Chesapeake Energy 1997 Annual Report Download - page 82

working interest participation in a well may not exceed 1%. Messrs. McClendon, Ward and Rowland may not
participate in any well in which their combined working interests cause the Company's working interest to be
reduced to less than 12.5%. Mr. Rowland agrees to hold shares of the Company's Common Stock having an
aggregate investment value equal to 100% of his annual base salary and bonus during each calendar year for
the term of the agreement.
Messrs. McClendon, Ward and Rowland have agreed that they will not engage in oil and gas operations
individually except pursuant to the aforementioned participation in Company wells and as a result of
subsequent operations on properties owned by them or their affiliates as of July 1, 1995 or acquired from the
Company with respect to Messrs. McClendon and Ward and as of March 1, 1993 with respect to
Mr. Rowland.
The Company also has employment agreements with Messrs. Dixon, Lester and Hood. These agreements
have a term of three years from July 1, 1997, with annual base salaries of $175,000 for Mr. Dixon, $160,000
for Mr. Lester and $155,000 for Mr. Hood for the term of their agreements. The agreements require each of
them to acquire and continue to hold shares of the Company's Common Stock having an annual aggregate
investment value equal to 15% for Messrs. Dixon and Lester and 10% for Mr. Hood of the annual base salary
and bonus compensation paid to them under their respective agreements.
The Company may terminate any of the employment agreements with its executive officers at any time
without cause; however, upon such termination Messrs. McClendon, Ward and Rowland are entitled to
continue to receive salary and benefits for the balance of the contract term. Messrs. Dixon, Hood and Lester
are entitled to 90 days compensation and benefits. Each of the employment agreements for Messrs.
McClendon, Ward and Rowland further states that if, during the term of the agreement, there is a change of
control and within one year (i) the agreement expires and is not extended; (ii) the executive officer is
terminated other than for cause, death or incapacity; or (iii) the executive resigns as a result of a reassignment
of duties inconsistent with his position or a reduction in his compensation, then the executive officer will be
entitled to a severance payment in an amount equal to 36 months of base salary compensation. Change of
control is defined in these agreements to include (x) an event which results in a person acquiring beneficial
ownership of securities having 35% or more of the voting power of the Company's outstanding voting
securities, or (y) within two years of a tender offer or exchange offer for the voting stock of the Company or as
a result of a merger, consolidation, sale of assets or contested election, a majority of the members of the
Company's Board of Directors is replaced by directors who were not nominated and approved by the Board of
Directors.
Directors' Compensation
During fiscal year 1997, each director who was not an officer of the Company received $2,500 for each
regular meeting of the Board attended, up to a maximum of $10,000 during the year. Beginning in fiscal 1998,
directors who are not officers of the Company will receive an annual retainer of $10,000, payable quarterly,
and $1,250 for each meeting of the Board attended. Directors are reimbursed for travel and other expenses.
Officers who also serve as directors do not receive fees for serving as directors.
During fiscal year 1997, each director who was not an officer of the Company was granted an option for
20,000 shares (10,000 shares pre-split) at an exercise price of $30.63 ($61.25 pre-split) per share under the
Company's 1992 Nonstatutory Stock Option Plan (the "1992 NSO Plan"). During fiscal year 1998, each
director who is not an officer will receive ten-year non-qualified options under the 1992 NSO Plan to purchase
15,000 shares of Common Stock, options for 3,750 shares granted on the first day of each quarter, at an
exercise price equal to the market price on the date of grant.
Compensation Committee Interlocks and Insider Participation
During fiscal 1997, the Compensation Committee was composed of Aubrey K. McClendon, Tom L.
Ward, E.F. Heizer, Jr. and Frederick B. Whittemore. Mr. McClendon is Chairman of the Board and Chief
Executive Officer of the Company. Mr. Ward is the Company's President and Chief Operating Officer.
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