exv10w12



 





Exhibit 10.12



EMPLOYMENT AGREEMENT




     THIS AGREEMENT is made effective September 2,
2006 (the “Effective Date”), between RIATA ENERGY,
INC., a Texas corporation (the “Company”), and LARRY COSHOW, an individual (the “Executive”).



WITNESSETH:




     WHEREAS, the Company and the Executive desire to set forth the terms of their agreements
relating to the employment of Executive by the Company; and



     NOW, THEREFORE, in consideration of the mutual promises herein contained, the Company and the
Executive agree as follows:



     1. Employment. The Company hereby employs the Executive and the Executive hereby accepts
such employment subject to the terms and conditions contained in this Agreement. The Executive is
engaged as an employee of the Company and the Executive and the Company do not intend to create a
joint venture, partnership or other relationship that might impose a fiduciary obligation on the
Executive or the Company in the performance of this Agreement, other than as an officer and
director of the Company.



     2. Executive’s Duties. The Executive is employed on a full-time basis. Throughout the term
of this Agreement, the Executive will use his best efforts and due diligence to assist the Company
in the objective of achieving the most profitable operation of the Company and the Company’s
affiliated entities consistent with developing and maintaining a quality business operation. The
Executive shall also devote all of Executive’s working time, attention and energies to the
performance of Executive’s duties and responsibilities under this Agreement.




     2.1 Specific Duties. During the term of this Agreement, the Executive will serve as
the Executive Vice-President of Land for the Company. The Executive will perform all of
the services required to fully and faithfully execute the position to which the Executive
is appointed and such other services as may be assigned by the Company’s Board of Directors
in their sole discretion. The Executive agrees to use the Executive’s best efforts to
perform all of the services required to fully and faithfully execute the offices and
positions to which the Executive is appointed and elected. In addition, the precise duties
to be performed by Executive may be changed or curtailed in the sole discretion of the
Board of Directors of the Company.




     2.2 Rules and Regulations. From time to time, the Company may issue policies and
procedures applicable to employees and the Executive including a policy manual. The
Executive agrees to comply with such policies and procedures, except to the extent such
policies are inconsistent with this Agreement. Such policies and procedures may be
supplemented, modified, changed or adopted without notice in the sole discretion of the
Company at any time. In the event of a conflict between such policies and procedures and
this Agreement, this Agreement will control unless



 









 






compliance with this Agreement will violate any law or regulation applicable to the
Company or its affiliated entities.



     3. Other Activities. The Executive shall not engage in any business activity that in the
judgment of the Board conflicts with the Executive’s duties hereunder, whether or not such
activity is pursued for gain, profit, or other pecuniary advantage. In addition, except for the
activities permitted under paragraph 3.1 of this Agreement or approved by the Board of Directors
in writing, the Executive will not: (a) engage in activities which require such substantial
services on the part of the Executive that the Executive is unable to perform the duties assigned
to the Executive in accordance with this Agreement; (b) serve as an officer or director of any
publicly held entity; or (c) directly or indirectly invest in, participate in or acquire an
interest in any oil and gas business, including, without limitation, (i) producing oil and gas,
(ii) drilling, owning or operating oil and gas leases or wells, (iii) providing services or
materials to the oil and gas industry, (iv) marketing or refining oil or gas, or (v) owning any
interest in any corporation, partnership, company or entity which conducts any of the foregoing
activities. The limitations in this paragraph 3 will not prohibit an investment by the Executive
in publicly traded securities. The Executive is not restricted from maintaining or making
investments, or engaging in other businesses, enterprises or civic, charitable or public service
functions if such activities, investments, businesses or enterprises do not result in a violation
of clauses (a) through (c) of this paragraph 3. Notwithstanding the foregoing, the Executive will
be permitted to participate in the activities set forth in Section 3.1 that will be deemed to be
approved by the Company, if such activities are undertaken in strict compliance with this
Agreement.




     3.1 Royalty Interests and Gifts. The foregoing restriction in clause (c) will not
prohibit the ownership of royalty interests where the Executive owns or previously owned
the surface of the land covered by the royalty interest and the ownership of the royalty
interest is incidental to the ownership of the surface estate or the ownership of royalty,
overriding royalty or working interests that are received by gift or inheritance subject to
disclosure by Executive to the Company in writing.



     4. Executive’s Compensation. The Company agrees to compensate the Executive as follows:




     4.1 Base Salary. Executive will be paid a base salary (the “Base Salary”) in an
annual rate of not less than Three Hundred Thousand Dollars ($300,000.00), which will be
paid to the Executive in installments consistent with the Company’s customary payroll
practices, during the term of this Agreement.




     4.2 Bonus. In addition to the Base Salary described at paragraph 4.1 of this
Agreement, the Company may periodically pay bonus compensation to the Executive.
Executive, however, is guaranteed a minimum bonus during the first year of employment.
During the first year of employment, Executive shall be paid a bonus of not less than One
Hundred Seventy-Five Thousand Dollars ($175,000.00). Such bonus will be paid pro rata on a
semi-annual basis on or before January 31 and July 31 of the applicable calendar year. Any
bonus compensation will be paid by separate check apart



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from Executive’s Base Salary less appropriate deductions pursuant to Internal Revenue
Service guidelines. In order to be entitled to the bonus compensation set forth herein and
any future bonuses, Executive must be an active full-time employee of the Company on the
dates the bonuses are to be paid. In other words, Executive must be employed full-time on
the date that the bonuses are to be paid in order to be eligible for such bonuses. Upon
separation of employment for any reason prior to the date any bonuses are paid, Executive
shall not be eligible for any pro rata bonus compensation. Executive recognizes and
acknowledges that except as provided above, the award of bonus is not guaranteed or
promised in any way. Any additional bonus compensation will be at the absolute discretion
of the Company in such amounts and at such times as the Board of Directors of the Company
(or a Compensation Committee thereof) may determine.




     4.3 Equity Compensation. In addition to the compensation set forth in paragraphs 4.1
and 4.2 of this Agreement, the Executive will be granted an award of 20,000 shares of
Company restricted stock under and subject to the Company’s equity compensation plans (the
“Equity Compensation Plans”) as set forth below which will vest over a four (4) year period
which begins to run from the date of each grant. The 20,000 shares will be granted as
follows: 10,000 shares of this stock will be granted on January 1, 2007 and another 10,000
shares will be granted on July 1, 2007. In order to be entitled to the award of equity
compensation set forth herein, the Executive must be an active full-time employee of the
Company on the grant dates. Further, the terms and provisions of the Equity Compensation
Plans control and direct the award of Company restricted stock and any conflict between
this Agreement and the Equity Compensation Plans will be resolved in favor of the terms and
provisions of the Equity Compensation Plans.




     4.4 Benefits. The Company agrees to extend to the Executive retirement benefits and
deferred compensation (if any and if made available) and reimbursement of reasonable
expenditures. The Company will also provide the Executive the opportunity to apply for
coverage under the Company’s medical, life and disability plans, if any. If the Executive
is accepted for coverage under such plans, the Company will provide such coverage on the
same terms as is customarily provided by the Company to the plan participants as modified
from time to time. The Executive is subject to all of the terms and provisions of the
Company’s benefit plans or policies.




     4.5 Vacation. The Executive will be entitled to take up to four (4) weeks or twenty
(20) days of paid time off each calendar year during the term of this Agreement, subject to
proration for any portion of a calendar year under this Agreement. No additional
compensation will be paid for failure to take vacation and no vacation may be carried
forward from one calendar year to another except for 40 hours.



     5. Term. In the absence of termination as set forth in paragraph 6 below, this Agreement
will extend for a term commencing on the Effective Date, and ending on September 2, 2008 (the
“Expiration Date”). Unless the Company provides thirty (30) days prior written notice of
non-extension to the Executive, on or before September 2, 2008, the term and the




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Expiration Date will be automatically extended for one (1) additional year from the
Expiration Date.




     6. Termination. The Executive’s employment will continue in effect until the expiration of
the term set forth in paragraph 5 of this Agreement unless earlier terminated pursuant to this
paragraph 6.




     6.1 Termination by Company. The Company will have the following rights to terminate
Executive’s employment:




     6.1.1 Termination without Cause. The Company may terminate Executive’s
employment without Cause at any time by the service of written notice of
termination to the Executive specifying an effective date of such termination not
sooner than ten (10) days after the date of such notice (the “Termination Date”).
In the event the Executive is terminated without Cause (other than a CC Termination
under paragraph 6.3 of this Agreement), the Executive will receive as termination
compensation: (a) his Base Salary (as in effect on the Termination Date) during the
remaining term of this Agreement, but in any event through the Expiration Date.
The payment of such amounts shall be made during the remaining term of the
Agreement in installments consistent with the Company’s normal payroll practices,
but, if on the Termination Date, the Executive is a “specified employee” as defined
in regulations under Section 409A of the Code, such payments will commence on the
first payroll payment date which is more than six months following the Termination
Date and the first payment shall include any amounts that would have otherwise been
payable during the six month period. The right to the foregoing termination
compensation under clause (a) above is subject to the Executive’s execution of the
Company’s severance agreement which will operate as a release of all legally
waivable claims against the Company. Such payment is further conditioned upon the
Executive’s compliance with all of the provisions of this Agreement, including all
post-employment obligations.




     6.1.2 Termination for Cause. The Company may terminate the employment of the
Executive hereunder at any time for Cause (as hereinafter defined) (such a
termination being referred to in this Agreement as a “Termination For Cause”) by
giving the Executive written notice of such termination, which shall take effect
immediately upon the giving of such notice to the Executive. As used in this
Agreement, “Cause” means (A) the Executive’s material breach or threatened breach
of this Agreement; (B) the Executive fails to substantially perform the Executive’s
duties hereunder; (C) the misappropriation or fraudulent conduct by the Executive
with respect to the assets or operations of the Company or any of its subsidiaries
or affiliated companies; (D) the Executive’s willful disregard of the instructions
of the Board or the Executive’s material neglect of duties or failure to act, other
than by reason of disability or death; (E) the Executive’s personal misconduct
which substantially injures the Company; or (F) the conviction of the Executive
for, or a plea of guilty or no




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contest to, a felony or any crime involving fraud, theft or dishonesty. In
the event Executive’s employment is terminated for Cause, the company will not have
any obligation to provide any further payments or benefits to the Executive after
the effective date of such termination.




     6.2 Termination by Executive. The Executive may voluntarily terminate his employment
with or without Cause by the service of written notice of such termination to the Company
specifying an effective date of such termination ninety (90) days after the date of such
notice. The Company may in its sole discretion, elect to waive all or any part of the
90-day notice period with no further obligations being owed to the Executive by the
Company. In the event employment is terminated by the Executive, neither the Company nor
the Executive will have any further obligations hereunder, except for any obligations which
expressly survive termination of employment including Sections 7, 8, 9, 10, 11 ,12 and 13.




     6.3 Termination After Change in Control. If during the term of this Agreement there
is a “Change of Control” and within one (1) year thereafter there is a CC Termination (as
hereafter defined), then the Executive will be entitled to a severance payment (in addition
to any other rights and other amounts payable to the Executive under Section 6.7 or under
Company plans in which Executive is a participant) payable in a lump sum in cash within 10
days following the CC Termination in an amount equal to the sum of the following: (a) one
(1) times the Executive’s Base Salary for the last 12 calendar months ending immediately
prior to the CC Termination and bonus paid pursuant to Section 4.2 (based on the average of
the last three years annual bonuses or such lesser number of years as Executive may have
been employed). If the foregoing amount is not paid within ten (10) days after the CC
Termination, the unpaid amount will bear interest at the per annum rate of 12%. The right
to the foregoing termination compensation under clause (a) above is subject to the
Executive’s execution of the Company’s severance agreement which will operate as a release
of all legally waivable claims against the Company. Such payment is further conditioned
upon the Executive’s compliance with all of the provisions of this Agreement, including all
post-employment obligations. Notwithstanding the foregoing, if at the time of a CC
Termination, the Executive is a “specified employee” as defined in regulations under
Section 409A of the Code, such payment will be made on the first day which is more than six
months following the CC Termination. In connection with any Change of Control, the Company
shall obtain the assumption of this Agreement, without limitation or reduction, by any
successor to the Company or any parent corporation of the Company.




     6.3.1 Change of Control. For the purpose of this Agreement, a “Change of
Control” means the occurrence of any of the following:




     (a) The acquisition by any individual, entity or group (within the meaning of
Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended
(the “Exchange Act”)) (a “Person”), other than Executive or his affiliates or Tom
L. Ward or his affiliates (the “Exempt Persons”), of beneficial ownership (within
the meaning of Rule 13d-3 promulgated under the Exchange



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Act) of 40% or more of either (i) the then outstanding shares of common stock
of the Company (the “Outstanding Company Common Stock”) or (ii) the combined voting
power of the then outstanding voting securities of the Company entitled to vote
generally in the election of directors (the “Outstanding Company Voting
Securities”). For purposes of this paragraph (a) the following acquisitions by a
Person will not constitute a Change of Control: (i) any acquisition directly from
the Company; (ii) any acquisition by the Company; (iii) any acquisition by any
employee benefit plan (or related trust) sponsored or maintained by the Company or
any corporation controlled by the Company; or (iv) any acquisition by any
corporation pursuant to a transaction which complies with clauses (i), (ii) and
(iii) of paragraph (c) of this paragraph 6.3.1.




     (b) The individuals who, as of the date hereof, constitute the Board of
Directors (the “Incumbent Board”) cease for any reason to constitute at least a
majority of the Board of Directors. Any individual becoming a director subsequent
to the date hereof whose election, or nomination for election by the Company’s
shareholders, is approved by a vote of at least a majority of the directors then
comprising the Incumbent Board will be considered a member of the Incumbent Board
as of the date hereof, but any such individual whose initial assumption of office
occurs as a result of an actual or threatened election contest with respect to the
election or removal of directors or other actual or threatened solicitation of
proxies or consents by or on behalf of a Person other than the Incumbent Board will
not be deemed a member of the Incumbent Board as of the date hereof.




     (c) The consummation of a reorganization, merger, consolidation or sale or
other disposition of all or substantially all of the assets of the Company (a
“Business Combination”), unless following such Business Combination: (i) the
individuals and entities who were the beneficial owners, respectively, of the
Outstanding Company Common Stock and Outstanding Company Voting Securities
immediately prior to such Business Combination beneficially own, directly or
indirectly, more than 60% of, respectively, the then outstanding shares of common
stock and the combined voting power of the then outstanding voting securities
entitled to vote generally in the election of directors, as the case may be, of the
corporation resulting from such Business Combination (including, without
limitation, a corporation which as a result of such transaction owns the Company or
all or substantially all of the Company’s assets either directly or through one or
more subsidiaries) in substantially the same proportions as their ownership,
immediately prior to such Business Combination of the Outstanding Company Common
Stock and Outstanding Company Voting Securities, as the case may be, (ii) no Person
(excluding any corporation resulting from such Business Combination or any employee
benefit plan (or related trust) of the Company or such corporation resulting from
such Business Combination) other than one or more of the Exempt Persons
beneficially owns, directly or indirectly, 40% or more of, respectively, the then
outstanding shares of common stock of




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the corporation resulting from such Business Combination or the combined
voting power of the then outstanding voting securities of such corporation except
to the extent that such ownership existed prior to the Business Combination and
(iii) at least a majority of the members of the board of directors of the
corporation resulting from such Business Combination were members of the Incumbent
Board at the time of the execution of the initial agreement, or of the action of
the Board, providing for such Business Combination.




     (d) The approval by the shareholders of the Company of a complete liquidation
or dissolution of the Company.




     6.3.2 CC Termination. The term “CC Termination” means any of the following:
(a) the Executive’s employment is terminated by the Company other than under
paragraphs 6.1.2, 6.4 or 6.5; or (b) the Executive resigns as a result of a change
in the Executive’s duties or title, a reduction in the Executive’s then current
Base Salary or a significant reduction in the Executive’s then current benefits as
provided in Section 4, a relocation of more than 25 miles from the Executive’s then
current place of employment being required by the Board of Directors or a default
by the Company under this Agreement.




     6.4 Incapacity of Executive. If the Executive suffers from a physical or mental
condition, which in the reasonable judgment of the Company’s Board of Directors, prevents
the Executive in whole or in part from performing the duties specified herein for a period
of sixteen (16) consecutive weeks, the Executive’s employment may be terminated by the
Company, in which event, the Company will pay Executive his Base Salary in effect on the
date of termination through the remaining term of this Agreement, but in any event through
the Expiration Date. The payment of such amounts shall be made during the remaining term
of the Agreement in installments consistent with the Company’s normal payroll practices,
but, if on the termination date, the Executive is a “specified employee” as defined in
regulations under Section 409A of the Code, such payments will commence on the first
payroll payment date which is more than six months following the termination date and the
first payment shall include any amounts that would have otherwise been payable during the
six month period. Notwithstanding the foregoing, the amount payable hereunder will be
reduced by any benefits payable under any disability plans provided by the Company under
paragraph 4.4 of this Agreement. The right to the compensation due under this paragraph
6.4 is subject to the execution by the Executive or the Executive’s legal representative of
the Company’s severance agreement which will operate as a release of all legally waivable
claims against the Company. In applying this section, the Company will comply with any
applicable legal requirements, including the Americans with Disabilities Act.




     6.5 Death of Executive. If the Executive dies during the term of this Agreement,
Executive’s employment will terminate without compensation to the Executive’s estate
except: (a) the obligation to continue the Base Salary payments under paragraph 4.1 of this
Agreement for twelve (12) months after the effective date of such termination.




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     6.6 Effect of Termination. The termination of Executive’s employment will terminate
all obligations of the Executive to render services on behalf of the Company. The
Executive will maintain the confidentiality of all information acquired by the Executive
during the term of his employment in accordance with paragraph 7 of this Agreement and the
Executive shall comply with all other post employment requirements including paragraphs 7,
8, 9, 10, 11, 12 and 13. Except as otherwise provided in this paragraph 6, no accrued
bonus, severance pay or other form of compensation will be payable by the Company to the
Executive by reason of the termination of his employment. All keys, entry cards, credit
cards, files, records, financial information, furniture, furnishings, equipment, supplies
and other items relating to the Company will remain the property of the Company. The
Executive will have the right to retain and remove all personal property and effects that
are owned by the Executive and located in the offices of the Company. All such personal
items will be removed from such offices no later than ten (10) days after the effective
date of termination, and the Company is hereby authorized to discard any items remaining
and to reassign the Executive’s office space after such date. Prior to the effective date
of termination, the Executive will cooperate with the Company to provide for the orderly
termination of the Executive’s employment.




     6.7 Equity Compensation Provisions. Notwithstanding any provision to the contrary in
any option agreement, restricted stock agreement, plan or other agreement relating to
equity based compensation, in the event of a termination under paragraph 6.1.1 or 6.3 of
this Agreement: (a) all units, stock options, incentive stock options, performance shares,
stock appreciation rights and restricted stock granted and held by Executive immediately
prior to such termination will immediately become 100% vested; and (b) the Executive’s
right to exercise any previously unexercised options will not terminate until the latest
date on which such option would expire but for Executive’s termination of employment. To
the extent Company is unable to provide for one or both of the foregoing rights the Company
will provide in lieu thereof a lump-sum cash payment equal to the difference between the
total value of such units, stock options, incentive stock options, performance shares,
stock appreciation rights and shares of restricted stock (the “Equity Compensation Rights”)
with the foregoing rights as of the date of Executive’s termination of employment and the
total value of the Equity Compensation Rights without the foregoing rights as of the date
of the Executive’s termination of employment. The foregoing amounts will be determined by
the Board of Directors in good faith based on a valuation performed by an independent
consultant selected by the Board of Directors and the cash payment, if any, will be paid in
a lump sum in the case of a termination under Section 6.1.1, at the same time as the first
severance payment is otherwise due under such Section, and in the case of a termination
under Section 6.3, at the same time the payment is due under such Section. The right to
the foregoing termination compensation under clauses (a) and (b) above is subject to the
Executive’s execution of the Company’s severance agreement which will operate as a release
of all legally waivable claims against the Company. Such payment is further conditioned
upon the Executive’s compliance with all of the provisions of this Agreement, including all
post-employment obligations.


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     7. Confidentiality. The Executive recognizes that the nature of the Executive’s services are
such that the Executive will have access to information which constitutes trade secrets, is of a
confidential nature, is of great value to the Company or is the foundation on which the business
of the Company is predicated. The Executive agrees not to disclose to any person other than the
Company’s employees or the Company’s legal counsel or other parties authorized by the Company to
receive confidential information (“Confidential Information”) nor use for any purpose, other than
the performance of this Agreement, any Confidential Information. Confidential Information
includes data or material (regardless of form) which is: (a) a trade secret; (b) provided,
disclosed or delivered to Executive by the Company, any officer, director, employee, agent,
attorney, accountant, consultant, or other person or entity employed by the Company in any
capacity, any customer, borrower or business associate of the Company or any public authority
having jurisdiction over the Company of any business activity conducted by the Company; or (c)
produced, developed, obtained or prepared by or on behalf of Executive or the Company (whether or
not such information was developed in the performance of this Agreement) with respect to the
Company or any assets oil and gas prospects, business activities, officers, directors, employees,
borrowers or customers of the foregoing. However, Confidential Information will not include any
information, data or material which at the time of disclosure or use was generally available to
the public other than by a breach of this Agreement, was available to the party to whom disclosed
on a non-confidential basis by disclosure or access provided by the Company or a third party, or
was otherwise developed or obtained independently by the person to whom disclosed without a breach
of this Agreement. On request by the Company, the Company will be entitled to a copy of any
Confidential Information in the possession of the Executive. The provisions of this paragraph 7
will survive the termination, expiration or cancellation of Executive’s employment for a period of
one (1) year after the date of termination. The Executive will deliver to the Company all
originals and copies of the documents or materials containing Confidential Information. For
purposes of paragraphs 7, 8, and 9 of this Agreement, the Company expressly includes any of the
Company’s subsidiaries or affiliates.



     8. Non-Solicitation. The Executive agrees that during the Non-Solicitation Period (as
hereafter defined), Executive will not directly, either personally or by or through his agent, on
behalf of himself or on behalf of any other individual, association or entity, (i) use any of the
Confidential Information for the purposes of calling on any established customer of the Company or
soliciting or inducing any of such customers to acquire, or providing to any of such customers,
any product or service provided by the Company or any affiliate or subsidiary of the Company; (ii)
solicit, influence or encourage any established customer of the Company to divert or direct such
customer’s business to the Executive or any person or entity by which or with which the Executive
is employed, associated, affiliated or otherwise related; or (iii) solicit, divert or attempt to
solicit or divert any entity which has been identified and contacted by the Company, either
directly or through such entity’s agent(s), with respect to a possible acquisition by the Company.
For the purposes hereof, the term “Non-Solicitation Period” shall mean a period of six (6) months
after Executive’s employment and for any reason.



     9. Non-Interference. The Executive agrees that during the Non-Interference Period (as
hereafter defined) he will not, directly or indirectly, either personally or by or through




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his agent, on behalf of himself or on behalf of any other individual, association or entity,
hire, solicit or seek to hire any employee of the Company or any affiliate or subsidiary of the
Company, or any individual who was an employee of the Company or any affiliate or subsidiary of
the Company during the twelve-month period prior to the Termination Date, or in any other manner
attempt, directly or indirectly, to persuade any such employee to discontinue his or her status of
employment with the Company or any affiliate or subsidiary of the Company or to become employed in
a business or activities likely to be competitive with the business of the Company or any
affiliate or subsidiary of the Company. For the purposes hereof, the term “Non-Interference
Period” shall mean a period of six (6) months after Executive’s employment and for any reason.




     10. Severability. It is the desire and intent of the parties hereto that the provisions of
this Agreement be enforced to the fullest extent permissible under the laws and public policies
applied in each jurisdiction in which enforcement is sought. Accordingly, if any particular
provision of this Agreement shall be adjudicated by a court of competent jurisdiction to be
invalid, prohibited or unenforceable for any reason, such provision, as to such jurisdiction,
shall be ineffective, without invalidating the remaining provisions of this Agreement or affecting
the validity or enforceability of such provision in any other jurisdiction. Notwithstanding the
foregoing, if such provision could be more narrowly drawn so as not to be invalid, prohibited or
unenforceable in such jurisdiction, it shall, as to such jurisdiction, be so narrowly drawn,
without invalidating the remaining provisions of this Agreement or affecting the validity or
enforceability of such provision in any other jurisdiction.



     11. Remedies. The Executive acknowledges and understands that the provisions of this
Agreement are of a special and unique nature, the loss of which cannot be adequately compensated
for in damages by an action at law, and that the breach or threatened breach of the provisions of
this Agreement would cause the Company or any of its Subsidiaries irreparable harm. In the event
of a breach or threatened breach by the Executive of the provisions of this Agreement, the Company
or any of its subsidiaries or affiliates shall be entitled to an injunction restraining the
Executive from such breach. In addition to the foregoing and not in any way in limitation
thereof, or in limitation of any right or remedy otherwise available, if the Executive violates
any provision of Paragraphs 7, 8 or 9 hereof, any compensation or severance payments then or
thereafter due from the Company to the Executive shall be terminated forthwith and the Company’s
obligation to pay and the Executive’s right to receive such compensation as severance payments
shall terminate and be of no further force or effect, in each case without limiting or affecting
the Executive’s obligations under such Paragraphs 7, 8 and 9 or the Company’s or its subsidiaries’
or affiliates’ other rights and remedies available at law or equity. Nothing contained in this
Agreement shall be construed as prohibiting the Company or any of its subsidiaries or affiliates
from pursuing, or limiting the Company’s or any of its subsidiaries’ or affiliates’ ability to
pursue, any other remedies available for any breach or threatened breach of this Agreement by the
Executive. The provisions of Paragraph 13 of this Agreement relating to arbitration shall not be
applicable to the Company to the extent it seeks an injunction in any court to restrain the
Executive from violating Paragraphs 7, 8 or 9 hereof.




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12. Proprietary Matters.




     12.1 The Executive acknowledges and agrees that the Company owns all right, title and
interest (including patent rights, copyrights, trade secret rights, trademark rights and
all other intellectual and industrial property rights) relating to any and all inventions
(whether or not patentable), works of authorship, design, know-how, ideas and information
made or conceived or reduced to practice, in whole or in part, by the Executive during the
term of this Agreement which are useful in, or directly or indirectly related to, the
business of the Company or any Confidential Information (collectively, the “Proprietary
Rights”). The Executive further acknowledges and agrees that all such Proprietary Rights
are “works made for hire” of which the Company is the author. The Executive agrees to
promptly disclose and provide all Proprietary Rights to the Company; provided, in the event
the Proprietary Rights shall not be deemed to constitute “works made for hire,” or in the
event the Executive should, by operation of law or otherwise, be deemed to retain any
rights in the Proprietary Rights, the Executive agrees to assign to the Company, without
further consideration, the Executive’s entire right, title and interest in and to each and
every such Proprietary Right.



     12.2 The Executive hereby agrees to assist Company in obtaining and enforcing United
States and/or foreign letters patent and copyright registrations covering the Proprietary
Rights and further agrees that Executive’s obligation to assist Company shall continue
beyond the termination of Executive’s employment hereunder. If Company is unable because
of Executive’s mental or physical incapacity or for any other reason to secure Executive’s
signature to apply for or to pursue any application for any United States or foreign
letters patent or copyright registrations covering inventions assigned to Company, then
Executive hereby irrevocably designates and appoints Company and its duly authorized
officers and agents as Executive’s agent and attorney-in-fact to act for and on Executive’s
behalf to execute and file any such applications and to do all other lawfully permitted
acts to further the prosecution and issuance of letters patent or copyright registrations
thereon with the same legal force and effect as if executed by Executive. Executive hereby
waives and quitclaims to Company any and all claims of any nature whatsoever which
Executive now or hereafter may have for infringement of any patent or copyright resulting
from any such application for letters patent or copyright registrations assigned hereunder
to Company. Executive will further assist Company in every lawful way to enforce any
copyrights or patents obtained, including without limitation, testifying in any suit or
proceeding involving any of the copyrights or patents or executing any documents deemed
necessary by Company, all without further consideration except as contemplated by the
immediately following sentence but at the expense of Company. If Executive is called upon
to render such assistance after termination of Executive’s employment hereunder, then
Executive shall be entitled to a fair and reasonable per diem fee (which shall not be less
than Executive’s equivalent daily Base Salary) in addition to reimbursement of any expenses
incurred at the request of Company.




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     13. Arbitration. Any dispute between the parties out of or related to this Agreement or the
employment relationship, whether arising during the term of this Agreement or afterwards, and
involving a claim for money damages shall be subject to binding arbitration and resolved pursuant
to the rules of the American Arbitration Association. All arbitration shall be final and binding
and shall be governed by the Federal Arbitration Act and the arbitration decision shall be
enforceable in any court of competent jurisdiction. This obligation to arbitrate shall survive
even if this Agreement shall be alleged to be rescinded or terminated. The arbitration hearing
shall be convened in Oklahoma City, Oklahoma. The Company will pay the costs and expenses of the
arbitration including, without limitation, the fees for the arbitrators.



     14. Miscellaneous. The parties further agree as follows:




     14.1 Time. Time is of the essence of each provision of this Agreement.




     14.2 Notices. Any notice, payment, demand or communication required or permitted to
be given by any provision of this Agreement will be in writing and will be deemed to have
been given when received by personal delivery, by facsimile, by overnight courier, or by
certified mail, postage and charges prepaid, directed to the following address or to such
other or additional addresses as any party might designate by written notice to the other
party:



	 	 	 	 	 	 	 	 	 
	 

	 	To the Company:
	 	 
	 	Riata Energy, Inc.

1601 NW Expressway, Suite 1600

Oklahoma City, OK 73118	 	 
	 
	 	 	 	 	 	 	 	 
	 

	 	To the Executive:
	 	 
	 	Mr. Larry Coshow

2612 NW 176th St.

Edmond, OK 73003	 	 






     14.3 Assignment. Neither this Agreement nor any of the parties’ rights or obligations
hereunder can be transferred or assigned without the prior written consent of the other
parties to this Agreement.




     14.4 Construction. If any provision of this Agreement or the application thereof to
any person or circumstances is determined, to any extent, to be invalid or unenforceable,
the remainder of this Agreement, or the application of such provision to persons or
circumstances other than those as to which the same is held invalid or unenforceable, will
not be affected thereby, and each term and provision of this Agreement will be valid and
enforceable to the fullest extent permitted by law. This Agreement is intended to be
interpreted, construed and enforced in accordance with the laws of the state of Oklahoma




     14.5 Entire Agreement. This Agreement constitutes the entire agreement between the
parties hereto with respect to the subject matter herein contained, and no





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modification hereof will be effective unless made by a supplemental written agreement
executed by all of the parties hereto.




     14.6 Binding Effect; Third Party Beneficiary; Assignment. This Agreement shall be
binding upon and inure to the benefit of the parties hereto and their respective
affiliates, officers, employees, agents, successors and assigns (including, in the case of
the Company or any of its subsidiaries or affiliated companies, the successor to the
business of the Company as a result of the transfer of all or substantially all of the
assets or capital stock of the Company or any of its subsidiaries or affiliates); provided,
that the Executive may not assign this Agreement or any of his rights or interests herein,
in whole or in part, to any other person or entity without the prior written consent of the
Company.




     14.7 Supercession. This Agreement is the final, complete and exclusive expression of
the agreement between the Company and the Executive and supersedes and replaces in all
respects any prior oral or written employment agreements. On execution of this Agreement by
the Company and the Executive, the relationship between the Company and the Executive after
the effective date of this Agreement will be governed by the terms of this Agreement and
not by any other agreements, oral or otherwise.




     14.8 Non-Contravention. Executive represents and warrants to the Company that the
execution and performance of this Agreement will not violate, constitute a default under,
or otherwise give rights to any third party, pursuant to the terms of any Agreement to
which Executive is a party.




     14.9 Indemnity. EXECUTIVE AGREES TO INDEMNIFY AND HOLD HARMLESS THE COMPANY, ITS
DIRECTORS, OFFICERS AND EMPLOYEES AND AGENTS (THE “INDEMNIFIED PARTIES”) AGAINST ANY LOSS,
CLAIM, DAMAGE, LIABILITY OR EXPENSE, AS INCURRED, (“LOSS”) TO WHICH THE INDEMNIFIED PARTIES
MAY BECOME SUBJECT OR INCUR, INSOFAR AS SUCH LOSS ARISES OUT OF OR IS BASED UPON ANY
INACCURACY IN ANY REPRESENTATION OR WARRANTY GIVEN BY EXECUTIVE IN SECTION 11.9 OF THIS
AGREEMENT AND TO REIMBURSE THE INDEMNIFIED PARTIES FOR ANY AND ALL EXPENSES (INCLUDING THE
FEES AND DISBURSEMENTS OF COUNSEL CHOSEN BY THE INDEMNIFIED PARTIES) AS SUCH EXPENSES ARE
REASONABLY INCURRED BY THE INDEMNIFIED PARTIES IN CONNECTION WITH INVESTIGATING, DEFENDING,
SETTLING, COMPROMISING OR PAYING ANY SUCH LOSS.




     14.10 Compliance with Section 409A of the Code. This Agreement is intended to comply
with Section 409A of the Code and shall be construed and interpreted in accordance with
such intent. To the extent any benefit paid under this Agreement shall be subject to
Section 409A of the Code, such benefit shall be paid in a manner that will comply with
Section 409A, including any IRS 409A Guidance. Any provision of this Agreement that would
cause the payment of any benefit to fail to satisfy



13









 






Section 409A of the Code shall have no force and effect until amended to comply with
Section 409A (which amendment may be retroactive to the extent permitted by the IRS 409A
Guidance.



     IN WITNESS WHEREOF, the undersigned have executed this Agreement effective the date first
above written.



[SIGNATURES ON FOLLOWING PAGE]





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	 	RIATA ENERGY, INC.

 	 
	 	By:  	/s/
Tom L. Ward 	 
	 	 	Tom L. Ward 	 
	 	 	Chief Executive Officer

(the “Company”) 	 
	 
	 	 	 
	 	By  	
/s/ Larry Coshow 	 
	 	 	Larry Coshow 	 
	 	 	(the “Executive”) 	 
	 





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