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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED) AUGUST 13, 2001 (AUGUST 13,
2001)
CHESAPEAKE ENERGY CORPORATION
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(Exact name of Registrant as specified in its Charter)
OKLAHOMA 1-13726 73-1395733
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(State or other jurisdiction (Commission File No.) (IRS Employer
of incorporation) Identification No.)
6100 NORTH WESTERN AVENUE, OKLAHOMA CITY, OKLAHOMA 73118
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(Address of principal executive offices) (Zip Code)
(405) 848-8000
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(Registrant's telephone number, including area code)
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INFORMATION TO BE INCLUDED IN THE REPORT
ITEM 5. OTHER EVENTS
We are filing the following description of our capital stock in order to amend
the description of capital stock contained in our Registration Statement on Form
8-B (No. 001-13726), as amended by the description filed on Form 8-K on December
18, 2000. The following supersedes such prior descriptions.
DESCRIPTION OF CHESAPEAKE ENERGY CORPORATION CAPITAL STOCK
The description of our capital stock set forth below is not complete and is
qualified by reference to our certificate of incorporation and bylaws. Copies of
our certificate of incorporation and bylaws are available from Chesapeake upon
request and both documents have been filed with the Securities and Exchange
Commission.
AUTHORIZED CAPITAL STOCK
Our authorized capital stock consists of 350,000,000 shares of common stock, par
value $.01 per share, and 10,000,000 shares of preferred stock, par value $.01
per share, of which 250,000 shares are designated as Series A Junior
Participating Preferred Stock.
COMMON STOCK
Holders of our common stock are entitled to one vote for each share held of
record on all matters submitted to a vote of shareholders. Subject to
preferences that may be applicable to any outstanding preferred stock, holders
of our common stock are entitled to receive ratably such dividends as may be
declared by the board of directors out of funds legally available for dividends.
In the event of our liquidation or dissolution, holders of our common stock are
entitled to share ratably in all assets remaining after payment of liabilities
and the liquidation preference of any outstanding preferred stock.
Holders of our common stock have no preemptive rights and have no rights to
convert their common stock into any other securities. All of the outstanding
shares of common stock are duly authorized, validly issued, fully paid and
nonassessable.
PREFERRED STOCK
We have shares of authorized preferred stock which are undesignated. Our board
of directors has the authority, without further shareholder approval, to issue
shares of preferred stock from time to time in one or more new series and to fix
the number of shares, designations, preferences, voting powers, qualifications
and special or relative rights or privileges of each series, including dividend
rights, voting rights, redemption and sinking fund provisions, liquidation
preferences and conversion rights.
While providing desirable flexibility for possible acquisitions and other
corporate purposes, and eliminating delays associated with a shareholder vote on
specific issuances, the issuance of preferred stock could adversely affect the
voting power of holders of common
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stock, as well as dividend and liquidation payments on common stock. It also
could have the effect of delaying, deferring or preventing a change in control.
The Series A preferred stock is described below under "-- Anti-Takeover
Provisions -- Share Rights Plan."
ANTI-TAKEOVER PROVISIONS
Our certificate of incorporation and bylaws and the Oklahoma General Corporation
Act include a number of provisions which may have the effect of encouraging
persons considering unsolicited tender offers or other unilateral takeover
proposals to negotiate with our board of directors rather than pursue
non-negotiated takeover attempts. These provisions include a classified board of
directors, authorized blank check preferred stock, restrictions on business
combinations and the availability of authorized but unissued common stock.
Classified Board of Directors. Our certificate of incorporation and bylaws
contain provisions for a staggered board of directors with only one-third of the
board standing for election each year. Directors can only be removed for cause.
A staggered board makes it more difficult for shareholders to change the
majority of the directors and instead promotes a continuity of existing
management.
Oklahoma Business Combination Statute. Section 1090.3 of the Oklahoma General
Corporation Act prevents an "interested shareholder" from engaging in a
"business combination" with an Oklahoma corporation for three years following
the date the person became an interested shareholder, unless
o prior to the date the person became an interested shareholder, the board
of directors of the corporation approved the transaction in which the
interested shareholder became an interested shareholder or approved the
business combination,
o upon consummation of the transaction that resulted in the interested
shareholder becoming an interested shareholder, the interested
shareholder owns stock having at least 85% of all voting power of the
corporation at the time the transaction commenced, excluding stock held
by directors who are also officers of the corporation and stock held by
certain employee stock plans, or
o on or subsequent to the date of the transaction in which the person
became an interested shareholder, the business combination is approved
by the board of directors of the corporation and authorized at a meeting
of shareholders by the affirmative vote of the holders of two-thirds of
all voting power not attributable to shares owned by the interested
shareholder.
The statute defines a "business combination" to include
o any merger or consolidation involving the corporation and an interested
shareholder,
o any sale, lease, exchange, mortgage, pledge, transfer or other
disposition to or with an interested shareholder of 10% or more of the
assets of the corporation,
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o subject to certain exceptions, any transaction which results in the
issuance or transfer by the corporation of any stock of the corporation
to an interested shareholder,
o any transaction involving the corporation which has the effect of
increasing the proportionate share of the stock of any class or series
or voting power of the corporation owned by the interested shareholder,
o the receipt by an interested shareholder of any loans, guarantees,
pledges or other financial benefits provided by or through the
corporation, or
o any share acquisition by the interested shareholder pursuant to Section
1090.1 of the Oklahoma General Corporation Act. For purposes of Section
1090.3, the term "corporation" also includes the corporation's
majority-owned subsidiaries.
In addition, Section 1090.3 defines an "interested shareholder," generally, as
any person that owns stock having 15% or more of all voting power of the
corporation, any person that is an affiliate or associate of the corporation and
owned stock having 15% or more of all voting power of the corporation at any
time within the three-year period prior to the time of determination of
interested shareholder status, and any affiliate or associate of such person.
Stock Purchase Provisions. Our certificate of incorporation includes a provision
which requires the affirmative vote of two-thirds of the votes cast by the
holders, voting together as a single class, of all then outstanding shares of
capital stock, excluding the votes by an interested shareholder, to approve the
purchase of any of our capital stock from the interested shareholder at a price
in excess of fair market value, unless the purchase is either (1) made on the
same terms offered to all holders of the same securities or (2) made on the open
market and not the result of a privately negotiated transaction.
Share Rights Plan.
The Rights. On July 7, 1998, our board of directors declared a dividend
distribution of one preferred stock purchase right for each outstanding share of
common stock. The distribution was paid on July 27, 1998 to the shareholders of
record on that date. Each right entitles the registered holder to purchase from
us one one-thousandth of a share of Series A preferred stock at a price of
$25.00, subject to adjustment.
The following is a summary of these rights. The full description and terms of
the rights are set forth in a rights agreement with UMB Bank, N.A., as rights
agent. Copies of the rights agreement and the certificate of designation for the
Series A preferred stock are available free of charge. This summary description
of the rights and the Series A preferred stock does not purport to be complete
and is qualified in its entirety by reference to all the provisions of the
rights agreement and the certificate of designation for the Series A preferred
stock.
Initially, the rights attached to all certificates representing shares of our
outstanding common stock, and no separate rights certificates were distributed.
The rights will separate from our common stock and the distribution date will
occur upon the earlier of:
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o 10 days following the date of public announcement that a person or group
of persons has become an acquiring person, or
o 10 business days (or a later date set by the board of directors prior to
the time a person becomes an acquiring person) following the
commencement of, or the announcement of an intention to make, a tender
offer or exchange offer upon consummation of which the offeror would, if
successful, become an acquiring person. The earlier of these dates is
called the distribution date.
The term "acquiring person" means any person who or which, together with all of
its affiliates and associates, is the beneficial owner of 15% or more of our
outstanding common stock, but does not include:
o Chesapeake or any of our subsidiaries or employee benefit plans,
o Aubrey K. McClendon, his spouse, lineal descendants and ascendants,
heirs, executors or other legal representatives and any trusts
established for the benefit of the foregoing or any other person or
entity in which the foregoing persons or entities are at the time of
determination the direct record and beneficial owners of all outstanding
voting securities (each a "McClendon shareholder"),
o Tom L. Ward, his spouse, lineal descendants and ascendants, heirs,
executors or other legal representatives and any trusts established for
the benefit of the foregoing, or any other person or entity in which the
foregoing persons or entities are at the time of determination the
direct record and beneficial owners of all outstanding voting securities
(each a "Ward shareholder"),
o Morgan Guaranty Trust Company of New York, in its capacity as pledgee of
shares beneficially owned by a McClendon or Ward shareholder, or both,
under any pledge agreement in effect on September 11, 1998, to the
extent that upon the exercise by the pledgee of any of its rights or
duties as pledgee, other than the exercise of any voting power by the
pledgee or the acquisition of ownership by the pledgee, such pledgee
becomes a beneficial owner of pledged shares, or
o any person (other than the pledgee just described) that is neither a
McClendon nor Ward shareholder, but who or which is the beneficial owner
of common stock beneficially owned by a McClendon or Ward shareholder (a
"second tier shareholder"), but only if the shares of common stock
otherwise beneficially owned by a second tier shareholder ("second tier
holder shares") do not exceed the sum of (A) the holder's second tier
holder shares held on September 11, 1998 and (B) 1% of the shares of our
common stock then outstanding (collectively, "exempt persons").
The rights agreement provides that, until the distribution date, the rights will
be transferred with and only with the common stock. Until the distribution date
(or earlier redemption or expiration of the rights), new common stock
certificates issued after July 27, 1998, upon transfer or new issuance of common
stock, will contain a notation incorporating the rights agreement by reference.
Until the distribution date or earlier redemption or expiration of the rights,
the surrender for transfer of any certificate for common stock, outstanding as
of July
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27, 1998, even without a notation or a copy of a summary of the rights being
attached, will also constitute the transfer of the rights associated with the
common stock represented by the certificate. As soon as practicable following
the distribution date, separate certificates evidencing the rights will be
mailed to holders of record of the common stock as of the close of business on
the distribution date and these separate rights certificates alone will evidence
the rights.
The rights are not exercisable until the distribution date. The rights will
expire on July 27, 2008.
The purchase price payable, and the number of one one-thousandths of a share of
Series A preferred stock or other securities or property issuable, upon exercise
of the rights are subject to adjustment from time to time to prevent dilution:
o in the event of a stock dividend on, or a subdivision, combination or
reclassification of, the Series A preferred stock;
o upon the grant to holders of the Series A preferred stock of certain
rights or warrants to subscribe for or purchase shares of Series A
preferred stock at a price, or securities convertible into Series A
preferred stock with a conversion price, less than the then current
market price of the Series A preferred stock; or
o upon the distribution to holders of the Series A preferred stock of
evidences of indebtedness or assets (excluding regular periodic cash
dividends paid or dividends payable in Series A preferred stock) or of
subscription rights or warrants (other than those referred to above).
The number of outstanding rights and the number of one one-thousandths of a
share of Series A preferred stock issuable upon exercise of each right are also
subject to adjustment in the event of a stock split of the common stock or a
stock dividend on the common stock payable in the common stock or subdivisions,
consolidations or combinations of the common stock occurring, in any such case,
prior to the distribution date.
In the event that following the date of public announcement that an acquiring
person has become an acquiring person, we are acquired in a merger or other
business combination transaction or more than 50% of our consolidated assets or
earning power is sold, proper provision will be made so that each holder of a
right will thereafter have the right to receive, upon the exercise of the right
at the then current exercise price of the right, that number of shares of common
stock of the acquiring company which at the time of such transaction will have a
market value of two times the exercise price of the right (the "flip-over
right").
In the event that a person, other than an exempt person, becomes an acquiring
person, proper provision will be made so that each holder of a right, other than
the acquiring person and its affiliates and associates, will thereafter have the
right to receive upon exercise that number of shares of common stock, or, if
applicable, cash, other equity securities or property of Chesapeake, having a
market value equal to two times the purchase price of the rights (the "flip-in
right"). Any rights that are or were at any time owned by an acquiring person
will then become void.
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With certain exceptions, no adjustment in the purchase price will be required
until cumulative adjustments require an adjustment of at least 1% in the
purchase price. Upon exercise of the rights, no fractional shares of Series A
preferred stock will be issued other than fractions which are integral multiples
of one one-hundredth of a share of Series A preferred stock. Cash will be paid
in lieu of fractional shares of Series A preferred stock that are not integral
multiples of one one-hundredth of a share of Series A preferred stock.
At any time prior to the earlier to occur of (1) 5:00 p.m., Oklahoma City,
Oklahoma time on the 10th day after the stock acquisition date or (2) the
expiration of the rights, we may redeem the rights in whole, but not in part, at
a price of $0.01 per right; provided, that (a) if the board of directors
authorizes redemption on or after the time a person becomes an acquiring person,
then the authorization must be by board approval and (b) the period for
redemption may, upon board approval, be extended by amending the rights
agreement. Board approval means the approval of a majority of our directors.
Immediately upon any redemption of the rights described in this paragraph, the
right to exercise the rights will terminate and the only right of the holders of
rights will be to receive the redemption price.
Our board of directors may amend the terms of the rights without the consent of
the holders of the rights at any time and from time to time provided that any
amendment does not adversely affect the interests of the holders of the rights.
In addition, during any time that the rights are subject to redemption, the
terms of the rights may be amended by the approval of a majority of the
directors, including an amendment that adversely affects the interests of the
holders of the rights, without the consent of the holders of rights.
Until a right is exercised, a holder will have no rights as a shareholder,
including, without limitation, the right to vote or to receive dividends. While
the distribution of the rights will not be taxable to Chesapeake or our
shareholders, shareholders may, depending upon the circumstances, recognize
taxable income in the event that the rights become exercisable for Series A
preferred stock, or other consideration.
The Series A Preferred Stock. Each one-thousandth of a share of the Series A
preferred stock (a "preferred share fraction") that may be acquired upon
exercise of the rights will be nonredeemable and junior to any other shares of
preferred stock that we may issue.
Each preferred share fraction will have a minimum preferential quarterly
dividend rate of $0.01 per preferred share fraction but will, in any event, be
entitled to a dividend equal to the per share dividend declared on the common
stock.
In the event of liquidation, the holder of a preferred share fraction will
receive a preferred liquidation payment equal to the greater of $0.01 per
preferred share fraction or the per share amount paid in respect of a share of
common stock.
Each preferred share fraction will have one vote, voting together with the
common stock. The holders of preferred share fractions, voting as a separate
class, will be entitled to elect two directors if dividends on the Series A
preferred stock are in arrears for six fiscal quarters.
In the event of any merger, consolidation or other transaction in which shares
of common
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stock are exchanged, each preferred share fraction will be entitled to receive
the per share amount paid in respect of each share of common stock.
The rights of holders of the Series A preferred stock to dividends, liquidation
and voting, and in the event of mergers and consolidations, are protected by
customary antidilution provisions.
Because of the nature of the Series A preferred stock's dividend, liquidation
and voting rights, the economic value of one preferred share fraction that may
be acquired upon the exercise of each right should approximate the economic
value of one share of our common stock.
SHAREHOLDER ACTION
Except as otherwise provided by law or in our certificate of incorporation or
bylaws, the approval by holders of a majority of the shares of common stock
present in person or represented by proxy at a meeting and entitled to vote is
sufficient to authorize, affirm, ratify or consent to a matter voted on by
shareholders. Our bylaws provide that all questions submitted to shareholders
will be decided by a plurality of the votes cast, unless otherwise required by
law, our certificate of incorporation, stock exchange requirements or any
certificate of designation. The Oklahoma General Corporation Act requires the
approval of the holders of a majority of the outstanding stock entitled to vote
for certain extraordinary corporate transactions, such as a merger, sale of
substantially all assets, dissolution or amendment of the certificate of
incorporation. Our certificate of incorporation provides for a vote of the
holders of two-thirds of the issued and outstanding stock having voting power,
voting as a single class, to amend, repeal or adopt any provision inconsistent
with the provisions of the certificate of incorporation limiting director
liability and stock purchases by Chesapeake, and providing for staggered terms
of directors and indemnity for directors. The same vote is also required for
shareholders to amend, repeal or adopt any provision of our bylaws.
Our certificate of incorporation permits shareholders to take action without the
holding of a meeting by written consent or consents signed by the holders of a
sufficient number of shares to approve the transaction had all of the
outstanding shares of our capital stock entitled to vote thereon been present at
a meeting. If shareholder action is taken by written consent, the rules and
regulations of the Securities and Exchange Commission require us to send each
shareholder entitled to vote on the matter, but whose consent was not solicited,
an information statement containing information substantially similar to that
which would have been contained in a proxy statement.
TRANSFER AGENT AND REGISTRAR
UMB Bank, N.A. is the transfer agent and registrar for our common stock.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
CHESAPEAKE ENERGY CORPORATION
BY: /s/ AUBREY K. MCCLENDON
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AUBREY K. MCCLENDON
Chairman of the Board and
Chief Executive Officer
Dated: August 13, 2001
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