Employment Agreement - Chesapeake Energy Corp. and Michael A. Johnson
EMPLOYMENT AGREEMENT
between
MICHAEL A. JOHNSON
and
CHESAPEAKE ENERGY CORPORATION
Effective July 1, 2000
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TABLE OF CONTENTS
Page
----
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............................................ 2
4.1 Base Salary.................................................... 2
4.2 Bonus.......................................................... 2
4.3 Stock Options.................................................. 2
4.4 Benefits....................................................... 3
4.4.1 Vacation................................................ 3
4.4.2 Membership Dues ........................................ 3
4.4.3 Compensation Review..................................... 3
5. Term................................................................ 3
6. Termination......................................................... 3
6.1 Termination by Company......................................... 3
6.1.1 Termination without Cause............................... 4
6.1.2 Termination for Cause................................... 4
6.1.3 Termination After Change in Control..................... 4
6.2 Termination by Executive....................................... 5
6.3 Incapacity of Executive........................................ 5
6.4 Death of Executive............................................. 5
6.5 Effect of Termination.......................................... 6
7. Confidentiality .................................................... 6
8. Noncompetition...................................................... 7
9. Proprietary Matters ................................................ 7
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TABLE OF CONTENTS (continued)
10. Arbitration ........................................................ 8
11. Miscellaneous ...................................................... 8
11.1 Time........................................................... 8
11.2 Notices........................................................ 8
11.3 Assignment..................................................... 9
11.4 Construction................................................... 9
11.5 Entire Agreement............................................... 9
11.6 Binding Effect................................................. 9
11.7 Attorney's Fees................................................ 9
11.8 Supersession................................................... 9
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EMPLOYMENT AGREEMENT
THIS AGREEMENT is made effective July 1, 2000, between CHESAPEAKE
ENERGY CORPORATION, an Oklahoma corporation (the "Company"), and Michael A.
Johnson, an individual (the "Executive") and replaces and supersedes that
certain Employment Agreement between Company and Executive dated July 1, 1997.
WITNESSETH:
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 - Accounting and Controller 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 Senior Vice President - Finance and Chief
Financial Officer, Mr. Marcus C. Rowland, and the Chief
Executive Officer, Mr. Aubrey K. McClendon.
2.3 Rules and Regulations. The Company currently has an Employment
Policies Manual which sets forth the general human resources
policies of the Company and 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. The Executive agrees to hold not less than
one thousand (1,000) shares of the Company's common stock
during the term of this Agreement.
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 the Executive's first date of
employment with the Company. The Executive agrees not to directly or indirectly
acquire any additional oil and gas interests or increase ownership of any oil
and gas interests owned by the Executive on the Executive's first date of
employment with the Company.
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 Thousand
Dollars ($150,000.00), will be paid to the Executive in equal
semi-monthly installments beginning July 15, 2000 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.
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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 and governed by 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 make such coverage
available to the Executive 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 month; and (b) the reasonable cost of any
approved 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,
2000, and ending on June 30, 2003 (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:
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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
this Agreement, 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 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 Termination Date.
6.1.3 Termination after Change of Control. If, during the
term of this Agreement, there is a "Change of
Control" and within one (1) year from the effective
date of such Change of Control: (a) this Agreement
expires and is not extended; or (b) the Executive
resigns as a result of (i) a reduction in the
Executive's compensation (including the Executive's
then current Base Salary under Paragraphs 4.1 of this
Agreement and bonuses equal to those paid to the
Executive during calendar year 2000 under Paragraph
4.2 of this Agreement), or (ii) a required relocation
more than twenty five (25) miles from the Executive's
then current place of employment; or within one (1)
year from the effective date of the Change of Control
the Executive is terminated other than under
Paragraphs 6.1.2, 6.3 or 6.4 based on adequate
grounds; 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, excluding any Base Salary payable under
Paragraph 6.1.1, as of the date of
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termination or resignation hereunder) in an amount
equal to six (6) months of the Executive's then
current Base Salary under Paragraph 4.1 of this
Agreement plus bonuses equal to those paid to the
Executive during calendar year 2000 under Paragraph
4.2. 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 Chesapeake Energy Corporation
("Chesapeake") 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 Chesapeake representing the
right to vote fifty one percent (51%) or more of the
combined voting power of Chesapeake's then
outstanding securities having the right to vote for
the election of directors, or (ii) a merger,
consolidation, sale of assets or contested election
or (iii) any combination of (i) and (ii) which
results in a majority of the members of Chesapeake's
board of directors being replaced by directors who
were not nominated and approved by the existing 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 a Termination Date no sooner than thirty (30) days
after the date of such notice. In the event this Agreement is
terminated by the Executive, neither the Company nor the
Executive will have any further obligations hereunder
including, without limitation, any obligation of the Company
to provide any further payments or benefits to the Executive
after the Termination Date.
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 may be deemed as a
termination for cause, any compensation payable under
paragraph 4 of this Agreement will be continued for ninety
(90) days following the Termination Date. 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
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following the date of the Executive's death; and (b) the
benefits described in paragraph 4.4 of this Agreement accrued
through the date of the Executive's death.
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 from and after the Termination Date,
provided that the Executive will maintain the confidentiality
of all information acquired by the Executive during the term
of Executive's 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 in the Executive's
possession 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 Termination Date, 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
Termination Date, 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, 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
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person to whom disclosed without a breach of this Agreement. On request by the
Company, the Company will be entitled to the return 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 three (3) 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 6.1.3 or 6.2 above, or termination for cause
pursuant to paragraph 6.1.2 above, Executive will not acquire, attempt to
acquire or aid another in the acquisition or attempted acquisition of an
interest in oil and gas assets, oil and gas production, oil and gas leases,
mineral interests, oil and gas wells or other such oil and gas exploration,
development or production activities within one (1) mile of any operations or
ownership interests of the Company or its affiliated corporations, partnerships
or entities for which Executive had primary responsibilities within three (3)
years prior to the Executive's Termination Date and while employed with the
Company. The Executive further agrees that the Executive will not 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.
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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 200% 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 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
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To the Executive: Mr. Michael A. Johnson
2100 Faircloud Dr.
Edmond, OK 73034
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; provided, however, the Company may assign this
Agreement to any wholly owned affiliate or subsidiary of the
Company without Executive's consent.
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 located in Oklahoma County, Oklahoma.
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, and the Executive waives the
consent requirement of paragraph 11.3 to effect such
assumption.
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, except with respect to any
arbitration proceeding conducted pursuant to paragraph 10
above.
11.8 Supersession. 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
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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/ Michael A. Johnson
---------------------------------------------
Michael A. Johnson, Individually
(the "Executive")
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