Sample Business Contracts


Employment Agreement - Chesapeake Energy Corp. and Tom L. Ward

Employment Forms

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                              AMENDED AND RESTATED

                              EMPLOYMENT AGREEMENT


                                     between


                                   TOM L. WARD


                                       and


                          CHESAPEAKE ENERGY CORPORATION







                             Effective July 1, 1998


<PAGE>   2
                                TABLE OF CONTENTS



                                                                                                                 PAGE
                                                                                                                 ----

                                                                                                              
1.       Employment...............................................................................................1

2.       Executive's Duties.......................................................................................1
         2.1      Specific Duties.................................................................................1
         2.2      Modifications...................................................................................2
         2.3      Rules and Regulations...........................................................................2
         2.4      Stock Investment................................................................................2

3.       Other Activities.........................................................................................3
         3.1      Company's Activities............................................................................3
                  3.1.1  Amount of Participation..................................................................3
                  3.1.2    Conditions of Participation. ..........................................................4
         3.2      Other Activities................................................................................5

4.       Executive's Compensation.................................................................................5
         4.1      Base Salary.....................................................................................5
         4.2      Bonus...........................................................................................5
         4.3      Stock Options...................................................................................5
         4.4      Benefits........................................................................................5
                  4.4.1    Vacation...............................................................................6
                  4.4.2    Membership Dues........................................................................6
                  4.4.3    Automobile and Travel Allowance........................................................6
                  4.4.4    Accounting Support.....................................................................6
         4.5      Compensation Review.............................................................................7

5.       Term.....................................................................................................7

6.       Termination..............................................................................................7
         6.1      Termination by Company..........................................................................7
                  6.1.1    Termination without Cause..............................................................7
                  6.1.2    Termination for Cause..................................................................8

         6.2      Termination by Executive........................................................................8
         6.3      Termination After Change in Control.............................................................8
                  6.3.1    Change of Control......................................................................9
                  6.3.2    CC Termination.........................................................................9
         6.4      Incapacity of Executive.........................................................................9
         6.5      Death of Executive.............................................................................10
         6.6      Effect of Termination..........................................................................10



                                        i

<PAGE>   3

                                                                                                             
7.       Confidentiality.........................................................................................10

8.       Noncompetition..........................................................................................11

9.       Proprietary Matters.....................................................................................11

10.      Arbitration.............................................................................................12

11.      Miscellaneous...........................................................................................12
         11.1     Time...........................................................................................12
         11.2     Notices........................................................................................12
         11.3     Assignment.................................................................................... 13
         11.4     Construction...................................................................................13
         11.5     Entire Agreement...............................................................................13
         11.6     Binding Effect.................................................................................13
         11.7     Attorneys' Fees................................................................................14
         11.8     Supercession...................................................................................14





                                       ii

<PAGE>   4
                              AMENDED AND RESTATED
                              EMPLOYMENT AGREEMENT

         THIS AGREEMENT is made effective July 1, 1998, 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
employment agreement dated effective July 1, 1997 (the "Prior Agreement");

         WHEREAS, the Company has announced that it would explore strategic
alternatives to increase shareholder value, and to retain employees during that
process the Company adopted a retention program for the Company's key employees
other than the senior executive officers;

         WHEREAS, for the reasons the Company adopted the retention program for
the other employees, the Board of Directors of the Company believes that it is
in the best interests of the Company to provide for the retention of the
Executive as part of the process of exploring the Company's strategic
alternatives; and

         WHEREAS, the Company and the Executive desire to amend and restate the
Prior Agreement in its entirety.

         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 which 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 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. The Executive will serve as President and
                  Chief Operating Officer for the Company. From time to time,
                  the Executive may be appointed as an officer of one (1) or
                  more of the Company's subsidiaries. During the term of this
                  Agreement, the Executive will be nominated for election or
                  appointed to serve as a director of the Company and one (1) or
                  more of the Company's subsidiaries. The Executive will 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.




<PAGE>   5
         2.2      Modifications. The precise duties to be performed by the
                  Executive may be extended or curtailed in the discretion of
                  the respective boards of directors of the Company. However,
                  except for termination for cause 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 President or
                  Chief Operating 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. The Company currently has an Employment
                  Policies Manual which addresses frequently asked questions
                  regarding the Company. The Executive agrees to comply with the
                  Employment Policies Manual except to the extent inconsistent
                  with this Agreement. The Employment Policies Manual is subject
                  to change without notice in the sole discretion of the Company
                  at any time. In the event of a conflict between the Employment
                  Policies Manual and this Agreement, this Agreement will
                  control over the terms of the Employment Policies Manual.

         2.4      Stock Investment. For each calendar year 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) equal to 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 this
                  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 the
                  price paid by the Executive for such shares; (b) for shares
                  acquired through the exercise of stock options, the fair
                  market value of the common stock on the date the option was
                  exercised; and (c) for shares acquired other than through open
                  market purchases or the exercise of options the fair market
                  value of the Company's common stock on the date of the
                  acquisition of such common stock. The stock acquired or owned
                  pursuant to this paragraph 2.4 must be held by the Executive
                  at all times during the Executive's employment by the Company
                  or the Company's affiliated entities. In order to administer
                  this provision, the Executive agrees to deliver to the
                  Company's Chief Executive Officer a semi-annual report of
                  purchases and ownership in a form prepared by the Company.
                  This paragraph will become null and void if the Company's
                  common


                                       -2-

<PAGE>   6
                  stock ceases to be listed on the New York Stock Exchange, 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")
expressly permitted by paragraphs 3.1 and 3.2 of this Agreement, or the prior
written approval of the board of directors of the Company, the Executive will
not: (a) engage in business independent of the Executive's employment by the
Company which requires any substantial portion of the Executive's time; (b)
serve as an officer or director of any corporation, partnership, company, or
firm; (c) except for passive investments that do not violate this Agreement and
require a minimal portion of the Executive's time, serve as a general partner or
member of any corporation, partnership, company or firm; or (d) 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. Notwithstanding the foregoing, the Executive will be
permitted to participate in the following activities which will be deemed to be
approved by the Company, if such activities are undertaken in strict compliance
with this Agreement.

        3.1       Company's Activities. The Executive or the Executive's
                  designated affiliate will be permitted to acquire a working
                  interest in all of the wells spudded by the Company or the
                  Company's subsidiary corporations, partnerships or entities
                  (the "Program Wells") on the terms and conditions set forth
                  herein in any Calendar Quarter (as hereafter defined) during
                  the Participation Term (as hereafter defined). The Program
                  Wells include any well spudded during such Calendar Quarter in
                  which the Company or the Company's subsidiary corporations,
                  partnerships or entities participate as a nonoperator.

                  3.1.1    Amount of Participation.  On or before the date which
                           is thirty (30) days before the first (1st) day of
                           each Calendar Quarter, the Executive will provide
                           notice to the compensation committee of the Company's
                           board of directors of the Executive's intent to
                           participate in the Program Wells during the
                           succeeding Calendar Quarter and the approximate
                           percentage working interest which the Executive
                           proposes to participate with during such Calendar
                           Quarter (the "Approved Percentage"). The Executive's
                           Approved Percentage working interest participation
                           (determined without consideration of any carried
                           interest) in the Program Wells for any Calendar
                           Quarter will not exceed two and one-half percent
                           (2.5%) on an eight-

                                      -3-
<PAGE>   7
                           eighths (8/8ths) basis. On designation of the
                           Approved Percentage for a Calendar Quarter, the
                           Executive will be deemed to have elected to
                           participate in each Program Well spudded during such
                           Calendar Quarter with a working interest equal to the
                           following applicable percentage determined on a
                           well-by-well basis (the "Minimum Participation"): (a)
                           the Approved Percentage for each Operations Well,
                           each Program Well which does not fall within clause
                           (b) of this paragraph 3 1.1 and any Program Well
                           which does not fall within clause (c) of this
                           paragraph 3.1.1; (b) zero percent (0%) if the
                           combined participation in the Program Well by the
                           Executive, Mr. Tom L. Ward and Mr. Marcus C. Rowland
                           with such individuals' Approved Percentage under
                           their respective employment agreements causes the
                           Company's working interest (determined without
                           consideration of any carried interest) on the spud
                           date for such Program Well to be less than twelve and
                           one-half percent (12.5%) on an eight- eighths
                           (8/8ths) basis; or (c) subsequent to a termination
                           under paragraphs 6.1.1 or 6.3 of this Agreement the
                           lowest Approved Percentage elected by the Executive
                           subsequent to such termination. If clause (b) of this
                           paragraph 3.1.1 prohibits the Executive's
                           participation in a Program Well, then Messrs. Ward
                           and Rowland will not be entitled to participate in
                           such Program Well under their employment agreements.
                           An "Operations Well" means a Program Well which falls
                           within the provisions of clause (b) of this paragraph
                           3.1.1, but for which the Executive's participation is
                           deemed necessary for the Company to retain operations
                           as determined by the disinterested members of the
                           compensation committee of the Company's board of
                           directors. If the Executive fails to provide notice
                           of the Executive's intent to participate and the
                           Executive's proposed participation prior to the
                           specified date as provided herein, the amount of the
                           Approved Percentage for the Calendar Quarter will be
                           deemed to be zero (0).

                  3.1.2    Conditions of Participation. The Participation by the
                           Executive in each Program Well will be on no better
                           terms than the terms agreed to by unaffiliated third
                           party participants in connection with the acquisition
                           of an interest in such Program Well from the Company
                           or its subsidiary corporations, partnerships or
                           entities. The Approved Percentage cannot be changed
                           during any Calendar Quarter without the prior
                           approval of the disinterested members of the
                           compensation committee of the Company's board of
                           directors. Any participation by the Executive under
                           this paragraph 3.1 is also conditioned upon the
                           Executive's participation in each Program Well
                           spudded during such Calendar Quarter in an amount
                           equal to the Minimum Participation. The Executive
                           hereby agrees to execute and deliver any documents
                           reasonably requested by the Company and hereby
                           appoints the Company as the Executive's agent and
                           attorney-in-fact to execute and deliver such
                           documents if the Executive fails or refuses to


                                       -4-

<PAGE>   8
                           execute such documents. The Executive further agrees
                           to pay all joint interest billings within one hundred
                           fifty (150) days after receipt. For purposes of this
                           Agreement, the term: (a) "Calendar Quarter" means the
                           three (3) month periods commencing on the first (1st)
                           day of January, April, July and October; and (b)
                           "Participation Term" means the term of this Agreement
                           plus five (5) years after a termination under
                           paragraphs 6.1.1 or 6.3 of this Agreement.

         3.2      Other Activities. The Executive currently conducts oil and gas
                  investment activities individually and through TLW
                  Investments, Inc., ("Investments"). The Executive will be
                  permitted to continue oil and gas activities in such entities
                  but only to the extent such activities are conducted on oil
                  and gas leases or interests owned by the Executive or
                  Investments as of July 1, 1995, or acquired by Investments
                  from the Company. The interests acquired by Investments shall
                  be limited by the provisions of paragraph 3.1 of this
                  Agreement. The Company also consents to the Executive serving
                  as a director of Pan East Petroleum Corp., an Ontario Canada
                  corporation, pursuant to approval by the board of directors.

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

         4.1      Base Salary. A base salary (the "Base Salary"), at the initial
                  annual rate of not less than Three Hundred Fifty Thousand
                  Dollars ($350,000.00), will be paid to the Executive in equal
                  semi-monthly installments beginning July 15, 1998 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 board of directors of the Company may
                  determine.

         4.3      Stock Options. 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 from the
                  Company's various stock option plans, subject to the terms and
                  conditions thereof.

         4.4      Benefits.  The Company will provide the Executive such
                  retirement benefits, reimbursement of reasonable expenditures
                  for dues, travel and entertainment and other benefits on terms
                  customarily provided by the Company from time to time. 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. The following specific benefits will also be provided to
                  the Executive at the expense of the Company:



                                       -5-
<PAGE>   9

                  4.4.1    Vacation. The Executive will be entitled to take
                           three (3) 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 (1) golf and/or country
                           club in the Oklahoma City area selected by the
                           Executive; and (b) the reasonable cost of any
                           qualified business entertainment at such country
                           club. 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    Automobile and Travel Allowance.  The Executive will
                           receive a monthly cash allowance in the amount of One
                           Thousand Five Hundred Dollars ($1,500.00) to defer a
                           portion of the Executive's cost of acquiring,
                           operating and maintaining an automobile for use in
                           the Executive's employment. Additionally, the
                           Executive will be entitled to utilize any aircraft
                           owned by the Company (whether in whole or in part)
                           for personal use and will not be required to
                           reimburse the Company for any cost related to such
                           use or pay any cost or charge with respect to such
                           use up to an amount during any calendar year equal to
                           the Aircraft Allowance. For purposes of this
                           Agreement the term "Aircraft Allowance" 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 excludes any fixed costs
                           of the aircraft (including acquisition costs and
                           depreciation). The Aircraft Allowance will be equal
                           to $40,000.00 for the Company's fiscal year ending on
                           June 30, 1998, $25,000.00 for the six month period
                           ending on December 31, 1998, and $50,000.00 for each
                           fiscal year thereafter during the term of this
                           Agreement. If the Executive's use of the Company's
                           aircraft exceeds the Aircraft Allowance during any
                           fiscal year the Executive will be required to
                           reimburse the Company for the variable costs directly
                           identified with each such use.

                  4.4.4    Accounting Support. The Executive will be permitted
                           to utilize the Company's office space, computer
                           facilities and the equivalent of one (1) full-time
                           accounting employee of the Company (presently Ms.
                           Cheryl Hamilton) to maintain books and records for
                           the Executive and the


                                       -6-

<PAGE>   10
                           Executive's Permitted Activities. The Executive will
                           not be required to pay any compensation to the
                           Company in connection with such accounting services.

         4.5      Compensation Review. The compensation of the Executive will be
                  reviewed not less frequently than annually by the board of
                  directors of the Company. The compensation of the Executive
                  prescribed by paragraph 4 of this Agreement may be increased
                  at the discretion of the Company, but may not be reduced
                  without the prior written consent of the Executive.

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,
1998, and ending on June 30, 2003 (the "Expiration Date") as extended from time
to time. Unless the Company provides thirty (30) days prior written notice of
nonextension to the Executive, on each June 30 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 sixty (60) 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 payable
                           by operation of paragraph 4.4 of this Agreement
                           during the remaining term of this Agreement, but in
                           any event through the Expiration Date; 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.

                                       -7-

<PAGE>   11
                  6.1.2    Termination for Cause.  The Company may terminate
                           this Agreement for cause if the Executive: (a)
                           misappropriates the property of the Company or
                           commits any other act of dishonesty; (b) engages in
                           personal misconduct which materially injures the
                           Company; (c) willfully violates any law or regulation
                           relating to the business of the Company which results
                           in injury to the Company; or (d) willfully and
                           repeatedly fails to perform the Executive's duties
                           hereunder. 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
                           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 twenty (20) days to request a board of
                           directors meeting to be held at a mutually agreeable
                           time and location within 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 sixty (60)
                  days after the date of such notice, during which time
                  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 two
                  (2) years thereafter there is a CC Termination (as hereafter
                  defined) then the Executive will be 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) five (5)
                  times the Executive's Base Compensation; plus (b) the Gross-up
                  Amount (as hereafter defined). 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 equal to the
                  prime rate published from time to time in the Wall Street
                  Journal. The interest rate will be adjusted on the date of a
                  change in such prime rate. For purposes of this Agreement the
                  term "Gross-up Amount" means the amount of the payment which
                  will result in the Executive retaining from such payment
                  (after paying all taxes imposed on such payment and any
                  interest or penalties related to such taxes) an amount equal
                  to any excise tax imposed by Section 4999 of the Internal
                  Revenue Code of 1986, as amended, together with any


                                       -8-

<PAGE>   12
                  interest and penalties with respect to such excise tax imposed
                  on the all of the payments made to the Executive under this
                  paragraph 6.3.

                  6.3.1    Change of Control.  The term "Change of Control"
                           means any action of a nature that would be required
                           to be reported in response to Item 6(e) of Schedule
                           14A of Regulation 14A under the Securities Exchange
                           Act of 1934 with respect to the Company including,
                           without limitation (i) the direct or indirect
                           acquisition by any person after the date hereof of
                           beneficial ownership of the right to vote or
                           securities of the Company representing the right to
                           vote thirty five percent (35%) or more of the
                           combined voting power of the Company's then
                           outstanding securities having the right to vote for
                           the election of directors, or (ii) within two years
                           of a tender offer or exchange offer for the voting
                           stock of the Company or as a result of a merger,
                           consolidation, sale of assets or contested election
                           (or any combination of the foregoing), a majority of
                           the members of the Company's board of directors is
                           replaced by directors who were not nominated and
                           approved by the board of directors.

                  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
                           nonextension; (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, a
                           reduction in the Executive's then 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 three (3) consecutive months, the Executive
                  may be terminated. Although the termination shall 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 of
                  this Agreement.


                                       -9-
<PAGE>   13

         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. In the event of a
                  termination under paragraphs 6.1.1 or 6.3 of this Agreement
                  the Executive's right to participate in Program Wells will
                  continue in accordance with paragraph 3 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. All keys, entry cards, credit
                  cards, files, records, financial 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 which 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 seven
                  (7) 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
                  render such services to the Company as might be reasonably
                  required to provide for the orderly termination of the
                  Executive's employment.

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


                                      -10-
<PAGE>   14
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 shall 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 five (5) years. 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's affiliated corporations,
partnerships or entities.

8.       Noncompetition. For a period of twelve (12) months after Executive is
no longer employed by the Company as a result of either the resignation by the
Executive pursuant to paragraph 6.2 above or termination for cause pursuant to
paragraph 6.1.2 above, the Executive will not: (a) 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, mineral interests,
oil and gas wells or other such oil and gas exploration, development or
production activities within five (5) miles of any operations or ownership
interests of the Company or its subsidiary corporations, partnerships or
entities (but excluding operations or ownership interests acquired by the
Company from a successor entity through a Change of Control as described in
paragraph 6.3); and (b) 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.

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


                                      -11-
<PAGE>   15
know-how. However, the improvements, inventions, discoveries, processes or
know-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) shall 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 its affiliates.

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) which 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. Each party will bear its own costs in connection with the arbitration
and the costs of the arbitrator will be borne by the party who the arbitrator
determines did not prevail in the matter. 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


                                      -12-

<PAGE>   16
                  such other or additional addresses as any party might
                  designate by written notice to the other party:

                  To the Company:           Chesapeake Energy Corporation
                                            Post Office Box 18496
                                            Oklahoma City, OK   73154-0496
                                            Attn: Aubrey K. McClendon

                  To the Executive:         Mr. Tom L. Ward
                                            19200 North Rockwell Avenue
                                            Edmond, Oklahoma 73003-9200

         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 and any litigation relating to
                  this Agreement will be conducted in a court of competent
                  jurisdiction sitting in Oklahoma County, 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.






                                      -13-
<PAGE>   17
         11.7     Attorneys' Fees. If any party institutes an action or
                  proceeding against any other party relating to the provisions
                  of this Agreement or any default hereunder, the unsuccessful
                  party to such action or proceeding will reimburse the
                  successful party therein for the reasonable expenses of
                  attorneys' fees and disbursements and litigation expenses
                  incurred by the successful party.

         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 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 /s/ AUBREY K. MCCLENDON
                                    --------------------------------------------
                                    Aubrey K. McClendon, Chief Executive Officer

                                 (the "Company")



                                    /s/ TOM L. WARD
                                    --------------------------------------------
                                    Tom L. Ward, individually

                                 (the "Executive")




                                      -14-

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