Exhibit 10.2.1
THIS AGREEMENT is made effective January 1, 2008,
between CHESAPEAKE ENERGY CORPORATION, an Oklahoma corporation (the
"Company"), and AUBREY K. McCLENDON, an individual (the
"Executive").
WHEREAS, the Company and the Executive entered into
that certain Employment Agreement dated effective October 1, 2007,
(the “Prior Agreement”);
WHEREAS, the Company and the Executive desire to
amend and restate the Prior Agreement in its entirety to reflect
the 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.
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2.4
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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) greater than 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 after the date
of this Agreement the price paid by the Executive for such shares;
(b) for shares acquired after the date of this Agreement 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 shares acquired prior
to the date of this Agreement, 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
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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.
3.
Other Activities .
Except for the activities (the “Permitted Activities”)
permitted under paragraphs 3.1, 3.2 and 3.3 of this Agreement 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 wells, (iii) providing services or
materials to the oil and gas industry, (iv) marketing or refining
oil or gas, or (v) owning any interest in any corporation,
partnership, company or entity which conducts any of the foregoing
activities. The limitations in this paragraph 3 will not prohibit
an investment by the Executive in publicly traded securities. 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
described therein 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 or 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
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 wells) directly or
through the Executive Affiliates , but only to the extent
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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 Executive 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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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"), in 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 July 1,
2007 during the term of this Agreement.
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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.
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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
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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, 2007, the Executive agrees to pay to the
Company as a partial reimbursement an amount equal to: (a) direct
costs for each Company employee primarily designated to provide
services under this paragraph (consisting of cash salaries, cash
bonuses, contributions to retirement and deferred compensation
plans, un-reimbursed insurance premiums for the benefit of the
employee 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's will not be required to be reimbursed in whole or part
under this paragraph.
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4.5
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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 be
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increased at the discretion of the Compensation
Committee of the Board of Directors of the Company, but may not be
reduced without the prior written consent of the Executive except
as expressly provided herein. 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.
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, 2012, 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 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 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) excepting participation in any retirement or
deferred compensation plan maintained by the Company, continuation
of the benefits provided by operation of paragraphs 4.4, 4.6 and
4.7 of this Agreement 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
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Agreement the term "Base Compensation" means the
Executive's current B
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