EXHIBIT 4.8
SECOND AMENDED AND RESTATED
EMPLOYMENT AGREEMENT
THIS AGREEMENT is made effective July 1, 2001, between CHESAPEAKE
ENERGY CORPORATION, an Oklahoma corporation (the "Company"), and XXX X. XXXX, an
individual (the "Executive").
WITNESSETH:
WHEREAS, the Company and the Executive entered into that certain
Amended and Restated Employment Agreement dated effective July 1, 1998 as
amended by the First Amendment to Amended and Restated Employment Agreement
dated December 31, 1998 (together the "Prior Agreement");
WHEREAS, the Company and the Executive desire to amend and restate the
Prior Agreement in its entirety.
NOW, THEREFORE, in consideration of the mutual promises herein
contained, the Company and the Executive agree as follows:
1. Employment. The Company hereby employs the Executive and the Executive hereby
accepts such employment subject to the terms and conditions contained in this
Agreement. The Executive is engaged as an employee of the Company and the
Executive and the Company do not intend to create a joint venture, partnership
or other relationship which might impose a fiduciary obligation on the Executive
or the Company in the performance of this Agreement.
2. Executive's Duties. The Executive is employed on a full-time basis.
Throughout the term of this Agreement, the Executive will use the Executive's
best efforts and due diligence to assist the Company in achieving the most
profitable operation of the Company and the Company's affiliated entities
consistent with developing and maintaining a quality business operation.
2.1 Specific Duties. The Executive will serve as 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 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.
2.2 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 President or 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. In the event of a conflict between the Employment
Policies Manual and this Agreement, this Agreement will
control over the terms of the Employment Policies Manual.
2.4 Stock Investment. During the term of this Agreement, the
Executive agrees to hold shares of the Company's common stock
having an aggregate Investment Value (as hereafter defined)
equal to five hundred percent (500%) of the compensation paid
to the Executive under paragraphs 4.1 and 4.2 of this
Agreement during such calendar year. Any shares of common
stock acquired by the Executive prior to the date of this
Agreement and still owned by the Executive during the term of
this Agreement may be used to satisfy the requirement to own
common stock. For purposes of this paragraph, the "Investment
Value" of each share of stock will be as follows: (a) for
shares purchased in the open market the price paid by the
Executive for such shares; (b) for shares acquired through the
exercise of stock options, the fair market value of the common
stock on the date the option was exercised; (c) for shares
acquired after the IPO other than through open market
purchases or the exercise of options, the fair market value of
the Company's common stock on the date of the acquisition of
such common stock; and (d) for shares acquired prior to the
Company's initial public offering, the price obtained for
stock in the IPO adjusted for subsequent stock splits. This
paragraph will become null and void if the Company's common
stock ceases to be listed on the New York Stock Exchange, the
National Association of Securities Dealers Automated Quotation
System or other national exchange. The Company has no
obligation to sell or to purchase from the Executive any of
the Company's stock in connection with this paragraph 2.4 and
has made no representations or warranties regarding the
Company's stock, operations or financial condition.
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3. Other Activities. Except for the activities (the "Permitted Activities")
expressly permitted by paragraphs 3.1 and 3.2 of this Agreement or approved by
the board of directors of the Company, the Executive will not: (a) engage in
business independent of the Executive's employment by the Company which requires
any substantial portion of the Executive's time; (b) serve as an officer or
director of any public corporation, partnership, company, or firm; (c) except
for passive investments that do not violate this Agreement and require a minimal
portion of the Executive's time, serve as a general partner or member of any
corporation, partnership, company or firm; or (d) directly or indirectly invest
in, participate in or acquire an interest in any oil and gas business,
including, without limitation, (i) producing oil and gas, (ii) drilling, owning
or operating oil and gas leases or 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 limitations in this paragraph 3
will not prohibit an investment by the Executive in publicly traded securities.
Notwithstanding the foregoing, the Executive will be permitted to participate in
the following activities which will be deemed to be approved by the Company, if
such activities are undertaken in strict compliance with this Agreement.
3.1 Existing Interests. The Executive has in the past conducted
oil and gas activities individually and through TLW
Investments Inc., TLW Production Company and 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 on oil and gas leases or interests which the
Executive or Executive Affiliates owned or had the right to
acquire as of July 1, 2001, or which the Executive or the
Executive Affiliates acquired from the Company under this
Agreement or prior agreements with the Company (collectively,
the "Prior Interests"). To the extent that the oil and gas
interests or activities covered by this paragraph 3.1 are
operated by the Company the ownership and participation will
be subject to the payment and revenue adjustment provisions
set forth in this paragraph 3.
3.2 Company's Activities. The Executive or the designated
Executive Affiliate will be permitted to acquire on the terms
and conditions set forth herein an interest in the
governmental spacing or production unit for each of the xxxxx
(the "Program Xxxxx") spudded by any of the Company Entities
(as hereafter defined) in any Calendar Quarter (as hereafter
defined) during the Participation Term (as hereafter defined).
The Program Xxxxx include any well spudded during such
Calendar Quarter in which the Company Entities participate as
a nonoperator. Program Xxxxx will include grass-roots xxxxx or
re-entries of existing xxxxx.
3.2.1 Election. On or before the date which is thirty (30)
days before the first (1st) day of each Calendar
Quarter, the Executive will provide
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notice to the compensation committee of the Company's
board of directors of the Executive's intent to
participate in Program Xxxxx during the succeeding
Calendar Quarter and the minimum percentage working
interest which the Executive proposes to participate
with during such Calendar Quarter (the "Acquisition
Percentage"). The Executive's elected Acquisition
Percentage for any Calendar Quarter will not exceed
two and one-half percent (2.5%) on an eight-eighths
(8/8ths) basis. If prior to the date specified
herein, the Executive fails to provide notice of the
Executive's intent to participate or of the
Acquisition Percentage for a Calendar Quarter, the
amount of the Acquisition Percentage for the Calendar
Quarter will be deemed to be equal to the Acquisition
Percentage for the immediately preceding Calendar
Quarter.
3.2.2 Amount of Participation. On election to participate
and the designation of the Acquisition 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 greater of the following
determined on a well-by-well basis (the "Minimum
Participation"): (a) the Acquisition Percentage for
such Program Well (as adjusted for any well under
paragraph 3.2.3); or (b) the Prior Interest of the
Executive or the Executive Affiliates in the drilling
unit for such Program Well. If the foregoing clause
(a) is applicable to a Program Well, then the Company
will assign or allocate to the Executive or the
designated Executive Affiliate a unit working
interest in the Program Well sufficient to cause the
Executive and the Executive Affiliates' combined
interest in such Program Well to equal the
Acquisition Percentage (including in such computation
any Prior Interests). The interest to be assigned or
allocated under this paragraph to cause the
Executive's participation to be equal to the
Acquisition Percentage will be derived
proportionately from all the interests owned by the
Company in the Program Xxxxx (including nonconsenting
interests, back-in interests, royalty interests,
overriding royalty interests or other similar
interests) so that the interests assigned or
allocated to the Executive are substantially similar
to the interests retained by the Company. If the
Executive elects not to participate in Program Xxxxx
during a Calendar Quarter, then the Executive can
elect to participate or not participate with any
Prior Interests under the existing agreements related
to such Prior Interests.
3.2.3 Minor Company Interests. If the combined interests in
a specific Program Well to be assigned or allocated
by the Company to the Executive and Xx. Xxxxxx X.
XxXxxxxxx under their respective employment
agreements causes the Company's working interest
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(determined after consideration of any carried or
reversionary interests) 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,
then the Acquisition Percentage for that Program Well
will be equal to zero for purposes of paragraph 3.2.2
of this Agreement. If this paragraph 3.2.3 prohibits
the Executive's participation in a Program Well, then
Xx. XxXxxxxxx will also not be entitled to
participate in such Program Well under his employment
agreement.
3.3 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 participation in such Program Well or
similar xxxxx operated by the Company Entities. The
Acquisition Percentage cannot be changed during any Calendar
Quarter without the prior approval of the members of the
compensation committee of the Company's board of directors.
Any participation by the Executive under paragraph 3.2 is also
conditioned on 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 xxxxxxxx within ninety (90) days after the month of
receipt. Any amount not paid within the designated time period
will accrue interest at the per annum rate of ten percent
(10%).
3.4 Revenue Timing. The Executive may request an advance (the
"Revenue Advance") from the Company up to an amount (the "RA
Amount") equal to: (a) the revenue disbursed by the Company to
the Executive during the prior six (6) months for all Program
Xxxxx and Prior Interests for which the Company disburses
revenue to the Executive, divided by (b) six (6). The Revenue
Advance will be recalculated at the end of each Calendar
Quarter. The Executive agrees to promptly pay any amount by
which the Revenue Advance and any amounts advanced to the
Executive in connection with revenue from the Executive's oil
and gas xxxxx exceed, in the aggregate, the RA Amount
calculated under this paragraph 3.4 and any amount not so paid
will accrue interest at the per annum rate of ten percent
(10%). The Revenue Advance represents oil and gas revenue
received by the Company with respect to the Executive's
interest in various oil and gas xxxxx for which the Company
markets production but has not yet disbursed to the Executive
or other participants in such xxxxx and as such will not
accrue interest except as provided in this paragraph 3.4.
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3.5. Definitions. For purposes of this Agreement, the term: (a)
"Calendar Quarter" means the three (3) month periods
commencing on the first (1st) day of January, April, July and
October; (b) the term "Company Entities" means the Company,
any affiliate or successor to the Company, any entity which
controls, subsequently owns or is under common control with
the Company and any subsidiary corporation, partnership,
limited liability company or other entity owned by, controlled
by or under common control with any of the foregoing (whether
direct or indirect); and (c) "Participation Term" means the
term of this Agreement plus five (5) years after a termination
under paragraphs 6.1.1 or 6.3 of this Agreement.
4. Executive's Compensation. The Company agrees to compensate the Executive as
follows:
4.1 Base Salary. A base salary (the "Base Salary"), in an annual
rate of not less than Five Hundred Seventy-Five Thousand
Dollars ($575,000.00), will be paid to the Executive in equal
semi-monthly installments beginning July 15, 2001 during the
term of this Agreement.
4.2 Bonus. In addition to the Base Salary described at paragraph
4.1 of this Agreement, the Company may periodically pay bonus
compensation to the Executive. Any bonus compensation will be
at the absolute discretion of the Company in such amounts and
at such times as the board of directors of the Company may
determine.
4.3 Stock Options. In addition to the compensation set forth in
paragraphs 4.1 and 4.2 of this Agreement, the Executive may
periodically receive grants of stock options from the
Company's various stock option plans, subject to the terms and
conditions thereof.
4.4 Benefits. The Company will provide the Executive such
retirement benefits, reimbursement of reasonable expenditures
for dues, travel and entertainment and other benefits on terms
customarily provided by the Company from time to time. The
Company will also provide the Executive the opportunity to
apply for coverage under the Company's medical, life and
disability plans, if any. If the Executive is accepted for
coverage under such plans, the Company will provide such
coverage on the same terms as is customarily provided by the
Company to the plan participants as modified from time to
time. The following specific benefits will also be provided to
the Executive at the expense of the Company:
4.4.1 Vacation. The Executive will be entitled to take up
to four (4) weeks of paid vacation each calendar year
during the term of this Agreement. No additional
compensation will be paid for failure to take
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vacation and no vacation may be carried forward from
one calendar year to another.
4.4.2 Membership Dues. The Company will reimburse the
Executive for: (a) the monthly dues necessary to
maintain a full membership in (1) golf and/or country
club in the Oklahoma City area selected by the
Executive; and (b) the reasonable cost of any
qualified business entertainment at such country
club. All other costs, including, without implied
limitation, any initiation costs, initial membership
costs, personal use and business entertainment
unrelated to the Company will be the sole obligation
of the Executive and the Company will have no
liability with respect to such amounts.
4.4.3 Allowances. The Executive will receive a monthly cash
allowance in the amount of Two Thousand Dollars
($2,000.00) 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 or leased 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 except for variable costs of
such use in excess of the aircraft allowance. For
purposes of this Agreement the variable cost of using
the Company's aircraft 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). The aircraft allowance will be equal
to $6,250 of the variable cost of using the Company's
aircraft for each month during the term of this
Agreement. If the Executive's unreimbursed variable
costs attributable to the Executive's use of the
Company's aircraft during any twenty-four month
period exceeds the aircraft allowance for that
period, the Executive will be required to reimburse
the Company for such excess.
4.4.4 Accounting Support. The Executive will be permitted
to utilize the Company's office space, computer
facilities and the equivalent of one (1) full-time
accounting employee of the Company to maintain books
and records for the Executive and the Executive's
Permitted Activities. The Executive will not be
required to pay any amount to the Company in
connection with such accounting services.
4.5 Gross-Up Payment. In the event it is determined that any
payment or distribution by the Company or the Company Entities
to or for the benefit of the Executive (whether paid or
payable or distributed or distributable
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pursuant to the terms of this Agreement or otherwise, but
determined without regard to any additional payments required
under this paragraph 4.5) (a "Payment") is subject to the
excise tax imposed by Section 4999 of the Internal Revenue
Code (the "Code") or any interest or penalties related to such
excise tax (collectively, the "Excise Tax"), the Executive
will be entitled to receive an additional payment (a "Gross-Up
Payment") from the Company. The Gross-Up Payment will be equal
to the amount, such that after payment by the Executive of all
taxes (including the Excise Tax, income taxes, interest and
penalties imposed with respect to such taxes) on the Gross-Up
Payment, the Executive will retain an amount of the Gross-Up
Payment equal to the Excise Tax imposed on the Payment.
4.5.1 Determination. Subject to the provisions of paragraph
4.5.2 all determinations required to be made under
this paragraph 4.5 (including whether and when a
Gross-Up Payment is required, the amount of such
Gross-Up Payment and the assumptions to be utilized)
will be made by a nationally recognized certified
public accounting firm designated by the Executive
(the "Accounting Firm"). The Accounting Firm will
provide detailed supporting calculations both to the
Company and the Executive within fifteen (15)
business days of the receipt of notice from the
Executive that there has been a Payment, or such
earlier time as is reasonably requested by the
Company. In the event that the Accounting Firm is
serving as accountant or auditor for the individual,
entity or group effecting a Change of Control (as
hereinafter defined), the Executive will be entitled
to appoint another nationally recognized accounting
firm to make the determinations required under this
paragraph (which accounting firm will then be
referred to as the Accounting Firm hereunder). All
fees and expenses of the Accounting Firm will be paid
by the Company. Any Gross-Up Payment required to be
paid under this paragraph 4.5 will be paid by the
Company to the Executive within five (5) days of the
receipt of the Accounting Firm's determination. Any
determination by the Accounting Firm will be binding
on the Company and the Executive. As a result of the
uncertainty in the application of Section 4999 of the
Code at the time of the initial determination by the
Accounting Firm, the Gross-Up Payment made by the
Company may be less than actually required (an
"Underpayment") consistent with the calculations
required to be made hereunder. In the event that the
Company exhausts its remedies pursuant to paragraph
4.5.2 below and the Executive thereafter is required
to make a payment of any Excise Tax, the Accounting
Firm will determine the amount of the Underpayment
that has occurred and any such Underpayment will be
promptly paid by the Company to or for the benefit of
the Executive.
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4.5.2 Contest of Claims. The Executive will notify the
Company in writing of any claim by the Internal
Revenue Service that, if successful, would require
the payment by the Company of a Gross-Up Payment.
Such notification will be given as soon as
practicable but no later than ten (10) business days
after the Executive is informed in writing of such
claim and will apprise the Company of the nature of
such claim and the date on which such claim is
requested to be paid. The Executive will not pay such
claim prior to the expiration of the thirty (30) day
period following the date on which the Executive
notifies the Company (or such shorter period ending
on the date that any payment of taxes with respect to
such claim is due). If the Company notifies the
Executive in writing prior to the expiration of such
thirty (30) day period that the Company desires to
contest such claim, the Executive will: (a) provide
to the Company any information reasonably requested
by the Company relating to such claim; (b) take such
action in connection with contesting such claim as
the Company reasonably requests in writing including,
without limitation, accepting legal representation
with respect to such claim by an attorney reasonably
selected by the Company; (c) cooperate with the
Company in good faith as necessary to effectively
contest such claim; and (d) permit the Company to
participate in any proceedings relating to such
claim. The Company will bear and pay directly all
costs and expenses (including additional interest and
penalties) incurred in connection with the contest of
the claim and agrees to indemnify and hold the
Executive harmless, on an after-tax basis, for any
Excise Tax or income tax (including interest and
penalties with respect thereto) imposed as a result
of such protest (including payment of costs and
expenses as provided hereunder). Without limitation
on the foregoing provisions, the Company will control
all proceedings related to such contested claim, may
at its sole option pursue or forgo any and all
administrative appeals, proceedings, hearings and
conferences with the taxing authority in respect of
such claim and may at its sole option either direct
the Executive to pay the tax claimed and xxx for a
refund or contest the claim in any permissible
manner. The Executive agrees to prosecute such
contest to a determination before any administrative
tribunal, in a court of initial jurisdiction and in
one or more appellate courts, as the Company
reasonably determines. If the Company directs the
Executive to pay a claim and xxx for a refund, the
Company will be required to advance the amount of
such payment to the Executive on an interest-free
basis and agrees to indemnify and hold the Executive
harmless, on an after-tax basis, from any Excise Tax
or income tax (including interest or penalties with
respect thereto) imposed with respect to such advance
or with respect to any imputed income with respect to
such advance, provided that any extension of the
statute of limitations relating to payment of taxes
for the taxable
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year of the Executive with respect to which such
contested amount is claimed to be due is limited
solely to such contested amount. Furthermore, the
Company's control of the contested claim will be
limited to issues with respect to which a Gross-Up
Payment would be payable hereunder and the Executive
will be entitled to settle or contest, as the case
may be, any other issue raised by the Internal
Revenue Service or any other taxing authority.
4.5.3 Refunds. If, after the receipt by the Executive of an
amount advanced by the Company pursuant to paragraph
4.5.2, the Executive becomes entitled to receive any
refund with respect to such claim the Executive will
(subject to the Company's complying with the
requirements of paragraph 4.5.2) promptly pay to the
Company the amount of such refund (together with any
interest paid or credited thereon after taxes
applicable thereto). If, after the receipt by the
Executive of an amount advanced by the Company
pursuant to paragraph 4.5.2, a determination is made
that the Executive will not be entitled to any refund
with respect to such claim and the Company does not
notify the Executive in writing of its intent to
contest such denial of refund prior to the expiration
of (30) days after such determination, then the
advance will be forgiven and will not be required to
be repaid and the amount of such advance will offset,
to the extent thereof, the amount of Gross-Up Payment
required to be paid.
4.6 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 in paragraph 4 of this Agreement (including
benefits) may be increased at the discretion of the Company,
but may not be reduced without the prior written consent of
the Executive.
5. Term. In the absence of termination as set forth in paragraph 6 below, this
Agreement will extend for a term of five (5) years commencing on July 1, 2001,
and ending on June 30, 2006 (the "Expiration Date") as extended from time to
time. Unless the Company provides thirty (30) days prior written notice of
nonextension to the Executive, on each June 30 during the term of this
Agreement, the term and the Expiration Date will be automatically extended for
one (1) additional year so that the remaining term on this Agreement will be not
less than four (4) and not more than five (5) years.
6. Termination. This Agreement will continue in effect until the expiration of
the term set forth in paragraph 5 of this Agreement unless earlier terminated
pursuant to this paragraph 6.
6.1 Termination by Company. The Company will have the following
rights to terminate this Agreement:
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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 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
receive as termination compensation: (a) Base
Compensation (as hereafter defined) during the
remaining term of this Agreement, but in any event
through the Expiration Date; (b) any benefits
provided by operation of paragraph 4.4 of this
Agreement during the remaining term of this
Agreement, but in any event through the Expiration
Date (including, without implied limitation, suitable
office space, secretarial and accounting support at
the levels presently provided by the Company to the
Executive); and (c) any vacation pay accrued through
the Termination Date. For purposes of this Agreement
the term "Base Compensation" means the Executive's
current Base Salary under paragraph 4.1 on the
Termination Date plus the bonus compensation received
by the Executive during the twelve (12) month period
preceding the Termination Date.
6.1.2 Termination for Cause. The Company may terminate this
Agreement for Cause. 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 code of
conduct, 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, the Company will
not have any obligation to provide any further
payments or benefits to the Executive after the
effective date of such
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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 thirty (30) days to request a board of
directors meeting to be held at a mutually agreeable
time and location 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.
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 ninety (90)
days after the date of such notice, during which time
Executive may use remaining accrued vacation days, or at the
Company's option, be paid for such days. In the event this
Agreement is terminated by the Executive, neither the Company
nor the Executive will have any further obligations hereunder
including, without limitation, any obligation of the Company
to provide any further payments or benefits to the Executive
after the effective date of such termination.
6.3 Termination After Change in Control. If during the term of
this Agreement there is a "Change of Control" and within three
(3) years thereafter there is a CC Termination (as hereafter
defined), then the Executive will be entitled to a severance
payment (in addition to any other rights and other amounts
payable to the Executive under this Agreement or otherwise) in
an amount equal to the sum of the following: (a) five (5)
times the Executive's Base Compensation; plus (b) five (5)
times the value of any benefits provided by operation of
paragraph 4.4 of this Agreement during the preceding twelve
(12) months; plus (c) any applicable Gross-Up Payment. If the
foregoing amount is not paid within ten (10) days after the CC
Termination, the unpaid amount will bear interest at the per
annum rate of 12%. In addition, for a period of twelve (12)
months after a CC Termination, the Company will provide at no
cost to the Executive suitable office space and secretarial
and accounting support at the levels presently provided by the
Company.
6.3.1 Change of Control. For the purpose of this Agreement,
a "Change of Control" means the occurrence of any of
the following:
(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
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under the Exchange Act) of 20% 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.
(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.
(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
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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, 20% 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.
(d) The approval by the shareholders of the Company
of a complete liquidation or dissolution of the
Company.
6.3.2 CC Termination. The term "CC Termination" means any
of the following: (a) this Agreement expires in
accordance with its terms; (b) this Agreement is not
extended under paragraph 5 of this Agreement and the
Executive resigns within one (1) year after such
nonextension; (c) the Executive is terminated by the
Company other than under paragraphs 6.1.2, 6.4 or 6.5
based on adequate grounds; (d) the Executive resigns
as a result of a change in the Executive's duties or
title, a reduction in the Executive's then current
compensation, a required relocation more than 25
miles from the Executive's then current place of
employment or a default by the Company under this
Agreement; (e) the failure by the Company after a
Change of Control to obtain the assumption of this
Agreement, without limitation or reduction, by any
successor to the Company or any parent corporation of
the Company; or (f) after a Change of Control has
occurred, the Executive agrees to remain employed by
the Company for a period of three (3) months to
assist in the transition and thereafter resigns.
6.4 Incapacity of Executive. If the Executive suffers from a
physical or mental condition which in the reasonable judgment
of the Company's board of directors prevents the Executive in
whole or in part from performing the duties specified herein
for a period of four (4) consecutive months, the Executive may
be terminated. Although the termination will be deemed as a
termination with Cause, any compensation payable under
paragraph 4 of this Agreement will be continued through the
remaining term of this Agreement, but in any event through the
Expiration Date. Notwithstanding the foregoing, the
Executive's Base Salary specified in paragraph 4.1 of this
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Agreement will be reduced by any benefits payable under any
disability plans provided by the Company under paragraph 4.4
of this Agreement.
6.5 Death of Executive. If the Executive dies during the term of
this Agreement, the Company may thereafter terminate this
Agreement without compensation to the Executive's estate
except: (a) the obligation to continue the Base Salary
payments under paragraph 4.1 of this Agreement for twelve (12)
months after the effective date of such termination, and (b)
the benefits described in paragraph 4.4 of this Agreement
accrued through the effective date of such termination.
6.6 Effect of Termination. The termination of this Agreement will
terminate all obligations of the Executive to render services
on behalf of the Company, provided that the Executive will
maintain the confidentiality of all information acquired by
the Executive during the term of his employment in accordance
with paragraph 7 of this Agreement. In the event of a
termination under paragraphs 6.1.1 or 6.3 of this Agreement,
the Executive's right to participate in Program Xxxxx will
continue in accordance with paragraph 3 of this Agreement
through the Expiration Date as extended under this Agreement.
Except as otherwise provided in this paragraph 6, no accrued
bonus, severance pay or other form of compensation will be
payable by the Company to the Executive by reason of the
termination of this Agreement. 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 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 ten (10)
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.
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
-15-
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. Noncompetition. For a period of twelve (12) months after Executive is no
longer employed by the Company as a result of either the resignation by the
Executive pursuant to paragraph 6.2 above or termination for Cause pursuant to
paragraph 6.1.2 above, the Executive will not: (a) acquire, attempt to acquire
or aid another in the acquisition or attempted acquisition of an interest in oil
and gas assets, oil and gas production, oil and gas leases, mineral interests,
oil and gas xxxxx or other such oil and gas exploration, development or
production activities within two (2) miles of any operations or ownership
interests of the Company or its subsidiary corporations, partnerships or
entities (but excluding operations or ownership interests acquired by the
Company from a successor entity through a Change of Control as described in
paragraph 6.3); and (b) solicit, induce, entice or attempt to entice any
employee (except the Executive's personal secretary and accountant), contractor,
customer, vendor or subcontractor to terminate or breach any relationship with
the Company or the Company's affiliates for the Executive's own account or for
the benefit of another party. The Executive further agrees that the Executive
will not circumvent or attempt to circumvent the foregoing agreements by any
future arrangement or through the actions of a third party.
9. Proprietary Matters. The Executive expressly understands and agrees that any
and all improvements, inventions, discoveries, processes or know-how that are
generated or conceived by the Executive during the term of this Agreement,
whether generated or conceived during the Executive's regular working hours or
otherwise, will be the sole and
-16-
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 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) 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. 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.
11. Miscellaneous. The parties further agree as follows:
-17-
11.1.1 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. Xxx X. Xxxx
00000 Xxxxx Xxxxxxxx Xxxxxx
Xxxxxx, Xxxxxxxx 00000-0000
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.
11.5 Entire Agreement. Except as provided in paragraph 2.3 of this
Agreement, this Agreement constitutes the entire agreement
between the parties hereto with respect to the subject matter
herein contained, and no modification hereof will be effective
unless made by a supplemental written agreement executed by
all of the parties hereto.
11.6 Binding Effect. This Agreement will be binding on the parties
and their respective successors, legal representatives and
permitted assigns. In the event of a merger, consolidation,
combination, dissolution or liquidation of the Company, the
performance of this Agreement will be assumed by any
-18-
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, 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.
11.8 Supercession. This Agreement is the final, complete and
exclusive expression of the agreement between the Company and
the Executive and supersedes and replaces in all respects any
prior employment agreements (including the Prior Agreement).
On execution of this Agreement by the Company and the
Executive, the relationship between the Company and the
Executive after the effective date of this Agreement will be
governed by the terms of this Agreement and not by any other
agreements, oral or otherwise.
IN WITNESS WHEREOF, the undersigned have executed this Agreement
effective the date first above written.
CHESAPEAKE ENERGY CORPORATION, an
Oklahoma corporation
By
--------------------------------------
Xxxxxx X. XxXxxxxxx, Chief Executive
Officer
(the "Company")
----------------------------------------
Xxx X. Xxxx, individually
(the "Executive")
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