EMPLOYMENT AGREEMENT
ARETE INDUSTRIES, INC. AND XXXXXX X. XXXXX
The following shall constitute an employment agreement between Arete
Industries, Inc., a Colorado corporation ("Employer") and Xxxxxx X.
Xxxxx ("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
Executive 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 his full time to his duties
hereunder, but it is understood and agreed that Executive has other
occasional employment as an attorney, and an officer and director of
affiliated corporate entities.
3. Compensation.
a) Salary. Annual base salary shall be $90,000 per year based on
devotion of full time as an employee. The base salary may be
increased from time to time as Employer's financial performance
allows. Salary shall accrue if not paid on a monthly basis. Executive
shall be paid a minimum draw against annual salary of $ 7,500 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referenced Change in Control Agreement unless specifically superceded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:___________________
