Factbox: The evolution of Chesapeake CEO's contract: excerpts

Tue May 8, 2012 2:29pm EDT

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(Reuters) - Chesapeake Energy CEO Aubrey McClendon's work contract has been revised or re-issued nearly a dozen times over the past 15 years, including several changes that granted him progressively greater leeway to engage in business ventures outside of the company, according to a review of the company's filings.

The current iteration of his multi-year contract, in effect since January 2009 and revised only once, in March of that year, included a new section that spelled out a range of permissible and impermissible activities in far greater detail than before, including a ban on owning or running a hedge fund. It also gave him explicit approval to trade commodities.

The following are verbatim sections of text extracted from his work contracts as filed with the Securities Exchange Commission (SEC) in chronological order, prefaced by a short explanation of relevant changes between versions. A short timeline of the dates for his contracts appears thereafter.

July 1, 1997 - First contract text available.

** TEXT: "Other Activities. Except for the activities (the 'Permitted Activities') expressly permitted by paragraphs 3.1 and 3.2 of this Agreement, or the prior written approval of the board of directors of the Company, the Executive will not: (a) engage in business independent of the Executive's employment by the Company which requires any substantial portion of the Executive's time; (b) serve as an officer, general partner or member in any corporation, partnership, company, or firm; (c) directly or indirectly invest in, participate in or acquire an interest in any oil and gas business, including, without limitation, (i) producing oil and gas, (ii) drilling, owning or operating oil and gas leases or wells, (iii) providing services or materials to the oil and gas industry, (iv) marketing or refining oil or gas, or (v) owning any interest in any corporation, partnership, company or entity which conducts any of the foregoing activities. The limitation in this paragraph 3 will not prohibit an investment by the Executive in publicly traded securities. Notwithstanding the foregoing, the Executive will be permitted to participate in the following activities which will be deemed to be approved by the Company, if such activities are undertaken in strict compliance with this Agreement."

July 1, 2001 -- Revises (b) to limit ban on holding office to 'public' enterprises (previously stated as 'any corporation, partnership, company or firm'); adds (c) to state executive may serve as general partner or member of any enterprise so long as it is a 'passive investment' that involves 'minimal' time.

** TEXT: "Other Activities. Except for the activities (the 'Permitted Activities') expressly permitted by paragraphs 3.1 and 3.2 of this Agreement or approved by the board of directors of the Company, the Executive will not: (a) engage in business independent of the Executive's employment by the Company which requires any substantial portion of the Executive's time; (b) serve as an officer or director of any public corporation, partnership, company, or firm; (c) except for passive investments that do not violate this Agreement and require a minimal portion of the Executive's time, serve as a general partner or member of any corporation, partnership, company or firm; or (d)..."

July 1, 2005 -- Changes (b) to bar holding office in "any publicly held entity" (previously said "any public corporation, partnership, company, or firm"); removes (c) barring activity with non-public enterprises; adds new text at end of section making clear that other business activities are permissible.

** TEXT: "Other Activities. Except for the activities (the 'Permitted Activities') permitted under paragraphs 3.1, 3.2 and 3.3 of this Agreement or approved by the Board of Directors, the Executive will not: (a) engage in activities which require such substantial services on the part of the Executive that the Executive is unable to perform the duties assigned to the Executive in accordance with this Agreement; (b) serve as an officer or director of any publicly held entity; (c)...

"The Executive is not restricted from maintaining or making investments, or engaging in other businesses, enterprises or civic, charitable or public service functions if such activities, investments, businesses or enterprises do not result in a violation of clauses (a) through (c) of this paragraph 3."

December 31, 2008 - No change in introductory text for Section 3. New sub-section 3.4 added in entirety.

** TEXT: 3.4 - "Non Active Investments. The foregoing restriction in clause (c) of this paragraph 3 will not prohibit the following activities by the Executive or the Executive's affiliates: (a) an investment in the securities of a publicly listed company; (b) investment or trading in commodities, currencies, financial instruments or other derivatives (including, without implied limitation, short positions, long positions or positions in options) whether on an exchange, by private contract or in the over the counter market; (c) an investment in non public entities which own de minimis passive interests in E&P Activities (as hereafter defined) which are incidental to such entity's primary non E&P business activity; and (d) an investment in an investment fund, hedge fund, limited partnership or other passive investment entity (i) which does not actively engage in E&P Activities; and (ii) for which the Executive does not directly or indirectly provide input, advice or management to such entity, the sponsor of such entity or any portfolio company of such entity. For purposes of this Agreement the term E&P Activities means the specific activities listed in sub clauses (i) or (ii) of clause (c) of paragraph 3 of this Agreement."

FULL HISTORY OF EMPLOYMENT CONTRACTS and revisions as they are described in Chesapeake's SEC filings, listed in order in which they came into effect:

July 1, 1995: Employment Agreement dated as of July 1, 1995 between Aubrey K. McClendon and Chesapeake Energy Corporation. Incorporated herein by reference to Exhibit 10.2.1 to Registrant's quarterly report on Form 10-Q for the quarter ended September 30, 1995. ** No text available **

July 1, 1997: Employment Agreement dated as of July 1, 1997 between Aubrey K. McClendon and Chesapeake Energy Corporation.

* Link: here

July 1, 1998: Amended and Restated Employment Agreement dated July 1, 1998 between Aubrey K. McClendon and Chesapeake Energy Corporation.

Changes to Section 3 introduction from previous contract: nil

Link: here

December 31, 1998: First Amendment to the Amended and Restated Employment Agreement dated as of December 31, 1998 between Aubrey K. McClendon and Chesapeake Energy Corporation. Incorporated herein by reference to Exhibit 10.2.1 to Registrant's quarterly report on Form 10-Q for the quarter ended June 30, 1999.

Changes to Section 3 introduction from previous contract: no text provided, stated revisions only applied to section 3.1 covering

Link: here

July 1, 2001: Second Amended and Restated Employment Agreement dated as of July 1, 2001, between Aubrey K. McClendon and Chesapeake Energy Corporation. Incorporated herein by reference to Exhibit 4.7 to Chesapeake's quarterly report on Form 10-Q for the quarter ended September 30, 2001.

Changes to Section 3 introduction from previous contract: revises (b) to limit ban on holding office to "public" enterprises (previously stated as "any corporation, partnership, company or firm"; adds (c) state executive may serve as general partner or member of any enterprise so long as it is a "passive investment" that involves "minimal" time.

Link: here

January 1, 2004: Third Amended and Restated Employment Agreement dated as of January 1, 2004, between Aubrey K. McClendon and Chesapeake Energy Corporation.

Changes to Section 3 introduction from previous contract: nil

Link: here

July 1, 2005: Fourth Amended and Restated Employment Agreement dated as of July 1, 2005, between Aubrey K. McClendon and Chesapeake Energy Corporation. Incorporated herein by reference to Exhibit 10.2.1 to Chesapeake's current report on Form 8-K dated June 16, 2005.

Changes to Section 3 introduction from previous contract: changes (b) to bar holding office in "any publicly held entity" (previously said "any public corporation, partnership, company, or firm"); removes (c) barring activity with non-public enterprises.

Link: here

July 1, 2006: Fifth Amended and Restated Employment Agreement dated as of July 1, 2006, between Aubrey K. McClendon and Chesapeake. Incorporated herein by reference to Exhibit 10.2.1 to Chesapeake's current report on Form 8-K filed June 15, 2006.

Changes to Section 3 introduction from previous contract: nil

Link: here

January 1, 2007: Sixth Amended and Restated Employment Agreement dated as of January 1, 2007, between Aubrey K. McClendon and Chesapeake Energy Corporation. Incorporated herein by reference to Exhibit 10.2.1 to Chesapeake's current report on Form 8-K dated December 20, 2006.

Changes to Section 3 introduction from previous contract: nil

Link: here

Oct 1, 2007 -- No description available.

Changes to Section 3 introduction from previous contract: nil

Link: here

January 1, 2008: Employment Agreement dated as of January 1, 2008, between Aubrey K. McClendon and Chesapeake Energy Corporation.

Changes to Section 3 introduction from previous contract: nil.

Link: here

December 31, 2008: Employment Agreement dated as of December 31, 2008, between Aubrey K. McClendon and Chesapeake Energy Corporation.

Changes to Section 3 introduction from previous contract: nil; new sub-section 3.4 added in entirety.

Link: here

Other Activities. Except for the activities (the "Permitted Activities") permitted under this paragraph or approved by the Board of Directors, the Executive will not: (a) engage in activities which require such substantial services on the part of the Executive that the Executive is unable to perform the duties assigned to the Executive in accordance with this Agreement; (b) serve as an officer or director of any publicly held entity; or (c) directly or indirectly invest in, participate in or acquire an interest in any oil and gas business, including, without limitation...

NEW SECTION: 3.4 -- Non Active Investments. The foregoing restriction in clause (c) of this paragraph 3 will not prohibit the following activities by the Executive or the Executive's affiliates: (a) an investment in the securities of a publicly listed company; (b) investment or trading in commodities, currencies, financial instruments or other derivatives (including, without implied limitation, short positions, long positions or positions in options) whether on an exchange, by private contract or in the over the counter market; (c) an investment in non public entities which own de minimis passive interests in E&P Activities (as hereafter defined) which are incidental to such entity's primary non E&P business activity; and (d) an investment in an investment fund, hedge fund, limited partnership or other passive investment entity (i) which does not actively engage in E&P Activities; and (ii) for which the Executive does not directly or indirectly provide input, advice or management to such entity, the sponsor of such entity or any portfolio company of such entity. For purposes of this Agreement the term E&P Activities means the specific activities listed in sub clauses (i) or (ii) of clause (c) of paragraph 3 of this Agreement.

March 1, 2009: Employment Agreement dated as of March 1, 2009, between Aubrey K. McClendon and Chesapeake Energy Corporation.

Changes to Section 3 introduction from previous contract: nil

(Reporting by Jonathan Leff; Editing by Prudence Crowther)

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