Document:

esgi8k20100805ex10-2.htm

EXHIBIT A

 

NEITHER THIS SECURITY NOR THE SECURITIES FOR WHICH THIS SECURITY IS 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 ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY.  THIS SECURITY AND THE SECURITIES ISSUABLE UPON EXERCISE OF THIS SECURITY MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN SECURED BY SUCH SECURITIES.

COMMON STOCK PURCHASE WARRANT

ENSURGE, INC.

 

	
Warrant Shares: 4,000,000

	
Initial Exercise Date: July 29, 2010

   

THIS COMMON STOCK PURCHASE WARRANT (the “Warrant”) certifies that, for value received, Seaside 88, L.P. or its assigns (the “Holder”) is entitled, upon the terms and subject to the limitations on exercise and the conditions hereinafter set forth, at any time on or after the date hereof (the “Initial Exercise Date”) and on or prior to the close of business on the five year anniversary of the Initial Exercise Date (the “Termination Date”) but not thereafter, to subscribe for and purchase from Ensurge, Inc., a Nevada corporation (the “Company”), up to 4,000,000 shares (as subject to adjustment hereunder, the “Warrant Shares”) of Common Stock.  The purchase price of one share of Common Stock under this Warrant shall be equal to the Exercise Price, as defined in Section 2(b).

 

Section 1.            Definitions.  Capitalized terms used and not otherwise defined herein shall have the meanings set forth in that certain Securities Purchase Agreement (the “Purchase Agreement”), dated July 23, 2010, among the Company and the purchasers signatory thereto.

 

Section 2.            Exercise.

 

a)           Exercise of Warrant.  Exercise of the purchase rights represented by this Warrant may be made, in whole or in part, at any time or times on or after the Initial Exercise Date and on or before the Termination Date by delivery to the Company (or such other office or agency of the Company as it may designate by notice in writing to the registered Holder at the address of the Holder appearing on the books of the Company) of a duly executed facsimile copy of the Notice of Exercise Form annexed hereto. The Company hereby acknowledges prior receipt of the Exercise Price for all of the Warrant Shares issuable upon future exercise of this Warrant. Notwithstanding anything herein to the contrary, the Holder shall not be required to physically surrender this Warrant to the Company until the Holder has purchased all of the Warrant Shares available hereunder and the Warrant has been exercised in full, in which case, the Holder shall surrender this Warrant to the Company for cancellation within three (3) Trading Days of the date the final Notice of Exercise is delivered to the Company. Partial exercises of this Warrant resulting in purchases of a portion of the total number of Warrant Shares available hereunder shall have the effect of lowering the outstanding number of Warrant Shares purchasable hereunder in an amount equal to the applicable number of Warrant Shares purchased.  The Holder and the Company shall maintain records showing the number of Warrant Shares purchased and the date of such purchases. The Company shall deliver any objection to any Notice of Exercise Form within one (1) Business Day of receipt of such notice.  The Holder and any assignee, by acceptance of this Warrant, acknowledge and agree that, by reason of the provisions of this paragraph, following the purchase of a portion of the Warrant Shares hereunder, the number of Warrant Shares available for purchase hereunder at any given time may be less than the amount stated on the face hereof.

  

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b)           Exercise Price.  The exercise price per share of the Common Stock under this Warrant shall be $0.14, subject to adjustment hereunder (the “Exercise Price”).

 

c)          Mechanics of Exercise.

 

i.      Delivery of Certificates Upon Exercise.  Certificates for shares purchased hereunder shall be transmitted by the Transfer Agent to the Holder by crediting the account of the Holder’s prime broker with The Depository Trust Company through its Deposit or Withdrawal at Custodian system (“DWAC”) if the Company is then a participant in such system and either (A) there is an effective registration statement permitting the issuance of the Warrant Shares to or resale of the Warrant Shares by the Holder or (B) the shares are eligible for resale by the Holder without volume or manner-of-sale limitations pursuant to Rule 144, and otherwise by physical delivery to the address specified by the Holder in the Notice of Exercise by the date that is three (3) Trading Days after the delivery to the Company of the Notice of Exercise (such date, the “Warrant Share Delivery Date”).   The Warrant Shares shall be deemed to have been issued, and Holder or any other person so designated to be named therein shall be deemed to have become a holder of record of such shares for all purposes, as of the date the Warrant has been exercised and all taxes required to be paid by the Holder, if any, pursuant to Section 2(c)(vi) prior to the issuance of such shares, having been paid.  If the Company fails for any reason to deliver to the Holder certificates evidencing the Warrant Shares subject to a Notice of Exercise by the Warrant Share Delivery Date, the Company shall pay to the Holder, in cash, as liquidated damages and not as a penalty, for each $1,000 of Warrant Shares subject to such exercise (based on the VWAP of the Common Stock on the date of the applicable Notice of Exercise), $10 per Trading Day (increasing to $20 per Trading Day on the fifth Trading Day after such liquidated damages begin to accrue) for each Trading Day after such Warrant Share Delivery Date until such certificates are delivered or Holder rescinds such exercise.

 

  

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ii.          Delivery of New Warrants Upon Exercise.  If this Warrant shall have been exercised in part, the Company shall, at the request of a Holder and upon surrender of this Warrant certificate, at the time of delivery of the certificate or certificates representing Warrant Shares, deliver to the Holder a new Warrant evidencing the rights of the Holder to purchase the unpurchased Warrant Shares called for by this Warrant, which new Warrant shall in all other respects be identical with this Warrant.

 

iii.         Rescission Rights.  If the Company fails to cause the Transfer Agent to transmit to the Holder a certificate or the certificates representing the Warrant Shares pursuant to Section 2(c)(i) by the Warrant Share Delivery Date, then the Holder will have the right to rescind such exercise.

 

iv.         Compensation for Buy-In on Failure to Timely Deliver Certificates Upon Exercise.  In addition to any other rights available to the Holder, if the Company fails to cause the Transfer Agent to transmit to the Holder a certificate or the certificates representing the Warrant Shares pursuant to an exercise on or before the Warrant Share Delivery Date, and if after such date the Holder is required by its broker to purchase (in an open market transaction or otherwise) or the Holder’s brokerage firm otherwise purchases, shares of Common Stock to deliver in satisfaction of a sale by the Holder of the Warrant Shares which the Holder anticipated receiving upon such exercise (a “Buy-In”), then the Company shall (A) pay in cash to the Holder the amount, if any, by which (x) the Holder’s total purchase price (including brokerage commissions, if any) for the shares of Common Stock so purchased exceeds (y) the amount obtained by multiplying (1) the number of Warrant Shares that the Company was required to deliver to the Holder in connection with the exercise at issue times (2) the price at which the sell order giving rise to such purchase obligation was executed, and (B) at the option of the Holder, either reinstate the portion of the Warrant and equivalent number of Warrant Shares for which such exercise was not honored (in which case such exercise shall be deemed rescinded) or deliver to the Holder the number of shares of Common Stock that would have been issued had the Company timely complied with its exercise and delivery obligations hereunder.  For example, if the Holder purchases Common Stock having a total purchase price of $11,000 to cover a Buy-In with respect to an attempted exercise of shares of Common Stock with an aggregate sale price giving rise to such purchase obligation of $10,000, under clause (A) of the immediately preceding sentence the Company shall be required to pay the Holder $1,000. The Holder shall provide the Company written notice indicating the amounts payable to the Holder in respect of the Buy-In and, upon request of the Company, evidence of the amount of such loss.  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.

  

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v.         No Fractional Shares or Scrip.  No fractional shares or scrip representing fractional shares shall be issued upon the exercise of this Warrant.  As to any fraction of a share which the Holder would otherwise be entitled to purchase upon such exercise, the Company shall, at its election, either pay a cash adjustment in respect of such final fraction in an amount equal to such fraction multiplied by the Exercise Price or round up to the next whole share.

 

vi.         Charges, Taxes and Expenses.  Issuance of certificates for Warrant Shares shall be made without charge to the Holder for any issue or transfer tax or other incidental expense in respect of the issuance of such certificate, all of which taxes and expenses shall be paid by the Company, and such certificates shall be issued in the name of the Holder or in such name or names as may be directed by the Holder; provided, however, that in the event certificates for Warrant Shares are to be issued in a name other than the name of the Holder, this Warrant when surrendered for exercise shall be accompanied by the Assignment Form attached hereto duly executed by the Holder and the Company may require, as a condition thereto, the payment of a sum sufficient to reimburse it for any transfer tax incidental thereto.

 

vii.         Closing of Books.  The Company will not close its stockholder books or records in any manner which prevents the timely exercise of this Warrant, pursuant to the terms hereof.

 

e)           Holder’s Exercise Limitations.  The Company shall not effect any exercise of this Warrant, and a Holder shall not have the right to exercise any portion of this Warrant, pursuant to Section 2 or otherwise, to the extent that after giving effect to such issuance after exercise as set forth on the applicable Notice of Exercise, the Holder (together with the Holder’s Affiliates, and any other Persons acting as a group together with the Holder or any of the Holder’s Affiliates), would beneficially own in excess of the Beneficial Ownership Limitation (as defined below).  For purposes of the foregoing sentence, the

 

  

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number of shares of Common Stock beneficially owned by the Holder and its Affiliates shall include the number of shares of Common Stock issuable upon exercise of this Warrant with respect to which such determination is being made, but shall exclude the number of shares of Common Stock which would be issuable upon (i) exercise of the remaining, nonexercised portion of this Warrant beneficially owned by the Holder or any of its Affiliates and (ii) exercise or conversion of the unexercised or nonconverted portion of any other securities of the Company (including, without limitation, any other  Common Stock Equivalents) subject to a limitation on conversion or exercise analogous to the limitation contained herein beneficially owned by the Holder or any of its Affiliates.  Except as set forth in the preceding sentence, for purposes of this Section 2(d), beneficial ownership shall be calculated in accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder, it being acknowledged by the Holder that the Company is not representing to the Holder that such calculation is in compliance with Section 13(d) of the Exchange Act and the Holder is solely responsible for any schedules required to be filed in accordance therewith.   To the extent that the limitation contained in this Section 2(d) applies, the determination of whether this Warrant is exercisable (in relation to other securities owned by the Holder together with any Affiliates) and of which portion of this Warrant is exercisable shall be in the sole discretion of the Holder, and the submission of a Notice of Exercise shall be deemed to be the Holder’s determination of whether this Warrant is exercisable (in relation to other securities owned by the Holder together with any Affiliates) and of which portion of this Warrant is exercisable, in each case subject to the Beneficial Ownership Limitation, and the Company shall have no obligation to verify or confirm the accuracy of such determination.   In addition, a determination as to any group status as contemplated above shall be determined in accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder.  For purposes of this Section 2(d), in determining the number of outstanding shares of Common Stock, a Holder may rely on the number of outstanding shares of Common Stock as reflected in (A) the Company’s most recent periodic or annual report filed with the Commission, as the case may be, (B) a more recent public announcement by the Company or (C) a more recent written notice by the Company or the Transfer Agent setting forth the number of shares of Common Stock outstanding.  Upon the written or oral request of a Holder, the Company shall within two Trading Days confirm orally and in writing to the Holder the number of shares of Common Stock then outstanding.  In any case, the number of outstanding shares of Common Stock shall be determined after giving effect to the conversion or exercise of securities of the Company, including this Warrant, by the Holder or its Affiliates since the date as of which such number of outstanding shares of Common Stock was reported.  The “Beneficial Ownership Limitation” shall be 9.99% of the number of shares of the Common Stock outstanding immediately after giving effect to the issuance of shares of Common Stock issuable upon exercise of this Warrant.  The provisions of this paragraph shall be construed and implemented in a manner otherwise than in strict conformity with the terms of this Section 2(d) to correct this paragraph (or any portion hereof) which may be defective or inconsistent with the intended Beneficial Ownership Limitation herein contained or to make changes or supplements necessary or desirable to properly give effect to such limitation. The limitations contained in this paragraph shall apply to a successor holder of this Warrant.

  

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Section 3.            Certain Adjustments.

 

a)           Stock Dividends and Splits. If the Company, at any time while this Warrant is outstanding: (i) pays a stock dividend or otherwise makes a distribution or distributions on shares of its Common Stock or any other equity or equity equivalent securities payable in shares of Common Stock (which, for avoidance of doubt, shall not include any shares of Common Stock issued by the Company upon exercise of this Warrant), (ii) subdivides outstanding shares of Common Stock into a larger number of shares, (iii) combines (including by way of reverse stock split) outstanding shares of Common Stock into a smaller number of shares or (iv) issues by reclassification of shares of the Common Stock any shares of capital stock of the Company, then in each case the Exercise Price shall be multiplied by a fraction of which the numerator shall be the number of shares of Common Stock (excluding treasury shares, if any) outstanding immediately before such event and of which the denominator shall be the number of shares of Common Stock outstanding immediately after such event, and the number of shares issuable upon exercise of this Warrant shall be proportionately adjusted such that the aggregate Exercise Price of this Warrant shall remain unchanged.  Any adjustment made pursuant to this Section 3(a) shall become effective immediately after the record date for the determination of stockholders entitled to receive such dividend or distribution and shall become effective immediately after the effective date in the case of a subdivision, combination or re-classification.

 

b)           Subsequent Rights Offerings.  If the Company, at any time while the Warrant is outstanding, shall issue rights, options or warrants to all holders of Common Stock (and not to the Holder) entitling them to subscribe for or purchase shares of Common Stock at a price per share less than the VWAP on the record date mentioned below, then the Exercise Price shall be multiplied by a fraction, of which the denominator shall be the number of shares of the Common Stock outstanding on the date of issuance of such rights, options or warrants plus the number of additional shares of Common Stock offered for subscription or purchase, and of which the numerator shall be the number of shares of the Common Stock outstanding on the date of issuance of such rights, options or warrants plus the number of shares which the aggregate offering price of the total number of shares so offered (assuming receipt by the Company in full of all consideration payable upon exercise of such rights, options or warrants) would purchase at such VWAP.  Such adjustment shall be made whenever such rights, options or warrants are issued, and shall become effective immediately after the record date for the determination of stockholders entitled to receive such rights, options or warrants.

 

c)           Pro Rata Distributions.  If the Company, at any time while this Warrant is outstanding, shall distribute to all holders of Common Stock (and not to the Holder) evidences of its indebtedness or assets (including cash and cash dividends) or rights or warrants to subscribe for or purchase any security, then in each such case the Exercise Price shall be adjusted by multiplying the Exercise Price in effect immediately prior to the record date fixed for determination of stockholders entitled to receive such distribution by a fraction of which the denominator shall be the VWAP determined as of the record date mentioned above, and of which the numerator shall be such VWAP on such record date less the then per share fair market value at such record date of the portion of such assets or evidence of indebtedness or rights or warrants so distributed applicable to one outstanding share of the Common Stock as determined by the Board of Directors in good faith.  In either case the adjustments shall be described in a statement provided to the Holder of the portion of assets or evidences of indebtedness so distributed or such subscription rights applicable to one share of Common Stock.  Such adjustment shall be made whenever any such distribution is made and shall become effective immediately after the record date mentioned above.

 

  

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d)           Fundamental Transaction. If, at any time while this Warrant is outstanding, (i) the Company, directly or indirectly, in one or more related transactions effects any merger or consolidation of the Company with or into another Person, (ii) the Company, directly or indirectly, effects any sale, lease, license, assignment, transfer, conveyance or other disposition of all or substantially all of its assets in one or a series of related transactions, (iii) any, direct or indirect, purchase offer, tender offer or exchange offer (whether by the Company or another Person) is completed pursuant to which holders of Common Stock are permitted to sell, tender or exchange their shares for other securities, cash or property and has been accepted by the holders of 50% or more of the outstanding Common Stock, (iv) the Company, directly or indirectly, in one or more related transactions effects any reclassification, reorganization or recapitalization 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, (v) the Company, directly or indirectly, in one or more related transactions consummates a stock or share purchase agreement or other business combination (including, without limitation, a reorganization, recapitalization, spin-off or scheme of arrangement) with another Person or group of Persons whereby such other Person or group acquires more than 50% of the outstanding shares of Common Stock (not including any shares of Common Stock held by the other Person or other Persons making or party to, or associated or affiliated with the other Persons making or party to, such stock or share purchase agreement or other business combination) (each a “Fundamental Transaction”), then, upon any subsequent exercise of this Warrant, the Holder shall have the right to receive, for each Warrant Share that would have been issuable upon such exercise immediately prior to the occurrence of such Fundamental Transaction, at the option of the Holder (without regard to any limitation in Section 2(d) on the exercise of this Warrant), the number of shares of Common Stock of the successor or acquiring corporation or of the Company, if it is the surviving corporation, and any additional consideration (the “Alternate Consideration”) receivable as a result of such Fundamental Transaction by a holder of the number of shares of Common Stock for which this Warrant is exercisable immediately prior to such Fundamental Transaction (without regard to any limitation in Section 2(d) on the exercise of this Warrant).  For purposes of any such exercise, the determination of the Exercise Price shall be appropriately adjusted to apply to such Alternate Consideration based on the amount of Alternate Consideration issuable in respect of one share of Common Stock in such Fundamental Transaction, and the Company shall apportion the Exercise Price

 

  

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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.  Notwithstanding anything to the contrary, in the event of a Fundamental Transaction that is (1) an all cash transaction, (2) a “Rule 13e-3 transaction” as defined in Rule 13e-3 under the Exchange Act, or (3) a Fundamental Transaction involving a person or entity not traded on a national securities exchange, the Company or any Successor Entity (as defined below) shall, at the Holder’s option, exercisable at any time concurrently with, or within 30 days after, the consummation of the Fundamental Transaction, purchase this Warrant from the Holder by paying to the Holder an amount of cash equal to the Black Scholes Value of the remaining unexercised portion of this Warrant on the date of the consummation of such Fundamental Transaction.  “Black Scholes Value” means the value of this Warrant based on the Black and Scholes Option Pricing Model obtained from the “OV” function on Bloomberg, L.P. (“Bloomberg”) determined as of the day of consummation of the applicable Fundamental Transaction for pricing purposes and reflecting (A) a risk-free interest rate corresponding to the U.S. Treasury rate for a period equal to the time between the date of the public announcement of the applicable Fundamental Transaction and the Termination Date, (B) an expected volatility equal to the greater of 100% and the 100 day volatility obtained from the HVT function on Bloomberg as of the Trading Day immediately following the public announcement of the applicable Fundamental Transaction, (C) the underlying price per share used in such calculation shall be the sum of the price per share being offered in cash, if any, plus the value of any non-cash consideration, if any, being offered in such Fundamental Transaction and (D) a remaining option time equal to the time between the date of the public announcement of the applicable Fundamental Transaction and the Termination Date.  The Company shall cause any successor entity in a Fundamental Transaction in which the Company is not the survivor (the “Successor Entity”) to assume in writing all of the obligations of the Company under this Warrant and the other Transaction Documents in accordance with the provisions of this Section 3(d) pursuant to written agreements in form and substance reasonably satisfactory to the Holder and approved by the Holder (without unreasonable delay) prior to such Fundamental Transaction and shall, at the option of the Holder, deliver to the Holder in exchange for this Warrant a security of the Successor Entity evidenced by a written instrument substantially similar in form and substance to this Warrant which is exercisable for a corresponding number of shares of capital stock of such Successor Entity (or its parent entity) equivalent to the shares of Common Stock acquirable and receivable upon exercise of this Warrant (without regard to any limitations on the exercise of this Warrant) prior to such Fundamental Transaction, and with an exercise price which applies the exercise price hereunder to such shares of capital stock (but taking into account the relative value of the shares of Common Stock pursuant to such Fundamental Transaction and the value of such shares of capital stock, such number of shares of capital stock and such exercise price being for the purpose of protecting the economic value of this Warrant immediately prior to the consummation of such Fundamental Transaction), and which is reasonably satisfactory in form and substance to the Holder.

 

  

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Upon the occurrence of any such Fundamental Transaction, the Successor Entity shall succeed to, and be substituted for (so that from and after the date of such Fundamental Transaction, the provisions of this Warrant and the other Transaction Documents referring to the “Company” shall refer instead to the Successor Entity), and may exercise every right and power of the Company and shall assume all of the obligations of the Company under this Warrant and the other Transaction Documents with the same effect as if such Successor Entity had been named as the Company herein.

 

e)           Calculations. All calculations under this Section 3 shall be made to the nearest cent or the nearest 1/100th of a share, as the case may be. For purposes of this Section 3, the number of shares of Common Stock deemed to be issued and outstanding as of a given date shall be the sum of the number of shares of Common Stock (excluding treasury shares, if any) issued and outstanding.

 

f)           Notice to Holder.

 

i.      Adjustment to Exercise Price. Whenever the Exercise Price is adjusted pursuant to any provision of this Section 3, the Company shall promptly mail to the Holder a notice setting forth the Exercise Price after such adjustment and any resulting adjustment to the number of Warrant Shares and setting forth a brief statement of the facts requiring such adjustment..

 

ii.      Notice to Allow Exercise by Holder. If (A) the Company shall declare a dividend (or any other distribution in whatever form) on the Common Stock, (B) the Company shall declare a special nonrecurring cash dividend on or a redemption of the Common Stock, (C) the Company shall authorize the granting to all holders of the Common Stock rights or warrants to subscribe for or purchase any shares of capital stock of any class or of any rights, (D) the approval of any stockholders of the Company shall be required in connection with any reclassification of the Common Stock, any consolidation or merger to which the Company is a party, any sale or transfer of all or substantially all of the assets of the Company, or any compulsory share exchange whereby the Common Stock is converted into other securities, cash or property, or (E) the Company shall authorize the voluntary or involuntary dissolution, liquidation or winding up of the affairs of the Company, then, in each case, the Company shall cause to be mailed to the Holder at its last address as it shall appear upon the Warrant Register of the Company, at least 20 calendar days prior to the applicable record or effective date hereinafter specified, a notice stating (x) the date on which a record is to be taken for the purpose of such dividend, distribution, redemption, rights or warrants, or if a record is not to be taken, the date as of which the holders of the Common Stock of record to be entitled to such dividend, distributions, redemption, rights or warrants are to be determined or (y) the date on which such reclassification, consolidation, merger, sale, transfer or share exchange is expected to become effective or close, and the date as of which it is expected that holders of the Common Stock of record shall be entitled to exchange their shares of the Common Stock for securities, cash or other property deliverable upon such reclassification, consolidation, merger, sale, transfer or share exchange; provided that the failure to mail such notice or any defect therein or in the mailing thereof shall not affect the validity of the corporate action required to be specified in such notice.  To the extent that any notice provided hereunder constitutes, or contains, material, non-public information regarding the Company or any of the Subsidiaries, the Company shall simultaneously file such notice with the Commission pursuant to a Current Report on Form 8-K.  The Holder shall remain entitled to exercise this Warrant during the period commencing on the date of such notice to the effective date of the event triggering such notice  except as may otherwise be expressly set forth herein.

 

  

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Section 4.             Transfer of Warrant.

 

a)           Transferability.  Subject to compliance with any applicable securities laws and the conditions set forth in Section 4(d) hereof and to the provisions of Section 4.1 of the Purchase Agreement, this Warrant and all rights hereunder (including, without limitation, any registration rights) are transferable, in whole or in part, upon surrender of this Warrant at the principal office of the Company or its designated agent, together with a written assignment of this Warrant substantially in the form attached hereto duly executed by the Holder or its agent or attorney and funds sufficient to pay any transfer taxes payable upon the making of such transfer.  Upon such surrender and, if required, such payment, the Company shall execute and deliver a new Warrant or Warrants in the name of the assignee or assignees, as applicable, and in the denomination or denominations specified in such instrument of assignment, and shall issue to the assignor a new Warrant evidencing the portion of this Warrant not so assigned, and this Warrant shall promptly be cancelled.  The Warrant, if properly assigned in accordance herewith, may be exercised by a new holder for the purchase of Warrant Shares without having a new Warrant issued.

 

b)           New Warrants. This Warrant may be divided or combined with other Warrants upon presentation hereof at the aforesaid office of the Company, together with a written notice specifying the names and denominations in which new Warrants are to be issued, signed by the Holder or its agent or attorney.  Subject to compliance with Section 4(a), as to any transfer which may be involved in such division or combination, the Company shall execute and deliver a new Warrant or Warrants in exchange for the Warrant or Warrants to be divided or combined in accordance with such notice. All Warrants issued on transfers or exchanges shall be dated the original Issue Date and shall be identical with this Warrant except as to the number of Warrant Shares issuable pursuant thereto.

 

c)           Warrant Register. 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.

 

  

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d)           Transfer Restrictions. If, at the time of the surrender of this Warrant in connection with any transfer of this Warrant, the transfer of this Warrant shall not be either (i) registered pursuant to an effective registration statement under the Securities Act and under applicable state securities or blue sky laws or (ii) eligible for resale without volume or manner-of-sale restrictions or current public information requirements pursuant to Rule 144, the Company may require, as a condition of allowing such transfer, that the Holder or transferee of this Warrant, as the case may be, comply with the provisions of Section 5.7 of the Purchase Agreement.

 

e)           Representation by the Holder.  The Holder, by the acceptance hereof, represents and warrants that it is acquiring this Warrant and, upon any exercise hereof, will acquire the Warrant Shares issuable upon such exercise, for its own account and not with a view to or for distributing or reselling such Warrant Shares or any part thereof in violation of the Securities Act or any applicable state securities law, except pursuant to sales registered or exempted under the Securities Act.

 

Section 5.             Miscellaneous.

 

a)           No Rights as Stockholder Until Exercise.  This Warrant does not entitle the Holder to any voting rights, dividends or other rights as a stockholder of the Company prior to the exercise hereof as set forth in Section 2(c)(i).

 

b)           Loss, Theft, Destruction or Mutilation of Warrant. The Company covenants that upon receipt by the Company of evidence reasonably satisfactory to it of the loss, theft, destruction or mutilation of this Warrant or any stock certificate relating to the Warrant Shares, and in case of loss, theft or destruction, of indemnity or security reasonably satisfactory to it (which, in the case of the Warrant, shall not include the posting of any bond), and upon surrender and cancellation of such Warrant or stock certificate, if mutilated, the Company will make and deliver a new Warrant or stock certificate of like tenor and dated as of such cancellation, in lieu of such Warrant or stock certificate.

 

c)           Saturdays, Sundays, Holidays, etc.  If the last or appointed day for the taking of any action or the expiration of any right required or granted herein shall not be a Business Day, then, such action may be taken or such right may be exercised on the next succeeding Business Day.

 

d)           Authorized Shares.

 

The Company covenants that, during the period the Warrant is outstanding, it will reserve from its authorized and unissued Common Stock a sufficient number of shares to provide for the issuance of the Warrant Shares upon the exercise of any purchase rights under this Warrant.  The Company further covenants that its issuance of this Warrant shall constitute full authority to its officers who are charged with the duty of executing stock certificates to execute and issue the necessary certificates for the Warrant Shares upon the exercise of the purchase rights under this Warrant.  The Company will take all such reasonable action as may be necessary to assure that such Warrant Shares may be issued as provided herein without violation of any applicable law or regulation, or of any requirements of the Trading Market upon which the Common Stock may be listed.  The Company covenants that all Warrant Shares which may be issued upon the exercise of the purchase rights represented by this Warrant will, upon exercise of the purchase rights represented by this Warrant and payment for such Warrant Shares in accordance herewith, be duly authorized, validly issued, fully paid and nonassessable and free from all taxes, liens and charges created by the Company in respect of the issue thereof (other than taxes in respect of any transfer occurring contemporaneously with such issue).

 

  

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Except and to the extent as waived or consented to by the Holder, the Company shall not by any action, including, without limitation, amending its certificate of incorporation 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 actions as may be necessary or appropriate to protect the rights of Holder as set forth in this Warrant against impairment.  Without limiting the generality of the foregoing, the Company will (i) not increase the par value of any Warrant Shares above the amount payable therefor upon such exercise immediately prior to such increase in par value, (ii) take all such action as may be necessary or appropriate in order that the Company may validly and legally issue fully paid and nonassessable Warrant Shares upon the exercise of this Warrant and (iii) use commercially reasonable efforts to obtain all such authorizations, exemptions or consents from any public regulatory body having jurisdiction thereof, as may be, necessary to enable the Company to perform its obligations under this Warrant.

 

Before taking any action which would result in an adjustment in the number of Warrant Shares for which this Warrant is exercisable or in the Exercise Price, the Company shall obtain all such authorizations or exemptions thereof, or consents thereto, as may be necessary from any public regulatory body or bodies having jurisdiction thereof.

 

e)           Jurisdiction. All questions concerning the construction, validity, enforcement and interpretation of this Warrant shall be determined in accordance with the provisions of the Purchase Agreement.

 

f)           Restrictions.  The Holder acknowledges that the Warrant Shares acquired upon the exercise of this Warrant, if not registered, will have restrictions upon resale imposed by state and federal securities laws.

 

g)           Nonwaiver and Expenses.  No course of dealing or any delay or failure to exercise any right hereunder on the part of Holder shall operate as a waiver of such right or otherwise prejudice the Holder’s rights, powers or remedies, notwithstanding the fact that all rights hereunder terminate on the Termination Date.  If the Company willfully and knowingly fails to comply with any provision of this Warrant, which results in any material damages to the Holder, the Company shall pay to the Holder such amounts as shall be sufficient to cover any costs and expenses including, but not limited to, reasonable attorneys’ fees, including those of appellate proceedings, incurred by the Holder in collecting any amounts due pursuant hereto or in otherwise enforcing any of its rights, powers or remedies hereunder.

 

  

12

  

 

h)           Notices.  Any notice, request or other document required or permitted to be given or delivered to the Holder by the Company shall be delivered in accordance with the notice provisions of the Purchase Agreement.

 

i)           Limitation of Liability.  No provision hereof, in the absence of any affirmative action by the Holder to exercise this Warrant to purchase Warrant Shares, and no enumeration herein of the rights or privileges of the Holder, shall give rise to any liability of the Holder for the purchase price of any Common Stock or as a stockholder of the Company, whether such liability is asserted by the Company or by creditors of the Company.

 

j)           Remedies.  The Holder, in addition to being entitled to exercise all rights granted by law, including recovery of damages, will be entitled to specific performance of its rights under this Warrant.  The Company agrees that monetary damages would not be adequate compensation for any loss incurred by reason of a breach by it of the provisions of this Warrant and hereby agrees to waive and not to assert the defense in any action for specific performance that a remedy at law would be adequate.

 

k)           Successors and Assigns.  Subject to applicable securities laws, this Warrant and the rights and obligations evidenced hereby shall inure to the benefit of and be binding upon the successors and permitted assigns of the Company and the successors and permitted assigns of Holder.  The provisions of this Warrant are intended to be for the benefit of any Holder from time to time of this Warrant and shall be enforceable by the Holder or holder of Warrant Shares.

 

l)           Amendment.  This Warrant may be modified or amended or the provisions hereof waived with the written consent of the Company and the Holder.

 

m)           Severability.  Wherever possible, each provision of this Warrant shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Warrant shall be prohibited by or invalid under applicable law, such provision shall be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such provisions or the remaining provisions of this Warrant.

 

n)           Headings.  The headings used in this Warrant are for the convenience of reference only and shall not, for any purpose, be deemed a part of this Warrant.

 

********************

(Signature Page Follows)

 

  

13

  

 

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

 

 

 

	  	
ENSURGE, INC.

 

 

	  	
By:    /s/ Jeff A. Hanks                                                        

 

 

Name:  Jeff A. Hanks

Title:  CFO

 

  

14

  

NOTICE OF EXERCISE

TO:           ENSURGE, INC.

(1)      The undersigned hereby elects to purchase ________ Warrant Shares of the Company pursuant to the terms of the attached Warrant (only if exercised in full), and tenders herewith payment of all applicable transfer taxes, if any.

 

(2)      Please issue a certificate or certificates representing said Warrant Shares in the name of the undersigned or in such other name as is specified below:

 

_______________________________

The Warrant Shares shall be delivered to the following DWAC Account Number or by physical delivery of a certificate to:

_______________________________

_______________________________

_______________________________

(3)  Accredited Investor.  The undersigned is an “accredited investor” as defined in Regulation D promulgated under the Securities Act of 1933, as amended.

[SIGNATURE OF HOLDER]

Name of Investing Entity:  _______________________________________________________________________

Signature of Authorized Signatory of Investing Entity: _________________________________________________

Name of Authorized Signatory: ___________________________________________________________________

Title of Authorized Signatory: ____________________________________________________________________

Date: _______________________________________________________________________________________

  

15

  

 

ASSIGNMENT FORM

(To assign the foregoing warrant, execute

this form and supply required information.

Do not use this form to exercise the warrant.)

FOR VALUE RECEIVED, [____] all of or [_______] shares of the foregoing Warrant and all rights evidenced thereby are hereby assigned to

 

_______________________________________________ whose address is

_______________________________________________________________.

_______________________________________________________________

Dated:  ______________, _______

Holder’s Signature:                                _____________________________

Holder’s Address:                                 _____________________________

                  _____________________________

Signature Guaranteed:  ___________________________________________

NOTE:  The signature to this Assignment Form must correspond with the name as it appears on the face of the Warrant, without alteration or enlargement or any change whatsoever, and must be guaranteed by a bank or trust company.  Officers of corporations and those acting in a fiduciary or other representative capacity should file proper evidence of authority to assign the foregoing Warrant.Exhibit 10.1

 

EXECUTION
COPY

 

EMPLOYMENT AGREEMENT

 

This Employment Agreement (this “Agreement”) is effective as of May 5,
2010 (the “Effective Date”), by and among Aventine Renewable Energy
Holdings, Inc. (together with its successors and assigns the “Company”)
and John Castle (“Executive”).

 

WHEREAS, the Company desires to employ Executive as Chief Financial
Officer of the Company;

 

WHEREAS, Executive desires to accept such employment, subject to the
terms and provisions of this Agreement; and

 

NOW, THEREFORE, in consideration of the premises and mutual covenants
continued herein and for other good and valuable consideration, the receipt of
which is mutually acknowledged, the Company and Executive (collectively, the “Parties”)
agree as follows:

 

1.             Term of
Employment. The Company
hereby agrees to employ Executive under this Agreement, and Executive hereby
accepts such employment, for the “Term of Employment” which shall
commence as of the Effective Date and shall end on December 31, 2012.

 

2.             Position, Duties and Responsibilities.

 

(a)           During the Term of
Employment, Executive shall serve as the Chief Financial Officer of the
Company; shall have all authorities, duties and responsibilities customarily
exercised by an individual serving in those positions in enterprises of a
similar size and structure; shall be assigned no authorities, duties or
responsibilities that are inconsistent with, or that impair his ability to
discharge, the foregoing authorities, duties and responsibilities; and shall
report directly to the Chief Executive Officer of the Company (the “CEO”).

 

(b)           Executive shall
devote substantially all of his business time and efforts to the affairs of the
Company; provided, however, that while employed by the Company,
Executive may serve as a member of the board of directors of any for-profit
company with the consent of the Board of Directors of the Company the “Board”)
(which will not be unreasonably withheld). 
In addition, without approval of the Board, Executive may (i) serve on the boards of directors of any not-for-profit
entity, (ii) serve in
any capacity with respect to any civic, educational, professional or charitable
organization, and (iii) manage
his and his family’s personal investments, provided, that such
activities do not materially interfere or conflict with the performance of his duties to
the Company or create a business conflict with the Company.

 

(c)           Upon expiration of
the Term of Employment or the termination of Executive’s employment for any
reason, Executive shall resign, in writing, from any positions he then holds
with the Company, including membership on any boards.

 

3.             Principal
Place of Business.  Executive’s principal place of business shall
be located in an office of the Company in Dallas, Texas.  Executive agrees to travel on behalf of the
Company as reasonably necessary to perform his duties under this Agreement,
including to the Company’s offices in Pekin, Illinois, to which Executive
acknowledges he may be required to 

 

1

 

travel on a regular basis.  The Company will pay, or reimburse Executive
in accordance with Section 4(f) below, for all reasonable and
necessary costs in connection with such travel.

 

4.             Compensation
and Benefits.

 

(a)           Base Salary.
Commencing as of the Effective Date, the Company shall pay Executive an
annualized Base Salary of $350,000 (“Base Salary”), payable in
accordance with the regular payroll practices applicable to senior executives
of the Company.  Executive’s Base Salary
shall be reviewed by the Board for possible increase no less frequently than
annually during the Term of Employment and any increased Base Salary shall
constitute “Base Salary” for purposes hereof. 
The Base Salary (including as increased pursuant to the preceding
sentence) shall not be decreased at any time during the Term of Employment.

 

(b)           Annual Bonus.
Executive will be entitled to receive an annual bonus each year during the Term
of Employment (the “Bonus”) with a target equal to at least 100% of
Executive’s Base Salary for the applicable year based on reasonably attainable
goals as determined by the Board or its Compensation Committee; provided that
for 2010 Executive’s Bonus will be no less than $350,000.  In addition, Executive shall be afforded the
opportunity to earn an incentive bonus of up another 100% of the Executive’s
Base Salary each year during the Term based on attainment of extraordinary
performance metrics determined by the CEO and approved by the Board or its
Compensation Committee (each an “Incentive Bonus”). 
Bonuses will be paid in accordance with the Company’s bonus policy as in
effect from time to time, but in no event later than 21⁄2 months after the fiscal
year in which it is earned.

 

(c)           Employee Benefits.
During the Term of Employment, Executive shall be entitled to participate in
all employee benefit plans and programs offered by the Company to senior
executives of the Company, and, subject to the eligibility requirements for
participation therein, any employee benefit plans and programs which the Company
may adopt from time to time generally for its employees.

 

(d)           Vacations.
During the Term of Employment, Executive shall be entitled to four (4) weeks
of paid vacation per year to be accrued and taken in accordance with the
Company’s normal vacation policies.

 

(e)           Reimbursement of
Business and Other Expenses. During the Term of Employment, Executive is
authorized to incur reasonable expenses, including, without limitation, expenses for travel, entertainment and other
ordinary and necessary activities, in carrying out his duties and responsibilities
under this Agreement, and the Company shall promptly reimburse him for all such
expenses subject to documentation and subject to the expense reimbursement
policies of the Company relating to expense reimbursement.

 

5.             Equity
Arrangements.

 

(a)           Equity Awards.  On the Effective Date, the Company will grant
the following equity awards to Executive: 
(i) stock options to purchase 100,000 shares of the Company’s
common stock (the “Common Stock”) (the “Options”) and (ii) 25,000
restricted shares of Common Stock (the “Restricted Stock,” and together
with the Options, the “Equity Awards”) 

 

2

 

granted
pursuant to the Company’s equity incentive plan as in effect on the Effective
Date (the “Incentive Plan”).

 

(b)           Vesting.  Fifty (50%) percent of the Options and Fifty (50%) percent of
the Restricted Stock will vest in the three equal installments on each of the
first two anniversaries of the Effective Date and December 31, 2012, subject
to Executive’s continuing employment with the Company.  Fifty (50%) percent of
the Options and Fifty (50%) percent of the Restricted Stock will vest
subject to the attainment of reasonable performance criteria to be determined
by the Board.  Notwithstanding the foregoing,
in the event of (A) a Change of Control (as defined below) of the Company,
then 100% of the Equity Awards shall vest, and the Options will remain
exercisable for the remainder of the Option Term (as defined below), or (B) a
termination of Executive’s employment by the Company without Cause (as defined
below), or Executive’s resignation with Good Reason (as defined below), then
100% of the Equity Awards shall vest, and the Options will remain exercisable
for the applicable period set forth in Section 9(d)(iii).  Any vested Options held by Executive as of
his termination shall remain exercisable for the applicable periods specified
below under Section 9.  The Options
shall expire ten (10) years following the Effective Date (the “Option
Term”).

 

(c)           Exercise Price.  The exercise price of each share of Common
Stock underlying an Option shall be equal to the per share fair market value of
the Common Stock on the Effective Date, as determined by the Board in its sole
discretion, in a manner that complies with the requirements of Section 409A
of Internal Revenue Code of 1986, as amended (“Code”), and the
regulations and guidance promulgated thereunder (“Code Section 409A”).

 

(d)           Method of
Exercise.  To the extent vested, the
Options may be exercised by Executive in whole or in part at any time and from
time to time during the Option Term by giving written notice of exercise to the
Company specifying the number of shares of Common Stock to be acquired.  Such notice shall be accompanied by payment
in full of the purchase price as follows: (i) in cash or by check, bank
draft or money order payable to the order of the Company; (ii) through a
cashless exercise whereby the Company reduces the number of shares of Common
Stock issuable upon exercise with a value equal to the applicable exercise
price and withholding, (iii) solely to the extent permitted by applicable
law, if the Common Stock is then traded on a securities exchange or system in
the United States, through a procedure whereby Executive delivers irrevocable
instructions to a broker reasonably acceptable to the committee established
under the Incentive Plan (the “Committee”) to deliver promptly to the
Company an amount equal to the purchase price; or (iv) on such other terms
and conditions as may be acceptable to the Committee.

 

3

 

6.             Call/Sale
Participation/Piggy-Back Rights. 
In the event that, as of the
Effective Date, the Common Stock is not traded on a securities exchange or
system, then the provisions of this Section 6 shall apply to any Common
Stock acquired by or granted to Executive under any equity award granted to
Executive by the Company until the Common Stock is so traded.  Other than as specifically provided in this
Agreement, the Executive’s right to transfer shares of Common Stock acquired by
or granted to Executive under any equity award granted to Executive by the
Company shall not be limited nor shall such shares be subject to any claw-back
provision or be subject to forfeiture due to a breach of Section 11.

 

(a)           Call Right.  In the event of Executive’s termination for
Cause, the Company shall have a call right on any shares of Common Stock
acquired by or granted to Executive under any equity award granted to Executive
by the Company then held by Executive at a price per share equal to the lower
of the per share fair market value as of the purchase date, as determined by
the Board in its sole discretion, and the price paid by Executive for each
share of Common Stock; provided; that shares of Common Stock granted as
restricted shares shall be forfeited automatically and without consideration on
a termination for Cause.  For the
avoidance of doubt, the Company will not have any call right upon a termination
other than for Cause in respect of Executive’s shares of Common Stock.

 

(b)           Sale
Participation.  If the event of a
sale or other disposition of all or substantially all the Common Stock to a
third party whether by stock sale, merger or otherwise, Executive agrees to
reasonably participate in such transaction with respect to the Equity Awards
and sell, exchange or transfer such Equity Awards on a commercially reasonable
basis to the third party and the Company agrees to take all commercially
reasonable steps to facilitate such participation.

 

(c)           Piggyback
Registration Rights.  Executive will
be entitled to standard “piggyback” registration rights.

 

(d)           Initial Public
Offering.  All transfer restrictions,
call rights, sale participation rights and obligation under this Section 6
shall terminate on the earlier of a public offering of the Common Stock or the
listing of the Common Stock on a securities exchange or system.

 

7.             Termination of Employment. Executive’s employment hereunder may be
terminated during the Term of Employment under the following circumstances and
any such termination shall not be, nor deemed to be, a breach of this
Agreement:

 

(a)           Death.
Executive’s employment hereunder shall terminate automatically upon Executive’s
death.

 

(b)           Disability.  The Company shall have the right to terminate
Executive’s employment hereunder for Disability by providing Executive with a
Notice of Termination (as defined below) at least thirty (30) days prior to
such termination.  For purposes of this
Agreement, “Disability” shall mean Executive’s becoming incapacitated by
reason of sickness, accident or other physical or mental incapacity and having
been unable to perform his normal duties for a period of six (6) consecutive
months as a result thereof.

 

4

 

(c)           For Cause.
The Company shall have the right to terminate Executive’s employment for Cause
by providing Executive with a Notice of Termination.  For purposes of this Agreement, “Cause”
shall mean (i) willful misconduct or gross negligence of a material nature
by Executive in the performance of his duties; (ii) Executive’s being
convicted of, or pleading guilty or nolo contendere to a felony (other than a traffic violation); (iii) Executive’s
willful theft or embezzlement from the Company or its affiliates; (iv) willful
and substantial failure of Executive to perform his duties or any other
material breach by Executive of any material provision of this Agreement, which
is not cured (if curable) by Executive within thirty (30) days following his receipt
of written notice thereof.  For the
purposes of this definition, no act, or failure to act, on the part of
Executive shall be considered “willful,” unless done, or omitted to be done, by
him in bad faith and without reasonable belief that his action or omission was
in, or not opposed to, the best interest of the Company (including
reputationally).  Notwithstanding the
foregoing, the Company may not terminate Executive for Cause unless prior to
such termination: (x) Executive is given five (5) business days
written notice specifying the alleged Cause event and is entitled to appear
with counsel upon written request, made within five (5) business days of
receiving such notice, before a meeting of the full Board, which may be
telephonic, within a reasonable time after such request to present information
regarding his views on the Cause event, and (y) after such meeting or
Executive’s failure to request such a meeting, there is a majority vote of the
full Board (excluding Executive) to terminate Executive for Cause.  After providing the notice in foregoing
sentence, the Board may suspend Executive with full pay and benefits until a
final determination has been made in accordance with the procedures set forth
above.

 

(d)           Without Cause.  The Company shall have the right to terminate
Executive’s employment hereunder without Cause at any time by providing
Executive with a Notice of Termination.

 

(e)           By Executive for
Good Reason.  Executive shall have
the right to terminate his employment hereunder for Good Reason by providing
the Company with a Notice of Termination. 
For purposes of this Agreement, Executive shall have “Good Reason”
to terminate his employment hereunder if, without Executive’s written consent,
any of the following events occurs that are not cured by the Company within
thirty (30) days of written notice specifying the occurrence such Good Reason
event, which notice shall be given by Executive to the Company within ninety
(90) days after the occurrence of the Good Reason event: (i) a material diminution in Executive’s
then authority, duties or responsibilities; (ii) a material diminution in
Executive’s Base Salary; (iii) a relocation of Executive’s principal
business location to a location outside of Dallas, Texas; or (vi) any material breach of this Agreement
by the Company.  Executive’s termination
hereunder for Good Reason shall not occur later than one hundred eighty (180)
days following the initial date on which the event Executive claims constitutes
Good Reason occurred.

 

(f)            By Executive
without Good Reason.  Executive shall
have the right to terminate his employment hereunder without Good Reason by
providing the Company with a Notice of Termination at least thirty (30) days
prior to such termination.

 

(g)           Due to Expiration
of the Term of Employment.  The Term
of Employment shall automatically terminate upon the expiration of the Term of
Employment in accordance with Section 1 hereof.

 

5

 

8.             Termination
Procedure.

 

(a)           Notice of
Termination.  Any termination of
Executive’s employment by the Company or by Executive during the Term of
Employment (other than termination pursuant to Section 7(a)) shall be
communicated by written Notice of Termination to the other party hereto in
accordance with Section 15 hereof. 
For purposes of this Agreement, a “Notice of Termination” shall
mean a notice which shall indicate the specific termination provision in this
Agreement relied upon and, in the event of a termination under Section 7(b),
7(c) or 7(e) above, shall set forth in reasonable detail the facts
and circumstances claimed to provide a basis for termination of Executive’s
employment under the provision so indicated.

 

(b)           Date of
Termination.  “Date of Termination”
shall mean (i) if Executive’s employment is terminated by his death, the
date of his death, (ii) if Executive’s employment is terminated pursuant
to Section 7(b), the thirty-first (31st) day after the
Notice of Termination is provided to Executive (provided that Executive shall
not have returned to the substantial performance of his duties on a full-time
basis during the thirty (30) day period following the Notice of Termination), (iii) if
Executive’s employment is terminated pursuant to Section 7(f), the
thirty-first (31st) day after the Notice of Termination is
provided to the Company; and (iv) if Executive’s employment is terminated
for any other reason, the date the Notice of Termination is given or any later
date set forth in such Notice of Termination as the effective date of
termination.

 

9.             Compensation
Upon Termination.  Upon the termination of Executive’s
employment, the Company shall provide Executive with the payments and benefits
set forth below.  The payments and
benefits described herein shall be in lieu of, and Executive hereby waives his
rights to receive, any other severance or termination benefits that Executive
may otherwise be eligible to receive under any policy, plan or program
maintained by the Company or as otherwise mandated by law (to the extent such
legal rights may be waived by Executive).

 

(a)           Death or
Disability.  If Executive’s
employment is terminated due to his death or is terminated by the Company due
to Disability during the Term of Employment:

 

(i)            the Company shall
pay to Executive (or his beneficiaries) any accrued but unpaid Base Salary
earned through the Date of Termination, payable in accordance with the regular
payroll practices applicable to senior executives of the Company;

 

(ii)           at the time that
the Bonus would otherwise be paid in accordance with Section 4(b) hereof,
the Company shall pay to Executive (or his beneficiaries) any earned but unpaid
Bonus in respect of any completed year preceding the year in which such
termination occurs (the “Accrued Bonus”);

 

(iii)          the Company shall
reimburse Executive pursuant to Section 4(f) for any business
expenses incurred through, but not reimbursed prior to, the Date of
Termination;

 

6

 

(iv)          within ten (10) days
following the Date of Termination, the Company shall pay to Executive a payment
for his accrued but unused vacation through the Date of Termination;

 

(v)           the Company shall
pay or provide to Executive such vested accrued benefits, if any, as to which
Executive may be entitled under the Company’s employee benefit plans and
programs applicable to Executive as of the Date of Termination (other than any
severance pay plan), which shall be paid or provided in accordance with the
terms of the applicable plan or program 
(clauses (i) — (v) collectively referred to as the “Accrued
Obligations”);

 

(vi)          Executive or his
beneficiary, legal representative or estate shall receive an amount equal to
the product of (x) and (y), where (x) is the Bonus, if any, that
would have been paid to Executive in respect of the year in which such termination
occurred, based on actual performance for the year of termination, and (y) is
a fraction, the numerator of which is the number of days Executive was employed
by the Company during the calendar year in which such termination occurred and
the denominator of which is the number of days in such year (the “Pro Rata
Bonus”), to be paid at such time as the Bonus would have normally been paid
pursuant to Section 4(b) hereof in respect of the year in which such
termination occurred; and

 

(vii)         All vested stock
options and other exercisable awards then held by Executive shall remain
exercisable for a period of one year following the Date of Termination and all
unvested equity awards held by Executive shall immediately be forfeited without
consideration.

 

(b)           Termination for
by the Company for Cause.  If
Executive’s employment is terminated by the Company for Cause during the Term
of Employment:

 

(i)            the Company shall
pay or provide to Executive the Accrued Obligations (other than the Accrued
Bonus) at the times, and subject to the same conditions, as provided in Section 9(a) hereof;
and

 

(ii)           all equity awards
held by Executive, whether or not vested and exercisable, shall immediately be
forfeited without consideration.

 

(c)           Termination by
Executive without Good Reason.  If
Executive’s employment is terminated by Executive other than for Good Reason
during the Term of Employment:

 

(i)            the Company shall
pay or provide to Executive the Accrued Obligations (other than the Accrued
Bonus) at the times, and subject to the same conditions, as provided in Section 9(a) hereof;
and

 

(ii)           all vested stock
options and other exercisable awards then held by Executive shall remain
exercisable for a period of ninety (90) days following the Date of Termination
and all unvested equity awards held by Executive shall immediately be forfeited
without consideration.

 

7

 

(d)           Termination
without Cause or for Good Reason. In the event that Executive’s employment
under this Agreement is terminated by the Company without Cause or by Executive
for Good Reason during the Term of Employment:

 

(i)            the Company shall
pay or provide to Executive the Accrued Obligations at the times, and subject
to the same conditions, as provided in Section 9(a) hereof;

 

(ii)           subject to Executive’s signing (and not
revoking) a general release of claims in the form attached hereto as Exhibit A
(with such changes as may be necessary for changes in applicable law) within
twenty-one (21) days or forty-five days, which ever period is required under
ADEA (as defined in Exhibit A) following such termination (the “Release”):

 

(A)          the Company shall pay
Executive the Pro Rata Bonus at such time as the Bonus would have normally been
paid pursuant to Section 4(b) hereof in respect of the year in which
such termination occurred;

 

(B)           within sixty (60)
days following the Date of Termination, the Company shall pay to Executive a
lump sum severance payment equal to the sum of the Base Salary and target
Bonus; provided that if Date of Termination occurs provided, that,
if the termination of your employment occurs less than sixty (60) days
preceding the end of a calendar year and the effective date of the Release
would occur before January 1 of the subsequent calendar year, payment
shall be made on January 2 of such subsequent calendar year; and

 

(C)           the Company shall
pay the costs of continued group life, medical, dental, and vision insurance
coverage for Executive and his dependents under the plans and programs in which
Executive participated immediately prior to the Date of Termination, or
materially equivalent plans and programs maintained by the Company in
replacement thereof, for a period of twelve (12) months following the Date of
Termination (the “Coverage Period”); provided, that in the event
the medical, dental, and vision plans under which Executive and his dependents
were receiving benefits immediately prior to the Date of Termination, or any
applicable replacement plan or program, is not fully-insured, then in lieu of
the foregoing, if Executive timely elects coverage under the Consolidated
Omnibus Budget Reconciliation Act of 1985, as amended (“COBRA”) and
timely pays the monthly premiums for such COBRA coverage, then the Company
shall reimburse Executive during the Coverage Period for the amount of such
monthly premium that is in excess of the active employee rate (excluding, for
purposes of calculating cost, an employee’s ability to pay premiums with
pre-tax dollars), on a tax grossed-up basis to the extent such monthly premium
is taxable to Executive, payable on the first Company payroll date in each
month following the Date of Termination; and

 

(iii)          all outstanding
equity awards held by Executive will become fully vested and all stock options
and other exercisable awards will become immediately exercisable and will
remain exercisable for a period following the Date of Termination of 

 

8

 

(x) ninety (90) days following a termination by Executive for Good
Reason and (y) twelve (12) months following a termination by the Company
without Cause.

 

(e)           Termination due
to Expiration of the Term of Employment. 
If Executive’s employment hereunder terminates due to the expiration of
the Term of Employment in accordance with Section 1:

 

(i)            the Company shall
pay to Executive the Accrued Obligations at the times, and subject to the same
conditions, as provided in Section 9(a) hereof; and

 

(ii)           subject to
Executive’s signing (and not revoking) the Release, the Company shall pay the
costs of continued group life, medical, dental, and vision insurance coverage
for Executive and his dependents under the plans and programs in which
Executive participated immediately prior to the Date of Termination, or
materially equivalent plans and programs maintained by the Company in
replacement thereof, for a period of twelve (12) months following the Date of
Termination (the “Expiration Coverage Period”); provided, that in
the event the medical, dental, and vision plans under which Executive and his
dependents were receiving benefits immediately prior to the Date of
Termination, or any applicable replacement plan or program, is not
fully-insured, then in lieu of the foregoing, if Executive timely elects COBRA
coverage and timely pays the monthly premiums for such COBRA coverage, then the
Company shall reimburse Executive during the Coverage Period for the amount of
such monthly premium that is in excess of the active employee rate (excluding,
for purposes of calculating cost, an employee’s ability to pay premiums with
pre-tax dollars), on a tax grossed-up basis to the extent such monthly premium
is taxable to Executive, payable on the first Company payroll date in each
month following the Date of Termination; and

 

(iii)          all vested stock
options and other exercisable awards then held by Executive shall remain
exercisable for a period of twelve (12) months following the Date of
Termination and all unvested equity awards held by Executive shall immediately
be forfeited without consideration.

 

(f)            No Mitigation;
No Off-Set.
 Executive will not be required to seek other
employment or attempt to reduce any payments due to Executive under this Section 9,
and any compensation (in whatever form) earned by Executive from any subsequent
employment will not offset or reduce the Company’s severance obligations under
this Section 9 following Executive’s termination.  The Company’s obligation to pay Executive any
payments under this Section 9 will not be subject to set-off, counterclaim
or recoupment of amounts owed by Executive to the Company.

 

(g)           Change of
Control/Golden Parachute Considerations. 
All equity awards held by Executive shall vest upon the occurrence a
Change in Control of the Company.  If
Executive becomes entitled to any payments and/or benefits that constitute “parachute
payments” within the meaning of Section 280G(b)(2) of the Code, and
as a result becomes subject to the excise tax under Section 4999 of the
Code, the provisions of Exhibit B attached hereto shall apply and are
incorporated herein.

 

9

 

For purposes of this Agreement, a “Change in Control” shall mean
the occurrence of any of the following events subsequent to the Effective
Date:  (i) any person, other than an
exempt person (which includes the Company and its subsidiaries and employee
benefit plans), becoming a beneficial owner of 50% or more of the shares of
common stock or equity interests or voting stock or equity interests of the
Company then outstanding; (ii) the consummation of a reorganization, merger
or consolidation in which existing Company stockholders or members own less
than 50% of the equity of the resulting company; (iii) the consummation of
the sale or other disposition of all or substantially all of the assets of the
Company; or (iv) during any 12-month period and provided no other
corporation is a majority shareholder of the Company,  individuals who on the Effective Date,
constitute the Board (the “Incumbent Board”) cease for any reason to
constitute at least a majority thereof, provided that any person becoming a
director subsequent to the Effective Date, whose election or nomination for
election was approved by a vote of at least a majority of the directors
comprising the Incumbent Board shall be considered a member of the Incumbent
Board.  Notwithstanding anything herein
to the contrary, the determination as to whether a “Change in Control” as
defined herein has occurred shall be determined in accordance with the
requirements of Code Section 409A and shall be intended to constitute a “change
in control event” within the meaning of Code Section 409A, except to that
the extent the provisions herein are more restrictive than the requirements of
Code Section 409A.

 

10.           Indemnification/Directors
and Officers Liability Insurance. The Company will indemnify Executive to the fullest extent permitted by
law and its bylaws (including advancement of legal fees) for any action or
inaction of Executive while serving as an officer or director of the
Company.  The Company will cover
Executive under its directors and officers liability insurance and its
defamation policies both during and, while potential liability exists, after
Executive’s termination of employment. 
The provisions of this Section 10 shall survive the termination of
Executive’s employment with the Company.

 

11.           Restrictive
Covenants.

 

(a)           Acknowledgments.  Executive acknowledges that:  (i) as a result of Executive’s
employment by the Company, Executive has obtained and will obtain Confidential
Information (as defined below); (ii) the Confidential Information has been
developed and created by the Company and its affiliates at substantial expense
and the Confidential Information constitutes valuable proprietary assets; (iii) the
Company and its affiliates will suffer substantial damage and irreparable harm
which will be difficult to compute if, during the Term of Employment and
thereafter, Executive should enter a Competitive Business (as defined herein)
in violation of the provisions of this Agreement; (iv) the nature of the
Company’s and its affiliates’ business is such that it could be conducted
anywhere in the world and that it is not limited to a geographic scope or
region; (v) the Company and its affiliates will suffer substantial damage
which will be difficult to compute if, during the Term of Employment or
thereafter, Executive should solicit or interfere with the Company’s or its
affiliates’ employees or should divulge Confidential Information relating to
the business of the Company and its affiliates; (vi) the provisions of
this Agreement are reasonable and necessary for the protection of the business
of the Company and its affiliates; (vi) the Company would not have hired
or continued to employ Executive or grant the equity awards and other benefits
contemplated under this Agreement unless he agreed to be bound by the terms
hereof; and (vii) the provisions of this Agreement will not preclude
Executive from other gainful employment. “Competitive Business” means any business, 

 

10

 

partnership,
enterprise, association or activity that is actively involved in the business
of producing and/or marketing ethanol and ethanol co-products, or any other
activity or business in which the Company was engaged, or had taken material
steps to engage in, at the time of Executive’s termination or in the twelve
(12) months immediately period prior thereto. “Confidential Information”
as used in this Agreement shall mean any and all confidential and/or
proprietary knowledge, data, or information of the Company or any affiliate,
including, without limitation, any: (A) trade secrets, drawings,
inventions, methodologies, mask works, ideas, processes, formulas, source and
object codes, data, programs, software source documents, works of authorship,
know-how, improvements, discoveries, developments, designs and techniques, and
all other work product of the Company or any affiliate, whether or not
patentable or registrable under trademark, copyright, patent or similar laws; (B) information
regarding plans for research, development, new service offerings and/or
products, marketing, advertising and selling, distribution, business plans,
business forecasts, budgets and unpublished financial statements, licenses,
prices and costs, suppliers, customers or distribution arrangements; (C) any
information regarding the skills and compensation of employees, suppliers,
agents, and/or independent contractors of the Company or any affiliate; (D) concepts
and ideas relating to the development and distribution of content in any medium
or to the current, future and proposed products or services of the Company or
any affiliate; or (E) any other information, data or the like that is
labeled confidential or orally disclosed to Executive as confidential.

 

(b)           Confidentiality.  In consideration of the benefits provided for
under this Agreement, Executive agrees not to, at any time, either during the
Term of Employment or thereafter, divulge, use, publish or in any other manner
reveal, directly or indirectly, to any person, firm, corporation or any other
form of business organization or arrangement and keep in the strictest
confidence any Confidential Information, except (i) in the good faith
performance of Executive’s duties hereunder, (ii) with the Company’s
express written consent, (iii) to the extent that any such information is
in or becomes in the public domain or the relevant trade or industry other than
as a result of Executive’s breach of any of obligations hereunder, or (iv) where
required to be disclosed by court order, subpoena or other government process
and in such event, Executive shall cooperate with the Company in attempting to
keep such information confidential.  Upon
the request of the Company, Executive agrees to promptly deliver to the Company
the originals and all copies, in whatever medium, of all such Confidential
Information.

 

(c)           Non-Compete.  In consideration of the benefits provided for
in this Agreement, Executive covenants and agrees that during Executive’s
employment and during the Restrictive
Period (as defined below), Executive will not, directly or indirectly for or on
behalf of himself or any other person or entity (i) engage in any
Competitive Business (as defined below) or (ii) participate or invest in,
provide or facilitate the provision of financing to, or assist (whether as
owner, part-owner, shareholder, member, partner, director, officer, trustee,
employee, agent or consultant, or in any other capacity) any Competitive
Business (as defined below).  For the
avoidance of doubt, this covenant shall not preclude Executive from trading ethanol-related commodities; provided that such
activity does not have a material and adverse effect on the Company.

 

“Restrictive Period” shall mean the period of
Executive’s employment with the Company and (i) in the event of termination
of Executive’s employment by the Company for Cause or without Cause or by the
Executive for Good Reason, the 12-month period thereafter or (ii) in the
event of 

 

11

 

termination of Executive’s employment by the
Executive without Good Reason or upon Expiration of the Term, the period of up
to 12 months following Executive’s employment for which the Company elects
(pursuant to 15 days advance written notice) to pay Executive the pro rata
portion of the Non-Compete Amount.  “Non-Compete
Amount” shall mean the sum of Executive’s Base salary and the average of the
Annual Bonuses earned under Section 5 during his Employment; provided that
if any such termination occurs before the completion of the first Annual Bonus
period, the Annual Bonus amount will be deemed to be the Target Bonus.  The noncompetition covenant in this Section 11(c) will
not apply in the event of a termination without Cause or for Good Reason if
Executive provides a written waiver to the Company of his right to all
severance benefits, including equity acceleration (but other than the Accrued
Amounts) within five business days following such termination.  The restrictions set forth in this Section 11(c) shall
not limit Executive’s right to own not more than 5% of any of the debt or
equity securities of any business organization that is then filing reports with
the Securities and Exchange Commission pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934, as amended, or any compensatory equity
securities that Executive receives in connection with services provided or to
be provided.

 

(d)           Non-Solicitation
of Employees.  During Executive’s
employment and for a period of twelve (12) months thereafter, Executive will
not directly or indirectly for or on behalf of himself or any other person or
entity (i) solicit, recruit, hire, endeavor to entice away from the
Company, or otherwise interfere with the Company’s relationship with, any of
its current employees, or anyone who was employed by or engaged to provide
exclusive services to the Company at any time during the twelve (12) months
prior to Executive’s Date of Termination, and (ii) endeavor to entice away
from or otherwise interfere with, the Company’s relationship with any persons
or entities that were investors, suppliers, clients, customers or licensees of
the Company at any time during the twelve (12) months prior to Executive’s Date
of Termination; provided that the foregoing shall not be violated by
general advertising nor by serving as a reference upon request.

 

(e)           Post-Employment
Property.  The parties agree that any
work of authorship, invention, design, discovery, development, technique,
improvement, source code, hardware, device, data, apparatus, practice, process,
method or other work product whatever (whether patentable or subject to
copyright, or not, and hereinafter collectively called “discovery”) related to
training or marketing methods and techniques that Executive, either solely or
in collaboration with others,  has made
or may make, discover, invent, develop, perfect, or reduce to practice during
the term of his employment, whether or not during regular business hours and
created, conceived or prepared on the Company’s or any affiliates’ premises or
otherwise shall be the sole and complete property of the Company and/or its
affiliates.  More particularly, and
without limiting the foregoing, Executive agrees that all of the foregoing and
any (i) inventions (whether patentable or not, and without regard to
whether any patent therefor is ever sought), (ii) marks, names, or logos
(whether or not registrable as trade or service marks, and without regard to
whether registration therefor is ever sought), (iii) works of authorship
(without regard to whether any claim of copyright therein is ever registered),
and (iv) trade secrets, ideas, and concepts ((i) - (iv) collectively,
“Intellectual Property Products”) created, conceived, or prepared on the
Company’s or any affiliates’ premises or otherwise, whether or not during
normal business hours, shall perpetually and throughout the world be the
exclusive property of the Company and/or its affiliates, as the case may be, as
shall all tangible media (including, but not limited to,

 

12

 

papers, computer media of all types, and models) in which such
Intellectual Property Products shall be recorded or otherwise fixed.  Executive further agrees promptly to disclose
in writing and deliver to the Company all Intellectual Property Products created
during his engagement by the Company, whether or not during normal business
hours.  Executive agrees that all works
of authorship created by Executive during his engagement by the Company shall
be works made for hire of which the Company or its affiliates is the author and
owner of copyright. To the extent that any competent decision-making authority
should ever determine that any work of authorship created by Executive during
his engagement by the Company is not a work made for hire, Executive hereby assigns
all right, title and interest in the copyright therein, in perpetuity and
throughout the world, to the Company.  To
the extent that this Agreement does not otherwise serve to grant or otherwise
vest in the Company or its affiliates all rights in any Intellectual Property
Product created by Executive during his engagement by the Company, or within
three (3) months thereafter, Executive hereby assigns all right, title and
interest therein, in perpetuity and throughout the world, to the Company.  Executive agrees to execute, immediately upon
the Company’s reasonable request and without charge, any further assignments,
applications, conveyances or other instruments, at any time after execution of
this Agreement, whether or not Executive is engaged by the Company at the time
such request is made, in order to permit the Company, its affiliates and/or
their respective assigns to protect, perfect, register, record, maintain, or
enhance their rights in any Intellectual Property Product; provided, that,
the Company shall bear the cost of any such assignments, applications or
consequences.   Upon termination of
Executive’s employment with the Company for any reason whatsoever, and at any
earlier time the Company so requests, Executive will immediately deliver to the
custody of the person designated by the Company all originals and copies of any
documents and other property of the Company in Executive’s possession, under
Executive’s control or to which he may have access.

 

(f)            Non-Disparagement.
Executive acknowledges and agrees that during and for a period of three (3) years
following the Term of Employment, he will not defame or publicly criticize the
Company and/or its affiliates and their respective officers, directors,
partners, executives or agents with the intent to damage the services,
business, integrity, veracity or personal or professional reputation of any
such party in either a professional or personal manner.  In addition, the Company acknowledges and
agrees that during and for a period of three (3) years following the Term
of Employment, the Company will not defame or publicly criticize Executive with
the intent to damage the services, business, integrity, veracity or personal or
professional reputation of Executive in either a professional or personal manner.  Notwithstanding the foregoing, nothing in
this Section 11(f) shall prevent any person from making any truthful
statement to the extent (i) necessary to rebut any untrue public
statements made by another party; (ii) necessary with respect to any litigation,
arbitration or mediation involving this Agreement, including, but not limited
to, the enforcement of this Agreement or (iii) required by law or by any
court, arbitrator, mediator or administrative or legislative body (including
any committee thereof) with jurisdiction over such person.

 

(g)           Enforcement.  If Executive commits a breach of any of the
provisions of this Section 11 or the Company commits a breach of Section 11(g),
the Company or Executive, as applicable, shall have the right and remedy to
have the provision specifically enforced by any court having jurisdiction.  Executive acknowledges and agrees that the
services being rendered hereunder to the Company are of a special, unique and
extraordinary character and that any such 

 

13

 

breach will
cause irreparable injury to the Company and that money damages will not provide
an adequate remedy to the Company and the Company acknowledges and agrees that
any such breach will cause irreparable injury to Executive and that money
damages will not provide an adequate remedy to Executive.  Such right and remedy shall be in addition
to, and not in lieu of, any other rights and remedies available to the Company
or Executive at law or in equity.

 

(h)           Blue Pencil.  If, at any time, the provisions of this Section 11
shall be determined to be invalid or unenforceable under any applicable law, by
reason of being vague or unreasonable as to area, duration or scope of
activity, this Agreement shall be considered divisible and shall become and be
immediately amended to only such area, duration and scope of activity as shall
be determined to be reasonable and enforceable by the court or other body
having jurisdiction over the matter and Executive and the Company agree that
this Agreement as so amended shall be valid and binding as though any invalid
or unenforceable provision had not been included herein.

 

(i)            EXECUTIVE
ACKNOWLEDGES THAT HE HAS CAREFULLY READ THIS SECTION 11 AND HAS HAD THE
OPPORTUNITY TO REVIEW ITS PROVISIONS WITH ANY ADVISORS AS HE CONSIDERED
NECESSARY AND THAT EXECUTIVE UNDERSTANDS THIS AGREEMENT’S CONTENTS AND
SIGNIFIES SUCH UNDERSTANDING AND AGREEMENT BY SIGNING BELOW.

 

12.           Assignability.  This Agreement may only be assigned to an acquiror of all or
substantially all of the Company’s business that agrees in writing to assume
the Company’s obligations under this Agreement.

 

13.           Representation. Executive represents and warrants to the
Company, and Executive acknowledges that the Company has relied on such
representations and warranties in employing Executive, that neither Executive’s
duties as an employee of the Company nor his performance of this Agreement will
breach any other agreement to which Executive is a party and that he has not
entered into, and will not enter into, any agreement, either oral or written,
in conflict herewith.  The Company
represents and warrants to Executive that all necessary corporate actions for
the approval of this Agreement have been taken such that, upon the Company’s
execution of this Agreement, this Agreement will constitute a legal, valid and
binding obligation of the Company.

 

14.           Resolution
of Disputes.  Any dispute concerning the validity,
interpretation, enforcement, or breach of this Agreement, or otherwise arising
between the parties, shall (except to the extent otherwise provided in Section 11(g) with
respect to certain requests for injunctive relief) be submitted to binding
arbitration before the American Arbitration Association (“AAA”) for
resolution.  Such arbitration shall be
conducted in Dallas, Texas, and the arbitrator will apply New York law,
including federal law as applied in New York courts.  The arbitration shall be conducted in
accordance with the AAA’s Commercial Arbitration Rules, as modified by the
terms set forth in this Agreement.  The
arbitration will be conducted by a single arbitrator, who shall be an attorney
who specializes in the field of employment law and shall have prior experience
arbitrating employment disputes.  The
award of the arbitrator shall be final and binding on the parties, and judgment
on the award may be confirmed and entered in any court having
jurisdiction.  The arbitration shall be
conducted on a strictly confidential basis except to 

 

14

 

the extent necessary to enforce any judgment,
and neither the Company nor Executive shall not disclose the existence of a
claim, the nature of a claim, any documents, exhibits, or information exchanged
or presented in connection with any such a claim, or the result of any
arbitration (collectively, “Arbitration Materials”), to any third party,
with the sole exception of such Parties legal counsel, who also shall be bound
by all confidentiality terms of this Agreement. 
In the event of any court proceeding to challenge or enforce an
arbitrator’s award, the parties hereby consent to the exclusive jurisdiction of
the state and federal courts in Dallas, Texas and agree to venue in that
jurisdiction.  The parties agree to take
all steps necessary to protect the confidentiality of the Arbitration Materials
in connection with any such proceeding, agree to file all Confidential
Information (and documents containing Confidential Information) under seal to
the extent possible and agree to the entry of an appropriate protective order
encompassing the confidentiality terms of this Agreement.  Each party agrees (a) to pay its own
costs and fees in connection with any arbitration of a dispute arising under
this Agreement, and any court proceeding arising therefrom, regardless of
outcome and (b) that the arbitration costs and other joint expenses shall
be borne equally by the Parties.

 

15.           Notices.  Any
notice, consent, demand, request or other communication given to a person in
connection with this Agreement (a “Notice”) shall be in writing and
delivered in person, by facsimile transmission (with a Notice contemporaneously
given by another method specified in this Section 15), by overnight
courier service or by postage prepaid mail with a return receipt requested, at
the following locations (or to such other address as either party may have
furnished to the other in writing by like Notice).  All such Notices shall be deemed to have been
given and effective upon receipt (or refusal of receipt).

 

	
  If to the Company:

  	
  Principal Place of Business

  
	
   

  	
  Attn:  Chief Executive Officer

  
	
   

  	
  Facsimile:

  
	
   

  	
   

  
	
  If to Executive:

  	
  To the address of his principal residence as it appears in the
  Company’s records, with a copy to him (during the Term of Employment).

  

 

16.           Miscellaneous.

 

(a)           Entire Agreement.  This Agreement, and the exhibits attached
hereto, contain the entire understanding and agreement among the Parties
concerning the subject matter hereof and supersede all prior agreements, term
sheets, understandings, discussions, negotiations and undertakings, whether
written or oral, among them with respect thereto.

 

(b)           Severability.  In the event that any provision or portion of
this Agreement shall be determined to be invalid or unenforceable for any
reason, in whole or in part, the remaining provisions of this Agreement shall
be unaffected thereby and shall remain in full force and effect to the fullest
extent permitted by law so as to achieve the purposes of this Agreement.

 

15

 

(c)           Amendment or
Waiver.  No provision in this
Agreement may be amended unless such amendment is set forth in a writing that
specifically identifies the provision being amended and that is signed by the
Parties.  No waiver by any person of any
breach of any condition or provision contained in this Agreement shall be
deemed a waiver of any similar or dissimilar condition or provision at the same
or any prior or subsequent time.  To be
effective, any waiver must be set forth in a writing that specifically refers
to the condition or provision that is being waived and is signed by the waiving
person.

 

(d)           Headings.  The headings of the Sections and sub-sections
contained in this Agreement are for convenience only and shall not be deemed to
control or affect the meaning or construction of any provision of this
Agreement.

 

(e)           Beneficiaries/References.  Executive shall be entitled, to the extent
permitted under applicable law, to select and change a beneficiary or
beneficiaries to receive any compensation or benefit under this Agreement
following Executive’s death by giving the Company written notice thereof.  In the event of Executive’s death or a
judicial determination of his incompetence, references in this Agreement to
Executive shall be deemed, where appropriate, to refer to his beneficiary,
transferee, estate or other legal representative.

 

(f)            Survivorship.  Except as otherwise set forth in this
Agreement, the respective rights and obligations of the Parties hereunder shall
survive any termination of Executive’s employment under this Agreement.

 

(g)           Withholding Taxes.  The Company may withhold from any amounts or
benefits payable under this Agreement any taxes that are required to be
withheld pursuant to any applicable law or regulation.

 

(h)           409A Provisions.

 

(i)            Notwithstanding
anything herein to the contrary, this Agreement is intended to be interpreted
and applied so that the payments and benefits set forth herein either shall
either be exempt from the requirements of Code Section 409A, or shall
comply with the requirements of Code Section 409A, and, accordingly, to
the maximum extent permitted, this Agreement shall be interpreted to be exempt
from or in compliance with Code Section 409A.

 

(ii)           If Executive
notifies the Company (with specificity as to the reason therefor) that
Executive believes that any provision of this Agreement (or of any award of
compensation or benefit, including equity compensation or benefits provided
herein or at any time during his employment with the Company) would cause the
Executive to incur any additional tax or interest under Code Section 409A
or the Company independently makes such determination, the Company shall, after
consulting with Executive, reform such provision (or award of compensation or
benefit) to attempt to comply with or be exempt from Code Section 409A
through good faith modifications to the minimum extent reasonably
appropriate.  To the extent that any
provision hereof (or award of compensation or benefit) is modified in order to
comply with Code Section 409A, such modification shall be made in good
faith and shall, to the maximum extent reasonably 

 

16

 

possible, maintain the original intent and economic benefit to
Executive and the Company without violating the provisions of Section 409A.

 

(iii)          Notwithstanding any
provision in this Agreement or elsewhere to the contrary, if on his Date of
Termination Executive is deemed to be a “specified employee” within the meaning
of Code Section 409A and using the identification methodology selected by
the Company from time to time, or if none, the default methodology under Code Section 409A,
any payments or benefits due upon a termination of Executive’s employment under
any arrangement that constitutes a “deferral of compensation” within the
meaning of Code Section 409A (whether under this Agreement, any other
plan, program, payroll practice or any equity grant) and which do not otherwise
qualify under the exemptions under Treas. Regs. Section 1.409A-1
(including without limitation, the short-term deferral exemption and the
permitted payments under Treas. Regs. Section 1.409A-1(b)(9)(iii)(A)),
shall be delayed and paid or provided to Executive in a lump sum (whether they
would have otherwise been payable in a single sum or in installments in the
absence of such delay) with interest at the prime rate as published in the Wall
Street Journal on the first business day on or following the Date of
Termination, on the earlier of (i) the date which is six (6) months
and one (1) day after Executive’s separation from service (as such term is
defined in Code Section 409A) for any reason other than death, and (ii) the
date of Executive’s death, and any remaining payments and benefits shall be
paid or provided in accordance with the normal payment dates specified for such
payment or benefit.

 

(iv)          Notwithstanding
anything in this Agreement or elsewhere to the contrary, a termination of
employment shall not be deemed to have occurred for purposes of any provision
of this Agreement providing for the payment of any amounts or benefits that
constitute “non-qualified deferred compensation” within the meaning of Code Section 409A
upon or following a termination of Executive’s employment unless such
termination is also a “separation from service” within the meaning of Code Section 409A
and, for purposes of any such provision of this Agreement, references to a “termination,”
“termination of employment” or like terms shall mean “separation from service.”
and the date of such separation from service shall be the Date of Termination
for purposes of any such payment or benefits.

 

(v)           Each payment under
this Agreement or otherwise (including any installment payments) shall be
treated as a separate payment for purposes of Code Section 409A.

 

(vi)          In no event may Executive,
directly or indirectly, designate the calendar year of any payment to be made
under this Agreement or otherwise which constitutes a “deferral of compensation”
within the meaning of Code Section 409A.

 

(vii)         All expenses or
other reimbursements paid pursuant to Section 4(g) hereof or
otherwise that are taxable income to Executive shall in no event be paid later
than the end of the calendar year next following the calendar year in which
Executive incurs such expense or pays such related tax.  With regard to any provision herein that
provides for reimbursement of costs and expenses or in-kind benefits, except 

 

17

 

as permitted by Code Section 409A, (i) the right to
reimbursement or in-kind benefits shall not be subject to liquidation or
exchange for another benefit, (ii) the amount of expenses eligible for
reimbursement, of in-kind benefits, provided during any taxable year shall not
affect the expenses eligible for reimbursement, or in-kind benefits to be
provided, in any other taxable year, provided
that the foregoing clause (ii) shall not be violated without regard to
expenses reimbursed under any arrangement covered by Internal Revenue Code Section 105(b) solely
because such expenses are subject to a limit related to the period the
arrangement is in effect and (iii) such payments shall be made on or
before the last day of Executive’s taxable year following the taxable year in
which the expense occurred.  Any tax
gross-up payment as provided herein shall be made in any event no later than
the end of the calendar year immediately following the calendar year in which
Executive remits the related taxes, and any reimbursement of expenses incurred
due to a tax audit or litigation shall be made no later than the end of the
calendar year immediately following the calendar year in which the taxes that
are the subject of the audit or litigation are remitted to the taxing
authority, or, if no taxes are to be remitted, the end of the calendar year
following the calendar year in which the audit or litigation is completed.

 

(i)            Governing Law.  This Agreement shall be governed, construed,
performed and enforced in accordance with its express terms, and otherwise in
accordance with the laws of the State of New York, without reference to
principles of conflict of laws.

 

(j)            Counterparts.  This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original and all of which
together shall be deemed to be one and the same instrument.

 

(k)           Joint Drafting.  The Company and Executive acknowledge and
agree that this Agreement was jointly drafted by the Company on the one side
and by Executive on the other side. 
Neither party, nor any party’s counsel, shall be deemed the drafter of
this Agreement in any proceeding that may hereafter arise between them.

 

[SIGNATURE PAGE FOLLOWS]

 

18

 

IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the date first set forth above.

 

	
   

  	
  Aventine Renewable Energy Holdings, Inc.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Thomas Manuel

  
	
   

  	
  Name:

  	
  Thomas Manuel

  
	
   

  	
  Title:

  	
  Chief Executive Officer

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Executive:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  /s/ John Castle

  
	
   

  	
  John Castle

  
				

 

19

 

EXHIBIT A

 

GENERAL RELEASE

 

1.             Termination
of Employment.  John Castle (the “Executive”)
acknowledges that Executive’s last day of employment with Aventine Renewable
Energy Holdings, Inc. (together with its successors and assigns the “Company”)
is
[                              ]
(the “Termination Date”).

 

2.             Consideration.  In accordance with the Employment Agreement
by and between the Company and Executive, dated March 15, 2010 (the “Employment
Agreement”), a copy of which is attached hereto and incorporated herewith,
the Company agrees to provide the consideration set forth in Section 9([d][e])(ii) of the Employment
Agreement in exchange for this General Release.

 

3.             Full Release.  Executive, for himself, his heirs, executors,
administrators, successors and assigns (hereinafter collectively referred to as
the “Releasors”), hereby fully releases and discharges the Company, its
parents, subsidiaries, affiliates, insurers, successors, and assigns, and their
respective officers, directors, employees, related parties and agents (all such
persons, firms, corporations and entities being deemed beneficiaries hereof and
are referred to herein as the “Related Parties”) from any and all
actions, causes of action, claims, obligations, costs, losses, liabilities,
damages and demands of whatsoever character, whether or not known, suspected or
claimed, which the Releasors have, from the beginning of time through the date
of this General Release, against the Related Parties arising out of or in any
way related to Executive’s employment with the Company or the termination of
his employment with the Company. 
Notwithstanding anything herein to the contrary, this General Release
shall not (i) apply to any benefits due to Executive under this General
Release or otherwise under Section 9 of the Employment Agreement,
including without limitation, your right to a gross-up payment under Section 9(g) and
Exhibit B of the Employment Agreement; (ii) apply to Executive’s
rights to indemnification from the Company or rights to be covered under any
applicable insurance policy with respect to any liability Executive incurred or
might incur as an employee, officer or director of the Company or a fiduciary
of any Company benefit plan including, without limitation, Executive’s rights
under Section 10 of the Employment Agreement; (iii) impair any vested
benefits Executive may have, as of the Termination Date, under any other
employee benefit plans and programs applicable to Executive as of the
Termination Date; and (iv) impair your rights to any continuation of
medical coverage, pursuant to the Consolidated Omnibus Budget Reconciliation
Act of 1985, as amended.

 

4.             Waiver of Rights
Under All Applicable Statutes, Contract And Common Law.  Executive understands that this General
Release waives all claims and rights Executive may have under certain
applicable federal, state and local statutory and regulatory laws, as each may
be amended from time to time, including but not limited to, the Age
Discrimination in Employment Act (including the Older Workers Benefit
Protection Act) (“ADEA”), Title VII of the Civil Rights Act; the
Employee Retirement Income Security Act of 1974; the Equal Pay Act; the
Rehabilitation Act of 1973; the Americans with Disabilities Act; the Americans
with Disabilities Amendment Act, the Worker Adjustment and Retraining
Notification Act; the Family and Medical Leave Act, and all other statutes,
regulations, contracts, common law, and other laws in any and all
jurisdictions.

 

20

 

5.             Informed
and Voluntary Signature.  No promise
or inducement has been made other than those set forth in this General
Release.  This General Release is
executed by Executive without reliance on any representation by the Company or
any of its agents.  Executive states that
that he is fully competent to manage his business affairs and understands that
he is waiving legal rights by signing this General Release.  Executive hereby acknowledges that he has
carefully read this General Release and has had the opportunity to thoroughly
discuss the terms of this General Release with legal counsel of his
choosing.  Executive hereby acknowledges
that he fully understands the terms of this General Release and its final and
binding effect and that he affixes his signature hereto voluntarily and of his
own free will.

 

6.             Waiver
of Rights Under the Age Discrimination Act. 
Executive understands that this General Release, and the release
contained herein, waives all of his claims and rights under the ADEA. The
waiver of Executive’s rights under the ADEA does not extend to claims or rights
that might arise after the date this General Release is executed.  All or part of the consideration to be paid
to Executive are in addition to any sums to which Executive would be entitled without
signing this General Release. For a period of seven (7) days following
execution of this General Release, Executive may revoke the terms of this
General Release by a written document received by the Employer no later than
11:59 p.m. of the seventh day following Executive’s
execution of this General Release.  This
General Release will not be effective until said revocation period has expired
without a revocation by Executive (the “Effective Date”). Executive
acknowledges that he has been given up to [21/45](1) days to decide
whether to sign this General Release. Executive has been advised to consult
with an attorney prior to executing this General Release and has been given a
full and fair opportunity to do so.

 

7.             Covenant Not To
Sue.  Except for an action brought to
enforce this General Release or challenge the validity of the ADEA waiver,
Executive agrees to refrain from filing or otherwise initiating any action,
lawsuit, charge, claim, demand, grievance, arbitration or other legal action
against the Company or Related Parties over matters released or waived herein,
and agrees that he will refrain from participating in any action, complaint,
charge, claim, demand, grievance, arbitration or other legal action initiated
or pursued by any individual, group of individuals, partnership, corporation or
other entity against Executive and/or the Related Parties over matters released
or waived herein, except as required by law. 
Notwithstanding the foregoing, nothing in this General Release shall
interfere with Executive’s right to file a charge with or participate in an
investigation or proceeding by the Equal Employment Opportunity Commission or
other federal or state regulatory or law enforcement agency.  However, the consideration provided to
Executive under this General Release shall be the sole relief provided for the
released claims. Executive will not be entitled to recover and Executive agrees
to waive any monetary benefits or other recovery in connection with any such
charge or proceeding, without regard to who has brought such charge or proceeding.

 

8.             Litigation And
Regulatory Cooperation.  Executive
shall (a) reasonably cooperate with the Company and/or Related Parties in
the defense or prosecution of any claims or actions now in existence or that
may be brought in the future against or on behalf of the Company and/or Related
Parties that relate to events or occurrences that transpired while Executive
was employed by the Company and (b) reasonably cooperate with the Company
in connection with any 

 

(1)  Insert 45 days in the event of a layoff of two or more
employees.

 

21

 

investigation or review by any federal, state, or local regulatory
authority as any such investigation or review relates to events or occurrences
that transpired while Executive was employed by the Company; provided, that the
forgoing shall not apply if the interests of the Company and Executive are
adverse.  Any request for such
cooperation shall take into account Executive’s other personal and business
commitments.  For any such cooperation
that Executive provides after December 31, 2012, the Company shall pay
Executive a per diem fee for such cooperation (calculated as one-fifth the
weekly gross Base Salary at the rate in effect immediately prior to the
Termination Date), paid on the last day of the month following the month in
which such fee was earned.  The Company
shall reimburse the Executive for all reasonable out-of-pocket expenses
incurred by him in connection with providing such cooperation.

 

9.             Reaffirmation of
Continuing Obligations Under Employment Agreement And Applicable Law.  Nothing in this General Release is intended
to replace, supersede or supplant Executive’s independent and obligations under
the Employment Agreement that specifically continue following a termination of
his employment.  By executing this
General Release, Executive hereby acknowledges and reaffirms all such
continuing obligations under the Employment Agreement and applicable law,
including but not limited to his obligations set forth in Section 11 of
the Employment Agreement, entitled “Restrictive Covenants.”  These obligations include, without
limitation, Executive’s agreements concerning Confidential Information,
non-competition and non-solicitation.

 

10.           No Admission of
Liability.  This General Release
shall not in any way be considered or construed as an admission by the Company
of any improper actions or liability whatsoever as to Executive or any other
person.

 

11.           Miscellaneous.

 

(a)           This General Release
shall be governed in all respects by the laws of the State of New York without
regard to the principles of conflict of law.

 

(b)           In the event that any one or more of
the provisions of this General Release is held to be invalid, illegal or
unenforceable, the validity, legality and enforceability of the remaining
provisions will not in any way be affected or impaired thereby. Moreover, if
any one or more of the provisions contained in this General Release is held to
be excessively broad as to duration, scope, activity or subject, such provisions
will be construed by limiting and reducing them so as to be enforceable to the
maximum extent compatible with applicable law.

 

(c)           This General Release may be executed
in two or more counterparts, each of which shall be deemed an original, but all
of which together shall constitute one and the same instrument.

 

(d)           The paragraph headings used in this
General Release are included solely for convenience and shall not affect or be
used in connection with the interpretation of this General Release.

 

(e)           This General Release and the
Employment Agreement represent the entire agreement between the parties with
respect to the subject matter hereto and may not be amended except in a writing
signed by the Company and Executive.

 

22

 

(f)            This General Release shall be
binding on the executors, heirs, administrators, successors and assigns of
Executive and the successors and assigns of the Related Parties and the
Releasors and shall inure to the benefit of the respective executors, heirs,
administrators, successors and assigns of the Related Parties and the
Releasors.

 

[signature page follows]

 

23

 

IN WITNESS
WHEREOF, the parties hereto have
executed this General Release on this        day
of
                              .

 

 

	
   

  	
  Aventine Renewable Energy Holdings, Inc.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Executive:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  John Castle

  

 

24

 

EXHIBIT B

 

PARACHUTE TAX INDEMNITY PROVISIONS

 

This Exhibit B sets forth the terms and provisions applicable to
Executive pursuant to the provisions of the Section 9(g) of the
Agreement.  This Exhibit B shall be
subject in all respects to the terms and conditions of the Agreement.  Capitalized terms used without definition in
this Exhibit B shall have the meanings set forth in the Agreement.

 

(i)            In
the event that Executive shall become entitled to payments and/or benefits
provided by the Agreement or any other amounts to (or for the benefit of)
Executive that constitute “parachute payments,” as such term is defined under Section 280G
of the Code, as a result of a change in ownership or effective control of the
Company or in the ownership of a substantial portion of the assets of the
Company (collectively, the “Company Payments”), and such Company
Payments will be subject to the tax (the “Excise Tax”) imposed by Section 4999
of the Code (and similar tax, if any, that may hereafter be imposed by any
taxing authority), the Company shall pay to Executive at the time specified in
clause (v) below an additional amount (the “Gross-Up Payment”) such
that the net amount retained by Executive from the Company Payments together
with the Gross-Up Payment, after deduction of any Excise Tax on the Company
Payments and any U.S. federal, state, and local income or payroll tax upon the
Gross-Up Payment provided for by this clause (i), but before deduction for any
U.S. federal, state, and local income or payroll tax on the Company Payments,
shall be equal to the Company Payments.

 

(ii)           Notwithstanding
the foregoing provisions of this Exhibit B to the contrary, if it shall be
determined that Executive is entitled to a Gross-Up Payment, but the Company
Payments do not exceed 110% of the greatest amount (the “Reduced Amount”)
that could be paid to Executive such that the receipt of the Company Payments
would not give rise to any Excise Tax, then no Gross-Up Payment shall be made
to Executive and the Company Payments, in the aggregate, shall be reduced to
the Reduced Amount.  Any such reduction
shall be made in the following order: 
any cash severance Executive is entitled to receive (starting with the
last payment due), then other cash amounts Executive is entitled to receive
that are considered parachute payments under Section 280G of the Code
(starting with the last payment due), then any stock options that have exercise
prices higher than the then fair market value price of the stock (based on the
latest vesting tranches), then restricted stock and restricted stock units based
on the last ones scheduled to be distributed and then other stock options based
on the latest vesting tranches.  In the
event that the Internal Revenue Service or court ultimately makes a
determination that the “excess parachute payments” plus the “base amount” is an
amount other than as determined initially, an appropriate adjustment shall be
made with regard to the Gross-Up Payment or Reduced Amount, as applicable, to
reflect the final determination and the resulting impact on whether this clause
(ii) applies.

 

(iii)          For
purposes of determining whether any of the Company Payments and Gross-Up
Payment (collectively, the “Total Payments”) will be subject to the
Excise Tax and the amount of such Excise Tax:

 

25

 

(A)  the
Total Payments shall be treated as “parachute payments” within the meaning of Section 280G(b)(2) of
the Code, and all “parachute payments” in excess of the “base amount” (as
defined under Section 280G(b)(3) of the Code) shall be treated as
subject to the Excise Tax, unless and except to the extent that, in the opinion
of the Company’s independent certified public accountants appointed prior to
any change in ownership (as defined under Section 280G(b)(2) of the
Code) or a certified public accountant appointed following a change in
ownership that is or tax counsel selected by such accountants or the Company
(the “Accountants”) such Total Payments (in whole or in part):  (1) do not constitute “parachute
payments,” (2) represent reasonable compensation for services actually
rendered within the meaning of Section 280G(b)(4) of the Code in
excess of the “base amount” or (3) are otherwise not subject to the Excise
Tax; and

 

(B) the
value of any non-cash benefits or any deferred payment or benefit shall be determined
by the Accountants in accordance with the principles of Section 280G of
the Code.

 

In the event that the Accountants are serving as accountants or
auditors for the individual, entity or group effecting the change in control
(within the meaning of Section 280G of the Code), Executive may appoint
another nationally recognized accounting firm to make the determinations
hereunder (which accounting firm shall then be referred to as the “Accountants”
hereunder).  All determinations hereunder
shall be made by the Accountants which shall provide detailed supporting
calculations both to the Company and Executive at such time as it is requested
by the Company or Executive.  The
determination of the Accountants, subject to the adjustments provided below,
shall be final and binding upon the Company and Executive.

 

(iv)          For
purposes of determining the amount of the Gross-Up Payment, Executive’s
marginal blended actual rates of federal, state and local income taxation in
the calendar year in which the change in ownership or effective control that
subjects Executive to the Excise Tax occurs shall be used.  In the event that the Excise Tax is
subsequently determined by the Accountants to be less than the amount taken
into account hereunder at the time the Gross-Up Payment is made, Executive
shall repay to the Company, at the time that the amount of such reduction in
Excise Tax is finally determined, the portion of the prior Gross-Up Payment
attributable to such reduction (plus the portion of the Gross-Up Payment attributable
to the Excise Tax and U.S. federal, state and local income tax imposed on the
portion of the Gross-Up Payment being repaid by Executive if such repayment
results in a reduction in Excise Tax or a U.S. federal, state and local income
tax deduction).  Notwithstanding the
foregoing, in the event that any portion of the Gross-Up Payment to be refunded
to the Company has been paid to any U.S. federal, state and local tax
authority, repayment thereof (and related amounts) shall not be required until
actual refund or credit of such portion has been made to Executive.  Executive and the Company shall mutually
agree upon the course of action to be pursued (and the method of allocating the
expense thereof) if Executive’s claim for refund or credit is denied.  In the event that the Excise Tax is later
determined by the Accountants or the Internal Revenue Service (or other taxing
authority) to exceed the amount taken into account hereunder at the time the
Gross-Up Payment is made (including by reason of any payment the existence or
amount of which cannot be determined at the time of the Gross-Up Payment), the
Company shall make an 

 

26

 

additional Gross-Up Payment in respect of such excess (plus any
interest or penalties payable with respect to such excess) promptly after the
amount of such excess is finally determined.

 

(v)           The
Gross-Up Payment or portion thereof provided for in clause (iv) above
shall be paid not later than the sixtieth (60th) day following an event occurring which
subjects Executive to the Excise Tax; provided, however, that if the amount of
such Gross-Up Payment or portion thereof cannot be finally determined on or
before such day, the Company shall pay to Executive on such day an estimate, as
determined in good faith by the Accountants, of the minimum amount of such
payments and shall pay the remainder of such payments (together with interest
at the rate provided in Section 1274(b)(2)(B) of the Code), subject
to further payments pursuant to clause (iv) above, as soon as the amount
thereof can reasonably be determined, but in no event later than the
seventy-fifth (75th) day
after the occurrence of the event subjecting Executive to the Excise Tax.  Subject to clauses (iv) and (ix) of
this Exhibit B, in the event that the amount of the estimated payments
exceeds the amount subsequently determined to have been due, such excess shall
constitute a loan by the Company to Executive, payable on the fifth (5th) day
after demand by the Company (together with interest at the rate provided in Section 1274(b)(2)(B) of
the Code).

 

(vi)          In
the event of any controversy with the Internal Revenue Service (or other taxing
authority) with regard to the Excise Tax, Executive shall permit the Company to
control issues related to the Excise Tax (at its expense), provided that such
issues do not potentially materially adversely affect Executive, but Executive
shall control any other issues.  In the
event that the issues are interrelated, Executive and the Company shall in good
faith cooperate so as not to jeopardize resolution of either issue, but if the
parties cannot agree, Executive shall make the final determination with regard
to the issues.  In the event of any
conference with any taxing authority as to the Excise Tax or associated income
taxes, Executive shall permit the representative of the Company to accompany
Executive, and Executive and Executive’s representative shall cooperate with
the Company and its representative.

 

(vii)         The
Company shall be responsible for all charges of the Accountants.

 

(viii)        The
Company and Executive shall promptly deliver to each other copies of any
written communications, and summaries of any verbal communications, with any
taxing authority regarding the Excise Tax covered by this Exhibit B.

 

(ix)           Nothing
in this Exhibit B is intended to violate the Sarbanes-Oxley Act of 2002
and to the extent that any advance or repayment obligation hereunder would do
so, such obligation shall be modified so as to make the advance a nonrefundable
payment to Executive and the repayment obligation null and void.

 

(x)            Notwithstanding
the foregoing, any payment or reimbursement made pursuant to this Exhibit B
shall be made in any event no later than the end of the calendar year
immediately following the calendar year in which Executive remits the related
taxes, and any reimbursement of expenses incurred due to a tax audit or
litigation shall be made no later than the end of the calendar year immediately
following the calendar year in which the taxes that are the subject of the
audit or litigation are remitted to the taxing authority, or, if no taxes are
to be 

 

27

 

remitted, the end of the calendar year following the calendar year in
which the audit or litigation is completed.

 

(xi)           The
provisions of this Exhibit B shall survive the termination of Executive’s
employment with the Company for any reason and any amount payable under this Exhibit B
shall be subject to the provisions of Section 16(h) of the Agreement.

 

28

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