EMPLOYMENT AGREEMENT

THIS EMPLOYMENT AGREEMENT (this “Agreement”) is entered into this January 12,
2007, by and between Daniel Foley, an individual resident of Arvada, Colorado
(the “Executive”), and Rancher Energy Corp., a Nevada corporation (the
“Company”).
 
R E C I T A L S:

A. The Company desires to employ the Executive as its Chief Financial Officer
with the responsibilities and authority as set forth in this Agreement or as
determined by the Company’s President & CEO pursuant to this Agreement, and the
Executive desires to be employed by the Company as its Chief Financial Officer,
on the terms set forth in this Agreement.
 
THE PARTIES HERETO AGREE AS FOLLOWS:

1.  Employment and Duties. During the term of this Agreement, the Executive
shall serve as the Company’s Chief Financial Officer, reporting to the Company’s
President & CEO. Subject to the control and direction of the Company’s President
& CEO, the Executive shall exercise general supervision and direction of the
finance functions of the Company, as more fully set forth on Exhibit A attached
hereto. The parties agree that the Executive’s service as Chief Financial
Officer of the Company is a full-time position, and the Executive agrees to
devote substantially all of his business time and his best efforts to the
performance of his responsibilities under this Agreement; provided, however,
that the devotion of time to board or committee service for non-profit
corporate, civic and charitable organizations unaffiliated with the Company and
the devotion of limited amounts of time to personal or family investments will
not be deemed a breach of this Agreement if such activities do not interfere or
conflict with the performance of the Executive’s duties hereunder. The Executive
shall duly, punctually, and faithfully perform and observe any and all rules and
regulations which the Company may now or shall hereafter reasonably establish
governing the conduct of its business or its employees. The Executive agrees to
serve without additional compensation if elected or appointed to any position or
office, including as a director of the Company or any subsidiary or affiliate of
the Company.
 
2.  Compensation.
 
(a)  Base Salary; Withholding. The Company shall pay the Executive a base salary
of $180,000 per year during the Term (as defined in Section 4), payable in
arrears in accordance with the Company’s standard payroll procedures as in
effect from time to time. During the Term additional increases may be made as
determined in the discretion of the Company’s President & CEO. The Board shall
consider the Executive’s base salary no less frequently than annually and may
increase, but not decrease, the base salary. The parties shall comply with all
applicable withholding requirements in connection with all compensation payable
to the Executive hereunder.
 
(b)  Discretionary Bonus. The Executive shall also be eligible to receive a
discretionary bonus for each calendar year during the Term. For each calendar
year during the Term, the Executive shall be eligible for such bonus as the
Company’s Board of Directors, in its absolute discretion, may determine to be
proper in light of the Executive’s performance and the Company’s performance
during such calendar year and any other facts and circumstances that he may see
fit to consider. The Company’s Board of Directors may condition a discretionary
bonus upon the achievement of specific goals, objectives, and milestones during
that calendar year that have been determined and approved by the Company’s
President & CEO and Board of Directors. Whether any such goal, objective, or
milestone has been achieved shall be determined by the Company’s Board of
Directors acting in its good faith discretion. Unless otherwise provided in
Section 5 below, that portion of the annual incentive bonus allocated to the
achievement of any specific goal, objective, or milestone shall accrue only upon
the actual achievement of that goal, objective, or milestone provided that the
Executive remains in the employ of the Company (or an affiliate of the Company)
on the date of achievement.
 
(c)  Stock Options. The Executive will be granted an option pursuant to the
Company’s 2006 Stock Incentive Plan, effective upon the approval of the option
and exercise price by the Company’s Board of Directors. The option will grant
the Executive the right to purchase up to 1,000,000 shares of the Company’s
common stock at a price equal to the fair market value of the Company’s common
stock on the date of grant. The option will vest ratably over a three-year
period from the date of grant, and will be exercisable for a term of five years,
subject to early termination of the Executive’s employment with the Company. The
Company’s President & CEO may recommend to the Company’s Board of Directors
other option grants to the Executive based on performance goals or Company
milestones as determined by the Company’s President & CEO. Notwithstanding
anything to the contrary, the Executive acknowledges and agrees that he will not
be able to exercise any part of the option prior to the later of either (1)
approval of the Company’s 2006 Stock Incentive Plan by the Company’s
stockholders, and (2) approval of the amendment to the Company’s articles of
incorporation increasing the authorized shares of common stock to at least
225,000,000 shares by the Company’s stockholders.
 
 
 

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(d)  Vacation. The Executive shall be entitled to such annual vacation time with
full pay as the Company may provide in its standard policies and practices for
its senior management; provided, however, that in any event the Executive shall
be entitled to a minimum of three (3) weeks annual paid vacation time.
 
(e)  Car Allowance and Parking. The Executive shall receive a car allowance of
$400 per month, payable in arrears at the end of each month. In addition, the
Company shall pay for the Executive’s parking at the Company’s principal place
of business.
 
(f)  Other Benefits. The Executive shall be able to participate in and have the
benefits of all present and future health insurance, life insurance, and
profit-sharing plans, and all other plans and benefits that the Company now or
in the future from time to time makes available to all of its senior management.
 
3.  Business Expenses. The Company shall promptly reimburse the Executive for
all appropriately documented, reasonable business expenses incurred by the
Executive in accordance with the Company’s policies for its senior management.
 
4.  Term. This Agreement shall commence on January 15, 2007 and, if not
terminated earlier as herein provided, shall expire on December 31, 2009 the
(“Term”). Notwithstanding any expiration of this Agreement: (i) the Company’s
severance and benefit obligations set forth in Sections 5, 7, 8 and 10 with
respect to any termination of the Executive’s employment occurring prior to such
expiration shall continue in full force and effect until such obligations are
paid or provided in full as provided in those Sections, and (ii) the Company’s
indemnification obligations under Section 11 shall continue indefinitely.
 
5.  Termination by the Company Without Cause. The Company may, by delivering
written notice to the Executive, terminate this Agreement and the Executive’s
employment at any time and for any reason without Cause (as “Cause” is defined
in Section 6 below), or for no reason, by paying to the Executive:
 
(i)  the Executive’s base salary accrued through the date of termination payable
upon termination,
 
 
 

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(ii)  any and all accrued vacation pay, and accrued benefits through the date of
termination payable upon termination,
 
(iii)  the Executive’s base salary at the rate in effect on the date of notice
of termination for a period of six months thereafter. Payments to the Executive
pursuant to this Section 5(iii) and payments to the Executive pursuant to
Sections 10(a) and 10(b) shall be conditioned upon the Company receiving a
release from the Executive (or his representative) of any and all claims that
the Executive and his representative may have against the Company and its
agents, including its officers, directors, employees, and attorneys, in a form
provided by the Company. During any period in which the Executive is receiving
payments from the Company pursuant to this Agreement, the Executive shall not
engage in, directly or indirectly, any business in any territory in which the
Company conducts business that is competitive with the Company’s business
operations, nor shall the Executive solicit any employee or customer of the
Company to terminate their relationship with the Company.
 
6.  Termination by the Company for Cause. The Company may terminate this
Agreement and the Executive’s employment at any time if such termination is for
“Cause”, as defined below, by delivering to the Executive written notice of
termination supported by a reasonably detailed statement of the relevant facts
and reason for termination and such termination shall be effective immediately
upon delivery of such notice to the Executive. In the event of such termination,
the Company shall pay the Executive, no later than ten (10) days following the
date of termination, a lump sum equal to the Executive’s accrued base salary
through the date of termination, and any and all accrued vacation pay, and
accrued benefits through the date of termination, but no accrued bonus under
Section 2(b) or 2(c) above. For purposes of this Agreement, “Cause” shall exist
if (i) the Executive has committed an act of embezzlement, fraud, or theft with
respect to the property of the Company, (ii) disregarded the rules of the
Company so as to cause material loss, damage, or injury to, or otherwise to
materially endanger, the Company’s property, business ,or employees, (iii) the
Executive has abused alcohol or drugs on the job or in a manner affecting his
job performance, (iv) the Executive has been found guilty of or has plead nolo
contendere to the commission of a felony offense or a misdemeanor offense
involving moral turpitude, (v) the Executive has breached this Agreement or has
failed to perform the Executive’s duties under this Agreement, including by
reason of the Executive’s failure to execute the directives of the Company’s
President & CEO, or (vi) the Executive’s actions or inactions have caused or are
reasonably likely to cause material loss, injury, or damage to, the Company’s
property, business, or employees. Notwithstanding the foregoing sentence, in the
event that a failure occurs under clause (v) or (vi) of the foregoing sentence,
“Cause” shall not exist if the failure is the result of the Executive’s
unwillingness to execute any act that would constitute a violation of existing
law, regulation, or rule applicable to Company or the Executive, or if the
failure is the result of an act of a party or an intervening event outside of
the Executive’s authority or control.
 
7.  Termination for Good Reason.
 
(a)  Definition of “Good Reason”. “Good Reason” shall mean any of the following
conditions or events:
 
(i)  The consistent assignment of the Executive for a period greater than one
month to duties inconsistent with the duties or responsibilities set forth
herein;
 
(ii)  A reduction by the Company in the Executive’s base salary;
 
 
 

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(iii)  Any failure by the Company to continue in effect for the Executive any
material benefit available to the Executive pursuant to this Agreement without
providing a substitute benefit; or
 
(iv)  Any material breach by the Company of this Agreement that is not cured
within thirty (30) days of notice thereof by the Executive to the Company.
 
(b)  Consequences of Termination for Good Reason. The Executive may terminate
this Agreement and the Executive’s employment for Good Reason at any time upon
providing written notice of termination to the Company, and such termination
shall be effective immediately upon such notice. In the event of termination by
the Executive of this Agreement for Good Reason, the Executive shall be entitled
to receive those payments and benefits provided under Section 5 of this
Agreement.
 
8.  Voluntary Termination by the Executive. In the absence of Good Reason, the
Executive may terminate this Agreement and the Executive’s employment at any
time for any reason or no reason upon delivering ninety (90) days’ prior written
notice to the Company, and no later than the date of termination, the Company
shall pay the Executive a lump sum equal to his accrued base salary through the
date of termination, and any and all accrued vacation pay, accrued bonuses and
accrued benefits through the date of termination, but no accrued bonus under
Section 2(b) or 2(c) above.
 
9.  No Termination by Merger; Transfer of Assets, or Dissolution. This Agreement
shall not be terminated by any voluntary or involuntary dissolution of the
Company or the transfer of all or substantially all the assets of the Company or
the merger of the Company with or into another entity.
 
10.  Termination by Death or Disability.
 
(a)  Death. This Agreement shall terminate immediately in the event of the death
of the Executive during the term hereof, and the Company, within ten (10) days
of receiving notice of such death, shall pay the Executive’s estate all salary
due or accrued as of the date of his death, and any and all accrued vacation pay
and accrued benefits as of the date of death. Any bonus to be paid to the
Executive will be prorated to reflect the time during the year that the
Executive was employed with the Company. All bonuses, whether annual or
otherwise, that would have been payable during the year of the Executive’s death
shall be paid the following year as promptly as the amount of such prorated
bonus can be determined.
 
(b)  Disability. In the event of mental or physical Disability (as defined
below) of the Executive during the term hereof, the Company may terminate this
Agreement and the Executive’s employment immediately upon written notice to the
Executive, and the Company, within ten (10) days following the notice of
termination for Disability, shall pay the Executive all salary due or accrued as
of the date of such termination, and any and all accrued vacation pay and
accrued benefits as of the date of termination. Any bonus to be paid to the
Executive will be prorated to reflect the time during the year that the
Executive was employed with the Company. All bonuses, whether annual or
otherwise, that would have been payable for the year of termination shall be
paid the following year as promptly as the amount of such prorated bonus can be
determined. For purposes of this Agreement, “Disability” shall mean a physical
or mental condition, verified by a Colorado-licensed physician designated by the
Company, which prevents the Executive from carrying out one or more of the
material aspects of his assigned duties for at least ninety (90) consecutive
days.
 
 
 

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11.  Indemnification. As an employee, officer, and agent of the Company, the
Executive shall be fully indemnified by the Company to the fullest extent
permitted by applicable law.
 
12.  Confidential Information. The Executive hereby agrees to comply with any
and all of the Company’s policies and procedures for the protection of
Confidential Information (defined below) and, except as required by the nature
of the Executive’s duties for the Company or with the prior written approval of
the Board, the Executive will not, during the Term or thereafter, reveal,
divulge or otherwise disclose, directly or indirectly in any manner or through
any form of ownership, any Confidential Information of the Company. Without in
any way limiting the foregoing, the Executive hereby agrees not to disclose
Confidential Information to the public through any electronic or
quasi-electronic means, including, without limitation, through web page
postings, chat rooms or other venues related to the Internet environment.
Notwithstanding the foregoing, the prohibition contained in this Section 12
shall not apply to any disclosure of Confidential Information made by the
Executive pursuant to a valid order or subpoena issued by a court or
administrative agency of competent jurisdiction, provided the Executive has
given the Company reasonable notice of such order or subpoena in order to
provide the Company with the opportunity to protect its interests.
 
The term “Confidential Information” shall mean any and all information of a
proprietary nature relating to the business of the Company or any of its
affiliates, regardless of whether such information would otherwise be regarded
or legally considered “confidential” and without regard to whether such
information constitutes a trade secret under applicable law or is separately
protectable at law or in equity as a trade secret. Notwithstanding the
foregoing, “Confidential Information” shall include all of the following: all
data bases, sales and marketing information; the names, addresses, telephone
numbers, contact persons and other identifying information related to any
business, client, or account of the Company; all compilations and lists of
clients or accounts; any information with respect to products and services
provided by the Company to any clients or accounts; terms and provisions of any
contract or other agreement to which the Company is a party or by which it is
bound; any rates or other pricing information related to the products and
services provided by the Company to any client or account; any and all
information related to any supplier of the Company, including the terms and
provisions of any contract or other agreement with any such supplier; all
business records and personal data relating to the employees of the Company,
including compensation arrangements with such employees; any information
contained in any confidential documents prepared by or on behalf of the Company;
any and all financial information related to the Company or any of its
businesses not yet publicly available; the existence, specifications,
components, methodologies or elements of any and all inventions, discoveries,
improvements, creations, formulae, processes, methods, recipes, works or ideas,
whether or not the same are patentable or copyrightable, that any employee of
the Company has conceived or made or may conceive or make during any period of
employment with the Company and that are in any way directly connected with
Company or its business; any trade secrets, know-how or confidential information
used, disclosed, learned, or obtained by the Executive during the course of his
employment with the Company; and any information related to any business system,
program, or report (whether or not computerized) used or developed by the
Company. Notwithstanding the foregoing, “Confidential Information” shall not
include any information that (A) is or becomes generally known to the public
through no fault of the Executive, (B) is supplied to the Executive by a third
party under no restriction as to disclosure, or (C) is developed by the
Executive after termination of this Agreement without the use of any
Confidential Information.
 
13.  Creations.
 
(a)  The Executive hereby agrees that (i) all Creations (defined below) and
other works created by the Executive or under the Company’s direction in
connection with its business, whether or not the same are patentable or
copyrightable, are “works made for hire” and shall be the sole and exclusive
property of the Company; (ii) any and all copyrights, trademarks or patents to
such Creations or other works shall belong to the Company; and (iii) the
Executive shall execute all documents that may be necessary in order to convey
or to assign to the Company any rights he may have in such Creations or other
works. To the extent such Creations or other works are not deemed to be “works
made for hire”, the Executive hereby assigns all proprietary rights, including
copyright, in such Creations or other works to the Company without further
compensation.
 
 
 

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(b)  The Executive further agrees (i) to disclose promptly to the Company all
such Creations that the Executive has made or may make solely, jointly or
commonly with others; (ii) to assign all such Creations to the Company; and
(iii) to execute and to deliver to the Company any and all applications,
assignments, or other instruments that the Company may deem necessary in order
to enable it to apply for, to prosecute and to obtain copyrights, patents or
other proprietary rights with respect to such Creations or in order to transfer
to the Company any and all right, title, and interest in such Creations.
 
(c)  “Creations” means and includes any and all inventions, discoveries,
improvements, creations, formulae, processes, methods, recipes, works or ideas,
whether or not the same are patentable or copyrightable, that any employee of
the Company has conceived or made or may conceive or make during any period of
employment with the Company and that are in any way directly connected with
Company or its business.
 
14.  Ownership and Return of Company Documents and Equipment. All equipment,
materials, files, customer lists, catalogs, price lists, management reports,
memoranda, research, forms, financial data, reports and tapes, and all other
written or recorded data and/or information in whatever form (collectively,
“Materials”) that may be used by, or made available to, the Executive during his
employment hereunder are and shall remain the sole property of the Company.
Promptly upon the termination of this Agreement or the Executive’s employment
with the Company, the Executive agrees to deliver promptly to the Company all
Materials of or relating to the Company (including all copies of the foregoing)
that are in his possession or control.
 
15.  Assignment. The rights and obligations of the parties under this Agreement
shall be binding upon and inure to the benefit of their respective successors,
assigns, executors, administrators, and heirs; provided, however, that the
Executive may not delegate any of the Executive’s duties under this Agreement.
 
16.  Counterparts. This Agreement may be executed in multiple counterparts, each
of which shall constitute an original, and all of which together shall
constitute one and the same agreement.
 
17.  The Executive’s Prior Employment. The Executive represents to the Company
that the Executive is not bound by the terms of any non-competition,
non-solicitation, or confidentiality agreement, and that he can perform his
assigned duties for the Company without reference to any such agreement.
 
18.  Miscellaneous.
 
(a)  Complete Agreement. This Agreement constitutes the entire agreement between
the parties and cancels and supersedes all other prior or contemporaneous
agreements between the parties which relate to the subject matter contained in
this Agreement.
 
(b)  Modification; Amendment; Waiver. No modification or amendment of any
provisions of this Agreement shall be effective unless approved in writing by
both parties. The failure at any time to enforce any of the provisions of this
Agreement shall in no way be construed as a waiver of such provisions and shall
not affect the right of either party thereafter to enforce each and every
provision hereof in accordance with its terms.
 
 
 

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(c)  Governing Law. This Agreement shall be construed in accordance with the
laws of the State of Colorado without regard to any such laws relating to choice
or conflict of laws.
 
(d)  Severability. Whenever possible, each provision of this Agreement shall be
interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Agreement shall be held to be prohibited by or
invalid under applicable law, such provision shall be ineffective only to the
extent of such prohibition or invalidity, without invalidating the remainder of
such provision or the remaining provisions of this Agreement.
 
(e)  Mediation; Waiver of Jury Trial. Any dispute arising out of or relating to
this Agreement that cannot be settled by good faith negotiation between the
parties will be submitted to a mediator for non-binding mediation in Denver,
Colorado. If complete agreement cannot be reached within 30 days of submission
to mediation, either party may commence litigation in any court of competent
jurisdiction, state or federal, located in Denver, Colorado. THE PARTIES HERETO
WAIVE A JURY TRIAL IN ANY LITIGATION WITH RESPECT TO THIS AGREEMENT.
 
(f)  Notices. All notices and other communications under this Agreement shall be
in writing and shall be given in person or by first class mail, certified or
registered with return receipt requested, and shall be deemed to have been duly
given when delivered personally or three days after mailing, as the case may be,
to the respective persons named below:
 
If to the Company:
Rancher Energy Corp.
   
999 18th Street, Suite 1740
   
Denver, Colorado 80202
   
Attention: President & CEO
       
If to the Executive:
Daniel Foley
   
999 18th Street, Suite 1740
   
Denver, Colorado 80202
 

 

 
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IN WITNESS WHEREOF, the parties have executed this Employment Agreement as of
the day and year first above written.
 

 

 
THE COMPANY:            
Rancher Energy Corp.,
 
a Nevada corporation
                 
 
By:
       /s/ John Works             
   
             John Works
   
             President & CEO
                 
THE EXECUTIVE:            
By:
       /s/ Daniel Foley            
   
             Daniel Foley

 
 

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Exhibit A
Duties of the Executive

Chief Financial Officer

 
OVERALL RESPONSIBILITIES

Works with Chief Executive Officer to establish major economic/financial
objectives and policies for the company

Responsible for the management, finance, accounting, treasury, capital markets,
and planning function

Provides strategic financial input and leadership on decision-making issues
affecting the corporation

Reviews financial data to analyze revenue trends and expenses, makes
projections, and suggests strategies where appropriate

Oversees all internal and external financial reporting, which includes,
reviewing and all quarterly and annual SEC filings; preparing, analyzing and
forecasting monthly, quarterly and annual operating budgets; and reviewing
operating results with executive management

Oversees a proper system of internal controls including evaluating and
implementing policies, procedures and standards and compliance with
Sarbanes-Oxley certification requirements

Oversees the coordination of the external audit

Participates in the evaluation and implementation of multiple accounting systems
and ancillary systems
 
Completes special projects and/or requests of executive management