Chesapeake Energy (CHK)

Aubrey K. McClendon

Aubrey K. McClendon

We have an employment agreement with Mr. McClendon which provides, among other things, for an annual base salary of not less than $950,000, bonuses at the discretion of the Board of Directors (through its Compensation Committee), eligibility for equity awards under the Company’s stock compensation plans and benefits, including club membership and personal accounting support. For safety, security and efficiency, Mr. McClendon is required to use aircraft owned or leased by the Company for business and personal use in the Western Hemisphere and is not required to reimburse the Company for any costs related to such use. In addition, Mr. McClendon’s immediate family members may use such Company aircraft for their personal use to the same extent. When a family member travels without Mr. McClendon, he is required to reimburse the Company for the variable costs of such use.

The employment agreement with Mr. McClendon has a term of five years commencing July 1, 2005, which term is automatically extended for one additional year on each January 31 unless the Company provides 30 days prior notice of non-extension. In addition, for each calendar year during which the employment agreement is in effect, Mr. McClendon is required to hold shares of the Company’s common stock having an aggregate investment value equal to 500% of his annual base salary and bonus.

The Company may terminate its employment agreement with Mr. McClendon at any time without cause; however, upon such termination he is entitled to continue to receive Base Compensation (defined as salary equal

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to his base salary on the date of termination plus annual bonus compensation equal to the bonus compensation he received during the twelve month period preceding the termination date) and benefits including office space, secretarial and accounting support and company aircraft usage for the balance of the contract term.

The employment agreement further provides that if, during the term of the agreement, there is a change of control and within three years thereafter (a) the agreement expires; (b) the agreement is not extended and Mr. McClendon resigns within one year after the non-extension; (c) he is terminated other than for cause, death or incapacity; (d) he resigns as a result of (i) a change in his duties or title, (ii) a reduction in his compensation, (iii) a required relocation more than 25 miles from his then current place of employment, or (iv) a default by the Company under the agreement; (e) the agreement has not been assumed by any successor to or parent of the Company; or (f) he has agreed to remain employed by the Company for a period of three months to assist in the transition and thereafter resigns, then Mr. McClendon will be entitled to a severance payment in an amount equal to three times his Base Compensation, plus three times the value of his benefits provided during the preceding twelve months, plus a gross-up amount to be paid with respect to any excise or income taxes or penalties imposed on the severance payment. Change of control is defined in this agreement to include:

(1) a person acquiring beneficial ownership of 20% or more of the Company’s outstanding common stock or the voting power of the Company’s existing voting securities unless one of the circumstances described in clause 3(i), (ii) and (iii) below exists or it is an acquisition directly from the Company or an acquisition by the Company or a Company employee benefit plan;

(2) a majority of the members of the Incumbent Board is replaced by directors who were not nominated or elected by the Incumbent Board (the current directors and directors later nominated or elected by a majority of such directors are referred to as the “Incumbent Board”);

(3) the consummation of a business combination such as a reorganization, merger, consolidation or sale of all or substantially all of the Company’s assets unless following such business combination (i) the persons who beneficially owned the Company’s common stock and voting securities immediately prior to the business combination beneficially own more than 60% of such securities of the corporation resulting from the business combination in substantially the same proportions, (ii) no person beneficially owns 20% or more of such securities of the corporation resulting from the business combination unless such ownership existed prior to the business combination, or (iii) a majority of the members of the board of directors of the corporation resulting from the business combination were members of the Incumbent Board at the time of the execution or approval of the business combination agreement; and

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

If Mr. McClendon becomes incapacitated, as determined by the Company’s Board of Directors, and is unable to perform his duties set out in the employment agreement for a period of four consecutive months, the Board may terminate his services. In the event such a termination should occur, Mr. McClendon is entitled to receive compensation and benefits through the remaining term of the agreement. If Mr. McClendon dies during the term of the agreement, the Company is obligated to continue payments of base salary for twelve months after the date of his death.

In the event any payment by the Company to Mr. McClendon is subject to the excise tax imposed by Section 4999 of the Internal Revenue Code or any interest or penalties related to such excise tax, he will be entitled to receive a gross-up payment from the Company. The gross-up payment will be equal to the amount such that after payment of all taxes (including penalties and interest on the taxes) on the gross-up payment, Mr. McClendon will retain an amount of the gross-up payment equal to the excise tax imposed.

Mr. McClendon is prohibited from engaging in various activities outside his employment with the Company without the approval of the Board of Directors. His employment agreement also provides for a six-month non-competition period after the termination of his employment and prohibits disclosure of confidential information

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for a one-year period following the termination of the agreement. In addition, the agreement contains non-solicitation restrictions with respect to employees, contractors, customers, vendors and subcontractors.