Document:

exv10w3

Exhibit 10.3

Member Interest Pledge Agreement

     Member Interest Pledge Agreement (“Pledge Agreement”) dated as of January 1, 2009 between
Renegy Holdings, Inc., a Delaware corporation (the “Pledgor”), and AZ Biomass LLC, a Delaware
limited liability company (“Pledgee”).

Recitals

     A. Pledgor and Pledgee have entered into that certain Member Interest Purchase Agreement dated
January 1, 2009 (the “Purchase Agreement”), pursuant to which Pledgee has purchased all the
outstanding Class A membership interests of Snowflake White Mountain Power, LLC, an Arizona limited
liability company (“Snowflake” or the “Company”) and Pledgor remains the owner of all the
outstanding Class B membership interests of Snowflake, which membership interests (the “Member
Interest”) have the rights, preferences and privileges set forth in the Amended and Restated
Limited Liability Company Agreement of the Company dated as of January 1, 2009 (the “Operating
Agreement”).

     B. The Pledgor may have certain payment obligations to the Pledgee under the terms of Section
11.01 of the Purchase Agreement. As security for due and punctual performance of all such payment
obligations to Pledgee under the terms of the Purchase Agreement, the Pledgor has agreed to pledge
the Member Interest (and all of Pledgor’s rights, privileges, authority and power thereunder as a
member of the Company) to the Pledgee pursuant to the terms of this Pledge Agreement.

     C. Pledgee is entering into the Purchase Agreement in reliance on the execution and delivery
by Pledgor of this Pledge Agreement.

     NOW THEREFORE, in consideration of the following premises and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, Pledgor and Pledgee
hereby agree as follows:

     1. The Pledgor hereby pledges and grants to the Pledgee a continuing lien on and a perfected
security interest in the Member Interest (and all of Pledgor’s rights, privileges, authority and
power as a member of the Company) as security for the due and punctual performance of all its
payment obligations to Pledgee under the terms of Section 11.01 of the Purchase Agreement,
including any extensions, modifications, substitutions, amendments and renewals thereof, which lien
and security interest shall be subordinate, in all respects, to the lien and security interest in
the Member Interest granted to CoBank, ACB, as Administrative Agent and Collateral Agent (“CoBank”)
pursuant to that certain Pledge Agreement dated as of October 1, 2007 between Pledgor and CoBank
(as amended, the “RH CoBank Pledge”), in accordance with the terms of that certain Subordination
Agreement dated as of January 1, 2009 among Pledgor, Pledgee and CoBank (the “Subordination
Agreement”).

 

 

     2. The Pledgee hereby accepts the Pledgor’s pledge of the Member Interest as security for the
due and punctual performance of all Pledgor’s payment obligations to Pledgee under the terms of
Section 11.01 of the Purchase Agreement.

     3. An “Event of Default” shall occur hereunder if the Pledgor fails to perform any payment
obligations of the Pledgor to the Pledgee when required under Section 11.01 of the Purchase
Agreement, and such failure continues for 10 days after the Pledgee delivers written notice of such
failure to the Pledgor. Unless and until there occurs an Event of Default that is continuing, the
Pledgor is entitled with respect to the Member Interest:

          (a) to (i) exercise any and all voting rights and powers relating or pertaining to the Member
Interest at meetings of members of the Company, (ii) exercise any and all consensual rights and
powers in respect of the Member Interest and (iii) consent to, ratify or waive notice of meetings
of the members of the Company or otherwise take any action permitted by a member of the Company;
and

          (b) to receive, collect, have paid over and retain all distributions to which it is entitled
under the terms of the Operating Agreement (as then in effect), except (i) distributions paid in
the form of additional membership interests (or similar securities) in the Company (or any
subsidiary or Affiliate thereof), including without limitation any such interests issued in a
Split, (ii) distributions in property other than cash, (iii) proceeds from a sale by or on behalf
of Pledgor of the Member Interest (or any portion thereof) and (iv) liquidation dividends (either
partial or complete) (collectively, “Excepted Dividends”), and whether regular, special or made in
connection with a partial or total liquidation of the Company, and whether attributable to profits,
the return of any contribution or investment or otherwise attributable to the Member Interest. All
Excepted Dividends shall constitute additional security for the Pledgee’s performance of its
payment obligations to Pledgee under Section 11.01 of the Purchase Agreement and shall be pledged
to Pledgee by the Pledgor. The Pledgor shall have all of the same powers and rights with respect
to all Excepted Dividends as it has in respect of the Member Interest and such Excepted Dividends
shall be considered part of the Member Interest pledged hereunder. As used in this Pledge
Agreement, the term “Split” means any transfer (including, without limitation, payment, issuance or
other awarding) of any securities, property or rights to any person or entity by virtue or in
respect of its ownership of Member Interests and shall include, without limitation, (i) payment of
dividends or other distributions in the form of units, debt instruments or other property the value
of which depends materially on the future results of the Company’s operations, (ii) membership
interests splits or reverse splits, (iii) unit exchanges and (iv) transfers, payments, issuances
and awards resulting from any consolidation, reorganization, recapitalization, merger or
combination.

     4. During the term of this Pledge Agreement, (a) if any distributions in the form of equity
ownership interests in the Company, reclassification, readjustment, or other change is declared or
made in the capital structure of the Company, or any subscription, warrant or other option is
issued with respect to the Member Interest (including without limitation any equity interest or
right issued in connection with a

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Split), all new, substituted, or additional interests or other securities issued by reason of
this change or option shall be considered as part of the Member Interest; and (b) Pledgor shall not
(i) subject the Member Interest (or any portion thereof) to any lien, security interest,
encumbrance, pledge, charge or preferential arrangement, other than any lien that is herein created
or otherwise permitted by this Section 4 or (ii) transfer, assign or grant any other person or
entity any right or interest in the Member Interest (or any portion thereof), including any option
therein (other than as contemplated by this Section 4). Pledgor represents that it has the full
right, power and authority to pledge the Member Interest to Pledgee hereunder and that it is the
sole legal, record and beneficial owner of the Member Interest free and clear of any lien, right or
option ( collectively, “Liens”) other than the security interest granted herein, Liens under the
Operating Agreement in favor of Pledgee and arising by, through or under Pledgor, and Liens
existing on or prior to the date hereof, including without limitation all the Liens and rights
granted to CoBank and the Lenders (or any transferee thereof) as set forth or as contemplated by
the RH CoBank Pledge and the Subordination Agreement.

     5. Upon an Event of Default and during the continuance thereof, the Pledgee may exercise all
rights and remedies of a pledgee and secured party under New York law, without presentment, demand,
protest or notice of any kind, all of which Pledgor hereby waives, but subject to the applicable
terms and conditions of the Subordination Agreement. The exercise of any such rights and remedies
shall not preclude Pledgee from exercising any other right or remedy it may have against Pledgor
under any other applicable law; provided that such exercise is expressly permitted under the terms
of the Subordination Agreement.

     6. The Pledgee agrees to notify the Pledgor of all notices it receives with respect to the
Member Interest.

     7. Pledgor will not hereafter suffer or allow any Liens to arise against or with respect to
the Member Interest in favor of any persons or entities other than: (a) Liens existing on the
Member Interest on or prior to the date hereof (including without limitation the lien created by
the RH CoBank Pledge); (b) Liens in favor of Pledgee; and (c) Liens arising under the Operating
Agreement. Pledgor also agrees that it will promptly execute and deliver all further instruments
and documents, and take all further action that may be reasonably requested by Pledgee in order to
perfect, maintain and protect the security interest and rights herein granted or to enable Pledgee
to exercise and enforce its rights and remedies hereunder with respect to the Member Interest.
Subject to the foregoing, and subject to all the rights of CoBank and the Lenders as set forth or
as contemplated by the RH CoBank Pledge and the Subordination Agreement, Pledgor will at all times
defend the Member Interest against any and all claims of any person adverse to the interests of
Pledgee.

     8. “Termination” of this Pledge Agreement shall occur upon the earlier to occur (a) the
performance in full by Pledgor of all its payment obligations under Section 11.01 of the Purchase
Agreement, including payment of all accrued and unpaid interest thereunder and (b) the repurchase
by Pledgor of the Class A membership interests; provided, that if Pledgee has made any claims under
Section 11.01 of the Purchase

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Agreement prior to such repurchase, this Pledge Agreement shall continue in full force and
effect with respect to such claims, but only until they are finally resolved or satisfied pursuant
to the relevant provisions of the Purchase Agreement (at which time Termination of this Pledge
Agreement shall occur). Upon Termination, as set forth herein, the security interest Pledgor
pledged and granted to and for the benefit of Pledgee pursuant to this Pledge Agreement shall
terminate and be of no further force and effect, and Pledgee shall return the certificates, if any,
representing the Member Interest and all other collateral held pursuant to this Pledge Agreement to
the Pledgor.

     9. All notices, demands or other communications required or permitted to be given under this
Pledge Agreement shall be in writing and shall be given by hand delivery, reputable overnight
courier (such as Federal Express), facsimile transmission or certified mail, return receipt
requested, to the parties at the addresses set forth under the applicable party’s signature in this
Pledge Agreement, and shall be deemed given (a) upon delivery in the case of hand delivery or
delivery by overnight courier, (b) upon written confirmation of transmission in the case of
facsimile transmission if received during normal business hours, otherwise the next business day
and (c) three (3) days after mailing in the case of certified mail. Any party may, by written
notice to the other party as provided in this section, change the place to which all further
notices to such party shall be sent.

     10. This Pledge Agreement may be amended, superseded, canceled, renewed or extended, and the
terms hereof may be waived, only by a written instrument signed by the parties hereto or, in the
case of a waiver, by the party waiving compliance. No delay on the part of any party in exercising
any right, power or privilege hereunder will operate as a waiver thereof, nor will any waiver on
the part of any party of any such right, power or privilege, nor any single or partial exercise of
any such right, power or privilege, preclude any further exercise thereof or the exercise of any
other such right, power or privilege. The rights and remedies herein provided are cumulative and
are not exclusive of any rights or remedies that any party may otherwise have at law or in equity.

     11. This Pledge Agreement shall be binding upon and inure to the benefit of the parties and
their respective successors, legal representatives and permitted assigns. This Pledge Agreement is
not assignable by Pledgor except by operation of law; provided that nothing in this sentence shall
be construed to limit Pledgor’s rights to assign the Member Interest pursuant to Section 10.3 of
the Operating Agreement. Pledgee may assign this Pledge Agreement to any person or entity upon
written notice to Pledgee; provided that concurrently therewith Pledgee assigns to such person or
entity all but not less than all of its membership interests in the Company in accordance with
Section 10.2 of the Operating Agreement and any such assignee agrees to assume all of Pledgee’s
obligations under the Subordination Agreement.

     12. THIS PLEDGE AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF
THE STATE OF NEW YORK WITHOUT REGARD TO ITS PRINCIPLES REGARDING CONFLICT OF LAWS (OTHER THAN
SECTION 5-1401 AND 1402 OF THE NEW YORK GENERAL OBLIGATIONS LAW). EACH OF THE PARTIES HEREBY
SUBMITS

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TO THE EXCLUSIVE JURISDICTION OF ANY OF THE COURTS OF THE STATE OF NEW YORK AND THE COURTS OF
THE UNITED STATES OF AMERICA FOR THE SOUTHERN DISTRICT OF NEW YORK, AND THE APPELLATE COURTS FROM
ANY THEREOF AND FOR PURPOSES OF ALL LEGAL PROCEEDINGS ARISING OUT OF OR RELATING TO THIS PLEDGE
AGREEMENT OR THE TRANSACTIONS PROVIDED FOR HEREIN. THE PARTIES CONSENT TO PERSONAL JURISDICTION IN
THE COURTS DESCRIBED IN THIS SECTION FOR THE PURPOSE OF ALL ACTIONS AND WAIVE ALL OBJECTIONS TO
VENUE AND THE RIGHT TO ASSERT THAT A COURT CHOSEN UNDER THIS SECTION IS IMPROPER BASED ON THE
DOCTRINE OF FORUM NON CONVENIENS. TO THE EXTENT THAT SUCH COURTS REFUSE TO EXERCISE JURISDICTION
HEREUNDER, THE PARTIES AGREE THAT JURISDICTION SHALL BE PROPER IN ANY COURT IN WHICH JURISDICTION
MAY BE OBTAINED.

     13. The paragraph headings of this Pledge Agreement have been used solely for convenience, and
are not intended to describe, interpret, define or limit the scope of this Pledge Agreement.
Conflicts or discrepancies, errors or omissions in this Pledge Agreement will not be strictly
construed against the drafter of the contract language; rather they shall be resolved by applying
the most reasonable interpretation under the circumstances giving full consideration to the
intentions of the parties at the time of contracting. Capitalized terms used herein without
definition shall have the same meanings ascribed to them in the Purchase Agreement.

     14. If any provision or portion of this Pledge Agreement is declared or found by a court of
competent jurisdiction to be unenforceable or null and void, such provision or portion thereof
shall be deemed stricken and severed from this Pledge Agreement, the remaining provisions and
portions thereof shall continue in full force and effect and the unenforceable or null and void
provision shall be replaced by a valid and enforceable provision that comes closest to the intent
of the parties.

     15. This Pledge Agreement may be executed by facsimile signature and in separate counterparts,
each of which when so executed and delivered will be an original, but all such counterparts shall
together constitute one and the same instrument. Each counterpart may consist of a number of
copies hereof each signed by less than all, but together signed by all of the parties hereto.

     16. This Pledge Agreement (together with the Subordination Agreement) constitutes the entire
agreement of the parties with respect to the subject matter hereof and supersedes and replaces all
previous verbal or written agreements that the parties may have made with respect to such subject
matter.

     17. In the event of any suit, action or other proceeding arising out of or based on this
Pledge Agreement, the prevailing party shall be entitled to receive from the non-prevailing party
all reasonable attorneys’ fees and court costs incurred in connection therewith.

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     18. The obligations and duties of the Pledgor hereunder shall not constitute a debt or
obligation of any current or future shareholder of Pledgor, or any direct or indirect member,
shareholder or other owner of such shareholder (each, a “Non-Recourse Person”). None of the
Non-Recourse Persons shall be liable for any amount due under this Pledge Agreement, the Purchase
Agreement or the Operating Agreement, and Pledgee shall not (a) assert or seek to assert any claim
against, (b) name in any civil action or proceeding or arbitration, or (c) seek or obtain any
judgment (including, without limitation, a deficiency or personal judgment), order or decree
against any Non-Recourse Person for payment of the obligations evidenced by this Pledge Agreement,
the Purchase Agreement or the Operating Agreement, or damages in respect thereof. No property or
assets of a Non-Recourse Person (other than the Member Interest pledged hereunder) shall be sold,
levied upon or otherwise used to satisfy any judgment rendered in connection with any action
brought with respect to this Pledge Agreement, the Purchase Agreement or the Operating Agreement.

     19. Notwithstanding the provisions of the preceding paragraph above to the contrary, nothing
contained in this Pledge Agreement shall be construed to (a) impair or limit any of the obligations
or duties of Pledgor or Pledgee under the Purchase Agreement or the Operating Agreement; (b)
impair or limit the validity of the obligations set forth in this Pledge Agreement, the Purchase
Agreement or the Operating Agreement or prevent the taking of any action permitted by law against
Pledgor or Pledgee or their properties or assets or the proceeds of such assets; or (c) prevent
the commencement of any action, suit or proceeding against any persons or entities (or prevent the
service of papers upon any persons or entities) solely for the purpose of obtaining jurisdiction
over Pledgor or Pledgee, as the case may be.

[signature page follows]

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     IN WITNESS WHEREOF, the parties have executed this Pledge Agreement as of the date first
written above.

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Pledgor:	 	 	 	Pledgee:	 	 
	Renegy Holdings, Inc.	 	 	 	AZ Biomass LLC	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	By:	 	/s/ Robert M. Worsley	 	 	 	By:	 	Antrim	 	Corporation	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 
	 

	 	Name:	 	Robert M. Worsley	 	 	 	Its:	 	Manager	 	 	 	 
	 	 	Title:
	 	Chief Executive Officer	 	

By:	 	/s/ Francine E. Lyons	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 
	 	 	 	 	 	Name:
	 	Francine E. Lyons	 	 
	 

	 	 	 	 	 	 	 	 	 	Title:
	 	 Vice President	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Address for Notices:	 	 	 	Address for Notices:	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	3418 North Val Vista Drive	 	 	 	AZ Biomass LLC	 	 
	Mesa, Arizona 85213	 	 	 	c/o State Street Bank and Trust Company,	 	 
	Attn: Robert M. Worsley	 	 	 	Energy Credit Investments	 	 
	Facsimile: (480) 556-5500	 	 	 	State Street Financial Center	 	 
	 	 	 	 	 	 	 	 	One Lincoln Street, SFC 12	 	 
	 	 	 	 	 	 	 	 	Boston, Massachusetts 02110-2900	 	 
	 	 	 	 	 	 	 	 	Attn: Francine E. Lyons	 	 
	 	 	 	 	 	 	 	 	Facsimile: Fax:(617)-664-4850	 	 

7exv10w4

Exhibit 10.4

 

 

SUBORDINATION AGREEMENT

among

AZ BIOMASS LLC,

a Delaware limited liability company

(Junior Claimant)

and

RENEGY HOLDINGS, INC.,

a Delaware corporation

(Pledgor)

and

COBANK, ACB

(Administrative Agent and Collateral Agent)

Dated as of January 1, 2009

 

 

 

TABLE OF CONTENTS

	 	 	 	 	 	 	 
	 	 	 	 	Page	 
	 
	 	 	 	 	 	 
	ARTICLE I. DEFINITIONS	 	 	2	 
	1.1
	 	Agreement Definitions	 	 	2	 
	1.2
	 	Credit Agreement Definitions	 	 	3	 
	1.3
	 	Rules of Interpretation	 	 	3	 
	 
	 	 	 	 	 	 
	ARTICLE II. CERTAIN SUBORDINATION TERMS	 	 	3	 
	2.1
	 	Subordination	 	 	3	 
	2.2
	 	Legend	 	 	3	 
	2.3
	 	Proceeding Against Renegy Holdings; Proof of Claim	 	 	3	 
	 
	 	2.3.1   Proceeding Against Renegy Holdings	 	 	3	 
	 
	 	2.3.2   Proof of Claim	 	 	4	 
	2.4
	 	Wrongful Collections	 	 	4	 
	 
	 	 	 	 	 	 
	ARTICLE III. OWNERSHIP OF SUBORDINATED AMOUNTS; AMENDMENT OF LLC AGREEMENT; CREDIT
DOCUMENTS
	 	 	4	 
	3.1
	 	Ownership of Subordinated Amounts	 	 	4	 
	3.2
	 	Amendment of the Agreements	 	 	5	 
	3.3
	 	Credit Documents	 	 	5	 
	 
	 	 	 	 	 	 
	ARTICLE IV. WAIVERS	 	 	5	 
	 
	 	 	 	 	 	 
	ARTICLE V. REINSTATEMENT	 	 	5	 
	 
	 	 	 	 	 	 
	ARTICLE VI. BANKRUPTCY	 	 	5	 
	 
	 	 	 	 	 	 
	ARTICLE VII. FURTHER ASSURANCES	 	 	6	 
	 
	 	 	 	 	 	 
	ARTICLE VIII. MISCELLANEOUS	 	 	6	 
	8.1
	 	Notices	 	 	6	 
	8.2
	 	Benefit of Agreement	 	 	7	 
	8.3
	 	Delay and Waiver	 	 	7	 
	8.4
	 	Amendments	 	 	8	 
	8.5
	 	Governing Law	 	 	8	 
	8.6
	 	Consent to Jurisdiction	 	 	8	 
	8.7
	 	WAIVER OF JURY TRIAL	 	 	8	 
	8.8
	 	Severability	 	 	8	 
	8.9
	 	Headings	 	 	8	 
	8.10
	 	Successors and Assigns	 	 	8	 
	8.11
	 	Entire Agreement	 	 	9	 
	8.12
	 	Survival of Agreements	 	 	9	 
	8.13
	 	Counterparts	 	 	9	 

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          This SUBORDINATION AGREEMENT, dated as of January 1, 2009 (as amended, amended and restated,
supplemented or otherwise modified from time to time, this “Agreement”), is entered into
among AZ BIOMASS LLC, a Delaware limited liability company (“Junior Claimant”), RENEGY
HOLDINGS, INC., a Delaware corporation (“Renegy Holdings”), and COBANK, ACB, as
Administrative Agent (together with its successors and assigns in such capacity,
“Administrative Agent”) and Collateral Agent (together with its successors and assigns in
such capacity, “Collateral Agent”) for the Senior Claimants (as defined in Section 1.1).

RECITALS

          A. Snowflake White Mountain Power, LLC, an Arizona limited liability company (“SWMP”)
owns, operates and maintains an approximately 24 MW biomass-fired power generation plant located
near Snowflake, Arizona (the “Project”).

          B. In connection with the ownership, operation and maintenance of the Project, SWMP has
entered into that certain Credit Agreement, dated as of September 1, 2006, as amended and restated
on the date hereof (as further amended, amended and restated, supplemented or otherwise modified
from time to time, the “Credit Agreement”), among SWMP, Renegy, LLC, an Arizona limited
liability company (“Renegy”), Renegy Trucking, LLC, an Arizona limited liability company
(“Renegy Trucking” and together with Renegy and SWMP, the “Borrowers”),
Administrative Agent, Collateral Agent and the financial institutions from time to time parties
thereto (collectively, the “Lenders”), pursuant to which, among other things, the Lenders
have extended Loans to, and for the benefit of, the Borrowers.

          C. As security for the obligations of SWMP under the Credit Agreement, Administrative Agent
required that Renegy Holdings pledge its membership interests (and all of its rights, privileges,
authority and power thereunder as a member of SWMP) to Collateral Agent pursuant to that certain
Pledge Agreement, dated as of October 1, 2007, between Renegy Holdings and Collateral Agent, as
amended by that certain First Amendment to Pledge Agreement dated as of the date hereof (the
“Senior Pledge Agreement”).

          D. Junior Claimant has entered into (i) that certain Member Interest Purchase Agreement, dated
as of the date hereof (the “Purchase Agreement”), with Renegy Holdings pursuant to which
Junior Claimant has purchased all of the Class A membership interests of SWMP (“Class A
Interest”) and Renegy Holdings has retained ownership of all of the Class B membership
interests of SWMP (“Class B Interest”) (ii) that certain Amended and Restated Limited
Liability Company Agreement of SWMP, dated as of the date hereof (as amended, amended and restated,
supplemented or otherwise modified from time to time, the “LLC Agreement” and together with
the Purchase Agreement, the “Agreements”), with Renegy Holdings.

          E. As security for certain obligations of Renegy Holdings under the Agreements, Junior
Claimant has required that Renegy Holdings pledge its Class B Interest (and all of its rights,
privileges, authority and power thereunder as a member of SWMP) to Junior

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Claimant pursuant to that certain Member Interest Pledge Agreement, dated as of the date
hereof, between Renegy Holdings and Junior Claimant (the “Subordinated Pledge Agreement”).

          F. The Senior Claimants have agreed that Renegy Holdings may enter into the Subordinated
Pledge Agreement only if Junior Claimant shall join in this Agreement and Junior Claimant shall
subordinate, to the extent and in the manner hereinafter set forth, all claims, rights and remedies
in respect of the Subordinated Pledge Agreement to the Senior Pledge Agreement to the extent set
forth in this Agreement.

AGREEMENT

          NOW, THEREFORE, in consideration of the promises contained herein, and in order to induce the
Lenders to continue to perform under the Credit Agreement and to make the advances of credit
contemplated thereby, and for other good and valuable consideration, the receipt and adequacy of
which are hereby acknowledged, the parties hereto agree as follows:

ARTICLE I.

DEFINITIONS

          1.1 Agreement Definitions. The following terms when used in this Agreement, including its
preamble and recitals, shall have the following meanings:

     “Proceeding” means any (a) insolvency, bankruptcy, receivership, liquidation,
reorganization, readjustment, composition or other similar proceeding relating to Renegy
Holdings, its property or its creditors as such, (b) proceeding for any liquidation,
dissolution or other winding-up of Renegy Holdings, voluntary or involuntary, whether or not
involving insolvency or bankruptcy proceedings, (c) general assignment for the benefit of
creditors of Renegy Holdings or (d) other marshaling of the assets of Renegy Holdings.

     “Senior Claimants” means the Secured Parties under and as defined in the Credit
Agreement.

     “Senior Rights” means all rights, privileges and remedies provided to
Collateral Agent under the Senior Pledge Agreement with respect to the Collateral (as
defined therein).

     “Subordinated Rights” means all rights, privileges and remedies provided to
Junior Claimant under the Subordinated Pledge Agreement with respect to the Member Interest
(as defined therein).

     “Subordination Period” means the period of time commencing on the date of the
execution and delivery of this Agreement by each of the parties hereto and ending on the
date on which all Senior Claims shall have been paid in full, in cash, all of the
Commitments of the Lenders under the Credit Agreement shall have been terminated and
all of the Swap Agreements to which any Senior Claimant is a party shall have been
terminated.

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          1.2 Credit Agreement Definitions. All capitalized terms used herein and not otherwise
defined herein shall have the meaning given in the Credit Agreement.

          1.3 Rules of Interpretation. Unless otherwise provided herein, the rules of
interpretation set forth in Exhibit A to the Credit Agreement shall apply to this Agreement,
including its preamble and recitals.

ARTICLE II.

CERTAIN SUBORDINATION TERMS

          2.1 Subordination.  During the Subordination Period, notwithstanding anything in the
Agreements or the Subordinated Pledge Agreement to the contrary, each of the parties hereto agree
that, to the extent and in the manner provided herein, all security interests, liens and the
Subordinated Rights now or hereafter existing in favor of Junior Claimant under the Subordinated
Pledge Agreement shall be subject, subordinate and junior in all respects and at all times to the
security interests, liens and collection in full of the Senior Rights now or hereafter existing of
the Senior Creditors, regardless of the time or order of attachment or perfection of such liens or
the time or order of filing of financing statements.

          2.2 Legend. Each negotiable instrument or promissory note evidencing a lien with respect
to the Subordinated Rights, if any, in respect thereof shall bear a legend (or otherwise include
notice provisions satisfactory to Administrative Agent) providing that the priority of any such
lien has been subordinated to the liens with respect to the Senior Rights in the manner and to the
extent set forth in this Agreement.

          2.3 Proceeding Against Renegy Holdings; Proof of Claim.

               2.3.1 Proceeding Against Renegy Holdings. At any general meeting of creditors of Renegy
Holdings or any member thereof, or in the event of any Proceeding during the Subordination Period,
Collateral Agent, on behalf of the Senior Claimants, is hereby irrevocably authorized at any such
meeting or in any such Proceeding:

     (a) to enforce claims comprising the Subordinated Rights in the name of Junior
Claimant, by proof of debt, proof of claim, suit or otherwise; and

     (b) to collect any payments or distributions of or in respect of the Class B Interest
(and all of its rights, privileges, authority and power thereunder as a member of SWMP) as a
result of a Proceeding on account of the Subordinated Rights as a result thereof and apply
the same, or the proceeds of any realization upon the same that the Senior Claimants in
their discretion elect to effect, to the Senior Rights until all Obligations (as defined in
the Credit Agreement) shall have been paid in full (the Senior Claimants hereby agreeing to
render any surplus as a court of competent jurisdiction may direct); and

     (c) other than voting claims comprising or arising out of the Subordinated Rights in
any Proceeding (including the right to vote to accept or reject any plan of partial or
complete liquidation or reorganization), to take generally any action in connection

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with any
such meeting or proceeding which Junior Claimant might otherwise take in respect of the
Subordinated Rights and claims relating thereto.

               2.3.2 Proof of Claim. After the commencement of any Proceeding referred to in Section
2.3.1, Junior Claimant may inquire of Collateral Agent in writing whether Collateral Agent, on
behalf of Senior Claimants, intends to exercise the foregoing rights with respect to the
Subordinated Rights. Should Collateral Agent fail, within a reasonable time after receipt of such
inquiry, either to file a proof of claim with respect to the Subordinated Rights and to furnish a
copy thereof to Junior Claimant, or to inform Junior Claimant in writing that the Senior Claimants
intend to exercise their rights to assert the Subordinated Rights in the manner hereinabove
provided, Junior Claimant may, but shall not be required to, proceed to file a proof of claim with
respect to the Subordinated Rights and take such further steps with respect thereto, not
inconsistent with this Agreement, as Junior Claimant may reasonably deem proper.

          2.4 Wrongful Collections. Should any payment on account of, or any collateral for any
part of the Subordinated Rights be received by Junior Claimant in violation of this Agreement, such
payment or collateral shall be delivered by Junior Claimant forthwith to Collateral Agent, on
behalf of the Senior Claimants, for application to the Senior Rights, in the form received.
Collateral Agent is irrevocably authorized to supply any required endorsement or assignment which
may have been omitted. Until so delivered, any such payment or collateral shall be held by Junior
Claimant in trust for the Senior Claimants and shall not be commingled with other funds or property
of Junior Claimant.

ARTICLE III.

OWNERSHIP OF SUBORDINATED AMOUNTS; AMENDMENT OF LLC AGREEMENT; CREDIT DOCUMENTS

          3.1 Ownership of Subordinated Amounts. Junior Claimant represents and warrants that it is
the lawful owner of the Subordinated Rights and no part thereof has been assigned to or
subordinated or subjected to any other security interest in favor of anyone other than the Senior
Claimants. Except as permitted pursuant to Sections 2.05, 12.03 and 13.09 of the Purchase
Agreement and Article X of the LLC
Agreement, Junior Claimant shall not assign all or any portion of the Subordinated Rights, its
commitment under, or any of its rights or remedies under, the Agreements or the Subordinated Pledge
Agreement without the prior written consent of Administrative Agent and the Majority Lenders, the
Required Lenders or all Lenders, as applicable (which consent may be granted or withheld in their
respective sole discretion), and in any event only upon the execution and delivery to
Administrative Agent of an agreement by any such assignee to be bound by the terms of this
Agreement (including provisions relating to assignment), in form and substance the same as this
Agreement, or otherwise as may be reasonably satisfactory to Administrative Agent; provided that
any assignment permitted pursuant to Sections 2.05, 12.03 and 13.09 of the Purchase Agreement and
Article X of the LLC Agreement shall include a transfer of all rights, and assumption by the
transferee of all obligations, under the Agreements, the Subordinated Pledge Agreement and that
certain Forbearance Agreement, dated as of the date hereof, among Junior Claimant, SWMP and
Collateral Agent, in each case, corresponding to the Collateral (as defined in the Subordinated
Pledge Agreement), or portion thereof, so assigned.

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          3.2 Amendment of the Agreements. Junior Claimant shall not amend either Agreement or the
Subordinated Pledge Agreement without Administrative Agent’s prior written consent.

          3.3 Credit Documents. Junior Claimant acknowledges that it has been provided with a
copy of the Credit Documents and has read and is familiar with the provisions thereof. Junior
Claimant shall not otherwise take any action prejudicial to or inconsistent with the Senior
Claimants’ priority position over Junior Claimant created by this Agreement. Notwithstanding
anything contained in the Agreements or in the Subordinated Pledge Agreement to the contrary,
Junior Claimant hereby agrees that is will not exercise any of its Subordinated Rights if such
exercise would cause a Default or Event of Default under the Credit Agreement.

ARTICLE IV.

WAIVERS

          Administrative Agent, Collateral Agent and the Senior Claimants are hereby authorized to
demand specific performance of this Agreement, whether or not Renegy Holdings shall have complied
with the provisions hereof applicable to it, at any time when Junior Claimant shall have failed to
comply with any provision hereof applicable to it. Junior Claimant hereby irrevocably waives any
defense based on the adequacy of a remedy at law which might be asserted as a bar to the remedy of
specific performance hereof in any action brought therefor by the Senior Claimants. Junior
Claimant further waives presentment, notice and protest in connection with all negotiable
instruments evidencing Senior Rights or Subordinated Rights to which Junior Claimant may be a
party, notice of the acceptance of this Agreement by the Senior Claimants, notice of any loan made,
extension granted or other action taken in reliance hereon, and all demands and notices of every
kind in connection with this Agreement, Senior Rights or exercise of Senior Rights or Subordinated
Rights. Junior Claimant hereby assents to any renewal, extension or postponement of the Senior
Rights or any other indulgence with respect thereto, to any substitution, exchange or release of
collateral therefor and to the addition or release of any person primarily or secondarily liable
thereon and assents to the provisions of any instrument, security or other writing evidencing
Senior Rights.

ARTICLE V.

REINSTATEMENT

          The obligations of Junior Claimant under this Agreement shall continue to be effective, or be
reinstated, as the case may be, if at any time any payment in respect of any Senior Rights, or any
other payment to any holder of any Senior Rights in its capacity as such, is rescinded or must
otherwise be restored or returned by the holder of such Senior Rights upon the occurrence of any
Proceeding, or upon or as a result of the appointment of a receiver, intervenor or conservator of,
or trustee or similar officer for, Renegy Holdings or any substantial part of its property, or
otherwise, all as though such payment had not been made.

ARTICLE VI.

BANKRUPTCY

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          This Agreement shall remain in full force and effect as between Junior Claimant and Senior
Claimant notwithstanding the occurrence of any Proceeding affecting Renegy Holdings or any member
thereof.

ARTICLE VII.

FURTHER ASSURANCES

          Renegy Holdings and Junior Claimant shall execute and deliver to the Senior Claimants such
further instruments and shall take such further action as the Senior Claimants may at any time or
times reasonably request in order to carry out the provisions and intent of this Agreement. To
this end, Junior Claimant (a) irrevocably authorizes and empowers (without imposing any obligation
on) the Senior Claimants and any agent thereof to demand, sue for, collect and receive all payments
and distributions on or in respect of its Subordinated Rights which are required to be paid or
delivered to the Senior Claimants, as provided herein, and to file and prove all claims therefor
and take all such other action, in the name of Junior Claimant or otherwise, as the Senior
Claimants may determine to be necessary or appropriate for the enforcement of these subordination
provisions, all in such manner as the Senior Claimants, Collateral Agent or Administrative Agent
shall instruct, (b) irrevocably authorizes and empowers (without imposing any obligation) the
Senior Claimants, Collateral Agent and Administrative Agent to vote the Subordinated Rights in such
manner as the Senior Claimants, Collateral Agent or Administrative Agent shall instruct and (c)
agrees to execute and deliver to the Senior Claimants, Collateral Agent or Administrative Agent all
such further instruments confirming the above authorization, and all such proofs of claim,
assignments of claim and other instruments, and to take all such other action, as may be requested
by Senior Claimants in order to enable the Senior Claimants to enforce all claims upon or in
respect of the Subordinated Rights.

ARTICLE VIII.

MISCELLANEOUS

          8.1 Notices. Any communications between the parties hereto or notices provided herein to
be given may be given to the following addresses:

	 	 	 
	If to Administrative Agent
or Collateral Agent:	 	CoBank, ACB
	 
	 	5500 S. Quebec Street
	 
	 	Greenwood Village, CO 80111
	 
	 	Attn:  Dale Keyes
	 
	 	Facsimile: (303) 224-2599

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	If to Junior Claimant:
	 	AZ Biomass LLC
	 
	 	c/o State Street Bank and Trust Company
	 
	 	Energy Credit Investments
	 
	 	State Street Financial Center
	 
	 	One Lincoln Street SFC 12
	 
	 	Boston, Massachusetts 02110-2900
	 
	 	Attn: Francine E. Lyons
	 
	 	Telecopy:  (617) 664-4850
	 
	 	 
	If to Renegy Holdings:
	 	Renegy Holdings, Inc.
	 
	 	301 West Warner Road, Suite 132
	 
	 	Tempe, Arizona 85284-2961
	 
	 	Attn:  Robert M. Worsley

	 
	 	Telecopy No.: (480) 556-5500

All notices or other communications required or permitted to be given hereunder shall be in
writing and shall be considered as properly given (a) if delivered in person, (b) if sent by
overnight delivery service (including Federal Express, UPS, ETA, Emery, DHL, AirBorne and other
similar overnight delivery services), (c) if mailed by first class United States Mail, postage
prepaid, registered or certified with return receipt requested, or (d) if sent by facsimile.
Notice so given shall be effective upon receipt by the addressee, except that communication or
notice so transmitted by facsimile or other direct written electronic means shall be deemed to have
been given when sent and receipt has been confirmed (except that, if not given during normal
business hours for the recipient, shall be deemed to have been given at the opening of business on
the next business day for recipient). Any party shall have the right to change its address for
notice hereunder to any other location within the continental United States by giving of 30 days’
notice to the other parties in the manner set forth above.

          8.2 Benefit of Agreement. Nothing in this Agreement, expressed or implied, shall give or
be construed to give to any Person other than the parties hereto and the Senior Claimants, any
legal or equitable right, remedy or claim under this Agreement, or under any covenants and
provisions of this Agreement, each such covenant and provision being for the sole benefit of the
parties hereto and the Senior Claimants. The rights granted to the Senior Claimants hereunder are
solely for their protection and nothing herein contained shall impose on the Senior Claimants any
duties with respect to any property of Renegy Holdings or Junior Claimant received hereunder. The
Senior Claimants shall have no duty to preserve rights against prior parties in any property of any
kind received hereunder.

          8.3 Delay and Waiver. No failure or delay by Collateral Agent in exercising any right or
power hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any
such right or power, or any abandonment or discontinuance of steps to enforce such a right or
power, preclude any other or further exercise thereof or the exercise of any other right or power.
The rights and remedies of Collateral Agent hereunder are cumulative and are not exclusive of any
rights or remedies that they would otherwise have. No waiver of any provision of this Agreement or
either Pledge Agreement or consent to any departure by Renegy

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Holdings therefrom shall be effective
only in the specific instance and for the purpose for which given.

          8.4 Amendments. This Agreement may not be amended, modified or supplemented, except in a
writing signed by each of the parties hereto.

          8.5 Governing Law. This Agreement shall be governed by, and construed under, the laws of
the State of New York, without reference to conflicts of laws (other than Section 5-1401 of the New
York General Obligations Law).

          8.6 Consent to Jurisdiction. Each of the parties hereto agrees that any legal action or
proceeding by or against Renegy Holdings or Junior Claimant or with respect to or arising out of
this Agreement may be brought in or removed to the courts of the State of New York, in and for the
County of New York, or of the United States of America for the Southern District of New York, as
Administrative Agent or Collateral Agent may elect. By execution and delivery of this Agreement,
each of the parties hereto accepts, for itself and in respect of its property, generally and
unconditionally, the jurisdiction of the aforesaid courts. Each of the parties hereto irrevocably
consents to the service of process out of any of the aforementioned courts in any manner permitted
by law. Nothing herein shall affect the right of Administrative Agent or Collateral Agent to bring
legal action or proceedings in any other competent jurisdiction. Each of the parties hereto hereby
waives any right to stay or dismiss any action or proceeding under or in connection with this
Agreement brought before the foregoing courts on the basis of forum non-conveniens.

          8.7 WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO HEREBY KNOWINGLY, VOLUNTARILY, AND
INTENTIONALLY WAIVES ANY RIGHTS IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED
HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH, THIS AGREEMENT, OR ANY COURSE OR CONDUCT,
COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN), OR ACTIONS OF ANY PARTY HERETO. THIS
PROVISION IS A MATERIAL INDUCEMENT FOR EACH PARTY TO ENTER INTO THIS AGREEMENT.

          8.8 Severability. The provisions of this Agreement are severable, and if any clause or
provision shall be held invalid or unenforceable in whole or in part in any jurisdiction, then such
invalidity or unenforceability shall affect only such clause or provision, or part thereof, in such
jurisdiction and shall not in any manner affect such clause or provision in any other jurisdiction,
or any other clause or provision of this Agreement in any jurisdiction.

          8.9 Headings. Article and Section headings have been inserted in this Agreement as a
matter of convenience for reference only and it is agreed that such article and section headings
are not a part of this Agreement and shall not be used in the interpretation of any provision of
this Agreement.

          8.10 Successors and Assigns. Without limiting anything set forth in Article 3,
this Agreement shall be binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns, provided that neither Renegy Holdings nor Junior
Claimant

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may assign or otherwise transfer any of its rights or obligations hereunder without the
prior written consent of Administrative Agent (which consent may be withheld in its sole
discretion).

          8.11 Entire Agreement. This Agreement and any agreement, document or instrument attached
hereto or referred to herein among the parties hereto integrate all the terms and conditions
mentioned herein or incidental hereto and supersede all oral negotiations and prior writings in
respect of the subject matter hereof. In the event of any conflict between the terms, conditions
and provisions of this Agreement and any such agreement, document or instrument, the terms,
conditions and provisions of this Agreement shall prevail.

          8.12 Survival of Agreements. All covenants, agreements, representations and warranties
made by Renegy Holdings and Junior Claimant herein and in the other instruments delivered in
connection with or pursuant to this Agreement shall be considered to have been relied upon by the
other parties hereto and shall survive the execution and delivery of this Agreement and the
termination of the Subordination Period.

          8.13 Counterparts. This Agreement and any amendments, waivers, consents or supplements
hereto or in connection herewith may be executed in any number of counterparts and by different
parties hereto in separate counterparts, each of which when so executed and delivered shall be
deemed an original, but all such counterparts together shall constitute but one and the same
instrument; signature pages may be detached from multiple separate counterparts and attached to a
single counterpart so that all signature pages are physically attached to the same document.

          8.14 Termination. This Agreement shall terminate upon the termination of the Subordinated
Pledge Agreement in accordance with Section 8.8 thereof.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

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          IN WITNESS WHEREOF, the parties hereto, by their officers duly authorized, intending to be
legally bound, have caused this Subordination Agreement to be duly executed and delivered as of the
date first above written.

	 	 	 	 	 
	 	AZ BIOMASS LLC,

a Delaware limited liability company

 	 
	 	By:  	Antrim Corporation, Its Manager
 	 
	 	 	 
	 	By:  	                                      /s/ Francine E. Lyons
 	 
	 	 	Francine E. Lyons 	 
	 	 	Vice President 	 
	 
	 	RENEGY HOLDINGS, INC.,
a Delaware corporation

 	 
	 	By:  	/s/ Robert M. Worsley
 	 
	 	 	Robert M. Worsley 	 
	 	 	Chief Executive Officer 	 
	 
	 	COBANK, ACB,

as Administrative Agent and Collateral Agent

 	 
	 	By:  	/s/ Dale Keyes
 	 
	 	 	Dale Keyes 	 
	 	 	Vice President, Energy Banking Group 	 
	 

SUBORDINATION AGREEMENT (SSB PLEDGE)

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