EMPLOYMENT AGREEMENT
ARETE INDUSTRIES, INC. AND XXXX XXXXXXXXX
The following shall constitute an employment agreement between Arete
Industries, Inc., a Colorado corporation ("Employer") and Xxxx
Xxxxxxxxx ("Executive") effective November 1, 1998:
1. Term: The Term of the Employment Agreement shall be a two-year
period from the date hereof and a like period from each successive
Renewal Date (defined below). The Employment Agreement shall
automatically renew one calendar year from the date hereof and each
successive anniversary date thereafter, unless terminated per this
Agreement.
2. Scope of Employment. Executive is hereby retained to act as a
senior executive officer of Employer in the capacity of Chief
Financial Officer and may also serve at the pleasure of the board of
directors in such corporate officer capacities as are designated by
the board of directors from time to time. Executive may also be
appointed as an executive officer and/or director of subsidiaries or
affiliates of Employer and Employer may allocate all or any portion
of Executives compensation to such entities. Notwithstanding such
allocation, Employer remains primarily obligated to Executive for
his compensation. Executive shall devote such of his time to his
duties hereunder as is negotiated with the Employer from time to
time, but it is understood and agreed that Executive has other
employment as consultant, officer and director of other unaffiliated
corporate entities.
3. Compensation.
a) Salary. Annual base salary shall be $90,000 per year based on
devotion of full time as an employee. Executives salary shall be
adjusted to reflect current allocation of 1/3 of his time to
business of Employer or $30,000 per year. The base salary will be
adjusted from time to time as needed and/or requested by either
party and agreed to in writing by the other. Salary shall accrue if
not paid on a monthly basis. Notwithstanding the foregoing,
Executive shall be paid a minimum draw against annual salary of $
2,500 per month plus expenses, benefits and incentive pay as
provided herein or otherwise agreed to by Employer and Executive.
Compensation herein set forth shall be in addition to any
compensation provided in the referenced Change in Control Agreement
unless specifically superceded by this Agreement.
b) Expenses. Executive shall be reimbursed all expenses advanced on
behalf of the Company if supported by proper evidence of their
amount and business purpose with adequate documentation, on a
monthly basis in cash.
c) Conversion of Accrued Salary to Class A Preferred Stock
("Preferred") and/or Common Stock. Any salary, incentive pay and
benefits which remain unpaid at the end of each monthly pay period
shall be paid in the form of cash, notes, common stock or Preferred
which has been designated by the Company to be issued for such
purpose. Notes shall provide for conversion at the option of the
holder into shares of common or Preferred. Common Stock issued on
conversion of the Preferred and/or issued directly to pay bonuses,
accrued salary and/or unreimbursed expenses shall be in registered
form under Form S-8 if applicable to the Employer at the time, or in
the alternative shall carry demand and piggy back registration
rights. The Employer can redeem the Preferred at face value plus
accrued dividends at any time, or the Executive will have the option
to convert the Preferred into shares of Common Stock of Employer on
the terms specified in the Certificate of Designation of the
Preferred on file with the Employer and incorporated herein by
reference.
d) Participation in Benefits. Executive will at all times from the
effective date hereof be entitled to participate in any such
pension, profit sharing, bonus, life insurance, hospitalization,
major medical, and other employee benefit plans of the Employer that
may be in effect from time to time, to the extent the Executive is
eligible under the terms of those plans (collectively, the
"Benefits").
4. Incentive Compensation. In addition to any other compensation
provided for herein or in any other agreements to which the
Executive is a party with Employer or any subsidiary or affiliate of
Employer, Employer agrees to negotiate bonus and/or incentive
compensation in good faith upon the occurrence of events which
substantially further the initiatives of Employer to return its
existing businesses to profitability, expand such businesses,
fulfill business plans adopted by Employer, its subsidiaries,
affiliates or joint venture partners, or upon events which Employee
brings or introduces major business opportunities to the Employer or
its subsidiaries or affiliates, which compensation shall fairly and
adequately reflect the value to the Employer and/or its
shareholders. In addition, the provisions contained in the Change
in Control Agreement pertaining to success fees to Executive/Boulder
Sports, LLC. are expressly continued in full force and effect and
are incorporated herein by reference.
5. Office Facilities, Equipment and Administrative Support.
Executive shall be provided with an office, utilities, telephone
(local long distance service and equipment), and such services
including part-time or full time secretarial as is economically
feasible in Boulder, Colorado. The cost of employees' office,
telephone, long distance, utilities and supplies will be born by
Executive to the extent that Executive devotes less than full time
to his duties as an Executive. If not advanced by Employer, such
expenses will be reimbursed to Executive on a monthly basis. Any
unpaid and accrued offices expenses may be included, at the option
of Executive in the issuance of notes, shares of Common or Preferred
Stock in lieu of salary per Paragraph 3(c), above. Employer will
also provide office contents and liability insurance on the offices
so provided.
6. Vacation, Holidays and Sick Pay. Executive will be entitled to
take four weeks paid vacation each fiscal year assuming full time
employment and the pro-rata portion of same based on time committed
to the business of the Employer, and based on the vacation policies
of the Employer in effect for its executive officers from time to
time. Vacation must be taken by the Executive at such time or times
as are approved by the highest ranked corporate officer. The
Executive will also be entitled to the paid holidays (and other paid
leave) set forth in Employer's policies. Unused vacation days in
any fiscal year may not be carried over in any subsequent fiscal
year. Executive will be given such sick pay or sick leave as is set
forth in the employment policies of the Employer as established from
time to time.
7. Errors and Omissions Insurance. Employer will immediately upon
securing the necessary funding acquire E&O or Directors and Officers
Liability Insurance of sufficient amount to cover ordinary risks
commonly associated with companies similarly situated.
8. Termination
a) Termination without cause by the Employer on or before April 30,
1999 will give rise to payment of (r) of the break-up fee set forth in
the Change in Control Agreement.
b) Termination without cause thereafter will entitle the Executive
to recover all salary remaining under the unexpired term of this
Agreement (the "Severance Period"), plus all outstanding accrued and
unpaid salary, expenses, advances and will further entitle Executive
to the vesting of all stock options, bonuses and incentive
compensation in effect or pending at the time of such termination.
On an event of such termination, Employer will have a maximum of 6
months from the effective date of termination to pay all accruals
under this and the previous paragraph 8(a) or to make mutually
acceptable provisions for such payment. Any obligations of the
Employer hereunder will be deemed subject to the security interest
granted to Executive to cover the potential break-up fee and unpaid
expenses and advances pursuant to Sections 5(a) and (c) of the
Change in Control Agreement, which provisions are incorporated
herein by reference.
c) The phrase "for cause" means: (a) the Executives material breach
of this Agreement; (b) the Executives failure to adhere to any
written Employer policy if the Executive has been given a reasonable
opportunity to comply with such policy or cure his failure to comply
(which reasonable opportunity must be granted during the ten-day
period preceding termination of this Agreement); (c) the
appropriation (or attempted appropriation) of a material business
opportunity of the Employer, including attempting to secure or
securing any personal profit in connection with any transaction
entered into on behalf of the Employer; (d) the misappropriation (or
attempted misappropriation) of any of the Employer's funds or
property; or (e) the conviction of, the indictment for (or its
procedural equivalent), or the entering of a guilty plea or plea of
no contest with respect to, a felony, the equivalent thereof, or any
other crime with respect to which imprisonment is a possible
punishment.
d) The Term, the Compensation and Incentive Compensation, and any
and all other rights of the Executive under this Agreement or
otherwise as an employee of the Employer will terminate (except as
otherwise provided in this Paragraph ):
i) upon the death of the Executive;
ii) upon the disability of the Executive immediately upon notice
from either party to the other;
iii) for cause immediately upon notice from the Employer to the
Executive, or at such later time as such notice may specify; or
iv) upon resignation of the Executive unless such resignation is
made by reason of a good faith dispute between Employer and
Executive over policies, actions and/or conditions in which
Executive has a good faith belief that he cannot continue without
compromising his reputation, without violating a statute, rule,
regulation or order of court, or which would in all likelihood not
stand the test of the business judgment rule. In such event,
Employer will remain obligated to pay separation pay as provided in
sub paragraphs 8(a) and (b), above, occurs for good reason (as
defined in Section 8(d)) upon not less than thirty days' prior
notice from the Executive to the Employer.
e) Definition of Disability. For purposes of Section 8(d)(ii), the
Executive will be deemed to have a "disability" if, for physical or
mental reasons, the Executive is unable to perform the essential
functions of the Executive's duties under this Agreement for 120
consecutive days, or 180 days during any twelve month period, as
determined in accordance with this Section 8(e). In the event of a
bona-fide dispute between Employer and Employee, the disability of
the Executive will be determined by a medical doctor selected by
written agreement of the Employer and the Executive upon the request
of either party by notice to the other. f) In the event of a
termination by disability, Executive will retain all accrued
benefits and incentive compensation through the end of the calendar
month following such disability. Salary will continue through the
earlier of the Severance Period, defined above or the date
disability insurance payments commence under provisions of insurance
purchased by Employer on behalf of Executive.
g) Termination upon Death. If this Agreement is terminated because
of the Executive's death, the Executive will be entitled to receive
his Salary through the end of the calendar month in which his death
occurs, and that part of the Executive's Incentive Compensation, if
any, for the Fiscal Year during which his death occurs, prorated
through the end of the calendar month during which his death occurs.
h) For purposes of this Section 8, the Executive's designated
beneficiary will be such individual beneficiary or trust, located at
such address as the Executive may designate by notice to the
Employer from time to time or, if the Executive fails to give notice
to the Employer of such a beneficiary, the Executive's estate.
Notwithstanding the preceding sentence, the Employer will have no
duty, in any circumstances, to attempt to open an estate on behalf
of the Executive, to determine whether any beneficiary designated by
the Executive is alive or to ascertain the address of any such
beneficiary, to determine the existence of any trust, to determine
whether any person or entity purporting to act as the Executive's
personal representative (or the trustee of a trust established by
the Executive) is duly authorized to act in that capacity, or to
locate or attempt to locate any beneficiary, personal
representative, or trustee.
i) Benefits. The Executive's accrual of, or participation in plans
providing for, employee benefits as specified herein will cease at
the effective date of the termination of this Agreement, and the
Executive will be entitled to accrued benefits pursuant to such
plans only as provided in such plans. Except under circumstances of
termination without cause, or termination by Executive by reason of
a bona fide dispute per sub-paragraph 8(d)(iv), above, the Executive
will not receive, as part of his termination pay pursuant to this
Section 8, any payment or other compensation for any vacation,
holiday, sick leave, or other leave unused on the date the notice of
termination is given under this Agreement.
9. Protection of Proprietary Property, Confidentiality Agreement.
The Executive agrees to protect and preserve the confidentiality of
all business opportunities, trade secrets and proprietary
information of Employer, its affiliates and subsidiaries, throughout
the term of this Agreement and will not disclose the same to others
without the express written permission of Employer. Any inventions,
ideas or concepts which are developed by Executive while and
employee of Employer will, in the absence of a written agreement to
the
contrary, become the sole and exclusive property of Employer.
10. Miscellaneous.
a) Binding Effect. This agreement is binding on and will inure to
the benefit of, and shall be binding upon, the parties hereto and
their respective successors, assigns, heirs, and legal
representatives, including any entity with which the Employer may
merge or consolidate or to which all or substantially all of its
assets may be transferred. The duties and covenants of the Executive
under this Agreement, being personal, may not be delegated.
b) Notices. All notices, consents, waivers, and other communications
under this Agreement must be in writing and will be deemed to have
been duly given when (a) delivered by hand (with written
confirmation of receipt), (b) sent by facsimile (with written
confirmation of receipt), provided that a copy is mailed by
registered mail, return receipt requested, or (c) when received by
the addressee, if sent by a nationally recognized overnight delivery
service (receipt requested), in each case to the last known
addresses and/or facsimile numbers of the respective party.
c) Entire Agreement; Amendments. This Agreement contains the entire
agreement between the parties with respect to the subject matter
hereof and supersede all prior agreements and understandings, oral
or written, between the parties hereto with respect to the subject
matter hereof, except any documents and/or agreements specifically
incorporated herein by reference. This Agreement may not be amended
orally, but only by an agreement in writing signed by the parties
hereto.
d) Governing Law. This Agreement will be governed by the laws of the
State of Colorado without regard to conflicts of laws principles.
e) Jurisdiction. Any action or proceeding seeking to enforce any
provision of, or based on any right arising out of, this Agreement
may be brought against either of the parties in the courts of the
State of Colorado, County of Boulder, or, if it has or can acquire
jurisdiction, in the United States District Court for the District
of Colorado, and each of the parties consents to the jurisdiction of
such courts (and of the appropriate appellate courts) in any such
action or proceeding and waives any objection to venue laid therein.
Process in any action or proceeding referred to in the preceding
sentence may be served on either party anywhere in the world.
f) Headings. The headings of sections in this Agreement are
provided for convenience only and will not affect its construction
or interpretation. All references to "Section" or "Sections" refer
to the corresponding Section or Sections of this Agreement unless
otherwise specified. All words used in this Agreement will be
construed to be of such gender or number as the circumstances
require. Unless otherwise expressly provided, the word "including"
does not limit the preceding words or terms.
g) Severability. If any provision of this Agreement is held invalid
or unenforceable by any court of competent jurisdiction, the other
provisions of this Agreement will remain in full force and effect.
Any provision of this Agreement held invalid or unenforceable only
in part or degree will remain in full force and effect to the extent
not held invalid or unenforceable.
h) Counterparts. This Agreement may be executed in one or more
counterparts, each of which will be deemed to be an original copy of
this Agreement and all of which, when taken together, will be deemed
to constitute one and the same agreement.
IN WITNESS WHEREOF, the parties have executed and delivered this
Agreement as of the date above first written above.
EMPLOYER: EXECUTIVE:
By:___________________
