Document:

chk04192013_101.htm

Exhibit 10.1

FOUNDER SEPARATION AND SERVICES AGREEMENT

This Founder Separation and Services Agreement (the “Agreement”) is made effective the 29th day of January, 2013 (the “Effective Date”) by and between Chesapeake Energy Corporation, an Oklahoma corporation (the “Company”), and Aubrey K. McClendon, an individual (the “Executive”).

 

WHEREAS, the Executive has served as the Company’s only Chief Executive Officer since the Executive founded the Company in 1989 and such service is currently governed by the terms of the Third Amended and Restated Employment Agreement between the Executive and the Company made effective March 1, 2009 (the “Employment Agreement”);

 

WHEREAS, the Company and the Executive mutually agreed on the Effective Date that the Executive would retire as Chief Executive Officer, President and a director of the Company as provided in the Agreement and the Executive’s employment with the Company would terminate without cause under paragraph 6.1.1 of the Employment Agreement as of April 1, 2013 (the “Separation Date”); and

 

WHEREAS, the Company and the Executive desire to memorialize the agreement regarding the Executive’s separation from employment with the Company, to provide for a smooth transition after the Effective Date and to facilitate an efficient, ongoing relationship between the Company and the Executive after the Separation Date as joint working interest owners of certain oil and gas wells, leases and acreage.

 

NOW THEREFORE, for good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged and fully intending to be legally bound, the Executive and the Company agree as follows:

 

1. Definitions.  Except as otherwise defined in the Agreement, capitalized terms used in the Agreement will have the same definition in the Agreement as those terms are defined in the Employment Agreement.

 

2. Termination of Employment; Resignations. On the Separation Date, the Executive’s employment with the Company will be terminated without cause as set forth in Section 6.1.1 of the Employment Agreement.  In this connection, on the Separation Date, all rules and policies with respect to employees of the Company will cease to be effective with respect to the Executive, other than those rules that, by their terms, as of the date of the Agreement, consistently apply to former employees post-termination.  No later than the Separation Date, the Executive will resign from any position as a director, officer, manager, partner or similar position of the Company and each subsidiary or affiliate of the Company.

 

3. Executive’s Interim Duties.  In the interim after the Effective Date through the Separation Date, the Executive will work closely with and transition the day-to-day management responsibilities of the Company to Domenic J. Dell’Osso, Jr., Chief Financial Officer of the Company, and Steven C. Dixon, Chief Operating Officer of the Company.

 

4. Compensation and Benefits.  The Executive will receive all of the rights, benefits and obligations owed to the Executive pursuant to Section 6.1.1 of the Employment Agreement in the 

 

 

 

 

  

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manner set forth in this paragraph 4.  For purposes of determining the payments contemplated by Section 6.1.1(a) of the Employment Agreement, the Executive’s Base Compensation will be computed based on a Base Salary of Nine Hundred Seventy Five Thousand Dollars ($975,000) and annual bonus compensation of One Million Nine Hundred Fifty Thousand Dollars ($1,950,000).  The payments contemplated by Section 6.1.1(a) of the Employment Agreement will be paid in 33 installments in the amount of $112,500 per pay period (except for the first payment which will be prorated to reflect active employment on April 1, 2013) commencing April 12, 2013 through July 3, 2014 and a lump sum payment in the amount of $7,237,500 on July 1, 2014 in full satisfaction of the remaining payments that would have otherwise been made through December 31, 2016 (the “Expiration Date”).  The Executive will receive a lump sum payment in the amount of $112,500 under Section 6.1.1(c) of the Employment Agreement for accrued and unused vacation pay based on six weeks of vacation (five weeks provided under the Employment Agreement, plus two rollover weeks, with one used).  The Executive’s agreed separation from employment with the Company is without cause and does not and will not trigger any right to recoupment by the Company of the Incentive Award and the Executive will be entitled to permanently retain, exercise and utilize all of the benefits associated with the Incentive Award.  The continuation of benefits provided by Section 6.1.1(b) of the Employment Agreement will be comprised of the items listed on Schedule “A” and will commence on the Separation Date and continue through June 30, 2014 (the “Benefit Continuation Period”).  In exchange for termination of any remaining benefit continuation (other than benefits relating to private airplane travel) the Executive may be entitled to through the Expiration Date, the Company will pay the Executive a lump sum payment in the amount of $26,320.80 on July 1, 2014.  In order to facilitate the efficient delivery and coordination of the benefits to be provided to the Executive pursuant to the Employment Agreement during the Benefit Continuation Period, the Company designates the Company’s General Counsel as the Executive’s point of contact for coordinating and resolving any issues regarding the continuation of such benefits and other rights through the Benefit Continuation Period.  The Executive’s point of contact for matters related to the Company’s assets and operations (other than with respect to the day-to-day operation of the wells and acreage that the Company and the Executive jointly own) will be the Company’s Chairman of the Board or Chief Executive Officer, and the Executive’s point of contact with respect to the day-to-day operation of the wells and acreage that the Company and the Executive jointly own will be the Company’s Chief Operating  Officer or General Counsel.   No later than April 19, 2013, the Company will transfer (in a manner that affords the full right to use, but not the ownership of) a 28.125% interest in a Citation X aircraft to an entity controlled by the Executive for the period ending on the Expiration Date and shall pay all costs, fees and expenses associated with such interest, except only special catering and ground transportation which will be paid by the Executive, for the period through the Expiration Date in fulfillment of the Company’s obligations under Section 4.6 of the Employment Agreement.  On the Expiration Date, the entity controlled by the Executive will reassign any rights in the 28.125% interest in a Citation X to the Company to the extent that any such interest continues to exist.  After the Expiration Date, the Company shall have no further obligations under Section 4.6 of the Employment Agreement nor shall the Executive have any continuing right to the interest in the Citation X.

 

5. FWPP.  Notwithstanding the termination of the Executive’s employment with the Company, the Executive will retain all rights and benefits under the Founder Well Participation Program approved by the Company’s shareholders in 2005 (as amended, the “FWPP”) until June

 

 

 

  

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30, 2014 without further action by either party and, consistent with the Executive’s prior election to participate in the FWPP through June 30, 2014, the Executive is obligated to participate in each eligible program well spud on or before June 30, 2014, subject to the terms and conditions of the FWPP.  The Company (a) acknowledges that the Executive is no longer a principal executive officer of the Company and his rewards and risks may no longer be aligned with those of the Company, and (b) agrees that it will not effectively exclude his participation in the FWPP directly or indirectly as a result of the occurrence of the events in subclause (a).  After the Separation Date, the Executive will pay applicable joint interest billings from the Company in accordance with terms afforded to the Company’s significant joint venture partners and the terms of the relevant joint operating agreement between the Company and the Executive or his affiliates.  In connection with the execution of the Agreement, the Company and the Executive (and his affiliates) will enter into a Founder Joint Operating Services Agreement which will provide for, among other matters, the Executive’s obligations to sell certain interests in connection with applicable sales by the Company.

 

6. 2013 LTIP Grant. On the Effective Date, the Company made certain grants of restricted stock, stock options and performance share units to the senior management of the Company pursuant to the Company’s Amended and Restated Long Term Incentive Plan (the “LTIP”), which included those made to the Executive shown on Schedule “B” attached as a part hereof (the “2013 LTIP Grant”).  The 2013 LTIP Grant will not be subject to accelerated vesting and, instead, each award will vest in accordance with the terms of the grant agreement for the 2013 LTIP Grant.  With the exception of the 2013 LTIP Grant as set forth in this paragraph 6, all other equity compensation rights listed on Schedule “B” will become 100% vested immediately after the Executive’s resignation as a director and separation from employment with the Company.

 

7. EP Information; Relocation.  After the Effective Date, the Company will assist the Executive with packing, moving and coordinating the relocation of all contents of the Executive’s personal office at the Company’s headquarters at 6100 N. Western Avenue, Oklahoma City, Oklahoma, and the accounting office located at 809 NW 57th Street, Oklahoma City, Oklahoma, and any of the Executive’s memorabilia, art and other items stored at the Company’s premises or other storage facilities.  Such assistance will include providing such personnel reasonably selected by the Executive and reasonably approved by the Company. The Executive will designate a location within the Oklahoma City metropolitan area for such relocation.  All computers, cell phones, security systems, network and related electronic devices and connections provided to the Executive by the Company during the Executive’s service to the Company wherever located (the “Electronic Equipment”) will be deemed and become the exclusive property of the Executive as of the Effective Date. The Executive and the Company will work cooperatively to image each device in a manner that protects the confidential nature of and the Executive’s rights to the EP Information and, after capturing such image, removing any Confidential Information from such devices without removing the EP Information.  All such images will be held in safekeeping in a mutually agreeable place and manner and will be subject to a protective agreement in form similar to those entered into previously under similar circumstances in the past and satisfactory to the Company and the Executive.  The Company will furnish all EP Information to the Executive (or any affiliated entity, agent or employee of the Executive) as soon as practicable within sixty (60) days after the Separation Date in a manner mutually determined by the Company and the Executive, provided that this does not apply to copies of EP information held by Company counsel pursuant to a protective agreement.  The

 

 

 

  

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Company will provide IT support for the Electronic Equipment through June 30, 2014. From the Effective Date, to the extent not prohibited by the software or data-use licenses with third parties, and without waiving or compromising the Company’s rights to the “CHK Search” interface, the Company will provide to the Executive the data and services (including administrative, engineering, IT and software) necessary to facilitate the efficient exchange of land, well, title (including title opinions, assignments and curative documents), geological, engineering, reservoir, operating, marketing, performance and other information in the Company’s well files or otherwise kept by the Company; and information provided to the Executive in printed, plotted or written format on a routine basis or as reasonably requested by the Executive related to the wells, increased density locations, leases and acreage jointly owned by the Executive and the Company (collectively, the “FWPP Well File Data”).  To the extent not prohibited by the software or data-use licenses with third parties the Company will provide to the Executive (or any affiliated entity, agent or employee of the Executive) the data, licenses and personnel services for development of reserve reports in connection with oil and gas interests acquired under the FWPP, or jointly owned by any affiliate of the Executive and the Company consistent with the reserve reports prepared in the past for the Executive and his affiliates.  The FWPP Well File Data, the reserve reports and the related information are the Executive’s property, but shall remain subject to the confidentiality obligations of Section 7 of the Employment Agreement except that the Executive will have the right to use all such information for the Executive’s own benefit and purposes and in connection therewith may disclose such information to the Executive’s employees, contractors, advisors, consultants and affiliated entities who are also under confidentiality obligations not to make disclosure to third parties consistent with Section 7 of the Employment Agreement.  In providing such data pursuant to this paragraph 7, in no event will the Company have any liability to the Executive and/or any of his affiliates except for acts or omissions constituting gross negligence or willful misconduct.

 

8. Company Information; Litigation Assistance.  After the Separation Date, the Executive will continue to have access to Company information to the extent the Executive reasonably deems such Company information necessary or useful for the Executive to participate in any formal or informal regulatory, administrative, civil or other governmental proceeding.  Notwithstanding the foregoing, the Executive will not be permitted access to any documents when the provision of such access would be reasonably likely, in the discretion and judgment of the Company or its counsel, to constitute a waiver of any applicable privilege or a breach of any confidentiality obligation of the Company.  The Executive will reasonably cooperate with and assist the Company and its representatives and attorneys as reasonably requested by the Company after the Separation Date with respect to any litigation, proceeding, arbitration or other formal or informal dispute resolution effort in which the Executive is or has had involvement or with respect to which the Executive has relevant information by being reasonably available for interviews, depositions and/or testimony in regard to any such matters, except with respect to any such matter the Executive deems, in his sole discretion and based upon advice of legal counsel, reasonably likely to be adverse to the Executive or with respect to which the Executive is or may become a party. The Company will advance, if applicable as provided in paragraph 10, or reimburse the Executive for any reasonable fees and expenses (including attorneys’ fees) incurred by or on behalf of the Executive in connection with this obligation.  The Executive will use reasonable efforts to avoid duplicative fees and expenses.  The Executive will maintain the confidentiality of all such information furnished to the Executive.

 

 

 

  

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9. Founders’ Lounge.  The Executive owns the rights to and personally pays for seats 1-4 in each of rows FL1-FL3 in Section 120 of the Chesapeake Energy Arena for Oklahoma City Thunder basketball games as of the Effective Date (the “Founder Seats”).  Through the Expiration Date, so long as the Executive owns any of the Founder Seats and the Company maintains the bunker suite currently designated as the “Chesapeake Founders’ Lounge,” the Executive and his guests will have access to and full use of the Chesapeake Founders’ Lounge (at the Executive’s expense for food and drink costs) for all events held at the Chesapeake Energy Arena.  Notwithstanding the forgoing, from time to time, if the Company requires the Chesapeake Founders’ Lounge for any legitimate purpose where the presence of the Executive and his guests would reasonably be considered to be detrimental to the interests of the Company, the Executive will not use the Chesapeake Founders’ Lounge for such event so long as he is notified in writing at least 48 hours prior to the event.  The Executive and the Company acknowledge and agree that the Thunder banners and other memorabilia located on the walls of and within the Chesapeake Founders' Lounge are the personal property of the Executive, that such property may remain in the Chesapeake Founders' Lounge until removed by the Executive at any time and that in no event will the Company have any liability to the Executive and/or any of his affiliates for the loss of or damage to such property except for acts or omissions constituting gross negligence or willful misconduct.

 

10. Indemnification; D&O Insurance.  The Executive will be entitled to the continued right to indemnification, in accordance with the terms of the Indemnification Agreement between the Company and the Executive dated June 21, 2012 (the “Indemnification Agreement”), the Company’s Amended and Restated Bylaws, the Company’s Restated Certificate of Incorporation and any and all governing statutory and common law (the “Indemnification Arrangements”).  The Company agrees and acknowledges that the foregoing rights are vested contract rights of the Executive and may not be changed in a manner adverse to the Executive. After the Separation Date, the Executive’s right to indemnification and advancement of fees from the Company will continue in accordance with the Indemnification Arrangements with respect to all current matters and will be applicable with respect to any and all continuing and/or future investigations or matters that may arise on or after the Effective Date that concern the Executive’s activities while an employee or director of the Company.  After the Effective Date and through the Expiration Date, the Company will maintain in force at all times directors and officers liability insurance for the Executive in an amount and scope at least as favorable as the coverage then applicable to directors and officers of the Company.

 

11. Map Rescission.  On or before April 19, 2013, the Company and the Executive will enter into such storage, lease or other agreements as they may mutually agree upon concerning the disposition of the maps to be acquired by the Executive through the rescission of the 2008 sale of those maps to the Company by the Executive.

 

12. Non-Disparagement.  The Company (directly and indirectly through its officers, directors and representatives) and the Executive (directly and indirectly, including through affiliates owned and controlled by the Executive) each mutually agree not to criticize, denigrate, or disparage the other.  Nothing in the Agreement shall prevent the Company or the Executive from responding to informal or formal requests for information from governmental authorities or taking any action in defense of any litigation asserted against the Company and/or the Executive.

 

 

 

 

  

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13. Agreement Not to Hire.  To the extent permitted by applicable law in the State of Oklahoma, for one year from the Effective Date, the Executive agrees not to hire any employee of the Company as of or after the Separation Date, except that Executive (or any affiliated entity, agent or employee of the Executive) may solicit for hire and hire: (a) those employees that have been assigned to the Executive to provide the Accounting Support set forth in Section 4.7 of the Employment Agreement, (b) any employee assigned to the Executive as an assistant, (c) any employee who has been terminated by the Company (but who has not voluntarily departed the Company), at any time, (d) any employee who elects (or has elected) to accept any voluntary severance or retirement program offered by the Company, or (e) any employee for which the Company consents in writing in advance to the Executive soliciting and hiring.  Any solicitation within the scope of parts (a) through (e) of this paragraph 13 and any communication directed to the Executive (or any affiliated entity, agent or employee of the Executive) from an employee of the Company will not be deemed a solicitation by the Executive (directly or indirectly) and will not otherwise violate Section 8 of the Employment Agreement. The Executive (or any affiliated entity, agent or employee of the Executive) may respond to any communication directed to the Executive (or any affiliated entity, agent or employee of the Executive) from an employee of the Company using substantially the form of reply previously approved by the Company’s General Counsel.  Any request for the Company’s consent under part (e) of this paragraph 13 will be directed to the Company’s General Counsel.  To the extent any employee of the Company responds to a general solicitation for employment issued by the Executive (or any affiliated entity, agent or employee of the Executive) not targeted specifically to the Company’s employees, any communication directed to the Executive (or any affiliated entity, agent or employee of the Executive) from an employee of the Company will not be deemed a solicitation by the Executive (directly or indirectly) and will not otherwise violate Section 8 of the Employment Agreement provided that the Executive may not otherwise solicit such employee during the relevant time period under Section 8 of the Employment Agreement.  Regardless of whether a Company employee contacts the Executive (or any affiliated entity, agent or employee of the Executive) and regardless of whether an employee of the Company responds to a general solicitation of employment, the Executive (and any affiliated entity, agent or employee of the Executive) is still barred and prohibited from hiring the Company employee unless the employee falls within the exceptions set forth in parts (a) through (e) above.  Except as otherwise provided in this paragraph, the Executive’s obligations under this paragraph are in addition to the Executive’s obligations under Section 8 of the Employment Agreement.  To the extent this paragraph and Section 8 of the Employment Agreement are in conflict with respect to any employee solicitation issue, this paragraph will control.

 

14. Non-competition. The Company acknowledges that following the Separation Date, the Executive will continue to be active in the oil and gas business and will be one of the Company’s largest joint interest owners; as such, the Executive has certain common law and contractual rights as a working interest owner and the exercise of those rights, including the acquisition of additional interests in the jointly owned spacing units (the “Additional Interests”), will not violate Section 8 of the Employment Agreement.  In addition, if, during the relevant time period under Section 8 of the Employment Agreement, the Executive acquires, attempts to acquire or aids another in the acquisition or attempted acquisition of any entity, property or package of properties or assets that includes an interest in oil and gas assets, oil and gas production, oil and gas leases, mineral interests, oil and gas wells or other such oil and gas exploration, development or production activities within any spacing unit in which the Company owns an oil and gas 

 

 

 

 

  

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interest on April 1, 2013, other than the Additional Interests (the “Restricted Properties”) in any manner (including through a merger or directly or indirectly through another entity), then notwithstanding any other provisions of the Agreement, the Employment Agreement or any other agreements between the Executive and the Company, such acquisition will not be deemed a violation of Section 8 of the Employment Agreement and the Company’s sole remedy with respect to such acquisition will be the preferential right to purchase the Restricted Properties at the cost paid by the Executive if such assets are eventually acquired, directly or indirectly, by the Executive.  In the event of a knowing acquisition of Restricted Properties, the Executive will give the General Counsel of the Company written notice within twenty (20) days of execution of the acquisition agreement and the Company will have twenty (20) days thereafter to elect to exercise such preferential right to purchase by giving the Executive written notice of such election and, unless the Executive and the Company agree otherwise, tendering the appropriate purchase price in immediately available funds at the later of the time the Executive acquires the Restricted Properties or the date that the Company elects to exercise such preferential right. In exercising such preferential right, the Company may, in its sole discretion, elect to purchase none, some or all of the Restricted Properties for that portion of the purchase price allocated only to those Restrictive Properties upon which the preferential right to purchase is exercised by Company.  Notwithstanding the foregoing, if the Restricted Properties constitute more than forty percent (40%) of the properties being acquired, in addition to such preferential right, the acquisition will be completed only if the Company consents.  The Executive shall have the right to utilize for his own benefit and purposes the knowledge, experience and expertise accumulated by the Executive during his years of service as an executive officer of the Company and in connection therewith may disclose such information to the Executive’s employees, contractors, advisors, consultants and affiliated entities (who are also under confidentiality obligations not to make disclosure to third parties consistent with Section 7 of the Employment Agreement), but such information shall otherwise remain subject to the confidentiality obligations of Section 7 of the Employment Agreement.

 

15. Entire Agreement; Counterparts. The Agreement supersedes all oral agreements and statements of the parties relating thereto and may not be modified or canceled in any manner except by a writing signed by both the Executive and an authorized officer of the Company.  To the extent there is a conflict between any provision in the Agreement and any agreement between the Executive and the Company, including, without limitation, the Employment Agreement, the terms of the Agreement will control.  The Executive acknowledges that Sections 7, 8, 9, 10, 11.2, 11.3, 11.4, 11.5. 11.6, 11.7 and 11.8 of the Employment Agreement remain in full force and effect, subject to the exceptions and limitations set forth in the Agreement.  The Agreement binds the Executive’s heirs, administrators, representatives, executors, successors, and assigns, as well as the Company, each and all of its affiliates, each and all of their respective officers, directors, attorneys, representatives, agents, shareholders, successors and assigns.  Neither the Executive nor the Company will assign his or its rights or delegate any or all of his or its obligations under the Agreement without the express prior written consent of the other party to the Agreement.  Any attempted assignment in violation of this paragraph 15 shall be void.  The waiver by any party to the Agreement of a breach of any term or provision of the Agreement shall not be construed as a waiver of any subsequent breach.  The Agreement may be executed in counterparts, each of which shall be deemed to be an original, but both of which shall constitute the same agreement.  Signatures to the Agreement transmitted by facsimile transmission, by electronic mail in “portable document format” (.pdf) form, or by any other electronic means

 

 

 

 

  

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intended to preserve the original graphic and pictorial appearance of a document, will have the same effect as physical delivery of the paper document bearing the original signature.

 

16. Severability.  If any term, provision, covenant or restriction of the Agreement is held by a court of competent jurisdiction or other authority to be invalid, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions of the Agreement (or portions thereof) shall remain in full force and effect and shall in no way be affected, impaired or invalidated so long as the economic or legal substance of the transactions contemplated hereby is not affected in any manner materially adverse to any party to the Agreement.  If any provision of the Agreement (or any portion thereof) shall be held to be so broad as to be unenforceable, such provision shall be interpreted to be only so broad as is enforceable.  Upon a determination that any term, provision, covenant or restriction of the Agreement is invalid, void or unenforceable, the Executive and the Company shall negotiate in good faith, if practicable, to modify the Agreement so as to effect the original intent of the parties as closely as possible in a mutually acceptable manner in order that the actions and obligations contemplated by the Agreement be consummated as originally contemplated to the fullest extent possible.

 

17. Interpretation and Governing Law. The Company, the Executive and their respective counsel have mutually contributed to the preparation of the Agreement.  Accordingly, no provision of the Agreement (nor the Agreement as a whole) will be construed against the Company or the Executive on the grounds that such party or its counsel drafted any provision of the Agreement. The Agreement will be governed by the statutes and common law of the State of Oklahoma, excluding its choice of law statutes and choice of law common law.

 

18. Arbitration.  The parties agree to resolve any dispute or controversy arising out of or relating to the Agreement in accordance with the arbitration procedures set forth in Section 10 of the Employment Agreement, which terms and procedures are incorporated into the Agreement by reference and in any such action the Company’s obligation to pay the Executive’s reasonable attorneys’ fees under Section 11.7 of the Employment Agreement shall also be applicable.  Any arbitration shall be regarded as a settlement negotiation.  The parties agree that they will cooperate with each other to take all necessary action to cause the arbitrator to make binding orders and rulings to protect the confidentiality of all documents and proceedings related to any arbitration.   Except as may be required by law, neither a party nor the arbitrator may disclose documents produced at arbitration or the existence, content, or results of any arbitration hereunder without the prior written consent of both parties.  In any judicial proceeding to confirm or vacate an arbitration award rendered pursuant to this paragraph, the parties agree to ensure the confidentiality of all documents and proceedings related to the arbitration, including but not limited to filing all documents under seal with the court pursuant to applicable law.

 

19. Withholding.  The Company shall be entitled to withhold from any amounts to be paid or benefits provided to the Executive any federal, state, local, or foreign withholding or other taxes which it is from time to time required by law to withhold.  Additionally, to the extent the payments or benefits to be received by the Executive during the 2013 calendar year are insufficient to satisfy the Company’s tax withholding obligation related to the amount included in the Executive’s gross income for the 2013 calendar year, the Executive shall be required to pay the Company the amount of the deficiency no later than the date on which the balance of the

 

 

 

 

  

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Executive's post-409A account under the Chesapeake Energy Corporation Nonqualified Deferred Compensation Plan is paid to the Executive.

 

 [SIGNATURE PAGE TO FOLLOW]

 

 

 

 

  

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SIGNATURE PAGE TO FOUNDER SEPARATION AND SERVICES AGREEMENT

 

 

IN WITNESS WHEREOF and intending to be legally bound, the Executive and the Company have executed this Agreement on the dates indicated below:

 

 

 

 

	 	/s/ Aubrey K. McClendon 	 	April 18, 2013
	 	
Aubrey K. McClendon

	 	Date

 

 

	 	
CHESAPEAKE ENERGY CORPORATION,

an Oklahoma corporation

 

	 	 
	By:	 /s/ James R. Webb	 	April 18, 2013
	Title:	 Senior Vice President - Legal and General Counsel	 	Date

 

 

 

  

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FOUNDER SEPARATION AND

SERVICES AGREEMENT

Schedule A

 

Benefits

 

	
I.  

	
Reimbursement of reasonable expenses for dues travel and entertainment.  Such expenses must be incurred at the request of the company and, to be eligible for reimbursement, must comply with the terms of the policy for such expense reimbursement in place at the Company.

 

	
II.  

	
Supplemental Long term Disability.  This is a voluntary benefit that is paid for in its entirety by the Executive.

 

	
III.  

	
Medical Insurance.  Executive is enrolled in the “80/60 Plan” and covers himself, his spouse and one dependent.

 

	
IV.  

	
Dental Insurance.  Executive covers himself plus two dependents.

 

	
V.  

	
Flexible Spending Account.  The Executive currently has a $2,500 balance.  He may enroll in this benefit for 2014 and is eligible through COBRA.

 

	
VI.  

	
Life Insurance.  The Executive has the maximum available coverage of $2,500,000. The Company’s Plan will be amended to provide for continuation of his coverage through June 30, 2014.  After such time, the Executive may “port” or “convert’ his coverage as defined in the terms of the Plan.

 

	
VII.  

	
Short Term Disability.

 

	
VIII.  

	
Fitness Center membership.  Executive will be eligible for an “Employee Only” membership at the Company’s main Fitness Center. No members of the Executive’s staff or his consultants will be eligible for membership.

 

Schedule "A"

 

Page 1 of 1 Pages

 

 

 

  

  

 

  

 

 

Founder Separation and

Services Agreement

Schedule B

 

2013 LTIP Grant subject to continued vesting

 

	
Grant Date

	
Plan

	
Type

	
Unvested

	
Vest Date

	
1/29/2013

	
2005

	
RSA

	
59,305

	
1/29/2014

	
1/29/2013

	
2005

	
RSA

	
59,305

	
1/29/2015

	
1/29/2013

	
2005

	
RSA

	
59,305

	
1/29/2016

 

	
Grant Date

	
Plan

	
Type

	
Unvested

	
Vest Date

	
1/29/2013

	
2005

	
NQO

	
152,029

	
1/29/2014

	
1/29/2013

	
2005

	
NQO

	
152,028

	
1/29/2015

	
1/29/2013

	
2005

	
NQO

	
152,028

	
1/29/2016

 

	
Grant Date

	
Plan

	
Type

	
Unvested & Unearned

	
Vest Date

	
1/29/2013

	
2005

	
3-Yr PSU*

	
108,227

	
1/29/2014

	
1/29/2013

	
2005

	
3-Yr PSU*

	
108,227

	
1/29/2015

	
1/29/2013

	
2005

	
3-Yr PSU*

	
108,226

	
1/29/2016

 

Equity-based compensation subject to acceleration effective April 1, 2013

 

Long Term Incentive Plan Awards

 

	
Grant Date

	
Plan

	
Type

	
Unvested

	
7/1/2009

	
2005

	
RSA

	
93,750

	
7/1/2009

	
2003

	
RSA

	
2,500

	
1/4/2010

	
2005

	
RSA

	
112,500

	
7/1/2010

	
2005

	
RSA

	
100,000

	
1/3/2011

	
2005

	
RSA

	
125,000

	
7/1/2011

	
2005

	
RSA

	
174,420

	
1/3/2012

	
2005

	
RSA

	
222,461

	 	 	 Total:   	830,631

 

 

	
Grant Date

	
Plan

	
Type

	
Unearned

	
Vested/Unvested

	
1/3/2012

	
2005

	
2-Yr PSU*

	
32,443

	
Vested

	
1/3/2012

	
2005

	
2-Yr PSU*

	
32,442

	
Unvested

	
1/3/2012

	
2005

	
3-Yr PSU*

	
64,885

	
Vested

	
1/3/2012

	
2005

	
3-Yr PSU*

	
64,885

	
Unvested

	
1/3/2012

	
2005

	
3-Yr PSU*

	
64,883

	
Unvested

 

 

Deferred Compensation Plan Company Matching Contributions

 

	
Plan

	
Type

	
Unvested

	
Deferred Compensation Plan   

	
Common Stock

	
32,005.7

 

* The Executive shall not be entitled to payment pursuant to any PSU award unless and until the Compensation Committee of the Board certifies the Company’s performance with respect to the performance goals pursuant to the applicable PSU Award Agreement.

 

 

 

Schedule "B"

Page 1 of 1 Pageschk04192013_102.htm

Exhibit 10.2

 

 

FOUNDER JOINT OPERATING SERVICES AGREEMENT

This Founder Joint Operating Services Agreement (the “Agreement”) is made effective the 29th day of January, 2013 (the “Effective Date”) by and among Chesapeake Energy Corporation, an Oklahoma corporation (the “Company”), Aubrey K. McClendon, an individual (the “Founder”), Arcadia Resources, L.P., an  Oklahoma limited partnership (“AR”), Larchmont Resources, L.L.C., an Oklahoma limited liability company (“LR”), Jamestown Resources, L.L.C., an Oklahoma limited liability company (“JT”), and Pelican Energy, L.L.C., an Oklahoma limited liability company (“PE” and together with AR, LR and JT, the “Founder Affiliates”).

 

WHEREAS, the Founder started the Company in 1989 and since such time has participated in the oil and gas wells drilled by the Company pursuant to the terms of what is now known as the Founder Well Participation Program as approved by the Company’s shareholders in 2005 (the “FWPP”);

 

WHEREAS, the FWPP will terminate pursuant to its terms on June 30, 2014;

 

WHEREAS, the Founder Affiliates in the aggregate are one of the Company’s three largest nonoperating working interest partners in the jointly developed oil and gas wells, increased density locations, leases and acreage jointly owned by the Company and the respective Founder Affiliates (the “Joint Interests”) and over the years have worked cooperatively to develop efficient methods and practices for access to and sharing of information essential for the efficient administration of their respective interests in the Joint Interests (the “Administrative Practices”);

 

WHEREAS, as of April 1, 2013 (the “Separation Date”), the Founder will no longer be employed by the Company and it is beneficial to the Company and the Founder Affiliates to maintain and continue the Administrative Practices and to provide a framework for the continued efficient administration of the Joint Interests.

 

NOW THEREFORE, for good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the Company, the Founder and the Founder Affiliates agree as follows:

 

1.  Joint Well File Data.  Pursuant to the Founder Separation and Services Agreement dated effective January 29, 2013 between the Company and the Founder (the “Separation Agreement”), the Company agreed to provide the data, licenses and services described in the Separation Agreement (the “Joint Well File Data”).  Any Joint Well File Data not provided by the Company to the Founder and the Founder Affiliates prior to the Separation Date will be furnished within one-hundred fifty (150) days after the Separation Date.  The Company will also make the same information and data available (a) for all new wells drilled in which the Company and any Founder Affiliate are working interest owners, and (b) to keep the Joint Well File Data current and in synch with the Company’s corresponding data in accordance with the methods and frequencies to be determined by the parties, but in any event in a manner that makes the information that was available to the Founder Affiliates prior to the Effective Date available after the Separation Date on substantially the same basis but utilizing the Asset Management System (as defined below).  After June 30, 2014, the data to be provided under this paragraph 1 will be

 

 

 

 

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limited to that required by the applicable joint operating agreements.  In providing such data pursuant to this paragraph 1, in no event will the Company have any liability to the Founder and/or the Founder Affiliates except for acts or omissions constituting gross negligence or willful misconduct.

 

2. Search Software.  In order for the Founder Affiliates and the Founder to review the Joint Well File Data and other data available to them prior to the Separation Date, the Company developed an interface program using Microsoft .NET Framework 4.5 and based on the Company’s existing “CHK Search” interface (the “Asset Management System”).  To the extent not prohibited by the software or data-use licenses with third parties, and without waiving or compromising the Company’s rights to the “CHK Search” interface, the Company grants to the Founder and the Founder Affiliates a perpetual, royalty-free, non-exclusive license to use and modify the Asset Management System for internal business purposes.  The Company shall provide the Founder with a copy of the existing source code, object code, documentation, flow charts, design documents, and record and file layouts relating thereto (“Documentation”).  The licenses granted in this paragraph 2 may not be transferred or sublicensed by the Founder or the Founder Affiliates except to entities owned or controlled by the Founder or the Founder Affiliates, but employees, contractors, advisors, agents and representatives of Founder or the Founder Affiliates may use and modify the Asset Management System for internal business purposes.  The Asset Management System and Documentation constitute confidential and trade secret information owned by Company, and the Founder and the Founder Affiliates shall maintain the software in strict confidence.  Notwithstanding anything in the Agreement to the contrary, this paragraph 2 only licenses rights relating to the Asset Management System and Documentation and conveys no rights whatsoever in any Company well data or any other Company confidential information.  The Asset Management System has been delivered and the Company shall have no obligation to provide maintenance, support, upgrades, updates or bug-and-error fixes to the Asset Management System to the Founder or the Founder Affiliates.  This non-exclusive license includes the rights to reproduce, transmit, adapt, prepare derivative works, or otherwise make use of the software (including all subsequent additions, revisions, supplements to, and versions of the software and derivatives, regardless of length or nature) for internal business purposes throughout the world, in any form or medium and in any language.  THE ASSET MANAGEMENT SYSTEM AND DOCUMENTATION ARE PROVIDED “AS IS” WITHOUT ANY WARRANTY OR REPRESENTATION WHATSOEVER.  THE COMPANY EXPRESSLY DISCLAIMS ALL REPRESENTATIONS AND WARRANTIES RELATING TO THE ASSET MANAGEMENT SYSTEM AND DOCUMENTATION INCLUDING BUT NOT LIMITED TO ANY IMPLIED WARRANTIES OF MERCHANTABILITY, NONINFRINGEMENT, AND FITNESS FOR A PARTICULAR PURPOSE, AND ANY OTHER WARRANTY AS TO PERFORMANCE, ACCURACY OR COMPLETENESS.  The Founder and the Founder Affiliates will defend, indemnify and hold harmless the Company and its officers, employees, agents and attorneys from and against any and all third party claims, liability, damage, cost, expenses, awards, fines, judgments and attorneys’ fees of every nature arising out of or related to the Founder’s and the Founder Affiliates’ use and modification of the Asset Management System and Documentation. The Founder will pay the Company $75,000 for the cost of the Company developing such software for use by the Founder and the Founder Affiliates as contemplated by this paragraph 2.

 

 

 

 

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3. Reserve Reports. From the Effective Date through no later than December 31, 2016, to the extent not prohibited by the software or data-use licenses with third parties, the Company will continue to provide the data, licenses and personnel services for development of and will prepare the quarterly and year-end reserve reports in connection with the Joint Interests consistent with the periodic reserve reports prepared in the past for the Founder and the Founder Affiliates.  The data and the reports will be furnished to the Founder, the Founder Affiliates and their respective agents and representatives.  The Founder Affiliates will reimburse the Company for the Company’s cost of the personnel and contractors performing such services and will acquire any necessary third party licenses at the Founder Affiliates’ expense.  In providing such data and reports, in no event will the Company have any liability to the Founder and/or the Founder Affiliates except for acts or omissions constituting gross negligence or willful misconduct.

 

4. Joint Operating Agreements.  The Company or its respective subsidiaries or affiliates have entered into standard Joint Operating Agreements with the Founder Affiliates (the “JOAs”) and the JOAs will control the joint operations, rights, and remedies between the Company and the respective Founder Affiliates for all wells drilled and jointly owned acreage except where an existing third party joint operating agreement exists or applies.  Prior to June 30, 2014, the JOAs will be amended to specify that the Joint Well Data will be provided after such date.  The JOAs may be further amended from time to time as the parties may agree. After the Separation Date, all wells drilled or subsequent operations conducted with respect to any of the Joint Interests will be proposed and governed by the applicable provisions of the applicable JOA.  In addition, all wells or subsequent operations proposed by the Company or its affiliates will be accompanied by a summary of the ownership of the proposed well, a list of the recipients of the well proposals and the applicable landman’s recap (if prepared) in the form previously approved by the Founder and the Company. The Company will make all proposals by email sent to an address previously specified by the Founder in writing or such other address as the Founder may specify.  The Company will use all commercially reasonable efforts to provide the Founder and Founder Affiliates access to information available from the ePIDS data base through the Asset Management System within a mutually agreed upon time period at a price equal to the Company’s costs for the time expended by personnel of the Company, or contractors retained by the Company, involved in such ePIDS project.  Except where required of the Company by a third party operator, a Founder Affiliate will not be required to pay any prebilling in connection with a proposed well or other operations so long as the Founder Affiliate continues to fully and timely pay the Founder Affiliate’s joint interest billings in accordance with the terms of the applicable JOAs and industry standards. No prebill will be made under any circumstances earlier than 30 days prior to the spud date of the well for which the prebill applies. Notwithstanding the overhead rates included in any existing third party joint operating agreement, the overhead rates to be charged by the Company to the Founder Affiliate will be the applicable joint venture partner rate for the well paid by the Company’s significant joint venture partners (i.e. Statoil, Total, CNOOC, SINOPEC or PXP), or if no such joint venture agreement exists for that area, the standard Company overhead rate and for the area (and in the case of the Barnett shale play, the standard Company overhead rate for the area will apply regardless) and, in any such case, will be on no better terms than the terms agreed to by unaffiliated third party participants in connection with the participation in any such well or similar wells operated by the Company. In all other respects, the COPAS provisions of the JOAs will control over any third party joint operating agreements to the extent of any inconsistencies.  The Company will conduct separate quarterly 

 

 

 

 

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update meetings for each of the Company’s divisions for the Founder, the Founder Affiliates, and their respective personnel, representatives and agents substantially the same or similar to those meetings held for the Company’s working interest or significant joint venture partners, as applicable.  In connection with the execution of the Agreement, the Company agrees to provide a monthly credit of $50,000 in the aggregate to reduce the marketing fees billed by the Company or its affiliates under the existing marketing fee arrangements between the Founder Affiliates and the Company or its affiliates beginning on the Separation Date through the Termination Date (as hereafter defined) to be allocated among the Founder Affiliates as they may choose provided that in no period will the credit reduce the marketing fees in any month below zero.

 

5. Third Party Wells.  Many third party operators ignore the Founder Affiliates’ Joint Interest as being separate from the Company’s Joint Interest and send bills, payments and notices directly to the Company for the Founder Affiliates’ Joint Interest.  In such circumstances, the Company will continue billing and paying the Founder Affiliates, but will work pro-actively with third party operators to have the Founder Affiliates’ Joint Interest separately recognized.  The Company will use all commercially reasonable efforts to deliver to the Founder Affiliates any notice from a third party operator pertaining to the Founder Affiliates’ Joint Interest, but to the extent the notice is not delivered at least 10 days prior to the deadline for taking any action required by the notice, the Company will make the same election with respect to the Founder Affiliates’ Joint Interest as the Company makes for its own Joint Interest unless the Company intends to elect non-consent, in which case the Founder Affiliates’ default election will be to consent to the proposed third-party operation.  The Founder Affiliates shall advise the Company of their election with respect to third party well proposals prior to the election due date by sending a copy to a designated email address at the Company with a copy to the Company’s appropriate land manager and the Company’s general counsel.  The Company will assist the Founder Affiliates in their efforts to change the third party operators’ records so that the Founder Affiliates are paid and billed directly by the third party operators. The Company will direct any third party operator to enter into a joint operating agreement directly with the Founder Affiliates.

 

6. Assignments.  The Company will continue to process assignments and adjustments to prior assignments, if any, of the Joint Interests attributable to the Founder Affiliates in the ordinary course of business.  At the time of the assignment, the appropriate Founder Affiliate will execute the applicable JOA (or, where appropriate, ratification and memorandum thereof between the Company and the Founder Affiliate).  All applicable acreage charges will be billed through the Company’s joint interest billing system at the earlier of the time of the assignment or 90 days after the rig is released for the applicable well.  The parties acknowledge that the exact size of the Unit may not be known at the time the acreage is billed and in that case, the Company will bill the appropriate Founder Affiliate based on the Company’s commercially reasonable efforts to estimate the correct Unit size.  Any adjustments to the size of the Unit will result in adjustments to the acreage charges and such adjustments will be made as additions to or credits against the respective Founder Affiliate’s next joint interest billing after the time of the adjustment.  The Company will provide assignments and ratification and memorandum of JOAs when submitting designations of pooled unit to Founder Affiliates for signature, where applicable, subject to amendment when the Unit is finalized.  Where no designation of pooled unit is created, assignments will be prepared and submitted 90 days after rig release.

 

 

 

 

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7. Ongoing Projects.  In order to provide the Founder Affiliate with complete Joint Well File Data for each well, the Company will continue to work diligently and use all commercially reasonable efforts to complete at the Company’s cost the following ongoing projects in connection with the Joint Interests of the Founder Affiliates: (a) document center and LTDB data export; (b) the applicable data base for the Asset Management System; (c) planning for and coordination of data exchange for after the Separation Date; (d) preparing schedules of all wells, leases, contracts and units;  (e) locate, clean, and add missing assignments and pages to existing assignments made to the respective Founder Affiliates; (f) JOA ratifications; (g) find and scan to data base missing well documents; (h) verify key well document images are correct; and (i) continue the Lease Records DOI cleanup.

 

8. Monthly Services. After the Separation Date and through the date after which an affiliate of the Founder no longer owns any of the Joint Interests (the “Termination Date”), the Company will continue to provide the following routine monthly services (in addition to the services provided by the Company as the operator of the Joint Interests, pursuant to any applicable JOA or other agreement among the Company and any of its affiliates, the Founder or any of the Founder Affiliates): (a) preparation of schedules and exhibits to mortgages; and (b) unit interest review with data of the type used in Dynamics DOI and well interest review with data of the type used in Artesia DOI, with the Company providing data extracts of the required lease, division of interest and billing information available to the Founder Affiliates on the same frequency as in the past in electronic form for import into the Founder’s systems; (c) preparation of stipulations and JOA ratifications; and (d) assignment review and GIS services (including, for example, the maps depicting earned acreage as currently provided). The cost of the services described in part (a) will be billed to the applicable Founder Affiliates as part of the monthly charges for the services provided pursuant to paragraph 10 of the Agreement at a monthly rate of $50,000 (the “Management Fee”) to be billed as part of the monthly joint interest billings beginning July 1, 2014 through the Termination Date, subject to termination or reduction in services and corresponding Management Fee by mutual agreement after June 30, 2014.  The Management Fee will be adjusted each April 1st by the rate recommended by COPAS.  For the avoidance of doubt the first applicable COPAS adjustment will be on April 1, 2015.  As to the remaining services set forth in this paragraph 8, the Company will recoup its costs of providing the services described in parts (b), (c) and (d) through the standard overhead billings pursuant to the terms of any applicable JOAs and paragraph 4 of the Agreement. All third party licenses necessary for the Founder Affiliates to receive data from the Company will be paid for by the Founder Affiliates.

 

9. Drag Along and Tag Along Rights. In the event the Company agrees to sell all or a portion of the Company’s Joint Interests in an area or play (a “Sale Transaction’), the Company may also include the Founder Affiliates’ Joint Interests in the sale (the “Drag Right”) and, if the Company does not elect to include the Founder Affiliates’ Joint Interests in the sale by exercising the Drag Right, any of the Founder Affiliates may include the applicable Founder Affiliates’ Joint Interests included in such sale (the “Tag Right”).  The Company will use all commercially reasonable efforts to provide the Founder Affiliates with written notice at least 30 days prior to any proposed closing date of a pending Sale Transaction specifying whether the Company has elected to exercise the Drag Right, the purchaser, the estimated purchase price, the property or properties expected to be sold and, as soon as available, the estimated allocation of the purchase price: (i) between the Company and the Founder Affiliates; and (ii) among the proved and unproved assets and furnish to the Founder Affiliates (a) at the time of giving such

 

 

 

 

  

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notice, copies of all agreements between the Company and the purchaser and (b) promptly after being requested, all such other customary information in the Company’s possession that the Founder Affiliates or their respective lenders may reasonably request in order to evaluate the proposed transaction.  Not less than forty-eight (48) hours after the Company learns of or determines the amounts to be paid at closing and the foregoing allocations, the Company will deliver to the Founder Affiliates such information in the same form received or prepared by the Company. If the Company has not exercised the Drag Rights, the Founder Affiliates will have ten (10) days after receipt of such notice and information to exercise the Tag Rights by written notice to the Company.   If the Company has elected to exercise the Drag Right or the Founder Affiliates have exercised the Tag Rights, the Founder Affiliates must participate in such transaction (such participation shall be subject to the approval of any lender holding a lien on any portion of the Founder Affiliates’ Joint Interest, which the Founder Affiliates will use all commercially reasonable efforts to secure) unless the purchaser indicates its preference that the Founder Affiliates’ corresponding Joint Interest not be sold to the purchaser or the Founder Affiliates do not consent to the allocations, which consent shall not be unreasonably withheld, conditioned or delayed.  Upon receipt of the proceeds of such transaction by the Company (including upon the release of any escrow, holdback or delayed payment), to the extent that the purchaser has not paid the Founder Affiliates directly, the Company will pay the Founder Affiliates by wire transfer on the closing date to the extent possible and no later than the next business day their respective portion based upon the estimated purchase price allocation, after deducting the Founder Affiliates’ respective portion (based  on a proration agreed upon by the Company and the Founder Affiliates) of any third party legal fees, accounting fees, advisory fees, or other professional fees incurred by the Company in connection with the transaction.  The final purchase price allocation must be agreed between the Founder Affiliates and the Company no later than 45 days after the date the transaction is consummated and any subsequent allocations for any such Sale Transaction will be on the same basis.  If the agreed final purchase price allocation allocates (i) less proceeds to the Founder Affiliates than the estimated purchase price allocation, the Founder Affiliates will promptly repay the Company the excess amount paid to the Founder Affiliates by the Company, or (ii) more proceeds to the Founder Affiliates than the estimated purchase price allocation, the Company will promptly pay the Founder Affiliates their remaining portion of the proceeds.  Nothing in this paragraph 9 will change or amend the Founder’s obligation under any indemnity provisions or similar provisions contained in the agreements entered into in connection with the transaction.

 

10. Scope of Services.  Effective on the Separation Date through the dates specified in this paragraph 10, subject to termination or reduction in services and corresponding fees by mutual agreement after June 30, 2014, the Company will provide or cause to be provided, at the Company’s cost, transition services to the Founder and Founder Affiliates that are reasonably necessary or appropriate to effect the orderly transfer to the Founder Affiliates land administration and reserve engineering services, including the following:

 

	
10.1  

	
Land Services.  After the Separation Date and through December 31, 2016 or so long as required under or in connection with any applicable JOA (or other agreement among the Founder, the Founder Affiliates and the Company and its affiliates), the Company will provide all land related, lease, division order and land administration services with respect to the Joint Interests of the Founder Affiliates, which services include, without limitation, the following:

 

 

 

 

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10.1.1  

	
Administering, managing, maintaining and complying with all leases and contracts relating to the  Joint Interests, including, without limitation, any actions pursuant to applicable operating agreements such as well proposals, elections and voting;

 

	
10.1.2  

	
Maintaining and updating all land records, contracts and databases relating to the Joint Interests;

 

	
10.1.3  

	
Maintaining and updating all royalty payment reports and databases;

 

	
10.1.4  

	
Maintaining and updating all royalty suspense accounts, reports and databases;

 

	
10.1.5  

	
Maintaining and updating all accounts, reports and databases associated with compulsory or non-compulsory pooled interests related to the Joint Interests;

 

	
10.1.6  

	
Generating, verifying and processing all internal and external division orders and transfer orders required in the normal course of business;

 

	
10.1.7  

	
Maintaining all land, contract, division of interest, lease files, and other files relating to the subject land administration functions; and

 

	
10.1.8  

	
Engaging, managing and overseeing contract landmen, brokers and title attorneys to evaluate, determine, and if necessary, clear title to lands associated with the wells and acreage comprising the Joint Interests including the rendering of title opinions, in each case in accordance with any applicable JOA.

 

	
10.2  

	
Transition Services.  After the Separation Date and until no later than June 30, 2014, the Company will cooperate with the Founder Affiliates in the transition of services relating to the Joint Interests sufficient to enable each Founder Affiliate to set up its operations and assume the land services not provided by the Company under JOAs and reserve engineer services relating to the Joint Interests provided by the Company pursuant to paragraph 3.  The Company, the Founder and the Founder Affiliates will reasonably cooperate with each other, and cause their affiliates, officers, employees, agents, auditors and representatives to reasonably cooperate with each other to assist in the orderly transition in order to minimize any disruption to the respective businesses of the Company, the Founder and the Founder Affiliates that may result from the transactions contemplated hereby. For purposes of the Agreement, the transition services (collectively “Transition Services”) to be provided by the Company include, without limitation, the following:

 

	
10.2.1  

	
The Company will provide, or cause to be provided, upon the Founder’s or the Founder Affiliates’ request, such reasonable and timely information and assistance to Founder and Founder Affiliate personnel to allow the Founder Affiliates to set up their well ownership, lease ownership,

 

 

 

 

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contracts database and division of interest databases in order for Founder Affiliates to assume the Transition Services as of no later than June 30, 2014 (other than those services provided by the Company in connection with JOAs or other agreements among the Founder, the Founder Affiliates and the Company), including, without limitation:

 

	
(a)  

	
Electronic reports in their current format (or hard copy, if electronic reports do not currently exist) from the Company’s land and drilling report systems;

 

	
(b)  

	
Extracting by the Company of the Company’s division of interest and/or division order records including those records maintained in electronic form, and providing all such information to the Founder Affiliates in a mutually acceptable format; and

 

	
(c)  

	
To the extent such records exist, extraction by the Company of copies of historical records and databases, division of interest digests and unit digests.  To the extent such electronic reports are prohibitively voluminous, the Parties will mutually agree as to the format in which the data will be provided to the Founder and Founder Affiliates and the timing thereof.

 

	
10.2.2  

	
The Company will provide or cause to be provided system support services necessary to extract accounting, division of interest, land data, production data and any other information related to Joint Interest leases, JOAs, rights-of-way, easements and other surface agreements and any other contracts related to the Joint Interests from the currently used Company operating systems as such services may have been provided by the Company and its providers prior to the Separation Date; provided that any electronic information or data provided will be in the same format as that then currently used by the Company and the Company is not required to perform or create additional programming or system support in connection therewith; and

 

	
10.2.3  

	
The Company will make its personnel available to the Founder and the Founder Affiliates’ personnel to explain Transition Services activities and to answer questions about the provision of the Transition Services.

 

11. Standard of Care.  The Company will provide or cause to be provided each service described in the Agreement (i) in a timely manner, (ii) as a reasonably prudent operator if the Company is the operator, (iii) in a good and workmanlike manner, (iv) in accordance with applicable law and good oilfield practices, and the provisions of the Agreement, and (v) subject to items (i) through (iv), in substantially the same manner that the Company provided each such service immediately prior to the Separation Date.  Notwithstanding the foregoing, in no event will the Company have any liability to the Founder and/or the Founder Affiliates except for acts or omissions constituting gross negligence or willful misconduct.

 

 

 

 

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12. Successors.  The Agreement binds the Founder, the Founder Affiliates and each of their respective heirs, administrators, representatives, executors, officers, directors, executives, attorneys, representatives, agents, shareholders, members, partners, successors and assigns successors, and assigns, as well as the Company, each and all of its affiliates, and each and all of their respective officers, directors, executives, attorneys, representatives, agents, shareholders, successors and assigns.

 

13. Severability.  If any term, provision, covenant or restriction of the Agreement is held by a court of competent jurisdiction or other authority to be invalid, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions of the Agreement (or portions thereof) shall remain in full force and effect and shall in no way be affected, impaired or invalidated so long as the economic or legal substance of the transactions contemplated hereby is not affected in any manner materially adverse to any party to the Agreement.  If any provision of the Agreement (or any portion thereof) shall be held to be so broad as to be unenforceable, such provision shall be interpreted to be only so broad as is enforceable.  Upon a determination that any term, provision, covenant or restriction of the Agreement is invalid, void or unenforceable, the parties to the Agreement shall negotiate in good faith, if practicable, to modify the Agreement so as to effect the original intent of the parties as closely as possible in a mutually acceptable manner in order that the actions and obligations contemplated by the Agreement be consummated as originally contemplated to the fullest extent possible.

 

14. Interpretation and Governing Law. The Company, the Founder and the Founder Affiliates and their respective counsel have mutually contributed to the preparation of the Agreement.  Accordingly, no provision of the Agreement (nor the Agreement as a whole) will be construed against the Company, the Founder or the Founder Affiliates on the grounds that such party or its counsel drafted any provision of the Agreement.  The Agreement shall be governed by the statutes and common law of the State of Oklahoma, excluding its choice of law statutes and choice of law common law.

 

15. Entire Agreement; Counterparts. The Agreement supersedes all oral agreements and statements of the parties relating thereto and may not be modified or canceled in any manner except by a writing signed by the Founder, the Founder Affiliates and an authorized officer of the Company.  The Agreement binds the Founder and the Founder’s heirs, administrators, representatives, executors, successors, and assigns, as well as the Company and the Founder Affiliates and, each and all of their respective affiliates, each and all of their respective officers, directors, attorneys, representatives, agents, shareholders, successors and assigns.  Neither the Founder, the Founder Affiliates nor the Company will assign his or its rights or delegate any or all of his or its obligations under the Agreement without the express prior written consent of the other parties to the Agreement.  Any attempted assignment in violation of this paragraph 15 shall be void.  The waiver by any party to the Agreement of a breach of any term or provision of the Agreement shall not be construed as a waiver of any subsequent breach.  The Agreement may be executed in counterparts, each of which shall be deemed to be an original, but both of which shall constitute the same agreement.  Signatures to the Agreement transmitted by facsimile transmission, by electronic mail in “portable document format” (.pdf) form, or by any other electronic means intended to preserve the original graphic and pictorial appearance of a document, will have the same effect as physical delivery of the paper document bearing the original signature.

 

 

 

 

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16. Arbitration.  The parties will attempt to promptly resolve any dispute or controversy arising out of or relating to the Agreement. Any negotiations pursuant to this paragraph 16 will be 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.  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 unsuccessful party in the arbitration will pay the costs and expenses of the arbitration including, without implied limitation, the fees for the arbitrators.  Each party will be responsible for its own attorney’s fees and related costs.  Unless otherwise expressly set forth in the Agreement, the procedures specified in this paragraph 16 will be the sole and exclusive procedures for the resolution of disputes and controversies between the parties arising out of or relating to the 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.  The parties agree that they will cooperate with each other to take all necessary action to cause the arbitrator to make binding orders and rulings to protect the confidentiality of all documents and proceedings related to any arbitration.   Except as may be required by law, neither a party nor the arbitrator may disclose documents produced at arbitration or the existence, content, or results of any arbitration hereunder without the prior written consent of both parties.  In any judicial proceeding to confirm or vacate an arbitration award rendered pursuant to this paragraph 16, the parties agree to ensure the confidentiality of all documents and proceedings related to the arbitration, including but not limited to filing all documents under seal with the court pursuant to applicable law.

 

[SIGNATURE PAGES TO FOLLOW]

 

 

 

 

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SIGNATURE PAGE TO FOUNDER JOINT OPERATING SERVICES AGREEMENT

 

IN WITNESS WHEREOF and intending to be legally bound, the Founder, the Founder Affiliates and the Company have executed the Agreement on the dates indicated below:

 

 

 

 

	 	 /s/ Aubrey K. McClendon	 	April 18, 2013
	 	
 Aubrey K. McClendon

	 	Date

 

 

 

	 	
 ARCADIA RESOURCES, L.P.,

 an Oklahoma limited partnership

 

	 	 
	By:	 /s/ Aubrey K. McClendon	 	April 18, 2013
	 	 Aubrey K. McClendon, General Partner	 	Date

 

 

	 	
 LARCHMONT RESOURCES, L.L.C.,

 an Oklahoma limited liability company

 

	 	 
	By:	 /s/ Aubrey K. McClendon	 	April 18, 2013
	 	 Aubrey K. McClendon, Manager	 	Date

 

	 	
 JAMESTOWN RESOURCES, L.L.C.,

 an Oklahoma limited liability company

 

	 	 
	By:	 /s/ Aubrey K. McClendon	 	April 18, 2013
	 	 Aubrey K. McClendon, Manager	 	Date

 

 

	 	
 PELICAN ENERGY, L.L.C.,

 an Oklahoma limited liability company

 

	 	 
	By:	 /s/ Aubrey K. McClendon	 	April 18, 2013
	 	 Aubrey K. McClendon, Manager	 	Date

 

 

	 	
 CHESAPEAKE ENERGY CORPORATION,

 an Oklahoma corporation

 

	 	 
	By:	 /s/ James R. Webb	 	April 18, 2013
	Title:	 Senior Vice President - Legal and General Counsel	 	Date

 

 

 

	FOUNDER JOINT OPERATING SERVICES AGREEMENT	 	 
	 	11

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