Filed by Automated Filing Services Inc. (604) 609-0244 - Terax Energy, Inc. - Exhibit 10.6






Exhibit 10.6 

 EMPLOYMENT AGREEMENT

                THIS
  EMPLOYMENT AGREEMENT (this “Agreement”) is made as of the 7th
  day of June, 2005 but effective the 1st day of June, 2005 (the “Effective
  Date”) by and between Terax Energy, Inc. (the "Company") and Bill Chester
  (the "Employee"). 

                WHEREAS,
  the Company desires to employ the Employee, and Employee desires to accept such
  employment, upon the terms, conditions and for the consideration hereinafter
  set forth. 

                NOW
  THEREFORE, in consideration of theses premises and the mutual covenants
  and obligations contained herein, the Company and the Employee agree as follows:


                1.
  Employment Period. The Company hereby agrees to employ the Employee,
  and the Employee hereby agrees to become an employee of the Company, subject
  to the terms and conditions of this Agreement, for the period commencing on
  the Effective Date and ending on the first anniversary of such date (the "Employment
  Period").

                2.
  Terms of Employment. (a) Position and Duties. (i) During the Employment
  Period, the Employee shall be employed as the senior officer of the Company,
  and hold the position of Vice President, Business Development of the Company,
  reporting to the Chief Executive Officer of the Company. The Employee will also
  hold such additional positions as determined by the Board of Directors of the
  Company (the “Board”), provided such determination is consistent
  with the Company’s then current financial situation.

                (ii)
  During the Employment Period, excluding any periods of vacation, sick leave
  and other time-off to which the Employee is entitled under this Agreement or
  applicable Company policies, the Employee agrees to devote substantially all
  of his attention and time to the business and affairs of the Company and, to
  the extent necessary to discharge the responsibilities of the Employee, use
  the Employee’s reasonable best efforts to perform faithfully and efficiently
  such responsibilities. It shall not be a violation of this Agreement during
  the Employment Period for the Employee, and the Employee is expressly permitted,
  to spend a reasonable amount of time during normal business hours of the Company
  (including out-of-town travel) (A) serving on or with corporate, civic or charitable
  boards, committees and groups, and (B) delivering lectures, accepting and fulfilling
  speaking engagements, teaching at educational institutions and seminars, and
  writing or publishing papers, articles or books, provided that such services
  are consistent with the interests of the Company and do not interfere with the
  Employee’s obligations to the Company hereunder. 

                (iii)
  During the Employment Period, except for out-of-town travel and meetings, the
  Employee's duties shall be performed primarily at the location of the Company’s
  principal corporate office which is to be located in Austin, Texas. 

                (b)
  Salary. During the Employment Period, the Employee shall receive an annual
  salary (the "Annual Salary"), which shall be paid in equal installments in accordance
  with the Company's standard policy regarding payment of compensation, but no
  less frequently than monthly. The amount of the Annual Salary shall be Ninety
  Thousand United States Dollars ($90,000). 

                (c)
  Bonuses. In addition to Annual Salary, the Employee may be awarded for
  each fiscal year of the Employment Period an annual bonus (the "Annual Bonus")
  as determined by the consent of a 

	
Terax Energy, Inc. 
		
Bill Chester 
	
	 

		
Employment Agreement 
	










 majority of the Board. The Annual Bonus shall be determined
  and awarded each year within thirty (30) days of the filing of the Company’s
  Annual Report with the Securities and Exchange Commission. 

                (d)
  Benefits. During the Employment Period, the Employee and/or the Employee's
  family, as the case may be, shall be eligible for participation in and shall
  receive all benefits and privileges under any benefit, welfare, savings and
  retirement, plans, practices, policies and programs provided by the Company
  and its affiliated companies (including, without limitation, medical, prescription,
  dental, disability, salary continuance, employee life, group life, accidental
  death and travel accident insurance, 401k and other plans and programs). 

                (e)
  Expenses. During the Employment Period the Employee shall be entitled
  to receive prompt reimbursement for all reasonable expenses and costs incurred
  by the Employee in accordance with the Company’s standard policies, practices
  and procedures.

                (f)
  Vacation. During the Employment Period the Employee shall be entitled
  to paid vacation (“Vacation”) each calendar year of twenty (20)
  days beginning with the year of the Effective Date. 

                3.
  Termination of Employment. (a) Death. The Employee’s employment
  shall terminate automatically upon the Death of the Employee during the Employment
  Period. For purposes of this Agreement, “Death” shall be deemed
  to have occurred on the date the Employee is certified to be dead by the government
  agency or person having competent jurisdiction over such certification, unless
  the Employee’s legal representative shall contest the certification through
  a court proceeding, in which case the court’s determination shall control.


                (b)
  Disability. If the Company determines in good faith that the Disability
  of the Employee has occurred during the Employment Period (pursuant to the definition
  of Disability set forth below), it may give to the Employee written notice of
  its intention to terminate the Employee's employment. In such event, the Employee's
  employment with the Company shall terminate effective on the 30th day after
  receipt of such notice by the Employee or his legal representative (the "Disability
  Effective Date"), unless within the 30 days after such receipt, the Employee
  shall have begun performance of the Employee's duties. For purposes of this
  Agreement, “Disability” shall mean the Employee has discontinued
  performing his duties for 60 consecutive business days due to incapacity due
  to mental or physical illness. 

                (c)
  Cause. The Company may terminate the Employee's employment during the
  Employment Period for Cause. "Cause" shall include: 

                (i)
  the Employee becoming charged with a felony offence; 

                (ii)
  the Board being presented with substantive evidence of drug, alcohol or substance
  abuse by the Employee; and 

                (iii)
  any breach by the Employee of his duties or obligations hereunder, provided
  that if such breach is “cureable” the Company shall be required
  to give the Employee notice of such breach and the Employee shall be required,
  within fourteen (14) days following delivery of such notice, to cure such breach
  or commence proceedings to cure such breach by appropriate performance and the
  breach must be cured without undue delay. 

	
Terax Energy, Inc. 
		 2	
Bill Chester 
	
	 

		 

		
Employment Agreement 
	










 For the purposes of this Section 3(b) a “cureable”
  breach shall not include any breach of this Agreement resulting from: 

                (i)
  fraud by the Employee against the Company; 

                (ii)
  a breach by the Employee of the provisions of Section 6 of this Agreement; 

                (iii)
  the intentional misappropriation of a corporate opportunity of the Company by
  the Employee for his direct or indirect personal benefit; or 

                (iv)
  willful or intentional failure to obey the instructions of the Board consistent
  with his duties hereunder. 

                (d)
  Good Reason. The Employee's employment may be terminated by the Employee
  for Good Reason. For the sole and exclusive purposes of this Agreement, "Good
  Reason" shall mean a failure by the Company to pay the amounts required under
  or otherwise comply with any of the provisions of Sections 2(b) or 2(e) of this
  Agreement (provided that the Company has sufficient funds available to make
  such payments), other than an isolated, insubstantial or inadvertent failure
  which is remedied by the Company promptly after receipt of notice thereof given
  by the Employee. 

                (e)
  Expiration. The Employee's employment shall terminate at the end of the
  Employment Period. 

                (f)
  Notice of Termination. Any termination of employment by the Company or
  by the Employee shall be communicated by Notice of Termination to the other
  party hereto. For purposes of this Agreement, a "Notice of Termination" means
  a written notice which (i) indicates the specific termination provision in this
  Agreement relied upon, (ii) to the extent applicable, sets forth in reasonable
  detail the facts and circumstances claimed to provide a basis for termination
  of the Employee's employment under the provision so indicated, and (iii) if
  the Date of Termination (as defined below) is other than the date of receipt
  of such notice, specifies the termination date (which date shall be not more
  than thirty days after the giving of such notice). The failure by the Employee
  or the Company to set forth in the Notice of Termination any fact or circumstance
  which contributes to a showing of Good Reason or Cause shall not waive any rights
  of the Employee or the Company, respectively, hereunder or preclude the Employee
  or the Company, respectively, from asserting such fact or circumstance in enforcing
  the Employee's or the Company's rights hereunder. 

                (g)
  Date of Termination. For purposes of this Agreement, “Date of Termination”
  means (i) if the Employee’s employment is terminated by the Company or
  by the Employee, the date of receipt of the Notice of Termination or any later
  date specified therein, as the case may be, (ii) if the Employee's employment
  is terminated by reason of Death or Disability, the Date of Termination shall
  be the date of Death of the Employee or the Disability Effective Date, as the
  case may be, and (iii) if the Employee's employment is terminated by reason
  of the expiration of the Employment Period, the Date of Termination shall be
  the last day of the Employment Period. 

                4.
  Obligations Upon Termination. (a) Good Reason; Other Than for Cause,
  Death, Disability or Expiration. If, during the Employment Period,
  the Company shall terminate the Employee's employment other than for: (i) Cause,
  (ii) Death, (iii) Disability, or (iv) the expiration of the Employment Period;
  or if the Employee shall terminate his employment for Good Reason, the Company
  shall pay to the Employee the following amounts: 

	 Terax Energy, Inc.  	 3	 Bill Chester  
	  	  	 Employment Agreement  







                (i)
  the sum of (1) the Annual Salary through the Date of Termination to the extent
  not theretofore paid, (2) any compensation previously deferred by the Employee
  (together with any accrued interest or earnings thereon), and (3) the prorata
  amount of the Annual Salary applied to any accrued but unused Vacation days
  of the Employee through the Date of Termination; in each case to the extent
  not theretofore paid (the sum of the amounts described in the foregoing clauses
  (1), (2), and (3) shall be hereinafter referred to as the “Accrued Obligations”);
  and 

                (ii)
  the lesser of (X) the Annual Salary, prorated for a one (1) month period, and
  (Y) the amount of the Annual Salary from the Date of Termination to the end
  of the Employment Period; 

                (iii)
  all unvested contributions to any savings, retirement or other plans or programs
  benefiting the Employee and/or his family shall immediately become 100% vested,
  and all such plans and programs applicable to the Employee shall be automatically
  amended and reformed as, and the Company shall take all actions which are, necessary,
  appropriate or reasonable to accommodate and give effect to this clause; and


                (iv)
  to the extent applicable and not theretofore paid or provided, the Company shall
  timely pay or provide to the Employee any other amounts or benefits that have
  accrued or which are required to be paid or provided or which the Employee and/or
  his family is eligible to receive under Section 2(e) hereof, or any applicable
  plan, program, policy or practice or contract or agreement of the Company and
  its affiliated companies (such benefits shall be hereinafter referred to as
  the “Other Benefits”); 

                (b)
  Death or Disability. If the Employee's employment is terminated by reason
  of the Employee's Death or Disability during the Employment Period, this Agreement
  shall terminate without further obligations to the Employee's estate or legal
  representatives under this Agreement, except that (i) the Company shall pay
  all Accrued Obligations in a lump sum in cash within 30 days of the Date of
  Termination, (ii) the Company shall timely pay and provide the Other Benefits
  to the extent applicable or theretofore unpaid. 

                (c)
  Cause or Other than for Good Reason. If the Employee's employment shall
  be terminated for Cause during the Employment Period, or if the Employee resigns
  or voluntarily terminates his employment during the Employment Period, excluding
  a termination for Good Reason: (I) this Agreement shall terminate without further
  obligations to the Employee, except that the Company shall pay to the Employee
  the following amounts: 

                (i)
  the Accrued Obligations through the Date of Termination to the extent not theretofore
  paid; and 

                (ii)
  the Company shall timely pay and provide the Other Benefits to the extent applicable
  or theretofore unpaid. 

                (d)
  Expiration of the Employment Period. If the Employee's employment is
  terminated by reason of the expiration of the Employment Period, this Agreement
  shall terminate without further obligations to the Employee.

                5.
  Non-exclusivity of Rights. Nothing in this Agreement shall prevent or
  limit the Employee's continuing or future participation in any plan, program,
  policy or practice provided by the Company or any of its affiliated companies
  for which the Employee may qualify, nor shall anything herein limit or otherwise
  affect such rights as the Employee may have under any contract or agreement


	 Terax Energy, Inc.  	 4	 Bill Chester  
	  	  	 Employment Agreement  










 with the Company or any of its affiliated companies. Amounts
  which are vested benefits or which the Employee is otherwise entitled to receive
  under any plan, policy, practice or program of or any contract or agreement
  with the Company or any of its affiliated companies at or subsequent to the
  Date of Termination shall be payable in accordance with such plan, policy, practice
  or program or contract or agreement except as explicitly modified by this Agreement.


                6.
  Confidential Information. The Employee shall hold in a fiduciary capacity
  for the benefit of the Company all secret or confidential information, knowledge
  or data relating to the Company or any of its affiliated companies, and their
  respective businesses, which shall have been obtained by the Employee during
  the Employee's employment by the Company or any of its affiliated companies
  and which shall not be or become public knowledge (other than by acts by the
  Employee or representatives of the Employee in violation of this Agreement).
  After termination of the Employee's employment with the Company, the Employee
  shall not, without the prior written consent of the Company or as may otherwise
  be required by law or legal process, communicate or divulge any such information,
  knowledge or data to anyone other than the Company and those designated by it.

                7.
  Successors. (a) This Agreement is personal to the Employee and without
  the prior written consent of the Company shall not be assignable by the Employee
  otherwise than by will or the laws of descent and distribution. This Agreement
  shall inure to the benefit of and be enforceable by the Employee’s estate,
  heirs, beneficiaries and legal representatives. 

                (b)
  This Agreement shall inure to the benefit of and be binding upon the Company
  and its successors and assigns. 

                8.
  Miscellaneous. (a) This Agreement shall be governed by and construed
  in accordance with the laws of the State of Texas, without reference to principles
  of conflict of laws. The captions of this Agreement are not part of the provisions
  hereof and shall have no force or effect. This Agreement contains the complete
  and entire agreement between the parties hereto with respect to the matters
  contained herein, and may not be amended or modified otherwise than by a written
  agreement executed by the parties hereto or their respective successors and
  legal representatives expressly written and executed for such purpose. 

                (b)
  All notices and other communications required hereunder to be in writing shall
  be given by two or more of the following methods: (i) hand delivery to the other
  party, (ii) commercial courier or mail service, or (iii) registered or certified
  US mail, return receipt requested, postage prepaid; and in the case of the Company
  shall be addressed to the Company’s Registered Agent and the Company’s
  Secretary at the Company’s principal corporate office, and in the case
  of the Employee shall be addressed to the Employee’s office at the Company
  and the Employee’s latest primary residence as identified in the records
  of the Company, or to such other address as either party shall have furnished
  to the other in writing in accordance herewith. Notice and communications hereunder
  shall be effective, when delivered on a businesses day on the date of delivery,
  and when delivered on a day other than a business day on the next following
  business day. 

                (c)
  The invalidity or unenforceability of any provision of this Agreement shall
  not affect the validity or enforceability of any other provision of this Agreement.


                (d)
  The Company may withhold from any amounts payable under this Agreement such
  Federal, state, local or foreign taxes as shall be required to be withheld pursuant
  to any applicable law or regulation. 

	 Terax Energy, Inc.  	 5	 Bill Chester  
	  	  	 Employment Agreement  







                (e)
  The Employee's or the Company's failure to insist upon strict compliance with
  any provision hereof or any other provision of this Agreement or the failure
  to assert any right the Employee or the Company may have hereunder shall not
  be deemed to be a waiver of such provision or right or any other provision or
  right of this Agreement. 

                IN
  WITNESS WHEREOF, the parties have executed this Agreement to be effective
  as of the 1st day of June, 2005. 


TERAX ENERGY, INC. 

	By: 	 /s/ J. William Rhea, IV  	 /s/ Bill Chester  
	 	  J. William Rhea, IV, Chief Executive Officer 
    	 Bill Chester  




 Execution Date: June 7, 2005 

 

 

 



	 Terax Energy, Inc.  	 6	 Bill Chester  
	  	  	 Employment Agreement