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EMPLOYMENT AGREEMENT

THIS AGREEMENTmade as of the 1st day of January, 2008

BETWEEN:

US Geothermal Inc.,a body
corporate having an office at 1505 Tyrell Lane Boise, Idaho 83706 (the
"Company")

AND:

Kerry Hawkleyof 1505 Tyrell
Lane, Boise, Idaho 83706 (the "Employee")

WHEREAS:

**(A)**      the
Company is in the business of developing geothermal properties;

(B)      the Company
wishes to engage the Employee as Chief Financial Officer; and

**(C)**      ****the
parties hereto wish to enter into this Agreement for the purpose of fixing the
compensation and terms applicable to the employment of the Employee during the
period hereinafter set out.

NOW THEREFORE THIS AGREEMENT WITNESSESthat the parties
hereto, in consideration of the respective covenants and agreements on the part
of each of them herein contained, do hereby covenant and agree as follows:

**1.**      
**Employment**

The Company hereby engages the Employee as Chief Financial Officer of the
Company and the Employee hereby accepts such employment, upon the terms and
conditions hereinafter set out.

**2.**     **Term**

This Agreement will be effective from January 1, 2008 and will remain in full
force and effect until December 31, 2008 or until terminated as hereinafter
provided.

**3.**      
**Responsibility**

The Employee will devote one hundred percent of his working time to his
Employment hereunder, and while engaged in his employment will have the
authority and duty to perform and carry out such duties and responsibilities as
are customarily carried out by persons holding similar positions in other
development companies comparable in size to the Company and such additional and
related duties as may from time to time be assigned, delegated, limited or
determined by the President.

**4.**      
**Other Business Activities**

It is agreed that the Employee's employment hereunder shall constitute one
hundred percent of his working time which shall be devoted exclusively for the
benefit of the

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Company, and therefore, the Employee may not engage in any
other business activities that would interfere with, or impede, in any
significant manner, the performance of his duties as Chief Financial Officer of
the Company.

**5.**      
**Compensation**In consideration of the performance by the
Employee of his responsibilities and duties as Chief Financial Officer
hereunder:

**(a)**       the
Company will pay the Employee the sum of US$134,400 per annum, payable in
monthly installments of $11,200 no later than the last working day of the
month;

**(b)**       the
Company will grant the Employee incentive stock options in such amount and on
such conditions as the Board of Directors of the Company may determine from time
to time;

| | (c) | the Company will provide the Employee and his immediate
      family (consisting of spouse and children) with medical, dental and
      related coverage as are available to the other employees of the Company;
      and
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                           
| | (d) | the Company will provide a 401K retirement benefit as is
      available to the other employees of the Company                                                                                                            

**6.**      
**Expenses**

The Company will reimburse the Employee for any and all reasonable and
documented expenses actually and necessarily incurred by the Employee in
connection with the performance of his duties under this Agreement. The Employee
will furnish the Company with an itemized account of his expenses in such form
or forms as may reasonably be required by the Company and at such times or
intervals as may be required by the Company.

**7.**      
**Vacation**

Employee will be entitled to a paid vacation of four weeks within each 12 month
period under the terms of this Agreement, to be calculated from the date of the
commencement of employment set forth in Section 2 herein. This vacation must be
taken on dates which do not adversely compromise the Employees performance of
his duties under this Agreement.

**8.**      
**Termination**

This Agreement and the Employee's employment may be terminated by
the Company summarily and without notice, payment in lieu of notice, severance
payments, benefits, damages or any sums whatsoever, on the occurrence of any one
or more of the following events:

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| | (a) | The Employee's failure to carry out his duties hereunder
      in a competent and professional manner;                                                                                                                                   
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                          
| | (b) | The Employee's appropriation of corporate opportunities
      for the Employee's direct or indirect benefit or his failure to disclose
      any material conflict of interest;                                                          
| |     |                                                                                                                                                                                                                                          
| | (c) | The Employee's plea of guilty to, or conviction of, an
      indictable offence once all appeals (if any) have been completed without
      such conviction having been reversed;                                                        
| |     |                                                                                                                                                                                                                                          
| | (d) | The existence of cause for termination of the Employee at
      common law including but not limited to cause related to fraud,
      dishonesty, illegality, breach of statute or regulation, or gross
      incompetence;              
| |     |                                                                                                                                                                                                                                          
| | (e) | Failure on the part of the Employee to disclose material
      facts concerning his business interests or employment outside of his
      employment by the Company, provided such facts relate to the Employee's
      duties hereunder;
| |     |                                                                                                                                                                                                                                          
| | (f) | Refusal on the part of the Employee to follow the
      reasonable and 1awfull directions of the Company;                                                                                                                                
| |     |                                                                                                                                                                                                                                          
| | (g) | Breach of fiduciary duty to the Company on the part of
      the Employee;                                                                                                                                                               
| |     |                                                                                                                                                                                                                                          
| | (h) | Material breach of this Agreement or gross negligence on
      the part of the Employee in carrying out his duties under this Agreement;
      or                                                                                        
| |     |                                                                                                                                                                                                                                          
| | (i) | A declaration of bankruptcy on the part of the Employee
      by a court of competent jurisdiction.                                                                                                                                      

8.1      In the event of
the early termination of the Agreement for any reason set out in Section 8
above, the Employee shall only be entitled to such compensation as would
otherwise be payable to the Employee hereunder up to and including such date of
termination, as the case may be.

**8.2**     This
Agreement and the Employee's employment may be terminated on notice by the
Company to the Employee for any reason other than for the reasons set out in
Section 8 above of this Agreement upon one month notice to the Employee. In such
event, the Employee will be entitled to payment of salary and expenses until the
date one month after which notice was given.

**8.3**     This
Agreement and the Employee's employment may be terminated on notice by the
Employee to the Company for any reason upon one month notice to the Company. In
such event, the Employee will be entitled to payment of salary and expenses
until the date one month after which notice was given.

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8.4      If a Change of Control (as
herein defined) occurs and this Agreement is terminated by the Company, either
effectively or constructively, within twelve (12) months of such Change of
Control, the Employee shall be entitled to receive a lump sum payment in an
amount equal to eighteen (18) monthly installments of the Employees
Compensation.

8.5      If this Agreement is
terminated in accordance with Section 8.4, the benefits provided to the Employee
pursuant to Section 5 of this Employment Agreement shall continue for the amount
of months of Compensation the Employee is entitled to following the termination
of this Agreement pursuant to Section 8.4 or until the Employee commences
alternative employment, whichever occurs first.

Change of Control means an event occurring after the
effective date of this Agreement pursuant to which:

| | a) | a merger, amalgamation, arrangement, consolidation,
      reorganization or transfer takes place in which securities of the Company
      possessing more than 50% of the total combined voting power of the
      Companys outstanding voting securities are acquired by a person or
      persons different from the person holding those voting securities
      immediately prior to such event, and the composition of the Board of
      Directors of the Company following such event is such that the directors
      of the Company prior to the transaction constitute less than 50% of the
      Board membership following the event;
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | b) | any person, or any combination of persons acting jointly
      or in concert by virtue of an agreement, arrangement, commitment or
      understanding acquires, directly or indirectly, 50% or more of the voting
      rights attached to all outstanding voting securities;                                                                                                                                                                                                                                                                                                                                                                    
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | c) | any person, or any combination of persons acting jointly
      or in concert by virtue of an agreement, arrangement or commitment or
      understanding acquires, directly or indirectly, the right to appoint a
      majority of the directors of the Company; or                                                                                                                                                                                                                                                                                                                                                                              
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | d) | the Company sells, transfers or otherwise disposes of all
      or substantially all of its assets, except that no Change of Control will
      be deemed to occur if such sale or disposition is made to a subsidiary or
      subsidiaries of the Company.                                                                                                                                                                                                                                                                                                                                                                                      

**9.**      
**Confidential Information**

The Employee agrees to keep the affairs and Confidential Information
(as defined below) of the Company strictly confidential and shall not disclose
the same to any person, company or firm, directly or indirectly, during or after
his employment by the Company except as authorized in writing by the Board.
"Confidential Information" includes, without limitation, the following types of
information or material, both existing and contemplated, regarding the Company
or its parent, affiliated or subsidiary companies: corporate information,
including contractual licensing arrangements, plans, strategies, tactics,
policies, resolutions, patent, trademark and trade name applications; any
litigation or negotiations; information concerning suppliers; marketing
information, including sales, investment and product plans, customer lists,
strategies, methods,

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customers, prospects and market research data; financial
information, including cost and performance data, debt arrangements, equity
structure, investors and holdings; operational and scientific information,
including trade secrets; technical information, including technical drawings and
designs; any information relating to any mineral projects in which the Company
has an actual or potential interest; and personnel information, including
personnel lists, resumes, personnel data, organizational structure and
performance evaluations. The Employee agrees not to use such information,
directly or indirectly, for his own interests, or any interests other than those
of the Company, whether or not those interests conflict with the interests of
the Company during or after his employment by the Company. The Employee
expressly acknowledges and agrees that all information relating to the Company,
whether financial, technical or otherwise shall, upon execution of this
Agreement and thereafter, as the case may be, be the sole property of the
Company, whether arising before or after the execution of this Agreement. The
Employee expressly agrees not to divulge any of the foregoing information to any
person, partnership, Company or other legal entity or to assist in the
disclosure or divulging of any such information, directly or indirectly, except
as required by law or as otherwise authorized in writing by the Board. The
provisions of this Section 9 and Section 9.1 below shall survive the termination
of this Agreement for a period of one year.

**9.1**     The
Employee agrees that all documents of any nature pertaining to the activities of
the Company or its related corporate entities, including Confidential
Information, in the Employee's possession now or at any time during the
Employee's period of employment, are and shall be the property of the Company
and that all such documents and copies of them shall be surrendered to the
Company when requested by the Company.

**10.**     **Non-Competition**            During
the Non-Competition Period (as defined below), the Employee shall not, either
individually or in partnership or jointly or in conjunction with any other
person, entity or organization, as principal, agent, consultant, lender,
contractor, employer, employee, investor, shareholder or in any other manner,
directly or indirectly, advise, manage, carry on, establish, control, engage in,
invest in, offer financial assistance or services to, or permit the Employee's
name or any part thereof to be used by, any business in geothermal resources
that competes with the business of the Company, its parent, affiliated or
subsidiary companies, or any business in which the Company, its parent,
affiliated or subsidiary companies is engaged. Competition, for purposes of this
paragraph is defined as a 100-mile radius around any and all geothermal
properties acquired by the Company up to and inclusive of the date of
termination. For purposes of this Agreement, "Non-Competition Period" means a
period ending twelve (12) months after the end of the termination of this
Agreement.

**11.**     **Acknowledgement**           
The Employee acknowledges that damages would be an insufficient remedy for a
breach by him of this Agreement and agrees that the Company may apply for and
obtain any relief available to it in a court of law or equity, including
injunctive relief, to restrain breach or threat of breach of this Agreement by
the Employee or to enforce the covenants

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contained therein and, in particular, the covenants contained
in Sections 9 and 10, in addition to rights the Company may have to damages
arising from said breach or threat of breach.

**12.**     **Representations and
Warranties**        
   The Employee represents and warrants to the Company that the
execution and performance of this Agreement will not result in or constitute a
default, breach, or violation, or an event that, with notice or lapse of time or
both, would be a default, breach, or violation, of any understanding, agreement
or commitment, written or oral, express or implied, to which the Employee is
currently a party or by which the Employee or Employee's property is currently
bound.

**13.**     **Governing
Law**      
     This Agreement shall be construed and enforced in
accordance with the laws of the State of Idaho, USA.

**14.**     **Entire
Agreement**      
     This Agreement constitutes the entire agreement
between the parties hereto with respect to the relationship between the Company
and the Employee and supersedes all prior arrangements and agreements, whether
oral or in writing between the parties hereto with respect to the subject matter
hereof.

**15.**     **Amendments**       
    No amendment to or variation of the terms of this
Agreement will be effective or binding upon the parties hereto unless made in
writing and signed by both of the parties hereto.

**16.**     **Assignment**      
     This Agreement is not assignable by the Employee.
This Agreement is assignable by the Company to any other company, which
controls, is controlled by, or is under common control with the Company. This
Agreement shall enure to the benefit of and be binding upon the Company and its
successors and permitted assigns and the Employee and his heirs, executors and
administrators.

**17.**     **Severability**       
    Any provision of this Agreement that is prohibited or
unenforceable in any jurisdiction shall, as to that jurisdiction, be ineffective
to the extent of the prohibition or unenforceability and shall be severed from
the balance of this Agreement, all without affecting the remaining provisions of
this Agreement or affecting the validity or enforceability of such provision in
any other jurisdiction.

**18.**     **Headings**      
     The division of this Agreement into Sections and
the insertion of headings are for convenience or reference only and shall not
affect the construction or interpretation of this Agreement.

**19.**     **Time
of Essence**

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Time shall be of the essence in all respects of this Agreement.

**20.**     **Independent
Legal Advice**        
   The Employee agrees that he has had, or has had the
opportunity to obtain, independent legal advice in connection with the execution
of this Agreement and has read this Agreement in its entirety, understands its
contents and is signing this Agreement freely and voluntarily, without duress or
undue influence from any party.

**21.**     **Notice**      
     Any notice required or permitted to be made or
given under this Agreement to either party shall be in writing and shall b6
sufficiently given if delivered personally, by facsimile, or if sent by prepaid
registered mail to the intended recipient of such notice at their respective
addresses set forth below or to such other address as may, from time to time, be
designated by notice given in the manner provided in this Section:

In the case of Company:

U.S. Geothermal Inc. 1505 Tyrell Lane Boise, Idaho
83706 Attention: Corporate Secretary Fax No.: 208-424-1030

In the case of Employee:

Kerry Hawkley 1505 Tyrell Lane Boise, Idaho 83706
Fax No.: 208-424-1030

**21.1**     ****Any notice delivered to the party to whom it is addressed shall be
deemed to have been given and received on the day it is so delivered or, if such
day is not a business day, then on the next business day following any such day.
Any notice mailed shall be deemed to have been given and received on the 10th
business day following the date of mailing. In the case of facsimile
transmission, notice is deemed to have been given or served on the party to whom
it was sent at the time of dispatch if, following transmission, the sender
receives a transmission confirmation report or, if the sender's facsimile
machine is not equipped to issue a transmission confirmation report, the
recipient confirms in writing that the notice has been received.

IN WITNESS WHEREOFthe parties hereto have executed this
Agreement as of the day and year first above written.

U.S. GEOTHERMAL INC.

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By:________________________________________           
Daniel Kunz - President

SIGNEDby the Employee in the presence of:



|                        |  |              
|----------------------- |  | -------------
|Witness                 |  | Kerry Hawkley
|                        |  |              
|                        |  |              
|Printed Name of Witness |  |              

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