Contract
Exhibit
10.2.1
SECOND
AMENDED AND RESTATED
THIS
AGREEMENT is made effective December 31, 2008, between CHESAPEAKE ENERGY
CORPORATION, an Oklahoma corporation (the "Company"), and XXXXXX X. XxXXXXXXX,
an individual (the "Executive").
W I T N E
S S E T H:
WHEREAS, the
Company and the Executive entered into that certain Amended and Restated
Employment Agreement dated effective January 1, 2008 (the “Prior
Agreement”).
WHEREAS, the
Board of Directors has determined that it is in the best interests of the
Company to modify the Executive’s employment arrangement in order to: (a)
maximize the Executive’s incentive to remain an employee and officer of the
Company; and (b) temporarily reduce the Executive’s minimum stock ownership
threshold in order to permit the Executive sufficient time to increase his
holdings of the Company’s stock given the forced liquidation of a majority of
the Executive’s stock holdings in October 2008.
WHEREAS, as a
result of the Executive’s extraordinary contribution to the joint venture
transactions that were consummated by the Company during 2008 and increased the
Company’s intrinsic value by at least $10 billion, the Board of Directors has
also determined that it is in the best interests of the Company to grant to the
Executive an incentive award in the form of a credit against the joint interest
xxxxxxxx issued in connection with the FWP Program (as hereafter defined) with a
proportionate clawback provision in the event the Executive resigns or is
terminated for Cause during the next five (5) years.
WHEREAS, the
Executive and the Board of Directors have agreed that the foregoing incentive
award should be conditioned on the following for the initial five year term of
this Agreement: (a) an agreement by the Executive not to resign or commit an act
which would give rise to a termination for Cause by the Company; and (b) that
the Executive’s salary and semi-annual bonuses will be frozen at current levels
and not exceed the amounts for calendar year 2008.
WHEREAS, the
Company and the Executive desire to amend and restate the Prior Agreement in its
entirety to incorporate the foregoing and other changes to the employment
arrangement between the Company and the Executive.
NOW THERFORE,
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 that might impose similar such fiduciary
obligations 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 the objective of achieving the most profitable operation of the
Company and the Company's affiliated entities consistent with developing and
maintaining a quality business operation.
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2.1
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Specific
Duties. During the term of this Agreement the
Executive: (a) will serve as Chairman of the Board and Chief
Executive Officer for the Company; (b) will be nominated for election or
appointed to serve as a director of the Company; (c) will be appointed as
an officer of one (1) or more of the Company’s subsidiaries; and (d) may
be nominated for election or appointed to serve as a director of one (1)
or more of the Company’s subsidiaries. The Executive agrees to
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
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Modifications.
The precise duties to be performed by the Executive may be extended or
curtailed in the discretion of the Board of Directors of the
Company. However, except for termination for Cause (as
hereinafter defined 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 and 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.
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2.3
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Rules and
Regulations. From time to time, the Company may issue policies and
procedures applicable to employees and the Executive including an
Employment Policies Manual. The Executive agrees to comply with such
policies and procedures, except to the extent such policies are
inconsistent with this Agreement. Such policies and procedures
may be supplemented, modified, changed or adopted without notice in the
sole discretion of the Company at any time. In the event of a
conflict between such policies and procedures and this Agreement, this
Agreement will control unless compliance with this Agreement will violate
any law or regulation applicable to the Company or its affiliated
entities. Any activity by the Executive that is expressly permitted by
this Agreement will not violate such policies and
procedures.
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2.4
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Stock
Investment. The Executive agrees to hold shares of the
Company’s common stock having an aggregate Investment Value (as hereafter
defined) greater than the designated percentage of the compensation paid
to the Executive under paragraphs 4.1 and 4.2 of this Agreement during
such calendar year. The designated percentage will be two
hundred percent (200%) for calendar year 2009 and five hundred percent
(500%) for the remaining term of this Agreement. 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 the requirement to own common stock including, without
implied limitation, shares of common stock held by Chesapeake Investments,
an Oklahoma Limited Partnership or owned beneficially through the
Executive’s retirement plans. 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 grant of restricted stock or the conversion of other
securities other than through open market purchases, the fair market value
of the common stock on the date the option is exercised, the restricted
stock vests, or the stock is acquired through the conversion of another
security or the date such stock is otherwise acquired; and (c) for each
share acquired prior to the date of this Agreement, the amount equal to
the greater of (i) the amount determined under clause (a) or (b) as
applicable, or (ii) the closing price for the Company's
stock on the New York Stock Exchange (the "NYSE") on the date
of this Agreement adjusted for subsequent stock splits. This paragraph
will automatically become null and void without notice or action by either
party if the Company’s common stock ceases to be listed on the NYSE, the
National Association of Securities Dealers Automated Quotation System or
other national exchange. The Company has no obligation to sell to 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”) permitted under this paragraph or approved by the Board of
Directors, the Executive will not: (a) engage in activities which require such
substantial services on the part of the Executive that the Executive is unable
to perform the duties assigned to the Executive in accordance with this
Agreement; (b) serve as an officer or director of any publicly held entity; or
(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 Executive is not restricted from maintaining or
making investments, or engaging in other businesses, enterprises or civic,
charitable or public service functions if such activities, investments,
businesses or enterprises do not result in a violation of clauses (a) through
(c) of this paragraph 3. Notwithstanding
the foregoing, the Executive will be permitted to participate in the following
activities and such activities will be deemed to be approved by the Company, if
such activities are undertaken in strict compliance with this
Agreement.
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3.1
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Surface Interests and
Gifts. The foregoing restriction in clause (c) will not prohibit
the ownership of (a) the interests in oil and gas where the Executive
acquires, owns or previously owned the surface of the land covered in
whole or in part by such interest in oil and gas and the ownership,
operation, development or use of the interest in oil and gas is incidental
to the ownership of the surface estate or (b) interests in oil and gas
received by gift or inheritance. For purposes of this paragraph
3.1: (y) interests in oil and gas means any interest in oil and
gas including, without implied limitation, any mineral interest, royalty
interest, overriding royalty interest, working interest, net profits
interest, production payment or similar interest in the production of oil
and gas; and (z) the interests in oil and gas permitted to be owned under
this paragraph 3.1 are not required to be acquired simultaneously with the
acquisition of the surface estate, but may be acquired at any time the
Executive owns any interest in the surface
estate.
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3.2
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Existing
Interests. The Executive has in the past conducted oil
and gas activities individually, through Chesapeake Investments, an
Oklahoma Limited Partnership, and through other entities owned or
controlled by the Executive (collectively, the “Executive Affiliates”).
The Executive will be permitted to continue to conduct oil and gas
activities (including participation in new xxxxx) directly or through the
Executive Affiliates, but only to the extent
such activities are conducted with respect to oil and gas leases or
interests in oil and gas which the Executive or Executive Affiliates (a)
owned or had the right to acquire as of the date of this Agreement, (b)
acquired or held in accordance with paragraph 3.1 of this Agreement or (c)
acquired from the Company under the FWP Program (as hereinafter defined),
prior employment agreements or any other written agreement between the
Executive, the Company or the Company's affiliated entities (collectively,
the “Prior Interests”). To the extent Prior Interests or
activities covered by this paragraph 3.2 are operated by the Company, the
Executive agrees to pay any costs or expenses with respect to the Prior
Interests in accordance with the terms of the Founder Well Participation
Program (the “FWP Program”).
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3.3
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FWP
Program. The Executive or the designated Founder
Affiliate will be permitted to participate in the FWP Program in
accordance with its terms. The parties hereto agree the FWP
Program cannot be modified or amended without the prior written consent of
the Board of Directors and the
Executive.
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3.4
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Non Active
Investments. The foregoing restriction in clause (c) of
this paragraph 3 will not prohibit the following activities by the
Executive or the Executive’s affiliates: (a) an investment in
the securities of a publicly listed company; (b) investment or trading in
commodities, currencies, financial instruments or other derivatives
(including, without implied limitation, short positions,
long positions or positions in options) whether on an exchange,
by private contract or in the over the counter market; (c) an
investment in non public entities which own de minimis passive interests
in E&P Activities (as hereafter defined) which are incidental to such
entity’s primary non E&P business activity; and (d) an investment in
an investment fund, hedge fund, limited partnership or other
passive investment entity (i) which does not actively engage in E&P
Activities; and (ii) for which the Executive does not directly or
indirectly provide input, advice or management to such entity, the sponsor
of such entity or any portfolio company of such entity. For
purposes of this Agreement the term E&P Activities means the specific
activities listed in sub clauses (i) or (ii) of clause (c) of paragraph 3
of this Agreement.
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4. Executive's
Compensation. The Company agrees to compensate the Executive
as follows:
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4.1
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Base
Salary. A base salary (the "Base Salary"), at an annual
rate of not less than Nine Hundred Seventy-Five Thousand Dollars
($975,000.00), will be paid to the Executive in equal bi-weekly
installments, beginning January 1, 2009, and continuing during the term of
this Agreement. The Executive agrees that the Base Salary will
not exceed Nine Hundred Seventy-Five Thousand Dollars ($975,000.00) prior
to the Executive Termination Date (as hereafter
defined).
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4.2
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Bonus. In
addition to the Base Salary described in paragraph 4.1 of this Agreement,
the Company may periodically pay bonus compensation to the Executive.
Except as expressly provided in this Agreement, any bonus compensation
will be awarded in the absolute discretion of the Company in such amounts
and at such times as the Compensation Committee of the Board of Directors
of the Company may determine. The cash bonuses to be paid by
the Company under this paragraph for any calendar year during the term of
this Agreement and prior to the Executive Termination Date will not exceed
the Executive’s cash bonus compensation for calendar year 2008, grants
which approximate One Million Nine Hundred Fifty Thousand Dollars
($1,950,000.00).
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4.3
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Equity
Compensation. 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, restricted stock or other
equity related awards from the Company’s various equity compensation
plans, subject to the terms and conditions
thereof.
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4.4
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Benefits. The
Company agrees to extend to the Executive retirement benefits, deferred
compensation, reimbursement of reasonable expenditures for dues, travel
and entertainment and any other benefits the Company provides to other
executives or officers from time to time on the same terms as such
benefits are provided to such individuals. 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 Company may condition any such benefits on the
Executive paying any amounts which the Company requires other employees to
pay with respect to such benefits.
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4.5
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Vacation. The
Executive will be entitled to take up to five (5) weeks of paid vacation
each calendar year during the term of this Agreement. Except as
provided in the Company's general employment policies or as otherwise
provided in 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.
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4.6
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Travel. For
safety, security and efficiency the Executive will utilize aircraft owned,
leased or chartered by the Company for business and personal use and will
not be required to reimburse the Company for any cost related to such use.
The Executive will: (a) not owe any additional amounts to the
Company under this paragraph for guests or family members traveling with
the Executive; and (b) pay all personal income taxes accruing as a result
of the personal use of the Company’s aircraft by the Executive and the
Executive’s immediate family members under this
paragraph.
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4.7
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Accounting
Support. The Executive will be permitted to utilize the Company’s
office facilities, computer facilities and personnel to provide accounting
services, management services, records maintenance, tax advice, tax return
preparation and other business services for the Executive’s (and the
Executive’s immediate family members’) personal
businesses, investments and activities. Beginning January 1,
2009, the Executive agrees to pay to the Company as a partial
reimbursement an amount equal to: (a) direct cash compensation for each
Company employee primarily designated to provide services under this
paragraph (consisting of cash salaries, cash bonuses, and the employer's
portion of payroll taxes) multiplied by the percentage of the time such
employee spends providing such services plus (b) as indirect costs the
amount for each employee under the foregoing clause (a) multiplied by a
percentage determined by the compensation committee of the Board of
Directors and approved by the Executive. Such amounts related
to the provision of secretarial or general administrative support for the
Executive will not be required to be reimbursed in whole or part under
this paragraph.
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4.8
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2008 Incentive
Award. The Company hereby grants to the Executive,
effective as of the date of this Agreement, an incentive award in the
amount of Seventy-five Million Dollars ($75,000,000.00) to be used,
applied and recouped in accordance with the terms of this paragraph (the
“Incentive Award”). The amount of the Incentive Award, less any
applicable federal and state tax withholding amounts, will be granted to
the Executive as a deposit for credit against joint interest xxxxxxxx
issued by the Company with respect to the Executive’s interest in xxxxx
acquired through participation in the FWP Program, well participation
provisions similar to the FWP Program under prior employment agreements
between the Company and the Executive and the Prior Interests (the “IA JIB
Credit”). The Executive may assign the IA JIB Credit to any
Founder Affiliate (as defined in the FWP Program) subject to any
conditions herein, may designate the application of the IA JIB Credit to
all or part of any unpaid joint interest billing issued by the Company to
the Executive or a Founder Affiliate and may not use the IA JIB Credit for
any other purpose prior to December 31, 2014. Any unused
portion of the IA JIB Credit existing on December 31, 2014, will be
disbursed to the Executive on written request by the
Executive. If, prior to the Executive Termination Date (as
hereafter defined), the Executive is terminated by the Company for Cause
in accordance with paragraph 6.1.2 of this Agreement or the Executive
terminates this Agreement in violation of paragraph 6.2 of this Agreement,
the IA JIB Credit will be recouped from the Executive by the Company as
follows: (a) any of the IA JIB Credit that has not been applied
to a joint interest billing as of the effective date of the foregoing
termination will be automatically forfeited and no consideration will be
paid or earned by the Executive as a result of such forfeiture; (b) the
Executive will within one hundred eighty (180) days after the effective
date of the foregoing termination pay to the Company in immediately
available funds an amount equal to the lesser of the following (1) the
aggregate amount of any IA JIB Credit applied to joint interest xxxxxxxx
issued by the Company plus any federal or state taxes withheld by the
Company for the benefit of the Executive from the Incentive Award or (2)
the original Seventy-five Million Dollar ($75,000,000.00) amount of the
Incentive Award multiplied by a percentage equal to (i) the number of full
calendar months remaining between the effective date of the foregoing
termination and the Executive Termination Date, divided by (ii) sixty
(60). The foregoing right of recoupment will only apply to a
termination of this Agreement under paragraph 6.1.2 or a termination in
violation of paragraph 6.2, each as expressly provided in the foregoing
sentence, and will not apply to any other termination of this Agreement
including, without implied limitation, an Executive FC Termination (as
hereafter defined) under paragraph 6.2 of this Agreement or any
termination under paragraphs 6.3, 6.4 or
6.5.
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4.9
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Compensation
Review. The compensation of the Executive will be
reviewed not less frequently than semi-annually by the Compensation
Committee of the Board of Directors of the Company. The compensation of
the Executive prescribed in paragraph 4 of this Agreement (including
benefits) may: (a) be increased at the discretion of the
Compensation Committee of the Board of Directors of the Company except as
expressly limited in paragraphs 4.1 and 4.2 of this Agreement and (b) not
be reduced without the prior written consent of the Executive except as
expressly provided herein. The limitations under paragraph 4.1
and 4.2 are not intended to impact the compensation under the remaining
paragraphs of this paragraph 4. Notwithstanding the foregoing, the Board
of Directors may reduce the amounts or awards under paragraph 4.2 or 4.3
of this Agreement on a reasonable basis provided such decrease is
applicable to all executives of the Company and does not result in a
proportionately greater reduction in the amounts or awards to Executive
under such paragraphs as compared to any other executive of the Company or
any of the Company's subsidiaries.
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5. Term. In
the absence of termination as set forth in paragraph 6 below, this Agreement
will extend for a term commencing on the effective date of this Agreement and
ending on December 31, 2013, as extended from time to time (the "Expiration
Date"). Unless the Company provides at least thirty (30) days prior written
notice of non-extension to the Executive, on each December 31 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.
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6.1
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Termination by
Company. The Company will have the following rights to
terminate this Agreement:
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6.1.1
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Termination without
Cause. The Company may terminate this Agreement without
Cause at any time by giving written notice of termination to the Executive
specifying an effective date of such termination not sooner than ninety
(90) 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 be entitled to the following: (a) payment of Base
Compensation (as hereafter defined) in accordance with the Company's
policies during the remaining term of this Agreement, but in any event
through the then current Expiration Date; (b) continuation of the benefits
provided by operation of paragraphs 4.4, 4.6, 4.7 and 4.8 of this
Agreement (excepting participation in any retirement or deferred
compensation plan maintained by the Company if such participation is
prohibited by law) at the levels and on the terms provided on the date of
termination hereunder during the remaining term of this Agreement, but in
any event through the then current Expiration Date; and (c) a lump sum
cash payment for any accrued but unused vacation through the Termination
Date in accordance with the Company’s Employment Policies
Manual. 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. Termination compensation under subsection (a) of this
paragraph 6.1.1 will not be paid in a lump sum, but will be paid in equal
installments during the remaining term of this Agreement in accordance
with the Company’s payroll schedule applicable to employees as of the date
of this Agreement (but in any event through the then current Expiration
Date). Any benefits under clause (b) will be subject to any
conditions or obligations in existence on the Termination
Date.
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6.1.2
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Termination for
Cause. The Company may terminate this Agreement for
Cause. For purposes of this Agreement, “Cause” means: (a) the willful and
continued failure of the Executive to perform substantially the
Executive’s duties with the Company or one of the Company Entities (other
than a failure resulting from incapacity due to physical or mental
illness), after a written demand for substantial performance is delivered
to the Executive by the Board of Directors which specifically identifies
the manner in which the Board of Directors believes that the Executive has
not substantially performed the Executive’s duties; or (b) the willful
engaging by the Executive in illegal conduct, gross misconduct or a
clearly established violation of the Company’s written policies and
procedures, in each case which is materially and demonstrably injurious to
the Company. For purposes of this provision, an act or failure to act, on
the part of the Executive, will not be considered “willful” unless it is
done, or omitted to be done, by the Executive in bad faith or without
reasonable belief that the Executive’s action or omission was in the best
interests of the Company. Any act, or failure to act, based on
authority given pursuant to a resolution duly adopted by the Board of
Directors or based on the advice of counsel for the Company will be
conclusively presumed to be done, or omitted to be done, by the Executive
in good faith and in the best interests of the Company. In the event this
Agreement is terminated for Cause, subject to paragraph 6.6 of this
Agreement, 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 independent
and 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 thirty (30) days to request a Board of Directors
meeting to be held at a mutually agreeable time and location to be
attended by the members of the Board of Directors in person within the
following 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.
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6.2
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Termination by
Executive. The Executive: (a) except as provided herein,
may not voluntarily terminate this Agreement prior to December 31, 2013
(the “Executive Termination Date”); (b) may terminate this Agreement after
the Executive Termination Date by giving written notice of such
termination to the Company at least one hundred eighty (180) days prior to
the effective date of such termination; (c) in addition to any other
remedy hereunder, may terminate this Agreement at any time (including
prior to the Executive Termination Date) if the Company defaults with
respect to a material provision of this Agreement, by giving written
notice of such termination to the Company specifying the default by the
Company and an effective date of such termination if the default is not
cured at least forty-five (45) days after the date of such notice (an
“Executive FC Termination”). After the delivery of a notice of
termination in accordance with this paragraph the 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 in accordance with this paragraph the obligations of the parties
will be controlled by paragraph 6.6 of this
Agreement.
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6.3
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Termination After
Change in Control. If during the term of this Agreement
there is a "Change of Control" and within three (3) years thereafter there
is a CC Termination (as hereafter defined), then the Executive will be
entitled to severance compensation (in addition to any other rights and
other amounts payable to the Executive under this Agreement or otherwise
through the date of the CC Termination) in an amount equal to three (3)
times the Executive's Base Compensation. Unless the Executive elects
otherwise as hereinafter provided, the severance compensation under this
paragraph 6.3 will not be paid in a lump sum but will be paid in equal
installments over the remaining term of this Agreement (but in any event
through the then current Expiration Date) in accordance with the Company’s
the payroll schedule applicable to employees as of the date of this
Agreement. The Executive may elect in the notice
under paragraph 6.3.2 of this Agreement to receive the foregoing severance
compensation in a lump sum in lieu of the payout, such lump sum to be paid
by the Company within ten (10) days after the CC Termination. If any
amount under this paragraph is not paid when due, the unpaid amount will
bear interest at the per annum rate of twelve percent
(12%).
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6.3.1
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Change of
Control. For the purpose of this Agreement, a “Change of
Control” means the occurrence of any of the
following:
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(a) The
acquisition by any individual, entity or group (within the meaning of
Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as
amended (the “Exchange Act”)) (a “Person”) of beneficial ownership (within
the meaning of Rule 13d-3 promulgated under the Exchange Act) of 30% or
more of either (i) the then outstanding shares of common stock of the
Company (the “Outstanding Company Common Stock”) or (ii) the combined
voting power of the then outstanding voting securities of the Company
entitled to vote generally in the election of directors (the “Outstanding
Company Voting Securities”). For purposes of this paragraph (a) the
following acquisitions by a Person will not constitute a Change of
Control: (i) any acquisition directly from the Company; (ii)
any acquisition by the Company; (iii) any acquisition by any employee
benefit plan (or related trust) sponsored or maintained by the Company or
any corporation controlled by the Company; or (iv) any acquisition by any
corporation pursuant to a transaction which complies with clauses (i),
(ii) and (iii) of paragraph (c) of this paragraph
6.3.1.
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(b) The
individuals who, as of the date hereof, constitute the Board of Directors
(the “Incumbent Board”) cease for any reason to constitute at least a
majority of the Board of Directors. Any individual becoming a
director subsequent to the date hereof whose election, or nomination for
election by the Company’s shareholders, is approved by a vote of at least
a majority of the directors then comprising the Incumbent Board will be
considered a member of the Incumbent Board as of the date hereof, but any
such individual whose initial assumption of office occurs as a result of
an actual or threatened election contest with respect to the election or
removal of directors or other actual or threatened solicitation of proxies
or consents by or on behalf of a Person other than the Incumbent Board
will not be deemed a member of the Incumbent Board as of the date
hereof.
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(c) The
consummation of a reorganization, merger, consolidation or sale or other
disposition of all or substantially all of the assets of the Company (a
“Business Combination”), unless following such Business Combination: (i)
all or substantially all of the individuals and entities who were the
beneficial owners, respectively, of the Outstanding Company Common Stock
and Outstanding Company Voting Securities immediately prior to such
Business Combination beneficially own, directly or indirectly, more than
60% of, respectively, the then outstanding shares of common stock and the
combined voting power of the then outstanding voting securities entitled
to vote generally in the election of directors, as the case may be, of the
corporation resulting from such Business Combination (including, without
limitation, a corporation which as a result of such transaction owns the
Company or all or substantially all of the Company’s assets either
directly or through one or more subsidiaries) in substantially the same
proportions as their ownership, immediately prior to such Business
Combination of the Outstanding Company Common Stock and Outstanding
Company Voting Securities, as the case may be, (ii) no Person (excluding
any corporation resulting from such Business Combination or any employee
benefit plan (or related trust) of the Company or such corporation
resulting from such Business Combination) beneficially owns, directly or
indirectly, 30% or more of, respectively, the then outstanding shares of
common stock of the corporation resulting from such Business Combination
or the combined voting power of the then outstanding voting securities of
such corporation except to the extent that such ownership existed prior to
the Business Combination and (iii) at least a majority of the members of
the board of directors of the corporation resulting from such Business
Combination were members of the Incumbent Board at the time of the
execution of the initial agreement, or of the action of the Board,
providing for such Business
Combination.
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(d) The
approval by the shareholders of the Company of a complete liquidation or
dissolution of the
Company.
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6.3.2
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CC
Termination. The term "CC Termination" means any of the
following which occur and for which the Executive notifies the Company
that the Executive deems such action a CC Termination under this
paragraph: (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
non-extension; (c) a required relocation more than 25 miles from the
Executive’s then current place of employment; (c) a default by the Company
under this Agreement; (d) 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 (e) 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.
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6.4
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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 four (4) consecutive months,
the Executive may be terminated. Although the termination will
be deemed as a termination with Cause, the Executive will be entitled to
the compensation provided for in paragraph 6.1.1 of this Agreement with
Base Compensation to be reduced by any benefits payable under any
disability plans provided to the Executive at the Company's
expense.
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6.5
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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 the Company will be
obligated to continue for twelve (12) months after the effective date of
such termination to: (a) pay the Base Salary payments under
paragraph 4.1 of this Agreement; and (b) provide Accounting Support
benefits under paragraph 4.7 of this
Agreement.
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6.6
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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 continue to comply with the
provisions of paragraphs 7 and 8 of this Agreement as long as they are
applicable. 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. In the event that payments are required to be made by the
Company under this paragraph 6, the Executive will not be required to seek
other employment as a means of mitigating the Company’s obligations
hereunder resulting from termination of the Executive’s employment and the
Company’s obligations hereunder (including payment of severance benefits)
will not be terminated, reduced or modified as a result of the Executive’s
earnings from other employment or self-employment. 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 that
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 sixty (60) 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 cooperate with the Company to provide for the orderly termination of
the Executive's employment. If prior to the Executive
Termination Date there occurs a termination by the Company under paragraph
6.1.2 of this Agreement or a termination by the Executive in violation of
paragraph 6.2 of this Agreement, the Company will be entitled to
recoupment of the Incentive Award from the Executive as provided in
paragraph 4.8 of this Agreement. In the event of termination
under any other provision of this Agreement (including, without implied
limitation, an Executive FC Termination under paragraph 6.2 of this
Agreement or any termination under paragraphs 6.3, 6.4 or 6.5), the
Company will not have a right of recoupment under paragraph 4.8 or
otherwise for all or part of the Incentive Award and the Executive, and
any assigns of the Executive, will be entitled to retain, exercise and
utilize all of the benefits of the Incentive Award including, without
implied limitation, to utilize or obtain a refund of the IA JIB Credit in
accordance with paragraph 4.8. In addition to the foregoing,
the Executive will be entitled to continue to participate in the FWP
Program to the extent allowed by the terms of the FWP
Program.
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6.7
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Equity Compensation
and Non-Qualified Deferred Compensation Plan Provisions.
Notwithstanding any provision to the contrary in any option agreement,
restricted stock agreement, plan or other agreement relating to equity
based compensation or non-qualified deferred compensation benefits, in the
event of a termination under paragraph 6.1.1, 6.2 (but only if the
Executive is at least 55 years of age on the date of termination under
paragraph 6.2), 6.4 or 6.5 of this Agreement: (a) all units,
stock options, incentive stock options, supplemental matching
contributions, performance shares, stock appreciation rights and
restricted stock held by Executive immediately prior to such termination
will immediately become 100% vested; and (b) the Executive's right to
exercise any previously unexercised options will not terminate until the
latest date on which such option would expire but for Executive's
termination of employment. To the extent Company is unable to
provide for one or both of the foregoing rights the Company will provide
in lieu thereof a lump-sum cash payment equal to the difference between
the total value of such units, stock options, incentive stock options,
supplemental matching contributions, performance shares, stock
appreciation rights and shares of restricted stock (the "Equity
Compensation Rights") with the foregoing rights as of the date of
Executive's termination of employment and the total value of the Equity
Compensation without the foregoing rights as of the date of the
Executive's termination of employment. The foregoing amounts
will be determined by the Board of Directors in good faith after
consultation with the Executive based on a valuation performed by an
independent consultant selected by the Board of
Directors.
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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 will 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 one (1) year. 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
Entities.
8. Non-competition. During
the Executive's employment hereunder and for the period ending six months after
the later of (i) the Executive’s termination in accordance with this Agreement
or (ii) the date amounts owing to the Executive in accordance with paragraph 6
of this Agreement cease to be due in accordance with the terms of this
Agreement, 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, minerals interests,
oil and gas xxxxx or other such oil and gas exploration, development or
production activities within any spacing unit in which the Company owns an oil
an gas interest on the date of the resignation or termination of the Executive;
(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; and (c) circumvent or attempt
to circumvent the foregoing agreements by any future arrangement or through the
actions of a third party. The foregoing will not prohibit the activities which
are expressly permitted by paragraph 3 of this Agreement.
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) will 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 the Company Entities.
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) that 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. The
Company will pay the costs and expenses of the arbitration including, without
implied limitation, the fees for the arbitrators. 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.
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Miscellaneous. The
parties further agree as follows:
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11.1
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Time.
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Time
is of the essence of each provision of this
Agreement.
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11.2
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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:
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To the
Company: Chesapeake
Energy Corporation
Xxxx Xxxxxx Xxx
00000
Xxxxxxxx Xxxx,
XX 00000-0000
Attn: Xxxxxx X.
Xxxxxx
To the
Executive:
Xx.
Xxxxxx X. XxXxxxxxx
0000 Xxxxxxxx
Xxxxx
Xxxxxxxx Xxxx,
Xxxxxxxx 00000
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11.3
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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.
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11.4
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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.
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11.5
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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.
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11.6
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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.
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11.7
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Attorneys'
Fees. If any party institutes an action, proceeding or
arbitration against any other party relating to the provisions of this
Agreement or any default hereunder, the Company will be responsible for
paying the Company’s legal fees and expenses and the Company will be
required to reimburse the Executive for reasonable expenses and legal fees
incurred by the Executive in connection with the resolution of such action
or proceeding, including any costs of
appeal.
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11.8
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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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11.9
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Section 409A
Compliance. This Agreement is intended to comply with
Section 409A of the Code and will be construed in accordance with such
intent. To the extent that any benefit to be paid or granted
under this Agreement is subject to Section 409A of the Code, such benefit
will be paid or granted in a manner that will comply with Section 409A of
the Code (including any Section 409A guidance reasonably acceptable to
both parties). Any provision of this Agreement that would cause
a benefit to fail to satisfy Section 409A of the Code will have no force
or effect until amended to comply with Section 409A of the Code (which
amendment may be retroactive to the extent permitted by Section 409A of
the Code).
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IN
WITNESS WHEREOF, the undersigned have executed this Agreement this 31st day of
December, 2008, effective the date first above written.
CHESAPEAKE
ENERGY CORPORATION, an
Oklahoma
corporation
By:/s/ Xxxxxx X.
Xxxxxx
Xxxxxx
X. Xxxxxx, Senior Vice
President,
Human and Corporate Resources
(the
"Company")
/s/ Xxxxxx X.
XxXxxxxxx
Xxxxxx X.
XxXxxxxxx, individually
(the
"Executive")
