UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM 8-K

 

 

CURRENT REPORT

Pursuant to Section 13 or 15(d)

of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): December 20, 2019

 

 

CHAPARRAL ENERGY, INC.

(Exact name of registrant as specified in its charter)

 

 

 

Delaware   001-38602   73-1590941

(State or other jurisdiction

of incorporation)

 

(Commission

File Number)

 

(I.R.S. Employer

Identification No.)

701 Cedar Lake Boulevard

Oklahoma City, OK

  73114
(Address of principal executive offices)   (Zip Code)

Registrant’s telephone number, including area code: (405) 478-8770

Not Applicable

(Former name or former address, if changed since last report.)

 

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Securities Registered pursuant to Section 12(b) of the Act:

 

Title of each class

 

Ticker

symbol(s)

 

Name of each exchange

on which registered

Class A common stock, par value $0.01 per share   CHAP   The New York Stock Exchange

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company  ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐

 

 

 


Introductory Note

Amended Support Agreements

On December 20, 2019 (the “Effective Time”), Chaparral Energy, Inc. (the “Company”) entered into an Amended and Restated Support Agreement with Strategic Value Partners, LLC (“SVP”) and certain investment funds directly and indirectly managed by SVP (the “Amended SVP Agreement”).

At the Effective Time, the Company also entered into an Amended and Restated Support Agreement with Contrarian Capital Management, L.L.C. (“Contrarian”) and certain private investment funds directly and indirectly managed by Contrarian (the “Amended Contrarian Agreement”).

Appointment of New Chief Executive Officer and President

As contemplated by the Amended SVP Agreement, Charles Duginski was appointed to be the Company’s Chief Executive Officer and President at the Effective Time. This executive transition is being made in connection with the departure of K. Earl Reynolds as Chief Executive Officer and President.

Change in Board Composition

The size of the Board was increased from seven to eight directors as of the Effective Time. Mr. Duginski was appointed to the Board to fill the new directorship created by the increase in the size of the Board.

At the same time, K. Earl Reynolds and Matthew D. Cabell resigned as directors. Pursuant to the Amended SVP Agreement, the number of individuals that SVP was entitled to designate to serve on the Company’s Board of Directors (the “Board”) increased from one to two (each, an “SVP Designee”). As of the Effective Time, SVP informed the Company that Michael Kuharski and Mark “Mac” McFarland would serve as the SVP Designees, replacing Marc Rowland in that role. Accordingly, Mr. Kuharski and Mr. McFarland were appointed as directors to fill the vacancies created by the resignations of Mr. Reynolds and Mr. Cabell. Even though Mr. Rowland is no longer serving on the Board as an SVP Designee, Mr. Rowland will remain on the Board, serving as Chairman of the Board.

Pursuant to the Amended Contrarian Agreement, Contrarian is no longer entitled to designate anyone for members on the Board.

Second Amended and Restated Bylaws

In connection with the Amended Support Agreements, the Board amended and restated the Company’s Amended and Restated Bylaws to create a position of Designated Independent Director and appointed Kenneth W. Moore, an existing director, to serve in that role. The amendment and restatement also modified the process for calling special meetings of stockholders.

 

Item 1.01.

Entry into a Material Definitive Agreement

Amended SVP Agreement. The description in Item 5.02 of the Amended SVP Agreement provided under the heading “Amended and Restated Support Agreement with SVP” (including the related indemnification agreements for the SVP Designees) is incorporated by reference into this Item 1.01.

Amended Contrarian Agreement. The description in Item 5.02 of the Amended Contrarian Agreement provided under the heading “Amended and Restated Support Agreement with Contrarian,” is incorporated by reference into this Item 1.01.

Duginski Employment Agreement and Grant Agreements. The description in Item 5.02 of Mr. Duginski’s employment agreement (including the related indemnification agreement, equity award grant agreements and cash incentive grant agreements) provided under the heading “Duginski Employment Agreement,” is incorporated by reference into this Item 1.01.

 

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Reynolds Separation Agreement. The description in Item 5.02 of Mr. Reynolds’ separation and release agreement provided under the heading “Reynolds Separation Agreement ” is incorporated by reference into this Item 1.01.

 

Item 1.02

Termination of a Material Definitive Agreement.

The information set forth in Item 5.02 below regarding the termination of the Amended and Restated Employment Agreement, dated as of March 17, 2017, by and among of K. Earl Reynolds, the Company and Chaparral Energy, L.L.C. (the “Reynolds Employment Agreement”) is incorporated by reference into this Item 1.02.

 

Item 5.02

Departure of Directors or Principal Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.

Amended and Restated Support Agreement with SVP

On June 6, 2018, the Company entered into a Support Agreement with SVP (the “Original SVP Support Agreement”). At the time the Original SVP Support Agreement was signed, SVP and its affiliated entities beneficially owned approximately 16.8% of the issued and outstanding shares of common stock of the Company. David Geenberg, co-head of SVP’s North American investment team, was originally designated as the SVP Designee. Effective as of March 11, 2019, Mr. Geenberg resigned from the Board, and SVP appointed Marc Rowland, who was not an officer or employee of SVP, to serve as the SVP Designee on the Board. Through a series of open market purchases of common stock from March 18, 2019 until July 17, 2019, SVP and its affiliated entities increased their ownership in the Company to approximately 30% of the issued and outstanding shares of common stock.

As a result of this increase in SVP’s ownership position in the Company, the Company and SVP have discussed amending the Original SVP Support Agreement to, among other things, increase SVP’s representation on the Board and provide for a change in the Company’s Chief Executive Officer. On December 20, 2019, the Company and SVP entered into the Amended SVP Agreement, which, among other things, increased the number of SVP Designees from one to two. Furthermore, the Company agreed that Mr. Rowland would remain on the Board, even though he no longer serves an SVP Designee.

Pursuant to the Amended SVP Agreement, the following actions were taken at the Effective Time. The taking of each of these actions was a condition to SVP’s agreeing to the terms and obligations set forth in the Amended SVP Agreement:

 

   

the authorized number of directors on the Board was increased from seven to eight;

 

   

Mr. Reynolds, the Company’s Chief Executive Officer, President and director, resigned from such positions;

 

   

Mr. Cabell resigned as a director, as well as Chairman of the Compensation Committee of the Board (the “Compensation Committee”) and a member of the Nominating and Governance Committee of the Board (the “Nominating and Governance Committee”);

 

   

Mr. Rowland ceased to be an SVP Designee and became instead a mutually-designated independent director (the “Mutual Independent Director”);

 

   

Mr. Rowland was appointed Chairman of the Board. (Mr. Rowland had been appointed Chairman of the Board on an interim basis in July 2019, but, as a result of the Board’s action at the Effective Time, Mr. Rowland no longer serves on an interim basis);

 

   

SVP designated Michael Kuharski and Mark “Mac” McFarland as SVP Designees, and those two SVP Designees were appointed to the Board to fill the vacancies created by the resignations of Mr. Reynolds and Mr. Cabell;

 

   

Mr. McFarland was appointed as a member of the Compensation Committee;

 

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Mr. Kuharski was appointed as a member of the Nominating and Governance Committee, filling the role that had been previously filled by Mr. Rowland; and

 

   

Mr. Duginski was appointed Chief Executive Officer and President of the Company and was also appointed as a director to fill the new directorship created by the increase in the number of authorized directors on the Board.

Information about the SVP Designees. Mr. Kuharski (age 35) is a Director on the North American Investment Team of SVP. Prior to joining SVP in September 2017, Mr. Kuharski was an Investment Analyst at Eton Park Capital Management beginning in March 2014, where he worked with the US Fundamental Team focused on investing across the capital structure in a range of different industries. From August 2012 to March 2014, Mr. Kuharski was an Analyst in Public Equities at York Capital Management. He was with KKR & Co. in the Private Equity Group from 2008 to 2010 and with Merrill Lynch in the Mergers & Acquisitions Group from 2006 to 2008. He received Bachelor of Arts degrees in both Finance and Economics from the University of St. Thomas and an MBA from Harvard Business School.

Mr. McFarland (age 50) is the Executive Chairman of the Board of Directors of GenOn Energy, Inc. (“GenOn”). Mr. McFarland has more than 25 years of experience and has held numerous executive positions with a broad range of responsibilities including operations, finance, commodity risk management and mergers and acquisitions. Prior to GenOn’s reorganization in 2018, Mr. McFarland served as GenOn’s President and Chief Executive Officer, where he led a strategic separation of the company from its parent, NRG Energy, Inc. through a pre-arranged bankruptcy. Prior to joining GenOn in 2017, Mr. McFarland served as Chief Executive Officer of Luminant Energy Company LLC (“Luminant”), an electric utility, where he oversaw a strategic realignment of the company’s organization. He was also Chief Commercial Officer and Executive Vice President of Luminant from 2008 to 2013. In between his two tenures at Luminant, Mr. McFarland was Chairman of the Board of Directors for the Comanche Peak Development Company. Mr. McFarland was also Senior Vice President of Corporate Development at the Exelon Corporation from 2005 to 2008 and Vice President of the Exelon Generation Power Team from 2003 to 2005. Mr. McFarland is also a director of TerraForm Power, Inc., for which he serves as lead independent director. He received his Bachelor of Science degree in Civil Engineering from Virginia Polytechnic Institute and State University and his MBA from the University of Delaware.

SVP Designees’ Independence. The Board and the Nominating and Governance Committee determined that each of Mr. Kuharski and Mr. McFarland is an “independent director” in accordance with the independence requirements of the Securities and Exchange Commission (the “SEC”) and the New York Stock Exchange (the “NYSE”).

SVP Designees’ Compensation as Directors; Indemnification Agreements. Mr. McFarland will be entitled to receive compensation as a member of the Board in accordance with the non-employee director compensation programs described under “Director Compensation” in the Company’s Amendment No. 1 to Annual Report on Form 10-K/A filed with the SEC on April 29, 2019 (collectively, “Non-Employee Director Compensation Programs”). Except for the Amended SVP Agreement, there are no other awards of compensation, material arrangements or understandings between Mr. McFarland and any other person pursuant to which Mr. McFarland was elected to serve as director that are not described above, and there are no transactions with Mr. McFarland that would be reportable under Item 404(a) of Regulation S-K under the Securities Exchange Act of 1934, as amended (the “Exchange Act”).

In accordance with SVP’s policies, Mr. Kuharski will waive his rights to receive any compensation as a member of the Board and will not participate in any Non-Employee Director Compensation Programs. Except for the Amended SVP Agreement, there are no other awards of compensation, material arrangements or understandings between Mr. Kuharski and any other person pursuant to which Mr. Kuharski was elected to serve as director that are not described above, and there are no transactions with Mr. Kuharski that would be reportable under Item 404(a) of Regulation S-K.

 

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Effective as of the Effective Time, each of Mr. McFarland and Mr. Kuharski entered into an indemnification agreement with the Company in the form previously filed as Exhibit 10.1 to the Company’s Amendment No. 1 to Form 10-K on Form 10-K/A on April 29, 2019, which is incorporated by reference herein.

Conditions to SVP’s Right Designate SVP Designees. If SVP and its affiliated entities cease to beneficially own at least 8% of the Company’s then outstanding shares of common stock (or, if less, 3,719,850 shares) (the “One Director Condition”), then SVP will no longer be entitled to designate any directors. In addition, if SVP or any of its affiliates materially breaches the Amended SVP Agreement and fails to cure such breach, SVP will no longer be entitled to designate any directors. In that circumstance, then the resignations described below for all SVP Designees will become effective at that time, if accepted by the Board.

If SVP and its affiliated entities (i) cease to beneficially own at least 16% of the Company’s then outstanding shares of common stock (or, if less, 7,439,700 shares), but (ii) still satisfy the One Director Condition, then SVP will be entitled to designate one director, but not two directors. In that circumstance, then the resignation described below for one SVP Designee (but not both) will become effective at that time, if accepted by the Board.

In accordance with the Amended SVP Agreement, Mr. Kuharski and Mr. McFarland each provided the Company with an irrevocable resignation letter that will become effective, subject to the Board’s acceptance, upon the occurrence of the events described above relating to SVP’s minimum ownership thresholds or a material breach of the Amended SVP Agreement and failure to cure such breach.

2020 Annual Meeting. Under the Amended SVP Agreement, the Company has agreed to hold the 2020 Annual Meeting no later than May 29, 2019.

Under the Amended SVP Agreement, if, prior to the Company’s 2020 annual meeting of stockholders (the “2020 Annual Meeting”) any independent director who is not affiliated or associated with SVP and who has not ever been an SVP Designee on the Board (each, a “Specified Independent Director”) resigns as a director or informs the Board that he or she will not stand for re-election at the 2020 Annual Meeting, then that director’s replacement must also meet the requirements to be a Specified Independent Director. That replacement will be recommended by the Nominating and Governance Committee for approval by the Board, and the only candidates that the Board may consider will be those candidates recommended by the Nominating and Governance Committee. The Amended SVP Agreement requires that a majority of the Nominating and Governance Committee and a majority of the Compensation Committee consist of Specified Independent Directors.

If, prior to the 2020 Annual Meeting, the Mutual Independent Director resigns as a director or informs the Board that he or she will not stand for re-election at the 2020 Annual Meeting, then that director’s replacement must meet the independence standards of the NYSE and the SEC (but not the Specified Independent Director requirements) and must be consented to by the SVP Designees.

Subject to the procedures described above, the Amended SVP Agreement provides that the Specified Independent Directors and the Mutual Independent Directors (including any replacements appointed as described above), will be nominated to stand for election at the 2020 Annual Meeting.

The Amended SVP Agreement provides that if (i) the Chairman of the Board resigns from that position or as a director and (ii) SVP and its affiliated entities satisfy the One Director Condition, then if the replacement Chairman of the Board must be appointed by a majority of the total number of authorized directors (regardless of how many vacancies then exist) (the “Whole Board”). Furthermore, if SVP and its affiliated entities satisfy the One Director Condition, then a vote of a majority of the Whole Board is required to remove the Chief Executive Officer or to appoint a new Chief Executive Officer.

Standstill and Voting Restrictions under the Amended SVP Agreement. Pursuant to the Amended SVP Agreement, SVP has agreed, at least until end of the standstill period, not to acquire beneficial ownership in excess of 31% of the Company’s issued and outstanding shares of common stock. The Amended SVP Agreement also includes, among other provisions, certain additional standstill and voting commitments by SVP, including a voting commitment that SVP will vote in favor of (i) any director nominees recommended by the Board to the stockholders for election and (ii) other routine matters submitted by the Board to the stockholders for a vote. The standstill period generally expires upon the conclusion of the 2020 Annual Meeting (or, if earlier, 120 days after that each SVP Designee ceases to serve on the Board). However, SVP has agreed that it will not participate in a proxy contest or propose an alternative slate of directors at any time prior to the 90th day after the conclusion of the 2020 Annual Meeting. The Amended SVP Agreement also included a mutual release of certain claims by SVP and the Company.

 

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This description of the Amended SVP Agreement is qualified in its entirety by reference to the full text of the Amended SVP Agreement, which is attached to this Current Report on Form 8-K as Exhibit 99.1 and incorporated by reference herein.

Amended and Restated Support Agreement with Contrarian

On August 8, 2018, the Company entered into a Support Agreement with Contrarian (the “Original Contrarian Support Agreement”), which permitted Contrarian to designate one individual to serve on the Board (the “Contrarian Designee”). At the time the Original Contrarian Support Agreement was signed, Contrarian and its affiliated entities beneficially owned a total of approximately 8.32% of the issued and outstanding shares of the Company’s common stock. Graham Morris was originally designated as the Contrarian Designee. Effective as of March 11, 2019, Mr. Morris resigned from the Board, and Contrarian never subsequently named a replacement Contrarian Designee.

On December 20, 2019, at the Effective Time, the Company entered into the Amended Contrarian Agreement with Contrarian. At the Effective Time, Contrarian informed the Company that Contrarian and its affiliated entities beneficially owned a total of approximately 8.84% of the issued and outstanding shares of the Company’s common stock.

Termination of Contrarian’s Right to Designate Directors. Pursuant to the Amended Contrarian Agreement, Contrarian is no longer entitled to designate anyone to serve on the Board.

Standstill and Voting Restrictions under the Amended SVP Agreement. Pursuant to the Amended Contrarian Agreement, Contrarian has agreed, at least until the conclusion of the 2020 Annual Meeting, not to acquire beneficial ownership in excess of 15% of the Company’s issued and outstanding shares of common stock. The Amended Contrarian Agreement also includes, among other provisions, certain additional standstill and voting commitments by Contrarian, including a voting commitment that Contrarian will vote in favor of (i) any director nominees recommended by the Board to the stockholders for election and (ii) other routine matters submitted by the Board to the stockholders for a vote. The standstill period generally expires upon the conclusion of the 2020 Annual Meeting. However, Contrarian has agreed that it will not participate in a proxy contest or propose an alternative slate of directors at any time prior to the 90th day after the conclusion of the 2020 Annual Meeting. The Amended Contrarian Agreement also included a mutual release of certain claims by Contrarian and the Company.

This description of the Amended Contrarian Agreement is qualified in its entirety by reference to the full text of the Amended Contrarian Agreement, which is attached as Exhibit 99.2 to this Current Report on Form 8-K and incorporated by reference herein.

Chief Executive Officer Transition

At the Effective Time, the Board appointed Charles Duginski as the Company’s Chief Executive Officer and President. This executive transition is being made in connection with the departure of K. Earl Reynolds as Chief Executive Officer and President.

Mr. Duginski (age 48) has more than 25 years of experience in the oil and natural gas industry. Prior to joining Chaparral, he served at Tapstone Energy, LLC (“Tapstone”) as Senior Vice President and Chief Operating Officer from February 2017 to December 2019, and was appointed to the Board of Directors of Tapstone in January 2019. Prior to joining Tapstone, he served as Chief Operating Officer of Echo Energy from July 2016 until February 2017. From October 2013 to June 2016, Mr. Duginski served as Vice President – Southern Region Production of Continental Resources, Inc., where he had operational and technical leadership responsibilities for the Anadarko Basin. From November 2004 until October 2013, Mr. Duginski held various positions at Chesapeake Energy Corporation, including District Manager – Haynesville, then Vice President – Haynesville/Barnett Business Unit. He began his career in technical roles at Mobil Oil and ExxonMobil. Mr. Duginski holds a Bachelor of Science degree in Mechanical Engineering from the University of Oklahoma.

 

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Except for the Amended SVP Agreement, there is no arrangement or understanding between Mr. Duginski and any other person pursuant to which he was appointed as an executive officer or director of the Company, and there are no related party transactions in which Mr. Duginski has an interest requiring disclosure pursuant to Item 404(a) of Regulation S-K. In addition, there is no family relationship between Mr. Duginski and any of the Company’s directors or other executive officers.

Duginski Employment Agreement

Mr. Duginski’s Employment Agreement (the “Duginski Employment Agreement”) became effective at the Effective Time. It is effective through December 20, 2022, after which the term will be automatically extended so as to terminate on December 20, 2024, and subsequently will be automatically extended so as to terminate on each anniversary thereafter. However, if notice of termination is properly given by the Company or Mr. Duginski prior to a renewal date, then the Duginski Employment Agreement will terminate on that renewal date.

Base Salary and Annual Bonus. Pursuant to the Duginski Employment Agreement, Mr. Duginski is entitled to an initial base salary of $525,000 per year, subject to increase (but not decrease) by the Compensation Committee. Mr. Duginski will also be entitled to an annual performance bonus if certain performance criteria are met, with a target of 100% of base salary.

Sign-on Bonus. Mr. Duginski will also receive a $225,000 sign-on bonus, payable in cash in payable in cash in four equal installments within 30 days after the beginning of the first four fiscal quarters immediately following Mr. Duginski’s December 20, 2019 commencement date, subject to Mr. Duginski’s continued employment on the applicable payment date. However, if Mr. Duginski is terminated by the Company for Cause or resigns for any reason other than Good Reason, in each case, prior to the 24-month anniversary of his commencement date, then Mr. Duginski will be required to repay any portion of the sign-on bonus that he received prior to his date of termination (net of any taxes he has paid or is required to pay with respect to the sign-on bonus). Both “Cause” and “Good Reason” are defined in the Duginski Employment Agreement and are summarized below.

Inducement Restricted Stock Grants. As an inducement for Mr. Duginski to join the Company as its Chief Executive Officer and President, Chaparral is granting to Mr. Duginski restricted stock awards (the “Inducement Equity Grants”) that consist of (i) 688,073 time-based restricted common shares that will vest in equal annual installments over three years and (ii) 1,032,110 time- and performance-based restricted common shares (based on achieving 150% of the target grant of 688,073 time- and performance-based shares). Under the terms of the grant agreement for the performance-vesting shares, the number of restricted shares that will become vested (and not forfeited) over the three-year vesting period will range from 0 to 1,032,110 shares (150% of the target grant), depending on the Company’s attainment of the performance measures set forth in that grant agreement. These inducement equity awards will be made outside the terms of Chaparral’s 2019 Long-Term Incentive Plan, in reliance on the exemption under NYSE Listed Company Manual Rule 303A.08.

If, within 18 months after a Change in Control (as defined in the Duginski Employment Agreement), Mr. Duginski is terminated by the Company without Cause or if Mr. Duginski resigns for Good Reason, then 100% of the unvested portion of the Inducement Equity Grants would vest on the termination date, with performance assumed to be achieved at the target performance level. Full vesting also occurs if a Change in the Inducement Equity Grants are not assumed by the acquirer in connection with a Change in Control, regardless of whether a termination of employment occurs.

In the event of a termination of employment as a result of Mr. Duginski’s death or Disability, a termination by the Company without Cause or a termination by Mr. Duginski for Good Reason (other than in connection with a Change in Control, as described above, if applicable), the portion of the Inducement Equity Grants that was scheduled to vest on the next regularly scheduled vesting date immediately following the termination date will vest on the termination date, with performance goals assumed to be achieved at the target performance level.

 

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If Mr. Duginski’s employment is terminated for any reason other than as a result of Mr. Duginski’s death or Disability, by the Company without Cause or by Mr. Duginski with Good Reason (other than in connection with a Change in Control, as described above, if applicable), then Mr. Duginski shall forfeit any unvested portion of the Inducement Equity Grants as of the termination date.

The form of grant agreement for the time-based restricted stock grant is attached to the Duginski Employment Agreement as Exhibit B-1 and is filed as Exhibit 99.5 to this Current Report on Form 8-K. The form of grant agreement for the time- and performance-based restricted stock grant is attached to the Duginski Employment Agreement as Exhibit B-2 and is filed as Exhibit 99.6 to this Current Report on Form 8-K. Each of those forms of grant agreement is incorporated by reference into this description.

Cash Incentive Awards. Mr. Duginski has also been granted cash incentive awards that consist of (i) a $262,500 time-based cash award that will vest in equal annual installments over three years and (ii) a $262,500 time- and performance-based cash award (based on achieving 100% of the target amount). Under the terms of the award agreement for the time- and performance-based cash award, the amount payable (and not forfeited) under that award over the three-year vesting period will range from $0 to $393,750 (150% of the target grant), depending on the Company’s attainment of the performance measures set forth in that award agreement.

The vesting and forfeiture provisions described above for the Inducement Equity Grants apply to the two cash incentive awards described above in substantially the same manner.

The cash incentive award agreement for the time-based cash incentive award is filed as Exhibit 99.7 to this Current Report on Form 8-K. The form of cash incentive award agreement for the time- and performance-based cash incentive award is filed as Exhibit 99.8 to this Current Report on Form 8-K. Each of those cash incentive award agreements is incorporated by reference into this description.

Termination of Employment. If Mr. Duginski is terminated by the Company for Cause or Mr. Duginski terminates his employment other than for Good Reason, the Company will make no further payments under the Duginski Employment Agreement other than the following accrued benefits:

 

   

the base salary to which he is entitled immediately prior to such termination;

 

   

any annual bonus that (x) relates to a completed performance period and (y) has been earned but not yet paid on or prior to Mr. Duginski’s termination date;

 

   

accrued but unpaid vacation pay through Mr. Duginski’s termination date; and

 

   

reimbursement for any unpaid business expenses that are reimbursable in accordance with the Company’s policies.

Should Mr. Duginski be terminated by the Company without Cause or should Mr. Duginski resign for Good Reason, Mr. Duginski will receive his accrued benefits, and subject to Mr. Duginski’s continuing compliance with the nondisclosure, non-compete, non-solicitation, non-hire and non-disparagement provisions in the Duginski Employment Agreement, Mr. Duginski will be entitled to certain severance benefits, as described below. Mr. Duginski’s severance benefits consist of cash payments in an aggregate amount equal to the sum of:

 

   

18 months of Mr. Duginski’s base salary; plus

 

   

150% of Mr. Duginski’s bonus target; plus

 

   

18 months of the monthly premium necessary to continue Mr. Duginski’s existing group health, dental and vision (and any such coverage of his eligible depends enrolled prior to his termination date), calculated in accordance with the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended (“COBRA”), but is payable regardless of whether Mr. Duginski elects a benefit under COBRA.

 

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Fifty percent of these cash amounts would be paid in a lump sum on the Company’s first payroll date occurring on or after the 60th day following the termination date. The remaining 50% would be paid in the form of salary continuation for a period of 12 months following the termination date. If, within 18 months after a Change in Control (as defined in the Duginski Employment Agreement), Mr. Duginski is terminated by the Company without Cause or if Mr. Duginski resigns for Good Reason, (i) the base salary component of the severance benefit described above would be increased from 18 months to 24 months and (ii) the bonus target component would be increased from 150% to 200%.

Cause and Good Reason. For purposes of the Duginski Employment Agreement, “Cause” means (i) conviction of, or entry by Mr. Duginski of a guilty or no contest plea to, a felony or crime involving moral turpitude; (ii) willful commission of an act of fraud or willful dishonesty resulting in economic or financial injury to the Company or any affiliate; (iii) willful failure to substantially perform or gross neglect of duties, including, the willful failure to follow any lawful directive of the Board, within the reasonable scope of Mr. Duginski’s duties; (iv) performance of acts materially detrimental to the Company or any affiliate, unless such acts were made in good faith or were otherwise approved in advance by the Board; (v) use of narcotics, alcohol, or illicit drugs in a manner reasonably expected to have a material detrimental effect on Mr. Duginski’s performance of his duties as a Company employee; (vi) violating any rule or policy adopted by the Company or any affiliate that results in material injury to the Company or an affiliate; (vii) material breach of the Duginski Employment Agreement; or (viii) any other willful acts or omissions that would reasonably be expected to be contrary to the best interests of the Company or any affiliate that has caused, or is likely to cause, material harm to one or more of them.

For purposes of the Duginski Employment Agreement, “Good Reason” means (i) a material diminution of Mr. Duginski’s authority, duties or responsibilities; (ii) a material diminution of Mr. Duginski’s base salary; (iii) the Company’s granting to another employee a total combined base salary and annual target bonus opportunity that exceeds Mr. Duginski’s combined total; (iv) the Company’s requiring Mr. Duginski to be based at any office or location that is more than 50 miles from Oklahoma City, Oklahoma; or (v) the Company’s material breach of the Duginski Employment Agreement.

Restrictive Covenants. As consideration for the Company entering into the Duginski Employment Agreement, Mr. Duginski has agreed that, during the term of his employment and for a period of 12 months following his date of termination, he will not solicit, direct or attempt to solicit or divert any customer of the Company or an affiliate of the Company or solicit or hire any employee or consultant of the Company. Furthermore, during the 12-month period following his date of termination, Mr. Duginski has agreed not to engage in certain activities in any county in which the Company operates on the date of termination. Mr. Duginski has also agreed not to disparage the Company or any of its officers, director other affiliates. This non-disparagement provision is not subject to a time limit.

Should Mr. Duginski be terminated by the Company without Cause or should Mr. Duginski resign for Good Reason, then, upon Mr. Duginski’s material breach of any of the restrictive covenants described above, the Company will be entitled to cease payment of any remaining installments of Mr. Duginski’s severance payment and to be repaid any portion of the severance payment that has already been paid (net of any taxes Mr. Duginski had paid or is required to pay in respect of that portion of the severance payment). Furthermore, if Mr. Duginski’s employment is terminated by the Company for Cause or by Mr. Duginski without Good Reason, then, upon Mr. Duginski’s material breach of any of the restrictive covenants described above, Mr. Duginski has agreed to pay the Company an amount equal to 150% of the sum of Mr. Duginski’s base salary and bonus target for the year in which his termination date occurs.

Indemnification Agreement. Effective as of the Effective Time, the Company also entered into an indemnification agreement with Mr. Duginski in the form previously filed as Exhibit 10.1 to the Company’s Amendment No. 1 to Form 10-K on Form 10-K/A on April 29, 2019, which is incorporated by reference herein.

The foregoing description of the Duginski Employment Agreement and the related restricted stock grants and cash incentive awards does not purport to be complete and is qualified in its entirety by reference to the full text of the Duginski Employment Agreement (filed as Exhibit 99.4 to this Current Report on Form 8-K and incorporated herein by reference) and the related grant agreements (filed as Exhibits 99.5, 99.6, 99.7 and 99.8 to this Current Report on Form 8-K and incorporated herein by reference).

Reynolds Separation Agreement

Mr. Reynolds resigned from all positions with the Company and its subsidiaries as of the Effective Time, including as Chief Executive Officer, President and director. However, he will continue to be an employee under the Reynolds Employment Agreement until December 27, 2019 (the “Reynolds Separation Date”). Mr. Reynolds’ resignation was not the result of any disagreement with the Company on any matter relating to the Company’s operations, policies or practices.

 

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In connection with Mr. Reynolds’ departure, at the Effective Time, the Company and Mr. Reynolds signed a Separation and Release Agreement (the “Reynolds Separation Agreement”). The Reynolds Separation Agreement provides that Mr. Reynolds will remain employed and provide transition services to the Company until the Reynolds Separation Date. He will continue to receive his current rate of base salary and employee benefits, as in effect immediately prior to Effective Time, until the Reynolds Separation Date.

Accrued Benefits. Under the terms of the Reynolds Employment Agreement, Mr. Reynolds is entitled to receive his unpaid salary and accrued but unpaid vacation pay, in each case, through the Reynolds Separation Date. He is also entitled to reimbursement for any unpaid business expenses that are reimbursable in accordance with the Company’s policies. He is also entitled to any vested benefits under the Company’s 401(k) plan. All of Mr. Reynolds unvested equity awards (consisting of 350,000 unvested restricted stock units and 173,311 unvested restricted common shares) will be forfeited as of the Reynolds Separation Date.

Separation Benefits. The Reynolds Separation Agreement also provides for certain separation benefits in exchange for a release of claims. Mr. Reynolds will receive (i) an initial separation payment of $286,500 on or before December 31, 2019, (ii) the full amount of his annual bonus for 2019, payable when the Company pays annual bonuses to its executives and (iii) a separation payment equal to the sum of (A) 1.5 times his final base salary of $572,858 plus (B) 1.5 times his annual bonus for 2019, payable as salary continuation for 18 months following the Reynolds Separation Date. In accordance with the Company’s 2019 annual bonus program for executives, the amount of Mr. Reynolds’ annual bonus for 2019 has not yet been determined. By way of illustration, if his 2019 annual bonus is earned at target (100% of his $572,858 base salary), then the amount of the separation payment described in clause (iii) above would be $1,718,574. Depending on the final amount of Mr. Reynolds’ 2019 annual bonus, this separation payment would be adjusted higher or lower.

Restrictive Covenants. Mr. Reynolds has agreed that, for a period of 18 months following the Reynolds Separation Date, he will not solicit, direct or attempt to solicit or divert any customer of the Company or a Company affiliate. He has already agreed during that 18-month period not to solicit, hire or seek to hire any employee or consultant of the Company, subject to certain customary exceptions. Furthermore, during the 12-month period following the Reynolds Separation Date, Mr. Reynolds has agreed not to engage in certain activities in the SCOOP, STACK and MERGE oil and gas plays in Oklahoma. The Reynolds Separation Agreement contains mutual non-disparagement provisions, without limitation as to time.

The foregoing description of the Reynolds Separation Agreement does not purport to be complete and is qualified in its entirety by reference to the Reynolds Separation Agreement attached as Exhibit 99.3 to this Current Report on Form 8-K.

Supplemental Compensation Arrangements for Certain Non-Employee Directors; Designated Independent Director Compensation

In recognition of Matthew Cabell’s voluntary resignation from the Board in order to facilitate the corporate governance changes contemplated by the Amended SVP Agreement, the Compensation Committee and the Board (with Mr. Cabell recusing himself) partially accelerated Mr. Cabell’s existing equity grants. Under the terms of the partial acceleration, the Compensation Committee accelerated the vesting of the two tranches of restricted stock awards that would have become vested if Mr. Cabell had remained a director until the 2020 Annual Meeting. As a result, a total of 10,000 unvested restricted stock units and 6,046 restricted shares became vested at the Effective Time. Mr. Cabell’s remaining 6,046 unvested restricted shares were forfeited at the Effective Time. Furthermore, Mr. Cabell will receive the director and committee fees he would have received for the full fourth quarter of 2019, even though his resignation became effective on December 20, 2019.

Furthermore, in recognition of the significant amount of time that Kenneth Moore, Chairman of the Nominating and Governance Committee, and Matthew Cabell, Chairman of the Compensation Committee, devoted to the corporate governance changes and executive transition contemplated by the Amended SVP Agreement, the Compensation Committee and the Board (with both Mr. Moore and Mr. Cabell recusing themselves) awarded each of those committee chairmen a supplemental cash fees of $20,000, payable promptly following the Effective Time.

 

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The description in Item 5.03 of the compensation for the Designated Independent Director is incorporated by reference into this Item 5.02.

 

Item 5.03

Amendments to Articles of Incorporation or Bylaws; Change in Fiscal Year

In connection with the Company’s entry into the Support Agreement Amendments, the Company’s Amended and Restated Bylaws (the “Existing Bylaws”) were amended and restated in the manner described in this Item 5.03. The Board adopted the Second Amended and Restated Bylaws (the “Amended Bylaws”) on December 20, 2019, effective as of the Effective Time. In accordance with the Existing Bylaws, the Amended Bylaws were adopted by a vote of a majority of the Whole Board.

The Amended Bylaws added a new Section 3.8 to establish the position of Designated Independent Director. The Amended Bylaws provide that the Designated Independent Director may (i) assist in the development of agendas for meetings of the Board and (ii) call meetings of the Board of Directors. The Designated Independent Director, if any, will be chosen from among the directors by a majority vote of the Whole Board and may not be removed from such role without a majority vote of the Whole Board.

After adopting the Amended Bylaws, the Board appointed Kenneth W. Moore to serve as Designated Independent Director, effective as of the Effective Time. Mr. Moore is an existing member of the Board, and will continue to serve as Chairman of the Nominating and Governance Committee of the Board. The Board, after receiving the recommendation of the Compensation Committee, set the compensation for the Designated Independent Director at $20,000 per year, which is the same compensation as the Chairman of the Board’s Audit Committee.

The Amended Bylaws also modified the process for calling special meetings of stockholders. The Existing Bylaws provided that a special meeting of stockholders could be called by the Board (by a vote of a majority of the directors at a meeting at which a quorum was present), the Chairman of the Board or the holders of a majority of the total voting power of all the shares of the Company entitled to vote generally in the election of directors. Under the Amended Bylaws, a special meeting of stockholders can be called by the Chairman of the Board, the Board (by a vote of a majority of the Whole Board, or half of the Whole Board if the Whole Board is an even number) or the holders of a majority of the total voting power of all the shares of the Company entitled to vote generally in the election of directors.

This summary is qualified in its entirety by reference to the full text of the Amended Bylaws, which are attached to this Current Report on Form 8-K as Exhibit 3.1, and incorporated by reference herein.

 

Item 7.01

Regulation FD Disclosure

On December 23, 2019, the Company issued a press release with respect to the appointment of Mr. Duginski as Chief Executive Officer, President and director of the Company, as well as the resignation of Mr. Reynolds from those same positions. The press release also discloses the appointments of Mr. Kuharski and Mr. McFarland as directors, as well as the resignation of Mr. Cabell as a director. The press release also discloses that the Inducement Equity Grants were made to Mr. Duginski in reliance on the exemption under NYSE Listed Company Manual Rule 303A.08. The full text of the press release is furnished with this Report as Exhibit 99.1 to this Current Report on Form 8-K. A copy of the press release is being furnished as Exhibit 99.1 hereto and is incorporated into this Item 7.01 by reference.

In accordance with General Instruction B.2 of Form 8-K, the information set forth in this Item 7.01 of this current report on Form 8-K, including Exhibit 99.9 attached hereto, is being furnished and shall not be deemed “filed” for purposes of Section 18 of Exchange Act, or otherwise subject to the liabilities of that Section, nor shall it be deemed incorporated by reference into any filings under the Securities Act of 1933, as amended, or the Exchange Act, whether made before or after the date hereof and regardless of any general incorporation language in such filings, except to the extent expressly set forth by specific reference in such a filing. The filing of this Current Report on Form 8-K shall not be deemed an admission as to the materiality of any information herein that is required to be disclosed solely by reason of Regulation FD.

 

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Item 9.01. Financial Statements and Exhibits.

(d) Exhibits

The exhibits listed in the following Exhibit Index are filed as part of this Current Report on Form 8-K.

 

Exhibit No.

  

Description

  3.1    Second Amended and Restated Bylaws of the Company, dated as of December 20, 2019
99.1    Amended and Restated Support Agreement, dated as of December  20, 2019, by and among Strategic Value Partners, LLC, certain investment funds directly and indirectly managed by Strategic Value Partners, LLC, and Chaparral Energy, Inc.
99.2    Amended and Restated Support Agreement, dated as of December  20, 2019, by and among Contrarian Capital Management, L.L.C., certain private investment funds directly and indirectly managed by Contrarian, Capital Management, L.L.C. and Chaparral Energy, Inc.
99.3†    Separation and Release Agreement, dated as of December 20, 2019, by and among Chaparral Energy, Inc., Chaparral Energy, L.L.C. and K. Earl Reynolds.
99.4†    Employment Agreement, dated as of December 20, 2019, by and among Chaparral Energy, Inc., Chaparral Energy, L.L.C. and Charles Duginski.
99.5†    Form of Restricted Stock Award Agreement by and between Chaparral Energy, Inc., and Charles Duginski, together with related Restricted Stock Award Notice (3-Year Time-Based Vesting)
99.6†    Form of Restricted Stock Award Agreement by and between Chaparral Energy, Inc., and Charles Duginski, together with related Restricted Stock Award Notice (3-Year Performance-Based Vesting)
99.7†    Cash Incentive Award Agreement, dated as of December 20, 2019, by and between Chaparral Energy, Inc., and Charles Duginski, together with related Cash Incentive Award Notice (3-Year Time-Based Vesting)
99.8†    Cash Incentive Award Agreement, dated as of December 20, 2019, by and between Chaparral Energy, Inc., and Charles Duginski, together with related Cash Incentive Award Notice (3-Year Performance-Based Vesting)
99.9    Press Release of Chaparral Energy, Inc., dated December 23, 2019.

 

Management contract or compensatory plan or arrangement

 

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

    CHAPARRAL ENERGY, INC.
Dated: December 27, 2019     By:  

/s/ Scott Pittman

   

Name:

Title:

 

Scott Pittman

Chief Financial Officer and Senior Vice President

 

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Exhibit 3.1

SECOND AMENDED AND RESTATED BYLAWS

OF

CHAPARRAL ENERGY, INC.

(a Delaware corporation, hereinafter called the “Corporation”)

Effective as of December 20, 2019

ARTICLE I

OFFICES AND RECORDS

Section 1.1 Registered Office. The registered office of the Corporation, and the registered agent of the Corporation at such address, shall initially be as fixed in the Corporation’s certificate of incorporation (as amended and/or restated from time to time, the “Certificate of Incorporation”). The registered office or registered agent of the Corporation may thereafter be changed from time to time by action of the board of directors of the Corporation (the “Board of Directors”).

Section 1.2 Other Offices. The Corporation may also have offices at such other places, both within and without the State of Delaware, as the Board of Directors may from time to time determine or the business of the Corporation may require.

Section 1.3 Books and Records.

(a) The books and records of the Corporation may be kept outside the State of Delaware at such place or places as may from time to time be designated by the Board of Directors.

(b) The Corporation shall, either at its principal executive office or at such place or places as designated by the Board of Directors, keep a record of its stockholders listing their names and addresses and the number and class of shares held by each stockholder, a copy of these bylaws, as may be amended to date, minute books, accounting books and other records.

(c) Any such records maintained by the Corporation may be kept on, or by means of, or be in the form of, any information storage device or method, provided that the records so kept can be converted into clearly legible paper form within a reasonable time. When records are kept in such manner, a clearly legible paper form produced from or by means of the information storage device or method shall be admissible in evidence, and accepted for all other purposes, to the same extent as an original paper form accurately portrays the record. The Corporation shall so convert any records so kept upon the request of any person or entity entitled to inspect such records pursuant to the provisions of the Certificate of Incorporation, these bylaws or applicable law.


ARTICLE II

STOCKHOLDERS

Section 2.1 Place of Meetings. Meetings of stockholders of the Corporation shall be held at any place, if any, either within or without the State of Delaware, as may be designated from time to time by the Board of Directors. The Board of Directors may, in its sole discretion, determine that a meeting of stockholders of the Corporation shall not be held at any place, but may instead be held solely by means of remote communication. In the absence of notice to the contrary, meetings of the stockholders of the Corporation shall be held at the principal executive office of the Corporation.

Section 2.2 Annual Meeting. The annual meeting of the stockholders of the Corporation shall be held on such date and at such place, if any, and/or by the means of remote communication, and time as may be fixed by resolution of the Board of Directors from time to time. At the annual meeting of the stockholders of the Corporation, directors shall be elected and any other business may be transacted which is properly brought before the annual meeting in accordance with the procedures set forth in Section 2.14 of these bylaws. Failure to hold any annual meeting as aforesaid shall not constitute, be deemed to be or otherwise effect a forfeiture or dissolution of the Corporation nor shall such failure affect otherwise valid corporate acts.

Section 2.3 Special Meetings. Except as otherwise required by law or provided in the instrument of designation of any series of preferred stock of the Corporation, special meetings of stockholders of the Corporation may be called at any time and from time to time only upon the written request (stating the purpose or purposes of the meeting) of (a) the Board of Directors (by a vote of a majority of the Whole Board or, in the event the number of authorized directors on the Whole Board is an even number, by a vote of at least half of the Whole Board), (b) the Chairman of the Board or (c) the holders of a majority of the total voting power of all the shares of the Corporation entitled to vote generally in the election of directors. Special meetings of the stockholders of the Corporation may not be called by any person, group or entity other than those specifically enumerated in this Section 2.3. The Board of Directors (by a vote of a majority of the Whole Board) shall determine the date, time, and place, if any, and/or means of remote communication, of any special meeting, which shall be stated in a notice of meeting delivered by the Board of Directors. Advance notice of stockholder nominations for the election of directors and of business to be brought by stockholders before any meeting of the stockholders of the Corporation, or any class or series of thereof, shall be given in the manner provided in these bylaws. No business may be transacted at any special meeting of the stockholders of the Corporation other than the business specified in the notice of such meeting.

Section 2.4 Chairman of the Meeting; Conduct of Meetings; Inspection of Elections.

(a) Meetings of stockholders of the Corporation shall be presided over by the chairman of the meeting, who shall be the Chairman of the Board or, in the absence thereof, such person as the Chairman of the Board shall appoint, or, in the absence thereof or in the event that the Chairman of the Board shall fail to make such appointment, any officer of the Corporation appointed by the Board of Directors.

(b) The secretary of any meeting of the stockholders of the Corporation shall be the Secretary or Assistant Secretary, or in the absence thereof, such person as the chairman of the meeting appoints. The secretary of the meeting shall keep the minutes thereof.

(c) The Board of Directors shall be entitled to make such rules or regulations for the conduct of meetings of stockholders of the Corporation as it shall deem necessary, appropriate or convenient from time to time. Subject to such rules and regulations, if any, the chairman of the meeting shall have the right and authority to convene and (for any or no reason) to recess and/or adjourn the meeting, to prescribe such rules, regulations and procedures and to

 

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do all acts as, in the judgment of such chairman, are necessary, appropriate or convenient (and not inconsistent with the Certificate of Incorporation or these bylaws) for the proper conduct of the meeting, including, without limitation, establishing an agenda of business of the meeting, recognizing stockholders entitled to speak, calling for the necessary reports, stating questions and putting them to a vote, calling for nominations, announcing the results of voting, establishing rules or regulations to maintain order, imposing restrictions on entry to the meeting after the time fixed for commencement thereof and the fixing of the date and time of the opening and closing of the polls for each matter upon which the stockholders of the Corporation will vote at a meeting (and shall announce such at the meeting).

(d) If required by law, the Board of Directors shall appoint one or more inspectors, which inspector or inspectors may include individuals who serve the Corporation in other capacities, including, without limitation, as officers, employees, agents or representatives, to act at a meeting of stockholders of the Corporation and make a written report thereof. One or more persons may be designated as alternate inspectors to replace any inspector who fails to act. If no inspector or alternate has been appointed to act or is able to act at a meeting of stockholders of the Corporation, the chairman of the meeting shall appoint one or more inspectors to act at the meeting. Each inspector, before discharging his or her duties, shall take an oath faithfully to execute the duties of inspector with strict impartiality and according to the best of his or her ability. The inspectors shall have such other duties as may be prescribed by law.

Section 2.5 Notice.

(a) Whenever stockholders of the Corporation are required or permitted to take any action at a meeting (whether special or annual), written notice (unless oral notice is reasonable under the circumstances) stating the place (if any), date, and time of the meeting, the means of remote communication (if any) by which stockholders and proxy holders may be deemed to be present in person and vote at such meeting, the record date for determining the stockholders entitled to vote at the meeting (if such date is different from the record date for stockholders entitled to notice of the meeting) and, in the case of special meetings, the purpose or purposes of such meeting, shall be given to each stockholder of the Corporation entitled to vote at such meeting not fewer than ten (10) nor more than sixty (60) days before the date of the meeting except as otherwise required by law, the Certificate of Incorporation or these bylaws. In the case of an annual meeting, the notice need not state the purpose or purposes of the meeting unless the Certificate of Incorporation or the General Corporation Law of the State of Delaware (as the same exists or may hereafter be amended from time to time, the “DGCL”) requires the purpose or purposes to be stated in the notice of the meeting.

(b) All such notices shall be delivered in writing (unless oral notice is reasonable under the circumstances) or by a form of electronic transmission if receipt thereof has been consented to by the stockholder to whom the notice is given. If mailed, such notice shall be deemed to be delivered when deposited in the United States mail, postage prepaid, addressed to the stockholder at such stockholder’s address as it appears on the records of the Corporation. If given by facsimile telecommunication, such notice shall be deemed to be delivered when directed to a number at which the stockholder has consented to receive notice by facsimile. Subject to the limitations of Section 2.6 of these bylaws, if given by electronic transmission, such notice shall be deemed to be delivered: (i) by electronic mail, when directed to an electronic mail address at which the stockholder has consented to receive notice; (ii) if by a posting on an

 

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electronic network together with separate written notice to the stockholder of such specific posting delivered by electronic mail or by United States mail, postage prepaid, addressed to the stockholder at such stockholder’s address as it appears on the records of the Corporation, upon the later of (x) such posting and (y) the giving of such separate notice; and (iii) if by any other form of electronic transmission, when directed to the stockholder. An affidavit of the Secretary or an Assistant Secretary, the transfer agent of the Corporation or any other agent of the Corporation that the notice has been given shall, in the absence of fraud, be prima facie evidence of the facts stated therein.

(c) Whenever notice is required to be given under any provisions of the DGCL, the Certificate of Incorporation or these bylaws, a written waiver thereof, signed by the stockholder entitled to notice, or a written waiver by electronic transmission by the person or entity entitled to notice, whether before or after the time stated therein, shall be deemed equivalent to notice. Neither the business to be transacted at, nor the purpose of, any meeting of the stockholders of the Corporation need be specified in any waiver of notice of such meeting.

(d) Attendance of a stockholder of the Corporation at a meeting of such stockholders shall constitute a waiver of notice of such meeting, except when the stockholder attends for the express purpose of objecting at the beginning of the meeting to the transaction of any business because the meeting is not lawfully called or convened.

(e) Whenever notice is required to be given under the DGCL, the Certificate of Incorporation or these bylaws to any stockholder with whom communication is unlawful, the giving of such notice to such stockholder shall not be required, and there shall be no duty to apply to any governmental authority or agency for a license or permit to give such notice to such stockholder. Any action or meeting which shall be taken or held without notice to any such stockholder with whom communication is unlawful shall have the same force and effect as if such notice had been duly given.

Section 2.6 Notice by Electronic Delivery. Without limiting the manner by which notice otherwise may be given effectively to stockholders of the Corporation pursuant to the DGCL, the Certificate of Incorporation or these bylaws, any notice to stockholders of the Corporation given by the Corporation under any provision of the DGCL, the Certificate of Incorporation or these bylaws shall be effective if given by a form of electronic transmission consented to by the stockholder of the Corporation to whom the notice is given. Any such consent shall be revocable by the stockholder by written notice to the Secretary. Any such consent shall be deemed revoked if: (i) the Corporation is unable to deliver by electronic transmission two (2) consecutive notices of meetings or of other business given by the Corporation in accordance with such consent; and (ii) such inability becomes known to the Secretary or an Assistant Secretary or to the transfer agent or other person responsible for the giving of notice. However, the inadvertent failure to treat such inability as a revocation shall not invalidate any meeting or other action. For purposes of these bylaws, except as otherwise limited by applicable law, the term “electronic transmission” means any form of communication not directly involving the physical transmission of paper that creates a record that may be retained, retrieved, and reviewed by a recipient thereof, and that may be directly reproduced in paper form by such a recipient through an automated process.

 

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Section 2.7 Stockholders List. The officer having charge of the stock ledger of the Corporation shall make, at least ten (10) days before every meeting of the stockholders of the Corporation, a complete list of the stockholders entitled to vote at such meeting (provided, however, if the record date for determining the stockholders entitled to vote is less than ten (10) days before the date of the meeting, the list shall reflect the stockholders entitled to vote as of the tenth day before the meeting date), arranged in alphabetical order, showing the address of (and any form of electronic transmission consented to by) each stockholder and the number of shares registered in the name of each stockholder. Such list shall be open to the examination of any stockholder of the Corporation for any purpose germane to the meeting for a period of at least ten (10) days prior to the meeting: (i) on a reasonably accessible electronic network; provided that the information required to gain access to such list is provided with the notice of the meeting; and/or (ii) during ordinary business hours, at the principal place of business of the Corporation. In the event that the Corporation determines to make the list available on an electronic network, the Corporation may take reasonable steps to ensure that such information is available only to stockholders of the Corporation. If the meeting is to be held at a place, then the list shall be produced and kept at the time and place of the meeting during the whole time thereof and may be examined by any stockholder who is present. If the meeting is to be held solely by means of remote communication, then the list shall also be open to the examination of any stockholder during the whole time of the meeting on a reasonably accessible electronic network, and the information required to access such list shall be provided with the notice of the meeting. Refusal or failure to prepare or make available the stockholder list shall not affect the validity of any action taken at a meeting of stockholders of the Corporation.

Section 2.8 Quorum. Except as otherwise provided by law or by the Certificate of Incorporation, the holders of a majority in voting power of the outstanding shares of capital stock of the Corporation entitled to vote thereat, present in person or represented by proxy, shall constitute a quorum for the transaction of business at all meetings of the stockholders of the Corporation. If a quorum is not present, the chairman of the meeting or the holders of a majority in voting power of the shares of capital stock of the Corporation present in person or represented by proxy at the meeting, and entitled to vote at the meeting, may adjourn the meeting to another place, if any, date and time. When a quorum is once present to commence a meeting of the stockholders of the Corporation, it is not broken by the subsequent withdrawal of any stockholders or their proxies.

Section 2.9 Adjournment and Postponement of Meetings.

(a) Any meeting of the stockholders of the Corporation, whether or not a quorum is present, may be adjourned to be reconvened at a specific date, time, place (if any) and/or by means of remote communication (if any) by the holders of a majority in voting power of the shares of capital stock present in person or represented by proxy at the meeting and entitled to vote at the meeting or, unless contrary to any provision of the Certificate of Incorporation, these bylaws or applicable law, the Chairman of the Board or the Board of Directors. When a meeting of the stockholders of the Corporation is adjourned to another date, time, place (if any), and/or by means of remote communication (if any), notice need not be given of the adjourned meeting if the date, time and place (if any) thereof, and/or the means of remote communication (if any) by which stockholders and proxy holders may be deemed to be present in person and vote at such adjourned meeting, are announced at the meeting at which the adjournment is taken; provided, however, that if the adjournment is for more than thirty (30)

 

5


days, a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the meeting. If after the adjournment a new record date for determination of stockholders entitled to vote is fixed for the adjourned meeting, the Board of Directors shall fix as the record date for determining stockholders entitled to notice of such adjourned meeting the same or an earlier date as that fixed for determination of stockholders entitled to vote at the adjourned meeting, and shall give notice of the adjourned meeting to each stockholder of record as of the record date so fixed for notice of such adjourned meeting.

(b) Any previously scheduled meeting of the stockholders of the Corporation may be postponed, and (unless contrary to applicable law or the Certificate of Incorporation) any special meeting of the stockholders may be cancelled, by resolution of the Board of Directors upon public announcement or notice given to the stockholders prior to the date previously scheduled for such meeting of stockholders.

(c) For purposes of these bylaws, “public announcement” shall mean disclosure in a press release reported by the Dow Jones News Service, Associated Press, PR Newswire or comparable national news service or in a document publicly filed by the Corporation with the Securities and Exchange Commission pursuant to Section 13, 14 or 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and the rules and regulations promulgated thereunder.

Section 2.10 Vote Required. When a quorum is present, the affirmative vote of the majority in voting power of the shares of capital stock of the Corporation present in person or represented by proxy at the meeting and entitled to vote on the subject matter shall be the act of the stockholders of the Corporation, unless the question is one upon which, by express provisions of applicable law, the Certificate of Incorporation, these bylaws, the rules or regulations of any stock exchange applicable to the Corporation, or pursuant to any regulation applicable to the Corporation or its securities, or the instrument of designation of any series of preferred stock of the Corporation, a different or additional vote is required or provided for, in which case such express provision shall govern and control the decision of such question. Where a separate vote by class or series is required or provided for, when a quorum is present, the affirmative vote of a majority in voting power of the shares of capital stock of the Corporation of such class or series present in person or represented by proxy at the meeting and entitled to vote on the subject matter shall be the act of such class or series of stockholders, unless the question is one upon which, by express provisions of applicable law, the Certificate of Incorporation, these bylaws, the rules or regulations of any stock exchange applicable to the Corporation, or pursuant to any regulation applicable to the Corporation or its securities, or the designation of any series of preferred stock of the Corporation, a different vote is required or provided for, in which case such express provision shall govern and control the decision of such question.

Section 2.11 Voting Rights. Except as otherwise provided by applicable law, each stockholder of the Corporation shall be entitled to that number of votes for each share of capital stock of the Corporation held by such stockholder as set forth in the Certificate of Incorporation or, in the case of preferred stock of the Corporation, in the instrument of designation thereof.

 

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Section 2.12 Proxies. Each stockholder entitled to vote at a meeting of stockholders of the Corporation may authorize another person or entity to act for such stockholder by proxy in such manner as prescribed under the DGCL, but no such proxy shall be voted or acted upon after three (3) years from its date unless such proxy expressly provides for a longer period. At each meeting of the stockholders of the Corporation, and before any voting commences, all proxies filed at or before the meeting shall be submitted to and examined by the Secretary or a person designated by the Secretary, and no shares may be represented or voted under a proxy that has been found (in the reasonable determination of the Secretary or such designee) to be invalid or irregular. Reference by the Secretary in the minutes of the meeting to the regularity of a proxy shall be received as prima facie evidence of the facts stated for the purpose of establishing the presence of a quorum at such meeting and for all other purposes. The revocability of a proxy that states on its face that it is irrevocable shall be governed by the applicable provisions of the DGCL and, without limiting the foregoing, a duly executed proxy shall be irrevocable if it states that it is irrevocable and if, and only so long as, it is coupled with an interest sufficient in law to support an irrevocable power. A proxy may be made irrevocable regardless of whether the interest with which it is coupled is an interest in the stock itself or an interest in the corporation generally.

Section 2.13 Record Date.

(a) In order that the Corporation may determine the stockholders entitled to notice of any meeting of stockholders or any adjournment thereof, the Board of Directors may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted by the Board of Directors, and which record date shall, unless otherwise required by law, not be more than sixty (60) nor less than ten (10) days before the date of such meeting. If the Board of Directors so fixes a date, such date shall also be the record date for determining the stockholders entitled to vote at such meeting unless the Board of Directors determines, at the time it fixes such record date, that a later date on or before the date of the meeting shall be the date for making such determination. If no record date is fixed by the Board of Directors, the record date for determining stockholders entitled to notice of or to vote at a meeting of stockholders shall be at the close of business on the day immediately preceding the day on which notice is given, or, if notice is waived, at the close of business on the day immediately preceding the day on which the meeting is held. A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the Board of Directors may fix a new record date for determination of stockholders entitled to vote at the adjourned meeting, and in such case shall also fix as the record date for stockholders entitled to notice of such adjourned meeting the same or an earlier date as that fixed for determination of stockholders entitled to vote in accordance herewith at the adjourned meeting.

(b) In order that the Corporation may determine the stockholders entitled to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any change, conversion or exchange of stock or for the purpose of any other lawful action, the Board of Directors may fix a record date, which record date shall not (i) precede the date upon which the resolution fixing the record date is adopted, or (ii) be more than sixty (60) days prior to such action. If no such record date is fixed, the record date for determining stockholders for any such purpose shall be at the close of business on the day on which the Board of Directors adopts the resolution relating thereto.

 

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(c) Unless such action in writing without a meeting is otherwise restricted by the Certificate of Incorporation, in order that the Corporation may determine the stockholders entitled to express consent to corporate action in writing without a meeting, the Board of Directors may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted by the Board of Directors, and which record date shall not be more than ten (10) days after the date upon which the resolution fixing the record date is adopted by the Board of Directors. Unless such action in writing without a meeting is otherwise restricted by the Certificate of Incorporation, if no record date for determining stockholders entitled to express consent to corporate action in writing without a meeting is fixed by the Board of Directors, (i) when no prior action of the Board of Directors is required by law, the record date for such purpose shall be the first date on which a signed written consent setting forth the action taken or proposed to be taken is delivered to the Corporation in accordance with applicable law, and (ii) if prior action by the Board of Directors is required by law, the record date for such purpose shall be at the close of business on the day on which the Board of Directors adopts the resolution taking such prior action.

Section 2.14 Advance Notice of Stockholder Business.

(a) Only such business shall be conducted before a meeting of the stockholders of the Corporation as shall have been properly brought before such meeting. To be properly brought before an annual or special meeting of the stockholders of the Corporation, from and after the date Common Stock (as defined in the Certificate of Incorporation) is listed, whether in connection with an initial public offering of the Common Stock or otherwise, on a U.S. national securities exchange registered with the Securities and Exchange Commission and any governmental body or agency succeeding to the functions thereof (a “Public Listing”), business must be: (i) with respect to any annual meeting, (A) specified in the notice of meeting (or any supplement or amendment thereto) given by or at the direction of the Board of Directors or a duly authorized committee of the Board of Directors; (B) otherwise properly brought before the meeting by or at the direction of the Board of Directors or a duly authorized committee of the Board of Directors; or (C) otherwise properly brought before the meeting by any stockholder (1) who is a stockholder of record on the date of the giving of the notice provided for in this Section 2.14 and on the record date for the determination of stockholders entitled to vote at such annual meeting and (2) who complies with the notice procedures set forth in this Section 2.14; and

(b) (ii) with respect to any special meeting, specified in the notice of meeting (or any supplement or amendment thereto) given to the stockholders of the Corporation by the Board of Directors pursuant to and in accordance with Section 2.3. For the avoidance of doubt, the provisions in this Section 2.14 shall not apply prior to completion of a Public Listing.

(c) For such business to be considered properly brought before the meeting by a stockholder of the Corporation, such stockholder must, in addition to any other applicable requirements, have given timely notice thereof in proper written form to the Secretary. To be timely with respect to any annual meeting, a stockholder’s notice to the Secretary must be delivered to or mailed and received by the Secretary at the principal executive office of the Corporation no fewer than ninety (90) and no more than one hundred twenty (120) days prior to the first (1st) anniversary of the immediately preceding annual meeting of the stockholders of the Corporation; provided, however, that in the event that no annual meeting was held in the previous year or the annual meeting is called for a date that is not within thirty (30) days before or after such anniversary date, notice by the stockholder to be timely must be so received not

 

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later than the close of business on the tenth (10th) day following the day on which notice of the date of the annual meeting was mailed or public announcement of the date of the annual meeting was made, whichever occurs first. To be timely with respect to any special meeting, a stockholder’s notice to the Secretary must be delivered or mailed and received by the Secretary at the principal executive office of the Corporation not less than sixty (60) days prior to the date of such meeting; provided, however, that in the event that less than seventy (70) days’ notice of the date of the meeting is given or made to stockholders, to be timely a stockholder’s notice must be delivered or mailed and received by the Secretary at the principal executive office of the Corporation not later than the close of business on the tenth (10th) day following the earlier of the day on which such notice or public announcement of the date of such special meeting is mailed or made (as applicable) by the Corporation. In no event shall the public announcement of an adjournment or postponement of an announced meeting commence a new time period (or extend any time period) for the giving of a stockholders notice as provided in this Section 2.14.

(d) To be in proper written form, a stockholder’s notice to the Secretary must set forth as to each matter such stockholder proposes to bring before the annual meeting: (i) a brief description of the business desired to be brought before the annual meeting and the reasons for conducting such business at the annual meeting; (ii) as to the stockholder giving the notice and the beneficial owner, if any, on whose behalf the proposal is made (A) the name and address of such stockholder, as they appear on the Corporation’s books, and of such beneficial owner, (B) the class or series and number of shares of capital stock of the Corporation which are directly or indirectly (including through any derivative arrangement) owned (1) beneficially and (2) of record by such stockholder and by such beneficial owner, (C) a description of all arrangements or understandings between such stockholder or such beneficial owner and any other person or entity (including, without limitation, their names) in connection with the ownership of the capital stock of the Corporation and the proposal of such business by such stockholder and such beneficial owner, and any material interest (financial or otherwise) of such stockholder or such beneficial owner in such business, (D) whether either such stockholder or beneficial owner intends to deliver a form of proxy to holders of at least the percentage of the Corporation’s voting shares required under applicable law to approve the proposal and (E) if the Corporation is then subject to Section 14(a) of the Exchange Act, any other information relating to such stockholder and beneficial owner, if any, required to be disclosed in a proxy statement or other filing required to be made in connection with a solicitation of proxies for the proposal pursuant to and in accordance with Section 14(a) of the Exchange Act and the rules and regulations promulgated thereunder; and (iii) a representation that such stockholder is a holder of record of stock of the Corporation entitled to vote at such meeting and intends to appear in person or by proxy at the meeting to introduce the business specified in the notice. As used herein, shares “beneficially owned” by a person (and phrases of similar import) shall mean all shares which such person is deemed to beneficially own pursuant to Rules 13d-3 and 13d-5 under the Exchange Act, including, without limitation, shares which are beneficially owned, directly or indirectly, by any other person with which such person has any agreement, arrangement or understanding for the purpose of acquiring, holding, voting or disposing of any shares of the capital stock of the Corporation.

(e) The chairman of a meeting of the stockholders of the Corporation shall determine and declare at such meeting whether the stockholder proposal was made in accordance with the terms of this Section 2.14. If the chairman of the meeting determines that such proposal was not properly brought before the meeting in accordance with the foregoing procedures, the chairman of the meeting shall declare to the meeting that the proposal was not properly brought before the meeting and the business of such proposal shall not be transacted.

 

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(f) This provision shall not prevent the consideration and approval or disapproval at any annual or special meeting of reports of officers, directors and committees of the Board of Directors, but in connection with such reports, no new business shall be acted upon at such meeting unless stated, filed and received as herein provided.

(g) In addition, notwithstanding anything in this Section 2.14 to the contrary, a stockholder of the Corporation intending to nominate one or more persons for election as a director at an annual or special meeting of stockholders must comply with Section 2.15 of these bylaws for such nomination to be properly brought before such meeting.

(h) For purposes of this Section 2.14, any adjournment(s) or postponement(s) of the original meeting whereby the meeting will reconvene within ninety (90) days from the original date shall be deemed for purposes of notice to be a continuation of the original meeting and no business may be brought before any such reconvened meeting unless pursuant to a notice of such business which was timely for the meeting and properly presented as determined as of the date originally scheduled.

Section 2.15 Advance Notice of Director Nominations.

(a) Unless otherwise required by applicable law or the Certificate of Incorporation, from and after the date on which the Corporation completes a Public Listing, only persons who are nominated in accordance with the following procedures shall be eligible for election as directors of the Corporation, except as may be otherwise provided in the instrument of designation of any series of preferred stock of the Corporation with respect to the right of holders of preferred stock of the Corporation to nominate and elect a specified number of directors of the Corporation, who shall be nominated as provided therein. For the avoidance of doubt, the provisions in this Section 2.15 shall not apply prior to completion of a Public Listing.

(b) Nominations of persons for election to the Board of Directors shall be made only at an annual or special meeting of stockholders of the Corporation called for the purpose of electing directors and must be (i) specified in the notice of meeting (or any supplement or amendment thereto) and (ii) made by (A) the Board of Directors or a duly authorized committee of the Board of Directors (or at the direction thereof) or (B) made by any stockholder of the Corporation (1) who is a stockholder of record on the date of the giving of the notice provided for in this Section 2.15 and on the record date for the determination of stockholders entitled to vote at such meeting and (2) who complies with the notice procedures set forth in this Section 2.15.

(c) In addition to any other applicable requirements, for a nomination to be made by a stockholder of the Corporation, such stockholder must have given timely notice thereof in proper written form to the Secretary. To be timely, a stockholder’s notice to the Secretary must be delivered to or mailed and received at the principal executive office of the Corporation: (i) in the case of an annual meeting of the stockholders of the Corporation, no fewer than ninety (90) nor more than one hundred twenty (120) days prior to the first (1st) anniversary of the immediately preceding annual meeting; provided, however, that in the event that no annual meeting was held in the previous year or the annual meeting is called for a date that is not within

 

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thirty (30) days before or after such anniversary date, notice by the stockholder to be timely must be so received not later than the close of business on the tenth (10th) day following the day on which notice of the date of the annual meeting was mailed or public announcement of the date of the annual meeting was made, whichever occurs first, and (ii) in the case of a special meeting of stockholders of the Corporation called for the purpose of electing directors, not less than sixty (60) days prior to the meeting; provided, however, that in the event that less than seventy (70) days’ notice of the date of the meeting is given or made to stockholders, notice by the stockholder to be timely must be so received not later than the close of business on the tenth (10th) day following the earlier of the day on which such notice or public announcement of the date of the meeting was mailed or made (as applicable). Notwithstanding anything to the contrary in the immediately preceding sentence, in the event that the number of directors to be elected to the Board of Directors is increased, a stockholder’s notice required by this Section 2.15 shall also be considered timely, but only with respect to nominees for any new positions created by such increase and only if otherwise timely notice of nomination for all other directorships was delivered by such stockholder in accordance with the requirements of the immediately preceding sentence, if it shall be delivered to the Secretary at the principal executive office of the Corporation not later than the close of business on the tenth (10th) day following the day on which notice to the stockholders of the Corporation was given or public announcement was made by the Corporation naming all of the nominees for director or specifying the size of the increase in the number of directors to serve on the Board of Directors, even if such tenth (10th) day shall be later than the date for which a nomination would otherwise have been required to be delivered to be timely. In no event shall the public announcement of an adjournment or postponement of an announced meeting commence a new time period (or extend any time period) for the giving of a stockholders notice as provided in this Section 2.15.

(d) To be in proper written form, a stockholder’s notice to the Secretary pursuant to this Section 2.15 must set forth (i) as to each person whom the stockholder of the Corporation proposes to nominate for election as a director, (A) the name, age, business address, and residence address of such person, (B) the principal occupation or employment of the person, (C) the class or series and number of shares of capital stock of the Corporation which are directly or indirectly (including through any derivative arrangement) owned beneficially or of record by the person, and (D) any other information relating to the person that would be required to be disclosed in a proxy statement or other filing required to be made in connection with a solicitation of proxies for an election of directors pursuant to the Exchange Act and the rules and regulations promulgated thereunder if the Corporation were a reporting company under the Exchange Act, and (ii) as to the stockholder giving the notice and the beneficial owner, if any, on whose behalf the director nomination is made (A) the name and address of such stockholder, as they appear on the Corporation’s books, and of such beneficial owner; (B) the class or series and number of shares of capital stock of the Corporation which are owned (1) beneficially and (2) of record by such stockholder and by such beneficial owner, (C) a description of all arrangements or understandings between such stockholder or such beneficial owner and any other person or entity (including, without limitation, their names) in connection with the ownership of the capital stock of the Corporation and the nomination of such nominee(s), and any material interest of such stockholder or such beneficial owner in such nomination(s), (D) whether either such stockholder or beneficial owner intends to deliver a form of proxy to holders of the Corporation’s voting shares to elect such nominee or nominees, (E) a representation that the stockholder giving the notice is a holder of record of stock of the Corporation entitled to vote at such meeting and that such stockholder intends to appear in person or by proxy at the meeting to

 

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nominate the persons named in its notice and (F) if the Corporation is then subject to Section 14(a) of the Exchange Act, any other information relating to such stockholder and beneficial owner, if any, required to be disclosed in a proxy statement or other filing required to be made in connection with a solicitation of proxies for an election of directors pursuant to the Exchange Act and the rules and regulations promulgated thereunder. Such notice must be accompanied by a written consent of each proposed nominee to be named as a nominee and to serve as a director if elected. The Corporation may require any nominee to furnish such other information (which may include meeting to discuss the information) as may reasonably be required by the Corporation to determine the eligibility of such nominee to serve as a director of the Corporation.

(e) If the chairman of a meeting of the stockholders of the Corporation determines that a nomination was not made in accordance with the foregoing procedures, the chairman of the meeting shall declare to the meeting that the nomination was defective and such defective nomination shall be disregarded.

(f) Nothing in this Section 2.15 shall be deemed to affect any rights of the holders of any series of preferred stock of the Corporation to elect directors pursuant to any applicable provisions of the Certificate of Incorporation.

Section 2.16 Action Without a Meeting. Until the date on which the Corporation completes a Public Listing, any action required or permitted to be taken at any annual or special meeting of stockholders of the Corporation may be taken without a meeting, without prior notice and without a vote, if a consent or consents in writing, setting forth the action so taken, shall be signed by the holders of outstanding stock of the Corporation having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted and shall be delivered to the Corporation by delivery to its registered office in the State of Delaware, its principal place of business, or to an officer or agent of the Corporation having custody of the book in which proceedings of meetings of stockholders are recorded. Following the date on which the Corporation completes a Public Listing, any action required or permitted to be taken at any annual or special meeting of stockholders of the Corporation may be taken without a meeting, without prior notice and without a vote, if a consent or consents in writing, setting forth the action so taken, shall be signed by all the holders of outstanding stock of the Corporation entitled to vote thereon.

ARTICLE III

DIRECTORS

Section 3.1 General Powers. All corporate powers shall be exercised by or under the authority of, and the business and affairs of the Corporation shall be managed under the direction of, the Board of Directors. In addition to the powers and authority expressly conferred upon it by these bylaws, the Board of Directors shall exercise all such powers of the Corporation and do all such lawful acts and things as are not by law or any other legal agreement among stockholders of the Corporation, by the Certificate of Incorporation, or by these bylaws directed or required to be exercised or done by the stockholders of the Corporation.

 

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Section 3.2 Number and Election.

(a) The total number of directors constituting the entire Board of Directors shall be not less than three (3) nor more than fifteen (15). Subject to the limits specified in the immediately preceding sentence, the exact number of directors shall be determined from time to time by the Board of Directors of the Corporation by a majority vote of the Whole Board (as defined below); provided, however, that in no case shall a decrease in the number of authorized directors constituting the Whole Board have the effect of removing or shortening the term of any incumbent director.

(b) Except as provided in Section 3.6 of these bylaws, a plurality of the votes cast at any annual meeting of stockholders of the Corporation or any special meeting of the stockholders of the Corporation properly called for the purpose of electing directors shall elect directors of the Corporation. Except as otherwise set forth in the instrument of designation of any class or series of preferred stock of the Corporation, no stockholder of the Corporation shall be entitled to cumulate votes on behalf of any candidate at any election of directors of the Corporation.

(c) All elections of directors of the Corporation shall be by written ballot, unless otherwise provided in the Certificate of Incorporation or authorized by the Board of Directors from time to time. If authorized by the Board of Directors, such requirement of a written ballot shall be satisfied by a ballot submitted by electronic transmission; provided, however, that any such electronic transmission must be either set forth or be submitted with information from which it can be determined that the electronic transmission was authorized.

Section 3.3 Term of Office. The term of office of directors shall expire at each annual meeting of stockholders, and in all cases as to each director until his or her successor shall be duly elected and qualified or until his or her earlier resignation, removal from office, death or incapacity.

Section 3.4 Removal. Subject to the rights, if any, of the holders of shares of any class or series of preferred stock of the Corporation then outstanding to remove directors as set forth in the instrument of designation of such preferred stock applicable thereto, any director or the entire Board of Directors of the Corporation may be removed from office, with or without cause, upon the affirmative vote of the holders of a majority of the total voting power of all the shares of the Corporation entitled to vote generally in the election of directors, voting together as a single class.

Section 3.5 Resignation. Any director may resign at any time upon notice given in writing or by electronic transmission to the Corporation. Any resignation shall take effect at the time specified therein or, if the time when it shall become effective is not specified therein, immediately upon receipt. Unless otherwise specified therein, the acceptance of any such resignation shall not be necessary to make it effective.

Section 3.6 Vacancies and Newly Created Directorships. Subject to the rights, if any, of the holders of shares of any class or series of preferred stock of the Corporation then outstanding to designate a director to fill a vacancy as set forth in the instrument of designation of such preferred stock applicable thereto, any vacancy on the Board of Directors resulting from any death, resignation, retirement, disqualification, removal from office, or newly created

 

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directorship resulting from any increase in the authorized number of directors or otherwise shall be filled only by the Board of Directors, acting by a majority of the remaining directors then in office, even if less than a quorum, or by a sole remaining director and not by the stockholders. A director elected to fill a vacancy shall hold office for a term expiring at the annual meeting of stockholders and until such director’s successor shall have been duly elected and qualified or until such director’s earlier death, resignation or removal. If there are no directors in office, then an election of directors shall be held in the manner provided by applicable law.

Section 3.7 Chairman of the Board. The Chairman of the Board shall be chosen from among the directors by a majority vote of the Whole Board. Any director elected as Chairman in accordance with this Section 3.7 shall hold such office until such director’s earlier death, resignation, retirement, disqualification or removal from office or the election of any successor by the Board of Directors from time to time. The Chairman of the Board shall preside at all meetings of the stockholders of the Corporation and shall have such other powers and perform such other duties (including, without limitation, as applicable, as an officer of the Corporation) as may be prescribed by the Board of Directors or provided in these bylaws.

Section 3.8 Designated Independent Director. The Designated Independent Director, if any, (a) shall be chosen from among the directors by a majority vote of the Whole Board (b) may not be removed from such role without a majority vote of the Whole Board. The Designated Independent Director shall have the right to (i) assist in the development of agendas for meetings of the Board of Directors and (ii) call meetings of the Board of Directors. Any Designated Independent Director shall hold such office until such director’s earlier death, resignation, retirement, disqualification or removal from office or the election of any successor by the Board of Directors from time to time.

Section 3.9 Meetings. Meetings of the Board of Directors may be held at such dates, times and places (if any) and/or by means of remote communication (if any) as shall be determined from time to time by the Board of Directors or as may be specified in a notice regarding a meeting of the Board of Directors. Special meetings of the Board of Directors may be called by the Chairman of the Board, the Designated Independent Director (if any), the Chief Executive Officer or President of the Corporation, or not less than a majority of the members of the Board of Directors and shall be called by the President or the Secretary if directed by the Chairman of the Board, the Designated Independent Director (if any), the Chief Executive Officer or President of the Corporation or not less than a majority of the members of the Board of Directors.

Section 3.10 Conduct of Meetings.

(a) Meetings of the Board of Directors shall be presided over by the chairman of the meeting, who shall be the Chairman of the Board or, in the discretion of the Board of Directors, such director as a majority of the directors present at such meeting shall appoint.

(b) The Board of Directors shall be entitled to make such rules or regulations for the conduct of meetings of the Board of Directors as it shall deem necessary, appropriate or convenient.

 

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Section 3.11 Notice.

(a) Unless the Certificate of Incorporation provides otherwise, (i) regular meetings of the Board of Directors may be held without notice of the date, time, place or purpose of the meeting at any date, time and place (if any) and/or means of remote communication (if any), as shall from time to time be determined by the Board of Directors, and (ii) unless waived by each of the directors entitled to notice thereof, special meetings of the Board of Directors shall be preceded by at least twenty-four (24) hours’ notice of the date, time and place (if any) and/or means of remote communication (if any). Any notice of a special or regular meeting of the Board of Directors shall be given to each director orally (either in person or by telephone), in writing (either by hand delivery, mail, courier or facsimile), or by electronic or other means of remote communication, in each case, directed to each director at that director’s address, telephone number, facsimile number or electronic mail address, as the case may be, as shown on the Corporation’s records. Any oral notice may be communicated either to the director or to a person at the office of the director who the person giving notice has reason to believe will promptly communicate such notice to the director. If the notice is: (i) delivered personally by hand, by courier, or orally by telephone or otherwise, (ii) sent by facsimile or (iii) sent by electronic mail, it shall be delivered or sent at least twenty-four (24) hours before the time of the holding of the meeting. If the notice is sent by United States mail or courier service, it shall be deposited in the United States mail or with the courier at least three (3) business days before the time of the holding of the meeting.

(b) Whenever notice is required to be given under any provisions of the DGCL, the Certificate of Incorporation or these bylaws, a written waiver thereof, signed by the director entitled to notice, or a waiver by electronic transmission by the person entitled to notice, whether before or after the time stated therein, shall be deemed equivalent to notice. Neither the business to be transacted at, nor the purpose of, any meeting of the Board of Directors or committee thereof need be specified in any waiver of notice of such meeting.

(c) Attendance of a director at a meeting of the Board of Directors shall constitute a waiver of notice of such meeting, except when the director attends for the express purpose of objecting at the beginning of the meeting to the transaction of any business because the meeting is not lawfully called or convened. Such director shall be conclusively presumed to have assented to any action taken at any such meeting unless his or her dissent shall be entered in the minutes of the meeting or unless his or her written dissent to such action shall be filed with the person acting as the secretary of the meeting before the adjournment thereof or shall be forwarded by registered mail to the Secretary immediately after the adjournment of the meeting. Such right to dissent shall not apply to any member who voted in favor of such action. Participation by means of remote communication, including, without limitation, by means of conference telephone or other communications equipment by means of which all persons participating in the meeting can hear each other, shall constitute attendance in person at the meeting.

Section 3.12 Quorum and Adjournment. Subject to Section 3.6, a majority of the Whole Board shall constitute a quorum for the transaction of business at all meetings of the Board of Directors, except as otherwise provided by law or by the Certificate of Incorporation or these bylaws. The act of the majority of the directors present at a meeting at which a quorum is present shall be the act of the Board of Directors. If a quorum is not present, the Chairman of the

 

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Board or a majority of the directors present at the meeting may adjourn the meeting without further notice to another date, time and place (if any) and/or means of remote communications (if any). When a quorum is once present to commence a meeting of the Board of Directors, it is not broken by the subsequent withdrawal of any directors. At any adjourned meeting at which a quorum is present, any business may be transacted which might have been transacted at the meeting as originally called. As used in these bylaws, the term “Whole Board” shall mean the total number of authorized directors whether or not there exists any vacancies in previously authorized directorships. For example, if the Whole Board is seven authorized directors, then the vote of four directors shall constitute a majority of the Whole Board.

Section 3.13 Vote Required. Subject to the Certificate of Incorporation, these bylaws, the DGCL and the rights, if any, of those directors who may be elected by the holders of any class or series of preferred stock of the Corporation as set forth in the instrument of designation of such preferred stock, the act by affirmative vote of a majority of the directors present at a meeting of the Board of Directors at which there is a quorum shall be an act of the Board of Directors.

Section 3.14 Minutes. The Secretary shall act as secretary of all meetings of the Board of Directors but in the absence of the secretary, the Chairman of the Board may appoint any other person present to act as secretary of the meeting. The secretary of the meeting shall keep the minutes thereof. Minutes of any regular or special meeting of the Board of Directors shall be prepared and distributed to each director.

Section 3.15 Board Action by Written Consent Without a Meeting. Unless otherwise restricted by the Certificate of Incorporation, any action required or permitted to be taken at any meeting of the Board of Directors, or any committee thereof, may be taken without a meeting if all members of the Board of Directors, or such committee, consent thereto in writing or by electronic transmission, and the writing(s) or electronic transmission(s) reasonably describe the action taken and are filed with the minutes of proceedings of the Board of Directors.

Section 3.16 Committees.

(a) The Board of Directors may by resolution create one or more committees (and thereafter, by resolution, dissolve any such committee). Each such committee shall consist of one or more of the directors of the Corporation who serve at the pleasure of the Board of Directors. Committee members may be removed, with or without cause, at any time by resolution of the Board of Directors and may resign from a committee at any time upon written notice to the Corporation. The Board of Directors may designate one or more directors as alternate members of any committee to replace any absent or disqualified member at any meeting of the committee. In the absence or disqualification of a member of a committee, the member or members present at any meeting and not disqualified from voting, whether or not he or they constitute a quorum, may unanimously appoint another member of the Board of Directors to act at the meeting in the place of any such absent or disqualified member.

(b) Any such committee, to the extent provided in these bylaws or in a resolution of the Board of Directors establishing such committee, shall have and may exercise all the powers and authority of the Board of Directors in the management of the business and affairs of the Corporation, and may authorize the seal of the Corporation to be affixed to all papers which may require it, to the extent permitted under applicable law. Any duly authorized action and otherwise proper action of a committee of the Board of Directors shall be deemed an action of the Board of Directors for purposes of these bylaws unless the context of these bylaws shall expressly state otherwise.

 

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(c) Each committee of the Board of Directors shall keep minutes of its meetings and shall report its proceedings to the Board of Directors when requested or required by the Board of Directors.

(d) Meetings and actions of each committee of the Board of Directors shall be governed by, and held and taken in accordance with, the provisions of Section 3.9, Section 3.10, Section 3.11, Section 3.12, Section 3.13 and Section 3.15 of these bylaws, with such changes in the context of those bylaws as are necessary to substitute such committee and its members for the Board of Directors and its directors and, if there shall be a chairman of such committee, such committee chairman for the Chairman of the Board; provided, however, that: (i) the time of regular meetings of committees may be determined either by resolution of the Board of Directors or by resolution of the committee; (ii) special meetings of committees may also be called by resolution of the Board of Directors; and (iii) notice of special meetings of committees shall also be given to all alternate members, who shall have the right to attend all meetings of the committee. The Board of Directors may adopt other rules for the government of any committee not inconsistent with the provisions of these bylaws. Each committee of the Board of Directors may fix its own other rules of procedure not inconsistent with the provisions of these bylaws or the rules of such committee adopted by the Board of Directors and shall hold its meetings as provided by such rules, except as may otherwise be provided by a resolution of the Board of Directors designating such committee or as provided in these bylaws.

Section 3.17 Compensation. The Board of Directors, irrespective of any personal interest of any of its members, may establish reasonable compensation of all directors for services to the Corporation as directors, officers, or otherwise, or may delegate such authority to an appropriate committee. Such compensation may be comprised of cash, property, stock, options to acquire stock, or such other assets, benefits or consideration as such directors shall deem, in the exercise of their sole discretion, to be reasonable and appropriate under the circumstances. The Board of Directors also shall have authority to provide for or delegate an authority to an appropriate committee to provide for reasonable pensions, disability or death benefits, and other benefits or payments, to directors, officers, and employees and to their families, dependents, estates, or beneficiaries on account of prior services rendered to the Corporation by such directors, officers, and employees.

Section 3.18 Corporate Governance. Without otherwise limiting the powers of the Board of Directors set forth in this Article III, if shares of capital stock of the Corporation are listed for trading on either the Nasdaq Stock Market (“NASDAQ”) or the New York Stock Exchange (“NYSE”), the Corporation shall comply with the corporate governance rules and requirements of the NASDAQ or the NYSE, as applicable.

 

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ARTICLE IV

OFFICERS

Section 4.1 Officers. The officers of the Corporation shall be a Chief Executive Officer, a Chief Financial Officer, one or more Presidents (at the discretion of the Board of Directors), a Treasurer, and a Secretary. The Corporation may also have, at the discretion of the Board of Directors, one or more Vice Presidents, one or more Assistant Treasurers, one or more Assistant Secretaries, a Controller, and any such other officers as may be appointed from time to time in accordance with the provisions of these bylaws. In addition, the Chairman of the Board shall exercise powers and perform such other duties as an officer of the Corporation as may be prescribed by the Board of Directors. Any number of offices may be held by the same person. In its discretion, the Board of Directors may choose not to fill any office for any period as it may deem advisable, except as required by law. The officers of the Corporation need not be stockholders of the Corporation nor, other than the Chairman of the Board, directors of the Corporation.

Section 4.2 Election of Officers. The Board of Directors shall elect the officers of the Corporation, except such officers as may be elected in accordance with the provisions of Section 4.3 of these bylaws, and subject to the rights, if any, of an officer under any employment contract. Each officer shall hold office until his or her successor is elected and qualified or until his or her earlier death, resignation or removal. A failure to elect officers shall not dissolve or otherwise affect the Corporation. Vacancies may be filled or new offices created and filled by the Board of Directors.

Section 4.3 Appointment of Subordinate Officers. The Board of Directors may appoint, or empower the Chief Executive Officer and/or one or more Presidents of the Corporation to appoint, such other officers and agents as the business of the Corporation may require. Each of such officers and agents shall hold office for such period, have such authority, and perform such duties as are provided in these bylaws or as the Board of Directors may from time to time determine.

Section 4.4 Removal and Resignation.

(a) Notwithstanding the provisions of any employment agreement, any officer of the Corporation may be removed at any time (i) by the majority vote of the Whole Board, with or without cause, and (ii) by any other officer of the Corporation upon whom the Board of Directors has expressly conferred the authority to remove another officer, in such case on the terms and subject to the conditions upon which such authority was conferred upon such officer. No elected officer shall have any contractual rights against the Corporation for compensation by virtue of such election beyond the date of the election of his successor, his death, his resignation or his removal from office, whichever event shall first occur, except as otherwise provided in an employment contract or under an employee deferred compensation plan or as otherwise required by law.

(b) Any officer may resign at any time by giving written or electronic notice to the Corporation. Any resignation shall take effect at the time specified therein or, if the time when it shall become effective is not specified therein, immediately upon receipt. Unless otherwise specified therein, the acceptance of any such resignation shall not be necessary to make it effective.

Section 4.5 Vacancies. Any vacancy occurring in any office because of death, resignation, retirement, disqualification, removal from office or otherwise may be filled as provided in Section 4.2 and/or Section 4.3 of these bylaws.

 

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Section 4.6 Chief Executive Officer. Subject to the powers of the Board of Directors, the Chief Executive Officer shall be responsible for the general management of the business, affairs and property of the Corporation and control over its officers, agents and employees, and shall see that all orders and resolutions of the Board of Directors are carried into effect. The Chief Executive Officer shall have such other powers and perform such other duties as may be prescribed by the Board of Directors or these bylaws.

Section 4.7 Chief Financial Officer. Subject to the powers of the Board of Directors, the Chief Financial Officer shall have the responsibility for the financial affairs of the Corporation and shall exercise supervisory responsibility for the performance of the duties of the Treasurer and the Controller, if any, of the Corporation. If there is no Controller, the Chief Financial Officer shall keep full and accurate account of receipts and disbursements in the books of the Corporation and render to the Board of Directors, the Chairman of the Board, or the President, whenever requested, an account of all his transactions as Chief Financial Officer and of the financial condition of the Corporation. The Chief Financial Officer shall have such other powers and perform such other duties as may be prescribed by the Board of Directors, the Chairman of the Board or these bylaws.

Section 4.8 President. The President(s) of the Corporation, subject to the powers of the Board of Directors and the Chief Executive Officer, shall act in general executive capacity, subject to the supervision and control of the Board of Directors. The President(s) shall have such other powers and perform such other duties as may be prescribed by the Board of Directors, the Chairman of the Board, the Chief Executive Officer or these bylaws.

Section 4.9 Vice President. The Vice President(s) shall have such powers and perform such duties as may be prescribed by the Board of Directors, the Chairman of the Board, the Chief Executive Officer, the President(s) or these bylaws.

Section 4.10 Treasurer. The Treasurer shall: (i) have the custody of the corporate funds and securities; (ii) keep full and accurate accounts of receipts and disbursements of the Corporation in books belonging to the Corporation; (iii) cause all monies and other valuable effects of the Corporation to be deposited in the name and to the credit of the Corporation in such banks as may be authorized by the Board of Directors; and (iv) cause the funds of the Corporation to be disbursed when such disbursements have been duly authorized, taking proper vouchers for such disbursements. The Treasurer shall have such other powers and perform such other duties as may be prescribed by the Board of Directors, the Chairman of the Board, the Chief Executive Officer, the Chief Financial Officer or these bylaws.

Section 4.11 Secretary. The Secretary shall attend all meetings of the Board of Directors and of the stockholders and record all votes and the minutes of all proceedings in a book to be kept for that purpose. The Secretary shall give, or cause to be given, notice of all meetings of the stockholders and special meetings of the Board of Directors and, when appropriate, shall cause the corporate seal to be affixed to any instruments executed on behalf of the Corporation. The Secretary shall also perform all duties incident to the office of Secretary and such other duties as may be prescribed by the Board of Directors, the Chairman of the Board, the Chief Executive Officer, the President(s) or these bylaws.

 

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Section 4.12 Assistant Treasurers. The Assistant Treasurer, or if there shall be more than one, the Assistant Treasurers in the order determined by the Board of Directors, shall, in the absence or disability of the Treasurer, perform the duties and functions, exercise the powers and be subject to all of the restrictions of the Treasurer. The Assistant Treasurer(s) shall have such other powers and perform such other duties as may be prescribed by the Board of Directors, the Chairman of the Board, the Chief Executive Officer, the Chief Financial Officer, the Treasurer or these bylaws.

Section 4.13 Assistant Secretaries. The Assistant Secretary, or if there shall be more than one, the Assistant Secretaries in the order determined by the Board of Directors, shall, in the absence or disability of the Secretary, perform the duties and functions, exercise the powers and be subject to all of the restrictions of the Secretary. The Assistant Secretary(ies) shall have such other powers and perform such other duties as may be prescribed by the Board of Directors, the Chairman of the Board, the Chief Executive Officer, the Secretary or these bylaws.

Section 4.14 Controller. The Controller, if any, shall keep full and accurate account of receipts and disbursements in the books of the Corporation and render to the Board of Directors, the Chairman of the Board, the President or Chief Financial Officer, whenever requested, an account of all his transactions as Controller and of the financial condition of the Corporation. The Controller shall also perform all duties incident to the office of Controller and such other duties as may be assigned to him by the Board of Directors, the Chairman of the Board, the Chief Financial Officer or these bylaws.

Section 4.15 Delegation of Duties. In the absence, disability or refusal of any officer of the Corporation to exercise and perform his or her duties, the Board of Directors may by resolution delegate the powers and duties of such officer to any other officer or to any director, or to any other person whom it may select.

ARTICLE V

STOCK

Section 5.1 Stock Certificates. The shares of capital stock of the Corporation shall be represented by certificates; provided, however, that the Board of Directors may provide by resolution that shares of some or all of any or all classes or series of stock of the Corporation shall be uncertificated and shall not be represented by certificates. Any such resolution by the Board of Directors shall not apply to shares represented by a certificate until such certificate is surrendered to the Corporation. Certificates representing shares of capital stock of the Corporation shall be issued in such form as may be approved by the Board of Directors and shall be signed by two authorized officers of the Corporation. The name of the person or entity to whom the shares are issued, with the number of shares and date of issue, shall be entered on the books of the Corporation.

Section 5.2 Electronic Signatures. Any and all of the signatures on a certificate representing shares of the Corporation may be electronic. In case any officer, transfer agent or registrar who has signed or whose electronic signature has been placed upon a certificate shall have ceased to be such officer, transfer agent or registrar before such certificate is issued, it may be issued by the Corporation with the same effect as if such person were such officer, transfer agent or registrar at the date of issue.

 

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Section 5.3 Special Designations of Shares. If the Corporation is authorized to issue more than one class of stock or more than one series of any class, (a) to the extent the shares are represented by certificates, the powers, designations, preferences, and relative, participating, optional or other special rights of each class of stock or series thereof and the qualifications, limitations or restrictions of such preferences and/or rights shall be set forth in full or summarized on the face or back of the certificate that the Corporation shall issue to represent such class or series of stock; provided, however, that, except as otherwise required by law (including, without limitation, Section 202 of the DGCL), in lieu of the foregoing requirements, there may be set forth on the face or back of the certificate that the Corporation shall issue to represent such class or series of stock a statement that the Corporation will furnish without charge to each stockholder who so requests the powers, designations, preferences, and relative, participating, optional or other special rights of each class of stock or series thereof and the qualifications, limitations or restrictions of such preferences and/or rights; and (b) to the extent the shares are uncertificated, within a reasonable time after the issuance or transfer of uncertificated shares, the Corporation shall send or cause to be sent to the registered owner thereof a written notice containing the information required to be set forth or stated on certificates pursuant to applicable provisions in the DGCL or a statement that the Corporation will furnish without charge to each stockholder who so requests the powers, designations, preferences, and relative, participating, optional or other special rights of each class of stock or series thereof and the qualifications, limitations or restrictions of such preferences and/or rights.

Section 5.4 Transfers of Stock.

(a) Shares of capital stock of the Corporation shall only be transferred on the books of the Corporation by the holder of record thereof or by such holder’s attorney or legal representative duly authorized in writing and, if the shares are represented by certificates, upon surrender to the Corporation of the certificate or certificates for such shares endorsed by the appropriate person or persons, with such evidence of the authenticity of such endorsement, transfer, authorization and other matters as the Corporation may reasonably require, and accompanied by all necessary stock transfer stamps. For shares of the Corporation’s capital stock represented by certificates, it shall be the duty of the Corporation to issue a new certificate to the person or entity entitled thereto, cancel the old certificate or certificates and record the transaction on its books. No transfer of stock shall be valid as against the Corporation for any purpose until it shall have been entered in the stock records of the Corporation by an entry showing from and to whom transferred.

(b) The Board of Directors shall have power and authority to make such other rules and regulations as it may deem necessary or proper concerning the issue, transfer and registration of certificates for shares of capital stock of the Corporation.

(c) The Board of Directors shall have the authority to appoint one or more banks or trust companies organized under the laws of the United States or any state thereof to act as its transfer agent or agents or registrar or registrars, or both, in connection with the transfer or registration of any class or series of securities of the Corporation, and may require stock certificates to be countersigned or registered by one or more of such transfer agents and/or registrars.

(d) The Corporation shall have the authority to enter into and perform any agreement with any number of stockholders of any one or more classes or series of capital stock of the Corporation to restrict the transfer of shares of capital stock of the Corporation of any one or more classes or series owned by such stockholders in any manner permitted by the DGCL.

 

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Section 5.5 Lost, Stolen or Destroyed Certificates. The Board of Directors may direct a new certificate or certificates representing one or more shares of capital stock of the Corporation or uncertificated shares to be issued in place of any certificate or certificates previously issued by the Corporation alleged to have been lost, stolen or destroyed, upon the making of an affidavit of that fact by the person or entity claiming the certificate of stock to be lost, stolen or destroyed or may otherwise require production of such evidence of such loss, theft or destruction as the Board of Directors may in its discretion require. Without limiting the generality of the foregoing, when authorizing such issue of a new certificate or certificates or such uncertificated shares, the Board of Directors may, in its discretion and as a condition precedent to the issuance thereof, require the owner of such lost, stolen or destroyed certificate or certificates, or such owner’s duly authorized attorney or legal representative, to give the Corporation a bond sufficient to indemnify the Corporation against any claim that may be made against the Corporation on account of the loss, theft or destruction of any such certificate or the issuance of such new certificate.

Section 5.6 Dividend Record Date. In order that the Corporation may determine the stockholders of the Corporation entitled to receive payment of any dividend or other distribution or allotment of any rights, or the stockholders entitled to exercise any rights of change, conversion or exchange of stock, or for the purposes of any other lawful action, the Board of Directors may fix a record date, which record date shall be determined in the manner set forth in Section 2.13 of these bylaws.

Section 5.7 Registered Stockholders. The Corporation shall be entitled to recognize the exclusive right of a person or entity registered on its books as the owner of shares of capital stock of the Corporation to receive dividends, to vote, to receive notifications and otherwise to exercise all the rights and powers of an owner of such shares, and shall not be bound to recognize any equitable or other claim to or interest in such share or shares on the part of any other person or entity, whether or not it shall have express or other notice thereof, except as otherwise required by law.

ARTICLE VI

INDEMNIFICATION

The Corporation shall indemnify any Indemnitee (as defined in the Certificate of Incorporation) as set forth in the Certificate of Incorporation.

ARTICLE VII

GENERAL PROVISIONS

Section 7.1 Reliance on Books and Records. Each director of the Corporation, each member of any committee of the Board of Directors and each officer of the Corporation shall, in the performance of his or her duties, be fully protected in relying in good faith upon the books of account or other records of the Corporation and upon such information, opinions, reports or documents presented to the Corporation by any of its officers or employees, or committees of the Board of Directors so designated, or by any other person or entity as to matters which such director or committee member reasonably believes are within such other person’s or entity’s professional or expert competence and who has been selected with reasonable care by or on behalf of the Corporation.

 

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Section 7.2 Dividends. Dividends upon the capital stock of the Corporation, subject to the requirements of the DGCL and the provisions of the Certificate of Incorporation, may be declared by the Board of Directors from time to time at any regular or special meeting of the Board of Directors and may be paid in cash, in property or in shares of the capital stock, or in any combination thereof. Before payment of any dividend, there may be set aside out of any funds of the Corporation available for dividends such sum or sums as the Board of Directors from time to time, in its absolute discretion, deems proper as a reserve or reserves to meet contingencies, or for purchasing any of the shares of capital stock, warrants, rights, options, bonds, debentures, notes, scrip or other securities or evidences of indebtedness of the Corporation, or for equalizing dividends, or for repairing or maintaining any property of the Corporation, or for any other proper purpose. The Board of Directors may modify or abolish any such reserve in the manner in which it was created.

Section 7.3 Corporate Funds; Checks, Drafts or Orders; Deposits. The funds of the Corporation shall be kept in such depositories as shall from time to time be prescribed by the Board of Directors. All checks, drafts or other orders for the payment of money by or to the Corporation and all notes and other evidences of indebtedness issued in the name of the Corporation shall be signed by such officer, officers, agent or agents of the Corporation, and in such manner, as shall be determined by resolution of the Board of Directors from time to time. All funds of the Corporation shall be deposited to the credit of the Corporation under such conditions and in such banks, trust companies or other depositories as the Board of Directors may designate or as may be designated by an officer or officers or agent or agents of the Corporation to whom such power may, from time to time, be determined by the Board of Directors.

Section 7.4 Execution of Contracts and Other Instruments. The Board of Directors, except as otherwise required by law, may authorize from time to time any officer or agent of the Corporation to enter into any contract or to execute and deliver any other instrument in the name of and on behalf of the Corporation. Such authority may be general or confined to specific instances. No officer, agent or employee shall have any power or authority to bind the Corporation by any contract or engagement or to pledge its credit or to render it liable for damages, whether monetary or otherwise, for any purpose or for any amount except as specifically authorized in these bylaws or by the Board of Directors or an officer or committee with the power to grant such authority.

Section 7.5 Signatures. In addition to the provisions for use of facsimile signatures elsewhere specifically authorized in these bylaws, facsimile or electronic signatures of any director or officer of the Corporation may be used whenever the signature of a director or officer of the Corporation shall be required, except as otherwise required by law or as directed by the Board of Directors from time to time.

Section 7.6 Fiscal Year. The fiscal year of the Corporation shall be fixed, and once fixed, may thereafter be changed from time to time, by the Board of Directors.

 

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Section 7.7 Corporate Seal. The Board of Directors may provide a corporate seal which shall be in the form of a circle and shall have inscribed thereon the name of the Corporation, the year of its incorporation and the words “Corporate Seal, Delaware.” The seal may be used by causing it or a facsimile thereof to be impressed or affixed or reproduced or otherwise.

Section 7.8 Voting Securities Owned By the Corporation. Powers of attorney, proxies, waivers of notice of meeting, consents, and other instruments relating to securities owned by the Corporation may be executed in the name of and on behalf of the Corporation by the Chief Executive Officer, the President, Treasurer or Secretary, any Vice President, Assistant Treasurer or Assistant Secretary, or any other officer of the Corporation authorized to do so by the Board of Directors. Any such officer may, in the name of and on behalf of the Corporation, take all such action as any such officer may deem advisable to vote in person or by proxy at any meeting of security holders of any corporation or other entity in which the Corporation may own securities, and at any such meeting shall possess and may exercise any and all rights and power incident to the ownership of such securities and which, as the owner thereof, the Corporation might have possessed and exercised if present.

Section 7.9 Section Headings. Section headings in these bylaws are for convenience of reference only and shall not be given any substantive effect in limiting or otherwise construing any provision herein.

Section 7.10 Inconsistent Provisions. In the event that any provision of these bylaws is or becomes inconsistent with any provision of the Certificate of Incorporation, the DGCL, or any other applicable law, the provision of these bylaws shall not be given any effect to the extent of such inconsistency but shall otherwise be given full force and effect.

ARTICLE VIII

AMENDMENTS

Section 8.1 Amendments. Subject to the power of the stockholders of the Corporation to adopt, amend or repeal any of these bylaws, these bylaws may be amended, modified or repealed, and new bylaws may be adopted at any time by a majority of the Whole Board. Notwithstanding any other provision of these bylaws or any provision of law which might otherwise permit a lesser vote or no vote, but in addition to any affirmative vote of the holders of any series of preferred stock of the Corporation required by law, by the Certificate of Incorporation or by any instrument designating any class or series of preferred stock of the Corporation, the affirmative vote of the holders of a majority of the total voting power of the shares of the Corporation entitled to vote generally in the election of directors, voting together as a single class, shall be required for the stockholders of the Corporation to alter, amend or repeal, or adopt any provision inconsistent with, the provisions of these bylaws.

*        *        *         *

 

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Exhibit 99.1

Execution Version

AMENDED AND RESTATED SUPPORT AGREEMENT

This Amended and Restated Support Agreement (this “Agreement”), dated as of December 20, 2019, is by and among Strategic Value Partners, LLC, a Delaware limited liability company, and certain investment funds directly or indirectly managed by Strategic Value Partners, LLC, as listed on Schedule A hereto (collectively, “Shareholder” and each individually, a “member” of Shareholder), and Chaparral Energy, Inc. (the “Company”).

RECITALS

WHEREAS, the Company and Shareholder have entered into that certain Support Agreement, dated June 6, 2018 (the “Existing Agreement”), pursuant to which the parties agreed to certain matters in respect of the Board of Directors of the Company (the “Board”) and certain other matters, as provided in the Existing Agreement;

WHEREAS, the Company and Shareholder have engaged in various discussions and communications concerning the Company’s business, financial performance and other matters;

WHEREAS, Shareholder has publicly disclosed that it Beneficially Owns 13,902,367 shares of Class A Common Stock, $0.01 par value, of the Company (the “Common Stock”), which represents approximately 30.0% of the issued and outstanding shares of Common Stock;

WHEREAS, the Company has determined that it is in the best interests of the Company and its shareholders and Shareholder has determined that it is in its best interests to come to an agreement with respect to certain matters in respect of the Board of Directors of the Company (the “Board”) and certain other matters, as provided in this Agreement; and

WHEREAS, contemporaneously with the execution hereof, the Company and Contrarian Capital Management, L.L.C. (“Contrarian”) are entering into a comparable amendment and restatement to the Support Agreement between those two parties dated August 8, 2018 (as amended and restated, the “Contrarian Support Agreement”);

NOW, THEREFORE, in consideration of and reliance upon the mutual covenants and agreements contained herein, and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto agree as follows:

 

1.

Board Representation and Board Matters.

 

  (a)

Effective as of the execution and delivery of this Agreement (such date and time, the “Effective Time”), Shareholder is entitled to designate two Shareholder Designees instead of one, subject to the provisions of Section 1(q) and Section 1(r).

 

  (b)

Prior to the execution of this Agreement, the following actions were taken, in each case effective as of the Effective Time:

 

  (i)

the Board, by a vote of a majority of the Whole Board (as defined in the Company’s Amended and Restated Bylaws (as amended from time to time, the “Bylaws”), increased the authorized number of directors from seven directors to eight directors, thereby creating a new directorship;


  (ii)

K. Earl Reynolds, Chief Executive Officer, President and a director of the Company, resigned from each such position, as well as from any other positions he holds with the Company or any Affiliate thereof, thereby creating a vacancy on the Board; provided, however, that Mr. Reynolds will continue to be an employee under his employment agreement until December 27, 2019;

 

  (iii)

Matthew Cabell, who served as a director, Chairman of the Compensation Committee of the Board (the “Compensation Committee”) and as a member of the Nominating and Governance Committee of the Board (the “Nominating and Governance Committee”), resigned from each such position, as well as from any other positions he holds with the Company or any Affiliate thereof thereby creating a second vacancy on the Board;

 

  (iv)

Shareholder notified the Company and the Board in writing that (A) Marc Rowland would no longer be a Replacement Shareholder Designee of Shareholder under this Agreement and (B) Michael Kuharski and Mark “Mac” McFarland were its two Shareholder Designees under this Agreement;

 

  (v)

the Board confirmed that Marc Rowland (the “Mutual Independent Director”) would not be required to resign from the Board, notwithstanding that he no longer served as a Replacement Shareholder Designee;

 

  (vi)

the Board, by a vote of a majority of the Whole Board, appointed Marc Rowland to serve as Chairman of the Board;

 

  (vii)

the Board, by a vote of a majority of the Whole Board, (A) amended and restated the Bylaws to create the position of Designated Independent Director, with the duties and responsibilities set forth in such amendment and restatement, which is attached hereto as Exhibit D, and (B) appointed Kenneth Moore to serve in such capacity;

 

  (viii)

the Board elected Michael Kuharski and Mark McFarland, the two Shareholder Designees to fill the two vacancies created by the two director resignations described above; and

 

  (ix)

the Board appointed Charles Duginski Chief Executive Officer and President of the Company and also elected Mr. Duginski to fill the newly created directorship on the Board.

 

  (c)

Each Shareholder Designee has previously executed and delivered to the Company (x) a completed director and officer questionnaire (the “D&O Questionnaire”), in the form provided, (y) an executed letter in the form attached hereto as Exhibit A (the “Nominee Letter”) and (z) an executed irrevocable resignation in the form

 

2


  attached hereto as Exhibit B (the “Resignation Letter” and, together with the D&O Questionnaire and the Nominee Letter, the “Nomination Documents”). Based on the Nomination Documents delivered by each Shareholder Designee, the Nominating and Governance Committee and the Board have determined that Mr. Kuharski and Mr. McFarland each qualifies as “independent” pursuant to the independence standards of the New York Stock Exchange and SEC rules (the “Independence Standards”).

 

  (d)

Subject to Shareholder’s and Shareholder Affiliates’ (as defined below) compliance with Section 2, the Company will include each Shareholder Designee in its slate of nominees for election as directors of the Company at the Company’s 2020 annual meeting of shareholders (the “2020 Annual Meeting”).

 

  (e)

Subject to Shareholder’s and Shareholder Affiliates’ compliance with Section 2, the Company will use reasonable best efforts to cause the election of each Shareholder Designee to the Board at the 2020 Annual Meeting (including that the Company’s shareholders vote in favor of the election of each Shareholder Designee (along with all of the Company’s nominees) and otherwise supporting each Shareholder Designee for election in a manner no less rigorous and favorable than the manner in which the Company supports any other independent director nominee).

 

  (f)

The Company agrees to hold the 2020 Annual Meeting no later than May 29, 2020.

 

  (g)

It is contemplated that each of the four incumbent Specified Independent Directors and Marc Rowland will stand for re-election at the 2020 Annual Meeting; provided, however, that if, effective as of the 2020 Annual Meeting, a majority of the Whole Board reduces the authorized number of directors to seven directors, then one such incumbent Specified Independent Director will not stand for re-election at such meeting.

 

  (h)

If, prior to the 2020 Annual Meeting, a Specified Independent Director resigns or informs the Board that he or she will not stand for re-election at the 2020 Annual Meeting, then the Nominating and Governance Committee will recommend an individual meeting the Independence Standards and the requirements to be a Specified Independent Director, and the Board will vote to fill the vacancy and/or nominate the replacement nominee to stand for election at the 2020 Annual Meeting, in each case only from a list of individuals recommended to the Board by the Nominating and Governance Committee.

 

  (i)

If, prior to the 2020 Annual Meeting, the Mutual Independent Director resigns or informs the Board that he will not stand for re-election at the 2020 Annual Meeting, then the Nominating and Governance Committee will recommend an individual who (x) meets the Independence Standards and the requirements to be a Specified Independent Director and (y) has been consented to by the Shareholder Designees, and the Board will vote to fill the Mutual Independent Director vacancy and/or nominate the replacement Mutual Independent Director to stand for election at the 2020 Annual Meeting. For the avoidance of doubt, the replacement Mutual Independent Director is not required to meet the requirements specified in the definition of Specified Independent Director.

 

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  (j)

If, at any time after the Effective Time, so long as Shareholder, together with all Shareholder Affiliates, satisfies the One Directorship Ownership Condition (as defined herein), the Chairman of the Board resigns from such position or his position as a director of the Company, then the Board will select a new Chairman of the Board by a vote of a majority of the Whole Board in accordance with Section 4.7 of the Bylaws.

 

  (k)

At any time after the Effective Time, so long as Shareholder, together with all Shareholder Affiliates satisfies the One Directorship Ownership Condition, the Company shall not (i) terminate or otherwise remove the Chief Executive Office of the Company from such position or (ii) appoint any person to the role of Chief Executive Officer, in each case, without a vote of a majority of the Whole Board.

 

  (l)

Subject to the provisions of Section 1(g), Section 1(h) and Section 1(i), the Company will include each such Specified Independent Director and the Mutual Independent Director (including any replacement Specified Independent Directors, Mutual Independent Director or nominees therefor) in its slate of nominees for election as directors of the Company at the 2020 Annual Meeting.

 

  (m)

Contemporaneously with the execution of this Agreement, the Board and all applicable committees of the Board will take all action necessary to (x) reconstitute the membership of the Nominating and Governance Committee so that its three members are Kenneth Moore, Michael Kuharski and Doug Brooks and (y) appoint Mark McFarland as a member of the Compensation Committee. Following such appointment and subject to the Nominating and Governance’s and the Board’s determination that a Shareholder Designee continues to meet the Independence Standards (and otherwise meets the applicable requirements for serving on the applicable Board committee), the Board and the Company shall cause such Shareholder Designee to remain a member of the Nominating and Governance Committee or Compensation Committee, as applicable, at all times such Shareholder Designee serves as a member of the Board as contemplated by this Agreement. A majority of the Nominating and Governance Committee and a majority of the Compensation Committee shall consist of Specified Independent Directors.

 

  (n)

At all times while serving as a member of the Board, each Shareholder Designee shall comply with all policies, procedures, processes, codes, rules, standards and guidelines applicable to non-management Board members, including the Code of Business Conduct and Ethics, securities trading policies, anti-hedging policies, Regulation FD-related policies, director confidentiality policies and corporate governance guidelines (collectively, the “Company Policies”), and preserve the confidentiality of Company business and information, including discussions or matters considered in meetings of the Board or Board committees. Except as may otherwise be required by the SEC, stock exchange listing rules or applicable law,

 

4


  the Company agrees that (i) it will not amend any of the Company Policies in any manner for the purpose of disqualifying any Shareholder Designee and (ii) any changes to the Company Policies, or new Company Policies, will be adopted in good faith and not for the purpose of undermining or conflicting with the arrangements contemplated by this Agreement. The Company has made available to each Shareholder Designee copies of the Company Policies as in effect on the date of this Agreement. Shareholder agrees, and shall instruct each Shareholder Designee, that, consistent with good corporate governance practice, the management of the Company will be conducted by the full Board of Directors, not by an operating committee or steering committee; provided, however, that the Nominating and Governance Committee, the Compensation Committee and the Audit Committee of the Board shall be responsible for the matters set forth in their respective committee charters on the date hereof. Furthermore, all advisors, counsel and consultants retained by the Company shall be instructed that they are to report to, and take direction, from the Company.

 

  (o)

The Company agrees that each Shareholder Designee shall receive the same benefits of director and officer insurance and any indemnity and exculpation arrangements available generally to the Company’s directors. The Company will execute a director indemnification agreement in favor of each Shareholder Designee upon his or her appointment to the Board, in a form substantially the same as that executed in favor of the Board’s current members. Each Shareholder Designee who is an officer or employee of Shareholder or any Shareholder Affiliate has waived any right to receive compensation for service as a director of the Company pursuant to the Company’s director compensation policy, including any stock or cash compensation.

 

  (p)

Should either Shareholder Designee be unable or unwilling to serve on the Board at any time, the Company shall, at the request of Shareholder, add as a member of the Board a qualified replacement that is selected by Shareholder and approved by the Board (by vote of the Specified Independent Directors) (a “Replacement”), such approval not to be unreasonably withheld, delayed or conditioned. Any such Replacement who becomes a Board member in replacement of such Shareholder Designee shall be deemed to be a Shareholder Designee for all purposes under this Agreement, and the Replacement, prior to his or her appointment to the Board, shall be required to provide to the Company equivalent Nomination Documents and meet with representatives of the Nominating and Governance Committee in accordance with the customary practices of the Board and the Nominating and Governance Committee. Subject to the Board’s determination that the Replacement meets the Independence Standards, the Company and the Board shall promptly take all necessary action to cause the election of any Replacement to the Board and the Nominating and Governance Committee or Compensation Committee, as applicable (i.e., whichever of those two committees on which the replaced Shareholder Designee served).

 

5


  (q)

If at any time after the Effective Time, Shareholder, together with all controlled Affiliates of the members of Shareholder (such controlled Affiliates, collectively and individually, the “Shareholder Affiliates”), ceases collectively to Beneficially Own the lesser of (x) an aggregate of at least 8% of the shares of Common Stock then outstanding and (y) an aggregate of 3,719,850 shares of Common Stock (the “One Directorship Ownership Condition”), then Shareholder shall no longer be entitled to designate any Shareholder Designees to serve on the Board. Accordingly, at such time, the Board shall have the option to accept the resignations of all Shareholder Designees in accordance with Section 1(s).

 

  (r)

If at any time after the Effective Time, Shareholder, together with all Shareholder Affiliates, satisfies the One Directorship Ownership Condition but ceases collectively to Beneficially Own the lesser of (x) an aggregate of at least 16% of the shares of Common Stock then outstanding and (y) an aggregate of 7,439,700 shares of Common Stock (the “Two Directorship Ownership Condition”), then Shareholder shall be entitled to designate one Shareholder Designees to serve on the Board, but not two Shareholder Designees. Accordingly, at such time, the Board shall have the option to accept the resignations of one of the two Shareholder Designees in accordance with Section 1(s) (and, for the avoidance of doubt, the other Shareholder Designee shall not be required to resign).

 

  (s)

With respect to any decrease pursuant to Section 1(q) or Section 1(r) in the number of Shareholder Designees that Shareholder is entitled to designate, the Resignation Letter previously provided by each affected Shareholder Designee in the form of Exhibit B shall become effective and the Board (by vote of the Specified Independent Directors) shall have the option to accept such resignation in its sole discretion, and, if the One Directorship Ownership Condition is no longer satisfied, the Company shall have no further obligations under this Section 1. During the Standstill Period, Shareholder shall notify the Company within five business days if it ceases to satisfy the One Directorship Ownership Condition or the Two Directorship Ownership Condition.

 

  (t)

If at any time after the Effective Time, Shareholder or any of the Shareholder Affiliates breaches in any material respect any of the terms of this Agreement, the Company in good faith notifies Shareholders or the applicable Shareholder Affiliates of such breach, and Shareholder or such Shareholder Affiliate fails to cure such breach within twenty business days following the receipt of written notice thereof from the Company specifying such breach (it being understood that unintentional breaches of this Agreement that by their nature cannot be reversed or undone shall be deemed to have been cured for purposes hereof if Shareholder or a Shareholder Affiliate has taken commercially reasonable actions to reduce the adverse impact of such breach), the Resignation Letter previously provided by each Shareholder Designee shall become effective and the Board (by vote of the Specified Independent Directors) shall have the option to accept such resignation in its sole discretion, and the Company shall have no further obligations under this Section 1.

 

6


  (u)

The Company promptly after the Effective Time (and promptly following the appointment of any Replacement) shall take all necessary action to cause the obligations of its insurers providing directors’ and officers’ insurance to be primary to any (1) directors’ and officers’ insurance policy issued to Shareholder or a Shareholder Affiliate, and (2) advancement or indemnification rights provided by Shareholder or a Shareholder Affiliate. The Company promptly after the Effective Time shall use its commercially reasonable efforts to amend such policies to clarify that such insurance is primary.

 

  (v)

Shareholder acknowledges, on behalf of itself and the Shareholder Affiliates, that each Shareholder Designee (or Replacement, as applicable) shall have all of the rights and obligations, including fiduciary duties to the Company and its shareholders, of a director under applicable law and the Company’s organizational documents while such Shareholder Designee (or Replacement, as applicable) is serving on the Board.

 

  (w)

Prior to selecting the Company’s slate of director nominees for the 2020 Annual Meeting, the Board shall vote on whether to reduce the number of authorized directors from eight directors to seven directors, effective as of the 2020 Annual Meeting. If the authorized number of directors is reduced below eight, then, from and after such reduction, at least one of the Shareholder Designees must be an individual who meets the Independence Standards and is not officer, employee, Affiliate or Associate of Shareholder or any Shareholder Affiliate.

 

2.

Standstill and Voting Obligations.

 

  (a)

Shareholder agrees that, from the Effective Time until the earlier of (A) completion of the 2020 Annual Meeting; (B) a material breach by the Company of its obligations under this Agreement that is not cured within twenty business days after receipt by the Company of written notice from Shareholder specifying the material breach (it being understood that unintentional breaches of this Agreement that by their nature cannot be reversed or undone shall be deemed to have been cured for purposes hereof if the Company has taken commercially reasonable actions to reduce the adverse impact of such breach); and (C) 120 days after the date that each Shareholder Designee (including any Replacement) ceases to serve as a director (the “Standstill Period”), no member of Shareholder shall, directly or indirectly, and each member of Shareholder shall cause each Shareholder Affiliate not to, directly or indirectly, take any of the actions set forth below (it being understood and agreed that the following restrictions shall not apply to any Shareholder Designee’s boardroom discussions conducted in such person’s capacity as a director of the Company, or other actions taken in his or her capacity as a director, including his or her responsibilities as a member of a board committee); provided, however, that the restrictions set forth in Sections 2(a)(ii), 2(a)(iv), 2(a)(v) (solely as it relates to any special meeting of stockholders) and 2(a)(viii) (solely as it relates to such Sections) shall not expire until the date that is 90 days after completion of the 2020 Annual Meeting:

 

7


  (i)

acquire, offer or seek to acquire, agree to acquire or acquire rights to acquire (except by way of stock dividends or other distributions or offerings made available to holders of voting securities of the Company generally on a pro rata basis), directly or indirectly, whether by purchase, tender or exchange offer, through the acquisition of control of another person, by joining a group, through swap or hedging transactions or otherwise, any voting securities of the Company (other than through a broad-based market basket or index) or any voting rights decoupled from the underlying voting securities that would result in the beneficial ownership of 31.0% or more than of the then-outstanding shares of the Common Stock in the aggregate;

 

  (ii)

engage in a “solicitation” of “proxies” (as such terms are defined under the Exchange Act) or written consents of stockholders with respect to, or from the holders of, the Voting Securities (other than any Shareholder Affiliate), for the election of individuals to the Board or to approve stockholder proposals, or become a “participant” (as such term is defined in Instruction 3 to Item 4 of Schedule 14A promulgated under the Exchange Act) in any contested “solicitation” for the election of directors with respect to the Company (as such terms are defined under the Exchange Act) (other than a “solicitation” or acting as a “participant” in support of the nominees of the Board (including any Shareholder Designee) at any stockholder meeting or voting its shares at any such meeting in its sole discretion, or providing such encouragement, advice or influence that is consistent with Company management’s recommendation in connection with such director nominees);

 

  (iii)

form or join a “group” as defined under Section 13(d) of the Exchange Act with respect to the Voting Securities (excluding, for the avoidance of doubt, any group composed solely of Shareholder and Shareholder Affiliates);

 

  (iv)

support or participate in any effort by any person or entity not a party to this Agreement (a “Third Party”) with respect to the matters set forth in Section 2(a)(ii) of this Agreement;

 

  (v)

present at any annual meeting or any special meeting of the Company’s stockholders or through action by written consent any proposal for consideration for action by stockholders or seek the removal of any member of the Board or propose any nominee for election to the Board or seek representation on the Board except as set forth herein;

 

  (vi)

grant any proxy, consent or other authority to vote with respect to any matters (other than to the named proxies included in the Company’s proxy card for any annual meeting or special meeting of stockholders) or deposit any Voting Securities of the Company in a voting trust or subject them to a voting agreement or other arrangement of similar effect with respect to any annual or special meeting or action by written consent (excluding customary brokerage accounts, margin accounts, prime brokerage accounts and the like), including, without limitation, lend any securities of the Company to any person or entity for the purpose of allowing such person or entity to vote such securities in connection with any stockholder vote or consent of the Company;

 

8


  (vii)

engage in any short sale or any purchase, sale or grant of any option, warrant, convertible security, stock appreciation right, or other similar right (including any put or call option, “swap” or hedging transaction with respect to any security (other than a broad based market basket or index)) that includes, relates to or derives any significant part of its value from a decline in the market price or value of the securities of the Company or encourage, initiate or support any person or entity in any such activity; or

 

  (viii)

request, directly or indirectly, any amendment or waiver of the foregoing in a manner that would be reasonably likely to require public disclosure by Shareholder or the Company;

provided that the restrictions in this Section 2(a) shall not prevent Shareholder or any Shareholder Affiliate from making (a) any factual statement as and to the extent required by applicable legal process, subpoena, or legal requirement from any governmental authority with competent jurisdiction over the party from whom information is sought (so long as such request did not arise as a result of discretionary acts by Shareholder or any of the Shareholder Affiliates); and (b) any confidential communication to the Company that would not be reasonably likely to require public disclosure by Shareholder, any Shareholder Affiliate or the Company.

 

  (b)

Shareholder and the Shareholder Affiliates shall cause all Voting Securities owned by them directly or indirectly, whether owned of record or Beneficially Owned, as of the record date for the 2020 Annual Meeting, that Shareholder and the Shareholder Affiliates are entitled to vote at the 2020 Annual Meeting, to be present for quorum purposes and to be voted, at the 2020 Annual Meeting or at any adjournment or postponement thereof, (i) for the election of the Shareholder Designee and any other directors or director nominees who are nominated by the Board for election at the 2020 Annual Meeting and (ii) in accordance with the recommendation of the Board on any other proposals or other business that comes before the 2020 Annual Meeting (other than any proposals relating to (1) amendments to the Company’s articles of incorporation or other organizational documents, (2) mergers, acquisitions, asset sales or purchases, recapitalizations, or other business combinations or extraordinary transactions, or (3) the issuance of Company equity securities or any securities convertible into, or exercisable or exchangeable for Company equity securities, each of which may be voted by Shareholder and the Shareholder Affiliates in their own discretion).

 

  (c)

Nothing in this Section 2 shall be deemed to limit the exercise in good faith by Shareholder Designee of his or her fiduciary duties solely in his or her capacity as a director of the Company.

 

9


3.

Public Announcements. Promptly following the execution of this Agreement, the Company shall announce this Agreement by means of a press release in the form attached hereto as Exhibit C (the “Press Release”).

 

4.

Confidentiality Agreement. The parties hereby agree that, notwithstanding any other provision of this Agreement to the contrary, if so requested by either party and agreed to by the other, Shareholder may be provided confidential information in accordance with and subject to the terms of that certain confidentiality agreement by and between Shareholder and the Company dated June 18, 2018 and supplemented as of July 30, 2019 and November 15, 2019 (as supplemented and as same may be further supplemented or amended from time to time, the “Confidentiality Agreement”).

 

5.

Non-Disparagement. During the Standstill Period, Shareholder and the Company agree to not make, or cause to be made, and to cause each of their respective officers, directors, members, and employees not to make (whether directly or indirectly through any Affiliate), any public statement or announcement that relates to and constitutes an ad hominem attack on, or relates to and otherwise disparages, the other party or their respective business, operations or financial performance, officers, members, partners or directors or any person who has served as an officer, member, partner or director of the other party in the past, or who serves as an officer, director, partner or agent of the other party (a) in any document or report filed with or furnished to the SEC or any other governmental agency, (b) in any press release or other publicly available format or (c) to any journalist or member of the media (including without limitation, in a television, radio, internet, newspaper or magazine interview).

 

6.

Representations and Warranties of All Parties. Each of the parties represents and warrants to the other party that: (a) such party has all requisite power and authority to execute and deliver this Agreement and to perform its obligations hereunder; (b) this Agreement has been duly and validly authorized, executed and delivered by it and is a valid and binding obligation of such party, enforceable against such party in accordance with its terms; and (c) this Agreement will not result in a violation of any terms or conditions of any agreements to which such person is a party or by which such party may otherwise be bound or of any law, rule, license, regulation, judgment, order or decree governing or affecting such party.

 

7.

Representations and Warranties of Shareholder. Each member of Shareholder represents and warrants that, as of the date of this Agreement, (a) Shareholder, together with all of the Shareholder Affiliates, Beneficially Owns, directly or indirectly, an aggregate of 13,902,367 shares of Common Stock, and such shares of capital stock of the Company Beneficially Owned by Shareholder and the Shareholder Affiliates or in which Shareholder or the Shareholder Affiliates have any interest or right to acquire or vote, whether through derivative securities, voting agreements or otherwise; (b) except for such ownership, no member of Shareholder, individually or in the aggregate with all other members of Shareholder and the Shareholder Affiliates, has any other Beneficial Ownership of any Voting Securities, including through any derivative transaction described in the definition of “Beneficial Ownership” below; and (c) Shareholder has not provided or agreed to provide, and will not provide, any compensation in cash or otherwise to any Shareholder

 

10


  Designee or any other incumbent or incoming director of the Company, in connection with any role or position such Shareholder Designee or other incumbent or incoming director holds or will hold or any services that have been or will be provided with respect to the Company. For the avoidance of doubt, compensation paid to a Shareholder Designee who is a partner, officer or employee of Shareholder for his or her service in such role to Shareholder is not compensation for a position held at or a service provided with respect to the Company.

 

8.

Mutual Releases.

 

  (a)

Effective as of the Effective Time, subject to the limitations set forth in Section 8(c), the Company on behalf of itself and, except for Shareholder and the Shareholder Affiliates, for each of its direct and indirect Affiliates, subsidiaries, subdivisions, successors, predecessors, shareholders, partners, members, managers and assigns, and their present and former officers, directors, legal representatives, employees, agents, and attorneys and other professionals, and their heirs, executors, administrators, trustees, successors and assigns (collectively, “Company Releasing Parties”), hereby irrevocably releases and forever discharges and covenants not to sue: (w) Shareholder and the Shareholder Affiliates, excluding the Company and its subsidiaries (collectively, the “Shareholder Group”), (x) each of the present and former directors and officers of each member of the Shareholder Group, (y) each of the respective direct and indirect parent companies, Affiliates, subsidiaries, subdivisions, successors, predecessors, affiliated management companies, funds or vehicles advised directly or indirectly by any such affiliated management companies, shareholders, members, managers, partners and assigns (collectively with respect to any Person, the Persons in this clause (y), the “Related Entities”) of any member of the Shareholder Group, and (z) each of the present and former Related Entities, officers, directors, managing and executive directors, managers or members of the boards of managers, partners, legal representatives, managers, employees, agents, professional and financial advisors and sub-advisors, investment bankers, accountants, attorneys and other professionals of the persons identified in clauses (x) and (y) immediately above, and the family members, estates, assets, trusts, heirs, executors, administrators, trustees, successors and assigns of the Persons identified in clauses (w), (x), (y) and (z) immediately above (collectively all of the foregoing released Persons in this Section 8, the “Shareholder Released Parties”) of and from any and all claims, causes of action, suits, remedies, debts, liabilities, losses, demands, rights, obligations, damages, expenses, attorneys’ or other professionals’ fees whatsoever then existing or thereafter arising, whether based on or sounding in or alleging (in whole or in part) tort, contract, negligence, strict liability, contribution, subrogation, respondeat superior, violations of federal or state securities laws, breach of fiduciary duty, any other legal theory or otherwise, whether individual, class, direct or derivative in nature, liquidated or unliquidated, fixed or contingent, whether at law or in equity, whether based on federal, state or foreign law or right of action, foreseen or unforeseen, matured or unmatured, known or unknown, disputed or undisputed, accrued or not accrued, or otherwise (collectively, “Company Claims”), that the Company Releasing Parties have, had or can, shall or may now or hereafter have

 

11


  against the Company Released Parties, from the beginning of time up to and through the Effective Time, that arise out of, relate to, or are in any way connected with the Company. For the avoidance of doubt, neither the Company nor any subsidiary thereof is included the Shareholder Group or as a Shareholder Released Party.

 

  (b)

Effective as of the Effective Time, subject to the limitations set forth in Section 8(d), Shareholder, on behalf of itself and, except for the Company and its subsidiaries, for each of its direct and indirect Affiliates, subsidiaries, subdivisions, successors, predecessors, shareholders, partners, members, managers and assigns, and their present and former officers, directors, legal representatives, employees, agents, and attorneys and other professionals, and their heirs, executors, administrators, trustees, successors and assigns (collectively, the “Shareholder Releasing Parties”), hereby irrevocably releases and forever discharges and covenants not to sue: (w) the Company, (x) each of the present and former directors and officers of each of Company and the direct or indirect subsidiaries or Affiliates thereof, (y) each of the Related Entities of the Persons identified in clause (w), and (z) each of the present and former Related Entities, officers, directors, managing and executive directors, managers or members of the boards of managers, partners, legal representatives, managers, employees, agents, professional and financial advisors and sub-advisors, investment bankers, accountants, attorneys and other professionals of the Persons identified in clauses (x) and (y) immediately above, and the family members, estates, assets, trusts, heirs, executors, administrators, trustees, successors and assigns of the Persons identified in clauses (w), (x), (y) and (z) immediately above (collectively all of the foregoing released Persons in this Section 8(b), the “Company Released Parties”) of and from any and all claims, causes of action, suits, remedies, debts, liabilities, losses, demands, rights, obligations, damages, expenses, attorneys’ or other professionals’ fees whatsoever then existing or thereafter arising, whether based on or sounding in or alleging (in whole or in part) tort, contract, negligence, strict liability, contribution, subrogation, respondeat superior, violations of federal or state securities laws, breach of fiduciary duty, any other legal theory or otherwise, whether individual, class, direct or derivative in nature, liquidated or unliquidated, fixed or contingent, whether at law or in equity, whether based on federal, state or foreign law or right of action, foreseen or unforeseen, matured or unmatured, known or unknown, disputed or undisputed, accrued or not accrued, or otherwise (collectively, “Shareholder Claims” and, together with Company Claims, “Claims”), that the Company Releasing Parties have, had, or can, shall or may now or hereafter have against the Company Released Parties, from the beginning of time up to and through the Effective Time, that arise out of, relate to, or are in any way connected with the Company.

 

  (c)

Notwithstanding anything to the contrary contained in this Section 8, the Company Released Parties will remain liable to the Shareholder Releasing Parties, with respect to the liabilities and obligations, if any, they may have to the Shareholder Releasing Parties, (i) pursuant to this Agreement, the Confidentiality Agreement or any other agreement or document executed or delivered pursuant to or in

 

12


  connection with this Agreement and (ii) any rights any Shareholder Releasing Party may have to indemnification or advancement or reimbursement of expenses under any D&O policy, indemnification agreement or pursuant to the organizational documents of the Company or any of its Subsidiaries or employee benefit plan or related trust thereof (in each case, for the avoidance of doubt, as amended from time to time).

 

  (d)

Notwithstanding anything to the contrary contained in this Section 8, the Shareholder Released Parties will remain liable to the Company Releasing Parties, with respect to the liabilities and obligations, if any, they may have to the Company Releasing Parties pursuant to this Agreement, the Confidentiality Agreement or any other agreement or document executed or delivered pursuant to or in connection with this Agreement (in each case, for the avoidance of doubt, as amended from time to time).

 

  (e)

Notwithstanding anything to the contrary contained in this Section 8, no Shareholder Releasing Party or Company Releasing Party is waiving or being required to waive any Claim with respect to any actual and intentional fraud by any other Person, or any right that cannot be waived under applicable Law, and nothing contained in this Release will be construed as an admission by any Shareholder Releasing Party or Company Releasing Party of any liability of any kind to any Person.

 

  (f)

Each of the undersigned, as a Shareholder Releasing Party or a Company Releasing Party (each, a “Releasor”), on behalf of himself, herself or its itself and each other Shareholder Releasing Party or Company Releasing Party, as applicable, that is a Related Entity of such Releasor, hereby waives any and all rights under Section 1542 of the Civil Code of California, and any similar Law, rule, provision or statute of Delaware, New York or any other jurisdiction, which states in full (or otherwise in substance) as follows:

A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS THAT THE CREDITOR OR RELEASING PARTY DOES NOT KNOW OR SUSPECT TO EXIST IN HIS OR HER FAVOR AT THE TIME OF EXECUTING THE RELEASE AND THAT, IF KNOWN BY HIM OR HER, WOULD HAVE MATERIALLY AFFECTED HIS OR HER SETTLEMENT WITH THE DEBTOR OR RELEASED PARTY.

Each Releasor, on behalf of himself, herself or itself and each other Shareholder Releasing Party or Company Releasing Party, as applicable, that is a Related Entity of such Releasor, hereby knowingly and willingly waives the provisions of Section 1542 of the Civil Code of California and any similar Law, rule, provision or statute of Delaware, New York or any other jurisdiction that operates to bar the release of unknown claims, and acknowledges and agrees that this waiver is an essential and material term of this release and this Agreement. In particular, each Releasor, on behalf of himself, herself or itself and each other Shareholder Releasing Party or Company Releasing Party, as applicable, that is a Related Entity of such Releasor, hereby acknowledges that it has reviewed this Release with its legal counsel, and each Releasor understands and acknowledges the significance and consequences of this Release and, in particular, of the waiver provided in this Section 8(f).

 

13


9.

Certain Defined Terms. For purposes of this Agreement:

 

  (a)

Affiliate” shall have the meaning set forth in Rule 12b-2 promulgated by the SEC under the Exchange Act; provided, however, that, solely for purposes of Section 1(w), no person shall be deemed to be an Affiliate of another person unless such other person has actual power to direct the activities of the person via a contractual, legal or other right (such as ownership of a majority of the voting stock).

 

  (b)

Associate” shall have the meaning set forth in Rule 12b-2 promulgated by the SEC under the Exchange Act; provided, however, that, solely for purposes of Section 1(w), no person shall be deemed to be an Associate of another person unless such other person has actual power to direct the activities of the person via a contractual, legal or other right (such as ownership of a majority of the voting stock).

 

  (c)

Beneficially Own,” “Beneficial Owner”, and “Beneficial Ownership” shall have the same meaning as set forth in Rule 13d-3 under the Exchange Act.

 

  (d)

Exchange Act” shall mean the Securities Exchange Act of 1934, as amended.

 

  (e)

The terms “person” or “persons” shall mean any individual, corporation (including not-for-profit), general or limited partnership, limited liability or unlimited liability company, joint venture, estate, trust, association, organization or other entity of any kind or nature.

 

  (f)

SEC” shall mean the Securities and Exchange Commission.

 

  (g)

Specified Independent Directors” means the members of the Board (i) who are neither officers of the Company nor employees, officers, Associates or Affiliates of Shareholder, any Shareholder Affiliate, Contrarian or any Contrarian Affiliate (as defined in the Contrarian Support Agreement and (ii) who have never been nominated to serve on the Board by Shareholder, any Shareholder Affiliate, Contrarian or any Contrarian Affiliate or any of their respective Affiliates, Associates or any persons with whom any such person has formed a “group” (within the meaning of Section 13(d)(3) of the Exchange Act).

 

  (h)

Voting Securities” shall mean the Common Stock, and any other securities of the Company entitled to vote in the election of directors, or securities convertible into, or exercisable or exchangeable for Common Stock or other securities entitled to vote in the election of directors, whether or not subject to the passage of time or other contingencies.

 

14


10.

Miscellaneous. The parties hereto recognize and agree that if for any reason any of the provisions of this Agreement are not performed in accordance with their specific terms or are otherwise breached, immediate and irreparable harm or injury would be caused for which money damages would not be an adequate remedy. Accordingly, the parties hereto shall be entitled to an injunction or injunctions to prevent breaches of this Agreement, to enforce specifically the terms and provisions of this Agreement exclusively in the Court of Chancery of the State of Delaware or, if such court shall not have jurisdiction, any state or federal court sitting in the State of Delaware, in addition to any other remedies at law or in equity, and each party agrees it will not take any action, directly or indirectly, in opposition to another party seeking or obtaining such relief, and it will not allege, and each party hereby waives the defense, that there is an adequate remedy at law. Each of the parties hereto agrees to waive any bonding requirement under any applicable law, in the case any other party seeks to enforce the terms by way of equitable relief. Furthermore, each of the parties hereto (a) consents to submit itself to the personal jurisdiction of the Court of Chancery of the State of Delaware and the federal and other state courts sitting in the State of Delaware in the event any dispute arises out of this Agreement or the transactions contemplated by this Agreement, (b) agrees that it shall not attempt to deny or defeat such personal jurisdiction by motion or other request for leave from any such court, and (c) agrees that it shall not bring any action relating to this Agreement or the transactions contemplated by this Agreement in any court other than such federal or state courts of the State of Delaware, and each of the parties irrevocably waives the right to trial by jury. THIS AGREEMENT SHALL BE GOVERNED IN ALL RESPECTS, INCLUDING VALIDITY, INTERPRETATION AND EFFECT, BY THE LAWS OF THE STATE OF DELAWARE APPLICABLE TO CONTRACTS EXECUTED AND TO BE PERFORMED WHOLLY WITHIN SUCH STATE WITHOUT GIVING EFFECT TO ANY CONFLICT OR CHOICE OF LAW PRINCIPLES THAT MAY RESULT IN THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION.

 

11.

No Waiver. Any waiver by any party of a breach of any provision of this Agreement shall not operate as or be construed to be a waiver of any other breach of such provision or of any breach of any other provision of this Agreement. The failure of a party to insist upon strict adherence to any term of this Agreement on one or more occasions shall not be considered a waiver or deprive that party of the right thereafter to insist upon strict adherence to that term or any other term of this Agreement.

 

12.

Entire Agreement. This Agreement and the Resignation Letters contain the entire understanding of the parties with respect to the subject matter hereof and may be amended only by an agreement in writing executed by the parties hereto; provided, however, that any waiver or amendment hereof by the Company must be approved by a majority of the Whole Board (as defined in the bylaws of the Company).

 

13.

Notices. All notices, consents, requests, instructions, approvals and other communications provided for herein and all legal process in regard hereto shall be in writing and shall be deemed validly given, made or served, if (a) given by email, when email is sent to the email address set forth below and the appropriate confirmation is received or (b) if given by any other means, when actually received during normal business hours at the address specified below in this Section 13:

 

15


if to the Company:

Chaparral Energy, Inc.

701 Cedar Lake Boulevard

Oklahoma City, Oklahoma 73114

Attention: Corporate Secretary

Email: justin.byrne@chaparralenergy.com

With a copy (which shall not constitute notice) to:

Sidley Austin LLP

1000 Louisiana St., Suite 5900

Houston, Texas 77019

Attention: J. Mark Metts

Email: mmetts@sidley.com

if to Shareholder:

Strategic Value Partners, LLC

100 West Putnam Ave.

Greenwich, CT 06830

Attention: David B. Charnin

Email: dcharnin@svpglobal.com

With a copy (which shall not constitute notice) to:

Schulte Roth & Zabel LLP

919 Third Avenue

New York, New York 10022

Attention: Eleazer Klein

Email: Eleazer.Klein@srz.com

 

14.

Severability. If at any time subsequent to the date hereof, any provision of this Agreement shall be held by any court of competent jurisdiction to be illegal, void or unenforceable, such provision shall be of no force and effect, but the illegality or unenforceability of such provision shall have no effect upon the legality or enforceability of any other provision of this Agreement.

 

15.

Counterparts. This Agreement may be executed in two or more counterparts which together shall constitute a single agreement.

 

16.

Successors and Assigns. This Agreement shall not be assignable by any of the parties to this Agreement. This Agreement, however, shall be binding on successors of the parties hereto.

 

17.

No Third Party Beneficiaries. This Agreement is solely for the benefit of the parties hereto and is not enforceable by any other persons, except with respect to Shareholder Designee (including any Replacement) and except for the Company Released Parties and the Shareholder Released Parties pursuant to Section 8.

 

16


18.

Fees and Expenses. Each party will bear its own costs, fees and expenses in connection with this Agreement.

 

19.

Interpretation and Construction. Each of the parties hereto acknowledges that it has been represented by counsel of its choice throughout all negotiations that have preceded the execution of this Agreement, and that it has executed the same with the advice of said independent counsel. Each party and its counsel cooperated and participated in the drafting and preparation of this Agreement and the documents referred to herein, and any and all drafts relating thereto exchanged among the parties shall be deemed the work product of all of the parties and may not be construed against any party by reason of its drafting or preparation. Accordingly, any rule of law or any legal decision that would require interpretation of any ambiguities in this Agreement against any party that drafted or prepared it is of no application and is hereby expressly waived by each of the parties hereto, and any controversy over interpretations of this Agreement shall be decided without regards to events of drafting or preparation. The Section headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. The term “including” shall be deemed to mean “including without limitation” in all instances. Any share numbers set forth in this Agreement shall be adjusted as necessary for any stock splits, stock dividends, reverse stock splits, recapitalizations or similar events (other than stock buybacks or repurchases).

[Signature Pages Follow; Remainder of Page Intentionally Left Blank]

 

17


IN WITNESS WHEREOF, each of the parties hereto has executed this Agreement, or caused the same to be executed by its duly authorized representative as of the date first above written.

 

CHAPARRAL ENERGY, INC.
By:  

/s/ Justin Byrne

  Justin Byrne
  Vice President and General Counsel

[Signatures continued on the following page.]

 

[Signature Page to Amended and Restated Support Agreement]


STRATEGIC VALUE PARTNERS, LLC
By:  

/s/ James Dougherty

  Name: James Dougherty
  Title: Chief Financial Officer
STRATEGIC VALUE MASTER FUND, LTD.
By:   Strategic Value Partners, LLC, its Investment Manager
By:  

/s/ James Dougherty

  Name: James Dougherty
  Title: Chief Financial Officer
STRATEGIC VALUE OPPORTUNITIES FUND, L.P.
By:   SVP Special Situations III A, LLC, its Investment Manager
By:  

/s/ James Dougherty

  Name: James Dougherty
  Title: Chief Financial Officer
STRATEGIC VALUE SPECIAL SITUATIONS MASTER FUND IV, L.P.
By:   SVP Special Situations IV, LLC, its Investment Manager
By:  

/s/ James Dougherty

  Name: James Dougherty
  Title: Chief Financial Officer

[Signatures continued on the following page.]

 

[Signature Page to Amended and Restated Support Agreement]


STRATEGIC VALUE SPECIAL SITUATIONS FUND III, L.P.
By:   SVP Special Situations III, LLC, its Investment Manager
By:  

/s/ James Dougherty

  Name: James Dougherty
  Title: Chief Financial Officer
STRATEGIC VALUE SPECIAL SITUATIONS OFFSHORE FUND III, L.P.
By:   SVP Special Situations III, LLC, its Investment Manager
By:  

/s/ James Dougherty

  Name: James Dougherty
  Title: Chief Financial Officer

 

 

[Signature Page to Amended and Restated Support Agreement]


SCHEDULE A

SVP ENTITIES

Strategic Value Master Fund, Ltd.

Strategic Value Opportunities Fund, L.P.

Strategic Value Special Situations Master Fund IV, L.P.

Strategic Value Special Situations Fund III, L.P.

Strategic Value Special Situations Offshore Fund III, L.P.


EXHIBIT A

FORM OF NOMINEE LETTER

[______], 2019

Attention: Board of Directors

Chaparral Energy, Inc.

701 Cedar Lake Boulevard

Oklahoma City, Oklahoma 73114

 

  Re:

Consent

Ladies and Gentlemen:

This letter is delivered pursuant to the Amended and Restated Support Agreement, dated as of December 20, 2019 (the “Agreement”), by and among Strategic Value Partners, LLC, a Delaware limited liability company, and certain investment funds directly or indirectly managed by Strategic Value Partners, LLC, as listed on Schedule A to the Agreement (collectively, “Shareholder”), and Chaparral Energy, Inc., a Delaware corporation (the “Company”). Capitalized terms used herein but not defined shall have the respective meanings set forth in the Agreement.

In connection with the Agreement, I hereby consent to (a) serve as a director on the Board effective December 20, 2019, (b) if nominated by the Company, be named as a nominee for the position of director of the Company in the Company’s proxy statement for the 2020 Annual Meeting and (c) serve as a director if I am so elected at the 2020 Annual Meeting. I also agree that, from the date hereof until the date at which I cease to serve as a director on the Board, I will provide to the Company, as requested by the Company from time to time, such information as the Company is entitled to reasonably receive from other non-management members of the Board that is required to be disclosed in proxy statements or other reports or filings under applicable law or securities exchange listing requirements.

At all times while serving as a member of the Board, I agree to comply with all policies, procedures, processes, codes, rules, standards and guidelines applicable to Board members, including the Company’s Code of Business Conduct and Ethics, securities trading policies, anti-hedging policies, Regulation FD-related policies, director confidentiality policies and corporate governance guidelines, in each case that have been identified to me, and preserve the confidentiality of the Company’s business and information, including discussions or matters considered in meetings of the Board or Board committees, in each case, subject to the terms of the Agreement. I further acknowledge that, consistent with good corporate governance practice, the management of the Company will be conducted by the full Board of Directors, not by an operating committee or steering committee; provided, however, that the Nominating and Governance Committee, the Compensation Committee and the Audit Committee of the Board, shall be responsible for the matters set forth in their respective committee charters on the date hereof. Furthermore, all advisors, counsel and consultants retained by the Company shall be instructed that they are to report to, and take direction, from the Company. [I hereby waive any right to receive compensation for service as a director of the Company pursuant to the Company’s director


compensation policy, including any stock or cash compensation. I acknowledge and agree that the foregoing obligations are in addition to the fiduciary and common law duties of any director of a Delaware corporation.]1

 

Sincerely,

 

 

1 

Note: [The bracketed language will not be included for any Shareholder Designee who is not an officer, or employee of Shareholder or any Shareholder Affiliate.]


EXHIBIT B

FORM OF IRREVOCABLE RESIGNATION

December 20, 2019

Attention: Board of Directors

Chaparral Energy, Inc.

701 Cedar Lake Boulevard

Oklahoma City, Oklahoma 73114

 

  Re:

Resignation

Ladies and Gentlemen:

This irrevocable resignation is delivered pursuant to the Support Agreement, dated as of December 20, 2019 (the “Agreement”), by and among Strategic Value Partners, LLC, a Delaware limited liability company, and certain investment funds directly or indirectly managed by Strategic Value Partners, LLC, as listed on Schedule A to the Agreement (collectively, “Shareholder”), and Chaparral Energy, Inc., a Delaware corporation (the “Company”). Capitalized terms used herein but not defined shall have the respective meanings set forth in the Agreement. Effective only upon, and subject to, (1) such time as Shareholder, together with the Shareholder Affiliates, continues to meet the One Directorship Ownership Condition and the Two Directorship Ownership Condition, or (2) Shareholder or any Shareholder Affiliate breaches in any material respect any of the terms of the Agreement and fails to cure such breach within twenty business days following the receipt of written notice thereof from the Company specifying such breach (it being understood that unintentional breaches of this Agreement that by their nature cannot be reversed or undone shall be deemed to have been cured for purposes hereof if Shareholder or a Shareholder Affiliate has taken commercially reasonable actions to reduce the adverse impact of such breach), I hereby offer to resign from my position as a director of the Company and from any and all committees of the Board on which I serve, with such resignation effective immediately upon a determination by the Board (by vote of the Specified Independent Directors) to accept such resignation in its sole discretion.

This resignation may not be withdrawn by me at any time during which it is effective.

 

Sincerely,
By:  

                 


EXHIBIT C

PRESS RELEASE

Oklahoma City, December 20, 2019 — Chaparral Energy, Inc. (NYSE: CHAP) today announced that its Board of Directors has appointed Charles “Chuck” Duginski as President and Chief Executive Officer, effective December 20, 2019. Mr. Duginski succeeds K. Earl Reynolds in those roles as Mr. Reynolds has resigned to pursue other interests. Mr. Duginski is also joining the Board of Directors as are Michael Kuharski and Mark “Mac” McFarland. Matthew Cabell is stepping down from the Board.

“We believe Chuck will bring strong leadership and a fresh perspective to Chaparral’s business in the STACK and Merge while at the same time benefitting from the valuable insights of the Chaparral team,” said Chaparral’s Chairman of the Board Marc Rowland. “With over 25 years of experience, he is a seasoned industry veteran, and we look forward to leveraging his expertise and leadership as we continue to create value for our shareholders.”

Mr. Duginski most recently served as Chief Operating Officer, Senior Vice President, and board member of Tapstone Energy, LLC. Prior to joining Tapstone, Mr. Duginski served as Chief Operating Officer of Echo Energy. He also served as Vice President – Southern Region Production of Continental Resources, Inc., where he had operational and technical responsibility for the Anadarko Basin. Before Continental, Mr. Duginski held various positions of increasing responsibility at Chesapeake Energy Corporation, including District Manager – Haynesville, then Vice President – Haynesville/Barnett Business Unit. Mr. Duginski began his career in technical roles at Mobil Oil and ExxonMobil and holds a Bachelor of Science in Mechanical Engineering from the University of Oklahoma.

“I am honored to be asked to join and lead the Chaparral team,” Mr. Duginski added. “Opportunities in this basin abound, and I am confident that, with keen focus on technical and operational excellence, safe operations, and improved cost structure, Chaparral will create value even in this challenging upstream environment.”

Mr. Kuharski is a Director on the North American Investment Team of Strategic Value Partners, LLC (“SVP”), Chaparral’s largest shareholder. Prior to joining SVP in 2017, Mr. Kuharski worked with Eaton Park Capital Management where he was an Investment Advisor on the US Fundamental Team, focused on investing across the capital structure in a range of industries. He has also worked at York Capital Management, KKR & Co. and Merrill Lynch. He received a Bachelor of Arts in each of Finance and Economics from the University of St. Thomas and earned his MBA at Harvard Business School.

Mr. McFarland has led organizations and business units in the energy industry for two decades. He is currently Executive Chairman of GenOn Energy Inc. and serves on the board of TerraForm Power (NASDAQ GS: TERP), where he sits on the Audit and Nominating and Governance Committees. Previously, he was President and CEO of GenOn and, before that, Chief Executive Officer of Luminant, a subsidiary of Energy Future Holdings Corp. He has a Bachelor of Science from Virginia Tech University and an MBA from the University of Delaware.


About Chaparral

Chaparral Energy (NYSE: CHAP) is an independent oil and natural gas exploration and production company headquartered in Oklahoma City. Founded in 1988, Chaparral is a pure-play operator focused in Oklahoma’s highly economic STACK Play, where it has approximately 131,000 net acres primarily in Kingfisher, Canadian and Garfield counties. The company has approximately 260,000 net surface acres in the Mid-Continent region. For more information, visit chaparralenergy.com.


EXHIBIT D

SECOND AMENDED AND RESTATED BYLAWS

[Filed as Exhibit 3.1 to the Company’s Current Report

on Form 8-K to which this Agreement is filed as an Exhibit.]

Exhibit 99.2

Execution Version

AMENDED AND RESTATED SUPPORT AGREEMENT

This Amended and Restated Support Agreement (this “Agreement”), dated as of December 20, 2019, is by and among Contrarian Capital Management, L.L.C., a Delaware limited liability company, and certain private investment funds directly or indirectly managed by Contrarian Capital Management, L.L.C., as listed on Schedule A hereto (collectively, “Shareholder” and each individually, a “member” of Shareholder), and Chaparral Energy, Inc. (the “Company”).

RECITALS

WHEREAS, the Company and Shareholder have entered into that certain Support Agreement, dated August 8, 2018 (the “Existing Agreement”), pursuant to which the parties agreed to certain matters in respect of the Board of Directors of the Company (the “Board”) and certain other matters, as provided in the Existing Agreement;

WHEREAS, the Company and Shareholder have engaged in various discussions and communications concerning the Company’s business, financial performance and other matters;

WHEREAS, Shareholder has informed the Company that it Beneficially Owns 4,101,950 shares of Class A Common Stock, $0.01 par value, of the Company (the “Common Stock”), which represents approximately 8.84% of the issued and outstanding shares of Common Stock;

WHEREAS, contemporaneously with the execution hereof, the Company and Strategic Value Partners, LLC (“SVP”) are entering into an amendment and restatement to the Support Agreement between those two parties dated June 6, 2018 (as amended and restated, the “SVP Support Agreement”), pursuant to which the number of individuals SVP is entitled to designate for appointment to the Board has been increased from one to two, on the terms and subject to the conditions set forth therein; and

WHEREAS, the Company has determined that it is in the best interests of the Company and its shareholders and Shareholder has determined that it is in its best interests to come to an agreement with respect to certain matters in respect of the Board of Directors of the Company (the “Board”) and certain other matters, as provided in this Agreement;

NOW, THEREFORE, in consideration of and reliance upon the mutual covenants and agreements contained herein, and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto agree as follows:

 

1.

Board Representation and Board Matters. Effective as of the date and time that the SVP Support Agreement has been executed and delivered by the parties thereto (the “Effective Time”), Shareholder shall no longer have any rights to designate any Shareholder Designees (as defined in the Existing Agreement).


2.

Standstill and Voting Obligations.

 

  (a)

Shareholder agrees that, from the Effective Time until the earlier of (A) completion of the Company’s 2020 annual meeting of shareholders (the “2020 Annual Meeting”); or (B) a material breach by the Company of its obligations under this Agreement that is not cured within twenty business days after receipt by the Company of written notice from Shareholder specifying the material breach (it being understood that unintentional breaches of this Agreement that by their nature cannot be reversed or undone shall be deemed to have been cured for purposes hereof if the Company has taken commercially reasonable actions to reduce the adverse impact of such breach) (the “Standstill Period”), no member of Shareholder shall, directly or indirectly, and each member of Shareholder shall cause each Shareholder Affiliate not to, directly or indirectly, take any of the actions set forth below; provided, however, that the restrictions set forth in Sections 2(a)(ii), 2(a)(iv), 2(a)(v) (solely as it relates to any special meeting of stockholders) and 2(a)(viii) (solely as it relates to such Sections) shall not expire until the date that is 90 days after completion of the 2020 Annual Meeting:

 

  (i)

acquire, offer or seek to acquire, agree to acquire or acquire rights to acquire (except by way of stock dividends or other distributions or offerings made available to holders of voting securities of the Company generally on a pro rata basis), directly or indirectly, whether by purchase, tender or exchange offer, through the acquisition of control of another person, by joining a group, through swap or hedging transactions or otherwise, any voting securities of the Company (other than through a broad-based market basket or index) or any voting rights decoupled from the underlying voting securities that would result in the beneficial ownership of 15% or more than of the then-outstanding shares of the Common Stock in the aggregate;

 

  (ii)

engage in a “solicitation” of “proxies” (as such terms are defined under the Exchange Act) or written consents of stockholders with respect to, or from the holders of, the Voting Securities (other than any Shareholder Affiliate), for the election of individuals to the Board or to approve stockholder proposals, or become a “participant” (as such term is defined in Instruction 3 to Item 4 of Schedule 14A promulgated under the Exchange Act) in any contested “solicitation” for the election of directors with respect to the Company (as such terms are defined under the Exchange Act) (other than a “solicitation” or acting as a “participant” in support of the nominees of the Board at any stockholder meeting or voting its shares at any such meeting in its sole discretion, or providing such encouragement, advice or influence that is consistent with Company management’s recommendation in connection with such director nominees);

 

  (iii)

form or join a “group” as defined under Section 13(d) of the Exchange Act with respect to the Voting Securities (excluding, for the avoidance of doubt, any group composed solely of Shareholder and Shareholder Affiliates);

 

2


  (iv)

support or participate in any effort by any person or entity not a party to this Agreement (a “Third Party”) with respect to the matters set forth in Section 2(a)(ii) of this Agreement;

 

  (v)

present at any annual meeting or any special meeting of the Company’s stockholders or through action by written consent any proposal for consideration for action by stockholders or seek the removal of any member of the Board or propose any nominee for election to the Board or seek representation on the Board except as set forth herein;

 

  (vi)

grant any proxy, consent or other authority to vote with respect to any matters (other than to the named proxies included in the Company’s proxy card for any annual meeting or special meeting of stockholders) or deposit any Voting Securities of the Company in a voting trust or subject them to a voting agreement or other arrangement of similar effect with respect to any annual or special meeting or action by written consent (excluding customary brokerage accounts, margin accounts, prime brokerage accounts and the like), including, without limitation, lend any securities of the Company to any person or entity for the purpose of allowing such person or entity to vote such securities in connection with any stockholder vote or consent of the Company;

 

  (vii)

engage in any short sale or any purchase, sale or grant of any option, warrant, convertible security, stock appreciation right, or other similar right (including any put or call option, “swap” or hedging transaction with respect to any security (other than a broad based market basket or index)) that includes, relates to or derives any significant part of its value from a decline in the market price or value of the securities of the Company or encourage, initiate or support any person or entity in any such activity; or

 

  (viii)

request, directly or indirectly, any amendment or waiver of the foregoing in a manner that would be reasonably likely to require public disclosure by Shareholder or the Company;

provided that the restrictions in this Section 2(a) shall not prevent Shareholder or any Shareholder Affiliate from making (a) any factual statement as and to the extent required by applicable legal process, subpoena, or legal requirement from any governmental or regulatory authority with competent jurisdiction over the party from whom information is sought (so long as such request did not arise as a result of discretionary acts by Shareholder or any of the Shareholder Affiliates); and (b) any confidential communication to the Company that would not be reasonably likely to require public disclosure by Shareholder, any Shareholder Affiliate or the Company.

 

3


  (b)

Until the end of the Standstill Period, Shareholder and the Shareholder Affiliates shall cause all Voting Securities owned by them directly or indirectly, whether owned of record or Beneficially Owned, as of the record date for any annual or special meeting of shareholders or in connection with any solicitation of shareholder action by written consent (each a “Shareholders Meeting”) within the Standstill Period, in each case that Shareholder and the Shareholder Affiliates are entitled to vote at any such Shareholders Meeting, to be present for quorum purposes and to be voted, at all such Shareholders Meetings or at any adjournments or postponements thereof, (i) for the election of the directors or director nominees who are nominated by the Board for election at such Shareholders Meeting and (ii) in accordance with the recommendation of the Board on any other proposals or other business that comes before the 2020 Annual Meeting (other than any proposals relating to (1) amendments to the Company’s articles of incorporation or other organizational documents, (2) mergers, acquisitions, asset sales or purchases, recapitalizations, or other business combinations or extraordinary transactions, or (3) the issuance of Company equity securities or any securities convertible into, or exercisable or exchangeable for Company equity securities, each of which may be voted by Shareholder and the Shareholder Affiliates in their own discretion).

 

3.

[Reserved]

 

4.

Confidentiality Agreement. The parties hereby agree that, notwithstanding any other provision of this Agreement to the contrary, if so requested by either party and agreed to by the other, Shareholder may be provided confidential information in accordance with and subject to the terms of a confidentiality agreement in a form to be agreed among the parties (the “Confidentiality Agreement”). Shareholder acknowledges and agrees that (i) until such time as the Confidentiality Agreement becomes effective, neither Shareholder nor any of the Shareholder Affiliates (excluding the Shareholder Designee) will request to receive (other as set forth in the previous sentence in connection with a request to enter into the Confidentiality Agreement), or knowingly and willingly accept, any confidential information concerning the Company, its subsidiaries or their respective businesses and (ii) non-public materials provided to the Board and communications relating thereto shall be deemed confidential information.

 

5.

Mutual Non-Disparagement. During the Standstill Period, Shareholder and the Company agree to not make, or cause to be made, and to cause each of their respective officers, directors, members, and employees not to make (whether directly or indirectly through any Affiliate), any public statement or announcement that relates to and constitutes an ad hominem attack on, or relates to and otherwise disparages, the other party or their respective business, operations or financial performance, officers, members, partners or directors or any person who has served as an officer, member, partner or director of the other party in the past, or who serves as an officer, director, partner or agent of the other party (a) in any document or report filed with or furnished to the SEC or any other governmental agency, (b) in any press release or other publicly available format or (c) to any journalist or member of the media (including without limitation, in a television, radio, internet, newspaper or magazine interview).

 

4


6.

Representations and Warranties of All Parties. Each of the parties represents and warrants to the other party that: (a) such party has all requisite power and authority to execute and deliver this Agreement and to perform its obligations hereunder; (b) this Agreement has been duly and validly authorized, executed and delivered by it and is a valid and binding obligation of such party, enforceable against such party in accordance with its terms; and (c) this Agreement will not result in a violation of any terms or conditions of any agreements to which such person is a party or by which such party may otherwise be bound or of any law, rule, license, regulation, judgment, order or decree governing or affecting such party.

 

7.

Representations and Warranties of Shareholder. Each member of Shareholder represents and warrants that, as of the date of this Agreement, (a) Shareholder, together with all of the Shareholder Affiliates, Beneficially Owns, directly or indirectly, an aggregate of 4,101,950 shares of Common Stock; and (b) except for such ownership, no member of Shareholder, individually or in the aggregate with all other members of Shareholder and the Shareholder Affiliates, has any other Beneficial Ownership of any Voting Securities, including through any derivative transaction described in the definition of “Beneficial Ownership” below.

 

8.

Mutual Releases.

 

  (a)

Effective as of the Effective Time, subject to the limitations set forth in Section 8(c), the Company on behalf of itself and, except for Shareholder and the Shareholder Affiliates, for each of its direct and indirect Affiliates, subsidiaries, subdivisions, successors, predecessors, shareholders, partners, members, managers and assigns, and their present and former officers, directors, legal representatives, employees, agents, and attorneys and other professionals, and their heirs, executors, administrators, trustees, successors and assigns (collectively, “Company Releasing Parties”), hereby irrevocably releases and forever discharges and covenants not to sue: (w) Shareholder and the Shareholder Affiliates or any of their respective direct or indirect Subsidiaries or Affiliates, excluding the Company and its subsidiaries (collectively, the “Shareholder Group”), (x) each of the present and former directors and officers of each member of the Shareholder Group, (y) each of the respective direct and indirect parent companies, Affiliates, subsidiaries, subdivisions, successors, predecessors, affiliated management companies, funds or vehicles advised directly or indirectly by any such affiliated management companies, shareholders, members, managers, partners and assigns (collectively with respect to any Person, the Persons in this clause (y), the “Related Entities”) of any member of the Shareholder Group, and (z) each of the present and former Related Entities, officers, directors, managing and executive directors, managers or members of the boards of managers, partners, legal representatives, managers, employees, agents, professional and financial advisors and sub-advisors, investment bankers, accountants, attorneys and other professionals of the persons identified in clauses (x) and (y) immediately above, and the family members, estates, assets, trusts, heirs, executors, administrators, trustees, successors and assigns of the Persons identified in clauses (w), (x), (y) and (z) immediately above (collectively all of the foregoing released Persons in this Section 8, the “Shareholder Released Parties”) of and from any and all claims, causes of action, suits, remedies, debts, liabilities, losses, demands, rights, obligations, damages, expenses, attorneys’ or other

 

5


  professionals’ fees whatsoever then existing or thereafter arising, whether based on or sounding in or alleging (in whole or in part) tort, contract, negligence, strict liability, contribution, subrogation, respondeat superior, violations of federal or state securities laws, breach of fiduciary duty, any other legal theory or otherwise, whether individual, class, direct or derivative in nature, liquidated or unliquidated, fixed or contingent, whether at law or in equity, whether based on federal, state or foreign law or right of action, foreseen or unforeseen, matured or unmatured, known or unknown, disputed or undisputed, accrued or not accrued, or otherwise (collectively, “Company Claims”), that the Company Releasing Parties have, had or can, shall or may now or hereafter have against the Company Released Parties, from the beginning of time up to and through the Effective Time, that arise out of, relate to, or are in any way connected with the Company. For the avoidance of doubt, neither the Company nor any subsidiary thereof is included the Shareholder Group or as a Shareholder Released Party.

 

  (b)

Effective as of the Effective Time, subject to the limitations set forth in Section 8(d), Shareholder, on behalf of itself and, except for the Company and its subsidiaries, for each of its direct and indirect Affiliates, subsidiaries, subdivisions, successors, predecessors, shareholders, partners, members, managers and assigns, and their present and former officers, directors, legal representatives, employees, agents, and attorneys and other professionals, and their heirs, executors, administrators, trustees, successors and assigns (collectively, the “Shareholder Releasing Parties”), hereby irrevocably releases and forever discharges and covenants not to sue: (w) the Company, (x) each of the present and former directors and officers of each of Company and the direct or indirect subsidiaries or Affiliates thereof, (y) each of the Related Entities of the Persons identified in clause (w), and (z) each of the present and former Related Entities, officers, directors, managing and executive directors, managers or members of the boards of managers, partners, legal representatives, managers, employees, agents, professional and financial advisors and sub-advisors, investment bankers, accountants, attorneys and other professionals of the Persons identified in clauses (x) and (y) immediately above, and the family members, estates, assets, trusts, heirs, executors, administrators, trustees, successors and assigns of the Persons identified in clauses (w), (x), (y) and (z) immediately above (collectively all of the foregoing released Persons in this Section 8(b), the “Company Released Parties”) of and from any and all claims, causes of action, suits, remedies, debts, liabilities, losses, demands, rights, obligations, damages, expenses, attorneys’ or other professionals’ fees whatsoever then existing or thereafter arising, whether based on or sounding in or alleging (in whole or in part) tort, contract, negligence, strict liability, contribution, subrogation, respondeat superior, violations of federal or state securities laws, breach of fiduciary duty, any other legal theory or otherwise, whether individual, class, direct or derivative in nature, liquidated or unliquidated, fixed or contingent, whether at law or in equity, whether based on federal, state or foreign law or right of action, foreseen or unforeseen, matured or unmatured, known or unknown, disputed or undisputed, accrued or not accrued, or otherwise (collectively, “Shareholder Claims” and, together with Company Claims, “Claims”), that the Company Releasing Parties have, had, or can, shall or may now or hereafter have against the Company Released Parties, from the beginning of time up to and through the Effective Time, that arise out of, relate to, or are in any way connected with the Company.

 

6


  (c)

Notwithstanding anything to the contrary contained in this Section 8, the Company Released Parties will remain liable to the Shareholder Releasing Parties, with respect to the liabilities and obligations, if any, they may have to the Shareholder Releasing Parties, (i) pursuant to this Agreement, the Confidentiality Agreement or any other agreement or document executed or delivered pursuant to or in connection with this Agreement and (ii) any rights any Shareholder Releasing Party may have to indemnification or advancement or reimbursement of expenses under any D&O policy, indemnification agreement or pursuant to the organizational documents of the Company or any of its Subsidiaries or employee benefit plan or related trust thereof (in each case, for the avoidance of doubt, as amended from time to time).

 

  (d)

Notwithstanding anything to the contrary contained in this Section 8, the Shareholder Released Parties will remain liable to the Company Releasing Parties, with respect to the liabilities and obligations, if any, they may have to the Company Releasing Parties pursuant to this Agreement, the Confidentiality Agreement or any other agreement or document executed or delivered pursuant to or in connection with this Agreement (in each case, for the avoidance of doubt, as amended from time to time).

 

  (e)

Notwithstanding anything to the contrary contained in this Section 8, no Shareholder Releasing Party or Company Releasing Party is waiving or being required to waive any Claim with respect to any actual and intentional fraud by any other Person, or any right that cannot be waived under applicable Law, and nothing contained in this Release will be construed as an admission by any Shareholder Releasing Party or Company Releasing Party of any liability of any kind to any Person.

 

  (f)

Each of the undersigned, as a Shareholder Releasing Party or a Company Releasing Party (each, a “Releasor”), on behalf of himself, herself or its itself and each other Shareholder Releasing Party or Company Releasing Party, as applicable, that is a Related Entity of such Releasor, hereby waives any and all rights under Section 1542 of the Civil Code of California, and any similar Law, rule, provision or statute of Delaware, New York or any other jurisdiction, which states in full (or otherwise in substance) as follows:

A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS THAT THE CREDITOR OR RELEASING PARTY DOES NOT KNOW OR SUSPECT TO EXIST IN HIS OR HER FAVOR AT THE TIME OF EXECUTING THE RELEASE AND THAT, IF KNOWN BY HIM OR HER, WOULD HAVE MATERIALLY AFFECTED HIS OR HER SETTLEMENT WITH THE DEBTOR OR RELEASED PARTY.

 

7


Each Releasor, on behalf of himself, herself or itself and each other Shareholder Releasing Party or Company Releasing Party, as applicable, that is a Related Entity of such Releasor, hereby knowingly and willingly waives the provisions of Section 1542 of the Civil Code of California and any similar Law, rule, provision or statute of Delaware, New York or any other jurisdiction that operates to bar the release of unknown claims, and acknowledges and agrees that this waiver is an essential and material term of this release and this Agreement. In particular, each Releasor, on behalf of himself, herself or itself and each other Shareholder Releasing Party or Company Releasing Party, as applicable, that is a Related Entity of such Releasor, hereby acknowledges that it has reviewed this Release with its legal counsel, and each Releasor understands and acknowledges the significance and consequences of this Release and, in particular, of the waiver provided in this Section 8(f).

 

9.

Certain Defined Terms. For purposes of this Agreement:

 

  (a)

Affiliate” shall have the meaning set forth in Rule 12b-2 promulgated by the SEC under the Exchange Act.

 

  (b)

Associate” shall have the meaning set forth in Rule 12b-2 promulgated by the SEC under the Exchange Act.

 

  (c)

Beneficially Own,” “Beneficial Owner”, and “Beneficial Ownership” shall have the same meaning as set forth in Rule 13d-3 under the Exchange Act.

 

  (d)

Exchange Act” shall mean the Securities Exchange Act of 1934, as amended.

 

  (e)

The terms “person” or “persons” shall mean any individual, corporation (including not-for-profit), general or limited partnership, limited liability or unlimited liability company, joint venture, estate, trust, association, organization or other entity of any kind or nature.

 

  (f)

SEC” shall mean the Securities and Exchange Commission.

 

  (g)

Voting Securities” shall mean the Common Stock, and any other securities of the Company entitled to vote in the election of directors, or securities convertible into, or exercisable or exchangeable for Common Stock or other securities entitled to vote in the election of directors, whether or not subject to the passage of time or other contingencies.

 

10.

Miscellaneous. The parties hereto recognize and agree that if for any reason any of the provisions of this Agreement are not performed in accordance with their specific terms or are otherwise breached, immediate and irreparable harm or injury would be caused for which money damages would not be an adequate remedy. Accordingly, the parties hereto shall be entitled to seek an injunction or injunctions to prevent breaches of this Agreement, to enforce specifically the terms and provisions of this Agreement exclusively in the Court of Chancery of the State of Delaware or, if such court shall not have jurisdiction, any state or federal court sitting in the State of Delaware, in addition to any other remedies at law or in equity, and each party agrees it will not take any action,

 

8


  directly or indirectly, in opposition to another party seeking or obtaining such relief, and it will not allege, and each party hereby waives the defense, that there is an adequate remedy at law. Each of the parties hereto agrees to waive any bonding requirement under any applicable law, in the case any other party seeks to enforce the terms by way of equitable relief. Furthermore, each of the parties hereto (a) consents to submit itself to the personal jurisdiction of the Court of Chancery of the State of Delaware and the federal and other state courts sitting in the State of Delaware in the event any dispute arises out of this Agreement or the transactions contemplated by this Agreement, (b) agrees that it shall not attempt to deny or defeat such personal jurisdiction by motion or other request for leave from any such court, and (c) agrees that it shall not bring any action relating to this Agreement or the transactions contemplated by this Agreement in any court other than such federal or state courts of the State of Delaware, and each of the parties irrevocably waives the right to trial by jury. THIS AGREEMENT SHALL BE GOVERNED IN ALL RESPECTS, INCLUDING VALIDITY, INTERPRETATION AND EFFECT, BY THE LAWS OF THE STATE OF DELAWARE APPLICABLE TO CONTRACTS EXECUTED AND TO BE PERFORMED WHOLLY WITHIN SUCH STATE WITHOUT GIVING EFFECT TO ANY CONFLICT OR CHOICE OF LAW PRINCIPLES THAT MAY RESULT IN THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION.

 

11.

No Waiver. Any waiver by any party of a breach of any provision of this Agreement shall not operate as or be construed to be a waiver of any other breach of such provision or of any breach of any other provision of this Agreement. The failure of a party to insist upon strict adherence to any term of this Agreement on one or more occasions shall not be considered a waiver or deprive that party of the right thereafter to insist upon strict adherence to that term or any other term of this Agreement.

 

12.

Entire Agreement. This Agreement contains the entire understanding of the parties with respect to the subject matter hereof and may be amended only by an agreement in writing executed by the parties hereto; provided, however, that any waiver or amendment hereof by the Company must be approved by a majority of the Whole Board (as defined in the bylaws of the Company).

 

13.

Notices. All notices, consents, requests, instructions, approvals and other communications provided for herein and all legal process in regard hereto shall be in writing and shall be deemed validly given, made or served, if (a) given by email, when email is sent to the email address set forth below and the appropriate confirmation is received or (b) if given by any other means, when actually received during normal business hours at the address specified below in this Section 13:

if to the Company:

Chaparral Energy, Inc.

701 Cedar Lake Boulevard

Oklahoma City, Oklahoma 73114

Attention: Corporate Secretary

Email: justin.byrne@chaparralenergy.com

 

9


With a copy (which shall not constitute notice) to:

Sidley Austin LLP

1000 Louisiana St., Suite 5900

Houston, Texas 77019

Attention: J. Mark Metts

Email: mmetts@sidley.com

if to Shareholder:

Contrarian Capital Management, L.L.C.

411 West Putnam Ave., Suite 425

Greenwich, CT 06830

Attention: Peter Zuckerman

Email: pzuckerman@contrariancapital.com

 

14.

Severability. If at any time subsequent to the date hereof, any provision of this Agreement shall be held by any court of competent jurisdiction to be illegal, void or unenforceable, such provision shall be of no force and effect, but the illegality or unenforceability of such provision shall have no effect upon the legality or enforceability of any other provision of this Agreement.

 

15.

Counterparts. This Agreement may be executed in two or more counterparts which together shall constitute a single agreement.

 

16.

Successors and Assigns. This Agreement shall not be assignable by any of the parties to this Agreement. This Agreement, however, shall be binding on successors of the parties hereto.

 

17.

No Third Party Beneficiaries. This Agreement is solely for the benefit of the parties hereto and is not enforceable by any other persons, except for the Company Released Parties and the Shareholder Released Parties pursuant to Section 8.

 

18.

Fees and Expenses. Each party will bear its own costs, fees and expenses in connection with this Agreement.

 

19.

Interpretation and Construction. Each of the parties hereto acknowledges that it has been represented by counsel of its choice throughout all negotiations that have preceded the execution of this Agreement, and that it has executed the same with the advice of said independent counsel. Each party and its counsel cooperated and participated in the drafting and preparation of this Agreement and the documents referred to herein, and any and all drafts relating thereto exchanged among the parties shall be deemed the work product of all of the parties and may not be construed against any party by reason of its drafting or preparation. Accordingly, any rule of law or any legal decision that would require interpretation of any ambiguities in this Agreement against any party that drafted or prepared it is of no application and is hereby expressly waived by each of the parties hereto, and any controversy over interpretations of this Agreement shall be decided

 

10


without regards to events of drafting or preparation. The Section headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. The term “including” shall be deemed to mean “including without limitation” in all instances. Any share numbers set forth in this Agreement shall be adjusted as necessary for any stock splits, stock dividends, reverse stock splits, recapitalizations or similar events (other than stock buybacks or repurchases).

[Signature Pages Follow; Remainder of Page Intentionally Left Blank]

 

11


IN WITNESS WHEREOF, each of the parties hereto has executed this Agreement, or caused the same to be executed by its duly authorized representative as of the date first above written.

 

CHAPARRAL ENERGY, INC.
By:  

/s/ Justin Byrne

  Justin Byrne
  Vice President and General Counsel

[Signatures continued on the following page.]

 

 

[Signature Page to Amended and Restated Support Agreement]


Contrarian Advantage-B, L.P.
Contrarian Capital Trade Claims, L.P.
Contrarian Capital Senior Secured, L.P.
Contrarian Opportunity Fund, L.P.
Contrarian Centre Street Partnership, L.P.
Contrarian Dome du Gouter Master Fund, LP
Contrarian Distressed Equity Fund, L.P.
Contrarian Capital Fund I, L.P.
By: Contrarian Capital Management, L.L.C., as Investment Manager
By:  

/s/ Jon R. Bauer

  Name: Jon R. Bauer
  Title: Managing Member

 

 

[Signature Page to Amended and Restated Support Agreement]


SCHEDULE A

CONTRARIAN ENTITIES

Contrarian Advantage-B, L.P.

Contrarian Capital Trade Claims, L.P.

Contrarian Capital Senior Secured, L.P.

Contrarian Opportunity Fund, L.P.

Contrarian Centre Street Partnership, L.P.

Contrarian Dome du Gouter Master Fund, LP

Contrarian Distressed Equity Fund, L.P.

Contrarian Capital Fund I, L.P.

Exhibit 99.3

Execution Version

SEPARATION AND RELEASE AGREEMENT

This Separation and Release Agreement (this “Agreement”) is by and between Chaparral Energy, L.L.C. (the “Employer”), Chaparral Energy, Inc. (the “Company”), and K. Earl Reynolds (“Executive”).

RECITALS

WHEREAS, Executive has been employed by the Employer as its Chief Executive Officer and President;

WHEREAS, Executive entered into an Amended and Restated Employment Agreement with the Employer and the Company effective as of March 17, 2017 (the “Employment Agreement”) (capitalized terms used but not defined herein shall have the respective meanings set forth in the Employment Agreement);

WHEREAS, Executive has submitted his resignation, pursuant to which he has voluntarily resigned as Chief Executive Officer, President and director, as well as from all other positions Executive holds with the Company, the Employer or any affiliate thereof (other than as an employee of the Employer), effective as of the acceptance of such resignation by the Company’s Board of Directors (the “Board”), and it is contemplated that such resignation will be accepted within one business day after the date hereof;

WHEREAS, Executive has submitted a separate resignation pursuant to which he has voluntarily resigned from his employment with the Employer effective as of December 27, 2019; and

WHEREAS, the parties desire to enter into this Agreement to reflect their mutual undertakings, promises, and agreements concerning the ending of Executive’s employment with the Employer and payments and benefits to Executive upon or by reason of such ending;

NOW, THEREFORE, in exchange for the valuable consideration paid or given under this Agreement, the receipt, adequacy and sufficiency of which are acknowledged, the parties knowingly and voluntarily agree to the following terms:

1. Date of Termination; Effect of Separation. Unless terminated earlier in accordance with Section 2 below, Executive’s employment with the Employer shall terminate effective as of December 27, 2019 due to his voluntary resignation. The parties acknowledge and agree that such resignation constitutes a resignation by Executive without Good Reason. The final day of Executive’s employment with the Employer shall be referred to as the “Date of Termination” for purposes of this Agreement. Effective as of the Date of Termination, Executive shall voluntarily resign, and does hereby voluntarily resign, from all positions (including, without limitation, any director and officer positions), if any, he held with the Employer, the Company, and their respective affiliates. For purposes of this Agreement, “affiliate” means, with respect to the Employer or the Company, any person that directly, or indirectly through one or more intermediaries, controls, is controlled by, or is under common control with, the Employer or the Company. As of the Date of Termination, Executive shall also experience a separation from service from the Employer, the Company, and their affiliates within the meaning of Section 409A (“Section 409A”) of the Internal Revenue Code of 1986 (the “Code”), as amended.


2. Duties and Responsibilities During Transition Period. During the period between the Effective Date and December 27, 2019 (the “Transition Period”), Executive shall remain employed by the Employer, but he will not be an officer or director of the Company, the Employer or any of their affiliates. During the Transition Period, Executive shall cooperate fully and completely with the Employer, at its request, in all matters in which it requests assistance, including, without limitation, in all matters relating to the performance and transition of his duties, responsibilities, and authorities for the Employer, the Company, and their respective affiliates. This obligation includes but is not limited to Executive promptly responding to telephone calls, e-mails, text messages, and other communications from the Employer and its employees and meeting with employees of the Employer at reasonable times upon their request, and promptly providing any reasonably requested assistance and performing any reasonably requested duties to the best of his ability. In addition to the other conditions in this Agreement, the obligation of the Employer and the Company to provide the Separation Benefits (as defined below) to Executive is subject to the condition that the Employer not terminate Executive’s employment for Cause at any time, including, without limitation, during the Transition Period. If the Employer terminates Executive’s employment for Cause, then, notwithstanding any other provision of this Agreement, the Employer and the Company shall have no obligation to provide Executive with the Separation Benefits and the rights and obligations of the parties shall be those that are set forth in the Employment Agreement and relate to a termination of Executive’s employment for Cause.

3. Termination of Employment Agreement and Continuing Obligations.

(a) The Employment Agreement shall be terminated without further action of the parties as of the Date of Termination. Accordingly, as of the Date of Termination, the Employer, the Company, and their affiliates shall have no further liabilities, obligations, or duties to Executive, and Executive shall forfeit all remaining rights and benefits, under the Employment Agreement, except as otherwise provided in this Agreement. Notwithstanding the previous two sentences, the post-termination rights and obligations of the parties that continue by their terms under the Employment Agreement, including, without limitation, the Continuing Obligations (as defined below), shall continue in full force and effect according to their terms notwithstanding the termination of Executive’s employment with the Employer, the termination of the Employment Agreement, or the execution of this Agreement. Executive acknowledges and agrees that he has fully complied with such Continuing Obligations at all times before he signs this Agreement and that he intends to, and shall, fully comply with such Continuing Obligations after he signs this Agreement.

(b) The term “Continuing Obligations” collectively refers to the obligations set forth in the Employment Agreement in Section 9 (Confidential Information; Non-Solicitation; Non-Competition); Section 11 (Indemnification and Insurance); Section 12 (Arbitration; Legal Fees and Expenses); Section 13 (Maximum Payments by the Company); Section 14 (Agreement Binding on Successors); Section 15 (Notice); Section 16 (Section 409A); Section 17 (Withholding); Section 18 (Miscellaneous); Section 19 (Validity); Section 22 (Entire Agreement); and Section 23 (Further Assurances) thereof; provided, however, that (i) the provisions of Section 9(a) of the Employment Agreement are hereby amended and restated in their entirety as set forth in Exhibit A hereto; (ii) the provisions of Section 9(b) of the Employment Agreement are hereby amended and restated in their entirety as set for in Exhibit B hereto; and (iii) the provisions of Section 9(c) shall not be considered Continuing Obligations under this Agreement and the Parties agree that Executive shall not be bound by the provisions of Section 9(c) of the Employment Agreement.

 

2


4. Final Pay and Benefits. In full accordance with Section 7(c) of the Employment Agreement, Executive shall receive the following payments and benefits in accordance with the Employment Agreement and the existing policies of the Employer, the Company, or their affiliates, or at the sole discretion of the Employer, the Company, or their affiliates, pursuant to his employment with the Employer and his participation in the employee benefit plans of the Employer, the Company, or their affiliates:

(a) Accrued Obligations. The Company will pay to Executive the aggregate amount of Executive’s Accrued Obligations, which the parties agree consist of the following:

(i) the unpaid portion, if any, of Executive’s Base Salary from the Employer’s most recent regular payroll date through Effective Date to the Date of Termination;

(ii) unused vacation owed to Executive as of the Date of Termination under the Employer’s vacation policy and the Employment Agreement, which the parties agree is 295.76 hours less any such vacation hours actually used by Executive after the Employer’s most recent regular payroll date and prior to the Date of Termination;

(iii) reimbursement for all unpaid reasonable business expenses properly incurred by Executive before the Date of Termination in accordance with the Company’s policies and supported by appropriate substantiating documentation within 30 days after the Date of Termination;

The payments described above in this Section 4(a) are subject to applicable taxes and withholdings. The payments described in Sections 4(a)(i), Section 4(a)(ii) and Section 4(a)(iii) shall be delivered to Executive within 30 days following the Date of Termination. Other than as provided in the immediately preceding sentence and in Section 5 below, Executive shall not receive any commissions, bonuses, or other forms or remuneration or compensation in connection with his employment with the Employer or any other arrangement with the Employer, the Company, or their affiliates after the Date of Termination.

(b) Vested 401(k) Plan Benefits. Following the Date of Termination, Executive shall receive payment or other entitlement, in accordance with the terms of the applicable plan or as required by applicable law, of any benefits under the 401(k) plan maintained by the Employer or its affiliates to which he has a vested entitlement as of the Date of Termination.

(c) Right to Continue Certain Insurance Benefits. Executive shall have the right to continue after the Date of Termination his group health, dental, and vision insurance benefits, if any, for himself and his dependents, at his own expense (except as provided below in Section 5 of this Agreement) in accordance with the Consolidated Omnibus Budget Reconciliation Act (“COBRA”). Executive should complete an insurance continuation election form, which will be furnished to him under separate cover, and timely return it if he wishes to apply to continue his insurance coverage under COBRA.

 

3


(d) Restricted Share Awards. Subject to the vesting, forfeiture, and other terms and conditions of the Company’s Management Incentive Plan dated as of August 9, 2017 (the “MIP”), and the Company’s 2019 Long-Term Incentive Plan (the “LTIP” and, together with the MIP, the “Plans”) and the applicable award agreements under the MIP or the LTIP, as applicable (the “Award Agreements”), Executive has been granted the following shares of the Company’s Common Stock (as defined in the Plans) (collectively, the “Restricted Shares”):

 

Grant

Date

  

Vesting Dates

(in each case, subject to continued

employment through such date)

   Share
Originally
Granted
     Unvested
Shares
     Performance-
or Time-

Based
 
8/9/2017    On the 1st, 2nd and 3rd anniversaries of the Grant Date one-third of the performance units multiplied by a factor ranging from 0 to 1.5 will vest, subject to the achievement of certain performance criteria.      131,198        43,733        Performance  
8/9/2017    1/3 each on the 1st, 2nd and 3rd anniversaries of the Grant Date      393,594        131,198        Time  
8/30/2019    On the 1st, 2nd and 3rd anniversaries of the Grant Date one-third of the performance units multiplied by a factor ranging from 0 to 1.5 will vest, subject to the achievement of certain performance criteria.      175,000        175,000        Performance  
8/30/2019    1/3 each on the 1st, 2nd and 3rd anniversaries of the Grant Date      175,000        175,000        Time  

Because of Executive’s voluntary resignation of his employment as of the Date of Termination without Good Reason, and without any further action by or notice from any person, Executive acknowledges and agrees that all Restricted Shares that are unvested as of the Date of Termination in accordance with the Award Agreements (and as shown in the immediately preceding table) will be automatically forfeited as of the Date of Termination. By signing below, Executive also acknowledges and agrees that he has no rights in any equity or equity-related interests in the Employer, the Company, or their respective affiliates other than (i) Restricted Shares that have previously vested and not been sold or otherwise disposed of by Executive and (ii) any shares of Common Stock that Executive has acquired from time to time on the open market.

(e) Payments to Executive’s Estate. In the event Executive dies before all amounts due to him pursuant to this Agreement have been paid (including, without limitation, under this Section 4 or Section 5, the Company shall timely pay to his estate all outstanding amounts due to Executive in accordance with this Agreement.

5. Separation Benefits. In addition to the payments and benefits described in Section 4, but expressly subject to Executive’s timely execution, return, and non-revocation (as provided in Section 19 below) of this Agreement, the Employer and the Company, as applicable, shall provide Executive with the separation benefits described below in this Section 5 (collectively, the “Separation Benefits”):

 

4


(a) Separation Payment. Subject to Section 26, the Company shall pay Executive the following amounts in the manner as forth for each below (collectively, the “Separation Payment”):

(i) an amount equal to $286,500, less applicable taxes and withholdings, as an additional separation payment, payable on or before December 31, 2019;

(ii) an amount equal to the Annual Bonus for the 2019 fiscal year that would have been paid to Executive if he had remained an employee of the Employer on the date on which such Annual Bonus is payable in accordance with the practice of the Company (the “Bonus Payment Date”), determined in accordance with the performance by the Company with respect to the criteria applicable thereto as previously adopted by the Compensation Committee of the Board, such amount, less applicable taxes and withholdings, to be paid to Executive on the Bonus Payment Date or March 15, 2020, whichever is earlier (the “2019 Annual Bonus Amount”);

(iii) an amount equal to the sum of (A) $859,287 (equal to 1.5 times Executive’s final Base Salary), plus (B) 1.5 times the 2019 Annual Bonus Amount, in each case, less applicable taxes and withholdings, as a separation payment in equal or nearly equal installments on the Employer’s regularly scheduled payroll dates beginning on the Employer’s first regularly scheduled payday following the Date of Termination and continuing thereafter for 18 months until such amount is paid in full; provided, however, that until the 2019 Annual Bonus Amount has been determined in the manner described in Section 5(a)(ii), then, solely for purposes of paying the installments required to be paid under this clause 5(a)(iii) prior to such determination, the 2019 Annual Bonus Amount shall be deemed to be equal to $572,858 (Executive’s target for the 2019 Annual Bonus Amount); provided further that, after the determination of the actual 2019 Annual Bonus Amount, the amount of the remaining equal installments under this clause 5(a)(iii) will be increased or decreased, as applicable, so that, at the end of such 18-month period, the cumulative total payments of all installments paid after the Date of Termination is equal to the total amount required to be paid under this clause 5(a)(iii).

(b) Payment of COBRA Premiums. If Executive is eligible to elect and elects to continue coverage for himself and his spouse and eligible dependents under the Employer’s group medical, hospitalization, and dental plans pursuant COBRA, or similar state law, the Employer shall reimburse Executive on a monthly basis for the difference between the amount Executive pays to effect and continue such coverage under COBRA and the employee contribution amount that active employees of the Employer pay for the same or similar coverage (the “COBRA Reimbursements”); provided, however, that (A) Executive shall notify the Company in writing within five days after he becomes eligible after the Date of Termination for group medical, hospitalization, or dental plan insurance coverage, if any, through subsequent employment or otherwise and Employer shall have no further obligation to provide the COBRA Reimbursements after Executive becomes eligible for group medical, hospitalization, or dental insurance plan coverage due to subsequent employment or otherwise; and (B) if Executive (or his spouse) is

 

5


eligible for Medicare or a similar type of governmental medical benefit, such benefit shall be the primary provider before Employer medical benefits are provided. Executive shall send monthly invoices to the Employer reflecting COBRA premiums paid by the last day of the month following the month in which the applicable premiums were paid by Executive and any COBRA Reimbursements due shall be made within fifteen (15) days of receipt of such invoices. For the avoidance of doubt, COBRA Reimbursements shall be taxable and subject to withholding.

Executive agrees that the Separation Benefits are in excess of any amounts otherwise owed to Executive, and that Executive would not otherwise be entitled to such Separation Benefits if he did not execute this Agreement, or if he revoked it pursuant to Section 19 below.

6. Return of Property and Information. Upon the Date of Termination, or upon request by the Employer and except as provided in Section 7(e) below, Executive shall promptly return to the Employer, the Company, or the other Released Parties (as defined below) any and all items of its or their property, including, without limitation, keys, all Confidential Information, badge/access card, computers, software, cellular telephones, iPhones, blackberries, other personal digital assistants, equipment, credit cards, forms, files, manuals, correspondence, business records, personnel data, lists of employees, salary and benefits information, customer files, lists of suppliers and vendors, price lists, contracts, contract information, marketing plans, brochures, catalogs, training materials, computer tapes and diskettes or other portable media, computer-readable files and data stored on any hard drive or other installed device, and data processing reports, and any and all other documents or property which he has had possession of or control over during his employment with the Employer or its affiliates. Executive’s obligations under this Section 6 supplement, rather than supplant, the Continuing Obligations and his obligations under the common law. Executive’s obligations under this paragraph shall not apply to, and Executive may retain copies of, personnel, benefit, or payroll documents concerning only him.

7. General Release.

(a) Full and Final Release by Releasing Parties. Executive, on behalf of himself and his spouse (if any), other family members, heirs, successors, and assigns (collectively, the “Releasing Parties”), hereby voluntarily, completely, and unconditionally to the maximum extent permitted by applicable law releases, acquits, waives, and forever discharges any and all claims, demands, liabilities, and causes of action of whatever kind or character, whether known, unknown, vicarious, derivative, direct, or indirect (individually a “Claim” and collectively the “Claims”), that he or they, individually, collectively, or otherwise, may have or assert against the Released Parties (as defined below).

(b) Claims Included. This release includes without limitation any Claim arising out of or relating in any way to:

(i) Executive’s employment, compensation, other terms and conditions of employment, or the termination of his employment with the Employer or with the employment practices of any of the Released Parties;

 

6


(ii) (A) the Age Discrimination in Employment Act, as amended (“ADEA”) and (B) any other federal, state, local, employment, services or other law, regulation, ordinance, constitutional provision, executive order or other source of law, including, without limitation, under any of the following laws, as amended from time to time: Title VII of the Civil Rights Act of 1964, 42 U.S.C. §§ 1981 & 1981a, the Americans with Disabilities Act, the Equal Pay Act, the Employee Retirement Income Security Act, the Lilly Ledbetter Fair Pay Act of 2009, the Family and Medical Leave Act, the Genetic Information Nondiscrimination Act, the Fair Credit Reporting Act, and the Oklahoma Anti-Discrimination Act;

(iii) any contract, agreement, or arrangement (whether written or oral, express or implied) between, concerning, or relating to Executive and any of the Released Parties, and any termination of such contract, agreement, or arrangement, including, without limitation, any Claim to any payments or other compensation or benefits under the Employment Agreement not provided for in this Agreement;

(iv) the forfeiture of the applicable Restricted Shares pursuant to this Agreement, the Award Agreement, or the Plan; and

(v) any other alleged act, breach, conduct, negligence, gross negligence, or omission of any of the Released Parties.

(c) Claims Excluded. Notwithstanding any other provision of this Agreement, this release does not:

(i) waive or release any Claim for breach or enforcement of this Agreement or the Continuing Obligations, including the right to retain the Time-Based Vested Restricted Shares and the Performance-Based Vested Restricted Shares in accordance with the terms and conditions of this Agreement, the Plan, and the Award Agreement;

(ii) waive or release any right or Claim that may not be waived or released by applicable law;

(iii) waive or release any right or Claim under the ADEA or otherwise that may arise after the date this Agreement is signed by Executive;

(iv) prevent Executive from pursuing any administrative Claim for unemployment compensation or workers’ compensation benefits; or

(v) waive or release any right or Claim Executive may have for indemnification as part of the Continuing Obligations (including, without limitation, Section 16(b)(iii) of the Employment Agreement), under applicable state or other law or the charter, articles of incorporation, or by-laws of the Employer or the Company, or under any insurance policy of the Employer or the Company providing directors’ and officers’ coverage for any lawsuit or claim relating to the period when Executive was a director, officer, or employee of the Employer or the Company;

provided, however, that (x) Executive’s execution of this Agreement is not a concession or guaranty that Executive has any such right or Claim to indemnification, (y) this Agreement does not create any additional rights to indemnification, and (z) the Employer and the Company retain any and all defenses they may have to such indemnification or coverage.

 

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(d) Definition of Released Parties. The “Released Parties” include (i) the Employer and the Company; (ii) any parent, subsidiary, or affiliate of the Employer or the Company; (iii) any past or present officer, director, or employee of the entities described in clause (i) or (ii), in their individual and official capacities; and (iv) any past or present predecessors, parents, subsidiaries, affiliates, owners, equity holders, members, managers, benefit plans, operating units, divisions, agents, representatives, officers, directors, partners, employees, fiduciaries, insurers, attorneys, successors, or assigns of the entities described in clause (i), (ii) or (iii).

(e) Permitted Activities. Notwithstanding any other provision of this Agreement but subject to Executive’s waiver in Section 9(a) below, nothing in this Agreement is intended to, or does, preclude Executive from (i) contacting, reporting to, responding to an inquiry from, filing a charge or complaint with, communicating with, or otherwise participating in an investigation conducted by, the Equal Employment Opportunity Commission, the Department of Labor, the National Labor Relations Board, the Occupational Safety and Health Administration, the Department of Justice, the Securities and Exchange Commission (“SEC”), or any other federal, state, or local governmental agency, commission, or regulatory body; (ii) giving truthful testimony or making statements under oath in response to a subpoena or other valid legal process or in any legal proceeding; (iii) otherwise making truthful statements as required by law or valid legal process; (iv) engaging in any concerted or other legally protected activities. Furthermore, U.S. federal law provides that: (x) an individual shall not be held criminally or civilly liable under any federal or state trade secret law for the disclosure of a trade secret that is made (1) in confidence to a federal, state, or local government official (either directly or indirectly) or to an attorney, solely for the purpose of reporting or investigating a suspected violation of law; or (2) in a complaint or other document filed in a lawsuit or other proceeding, if such filing is made under seal; and (y) an individual who files a lawsuit for retaliation by an employer for reporting a suspected violation of law may disclose the trade secret to the attorney of the individual and use the trade secret information in the court proceeding, if the individual (1) files any document containing the trade secret under seal; and (2) does not disclose the trade secret, except pursuant to court order. Nothing in this Agreement prohibits, or creates liability for, any such protected conduct. In accordance with applicable law and notwithstanding any other provision of this Agreement, nothing in this Agreement or any of the Employer’s policies or agreements applicable to Executive (i) impedes his right to communicate with the SEC or any other governmental agency about possible violations of federal securities or other laws or regulations or (ii) requires his to provide any prior notice to the Employer or obtain the Employer’s prior approval before engaging in any such communications.

8. Non-Disparagement; Cooperation.

(a) Non-Disparagement and Waiver of Related Rights. Except as requested by the Employer, the Company, or the other Released Parties, as permitted in Section 7(e) above or by law that may supersede the terms of this Agreement, or as compelled by valid legal process, Executive shall not before or after the Date of Termination make to any other parties any statement, oral or written, which directly or indirectly impugns the quality or integrity of the Employer’s, of

 

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the Company’s, or any of the other Released Parties’ business or employment practices, or any other disparaging or derogatory remarks about the Employer, the Company, or any of the other Released Parties, their officers, directors, equityholders, managerial personnel, or other employees. The Company will instruct its senior executive officers and members of its Board not to disparage or defame to third parties the integrity of Executive in any statement oral or written. The obligations in the preceding sentence shall not prohibit any truthful statements that are required or permitted by applicable law, regulation, administrative guidance, or valid legal process or prohibit the Employer’s senior executive officers or Board members from making any statements to persons within or outside the Employer with whom the Employer has an actual or prospective business relationship and therefore have a business need to receive the information communicated in such statements.

(b) Cooperation. Subject to Section 7(e) above, Executive shall cooperate fully and completely with the Employer, the Company, and any of the other Released Parties, at their request, in all pending and future litigation, investigations, arbitrations, and/or other fact-finding or adjudicative proceedings, public or private, involving the Employer, the Company, or any of the other Released Parties. This obligation includes but is not limited to Executive promptly meeting with counsel for the Employer, the Company, or the other Released Parties at reasonable times upon their request, and providing testimony in court, before an arbitrator or other convening authority, or upon deposition that is truthful, accurate, and complete, according to information known to Executive. If Executive provides cooperation under this Section 8(b) (including, without limitation, if Executive appears as a witness in any pending or future litigation, arbitration, or other fact-finding or adjudicative proceeding at the request of the Employer, the Company, or any of the other Released Parties), the Employer or the Company, as applicable, shall reimburse him, upon submission of substantiating documentation, for necessary and reasonable out-of-pocket expenses incurred by him as a result of such cooperation (not including attorneys’ fees or expenses).

9. Waiver of Certain Rights.

(a) Right to Relief Not Provided in this Agreement. Executive waives any right to monetary recovery from the Employer, the Company, or the other Released Parties, whether sought directly by him or in the event any administrative agency or other public authority, individual, or group of individuals should pursue any Claim on his behalf; and he shall not request or accept from the Employer, the Company, or the other Released Parties, as monetary compensation or monetary damages related to his employment or the termination of his employment with any of the Released Parties, anything of monetary value that is not provided for in this Agreement. Notwithstanding the previous sentence, this Agreement does not limit Executive’s right to receive an award for information provided to any governmental agency.

(b) Right to Class- or Collective-Action Initiation or Participation. Executive waives the right to initiate or participate in any class or collective action with respect to any Claim against the Employer, the Company, or the Released Parties, including, without limitation, any Claim arising from the formation, continuation, or termination of his employment relationship with any of the Released Parties, or the terms and conditions of such employment relationship.

 

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10. No Violations. Executive represents and warrants that he has no knowledge that the Employer, the Company, or any of the Released Parties has committed or is suspected of committing any act which is or may be in violation of any federal or state law or regulation or has acted in a manner which requires corrective action of any kind. Executive further represents and warrants that he has not informed the Employer, the Company, or any of the other Released Parties of, and that he is unaware of, any alleged violations of their standards of business conduct or personnel policies, of their integrity or ethics policies, or other misconduct by them, that have not been resolved satisfactorily by the Employer, the Company, or the other Released Parties.

11. Remedies; After-Acquired Evidence.

(a) Remedies.

(i) Notwithstanding any other provision in this Agreement, the obligation of the Employer and the Company to provide the Separation Benefits to Executive is subject to the condition that he materially complies with his obligations under this Agreement and the Continuing Obligations. The Employer and the Company shall have the right to suspend or cease providing any or all components of the Separation Benefits if Executive has materially breached any such obligations, but all other provisions of this Agreement shall remain in full force and effect.

(ii) Executive acknowledges and agrees that a breach by him of any provision of the Continuing Obligations, or of Section 6, 8 or 12 of this Agreement, will result in immediate and irreparable harm to the Employer, the Company and/or the other Released Parties (as applicable) for which full damages cannot readily be calculated and for which damages are an inadequate remedy. Accordingly, Executive agrees that the Employer, the Company and/or the other Released Parties shall be entitled to injunctive relief to prevent any such actual or threatened breach or any continuing breach by Executive (without posting a bond or other security), without limiting any other remedies that may be available to them. Executive further agrees to reimburse the Employer, the Company and/or the other Released Parties for all costs and expenditures, including, but not limited to, reasonable attorneys’ fees and expenses and court costs, incurred by any of them in connection with the successful enforcement of any of their rights under any of the Continuing Obligations or of Section 6, 8 or 12 of this Agreement.

(b) After-Acquired Evidence. Notwithstanding any provision of this Agreement, if the Employer or the Company provides the Separation Benefits to Executive but subsequently acquires evidence that (i) he has materially breached any of his obligations under this Agreement or the Continuing Obligations; or (ii) a condition existed prior to payment of the Separation Benefits with respect to which the Board was not aware of all material facts during Executive’s employment, that, had the Board been fully aware of such condition, would reasonably have been expected to cause the Employer to terminate his employment for Cause before such payment, then Executive shall promptly return to the Employer and the Company, as applicable, the entire Separation Payment received by him prior to the date that the Employer or the Company exercises its rights under this Section 11(b), but all other provisions of this Agreement shall remain in full force and effect.

 

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(c) Non-Exclusive Rights and Remedies. The rights and remedies of the Employer and the Company under this paragraph shall be in addition to any other available rights and remedies should Executive breach any applicable obligations, as well as rights and remedies available under their clawback policies or procedures which may provide for forfeiture and/or recoupment of amounts paid or payable under this Agreement.

12. Insider-Trading Obligations. Executive acknowledges and agrees that he shall remain subject to the insider-trading policies and procedures of the Employer, the Company, and their respective affiliates through the Date of Termination and, as such, may not during such period, or thereafter, trade in their securities in accordance therewith until any material, nonpublic information he possesses has become public or is no longer material. Executive further acknowledges and agrees that he shall remain subject to all federal and state securities laws applicable to the trading of securities of the Employer, the Company, or their affiliates while possessing knowledge of material non-public information regarding the Employer, the Company, and their affiliates.

13. Nonadmission of Liability or Wrongdoing. Executive acknowledges that (a) this Agreement shall not in any manner constitute an admission of liability or wrongdoing on the part of the Employer, the Company, or any of the other Released Parties; (b) the Employer, the Company, and the other Released Parties expressly deny any such liability or wrongdoing; and, (c) except to the extent necessary to enforce this Agreement, neither this Agreement nor any part of it may be construed, used, or admitted into evidence in any judicial, administrative, or arbitral proceedings as an admission of any kind by the Employer, the Company, or any of the other Released Parties.

14. Jury Trial Waiver; Arbitration; Legal Fees and Expenses. THE INDIVIDUAL HEREBY WAIVES THE RIGHT TO TRIAL BY JURY WITH RESPECT TO ANY CLAIM AGAINST THE COMPANY, THE EMPLOYER, OR ANY OF THE OTHER RELEASED PARTIES ARISING OUT OF OR RELATING TO THIS AGREEMENT, INCLUDING, WITHOUT LIMITATION, FOR BREACH OR ENFORCEMENT OF THIS AGREEMENT. The parties agree that Executive’s employment with the Employer and this Agreement relate to interstate commerce, and that any Claims between Executive and the Employer, the Company, or their affiliates which may arise out of or relate to Executive’s employment relationship with the Employer or this Agreement shall be settled by arbitration. This agreement to arbitrate shall survive the termination of this Agreement. Any arbitration shall be in accordance with the then-current Employment Arbitration Rules of the American Arbitration Association and undertaken pursuant to the Federal Arbitration Act. Arbitration shall be held in Oklahoma City, Oklahoma unless the parties mutually agree on another location. The decision of the arbitrator shall be enforceable in any court of competent jurisdiction. The parties agree that punitive, liquidated, or indirect damages shall not be awarded by the arbitrator unless such damages would have been awarded by a court of competent jurisdiction. Nothing in this agreement to arbitrate, however, shall preclude the Employer or the Company from seeking or obtaining injunctive relief, without the requirement of posting bond, from a court of competent jurisdiction prohibiting any ongoing breaches by Executive of this Agreement including, without limitation, the Continuing Obligations. If any Claim arises between the Employer or the Company and Executive regarding any provision of this Agreement, the arbitrator may award to the prevailing party the reasonable attorney fees, costs, and expenses incurred by the prevailing party in connection with such contest or dispute.

 

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15. Authority to Execute. Executive represents and warrants that he has the authority to execute this Agreement on behalf of all the Releasing Parties.

16. Governing Law; Venue; Judicial Modification and Severability; Interpretation. This Agreement and the rights and duties of the parties under it shall be governed by the laws of the State of Oklahoma, without regard to any conflict-of-laws principles. If any provision of this Agreement is held to be unenforceable as written by a court of competent jurisdiction but may be made to be enforceable by judicial modification, then such provision shall be modified and deemed enforceable to the maximum limit permitted by applicable law. The provisions of this Agreement shall be severable, such that any one or more provisions of this Agreement may be determined by a court of competent jurisdiction, after any modification provided for in the immediately preceding sentence, to be illegal or otherwise unenforceable, in whole or in part, such provision shall be considered separate, distinct, and severable from the other remaining provisions of this Agreement, such a determination shall not affect the validity or enforceability of such other remaining provisions, and in all other respects the remaining provisions of this Agreement shall be binding and enforceable and remain in full force and effect. The language of all parts of this Agreement shall in all cases be construed as a whole, according to its fair meaning, and not strictly for or against any of the parties.

17. Assignment. Executive’s obligations, rights, and benefits under this Agreement are personal to him and shall not be assigned to any person or entity without written permission from the Employer and the Company. The Employer and the Company may assign this Agreement without Executive’s further consent to any affiliate or to any successor (whether direct or indirect, by purchase, merger, reorganization, sale, transfer of stock, consolidation, or otherwise) to all or substantially all of their business and/or assets. This Agreement shall be binding upon and inure to the benefit of the parties and their respective heirs, legal representatives, successors, and permitted assigns.

18. Expiration Date. The Company’s and the Employer’s offer of this Agreement shall expire after a period of 21 days after the date Executive first received this Agreement for consideration (the “Expiration Date”). Changes to this Agreement, whether material or immaterial, do not restart the running of the consideration period. Executive may accept the offer at any time before the Expiration Date by signing this Agreement in the space provided below and returning it to the Company’s General Counsel so that the signed Agreement is received no later than the close of business on the Expiration Date.

19. Limited Revocation Right; Effect of Revocation. After signing this Agreement, Executive shall have a period of seven days to reconsider and revoke his acceptance of this Agreement if he wishes (the “Revocation Period”). If Executive chooses to revoke his acceptance of this Agreement, he must do so by providing written notice to the Company’s General Counsel before the eighth day after signing this Agreement, in which case this Agreement shall not become effective or enforceable and Executive shall not receive the Separation Benefits.

20. Effective Date. This Agreement shall become effective and enforceable upon the expiration of seven days after Executive signs it (the “Effective Date”), but only if he signs the Agreement on or before the Expiration Date and does not revoke his acceptance of the Agreement during the Revocation Period.

 

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21. Knowing and Voluntary Agreement. EXECUTIVE ACKNOWLEDGES AND AGREES THAT: (a) EXECUTIVE HAS READ AND UNDERSTANDS THE TERMS AND EFFECT OF THIS AGREEMENT; (b) EXECUTIVE RELEASES AND WAIVES CLAIMS UNDER THIS AGREEMENT KNOWINGLY AND VOLUNTARILY, IN EXCHANGE FOR CONSIDERATION IN ADDITION TO ANYTHING OF VALUE TO WHICH EXECUTIVE ALREADY IS ENTITLED; (c) EXECUTIVE HEREBY IS AND HAS BEEN ADVISED TO HAVE EXECUTIVE’S ATTORNEY REVIEW THIS AGREEMENT (AT EXECUTIVE’S COST) BEFORE SIGNING IT; (d) EXECUTIVE HAS TWENTY-ONE (21) DAYS IN WHICH TO CONSIDER WHETHER TO EXECUTE THIS AGREEMENT; AND (e) WITHIN SEVEN (7) DAYS AFTER THE DATE ON WHICH EXECUTIVE SIGNS THIS AGREEMENT, EXECUTIVE MAY, AT EXECUTIVE’S SOLE OPTION, REVOKE THIS AGREEMENT UPON WRITTEN NOTICE TO THE COMPANY’S GENERAL COUNSEL, AND THE AGREEMENT WILL NOT BECOME EFFECTIVE OR ENFORCEABLE UNTIL THIS SEVEN-DAY REVOCATION PERIOD HAS EXPIRED WITHOUT ANY REVOCATION BY EXECUTIVE. IF EXECUTIVE REVOKES THIS AGREEMENT, IT SHALL BE NULL AND VOID.

22. Independent Consideration. Whether or not expressly stated in this Agreement, all obligations and undertakings that Executive makes and assumes in this Agreement are in consideration of the mutual promises and undertakings in this Agreement and the Separation Benefits.

23. Entire Agreement. This Agreement, the Employment Agreement, the Plan, and the Award Agreement contain and represent the entire agreements of the parties with respect to their subject matters, and supersede all prior agreements and understandings, written and oral, between the parties with respect to its subject matters, including, without limitation, the Employment Agreement; provided, however, that nothing in this Agreement shall be interpreted or construed as relieving Executive of complying with the Continuing Obligations. Executive agrees that neither the Employer, the Company, nor any of the other Released Parties has made any promise or representation to him concerning this Agreement not expressed in this Agreement, and that, in signing this Agreement, he is not relying on any prior oral or written statement or representation by the Employer, the Company, or any of the other Released Parties outside of this Agreement but is instead relying solely on his own judgment and his attorney (if any).

24. Modification; Waiver. Except as provided in Section 16 above, no provision of this Agreement shall be amended, modified, or waived unless such amendment, modification, or waiver is agreed to in writing and signed by Executive and a duly authorized representative of the Employer and the Company. Notwithstanding the previous sentence, the Employer and the Company may amend the Continuing Obligations without the approval of Executive or any other person to provide for less restrictive limitations as to time, geographical area, or scope of activity to be restrained as set forth in any such Continuing Obligations. Any such less restrictive limitations may, at the option of the Employer or the Company, apply only with respect to the enforcement of the Continuing Obligations in certain jurisdictions specified in any such amendment. At the request of the Employer or the Company, Executive shall promptly consent to any such amendment and shall execute and deliver to the Employer or the Company a counterpart signature page to such amendment; provided, however, that the failure or refusal to provide such consent shall not negate the validity of the amendment.

 

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25. Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original and all of which together shall be considered one and the same agreement. The delivery of this Agreement in the form of a clearly legible facsimile or electronically scanned version by e-mail shall have the same force and effect as delivery of the originally executed document.

26. Internal Revenue Code Section 409A. The payments and benefits provided under this Agreement are intended to satisfy the requirements of Section 409A, and this Agreement shall be interpreted and administered in a manner consistent with that intent; provided, however, that no persons connected with this Agreement in any capacity, including but not limited to the Employer, the Company, and their affiliates, and their respective directors, officers, agents and employees, makes any representation, commitment or guarantee that any tax treatment, including but not limited to, federal, state and local income, estate and gift tax treatment, will be applicable with respect to any amounts payable under the Agreement or that such tax treatment will apply to Executive. Notwithstanding anything to the contrary in this Agreement, no compensation or benefits, including without limitation the Separation Payment or benefits payable under Section 4 hereof, shall be paid to Executive during the six (6)-month period following Executive’s Separation from Service if the Company determines that paying such amounts at the time or times indicated in this Agreement would be a prohibited distribution under Section 409A(a)(2)(B)(i) of the Code. If the payment of any such amounts is delayed as a result of the previous sentence, then on the first business day following the end of such six (6)-month period (or such earlier date upon which such amount can be paid under Section 409A of the Code without resulting in a prohibited distribution, including as a result of Executive’s death), the Company shall pay Executive a lump-sum amount equal to the cumulative amount that would have otherwise been payable to Executive during such period.

27. Third-Party Beneficiaries. The Released Parties besides the Employer and the Company are intended to be third-party beneficiaries of this Agreement and therefore may enforce this Agreement.

28. Responsibility for Certain Taxes; Right to Consult a Tax Advisor. Notwithstanding any contrary provision in this Agreement, Executive shall be solely responsible for any risk that the tax treatment of all or part of the payments provided by this Agreement may be affected by Section 409A, which may impose significant adverse tax consequences on him, including accelerated taxation, a 20% additional tax, and interest. Executive therefore has the right, and is encouraged by this Section 28, to consult with a tax advisor of his choice before signing this Agreement.

[Signature Page Follows; Remainder of Page Intentionally Left Blank]

 

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IN WITNESS WHEREOF, the parties have executed this Agreement as of the Effective Date.

 

       CHAPARRAL ENERGY, L.L.C.    EXECUTIVE
  By:   

/s/ Justin Byrne

     

/s/ K. Earl Reynolds

     Justin Byrne       K. Earl Reynolds
     Vice President and General Counsel      
  Date Signed: December 20, 2019    Date Signed: December 20, 2019
  CHAPARRAL ENERGY, INC.   
  By:   

/s/ Justin Byrne

     
     Justin Byrne      
     Vice President and General Counsel      
  Date Signed: December 20, 2019   

[Signature Page to Earl Reynolds Separation and Release Agreement]


EXHIBIT A

1. Section 9(a) of the Employment Agreement is hereby amended and restated in its entirety as follows:

“(a) Nondisclosure and Nonuse of Confidential Information. Executive acknowledges that it is the policy of the Company to maintain as secret and confidential (i) all valuable and unique information, (ii) other information heretofore or hereafter acquired by the Company, or any affiliated entity and deemed by it to be confidential, and (iii) information developed or used by the Company or any affiliated entity relating to the business, operations, employees and customers of the Company or any affiliated entity including, but not limited to, the mental impressions of Executive acquired by Executive during his employment by the Employer as well as any employee information (all such information described in clauses (i), (ii) and (iii) above, other than information that is known to the public or becomes known to the public through no fault of Executive, is hereinafter referred to as “Confidential Information”). The parties recognize that the services performed by Executive for the Employer and the Company during the course of his employment are special and unique and that by reason of his employment by the Employer, Executive acquired Confidential Information. Executive recognizes that all such Confidential Information is the property of the Company. Accordingly, Executive shall not, directly or indirectly, without the prior written consent of the Company, use the Confidential Information for any purpose or disclose the Confidential Information to any Person other than the Company, whether or not such Person is a competitor of the Company, and shall use his best efforts to prevent the use, publication or disclosure of any Confidential Information obtained by, or which has come to the knowledge of, Executive prior or subsequent to the date hereof. For purposes of the foregoing, the parties acknowledge and agree that overseeing, supervising, consulting with or advising others with respect to (a) the acquisition or disposition of producing or non-producing leasehold, mineral interests or royalty interests (including, without limitation, farm-ins, farm-out, poolings, leasing activities, unitizations and similar activities), (b) hydrocarbon reservoir characteristics, (c) drilling and completion objectives and techniques, (d) prospective geologic and geophysical targets and (e) spacing of oil and gas wells, in each case in clauses (a) through (e) only as relates to the SCOOP, STACK and/or MERGE oil and gas plays in Oklahoma, will necessarily require and be deemed hereby to constitute the use and/or disclosure of Confidential Information in violation of the covenant set forth in this Section 9(a). Notwithstanding the foregoing provisions of this Section 9(a), from and after the 12-month anniversary of the Date of Termination (but not before such time), Executive’s retention or use of Executive’s mental impressions of Confidential Information, without conscious memorization or subsequent reference to Confidential Information, will not preclude the activities described in the immediately preceding sentence.”

2. For the avoidance of doubt, (a) any reference in the Employment Agreement to Section 9(a) shall be a reference to such amended and restated provision set forth above, and (b) any reference in the Employment Agreement to Section 9 shall include such amended and restated provision.

3. The provisions of the penultimate sentence of the amended and restated Section 9(a) set forth in paragraph 1 above will not apply to Executive’s activities following a failure by the Company or the Employer to timely pay any portion of the Separation Payment due to Executive pursuant to Section 5(a) of the Separation and Release Agreement to which this Exhibit A is an exhibit, unless such failure to pay is cured by the Company or the Employer within ten business days after notice from Executive to the Company, describing such failure to timely pay.

 

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EXHIBIT B

1. Section 9(b) of the Employment Agreement is hereby amended and restated in its entirety as follows:

(b) Non-Solicitation. Executive shall not, during the Term and for a period of 18 months following the Date of Termination (the “Non-Solicitation Period”), either personally or by or through his agent and whether for himself or on behalf of any other person or entity, directly or indirectly hire, solicit or seek to hire any individual as an employee or consultant who was an employee or consultant of the Employer at any time during the six months prior to such hiring, solicitation or seeking to hire, including by attempting, directly or indirectly, to persuade any such employee or consultant to discontinue his/her status of employment or consultancy with the Employer to become an employee or consultant of any other person or entity; provided, however, that with respect to any individual whose employment is terminated by the Employer or the Company, the six-month waiting period required above will not apply to hiring any such individual, but, for the avoidance of doubt, will continue to apply to soliciting or seeking to hire such individual. Additionally, during the Non-Solicitation Period, Executive shall not, for himself or on behalf of any person or entity, directly solicit any established customer of the Employer for the purpose of causing such customer to purchase goods, services or a combination of goods and services from another person or entity. For purposes of this Agreement, an “established customer” shall be given the broadest possible interpretation under Oklahoma law. Nothing contained in this provision is intended to prohibit general advertising or solicitation not specifically directed at any or all of the Employer’s customers or employees.

 

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Exhibit 99.4

Execution Version

EMPLOYMENT AGREEMENT

THIS EMPLOYMENT AGREEMENT (this “Agreement”), dated as of the 20th day of December, 2019 (the “Effective Date”), is entered into by and between CHAPARRAL ENERGY, INC., a Delaware corporation (the “Company”), CHAPARRAL ENERGY, L.L.C. (the “Employer”) and CHARLES DUGINSKI (“Executive”).

WHEREAS, the Employer desires to continue to retain Executive as its employee and to provide services to the Company and believes it is necessary to enter into this Agreement to provide the proper incentive to Executive.

NOW, THEREFORE, in consideration of the mutual promises and covenants contained in this Agreement, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereby agree to the following terms:

1. Term. Subject to the provisions for earlier termination hereinafter provided, Executive’s employment with the Employer under this Agreement shall be for a term commencing upon the Effective Date and ending on the third anniversary of the Effective Date (the initial three-year term and any extension thereof pursuant to this Section 1, the “Term”); provided, however, that commencing on the date that is the third anniversary of the Effective Date, the Term shall be automatically extended so as to terminate on the second anniversary of such date, and the Term shall be automatically extended so as to terminate on each anniversary thereafter (each such anniversary referred to as a “Renewal Date”). Notwithstanding the foregoing, if at least ninety (90) days prior to any Renewal Date, the Employer gives Executive or Executive gives the Employer written notice that the Term will not be so extended, this Agreement will continue for the remainder of the then current Term and automatically expire upon its completion. The Term may be sooner terminated under Section 5 of this Agreement.

2. Position and Duties. During the Term, Executive will serve as Chief Executive Officer and President of the Company and will report directly to the Board of Directors of the Company (the “Board”). Executive shall devote Executive’s best efforts and full business time and attention to perform all services reasonably required to fully execute the duties and responsibilities associated with the Company, the Employer, and their subsidiaries as directed by the Board. Notwithstanding the above, Executive will be permitted, to the extent such activities do not interfere with the performance by Executive of his duties and responsibilities under this Agreement or violate this Agreement, to (i) manage Executive’s personal, financial, and legal affairs, and (ii) serve on industry, civic, or charitable boards or committees. Executive shall not become a director of any for profit entity without first receiving the approval of the Board. Executive agrees to observe and comply with the rules and policies of the Company, the Employer, and their subsidiaries as in effect from time to time and to which Executive is provided access by the Company, the Employer or any such affiliate, including, without limitation, any rules and policies relating to Executive’s obligations to them upon a termination of employment. In addition, during the Term, Executive shall owe a fiduciary duty of loyalty, fidelity, and allegiance to act in the best interests of the Company, the Employer, and their subsidiaries, and to not act in a manner that would materially injure their business, interests, or reputations.


3. Place of Performance. During the Term, Executive’s place of employment will be the Employer’s principal executive offices in Oklahoma City, Oklahoma (the “Principal Location”), except for travel to other locations as may be necessary to fulfill Executive’s duties and responsibilities hereunder.

4. Compensation and Related Matters.

(a) Base Salary. During the Term, the Employer will pay Executive a base salary of not less than $525,000 per year (“Base Salary”), prorated for any partial period of employment and payable in accordance with the Employer’s customary payroll practices. Executive’s Base Salary may be increased, but not decreased unless the base salaries for all executive officers of the Employer are decreased by an equivalent or higher percentage, pursuant to annual review by the Compensation Committee (the “Compensation Committee”) of the Board in its sole discretion. In the event that Executive’s Base Salary is increased, the increased amount will then constitute the Base Salary for all purposes of this Agreement.

(b) Annual Bonus Incentives. In addition to the Base Salary, Executive shall be eligible to participate in and earn an annual cash bonus under any annual incentive plan established by the Board so long as the terms of any such plan allow participation by the executive officers of the Employer (“Annual Bonus”). The target Annual Bonus for Executive shall be equal to 100% of Executive’s then-current Base Salary (the “Bonus Target”), but the actual Annual Bonus, including the terms relating to any payment of an Annual Bonus, shall be determined by the Compensation Committee in its sole discretion in accordance with the terms of such plan, in effect at that time, if any. The Bonus Target may be increased, but not decreased, unless the bonus targets for other executive officers of the Employer are also decreased by an equivalent or higher percentage. All Annual Bonuses due under this Agreement shall be paid following the conclusion of the performance year-end on the date that Annual Bonuses are paid to other senior executive officers of the Employer (but in no event later than the end of the calendar year immediately following the end of the calendar year for which the Annual Bonus is earned). Except as expressly provided below, Executive shall not be eligible to receive an Annual Bonus unless he remains employed by the Employer through the entire calendar year upon which such Annual Bonus is based.

(c) Long-Term Incentive Plan. Executive shall be eligible to participate in the Chaparral Energy, Inc. 2019 Long-Term Incentive Plan or any successor equity incentive plan (in either case, the “Equity Incentive Plan”). Executive’s entitlement to any award under the Equity Incentive Plan shall be subject to approval by the Board or its designee and shall be granted pursuant, and subject, to the vesting, forfeiture, repurchase, and other terms and conditions of the Equity Incentive Plan and the applicable award agreement or other similar agreement in the form established by the Compensation Committee or its designee in its sole discretion.

 

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(d) Initial Equity Grant. No later than five business days after the Effective Date, the Company shall grant, or cause to be granted to, Executive a one-time grant of restricted stock with a fair value equal to $1,500,000 (the “Initial Equity Grant”), based on the most recent closing price on the New York Stock Exchange as of the date and time that the Company publicly announces Executive’s appointment as the Company’s Chief Executive Officer. The Initial Equity Grant shall be granted to Executive as an “employment inducement award” under New York Stock Exchange Rule 303A.08, outside of the Equity Incentive Plan. Notwithstanding that the equity awards are being granted outside of the Equity Incentive Plan, except as expressly provided otherwise, the equity awards will be governed in a manner consistent with the terms and conditions of the Equity Incentive Plan. The Initial Equity Grant shall be subject to the terms of a grant agreement, substantially in the form attached hereto as Exhibit B-1 and Exhibit B-2, including, without limitation, provisions relating to the forfeiture of the Initial Equity Grant in the event of a termination for Cause. One-half of the Initial Equity Grant shall be subject to the terms of a grant agreement substantially in the form of Exhibit B-1 attached hereto and shall vest in three equal annual installments on each of the first, second and third anniversaries of the Effective Date, subject to Executive’s continued employment through the applicable vesting date. The remaining one-half of the Initial Equity Grant shall be subject to the terms of a grant agreement substantially in the form of Exhibit B-2 attached hereto and shall vest in three equal annual installments on each of the first, second and third anniversaries of the Effective Date, subject to (i) Executive’s continued employment through the applicable vesting date and (ii) the achievement of specified performance goals, which shall be described in the applicable grant agreement. Notwithstanding the foregoing, (i) the unvested portion of the Initial Equity Grant, with performance assumed achieved at the target performance level, shall vest upon (A) a Change in Control (as defined in this Agreement but without giving effect to any changes to such definition as a result of the adoption of a successor plan to the Equity Incentive Plan) if the Equity Grant is not effectively assumed by the acquirer (with appropriate adjustments as determined by the Board in good faith in order to achieve substantially equivalent economic value for Executive) in connection with such Change in Control or (B) the termination of Executive’s employment by the Company or any affiliate thereof (or their successors in the Change in Control) without Cause (as defined in this Agreement) or by Executive for Good Reason (as defined in this Agreement), in each case, within 18 months after a Change in Control, and (ii) in event of a termination as a result of Executive’s death or Disability, a termination by the Employer without Cause or a termination by Executive for Good Reason (in each case, if applicable, other than as described in clause (i)(B) of this sentence), the portion of the Initial Equity Grant that was scheduled to vest on the next regularly scheduled vesting date that immediately follows the Date of Termination (as defined in this Agreement) shall vest upon the Date of Termination, with performance goals deemed achieved at the target performance level. For the avoidance of doubt, if Executive’s employment is terminated for any reason other than as a result of Executive’s death or Disability, by the Employer without Cause or by Executive with Good Reason (in each case, if applicable, other than as described in clause (i)(B) of the immediately preceding sentence), then Executive shall forfeit any portion of the Initial Equity Grant that is unvested as of the Date of Termination.

 

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(e) Sign-On Bonus. The Employer shall pay Executive a sign-on bonus of $225,000 (the “Sign-On Bonus”), which amount shall be payable in cash in four (4) equal installments within thirty (30) days of the beginning of each of the first four (4) fiscal quarters immediately following the Effective Date, subject to Executive’s continued employment through each applicable payment date; provided, however, that if the Employer terminates Executive’s employment for Cause or Executive resigns for any reason other than due to Good Reason, in each case, prior to the 24-month anniversary of the Effective Date then Executive shall repay any portion of the Sign-On Bonus (net of any taxes Executive has paid or is required to pay in respect thereof) that has been paid to Executive on or prior to the Date of Termination.

(f) Initial Cash Incentive Award. In addition to the Sign-On Bonus, the Employer shall award Executive a long-term cash incentive award of $525,000 (the “Cash Incentive Award”). The Cash Incentive Award shall be subject to the terms of a grant agreement, substantially in the form attached hereto as Exhibit C-1 and Exhibit C-2, including, without limitation, provisions relating to the forfeiture of the Cash Incentive Award in the event of a termination for Cause. One-half of the Cash Incentive Award shall be subject to the terms of a grant agreement substantially in the form of Exhibit C-1 attached hereto and shall vest in three equal annual installments on each of the first, second and third anniversaries of the Effective Date, subject to Executive’s continued employment through the applicable vesting date. The remaining one-half of the Cash Incentive Award shall be subject to the terms of a grant agreement substantially in the form of Exhibit C-2 attached hereto and shall vest in three equal annual installments on each of the first, second and third anniversaries of the Effective Date, subject to (i) Executive’s continued employment through each applicable vesting date and (ii) the achievement of specified performance goals applicable to the Cash Incentive Award. Notwithstanding the foregoing, (i) the unvested portion of the Cash Incentive Award, with performance assumed achieved at the target performance level, shall vest in the event of a Change in Control if Executive’s employment is terminated by the Company or any affiliate thereof (or their successors in the Change in Control) without Cause or by Executive for Good Reason, in each case, within 18 months after such Change in Control, and (ii) in event of a termination as a result of Executive’s death or Disability, a termination by the Employer without Cause or a termination by Executive for Good Reason (in each case, if applicable, other than as described in clause (i)(B) of this sentence), the portion of the Cash Incentive Award that was scheduled to vest on the next regularly scheduled vesting date that immediately follows the Date of Termination (as defined in this Agreement) shall vest upon the Date of Termination, with performance goals deemed achieved at the target performance level. For the avoidance of doubt, if Executive’s employment is terminated for any reason other than as a result of Executive’s death or Disability, by the Employer without Cause or by Executive with Good Reason (in each case, if applicable, other than as described in clause (i)(B) of the immediately preceding sentence), then Executive shall forfeit any portion of the Cash Incentive Award that is unvested as of the Date of Termination.

(g) Welfare and Retirement Benefits. During the Term, Executive (and Executive’s spouse and/or eligible dependents to the extent provided in the applicable plans and programs) will be eligible to participate in and be covered under all the welfare benefit plans or programs maintained by the Employer for the benefit of its senior executive officers pursuant to the terms of such plans and programs including, without limitation, all medical, life, hospitalization, dental, disability, accidental death and dismemberment and travel accident insurance plans and programs. In addition, during the Term, Executive will be eligible to participate in all pension, retirement, savings, and other employee benefit

 

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plans and programs maintained from time to time by the Employer for the benefit of the Employer’s senior executive officers, including, without limitation, the Employer’s 401(k) plan. Such benefits shall be governed by the applicable plan documents, insurance policies, or employment policies, and may be modified, suspended, or revoked in accordance with the terms of the applicable documents or policies without violating this Agreement.

(h) Vacation. Executive shall be entitled to paid vacation in accordance with the Employer’s vacation policy during the Term.

(i) Fringe Benefits. During the Term, the Employer will provide Executive with such other fringe benefits as commensurate with Executive’s position as determined by the Board or its designee in its sole discretion.

(j) Expenses. Executive shall be entitled to receive prompt reimbursement for all reasonable business expenses incurred by Executive in accordance with the Employer’s expense reimbursement policy during the Term. All payments under this Section 4(j) shall be paid to Executive on or before the last day of Executive’s taxable year following the taxable year in which Executive incurred such expenses.

5. Termination of Employment. Executive’s employment under this Agreement may be terminated before the end of Term under the following circumstances:

(a) Death. Executive’s employment under this Agreement will terminate upon his death.

(b) Disability. Upon Executive’s Disability, Executive will receive a Notice of Termination (as defined in Section 6(a)) from the Employer. If Executive does not return to the substantial performance of his duties on a full-time basis within thirty (30) days of such Notice of Termination, Executive’s employment under this Agreement shall be terminated due to Disability, and such termination will not be a breach of this Agreement by the Employer. For purposes of this Agreement, “Disability” means Executive’s physical or mental impairment which prevents him from being able to perform his essential job functions under this Agreement (with or without reasonable accommodation, as may be required by applicable law) for a period of six (6) consecutive months or a period of one-hundred and twenty (120) calendar days in any twelve (12)-month period.

(c) Cause. The Employer has the right to terminate Executive’s employment for Cause by providing Executive with a Notice of Termination, and such termination will not be a breach of this Agreement by the Employer. For purposes of this Agreement, “Cause” means the occurrence of any one or more of the following events: (i) Executive’s conviction of, or entry by Executive of a guilty or no contest plea to, a felony or crime involving moral turpitude; (ii) Executive’s willful commission of an act of fraud or willful dishonesty resulting in economic or financial injury to the Company, Employer, or any affiliate; (iii) Executive’s willful failure to substantially perform or gross neglect of Executive’s duties, including, but not limited to, the willful failure to follow any lawful directive of the Board, within the reasonable scope of Executive’s duties; (iv) Executive’s performance of acts materially detrimental to the Company, Employer, or any affiliate,

 

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unless such acts were made in good faith or were otherwise approved in advance by the Board; (v) Executive’s use of narcotics, alcohol, or illicit drugs in a manner that has or would reasonably be expected to have a material detrimental effect on Executive’s performance of his duties as an employee of the Company; (vi) Executive’s commission of a violation of the Code of Conduct of the Company or the Employer any other rule or policy adopted by the Company, the Employer, or any affiliate which results in material injury to the Company, Employer, or an affiliate; (vii) Executive’s material breach of this Agreement, including, but not limited to, any material breach by Executive of any covenant set forth in Section 9 hereof; or (viii) any other willful acts or omissions which would reasonably be expected to be contrary to the best interests of the Company, Employer, or an affiliate which has caused, or is likely to cause, material harm to one or more of them. Cause shall not be deemed to exist with respect to clause (iii), clause (vi), clause (vii), and clause (viii) above unless (A) the Employer provides written notice to Executive of the conduct giving rise to Cause under the applicable clause within ninety (90) days after the Employer has actual knowledge of the existence of such conduct and (B) Executive fails to completely remedy the conduct so identified and, with respect to clause (vi), clause (vii) and clause (viii) any actual harm associated therewith within thirty (30) days after receipt of such notice.

(d) Good Reason. Executive may terminate Executive’s employment with the Employer for Good Reason, and such termination will not be a breach of this Agreement by Executive. For purposes of this Agreement, “Good Reason” shall mean the occurrence without the written consent of Executive, of one of the events set forth below:

(i) the Employer’s granting to another employee a Base Salary and annual target bonus opportunity, the sum of which exceeds the sum of Executive’s Base Salary and Bonus Target;

(ii) a material diminution in Executive’s authority, duties, or responsibilities;

(iii) a material diminution in Executive’s Base Salary;

(iv) the requirement that Executive be based at any office or location that is more than 50 miles from the Principal Location, except for travel reasonably required in the performance of Executive’s responsibilities; or

(v) any other action or inaction that constitutes a material breach by the Company or the Employer of this Agreement such as the failure of any successor to the Company to assume this Agreement pursuant to Section 14.

Notwithstanding the foregoing, Executive will not be deemed to have terminated his employment for Good Reason unless (A) Executive provides written notice to the Employer of the existence of one of the conditions described above within ninety (90) days after Executive has knowledge of the existence of the condition, (B) the Employer fails to remedy the condition so identified within thirty (30) days after receipt of such notice, (C) Executive provides a Notice of Termination to the Employer within thirty (30) days of the expiration of the Employer’s period to remedy the condition, and (D) Executive terminates employment within ninety (90) days after Executive provides written notice to the Employer of the existence of the condition referred to in clause (A).

 

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(e) Without Cause. The Employer has the right to terminate Executive’s employment under this Agreement without Cause by providing Executive with a Notice of Termination. For purposes of Section 7 hereto, a “termination without Cause” shall include the Employer’s failure to renew this Agreement pursuant to Section 1 prior to a Renewal Date.

(f) Without Good Reason. Executive may voluntarily terminate employment with the Employer without Good Reason at any time by providing the Employer with a Notice of Termination.

6. Termination Procedure.

(a) Notice of Termination. Any termination of Executive’s employment by the Employer or by Executive during the Term (other than termination pursuant to Section 5(a)) will be communicated by Notice of Termination to the other party in accordance with Section 15. For purposes of this Agreement, a “Notice of Termination” means a written notice which indicates the specific termination provision in this Agreement relied upon and sets forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of Executive’s employment.

(b) Date of Termination. “Date of Termination” shall mean (i) if Executive’s employment is terminated by his death, the date of his death, (ii) if Executive’s employment is terminated due to Disability pursuant to Section 5(b), thirty (30) days after the date the Notice of Termination is delivered (provided that Executive has not returned to the substantial performance of his duties on a full-time basis during such thirty (30) day period), (iii) if Executive’s employment is terminated for Good Reason pursuant to Section 5(d), the date on which a Notice of Termination provided in accordance with such Section is given or any later date (within thirty (30) days after the giving of such Notice of Termination) determined by Executive and set forth in such Notice of Termination, (iv) if Executive’s employment is terminated voluntarily by Executive without Good Reason pursuant to Section 5(f), ninety (90) days after the Notice of Termination or, at the Employer’s election, immediately upon the receipt of the Notice of Termination, (v) if Executive’s employment is terminated by the Employer giving a proper notice of non-renewal as permitted in Section 1 above, the last day of the Term, or (vi) if Executive’s employment is terminated for any other reason, the date on which a Notice of Termination is given or any later date (within thirty (30) days after the giving of such Notice of Termination) set forth in such Notice of Termination; provided, however, that in the case of clauses (i), (ii), (iv) and (v) under the “Cause” definition, the “Date of Termination” shall occur immediately upon the giving of such Notice of Termination; provided further that if the Employer elects to immediately terminate Executive’s employment upon the receipt of a Notice of Termination under clause (iv) of this Section 6(b), then Executive shall still be entitled to the payments described in Section 7(c) as if the Date of Termination was ninety (90) days after the Notice of Termination.

 

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7. Obligations of the Employer Upon Termination. In the event Executive’s employment under this Agreement terminates during the Term and such termination constitutes a “separation from service” from the Employer (within the meaning of Section 409A(a)(2)(A)(i) of the Internal Revenue Code of 1986, as amended (the “Code”), and Treasury Regulation Section 1.409A-1(h)) (“Separation from Service”), the Employer will provide Executive with the payments and benefits set forth below.

(a) Termination by Employer Without Cause or by Executive for Good Reason Not Following Change in Control. If Executive’s employment is terminated by the Employer without Cause or by Executive for Good Reason at any time that is not within eighteen (18) months after the occurrence of a Change in Control (as defined below):

(i) The Employer will pay to Executive the following: (A) any earned but unpaid Base Salary through the Date of Termination, (B) any Annual Bonus required to be paid to Executive pursuant to Section 4(b) for any calendar year of the Employer that ends on or before the Date of Termination if not previously paid, (C) accrued but unpaid vacation pay through the Date of Termination if due under the applicable vacation policy, and (D) reasonable business expenses incurred but unpaid through the Date of Termination (together, the “Accrued Obligations”). Except as provided under this Agreement, the Employer’s plans and policies, and/or applicable law, the Accrued Obligations shall be paid within thirty (30) days after the Date of Termination.

(ii) Subject to Sections 7(f) and 10 below, the Employer will pay to Executive an amount equal to (A) eighteen (18) months of Executive’s Base Salary in effect on the Date of Termination plus (B) one-hundred fifty percent (150%) of the Bonus Target for Executive for the calendar year during which the Date of Termination occurs plus (C) eighteen (18) months of the monthly premium payment necessary to continue Executive’s existing group health, dental coverage and vision (and any such coverage of Executive’s eligible dependents enrolled immediately prior to the Date of Termination), calculated under the applicable provisions of COBRA, and calculated without regard to whether Executive actually elects such continuation coverage (the “COBRA Severance Amount” and, collectively with the amounts set forth in clauses A and B, the “Severance Payment”). The Severance Payment will be paid as follows: (x) 50% of the Severance Payment will be paid in the form of a lump sum on the Employer’s first payroll date occurring on or after the sixtieth (60th) day following the Date of Termination and (y) 50% of the Severance Payment will be paid in the form of a salary continuation for a period of 12 months following the Date of Termination. Each payment under this Section 7(a)(ii) shall be treated as a separate payment for purposes of Section 409A of the Code.

 

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(iii) For purposes of this Agreement, “Change in Control” shall have the same definition assigned to “Change in Control” in the Equity Incentive Plan. If “Change in Control” is not defined in the Equity Incentive Plan, “Change in Control” shall mean:

 

  (A)

any consolidation or merger of the Company in which the Company is not the continuing or surviving corporation or pursuant to which shares of the Company’s common stock would be converted into cash, securities or other property, other than a merger of the Company in which the holders of the Company’s common stock immediately prior to the merger have the same proportionate ownership of common stock of the surviving corporation immediately after the merger;

 

  (B)

any sale, lease, exchange or other transfer (in one transaction or a series of related transactions) of all or substantially all, of the assets of the Company and its subsidiaries to any other person or entity (other than an affiliate of the Company);

 

  (C)

the stockholders of the Company approve any plan or proposal for liquidation or dissolution of the Company;

 

  (D)

any person or entity, including a “group” as contemplated by Section 13(d)(3) of the Exchange Act acquires or gains ownership or control (including, without limitation, power to vote) of more than 50% of the outstanding shares of the Company’s voting stock (based upon voting power); or

 

  (E)

as a result of or in connection with a contested election of directors, the persons who were directors of the Company before such election shall cease to constitute a majority of the Board.

(b) Termination by Employer Without Cause or by Executive for Good Reason Following Change in Control. If at any time within eighteen (18) months after a Change in Control, Executive’s employment is terminated by the Employer (or its successor) without Cause or by Executive for Good Reason, then Executive shall be entitled to the payments and benefits provided in Section 7(a) hereof, subject to the terms and conditions thereof (including, without limitation, the requirement that a condition to Executive’s right to receive the amounts provided for thereunder is that Executive execute, deliver, and not revoke the Release as set forth in Section 10 below), except that for purposes of this Section 7(b), the Severance Payment shall be an amount equal to (A) 24 months of Executive’s Base Salary in effect on the Date of Termination plus (B) 200% of the Bonus Target for Executive for the calendar year during which the Date of Termination occurs plus (C) the COBRA Severance Amount; provided, however, that, for the avoidance of doubt, the Severance Payment as modified by this Section 7(b) shall otherwise be paid in the manner provided in Section 7(a)(ii). Executive’s entitlement to payments under this Section 7(b) shall be conditioned upon Executive’s agreement, at the request of the successor company in a Change in Control, to provide transition services following such Change in Control to such successor company for a period not to exceed 120 days.

 

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(c) Termination by Employer for Cause or by Executive Without Good Reason. If Executive’s employment is terminated by the Employer for Cause or by Executive without Good Reason, the Employer will pay Executive the Accrued Obligations as provided in Section 7(a)(i); provided, however, the amounts described in Section 7(a)(i)(D) shall not be paid to Executive to the extent that Executive’s employment was terminated by the Employer for Cause due to Executive’s misappropriation of funds.

(d) Disability. During any period that Executive fails to perform Executive’s duties under this Agreement before its termination as a result of incapacity due to physical or mental illness, Executive will continue to receive his full Base Salary set forth in Section 4(a) until his employment is terminated, including, without limitation, pursuant to Section 5(b). If Executive’s employment is terminated due to Disability pursuant to Section 5(b), the Employer will pay Executive the Accrued Obligations as provided in Section 7(a)(i), plus the product of (x) Bonus Target for Executive for the calendar year of the Employer in which the Date of Termination occurs multiplied by (y) the payout percentage reasonably projected in good faith by the Board (or its designee) to be applied to such Bonus Target as of the Date of Termination (the “Bonus Severance Amount”), payable within thirty (30) days after the Date of Termination.

(e) Death. If Executive’s employment is terminated by death, the Employer will pay to Executive’s beneficiary, or personal or legal representatives or estate, as the case may be, the Accrued Obligations as provided in Section 7(a)(i), plus the Bonus Severance Amount for the calendar year of the Employer in which the Date of Termination occurs within thirty (30) days after the Date of Termination.

(f) Six-Month Delay. Notwithstanding anything to the contrary in this Agreement, no compensation or benefits, including, without limitation, any Severance Payment (including, without limitation, any Bonus Severance Amount payable under Section 7(d), if applicable), shall be paid to Executive during the six (6)-month period following Executive’s Separation from Service if the Employer determines that paying such amounts at the time or times indicated in this Agreement would be a prohibited distribution under Section 409A(a)(2)(B)(i) of the Code. If the payment of any such amounts is delayed as a result of the previous sentence, then on the first business day following the end of such six (6)-month period (or such earlier date upon which such amount can be paid under Section 409A (as defined below) without resulting in a prohibited distribution, including, without limitation, as a result of Executive’s death), the Employer shall pay Executive a lump-sum amount equal to the cumulative amount that would have otherwise been payable to Executive during such period.

8. Separation from Service Requirement. Notwithstanding any other provision of this Agreement, Executive shall be entitled to the Severance Payment only if the termination of Executive’s employment constitutes a Separation from Service.

 

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9. Restrictive Covenants.

(a) Nondisclosure of Confidential Information. Executive acknowledges that it is the policy of the Company and the Employer to maintain as secret and confidential (i) all valuable and unique information, (ii) other information heretofore or hereafter acquired by the Company, the Employer, or any affiliated entity and deemed by it to be confidential, and (iii) information developed or used by the Company, the Employer, or any affiliated entity, in each case, relating to the business, operations, employees and customers of the Company, the Employer, or any affiliated entity including, but not limited to, the mental impressions of Executive acquired by Executive during his employment by the Employer as well as any employee information (all such information described in clauses (i), (ii) and (iii) above, other than information that is known to the public or becomes known to the public through no fault of Executive, is hereinafter referred to as “Confidential Information”). The parties recognize that the services to be performed by Executive pursuant to this Agreement are special and unique and that by reason of his employment by the Employer before, on and after the date hereof, Executive has acquired and will acquire previously undisclosed Confidential Information. Executive recognizes that all such Confidential Information is the property of the Company, the Employer, and their subsidiaries. Accordingly, at any time during or after the Term and subject to Section 9(k), Executive shall not, except in the proper performance of his duties under this Agreement, directly or indirectly, without the prior written consent of the Company or the Employer, use the Confidential Information for any purpose or disclose the Confidential Information to any Person other than the Company, the Employer, or their subsidiaries, whether or not such Person is a competitor of the Company, the Employer, or their subsidiaries, and shall prevent the use, publication or disclosure of any Confidential Information obtained by, or which has come to the knowledge of, Executive before, on and after the date hereof. For purposes of the foregoing, the parties acknowledge and agree that overseeing, supervising, consulting with or advising others with respect to the acquisition or disposition of producing or non-producing leasehold, mineral interests or royalty interests (including, without limitation, farm-ins, farm-out, poolings, leasing activities, unitizations and similar activities), during the 12-month period commencing on the Date of Termination, solely as relates to any county or parish in which the Company conducts oil and gas operations on the Date of Termination will necessarily require and be deemed hereby to constitute the use and/or disclosure of Confidential Information in violation of the covenant set forth in this Section 9(a). For avoidance of doubt and notwithstanding the foregoing provisions of the immediately preceding sentence, following the 12-month anniversary of the Date of Termination (but not before such time), Executive’s retention of Executive’s mental impressions of Confidential Information, without conscious memorization or subsequent reference to Confidential Information, will not preclude the activities described in the immediately preceding sentence.

(b) Non-Solicitation. Executive shall not, during the Term and for a period of 12 months following the Date of Termination (the “Non-Solicitation Period”), either personally or by directing, assisting or encouraging his agent and whether for himself or on behalf of any other person or entity, directly or indirectly hire or solicit any employee or consultant of the Employer, including by attempting, directly or indirectly, to persuade any such employee or consultant to discontinue his/her status of employment or

 

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consultancy with the Employer to become an employee or consultant of any other person or entity. Additionally, during the Non-Solicitation Period, Executive shall not, for himself or on behalf of any person or entity, directly solicit any established customer of the Employer or the Company for the purpose of causing such customer to purchase goods, services or a combination of goods and services from another person or entity in lieu of goods, services or a combination thereof from the Employer or the Company. For purposes of this Agreement, an “established customer” shall be given the broadest possible interpretation under Oklahoma law. Nothing contained in this provision is intended to prohibit general advertising or solicitation not specifically directed at any or all of the Employer’s customers or employees.

(c) Non-Competition.

(i) As part of the consideration for the compensation and benefits to be paid to Executive hereunder, to protect the trade secrets and Confidential Information of the Company and its customers and clients that have been and will be entrusted to Executive, the business goodwill of the Company and its subsidiaries that will be developed in and through Executive and the business opportunities that will be disclosed or entrusted to Executive by the Company and its subsidiaries, and as an additional incentive for the Company to enter into this Agreement, during the Term, Executive shall not directly or indirectly, individually or on behalf of any other person or entity, manage, participate in, work for, consult with, render services for, or take an interest in (as an owner, stockholder, partner or lender) (i) any Competitor in an area of Competing Business or (ii) any entity for the purposes of evaluating an investment or financing activity in any counties in which the Company or the Employer operates.

(ii) For purposes of Section 9(c)(i):

 

  (A)

(A) “Competitor” means any business, company or individual which is in, or is actively seeking to be in the Competing Business in any county in which the Company or the Employer operates.

 

  (B)

(B) “Competing Business” means the acquisition, exploration, exploitation, development, production and/or operation of oil and gas properties.

(iii) Executive acknowledges that each of the covenants of Section 9(c)(i) are in addition to, and shall not be construed as a limitation upon, any other covenant provided in Section 9. Executive agrees that the scope of prohibited activities and time duration of each of the covenants set forth in Section 9(c)(i) are reasonable in nature and are no broader than are necessary to maintain the confidentiality and the goodwill of the Company’s proprietary and Confidential Information, plans and services and to protect the other legitimate business interests of the Company, including without limitation the goodwill developed by Executive with the Company’s customers, suppliers, licensees and

 

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business relations. It is also the intent of the Company and Executive that such covenants be construed and enforced in accordance with the changing activities, business and locations of the Company throughout the term of this covenant. The covenants in Section 9(c)(i) are severable and separate, and the unenforceability of any specific covenant shall not affect the provisions of any other covenant. Moreover, in the event any court of competent jurisdiction shall determine that the scope or duration set forth are unreasonable, then it is the intention of the parties that such restrictions be enforced to the fullest extent which the court deems reasonable, and the Agreement shall thereby be reformed.

(iv) Nothing in this Section 9(c) shall prohibit: (A) direct or indirect ownership of publicly traded securities which are issued by a Competitor involved in or conducting a Competing Business, provided that Executive, directly or indirectly, does not own more than 5% of the outstanding equity or voting securities of such Competitor; (B) ownership of royalty interests where Executive owns the surface of the land covered by the royalty interest and the ownership of the royalty interest is incidental to the ownership of such surface estate, provided that any such surface estate does not adjoin, or is not near to, any property ownership interest held directly or indirectly by the Company; (C) direct or indirect ownership of royalty interests or overriding royalty interests owned prior to the Effective Date; (D) direct or indirect ownership of working interests or other interests in oil and gas owned prior to the Effective Date and disclosed by Executive to the Company in writing; or (E) Executive’s ownership of an equity interest in Tapstone Energy, LLC (constituting less than 1% of such company’s outstanding equity) owned prior to the Effective Date. It is the intent of the Company that during, the Term of this Agreement, Executive is not acquiring additional oil and gas interests, directly or indirectly.

(v) For the avoidance of doubt, Executive will have no continuing obligations under this Section 9(c) on the 12-month anniversary of the Date of Termination.

(d) Non-Disparagement. During the Term and following the termination of Executive’s employment for any reason, Executive shall not disparage the Employer, the Company, or any of their respective affiliates, including any of the officers or directors, or the reputation of such entities.

(e) Cooperation. Upon reasonable request, Executive agrees to cooperate with the Company and the Employer and all individuals employed by the Company or the Employer in any and all matters relating to the Company or the Employer, including cooperation in any transition of his duties as Chief Executive Officer, as well as any ongoing investigations by the Securities and Exchange Commission (the “SEC”) and related investigations or any other related matters at the request of the Company or the Employer.

 

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(f) Obligations of Executive Upon Termination. Upon termination of Executive’s employment for any reason, Executive shall return to the Employer all property of the Company, Employer, and their affiliates, including, without limitation, all documents and copies, including, without limitation, hard and electronic copies, of documents in his possession or under his control relating to any Confidential Information including, but not limited to, internal and external business forms, manuals, correspondence, notes and computer programs, and Executive shall not make or retain any copy or extract of any of the foregoing. In addition, Executive shall resign from all positions held with the Company, the Employer, and their affiliated entities.

(g) Remedies. Executive acknowledges and understands that Section 9(a), Section 9(b), and the other provisions of this Agreement are of a special and unique nature, the loss of which cannot be adequately compensated for in damages by an action at law, and that the breach or threatened breach of the provisions of this Agreement would cause the Company, the Employer, and their affiliates irreparable harm. In the event of a breach or threatened breach by Executive of the provisions of this Agreement, the Company, the Employer, and their affiliates, as applicable, shall be entitled to an injunction restraining him from such breach in addition to other appropriate equitable and legal relief. Nothing contained in this Agreement shall be construed as prohibiting the Company, the Employer, or their affiliates from pursuing, or limiting their ability to pursue, any other remedies available for any breach or threatened breach of this Agreement by Executive, including, without limitation, the right to repayment of any Severance Payment (net of any taxes Executive has paid or is required to pay in respect thereof) already paid to Executive as contemplated by Section 7. If Executive’s employment is terminated by the Employer for Cause or by Executive without Good Reason, then, in the event of a material breach by Executive of the terms of Section 9, Executive shall pay the Employer an amount equal to 150% of the sum of Executive’s Base Salary and Bonus Target for the year in which the Date of Termination occurs. The provision of Section 12 hereof relating to arbitration of disputes shall not be applicable to the Company, the Employer, or their affiliates to the extent they seek an injunction in any court of competent jurisdiction to restrain Executive from violating Section 9(a) or Section 9(b) hereof. Notwithstanding anything to the contrary in this Agreement, the Company and the Employer may amend the provisions of Section 9 without the approval of Executive or any other person to provide for less restrictive limitations as to time, geographical area, or scope of activity to be restrained. Any such less restrictive limitations may, in sole discretion of the Company and the Employer, apply only with respect to the enforcement of this Agreement in certain jurisdictions specified in any such amendment. At the request of the Company or the Employer, Executive shall consent to any such amendment and shall execute and deliver to the Company and the Employer a counterpart signature page to such amendment; provided, however, that Executive’s failure to do so shall not impact the validity of the amendment.

(h) After-Acquired Evidence. Notwithstanding any provision of this Agreement to the contrary, if the Company or the Employer determines that Executive is eligible to receive any Severance Payment payable under Section 7 hereof, but, after such determination, the Company or the Employer within the subsequent twenty-four (24) months acquire evidence that (i) Executive has materially breached the terms of Section 9; or (ii) one or more of clauses (ii), (iv) and (viii) in the definition of “Cause” existed prior to the Date of Termination that has subsequently resulted in material injury to the Company,

 

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and had the Employer been aware of all material facts relating to such condition, would have given the Employer the right to terminate Executive’s employment for Cause, then, in each case, the Company and the Employer shall have the right to cease payment of any future installments of such Severance Payment, and the prompt repayment of the Severance Payment (net of any taxes Executive has paid or is required to pay in respect thereof) already paid to Executive as contemplated by Section 7 hereof.

(i) Clawback. To the extent required by applicable law or any applicable securities exchange listing standards, amounts paid or payable under this Agreement shall be subject to the provisions of any applicable clawback policies or procedures adopted by the Company, the Employer, or their affiliates, which clawback policies or procedures may provide for forfeiture and/or recoupment of amounts paid or payable under this Agreement. Notwithstanding any provision of this Agreement to the contrary, and to the extent required by applicable law or any applicable securities exchange listing standards, the Company and the Employer reserve the right, without the consent of Executive, to adopt any such clawback policies and procedures, including, without limitation, such policies and procedures applicable to this Agreement with retroactive effect.

(j) Continuing Operation. Except as specifically provided in this Section 9, the termination of Executive’s employment or of this Agreement will have no effect on the continuing operation of this Section 9.

(k) Protected Activities. Nothing in this Agreement is intended to, or does, prohibit Executive from (i) filing a charge or complaint with, providing truthful information to, or cooperating with an investigation being conducted by a governmental agency (such as the Equal Employment Opportunity Commission, another other fair employment practices agency, the National Labor Relations Board, the Department of Labor, or the SEC); (ii) engaging in other legally-protected activities; (iii) giving truthful testimony or making statements under oath in response to a subpoena or other valid legal process or in any legal proceeding; (iv) otherwise making truthful statements as required by law or valid legal process; or (v) disclosing a trade secret in confidence to a governmental official, directly or indirectly, or to an attorney, if the disclosure is made solely for the purpose of reporting or investigating a suspected violation of law. Accordingly, Executive understands that he shall not be held criminally or civilly liable under any federal or state trade secret law for the disclosure of a trade secret that (i) is made (A) in confidence to a federal, state, or local government official, either directly or indirectly, or to an attorney, and (B) solely for the purpose of reporting or investigating a suspected violation of law; or (ii) is made in a complaint or other document filed in a lawsuit or other proceeding, if such filing is made under seal. Executive likewise understands that, in the event he files a lawsuit for retaliation by the Company or the Employer for reporting a suspected violation of law, he may disclose the trade secret(s) of the Company or the Employer to his attorney and use the trade secret information in the court proceeding, if he (i) files any document containing the trade secret under seal; and (ii) does not disclose the trade secret, except pursuant to court order. In accordance with applicable law, and notwithstanding any other provision of this Agreement, nothing in this Agreement or any of any policies or agreements of the Company, the Employer, or their affiliates applicable to Executive (i) impedes his right to communicate with the SEC or any other governmental agency about possible violations of federal securities or other laws or regulations or (ii) requires him to provide any prior notice to the Company, the Employer, or their affiliates or obtain their prior approval before engaging in any such communications.

 

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10. Release. Notwithstanding any other provisions of this Agreement, it shall be a condition to Executive’s right to receive the Severance Payment that (a) Executive will execute and deliver to the Company and the Employer a release of claims in substantially the form attached hereto as Exhibit A (the “Release”), with the Release to be returned by Executive within the period specified in the Release (not to exceed forty-five (45) days following the Date of Termination) and (b) Executive not revoke such Release within the period specified in the Release (not to exceed seven (7) days thereafter). The form of the Release may be modified by the Company or the Employer, including, without limitation, as needed to reflect changes in the applicable law or regulations that are needed to provide a legally enforceable and binding Release to all parties at the time of execution.

11. Indemnification. Executive shall be eligible, to the extent provided by the corporate bylaws or directors’ and officers’ liability insurance of the Company or the Employer, if any, to be indemnified and held harmless by the Company or Employer during the Term of this Agreement and following any termination of this Agreement for any reason whatsoever in the same manner, and subject to the same limitations, as would any other senior executive officer or director of the Employer with respect to acts or omissions occurring prior to (a) the termination of this Agreement or (b) the termination of employment of Executive.

12. Arbitration; Legal Fees and Expenses. The parties agree that Executive’s employment and this Agreement relate to interstate commerce, and that any disputes, claims, or controversies between Executive and the Company, the Employer, or their affiliates which may arise out of or relate to Executive’s employment relationship or this Agreement shall be settled by arbitration. This agreement to arbitrate shall survive the termination of this Agreement. Any arbitration shall be in accordance with then-current Employment Arbitration Rules of the American Arbitration Association and undertaken pursuant to the Federal Arbitration Act. Arbitration will be held in Oklahoma City, Oklahoma unless the parties mutually agree on another location. The decision of the arbitrator will be enforceable in any court of competent jurisdiction. The parties agree that punitive, liquidated, or indirect damages shall not be awarded by the arbitrator unless such damages would have been awarded by a court of competent jurisdiction. Nothing in this agreement to arbitrate, however, shall preclude the Company, the Employer, or their affiliates from obtaining injunctive relief from a court of competent jurisdiction prohibiting any ongoing breaches by Executive of this Agreement including, without limitation, violations of Section 9. If any contest or dispute arises between the Company, the Employer, their affiliates, and Executive regarding any provision of this Agreement, the arbitrator may award to the prevailing party, as determined by the arbitrator, the reasonable attorneys’ fees, costs, and expenses incurred by the prevailing party in connection with such contest or dispute.

 

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13. Maximum Payments by the Employer.

(a) It is the objective of this Agreement to maximize Executive’s Net After-Tax Benefit (as defined herein) if payments or benefits provided under this Agreement or any other agreement are subject to excise tax under Section 4999 of the Code. Notwithstanding any other provisions of this Agreement, in the event that any payment or benefit by the Employer or otherwise to or for the benefit of Executive, whether paid or payable or distributed or distributable pursuant to the terms of this Agreement or otherwise, including, by example and not by way of limitation, acceleration by the Employer or otherwise of the date of vesting or payment or rate of payment under any plan, program, arrangement, or agreement of the Company or the Employer (all such payments and benefits, including, without limitation, the payments and benefits under Section 7 hereof, being hereinafter referred to as the “Total Payments”), would be subject (in whole or in part) to the excise tax imposed by Section 4999 of the Code (the “Excise Tax”), then the cash severance payments shall first be reduced, and the non-cash severance payments shall thereafter be reduced, to the extent necessary so that no portion of the Total Payments shall be subject to the Excise Tax, but only if (i) the net amount of such Total Payments, as so reduced (and after subtracting the net amount of federal, state and local income taxes on such reduced Total Payments and after taking into account the phase out of itemized deductions and personal exemptions attributable to such reduced Total Payments), is greater than or equal to (ii) the net amount of such Total Payments without such reduction (but after subtracting the net amount of federal, state and local income taxes on such Total Payments and the amount of Excise Tax to which Executive would be subject in respect of such unreduced Total Payments and after taking into account the phase out of itemized deductions and personal exemptions attributable to such unreduced Total Payments).

(b) The Total Payments shall be reduced by the Employer in the following order: (i) reduction of any cash severance payments otherwise payable to Executive that are exempt from Section 409A of the Code, (ii) reduction of any other cash payments or benefits otherwise payable to Executive that are exempt from Section 409A of the Code, but excluding any payments attributable to the acceleration of vesting or payments with respect to any equity award with respect to the Company’s common stock that is exempt from Section 409A of the Code, (iii) reduction of any other payments or benefits otherwise payable to Executive on a pro-rata basis or such other manner that complies with Section 409A of the Code, but excluding any payments attributable to the acceleration of vesting and payments with respect to any equity award with respect to the Company’s common stock that are exempt from Section 409A of the Code, and (iv) reduction of any payments attributable to the acceleration of vesting or payments with respect to any other equity award with respect to the Company’s common stock that are exempt from Section 409A of the Code.

(c) For purposes of determining whether and the extent to which the Total Payments will be subject to the Excise Tax, (i) no portion of the Total Payments the receipt or enjoyment of which Executive shall have waived at such time and in such manner as not to constitute a “payment” within the meaning of Section 280G(b) of the Code shall be taken into account, (ii) no portion of the Total Payments shall be taken into account which, in the written opinion of independent auditors of nationally recognized standing (“Independent Advisors”) selected by the Employer, does not constitute a “parachute payment” within the meaning of Section 280G(b)(2) of the Code (including, without limitation, by reason of Section 280G(b)(4)(A) of the Code) and, in calculating the Excise Tax, no portion of such Total Payments shall be taken into account which, in the opinion of Independent Advisors,

 

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constitutes reasonable compensation for services actually rendered, within the meaning of Section 280G(b)(4)(B) of the Code, in excess of the “base amount” (as defined in Section 280G(b)(3) of the Code) allocable to such reasonable compensation, and (iii) the value of any non-cash benefit or any deferred payment or benefit included in the Total Payments shall be determined by the Independent Advisors in accordance with the principles of Sections 280G(d)(3) and (4) of the Code. The costs of obtaining such determination shall be borne by the Employer.

14. Agreement Binding on Successors.

(a) Companys Successors. No rights or obligations of the Company or the Employer under this Agreement may be assigned or transferred except that the Company will require any successor (whether direct or indirect, by purchase, merger, reorganization, sale, transfer of stock, consolidation, or otherwise) to all or substantially all of the business and/or assets of the Company to expressly assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no succession had taken place. As used in this Agreement, “Company” means the Company as herein defined, and any successor to its or the Company’s business and/or assets (by merger, purchase or otherwise) which executes and delivers the agreement provided for in this Section 14 or which otherwise becomes bound by all the terms and provisions of this Agreement by operation of law.

(b) Executive’s Successors. No rights or obligations of Executive under this Agreement may be assigned or transferred by Executive other than his rights to payments or benefits under this Agreement, which may be transferred only by will or the laws of descent and distribution. Upon Executive’s death, this Agreement and all rights of Executive under this Agreement shall inure to the benefit of and be enforceable by Executive’s beneficiary, or personal or legal representatives, or estate, to the extent any such person succeeds to Executive’s interests under this Agreement. In the event of Executive’s death or a judicial determination of his incompetence, reference in this Agreement to Executive shall be deemed, where appropriate, to refer to his estate or other legal representative(s). If Executive should die following his Date of Termination while any amounts would still be payable to him under this Agreement if he had continued to live, unless otherwise provided, all such amounts shall be paid in accordance with the terms of this Agreement to his beneficiary or personal or legal representatives or estate.

15. Notice. For the purposes of this Agreement, notices, demands, and all other communications provided for in this Agreement shall be in writing and shall be deemed to have been duly given when delivered either personally or by United States certified or registered mail, return receipt requested, postage prepaid, addressed as follows:

If to Executive:

At his last known

address evidenced on the Employer’s

payroll records.

 

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If to the Company or Employer:

Chaparral Energy, Inc.

701 Cedar Lake Boulevard

Oklahoma City, OK 73114

or to such other address as any party may have furnished to the other in writing in accordance with this Agreement, except that notices of change of address shall be effective only upon receipt.

16. Section 409A.

(a) To the extent applicable, this Agreement shall be interpreted in accordance with Section 409A of the Code and Department of Treasury regulations and other interpretative guidance issued thereunder, including, without limitation, any such regulations or other such guidance that may be issued after the Effective Date (“Section 409A”). Any payments under this Agreement that may be excluded from Section 409A either as separation pay due to an involuntary separation from service or as a short-term deferral shall be excluded from Section 409A to the maximum extent possible. Notwithstanding any provision of this Agreement to the contrary, in the event that following the Effective Date, the Employer determines in good faith that any compensation or benefits payable under this Agreement may not be either exempt from or compliant with Section 409A, the Employer shall adopt such amendments to this Agreement or adopt other policies or procedures (including, without limitation, amendments, policies and procedures with retroactive effective), or take any other commercially reasonable actions necessary or appropriate to (i) preserve the intended tax treatment of the compensation and benefits payable hereunder, to preserve the economic benefits of such compensation and benefits, and/or to avoid less favorable accounting or tax consequences for the Employer and/or (ii) to exempt the compensation and benefits payable hereunder from Section 409A or to comply with the requirements of Section 409A and thereby avoid the application of penalty taxes thereunder; provided, however, that this Section 16(a) does not, and shall not be construed so as to, create any obligation on the part of the Employer to adopt any such amendments, policies or procedures or to take any other such actions or to indemnify Executive for any failure to do so.

(b) Any reimbursement or in-kind benefit provided under this Agreement which constitutes a “deferral of compensation” within the meaning of Treasury Regulation Section 1.409A-1(b) shall be made or provided in accordance with the requirements of Section 409A, including, without limitation, where applicable, the requirement that (i) any reimbursement is for expenses incurred during the period of time specified in this Agreement, (ii) the amount of expenses eligible for reimbursement, or in-kind benefits provided, during a calendar year may not affect the expenses eligible for reimbursement, or in-kind benefits to be provided, in any other calendar year, (iii) the reimbursement of an eligible expense will be made no later than the last day of the calendar year following the year in which the expense is incurred, and (iv) the right to reimbursement or in-kind benefits is not subject to liquidation or exchange for another benefit.

 

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(c) Notwithstanding anything herein to the contrary, Executive acknowledges and agrees that in the event that any tax is imposed under Section 409A in respect to any compensation or benefits payable to Executive, whether under this Agreement or otherwise, then (i) the payment of such tax shall be solely Executive’s responsibility, (ii) neither the Company, the Employer, their affiliates, nor any of their respective past or present directors, officers, employees, or agents shall have any liability for any such tax, and (iii) Executive shall indemnify and hold harmless, to the greatest extent permitted under law, each of the foregoing from and against any claims or liabilities that may arise in respect of any such tax.

17. Withholding. All payments and benefits hereunder shall be subject to any required withholding of federal, state, and local taxes pursuant to any applicable law or regulation in addition to any withholding authorized by Executive.

18. Miscellaneous. Except as expressly permitted above, no provisions of this Agreement may be amended, modified, or waived unless agreed to in writing and signed by Executive and by a duly authorized officer of the Company and Employer. Notwithstanding the previous sentence, the Company and the Employer may modify or amend this Agreement in their sole discretion at any time without the further consent of Executive in any manner necessary to comply with applicable law and regulations or the listing or other requirements of any stock exchange upon which the Company, the Employer, or their affiliate is listed. No waiver by either party of any breach by the other party of any condition or provision of this Agreement shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time. The respective rights and obligations of the parties under this Agreement shall survive Executive’s termination of employment and the termination of this Agreement to the extent necessary for the intended preservation of such rights and obligations. The validity, interpretation, construction and performance of this Agreement shall be governed by the laws of the State of Oklahoma without regard to its conflicts of law principles. The parties hereby irrevocably consent to the binding and exclusive venue for any dispute, controversy, claim, or cause of action between them arising out of or related to this Agreement which is permitted to be filed in court being in the state or federal court of competent jurisdiction that regularly conducts proceedings in Oklahoma County, Oklahoma. Nothing in this Agreement, however, precludes either party from seeking to remove a civil action from any state court to federal court. If any provision of this Agreement is held to be illegal, invalid, or unenforceable by an arbitrator or court of competent jurisdiction, (a) this Agreement shall be considered divisible, (b) such provision shall be deemed inoperative to the extent it is deemed illegal, invalid, or unenforceable, and (c) in all other respects this Agreement shall remain in full force and effect; provided, however, that, if any such provision may be made enforceable by such court by limitation, then such provision shall be so limited by such arbitrator or court and shall be enforceable to the maximum extent permitted by applicable law.

19. Validity. The invalidity or unenforceability of any provision or provisions of this Agreement will not affect the validity or enforceability of any other provision of this Agreement, which will remain in full force and effect.

20. Counterparts. This Agreement may be executed in one or more counterparts, each of which will be deemed to be an original but all of which together will constitute one and the same instrument.

 

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21. Section Headings. The section headings in this Agreement are for convenience of reference only, and they form no part of this Agreement and will not affect its interpretation.

22. Entire Agreement. Except as provided elsewhere herein and except for the other documents and agreements contemplated in accordance herewith, this Agreement sets forth the entire agreement of the parties with respect to its subject matter and supersedes all prior agreements, promises, covenants, arrangements, communications, representations or warranties, whether oral or written, by any officer, employee or representative of any party to this Agreement with respect to such subject matter. Executive acknowledges and agrees neither the Company, the Employer nor any affiliate thereof has made any promise or representation to him concerning this Agreement not expressed in this Agreement, and that, in signing this Agreement, he is not relying on any prior oral or written statement or representation by the Company, the Employer, any affiliate thereof or their respective representatives outside of this Agreement but is instead relying solely on his own judgment and his legal and tax advisors, if any.

23. Further Assurances. The parties hereby agree, without further consideration, to execute and deliver such other instruments or to take such other action as may reasonably be required to effectuate the terms and provisions of this Agreement.

24. Third-Party Beneficiaries; Definition of Affiliate. The subsidiaries of the Company and the Employer are intended to be third-party beneficiaries of this Agreement and therefore may enforce this Agreement. For purpose of this Agreement, “affiliate” means, with respect to the entity or person at issue, any person or entity that directly, or indirectly through one or more intermediaries, controls, is controlled by, or is under common control with, such entity or person.

25. Representations of Executive. Executive represents and warrants that (a) he has not previously assumed any obligations inconsistent with those in this Agreement; (b) neither his execution of this Agreement nor his performance of his duties as an officer and director of the Company and the Employer, as applicable, shall violate any other contract or obligation between him and any former employer or other third party to the extent he complies with the Tapstone Restrictive Covenants (as defined below); and (c) during the Term and subject to Section 9(k), he shall not use or disclose to anyone within the Company, the Employer, or their affiliates any proprietary information or trade secrets of any former employer or other third party. Executive further represents and warrants that he has entered into this Agreement pursuant to his own initiative and that the Company and the Employer did not induce him to execute this Agreement in contravention of any existing commitments. Executive further acknowledges that the Company and the Employer have entered into this Agreement in reliance upon the foregoing representations by him. The term “Tapstone Restrictive Covenants” means those obligations referred to as the “Restrictive Covenants” in that certain Waiver and Amendment dated December 20, 2019 by and among Tapstone Management Company, LLC, Tapstone Energy, LLC and Executive (the “Tapstone Restrictive Covenants Waiver”). True and correct copies of the Tapstone Restrictive Covenants Waiver, as well as the employment agreement and restrictive covenants agreement referred to therein, have been provided to the Company prior to Executive’s execution of this Agreement.

 

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26. Acknowledgement by the Company. The Company and the Employer acknowledge that Executive’s employment is subject to his compliance with the Tapstone Restrictive Covenants Waiver and the obligations referred to therein. If, promptly after receiving a directive from the Board that Executive reasonably believes would violate the terms of the Tapstone Restrictive Covenants Waiver and the obligations referred to therein, Executive informs the Board of such reasonable belief and the basis therefor, then Executive’s failure to perform such directive shall not form a basis for termination of this Agreement by the Company for Cause.

* * * *

 

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IN WITNESS WHEREOF, the parties have executed this Agreement as of the Effective Date.

 

CHAPARRAL ENERGY, L.L.C.     EXECUTIVE
By:   /s/ Justin Byrne     /s/ Charles Duginski
  Justin Byrne     Charles Duginski
  Vice President and General Counsel    
Date Signed: December 20, 2019     Date Signed: December 20, 2019
CHAPARRAL ENERGY, INC.    
By:   /s/ Justin Byrne    
  Justin Byrne    
  Vice President and General Counsel    
Date Signed: December 20, 2019    

[Signature Page to Duginski Employment Agreement]


EXHIBIT A

GENERAL RELEASE

NOTICE. Various laws, including, without limitation, Title VII of the Civil Rights Act of 1964, the Civil Rights Act of 1866, the Pregnancy Discrimination Act of 1978, the Equal Pay Act, the Civil Rights Act of 1991, the Age Discrimination in Employment Act, the Rehabilitation Act of 1973, the Americans With Disabilities Act, the Employee Retirement Income Security Act, and the Veterans Reemployment Rights Act (all as amended from time to time), prohibit employment discrimination based on sex, race, color, national origin, religion, age, disability, eligibility for covered employee benefits and veteran status. You may also have rights under laws such as the Older Workers Benefit Protection Act of 1990, the Worker Adjustment and Retraining Act of 1988, the Fair Labor Standards Act, the Family and Medical Leave Act, the Occupational Health and Safety Act, and other federal, state and/or municipal statutes, orders or regulations pertaining to labor, employment and/or employee benefits. These laws are enforced through the United States Department of Labor and its agencies, including, without limitation, the Equal Employment Opportunity Commission (EEOC), and various state and municipal labor departments, fair employment boards, human rights commissions and similar agencies.

This General Release is being provided to you in connection with the Employment Agreement between you, Chaparral Energy, L.L.C., and Chaparral Energy, Inc. dated December 20, 2019 (the “Agreement”). The federal Older Workers Benefit Protection Act requires that you have at least twenty-one (21) days, if you want it, to consider whether you wish to sign a release such as this one in connection with a special, individualized severance package. You have at least until the close of business twenty-one (21) days from the date you receive this General Release to make your decision. You may not sign this General Release until, at the earliest, your official date of separation from employment.

BEFORE EXECUTING THIS GENERAL RELEASE YOU SHOULD REVIEW THESE DOCUMENTS CAREFULLY AND CONSULT WITH YOUR ATTORNEY.

You may revoke this General Release within seven (7) days after you sign it and it shall not become effective or enforceable until that revocation period has expired. If you do not accept the severance package and sign and return this General Release, or if you exercise your right to revoke the General Release after signing it, you will not be eligible for the special, individualized severance package. Any revocation must be in writing and must be received by Chaparral Energy, Inc., 701 Cedar Lake Boulevard, Oklahoma City, OK 73114, within the seven-day period following your execution of this General Release.

In consideration of the special, individualized severance package offered to me by Chaparral Energy, LLC and Chaparral Energy, Inc. and the separation benefits I will receive as reflected in the Agreement, I hereby release and discharge Chaparral Energy, L.L.C., Chaparral Energy, Inc. and their predecessors, successors, affiliates, parent, subsidiaries and partners and each of those entities’ employees, officers, directors and agents (hereafter collectively referred to as the “Company”) from all claims, liabilities, demands, and causes of action, known or unknown, fixed or contingent, which I may have or claim to have against the Company either as a result of my past employment with the Company and/or the severance of that relationship and/or otherwise, and hereby waive any and all rights I may have with respect to and promise not to file a lawsuit to assert any such claims.


This General Release includes, but is not limited to, claims arising under Title VII of the Civil Rights Act of 1964, the Civil Rights Act of 1866, the Pregnancy Discrimination Act of 1978, the Equal Pay Act, the Civil Rights Act of 1991, the Age Discrimination in Employment Act, the Rehabilitation Act of 1973, the Americans With Disabilities Act, the Employee Retirement Income Security Act or 1974 and the Veterans Reemployment Rights Act (all as amended from time to time). This General Release also includes, but is not limited to, any rights I may have under the Older Workers Benefit Protection Act of 1990, the Worker Adjustment and Retraining Act of 1988, the Fair Labor Standards Act, the Family and Medical Leave Act, the Occupational Health and Safety Act and any other federal, state and/or municipal statutes, orders or regulations pertaining to labor, employment and/or employee benefits. This General Release also applies to any claims or rights I may have growing out of any legal or equitable restrictions on the Company’s rights not to continue an employment relationship with its employees, including, without limitation, any express or implied employment contracts, and to any claims I may have against the Company for fraudulent inducement or misrepresentation, defamation, wrongful termination or other retaliation claims in connection with workers’ compensation or alleged “whistleblower” status or on any other basis whatsoever.

It is specifically agreed, however, that this General Release does not have any effect on any rights or claims I may have against the Company which arise after the date I execute this General Release or on any vested rights I may have under any of the Company’s qualified or non-qualified benefit plans or arrangements as of or after my last day of employment with the Company, or on any of the Company’s obligations under the Agreement or as otherwise required under the Consolidated Omnibus Budget and Reconciliation Act of 1985 (COBRA).

I have carefully reviewed and fully understand all the provisions of the Agreement and General Release, including, without limitation, the foregoing Notice. I have not relied on any representation or statement, oral or written, by the Company or any of its representatives, which is not set forth in those documents.

The Agreement and this General Release, including, without limitation, the foregoing Notice, set forth the entire agreement between me and the Company with respect to this subject. I understand that my receipt and retention of the separation benefits covered by the Agreement are contingent not only on my execution of this General Release, but also on my continued compliance with my obligations under the Agreement that survive and continue in effect in accordance with the respective terms thereof, notwithstanding any termination of employment, including, without limitation, Section 9 thereof. I acknowledge that the Company gave me at least twenty-one (21) days to consider whether I wish to accept or reject the separation benefits I am eligible to receive under the Agreement in exchange for this General Release. I also acknowledge that the Company advised me to seek independent legal advice as to these matters, if I chose to do so. I hereby represent and state that I have taken such actions and obtained such information and independent legal or other advice, if any, that I believed were necessary for me to fully understand the effects and consequences of the Agreement and General Release prior to signing those documents.

[Signature Page Follows]

 

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Dated this _____ day of __________, _______.

 

CHAPARRAL ENERGY, L.L.C.     EXECUTIVE
By:                                                     By:    
  Name:       Charles Duginski
  Title:      
Date Signed:  

                                                              

    Date Signed:                                                                              
CHAPARRAL ENERGY, INC.      
By:          
  Name:      
  Title:      
Date Signed:  

 

     


EXHIBIT B-1

FORM OF GRANT AGREEMENT FOR INITIAL EQUITY GRANT

(3-Year Time Based Grant)

[Filed as Exhibit 99.5 to the Company’s Current Report

on Form 8-K to which this Agreement is filed as an Exhibit.]


EXHIBIT B-2

FORM OF GRANT AGREEMENT FOR INITIAL EQUITY GRANT

(3-Year Time and Performance Based Grant)

[Filed as Exhibit 99.6 to the Company’s Current Report

on Form 8-K to which this Agreement is filed as an Exhibit.]


EXHIBIT C-1

FORM OF GRANT AGREEMENT FOR CASH INCENTIVE AWARD

(3-Year Time Based Grant)

[The Execution Version of this Form is Filed as Exhibit 99.7 to the

Company’s Current Report on Form 8-K to which this Agreement is filed as an Exhibit.]


EXHIBIT C-2

FORM OF GRANT AGREEMENT FOR CASH INCENTIVE AWARD

(3-Year Time and Performance Based Grant)

[The Execution Version of this Form is Filed as Exhibit 99.8 to the

Company’s Current Report on Form 8-K to which this Agreement is filed as an Exhibit.]

Exhibit 99.5

Exhibit B-1

CHAPARRAL ENERGY, INC.

RESTRICTED STOCK AWARD NOTICE

3-YEAR TIME-BASED VESTING

You, the grantee named below (“Grantee”), have been granted a restricted stock award (this “Award”) for the number of shares of Common Stock (the “Shares”), of Chaparral Energy, Inc., a Delaware corporation (“Chaparral”), set forth below and on the terms and conditions set forth below and in accordance with the Restricted Stock Award Agreement to which this Restricted Stock Award Notice is attached (the “Agreement”). This Award is being granted to you as an “employment inducement award” under NYSE Rule 303A.08, outside of the Chaparral Energy, Inc. 2019 Long-Term Incentive Plan (the “Plan”). Notwithstanding that this Award is being granted outside of the Plan, except as expressly provided otherwise, this Award will be governed in a manner consistent with the terms and conditions of the Plan.

 

Grantee Name:    Charles Duginski
Number of Shares Awarded:    688,073
Award Date:    December [__], 2019
Vesting Schedule:    This Award will be subject to a restricted period (the “Restricted Period”) that will commence on the Award Date and end on the third anniversary of the Award Date. During the Restricted Period, this Award will be subject to the restrictions described in the Agreement; provided, however, that the restrictions will be removed (and such portion of this Award will “vest”) as to:
  

(i) one third (1/3) of this Award (or if such fraction results in a number of Shares that includes a fraction, then the next lower whole number of Shares) on December 20, 2020, but only if Grantee is in the continuous employ or service of Chaparral or an Affiliate (as defined in the Agreement) until such date;

  

(ii)  an additional one third (1/3) of this Award (or if such fraction results in a number of Shares that includes a fraction, then the next lower whole number of Shares) on December 20, 2021, but only if Grantee is in the continuous employ or service of Chaparral or an Affiliate until such date; and

  

(iii)  the remaining portion of this Award on December 20, 2022, but only if Grantee is in the continuous employ or service of Chaparral or an Affiliate until such date.

Please note that this Restricted Stock Award Notice serves as your notice of this Award and is for your personal files. You are not required to sign and return any documents. You will be deemed to accept this Award unless you promptly notify the human resources department of Chaparral in writing that you reject this Award. By accepting this Award, you are agreeing to be bound by the terms of this Restricted Stock Award Notice, the Agreement and the administrative provisions of the Plan.

 

CHAPARRAL ENERGY, INC.
[ELECTRONIC SIGNATURE]
[NAME]
[TITLE]

 


CHAPARRAL ENERGY, INC.

RESTRICTED STOCK AWARD AGREEMENT

This Restricted Stock Award Agreement (“Agreement”), made and entered into as of the Award Date (as set forth on the Restricted Stock Award Notice), is by and between Chaparral Energy, Inc., a Delaware corporation (“Chaparral”), and the Grantee named in the Restricted Stock Award Notice (“Grantee”) pursuant to the Employment Agreement, by and between Grantee, Chaparral and Chaparral Energy, L.L.C., dated as of December 20, 2019 (the “Employment Agreement”). The Award is being granted to Grantee as an “employment inducement award” under NYSE Rule 303A.08, outside of the Chaparral Energy, Inc. 2019 Long-Term Incentive Plan (the “Plan”). Notwithstanding that the Award is being granted outside of the Plan, except as expressly provided otherwise herein, the Award will be governed in a manner consistent with the terms and conditions of the Plan.

1. Award of Restricted Stock. Effective as of the Award Date, Chaparral hereby awards to Grantee, and Grantee hereby accepts, a restricted stock award (“Award”) for shares of Common Stock (the “Shares”) of Chaparral on the terms and conditions and subject to the restrictions, including forfeiture, set forth in this Agreement, the Restricted Stock Award Notice and the Plan. The Award shall be null and void unless Grantee shall, if requested by Chaparral, execute and return one or more irrevocable stock powers to facilitate the transfer to Chaparral (or its assignee or nominee) of the Shares subject to the Award if such Shares are forfeited pursuant to Section 3 hereof or if required under applicable laws or regulations. As soon as practicable after Grantee has accepted this Agreement in accordance with the procedures prescribed by Chaparral and, if requested by Chaparral, such stock power or powers, and returned the same to Chaparral, Chaparral shall cause to be issued in Grantee’s name the total number of Shares subject to the Award.

2. Custody and Delivery of Shares. The Shares subject to the Award shall be registered in the name of Grantee with notations regarding the applicable restrictions on transfer imposed under this Agreement until the Shares subject to the Award have become vested. As soon as practicable after the date any Shares become vested, in whole or in part, pursuant to Section 3 hereof, the Company shall remove the applicable notations regarding restrictions imposed by this Agreement on the transfer of such vested Shares. Alternatively, in the sole discretion of Chaparral, Chaparral shall hold a certificate or certificates representing the Shares subject to the Award until such Award shall have vested, in whole or in part, pursuant to Section 3 hereof, and Chaparral shall as soon thereafter as practicable, subject to Section 5 hereof, deliver the certificate or certificates for the vested Shares to Grantee and destroy the stock power or powers relating to the vested Shares delivered by Grantee pursuant to Section 1 hereof. If such stock power or powers also relate to unvested Shares, Chaparral may require, as a condition precedent to delivery of any certificate pursuant to this Section 2, the execution and delivery to Chaparral of one or more stock powers relating to such unvested Shares.

 

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3. Vesting and Forfeiture.

(a) The Award will be subject to restrictions during the Restricted Period in accordance with the Vesting Schedule set forth in the Restricted Stock Award Notice. Until the date the restrictions applicable hereunder to a portion of the Award are removed in accordance with the Vesting Schedule (each such date, a “Vesting Date”), the Award is subject to being forfeited by Grantee.

(b) Except as otherwise provided in Section 3(d), immediately after termination of Grantee’s employment or service with Chaparral and its Affiliates (i) by Chaparral or its Affiliates without Cause, (ii) by Grantee for Good Reason or (iii) due to Grantee’s death or Disability, the portion of the Award that was scheduled to vest on the regularly scheduled Vesting Date (as provided in the Vesting Schedule) that immediately follows the Date of Termination shall vest upon such Date of Termination. Any portion of the Award that has not by that time become vested and does not become vested as of such date pursuant to the Restricted Stock Award Notice and this Section 3(b) or the applicable provisions of the Plan will be forfeited by Grantee, without payment of any consideration to Grantee, and neither Grantee nor any of his or her heirs, beneficiaries, executors, administrators or other personal representatives will have any rights whatsoever in and to any portion of the forfeited Award.

(c) Immediately after termination of Grantee’s employment or service with Chaparral and its Affiliates for any reason other than as specified in Section 3(b) or Section 3(d), any portion of the Award that has not by that time become vested and does not become vested as of such date pursuant to the Restricted Stock Award Notice and this Agreement or the applicable provisions of the Plan will be forfeited by Grantee, without payment of any consideration to Grantee, and neither Grantee nor any of his or her heirs, beneficiaries, executors, administrators or other personal representatives will have any rights whatsoever in and to any portion of the forfeited Award.

(d) Notwithstanding the foregoing, in the event of a Change in Control, the unvested portion of the Award shall vest upon (i) a Change in Control if the Award is not effectively assumed by the acquirer, with appropriate adjustments as determined by the Board, in connection with such Change in Control or (ii) the termination of Grantee’s employment by Chaparral or its Affiliates without Cause or by Grantee for Good Reason, in each case, within eighteen (18) months after such Change in Control.

(e) For purposes of this Agreement, “Cause,” “Change in Control,” “Date of Termination,” “Disability” and “Good Reason” shall have the respective meanings specified in the Employment Agreement.

(f) For purposes of this Agreement, “Affiliate” means (i) any “parent corporation” within the meaning of Section 424 of the Code (provided, however, that “100%” shall be substituted for “50%” in such definition for purposes of this clause (i)) or (ii) any “subsidiary corporation” within the meaning of Section 424 of the Code.

(g) Subject to Section 5, upon the vesting of the Award, in whole or in part, Chaparral shall remove the applicable notations regarding restrictions imposed by this Agreement on the transfer of such vested Shares or, alternatively, deliver the certificate or certificates for the vested Shares to Grantee and destroy the stock power or powers relating to the vested Shares delivered by Grantee pursuant to Section 1 hereof. Chaparral shall pay all original issue or transfer taxes and all fees and expenses incident to such delivery, except as otherwise provided in Section 5.

 

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4. Rights As a Stockholder. Grantee shall have the right to vote the Shares subject to the Award and to receive dividends and other distributions thereon unless and until such Shares are forfeited pursuant to Section 3 hereof; provided, however, that a dividend or other distribution with respect to such Shares (including, without limitation, a stock dividend, stock split or a regular cash dividend), shall be subject to the same restrictions as the Shares with respect to which such dividend or other distribution was made (and if Grantee shall have received such dividend or other distribution, Grantee shall deliver the same to Chaparral and shall, if requested by Chaparral, execute and return one or more irrevocable stock powers related thereto).

5. Withholding Taxes. Chaparral and its Affiliates shall, to the extent permitted by law, deduct from any payments made hereunder any federal, state or local taxes required to be withheld on account of amounts payable hereunder (the “Required Tax Payments”). Chaparral or an Affiliate shall satisfy any Required Tax Payments by withholding whole Shares which would otherwise be delivered to Grantee having an aggregate fair market value, determined as of the date on which such withholding obligation arises, equal to the Required Tax Payments. Shares withheld may not have a fair market value in excess of the amount determined by applying the minimum statutory withholding rate; provided, however, that if a fraction of a Share would be required to satisfy the minimum individual statutory rate in Grantee’s jurisdiction, then the number of Shares to be withheld shall be rounded up to the next nearest whole Share. No certificate representing a Share shall be delivered until the Required Tax Payments have been satisfied in full.

6. Taxation; Section 83(b) Election. Grantee understands that Grantee is solely responsible for all tax consequences to Grantee in connection with this Award. Grantee represents that Grantee has consulted with any tax consultants Grantee deems advisable in connection with the Award and that Grantee is not relying on Chaparral for any tax advice. By accepting this Agreement, Grantee agrees that Grantee may make an election with the Internal Revenue Service under Section 83(b) of the Code, as amended, and the regulations promulgated thereunder, in the form of Exhibit A attached hereto, to include in Grantee’s gross income the Fair Market Value of the unvested Shares subject to the Award as of such date. Grantee further agrees to deliver the executed Section 83(b) election to Chaparral for filing with the Internal Revenue Service within five days following the filing thereof.

7. Effect on Employment or Services. Nothing contained in the Plan or in this Agreement will confer upon Grantee any right with respect to the continuation of his or her employment by or service with Chaparral or an Affiliate, or interfere in any way with the right of Chaparral or an Affiliate, (subject to the terms of any separate agreement to the contrary) at any time to terminate such employment or service or to increase or decrease the compensation of Grantee from the rate in existence at the date of this Agreement.

8. The Plan and Restricted Stock Award Notice. Except as otherwise provided in this Agreement or in the Employment Agreement, the terms and provisions of the Plan and the attached Restricted Stock Award Notice are hereby incorporated into this Agreement as if set forth herein in their entirety. Capitalized terms used in this Agreement and not otherwise defined in this Agreement or the Restricted Stock Award Notice will have the respective meanings assigned to such terms in the Plan.

 

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9. Assignment/Transferability. Chaparral may assign all or any portion of its rights and obligations under this Agreement. Prior to the vesting of the Shares subject to the Award, such Shares may not be transferred by Grantee other than by will, the laws of descent and distribution or pursuant to beneficiary designation procedures approved by Chaparral. Except to the extent permitted by the foregoing, such unvested Shares may not be sold, transferred, pledged, exchanged, hypothecated or otherwise disposed of (whether by operation of law or otherwise) or be subject to execution, attachment or similar process.

10. Binding Effect/Governing Law. This Agreement will be binding upon and inure to the benefit of (i) Chaparral and its successors and assigns, and (ii) Grantee and his or her heirs, devisees, executors, administrators and personal representatives. This Agreement will be governed by and construed in accordance with the internal laws (and not the principles relating to conflicts of laws) of the State of Delaware, except as superseded by federal law.

 

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Exhibit 99.6

Exhibit B-2

CHAPARRAL ENERGY, INC.

RESTRICTED STOCK AWARD NOTICE

3-YEAR PERFORMANCE AND TIME-BASED VESTING

You, the grantee named below (“Grantee”), have been granted a restricted stock award (this “Award”) for the number of shares of Common Stock (the “Shares”), of Chaparral Energy, Inc., a Delaware corporation (“Chaparral”), set forth below and on the terms and conditions set forth below and in accordance with the Restricted Stock Award Agreement to which this Restricted Stock Award Notice is attached (the “Agreement”). This Award is being granted to you as an “employment inducement award” under NYSE Rule 303A.08, outside of the Chaparral Energy, Inc. 2019 Long-Term Incentive Plan (the “Plan”). Notwithstanding that this Award is being granted outside of the Plan, except as expressly provided otherwise, this Award will be governed in a manner consistent with the terms and conditions of the Plan.

 

Grantee Name:    Charles Duginski
Number of Target Shares Awarded:    688,073. The number of “Earned Shares” that determines the number of Shares that will be deliverable will range from 0% to 150% of the number of Target Shares.
Award Date:    December [__], 2019
Annual Performance Periods:   

Twelve month period ending December 20, 2020 (the “First Annual Performance Period”)

 

Twelve month period ending December 20, 2021 (the “Second Annual Performance Period”)

 

Twelve month period ending December 20, 2022 (the “Third Annual Performance Period”)

Vesting Schedule:   

This Award will be subject to a restricted period (the “Restricted Period”) that will commence on the Award Date and end on the last day of the Third Annual Performance Period. During the Restricted Period, this Award will be subject to the restrictions described in the Agreement; provided, however, that the restrictions will be removed (and such portion of this Award will “vest”) as to:

 

(i) a percentage, determined by the Committee for the First Annual Performance Period, of one third (1/3) of the Target Shares (or if such fraction results in a number of Shares that includes a fraction, then the next lower whole number of Shares) on the last day of the First Annual Performance Period, but only if Grantee is in the continuous employ or service of Chaparral or an Affiliate (as defined in the Agreement) until such date;


  

(ii)  a percentage, determined by the Committee for the Second Annual Performance Period, of an additional one third (1/3) of the Target Shares (or if such fraction results in a number of Shares that includes a fraction, then the next lower whole number of Shares) on the last day of the Second Annual Performance Period, but only if Grantee is in the continuous employ or service of Chaparral or an Affiliate until such date; and

  

(iii)  a percentage, determined by the Committee for the Third Annual Performance Period, of the remaining Target Shares on the last day of the Third Annual Performance Period, but only if Grantee is in the continuous employ or service of Chaparral or an Affiliate until such date.

Please note that this Restricted Stock Award Notice serves as your notice of this Award and is for your personal files. You are not required to sign and return any documents. You will be deemed to accept this Award unless you promptly notify the human resources department of Chaparral in writing that you reject this Award. By accepting this Award, you are agreeing to be bound by the terms of this Restricted Stock Award Notice, the Agreement and the administrative provisions of the Plan.

 

CHAPARRAL ENERGY, INC.
[ELECTRONIC SIGNATURE]
[NAME]
[TITLE]

 

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CHAPARRAL ENERGY, INC.

RESTRICTED STOCK AWARD AGREEMENT

This Restricted Stock Award Agreement (“Agreement”), made and entered into as of the Award Date (as set forth on the Restricted Stock Award Notice), is by and between Chaparral Energy, Inc., a Delaware corporation (“Chaparral”), and the Grantee named in the Restricted Stock Award Notice (“Grantee”) pursuant to the Employment Agreement, by and between Grantee, Chaparral and Chaparral Energy, L.L.C., dated as of December 20, 2019 (the “Employment Agreement”). The Award is being granted to Grantee as an “employment inducement award” under NYSE Rule 303A.08, outside of the Chaparral Energy, Inc. 2019 Long-Term Incentive Plan (the “Plan”). Notwithstanding that the Award is being granted outside of the Plan, except as expressly provided otherwise herein, the Award will be governed in a manner consistent with the terms and conditions of the Plan.

1. Definitions. For purposes of this Agreement:

(a) “Earned Shares” means the Shares that have been earned by Grantee for an Annual Performance Period as a percentage of the Target Shares, as determined in accordance with Section 4 below.

(b) “Peer Group” means the group of companies consisting of each of the companies selected by the Committee in its sole and absolute discretion prior to the beginning of the applicable Annual Performance Period; provided, however, that in the event any such company ceases to exist, ceases to file public reports timely with the U.S. Securities and Exchange Commission with respect to the applicable Annual Performance Period or merges or combines with any other entity that, in the determination of the Committee makes such combined company not comparable for use as part of the Peer Group, the Committee in its sole discretion may continue to include or exclude such company in the Peer Group, but in no event may substitute any other company in its place as part of the Peer Group. For this purpose, a company will not be considered to cease to be in existence merely on account of a name change, internal restructuring or reorganization, or similar event, if the company (or its successor) continues as substantially the same business following the change or event.

(c) “Total Stockholder Return” for Chaparral and for the other Peer Group companies will be determined on the basis of the total investment performance that would have resulted at the end of the applicable Annual Performance Period from investing $100 in the common stock of Chaparral and each of the other companies in the Peer Group, using a beginning stock price and an ending stock price equal to the average of the high price and the low price for the first trading day and the last trading day of such period, respectively, and with all dividends reinvested.

(d) “Vesting Date” means the date the restrictions applicable hereunder to a portion of the Award are removed in accordance with the Vesting Schedule set forth in the Restricted Stock Award Notice.

 

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2. Award of Restricted Stock. Effective as of the Award Date, Chaparral hereby awards to Grantee, and Grantee hereby accepts, a restricted stock award (“Award”) for shares of Common Stock (the “Shares”) of Chaparral on the terms and conditions and subject to the restrictions, including forfeiture, set forth in this Agreement, the Restricted Stock Award Notice and the Plan. The actual number of Shares, if any, that vest shall be determined in accordance with Section 4 below. The Award shall be null and void unless Grantee shall, if requested by Chaparral, execute and return one or more irrevocable stock powers to facilitate the transfer to Chaparral (or its assignee or nominee) of the Shares subject to the Award if such Shares are forfeited pursuant to Section 4 hereof or if required under applicable laws or regulations. As soon as practicable after Grantee has accepted this Agreement in accordance with the procedures prescribed by Chaparral and, if requested by Chaparral, such stock power or powers, and returned the same to Chaparral, Chaparral shall cause to be issued in Grantee’s name the total number of Shares subject to the Award.

3. Custody and Delivery of Shares. The Shares subject to the Award shall be registered in the name of Grantee with notations regarding the applicable restrictions on transfer imposed under this Agreement until the Shares subject to the Award have become vested. As soon as practicable after the date any Shares become vested, in whole or in part, pursuant to Section 4 hereof, Chaparral shall remove the applicable notations regarding restrictions imposed by this Agreement on the transfer of such vested Shares. Alternatively, in the sole discretion of Chaparral, Chaparral shall hold a certificate or certificates representing the Shares subject to the Award until such Award shall have vested, in whole or in part, pursuant to Section 4 hereof, and Chaparral shall as soon thereafter as practicable, subject to Section 6 hereof, deliver the certificate or certificates for the vested Shares to Grantee and destroy the stock power or powers relating to the vested Shares delivered by Grantee pursuant to Section 2 hereof. If such stock power or powers also relate to unvested Shares, Chaparral may require, as a condition precedent to delivery of any certificate pursuant to this Section 3, the execution and delivery to Chaparral of one or more stock powers relating to such unvested Shares.

4. Vesting and Forfeiture.

(a) The Award will be subject to restrictions during the Restricted Period in accordance with the Vesting Schedule set forth in the Restricted Stock Award Notice. Until the Vesting Date, the Award is subject to being forfeited by Grantee.

(b) As soon as practicable (but in no event later than 15 days) following the applicable Vesting Date, the Committee must determine a payout percentage in accordance with the schedule below. The payout percentage determined in accordance with the schedule below will be based on Chaparral’s Total Stockholder Return relative to the Total Stockholder Return of the companies in the Peer Group, all determined as of the end of the applicable Annual Performance Period.

 

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Chaparral’s Total

Stockholder Return Relative

to Peer Group Companies

   Payout Percentage  

75th percentile or above

     150

50th percentile

     100

25th percentile

     50

Below 25th percentile

     None  

If the percentile level of Chaparral’s Total Stockholder Return is between two levels indicated on the foregoing schedule, the payout percentage under such schedule will be determined on the basis of a straight-line interpolation between such levels. Such payout percentage will be multiplied by the number of Target Shares vesting on the applicable Vesting Date to determine the number of Earned Shares; provided, however, that if the product is a fraction, then the number of Earned Shares will equal the next lower whole number of Shares. The actual number of Shares, if any, that vest shall equal the amount of Earned Shares.

(c) Except as otherwise provided in Section 4(e), immediately after termination of Grantee’s employment or service with Chaparral and its Affiliates (i) by Chaparral or its Affiliates without Cause, (ii) by Grantee for Good Reason or (iii) due to Grantee’s death or Disability, the portion of the Award that was scheduled to vest on the regularly scheduled Vesting Date (as provided in the Vesting Schedule) that immediately follows the Date of Termination shall vest upon such Date of Termination with a payout percentage equal to 100%. Any portion of the Award that has not by that time become vested and does not become vested as of such date pursuant to the Restricted Stock Award Notice and this Section 4(c) or the applicable provisions of the Plan will be forfeited by Grantee, without payment of any consideration to Grantee, and neither Grantee nor any of his or her heirs, beneficiaries, executors, administrators or other personal representatives will have any rights whatsoever in and to any portion of the forfeited Award.

(d) Immediately after termination of Grantee’s employment or service with Chaparral and its Affiliates for any reason other than as specified in Section 4(c) or Section 4(e), any portion of the Award that has not by that time become vested and does not become vested as of such date pursuant to the Restricted Stock Award Notice and this Agreement or the applicable provisions of the Plan will be forfeited by Grantee, without payment of any consideration to Grantee, and neither Grantee nor any of his or her heirs, beneficiaries, executors, administrators or other personal representatives will have any rights whatsoever in and to any portion of the forfeited Award.

(e) Notwithstanding the foregoing, in the event of a Change in Control, the unvested portion of the Award, with a payout percentage equal to 100%, shall vest upon (i) a Change in Control if the Award is not effectively assumed by the acquirer, with appropriate adjustments as determined by the Board, in connection with such Change in Control or (ii) the termination of Grantee’s employment by Chaparral or its Affiliates without Cause or by Grantee for Good Reason, in each case, within eighteen (18) months after such Change in Control.

 

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(f) For purposes of this Agreement, “Cause,” “Change in Control,” “Date of Termination,” “Disability” and “Good Reason” shall have the respective meanings specified in the Employment Agreement.

(g) For purposes of this Agreement, “Affiliate” means (i) any “parent corporation” within the meaning of Section 424 of the Code (provided, however, that “100%” shall be substituted for “50%” in such definition for purposes of this clause (i)) or (ii) any “subsidiary corporation” within the meaning of Section 424 of the Code.

(h) Subject to Section 6, upon the vesting of the Award, in whole or in part, Chaparral shall remove the applicable notations regarding restrictions imposed by this Agreement on the transfer of such vested Shares or, alternatively, deliver the certificate or certificates for the vested Shares to Grantee and destroy the stock power or powers relating to the vested Shares delivered by Grantee pursuant to Section 2 hereof. Chaparral shall pay all original issue or transfer taxes and all fees and expenses incident to such delivery, except as otherwise provided in Section 6.

5. Rights As a Stockholder. Grantee shall have the right to vote the Shares subject to the Award and to receive dividends and other distributions thereon unless and until such Shares are forfeited pursuant to Section 4 hereof; provided, however, that a dividend or other distribution with respect to such Shares (including, without limitation, a stock dividend, stock split or a regular cash dividend), shall be subject to the same restrictions as the Shares with respect to which such dividend or other distribution was made (and if Grantee shall have received such dividend or other distribution, Grantee shall deliver the same to Chaparral and shall, if requested by Chaparral, execute and return one or more irrevocable stock powers related thereto).

6. Withholding Taxes. Chaparral and its Affiliates shall, to the extent permitted by law, deduct from any payments made hereunder any federal, state or local taxes required to be withheld on account of amounts payable hereunder (the “Required Tax Payments”). Chaparral or an Affiliate shall satisfy any Required Tax Payments by withholding whole Shares which would otherwise be delivered to Grantee having an aggregate fair market value, determined as of the date on which such withholding obligation arises, equal to the Required Tax Payments. Shares withheld may not have a fair market value in excess of the amount determined by applying the minimum statutory withholding rate; provided, however, that if a fraction of a Share would be required to satisfy the minimum individual statutory rate in Grantee’s jurisdiction, then the number of Shares to be withheld shall be rounded up to the next nearest whole Share. Notwithstanding the foregoing, if the Required Tax Payments are due prior to the date Chaparral determines the number of Shares that have become vested, the amount of the Required Tax Payments, including the number of Shares withheld to pay such Required Tax Payments, shall be based on a reasonable estimate of the number of Shares that are expected to become vested. No certificate representing a Share shall be delivered until the Required Tax Payments have been satisfied in full.

7. Taxation; Section 83(b) Election. Grantee understands that Grantee is solely responsible for all tax consequences to Grantee in connection with this Award. Grantee represents that Grantee has consulted with any tax consultants Grantee deems advisable in connection with the Award and that Grantee is not relying on Chaparral for any tax advice. By

 

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accepting this Agreement, Grantee agrees that Grantee may make an election with the Internal Revenue Service under Section 83(b) of the Code, as amended, and the regulations promulgated thereunder, in the form of Exhibit A attached hereto, to include in Grantee’s gross income the Fair Market Value of the unvested Shares subject to the Award as of such date. Grantee further agrees to deliver the executed Section 83(b) election to Chaparral for filing with the Internal Revenue Service within five days following the filing thereof.

8. Effect on Employment or Services. Nothing contained in the Plan or in this Agreement will confer upon Grantee any right with respect to the continuation of his or her employment by or service with Chaparral or an Affiliate, or interfere in any way with the right of Chaparral or an Affiliate, (subject to the terms of any separate agreement to the contrary) at any time to terminate such employment or service or to increase or decrease the compensation of Grantee from the rate in existence at the date of this Agreement.

9. The Plan and Restricted Stock Award Notice. Except as otherwise provided in this Agreement or in the Employment Agreement, the terms and provisions of the Plan and the attached Restricted Stock Award Notice are hereby incorporated into this Agreement as if set forth herein in their entirety. Capitalized terms used in this Agreement and not otherwise defined in this Agreement or the Restricted Stock Award Notice will have the respective meanings assigned to such terms in the Plan.

10. Assignment/Transferability. Chaparral may assign all or any portion of its rights and obligations under this Agreement. Prior to the vesting of the Shares subject to the Award, such Shares may not be transferred by Grantee other than by will, the laws of descent and distribution or pursuant to beneficiary designation procedures approved by Chaparral. Except to the extent permitted by the foregoing, such unvested Shares may not be sold, transferred, pledged, exchanged, hypothecated or otherwise disposed of (whether by operation of law or otherwise) or be subject to execution, attachment or similar process.

11. Binding Effect/Governing Law. This Agreement will be binding upon and inure to the benefit of (i) Chaparral and its successors and assigns, and (ii) Grantee and his or her heirs, devisees, executors, administrators and personal representatives. This Agreement will be governed by and construed in accordance with the internal laws (and not the principles relating to conflicts of laws) of the State of Delaware, except as superseded by federal law.

 

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Exhibit 99.7

Execution Version

CHAPARRAL ENERGY, INC.

CASH INCENTIVE AWARD NOTICE

3-YEAR TIME-BASED VESTING

You, the grantee named below (“Grantee”), have been awarded the following cash award (this “Award”) on the terms and conditions set forth below and in accordance with the Cash Incentive Award Agreement to which this Cash Incentive Award Notice is attached (the “Agreement”).

 

Grantee Name:    Charles Duginski
Award Amount:    $262,500
Award Date:    December 20, 2019
Vesting Schedule:    This Award will be subject to a restricted period (the “Restricted Period”) that will commence on the Award Date and end on the third anniversary of the Award Date. During the Restricted Period, this Award will be subject to the restrictions described in the Agreement, provided, however, that the restrictions will be removed (and such portion of this Award will “vest”) as to:
  

(i) one third (1/3) of this Award on December 20, 2020, but only if Grantee is in the continuous employ or service of Chaparral Energy, Inc. (“Chaparral”) or an Affiliate (as defined in the Agreement) until such date;

  

(ii)  an additional one third (1/3) of this Award on December 20, 2021, but only if Grantee is in the continuous employ or service of Chaparral or an Affiliate until such date; and

  

(iii)  the remaining one third (1/3) of this Award on December 20, 2022, but only if Grantee is in the continuous employ or service of Chaparral or an Affiliate until such date.

Please note that this Cash Incentive Award Notice serves as your notice of this Award and is for your personal files. You are not required to sign and return any documents. You will be deemed to accept this Award unless you promptly notify the human resources department of Chaparral in writing that you reject this Award. By accepting this Award, you are agreeing to be bound by the terms of this Cash Incentive Award Notice and the Agreement.

 

CHAPARRAL ENERGY, INC.
By:  

/s/ Justin Byrne

  Justin Byrne
  Vice President and General Counsel

 


CHAPARRAL ENERGY, INC.

CASH INCENTIVE AWARD AGREEMENT

This Cash Incentive Award Agreement (“Agreement”), made and entered into as of the Award Date (as set forth on the Cash Incentive Award Notice), is by and between Chaparral Energy, Inc., a Delaware corporation (“Chaparral”), and the Grantee named in the Cash Incentive Award Notice (“Grantee”) pursuant to the Employment Agreement, by and between Grantee, Chaparral and Chaparral Energy, L.L.C., dated as of December 20, 2019 (the “Employment Agreement”).

1. Cash Award. Effective as of the Award Date, Chaparral hereby awards to Grantee, and Grantee hereby accepts, a cash award (“Award”) in the amount of $262,500, on the terms and conditions and subject to the restrictions, including forfeiture, set forth in this Agreement and the Cash Incentive Award Notice.

2. Vesting and Forfeiture/Payment.

(a) Subject to this Agreement, the Award shall vest (i) in three equal annual installments, as indicated on the Vesting Schedule or (ii) as otherwise provided pursuant to this Section 2. The Award will be subject to restrictions during the Restricted Period in accordance with the Vesting Schedule set forth in the Cash Incentive Award Notice. Until the date the restrictions applicable hereunder to a portion of the Award are removed in accordance with the Vesting Schedule (each such date, a “Vesting Date”), the Award is subject to being forfeited by Grantee.

(b) Except as otherwise provided in Section 2(d), immediately after termination of Grantee’s employment or service with Chaparral and its Affiliates (i) by Chaparral or its Affiliates without Cause, (ii) by Grantee for Good Reason or (iii) due to Grantee’s death or Disability, the portion of the Award that was scheduled to vest on the regularly scheduled Vesting Date (as provided in the Vesting Schedule) that immediately follows the Date of Termination shall vest upon such Date of Termination. Any portion of the Award that has not by that time become vested and does not become vested as of such date pursuant to the Cash Incentive Award Notice and this Section 2(b) will be forfeited, and neither Grantee nor any of his or her heirs, beneficiaries, executors, administrators or other personal representatives will have any rights whatsoever in and to any portion of the forfeited Award.

(c) Immediately after termination of Grantee’s employment or service with Chaparral and its Affiliates for any reason other than as specified in Section 2(b) or 2(d), any portion of the Award that has not by that time become vested and does not become vested as of such date pursuant to the Cash Incentive Award Notice and this Agreement will be forfeited, and neither Grantee nor any of his or her heirs, beneficiaries, executors, administrators or other personal representatives will have any rights whatsoever in and to any portion of the forfeited Award.

(d) Notwithstanding the foregoing, in the event of a Change in Control, the unvested portion of the Award shall vest upon the termination of Grantee’s employment by Chaparral or its Affiliates without Cause or by Grantee for Good Reason, in each case, within eighteen (18) months after such Change in Control.

 

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(e) For purposes of this Agreement, “Cause,” “Change in Control,” “Date of Termination,” “Disability” and “Good Reason” shall have the respective meanings specified in the Employment Agreement.

(f) For purposes of this Agreement, “Affiliate” means (i) any “parent corporation” within the meaning of Section 424 of the Code (provided, however, that “100%” shall be substituted for “50%” in such definition for purposes of this clause (i)) or (ii) any “subsidiary corporation” within the meaning of Section 424 of the Code.

(g) As soon as practicable (but in no event later than 45 days) following the applicable Vesting Date, or, if earlier, the Date of Termination pursuant to Section 2(b) or Section 2(d), Chaparral will make a lump sum cash payment to Grantee for the portion of the Award that vests on such Vesting Date. Notwithstanding the foregoing provisions of this Section and subject to Section 409A of the Code, in the event that the Committee determines that making all or a portion of a cash payment under this Section 2(d) would jeopardize the ability of Chaparral to continue as a going concern, the Committee may delay such payment or portion thereof until the making of the payment or portion thereof would no longer have such effect. The Award will cease to be outstanding upon the earlier of forfeiture or upon settlement of the Award.

3. Withholding Taxes. Chaparral and its Affiliates will, to the extent permitted by law, have the right to deduct from any payments made hereunder any federal, state or local taxes required to be withheld on account of amounts payable hereunder.

4. Effect on Employment or Services. Nothing contained in this Agreement will confer upon Grantee any right with respect to the continuation of his or her employment by or service with Chaparral or an Affiliate, or interfere in any way with the right of Chaparral or an Affiliate, (subject to the terms of any separate agreement to the contrary) at any time to terminate such employment or service or to increase or decrease the compensation of Grantee from the rate in existence at the date of this Agreement.

5. Assignment/Transferability. Chaparral may assign all or any portion of its rights and obligations under this Agreement. The Award and the rights and obligations of Grantee under this Agreement may not be sold, transferred, pledged, exchanged, hypothecated or otherwise disposed of by Grantee other than by will or the laws of descent and distribution.

6. Binding Effect/Governing Law. This Agreement will be binding upon and inure to the benefit of (i) Chaparral and its successors and assigns, and (ii) Grantee and his or her heirs, devisees, executors, administrators and personal representatives. This Agreement will be governed by and construed in accordance with the internal laws (and not the principles relating to conflicts of laws) of the State of Delaware, except as superseded by federal law.

7. Code Section 409A. The Award is intended to be exempt from Section 409A of the Code and any ambiguities herein will be interpreted, to the extent possible, in a manner consistent therewith. Each payment hereunder shall be considered a separate payment.

 

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Notwithstanding the preceding, no person connected with this Agreement in any capacity, including without limitation Chaparral and any person affiliated with Chaparral and their respective directors, officers, agents and employees, makes any representation, commitment or guarantee that any tax treatment, including without limitation federal, state and local income, estate and gift tax treatment, will be applicable with respect to the Award.

 

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Exhibit 99.8

Execution Version

CHAPARRAL ENERGY, INC.

CASH INCENTIVE AWARD NOTICE

3-YEAR PERFORMANCE AND TIME-BASED VESTING

You, the grantee named below (“Grantee”), have been awarded the following cash award (this “Award”) on the terms and conditions set forth below and in accordance with the Cash Incentive Award Agreement to which this Cash Incentive Award Notice is attached (the “Agreement”).

 

Grantee Name:    Charles Duginski
Target Award Amount:    $262,500. The cash amount payable with respect to the Target Award Amount will range from 0% to 150% of the Target Award Amount.
Award Date:    December 20, 2019
Annual Performance Periods:   

Twelve month period ending December 20, 2020 (the “First Annual Performance Period”)

 

Twelve month period ending December 20, 2021 (the “Second Annual Performance Period”)

 

Twelve month period ending December 20, 2022 (the “Third Annual Performance Period”)

Vesting Schedule:   

This Award will be subject to a restricted period (the “Restricted Period”) that will commence on the Award Date and end on the last day of the Third Annual Performance Period. During the Restricted Period, this Award will be subject to the restrictions described in the Agreement, provided, however, that the restrictions will be removed (and such portion of this Award will “vest”) as to:

 

(i) a percentage, determined by the Committee for the First Annual Performance Period, of one third (1/3) of the Target Award Amount on the last day of the First Annual Performance Period, but only if Grantee is in the continuous employ or service of Chaparral Energy, Inc. (“Chaparral”) or an Affiliate (as defined in the Agreement) until such date;

 

(ii)  a percentage, determined by the Committee for the Second Annual Performance Period, of an additional one third (1/3) of the Target Award Amount on the last day of the Second Annual Performance Period, but only if Grantee is in the continuous employ or service of Chaparral or an Affiliate until such date; and

 

(iii)  a percentage, determined by the Committee for the Third Annual Performance Period, of the remaining one third (1/3) of the Target Award Amount on the last day of the Third Annual Performance Period, but only if Grantee is in the continuous employ or service of Chaparral or an Affiliate until such date.

 


Please note that this Cash Incentive Award Notice serves as your notice of this Award and is for your personal files. You are not required to sign and return any documents. You will be deemed to accept this Award unless you promptly notify the human resources department of Chaparral in writing that you reject this Award. By accepting this Award, you are agreeing to be bound by the terms of this Cash Incentive Award Notice and the Agreement.

 

CHAPARRAL ENERGY, INC.
By:  

/s/ Justin Byrne

  Justin Byrne
  Vice President and General Counsel

 

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CHAPARRAL ENERGY, INC.

CASH INCENTIVE AWARD AGREEMENT

This Cash Incentive Award Agreement (“Agreement”), made and entered into as of the Award Date (as set forth on the Cash Incentive Award Notice), is by and between Chaparral Energy, Inc., a Delaware corporation (“Chaparral”), and the Grantee named in the Cash Incentive Award Notice (“Grantee”) pursuant to the Employment Agreement, by and between Grantee, Chaparral and Chaparral Energy, L.L.C., dated as of December 20, 2019 (the “Employment Agreement”).

1. Definitions. For purposes of this Agreement:

(a) “Peer Group” means the group of companies consisting of each of the companies selected by the Committee in its sole and absolute discretion prior to the beginning of the applicable Annual Performance Period; provided, however, that in the event any such company ceases to exist, ceases to file public reports timely with the U.S. Securities and Exchange Commission with respect to the applicable Annual Performance Period or merges or combines with any other entity that, in the determination of the Committee makes such combined company not comparable for use as part of the Peer Group, the Committee in its sole discretion may continue to include or exclude such company in the Peer Group, but in no event may substitute any other company in its place as part of the Peer Group. For this purpose, a company will not be considered to cease to be in existence merely on account of a name change, internal restructuring or reorganization, or similar event, if the company (or its successor) continues as substantially the same business following the change or event.

(b) “Total Stockholder Return” for Chaparral and for the other Peer Group companies will be determined on the basis of the total investment performance that would have resulted at the end of the applicable Annual Performance Period from investing $100 in the common stock of Chaparral and each of the other companies in the Peer Group, using a beginning stock price and an ending stock price equal to the average of the high price and the low price for the first trading day and the last trading day of such period, respectively, and with all dividends reinvested.

(c) “Vesting Date” means the date the restrictions applicable hereunder to a portion of the Award are removed in accordance with the Vesting Schedule set forth in the Cash Incentive Award Notice.

2. Cash Award. Effective as of the Award Date, Chaparral hereby awards to Grantee, and Grantee hereby accepts, a cash award (“Award”) in the amount of $262,500, on the terms and conditions and subject to the restrictions, including forfeiture, set forth in this Agreement and the Cash Incentive Award Notice. The actual cash amount payable, if any, will be determined in accordance with Section 3 below.

 

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3. Vesting and Forfeiture/Payment.

(a) Subject to this Agreement, the Award shall vest (i) in one-third increments on the last day of each of the First, Second and Third Performance Periods or (ii) as otherwise provided pursuant to this Section 3. The Award will be subject to restrictions during the Restricted Period in accordance with the Vesting Schedule set forth in the Cash Incentive Award Notice. Until the Vesting Date, the Award is subject to being forfeited by Grantee.

(b) As soon as practicable (but in no event later than 15 days) following the applicable Vesting Date, the Committee must determine a payout percentage in accordance with the schedule below. The payout percentage determined in accordance with the schedule below will be based on Chaparral’s Total Stockholder Return relative to the Total Stockholder Return of the companies in the Peer Group, all determined as of the end of the applicable Annual Performance Period.

 

Chaparral’s Total

Stockholder Return Relative

to Peer Group Companies

   Payout Percentage  

75th percentile or above

     150

50th percentile

     100

25th percentile

     50

Below 25th percentile

     None  

If the percentile level of Chaparral’s Total Stockholder Return is between two levels indicated on the foregoing schedule, the payout percentage under such schedule will be determined on the basis of a straight-line interpolation between such levels. Such payout percentage will be multiplied by the amount of the Award vesting on the applicable Vesting Date to determine the payment amount.

(c) As soon as practicable (but in no event later than 45 days) following the applicable Vesting Date, or, if earlier, the Date of Termination pursuant to Section 3(d) or Section 3(f), Chaparral will make a lump sum cash payment to Grantee in an amount determined pursuant to Section 3(b). Notwithstanding the foregoing provisions of this Section and subject to Section 409A of the Code, in the event that the Committee determines that making all or a portion of a cash payment under this Section would jeopardize the ability of Chaparral to continue as a going concern, the Committee may delay such payment or portion thereof until the making of the payment or portion thereof would no longer have such effect. The Award will cease to be outstanding upon the earlier of forfeiture or upon settlement of the Award.

(d) Except as otherwise provided in Section 3(f), immediately after termination of Grantee’s employment or service with Chaparral and its Affiliates (i) by Chaparral or its Affiliates without Cause, (ii) by Grantee for Good Reason or (iii) due to Grantee’s death or Disability, the portion of the Award that was scheduled to vest on the regularly scheduled Vesting Date (as provided in the Vesting Schedule) that immediately follows the Date of Termination shall vest upon such Date of Termination with a payout percentage equal to 100%. Any portion of the Award that has not by that time become vested and does not become vested as of such date pursuant to the Cash Incentive Award Notice and this Section 3(d) will be forfeited, and neither Grantee nor any of his or her heirs, beneficiaries, executors, administrators or other personal representatives will have any rights whatsoever in and to any portion of the forfeited Award.

 

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(e) Immediately after termination of Grantee’s employment or service with Chaparral and its Affiliates for any reason other than as specified in Section 3(d) or 3(f), any portion of the Award that has not by that time become vested and does not become vested as of such date pursuant to the Cash Incentive Award Notice and this Agreement will be forfeited, and neither Grantee nor any of his or her heirs, beneficiaries, executors, administrators or other personal representatives will have any rights whatsoever in and to any portion of the forfeited Award.

(f) Notwithstanding the foregoing, in the event of a Change in Control, the unvested portion of the Award, with a payout percentage equal to 100%, shall vest upon the termination of Grantee’s employment by Chaparral or its Affiliates without Cause or by Grantee for Good Reason, in each case, within eighteen (18) months after such Change in Control.

(g) For purposes of this Agreement, “Cause,” “Change in Control,” “Date of Termination,” “Disability” and “Good Reason” shall have the respective meanings specified in the Employment Agreement.

(h) For purposes of this Agreement, “Affiliate” means (i) any “parent corporation” within the meaning of Section 424 of the Code (provided, however, that “100%” shall be substituted for “50%” in such definition for purposes of this clause (i)) or (ii) any “subsidiary corporation” within the meaning of Section 424 of the Code.

4. Withholding Taxes. Chaparral and its Affiliates will, to the extent permitted by law, have the right to deduct from any payments made hereunder any federal, state or local taxes required to be withheld on account of amounts payable hereunder.

5. Effect on Employment or Services. Nothing contained in this Agreement will confer upon Grantee any right with respect to the continuation of his or her employment by or service with Chaparral or an Affiliate, or interfere in any way with the right of Chaparral or an Affiliate, (subject to the terms of any separate agreement to the contrary) at any time to terminate such employment or service or to increase or decrease the compensation of Grantee from the rate in existence at the date of this Agreement.

6. Assignment/Transferability. Chaparral may assign all or any portion of its rights and obligations under this Agreement. The Award and the rights and obligations of Grantee under this Agreement may not be sold, transferred, pledged, exchanged, hypothecated or otherwise disposed of by Grantee other than by will or the laws of descent and distribution.

7. Binding Effect/Governing Law. This Agreement will be binding upon and inure to the benefit of (i) Chaparral and its successors and assigns, and (ii) Grantee and his or her heirs, devisees, executors, administrators and personal representatives. This Agreement will be governed by and construed in accordance with the internal laws (and not the principles relating to conflicts of laws) of the State of Delaware, except as superseded by federal law.

8. Code Section 409A. The Award is intended to be exempt from Section 409A of the Code and any ambiguities herein will be interpreted, to the extent possible, in a manner consistent therewith. Each payment hereunder shall be considered a separate payment. Notwithstanding the preceding, no person connected with this Agreement in any capacity,

 

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including without limitation Chaparral and any person affiliated with Chaparral and their respective directors, officers, agents and employees, makes any representation, commitment or guarantee that any tax treatment, including without limitation federal, state and local income, estate and gift tax treatment, will be applicable with respect to the Award.

 

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Exhibit 99.9

Chaparral Energy Announces Appointment of Charles Duginski as President, Chief Executive Officer and Director and Changes to the Board of Directors

OKLAHOMA CITY, Dec. 23, 2019 (GLOBE NEWSWIRE) — Chaparral Energy, Inc. (CHAP) today announced that its Board of Directors has appointed Charles “Chuck” Duginski as President and Chief Executive Officer, effective December 20, 2019. Mr. Duginski succeeds K. Earl Reynolds in those roles as Mr. Reynolds has resigned to pursue other interests. Mr. Duginski is also joining the Board of Directors as are Michael Kuharski and Mark “Mac” McFarland. Matthew Cabell is stepping down from the Board.

“We believe Chuck will bring strong leadership and a fresh perspective to Chaparral’s business in the STACK and Merge while at the same time benefitting from the valuable insights of the Chaparral team,” said Chaparral’s Chairman of the Board Marc Rowland. “With over 25 years of experience, he is a seasoned industry veteran, and we look forward to leveraging his expertise and leadership as we continue to create value for our shareholders.”

Mr. Duginski most recently served as Chief Operating Officer, Senior Vice President, and board member of Tapstone Energy, LLC. Prior to joining Tapstone, Mr. Duginski served as Chief Operating Officer of Echo Energy. He also served as Vice President – Southern Region Production of Continental Resources, Inc., where he had operational and technical responsibility for the Anadarko Basin. Before Continental, Mr. Duginski held various positions of increasing responsibility at Chesapeake Energy Corporation, including District Manager – Haynesville, then Vice President – Haynesville/Barnett Business Unit. Mr. Duginski began his career in technical roles at Mobil Oil and ExxonMobil and holds a Bachelor of Science in Mechanical Engineering from the University of Oklahoma.

“I am honored to be asked to join and lead the Chaparral team,” Mr. Duginski added. “Opportunities in this basin abound, and I am confident that, with keen focus on technical and operational excellence, safe operations, and improved cost structure, Chaparral will create value even in this challenging upstream environment.”

Mr. Kuharski is a Director on the North American Investment Team of Strategic Value Partners, LLC (“SVP”), Chaparral’s largest shareholder. Prior to joining SVP in 2017, Mr. Kuharski worked with Eaton Park Capital Management where he was an Investment Advisor on the US Fundamental Team, focused on investing across the capital structure in a range of industries. He has also worked at York Capital Management, KKR & Co. and Merrill Lynch. He received a Bachelor of Arts in each of Finance and Economics from the University of St. Thomas and earned his MBA at Harvard Business School.

Mr. McFarland has led organizations and business units in the energy industry for two decades. He is currently Executive Chairman of GenOn Energy Inc and serves on the board of TerraForm Power (NASDAQ GS: TERP), where he sits on the Audit and Nominating and Governance Committees. Previously, he was President and CEO of GenOn and, before that, Chief Executive Officer of Luminant, a subsidiary of Energy Future Holdings Corp. He has a Bachelor of Science from Virginia Tech University and an MBA from the University of Delaware.


As an inducement for Mr. Duginski to join Chaparral, Chaparral has granted to Mr. Duginski restricted stock awards that consist of (i) 688,073 time-based restricted common shares that will vest in equal annual installments over three years and (ii) 1,032,110 time and performance-based restricted shares (assuming achievement of maximum performance) that will vest based on service and the attainment of performance conditions over a three-year period. These inducement equity awards will be made outside the terms of Chaparral’s 2019 Long-Term Incentive Plan, in reliance on the exemption under NYSE Listed Company Manual Rule 303A.08. Upon certain qualifying terminations of Mr. Duginski’s employment, all or a prorated portion of the restricted stock awards will vest.

About Chaparral

Chaparral Energy, Inc. (CHAP) is an independent oil and natural gas exploration and production company headquartered in Oklahoma City. Founded in 1988, Chaparral is a pure-play operator focused in Oklahoma’s STACK/Merge Play, where it has approximately 129,000 net acres primarily in Kingfisher, Canadian and Garfield counties. The company has approximately 218,000 net surface acres in the Mid-Continent region. For more information, visit chaparralenergy.com.

Investor Contact

Scott Pittman

Chief Financial Officer

405-426-6700

investor.relations@chaparralenergy.com