executive on an after-tax basis, of
        the
        greatest amount of benefits, notwithstanding that all or some portion of
        such
        benefits may be taxable under Section 4999 of the Code. If a reduction in
        payments or benefits constituting “parachute payments” is necessary pursuant to
        the foregoing provision, reduction shall occur in the following order unless
        the
        Executive elects in writing a different order (provided,
        however,
        that
        such election shall be subject to Company approval if made on or after the
        date
        on which the event that triggers the parachute payment occurs): reduction
        of
        cash payments; cancellation of accelerated vesting of stock awards; reduction
        of
        employee benefits. If acceleration of vesting of stock award compensation
        is to
        be reduced, such acceleration of vesting shall be cancelled in the reverse
        order
        of the date of grant of the Executive’s stock awards unless the Executive elects
        in writing a different order for cancellation.

       

      Unless
        the Company and Executive otherwise agree in writing, any determination required
        under this Section 5.6 shall be made in writing by the Company’s independent
        public accountants (the “Accountants”), whose determination shall be conclusive
        and binding upon Executive and the Company for all purposes and may be relied
        upon by the Company. For purposes of making the calculations required by
        this
        Section 5.6, the Accountants may make reasonable assumptions and approximations
        concerning applicable taxes and may rely on reasonable, good faith
        interpretations concerning the application of Section 280G and 4999 of the
        Code.
        The Company and Executive shall further to the Accountants such information
        and
        documents as the Accountants may reasonably request in order to make a
        determination under this Section 5.6. The Company shall bear all costs the
        Accountants may reasonably incur in connection with any calculations
        contemplated by this Section 5.6.

       

      
        
           

        

        
           

          
            

          

        

        
           

        

      

      5.7 No
        Mitigation.
        Executive shall not be required to mitigate damages or the amount of any
        payment
        provided for under this Agreement by seeking other employment or otherwise,
        nor
        shall the amount of any payment provided for under this Agreement be reduced
        by
        any compensation earned by Executive as the result of employment by another
        employer after the date of termination, or otherwise, except for health
        insurance benefits as set forth herein.

       

      5.8 Definitions.

       

      (a) For
        purposes of this Agreement, “Cause”
shall
        mean any one or more of the following: 

       

      (i) Executive’s
        indictment or conviction of any felony or of any crime involving dishonesty;
        

       

      (ii) Executive’s
        participation in any fraud or other act of willful misconduct against the
        Company (including any material breach of Company policy that causes or
        reasonably could cause harm to the Company); 

       

      (iii) Executive’s
        refusal to comply with any lawful directive of the Company; 

       

      (iv) Executive’s
        material breach of Executive’s fiduciary, statutory, contractual, or common law
        duties to the Company (including any material breach of this Agreement or
        the
        Confidential Information and Inventions Agreement); or 

       

      (v) Conduct
        by Executive which in the good faith and reasonable determination of the
        Board
        demonstrates gross unfitness to serve.

       

      Provided,
        however,
        that in
        the event that any of the foregoing events is reasonably capable of being
        cured,
        the Company shall, within twenty (20) days after the discovery of such event,
        provide written notice to the Executive describing the nature of such event
        and
        Executive shall thereafter have ten (10) business days to cure such event.
        

       

      (b) For
        purposes of this Agreement, Executive shall have “Good
        Reason”
        for
        Executive’s resignation if: (w) any of the following occurs without Executive’s
        consent; (x) Executive notifies the Company in writing, within twenty
        (20) days after the occurrence of one of the following events that
        Executive intends to terminate his employment no earlier than thirty (30)
        days
        after providing such notice; (y) the Company does not cure such condition
        within thirty (30) days following its receipt of such notice or states
        unequivocally in writing that it does not intend to attempt to cure such
        condition, and (z) the Executive resigns from employment within thirty (30)
        days
        following the end of the period within which the Company was entitled to
        remedy
        the condition constituting Good Reason but failed to do so:

       

      
        
           

        

        
           

          
            

          

        

        
           

        

      

      (i) the
        assignment to Executive of any duties or responsibilities which result in
        the
        material diminution of Executive’s authority, duties or responsibility;
provided,
        however,
        that the
        acquisition of the Company and subsequent conversion of the Company to a
        division or unit of the acquiring corporation will not by itself result in
        a
        material diminution of Executive’s authority, duties or
        responsibility;

       

      (ii) a
        material reduction by the Company in Executive’s annual base salary, except to
        the extent the base salaries of all other executive officers of the Company
        are
        accordingly reduced;

       

      (iii) a
        relocation of Executive’s place of work, or the Company’s principal executive
        offices if Executive’s principal office is at such offices, to a location that
        increases Executive’s daily one-way commute by more than thirty-five (35) miles;
        or

       

      (iv) any
        material breach by the Company of any material provision of this Agreement,
        including but not limited to Section 7.7.

       

      (c) For
        purposes of this Agreement, “Change
        in Control”
        shall be
        deemed to have occurred if, in a single transaction or series of related
        transactions: (i) any person (as such term is used in Section 13(d) and 14(d)
        of
        the Securities Exchange Act of 1934 (“Exchange Act”)), or persons acting as a
        group, other than a trustee or fiduciary holding securities under an employment
        benefit program, is or becomes a “beneficial owner” (as defined in Rule 13-3
        under the Exchange Act), directly or indirectly of securities of the Company
        representing 51% or more of the combined voting power of the Company, (ii)
        there
        is a merger, consolidation or other business combination transaction of the
        Company with or into another corporation, entity or person, other than a
        transaction in which the holders of at least a majority of the shares of
        voting
        capital stock of the Company outstanding immediately prior to such transaction
        continue to hold (either by such shares remaining outstanding or by their
        being
        converted into shares of voting capital stock of the surviving entity) a
        majority of the total voting power represented by the shares of voting capital
        stock of the Company (or the surviving entity) outstanding immediately after
        such transaction, or (iii) all or substantially all of the Company’s assets are
        sold.

       

      6.     Arbitration.

       

      To
        ensure
        the timely and economical resolution of disputes that may arise in connection
        with Executive’s employment with the Company, Executive and the Company agree
        that any and all disputes, claims, or causes of action arising from or relating
        to the enforcement, breach, performance, negotiation, execution, or
        interpretation of this Agreement, Executive’s employment, or the termination of
        Executive’s employment, shall be resolved to the fullest extent permitted by law
        by final, binding and confidential arbitration, by a single arbitrator, in
        Sacramento, California, conducted by JAMS under the then applicable JAMS
        rules.
By
        agreeing to this arbitration procedure, both Executive and the Company waive
        the
        right to resolve any such dispute through a trial by jury or judge or
        administrative proceeding.
        The
        arbitrator shall: (a) have the authority to compel adequate discovery for
        the
        resolution of the dispute and to award such relief as would otherwise be
        permitted by law; and (b) issue a written arbitration decision, to include
        the
        arbitrator’s essential findings and conclusions and a statement of the award.
        The arbitrator shall be authorized to award any or all remedies that Executive
        or the Company would be entitled to seek in a court of law. The Company shall
        pay all JAMS’ arbitration fees in excess of the amount of court fees that would
        be required if the dispute were decided in a court of law. Nothing in this
        Agreement is intended to prevent either Executive or the Company from obtaining
        injunctive relief in court to prevent irreparable harm pending the conclusion
        of
        any such arbitration.

       

      
        
           

        

        
           

          
            

          

        

        
           

        

      

      7.     General
        Provisions.

       

      7.1 Notices.
        Any
        notices provided hereunder must be in writing and shall be deemed effective
        upon
        the earlier of personal delivery (including personal delivery by fax) or
        the
        next day after sending by overnight carrier, to the Company at its primary
        office location and to Executive at his address as listed on the Company
        payroll.

       

      7.2 Severability.
        Whenever
        possible, each provision of this Agreement will be interpreted in such manner
        as
        to be effective and valid under
        applicable law, but if any provision of this Agreement is held to be invalid,
        illegal or unenforceable in any respect under any applicable law or rule
        in any
        jurisdiction, such invalidity, illegality or unenforceability will not affect
        any other provision or any other jurisdiction, but this Agreement will be
        reformed, construed and enforced in such jurisdiction to the extent possible
        in
        keeping with the intent of the parties.

       

      7.3 Waiver.
        Any
        waiver of any breach of any provisions of this Agreement must be in writing
        to
        be effective, and it shall not thereby be deemed to have waived any preceding
        or
        succeeding breach of the same or any other provision of this
        Agreement.

       

      7.4 Complete
        Agreement.
        This
        Agreement, including Exhibit A, constitutes the entire agreement between
        Executive and the Company and it is the complete,
        final,
        and exclusive embodiment of their agreement with regard to this subject matter.
        This Agreement supersedes and replaces the Offer Letter in its entirety and
        the
        Offer Letter shall have no further force or effect. It is entered into without
        reliance on any promise or representation other than those expressly contained
        herein, and it cannot be modified or amended except in a writing signed by
        the
        Executive and a duly authorized officer of the Company.

       

      7.5 Counterparts.
        This
        Agreement may be executed in separate counterparts, any one of which need
        not
        contain signatures of more than one party, but all of which taken together
        will
        constitute one and the same Agreement.

       

      7.6 Headings.
        The
        headings of the sections hereof are inserted for convenience only and shall
        not
        be deemed to constitute a part hereof nor to affect the meaning
        thereof.

       

      7.7 Successors
        and Assigns.
        This
        Agreement is intended to bind and inure to the benefit of and be enforceable
        by
        Executive and the Company, and their respective successors, assigns, heirs,
        executors and administrators, except that Executive may not assign any of
        his
        duties hereunder and he may not assign any of his rights hereunder without
        the
        written consent of the Company, which shall not be withheld unreasonably.
        The
Company
        shall obtain the assumption of this Agreement by any successor or assign
        of the
        Company.

       

      
        
           

        

        
           

          
            

          

        

        
           

        

      

      7.8 Choice
        of Law.
        All
        questions concerning
        the
        construction, validity and interpretation of this Agreement will be governed
        by
        the law of the State of California. 

       

      In
        Witness Whereof,
        the
        parties have executed this Agreement.

       

      Pacific
        Ethanol, Inc. 

       

      By:
        /s/
        NEIL M. KOEHLER

      Neil
        M.
        Koehler

      President
        and Chief Executive Officer

       

      Date:
        May
        4,
        2007 

       

      

       

      Understood
        and Agreed:

      

      Executive

      

      

      

      By:
        /s/
        DOUGLAS JEFFRIES 

       Douglas
        Jeffries

      

      Date:
        May
        4,
        2007

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00123-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00123-of-00352.parquet"}]]