EXHIBIT 10.1

CATALYTICA ENERGY SYSTEMS, INC./SCR-TECH LLC/CESI-SCR, INC.

EMPLOYMENT AGREEMENT

This Employment Agreement (the “Agreement”) is made and entered into between and
among William J. McMahon III (the “Employee”), Catalytica Energy Systems, Inc.
(the “Company”), SCR-Tech LLC (“SCR-Tech”) and CESI-SCR, Inc., a wholly-owned
subsidiary of the Company and the manager of SCR-Tech (“CESI-SCR”), effective as
of January 1, 2007 (the “Effective Date”).  This Agreement replaces and
supersedes in their entirety (i) the letter agreement between the Company and
Employee dated March 16, 2005, and (ii) the SCR-Tech, LLC Change of Control
Severance Agreement between and among the Company, SCR-Tech LLC and Employee
dated March 17, 2005 (the “Prior Agreements”).

1.                                       DUTIES AND SCOPE OF EMPLOYMENT.

(A)                                  POSITIONS AND DUTIES.  AS OF THE EFFECTIVE
DATE, EMPLOYEE WILL CONTINUE TO SERVE AS PRESIDENT OF SCR-TECH.  EMPLOYEE WILL
RENDER SUCH BUSINESS AND PROFESSIONAL SERVICES IN THE PERFORMANCE OF HIS DUTIES,
CONSISTENT WITH EMPLOYEE’S POSITION WITHIN SCR-TECH, AS SHALL REASONABLY BE
ASSIGNED TO HIM, BY THE CHIEF EXECUTIVE OFFICER OF THE COMPANY (THE “CEO”), THE
BOARD OF DIRECTORS OF CESI-SCR OR THEIR DESIGNEE.  MOREOVER, EMPLOYEE WILL
REMAIN A SECTION 16 EXECUTIVE OFFICER FOR SO LONG AS THE BOARD OF DIRECTORS OF
THE COMPANY (THE “BOARD) DETERMINES, IN ITS REASONABLE DISCRETION AND IN
CONSULTATION WITH ITS OUTSIDE COUNSEL, THAT SUCH DESIGNATION IS APPROPRIATE. THE
PERIOD OF EMPLOYEE’S EMPLOYMENT UNDER THIS AGREEMENT IS REFERRED TO HEREIN AS
THE “EMPLOYMENT TERM.”  THE EMPLOYEE WILL CONTINUE TO SERVE AS PRESIDENT OF
CESI-SCR, TO THE EXTENT DETERMINED BY THE BOARD OF DIRECTORS OF CESI-SCR IN ITS
SOLE DISCRETION

(B)                                 OBLIGATIONS.  DURING THE EMPLOYMENT TERM,
EMPLOYEE WILL PERFORM HIS DUTIES FAITHFULLY AND TO THE BEST OF HIS ABILITY AND
WILL DEVOTE HIS FULL BUSINESS EFFORTS AND TIME TO SCR-TECH AND THE COMPANY.  FOR
THE DURATION OF THE EMPLOYMENT TERM, EMPLOYEE AGREES NOT TO ACTIVELY ENGAGE IN
ANY OTHER EMPLOYMENT, OCCUPATION OR CONSULTING ACTIVITY FOR ANY DIRECT OR
INDIRECT REMUNERATION WITHOUT THE PRIOR APPROVAL OF THE CEO OR THE BOARD.  THE
BOARD ACKNOWLEDGES THAT EMPLOYEE CURRENTLY SERVES ON THE ADVISORY BOARD OF GREAT
POINT ENERGY AND AS A MEMBER OF THE BOARD OF DIRECTORS OF COALTEC ENERGY USA,
INC.  EMPLOYEE AGREES TO NOTIFY THE BOARD OR CEO IN WRITING OR BY E-MAIL PRIOR
TO RECEIVING ANY ADDITIONAL COMPENSATION FROM THESE ENTITIES, SPECIFYING THE
AMOUNT OF THE COMPENSATION.

2.                                       AT-WILL EMPLOYMENT.  THE COMPANY,
SCR-TECH AND CESI-SCR (TOGETHER, THE “COMPANIES”) AND THE EMPLOYEE ACKNOWLEDGE
THAT THE EMPLOYEE’S EMPLOYMENT IS AND SHALL CONTINUE TO BE AT-WILL, AS DEFINED
UNDER APPLICABLE LAW.  IF THE EMPLOYEE’S EMPLOYMENT TERMINATES FOR ANY REASON,
INCLUDING (WITHOUT LIMITATION) ANY TERMINATION AFTER AN ANNOUNCEMENT OF CHANGE
OF CONTROL AND PRIOR TO TWENTY-FOUR (24) MONTHS FOLLOWING A CHANGE OF CONTROL OR
THE ANNOUNCEMENT OF A CHANGE OF CONTROL, WHICHEVER COMES LATER, THE EMPLOYEE
SHALL NOT BE ENTITLED TO ANY PAYMENTS, BENEFITS, DAMAGES, AWARDS OR COMPENSATION
OTHER THAN AS PROVIDED BY THIS AGREEMENT.

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3.                                       COMPENSATION.

(A)                                  BASE SALARY.  DURING THE EMPLOYMENT TERM,
THE COMPANY WILL PAY EMPLOYEE AS COMPENSATION FOR HIS SERVICES A BASE SALARY AT
THE ANNUALIZED RATE OF $200,000 UNTIL JANUARY 1, 2007 WHEN THE AMOUNT SHALL
INCREASE TO AN ANNUALIZED RATE OF $215,000 (“BASE SALARY”).  THE BASE SALARY
WILL BE PAID PERIODICALLY IN ACCORDANCE WITH THE COMPANY’S NORMAL PAYROLL
PRACTICES AND BE SUBJECT TO THE USUAL, REQUIRED WITHHOLDING.

(B)                                 ANNUAL BONUS.  DURING THE EMPLOYMENT TERM,
EMPLOYEE SHALL BE ELIGIBLE TO RECEIVE AN ANNUAL BONUS WITH A TARGET PAYMENT
EQUAL TO 50% OF BASE SALARY BASED UPON CRITERIA DEVELOPED BY THE BOARD OR BY THE
COMPANY’S COMPENSATION COMMITTEE (THE “TARGET BONUS”).

4.                                       EMPLOYEE BENEFITS.  DURING THE
EMPLOYMENT TERM, EMPLOYEE WILL BE ENTITLED TO PARTICIPATE IN THE EMPLOYEE
BENEFIT PLANS CURRENTLY AND HEREAFTER MAINTAINED BY THE COMPANY OF GENERAL
APPLICABILITY TO OTHER SENIOR EXECUTIVES OF THE COMPANY.  THE COMPANY RESERVES
THE RIGHT TO CANCEL OR CHANGE THE BENEFIT PLANS AND PROGRAMS IT OFFERS TO ITS
EMPLOYEES AT ANY TIME.

5.                                       SEVERANCE BENEFITS.

(A)                                  TERMINATION NOT IN CONNECTION WITH A CHANGE
OF CONTROL.  IF THE EMPLOYEE’S EMPLOYMENT WITH SCR-TECH TERMINATES AS A RESULT
OF INVOLUNTARY TERMINATION (AS DEFINED BELOW) OTHER THAN FOR CAUSE AT ANY TIME
PRIOR TO AN ANNOUNCEMENT OF A CHANGE OF CONTROL OR ON OR AFTER THE DATE THAT IS
TWENTY-FOUR (24) MONTHS FOLLOWING A CHANGE OF CONTROL OR THE ANNOUNCEMENT OF A
CHANGE OF CONTROL, WHICHEVER COMES LATER (A “NON-CHANGE OF CONTROL SEVERANCE
TERMINATION”), THEN, SUBJECT TO EMPLOYEE (I) EXECUTING AND NOT REVOKING A
STANDARD RELEASE OF CLAIMS IN FAVOR OF THE COMPANY; PROVIDED, HOWEVER, THAT SUCH
RELEASE SHALL PRESERVE ALL INDEMNIFICATION RIGHTS OF EMPLOYEE AND ALL OTHER
RIGHTS OF EMPLOYEE UNDER THE CURRENTLY EXISTING INDEMNIFICATION AGREEMENT OR
SIMILAR AGREEMENT WITH THE COMPANY (A “RELEASE”), AND (II) NOT BREACHING THE
PROVISIONS OF SECTION 6 HEREOF, THEN EMPLOYEE SHALL BE ENTITLED TO RECEIVE THE
FOLLOWING SEVERANCE AND NON-COMPETITION BENEFITS:

(I)             SEVERANCE PAYMENTS.  FOLLOWING THE EMPLOYMENT TERMINATION DATE
THE COMPANY SHALL PAY EMPLOYEE AN AGGREGATE AMOUNT EQUAL TO ONE HUNDRED PERCENT
(100%) OF HIS BASE SALARY, LESS APPLICABLE TAXES, RATABLY OVER THE REMAINING
PAYROLL PERIODS IN THE SAME CALENDAR YEAR IN WHICH EMPLOYEE TERMINATED.   FOR
EXAMPLE, IF EMPLOYEE TERMINATES ON JUNE 30 OF A PARTICULAR YEAR, HE WILL RECEIVE
HIS ANNUAL BASE SALARY AMOUNT, (E.G., $215,000) OVER THE REMAINING SIX MONTHS OF
THE YEAR.

(II)          SUBSIDIZED COBRA.  SUBJECT TO EMPLOYEE TIMELY ELECTING
CONTINUATION COVERAGE UNDER TITLE X OF THE CONSOLIDATED BUDGET RECONCILIATION
ACT OF 1985 (“COBRA”), THE COMPANY SHALL SUBSIDIZE EMPLOYEE AND HIS ELIGIBLE
DEPENDENT’S COBRA PREMIUMS SO THAT EMPLOYEE PAYS THE SAME PREMIUM AS AN ACTIVE
EMPLOYEE OF THE COMPANY FOR A PERIOD EQUAL TO THE LESSER OF (I) TWELVE MONTHS
FOLLOWING THE EMPLOYEE’S TERMINATION DATE, OR (II) THE DATE UPON WHICH EMPLOYEE
BECOMES COVERED UNDER THE GROUP HEALTH PLANS OF ANOTHER EMPLOYER WITH COMPARABLE
GROUP HEALTH BENEFITS AND LEVELS OF COVERAGE.

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(B)                                 TERMINATION IN CONNECTION WITH A CHANGE OF
CONTROL.  IF THE EMPLOYEE’S EMPLOYMENT TERMINATES AS A RESULT OF INVOLUNTARY
TERMINATION (AS DEFINED BELOW) OTHER THAN FOR CAUSE AT ANY TIME AFTER AN
ANNOUNCEMENT OF A CHANGE OF CONTROL AND PRIOR TO TWENTY-FOUR (24) MONTHS
FOLLOWING A CHANGE OF CONTROL OR THE ANNOUNCEMENT OF A CHANGE OF CONTROL,
WHICHEVER COMES LATER (THE “CHANGE OF CONTROL PERIOD”) (A “CHANGE OF CONTROL
SEVERANCE TERMINATION”), THEN, SUBJECT TO EMPLOYEE (I) EXECUTING AND NOT
REVOKING A RELEASE, (II) NOT BREACHING THE PROVISIONS OF SECTION 6 HEREOF, AND
(III) THE PROVISIONS OF SECTION 8 HEREOF, THE EMPLOYEE SHALL BE ENTITLED TO
RECEIVE THE FOLLOWING SEVERANCE BENEFITS:

(I)             SEVERANCE AND NON-COMPETITION PAYMENT.  A CASH PAYMENT IN AN
AMOUNT EQUAL TO:

(1)                                  IF THE COMPANY VALUE IS LESS THAN FIVE
MILLION DOLLARS, ONE HUNDRED PERCENT (100%) OF THE EMPLOYEE’S ANNUAL
COMPENSATION.  OF THIS AMOUNT, FIFTY PERCENT (50%) OF EMPLOYEE’S ANNUAL
COMPENSATION IS PAID SPECIFICALLY IN EXCHANGE FOR EMPLOYEE ENTERING INTO AND NOT
BREACHING THE NON-COMPETITION PROVISIONS OF SECTION 6 HEREOF.

(2)                                  IF THE COMPANY VALUE IS AT LEAST FIVE
MILLION DOLLARS BUT LESS THAN TEN MILLION DOLLARS, ONE HUNDRED AND FIFTY PERCENT
(150%) OF THE EMPLOYEE’S ANNUAL COMPENSATION.  OF THIS AMOUNT, SEVENTY-FIVE
PERCENT (75%) OF EMPLOYEE’S ANNUAL COMPENSATION IS PAID SPECIFICALLY IN EXCHANGE
FOR EMPLOYEE ENTERING INTO AND NOT BREACHING THE NON-COMPETITION PROVISIONS OF
SECTION 6 HEREOF.

(3)                                  IF THE COMPANY VALUE IS TEN MILLION DOLLARS
OR MORE, TWO HUNDRED PERCENT (200%) OF THE EMPLOYEE’S ANNUAL COMPENSATION.  OF
THIS AMOUNT, ONE HUNDRED PERCENT (100%) OF EMPLOYEE’S ANNUAL COMPENSATION IS
PAID SPECIFICALLY IN EXCHANGE FOR EMPLOYEE ENTERING INTO AND NOT BREACHING THE
NON-COMPETITION PROVISIONS OF SECTION 6 HEREOF.

(II)          CONTINUED EMPLOYEE BENEFITS.  ONE HUNDRED PERCENT (100%)
COMPANY-PAID HEALTH, DENTAL AND LIFE INSURANCE COVERAGE AT THE SAME LEVEL OF
COVERAGE AS WAS PROVIDED TO SUCH EMPLOYEE IMMEDIATELY PRIOR TO THE CHANGE OF
CONTROL SEVERANCE TERMINATION (THE “COMPANY-PAID COVERAGE”).  IF SUCH COVERAGE
INCLUDED THE EMPLOYEE’S DEPENDENTS IMMEDIATELY PRIOR TO THE CHANGE OF CONTROL
SEVERANCE TERMINATION, SUCH DEPENDENTS SHALL ALSO BE COVERED AT THE COMPANY’S
EXPENSE.  COMPANY-PAID COVERAGE SHALL CONTINUE UNTIL THE EARLIER OF (I) TWO
YEARS FROM THE DATE OF THE INVOLUNTARY TERMINATION OR (II) THE DATE THAT THE
EMPLOYEE AND HIS DEPENDENTS BECOME COVERED UNDER ANOTHER EMPLOYER’S GROUP
HEALTH, DENTAL OR LIFE INSURANCE PLANS THAT PROVIDE EMPLOYEE AND HIS DEPENDENTS
WITH COMPARABLE BENEFITS AND LEVELS OF COVERAGE.  FOR PURPOSES OF COBRA, THE
DATE OF THE “QUALIFYING EVENT” FOR EMPLOYEE AND HIS DEPENDENTS SHALL BE THE DATE
UPON WHICH THE COMPANY-PAID COVERAGE TERMINATES.

(III)       TIMING OF SEVERANCE & NON-COMPETITION PAYMENTS.  ANY CHANGE OF
CONTROL SEVERANCE AND NON-COMPETITION PAYMENTS TO WHICH EMPLOYEE IS ENTITLED
UNDER SECTION 5(B)(I) SHALL BE PAID BY THE COMPANY TO THE EMPLOYEE (OR TO THE
EMPLOYEE’S SUCCESSOR IN INTEREST, PURSUANT TO SECTION 10(B)) IN CASH AND IN
FULL, NOT LATER THAN THIRTY (30) CALENDAR DAYS FOLLOWING THE TERMINATION DATE,
SUBJECT TO SECTIONS 9(D) AND 12(F).  SEVERANCE PAYMENTS AND

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benefits may be delayed hereunder in order to comply with the provisions of
Internal Revenue Code Section 409A and the proposed or final regulations issued
thereunder.

(C)                                  VOLUNTARY RESIGNATION; TERMINATION FOR
CAUSE.  IF THE EMPLOYEE’S EMPLOYMENT TERMINATES BY REASON OF THE EMPLOYEE’S
VOLUNTARY RESIGNATION (AND IS NOT AN INVOLUNTARY TERMINATION), OR IF THE
EMPLOYEE IS TERMINATED FOR CAUSE, THEN THE EMPLOYEE SHALL NOT BE ENTITLED TO
RECEIVE SEVERANCE OR OTHER BENEFITS EXCEPT FOR THOSE (IF ANY) AS MAY THEN BE
ESTABLISHED UNDER THE COMPANY’S THEN EXISTING OPTION, SEVERANCE AND BENEFITS
PLANS AND PRACTICES.

(D)                                 DISABILITY; DEATH.  IF THE COMPANY
TERMINATES THE EMPLOYEE’S EMPLOYMENT AS A RESULT OF THE EMPLOYEE’S DISABILITY,
OR SUCH EMPLOYEE’S EMPLOYMENT IS TERMINATED DUE TO THE DEATH OF THE EMPLOYEE,
THEN THE EMPLOYEE SHALL NOT BE ENTITLED TO RECEIVE SEVERANCE OR OTHER BENEFITS
EXCEPT FOR THOSE (IF ANY) AS MAY THEN BE ESTABLISHED UNDER THE COMPANY’S THEN
EXISTING SEVERANCE AND BENEFITS PLANS AND PRACTICES OR PURSUANT TO OTHER
AGREEMENTS WITH THE COMPANY.

(E)                                  CHANGE IN STATUS WITH CESI-SCR OR THE
COMPANY.  EMPLOYEE’S TERMINATION AS PRESIDENT OF CESI-SCR SHALL NOT BE DEEMED TO
BE A TERMINATION OF EMPLOYMENT WITH SCR-TECH, NOR SHALL ANY SUCH TERMINATION
TRIGGER ANY PAYMENTS UNDER SECTION 5 OR OTHERWISE UNDER THIS AGREEMENT. 
NOTWITHSTANDING THE FOREGOING, IF EMPLOYEE’S TERMINATION AS PRESIDENT OF
CESI-SCR RESULTS IN A SIGNIFICANT REDUCTION OF EMPLOYEE’S DUTIES, AUTHORITY OR
RESPONSIBILITIES AS THE PRESIDENT OF SCR-TECH, THEN THAT SHALL CONSTITUTE
GROUNDS FOR AN INVOLUNTARY TERMINATION PURSUANT TO SECTION 9(G) HEREOF, SUBJECT
TO THE NOTICE AND OPPORTUNITY TO CURE PROVISIONS OF SUCH SECTION.

6.                                       CONDITIONAL NATURE OF SECTION 5
PAYMENTS.

(A)                                  NONCOMPETE.  EMPLOYEE ACKNOWLEDGES THAT THE
NATURE OF THE COMPANY’S BUSINESS IS SUCH THAT IF EMPLOYEE WERE TO BECOME
EMPLOYED BY, OR SUBSTANTIALLY INVOLVED IN, THE BUSINESS OF A COMPETITOR OF THE
COMPANIES DURING THE 12 MONTHS FOLLOWING THE TERMINATION OF EMPLOYEE’S
EMPLOYMENT, IT WOULD BE VERY DIFFICULT FOR EMPLOYEE NOT TO RELY ON OR USE THE
COMPANY’S TRADE SECRETS AND CONFIDENTIAL INFORMATION.  THUS, TO AVOID THE
INEVITABLE DISCLOSURE OF THE COMPANIES’ TRADE SECRETS AND CONFIDENTIAL
INFORMATION, EMPLOYEE AGREES AND ACKNOWLEDGES THAT EMPLOYEE’S RIGHT TO RECEIVE
THE PAYMENTS SET FORTH IN SECTION 5 (TO THE EXTENT EMPLOYEE IS OTHERWISE
ENTITLED TO SUCH PAYMENTS) SHALL BE CONDITIONED UPON EMPLOYEE NOT DIRECTLY OR
INDIRECTLY ENGAGING IN (WHETHER AS AN EMPLOYEE, CONSULTANT, AGENT, PROPRIETOR,
PRINCIPAL, PARTNER, STOCKHOLDER, CORPORATE OFFICER, DIRECTOR OR OTHERWISE), NOR
HAVING ANY OWNERSHIP INTERESTED IN OR PARTICIPATING IN THE FINANCING, OPERATION,
MANAGEMENT OR CONTROL OF, ANY PERSON, FIRM, CORPORATION OR BUSINESS THAT IS IN
COMPETITION WITH ANY OF THE COMPANIES OR THEIR AFFILIATES; PROVIDED, HOWEVER,
THAT FOLLOWING HIS TERMINATION OF EMPLOYMENT, EMPLOYEE SHALL BE PERMITTED TO
WORK FOR AN ENTITY IN COMPETITION WITH THE COMPANIES WHOSE PRIMARY BUSINESS IS
NOT PROVIDING PRODUCTS OR SERVICES COMPETITIVE WITH THE PRODUCTS OR SERVICES OF
THE COMPANIES, SO LONG EMPLOYEE DOES NOT ENGAGE IN A BUSINESS THAT MAKES SUCH
ENTITY IN COMPETITION WITH THE COMPANIES.  NOTWITHSTANDING THE FOREGOING,
EMPLOYEE MAY, WITHOUT VIOLATING THIS SECTION 6, OWN, AS A PASSIVE INVESTMENT,
SHARES OF CAPITAL STOCK OF A PUBLICLY-HELD CORPORATION THAT ENGAGES IN
COMPETITION WHERE THE NUMBER OF SHARES OF SUCH CORPORATION’S CAPITAL STOCK THAT
ARE OWNED BY EMPLOYEE REPRESENT LESS THAN THREE PERCENT OF THE TOTAL NUMBER OF
SHARES OF SUCH CORPORATION’S CAPITAL STOCK OUTSTANDING.  FURTHER, IF THE
EMPLOYEE NOTIFIES THE CEO OR THE BOARD IN WRITING ABOUT POTENTIAL EMPLOYMENT
THAT MAY BE CONSTRUED AS IN COMPETITION, THE CEO

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or Board agrees to consider in good faith whether such potential employment may
be construed as in Competition and to notify Employee of its determination in
writing or by e-mail within a reasonable period of time.

(B)                                 NON-SOLICITATION.  UNTIL THE DATE 12 MONTHS
AFTER THE TERMINATION OF EMPLOYEE’S EMPLOYMENT HEREUNDER FOR ANY REASON,
EMPLOYEE AGREES AND ACKNOWLEDGES THAT EMPLOYEE’S RIGHT TO RECEIVE THE SEVERANCE
PAYMENTS SET FORTH IN SECTION 5 (TO THE EXTENT EMPLOYEE IS OTHERWISE ENTITLED TO
SUCH PAYMENTS) SHALL BE CONDITIONED UPON EMPLOYEE NOT EITHER DIRECTLY OR
INDIRECTLY SOLICITING, INDUCING, RECRUITING OR ENCOURAGING AN EMPLOYEE TO LEAVE
HIS OR HER EMPLOYMENT EITHER FOR EMPLOYEE OR FOR ANY OTHER ENTITY OR PERSON WITH
WHICH OR WHOM EMPLOYEE HAS A BUSINESS RELATIONSHIP.

(C)                                  UNDERSTANDING OF COVENANTS.  EMPLOYEE
REPRESENTS THAT HE (I) IS FAMILIAR WITH THE FOREGOING COVENANTS NOT TO COMPETE
AND NOT TO SOLICIT, AND (II) IS FULLY AWARE OF HIS OBLIGATIONS HEREUNDER,
INCLUDING, WITHOUT LIMITATION, THE REASONABLENESS OF THE LENGTH OF TIME, SCOPE
AND GEOGRAPHIC COVERAGE OF THESE COVENANTS.

(D)                                 REMEDY FOR BREACH.  UPON ANY BREACH OF THIS
SECTION BY EMPLOYEE, ALL SEVERANCE PAYMENTS PURSUANT TO SECTION 5 SHALL
IMMEDIATELY CEASE, AND THAT SHALL BE THE SOLE REMEDY AVAILABLE TO THE COMPANY
FOR SUCH BREACH.

7.                                       ATTORNEY FEES, COSTS AND EXPENSES. 
WITH RESPECT TO ANY CHANGE OF CONTROL SEVERANCE TERMINATION ONLY, THE COMPANY
SHALL REIMBURSE EMPLOYEE FOR THE REASONABLE ATTORNEY FEES, COSTS AND EXPENSES
INCURRED BY THE EMPLOYEE IN CONNECTION WITH ANY ACTION BROUGHT BY EMPLOYEE TO
ENFORCE HIS RIGHTS HEREUNDER, PROVIDED SUCH ACTION IS NOT DECIDED IN FAVOR OF
THE COMPANY.

8.                                       LIMITATION ON PAYMENTS.

(A)                                  IN THE EVENT THAT THE SEVERANCE AND OTHER
BENEFITS PROVIDED FOR IN THIS AGREEMENT OR OTHERWISE PAYABLE TO THE EMPLOYEE
(I) CONSTITUTE “PARACHUTE PAYMENTS” WITHIN THE MEANING OF SECTION 280G OF THE
INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE “CODE”) AND (II) BUT FOR THIS
SECTION 8, WOULD BE SUBJECT TO THE EXCISE TAX IMPOSED BY SECTION 4999 OF THE
CODE, THEN THE EMPLOYEE’S SEVERANCE BENEFITS UNDER THIS AGREEMENT SHALL BE
EITHER

(A)                              delivered in full, or

(B)                                delivered as to such lesser extent which
would result in no portion of such severance benefits being subject to excise
tax under Section 4999 of the Code,

whichever of the foregoing amounts, taking into account the applicable federal,
state and local income taxes and the excise tax imposed by Section 4999, results
in the receipt by the Employee on an after-tax basis, of the greatest amount of
severance benefits, notwithstanding that all or some portion of such severance
benefits may be taxable under Section 4999 of the Code.  Any taxes due under
Section 4999 shall be the responsibility of the employee.

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(B)                                 IF A REDUCTION IN THE PAYMENTS AND BENEFITS
THAT WOULD OTHERWISE BE PAID OR PROVIDED TO THE EMPLOYEE UNDER THE TERMS OF THIS
AGREEMENT IS NECESSARY TO COMPLY WITH THE PROVISIONS OF SECTION 8(A), THE
EMPLOYEE SHALL BE ENTITLED TO SELECT WHICH PAYMENTS OR BENEFITS WILL BE REDUCED
AND THE MANNER AND METHOD OF ANY SUCH REDUCTION OF SUCH PAYMENTS OR BENEFITS
SUBJECT TO REASONABLE LIMITATIONS (INCLUDING, FOR EXAMPLE, EXPRESS PROVISIONS
UNDER THE COMPANIES’ BENEFIT PLANS) (SO LONG AS THE REQUIREMENTS OF SECTION 8(A)
ARE MET).  WITHIN THIRTY (30) DAYS AFTER THE AMOUNT OF ANY REQUIRED REDUCTION IN
PAYMENTS AND BENEFITS IS FINALLY DETERMINED IN ACCORDANCE WITH THE PROVISIONS OF
SECTION 8(C), THE EMPLOYEE SHALL NOTIFY THE COMPANY IN WRITING REGARDING WHICH
PAYMENTS OR BENEFITS ARE TO BE REDUCED.  IF NO NOTIFICATION IS GIVEN BY THE
EMPLOYEE, THE COMPANY WILL DETERMINE WHICH AMOUNTS TO REDUCE.  IF, AS A RESULT
OF ANY REDUCTION REQUIRED BY SECTION 8(A), AMOUNTS PREVIOUSLY PAID TO THE
EMPLOYEE EXCEED THE AMOUNT TO WHICH THE EMPLOYEE IS ENTITLED, THE EMPLOYEE WILL
PROMPTLY RETURN THE EXCESS AMOUNT TO THE COMPANY.

(C)                                  UNLESS THE COMPANY AND THE EMPLOYEE
OTHERWISE AGREE IN WRITING, ANY DETERMINATION REQUIRED UNDER THIS SECTION 8
SHALL BE MADE IN WRITING BY THE COMPANY’S PRIMARY OUTSIDE TAX ADVISORS
IMMEDIATELY PRIOR TO THE CHANGE OF CONTROL (THE “ACCOUNTANTS”), WHOSE
DETERMINATION SHALL BE CONCLUSIVE AND BINDING UPON THE EMPLOYEE AND THE COMPANY
FOR ALL PURPOSES.  FOR PURPOSES OF MAKING THE CALCULATIONS REQUIRED BY THIS
SECTION 8, THE ACCOUNTANTS MAY, AFTER TAKING INTO ACCOUNT THE INFORMATION
PROVIDED BY THE EMPLOYEE, MAKE REASONABLE ASSUMPTIONS AND APPROXIMATIONS
CONCERNING APPLICABLE TAXES AND MAY RELY ON REASONABLE, GOOD FAITH
INTERPRETATIONS CONCERNING THE APPLICATION OF SECTIONS 280G AND 4999 OF THE
CODE.  THE COMPANIES AND THE EMPLOYEE SHALL FURNISH TO THE ACCOUNTANTS SUCH
INFORMATION AND DOCUMENTS AS THE ACCOUNTANTS MAY REASONABLY REQUEST IN ORDER TO
MAKE A DETERMINATION UNDER THIS SECTION.  THE COMPANIES SHALL BEAR ALL COSTS THE
ACCOUNTANTS MAY REASONABLY INCUR IN CONNECTION WITH ANY CALCULATIONS
CONTEMPLATED BY THIS SECTION 8.

9.                                       DEFINITION OF TERMS.  THE FOLLOWING
TERMS REFERRED TO IN THIS AGREEMENT SHALL HAVE THE FOLLOWING MEANINGS:

(A)                                  ANNUAL COMPENSATION.  “ANNUAL COMPENSATION”
MEANS AN AMOUNT EQUAL TO THE GREATER OF (I) EMPLOYEE’S BASE SALARY FOR THE
TWELVE (12) MONTHS PRECEDING THE CHANGE OF CONTROL PLUS THE EMPLOYEE’S TARGET
BONUS FOR THE SAME PERIOD, OR (II) EMPLOYEE’S BASE SALARY ON AN ANNUALIZED BASIS
AND THE EMPLOYEE’S TARGET BONUS AS OF THE TERMINATION DATE.

(B)                                 CAUSE.  “CAUSE” SHALL MEAN (I) ANY ACT OF
PERSONAL DISHONESTY TAKEN BY THE EMPLOYEE IN CONNECTION WITH HIS
RESPONSIBILITIES AS AN EMPLOYEE AND INTENDED TO RESULT IN SUBSTANTIAL PERSONAL
ENRICHMENT OF THE EMPLOYEE, (II) THE CONVICTION OF OR PLEA OF NOLO CONTENDERE TO
A FELONY, (III) A WILLFUL ACT BY THE EMPLOYEE THAT CONSTITUTES GROSS MISCONDUCT
AND THAT IS INJURIOUS TO THE COMPANY, OR (IV) FOR A PERIOD OF NOT LESS THAN
THIRTY (30) DAYS FOLLOWING DELIVERY TO THE EMPLOYEE OF A WRITTEN DEMAND FOR
PERFORMANCE FROM THE COMPANY THAT DESCRIBES THE BASIS FOR THE COMPANY’S BELIEF
THAT THE EMPLOYEE HAS NOT SUBSTANTIALLY PERFORMED HIS DUTIES, CONTINUED
VIOLATIONS BY THE EMPLOYEE OF THE EMPLOYEE’S OBLIGATIONS TO THE COMPANY THAT ARE
DEMONSTRABLY WILLFUL AND DELIBERATE ON THE EMPLOYEE’S PART.  ANY DISMISSAL FOR
CAUSE MUST BE APPROVED BY THE COMPANY’S BOARD OF DIRECTORS PRIOR TO THE
DISMISSAL DATE.

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(C)                                  CHANGE OF CONTROL.  “CHANGE OF CONTROL”
MEANS THE OCCURRENCE OF ANY OF THE FOLLOWING EVENTS:

(I)                                        ANY “PERSON” (AS SUCH TERM IS USED IN
SECTIONS 13(D) AND 14(D) OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED)
BECOMES THE “BENEFICIAL OWNER” (AS DEFINED IN RULE 13D-3 UNDER SAID ACT),
DIRECTLY OR INDIRECTLY, OF SECURITIES OF THE COMPANY REPRESENTING FIFTY PERCENT
(50%) OR MORE OF THE TOTAL VOTING POWER REPRESENTED BY THE COMPANY’S THEN
OUTSTANDING VOTING SECURITIES;

(II)                                     ANY “PERSON” (AS SUCH TERM IS USED IN
SECTIONS 13(D) AND 14(D) OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED),
OTHER THAN THE COMPANY, CESI-SCR OR AN AFFILIATED ENTITY, BECOMES THE
“BENEFICIAL OWNER” (AS DEFINED IN RULE 13D-3 UNDER SAID ACT), DIRECTLY OR
INDIRECTLY, OF SECURITIES OF SCR-TECH REPRESENTING FIFTY PERCENT (50%) OR MORE
OF THE TOTAL VOTING POWER REPRESENTED BY THE SCR-TECH’S THEN OUTSTANDING VOTING
SECURITIES;

(III)                                  ANY “PERSON” (AS SUCH TERM IS USED IN
SECTIONS 13(D) AND 14(D) OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED),
OTHER THAN THE COMPANY OR AN AFFILIATED ENTITY, BECOMES THE “BENEFICIAL OWNER”
(AS DEFINED IN RULE 13D-3 UNDER SAID ACT), DIRECTLY OR INDIRECTLY, OF SECURITIES
OF CESI-SCR REPRESENTING FIFTY PERCENT (50%) OR MORE OF THE TOTAL VOTING POWER
REPRESENTED BY THE CESI-SCR’S THEN OUTSTANDING VOTING SECURITIES;

(IV)                                 A CHANGE IN THE COMPOSITION OF THE
COMPANY’S BOARD OF DIRECTORS OCCURRING WITHIN A TWELVE-MONTH PERIOD, AS A RESULT
OF WHICH FEWER THAN A MAJORITY OF THE DIRECTORS ARE INCUMBENT DIRECTORS. 
“INCUMBENT DIRECTORS” SHALL MEAN DIRECTORS WHO EITHER (A) ARE DIRECTORS OF THE
COMPANY AS OF THE DATE HEREOF, OR (B) ARE ELECTED, OR NOMINATED FOR ELECTION, TO
THE BOARD WITH THE AFFIRMATIVE VOTES OF AT LEAST A MAJORITY OF THE INCUMBENT
DIRECTORS AT THE TIME OF SUCH ELECTION OR NOMINATION (BUT SHALL NOT INCLUDE AN
INDIVIDUAL WHOSE ELECTION OR NOMINATION IS IN CONNECTION WITH AN ACTUAL OR
THREATENED PROXY CONTEST RELATING TO THE ELECTION OF DIRECTORS TO THE COMPANY);

(V)                                    THE CONSUMMATION OF A MERGER OR
CONSOLIDATION OF THE COMPANY WITH ANY OTHER CORPORATION, OTHER THAN A MERGER OR
CONSOLIDATION THAT WOULD RESULT IN THE VOTING SECURITIES OF THE COMPANY
OUTSTANDING IMMEDIATELY PRIOR THERETO CONTINUING TO REPRESENT (EITHER BY
REMAINING OUTSTANDING OR BY BEING CONVERTED INTO VOTING SECURITIES OF THE
SURVIVING ENTITY OR SUCH SURVIVING ENTITY’S PARENT) AT LEAST FIFTY PERCENT (50%)
OF THE TOTAL VOTING POWER REPRESENTED BY THE VOTING SECURITIES OF THE COMPANY OR
SUCH SURVIVING ENTITY OR SUCH SURVIVING ENTITY’S PARENT OUTSTANDING IMMEDIATELY
AFTER SUCH MERGER OR CONSOLIDATION;

(VI)                                 THE CONSUMMATION OF A MERGER OR
CONSOLIDATION OF SCR TECH WITH ANY OTHER CORPORATION (OTHER THAN A MERGER OR
CONSOLIDATION WITH THE COMPANY, CESI-SCR OR AN AFFILIATED ENTITY), OTHER THAN A
MERGER OR CONSOLIDATION THAT WOULD RESULT IN THE VOTING SECURITIES OF SCR TECH
OUTSTANDING IMMEDIATELY PRIOR THERETO CONTINUING TO REPRESENT (EITHER BY
REMAINING OUTSTANDING OR BY BEING CONVERTED INTO VOTING SECURITIES OF THE
SURVIVING ENTITY OR SUCH SURVIVING ENTITY’S PARENT) AT LEAST FIFTY PERCENT (50%)
OF THE TOTAL VOTING POWER REPRESENTED BY THE VOTING SECURITIES OF SCR TECH OR
SUCH SURVIVING ENTITY OR SUCH SURVIVING ENTITY’S PARENT OUTSTANDING IMMEDIATELY
AFTER SUCH MERGER OR CONSOLIDATION;

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(VII)                              THE CONSUMMATION OF THE SALE OR DISPOSITION
BY THE COMPANY OF ALL OR SEVENTY-FIVE PERCENT (75%) OR MORE OF THE COMPANY’S
ASSETS, OR

(VIII)                           THE CONSUMMATION OF THE SALE OR DISPOSITION BY
SCR-TECH OF ALL OR SEVENTY-FIVE PERCENT (75%) OR MORE OF SCR-TECH’S ASSETS.

(D)                                 COMPANY VALUE.  “COMPANY VALUE” SHALL MEAN
THE VALUE OF THE TOTAL CONSIDERATION PAYABLE TO THE COMPANIES OR TO THE
COMPANY’S STOCKHOLDERS, IN THE EVENT OF A CHANGE OF CONTROL, LESS THE VALUE OF
ANY CASH, CASH EQUIVALENTS AND SHORT-TERM SECURITIES HELD BY OR ON ACCOUNT OF
ANY OF THE COMPANIES OR THEIR AFFILIATES IMMEDIATELY PRIOR TO SUCH CHANGE OF
CONTROL.  THE DETERMINATION OF COMPANY VALUE SHALL BASED UPON CONSIDERATION TO
BE RECEIVED BY THE COMPANIES OR BY THE COMPANY’S STOCKHOLDERS AND SHALL BE
DETERMINED PROMPTLY FOLLOWING ANY TERMINATION OF EMPLOYEE’S EMPLOYMENT THAT
WOULD GIVE RISE TO A SEVERANCE PAYMENT UNDER SECTION 5(B) HEREOF.  IF PART OF
THE CONSIDERATION TO BE RECEIVED BY COMPANIES OR THE COMPANY’S STOCKHOLDERS IN A
CHANGE OF CONTROL CONSISTS OF EARN-OUT PAYMENTS OR OTHER CONTINGENT PAYMENTS,
THE PRESENT VALUE OF SUCH CONTINGENT PAYMENTS, INCLUDING A DISCOUNT TO REFLECT
THE PROBABILITY OF SUCH PAYMENTS BEING MADE, SHALL BE REASONABLY DETERMINED BY
THE ACQUIRER.  IN THE EVENT OF A CHANGE OF CONTROL NOT INVOLVING THE COMPANY
(I.E., A CHANGE OF CONTROL INVOLVING CESI-SCR AND/OR SCR-TECH BUT NOT THE
COMPANY), COMPANY VALUE SHALL BE REDUCED BY THE AMOUNT OF ANY INTRA-COMPANY DEBT
OF CESI-SCR OR SCR-TECH TO THE COMPANY OR ITS AFFILIATES THAT IS FORGIVEN BY THE
COMPANY OR SUCH AFFILIATES IN CONTEMPLATION OF THE CHANGE OF CONTROL.

(E)                                  COMPETITION.  “COMPETITION” SHALL MEAN (I)
SCR CATALYST AND MANAGEMENT SERVICES INCLUDING, BUT NOT LIMITED TO THE CLEANING,
REJUVENATION AND REGENERATION OF SCR CATALYSTS AND MANAGING SCR CATALYSTS FOR
UTILITIES AND INDEPENDENT POWER PRODUCERS, AND (II) ANY OTHER BUSINESS ENGAGED
IN BY ANY OF THE COMPANIES THAT RELATES TO THE ACTIVITIES SPECIFIED IN
SUBSECTION (I) HEREOF.

(F)                                    DISABILITY.  “DISABILITY” SHALL MEAN THAT
THE EMPLOYEE HAS BEEN UNABLE TO PERFORM HIS COMPANY DUTIES AS THE RESULT OF HIS
INCAPACITY DUE TO PHYSICAL OR MENTAL ILLNESS, AND SUCH INABILITY, AT LEAST
TWENTY-SIX (26) WEEKS AFTER ITS COMMENCEMENT, IS DETERMINED TO BE TOTAL AND
PERMANENT BY A PHYSICIAN SELECTED BY THE COMPANY OR ITS INSURERS AND ACCEPTABLE
TO THE EMPLOYEE OR THE EMPLOYEE’S LEGAL REPRESENTATIVE (SUCH AGREEMENT AS TO
ACCEPTABILITY NOT TO BE UNREASONABLY WITHHELD).  TERMINATION RESULTING FROM
DISABILITY MAY ONLY BE EFFECTED AFTER AT LEAST THIRTY (30) DAYS’ WRITTEN NOTICE
BY THE COMPANY OF ITS INTENTION TO TERMINATE THE EMPLOYEE’S EMPLOYMENT.  IN THE
EVENT THAT THE EMPLOYEE RESUMES THE PERFORMANCE OF SUBSTANTIALLY ALL OF HIS
DUTIES HEREUNDER BEFORE THE TERMINATION OF HIS EMPLOYMENT BECOMES EFFECTIVE, THE
NOTICE OF INTENT TO TERMINATE SHALL AUTOMATICALLY BE DEEMED TO HAVE BEEN
REVOKED.

(G)                                 INVOLUNTARY TERMINATION.  “INVOLUNTARY
TERMINATION” SHALL MEAN (I) WITHOUT THE EMPLOYEE’S EXPRESS WRITTEN CONSENT, THE
SIGNIFICANT REDUCTION OF THE EMPLOYEE’S DUTIES, AUTHORITY OR RESPONSIBILITIES,
RELATIVE TO THE EMPLOYEE’S DUTIES, AUTHORITY OR RESPONSIBILITIES AS IN EFFECT
IMMEDIATELY PRIOR TO SUCH REDUCTION, OR THE ASSIGNMENT TO EMPLOYEE OF SUCH
REDUCED DUTIES, AUTHORITY OR RESPONSIBILITIES; PROVIDED, HOWEVER, THAT SO LONG
AS EMPLOYEE REMAINS THE PRESIDENT OF SCR-TECH, OR, FOLLOWING A CHANGE OF CONTROL
OF SCR-TECH, WHATEVER ENTITY SUBSTANTIALLY CONTAINS SCR-TECH’S BUSINESS, IN
EITHER CASE WITH THE DUTIES, AUTHORITY AND RESPONSIBILITIES THAT ARE

8

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COMMENSURATE WITH SUCH POSITION, THEN EMPLOYEE SHALL HAVE NO GROUNDS FOR AN
INVOLUNTARY TERMINATION PURSUANT TO THIS SECTION 9(G)(I) OR SECTION 9(G)(VIII);
PROVIDED, FURTHER, THAT IF EMPLOYEE REPORTS TO SOMEONE OTHER THAN THE CHIEF
EXECUTIVE OFFICER OF THE COMPANY, THAT SHALL NOT IN AND OF ITSELF CONSTITUTE
GROUNDS FOR AN INVOLUNTARY TERMINATION PURSUANT TO THIS SECTION 9(G)(I) OR
SECTION 9(G)(VIII); PROVIDED, FURTHER, THAT IF EMPLOYEE CEASES TO BE A SECTION
16 OFFICER PURSUANT TO SECTION 1(A) HEREOF, THAT SHALL NOT IN AND OF ITSELF
CONSTITUTE GROUNDS FOR AN INVOLUNTARY TERMINATION, (II) WITHOUT THE EMPLOYEE’S
EXPRESS WRITTEN CONSENT, A SUBSTANTIAL REDUCTION, WITHOUT GOOD BUSINESS REASONS,
OF THE FACILITIES AND PERQUISITES (INCLUDING OFFICE SPACE AND LOCATION)
AVAILABLE TO THE EMPLOYEE IMMEDIATELY PRIOR TO SUCH REDUCTION; (III) A REDUCTION
BY THE COMPANY IN THE BASE SALARY OR TARGET BONUS OF THE EMPLOYEE AS IN EFFECT
IMMEDIATELY PRIOR TO SUCH REDUCTION; (IV) A MATERIAL REDUCTION BY THE COMPANY IN
THE KIND OR LEVEL OF EMPLOYEE BENEFITS TO WHICH THE EMPLOYEE WAS ENTITLED
IMMEDIATELY PRIOR TO SUCH REDUCTION WITH THE RESULT THAT THE EMPLOYEE’S OVERALL
BENEFITS PACKAGE IS SIGNIFICANTLY REDUCED; (V) THE RELOCATION OF THE EMPLOYEE TO
A FACILITY OR A LOCATION MORE THAN TWENTY-FIVE (25) MILES FROM THE EMPLOYEE’S
THEN PRESENT LOCATION, WITHOUT THE EMPLOYEE’S EXPRESS WRITTEN CONSENT; (VI) ANY
PURPORTED TERMINATION OF THE EMPLOYEE BY THE COMPANY THAT IS NOT EFFECTED FOR
DISABILITY OR FOR CAUSE, OR, DURING THE CHANGE OF CONTROL PERIOD ONLY, ANY
PURPORTED TERMINATION FOR WHICH THE GROUNDS RELIED UPON ARE NOT VALID; (VII) THE
FAILURE OF THE COMPANY TO OBTAIN THE ASSUMPTION OF THIS AGREEMENT BY ANY
SUCCESSORS CONTEMPLATED IN SECTION 10(A) BELOW; OR (VIII) DURING THE CHANGE OF
CONTROL PERIOD ONLY, ANY ACT OR SET OF FACTS OR CIRCUMSTANCES THAT WOULD, UNDER
NORTH CAROLINA CASE LAW OR STATUTE CONSTITUTE A CONSTRUCTIVE TERMINATION OF THE
EMPLOYEE.  HOWEVER, WITH RESPECT TO ANY NON-CHANGE OF CONTROL SEVERANCE
TERMINATION, AN INVOLUNTARY TERMINATION SHALL NOT BE DEEMED TO HAVE OCCURRED
UNLESS EMPLOYEE PROVIDES WRITTEN NOTICE TO THE COMPANY DESCRIBING THE NATURE OF
THE EVENT THAT HE BELIEVES FORMS THE BASIS FOR INVOLUNTARY TERMINATION AND THE
COMPANY DOES NOT CURE SUCH EVENT WITHIN TEN (10) DAYS FOLLOWING RECEIPT OF SUCH
NOTICE.

(H)                                 TERMINATION DATE.  “TERMINATION DATE” SHALL
MEAN (I) IF THIS AGREEMENT IS TERMINATED BY THE COMPANY FOR DISABILITY, THIRTY
(30) DAYS AFTER NOTICE OF TERMINATION IS GIVEN TO THE EMPLOYEE (PROVIDED THAT
THE EMPLOYEE SHALL NOT HAVE RETURNED TO THE PERFORMANCE OF THE EMPLOYEE’S DUTIES
ON A FULL-TIME BASIS DURING SUCH THIRTY (30)-DAY PERIOD), (II) IF THE EMPLOYEE’S
EMPLOYMENT IS TERMINATED BY THE COMPANY FOR ANY OTHER REASON, THE DATE ON WHICH
A NOTICE OF TERMINATION IS GIVEN, PROVIDED THAT IF WITHIN THIRTY (30) DAYS AFTER
THE COMPANY GIVES THE EMPLOYEE NOTICE OF TERMINATION, THE EMPLOYEE NOTIFIES THE
COMPANY THAT A DISPUTE EXISTS CONCERNING THE TERMINATION OR THE BENEFITS DUE
PURSUANT TO THIS AGREEMENT, THEN THE TERMINATION DATE SHALL BE THE DATE ON WHICH
SUCH DISPUTE IS FINALLY DETERMINED, EITHER BY MUTUAL WRITTEN AGREEMENT OF THE
PARTIES, OR A BY FINAL JUDGMENT, ORDER OR DECREE OF A COURT OF COMPETENT
JURISDICTION (THE TIME FOR APPEAL THEREFROM HAVING EXPIRED AND NO APPEAL HAVING
BEEN PERFECTED), OR (III) IF THE AGREEMENT IS TERMINATED BY THE EMPLOYEE, THE
DATE ON WHICH THE EMPLOYEE DELIVERS THE NOTICE OF TERMINATION TO THE COMPANY.

10.                                 SUCCESSORS.

(A)                                  COMPANY’S SUCCESSORS.  ANY SUCCESSOR TO THE
COMPANY (WHETHER DIRECT OR INDIRECT AND WHETHER BY PURCHASE, MERGER,
CONSOLIDATION, LIQUIDATION OR OTHERWISE) TO ALL OR SUBSTANTIALLY ALL OF THE
COMPANY’S BUSINESS AND/OR ASSETS SHALL ASSUME THE OBLIGATIONS UNDER THIS
AGREEMENT AND AGREE EXPRESSLY TO PERFORM THE OBLIGATIONS UNDER THIS AGREEMENT IN
THE SAME MANNER AND TO THE SAME EXTENT AS THE COMPANY WOULD BE REQUIRED TO
PERFORM SUCH OBLIGATIONS IN THE ABSENCE

9

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of a succession.  For all purposes under this Agreement, the term “Company”
shall include any successor to the Company’s business and/or assets which
executes and delivers the assumption agreement described in this Section 10(a)
or which becomes bound by the terms of this Agreement by operation of law.

(B)                                 EMPLOYEE’S SUCCESSORS.  THE TERMS OF THIS
AGREEMENT AND ALL RIGHTS OF THE EMPLOYEE HEREUNDER SHALL INURE TO THE BENEFIT
OF, AND BE ENFORCEABLE BY, THE EMPLOYEE’S PERSONAL OR LEGAL REPRESENTATIVES,
EXECUTORS, ADMINISTRATORS, SUCCESSORS, HEIRS, DISTRIBUTEES, DEVISEES AND
LEGATEES.

11.                                 NOTICE.

(A)                                  GENERAL.  NOTICES AND ALL OTHER
COMMUNICATIONS CONTEMPLATED BY THIS AGREEMENT SHALL BE IN WRITING AND SHALL BE
DEEMED TO HAVE BEEN DULY GIVEN WHEN PERSONALLY DELIVERED OR WHEN MAILED BY U.S. 
REGISTERED OR CERTIFIED MAIL, RETURN RECEIPT REQUESTED AND POSTAGE PREPAID.  IN
THE CASE OF THE EMPLOYEE, MAILED NOTICES SHALL BE ADDRESSED TO HIM AT THE HOME
ADDRESS WHICH HE MOST RECENTLY COMMUNICATED TO THE COMPANY IN WRITING.  IN THE
CASE OF THE COMPANY, MAILED NOTICES SHALL BE ADDRESSED TO ITS CORPORATE
HEADQUARTERS, AND ALL NOTICES SHALL BE DIRECTED TO THE ATTENTION OF ITS
SECRETARY.

(B)                                 NOTICE OF TERMINATION.  ANY TERMINATION BY
THE COMPANY FOR CAUSE OR BY THE EMPLOYEE AS A RESULT OF A VOLUNTARY RESIGNATION
OR AN INVOLUNTARY TERMINATION SHALL BE COMMUNICATED BY A NOTICE OF TERMINATION
TO THE OTHER PARTY HERETO GIVEN IN ACCORDANCE WITH SECTION 11(A) OF THIS
AGREEMENT.  SUCH NOTICE SHALL INDICATE THE SPECIFIC TERMINATION PROVISION IN
THIS AGREEMENT RELIED UPON, SHALL SET FORTH IN REASONABLE DETAIL THE FACTS AND
CIRCUMSTANCES CLAIMED TO PROVIDE A BASIS FOR TERMINATION UNDER THE PROVISION SO
INDICATED, AND SHALL SPECIFY THE TERMINATION DATE (WHICH SHALL BE NOT MORE THAN
THIRTY (30) DAYS AFTER THE GIVING OF SUCH NOTICE).  THE FAILURE BY THE EMPLOYEE
TO INCLUDE IN THE NOTICE ANY FACT OR CIRCUMSTANCE WHICH CONTRIBUTES TO A SHOWING
OF INVOLUNTARY TERMINATION SHALL NOT WAIVE ANY RIGHT OF THE EMPLOYEE HEREUNDER
OR PRECLUDE THE EMPLOYEE FROM ASSERTING SUCH FACT OR CIRCUMSTANCE IN ENFORCING
HIS RIGHTS HEREUNDER.

12.                                 MISCELLANEOUS PROVISIONS.

(A)                                  NO DUTY TO MITIGATE.  THE EMPLOYEE SHALL
NOT BE REQUIRED TO MITIGATE THE AMOUNT OF ANY SEVERANCE PAYMENT CONTEMPLATED BY
THIS AGREEMENT, NOR SHALL ANY SUCH SEVERANCE PAYMENT BE REDUCED BY ANY EARNINGS
THAT THE EMPLOYEE MAY RECEIVE FROM ANY OTHER SOURCE, PROVIDED EMPLOYEE IS IN
COMPLIANCE WITH ALL OBLIGATIONS THAT THE EMPLOYEE OWES UNDER THIS AGREEMENT.

(B)                                 WAIVER.  NO PROVISION OF THIS AGREEMENT
SHALL BE MODIFIED, WAIVED OR DISCHARGED UNLESS THE MODIFICATION, WAIVER OR
DISCHARGE IS AGREED TO IN WRITING AND SIGNED BY THE EMPLOYEE AND BY AN
AUTHORIZED OFFICER OF THE COMPANY (OTHER THAN THE EMPLOYEE).  NO WAIVER BY
EITHER PARTY OF ANY BREACH OF, OR OF COMPLIANCE WITH, ANY CONDITION OR PROVISION
OF THIS AGREEMENT BY THE OTHER PARTY SHALL BE CONSIDERED A WAIVER OF ANY OTHER
CONDITION OR PROVISION OR OF THE SAME CONDITION OR PROVISION AT ANOTHER TIME.

(C)                                  WHOLE AGREEMENT.  THIS AGREEMENT REPRESENTS
THE ENTIRE UNDERSTANDING OF THE PARTIES HERETO WITH RESPECT TO THE SUBJECT
MATTER HEREOF AND SUPERSEDES IN THEIR ENTIRETY ALL PRIOR

10

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arrangements and understandings regarding same, including the Prior Agreements
and any offer letter, promotion letter, employment agreement, oral
representation or promise or other agreement regarding Employee’s employment
terms with the Company.  Other than this Agreement and the At-Will Employment,
Confidential Information and Invention Assignment Agreement, no agreements,
representations or understandings (whether oral or written and whether express
or implied) which are not expressly set forth in this Agreement have been made
or entered into by either party with respect to the subject matter hereof.

(D)                                 CHOICE OF LAW.  THE VALIDITY,
INTERPRETATION, CONSTRUCTION AND PERFORMANCE OF THIS AGREEMENT SHALL BE
CONSTRUED AND ENFORCED IN ACCORDANCE WITH, AND THE RIGHTS OF THE PARTIES SHALL
BE GOVERNED BY, THE LAWS OF THE STATE OF NORTH CAROLINA WITHOUT REGARD TO
PRINCIPLES OF CONFLICTS OF LAWS.

(E)                                  SEVERABILITY.  THE INVALIDITY OR
UNENFORCEABILITY OF ANY PROVISION OR PROVISIONS OF THIS AGREEMENT SHALL NOT
AFFECT THE VALIDITY OR ENFORCEABILITY OF ANY OTHER PROVISION HEREOF, WHICH SHALL
REMAIN IN FULL FORCE AND EFFECT.

(F)                                    WITHHOLDING.  ALL PAYMENTS MADE PURSUANT
TO THIS AGREEMENT WILL BE SUBJECT TO WITHHOLDING OF APPLICABLE INCOME AND
EMPLOYMENT TAXES.

(G)                                 COUNTERPARTS.  THIS AGREEMENT MAY BE
EXECUTED IN COUNTERPARTS, EACH OF WHICH SHALL BE DEEMED AN ORIGINAL, BUT ALL OF
WHICH TOGETHER WILL CONSTITUTE ONE AND THE SAME INSTRUMENT.

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IN WITNESS WHEREOF, each of the parties has executed this Agreement, in the case
of the Company by its duly authorized officer, as of the day and year set forth
below.

 

COMPANY

CATALYTICA ENERGY SYSTEMS, INC.

 

 

 

 

 

 

 

 

 

 

 

By:

/s/ ROBERT ZACK

 

 

Robert Zack

 

 

 

 

 

 

 

 

Its: CEO

 

 

 

 

 

 

 

Date:

January 10, 2007

 

 

 

 

 

 

 

 

 

 

 

 

SCR-Tech LLC

By: CESI-SCR, Inc., its Manager

 

 

 

 

 

 

 

 

By:

/s/ ROBERT ZACK

 

 

Robert Zack

 

 

 

 

 

 

 

 

 

 

 

 

 

Its: Vice President

 

 

 

 

 

 

 

 

Date:

January 10, 2007

 

 

 

 

 

 

 

 

 

 

 

CESI-SCR, Inc.

By:

/s/ ROBERT ZACK

 

 

Robert Zack

 

 

 

 

 

 

 

 

 

 

 

 

 

Its: Vice President

 

 

 

 

 

 

 

 

Date:

January 10, 2007

 

 

 

 

 

 

 

 

 

 

 

 

EMPLOYEE

/s/ WILLIAM J. MCMAHON III

 

 

 

 

 

 

Date:

December 26, 2006

 

 

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