**Exhibit 10.3**

 

**EXECUTION COPY**

 

**AVENTINE RENEWABLE ENERGYHOLDINGS, INC.**

**2010 EQUITY INCENTIVE PLAN**

**STOCK OPTION AGREEMENT**

 

THIS AGREEMENT, made this 5th day of May, 2010 (the “***Dateof Grant***”), by and between Aventine Renewable Energy Holdings, Inc.(the “***Company***”) and John Castle(the “***Participant***”).

 

W I T N E S S E T H:

 

WHEREAS, pursuant to the Aventine Renewable EnergyHoldings, Inc. 2010 Equity Incentive Plan (the “***Plan***”),the Company desires to afford the Participant the opportunity to acquireownership of the Company’s common shares, $0.001 par value per share (“***Common Shares***”), so that theParticipant may have a direct proprietary interest in the Company’s success.

 

NOW, THEREFORE, in consideration of the covenantsand agreements herein contained, the parties hereto hereby agree as follows:

 

1.             **Grant of Option**.  Subject to the terms and conditions set forthherein and in the Plan, the Company hereby grants to the Participant the rightand option (the right to purchase any one Common Share hereunder being an “***Option***”) to purchase from theCompany, at a price of $43.75 per share (the “***OptionPrice***”), an aggregate of 100,000 Common Shares (the “***Option Shares***”).  The Options granted hereunder shall expireten (10) years following the Date of Grant.

 

2.             **Limitation on Exercise ofOption**.

 

(a)           Subject to the terms and conditions set forth herein andthe Plan, the Participant will become vested in the Options as follows: (i) 16,667 Options will vest and become exercisable each of the first twoanniversaries of the Date of Grant, (ii) an additional 16,666 Options willvest and become exercisable on December 31, 2012, and (iii) theremaining 50,000 Options will vest and become exercisable subject to theattainment of reasonable performance criteria to be determined by the Board,and once so determined will be set forth on Annex A hereto; provided,that, the Participant is then employed by the Company.

 

(b)           Notwithstanding the foregoing, in the event that theParticipant’s employment with the Company is terminated (i) by the Companywithout Cause (as defined in the Employment Agreement between the Company andthe Participant dated as of May 5, 2010 (the “***EmploymentAgreement***”)), or (ii) by the Participant for Good Reason(as defined in the Employment Agreement), the Options shall immediately vestand become exercisable in full.

 

(c)           Change inControl.  Upon the occurrence of a Change in Control(as defined in the Employment Agreement), the Options shall immediately vestand become exercisable in full.

 

3.             **Post-Termination ExercisePeriod**. If the Participant’s termination of employment is due to(i) (a) the Participant’s death, (b) the Participant’stermination by the 

 

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Company for Disability (as defined in the EmploymentAgreement) or without Cause, or (c) due to the expiration of the Term ofEmployment (as defined in the Employment Agreement), all vested Options thenheld by the Participant shall remain exercisable until the earlier of (x) thefirst anniversary of the Date of Termination (as defined in the EmploymentAgreement) and (y) the expiration of the Option Period, and shallthereafter terminate; or (ii) termination by the Participant with orwithout Good Reason, all vested Options then held by the Participant shallremain exercisable until the earlier of (x) ninety days following the Dateof Termination and (y) the expiration of the Option Period, and shallthereafter terminate.  If the Participant’stermination of employment is for any other reason, all unvested Options (and inthe case of a termination by the Company for Cause, all vested Options) shallterminate on the Date of Termination.

 

4.             **Method of ExercisingOption**.

 

(a)           Payment of Option Price.  Options, to the extent vested, may beexercised, in whole or in part, by giving written notice of exercise to theCompany specifying the number of Common Shares to be purchased.  Such notice shall be accompanied by thepayment in full of the aggregate Option Price. Such payment shall be made: (i) in cash or by check, bank draft ormoney order payable to the order of the Company, (ii) through a cashlessexercise whereby the Company reduces the number of Common Shares issuable uponexercise with a value equal to the aggregate Option Price and withholdingobligation, (iii) solely to the extent permitted by applicable law, if theCommon Shares are then traded on an established securities exchange or systemin the United States, through a procedure whereby the Participant deliversirrevocable instructions to a broker reasonably acceptable to the Committee todeliver promptly to the Company an amount equal to the aggregate Option Priceor (iv) on such other terms and conditions as the Committee may permit, inits sole discretion.

 

(b)           Tax Withholding. At the time of exercise, the Participant shall pay to the Company suchamount as the Company deems necessary to satisfy its obligation, if any, towithhold federal, state or local income or other taxes incurred by reason ofthe exercise of Options granted hereunder. Such payment shall be made: (i) in cash, (ii) by having theCompany withhold from the delivery of Common Shares for which the Option wasexercised that number of Common Shares having a Fair Market Value equal to theminimum withholding obligation, (iii) by delivering Common Shares owned bythe holder of the Option that are Mature Shares, or (iv) by a combinationof any such methods.  For purposeshereof, Common Shares shall be valued at Fair Market Value.

 

5.             **Issuance of Shares**.  Except as otherwise provided in the Plan, aspromptly as practical after receipt of such written notification of exerciseand full payment of the Option Price and any required income tax withholding,the Company shall issue or transfer to the Participant the number of OptionShares with respect to which Options have been so exercised (less shareswithheld for payment of the Option Price and/or in satisfaction of taxwithholding obligations, if any), and shall deliver to the Participant acertificate or certificates therefor, registered in the Participant’s name.

 

6.             **Non-Transferability**.  The Options are not transferable by theParticipant otherwise than to a designated beneficiary upon death or by will orthe laws of descent and 

 

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distribution, and are exercisable during theParticipant’s lifetime only by him/her (or his or her legal representative inthe event of incapacity).  No assignmentor transfer of the Options, or of the rights represented thereby, whethervoluntary or involuntary, by operation of law or otherwise (except to adesignated beneficiary, upon death, by will or the laws of descent anddistribution), shall vest in the assignee or transferee any interest or rightherein whatsoever, but immediately upon such assignment or transfer the Optionsshall terminate and become of no further effect.  Notwithstanding the foregoing, theParticipant may transfer the Options to an Immediate Family Member inaccordance with Section 16(b)(ii) and (iii) of the Plan.

 

7.             **Rights as Shareholder**.  The Participant or a transferee of theOptions shall have no rights as shareholder with respect to any Option Sharesuntil he shall have become the holder of record of such shares, and noadjustment shall be made for dividends or distributions or other rights inrespect of such Option Shares for which the date on which shareholders ofrecord are determined for purposes of paying cash dividends on Common Shares isprior to the date upon which he/she shall become the holder of record thereof.

 

8.             **Adjustments**.  In the event of any adjustment pursuant to Section 12of the Plan that would adversely affect the value of the Options grantedhereunder or cause such Options to become subject to Section 409A of theCode, such adjustment may only be made with the Participant’s written consent,which consent shall not be unreasonably withheld.

 

9.             **Compliance with Law**.  Notwithstanding any of the provisions hereof,the Participant hereby agrees that he/she will not exercise the Options, andthat the Company will not be obligated to issue or transfer any shares to theParticipant hereunder, if the exercise hereof or the issuance or transfer ofsuch shares shall constitute a violation by the Participant or the Company ofany provisions of any law or regulation of any governmental authority.  Any determination in this connection by theCommittee shall be final, binding and conclusive.

 

10.           **Notice**.  Every notice or other communication relatingto this Agreement shall be in writing, and shall be mailed to or delivered tothe party for whom it is intended at such address as may from time to time bedesignated by it in a notice mailed or delivered to the other party as hereinprovided; provided, that, unless and until some other address beso designated, all notices or communications by the Participant to the Companyshall be mailed or delivered to the Company at its principal executive office,and all notices or communications by the Company to the Participant may begiven to the Participant personally or may be mailed to him at his address asrecorded in the records of the Company.

 

11.           **Non-Qualified StockOptions**.  The Optionsgranted hereunder are not intended to be incentive stock options within themeaning of Section 422 of the Code.

 

12.           **Binding Effect**.  Subject to Section 6 hereof, thisAgreement shall be binding upon the heirs, executors, administrators andsuccessors of the parties hereto.

 

13.           **Governing Law**.  This Agreement shall be construed andinterpreted in accordance with the laws of the State of New York without regardto its conflict of law principles.

 

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14.           **Plan**.  The terms and provisions of the Plan areincorporated herein by reference, and the Participant hereby acknowledgesreceiving a copy of the Plan.  In the eventof a conflict or inconsistency between the terms and provisions of the Plan andthe provisions of this Agreement, this Agreement shall govern and control.  All capitalized terms not defined hereinshall have the meaning ascribed to them as set forth in the Plan.  Notwithstanding anything herein or in thePlan to the contrary, the provisions of Section 15 of the Plan shall notapply to the Participant.

 

15.           **Interpretation**.Any dispute regarding the interpretation of this Agreement shall be submittedby the Participant or the Company to the Committee for review.  The resolution of such a dispute by theCommittee shall be binding on the Company and the Participant.

 

16.           **NoRight to Continued Employment**. Nothing in this Agreement shall be deemed by implication or otherwise toimpose any limitation on any right of the Company to terminate the Participant’semployment.

 

17.           **Severability**.  Every provision of this Agreement is intendedto be severable and any illegal or invalid term shall not affect the validityor legality of the remaining terms.

 

18.           **Headings**.  The headings of the Sections hereof areprovided for convenience only and are not to serve as a basis forinterpretation of construction, and shall not constitute a part of thisAgreement.

 

19.           **Signature in Counterparts**. ThisAgreement may be signed in counterparts, each of which shall be deemed anoriginal, with the same effect as if the signatures thereto and hereto wereupon the same instrument

 

**[signature page follows]**

 

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IN WITNESS WHEREOF, the parties hereto have executedthis Agreement as of the date first set forth above.

 

 
|   | **AVENTINE RENEWABLE ENERGY HOLDINGS, INC.** |
|--------|---------------------------------------------------|
|   | ** **                                        |
|   |                                              |
|   | By:                                               |   |
|   | Name:                                             | Thomas Manuel |
|   | Title:                                            | Chief Executive Officer |
|   |                                              |   |
|   |                                              |   |
|   | **PARTICIPANT**                                   |
|   |                                              |   |
|   |                                              |   |
|   | By:                                               |   |
|   | Name: John Castle                                 |
|        |                                                   |  |  |

 

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**ANNEX A**

 

**[PERFORMANCE CRITERIA]**

 

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