Document:

exv10w22

 

EXHIBIT
10.22

EMPLOYMENT AGREEMENT

     THIS EMPLOYMENT AGREEMENT (“Agreement”) is made by and between Concho Resources Inc., a
Delaware corporation (“Company”), and David M. Thomas III (“Executive”).

W I T N E S S E T H:

     WHEREAS, Executive is currently employed by Company or a subsidiary of Company; and

     WHEREAS, Company is desirous of continuing to employ Executive in an executive capacity on the
terms and conditions, and for the consideration, hereinafter set forth and Executive is desirous of
continuing to be employed by Company on such terms and conditions and for such consideration;

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

ARTICLE 1: DEFINITIONS AND INTERPRETATIONS 

	 	1.1	 	Definitions. 

          (a) “Annual Base Salary” shall mean an amount equal to the greater of:

     (i) Executive’s base salary at the annual rate in effect pursuant to Section
4.1 at the date of Executive’s Involuntary Termination;

     (ii) Executive’s base salary at the annual rate in effect pursuant to Section
4.1 on the date that is 60 days prior to the date of Executive’s Involuntary
Termination; or

     (iii) Executive’s base salary at the annual rate in effect pursuant to Section
4.1 immediately prior to a Change of Control if Executive’s employment shall be
subject to an Involuntary Termination during the Change of Control Period.

          (b) “Board” shall mean the Board of Directors of Company.

          (c) “Cause” shall mean Executive (i) has engaged in gross negligence, gross
incompetence or willful misconduct in the performance of Executive’s duties, (ii) has
refused, without proper reason, to perform Executive’s duties, (iii) has materially breached
any material provision of this Agreement or corporate policy or code of conduct established
by Company, (iv) has willfully engaged in conduct which is materially injurious to Company
or its subsidiaries (monetarily or otherwise), (v) has committed an act of fraud,
embezzlement or willful breach of a fiduciary duty to Company or an affiliate (including the
unauthorized disclosure of confidential or proprietary material

 

 

information of Company or an affiliate), or (vi) has been convicted of (or pleaded no
contest to) a crime involving fraud, dishonesty or moral turpitude or any felony.

          (d) “Change in Duties” shall mean:

     (i) The occurrence, prior to the date that a Change of Control Period begins or
after the expiration of a Change of Control Period, of any one or more of the
following without the consent of Executive:

     (1) a reduction in the rank of Executive’s title as an officer of
Company from that previously applicable to Executive (it is specifically
agreed that any change in Executive’s position(s) or title(s) with Company
shall not constitute a Change in Duties under this clause unless the rank of
Executive’s title as an officer is reduced in connection with such change
(for example, a reduction in rank from vice president to assistant vice
president));

     (2) a reduction in Executive’s base salary; or

     (3) a material diminution in employee benefits (including but not
limited to medical, dental, life insurance and long-term disability plans)
and perquisites applicable to Executive from those substantially similar to
the employee benefits and perquisites provided by Company (including its
subsidiaries) to similarly situated executives; or

     (ii) The occurrence, within a Change of Control Period, of any one or more of
the following without the consent of Executive:

     (1) a material reduction in the nature or scope of Executive’s
authorities or duties from those applicable to Executive immediately prior
to the date on which a Change of Control Period begins;

     (2) a reduction in Executive’s base salary from that provided to
Executive immediately prior to the date on which a Change of Control Period
begins;

     (3) a diminution in Executive’s eligibility to participate in bonus,
stock option, incentive award and other compensation plans which provide
opportunities to receive compensation which are the greater of (A) the
opportunities provided by Company (including its subsidiaries) for similarly
situated executives or (B) the opportunities under any such plans under
which Executive was participating immediately prior to the date on which a
Change of Control Period begins;

     (4) a material diminution in employee benefits (including but not
limited to medical, dental, life insurance and long-term disability plans)
and perquisites applicable to Executive from the greater of (A) the employee
benefits and perquisites provided by Company (including its

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subsidiaries) to similarly situated executives or (B) the employee
benefits and perquisites to which Executive was entitled immediately prior
to the date on which a Change of Control Period begins; or

     (5) a change in the location of Executive’s principal place of
employment by Company (including its subsidiaries) by more than 10 miles
from the location where Executive was principally employed immediately prior
to the date on which a Change of Control Period begins.

               (e) “Change of Control” shall mean:

     (i) a merger of Company with another entity, a consolidation involving Company,
or the sale of all or substantially all of the assets of Company to another entity
if, in any such case, (1) the holders of equity securities of Company immediately
prior to such transaction or event do not beneficially own immediately after such
transaction or event equity securities of the resulting entity entitled to 50% or
more of the votes then eligible to be cast in the election of directors generally
(or comparable governing body) of the resulting entity in substantially the same
proportions that they owned the equity securities of Company immediately prior to
such transaction or event or (2) the persons who were members of the Board
immediately prior to such transaction or event shall not constitute at least a
majority of the board of directors of the resulting entity immediately after such
transaction or event;

     (ii) the dissolution or liquidation of Company;

     (iii) when any person or entity, including a “group” as contemplated by Section
13(d)(3) of the Securities Exchange Act of 1934, other than an Excluded Person
acquires or gains ownership or control (including, without limitation, power to
vote) of more than 50% of the combined voting power of the outstanding securities of
Company; or

     (iv) as a result of or in connection with a contested election of directors,
the persons who were members of the Board immediately before such election shall
cease to constitute a majority of the Board.

For purposes of the preceding sentence, (1) “resulting entity” in the context of a
transaction or event that is a merger, consolidation or sale of all or substantially
all assets shall mean the surviving entity (or acquiring entity in the case of an
asset sale) unless the surviving entity (or acquiring entity in the case of an asset
sale) is a subsidiary of another entity and the holders of common stock of Company
receive capital stock of such other entity in such transaction or event, in which
event the resulting entity shall be such other entity, and (2) subsequent to the
consummation of a merger or consolidation that does not constitute a Change of
Control, the term “Company” shall refer to the resulting entity and the term “Board”
shall refer to the board of directors (or comparable governing body) of the
resulting entity.

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     (f) “Change of Control Period” shall mean, with respect to a Change of Control, the
two-year period beginning on the date upon which such Change of Control occurs.

     (g) “Code” shall mean the Internal Revenue Code of 1986, as amended.

     (h) “Compensation Committee” shall mean the Compensation Committee of the Board.

     (i) “Disability” shall mean that, as a result of Executive’s incapacity due to physical
or mental illness, Executive shall have been absent from the full-time performance of
Executive’s duties for six consecutive months and Executive shall not have returned to
full-time performance of Executive’s duties within 30 days after written notice of
termination is given to Executive by Company (provided, however, that such notice may not be
given prior to 30 days before the expiration of such six-month period).

     (j) “Effective Date” shall mean June 1, 2006.

     (k) “Excluded Person” means Chase Oil Corporation, Yorktown Partners LLC, and their
respective affiliates. For purposes of this Section 1.1(k), (i) an “affiliate” of an entity
means any other person or entity that, directly or indirectly, controls, is controlled by or
is under common control with, such specified entity through one or more intermediaries or
otherwise, and (ii) “control” means, where used with respect to any person or entity, the
possession, directly or indirectly, of the power to direct or cause the direction of the
management and policies of such person or entity, whether through the ownership of voting
securities, by contract or otherwise, and the terms “controlling” and “controlled” have
correlative meanings.

     (l) “Involuntary Termination” shall mean any termination of Executive’s employment with
Company which:

     (i) does not result from a resignation by Executive (other than a resignation
pursuant to clause (ii) of this Section 1.1(l)); or

     (ii) results from a resignation by Executive on or before the date which is 60
days after the date upon which Executive receives notice of a Change in Duties;

provided, however, the term “Involuntary Termination” shall not include a termination for
Cause or any termination as a result of death or Disability.

     (m) “Monthly Severance Amount” shall mean an amount equal to one-twelfth of Executive’s
Annual Base Salary.

     1.2 Interpretations. In this Agreement, unless a clear contrary intention appears,
(a) the words “herein,” “hereof” and “hereunder” and other words of similar import refer to this
Agreement as a whole
and not to any particular Article, Section or other subdivision, (b) reference to any Article
or Section, means such Article or Section hereof, (c) the words

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“including” (and with correlative
meaning “include”) means including, without limiting the generality of any description preceding
such term, and (d) where any provision of this Agreement refers to action to be taken by either
party, or which such party is prohibited from taking, such provision shall be applicable whether
such action is taken directly or indirectly by such party.

ARTICLE 2: EMPLOYMENT AND DUTIES

     2.1 Employment. Effective as of the Effective Date and continuing for the period of
time set forth in Section 3.1, Executive’s employment by Company shall be subject to the terms and
conditions of this Agreement.

     2.2 Positions. From and after the Effective Date, (a) Executive shall serve as an
officer of Company in the position or positions determined by the Board and (b) Executive shall be
employed by Company or a subsidiary or affiliate of Company. The Board may at any time and from
time to time assign Executive to a different position or positions with Company and cause Executive
to be employed by Company or any subsidiary or affiliate of Company. Employment with a subsidiary
or affiliate of Company pursuant to the preceding sentence shall be considered as employment with
Company for purposes of this Agreement.

     2.3 Duties and Services. Executive agrees to serve in the positions referred to in
Section 2.2 and to perform diligently and to the best of Executive’s abilities the duties and
services appertaining to such offices, as well as such additional duties and services appropriate
to such offices which the parties mutually may agree upon from time to time. Executive’s
employment shall also be subject to the policies maintained and established by Company that are of
general applicability to Company’s executive employees, as such policies may be amended from time
to time.

     2.4 Other Interests. Executive agrees, during the period of Executive’s employment by
Company, to devote substantially all of Executive’s business time, energy and best efforts to the
business and affairs of Company and its affiliates and not to engage, directly or indirectly, in
any other business or businesses, whether or not similar to that of Company, except with the
consent of the Board. The foregoing notwithstanding, the parties recognize and agree that
Executive may engage in passive personal investment and charitable activities that do not conflict
with the business and affairs of Company or interfere with Executive’s performance of Executive’s
duties hereunder, which shall be at the sole determination of the Board. As of the date of this
Agreement, the Board has approved the activities set forth on Attachment A to this Agreement.

     2.5 Duty of Loyalty. Executive acknowledges and agrees that Executive owes a fiduciary duty of loyalty to act at
all times in the best interests of Company. In keeping with such duty, Executive shall make full
disclosure to Company of all business opportunities pertaining to Company’s business and shall not
appropriate for Executive’s own benefit business opportunities concerning Company’s business.

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ARTICLE 3: TERM AND TERMINATION OF EMPLOYMENT

     3.1 Term. Unless sooner terminated pursuant to other provisions hereof, Company
agrees to employ Executive for the period beginning on the Effective Date and ending on the third
anniversary of the Effective Date (the “Initial Expiration Date”); provided, however, that
beginning on the Initial Expiration Date, and on each anniversary of the Initial Expiration Date
thereafter, if Executive’s employment under this Agreement has not been terminated pursuant to
Section 3.2 or 3.3, then said term of employment shall automatically be extended for an additional
one-year period unless on or before the date that is 90 days prior to the first day of any such
extension period either party shall give written notice to the other that no such automatic
extension shall occur.

     3.2 Company’s Right to Terminate. Notwithstanding the provisions of Section 3.1,
Company shall have the right to terminate Executive’s employment under this Agreement at any time
for any of the following reasons:

     (a) upon Executive’s death;

     (b) upon Executive’s Disability;

     (c) for Cause; or

     (d) at any time, for any other reason whatsoever, in the sole discretion of the Board;
provided, however, that Company may not terminate Executive’s employment pursuant to this
Section 3.2(d) prior to the date that is four months after the Effective Date.

     3.3 Executive’s Right to Terminate. Notwithstanding the provisions of Section 3.1
Executive shall have the right to terminate Executive’s employment under this Agreement for any of
the following reasons:

     (a) as a result of a Change in Duties; provided, however, that prior to Executive’s
termination as a result of a Change in Duties, Executive must give written notice to Company
of the specific occurrence that resulted in the Change in Duties and such occurrence must
remain uncorrected for 10 days following such written notice; or

     (b) at any time for any other reason whatsoever, in the sole discretion of Executive.

     3.4 Notice of Termination. If Company desires to terminate Executive’s employment
hereunder at any time prior to expiration of the term of employment as provided in Section 3.1, it
shall do so by giving written notice to Executive that it has elected to terminate Executive’s
employment hereunder and stating the effective date and reason for such termination, provided that
no such action shall alter or amend any other provisions hereof or rights arising hereunder. If
Executive desires to terminate Executive’s employment hereunder at any time prior to expiration of
the term of employment as provided in Section 3.1, Executive shall do so by giving a 30-day written
notice to Company that Executive has elected to terminate Executive’s employment hereunder and
stating the effective date and reason for such

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termination, provided that no such action shall
alter or amend any other provisions hereof or rights arising hereunder.

     3.5 Deemed Resignations. Any termination of Executive’s employment shall constitute
an automatic resignation of Executive as an officer of Company and each affiliate of Company, and
an automatic resignation of Executive from the Board (if applicable) and from the board of
directors or similar governing body of any affiliate of Company and from the board of directors or
similar governing body of any corporation, limited liability company or other entity in which
Company or any affiliate holds an equity interest and with respect to which board or similar
governing body Executive serves as Company’s or such affiliate’s designee or other representative.

ARTICLE 4: COMPENSATION AND BENEFITS

     4.1 Base Salary. During the period of this Agreement, Executive shall receive a
minimum base salary of $250,000.00 per annum. Executive’s base salary may, in the sole discretion
of the Compensation Committee, be increased, but not decreased, effective as of any date determined
by the Compensation Committee. Executive’s base salary shall be paid in equal installments in
accordance with Company’s standard policy regarding payment of compensation to executives but no
less frequently than monthly.

     4.2 Bonuses. Executive shall be eligible to participate in Company’s annual cash
incentive plan as approved from time to time by the Board or the Compensation Committee in amounts
to be determined by the Compensation Committee based upon criteria established by the Compensation
Committee.

     4.3 Other Perquisites. During Executive’s employment hereunder, Executive shall be
afforded the following benefits as incidences of Executive’s employment:

     (a) Business and Entertainment Expenses - Subject to Company’s standard policies and
procedures with respect to expense reimbursement as applied to its executive employees
generally, Company shall reimburse Executive for, or pay on behalf of Executive, reasonable
and appropriate expenses incurred by Executive for business related purposes, including dues
and fees to industry and professional organizations and costs of entertainment and business
development.

     (b) Other Company Benefits - Executive and, to the extent applicable, Executive’s
spouse, dependents and beneficiaries, shall be allowed to participate in all benefits, plans
and programs, including improvements or modifications of the same, which are now, or may
hereafter be, available to other executive employees of Company. Such benefits, plans and
programs shall include, without limitation, any profit sharing plan, thrift plan, health
insurance or health care plan, life insurance, disability insurance, pension plan,
supplemental retirement plan, vacation and sick leave plan, and the like which may be
maintained by Company. Company shall not, however, by reason of this paragraph be obligated
to institute, maintain, or refrain from changing, amending, or discontinuing, any such
benefit plan or program, so long as such changes are similarly applicable to executive
employees generally.

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ARTICLE 5: EFFECT OF TERMINATION ON COMPENSATION; ADDITIONAL PAYMENTS

     5.1 Termination Other Than an Involuntary Termination. If Executive’s employment
hereunder shall terminate upon expiration of the term provided in Section 3.1 because either party
has provided the notice contemplated in such Section, or if Executive’s employment hereunder shall
terminate for any other reason except those described in Sections 5.2 and 5.3, then all
compensation and all benefits to Executive hereunder shall continue to be provided until the date
of such termination of employment and such compensation and benefits shall terminate
contemporaneously with such termination of employment.

     5.2 Involuntary Termination Other Than During a Change of Control Period. Subject to
the provisions of Sections 5.5, 5.6 and 5.7, if Executive’s employment by Company or any subsidiary
thereof or successor thereto shall be subject to an Involuntary Termination which occurs prior to
the date that a Change of Control Period begins or after the expiration of a Change of Control
Period, then Company shall, as additional compensation for services rendered to Company (including
its subsidiaries), pay to Executive the following amounts and take the following actions:

     (a) pay Executive the Monthly Severance Amount on the last day of each month throughout
the 12-month period commencing on the date of such Involuntary Termination; and

     (b) during the portion, if any, of the 12-month period commencing on the date of such
Involuntary Termination that Executive is eligible to elect and elects to continue coverage
for himself and his eligible dependents under Company’s or a subsidiary’s
group health plans, as applicable, under the Consolidated Omnibus Budget Reconciliation
Act of 1985, as amended, and/or Sections 601 through 608 of the Employee Retirement Income
Security Act of 1974, as amended, Company shall promptly reimburse Executive on a monthly
basis for the difference between the amount Executive pays to effect and continue such
coverage and the employee contribution amount that active senior executive employees of
Company pay for the same or similar coverage under such group health plans.

     5.3 Involuntary Termination During a Change of Control Period. Subject to the
provisions of Section 5.5, 5.6 and 5.7, if Executive’s employment by Company or any subsidiary
thereof or successor thereto shall be subject to an Involuntary Termination during a Change of
Control Period, then Company shall, as additional compensation for services rendered to Company
(including its subsidiaries), pay to Executive the following amounts and take the following
actions:

     (a) pay Executive a lump sum cash payment in an amount equal to two times Executive’s
Annual Base Salary on or before the fifth day after the last day of Executive’s employment
with Company;

     (b) cause any and all outstanding options to purchase common stock of Company held by
Executive to be fully vested and to become immediately exercisable in

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full and cause any and
all shares of restricted shares of Company’s common stock held by Executive to become
immediately nonforfeitable; and

     (c) during the portion, if any, of the 18-month period commencing on the date of such
Involuntary Termination that Executive is eligible to elect and elects to continue coverage
for himself and his eligible dependents under Company’s or a subsidiary’s group health
plans, as applicable, under the Consolidated Omnibus Budget Reconciliation Act of 1985, as
amended, and/or Sections 601 through 608 of the Employee Retirement Income Security Act of
1974, as amended, Company shall promptly reimburse Executive on a monthly basis for the
difference between the amount Executive pays to effect and continue such coverage and the
employee contribution amount that active senior executive employees of Company pay for the
same or similar coverage under such group health plans.

     5.4 Interest on Late Payments. If any payment provided for in Section 5.2 or Section
5.3 hereof is not made when due (applying the deferred payment date provided for in Section 5.7 as
the due date, if applicable), then Company shall pay to Executive interest on the amount payable
from the date that such payment should have been made under such Section until such payment is
made, which interest shall be calculated at the prime or base rate of interest announced by
JPMorgan Chase Bank (or any successor thereto) at its principal office in New York, and shall
change when and as any such change in such prime or base rate shall be announced by such bank.

     5.5 Parachute Payments. Notwithstanding anything to the contrary in this Agreement, if Executive is a “disqualified
individual” (as defined in Section 280G(c) of the Code), and the benefits provided for in this
Article, together with any other payments and benefits which Executive has the right to receive
from Company and its affiliates, would constitute a “parachute payment” (as defined in Section
280G(b)(2) of the Code), then the benefits provided hereunder (beginning with any benefit to be
paid in cash hereunder) shall be either (1) reduced (but not below zero) so that the present value
of such total amounts and benefits received by Executive from Company will be one dollar ($1.00)
less than three times Executive’s “base amount” (as defined in Section 280G(b)(3) of the Code) and
so that no portion of such amounts and benefits received by Executive shall be subject to the
excise tax imposed by Section 4999 of the Code or (2) paid in full, whichever produces the better
net after-tax position to Executive (taking into account any applicable excise tax under Section
4999 of the Code and any other applicable taxes). The determination as to whether any such
reduction in the amount of the benefits provided hereunder is necessary shall be made by the
Compensation Committee in good faith. If a reduced cash payment is made and through error or
otherwise that payment, when aggregated with other payments and benefits from Company (or its
affiliates) used in determining if a “parachute payment” exists, exceeds one dollar ($1.00) less
than three times Executive’s base amount, then Executive shall immediately repay such excess to
Company upon notification that an overpayment has been made. Nothing in this Section 5.5 shall
require Company to be responsible for, or have any liability or obligation with respect to,
Executive’s excise tax liabilities under Section 4999 of the Code.

     5.6 Release and Full Settlement. As a condition to the receipt of any severance
compensation and benefits under this Agreement, Executive must first execute a release and

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agreement, in a form reasonably satisfactory to Company, which shall release and discharge Company
and its affiliates, and their officers, directors, employees and agents from any and all claims or
causes of action of any kind or character, including but not limited to all claims or causes of
action arising out of Executive’s employment with Company or its affiliates or the termination of
such employment. If Executive is entitled to and receives the benefits provided hereunder,
performance of the obligations of Company hereunder will constitute full settlement of all claims
that Executive might otherwise assert against Company on account of Executive’s termination of
employment.

     5.7 Payments Subject to Section 409A of the Code. Notwithstanding the foregoing provisions
of this Article 5, if the payment of any severance compensation or severance benefits under this
Agreement would be subject to additional taxes and interest under Section 409A of the Code because
the timing of such payment is not delayed as provided in Section 409A(a)(2)(B) of the Code, then
any such payments that Executive would otherwise be entitled to during the first six months
following the date of Executive’s termination of employment shall be accumulated and paid on the
date that is six months after the date of Executive’s termination of employment (or if such payment
date does not fall on a business day of Company, the next following business day of Company), or
such earlier date upon which such amount can be paid under Section 409A of the Code without being
subject to such additional taxes and interest.

     5.8 Liquidated Damages. In light of the difficulties in estimating the damages for an
early termination of Executive’s employment under this Agreement, Company and Executive hereby
agree that the payments, if any, to be received by Executive pursuant to this Article 5 shall be
received by Executive as liquidated damages.

     5.9 Other Benefits. This Agreement governs the rights and obligations of Executive
and Company with respect to Executive’s base salary and certain perquisites of employment. Except
as expressly provided herein, Executive’s rights and obligations both during the term of his
employment and thereafter with respect to stock options, restricted stock, incentive and deferred
compensation, life insurance policies insuring the life of Executive, and other benefits under the
plans and programs maintained by Company shall be governed by the separate agreements, plans and
other documents and instruments governing such matters.

ARTICLE 6: PROTECTION OF CONFIDENTIAL INFORMATION

     6.1 Disclosure to and Property of Company. All information, designs, ideas, concepts,
improvements, product developments, discoveries and inventions, whether patentable or not, that are
conceived, made, developed or acquired by Executive, individually or in conjunction with others,
during the period of Executive’s employment by Company (whether during business hours or otherwise
and whether on Company’s premises or otherwise) that relate to Company’s (or any of its
affiliates’) business, trade secrets, products or services (including, without limitation, all such
information relating to corporate opportunities, product specification, compositions, manufacturing
and distribution methods and processes, research, financial and sales data, pricing terms,
evaluations, opinions, interpretations, acquisitions prospects, the identity of customers or their
requirements, the identity of key contacts within the customer’s organizations or within the
organization of acquisition prospects, marketing and merchandising techniques, business plans,
computer software or programs, computer software and database

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technologies, prospective names and
marks) (collectively, “Confidential Information”) shall be disclosed to Company and are and shall
be the sole and exclusive property of Company (or its affiliates). Moreover, all documents,
videotapes, written presentations, brochures, drawings, memoranda, notes, records, files,
correspondence, manuals, models, specifications, computer programs, E-mail, voice mail, electronic
databases, maps, drawings, architectural renditions, models and all other writings or materials of
any type embodying any of such information, ideas, concepts, improvements, discoveries, inventions
and other similar forms of expression (collectively, “Work Product”) are and shall be the sole and
exclusive property of Company (or its affiliates). Upon Executive’s termination of employment with
Company, for any reason, Executive promptly shall deliver such Confidential Information and Work
Product, and all copies thereof, to Company.

     6.2 Disclosure to Executive. Company has and will disclose to Executive, or place
Executive in a position to have access to or develop, Confidential Information and Work Product of
Company (or its affiliates);
and/or has and will entrust Executive with business opportunities of Company (or its
affiliates); and/or has and will place Executive in a position to develop business good will on
behalf of Company (or its affiliates). Executive agrees to preserve and protect the
confidentiality of all Confidential Information or Work Product of Company (or its affiliates).

     6.3 No Unauthorized Use or Disclosure. Executive agrees that he will not, at any time
during or after Executive’s employment by Company, make any unauthorized disclosure of, and will
prevent the removal from Company premises of, Confidential Information or Work Product of Company
(or its affiliates), or make any use thereof, except in the carrying out of Executive’s
responsibilities during the course of Executive’s employment with Company. Executive shall use
commercially reasonable efforts to cause all persons or entities to whom any Confidential
Information shall be disclosed by him hereunder to observe the terms and conditions set forth
herein as though each such person or entity was bound hereby. Executive shall have no obligation
hereunder to keep confidential any Confidential Information if and to the extent disclosure thereof
is specifically required by law; provided, however, that in the event disclosure is required by
applicable law, Executive shall provide Company with prompt notice of such requirement prior to
making any such disclosure, so that Company may seek an appropriate protective order. At the
request of Company at any time, Executive agrees to deliver to Company all Confidential Information
that he may possess or control. Executive agrees that all Confidential Information of Company
(whether now or hereafter existing) conceived, discovered or made by him during the period of
Executive’s employment by Company exclusively belongs to Company (and not to Executive), and
Executive will promptly disclose such Confidential Information to Company and perform all actions
reasonably requested by Company to establish and confirm such exclusive ownership. Affiliates of
Company shall be third party beneficiaries of Executive’s obligations under this Article 6. As a
result of Executive’s employment by Company, Executive may also from time to time have access to,
or knowledge of, Confidential Information or Work Product of third parties, such as customers,
suppliers, partners, joint venturers, and the like, of Company and its affiliates. Executive also
agrees to preserve and protect the confidentiality of such third party Confidential Information and
Work Product to the same extent, and on the same basis, as Company’s Confidential Information and
Work Product.

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     6.4 Ownership by Company. If, during Executive’s employment by Company, Executive
creates any work of authorship fixed in any tangible medium of expression that is the subject
matter of copyright (such as videotapes, written presentations, or acquisitions, computer programs,
E-mail, voice mail, electronic databases, drawings, maps, architectural renditions, models,
manuals, brochures, or the like) relating to Company’s business, products, or services, whether
such work is created solely by Executive or jointly with others (whether during business hours or
otherwise and whether on Company’s premises or otherwise), including any Work Product, Company
shall be deemed the author of such work if the work is prepared by Executive in the scope of
Executive’s employment; or, if the work is not prepared by Executive within the scope of
Executive’s employment but is specially ordered by Company as a contribution to a collective work,
as a part of a motion picture or other audiovisual work, as a translation, as a supplementary work,
as a compilation, or as an instructional text, then the work shall be considered to be work made
for
hire and Company shall be the author of the work. If such work is neither prepared by
Executive within the scope of Executive’s employment nor a work specially ordered that is deemed to
be a work made for hire, then Executive hereby agrees to assign, and by these presents does assign,
to Company all of Executive’s worldwide right, title, and interest in and to such work and all
rights of copyright therein.

     6.5 Assistance by Executive. During the period of Executive’s employment by Company
and thereafter, Executive shall assist Company and its nominee, at any time, in the protection of
Company’s (or its affiliates’) worldwide right, title and interest in and to Work Product and the
execution of all formal assignment documents requested by Company or its nominee and the execution
of all lawful oaths and applications for patents and registration of copyright in the United States
and foreign countries.

     6.6 Remedies. Executive acknowledges that money damages would not be sufficient
remedy for any breach of this Article 6 by Executive, and Company or its affiliates shall be
entitled to enforce the provisions of this Article 6 by terminating payments then owing to
Executive under this Agreement or otherwise and to specific performance and injunctive relief as
remedies for such breach or any threatened breach. Such remedies shall not be deemed the exclusive
remedies for a breach of this Article 6 but shall be in addition to all remedies available at law
or in equity, including the recovery of damages from Executive and his agents.

ARTICLE 7: NON-COMPETITION AND RELATED OBLIGATIONS

     7.1 General. (a) As part of the consideration for Company’s employment of Executive
and the compensation and benefits that may be paid to Executive hereunder; to protect the trade
secrets and Confidential Information of Company or its affiliates that have been and will in the
future be disclosed or entrusted to Executive, the business good will of Company or its affiliates
that has been and will in the future be developed in Executive, or the business opportunities that
have been and will in the future be disclosed or entrusted to Executive by Company or its
affiliates; and as an additional incentive for Company to enter into this Agreement, Company and
Executive agree to the provisions of this Article 7. Except as provided in Section 7.1(b),
Executive agrees that during Executive’s employment with Company and for a period of one year
following the termination of Executive’s employment with Company for any reason (the “Non-Compete
Period”), Executive shall not:

12

 

     (i) directly or indirectly, either as principal, agent, independent contractor,
consultant, director, officer, employee, employer, advisor, stockholder, partner or in any
other individual or representative capacity whatsoever, either for Executive’s own benefit
or for the benefit of any other person or entity either (1) hire, contract or solicit, or
attempt any of the foregoing with respect to hiring any employee of Company or its
affiliates, or (2) induce or otherwise counsel, advise, or encourage any employee of Company
or its affiliates to leave the employment of Company or its affiliates; and

     (ii) within any geographic area or market where Company or any of its affiliates are
conducting any business or have, during the twelve months preceding the termination of
Executive’s employment with Company, conducted such business, as applicable:

     (1) directly or indirectly participate in the ownership, management, operation
or control of, or be connected as an officer, employee, partner, director,
contractor or otherwise with, or have any financial interest in or aid or assist
anyone else in the conduct of, any business in any of the business territories in
which Company is presently or from time-to-time conducting business that either
conducts a business similar to that conducted by Company or its affiliates or
provides or sells a service or product that is the same, substantially similar to or
otherwise competitive with the products and services provided or sold by Company or
its affiliates (a “Competitive Operation”); provided, however, that this provision
shall not preclude Executive after the termination of Executive’s employment with
Company from owning less than 2% of the equity securities of any publicly held
Competitive Operation so long as Executive does not serve as an employee, officer,
director or consultant to such business;

     (2) directly or indirectly, either as principal, agent, independent contractor,
consultant, director, officer, employee, employer, advisor, stockholder, partner or
in any other individual or representative capacity whatsoever, either for
Executive’s own benefit or for the benefit of any other person or entity call upon,
solicit, divert or take away, any customer or vendor of Company or its affiliates
with whom Executive dealt, directly or indirectly, during Executive’s engagement
with Company or its affiliates, in connection with a Competitive Operation; or

     (3) call upon any prospective acquisition candidate on Executive’s own behalf
or on behalf of any Competitive Operation, which candidate is a Competitive
Operation or which candidate was, to Executive’s knowledge after due inquiry, either
called upon by Company or for which Company or any of its affiliates made an
acquisition analysis, for the purpose of acquiring such entity.

     (b) Notwithstanding the provisions of Section 7.1(a), if (i) Executive provides written notice
to Company pursuant to Section 3.4 that Executive will terminate employment with Company pursuant
to a resignation by Executive that does not constitute an Involuntary Termination or (ii) either
party provides written notice to the other that the term of this Agreement shall not be
automatically extended as provided in Section 3.1, then, in any such case:

13

 

     (1) for purposes of Sections 7.1(a)(ii)(1), the Non-Compete Period shall end on a date
selected by Company and set forth in a written notice provided by Company to Executive (the
“Non-Compete Notice”); provided, however, that (1) the date selected by Company shall be a
whole number of months (not in excess of 12) after the last day of Executive’s employment
with Company and (2) Company shall pay to Executive the Monthly Severance Amount on the last
day of each month during the portion of the Non-Compete Period that is after the last day of
Executive’s employment with Company; and

     (2) for purposes of Sections 7.1(a)(i), 7.1(a)(ii)(2) and 7.1(a)(ii)(3), the
Non-Compete period shall end on the date that is one year after the last day of Executive’s
employment with Company.

The Non-Compete Notice shall be delivered by Company to Executive within 10 days after receipt by
Company of Executive’s notice pursuant to Section 3.4 or on or before the date that is 45 days
prior to the expiration of the term of this Agreement under Section 3.1, as applicable. Executive
hereby delegates to Company the right to select and determine in good faith the duration of the
Non-Compete Period as provided in Section 7.1(b)(i).

     7.2 Non-Disparagement. During Executive’s employment with Company and following any
termination of employment with Company, Executive and Company agree not to disparage, either orally
or in writing, Executive, Company, any of Company’s affiliates, business, products, services or
practices, or any of Company’s or its affiliates’ directors, officers, agents, representatives,
stockholders, or employees.

     7.3 New Employer. Executive agrees that prior to accepting any new employment during
the Non-Compete Period, Executive shall advise Company of the identity of the potential new
employer. Company may serve such new employer with notice of the non-competition restrictions set
forth in this Article 7 and may furnish such employer with a copy of this Agreement or the relevant
portions thereof.

     7.4 Remedies. Executive acknowledges that money damages would not be sufficient
remedy for any breach of this Article 7 by Executive, and Company or its affiliates shall be
entitled to enforce the provisions of this Article 7 by terminating payments then owing to
Executive under this Agreement or otherwise and to specific performance and injunctive relief as
remedies for such breach or any threatened breach. Such remedies shall not be deemed the exclusive
remedies for a breach of this Article 7 but shall be in addition to all remedies available at law
or in equity, including the recovery of damages from Executive and his agents.

     7.5 Reformation. Company and Executive agree that the foregoing restrictions are
reasonable under the circumstances and that any breach of the covenants contained in this Article 7
would cause irreparable injury to Company. Executive understands that the foregoing restrictions
may limit Executive’s ability to engage in certain businesses anywhere in the United States or such
other geographic areas or markets in which Company or any of its affiliates are conducting business
or have, during the 12 months preceding the termination of Executive’s employment, conducted such
business, as applicable, during the Non-Compete Period, but acknowledges that Executive will
receive sufficiently high remuneration and other benefits from Company to justify such restriction.
Nevertheless, if any of the aforesaid restrictions are found

14

 

by a court of competent jurisdiction
to be unreasonable, or overly broad as to geographic area or time, or otherwise
unenforceable, the parties intend for the restrictions therein set forth to be modified by the
court making such determination so as to be reasonable and enforceable and, as so modified, to be
fully enforced. By agreeing to this contractual modification prospectively at this time, Company
and Executive intend to make this provision enforceable under the law or laws of all applicable
States so that the entire agreement not to compete and this Agreement as prospectively modified
shall remain in full force and effect and shall not be rendered void or illegal. Such modification
shall not affect the payments made to Executive under this Agreement.

ARTICLE 8: MISCELLANEOUS

     8.1 Indemnification. If Executive shall obtain any money judgment or otherwise
prevail with respect to any litigation brought by Executive or Company to enforce or interpret any
provision contained herein, Company, to the fullest extent permitted by applicable law, hereby
indemnifies Executive for his reasonable attorneys’ fees and disbursements incurred in such
litigation and hereby agrees (i) to pay in full all such fees and disbursements and (ii) to pay
prejudgment interest on any money judgment obtained by Executive from the earliest date that
payment to him should have been made under this Agreement until such judgment shall have been paid
in full, which interest shall be calculated at the prime or base rate of interest announced by
JPMorgan Chase Bank (or any successor thereto) at its principal office in New York, and shall
change when and as any such change in such prime or base rate shall be announced by such bank.

     8.2 Payment Obligations Absolute. Except as specifically provided in Sections 6.6 and
7.4, Company’s obligation to pay (or cause one of its subsidiaries to pay) Executive the amounts
and to make the arrangements provided herein shall be absolute and unconditional and shall not be
affected by any circumstances, including, without limitation, any set-off, counterclaim,
recoupment, defense or other right which Company (including its subsidiaries) may have against him
or anyone else. All amounts payable by Company (including its subsidiaries hereunder) shall be
paid without notice or demand. Executive shall not be obligated to seek other employment in
mitigation of the amounts payable or arrangements made under any provision of this Agreement, and
the obtaining of any such other employment shall in no event effect any reduction of Company’s
obligations to make (or cause to be made) the payments and arrangements required to be made under
this Agreement.

     8.3 Notices. For purposes of this Agreement, notices and all other communications
provided for herein shall be in writing and shall be deemed to have been duly given when personally
delivered or when mailed by United States registered or certified mail, return receipt requested,
postage prepaid, addressed as follows:

			
	If to Company to:	 	Concho Resources Inc.

550 W. Texas Avenue, Suite 1300

Midland, Texas 79701

Attention: Chairman of the Board of Directors

15

 

			
	If to Executive to:	 	David M. Thomas III

4400 Teakwood Trace

Midland, Texas 79707

or to such other address as either party may furnish to the other in writing in accordance
herewith, except that notices or changes of address shall be effective only upon receipt.

     8.4 Applicable Law. This Agreement is entered into under, and shall be governed for
all purposes by, the laws of the State of Texas.

     8.5 No Waiver. No failure by either party hereto at any time to give notice of any
breach by the other party of, or to require compliance with, any condition or provision of this
Agreement shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or
at any prior or subsequent time.

     8.6 Severability. Any provision in this Agreement which is prohibited or
unenforceable in any jurisdiction by reason of applicable law shall, as to such jurisdiction, be
ineffective only to the extent of such prohibition or unenforceability without invalidating or
affecting the remaining provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.

     8.7 Counterparts. This Agreement may be executed in one or more counterparts, each of
which shall be deemed to be an original, but all of which together will constitute one and the same
Agreement.

     8.8 Withholding of Taxes and Other Employee Deductions. Company may withhold from any
benefits and payments made pursuant to this Agreement all federal, state, city and other taxes as
may be required pursuant to any law or governmental regulation or ruling and all other normal
employee deductions made with respect to Company’s employees generally.

     8.9 Headings. The paragraph headings have been inserted for purposes of convenience
and shall not be used for interpretive purposes.

     8.10 Gender and Plurals. Wherever the context so requires, the masculine gender
includes the feminine or neuter, and the singular number includes the plural and conversely.

     8.11 Assignment. This Agreement shall be binding upon and inure to the benefit of
Company and any successor of Company, by merger or otherwise. This Agreement shall also be binding
upon and inure to the benefit of Executive and his estate. If Executive shall die prior to full
payment of amounts due pursuant to this Agreement, such amounts shall be payable pursuant to the
terms of this Agreement to his estate. Executive shall not have any right to pledge, hypothecate,
anticipate or assign this Agreement or the rights hereunder, except by will or the laws of descent
and distribution.

     8.12 Term. This Agreement has a term co-extensive with the term of employment
provided in Section 3.1. Termination shall not affect any right or obligation of any party which
is accrued or vested prior to such termination. The provisions of Section 3.5 and Articles 6 and 7
shall survive the termination of this Agreement.

16

 

     8.13 Entire Agreement. This Agreement constitutes the entire agreement of the parties
with regard to the subject matter hereof, and contains all the covenants, promises,
representations, warranties and agreements between the parties with respect to such subject matter.
Without limiting the scope of the preceding sentence, all understandings and agreements preceding
the date of execution of this Agreement and relating to the subject matter hereof are hereby null
and void and of no further force and effect, including, without limitation, all prior employment
and severance agreements, if any, by and between Company and Executive. Any modification of this
Agreement will be effective only if it is in writing and signed by the party to be charged.

[Signatures begin on next page.]

17

 

     IN
WITNESS WHEREOF, the parties hereto have executed this Agreement on the 14th day of July,
2006, to be effective as of the Effective Date.

	 	 	 	 	 
	 	Concho Resources Inc.

 	 
	 	By:  	/s/ Steven L. Beal	 
	 	 	Steven L. Beal, President 	 
	 	 	 	 
	 

COMPANY

	 	 	 	 	 
	 	/s/ David M. Thomas III	 
	 	David M. Thomas III

 	 
	 	 	 
	 	 	 
	 	 	 
	 

EXECUTIVE

18

 

ATTACHMENT A

TO

EMPLOYMENT AGREEMENT BY AND BETWEEN

CONCHO RESOURCES INC., A DELAWARE CORPORATION,

AND DAVID M. THOMAS III (“EXECUTIVE”)

PERMITTED ACTIVITIES

          As of the Effective Date, the Board has approved Executive’s participation in the following
activities:

	 	•	 	49% Minority Shareholder in Trey Resources, Inc., an Oklahoma Corporation. Trey
Resources, Inc. owns wells and holds leases the majority of which are in the state of
Oklahoma, as set forth on the document provided to COG on June 5, 2005.
	 
	 	•	 	Partner BPO Share of 0% and a 11.875% Partner APO share in the Navigator Ranch LP. The
Navigator Ranch LP owns property in Culberson County, Texas.
	 
	 	•	 	6.25% Sharing Ratio in the Navigator Ranch Partners Management, LLC. This limited
liability company is the management company for the Navigator Ranch LP.
	 
	 	•	 	A Mineral BPO Sharing Ratio of 0%, Mineral APO Sharing Ratio of 8.75%, a Non-Mineral BPO
(Surface) Sharing Ratio of 0% and a Non-Mineral APO (Surface) Sharing Ratio of 8.75% in the
Frijole Ranch Partners LP. The Frijole Ranch Partners LP owns property in Culberson
County, Texas.
	 
	 	•	 	1% Overriding Royalty Interest attributable to certain oil and gas leases situated in
Culberson County as fully described in the Assignment of Overriding Royalty Interest,
recorded in Culberson County at Book 91, Page 536.

A-1exv10w23

 

Exhibit 10.23

EMPLOYMENT AGREEMENT

     THIS EMPLOYMENT AGREEMENT (“Agreement”) is made by and between Concho Resources Inc., a
Delaware corporation (“Company”), and E. Joseph Wright (“Executive”).

W I T N E S S E T H:

     WHEREAS, Executive is currently employed by Company or a subsidiary of Company; and

     WHEREAS, Company is desirous of continuing to employ Executive in an executive capacity on the
terms and conditions, and for the consideration, hereinafter set forth and Executive is desirous of
continuing to be employed by Company on such terms and conditions and for such consideration;

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

ARTICLE 1: DEFINITIONS AND INTERPRETATIONS

     1.1 Definitions.

          (a) “Annual Base Salary” shall mean an amount equal to the greater of:

     (i) Executive’s base salary at the annual rate in effect pursuant to Section
4.1 at the date of Executive’s Involuntary Termination;

     (ii) Executive’s base salary at the annual rate in effect pursuant to Section
4.1 on the date that is 60 days prior to the date of Executive’s Involuntary
Termination; or

     (iii) Executive’s base salary at the annual rate in effect pursuant to Section
4.1 immediately prior to a Change of Control if Executive’s employment shall be
subject to an Involuntary Termination during the Change of Control Period.

          (b) “Board” shall mean the Board of Directors of Company.

          (c) “Cause” shall mean Executive (i) has engaged in gross negligence, gross
incompetence or willful misconduct in the performance of Executive’s duties, (ii) has
refused, without proper reason, to perform Executive’s duties, (iii) has materially breached
any material provision of this Agreement or corporate policy or code of conduct established
by Company, (iv) has willfully engaged in conduct which is materially injurious to Company
or its subsidiaries (monetarily or otherwise), (v) has committed an act of fraud,
embezzlement or willful breach of a fiduciary duty to Company or an affiliate (including the
unauthorized disclosure of confidential or proprietary material

 

 

information of Company or an affiliate), or (vi) has been convicted of (or pleaded no
contest to) a crime involving fraud, dishonesty or moral turpitude or any felony.

          (d) “Change in Duties” shall mean:

     (i) The occurrence, prior to the date that a Change of Control Period begins or
after the expiration of a Change of Control Period, of any one or more of the
following without the consent of Executive:

     (1) a reduction in the rank of Executive’s title as an officer of
Company from that previously applicable to Executive (it is specifically
agreed that any change in Executive’s position(s) or title(s) with Company
shall not constitute a Change in Duties under this clause unless the rank of
Executive’s title as an officer is reduced in connection with such change
(for example, a reduction in rank from vice president to assistant vice
president));

     (2) a reduction in Executive’s base salary; or

     (3) a material diminution in employee benefits (including but not
limited to medical, dental, life insurance and long-term disability plans)
and perquisites applicable to Executive from those substantially similar to
the employee benefits and perquisites provided by Company (including its
subsidiaries) to similarly situated executives; or

     (ii) The occurrence, within a Change of Control Period, of any one or more of
the following without the consent of Executive:

     (1) a material reduction in the nature or scope of Executive’s
authorities or duties from those applicable to Executive immediately prior
to the date on which a Change of Control Period begins;

     (2) a reduction in Executive’s base salary from that provided to
Executive immediately prior to the date on which a Change of Control Period
begins;

     (3) a diminution in Executive’s eligibility to participate in bonus,
stock option, incentive award and other compensation plans which provide
opportunities to receive compensation which are the greater of (A) the
opportunities provided by Company (including its subsidiaries) for similarly
situated executives or (B) the opportunities under any such plans under
which Executive was participating immediately prior to the date on which a
Change of Control Period begins;

     (4) a material diminution in employee benefits (including but not
limited to medical, dental, life insurance and long-term disability plans)
and perquisites applicable to Executive from the greater of (A) the employee
benefits and perquisites provided by Company (including its

2

 

subsidiaries) to similarly situated executives or (B) the employee
benefits and perquisites to which Executive was entitled immediately prior
to the date on which a Change of Control Period begins; or

     (5) a change in the location of Executive’s principal place of
employment by Company (including its subsidiaries) by more than 10 miles
from the location where Executive was principally employed immediately prior
to the date on which a Change of Control Period begins.

          (e) “Change of Control” shall mean:

             (i) a merger of Company with another entity, a consolidation involving Company,
or the sale of all or substantially all of the assets of Company to another entity
if, in any such case, (1) the holders of equity securities of Company immediately
prior to such transaction or event do not beneficially own immediately after such
transaction or event equity securities of the resulting entity entitled to 50% or
more of the votes then eligible to be cast in the election of directors generally
(or comparable governing body) of the resulting entity in substantially the same
proportions that they owned the equity securities of Company immediately prior to
such transaction or event or (2) the persons who were members of the Board
immediately prior to such transaction or event shall not constitute at least a
majority of the board of directors of the resulting entity immediately after such
transaction or event;

     (ii) the dissolution or liquidation of Company;

     (iii) when any person or entity, including a “group” as contemplated by Section
13(d)(3) of the Securities Exchange Act of 1934, other than an Excluded Person
acquires or gains ownership or control (including, without limitation, power to
vote) of more than 50% of the combined voting power of the outstanding securities of
Company; or

     (iv) as a result of or in connection with a contested election of directors,
the persons who were members of the Board immediately before such election shall
cease to constitute a majority of the Board.

For purposes of the preceding sentence, (1) “resulting entity” in the context of a
transaction or event that is a merger, consolidation or sale of all or substantially
all assets shall mean the surviving entity (or acquiring entity in the case of an
asset sale) unless the surviving entity (or acquiring entity in the case of an asset
sale) is a subsidiary of another entity and the holders of common stock of Company
receive capital stock of such other entity in such transaction or event, in which
event the resulting entity shall be such other entity, and (2) subsequent to the
consummation of a merger or consolidation that does not constitute a Change of
Control, the term “Company” shall refer to the resulting entity and the term “Board”
shall refer to the board of directors (or comparable governing body) of the
resulting entity.

3

 

     (f) “Change of Control Period” shall mean, with respect to a Change of Control, the
two-year period beginning on the date upon which such Change of Control occurs.

     (g) “Code” shall mean the Internal Revenue Code of 1986, as amended.

     (h) “Compensation Committee” shall mean the Compensation Committee of the Board.

     (i) “Disability” shall mean that, as a result of Executive’s incapacity due to physical
or mental illness, Executive shall have been absent from the full-time performance of
Executive’s duties for six consecutive months and Executive shall not have returned to
full-time performance of Executive’s duties within 30 days after written notice of
termination is given to Executive by Company (provided, however, that such notice may not be
given prior to 30 days before the expiration of such six-month period).

     (j) “Effective Date” shall mean June 1, 2006.

     (k) “Excluded Person” means Chase Oil Corporation, Yorktown Partners LLC, and their
respective affiliates. For purposes of this Section 1.1(k), (i) an “affiliate” of an entity
means any other person or entity that, directly or indirectly, controls, is controlled by or
is under common control with, such specified entity through one or more intermediaries or
otherwise, and (ii) “control” means, where used with respect to any person or entity, the
possession, directly or indirectly, of the power to direct or cause the direction of the
management and policies of such person or entity, whether through the ownership of voting
securities, by contract or otherwise, and the terms “controlling” and “controlled” have
correlative meanings.

     (l) “Involuntary Termination” shall mean any termination of Executive’s employment with
Company which:

     (i) does not result from a resignation by Executive (other than a resignation
pursuant to clause (ii) of this Section 1.1(l)); or

     (ii) results from a resignation by Executive on or before the date which is 60
days after the date upon which Executive receives notice of a Change in Duties;

provided, however, the term “Involuntary Termination” shall not include a termination for
Cause or any termination as a result of death or Disability.

     (m) “Monthly Severance Amount” shall mean an amount equal to one-twelfth of Executive’s
Annual Base Salary.

     1.2 Interpretations. In this Agreement, unless a clear contrary intention appears,
(a) the words “herein,” “hereof” and “hereunder” and other words of similar import refer to this
Agreement as a whole
and not to any particular Article, Section or other subdivision, (b) reference to any Article
or Section, means such Article or Section hereof, (c) the words

4

 

“including” (and with correlative
meaning “include”) means including, without limiting the generality of any description preceding
such term, and (d) where any provision of this Agreement refers to action to be taken by either
party, or which such party is prohibited from taking, such provision shall be applicable whether
such action is taken directly or indirectly by such party.

ARTICLE 2: EMPLOYMENT AND DUTIES

     2.1 Employment. Effective as of the Effective Date and continuing for the period of
time set forth in Section 3.1, Executive’s employment by Company shall be subject to the terms and
conditions of this Agreement.

     2.2 Positions. From and after the Effective Date, (a) Executive shall serve as an
officer of Company in the position or positions determined by the Board and (b) Executive shall be
employed by Company or a subsidiary or affiliate of Company. The Board may at any time and from
time to time assign Executive to a different position or positions with Company and cause Executive
to be employed by Company or any subsidiary or affiliate of Company. Employment with a subsidiary
or affiliate of Company pursuant to the preceding sentence shall be considered as employment with
Company for purposes of this Agreement.

     2.3 Duties and Services. Executive agrees to serve in the positions referred to in
Section 2.2 and to perform diligently and to the best of Executive’s abilities the duties and
services appertaining to such offices, as well as such additional duties and services appropriate
to such offices which the parties mutually may agree upon from time to time. Executive’s
employment shall also be subject to the policies maintained and established by Company that are of
general applicability to Company’s executive employees, as such policies may be amended from time
to time.

     2.4 Other Interests. Executive agrees, during the period of Executive’s employment by
Company, to devote substantially all of Executive’s business time, energy and best efforts to the
business and affairs of Company and its affiliates and not to engage, directly or indirectly, in
any other business or businesses, whether or not similar to that of Company, except with the
consent of the Board. The foregoing notwithstanding, the parties recognize and agree that
Executive may engage in passive personal investment and charitable activities that do not conflict
with the business and affairs of Company or interfere with Executive’s performance of Executive’s
duties hereunder, which shall be at the sole determination of the Board. As of the date of this
Agreement, the Board has approved the activities set forth on Attachment A to this Agreement.

     2.5 Duty of Loyalty. Executive acknowledges and agrees that Executive owes a fiduciary duty of loyalty to act at
all times in the best interests of Company. In keeping with such duty, Executive shall make full
disclosure to Company of all business opportunities pertaining to Company’s business and shall not
appropriate for Executive’s own benefit business opportunities concerning Company’s business.

5

 

ARTICLE 3: TERM AND TERMINATION OF EMPLOYMENT

     3.1 Term. Unless sooner terminated pursuant to other provisions hereof, Company
agrees to employ Executive for the period beginning on the Effective Date and ending on the third
anniversary of the Effective Date (the “Initial Expiration Date”); provided, however, that
beginning on the Initial Expiration Date, and on each anniversary of the Initial Expiration Date
thereafter, if Executive’s employment under this Agreement has not been terminated pursuant to
Section 3.2 or 3.3, then said term of employment shall automatically be extended for an additional
one-year period unless on or before the date that is 90 days prior to the first day of any such
extension period either party shall give written notice to the other that no such automatic
extension shall occur.

     3.2 Company’s Right to Terminate. Notwithstanding the provisions of Section 3.1,
Company shall have the right to terminate Executive’s employment under this Agreement at any time
for any of the following reasons:

     (a) upon Executive’s death;

     (b) upon Executive’s Disability;

     (c) for Cause; or

     (d) at any time, for any other reason whatsoever, in the sole discretion of the Board;
provided, however, that Company may not terminate Executive’s employment pursuant to this
Section 3.2(d) prior to the date that is four months after the Effective Date.

     3.3 Executive’s Right to Terminate. Notwithstanding the provisions of Section 3.1
Executive shall have the right to terminate Executive’s employment under this Agreement for any of
the following reasons:

     (a) as a result of a Change in Duties; provided, however, that prior to Executive’s
termination as a result of a Change in Duties, Executive must give written notice to Company
of the specific occurrence that resulted in the Change in Duties and such occurrence must
remain uncorrected for 10 days following such written notice; or

     (b) at any time for any other reason whatsoever, in the sole discretion of Executive.

     3.4 Notice of Termination. If Company desires to terminate Executive’s employment
hereunder at any time prior to expiration of the term of employment as provided in Section 3.1, it
shall do so by giving written notice to Executive that it has elected to terminate Executive’s
employment hereunder and stating the effective date and reason for such
termination, provided that
no such action shall alter or amend any other provisions hereof or rights arising hereunder. If
Executive desires to terminate Executive’s employment hereunder at any time prior to expiration of
the term of employment as provided in Section 3.1, Executive shall do so by giving a 30-day written
notice to Company that Executive has elected to terminate Executive’s employment hereunder and
stating the effective date and reason for such

6

 

termination, provided that no such action shall
alter or amend any other provisions hereof or rights arising hereunder.

     3.5 Deemed Resignations. Any termination of Executive’s employment shall constitute
an automatic resignation of Executive as an officer of Company and each affiliate of Company, and
an automatic resignation of Executive from the Board (if applicable) and from the board of
directors or similar governing body of any affiliate of Company and from the board of directors or
similar governing body of any corporation, limited liability company or other entity in which
Company or any affiliate holds an equity interest and with respect to which board or similar
governing body Executive serves as Company’s or such affiliate’s designee or other representative.

ARTICLE 4: COMPENSATION AND BENEFITS

     4.1 Base Salary. During the period of this Agreement, Executive shall receive a
minimum base salary of $250,000.00 per annum. Executive’s base salary may, in the sole discretion
of the Compensation Committee, be increased, but not decreased, effective as of any date determined
by the Compensation Committee. Executive’s base salary shall be paid in equal installments in
accordance with Company’s standard policy regarding payment of compensation to executives but no
less frequently than monthly.

     4.2 Bonuses. Executive shall be eligible to participate in Company’s annual cash
incentive plan as approved from time to time by the Board or the Compensation Committee in amounts
to be determined by the Compensation Committee based upon criteria established by the Compensation
Committee.

     4.3 Other Perquisites. During Executive’s employment hereunder, Executive shall be
afforded the following benefits as incidences of Executive’s employment:

     (a) Business and Entertainment Expenses - Subject to Company’s standard policies and
procedures with respect to expense reimbursement as applied to its executive employees
generally, Company shall reimburse Executive for, or pay on behalf of Executive, reasonable
and appropriate expenses incurred by Executive for business related purposes, including dues
and fees to industry and professional organizations and costs of entertainment and business
development.

     (b) Other Company Benefits - Executive and, to the extent applicable, Executive’s
spouse, dependents and beneficiaries, shall be allowed to participate in all benefits, plans
and programs, including improvements or modifications of the same, which are now, or may
hereafter be, available to other executive employees of Company. Such benefits, plans and
programs shall include, without limitation, any profit sharing plan, thrift plan, health
insurance or health care plan, life insurance, disability insurance, pension plan,
supplemental retirement plan, vacation and sick leave plan, and the like which may be
maintained by Company. Company shall not, however, by reason of this paragraph be obligated
to institute, maintain, or refrain from changing, amending, or discontinuing, any such
benefit plan or program, so long as such changes are similarly applicable to executive
employees generally.

7

 

ARTICLE 5: EFFECT OF TERMINATION ON COMPENSATION; ADDITIONAL PAYMENTS

     5.1 Termination Other Than an Involuntary Termination. If Executive’s employment
hereunder shall terminate upon expiration of the term provided in Section 3.1 because either party
has provided the notice contemplated in such Section, or if Executive’s employment hereunder shall
terminate for any other reason except those described in Sections 5.2 and 5.3, then all
compensation and all benefits to Executive hereunder shall continue to be provided until the date
of such termination of employment and such compensation and benefits shall terminate
contemporaneously with such termination of employment.

     5.2 Involuntary Termination Other Than During a Change of Control Period. Subject to
the provisions of Sections 5.5, 5.6 and 5.7, if Executive’s employment by Company or any subsidiary
thereof or successor thereto shall be subject to an Involuntary Termination which occurs prior to
the date that a Change of Control Period begins or after the expiration of a Change of Control
Period, then Company shall, as additional compensation for services rendered to Company (including
its subsidiaries), pay to Executive the following amounts and take the following actions:

     (a) pay Executive the Monthly Severance Amount on the last day of each month throughout
the 12-month period commencing on the date of such Involuntary Termination; and

     (b) during the portion, if any, of the 12-month period commencing on the date of such
Involuntary Termination that Executive is eligible to elect and elects to continue coverage
for himself and his eligible dependents under Company’s or a subsidiary’s
group health plans, as applicable, under the Consolidated Omnibus Budget Reconciliation
Act of 1985, as amended, and/or Sections 601 through 608 of the Employee Retirement Income
Security Act of 1974, as amended, Company shall promptly reimburse Executive on a monthly
basis for the difference between the amount Executive pays to effect and continue such
coverage and the employee contribution amount that active senior executive employees of
Company pay for the same or similar coverage under such group health plans.

     5.3 Involuntary Termination During a Change of Control Period. Subject to the
provisions of Section 5.5, 5.6 and 5.7, if Executive’s employment by Company or any subsidiary
thereof or successor thereto shall be subject to an Involuntary Termination during a Change of
Control Period, then Company shall, as additional compensation for services rendered to Company
(including its subsidiaries), pay to Executive the following amounts and take the following
actions:

     (a) pay Executive a lump sum cash payment in an amount equal to two times Executive’s
Annual Base Salary on or before the fifth day after the last day of Executive’s employment
with Company;

     (b) cause any and all outstanding options to purchase common stock of Company held by
Executive to be fully vested and to become immediately exercisable in

8

 

full and cause any and
all shares of restricted shares of Company’s common stock held by Executive to become
immediately nonforfeitable; and

     (c) during the portion, if any, of the 18-month period commencing on the date of such
Involuntary Termination that Executive is eligible to elect and elects to continue coverage
for himself and his eligible dependents under Company’s or a subsidiary’s group health
plans, as applicable, under the Consolidated Omnibus Budget Reconciliation Act of 1985, as
amended, and/or Sections 601 through 608 of the Employee Retirement Income Security Act of
1974, as amended, Company shall promptly reimburse Executive on a monthly basis for the
difference between the amount Executive pays to effect and continue such coverage and the
employee contribution amount that active senior executive employees of Company pay for the
same or similar coverage under such group health plans.

     5.4 Interest on Late Payments. If any payment provided for in Section 5.2 or Section
5.3 hereof is not made when due (applying the deferred payment date provided for in Section 5.7 as
the due date, if applicable), then Company shall pay to Executive interest on the amount payable
from the date that such payment should have been made under such Section until such payment is
made, which interest shall be calculated at the prime or base rate of interest announced by
JPMorgan Chase Bank (or any successor thereto) at its principal office in New York, and shall
change when and as any such change in such prime or base rate shall be announced by such bank.

     5.5 Parachute Payments. Notwithstanding anything to the contrary in this Agreement, if Executive is a “disqualified
individual” (as defined in Section 280G(c) of the Code), and the benefits provided for in this
Article, together with any other payments and benefits which Executive has the right to receive
from Company and its affiliates, would constitute a “parachute payment” (as defined in Section
280G(b)(2) of the Code), then the benefits provided hereunder (beginning with any benefit to be
paid in cash hereunder) shall be either (1) reduced (but not below zero) so that the present value
of such total amounts and benefits received by Executive from Company will be one dollar ($1.00)
less than three times Executive’s “base amount” (as defined in Section 280G(b)(3) of the Code) and
so that no portion of such amounts and benefits received by Executive shall be subject to the
excise tax imposed by Section 4999 of the Code or (2) paid in full, whichever produces the better
net after-tax position to Executive (taking into account any applicable excise tax under Section
4999 of the Code and any other applicable taxes). The determination as to whether any such
reduction in the amount of the benefits provided hereunder is necessary shall be made by the
Compensation Committee in good faith. If a reduced cash payment is made and through error or
otherwise that payment, when aggregated with other payments and benefits from Company (or its
affiliates) used in determining if a “parachute payment” exists, exceeds one dollar ($1.00) less
than three times Executive’s base amount, then Executive shall immediately repay such excess to
Company upon notification that an overpayment has been made. Nothing in this Section 5.5 shall
require Company to be responsible for, or have any liability or obligation with respect to,
Executive’s excise tax liabilities under Section 4999 of the Code.

     5.6 Release and Full Settlement. As a condition to the receipt of any severance
compensation and benefits under this Agreement, Executive must first execute a release and

9

 

agreement, in a form reasonably satisfactory to Company, which shall release and discharge Company
and its affiliates, and their officers, directors, employees and agents from any and all claims or
causes of action of any kind or character, including but not limited to all claims or causes of
action arising out of Executive’s employment with Company or its affiliates or the termination of
such employment. If Executive is entitled to and receives the benefits provided hereunder,
performance of the obligations of Company hereunder will constitute full settlement of all claims
that Executive might otherwise assert against Company on account of Executive’s termination of
employment.

     5.7 Payments Subject to Section 409A of the Code. Notwithstanding the foregoing provisions
of this Article 5, if the payment of any severance compensation or severance benefits under this
Agreement would be subject to additional taxes and interest under Section 409A of the Code because
the timing of such payment is not delayed as provided in Section 409A(a)(2)(B) of the Code, then
any such payments that Executive would otherwise be entitled to during the first six months
following the date of Executive’s termination of employment shall be accumulated and paid on the
date that is six months after the date of Executive’s termination of employment (or if such payment
date does not fall on a business day of Company, the next following business day of Company), or
such earlier date upon which such amount can be paid under Section 409A of the Code without being
subject to such additional taxes and interest.

     5.8 Liquidated Damages. In light of the difficulties in estimating the damages for an
early termination of Executive’s employment under this Agreement, Company and Executive hereby
agree that the payments, if any, to be received by Executive pursuant to this Article 5 shall be
received by Executive as liquidated damages.

     5.9 Other Benefits. This Agreement governs the rights and obligations of Executive
and Company with respect to Executive’s base salary and certain perquisites of employment. Except
as expressly provided herein, Executive’s rights and obligations both during the term of his
employment and thereafter with respect to stock options, restricted stock, incentive and deferred
compensation, life insurance policies insuring the life of Executive, and other benefits under the
plans and programs maintained by Company shall be governed by the separate agreements, plans and
other documents and instruments governing such matters.

ARTICLE 6: PROTECTION OF CONFIDENTIAL INFORMATION

     6.1 Disclosure to and Property of Company. All information, designs, ideas, concepts,
improvements, product developments, discoveries and inventions, whether patentable or not, that are
conceived, made, developed or acquired by Executive, individually or in conjunction with others,
during the period of Executive’s employment by Company (whether during business hours or otherwise
and whether on Company’s premises or otherwise) that relate to Company’s (or any of its
affiliates’) business, trade secrets, products or services (including, without limitation, all such
information relating to corporate opportunities, product specification, compositions, manufacturing
and distribution methods and processes, research, financial and sales data, pricing terms,
evaluations, opinions, interpretations, acquisitions prospects, the identity of customers or their
requirements, the identity of key contacts within the customer’s organizations or within the
organization of acquisition prospects, marketing and merchandising techniques, business plans,
computer software or programs, computer software and database

10

 

technologies, prospective names and
marks) (collectively, “Confidential Information”) shall be disclosed to Company and are and shall
be the sole and exclusive property of Company (or its affiliates). Moreover, all documents,
videotapes, written presentations, brochures, drawings, memoranda, notes, records, files,
correspondence, manuals, models, specifications, computer programs, E-mail, voice mail, electronic
databases, maps, drawings, architectural renditions, models and all other writings or materials of
any type embodying any of such information, ideas, concepts, improvements, discoveries, inventions
and other similar forms of expression (collectively, “Work Product”) are and shall be the sole and
exclusive property of Company (or its affiliates). Upon Executive’s termination of employment with
Company, for any reason, Executive promptly shall deliver such Confidential Information and Work
Product, and all copies thereof, to Company.

     6.2 Disclosure to Executive. Company has and will disclose to Executive, or place
Executive in a position to have access to or develop, Confidential Information and Work Product of
Company (or its affiliates);
and/or has and will entrust Executive with business opportunities of Company (or its
affiliates); and/or has and will place Executive in a position to develop business good will on
behalf of Company (or its affiliates). Executive agrees to preserve and protect the
confidentiality of all Confidential Information or Work Product of Company (or its affiliates).

     6.3 No Unauthorized Use or Disclosure. Executive agrees that he will not, at any time
during or after Executive’s employment by Company, make any unauthorized disclosure of, and will
prevent the removal from Company premises of, Confidential Information or Work Product of Company
(or its affiliates), or make any use thereof, except in the carrying out of Executive’s
responsibilities during the course of Executive’s employment with Company. Executive shall use
commercially reasonable efforts to cause all persons or entities to whom any Confidential
Information shall be disclosed by him hereunder to observe the terms and conditions set forth
herein as though each such person or entity was bound hereby. Executive shall have no obligation
hereunder to keep confidential any Confidential Information if and to the extent disclosure thereof
is specifically required by law; provided, however, that in the event disclosure is required by
applicable law, Executive shall provide Company with prompt notice of such requirement prior to
making any such disclosure, so that Company may seek an appropriate protective order. At the
request of Company at any time, Executive agrees to deliver to Company all Confidential Information
that he may possess or control. Executive agrees that all Confidential Information of Company
(whether now or hereafter existing) conceived, discovered or made by him during the period of
Executive’s employment by Company exclusively belongs to Company (and not to Executive), and
Executive will promptly disclose such Confidential Information to Company and perform all actions
reasonably requested by Company to establish and confirm such exclusive ownership. Affiliates of
Company shall be third party beneficiaries of Executive’s obligations under this Article 6. As a
result of Executive’s employment by Company, Executive may also from time to time have access to,
or knowledge of, Confidential Information or Work Product of third parties, such as customers,
suppliers, partners, joint venturers, and the like, of Company and its affiliates. Executive also
agrees to preserve and protect the confidentiality of such third party Confidential Information and
Work Product to the same extent, and on the same basis, as Company’s Confidential Information and
Work Product.

11

 

     6.4 Ownership by Company. If, during Executive’s employment by Company, Executive
creates any work of authorship fixed in any tangible medium of expression that is the subject
matter of copyright (such as videotapes, written presentations, or acquisitions, computer programs,
E-mail, voice mail, electronic databases, drawings, maps, architectural renditions, models,
manuals, brochures, or the like) relating to Company’s business, products, or services, whether
such work is created solely by Executive or jointly with others (whether during business hours or
otherwise and whether on Company’s premises or otherwise), including any Work Product, Company
shall be deemed the author of such work if the work is prepared by Executive in the scope of
Executive’s employment; or, if the work is not prepared by Executive within the scope of
Executive’s employment but is specially ordered by Company as a contribution to a collective work,
as a part of a motion picture or other audiovisual work, as a translation, as a supplementary work,
as a compilation, or as an instructional text, then the work shall be considered to be work made
for
hire and Company shall be the author of the work. If such work is neither prepared by
Executive within the scope of Executive’s employment nor a work specially ordered that is deemed to
be a work made for hire, then Executive hereby agrees to assign, and by these presents does assign,
to Company all of Executive’s worldwide right, title, and interest in and to such work and all
rights of copyright therein.

     6.5 Assistance by Executive. During the period of Executive’s employment by Company
and thereafter, Executive shall assist Company and its nominee, at any time, in the protection of
Company’s (or its affiliates’) worldwide right, title and interest in and to Work Product and the
execution of all formal assignment documents requested by Company or its nominee and the execution
of all lawful oaths and applications for patents and registration of copyright in the United States
and foreign countries.

     6.6 Remedies. Executive acknowledges that money damages would not be sufficient
remedy for any breach of this Article 6 by Executive, and Company or its affiliates shall be
entitled to enforce the provisions of this Article 6 by terminating payments then owing to
Executive under this Agreement or otherwise and to specific performance and injunctive relief as
remedies for such breach or any threatened breach. Such remedies shall not be deemed the exclusive
remedies for a breach of this Article 6 but shall be in addition to all remedies available at law
or in equity, including the recovery of damages from Executive and his agents.

ARTICLE 7: NON-COMPETITION AND RELATED OBLIGATIONS

     7.1 General. (a) As part of the consideration for Company’s employment of Executive
and the compensation and benefits that may be paid to Executive hereunder; to protect the trade
secrets and Confidential Information of Company or its affiliates that have been and will in the
future be disclosed or entrusted to Executive, the business good will of Company or its affiliates
that has been and will in the future be developed in Executive, or the business opportunities that
have been and will in the future be disclosed or entrusted to Executive by Company or its
affiliates; and as an additional incentive for Company to enter into this Agreement, Company and
Executive agree to the provisions of this Article 7. Except as provided in Section 7.1(b),
Executive agrees that during Executive’s employment with Company and for a period of one year
following the termination of Executive’s employment with Company for any reason (the “Non-Compete
Period”), Executive shall not:

12

 

     (i) directly or indirectly, either as principal, agent, independent contractor,
consultant, director, officer, employee, employer, advisor, stockholder, partner or in any
other individual or representative capacity whatsoever, either for Executive’s own benefit
or for the benefit of any other person or entity either (1) hire, contract or solicit, or
attempt any of the foregoing with respect to hiring any employee of Company or its
affiliates, or (2) induce or otherwise counsel, advise, or encourage any employee of Company
or its affiliates to leave the employment of Company or its affiliates; and

     (ii) within any geographic area or market where Company or any of its affiliates are
conducting any business or have, during the twelve months preceding the termination of
Executive’s employment with Company, conducted such business, as applicable:

     (1) directly or indirectly participate in the ownership, management, operation
or control of, or be connected as an officer, employee, partner, director,
contractor or otherwise with, or have any financial interest in or aid or assist
anyone else in the conduct of, any business in any of the business territories in
which Company is presently or from time-to-time conducting business that either
conducts a business similar to that conducted by Company or its affiliates or
provides or sells a service or product that is the same, substantially similar to or
otherwise competitive with the products and services provided or sold by Company or
its affiliates (a “Competitive Operation”); provided, however, that this provision
shall not preclude Executive after the termination of Executive’s employment with
Company from owning less than 2% of the equity securities of any publicly held
Competitive Operation so long as Executive does not serve as an employee, officer,
director or consultant to such business;

     (2) directly or indirectly, either as principal, agent, independent contractor,
consultant, director, officer, employee, employer, advisor, stockholder, partner or
in any other individual or representative capacity whatsoever, either for
Executive’s own benefit or for the benefit of any other person or entity call upon,
solicit, divert or take away, any customer or vendor of Company or its affiliates
with whom Executive dealt, directly or indirectly, during Executive’s engagement
with Company or its affiliates, in connection with a Competitive Operation; or

     (3) call upon any prospective acquisition candidate on Executive’s own behalf
or on behalf of any Competitive Operation, which candidate is a Competitive
Operation or which candidate was, to Executive’s knowledge after due inquiry, either
called upon by Company or for which Company or any of its affiliates made an
acquisition analysis, for the purpose of acquiring such entity.

     (b) Notwithstanding the provisions of Section 7.1(a), if (i) Executive provides written notice
to Company pursuant to Section 3.4 that Executive will terminate employment with Company pursuant
to a resignation by Executive that does not constitute an Involuntary Termination or (ii) either
party provides written notice to the other that the term of this Agreement shall not be
automatically extended as provided in Section 3.1, then, in any such case:

13

 

     (1) for purposes of Sections 7.1(a)(ii)(1), the Non-Compete Period shall end on a date
selected by Company and set forth in a written notice provided by Company to Executive (the
“Non-Compete Notice”); provided, however, that (1) the date selected by Company shall be a
whole number of months (not in excess of 12) after the last day of Executive’s employment
with Company and (2) Company shall pay to Executive the Monthly Severance Amount on the last
day of each month during the portion of the Non-Compete Period that is after the last day of
Executive’s employment with Company; and

     (2) for purposes of Sections 7.1(a)(i), 7.1(a)(ii)(2) and 7.1(a)(ii)(3), the
Non-Compete period shall end on the date that is one year after the last day of Executive’s
employment with Company.

The Non-Compete Notice shall be delivered by Company to Executive within 10 days after receipt by
Company of Executive’s notice pursuant to Section 3.4 or on or before the date that is 45 days
prior to the expiration of the term of this Agreement under Section 3.1, as applicable. Executive
hereby delegates to Company the right to select and determine in good faith the duration of the
Non-Compete Period as provided in Section 7.1(b)(i).

     7.2 Non-Disparagement. During Executive’s employment with Company and following any
termination of employment with Company, Executive and Company agree not to disparage, either orally
or in writing, Executive, Company, any of Company’s affiliates, business, products, services or
practices, or any of Company’s or its affiliates’ directors, officers, agents, representatives,
stockholders, or employees.

     7.3 New Employer. Executive agrees that prior to accepting any new employment during
the Non-Compete Period, Executive shall advise Company of the identity of the potential new
employer. Company may serve such new employer with notice of the non-competition restrictions set
forth in this Article 7 and may furnish such employer with a copy of this Agreement or the relevant
portions thereof.

     7.4 Remedies. Executive acknowledges that money damages would not be sufficient
remedy for any breach of this Article 7 by Executive, and Company or its affiliates shall be
entitled to enforce the provisions of this Article 7 by terminating payments then owing to
Executive under this Agreement or otherwise and to specific performance and injunctive relief as
remedies for such breach or any threatened breach. Such remedies shall not be deemed the exclusive
remedies for a breach of this Article 7 but shall be in addition to all remedies available at law
or in equity, including the recovery of damages from Executive and his agents.

     7.5 Reformation. Company and Executive agree that the foregoing restrictions are
reasonable under the circumstances and that any breach of the covenants contained in this Article 7
would cause irreparable injury to Company. Executive understands that the foregoing restrictions
may limit Executive’s ability to engage in certain businesses anywhere in the United States or such
other geographic areas or markets in which Company or any of its affiliates are conducting business
or have, during the 12 months preceding the termination of Executive’s employment, conducted such
business, as applicable, during the Non-Compete Period, but acknowledges that Executive will
receive sufficiently high remuneration and other benefits from Company to justify such restriction.
Nevertheless, if any of the aforesaid restrictions are found

14

 

by a court of competent jurisdiction
to be unreasonable, or overly broad as to geographic area or time, or otherwise
unenforceable, the parties intend for the restrictions therein set forth to be modified by the
court making such determination so as to be reasonable and enforceable and, as so modified, to be
fully enforced. By agreeing to this contractual modification prospectively at this time, Company
and Executive intend to make this provision enforceable under the law or laws of all applicable
States so that the entire agreement not to compete and this Agreement as prospectively modified
shall remain in full force and effect and shall not be rendered void or illegal. Such modification
shall not affect the payments made to Executive under this Agreement.

ARTICLE 8: MISCELLANEOUS

     8.1 Indemnification. If Executive shall obtain any money judgment or otherwise
prevail with respect to any litigation brought by Executive or Company to enforce or interpret any
provision contained herein, Company, to the fullest extent permitted by applicable law, hereby
indemnifies Executive for his reasonable attorneys’ fees and disbursements incurred in such
litigation and hereby agrees (i) to pay in full all such fees and disbursements and (ii) to pay
prejudgment interest on any money judgment obtained by Executive from the earliest date that
payment to him should have been made under this Agreement until such judgment shall have been paid
in full, which interest shall be calculated at the prime or base rate of interest announced by
JPMorgan Chase Bank (or any successor thereto) at its principal office in New York, and shall
change when and as any such change in such prime or base rate shall be announced by such bank.

     8.2 Payment Obligations Absolute. Except as specifically provided in Sections 6.6 and
7.4, Company’s obligation to pay (or cause one of its subsidiaries to pay) Executive the amounts
and to make the arrangements provided herein shall be absolute and unconditional and shall not be
affected by any circumstances, including, without limitation, any set-off, counterclaim,
recoupment, defense or other right which Company (including its subsidiaries) may have against him
or anyone else. All amounts payable by Company (including its subsidiaries hereunder) shall be
paid without notice or demand. Executive shall not be obligated to seek other employment in
mitigation of the amounts payable or arrangements made under any provision of this Agreement, and
the obtaining of any such other employment shall in no event effect any reduction of Company’s
obligations to make (or cause to be made) the payments and arrangements required to be made under
this Agreement.

     8.3 Notices. For purposes of this Agreement, notices and all other communications
provided for herein shall be in writing and shall be deemed to have been duly given when personally
delivered or when mailed by United States registered or certified mail, return receipt requested,
postage prepaid, addressed as follows:

			
	If to Company to:	 	Concho Resources Inc.

550 W. Texas Avenue, Suite 1300

Midland, Texas 79701

Attention: Chairman of the Board of Directors

15

 

			
	If to Executive to:	 	E. Joseph Wright

2102 North L Street

Midland, Texas 79705

or to such other address as either party may furnish to the other in writing in accordance
herewith, except that notices or changes of address shall be effective only upon receipt.

     8.4 Applicable Law. This Agreement is entered into under, and shall be governed for
all purposes by, the laws of the State of Texas.

     8.5 No Waiver. No failure by either party hereto at any time to give notice of any
breach by the other party of, or to require compliance with, any condition or provision of this
Agreement shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or
at any prior or subsequent time.

     8.6 Severability. Any provision in this Agreement which is prohibited or
unenforceable in any jurisdiction by reason of applicable law shall, as to such jurisdiction, be
ineffective only to the extent of such prohibition or unenforceability without invalidating or
affecting the remaining provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.

     8.7 Counterparts. This Agreement may be executed in one or more counterparts, each of
which shall be deemed to be an original, but all of which together will constitute one and the same
Agreement.

     8.8 Withholding of Taxes and Other Employee Deductions. Company may withhold from any
benefits and payments made pursuant to this Agreement all federal, state, city and other taxes as
may be required pursuant to any law or governmental regulation or ruling and all other normal
employee deductions made with respect to Company’s employees generally.

     8.9 Headings. The paragraph headings have been inserted for purposes of convenience
and shall not be used for interpretive purposes.

     8.10 Gender and Plurals. Wherever the context so requires, the masculine gender
includes the feminine or neuter, and the singular number includes the plural and conversely.

     8.11 Assignment. This Agreement shall be binding upon and inure to the benefit of
Company and any successor of Company, by merger or otherwise. This Agreement shall also be binding
upon and inure to the benefit of Executive and his estate. If Executive shall die prior to full
payment of amounts due pursuant to this Agreement, such amounts shall be payable pursuant to the
terms of this Agreement to his estate. Executive shall not have any right to pledge, hypothecate,
anticipate or assign this Agreement or the rights hereunder, except by will or the laws of descent
and distribution.

     8.12 Term. This Agreement has a term co-extensive with the term of employment
provided in Section 3.1. Termination shall not affect any right or obligation of any party which
is accrued or vested prior to such termination. The provisions of Section 3.5 and Articles 6 and 7
shall survive the termination of this Agreement.

16

 

     8.13 Entire Agreement. This Agreement constitutes the entire agreement of the parties
with regard to the subject matter hereof, and contains all the covenants, promises,
representations, warranties and agreements between the parties with respect to such subject matter.
Without limiting the scope of the preceding sentence, all understandings and agreements preceding
the date of execution of this Agreement and relating to the subject matter hereof are hereby null
and void and of no further force and effect, including, without limitation, all prior employment
and severance agreements, if any, by and between Company and Executive. Any modification of this
Agreement will be effective only if it is in writing and signed by the party to be charged.

[Signatures begin on next page.]

17

 

     IN
WITNESS WHEREOF, the parties hereto have executed this Agreement on the 14th day of July,
2006, to be effective as of the Effective Date.

	 	 	 	 	 
	 	Concho Resources Inc.

 	 
	 	By:  	/s/ Steven L. Beal	 
	 	 	Steven L. Beal, President 	 
	 

COMPANY

	 	 	 	 	 
	 	/s/ E. Joseph Wright	 
	 	E. Joseph Wright	 
	 	 	 
	 	 	 
	 	 	 
	 

EXECUTIVE

18

 

ATTACHMENT A

TO

EMPLOYMENT AGREEMENT BY AND BETWEEN

CONCHO RESOURCES INC., A DELAWARE CORPORATION,

AND E. JOSEPH WRIGHT (“EXECUTIVE”)

PERMITTED ACTIVITIES

          As of the Effective Date, the Board has approved Executive’s participation in the following
activities:

	 	•	 	Participation on the church board at 1st Christian Church, Midland, Texas as
well as subcommittee of the board.
	 
	 	•	 	Teaching Sunday school class at 1st Christian Church, Midland, Texas
	 
	 	•	 	Board member and Tryout coordinator for the WTJ Volleyball Club of Midland, Texas
	 
	 	•	 	Treasurer of the GFC Investment Club (passive investment in publicly traded stocks)
	 
	 	•	 	Board member of the Midland High School Football Booster Club
	 
	 	•	 	Youth soccer coach
	 
	 	•	 	Member of the Midland High School Volleyball Booster Club
	 
	 	•	 	Ownership of a .25% ORRI in the Valhalla lease, Lea County, New Mexico

A-1

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