Employment Agreement - Chesapeake Energy Corp. and HenRy J. Hood
EMPLOYMENT AGREEMENT
between
HENRY J. HOOD
and
CHESAPEAKE ENERGY CORPORATION
Effective July 1, 1997
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TABLE OF CONTENTS
Page
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1. Employment....................................................................................... 1
2. Executive's Duties............................................................................... 1
2.1 Specific Duties..................................................................... 1
2.2 Supervision........................................................................ 1
2.3 Rules and Regulations.............................................................. 1
2.4 Stock Investment................................................................... 2
3. Other Activities................................................................................. 2
4. Executive's Compensation......................................................................... 3
4.1 Base Salary......................................................................... 3
4.2 Bonus............................................................................... 3
4.3 Stock Options....................................................................... 3
4.4 Benefits........................................................................... 3
4.4.5 Vacation..................................................................... 3
4.4.6 Membership Dues.............................................................. 3
4.4.7 Compensation Review.......................................................... 4
5. Term............................................................................................. 4
6. Termination...................................................................................... 4
6.1 Termination by Company.............................................................. 4
6.1.1 Termination without Cause............................................... 4
6.1.2 Termination for Cause................................................... 4
6.1.3 Termination After Change in Control..................................... 5
6.2 Termination by Executive............................................................ 5
6.3 Incapacity of Executive............................................................. 6
6.4 Death of Executive.................................................................. 6
6.5 Effect of Termination............................................................... 6
7. Confidentiality................................................................................. 6
8. Noncompetition.................................................................................. 7
9. Proprietary Matters............................................................................. 8
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TABLE OF CONTENTS (continued)
10. Arbitration..................................................................................... 8
11. Miscellaneous................................................................................... 9
11.1 Time................................................................................ 9
11.2 Notices............................................................................. 9
11.3 Assignment.......................................................................... 9
11.4 Construction........................................................................ 9
11.5 Entire Agreement.................................................................... 10
11.6 Binding Effect...................................................................... 10
11.7 Attorney's Fees..................................................................... 10
11.8 Supersession........................................................................ 10
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EMPLOYMENT AGREEMENT
THIS AGREEMENT is made effective July 1, 1997, between CHESAPEAKE
ENERGY CORPORATION, an Oklahoma corporation (the "Company"), and HENRY J. HOOD,
an individual (the "Executive") and replaces and supersedes that certain
Employment Agreement between Company and Executive dated July 1, 1995.
W I T N E S S E T H:
WHEREAS, the Company desires to retain the services of the Executive
and the Executive desires to make the Executive's services available to the
Company.
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 which might impose a fiduciary obligation on the
Executive or the Company in the performance of this Agreement.
2. Executive's Duties. The Executive is employed on a full-time basis.
Throughout the term of this Agreement, the Executive will use the Executive's
best efforts and due diligence to assist the Company in achieving the most
profitable operation of the Company and the Company's affiliated entities
consistent with developing and maintaining a quality business operation.
2.1 Specific Duties. The Executive will serve as Senior Vice President
- Land and Legal for the Company. The Executive will perform all of
the services required to fully and faithfully execute the office
and position to which the Executive is appointed and such other
services as may be reasonably requested by the Executive's
supervisor. During the term of this Agreement, the Executive may be
nominated for election or appointed to serve as a director or
officer of the Company's subsidiaries as determined in the board of
directors' sole discretion.
2.2 Supervision. The services of the Executive will be requested and
directed by the President and Chief Operating Officer, Mr. Tom L.
Ward, and the Chief Executive Officer, Mr. Aubrey K. McClendon.
2.3 Rules and Regulations. The Company currently has an Employment
Policies Manual which addresses frequently asked questions
regarding the
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Company. The Executive agrees to comply with the Employment
Policies Manual except to the extent inconsistent with this
Agreement. The Employment Policies Manual is subject to change
without notice in the sole discretion of the Company at any time.
2.4 Stock Investment. For each calendar year during which this
Agreement is in effect, the Executive agrees to hold shares of the
Company's common stock having aggregate Investment Value equal to
ten percent (10%) of the compensation paid to the Executive under
paragraphs 4.1 and 4.2 of this Agreement during such calendar year.
For purposes of this section, the "Investment Value" of each share
of stock will be the higher of either (a) the price paid by the
Executive for such share as part of an open market purchase; or (b)
the fair market value on the date of exercise for shares acquired
through the exercise of employee stock options. Any shares of
common stock acquired by the Executive prior to the date of this
Agreement and still owned by the Executive during the term of this
Agreement may be used to satisfy this requirement to acquire common
stock. The Investment Value for previously acquired stock shall be
calculated using the average stock price during the first six
months of this Agreement.
The stock acquired or owned pursuant to this paragraph 2.4 must be
held by the Executive at all times during the Executive's
employment by the Company or the Company's affiliated entities. In
order to administer this provision, the Executive agrees to return
to the Company's Chief Executive Officer a semi-annual report of
purchases and ownership in a form prepared by the Company. This
paragraph will become null and void if the Company's common stock
ceases to be listed on the New York Stock Exchange or on the
National Association of Securities Dealers Automated Quotation
System. The Company has no obligation to sell or to purchase from
the Executive any of the Company's stock in connection with this
paragraph 2.4 and has made no representations or warranties
regarding the Company's stock, operations or financial condition.
3. Other Activities. Unless the Executive has obtained the prior written
approval of the board of directors of the Company, the Executive will not: (a)
engage in business independent of the Executive's employment by the Company;
(b) serve as an officer, general partner or member in any corporation,
partnership, company, or firm; (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 limitation in this paragraph 3 will not
prohibit an investment by the Executive in publicly traded securities; or the
continued direct ownership and operation of oil and gas interests and leases to
the extent such interests were owned by the Executive on July 1, 1995. The
Executive agrees not to directly
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or indirectly acquire any additional oil and gas interests or increase
ownership of any oil and gas interests owned by the Executive on July 1, 1995.
4. Executive's Compensation. The Company agrees to compensate the Executive
as follows:
4.1 Base Salary. A base salary (the "Base Salary"), at the initial
annual rate of not less than One Hundred Fifty Five Thousand Dollars
($155,000.00), will be paid to the Executive in equal semi-monthly
installments beginning July 15, 1997 during the term of this
Agreement.
4.2 Bonus. In addition to the Base Salary described at paragraph 4.1 of
this Agreement, the Company may periodically pay bonus compensation
to the Executive. Any bonus compensation will be at the absolute
discretion of the Company in such amounts and at such times as the
board of directors of the Company may determine.
4.3 Stock Options. In addition to the compensation set forth in
paragraphs 4.1 and 4.2 of this Agreement, the Executive may
periodically receive grants of stock options from the Company's
various stock option plans, subject to the terms and conditions
thereof.
4.4 Benefits. The Company will provide the Executive such retirement
benefits, reimbursement of reasonable expenditures for dues, travel
and entertainment and such other benefits as are customarily
provided by the Company and as are set forth in the Company's
Employment Policies Manual. The Company will also provide the
Executive the opportunity to apply for coverage under the Company's
medical, life and disability plans, if any. If the Executive is
accepted for coverage under such plans, the Company will provide
such coverage on the same terms as is customarily provided by the
Company to the plan participants as modified from time to time. The
following specific benefits will also be provided to the Executive
at the expense of the Company:
4.4.1 Vacation. The Executive will be entitled to take three
(3) weeks of paid vacation each twelve months during
the term of this Agreement. No additional compensation
will be paid for failure to take vacation and no
vacation may be carried forward from one twelve month
period to another.
4.4.2 Membership Dues. The Company will reimburse the
Executive for: (a) the monthly dues necessary to
maintain a full membership in a country club in the
Oklahoma City area selected by the Executive in an
amount not to exceed Five Hundred Dollars ($500.00) per
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month; and (b) the reasonable cost of any qualified
business entertainment at such country club. All other
costs, including, without implied limitation, any
initiation costs, initial membership costs, personal
use and business entertainment unrelated to the Company
will be the sole obligation of the Executive and the
Company will have no liability with respect to such
amounts.
4.4.3 Compensation Review. The compensation of the Executive
will be reviewed not less frequently than annually by
the board of directors of the Company.
5. Term. The employment relationship evidenced by this Agreement is an "at
will" employment relationship and the Company reserves the right to terminate
the Executive at any time with or without cause. In the absence of such
termination, this Agreement will extend for a term of three (3) years
commencing on July 1, 1997, and ending on June 30, 2000 (the "Expiration
Date").
6. Termination. This Agreement will continue in effect until the expiration
of the term stated at 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 this Agreement:
6.1.1 Termination without Cause. The Company may terminate
this Agreement 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 sixty (60) business days after the date of
such notice (the "Termination Date"). In the event the
Executive is terminated without cause, or the Company
elects not to renew the contract, the Executive will
receive as termination compensation: (a) Base Salary
for a period of ninety (90) days; (b) any benefits
payable by operation of paragraph 4.4 of this
Agreement; and (c) any vacation pay accrued through the
Termination Date. The termination compensation in (a)
shall be paid only if the Executive executes the
Company's standard termination agreement releasing all
legally waivable claims arising from the Executive's
employment.
6.1.2 Termination for Cause. The Company may terminate this
Agreement for cause if the Executive: (a)
misappropriates the property of the Company or commits
any other act of dishonesty; (b) engages in personal
misconduct which materially injures the Company; (c)
willfully violates any law or regulation relating to
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the business of the Company which results in injury to
the Company; or (d) willfully and repeatedly fails to
perform the Executive's duties hereunder. In the event
this Agreement 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.
6.1.3 Termination After Change in Control. If, during the
term of this Agreement, there is a "Change of Control"
and within one (1) year thereafter: (a) this Agreement
expires and is not extended; or (b) the Executive is
terminated other than under paragraphs 6.1.2, 6.3 or
6.4 based on adequate grounds; or (c) the Executive
resigns as a result of a reassignment of duties
inconsistent with the Executive's position, a reduction
in the Executive's then current compensation under
paragraph 4 of this Agreement, or a required relocation
more than 25 miles from the Executive's then current
place of employment, then the Executive will be
entitled to a severance payment (in addition to any
other amounts payable to the Executive under this
Agreement or otherwise) in an amount equal to twelve
(12) months of Base Salary as set forth in paragraph
4.1 of this Agreement. The term "Change of Control"
means any action of a nature that would be required to
be reported in response to Item 6(e) of Schedule 14A of
Regulation 14A under the Securities Exchange Act of
1934 with respect to the Company including, without
limitation (i) the direct or indirect acquisition by
any person after the date hereof of beneficial
ownership of the right to vote or securities of the
Company representing the right to vote thirty five
percent (35%) or more of the combined voting power of
the Company's then outstanding securities having the
right to vote for the election of directors, or (ii)
within two years of a tender offer or exchange offer
for the voting stock of the Company or as a result of a
merger, consolidation, sale of assets or contested
election (or any combination of the foregoing), a
majority of the members of the Company's board of
directors is replaced by directors who were not
nominated and approved by the board of directors.
6.2 Termination by Executive. The Executive may voluntarily terminate
this Agreement with or without cause by the service of written
notice of such termination to the Company specifying an effective
date of such termination thirty (30) days after the date of such
notice, during which time Executive may use remaining accrued
vacation days, or at the Company's option, be paid for such days.
In the event this Agreement is terminated by the Executive, neither
the Company nor the Executive will have any further obligations
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hereunder including, without limitation, any obligation of the
Company to provide any further payments or benefits to the
Executive after the effective date of such termination.
6.3 Incapacity of Executive. If the Executive suffers from a physical
or mental condition which in the reasonable judgment of the
Company's management prevents the Executive in whole or in part
from performing the duties specified herein for a period of three
(3) consecutive months, the Executive may be terminated. Although
the termination shall be deemed as a termination with cause, any
compensation payable under paragraph 4 of this Agreement will be
continued for ninety (90) days. Notwithstanding the foregoing, the
Executive's Base Salary specified in paragraph 4.1 of this
Agreement will be reduced by any benefits payable under any
disability plans.
6.4 Death of Executive. If the Executive dies during the term of this
Agreement, the Company may thereafter terminate this Agreement
without compensation to the Executive's estate except: (a) the
obligation to continue the Base Salary payments under paragraph 4.1
of this Agreement for ninety (90) days; and (b) the benefits
described in paragraph 4.4 of this Agreement accrued through the
effective date of such termination.
6.5 Effect of Termination. The termination of this Agreement will
terminate all obligations of the Executive to render services on
behalf of the Company, provided that the Executive will maintain
the confidentiality of all information acquired by the Executive
during the term of his employment in accordance with paragraph 7 of
this Agreement. Except as otherwise provided in paragraph 6 of this
Agreement, no accrued bonus, severance pay or other form of
compensation will be payable by the Company to the Executive by
reason of the termination of this Agreement. All keys, entry cards,
credit cards, files, records, financial information, furniture,
furnishings, equipment, supplies and other items relating to the
Company will remain the property of the Company. The Executive will
have the right to retain and remove all personal property and
effects which are owned by the Executive and located in the offices
of the Company. All such personal items will be removed from such
offices no later than two (2) days after the effective date of
termination, and the Company is hereby authorized to discard any
items remaining and to reassign the Executive's office space after
such date. Prior to the effective date of termination, the
Executive will render such services to the Company as might be
reasonably required to provide for the orderly termination of the
Executive's employment.
7. Confidentiality. The Executive recognizes that the nature of the
Executive's services are such that the Executive will have access to
information which constitutes trade secrets,
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is of a confidential nature, is of great value to the Company or is the
foundation on which the business of the Company is predicated. The Executive
agrees not to disclose to any person other than the Company's employees or the
Company's legal counsel nor use for any purpose, other than the performance of
this Agreement, any confidential information ("Confidential Information").
Confidential Information includes data or material (regardless of form) which
is: (a) a trade secret; (b) provided, disclosed or delivered to Executive by
the Company, any officer, director, employee, agent, attorney, accountant,
consultant, or other person or entity employed by the Company in any capacity,
any customer, borrower or business associate of the Company or any public
authority having jurisdiction over the Company of any business activity
conducted by the Company; or (c) produced, developed, obtained or prepared by
or on behalf of Executive or the Company (whether or not such information was
developed in the performance of this Agreement) with respect to the Company or
any assets oil and gas prospects, business activities, officers, directors,
employees, borrowers or customers of the foregoing. However, Confidential
Information shall not include any information, data or material which at the
time of disclosure or use was generally available to the public other than by a
breach of this Agreement, was available to the party to whom disclosed on a
non-confidential basis by disclosure or access provided by the Company or a
third party, or was otherwise developed or obtained independently by the person
to whom disclosed without a breach of this Agreement. On request by the
Company, the Company will be entitled to a copy of any Confidential Information
in the possession of the Executive. The Executive also agrees that the
provisions of this paragraph 7 will survive the termination, expiration or
cancellation of this Agreement for a period of five (5) years. The Executive
will deliver to the Company all originals and copies of the documents or
materials containing Confidential Information. For purposes of paragraphs 7, 8,
and 9 of this Agreement, the Company expressly includes any of the Company's
affiliated corporations, partnerships or entities.
8. Noncompetition. For a period of twelve (12) months after Executive is no
longer employed by the Company as a result of either the resignation by the
Executive pursuant to paragraph 6.2 above, or Termination for Cause pursuant to
paragraph 6.1.2 above, Executive will not: (a) acquire, attempt to acquire or
aid another in the acquisition or attempted acquisition of an interest in oil
and gas assets, oil and gas production, oil and gas leases, mineral interests,
oil and gas wells or other such oil and gas exploration, development or
production activities within five (5) miles of any operations or ownership
interests of the Company or its affiliated corporations, partnerships or
entities, provided, however, this provision shall not apply to acquisitions
within said five (5) mile radius of assets or activities of a successor entity
resulting from a "Change in Control" as described in paragraph 6.1.3., which
assets were owned or activities were being conducted (1) prior to the date of
such Change in Control, or (2) after such Change in Control but for which the
Executive had no material responsibility; and (b) for the Executive's own
account or for the benefit of another party solicit, induce, entice or attempt
to entice any employee, contractor, customer, vendor or subcontractor to
terminate or breach any relationship with the Company or the Company's
affiliates. The Executive further agrees that the Executive will not
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circumvent or attempt to circumvent the foregoing agreements by any future
arrangement or through the actions of a third party.
9. Proprietary Matters. The Executive expressly understands and agrees that
any and all improvements, inventions, discoveries, processes or know-how that
are generated or conceived by the Executive during the term of this Agreement,
whether generated or conceived during the Executive's regular working hours or
otherwise, will be the sole and exclusive property of the Company. Whenever
requested by the Company (either during the term of this Agreement or
thereafter), the Executive will assign or execute any and all applications,
assignments and or other instruments and do all things which the Company deems
necessary or appropriate in order to permit the Company to: (a) assign and
convey or otherwise make available to the Company the sole and exclusive right,
title, and interest in and to said improvements, inventions, discoveries,
processes, know-how, applications, patents, copyrights, trade names or
trademarks; or (b) apply for, obtain, maintain, enforce and defend patents,
copyrights, trade names, or trademarks of the United States or of foreign
countries for said improvements, inventions, discoveries, processes or
know-how. However, the improvements, inventions, discoveries, processes or
know-how generated or conceived by the Executive and referred to above (except
as they may be included in the patents, copyrights or registered trade names or
trademarks of the Company, or corporations, partnerships or other entities
which may be affiliated with the Company) shall not be exclusive property of
the Company at any time after having been disclosed or revealed or have
otherwise become available to the public or to a third party on a
non-confidential basis other than by a breach of this Agreement, or after they
have been independently developed or discussed without a breach of this
Agreement by a third party who has no obligation to the Company or its
affiliates.
10. Arbitration. The parties will attempt to promptly resolve any dispute or
controversy arising out of or relating to this Agreement or termination of the
Executive by the Company. Any negotiations pursuant to this paragraph 10 are
confidential and will be treated as compromise and settlement negotiations for
all purposes. If the parties are unable to reach a settlement amicably, the
dispute will be submitted to binding arbitration before a single arbitrator in
accordance with the Employment Dispute Resolution Rules of the American
Arbitration Association. The arbitrator will be instructed and empowered to
take reasonable steps to expedite the arbitration and the arbitrator's judgment
will be final and binding upon the parties subject solely to challenge on the
grounds of fraud or gross misconduct. Except for damages arising out of a
breach of paragraphs 7, 8 or 9 of this Agreement, the arbitrator is not
empowered to award total damages (including compensatory damages) which exceed
300% of compensatory damages and each party hereby irrevocably waives any
damages in excess of that amount. The arbitration will be held in Oklahoma
County, Oklahoma. Judgment upon any verdict in arbitration may be entered in
any court of competent jurisdiction and the parties hereby consent to the
jurisdiction of, and proper venue in, the federal and state courts located in
Oklahoma County, Oklahoma. Each party will bear its own costs in connection
with the arbitration and the costs of the arbitrator will be borne by the party
who the arbitrator determines did not prevail in the matter. Unless otherwise
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expressly set forth in this Agreement, the procedures specified in this
paragraph 10 will be the sole and exclusive procedures for the resolution of
disputes and controversies between the parties arising out of or relating to
this Agreement. Notwithstanding the foregoing, a party may seek a preliminary
injunction or other provisional judicial relief if in such party's judgment
such action is necessary to avoid irreparable damage or to preserve the status
quo.
11. Miscellaneous. The parties further agree as follows:
11.1 Time. Time is of the essence of each provision of this Agreement.
11.2 Notices. Any notice, payment, demand or communication required or
permitted to be given by any provision of this Agreement will be in
writing and will be deemed to have been given when delivered
personally or by telefacsimile to the party designated to receive
such notice, or on the date following the day sent by overnight
courier, or on the third (3rd) business day after the same is sent
by certified mail, postage and charges prepaid, directed to the
following address or to such other or additional addresses as any
party might designate by written notice to the other party:
To the Company: Chesapeake Energy Corporation
Post Office Box 18496
Oklahoma City, OK 73154-0496
Attn: Aubrey K. McClendon
To the Executive: Mr. Henry J. Hood
6700 N.W. Grand Blvd.
Oklahoma City, OK 73116
11.3 Assignment. Neither this Agreement nor any of the parties' rights
or obligations hereunder can be transferred or assigned without the
prior written consent of the other parties to this Agreement.
11.4 Construction. If any provision of this Agreement or the application
thereof to any person or circumstances is determined, to any
extent, to be invalid or unenforceable, the remainder of this
Agreement, or the application of such provision to persons or
circumstances other than those as to which the same is held invalid
or unenforceable, will not be affected thereby, and each term and
provision of this Agreement will be valid and enforceable to the
fullest extent permitted by law. This Agreement is intended to be
interpreted, construed and enforced in accordance with the laws of
the State of Oklahoma and any litigation relating to this Agreement
will be conducted in a court of competent jurisdiction sitting in
Oklahoma County, Oklahoma.
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11.5 Entire Agreement. This Agreement constitutes the entire agreement
between the parties hereto with respect to the subject matter
herein contained, and no modification hereof will be effective
unless made by a supplemental written agreement executed by all of
the parties hereto.
11.6 Binding Effect. This Agreement will be binding on the parties and
their respective successors, legal representatives and permitted
assigns. In the event of a merger, consolidation, combination,
dissolution or liquidation of the Company, the performance of this
Agreement will be assumed by any entity which succeeds to or is
transferred the business of the Company as a result thereof.
11.7 Attorneys' Fees. If any party institutes an action or proceeding
against any other party relating to the provisions of this
Agreement or any default hereunder, the unsuccessful party to such
action or proceeding will reimburse the successful party therein
for the reasonable expenses of attorneys' fees and disbursements
and litigation expenses incurred by the successful party.
11.8 Supercession. On execution of this Agreement by the Company and the
Executive, the relationship between the Company and the Executive
will be bound by the terms of this Agreement and the Employment
Policies Manual and not by any other agreements or otherwise. In
the event of a conflict between the Employment Policies Manual and
this Agreement, this Agreement will control in all respects.
IN WITNESS WHEREOF, the undersigned have executed this Agreement
effective the date first above written.
CHESAPEAKE ENERGY CORPORATION, an
Oklahoma corporation
By: /s/ AUBREY K. MCCLENDON
--------------------------------------------
Aubrey K. McClendon, Chief Executive Officer
(the "Company")
By: /s/ HENRY J. HOOD
--------------------------------------------
Henry J. Hood, Individually
(the "Executive")
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