CHESAPEAKE ENERGY CORP, 10-K/A, 1997-10-31

CHESAPEAKE ENERGY CORP
10-K/A, 1997-10-31
CRUDE PETROLEUM & NATURAL GAS

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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K/A
(AMENDMENT NO. 2)

(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended June 30, 1997

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES ACT OF 1934

Commission File Number 1-13726

CHESAPEAKE ENERGY CORPORATION
(Exact Name of Registrant as Specified in Its Charter)

<TABLE>
<C> <C>
OKLAHOMA 73-1395733
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
6100 NORTH WESTERN AVENUE 73118
OKLAHOMA CITY, OKLAHOMA (Zip Code)
(Address of principal executive offices)
</TABLE>

(405) 848-8000
Registrant's telephone number, including area code

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

<TABLE>
<CAPTION>
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
------------------- ---------------------
<C> <C>
Common Stock, par value $.01 New York Stock Exchange
9.125% Senior Notes due 2006 New York Stock Exchange
</TABLE>

Securities registered pursuant to Section 12(g) of the Act:
None

Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No ____.

Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendments to
this Form 10-K. [ ].

The aggregate market value of Common Stock held by non-affiliates on
October 27, 1997 was $423,923,486. At such date, there were 70,429,017 shares of
Common Stock issued and outstanding.

DOCUMENTS INCORPORATED BY REFERENCE
None
================================================================================
<PAGE> 2

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

INFORMATION REGARDING DIRECTORS

Pursuant to provisions of the Company's Certificate of Incorporation and
Bylaws, the Board of Directors has fixed the number of directors at seven. The
Company's Certificate of Incorporation and Bylaws provide for three classes of
directors serving staggered three-year terms, with each class to be as nearly
equal in number as possible. The Board of Directors has nominated Breene M. Kerr
and Walter C. Wilson for re-election as directors at the Company's annual
meeting of shareholders scheduled to be held on December 12, 1997. The following
information is furnished for each person who is a director of the Company.

NOMINEES FOR RE-ELECTION AS DIRECTORS FOR TERMS EXPIRING IN 2000

Breene M. Kerr, age 68, has been a director of the Company since 1993. In
1969, he founded Kerr Consolidated, Inc. and remains Chairman and President of
this private company with investments in the oil and gas and trucking
industries. Additionally, in 1969, Mr. Kerr co-founded the Resource Analysis and
Management Group and remained its senior partner until 1982. From 1967 to 1969,
he was Vice President of Kerr-McGee Chemical Corporation. From 1951 through
1967, Mr. Kerr worked for Kerr-McGee Corporation as a geologist and land
manager. Mr. Kerr has served as Chairman of the Investment Committee for the
Massachusetts Institute of Technology and is a life member of the Corporation
(Board of Trustees) of that university. He served as a director of Kerr-McGee
Corporation from 1957 to 1981. Mr. Kerr currently is a trustee and serves on the
Investment Committee of the Brookings Institute in Washington, D.C., and has
been an associate director since 1987 of Aven Gas & Oil, Inc., an oil and gas
property management company located in Oklahoma City. Mr. Kerr graduated in 1951
from the Massachusetts Institute of Technology.

Walter C. Wilson, age 62, has been a director of the Company since 1993.
From 1963 to 1974 and from 1978 to 1997, Mr. Wilson was a general agent with
Massachusetts Mutual Life Insurance Company. From 1974 to 1978, he was Senior
Vice President of Massachusetts Mutual Life Insurance Company, and from 1958 to
1963, he was an agent with that company. Mr. Wilson is a member of the Board of
Trustees of Springfield College in Springfield, Massachusetts, and is a director
of Earth Satellite Corporation of Rockville, Maryland and Amerac Energy
Corporation of Houston, Texas. Mr. Wilson graduated in 1958 from Dartmouth
College.

DIRECTORS WHOSE TERMS EXPIRE IN 1998

Tom L. Ward, age 38, has served as President, Chief Operating Officer, and
a director of the Company since its inception in 1989. From 1982 to 1989, Mr.
Ward was an independent producer of oil and gas in affiliation with Aubrey K.
McClendon, the Company's Chairman and Chief Executive Officer. Mr. Ward is a
member of the Board of Trustees of Anderson University in Anderson, Indiana. Mr.
Ward graduated from the University of Oklahoma in 1981.

E. F. Heizer, Jr., age 68, has been a director of the Company since 1993.
From 1985 to the present, Mr. Heizer has been a private venture capitalist. He
founded Heizer Corp., an American Stock Exchange-listed business development
company, in 1969 and served as Chairman and Chief Executive Officer from 1969
until 1986, when Heizer Corporation was reorganized into a number of public and
private companies. Mr. Heizer was assistant treasurer of the Allstate Insurance
Company from 1962 to 1969. He was employed by Booz, Allen and Hamilton from 1958
to 1962, Kidder, Peabody & Co. from 1956 to 1958, and Arthur Andersen & Co. from
1954 to 1956. He serves on the advisory board of the Kellogg School of
Management at Northwestern University and the Executive Committee of Yale Law
School. Mr. Heizer is a director of Amdahl Corporation in Santa Clara,
California, Material Science Corporation, Elk Grove, Illinois, and numerous
private companies. Mr. Heizer graduated in 1951 from Northwestern University and
from Yale University Law School in 1954.

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<PAGE> 3

Frederick B. Whittemore, age 66, has been a director of the Company since
1993. Mr. Whittemore has been an advisory director of Morgan Stanley & Co. since
1989 and was a managing director of Morgan Stanley & Co. from 1970 to 1989. He
was Vice-Chairman of the American Stock Exchange from 1982 to 1984. Mr.
Whittemore was a partner with Morgan Stanley & Co. from 1967 to 1970 and an
associate from 1958 to 1967. Mr. Whittemore is a director of Integon Insurance
Company in Winston-Salem, North Carolina, Partner Reinsurance Company, Limited
in Bermuda and Southern Pacific Petroleum, N.L. of Sydney, Australia. Mr.
Whittemore graduated in 1953 from Dartmouth College and from the Amos Tuck
School of Business Administration in 1954.

DIRECTORS WHOSE TERMS EXPIRE IN 1999

Aubrey K. McClendon, age 38, has served as Chairman of the Board, Chief
Executive Officer and director of the Company since its inception in 1989. From
1982 to 1989, Mr. McClendon was an independent producer of oil and gas in
affiliation with Tom L. Ward, the Company's President and Chief Operating
Officer. Mr. McClendon is a member of the Board of Visitors of the Fuqua School
of Business at Duke University, an Executive Committee member of the Texas
Independent Producers and Royalty Owners Association, a director of the Oklahoma
Independent Petroleum Association, and a director of the Louisiana Independent
Oil and Gas Association. Mr. McClendon is a 1981 graduate of Duke University.

Shannon T. Self, age 41, has been a director of the Company since 1993. He
is a shareholder of Self, Giddens & Lees, Inc., Attorneys at Law, in Oklahoma
City, which he co-founded in 1991. Mr. Self was an associate and shareholder in
the law firm of Hastie and Kirschner, Oklahoma City, from 1984 to 1991 and was
employed by Arthur Young & Co. from 1979 to 1980. Mr. Self is a certified public
accountant. He graduated from the University of Oklahoma in 1979 and from
Northwestern University Law School in 1984.

INFORMATION REGARDING OFFICERS

Executive Officers

In addition to Messrs. McClendon and Ward, the following are also executive
officers of the Company.

Marcus C. Rowland, age 45, was appointed Senior Vice President - Finance
and Chief Financial Officer in September 1997. He served as Vice President -
Finance and Chief Financial Officer from 1993 to 1997. From 1990 until his
association with the Company, Mr. Rowland was Chief Operating Officer of Anglo-
Suisse, L.P. assigned to the White Nights Russian Enterprise, a joint venture of
Anglo-Suisse, L.P. and Phibro Energy Corporation, a major foreign operation
which was granted the right to engage in oil and gas operations in Russia. Prior
to his association with White Nights Russian Enterprise, Mr. Rowland owned and
managed his own oil and gas company and prior to that was Chief Financial
Officer of a private exploration company in Oklahoma City from 1981 to 1985. Mr.
Rowland is a certified public accountant and graduated from Wichita State
University in 1975.

Steven C. Dixon, age 39, has been Senior Vice President - Operations since
1995 and served as Vice President -Exploration from 1991 to 1995. Mr. Dixon was
a self-employed geological consultant in Wichita, Kansas from 1983 through 1990.
He was employed by Beren Corporation in Wichita, Kansas from 1980 to 1983 as a
geologist. Mr. Dixon graduated from the University of Kansas in 1980.

J. Mark Lester, age 44, has been Senior Vice President - Exploration since
1995 and served as Vice President - Exploration from 1989 to 1995. From 1986 to
1989, Mr. Lester was employed by Messrs. McClendon and Ward. He was employed by
various independent oil companies in Oklahoma City from 1980 to 1986, and was
employed by Union Oil Company of California from 1977 to 1980 as a geophysicist.
Mr. Lester graduated from Purdue University in 1975 and in 1977.

Henry J. Hood, age 37, was appointed Senior Vice President - Land and Legal
in September 1997 and served as Vice President - Land and Legal from 1995. Mr.
Hood was retained as a consultant to the Company during the two years prior to
his joining the Company. He was associated with the law firm of Watson &
McKenzie from 1987 to 1992. From 1991 to 1992, Mr. Hood was of counsel with the
Oklahoma City law firm

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<PAGE> 4

of White, Coffey, Galt & Fite. Mr. Hood is a member of the Oklahoma and Texas
Bar Associations. Mr. Hood graduated from Duke University in 1982 and from the
University of Oklahoma College of Law in 1985.

Ronald A. Lefaive, age 50, has served as Controller and Chief Accounting
Officer since 1993. From 1991 until his association with the Company, Mr.
Lefaive was Controller for Phibro Energy Production, Inc., an international
exploration and production subsidiary of Phibro Energy, whose principal
operations were located in Russia. From 1982 to 1991, Mr. Lefaive served as
Assistant Controller, General Auditor and Manager of Management Information
Systems at Conquest Exploration Company in Houston, Texas. Prior to joining
Conquest, Mr. Lefaive held various financial staff and management positions with
The Superior Oil Company from 1980 to 1982 and Shell Oil Company from 1975 to
1982. Mr. Lefaive is a certified public accountant and graduated from the
University of Houston in 1975.

Martha A. Burger, age 44, has served as Treasurer since 1995 and as
Treasurer and Human Resources Manager since 1996. From 1994 to 1995, she served
in various accounting positions with the Company including Assistant
Controller-Operations. From 1989 to 1993, Ms. Burger was employed by Hadson
Corporation as Assistant Treasurer and from 1994 to 1995, served as Vice
President and Controller of Hadson. Prior to joining Hadson, Ms. Burger was
employed by Phoenix Resource Companies, Inc. as Assistant Treasurer and by
Arthur Andersen & Co. Ms. Burger is a certified public accountant and graduated
from the University of Central Oklahoma in 1982 and from Oklahoma City
University in 1992.

Other Officers

Thomas S. Price, Jr., age 45, has served as Vice President - Corporate
Development since 1992 and was a consultant to the Company during the prior two
years. He was employed by Kerr-McGee Corporation, Oklahoma City, from 1988 to
1990 and by Flag-Redfern Oil Company in Oklahoma City from 1984 to 1988. Mr.
Price graduated from the University of Central Oklahoma in 1983, from the
University of Oklahoma in 1989, and from the American Graduate School of
International Management in 1992.

Dale W. Bossert, age 53, has served as Vice President - Production since
January 1997. Mr. Bossert was previously employed by Celsius Energy Company as
Consulting General Manager - Canada in 1996 and by Union Pacific Resources
Company of Fort Worth, Texas from 1978 serving in various capacities, including
Vice President - Production from 1989 to 1993 and as Vice President -
Exploration and Production Services from 1993 to 1995. Mr. Bossert graduated
from the University of Alberta in 1966.

Charles W. Imes, age 50, has served as Vice President - Information
Technology since 1997 and served as Director -Management Information Systems
since 1993. From 1983 to 1993, Mr. Imes owned Imes Software Systems in Oklahoma
City and served as a consultant and supplier of software to the Company from
1990 to 1993. Mr. Imes graduated from the University of Oklahoma in 1969.

Terry L. Kite, age 43, has served as Vice President - Information
Technology since February 1997. From 1981 to 1996, Mr. Kite served in various
positions in information technology at Amerada Hess Corporation in Houston,
Texas, including Manager - Geoscience and Engineering Systems. Prior to joining
Amerada Hess, Mr. Kite held information systems staff positions with Earth
Science Programming in Tulsa from 1979 to 1980 and with Seismograph Service
Corporation in Tulsa from 1976 to 1979. Mr. Kite graduated from the Colorado
School of Mines in 1976.

Janice A. Dobbs, age 49, has served as Corporate Secretary and Compliance
Manager since 1993. From 1975 until her association with the Company, Ms. Dobbs
was the corporate/securities legal assistant with the law firm of Andrews Davis
Legg Bixler Milsten & Price, Inc. in Oklahoma City. From 1973 to 1975, Ms. Dobbs
was the Administrative Assistant to the President and General Counsel of Texas
International Company, an oil and gas exploration and production company in
Oklahoma City. Ms. Dobbs is a certified legal assistant, an associate member of
the American Bar Association, a member of the American Society of Corporate
Secretaries and the Society of Human Resources Management.

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SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Section 16(a) of the Securities Exchange Act of 1934 (the "Exchange Act")
requires the Company's directors and executive officers and persons who
beneficially own more than 10% of the Company's Common Stock to file reports of
ownership and subsequent changes with the Securities and Exchange Commission.

Executive officers of the Company, Marcus C. Rowland, Steven C. Dixon, J.
Mark Lester, Henry J. Hood, Ronald A. Lefaive and Martha A. Burger were late in
filing Form 4's to report the cancelation of stock options and also failed to
timely report on Form 5 options granted to replace such options.

Shannon T. Self, a director of the Company, has advised the Company that
the acquisition of 52,000 shares of Common Stock acquired through the exercise
of a stock option granted by the Company and the disposition of 50,000 of those
shares were reported on a late filed Form 4.

ITEM 11. EXECUTIVE COMPENSATION

SUMMARY COMPENSATION TABLE

The following table sets forth for the last three fiscal years the cash
compensation of (i) the Company's chief executive officer and (ii) the five
other most highly compensated executive officers:

<TABLE>
<CAPTION>
ANNUAL COMPENSATION SECURITIES
------------------------------------- UNDERLYING
OTHER OPTION ALL
FISCAL ANNUAL AWARDS(B) OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION(A) (# OF SHARES) COMPENSATION(C)
--------------------------- ------ -------- -------- --------------- ------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Aubrey K. McClendon..................... 1997 $250,000 $120,000 $74,450 463,000 $11,050
Chairman of the Board and 1996 $185,000 $ 40,000 $65,408 288,000 $ 8,295
Chief Executive Officer 1995 $180,000 $ 65,400 $57,640 540,000 $ 4,620
Tom L. Ward............................. 1997 $250,000 $120,000 $75,408 463,000 $13,700
President and 1996 $185,000 $ 40,000 $66,850 288,000 $ 8,368
Chief Operating Officer 1995 $180,000 $ 65,400 $57,340 540,000 $ 4,620
Marcus C. Rowland....................... 1997 $185,000 $ 50,000 (d) 36,000 $ 9,500
Senior Vice President -- Finance 1996 $165,000 $ 20,000 (d) 171,000 $11,333
and Chief Financial Officer 1995 $155,000 $ 45,400 (d) 324,000 $ 4,620
Steven C. Dixon......................... 1997 $145,000 $ 45,000 (d) 30,000 $11,500
Senior Vice President -- 1996 $125,000 $ 12,500 (d) 97,500 $ 9,870
Operations 1995 $112,500 $ 27,900 (d) 184,500 $ 3,510
Henry J. Hood........................... 1997 $135,000 $ 30,000 (d) 19,500 $ 2,920
Senior Vice President -- 1996 $120,000 $ 12,000 (d) 51,000 $ 6,400
Land and Legal 1995 $120,000 $ 6,300 (d) 20,250 --
J. Mark Lester.......................... 1997 $132,500 $ 30,000 (d) 19,500 $10,400
Senior Vice President -- 1996 $110,000 $ 11,000 (d) 64,500 $ 7,635
Exploration 1995 $105,000 $ 14,800 (d) 81,000 $ 2,063
</TABLE>

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(a) Represents the cost of personal benefits provided by the Company, including
for fiscal 1997 personal accounting support ($53,000 for Mr. McClendon and
$53,350 for Mr. Ward), personal vehicle ($18,000 each) and country club
membership dues ($3,450 for Mr. McClendon and $4,058 for Mr. Ward).

(b) No awards of restricted stock or payments under long-term incentive plans
were made by the Company to any of the named executives in any period
covered by the table.

(c) Represents Company matching contributions to the Chesapeake Energy
Corporation Savings and Incentive Stock Bonus Plan.

(d) Other annual compensation did not exceed the lesser of $50,000 or 10% of the
executive officer's salary and bonus during the year.

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STOCK OPTIONS GRANTED IN FISCAL 1997

The following table sets forth information concerning options to purchase
Common Stock granted in fiscal 1997 to the executive officers named in the
Summary Compensation Table. Amounts represent stock options granted under the
Company's 1994 and 1996 Plans and include both incentive and non-qualified stock
options. One-fourth of each option becomes exercisable on each of the first four
grant date anniversaries. The exercise price of each option represents the
market price of the Common Stock on the date of grant (110% of such market price
with respect to incentive stock options granted to Messrs. McClendon and Ward).

<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
---------------------------------------------------
PERCENT OF POTENTIAL REALIZABLE VALUE
NUMBER OF TOTAL AT ASSUMED ANNUAL RATES
SECURITIES OPTIONS OF STOCK PRICE APPRECIATION
UNDERLYING GRANTED TO EXERCISE FOR OPTION TERM(A)
OPTIONS EMPLOYEES IN PRICE PER EXPIRATION ---------------------------
NAME GRANTED FISCAL 1997 SHARE DATE 5% 10%
---- ---------- ------------ --------- ---------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Aubrey K. McClendon........ 15,456(b) 0.4% $28.47 6/13/97 N/A N/A
184,544(b) 5.3% $25.87 6/13/97 N/A N/A
235,176 6.7% $14.75 6/13/07 $958,378 $2,117,765
27,824 0.8% $16.23 6/13/02 $ 83,824 $ 220,993
Tom L. Ward................ 15,456(b) 0.4% $28.47 6/13/97 N/A N/A
184,544(b) 5.3% $25.87 6/13/97 N/A N/A
235,176 6.7% $14.75 6/13/07 $958,378 $2,117,765
27,824 0.8% $16.23 6/13/02 $ 83,824 $ 220,993
Marcus C. Rowland.......... 36,000 1.0% $14.25 4/25/07 $322,623 $ 817,590
Steven C. Dixon............ 30,000 0.9% $14.25 4/25/07 $268,852 $ 681,325
Henry J. Hood.............. 19,500 0.6% $14.25 4/25/07 $174,754 $ 442,861
J. Mark Lester............. 19,500 0.6% $14.25 4/25/07 $174,754 $ 442,861
</TABLE>

- ---------------

(a) The assumed annual rates of stock price appreciation of 5% and 10% are set
by the Securities and Exchange Commission and are not intended as a forecast
of possible future appreciation in stock prices.

(b) Option was canceled upon grant of replacement option.

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AGGREGATED OPTION EXERCISES IN FISCAL 1997 AND FISCAL YEAR-END OPTION VALUES

The following table sets forth information about options exercised by the
named executive officers during the fiscal year ended June 30, 1997 and the
unexercised options to purchase Common Stock held by them at June 30, 1997.

<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
SHARES OPTIONS AT 6/30/97 OPTIONS AT 6/30/97(A)
ACQUIRED VALUE ---------------------------- ----------------------------
NAME ON EXERCISE REALIZED(B) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ----------------------------- ----------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Aubrey K. McClendon.......... 315,000(c) $4,499,496 402,750 701,750 $2,614,777 $2,437,118
Tom L. Ward.................. -- -- 717,750 701,750 $5,520,373 $2,437,118
Marcus C. Rowland............ 249,750 $4,409,183 -- 399,250 -- $1,462,271
Steven C. Dixon.............. -- -- 358,273 253,627 $3,006,497 $ 838,860
Henry J. Hood................ 7,876 $ 162,847 10,687 83,251 $ 47,775 $ 163,812
J. Mark Lester............... 28,128 $ 678,811 96,386 120,514 $ 793,653 $ 391,377
</TABLE>

- ---------------

(a) At June 30, 1997, the closing price of the Common Stock on the New York
Stock Exchange ("NYSE") was $9.94. "In-the-money options" are stock options
with respect to which the market value of the underlying shares of Common
Stock exceeded the exercise price at June 30, 1997. The values shown were
determined by subtracting the aggregate exercise price of such options from
the aggregate market value of the underlying shares of Common Stock on June
30, 1997.

(b) Represents amounts determined by subtracting the aggregate exercise price of
such options from the aggregate market value of the underlying shares of
Common Stock on the exercise date.

EMPLOYMENT AGREEMENTS

The Company has employment agreements with Messrs. McClendon and Ward, each
of which provides, among other things, for an annual base salary of not less
than $300,000 commencing July 1, 1997; bonuses at the discretion of the Board of
Directors; eligibility for stock options; and benefits, including an automobile
and aircraft allowance, club membership and personal accounting support. Each
agreement has a term of three years commencing July 1, 1997, which term is
automatically extended for one additional year on each June 30 unless the
Company provides 30 days prior notice of non-extension.

The employment agreements between the Company and Messrs. McClendon and
Ward permit them to participate in each well drilled by the Company on terms no
less favorable to the Company than those agreed to by unaffiliated industry
partners. Messrs. McClendon and Ward have participated in all wells drilled by
the Company since its initial public offering in February 1993 and intend to
continue participating in wells drilled by the Company under the terms of their
employment agreements. Thirty days prior to the beginning of each calendar
quarter, Messrs. McClendon and Ward and the disinterested members of the
Compensation Committee of the Board of Directors agree upon the working interest
percentage in all wells spudded during that quarter to be purchased by Messrs.
McClendon and Ward. That percentage may not be adjusted during such quarter
except with the approval of such disinterested directors. No such adjustments
have ever been requested or granted. The participation election by Messrs.
McClendon or Ward may not exceed a 2.5% working interest in a well. Messrs.
McClendon and Ward are obligated to pay within 150 days after billing all costs
and expenses associated with the working interests they acquire under this
arrangement. In addition, for each calendar year during which the employment
agreements are in effect, Messrs. McClendon and Ward each agree 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 has a similar employment agreement with Mr. Rowland. It
provides for an annual base salary of not less than $225,000 commencing July 1,
1997. The agreement has a term of three years beginning July 1, 1997, which term
is automatically extended for one additional year on each June 30 unless the
Company provides 30 days prior notice of non-extension. Mr. Rowland is permitted
to participate in wells drilled by the Company in the same manner as Messrs.
McClendon and Ward, except that Mr. Rowland's

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<PAGE> 8

working interest participation in a well may not exceed 1%. Messrs. McClendon,
Ward and Rowland may not participate in any well in which their combined working
interests cause the Company's working interest to be reduced to less than 12.5%.
Mr. Rowland agrees to hold shares of the Company's Common Stock having an
aggregate investment value equal to 100% of his annual base salary and bonus
during each calendar year for the term of the agreement.

Messrs. McClendon, Ward and Rowland have agreed that they will not engage
in oil and gas operations individually except pursuant to the aforementioned
participation in Company wells and as a result of subsequent operations on
properties owned by them or their affiliates as of July 1, 1995 or acquired from
the Company with respect to Messrs. McClendon and Ward and as of March 1, 1993
with respect to Mr. Rowland.

The Company also has employment agreements with Messrs. Dixon, Lester and
Hood. These agreements have a term of three years from July 1, 1997, with annual
base salaries of $175,000 for Mr. Dixon, $160,000 for Mr. Lester and $155,000
for Mr. Hood for the term of their agreements. The agreements require each of
them to acquire and continue to hold shares of the Company's Common Stock having
an annual aggregate investment value equal to 15% for Messrs. Dixon and Lester
and 10% for Mr. Hood of the annual base salary and bonus compensation paid to
them under their respective agreements.

The Company may terminate any of the employment agreements with its
executive officers at any time without cause; however, upon such termination
Messrs. McClendon, Ward and Rowland are entitled to continue to receive salary
and benefits for the balance of the contract term. Messrs. Dixon, Hood and
Lester are entitled to 90 days compensation and benefits. Each of the employment
agreements for Messrs. McClendon, Ward and Rowland further states that if,
during the term of the agreement, there is a change of control and within one
year (i) the agreement expires and is not extended; (ii) the executive officer
is terminated other than for cause, death or incapacity; or (iii) the executive
resigns as a result of a reassignment of duties inconsistent with his position
or a reduction in his compensation, then the executive officer will be entitled
to a severance payment in an amount equal to 36 months of base salary
compensation. Change of control is defined in these agreements to include (x) an
event which results in a person acquiring beneficial ownership of securities
having 35% or more of the voting power of the Company's outstanding voting
securities, or (y) 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, 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.

DIRECTORS' COMPENSATION

During fiscal year 1997, each director who was not an officer of the
Company received $2,500 for each regular meeting of the Board attended, up to a
maximum of $10,000 during the year. Beginning in fiscal 1998, directors who are
not officers of the Company will receive an annual retainer of $10,000, payable
quarterly, and $1,250 for each meeting of the Board attended. Directors are
reimbursed for travel and other expenses. Officers who also serve as directors
do not receive fees for serving as directors.

During fiscal year 1997, each director who was not an officer of the
Company was granted an option for 20,000 shares (10,000 shares pre-split) at an
exercise price of $30.63 ($61.25 pre-split) per share under the Company's 1992
Nonstatutory Stock Option Plan (the "1992 NSO Plan"). During fiscal year 1998,
each director who is not an officer will receive ten-year non-qualified options
under the 1992 NSO Plan to purchase 15,000 shares of Common Stock, options for
3,750 shares granted on the first day of each quarter, at an exercise price
equal to the market price on the date of grant.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

During fiscal 1997, the Compensation Committee was composed of Aubrey K.
McClendon, Tom L. Ward, E.F. Heizer, Jr. and Frederick B. Whittemore. Mr.
McClendon is Chairman of the Board and Chief Executive Officer of the Company.
Mr. Ward is the Company's President and Chief Operating Officer.

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<PAGE> 9

Messrs. McClendon and Ward administer the Company's 1992 stock options
plans. The grant of new options under the 1992 Incentive Stock Option Plan (the
"1992 ISO Plan") was terminated in December 1994. The only options issued under
the 1992 NSO Plan during fiscal 1997 were those to the Company's non-employee
directors pursuant to an annual formula award provision. Messrs. McClendon and
Ward also administer the 1994 and 1996 Plans with respect to non-director
employee participants. Messrs. Heizer and Whittemore, administer the 1994 and
1996 Plans with respect to executive officers or employee participants who are
directors.

Messrs. McClendon and Ward participate as working interest owners in the
Company's oil and gas wells pursuant to the terms of their employment agreements
with the Company. See "Employment Agreements." Accounts receivable from Messrs.
McClendon and Ward are generated by joint interest billings relating to such
participation and as a result of miscellaneous expenses paid on their behalf by
the Company. The Company has extended certain registration rights to Messrs.
McClendon and Ward. Mr. Self is a partner in the firm of Self, Giddens & Lees,
Inc., counsel to the Company. See "Certain Transactions."

ITEM 12. SECURITY OWNERSHIP

The table below sets forth as of the Record Date (i) the name and address
of each person known by management to own beneficially 5% or more of the
Company's outstanding Common Stock, the number of shares beneficially owned by
each such shareholder and the percentage of outstanding shares owned and (ii)
the number and percentage of outstanding shares of Common Stock beneficially
owned by each of the Company's nominees, directors and executive officers listed
in the Summary Compensation Table below and by all directors and executive
officers of the Company as a group. Unless otherwise noted, the persons named
below have sole voting and investment power with respect to such shares.

<TABLE>
<CAPTION>
COMMON STOCK
----------------------------
NUMBER OF PERCENT OF
BENEFICIAL OWNER SHARES CLASS
---------------- ---------- ----------
<S> <C> <C>
Tom L. Ward*+.............................................. 11,263,072(a)(b) 16%
6100 North Western Avenue
Oklahoma City, OK 73118
Aubrey K. McClendon*+...................................... 11,005,978(b)(c) 15%
6100 North Western Avenue
Oklahoma City, OK 73118
Pilgrim Baxter & Associates................................ 5,303,008(d) 8%
1255 Drummers Lane
Wayne, PA 19087-1590
Shannon T. Self*........................................... 2,731,998(e) 4%
E. F. Heizer, Jr.*......................................... 1,054,400(f) 1%
Frederick B. Whittemore*................................... 919,000(g) 1%
Steven C. Dixon+........................................... 407,584(b)(h) **
Breene M. Kerr*............................................ 346,250(i) **
Walter C. Wilson*.......................................... 248,000(j) **
Marcus C. Rowland+......................................... 165,215(b)(k) **
J. Mark Lester+............................................ 106,105(b)(l) **
Henry J. Hood+............................................. 23,162(b)(m) **
All directors and executive officers as a group............ 30,948,588(n) 42%
</TABLE>

- ---------------

* Director

+ Executive officer of the Company

** Less than 1%

8
<PAGE> 10

(a) Includes 1,846,860 shares held by TLW Investments, Inc., an Oklahoma
corporation of which Mr. Ward is sole shareholder and chief executive
officer, and 841,500 shares which may be acquired pursuant to currently
exercisable stock options granted by the Company.

(b) Includes shares purchased on behalf of the executive officer in the
Chesapeake Energy Corporation Savings and Incentive Stock Bonus Plan (Tom L.
Ward, 3,522 shares; Aubrey K. McClendon, 1,643 shares; Steven C. Dixon, 937
shares; Marcus C. Rowland, 985 shares; J. Mark Lester, 719 shares and Henry
J. Hood, 776 shares).

(c) Includes 508,560 shares held by Chesapeake Investments, an Oklahoma limited
partnership of which Mr. McClendon is sole general partner, and 526,500
shares which may be acquired pursuant to currently exercisable stock options
granted by the Company.

(d) Based on information provided by Pilgrim Baxter & Associates.

(e) Includes 2,382 shares held by Pearson Street Limited Partnership, an
Oklahoma limited partnership of which Mr. Self is a general partner and the
remaining partners are members of Mr. Self's immediate family sharing the
same household; 1,098,600 shares held by Mr. Self as trustee of the Aubrey
K. McClendon Children's Trust, 1,209,100 shares held by Mr. Self as trustee
of the Tom L. Ward Children's Trust and 421,916 shares which Mr. Self has
the right to acquire pursuant to currently exercisable stock options granted
by the Company.

(f) Includes 344,750 shares subject to currently exercisable stock options
granted to Mr. Heizer by the Company.

(g) Includes 374,000 shares subject to currently exercisable stock options
granted to Mr. Whittemore by the Company.

(h) Includes 403,647 shares subject to currently exercisable stock options
granted to Mr. Dixon by the Company.

(i) Includes 27,500 shares subject to currently exercisable stock options
granted to Mr. Kerr by the Company.

(j) Includes 248,000 shares subject to currently exercisable stock options
granted to Mr. Wilson by the Company.

(k) Includes 74,250 shares subject to currently exercisable stock options
granted to Mr. Rowland by the Company.

(l) Includes 100,886 shares subject to currently exercisable stock options
granted to Mr. Lester by the Company.

(m) Includes 20,812 shares subject to currently exercisable stock options
granted to Mr. Hood by the Company.

(n) Includes shares subject to options which are currently exercisable.

ITEM 13. CERTAIN TRANSACTIONS

Legal Counsel. Shannon T. Self, a director of the Company, is a shareholder
in the law firm of Self, Giddens & Lees, Inc., which provides legal services to
the Company. During fiscal 1997, the firm billed the Company approximately
$207,000 for such legal services.

Oil and Gas Operations. Prior to 1989, Messrs. McClendon and Ward and their
affiliates, as independent oil producers, acquired various leasehold and working
interests. In 1989, Chesapeake Operating, Inc. ("COI"), a wholly-owned
subsidiary of the Company, was formed to drill and operate wells in which
Messrs. McClendon and Ward or their affiliates owned working interests. COI
entered into joint operating agreements with Messrs. McClendon and Ward and
other working interest owners and billed each for their respective shares of
expenses and fees.

COI continues to operate wells in which directors, executive officers and
related parties own working interests. In addition, directors, executive
officers and related parties have acquired working interests directly and
indirectly from the Company and participated in wells drilled by COI on terms no
less favorable to the

9
<PAGE> 11

Company than available to unrelated parties. Other than interests owned prior to
the Company's initial public offering in 1993, the Company's directors who are
not officers have not acquired from the Company interests in any new wells
drilled by the Company since their election as directors and have no present
intention to acquire interests in any new wells of the Company. The table below
presents information about drilling, completion, equipping and operating costs
billed to the person named from July 1, 1996 to June 30, 1997, the largest
amount owed by them during the period and the balance owed at July 1, 1996 and
June 30, 1997. No interest is charged on amounts owing for such costs, unless
such costs are not paid in a timely manner. The amounts for all other directors,
executive officers and related parties were insignificant.

<TABLE>
<CAPTION>
AUBREY K. TOM L. MARCUS C.
MCCLENDON WARD ROWLAND
--------- ------ ---------
(IN THOUSANDS)
<S> <C> <C> <C>
Balance at July 1, 1996............................ $ 971 $1,288 $ 82
Amount billed (to June 30, 1997)................... $3,662 $3,534 $171
Largest outstanding balance (month end)............ $3,552 $2,997 $ 79
Balance at June 30, 1997........................... $3,552 $2,997 $ 42
</TABLE>

Miscellaneous. From time to time, the Company pays various expenses
incurred on behalf of Messrs. McClendon and Ward and their affiliates, creating
accounts receivable of the Company. During fiscal 1997 additions to accounts
receivable (excluding joint interest billings, which are described above) from
Messrs. McClendon and Ward and their affiliates were insignificant.

10
<PAGE> 12

PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

(a) The following documents are filed as part of this report:

1. Financial Statements. The Company's Consolidated Financial
Statements are included in Item 8 of this report. Reference is made to the
accompanying Index to Consolidated Financial Statements.

2. Financial Statement Schedules. No financial statement schedules are
filed with this report as no schedules are applicable or required.

3. Exhibits. The following exhibits are filed herewith pursuant to the
requirements of Item 601 of Regulation S-K:

11
<PAGE> 13
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
10.1.2+ -- Registrant's 1992 Nonstatutory Stock Option Plan, as
amended. Incorporated herein by reference to Exhibit
10.1.2 to Registrant's quarterly report on Form 10-Q for
the quarter ended December 31, 1996.
10.1.3+ -- Registrant's 1994 Stock Option Plan, as amended.
Incorporated herein by reference to Exhibit 10.1.3 to
Registrant's quarterly report on Form 10-Q for the
quarter ended December 31, 1996.
10.1.4+ -- Registrant's 1996 Stock Option Plan. Incorporated herein
by reference to Registrant's Proxy Statement for its 1996
Annual Meeting of Shareholders.
10.1.4.1* -- Amendment to the Chesapeake Energy Corporation 1996 Stock
Option Plan.
10.2.1+# -- Employment Agreement dated as of July 1, 1997 between
Aubrey K. McClendon and Chesapeake Energy Corporation.
10.2.2+# -- Employment Agreement dated as of July 1, 1997 between Tom
L. Ward and Chesapeake Energy Corporation.
10.2.3+# -- Employment Agreement dated as of July 1, 1997 between
Marcus C. Rowland and Chesapeake Energy Corporation.
10.2.4+ -- Employment Agreement dated as of July 1, 1995 between
Steven C. Dixon and Chesapeake Energy Corporation.
Incorporated herein by reference to Exhibit 10.2.4 to
Registrant's quarterly report on Form 10-Q for the
quarter ended September 30, 1995.
10.2.5+* -- Employment Agreement dated as of July 1, 1997 between J.
Mark Lester and Chesapeake Energy Corporation.
10.2.6+* -- Employment Agreement dated as of July 1, 1997 between
Henry J. Hood and Chesapeake Energy Corporation.
10.2.7+* -- Employment Agreement dated as of July 1, 1997 between
Ronald A. Lefaive and Chesapeake Energy Corporation.
10.2.8+* -- Employment Agreement dated as of July 1, 1997 between
Martha A. Burger and Chesapeake Energy Corporation.
10.3+ -- Form of Indemnity Agreement for officers and directors of
Registrant and its subsidiaries. Incorporated herein by
reference to Exhibit 10.30 to Registrant's registration
statement on Form S-1 (No. 33-55600).
10.9 -- Indemnity and Stock Registration Agreement, as amended by
First Amendment (Revised) thereto, dated as of February
12, 1993, and as amended by Second Amendment thereto
dated as of October 20, 1995, among Chesapeake Energy
Corporation, Chesapeake Operating, Inc., Chesapeake
Investments, TLW Investments, Inc., et al. Incorporated
herein by reference to Exhibit 10.35 to Registrant's
annual report on Form 10-K for the year ended June 30,
1993 and Exhibit 10.4.1 to Registrant's quarterly report
on Form 10-Q for the quarter ended December 31, 1995.
10.10 -- Partnership Agreement of Chesapeake Exploration Limited
Partnership dated December 27, 1994 between Chesapeake
Energy Corporation and Chesapeake Operating, Inc.
Incorporated herein by reference to Exhibit 10.10 to
Registrant's registration statement on Form S-4 (No.
33-93718).
10.11* -- Amended and Restated Limited Partnership Agreement of
Chesapeake Louisiana, L.P. dated June 30, 1997 between
Chesapeake Operating, Inc. and Chesapeake Energy
Louisiana Corporation.
11* -- Statement of Net Income (Loss) Per Share.
</TABLE>

12
<PAGE> 14
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
21* -- Subsidiaries of Registrant
23.1* -- Consent of Coopers & Lybrand L.L.P.
23.2* -- Consent of Price Waterhouse LLP
23.3* -- Consent of Williamson Petroleum Consultants, Inc.
27* -- Financial Data Schedule
</TABLE>

- ---------------

* Previously filed.

# Filed herewith.

+ Management contract or compensatory plan or arrangement.

(b) Reports on Form 8-K

During the quarter ended June 30, 1997, the Company filed the following
Current Reports on Form 8-K dated

April 2, 1997 announcing the completion of its Brown #1-H in Washington
County, Texas,

April 24, 1997 reporting third quarter and first nine months fiscal 1997
results, and

June 27, 1997 announcing refocused Louisiana drilling program and expected
asset writedown.

13
<PAGE> 15

SIGNATURE

Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this amendment on Form
10-K/A to be signed on its behalf by the undersigned thereunto duly authorized
on October 31, 1997.

CHESAPEAKE ENERGY CORPORATION

By: /s/ MARCUS C. ROWLAND
----------------------------------
Marcus C. Rowland
Senior Vice President-Finance
and Chief Financial Officer
(Principal Financial Officer)

14
<PAGE> 16

INDEX TO EXHIBITS

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
3.1 -- Registrant's Certificate of Incorporation. Incorporated
herein by reference to Exhibit 3.1 to Registrant's
quarterly report on Form 10-Q for the quarter ended
December 31, 1996.
3.2 -- Registrant's Bylaws. Incorporated herein by reference to
Exhibit 3.2 to Registrant's registration statement on
Form 8-B (No. 001-13726).
4.1 -- Indenture dated as of March 15, 1997 among the
Registrant, as issuer, Chesapeake Operating, Inc.,
Chesapeake Gas Development Corporation and Chesapeake
Exploration Limited Partnership, as Subsidiary
Guarantors, and United States Trust Company of New York,
as Trustee, with respect to 7.875% Senior Notes due 2004.
Incorporated herein by reference to Exhibit 4.1 to
Registrant registration statement on Form S-4 (No.
333-24995).
4.2 -- Indenture dated as of March 15, 1997 among the
Registrant, as issuer, Chesapeake Operating, Inc.,
Chesapeake Gas Development Corporation and Chesapeake
Exploration Limited Partnership, as Subsidiary
Guarantors, and United States Trust Company of New York,
as Trustee, with respect to 8.5% Senior Notes due 2012.
Incorporated herein by reference to Exhibit 4.1.3 to
Registrant registration statement on Form S-4 (No.
333-24995).
4.3 -- Indenture dated as of May 15, 1995 among Chesapeake
Energy Corporation, its subsidiaries signatory thereto as
Subsidiary Guarantors and United States Trust Company of
New York, as Trustee, with respect to 10.5% Senior Notes
due 2002. Incorporated herein by reference to Exhibit 4.3
to Registrant's registration statement on Form S-4 (No.
33-93718).
4.4 -- Indenture dated April 1, 1996 among Chesapeake Energy
Corporation, its subsidiaries signatory thereto as
Subsidiary Guarantors and United States Trust Company of
New York, as Trustee, with respect to 9.125% Senior Notes
due 2006. Incorporated herein by reference to Exhibit 4.6
to Registrant's registration statement on Form S-3
Registration Statement (No. 333-1588)
4.5* -- Agreement to furnish copies of unfiled long-term debt
instruments.
4.8 -- Stock Registration Agreement dated May 21, 1992 between
Chesapeake Energy Corporation and various lenders, as
amended by First Amendment thereto dated May 26, 1992.
Incorporated herein by reference to Exhibits 10.26.1 and
10.26.2 to Registrant's registration statement on Form
S-1 (No. 33-55600).
10.1.1+ -- Registrant's 1992 Incentive Stock Option Plan.
Incorporated herein by reference to Exhibit 10.1.1 to
Registrant's registration statement on Form S-4 (No.
33-93718).
10.1.2+ -- Registrant's 1992 Nonstatutory Stock Option Plan, as
amended. Incorporated herein by reference to Exhibit
10.1.2 to Registrant's quarterly report on Form 10-Q for
the quarter ended December 31, 1996.
10.1.3+ -- Registrant's 1994 Stock Option Plan, as amended.
Incorporated herein by reference to Exhibit 10.1.3 to
Registrant's quarterly report on Form 10-Q for the
quarter ended December 31, 1996.
10.1.4+ -- Registrant's 1996 Stock Option Plan. Incorporated herein
by reference to Registrant's Proxy Statement for its 1996
Annual Meeting of Shareholders.
10.1.4.1* -- Amendment to the Chesapeake Energy Corporation 1996 Stock
Option Plan.
10.2.1+# -- Employment Agreement dated as of July 1, 1997 between
Aubrey K. McClendon and Chesapeake Energy Corporation.
</TABLE>
<PAGE> 17
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
10.2.2+# -- Employment Agreement dated as of July 1, 1997 between Tom
L. Ward and Chesapeake Energy Corporation.
10.2.3+# -- Employment Agreement dated as of July 1, 1997 between
Marcus C. Rowland and Chesapeake Energy Corporation.
10.2.4+ -- Employment Agreement dated as of July 1, 1995 between
Steven C. Dixon and Chesapeake Energy Corporation.
Incorporated herein by reference to Exhibit 10.2.4 to
Registrant's quarterly report on Form 10-Q for the
quarter ended September 30, 1995.
10.2.5+* -- Employment Agreement dated as of July 1, 1997 between J.
Mark Lester and Chesapeake Energy Corporation.
10.2.6+* -- Employment Agreement dated as of July 1, 1997 between
Henry J. Hood and Chesapeake Energy Corporation.
10.2.7+* -- Employment Agreement dated as of July 1, 1997 between
Ronald A. Lefaive and Chesapeake Energy Corporation.
10.2.8+* -- Employment Agreement dated as of July 1, 1997 between
Martha A. Burger and Chesapeake Energy Corporation.
10.3+ -- Form of Indemnity Agreement for officers and directors of
Registrant and its subsidiaries. Incorporated herein by
reference to Exhibit 10.30 to Registrant's registration
statement on Form S-1 (No. 33-55600).
10.9 -- Indemnity and Stock Registration Agreement, as amended by
First Amendment (Revised) thereto, dated as of February
12, 1993, and as amended by Second Amendment thereto
dated as of October 20, 1995, among Chesapeake Energy
Corporation, Chesapeake Operating, Inc., Chesapeake
Investments, TLW Investments, Inc., et al. Incorporated
herein by reference to Exhibit 10.35 to Registrant's
annual report on Form 10-K for the year ended June 30,
1993 and Exhibit 10.4.1 to Registrant's quarterly report
on Form 10-Q for the quarter ended December 31, 1995.
10.10 -- Partnership Agreement of Chesapeake Exploration Limited
Partnership dated December 27, 1994 between Chesapeake
Energy Corporation and Chesapeake Operating, Inc.
Incorporated herein by reference to Exhibit 10.10 to
Registrant's registration statement on Form S-4 (No.
33-93718).
10.11* -- Amended and Restated Limited Partnership Agreement of
Chesapeake Louisiana, L.P. dated June 30, 1997 between
Chesapeake Operating, Inc. and Chesapeake Energy
Louisiana Corporation.
11* -- Statement of Net Income (Loss) Per Share.
21* -- Subsidiaries of Registrant
23.1* -- Consent of Coopers & Lybrand L.L.P.
23.2* -- Consent of Price Waterhouse LLP
23.3* -- Consent of Williamson Petroleum Consultants, Inc.
27* -- Financial Data Schedule
</TABLE>

- ---------------

* Previously filed.

# Filed herewith.

+ Management contract or compensatory plan or arrangement.

<PAGE> 1
EXHIBIT 10.2.1

EMPLOYMENT AGREEMENT

between

AUBREY K. McCLENDON

and

CHESAPEAKE ENERGY CORPORATION

Effective July 1, 1997
<PAGE> 2
TABLE OF CONTENTS

<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
1. Employment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

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

3. Other Activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
3.1 Company's Activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
3.1.1 Amount of Participation . . . . . . . . . . . . . . . . . . . . . . . . 3
3.1.2 Conditions of Participation . . . . . . . . . . . . . . . . . . . . . . 4
3.2 Other Activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
4.4.2 Membership Dues . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
4.4.3 Compensation Review . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
4.4.4 Automobile and Travel Allowance . . . . . . . . . . . . . . . . . . . . 6
4.4.5 Accounting Support . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

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 . . . . . . . . . . . . . . . . . . . . . . . . . 7
6.1.3 Termination After Change in Control . . . . . . . . . . . . . . . . . . 8
6.2 Termination by Executive. . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
6.3 Incapacity of Executive . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
6.4 Death of Executive . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
6.5 Effect of Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
</TABLE>
<PAGE> 3
TABLE OF CONTENTS (continued)

<TABLE>
<S> <C> <C>
7. Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

8. Noncompetition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

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

10. Arbitration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11

11. Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
11.1 Time . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
11.2 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
11.3 Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
11.4 Construction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
11.5 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
11.6 Binding Effect . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
11.7 Attorney's Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
11.8 Supersession . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
</TABLE>
<PAGE> 4
EMPLOYMENT AGREEMENT

THIS AGREEMENT is made effective July 1, 1997, between CHESAPEAKE
ENERGY CORPORATION, an Oklahoma corporation (the "Company"), and AUBREY K.
McCLENDON, an individual (the "Executive") and replaces and supersedes that
certain Employment Agreement between Company and Executive dated July 1, 1995.

W I T N E S S E T H:

WHEREAS, the Company desires to retain the services of the Executive
and the Executive desires to make the Executive's services available to the
Company.

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 Chairman of the
Board and Chief Executive 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
perform all of the services required to fully and faithfully
execute the office and position to which the Executive is
appointed and such other services as may be reasonably
directed by the board of directors of the Company.

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

<PAGE> 5
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 or 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. 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.

2.4 Stock Investment. For each calendar year during which this
Agreement is in effect, the Executive agrees to hold shares of
the Company's common stock having aggregate Investment Value
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. For purposes of this
section, the "Investment Value" of each share of stock will be
the higher of either (a) the price paid by the Executive for
such share as part of an open market purchase; or (b) the fair
market value on the date of exercise for shares acquired
through the exercise of employee stock options. 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 acquire common stock. The Investment Value for previously
acquired stock shall be calculated using the average stock
price during the first six months of this Agreement.

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 return 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 stock ceases
to be listed on the New York Stock Exchange or on the National
Association of Securities Dealers Automated Quotation System.
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.

2
<PAGE> 6
Executive's employment by the Company which requires any substantial portion of
the Executive's time; (b) serve as an officer, general partner or member in any
corporation, partnership, company, or firm; (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 limitation 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") during any Calendar Quarter (as
hereafter defined) on the terms and conditions set forth
herein. 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 (st) 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 Executive's
percentage working interest in the Program Wells
spudded during such Calendar Quarter will be subject
to approval by the disinterested members of the
compensation committee of the Company's board of
directors and to the limitations set forth herein
(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-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 a Program Well which
does not fall within clause (b) of this paragraph
3.1.1 or an Operations Well; or (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'

3
<PAGE> 7
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. 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
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 "Calendar Quarter" means the
three (3) month periods commencing on the first (1st)
day of January, April, July and October.

3.2 Other Activities. The Executive currently conducts oil and
gas investment activities individually and through Chesapeake
Investments, an Oklahoma Limited Partnership ("Investments"),
Chesapeake Production Company, an Oklahoma corporation
("Production"), and Chesapeake/Wood Joint Venture ("Venture").
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

4
<PAGE> 8
gas leases or interests owned by the Executive, Investments,
Production or Venture as of July 1, 1995, or acquired by
Investments, production or Venture 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 on the Board of
Directors of American Bank and Trust Company, located in
Edmond, OK.

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 Thousand
Dollars ($300,000.00), will be paid to the Executive in equal
semi-monthly installments beginning July 15, 1997 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 such other benefits as
are customarily provided by the Company and as are set forth
in the Company's Employment Policies Manual. 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:

4.4.1 Vacation. The Executive will be entitled to take
three (3) weeks of paid vacation each twelve months
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 twelve month period 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 a golf

5
<PAGE> 9
and/or country club in the Oklahoma City area as the
Executive may select; 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 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.

4.4.4 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 fiscal 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 excluding any fixed
costs of the aircraft (including acquisition costs
and depreciation) and will be equal to $40,000.00 for
the Company's fiscal year ending on June 30, 1997,
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.

4.4.5 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 (presently Linda Peterburs) of
the Company to maintain books and records for the
Executive and the Executive's Permitted Activities.
The Executive will not be required to pay any
compensation to the Company in connection with such
accounting services.

<PAGE> 10
5. Term. In the absence of termination as set forth in paragraph 6
below, this Agreement will extend for a term of three (3) years commencing on
July 1, 1997, and ending on June 30, 2000 (the "Expiration Date"). 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 will be
automatically extended for one (1) additional year so that the remaining term
on this Agreement will be not less than two (2) and not more than three (3)
years.

6. Termination. This Agreement will continue in effect until the
expiration of the term stated at 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,
the Executive will receive as termination
compensation: (a) continuation of the Base
Salary provided by paragraph 4.1 during the
portion of the contract period remaining after
the date of the Executive's termination, but in
any event, through the Expiration Date; (b) any
benefits payable by operation of paragraph 4.4
of this Agreement during the portion of the
contract period remaining after the date of the
Executive's termination, but in any event,
through the Expiration Date; and (c) any
vacation pay accrued through the Termination
Date. The termination compensation in (a) shall
be paid only if the Executive executes the
Company's standard termination agreement
releasing all legally waivable claims arising
from the Executive's employment.

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

7
<PAGE> 11
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.

6.1.3 Termination After Change in Control. If, during
the term of this Agreement, there is a "Change
of Control" and within one (1) year thereafter:
(a) this Agreement expires and is not extended;
or (b) the Executive is terminated other than
under paragraphs 6.1.2, 6.3 or 6.4 based on
adequate grounds; or (c) the Executive resigns
as a result of a reassignment of duties
inconsistent with the Executive's position, a
reduction in the Executive's then current
compensation under paragraph 4 of this
Agreement, or a required relocation more than 25
miles from the Executive's then current place of
employment, then the Executive will be entitled
to a severance payment (in addition to any other
amounts payable to the Executive under this
Agreement or otherwise) in an amount equal to
thirty six (36) months of Base Salary as set
forth in paragraph 4.1 of this Agreement. 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.

8
<PAGE> 12
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 Incapacity of Executive. If the Executive suffers from a
physical or mental condition which in the reasonable
judgment of the Company's management 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 contract period, but in any
event, through the Expiration Date. Notwithstanding the
foregoing, the Executive's Base Salary specified in
paragraph 4.1 of this Agreement shall be reduced by any
benefits payable under any disability plans.

6.4 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 and (b) the benefits described in paragraph 4.4
of this Agreement accrued through the effective date of such
termination.

6.5 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 paragraph 6 of this
Agreement, 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.

9
<PAGE> 13
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
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, 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 affiliated corporations, partnerships or
entities, provided, however, this provision shall not apply to acquisitions
within said five (5) mile radius of assets or activities of a successor entity
resulting from a "Change in Control" as described in paragraph 6.1.3., which
assets were owned or activities were being conducted (1) prior to the date of
such Change in Control, or (2) after such Change in Control but for which the
Executive had no material responsibility; and; (b) for the Executive's own
account or for the benefit of another party 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. The Executive further agrees that the Executive

10
<PAGE> 14
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
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 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

11
<PAGE> 15
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:

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

To the Executive: Mr. Aubrey K. McClendon
1214 Larchmont Lane
Oklahoma City, OK 73116
Fax: (405) 843-8482

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.

12
<PAGE> 16
11.5 Entire 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 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. On execution of this Agreement by the Company
and the Executive, the relationship between the Company and
the Executive will be bound by the terms of this Agreement
and the Employment Policies Manual and not by any other
agreements or otherwise. In the event of a conflict between
the Employment Policies Manual and this Agreement, this
Agreement will control in all respects.

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

CHESAPEAKE ENERGY CORPORATION, an
Oklahoma corporation

By: /s/ TOM L. WARD
---------------------------------
Tom L. Ward, President
(the "Company")

By: /S/ AUBREY K. McCLENDON
---------------------------------
Aubrey K. McClendon, Individually
(the "Executive")

<PAGE> 1
EXHIBIT 10.2.2

EMPLOYMENT AGREEMENT

between

TOM L. WARD

and

CHESAPEAKE ENERGY CORPORATION

Effective July 1, 1997
<PAGE> 2
TABLE OF CONTENTS

<TABLE>
<CAPTION>
Page
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<S> <C> <C>
1. Employment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

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

3. Other Activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
3.1 Company's Activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
3.1.1 Amount of Participation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
3.1.2 Conditions of Participation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
3.2 Other Activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
4.4.2 Membership Dues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
4.4.3 Compensation Review . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
4.4.4 Automobile and Travel Allowance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
4.4.5 Accounting Support . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

5. Term . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

6. Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
6.1 Termination by Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
6.1.1 Termination without Cause . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
6.1.2 Termination for Cause . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
6.1.3 Termination After Change in Control . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
6.2 Termination by Executive . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
6.3 Incapacity of Executive . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
6.4 Death of Executive . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
6.5 Effect of Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
</TABLE>
<PAGE> 3

TABLE OF CONTENTS (continued)

<TABLE>
<S> <C> <C>
7. Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

8. Noncompetition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

9. Proprietary Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

10. Arbitration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11

11. Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
11.1 Time . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
11.2 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
11.3 Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
11.4 Construction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
11.5 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
11.6 Binding Effect . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
11.7 Attorney's Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
11.8 Supersession . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
</TABLE>
<PAGE> 4
EMPLOYMENT AGREEMENT

THIS AGREEMENT is made effective July 1, 1997, between CHESAPEAKE
ENERGY CORPORATION, an Oklahoma corporation (the "Company"), and TOM L. WARD,
an individual (the "Executive") and replaces and supersedes that certain
Employment Agreement between Company and Executive dated July 1, 1995.

W I T N E S S S E T H:

WHEREAS, the Company desires to retain the services of the Executive
and the Executive desires to make the Executive's services available to the
Company.

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

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
perform all of the services required to fully and faithfully
execute the office and position to which the Executive is
appointed and such other services as may be reasonably
directed by the board of directors of the Company.

1
<PAGE> 5
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 and 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
<PAGE> 6
Executive's employment by the Company which requires any substantial portion of
the Executive's time; (b) serve as an officer, general partner or member in any
corporation, partnership, company, or firm; (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 limitation 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.

3.1.1 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 Executive's
percentage working interest in the Program Wells
spudded during such Calendar Quarter will be subject
to approval by the disinterested members of the
compensation committee of the Company's board of
directors and to the limitations set forth herein
(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-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 a Program Well which
does not fall within clause (b) of this paragraph
3.1.1 or an Operations Well; or (b) zero percent (0%)
if the combined participation in the Program Well by
the Executive, Mr. Aubrey K. McClendon and Mr.
Marcus C. Rowland with such

3
<PAGE> 7
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.
If clause (b) of this paragraph 3.1.1 prohibits the
Executive's participation in a Program Well, then
Messrs. McClendon 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).

3.2 Other Activities. The Executive currently conducts oil and
gas investment activities individually and through TLW
Production Company, an Oklahoma corporation ("Production"),
and TLW Investments, Inc., an Oklahoma corporation
("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,

4
<PAGE> 8
Production or Investments as of July 1, 1995, or acquired by
Production or Investments from the Company. The interests
acquired by Investments shall be limited by the provisions of
paragraph 3.1 of this Agreement.

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

4.4.2 Membership Dues. The Company will reimburse the
Executive for: (a) the monthly dues necessary to
maintain a full membership in a golf and/or country
club in the Oklahoma City area as the Executive may
select; and (b) the reasonable cost of any qualified
business entertainment at such country club. All
other costs, including, without

5
<PAGE> 9
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.

4.4.5 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 (presently Cheryl Hamilton) of
the Company to maintain books and records for the
Executive and the Executive's Permitted Activities.
The Executive will not be required to pay any
compensation to the Company in connection with such
accounting services.

6
<PAGE> 10
Agreement, the term will be automatically extended for one (1) additional year
so that the remaining term on this Agreement will be not less than two (2) and
not more than three (3) years.

6. Termination. This Agreement will continue in effect until the
expiration of the term stated at 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, the Executive will receive as
termination compensation: (a) continuation of the
Base Salary provided by paragraph 4.1 during the
portion of the contract period remaining after the
date of the Executive's termination, but in any
event, through the Expiration Date; (b) any benefits
payable by operation of paragraph 4.4 of this
Agreement during the portion of the contract period
remaining after the date of the Executive's
termination, but in any event, through the Expiration
Date; and (c) any vacation pay accrued through the
Termination Date. The termination compensation in
(a) shall be paid only if the Executive executes the
Company's standard termination agreement releasing
all legally waivable claims arising from the
Executive's employment.

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

7
<PAGE> 11
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.

6.1.3 Termination After Change in Control. If, during the
term of this Agreement, there is a "Change of
Control" and within one (1) year thereafter: (a)
this Agreement expires and is not extended; or (b)
the Executive is terminated other than under
paragraphs 6.1.2, 6.3 or 6.4 based on adequate
grounds; or (c) the Executive resigns as a result of
a reassignment of duties inconsistent with the
Executive's position, a reduction in the Executive's
then current compensation under paragraph 4 of this
Agreement, or a required relocation more than 25
miles from the Executive's then current place of
employment, then the Executive will be entitled to a
severance payment (in addition to any other amounts
payable to the Executive under this Agreement or
otherwise) in an amount equal to thirty six (36)
months of Base Salary as set forth in paragraph 4.1
of this Agreement. 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.

6.2 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.

8
<PAGE> 12
6.3 Incapacity of Executive. If the Executive suffers from a
physical or mental condition which in the reasonable judgment
of the Company's management 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 contract period, but in any event, through the
Expiration Date. Notwithstanding the foregoing, the
Executive's Base Salary specified in paragraph 4.1 of this
Agreement shall be reduced by any benefits payable under any
disability plans.

6.4 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 and (b) the benefits described in paragraph 4.4 of this
Agreement accrued through the effective date of such
termination.

6.5 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 paragraph 6 of this Agreement, 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

9
<PAGE> 13
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
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.

9. Proprietary Matters. The Executive expressly understands and agrees
that any and all improvements, inventions, discoveries, processes or know-how
that are generated or

10
<PAGE> 14
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-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.

11
<PAGE> 15
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:

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 N. Rockwell Avenue
Edmond, OK 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. 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.

12
<PAGE> 16
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 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. On execution of this Agreement by the Company
and the Executive, the relationship between the Company and
the Executive will be bound by the terms of this Agreement and
the Employment Policies Manual and not by any other agreements
or otherwise. In the event of a conflict between the
Employment Policies Manual and this Agreement, this Agreement
will control in all respects.

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")

By: /s/ TOM L. WARD
--------------------------------------------
Tom L. Ward, Individually
(the "Executive")

<PAGE> 1

EXHIBIT 10.2.3

EMPLOYMENT AGREEMENT

between

MARCUS C. ROWLAND

and

CHESAPEAKE ENERGY CORPORATION

Effective July 1, 1997
<PAGE> 2
TABLE OF CONTENTS

<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
1. Employment . . . . . . . . . . . . . . . . . . . . . . . . 1

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

3. Other Activities . . . . . . . . . . . . . . . . . . . . . 2
3.1 Company's Activities . . . . . . . . . . . . . . . . 3
3.1.1 Amount of Participation . . . . . . . . . . . 3
3.1.2 Conditions of Participation . . . . . . . . . 4
3.2 Other Activities . . . . . . . . . . . . . . . . . . 4

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

5. Term . . . . . . . . . . . . . . . . . . . . . . . . 6

6. Termination . . . . . . . . . . . . . . . . . . . . . . . . 6
6.1 Termination by Company . . . . . . . . . . . . . . . 6
6.1.1 Termination without Cause . . . . . . . . . . . 6
6.1.2 Termination for Cause . . . . . . . . . . . . . 6
6.1.3 Termination After Change in Control . . . . . . 7
6.2 Termination by Executive . . . . . . . . . . . . . . 7
6.3 Incapacity of Executive . . . . . . . . . . . . . . . 8
6.4 Death of Executive . . . . . . . . . . . . . . . . . 8
6.5 Effect of Termination . . . . . . . . . . . . . . . . 8
</TABLE>
<PAGE> 3
TABLE OF CONTENTS (continued)

7. Confidentiality . . . . . . . . . . . . . . . . . . . . . . 8

8. Noncompetition . . . . . . . . . . . . . . . . . . . . . . 9

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

10. Arbitration . . . . . . . . . . . . . . . . . . . . . . . . 10

11. Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . 11
11.1 Time . . . . . . . . . . . . . . . . . . . . . . . . 11
11.2 Notices . . . . . . . . . . . . . . . . . . . . . . . 11
11.3 Assignment . . . . . . . . . . . . . . . . . . . . . 11
11.4 Construction . . . . . . . . . . . . . . . . . . . . 11
11.5 Entire Agreement . . . . . . . . . . . . . . . . . . 11
11.6 Binding Effect . . . . . . . . . . . . . . . . . . . 12
11.7 Attorney's Fees . . . . . . . . . . . . . . . . . . . 12
11.8 Supersession . . . . . . . . . . . . . . . . . . . . 12
</TABLE>
<PAGE> 4
EMPLOYMENT AGREEMENT

THIS AGREEMENT is made effective July 1, 1997, between CHESAPEAKE ENERGY
CORPORATION, an Oklahoma corporation (the "Company"), and MARCUS C. ROWLAND, an
individual (the "Executive") and replaces and supersedes that certain
Employment Agreement between Company and Executive dated March 1, 1995.

W I T N E S S E T H:

WHEREAS, the Company desires to retain the services of the Executive and
the Executive desires to make the Executive's services available to the
Company.

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.

2.1 Specific Duties. The Executive will serve as Chief Financial Officer
and Senior Vice President - Finance for the Company. The Executive
will perform all of the services required to fully and faithfully
execute the office and position to which the Executive is appointed
and such other services as may be reasonably requested by the
Executive's supervisor. During the term of this Agreement, the
Executive may be nominated for election or appointed to serve as a
director or officer of the Company's subsidiaries as determined in the
board of directors' sole discretion.

2.2 Supervision. The services of the Executive will be requested and
directed by the Chief Executive Officer, Mr. Aubrey K. McClendon.

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

1
<PAGE> 5
Manual is subject to change without notice in the sole discretion of
the Company at any time.

2.4 Stock Investment. For each calendar year during which this Agreement
is in effect, the Executive agrees to hold shares of the Company's
common stock having aggregate Investment Value equal to one hundred
percent (100%) of the compensation paid to the Executive under
paragraphs 4.1 and 4.2 of this Agreement during such calendar year.
For purposes of this section, the "Investment Value" of each share of
stock will be the higher of either (a) the price paid by the Executive
for such share as part of an open market purchase; or (b) the fair
market value on the date of exercise for shares acquired through the
exercise of employee stock options. 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 acquire common stock. The
Investment Value for previously acquired stock shall be calculated
using the average stock price during the first six months of this
Agreement.

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 return 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 stock ceases to be listed
on the New York Stock Exchange or on the National Association of
Securities Dealers Automated Quotation System. 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; (b) serve as an officer, general partner or member in any corporation,
partnership, company, or firm; (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 limitation in this paragraph 3 will not
prohibit an investment by the Executive in publicly traded securities; or the
continued direct ownership and operation of oil and gas interests and leases to
the extent such interests were owned by the Executive on March 1, 1995.
Notwithstanding the foregoing, the Executive will be

2
<PAGE> 6
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") during
any Calendar Quarter (as hereafter defined) on the terms and
conditions set forth herein. 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 Executive's percentage working
interest in the Program Wells spudded during such Calendar
Quarter will be subject to approval by the disinterested
members of the compensation committee of the Company's
board of directors and to the limitations set forth herein
(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 one
percent (1.0%) on an eight-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 a Program Well which does not fall within
clause (b) of this paragraph 3.1.1 or an Operations Well;
or (b) zero percent (0%) if the combined participation in
the Program Well by the Executive, Mr. Tom L. Ward and Mr.
Aubrey K. McClendon 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. If
clause (b) of this paragraph 3.1.1 prohibits the
Executive's participation in a Program Well, then Messrs.
Ward and McClendon 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

3
<PAGE> 7
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 execute such documents. The Executive further agrees to
pay all joint interest billings within one hundred twenty
(120) days after receipt. For purposes of this Agreement,
the term "Calendar Quarter" means the three (3) month
periods commencing on the first (1st) day of January,
April, July and October.

3.2 Other Activities. The Executive currently conducts oil and gas
investment activities individually and through MJ Partners, a Texas
general partnership ("MJ"). The Executive will be permitted to
continue oil and gas activities in such entity, but only to the extent
such activities are conducted on oil and gas leases or interests owned
by the Executive or MJ as of March 1, 1993, or acquired pursuant to
paragraph 3.1 of this Agreement.

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 Two Hundred Twenty Five Thousand Dollars
($225,000.00), will be paid to the Executive in equal semi-monthly
installments beginning July 15, 1997 during the term of this
Agreement.

4
<PAGE> 8
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 such other benefits as are customarily provided
by the Company and as are set forth in the Company's Employment
Policies Manual. 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:

4.4.1 Vacation. The Executive will be entitled to take three (3)
weeks of paid vacation each twelve months 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 twelve month period 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 a 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 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
<PAGE> 9
4.4.4 Automobile Allowance. The Executive will receive a monthly
cash allowance in the amount of One Thousand Dollars
($1,000.00) to defer a portion of the Executive's cost of
acquiring, operating and maintaining an automobile for use in
the Executive's employment.

5. Term. In the absence of termination as set forth in paragraph 6 below, this
Agreement will extend for a term of three (3) years commencing on July 1, 1997,
and ending on June 30, 2000 (the "Expiration Date"). 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 will be
automatically extended for one (1) additional year so that the remaining term
on this Agreement will be not less than two (2) and not more than three (3)
years.

6. Termination. This Agreement will continue in effect until the expiration of
the term stated at 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, the
Executive will receive as termination compensation: (a)
continuation of the Base Salary provided by paragraph 4.1
during the portion of the contract period remaining after the
date of the Executive's termination, but in any event, through
the Expiration Date; (b) any benefits payable by operation of
paragraph 4.4 of this Agreement during the portion of the
contract period remaining after the date of the Executive's
termination, but in any event, through the Expiration Date;
and (c) any vacation pay accrued through the Termination Date.
The termination compensation in (a) shall be paid only if the
Executive executes the Company's standard termination
agreement releasing all legally waivable claims arising from
the Executive's employment.

6
<PAGE> 10
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.

6.1.3 Termination After Change in Control. If, during the term of
this Agreement, there is a "Change of Control" and within one
(1) year thereafter: (a) this Agreement expires and is not
extended; or (b) the Executive is terminated other than under
paragraphs 6.1.2, 6.3 or 6.4 based on adequate grounds; or (c)
the Executive resigns as a result of a reassignment of duties
inconsistent with the Executive's position, a reduction in the
Executive's then current compensation under paragraph 4 of
this Agreement, or a required relocation more than 25 miles
from the Executive's then current place of employment, then
the Executive will be entitled to a severance payment (in
addition to any other amounts payable to the Executive under
this Agreement or otherwise) in an amount equal to thirty six
(36) months of Base Salary as set forth in paragraph 4.1 of
this Agreement. 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.

6.2 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.

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<PAGE> 11
6.3 Incapacity of Executive. If the Executive suffers from a physical or
mental condition which in the reasonable judgment of the Company's
management 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 contract period, but in any event, through the Expiration
Date. Notwithstanding the foregoing, the Executive's Base Salary
specified in paragraph 4.1 of this Agreement shall be reduced by any
benefits payable under any disability plans.

6.4 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 and (b) the benefits described in
paragraph 4.4 of this Agreement accrued through the effective date of
such termination.

6.5 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 paragraph 6 of this
Agreement, 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 two (2)
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

8
<PAGE> 12

("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 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, 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 affiliated corporations, partnerships or
entities, provided, however, this provision shall not apply to acquisitions
within said five (5) mile radius of assets or activities of a successor entity
resulting from a "Change in Control" as described in paragraph 6.1.3., which
assets were owned or activities were being conducted (1) prior to the date of
such Change in Control, or (2) after such Change in Control but for which the
Executive had no material responsibility; and; (b) for the Executive's own
account or for the benefit of another party 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. 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.

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<PAGE> 13
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-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 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.

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<PAGE> 14

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:

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

To the Executive: Mr. Marcus C. Rowland
15000 Wilson Rd.
Edmond, OK 73013

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. 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

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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 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. On execution of this Agreement by the Company and
the Executive, the relationship between the Company and the
Executive will be bound by the terms of this Agreement and the
Employment Policies Manual and not by any other agreements or
otherwise. In the event of a conflict between the Employment
Policies Manual and this Agreement, this Agreement will control in
all respects.

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")

By: /s/ MARCUS C. ROWLAND
--------------------------------------------
Marcus C. Rowland, Individually
(the "Executive")