Exhibit 10.16

EMPLOYMENT AGREEMENT

By and Between

RASER TECHNOLOGIES OPERATING COMPANY, INC.

And

Patrick J. Schwartz

June 27, 2006

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EMPLOYMENT AGREEMENT

This Employment Agreement (this “Agreement”) is made and entered into as of the
27th day of June 2006 (the “Effective Date”) by and between Raser Technologies
Operating Company, Inc. (the “Company”) and Patrick J. Schwartz (“Employee”).
For purposes of this Agreement, the Company and Employee are sometimes
collectively referred to as the “Parties.”

RECITALS

This Agreement is entered into with reference to the following facts and mutual
objectives:

A. Employee’s services are deemed to be of value to the Company.

TERMS AND CONDITIONS OF AGREEMENT

NOW THEREFORE, in consideration of the foregoing, and the covenants, conditions,
and promises set forth in this Agreement, the Parties agree as follows:

1. Employment and Position

The Company employs Employee, and Employee accepts employment by the Company as,
President of the Company for the period of employment specified in Section 3
hereinbelow (“Period of Employment”).

2. Services To Be Rendered

The Employee shall, during the Period of Employment, serve the Company in the
position set forth in Section 1 hereinabove diligently and competently. During
the Period of Employment, Employee shall be free to conduct personal business
and investment activities provided that such activities do not conflict or
interfere with the performance of Employee’s duties under this Agreement. In
discharging his duties under this Agreement, Employee shall act in the best
interests of the Company. In fulfilling his duties and responsibilities under
this Agreement, Employee shall report to the CEO of the Company.

 

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3. Period of Employment

Employee’s employment by the Company pursuant to this Agreement shall commence
on the Effective Date and continue, unless terminated sooner pursuant to the
provisions of this Agreement, for a period of one (1) year from the Effective
Date (“Period of Employment”).

4. Base Salary

At the commencement of the Period of Employment, Employee shall be paid an
annual base salary in an amount that shall be not less than $185,000 (“Base
Salary”). Base Salary shall be paid in accordance with the Company’s standard
payroll practices.

5. Incentive Bonus

The Board of Directors and its compensation committee shall determine any
incentive bonus guidelines during the Period of Employment. Employee shall be
entitled to receive a bonus pursuant to the Company’s bonus plan, and to
participate in a deferred compensation plan that may be in effect at the Company
from time to time. It is anticipated that any bonus plan for Employee shall
depend upon the Company’s income performance as well as general performance
evaluations.

6. Expense Reimbursement

Employee shall be entitled to prompt and full reimbursement from the Company for
reasonable expenses incurred by Employee in performing services for the Company.
Employee shall be required to provide proof and documentation of such
expenditures as required by the Company.

7. Stock Options

Employee shall also be eligible to receive additional Company stock options
during the Period of Employment, pursuant to a Company stock options bonus plan
that may, as from time to time, be in effect. Annual awards, if any, shall take
into account the original grant amounts as awarded in Section 15.

8. Other Benefits

In addition to the benefits previously set forth in this Agreement, Employee
shall, during the Period of Employment, be entitled to the benefits described
below, and, as concerns all such benefit programs where years of service are a
factor, Employee shall, to the extent permitted by law, be given full credit for
his years of service with the Company prior to the implementation of any benefit
program, whether in his capacity as a director, officer, or otherwise:

(a) Vacation. During the Period of Employment, Employee shall be entitled to not
less than four (4) weeks of paid vacation during each calendar year during the
Period of Employment. Employee shall be paid the cash amount of the unused
portion of accrued salary attributable to any unused vacation time on each
annual anniversary date of this Agreement.

 

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(b) Insurance. Employee shall be entitled to participate in the group insurance
program of the Company as concerns life, disability, medical, dental, vision, or
employee assistance insurance made available to other employees as the same may
be implemented, changed, modified, or terminated for all participants from time
to time. To the extent that such insurance benefits or programs are offered to
employees by the Company, the Company shall pay the same premiums for such
coverage for Employee.

(c) Retirement Plan. The Employee shall be entitled to participate in the
Company’s retirement plans in accordance with the terms and conditions of such
plans and applicable law, as the same may be implemented, changed, or terminated
from time to time. Employee shall become eligible to participate in the
Company’s retirement plans as of the Effective Date or the date of
implementation of such plans, whichever is later.

(d) Other Miscellaneous Benefits. The Company shall pay or reimburse Employee
for the following miscellaneous benefits:

(i) Annual dues for association membership for relevant professional groups; and

(ii) Subscriptions and purchase of books, journals, publications, and other
materials that relate to Employee’s job duties and responsibilities.

9. Term of Employment

(a) Term. The Company hereby agrees to continue the Employee in its employ, and
the Employee hereby agrees to remain in the employ of the Company, in accordance
with the terms and provisions of Section 3 of this Agreement, for the Period of
Employment, thus terminating on the anniversary of the Effective Date of this
Agreement.

 

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(b) During the Period of Employment. The Employee’s position, authority, duties,
and responsibilities shall be commensurate in all material respects with those
held and exercised as of the Effective Date.

(c) Location. The Employee’s services shall be performed at the location where
the Employee was employed on the Effective Date, or at any office which is the
headquarters of the Company, provided that such headquarters are located in the
Salt Lake City/Provo, Utah metropolitan area.

10. Termination of Agreement

(a) Termination of the Employment by Employer. After the one year anniversary of
this Agreement, the Employee’s employment shall be at will, meaning that either
the Company or the Employee shall be entitled to terminate this Agreement at any
time, for any reason, with or without cause. The Company shall have the
following rights with respect to termination of Employee’s employment.

(i) Cause. Employee’s employment may be terminated for Cause. For purpose of
this Agreement, “Cause” shall mean and refer to a determination made in good
faith by the Company’s Board of Directors that:

(1) Employee has been convicted of, or has entered into a plea of guilty or nolo
contendere to, a felony punishable by incarceration for a period of one (1) year
or longer;

(2) Employee has been convicted of committing a theft, embezzlement, or other
criminal misappropriation of funds from the Company; or

(3) Employee has willfully failed or refused to follow reasonable and lawful
written policies or directives established by the Board of Directors of the
Company, or Employee has willfully failed to attend to material duties or
obligations of Employee’s office (other than any such failure resulting from
Employee’s incapacity due to physical or mental illness, which is the cause or
manifestation of Employee’s disability), which failure or refusal continues for
thirty (30) days following delivery of a written demand from the Company’s Board
of Directors for performance to Employee identifying the manner in which
Employee has failed to follow such policy or directives or to perform such
duties.

(ii) Effect Date of Termination. Termination pursuant to this Section shall be
effective as of the date of written notice by the Board of Directors to Employee
that it has made the required determination, or at such other subsequent date,
if any specified in such notice.

(b) Termination by Employee. Employee shall have the right to terminate his

 

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employment under this Agreement at any time for Good Reason, provided Employee
has delivered written notice to the Company which briefly describes the facts
underlying Employee’s belief that “Good Reason” exists and the Company has
failed to cure such situation within thirty (30) days after effective date of
such notice.

(i) With Good Reason. For purposes of this Agreement, “Good Reason” shall mean
and consist of:

(1) A material breach by the Company of its obligations under this Agreement;

(2) The assignment to Employee of duties that are materially inconsistent with,
or that constitute a material alteration in the status of his responsibilities
set forth in this Agreement, as an employee of the Company;

(3) Without Employee’s prior written consent, the transfer or relocation of
Employee’s place of employment to any place other than the Salt Lake City/Provo,
Utah metropolitan area, except for reasonable travel on the business of the
Company; or

(4) Upon the consummation of a sale of all or a substantial portion of the
assets of the Company not in the usual regular course of the business of the
Company in which sale the acquiring company did not assume all the obligations
of the Company under this Agreement, or a change in control of the ownership or
management of the Company.

11. Confidential Information

The Employee shall hold in confidence for the benefit of the Company all secret
or confidential information, knowledge, or data relating to the Company or any
of its affiliated companies and their respective businesses, which have been
obtained by the Employee during the Employee’s employment by the Company or any
of its affiliated companies and which shall not be or become public knowledge
(other than by acts of the Employee or representatives of the Employee in
violation of this Agreement). After termination of the Employee’s employment
with the Company, the Employee shall not, without prior written consent of the
Company or as may otherwise be required by law or legal process, communicate or
divulge any such information, knowledge, or data to anyone other than the
Company and those designated by the Company. In no event, however, shall an
asserted violation of the provisions of this Section constitute a basis for
deferring or withholding any amounts otherwise payable to the Employee under the
provisions of this Agreement.

12. Inventions

(a) Assignment. Without further consideration, the Employee shall fully and
promptly report to the Company all ideas, concepts, inventions, discoveries,
formulas,

 

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and designs conceived or produced by the Employee at any time during the Period
of Employment relating to the Company’s trade or business, whether patentable or
unpatentable (collectively, “Inventions”), and shall assign and hereby does
assign to the Company or its nominee the Employee’s entire right, title, and
interest in and to all such Inventions.

(b) Cooperation. Employee shall take all reasonable action requested by the
Company to protect or obtain title to any and all United States and/or foreign
patents on any Inventions, including execution and delivery of all applications,
assignments, and other documents deemed necessary or desirable by the Company,
provided that the Company shall reimburse the Employee for all expenses incurred
by the Employee in connection with such execution and delivery.

13. Non-Competition after Termination

(a) Acknowledgment. Employee acknowledges that his services and responsibilities
are of a particular significance to the Company, and that his position with the
Company does and will continue to give him an intimate knowledge of its
business. Because of this, it is important to the Company that the Employee be
restricted from the competing with the Company in the event of the termination
of his employment.

(b) Agreement. Employee agrees that, in addition to any other limitations, for a
period of two (2) years after the termination of his employment under this
Agreement, Employee will not directly compete with the Company or its business
within the continental United States of America.

14. Severance Pay

Upon six months of services, if Employee does not continue in the employ of the
Company after the termination of this Agreement, whether or not the Employee is
offered or continues employment by the Company, Company shall pay to Employee,
no later than thirty (30) days after termination, the sum of six months salary
and Employee shall not be required to mitigate the amount of the payment
provided for in this section by seeking other employment or otherwise; nor shall
the amount of the severance payment be reduced by any compensation earned by the
Employee as a result of the employment by another employer after termination or
otherwise.

15. Vesting of Stock Options

Employee is receiving stock options exercisable for 250,000 shares of the
Company’s common stock in connection with the execution of this Agreement. Stock
options exercisable for 25,000 shares of the Company’s common stock shall vest
immediately. The remaining stock options shall vest over a four year period.
Stock options exercisable for 45,000 shares of the Company’s common stock shall
be vested on a monthly pro rata basis for the first year of this Agreement. On
each of the first four anniversary dates of this Agreement, stock options
exercisable for 45,000 shares of the Company’s stock shall vest. The sale of the
common stock

 

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issuable upon exercise of stock option will be registered during the term of the
options under the Securities Act of 1933, as amended, on a Form S-8 or other
appropriate form of registration statement.

16. Indemnification

The Company shall release, indemnify, defend, and hold harmless Employee with
respect to any and all losses, claims, actions, or suits of any kind, nature, or
description, whether before a trial or appellate court, or in an administrative,
arbitration, or alternative dispute resolution proceeding, relating to, arising
from, or in any way connected with the Employee’s acts or omissions as a
director, officer, employee, or agent of the Company. Employee shall be
permitted to select independent defense counsel of his own choosing, and such
counsel shall promptly be reimbursed by the Company for all reasonable fees,
expenses, and costs incurred in the defense of Employee. In addition to the
foregoing, the Company shall at all times maintain appropriate insurance
coverage to protect Employee’s interests as a director, officer, employee, or
agent of the Company.

17. Notice

Any notice or other communication required or permitted to be given to the
Parties under this Agreement shall be deemed to have been given when received,
addressed as follows (or at such other address as the party addressed may have
substituted by notice pursuant to this Section):

 

  (a) If to the Company:

Raser Technologies, Inc.

5152 North Edgewood Drive

Suite 375

Provo, Utah 84604

Attn: Chief Financial Officer

 

  (b) If to Employee:

Patrick J. Schwartz

1097 E. 1500 S.

Bountiful, Utah 84010

18. Governing Law

This Agreement shall in all respects be interpreted, construed, and governed by
and in accordance with the laws of the State of Utah.

IN WITNESS WHEREOF, the parties have executed this Agreement as of the Effective
Date

 

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Raser Technologies Operating Company, Inc. By:      Signature Name:   Brent M.
Cook Its:   Chief Executive Officer Patrick J. Schwartz    Signature

 

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