CONSULTING AGREEMENT



 



CONSULTING AGREEMENT


     THIS CONSULTING AGREEMENT (“Agreement”) is made and entered into as of May
15, 2002, at Fayetteville, Washington County, Arkansas, by and between
SOUTHWESTERN ENERGY COMPANY, an Arkansas business corporation, designated
herein as SWEN, and CHARLES E. SCHARLAU, designated herein as Scharlau.


W  I  T  N  E  S  S  E  T  H:



     A.     PARTIES:



     1.     SOUTHWESTERN ENERGY COMPANY (“SWEN”) is an Arkansas business
corporation with its principal office being situated in Houston, Harris County,
Texas, and it is the parent company of the following wholly-owned subsidiary
corporations (“Subsidiaries”):



		
	 	     (a) Arkansas Western Gas Company. Arkansas Western Gas Company
(“AWG”) is an Arkansas business corporation with its home office being
situated in Fayetteville, Washington County, Arkansas, and it is a
natural gas distribution public utility in the State of Arkansas;
	 
	 	     (b) SEECO, Inc. SEECO, Inc. (“SEECO”) is an Arkansas business
corporation with its home office situated in Fayetteville, Washington
County, Arkansas, and it is engaged in the natural gas exploration,
development and production business in the State of Arkansas;
	 
	 	     (c) Southwestern Energy Production Company. Southwestern Energy
Production Company (“SEPCO”) is an Arkansas business corporation with its
home office situated in Houston, Harris County, Texas, and it is engaged
in the oil and gas exploration, development and production business in
the States of Arkansas, Oklahoma, Texas, Louisiana and other areas in the
United States and in the Gulf of Mexico; and
	 
	 	     (d) AW Realty Company. AW Realty Company (“AWR”) is an Arkansas
business corporation with its home office situated in Fayetteville,
Washington County, Arkansas, and it is engaged in real estate development
and sales and owning and operating rental properties in Arkansas.



     2.     Charles E. Scharlau. Charles E. Scharlau (“Scharlau”) is a natural
person, he is now and since June of 1951, he has been a licensed attorney at
law in the State of Arkansas; and he first became an employee of AWG in 1951,
and he served the organization as the head of the legal department until 1968,
when he became the President and the Chief Executive Officer of the
organization. In
 addition, he is now and at all times since 1968 he has been a member of and the
Chairman of the Board of Directors.


 







 


     B.     RECITALS.



     1.     SWEN, as the parent corporation of all the Subsidiaries, is engaged in
the business of oil and gas exploration and development; the sale and
distribution of oil and gas; the natural gas public utility business; the real
estate development business; and the ownership of real estate for sale and
rental, all for the production of income.



     2.     Scharlau is a regularly licensed attorney in the State of Arkansas, and
is an experienced corporate executive in the field of oil and gas exploration
and development, the sale and distribution of oil and gas, the natural gas
utility distribution business, the development and sale of real property and
the ownership and operation of rental real estate.



     3.     SWEN wishes to be assured of the consulting services of Scharlau,
particularly with reference to the operation of the businesses now conducted by
SWEN and the Subsidiaries as specified above and in the areas indicated.



     4.     The purposes of this Agreement are:




		
	 	     (a) To provide for the engagement of Scharlau as a business
consultant and advisor to SWEN and its Subsidiaries;
	 
	 	     (b) To secure for SWEN and all of its Subsidiaries the advisory and
consulting services of Scharlau (the “Services”) and to provide for the
payment of compensation to Scharlau for the Services to be rendered
directly to SWEN and the Subsidiaries and any other entities that are now
owned or which may be owned by SWEN and/or the Subsidiaries in the
future; and
	 
	 	     (c) To assure that Scharlau shall not compete with SWEN and/or any
of its Subsidiaries in any undertaking of any advisory and consulting
services in the area of the operations of SWEN and the Subsidiaries
during the term hereof and for two (2) years after the expiration of this
Agreement.



     C.     AGREEMENT. FOR AND IN CONSIDERATION of the foregoing recitals and of
the mutual and interdependent promises contained herein, SWEN hereby engages
Scharlau as an independent consultant and Scharlau accepts such engagement, in
accordance with the terms set forth herein:




		
	 	     1. Term. This Agreement shall commence with SWEN’s Annual Meeting
in 2002 and, subject to the other provisions hereof, shall continue in
full force and effect until SWEN’s Annual Meeting in 2005 (the “Term”).
This Agreement may be extended beyond the initial Term by the mutual
agreement of SWEN and Scharlau. Any such extension of the initial Term
shall be executed no later than thirty (30) days prior to the expiration
of the initial Term. During the Term of this Agreement, Scharlau shall
perform such Services to SWEN and represent SWEN in such manner as may be
reasonably requested by the Chief Executive Officer or the Board of
Directors of SWEN.




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	 	     2. Compensation. As compensation for the Services, SWEN shall pay
to Scharlau the sum of $5,000 per year (the “Consulting Fee”). The
Consulting Fee for the first year of the Term shall be paid to Scharlau
no later than June 1, 2002. The Consulting Fee for the second year of
the Term shall be paid on the date of SWEN’s Annual Meeting in 2003 and
the Consulting Fee for the third year of the Term shall be paid on the
date of SWEN’s Annual Meeting in 2004.
	 
	 	     3. Expenses. Scharlau shall be entitled to receive prompt
reimbursement for all reasonable expenses incurred by Scharlau in
connection with the provision of Services hereunder. Reimbursement shall
be made in accordance with the Company’s policies and procedures for
reimbursing third party consultants.
	 
	 	     4. Meetings, Conventions and Seminars. Scharlau is encouraged and
is expected to attend seminars, professional meetings and conventions,
and educational courses. The cost of travel, tuition or registration,
food and lodging for attending those activities will be paid by SWEN.
Other costs are Scharlau’s expense, unless SWEN authorizes those costs.
If those other costs are authorized expenses, Scharlau will be reimbursed
after satisfying SWEN’s policies and procedures for such reimbursement
(which may include a requirement that Scharlau submit an itemized expense
voucher).
	 
	 	     5. Promotional Expenses. Scharlau is encouraged and is expected,
from time to time, to incur reasonable expenses for promoting SWEN’s
business. Such promotional expenses include travel, entertainment,
professional advancement and community service expenses. Scharlau agrees
to bear those expenses except to the extent that those expenses are
incurred at SWEN’s specific direction or those expenses are specifically
authorized by SWEN as expenses that SWEN may pay directly or indirectly
through reimbursement to Scharlau.
	 
	 	     6. Outside Activities. During the Term of this Agreement, Scharlau
may (i) serve on corporate, civic or charitable boards or committees;
(ii) deliver lectures, fulfill speaking engagements or teach at
educational institutions; (iii) manage personal investments and (iv)
engage as an attorney, consultant, advisor or investor in any business
enterprise, provided that (i) there is no conflict of interest with SWEN as outlined in
Section 7 below and (ii) such activities do not significantly interfere
with the performance of Scharlau’s Services to SWEN. To the extent that
any such activities have been conducted by Scharlau before the execution
date of this Agreement, such prior conduct of activities and any
subsequent conduct of activities similar in nature and scope may not be
deemed to interfere with the performance of Scharlau’s Services to SWEN.
	 
	 	     7. Non-Compete Agreement. For a period of two (2) years from and
after the date of the termination of this Agreement, Scharlau agrees that
he will not, without the prior consent of SWEN and the Subsidiaries,
either directly or indirectly, (i) be engaged as chief operating officer,
manager, employee or director of, or agent, consultant or business
advisor for, or (ii) own a substantial ownership interest in, any
incorporated or 




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	 	unincorporated oil and gas exploration, production and
sales entity in the geographical area of SWEN’s and the Subsidiaries’
area of operation. SWEN agrees that it will not unreasonably withhold
its consent to Scharlau acting as attorney, advisor or consultant to any
such entity if there is no conflict of interest with SWEN.





		
	 	     8. Non-Assignability. Neither this Agreement nor any rights
hereunder shall be assignable by either party.
	 
	 	     9. Inurement. Except as provided in Section 8 above, this Agreement
shall be binding upon and inure to the benefit of the parties hereto,
their executors, administrators heirs-at-law, successors and assigns.
	 
	 	     10. Independent Contractor. The parties agree that the Services to
be rendered by Scharlau are as an independent contractor and not as an
employee, partner or agent of SWEN or its Subsidiaries.
	 
	 	     11. Complete Agreement. This Agreement contains all the agreements,
conditions and understandings between the parties with respect to the
subject matter hereof and supersedes all prior understandings and
agreements (whether oral or written). No amendments to this Agreement
shall be effective or binding on any party unless the same shall be in
writing and signed by all parties.
	 
	 	     12. Applicable Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Arkansas, excluding
any choice of law rules which may direct the application of the laws of
another jurisdiction. In the event that any portion of the Services
provided to SWEN by Scharlau constitute “Lobbying” under Arkansas law,
Scharlau shall comply with all rules and regulations that are applicable
to “Lobbyists” under Arkansas law.



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     IN WITNESS WHEREOF, the parties hereto have executed this Agreement in
original triplicates on the date first hereinabove written.



	 	 	 	 	 
	 	 	SOUTHWESTERN ENERGY COMPANY;

ARKANSAS WESTERN GAS COMPANY;

SEECO, INC.; SOUTHWESTERN ENERGY

PRODUCTION COMPANY; AND AW REALTY

COMPANY
	 	 	 	 	 
	 	 	
By:
	 	Compensation Committee of the

Board of Directors
	ATTEST:	 	 	 	
	 	 	 	 	/s/ Robert L. Howard

	 	 	 	 	Robert L. Howard
	 	 	 	 	 
	/s/ Mark K. Boling
	 	 	 	/s/ Kenneth R.
Mourton

	Mark K. Boling, Secretary	 	 	 	Kenneth R. Mourton
	 	 	 	 	 
	 	 	 	 	/s/ John Paul
Hammerschmidt

	 	 	 	 	John Paul Hammerschmidt
	 	 	 	 	 
	 	 	 	 	 
	 	 	EMPLOYEE:
	 	 	 	 	 
	 	 	 	 	 
	 	 	 	 	 
	 	 	/s/ Charles E. Scharlau

Charles E. Scharlau




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