exv10w4



 




EXHIBIT 10.4




CATALYTICA ENERGY SYSTEMS, INC.




301 West Warner Road, Suite 132

Tempe, AZ 85284-2961




May 8, 2007




Robert Zack

301 West Warner Road, Suite 132

Tempe, AZ 85284-2961




     Re: Your Amended and Restated Employment Agreement dated March 23, 2007



Dear Mr. Zack:




     This letter is intended to amend certain tax provisions and to clarify and confirm our mutual
understanding concerning certain aspects of your Amended and Restated Employment Agreement (the
“Employment Agreement”) entered into by and between you and Catalytica Energy Systems, Inc. (the
“Company”) dated March 23, 2007.



     The Company is entering into that certain Contribution and Merger Agreement by and among the
Company, Renegy Holdings, Inc. (“Holdings”), Snowflake Acquisition Corporation, Renegy, LLC, Renegy
Trucking, LLC, Snowflake White Mountain Power, LLC, Robert M. Worsley, Christi M. Worsley and the
Robert M. Worsley and Christi M. Worsley Revocable Trust (the “CMA”). In connection with the
transactions contemplated under the CMA (the “Merger”), your Employment Agreement will be assumed
by Holdings effective as of the Closing (as defined in the CMA).



     By signing this letter, you expressly acknowledge that your Employment Agreement will be
assumed by Holdings as of the Closing of the Merger, and that the Merger constitutes a Change of
Control (as defined in the Employment Agreement) entitling you to the Change of Control Retention
Payments (as defined in the Employment Agreement) set forth therein (subject to the requirement of
your continued employment with Holdings through the date of each such retention payment). You also
expressly acknowledge that the assumption of your Employment Agreement by Holdings does not entitle
you to receive any severance benefits described in your Employment Agreement for an Involuntary
Termination (as defined in the Employment Agreement). Of course, you nevertheless may be entitled
to receive severance benefits in accordance with your Employment Agreement if your employment with
Holdings is terminated after the Merger (and while the Employment Agreement remains in effect) and
the termination at that time constitutes an Involuntary Termination. For purposes of clarity,
payments of any Change of Control Retention Payments to you pursuant to the terms of the Employment



 









 







Agreement will in no way affect, impair or diminish your eligibility to receive any Target
Bonus pursuant to, in accordance with and otherwise subject to the terms of the Employment
Agreement.



     Section 10(e) of your Employment Agreement is amended to replace the existing definition of
Involuntary Termination with the following:




“(e) Involuntary Termination. “Involuntary Termination” shall mean a material
negative change in Employee’s employment by any of the following: (i) without the Employee’s
express written consent, the significant reduction of the Employee’s duties, authority or
responsibilities, relative to the Employee’s duties, authority or responsibilities as in
effect immediately prior to such reduction, or the assignment to Employee of such reduced
duties, authority or responsibilities; provided, however, that so long as Employee’s title,
duties, authority and responsibility are at the level of Chief Financial Officer or greater,
whether at the Company or at an acquirer following a Change of Control, then that will not
constitute an Involuntary Termination under this clause (i), (ii) without the Employee’s
express written consent, a substantial reduction, without good business reasons, of the
facilities and perquisites (including office space and location) available to the Employee
immediately prior to such reduction; (iii) a reduction by the Company in the base salary or
target bonus of the Employee as in effect immediately prior to such reduction; (iv) a
material reduction by the Company in the kind or level of employee benefits to which the
Employee was entitled immediately prior to such reduction with the result that the
Employee’s overall benefits package is significantly reduced; (v) the relocation of the
Employee to a facility or a location more than twenty-five (25) miles from the Employee’s
then present location, without the Employee’s express written consent; (vi) any purported
termination of the Employee by the Company that is not effected for Disability or for Cause,
or, during the Change of Control Period only, any purported termination for which the
grounds relied upon are not valid; (vii) the failure of the Company to obtain the assumption
of this Agreement by any successors contemplated in Section 11(a) below; (viii) requiring
Employee to work outside of Arizona on more than 50% of the business days in any 90
consecutive day period or (viii) during the Change of Control Period only, any act or set of
facts or circumstances that would, under California case law or statute constitute a
constructive termination of the Employee. However, with respect to any Non-Change of
Control Severance Termination, an Involuntary Termination shall not be deemed to have
occurred unless Employee provides written notice to the Company describing the nature of the
event that he believes forms the basis for Involuntary Termination and the Company does not
cure such event within ten (10) days following receipt of such notice.”




In additions, the following new Section 14 is added to your Employment Agreement:




“14. Code Section 409A. Notwithstanding any provisions of this Agreement to the
contrary, if Employee is a “specified employee” within the meaning of Section 409A of the
Code and any temporary, proposed or final regulations thereunder (together, “Section 409A”)
at the time of Employee’s termination, and any severance payments (including any benefits
which provide for a “deferral of compensation” within the meaning of



 









 







Section 409A) to be made to Employee pursuant to this Agreement will not be paid or provided
in full by March 15 of the year following the year in which Employee’s “separation from
service” (within the meaning of Section 409A) occurs, then only that portion of such
severance payments up to the 409A Limit (as defined below) may be made within the first six
months following Employee’s separation from service in accordance with the applicable
payment schedule. Any portion of such severance payments in excess of the 409A Limit shall
accrue and, to the extent such severance payments would otherwise have been payable within
the first six (6) months following Employee’s separation from service, will become payable
the date that is six (6) months and one (1) day following the date of Employee’s separation
from service. All subsequent severance payments, if any, will be payable as provided in
this Agreement. For purposes of this Agreement, the “409A Limit” means the lesser of:




(a) two (2) times the Employee’s annualized compensation based upon the Employee’s annual
rate of pay (the determination of Employee’s annual rate of pay for this purpose shall be as
determined in accordance with Section 409A if additional guidance is released after the date
of this Agreement or, if no such guidance is released, Employee’s annual rate of pay shall
be deemed to be Employee’s annual base salary); and




(b) two (2) times the maximum amount that may be taken into account under a qualified plan
pursuant to Section 401(a)(17) for the year in which the Employee has a separation from
service.




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



     Except as described in the above amendments, this letter does not change your Employment
Agreement in any way. This instrument may be executed in several counterparts, each of which shall
be deemed to be an original, but all of which together will constitute one and the same instrument.



Signature page follows.




 









 





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



	 	 	 	 	 
	 	Very truly yours,





CATALYTICA ENERGY SYSTEMS, INC.

 	 
	 	/s/ Ricardo B. Levy
 	 
	 	Name:  	Ricardo B. Levy 	 
	 	Title:  	Director, Chairman 	 
	 



Agreed and Accepted:




	 	 	 
	/s/ Robert W. Zack
 

Robert W. Zack

	 	 






Signature
Page to Employment Agreement Side Letter