Employment Agreement - Chesapeake Energy Corp. and Tom L. Ward
EMPLOYMENT AGREEMENT
between
TOM L. WARD
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 Modifications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2.3 Rules and Regulations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.4 Stock Investment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
3. Other Activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
3.1 Company's Activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
3.1.1 Amount of Participation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
3.1.2 Conditions of Participation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
3.2 Other Activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
4.4.2 Membership Dues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
4.4.3 Compensation Review . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
4.4.4 Automobile and Travel Allowance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
4.4.5 Accounting Support . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
5. Term . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
6. Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
6.1 Termination by Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
6.1.1 Termination without Cause . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
6.1.2 Termination for Cause . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
6.1.3 Termination After Change in Control . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
6.2 Termination by Executive . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
6.3 Incapacity of Executive . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
6.4 Death of Executive . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
6.5 Effect of Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
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TABLE OF CONTENTS (continued)
7. Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
8. Noncompetition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
9. Proprietary Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
10. Arbitration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
11. Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
11.1 Time . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
11.2 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
11.3 Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
11.4 Construction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
11.5 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
11.6 Binding Effect . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
11.7 Attorney's Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
11.8 Supersession . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
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EMPLOYMENT AGREEMENT
THIS AGREEMENT is made effective July 1, 1997, between CHESAPEAKE
ENERGY CORPORATION, an Oklahoma corporation (the "Company"), and TOM L. WARD,
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 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 President and
Chief Operating 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
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
directed by the board of directors of the Company.
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
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removal of the Executive as a member of the board of directors
of the Company, the withdrawal of the designation of the
Executive as President and Chief Operating 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.
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 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. 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. 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
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Executive's employment by the Company which requires any substantial portion of
the Executive's time; (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.
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") during any Calendar Quarter (as
hereafter defined) on the terms and conditions set forth
herein. 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 Executive's
percentage working interest in the Program Wells
spudded during such Calendar Quarter will be subject
to approval by the disinterested members of the
compensation committee of the Company's board of
directors and to the limitations set forth herein
(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 Approved Percentage for a Program Well which
does not fall within clause (b) of this paragraph
3.1.1 or an Operations Well; or (b) zero percent (0%)
if the combined participation in the Program Well by
the Executive, Mr. Aubrey K. McClendon and Mr.
Marcus C. Rowland with such
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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. McClendon 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 "Calendar Quarter" means the
three (3) month periods commencing on the first (1st)
day of January, April, July and October.
3.2 Other Activities. The Executive currently conducts oil and
gas investment activities individually and through TLW
Production Company, an Oklahoma corporation ("Production"),
and TLW Investments, Inc., an Oklahoma corporation
("Investments"). 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,
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Production or Investments as of July 1, 1995, or acquired by
Production or Investments from the Company. The interests
acquired by Investments shall be limited by the provisions of
paragraph 3.1 of this Agreement.
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 Thousand
Dollars ($300,000.00), 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 golf and/or country
club in the Oklahoma City area as the Executive may
select; and (b) the reasonable cost of any qualified
business entertainment at such country club. All
other costs, including, without
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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.
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.
4.4.4 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 fiscal 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 excluding any fixed
costs of the aircraft (including acquisition costs
and depreciation) and will be equal to $40,000.00 for
the Company's fiscal year ending on June 30, 1997,
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.
4.4.5 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 (presently Cheryl Hamilton) of
the Company 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.
5. Term. In the absence of termination as set forth in paragraph 6
below, 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"). Unless the
Company provides thirty (30) days prior written notice of nonextension to the
Executive, on each June 30 during the term of this
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Agreement, the term will be automatically extended for one (1) additional year
so that the remaining term on this Agreement will be not less than two (2) and
not more than three (3) years.
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, the Executive will receive as
termination compensation: (a) continuation of the
Base Salary provided by paragraph 4.1 during the
portion of the contract period remaining after the
date of the Executive's termination, but in any
event, through the Expiration Date; (b) any benefits
payable by operation of paragraph 4.4 of this
Agreement during the portion of the contract period
remaining after the date of the Executive's
termination, but in any event, through the Expiration
Date; 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 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
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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.
6.1.3 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 thirty six (36)
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 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.
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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 through the
remaining contract period, but in any event, through the
Expiration Date. Notwithstanding the foregoing, the
Executive's Base Salary specified in paragraph 4.1 of this
Agreement shall 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 twelve (12)
months 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 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
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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
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
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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
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.
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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. Tom L. Ward
19200 N. Rockwell Avenue
Edmond, OK 73003-9200
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. 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.
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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/ TOM L. WARD
--------------------------------------------
Tom L. Ward, Individually
(the "Executive")
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