Document:

exv10w4

Exhibit 10.4

EMPLOYMENT AGREEMENT

     THIS EMPLOYMENT AGREEMENT (the “Agreement”), is made and entered into as of August 31,
2006 (the “Effective Date”), by and between Alta Mesa Services, LP, a Texas limited partnership
(hereafter “Partnership”) and Harlan H. Chappelle (hereafter “Executive”). The Partnership and
Executive may sometimes hereafter be referred to singularly as a “Party” or collectively as the
“Parties.”

W I T N E S S E T H:

     WHEREAS, the Partnership desires to continue to secure the employment services of
Executive subject to the terms and conditions hereafter set forth;

     WHEREAS the Partnership provides various services including management services to Alta Mesa
Holdings, LP (“Holding Co.”), Alta Mesa Holdings GP (“General Partner”), and all Subsidiaries of
Holding Co., under the Shared Services and Expenses Agreement dated as of January 1, 2006 between
the Partnership, Holding Co., General Partner and the Subsidiaries (“Services Agreement”);

     WHEREAS, the Executive is willing to enter into this Agreement upon the terms and conditions
hereafter set forth;

     NOW, THEREFORE, in consideration of Executive’s employment with the Partnership, and the
premises and mutual covenants contained herein, the Parties hereto agree as follows:

     1. Employment. During the Employment Period (as defined in Section
4 hereof), the Partnership shall employ Executive, and Executive shall serve as, President and
Chief Executive Officer of the Partnership. Executive’s principal place of employment shall be at
the main business offices of the Partnership in Houston, Texas.

     2. Compensation.

          (a) Base Salary. The Partnership shall pay to Executive during the Employment Period a
base salary of $400,000 per year, as adjusted pursuant to the subsequent provisions of this
paragraph (the “Base Salary”). The Base Salary shall be payable in accordance with the
Partnership’s normal payroll schedule and procedures for its executives. Nothing contained herein
shall preclude the payment of any other compensation to Executive at any time as determined by the
Partnership.

          (b) Annual Bonus. In addition to the Base Salary in Section 2(a), for
each annual fiscal year of the Partnership during the Employment Period (as defined in Section
4) (each such annual period being referred to as a “Bonus Period”), Executive shall be
entitled to a bonus equal to a percentage of Executive’s Base Salary paid during each such one
year period (referred to herein as the “Annual Bonus”), such percentage to be established by the
Partnership in its sole discretion, and approved by Holding Co.; provided, however, Executive
shall be entitled to the Annual Bonus only if Executive has met the performance criteria set by
the Partnership for the applicable period.

     In the event that the Employment Period ends before the end of the Bonus Period, Executive
shall be entitled to a pro rata portion of the Annual Bonus for that year (based on the number of
days in which Executive was employed during the year divided by 365), as determined based on
satisfaction of the performance criteria for that period on a pro rata basis, unless Executive was
terminated for Cause (as defined in Section 6(d), in which event Executive shall not be
entitled to any Annual Bonus for that year. Executive acknowledges that the amount and performance
criteria for Executive’s Annual Bonus to be

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earned for each Bonus Period shall be set on or before the beginning of the applicable Bonus
Period. If Executive successfully meets the performance criteria established by the Partnership,
the Partnership shall pay Executive the earned Annual Bonus amount within the earlier of: (i)
sixty days (60) days after the end of the Bonus Period or (ii) sixty days (60) after the end of
the Employment Period, as applicable.

          (c) Compensation in Event of Injury or Sickness. In the event Executive becomes injured or
suffers a medically determinable physical or mental illness, as determined by a physician
acceptable to both the Partnership and Executive in the same manner as provided in Section
6(d)(5), Executive shall be entitled to receive continued Base Salary as set forth in
Section 2(a) for a period of six (6) months following the occurrence of such injury or
sickness; provided, however, such Base Salary shall be reduced by any short-term and/or long-term
disability benefits that are received by Executive under such programs sponsored by the
Partnership during such six (6) month period.

     3. Duties and Responsibilities of Executive. During the Employment Period,
Executive’s services shall be devoted on substantially a full-time basis to (i) the business of
the Partnership as directed by the General Partner under the Services Agreement and (ii)
performance of the duties and responsibilities assigned to Executive by the Board or the Chief
Executive Officer, to the best of Executive’s ability and with reasonable diligence. In
determining Executive’s duties and responsibilities, Executive shall not be assigned duties and
responsibilities that are inappropriate for Executive’s position. This Section 3 shall not
be construed as preventing Executive from (a) engaging in reasonable volunteer services for
charitable, educational or civic organizations, or (b) investing personal assets in such a manner
that will not require a material amount of the Executive’s time or services in the operation of
the businesses in which such investments are made; provided, however, no such other activity shall
conflict with Executive’s loyalties and duties to the Partnership. Executive shall at all times
use best efforts to comply in good faith with United States laws applicable to Executive’s actions
on behalf of the Partnership and its Affiliates (as defined in Section 6(d)(1)). Executive
understands and agrees that Executive may be required to travel from time to time for purposes of
the Partnership’s business. The Parties agree that Executive’s principal work location cannot be
relocated further than 50 miles from Executive’s principal work location on the Effective Date,
except as mutually agreed by the Parties.

     4. Term of Employment. Executive’s initial term of employment with the
Partnership under this Agreement shall be for the period from the Effective Date through the date
that is four (4) years from the Effective Date (the “Initial Term of Employment”). Thereafter, the
Employment Period hereunder shall be automatically extended repetitively for an additional one (1)
year period on each anniversary of the Effective Date, unless Notice of Termination (pursuant to
Section 7) is given by either the Partnership or Executive to the other Party at least
sixty (60) days prior to the end of the Initial Term of Employment or any one-year extension
thereof, as applicable, that the Agreement will not be renewed for a successive one-year period
after the end of the current one-year period. The Partnership and Executive shall each have the
right to give Notice of Termination at will, with or without cause, at any time subject, however,
to the terms and conditions of this Agreement regarding the rights and duties of the Parties upon
termination of employment. The Initial Term of Employment, and any one-year extension of
employment hereunder, shall each be referred to herein as a “Term of Employment.” The period from
the Effective Date through the date of Executive’s termination of employment with the Partnership
and all Affiliates, for whatever reason, shall be referred to herein as the “Employment Period.”
Notwithstanding the above, Executive agrees to remain available beyond the Employment Period to
provide assistance to the Partnership or its Affiliates in the event the Partnership or its
Affiliate become involved in litigation regarding matters of which Executive has relevant
knowledge resulting from Executive’s employment with the Partnership. Such post-termination
assistance shall be provided by Executive in the capacity of an independent contractor at an
agreed-upon, reasonable consulting fee, and shall not be deemed to create or continue an
employee-employer relationship or to represent a continuation of any provision of this Agreement.

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     5. Benefits. Subject to the terms and conditions of this Agreement,
during the Employment Period, Executive shall be entitled to all of the following:

          (a) Reimbursement of Business Expenses. The Partnership shall pay or reimburse
Executive for all reasonable travel, entertainment and other business expenses paid or incurred by
Executive in the performance of duties hereunder. The Partnership shall also provide Executive
with suitable office space, including staff support, paid parking, and necessary equipment,
including but not limited to cellular telephone and laptop computer.

          (b) Other Employee Benefits. Executive shall be entitled to participate in any
pension, retirement, 401(k), profit-sharing, and other employee benefits plans or programs of the
Partnership to the same extent as available to other key management employees of the Partnership
under the terms of such plans or programs. Executive shall also be entitled to participate in any
group insurance, hospitalization, medical, dental, health, life, accident, disability and other
employee benefits plans or programs of the Partnership to the extent available to other key
management employees of the Partnership, and their spouses and eligible dependents, under the
terms of such plans or programs, including any medical expense reimbursement account and
post-retirement medical program as available to other key management employees of the Partnership.

          (c) Vacation and Holidays. Executive shall be entitled to four (4) weeks of paid
vacation per calendar year (prorated in any calendar year during which Executive is employed for
less than the entire year based on the number of days in such calendar year in which Executive was
employed). Executive shall also be entitled to all paid holidays and personal days provided by the
Partnership for its key management employees under the Partnership’s personnel policy as then
effective. Unused vacation shall not carryover to the following year unless specifically approved
by the Partnership.

          (d) Nonqualified Deferred Compensation. Executive shall be entitled to
participate in any nonqualified plan of deferred compensation maintained by the Partnership,
Holding Co., the General Partner or any of the Subsidiaries, to the same extent as available to
any other key management employees of such entities. If, and to the extent, that any such plan
relates or is attributable to compensation derived from the equity of Holding Co., such
compensation shall come solely from the interests held by the Class A Limited Partners in Holding
Co.

          (e) Equity Grants. Executive shall be entitled to participate in any long-term
incentive plan providing for equity grants or other incentive awards, the amount of which is based
upon the value of the Partnership or an Affiliate, to the same extent as available to any other
key management employees of the Partnership. Specifically, the Partnership shall provide a
participation in the equity of Holding Co. for the benefit of the Executive. Such participation in
any equity plan shall come solely from the interests held by the Class A Limited Partners in
Holding Co.

          (f) Annual Physical. Executive shall be entitled to be reimbursed by the
Partnership for the full cost of an annual physical examination by a physician (i) selected by the
Partnership or (ii) selected by Executive and approved by the Partnership.

          (g) Key Man Life Insurance. The Partnership may, at any time during the term of
this Agreement, apply for and procure as owner, and for its sole benefit, life insurance on the
Executive’s life in such amounts and in such forms as the Partnership may select. Executive hereby
acknowledges that Executive will have no interest whatsoever in any such insurance policy.
Executive must submit to such medical examinations, supply such information, and execute such
documents as may be reasonably requested by the insuring companies to obtain any such key man
policy.

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     6. Rights and Payments upon Termination. The Executive’s right to compensation and
benefits for periods after the date on which Executive’s employment terminates with the
Partnership and all Affiliates (the “Termination Date”), shall be determined in accordance with
this Section 6, as follows:

          (a) Minimum Payments and Vesting. Executive shall be entitled to the following minimum
payments under this Section 6(a), in addition to any other payments or benefits to which
Executive is entitled to receive under the terms of any employee benefit plan or program or
Section 6(b):

	 	(1)	 	unpaid salary for the full month in which the Termination Date
occurred; provided, however, if Executive is terminated for Cause (as defined
in Section 6(d)), Executive shall only be entitled to receive accrued
but unpaid salary through the Termination Date;
	 
	 	(2)	 	unpaid vacation days for that year which have accrued through the
Termination Date;
	 
	 	(3)	 	reimbursement of reasonable business expenses which were incurred
but unpaid as of the Termination Date; and
	 
	 	(4)	 	to the extent Executive participated in any nonqualified deferred
compensation or incentive plan or program with vesting criteria, or received
any equity grant that is not fully vested, Executive will be automatically
100% vested as of the Termination Date.

     Such salary and accrued vacation days shall be paid to Executive within five (5)
business days following the Termination Date in a cash lump sum less applicable
withholdings. Business expenses shall be reimbursed in accordance with the Partnership’s
normal procedures.

          (b) Other Severance Payments. In the event that during the Term of Employment (i) Executive’s
employment is involuntarily terminated by the Partnership (except due to a “No Severance Benefits
Event” (as defined in Section 6(d)), (ii) Executive’s employment is terminated due to
“Disability” or “Retirement” (as such terms are defined in Section 6(d)) or (iii)
Executive terminates his employment for Good Reason (as defined in Section 6(d)), then in
any such event under clause (i), clause (ii) or clause (iii), the following severance benefits
shall be provided to Executive or, in the event of death before receiving all such benefits, to
Executive’s “Designated Beneficiary” (as defined in Section 6(d)) following death:

     (1) The Partnership shall pay as additional compensation (the “Additional
Payment”), an amount equal to Two (2) years of Base Salary in effect as of the Termination
Date. The Partnership shall make the Additional Payment to Executive in a cash lump sum,
net of applicable withholdings, not later than sixty (60) calendar days following the
Termination Date.

     (2) COBRA Coverage. The Partnership shall maintain continued group
health plan coverage following the Termination Date under all plans subject to the
Consolidated Omnibus Budget Reconciliation Act of 1985, as amended (“COBRA”) (as codified
in Code Section 4980B and Part 6 of Subtitle B of Title I of ERISA) for Executive and
Executive’s eligible spouse and dependents for the maximum period for which such qualified
beneficiaries are eligible to receive COBRA coverage. However, Executive (and Executive’s
spouse and dependents) shall not be required to pay more for such COBRA coverage than is
charged by the Partnership to its key management employees who are then in active service
for the Partnership and receiving coverage

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under such plan and, therefore, the Partnership shall be responsible for the
difference between the amount charged hereunder and the full COBRA premiums for a period of
one (1) year following Executive’s Termination Date. In all other respects, Executive (and
Executive’s spouse and dependents) shall be treated the same as other COBRA qualified
beneficiaries under the terms of such plans and the provisions of COBRA. In the event of
any change to a group health plan following the Termination Date, Executive and Executive’s
spouse and dependents, as applicable, shall be treated consistently with the then-current
key management employees of the Partnership with respect to the terms and conditions of
coverage and other substantive provisions of the plan. Executive and Executive’s spouse
hereby agree to acquire and maintain any and all coverage that either or both of them are
entitled to at any time during their lives under the Medicare program or any similar
program of the United States or any agency thereof. Executive and Executive’s spouse
further agree to pay any required premiums for Medicare coverage from their personal funds.

     For purposes of clarity, in the event that (i) Executive voluntarily resigns or otherwise
voluntarily terminates employment, except due to Disability or Retirement (as such terms are
defined in Section 6(d)) or for Good Reason, or (ii) Executive’s employment is terminated
due to a No Severance Benefits Event (as defined in Section 6(d)), then, in either such
event under clause (i) or (ii), the Partnership shall have no obligation to provide the severance
benefits described in paragraphs (1) and (2) (above) of this Section 6(b), except to offer
COBRA coverage (as required by COBRA law) but not at the discounted rate described in paragraph
(2). Executive shall still be entitled to the minimum benefits provided under Section
6(a). The severance payments provided under Section 6(b) shall supersede and replace
any severance payments under any severance pay plan that the Partnership or any Affiliate
maintains for key management employees or employees generally.

          (c) Release Agreement. Notwithstanding any provision of the Agreement to the contrary, in
order to receive the severance benefits provided under Section 6(b), the Executive must
first execute an appropriate release agreement (on a form provided by the Partnership) whereby the
Executive agrees to release and waive, in return for such severance benefits, any claims that
Executive may have against the Partnership or any of its Affiliates including, without limitation,
for unlawful discrimination (e.g., Title VII of the Civil Rights Act); provided,
however, such release agreement shall not release any claim or cause of action by or on behalf of
the Executive for (a) any payment or benefit that may be due or payable under this Agreement or
any employee benefit plan or program prior to the receipt thereof, (b) nonpayment of salary or
benefits to which Executive is entitled from the Partnership as of the Termination Date, or (c) a
breach of this Agreement by the Partnership.

          (d) Definitions.

	 	(1)	 	“Affiliate” means Holding Co., General Partner, the Subsidiaries and any
parent or subsidiary company, or any other entity in whatever form, of which
the Partnership has any controlling ownership interest or ownership or
management control, or vice-versa, as determined by the Partnership.
	 
	 	(2)	 	“Cause” means any of the following: (A) the Executive’s conviction
by a court of competent jurisdiction of a crime involving moral turpitude or a
felony, or entering the plea of nolo contendere to such crime by the
Executive; (B) the commission by the Executive of a demonstrable act of fraud,
or a misappropriation of funds or property, of or upon the Partnership or any
Affiliate; (C) the engagement by the Executive, without the written approval
of the Partnership and Holding Co., in any material activity which directly
competes with the business of the Partnership or any Affiliate, or which would
directly result in a material injury to the business or reputation of the
Partnership

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	 	 	 	or any Affiliate (including the partners of Holding Co.); or (D) (i) the
breach by Executive of any material provision of this Agreement, and
Executive’s continued failure to cure such breach within a reasonable time
period set by the Partnership but in no event less than twenty (20)
calendar days after Executive’s receipt of such notice.
	 
	 	(3)	 	“Code” means the Internal Revenue Code of 1986, as amended, or its
successor. References herein to any Section of the Code shall include any
successor provisions of the Code.
	 
	 	(4)	 	“Designated Beneficiary” means the Executive’s surviving spouse, if
any. If there is no such surviving spouse at the time of Executive’s death,
then the Designated Beneficiary hereunder shall be Executive’s estate.
	 
	 	(5)	 	“Disability” shall mean that (a) Executive is unable to engage in
any substantial gainful activity by reason of any medically determinable
physical or mental impairment which can be expected to result in death or last
for a continuous period of not less than 12 months, or (b) by reason of any
medically determinable physical or mental impairment which can be expected to
result in death or to last for a continuous period of not less than 12 months,
Executive is receiving income replacement for a period of not less than three
months under an accident and health plan covering employees of the
Partnership. Evidence of such Disability shall be certified by a physician
acceptable to both the Partnership and Executive. In the event that the
Parties are not able to agree on the choice of a physician, each shall select
one physician who, in turn, shall select a third physician to render such
certification. All costs relating to the determination of whether Executive
has incurred a Disability shall be paid by the Partnership. Executive agrees
to submit to any examinations that are reasonably required by the attending
physician or other healthcare service providers to determine whether Executive
has a Disability.
	 
	 	(6)	 	“Dispute” means any dispute, disagreement, claim, or controversy
arising from, in connection with, or relating to (a) the employment, or
termination of employment, of Executive, or (b) the Agreement, or the
validity, interpretation, performance, breach or termination of the Agreement.
	 
	 	(7)	 	“Good Reason” means the occurrence of any of the following, if not
cured and corrected by the Partnership or its successor, within 60 days after
written notice thereof is provided by Executive to the Partnership or its
successor: (a) the demotion or reduction in title or rank of Executive, or the
assignment to Executive of duties that are materially inconsistent with
Executive’s current positions, duties, responsibilities and status with the
Partnership, or any removal of the Executive from, or any failure to reelect
the Executive to, any of such positions (other than a change due to the
Executive’s Disability or as an accommodation under the American with
Disabilities Act), except for any such demotion, reduction, assignment,
removal or failure that occurs in connection with (i) Executive’s termination
of employment for Cause, Disability or death, or (ii) Executive’s prior
written consent; (b) the reduction of the Executive’s annual base salary or
bonus opportunity as compared to base salary and bonus opportunity as
effective immediately prior to such reduction without the prior

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	 	 	 	written consent of Executive; (c) a relocation of Executive’s principal
work location to a location in excess of 50 miles from its then current
location.
	 
	 	(8)	 	“No Severance Benefits Event” means termination of Executive’s
employment by the Partnership (i) for Cause (as defined above) or due to death
or (ii) arising from or in connection with the sale of Holding Co. and its
subsidiaries, in one transaction or in a series of related transactions,
whether structured as (1) a sale or transfer of all or substantially all of
the partnership or equity interest of the Partnership and its subsidiaries
(including by way of merger, consolidation, share exchange or other similar
transaction) or (2) the sale or transfer of all or substantially all of the
assets of the Holding Co. and its subsidiaries or (3) a combination of (1) and
(2).
	 
	 	(9)	 	“Retirement” means the termination of Executive’s employment for
normal retirement at or after attaining age seventy (70), provided that, on
the date of retirement, Executive has accrued at least five years of active
service as an employee with the Partnership or its Affiliates.

     7. Notice of Termination. Any termination by the Partnership or the Executive shall
be communicated by Notice of Termination to the other Party hereto. For purposes of this
Agreement, the term “Notice of Termination” means a written notice which indicates the specific
termination provision of this Agreement relied upon and sets forth in reasonable detail the facts
and circumstances claimed to provide a basis for termination of the Executive’s employment under
the provision so indicated.

     8. No Mitigation. Subject to Section 6(b)(2), Executive shall not
be required to mitigate the amount of any payment or other benefits provided under this Agreement
by seeking other employment or in any other manner.

     9. Restrictive Covenants. As an inducement to the Partnership to enter
into this Agreement, Executive represents to, and covenants with or in favor of, the Partnership
that Executive will comply with all of the restrictive covenants in Sections 9 through 17,
as a condition to the Partnership’s obligation to provide any benefits to Executive under this
Agreement.

     10. Trade Secrets.

          (a) Access to Trade Secrets. As of the Effective Date and on an ongoing basis, the
Partnership agrees to give Executive access to Trade Secrets which the Executive did not have
access to, or knowledge of, before the Effective Date.

          (b) Access to Specialized Training. As of the Effective Date and on an ongoing
basis, the Partnership has provided, and agrees to provide on an ongoing basis, Executive with
Specialized Training which the Executive does not have access to, or knowledge of, before the
Effective Date.

          (c) Agreement Not to Use or Disclose Trade Secrets. In exchange for the
Partnership’s promises to provide Executive with access to Trade Secrets and Specialized Training
and the other consideration and benefits provided to Executive under this Agreement, Executive
agrees, during the Employment Period, and any time thereafter, not to disclose to anyone,
including, without limitation, any person, firm, corporation or other entity, or publish or use
for any purpose, any Trade Secrets and Specialized Training, except as required in the ordinary
course of the Partnership’s business or as authorized by the Partnership.

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          (d) Agreement to Refrain from Defamatory Statements. Executive shall refrain,
both during the Employment Period and thereafter, from publishing any oral or written statements
about any directors, partners, officers, employees, agents, investors or representatives of the
Partnership or any Affiliate that are slanderous, libelous, or defamatory; or that disclose
private or confidential information about the business affairs, directors, partners, officers,
employees, agents, investors or representatives of the Partnership or any Affiliate; or that
constitute an intrusion into the seclusion or private lives of any such person; or that give rise
to unreasonable publicity about the private life of any such person; or that place any such person
in a false light before the public; or that constitute a misappropriation of the name or likeness
of any such person. A violation or threatened violation of these restrictive covenants may be
enjoined by a court of law notwithstanding the arbitration provisions of Section 29.

          (e) Definitions. The following terms, when used in this Agreement, are defined
below:

	 	(1)	 	“Restricted Territory” means, collectively each county (or
equivalent subdivision) of any state, district, or territory of North America
as to which the Partnership conducts its business; and any area adjacent to
such counties (or equivalent territories) to the extent such are within a
50-mile radius of any producing property or leasehold of the Partnership.
	 
	 	(2)	 	“Specialized Training” includes the training the Partnership
provides to Executive that is unique to its business and enhances Executive’s
ability to perform Executive’s job duties effectively. Specialized Training
includes, without limitation, sales methods/techniques training; operation
methods training; engineering and scientific training; and computer and
systems training.
	 
	 	(3)	 	“Trade Secrets” means any and all information and materials
(in any form or medium) that are proprietary to the Partnership or an
Affiliate, or are treated as confidential by the Partnership or Affiliate as
part of, or relating to, all or any portion of its or their business,
including information and materials about the products and services offered by
the Partnership or an Affiliate; compilations of information, records and
specifications, properties, processes, programs, and systems of the
Partnership or Affiliate; research for the Partnership or an Affiliate; and
methods of doing business of the Partnership or an Affiliate. Trade Secrets
include, without limitation, all of the Partnership’s or Affiliate’s technical
and business information, whether patentable or not, which is of a
confidential, trade secret or proprietary character, and which is either
developed by the Executive alone, or with others or by others; lists of
customers; identity of customers; contract terms; bidding information and
strategies; pricing methods or information; computer software; computer
software methods and documentation; hardware; the Partnership’s or Affiliate’s
methods of business operations; the procedures, forms and techniques used in
conducting its business operations; and other documents, information or data
that the Partnership requires to be maintained in confidence for the
Partnership’s business success.

     11. Duty to Return Partnership Documents and Property. Upon termination of the
Employment Period, Executive shall immediately return and deliver to the Partnership any and all
papers, books, records, documents, memoranda and manuals, e-mail, electronic or magnetic
recordings or data, including all copies thereof, belonging to the Partnership or relating to its
business, in Executive’s possession, whether prepared by Executive or others. If at any time after
the Employment Period,

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Executive determines that Executive has any Trade Secrets in Executive’s possession or
control, Executive shall immediately return them to the Partnership, including all copies thereof.

     12. Best Efforts and Disclosure. Executive agrees that, while employed
with the Partnership, Executive’s services shall be devoted on a full time basis to the
Partnership’s business, and Executive shall use best efforts to promote its success. Further,
Executive shall promptly disclose to the Partnership all ideas, inventions, computer programs, and
discoveries, whether or not patentable or copyrightable, which Executive may conceive or make,
alone or with others, during the Employment Period, whether or not during working hours, and which
directly or indirectly:

     (a) relate to a matter within the scope, field, duties or responsibility
of Executive’s employment with the Partnership; or

     (b) are based on any knowledge of the actual or anticipated business or
interests of the Partnership; or

     (c) are aided by the use of time, materials, facilities or information of
the Partnership.

     Executive assigns to the Partnership, without further compensation, any and all rights,
titles and interest in all such ideas, inventions, computer programs and discoveries in all
countries of the world. Executive recognizes that all ideas, inventions, computer programs and
discoveries of the type described above, conceived or made by Executive alone or with others
within 12 months after the Termination Date (voluntary or otherwise), are likely to have been
conceived in significant part either while employed by the Partnership or as a direct result of
knowledge Executive had of proprietary information or Trade Secrets. Accordingly, Executive agrees
that such ideas, inventions or discoveries shall be presumed to have been conceived during the
Employment Period, unless and until the contrary is clearly established by the Executive.

     13. Inventions and Other Works. Any and all writings, computer software,
inventions, improvements, processes, procedures and/or techniques which Executive may make,
conceive, discover, or develop, either solely or jointly with any other person or persons, at any
time during the Employment Period, whether at the request or upon the suggestion of the
Partnership or otherwise, which relate to or are useful in connection with any business now or
hereafter carried on or contemplated by the Partnership, including developments or expansions of
its present fields of operations, shall be the sole and exclusive property of the Partnership.
Executive agrees to take any and all actions necessary or appropriate so that the Partnership can
prepare and present applications for copyright or Letters Patent therefore, and secure such
copyright or Letters Patent wherever possible, as well as reissue renewals, and extensions
thereof, and obtain the record title to such copyright or patents. Executive shall not be entitled
to any additional or special compensation or reimbursement regarding any such writings, computer
software, inventions, improvements, processes, procedures and techniques. Executive acknowledges
that the Partnership from time to time may have agreements with other persons or entities which
impose obligations or restrictions on the Partnership regarding inventions made during the course
of work thereunder or regarding the confidential nature of such work. Executive agrees to be bound
by all such obligations and restrictions, and to take all action necessary to discharge the
obligations of the Partnership.

     14. Non-Solicitation Restriction. To protect Trade Secrets after
termination of the Employment Period, it is necessary to enter into the following restrictive
covenants, which are ancillary to the enforceable promises between the Partnership and Executive
in Sections 9 through 13 and other provisions of this Agreement. Following the Termination
Date (regardless of the reason for termination), Executive hereby covenants and agrees that
Executive will not, directly or indirectly, without the prior

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written consent of the Partnership, either individually or as a principal, partner, agent,
consultant, contractor, employee, or as a director or officer of any entity, or in any other
manner or capacity whatsoever, except on behalf of the Partnership, solicit business, or attempt
to solicit business, in products or services competitive with any products or services offered or
performed by the Partnership or its Affiliates in any business which the Partnership or any of its
Affiliates does business or has any business interest as of the Termination Date, or either (a)
from those individuals or entities with whom the Partnership or Affiliate conducted business with
or (b) with respect to any assets or holdings in which the Partnership or Affiliate had any
interest, at any time during the one (1) year period ending on the Termination Date. The
prohibitions set forth in this Section 15 shall remain in effect for a period of one (1)
year following the Termination Date.

     15. Non-Competition Restriction. Executive hereby agrees that in order to
protect Trade Secrets, it is necessary to enter into the following restrictive covenant, which is
ancillary to the enforceable promises between the Partnership and Executive in Sections 9
through 14 and other provisions of this Agreement. Executive hereby covenants and agrees that
during the Employment Period, and for a period of one (1) year following the Termination Date
(regardless of the reason for termination), Executive will not, without the prior written consent
of the Partnership, become interested in any capacity in which Executive would perform any similar
duties to those performed while at the Partnership, directly or indirectly (whether as proprietor,
stockholder, director, partner, employee, agent, independent contractor, consultant, trustee, or
in any other capacity), with respect to any entity engaged in the business of oil and gas
exploration and production within the Restricted Territory (a “Competing Enterprise”); provided,
however, Executive shall not be deemed to be participating or engaging in a Competing Enterprise
solely by virtue of the ownership of not more than one percent (1%) of any class of stock or other
securities which are publicly traded on a national securities exchange or in a recognized
over-the-counter market.

     16. No-Recruitment Restriction. Executive agrees that during the
Employment Period, and for a period of one (1) year following the Termination Date (regardless of
the reason for termination), Executive will not, either directly or indirectly, or by acting in
concert with others, solicit or influence, or seek to solicit or influence, any employee or
independent contractor performing services for the Partnership or any Affiliate to terminate,
reduce or otherwise adversely affect Executive’s employment or other relationship with the
Partnership or any Affiliate.

     17. Tolling. If Executive violates any of the restrictions contained in
Sections 9 through 16, then notwithstanding any provision hereof to the contrary, the
restrictive period will be suspended and will not run in favor of Executive from the time of the
commencement of any such violation, unless and until such time when the Executive cures the
violation to the reasonable satisfaction of the Partnership.

     18. Reformation. If a court or arbitrator rules that any time period or
the geographic area specified in any restrictive covenant in Sections 9 through 17 is
unenforceable, then the time period will be reduced by the number of months, or the geographic
area will be reduced by the elimination of such unenforceable portion, or both, so that the
restrictions may be enforced in the geographic area and for the time to the full extent permitted
by law.

     19. No Previous Restrictive Agreements. Executive represents that, except
as disclosed in writing to the Partnership as of the Effective Date, Executive is not bound by the
terms of any agreement with any previous employer or other third party to (a) refrain from using
or disclosing any confidential or proprietary information in the course of Executive’s employment
by the Partnership or (b) refrain from competing, directly or indirectly, with the business of
such previous employer or any other person or entity. Executive further represents that
Executive’s performance under this Agreement and work duties for the Partnership do not, and will
not, breach any agreement to keep in confidence proprietary

10

 

information, knowledge or data acquired by Executive in confidence or in trust prior to
Executive’s employment with the Partnership, and Executive will not disclose to the Partnership or
induce the Partnership to use any confidential or proprietary information or material belonging to
any previous employer or others.

     20. Conflicts of Interest. In keeping with Executive’s fiduciary duties
to the Partnership, Executive hereby agrees that Executive shall not become involved in a conflict
of interest, or upon discovery thereof, allow such a conflict to continue at any time during the
Employment Period. In this respect, Executive agrees to fully comply with the conflict of interest
agreement entered into by Executive as an employee, officer or director of the Partnership or an
Affiliate. In the instance of a violation of the conflict of interest agreement to which Executive
is a party, it may be necessary for the Partnership to terminate Executive’s employment for Cause
(as defined in Section 6(d)).

     21. Remedies. Executive acknowledges that the restrictions contained in
Sections 9 through 20 of this Agreement, in view of the nature of the Partnership’s
business, are reasonable and necessary to protect the Partnership’s legitimate business interests,
and that any violation of this Agreement would result in irreparable injury to the Partnership.
Notwithstanding the arbitration provisions in Section 28, in the event of a breach or a
threatened breach by Executive of any provision of Sections 9 through 20 of this
Agreement, the Partnership shall be entitled to a temporary restraining order and injunctive
relief restraining Executive from the commission of any breach, and to recover the Partnership’s
attorneys’ fees, costs and expenses related to the breach or threatened breach. Nothing contained
in this Agreement shall be construed as prohibiting the Partnership from pursuing any other
remedies available to it for any such breach or threatened breach, including, without limitation,
the recovery of money damages, attorneys’ fees, and costs. These covenants and agreements shall
each be construed as independent of any other provisions in this Agreement, and the existence of
any claim or cause of action by Executive against the Partnership, whether predicated on this
Agreement or otherwise, shall not constitute a defense to the enforcement by the Partnership of
such covenants and agreements.

     22. Withholdings; Right of Offset. The Partnership may withhold and
deduct from any benefits and payments made or to be made pursuant to this Agreement (a) all
federal, state, local and other taxes as may be required pursuant to any law or governmental
regulation or ruling, (b) all other normal employee deductions made with respect to Partnership’s
employees generally, and (c) any advances made to Executive and owed to Partnership.

     23. Nonalienation. The right to receive payments under this Agreement
shall not be subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge
or encumbrance by Executive, dependents or beneficiaries of Executive, or to any other person who
is or may become entitled to receive such payments hereunder. The right to receive payments
hereunder shall not be subject to or liable for the debts, contracts, liabilities, engagements or
torts of any person who is or may become entitled to receive such payments, nor may the same be
subject to attachment or seizure by any creditor of such person under any circumstances, and any
such attempted attachment or seizure shall be void and of no force and effect.

     24. Incompetent or Minor Payees. Should the Partnership determine, in its
discretion, that any person to whom any payment is payable under this Agreement has been
determined to be legally incompetent or is a minor, any payment due hereunder, notwithstanding any
other provision of this Agreement to the contrary, may be made in any one or more of the following
ways: (a) directly to such minor or person; (b) to the legal guardian or other duly appointed
personal representative of the person or estate of such minor or person; or (c) to such adult or
adults as have, in the good faith knowledge of the Partnership, assumed custody and support of
such minor or person; and any payment so made shall constitute full and complete discharge of any
liability under this Agreement in respect to the amount paid.

11

 

     25. Severability. It is the desire of the Parties hereto that this
Agreement be enforced to the maximum extent permitted by law, and should any provision contained
herein be held unenforceable by a court of competent jurisdiction or arbitrator (pursuant to
Section 28), the Parties hereby agree and consent that such provision shall be reformed to
create a valid and enforceable provision to the maximum extent permitted by law; provided,
however, if such provision cannot be reformed, it shall be deemed ineffective and deleted herefrom
without affecting any other provision of this Agreement. This Agreement should be construed by
limiting and reducing it only to the minimum extent necessary to be enforceable under then
applicable law.

     26. Title and Headings; Construction. Titles and headings to Sections
hereof are for the purpose of reference only and shall in no way limit, define or otherwise affect
the provisions hereof. The words “herein”, “hereof”, “hereunder” and other compounds of the word
“here” shall refer to the entire Agreement and not to any particular provision.

     27. Governing Law; Jurisdiction. All matters or issues relating to the
interpretation, construction, validity, and enforcement of this Agreement shall be governed by the
laws of the State of Texas, without giving effect to any choice-of-law principle that would cause
the application of the laws of any jurisdiction other than Texas. Jurisdiction and venue of any
action or proceeding relating to this Agreement or any Dispute (to the extent arbitration is not
required under Section 28) shall be exclusively in Houston, Texas.

     28. Mandatory Arbitration. Except as provided in subsection (h) of this
Section 28, any Dispute (as defined in Section 6(d)) must be resolved by binding
arbitration in accordance with the following:

          (a) Either Party may begin arbitration by filing a demand for arbitration in
accordance with the Arbitration Rules and concurrently notifying the other Party of that demand.
If the Parties are unable to agree upon a panel of three arbitrators within ten days after the
demand for arbitration was filed (and do not agree to an extension of that ten-day period), either
Party may request the Houston, Texas office of the American Arbitration Association (“AAA”) to
appoint the arbitrator or arbitrators necessary to complete the panel in accordance with the
Arbitration Rules. Each arbitrator so appointed shall be deemed accepted by the Parties as part of
the panel. Notwithstanding the foregoing, the Parties, by mutual consent, may agree to a single
arbitrator instead of a panel of three arbitrators and, in such event, references herein to
“panel” shall refer to the single appointed arbitrator.

          (b) The arbitration shall be conducted in the Houston, Texas metropolitan area at
a place and time agreed upon by the Parties with the panel, or if the Parties cannot agree, as
designated by the panel. The panel may, however, call and conduct hearings and meetings at such
other places as the Parties may agree or as the panel may, on the motion of one Party, determine
to be necessary to obtain significant testimony or evidence.

          (c) The panel may authorize any and all forms of discovery upon a Party’s showing
of need that the requested discovery is likely to lead to material evidence needed to resolve the
Dispute and is not excessive in scope, timing, or cost.

          (d) The arbitration shall be subject to the Federal Arbitration Act and conducted
in accordance with the Arbitration Rules to the extent that they do not conflict with this
Section 28. The Parties and the panel may, however, agree to vary to provisions of this
Section 28 or the matters otherwise governed by the Arbitration Rules.

12

 

          (e) The arbitration hearing shall be held within 60 days after the appointment of the panel.
The panel’s final decision or award shall be made within 30 days after the hearing. That final
decision or award shall be made by unanimous or majority vote or consent of the arbitrators
constituting the panel, and shall be deemed issued at the place of arbitration. The panel’s final
decision or award shall be based on the terms and conditions of this Agreement and applicable law.

          (f) The panel’s final decision or award may include injunctive relief in response
to any actual or impending breach of this Agreement or any other actual or impending action or
omission of a Party under or in connection with this Agreement.

          (g) The panel’s final decision or award shall be final and binding upon the
Parties, and judgment upon that decision or award may be entered in any court having jurisdiction.
The Parties waive any right to apply or appeal to any court for relief from the preceding sentence
or from any decision of the panel that is made before the final decision or award.

          (h) Nothing in this Section 28 limits the right of either Party to apply
to a court having jurisdiction to (i) enforce the agreement to arbitrate in accordance with this
Section 28, (ii) seek provisional or temporary injunctive relief, in response to an actual
or impending breach of the Agreement or otherwise so as to avoid an irreparable damage or maintain
the status quo, until a final arbitration decision or award is rendered or the Dispute is
otherwise resolved, or (iii) challenge or vacate any final arbitration decision or award that does
not comply with this Section 28. In addition, nothing in this Section 28 prohibits
the Parties from resolving any Dispute (in whole or in part) at any time by mutual agreement or
compromise. This Section 28 shall also not preclude the Parties at any time from mutually
agreeing to pursue non-binding mediation of the Dispute.

          (i) The panel may proceed to an award notwithstanding the failure of any Party to
participate in such proceedings. The prevailing Party in the arbitration proceeding may be
entitled to an award of reasonable attorneys’ fees incurred in connection with the arbitration in
such amount, if any, as determined by the panel in its discretion. The costs of the arbitration
shall be borne equally by the Parties unless otherwise determined by the panel in its award.

          (j) The panel shall be empowered to impose sanctions and to take such other actions as it
deems necessary to the same extent a judge could impose sanctions or take such other actions
pursuant to the Federal Rules of Civil Procedure and applicable law. Each party agrees to keep all
Disputes and arbitration proceedings strictly confidential except for disclosure of information
required by applicable law which cannot be waived.

     29. Binding Effect: Third Party Beneficiaries. This Agreement shall be
binding upon and inure to the benefit of the Parties hereto, and to their respective heirs,
executors, beneficiaries, personal representatives, successors and permitted assigns hereunder.
Holding Co. and its partners shall expressly be deemed to be third party beneficiaries of the
covenants and agreements of the parties hereto; otherwise this Agreement shall not be for the
benefit of any third parties.

     30. Entire Agreement; Amendment and Termination. This Agreement contains
the entire agreement of the Parties hereto with respect to the matters covered herein; moreover,
this Agreement supersedes all prior and contemporaneous agreements and understandings, oral or
written, between the Parties concerning the subject matter hereof. This Agreement may be amended,
waived or terminated only by a written instrument that is identified as an amendment, waiver or
termination hereto, and is executed on behalf of both Parties.

13

 

     31. Survival of Certain Provisions. Wherever appropriate to the intention
of the Parties, the respective rights and obligations of the Parties hereunder shall survive any
termination or expiration of this Agreement.

     32. Waiver of Breach. No waiver by either Party hereto of a breach of any
provision of this Agreement by any other Party, or of compliance with any condition or provision
of this Agreement to be performed by such other Party, will operate or be construed as a waiver of
any subsequent breach by such other Party or any similar or dissimilar provision or condition at
the same or any subsequent time. The failure of either Party hereto to take any action by reason
of any breach will not deprive such Party of the right to take action at any time while such
breach continues.

     33. Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the Partnership and its Affiliates (and its and their successors), as well
as upon any person or entity acquiring, whether by merger, consolidation, purchase of assets,
dissolution or otherwise, all or substantially all of the capital stock, business and/or assets of
the Partnership (or its successor) regardless of whether the Partnership is the surviving or
resulting corporation. The Partnership shall require any successor (whether direct or indirect, by
purchase, merger, consolidation, dissolution or otherwise) to all or substantially all of the
capital stock, business or assets of the Partnership to expressly assume and agree to perform this
Agreement in the same manner and to the same extent that the Partnership would be required to
perform it if no such succession had occurred; provided, however, no such assumption shall relieve
the Partnership of any of its duties or obligations hereunder unless otherwise agreed, in writing,
by Executive.

     This Agreement shall inure to the benefit of and be enforceable by Executive’s personal or
legal representative, executors, administrators, successors, and heirs. In the event of the death
of Executive while any amount is payable hereunder, all such amounts shall be paid to the
Designated Beneficiary (as defined in Section 6(d)).

     34. Notice. Each notice or other communication required or permitted
under this Agreement shall be in writing and transmitted, delivered, or sent by personal delivery,
prepaid courier or messenger service (whether overnight or same-day), or prepaid certified United
States mail (with return receipt requested), addressed (in any case) to the other Party at the
address for that Party set forth below that Party’s signature on this Agreement, or at such other
address as the recipient has designated by Notice to the other Party.

     Each notice or communication so transmitted, delivered, or sent (a) in person, by courier or
messenger service, or by certified United States mail shall be deemed given, received, and
effective on the date delivered to or refused by the intended recipient (with the return receipt,
or the equivalent record of the courier or messenger, being deemed conclusive evidence of delivery
or refusal), or (b) by telecopy or facsimile shall be deemed given, received, and effective on the
date of actual receipt (with the confirmation of transmission being deemed conclusive evidence of
receipt, except where the intended recipient has promptly notified the other Party that the
transmission is illegible). Nevertheless, if the date of delivery or transmission is not a
business day, or if the delivery or transmission is after 5:00 p.m. on a business day, the notice
or other communication shall be deemed given, received, and effective on the next business day.

     35. Executive Acknowledgment. Executive acknowledges (a) being
knowledgeable and sophisticated as to business matters, including the subject matter of this
Agreement, (b) having read this Agreement and understanding its terms and conditions, (c) having
been given an ample opportunity to discuss this Agreement with Executive’s personal legal counsel
prior to execution, and (d) that no strict rules of construction shall apply for or against the
drafter or any other Party. Executive hereby represents

14

 

that Executive is free to enter into this Agreement including, without limitation, that
Executive is not subject to any covenant not to compete that would conflict with any duties under
this Agreement.

     36. Counterparts. This Agreement may be executed in any number of
counterparts, each of which when so executed and delivered shall be an original, but all such
counterparts shall together constitute one and the same instrument. Each counterpart may consist of
a copy hereof containing multiple signature pages, each signed by one party hereto, but together
signed by both Parties.

[Signature page follows.]

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     IN WITNESS WHEREOF, Executive has executed this Agreement and the Partnership has caused
this Agreement to be executed in its name and on its behalf by its duly authorized representative,
to be effective as of the Effective Date.

	 	 	 	 	 	 	 

	WITNESS:

	 	EXECUTIVE:
	 
	 	 	 	 	 	 
	Signature: 

	/s/ Carol Gore
	 	Signature:
	 	/s/ Harlan H. Chappelle
	 

	 
	 	 	 	 
	 

	Name: 	Carol Gore
	 	 	 	Name: Harlan H. Chappelle
	 

	Date: 	8/28/06
	 	 	 	Date: 28 August 2006
	 
	 	 	 	 	 	 
	 

	 	 	 	 	 	Address for Notices:
	 
	 	 	 	 	 	 
	 

	 	 	 	 	 	10 N. Lansdowne Circle
	 

	 	 	 	 	 	The Woodlands, TX 77382
	 
	 	 	 	 	 	 

	 	 	 	 	 	 	 

	ATTEST:

	 	 	ALTA MESA SERVICES, LP:
	 
	 	 	 	 	 	 
	By: 

	 	 	 	By:
	 	/s/ Michael E. Ellis
	 

	 
	 	 	 	 
	 

	Title: 	 	 	 	 	Its: Vice President
	 

	 	 	 	 	 	 
	

	Name: 	 	 	 	 	Name: Michael E. Ellis
	 

	 	 	 	 	 	 
	

	Date: 	 	 	 	 	Date: 8/28/06
	 

	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 

	 	 	 	 	 	Address for Notices:
	 
	 	 	 	 	 	 
	 

	 	 	 	 	 	Alta Mesa Services, LP
	 

	 	 	 	 	 	6200 Highway 6 South, Suite 201
	 

	 	 	 	 	 	Houston, Texas 77083-1539
	 
	 	 	 	 	 	 
	 

	 	 	 	 	 	Attention: Harlan H. Chappelle

16exv10w5

Exhibit 10.5

EMPLOYMENT AGREEMENT

     THIS EMPLOYMENT AGREEMENT (the “Agreement”), is made and entered into as of August 31, 2006
(the ‘“Effective Date”), by and between Alta Mesa Services, LP, a Texas limited partnership
(hereafter “Partnership”) and Michael E. Ellis (hereafter “Executive”). The Partnership and
Executive may sometimes hereafter be referred to singularly as a “Party” or collectively as the
“Parties.”

W
I T N E S S E T H:

     WHEREAS, the Partnership desires to continue to secure the employment services of Executive
subject to the terms and conditions hereafter set forth;

     WHEREAS the Partnership provides various services including management services to Alta Mesa
Holdings, LP (“Holding Co.”), Alta Mesa Holdings GP (“General Partner”), and all Subsidiaries of
Holding Co., under the Shared Services and Expenses Agreement dated as of January 1, 2006 between
the Partnership, Holding Co., General Partner and the Subsidiaries (“Services Agreement”);

     WHEREAS, the Executive is willing to enter into this Agreement upon the terms and conditions
hereafter set forth;

     NOW, THEREFORE, in consideration of Executive’s employment with the Partnership, and the
premises and mutual covenants contained herein, the Parties hereto agree as follows:

     1. Employment. During the Employment Period (as defined in Section 4 hereof),
the Partnership shall employ Executive, and Executive shall serve as, Vice President and Chief
Operating Officer of the Partnership. Executive’s principal place of employment shall be at the
main business offices of the Partnership in Houston, Texas.

     2. Compensation.

          (a) Base Salary. The Partnership shall pay to Executive during the Employment Period a base
salary of $400,000 per year, as adjusted pursuant to the subsequent provisions of this paragraph
(the “Base Salary”). The Base Salary shall be payable in accordance with the Partnership’s normal
payroll schedule and procedures for its executives. Nothing contained herein shall preclude the
payment of any other compensation to Executive at any time as determined by the Partnership.

          (b) Annual Bonus. In addition to the Base Salary in Section 2(a), for each annual
fiscal year of the Partnership during the Employment Period (as defined in Section 4)
(each such annual period being referred to as a “Bonus Period”), Executive shall be entitled to a
bonus equal to a percentage of Executive’s Base Salary paid during each such one year period
(referred to herein as the “Annual Bonus”), such percentage to be established by the Partnership
in its sole discretion, and approved by Holding Co.; provided, however, Executive shall be
entitled to the Annual Bonus only if Executive has met the performance criteria set by the
Partnership for the applicable period.

     In the event that the Employment Period ends before the end of the Bonus Period, Executive
shall be entitled to a pro rata portion of the Annual Bonus for that year (based on the number of
days in which Executive was employed during the year divided by 365), as determined based on
satisfaction of the performance criteria for that period on a pro rata basis, unless Executive was
terminated for Cause (as defined in Section 6(d), in which event Executive shall not be
entitled to any Annual Bonus for that year.

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Executive acknowledges that the amount and performance criteria for Executive’s Annual Bonus
to be earned for each Bonus Period shall be set on or before the beginning of the applicable Bonus
Period. If Executive successfully meets the performance criteria established by the Partnership,
the Partnership shall pay Executive the earned Annual Bonus amount within the earlier of: (i)
sixty days (60) days after the end of the Bonus Period or (ii) sixty days (60) after the end of
the Employment Period, as applicable.

          (c) Compensation in Event of Injury or Sickness. In the event Executive becomes injured or
suffers a medically determinable physical or mental illness, as determined by a physician
acceptable to both the Partnership and Executive in the same manner as provided in Section
6(d)(5), Executive shall be entitled to receive continued Base Salary as set forth in
Section 2(a) for a period of six (6) months following the occurrence of such injury or
sickness; provided, however, such Base Salary shall be reduced by any short-term and/or long-term
disability benefits that are received by Executive under such programs sponsored by the
Partnership during such six (6) month period.

     3. Duties and Responsibilities of Executive. During the Employment Period,
Executive’s services shall be devoted on substantially a full-time basis to (i) the business of
the Partnership as directed by the General Partner under the Services Agreement and (ii)
performance of the duties and responsibilities assigned to Executive by the Board or the Chief
Executive Officer, to the best of Executive’s ability and with reasonable diligence. In
determining Executive’s duties and responsibilities, Executive shall not be assigned duties and
responsibilities that are inappropriate for Executive’s position. This Section 3 shall not
be construed as preventing Executive from (a) engaging in reasonable volunteer services for
charitable, educational or civic organizations, or (b) investing personal assets in such a manner
that will not require a material amount of the Executive’s time or services in the operation of
the businesses in which such investments are made; provided, however, no such other activity shall
conflict with Executive’s loyalties and duties to the Partnership. Executive shall at all times
use best efforts to comply in good faith with United States laws applicable to Executive’s actions
on behalf of the Partnership and its Affiliates (as defined in Section 6(d)(1)). Executive
understands and agrees that Executive may be required to travel from time to time for purposes of
the Partnership’s business. The Parties agree that Executive’s principal work location cannot be
relocated further than 50 miles from Executive’s principal work location on the Effective Date,
except as mutually agreed by the Parties.

     4. Term of Employment. Executive’s initial term of employment with the Partnership
under this Agreement shall be for the period from the Effective Date through the date that is four
(4) years from the Effective Date (the “Initial Term of
Employment”). Thereafter, the Employment
Period hereunder shall be automatically extended repetitively for an additional one (1) year
period on each anniversary of the Effective Date, unless Notice of Termination (pursuant to
Section 7) is given by either the Partnership or Executive to the other Party at least
sixty (60) days prior to the end of the Initial Term of Employment or any one-year extension
thereof, as applicable, that the Agreement will not be renewed for a successive one-year period
after the end of the current one-year period. The Partnership and Executive shall each have the
right to give Notice of Termination at will, with or without cause, at any time subject, however,
to the terms and conditions of this Agreement regarding the rights and duties of the Parties upon
termination of employment. The Initial Term of Employment, and any one-year extension of
employment hereunder, shall each be referred to herein as a “Term of Employment.” The period from
the Effective Date through the date of Executive’s termination of employment with the Partnership
and all Affiliates, for whatever reason, shall be referred to herein as the “Employment Period.”
Notwithstanding the above, Executive agrees to remain available beyond the Employment Period to
provide assistance to the Partnership or its Affiliates in the event the Partnership or its
Affiliate become involved in litigation regarding matters of which Executive has relevant
knowledge resulting from Executive’s employment with the Partnership. Such post-termination
assistance shall be provided by Executive in the capacity of an independent contractor at an
agreed-upon, reasonable consulting fee,

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and shall not be deemed to create or continue an employee-employer relationship or to
represent a continuation of any provision of this Agreement.

     5. Benefits. Subject to the terms and conditions of this Agreement, during the
Employment Period, Executive shall be entitled to all of the following:

          (a) Reimbursement of Business Expenses. The Partnership shall pay or reimburse Executive for
all reasonable travel, entertainment and other business expenses paid or incurred by Executive in
the performance of duties hereunder. The Partnership shall also provide Executive with suitable
office space, including staff support, paid parking, and necessary equipment, including but not
limited to cellular telephone and laptop computer.

          (b) Other Employee Benefits. Executive shall be entitled to participate in any pension,
retirement, 401(k), profit-sharing, and other employee benefits plans or programs of the
Partnership to the same extent as available to other key management employees of the Partnership
under the terms of such plans or programs. Executive shall also be entitled to participate in any
group insurance, hospitalization, medical, dental, health, life, accident, disability and other
employee benefits plans or programs of the Partnership to the extent available to other key
management employees of the Partnership, and their spouses and eligible dependents, under the
terms of such plans or programs, including any medical expense reimbursement account and
post-retirement medical program as available to other key management employees of the Partnership.

          (c) Vacation and Holidays. Executive shall be entitled to four (4) weeks of paid vacation per
calendar year (prorated in any calendar year during which Executive is employed for less than the
entire year based on the number of days in such calendar year in which Executive was employed).
Executive shall also be entitled to all paid holidays and personal days provided by the
Partnership for its key management employees under the Partnership’s personnel policy as then
effective. Unused vacation shall not carryover to the following year unless specifically approved
by the Partnership.

          (d) Nonqualified Deferred Compensation. Executive shall be entitled to participate in any
nonqualified plan of deferred compensation maintained by the Partnership, Holding Co., the General
Partner or any of the Subsidiaries, to the same extent as available to any other key management
employees of such entities. If, and to the extent, that any such plan relates or is attributable
to compensation derived from the equity of Holding Co., such compensation shall come solely from
the interests held by the Class A Limited Partners in Holding Co.

          (e) Equity Grants. Executive shall be entitled to participate in any long-term incentive plan
providing for equity grants or other incentive awards, the amount of which is based upon the value
of the Partnership or an Affiliate, to the same extent as available to any other key management
employees of the Partnership. Specifically, the Partnership shall provide a participation in the
equity of Holding Co. for the benefit of the Executive. Such participation in any equity plan
shall come solely from the interests held by the Class A Limited Partners in Holding Co.

          (f) Annual Physical. Executive shall be entitled to be reimbursed by the Partnership for the
full cost of an annual physical examination by a physician (i) selected by the Partnership or (ii)
selected by Executive and approved by the Partnership.

          (g) Key Man Life Insurance. The Partnership may, at any time during the term of this
Agreement, apply for and procure as owner, and for its sole benefit, life insurance on the
Executive’s life in such amounts and in such forms as the Partnership may select. Executive hereby
acknowledges

3

 

that Executive will have no interest whatsoever in any such insurance policy. Executive must
submit to such medical examinations, supply such information, and execute such documents as may be
reasonably requested by the insuring companies to obtain any such key man policy.

     6. Rights and Payments upon Termination. The Executive’s right to compensation and
benefits for periods after the date on which Executive’s employment terminates with the
Partnership and all Affiliates (the “Termination Date”), shall be determined in accordance with
this Section 6, as follows:

          (a) Minimum Payments and Vesting. Executive shall be entitled to the following minimum
payments under this Section 6(a), in addition to any other payments or benefits to which
Executive is entitled to receive under the terms of any employee benefit plan or program or
Section 6(b):

	 	(1)	 	unpaid salary for the full month in which the Termination Date
occurred; provided, however, if Executive is terminated for Cause (as defined
in Section 6(d)), Executive shall only be entitled to receive accrued
but unpaid salary through the Termination Date;
	 
	 	(2)	 	unpaid vacation days for that year which have accrued through
the Termination Date;
	 
	 	(3)	 	reimbursement of reasonable business expenses which were
incurred but unpaid as of the Termination Date; and
	 
	 	(4)	 	to the extent Executive participated in any nonqualified
deferred compensation or incentive plan or program with vesting criteria, or
received any equity grant that is not fully vested, Executive will be
automatically 100% vested as of the Termination Date.

     Such salary and accrued vacation days shall be paid to Executive within five (5)
business days following the Termination Date in a cash lump sum less applicable
withholdings. Business expenses shall be reimbursed in accordance with the Partnership’s
normal procedures.

          (b) Other Severance Payments. In the event that during the Term of Employment (i) Executive’s
employment is involuntarily terminated by the Partnership (except due to a “No Severance Benefits
Event” (as defined in Section 6(d)), (ii) Executive’s employment is terminated due to
“Disability” or “Retirement” (as such terms are defined in Section 6(d)) or (iii)
Executive terminates his employment for Good Reason (as defined in Section 6(d)), then in
any such event under clause (i), clause (ii) or clause (iii), the following severance benefits
shall be provided to Executive or, in the event of death before receiving all such benefits, to
Executive’s “Designated Beneficiary” (as defined in Section 6(d)) following death:

     (1)
The Partnership shall pay as additional compensation (the “Additional Payment”),
an amount equal to Two (2) years of Base Salary in effect as of the Termination Date. The
Partnership shall make the Additional Payment to Executive in a cash lump sum, net of
applicable withholdings, not later than sixty (60) calendar days following the Termination
Date.

     (2) COBRA Coverage. The Partnership shall maintain continued group health plan
coverage following the Termination Date under all plans subject to the Consolidated Omnibus
Budget Reconciliation Act of 1985, as amended (“COBRA”) (as codified in Code Section 4980B
and Part 6 of Subtitle B of Title I of ERISA) for Executive and Executive’s eligible spouse
and

4

 

dependents for the maximum period for which such qualified beneficiaries are eligible
to receive COBRA coverage. However, Executive (and Executive’s spouse and dependents) shall
not be required to pay more for such COBRA coverage than is charged by the Partnership to
its key management employees who are then in active service for the Partnership and
receiving coverage under such plan and, therefore, the Partnership shall be responsible for
the difference between the amount charged hereunder and the full COBRA premiums for a
period of one (1) year following Executive’s Termination Date. In all other respects,
Executive (and Executive’s spouse and dependents) shall be treated the same as other COBRA
qualified beneficiaries under the terms of such plans and the provisions of COBRA. In the
event of any change to a group health plan following the Termination Date, Executive and
Executive’s spouse and dependents, as applicable, shall be treated consistently with the
then-current key management employees of the Partnership with respect to the terms and
conditions of coverage and other substantive provisions of the plan. Executive and
Executive’s spouse hereby agree to acquire and maintain any and all coverage that either or
both of them are entitled to at any time during their lives under the Medicare program or
any similar program of the United States or any agency thereof. Executive and Executive’s
spouse further agree to pay any required premiums for Medicare coverage from their personal
funds.

     For purposes of clarity, in the event that (i) Executive voluntarily resigns or otherwise
voluntarily terminates employment, except due to Disability or Retirement (as such terms are
defined in Section 6(d)) or for Good Reason, or (ii) Executive’s employment is terminated
due to a No Severance Benefits Event (as defined in Section 6(d)), then, in either such
event under clause (i) or (ii), the Partnership shall have no obligation to provide the severance
benefits described in paragraphs (1) and (2) (above) of this Section 6(b), except to offer
COBRA coverage (as required by COBRA law) but not at the discounted rate described in paragraph
(2). Executive shall still be entitled to the minimum benefits provided under Section
6(a). The severance payments provided under Section 6(b) shall supersede and replace
any severance payments under any severance pay plan that the Partnership or any Affiliate
maintains for key management employees or employees generally.

          (c) Release Agreement. Notwithstanding any provision of the Agreement to the contrary, in
order to receive the severance benefits provided under Section 6(b), the Executive must
first execute an appropriate release agreement (on a form provided by the Partnership) whereby the
Executive agrees to release and waive, in return for such severance benefits, any claims that
Executive may have against the Partnership or any of its Affiliates including, without limitation,
for unlawful discrimination (e.g., Title VII of the Civil Rights Act); provided, however, such
release agreement shall not release any claim or cause of action by or on behalf of the Executive
for (a) any payment or benefit that may be due or payable under this Agreement or any employee
benefit plan or program prior to the receipt thereof, (b) nonpayment of salary or benefits to
which Executive is entitled from the Partnership as of the Termination Date, or (c) a breach of
this Agreement by the Partnership.

          (d) Definitions.

	 	(1)	 	“Affiliate” means Holding Co., General Partner, the
Subsidiaries and any parent or subsidiary company, or any other entity in
whatever form, of which the Partnership has any controlling ownership interest
or ownership or management control, or vice-versa, as determined by the
Partnership.
	 
	 	(2)	 	“Cause” means any of the following: (A) the Executive’s
conviction by a court of competent jurisdiction of a crime involving moral
turpitude or a felony, or entering the plea of nolo contendere to such crime
by the Executive; (B) the commission by the Executive of a demonstrable act of
fraud, or a

5

 

	 	 	 	misappropriation of funds or property, of or upon the Partnership or any
Affiliate; (C) the engagement by the Executive, without the written
approval of the Partnership and Holding Co., in any material activity which
directly competes with the business of the Partnership or any Affiliate, or
which would directly result in a material injury to the business or
reputation of the Partnership or any Affiliate (including the partners of
Holding Co.); or (D) (i) the breach by Executive of any material provision
of this Agreement, and Executive’s continued failure to cure such breach
within a reasonable time period set by the Partnership but in no event less
than twenty (20) calendar days after Executive’s receipt of such notice.
	 
	 	(3)	 	“Code” means the Internal Revenue Code of 1986, as amended, or
its successor. References herein to any Section of the Code shall include any
successor provisions of the Code.
	 
	 	(4)	 	“Designated Beneficiary” means the Executive’s surviving
spouse, if any. If there is no such surviving spouse at the time of
Executive’s death, then the Designated Beneficiary hereunder shall be
Executive’s estate.
	 
	 	(5)	 	“Disability” shall mean that (a) Executive is unable to engage
in any substantial gainful activity by reason of any medically determinable
physical or mental impairment which can be expected to result in death or last
for a continuous period of not less than 12 months, or (b) by reason of any
medically determinable physical or mental impairment which can be expected to
result in death or to last for a continuous period of not less than 12 months,
Executive is receiving income replacement for a period of not less than three
months under an accident and health plan covering employees of the
Partnership. Evidence of such Disability shall be certified by a physician
acceptable to both the Partnership and Executive. In the event that the
Parties are not able to agree on the choice of a physician, each shall select
one physician who, in turn, shall select a third physician to render such
certification. All costs relating to the determination of whether Executive
has incurred a Disability shall be paid by the Partnership. Executive agrees
to submit to any examinations that are reasonably required by the attending
physician or other healthcare service providers to determine whether Executive
has a Disability.
	 
	 	(6)	 	“Dispute” means any dispute, disagreement, claim, or
controversy arising from, in connection with, or relating to (a) the
employment, or termination of employment, of Executive, or (b) the Agreement,
or the validity, interpretation, performance, breach or termination of the
Agreement.
	 
	 	(7)	 	“Good Reason” means the occurrence of any of the following, if
not cured and corrected by the Partnership or its successor, within 60 days
after written notice thereof is provided by Executive to the Partnership or
its successor: (a) the demotion or reduction in title or rank of Executive, or
the assignment to Executive of duties that are materially inconsistent with
Executive’s current positions, duties, responsibilities and status with the
Partnership, or any removal of the Executive from, or any failure to reelect
the Executive to, any of such positions (other than a change due to the
Executive’s Disability or as an accommodation under the American with
Disabilities Act), except for any such demotion, reduction, assignment,
removal or failure that occurs in connection

6

 

	 	 	 	with (i) Executive’s termination of employment for Cause, Disability or
death, or (ii) Executive’s prior written consent; (b) the reduction of the
Executive’s annual base salary or bonus opportunity as compared to base
salary and bonus opportunity as effective immediately prior to such
reduction without the prior written consent of Executive; (c) a relocation
of Executive’s principal work location to a location in excess of 50 miles
from its then current location.
	 
	 	(8)	 	“No Severance Benefits Event” means termination of Executive’s
employment by the Partnership (i) for Cause (as defined above) or due to death
or (ii) arising from or in connection with the sale of Holding Co. and its
subsidiaries, in one transaction or in a series of related transactions,
whether structured as (1) a sale or transfer of all or substantially all of
the partnership or equity interest of the Partnership and its subsidiaries
(including by way of merger, consolidation, share exchange or other similar
transaction) or (2) the sale or transfer of all or substantially all of the
assets of the Holding Co. and its subsidiaries or (3) a combination of (1) and
(2).
	 
	 	(9)	 	“Retirement” means the termination of Executive’s employment
for normal retirement at or after attaining age seventy (70), provided that,
on the date of retirement, Executive has accrued at least five years of active
service as an employee with the Partnership or its Affiliates.

     7. Notice of Termination. Any termination by the Partnership or the Executive shall
be communicated by Notice of Termination to the other Party hereto. For purposes of this
Agreement, the term “Notice of Termination” means a written notice which indicates the specific
termination provision of this Agreement relied upon and sets forth in reasonable detail the facts
and circumstances claimed to provide a basis for termination of the Executive’s employment under
the provision so indicated.

     8. No Mitigation. Subject to Section 6(b)(2), Executive shall not be required
to mitigate the amount of any payment or other benefits provided under this Agreement by seeking
other employment or in any other manner.

     9. Restrictive Covenants. As an inducement to the Partnership to enter into this
Agreement, Executive represents to, and covenants with or in favor of, the Partnership that
Executive will comply with all of the restrictive covenants in Sections 9 through 17, as a
condition to the Partnership’s obligation to provide any benefits to Executive under this
Agreement.

     10. Trade Secrets.

          (a) Access to Trade Secrets. As of the Effective Date and on an ongoing basis, the
Partnership agrees to give Executive access to Trade Secrets which the Executive did not have
access to, or knowledge of, before the Effective Date.

          (b) Access to Specialized Training. As of the Effective Date and on an ongoing basis, the
Partnership has provided, and agrees to provide on an ongoing basis, Executive with Specialized
Training which the Executive does not have access to, or knowledge of, before the Effective Date.

          (c) Agreement Not to Use or Disclose Trade Secrets. In exchange for the Partnership’s
promises to provide Executive with access to Trade Secrets and Specialized Training and the other
consideration and benefits provided to Executive under this Agreement, Executive agrees,

7

 

during the Employment Period, and any time thereafter, not to disclose to anyone, including,
without limitation, any person, firm, corporation or other entity, or publish or use for any
purpose, any Trade Secrets and Specialized Training, except as required in the ordinary course of
the Partnership’s business or as authorized by the Partnership.

          (d) Agreement to Refrain from Defamatory Statements. Executive shall refrain, both during the
Employment Period and thereafter, from publishing any oral or written statements about any
directors, partners, officers, employees, agents, investors or representatives of the Partnership
or any Affiliate that are slanderous, libelous, or defamatory; or that disclose private or
confidential information about the business affairs, directors, partners, officers, employees,
agents, investors or representatives of the Partnership or any Affiliate; or that constitute an
intrusion into the seclusion or private lives of any such person; or that give rise to
unreasonable publicity about the private life of any such person; or that place any such person in
a false light before the public; or that constitute a misappropriation of the name or likeness of
any such person. A violation or threatened violation of these restrictive covenants may be
enjoined by a court of law notwithstanding the arbitration provisions of Section 29.

          (e) Definitions. The following terms, when used in this Agreement, are defined below:

	 	(1)	 	“Restricted Territory” means, collectively each county (or
equivalent subdivision) of any state, district, or territory of North America
as to which the Partnership conducts its business; and any area adjacent to
such counties (or equivalent territories) to the extent such are within a
50-mile radius of any producing property or leasehold of the Partnership.

	 	(2)	 	“Specialized Training” includes the training the Partnership
provides to Executive that is unique to its business and enhances Executive’s
ability to perform Executive’s job duties effectively. Specialized Training
includes, without limitation, sales methods/techniques training; operation
methods training; engineering and scientific training; and computer and
systems training.

	 	(3)	 	“Trade Secrets” means any and all information and materials
(in any form or medium) that are proprietary to the Partnership or an
Affiliate, or are treated as confidential by the Partnership or Affiliate as
part of, or relating to, all or any portion of its or their business,
including information and materials about the products and services offered by
the Partnership or an Affiliate; compilations of information, records and
specifications, properties, processes, programs, and systems of the
Partnership or Affiliate; research for the Partnership or an Affiliate; and
methods of doing business of the Partnership or an Affiliate. Trade Secrets
include, without limitation, all of the Partnership’s or Affiliate’s technical
and business information, whether patentable or not, which is of a
confidential, trade secret or proprietary character, and which is either
developed by the Executive alone, or with others or by others; lists of
customers; identity of customers; contract terms; bidding information and
strategies; pricing methods or information; computer software; computer
software methods and documentation; hardware; the Partnership’s or Affiliate’s
methods of business operations; the procedures, forms and techniques used in
conducting its business operations; and other documents, information or data
that the Partnership requires to be maintained in confidence for the
Partnership’s business success.

8

 

     11. Duty to Return Partnership Documents and Property. Upon termination of the
Employment Period, Executive shall immediately return and deliver to the Partnership any and all
papers, books, records, documents, memoranda and manuals, e-mail, electronic or magnetic
recordings or data, including all copies thereof, belonging to the Partnership or relating to its
business, in Executive’s possession, whether prepared by Executive or others. If at any time after
the Employment Period, Executive determines that Executive has any Trade Secrets in Executive’s
possession or control, Executive shall immediately return them to the Partnership, including all
copies thereof.

     12. Best Efforts and Disclosure. Executive agrees that, while employed with the
Partnership, Executive’s services shall be devoted on a full time basis to the Partnership’s
business, and Executive shall use best efforts to promote its success. Further, Executive shall
promptly disclose to the Partnership all ideas, inventions, computer programs, and discoveries,
whether or not patentable or copyrightable, which Executive may conceive or make, alone or with
others, during the Employment Period, whether or not during working hours, and which directly or
indirectly:

     (a) relate to a matter within the scope, field, duties or responsibility of
Executive’s employment with the Partnership; or

     (b) are based on any knowledge of the actual or anticipated business or interests of
the Partnership; or

     (c) are aided by the use of time, materials, facilities or information of the
Partnership.

     Executive assigns to the Partnership, without further compensation, any and all rights,
titles and interest in all such ideas, inventions, computer programs and discoveries in all
countries of the world. Executive recognizes that all ideas, inventions, computer programs and
discoveries of the type described above, conceived or made by Executive alone or with others
within 12 months after the Termination Date (voluntary or otherwise), are likely to have been
conceived in significant part either while employed by the Partnership or as a direct result of
knowledge Executive had of proprietary information or Trade Secrets. Accordingly, Executive agrees
that such ideas, inventions or discoveries shall be presumed to have been conceived during the
Employment Period, unless and until the contrary is clearly established by the Executive.

     13. Inventions and Other Works. Any and all writings, computer software, inventions,
improvements, processes, procedures and/or techniques which Executive may make, conceive,
discover, or develop, either solely or jointly with any other person or persons, at any time
during the Employment Period, whether at the request or upon the suggestion of the Partnership or
otherwise, which relate to or are useful in connection with any business now or hereafter carried
on or contemplated by the Partnership, including developments or expansions of its present fields
of operations, shall be the sole and exclusive property of the Partnership. Executive agrees to
take any and all actions necessary or appropriate so that the Partnership can prepare and present
applications for copyright or Letters Patent therefor, and secure such copyright or Letters Patent
wherever possible, as well as reissue renewals, and extensions thereof, and obtain the record
title to such copyright or patents. Executive shall not be entitled to any additional or special
compensation or reimbursement regarding any such writings, computer software, inventions,
improvements, processes, procedures and techniques. Executive acknowledges that the Partnership
from time to time may have agreements with other persons or entities which impose obligations or
restrictions on the Partnership regarding inventions made during the course of work thereunder or
regarding the confidential nature of such work. Executive agrees to be bound by all such
obligations and restrictions, and to take all action necessary to discharge the obligations of the
Partnership.

9

 

     14. Non-Solicitation Restriction. To protect Trade Secrets after termination of the
Employment Period, it is necessary to enter into the following restrictive covenants, which are
ancillary to the enforceable promises between the Partnership and Executive in Sections 9
through 13 and other provisions of this Agreement. Following the Termination Date (regardless
of the reason for termination), Executive hereby covenants and agrees that Executive will not,
directly or indirectly, without the prior written consent of the Partnership, either individually
or as a principal, partner, agent, consultant, contractor, employee, or as a director or officer
of any entity, or in any other manner or capacity whatsoever, except on behalf of the Partnership,
solicit business, or attempt to solicit business, in products or services competitive with any
products or services offered or performed by the Partnership or its Affiliates in any business
which the Partnership or any of its Affiliates does business or has any business interest as of
the Termination Date, or either (a) from those individuals or entities with whom the Partnership
or Affiliate conducted business with or (b) with respect to any assets or holdings in which the
Partnership or Affiliate had any interest, at any time during the one (1) year period ending on
the Termination Date. The prohibitions set forth in this Section 15 shall remain in effect
for a period of one (1) year following the Termination Date.

     15. Non-Competition Restriction. Executive hereby agrees that in order to protect
Trade Secrets, it is necessary to enter into the following restrictive covenant, which is
ancillary to the enforceable promises between the Partnership and Executive in Sections 9
through 14 and other provisions of this Agreement. Executive hereby covenants and agrees that
during the Employment Period, and for a period of one (1) year following the Termination Date
(regardless of the reason for termination), Executive will not, without the prior written consent
of the Partnership, become interested in any capacity in which Executive would perform any similar
duties to those performed while at the Partnership, directly or indirectly (whether as proprietor,
stockholder, director, partner, employee, agent, independent contractor, consultant, trustee, or
in any other capacity), with respect to any entity engaged in the business of oil and gas
exploration and production within the Restricted Territory (a
“Competing Enterprise”); provided,
however, Executive shall not be deemed to be participating or engaging in a Competing Enterprise
solely by virtue of the ownership of not more than one percent (1%) of any class of stock or other
securities which are publicly traded on a national securities exchange or in a recognized
over-the-counter market.

     16. No-Recruitment Restriction. Executive agrees that during the Employment Period,
and for a period of one (1) year following the Termination Date (regardless of the reason for
termination), Executive will not, either directly or indirectly, or by acting in concert with
others, solicit or influence, or seek to solicit or influence, any employee or independent
contractor performing services for the Partnership or any Affiliate to terminate, reduce or
otherwise adversely affect Executive’s employment or other relationship with the Partnership or
any Affiliate.

     17. Tolling. If Executive violates any of the restrictions contained in Sections
9 through 16, then notwithstanding any provision hereof to the contrary, the restrictive
period will be suspended and will not run in favor of Executive from the time of the commencement
of any such violation, unless and until such time when the Executive cures the violation to the
reasonable satisfaction of the Partnership.

     18. Reformation. If a court or arbitrator rules that any time period or the
geographic area specified in any restrictive covenant in Sections 9 through 17 is
unenforceable, then the time period will be reduced by the number of months, or the geographic
area will be reduced by the elimination of such unenforceable portion, or both, so that the
restrictions may be enforced in the geographic area and for the time to the full extent permitted
by law.

     19. No Previous Restrictive Agreements. Executive represents that, except as
disclosed in writing to the Partnership as of the Effective Date, Executive is not bound by the
terms of any agreement

10

 

with any previous employer or other third party to (a) refrain from using or disclosing any
confidential or proprietary information in the course of Executive’s employment by the Partnership
or (b) refrain from competing, directly or indirectly, with the business of such previous employer
or any other person or entity. Executive further represents that Executive’s performance under
this Agreement and work duties for the Partnership do not, and will not, breach any agreement to
keep in confidence proprietary information, knowledge or data acquired by Executive in confidence
or in trust prior to Executive’s employment with the Partnership, and Executive will not disclose
to the Partnership or induce the Partnership to use any confidential or proprietary information or
material belonging to any previous employer or others.

     20. Conflicts of Interest. In keeping with Executive’s fiduciary duties to the
Partnership, Executive hereby agrees that Executive shall not become involved in a conflict of
interest, or upon discovery thereof, allow such a conflict to continue at any time during the
Employment Period. In this respect, Executive agrees to fully comply with the conflict of interest
agreement entered into by Executive as an employee, officer or director of the Partnership or an
Affiliate. In the instance of a violation of the conflict of interest agreement to which Executive
is a party, it may be necessary for the Partnership to terminate Executive’s employment for Cause
(as defined in Section 6(d)).

     21. Remedies. Executive acknowledges that the restrictions contained in Sections
9 through 20 of this Agreement, in view of the nature of the Partnership’s business, are
reasonable and necessary to protect the Partnership’s legitimate business interests, and that any
violation of this Agreement would result in irreparable injury to the Partnership. Notwithstanding
the arbitration provisions in Section 28, in the event of a breach or a threatened breach
by Executive of any provision of Sections 9 through 20 of this Agreement, the Partnership
shall be entitled to a temporary restraining order and injunctive relief restraining Executive
from the commission of any breach, and to recover the Partnership’s attorneys’ fees, costs and
expenses related to the breach or threatened breach. Nothing contained in this Agreement shall be
construed as prohibiting the Partnership from pursuing any other remedies available to it for any
such breach or threatened breach, including, without limitation, the recovery of money damages,
attorneys’ fees, and costs. These covenants and agreements shall each be construed as independent
of any other provisions in this Agreement, and the existence of any claim or cause of action by
Executive against the Partnership, whether predicated on this Agreement or otherwise, shall not
constitute a defense to the enforcement by the Partnership of such covenants and agreements.

     22. Withholdings; Right of Offset. The Partnership may withhold and deduct from any
benefits and payments made or to be made pursuant to this Agreement (a) all federal, state, local
and other taxes as may be required pursuant to any law or governmental regulation or ruling, (b)
all other normal employee deductions made with respect to Partnership’s employees generally, and
(c) any advances made to Executive and owed to Partnership.

     23. Nonalienation. The right to receive payments under this Agreement shall not be
subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge or
encumbrance by Executive, dependents or beneficiaries of Executive, or to any other person who is
or may become entitled to receive such payments hereunder. The right to receive payments hereunder
shall not be subject to or liable for the debts, contracts, liabilities, engagements or torts of
any person who is or may become entitled to receive such payments, nor may the same be subject to
attachment or seizure by any creditor of such person under any circumstances, and any such
attempted attachment or seizure shall be void and of no force and effect.

     24. Incompetent or Minor Payees. Should the Partnership determine, in its discretion,
that any person to whom any payment is payable under this Agreement has been determined to be
legally incompetent or is a minor, any payment due hereunder, notwithstanding any other provision
of this

11

 

Agreement to the contrary, may be made in any one or more of the following ways: (a) directly
to such minor or person; (b) to the legal guardian or other duly appointed personal representative
of the person or estate of such minor or person; or (c) to such adult or adults as have, in the
good faith knowledge of the Partnership, assumed custody and support of such minor or person; and
any payment so made shall constitute full and complete discharge of any liability under this
Agreement in respect to the amount paid.

     25. Severability. It is the desire of the Parties hereto that this Agreement be
enforced to the maximum extent permitted by law, and should any provision contained herein be held
unenforceable by a court of competent jurisdiction or arbitrator (pursuant to Section 28),
the Parties hereby agree and consent that such provision shall be reformed to create a valid and
enforceable provision to the maximum extent permitted by law; provided, however, if such provision
cannot be reformed, it shall be deemed ineffective and deleted herefrom without affecting any
other provision of this Agreement. This Agreement should be construed by limiting and reducing it
only to the minimum extent necessary to be enforceable under then applicable law.

     26. Title and Headings; Construction. Titles and headings to Sections hereof are for
the purpose of reference only and shall in no way limit, define or otherwise affect the provisions
hereof. The words “herein”, “hereof”, “hereunder” and other compounds of the word “here” shall
refer to the entire Agreement and not to any particular provision.

     27, Governing Law; Jurisdiction. All matters or issues relating to the
interpretation, construction, validity, and enforcement of this Agreement shall be governed by the
laws of the State of Texas, without giving effect to any choice-of-law principle that would cause
the application of the laws of any jurisdiction other than Texas. Jurisdiction and venue of any
action or proceeding relating to this Agreement or any Dispute (to the extent arbitration is not
required under Section 28) shall be exclusively in Houston, Texas.

     28. Mandatory Arbitration. Except as provided in subsection (h) of this Section
28, any Dispute (as defined in Section 6(d)) must be resolved by binding arbitration
in accordance with the following:

          (a) Either Party may begin arbitration by filing a demand for arbitration in accordance with
the Arbitration Rules and concurrently notifying the other Party of that demand. If the Parties
are unable to agree upon a panel of three arbitrators within ten days after the demand for
arbitration was filed (and do not agree to an extension of that ten-day period), either Party may
request the Houston, Texas office of the American Arbitration Association (“AAA”) to appoint the
arbitrator or arbitrators necessary to complete the panel in accordance with the Arbitration
Rules. Each arbitrator so appointed shall be deemed accepted by the Parties as part of the panel.
Notwithstanding the foregoing, the Parties, by mutual consent, may agree to a single arbitrator
instead of a panel of three arbitrators and, in such event, references herein to “panel” shall
refer to the single appointed arbitrator.

          (b) The arbitration shall be conducted in the Houston, Texas metropolitan area at a place and
time agreed upon by the Parties with the panel, or if the Parties cannot agree, as designated by
the panel. The panel may, however, call and conduct hearings and meetings at such other places as
the Parties may agree or as the panel may, on the motion of one Party, determine to be necessary
to obtain significant testimony or evidence.

          (c) The panel may authorize any and all forms of discovery upon a Party’s showing of need
that the requested discovery is likely to lead to material evidence needed to resolve the Dispute
and is not excessive in scope, timing, or cost.

12

 

          (d) The arbitration shall be subject to the Federal Arbitration Act and conducted in
accordance with the Arbitration Rules to the extent that they do not conflict with this
Section 28. The Parties and the panel may, however, agree to vary to provisions of this
Section 28 or the matters otherwise governed by the Arbitration Rules.

          (e) The arbitration hearing shall be held within 60 days after the appointment of the panel.
The panel’s final decision or award shall be made within 30 days after the hearing. That final
decision or award shall be made by unanimous or majority vote or consent of the arbitrators
constituting the panel, and shall be deemed issued at the place of arbitration. The panel’s final
decision or award shall be based on the terms and conditions of this Agreement and applicable law.

          (f) The panel’s final decision or award may include injunctive relief in response to any
actual or impending breach of this Agreement or any other actual or impending action or omission
of a Party under or in connection with this Agreement.

          (g) The panel’s final decision or award shall be final and binding upon the Parties, and
judgment upon that decision or award may be entered in any court having jurisdiction. The Parties
waive any right to apply or appeal to any court for relief from the preceding sentence or from any
decision of the panel that is made before the final decision or award.

          (h) Nothing in this Section 28 limits the right of either Party to apply to a court
having jurisdiction to (i) enforce the agreement to arbitrate in accordance with this Section
28, (ii) seek provisional or temporary injunctive relief, in response to an actual or
impending breach of the Agreement or otherwise so as to avoid an irreparable damage or maintain
the status quo, until a final arbitration decision or award is rendered or the Dispute is
otherwise resolved, or (iii) challenge or vacate any final arbitration decision or award that does
not comply with this Section 28. In addition, nothing in this Section 28 prohibits
the Parties from resolving any Dispute (in whole or in part) at any time by mutual agreement or
compromise. This Section 28 shall also not preclude the Parties at any time from mutually
agreeing to pursue non-binding mediation of the Dispute.

          (i) The panel may proceed to an award notwithstanding the failure of any Party to participate
in such proceedings. The prevailing Party in the arbitration proceeding may be entitled to an
award of reasonable attorneys’ fees incurred in connection with the arbitration in such amount, if
any, as determined by the panel in its discretion. The costs of the arbitration shall be borne
equally by the Parties unless otherwise determined by the panel in its award.

          (j) The panel shall be empowered to impose sanctions and to take such other actions as it
deems necessary to the same extent a judge could impose sanctions or take such other actions
pursuant to the Federal Rules of Civil Procedure and applicable law. Each party agrees to keep all
Disputes and arbitration proceedings strictly confidential except for disclosure of information
required by applicable law which cannot be waived.

     29. Binding Effect: Third Party Beneficiaries. This Agreement shall be binding upon
and inure to the benefit of the Parties hereto, and to their respective heirs, executors,
beneficiaries, personal representatives, successors and permitted assigns hereunder. Holding Co.
and its partners shall expressly be deemed to be third party beneficiaries of the covenants and
agreements of the parties hereto; otherwise this Agreement shall not be for the benefit of any
third parties.

     30. Entire Agreement; Amendment and Termination. This Agreement contains the entire
agreement of the Parties hereto with respect to the matters covered herein; moreover, this
Agreement supersedes all prior and contemporaneous agreements and understandings, oral or written,
between the

13

 

Parties concerning the subject matter hereof. This Agreement may be amended, waived or
terminated only by a written instrument that is identified as an amendment, waiver or termination
hereto, and is executed on behalf of both Parties.

     31. Survival of Certain Provisions. Wherever appropriate to the intention of the
Parties, the respective rights and obligations of the Parties hereunder shall survive any
termination or expiration of this Agreement.

     32. Waiver of Breach. No waiver by either Party hereto of a breach of any provision
of this Agreement by any other Party, or of compliance with any condition or provision of this
Agreement to be performed by such other Party, will operate or be construed as a waiver of any
subsequent breach by such other Party or any similar or dissimilar provision or condition at the
same or any subsequent time. The failure of either Party hereto to take any action by reason of
any breach will not deprive such Party of the right to take action at any time while such breach
continues.

     33. Successors and Assigns. This Agreement shall be binding upon and inure to the
benefit of the Partnership and its Affiliates (and its and their successors), as well as upon any
person or entity acquiring, whether by merger, consolidation, purchase of assets, dissolution or
otherwise, all or substantially all of the capital stock, business and/or assets of the
Partnership (or its successor) regardless of whether the Partnership is the surviving or resulting
corporation. The Partnership shall require any successor (whether direct or indirect, by purchase,
merger, consolidation, dissolution or otherwise) to all or substantially all of the capital stock,
business or assets of the Partnership to expressly assume and agree to perform this Agreement in
the same manner and to the same extent that the Partnership would be required to perform it if no
such succession had occurred; provided, however, no such assumption shall relieve the Partnership
of any of its duties or obligations hereunder unless otherwise agreed, in writing, by Executive.

     This Agreement shall inure to the benefit of and be enforceable by Executive’s personal or
legal representative, executors, administrators, successors, and heirs. In the event of the death
of Executive while any amount is payable hereunder, all such amounts shall be paid to the
Designated Beneficiary (as defined in Section 6(d)).

     34. Notice. Each notice or other communication required or permitted under this
Agreement shall be in writing and transmitted, delivered, or sent by personal delivery, prepaid
courier or messenger service (whether overnight or same-day), or prepaid certified United States
mail (with return receipt requested), addressed (in any case) to the other Party at the address
for that Party set forth below that Party’s signature on this Agreement, or at such other address
as the recipient has designated by Notice to the other Party.

     Each notice or communication so transmitted, delivered, or sent (a) in person, by courier or
messenger service, or by certified United States mail shall be deemed given, received, and
effective on the date delivered to or refused by the intended recipient (with the return receipt,
or the equivalent record of the courier or messenger, being deemed conclusive evidence of delivery
or refusal), or (b) by telecopy or facsimile shall be deemed given, received, and effective on the
date of actual receipt (with the confirmation of transmission being deemed conclusive evidence of
receipt, except where the intended recipient has promptly notified the other Party that the
transmission is illegible). Nevertheless, if the date of delivery or transmission is not a
business day, or if the delivery or transmission is after 5:00 p.m. on a business day, the notice
or other communication shall be deemed given, received, and effective on the next business day.

14

 

     35. Executive Acknowledgment. Executive acknowledges (a) being knowledgeable and
sophisticated as to business matters, including the subject matter of this Agreement, (b) having
read this Agreement and understanding its terms and conditions, (c) having been given an ample
opportunity to discuss this Agreement with Executive’s personal legal counsel prior to execution,
and (d) that no strict rules of construction shall apply for or against the drafter or any other
Party. Executive hereby represents that Executive is free to enter into this Agreement including,
without limitation, that Executive is not subject to any covenant not to compete that would
conflict with any duties under this Agreement.

     36. Counterparts. This Agreement may be executed in any number of counterparts, each
of which when so executed and delivered shall be an original, but all such counterparts shall
together constitute one and the same instrument. Each counterpart may consist of a copy hereof
containing multiple signature pages, each signed by one party hereto, but together signed by both
Parties.

[Signature page follows.]

15

 

     IN WITNESS WHEREOF, Executive has executed this Agreement and the Partnership has caused this
Agreement to be executed in its name and on its behalf by its duly authorized representative, to be
effective as of the Effective Date.

	 	 	 	 	 	 	 

	WITNESS:

	 	EXECUTIVE:
	 
	 
	 	 	 	 	 	 
	Signature:

	 	/s/ Carol Gore
	 	Signature:
	 	/s/ Michael E. Ellis
	 

	 	 
	 	 	 	 
	 

	 	Name: Carol Gore
	 	 	 	Name: Michael E. Ellis
	 

	 	Date: 8/28/06
	 	 	 	Date: 8/28/06
	 
	 	 	 	 	 	 
	 

	 	 	 	 	 	Address for Notices:
	 
	 

	 	 	 	 	 	19214 Oak View Terrace
	 

	 	 	 	 	 	Houston, TX 77094
	 
	 	 	 	 	 	 

	 	 	 	 	 	 	 	 
	ATTEST:	 	 	ALTA MESA SERVICES, LP:
	 
	 	 	 	 	 	 	 
	By:

	 	 	 	 	By:
	 	/s/ Harlan H. Chappelle
	 

	 
	 	 	 	 
	

	Title:	 	 	 	 	 	Its: President
	 

	 	 	 	 	 	 	 
	

	Name:	 	 	 	 	 	Name: Harlan H. Chappelle
	 

	 	 	 	 	 	 	 
	 

	Date:	 	 	 	 	 	Date: 28 August 2006
	 

	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 

	 	 	 	 	 	 	Address for Notices:
	 
	 	 	 	 	 	 
	 

	 	 	 	 	 	 	Alta Mesa Services, LP
	 

	 	 	 	 	 	 	6200 Highway 6 South, Suite 201
	 

	 	 	 	 	 	 	Houston, Texas 77083-1539
	 
	 	 	 	 	 	 
	 

	 	 	 	 	 	 	Attention: Harlan H. Chappelle

16

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