Document:

exv10w15

 

Exhibit 10.15

FORM OF INDEMNIFICATION AGREEMENT

     This Indemnification Agreement (“Agreement”) is made as of                     , 200___by and between
Catalytica Energy Systems, Inc., a Delaware corporation (the “Company”), and                      (“Indemnitee”).

RECITALS

     WHEREAS, the Company desires to attract and retain the services of highly qualified
individuals, such as Indemnitee, to serve the Company;

     WHEREAS, in order to induce Indemnitee to continue to provide services to the Company, the
Company wishes to provide for the indemnification of, and advancement of expenses to, Indemnitee to
the maximum extent permitted by law;

     WHEREAS, the Amended and Restated Certificate of Incorporation (the “Charter”) and the
bylaws of the Company require (i) indemnification of the officers and directors of the Company to
the fullest extent authorized by the General Corporation Law of the State of Delaware (the
“DGCL”) and (ii) the advancement of expenses (including legal fees) incurred in any
proceeding for which indemnification is available in advance of such proceedings final disposition.

     WHEREAS, the Charter and the DGCL expressly provide that the indemnification provisions set
forth therein are not exclusive and thereby contemplate that contracts may be entered into between
the Company and members of the board of directors, officers and other persons with respect to
indemnification;

     WHEREAS, the Company and Indemnitee recognize the continued difficulty in obtaining liability
insurance for the Company’s directors, officers, employees, agents and fiduciaries, the significant
and continual increases in the cost of such insurance and the general trend of insurance companies
to reduce the scope of coverage of such insurance;

     WHEREAS, the Company and Indemnitee further recognize the substantial increase in corporate
litigation in general, subjecting directors, officers, employees, agents and fiduciaries to
expensive litigation risks at the same time as the availability and scope of coverage of liability
insurance provide increasing challenges for the Company;

     WHEREAS, Indemnitee does not regard the protection currently provided by applicable law, the
Company’s governing documents and available insurance as adequate under the present circumstances,
and the Indemnitee and certain other directors, officers, employees, agents and fiduciaries of the
Company may not be willing to continue to serve in such capacities without additional protection;

     WHEREAS, the Board of Directors of the Company (the “Board”) has determined that the
increased difficulty in attracting and retaining highly qualified persons such as Indemnitee is

 

 

detrimental to the best interests of the Company’s stockholders and that the Company should
act to assure such persons that there will be increased certainty of such protection in the future;

     WHEREAS, it is reasonable, prudent and necessary for the Company contractually to obligate
itself to indemnify, and to advance expenses on behalf of, such persons to the fullest extent
permitted by applicable law so that they will serve or continue to serve the Company free from
undue concern that they will not be so indemnified; and

     WHEREAS, this Agreement is a supplement to and in furtherance of the indemnification provided
in the Charter and any resolutions adopted pursuant thereto, and shall not be deemed a substitute
therefor, nor to diminish or abrogate any rights of Indemnitee thereunder.

     NOW, THEREFORE, in consideration of the premises and the covenants contained herein, the
Company and Indemnitee do hereby covenant and agree as follows:

     Section 1. Services to the Company. Indemnitee agrees to serve as a director of the
Company. Indemnitee may at any time and for any reason resign from such position (subject to any
other contractual obligation or any obligation imposed by operation of law), in which event the
Company shall have no obligation under this Agreement to continue Indemnitee in such position.
This Agreement shall not be deemed an employment contract between the Company (or any of its
subsidiaries or any Enterprise) and Indemnitee. The foregoing notwithstanding, this Agreement
shall continue in force after Indemnitee has ceased to serve as a director of the Company for the
applicable time period set forth in Section 15 hereto.

     Section 2. Definitions.

     As used in this Agreement:

          (a) “Corporate Status” describes the status of a person who is or was a director,
officer, employee or agent of the Company or of any other corporation, partnership or joint
venture, trust, employee benefit plan or other enterprise which such person is or was serving at
the request of the Company.

          (b) “Enterprise” shall mean the Company and any other corporation, partnership, joint
venture, trust, employee benefit plan or other enterprise of which Indemnitee is or was serving at
the request of the Company as a director, officer, employee, agent or fiduciary.

          (c) “Expenses” shall include all reasonable attorneys’ fees, retainers, court costs,
transcript costs, fees of experts, witness fees, travel expenses, duplicating costs, printing and
binding costs, telephone charges, postage, delivery service fees, and all other disbursements or
expenses of the types customarily incurred in connection with prosecuting, defending, preparing to
prosecute or defend, investigating, being or preparing to be a witness in, or otherwise
participating in, a Proceeding. Expenses also shall include Expenses incurred in connection with
any appeal resulting from any Proceeding, including without limitation the premium, security for,
and other costs relating to any cost bond, supersedeas bond, or other appeal bond or its
equivalent. Expenses, however, shall not include amounts paid in settlement by Indemnitee
or the amount of judgments or fines against Indemnitee.

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          (d) “Independent Counsel” means a law firm, or a partner (or, if applicable, a member)
of such a law firm, that is experienced in matters of corporation law and neither presently is, nor
in the past five years has been, retained to represent: (i) the Company or Indemnitee in any matter
material to either such party (other than with respect to matters concerning the Indemnitee under
this Agreement or other indemnitees under similar indemnification agreements), or (ii) any other
party to the Proceeding giving rise to a claim for indemnification hereunder. Notwithstanding the
foregoing, the term “Independent Counsel” shall not include any person who, under the applicable
standards of professional conduct then prevailing, would have a conflict of interest in
representing either the Company or Indemnitee in an action to determine Indemnitee’s rights under
this Agreement. The Company agrees to pay the reasonable legal fees and related expenses of the
Independent Counsel referred to above arising out of or relating to this Agreement or its
engagement pursuant hereto.

          (e) The term “Proceeding” shall include any threatened, pending or completed action, suit,
arbitration, alternate dispute resolution mechanism, investigation, inquiry, administrative hearing
or any other actual, threatened or completed proceeding, whether brought in the right of the
Company or otherwise and whether of a civil, criminal, administrative or investigative nature, in
which Indemnitee was, is or will be involved as a party or otherwise by reason of the fact that
Indemnitee is or was a director of the Company, by reason of any action taken by him or her or of
any action on his or her part while acting as director of the Company, or by reason of the fact
that he or she is or was serving at the request of the Company as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust, employee benefit plan or other
enterprise, in each case whether or not serving in such capacity at the time any liability or
expense is incurred for which indemnification, reimbursement, or advancement of expenses can be
provided under this Agreement; provided, however, that the term “Proceeding” shall
not include any action, suit or arbitration initiated by Indemnitee to enforce Indemnitee’s rights
under this Agreement.

     Section 3. Indemnity in Third-Party Proceedings. The Company shall indemnify
Indemnitee in accordance with the provisions of this Section 3 if Indemnitee is, or is threatened
to be made, a party to or a participant in any Proceeding other than a Proceeding by or in the
right of the Company to procure a judgment in its favor. Pursuant to this Section 3, Indemnitee
shall be indemnified against all Expenses, judgments, fines and amounts paid in settlement actually
and reasonably incurred by Indemnitee or on his or her behalf in connection with such Proceeding or
any claim, issue or matter therein, if Indemnitee acted in good faith and in a manner he or she
reasonably believed to be in or not opposed to the best interests of the Company and, in the case
of a criminal proceeding, had no reasonable cause to believe that his or her conduct was unlawful.
Indemnitee shall not enter into any settlement in connection with a Proceeding without (a) thirty
(30) days prior notice to the Company and (b) the Company’s prior written consent to the terms of
such settlement, which consent shall not be unreasonably withheld.

     Section 4. Indemnity in Proceedings by or in the Right of the Company. The Company
shall indemnify Indemnitee in accordance with the provisions of this Section 4 if Indemnitee is, or
is threatened to be made, a party to or a participant in any Proceeding by or in the right of the
Company to procure a judgment in its favor. Pursuant to this Section 4, Indemnitee shall be
indemnified against all Expenses actually and reasonably incurred by him or her or on his or her
behalf in connection with such Proceeding or any claim, issue or matter therein, if Indemnitee
acted

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in good faith and in a manner he or she reasonably believed to be in or not opposed to the
best interests of the Company. No indemnification for Expenses shall be made under this Section 4
in respect of any claim, issue or matter as to which Indemnitee shall have been finally adjudged by
a court to be liable to the Company, unless and only to the extent that the Delaware Court of
Chancery (the “Delaware Court”) or any court in which the Proceeding was brought shall
determine upon application that, despite the adjudication of liability but in view of all the
circumstances of the case, Indemnitee is fairly and reasonably entitled to indemnification for such
expenses as the Delaware Court or such other court shall deem proper.

     Section 5. Indemnification for Expenses of a Party Who is Wholly or Partly Successful.
Notwithstanding any other provisions of this Agreement, to the extent that Indemnitee is a party
to or a participant in and is successful, on the merits or otherwise, in any Proceeding or in
defense of any claim, issue or matter therein, in whole or in part, the Company shall indemnify
Indemnitee against all Expenses actually and reasonably incurred by him or her in connection
therewith. If Indemnitee is not wholly successful in such Proceeding but is successful, on the
merits or otherwise, as to one or more but less than all claims, issues or matters in such
Proceeding, the Company shall indemnify Indemnitee against (a) all Expenses actually and reasonably
incurred by him or her or on his or her behalf in connection with each successfully resolved claim,
issue or matter and (b) any claim, issue or matter related to any such successfully resolved claim,
issue or matter. For purposes of this Section and without limitation, the termination of any
claim, issue or matter in such a Proceeding by dismissal, with or without prejudice, shall be
deemed to be a successful result as to such claim, issue or matter.

     Section 6. Indemnification for Expenses of a Witness. Notwithstanding any other
provision of this Agreement, to the extent that Indemnitee is, by reason of his or her Corporate
Status, a witness in any Proceeding to which Indemnitee is not a party, he or she shall be
indemnified against all Expenses actually and reasonably incurred by him or her or on his or her
behalf in connection therewith.

     Section 7. Additional Indemnification.

          (a) Notwithstanding any limitation in Sections 3, 4, or 5 hereof, the Company shall indemnify
Indemnitee to the fullest extent permitted by law if Indemnitee is, or is threatened to be made, a
party to any Proceeding (including a Proceeding by or in the right of the Company to procure a
judgment in its favor) against all Expenses, judgments, fines and amounts paid in settlement
actually and reasonably incurred by Indemnitee in connection with the Proceeding.

          (b) For purposes of Section 7(a), the meaning of the phrase “to the fullest extent permitted
by law” shall include, but not be limited to:

               (i) to the fullest extent permitted by the provision of the DGCL that authorizes or
contemplates additional indemnification by agreement, or the corresponding provision of any
amendment to or replacement of the DGCL or such provision thereof; and

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               (ii) to the fullest extent authorized or permitted by any amendments to or replacements of the
DGCL adopted after the date of this Agreement that increase the extent to which a corporation may
indemnify its officers and directors.

     Section 8. Exclusions. Notwithstanding any provision in this Agreement to the
contrary, the Company shall not be obligated under this Agreement to make any indemnity in
connection with:

          (a) any claim made against Indemnitee for which payment has actually been made to or on behalf
of Indemnitee under any insurance policy or other indemnity provision, except with respect to any
excess beyond the amount paid under any insurance policy or other indemnity provision;

          (b) any claim made against Indemnitee for an accounting of profits made from the purchase and
sale (or sale and purchase) by Indemnitee of securities of the Company within the meaning of
Section 16(b) of the Securities Exchange Act of 1934, as amended, or similar provisions of state
statutory law or common law;

          (c) any claim made against Indemnitee for which payment is prohibited by applicable law; or

          (d) any claim initiated or brought voluntarily by Indemnitee and not by way of defense, except
(i) with respect to actions or proceedings brought to establish or enforce a right to receive an
advance of Expenses or indemnification of any amounts under this Agreement or any other agreement
or insurance policy or under the Charter or bylaws of the Company now or hereafter in effect
relating to indemnification and the advancement of Expenses, (ii) in specific cases if the Board
has approved the initiation or bringing of such claim, or (iii) as otherwise required under the
DGCL.

     Section 9. Advances of Expenses. The Company shall advance, to the extent not
prohibited by applicable law, the Expenses incurred by Indemnitee in connection with any
Proceeding, and such advancement shall be made within thirty (30) days after the receipt by the
Company of a statement or statements requesting such advances (which shall include invoices
received by Indemnitee in connection with such Expenses; provided, however. that ,
in the case of invoices in connection with legal services, any references to legal work performed
or to expenditures made that would cause Indemnitee to waive any privilege accorded by applicable
law shall not be included with the invoice) from time to time, whether prior to or after final
disposition of any Proceeding. Advances shall be unsecured and interest free. Advances shall be
made without regard to Indemnitee’s ability to repay the expenses and without regard to
Indemnitee’s ultimate entitlement to indemnification under the other provisions of this Agreement.
Advances shall include any and all reasonable Expenses incurred pursuing an action to enforce this
right of advancement, including Expenses incurred preparing and forwarding statements to the
Company to support the advances claimed. The Indemnitee shall qualify for advances upon the
execution and delivery to the Company of this Agreement which shall constitute an undertaking
providing that the Indemnitee undertakes to the fullest extent required by law to repay the advance
if and to the extent that it is ultimately determined by a court of competent jurisdiction in a
final judgment, not subject to appeal, that Indemnitee is not entitled to be indemnified by the
Company. This Section 9 shall not apply to

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any claim made by Indemnitee for which indemnity is excluded pursuant to Section 8. The right
to advances under this paragraph shall in all events continue until final disposition of any
Proceeding, including any appeal therein.

     Section 10. Procedure for Notification and Defense of Claim.

          (a) To obtain indemnification under this Agreement, Indemnitee shall submit to the Company a
written request therefor.

          (b) The Company will be entitled to participate in the Proceeding at its own expense.

     Section 11. Procedure Upon Application for Indemnification.

          (a) Upon written request by Indemnitee for indemnification pursuant to Section 10(a), a
determination, if required by applicable law, with respect to Indemnitee’s entitlement thereto
shall be made in the specific case by Independent Counsel in a written opinion to the Board, a copy
of which shall be delivered to Indemnitee and, if it is so determined that Indemnitee is entitled
to indemnification, payment to Indemnitee shall be made within ten (10) days after such
determination. Indemnitee shall cooperate with the Independent Counsel making such determination
with respect to Indemnitee’s entitlement to indemnification, including providing to such counsel
upon reasonable advance request any documentation or information which is not privileged or
otherwise protected from disclosure and which is reasonably available to Indemnitee and reasonably
necessary to such determination. Any costs or expenses (including attorneys’ fees and
disbursements) incurred by Indemnitee in so cooperating with the Independent Counsel shall be borne
by the Company (irrespective of the determination as to Indemnitee’s entitlement to
indemnification), and the Company hereby indemnifies and agrees to hold Indemnitee harmless
therefrom.

          (b) The Independent Counsel shall be selected by Indemnitee and shall be the same law firm or
partner (or, if applicable, member) as is acting as “Independent Counsel” or in a similar role for
other indemnitees under indemnification agreements similar to this Agreement, unless such law firm,
partner (or, if applicable, member), under applicable standards of professional conduct then
prevailing, would have a conflict of interest in representing Indemnitee and such other
indemnitees. The Company may, within ten (10) days after written notice of such selection, deliver
to the Indemnitee a written objection to such selection; provided, however, that
such objection may be asserted only on the ground that the Independent Counsel so selected does not
meet the requirements of “Independent Counsel” as defined in Section 2 of this Agreement, and the
objection shall set forth with particularity the factual basis of such assertion. Absent a proper
and timely objection, the person so selected shall act as Independent Counsel. If such written
objection is so made and substantiated, the Independent Counsel so selected may not serve as
Independent Counsel unless and until such objection is withdrawn or a court has determined that
such objection is without merit. If, within twenty (20) days after the later of submission by
Indemnitee of a written request for indemnification pursuant to Section 10(a) hereof, and the final
disposition of the Proceeding, including any appeal therein, no Independent Counsel shall have been
selected and not objected to, the Indemnitee may petition a court of competent jurisdiction for
resolution of any objection which

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shall have been made by the Company to the selection of Independent Counsel and/or for the
appointment as Independent Counsel of a person selected by the court or by such other person as the
court shall designate, and the person with respect to whom all objections are so resolved or the
person so appointed shall act as Independent Counsel under Section 11(a) hereof. Upon the due
commencement of any judicial proceeding or arbitration pursuant to Section 13(a) of this Agreement,
Independent Counsel shall be discharged and relieved of any further responsibility in such capacity
(subject to the applicable standards of professional conduct then prevailing).

     Section 12. Presumptions and Effect of Certain Proceedings.

          (a) In making a determination with respect to entitlement to indemnification hereunder, the
Independent Counsel making such determination shall presume that Indemnitee is entitled to
indemnification under this Agreement if Indemnitee has submitted a request for indemnification in
accordance with Section 10(a) of this Agreement, and the Company shall have the burden of proof to
overcome that presumption in connection with the making by the Independent Counsel of any
determination contrary to that presumption. Neither the failure of the Company or of Independent
Counsel to have made a determination prior to the commencement of any action pursuant to this
Agreement that indemnification is proper in the circumstances because Indemnitee has met the
applicable standard of conduct, nor an actual determination by the Company or by Independent
Counsel that Indemnitee has not met such applicable standard of conduct, shall be a defense to the
action or create a presumption that Indenmitee has not met the applicable standard of conduct.

          (b) The termination of any Proceeding or of any claim, issue or matter therein, by judgment,
order, settlement or conviction, or upon a plea of guilty, nolo contendere or its
equivalent, shall not (except as otherwise expressly provided in this Agreement) of itself
adversely affect the right of Indemnitee to indemnification or create a presumption that Indemnitee
did not act in good faith and in a manner which he or she reasonably believed to be in or not
opposed to the best interests of the Company or, with respect to any criminal Proceeding, that
Indemnitee had reasonable cause to believe that his or her conduct was unlawful.

          (c) For purposes of any determination of good faith, Indemnitee shall be deemed to have acted
in good faith if Indemnitee’s action is based on the records or books of account of the Enterprise,
including financial statements, or on information supplied to Indemnitee by the officers of the
Enterprise in the course of their duties, or on the advice of legal counsel for the Enterprise or
the Board or counsel selected by any committee of the Board or on information or records given or
reports made to the Enterprise by an independent certified public accountant or by an appraiser,
investment banker or other expert selected with reasonable care by the Company or the Board or any
committee of the Board. The provisions of this Section 12(c) shall not be deemed to be exclusive
or to limit in any way the other circumstances in which the Indemnitee may be deemed to have met
the applicable standard of conduct set forth in this Agreement.

          (d) The knowledge and/or actions, or failure to act, of any director, officer, agent or
employee of the Enterprise shall not be imputed to Indemnitee for purposes of determining the right
to indemnification under this Agreement.

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     Section 13. Remedies of Indemnitee.

          (a) Subject to Section 13(e), in the event that (i) a determination is made pursuant to
Section 11 of this Agreement that Indemnitee is not entitled to indemnification under this
Agreement, (ii) advancement of Expenses is not timely made pursuant to Section 9 of this Agreement,
(iii) no determination of entitlement to indemnification shall have been made pursuant to
Section 11(a) of this Agreement within ninety (90) days after receipt by the Company of the request
for indemnification, (iv) payment of indemnification is not made pursuant to Section 5 or 6 or the
last sentence of Section 11(a) of this Agreement within ten (10) days after receipt by the Company
of a written request therefor, or (v) payment of indemnification pursuant to Section 3, 4 or 7 of
this Agreement is not made within ten (10) days after a determination has been made that Indemnitee
is entitled to indemnification, Indemnitee shall be entitled to an adjudication by a court of his
or her entitlement to such indemnification or advancement of Expenses. Indemnitee shall commence
such proceeding seeking an adjudication within 180 days following the date on which Indemnitee
first has the right to commence such proceeding pursuant to this Section 13(a); provided,
however, that the foregoing clause shall not apply in respect of a proceeding brought by
Indemnitee to enforce his or her rights under Section 5 of this Agreement. The Company shall not
oppose Indemnitee’s right to seek any such adjudication.

          (b) In the event that a determination shall have been made pursuant to Section 11(a) of this
Agreement that Indemnitee is not entitled to indemnification, any judicial proceeding commenced
pursuant to this Section 13 shall be conducted in all respects as a de novo trial on the merits and
Indemnitee shall not be prejudiced by reason of that adverse determination. In any judicial
proceeding commenced pursuant to this Section 13 the Company shall have the burden of proving
Indemnitee is not entitled to indemnification or advancement of Expenses, as the case may be.

          (c) If a determination shall have been made pursuant to Section 11(a) of this Agreement that
Indemnitee is entitled to indemnification, the Company shall be bound by such determination in any
judicial proceeding commenced pursuant to this Section 13, absent (i) a misstatement by Indemnitee
of a material fact, or an omission of a material fact necessary to make Indemnitee’s statement not
materially misleading, in connection with the request for indemnification, or (ii) a prohibition of
such indemnification under applicable law.

          (d) The Company shall be precluded from asserting in any judicial proceeding commenced
pursuant to this Section 13 that the procedures and presumptions of this Agreement are not valid,
binding and enforceable and shall stipulate in any such court or before any such arbitrator that
the Company is bound by all the provisions of this Agreement. The Company shall indemnify
Indemnitee against any and all Expenses and, if requested by Indemnitee, shall (within ten (10)
days after receipt by the Company of a written request therefor) advance, to the extent not
prohibited by law, such Expenses to Indemnitee, which are incurred by Indemnitee in connection with
any action brought by Indemnitee for indemnification or advance of Expenses from the Company under
this Agreement or under any directors’ and officers’ liability insurance policies maintained by the

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Company, regardless of whether Indemnitee ultimately is determined to be entitled to such
indemnification, advancement of Expenses or insurance recovery, as the case may be.

          (e) Notwithstanding anything in this Agreement to the contrary, no determination as to
entitlement to indemnification under this Agreement shall be required to be made prior to the final
disposition of the Proceeding, including any appeal therein.

     Section 14. Non-exclusivity, Survival of Rights; Insurance Subrogation.

          (a) The rights of indemnification and to receive advancement of Expenses as provided by this
Agreement shall not be deemed exclusive of any other rights to which Indemnitee may at any time be
entitled under applicable law, the Charter, the Company’s Bylaws, any agreement, a vote of
stockholders or a resolution of directors, or otherwise. No amendment, alteration or repeal of
this Agreement or of any provision hereof shall limit or restrict any right of Indemnitee under
this Agreement in respect of any action taken or omitted by such Indemnitee in his or her Corporate
Status prior to such amendment, alteration or repeal. To the extent that a change in Delaware law,
whether by statute or judicial decision, permits greater indemnification or advancement of Expenses
than would be afforded currently under the Charter, Bylaws and this Agreement, it is the intent of
the parties hereto that Indemnitee shall enjoy by this Agreement the greater benefits so afforded
by such change. No right or remedy herein conferred is intended to be exclusive of any other right
or remedy, and every other right and remedy shall be cumulative and in addition to every other
right and remedy given hereunder or now or hereafter existing at law or in equity or otherwise.
The assertion or employment of any right or remedy hereunder, or otherwise, shall not prevent the
concurrent assertion or employment of any other right or remedy.

          (b) To the extent that the Company maintains an insurance policy or policies providing
liability insurance for directors, officers, employees, or agents of the Company or of any other
Enterprise, Indemnitee shall be covered by such policy or policies in accordance with its or their
terms to the maximum extent of the coverage available for any such director, officer, employee or
agent under such policy or policies. If, at the time of the receipt of a notice of a claim
pursuant to the terms hereof, the Company has director and officer liability insurance in effect,
the Company shall give prompt notice of the commencement of such proceeding to the insurers in
accordance with the procedures set forth in the respective policies. The Company shall thereafter
take all necessary or desirable action to cause such insurers to pay, on behalf of the Indemnitee,
all amounts payable as a result of such proceeding in accordance with the terms of such policies.

          (c) In the event of any payment under this Agreement, the Company shall be subrogated to the
extent of such payment to all of the rights of recovery of Indemnitee, who shall execute all papers
required and take all action necessary to secure such rights, including execution of such documents
as are necessary to enable the Company to bring suit to enforce such rights.

          (d) The Company shall not be liable under this Agreement to make any payment of amounts
otherwise indemnifiable hereunder (or for which advancement is provided hereunder) if and to the
extent that Indemnitee has otherwise actually received such payment under any insurance policy,
contract, agreement or otherwise.

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          (e) The Company’s obligation to indemnify or advance Expenses hereunder to Indemnitee who is
or was serving at the request of the Company as a director, officer, employee or agent of any other
corporation, partnership, joint venture, trust, employee benefit plan or other enterprise shall be
reduced by any amount Indemnitee has actually received as indemnification or advancement of
Expenses from such other corporation, partnership, joint venture, trust, employee benefit plan or
other enterprise.

     Section 15. Duration of Agreement. This Agreement shall continue until and terminate
upon the later of (a) ten (10) years after the date that Indemnitee shall have ceased to serve as a
director of the Company or (b) one (1) year after the final termination of any Proceeding,
including any appeal, then pending in respect of which Indemnitee is granted rights of
indemnification or advancement of Expenses hereunder and of any proceeding commenced by Indemnitee
pursuant to Section 13 of this Agreement relating thereto. This Agreement shall be binding upon
the Company and its successors and assigns and shall inure to the benefit of Indemnitee and his or
her heirs, executors and administrators. The Company shall require and cause any successor
(whether direct or indirect by purchase, merger, consolidation or otherwise) to all, substantially
all or a substantial part, of the business and/or assets of the Company, by written agreement in
form and substance satisfactory to the Indemnitee, expressly to assume and agree to perform this
Agreement in the same manner and to the same extent that the Company would be required to perform
if no such succession had taken place.

     Section 16. Severability. If any provision or provisions of this Agreement shall be
held to be invalid, illegal or unenforceable for any reason whatsoever: (a) the validity, legality
and enforceability of the remaining provisions of this Agreement (including without limitation,
each portion of any Section of this Agreement containing any such provision held to be invalid,
illegal or unenforceable, that is not itself invalid, illegal or unenforceable) shall not in any
way be affected or impaired thereby and shall remain enforceable to the fullest extent permitted by
law; (b) such provision or provisions shall be deemed reformed to the extent necessary to conform
to applicable law and to give the maximum effect to the intent of the parties hereto; and (c) to
the fullest extent possible, the provisions of this Agreement (including, without limitation, each
portion of any Section of this Agreement containing any such provision held to be invalid, illegal
or unenforceable, that is not itself invalid, illegal or unenforceable) shall be construed so as to
give effect to the intent manifested thereby.

     Section 17. Enforcement.

          (a) The Company expressly confirms and agrees that it has entered into this Agreement and
assumed the obligations imposed on it hereby in order to induce Indemnitee to serve as a director
of the Company, and the Company acknowledges that Indemnitee is relying upon this Agreement in
serving as a director of the Company.

          (b) This Agreement constitutes the entire agreement between the parties hereto with respect to
the subject matter hereof and supersedes all prior agreements and understandings, oral, written and
implied, between the parties hereto with respect to the subject matter hereof; provided,
however, that this Agreement is a supplement to and in furtherance of the Charter of the

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Company, the Bylaws of the Company and applicable law, and shall not be deemed a substitute
therefor, nor to diminish or abrogate any rights of Indemnitee thereunder.

     Section 18. Modification and Waiver. No supplement, modification or amendment of this
Agreement shall be binding unless executed in writing by the parties thereto. No waiver of any of
the provisions of this Agreement shall be deemed or shall constitute a waiver of any other
provisions of this Agreement nor shall any waiver constitute a continuing waiver.

     Section 19. Noticed Indemnitee. Indemnitee agrees promptly to notify the Company in
writing upon being served with any summons, citation, subpoena, complaint, indictment, information
or other document relating to any Proceeding or matter which may be subject to indemnification or
advancement of Expenses covered hereunder. The failure of Indemnitee to so notify the Company
shall not relieve the Company of any obligation which it may have to the Indemnitee under this
Agreement or otherwise.

     Section 20. Notices. All notices, requests, demands and other communications under
this Agreement shall be in writing and shall be deemed to have been duly given if (a) delivered by
hand and receipted for by the party to whom said notice or other communication shall have been
directed, (b) mailed by certified or registered mail with postage prepaid, on the third business
day after the date on which it is so mailed, (c) mailed by reputable overnight courier and
receipted for by the party to whom said notice or other communication shall have been directed or
(d) sent by facsimile transmission, with receipt of oral confirmation that such transmission has
been received:

          (a) If to Indemnitee, at such address as Indemnitee shall provide to the Company.

          (b) If to the Company to:

Catalytica Energy Systems, Inc.

Attn: CEO

1388 N. Tech Blvd.

Gilbert, AZ 85233

with a copy to:

Wilson Sonsini Goodrich & Rosati, P.C.

Attn: Brian C. Erb

650 Page Mill Road

Palo Alto, CA 94304

or to any other address as may have been furnished to Indemnitee by the Company.

     Section 21. Contribution. To the fullest extent permissible under applicable law, if
the indemnification provided for in this Agreement is unavailable to Indemnitee for any reason
whatsoever, the Company, in lieu of indemnifying Indemnitee, shall contribute to the amount
incurred by Indemnitee, whether for judgments, fines, penalties, excise taxes, amounts paid or to
be paid in settlement and/or for Expenses, in connection with any claim relating to an
indemnifiable

-11-

 

event under this Agreement, in such proportion as is deemed fair and reasonable in light of
all of the circumstances of such Proceeding in order to reflect (i) the relative benefits received
by the Company and Indemnitee as a result of the event(s) and/or transaction(s) giving cause to
such Proceeding; and/or (ii) the relative fault of the Company (and its directors, officers,
employees and agents) and Indemnitee in connection with such event(s) and/or transaction(s).

     Section 22. Applicable Law and Consent to Jurisdiction. This Agreement and the legal
relations among the parties shall be governed by, and construed and enforced in accordance with,
the laws of the State of Delaware, without regard to its conflict of laws rules. Except with
respect to any arbitration commenced by Indemnitee pursuant to Section 13(a) of this Agreement, the
Company and Indemnitee hereby irrevocably and unconditionally (i) agree that any action or
proceeding arising out of or in connection with this Agreement shall be brought only in the
Delaware Court, and not in any other state or federal court in the United States of America or any
court in any other country, (ii) consent to submit to the exclusive jurisdiction of the Delaware
Court for purposes of any action or proceeding arising out of or in connection with this Agreement,
(iii) appoint, to the extent such party is not otherwise subject to service of process in the State
of Delaware, The Corporation Trust Company, Wilmington, Delaware as its agent in the State of
Delaware as such party’s agent for acceptance of legal process in connection with any such action
or proceeding against such party with the same legal force and validity as if served upon such
party personally within the State of Delaware, (iv) waive any objection to the laying of venue of
any such action or proceeding in the Delaware Court, and (v) waive, and agree not to plead or to
make, any claim that any such action or proceeding brought in the Delaware Court has been brought
in an improper or inconvenient forum.

     Section 23. Identical Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall for all purposes be deemed to be an original but all of which
together shall constitute one and the same Agreement. Only one such counterpart signed by the
party against whom enforceability is sought needs to be produced to evidence the existence of this
Agreement.

          (a) Miscellaneous. The headings of the paragraphs of this Agreement are inserted for
convenience only and shall not be deemed to constitute part of this Agreement or to affect the
construction thereof.

-12-

 

     IN WITNESS WHEREOF, the parties have caused this Agreement to be signed as of the day and year
first above written.

	 	 	 	 	 
	 	CATALYTICA ENERGY SYSTEMS, INC.

 	 
	 	By:  	 	 
	 	 	[Name] 	 
	 	 	[Title] 	 
	 
	 	 	 
	 	By:  	
 	 
	 	 	[Indemnitee] 	 
	 	 	[Name] 	 
	 

-13-<PAGE>

                                              *TEXT OMITTED AND FILED SEPARATELY
                                                CONFIDENTIAL TREATMENT REQUESTED
                                           UNDER 17 C.F.R. SECTION 200.80(b)(4),
                                                            200.83 AND 240.24b-2

                                                                   Exhibit 10.16

                                                               EXECUTION VERSION

                           SECOND AMENDED AND RESTATED

                  RENEWABLE ENERGY PURCHASE AND SALE AGREEMENT

THIS SECOND AMENDED AND RESTATED RENEWABLE ENERGY PURCHASE AND SALE AGREEMENT
(hereinafter referred to as the "Agreement"), dated as of August 18, 2006 is
entered into by and between Snowflake White Mountain Power, LLC, a limited
liability company organized and existing under the laws of the State of Arizona
(hereinafter referred to as "Seller"), and Salt River Project Agricultural
Improvement and Power District, an agricultural improvement district organized
and existing under the laws of the State of Arizona (hereinafter referred to as
"Buyer").

                                TABLE OF CONTENTS

<TABLE>
<S>                                                                          <C>
Article 1:   Conditions Precedent; Term of Agreement.......................    2
Article 2:   Definitions...................................................    4
Article 3:   Tier One Purchase Provisions..................................    8
Article 4:   Tier Two Purchase Provisions..................................   13
Article 5:   Title and Risk of Loss; Indemnity.............................   15
Article 6:   Billing and Terms of Payment..................................   15
Article 7:   Events of Default.............................................   16
Article 8:   Remedies......................................................   17
Article 9:   Termination...................................................   18
Article 10:  Limitation of Liability.......................................   19
Article 11:  Relationship of the Parties...................................   19
Article 12:  Taxes.........................................................   19
Article 13:  Notices.......................................................   20
Article 14:  Confidential Information......................................   21
Article 15:  Miscellaneous.................................................   22
EXHIBIT A:   Contract Rates................................................   29
EXHIBIT B:   EA Certificate................................................   30
</TABLE>

                                    RECITALS

Whereas, Seller has now, or will have in the future, a certain Renewable
Resource located in Snowflake, Arizona (the "Project");

Whereas, the Project will create certain Environmental Attributes that arise
from the generation of electricity;

Whereas, Seller is in the business of generating and marketing electricity,
capacity, and the associated Environmental Attributes; and

Whereas, Seller desires to sell to Buyer and Buyer desires to purchase from
Seller certain quantities of energy, capacity, and corresponding Environmental
Attributes created by the Project; and

Whereas, Seller and Buyer previously entered into (i) that certain Renewable
Energy Purchase and Sale Agreement, dated as of February 24, 2005, that was
subsequently replaced in its entirety by (ii) that certain Amended and Restated
Renewable Energy

<PAGE>

Purchase and Sale Agreement date as of May 25, 2006 pertaining to the purchase
and sale of the energy identified herein as "Tier One" for a term of twenty (20)
years; and

Whereas, Seller has entered into an agreement with Arizona Public Service
Company ("APS Agreement") for substantially all of the additional energy
produced by the Project for a term of fifteen (15) years; and

Whereas, Seller has offered to sell and Buyer desires to purchase additional
energy from the Project, commencing at the beginning of the sixteenth (16th)
Delivery Year and ending on the Termination Date of this Agreement. The amount
purchased shall consist of all of the remaining capacity and energy of the
Project after Tier One deliveries are made to Buyer.

NOW, THEREFORE, in consideration of the above recitals and the mutual promises
of the Parties set forth below, the Parties hereto and intending to be legally
bound hereby, agree as follows:

ARTICLE 1: CONDITIONS PRECEDENT; TERM OF AGREEMENT.

(a)  Conditions Precedent. Each of Seller's and Buyer's obligations under this
     Agreement shall become effective upon the satisfaction or waiver by Seller
     of each of the following conditions precedent:

     (i)  Seller shall have obtained all governmental and regulatory
          authorizations required for the construction, ownership, operation and
          maintenance of the Project and for the sale of capacity and energy
          therefrom;

     (ii) Seller shall have obtained financing in connection with the
          construction, ownership, operation and maintenance of the Project on
          terms and conditions reasonably acceptable to Seller; and

     (iii) Seller shall have entered into an interconnection arrangement on
          terms and conditions reasonably acceptable to Seller.

(b)  Termination Rights Upon Failure to Achieve Conditions Precedent. In the
     event that any of the conditions precedent set forth in subsection (a) of
     this Article 1 have not been satisfied or waived by Seller by May 1, 2006,
     either Seller or Buyer shall have the right to terminate this Agreement
     upon thirty (30) days written notice to the other Party if the conditions
     precedent have not been satisfied or waived by Seller within such thirty
     (30) day period. If Buyer elects to terminate this Agreement pursuant to
     this Article 1, neither Party shall have any liability or obligation to the
     other Party. If Seller elects to waive any of the conditions precedent set
     forth in subsection (a) of this Article 1, such condition shall no longer
     be a condition precedent to the effectiveness of Seller's and Buyer's
     obligations under this Agreement. If Seller elects to terminate this
     Agreement pursuant to this Article 1, Seller shall make a one-time payment
     to Buyer for liquidated damages, within ten (10) days of such termination,
     in the amount of $250,000.
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(c)  Term: First Right of Refusal.

     (i) The term of this Agreement shall commence on the date hereof and shall
     remain in effect through and including the Termination Date.

     (ii) Commencing on the beginning of the fifteenth (15th) Delivery Year but
     not sooner, Seller may negotiate with third parties for proposed agreements
     for the sale of the net energy, capacity and Environmental Attributes
     generated by the Project during all or any portion of the period commencing
     on the day after the Termination Date and ending on the ten (10) year
     anniversary of the Termination Date, or, stated differently, for a period
     from the end of the twentieth (20th) Delivery Year and ending on the day
     before the thirty-first (31st) anniversary of the Delivery Commencement
     Date (such period, the "Right of First Refusal Term" or "ROFR Term");
     provided, however, that Buyer shall have a first right of refusal to match
     any proposed agreement with any such third party for the sale of the net
     energy, capacity and Environmental Attributes generated by the Project
     during all or any portion of the ROFR Term, as follows. If Seller reaches a
     bona fide proposed definitive agreement with a third party for the sale of
     the net energy, capacity and Environmental Attributes generated by the
     Project during all or any portion of the ROFR Term (a "Third Party Offer"),
     Seller shall provide a copy of such proposed definitive agreement to Buyer
     within ten (10) days of reaching agreement on the proposed Third Party
     Offer. Buyer shall have thirty (30) days to notify Seller in writing
     whether it wishes to exercise its right of refusal by entering into an
     agreement with Seller for the sale of the net energy, capacity and
     Environmental Attributes generated by the Project by Seller to Buyer on
     essentially the same terms and conditions (including sources of fuel) as
     set forth in the Third Party Offer (such notice, the "Election Notice").
     Upon the timely and proper delivery of an Election Notice, Seller and Buyer
     shall act in good faith to modify and execute any and all definitive
     agreements required for Buyer to purchase the net energy, capacity and
     Environmental Attributes on essentially the same terms and conditions
     (including sources of fuel) as set forth in the Third Party Offer, it being
     understood that the Third Party Offer shall be modified only as minimally
     necessary to properly reflect the identification of the Buyer and to meet
     Buyer's minimum standards for power purchase contracts, but shall be
     essentially identical to the Third Party Offer with respect to all
     financial terms. If Buyer shall fall to properly deliver an Election Notice
     within the 30-day notification period, or if Buyer shall property deliver
     such Election Notice within the 30-day notification period but, after
     good-faith negotiations between Buyer and Seller to modify the Third Party
     Offer agreements as provided above, shall fail to execute the necessary
     definitive agreements within thirty (30) days following the date on which
     the Election Notice is given to Seller, then in either event Seller shall
     be free to execute definitive agreements with the third party who
     originally made such offer to Seller. Buyer's right of refusal under this
     Section 1(c) shall survive the Termination Date of this Agreement for the
     ROFR Term.

(d)  Prior Agreement Terminated. Seller and Buyer have previously entered into
     the "Renewable Energy Purchase and Sale Agreement", dated as of February
     24, 2005 that was replaced by and terminated pursuant to the Amended and
     Restated Renewable Energy Purchase and Sale Agreement date as of May 25,
     2006 (the "Prior Agreement"). It is the intention of the Parties that this
     Second Amended and Restated Renewable Energy Purchase and Sale Agreement
     shall
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<PAGE>

     replace the Prior Agreement in its entirety. Accordingly, upon the
     execution by each of the Parties of this Second Amended and Restated
     Renewable Energy Purchase and Sale Agreement, the Prior Agreement shall
     terminate and have no further force and effect.

ARTICLE 2: DEFINITIONS. As used in this Agreement, the following terms have the
respective meanings set forth below. Other capitalized terms are defined
elsewhere in this Agreement.

     "AGREEMENT" means all provisions, exhibits incorporated as part of this
     Agreement, and documents incorporated by reference.

     "ARIZONA FOREST THINNINGS" means forest thinnings and/or residues
     associated with the harvest of trees, salvage timber, small diameter
     timber, salt cedar and other phreatophyte or woody vegetation removed from
     forest and woodlands, river basins or watersheds in the State of Arizona,
     including sawdust and sawmill waste resulting from the processing of the
     foregoing.

     "ARIZONA FOREST THINNINGS CALCULATION" has the meaning set forth in Article
     3(a)(i).

     "AUTHORIZED REPRESENTATIVE" has the meaning set forth in Article 15(m).

     "BIOMASS" means paper sludge, urban debris, agricultural waste and any
     other "biomass," including Arizona Forest Thinnings and Out-of State Forest
     Thinnings, falling within the definition thereof for purposes of qualifying
     renewable generation and promulgated from time to time by the Arizona
     Corporation Commission or any successor agency having regulatory
     jurisdiction over renewable generation.

     "BUSINESS DAY" means any day which is not (i) a Saturday, (ii) a Sunday or
     (iii) a legal holiday in the State of Arizona or a federal holiday in the
     United States of America.

     "CAMD" means the Clean Air Markets Division of the Environmental Protection
     Agency, any successor agency and any other state or federal entity that is
     given jurisdiction over a program involving transferability of
     Environmental Attributes.

     "CLAIMS" means all third party claims or actions, threatened or filed and,
     whether groundless, false, fraudulent or otherwise, that directly or
     indirectly relate to the subject matter of an indemnity, and the resulting
     losses, damages, expenses, attorneys' fees and court costs, whether
     incurred by settlement or otherwise, and whether such claims or actions are
     threatened or filed prior to or after the termination of this AGREEMENT.

     "DEFAULTING PARTY" has the meaning set forth in Article 7(a).

     "DELIVERY COMMENCEMENT DATE" means the earlier to occur of (i) January 1,
     2008 or (ii) the commercial operation date of the Project, as designated in
     a written notice from Seller to Buyer; provided, however, that without
     limiting the generality of the provisions of Article 15(i), and so long as
     Seller has achieved Significant Construction Milestones by April 30, 2007,
     if due to delays in construction of the Project that are beyond the
     reasonable control of Seller, the commercial operation
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<PAGE>

     date of the Project does not occur on or prior to January 1, 2008, the
     Services Commencement Date shall mean the earlier to occur of July 1, 2008
     or such commercial operation date.

     "DELIVERY TERM" means the period commencing at hour ending 0100 MST on the
     Delivery Commencement Date through and including the hour ending 2400 MST
     on the Termination Date.

     "DELIVERY YEAR" means the consecutive twelve-month period commencing at
     hour ending 0100 MST on the Delivery Commencement Date (and each subsequent
     anniversary thereof) through and including the hour ending 2400 MST on the
     final day of such twelve-month period.

     "EA CERTIFICATE" means a certificate in the form attached hereto as Exhibit
     B.

     "ELECTION NOTICE" has the meaning set forth in Article 1(c).

     "ENVIRONMENTAL ATTRIBUTE" means any and all fuel, emissions, air quality,
     or other environmental characteristics, including green energy tags,
     renewable energy credits or certificates (REC) (including as defined in any
     legislation applicable in the Western Electricity Coordinating Council
     region), credits, benefits, reductions, offsets, and allowances, howsoever
     entitled or named, resulting from the use of renewable generation or the
     avoidance of the emission of any gas, chemical, or other substance to the
     air, soil or water attributable to the metered output generated by the
     facility which generated the energy sold by Seller to Buyer during the
     Delivery Term and in which the Seller has property rights or will have
     property rights upon such attributes coming into existence, and includes
     any of the same arising out of legislation or regulation concerned with
     oxides of nitrogen, sulfur, or carbon, particulate matter, soot, or
     mercury, or implementing the United Nations Framework Convention on Climate
     Change (the "UNFCCC") or the Kyoto Protocol to the UNFCCC or crediting
     "early action" with a view thereto, or laws or regulations involving or
     administered by the CAMD, and all Environmental Attribute Reporting Rights,
     but specifically excluding only the Production Tax Credits (PTC) or fuel
     subsidies. One (1) MWh of electrical energy from the Project or another
     applicable renewable energy generation facility corresponds to one (1) MWh
     Environmental Attribute.

     "ENVIRONMENTAL ATTRIBUTE REPORTING RIGHTS" means the right to report to any
     agency, authority or other party, including without limitation under
     Section 1605(b) of the Energy Policy Act of 1992, ownership of the
     Environmental Attributes.

     "FINANCIER" means any individual(s) or entity(ies) and any
     representative(s) or trustee(s) for any such individual(s) or entity(ies)
     providing financing to Seller or any entity controlling, controlled by or
     under common control with such entity, in respect of the Project or the
     transactions contemplated by this Agreement, including in the form of term
     debt or Interim debt or subordinated debt financing, including any
     refinancing or take-out of any such loan(s) or financings.

     "FIRM TRANSMISSION SERVICE" means (i) with respect to Seller, firm
     point-to-point transmission service provided by Arizona Public Service
     Company under the Arizona Public Service Company Pro Forma Open Access
     Transmission Tariff and (ii) with respect to Buyer, firm point-to-point
     transmission service provided by Salt River
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<PAGE>

     Project Agricultural Improvement and Power District under the Salt River
     Project Agricultural Improvement and Power District Open Access
     Transmission Tariff.

     "GUARANTOR" means, with respect to Seller, Robert M. Worsley and Christi M.
     Worsley.

     "LATE PAYMENT RATE" means a per annum rate of interest equal to the lesser
     of (i) LIBOR plus two percent (2%) or (ii) the maximum rate permitted by
     applicable law.

     "LIBOR" means the London Interbank Offered Rate of interest per annum at
     which deposits in U.S. Dollars are offered by prime banks as of 11:00 a.m.,
     London time, on the date which is two (2) Business Days prior to the first
     day of any period to which interest is applicable, for settlement on the
     first day of such interest period as such rate is quoted on Telerate Page
     3750, or a functionally equivalent successor thereto, to be agreed between
     Buyer and Seller.

     "MW" means megawatt(s).

     "MWH" means megawatt hour(s).

     "MINIMUM NET WORTH AMOUNT" has the meaning set forth in the Personal
     Guaranty Agreement dated of even date herewith by Guarantor.

     "MOODY'S" means Moody's Investor Services, Inc.

     "MST" means Mountain Standard Time, as applicable, in Phoenix, Arizona.

     "NET-OUT-OF-STATE FUEL COST" has the meaning set forth in Article 3(a)(ii).

     "NET-ARIZONA FUEL COST INCREASE" has the meaning set forth in
     Article 3(a)(i).

     "NON-DEFAULTING PARTY" has the meaning set forth in Article 7(a).

     "OPTION" has the meaning set forth in Article 3(k).

     "OPTION PERIOD" has the meaning set forth in Article 3(k)(i).

     "OPTION PREMIUM" has the meaning set forth in Article 3(k)(iii).

     "OUT-OF-STATE FOREST THINNINGS" means forest thinnings and/or residues
     associated with the harvest of trees, salvage timber, small diameter
     timber, salt cedar and other phreatophyte or woody vegetation removed from
     forest and woodlands, river basins or watersheds outside the State of
     Arizona, including sawdust and sawmill waste resulting from the processing
     of the foregoing.

     "PARTY" or "PARTIES" means Buyer and Seller, individually or collectively,
     as applicable.

     "PERSON" means an individual, partnership, corporation, limited liability
     company, association, trust, unincorporated organization, or a governmental
     authority or agency or political subdivision thereof.
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     "PRODUCTION TAX CREDITS" means the federal renewable electricity production
     tax credit allowed in conjunction with the sale of electricity from
     qualified energy resources as most recently set forth in the Working
     Families Tax Relief Act of 2004 (Public Law No. 108-311) and the American
     Jobs Creation Act of 2004 (Public Law No. 108-357) and as it may be further
     defined in subsequent legislation.

     "PROJECT" has the meaning set forth in the recitals of this Agreement.

     "RENEWABLE RESOURCE" means an electric power generator using Biomass to
     produce electric energy.

     "ROFR PERIOD" has the meaning set forth in Article 1(c).

     "S&P" means Standard & Poor's Rating Group, a division of McGraw-Hill, Inc.

     "SIGNIFICANT CONSTRUCTION MILESTONES" means (i) the boiler and steam
     generator components of the Project have been delivered to the Project Site
     and (ii) Seller has entered into contracts for installation and testing of
     the Project with the major contractors for the construction of the Project.

     "TEST ENERGY PRICE" has the meaning set forth in Article 3(k)(iv).

     "TIER ONE DELIVERY POINT" has the meaning set forth in Article 3(e).

     "TIER TWO DELIVERY POINT" has the meaning set forth in Article 4(e).

     "TIER ONE DELIVERY TERM" means the period commencing at hour ending 0100
     MST on the Delivery Commencement Date through and including the hour ending
     2400 MST on the Termination Date.

     "TIER TWO DELIVERY TERM" means the period commencing at hour ending 0100
     MST on the first day of the sixteenth (16th) Delivery Year through and
     including the hour ending 2400 MST on the Termination Date.

     "TIER ONE MAXIMUM ANNUAL CONTRACT QUANTITY" means 87,600 MWh (of which
     70,080 MWh must be Biomass energy); provided that, in any Delivery Year in
     which the month of February has twenty-nine (29) days, the Tier One Maximum
     Annual Contract Quantity shall be 87,840 MWh (of which 70,272 MWh must be
     Biomass energy); provided further that, with respect to the Delivery Year
     in which the Tier One Delivery Term terminates, the Maximum Annual Contract
     Quantity shall be reduced accordingly based upon the ratio of (i) the total
     number of days in such Delivery Year within the Delivery Term for such year
     to (ii) 365.

     "TIER ONE MINIMUM ANNUAL CONTRACT QUANTITY" means 78,840 MWh (of which
     63,072 MWh must be Biomass energy); provided that, in any Delivery Year in
     which the month of February has twenty-nine (29) days, the Tier One Minimum
     Annual Contract Quantity shall be 79,056 MWh (of which 63,245 MWh must be
     Biomass energy); provided further that, with respect to the Delivery Year
     in which the Delivery Term terminates, the Tier One Minimum Annual Contract
     Quantity shall be reduced accordingly based upon the ratio of (i) the total
     number of days in such Delivery Year within the Delivery Term for such year
     to (ii) 365.

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     "TIER TWO MINIMUM ANNUAL CONTRACT QUANTITY" means 78,840 MWh of Biomass
     energy; provided that, in any Delivery Year in which the month of February
     has twenty-nine (29) days, the Tier Two Minimum Annual Contract Quantity
     shall be 79,056 MWh of Biomass energy; provided further that, with respect
     to the Delivery Year in which the Delivery Term terminates, the Tier Two
     Minimum Annual Contract Quantity shall be reduced accordingly based upon
     the ratio of (i) the total number of days in such Delivery Year within the
     Delivery Term for such year to (ii) 365. There is no maximum annual
     quantity for Tier Two deliveries, which shall include all power and energy
     generated by the Project that is not delivered as Tier One quantities.

     "TERMINATION DATE" means, with respect to both Tier One and Tier Two, the
     end of Delivery Year twenty (20), or such earlier date upon which this
     Agreement is terminated in accordance with the provisions of this
     Agreement.

ARTICLE 3: TIER ONE PURCHASE PROVISIONS.

Seller agrees to deliver and sell and Buyer agrees to accept and purchase,
during the Tier One Delivery Term, all right, title and interest of Seller in
and to the Tier One energy, capacity and associated Environmental Attributes as
set forth in this Article 3 to the extent (i) Seller has such right, title, and
interest in and to such Tier One energy, capacity and associated Environmental
Attributes under applicable law, and (ii) such transfer and sale to Seller is
not in violation of any applicable law at the time of such transfer and sale.
Seller shall take such action as may be necessary to transfer and evidence the
transfer of Environmental Attributes to Buyer.

(a)  Tier One Contract Price. Subject to adjustment pursuant to clauses
     (i)-(iii) of this Article 3(a), for the Tier One energy, capacity and
     associated Environmental Attributes delivered by Seller to Buyer during
     each hour of the Tier One Delivery Term, Buyer shall pay to Seller an
     amount equal to the product of (i) the applicable Contract Rate (in dollars
     per MWh) set forth in Exhibit A (which the Parties acknowledge contains an
     escalation of [*] per Delivery Year) and (ii) the quantity of Tier One
     energy (in MWh) delivered by or on behalf of Seller.

     (i)  No later than six (6) months prior to the end of the fifteenth (15th)
          Delivery Year, Seller may (but shall not be obligated to) calculate
          the increase (the "Net Arizona Fuel Cost Increase") in Seller's actual
          fuel cost (determined consistent with past practices and net of any
          subsidy for Arizona Forest Thinnings received by Seller from the
          United States Department of Agriculture Forest Service) since the
          Delivery Commencement Date for transporting to the Project Arizona
          Forest Thinnings to generate the Tier One energy, capacity and
          Environmental Attributes sold to Buyer under this Agreement (such
          calculation, the "Arizona Forest Thinnings Calculation"), and deliver
          the Arizona Forest Thinnings Calculation to Buyer. Buyer shall have
          twenty (20) days from receipt of the Arizona Forest Thinnings
          Calculation to review such calculations in accordance with its rights
          under Article 3(h), and if a dispute arises between Seller and Buyer
          as to such calculations, such dispute shall be resolved in
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          accordance with the provisions of Article 3(i). If the Arizona Forest
          Thinnings Calculation, as finally determined either by Buyer's
          agreement or resolved after a dispute pursuant to the provisions of
          Article 3(i), reflects that the Net Arizona Fuel Cost Increase exceeds
          44.80% (which the Parties acknowledge is equivalent to an average
          annual increase of 2.50%) Buyer shall elect, in its sole discretion,
          by written notice to Seller within ten (10) Business Days of such
          final determination, either (A) to increase the Contract Rate
          applicable during Delivery Years sixteen (16) through twenty (20) by
          an amount (expressed in dollars per megawatt-hour) by which the Net
          Arizona Fuel Cost Increase exceeded 44.80%, or (B) exercise its rights
          under Article 3(a)(ii) below. If Buyer falls to make an election
          within such ten (10) Business Day period, Buyer shall be deemed to
          have elected option (A). If Buyer elects or is deemed to have elected
          option (A), the Parties shall amend this Agreement to reflect the new
          Contract Rate for the remaining Delivery Years and to delete clauses
          (I)-(iii) of this Article 3(a).

     (ii) If Buyer elects under Article 3(a)(i) to exercise its rights under
          this Article 3(a)(ii), Seller shall, within thirty (30) days after
          Buyer's election, calculate the projected fuel cost (the "Net
          Out-of-State Fuel Cost") (net of any subsidy for Out-of-State Forest
          Thinnings payable by the United States Department of Agriculture
          Forest Service) during the sixteenth (16th) Delivery Year for
          transporting to the Project Out-of-State Forest Thinnings to generate
          the energy, capacity and Environmental Attributes sold to Buyer under
          this Agreement (such calculation, the "Out-of-State Forest Thinnings
          Calculation"), and deliver the Out-of-State Forest Thinnings
          Calculation to Buyer. Buyer shall have twenty (20) days from receipt
          of the Out-of-State Forest Thinnings Calculation to review such
          calculations in accordance with its rights under Article 3(h), and if
          a dispute arises between Seller and Buyer as to such calculations,
          such dispute shall be resolved in accordance with the provisions of
          Article 3(i). If the Out-of-State Forest Thinnings Calculation, as
          finally determined either by Buyer's agreement or resolved after a
          dispute pursuant to the provisions of Article 3(i), reflects that the
          Net Out-of-State Fuel Cost exceeds the first Delivery Year fuel cost
          by more than 44.80%, Buyer shall elect, in its sole discretion, by
          written notice to Seller within ten (10) Business Days of such final
          determination, either (A) to increase the Contract Rate applicable
          during Delivery Years sixteen (16) through twenty (20) by an amount
          (expressed in dollars per megawatt-hour) by which the Net Out-of-State
          Fuel Cost exceeds 44.80%, or (B) exercise its rights under Article
          3(a)(iii) below. If Buyer fails to make an election within such ten
          (10) Business Day period, Buyer shall be deemed to have elected option
          (A). If Buyer elects or is deemed to have elected option (A), the
          Parties shall amend this Agreement to reflect the new Contract Rate
          for the remainder of the Term, to modify the provisions of Article
          3(c) in order to allow Seller to utilize Out-of-State Forest Thinnings
          as fuel at the Project rather than Arizona Forest Thinnings for the
          remainder of the Term, and to delete clauses (i)-(iii) of this Article
          3(a).

     (iii) If Buyer elects under Article 3(a)(ii) to exercise its rights under
          this Article 3(a)(iii), the Contract Rate shall not be increased, and
          the Parties shall

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          amend this Agreement to modify the provisions of Article 3(c) in order
          to allow Seller to utilize any Biomass as fuel at the Project rather
          than Arizona Forest Thinnings or Out-of-State Forest Thinnings during
          the remainder of the Term and to delete clauses (i)-(iii) of this
          Article 3(a).

(b)  Tier One Contract Quantity. In Delivery Years one (1) through twenty (20),
     Seller shall deliver at least the Tier One Minimum Annual Contract Quantity
     of energy and associated Environmental Attributes to Buyer. If in Delivery
     Year one (1) through nineteen (19), Seller delivers more than the Tier One
     Minimum Annual Contract Quantity to Buyer, Seller may elect, upon written
     notice to Buyer, to apply such excess quantities towards Seller's
     obligation to deliver the Tier One Minimum Annual Contract Quantity to
     Buyer in the immediately succeeding Delivery Year. Seller shall not deliver
     more than the Tier One Maximum Annual Contract Quantity of energy and
     associated Environmental Attributes to Buyer in Delivery Years one (1)
     through fifteen (15), without the written consent of Buyer. In Delivery
     Years sixteen (16) through twenty (20) Seller shall deliver the Tier One
     Minimum Annual Contract Quantity and Tier Two Minimum Annual Contract
     Quantity of energy and associated Environmental Attributes to Buyer prior
     to making any election, as provided above in this subsection, to apply any
     portion of any excess quantities towards Seller's obligation to deliver the
     Tier One Minimum Annual Contract Quantity to Buyer in the immediately
     succeeding Delivery Year.

(c)  Tier One Sources of Fuel. Subject to Buyer's election to terminate the
     applicability of this sentence pursuant to the provisions of Article 3(a),
     at least eighty percent (80%) of the MWh of Tier One electric energy
     delivered by Seller to Buyer under this Agreement shall be generated using
     a fuel source comprised of Arizona Forest Thinnings. Arizona Forest
     Thinnings shall be used in concentrations that will allow, on a monthly
     basis, the Seller to meet the fuel requirement in this Article 3(c). Any
     Tier One electric energy generated by the Project in excess of eighty
     percent (80%) of the MWh of electric Tier One energy delivered by Seller to
     Buyer under this Agreement may be generated using any fuel source,
     Including construction debris, paper sludge, agricultural waste, tire
     derived fuels, waste paper, plastics or other Biomass, including
     Out-of-State Forest Thinnings.

(d)  Tier One Delivery Rate. During the Tier One Delivery Term Seller may
     schedule and deliver to Buyer at the Tier One Delivery Point up to ten (10)
     MWhs of energy per hour up to the Tier One Maximum Annual Contract Quantity
     of Tier One energy; provided that in Delivery Years one (1) through fifteen
     (15) such delivery rate may be Increased up to a maximum of 20 MWhs of
     energy per hour upon mutual agreement of Buyer and Seller.

(e)  Tier One Delivery Point. The delivery point for Tier One energy delivered
     by or on behalf of Seller to Buyer under this Agreement shall be the Cholla
     500 kV Switchyard, or any other delivery point mutually agreed to by Seller
     and Buyer (the "Tier One Delivery Point").

(f)  Tier One Energy Sourcing. Unless otherwise noted and mutually agreed to by
     both Parties in writing, the Tier One energy and associated Environmental
     Attributes delivered by Seller to Buyer pursuant to this Agreement shall be
     generated from the Project.

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(g)  Tier One Reporting. On or before the 30th day following the end of each
     Delivery Year during the Tier One Delivery Term, Seller shall complete and
     provide to Buyer an EA Certificate designating, for the previous Delivery
     Year: (i) the quantity of Tier One energy generation and Environmental
     Attributes created In MWh by month; (ii) the location and name of the
     generator used to create the Environmental Attributes; and (iii) the date
     the generator used to create the Environmental Attributes began operation.
     In addition, if in any Delivery Year during the Tier One Delivery Term
     Seller delivers Buyer Tier One electric energy under this Agreement from
     any Renewable Resource other than the Project, Seller shall be obligated to
     provide to Buyer a signed copy of an EA Certificate completed by such
     Renewable Resource for such Tier One Delivery Year.

(h)  Tier One Audit Rights. Upon reasonable advance notice to Seller, Buyer
     shall have the right to designate its own employee representative(s) or its
     contracted representative(s) to audit and to examine at its own expense the
     supporting documentation concerning Seller's source of the Arizona Forest
     Thinnings, the Out-of-State Forest Thinnings or other Biomass used by
     Seller to generate Tier One electric energy delivered by Seller to Buyer
     under this Agreement and, subject to the limitations of time set forth in
     Article 3(a), Seller's calculations regarding costs of Arizona Forest
     Thinnings, Out-of-State Forest Thinnings and other Biomass pursuant to the
     provisions of Article 3(a). Buyer or Its representative(s) shall undertake
     any such audit(s) at reasonable times and appropriate locations and in
     conformance with generally accepted auditing standards. Seller agrees to
     fully cooperate with any such audit(s). During the term of this Agreement,
     Seller agrees to retain all records and documentation subject to audit by
     Buyer in accordance with this Article 3(h). Buyer shall promptly notify
     Seller in writing of any exception taken as a result of an audit and Seller
     shall respond In writing to such notification within thirty (30) days of
     receipt of Buyer's notice.

(i)  Tier One Dispute Resolution - Fuel Costs. If a dispute arises between the
     Parties regarding either the Arizona Forest Thinnings Calculation under
     Article 3(a)(i) or the Out-of-State Forest Thinnings Calculation under
     Article 3(a)(ii) hereof, the Parties shall, within ten (10) days of
     Seller's response to Buyer's exceptions to either such calculation, engage
     an independent accounting firm or electric industry consultant (or both) as
     mutually agreed by the Parties to finally and conclusively determine the
     accuracy or inaccuracy of such documentation or calculations. The Parties
     shall instruct such firm or consultant (or both) to make such determination
     as soon as practicable and in any event within thirty (30) days of such
     engagement. The Parties shall share the cost of such engagement equally,
     The conclusions of such firm or consultant (or both) shall be binding on
     the Parties for all purposes under this Agreement. The foregoing procedures
     shall be applicable to Article 3(a)(i) or (ii) calculation disputes only.

(j)  Tier One Transmission of Energy. Seller shall, during the Tier One Delivery
     Term, arrange for and maintain Firm Transmission Service for the
     transmission of all Tier One energy that is delivered to Buyer hereunder at
     the Tier One Delivery Point and be responsible for paying for all
     associated transmission charges to the Tier One Delivery Point. Buyer
     shall, during the Tier One Delivery Term, accept all energy that is
     delivered by Seller hereunder at the Tier One Delivery Point.

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(k)  Test Energy. Prior to the Delivery Commencement Date, Seller may, but shall
     have no obligation to, purchase real time put options from Buyer pursuant
     to which Buyer agrees to purchase non-firm test energy delivered by Seller
     in accordance with this Article 3(k). Each real time put option ("Option")
     will provide Seller the right, but not the obligation, to deliver or put
     non-firm test energy from the Project to Buyer. Seller shall notify Buyer
     of its intent to purchase the initial Option no less than ninety (90) days
     prior to the first day Seller anticipates delivering test energy to Buyer.
     Within ten (10) days of receipt of such notice, Buyer shall provide to
     Seller (a) the email address required pursuant to Article 3(k)(vi) below,
     (b) the real-time traders phone number required pursuant to Article
     3(k)(vi) below, and (c) the wire transfer instructions for the payment
     required pursuant to Article 3(k)(iii) below. Seller may purchase
     additional Options by paying the Option Premium to Buyer in accordance with
     Article 3(k)(iii) below.

     (i)  Option Period: Each Option purchased by Seller shall give Seller the
          right to delivery test energy to Buyer for a period of thirty (30)
          days commencing on the day that Seller first delivers test energy to
          Buyer (each such period an "Option Period").

     (ii) Quantity: Seller has the option during each hour of each Option Period
          to deliver to Buyer at the Delivery Point the full output of the
          Project, provided the Project's nominal rating is not in excess of 20
          MW.

     (iii) Option Premium: Seller shall pay to Buyer $[*] for each Option.
          Such premium shall be due three (3) Business Days prior to the first
          day of each Option Period and shall be payable by wire transfer.

     (iv) Test Energy Price: For the energy delivered by Seller to Buyer during
          each hour of each Option Period, Buyer shall pay to Seller an amount
          equal to the product of (A) $45.00 and (B) the quantity of test energy
          (in MWh) delivered by Seller to Buyer.

     (v)  Delivery of Test Energy:

          (A)  Buyer agrees to accept delivery of non-firm test energy up to
               those quantities identified in Article 3(k)(ii) for all hours,
               during each Option Period, on days when Seller chooses to
               exercise the option.

          (B)  The Seller's obligation to deliver energy to Buyer hereunder is
               non-firm and can be interrupted or curtailed at any time for any
               reason. The Buyer's obligation to receive energy from Seller
               hereunder is firm, and can be interrupted without any liability
               only if the interruption is: (1) allowed by conditions mutually
               agreed to by Seller and Buyer, or (2) due to an Uncontrollable
               Force, or (3) to meet Buyer's public utility or statutory
               obligations to its customers. If Buyer interrupts for any other
               reason (other than those in the preceding sentence), Buyer shall
               pay damages as calculated in Article 3(k)(viii) below.

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     (vi) Scheduling: Within two (2) weeks after Seller notifies Buyer of
          Seller's desire to purchase an Option pursuant to this Article 3(k),
          Seller and Buyer shall meet to develop appropriate scheduling
          procedures for implementing the delivery of test energy to Buyer. Such
          scheduling procedures shall be consistent with Western Electricity
          Coordinating Council and North American Electric Reliability Council
          procedures and guidelines, as either may be amended from time to time.
          All costs for implementing such scheduling procedures including but
          not limited to the cost of all necessary metering and communication
          equipment shall be the responsibility of Seller.

     (vii) Billing: Within ten (10) days of the end of each Option Period,
          Seller shall prepare and deliver to Buyer an invoice setting forth a
          calculation of the amount owed by Buyer for the test energy delivered
          by Seller during such test period and any damages owed by Buyer
          pursuant to Article 3(k)(viii). Buyer shall pay such invoice in
          accordance with the terms of Article 6(b).

     (viii) Damages: If during any Option Period Buyer interrupts the delivery
          of test energy for any reason other than those reasons listed in
          Article 3(k)(v)(B) above, then for each hour during the Option Period
          that delivery of test energy was interrupted Buyer shall pay Seller an
          amount equal to (A) the product of (1) $[*] and (2) the positive
          difference between the quantity of test energy (in MWh) scheduled by
          Seller and the quantity of test energy (in MWh) received by the Buyer;
          plus (B) any charges imposed on the Seller under open access
          transmission tariffs as a result of Buyer's non-performance.

(l)  Third Party Sales. Buyer acknowledges and agrees that (i) prior to the
     Delivery Commencement Date, Seller shall have the right to sell energy,
     capacity and associated Environmental Attributes generated by the Project
     to any third party and (ii) during any Delivery Year during the Delivery
     Term, Seller shall have the right to sell energy, capacity and associated
     Environmental Attributes generated by the Project in excess of the Minimum
     Annual Contract Quantity to any third party.

ARTICLE 4: TIER TWO PURCHASE PROVISIONS.

Seller agrees to deliver and sell and Buyer agrees to accept and purchase,
during the Tier Two Delivery Term, all right, title and interest of Seller in
and to the Tier Two energy, capacity and associated Environmental Attributes as
set forth in this Article 4 to the extent (i) Seller has such right, title, and
interest in and to such Tier Two energy, capacity and associated Environmental
Attributes under applicable law, and (ii) such transfer and sale to Seller is
not in violation of any applicable law at the time of such transfer and sale.
Seller shall take such action as may be necessary to transfer and evidence the
transfer of Environmental Attributes to Buyer.

(a)  Tier Two Contract Quantity. In Delivery Years sixteen (16) through twenty
     (20), Seller shall deliver the full output of the Project, net of the Tier
     One purchases, but not less than the Tier Two Minimum Contract Quantity,
     and associated

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     Environmental Attributes to Buyer. If in Delivery Year sixteen (16) through
     twenty (20), Seller delivers more than the Tier One Maximum Contract
     Quantity and Tier Two Minimum Annual Contract Quantity to Buyer, Seller may
     elect, upon written notice to Buyer, to apply such excess quantities
     towards Seller's obligation to deliver the Tier Two Minimum Annual Contract
     Quantity to Buyer in the immediately succeeding Delivery Year.

(b)  Tier Two Contract Price. For the Tier Two energy, capacity and associated
     Environmental Attributes delivered by Seller to Buyer during each hour of
     the Tier Two Delivery Term, Buyer shall pay to Seller an amount equal to
     the product of (i) the applicable Contract Rate (in dollars per MWh) set
     forth in Exhibit A (Delivery Year sixteen (16) through twenty (20)), that
     the Parties acknowledge contains an escalation of 2.50% per Delivery Year)
     and (ii) the quantity of Tier Two energy (in MWh) delivered by or on behalf
     of Seller. The Contract Rates set forth in Exhibit A shall apply to Tier
     Two Purchases, notwithstanding any adjustments that may be made pursuant to
     the Tier One pricing provisions.

(c)  Tier Two Sources of Fuel. One hundred percent (100%) of the MWh of Tier Two
     electric energy delivered by Seller to Buyer under this Agreement shall be
     generated using Biomass, as defined in Article 2 of this Agreement.

(d)  Tier Two Delivery Rate. During the Tier Two Delivery Term, Seller shall
     schedule and deliver to Buyer at the Tier Two Delivery Point the full
     energy output of the Project (approximately twenty (20) MWhs per hour),
     provided that unless and until the Tier One Maximum Annual Contract
     Quantity is met for each Delivery Year all the deliveries in the month up
     to a maximum of ten (10) MWhs per hour times the number of hours in each
     month shall be deemed to be Tier One deliveries.

(e)  Tier Two Delivery Point. The delivery point for Tier Two energy delivered
     by or on behalf of Seller to Buyer under this Agreement shall be the Cholla
     500 kV Switchyard, or any other delivery point mutually agreed to by Seller
     and Buyer (the Tier Two Delivery Point").

(f)  Tier Two Energy Sourcing. Unless otherwise noted and mutually agreed to by
     both Parties in writing, the Tier Two energy and associated Environmental
     Attributes delivered by Seller to Buyer pursuant to this Agreement shall be
     generated from the Project.

(g)  Tier Two Reporting. On or before the 30th day following the end of each
     Delivery Year during the Tier Two Delivery Term, Seller shall complete and
     provide to Buyer an EA Certificate designating, for the previous Delivery
     Year: (i) the quantity of Tier Two energy generation and Environmental
     Attributes created in MWh by month; (ii) the location and name of the
     generator used to create the Environmental Attributes; and (iii) the date
     the generator used to create the Environmental Attributes began operation.
     In addition, if in any Delivery Year during the Tier Two Delivery Term
     Seller delivers Buyer Tier Two electric energy under this Agreement from
     any Renewable Resource other than the Project, Seller shall be obligated to
     provide to Buyer a signed copy of an EA Certificate completed by such
     Renewable Resource for such Tier Two Delivery Year.

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(h)  Tier Two Audit Rights. Upon reasonable advance notice to Seller, Buyer
     shall have the right to designate its own employee representative(s) or its
     contracted representative(s) to audit and to examine at its own expense the
     supporting documentation concerning Seller's source of the Biomass used by
     Seller to generate Tier Two electric energy delivered by Seller to Buyer
     this Agreement and, subject to the limitations of time set forth in Article
     4(a), Seller's calculations regarding costs of Biomass pursuant to the
     provisions of Article 4(a). Buyer or its representative(s) shall undertake
     any such audit(s) at reasonable times and appropriate locations and in
     conformance with generally accepted auditing standards. Seller agrees to
     fully cooperate with any such audit(s). During the term of this Agreement,
     Seller agrees to retain all records and documentation subject to audit by
     Buyer in accordance with this Article 4(h). Buyer shall promptly notify
     Seller in writing of any exception taken as a result of an audit and Seller
     shall respond in writing to such notification within thirty (30) days of
     receipt of Buyer's notice.

(i)  Tier Two Transmission of Energy. Seller shall, during the Tier Two Delivery
     Term, arrange for and maintain Firm Transmission Service for the
     transmission of all energy that is delivered to Buyer hereunder at the Tier
     Two Delivery Point and be responsible for paying for all associated
     transmission charges to the Tier Two Delivery Point. Buyer shall, during
     the Tier Two Delivery Term, accept all energy that is delivered by Seller
     hereunder at the Tier Two Delivery Point.

ARTICLE 5: TITLE AND RISK OF LOSS; INDEMNITY.

Title to and the risk of loss on any electric energy generated from the Project
and transmitted to Buyer in accordance with this Agreement shall pass to Buyer
at the Tier One Delivery Point and Tier Two Delivery Point. Each Party shall
indemnify, defend and hold harmless the other Party from any Claims arising from
or out of any event, circumstance, act or incident related to such electric
energy first occurring or existing during the period when control and title to
such electric energy is vested in such Party as provided in this Article 5.

ARTICLE 6: BILLING AND TERMS OF PAYMENT.

(a)  Billing. On or before the tenth (10th) day of each month during the
     Delivery Term, Seller shall prepare and deliver to Buyer an invoice setting
     forth: (i) a calculation of the quantity of energy (in MWh) delivered by
     Seller to Buyer in the immediately preceding month multiplied by the
     applicable rate set forth in Exhibit A and (ii) any other payment due and
     owing from one Party to the other Party under this Agreement. For any
     billing period in which both Tier One and Tier Two deliveries are, or may
     be, made, Seller shall specify the amounts of Tier One and Tier Two
     deliveries made during the billing period.

(b)  Terms of Payment. On or before the twentieth (20th) day following receipt
     of such invoice, Buyer shall (i) pay, by wire transfer of immediately
     available funds into an account designated by Seller, the full amount
     stated in such invoice, or (ii) if Buyer objects to all or a portion of
     such invoice, Buyer shall (A) pay the

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     undisputed portion of such invoice by wire transfer of immediately
     available funds into an account designated by Seller and (B) provide an
     itemized statement of its objections to such invoice setting forth in
     reasonable detail the basis for such objections and supporting
     documentation therefore. If Buyer does not object to an invoice prior to
     the date payment of such invoice is due, Buyer shall pay the full amount of
     such invoice; provided however, that Buyer may subsequently object to such
     invoice and, if such objection proves to be correct Seller shall refund to
     Buyer the disputed amount within ten (10) days of the date the objection is
     proven to be correct. Any amounts due by either Party under this Agreement
     not paid when due shall bear interest at the Late Payment Rate. Such
     interest shall accrue daily from the due date until the date upon which
     such payment is made.

Article 7: Events of Default.

(a)  Events of Default, As used in this Agreement an "Event of Default" shall
     mean any of the events set forth below in this Article 7 with respect to
     either Party, as the case may be (the "Defaulting Party"):

     (i)  the Delivery Commencement Date has not occurred on or before January
          1, 2008 (or, if delayed for the reasons set forth in the definition
          thereof, July 1,2008); or

     (ii) the failure by the Defaulting Party to make, when due, any payment
          required under this Agreement if such failure is not remedied within
          five (5) Business Days after written notice of such failure is given
          to the Defaulting Party by the other Party (the "Non-Defaulting
          Party"); or

     (iii) any representation or warranty made by the Defaulting Party in this
          Agreement shall prove to have been false or misleading in any material
          respect when made, and such breach is not remedied within ten (10)
          days after written notice thereof is given to the Defaulting Party by
          the Non-Defaulting Party; or

     (iv) at any time after the first Delivery Year, the failure by Seller,
          other than due to an Uncontrollable Force, to deliver to Buyer during
          the immediately preceding Delivery Year the Tier One Minimum Annual
          Contract Quantity and, if applicable, the Tier Two Minimum Annual
          Contract Quantity and such failure to deliver is not corrected by one
          of the following:

          (A)  delivering, within sixty (60) days following the end of such
               Delivery Year, a quantity of energy (in MWh) from the Project
               that is sufficient to satisfy such shortfall, or

          (B)  delivering, within sixty (60) days following the end of such
               Delivery Year, a quantity of energy (in MWh) from a source (other
               than the Project) reasonably acceptable to Buyer that is
               sufficient to satisfy such shortfall; or

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     (v)  the failure by the Defaulting Party to perform any covenant or
          material obligation set forth in this Agreement (other than events
          that are otherwise specifically covered in this Article 7 as a
          separate Event of Default, including the failure to make any payment
          when due and the failure to deliver as required by this Agreement),
          and such failure is not excused by an Uncontrollable Force, or is not
          cured within sixty (60) days after written notice thereof to the
          Defaulting Party; or

     (vi) the Defaulting Party:

          (A)  makes an assignment or any general arrangement for the benefit of
               creditors,

          (B)  files a petition or otherwise commence, authorize or acquiesce in
               the commencement of a proceeding or cause under any bankruptcy or
               similar law for the protection of creditors, or has such petition
               filed against it and such proceeding remains undismissed for
               sixty (60) days,

          (C)  otherwise becomes bankrupt or insolvent (however evidenced), or

          (D)  acknowledges in writing that it is unable to pay its debts as
               they fall due.

ARTICLE 8: REMEDIES.

(a)  Remedies in General. If an Event of Default occurs with respect to either
     Party at any time during the term of this Agreement, the Non-Defaulting
     Party may (i) terminate this Agreement pursuant to Article 9, (ii) withhold
     any payments or energy due in respect of this Agreement to the extent of
     its damages pursuant to this Agreement and (iii) exercise such other
     remedies as may be available at law or in equity or as otherwise provided
     in this Agreement.

(b)  Buyer's Liability. If an Event of Default occurs with respect to Buyer and
     Seller elects to terminate this Agreement, then notwithstanding termination
     hereof, Buyer shall be obligated to pay Seller termination damages equal to
     the sum of (i) all amounts payable by Buyer to Setter for any energy and
     Environmental Attributes delivered by Seller to Buyer which have not been
     paid, plus (ii) an amount equal to the present value, as of the termination
     date, of the net economic loss, if any, to Seller resulting from the
     termination of this Agreement, such loss to be determined in a commercially
     reasonable manner and based on a comparison of (A) the amount that Seller
     would have received from Buyer under this Agreement (assuming deliveries of
     energy for the remainder of the Delivery Term are equal to the average
     quantities of energy delivered to Buyer from the Delivery Commencement Date
     through the date on which such Event of Default occurred; provided that in
     no event shall such assumed deliveries be less than the Minimum Annual
     Contract Quantity for the remainder of the Delivery Term) and (B) an amount
     equal to the market value of the energy and Environmental Attributes
     remaining to be delivered to Buyer under this

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     Agreement as of the termination date (assuming deliveries of energy for the
     remainder of the Delivery Term are equal to the average quantities of
     energy delivered to Buyer from the Delivery Commencement Date through the
     date on which such Event of Default occurred; provided that in no event
     shall such assumed deliveries be less than the Minimum Annual Contract
     Quantity for the remainder of the Delivery Term), based on market prices as
     of the termination date for energy and Environmental Attributes of the same
     vintage and quality, such market prices to be determined based on the
     average of prices quoted by at least two independent third party brokerage
     services reasonably selected by Seller, plus (iii) all costs (including
     reasonable attorneys' fees and expenses) reasonably incurred by Seller in
     connection with the termination of this Agreement.

(c)  Seller's Liability. If an Event of Default occurs with respect to Seller
     and Buyer elects to terminate this Agreement, then notwithstanding
     termination hereof, Seller shall be obligated to pay Buyer termination
     damages equal to the sum of (i) all amounts prepaid by Buyer to Seller for
     any energy and Environmental Attributes that have not been delivered by
     Seller to Buyer, Plus (ii) an amount equal to the present value, as of the
     termination date, of the net economic loss, if any, to Buyer resulting from
     the termination of this Agreement, such loss to be determined in a
     commercially reasonable manner and based on a comparison of (A) the amount
     that Buyer would have paid to Seller under this Agreement (assuming
     deliveries of energy by Seller at the Minimum Annual Contract Quantity for
     the remainder of the Delivery Term) and (B) an amount equal to the market
     value of the energy and Environmental Attributes remaining to be delivered
     to Buyer under this Agreement as of the termination date (assuming
     deliveries of energy at the Minimum Annual Contract Quantity), based on
     market prices as of the termination date for energy and Environmental
     Attributes of the same vintage and quality, such market prices to be
     determined based on the average of prices quoted by at least two
     independent third party brokerage services reasonably selected by Buyer,
     plus (iii) all costs (including reasonable attorneys' fees and expenses)
     reasonably incurred by Buyer in connection with the termination of this
     Agreement.

(d)  No Penalty. Both Parties hereby stipulate that the payment obligations set
     forth above are reasonable in light of the anticipated harm and the
     difficulty of estimation or calculation of actual damages, and each Party
     hereby waives the right to contest such payments as an unreasonable
     penalty.

(e)  Bankruptcy - Forward Contract, Forward Contract Merchants. The Parties
     acknowledge and agree that this Agreement is a forward contract and that
     the Parties are forward contract merchants, as those terms are used in the
     United States Bankruptcy Code.

ARTICLE 9: TERMINATION.

If an Event of Default occurs with respect to either Party at any time during
the term of this Agreement, the Non-Defaulting Party has the right, but not the
obligation, to deliver a written notice to the Defaulting Party designating a
day, no earlier than the day such notice Is effective and no later than twenty
(20) days after such notice is effective, as an early termination date of this
Agreement. Upon the occurrence of any Event of Default

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listed in clauses (i) or (vi) of the definition of "Event of Default" above as
it may apply to any Party, the Non-Defaulting Party shall have the right to
terminate this Agreement immediately. Notwithstanding any termination under this
Article 9, any and all remedies provided to the Parties under this Agreement or
available in equity or under other applicable law may be pursued by the affected
Party. Any amounts owed under this Agreement shall be immediately due and
payable.

ARTICLE 10: LIMITATION OF LIABILITY.

NOTWITHSTANDING ANYTHING TO THE CONTRARY HEREIN, NEITHER SELLER NOR ANY OF ITS
AFFILIATES OR REPRESENTATIVES HAS MADE OR IS MAKING ANY REPRESENTATION OR
WARRANTY WHATSOEVER, EXPRESS OR IMPLIED, WRITTEN OR ORAL, INCLUDING ANY IMPLIED
REPRESENTATION AS TO THE CONDITION, MERCHANTABILITY, USAGE, SUITABILITY OR
FITNESS FOR ANY PARTICULAR PURPOSE WITH RESPECT TO THE ENVIRONMENTAL ATTRIBUTES,
EXCEPT THOSE REPRESENTATIONS AND WARRANTIES SET FORTH IN ARTICLE 3. IT IS
UNDERSTOOD AND AGREED THAT EXCEPT AS PROVIDED IN ARTICLE 15 BELOW, NEITHER PARTY
HAS MADE OR IS MAKING ANY REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED,
WRITTEN OR ORAL, STATUTORY OR OTHERWISE, WITH RESPECT TO THE SERVICES EACH PARTY
WILL PROVIDE PURSUANT TO THIS AGREEMENT. NEITHER PARTY TO THIS AGREEMENT SHALL
BE LIABLE TO THE OTHER PARTY FOR ANY UNFORESEEABLE INDIRECT, INCIDENTAL,
CONSEQUENTIAL OR SPECIAL DAMAGES, INCLUDING, WITHOUT LIMITATION, ANY LOSS OF
REVENUES OR LOSS OF PROFITS.

ARTICLE 11: RELATIONSHIP OF THE PARTIES.

The relationship of the Parties under this Agreement is that of independent
contractors. The Parties specifically state their intention that this Agreement
is not intended to create a partnership or any other co-owned enterprise unless
specifically agreed to by the Parties in a separate written instrument. Except
as specifically provided herein, each Party shall continue to have the right to
contract independent of the other Party with individuals and entities. Each
Party shall be responsible for its own operating expenses and personnel
expenses.

ARTICLE 12: TAXES.

Seller is liable for and shall pay, or cause to be paid, all taxes applicable to
the sale of energy, capacity and associated Environmental Attributes hereunder
arising prior to the Delivery Point. Buyer is liable for and shall pay, or cause
to be paid, all taxes applicable to the sale of energy, capacity and associated
Environmental Attributes hereunder arising at and from the Delivery Point.

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ARTICLE 13: NOTICES.

All notices required or permitted to be given hereunder in writing shall, unless
expressly provided otherwise, be in writing, properly addressed, postage
pre-paid and delivered by hand, facsimile, certified or registered mail, courier
or by facsimile to the appropriate address as either Party may designate from
time to time by providing notice thereof to the other Party.

     If to Buyer:                         If to Seller:

     Salt River Project Agricultural      Snowflake White Mountain Power, LLC
     Improvement and Power District       [on file with Registrant]
     Mail Station ISB 669                 [on file with Registrant]
     P.O. Box 52025                       Attention: Robert M. Worsley
     Phoenix, Arizona 85072-2025          Telephone: [on file with Registrant]
     1600 North Priest Drive              Fax: (480) [on file with Registrant]
     Tempe, Arizona 85281-8100
     Attn: Manager, Resource Planning &
     Development
     Telephone: 502-236-6992
     FAX: 602-236-5469

     Copy to:

     Salt River Project Agricultural
     Improvement and Power District
     Mail Station PAB 215
     P.O. Box 52025
     Phoenix, Arizona 85072-2025
     1600 North Priest Drive
     Tempe, Arizona 85281-8100
     Attn: Corporate Secretary's Office
     Telephone: 602-236-8806
     Fax: 602-236-2188

Any such notice shall be effective only upon actual delivery or receipt thereof.
All notices given by facsimile shall be deemed received when confirmed by the
sending Party's facsimile machine, when sent on a Business Day before 5:00 p.m.
in the receiving Party's place of business. Facsimile transmissions received
after 5:00 p.m. shall be deemed received on the following Business Day.

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ARTICLE 14: CONFIDENTIAL INFORMATION.

(a)  The provisions of this Agreement and any information provided by either
     Party to the other Party pursuant to this Agreement or which is otherwise
     derived as a result of a Party's performance under this Agreement shall be
     utilized by the receiving Party solely in connection with the purposes of
     this Agreement and shall not be disclosed by the receiving party to any
     third party. Notwithstanding the foregoing, any such information may be
     disclosed: (i) to the extent required by applicable laws and regulations or
     by any subpoena or similar legal process of any court or agency of federal,
     state or local government so long as the receiving Party gives the
     non-disclosing Party written notice at least three (3) Business Days prior
     to such disclosure, if practicable, and files for a protective order, if
     possible, limiting access to such information to specific Persons, (ii) to
     sources that provide or may provide capital or credit to Buyer or Seller
     and their respective successors, assigns, participants, trustees or agents
     of such sources to the extent any such Person agrees to be bound by
     standard confidentiality provisions, (iii) to agents, trustees, advisors
     and accountants of the Parties, (iv) to the extent the non-disclosing Party
     shall have consented in writing prior to any such disclosure, (v) by Buyer
     to a potential assignee of this Agreement; provided that Purchaser shall
     require such potential assignee or prospective buyers to keep such
     information confidential, (vi) by Seller to a potential assignee of this
     Agreement; provided that Seller shall require such potential assignee or
     prospective suppliers to keep such information confidential, (vii) to the
     mediators and/or arbitrators in accordance with any dispute resolution
     procedures involving this Agreement or (viii) to the holder of the Party's
     debt obligations, any trustee or agent for such holder, any surety, any
     energy transmitter or supplier and, if such holder, surety, transmitter or
     supplier is a nominee for one or more beneficial holders, with such
     beneficial holders. Nothing in this Agreement shall limit either Party's
     use or disclosure of information which: (i) is now generally known or
     available on an unrestricted basis to the public or becomes so known or
     available on an unrestricted basis through no fault of the receiving Party;
     (ii) is already in the receiving Party's possession without restriction as
     to its use or disclosure prior to its receipt from the disclosing Party;
     (iii) is acquired by the receiving Party on an unrestricted basis from any
     third party, provided that the receiving party does not know or have reason
     to know, or is not informed subsequent to disclosure by such third party
     and prior to disclosure by the disclosing Party, that such information was
     acquired under an obligation of confidentiality, or (iv) information that
     was developed by or for the receiving Party independently of and without
     reference to the information of the disclosing Party.

(b)  In addition, neither Party shall use the name, tradename, trademarks,
     service marks of or owned by the other Party, or logos of the other Party
     in any publicity releases, news releases, annual reports, product
     packaging, signage, stationery, print literature, advertising, websites or
     other media without securing prior written approval from the other Party,
     Neither Party shall, without prior written consent of the other Party,
     represent, directly or indirectly, that any product or service offered by
     that Party has been approved or endorsed by the other Party.

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ARTICLE 15: MISCELLANEOUS.

(a)  Representations and Warranties. Each Party represents and warrants to the
     other Party that (i) it is duly organized or registered, as applicable,
     validly existing and in good standing under the laws of the jurisdiction of
     its formation; (ii) It has, or in the case of Seller will have as of the
     first date Seller delivers electric energy to Buyer from the Project, all
     authorizations, licenses and consents necessary for it to legally perform
     its obligations under this Agreement; (iii) the execution, delivery and
     performance of this Agreement are within its powers, have been duly
     authorized by all necessary action and do not violate any of its governing
     documents, any contracts to which it is a party or any law, rule,
     regulation, or order applicable to it; (iv) this Agreement and every other
     document executed and delivered in accordance with this Agreement
     constitutes its legally valid and binding obligation enforceable against it
     in accordance with its terms, except to the extent such enforcement may be
     limited by applicable bankruptcy, insolvency and other similar laws
     affecting creditors' rights generally and subject to any equitable
     defenses; (v) it is not bankrupt and there are no proceedings pending or
     being contemplated by it or, to its knowledge, threatened against it which
     would result in it being or becoming bankrupt; (vi) there is not pending
     nor, to its knowledge, threatened against it or any of its affiliates any
     legal proceedings that could materially adversely affect its ability to
     perform its obligations under this Agreement; (vii) no Event of Default, or
     any event that with the passage of time would constitute an Event of
     Default, with respect to it has occurred and is continuing and no such
     event or circumstance would occur as a result of its entering into or
     performing its obligations under this Agreement; (viii) it is acting for
     its own account, and it has made its own independent decisions to enter
     into this Agreement and as to whether this Agreement is appropriate or
     proper for it based upon its own judgment and upon advice from such
     advisors, as it deems necessary; (ix) it is not relying on any
     communication (written or oral) of the other Party as investment advice or
     as a recommendation to enter into this Agreement; it being understood that
     information and explanations related to the terms and conditions of this
     Agreement shall not be considered investment advice or a recommendation to
     enter into this Agreement; (x) no communication (written or oral) received
     from the other Party shall be deemed to be an assurance or guarantee as to
     expected results of this Agreement; (xi) it is capable of assessing the
     merits of and understanding (on its own behalf or through independent
     professional advice), and understands and accepts, the terms, conditions
     and risks of this Agreement; and (xii) it is capable of assuming, and
     assumes, the risks of this Agreement.

(b)  Governing Law and Venue. THIS AGREEMENT AND THE RIGHTS AND DUTIES OF THE
     PARTIES HEREUNDER SHALL BE GOVERNED BY AND CONSTRUED, ENFORCED AND
     PERFORMED IN ACCORDANCE WITH THE LAWS OF THE STATE OF ARIZONA WITHOUT
     REGARD TO PRINCIPLES OF CONFLICTS OF LAW. Any legal action brought by
     either Party against the other pertaining to this Agreement shall be
     commenced and prosecuted in a state or federal court of proper jurisdiction
     located in Maricopa County, Arizona. Both Parties irrevocably consent to
     the jurisdiction of any such court.

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(c)  Entire Agreement. This Agreement constitutes the entire agreement between
     the Parties relating to the subject matter hereof and supersedes all prior
     agreements, understandings, negotiations, whether oral or written, of the
     Parties.

(d)  Amendments. Except to the extent herein provided, no amendment, supplement,
     modification, termination or waiver of this Agreement shall be enforceable
     unless executed in writing by the Party to be bound thereby.

(e)  Assignment. This Agreement is binding on any successors and assigns of the
     Parties, Neither Party may transfer or assign its rights, title or interest
     in this Agreement, in whole or in part, without the other Party's written
     consent, such consent not to be unreasonably withheld. Notwithstanding
     anything to the contrary in this Agreement, Seller may, without the consent
     of Buyer, assign its interest in this Agreement as collateral to any
     Financier.

(f)  Non-Waiver; No Third Party Beneficiaries. No waiver by any Party of any of
     its rights with respect to the other Party or with respect to this
     Agreement or any matter or default arising in connection with this
     Agreement, shall be construed as a waiver of any other right, matter or
     default. Any waiver shall be in writing signed by the waiving Party. This
     Agreement is made and entered into for the sole benefit of the Parties, and
     their permitted successors and assigns, and no other Person shall be a
     direct or indirect legal beneficiary of, have any rights under, or have any
     direct or indirect cause of action or claim in connection with this
     Agreement.

(g)  Counterparts. This Agreement may be executed in counterparts, all of which
     shall constitute one agreement binding on both Parties and shall have the
     same force and effect as an original instrument, notwithstanding that both
     Parties may not be signatories to the same original or the same
     counterpart.

(h)  Severability. In the event that any provision of the Agreement shall be
     found to be void or unenforceable, such findings shall not be construed to
     render any other provision of the Agreement either void or unenforceable,
     and all other provisions shall remain in full force and effect unless the
     provisions which are void or unenforceable shall substantially affect the
     rights or obligations granted to or undertaken by either Party.

(i)  Uncontrollable Force. To the extent either Party is prevented by an
     Uncontrollable Force from carrying out, in whole or in part, its
     obligations under this Agreement, such Party shall be excused from the
     performance of its obligations under this Agreement to the extent affected
     by such Uncontrollable Force (other than the obligation to make payments
     then due or becoming due with respect to performance prior to the
     Uncontrollable Force). Neither Party shall, however, be relieved of
     liability for failure of performance to the extent that such failure is due
     to causes arising out of Its own negligence or due to removable or
     remediable causes which it fails to remove or remedy within a reasonable
     time period. The term "Uncontrollable Force" means an event or circumstance
     which prevents one Party from performing its obligations under this
     Agreement, which event or circumstance is not within the reasonable control
     of, or the result of the negligence of the claiming Party, and which by the
     exercise of due diligence, the claiming Party is unable to avoid, cause to
     be avoided, or

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     overcome. "Uncontrollable Forces" may include and are not restricted to
     flood, drought, earthquake, storm, lightning and other acts of God, fire,
     epidemic, war, riot, civil disturbance or disobedience, labor dispute,
     labor or material shortage, sabotage, terrorism, change in applicable law
     or regulation and restraint by court order or public authority. The
     following shall not be considered "Uncontrollable Forces": (i) the price of
     electricity paid to Seller; or (ii) Buyer's Inability due to price to use
     or resell the power purchased hereunder. Nothing contained herein shall be
     construed to require a Party to settle any strike or labor dispute In which
     it may be involved. Either Party rendered unable to fulfill any of its
     obligations by reason of an Uncontrollable Force shall give prompt notice
     of such fact and shall exercise due diligence, as provided above, to remove
     such inability within a reasonable time period. If oral notice is provided,
     it shall be promptly followed by written notice.

(j)  Creditworthiness.

     (i)  If at any time during the term of this Agreement, Buyer fails to
          maintain a rating of BBB or higher by S&P and Baa2 or higher by
          Moody's for its revenue bonds, unless Buyer is only rated by one of
          S&P or Moody's as of the date of this Agreement, in which case, unless
          and until Buyer becomes rated by both S&P and Moody's, a rating of BBB
          or higher by S&P or Baa2 by Moody's, Seller may require Buyer to
          provide (1) a letter of credit from a bank or trust company with a
          combined capital and surplus of at least $1 billion and whose
          long-term unsecured senior debt is rated at least "A-" by S&P and "A3"
          by Moody's or (2) such other collateral or security as Seller may
          require. Buyer's obligation under this provision shall be limited to
          providing a letter of credit or other collateral or security in an
          amount equal to a reasonable estimate of the damages that Seller would
          be entitled to recover in accordance with Article 8(b) if Seller was
          entitled to terminate this Agreement. If Buyer fails to provide the
          assurances required by this Article 15(j)(i) within twenty (20)
          Business Days of demand therefore, such failure will be considered an
          Event of Default by Buyer under Article 7 and Seller shall have the
          right to exercise any of the remedies provided for under this
          Agreement.

     (ii) If at any time during the term of this Agreement Guarantor falls to
          maintain an aggregate net worth equal to or in excess of the Minimum
          Net Worth Amount, Buyer may require Seller (or its successors or
          assigns) to provide (1) a letter of credit from a bank or trust
          company with a combined capital and surplus of at least $1 billion and
          whose long-term unsecured senior debt is rated at least "A-" by S&P
          and "A3" by Moody's or (2) such other collateral or security as Buyer
          may require. Seller's obligation under this Article 15(j)(ii) shall be
          limited to providing a letter of credit or other collateral or
          security in an amount equal to a reasonable estimate of the damages
          that Buyer would be entitled to recover in accordance with Article
          8(c) of this Agreement if Buyer was entitled to terminate this
          Agreement. If Seller fails to provide the assurances required by this
          Article 15(j)(ii) within twenty (20) Business Days of demand
          therefore, such failure will be considered an Event of Default by
          Seller under Article 7 and Buyer shall have the right to exercise any
          of the remedies provided for under this Agreement.

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     (iii) In the event the Personal Guaranty Agreement dated of even date
          herewith and delivered by Guarantor has been terminated and is no
          longer in effect, should Seller's creditworthiness, financial
          responsibility, or performance viability become unsatisfactory to
          Buyer in Buyer's reasonably exercised discretion with regard to this
          Agreement, Buyer may require Seller (or its successors and assigns) to
          provide, at the Seller's option (but subject to Buyer's acceptance
          based upon reasonably exercised discretion), either (1) the posting of
          a letter of credit, (2) a cash prepayment, (3) the posting of other
          acceptable collateral or security, (4) a guarantee agreement executed
          by a creditworthy entity; or (5) some other mutually agreeable method
          of satisfying Buyer. Seller's obligations under this provision shall
          be limited to a reasonable estimate of the damages to Buyer
          (consistent with Article 8 of this Agreement) if Seller were to fail
          to perform its obligations under this Agreement. If Seller fails to
          provide such reasonably satisfactory assurances of its ability to
          perform a transaction hereunder within twenty (20) Business Days of
          demand therefore, such failure will be considered an Event of Default
          under Article 7 of this Agreement and Buyer shall have the right to
          exercise any of the remedies provided to it under this Agreement.

(k)  Scheduling. No less than three (3) months prior to the date Seller
     anticipates the Project to be placed into commercial operation, Seller and
     Buyer shall meet to develop appropriate scheduling procedures for
     implementing the delivery of energy under this Agreement. Such scheduling
     procedures shall be consistent with Western Electricity Coordinating
     Council and North American Electric Reliability Council procedures and
     guidelines, as either may be amended from time to time. All costs for
     implementing such scheduling procedures including but not limited to the
     cost of all necessary metering and communication equipment shall be the
     responsibility of Seller.

(l)  Cure By Financier. During the term of this Agreement, Seller shall provide
     Buyer with current information regarding the name(s) and address(es) of any
     Financier. As long as Seller has outstanding and unpaid financing
     liabilities, Buyer agrees to promptly furnish to all Financiers, then known
     to Buyer, (i) if in any Delivery Year Seller fails, other than due to an
     Uncontrollable Force, to deliver to Buyer one-half of the Minimum Annual
     Contract Quantity by the end of the seventh (7th) month of such Delivery
     Year, notice that Seller may not meet its obligation to deliver Buyer the
     Minimum Annual Contract Quantity, (ii) if in any Delivery Year Seller
     fails, other than due to an Uncontrollable Force, to deliver to Buyer the
     Minimum Annual Contract Quantity by the end of such Delivery Year, notice
     that Seller has not delivered the Minimum Annual Contract Quantity during
     such Delivery Year and (iii) a copy of any default pursuant to Article 7
     given to Seller. Prior to any exercise by Buyer of any remedies it may have
     under this Agreement, including termination or suspension of Buyer's
     performance hereunder, Buyer shall give Financier written notice of the
     event, occurrence or omission (any such event, occurrence, or omission, a
     "Breach") giving rise to the Buyer's right to exercise such remedies and
     will afford the Financier or its designees a period of thirty (30) days in
     addition to any cure period provided to Seller under this Agreement to cure
     any Breaches.

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(m)  Authorized Representatives. As a means of securing effective and timely
     cooperation here under and as a means of dealing on a prompt and orderly
     basis with various problems which may arise in connection with system
     coordination and operation hereunder, the Parties shall each appoint a
     representative (each an "Authorized Representative") and an alternate
     representative to act in the absence of the Authorized Representative.

     (i)  The responsibilities of the Authorized Representatives are as follows:

          (A)  To establish, review, approve, and/or modify procedures and
               standard practices, consistent with the provisions hereof, for
               the guidance of traders or power schedulers as to matters
               affecting transactions hereunder.

          (B)  To establish, review, approve, and/or modify any scheduling
               procedures required in connection with transactions hereunder.

          (C)  To do such other things and carry out such duties as specifically
               required or authorized by this Agreement; provided, however, that
               the Authorized Representatives shall have no authority to amend
               or modify this Agreement.

     (ii) Each Party shall give written notice to the other Party of the name of
          its designated Authorized Representative and alternate Authorized
          Representative within one hundred and eighty (180) days after the date
          of execution of this Agreement. Notice of any change of Authorized
          Representative or alternate Authorized Representative shall be given
          by written notice to the other Party. Each Party's designated
          Authorized Representative shall be authorized to act on behalf of such
          Party with respect to those responsibilities provided herein.

(n)  Waiver of Jury Trial. Each Party hereby irrevocably waives any and all
     rights to trial by jury with respect to any legal proceeding arising out of
     or relating to this Agreement.

(o)  Headings. The headings contained in this Agreement are solely for the
     convenience of the Parties and should not be used or relied upon in any
     manner in the construction or interpretation of this Agreement.

(p)  Further Assurances. If either Party determines in its reasonable discretion
     that any further instruments, assurances or other things are necessary or
     desirable to carry out the terms of this Agreement the other Party shall,
     at the expense of the requesting Party, execute and deliver all such
     instruments and assurances and do all things reasonably necessary or
     desirable to carry out the terms of this Agreement.

(q)  Survival. Termination of this Agreement for any reason shall not relieve
     either Party of any obligation accruing or arising with respect to the
     period prior to such termination and required by the terms of this
     Agreement to be performed at a date subsequent to the date of termination.

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(r)  Construction of Certain Terms and Phrases. Unless context of this Agreement
     otherwise requires:

     (i)  words of any gender include each other gender;

     (ii) words singular and plural in number will be deemed to include the
          other;

     (iii) the terms "hereof," "herein," "hereby," and similar words refer to
          this entire Agreement and not any particular article, section,
          exhibit, appendix or schedule or any other subdivision of this
          Agreement;

     (iv) all article, section, schedule and exhibit references used in this
          Agreement are to articles, sections, schedules and exhibits to this
          Agreement unless otherwise specified. The schedules and exhibits
          attached to this Agreement constitute a part of this Agreement and are
          incorporated herein for all purposes;

     (v)  The term "includes" or "including" shall mean "including without
          limitation";

     (vi) References to "this Agreement" or any other agreement or document
          shall be construed as a reference to this Agreement or such agreement
          or document as amended, modified or supplemented and in effect from
          time to time and shall include a reference to any document which
          amends, modifies or supplements it, or is entered into, made or given
          pursuant to or in accordance with its terms.

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IN WITNESS WHEREOF, each of the Parties hereto acknowledge that they have read
the terms and conditions contained herein, understand and agree to the same and
agree to be bound thereby and have caused this Agreement to be executed In
duplicate originals by its duly authorized representative on the respective
dates entered below.

                                        SNOWFLAKE WHITE MOUNTAIN POWER, LLC
                                        ("SELLER")

                                        By: /s/ Robert M. Worsley
                                            ------------------------------------
                                            (Signature)

                                        Robert M. Worsley
                                        (Name typed or printed)
                                        Title: CEO
                                        Date: 8-17-06

                                        SALT RIVER PROJECT AGRICULTURAL AND
                                        IMPROVEMENT DISTRICT ("BUYER")

                                        By: /s/ Mark B. Bonsall
                                            ------------------------------------
                                        (Signature)

                                        Mark B. Bonsall
                                        (Name typed or printed)

                                        Associate  General Manager
                                        Title:
                                        8/29/06
                                        Date:

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EXHIBIT A: CONTRACT RATES

(I)  CONTRACT RATE: The rate for deliveries of energy by Seller to Buyer under
     this Agreement shall be priced as follows:

<TABLE>
<CAPTION>
                   Contract Rate*
     Period           Per MWh
----------------   --------------
<S>                <C>
Delivery Year 1        $ [*]
Delivery Year 2        $ [*]
Delivery Year 3        $ [*]
Delivery Year 4        $ [*]
Delivery Year 5        $ [*]
Delivery Year 6        $ [*]
Delivery Year 7        $ [*]
Delivery Year 8        $ [*]
Delivery Year 9        $ [*]
Delivery Year 10       $ [*]
Delivery Year 11       $ [*]
Delivery Year 12       $ [*]
Delivery Year 13       $ [*]
Delivery Year 14       $ [*]
Delivery Year 15       $ [*]
Delivery Year 16       $ [*]
Delivery Year 17       $ [*]
Delivery Year 18       $ [*]
Delivery Year 19       $ [*]
Delivery Year 20       $ [*]
</TABLE>

*    This Contract Rate is subject to adjustment as provided in Article 3(a).

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