Document:

Exhibit 10.40

 

[ * ] CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.

 

GRANT AGREEMENT

 

BETWEEN

 

LE MINIST`ERE DES RESSOURCES NATURELLES ET DE LA FAUNE, Clément Gignac, for and on behalf of the government of Quebec, herein represented by Mario Gosselin, Associate Deputy Minister for Energy, duly authorized pursuant to section 5 of the Act respecting the Ministère des Ressources naturelles et de la Faune (R.S.Q., c. M-25.2);

 

(hereinafter referred to as the “Minister”)

 

AND

 

Éthanol Cellulosique Varennes s.e.c. (Varennes Cellulosic Ethanol LP), herein acting and represented by its general partner, 7037163 CANADA INC., a corporation constituted under the  laws of Canada, the address of the elected domicile in Quebec of which is located at 1010 Sherbrooke Street West, Suite 1610, Montreal, Quebec, H3A 2R7, represented in turn by Vincent Chornet and Jean Roberge, duly authorized pursuant to a resolution of its Board of Directors (Schedule A).

 

(hereinafter referred to as “Varennes Cellulosic Ethanol LP”)

 

(The Minister and Varennes Cellulosic Ethanol LP being hereinafter collectively referred to as the “Parties” and individually as a “Party”.)

 

RECITALS

 

WHEREAS the purpose of Quebec’s 2006-2015 energy strategy as well as Step 4 of the 2006-2012 action plan on climate change is to achieve the goal of an average content of 5% ethanol in gas sales by 2012;

 

WHEREAS  Varennes Cellulosic Ethanol LP will use as raw material residual materials managed according to the hierarchy of the management methods set forth in the Quebec policy for managing residual materials.

 

WHEREAS  Varennes Cellulosic Ethanol LP has determined that the most appropriate place to set up its plant is the City of Varennes in Montérégie, given in particular the operation by Éthanol GreenField Québec inc. on the same site, namely at 3300 Marie-Victorin Boulevard in Varennes, of a first generation ethanol distillery with which it will be integrated;

 

WHEREAS  Varennes Cellulosic Ethanol LP has confirmed its interest in participating in this proposed plant and has undertaken to contribute with the Minister and the federal government to the financing of the said plant;

 

 

WHEREAS the only business operated by Varennes Cellulosic Ethanol LP will be limited to the construction and operation of the proposed plant in the City of Varennes in Montérégie;

 

Whereas, pursuant to the first paragraph of section 15 of the Act respecting the ministère des Ressources naturelles et de la Faune (R.S.Q., c. M-25.2), the Minister may grant subsidies in the exercise of his functions;

 

Whereas, pursuant to section 3 of the Regulation respecting the promise and awarding of grants (R.R.Q., 1981, c. A-6.01, r. 6), the Minister has been authorized by the government, on the recommendation of the Conseil du trésor, in accordance with Order-in-Council No. 465-2011 dated May 4, 2011, to pay Varennes Cellulosic Ethanol LP a maximum subsidy of $18,000,000.

 

THE PARTIES AGREE AS FOLLOWS:

 

ARTICLE 1:  PURPOSE OF AGREEMENT

 

The purpose of this agreement is the granting of a subsidy during fiscal years [ * ] to [ * ] by the Minister of a maximum amount of $18,000,000 to Varennes Cellulosic Ethanol LP as a contribution to the financing of the construction of a cellulosic ethanol production plant using thermochemical technology (gasification) in Varennes (hereinafter referred to as the “Project”).

 

This contribution represents approximately 20% of the cost of the Project, which is estimated to be $90,000,000 according to the financing package and projected expenses appearing in Schedule B hereof.

 

The said project consists of producing ethanol from residual material resulting from industry, commerce and institutions (ICI), construction, renovation and demolition activities (CRD) as well as wood residue processed using thermochemical technology (gasification).  The production capacity of such plant shall be approximately 40 million litres of ethanol per year.

 

ARTICLE 2:  OBLIGATIONS OF VARENNES CELLULOSIC ETHANOL LP

 

In order to receive the subsidy contemplated by section 1, Varennes Cellulosic Ethanol LP agrees to comply with the following conditions:

 

2.1                                use the subsidy granted hereby for the sole purposes set forth herein;

2.2                                 repay the Minister, upon the expiry of this agreement, any unused amount of the subsidy granted;

2.3                                 repay the Minister forthwith any amount used for purposes other than those contemplated hereby;

 

[ * ] CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.

 

 

2.4                                 carry out the Project substantially according to the document entitled “Projet d’usine de production d’éthanol de seconde génération à Varennes” [proposed second generation ethanol production plant in Varennes] dated January 2010, subject to the adjustments made to the Project since that date;

2.5                                 use the subsidy according to the schedule set forth in Schedule C, to pay the costs of the anticipated work;

2.6                                 keep specific accounting records for Varennes Cellulosic Ethanol LP;

2.7                                 give the Minister, not later than April 30th each year, an audited report of the expenses incurred, the use of the subsidy and the financial contributions received from other sources by Varennes Cellulosic Ethanol LP.  Such reports shall specifically mention any material change affecting the financial package and Project costs;

2.8                                 use suppliers of goods and services, manufacturers, associates and sub-contractors established in Quebec, when the goods and services they provide are satisfactory in the opinion of Varennes Cellulosic Ethanol LP in terms of quality, performance, price and delivery terms.  This obligation shall not apply in the case of sales of equipment outside Quebec conditional upon local purchases;

2.9                                 mention in all communications, publications, advertising and press releases related hereto that a financial contribution of the government of Quebec has been paid and send the Minister a copy of such communication material.  However, the mention of a financial contribution of the Minister shall not in any event suggest that the Minister recommends any products or processes;

2.10                           give the representative designated by the Minister technical progress reports based on completion of the important steps of the Project (see Schedule C) and, at the end of the Project, a sufficiently complete final technical report to allow the Minister to analyze the progress and evolution of the work and the results;

2.11                           provide the Minister with all information and documents reasonably necessary to allow the expenses to be audited and give access to any financial information which may be useful for such purpose;

2.12                           agree to a public announcement being made by the Minister providing the following information:  the name and address of Varennes Cellulosic Ethanol LP, the nature of the Project and the terms of this agreement;

2.13                          keep all documents related to the subsidy for a five (5) year period following the expiry of this agreement, give access thereto to a representative designated by the Minister and allow him to make and keep a copy;

2.14                           comply with the laws, regulations, orders-in-council, Ministerial orders and standards applicable to the Project and this agreement; and

2.15                           obtain the Minister’s prior consent for any material change in the nature, scope, pace or breakdown of the anticipated budgets for the Project or for any change of other material elements of the Project.

 

[ * ] CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.

 

 

ARTICLE 3:  TERMS OF PAYMENT

 

The amount of the subsidy contemplated by section 1 shall be paid to Varennes Cellulosic Ethanol LP according to the following terms:

 

3.1                                 for fiscal year [ * ], following the signing hereof by Varennes Cellulosic Ethanol LP, written confirmation that the project financing is completely met and the public announcement of the implementation of the project by Varennes Cellulosic Ethanol LP, an initial payment of $8,000,000 shall be made not later than thirty (30) days following receipt of an application for payment submitted to the Minister by Varennes Cellulosic Ethanol LP;

 

3.2                                 for fiscal year [ * ], after the start-up of the construction site for the plant, a second payment of $3,200,000 shall be made not later than thirty (30) days following receipt of an application for payment submitted to the Minister by Varennes Cellulosic Ethanol LP, along with a progress report on the finalizing of the detailed engineering of the processes and the review of engineering documents;

 

3.3                                 for fiscal year [ * ], a third payment of $3,200,000 shall be made not later than thirty (30) days following receipt of an application for payment submitted to the Minister by Varennes Cellulosic Ethanol LP, along with a progress report on the implementation of the gasifier and following inspection of the gasifier construction site; and

 

3.4                                 for fiscal year [ * ], a fourth and last payment of up to $3,600,000, i.e. 20% of the maximum subsidy of $18,000,000, shall be made not later than ninety (90) days after the end of construction work on the plant, including that relating to the implementation of the methanol and ethanol trains, a final inspection of the plant and approval by the Minister of a final technical and financial report prepared by Varennes Cellulosic Ethanol LP.

 

ARTICLE 4:  INTELLECTUAL AND MATERIAL PROPERTY RIGHTS

 

4.1                                 Holder of intellectual and material property rights

 

The intellectual and material property rights belonging to Enerkem inc. when this agreement is signed shall remain the property of Enerkem inc.

 

The intellectual and material property rights belonging to GreenField Ethanol inc. when this agreement is signed shall remain the property of GreenField Ethanol inc.

 

The intellectual and material property rights relating to the work resulting from this agreement which will be granted by Enerkem inc. or GreenField Ethanol inc. to Varennes Cellulosic Ethanol LP shall belong to it.

 

[ * ] CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.

 

 

4.2                                 Specific licence concerning the intellectual property rights stemming from certain work resulting from this agreement

 

Varennes Cellulosic Ethanol LP grants the Minister a non-exclusive, non-transferable and irrevocable licence allowing it to publish the general, non-confidential results of the Project.

 

Any consideration for such licence shall be included in the amount of the subsidy contemplated by section 1.

 

Varennes Cellulosic Ethanol LP agrees to obtain, in favour of the Minister, from the authors of such general, non-confidential results of the Project, a waiver of their moral right to the integrity thereof.

 

4.3                                 Guarantee respecting the licence contemplated by paragraph 4.2 hereof

 

Varennes Cellulosic Ethanol LP warrants to the Minister that it holds all the rights allowing it to enter into and fulfil its obligations hereunder and in particular to grant the copyright licence contemplated by subsection 4.2 and shall defend the Minister against any recourse, claim, demand, lawsuit and other proceedings taken by any person with respect to the subject of such guarantees.

 

Varennes Cellulosic Ethanol LP agrees to indemnify the Minister and hold him harmless with respect to any recourse, claim, demand, lawsuit and other proceedings taken by any person with respect to the subject of such guarantees.

 

ARTICLE 5:  CONFIDENTIALITY

 

Each Party agrees not to disclose or reveal, without being duly authorized thereto by the other Party, any information of which they become aware in the performance of this agreement.

 

Each of the Parties agrees to take the necessary steps so that each of its employees assigned to the performance of this agreement shall certify that any information obtained in connection with the performance of this agreement shall not be disclosed or made known to any person whomsoever and that the employee will not use such information for his personal benefit.

 

ARTICLE 6:  CONFLICT OF INTEREST

 

Varennes Cellulosic Ethanol LP shall avoid any situation which would create a conflict between its own interests and the interests of the Minister.  If such a situation occurs, Varennes Cellulosic Ethanol LP shall notify the Minister thereof as soon as possible and the Minister may terminate the agreement, at his discretion.

 

[ * ] CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.

 

 

ARTICLE 7:  ASSIGNMENT

 

The rights and obligations of Varennes Cellulosic Ethanol LP set forth herein may not be assigned, sold or transferred, in whole or in part, without the written consent of the Minister.

 

ARTICLE 8:  TERMINATION

 

The Minister reserves the right to terminate this agreement at any time if Varennes Cellulosic Ethanol LP fails to fulfil any of the terms, conditions and obligations incumbent upon it hereunder, and in particular if:

 

1.                   Varennes Cellulosic Ethanol LP gives the Minister false or misleading information or makes misrepresentations to the Minister;

2.                   the Minister is of the opinion that a situation is occurring which, for public policy reasons, calls into question the purposes for which the subsidy was granted; or

3.                   Varennes Cellulosic Ethanol LP ceases to carry on business in any manner whatsoever, including due to bankruptcy, liquidation or the assignment of its property.

 

In such a case, the Minister shall send a termination notice to Varennes Cellulosic Ethanol LP, which shall have thirty (30) business days to remedy the defaults mentioned in the notice and to inform the Minister thereof, failing which this agreement shall automatically be terminated as of the expiry of such period, without compensation or indemnification for any cause or reason whatsoever.

 

The Minister reserves the right to require the full or partial repayment, with interest, of the amount of the subsidy which has been paid as of the termination date.  The interest rate shall be determined according to the average of the prime rates of commercial bank loans. Such rates are published by the Bank of Canada on the last Wednesday of the second month of each quarter and take effect in the following quarter.  The result is rounded to the nearest whole number, and one-half is rounded down to the nearest whole number.

 

The failure of the Minister to exercise his termination right shall not be construed as a waiver of the right to exercise such right.

 

The application of sections 4.1, 4.2, 4.3, 5 and 9 shall survive the termination of this agreement.

 

[ * ] CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.

 

 

ARTICLE 9:  LIABILITY

 

Varennes Cellulosic Ethanol LP agrees, firstly, to bear alone any legal liability with respect to third Parties and to bear alone the liability for any action, claim or demand which may be caused by the execution of the purpose of this agreement and, secondly, to defend and hold harmless the Minister, his representatives and the government in the event of any claim which may stem therefrom and to ensure that the same applies to any contract granted for the purpose of carrying out the purpose of this agreement.

 

ARTICLE 10: AMENDMENT OF AGREEMENT

 

Any amendment of this agreement shall be the subject of a written agreement between the Parties.  Such agreement may not change the nature of this agreement and shall become an integral part hereof.

 

ARTICLE 11:  PARTIES’ REPRESENTATIVES AND NOTICE

 

The Minister designates, for the purposes of this agreement, including for any consent which is required, Mario Gosselin, the Associate Deputy Minister for Energy, as his representative.  If a substitute is necessary, the Minister shall notify Varennes Cellulosic Ethanol LP in writing as soon as possible.

 

Varennes Cellulosic Ethanol LP designates, for the purposes of this agreement, including for any consent which is required, Vincent Chornet and Jean Roberge, acting jointly, as its representatives.  If a substitute is necessary, Varennes Cellulosic Ethanol LP  shall notify the Minister in writing as soon as possible.

 

Any notice from one Party to another, without preventing a Party from using another means to give notice, shall be given in writing and delivered by hand, sent by fax or by any other electronic means of communication, or sent by registered mail addressed as follows:

 

VARENNES CELLULOSIC ETHANOL LP

 

c/o Enerkem inc.

(Re:  Éthanol Cellulosique Varennes s.e.c.)

1010 Sherbrooke St. W., Suite 1610

Montreal, Quebec, H3A 2R7

 

Attention:  Vincent Chornet, President

 

- and -

 

[ * ] CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.

 

 

c/o Éthanol GreenField inc.

(Re:  Éthanol Cellulosique Varennes s.e.c.)

20 Toronto St., 14th Floor

Toronto, Ontario, M5C 2B8

 

Attention:  Jean Roberge, Director, Thermochemical Group

 

THE MINISTER OF NATURAL RESOURCES AND WILDLIFE

5700 - 4th Avenue W., Suite B 401

Quebec City, Quebec, G1H 6R1

 

Attention:  Mario Gosselin

Associate Deputy Minister for Energy

E-mail:  [ * ]

Telephone:  418 627-6377

 

ARTICLE 12:  CONTRACT DOCUMENTS

 

The schedules referred to herein form an integral part of this agreement.  Varennes Cellulosic Ethanol LP declares that it has read them and accepts all the terms thereof.

 

This agreement constitutes the only agreement entered into between the Parties and any other prior agreement not reproduced herein shall be deemed to be null and void.

 

In the event of inconsistency between the schedules and this agreement, this agreement shall prevail.

 

ARTICLE 13:  GOVERNING LAW

 

This agreement shall be governed by the laws of Quebec and, in the event of a dispute, the courts of Quebec shall have sole jurisdiction.

 

ARTICLE 14:  SUCCESSORS AND ASSIGNS

 

This agreement shall be binding upon the respective successors and assigns of the Parties and their beneficiaries.

 

ARTICLE 15:  TERM OF AGREEMENT

 

This agreement shall take effect as of the date of the last signature and shall terminate, to the exclusion of sections 4.1, 4.2, 4.3, 5 and 9, on the date on which its purpose and the obligations set forth herein have been achieved.

 

[ * ] CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.

 

 

ARTICLE 16:  BUDGETARY UNDERTAKING

 

In accordance with section 21 of the Financial Administration Act (R.S.Q., c. A-6.001), no financial commitment by the government of Quebec may be made or is valid unless there is a sufficient balance available against which the expenditure arising from the commitment may be charged in the fiscal year during which the commitment is made.

 

IN WITNESS WHEREOF, THE PARTIES HAVE DULY SIGNED THIS AGREEMENT IN TRIPLICATE AFTER READING IT AND AGREEING WITH ALL ITS TERMS AND CONDITIONS:

 

	
IN: 
    	
Quebec City
    	
 
    	
 
    	
this 2012-02-07
    
	
 
    	
 
    	
 
    	
 
    	
Date
    
	
 
    	
 
    	
 
    	
 
    
	
THE  MINISTER
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
Per:
    	
/s/ Mario Gosselin
    	
 
    	
 
    
	
 
    	
Mario Gosselin
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
IN:
    	
Varennes
    	
 
    	
this February 6, 2012
    
	
 
    	
 
    	
 
    	
Date
    

 

	
ÉTHANOL CELLULOSIQUE VARENNES   S.E.C.
    	
 
    
	
(Varennes Cellulosic   Ethanol LP),
    	
 
    
	
acting and represented through its general   partner,
    	
 
    
	
7037163 CANADA INC.
    	
 
    
	
 
    	
 
    
	
Per:
    	
/s/ Vincent Chornet
    	
 
    
	
 
    	
Vincent Chornet
    	
 
    
	
 
    	
 
    	
 
    
	
Per:
    	
/s/ Jean Roberge
    	
 
    
	
 
    	
Jean Roberge
    	
 
    

 

[ * ] CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.

 

 

SCHEDULE A

 

RESOLUTION OF THE BOARD OF DIRECTORS OF 7037163 CANADA INC.

 

 

See the attached document.

 

[ * ] CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.

 

 

RESOLUTIONS OF THE DIRECTORS

OF

7037163 CANADA INC.

 

(the “Corporation”)

 

ACTING AS GENERAL PARTNER OF

VARENNES CELLULOSIC ETHANOL LP

 

The undersigned, being all the directors of the Corporation, hereby adopt the following resolutions:

 

SUBSIDY APPLICATION SUBMITTED TO THE MINISTER OF
 NATURAL RESOURCES AND WILDLIFE (the “Minister”)

 

WHEREAS, pursuant to section 3 of the Regulation respecting the promise and awarding of grants (R.R.Q., 1981, c. A-6.01, r. 6), the Minister has been authorized by the government, on the recommendation of the Conseil du trésor, in accordance with Order-in-Council No. 465-2011 dated May 4, 2011 (the “Order-in-Council), to pay the “Enerkem inc. and Éthanol GreenField Québec inc. joint venture” a maximum subsidy of $18,000,000.

 

WHEREAS the “Enerkem inc. and Éthanol GreenField Québec inc. joint venture” was set up in the form of a limited partnership, the name of which is “Varennes Cellulosic Ethanol LP”, the general partner of which is the Corporation and the sole special partners of which are Enerkem inc. and Éthanol GreenField Québec inc. (the “Joint Venture”);

 

WHEREAS the activities of the Joint Venture shall be limited to the construction and operation of the proposed plant in the City of Varennes in Montérégie referred to in the Order-in-Council; and

 

WHEREAS the majority shareholder of Éthanol GreenField Québec inc. is Éthanol GreenField inc. and this is the entity referred to in the document entitled “Projet d’usine de production d’éthanol de seconde génération à Varennes” [proposed second generation ethanol production plant in Varennes] dated January 2010 which was filed with the subsidy application to the Minister by the Joint Venture.

 

IT IS UNANIMOUSLY RESOLVED AS FOLLOWS:

 

1.                                       To confirm and ratify for all legal purposes that the subsidy application relating to the proposed plant referred to in the Order-in-Council was submitted for and on behalf of the Joint Venture and that the above information is accurate and true;

 

[ * ] CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.

 

 

2.                                       To authorize Brian C. Keith, Secretary and director of the Corporation, as well as Jocelyn Auger, director of the Corporation, to provide any information, sign any document and otherwise do anything which may be useful or necessary to allow the Minister to satisfy himself as to the accuracy and truth of the foregoing.

 

(The signature page follows)

 

[ * ] CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.

 

 

RESOLUTIONS OF THE DIRECTORS OF THE CORPORATION, ACTING AS GENERAL PARTNER OF THE JOINT VENTURE, ADOPTED AS OF NOVEMBER 2, 2011:

 

	
/s/ Jocelyn Auger
    	
 
    	
/s/ Vincent Chornet
    
	
Jocelyn Auger
    	
 
    	
Vincent Chornet
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
/s/ Brian C. Keith
    	
 
    	
/s/ Patrice Ouimet
    
	
Brian C. Keith
    	
 
    	
Patrice Ouimet
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
/s/ Jean Roberge
    	
 
    	
/s/ Barry Wortzman
    
	
Jean Roberge
    	
 
    	
Barry Wortzman
    

 

 

INTERVENTION OF SPECIAL PARTNERS

 

We, the undersigned, duly authorized to act for and on behalf of the special partner of Varennes Cellulosic Ethanol LP below which our respective signatures appear, declare that we have read the Resolutions of the directors of the Corporation, acting as general partner of the Joint Venture, adopted as of November 2, 2011, the original of which is set forth above (the “Resolutions”).

 

We confirm and ratify for all legal purposes, acting for and on behalf of the special partner of Varennes Cellulosic Ethanol LP below which our respective signatures appear, that the subsidy application relating to the proposed plant referred to in the Order-in-Council was submitted for and on behalf of the Joint Venture and that the information indicated in the Resolutions is accurate and true.

 

We declare that we are duly authorized, acting for and on behalf of the special partner of Varennes Cellulosic Ethanol LP below which our respective signatures appear, to provide any information, sign any document and do any other thing which may be useful or necessary to allow the Minister to establish to his satisfaction that the information indicated in the Resolutions is accurate and true.

 

	
GREENFIELD ETHANOL INC.
    	
 
    	
ENERKEM INC.
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
/s/ Brian Keith
    	
 
    	
/s/ Jocelyn Auger
    
	
Brian Keith
    	
 
    	
Jocelyn Auger
    

 

[ * ] CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.

 

 

RESOLUTIONS OF THE DIRECTORS

 

OF

 

7037163 CANADA INC.

 

(the “Corporation”)

 

ACTING AS GENERAL PARTNER OF

VARENNES CELLULOSIC ETHANOL LP

 

The undersigned, being all the directors of the Corporation, hereby adopt the following resolutions:

 

SUBSIDY AGREEMENT WITH THE MINISTER OF NATURAL

RESOURCES AND WILDLIFE (the “Minister”)

 

The Corporation wishes to enter into a Subsidy Agreement with the Minister (the “Agreement”) on terms and conditions substantially the same as those set forth in the draft Agreement attached here to as Schedule “A”.

 

IT IS UNANIMOUSLY RESOLVED AS FOLLOWS:

 

1.                   The Corporation is authorized to enter into the Agreement on terms and conditions substantially the same as those set forth in the draft Agreement attached here to as Schedule “A”.

 

2.                   Jean Roberge and Vincent Chornet, directors of the Corporation, are authorized and instructed, acting for and on behalf of the Corporation, to negotiate, finalize, enter into and sign the Agreement with any addition, withdrawal or other amendment which they consider necessary or desirable.

 

3.                   Each director of the Corporation is authorized and instructed, acting for and on behalf of the Corporation, to enter into and sign any document or other written instrument and to take any action and otherwise do anything which they consider necessary or desirable to give full effect hereto.

 

[ * ] CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.

 

 

RESOLUTIONS OF THE DIRECTORS OF THE CORPORATION, ACTING AS GENERAL PARTNER OF THE JOINT VENTURE, ADOPTED AS OF NOVEMBER 2, 2011:

 

	
/s/ Jocelyn Auger
    	
 
    	
/s/ Vincent Chornet
    
	
Jocelyn Auger
    	
 
    	
Vincent Chornet
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
/s/ Brian C. Keith
    	
 
    	
/s/ Patrice Ouimet
    
	
Brian C. Keith
    	
 
    	
Patrice Ouimet
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
/s/ Jean Roberge
    	
 
    	
/s/ Barry Wortzman
    
	
Jean Roberge
    	
 
    	
Barry Wortzman
    

 

[ * ] CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.

 

 

 

SCHEDULE B

 

FINANCIAL PACKAGE AND ANTICIPATED EXPENDITURES

 

FINANCIAL PACKAGE

 

	
Private   contribution (promoters)
    	
 
    	
 
    	
 
    	
$
    	
[ * ] M
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Financial   assistance from Quebec
    	
 
    	
 
    	
 
    	
$
    	
27 M
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Loan:
    	
 
    	
$
    	
9 M
    	
 
    	
 
    	
 
    
	
Subsidy:
    	
 
    	
$
    	
18 M
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Financial   assistance from the SDTC
    	
 
    	
 
    	
 
    	
$
    	
33 M
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Total
    	
 
    	
 
    	
 
    	
$
    	
[ * ] M
    	
 
    

 

[ * ] CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.

 

 

Financial information

 

Capital investment

 

	
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[ * ] CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.

 

 

	
[   * ]  
    	
 
    	
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[   * ]  
    	
 
    	
$
    	
[ * ]
    	
 
    

 

	
VARENNES-GENERATIONS   PROJECT
    	
CONFIDENTIAL
    	
TRADE SECRETS
    

 

[ * ] CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.

 

 

SCHEDULE C

 

COMPLETION SCHEDULE

 

	
Steps
    	
 
    	
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[ * ] CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.Exhibit 10.118

 

EMPLOYMENT AGREEMENT

  between

  AdCare Health Systems, Inc. (the “Company”)

  and

  David Rubenstein (the “Officer”)

 

This Employment Agreement (“Agreement”) is entered into November 15, 2011, to be effective the later of December 19, 2011 or the date upon which Officer provides the Company with a fully executed release by Shoreline Healthcare Management, LLC (“Shoreline”) of all obligations owed by Officer to Shoreline under the Assignment and Assumption Agreement and First Amendment to Employment Agreement of September 12, 2011 (“Prior Obligations”), or as otherwise discussed herein.

 

Background

 

The Company and the Officer desire that the Officer be engaged as Executive Vice President and Chief Operating Officer of the Company and desire to enter into this Agreement to reflect the terms and conditions of such engagement.

 

Statement of Agreement

 

For good and valuable consideration (including the respective obligations of the parties hereunder), the receipt and adequacy of which are hereby acknowledged, the parties hereto agree as follows:

 

Section 1.               Employment.  For the purposes and upon the terms and conditions hereinafter set forth, the Company agrees to employ the Officer and the Officer accepts such employment.  The Officer’s employment shall be based in the Atlanta, Georgia greater metropolitan area, subject to business travel as necessary.  The Company shall provide the Officer with an office in Roswell, Georgia at its 1145 Hembree Road location.

 

Section 2.               Duties.  The Officer shall be employed as of the Effective Date as Executive Vice President and Chief Operating Officer of the Company.  The Officer shall have such duties and responsibilities as are commonly incident to such offices of a substantial corporation and shall report to the Chief Executive Officer.  The Officer shall devote such time, attention and energy to the business of the Company and the performance of his duties hereunder as are necessary to properly perform his duties hereunder.  The Officer represents and warrants that his entry into and performance of services under this Agreement does not violate the terms of his engagement with Shoreline, the restrictive covenants in any agreement with Shoreline or the Prior Obligations and that Shoreline has expressly released the Officer from any obligation not to compete with Shoreline or to solicit any clients, customers, vendors or suppliers of Shoreline.  The Officer also represents and warrants that other than the Prior Obligations, he is bound by no agreement that would in any way restrict his ability to perform his duties for the Company.  The Officer will be expected to carry out his duties with the highest degree of ethical

 

`

and moral standards and to comply with all terms and conditions regarding the nature and manner in carrying out his duties as may be established from time to time by the Company and set forth in its employee handbook or manual.

 

Section 3.               Compensation.

 

(a)           Salary.  The Officer shall be paid an initial salary of $300,000 per year (the “Annual Salary”), payable in installments on the date of the Company’s regular pay periods or such other installments as the Officer and the Company from time to time mutually agree upon.  On or before June 30, 2012 Officer’s Annual Salary shall be increased to $325,000 per year.  The Annual Salary shall be reviewed at least annually by the Compensation Committee of the Board of Directors of the Company (the “Compensation Committee”) for possible increases, and if so increased, the increased amount shall thereafter be deemed to be the “Annual Salary” for all purposes under this Agreement.

 

(b)           Signing Bonus.  The Officer shall be paid a one time bonus of $150,000 that shall be earned upon the completion of his first day of employment with the Company after the Effective Date and which shall be paid on the date of the first regular pay period after his first day of employment with the Company.

 

(c)           Bonus.  The Officer shall be eligible to earn an annual bonus for 2012 and each year thereafter, the target amount of which, based on reasonably expected performance, shall be seventy-five percent (75%) of Annual Salary (the “Target Bonus”).  The performance criteria for earning the bonus and the formula for determining the amount of the bonus shall be established by the CEO and Compensation Committee under the Company’s management incentive plan for executive officers.  The criteria and the formula for each year will be provided to the Officer no later than the ninetieth (90th) day of that year.  The bonus earned shall be paid as soon as feasible following the end of each year, but not later than March 30 of the following year.  The bonus for any year will be earned and accrued and payable only if the Officer is employed by the Company on the last day of the year for which the bonus is earned.

 

(d)           Equity Compensation.  As of the Effective Date and as a material inducement to the Officer to enter into employment with the Company, the Compensation Committee shall grant to the Officer: (i) a warrant to purchase 100,000 shares of the Company’s common stock, no par value (the “Common Stock”), with an exercise price per share equal to the Fair Market Value (as defined in the AdCare Health Systems, Inc.  2011 Stock Incentive Plan) of the Common Stock on the Effective Date (the “First Warrant”); and (ii) a warrant to purchase 100,000 shares of Common Stock with an exercise price per share equal to the sum of the Fair Market Value of the Common Stock on the Effective Date plus $1.00 per share (the “Second Warrant” and, together with the First Warrant, the “Warrants”).  The First Warrant shall vest one third (1/3) on each of the three subsequent anniversaries of the Effective Date; the Second Warrant will vest one third (1/3) on the second, third and fourth anniversaries of the Effective Date.  All vesting requires that the Officer is employed by the Company on such date, provided however, that if the Officer resigns for “Good Reason,” or a “Change in Control” occurs while the Officer is employed by the Company, then the Warrants shall immediately become one hundred percent (100%) vested.  The Warrants shall have a term of ten (10) years subject to earlier expiration upon termination of Officer’s employment.  The Warrants shall be exercisable

 

2

 

for cash, or at the option of the Officer, in a cashless exercise (by reducing the number of shares he receives upon exercise by a number of shares with a then Fair Market Value equal to the aggregate exercise price of the shares purchased).  The Warrants, to the extent vested, shall continue to be exercisable for three (3) months following the Officer’s termination of employment.  The Warrants shall be evidenced by warrant certificates bearing restrictive legends, in form and substance acceptable to the Company and the Officer and otherwise in accordance with this Agreement.  The Officer understands and acknowledges that, (i) the Warrants are being issued without registration under the Securities Act of 1933, as amended (the “Securities Act”), or any state securities laws pursuant to an exemption from the Securities Act and such laws; (ii) the issuance of the Common Stock issuable upon the exercise of any Warrant or portion thereof may be made only if an exemption from the registration requirements of the Securities Act and any applicable state securities laws is available; and (iii) the Warrants and all shares of Common Stock issuable upon exercise of the Warrants may be disposed of only in accordance with the Securities Act and any applicable state securities laws.

 

The Officer shall be eligible to receive future grants of equity compensation at the discretion of the CEO and Compensation Committee.

 

For purposes of this Agreement, the following terms shall have the following meanings.  Resignation for “Good Reason” means the Officer’s resignation within ninety (90) days following the Company’s failure to cure a material breach of this Agreement within thirty (30) days after the Officer gives the Company written notice of such breach within ninety (90) days of the occurrence of such breach.  “Cause” means the Officer’s fraud, dishonesty, willful misconduct, or gross negligence in his performance of his duties hereunder, or the Officer’s conviction for a crime of moral turpitude, or material breach by the Officer of this Agreement which the Officer fails to cure within thirty (30) days after the Company gives the Officer written notice of such breach.  “Change in Control” means one or more sales or dispositions, within a twelve (12) month period, of assets representing a majority of the value of the assets of the Company or the acquisition (whether by purchase or through a merger or otherwise) of common stock of the Company immediately following which the holders of common stock of the Company immediately prior to such acquisition cease to own directly or indirectly common stock of the Company or its legal successor representing more than fifty percent (50%) of the voting power of the common stock of the Company or its legal successor.

 

Section 4.               Officer Benefits; Vacation.  During the Employment Term, the Officer shall be entitled to participate in life insurance, hospitalization medical insurance, retirement, and other benefits as are presently or may hereafter be provided to other executive officers of the Company and paid vacation in accordance with the Company’s vacation policy for executive officers.  In addition to the benefits generally available to executive officers of the Company, the Company agrees to (a) pay the COBRA premiums of the Officer and his spouse and eligible dependents for the period from the Effective Date until the Officer is covered under the Company’s group health plan, such amounts to be paid as soon as feasible, or at the Company’s option, waive any waiting period for eligibility under the Company’s group health plan, and (b) continue to pay the Officer at the rate of 100% of his Annual Salary for a period of three (3) months after the date of “Disability” and at the rate of 60% of his Annual Salary as of the date of Disability for an additional twenty-one (21) months.  For purposes of this Agreement, the term “Disability” means the inability of the Officer to perform his duties for medical reasons for a

 

3

 

period of ninety (90) days in any three hundred sixty-five (365) day period.  In the event there is a question as to whether or not the Officer is subject to a Disability, the Board of Directors of the Company will select a qualified physician who will make the determination which will be binding on both the Officer and the Company.

 

Section 5.               Term of Employment.

 

(a)           The term of this Agreement shall begin on the Effective Date and remain in effect thereafter while the Officer is employed by the Company (the “Employment Term”).

 

(b)           The Company and the Officer shall at all times have the right to terminate the Officer’s employment, in the case of the Company with or without Cause, and in the case of the Officer with or without Good Reason, and in either case subject to the terms of this Agreement.  Upon termination of the Officer’s employment, the Officer shall have no obligation or duty to further serve the Company in any capacity (other than to comply with the obligations set forth in Section 6 below), nor shall the Company be under any obligation or duty to employ the Officer or provide the benefits specified in Section 4 or make any of the payments provided for in Sections 3, or 4, (except to the extent any such benefits are required to be provided by this Agreement, the applicable plan or law or any such payments under Sections 3, or 4, have accrued prior to and remain unpaid as of the effective date of such termination).

 

(c)           If, during the first three months of continuous employment with the Company the officer resigns his employment for Good Reason, or the Company terminates the Officer’s employment without Cause, the Officer shall receive severance pay in the form of salary continuation for three months.  If after a minimum of three months continuous employment with the Company after the Effective Date, but less than a six months of continuous employment with the Company, the Officer resigns his employment for Good Reason or the Company terminates the Officer’s employment without Cause (other than due to the Officer’s Disability), the Officer, or his successors and assigns, shall receive severance pay in an amount equal to one-half (1/2) times the sum of the Annual Salary, payable in substantially equal installments at least monthly for six (6) months after the Officer’s termination date.  If, after a minimum of six months of continuous employment with the Company after the Effective Date the Officer resigns his employment for Good Reason or the Company terminates the Officer’s employment without Cause (other than due to the Officer’s Disability) the Officer or his successors and assigns shall receive the severance pay and benefits hereafter provided.  The severance pay shall be an amount equal to one (1) times the sum of Annual Salary payable in substantially equal installments at least monthly for twelve (12) months after the termination date, plus if such termination occurs within three (3) months before or twenty-four (24) months after the occurrence of a “Change in Control,” an additional half time the sum of Annual Salary plus Target Bonus, payable in substantially equal installments at least monthly for six (6) months beginning immediately after twelve (12) months following the termination date.

 

For the period for which severance pay is paid, i.e., three (3), six (6), twelve (12) or eighteen (18) months following termination of employment (the “Severance Period”), the Officer and his family shall be entitled to continue to be covered under all employee benefit plans of the Company under which executive officers of the Company are covered and at the same cost and under the same terms and conditions as apply to executive officers, provided, however, that if the

 

4

 

Company is unable under applicable law or the insurer will not permit the Officer to be covered under any such plan, the Company shall pay to the Officer an amount each month during the Severance Period equal to the Company’s cost of coverage for similarly situated executive officers.  For purposes of this Agreement, termination of employment and similar terms means a termination of employment constituting a “separation from service” within the meaning of Code Section 409A.  Notwithstanding the foregoing, to the extent necessary to avoid the Officer incurring a tax under Code Section 409A, any amount that is otherwise due within six (6) months following termination of employment shall be delayed until six months after termination of employment.  The provisions contained in this Section shall survive the termination of the Officer’s employment.

 

Section 6.               Certain Officer Covenants.  The Officer expressly covenants and agrees to and with the Company as hereinafter set forth in this Section 6.

 

(a)           Non-Competition.  In the event that the Officer’s employment is voluntarily terminated by the Officer other than for Good Reason or is terminated by the Company for Cause, then for a period of twelve (12) months after the date of termination, the Officer shall not within the Area, directly or indirectly, acting alone or with others, on behalf of a competitor of the Company undertake to perform executive management responsibilities similar to those the Officer provides for the Company during the last twenty-four (24) months of his employment with the Company.  For purposes of this Agreement “Area” shall be defined as a twenty-five (25) mile radius from the physical address of any skilled nursing facility or business office owned or operated by the Company as of the date of the termination of this Agreement.  The foregoing restrictions shall not, however, prohibit the Officer from performing services for a division or business unit of a competitor of the Company if such division or business unit does not provide goods or services competitive with those offered by the Company.  Notwithstanding anything herein to the contrary, the provisions of this Section shall not prohibit the Officer from acquiring less than 1% of the securities of any corporation which competes with the Company and whose shares are regularly traded on a nationally recognized stock exchange or over-the-counter market.

 

(b)           Prohibition Against Hiring Employees.  For a period of twelve (12) months after the date of termination, regardless of the reason for termination, the Officer shall not directly or indirectly solicit for employment, or directly or indirectly assist others in soliciting for employment, any person who was an employee of the Company at any time during the twelve (12) months preceding the date of the Officer’s termination of employment and with whom the Officer had material contact during such twelve (12) month period, unless the employment of such employee has been terminated by the Company or such employee has been laid-off by the Company during such period.

 

(c)           Confidential Information.  Except to the extent required in the performance of his duties hereunder, the Officer shall not at any time while he is employed by the Company or after termination of his employment, directly or indirectly, use, disclose, disseminate or otherwise publish “Confidential Information.” For purposes of this Agreement, the term “Confidential Information” means data and information relating to the business of the Company (whether constituting a Trade Secret or not) which is or has been disclosed to the Officer or of which the Officer became aware as a consequence of or through his relationship

 

5

 

with Company and which has value to the Company and is not generally known to the Company’s competitors.  Confidential Information shall not include any data or information which has been voluntarily disclosed to the public by the Company (except where such disclosure has been made by representative without authorization) or that has been independently developed and disclosed by others, or otherwise has entered the public domain through lawful means.

 

(d)           Return of Information.  Upon termination of the Officer’s employment for whatever reason, the Officer shall return to or leave with the Company, without making or retaining copies thereof, all documents, records, notebooks and similar repositories containing Confidential Information.

 

(e)           Reasonableness of Covenants.  The Officer has carefully considered the nature and extent of the restrictions upon him and the rights and remedies conferred upon the Company under this Section 6, and hereby acknowledges and agrees that, in light of his position, the information to which he will be privy, and the nature of the business, the restrictions are reasonable in time and territory, are designed to eliminate unfair competition to the Company, are fully required to protect the Company’s legitimate interests, and do not confer a benefit upon the Company disproportionate to any detriment to the Officer.

 

If the Officer breaches any of the agreements contained in this Section 6, then, in addition to any other rights or remedies which the Company may have, the Company shall have the right to an accounting and repayment of all profits or other benefits directly realized as a result of any such breach, to collect any damages caused by such breach in addition to those specifically listed herein, and to enforce any legal or equitable remedy (including injunctive relief) that it may have against the Officer to prevent further injury to the Company resulting from such breach.

 

The Officer acknowledges that any breach of the agreements contained in this Section could cause irreparable harm to the Company.  The Officer acknowledges that damages in the event of Officer’s breach of this Agreement will be difficult, if not impossible, to ascertain and therefore it is agreed that the Company, in addition to, and without limiting any other remedy or right it may have under this Agreement or the law, will have the right to an injunction enjoining any such breach.  The Officer agrees to reimburse the Company for all costs and expenses, including reasonable attorney’s fees, incurred by the Company because of any breach of this provision, but only in the event that the Officer fails to cure such breach, within ten (10) days after being provided written notice thereof by the Company.

 

All covenants and provisions contained in Section 6 shall survive the termination of the Officer’s employment, regardless of the reason of such termination.

 

The Officer confirms that he has reviewed this Agreement with his independent legal counsel.

 

Section 7.               Notices.  Any notice or other communication required or desired to be given hereunder shall be in writing and shall be deemed duly given when personally delivered or when deposited in the United States mail, first class postage prepaid, properly addressed to the

 

6

 

parties at their respective addresses below or such addresses as shall be given by notice of any party.

 

	
The Company:
    	
AdCare Health Systems, Inc.
    
	
 
    	
5057 Troy Road
    
	
 
    	
Springfield, OH 45502
    
	
 
    	
Attn: Chairman
    
	
 
    	
 
    
	
 
    	
With a copy to:
    
	
 
    	
Boyd P. Gentry
    
	
 
    	
Two Buckhead Plaza
    
	
 
    	
3050 Peachtree Road NW 
    
	
 
    	
Suite 355
    
	
 
    	
Atlanta, GA 30305
    
	
 
    	
 
    
	
The Officer:
    	
The most recent address that the Company has   on file.
    

 

Section 8.               Actions by the Company.  Any determination, consent, waiver, agreement, or other action under or with respect to this Agreement and its implementation of or by the Company shall not be deemed made, taken or effected hereunder unless made, taken or effected in a writing signed by a duly authorized officer of the Company.

 

Section 9.               Waiver; Remedies Cumulative.  No waiver of any right or option hereunder by any party shall operate as a waiver of any other right or option, or the same right or option as respects any subsequent occasion for its exercise, or of any legal remedy.  No waiver by any party of any breach of this Agreement or of any agreement or covenant contained herein shall be held to constitute a waiver of any other breach or a continuation of the same breach.  All remedies provided by this Agreement are in addition to all other remedies by it or the law provided.

 

Section 10.             Assignment.  This Agreement shall be binding upon and inure to the benefit of the legal successors of the Company.  Neither this Agreement nor any rights hereunder shall be assignable and any such purported assignment by his shall be void and of no force or effect; provided, however, that in the event of the Officer’s death, any amounts that are unpaid and owing to the Officer or rights that are exercisable by the Officer shall be paid to or exercisable by his estate.

 

Section 11.             Applicable Law.  This Agreement shall be governed and construed in accordance with the laws of the State of Georgia.  Any action for breach or to enforce the terms of this Agreement, or in any way arising out of or related to Officer’s employment with the company or this Agreement, including without limitation the covenants and provisions contained in Section 6, shall be brought in the Superior Court of Fulton County, Georgia or in a federal court sitting in Atlanta, Georgia, and the parties hereto each consent to jurisdiction and venue in such courts.

 

Section 12.             Indemnification.  The Company shall indemnify the Officer for his actions and omissions as an officer and provide for advancement of expenses in connection therewith to the maximum extent permitted by its state of incorporation.  The Company shall maintain, during

 

7

 

the Employment Term and for at least three (3) years thereafter, an adequate officer’s liability policy covering the Officer for actions and omissions during the Employment Term.

 

Section 13.             Severability and Judicial Modification.  The parties agree that each provision of this Agreement is separate, distinct and severable from the other remaining provisions of this Agreement, and that the invalidity or unenforceability of any Agreement provision shall not effect the validity and unenforceability of any other provision or provisions of this Agreement.  Further, if any provision of this Agreement is ruled invalid or unenforceable by a court of competent jurisdiction because of the conflict between such provision and any applicable law or public policy, it is the intent of the parties that such provision shall be modified by the Court to the extent appropriate to render the provision reasonable valid and enforceable.

 

Section 14.             Miscellaneous.  This Agreement constitutes the entire understanding between the parties concerning the Officer’s employment with the Company and supersedes any and all previous agreements between the Officer and the Company concerning such employment.  Except for judicial modification as set forth in Section 13, this Agreement cannot be amended or modified in any respect, unless such amendment or modification is evidenced by a written instrument signed by both the Company and the Officer.  The captions of the various sections of this Agreement are not a part of the context hereof, are inserted merely for convenience in locating the different provisions hereof and shall be ignored in construing this Agreement.

 

Section 15.             Agreement Void If No Release.  This Agreement shall be null and void and of no force or effect and the Company shall owe no compensation or obligation to the Officer if a full written release of the Prior Obligations is not delivered to the Company on or before December 31, 2011 in the form attached hereto as Exhibit “A” or in some other form acceptable to the Company in its sole discretion.

 

The parties have executed multiple counterparts of this Agreement, each of which shall be deemed to be an original, as of the date set forth at the beginning hereof.

 

 

	
THE COMPANY:
    	
 
    	
THE OFFICER:
    
	
 
    	
 
    	
 
    
	
ADCARE HEALTH SYSTEMS, INC.
    	
 
    	
DAVID RUBENSTEIN
    
	
 
    	
 
    	
 
    
	
By:
    	
/s/ Boyd P. Gentry
    	
 
    	
/s/ David Rubenstein
    
	
 
    	
Boyd P. Gentry,
    	
 
    	
David Rubenstein
    
	
 
    	
President and CEO
    	
 
    	
 
    

 

8

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