Document:

exv10w11

 

Exhibit 10.11

EMPLOYMENT AGREEMENT

     THIS AGREEMENT is made effective June 8, 2006 (the “Effective Date”), between RIATA
ENERGY, INC., a Texas corporation (the “Company”), and TOM L. WARD, an individual (the
“Executive”).

WITNESSETH:

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

     WHEREAS, the Company has adopted the Well Participation Program (the “WP Program”) in order
to provide for the participation by the Executive in the Company’s wells.

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

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

     2. Executive’s Duties. The Executive is employed on a full-time basis. Throughout
the term of this Agreement, the Executive will use the Executive’s best efforts and due
diligence to assist the Company in the objective of achieving the most profitable operation of the
Company and the Company’s affiliated entities consistent with developing and maintaining a quality
business operation.

     2.1 Specific Duties. During the term of this Agreement the Executive: (a)
will serve as Chief Executive Officer for the Company; (b) will be nominated for
election or appointed to serve as a director of the Company and will be nominated as Chairman of
the Board; (c) will be appointed as an officer or manager of such of the Company’s
subsidiaries as the Executive requests; and (d) will be nominated for election or
appointed to serve as a director of such of the Company’s subsidiaries as the Executive
requests. The Executive agrees to use the Executive’s best efforts to perform all of
the services required to fully and faithfully execute the offices and positions to which
the Executive is appointed and elected and such other services as may be reasonably
directed by the Board of Directors of the Company in accordance with this Agreement.

     2.2 Modifications. The precise duties to be performed by the Executive may
be extended or curtailed in the discretion of the Board of Directors of the Company.
However, except for termination for Cause (as hereinafter defined) under paragraph
6.1.2 of this Agreement, the failure of the Executive to be elected, be reelected or serve as
a director of the Company during the term of this Agreement, the removal of the Executive
as a member of the Board of Directors of the Company, the failure to reelect or
reappoint

 

 

the Executive as Chairman of the Board and Chief Executive Officer of the Company, or the
assignment of the performance of duties incumbent on the foregoing offices to other persons
without the prior written consent of the Executive will constitute termination without
Cause by the Company.

     2.3 Rules and Regulations. From time to time, the Company may issue
policies and procedures applicable to employees and the Executive including an
Employment Policies Manual. The Executive agrees to comply with such policies and
procedures, except to the extent such policies are inconsistent with this Agreement.
Such policies and procedures may be supplemented, modified, changed or adopted without
notice in the sole discretion of the Company at any time. In the event of a conflict
between such policies and procedures and this Agreement, this Agreement will control
unless compliance with this Agreement will violate any law or regulation applicable to
the Company or its affiliated entities.

     2.4 Stock Investment. During the term of this Agreement, the Executive
agrees to hold shares of the Company’s common stock having an aggregate Investment
Value (as hereafter defined) greater than five hundred percent (500%) of
the compensation paid to the Executive under paragraphs 4.1 and 4.2 of this Agreement
during such calendar year. Any shares of common stock acquired by the Executive prior,
to the date of this Agreement and still owned by the Executive during the term of this
Agreement may be used to satisfy the requirement to own common stock. For purposes
of this paragraph, the “Investment Value” of each share of stock will be as follows:
(a) for shares purchased after the date of this Agreement the price paid by the Executive
for such shares; (b) for shares acquired after the date of this Agreement through the
exercise of stock options, the grant of restricted stock, the conversion of preferred stock or
other than through open market purchases, the fair market value of the common stock on the
date the option was exercised, the stock was issued or the stock was acquired through
the conversion of preferred stock, or the date such stock was otherwise acquired; and (c)
for shares acquired on or prior to the date of this Agreement, the price paid by the
Executive. The Company has no obligation to sell or to purchase from the Executive any of the
Company’s stock in connection with this paragraph 2.4 and has made no representations
or warranties regarding the Company’s stock, operations or financial condition.

     3. Other Activities. Except for the activities (the “Permitted Activities”) permitted under
paragraphs 3.1, 3.2 and 3.3 of this Agreement or approved by the Board of Directors, during the
period of Executive’s employment, the Executive will not: (a) engage in activities which require
such substantial services on the part of the Executive that the Executive is unable to perform the
duties assigned to the Executive in accordance with this Agreement; (b) serve as an officer or
director of any publicly held entity; or (c) directly or indirectly invest in, participate in or
acquire an interest in any oil and gas business, including, without limitation, (i) producing oil
and gas, (ii) drilling, owning or operating oil and gas leases or wells, (iii) providing services
or materials to the oil and gas industry, (iv) marketing or refining oil or gas, or (v) owning any
interest in any corporation, partnership, company or entity which conducts any of the foregoing
activities. The limitations in this paragraph 3 will not prohibit an investment by the Executive
in publicly traded securities. The Executive is not restricted from maintaining or making
investments, or engaging in other businesses, enterprises or civic, charitable or public service

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functions if such activities, investments, businesses or enterprises do not result in a violation
of clauses (a) through (c) of this paragraph 3. Notwithstanding the foregoing, the Executive will
be permitted to participate in the following activities that will be deemed to be approved by the
Company, if such activities are undertaken in strict compliance with this Agreement.

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

     3.2 Existing Interests. The Executive has in the past conducted oil and gas
activities individually and through TLW Investments, Inc., an Oklahoma corporation, and
other entities owned or controlled by the Executive (collectively, the “Executive
Affiliates”). The Executive also has a pre-existing right to participate in the
drilling of oil and gas wells through the Chesapeake Energy Corporation Founder Well Participation
Program (“CHK Program”) until August 10, 2006. The Executive will be permitted to
continue to conduct oil and gas activities (including participation in new wells)
through the CHK Program; or otherwise directly or through the Executive Affiliates, but only to
the extent such activities are conducted on oil and gas leases or interests which the
Executive or Executive Affiliates owned or had the right to acquire as of the date of
this Agreement or which Executive or Executive affiliates acquires through the CHK
Program (the “Prior Interests”).

     3.3 Company’s Activities. The Executive or the designated Executive
Affiliate will be permitted to participate in the WP Program. The WP Program may not
be amended or modified without the prior written consent of the Board of Directors and
the Executive.

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

     4.1 Base Salary. A base salary (the “Base Salary”), in an annual rate of not
less than Nine Hundred Fifty Thousand Dollars ($950,000.00), will be paid to the
Executive in installments consistent with the Company’s customary payroll practices,
during the term of this Agreement.

     4.2 Bonus. In addition to the Base Salary described at paragraph 4.1 of this
Agreement, the Company may periodically pay bonus compensation to the Executive.
Any bonus compensation will be at the absolute discretion of the Company in such
amounts and at such times as the Board of Directors of the Company (or a Compensation
Committee thereof) may determine.

     4.3 Equity Compensation. In addition to the compensation set forth in
paragraphs 4.1 and 4.2 of this Agreement, the Executive may periodically receive grants
of stock options, restricted stock or other equity related awards from the Company’s

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stock compensation plans in effect from time to time, subject to the terms and conditions of such
plans.

     4.4 Benefits. The Company agrees to extend to the Executive retirement benefits, deferred
compensation, reimbursement of reasonable expenditures for dues, travel and entertainment and any
other benefits the Company provides to other executives or officers from time to time on the same
terms as such benefits are provided to such individuals. The Company will also provide the
Executive the opportunity to apply for coverage under the Company’s medical, life and disability
plans, if any. If the Executive is accepted for coverage under such plans, the Company will provide
such coverage on the same terms as is customarily provided by the Company to the plan participants
as modified from time to time. The following specific benefits will also be provided to the
Executive at the expense of the Company.

     4.4.1 Vacation. The Executive will be entitled to take up to five (5)
weeks of paid vacation each calendar year during the term of this Agreement,
subject to proration for any portion of a calendar year under this Agreement. No
additional compensation will be paid for failure to take vacation and no vacation
may be carried forward from one calendar year to another.

     4.4.2 Membership Dues. The Company will reimburse the Executive
for: (a) the monthly dues necessary to maintain a full membership in any country
club in the Oklahoma City or Amarillo area at which the Executive hosts business
functions; and (b) the reasonable cost of any business entertainment at such clubs
consistent with Company policy. All other costs, including, without implied
limitation, any initiation costs, initial membership costs, personal use and
business entertainment unrelated to the Company will be the sole obligation of the
Executive and the Company will have no liability with respect to such amounts.

     4.4.3 Travel. For safety, security and efficiency the Executive will be
required to utilize aircraft owned or leased by the Company for business and
reasonable personal use in the Western Hemisphere (including North America,
South America and the surrounding oceans) and will not be required to reimburse
the Company for any cost related to such use. In addition, the Executive’s
immediate family members may use such Company aircraft for their personal use
to the same extent. When a family member travels without the Executive, the
Executive agrees to reimburse the Company for the variable costs of such use.
For purposes of this Agreement, the variable cost of using the Company’s aircraft
means the variable costs directly identifiable with each use (including fuel, pilot
charges, landing fees, hourly charges under co-ownership arrangements and other
such costs), but specifically excluding any fixed costs of the aircraft (including
acquisition costs and depreciation). The Executive will: (a) not owe any
additional amounts to the Company under this paragraph for guests or family
members traveling with the Executive; and (b) pay all personal income taxes
accruing as a result of the personal use of the Company’s aircraft by the
Executive, his family or guests under this paragraph. The amount of reasonable

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personal and family use shall be subject to annual review by the compensation committee of
the Board of Directors of the Company.

     4.4.4 Accounting Support. The Executive will be reasonably permitted to utilize the
Company’s office space, computer facilities and personnel to provide accounting services,
records maintenance, tax advice and tax return preparation for the Executive’s (and his
family’s) personal business investments and activities. The Executive agrees to reimburse
the Company an amount equal to 50% of the salaries and bonuses paid by the Company to
employees primarily engaged in providing such support services to the Executive. Such
amounts will be billed monthly on an estimated basis, adjusted to actual at least once
annually and paid by the Executive on receipt of an invoice from the Company. The cost of
secretarial or general administrative support for the Executive will not be required to be
reimbursed in whole or part by the Executive. The amount of reasonable use of service
provided by this paragraph 4.4.4 shall be subject to annual review by the compensation
committee of the Board of Directors of the Company.

     4.5 Gross-Up Payment. In the event it is determined that any payment or distribution by the
Company or the Company’s subsidiaries or affiliates to or for the benefit of the Executive
(whether paid or payable or distributed or distributable pursuant to the terms of this Agreement
or otherwise, but determined without regard to any additional payments required under this
paragraph 4.5) (a “Payment”) is subject to the excise tax imposed by Section 4999 of the Internal
Revenue Code (the “Code”) or any interest or penalties related to such excise tax (collectively,
the “Excise Tax”), the Executive will be entitled to receive an additional payment (a “Gross-Up
Payment”) from the Company. The Gross-Up Payment will be equal to the amount such that after
payment by the Executive of all taxes (including the Excise Tax, income taxes, interest and
penalties imposed with respect to such taxes) on the Gross-Up Payment, the Executive will retain
an amount of the Gross-Up Payment equal to the Excise Tax imposed on the Payment.

     4.5.1 Determination. Subject to the provisions of paragraph 4.5.2 all determinations
required to be made under this paragraph 4.5 (including whether and when a Gross-Up
Payment is required, the amount of such Gross-Up Payment and the assumptions to be
utilized) will be made by a nationally recognized certified public accounting firm
designated by the Executive (the “Accounting Firm”). The Accounting Firm will provide
detailed supporting calculations both to the Company and the Executive within fifteen (15)
business days of the receipt of notice from the Executive that there has been a Payment,
or such earlier time as is reasonably requested by the Company. In the event that the
Accounting Firm is serving as accountant or auditor for the individual, entity or group
effecting a Change of Control (as hereinafter defined), the Executive will be entitled to
appoint another nationally recognized accounting firm to make the determinations required
under this paragraph (which accounting firm will then be referred to as the Accounting
Firm hereunder). All fees and expenses of the Accounting Firm will be paid by the Company.
Any Gross-Up Payment required to be paid under

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this paragraph 4.5 will be paid by the Company to the Executive within five (5) days of the
receipt of the Accounting Firm’s determination, Any determination by the Accounting Firm will be
binding on the Company and the Executive. As a result of the uncertainty in the application of
Section 4999 of the Code at the time of the initial determination by the Accounting Firm, the
Gross-Up Payment made by the Company may be less than actually required (an “Underpayment”)
consistent with the calculations required to be made hereunder. In the event that the Company
exhausts its remedies pursuant to paragraph 4.5.2 below and the Executive thereafter is required
to make a payment of any Excise Tax, the Accounting Firm will determine the amount of the
Underpayment that has occurred and any such Underpayment will be promptly paid by the Company to
or for the benefit of the Executive.

     4.5.2 Contest of Claims. The Executive will notify the Company in writing of any claim by the
Internal Revenue Service that, if successful, would require the payment by the Company of a
Gross-Up Payment. Such notification will be given as soon as practicable but no later than ten (10)
business days after the Executive is informed in writing of such claim and will apprise the Company
of the nature of such claim and the date on which such claim is requested to be paid. The Executive
will not pay such claim prior to the expiration of the thirty (30) day period following the date on
which the Executive notifies the Company (or such shorter period ending on the date that any
payment of taxes with respect to such claim is due). If the Company notifies the Executive in
writing prior to the expiration of such thirty (30) day period that the Company desires to contest
such claim, the Executive will: (a) provide to the Company any information reasonably requested by
the Company relating to such claim; (b) take such action in connection with contesting such claim
as the Company reasonably requests in writing including, without limitation, accepting legal
representation with respect to such claim by an attorney reasonably selected by the Company; (c)
cooperate with the Company in good faith as necessary to effectively contest such claim; and (d)
permit the Company to participate in any proceedings relating to such claim. The Company will bear
and pay directly all costs and expenses (including additional interest and penalties) incurred in
connection with the contest of the claim and agrees to indemnify and hold the Executive harmless,
on an after-tax basis, for any Excise Tax or income tax (including interest and penalties with
respect thereto) imposed as a result of such protest (including payment of costs and expenses as
provided hereunder). Without limitation on the foregoing provisions, the Company will control all
proceedings related to such contested claim, may at its sole option pursue or forgo any and all
administrative appeals, proceedings, hearings and conferences with the taxing authority in respect
of such claim and may at its sole option either direct the Executive to pay the tax claimed and sue
for a refund or contest the claim in any permissible manner. The Executive agrees to prosecute such
contest to a determination before any administrative tribunal, in a court of initial jurisdiction
and in one or more appellate courts, as the Company reasonably determines. If the Company directs
the Executive to pay a claim and sue for a refund, the Company will be required to advance the
amount of such payment to the Executive on an interest-free basis

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and agrees to indemnify and hold the Executive harmless, on an after-tax basis, from any
Excise Tax or income tax (including interest or penalties with respect thereto) imposed
with respect to such advance or with respect to any imputed income with respect to such
advance, provided that any extension of the statute of limitations relating to payment of
taxes for the taxable year of the Executive with respect to which such contested amount is
claimed to be due is limited solely to such contested amount. Furthermore, the Company’s
control of the contested claim will be limited to issues with respect to which a Gross-Up
Payment would be payable hereunder and the Executive will be entitled to settle or contest,
as the case may be, any other issue raised by the Internal Revenue Service or any other
taxing authority.

     4.5.3 Refunds. If, after the receipt by the Executive of an amount advanced by the
Company pursuant to paragraph 4.5.2, the Executive becomes entitled to receive any refund
with respect to such claim the Executive will (subject to the Company’s complying with the
requirements of paragraph 4.5.2) promptly pay to the Company the amount of such refund
(together with any interest paid or credited thereon after taxes applicable thereto). If,
after the receipt by the Executive of an amount advanced by the Company pursuant to
paragraph 4.5.2, a determination is made that the Executive will not be entitled to any
refund with respect to such claim and the Company does not notify the Executive in writing
of its intent to contest such denial of refund prior to the expiration of (30) days after
such determination, then the advance will be forgiven and will not be required to be
repaid and the amount of such advance will offset, to the extent thereof, the amount of
Gross-Up Payment required to be paid.

     4.6 Compensation Review. The compensation of the Executive will be reviewed not less
frequently than annually by the Board of Directors of the Company (or a Compensation Committee
thereof) and shall be reviewed semi-annually if the compensation of other executive officers of
the Company is reviewed at such frequency. The compensation of the Executive prescribed in
paragraph 4 of this Agreement (including benefits) may be increased at the discretion of the Board
of Directors of the Company or the Compensation Committee, but may not be reduced without the
prior written consent of the Executive except as expressly provided herein.

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     5. Term. In the absence of termination as set forth in paragraph 6 below, this
Agreement will extend for a term commencing on the Effective Date, and ending on June 30,
2009 (the “Expiration Date”) as extended from time to time. Unless the Company provides
thirty (30) days prior written notice of non-extension to the Executive, on or before each
June 30 during the term of this Agreement, the term and the Expiration Date will be automatically
extended for one (1) additional year so that the remaining term on this Agreement will be not
less than two (2) and not more than three (3) years.

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

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

     6.1.1 Termination without Cause. The Company may terminate
Executive’s employment without Cause at any time by the service of written
notice of termination to the Executive specifying an effective date of such
termination not sooner than ten (10) days after the date of such notice (the
“Termination Date”). In the event the Executive is terminated without Cause
(other than a CC Termination under paragraph 6.3 of this Agreement), the
Executive will receive as termination compensation: (a) his Base Salary (as in
effect on the Termination Date) during the remaining term of this Agreement,
but in any event through the Expiration Date; and (b) any vacation pay accrued
through the Termination Date. The payment of such amounts shall be made
during the remaining term of the Agreement in installments consistent with the
Company’s normal payroll practices, but, if on the Termination Date, the
Executive is a “specified employee” as defined in regulations under Section
409A of the Code, such payments will commence on the first payroll payment date
which is more than six months following the Termination Date and
the first payment shall include any amounts that would have otherwise been payable
during the six month period.

     6.1.2 Termination for Cause. The Company may terminate
Executive’s employment for Cause. For purposes of this Agreement, “Cause”
means: (a) the willful and continued failure of the Executive to perform
substantially the Executive’s duties with the Company or its subsidiaries or
affiliates (other than a failure resulting from incapacity due to physical or
mental illness), after a written demand for substantial performance is delivered to
the Executive by the Board of Directors which specifically identifies the manner
in which the Board of Directors believes that the Executive has not substantially
performed the Executive’s duties; or (b) the willful engaging by the Executive
in illegal conduct, gross misconduct or a clearly established violation of the
Company’s written policies and procedures, in each case which is materially
and demonstrably injurious to the Company. For purposes of this provision, an act
or failure to act, on the part of the Executive, will not be considered “willful”
unless it is done, or omitted to be done, by the Executive in bad faith or without

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reasonable belief that the Executive’s action or omission was in the best interests of the
Company. Any act, or failure to act, based on authority given pursuant to a resolution duly
adopted by the Board of Directors or based on the advice of counsel for the Company will be
conclusively presumed to be done, or omitted to be done, by the Executive in good faith and
in the best interests of the Company. In the event Executive’s employment is terminated for
Cause, the Company will not have any obligation to provide any further payments or benefits
to the Executive after the effective date of such termination. Executive’s employment will
not be deemed to have terminated for Cause unless a written determination specifying the
reasons for such termination is made, approved by a majority of the independent and
disinterested members of the Board of Directors of the Company and delivered to the
Executive. Thereafter, the Executive will have the right for a period of thirty (30) days
to request a Board of Directors meeting to be held at a mutually agreeable time and
location to be attended by the members of the Board of Directors in person within the
following thirty (30) days, at which meeting the Executive and his designated
representatives will have an opportunity to be heard. Failing such determination and
opportunity for hearing, any termination of Executive’s employment will be deemed to have
occurred without Cause.

     6.2 Termination by Executive. The Executive may voluntarily terminate his
employment with or without Cause by the service of written notice of such termination to
the Company specifying an effective date of such termination ninety (90) days after the
date of such notice, during which time the Executive may use remaining accrued vacation
days, or at the Company’s option, be paid for such days. In the event his employment is
terminated by the Executive, neither the Company nor the Executive will have any
further obligations hereunder, except for any obligations which expressly survive
termination of employment including, without limitation, any obligation of the Company
to provide any further payments or benefits to the Executive after the effective date of
such termination.

     6.3 Termination After Change in Control. If during the term of this
Agreement there is a “Change of Control” and within one (1) year thereafter there is a
CC Termination (as hereafter defined), then the Executive will be entitled to a severance
payment (in addition to any other rights and other amounts payable to the Executive
under Section 6.7 or under Company plans in which Executive is a participant) payable in
a lump sum in cash within 10 days following the CC Termination in an amount equal to
the sum of the following: (a) three (3) times the Executive’s Base Salary for the last 12
calendar months ending immediately prior to the CC Termination and bonus paid
pursuant to Section 4.2 (based on the average of the last three years annual bonuses or
such lesser number of years as Executive may have been employed); plus (b) any
applicable Gross-Up Payment. If the foregoing amount is not paid within ten (10) days
after the CC Termination, the unpaid amount will bear interest at the per annum rate of
12%. Notwithstanding the foregoing, if at the time of a CC Termination, the Executive is
a “specified employee” as defined in regulations under Section 409A of the Code, such
payment will be made on the first day which is more than six months following the CC
Termination. In connection with any Change of Control, the Company shall obtain the

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assumption of this Agreement, without limitation or reduction, by any successor to the Company or
any parent corporation of the Company.

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

     (a) The acquisition by any individual, entity or group (within
the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange
Act of 1934, as amended (the “Exchange Act”)) (a “Person”), other than
Executive or his affiliates or Malone Mitchell 3rd or his affiliates (the
“Exempt Persons”), of beneficial ownership (within the meaning of Rule
13d-3 promulgated under the Exchange Act) of 40% or more of either (i)
the then outstanding shares of common stock of the Company (the
“Outstanding Company Common Stock”) or (ii) the combined voting
power of the then outstanding voting securities of the Company entitled to
vote generally in the election of directors (the “Outstanding Company
Voting Securities”). For purposes of this paragraph (a) the following
acquisitions by a Person will not constitute a Change of Control: (i) any
acquisition directly from the Company; (ii) any acquisition by the
Company; (iii) any acquisition by any employee benefit plan (or related
trust) sponsored or maintained by the Company or any corporation
controlled by the Company; or (iv) any acquisition by any corporation
pursuant to a transaction which complies with clauses (i), (ii) and (iii) of
paragraph (c) of this paragraph 6.3.1.

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

     (c) The consummation of a reorganization, merger,
consolidation or sale or other disposition of all or substantially all of the
assets of the Company (a “Business Combination”), unless following
such Business Combination: (i) the individuals and entities who were the
beneficial owners, respectively, of the Outstanding Company Common
Stock and Outstanding Company Voting Securities immediately prior to
such Business Combination beneficially own, directly or indirectly, more
than 60% of, respectively, the then outstanding shares of common stock

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and the combined voting power of the then outstanding voting securities entitled to
vote generally in the election of directors, as the case may be, of the corporation
resulting from such Business Combination (including, without limitation, a
corporation which as a result of such transaction owns the Company or all or
substantially all of the Company’s assets either directly or through one or more
subsidiaries) in substantially the same proportions as their ownership, immediately
prior to such Business Combination of the Outstanding Company Common Stock and
Outstanding Company Voting Securities, as the case may be, (ii) no Person
(excluding any corporation resulting from such Business Combination or any employee
benefit plan (or related trust) of the Company or such corporation resulting from
such Business Combination) other than one or more of the Exempt Persons
beneficially owns, directly or indirectly, 40% or more of, respectively, the then
outstanding shares of common stock of the corporation resulting from such Business
Combination or the combined voting power of the then outstanding voting securities
of such corporation except to the extent that such ownership existed prior to the
Business Combination and (iii) at least a majority of the members of the board of
directors of the corporation resulting from such Business Combination were members
of the Incumbent Board at the time of the execution of the initial agreement, or of
the action of the Board, providing for such Business Combination.

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

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

     6.4 Incapacity of Executive. If the Executive suffers from a physical or mental condition,
which in the reasonable judgment of the Company’s Board of Directors, prevents the Executive in
whole or in part from performing the duties specified herein for a period of four (4) consecutive
months, the Executive’s employment may be terminated by the Company, in which event, the Company
will pay Executive his Base Salary in effect on the date of termination through the remaining term
of this Agreement, but in any event through the Expiration Date. The payment of such amounts shall
be made during the remaining term of the Agreement in installments consistent with the Company’s
normal payroll practices, but, if on the termination date, the Executive is a “specified employee”
as defined in regulations under Section 409A of the Code, such payments will commence on the first
payroll payment date which is more than six months following the termination date and the first
payment shall include any amounts that

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would have otherwise been payable during the six month period. Notwithstanding the foregoing, the
amount payable hereunder will be reduced by any benefits payable under any disability plans
provided by the Company under paragraph 4.4 of this Agreement.

     6.5 Death of Executive. If the Executive dies during the term of this
Agreement, Executive’s employment will terminate without compensation to the
Executive’s estate except: (a) the obligation to continue the Base Salary payments under
paragraph 4.1 of this Agreement for twelve (12) months after the effective date of such
termination, and (b) the benefits described in paragraph 4.4 of this Agreement accrued
through the effective date of such termination.

     6.6 Effect of Termination. The termination of Executive’s employment will
terminate all obligations of the Executive to render services on behalf of the Company.
The Executive will maintain the confidentiality of all information acquired by the
Executive during the term of his employment in accordance with paragraph 7 of this
Agreement. Except as otherwise provided in this paragraph 6, no accrued bonus,
severance pay or other form of compensation will be payable by the Company to the
Executive by reason of the termination of his employment. In the event that payments
are required to be made by the Company under this paragraph 6, the Executive will not
be required to seek other employment as a means of mitigating the Company’s
obligations hereunder resulting from termination of the Executive’s employment and the
Company’s obligations hereunder (including payment of severance benefits) will not be
terminated, reduced or modified as a result of the Executive’s earnings from other
employment or self-employment. All keys, entry cards, credit cards, files, records,
financial information, furniture, furnishings, equipment, supplies and other items relating
to the Company will remain the property of the Company. The Executive will have the
right to retain and remove all personal property and effects that are owned by the
Executive and located in the offices of the Company. All such personal items will be
removed from such offices no later than ten (10) days after the effective date of
termination, and the Company is hereby authorized to discard any items remaining and to
reassign the Executive’s office space after such date. Prior to the effective date of
termination, the Executive will cooperate with the Company to provide for the orderly
termination of the Executive’s employment.

     6.7 Equity Compensation Provisions. Notwithstanding any provision to the
contrary in any option agreement, restricted stock agreement, plan or other agreement
relating to equity based compensation, in the event of a termination under paragraph 6.1.1
or 6.3 of this Agreement: (a) all units, stock options, incentive stock options, performance
shares, stock appreciation rights and restricted stock held by Executive immediately prior
to such termination will immediately become 100% vested; and (b) the Executive’s right
to exercise any previously unexercised options will not terminate until the latest date on
which such option would expire but for Executive’s termination of employment. To the
extent Company is unable to provide for one or both of the foregoing rights the Company
will provide in lieu thereof a lump-sum cash payment equal to the difference between the
total value of such units, stock options, incentive stock options, performance shares, stock
appreciation rights and shares of restricted stock (the “Equity Compensation Rights”)
with the foregoing rights as of the date of Executive’s termination of employment and the

12

 

total value of the Equity Compensation Rights without the foregoing rights as of the date
of the Executive’s termination of employment. The foregoing amounts will be determined by
the Board of Directors in good faith based on a valuation performed by an independent
consultant selected by the Board of Directors and the cash payment, if any, will be paid in
a lump sum in the case of a termination under Section 6.1.1, at the same time as the first
severance payment is otherwise due under such Section, and in the case of a termination
under Section 6.3, at the same time the payment is due under such Section.

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

     8. Non-competition. During the period of Executive’s employment and for a period
ending six months after the Executive’s termination of employment for any reason other than
pursuant to Sections 6.1.1 or 6.3, (a) the Executive will not acquire, attempt to acquire or
aid another in the acquisition or attempted acquisition of an interest in oil and gas assets, oil
and gas production, oil and gas leases, minerals interests, oil and gas wells or other such oil and
gas exploration, development or production activities within any spacing unit in which the Company
owns an oil an gas interest on the date of termination of employment of the Executive; (b) the
Executive will not solicit, induce, entice or attempt to entice any employee, contractor,
customer, vendor or subcontractor to terminate or breach any relationship with the Company or the
Company’s subsidiaries or affiliates for the Executive’s own account or for the benefit of
another

13

 

party; and (c) the Executive will not circumvent or attempt to circumvent the foregoing agreements
in clause (a) or (b) by any future arrangement or through the actions of a third party. The
foregoing will not prohibit the activities which are expressly permitted by paragraph 3 of this
Agreement.

     9. Proprietary Matters. The Executive expressly understands and agrees that any
and all improvements, inventions, discoveries, processes or know-how that are generated or
conceived by the Executive during the term of this Agreement, whether generated or conceived
during the Executive’s regular working hours or otherwise, will be the sole and exclusive
property of the Company. Whenever requested by the Company (either during the term of this
Agreement or thereafter), the Executive will assign or execute any and all applications,
assignments and or other instruments and do all things which the Company deems necessary or
appropriate in order to permit the Company to: (a) assign and convey or otherwise make
available to the Company the sole and exclusive right, title, and interest in and to said
improvements, inventions, discoveries, processes, know-how, applications, patents, copyrights,
trade names or trademarks; or (b) apply for, obtain, maintain, enforce and defend patents,
copyrights, trade names, or trademarks of the United States or of foreign countries for said
improvements, inventions, discoveries, processes or know-how. However, the improvements,
inventions, discoveries, processes or know-how generated or conceived by the Executive and
referred to above (except as they may be included in the patents, copyrights or registered
trade names or trademarks of the Company, or corporations, partnerships or other entities which may
be affiliated with the Company) will not be exclusive property of the Company at any time
after having been disclosed or revealed or have otherwise become available to the public or to a
third party on a non-confidential basis other than by a breach of this Agreement, or after they have
been independently developed or discussed without a breach of this Agreement by a third party
who has no obligation to the Company or the Company Entities.

     10. Arbitration. The parties will attempt to promptly resolve any dispute or
controversy arising out of or relating to this Agreement or termination of the Executive by
the Company. Any negotiations pursuant to this paragraph 10 are confidential and will be treated
as compromise and settlement negotiations for all purposes. If the parties are unable to reach
a settlement amicably, the dispute will be submitted to binding arbitration before a single
arbitrator in accordance with the Employment Dispute Resolution Rules of the American Arbitration
Association. The arbitrator will be instructed and empowered to take reasonable steps to
expedite the arbitration and the arbitrator’s judgment will be final and binding upon the
parties subject solely to challenge on the grounds of fraud or gross misconduct. Except for damages
arising out of a breach of paragraphs 6, 7, 8 or 9 of this Agreement, the arbitrator is not
empowered to award total damages (including compensatory damages) that exceed 300% of
compensatory damages and each party hereby irrevocably waives any damages in excess of that
amount. The arbitration will be held in Oklahoma County, Oklahoma. Judgment upon any
verdict in arbitration may be entered in any court of competent jurisdiction and the parties
hereby consent to the jurisdiction of, and proper venue in, the federal and state courts located in
Oklahoma County, Oklahoma. The Company will pay the costs and expenses of the arbitration
including, without implied limitation, the fees for the arbitrators. Unless otherwise
expressly set forth in this Agreement, the procedures specified in this paragraph 10 will be the sole and
exclusive procedures for the resolution of disputes and controversies between the parties
arising out of or relating to this Agreement. Notwithstanding the foregoing, a party may seek a

14

 

preliminary injunction or other provisional judicial relief if in such party’s judgment such action
is necessary to avoid irreparable damage or to preserve the status quo.

     11. Miscellaneous. The parties further agree as follows:

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

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

	 	 	 	 	 	 	 
	 

	 	To the Company:
	 	Riata Energy, Inc.
	 	 
	 

	 	 	 	701 South Taylor, Suite 390	 	 
	 

	 	 	 	Amarillo, TX 79101
	 	 
	 

	 	 	 	Attn: Malone Mitchell 3rd	 	 
	 
	 	 	 	 	 	 
	 

	 	To the Executive:
	 	Mr. Tom L. Ward
	 	 
	 

	 	 	 	19200 North Rockwell	 	 
	 

	 	 	 	Edmond, OK 73003	 	 

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

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

     11.5 Entire Agreement. Except as provided in paragraph 2.3 of this
Agreement, this Agreement constitutes the entire agreement between the parties hereto
with respect to the subject matter herein contained, and no modification hereof will be
effective unless made by a supplemental written agreement executed by all of the
parties hereto.

     11.6 Binding Effect. This Agreement will be binding on the parties and their
respective successors, legal representatives and permitted assigns. In the event of a
merger, consolidation, combination, dissolution or liquidation of the Company, the
performance of this Agreement will be assumed by any entity which succeeds to or is
transferred the business of the Company as a result thereof.

15

 

     11.7 Attorneys’ Fees. If any party institutes an action, proceeding or
arbitration against any other party relating to the provisions of this Agreement or any
default hereunder, the Company will be responsible for paying the Company’s legal fees
and expenses and the Company will be required to reimburse the Executive for
reasonable expenses and legal fees incurred by the Executive in connection with the
resolution of such action or proceeding, including any costs of appeal.

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

     11.9 Non-Contravention. Executive represents and warrants to the Company
that the execution and performance of this Agreement will not violate, constitute a default
under, or otherwise give rights to any third party, pursuant to the terms of any Agreement
to which Executive is a party. The Company acknowledges that Executive has
confidentiality and noncompetition obligations to Chesapeake Energy Corporation,
pursuant to the terms of his employment agreement dated July 1, 2005 and resignation
agreement dated February 10, 2006, copies of which have been made available to the
Corporation and that Executive intends to abide by the terms of such obligations.

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

     11.11 Compliance with Section 409A of the Code. This Agreement is
intended to comply with Section 409A of the Code and shall be construed and interpreted
in accordance with such intent. To the extent any benefit paid under this Agreement shall
be subject to Section 409A of the Code, such benefit shall be paid in a manner that will
comply with Section 409A, including any IRS 409A Guidance. Any provision of this
Agreement that would cause the payment of any benefit to fail to satisfy Section 409A of
the Code shall have no force and effect until amended to comply with Section 409A
(which amendment may be retroactive to the extent permitted by the IRS 409A Guidance.

[SIGNATURES ON FOLLOWING PAGE]

16

 

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

	 	 	 	 	 
	 	RIATA ENERGY, INC. 

 	 
	 	By:  	 /s/ Malone Mitchell, 3rd	 
	 	 	Malone Mitchell, 3rd 	 
	 	 	President

(the “Company”) 	 
	 
	 	 	 
	 	By:  	
 /s/ Tom L. Ward	 
	 	 	Tom L. Ward, individually 	 
	 	 	(the “Executive”) 	 
	 

[Signature Page to Employment Agreement]exv10w12

 

Exhibit 10.12

EMPLOYMENT AGREEMENT

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

WITNESSETH:

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

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

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

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

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

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

 

 

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

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

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

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

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

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

2

 

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

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

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

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

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

3

 

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

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

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

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

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

4

 

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

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

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

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

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

5

 

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

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

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

6

 

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

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

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

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

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

7

 

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

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

8

 

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

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

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

9

 

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

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

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

10

 

12. Proprietary Matters.

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

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

11

 

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

     14. Miscellaneous. The parties further agree as follows:

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

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

	 	 	 	 	 	 	 	 	 
	 

	 	To the Company:
	 	 
	 	Riata Energy, Inc.

1601 NW Expressway, Suite 1600

Oklahoma City, OK 73118	 	 
	 
	 	 	 	 	 	 	 	 
	 

	 	To the Executive:
	 	 
	 	Mr. Larry Coshow

2612 NW 176th St.

Edmond, OK 73003	 	 

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

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

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

12

 

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

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

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

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

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

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

13

 

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

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

[SIGNATURES ON FOLLOWING PAGE]

14

 

	 	 	 	 	 
	 	RIATA ENERGY, INC.

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

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

15

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