ENERPULSE, INC.

 

CAMILLI STOCK BUYOUT AGREEMENT

 

THIS STOCK BUYOUT AGREEMENT (this "Agreement") is made effective as of the 20th
day of January, 2004, by and between Enerpu l se, Inc., a Delaware corporation
(the "Corporation"), and Louis Camilli (the "Shareholder").

 

RECITALS

 

A.         The Shareholder currently owns Three Million Six Hundred Fifty-Four
Thousand Seven Hundred Sixty Three (3,654,763) shares of the Corporation's $.001
par value common stock (such shares. together with any additional shares of
capital stock in the Corporation that may be later acquired by the Shareholder,
are referred to herein as the "Shares").

 

B.         The parties recognize that if the Shareholder should cease to be a
full-time employee of the Corporation, then it is fair and appropriate to allow
the Corporation to purchase the Shareholder 's Shares, or a portion of the
Shares, under the terms and conditions set forth herein.

 

C. The parties recognize that this Agreement will provide stability to the
Corporation and enhance the value of the Shares held by the Shareholder.

 

AGREEMENT

 

In consideration of the Recitals, the mutual promises and agreements set forth
herein, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereby agree as
follows:

 

1.Purchase Option.

 

a.If the employment of the Shareholder shall terminate at any time, and such
termination is for Cause (as defined in Section I (f) below), then the
Corporation shall have the right and option, but not the obligation (the
"Purchase Option"), to purchase one hundred percent (100%) of the Shareholder's
Shares (the "Sa le Portion").

 

b.The Corporation, in its sole discretion, may elect to purchase Jess than the
entire Sale Portion.

 

c.The purchase price of the Shares shall be equal to the Fair Market Value of
the Shares (as defined in Section 2 below).

 

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d.The Purchase Option shall be exercised by an authorized representative of the
Corporation delivering written notice (the ''Notice of Exercise") to the
Shareholder, or his personal representative, of the Corporation 's intent to
purchase the Sale Port ion of the Shareholder 's Shares, which notice shall
specify the number of Shares to be purchased and the proposed purchase price for
the Shares. The Notice of Exercise must be delivered within sixty (60) days
after the last day of the month in which the Shareholder's employment was
terminated.

 

e.The Notice of Exercise shall set forth a proposed purchase price for the
Shares to be purchased by the Corporation which will be the Corporation 's good
faith determination of the Fair Market Value of such Shares. The Shareholder, or
his personal representative, may accept the proposed purchase price as stated in
the Notice of Exercise, or may deliver notice to the Corporation of the
Shareholder 's disagreement with the valuation set forth in the Notice of
Exercise ("Notice of Alternative Valuation"). The Notice of Alternative
Valuation shall set forth the Shareholder's, or his personal representative's,
good faith determination of the Fai r Market Value of the Shares to be purchased
by the Corporation; provided, however, that the failure of the Shareholder to
accept the proposed purchase price in the Notice of Exercise or to deliver a
Notice of Alternative Valuation to the Corporation within fifteen (1 5) days of
his receipt of the Notice of Exercise shall constitute the Shareholder's
irrevocable acceptance of the proposed purchase price stated in the Notice of
Exercise. The deli very of a Notice of Alternative Valuation shall not affect
the timing of the transfer of the Shares provided for in Section 3 below.

 

f.For purposes of this Agreement, the termination of the Shareholder's
employment for "Cause" i s a termination by reason of any of the following:

 

(i)      willful misconduct by the Shareholder that is materially and
demonstrably detrimental to the Corporation, monetarily or otherwise, or that
constitutes willful misconduct or gross negligence in the performance of his
duties hereunder;

 

(ii)     conduct by the Shareholder that constitutes fraud, dishonesty, or a
criminal act, whether or not with respect to the Corporation;

 

(iii)    embezzlement of funds or misappropriation of other property by the
Shareholder from the Corporation or one or more of the Corporation's employees,
clients, partners, or affiliates;

 

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(iv)    conviction of the Shareholder of a felon y or of any other crime that
involves fraud, dishonest y, or moral turpitude;

 

(v)     the willful breach by the Shareholder, or the continued breach by the
Shareholder after reasonable notice and opportunity to take corrective action,
of any of the material provisions of any written Agreement to which both the
Shareholder and the Corporation are parties;

 

(vi)    conduct by the Shareholder that, in the good faith opinion of the Board
of Directors of the Corporation, is materially detrimental to the Corporation,
causes the Corporation to breach any term or the Share Purchase Agreement, dated
January 20, 2004, by and among the Corporation, Altira Technology Fund IV L.P
and Altira Technology Fund IV Direct Investor, LLC or reflects unfavorably on
the Corporation or the Shareholder to such an extent that the Corporation 's
best short or long term interests reasonably require the termination of the
Shareholder's employment; or

 

(vii)   the willful and continued failure by the Shareholder to substantially
perform his duties as an employee or officer of the Corporation (other than any
such failure resulting from the Shareholder 's physical or mental incapacity),
after demand for substantial performance is delivered by the Corporation that
specifically identifies the manner in which the Corporation believes the
Shareholder has not substantially performed his duties and recommends corrective
behavior that the Shareholder fails to carry out.

 

2.         Definition of "Fair Market Value". For purposes of this Agreement,
the "Fair Market Value" of the Shareholder's Shares means the amount that would
be received by the Shareholder pursuant to the Corporation 's Amended and
Restated Certificate of Incorporation if the Corporation was liquidated and
dissolved and its sole assets at the time of such liquidation and di ssolution
consisted of cash in an amount equal to the amount which a hypothetical willing
buyer would pay a hypothetical willing seller(s) in cash for one hundred percent
(I 00%) of the then outstanding capital stock of the Corporation, with all
in-the-money options and warrants for capital stock having been exercised in
accordance with their respective terms, in an arm's-length transaction, with
neither buyer nor seller(s) being under any undue pressure to complete the
transaction, and with all parties having equal access to, and accurate knowledge
of, all material facts.

 

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3.         Delivery of the Shares. Thirty (30) days after the delivery of a
Notice of Exercise (the "Date of Transfer"), the Shares referenced therein will
be transferred to the Corporation without the need for further action on the
part of any party to this Agreement, regardless of whether there is then pending
any arbitration or dispute as to the proper amount of the purchase price for the
Shares referenced in the Notice of Exercise, and the then acting Secretary of
the Corporation shall reflect the transfer on the books of the Corporation. On
or before the Date of Transfer, the Shareholder shall physically deliver to the
then acting Secretary of the Corporation any and all share certificates that
represent ownership of any of the Shareholder's Shares to be transferred
pursuant to the Notice of Exercise. The Shareholder hereby irrevocably appoints
the then acting Secretary of the Corporation as his attorney-in-fact to effect
the transfer of the Shares contemplated by this Agreement, without the need for
further action on the part of the Shareholder.

 

4.         Payment of Purchase Price. The purchase price for any Shares
purchased pursuant to the terms and provisions of this Agreement shall be paid
to the Shareholder by the Corporation delivering a promissory note (the "Note")
to the Shareholder on or before the Date of Transfer. The Note shall bear
interest at the Applicable Federal Rate (short-term), as published by the
Internal Revenue Service, in effect as of the Date of Transfer. Interest shall
accrue from the Date of Transfer and shall be paid on an annual basis upon each
anniversary of the Date of Transfer, until such time as a final payment of
principal is made, whereupon all accrued but unpaid interest shall become due.
Principal payments on the Note shall be due as follows: ten percent (10%) at the
Date of Transfer, ten percent (10%) at the six (6) month anniversary of the Date
of Transfer, twenty percent (20%) at the one (I) year anniversary of the Date of
Transfer, forty percent (40%) at the two (2) year anniversary of the Date of
Transfer, and the remainder at the three (3) year anniversary of the Date of
Transfer. The Corporation may, in its sole discretion, prepay the Note in whole
or in part at any time without penalty.

 

5.         Arbitration. If the Shareholder delivers a Notice of Alternative
Valuation within the fifteen (15) day period set forth in Section I (d) above,
and the Corporation of such Notice of Alternative Valuation does not expressly
accept the proposed purchase price stated in the Notice of Alternative Valuation
within five (5) business days after delivery, then the Shareholder shall have
the right to commence arbitration. Arbitration must be commenced within sixty
(60) days after the Date of Transfer. Arbitration shall be conducted in Denver,
Colorado, in accordance with the Commercial Arbitration Rules of the American
Arbitration Association (expedited procedures) then in effect. There shall be
three (3) arbitrators, all of whom shall be neutral, and at least one (1) of
whom shall be an attorney who has been licensed to practice law in the State of
Colorado for at least ten (10) years. The arbitrators shall have the authority
to exclude evidence found to be irrelevant, redundant, or prejudicial beyond its
probative value, and shall be authorized and directed to exercise that authority
consistently for the purpose of expediting the proceeding. The arbitration shall
be conducted as a "baseball style'· arbitration, in which the arbitrators will
only consider the two proposed purchase prices set forth in the Notice of
Exercise and the Notice of Alternative Valuation, and in which the arbitrators
shall be required to determine which one of the two proposed purchase prices is
closest to the Fair Market Value of the Shares. The proposed purchase price that
the arbitrators identify as being closest to the Fair Market Value of the Shares
will be the purchase price for the purchase, sale, and transfer of the Shares
under the Purchase Option and. for any other appropriate purpose. will be the
Fair Market Value of the Shares as of the date of termination of the
Shareholder's employment with the Corporation. The arbitrators may order
specific performance, preliminary and final injunctive relief, and other
equitable relief. The award of the arbitrators may be entered and enforced in
any court of competent jurisdiction. Should the arbitrators accept the valuation
originally presented in the Notice of Exercise, then the Shareholder shall be
liable for all of the costs of arbitration, including the fees of the
arbitrators and the reasonable attorney's fees of the Corporation incurred in
connection therewith. Any dispute or controversy arising under or in connection
with this Agreement, other than one involving a determination of the fair market
value of the Shareholder's Shares, shall be finally settled and determined by
binding arbitration in Denver, Colorado, under the same rules and procedures as
those stated in this Section 5, except that the provision regarding "baseball
style" arbitration shall not apply.

 

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6.         Termination of Agreement. This Agreement shall terminate on the
occurrence of any one or more of the following events: (i) the cessation of
business by the Corporation, (ii) the bankruptcy, receivership, or assignment
for the benefit of creditors of all of the assets of the Corporation, (iii ) the
dissolution of the Corporation, (iv) the signing of a written agreement by the
Shareholder and the Corporation which expressly terminates this Agreement, or
(v) when the Corporation is no longer a private entity, e.g., there is a public
market for its securities.

 

7.         Amendment. This Agreement may only be amended by written agreement of
the Shareholder and the Corporation.

 

8.         Binding Effect. This Agreement shall be binding upon the Shareholder
and his respective heirs and legal representatives and upon the Corporation and
its successors and assigns.

 

9.         Choice of Law. This Agreement shall be construed m accordance with
the internal laws, and not the conflict of law rules, of Colorado.

 

10.       Counterparts. This Agreement may be executed in several counterparts,
each of which shall be an original, and such counterparts shall together
constitute one and the same instrument.

 

11.       Employment by Subsidiary. If the Shareholder ceases to be employed by
the Corporation because he becomes an employee of a wholly-owned subsidiary of
the Corporation, the term "Corporation" as used in this Agreement shall refer to
such wholly-owned subsidiary.

 

12.       Notices. Any notice, direction, or other document or communication
required or permitted to be given or made to any party pursuant to this
Agreement shall be considered given or made if and when received by the party to
whom it is directed . Such notice, direction. or other document or communication
shall be presumed received if it is actually received at the address (as set
forth below) of the party to whom it is directed by any manner of delivery,
including, without limitation, personal delivery, courier, mail , or telecopier.
Any such notice, direction, or other document or communication sent by means of
the United States Postal Service, postage prepaid , shall be presumed received
within five (5) business days after it is sent. The parties' notice addresses
are as follows, and any party may change its notice address by giving written
notice of such change to the other parties:

 

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To the Corporation:

 

Enerpulse, Inc.

Attention: Louis Camilli, President

230l Yale Blvd. SE, Unit A5

Albuquerque, NM 87106

Facsimile: (505) 842-6S92

 

with a copy to:

 

Altira Technology Fund IV

LP c/o Altira Group LLC

Attention: James R. Newell

1625 Broadway, Suite 2450

Denver, CO 80202-4725

 

To the Shareholder:

 

Louis Camilli

2301 Yale Blvd. SE, Unit A5

Albuquerque, NM 87106

  

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

 

CORPORATION:       ENERPULSE, INC.        /s/ Daniel Parker   By: Daniel Parker,
Chief Executive Officer       SHAREHOLDER        /s/ Louis  Camilli   Louis 
Camilli              

 

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