Employment Agreement - Chesapeake Energy Corp. and Aubrey K. McClendon
AMENDED AND RESTATED
EMPLOYMENT AGREEMENT
between
AUBREY K. McCLENDON
and
CHESAPEAKE ENERGY CORPORATION
Effective July 1, 1998
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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 Modifications...................................................................................2
2.3 Rules and Regulations...........................................................................2
2.4 Stock Investment................................................................................2
3. Other Activities.........................................................................................3
3.1 Company's Activities............................................................................3
3.1.1 Amount of Participation................................................................3
3.1.2 Conditions of Participation. ..........................................................4
3.2 Other Activities................................................................................5
4. Executive's Compensation.................................................................................5
4.1 Base Salary.....................................................................................5
4.2 Bonus...........................................................................................5
4.3 Stock Options...................................................................................5
4.4 Benefits........................................................................................5
4.4.1 Vacation...............................................................................6
4.4.2 Membership Dues........................................................................6
4.4.3 Automobile and Travel Allowance........................................................6
4.4.4 Accounting Support.....................................................................6
4.5 Compensation Review.............................................................................7
5. Term.....................................................................................................7
6. Termination..............................................................................................7
6.1 Termination by Company..........................................................................7
6.1.1 Termination without Cause..............................................................7
6.1.2 Termination for Cause..................................................................7
6.2 Termination by Executive........................................................................8
6.3 Termination After Change in Control.............................................................8
6.3.1 Change of Control......................................................................8
6.3.2 CC Termination.........................................................................9
6.4 Incapacity of Executive.........................................................................9
6.5 Death of Executive..............................................................................9
6.6 Effect of Termination..........................................................................10
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7. Confidentiality.........................................................................................10
8. Noncompetition..........................................................................................11
9. Proprietary Matters.....................................................................................11
10. Arbitration.............................................................................................12
11. Miscellaneous...........................................................................................12
11.1 Time...........................................................................................12
11.2 Notices........................................................................................12
11.3 Assignment.....................................................................................13
11.4 Construction...................................................................................13
11.5 Entire Agreement...............................................................................13
11.6 Binding Effect.................................................................................13
11.7 Attorneys' Fees................................................................................13
11.8 Supercession...................................................................................13
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AMENDED AND RESTATED
EMPLOYMENT AGREEMENT
THIS AGREEMENT is made effective July 1, 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
employment agreement dated effective July 1, 1997 (the "Prior Agreement");
WHEREAS, the Company has announced that it would explore strategic
alternatives to increase shareholder value, and to retain employees during that
process the Company adopted a retention program for the Company's key employees
other than the senior executive officers;
WHEREAS, for the reasons the Company adopted the retention program for
the other employees, the Board of Directors of the Company believes that it is
in the best interests of the Company to provide for the retention of the
Executive as part of the process of exploring the Company's strategic
alternatives; and
WHEREAS, the Company and the Executive desire to amend and restate the
Prior Agreement in its entirety.
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 Chairman of the
Board and Chief Executive Officer for the Company. From time
to time, the Executive may be appointed as an officer of one
(1) or more of the Company's subsidiaries. During the term of
this Agreement, the Executive will be nominated for election
or appointed to serve as a director of the Company and one (1)
or more of the Company's subsidiaries. The Executive will 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 such other
services as may be reasonably directed by the board of
directors of the Company in accordance with this Agreement.
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2.2 Modifications. The precise duties to be performed by the
Executive may be extended or curtailed in the discretion of
the respective boards of directors of the Company. However,
except for termination for cause under paragraph 6.1.2 of this
Agreement, the failure of the Executive to be elected, be
reelected or serve as a director of the Company during the
term of this Agreement, the removal of the Executive as a
member of the board of directors of the Company, the
withdrawal of the designation of the Executive as Chairman of
the Board or Chief Executive Officer of the Company, or the
assignment of the performance of duties incumbent on the
foregoing offices to other persons without the prior written
consent of the Executive will constitute termination without
cause by the Company.
2.3 Rules and Regulations. The Company currently has an Employment
Policies Manual which addresses frequently asked questions
regarding the 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. In the event of a conflict between the Employment
Policies Manual and this Agreement, this Agreement will
control over the terms of the Employment Policies Manual.
2.4 Stock Investment. For each calendar year during the term of
this Agreement the Executive agrees to hold shares of the
Company's common stock having an aggregate Investment Value
(as hereafter defined) equal to five hundred percent (500%) of
the compensation paid to the Executive under paragraphs 4.1
and 4.2 of this Agreement during such calendar year. 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 own common stock. For purposes of this
paragraph, the "Investment Value" of each share of stock will
be as follows: (a) for shares purchased in the open market the
price paid by the Executive for such shares; (b) for shares
acquired through the exercise of stock options, the fair
market value of the common stock on the date the option was
exercised; and (c) for shares acquired other than through open
market purchases or the exercise of options the fair market
value of the Company's common stock on the date of the
acquisition of such common stock. 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 deliver 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, the National Association of Securities Dealers
Automated Quotation System or other national exchange. 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.
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3. Other Activities. Except for the activities (the "Permitted Activities")
expressly permitted by paragraphs 3.1 and 3.2 of this Agreement, or 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 which requires any substantial portion of the Executive's time; (b)
serve as an officer or director of any corporation, partnership, company, or
firm; (c) except for passive investments that do not violate this Agreement and
require a minimal portion of the Executive's time, serve as a general partner or
member of any corporation, partnership, company or firm; or (d) 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. Notwithstanding the foregoing, the Executive will be
permitted to participate in the following activities which will be deemed to be
approved by the Company, if such activities are undertaken in strict compliance
with this Agreement.
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 Participation Term (as hereafter defined). 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 Quarter with a working interest equal
to the following applicable percentage determined on
a well-by-well basis (the "Minimum Participation"):
(a) the
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Approved Percentage for each Operations Well, each
Program Well which does not fall within clause (b) of
this paragraph 3 1.1 and any Program Well which does
not fall within clause (c) of this paragraph 3.1.1;
(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; or (c) subsequent to
a termination under paragraphs 6.1.1 or 6.3 of this
Agreement the lowest Approved Percentage elected by
the Executive subsequent to such termination. 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
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. 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. 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
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 all joint interest billings within one hundred
fifty (150) days after receipt. For purposes of this
Agreement, the term: (a) "Calendar Quarter" means the
three (3) month periods commencing on the first (1st)
day of January, April, July and October; and (b)
"Participation Term" means the term of this Agreement
plus five (5) years after a termination under
paragraphs 6.1.1 or 6.3 of this Agreement.
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3.2 Other Activities. The Executive currently conducts oil and gas
investment activities individually and through Chesapeake
Investments, an Oklahoma Limited Partnership ("Investments"),
Chesapeake Production Company, an Oklahoma corporation
("Production"), and Chesapeake/Wood Joint Venture ("Venture").
The Executive will be permitted to continue oil and gas
activities in such entities but only to the extent such
activities are conducted on oil and gas leases or interests
owned by the Executive, Investments, Production or Venture as
of July 1, 1995, or acquired by Investments, Production or
Venture from the Company. The interests acquired by
Investments shall be limited by the provisions of paragraph
3.1 of this Agreement. The Company also consents to the
Executive serving: (a) as a director of American Bank and
Trust Company located in Edmond, Oklahoma; (b) as a director
of Pan East Petroleum Corp., an Ontario Canada corporation,
pursuant to approval by the board of directors.
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 Three Hundred Fifty Thousand
Dollars ($350,000.00), will be paid to the Executive in equal
semi-monthly installments beginning July 15, 1998 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 other benefits on terms
customarily provided by the Company from time to time. 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:
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4.4.1 Vacation. The Executive will be entitled to take
three (3) weeks of paid vacation each calendar year
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 calendar year 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 (1) golf and/or country
club in the Oklahoma City area selected by the
Executive; 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 Automobile and Travel Allowance. The Executive will
receive a monthly cash allowance in the amount of One
Thousand Five Hundred Dollars ($1,500.00) to defer a
portion of the Executive's cost of acquiring,
operating and maintaining an automobile for use in
the Executive's employment. Additionally, the
Executive will be entitled to utilize any aircraft
owned by the Company (whether in whole or in part)
for personal use and will not be required to
reimburse the Company for any cost related to such
use or pay any cost or charge with respect to such
use up to an amount during any calendar year equal to
the Aircraft Allowance. For purposes of this
Agreement the term "Aircraft Allowance" means the
variable costs directly identifiable with each use
(including fuel, pilot charges, landing fees, hourly
charges under co-ownership arrangements and other
such costs) but specifically excludes any fixed costs
of the aircraft (including acquisition costs and
depreciation). The Aircraft Allowance will be equal
to $40,000.00 for the Company's fiscal year ending on
June 30, 1998, $25,000.00 for the six month period
ending on December 31, 1998, and $50,000.00 for each
fiscal year thereafter during the term of this
Agreement. If the Executive's use of the Company's
aircraft exceeds the Aircraft Allowance during any
fiscal year the Executive will be required to
reimburse the Company for the variable costs directly
identified with each such use.
4.4.4 Accounting Support. The Executive will be permitted
to utilize the Company's office space, computer
facilities and the equivalent of one (1) full-time
accounting employee of the Company (presently Ms.
Linda Peterburs) to maintain books and records for
the Executive and the Executive's Permitted
Activities. The Executive will not be required to pay
any compensation to the Company in connection with
such accounting services.
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4.5 Compensation Review. The compensation of the Executive will be
reviewed not less frequently than annually by the board of
directors of the Company. The compensation of the Executive
prescribed by paragraph 4 of this Agreement may be increased
at the discretion of the Company, but may not be reduced
without the prior written consent of the Executive.
5. Term. In the absence of termination as set forth in paragraph 6 below,
this Agreement will extend for a term of five (5) years commencing on July 1,
1998, and ending on June 30, 2003 (the "Expiration Date") as extended from time
to time. Unless the Company provides thirty (30) days prior written notice of
nonextension to the Executive, on each June 30 during the term of this
Agreement, the term and the Expiration Date will be automatically extended for
one (1) additional year so that the remaining term on this Agreement will be not
less than four (4) and not more than five (5) years.
6. Termination. This Agreement 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 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 (other than a CC Termination under
paragraph 6.3 of this Agreement), the Executive will
receive as termination compensation: (a) Base
Compensation (as hereafter defined) during the
remaining term of this Agreement, but in any event
through the Expiration Date; (b) any benefits payable
by operation of paragraph 4.4 of this Agreement
during the remaining term of this Agreement, but in
any event through the Expiration Date; and (c) any
vacation pay accrued through the Termination Date.
For purposes of this Agreement the term "Base
Compensation" means the Executive's current Base
Salary under paragraph 4.1 on the Termination Date
plus the bonus compensation received by the Executive
during the twelve (12) month period preceding the
Termination Date.
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
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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. This Agreement will not be deemed to
have terminated for cause unless a written
determination specifying the reasons for such
termination is made, approved by a majority of the
disinterested members of the board of directors of
the Company and delivered to the Executive.
Thereafter, the Executive will have the right for a
period of twenty (20) days to request a board of
directors meeting to be held at a mutually agreeable
time and location within thirty (30) days, at which
meeting the Executive will have an opportunity to be
heard. Failing such determination and opportunity for
hearing, any termination of this Agreement will be
deemed to have occurred without cause.
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 sixty (60)
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 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 Termination After Change in Control. If during the term of
this Agreement there is a "Change of Control" and within two
(2) years 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 this Agreement or otherwise) in
an amount equal to the sum of the following: (a) five (5)
times the Executive's Base Compensation; plus (b) the Gross-up
Amount (as hereafter defined). 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 equal to the
prime rate published from time to time in the Wall Street
Journal. The interest rate will be adjusted on the date of a
change in such prime rate. For purposes of this Agreement the
term "Gross-up Amount" means the amount of the payment which
will result in the Executive retaining from such payment
(after paying all taxes imposed on such payment and any
interest or penalties related to such taxes) an amount equal
to any excise tax imposed by Section 4999 of the Internal
Revenue Code of 1986, as amended, together with any interest
and penalties with respect to such excise tax imposed on the
all of the payments made to the Executive under this paragraph
6.3.
6.3.1 Change of Control. 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
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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.
6.3.2 CC Termination. The term "CC Termination" means any
of the following: (a) this Agreement expires in
accordance with its terms; (b) this Agreement is not
extended under paragraph 5 of this Agreement and the
Executive resigns within one (1) year after such
nonextension; (c) the Executive is terminated by the
Company other than under paragraphs 6.1.2, 6.4 or 6.5
based on adequate grounds; (d) the Executive resigns
as a result of a change in the Executive's duties, a
reduction in the Executive's then current
compensation, a required relocation more than 25
miles from the Executive's then current place of
employment or a default by the Company under this
Agreement; (e) the failure by the Company after a
Change of Control to obtain the assumption of this
Agreement, without limitation or reduction, by any
successor to the Company or any parent corporation of
the Company; or (f) after a Change of Control has
occurred, the Executive agrees to remain employed by
the Company for a period of three (3) months to
assist in the transition and thereafter resigns.
6.4 Incapacity of Executive. If the Executive suffers from a
physical or mental condition which in the reasonable judgment
of the Company's board of directors 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 through the
remaining term of this Agreement, but in any event through the
Expiration 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 provided by the Company under paragraph 4 of
this Agreement.
6.5 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 twelve (12)
months after the effective date of such termination, and (b)
the benefits described in paragraph 4.4 of this Agreement
accrued through the effective date of such termination.
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6.6 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. In the event of a
termination under paragraphs 6.1.1 or 6.3 of this Agreement
the Executive's right to participate in Program Wells will
continue in accordance with paragraph 3 of this Agreement.
Except as otherwise provided in this paragraph 6, 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 seven
(7) 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, 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
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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, the 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 subsidiary corporations, partnerships or
entities (but excluding operations or ownership interests acquired by the
Company from a successor entity through a Change of Control as described in
paragraph 6.3); and (b) 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 for the
Executive's own account or for the benefit of another party. 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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<PAGE> 15
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 6, 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 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, Oklahoma 73154-0496
Attn: Mr. Tom L. Ward
To the Executive: Mr. Aubrey K. McClendon
1214 Larchmont Lane
Oklahoma City, Oklahoma 73116
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<PAGE> 16
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.
11.5 Entire Agreement. Except as provided in paragraph 2.3 of this
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. This Agreement is the final, complete and
exclusive expression of the agreement between the Company and
the Executive and supersedes and replaces in all respects any
prior employment agreements (including the Prior Agreement).
On execution of this Agreement by the Company and the
Executive, the relationship between the Company and the
Executive after the effective date of this Agreement will be
governed by the terms of this Agreement and not by any other
agreements, oral or otherwise.
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<PAGE> 17
IN WITNESS WHEREOF, the undersigned have executed this
Agreement effective the date first above written.
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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