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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:

Daniel Kunzof 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 President and Chief Executive 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 President and
Chief Executive 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 the earlier of
December 31, 2008 or until terminated as hereinafter provided.

3.       
 Responsibility

****     The Employee will devote appropriate
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

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the Company and such additional and related duties as may from
time to time be assigned, delegated, limited or determined by the Board of
Directors.

4.         Other
Business Activities

****  
    It is agreed that the Employee's employment hereunder
shall constitute one hundred forty (140) hours per month, which shall be devoted
exclusively for the benefit of the Company.

(a)the
Employee may engage in any other business activities, so long as such activities
will not interfere with, or impede, or have the potential to conflict in any
significant manner with either the interests of the Company and/or the
performance of his duties as President and Chief Executive Officer of the
Company. Before the Employee can engage in any other geothermal-related business
activity the Employee must disclose full particulars thereof in writing to the
Board of Directors, and within 15 days after the date of such disclosure, the
Employee must receive from a majority of the Board of Directors a decision that
such activities by the Employee will not, in the opinion of the Board of
Directors, interfere or be in conflict with the interests of the Company and/or
the Employee's performance of his duties to the Company hereunder;

(b)the
Employee shall refer to the Board of Directors any and all matters and
transactions in respect of which an actual or potential conflict of interest
between the Employee and the Company has arisen or may arise, however remote the
possibility, and the Employee shall not proceed with any such matter or
transaction until the Board of Director's approval therefore is obtained. Such
approval shall not be unreasonably withheld. For purposes of clarification, this
provision is not intended to limit in any way the Employee's other fiduciary
obligations to the Company, which may arise in law or in equity.

5.        Compensation

****  In
consideration of the performance by the Employee of his responsibilities and
duties as President and Chief Executive Officer hereunder:

(a)the
Company will pay the Employee the sum of US$170,400 per annum, payable in
monthly installments of $14,200 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.
      The Company will also provide reasonable life insurance and accidental
      death coverage with the proceeds payable to the Employee's estate or
      specified family member; and,
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|(d) | the Company will provide a 401K retirement benefit as is
      available to the other employees of the Company.
|--- | ---------------------------------------------------------------------------------------------------------------

6.         Expenses

****   The Company shall 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.

8.         Change of
Control

Cognizant that the Company is a publicly owned entity, should a
Change of Control occur, the Employee shall be entitled to receive a lump sum
payment in an amount equal to twenty-four (24) monthly installments of the
Employees Compensation no later than five (5) working days after the effective
date that the Change of Control has occurred. This compensation is payable by
the Company or its Successor regardless of whether or not the Employee continues
under employment pursuant to this Employment Agreement or is replaced with a new
agreement.

If this Agreement is terminated in accordance with Section 8,
the benefits provided to the Employee pursuant to Section 5 of this Employment
Agreement shall continue for the four (4) months of Compensation the Employee
following the termination of this Agreement pursuant to Section 8 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                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      

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| |    | 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.        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:

| | (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 1awful directions of the Board of Directors 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.                                                                                                                                      

9.1 ****In
the event of the early termination of the Agreement for any reason set out in

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Section 9 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.

9.2This
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 9 above of this Agreement upon one month notice to the Employee. In such
event, the Employee will be entitled to a lump sum payment of salary and
incurred expenses from the date of the notice to the termination date contained
in section 2 of this agreement.

9.3This
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.

10.       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, 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 10 and Section 10.1 below shall survive the
termination of this Agreement for a period of one year.

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10.1The 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.

11.       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 10-mile radius around any and all geothermal
properties acquired by or in negotiations to be 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.

12.       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 contained therein and, in particular, the covenants
contained in Sections 10, and 11, in addition to rights the Company may have to
damages arising from said breach or threat of breach.

13.       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.

14.       Governing Law

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

15.       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

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prior arrangements and agreements, whether oral or in writing
between the parties hereto with respect to the subject matter hereof.

16.       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.

17.       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.

18.       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.

19.       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.

20.       Time of Essence

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

21.       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.

22.       Notice

Any notice required or permitted to be made or given under this
Agreement to either party shall be in writing and shall be 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.

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

In the case of Employee:

Daniel Kunz 1505 Tyrell Lane Boise, Idaho 83706 Fax
No.: 208-424-1030

22.1Any 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.

By:________________________________________          
Chairman, US Geothermal Inc.

SIGNEDby the Employee in the presence of:



|                        |  |            
|----------------------- |  | -----------
|Witness                 |  | Daniel Kunz
|                        |  |            
|                        |  |            
|Printed Name of Witness |  |            

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