EXHIBIT 10.4
CATALYTICA ENERGY SYSTEMS, INC.
301 West Warner Road, Suite 132
Tempe, AZ 85284-2961
May 8, 2007
Robert Zack
301 West Warner Road, Suite 132
Tempe, AZ 85284-2961
     Re: Your Amended and Restated Employment Agreement dated March 23, 2007
Dear Mr. Zack:
     This letter is intended to amend certain tax provisions and to clarify and
confirm our mutual understanding concerning certain aspects of your Amended and
Restated Employment Agreement (the “Employment Agreement”) entered into by and
between you and Catalytica Energy Systems, Inc. (the “Company”) dated March 23,
2007.
     The Company is entering into that certain Contribution and Merger Agreement
by and among the Company, Renegy Holdings, Inc. (“Holdings”), Snowflake
Acquisition Corporation, Renegy, LLC, Renegy Trucking, LLC, Snowflake White
Mountain Power, LLC, Robert M. Worsley, Christi M. Worsley and the Robert M.
Worsley and Christi M. Worsley Revocable Trust (the “CMA”). In connection with
the transactions contemplated under the CMA (the “Merger”), your Employment
Agreement will be assumed by Holdings effective as of the Closing (as defined in
the CMA).
     By signing this letter, you expressly acknowledge that your Employment
Agreement will be assumed by Holdings as of the Closing of the Merger, and that
the Merger constitutes a Change of Control (as defined in the Employment
Agreement) entitling you to the Change of Control Retention Payments (as defined
in the Employment Agreement) set forth therein (subject to the requirement of
your continued employment with Holdings through the date of each such retention
payment). You also expressly acknowledge that the assumption of your Employment
Agreement by Holdings does not entitle you to receive any severance benefits
described in your Employment Agreement for an Involuntary Termination (as
defined in the Employment Agreement). Of course, you nevertheless may be
entitled to receive severance benefits in accordance with your Employment
Agreement if your employment with Holdings is terminated after the Merger (and
while the Employment Agreement remains in effect) and the termination at that
time constitutes an Involuntary Termination. For purposes of clarity, payments
of any Change of Control Retention Payments to you pursuant to the terms of the
Employment

 

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Agreement will in no way affect, impair or diminish your eligibility to receive
any Target Bonus pursuant to, in accordance with and otherwise subject to the
terms of the Employment Agreement.
     Section 10(e) of your Employment Agreement is amended to replace the
existing definition of Involuntary Termination with the following:
“(e) Involuntary Termination. “Involuntary Termination” shall mean a material
negative change in Employee’s employment by any of the following: (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’s title, duties,
authority and responsibility are at the level of Chief Financial Officer or
greater, whether at the Company or at an acquirer following a Change of Control,
then that will not constitute an Involuntary Termination under this clause (i),
(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 11(a) below; (viii) requiring Employee to work outside of Arizona on
more than 50% of the business days in any 90 consecutive day period or
(viii) during the Change of Control Period only, any act or set of facts or
circumstances that would, under California 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.”
In additions, the following new Section 14 is added to your Employment
Agreement:
“14. Code Section 409A. Notwithstanding any provisions of this Agreement to the
contrary, if Employee is a “specified employee” within the meaning of
Section 409A of the Code and any temporary, proposed or final regulations
thereunder (together, “Section 409A”) at the time of Employee’s termination, and
any severance payments (including any benefits which provide for a “deferral of
compensation” within the meaning of

 

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Section 409A) to be made to Employee pursuant to this Agreement will not be paid
or provided in full by March 15 of the year following the year in which
Employee’s “separation from service” (within the meaning of Section 409A)
occurs, then only that portion of such severance payments up to the 409A Limit
(as defined below) may be made within the first six months following Employee’s
separation from service in accordance with the applicable payment schedule. Any
portion of such severance payments in excess of the 409A Limit shall accrue and,
to the extent such severance payments would otherwise have been payable within
the first six (6) months following Employee’s separation from service, will
become payable the date that is six (6) months and one (1) day following the
date of Employee’s separation from service. All subsequent severance payments,
if any, will be payable as provided in this Agreement. For purposes of this
Agreement, the “409A Limit” means the lesser of:
(a) two (2) times the Employee’s annualized compensation based upon the
Employee’s annual rate of pay (the determination of Employee’s annual rate of
pay for this purpose shall be as determined in accordance with Section 409A if
additional guidance is released after the date of this Agreement or, if no such
guidance is released, Employee’s annual rate of pay shall be deemed to be
Employee’s annual base salary); and
(b) two (2) times the maximum amount that may be taken into account under a
qualified plan pursuant to Section 401(a)(17) for the year in which the Employee
has a separation from service.
The intent of this Agreement is for all payments made hereunder to comply with
the requirements of Section 409A; to the extent any terms of this Agreement are
ambiguous, such terms shall be interpreted in accordance with such intent.”
     Except as described in the above amendments, this letter does not change
your Employment Agreement in any way. This instrument may be executed in several
counterparts, each of which shall be deemed to be an original, but all of which
together will constitute one and the same instrument.
Signature page follows.

 

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          Please confirm your understanding and agreement to the above by
signing in the place indicated below.

            Very truly yours,

CATALYTICA ENERGY SYSTEMS, INC.
      /s/ Ricardo B. Levy       Name:   Ricardo B. Levy      Title:   Director,
Chairman     

Agreed and Accepted:

     
/s/ Robert W. Zack
 
Robert W. Zack
   

Signature Page to Employment Agreement Side Letter