Document:

CVD EQUIPMENT CORPORATION
1989 “KEY KMPLOYEE” STOCK OPTION PLAN

		1.	PURPOSE OF PLAN. The purpose of this 1989 “Key Employee” Stock Option Plan (hereinafter called the “Plan”) is to further the success of CVD Equipment Corporation (hereinafter called the “Company”), and its subsidiaries or affiliates by making available Common Stock of the Company for purchase by “key employees” including officers, directors and/or other key personnel of the Company and its subsidiaries and affiliates and thus to provide an additional incentive to such employees to continue in the employ of the Company or its subsidiaries or affiliates and to give them a greater interest as stockholders in the success of the Company.

		2.	STOCK SUBJECT TO PLAN. Subject to the provisions of paragraph 10 hereof, there shall be reserved for issuance or transfer upon the exercise of options to be granted from time to time under the Plan an aggregate of 700,000 shares of Common Stock, $.0l par value (hereinafter called “Common Stock”), which shares may be in whole or in part, as the Board of Directors of the Company shall from time to time determine, authorized and unissued shares of Common Stock or issued shares of Common Stock which shall have been reacquired by the Company. If any option granted under the Plan shall expire or terminate for any reason without having been exercised in full, including shares subject to options which are surrendered in whole or in part pursuant to rights granted under paragraph 7 hereof (except to the extent that shares of Common Stock are paid to the holder of the option upon such surrender), the unpurchased shares subject thereto shall
again be available for the purposes of the Plan.

		3.	ADMINISTRATION. The Plan shall be administered by the Board of Directors of the Company or by a Committee appointed by the Board (hereinafter called the “Committee”). If the Plan is administered by the Committee, it shall report all action taken by it to the Board. Options to members of the Committee may be granted only by a majority of the disinterested members of the Board.

The Committee shall have plenary authority in its discretion, but subject to the express provisions of the Plan, the employees to whom, at the time or times which, options shall be granted, and the number of shares to be subject to each option; to determine when an option can be exercised and whether in whole or in installments; to determine whether surrender rights under paragraph 7 hereof shall be granted to an employee; to interpret the Plan; to prescribe, amend, and rescind rules and regulations relating to it; to determine the terms and provisions (and amendments thereof) of the respective option agreements (which need not be identical),
including such terms and provisions (and amendments) as shall be required in the judgment of the Committee to conform to any change in any law or regulation applicable thereto; and to make all other determinations deemed necessary or advisable for the administration of the Plan. The Committee’s determination on the foregoing matters shall be conclusive.

The Committee shall select one of its members as its chairman and shall hold its meetings at such times and places as it may determine. A majority of its members shall constitute a quorum. All determinations of the Committee shall be made by not less than a majority of its members. Any decision or determination reduced to writing and signed by all the members shall be fully as effective as if it had been made by a majority vote at a meeting duly called and held. The Committee may appoint a secretary, shall keep minutes of its meetings and sha1l make such rules and regulations for the conduct of its business as it shall deem advisable. 

		4.	ELIGIBILITY. Options may be granted only to-key employees, officers and/or directors of (a) the Company, (b) subsidiary corporations (“subsidiaries”), of the Company from time to time and/or (C) any business entity (“affiliate”) in which the Company shall have a substantial interest. In determining the individuals to whom options shall be granted and the number of shares to be covered by each option, the Committee may take into account the nature of the services rendered by the respective individuals, their present and potential contributions to the Company’s success and such other factors as the Committee in its discretion shall deem relevant. Options may be granted to individuals who hold or have held options under previous plans. An individual who has been granted an option under the Plan may be granted an additional option or options under the Plan if the Committee shall so determine.

		5.	OPTION PRICES. The purchase price of the Common Stock under each option shall be the average bid 

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			price per share~, calculated on a monthly basis, that the Common Stock (as reported by NASDAQ) traded during the calendar year immediately preceding the year in which the option is granted. The purchase price may be less than the fair market value of the Common Stock at the time of granting, but may not be less than the par value thereof.

		6.	EXERCISE OF OPTIONS. Unless otherwise provided in the option agreement, an option granted under the Plan shall become exercisable in installments as follows: to the extent of 25% of the number of shares originally covered thereby, at any time after the commencement of the second year of the term of the option, and, to the extent of an additional 25% of such number of shares, at any time after the commencement of each of the third, fourth, and fifth years of the term of the option; and such installments shall be cumulative. The Committee shall have authority in its discretion to prescribe in any option agreement that the option may be exercised in different installments during the term of the option. An option may be exercised at any time or from time to time during the term of the option as to any or all full shares which have become purchasable under the provisions of the option, but not at any time as to less than 100 shares unless the
remaining shares which have become purchasable are less than 100 shares. The purchase price of the shares shall be paid in full upon the exercise of the option, and the Company shall not be required to deliver certificates for such shares until such payment has been made. The term of each option shall be for such period as the Committee shall determine, but not more than ten years from the date of granting thereof, or such shorter period as is prescribed in paragraph 9 hereof. Except as provided in paragraph 9, an option may not be exercised at any time unless the holder thereof is then an employee of the Company or one of its subsidiaries or an affiliate. The holder of an option shall not have any of the rights of a stockholder with respect to the shares subject to option until such shares shall be issued or transferred to him upon the exercise of his option.

		7.	SURRENDER RIGHTS. The Committee may include in an option granted under the Plan at any time prior to the exercise thereof the right to surrender all or a portion of the option to the extent that the same is then exercisable and received in exchange therefor an amount (payable in cash, shares of Common Stock valued at the then fair market value, or a combination thereof as determined by the Committee) equal to the difference between the then fair market value of the shares issuable upon the exercise of the option or portion thereof surrendered and the option price payable upon the exercise of the option or portion thereof surrendered. Such fair market value shall be determined by the Committee and shall not be more than the mean of the high and low prices of the Common Stock as reported on the composite tape and published in the “Wall Street Journal” with respect to trading on the day on which the surrender occurs, or on the
immediately preceding trading day if such surrender should occur on a day during which there shall not be reported trading.

		8.	NONTRANSFERABILITY OF OPTIONS. No option granted under the Plan shall be transferable otherwise than by will or the laws of descent and distribution, and an option may be exercised, during the lifetime of the holder thereof, only by him.

		9.	TERMINATION OF EMPLOYMENT OR SERVICE:

		9.1	If the Optionee’s employment or service shall terminate by reason of dismissal for cause or resignation without prior consent of the Company, the option granted hereby shall terminate and expire on the day the Optionee’s employment or service terminates.

		9.2	If the Optionee’s employment or service shall terminate other than by reason of death, dismissal for cause or resignation without the Company’s prior consent, the Optionee may thereafter exercise the option only on the following terms and conditions: (a) such exercise may be made only to the extent that the Optionee was entitled to exercise such option on the date his employment or service terminates; and (b) such exercise must be made by the earlier of the expiration date of such option (determined pursuant to Section 6) or the 90th day after his employment or service terminates.

		9.3	If the Optionee dies while in the employ or service of the Company or a subsidiary, or during the 90-day period after his employment or service terminates for any reason other than dismissal for cause or resignation from employment without the Company’s prior consent, the option granted hereby shall be exercisable, but only within one year after the date of the Optionee’s death, to the extent that the 

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			Optionee was entitled to exercise such option on the date of death. Any such exercise following the Optionee’s death may be made only by such Optionee’s personal representative, unless the Optionee’s will specifically disposes of such option, in which case such exercise shall be made only by the recipient of such specific disposition. If the Optionee’s personal representative or the recipient of a specific disposition under the Optionee’s will shall be entitled to exercise any option pursuant to the preceding sentence, such representative or recipient shall be bound by all the terms and conditions of the Plan and this Agreement which would have applied to the Optionee’ s exercise of the option granted hereby (if he had lived) including, without limitation, the provisions of Sections 11, 14 and 15.

		9.4	The Optionee shall be deemed to have terminated employment or service when the Optionee ceases to be employed by or serve as a director of the Company and all of its subsidiaries. The Committee may in its discretion determine (a) whether any leave of absence constitutes a termination of employment or service within the meaning of this Agreement, and (b) the impact, if any, of any such leave of absence on the option granted under this Agreement.

		10.	ADJUSTMENT UPON CHANGES IN CAPITALIZATION:Notwithstanding any other provisions of the Plan, each option agreement may contain such provisions as the Committee shall determine to be appropriate for the adjustment of the number and class of shares subject to such option and the option price in the event of changes in the outstanding Common Stock by reason of any stock dividend, split up, recapitalization, combination or exchange of shares, merger, consolidation, acquisition of property or stock, separation, reorganization or liquidation and the like, and, in the event of any such change in the outstanding Common Stock, the aggregate number and class of shares available under the Plan shall be appropriately adjusted by the Committee, whose determination shall be conclusive.

		11.	REORGANIZATION.

		11.1	In the event that the Company is merged or consolidated with another corporation and (i) the Company is not the surviving corporation or (ii) the Company shall be the surviving corporation and there shall be any change in the shares of Common Stock by reason of such merger or consolidation, or in the event that all or substantially all of the assets of the Company are acquired by another corporation, or in the event of the reorganization or liquidation of the Company (each such event being hereinafter referred to as a “Reorganization Event”) or in the event that the Board of Directors of the Company shall propose that the Company enter into a Reorganization Event, then the Committee may in its discretion (1) by written notice to the Optionee, provide that the option granted hereby will be terminated unless exercised within 30 days (or such longer period as the Committee shall determine in its sole discretion) after the date of such
notice, and/or (ii) advance any one or more of the dates upon which such option shall become exercisable in whole or in part. Wherever deemed appropriate by the Committee, any such action may be made conditional upon the consummation of the applicable Reorganization Event.

		11.2	Notwithstanding the provisions of paragraph 11.1, if any “corporate transaction” as defined in Section 1.425-1 of the Treasury Regulations promulgated under the Internal Revenue Code of 1954 occurs after the date hereof and in connection therewith the Company and another corporation enter into an agreement providing for the issuance of substitute stock options in exchange for the Option or for the assumption of such Option, in either case giving the employee the right to purchase the largest whole number of shares of stock of the Company or of any other corporation at the lowest option price permitted by said Section 1.425-1, the Option shall, from and after the effective date of such corporate transaction, be deemed to provide for the purchase of such number of shares of stock of such option price as shall be agreed upon by the Company and such other corporation, and the term “Company” herein shall mean the issuer of the
stock then covered by the Option and the term “Common Stock” shall mean such stock.

		12.	AGREEMENT TO SERVE. Except for options granted in 1986, each employee receiving an option shall, as one of the terms of the option agreement, agree that he will remain in the employ of the Company-or one of its subsidiaries or affiliates for a period of at least one year from the date the option is granted to him or for a period expiring one year after the expiration of the longest period of service called for by any other contract theretofore entered into by him with the Company or a subsidiary or affiliate, whichever is longer (or until his earlier compulsory retirement date as prescribed from time to time by the 

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			Company), and that he will, during such employment, devote his entire time, energy, and skill to the service of the Company or such subsidiary or affiliate and the promotion of its interest, subject to vacations, sick leave, and other absences in accordance with the policies of the Company and its subsidiaries or affiliates. Such employment shall (subject to the terms of any contract between the Company or any such subsidiary or affiliate and such employee) be at the pleasure of the Company or of such subsidiary or affiliate and at such compensation as the Company or such subsidiary or affiliate shall determine from time to time.

		13.	LOANS TO ASSIST IN EXERCISE OF OPTIONS. If approved by the Board of Directors, the Company may lend money or guarantee loans by third parties to any individual to finance the exercise of any option granted under the Plan and to carry Common Stock thereby acquired.

		14.	AMENDMENT AND TERMINATION. Unless the Plan shall theretofore have been terminated as hereinafter provided, it shall terminate on, and no option shall be granted thereunder after, June 30, 1999. The Plan may be terminated, modified, or amended by the Board of Directors of the Company. No termination, modification, or amendment of the Plan may, without the consent of the employee to whom any option shall theretofore have been granted, adversely affect the rights of such employee under such option.

		15.	EFFECTIVENESS OF PLAN. The Plan shall become effective upon such date as (a) it shall have been approved by the Board of Directors. The Committee may in its discretion authorize the granting of options the exercise of which shall be expressly subject to the provisions that (a) the shares of Common Stock reserved for issuance upon the exercise of options granted under the Plan shall have been duly listed, subject to official notice of issuance, upon NASDAQ and (b) a registration statement under the Securities Act of 1933 with respect to such shares shall have become effective.

		16.	TIME OF GRANTING OPTIONS. Nothing contained in the Plan or in any resolution adopted or to be adopted by the Committee, the Board of Directors, or the stockholders of the Company shall constitute the granting of any option hereunder. The granting of an option pursuant to the Plan shall take place only when a written option agreement shall have been duly executed and delivered by or on behalf of the Company and the individual (or his duly authorized attorney-in-fact) to whom such option is to be granted.

		 	
	Adopted at Meeting of Board of
 Directors on ______1989	 	/s/ Leonard A. Rosenbaum
LEONARD A. ROSENBAUM
President

4EMPLOYMENT
      AGREEMENT

    

    THIS
      EMPLOYMENT AGREEMENT (this “Agreement”) is entered into on August 3, 2007,
      by and between Richard E. Kurtenbach, an individual resident of Littleton,
      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 Accounting Officer with
      the
      responsibilities and authority as set forth in this Agreement or as determined
      by the Company’s CEO pursuant to this Agreement, and the Executive desires to be
      employed by the Company as its Chief Accounting 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
      Accounting Officer, reporting to the Company’s CEO & CFO. Subject to the
      control and direction of the Company’s CEO & CFO, the Executive shall
      exercise general supervision and direction of the accounting functions of the
      Company, as more fully set forth on Exhibit A
      attached
      hereto. The parties agree that the Executive’s service as Chief Accounting
      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. The Executive will
      not
      engage in any business or proposed business in the oil & gas industry, or
      that he is or plans to be engaged in competition with the business activities
      of
      the Company. It is understood 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 $175,000 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. 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 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 450,000 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 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 CEO.

     

    (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 the fee for one
      parking space 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, 401(k) 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 August 27, 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,

     

    (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 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;

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    (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.

     

    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. 

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    (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, property reports and plans, 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.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    (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:
      CEO

    

    If
      to the
      Executive:     Richard
      E. Kurtenbach

    31
      Lark
      Bunting Lane

    Littleton,
      Colorado 80127

    

    

     

    

     

    [Remainder
      of Page Intentionally Left Blank]

     

    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    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:

              	By:  	
                /s/
                  Richard E. Kurtenbach

              
	 	
                
                  

                

                Richard
                  E. Kurtenbach

              

      

    

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    Exhibit
      A

    Duties
      of the Executive

    

    Chief
      Accounting Officer

    

    SUMMARY
      

    Organizational
      responsibility for the Accounting Department reporting to the CEO including
      accounting, payroll, and procurement, managing the daily operational activities
      of the Accounting Department, periodic internal and external financial
      management reporting, management of the Company’s audit processes, and
      compliance with Sarbanes-Oxley. 

     

    ESSENTIAL
      DUTIES AND RESPONSIBILITIES to include the following:

     

    
      	·  	
              Establish
                policies, procedures, and controls for the financial reporting process.
                

            

    

     

    
      	·  	
              Ensure
                that financials are accurate and in accordance with SEC and accounting
                treatment according to GAAP, and other governmental
                regulations.

            

    

     

    
      	·  	
              Responsible
                for ongoing compliance with Sections 302 and 404 of the Sarbanes-Oxley
                Act
                of 2002 and SEC financial
                reporting.

            

    

     

    
      	·  	
              Responsible
                for internal financial reporting to management and external financial
                reporting to shareholders and the
                SEC.

            

    

     

    
      	·  	
              Working
                with the CFO and the COO, oversee third-party relationships including
                Sarbanes-Oxley consultants, independent auditors, and tax
                consultants.

            

    

     

    
      	·  	
              Advise
                management on accounting treatment, desirable operational adjustments,
                and
                treasury and cash management.

            

    

     

    
      	·  	
              Develop
                regular weekly, monthly, quarterly, and annual operating financial
                reports
                for management. 

            

    

     

    
      	·  	
              Manage
                joint interest billings, revenue accounting, tertiary recovery operations
                accounting, and other accounting issues directly related to oil & gas
                operations. 

            

    

     

    
      	·  	
              Develop
                a budgeting system to be integrated into the management reporting
                system.
                

            

    

     

    
      	·  	
              Provide
                regular financial updates and presentations to the President & CEO,
                Audit Committee, and other management
                staff.

            

    

     

    
      	·  	
              Ensure
                the accounting systems remain functionally efficient and market
                competitive.

            

    

     

    
      	·  	
              Review
                daily, weekly, and monthly financial reports to verify
                accuracy.

            

    

     

    
      	·  	
              Review
                departmental reports; addressing potential conflicts and/or
                misinformation

            

    

     

    
      	·  	
              Held
                accountable, to a very high degree, for the accuracy and thoroughness
                of
                departmental performance

            

    

     

    
      	·  	
              Familiarity
                with mid level accounting software systems
                required,

            

    

     

    SUPERVISORY
      RESPONSIBILITIES

     

    CAO
      carries out supervisory responsibilities in accordance with the Company’s
      policies and applicable laws. Responsibilities include planning, assigning,
      and
      directing work; appraising performance; and communicating and administering
      policies and procedures for areas within the Company. Direct reports include
      staff accountants and accounting clerks and some administrative
      personnel.

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