Document:

NEITHER THESE SECURITIES NOR THE SECURITIES FOR WHICH THESE SECURITIES ARE EXERCISABLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN COMPLIANCE WITH APPLICABLE STATE SECURITIES OR BLUE SKY LAWS.  THESE SECURITIES AND THE SECURITIES ISSUABLE UPON EXERCISE OF THESE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN SECURED BY SUCH SECURITIES.

 

BEACON POWER CORPORATION

WARRANT

	
            Warrant No. o
 	
            Dated:  November 4, 2005
 

Beacon Power Corporation, a Delaware corporation (the “Company”), hereby certifies that, for value received, [Name of Holder] or its registered assigns (the “Holder”), is entitled to purchase from the Company up to a total of [          ] shares of common stock, $0.01 par value per share (the “Common Stock”), of the Company (each such share, a “Warrant Share” and all such shares, the “Warrant Shares”) at an exercise price equal to $2.21 per share (as adjusted from time to time as provided in Section 9, the “Exercise
Price”), at any time and from time to time from and after the date six months and one day after the Closing Date (the “Initial Exercise Date”) and through and including the fifth anniversary of the Initial Exercise Date (the “Expiration Date”), and subject to the following terms and conditions.  This Warrant (this “Warrant”) is one of a series of similar warrants issued pursuant to that certain Securities Purchase Agreement, dated as of the date hereof, by and among the Company and the Purchasers identified therein (the “Purchase Agreement”).  All such warrants are referred to herein, collectively, as the “Warrants.”

1.        Definitions.  In addition to the terms defined elsewhere in this Warrant, capitalized terms that are not otherwise defined herein have the meanings given to such terms in the Purchase Agreement.

2.         Registration of Warrant.  The Company shall register this Warrant, upon records to be maintained by the Company for that purpose (the “Warrant Register”), in the name of the record Holder hereof from time to time.  The Company may deem and treat the registered Holder of this Warrant as the absolute owner hereof for the purpose of any exercise hereof or any distribution to the Holder, and for all other purposes, absent actual notice to the contrary.

 

 

 

 

3.        Registration of Transfers.  The Company shall register the transfer of any portion of this Warrant in the Warrant Register, upon surrender of this Warrant, with the Form of Assignment attached hereto duly completed and signed, to the Transfer Agent or to the Company at its address specified herein.  Upon any such registration or transfer, a new warrant to purchase Common Stock, in substantially the form of this Warrant (any such new warrant, a “New Warrant”), evidencing the portion of this Warrant so transferred shall be issued to the transferee and a New Warrant evidencing the remaining portion of this Warrant not so transferred, if any, shall be issued to the transferring Holder.  The acceptance of the New Warrant by the transferee thereof shall be
deemed the acceptance by such transferee of all of the rights and obligations of a holder of a Warrant.

	
            4.  
 	
            Exercise and Duration of Warrants.  Subject to Section 11:
 

(a)        This Warrant shall be exercisable by the registered Holder at any time and from time to time on or after the date hereof to and including the Expiration Date.  At 6:30 P.M., New York City time on the Expiration Date, the portion of this Warrant not exercised prior thereto shall be and become void and of no value; provided that, if the average of the Closing Prices for the five Trading Days immediately prior to (but not including) the Expiration Date exceeds the Exercise Price on the Expiration Date, then this Warrant shall be deemed to have been exercised in full (to the extent not previously exercised) on a “cashless exercise” basis at 6:30 P.M. New York City time on the Expiration Date if a “cashless exercise” may occur at such time pursuant to Section 10 below. Notwithstanding anything to the contrary herein, the Expiration Date
shall be extended for each day following the Effective Date that the Registration Statement is not effective.

(b)      A Holder may exercise this Warrant by delivering to the Company (i) an exercise notice, in the form attached hereto (the “Exercise Notice”), appropriately completed and duly signed, and (ii) payment of the Exercise Price for the number of Warrant Shares as to which this Warrant is being exercised (which may take the form of a “cashless exercise” if so indicated in the Exercise Notice and if a “cashless exercise” may occur at such time pursuant to this Section 10 below), and the date such items are delivered to the Company (as determined in accordance with the notice provisions hereof) is an “Exercise Date.”   The Holder shall not be required to deliver the original Warrant in order to effect an exercise hereunder. Upon the
execution and delivery of the Exercise Notice, the Company shall issue a New Warrant to the Holder evidencing the right to purchase the remaining number of Warrant Shares.

	
            5.  
 	
            Delivery of Warrant Shares.  
 

(a)        Upon exercise of this Warrant, the Company shall promptly (but in no event later than three Trading Days after the Exercise Date) issue or cause to be issued and cause to be delivered to or upon the written order of the Holder and in such name or names as the Holder may designate, a certificate for the Warrant Shares issuable upon such exercise, free of restrictive legends unless a registration statement covering the resale of the Warrant Shares and naming the Holder as a selling stockholder thereunder is not then effective and the Warrant Shares are not freely transferable without volume restrictions pursuant to Rule 144 under the Securities Act.  The Holder, or any Person so designated by the Holder to receive Warrant Shares, shall be deemed to have become holder of record of such Warrant Shares as of the 

 

	
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Exercise Date.  The Company shall, upon request of the Holder, use its best efforts to deliver Warrant Shares hereunder electronically through the Depository Trust Corporation or another established clearing corporation performing similar functions.

(b)       This Warrant is exercisable, either in its entirety or, from time to time, for a portion of the number of Warrant Shares.  Upon surrender of this Warrant following one or more partial exercises, the Company shall issue or cause to be issued, at its expense, a New Warrant evidencing the right to purchase the remaining number of Warrant Shares.

(c)        In addition to any other rights available to a Holder, if the Company fails to deliver to the Holder a certificate representing Warrant Shares by the third Trading Day after the date on which delivery of such certificate is required by this Warrant, and if after such third Trading Day the Holder purchases (in an open market transaction or otherwise) shares of Common Stock to deliver in satisfaction of a sale by the Holder of the Warrant Shares that the Holder anticipated receiving from the Company (a “Buy-In”), then the Company shall, within three Trading Days after the Holder’s request and in the Holder's discretion, either (i) pay cash to the Holder in an amount equal to the Holder’s total purchase price (including brokerage commissions, if any) for the shares of Common Stock so
purchased (the “Buy-In Price”), at which point the Company’s obligation to deliver such certificate (and to issue such Common Stock) shall terminate, or (ii) promptly honor its obligation to deliver to the Holder a certificate or certificates representing such Common Stock and pay cash to the Holder in an amount equal to the excess (if any) of the Buy-In Price over the product of (A) such number of shares of Common Stock, times (B) the Closing Price on the date of the event giving rise to the Company’s obligation to deliver such certificate.

(d)      The Company’s obligations to issue and deliver Warrant Shares in accordance with the terms hereof are absolute and unconditional, irrespective of any action or inaction by the Holder to enforce the same, any waiver or consent with respect to any provision hereof, the recovery of any judgment against any Person or any action to enforce the same, or any setoff, counterclaim, recoupment, limitation or termination, or any breach or alleged breach by the Holder or any other Person of any obligation to the Company or any violation or alleged violation of law by the Holder or any other Person, and irrespective of any other circumstance which might otherwise limit such obligation of the Company to the Holder in connection with the issuance of Warrant Shares.  Nothing herein shall limit a Holder’s right to pursue any other remedies available to it hereunder, at law
or in equity including, without limitation, a decree of specific performance and/or injunctive relief with respect to the Company’s failure to timely deliver certificates representing shares of Common Stock upon exercise of the Warrant  as required pursuant to the terms hereof.

6.        Charges, Taxes and Expenses.   Issuance and delivery of certificates for shares of Common Stock upon exercise of this Warrant shall be made without charge to the Holder for any issue or transfer tax, withholding tax, transfer agent fee or other incidental tax or expense in respect of the issuance of such certificates, all of which taxes and expenses shall be paid by the Company; provided, however, that the Company shall not be required to pay any tax which may be payable in respect of any transfer involved in the registration of any certificates for Warrant Shares or Warrants in a name other than that of the Holder or an Affiliate thereof.  The Holder 

 

	
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shall be responsible for all other tax liability that may arise as a result of holding or transferring this Warrant or receiving Warrant Shares upon exercise hereof.

7.        Replacement of Warrant.  If this Warrant is mutilated, lost, stolen or destroyed, the Company shall issue or cause to be issued in exchange and substitution for and upon cancellation hereof, or in lieu of and substitution for this Warrant, a New Warrant, but only upon receipt of evidence reasonably satisfactory to the Company of such loss, theft or destruction and customary and reasonable bond or indemnity, if requested.  Applicants for a New Warrant under such circumstances shall also comply with such other reasonable regulations and procedures and pay such other reasonable third-party costs as the Company may prescribe.

8.         Reservation of Warrant Shares.  The Company covenants that it will at all times reserve and keep available out of the aggregate of its authorized but unissued and otherwise unreserved Common Stock, solely for the purpose of enabling it to issue Warrant Shares upon exercise of this Warrant as herein provided, the number of Warrant Shares which are then issuable and deliverable upon the exercise of this entire Warrant, free from preemptive rights or any other contingent purchase rights of persons other than the Holder (taking into account the adjustments and restrictions of Section 9). The Company covenants that all Warrant Shares so issuable and deliverable shall, upon issuance and the payment of the applicable Exercise Price in accordance with the terms
hereof, be duly and validly authorized, issued and fully paid and nonassessable. The Company will take all such actions as may be necessary to assure that such shares of Common Stock may be issued as provided herein without violation of any applicable law or regulation, or of any requirements of any securities exchange or automated quotation system upon which the Common Stock may be listed.

9.         Certain Adjustments.  The Exercise Price and number of Warrant Shares issuable upon exercise of this Warrant are subject to adjustment from time to time as set forth in this Section 9.

(a)        Stock Dividends and Splits.  If the Company, at any time while this Warrant is outstanding, (i) pays a stock dividend on its Common Stock or otherwise makes a distribution on any class of capital stock that is payable in shares of Common Stock, (ii) subdivides outstanding shares of Common Stock into a larger number of shares, or (iii) combines outstanding shares of Common Stock into a smaller number of shares, then in each such case the Exercise Price shall be multiplied by a fraction of which the numerator shall be the number of shares of Common Stock outstanding immediately before such event and of which the denominator shall be the number of shares of Common Stock outstanding immediately after such event.  Any adjustment made pursuant to clause (i) of this paragraph shall become effective immediately
after the record date for the determination of stockholders entitled to receive such dividend or distribution, and any adjustment pursuant to clause (ii) or (iii) of this paragraph shall become effective immediately after the effective date of such subdivision or combination.

(b)      Pro Rata Distributions.  If the Company, at any time while this Warrant is outstanding, distributes to all holders of Common Stock (i) evidences of its indebtedness, (ii) any security (other than a distribution of Common Stock covered by the preceding paragraph), (iii) rights or warrants to subscribe for or purchase any security, or (iv) any other asset (in each case, “Distributed Property”), then in each such case the Exercise Price in effect immediately 

 

	
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prior to the record date fixed for determination of stockholders entitled to receive such distribution shall be adjusted (effective on such record date) to equal the product of such Exercise Price times a fraction of which the denominator shall be the average of the Closing Prices for the five Trading Days immediately prior to (but not including) such record date and of which the numerator shall be the average of the Closing Prices for the five Trading Days immediately after (but not including) such record date. As an alternative to the foregoing adjustment to the Exercise Price, at the request of the Holder delivered no later than three days prior to such distribution, the Company will deliver to such Holder on the effective date of such distribution, the Distributed Property that such Holder would have been entitled to receive in respect of the Warrant Shares for which this Warrant could have been
exercised immediately prior to such record date.  If such Distributed Property is not delivered to a Holder pursuant to the preceding sentence, then upon expiration of or any exercise of the Warrant that occurs after such record date, such Holder shall remain entitled to receive, in addition to the Warrant Shares otherwise issuable upon such exercise (if applicable), such Distributed Property.

(c)       Fundamental Transactions.  If, at any time while this Warrant is outstanding, (i) the Company effects any merger or consolidation of the Company with or into another Person and the Company is not the surviving party, (ii) the Company effects any sale of all or substantially all of its assets in one or a series of related transactions, (iii) any tender offer or exchange offer (whether by the Company or another Person) is completed pursuant to which holders of Common Stock are permitted to tender or exchange their shares for other securities, cash or property, or (iv) the Company effects any reclassification of the Common Stock or any compulsory share exchange pursuant to which the Common Stock is effectively converted into or exchanged for other securities, cash or property (other than as a result of a subdivision
or combination of shares of Common Stock covered by Section 9(a) above) (in any such case, a “Fundamental Transaction”), then the Holder shall have the right thereafter to receive, upon exercise of this Warrant, the same amount and kind of securities, cash or property as it would have been entitled to receive upon the occurrence of such Fundamental Transaction if it had been, immediately prior to such Fundamental Transaction, the holder of the number of Warrant Shares then issuable upon exercise in full of this Warrant (the “Alternate Consideration”).  The aggregate Exercise Price for this Warrant will not be affected by any such Fundamental Transaction, but the Company shall apportion such aggregate Exercise Price among the Alternate Consideration in a reasonable manner reflecting the relative value of any different components of the Alternate Consideration.  If holders
of Common Stock are given any choice as to the securities, cash or property to be received in a Fundamental Transaction, then the Holder shall be given the same choice as to the Alternate Consideration it receives upon any exercise of this Warrant following such Fundamental Transaction.  In the event of a Fundamental Transaction, the Company or the successor or purchasing Person, as the case may be, shall execute with the Holder a written agreement providing that:

 

 (x)            this Warrant shall thereafter entitle the Holder to purchase the Alternate Consideration in accordance with this section 9(c), 

 

 (y)            in the case of any such successor or purchasing Person, upon such consolidation, merger, statutory exchange, combination, sale or conveyance such successor or purchasing Person shall be jointly and severally liable with the Company for 

 

	
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the performance of all of the Company's obligations under this Warrant and the Purchase Agreement, and 

 

 (z)             if registration or qualification is required under the Exchange Act or applicable state law for the public resale by the Holder of shares of stock and other securities so issuable upon exercise of this Warrant, all rights applicable to registration of the Common Stock issuable upon exercise of this Warrant shall apply to the Alternate Consideration.  

 

If, in the case of any Fundamental Transaction, the Alternate Consideration includes shares of stock, other securities, other property or assets of a Person other than the Company or any such successor or purchasing Person, as the case may be, in such Fundamental Transaction, then such written agreement shall also be executed by such other Person and shall contain such additional provisions to protect the interests of the Holder as the Board of Directors of the Company shall reasonably consider necessary by reason of the foregoing.  At the Holder’s request, any successor to the Company or surviving entity in such Fundamental Transaction shall issue to the Holder a new warrant consistent with the foregoing provisions and evidencing the Holder’s right to purchase the Alternate Consideration for the aggregate Exercise Price upon exercise thereof.  The terms of any agreement
pursuant to which a Fundamental Transaction is effected shall include terms requiring any such successor or surviving entity to comply with the provisions of this paragraph (c) and insuring that the Warrant (or any such replacement security) will be similarly adjusted upon any subsequent transaction analogous to a Fundamental Transaction. If any Fundamental Transaction constitutes or results in a “Rule 13e-3 transaction” as defined in Rule 13e-3 under the Exchange Act with respect to the Company in which the consideration issued consists principally of cash or stock in a non-public company, the Company (or any such successor or surviving entity) will purchase the Warrant from the Holder for a purchase price, payable in cash within five Trading Days after such request (or, if later, on the effective date of the Fundamental Transaction), equal to the Black-Scholes value of the remaining unexercised portion of this Warrant on the date of such request.

 

	
            (d)  
 	
            Subsequent Equity Sales.
 

(i)         If, at any time while this Warrant is outstanding, the Company or any Subsidiary issues additional shares of Common Stock or rights, warrants, options or other securities or debt convertible, exercisable or exchangeable for shares of Common Stock or otherwise entitling any Person to acquire shares of Common Stock (collectively, “Common Stock Equivalents”) at a price to the Company per share of Common Stock (the “Effective Price”) less than the closing bid price for the Company’s Common Stock on the date hereof (as adjusted for stock splits, stock dividends, stock combinations and other similar events and transactions) (the “Bid Price”), then
the Exercise Price shall be reduced to equal the product of (A) the Exercise Price in effect immediately prior to such issuance of shares of Common Stock or Common Stock Equivalents times (B) a fraction, the numerator of which is the sum of (1) the number of shares of Common Stock outstanding immediately prior to such issuance, plus (2) the number of shares of Common Stock which the aggregate Effective Price of the shares of Common Stock 

 

	
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issued (or deemed to be issued) would purchase at the Bid Price, and the denominator of which is the aggregate number of shares of Common Stock outstanding or deemed to be outstanding immediately after such issuance. For purposes of this paragraph, in connection with any issuance of any Common Stock Equivalents, (A) the number of shares of Common Stock that would be issuable at conversion, exercise or exchange of such Common Stock Equivalents on the date of issuance (the “Deemed Number”) shall be deemed to be outstanding upon issuance of such Common Stock Equivalents, (B) the Effective Price applicable to such Common Stock shall equal the minimum dollar value of consideration payable to the Company to purchase such Common Stock Equivalents and to convert, exercise or exchange them into Common Stock (net of any discounts, fees,
commissions and other expenses), divided by the Deemed Number, and (C) no further adjustment shall be made to the Exercise Price upon the actual issuance of Common Stock upon conversion, exercise or exchange of such Common Stock Equivalents. The Effective Price of Common Stock or Common Stock Equivalents issued in any transaction in which more than one type of securities are issued shall give effect to the allocation by the Company of the aggregate amount paid for such securities issued in such transaction.

(ii)         Notwithstanding the foregoing, no adjustment will be made under this paragraph in respect of any Excluded Stock.

(e)       Number of Warrant Shares.  Simultaneously with any adjustments to the Exercise Price pursuant to paragraphs (a), (b) or (d) of this Section, the number of Warrant Shares that may be purchased upon exercise of this Warrant shall be increased or decreased proportionately, so that after such adjustment the aggregate Exercise Price payable hereunder for the increased or decreased number of Warrant Shares shall be the same as the aggregate Exercise Price in effect immediately prior to such adjustment.

(f)        Calculations.  All calculations under this Section 9 shall be made to the nearest cent or the nearest 1/100th of a share, as applicable.  The number of shares of Common Stock outstanding at any given time shall not include shares owned or held by or for the account of the Company, and the disposition of any such shares shall be considered an issue or sale of Common Stock.

(g)       Notice of Adjustments.  Upon the occurrence of each adjustment pursuant to this Section 9, the Company at its expense will promptly compute such adjustment in accordance with the terms of this Warrant and prepare a certificate setting forth such adjustment, including a statement of the adjusted Exercise Price and adjusted number or type of Warrant Shares or other securities issuable upon exercise of this Warrant (as applicable), describing the transactions giving rise to such adjustments and showing in detail the facts upon which such adjustment is based.  Upon written request, the Company will promptly deliver a copy of each such certificate to the Holder and to the Company’s Transfer Agent.

(h)        Notice of Corporate Events.  If the Company (i) declares a dividend or any other distribution of cash, securities or other property in respect of its Common Stock, including without limitation any granting of rights or warrants to subscribe for or purchase any capital stock of the Company or any Subsidiary, (ii) authorizes or approves, enters into any agreement 

 

	
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contemplating or solicits stockholder approval for any Fundamental Transaction or (iii) authorizes the voluntary dissolution, liquidation or winding up of the affairs of the Company, then the Company shall deliver to the Holder a notice describing the material terms and conditions of such transaction, at least 20 calendar days prior to the applicable record or effective date on which a Person would need to hold Common Stock in order to participate in or vote with respect to such transaction, and the Company will take all steps reasonably necessary in order to insure that the Holder is given the practical opportunity to exercise this Warrant prior to such time so as to participate in or vote with respect to such transaction; provided, however, that the failure to deliver such notice or any defect therein shall not affect the validity of the corporate action required to be described in such notice. 

10.      Payment of Exercise Price.  The Holder shall pay the Exercise Price in immediately available funds; provided, however, if at anytime after the Required Effectiveness Date there is no effective Registration Statement registering, or no current prospectus available for, the resale of the Warrant Shares by the Holder, the Holder may satisfy its obligation to pay the Exercise Price through a “cashless exercise,” in which event the Company shall issue to the Holder the number of Warrant Shares determined as follows:

	
             
 	
            X = Y [(A-B)/A]
 
	
            where:
 	
             
 
	
             
 	
            X = the number of Warrant Shares to be issued to the Holder.
 
	
             
 	
             
 
	
             
 	
            Y = the number of Warrant Shares with respect to which this Warrant is being exercised.
 
	
             
 	
             
 
	
             
 	
            A = the arithmetic average of the Closing Prices for the five Trading Days immediately prior to (but not including) the Exercise Date.
 
	
             
 	
             
 
	
             
 	
            B = the Exercise Price.
 

 

For purposes of Rule 144 promulgated under the Securities Act, it is intended, understood and acknowledged that the Warrant Shares issued in a cashless exercise transaction shall be deemed to have been acquired by the Holder, and the holding period for the Warrant Shares shall be deemed to have commenced, on the date this Warrant was originally issued pursuant to the Purchase Agreement.

11.       Limitation on Exercise. (a) Notwithstanding anything to the contrary contained herein, the number of shares of Common Stock that may be acquired by the Holder upon any exercise of this Warrant (or otherwise in respect hereof) shall be limited to the extent necessary to insure that, following such exercise (or other issuance), the total number of shares of Common Stock then beneficially owned by such Holder and its Affiliates and any other Persons whose beneficial ownership of Common Stock would be aggregated with the Holder’s for purposes of Section 13(d) of the Exchange Act, does not exceed 4.999%  (the “Threshold Percentage”) or 9.999% (the “Maximum Percentage”) of the total number of issued and
outstanding shares of Common Stock (including for such purpose the shares of Common Stock issuable upon such exercise).  For such purposes, beneficial ownership shall be determined in accordance with 

 

	
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Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder.  Each delivery of an Exercise Notice hereunder will constitute a representation by the Holder that it has evaluated the limitations set forth in this paragraph and determined that issuance of the full number of Warrant Shares requested in such Exercise Notice is permitted under this paragraph.  The Company’s obligation to issue shares of Common Stock in excess of the limitation referred to in this Section shall be suspended (and shall not terminate or expire notwithstanding any contrary provisions hereof) until such time, if any, as such shares of Common Stock may be issued in compliance with such limitation.  By written notice to the Company, the Holder shall have the right (x) at any time and from time to time to reduce its Maximum Percentage immediately upon notice to the Company in the event and only to the
extent that Section 16 of the Exchange Act or the rules promulgated thereunder (or any successor statute or rules) is changed to reduce the beneficial ownership percentage threshold thereunder to a percentage less than 9.999% and (y) at any time and from time to time, to waive the provisions of this Section insofar as they relate to the Threshold Percentage or to increase or decrease its Threshold Percentage (but not in excess of the Maximum Percentage) unless the Holder shall have, by written instrument delivered to the Company, irrevocably waived its rights to so increase or decrease its Threshold Percentage, but (i) any such waiver, increase or decrease will not be effective until the 61st day after such notice is delivered to the Company, and (ii) any such waiver or increase or decrease will apply only to the Holder and not to any other holder of Warrants.

(b)        Notwithstanding anything to the contrary contained herein the maximum number of shares of Common Stock that the Company may issue pursuant to the Transaction Documents at an effective purchase price less than the Closing Price on the Trading Day immediately preceding the Closing Date equals 19.99% of the outstanding shares of Common Stock immediately preceding the Closing Date (the “Issuable Maximum”), unless the Company obtains shareholder approval in accordance with the rules and regulations of such Trading Market.  If, at the time any Holder requests an exercise of any of the Warrants, the Actual Minimum (excluding any shares issued or issuable at an effective purchase price in excess of the Closing Price on the Trading Day immediately preceding the Closing Date) exceeds the
Issuable Maximum (and if the Company has not previously obtained the required shareholder approval), then the Company shall issue to the Holder requesting such exercise a number of shares of Common Stock not exceeding such Holder’s pro-rata portion of the Issuable Maximum (based on such Holder’s share (vis-à-vis other Holders) of the aggregate purchase price paid under the Purchase Agreement and taking into account any Warrant Shares previously issued to such Holder).  For the purposes hereof, “Actual Minimum” shall mean, as of any date, the maximum aggregate number of shares of Common Stock then issued or potentially issuable in the future pursuant to the Transaction Documents, including any Underlying Shares issuable upon exercise in full of all Warrants, without giving effect to any limits on the number of shares of Common Stock that may be owned by a Holder at any one time.

 

12.       Fractional Shares.  The Company shall not be required to issue or cause to be issued fractional Warrant Shares on the exercise of this Warrant.  If any fraction of a Warrant Share would, except for the provisions of this Section, be issuable upon exercise of this Warrant, the number of Warrant Shares to be issued will be rounded up to the nearest whole share.

 

 

	
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13.       Notices.  Any and all notices or other communications or deliveries hereunder (including without limitation any Exercise Notice) shall be in writing and shall be deemed given and effective on the earliest of (i) the date of transmission, if such notice or communication is delivered via facsimile at the facsimile number specified in this Section prior to 6:30 p.m. (New York City time) on a Trading Day, (ii) the next Trading Day after the date of transmission, if such notice or communication is delivered via facsimile at the facsimile number specified in this Section on a day that is not a Trading Day or later than 6:30 p.m. (New York City time) on any Trading Day, (iii) the Trading Day following the date of mailing, if sent by nationally recognized overnight courier service, or (iv) upon actual receipt by the party to
whom such notice is required to be given.  The address for such notices or communications shall be as set forth in the Purchase Agreement.

14.       Warrant Agent.  The Company shall serve as warrant agent under this Warrant.  Upon 30 days' notice to the Holder, the Company may appoint a new warrant agent.  Any corporation into which the Company or any new warrant agent may be merged or any corporation resulting from any consolidation to which the Company or any new warrant agent shall be a party or any corporation to which the Company or any new warrant agent transfers substantially all of its corporate trust or shareholders services business shall be a successor warrant agent under this Warrant without any further act.  Any such successor warrant agent shall promptly cause notice of its succession as warrant agent to be mailed (by first class mail, postage prepaid) to the Holder at the Holder's last address as shown on the Warrant Register.

	
            15.  
 	
            Miscellaneous.
 

(a)        Subject to the restrictions on transfer set forth on the first page hereof, this Warrant may be assigned by the Holder. This Warrant may not be assigned by the Company except to a successor in the event of a Fundamental Transaction. This Warrant shall be binding on and inure to the benefit of the parties hereto and their respective successors and assigns.  Subject to the preceding sentence, nothing in this Warrant shall be construed to give to any Person other than the Company and the Holder any legal or equitable right, remedy or cause of action under this Warrant.  This Warrant may be amended only in writing signed by the Company and the Holder and their successors and assigns.

(b)       The Company will not, by amendment of its governing documents or through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Warrant, but will at all times in good faith assist in the carrying out of all such terms and in the taking of all such action as may be necessary or appropriate in order to protect the rights of the Holder against impairment.  Without limiting the generality of the foregoing, the Company (i) will not increase the par value of any Warrant Shares above the amount payable therefor on such exercise, (ii) will take all such action as may be reasonably necessary or appropriate in order that the Company may validly and legally issue fully paid and nonassessable Warrant Shares on the
exercise of this Warrant, and (iii) will not close its shareholder books or records in any manner which interferes with the timely exercise of this Warrant.

 

 

	
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(C)       GOVERNING LAW; VENUE; WAIVER OF JURY TRIAL.  ALL QUESTIONS CONCERNING THE CONSTRUCTION, VALIDITY, ENFORCEMENT AND INTERPRETATION OF THIS WARRANT  SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK,
WITHOUT REGARD TO THE PRINCIPLES OF CONFLICTS OF LAW THEREOF.  EACH PARTY AGREES THAT ALL LEGAL PROCEEDINGS CONCERNING THE INTERPRETATIONS, ENFORCEMENT AND DEFENSE OF THE TRANSACTIONS CONTEMPLATED BY ANY OF THE TRANSACTION DOCUMENTS (WHETHER BROUGHT AGAINST A PARTY HERETO OR ITS RESPECTIVE AFFILIATES, DIRECTORS, OFFICERS,
SHAREHOLDERS, EMPLOYEES OR AGENTS) SHALL BE COMMENCED EXCLUSIVELY IN THE STATE AND FEDERAL COURTS SITTING IN THE CITY OF NEW YORK, BOROUGH OF MANHATTAN.  EACH PARTY HERETO HEREBY IRREVOCABLY SUBMITS TO THE EXCLUSIVE JURISDICTION OF THE STATE AND FEDERAL COURTS SITTING IN THE CITY OF NEW YORK,
BOROUGH OF MANHATTAN FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION HEREWITH OR WITH ANY TRANSACTION CONTEMPLATED HEREBY OR DISCUSSED HEREIN (INCLUDING WITH RESPECT TO THE ENFORCEMENT OF ANY OF THIS WARRANT), AND HEREBY IRREVOCABLY WAIVES, AND AGREES NOT TO ASSERT IN ANY SUIT,
ACTION OR PROCEEDING, ANY CLAIM THAT IT IS NOT PERSONALLY SUBJECT TO THE JURISDICTION OF ANY SUCH COURT, THAT SUCH SUIT, ACTION OR PROCEEDING IS IMPROPER.  EACH PARTY HERETO HEREBY IRREVOCABLY WAIVES PERSONAL SERVICE OF PROCESS AND CONSENTS TO PROCESS BEING SERVED IN ANY SUCH SUIT, ACTION
OR PROCEEDING BY MAILING A COPY THEREOF VIA REGISTERED OR CERTIFIED MAIL OR OVERNIGHT DELIVERY (WITH EVIDENCE OF DELIVERY) TO SUCH PARTY AT THE ADDRESS IN EFFECT FOR NOTICES TO IT UNDER THIS WARRANT AND AGREES THAT SUCH SERVICE SHALL CONSTITUTE GOOD AND SUFFICIENT SERVICE OF PROCESS
AND NOTICE THEREOF.  NOTHING CONTAINED HEREIN SHALL BE DEEMED TO LIMIT IN ANY WAY ANY RIGHT TO SERVE PROCESS IN ANY MANNER PERMITTED BY LAW. EACH PARTY HERETO HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY AND ALL RIGHT TO TRIAL BY JURY IN
ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS WARRANT OR ANY OF THE TRANSACTION DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY. IF EITHER PARTY SHALL COMMENCE AN ACTION OR PROCEEDING TO ENFORCE ANY PROVISIONS OF THIS WARRANT OR ANY TRANSACTION DOCUMENT, THEN THE
PREVAILING PARTY IN SUCH ACTION OR PROCEEDING SHALL BE REIMBURSED BY THE OTHER PARTY FOR ITS REASONABLE ATTORNEYS FEES AND OTHER REASONABLE COSTS AND EXPENSES INCURRED WITH THE INVESTIGATION, PREPARATION AND PROSECUTION OF SUCH ACTION OR PROCEEDING.

(d)       The headings herein are for convenience only, do not constitute a part of this Warrant and shall not be deemed to limit or affect any of the provisions hereof.

(e)        In case any one or more of the provisions of this Warrant shall be invalid or unenforceable in any respect, the validity and enforceability of the remaining terms and provisions of this Warrant shall not in any way be affected or impaired thereby and the parties will attempt in good faith to agree upon a valid and enforceable provision which shall be a commercially reasonable substitute therefor, and upon so agreeing, shall incorporate such substitute provision in this Warrant.

(f)         The holder of this Warrant shall have no rights as a stockholder of the Company by virtue of holding this Warrant.

 

 

 

	
            - 11 -
 

 

 

 

IN WITNESS WHEREOF, the Company has caused this Warrant to be duly executed by its authorized officer as of the date first indicated above.

	
             
 
	
            BEACON POWER CORPORATION
 
	
             
 
	
             
 
	
            By:                                                                                                                                                                                                                                                                          
 
	
            Name:                                                                                                                                                                                                                                                      
 
	
            Title:                                                                                                                                                                                                                                                                 
 

 

	
            - 12 -
 

 

 

 

FORM OF EXERCISE NOTICE

(To be executed by the Holder to exercise the right to purchase shares of Common Stock under the foregoing Warrant)

To:  Beacon Power Corporation

The undersigned is the Holder of Warrant No. _______ (the “Warrant”) issued by Beacon Power Corporation, a Delaware corporation (the “Company”).  Capitalized terms used herein and not otherwise defined have the respective meanings set forth in the Warrant.

	
            1.    
 	
            The Warrant is currently exercisable to purchase a total of ______________ Warrant Shares.
 
	
            2.    
 	
            The undersigned Holder hereby exercises its right to purchase _________________ Warrant Shares pursuant to the Warrant.
 

	
            3.  
 	
            The Holder intends that payment of the Exercise Price shall be made as (check one):
 
	
             
	
            ____
 	
            “Cash Exercise” under Section 10
 	
             

	
             
	
            ____
 	
            “Cashless Exercise” under Section 10 (if permitted)
 	
             

						

	
            4.    
 	
            If the holder has elected a Cash Exercise, the holder shall pay the sum of $____________ to the Company in accordance with the terms of the Warrant.
 
	
            5.    
 	
            Pursuant to this exercise, the Company shall deliver to the holder _______________ Warrant Shares in accordance with the terms of the Warrant.
 

6.          The Holder hereby certifies to the Company (and acknowledges that the Company and its counsel will rely upon this certification for purposes of determining compliance with the registration provisions of the Securities Act of 1933, as amended ("The Act")) that the Holder is an "accredited investor" as that term is defined in Rule 501 under The Act.  

 

7.          Following this exercise, the Warrant shall be exercisable to purchase a total of ______________ Warrant Shares.

	
             
 	
             
 	
             
 
	
            Dated:              ,                                                                                                                                                                 
 	
             
 	
            Name of Holder:
 
	
             
 	
             
 	
             
 
	
             
 	
             
 	
            (Print)                                                                                                                                                                                                                                        
 
	
             
 	
             
 	
             
 
	
             
 	
             
 	
            By:                                                                                                                                                                                                                                                             
 
	
             
 	
             
 	
            Name:                                                                                                                                                                                                                                         
 
	
             
 	
             
 	
            Title:                                                                                                                                                                                                                                                    
 
	
             
 	
             
 	
             
 
	
             
 	
             
 	
            (Signature must conform in all respects to name of holder as specified on the face of the Warrant)
 

 

 

 

 

 

FORM OF ASSIGNMENT

[To be completed and signed only upon transfer of Warrant]

FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto ________________________________ the right represented by the within Warrant to purchase  ____________ shares of Common Stock of Beacon Power Corporation to which the within Warrant relates and appoints ________________ attorney to transfer said right on the books of Beacon Power Corporation with full power of substitution in the premises.

	
             
 	
             
 
	
             
 	
             
 
	
            Dated:              ,                                                                                                                                                                 
 	
             
 
	
             
 	
             
 
	
             
 	
                                                                                                                                                                                                                                                                                                                     
 
	
             
 	
            (Signature must conform in all respects to name of holder as specified on the face of the Warrant)
 
	
             
 	
             
 
	
             
 	
                                                                                                                                                                                                                                                                                             
 
	
             
 	
            Address of Transferee
 
	
             
 	
             
 
	
             
 	
                                                                                                                                                                                                                                                                                             
 
	
             
 	
             
 
	
             
 	
                                                                                                                                                                                                                                                                                             
 
	
             
 	
             
 
	
             
 	
             
 
	
            In the presence of:
 	
             
 
	
             
 	
             
 
	
             
 	
             
 
	
                                                                                                                                                                                                                                            
 	
             
 

 

 

 

 

 

	
            - 14 -Exhibit 10.24

 

EXECUTIVE EMPLOYMENT AGREEMENT

 

This EMPLOYMENT AGREEMENT (“Agreement”) dated March 24, 2005 and
effective as of March 29, 2005 (“Effective Date”) is entered into by and
between David Z. Arakawa (“Employee”) and Hawaiian Airlines, Inc., a Hawaii
corporation (“Company”).

 

Company and Employee desire to establish Company’s right to services of
Employee, in the capacity described below, on the terms and conditions and
subject to the rights of termination hereinafter set forth, and Employee agrees
to engage in such employment on those terms and conditions.

 

In consideration of the mutual agreements hereinafter set forth,
Employee and Company have agreed and do hereby agree as follows:

 

1.                                       EMPLOYMENT
AS SENIOR VICE PRESIDENT, GENERAL COUNSEL AND CORPORATE SECRETARY (“GC”).  Company does hereby employ and engage
Employee as Senior Vice President - GC, and Employee does hereby accept and
agree to such engagement and employment.

 

a.                                       Basic
Duties.  Employee’s duties during the
Employment Period shall be to serve as Senior Vice President – GC, which shall
generally include those contained in Attachment A.  The precise scope of the duties of Employee
may be modified from time to time at the discretion of Company’s President or
his designee(s) consistent with Employee’s titles and general duties and
responsibilities hereunder.

 

b.                                      Reporting
Relationship.  Employee shall at all
times report to the President or his designee(s).

 

c.                                       Time
and Effort Expected of Employee. 
Employee shall devote full time, attention, energy and skill to the
performance of Employee’s duties for Company and for the benefit of
Company.  Furthermore, Employee shall

 

 

 

exercise due diligence and care in the performance of Employee’s duties
to Company under this Agreement.

 

2.                                       TERM
OF AGREEMENT.  The term of this
Agreement (“Term”) shall commence on the Effective Date and shall continue for
a period of two (2) years, unless terminated earlier as provided in Section 7
of this Agreement.  The term of this
Agreement may be extended upon mutual agreement in writing signed by Employee
and an authorized representative of Company. 
The period of time commencing on the Effective Date and ending on the
expiration date of the Term, or, if earlier, the date of termination of
Employee’s employment (“Termination Date”) under this or any successor
agreement shall be referred to as the “Employment Period.”

 

3.                                       COMPENSATION.

 

a.                                       BASE
SALARY.  Company shall pay Employee,
and Employee agrees to accept from Company, a base salary at the rate of TWO
HUNDRED THOUSAND DOLLARS AND NO /100THS DOLLARS ($200,000) per year
(“Base Salary”), less applicable withholdings required by law or Employee’s
benefit plans or other deductions authorized in writing by Employee to be
withheld or deducted, payable in equal semi-monthly installments in accordance
with Company’s regular payroll practices. 
Employee’s Base Salary shall be reviewed annually by Company and may be
increased, but not decreased, by Company in its sole and absolute
discretion.  Any adjusted amounts under this
Section 3.a. will thereafter become the “Base Salary” for purposes of this
Agreement.

 

c.                                       PERFORMANCE
BONUS.  In addition to the Base
Salary, Employee shall be eligible to participate during the Employment Period
in any performance bonus plan hereafter established for senior officers of
Company by the Board of Directors (the “BOD”). 
Any award to Employee under that plan shall be payable, less applicable
withholdings, in the amount, in the manner, and at the time determined by the
BOD, in its sole and absolute discretion. Company will request that the BOD
award a target bonus equal to 50% of

 

2

 

Employee’s Base Salary, with actual payment amount established annually
as a function of overall corporate performance and Employee’s performance
relative to previously established management objectives.

 

d.                                      STOCK
OPTIONS.  In addition to Base Salary,
Employee shall be eligible to participate during the Employment Period in any
stock option plan hereafter established for the senior officers of Company by
the BOD in accordance with plan terms and applicable law.  Any award to Employee under such plan shall
be made in an amount, in the manner, and at the time determined by the BOD, in
its sole and absolute discretion. 
Company will request an incoming grant of 53,000 stock options for
Employee that would vest in two equal tranches, one tranche each year, during
the Employment Period.  Additionally,
Employee will be considered for additional stock option grants if and when such
grants are awarded for other senior executives at Company.

 

e.                                       LONG
TERM INCENTIVE PLANS.  In addition to
Base Salary, Employee shall be eligible to participate during the Employment
Period in any long term incentive plans hereafter established for the senior
officers of Company by the BOD in accordance with plan terms and applicable
law.  Any award to Employee under such
plan shall be made in an amount, in the manner, and at the time determined by
the BOD, in its sole and absolute discretion.

 

f.                                         401(k)
PLAN.  Employee shall be eligible to
participate in a 401(k) or analogous plan (the “401(k) Plan”) according to its
terms, which shall be developed by Company, subject to approval of the BOD, and
which shall not occur before Company’s emergence from Chapter 11 bankruptcy.

 

4.                                       FRINGE
BENEFITS.  During his employment
under this Agreement, Employee shall be eligible to participate in, and to be
covered by, such employee benefit plans effective generally with respect to
Company’s senior officers as those plans may be amended, supplemented, replaced
or terminated from time to time, to the extent Employee is eligible under the
terms of such

 

3

 

plans; and Employee shall be eligible to receive such other fringe
benefits as may be granted to Employee from time to time by the BOD or as
delegated by it in its sole and absolute discretion.  In addition to the foregoing benefits,
Employee shall also receive the following individual benefits:

 

a.                                       TRAVEL
BENEFITS.  During the Employment
Period, Employee and Employee’s spouse and eligible dependents shall be
entitled to travel benefits on Company flights (but not charter flights) at a
level and under procedures commensurate with the senior officer level, subject
to IRS requirements, and pursuant to Company policy.  Employee and Employee’s spouse and eligible
dependents of Employee shall be entitled to travel benefits on other airlines
consistent with Company’s interline transportation agreements.

 

b.                                      EXECUTIVE
LONG-TERM DISABILITY INSURANCE PLAN. 
Subject to the applicable waiting periods, Employee will be included, at
Company’s expense, in Company’s Executive Long-Term Disability Insurance Plan,
as it may be amended, supplemented, replaced or terminated from time to time.

 

c.                                       BUSINESS
EXPENSES.  Company shall reimburse
Employee for any and all reasonable out-of-pocket, necessary, customary, and
usual expenses, properly receipted in accordance with Company policies,
incurred by Employee on behalf of Company, provided Employee properly accounts
to Company for such expenses in accordance with the rules and regulations
of the Internal Revenue Service under the Code, and in accordance with the
standard policies and procedures of Company to reimburse business expenses,
which obligation shall survive the termination of this Agreement.

 

d.                                      VACATIONS.  Company will provide reasonable vacations
authorized by the President subject to requirements of operations and as duties
may permit, provided that unused vacation will not be accrued and Company will
not make payment to Employee for unutilized vacation.

 

e.                                       SICK
LEAVE.  Reasonable sick leave for
illness or injury will also be

 

4

 

provided, provided that unused sick leave will not be accrued and
Company will not make payment to Employee for unutilized sick leave.

 

5.                                       CONFIDENTIAL
INFORMATION.  Employee recognizes
that by reason of Employee’s employment by and service to Company, Employee
will occupy a position of trust with respect to business and technical
information of a secret or confidential nature which is the property of Company
which will be imparted to Employee from time to time in the course of the
performance of Employee’s duties hereunder (the “Confidential Information”).  Employee acknowledges that such information
is Company’s valuable and unique asset and agrees that Employee shall not,
during or after the Term of this Agreement, use or disclose directly or
indirectly any of Company’s Confidential Information to any person, except that
Employee may use and disclose to Company’s authorized personnel such
Confidential Information as is reasonably appropriate in the course of the
performance of Employee’s duties hereunder. 
Company’s Confidential Information shall include all information and
knowledge of any nature and in any form relating to Company including, but not
limited to, business plans; development projects; computer software and related
documentation and materials; designs, practices, processes, methods, know-how
and other facts relating to Company’s business; and advertising, promotions,
financial matters, sales and profit figures, and customers or customer lists.

 

6.                                       TERMINATION
OF EMPLOYEE’S EMPLOYMENT.

 

a.                                       DEATH.  If Employee dies while employed by Company,
Employee’s employment shall immediately terminate.  Company’s obligation to pay Employee’s Base
Salary shall cease as of the date of Employee’s death. Thereafter, Employee’s
beneficiaries or estate shall receive benefits, if any, in accordance with
Company’s retirement, insurance, and other applicable benefit plans then in
effect.

 

b.                                      DISABILITY.  If Employee (i) becomes Disabled, as
defined in Company’s Executive Long-Term Disability Plan, (ii) he cannot
be reasonably

 

5

 

accommodated by Company, and (iii) he commences to receive
long-term disability benefits, Employee’s employment may be terminated by
Company or Employee.  During any period
prior to such termination during which Employee is absent from the full-time performance
of Employee’s duties with Company due to Disability, Company shall continue to
pay Employee the Base Salary at the rate in effect at the commencement of such
period of Disability.  Any such payments
made to Employee shall be reduced by amounts received from disability insurance
obtained or provided by Company, and by the amounts of any benefits payable to
Employee, with respect to such period, under Company’s Executive Long-Term
Disability Plan.  Subsequent to the
termination provided for in this Section 6.b., Employee’s eligibility for
any benefits shall be determined under Company’s retirement, insurance, and
other applicable benefit plans then in effect in accordance with the terms of
such plans.

 

c.                                       TERMINATION
BY COMPANY FOR CAUSE.  Company may
terminate Employee’s employment under this Agreement for “Cause” at any time
prior to expiration of the Term of the Agreement, only upon the occurrence of
any one or more of the following events:

 

(i)                                     The
material breach of this Agreement by Employee, including without limitation,
repeated neglect of Employee’s duties, Employee’s repeated material lack of
diligence and attention in performing services as provided in this Agreement,
or Employee’s repeated failure to implement or adhere to Company policies.

 

(ii)                                  Conduct
of a criminal nature that may have an adverse impact on Company’s reputation
and standing in the community.

 

(iii)                               Fraudulent
conduct in connection with the business affairs of Company, regardless of
whether said conduct is designed to defraud Company or others.

 

(iv)                              Conduct at any time or
place which is detrimental to

 

6

 

Hawaiian Airlines’ reputation and/or goodwill
among its customers and/or the community as determined by the company.

 

(v)                                 Conduct
in violation of the Company’s and/or its parent company’s corporate compliance
rules, practices, procedures and ethical guidelines.

 

(vi)                              Material
violation(s) of Company’s House Rules, a
copy of which has been provided to Employee by Company.

 

In the event of termination for Cause, Company’s obligation to pay
Employee’s Base Salary and all benefits shall cease as of the Termination
Date.  If Employee’s employment is
terminated for Cause, Employee’s employment may be terminated immediately
without any advance written notice.

 

d.                                      TERMINATION
BY COMPANY WITHOUT CAUSE.  Company
shall have the right to terminate Employee’s employment prior to the expiration
of the Term, at any time, without Cause. 
In the event Company shall so elect to terminate Employee’s employment
without Cause, Employee shall be entitled to only such payments as may be
required under the terms of Section 7 of this Agreement.  Employee agrees that in the event of his
termination without Cause, the Term of this Agreement will be deemed to be the
period between the Effective Date and the Termination Date.

 

e.                                       TERMINATION
AT END OF TERM.  If Employee
continues to work through the end of the Term, this Agreement will expire at
the end of the Term, and Company’s obligation to pay Employee’s compensation
and fringe benefits shall cease as of the end of the Term.

 

f.                                         RESIGNATION
BY EMPLOYEE.  If Employee voluntarily
resigns his employment at any time during the term of this Agreement, Company’s
obligation to pay Employee’s compensation and fringe benefits shall cease as of
the date of resignation.  Employee agrees
to provide Company with at least thirty (30) days written notice prior to the
effective date of resignation.

 

7

 

Company may elect, in its sole and absolute discretion, to relieve
Employee of his employment duties for all or any part of the thirty (30) day
notice period. However, Employee shall continue to receive compensation and
benefits under this Agreement through the effective date of his resignation.

 

g.                                      RETURN
OF COMPANY PROPERTY.  Upon
termination, Employee will immediately return all Company issued items,
including, but not limited to Company identification badge(s), access card(s),
AOA badge(s), travel card, Friendship Travel Passes (FTPs), computer equipment
(hardware/software), disks and/or electronic data, fax machine(s), pager(s),
company credit card(s), company telephone card(s), access code(s), key(s),
company files, work product, manuals, customer lists, company documents, financial
information, operational information, plans, memoranda, notes, and
correspondence.

 

h.                                      PAYMENT
OF ACCRUED OBLIGATIONS. 
Notwithstanding anything in this Section 6 to the contrary, upon
termination of Employee’s employment for any reason, Company shall pay
Employee: (i) Employee’s Base Salary earned and unpaid through the
Termination Date, if any, and (ii) unreimbursed expenses payable in
accordance with Company policy (“Accrued Expenses”).  The payment of Accrued Expenses shall be made
within ten (10) days following Termination Date.

 

7.                                       PAYMENTS
UPON TERMINATION WITHOUT CAUSE IN EXCHANGE FOR AGREEMENT TO WAIVE ALL CLAIMS.

 

a.                                       If,
during the Term of this Agreement, Employee’s employment is terminated by
Company without Cause, in addition to Accrued Obligations, Employee shall be
entitled to the following payments in exchange for a valid release and waiver
of all claims through the Termination Date that Employee may have at that time
against Company or related persons or entities (“Waiver of All Claims”):
Company shall pay to Employee an amount equal to Employee’s Base Salary and
medical/dental premiums for one year (“the Settlement Sum”).  The Settlement Sum shall be paid in a lump
sum, less applicable withholdings,

 

8

 

on the Termination Date.  Company
shall provide all information for continuation of fringe benefits to the extent
required by law.

 

b.                                      If
Employee fails or refuses to agree to a valid Waiver of All Claims through the
Termination Date, Employee will not be paid any amounts under this Section 7.

 

c.                                       TAX
WITHHOLDING OBLIGATIONS.  At the time
that the Waiver of All Claims is executed, the parties will determine the
extent to which any of the payments provided for in this Section 7 may be
subject to federal, state, or local tax or other withholdings.  Those tax/withholding obligations will be
detailed in the Waiver of All Claims.

 

d.                                      NO
OTHER COMPENSATION OR BENEFITS POST TERMINATION.  No other payment, compensation or fringe
benefit other than as described in this Section 7 and in Section 4.b.
shall be provided to, or owed to, Employee after termination with or without
Cause.

 

e.                                       Employee
shall not be required in any way to mitigate the amount of any payment provided
for in this Section 7, including, but not limited to, by seeking other
employment, nor shall the amount of any payment provided for in this Section 7
be reduced by any compensation earned by Employee as the result of employment
with another employer after the Termination Date, or otherwise.

 

8.                                       NONCOMPETITION
PROVISIONS.

 

a.                                       NONCOMPETITION.  During the Term of this Agreement and for a
period of twelve (12) months commencing on the Termination Date, Employee
agrees and covenants that Employee shall not, directly or indirectly, undertake
to become an employee, officer, partner, consultant or otherwise be connected
with any entity (i) for which, at such time, in excess of 10% of its
revenues are derived from airline operations (including without limitation,
passenger,

 

9

 

charter, military, cargo, or other airline operations) within Hawaii
and/or between Hawaii and the mainland United States, or (ii) in which
Employee’s specific duties and responsibilities are in direct competition with
Company either within Hawaii or on routes to and from Hawaii serviced by
Company. Employee acknowledges and agrees that any breach of this
non-competition provision shall entitle Employer to immediately terminate any
payments to him pursuant to Section 7 of this Agreement.  In addition, Employee agrees that any breach
or threatened breach of this provision 8.a. will entitle Company to an
injunction from any court having jurisdiction over Employee, it being agreed
that any such breach would irreparably harm Company.  In addition, Company will be entitled to such
damages as may be proved in court arising from such breach.

 

b.                                      NONDISPARAGEMENT.  During the Term of this Agreement and for a
period of twelve (12) months commencing on the Termination Date, Employee agrees
that he shall not make any statements that disparage or tend to disparage
Company, its products, services, officers, employees, advisers or other
business contacts.  The parties
acknowledge and agree that each act of such disparagement shall entitle the Company
to $5,000 in liquidated damages, which shall be awarded by an arbitrator
pursuant to the provisions of Section 10 of this Agreement.  In addition, Employee acknowledges that any
breach of this non-disparagement provision shall entitle Company to immediately
terminate any payments pursuant to Section 7 of this Agreement.

 

c.                                       RIGHT
TO COMPANY MATERIALS.  Employee
agrees that all styles, designs, lists, materials, books, files, reports,
correspondence, e-mails and other paper and electronically stored information,
records, and other documents (“Company Materials”) used, prepared, or made
available to Employee, shall be and shall remain the property of Company.  Upon the termination of employment or the
expiration of this Agreement, all Company Materials shall be returned
immediately to Company, and Employee shall not make or retain any copies
thereof.

 

10

 

d.                                      ANTI-SOLICITATION.  Employee promises and agrees that during the
term of this Agreement and for a period of twelve (12) months commencing on the
Termination Date, Employee will not influence or attempt to influence customers
or suppliers of Company or any of its present or future subsidiaries or
affiliates, either directly or indirectly, to divert their business to any
individual, partnership, firm, corporation or other entity then in competition
with the business of Company or any subsidiary or affiliate of Company.
Employee acknowledges and agrees that any breach of this anti-solicitation
provision shall entitle Company to immediately terminate any payments pursuant
to Section 7 of this Agreement.  In
addition, Employee agrees that each act of such solicitation shall entitle
Company to $5,000 in liquidated damages, which shall be awarded by an arbitrator
pursuant to the provisions of Section 10 of this Agreement.

 

e.                                       SOLICITING
EMPLOYEES.  During the term of this
Agreement and for a period of twelve (12) months commencing on the Termination
Date, Employee promises and agrees that Employee will not directly or
indirectly solicit any of Company’s employees to work for any business,
individual, partnership, firm, corporation, or other entity.  Employee acknowledges and agrees that any
breach of this Soliciting Employees provision shall entitle Company to immediately
terminate any payments pursuant to Section 7 of this Agreement. In
addition, Employee agrees that each act of such solicitation shall entitle
Company to $5,000 in liquidated damages, which shall be awarded by an
arbitrator pursuant to the provisions of Section 10 of this Agreement.

 

9.                                       NOTICES.  All notices,  requests, demands and
other communications hereunder shall be in writing and shall be effective upon
receipt.  All notices shall be given or
served personally or sent by facsimile or first class mail, postage prepaid,
addressed as follows:

 

If to Company:

 

Hawaiian Airlines, Inc.

 

11

 

Attn:  Senior Vice President,
People Services Group

3375 Koapaka Street, Suite G-350

Honolulu, Hawaii 96819

Phone:    808/835-3700

Fax:         808/838-6731

 

If to Employee:

 

David Z. Arakawa

99-1378 Hele Mauna Place

Aiea, HI    96701

 

or to such other address which the party receiving the notice has
notified the party giving the notice in the manner aforesaid.

 

10.                                 ARBITRATION
CLAUSE/ATTORNEY’S FEES.  Any
controversy or claim arising out of or relating to this Agreement (other than a
breach of Provision 8.a.) shall be settled by expedited arbitration
administered by Dispute Prevention and Resolution, Inc. (“DPR”) in
Honolulu, Hawaii under its rules applicable to the arbitration of
employment disputes, and judgment upon the award rendered by the arbitrator(s)
may be entered in any court having jurisdiction thereof.  In the event judicial, quasi-judicial or
arbitral determination is necessary to resolve any dispute arising as to the
parties’ rights and obligations hereunder, Company and Employee shall each bear
their respective attorney’s fees and costs associated with such dispute.

 

11.                                 TERMINATION
OF PRIOR AGREEMENTS.  This Agreement
terminates and supersedes any and all prior agreements and understandings
between the parties with respect to employment or with respect to the
compensation of Employee by Company from, and after the Effective Date.

 

12.                                 ASSIGNMENT:
SUCCESSORS.  This Agreement is
personal in its nature and neither of the parties hereto shall, without the
consent of the other, assign or

 

12

 

transfer this Agreement or any rights or obligations hereunder;
provided that, in the event of the merger, consolidation, transfer, or sale of
all or substantially all of the assets of Company with or to any other
individual or entity, this Agreement shall, subject to the provisions hereof,
be binding upon, and inure to the benefit of such successor and such successor
shall discharge and perform all the promises, covenants, duties, and
obligations of Company hereunder.

 

13.                                 GOVERNING
LAW.  This Agreement and the legal
relations thus created between the parties hereto shall be governed by and
construed under and in accordance with the laws of the State of Hawaii.

 

14.                                 ENTIRE
AGREEMENT: HEADINGS.  This Agreement
embodies the entire agreement of the parties respecting the matters within its
scope and may be modified only in writing. 
Section headings in this Agreement are included herein for
convenience of reference only and shall not constitute a part of this Agreement
for any other purpose.

 

15.                                 WAIVER;
MODIFICATION.  Company’s failure to
insist upon strict compliance with any of the terms, covenants, or conditions
hereof shall not be deemed a waiver of such term, covenant, or condition, nor
shall any waiver or relinquishment of, or failure to insist upon strict
compliance with, any right or power hereunder at any one or more times be
deemed a waiver or relinquishment of such right or power at any other time or
times.  This Agreement shall not be
modified in any respect except by a writing executed by each party hereto.

 

16.                                 SEVERABILITY.  In the event that a court of competent
jurisdiction determines that any portion of this Agreement is in violation of
any statute or public policy, only the portions of this Agreement that violate
such statute or public policy shall be stricken.  All portions of this Agreement that do not
violate any statute or public policy shall continue in full force and effect.
Further, any court order striking any portion of this Agreement shall modify
the

 

13

 

stricken terms as narrowly as possible to give as much effect as possible
to the intentions of the parties under this Agreement.

 

17.                                 INDEMNIFICATION.  Company shall indemnify and hold Employee
harmless to the maximum extent permitted by Section 415-5 of the Hawaii
Business Corporation Act, and the Restated Articles of Incorporation and
Amended Bylaws of Hawaiian Airlines, Inc. 
Company will maintain a directors and officers liability insurance
policy during the term of this Agreement, which policy shall name Employee as
an insured.

 

18.                                 COUNTERPARTS.  This Agreement may be executed in several
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.

 

14

 

19.                                 FACSIMILE
SIGNATURES.  This Agreement may be
executed by the parties by facsimile, and facsimile signatures shall be
binding.

 

IN WITNESS WHEREOF, Company has caused this Agreement to be executed by
its duly authorized officers, and Employee has hereunto signed this Agreement,
as of the date first above written.

 

 

	
  HAWAIIAN AIRLINES, INC.:

  	
  EMPLOYEE:

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
  /s/ Mark B. Dunkerley

  	
   

  	
  By:

  	
  /s/ David Z. Arakawa

  	
   

  
	
   

  	
  Mark B. Dunkerley

  	
    David Z. Arakawa

  
	
   

  	
  President and Chief Operating Officer

  	
   

  
							

 

15

 

Attachment A

 

Senior Vice President, General Counsel and
Corporate Secretary

Duties and Responsibilities

 

SUMMARY:

 

Performs complex legal work for the highest levels of Hawaiian Airlines, Inc.
(“Company”) administration.  Advises
Company’s senior leadership on legal issues of significant importance to
Company operations.  Represents the
Company in legal proceedings or supervises such representation.  Analyzes legal and regulatory issues affecting
Company operations and develops institutional policies.  Supervises and trains attorneys and other
professional legal staff assigned to him.

 

DUTIES AND RESPONSIBILITIES:

 

1.                                       Provides legal
counsel and guidance to officers and upper management on legal matters relevant
to Company; coordinates and supervises legal services for Company’s senior
administrators and executives; supervises and trains Company’s attorneys and
paralegals assigned to him; manages workloads, provides advice and guidance for
projects; assigns, supervises, and critiques legal services of Company’s
attorneys and paralegals; conducts performance appraisals; supervises and
coordinates work of outside attorneys and consults with them on sensitive legal
issues; develops and manages budgets and supervises financial management and
office operations.

 

2.                                       Drafts, reviews
and approves policies and procedures, bylaws, resolutions and other documents
related to governance, regulatory compliance, and business operations of the
Company, its facilities, and its governing boards, advisory boards and
affiliated corporate

 

16

 

entities.

 

3.                                       Anticipates and
identifies legal issues of concern to senior Company officials, and develops
legal strategies and solutions, often in situations of great financial,
political and/or public relations risk or significance, and with limited time
for assessing alternatives; provides advice to senior Company officials for
strategic planning purposes and participates in Company strategic planning.

 

4.                                       Drafts and
reviews, or supervises drafting and review, of contracts and related documents
for conduct of Company’s business, procurement of goods and services,
affiliations with other entities, confidentiality of proprietary information,
employment, leases of space and equipment, software licenses, and electronic
transmission of data; trains Company staff in contract review.

 

5.                                       Analyzes a broad
range of complex laws and regulations affecting the Company in areas of legal
specialty, including but not limited to federal and state laws and regulations
affecting the business of airlines (for example, laws, regulations, and
constitutional provisions regarding aviation, real estate, taxation, insurance,
safety and security, antitrust, procurement, compliance, taxation, etc.);
prepares opinions of counsel as needed.

 

6.                                       Represents
senior administrators, executives and managers in administrative hearings, and
represents or oversees the representation of the Company and its officials in
complex litigation; negotiates, supervises, or provides advice regarding negotiation
of settlements involving complex legal issues or transactions on behalf of the
Company; provides advice and representation regarding regulatory audits,
settlements and appeals.

 

7.                                       Participates in
development of federal and state legislative strategy;

 

17

 

drafts and reviews legislative bills and amendments affecting the
Company; develops priority bill summaries; tracks priority bill activity; and
supervises communication to the Company leadership of information regarding
legislative activity.

 

8.                                                               Provides advice for, and
participates in, negotiations with federal, state and local government
officials regarding Company relationships with those entities.

 

9.                                                               Conducts training of Company
personnel in areas of legal specialty and develops training materials; provides
advice regarding training needs at Company in areas of legal specialty and in
compliance with training requirements imposed by regulations.

 

10.                                 Enhances
professional growth and development through participation in seminars and
workshops; maintains professional affiliations to keep abreast of developments
and trends in aviation law.

 

11.                                 Performs
miscellaneous job-related duties as assigned.

 

18

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