Exhibit 10.12
EMPLOYMENT AGREEMENT
THIS AGREEMENT is made effective
September 2, 2006 (the “Effective Date” ),
between RIATA ENERGY, INC., a Texas corporation (the
“Company” ), and LARRY COSHOW, an individual
(the “Executive” ).
WITNESSETH:
WHEREAS, the Company and the
Executive desire to set forth the terms of their agreements
relating to the employment of Executive by the Company; and
NOW, THEREFORE, in consideration of
the mutual promises herein contained, the Company and the Executive
agree as follows:
1. Employment. The
Company hereby employs the Executive and the Executive hereby
accepts such employment subject to the terms and conditions
contained in this Agreement. The Executive is engaged as an
employee of the Company and the Executive and the Company do not
intend to create a joint venture, partnership or other relationship
that might impose a fiduciary obligation on the Executive or the
Company in the performance of this Agreement, other than as an
officer and director of the Company.
2. Executive’s
Duties. The Executive is employed on a full-time basis.
Throughout the term of this Agreement, the Executive will use his
best efforts and due diligence to assist the Company in the
objective of achieving the most profitable operation of the Company
and the Company’s affiliated entities consistent with
developing and maintaining a quality business operation. The
Executive shall also devote all of Executive’s working time,
attention and energies to the performance of Executive’s
duties and responsibilities under this Agreement.
2.1 Specific Duties. During
the term of this Agreement, the Executive will serve as the
Executive Vice-President of Land for the Company. The Executive
will perform all of the services required to fully and faithfully
execute the position to which the Executive is appointed and such
other services as may be assigned by the Company’s Board of
Directors in their sole discretion. The Executive agrees to use the
Executive’s best efforts to perform all of the services
required to fully and faithfully execute the offices and positions
to which the Executive is appointed and elected. In addition, the
precise duties to be performed by Executive may be changed or
curtailed in the sole discretion of the Board of Directors of the
Company.
2.2 Rules and Regulations.
From time to time, the Company may issue policies and procedures
applicable to employees and the Executive including a policy
manual. The Executive agrees to comply with such policies and
procedures, except to the extent such policies are inconsistent
with this Agreement. Such policies and procedures may be
supplemented, modified, changed or adopted without notice in the
sole discretion of the Company at any time. In the event of a
conflict between such policies and procedures and this Agreement,
this Agreement will control unless
compliance with
this Agreement will violate any law or regulation applicable to the
Company or its affiliated entities.
3. Other Activities. The
Executive shall not engage in any business activity that in the
judgment of the Board conflicts with the Executive’s duties
hereunder, whether or not such activity is pursued for gain,
profit, or other pecuniary advantage. In addition, except for the
activities permitted under paragraph 3.1 of this Agreement or
approved by the Board of Directors in writing, the Executive will
not: (a) engage in activities which require such substantial
services on the part of the Executive that the Executive is unable
to perform the duties assigned to the Executive in accordance with
this Agreement; (b) serve as an officer or director of any
publicly held entity; or (c) directly or indirectly invest in,
participate in or acquire an interest in any oil and gas business,
including, without limitation, (i) producing oil and gas,
(ii) drilling, owning or operating oil and gas leases or
wells, (iii) providing services or materials to the oil and
gas industry, (iv) marketing or refining oil or gas, or
(v) owning any interest in any corporation, partnership,
company or entity which conducts any of the foregoing activities.
The limitations in this paragraph 3 will not prohibit an investment
by the Executive in publicly traded securities. The Executive is
not restricted from maintaining or making investments, or engaging
in other businesses, enterprises or civic, charitable or public
service functions if such activities, investments, businesses or
enterprises do not result in a violation of clauses
(a) through (c) of this paragraph 3. Notwithstanding the
foregoing, the Executive will be permitted to participate in the
activities set forth in Section 3.1 that will be deemed to be
approved by the Company, if such activities are undertaken in
strict compliance with this Agreement.
3.1 Royalty Interests and
Gifts. The foregoing restriction in clause (c) will not
prohibit the ownership of royalty interests where the Executive
owns or previously owned the surface of the land covered by the
royalty interest and the ownership of the royalty interest is
incidental to the ownership of the surface estate or the ownership
of royalty, overriding royalty or working interests that are
received by gift or inheritance subject to disclosure by Executive
to the Company in writing.
4. Executive’s
Compensation. The Company agrees to compensate the Executive as
follows:
4.1 Base Salary. Executive
will be paid a base salary (the “Base Salary” )
in an annual rate of not less than Three Hundred Thousand Dollars
($300,000.00), which will be paid to the Executive in installments
consistent with the Company’s customary payroll practices,
during the term of this Agreement.
4.2 Bonus. In addition to the
Base Salary described at paragraph 4.1 of this Agreement, the
Company may periodically pay bonus compensation to the Executive.
Executive, however, is guaranteed a minimum bonus during the first
year of employment. During the first year of employment, Executive
shall be paid a bonus of not less than One Hundred Seventy-Five
Thousand Dollars ($175,000.00). Such bonus will be paid pro rata on
a semi-annual basis on or before January 31 and July 31
of the applicable calendar year. Any bonus compensation will be
paid by separate check apart
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from
Executive’s Base Salary less appropriate deductions pursuant
to Internal Revenue Service guidelines. In order to be entitled to
the bonus compensation set forth herein and any future bonuses,
Executive must be an active full-time employee of the Company on
the dates the bonuses are to be paid. In other words, Executive
must be employed full-time on the date that the bonuses are to be
paid in order to be eligible for such bonuses. Upon separation of
employment for any reason prior to the date any bonuses are paid,
Executive shall not be eligible for any pro rata bonus
compensation. Executive recognizes and acknowledges that except as
provided above, the award of bonus is not guaranteed or promised in
any way. Any additional bonus compensation will be at the absolute
discretion of the Company in such amounts and at such times as the
Board of Directors of the Company (or a Compensation Committee
thereof) may determine.
4.3 Equity Compensation. In
addition to the compensation set forth in paragraphs 4.1 and 4.2 of
this Agreement, the Executive will be granted an award of 20,000
shares of Company restricted stock under and subject to the
Company’s equity compensation plans (the “Equity
Compensation Plans” ) as set forth below which will vest
over a four (4) year period which begins to run from the date
of each grant. The 20,000 shares will be granted as follows: 10,000
shares of this stock will be granted on January 1, 2007 and
another 10,000 shares will be granted on July 1, 2007. In
order to be entitled to the award of equity compensation set forth
herein, the Executive must be an active full-time employee of the
Company on the grant dates. Further, the terms and provisions of
the Equity Compensation Plans control and direct the award of
Company restricted stock and any conflict between this Agreement
and the Equity Compensation Plans will be resolved in favor of the
terms and provisions of the Equity Compensation Plans.
4.4 Benefits. The Company
agrees to extend to the Executive retirement benefits and deferred
compensation (if any and if made available) and reimbursement of
reasonable expenditures. The Company will also provide the
Executive the opportunity to apply for coverage under the
Company’s medical, life and disability plans, if any. If the
Executive is accepted for coverage under such plans, the Company
will provide such coverage on the same terms as is customarily
provided by the Company to the plan participants as modified from
time to time. The Executive is subject to all of the terms and
provisions of the Company’s benefit plans or policies.
4.5 Vacation. The Executive
will be entitled to take up to four (4) weeks or twenty
(20) days of paid time off each calendar year during the term
of this Agreement, subject to proration for any portion of a
calendar year under this Agreement. No additional compensation will
be paid for failure to take vacation and no vacation may be carried
forward from one calendar year to another except for 40
hours.
5. Term. In the absence of
termination as set forth in paragraph 6 below, this Agreement will
extend for a term commencing on the Effective Date, and ending on
September 2, 2008 (the “Expiration Date” ).
Unless the Company provides thirty (30) days prior written
notice of non-extension to the Executive, on or before
September 2, 2008, the term and the
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Expiration Date will be automatically extended for one
(1) additional year from the Expiration Date.
6. Termination. The
Executive’s employment will continue in effect until the
expiration of the term set forth in paragraph 5 of this Agreement
unless earlier terminated pursuant to this paragraph 6.
6.1 Termination by Company.
The Company will have the following rights to terminate
Executive’s employment:
6.1.1 Termination without
Cause. The Company may terminate Executive’s employment
without Cause at any time by the service of written notice of
termination to the Executive specifying an effective date of such
termination not sooner than ten (10) days after the date of
such notice (the “Termination Date” ). In the
event the Executive is terminated without Cause (other than a CC
Termination under paragraph 6.3 of this Agreement), the Executive
will receive as termination compensation: (a) his Base Salary
(as in effect on the Termination Date) during the remaining term of
this Agreement, but in any event through the Expiration Date. The
payment of such amounts shall be made during the remaining term of
the Agreement in installments consistent with the Company’s
normal payroll practices, but, if on the Termination Date, the
Executive is a “specified employee” as defined in
regulations under Section 409A of the Code, such payments will
commence on the first payroll payment date which is more than six
months following the Termination Date and the first payment shall
include any amounts that would have otherwise been payable during
the six month period. The right to the foregoing termination
compensation under clause (a) above is subject to the
Executive’s execution of the Company’s severance
agreement which will operate as a release of all legally waivable
claims against the Company. Such payment is further conditioned
upon the Executive’s compliance with all of the provisions of
this Agreement, including all post-employment obligations.
6.1.2 Termination for Cause.
The Company may terminate the employment of the Executive hereunder
at any time for Cause (as hereinafter defined) (such a termination
being referred to in this Agreement as a “Termination For
Cause”) by giving the Executive written notice of such
termination, which shall take effect immediately upon the giving of
such notice to the Executive. As used in this Agreement,
“Cause” means (A) the Executive’s material
breach or threatened breach of this Agreement; (B) the
Executive fails to substantially perform the Executive’s
duties hereunder; (C) the misappropriation or fraudulent
conduct by the Executive with respect to the assets or operations
of the Company or any of its subsidiaries or affiliated companies;
(D) the Executive’s willful disregard of the
instructions of the Board or the Executive’s material neglect
of duties or failure to act, other than by reason of disability or
death; (E) the Executive’s personal misconduct which
substantially injures the Company; or (F) the conviction of
the Executive for, or a plea of guilty or no
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contest to, a
felony or any crime involving fraud, theft or dishonesty. In the
event Executive’s employment is terminated for Cause, the
company will not have any obligation to provide any further
payments or benefits to the Executive after the effective date of
such termination.
6.2 Termination by Executive.
The Executive may voluntarily terminate his employment with or
without Cause by the service of written notice of such termination
to the Company specifying an effective date of such termination
ninety (90) days after the date of such notice. The Company
may in its sole discretion, elect to waive all or any part of the
90-day notice period with no further obligations being owed to the
Executive by the Company. In the event employment is terminated by
the Executive, neither the Company nor the Executive will have any
further obligations hereunder, except for any obligations which
expressly survive termination of employment including
Sections 7, 8, 9, 10, 11 ,12 and 13.
6.3 Termination After Change in
Control. If during the term of this Agreement there is a
“Change of Control” and within one (1) year
thereafter there is a CC Termination (as hereafter defined), then
the Executive will be entitled to a severance payment (in addition
to any other rights and other amounts payable to the Executive
under Section 6.7 or under Company plans in which Executive is
a participant) payable in a lump sum in cash within 10 days
following the CC Termination in an amount equal to the sum of the
following: (a) one (1) times the Executive’s Base
Salary for the last 12 calendar months ending immediately prior to
the CC Termination and bonus paid pursuant to Section 4.2
(based on the average of the last three years annual bonuses or
such lesser number of years as Executive may have been employed).
If the foregoing amount is not paid within ten (10) days after
the CC Termination, the unpaid amount will bear interest at the per
annum rate of 12%. The right to the foregoing termination
compensation under clause (a) above is subject to the
Executive’s execution of the Company’s severance
agreement which will operate as a release of all legally waivable
claims against the Company. Such payment is further conditioned
upon the Executive’s compliance with all of the provisions of
this Agreement, including all post-employment obligations.
Notwithstanding the foregoing, if at the time of a CC Termination,
the Executive is a “specified employee” as defined in
regulations under Section 409A of the Code, such payment will
be made on the first day which is more than six months following
the CC Termination. In connection with any Change of Control, the
Company shall obtain the assumption of this Agreement, without
limitation or reduction, by any successor to the Company or any
parent corporation of the Company.
6.3.1 Change of Control. For
the purpose of this Agreement, a “Change of
Control” means the occurrence of any of the
following:
(a) The acquisition by any
individual, entity or group (within the meaning of
Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of
1934, as amended (the “Exchange Act” )) (a
“Person” ), other than Executive or his
affiliates or Tom L. Ward or his affiliates (the “Exempt
Persons” ), of beneficial ownership (within the meaning
of Rule 13d-3 promulgated under the Exchange
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Act) of 40% or
more of either (i) the then outstanding shares of common stock
of the Company (the “Outstanding Company Common
Stock” ) or (ii) the combined voting power of the
then outstanding voting securities of the Company entitled to vote
generally in the election of directors (the “Outstanding
Company Voting Securities” ). For purposes of this
paragraph (a) the following acquisitions by a Person will not
constitute a Change of Control: (i) any acquisition directly
from the Company; (ii) any acquisition by the Company;
(iii) any acquisition by any employee benefit plan (or related
trust) sponsored or maintained by the Company or any corporation
controlled by the Company; or (iv) any acquisition by any
corporation pursuant to a transaction which complies with clauses
(i), (ii) and (iii) of paragraph (c) of this
paragraph 6.3.1.
(b) The individuals who, as of the
date hereof, constitute the Board of Directors (the
“Incumbent Board” ) cease for any reason to
constitute at least a majority of the Board of Directors. Any
individual becoming a director subsequent to the date hereof whose
election, or nomination for election by the Company’s
sharehold
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