exv10w1






Exhibit 10.1




[RENEGY LETTERHEAD]




December 18, 2008




Hugh W. Smith

60 E. Rio Salado Parkway

Suite 1012

Tempe, Arizona 85281





			
	         Re:	 	Your Employment Agreement dated August 14, 2008, as amended on October 1, 2008




Dear Hugh:




     This letter agreement is intended to amend certain provisions and to clarify and confirm our
mutual understanding concerning certain aspects of your Employment Agreement dated August 14, 2008,
as amended on October 1, 2008 (your “Employment Agreement”), between you and Renegy
Holdings, Inc. (the “Company”). All capitalized terms not defined herein shall have the
meaning ascribed thereto in your Employment Agreement.



     The Company has agreed to the following terms, and would like to confirm your acceptance of
the same:



     1. Terms of Employment.



          a. Effective January 3, 2009, your employment will be reduced to part-time status.
Thereafter, until termination of your employment as provided herein, you agree to dedicate a
minimum of nine hours per week to the Company, with your specific schedule being at your reasonable
discretion. Your salary will be $1,600 per week payable in accordance with the Company’s
established payroll practices, plus $165 per hour for any time in excess of nine hours per week to
the extent such excess hours are agreed to by you and the Company. You may terminate your
employment with the Company at any time and for any reason on or after January 3, 2009. The
Company agrees not to terminate your employment prior to March 31, 2009 except for Cause or in the
event of the consummation of a Change of Control transaction.




          b. You agree to continue to perform your duties either at the Company’s offices in Tempe or,
commencing December 15, 2008, you may perform your duties at your personal residence. Effective
January 3, 2009, the Company may, but will not be obligated to, furnish you with office space,
secretarial and support staff or other facilities and services, except for such equipment (e.g.,
computer, printer, etc.) and services as may be reasonably necessary to perform your duties from
your personal residence. The Company acknowledges that your computer, monitor and printer are of
nominal value and that ownership of the same shall transfer to you upon the termination of your
employment with the Company.




          c. You may actively seek or engage in any other employment, occupation or consulting activity
for any direct or indirect remuneration without violating the terms of your



 









 






Employment Agreement, provided, however, that you will remain subject to Section 12 of your
Employment Agreement with respect to the noncompete and non-solicitation covenants made therein;
provided, however, that notwithstanding any provision in Section 12 of your Employment Agreement,
following termination of your employment with the Company you shall be permitted to work for any
entity in Competition with the Company provided that such entity is not engaged in the business of
converting biomass to electricity in any of Navajo, Apache or Gila counties in Arizona.




          d. The Company will continue to reimburse you for reasonable business expenses (including,
without limitation, travel, mileage, cell phone expenses) incurred in the performance of your
duties in accordance with the terms of your Employment Agreement. You will no longer accrue
vacation and sick days commencing January 3, 2009, and you will not be entitled to any bonus or
other incentive compensation.




     2. Severance Benefits. Notwithstanding any provision in your Employment Agreement to
the contrary, your severance benefits (“Severance Benefits”) shall be as follows:



          a. Your Severance Benefits will be triggered and become payable in accordance with the terms
set forth herein upon the earliest to occur of (i) termination of your employment by the Company
without Cause, (ii) termination of your Employment Agreement by you for Good Reason, and (iii)
January 3, 2009 (the earliest of such dates being referred to herein as the “Severance
Date”). The Severance Benefits shall not be deemed to limit your rights against the Company in
the event your employment is terminated by the Company without Cause prior to March 31, 2009 in
violation of Section 1.a., other than with respect to your rights to severance benefits.




          b. Your Severance Benefits shall include cash payments as follows:





          (i) Subject to the other provisions of this Section 2.b., $200,000 shall be payable
equally over 12 months, and as a part of the regular bi-weekly payroll cycle, without
interest, beginning with the first full pay period following the Severance Date (the
“Severance Period”);




          (ii) In the event definitive agreements are executed for a Change of Control
transaction on or prior to June 30, 2009, and you are not offered any of the positions of
Chief Operating Officer, Chief Executive Officer or President with the successor company
together with compensation substantially equivalent to or greater than your current
compensation, your aggregate cash severance amount shall increase to $400,000; provided,
that, you shall continue receiving cash severance payments in accordance with Section
2.b.(i) (without increase) pending consummation of the Change of Control transaction, and,
in the event such Change of Control Transaction is consummated during the Severance Period,
the full remaining balance of your aggregate severance amount (i.e., $400,000 less severance
payments received to date) shall be payable within five business days of the consummation of
such Change of Control transaction.



 









 






          (iii) In the event definitive agreements are executed for a Change of Control
transaction on or prior to June 30, 2009, and you are offered any of the positions of Chief
Operating Officer, Chief Executive Officer or President with the successor company together
with compensation substantially equivalent to or greater than your current compensation,
your aggregate cash severance amount shall be $250,000; provided, that, you shall continue
receiving cash severance payments in accordance with Section 2.b.(i) (without increase)
pending consummation of the Change of Control transaction, and, in the event such Change of
Control Transaction is consummated during the Severance Period, the full remaining balance
of your aggregate severance amount (i.e., $250,000 less severance payments received) shall
be payable within five business days of the consummation of such Change of Control
transaction.




          (iv) In the event the Company has received proceeds from a tax equity transaction
relating to the biomass power plant in Snowflake, Arizona having substantially the terms
contemplated as of the date of this letter agreement (a “Tax Equity Transaction”) on
or prior to March 31, 2009, (A) $150,000 shall be payable to you upon the Company’s receipt
of such proceeds from the Tax Equity Transaction and (B) your remaining severance payments
under Sections 2.b.(i), (ii) or (iii), as applicable, shall be payable in accordance with
such provisions; provided that, (x) in the event the Company has received proceeds from a
Tax Equity Transaction prior to the Severance Date, the $150,000 payment from such Tax
Equity Transaction shall be payable on the Severance Date, and (y) in the event the Company
has received proceeds from a Tax Equity Transaction on or prior to March 31, 2009, your
aggregate cash severance payments under Section 2.b.(i) shall increase to $300,000 and your
remaining monthly severance payments under Section 2.b.(i) shall be adjusted pro rata to
reflect such increase, provided, however, with respect to this subsection (y), such $300,000
aggregate severance amount shall be subject to reduction in the event the severance
obligations under Section 2.b.(iii) apply (for the avoidance of doubt, in the event the
Company has received proceeds from a Tax Equity transaction and your aggregate severance
amount increases to $300,000, any remaining severance payments to be made in the event that
a Change of Control transaction contemplated by Section 2.b(iii) is actually consummated
during the Severance Period shall be adjusted pro rata so that the aggregate amount of such
remaining payments shall be equal to a maximum of $250,000 less any severance payments
previously received).



          c. Upon termination of your employment with the Company, or otherwise upon your loss of
coverage under the Company’s group health plans as a result of your reduction in employment as
contemplated by this letter agreement, if applicable, and subject to you timely electing
continuation coverage under Title X of the Consolidated Budget Reconciliation Act of 1985
(“COBRA”), the Company shall subsidize you and your eligible dependents’ COBRA premiums so
that you pay the same premium as an active employee of the Company for the period ending on the
earlier of June 30, 2009 and the date on which you become eligible for coverage under the group
health plans of another employer with comparable group health benefits and levels of coverage.




          d. The Company agrees not to terminate any policies relating to life insurance or disability
that have been paid for as of the date of this letter agreement and which



 









 






expire in September 2009. You agree and acknowledge that, except with respect to such life and
disability insurance, and except as provided in Sections 2.c. and 2.e., there are no other employee
benefit plans that you will be entitled to participate in.




          e. You will be entitled to continue participating in the Company’s 401(k) plan in accordance
with the terms of such plan as of the date of this letter agreement until the termination of your
employment with the Company (including with respect to severance payments under Sections 2.b.).
You agree and acknowledge that your right to participate in the 401(k) plan will cease upon
termination of your employment with the Company.




          f. Your accrued and unpaid vacation days shall be paid in cash upon the earlier to occur of
your termination with the Company (for any reason) and the Severance Date in accordance with
established payroll practices.




          g. Any payments made by the Company to you for relocation, your signing bonus and mortgage
payments as provided in your Employment Agreement shall not be subject to refund to the Company;
provided, however, that the Company’s obligation for any remaining amounts due for your signing
bonus and to provide up to 15 months of your monthly mortgage payments for your personal residence
shall cease as of January 3, 2009.




          h. In the event the Company terminates your employment on or prior to March 31, 2009, as a
result of (i) your commission of any act of fraud, theft or personal dishonesty in connection with
your responsibilities as an employee that involves the Company or its business and that is intended
to result in substantial personal enrichment to you, or (ii) any willful act or gross negligence by
you that results or is reasonably likely to result in injury to the Company, the Company shall have
no obligation to you for Severance Benefits, except for any Severance Benefits which may have
become due and payable to Employee up to and as of the date of termination in accordance with
Section 2.b., except with respect to accrued an unpaid vacation days as set forth in Section 2.f,
and except with respect to mortgage and signing bonus payments to the extent the Company is
responsible for such payments under Section 2.g. above.




          i. Your right to receive Severance Benefits is specifically conditioned on your compliance
with Section 12 of your Employment Agreement with respect to the noncompete and non-solicitation
covenants made therein, as modified by this letter agreement. In addition, (A) your right to
receive Severance Benefits following the Severance Date is subject to you executing and not
revoking a standard release of claims in favor of the Company (and which shall include provisions
relating to confidentiality and nondisparagement of the Company) (a “Release”), and (B)
your right to continue receiving Severance Benefits following termination of your employment with
the Company is subject to you executing and not revoking a new Release (or reaffirmation of your
original Release as the Company may determine), provided that such Releases shall preserve all of
your indemnification rights and all other rights you may have under the currently existing
indemnification agreement or similar agreement with the Company. Upon any breach by you of Section
12 of your Employment Agreement, as modified by this letter agreement, or upon any breach of the
Releases, all Severance Benefits shall immediately cease.




 









 








     The definitive agreements for any Change of Control transaction shall require the Company’s
successor (or purchaser of its assets) to expressly assume all obligations of the Company under
this letter agreement to the extent any of the Company’s obligations for Severance Benefits under
Section 2 remain outstanding or will not otherwise be satisfied upon the consummation of the Change
of Control transaction as may be contemplated in this letter agreement, including without
limitation and as allowed by applicable law the obligations of the Company under Section 2.c.



     Renegy agrees to work with you as you may reasonably request to structure all payments
contemplated by this letter agreement to provide you with the highest level of net payment
consistent with the terms of this letter agreement.



     In the event the Company fails to make any required severance payment required by Section 2.b.
on the applicable due date, interest shall accrue on such past due amount commencing as of the
required due date at the rate of 10% per annum until such past due amount, together with interest,
is paid in full. In the event any past due severance payment required to be made pursuant to
Section 2.b. as part of the regular bi-weekly payroll cycle (as described in Section 2.b.(i)), plus
accrued interest thereon, is not paid in full by the second severance payment date (in accordance
with the regular bi-weekly payroll cycle) following the missed payment, then the entire applicable
severance amount under Section 2.b., plus the accrued interest on the past due amount, shall become
immediately due and payable. Further, until the balance due is paid in full, interest shall accrue
on such amounts due and payable. For the purposes of this paragraph, only those payments expressly
described in Section 2.b. shall be deemed to be required severance payments that may accrue
interest or result in the acceleration of your remaining severance payments.



     The Company agrees to reimburse you for the reasonable attorney fees, costs and expenses
incurred by you in connection with any action brought by you to enforce your rights hereunder,
including, without limitation, in the event any such action is resolved prior to any court
decision, provided such action is not decided in favor of the Company.



     By signing this letter agreement, you expressly acknowledge and agree that: (i) the execution
of this letter agreement and the performance of the parties hereunder does not entitle you to
receive any severance benefits described in your Employment Agreement for termination for Good
Reason, including, without limitation, the reduction of your employment to part-time basis and
reduced duties and responsibilities associated therewith; (ii) as of the date of this letter
agreement, you do not have Good Reason to terminate your Employment Agreement; (iii) the
obligations of the Company set forth herein shall be in lieu of any severance obligations of the
Company under Section 7 and Section 13 of your Employment Agreement, whether or not such
termination is in connection with a Change of Control or Pending Change of Control and regardless
of the reason for termination; and (iv) the execution of definitive agreements for, or the
consummation of, a Tax Equity Transaction shall not constitute a Change of Control or Pending
Change of Control under your Employment Agreement.



     The intent of this letter agreement is for all payments made hereunder to comply with the
requirements of Section 409A; to the extent any terms of this letter agreement are ambiguous, such
terms shall be interpreted in accordance with such intent.



 









 





     Except as described in the above amendments, this letter agreement does not change your
Employment Agreement in any way. In the event of any conflict between this letter agreement and
your Employment Agreement, the terms of this letter agreement shall govern.



     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]




 









 








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



	 	 	 	 	 
	 	Very truly yours,



RENEGY HOLDINGS, INC.

 	 
	 	/s/ Robert M. Worsley
 	 
	 	Name:  	Robert M. Worsley 	 
	 	Title:  	CEO and Chairman 	 
	 



	 	 	 
	Agreed and Accepted:
	 	 
	 
	 	 
	/s/ Hugh W. Smith
 

Hugh W. Smith