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EXHIBIT 10.2.7
EMPLOYMENT AGREEMENT
between
XXXXXX X. XXXXXXX
and
CHESAPEAKE ENERGY CORPORATION
Effective July 1, 1997
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TABLE OF CONTENTS
Page
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1. Employment................................................................. 1
2. Executive's Duties......................................................... 1
2.1 Specific Duties..................................................... 1
2.2 Supervision......................................................... 1
2.3 Rules and Regulations............................................... 1
2.4 Stock Investment.................................................... 2
3. Other Activities........................................................... 2
4. Executive's Compensation................................................... 3
4.1 Base Salary......................................................... 3
4.2 Bonus............................................................... 3
4.3 Stock Options....................................................... 3
4.4 Benefits............................................................ 3
4.4.1 Vacation .................................................... 3
4.4.2 Membership Dues.............................................. 3
4.4.3 Compensation Review.......................................... 4
5. Term....................................................................... 4
6. Termination................................................................ 4
6.1 Termination by Company.............................................. 4
6.1.1 Termination without Cause.................................... 4
6.1.2 Termination for Cause........................................ 4
6.1.3 Termination After Change in Control.......................... 5
6.2 Termination by Executive............................................ 5
6.3 Incapacity of Executive............................................. 5
6.4 Death of Executive.................................................. 6
6.5 Effect of Termination............................................... 6
7. Confidentiality............................................................ 6
8. Noncompetition............................................................. 7
9. Proprietary Matters........................................................ 8
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TABLE OF CONTENTS (continued)
10. Arbitration................................................................ 8
11. Miscellaneous.............................................................. 9
11.1 Time................................................................. 9
11.2 Notices.............................................................. 9
11.3 Assignment........................................................... 9
11.4 Construction......................................................... 9
11.5 Entire Agreement..................................................... 10
11.6 Binding Effect....................................................... 10
11.7 Attorney's Fees...................................................... 10
11.8 Supersession......................................................... 10
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EMPLOYMENT AGREEMENT
THIS AGREEMENT is made effective July 1, 1997, between CHESAPEAKE ENERGY
CORPORATION, an Oklahoma corporation (the "Company"), and XXXXXX X. XXXXXXX, an
individual (the "Executive") and replaces and supersedes that certain
Employment Agreement between Company and Executive dated May 1, 1995.
W I T N E S S E T H:
WHEREAS, the Company desires to retain the services of the Executive and
the Executive desires to make the Executive's services available to the
Company.
NOW, THEREFORE, in consideration of the mutual promises herein
contained, the Company and the Executive agree as follows:
1. Employment. The Company hereby employs the Executive and the Executive
hereby accepts such employment subject to the terms and conditions contained in
this Agreement. The Executive is engaged as an employee of the Company, and
the Executive and the Company do not intend to create a joint venture,
partnership or other relationship which might impose a fiduciary obligation on
the Executive or the Company in the performance of this Agreement.
2. Executive's Duties. The Executive is employed on a full-time basis.
Throughout the term of this Agreement, the Executive will use the Executive's
best efforts and due diligence to assist the Company in achieving the most
profitable operation of the Company and the Company's affiliated entities
consistent with developing and maintaining a quality business operation.
2.1 Specific Duties. The Executive will serve as Controller for the
Company. The Executive will perform all of the services required
to fully and faithfully execute the office and position to which
the Executive is appointed and such other services as may be
reasonably requested by the Executive's supervisor. During the
term of this Agreement, the Executive may be nominated for
election or appointed to serve as a director or officer of the
Company's subsidiaries as determined in the board of directors'
sole discretion.
2.2 Supervision. The services of the Executive will be requested and
directed by the Vice President - Finance, Xx. Xxxxxx X. Xxxxxxx
and the Chief Executive Officer, Xx. Xxxxxx X. XxXxxxxxx.
2.3 Rules and Regulations. The Company currently has an Employment
Policies Manual which addresses frequently asked questions
regarding the
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Company. The Executive agrees to comply with the Employment
Policies Manual except to the extent inconsistent with this
Agreement. The Employment Policies Manual is subject to change
without notice in the sole discretion of the Company at any time.
2.4 Stock Investment. For each calendar year during which this
Agreement is in effect, the Executive agrees to hold shares of
the Company's common stock having aggregate Investment Value
equal to ten percent (10%) of the compensation paid to the
Executive under paragraphs 4.1 and 4.2 of this Agreement during
such calendar year. For purposes of this section, the
"Investment Value" of each share of stock will be the higher of
either (a) the price paid by the Executive for such share as part
of an open market purchase; or (b) the fair market value on the
date of exercise for shares acquired through the exercise of
employee stock options. Any shares of common stock acquired by
the Executive prior to the date of this Agreement and still owned
by the Executive during the term of this Agreement may be used to
satisfy this requirement to acquire common stock. The Investment
Value for previously acquired stock shall be calculated using the
average stock price during the first six months of this
Agreement.
The stock acquired or owned pursuant to this paragraph 2.4 must
be held by the Executive at all times during the Executive's
employment by the Company or the Company's affiliated entities.
In order to administer this provision, the Executive agrees to
return to the Company's Chief Executive Officer a semi-annual
report of purchases and ownership in a form prepared by the
Company. This paragraph will become null and void if the
Company's common stock ceases to be listed on the New York Stock
Exchange or on the National Association of Securities Dealers
Automated Quotation System. The Company has no obligation to sell
or to purchase from the Executive any of the Company's stock in
connection with this paragraph 2.4 and has made no
representations or warranties regarding the Company's stock,
operations or financial condition.
3. Other Activities. Unless the Executive has obtained the prior written
approval of the board of directors of the Company, the Executive will not: (a)
engage in business independent of the Executive's employment by the Company;
(b) serve as an officer, general partner or member in any corporation,
partnership, company, or firm; (c) directly or indirectly invest in,
participate in or acquire an interest in any oil and gas business, including,
without limitation, (i) producing oil and gas, (ii) drilling, owning or
operating oil and gas leases or xxxxx, (iii) providing services or materials to
the oil and gas industry, (iv) marketing or refining oil or gas, or (v) owning
any interest in any corporation, partnership, company or entity which conducts
any of the foregoing activities. The limitation in this paragraph 3 will not
prohibit an investment by the Executive in publicly traded securities; or the
continued direct ownership and operation of oil and gas interests and leases to
the extent such interests were owned by the Executive on July 1, 1995. The
Executive agrees not to directly
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or indirectly acquire any additional oil and gas interests or increase
ownership of any oil and gas interests owned by the Executive on May 1, 1993.
4. Executive's Compensation. The Company agrees to compensate the
Executive as follows:
4.1 Base Salary. A base salary (the "Base Salary"), at the initial
annual rate of not less than One Hundred Forty Thousand Dollars
($140,000.00), will be paid to the Executive in equal semi-
monthly installments beginning July 15, 1997 during the term of
this Agreement.
4.2 Bonus. In addition to the Base Salary described at paragraph 4.1
of this Agreement, the Company may periodically pay bonus
compensation to the Executive. Any bonus compensation will be at
the absolute discretion of the Company in such amounts and at
such times as the board of directors of the Company may
determine.
4.3 Stock Options. In addition to the compensation set forth in
paragraphs 4.1 and 4.2 of this Agreement, the Executive may
periodically receive grants of stock options from the Company's
various stock option plans, subject to the terms and conditions
thereof.
4.4 Benefits. The Company will provide the Executive such retirement
benefits, reimbursement of reasonable expenditures for dues,
travel and entertainment and such other benefits as are
customarily provided by the Company and as are set forth in the
Company's Employment Policies Manual. The Company will also
provide the Executive the opportunity to apply for coverage under
the Company's medical, life and disability plans, if any. If the
Executive is accepted for coverage under such plans, the Company
will provide such coverage on the same terms as is customarily
provided by the Company to the plan participants as modified from
time to time. The following specific benefits will also be
provided to the Executive at the expense of the Company:
4.4.1 Vacation. The Executive will be entitled to take three
(3) weeks of paid vacation each twelve months during the
term of this Agreement. No additional compensation will
be paid for failure to take vacation and no vacation may
be carried forward from one twelve month period to
another.
4.4.2 Membership Dues. The Company will reimburse the Executive
for: (a) the monthly dues necessary to maintain a full
membership in a country club in the Oklahoma City area
selected by the Executive in an amount not to exceed Five
Hundred Dollars ($500.00) per
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month; and (b) the reasonable cost of any qualified
business entertainment at such country club. All other
costs, including, without implied limitation, any
initiation costs, initial membership costs, personal use
and business entertainment unrelated to the Company will
be the sole obligation of the Executive and the Company
will have no liability with respect to such amounts.
4.4.3 Compensation Review. The compensation of the Executive
will be reviewed not less frequently than annually by the
board of directors of the Company.
5. Term. The employment relationship evidenced by this Agreement is an "at
will" employment relationship and the Company reserves the right to terminate
the Executive at any time with or without cause. In the absence of such
termination, this Agreement will extend for a term of three (3) years
commencing on July 1, 1997, and ending on June 30, 2000 (the "Expiration
Date").
6. Termination. This Agreement will continue in effect until the
expiration of the term stated at paragraph 5 of this Agreement unless earlier
terminated pursuant to this paragraph 6.
6.1 Termination by Company. The Company will have the following
rights to terminate this Agreement:
6.1.1 Termination without Cause. The Company may terminate this
Agreement without cause at any time by the service of
written notice of termination to the Executive specifying
an effective date of such termination not sooner than
sixty (60) business days after the date of such notice
(the "Termination Date"). In the event the Executive is
terminated without cause, or the Company elects not to
renew the contract, the Executive will receive as
termination compensation: (a) Base Salary for a period of
ninety (90) days; (b) any benefits payable by operation of
paragraph 4.4 of this Agreement; and (c) any vacation pay
accrued through the Termination Date. The termination
compensation in (a) shall be paid only if the Executive
executes the Company's standard termination agreement
releasing all legally waivable claims arising from the
Executive's employment.
6.1.2 Termination for Cause. The Company may terminate this
Agreement for cause if the Executive: (a) misappropriates
the property of the Company or commits any other act of
dishonesty; (b) engages in personal misconduct which
materially injures the Company; (c) willfully violates any
law or regulation relating to the
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business of the Company which results in injury to the
Company; or (d) willfully and repeatedly fails to perform
the Executive's duties hereunder. In the event this
Agreement is terminated for cause, the Company will not
have any obligation to provide any further payments or
benefits to the Executive after the effective date of such
termination.
6.1.3 Termination After Change in Control. If, during the term
of this Agreement, there is a "Change of Control" and
within one (1) year thereafter: (a) this Agreement
expires and is not extended; or (b) the Executive is
terminated other than under paragraphs 6.1.2, 6.3 or 6.4
based on adequate grounds; or (c) the Executive resigns as
a result of a reassignment of duties inconsistent with the
Executive's position, a reduction in the Executive's then
current compensation under paragraph 4 of this Agreement,
or a required relocation more than 25 miles from the
Executive's then current place of employment, then the
Executive will be entitled to a severance payment (in
addition to any other amounts payable to the Executive
under this Agreement or otherwise) in an amount equal to
twelve (12) months of Base Salary as set forth in
paragraph 4.1 of this Agreement. The term "Change of
Control" means any action of a nature that would be
required to be reported in response to Item 6(e) of
Schedule 14A of Regulation 14A under the Securities
Exchange Act of 1934 with respect to the Company
including, without limitation (i) the direct or indirect
acquisition by any person after the date hereof of
beneficial ownership of the right to vote or securities of
the Company representing the right to vote thirty five
percent (35%) or more of the combined voting power of the
Company's then outstanding securities having the right to
vote for the election of directors, or (ii) within two
years of a tender offer or exchange offer for the voting
stock of the Company or as a result of a merger,
consolidation, sale of assets or contested election (or
any combination of the foregoing), a majority of the
members of the Company's board of directors is replaced by
directors who were not nominated and approved by the board
of directors.
6.2 Termination by Executive. The Executive may voluntarily
terminate this Agreement with or without cause by the service of
written notice of such termination to the Company specifying an
effective date of such termination thirty (30) days after the
date of such notice, during which time Executive may use
remaining accrued vacation days, or at the Company's option, be
paid for such days. In the event this Agreement is terminated by
the Executive, neither the Company nor the Executive will have
any further obligations hereunder including, without limitation,
any obligation of the
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Company to provide any further payments or benefits to the
Executive after the effective date of such termination.
6.3 Incapacity of Executive. If the Executive suffers from a
physical or mental condition which in the reasonable judgment of
the Company's management prevents the Executive in whole or in
part from performing the duties specified herein for a period of
three (3) consecutive months, the Executive may be terminated.
Although the termination shall be deemed as a Termination With
Cause, any compensation payable under paragraph 4 of this
Agreement will be continued for ninety (90) days. Notwithstanding
the foregoing, the Executive's Base Salary specified in paragraph
4.1 of this Agreement will be reduced by any benefits payable
under any disability plans.
6.4 Death of Executive. If the Executive dies during the term of
this Agreement, the Company may thereafter terminate this
Agreement without compensation to the Executive's estate except:
(a) the obligation to continue the Base Salary payments under
paragraph 4.1 of this Agreement for ninety (90) days; and (b) the
benefits described in paragraph 4.4 of this Agreement accrued
through the effective date of such termination.
6.5 Effect of Termination. The termination of this Agreement will
terminate all obligations of the Executive to render services on
behalf of the Company, provided that the Executive will maintain
the confidentiality of all information acquired by the Executive
during the term of his employment in accordance with paragraph 7
of this Agreement. Except as otherwise provided in paragraph 6
of this Agreement, no accrued bonus, severance pay or other form
of compensation will be payable by the Company to the Executive
by reason of the termination of this Agreement. All keys, entry
cards, credit cards, files, records, financial information,
furniture, furnishings, equipment, supplies and other items
relating to the Company will remain the property of the Company.
The Executive will have the right to retain and remove all
personal property and effects which are owned by the Executive
and located in the offices of the Company. All such personal
items will be removed from such offices no later than two (2)
days after the effective date of termination, and the Company is
hereby authorized to discard any items remaining and to reassign
the Executive's office space after such date. Prior to the
effective date of termination, the Executive will render such
services to the Company as might be reasonably required to
provide for the orderly termination of the Executive's
employment.
7. Confidentiality. The Executive recognizes that the nature of the
Executive's services are such that the Executive will have access to
information which constitutes trade secrets,
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is of a confidential nature, is of great value to the Company or is the
foundation on which the business of the Company is predicated. The Executive
agrees not to disclose to any person other than the Company's employees or the
Company's legal counsel nor use for any purpose, other than the performance of
this Agreement, any confidential information ("Confidential Information").
Confidential Information includes data or material (regardless of form) which
is: (a) a trade secret; (b) provided, disclosed or delivered to Executive by
the Company, any officer, director, employee, agent, attorney, accountant,
consultant, or other person or entity employed by the Company in any capacity,
any customer, borrower or business associate of the Company or any public
authority having jurisdiction over the Company of any business activity
conducted by the Company; or (c) produced, developed, obtained or prepared by
or on behalf of Executive or the Company (whether or not such information was
developed in the performance of this Agreement) with respect to the Company or
any assets oil and gas prospects, business activities, officers, directors,
employees, borrowers or customers of the foregoing. However, Confidential
Information shall not include any information, data or material which at the
time of disclosure or use was generally available to the public other than by a
breach of this Agreement, was available to the party to whom disclosed on a
non-confidential basis by disclosure or access provided by the Company or a
third party, or was otherwise developed or obtained independently by the person
to whom disclosed without a breach of this Agreement. On request by the
Company, the Company will be entitled to a copy of any Confidential Information
in the possession of the Executive. The Executive also agrees that the
provisions of this paragraph 7 will survive the termination, expiration or
cancellation of this Agreement for a period of five (5) years. The Executive
will deliver to the Company all originals and copies of the documents or
materials containing Confidential Information. For purposes of paragraphs 7,
8, and 9 of this Agreement, the Company expressly includes any of the Company's
affiliated corporations, partnerships or entities.
8. Noncompetition. For a period of twelve (12) months after Executive is
no longer employed by the Company as a result of either the resignation by the
Executive pursuant to paragraph 6.2 above, or Termination for Cause pursuant to
paragraph 6.1.2 above, Executive will not: (a) acquire, attempt to acquire or
aid another in the acquisition or attempted acquisition of an interest in oil
and gas assets, oil and gas production, oil and gas leases, mineral interests,
oil and gas xxxxx 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
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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.
10. Arbitration. The parties will attempt to promptly resolve any dispute
or controversy arising out of or relating to this Agreement or termination of
the Executive by the Company. Any negotiations pursuant to this paragraph 10
are confidential and will be treated as compromise and settlement negotiations
for all purposes. If the parties are unable to reach a settlement amicably,
the dispute will be submitted to binding arbitration before a single arbitrator
in accordance with the Employment Dispute Resolution Rules of the American
Arbitration Association. The arbitrator will be instructed and empowered to
take reasonable steps to expedite the arbitration and the arbitrator's judgment
will be final and binding upon the parties subject solely to challenge on the
grounds of fraud or gross misconduct. Except for damages arising out of a
breach of paragraphs 7, 8 or 9 of this Agreement, the arbitrator is not
empowered to award total damages (including compensatory damages) which exceed
300% of compensatory damages and each party hereby irrevocably waives any
damages in excess of that amount. The arbitration will be held in Oklahoma
County, Oklahoma. Judgment upon any verdict in arbitration may be entered in
any court of competent jurisdiction and the parties hereby consent to the
jurisdiction of, and proper venue in, the federal and state courts located in
Oklahoma County, Oklahoma. Each party will bear its own costs in connection
with the arbitration and the costs of the arbitrator will be borne by the party
who the arbitrator determines did not prevail in the matter. Unless otherwise
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expressly set forth in this Agreement, the procedures specified in this
paragraph 10 will be the sole and exclusive procedures for the resolution of
disputes and controversies between the parties arising out of or relating to
this Agreement. Notwithstanding the foregoing, a party may seek a preliminary
injunction or other provisional judicial relief if in such party's judgment
such action is necessary to avoid irreparable damage or to preserve the status
quo.
11. Miscellaneous. The parties further agree as follows:
11.1 Time. Time is of the essence of each provision of this
Agreement.
11.2 Notices. Any notice, payment, demand or communication required
or permitted to be given by any provision of this Agreement will
be in writing and will be deemed to have been given when
delivered personally or by telefacsimile to the party designated
to receive such notice, or on the date following the day sent by
overnight courier, or on the third (3rd) business day after the
same is sent by certified mail, postage and charges prepaid,
directed to the following address or to such other or additional
addresses as any party might designate by written notice to the
other party:
To the Company: Chesapeake Energy Corporation
Xxxx Xxxxxx Xxx 00000
Xxxxxxxx Xxxx, XX 00000-0000
Attn: Xxxxxx X. XxXxxxxxx
To the Executive: Xx. Xxxxxx X. Xxxxxxx
0000 Xxx Xxxxxx Xx.
Xxxxxx, XX 00000
11.3 Assignment. Neither this Agreement nor any of the parties'
rights or obligations hereunder can be transferred or assigned
without the prior written consent of the other parties to this
Agreement.
11.4 Construction. If any provision of this Agreement or the
application thereof to any person or circumstances is determined,
to any extent, to be invalid or unenforceable, the remainder of
this Agreement, or the application of such provision to persons
or circumstances other than those as to which the same is held
invalid or unenforceable, will not be affected thereby, and each
term and provision of this Agreement will be valid and
enforceable to the fullest extent permitted by law. This
Agreement is intended to be interpreted, construed and enforced
in accordance with the laws of the State of Oklahoma and any
litigation relating to this Agreement will be conducted in a
court of competent jurisdiction sitting in Oklahoma County,
Oklahoma.
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11.5 Entire Agreement. This Agreement constitutes the entire
agreement between the parties hereto with respect to the subject
matter herein contained, and no modification hereof will be
effective unless made by a supplemental written agreement
executed by all of the parties hereto.
11.6 Binding Effect. This Agreement will be binding on the parties
and their respective successors, legal representatives and
permitted assigns. In the event of a merger, consolidation,
combination, dissolution or liquidation of the Company, the
performance of this Agreement will be assumed by any entity which
succeeds to or is transferred the business of the Company as a
result thereof.
11.7 Attorneys' Fees. If any party institutes an action or proceeding
against any other party relating to the provisions of this
Agreement or any default hereunder, the unsuccessful party to
such action or proceeding will reimburse the successful party
therein for the reasonable expenses of attorneys' fees and
disbursements and litigation expenses incurred by the successful
party.
11.8 Supercession. On execution of this Agreement by the Company and
the Executive, the relationship between the Company and the
Executive will be bound by the terms of this Agreement and the
Employment Policies Manual and not by any other agreements or
otherwise. In the event of a conflict between the Employment
Policies Manual and this Agreement, this Agreement will control
in all respects.
IN WITNESS WHEREOF, the undersigned have executed this Agreement
effective the date first above written.
CHESAPEAKE ENERGY CORPORATION, an
Oklahoma corporation
By: /s/ XXXXXX X. XXXXXXXX
------------------------------------------------
Xxxxxx X. XxXxxxxxx, Chief Executive Officer
(the "Company")
By: /s/ XXXXXX X. XXXXXXX
------------------------------------------------
Xxxxxx X. Xxxxxxx, Individually
(the "Executive")
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