This excerpt taken from the CHK DEF 14A filed Apr 28, 2006.
Tom L. Ward
On February 9, 2006, Tom L. Ward, our former President and Chief Operating Officer and a co-founder of the Company, resigned as a director, officer and employee of the Company. Our Board of Directors accepted Mr. Wards resignation effective February 10, 2006 and approved a proposed resignation agreement with Mr. Ward in recognition of his significant contributions to the Company, his participation in the founding and success of the Company and his agreement to assist in the transition of his duties for a six-month period after his resignation. The Board authorized Mr. McClendon to complete negotiations of the agreement with Mr. Ward. Mr. Wards resignation agreement was included as Exhibit 10.2.5 of our current report on Form 8-K filed with the Securities and Exchange Commission on February 15, 2006. Upon his resignation, his employment agreement with the Company, which provided for Mr. Wards full-time employment as Chesapeakes President and Chief Operating Officer and was substantially identical to Mr. McClendons employment agreement described above, terminated.
The resignation agreement provided for Mr. Wards resignation from his employment and directorship with Chesapeake and his positions as an officer, director and/or manager of any Chesapeake subsidiary. In addition, Mr. Ward agreed to act as a consultant to Chesapeake for a period of six months from the effective date of the resignation agreement (the Consulting Period) to assist in the transition of his responsibilities.
During the Consulting Period, Mr. Ward receives no cash compensation but the Company provides him support staff for personal administrative and accounting services and the use of the fractional ownership interests of the Companys aircraft in accordance with historical practices. Mr. Ward is permitted by the resignation agreement to employ support staff personnel that report directly to him.
The resignation agreement further provided for the immediate vesting of all of Mr. Wards unvested stock options and restricted stock on February 10, 2006. As a result of such vesting, options to purchase 724,615 shares of Chesapeakes common stock at an average exercise price of $8.01 per share and 1,291,875 shares of restricted common stock became immediately vested. The estimated Black-Scholes value of these stock options was approximately $15.7 million and the fair market value of the previously restricted common stock was approximately $38.3 million as of February 10, 2006. Mr. Ward exercised all of his outstanding stock options to purchase 7,815,808 shares of common stock on March 14, 2006.
The resignation agreement requires Mr. Ward to notify the Company if he acquires or enters into an agreement to acquire, directly or indirectly, any oil and gas interest or business that violates his employment agreement. If he should acquire a company or package of properties that includes interests covered by the non-competition provisions of his employment agreement and the allocated value of such interests is less than 25% of the total purchase price, the Companys sole remedy will be the right to purchase the interests at Mr. Wards cost. The resignation agreement also included a release of claims by Mr. Ward and the Company and indemnification by Mr. Ward.