Document:

chk10012009_1025.htm

Exhibit 10.2.5

AMENDED AND RESTATED EMPLOYMENT AGREEMENT

 

THIS AGREEMENT is made effective September 30, 2009, between CHESAPEAKE ENERGY CORPORATION, an Oklahoma corporation (the "Company"), and DOUGLAS J. JACOBSON, an individual (the "Executive").

 

W I T N E S S E T H:

 

WHEREAS, the Company previously retained the services of the Executive under the Employment Agreement dated effective January 1, 2007, (the "Prior Agreement").

 

WHEREAS, the Board of Directors has determined that it is in the best interests of the Company to renew the Executive's employment arrangement and to maximize the Executive's incentive to remain as an employee and officer of the Company.

WHEREAS, as a result of the Executive's contribution to the Company and the Company's consummation of the joint venture transactions consummated by the Company during 2008 that increased the Company's intrinsic value by at least $10 billion, the Board of Directors has also determined that it is in the best interests of the Company to grant
to the Executive an incentive award as provided herein.

WHEREAS, the Company and the Executive desire to amend and restate the Prior Agreement in its entirety to incorporate the foregoing and other changes to the employment arrangement between the Company and the Executive.

NOW, THEREFORE, in consideration of the mutual promises herein contained, the Company and the Executive agree as follows:

 

	
1.
	
Employment.  The Company hereby employs the Executive and the Executive hereby accepts such employment subject to the terms and conditions contained in this Agreement.  The Executive is engaged as an Executive of the Company, and the Executive and the Company do not intend to create a joint venture, partnership or other relationship
which might impose a fiduciary obligation on the Executive or the Company in the performance of this Agreement.

 

	
2.
	
Executive's Duties.  The Executive is employed on a full-time basis.  Throughout the term of this Agreement, the Executive will use the Executive's best efforts and due diligence to assist the Company in achieving the most profitable operation of the Company and the Company's affiliated entities consistent with developing and maintaining
a quality business operation. The Executive shall also devote all of Executive's working time, attention and energies to the performance of Executive's duties and responsibilities under this Agreement.

 

	
  
	
2.1
	
Specific Duties.  The Executive will serve as Executive Vice President – Acquisitions & Divestitures for the Company, and in such positions as are mutually agreed upon by the parties. The Executive shall perform all of the duties required to fully and faithfully execute the office and position to which the Executive is appointed, and
such other duties as may be reasonably requested by the Executive's supervisor. During the term of this Agreement, the Executive may be nominated for election or appointed to serve as a director or officer of any of the Company's affiliated entities as determined in such affiliates' Board of Directors' sole discretion.  The services of the Executive will be requested and directed by the Chief Executive Officer, Mr. Aubrey K. McClendon.

 

	
  
	
2.2
	
Rules and Regulations.  The Company has issued various policies and procedures applicable to employees and the Executive including an Employment Policies Manual which sets forth the general human resources policies of the Company and addresses frequently asked questions regarding the Company.  The Executive agrees to comply with
such policies and procedures except to the extent inconsistent with this Agreement.  Such policies and procedures may be changed or adopted in the sole discretion of the Company without advance notice.

 

	
  
	
2.3
	
Stock Investment.  The Executive acknowledges that the Executive is expected to own not less than twenty-five thousand (25,000) shares of the Company's common stock at all times after September 29, 2009 and prior to termination of the Agreement.  In the event the Executive's stock investment is less than 25,000 shares, the Executive
will have a grace period of at least ninety (90) days to restore the Executive's stock investment to the guideline amount.  The Compensation Committee of the Board of Directors (the "Compensation Committee") may in its discretion extend the grace period for complying with the Executive's stock investment guideline. The Company has no obligation to sell to or to purchase from the Executive any of the Company's stock in connection with this paragraph and has made no representations or warranties regarding
the Company's stock, operations or financial condition.

 

	
3.
	
Other Activities.  Except as provided in this Agreement or approved by the Compensation Committee, or its designee, as applicable, in writing, the Executive agrees not to:  (a) engage in other business activities independent of the Company; (b) serve as a general partner, officer, executive, director or member of any corporation,
partnership, company or firm; or (c) directly or indirectly invest, participate or engage in the Oil and Gas Business.  For purposes of this Agreement the term "Oil and Gas Business" means:  (i) producing oil and gas; (ii) drilling, owning or operating an interest in oil and gas leases or wells; (iii) providing material or services to the Oil and Gas Business; (iv) refining, processing or marketing oil or gas; or (v) owning an interest in or assisting any corporation, partnership, company,
entity or person in any of the foregoing.  The foregoing will not prohibit: (v) ownership of publicly traded securities; (w) ownership of royalty interests where the Executive owns or previously owned the surface of the land covered in whole or in part by the royalty interest and the ownership of the royalty interest is incidental to the ownership of such surface estate; (x) ownership of royalty interests, overriding royalty interests, working interests or other interests in oil and gas owned prior
to the Executive's date of first employment with the company and disclosed to the Company in writing; (y) ownership of royalty interests, overriding royalty interests, working interests or other interests in oil and gas acquired by the Executive through a bona fide gift or inheritance subject to disclosure by Executive to the Company in writing; or (z) service as an officer or director of a not-for-profit organization.  If the Executive serves as a director or officer of a not-for-profit organization,
the Executive shall disclose the name of the organization and their involvement in an annual disclosure statement, the form of which shall be provided by the Company.

 

4.           Executive's Compensation.  The Company agrees to compensate the Executive as follows:

 

	
  
	
4.1
	
Base Salary.  A base salary (the "Base Salary"), at the initial annual rate of not less than Eight Hundred Thousand Dollars ($800,000.00) will be paid to the Executive in regular installments in accordance with the Company's designated payroll schedule.  The Executive Agrees that the Base Salary will not exceed the amount set forth
in this paragraph prior to September 30, 2012.

 

	
  
	
4.2
	
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.  Any bonus compensation is subject to the requirement that the Executive be employed on the bonus payment date(s) selected by the Company and will be at the absolute discretion
of the Company in such amounts and at such times as the Board of Directors of the Company may determine. The Executive Agrees that any bonus compensation payable under this paragraph 4.2 during any calendar year through 2012 will not exceed the sum of the bonus compensation paid to the Executive (a) for the last half of 2008, plus (b) for the first half of 2009.

 

	
  
	
4.3
	
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 Chesapeake Energy Corporation restricted stock or other awards from the Company's various equity compensation plans, subject to the terms and conditions thereof. 

 

	
  
	
4.4
	
Benefits.  The Company will provide the Executive such retirement benefits, reimbursement of reasonable expenditures for dues, travel and entertainment and such other benefits as are customarily provided to similarly situated executives of  the Company and as are set forth in and governed by the Company's Employment Policies Manual.
The Company will also provide the Executive the opportunity to apply for coverage under the Company's medical, life and disability plans, if any.  If the Executive is accepted for coverage under such plans, the Company will make such coverage available to the Executive on the same terms as is customarily provided by the Company to the plan participants as modified from time to time.  The Executive is subject to all of the terms and provisions of the Company's benefit plans or policies.  The
following specific benefits will also be provided to the Executive at the expense of the Company:

 

	
  
	
4.4.1
	
Vacation.  The Executive will be entitled to take four (4) weeks of paid vacation, calculated from the Executive's anniversary date, during the term of this Agreement.  No additional compensation will be paid for failure to take vacation.

 

	
  
	
4.4.2
	
Membership Dues.  The Company will reimburse the Executive for: (a) the monthly dues necessary to maintain a full membership in a club in the Oklahoma City area selected by the Executive; and (b) the reasonable cost of any approved business entertainment at such club.  Such reimbursement shall be made within thirty (30) days of the
date such costs are incurred and submitted for reimbursement.  All other costs, including, without implied limitation, any initiation costs, initial membership costs, personal use and business entertainment unrelated to the Company will be the sole obligation of the Executive and the Company will have no liability with respect to such amounts.

 

	
  
	
4.5
	
Change of Control Payment.  If, during the term of this Agreement, there is a Change of Control (as hereafter defined) the Executive will be entitled to a lump sum payment (the "Change of Control Payment") within thirty (30) days of the effective date of the Change of Control (in addition to any other amounts payable to the Executive under
this Agreement or otherwise including the acceleration of the 2008 Incentive Award Payments under paragraph 4.6 of this Agreement) in an amount equal to two hundred percent (200%) of: (a) the Executive's then current Base Salary under paragraph 4.1 of this Agreement and (b) the actual bonuses paid to the Executive during the twelve (12) calendar months preceding the Change of Control under paragraph 4.2 of this Agreement or its predecessor.  Additionally, upon the occurrence of such a Change of Control
all Equity Compensation granted to the Executive under Section 4.3 of this Agreement will be immediately vested and the remaining unpaid installments of the 2008 Incentive Award under paragraph 4.6 of this Agreement will be paid in a lump sum contemporaneously with the Change of Control Payment.  For the purpose of this Agreement, a "Change of Control" means the occurrence of any of the following:

 

	
  
	
(a)
	
the acquisition by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")) (a "Person") of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of thirty percent (30%) or more of either (i) the then outstanding shares of the Company's common stock (the "Outstanding CHK Common
Stock") or (ii) the combined voting power of the then outstanding voting securities of the Company entitled to vote generally in the election of directors (the "Outstanding CHK Voting Securities").  For purposes of this paragraph, the following acquisitions by a Person will not constitute a Change of Control: (i) any acquisition directly from the Company; (ii) any acquisition by the Company; (iii) any acquisition by or sponsored by Mr. Aubrey K. McClendon; (iv) any acquisition by any Executive benefit
plan (or related trust) sponsored or maintained by the Company or any corporation controlled by the Company; or (v) any acquisition by any corporation pursuant to a transaction which complies with clauses (i), (ii) and (iii) of paragraph (c) below;

 

	
  
	
(b)
	
the individuals who, as of June 12, 2009, constitute the Board of Directors (the "Incumbent Board") cease for any reason to constitute at least a majority of the Board of Directors.  Any individual becoming a director subsequent to the date hereof whose election, or nomination for election by the Company's shareholders, is approved by a vote of at least a majority of the directors then comprising the Incumbent
Board will be considered a member of the Incumbent Board as of the date hereof, but any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Incumbent Board will not be deemed a member of the Incumbent Board as of the date hereof;

 

	
  
	
(c)
	
the consummation of a reorganization, merger, consolidation or sale or other disposition of all or substantially all of the assets of the Company (a "Business Combination"), unless following such Business Combination: (i) all or substantially all of the individuals and entities who were the beneficial owners, respectively, of the Outstanding CHK Common Stock and Outstanding CHK Voting Securities immediately prior
to such Business Combination beneficially own, directly or indirectly, more than sixty percent (60%) of, respectively, the then outstanding shares of common stock and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the corporation resulting from such Business Combination (including, without limitation, a corporation which as a result of such transaction owns the Company or all or substantially all of the Company's
assets either directly or through one or more subsidiaries) in substantially the same proportions as their ownership, immediately prior to such Business Combination of the Outstanding CHK Common Stock and Outstanding CHK Voting Securities, as the case may be, (ii) no Person (excluding any corporation resulting from such Business Combination or any Executive benefit plan (or related trust) of the Company or such corporation resulting from such Business Combination) beneficially owns, directly or indirectly, thirty
percent (30%) or more of, respectively, the then outstanding shares of common stock of the corporation resulting from such Business Combination or the combined voting power of the then outstanding voting securities of such corporation except to the extent that such ownership existed prior to the Business Combination and (iii) at least a majority of the members of the Board of Directors of the corporation resulting from such Business Combination were members of the Incumbent Board at the time of the execution
of the initial agreement, or of the action of the Incumbent Board, providing for such Business Combination; or,

 

	
  
	
(d)
	
the approval by the shareholders of the Company of a complete liquidation or dissolution of the Company.

 

	
  
	
4.6
	
2008 Incentive Award.  In addition to any bonus compensation under paragraph 4.2 of this Agreement, the Company hereby grants to the Executive an incentive award in the amount of Nine Million Six Hundred Twelve Thousand Five Hundred Dollars ($9,612,500.00) (the "2008 Incentive Award") to be paid in four (4) equal annual installments. The first
installment of the 2008 Incentive Award will be paid no later than September 30, 2009 and the remaining installments of the 2008 Incentive Award will be paid on September 30, 2010, September 30, 2011 and September 30, 2012. Except as expressly provided herein or approved by the Board of Directors, the payment of each installment of the 2008 Incentive Award is conditioned on the continued employment of the Executive by the Company or an affiliate of the Company on the scheduled date of payment of such installment.  The
remaining unpaid installments of the 2008 Incentive Award will be accelerated and payable in a lump sum: (a) on a Change of Control in accordance with paragraph 4.5 of this Agreement; (b) as provided in paragraphs 6.1.1, 6.2, 6.4 and 6.5 of this Agreement.  The amounts payable under this paragraph will be excluded from all other wage and benefit computations including, without implied limitation, the base used to compute 401(k) benefits, deferred compensation benefits, change of control payments and
severance compensation.

 

	
5.
	
Term.  The employment relationship evidenced by this Agreement is an "at will" employment relationship and the Company reserves the right to terminate the Executive at any time with or without cause as provided herein.  In the absence of such termination, this Agreement will commence on September 30, 2009 and end on September 30,
2012 (the "Expiration Date").

 

	
6.
	
Termination.  This Agreement will continue in effect until the expiration of the term stated in paragraph 5 of this Agreement unless earlier terminated pursuant to this paragraph 6.

 

	
  
	
6.1
	
Termination by Company.  The Company will have the following rights to terminate this Agreement:

 

	
  
	
6.1.1
	
Termination without Cause.  The Company may terminate this Agreement without Cause at any time by the service of written notice of termination to the Executive specifying an effective date of such termination not sooner than thirty (30) business days after the date of such notice (the "Termination Date").  In the event of elimination
of the Executive's job position or reduction in duties and/or reassignment of the Executive to a new position of less authority or reduction in Base Salary (collectively referred to as the "Good Reason Conditions") the Executive may terminate this Agreement if the Executive provides notice to the Company within ninety (90) days of the initial existence of the Good Reason Condition and a thirty (30) day period for the Company to cure the Good Reason Condition.  If the Company fails to cure the Good Reason
Condition within the thirty (30) day cure period, the Executive may terminate this Agreement and it will be deemed to be a termination without Cause.  In the event the Executive is terminated without Cause, the Executive will receive as termination compensation within thirty (30) days of the Termination Date: (a) fifty-two (52) weeks of Base Salary in a lump sum payment; (b) all Equity Compensation granted to Executive under Section 4.3 of this Agreement and any Supplemental Matching Contributions to
the Chesapeake Energy Corporation Amended and Restated Deferred Compensation Plan (the “401(k) Make-Up Plan”) shall be immediately vested; (c) the remaining unpaid portion of the 2008 Incentive Award under paragraph 4.6 of this Agreement in a lump sum payment; and (d) payment of any vacation pay accrued through the Termination Date.  The right to the foregoing termination compensation under clauses (a), (b) and (c) above is subject to the Executive's execution of the Company's severance
agreement which will operate as a release of all legally waivable claims against the Company and the Executive's compliance with all of the provisions of this Agreement, including all post-employment obligations.

 

	
  
	
6.1.2
	
Termination for Cause.  The Company may terminate the employment of the Executive hereunder at any time for Cause (as hereinafter defined) (such a termination being referred to in this Agreement as a "Termination For Cause") by giving the Executive written notice of such termination, which shall take effect immediately upon the giving of such
notice to the Executive.  As used in this Agreement, "Cause" means (a) the Executive's breach or threatened breach of this Agreement; (b) the Executive's neglect of duties or failure to act, other than by reason of disability or death; (c) the misappropriation, fraudulent conduct, or acts of workplace dishonesty by the Executive with respect to the assets or operations of the Company or any of its subsidiaries or affiliated companies; (d) the Executive's failure to comply with directives from superiors
or written company policies; (e) the Executive's personal misconduct which injures the Company and/or reflects poorly on the Company's reputation; (f) the Executive's failure to perform Executive's duties; or (g) the conviction of the Executive for, or a plea of guilty or no contest to, a felony or any crime involving moral turpitude.  In the event this Agreement is terminated for Cause, the Company will not have any obligation to provide any further payments or benefits to the Executive after the Termination
Date other than any vacation pay accrued through the Termination Date.

 

	
  
	
6.2
	
Termination by Executive.  The Executive may voluntarily terminate this Agreement with or without cause by the service of written notice of such termination to the Company specifying a Termination Date no sooner than thirty (30) days after the date of such notice.  The Company reserves the right to end the employment relationship
at any time after the notice date and to pay Executive through the notice date.  If this Agreement is terminated by the Executive in accordance with this paragraph: (a)  the obligations of the parties will be controlled by paragraphs 6.3 and 6.6 of this Agreement; and (b) if the termination is based in whole, or in part, on the breach by the Company of a material provision of this Agreement or another material obligation of the Company in favor of the Executive and the breach is not cured
after thirty (30) days written notice and the Executive has not exercised the termination rights under paragraph 6.1.1 of this Agreement, in addition to any other amounts the Executive will be entitled to a lump sum payment of the remaining unpaid installments of the 2008 Incentive Award under paragraph 4.6 of this Agreement.

 

	
  
	
6.3
	
Retirement by Executive.  In the event the Executive is fifty-five (55) years or older and terminates this Agreement under paragraph 6.2 of this Agreement, the Executive will be (a) eligible for accelerated vesting of the unvested Equity Compensation awarded by the Company with the exception of any Equity Compensation issued to the Executive
under the 2006 Long Term Stock Incentive Program award; and (b) eligible for accelerated vesting of the unvested Supplemental Matching Contributions to the 401(k) Make-Up Plan.  The accelerated vesting under clauses (a) and (b) of this paragraph will be in accordance with the retirement matrix (the "Retirement Matrix") attached to this Agreement.

 

	
  
	
6.4
	
Incapacity of Executive.  If the Executive suffers from a physical or mental condition which in the reasonable judgment of the Company's management prevents the Executive in whole or in part from performing the duties specified herein for a period of three (3) consecutive months, the Executive may be terminated. Although the termination may
be deemed as a termination for Cause, the Executive will be entitled to receive within thirty (30) days of the Date of Termination: (a) a payment of twenty-six (26) weeks of Base Salary in a lump sum; (b) all Equity Compensation granted to the Executive under Section 4.3 of this Agreement and any Supplemental Matching Contributions to the 401(k) Make-Up Plan shall be immediately vested; (c) a lump sum payment of the remaining unpaid installments of the 2008 Incentive Award under paragraph 4.6 of this Agreement;
and (d) payment of any vacation pay accrued through the Termination Date.  Notwithstanding the foregoing, the amount payable under clause (a) above will be reduced by any benefits payable under any disability plans provided by the Company.  The right to the foregoing compensation due under clauses (a), (b) and (c) above is subject to the execution by the Executive or the Executive's legal representative of the Company's severance agreement which will operate as a release of all legally waivable
claims against the Company.  In applying this section, the Company will comply with any applicable legal requirements, including the Americans with Disabilities Act.

 

	
  
	
6.5
	
Death of Executive.  If the Executive dies during the term of this Agreement, the Company may thereafter terminate this Agreement without compensation except the Company will: (a) pay fifty-two (52) weeks of Base Salary in a single lump sum payment within ninety (90) days of the date of the Executive's death; (b) immediately vest all Equity
Compensation granted to the Executive under Section 4.3 of this Agreement and any Supplemental Matching Contributions to the 401(k) Make-Up Plan; (c) pay in a lump sum the remaining unpaid portion of the 2008 Incentive Award under paragraph 4.6 of this Agreement within ninety (90) days of the date of the Executive's death; and (d) pay any vacation pay accrued through the Termination Date .  Amounts payable under this Section 6.5 shall be paid to the beneficiary designated on the Company's universal
beneficiary designation form in effect on the date of the Executive's death.  If the Executive fails to designate a beneficiary or if such designation is ineffective, in whole or in part, any payment that would otherwise have been paid under this Section 6.5 shall be paid to the Executive's estate.  The right to the foregoing compensation due under clauses (a), (b) and (c) is subject to the execution by the beneficiary, or as applicable, the administrator of the Executive's estate of the Company's
severance agreement which will operate as a release of all legally waivable claims against the Company.

 

	
  
	
6.6
	
Effect of Termination.  The termination of this Agreement will terminate all obligations of the Executive to render services on behalf of the Company from and after the Termination Date, provided that the Executive will maintain the confidentiality of all information acquired by the Executive during the term of Executive's employment in accordance
with paragraph 7 of this Agreement and the Executive shall comply with all other post employment requirements including paragraphs 7, 8, 9, 10, 11, 12, 13 and 14.  Except as otherwise provided in paragraphs 4.5, 4.6 and 6 of this Agreement and payment of any vacation pay accrued through the Termination Date, no accrued bonus, severance pay or other form of compensation will be payable by the Company to the Executive by reason of the termination of this Agreement.  All keys, entry cards, credit
cards, files, records, financial information, furniture, furnishings, equipment, supplies and other items relating to the Company in the Executive's possession will remain the property of the Company.  The Executive will have the right to retain and remove all personal property and effects which are owned by the Executive and located in the offices of the Company at a time determined by the Company. All such personal items will be removed from such offices no later than two (2) days after the Termination
Date, and the Company is hereby authorized to discard any items remaining and to reassign the Executive's office space after such date.  Prior to the Termination Date, the Executive will render such services to the Company as might be reasonably required to provide for the orderly termination of the Executive's employment. Notwithstanding the foregoing and without discharging any obligations to pay compensation to the Executive under this Agreement, after notice of the Termination, the Company may request
that the Executive not provide any other services to the Company and not enter the Company's premises before or after the Termination Date.  In the event that the Executive separates employment with the Company, Executive hereby grants consent to notification by the Company to Executive's new employer about Executive's rights and obligations under this Agreement. Upon such termination of employment, the Executive further agrees to acknowledge compliance with this Agreement in a form reasonably provided
by the Company.

 

	
7.
	
Confidentiality.  The Executive recognizes that the nature of the Executive's services are such that the Executive will have access to information which constitutes trade secrets, is of a confidential nature, is of great value to the Company and/or is the foundation on which the business of the Company is predicated.  The Executive
also acknowledges that, during the course of employment, the Executive may have personal contact and conduct business with the customers, suppliers and accounts of the Employer.  The Executive agrees not to disclose to any person other than authorized Executives of the Company or the Company's legal counsel nor use for any purpose, other than the performance of this Agreement, any confidential information ("Confidential Information").  Confidential Information includes data or material (regardless
of form) which is:  (a) a trade secret (a trade secret shall include any formula, pattern, device or compilation of information used by the Employer in its business); (b) provided, disclosed or delivered to Executive by the Company, any officer, director, Executive, agent, attorney, accountant, consultant, or other person or entity employed by the Company in any capacity, any customer, borrower or business associate of the Company or any public authority having jurisdiction over the Company of any business
activity conducted by the Company; or (c) produced, developed, obtained or prepared by or on behalf of Executive or the Company (whether or not such information was developed in the performance of this Agreement) with respect to the Company or any assets oil and gas prospects, business activities, officers, directors, Executives, borrowers or customers of the foregoing.  The Executive acknowledges that Executive will obtain unique benefits from employment and the provisions contained in this Agreement
are reasonably necessary to protect the Employer's legitimate business interests.  On request by the Company, the Company will be entitled to the return of any Confidential Information in the possession of the Executive. The Executive also agrees that the provisions of this paragraph 7 will survive the termination, expiration or cancellation of this Agreement for a period of three (3) years.  The Executive will deliver to the Company all originals and copies of the documents or materials containing
Confidential Information.  For purposes of paragraphs 7, 8, 9, 10 and 13 of this Agreement, the Company expressly includes any of the Company's affiliated corporations, partnerships or entities.

 

	
8.
	
Non-Competition.  For a period of six (6) months after the Executive is no longer employed by the Company for any reason, the Executive will not acquire, attempt to acquire or aid another in the acquisition or attempted acquisition of an interest in oil and gas assets, oil and gas production, oil and gas leases, mineral interests, oil and
gas 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 interest on the date of the resignation or termination of the Executive.

 

	
9.
	
Non-Solicitation.  The Executive agrees that during his/her employment hereunder, and for the one (1) year period immediately following the separation of employment for any reason, the Executive shall not solicit or contact any established client or customer of the Company with a view to inducing or encouraging such established client or customer
to discontinue or curtail any business relationship with the Company.  The Executive further agrees that the Executive will not request or advise any established clients, customers or suppliers of the Company to withdraw, curtail or cancel its business with the Company.

 

	
10.
	
Non-Solicitation of Employees.  The Executive covenants that during the term of employment and for the one (1) year period immediately following the separation of employment for any reason, Executive will neither directly nor indirectly induce nor attempt to induce any Executive or Employee of the Company to terminate his or her employment
to go to work for any other Company.

 

	
11.
	
Reasonableness.  The Company and Executive have attempted to specify a reasonable period of time and reasonable restrictions to which this Agreement shall apply.  The Company and Executive agree that if a court or administrative body should subsequently determine that the terms of this Agreement are greater than reasonably necessary
to protect the Company's interest, the Company agrees to waive those terms which are found by a court or administrative body to be greater than reasonably necessary to protect the Company's interest and to request that the court or administrative body reform this Agreement specifying a reasonable period of time and such other reasonable restrictions as the court or administrative body deems necessary.

 

	
12.
	
Equitable Relief.  The Executive acknowledges that the services to be rendered by Executive are of a special, unique, unusual, extraordinary, and intellectual character, which gives them a peculiar value, and the loss of which cannot reasonably or adequately be compensated in damages in an action at law; and that a breach by the Executive
of any of the provisions contained in this Agreement will cause the Company irreparable injury and damage.  The Executive further acknowledges that the Executive possesses unique skills, knowledge and ability and that any material breach of the provisions of this Agreement would be extremely detrimental to the Company.  By reason thereof,  the Executive agrees that the Company shall be entitled, in addition to any other remedies it may have under this Agreement or otherwise, to injunctive
and other equitable relief to prevent or curtail any breach of this Agreement by him/her.

 

	
13.
	
Proprietary Matters.  The Executive expressly understands and agrees that any and all improvements, inventions, discoveries, processes, know-how or intellectual property that are generated or conceived by the Executive during the term of this Agreement, whether generated or conceived during the Executive's regular working hours or otherwise,
will be the sole and exclusive property of the Company.  Whenever requested by the Company (either during the term of this Agreement or thereafter), the Executive will assign or execute any and all applications, assignments and or other instruments and do all things which the Company deems necessary or appropriate in order to permit the Company to:  (a) assign and convey or otherwise make available to the Company the sole and exclusive right, title, and interest in and to said improvements,
inventions, discoveries, processes, know-how, applications, patents, copyrights, trade names or trademarks; or (b) apply for, obtain, maintain, enforce and defend patents, copyrights, trade names, or trademarks of the United States or of foreign countries for said improvements, inventions, discoveries, processes or know-how.  However, the improvements, inventions, discoveries, processes or know-how generated or conceived by the Executive and referred to above (except as they may be included in the patents,
copyrights or registered trade names or trademarks of the Company, or corporations, partnerships or other entities which may be affiliated with the Company) shall not be exclusive property of the Company at any time after having been disclosed or revealed or have otherwise become available to the public or to a third party on a non-confidential basis other than by a breach of this Agreement, or after they have been independently developed or discussed without a breach of this Agreement by a third party who has
no obligation to the Company or its affiliates.  The foregoing will not prohibit any activities which are expressly permitted by the last sentence of paragraph 3 of this Agreement during the term of this Agreement.

 

	
14.
	
Arbitration.  Any disputes, claims or controversy's between the Employer and Executive including, but not limited to those arising out of or related to this Agreement or out of the parties' employment relationship, shall be settled by arbitration as provided herein.  This agreement shall survive the termination or rescission of this
Agreement.  All arbitration shall be in accordance with Rules of the American Arbitration Association, including discovery, and shall be undertaken pursuant to the Federal Arbitration Act.  Arbitration will be held in Oklahoma City, Oklahoma unless the parties mutually agree to another location.  The decision of the arbitrator will be enforceable in any court of competent jurisdiction.  The parties, however, agree that the Employer shall be entitled to obtain injunctive
or other equitable relief to enforce the provisions of this Agreement in a court of competent jurisdiction.  The parties further agree that this arbitration provision is not only applicable to the Company but its affiliates, officers, directors, employees and related parties.

 

15.           Miscellaneous.  The parties further agree as follows:

 

	 	
15.1
	
Time.  Time is of the essence of each provision of this Agreement.

 

	
  
	
15.2
	
Notices.  Any notice, payment, demand or communication required or permitted to be given by any provision of this Agreement will be in writing and will be deemed to have been given when delivered personally or by telefacsimile to the party designated to receive such notice, or on the date following the day sent by overnight courier, or on
the third (3rd) business day after the same is sent by certified mail, postage and charges prepaid, directed to the following address or to such other or additional addresses as any party might designate by written notice to the other party:

 

	 	To the Company: 	 	Chesapeake Energy Corporation
	 	 	 	Post Office Box 18496
	 	 	 	Oklahoma City, OK  73154-0496
	 	 	 	Attn: Aubrey K. McClendon
	 	 	 	 
	 	To the Executive: 	 	Douglas J. Jacobson
	 	 	 	22950 Lauren Lane
	 	 	 	Edmond, OK 73003

 

	
  
	
15.3
	
Assignment.  Neither this Agreement nor any of the parties' rights or obligations hereunder can be transferred or assigned without the prior written consent of the other parties to this Agreement; provided, however, the Company may assign this Agreement to any wholly owned affiliate or subsidiary of Chesapeake Energy Corporation without Executive's
consent as well as to any purchaser of the Company.

 

	
  
	
15.4
	
Construction.  If any provision of this Agreement or the application thereof to any person or circumstances is determined, to any extent, to be invalid or unenforceable, the remainder of this Agreement, or the application of such provision to persons or circumstances other than those as to which the same is held invalid or unenforceable, will
not be affected thereby, and each term and provision of this Agreement will be valid and enforceable to the fullest extent permitted by law.  Except as provided for in paragraph 14, this Agreement is intended to be interpreted, construed and enforced in accordance with the laws of the State of Oklahoma.

 

	
  
	
15.5
	
Entire Agreement.  This Agreement, any documents executed in connection with this Agreement, any documents specifically referred to in this Agreement and the Employment Policies Manual constitute the entire agreement between the parties hereto with respect to the subject matter herein contained, and no modification hereof will be effective
unless made by a supplemental written agreement executed by all of the parties hereto.

 

	
  
	
15.6
	
Binding Effect.  This Agreement will be binding on the parties and their respective successors, legal representatives and permitted assigns.  In the event of a merger, consolidation, combination, dissolution or liquidation of the Company, the performance of this Agreement will be assumed by any entity which succeeds to or is transferred
the business of the Company as a result thereof, and the Executive waives the consent requirement of paragraph 15.3 to effect such assumption.

 

	
  
	
15.7
	
Supersession.  This Agreement supersedes and replaces any prior employment agreements including the Prior Agreement.  On execution of this Agreement by the Company and the Executive, the relationship between the Company and the Executive will be bound by the terms of this Agreement, any documents executed in connection with this
Agreement, any documents specifically referred to in this Agreement and the Employment Policies Manual.  In the event of a conflict between the Employment Policies Manual and this Agreement, this Agreement will control in all respects.

 

	
  
	
15.8
	
Third-Party Beneficiary.  The Company's affiliated entities and partnerships are beneficiaries of all terms and provisions of this Agreement and entitled to all rights hereunder.

 

	
  
	
15.9
	
Section 409A.  This Agreement is intended to comply with Internal Revenue Code Section 409A and related U.S. Treasury regulations or pronouncements ("Section 409A") and any ambiguous provision will be construed in a manner that is compliant with or exempt from the application of Section 409A.  Notwithstanding any provision to
the contrary in this Agreement, if Executive is deemed on his Termination Date to be a "specified employee" within the meaning of that term under Section 409A(a)(2)(B) of the Internal Revenue Code, then the payments and benefits under this Agreement that are subject to Section 409A and paid by reason of a termination of employment shall be made or provided (subject to the last sentence hereof) on the later of (a) the payment date set forth in this Agreement or (b) the date that is the earliest of (i) the expiration
of the six-month period measured from the date of the Executive's Termination of employment or (ii) the date of the Executive's death (the "Delay Period").  Payments subject to the Delay Period shall be paid to the Executive without interest for such delay in payment.

 

IN WITNESS WHEREOF, the undersigned have executed this Agreement effective the date first above written.

 

	 	CHESAPEAKE ENERGY CORPORATION, an Oklahoma corporation.
	 	 	 
	 	 	 
	 	 By:	/s/ AUBREY K. MCCLENDON
	 	 	Aubrey K. McClendon, Chief Executive Officer
	 	 	(the "Company")
	 	 	 
	 	 By:	/s/ DOUGLAS J. JACOBSON 
	 	 	Douglas J. Jacobson, Individually
	 	 	(the "Executive")

 

 

 

 

RETIREMENT MATRIX

	
Douglas J. Jacobson

	
Equity Comp Vesting Upon Retirement

	
< age 55
	
0%

	
age 55 or over
	
100%ex101928.htm

    Exhibit
10.1

    
 

    FEDERAL
DEPOSIT INSURANCE CORPORATION

    

    WASHINGTON,
D.C.

    

    WASHINGTON
DEPARTMENT OF FINANCIAL INSTITUTIONS

    

    OLYMPIA,
WASHINGTON

     

    
    

     

    
      	 	 	 
	

              In
      the Matter of

               

              RAINIER
      PACIFIC BANK

              
                TACOMA,
      WASHINGTON

                 

                (INSURED
      STATE NONMEMBER BANK) 

                 

              

            	
              )

              )

              )

              )

              )

              )

              )

              )

              )

              )

              )

            	 

               

               

              ORDER
      TO CEASE AND DESIST

               

              FDIC-09-
      521b

            
	 	 	 

    

    Rainier Pacific Bank, Tacoma,
Washington ("Bank"), having been advised of its right to a NOTICE OF CHARGES AND
OF HEARING detailing the unsafe or unsound banking practices and violations of
law and/or regulations alleged to have been committed by the Bank and of its
right to a hearing on the alleged charges under section 8(b)(1) of the Federal
Deposit Insurance Act ("Act"), 12 U.S.C. § 1818(b)(1), and Section 32.04.250 of
the Revised Code of Washington, and having waived those rights, entered into a
STIPULATION AND CONSENT TO THE ISSUANCE OF AN ORDER TO CEASE AND DESIST
("CONSENT AGREEMENT") with counsel for the Federal Deposit Insurance Corporation
("FDIC"), and with counsel for the Washington Department of Financial
Institutions (“WDFI”), dated September 28, 2009, whereby solely for the purpose
of this proceeding and without admitting or denying the alleged charges of
unsafe or unsound banking practices and violations of law and/or regulations,
the Bank consented to the issuance of an ORDER TO CEASE AND DESIST ("ORDER") by
the FDIC and the WDFI.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    
       

      
        	
                 -2-

              

      

    

     

        The FDIC and
the WDFI considered the matter and determined that they had reason to believe
that the Bank had engaged in unsafe or unsound banking practices and violations
of law and/or regulations.  The FDIC and the WDFI, therefore, accepted
the CONSENT AGREEMENT and issued the following:

    ORDER TO CEASE AND
DESIST

    IT IS HEREBY ORDERED, that the Bank,
its institution-affiliated parties, as that term is defined in section 3(u) of
the Act, 12 U.S.C. § 1813(u), and its successors and assigns, cease and desist
from the following unsafe and unsound banking practices, as more fully set forth
in the Joint FDIC and WDFI Report of Examination (“ROE”) dated February 9,
2009:

    (a)  operating
with management whose policies and practices are detrimental to the Bank and
jeopardize the safety of its deposits;

    (b)  operating
with a board of directors which has failed to provide adequate supervision over
and direction to the active management of the Bank;

    (c)  operating
with inadequate capital in relation to the kind and quality of assets held by
the Bank;

    (d)  operating
with an inadequate loan valuation reserve;

    (e)  operating
with a large volume of poor quality loans and securities;

    (f)  engaging
in unsatisfactory lending and collection practices;

    (g)  operating
with inadequate procedures for valuing and pricing collateral debt obligation
investments;

    (h)  operating
with inadequate provisions for liquidity;

    (i)  operating
in such a manner as to produce operating losses;

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    
    

     

    
      	
               -3-

            

    

     

    (j)  operating
in violation of section 337.3(c)(2) of the FDIC’s Rules and Regulations, 12
C.F.R. § 337.3(c)(2); and section 215.4(e) of Regulation O of the Board of
Governors of the Federal Reserve System, 12 C.F.R. §§ 215.4(e), made applicable
to state nonmember institutions by section 18(j)(2) of the Act, 12 U.S.C. §
1828(j)(2), as more fully set forth in the ROE dated February 9, 2009;
and

    (k)  operating
in contravention of the Interagency Policy Statement on the Allowance for Loan
and Lease Losses dated December 13, 2006, as more fully set forth in the ROE
dated February 9, 2009.

    IT IS FURTHER ORDERED, that the Bank,
its institution-affiliated parties, and its successors and assigns, take
affirmative action as follows:

    1.            
The Bank
shall have and retain qualified management.

    (a)   Each
member of management shall have qualifications and experience commensurate with
his or her duties and responsibilities at the Bank.  Each member of
management shall be provided appropriate written authority from the Bank's Board
to implement the provisions of this ORDER.

    (b)   The
qualifications of management shall be assessed on its ability to:

    (i)       
comply
with the requirements of this ORDER;

    (ii)      
operate
the Bank in a safe and sound manner;

    (iii)  comply
with applicable laws and regulations; and

    (iv)  restore
all aspects of the Bank to a safe and sound condition, including asset quality,
capital adequacy, earnings, management effectiveness, liquidity, and sensitivity
to market risk.

     

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    
    

     

    
      	
               -4-

            

    

     

    (c)   During
the life of this ORDER, the Bank shall notify the Regional Director of the
FDIC’s San Francisco Regional Office (“Regional Director”) and the Director of
Banks of the Washington Department of Financial Institutions ("Director") in
writing when it proposes to add any individual to the Bank's Board or employ any
individual as a senior executive officer.  The notification must be
received at least 30 days before such addition or employment is intended to
become effective and should include a description of the background and
experience of the individual or individuals to be added or
employed.

    (d)           The
Bank shall not pay executive management bonuses without the prior written
consent of the Regional Director and Director.  The term “Executive
Management” is as defined in the Federal Reserve Board’s Regulation
O.

    2.   Within 30
days from the effective date of this ORDER, the Bank’s Board shall increase its
participation in the affairs of the Bank, assuming full responsibility for the
approval of sound policies and objectives and for the supervision of all of the
Bank's activities, consistent with the role and expertise commonly expected for
directors of banks of comparable size.  This participation shall
include meetings to be held no less frequently than monthly at which, at a
minimum, the following areas shall be reviewed and approved: reports of income
and expenses; new, overdue, renewal, insider, charged-off, and recovered loans;
investment activity; operating policies; and individual committee
actions.  The Bank’s Board minutes shall document these reviews and
approvals, including the names of any dissenting directors.

    3.   (a)           Within
60 days of the effective date of this ORDER, the Bank shall increase and
thereafter maintain Tier 1 capital in such an amount as to equal or exceed 10
percent of the Bank’s total assets.

     

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    
       

      
        	
                 -5-

              

      

    

     

    (b)  Within 60
days from the effective date of this ORDER, the Bank shall develop and adopt a
plan to meet and thereafter maintain the minimum risk-based capital requirements
as described in the FDIC’s Statement of Policy on Risk-Based Capital contained
in Appendix A to Part 325 of the FDIC’s Rules and Regulations, 12 C.F.R. Part
325, Appendix A.  The Plan shall be in a form and manner acceptable to
the Regional Director and Director as determined at subsequent
examinations.

    (c)  The level
of Tier 1 capital to be maintained during the life of this ORDER pursuant to
Subparagraph 3(a) shall be in addition to a fully funded allowance for loan and
lease losses (“ALLL”), the adequacy of which shall be satisfactory to the
Regional Director and the Director as determined at subsequent examinations
and/or visitations.

    (d)      For the
purpose of this Order, the terms “Tier 1 capital” and “total assets” shall have
the meaning as described to them in Part 325 of the FDIC’s Rules and
Regulations, 12 C.F.R. § 325.2(v) and 325.2(x).

    4.             (a)      Within
30 days from the effective date of this ORDER, the Bank shall maintain the ALLL
at an adequate level commensurate with the risk in the loan
portfolio.

    (b)  Additionally,
within 30 days from the effective date of this ORDER, the Bank’s Board shall
develop or revise, adopt and implement a comprehensive policy for determining
the adequacy of the ALLL.  For the purpose of this determination, the
adequacy of the reserve shall be determined after the charge-off of all loans or
other credit-related items classified "Loss" in the Joint ROE dated February 9,
2009.  The policy shall provide for a review of the ALLL at least once
each calendar quarter.  Said review should be completed in order that
the findings of the Bank’s Board with respect to the ALLL may be properly
reported in the quarterly Reports of Condition and Income. The review should
focus on the results of the Bank's internal loan review, 

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

       

      
         

        
          	
                  -6- 

                

        

         

      

      loan loss
experience, trends of delinquent and non-accrual loans, an estimate of potential
loss exposure of significant credits, concentrations of credit, and present and
prospective economic conditions.  A deficiency in the ALLL shall be
remedied in the calendar quarter it is discovered, prior to submitting the
Report of Condition, by a charge to current operating earnings.  The
minutes of the Bank’s Board meeting at which such review is undertaken shall
indicate the results of the review.  Upon completion of the review,
the Bank shall maintain its ALLL consistent with the ALLL policy
established.  Such policy and its implementation shall be satisfactory
to the Regional Director and the Director as determined at subsequent
examinations and/or visitations.

    

    5.            
(a)           Within
30 days from the effective date of this ORDER, the Bank shall eliminate from its
books, by charge-off or collection, all assets classified "Loss" and one-half of
the loans classified "Doubtful" in the ROE dated February 9, 2009 that have not
been previously collected or charged off.  Elimination of these assets
through proceeds of other loans made by the Bank is not considered collection
for the purpose of this paragraph.

    (b)   Within
120 days from the effective date of this ORDER, the Bank shall have reduced the
loans classified “Substandard” and the loans classified as "Doubtful" in the ROE
dated February 9, 2009 that have not previously been charged off to not more
than 50 percent of Tier 1 capital plus the ALLL.

    (c)   The
requirements of Subparagraphs 5(a) and 5(b) of this ORDER are not to be
construed as standards for future operations and, in addition to the foregoing,
the Bank shall eventually reduce the total of all adversely classified
assets.  Reduction of these assets through proceeds of other loans
made by the Bank is not considered collection for the purpose of this
paragraph.  As used in this paragraph the word "reduce"
means:

     

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    
       

      
        	
                -7- 

              

      

      (i)     
 to
collect;

    

    (ii)  to
charge-off; or

    (iii)  to
sufficiently improve the quality of assets adversely classified to warrant
removing any adverse classification, as determined by the FDIC and/or
WDFI.

    (d)   Within 60
days from the effective date of this ORDER, the Bank shall develop written asset
disposition plans for each classified asset identified in the ROE dated February
9, 2009 that is greater than $500,000.  The plans shall be reviewed
and approved by the Bank’s Board and acceptable to the Regional Director and
Director as determined at subsequent examinations.

    6.   (a)         
    Beginning with the effective date of this ORDER, the
Bank shall not extend, directly or indirectly, any additional credit to, or for
the benefit of, any borrower who has a loan or other extension of credit from
the Bank that has been charged off or classified, in whole or in part, "Loss"
and is uncollected.  Subparagraph 6(a) of this ORDER shall not
prohibit the Bank from renewing or extending the maturity of any credit in
accordance with the Financial Accounting Standards Board Statement Number 15
("FASB 15").

    (b)   Beginning
with the effective date of this ORDER, the Bank shall not extend, directly or
indirectly, any additional credit to, or for the benefit of, any borrower who
has a loan or other extension of credit from the Bank that has been classified,
in whole or part, "Doubtful" without the prior approval of a majority of the
Bank’s Board or the loan committee of the Bank.

    (c)   Beginning with the
effective date of this ORDER, the Bank shall not extend, directly or indirectly,
any additional credit to, or for the benefit of, any borrower who has a loan or
other extension of credit from the Bank that has been classified, in whole or
part, 

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

       

      
         

        
          	
                   -8-

                

        

         

      

       

      "Substandard"
without the prior approval of a majority of the Bank’s Board or the loan
committee of the Bank.

       

    

    (d)   The loan
committee or Bank’s Board shall not approve any extension of credit, or
additional credit to a borrower in Paragraphs (b) and (c) above without first
collecting in cash all past due interest.

    7.   Within 30
days from the effective date of this ORDER, the Bank shall implement accurate
and realistic models for valuing and pricing its collateralized debt obligations
portfolio and recognizing Other-Than-Temporary Impairment (“OTTI”) securities as
described in the Joint ROE dated February 9, 2009.  The model(s)
utilized for quarterly determinations of impairment charges and investment
pricing and securities valuation shall adhere to Generally Accepted Accounting
Principles (“GAAP”) and appropriate practices applied to such
securities.  The analysis and assumptions shall be satisfactory to the
Regional Director and the Director consistent with GAAP, as determined at
subsequent examinations and/or visitations.

    8.   Within 60 days of the
effective date of this ORDER, the Bank shall develop and submit to the Regional
Director and the Director a written three-year strategic plan.  Such
plan shall include specific goals for the dollar volume of total loans, total
investment securities, and total deposits as of December 31, 2010, December 31,
2011, and December 31, 2012.  For each time frame, the plan will also
specify the anticipated average maturity and average yield on loans and
securities; the average maturity and average cost of deposits; the level of
earning assets as a percentage of total assets; and the ratio of net interest
income to average earning assets.  The plan shall be in a form and
manner acceptable to the Regional Director and the Director as determined at
subsequent examinations and/or visitations.

     

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    
       

      
        	
                 -9-

              

      

       

      9.   Within 60
days from the effective date of this ORDER, the Bank shall formulate and
implement a written profit plan.  This plan shall be forwarded to the
Regional Director and the Director for review and comment and shall address, at
a minimum, the following:

    

    (a)   goals and
strategies for improving and sustaining the earnings of the Bank,
including:

    (i)   an
identification of the major areas in, and means by which, the Bank’s Board will
seek to improve the Bank's operating performance;

    (ii)   realistic
and comprehensive budgets;

    (iii)   a budget
review process to monitor the income and expenses of the Bank to compare actual
figures with budgetary projections; and

    (iv)   a
description of the operating assumptions that form the basis for, and adequately
support, major projected income and expense components.

    (b)   coordination
of the Bank's loan, investment, and operating policies, and budget and profit
planning, with the funds management policy.

    10.   Within 30
days from the effective date of this ORDER, the Bank shall eliminate and/or
correct all violations of law and contraventions of policy, as more fully set
forth in the ROE dated February 9, 2009.  In addition, the Bank shall
take all necessary steps to ensure future compliance with all applicable laws
and regulations.

    11.   Within 30
days from the effective date of this ORDER, the Bank’s Board shall revise, adopt
and fully implement a written liquidity and funds management policy which
includes a contingency plan detailing the actions to be implemented under
various liquidity scenarios.  Such policy shall include specific
provisions to provide for a minimum primary liquidity ratio (net cash,
short-term, and marketable assets divided by net deposits and short-term

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

       

      
         

        
          	
                  -10- 

                

        

         

      

      liabilities)
of at least 15 percent and a plan for achieving and maintaining the minimum
primary liquidity ratio.  The policy and plan for achieving the
minimum primary liquidity ratio shall be in a form and manner acceptable to the
Regional Director and Director of Bank’s as determined at subsequent
examinations and/or visitations.

    

    12.   (a)           Within
10 days of the effective date of this ORDER, the Bank shall submit to the
Regional Director and the Director a written plan for eliminating its reliance
on brokered deposits.  The plan should contain details as to the
current composition of brokered deposits by maturity and explain the means by
which such deposits will be paid or rolled over.  The Regional
Director and the Director shall have the right to reject the Bank's
plan.  On the 10th day of each month, the Bank shall provide a written
progress report to the Regional Director and the Director detailing the level,
source, and use of brokered deposits with specific reference to progress under
the Bank's plan.  For purposes of this ORDER, brokered deposits are
defined as described in section 337.6(a)(2) of the FDIC’s Rules and Regulations
to include any deposits funded by third party agents or nominees for depositors,
including deposits managed by a trustee or custodian when each individual
beneficial interest is entitled to or asserts a right to federal deposit
insurance.

    (b)           Within
10 days of the effective date of this ORDER, the Bank shall certify in writing
to the Regional Director and the Director that the pricing of all of the Bank’s
deposit products is in compliance with the interest rate limitations in section
337.6 of the FDIC’s Rules and Regulations.  Such written certification
should accompany data analysis adequate to support Bank’s
conclusion.  Thereafter, the Bank shall make such certification and
data available for the review of the Regional Director and the Director as
requested at subsequent examinations and/or visitations.

     

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    
      
        	
                 -11-

              

      

       

    

    13.   The Bank
shall not pay cash dividends without the prior written consent of the Regional
Director and the Director.

    14.   Within 30
days of the end of the first quarter, following the effective date of this
ORDER, and within 30 days of the end of each quarter thereafter, the Bank shall
furnish written progress reports to the Regional Director and the Director
detailing the form and manner of any actions taken to secure compliance with
this ORDER and the results thereof.  Such reports shall include a copy
of the Bank's Report of Condition and the Bank's Report of
Income.  Such reports may be discontinued when the corrections
required by this ORDER have been accomplished and the Regional Director and the
Director have released the Bank in writing from making further
reports.

    15.   Following
the effective date of this ORDER, the Bank shall send to its shareholder(s) or
otherwise furnish a description of this ORDER in conjunction with the Bank's
next shareholder communication and also in conjunction with its notice or proxy
statement preceding the Bank's next shareholder meeting.  The
description shall fully describe the ORDER in all material
respects.  The description and any accompanying communication,
statement, or notice shall be sent to the FDIC, Accounting and Securities
Section, Washington, D.C. 20429, at least 15 days prior to dissemination to
shareholders.  Any changes requested to be made by the FDIC shall be
made prior to dissemination of the description, communication, notice, or
statement.

    
    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    
       

      
        	
                 -12-

              

      

       

    

          
This ORDER will become effective upon its issuance by the FDIC and the
WDFI.  The provisions of this ORDER shall remain effective and
enforceable except to the extent that, and until such time as, any provisions of
this ORDER shall have been modified, terminated, suspended, or set aside by the
FDIC and the WDFI.

    Pursuant to delegated
authority.

    Dated at San Francisco, California,
this 30th day of September, 2009.

     

    
    

     

    
      	 	
              /s/J.
      George
      Doerr                                                             
      

            
	 	
              J.
      George Doerr

              Deputy
      Regional Director

              Risk
      Management

              Division
      of Supervision and Consumer Protection

              San
      Francisco Region

              Federal
      Deposit Insurance Corporation 

            
	 	 
	 	 
	 	 
	 	
              

                /s/Brad
      Williamson                                                           
      

              

            
	 	
              Brad
      Williamson

              Director
      of Banks

              Washington
      Department of Financial
Institutions

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