EXHIBIT 10.2.2

 

FOURTH AMENDED AND RESTATED

EMPLOYMENT AGREEMENT

 

THIS AGREEMENT is made effective July 1, 2005, between CHESAPEAKE ENERGY
CORPORATION, an Oklahoma corporation (the “Company”), and TOM L. WARD, an
individual (the “Executive”).

 

W I T N E S S E T H:

 

WHEREAS, the Company and the Executive entered into that certain Amended and
Restated Employment Agreement dated effective July 1, 1998 as amended by the
First Amendment to Amended and Restated Employment Agreement dated December 31,
1998, as further amended by the Second Amended and Restated Employment Agreement
dated January 1, 2001, and as further amended by the Third Amended and Restated
Employment Agreement dated January 1, 2004 (together the “Prior Agreements”);

 

WHEREAS, the Company has adopted the Founder Well Participation Program (the
“FWP Program”) in order to provide for the participation by the Executive in the
Company’s wells; and

 

WHEREAS, the Company and the Executive desire to amend and restate the Prior
Agreements in their entirety to reflect the foregoing and other changes to the
arrangement between the Company and the Executive.

 

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

 

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

 

2.         Executive’s Duties. The Executive is employed on a full-time basis.
Throughout the term of this Agreement, the Executive will use the Executive’s
best efforts and due diligence to assist the Company in the objective of
achieving the most profitable operation of the Company and the Company’s
affiliated entities consistent with developing and maintaining a quality
business operation.

 

2.1

Specific Duties. During the term of this Agreement the Executive: (a) will serve
as President and Chief Operating Officer for the Company; (b) will be nominated
for election or appointed to serve as a director of the Company; (c) will be
appointed as an officer of

 

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one (1) or more of the Company’s subsidiaries; and (d) may be nominated for
election or appointed to serve as a director of one (1) or more of the Company’s
subsidiaries. The Executive agrees to use the Executive’s best efforts to
perform all of the services required to fully and faithfully execute the offices
and positions to which the Executive is appointed and such other services as may
be reasonably directed by the Board of Directors of the Company in accordance
with this Agreement.

 

2.2

Modifications. The precise duties to be performed by the Executive may be
extended or curtailed in the discretion of the Board of Directors of the
Company. However, except for termination for Cause (as hereinafter defined)
under paragraph 6.1.2 of this Agreement, the failure of the Executive to be
elected, be reelected or serve as a director of the Company during the term of
this Agreement, the removal of the Executive as a member of the board of
directors of the Company, the withdrawal of the designation of the Executive as
Chairman of the Board and Chief Executive Officer of the Company, or the
assignment of the performance of duties incumbent on the foregoing offices to
other persons without the prior written consent of the Executive will constitute
termination without Cause by the Company.

 

2.3

Rules and Regulations. From time to time, the Company may issue policies and
procedures applicable to employees and the Executive including an Employment
Policies Manual. The Executive agrees to comply with such policies and
procedures, except to the extent such policies are inconsistent with this
Agreement. Such policies and procedures may be supplemented, modified, changed
or adopted without notice in the sole discretion of the Company at any time. In
the event of a conflict between such policies and procedures and this Agreement,
this Agreement will control unless compliance with this Agreement will violate
any law or regulation applicable to the Company or its affiliated entities.

 

2.4

Stock Investment. During the term of this Agreement, the Executive agrees to
hold shares of the Company’s common stock having an aggregate Investment Value
(as hereafter defined) greater than five hundred percent (500%) of the
compensation paid to the Executive under paragraphs 4.1 and 4.2 of this
Agreement during such calendar year. Any shares of common stock acquired by the
Executive prior to the date of this Agreement and still owned by the Executive
during the term of this Agreement may be used to satisfy the requirement to own
common stock. For purposes of this paragraph, the “Investment Value” of each
share of stock will be as follows: (a) for shares purchased in the open market
after the date of this Agreement the price paid by the Executive for such
shares; (b) for shares acquired after the date of this Agreement through the
exercise of stock options, the grant of restricted stock, the conversion of
preferred stock or other than through open market purchases, the fair market
value of the common stock on the

 

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date the option was exercised, the stock was issued or the stock was acquired
through the conversion of preferred stock, or the date such stock was otherwise
acquired; and (c) for shares acquired prior to the date of this Agreement, the
closing price for the Company’s stock on the New York Stock Exchange (the
“NYSE”) on the date of this Agreement adjusted for subsequent stock splits. This
paragraph will become null and void if the Company’s common stock ceases to be
listed on the NYSE, the National Association of Securities Dealers Automated
Quotation System or other national exchange. The Company has no obligation to
sell or to purchase from the Executive any of the Company’s stock in connection
with this paragraph 2.4 and has made no representations or warranties regarding
the Company’s stock, operations or financial condition.

 

3.         Other Activities. Except for the activities (the “Permitted
Activities”) permitted under paragraphs 3.1, 3.2 and 3.3 of this Agreement or
approved by the Board of Directors, the Executive will not: (a) engage in
activities which require such substantial services on the part of the Executive
that the Executive is unable to perform the duties assigned to the Executive in
accordance with this Agreement; (b) serve as an officer or director of any
publicly held entity; or (c) directly or indirectly invest in, participate in or
acquire an interest in any oil and gas business, including, without limitation,
(i) producing oil and gas, (ii) drilling, owning or operating oil and gas leases
or wells, (iii) providing services or materials to the oil and gas industry,
(iv) marketing or refining oil or gas, or (v) owning any interest in any
corporation, partnership, company or entity which conducts any of the foregoing
activities. The limitations in this paragraph 3 will not prohibit an investment
by the Executive in publicly traded securities. The Executive is not restricted
from maintaining or making investments, or engaging in other businesses,
enterprises or civic, charitable or public service functions if such activities,
investments, businesses or enterprises do not result in a violation of clauses
(a) through (c) of this paragraph 3. Notwithstanding the foregoing, the
Executive will be permitted to participate in the following activities that will
be deemed to be approved by the Company, if such activities are undertaken in
strict compliance with this Agreement.

 

3.1

Royalty Interests and Gifts. The foregoing restriction in clause (c) will not
prohibit the ownership of royalty interests where the Executive owns or
previously owned the surface of the land covered by the royalty interest and the
ownership of the royalty interest is incidental to the ownership of the surface
estate or the ownership of royalty, overriding royalty or working interests that
are received by gift or inheritance.

 

3.2

Existing Interests. The Executive has in the past conducted oil and gas
activities individually and through TLW Investments, Inc., an Oklahoma
corporation, and other entities owned or controlled by the Executive
(collectively, the “Executive Affiliates”). The Executive will be permitted to
continue to conduct oil and gas activities (including participation in new
wells) directly or through the Executive Affiliates, but only to the extent such
activities are conducted on oil and gas leases or interests which the Executive
or Executive Affiliates owned or had the right to acquire as of

 

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the date of this Agreement or which the Executive or the Executive Affiliates
acquired from the Company under the Prior agreements (collectively, the “Prior
Interests”). To the extent that the oil and gas interests or activities covered
by this paragraph 3.2 are operated by the Company the Executive agrees to pay
any costs or expenses with respect to the Prior Interests in accordance with the
FWP Program.

 

3.3

Company’s Activities. The Executive or the designated Executive Affiliate will
be permitted to participate in the FWP Program. The Executive hereby agrees that
the right to participate in the Company’s wells after the date of this Agreement
will be under the FWP Program and the Executive waives any right to participate
under the Prior Agreements subsequent to the date of this Agreement. The parties
hereto agree the FWP Program cannot be amended or modified without the prior
written consent of the Board of Directors and the Executive.

 

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

 

4.1

Base Salary. A base salary (the “Base Salary”), in an annual rate of not less
than Nine Hundred Fifty Thousand Dollars ($950,000.00), will be paid to the
Executive in equal semi-monthly installments, beginning July 15, 2005, during
the term of this Agreement.

 

4.2

Bonus. In addition to the Base Salary described at paragraph 4.1 of this
Agreement, the Company may periodically pay bonus compensation to the Executive.
Any bonus compensation will be at the absolute discretion of the Company in such
amounts and at such times as the Compensation Committee of the Board of
Directors of the Company may determine.

 

4.3

Equity Compensation. In addition to the compensation set forth in paragraphs 4.1
and 4.2 of this Agreement, the Executive may periodically receive grants of
stock options, restricted stock or other equity related awards from the
Company’s various stock compensation plans, subject to the terms and conditions
thereof.

 

4.4

Benefits. The Company agrees to extend to the Executive retirement benefits,
deferred compensation, reimbursement of reasonable expenditures for dues, travel
and entertainment and any other benefits the Company provides to other
executives or officers from time to time on the same terms as such benefits are
provided to such individuals. The Company will also provide the Executive the
opportunity to apply for coverage under the Company’s medical, life and
disability plans, if any. If the Executive is accepted for coverage under such
plans, the Company will provide such coverage on the same terms as is
customarily provided by the Company to the plan participants as modified from
time to time.

 

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The following specific benefits will also be provided to the Executive at the
expense of the Company.

 

4.4.1

Vacation. The Executive will be entitled to take up to five (5) weeks of paid
vacation each calendar year during the term of this Agreement. No additional
compensation will be paid for failure to take vacation and no vacation may be
carried forward from one calendar year to another.

 

4.4.2

Membership Dues. The Company will reimburse the Executive for: (a) the monthly
dues necessary to maintain a full membership in any club in the Oklahoma City
area at which the Executive hosts business functions; and (b) the reasonable
cost of any qualified business entertainment at such clubs. All other costs,
including, without implied limitation, any initiation costs, initial membership
costs, personal use and business entertainment unrelated to the Company will be
the sole obligation of the Executive and the Company will have no liability with
respect to such amounts.

 

4.4.3

Travel. For safety, security and efficiency the Executive will be required to
utilize aircraft owned or leased by the Company for business and personal use in
the Western Hemisphere (including North America, South America and the
surrounding oceans) and will not be required to reimburse the Company for any
cost related to such use. In addition, the Executive’s immediate family members
may use such company aircraft for their personal use to the same extent. When a
family member travels without the Executive, then the Executive agrees to
reimburse the company for the variable costs of such use. For purposes of this
Agreement, the variable cost of using the Company’s aircraft means the variable
costs directly identifiable with each use (including fuel, pilot charges,
landing fees, hourly charges under co-ownership arrangements and other such
costs), but specifically excluding any fixed costs of the aircraft (including
acquisition costs and depreciation). The Executive will: (a) not owe any
additional amounts to the Company under this paragraph for guests or family
members traveling with the Executive; and (b) pay all personal income taxes
accruing as a result of the personal use of the Company’s aircraft by the
Executive under this paragraph.

4.4.4

Accounting Support. The Executive will be permitted to utilize the Company’s
office space, computer facilities and personnel to provide accounting services,
records maintenance, tax advice and tax return preparation for the Executive’s
(and his family’s) personal business investments and activities. The Executive
agrees to reimburse the Company an amount equal to one half of 50% of the
salaries and bonuses paid by the Company to employees primarily engaged in
providing such

 

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support services to the Executive or Aubrey K. McClendon. Such amounts will be
billed monthly on an estimated basis, adjusted to actual at least once annually
and paid by the Executive on receipt of an invoice from the Company. The cost of
secretarial or general administrative support for the Executive will not be
required to be reimbursed in whole or part by the Executive.

 

4.5

Gross-Up Payment. In the event it is determined that any payment or distribution
by the Company or the Company Entities to or for the benefit of the Executive
(whether paid or payable or distributed or distributable pursuant to the terms
of this Agreement or otherwise, but determined without regard to any additional
payments required under this paragraph 4.5) (a “Payment”) is subject to the
excise tax imposed by Section 4999 of the Internal Revenue Code (the “Code”) or
any interest or penalties related to such excise tax (collectively, the “Excise
Tax”), the Executive will be entitled to receive an additional payment (a
“Gross-Up Payment”) from the Company. The Gross-Up Payment will be equal to the
amount such that after payment by the Executive of all taxes (including the
Excise Tax, income taxes, interest and penalties imposed with respect to such
taxes) on the Gross-Up Payment, the Executive will retain an amount of the
Gross-Up Payment equal to the Excise Tax imposed on the Payment.

 

4.5.1

Determination. Subject to the provisions of paragraph 4.5.2 all determinations
required to be made under this paragraph 4.5 (including whether and when a
Gross-Up Payment is required, the amount of such Gross-Up Payment and the
assumptions to be utilized) will be made by a nationally recognized certified
public accounting firm designated by the Executive (the “Accounting Firm”). The
Accounting Firm will provide detailed supporting calculations both to the
Company and the Executive within fifteen (15) business days of the receipt of
notice from the Executive that there has been a Payment, or such earlier time as
is reasonably requested by the Company. In the event that the Accounting Firm is
serving as accountant or auditor for the individual, entity or group effecting a
Change of Control (as hereinafter defined), the Executive will be entitled to
appoint another nationally recognized accounting firm to make the determinations
required under this paragraph (which accounting firm will then be referred to as
the Accounting Firm hereunder). All fees and expenses of the Accounting Firm
will be paid by the Company. Any Gross-Up Payment required to be paid under this
paragraph 4.5 will be paid by the Company to the Executive within five (5) days
of the receipt of the Accounting Firm’s determination. Any determination by the
Accounting Firm will be binding on the Company and the Executive. As a result of
the uncertainty in the application of Section 4999 of the Code at the time of
the initial determination by the Accounting Firm, the Gross-Up Payment made by
the Company may be less

 

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than actually required (an “Underpayment”) consistent with the calculations
required to be made hereunder. In the event that the Company exhausts its
remedies pursuant to paragraph 4.5.2 below and the Executive thereafter is
required to make a payment of any Excise Tax, the Accounting Firm will determine
the amount of the Underpayment that has occurred and any such Underpayment will
be promptly paid by the Company to or for the benefit of the Executive.

 

4.5.2

Contest of Claims. The Executive will notify the Company in writing of any claim
by the Internal Revenue Service that, if successful, would require the payment
by the Company of a Gross-Up Payment. Such notification will be given as soon as
practicable but no later than ten (10) business days after the Executive is
informed in writing of such claim and will apprise the Company of the nature of
such claim and the date on which such claim is requested to be paid. The
Executive will not pay such claim prior to the expiration of the thirty (30) day
period following the date on which the Executive notifies the Company (or such
shorter period ending on the date that any payment of taxes with respect to such
claim is due). If the Company notifies the Executive in writing prior to the
expiration of such thirty (30) day period that the Company desires to contest
such claim, the Executive will: (a) provide to the Company any information
reasonably requested by the Company relating to such claim; (b) take such action
in connection with contesting such claim as the Company reasonably requests in
writing including, without limitation, accepting legal representation with
respect to such claim by an attorney reasonably selected by the Company; (c)
cooperate with the Company in good faith as necessary to effectively contest
such claim; and (d) permit the Company to participate in any proceedings
relating to such claim. The Company will bear and pay directly all costs and
expenses (including additional interest and penalties) incurred in connection
with the contest of the claim and agrees to indemnify and hold the Executive
harmless, on an after-tax basis, for any Excise Tax or income tax (including
interest and penalties with respect thereto) imposed as a result of such protest
(including payment of costs and expenses as provided hereunder). Without
limitation on the foregoing provisions, the Company will control all proceedings
related to such contested claim, may at its sole option pursue or forgo any and
all administrative appeals, proceedings, hearings and conferences with the
taxing authority in respect of such claim and may at its sole option either
direct the Executive to pay the tax claimed and sue for a refund or contest the
claim in any permissible manner. The Executive agrees to prosecute such contest
to a determination before any administrative tribunal, in a court of initial
jurisdiction and in one or more appellate courts, as the Company reasonably

 

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determines. If the Company directs the Executive to pay a claim and sue for a
refund, the Company will be required to advance the amount of such payment to
the Executive on an interest-free basis and agrees to indemnify and hold the
Executive harmless, on an after-tax basis, from any Excise Tax or income tax
(including interest or penalties with respect thereto) imposed with respect to
such advance or with respect to any imputed income with respect to such advance,
provided that any extension of the statute of limitations relating to payment of
taxes for the taxable year of the Executive with respect to which such contested
amount is claimed to be due is limited solely to such contested amount.
Furthermore, the Company’s control of the contested claim will be limited to
issues with respect to which a Gross-Up Payment would be payable hereunder and
the Executive will be entitled to settle or contest, as the case may be, any
other issue raised by the Internal Revenue Service or any other taxing
authority.

 

4.5.3

Refunds. If, after the receipt by the Executive of an amount advanced by the
Company pursuant to paragraph 4.5.2, the Executive becomes entitled to receive
any refund with respect to such claim the Executive will (subject to the
Company’s complying with the requirements of paragraph 4.5.2) promptly pay to
the Company the amount of such refund (together with any interest paid or
credited thereon after taxes applicable thereto). If, after the receipt by the
Executive of an amount advanced by the Company pursuant to paragraph 4.5.2, a
determination is made that the Executive will not be entitled to any refund with
respect to such claim and the Company does not notify the Executive in writing
of its intent to contest such denial of refund prior to the expiration of (30)
days after such determination, then the advance will be forgiven and will not be
required to be repaid and the amount of such advance will offset, to the extent
thereof, the amount of Gross-Up Payment required to be paid.

 

4.6

Compensation Review. The compensation of the Executive will be reviewed not less
frequently than semi-annually by the Compensation Committee of the Board of
Directors of the Company. The compensation of the Executive prescribed in
paragraph 4 of this Agreement (including benefits) may be increased at the
discretion of the Compensation Committee of the Board of Directors of the
Company, but may not be reduced without the prior written consent of the
Executive except as expressly provided herein. Notwithstanding the foregoing,
the Board of Directors may reduce the amounts or awards under paragraph 4.2 or
4.3 of this Agreement on a reasonable basis provided such decrease is applicable
to all executives of the Company and does not result in a proportionately
greater reduction in the amounts

 

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or awards to Executive under such paragraphs as compared to any other executive
of the Company or any of the Company’s subsidiaries.

 

5.         Term. In the absence of termination as set forth in paragraph 6
below, this Agreement will extend for a term of five (5) years commencing on
July 1, 2005, and ending on June 30, 2010 (the “Expiration Date”) as extended
from time to time. Unless the Company provides thirty (30) days prior written
notice of non-extension to the Executive, on each January 31 during the term of
this Agreement, the term and the Expiration Date will be automatically extended
for one (1) additional year so that the remaining term on this Agreement will be
not less than four (4) and not more than five (5) years.

 

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

 

6.1

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

 

6.1.1

Termination without Cause. The Company may terminate this Agreement without
Cause at any time by the service of written notice of termination to the
Executive specifying an effective date of such termination not sooner than
ninety (90) business days after the date of such notice (the “Termination
Date”). In the event the Executive is terminated without Cause (other than a CC
Termination under paragraph 6.3 of this Agreement), the Executive will receive
as termination compensation: (a) Base Compensation (as hereafter defined) during
the remaining term of this Agreement, but in any event through the Expiration
Date; (b) any benefits provided by operation of paragraph 4.4 of this Agreement
during the remaining term of this Agreement, but in any event through the
Expiration Date (including, without implied limitation, suitable office space,
secretarial and accounting support at the levels provided by the Company to the
Executive at the time of termination); and (c) any vacation pay accrued through
the Termination Date. For purposes of this Agreement the term “Base
Compensation” means the Executive’s current Base Salary under paragraph 4.1 on
the Termination Date plus the bonus compensation received by the Executive
during the twelve (12) month period preceding the Termination Date.

 

6.1.2

Termination for Cause. The Company may terminate this Agreement for Cause. For
purposes of this Agreement, “Cause” means: (a) the willful and continued failure
of the Executive to perform substantially the Executive’s duties with the
Company or one of the Company Entities (other than a failure resulting from
incapacity due to

 

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physical or mental illness), after a written demand for substantial performance
is delivered to the Executive by the Board of Directors which specifically
identifies the manner in which the Board of Directors believes that the
Executive has not substantially performed the Executive’s duties; or (b) the
willful engaging by the Executive in illegal conduct, gross misconduct or a
clearly established violation of the Company’s written policies and procedures,
in each case which is materially and demonstrably injurious to the Company. For
purposes of this provision, an act or failure to act, on the part of the
Executive, will not be considered “willful” unless it is done, or omitted to be
done, by the Executive in bad faith or without reasonable belief that the
Executive’s action or omission was in the best interests of the Company. Any
act, or failure to act, based on authority given pursuant to a resolution duly
adopted by the Board of Directors or based on the advice of counsel for the
Company will be conclusively presumed to be done, or omitted to be done, by the
Executive in good faith and in the best interests of the Company. In the event
this Agreement is terminated for Cause, the Company will not have any obligation
to provide any further payments or benefits to the Executive after the effective
date of such termination. This Agreement will not be deemed to have terminated
for Cause unless a written determination specifying the reasons for such
termination is made, approved by a majority of the independent and disinterested
members of the Board of Directors of the Company and delivered to the Executive.
Thereafter, the Executive will have the right for a period of thirty (30) days
to request a Board of Directors meeting to be held at a mutually agreeable time
and location to be attended by the members of the Board of Directors in person
within the following thirty (30) days, at which meeting the Executive will have
an opportunity to be heard. Failing such determination and opportunity for
hearing, any termination of this Agreement will be deemed to have occurred
without Cause.

 

6.2

Termination by Executive. The Executive may voluntarily terminate this Agreement
with or without Cause by the service of written notice of such termination to
the Company specifying an effective date of such termination ninety (90) days
after the date of such notice, during which time the Executive may use remaining
accrued vacation days, or at the Company’s option, be paid for such days. In the
event this Agreement is terminated by the Executive, neither the Company nor the
Executive will have any further obligations hereunder including, without
limitation, any obligation of the Company to provide any further payments or
benefits to the Executive after the effective date of such termination.

 

6.3

Termination After Change in Control. If during the term of this Agreement there
is a “Change of Control” and within three (3) years thereafter there is a CC
Termination (as hereafter defined), then the Executive will be

 

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entitled to a severance payment (in addition to any other rights and other
amounts payable to the Executive under this Agreement or otherwise) in an amount
equal to the sum of the following: (a) three (3) times the Executive’s Base
Compensation; plus (b) three (3) times the value of any benefits provided by
operation of paragraph 4.4 of this Agreement during the preceding twelve (12)
months; plus (c) any applicable Gross-Up Payment. If the foregoing amount is not
paid within ten (10) days after the CC Termination, the unpaid amount will bear
interest at the per annum rate of 12%. In addition, for a period of twelve (12)
months after a CC Termination, the Company will provide at no cost to the
Executive suitable office space and secretarial and accounting support at the
levels presently provided by the Company.

 

6.3.1

Change of Control. For the purpose of this Agreement, a “Change of Control”
means the occurrence of any of the following:

 

(a) The acquisition by any individual, entity or group (within the meaning of
Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended
(the “Exchange Act”)) (a “Person”) of beneficial ownership (within the meaning
of Rule 13d-3 promulgated under the Exchange Act) of 20% or more of either (i)
the then outstanding shares of common stock of the Company (the “Outstanding
Company Common Stock”) or (ii) the combined voting power of the then outstanding
voting securities of the Company entitled to vote generally in the election of
directors (the “Outstanding Company Voting Securities”). For purposes of this
paragraph (a) the following acquisitions by a Person will not constitute a
Change of Control: (i) any acquisition directly from the Company; (ii) any
acquisition by the Company; (iii) any acquisition by any employee benefit plan
(or related trust) sponsored or maintained by the Company or any corporation
controlled by the Company; or (iv) any acquisition by any corporation pursuant
to a transaction which complies with clauses (i), (ii) and (iii) of paragraph
(c) of this paragraph 6.3.1.

 

(b) The individuals who, as of the date hereof, constitute the Board of
Directors (the “Incumbent Board”) cease for any reason to constitute at least a
majority of the Board of Directors. Any individual becoming a director
subsequent to the date hereof whose election, or nomination for election by the
Company’s shareholders, is approved by a vote of at least a majority of the
directors then comprising the Incumbent Board will be considered a member of the
Incumbent Board as of the date hereof, but any such individual whose initial
assumption of office occurs as a result of an actual or threatened election
contest with respect to the election or removal of directors or other actual or
threatened solicitation of proxies or consents by or on behalf of a Person other
than the Incumbent

 

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Board will not be deemed a member of the Incumbent Board as of the date hereof.

 

(c) The consummation of a reorganization, merger, consolidation or sale or other
disposition of all or substantially all of the assets of the Company (a
“Business Combination”), unless following such Business Combination: (i) all or
substantially all of the individuals and entities who were the beneficial
owners, respectively, of the Outstanding Company Common Stock and Outstanding
Company Voting Securities immediately prior to such Business Combination
beneficially own, directly or indirectly, more than 60% of, respectively, the
then outstanding shares of common stock and the combined voting power of the
then outstanding voting securities entitled to vote generally in the election of
directors, as the case may be, of the corporation resulting from such Business
Combination (including, without limitation, a corporation which as a result of
such transaction owns the Company or all or substantially all of the Company’s
assets either directly or through one or more subsidiaries) in substantially the
same proportions as their ownership, immediately prior to such Business
Combination of the Outstanding Company Common Stock and Outstanding Company
Voting Securities, as the case may be, (ii) no Person (excluding any corporation
resulting from such Business Combination or any employee benefit plan (or
related trust) of the Company or such corporation resulting from such Business
Combination) beneficially owns, directly or indirectly, 20% or more of,
respectively, the then outstanding shares of common stock of the corporation
resulting from such Business Combination or the combined voting power of the
then outstanding voting securities of such corporation except to the extent that
such ownership existed prior to the Business Combination and (iii) at least a
majority of the members of the board of directors of the corporation resulting
from such Business Combination were members of the Incumbent Board at the time
of the execution of the initial agreement, or of the action of the Board,
providing for such Business Combination.

 

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

 

6.3.2

CC Termination. The term “CC Termination” means any of the following: (a) this
Agreement expires in accordance with its terms; (b) this Agreement is not
extended under paragraph 5 of this Agreement and the Executive resigns within
one (1) year after such non-extension; (c) the Executive is terminated by the
Company other than under paragraphs 6.1.2, 6.4 or 6.5 based on adequate grounds;
(d) the Executive resigns as a result of a change in the Executive’s duties or
title, a reduction in the Executive’s then

 

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current compensation, a required relocation more than 25 miles from the
Executive’s then current place of employment or a default by the Company under
this Agreement; (e) the failure by the Company after a Change of Control to
obtain the assumption of this Agreement, without limitation or reduction, by any
successor to the Company or any parent corporation of the Company; or (f) after
a Change of Control has occurred, the Executive agrees to remain employed by the
Company for a period of three (3) months to assist in the transition and
thereafter resigns.

 

6.4

Incapacity of Executive. If the Executive suffers from a physical or mental
condition, which in the reasonable judgment of the Company’s Board of Directors,
prevents the Executive in whole or in part from performing the duties specified
herein for a period of four (4) consecutive months, the Executive may be
terminated. Although the termination will be deemed as a termination with Cause,
any compensation payable under paragraph 4 of this Agreement will be continued
through the remaining term of this Agreement, but in any event through the
Expiration Date. Notwithstand­ing the foregoing, the Executive’s Base Salary
specified in paragraph 4.1 of this Agreement will be reduced by any benefits
payable under any disability plans provided by the Company under paragraph 4.4
of this Agreement.

 

6.5

Death of Executive. If the Executive dies during the term of this Agreement, the
Company may thereafter terminate this Agreement without compensation to the
Executive’s estate except: (a) the obligation to continue the Base Salary
payments under paragraph 4.1 of this Agreement for twelve (12) months after the
effective date of such termination, and (b) the benefits described in paragraph
4.4 of this Agreement accrued through the effective date of such termination.

 

6.6

Effect of Termination. The termination of this Agreement will terminate all
obligations of the Executive to render services on behalf of the Company,
provided that the Executive will maintain the confidentiality of all information
acquired by the Executive during the term of his employment in accordance with
paragraph 7 of this Agreement. Except as otherwise provided in this paragraph 6,
no accrued bonus, severance pay or other form of compensation will be payable by
the Company to the Executive by reason of the termination of this Agreement. In
the event that payments are required to be made by the Company under this
paragraph 6, the Executive will not be required to seek other employment as a
means of mitigating the Company’s obligations hereunder resulting from
termination of the Executive’s employment and the Company’s obligations
hereunder (including payment of severance benefits) will not be terminated,
reduced or modified as a result of the Executive’s earnings from other
employment or self-employment. All keys, entry cards, credit cards, files,
records, financial

 

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information, furniture, furnishings, equipment, supplies and other items
relating to the Company will remain the property of the Company. The Executive
will have the right to retain and remove all personal property and effects that
are owned by the Executive and located in the offices of the Company. All such
personal items will be removed from such offices no later than ten (10) days
after the effective date of termination, and the Company is hereby authorized to
discard any items remaining and to reassign the Executive’s office space after
such date. Prior to the effective date of termination, the Executive will
cooperate with the Company to provide for the orderly termination of the
Executive’s employment.

 

6.7

Equity Compensation Provisions. Notwithstanding any provision to the contrary in
any option agreement, restricted stock agreement, plan or other agreement
relating to equity based compensation, in the event of a termination under
paragraph 6.1.1 or 6.3 of this Agreement: (a) all units, stock options,
incentive stock options, performance shares, stock appreciation rights and
restricted stock held by Executive immediately prior to such termination will
immediately become 100% vested; and (b) the Executive’s right to exercise any
previously unexercised options will not terminate until the latest date on which
such option would expire but for Executive’s termination of employment. To the
extent Company is unable to provide for one or both of the foregoing rights the
Company will provide in lieu thereof a lump-sum cash payment equal to the
difference between the total value of such units, stock options, incentive stock
options, performance shares, stock appreciation rights and shares of restricted
stock (the “Equity Compensation Rights”) with the foregoing rights as of the
date of Executive’s termination of employment and the total value of the Equity
Compensation without the foregoing rights as of the date of the Executive’s
termination of employment. The foregoing amounts will be determined by the Board
of Directors in good faith based on a valuation performed by an independent
consultant selected by the Board of Board of Directors.

 

7.         Confidentiality. The Executive recognizes that the nature of the
Executive’s services are such that the Executive will have access to information
which constitutes trade secrets, is of a confidential nature, is of great value
to the Company or is the foundation on which the business of the Company is
predicated. The Executive agrees not to disclose to any person other than the
Company’s employees or the Company’s legal counsel nor use for any purpose,
other than the performance of this Agreement, any confidential information
(“Confidential Information”). Confidential Information includes data or material
(regardless of form) which is: (a) a trade secret; (b) provided, disclosed or
delivered to Executive by the Company, any officer, director, employee, agent,
attorney, accountant, consultant, or other person or entity employed by the
Company in any capacity, any customer, borrower or business associate of the
Company or any public authority having jurisdiction over the Company of any
business activity conducted by the Company; or (c) produced, developed, obtained
or prepared by or on behalf of Executive or the

 

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Company (whether or not such information was developed in the performance of
this Agreement) with respect to the Company or any assets oil and gas prospects,
business activities, officers, directors, employees, borrowers or customers of
the foregoing. However, Confidential Information will not include any
information, data or material which at the time of disclosure or use was
generally available to the public other than by a breach of this Agreement, was
available to the party to whom disclosed on a non-confidential basis by
disclosure or access provided by the Company or a third party, or was otherwise
developed or obtained independently by the person to whom disclosed without a
breach of this Agreement. On request by the Company, the Company will be
entitled to a copy of any Confidential Information in the possession of the
Executive. The Executive also agrees that the provisions of this paragraph 7
will survive the termination, expiration or cancellation of this Agreement for a
period of one (1) year. The Executive will deliver to the Company all originals
and copies of the documents or materials containing Confidential Information.
For purposes of paragraphs 7, 8, and 9 of this Agreement, the Company expressly
includes any of the Company Entities.

 

8.         Non-competition. For a period ending six months after the later of
the Executive’s termination or the termination of the Executive’s participation
rights as described in paragraph 3 of this Agreement, the Executive will not
acquire, attempt to acquire or aid another in the acquisition or attempted
acquisition of an interest in oil and gas assets, oil and gas production, oil
and gas leases, minerals interests, oil and gas wells or other such oil and gas
exploration, development or production activities within any spacing unit in
which the Company owns an oil an gas interest on the date of the resignation or
termination of the Executive. In addition, the Executive will not solicit,
induce, entice or attempt to entice any employee, contractor, customer, vendor
or subcontractor to terminate or breach any relationship with the Company or the
Company’s affiliates for the Executive’s own account or for the benefit of
another party. The Executive further agrees that the Executive will not
circumvent or attempt to circumvent the foregoing agreements by any future
arrangement or through the actions of a third party. The foregoing will not
prohibit the activities which are expressly permitted by paragraph 3 of this
Agreement.

 

9.         Proprietary Matters. The Executive expressly understands and agrees
that any and all improvements, inventions, discoveries, processes or know-how
that are generated or conceived by the Executive during the term of this
Agreement, whether generated or conceived during the Executive’s regular working
hours or otherwise, will be the sole and exclusive property of the Company.
Whenever requested by the Company (either during the term of this Agreement or
thereafter), the Executive will assign or execute any and all applications,
assignments and or other instruments and do all things which the Company deems
necessary or appropriate in order to permit the Company to: (a) assign and
convey or otherwise make available to the Company the sole and exclusive right,
title, and interest in and to said improvements, inventions, discoveries,
processes, know-how, applications, patents, copyrights, trade names or
trademarks; or (b) apply for, obtain, maintain, enforce and defend patents,
copyrights, trade names, or trademarks of the United States or of foreign
countries for said improvements, inventions, discoveries, processes or know-how.
However, the improvements, inventions, discoveries, processes or know-

 

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how generated or conceived by the Executive and referred to above (except as
they may be included in the patents, copyrights or registered trade names or
trademarks of the Company, or corporations, partnerships or other entities which
may be affiliated with the Company) will not be exclusive property of the
Company at any time after having been disclosed or revealed or have otherwise
become available to the public or to a third party on a non-confidential basis
other than by a breach of this Agreement, or after they have been independently
developed or discussed without a breach of this Agreement by a third party who
has no obligation to the Company or the Company Entities.

 

10.       Arbitration. The parties will attempt to promptly resolve any dispute
or controversy arising out of or relating to this Agreement or termination of
the Executive by the Company. Any negotiations pursuant to this paragraph 10 are
confidential and will be treated as compromise and settlement negotiations for
all purposes. If the parties are unable to reach a settlement amicably, the
dispute will be submitted to binding arbitration before a single arbitrator in
accordance with the Employment Dispute Resolution Rules of the American
Arbitration Association. The arbitrator will be instructed and empowered to take
reasonable steps to expedite the arbitration and the arbitrator’s judgment will
be final and binding upon the parties subject solely to challenge on the grounds
of fraud or gross misconduct. Except for damages arising out of a breach of
paragraphs 6, 7, 8 or 9 of this Agreement, the arbitrator is not empowered to
award total damages (including compensatory damages) that exceed 300% of
compensatory damages and each party hereby irrevocably waives any damages in
excess of that amount. The arbitration will be held in Oklahoma County,
Oklahoma. Judgment upon any verdict in arbitration may be entered in any court
of competent jurisdiction and the parties hereby consent to the jurisdiction of,
and proper venue in, the federal and state courts located in Oklahoma County,
Oklahoma. The Company will pay the costs and expenses of the arbitration
including, without implied limitation, the fees for the arbitrators. Unless
otherwise expressly set forth in this Agreement, the procedures specified in
this paragraph 10 will be the sole and exclusive procedures for the resolution
of disputes and controversies between the parties arising out of or relating to
this Agreement. Notwithstanding the foregoing, a party may seek a preliminary
injunction or other provisional judicial relief if in such party’s judgment such
action is necessary to avoid irreparable damage or to preserve the status quo.

 

11.

Miscellaneous. The parties further agree as follows:

 

11.1

Time.

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

 

11.2

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

 

 

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To the Company:

Chesapeake Energy Corporation

Post Office Box 18496

Oklahoma City, OK

73154-0496

Attn: Marcus C. Rowland

 

To the Executive:

Mr. Tom L. Ward

19200 North Rockwell

Edmond, Oklahoma 73003

 

11.3

Assignment. Neither this Agreement nor any of the parties’ rights or obligations
hereunder can be transferred or assigned without the prior written consent of
the other parties to this Agreement.

 

11.4

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

 

11.5

Entire Agreement. Except as provided in paragraph 2.3 of this Agreement, this
Agreement constitutes the entire agreement between the parties hereto with
respect to the subject matter herein contained, and no modification hereof will
be effective unless made by a supplemental written agreement executed by all of
the parties hereto.

 

11.6

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

 

11.7

Attorneys’ Fees. If any party institutes an action, proceeding or arbitration
against any other party relating to the provisions of this Agreement or any
default hereunder, the Company will be responsible for paying the Company’s
legal fees and expenses and the Company will be required to reimburse the
Executive for reasonable expenses and legal fees incurred by the Executive in
connection with the resolution of such action or proceeding, including any costs
of appeal.

 

11.8

Supercession. This Agreement is the final, complete and exclusive expression of
the agreement between the Company and the Executive and supersedes and replaces
in all respects any prior employment

 

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agreements (including the Prior Agreement). On execution of this Agreement by
the Company and the Executive, the relationship between the Company and the
Executive after the effective date of this Agreement will be governed by the
terms of this Agreement and not by any other agreements, oral or otherwise.

 

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

 

CHESAPEAKE ENERGY CORPORATION, an

Oklahoma corporation

 

By:__________________________________

 

Marcus C. Rowland, Executive Vice

 

President and Chief Financial Officer

 

(the “Company”)

 

 

By:____________________________________

Tom L. Ward, individually

 

(the “Executive”)

 

 

 

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