Chesapeake Energy 2000 Annual Report Download - page 73

During 2000, Chesapeake Energy Marketing, Inc. purchased 99.8% of Gothic Energy Corporation's $104
million 14.125% Series B senior secured discount notes for total consideration of $80.8 million, comprised of $17.2
million in cash and $63.6 million of Chesapeake common stock (8,875,775 shares valued at $7.16 per share), as
adjusted for make-whole provisions. Chesapeake Energy Marketing, Inc. received $6.1 million in cash and $7.2
million of Chesapeake common stock (982,562 shares) from the sellers of Gothic notes pursuant to make-whole
provisions included in the purchase agreements. These provisions required payments to be made by the sellers to us
or additional payments to be made by us to the sellers, depending upon changes in market value of our common
stock during a specified period pending registration of our common stock issued to the sellers of Gothic notes.
In 2000, Chesapeake purchased $31.6 million of the $235 million of 11.125% senior secured notes issued by
Gothic Production Corporation for total consideration of $34.8 million consisting of $11.5 million in cash and $23.3
million of Chesapeake common stock (3,694,939 shares valued at $6.30 per share), as adjusted for make-whole
provisions as described above. Through the make-whole provisions, Chesapeake received cash of $1.0 million.
Stock Option Plans
Chesapeake's 1992 Incentive Stock Option Plan terminated on December 16, 1994. Until then, we granted
incentive stock options to purchase common stock under the ISO Plan to employees. Subject to any adjustment as
provided by the ISO Plan, the aggregate number of shares which may be issued and sold may not exceed 3,762,000
shares. The maximum period for exercise of an option may not be more than ten years (or five years for an optionee
who owns more than 10% of the common stock) from the date of grant, and the exercise price may not be less than
the fair market value of the shares underlying the options on the date of grant (or 110% of such value for an optionee
who owns more than 10% of the common stock). Options granted become exercisable at dates determined by the
Stock Option Committee of the Board of Directors.
Under our 1992 Nonstatutory Stock Option Plan, non-qualified options to purchase common stock may be
granted only to directors and consultants of Chesapeake. Subject to any adjustment as provided by this plan, the
aggregate number of shares which may be issued and sold may not exceed 3,132,000 shares. The maximum period
for exercise of an option may not be more than ten years from the date of grant, and the exercise price may not be
less than the fair market value of the shares underlying the options on the date of grant.' Options granted become
exercisable at dates determined by the Stock Option Committee of the Board of Directors. This plan also contains a
formula award provision pursuant to which each director who is not an executive officer receives every quarter a ten-
year immediately exercisable option to purchase 7,500 shares of common stock at an option price equal to the fair
market value of the shares on the date of grant. The amount of the award was changed from 20,000 shares to 15,000
shares per year in 1998, to 25,000 shares per year in 1999 and to 30,000 shares per year in 2000. No options can be
granted under this plan after December 10, 2002.
Under Chesapeake's 1994 Stock Option Plan, and our 1996 Stock Option Plan, incentive and nonqualified
stock options to purchase Chesapeake common stock may be granted to employees and consultants of Chesapeake.
Subject to any adjustment as provided by the respective plans, the aggregate number of shares which may be issued
and sold may not exceed 4,886,910 shares under the 1994 Plan and 6,000,000 shares under the 1996 Plan. The
maximum period for exercise of an option may not be more than ten years from the date of grant and the exercise
price of nonqualified stock options may not be less than par value and, under the 1996 Plan, 85% of the fair market
value of the shares underlying the options on the date of grant. Options granted become exercisable at dates
determined by the Stock Option Committee of the Board of Directors. No options can be granted under the 1994
Plan after October 17, 2004 or under the 1996 Plan after October 14, 2006.
Under Chesapeake's 1999 Stock Option Plan, nonqualified stock options to purchase Chesapeake common
stock may be granted to employees and consultants of Chesapeake. Subject to any adjustment as provided by this
plan, the aggregate number of shares which may be issued and sold may not exceed 3,000,000 shares. The
maximum period for exercise of an option may not be more than ten years from the date of grant and the exercise
price may not be less than the fair market value of the shares underlying the options on the date of grant; provided,
however, nonqualified stock options not exceeding 10% of the options issuable under this plan may be granted at an
exercise price which is not less than 85% of the grant date fair market value. Options granted become exercisable at
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