Employment Agreement [Amendment No. 1] - Chesapeake Energy Corp. and Aubrey K. McClendon
FIRST AMENDMENT TO
AMENDED AND RESTATED EMPLOYMENT AGREEMENT
THIS AGREEMENT is made effective December 31, 1998, between CHESAPEAKE
ENERGY CORPORATION, an Oklahoma corporation (the "Company"), and AUBREY K.
McCLENDON, an individual (the "Executive").
W I T N E S S E T H :
WHEREAS, the Company and the Executive entered into that certain
Amended and Restated Employment Agreement (the "Prior Agreement") dated
effective July 1, 1998, which the parties desire to amend as provided herein.
NOW, THEREFORE, in consideration of the mutual promises herein
contained, the Company and the Executive agree as follows:
1. Amendment to Paragraph 3.1. Paragraph 3.1 of the Prior Agreement is hereby
deleted in its entirety (including subparagraphs 3.1.1 and 3.1.2) and the
following paragraphs are substituted therefor:
3.1 Company's Activities. The Executive or the Executive's designated
affiliate will be permitted to acquire a working interest in all of the
wells spudded by the Company or the Company's subsidiary corporations,
partnerships or entities (the "Program Wells") on the terms and
conditions set forth herein in any Calendar Quarter (as hereafter
defined) during the term of this Agreement. The Program Wells include
any well spudded during such Calendar Quarter in which the Company or
the Company's subsidiary corporations, partnerships or entities
participate as a nonoperator.
3.1.1 Amount of Participation. On or before the date which is thirty
(30) days before the first (1st) day of each Calendar Quarter,
the Executive will provide notice to the compensation committee
of the Company's board of directors of the Executive's intent to
participate in the Program Wells during the succeeding Calendar
Quarter and the approximate percentage working interest which the
Executive proposes to participate with during such Calendar
Quarter (the "Approved Percentage"). The Executive's Approved
Percentage working interest participation (determined without
consideration of any carried interest) in the Program Wells for
any Calendar Quarter will not exceed two and one-half percent
(2.5%) on an eight-eighths (8/8ths) basis. On designation of the
Approved Percentage for a Calendar Quarter, the Executive will be
deemed to have elected to participate in each Program Well
spudded during such Calendar
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Quarter with a working interest equal to the following applicable
percentage determined on a well-by-well basis (the "Minimum
Participation"): (a) the Approved Percentage for each Operations
Well and each Program Well which does not fall within clause (b)
of this paragraph 3 1.1; or (b) zero percent (0%) if the combined
participation in the Program Well by the Executive, Mr. Tom L.
Ward and Mr. Marcus C. Rowland with such individuals' Approved
Percentage under their respective employment agreements causes
the Company's working interest (determined without consideration
of any carried interest) on the spud date for such Program Well
to be less than twelve and one-half percent (12.5%) on an
eight-eighths (8/8ths) basis. If clause (b) of this paragraph
3.1.1 prohibits the Executive's participation in a Program Well,
then Messrs. Ward and Rowland will not be entitled to participate
in such Program Well under their employment agreements. An
"Operations Well" means a Program Well which falls within the
provisions of clause (b) of this paragraph 3.1.1, but for which
the Executive's participation is deemed necessary for the Company
to retain operations as determined by the disinterested members
of the compensation committee of the Company's board of
directors. If the Executive elects not to participate for a
Calendar Quarter or fails to provide notice of the Executive's
intent to participate and the Executive's proposed participation
prior to the specified date as provided herein, the amount of the
Approved Percentage for the Calendar Quarter will be deemed to be
zero (0).
3.1.2 Conditions of Participation. Except as provided herein, the
participation by the Executive in each Program Well will be on no
better terms than the terms agreed to by unaffiliated third party
participants in connection with the acquisition of an interest in
such Program Well from the Company or its subsidiary
corporations, partnerships or entities. Once elected the Approved
Percentage cannot be changed during any Calendar Quarter without
the prior approval of the disinterested members of the
compensation committee of the Company's board of directors. Any
participation by the Executive under this paragraph 3.1 is also
conditioned upon the Executive's participation in each Program
Well spudded during such Calendar Quarter in an amount equal to
the Minimum Participation. The Executive hereby agrees to execute
and deliver any documents reasonably requested by the Company and
hereby irrevocably appoints the Company as the Executive's agent
and attorney-in-fact to execute and deliver such documents if the
Executive fails or refuses to execute such documents. The
Executive further agrees to pay: (a) all joint interest billings
within one hundred fifty (150) days after receipt for all joint
interest billings received before June 30,
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2000; and (b) within ninety (90) days after receipt for all other
joint interest billings. For purposes of this Agreement, the term
"Calendar Quarter" means the three (3) month period commencing on
the first (1st) day of January, April, July and October.
3.1.3 Revenue Advance. After the date of this Agreement, the Executive
will receive an advance (the "Revenue Advance") from the Company
in an amount equal to the revenue disbursed by the Company to the
Executive during the prior six (6) months for all Program Wells
and any other wells for which the Company disburses revenue to
the Executive divided by six (6). The Revenue Advance represents
oil and gas revenue received by the Company with respect to the
Executive's interest in various oil and gas wells for which the
Company markets production but not yet disbursed to the Executive
or other participants in such wells. As a result, if the
Executive sells or the Company otherwise ceases to market oil and
gas for a material portion of the Executive's oil and gas
interests the six (6) month revenue amount used in computing the
Revenue Advance will be adjusted to reflect such change in
circumstances. As of the date of this Agreement, the amount the
Company has actually advanced (the "Current Advance") to the
Executive is Nine Hundred Eighty-Four Thousand Dollars
($984,000.00), which amount exceeds the Revenue Advance as a
result of a decline in the Executive's production and prices
received for such production. Subsequent to January 1, 1999, the
Company will charge and the Executive will pay quarterly interest
at the per annum rate of 9 1/8% on the amount by which the
Current Advance exceeds the oil and gas revenue received by the
Company with respect to the Executive's interest but not yet
disbursed. Prior to December 31, 2000, the Company will not
increase the Current Advance or make additional advances to the
Executive unless the amount of the Current Advance is less than
the Revenue Advance. After December 31, 2000, the Executive
agrees to promptly pay any amount by which the Current Advance
and any amounts advanced to the Executive in connection with
revenue from the Executive's oil and gas wells exceed, in the
aggregate, the Revenue Advance.
2. Supersession. Except as expressly amended by this First Amendment to Amended
and Restated Employment Agreement, the Prior Agreement continues in full force
and effect and the terms and conditions thereof as amended hereby will govern
the relationship between the Company and the Executive.
IN WITNESS WHEREOF, the undersigned have executed this Agreement
effective the date first above written.
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CHESAPEAKE ENERGY CORPORATION, an
Oklahoma corporation
By /s/ TOM L. WARD
--------------------------------------
Tom L. Ward, President
(the "Company")
/s/ AUBREY K. McCLENDON
-----------------------------------------
AUBREY K. McCLENDON, individually
(the "Executive")
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