Document:

U.S.Geothermal Inc.: Exhibit 10.42 - Prepared by TNT Filings Inc.

Exhibit 10.42

AGENCY AGREEMENT

August 17, 2009

U.S. Geothermal Inc.
1505 Tyrell Lane 
Boise, Idaho 83706

Dear Sirs:

Dundee Securities Corporation, Clarus
Securities Inc. and Toll Cross Securities Inc. (collectively, the "Agents")
understand that U.S. Geothermal Inc. (the "Company") proposes to offer
(the "Offering") for sale, on a private placement basis, up to 8,100,000
subscription receipts (the "Subscription Receipts") at a purchase price
(the "Purchase
Price") of Cdn.$1.35 per Subscription Receipt. Each Subscription Receipt
will entitle the holder thereof to receive, on the earlier of: (i) the date on
which a receipt is obtained in all of the Canadian Offering Jurisdictions for
the Final Prospectus (as defined below); or (ii) four months and one day after
the Closing (as defined below) (the earlier of (i) and (ii) being referred to
herein as the "Exchange Date"), and without additional consideration, one
unit (a "Unit"). Each Unit is comprised of one Underlying Common Share
(as defined below) and one-half of one Share Purchase Warrant (as defined below)
that shall each be issued as separate securities. Each whole Share Purchase
Warrant shall entitle the holder thereof to purchase one Warrant Share (as
defined below) of the Company at a price of US$1.75 for a period of 24 months
following the Closing.

As part of the Offering, the Company
also grants to the Agents special warrants ("Agents' Special Warrants"),
exchangeable on the Exchange Date for compensation options (the "Compensation Options")
in the amount sufficient to permit the Agents to acquire in the aggregate Common
Shares (the "Compensation Shares") in an amount equal to 3% of the total
number of Subscription Receipts issued pursuant to the Offering. The
Compensation Options will be issued to the Agents on the Exchange Date and will
be exercisable by the Agents to acquire Compensation Shares for the 24 month
period after the Closing at an exercise price equal to the U.S. dollar
equivalent of the Purchase Price. 

 

	 	 	
The Agents understand that:

    
	 	 	
       
	 	(a) 	
      the Company will use the net proceeds from the Offering
      for drilling and exploration at Neal Hot Springs and for general working
      capital; and

	 	 	 
	 	(b) 	
      upon Closing, the net proceeds of the Offering will be
      immediately available to the Company and will not be subject to
    escrow.

Based on the foregoing and subject to the terms and conditions
set out below, the Agents hereby agree to act as the Company's exclusive agents,
on a reasonable best efforts basis, to offer the Subscription Receipts for sale
on the Company's behalf, all as contemplated in this Agreement. 

TERMS AND CONDITIONS

	1. 	 	
      Definitions. As used in this Agreement, unless the
      context otherwise requires:

	 	(a) 	
      "affiliate", "distribution" and "insider" have the respective meanings ascribed to them in the
      Securities Act (British Columbia);

	 	(b) 	
      "Agents" means Dundee, Clarus and Toll Cross
      Securities Inc.;

	 	 	 
	 	(c) 	
      "Agents' Special Warrants" has the meaning
      ascribed thereto on the cover page of this Agreement;

	 	 	 
	 	(d) 	
      "Agents' Special Warrant Certificate" means the
      certificate representing the Agents' Special Warrants, substantially in
      the form attached hereto as Schedule "E";

	 	 	 
	 	(e) 	
      "Business Day(s)" means any day except Saturday or
      Sunday or any statutory holiday in the Province of British Columbia or the
      State of Idaho;

	 	 	 
	 	(f) 	
      "Canadian Offering Jurisdictions" means each of
      the Provinces of Canada, other than Quebec;

	 	 	 
	 	(g) 	
      "Clarus" means Clarus Securities Inc.;

	 	 	 
	 	(h) 	
      "Closing" means the completion of the issue and
      sale by the Company and the purchase by the Purchasers of the Subscription
      Receipts pursuant to this Agreement and the Subscription
  Agreements;

	 	 	 
	 	(i) 	
      "Closing Date" means August 17, 2009 or such other
      date as the Company and the Agents may agree pursuant to this
      Agreement;

	 	 	 
	 	(j) 	
      "Closing Time" means 8:00 a.m. (Vancouver time) on
      the Closing Date or such other time as the Company and the Agents may
      agree pursuant to this Agreement;

	 	 	 
	 	(k) 	
      "Common Shares" means the shares of common stock
      with a par value of $0.001 per share, in the capital of the
  Company;

	 	 	 
	 	(l) 	
      "Company" means U.S. Geothermal Inc.;

	 	 	 
	 	(m) 	
      "Company's Auditors" means Williams & Webster, P.S., the auditors of the Company;

	 	 	 
	 	(n) 	
      "Compensation Fee" has the meaning ascribed
      thereto in Section 16 of this Agreement;

	 	 	 
	 	(o) 	
      "Compensation Options" has the meaning ascribed
      thereto on the cover page of this Agreement;

	 	 	 
	 	(p) 	
      "Compensation Option Certificate" means the
      certificate representing the Compensation Options, substantially in the
      form attached the Agents' Special Warrant Certificate as Schedule "A";

	 	 	 
	 	(q) 	
      "Compensation Shares" has the meaning ascribed
      thereto on the cover page of this Agreement;

	 	 	 
	 	(r) 	
      "Condition" has the meaning ascribed thereto in
      the Subscription Receipt Agreement;

	 	 	 
	 	(s) 	
      "Disclosure Documents" means each document (as
      such term is defined in Section 138.1 of the Securities Act
      (Ontario)) released by the Company since March 31, 2008;

	 	 	 
	 	(t) 	
      "Dundee" means Dundee Securities
    Corporation;

- 2 -

	 	(u) 	
      "Environmental Laws" has the meaning ascribed
      thereto in Subsection 6.2(q);

	 	 	 
	 	(v) 	
      "Exemptions" means the exemption from the
      prospectus and registration requirements under applicable Securities Laws
      and, in respect of the issue of the Securities (except the Warrant Shares
      and the Compensation Shares and, if a receipt for the Final Prospectus is
      not obtained, the issuance, on exchange, of the Underlying Common Shares
      and Share Purchase Warrants), Section 2.10 of National Instrument 45-106 –
      Prospectus and Registration Exemptions and similar exemptions
      applicable in the United States or such other jurisdictions where the
      Subscription Receipts may be offered or sold;

	 	 	 
	 	(w) 	
      "Final Prospectus" means the final short form
      prospectus of the Company to be filed with the Securities Commissions in
      the Canadian Offering Jurisdictions to qualify the distribution of the
      Underlying Common Shares, Shares Purchase Warrants and Compensation
      Options upon exchange of the Subscription Receipts and Agents' Special
      Warrants in the Canadian Offering Jurisdictions;

	 	 	 
	 	(x) 	
      "General Solicitation or General Advertising"
      means "general solicitation or general advertising", as used under Rule
      502(c) under the U.S. Securities Act, including advertisements, articles,
      notices or other communications published in any newspaper, magazine or
      similar media or broadcast over radio, television, or telecommunications,
      including electronic display or the Internet, or any seminar or meeting
      whose attendees had been invited by general solicitation or general
      advertising;

	 	 	 
	 	(y) 	
      "Gerlach Project" means the Gerlach geothermal
      system located in Northwestern Nevada, near the town of Gerlach, as
      discussed in the Disclosure Documents;

	 	 	 
	 	(z) 	
      "Governmental Authority" means any domestic or
      foreign government, whether federal, provincial, state, territorial,
      local, regional, municipal or other political jurisdiction, and any
      agency, authority, instrumentality, court, tribunal, board, commission,
      bureau, arbitrator, arbitration tribunal or other tribunal, or any quasi-
      governmental or other entity, insofar as it exercises a legislative,
      judicial, regulatory, administrative, expropriation or taxing power or
      function of or pertaining to government;

	 	 	 
	 	(aa) 	
      "Granite Creek Project" means the approximately
      5,414 acres of Bureau of Land Management geothermal leases located 6 miles
      north of Gerlach;

	 	 	 
	 	(bb) 	
      "Hazardous Substances" has the meaning ascribed
      thereto in Subsection 6.2(q);

	 	 	 
	 	(cc) 	
      "Intellectual Property" has the meaning ascribed
      thereto in Subsection 6.2(ll);

	 	 	 
	 	(dd) 	
      "material" means material in relation to the
      Company and its subsidiaries considered on a consolidated basis;

	 	 	 
	 	(ee) 	
      "material change" means any change in the
      business, operations, assets, liabilities, ownership or capital of the
      Company (except the transactions contemplated herein) that would
      reasonably be expected to have a significant effect on the market price or
      value of the Subscription Receipts (and underlying securities) and
      includes a decision to implement such a change made by the board of
      directors of the Company or by senior management of the Company who
      believe that confirmation of the decision by the board of directors is
      probable;

- 3 -

	 	(ff) 	
      "material fact" means any fact that significantly
      affects or would reasonably be expected to have a significant effect on
      the market price or value of the Subscription Receipts (and underlying
      securities);

	 	 	 
	 	(gg) 	
      "Material Subsidiaries" means the Subsidiaries
      whose assets or revenues, calculated on an individual basis, represent
      more than 10% of the consolidated assets or revenues of the
  Company;

	 	 	 
	 	(hh) 	
      "misrepresentation" means, with respect to
      circumstances in which the Securities Laws are applicable, a
      misrepresentation as defined under the Securities Act (British
      Columbia);

	 	 	 
	 	(ii) 	
      "Neal Hot Springs Project" means the Neal Hot
      Springs exploration project located in eastern Oregon, as described in the
      Disclosure Documents;

	 	 	 
	 	(jj) 	
      "NI 45-102" means National Instrument 45-102 -
      Resale of Securities;

	 	 	 
	 	(kk) 	
      "NI 51-102" means National Instrument 51-102 -
      Continuous Disclosure Obligations;

	 	 	 
	 	(ll) 	
      "Offering" shall have the meaning ascribed thereto
      on the cover page of this Agreement;

	 	 	 
	 	(mm) 	
      "Offering Jurisdictions" means each of the
      provinces of Canada, other than Quebec, any state of the United States of
      America and such other jurisdictions where the Agents choose to sell
      Subscription Receipts in accordance with this Agreement;

	 	 	 
	 	(nn) 	
      "Preliminary Prospectus" means the preliminary
      short form prospectus of the Company to be filed with the Securities
      Commissions in the Canadian Offering Jurisdictions to qualify the
      distribution of the Underlying Common Shares, Shares Purchase Warrants and
      Compensation Options upon exchange of the Subscription Receipts and
      Agents' Special Warrants in the Canadian Offering Jurisdictions;

	 	 	 
	 	(oo) 	
      "Projects" means the Gerlach Project, the Granite
      Creek Project, the Neal Hot Springs Project, the Raft River Project and
      the San Emidio Project;

	 	 	 
	 	(pp) 	
      "Public Record" means the financial statements,
      management discussion and analysis, annual information forms, information
      circulars, material change reports and press releases filed with the Stock
      Exchanges and any applicable Canadian securities regulatory authority
      (including on SEDAR) since March 31, 2008;

	 	 	 
	 	(qq) 	
      "Purchase Price" shall have the meaning ascribed
      thereto on the cover page of this Agency Agreement;

	 	 	 
	 	(rr) 	
      "Purchaser" means a purchaser of Subscription
      Receipts and "Purchasers" means all of the purchasers of the
      Subscription Receipts;

	 	 	 
	 	(ss) 	
      "Raft River Energy I LLC" means Raft River Energy
      I LLC, a Delaware limited liability company, the joint venture entity
      established to facilitate the financing of Phase 1 of the Raft River
      Project;

- 4 -

	 	(tt) 	
      "Raft River Project" means Phase 1 of development
      at Raft River located in Southern Idaho, resulting in the construction and
      operation of a 13 megawatt binary cycle geothermal power plant (Unit 1),
      as described in the Disclosure Documents;

	 	 	 
	 	(uu) 	
      "Regulation M" means Regulation M promulgated
      under the 1934 Act;

	 	 	 
	 	(vv) 	
      "Registration Statement" has the meaning ascribed
      thereto in the Subscription Agreement;

	 	 	 
	 	(ww) 	
      "Regulation D" means Regulation D promulgated
      under the U.S. Securities Act;

	 	 	 
	 	(xx) 	
      "Regulation S" means Regulation S promulgated
      under the U.S. Securities Act;

	 	 	 
	 	(yy) 	
      "Regulatory Authorities" means the Securities
      Commissions and the Stock Exchanges;

	 	 	 
	 	(zz) 	
      "San Emidio Project" means the assets located in
      the San Emidio Desert, Washoe County, Nevada and includes the geothermal
      power plant project, approximately 22,944 acres of geothermal leases, and
      associated ground water rights;

	 	 	 
	 	(aaa) 	
      "San Emedio Repower Project" means the replacement
      of the existing power block at the San Emidio Project using existing well
      field flows to increase power output;

	 	 	 
	 	(bbb) 	
      "SEC" means the United States Securities and
      Exchange Commission;

	 	 	 
	 	(ccc) 	
      "Securities" means the Subscription Receipts,
      Agents' Special Warrants, Units, Underlying Common Shares and Share
      Purchase Warrants underlying the Units, Compensation Options, Warrant
      Shares and Compensation Shares;

	 	 	 
	 	(ddd) 	
      "Securities Commissions" means, collectively, the
      securities regulatory authorities of the Offering Jurisdictions;

	 	 	 
	 	(eee) 	
      "Securities Laws" means, collectively, the
      applicable securities laws of the Offering Jurisdictions and the
      respective regulations and rules made and forms prescribed thereunder
      together with all applicable published policy statements, blanket orders,
      rulings and notices of the Securities Commissions;

	 	 	 
	 	(fff) 	
      "Share Purchase Warrant(s)" means the warrants to
      purchase Warrant Shares to be issued by the Company upon the exchange of
      the Subscription Receipt in accordance with and subject to the terms of
      the Subscription Receipt Agreement and having the characteristics as
      described in the Share Purchase Warrant Certificate;

	 	 	 
	 	(ggg) 	
      "Share Purchase Warrant Certificate" means the
      certificate to be dated the date of issue which will represent the Share
      Purchase Warrants substantially in the form attached to the Subscription
      Receipt Agreement as Schedule "B";

	 	 	 
	 	(hhh) 	
      "Share Purchase Warrant Expiry Date" means 4:00
      p.m. (Vancouver time) on the date which is 24 months after the
    Closing;

	 	 	 
	 	(iii) 	
      "Stock Exchanges" means the Toronto Stock Exchange
      and the NYSE Amex LLC;

- 5 -

	 	(jjj) 	
      "Subscription Agreements" means the agreements to
      be entered into between the Company and each Purchaser of Subscription
      Receipts resident in an Offering Jurisdiction in the forms attached as
      Schedule "A" hereto;

	 	 	 
	 	(kkk) 	
      "Subscription Receipt" shall have the meaning
      ascribed thereto on the cover page of this Agency Agreement and having the
      characteristics as described in the Subscription Receipt
  Agreement;

	 	 	 
	 	(lll) 	
      "Subscription Receipt Agreement" means the
      subscription receipt agreement to be entered into among the Company, the
      Agents and Computershare Trust Company of Canada on the Closing Date
      governing the terms and conditions of the Subscription Receipts;

	 	 	 
	 	(mmm) 	
      "Subscription Receipt Certificate" means the
      certificate to be dated the date of issue which will represent the
      Subscription Receipts substantially in the form attached to the
      Subscription Receipt Agreement as Schedule "A";

	 	 	 
	 	(nnn) 	
      "Subsidiaries" means Raft River Energy I, LLC, Gerlach Geothermal LLC, U.S. Geothermal Services, LLC, USG Nevada LLC, USG
      Gerlach LLC and U.S. Geothermal Guatemala, LLC and any entity of which
      more than 50 percent of the voting securities are directly or indirectly
      owned by the Company and the financial statements of which are
      consolidated with those of the Company and "Subsidiary" means any
      one of the Subsidiaries;

	 	 	 
	 	(ooo) 	
      "to the knowledge of" means (unless otherwise
      expressly stated), with respect to the Company, a statement of the actual
      knowledge, after having made reasonable enquiries or investigations of the
      executive officers of the Company of the facts or circumstances to which
      such phrase relates;

	 	 	 
	 	(ppp) 	
      "Unit" means one (1) Underlying Common Share and
      one-half (1/2) of one Share Purchase Warrant issuable upon the exchange of
      the Subscription Receipt in accordance with and subject to the terms of
      the Subscription Receipt Agreement;

	 	 	 
	 	(qqq) 	
      "United States" means the United States of
      America, its territories and possessions, any state of the United States,
      and the District of Columbia;

	 	 	 
	 	(rrr) 	
      "U.S. Accredited Investor" means an "accredited
      investor" as defined in Rule 501(a) of Regulation D;

	 	 	 
	 	(sss) 	
      "U.S. Affiliate" of any Agent means the U.S.
      registered broker-dealer affiliate of such Agent;

	 	 	 
	 	(ttt) 	
      "U.S. Person" means a U.S. Person as defined in
      Rule 902(k) of Regulation S under the U.S. Securities Act;

	 	 	 
	 	(uuu) 	
      "U.S. Placement Agents'" means Dundee Securities
      Inc. and Toll Cross Securities USA Inc.;

	 	 	 
	 	(vvv) 	
      "U.S. Securities Act" means the United States
      Securities Act of 1933, as amended, and the rules and regulations
      promulgated thereunder, including judicial and administrative
      interpretations thereof;

- 6 -

	 	(www) 	
      "U.S. Securities Laws" means the applicable blue
      sky or securities legislation in the United States, together with the 1934
      Act and the U.S. Securities Act and the rules and regulations of the SEC
      or state securities authority thereunder;

	 	 	 
	 	(xxx) 	
      "Underlying Common Share" means one Common Share
      issuable upon exchange of one Subscription Receipt in accordance with and
      subject to the terms of the Subscription Receipt Agreement;

	 	 	 
	 	(yyy) 	
      "Warrant Shares" means the Common Shares issuable
      upon exercise of the Share Purchase Warrants; and

	 	 	 
	 	(zzz) 	
      "1934 Act" means the United States Securities and
      Exchange Act of 1934, as amended and the rules and regulations promulgated
      thereunder, including judicial and administrative interpretations
      thereof.

2.  

 

Interpretation. For the purposes of this Agreement,
except as otherwise expressly provided or unless the context otherwise requires:

	 	(a) 	
      "this Agreement" means this Agency
    Agreement;

	 	 	 
	 	(b) 	
      any reference in this Agreement to a designated "Section",
      "Subsection", "Paragraph" or other
      subdivision refers to the designated section, subsection, paragraph or
      other subdivision of this Agreement;

	 	 	 
	 	(c) 	
      the words "herein" and "hereunder" and
      other words of similar import refer to this Agreement as a whole and not
      to any particular section or other subdivision of this
Agreement;

	 	 	 
	 	(d) 	
      the word "including", when following any general
      statement, term or matter, is not to be construed to limit such general
      statement, term or matter to the specific items or matters set forth
      immediately following such word or to similar items or matters, whether or
      not non-limiting language (such as "without limitation" or "but
      not limited to" or words of similar import) is used with reference
      thereto but rather refers to all other items or matters that could
      reasonably fall within the broadest possible scope of such general
      statement, term or matter;

	 	 	 
	 	(e) 	
      any reference to a statute includes and, unless otherwise
      specified herein, is a reference to such statute and to the regulations
      made pursuant thereto, with all amendments made thereto and in force from
      time to time, and to any statute or regulations that may be passed which
      have the effect of supplementing or superseding such statute or such
      regulation;

	 	 	 
	 	(f) 	
      any reference to "party" or "parties" means
      the Company, the Agents, or both, as the context requires;

	 	 	 
	 	(g) 	
      the headings in this Agreement are for convenience of
      reference only and do not affect the interpretation of this Agreement;
      and

	 	 	 
	 	(h) 	
      words importing the masculine gender include the feminine
      or neuter gender and words in the singular include the plural, and vice
      versa.

- 7 -

3.   

Appointment of Agents. Subject to the terms and
conditions of this Agreement, the Company appoints the Agents, and the Agents
agree to act as the exclusive Agents of the Company, to offer the Subscription
Receipts for sale to the public in the Offering Jurisdictions and to use their
reasonable best efforts to solicit and procure Purchasers of the Subscription
Receipts on behalf of the Company. The Subscription Receipts will be sold by way
of the exemption from registration under the U.S. Securities Act provided by
Section 4(2) thereof and Rule 506 of Regulation D thereunder and (i) private
placement under the applicable Exemptions in each of the provinces of Canada,
other than Quebec, (ii) in the United States through the U.S. Placement Agents
and (iii) in such other jurisdictions (in accordance with local laws) as may be
agreed to by the Company and the Agents. The Company shall issue and sell the
Subscription Receipts at the Closing Time, in accordance with and subject to the
provisions of this Agreement and the Subscription Agreements. It is understood
and agreed by the parties that the Agents shall act as agent only and at no time
shall the Agents have any obligation whatsoever to purchase Subscription
Receipts as principal. 

4.   

Agents' Commission. In consideration of the Agents
agreement to act as financial advisors to the Company, find and introduce
potential Purchasers of the Subscription Receipts and otherwise assist in the
distribution of the Subscription Receipts in accordance with this Agreement, the
Company agrees to pay to the Agents the following: 

	 	(a) 	
      an aggregate cash commission (the "Agents'
      Commission") equal to 6.0% of the gross proceeds of the Subscription
      Receipts; and

	 	 	 
	 	(b) 	
      Agents' Special Warrants, exchangeable for the same
      number of Compensation Options, entitling the Agents to purchase in the
      aggregate, at the U.S. dollar equivalent of the Purchase Price from and
      for a period of 24 months following the Closing, Compensation Shares equal
      in number to 3.0% of the number of Subscription Receipts sold under the
      Offering.

In connection with the Agents' Special Warrants, each Agent (i)
represents and warrants that it is an "accredited investor" as defined in Rule
501(a) of Regulation D under the U.S. Securities Act, (ii) acknowledges that the
Agents' Special Warrants , Compensation Options and Compensation Shares will be
"restricted securities" as defined in Rule 144 under the U.S. Securities Act,
and (iii) agrees not to offer, sell or otherwise transfer the Agents' Special
Warrants without registration under the U.S. Securities Act unless an exemption
from registration is available. 

In addition, the Company agrees to pay the Compensation Fee in
accordance with Section 16, if applicable, and the Agents' expenses in
accordance with Section 12. 

5.  

Offering
Procedures. 

5.1  

Each Purchaser of Subscription Receipts will purchase
Subscription Receipts and the Company will issue and sell the Subscription Receipts pursuant
to exemptions from applicable prospectus and registration requirements under
securities laws of the jurisdiction of residence of the Purchaser or such other
jurisdiction as may be applicable to the Purchaser. Each Purchaser will enter
into a Subscription Agreement with the Company. The Agents will notify the
Company with respect to the identities of Purchasers in sufficient time to allow
the Company to comply with all applicable regulatory requirements and all
requirements under the Securities Laws to be complied with by the Company as a
result of the offering and sale of the Subscription Receipts to such Purchasers
on a private placement basis in such Offering Jurisdictions.

- 8 -

5.2 

The Company and
the Agents will each use their best efforts to file or cause to be filed all
documents required to be filed by the Company and the Purchasers, respectively,
in connection with the purchase and sale of the Subscription Receipts so that
the distribution of the Subscription Receipts may lawfully occur on an exempt
basis. 

5.3 

The Company
covenants that it will as soon as reasonably practicable after the Closing: 

	 	(a) 	
      prepare and file with Securities Commissions in the
      Canadian Offering Jurisdictions, the Preliminary Prospectus, together with
      all required supporting documentation;

	 	 	 
	 	(b) 	
      use its reasonable best efforts to address as
      expeditiously as possible, the comments made by the Securities Commissions
      in the Canadian Offering Jurisdictions in respect of the Preliminary
      Prospectus; and

	 	 	 
	 	(c) 	
      as soon as reasonably practicable, after all of the
      comments referred to in paragraph 5.3(b) above have been addressed,
      prepare and file with the Securities Commissions in the Canadian Offering
      Jurisdictions the Final Prospectus and to use commercially reasonable
      efforts to expeditiously obtain the requisite receipts therefore from the
      Securities Commissions in the Canadian Offering Jurisdictions in order to
      qualify the distribution of the Underlying Common Shares, Share Purchase
      Warrants and Compensation Options upon exchange of the Subscription
      Receipts and Agents' Special Warrants in the Canadian Offering
      Jurisdictions.

5.4 

The Company
further covenants that it will, as soon as reasonably practicable after the
Closing, prepare and file the Registration Statement as set out in Schedule "F'
to the Subscription Agreement. 

5.5 

The Company will
promptly inform the Agents of the full particulars of: 

	 	(a) 	
      any material change (actual, anticipated or threatened)
      in the business, operations, capital or condition (financial or otherwise)
      of the Company, the Subsidiaries or their assets;

	 	 	 
	 	(b) 	
      the occurrence of a material fact or event, which, in any
      such case, is, or may be, of such a nature as to render the Preliminary
      Prospectus or the Final Prospectus untrue or misleading in a material
      respect, result in a misrepresentation in the Preliminary Prospectus or
      Final Prospectus or result in the Preliminary Prospectus or Final
      Prospectus not complying with the Securities Laws;

	 	 	 
	 	(c) 	
      the occurrence of a material fact or event, which, in any
      such case, is, or may be, of such a nature as to render the Preliminary
      Prospectus or Final Prospectus untrue or misleading in a material respect,
      result in a misrepresentation in the Preliminary Prospectus or Final
      Prospectus or result in the Preliminary Prospectus or Final Prospectus not
      complying with the Securities Laws;

Provided that the Company will also in good faith discuss with
the Agents any change in circumstance (actual, proposed or prospective) which is
of such a nature that there is reasonable doubt whether notice in writing need
be given to the Agents pursuant to this section. 

5.6 

The Company will promptly inform the Agents and Borden Ladner Gervais LLP of: 

- 9 -

	 	(a) 	
      any request of the Securities Commissions for any
      amendment to the Preliminary Prospectus or the Final Prospectus;
  and

	 	 	 
	 	(b) 	
      the receipt by the Company of any communication from the
      Securities Commissions or any other securities regulatory authority of any
      other jurisdiction, the Stock Exchanges or any other competent authority
      relating to the Preliminary Prospectus, the Final Prospectus or the
      Registration Statement.

5.7 

The Company will
promptly comply with the Securities Laws with respect to any change or
occurrence of the nature referred to in Sections 5.5 and 5.6, and the Company
will prepare and file any amendment to the Preliminary Prospectus or Final
Prospectus and take such other steps which are necessary to comply with the
Securities Laws. 

5.8 

The Company shall
cause to be delivered: 

	 	(a) 	
      as soon as practicable after the issuance of a receipt
      for the Preliminary Prospectus or Final Prospectus, as the case may be, as
      many copies of the Preliminary Prospectus or Final Prospectus, as the case
      may be, as the Agents may reasonably request and such delivery will
      constitute a representation and warranty by the Company to the Agents that
      the Preliminary Prospectus or Final Prospectus, as the case may be (except
      statements relating solely to the Agents), contains full, true and plain
      disclosure of all material facts relating to the Company, the Underlying
      Common Shares, Share Purchase Warrants, Compensation Options, Warrant
      Shares and Compensation Shares and does not contain any misrepresentation
      and will constitute the Company's authorization to the Agents to use the
      Preliminary Prospectus or Final Prospectus, as the case may be, in the
      Canadian Offering Jurisdictions in accordance with the applicable
      Securities Laws; and

	 	 	 
	 	(b) 	
      in the event of any amendment to the Preliminary
      Prospectus or Final Prospectus, the Company will deliver to the Agents:
      (i) a similar letter to that referred to below in subsection 5.9 with
      respect to the contents referred to therein; (ii) a legal opinion of
      Company's counsel, in form and substance satisfactory to the Agents and
      the Agents' counsel and with respect to such matters as the Agents and the
      Agents' counsel may reasonably request relating to such amendment's
      compliance with the applicable Securities Laws; and (iii) as soon as
      reasonably practicable, as many copies of the amendment as the Agent may
      request, such delivery to constitute a delivery referred to in this
      paragraph 5.8(b) and thereby be subject to the representation and warranty
      therein referred to.

5.9 

The Company shall
deliver to the Agents at the time the Agents execute the Final Prospectus, a
letter addressed to the Agents, signed by the Company's Auditor and dated the
date of delivery thereof, in form and substance satisfactory to the Agents, with
respect to the financial and accounting information relating to the Company and
its business contained in the Final Prospectus, and with respect to any material
changes thereto up to a date within two business days of the date of such
letter, which letter shall be in addition to the auditor's report incorporated
by reference in the Final Prospectus and any auditor's consent and comfort
letters required to be filed with the Final Prospectus. 

5.10 

If any financial
or accounting information is contained in any new or amended prospectus or
supplemental material described in Section 5.9 hereof which is required to be
executed by the Agents, the Company will deliver or cause to be delivered to the
Agents a letter signed by the Company's Auditor in form and substance to the
letter specified in Section 5.9 hereof at the time of execution thereof by the
Agent. 

- 10 -

6.  

Representations and Warranties of the Company. 

6.1 

Each officers'
certificate required to be provided in accordance with the terms of this
Agreement, signed by any officer of the Company and delivered to the Agents or
Agents' counsel, will constitute a representation and warranty by the Company to
the Agents or Agents' counsel, as the case may be, as to the matters covered by
the certificate. 

6.2 

The Company
represents and warrants to each of the Agents and acknowledges that each of the
Agents is relying upon such representations and warranties in connection with
its execution and delivery of this Agreement that: 

	 	(a) 	
      the Company and each Subsidiary was duly incorporated and
      is validly existing under the laws of the jurisdiction of incorporation
      and has all requisite power and authority and is duly qualified to carry
      on its business as now conducted and to own, lease and operate its
      property and assets;

	 	 	 
	 	(b) 	
      all necessary corporate action has been taken by the
      Company to authorize the execution and delivery of and the performance of
      its obligations under this Agreement;

	 	 	 
	 	(c) 	
      this Agreement, the Subscription Agreements, the
      Subscription Receipt Agreement, the Subscription Receipt Certificates and
      the Agents' Special Warrant Certificates have been and, as at the Exchange
      Date, the Share Purchase Warrant Certificates and Compensation Option
      Certificates will be duly authorized, executed and delivered by the
      Company and (assuming due execution and delivery by the other parties
      thereto) is, or will be, a legal, valid and binding obligation of the
      Company enforceable against the Company in accordance with its terms,
      except as that enforcement may be limited by bankruptcy, insolvency and
      other laws affecting the rights of creditors generally and except that
      equitable remedies may be granted only in the discretion of a court of
      competent jurisdiction;

	 	 	 
	 	(d) 	
      the authorized capital of the Company consists of
      250,000,000 Common Shares of which 62,033,882 Common Shares have been
      validly issued as at the date hereof, are outstanding as fully paid and
      non-assessable shares and were not issued in violation of any pre-emptive
      rights or other contractual rights to issue securities issued by the
      Company or of any applicable law;

	 	 	 
	 	(e) 	
      no person has any agreement or option or any right or
      privilege (whether by law, pre-emptive or contractual) capable of
      becoming an agreement, including convertible securities, warrants or
      convertible obligations of any nature, for the purchase, subscription,
      allotment or issuance of any un-issued shares or other securities of the
      Company, except for:

	 	(i) 	
      the Underlying Common Shares, the Warrant Shares and the
      Compensation Shares issuable pursuant to this Agreement and the
      Subscription Agreements; and

	 	 	 
	 	(ii) 	
      5,954,250 Common Shares issuable by the Company pursuant
      to stock options held by directors, officers and employees, and 3,382,725
      Common Shares issuable pursuant to outstanding
warrants.

- 11 -

	 	(f) 	
      the Subscription Receipts, Agents' Special Warrants,
      Underlying Common Shares, the Share Purchase Warrants, the Warrant Shares,
      the Compensation Options and the Compensation Shares to be issued by the
      Company and/or sold pursuant to this Agreement and the Subscription
      Agreements will be duly authorized for that issuance and sale by all
      necessary action on the part of the Company and, when issued and delivered
      by the Company against payment of the applicable consideration, the
      Subscription Receipts, Agents' Special Warrants, Underlying Common Shares,
      the Share Purchase Warrants, the Warrant Shares, the Compensation Options
      and the Compensation Shares issued pursuant to this Agreement and the
      Subscription Agreements, will have been validly issued, will be
      outstanding as fully paid and non-assessable and will not have been issued
      in violation of or subject to any pre-emptive rights or other contractual
      rights to purchase securities issued by the Company or in violation of any
      applicable law;

	 	 	 
	 	(g) 	
      each of the Company and each
Subsidiary:

	 	(i) 	
      has complied with, and has conducted and is conducting
      its business in compliance in all material respects with all applicable
      laws, statutes, ordinances, regulations and rules in each jurisdiction in
      which it conducts business;

	 	 	 
	 	(ii) 	
      is duly licensed, registered or qualified in all
      jurisdictions to enable its business to be carried on in all material
      respects as now conducted and its property and assets owned, leased and
      operated, and all such licences, registrations and qualifications are
      valid and subsisting and no such licence, registration or qualification
      contains any term, provision, condition or limitation which has or is
      likely to have any material adverse effect on its business as now
      conducted; and

	 	 	 
	 	(iii) 	
      is not in default in filing any government returns, or
      payment of any licence or registration or qualification fee owing to any
      Governmental Authority under the laws of each jurisdiction in which it
      conducts business which has or is likely to have any material adverse
      effect on its business as now conducted;

	 	(h) 	
      except as disclosed in the Disclosure Documents, the
      Company is the beneficial and registered owner of all of the issued and
      outstanding shares of each of its Subsidiaries, in each case free and
      clear of all mortgages, liens, charges, pledges, hypothecs, security
      interests, encumbrances, claims or other demands whatsoever, and all those
      shares have been validly issued, are issued and outstanding as fully paid
      and non-assessable shares and were not issued in violation of any
      pre-emptive rights or other contractual rights to issue securities issued
      by the Subsidiary or of any applicable law;

	 	 	 
	 	(i) 	
      except as disclosed in the Disclosure Documents with
      respect to Raft River Energy I, LLC no person has any agreement or option
      or any right or privilege (whether by law, pre-emptive or contractual)
      capable of becoming an agreement, including convertible securities,
      warrants or convertible obligations of any nature, for the purchase,
      subscription, allotment or issuance of any un-issued shares or other
      securities of any Subsidiary;

	 	 	 
	 	(j) 	
      except as disclosed to the Agents in writing, the
      consolidated financial statements of the Company for the years ended March
      31, 2009 and 2008, including the notes thereto, and for the three-month
      period ending June 30, 2009, including the notes thereto, have been
      prepared in accordance with United States generally accepted accounting
      principles consistently applied throughout the periods indicated and
      present fairly in all material

- 12 -

respects the assets, liabilities
(whether accrued, absolute, contingent or otherwise) and financial condition of
the Company on a consolidated basis as at the respective dates indicated and the
sales, earnings and results of operations of the Company on a consolidated basis
throughout the periods indicated; 

	 	(k) 	
      the execution, delivery and performance of this
      Agreement, the Subscription Agreements, the Subscription Receipt
      Agreement, the Subscription Receipt Certificates, the Agents' Special
      Warrant Certificates, the Share Purchase Warrant Certificates and the
      Compensation Option Certificates by the Company and the completion of the
      transactions provided for in this Agreement will not (whether after the
      passage of time or notice or both) result in, any material
  respect:

	 	(i) 	
      the breach or violation of any of the provisions of, or
      constitute a default under, or a conflict with or cause the acceleration
      of, any obligation of the Company under:

	 	(A) 	
      any indenture, agreement or other instrument to which the
      Company or any Subsidiary is a party or by which it or its properties are
      bound or affected;

	 	 	 
	 	(B) 	
      any provision of the articles, by-laws or resolutions of
      the board of directors (or any committee thereof) or shareholders of, the
      Company or any Subsidiary;

	 	 	 
	 	(C) 	
      any judgment, decree, order or award of any Governmental
      Authority having jurisdiction over the Company;

	 	 	 
	 	(D) 	
      any licence, permit, approval, consent or authorization
      issued to, held by or for the benefit of the Company or necessary to the
      operation of its business as now conducted; or

	 	 	 
	 	(E) 	
      any applicable law or statute, or any ordinance, rule,
      regulation, policy, order or ruling made thereunder;
or

	 	(ii) 	
      the creation or imposition of any mortgage, lien, charge,
      pledge, hypothec, security interest, encumbrance, claim or other demand
      whatsoever on any of the property or assets of the
  Company;

	 	(l) 	
      each of the contracts which is material to the Company is
      described in the Disclosure Documents and none of the Company, any of its
      Subsidiaries or, to the knowledge of the Company, any other party, is, in
      any material respect, in default or alleged to be in default in the
      performance of any term or obligation to be performed by it under any
      material contract to which the Company or any Subsidiary is a party or by
      which the Company or any Subsidiary is bound or affected, and to the
      knowledge of the Company no event, condition or occurrence exists that,
      after notice or lapse of time or both, would constitute such a default
      which materially adversely affects or may materially adversely affect the
      business, operations, assets, liabilities, capital, prospects, condition
      (financial or otherwise) or results of operations of the Company and its
      Subsidiaries on a consolidated basis;

- 13 -

	 	(m) 	
      no legal or governmental proceedings are pending to which
      the Company and/or any Subsidiary is a party or to which the property of
      the Company and/or any Subsidiary is subject that would result
      individually or in the aggregate in a material adverse change in the
      operation, business or condition of the Company and its Subsidiaries on a
      consolidated basis, and no such proceedings have been threatened against
      or, to the knowledge of the Company, are contemplated with respect to the
      Company and/or any Subsidiary or with respect to any of their respective
      properties which would be material to the Company and/or any Subsidiary on
      a consolidated basis;

	 	 	 
	 	(n) 	
      except as provided herein, there is no person, firm or
      corporation which has been engaged by the Company to act for the Company
      and which is entitled to any brokerage or finder's fee in connection with
      this Agreement or the transactions contemplated hereunder;

	 	 	 
	 	(o) 	
      the Company and each Subsidiary has paid or made adequate
      provision for the payment of all taxes (or payments in lieu of taxes)
      levied on its property or income which are due and payable, including
      interest and penalties, or has accrued such amounts in its financial
      statements for the payment of such taxes except for charges, fees or dues
      which are not material in amount or which are not delinquent or if
      delinquent are being contested, and there is no material action, suit,
      proceeding, investigation, audit or claim no pending, or to its knowledge,
      threatened by any governmental authority regarding any taxes;

	 	 	 
	 	(p) 	
      the Company and each Subsidiary is in material compliance
      with all applicable material laws, regulations and statutes (including all
      environmental laws and regulations) in the jurisdictions in which it
      carries on business and for the purposes described in the Disclosure
      Documents; the Company has not received a notice of material non-
      compliance, nor knows of, nor has reasonable grounds to know of, any facts
      that could give rise to a notice of non-compliance with any such laws,
      regulations and statutes, and is not aware of any pending change or
      contemplated change to any applicable law or regulation or governmental
      position that would materially adversely affect the business of the
      Company or the business or legal environment under which the Company
      operates;

	 	 	 
	 	(q) 	
      to its knowledge the Company, and except as previously
      disclosed, in writing, to the Agents, each Subsidiary has not caused or
      permitted the release, in any manner whatsoever, of any pollutants,
      contaminants, chemicals or industrial toxic or hazardous waste or
      substances (collectively, the "Hazardous Substances") on or from
      any of its properties or assets nor has it received any notice that it is
      potentially responsible for a material, on a consolidated basis, clean-up
      site or corrective action under any applicable laws, statutes, ordinances,
      by-laws, regulations, or any orders, directions or decisions rendered by
      any government, ministry, department or administrative regulatory agency
      relating to the protection of the environment (the "Environmental
      Laws"), occupational health and safety or otherwise relating to
      dealing with Hazardous Substances;

	 	 	 
	 	(r) 	
      the Company and each Subsidiary holds all material
      licences, registrations, qualifications, permits and consents necessary or
      appropriate for carrying on its business as currently carried on and for
      the purposes described in the Disclosure Documents, and all such licences,
      registrations, qualifications, permits and consents are valid and
      subsisting and in good standing in all material respects except where the
      failure to hold or the lack of good standing in respect to such licences,
      registrations, qualifications, permits and consents would not materially
      adversely affect the assets, business, results of operations, or condition
      of the Company and its Subsidiaries on a consolidated
  basis;

- 14 -

	 	(s) 	
      the Company has acquired (or in the case of future
      actions, expects to acquire in the ordinary course of business) all the
      leases, easements, rights of way, access rights, including but not limited
      to any mineral and geothermal rights in respect of lands related to the
      Projects, and rights and allocation to water, that are necessary to
      conduct its business as currently conducted, and proposed to be conducted
      at the Raft River, Neal Hot Springs and San Emidio Repower Projects as
      described in the Disclosure Documents, except where the failure to hold
      such leases easements, rights of way, access rights, and rights and
      allocation to water would not materially adversely affect the assets,
      business, results of operations or condition of the Company and its
      Subsidiaries on a consolidated basis;

	 	 	 
	 	(t) 	
      all licenses, permits, authorizations and other approvals
      required under applicable law in connection with the leases, easements,
      rights of way and access rights are in full force and effect (or in the
      case of future actions, are expected to be acquired in the ordinary course
      of business) and are sufficient to permit the Company and each Subsidiary
      to conduct its business as currently conducted and proposed to be
      conducted at the Raft River, Neal Hot Springs and San Emidio Repower
      Projects as described in the Disclosure Documents;

	 	 	 
	 	(u) 	
      no event exists which, but for the passing of time or the
      giving of notice, or both, would constitute a default by any party to any
      of the leases, easements, rights of way or access rights and no party to
      any lease, easement, right of way or access right is claiming any such
      default or taking any action purportedly based upon any such default,
      except where the failure of such licenses, permits, authorizations and
      other approvals to be in full force and effect would not materially
      adversely affect the assets, business, results of operations or condition
      of the Company and its Subsidiaries on a consolidated basis;

	 	 	 
	 	(v) 	
      the Company has not received any, nor to the Company's
      knowledge are there any pending or threatened, notices of violation or
      alleged violation of any applicable laws affecting the Projects;

	 	 	 
	 	(w) 	
      the Company has such rights of entry and exit to and from
      the Projects as are reasonably necessary to carry on its business and
      operate at the Projects;

	 	 	 
	 	(x) 	
      there are no material restrictions imposed by any
      applicable law or by agreement which conflict with the proposed
      acquisition, development, construction, maintenance and operation of the
      Projects;

	 	 	 
	 	(y) 	
      to the Company's knowledge, the Projects are now zoned
      and otherwise regulated so as to permit the use of the sites for their
      intended uses and in accordance with applicable law;

	 	 	 
	 	(z) 	
      neither the Company nor any Subsidiary has received
      written notice of any claims for construction liens or other liens,
      charges, encumbrances, security interests or adverse claims with respect
      to work or services performed or materials supplied to, on or in
      connection with the Projects other than liens or encumbrances imposed in
      the ordinary course of business;

	 	 	 
	 	(aa) 	
      there are no outstanding judgments, writs of execution,
      seizures, injunctions or directives against the Company or any Subsidiary
      nor any work orders or directives or notices of deficiency capable of
      resulting in work orders or directives with respect to the
  Projects;

- 15 -

	 	(bb) 	
      the Company holds all necessary rights for all roads
      necessary for full utilization of the Projects, as applicable, as each is
      currently conducted;

	 	 	 
	 	(cc) 	
      all necessary easements, rights of way, licenses,
      agreements and other rights for the transmission, interconnection and
      utilization of the interconnection facilities have been acquired for the
      Projects as each project is currently conducted at the Raft River, Neal
      Hot Springs and San Emidio Projects and as each is intended to be
      developed;

	 	 	 
	 	(dd) 	
      except as disclosed in the Disclosure Documents, the
      Company or its Subsidiary is the legal and beneficial owner, and has good
      and marketable title to, all of the material property or assets of the
      Company or the Subsidiary, as applicable, described in the Disclosure
      Documents, and no other property or assets (other than facilities to be
      constructed) are necessary for the conduct of the business of the Company
      and each Subsidiary as currently conducted, or as proposed to be conducted
      at the Raft River, Neal Hot Springs and San Emedio Repower Projects, and
      none of the Company or any of the Subsidiaries has any responsibility or
      obligation to pay any material commission, royalty, licence fee or similar
      payment to any person with respect to its property and assets;

	 	 	 
	 	(ee) 	
      the Company is a reporting issuer under the securities
      laws of Ontario, Alberta and British Columbia and a registrant under the
      1934 Act, and as except as disclosed to the Agents in writing is not in
      default in any material respect of any requirement of such Securities Laws
      and the Company is not included on a list of defaulting reporting issuers
      maintained by the Securities Commissions of the Provinces of Ontario,
      Alberta and British Columbia;

	 	 	 
	 	(ff) 	
      the securities underlying the Subscription Receipts will
      not be subject to a restricted period or to a statutory hold period under
      the Securities Laws or to any resale restriction under the policies of the
      Stock Exchanges other than as described in the Subscription
    Agreement;

	 	 	 
	 	(gg) 	
      since March 31, 2009, and except as disclosed to the
      Agents in writing the Company has been in compliance in all material
      respects with its continuous disclosure obligations under the Securities
      Laws and the policies, rules and regulations of the Stock
  Exchanges;

	 	 	 
	 	(hh) 	
      all the statements set forth in the Disclosure Documents
      were true, correct, and complete in all material respects and did not
      contain any misrepresentation as of the date of such statements and the
      Company has not filed any confidential material change reports under the
      laws of Canada since the date of such statements which remain confidential
      as at the date hereof;

	 	 	 
	 	(ii) 	
      other than as disclosed in the Disclosure Documents, no
      material fact or material change has arisen or has been discovered which
      would have been required to have been stated in the Disclosure Documents
      had the fact arisen or been discovered on, or prior to, the date of such
      Disclosure Documents;

	 	 	 
	 	(jj) 	
      the Company's Auditors are independent public accountants
      as required under applicable Securities Laws, are qualified to act as
      auditors of the Company under the applicable Securities Laws, and there
      has never been a reportable disagreement (within the meaning of NI 51-102)
      between the Company and the Company's Auditors;

- 16 -

	 	(kk) 	
      the Company has all licenses, leases, permits,
      authorizations and other approvals, all proprietary rights to all patents
      and patent applications, all copyrights, registered and unregistered, and
      all rights, claims and privileges pertaining thereto, software and
      documentation therefor, object code, source code (including all
      programmers' notes), procedures, methods, works of authorship, and other
      documentation, data and information, inventions (whether or not
      patentable), formulas, processes, invention disclosures, technology,
      technical data or information, and all rights, claims and privileges
      pertaining thereto, all industrial designs, trade secrets, know-how,
      concepts, information and all other intellectual and industrial property
      and other proprietary rights information and other intellectual and
      industrial property (collectively, "Intellectual Property")
      necessary to permit the Company, in all material respects, to conduct its
      business as currently conducted; the Company has not received any notice
      nor is it aware of any material infringement of or conflict with asserted
      rights of others with respect to any Intellectual Property or of any facts
      or circumstances that would render any Intellectual Property invalid or
      inadequate to protect the interests of the Company therein;

	 	 	 
	 	(ll) 	
      during the period in which the Subscription Receipts are
      offered for sale, neither the Company nor any of its affiliates, nor any
      person acting on its or their behalf (other than the Agents, their
      affiliates and any person acting on their behalf, as to which no
      representation is made) has taken or will take any action that would cause
      the exemption afforded by Section 4(2) of the U.S. Securities Act to be
      unavailable for offers and sales of the Subscription Receipts, pursuant to
      this Agreement;

	 	 	 
	 	(mm) 	
      none of the Company, any of its affiliates or any person
      acting on its or their behalf have engaged or will engage in any form of
      General Solicitation or General Advertising with respect to offers or
      sales of the Subscription Receipts;

	 	 	 
	 	(nn) 	
      the Company has not, for a period of six months prior to
      the date hereof sold, offered for sale or solicited any offer to buy any
      of its securities in the United States in a manner that would be
      "integrated" with the Offering and that would cause the exemption afforded
      by Section 4(2) of the U.S. Securities Act and Rule 506 of Regulation D to
      be unavailable for offers and sales of the Subscription
Receipts;

	 	 	 
	 	(oo) 	
      during the period in which the Subscription Receipts are
      offered for sale, neither the Company nor any of its affiliates, nor any
      person acting on its or their behalf (other than the Agents, their
      affiliates and any person acting on their behalf, as to which no
      representation is made) has taken or will take, directly or indirectly,
      any action that would constitute a violation of Regulation M of the SEC
      under the 1934 Act;

	 	 	 
	 	(pp) 	
      the Company shall cause a Form D to be filed with the SEC
      within 15 days of the first sale of Subscription Receipts and shall,
      unless directed to the contrary by the Agents with regard to any
      jurisdiction in which a U.S. Affiliate is relying on a state institutional
      exemption that does not require the making of any filing, make such other
      filings as shall be required by applicable state securities laws to secure
      exemption from registration under such securities laws for the sale of the
      Subscription Receipts in such states;

	 	 	 
	 	(qq) 	
      neither the Company nor any of the predecessors or
      affiliates thereof has been subject to any order, judgment or decree of
      any court of competent jurisdiction temporarily, preliminarily or
      permanently enjoining such person for failure to comply with Rule 503 of
      Regulation D concerning the filing of notice of sales on Form D;
  and

- 17 -

	 	(rr) 	
      the Company is not now and, as a result of the
      transactions contemplated by this Agreement and the Subscription
      Agreements, will not be an "investment company" (as defined in the United
      States Investment Company Act of 1940) that is or will be required to be
      registered under Section 8 of that Act.

7.  

Covenants of the Company. The Company covenants and
agrees with the Agents that: 

	 	(a) 	
      it will advise the Agents, promptly after receiving
      notice or any obtaining knowledge thereof, of the imposition of any cease
      trading or similar order affecting the Common Shares or the Subscription
      Receipts (or any securities underlying the Subscription Receipts) or order
      modifying or making unavailable any exemption pursuant to which the
      Subscription Receipts (or any securities underlying the Subscription
      Receipts) are being offered or sold, or the institution, threatening or
      contemplation of any proceedings for any such purpose or any request made
      by any Securities Commission relating to the Offering;

	 	 	 
	 	(b) 	
      unless it would be unlawful to do so or unless the
      Company, acting reasonably, determines that it would not be in the best
      interests of the Company to do so or would result in non-compliance with
      any applicable laws or the requirements of the Stock Exchanges, the
      Company will accept each duly completed and executed Subscription
      Agreement and any such acceptance will be made on the Closing
  Date;

	 	 	 
	 	(c) 	
      the Company will have taken, on or prior to the Closing
      Date, all necessary steps to ensure the Subscription Receipts, the
      Underlying Common Shares and Share Purchase Warrants that each form part
      of the Units, the Warrant Shares issuable pursuant to the exercise of
      Share Purchase Warrants, the Agents' Special Warrants, the Compensation
      Options and the Compensation Shares issuable pursuant to the exercise of
      Compensation Options have been duly authorized for issuance and in respect
      of the Underlying Common Shares, Warrant Shares and Compensation Shares,
      reserved for issue to the persons entitled thereto;

	 	 	 
	 	(d) 	
      the Company will conduct the Offering in accordance with
      the terms and conditions in Schedule "C" hereto;

	 	 	 
	 	(e) 	
      the representations and warranties of the Company in
      Schedule "C" hereto are true and correct as of the Closing Date;

	 	 	 
	 	(f) 	
      the Company will duly, punctually and faithfully perform
      all of the obligations to be performed by it under the Subscription
      Agreements;

	 	 	 
	 	(g) 	
      the Company will take all such steps as may be necessary
      to obtain conditional approval of the Stock Exchanges and the approval of
      all Securities Commissions having jurisdiction over the transactions
      contemplated by this Agreement and the Subscription Agreements on or prior
      to the Closing Date;

	 	 	 
	 	(h) 	
      for a period commencing as of the date of this Agreement
      and ending on the earlier of: (i) the date the Company has both a receipt
      for the Final Prospectus and the Registration Statement has been made
      effective; and (ii) 180 days after Closing, the Company agrees that it
      will not, and will not announce any intention to, (a) provide any waivers
      to accelerate the trading of any Common Shares that are currently
      restricted from trading without the prior written consent of the Agents,
      which consent shall not be unreasonably

- 18 -

	 		
      withheld or delayed, or (b) directly or indirectly, enter
      into any agreement to offer or sell any Common Shares or financial
      instruments convertible or exchangeable into Common Shares, other than
      pursuant to: (I) the exercise of convertible securities, options or
      warrants outstanding as of the date hereof, (II) the grant or exercise of
      options pursuant to the Company's Stock Option Plan, (III) a private or
      public equity offering, (IV) one or more arm's length acquisitions by the
      Company or its subsidiaries or (V) an offer or sale, or a negotiation or
      entry into an agreement to offer or sell to a strategic investor or
      investors securities which are "restricted securities" under the U.S.
      Securities Act and the Company takes action to register the resale of such
      securities prior to six months from the issuance of such securities;
      provided that, in the case of Subsection 7(f)(b)(III), (IV) and (V), the
      prior written consent of the Agents shall have been obtained, such consent
      shall not be unreasonably withheld or delayed (provided, that in respect
      of the consents related to Section 7(f)(b)(III), the intent of the parties
      is that the Purchasers should not be disadvantaged with respect to the
      liquidity of the securities relating to the Offering relative to
      purchasers under a subsequent offering).

	 	 	 
	 	(i) 	
      the Company will comply with all filing and other
      continuous disclosure requirements under all applicable Securities
      Laws;

	 	 	 
	 	(j) 	
      the Company will have received the approval of the
      Agents, acting reasonably, regarding the form and content of the
      Subscription Receipt Agreement, Subscription Receipt Certificate, Share
      Purchase Warrant Certificate, Agents' Special Warrant Certificate and
      Compensation Option Certificate; and

	 	 	 
	 	(k) 	
      the Company will use commercially reasonable efforts to
      ensure that there is available "adequate current public information" with
      respect to the Company within the meaning of Rule 144(c) under the U.S.
      Securities Act commencing six months after the Closing Date and at all
      times thereafter when the Registration Statement is not effective and up
      to date.

8. 

Due Diligence. Until the date on which a receipt is
received for the Final Prospectus, the Company shall at all times allow the
Agents and their representatives to conduct all due diligence investigations and
examinations which the Agents may reasonably require in order to fulfil their
obligations as Agents, in order to avail themselves of a defence to any claim.

9.  

Indemnity and
Contribution. 

9.1 

The Company
covenants and agrees to indemnify and save harmless the Agents and their U.S.
Affiliates and their respective directors, officers, employees, shareholders and
Agents (collectively, "Agents
Personnel"), against all losses (other than loss of profits), claims,
damages, liabilities, costs or expenses, whether joint or several, caused or
incurred in connection with the services rendered by the Agents pursuant to this
Agreement by reason of or in connection with: 

	 	(a) 	
      any statement (other than a statement contained in and
      included in reliance upon and in conformity with written information
      furnished to the Company by the Agents relating to the Agents specifically
      for use therein) in: (i) any document filed by the Company with the
      relevant securities regulatory authorities in Canada since March 31, 2009
      including all press releases filed on SEDAR; and (ii) the Preliminary
      Prospectus and Final Prospectus, which at the time and in the light of the
      circumstances under which it was made contains or is alleged to contain a
      misrepresentation;

- 19 -

	 	(b) 	
      the omission or alleged omission to state in any
      certificate of the Company or of any officers of the Company delivered
      hereunder or pursuant hereto any material fact (other than a material fact
      omitted in reliance upon and in conformity with written information
      furnished to the Company by the Agents relating to the Agents specifically
      for use therein) required to be stated therein where such omission or
      alleged omission constitutes or is alleged to constitute a
      misrepresentation;

	 	 	 
	 	(c) 	
      any order made or any inquiry, investigation or
      proceeding commenced or threatened by any securities regulatory authority,
      Stock Exchanges or by any other competent authority based upon any failure
      or alleged failure to comply with applicable securities laws (other than
      any failure or alleged failure to comply by the Agents) preventing and
      restricting the trading in or the sale of the Common Shares in the
      provinces of Canada;

	 	 	 
	 	(d) 	
      the non-compliance or alleged non-compliance by the
      Company with any requirement of Securities Laws, including the Company's
      non-compliance with any statutory requirement to make any document
      available for inspection; or

	 	 	 
	 	(e) 	
      any breach of any representation, warranty or covenant of
      the Company contained herein or the failure of the Company to comply with
      any of its obligations hereunder;

and will reimburse the Agents promptly upon demand for any
legal or other expenses reasonably incurred by it in connection with
investigating or defending any such losses, claims, damages, liabilities or
actions in respect thereof, as incurred. 

Notwithstanding the foregoing, the Company will not be liable
to indemnify or reimburse an indemnified party in respect of any losses, claims,
damages, liabilities, costs or expenses that have been determined, by a court of
competent jurisdiction in a decision that has become final and is not
appealable, to have been caused by the wilful misconduct, fraud or gross
negligence of an Indemnified Party (as defined below). 

9.2 

The Company shall
not, without the prior written consent of the Agents, which consent shall not be
unreasonably withheld, settle or compromise or consent to the entry of any
judgment in any pending or threatened claim, action, suit or proceeding in
respect of which indemnification may be sought hereunder (whether or not the
Agents or any Agents' Personnel are a party to such claim, action, suit or
proceeding), unless such settlement, compromise or consent includes an
unconditional release of the Agents and all Agents' Personnel from all liability
arising out of such claim, action, suit or proceeding. 

9.3 

Notwithstanding
the foregoing, an indemnifying party shall not be liable for the settlement of
any claim or action in respect of which indemnity may be sought hereunder
effected without its written consent, which consent shall not be unreasonably
withheld. 

9.4 

If any claim,
action suit or proceeding shall be asserted against any person in respect of
which indemnification is or might reasonably be considered to be provided, such
person (the "Indemnified Party") will
notify the Company as soon as possible and in any event on a timely basis, of
the nature of such claim and the Company shall be entitled (but not required) to
assume the defence of any suit brought to enforce such claim; provided, however,
that the defence shall be through legal counsel selected by the Company and
acceptable to the Indemnified Party, acting reasonably, and that no settlement
may be made by the Company or the Indemnified Party without the prior written
consent of the other, acting reasonably. 

- 20 -

9.5 

In any such claim, the Indemnified Party shall have the
right to retain other counsel (only one in each jurisdiction) to act on the
Indemnified Party's behalf, provided that the fees and disbursements of such
other counsel shall be paid by the Indemnified Party, unless (i) the Company and
the Indemnified Party mutually agree to retain such other counsel or (ii) the
named parties to any such claim (including any third or implicated party)
include both the Indemnified Party on the one hand and the Company, on the other
hand, and the Indemnified Party has been advised by counsel that the
representation of the Company and the Indemnified Party by the same counsel
would be inappropriate due to actual or potential conflicting interests, in
which event such fees and disbursements shall be paid by the Company to the
extent that they have been reasonably incurred. 

9.6 

To the extent
that any Indemnified Party is not a party to this Agreement, the Agents shall
obtain and hold the right and benefit of the indemnity provisions hereunder in
trust for and on behalf of such Indemnified Party. 

9.7 

The Company
hereby waives all rights which it may have by statute or common law to recover
contribution from Agents or any other Indemnified Party in respect of losses,
claims, costs, damages, expenses or liabilities which it may suffer or incur
directly or indirectly (in this paragraph, "losses") by reason of or in
consequence of a document of the Company containing a misrepresentation;
provided, however, that such waiver shall not apply in respect of losses by
reason of or in consequence of any misrepresentation which is based upon or
results from information or statements furnished by or relating solely to the
Agents or an affiliate thereof. 

10.   

Conditions of Closing. The obligations of the Agents
to deliver at the Closing Time executed Subscription Agreements shall be
conditional upon the Agents being satisfied with the results of their due
diligence investigations relating to the Company and upon the fulfilment or
waiver by the Agents at or before the Closing Time of the following conditions,
which conditions the Company covenants to use its best efforts to fulfil or
cause to be fulfilled prior to the Closing Time: 

	 	(a) 	
      the execution and delivery of this Agreement, the
      Subscription Agreements, the Subscription Receipt Agreement and the
      creation and issuance of the Subscription Receipts and Agents' Special
      Warrants, the due authorization of the issuance of the Underlying Common
      Shares, Share Purchase Warrants and Compensation Options and the allotment
      and reservation of the Underlying Common Shares, Warrant Shares and
      Compensation Shares, shall have been duly authorized by all necessary
      corporate action;

	 	 	 
	 	(b) 	
      any necessary consents or approvals of the Securities
      Commissions with respect to the issue and sale of the Subscription
      Receipts and Agents' Special Warrants shall have been obtained, and the
      conditional approval of the Stock Exchanges to list the Underlying Common
      Shares, Warrant Shares and Compensation Shares shall have been
      obtained;

	 	 	 
	 	(c) 	
      the Agents shall have received certificates addressed to
      the Agents and to the Purchasers, dated as of the date of Closing, signed
      by the President and the Chief Executive Officer of the Company, or such
      other officer or officers of the Company as the Agents may accept,
      certifying on behalf of the Company to the effect that, except as has been
      generally disclosed at the date thereof:

	 	(i) 	
      no order, ruling or determination suspending or cease
      trading the Common Shares has been issued, and no proceedings for that
      purpose have been instituted or, to the knowledge of such officers,
      contemplated or threatened by any Securities
Commission;

- 21 -

	 	(ii) 	
      other than as disclosed in the Disclosure Documents,
      since March 31, 2009 there has not been any material change (actual,
      anticipated, contemplated or threatened, whether financial or otherwise)
      in the condition, business, affairs, results, operations, assets or
      liabilities of the Corporation and its Subsidiaries on a consolidated
      basis; and

	 	 	 
	 	(iii) 	
      other than as disclosed in the Disclosure Documents,
      since March 31, 2009 no material fact has arisen or has been discovered
      which would have been required to have been stated in the Disclosure
      Documents had the fact arisen or been discovered on, or prior to the date
      of such Disclosure Documents;

	 	 	 
	 	(iv) 	
      the representations and warranties of the Company
      contained in this Agreement are true and correct in all material respects
      as of the Closing Time with the same force and effect as if made at and as
      of the Closing Time;

	 	 	 
	 	(v) 	
      the Company has complied in all material respects with
      all the terms and conditions of this Agreement on its part to be complied
      with at or before the Closing Time; and

	 	 	 
	 	(vi) 	
      as to such other matters of a factual nature as are
      appropriate and usual in the circumstances and as the Agents or the
      Agents' Counsel may reasonably request;

	 	(d) 	
      the Company shall have delivered lock-up agreements
      executed by each director and officer of the Company in the form attached
      hereto as Schedule "F";

	 	 	 
	 	(e) 	
      subject to the Conditions, the Agents shall have received
      favourable legal opinions, in a form satisfactory to the Agents, acting
      reasonably, dated as of the date of Closing, from Dorsey & Whitney
      LLP, United States counsel to the Company, and Goodmans, Canadian counsel
      to the Company substantially in the form annexed hereto as Schedule "B"
      and where appropriate, counsel in the other Offering Jurisdictions and
      other jurisdictions as may be required addressed to the Agents and to the
      Purchasers with respect to such matters as the Agents may reasonably
      request prior to the Closing Time;

	 	 	 
	 	(f) 	
      the Company shall have delivered the certificates
      representing the Subscription Receipts and Agents' Special Warrants;
      and

	 	 	 
	 	(g) 	
      the Agents shall have received the Agents' Commission and
      reimbursement for expenses incurred to the Closing Date in the manner
      specified in Sections 4 and 12.

In providing such opinions, counsel may, where appropriate,
rely on the opinions of other counsel as to matters mentioned therein relating
to jurisdictions where Company's counsel does not practice law and on
certificates or letters of the auditors, of the officers of the Company, of the
transfer agents of the Company and public officials as to factual matters
relevant to such opinions. 

11.   

Closing Procedures. Provided duly executed
Subscription Agreements have been delivered to the Company's counsel, the
Company will cause to be issued and to be delivered to the Agents at the offices
of Goodmans LLP in Toronto, Ontario (or such other place or places as the Agents
may reasonably direct) without charge at the Closing Time and contemporaneously
with the delivery to the Company of the aggregate Purchase Price for all
Subscription Receipts, certificates representing the Subscription Receipts and
Agents' Special Warrants in such number and denomination and bearing the
registration particulars as the Agents may, in writing, direct to the Company
prior to the Closing Time. 

- 22 -

12.   

Expenses of Offering. Whether or not the
transactions herein contemplated shall be completed, all costs and expenses of
and incidental to the sale of the Subscription Receipts to the Purchasers and
all other matters in connection with the transactions herein set out shall be
borne by the Company, whether before or after Closing, including without
limitation, all costs and expenses in connection with the preparation and issue
of the certificates for the securities to be offered hereunder, the fees and
disbursements of the Company's counsel, all local counsel and the expenses of
the Agents in connection with the Offering including without limitation the
reasonable fees and expenses of the Agents' counsel, and the Agents' out of
pocket expenses, collectively to a maximum of $100,000 (including GST, if
applicable). Any expenses incurred in excess of this maximum shall be subject to
pre-approval by the Company, acting reasonably. The Company shall be responsible
for the payment of any applicable sales taxes on the foregoing amounts. 

The Agents may render accounts to the Company from time to
time, for their expenses, for payment on or before the date set out in the
accounts. The Company will pay to the Agents the reasonable expenses in
connection with the Offering of the Agents by; (i) cheque at the Closing Date;
or (ii) the Agents will deduct the amount of such expenses from the gross
proceeds of the Offering when paid to the Company. 

13.  

Termination. 

13.1 

If at any time
prior to Closing:

	 	(a) 	
      there shall have occurred any adverse material change or
      the Agents shall discover any previously undisclosed adverse material fact
      (determined by the Agents, acting reasonably) in relation to the Company
      that has or could reasonably be expected to have a significant adverse
      effect on the market price or value of the Subscription Receipts or Common
      Shares; or

	 	 	 
	 	(b) 	
      there should develop, occur or come into effect or
      existence any event, action, state, condition or major financial
      occurrence or catastrophe, war or act of terrorism of national or
      international consequence or any law or regulation which, in the
      reasonable opinion of the Agents, seriously adversely affects or involves,
      or will seriously adversely affect or involve, the financial markets or
      the business, operations or affairs of the Company and its subsidiaries,
      on a consolidated basis; or

	 	 	 
	 	(c) 	
      the Company is in breach of any material term, condition
      or covenant of this Agreement or any material representation or warranty
      given by the Company in this Agreement becomes or is false; or

	 	 	 
	 	(d) 	
      the Agents are not satisfied, at their discretion, with
      the terms of their due diligence review and investigation of the Company
      and the Subsidiaries;

the Agents shall be entitled, at their option, to terminate and
cancel their obligations to the Company under this Agreement by written notice
to that effect given to the Company at the address shown in Section 17.3 prior
to the Closing Time. In the event of any such termination, the Company's
obligations under this Agreement to the Agents shall be at an end except for any
liability of the Company provided for in Sections 9 and 12 hereof. 

13.2 

The rights of
termination contained in this Section 13 are in addition to any other rights or
remedies the Agents may have in respect of any default, misrepresentation, act
or failure to act of the Company in respect of any matters contemplated by this
Agreement. 

- 23 -

14.  

Agents' Obligations. 

14.1 

The Agents represent, warrant and covenant to the Company as
follows: 

	 	(a) 	
      the Agents and each of their affiliates have complied and
      will comply with all Securities Laws and other laws and regulations or
      similar enactments applicable in respect of the Offering in each of the
      jurisdictions in which they may offer or sell the Subscription
      Receipts;

	 	 	 
	 	(b) 	
      the Agents will conduct the Offering in accordance with
      the terms and conditions in Schedule "C" hereto;

	 	 	 
	 	(c) 	
      the representations and warranties of the Agents in
      Schedule "C" hereto are true and correct as of the Closing Date;

	 	 	 
	 	(d) 	
      the Agents are appropriately registered under the
      Securities Laws of the Offering Jurisdictions to permit them to lawfully
      fulfil their obligations hereunder; and

	 	 	 
	 	(e) 	
      the Agents have not directly or indirectly, offered, sold
      or delivered any Subscription Receipts to any person in any jurisdiction
      other than in the Offering Jurisdictions, and in all cases except in a
      manner which is exempt from registration and prospectus requirements under
      applicable securities laws and which, other than the Preliminary
      Prospectus, Final Prospectus and Registration Statement, does not require
      the Company to file a prospectus, an offering memorandum, or similar
      document to register any of its securities or to comply with ongoing
      filing or disclosure or other similar requirements, under the laws of any
      jurisdiction.

15. 

Subsequent
Offerings. 

15.1  

The Company will use commercially reasonable efforts to
include Dundee and Clarus as syndicate members in future equity offerings of the Company
involving an investment dealer during the 12 month period following the Closing
Date. 

15.2 

In addition to the participation right referenced above in
subsection 15.1, Dundee and Clarus shall have the right to provide a formal
proposal to the Board of Directors of the Company to act as co-lead advisors in
Canada or the United States on terms that are mutually acceptable, with regard
to any merger and/or acquisition transaction that the Company may enter into
during the 12 month period following the Closing Date. 

16. 

 Compensation Fee. 

16.1 

In the event the
Company does not proceed with the Offering and the Company or any of the
Subsidiaries enters into or announces an intention to enter into a binding
agreement in respect of an Alternative Transaction (as defined below), at any
time prior to the termination of this Agreement or within 40 days of the date of
the termination of this Agreement, then the Company agrees to pay a compensation
fee of US$600,000 to the Agents (the "Compensation Fee"). An "Alternative Transaction" means any transaction involving the Company
which, in the opinion of the Agents, acting reasonably, would replace or
supersede the completion of the Offering including but not limited to (a) any
issuance or agreement to issue securities of the Company (other than the
Offering and as set out in Sections 7(f)(I), (II), (III), (IV), and (V),
(b), a material transaction involving the Company or any of its subsidiaries
or material assets including, without limitation, a take-over bid, insider bid,
merger, amalgamation, arrangement, reorganization or joint venture or
other form of business combination with a third party or (c) the direct or
indirect sale or exchange of all or substantially all of the asset of the
Company or any of its material subsidiaries. The Compensation Fee shall be paid
to Dundee and Clarus (50% each), within two business days of the Company
entering into or announcing the intention to enter into a binding agreement in
respect of an Alternative Transaction. 

- 24 -

17.  

Miscellaneous. 

17.1 

All
representations and warranties contained herein and all of the covenants and agreements of the Company herein, to the extent that they are
required to be performed on or before Closing, shall be construed as conditions
and any material breach or failure to comply with any thereof shall entitle the
Agents, in addition to and not in lieu of any other remedies the Agents have in
respect thereof, to terminate any obligation to purchase the Subscription
Receipts by written notice to that effect given to the Company prior to the
Closing Time. It is understood that the Agents may waive in whole or in part or
extend the time for compliance with any of such terms and conditions without
prejudice to its rights in respect of any other of such terms and conditions or
any other subsequent breach or non-compliance, provided that to be binding on
the Agents any such waiver or extension must be in writing.

17.2 

Dundee is hereby authorized by Clarus and Toll Cross
Securities Inc. to act on their behalf and the Company shall be entitled to and
shall act on any notice given in accordance with this Agreement or any agreement
entered into by or on behalf of the Agents by Dundee which represents and
warrants that it has irrevocable authority to bind the Agents, except in respect
of any consent to a settlement pursuant to Section 9 which consent shall
be given by the Indemnified Party or a notice of termination pursuant to Section
13 which notice may be given by any of the Agents. 

17.3 

Any notice or other communication hereunder shall be in
writing and shall unless herein otherwise provided be given by delivery to a
responsible officer of the addressee or by telex or telecopier, if to the
Company, addressed to: U.S. Geothermal Inc., 1505 Tyrell Lane, Boise, Idaho
83706 (Attention: President and Chief Executive Officer) (telecopier: (208)
424-1030); and if to the Agents addressed to: Dundee Securities Corporation, 1
Adelaide Street East, 27th Floor, Toronto, Ontario M5C 2V9
(Attention: Clarke D. Herring) (telecopier: (416) 350-3312) and shall be deemed
to have been given when actually delivered or when such notice should have
reached the addressee in the ordinary course. 

17.4 

Time shall be of
the essence of the foregoing offer and of the agreement resulting from the
acceptance thereof.

17.5 

The
representations, warranties, covenants and other agreements herein contained
shall survive the purchase by the Purchasers of the Subscription Receipts and
shall continue in full force and effect unaffected by any subsequent disposition
by the Purchasers of the Subscription Receipts for a period of one (1) year
after the closing of the Acquisition (other than obligations of the Company set
forth in Sections 9 and 12 hereof which will continue indefinitely). 

17.6 

This Agreement
may be executed in any number of counterparts, each of which when delivered,
either in original or facsimile form, shall be deemed to be an original and all
of which together shall constitute one and the same document. 

17.7

This Agreement
shall be governed by the laws of the Province of British Columbia and the
federal laws of Canada applicable therein.

- 25 -

17.8 

The provisions
herein contained constitute the entire agreement between the parties and
supersede all previous communications, representations, understandings and
agreements between the parties with respect to the subject matter hereof whether
verbal or written including the engagement letter dated July 28, 2009.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

- 26 -

If the foregoing is in accordance with your understanding, will
you please confirm your acceptance by signing the enclosed copies in the place
indicated and by returning the same to us.

Yours very truly, 

	DUNDEE SECURITIES CORPORATION 	
			
	By: 	 	
	 	             Clarke D.
      Herring 	
	 	             Managing
      Director, Investment Banking 	
			
			
	CLARUS SECURITIES INC. 	
			
	By:	 	
	 	             Rod
      Campbell 	
	 	             Managing
      Director, Investment Banking 	
			
			
	TOLL CROSS SECURITIES INC. 	
			
	By:	 	
	
    	             Rodger Gray
    	
	
    	             President
    	

The foregoing is in accordance with our understanding and is
accepted and agreed to by as of the ___th day of August, 2009. 

U.S. GEOTHERMAL INC. 

	 		
	
    By: 
		
	 	             Daniel Kunz
    	 
	 	             Chief
      Executive Officer, President and Director 	

- 27 - 

SCHEDULE "A" 

[INSERT FINALIZED SUBSCRIPTION AGREEMENT]

A-1

SCHEDULE "B"

OPINION OF COMPANY' COUNSEL

	1. 	
      the due incorporation of the Company and its Material
      Subsidiaries and that each of the Company and its Material Subsidiaries
      has not been dissolved;

	 	 
	2. 	
      the qualification of the Company and each of its Material
      Subsidiaries to carry on its business under the laws of each jurisdiction
      in which it carries on its business;

	 	 
	3. 	
      the corporate power of each of the Company and Material
      Subsidiaries to own its property and carry on its business;

	 	 
	4. 	
      the authorized and issued capital of the
  Company;

	 	 
	5. 	
      the due authorization and issuance of the Subscription
      Receipts and Agents' Special Warrants, the due authorization and
      reservation for issuance of the Underlying Common Shares, Warrants,
      Agents' Compensation Options, Warrant Shares and Compensation Shares, and
      that upon issuance with the applicable instrument the Underlying Common
      Shares, Warrant Shares and Compensation Shares will be fully paid and
      non-assessable;

	 	 
	6. 	
      based solely on a review of the shareholders' register of
      the Material Subsidiaries, the Company is the sole registered holder of
      all of its outstanding shares in the capital of each Material Subsidiary
      other than Raft River Energy I;

	 	 
	7. 	
      the approval of the listing of the Underlying Common
      Shares, the Warrant Shares and the Compensation Shares on the Toronto
      Stock Exchange and the NYSE-Amex subject to filing of required
      documentation and payment of fees within applicable time
periods;

	 	 
	8. 	
      the authorization, execution, delivery, binding effect
      and enforceability of this Agreement, the Subscription Receipt
      Certificates, the Agents' Special Warrant Certificates, the Warrant
      Certificates, the Compensation Option Certificates and the Subscription
      Agreements by, on and against the Company, subject to bankruptcy laws, the
      availability of equitable remedies and except with respect to rights to
      indemnity, contribution and waiver of contribution which may be subject to
      applicable laws;

	 	 
	9. 	
      the appointment of Computershare at its office in the
      City of Vancouver as transfer agent and registrar for the Common
      Shares;

	 	 
	10. 	
      the form of certificate representing the Common Shares
      has been duly approved by the Company and complies with the laws of the
      Company's jurisdiction of incorporation, the constating documents of the
      Company and the requirements of the Toronto Stock Exchange and the
      NYSE-Amex;

	 	 
	11. 	
      this Agreement and the issuance and sale of the
      Subscription Receipts, Agents' Special Warrants, Warrants, Underlying
      Common Shares, Compensation Options, Warrant Shares and the Compensation Shares not conflicting with
      or resulting in a breach of or a default under, in any material respect,
      (i) any of the terms, conditions or provisions of the constating documents
      of the Company, (ii) any of the resolutions of the directors or
      shareholders of the Company, (iii) the provisions of any U.S. federal
      statute, rule or regulation to which the Company is subject or the
      Delaware General Corporation Law;

B-1

	12. 	
      the Company is a reporting issuer not in default under
      the Securities Laws of the Provinces of Ontario and British
    Columbia;

	 	 
	13. 	
      the offering, sale and issuance of the Subscription
      Receipts, Agents' Special Warrants, Underlying Common Shares, Warrants,
      Compensation Options, Warrant Shares and Compensation Shares in accordance
      with the terms of this Agreement are exempt from the prospectus
      requirements of the Canadian Securities Laws, and the only filing,
      proceeding, approval, permit, consent or authorization required to be
      made, taken or obtained under the Securities Laws is the filing with the
      applicable provincial securities regulatory authority within the
      prescribed time periods, of a report in Form 45-106FI (as prescribed by
      National Instrument 45-106 of the Canadian Securities Administrators)
      prepared and executed in accordance with applicable Securities Laws,
      together with the requisite filing fees;

	 	 
	14. 	
      The first trade, if any, by Purchaser, of the
      Subscription Receipts or Agents' Special Warrants, other than a trade
      which is otherwise exempt under the Securities Laws of the Canadian
      Offering Jurisdictions, will be a distribution subject to the prospectus
      and registration requirements of the Securities Laws of the Canadian
      Offering Jurisdictions unless:

	 	(a) 	
      the Company is and has been a reporting issuer in one of
      the jurisdictions in Canada for the four months immediately preceding the
      trade;

	 	 	 
	 	(b) 	
      at least four months have elapsed form the Closing
      Date;

	 	 	 
	 	(c) 	
      the certificates representing the Subscription Receipts
      and Agents' Special Warrants, bear a legend in the form prescribed by
      National Instrument 45-102;

	 	 	 
	 	(d) 	
      the first trade is not a "control distribution" (within
      the meaning of National Instrument 45-102);

	 	 	 
	 	(e) 	
      no unusual effort is made to prepare the market or to
      create a demand for the security that is subject of the trade;

	 	 	 
	 	(f) 	
      no extraordinary commission or consideration is paid to a
      person in respect of the trade;

	 	 	 
	 	(g) 	
      if the Purchaser is an insider or officer of the Company,
      such Purchaser has no reasonable grounds to believe the Company is in
      default of securities legislation (as such term is defined in National
      Instrument 14-101).

B-2

	15. 	
      The offer and sale of the Subscription Receipts, Agents'
      Special Warrants, Underlying Common Shares, Warrants, Compensation
      Options, [Warrant Shares and Compensation Shares] to the Purchasers
      or Agents, as applicable, in the manner described in the Agency Agreement
      and Subscription Agreements are exempt from the registration provisions of
      the U.S. Securities Act.

	 	 
	16. 	
      The Company is not an "investment company" (as defined in
      the Investment Company Act of 1940) that is required to be registered
      under such Act.

	 	 
	17. 	
      Assuming that the Subscription Receipts are exchanged for
      Units in accordance with the terms of the Subscription Receipt Agreement
      and the Subscription Receipts, and that no commission or other
      remuneration is paid or given directly or indirectly for soliciting the
      exchange of Subscription receipts for Units or the exercise of Warrants,
      the six month holding period required by Rule 144(d)(1)(i) under the U.S.
      Securities Act for Warrant Shares issued pursuant to a cashless exercise
      of Warrants in accordance with Section 4.2 of the form of Warrant would
      begin to run on the date of issuance of the Subscription
  Receipts.

B-3

SCHEDULE "C"

U.S. TERMS AND CONDITIONS

This is Schedule "C" to the Agency Agreement among Dundee
Securities Corporation, Clarus Securities Inc. [and Toll Cross Securities Inc.]
(collectively, the "Agents"),U.S. Geothermal Inc. (the "Company") made as of August
●, 2009. 

As used in this schedule, the following terms shall have the
meanings indicated: 

	
    Accredited Investor 
	
    means an "accredited investor" as defined in
      Rule 501(a) of Regulation D; 

	
    General Solicitation or General
      Advertising 
	
    means general solicitation or general
      advertising (as those terms are used in Regulation D), including
      advertisements, articles, notices or other communications published in any
      newspaper, magazine, or similar media or broadcast over radio or
      television, or any seminar or meeting whose attendees had been invited by
      general solicitation or general advertising, or any other manner of
      conduct involving a public offering in the United States within the
      meaning of Section 4(2) of the U.S. Securities Act; 

	
    Regulation D 
	
    means Regulation D under the U.S. Securities
      Act; 

	
    Regulation S 
	
    means Regulation S under the U.S. Securities
      Act; 

	
    United States 
	
    means the United States of America, its
      territories and possessions, any state of the United States, and the
      District of Columbia; 

	
    U.S. Exchange Act 
	
    means the United States Securities Exchange
      Act of 1934, as amended; 

	
    U.S. Person 
	
    means "U.S. person" as defined in Rule 902(k)
      of Regulation S; 

	
    U.S. Placement Agents 
	
    means [●]; and 

	
    U.S. Securities Act 
	
    means the United States Securities Act of
      1933, as amended. 

All other capitalized terms used but not otherwise defined in
this Schedule "A" shall have the meanings assigned to them in the Agency
Agreement to which this Schedule "A" is attached. 

Representations, Warranties and Covenants of the Agents

The Agents acknowledge that the Securities have not been and
will not be registered under the U.S. Securities Act or applicable state
securities laws and may not be offered or sold, except in accordance with an
exemption or exclusion from the registration requirements of the U.S. Securities
Act and applicable state securities laws. Accordingly, the Agents, on behalf of
themselves and their affiliates, represent, warrant and covenant to and with the
Company that: 

C-1

	1. 	
      The Agents have offered and sold and will offer and sell
      the Subscription Receipts only as provided in paragraphs 2 through 12
      below.

	 	
     

	2. 	
      All offers and sales of Subscription Receipts to persons
      in the United States have been or will be made by the U.S. Placement
      Agents in accordance with applicable U.S. federal and state broker-dealer
      requirements.

	 	
     

	3. 	
      The U.S. Placement Agents are duly registered as
      broker-dealers under section 15(b) of the U.S. Exchange Act and are
      members of, and in good standing with, Financial Industry Regulatory
      Authority, Inc. (formerly, the National Association of Securities Dealers,
      Inc.) on the date hereof and on the date offers and sales were made in the
      United States.

	4. 	
      Any offer, sale or solicitation of an offer to buy the
      Subscription Receipts was or will be made only to Accredited Investors in
      transactions that are exempt from registration pursuant to Rule 506 of
      Regulation D under the U.S. Securities Act and available exemptions under
      all applicable state securities laws and require no filings or actions
      except as otherwise agreed by the Company.

	 	 
	5. 	
      Immediately prior to any offer or sale of the
      Subscription Receipts, the Agents or the U.S. Placement Agent had a
      pre-existing relationship with such offeree or purchaser and had or will
      have reasonable grounds to believe and did or will believe that each such
      offeree or purchaser was an Accredited Investor.

	 	 
	6. 	
      None of the Agents or the U.S. Placement Agent or any of
      their affiliates or any person acting on its or their behalf has used or
      will use any form of General Solicitation or General Advertising or has
      offered or will offer to sell the Subscription Receipts in any manner
      involving a public offering in the United States within the meaning of
      Section 4(2) of the U.S. Securities Act.

	7. 	
      They have not entered and will not enter into any
      contractual arrangement with respect to the distribution of the
      Subscription Receipts except with its affiliates, any selling group
      members or with the prior written consent of the Company. The Agents shall
      cause the U.S. Placement Agent and each affiliate or selling group member
      participating in the distribution of the Subscription Receipts to agree,
      for the benefit of the Company, to the same provisions contained in this
      Schedule "C" as apply to the Agents as if such provisions applied to such
      persons.

	 	 
	8. 	
      All purchasers of Subscription Receipts shall be informed
      that the Securities have not been and will not be registered under the
      U.S. Securities Act and the Subscription Receipts are being offered and
      sold in reliance upon an exemption from the registration requirements of
      the U.S. Securities Act provided by Rule 506 of Regulation D and/or
      Section 4(2) of the U.S. Securities Act.

	 	 
	9. 	
      Prior to completion of any sale of Subscription Receipts,
      each purchaser will be required to complete and execute a subscription
      agreement in the form or forms consented to by the Company and the
      Agents.

	10. 	
      At the Closing, the Agents, together with the U.S.
      Placement Agents, will provide a certificate substantially in the form of
      Exhibit 1 to this Schedule, relating to the manner of the offer and sale
      of the Subscription Receipts.

	 	 
	11. 	
      Neither the Agents, any U.S. Placement Agent, their
      respective affiliates nor any person acting on its or their behalf has
      taken or will take, directly or indirectly, any action in violation of
      Regulation M under the U.S. Exchange Act in connection with the offer and
      sale of the Subscription Receipts or the
Securities.

C-2 

	12. 	
      The Agents agree that all certificates representing the
      Securities sold in the United States as part of the Offering, and all
      certificates issued in exchange for or in substitution of the foregoing
      Securities, will bear a legend provided for in the subscription agreement
      to be completed and executed by each purchaser.

Representations, Warranties and Covenants of the Company

The Company represents, warrants, covenants and agrees to and
with the Agents and the U.S. Placement Agent that: 

	1. 	
      Neither the Company nor any of their affiliates, nor any
      person acting on their or its behalf (except the Agents, their affiliates
      and any person acting on any of their behalf, as to which no
      representation is made) has taken or will take, directly or indirectly,
      any action in violation of Regulation M under the U.S. Exchange Act in
      connection with the offer and sale of the Securities, or has taken or will
      take any action that would cause the exemption afforded by Rule 506 of
      Regulation D or Section 4(2) of the U.S. Securities Act to be unavailable
      for offers and sales of Subscription Receipts or Securities pursuant to
      the Agency Agreement or for exercises or conversion of Subscription
      Receipts or Warrants.

	 	 
	2. 	
      None of the Company, its affiliates or any person acting
      on its or their behalf (except the Agents, their affiliates and any person
      acting on any of their behalf, as to which no representation is made) has
      engaged or will engage in any form of General Solicitation or General
      Advertising.

	 	 
	3. 	
      Neither the Company nor any of its affiliates has offered
      or sold, for a period of six months prior to commencement of the offering
      of the Subscription Receipts, and will not offer or sell, any securities
      in a manner that would be integrated with the offer and sale of the
      Subscription Receipts and would cause the exemption from registration set
      forth in Rule 506 of Regulation D to become unavailable with respect to
      the offer and sale of the Securities.

	 	 
	4. 	
      None of the Company or any of its affiliates or any
      person acting on its or their behalf has offered or sold or will offer or
      sell any of the Subscription Receipts or the Shares sold pursuant to the
      Offering except through the Agents or a U.S. Placement Agent in accordance
      with this Schedule.

C-3 

EXHIBIT 1

AGENTS' CERTIFICATE

In connection with the offering of the Securities of U. S.
Geothermal Inc. (the "Corporation") pursuant to the Agency Agreement dated as of
August ___, 2009 among the Corporation , and the Agents named therein (the "Agency Agreement"), each of the undersigned hereby certify severally as to
their respective status and conduct, as follows: 

	 	(A) 	
      each U. S. affiliate of the undersigned Agent (a "U.S.
      Affiliate") who offered or sold Securities in the United States, or to, or
      for the account or benefit of, a U.S. Person, is a duly registered broker
      or dealer with the United States Securities and Exchange Commission and is
      a member of and is in good standing with the Financial Industry Regulatory
      Authority Inc. on the date hereof and on the dates of such offers and
      sales;

	 	 	 	 
		(B) 	
      all offers and sales of Securities in the United States,
      or to, or for the account or benefit of, a U.S. Person, have been effected
      in accordance with federal and state U. S. broker-dealer requirements in
      all material respects;

	 	 	 	 
	 	(C) 	
      immediately prior to contacting any offeree, we had
      reasonable grounds to believe and did believe that each offeree was an
      "accredited investor" as specified in Rule 501(a) of Regulation D (an "Accredited Investor") under the Securities Act of 1933, as amended (the
      "U.S. Securities Act") and, on the date hereof, we continue to believe
      that each person purchasing Securities is an Accredited
Investor;

	 	 	 	 
	 	(D) 	
      no form of general solicitation or general advertising
      (as those terms are used in Regulation D under the U.S. Securities Act)
      was used by us, including advertisements, articles, notices or other
      communications published in any newspaper, magazine or similar media or
      broadcast over radio, television, or telecommunications, including
      electronic display or the connection with the offer or sale of the
      Securities;

	 	 	 	 
		(E) 	
      the offering of the Securities has been conducted by us
      and by our respective U. S. affiliates in accordance with the terms of the
      Agency Agreement; and

	 	 	
       
	 	(F) 	
      prior to any sale of Securities, we obtained properly
      completed and executed Subscription Agreements from all
  purchasers.

C-4

Terms used in this certificate have the meanings given to them
in the Agency Agreement unless otherwise defined herein. 

Dated this ___ day of August, 2009 

	AGENTS 	 	U. S. AFFILIATES 	 
	 	 	 	 	 	 
	DUNDEE SECURITIES CORPORATION 	 	DUNDEE SECURITIES INC. 	 
	 	 	 	 	 	 
	 	 	 	 	 	 
	By: 	 	 	By: 	 	 
	Name: 	 	 	Name: 	 	 
	Title: 	 	 	Title: 	 	 
	 	 	 	 	 	 
	CLARUS SECURITIES INC. 	 	  	 	 
	 	 	 	 	 	 
	 	 	 	 	 	 
	By: 	 	 	  	 	 
	Name: 	 	 	  	 	 
	Title: 	 	 	  	 	 
	 	 	 	 	 	 
	TOLL CROSS SECURITIES INC. 	 	TOLL CROSS SECURITIES USA INC.
    	 
	 	 	 	 	 	 
	 	 	 	 	 	 
	By: 	 	 	By: 	 	 
	Name: 	 	 	Name: 	 	 
	Title: 	 	 	Title: 	 	 

C-5 

SCHEDULE "D"

[INSERT SUBSCRIPTION RECEIPT AGREEMENT]

D-1

SCHEDULE "E" 

[INSERT AGENTS' SPECIAL WARRANT CERTIFICATE]

E-1

SCHEDULE "F" 

[INSERT FORM OF LOCK-UP AGREEMENT]

F-1EX-10.27

SEPARATION AGREEMENT AND GENERAL RELEASE OF ALL CLAIMS

This Separation Agreement and General Release Of All Claims (hereinafter referred to as the
“Agreement”) is made and entered into this 24th day of November, 2009 (hereinafter referred
to as the “Execution Date”) by and between KONA GRILL, INC., a Delaware corporation, its
affiliates, subsidiaries, divisions, successors, and assigns, and the directors, officers, and
agents thereof (hereinafter collectively referred to as “Employer”) and MARK L. BARTHOLOMAY
(hereinafter referred to as “Employee”).

RECITALS

WHEREAS, Employee was employed by Employer as Chief Operating Officer;

WHEREAS, the terms and conditions of Employee’s employment with Employer were most recently
set forth in that certain Executive Employment Agreement dated May 11, 2009 (hereinafter referred
to as the “Employment Agreement”);

WHEREAS, Employee’s employment with Employer was terminated without Cause (as that term is
defined in Section 1.2 of the Employment Agreement), effective November 20, 2009
(hereinafter referred to as the “Separation Date”);

WHEREAS, Employer and Employee, in order to settle, compromise and fully and finally release
any and all claims and potential claims against Employer and the Released Parties (as defined below
in Paragraph 5) arising out of Employee’s employment and the cessation thereof, have agreed to
resolve these matters on the terms and conditions set forth herein; and

WHEREAS, Employee acknowledges he is waiving rights and claims described herein in exchange
for consideration in addition to anything of value to which he is already entitled.

AGREEMENT

NOW, THEREFORE, in consideration of the mutual promises and covenants contained herein, the
parties agree as follows:

1. Recitals; Effective Date. The recitals set forth above are true, accurate, and
correct, and are incorporated in this Agreement by this reference and made a material part of this
Agreement. This Agreement shall become effective on the eighth calendar day after the Execution
Date so long as Employee has not revoked the Agreement pursuant to Paragraph 12 herein (hereinafter
referred to as the “Effective Date”).

2. Employment-Related Compensation. Employee acknowledges and agrees that he has
received from Employer all compensation to which he is entitled for services provided to Employer
through the Separation Date. Employee further acknowledges and agrees that he is not entitled to,
or has been provided all compensation due for, any accrued vacation or other benefits, and that he
has received reimbursement from Employer of all reasonable business expenses incurred by him
through the Separation Date, if any, in accordance with Employer’s expense reimbursement policy and
practices.

3. Severance Benefits.

(a) In consideration of the promises set forth herein, and provided Employee does not revoke
this Agreement pursuant to Paragraph 12 herein, pursuant to Section 6.3.1 of the Employment
Agreement, Employee shall be entitled to the following severance benefits in return for Employee’s
execution and non-revocation of this Agreement (which Employee acknowledges he must execute and not
revoke in accordance with Section 6.3.1 of the Employment Agreement), subject to the terms
and conditions set forth therein. For purposes of clarification and avoidance of doubt, provided
Employee executes and does not revoke this Agreement pursuant to Paragraph 12 herein, Employee
shall receive the following as severance benefits: (a) Base Salary earned but unpaid as of the
Separation Date; and (b) any other payments and/or benefits which Employee is entitled to receive
under any of the Benefit Plans or otherwise in accordance with the terms of such plan or
arrangement. Additionally, Employee will receive: (x) Base Salary in effect at the time of the
termination for a period of fifteen (15) months following the termination of Employee’s employment
with Employer, in the manner and at such times as the Base Salary otherwise would have been payable
to Employee; (y) continuation of medical and dental benefits in effect under COBRA as of the date
of termination of employment for a period of twelve (12) months (“Continuation Period”)
following the date of termination of Employee’s employment with Employer; and (z) all unvested
Stock Options scheduled to vest over the Continuation Period shall immediately vest and be
immediately exercisable. Employee acknowledges and agrees that he shall not be entitled to any
discretionary Incentive Bonus, or any pro-rata portion of any such bonus, as any severance benefit,
notwithstanding anything to the contrary herein or in Section 6.3.1 of the Employment
Agreement.

(b) Section 9.2 of the Employment Agreement shall be amended in its entirety to read as
follows:

“9.2 Non-Competition. During the Period of Employment and for a period
of twelve (12) months after any termination of employment hereunder for any reason,
the Executive will not, directly or indirectly, engage or invest in, own, manage,
operate, finance, control or participate in the ownership, management, operation,
financing or control of, be employed by, associated with or in any manner connected
with, or render services or advice or other aid to, or guarantee any obligation of,
any person or entity engaged in or planning to become engaged in any business
involving a restaurant or chain of restaurants in the upscale casual dining segment
operating or planning to operate a restaurant within a 10 mile radius of an existing
or planned Company restaurant. Executive agrees that this covenant is reasonable
with respect to its duration, geographical area and scope.”

Notwithstanding the foregoing, all of the terms and conditions of Section 9 of the Employment
Agreement shall continue in full force and effect.

4. Adequate Consideration. Employee acknowledges and agrees that Paragraph 3 of this
Agreement provides substantial consideration to Employee in addition to anything of value to which
he is, as a matter of law, otherwise entitled.

5. Release of All Claims by Employee. In consideration of his receipt of the
severance benefits set forth in Paragraph 3 of this Agreement, Employee, for himself, his spouse
(if any), their marital community (if any), and their respective heirs, estates, representatives,
executors, successors and assigns, hereby fully, forever, irrevocably, and unconditionally release
and discharge Employer, its subsidiaries, parent companies, employee benefit plans, any
co-employers or joint employers, their officers, directors, employees, agents, attorneys,
administrators, representatives, successors, heirs, assigns, and all persons acting by, through,
under, or in concert with them (collectively referred to hereinafter as the “Released
Parties”), from any and all claims which he or they may have against them, or any of them,
which could have arisen out of any act or omission occurring from the beginning of time to the
Effective Date of this Agreement, whether now known or unknown, asserted or unasserted. This
release includes, but is not limited to, any and all claims brought or that could be brought under
any agreement between Employer and Employee (except for this Agreement), as well as any and all
claims brought or that could be brought to pursuant to or under the Americans with Disabilities
Act, Title VII of the Civil Rights Act of 1964, the Age Discrimination in Employment Act, the Civil
Rights Act of 1991, the National Labor Relations Act, the Fair Labor Standards Act, the Employee
Retirement and Income Security Act (ERISA), the Securities and Exchanges Acts of 1933 and 1934; the
Sarbanes-Oxley Act (SOX), the Consolidated Omnibus Budget Reconciliation Act (COBRA), the Family
and Medical Leave Act, the Equal Pay Act, the Arizona Constitution, the Arizona Civil Rights Act,
the Arizona Employment Protection Act, Arizona’s wage and hour statutes, and any other statute set
forth in the statutes or codes of any state, including but not limited to Arizona or Minnesota,
that pertain or relate to, or otherwise touches upon, the employment relationship between Employer
and Employee and the Released Parties; including (but not limited to) any and all actions for
breach of contract, express or implied, breach of the covenant of good faith and fair dealing,
express or implied, promissory estoppel, wrongful termination in violation of public policy, all
other claims for wrongful termination and constructive discharge, and all other tort claims,
including, but not limited to, assault, battery, false imprisonment, intentional interference with
contractual relations, intentional or negligent infliction of emotional distress, invasion of
privacy, negligence, negligent investigation, negligent hiring, supervision, or retention,
defamation, intentional or negligent misrepresentation, fraud, and any and all other laws and
regulations relating to employment, employment termination, employment discrimination, harassment,
and/or retaliation, wages, hours, employee benefits, compensation, sexual harassment, and any and
all claims for attorneys’ fees and costs, pursuant to or arising under any federal, state, or local
statute, law, regulation, ordinance, or order. This release of claims expressly includes, but is
not limited to, any and all claims arising out of and/or in any way related to Employee’s
employment with Employer or the circumstances of the termination of that employment, whether known
by him at the time of execution of this Agreement or not, including any such claims that could be
brought for breach of the Employment Agreement, and further including, without limitation, any
claim(s) for any unpaid wages, bonus amounts, or any other compensation from Employer. By signing
this Agreement, however, Employee does not waive any rights or claims that may arise after the
Effective Date of this Agreement, nor does he waive any vested rights he may have under the terms
of any stock option plan or any profit-sharing, retirement, or similar employee welfare benefit
plan administered or sponsored by Employer.

6. No Pending Claims. Employee represents and warrants that there are no claims,
charges, lawsuits, or any similar matters of any kind filed by him or on his behalf or for his
benefit presently pending against Employer or the Released Parties, or any of them, in any forum
whatsoever, including, without limitation, in any state or federal court, or before any federal,
state, or local administrative agency, board, or governing body.

7. Covenant Not to Sue. Employee specifically covenants not to file any lawsuits,
complaints, claims, or charges, either on his own behalf or in any representative capacity, in any
state or federal court or before any federal, state, or local administrative agency, board, or
governing body against Employer or the Released Parties, or any of them, on and/or for any and all
of the claims released by this Agreement.

8. Preclusive Effect of Agreement. Employee acknowledges, understands, and agrees
that this Agreement may be pled as a complete bar to any action or suit before any court or
administrative body with respect to any lawsuit, complaint, charge, or claim under federal, state,
local, or other law relating to any possible claim that existed or may have existed against
Employer or the Released Parties, or any of them, arising out of any event occurring from the
beginning of time through the Effective Date of this Agreement.

9. Return of Employer Property. Prior to or on the date Employee signs this
Agreement, Employee agrees to and shall return to Employer all Employer property in his actual or
constructive possession, if he has not already done so, including, but not limited to, all key
cards, access badges, keys, credit cards, computers, books, and records belonging to Employer.

10. Non-Admission. Execution of this Agreement and compliance with its terms shall
not be considered or deemed an admission by Employer of any liability whatsoever, or as an
admission by Employer of any violation of Employee’s rights or the rights of any other person, a
violation of any order, law, statute or duty, or breach of any duty owed to Employee or any other
person. Employer specifically disclaims any and all such liability.

11. Review. A copy of this Agreement was delivered to Employee on November 23, 2009.
Employee is advised that he has twenty-one (21) days from the date he is presented with this
Agreement to consider this Agreement. If Employee executes this Agreement before the expiration of
twenty-one (21) days, he acknowledges that he has done so for the purpose of expediting the payment
of the consideration provided for herein, and that he has expressly waived his right to take
twenty-one (21) days to consider this Agreement.

12. Revocation. Employee may revoke this Agreement for a period of seven (7) days
after he signs it. Employee agrees that if he elects to revoke this Agreement, he will notify
Employer, in writing (care of Daniel B. Pasternak, Greenberg Traurig, LLP, 2375 East Camelback
Road, Suite 700, Phoenix, Arizona 85016), via certified mail, on or before the expiration of the
revocation period. Receipt of proper and timely notice of revocation by Employer cancels and voids
this Agreement. Provided that Employee does not provide notice of revocation, this Agreement will
become effective upon expiration of the revocation period, as provided in Paragraph 1 above.

13. Knowing and Voluntary; ADEA Waiver.  Employee represents and warrants that he was
advised by Employer to consult with an attorney of his own choosing concerning the provisions set
forth herein, and that he has thoroughly discussed all aspects of this Agreement with counsel of
his choosing, or that he had the opportunity to do so. Employee further represents and warrants
that he has carefully read and fully understands all of the provisions of this Agreement, including
the fact that he is releasing all claims and potential claims against Employer and the Released
Parties, and that he is entering into this Agreement, without coercion, and with full knowledge of
its significance and the legal consequences thereof. Employee represents and warrants that as part
of this Agreement, he is knowingly and voluntarily releasing and waiving any claims he believes he
may have under the Age Discrimination in Employment Act.

14. Acknowledgement and Confirmation of Continuing Obligations. Employee acknowledges
and confirms that the obligations set forth in Sections 8 and 9 of the Employment Agreement
continue after, and shall survive, Employee’s termination of employment with Employer.

15. Confidentiality. Employee agrees to keep confidential, and to not divulge, the
existence and terms of this Agreement, its negotiation, its execution, and/or its implementation to
any person or organization, including but not limited to current or former employees of Employer or
the Released Parties, members of the press and media, and other members of the public.
Notwithstanding the foregoing, Employee may permissibly disclose the existence and terms of this
Agreement to his spouse, however, his spouse shall be bound to the confidentiality provisions set
forth in this paragraph, and they specifically agree to not divulge the existence and terms of this
Agreement, its negotiation, its execution, and/or its implementation to any person or organization,
including but not limited to employees or former employees of Employer or the Released Parties,
members of the press and media, and other members of the public. This paragraph shall not prohibit
Employee and his attorney(s) from disclosing the terms of this Agreement to his tax advisor(s) to
the extent necessary to prepare his income tax returns and to represent his in connection with any
proceedings relating thereto, or from advising a governmental taxing authority of the consideration
being paid to him, or of the existence of this Agreement in response to a question or questions
posed by such taxing authority.  The parties agree that it shall not be a breach of this Agreement
if Employee’s disclosure of such information has been compelled through the issuance of compulsory
legal process, provided, however, that in such case, Employee agrees to give Employer reasonable
notice (care of Daniel B. Pasternak, Greenberg Traurig, LLP, 2375 East Camelback Road, Suite 700,
Phoenix, Arizona 85016) of the order or subpoena in question and an opportunity to challenge the
disclosure of any such information before the appropriate court or agency. It shall not be a
breach of this paragraph for Employee to disclose the terms of this Agreement in a suit to enforce
the terms of this Agreement or defend a claim that this Agreement has been breached. Employee
understands and agrees that this confidentiality provision is a material term of this Agreement,
and that his agreement to this provision concerning confidentiality is a material inducement to
Employer’s willingness to enter into this Agreement.

16. Cooperation. Employee agrees, for a reasonable period of time following the
Separation Date, to provide reasonable assistance to Employer (including assistance with litigation
and arbitration matters), upon Employer’s reasonable request, concerning Employee’s previous
employment-related responsibilities. Such assistance may include, but is not limited to,
communicating and/or meeting with Employer’s attorneys, giving deposition testimony, attending
depositions, reviewing pleadings, including discovery pleadings, and attending and giving testimony
in court and arbitration proceedings.

17. Non-Disparagement. Neither Employee nor Employer, nor anyone acting on such
party’s behalf will make any derogatory or disparaging statement about the other party, to any
individual or entity, including but not limited to, such party’s actual or potential clients,
customers, vendors, business partners, suppliers, employees, financial or credit institutions, or
the media, nor directly or indirectly take any action which is intended to embarrass any of them.
For purposes of this Paragraph 17, a disparaging statement is any communication, oral or written,
which would cause to tend to cause the recipient of the communication to question the business
condition, integrity, competence, fairness, or good character of the person to whom or entity to
which the communication relates.

18. Amendment. This Agreement shall be binding upon the parties and may not be
amended, supplemented, changed, or modified in any manner, orally or otherwise, except by an
instrument in writing of concurrent or subsequent date signed by both of the parties hereto.

19. Entire Agreement. This Agreement contains and constitutes the entire
understanding and agreement between the parties hereto with respect to the subject matter hereof,
and, except as otherwise provided herein, cancels all prior or contemporaneous oral or written
understandings, negotiations, agreements, commitments, representations, and promises in connection
herewith.

20. Paragraph Titles. The paragraph titles in this Agreement are for convenience
only; they form no part of this Agreement and shall not affect its interpretation.

21. Construction. The parties hereto acknowledge and agree that each party has
participated in the drafting of this Agreement and has had the opportunity to have this document
reviewed by the respective legal counsel for the parties hereto and that the normal rule of
construction to the effect that any ambiguities are to be resolved against the drafting party shall
not be applied to the interpretation of this Agreement. No inference in favor of, or against, any
party shall be drawn from the fact that one party has drafted any portion hereof.

22. Execution in Counterparts; Facsimile Signatures. This Agreement may be executed
in any number of counterparts, each of which shall be deemed to be an original as against any party
whose signature appears thereon, and all of which shall together constitute one and the same
instrument. This Agreement shall become binding when one or more counterparts hereof, individually
or taken together, shall bear the signatures of the parties reflected hereon as the signatories.
Facsimile signatures shall be sufficient and fully binding.

23. Arbitration.

(a) Except for actions seeking an injunction, which shall not be subject to arbitration, the
parties agree to submit all disputes, controversies, and claims arising out of or relating to this
Agreement or relating to Employee’s former employment with Employer, to private, confidential,
final, and binding arbitration before a single arbitrator in the greater Phoenix, Arizona
metropolitan area, pursuant to the Employment Arbitration Rules of the American Arbitration
Association.

(b) Either party may initiate the arbitration process by delivering a written request for
arbitration to the other party within the time limits which would apply to the filing of a civil
complaint in Arizona state court. A late request will be void. If Employee and Employer are
unable to agree upon a neutral arbitrator, the party requesting arbitration will obtain a list of
arbitrators from the American Arbitration Association. An arbitrator shall thereafter be selected
off of this list using the process of alternate strikes, with the party that did not initiate
arbitration having the first strike. The arbitrator shall be bound by the provisions and
procedures set forth in the Employment Arbitration Rules of the American Arbitration Association.
The arbitrator shall determine the prevailing party in the arbitration. All administrative
expenses of arbitration, e.g., arbitrator’s fees, court reporter fees, etc., will be borne equally
by both parties. Each party shall bear its own respective attorneys’ fees or taxable costs. The
arbitrator shall have the authority to order any legal and equitable remedy which would be
available in a civil or administrative action on the claim(s) at issue, including an award of
attorneys’ fees and costs.

(c) Except for injunctive matters, arbitration shall be the exclusive means of resolving any
dispute(s) under or identified in this Agreement and no other action shall be brought in any court
or administrative forum for such disputes. However, nothing in this Section shall affect National
Labor Relations Board proceedings or petitions for judicial review of a decision issued by any
state civil rights agency, with appropriate authority, after an administrative hearing.

(d) If any court of competent jurisdiction declares that any part of this Section of this
Agreement pertaining to arbitration of disputes is illegal, invalid, or unenforceable, such a
declaration will not affect the legality, validity, or enforceability of the remaining parts of the
Agreement, and the illegal, invalid, or unenforceable part will no longer be part of this Agreement
in accordance with the provisions set forth in this Agreement in Section 25. The parties hereto
agree that the United States District Court for the District of Arizona or the Superior Court of
Maricopa County, Arizona (but only if the United States District Court lacks jurisdiction), shall
have the authority to enter a judgment to enforce the arbitration decision, and shall irrevocably
constitute the sole and exclusive forum for enforcing any arbitration decision.

(e) THIS ARBITRATION PROVISION IS A WAIVER OF ALL RIGHTS TO A CIVIL JURY TRIAL FOR CLAIMS,
INCLUDING CLAIMS RELATING TO A DISPUTED TERMINATION, STATE LAW-BASED CONTRACT AND TORT CLAIMS,
AND/OR A CLAIM FOR UNLAWFUL HARASSMENT OR EMPLOYMENT DISCRIMINATION, TO THE EXTENT ALLOWED BY LAW.

24. Choice of Law and Venue. This Agreement shall be governed by the laws of the
State of Arizona, without regard to the conflicts of laws principles thereof. Except as provided
in Section 23 above, with respect to any litigation based on, arising out of, or in connection with
this Agreement, the parties expressly submit to the personal jurisdiction of the District Court for
the District of Arizona or the Superior Court of Maricopa County, Arizona (but only if the United
States District Court lacks jurisdiction), and the parties hereby expressly waive, to the fullest
extent permitted by law, any objection that they may now or hereafter have to the laying of venue
of any such litigation brought in any such court referred to above, including without limitation
any claim that any such litigation has been brought in an inconvenient forum.

25. Severability. Should any provision in this Agreement or any provision of any
agreement incorporated or referenced herein, be declared or determined by any court to be illegal
or invalid, the validity of he remaining parts, terms, or provisions shall not be affected, and the
illegal or invalid part, term, or provision shall be deemed not to be a part of this Agreement.

26. Waiver. The failure of a party to insist upon strict adherence to any obligation
of this Agreement shall not be considered a waiver or deprive that party of the right thereafter to
insist upon strict adherence to that term or any other term of this Agreement. Any waiver of any
provision of this Agreement must be in a written instrument signed and delivered by the party
waiving the provision.

27. Successors and Assigns.  This Agreement shall be binding upon and inure to the
benefit of, as applicable, the parties’ respective successors, assigns, heirs, estates, and
representatives.

28. Defined Terms. Capitalized terms set forth herein not defined in this Agreement
shall have the meaning and definition provided for them in the Employment Agreement.

29. Attorneys’ Fees and Costs. Employee and Employer agree that each party will bear
its own costs and attorneys’ fees in connection with all matters related to the subject matter of
this Agreement and the settlement of those matters encompassed by this Agreement. Should any legal
action be commenced arising out of this Agreement, the prevailing party in any such action shall be
entitled to an award of attorneys’ fees and costs incurred therein.

30. Waiver of Notice Provision by Employee. Employee waives any right Employee may
have had to notice in advance of termination of employment, including but not limited to any such
right that might have or may arise under or out of Section 6.3 of the Employment Agreement.

31. Indemnification. Employer agrees that if Employee is made a party to or involved
in, or is threatened to be made a party to or otherwise to be involved in, any action, suit or
proceeding, whether civil, criminal, administrative or investigative (a “Proceeding”), by
reason of the fact that he is or was an officer or employee of Employer or is or was serving at the
request of Employer as an officer, member, employee or agent of another corporation, limited
liability corporation, partnership, joint venture, trust or other enterprise, including service
with respect to employee benefit plans, whether or not the basis of such Proceeding is Employee’s
alleged action in an official capacity while serving as an officer, member, employee or agent,
Employee shall be indemnified, protected, defended, and held harmless by Employer against any and
all liabilities, losses, expenses, judgments, penalties, fines and amounts reasonably paid in
settlement or as a result of a judgment in connection therewith, and shall be advanced reasonable
expenses (including attorneys’ fees and costs) as and when incurred in connection therewith, to the
fullest extent legally permitted or authorized by Employer’s By-laws or, if greater, by the laws of
the State of Delaware, as may be in effect from time to time, except that this Section 31 shall not
apply to the following Proceedings: (a) any Proceeding initiated or brought voluntarily by
Employee against Employer or its directors, officers, employees, or other indemnified parties,
unless the Board has authorized or consented to the initiation of the Proceeding (or any part of
the Proceeding), (b) for an accounting of profits made from the purchase and sale (or sale and
purchase) by Employee of securities of Employer within the meaning of Section 16(b) of the Exchange
Act or any similar successor statute, and (c) any litigation brought against Employee by Employer
under Sections 14, 15, and/or 17 of this Agreement. The rights conferred on Employee by this
Section 31 shall not be exclusive of any other rights which Employee may have or hereafter acquire
under any statute, Employer’s By-laws, agreement, vote of stockholders or disinterested directors,
or otherwise. The indemnification and advancement of expenses provided for by this Section 31
shall continue until and terminate upon the latest of: (a) the statute of limitations applicable
to any claim that could be asserted against Employee or Employer with respect to which he may be
entitled to indemnification under this Section 31; (b) ten years after the date that Employee has
ceased to serve as a director or officer of Employer or as a director, officer, employee, member,
or agent of any other corporation, limited liability corporation, partnership, joint venture, trust
or other enterprise at the request of Employer; or (c) if, at the later of the dates referred to in
(a) and (b) above, there is a pending Proceeding in respect of which Employee is granted rights of
indemnification under this Section 31, one year after the final termination of such Proceeding,
including any and all appeals. The indemnification and advancement of expenses provided for by
this Section 31 shall inure to the benefit of Employee’ heirs, executors and administrators.

32. D&O Insurance. Notwithstanding the separation of his employment with Employer,
Employee shall continue to be covered under Employer’s Director and Officer liability insurance
policy(ies) to the extent permitted and provided for under the terms and conditions of that
policy(ies).

By signing below, the parties acknowledge that they have carefully read and fully understand
all of the provisions of this Agreement and that they are voluntarily entering into this Agreement.

	 	 	 
	/s/ Mark L. Bartholomay	 	Kona Grill, Inc.,
	Mark L. Bartholomay	 	a Delaware corporation
	“Employee”	 	“Employer”
	Dated: November 24, 2009
	 	By: /s/ Marc A. Buehler

Title: President and Chief Executive Officer

Dated: November 24, 2009

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