For 2008, the cash bonus opportunity shall be computed from your 2008 base earnings and thestock bonus opportunity shall be computed from your 2008 Base Salary.. In the event that all or aportion of the equity compensation component is paid in stock options, the number of options shallbe determined by dividing the dollar amount by the Black-Scholes value of Company options (or bysuch other reasonable method of valuing Company options as the Compensation Committee shalldetermine), and such options shall at a maximum be subject to a four-year vesting schedule, with1/48th of the covered shares vesting each month thereafter, so as to be 100% vested onthe four year anniversary of the grant date, subject to Executive remaining a Service Provider, assuch term is defined in the Company’s 2007 Equity Incentive Plan (“Service Provider”) on eachvesting date.4. Benefits; Vacation. During the Employment Period, the Company shall provide orcause to be provided to the Executive such employee benefits as are provided to other executiveofficers of the Company, including family medical and dental, disability and life insurance, andparticipation in pension and retirement plans, incentive compensation plans, stock option plans andother benefit plans (collectively, the “Applicable Benefit Plans”). The Executive shall be entitledto annual vacations in accordance with the Company’s vacation policies in effect from time to timefor executive officers of the Company.5. Term: Employment Period. The “Employment Period” shall commence on the EffectiveDate and shall continue for an initial term of three (3) years (the “Initial Term”). Thereafter,the Employment Period shall continue for successive one (1) year terms (the “Additional Terms”)unless either the Company or the Executive provides written notice of termination of the EmploymentPeriod not less than one hundred twenty (120) days prior to the end of the Initial Term or anyAdditional Term, or unless earlier terminated pursuant to Section 6. If the Executive shall remainin the full time employ of the Company beyond the Employment Period without any written agreementbetween the parties, this Agreement shall be deemed to continue on a month to month basis andeither party shall have the right to terminate this Agreement at the end of any ensuing calendarmonth on written notice of at least thirty (30) days.6. Termination.(a) Executive’s employment with the company shall be “at will”. Either the Company or theExecutive may terminate this Agreement and Executive’s employment at any time, with or withoutCause or Good Reason (as such terms are defined below), in its or his sole discretion, upon thirty(30) days prior written notice of termination.(b) Without limiting the foregoing Section 6(a), (i) the Executive may terminate hisemployment with the company at any time for Good Reason, or (ii) the Company may terminate hisemployment at any time for Cause. “Good Reason” shall mean any of the following: (i) the Company’sfailure to elect or reelect, or to appoint or reappoint, Executive to the office of Chief OperatingOfficer of the Company; (ii) material changes by the Company in the Executive’s function, duties orresponsibilities of a scope less than that associated with the position of Chief Operating Officerof the Company; (iii) Executive’s Base Salary is reduced by the Company below the highest BaseSalary of Executive in effect during the Employment Period; (iv) relocation of Executive’sprincipal place of employment to a place that is not within twenty five (25) miles of the citylimits of Tempe, Arizona,;(v) failure by the Company to obtainthe assumption of this Agreement by any successor or assign of the Company; or
 
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 (vi) a materialbreach of this Agreement by the Company, which breach is not cured within five (5) days afterwritten notice thereof is delivered to the Company. “Cause” shall mean (i) the Executive’swillful, repeated or negligent failure to perform his duties hereunder and to comply with anyreasonable or proper direction given by or on behalf of the Company’s Board of Directors and thecontinuation of such failure following twenty (20) days written notice to such effect, (ii) theExecutive being guilty of serious misconduct on the Company’s premises or elsewhere, whether duringthe performance of his duties or not, which is reasonably likely to cause material damage to thereputation of the Company or render it materially more difficult for the Executive tosatisfactorily continue to perform his duties and the continuation or a second instance of suchserious misconduct following twenty (20) days written notice to such effect; (iii) the Executivebeing found guilty in a criminal court of any offense of a nature which is reasonably likely tomaterially adversely affect the reputation of the Company or to materially prejudice its interestsif the Executive were to continue to be employed by the Company; (iv) the Executive’s commission ofany act of fraud or theft involving the Company or its business, or any intentional tort againstthe Company; or (v) the Executive’s violation of any of the material terms, covenants,representations or warranties contained in this Agreement and failure to correct such violationwithin twenty (20) days after written notice by the Company. Notwithstanding the foregoing,“Cause” shall only be deemed to exist if it is so determined by the Board of Directors of theCompany, after the Executive and his counsel are first given the opportunity to address the Boardwith respect to such determination at a duly noticed meeting of the Board of Directors.(c) “Disability” shall mean that the Executive, in the good faith determination of the Boardof Directors of the Company, based on the advice of a qualified physician after a properexamination of the Executive (which Executive shall take reasonable actions to facilitate), isunable to render services of the character contemplated hereby and that such inability (i) may beexpected to be permanent, or (ii) may be expected to continue for a period of at least six (6)consecutive months (or for shorter periods totaling more than six (6) months during any period oftwelve (12) consecutive months). Termination resulting from Disability may only be effected afterat least thirty (30) days written notice by the Company of its intention to terminate theExecutive’s employment.(d) “Termination Date” shall mean (i) if this Agreement is terminated on account of death, thedate of death; (ii) if this Agreement is terminated for Disability, the date established by theCompany pursuant to Section 6(c) hereof; (iii) if this Agreement is terminated by the Company, thedate on which a notice of termination is given to the Executive; (iv) if the Agreement isterminated by the Executive, the date the Executive ceases work; or (v) if this Agreement expiresby its terms, the last day of the term of this Agreement. Notwithstanding the foregoing, if withinthirty (30) days after any notice of termination is given, the party receiving such notice notifiesthe other party that a dispute exists concerning the termination, the Termination Date shall be thedate finally determined to be the Termination Date, either by mutual written agreement of theparties or by binding arbitration in the manner provided in Section 21 hereof; provided that theTermination Date shall be extended by a notice of dispute only if such notice is given in goodfaith and the party giving such notice pursues the resolution of such dispute with reasonablediligence.
 
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7. Severance:(a) If (i) the Company terminates the employment of the Executive against his will and withoutCause (including by giving notice of termination of the Agreement pursuant to Section 5), or (ii)the Executive terminates his employment for Good Reason, if the Executive executes and does notrevoke a standard release in a form reasonably acceptable to the Company the Executive shall beentitled to receive salary, Incentive Compensation and vacation accrued through the TerminationDate, plus the following:(i) an amount equal to one year of Executive’s Base Salary in effect on the Termination Date;(ii) a pro-rated portion of the amount of Incentive Compensation Executive would earn for thefiscal year in which the termination occurs if the results of operations of the Company for theperiod from the beginning of such fiscal year to the Termination Date were annualized (the“Pro-Rated Incentive Compensation”); and(iii) full vesting of all outstanding stock options held by Executive.The Company shall make the termination payment required hereunder within thirty (30) days of theTermination Date. Notwithstanding the foregoing, the Company shall not be required to pay anyseverance pay for any period following the Termination Date if the Executive violates theprovisions of Section 13 of this Agreement in any material respect, and fails to cure suchviolation within thirty (30) days after written notice from the Company to the Executive detailingsuch violation.(b) If (i) the Executive voluntarily terminates his employment other than for Good Reason,(ii) the Executive’s employment is terminated due to death or Disability, or (iii) the Executive isterminated by the Company for Cause, then the Executive shall be entitled to receive salary andaccrued vacation through the Termination Date only. In the event of death or Disability theExecutive shall also be entitled to receive the Pro-Rated Incentive Compensation and vesting ofoutstanding stock options as provided in Section 7(a).(c) Subject to Executive timely electing continuation coverage under Title X of theConsolidated Omnibus Budget Reconciliation Act of 1985 (“COBRA”), the Company shall subsidizeExecutive and his eligible dependents’ COBRA premiums so that Executive pays the same premium as anactive employee of the Company for a period equal to the lesser of (i) eighteen (18) monthsfollowing Executive’s termination date, or (ii) the date on which Executive becomes covered underthe group health plans of another employer with comparable group health benefits and levels ofcoverage; and(d) The Executive acknowledges that, upon termination of his employment, he is entitled to noother compensation, severance or other benefits other than those specifically set forth in thisAgreement or any applicable Stock Option Agreement, or pursuant to any Applicable Benefit Plan.Expenses. The Company shall pay or reimburse the Executive for allexpenses normally reimbursed by Company, reasonably incurred by him in furtheranceofhis duties hereunder, and authorized and approved by the Company in compliance withsuch rules relating thereto as the Company may, from time to time, adopt and as maybe required in order to permit such payments as proper deductions to Company underthe Internal Revenue Code of 1986, as amended, and the rule and regulations adoptedpursuant thereto now or hereafter in effect.
 
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8. Facilities and Services. The Company shall furnish the Executive with officespace, secretarial and support staff and such other facilities and services as shall be reasonablynecessary for the performance of his duties under this Agreement.9. Mitigation Not Required. In the event this Agreement is terminated, the Executiveshall not be required to mitigate amounts payable pursuant hereto by seeking other employment orotherwise. The Executive’s acceptance of any such other employment shall not diminish or impairthe amounts payable to the Executive pursuant hereto.10. Place of Performance. The Executive shall perform his duties primarily in Tempe,Arizona or locations within a reasonable proximity thereof, except for reasonable travel as theperformance of the Executive’s duties may require.11. Insurance and Indemnity. During the Employment Period, if available at reasonablecosts, the Company shall maintain, at its expense, officers and directors fiduciary liabilityinsurance covering the Executive and all other executive officers and directors in an amount of noless than $10,000,000. The Company shall also indemnify the Executive, to the fullest extentpermitted by law, from any liability asserted against or incurred by the Executive by reason of thefact that the Executive is or was an officer or director of the Company or any affiliate or relatedparty or is or was serving in any capacity at the request of the Company for any other corporation,partnership, joint venture, trust, employment benefit plan or other enterprise. This indemnityshall survive termination of this Agreement.12. Noncompete and Non-Solicitation.(a) The Executive agrees that, except in accordance with his duties under this Agreement onbehalf of the Company, or with respect to any Permitted Activities (as defined in Section 13(c)below):(i) During the term of this Agreement, Executive will not participate in, be employed in anycapacity by, serve as director, consultant, agent or representative for, or have any interest,directly or indirectly, in any enterprise which is engaged in a business competitive with thebusiness of the Company or any of its subsidiaries conducted during the term of the Executive’semployment with the Company, or which is being actively developed during the term of theExecutive’s employment with the Company; and(ii) The Executive acknowledges that the nature of the Company’s business is such that ifExecutive were to become employed by, or substantially involved in, the business of a competitor ofthe Company during the twelve (12) months following termination of Executive’s employment with theCompany, it would be very difficult for Executive not to rely on or use the Company’s trade secretsand confidential information. Thus, to avoid the inevitable disclosure of the Company’s tradesecrets and confidential information, Executive agrees andacknowledges that Executive’s right to receive the payments set forth in Section 7 or 14 (tothe extent Executive is otherwise entitled to such payments) shall be conditioned upon Executivenot directly or indirectly engaging in, as an employee of another company, that is engaged solelyin the business of converting biomass to electricity during the one year period following theTermination Date (“Competition”).
 
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(b) Notwithstanding the provisions of Section 13(a), Executive may, without violating thisSection 13(a), own, as a passive investment, shares of capital stock of a publicly held-corporationthat engages in Competition where the number of shares of such corporation’s capital stock that areowned by Executive represent less than three percent (3%) of the total number of shares of suchcorporation’s capital stock outstanding.(c) Non-Solicitation. The Executive further agrees and acknowledges, for such 12month period following termination of Executive’s employment with the Company for any reason, thatExecutive’s right to receive the payments set forth in Sections 7 and 14 (to the extent Executiveis otherwise entitled to such payments) shall be conditioned upon Executive not either directly orindirectly soliciting, inducing, recruiting or encouraging an employee to leave his or heremployment either for Executive or for any other entity or person with which or whom Executive hasa business relationship.(d) Understanding of Covenants. The Executive represents that he (i) is familiar withthe foregoing covenants not to compete and not to solicit, and (ii) is fully aware of hisobligations hereunder, including, without limitation, the reasonableness of the length of time,scope and geographic coverage of these covenants.13. Provisions After Change of Control.(a) In the event Executive’s employment with the Company is terminated (other than as aconsequence of death or Disability) either (x) by the Company for any reason other than for Causeduring a Pending Change of Control (as hereinafter defined) or within twenty-four (24) monthsfollowing the occurrence of a Change of Control, or (y) by Executive for Good Reason withintwenty-four (24) months following the occurrence of a Change of Control, if the Executive executesa standard release in a form reasonably acceptable to the Company, then Executive shall be entitledto receive from the Company, in lieu of the severance payment otherwise payable pursuant to Section7(a), the following:(i) an amount equal to two (2) years of Executive’s Base Salary in effect on the TerminationDate;(ii) the maximum amount of the Incentive Compensation which Executive could earn for thefiscal year in which the Termination Date occurs; and(iii) full vesting of all outstanding stock options held by Executive.The Company shall make the termination payments required hereunder within ten (10) days of theTermination Date. Notwithstanding the foregoing, the Company shall not be required to pay thetermination payments set forth in this Section 14 for any period following the Termination Date ifthe Executive violates the provisions of Section 13 of this Agreement in any materialrespect, and fails to cure such violation within thirty (30) days after written notice from theCompany to the Executive detailing such violation.
 
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(b) For purposes of this Agreement, the term “Change of Control” shall mean:(i) The acquisition, other than from the Company, by any individual, entity or group (withinthe meaning of Rule 13d-3 promulgated under the Exchange Act or any successor provision) (any ofthe foregoing described in this Section 14(b)(i) hereafter a “Person”) of 50% or more of either (a)the then outstanding shares of Capital Stock of the Company (the “Outstanding Capital Stock”) or(b) the combined voting power of the then outstanding voting securities of the Company entitled tovote generally in the election of directors (the “Voting Securities”), provided, however, that anyacquisition by (x) the Company or any of its subsidiaries, or any employee benefit plan (or relatedtrust) sponsored or maintained by the Company or any of its subsidiaries or (y) any corporationwith respect to which, following such acquisition, more than 60% of, respectively, the thenoutstanding shares of common stock of such corporation and the combined voting power of the thenoutstanding voting securities of such corporation entitled to vote generally in the election ofdirectors is then beneficially owned, directly or indirectly, by all or substantially all of theindividuals and entities who were the beneficial owners, respectively, of the Outstanding CapitalStock and Voting Securities immediately prior to such acquisition in substantially the sameproportion as their ownership, immediately prior to such acquisition, of the Outstanding CapitalStock and Voting Securities, as the case may be, shall not constitute a Change of Control; or(ii) Individuals who, as of the Effective Date, constitute the Board (the “Incumbent Board”)cease for any reason to constitute at least a majority of the Board, provided that any individualbecoming a director subsequent to the date hereof whose election or nomination for election by theCompany’s shareholders, was approved by a vote of at least a majority of the directors thencomprising the Incumbent Board shall be considered as though such individual were a member of theIncumbent Board, but excluding, for this purpose, any such individual whose initial assumption ofoffice is in connection with an actual or threatened election contest relating to the election ofthe Directors of the Company (as such terms are used in Rule 14a-11 of Regulation 14A, or anysuccessor section, promulgated under the Exchange Act); or(iii) Approval by the shareholders of the Company of a reorganization, merger or consolidation(a “Business Combination”), in each case, with respect to which all or substantially all holders ofthe Outstanding Capital Stock and Voting Securities immediately prior to such Business Combinationdo not, following such Business Combination, beneficially own, directly or indirectly, more than60% of, respectively, the then outstanding shares of common stock and the combined voting power ofthe then outstanding voting securities entitled to vote generally in the election of directors, asthe case may be, of the corporation resulting from the Business Combination; or
 
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(iv) a sale or other disposition of all or substantially all of the assets of the Companyother than to a corporation with respect to which, following such sale or disposition, more than60% of respectively, the then outstanding shares of common stock and the combined voting power ofthe then outstanding voting securities entitled to vote generally in theelection of directors is then owned beneficially, directly or indirectly, by all orsubstantially all of the individuals and entities who were the beneficial owners, respectively, ofthe Outstanding Capital Stock and Voting Securities immediately prior to such sale or dispositionin substantially the same proportion as their ownership of the Outstanding Capital Stock and VotingSecurities, as the case may be, immediately prior to such sale or disposition; or(v) The first purchase under a tender offer or exchange offer for 50% or more of theoutstanding shares of stock (or securities convertible into stock) of the Company, other than anoffer by the Company or any of its subsidiaries or any employee benefit plan sponsored by theCompany or any of its subsidiaries.(c) For purposes of this Agreement, the term “Pending Change of Control” shall mean theoccurrence of one of the following events as the result of which a Change in Control pursuantthereto is reasonably expected within ninety (90) days after the date of determination as towhether there is a Pending Change in Control: (i) the Company executes a letter of intent, termsheet or similar instrument with respect to a transaction or series of transactions, theconsummation of which would result in a Change of Control; (ii) the Board approves a transaction orseries of transactions, the consummation of which would result in a Change of Control; (iii) aPerson makes a public announcement of a tender offer for the Common Stock of the Company, theconsummation of which would result in a Change of Control; or (iv) a Person makes a publicannouncement of, or makes a public filing with respect to, the intention of that Person to seek tochange the membership of the Board of Directors of the Company in a manner that would result in aChange of Control. A Pending Change of Control shall cease to exist upon a Change of Control.14. Code Section 409A. Notwithstanding any provisions of this Agreement to thecontrary, if Executive is a “specified employee” within the meaning of Section 409A of the Code andany temporary, proposed or final regulations thereunder (together, “Section 409A”) at the time ofExecutive’s termination, and any severance payments (including any benefits which provide for a“deferral of compensation” within the meaning of Section 409A) to be made to Executive pursuant tothis Agreement will not be paid or provided in full by March 15 of the year following the year inwhich Executive’s “separation from service” (within the meaning of Section 409A) occurs, then onlythat portion of such severance payments up to the 409A Limit (as defined below) may be made withinthe first six (6) months following Executive’s separation from service in accordance with theapplicable payment schedule. Any portion of such severance payments in excess of the 409A Limitshall accrue and, to the extent such severance payments would otherwise have been payable withinthe first six (6) months following Executive’s separation from service, will become payable thedate that is six (6) months and one (1) day following the date of Executive’s separation fromservice. 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 Executive’s annualized compensation based upon the Executive’s annualrate of pay (the determination of Executive’s annual rate of pay for this purpose shall beas determined in accordance with Section 409A if additional guidance is released after thedate of this Agreement or, if no such guidance is released, Executive’s annual rate of payshall be deemed to be Executive’s annual base salary); and
 
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(b) two (2) times the maximum amount that may be taken into account under a qualified planpursuant to Section 401(a)(17) of the Code for the year in which the Executive has aseparation from service.The intent of this Agreement is for all payments made hereunder to comply with the requirements ofSection 409A; to the extent any terms of this Agreement are ambiguous, such terms shall beinterpreted in accordance with such intent.15. Certain Additional Payments by Company.(a) Anything in this Agreement to the contrary notwithstanding, if it shall be determined thatany payment or distribution by the Company to or for the benefit of Executive (whether paid orpayable or distributed or distributable pursuant to the terms of this Agreement or otherwise) isdetermined without regard to any additional payments required under this Section 16 (a “Payment”)would be subject to the excise tax imposed by Section 409A, or any interest or penalties areincurred by Executive with respect to such excise tax (such excise tax, together with any suchinterest and penalties, are hereinafter collectively referred to as the “Excise Tax”), thenExecutive shall be entitled to receive, in addition to the Payment, a payment (a “Gross-UpPayment”) in an amount such that, after payment by the Executive of all taxes (including anyinterest or penalties imposed with respect to such taxes), including, without limitation, anyfederal or state income taxes (and any interest and penalties imposed with respect thereto) and theExcise Tax imposed upon the Gross-Up Payment, Executive will have received the Gross-Up Payment inan amount equal to the Excise Tax imposed upon the Payment. The maximum amount of any Gross-UpPayment shall be $150,000.(b) Subject to the provision of Section 16(c), all determinations required to be made underthis Section 16, including whether and when a Gross-Up Payment is required and the amount of suchGross-Up Payment and the assumptions to be utilized in arriving at such determination, shall bemade by a “Big Four” accounting firm retained by the Company as its auditor at the time suchdeterminations are required (the “Accounting Firm”) which shall provide detailed supportingcalculations both to the Company and Executive within fifteen (15) business days of the receipt ofnotice from the Company that there has been a Payment, or such earlier time as is required by theCompany. All fees and expenses of the Accounting Firm shall be borne solely by the Company. AnyGross-Up Payment, as determined pursuant to this Section 16, shall be paid by the Company toExecutive within ten (10) business days of the Company’s receipt of the Accounting Firm’sdetermination. If the Accounting Firm determines that no Excise Tax is payable by Executive, itshall furnish Executive with a written opinion that failure to report the Excise Tax on Executive’sapplicable federal income tax return would not result in the imposition of a negligence or similarpenalty. Any determination by the Accounting Firm shall be binding upon the Company and Executive.As a result of the uncertainty in the application of Section 409A at the time of the initialdetermination by the Accounting Firm hereunder, it is possible that Gross-Up Payments which willnot have been made by the Company should have been made (“Underpayment”), consistent with thecalculations required to be made hereunder. If Executive thereafter is required to make a paymentof any Excise Tax, the Accounting Firm should determine the amount of the Underpayment that hasoccurred and any such Underpayment shall be promptly paid by the Company to or for the benefit ofExecutive.
 
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(c) Executive shall notify the Company in writing of any claim by the Internal Revenue Servicethat, if successful, would require the payment by the Company of the Gross-Up Payment. Suchnotification shall be given as soon as practicable, but in no event later than ten (10) businessdays after Executive has been informed in writing of such claim, and shall apprise the Company ofthe nature of such claim and the date on which such claim is required to be paid. Executive shallnot pay such claim prior to the expiration of the thirty- (30)- day period following the date onwhich Executive gives such notice to the Company (or such shorter period ending on the date thatany payment of taxes with respect to such claim is due). If the Company notifies Executive inwriting prior to the expiration of such thirty- (30)- day period that the Company desires toconsent such claim, Executive shall:(i) give the Company any information reasonably required by the Company relating to suchclaim,(ii) take such action in connection with contesting such claim as the Company shall reasonablyrequest in writing from time to time, including, but not limited to, accepting legal representationwith respect to such claim by an attorney reasonably selected by the Company,(iii) cooperate with the Company in good faith in order effectively to contest such claim, and(iv) permit the Company to participate in any proceedings relation to such claim; provided,however, that the Company shall bear and pay directly all costs and expenses (including additionalinterest and penalties) incurred in connection with such contest and shall indemnify and holdExecutive harmless for (A) any Excise Tax or federal or state income tax (including interest andpenalties with respect thereto) imposed as a result of such representation and payment of costs andexpenses, and (B) any federal, state and local income tax imposed with respect to the payment ofamounts pursuant to clause (A) above and this clause (B), based on the highest marginal income taxrate applicable to Executive for the tax year such payments are includable in his taxable income.Without limitation on the foregoing provisions of this Section 16(c), the Company shall control allproceedings taken in connection with such contest and, at its sole option, may pursue or forego anyand all administrative appeals, proceedings, hearing sand conferences with the taxing authority inrespect of such claim and may, at its sole option, either direct Executive to pay the tax claimedand sue for a refund or contest the claim in any permissible manner, and Executive agrees toprosecute such contest to a determination before any administrative tribunal, in a court of initialjurisdiction and in one or more appellate courts, as the Company shall determine; provided,however, that if the Company directs Executive to pay such claim and sue for a refund, the Companyshall advance the amount of such payment to Executive, on an interest-free basis and shallindemnify and hold Executive harmless from (X) any Excise Tax or federal or state income tax(including interest or penalties with respect thereto) imposed with respect to such advance or withrespect to any imputed income with respect to such advance, and (Y) any federal, state and localincome tax imposed with respect to the payment of amounts pursuant to clause (X) above and thisclause (Y), based on the highest marginal income tax rate applicable to Executive for the tax yearsuch payments are includable in his taxable income; and further provided that any extension of thestatute of limitations relating to payment of taxes for the taxable year of Executive with respectto whichsuch contested amount is claimed to be due is limited solely to such contested amount.Furthermore, the Company’s control of the contest shall be limited to issues within respect towhich a Gross-Up Payment would be payable hereunder and Executive shall be entitled to settle orcontest, as the case may be, any other issue raised by the Internal Revenue Service or any othertaxing authority.
 
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(d) If, after the receipt by Executive of an amount advanced by the Company pursuant toSection 16(c), Executive becomes entitled to receive any refund with respect to such claim,Executive shall (subject to the Company’s complying with the requirements of Section 16(c))promptly pay to the Company the amount of such refund (together with any interest paid or creditedthereon after taxes applicable thereto) and, as and when received, an amount equal to any savingsin federal and state income taxes realized by Executive by reason of the payment to the Company ofsuch refunds and interest. If, after the receipt by Executive of an amount advanced by the Companypursuant to Section 16(c), a determination is made that Executive shall not be entitled to anyrefund with respect to such claim and the Company does not notify Executive in writing of itsintent to contest such denial of refund prior to the expiration of thirty (30) days after suchdetermination, then such advance shall be forgiven and shall not be required to be repaid and theamount of such advance shall offset, to the extent thereof, the amount of Gross-Up Payment requiredto be paid.16. Notices. Any notice required or permitted to be given under this Agreement shallbe sufficient if in writing and if sent by registered or certified mail, return receipt requestedto his residence in the case of the Executive, or to its principal office in the case of theCompany, or to such other addresses as they may respectively designate in writing.17. Entire Agreement; Waiver. This Agreement contains the entire understanding of theparties and may not be changed orally but only by an agreement in writing, signed by the partyagainst whom enforcement of any waiver, change, modification or discharge is sought. Waiver of orfailure to exercise any rights provided by this Agreement in any respect shall not be deemed awaiver of any further or future rights.18. Binding Effect; Assignment. The rights and obligations of this Agreement shallbind and inure to the benefit of any successor of the Company by reorganization, merger orconsolidation, or any assignee of all or substantially all of the Company’s business or properties.The Executive’s rights hereunder are personal to and shall not be transferable nor assignable bythe Executive.19. Headings. The headings contained in this Agreement are for reference purposesonly and shall not affect the meaning or interpretation of this Agreement.20. Governing Law; Arbitration. This Agreement shall be construed in accordance withand governed for all purposes by the laws and public policy of the State of Arizona applicable tocontracts executed and to be wholly performed within such state. Any dispute or controversyarising out of or relating to this Agreement shall be settled by arbitration in accordance with therules of the American Arbitration Association and judgment upon the award may be entered in anycourt having jurisdiction thereof. The arbitration shall be held in Maricopa County or in suchother place as the parties hereto may agree.
 
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21. Further Assurances. Each of the parties agrees to execute, acknowledge, deliverand perform, and cause to be executed, acknowledged, delivered and performed, at any time and fromtime to time, all such further acts, deeds, assignments, transfers, conveyances, powers of attorneyand/or assurances as may be necessary or proper to carry out the provisions or intent of thisAgreement.22. Severability. The parties agree that if any one or more of the terms, provisions,covenants or restrictions of this Agreement shall be determined by a court of competentjurisdiction to be invalid, void or unenforceable, the remainder of the terms, provisions,covenants and restrictions of this Agreement shall remain in full force and effect and shall in noway be affected, impaired or invalidated.23. Counterparts. This Agreement may be executed in several counterparts, each ofwhich shall be deemed to be an original, but all of which together will constitute one and the sameAgreement.*[Signature page follows.]*
 
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IN WITNESS WHEREOF, Renegy Holdings, Inc. has caused by instrument to be signed by a dulyauthorized officer and the Executive has hereunto set his hand the day and year first abovewritten.         Renegy Holdings, Inc.             By /s/ Robert M. Worsley   /s/ Hugh W. Smith         Name: Robert M. Worsley   Hugh W.Smith  Title: Chief Executive Officer    **Signature Page to Employment Agreement**