Chesapeake Energy 1999 Annual Report Download - page 62

In accordance with certain provisions of the Tax Reform Act of 1986, a change of greater than 50% of the
beneficial ownership of the Company within a three-year period (an 'Ownership Change') would place an annual
limitation on the Company's ability to utilize its existing tax carryforwards. Under regulations issued by the Internal
Revenue Service, the Company has had two Ownership Changes. However, these ownership changes have not
resulted in a significant limitation of the tax carryforwards.
Related Party Transactions
Certain directors, shareholders and employees of the Company have acquired working interests in certain of the
Company's oil and gas properties. The owners of such working interests are required to pay their proportionate share
of all costs. As of December 31, 1999 and 1998, the Company had accounts receivable from related parties,
primarily related to such participation, of $4.6 million and $5.6 million, respectively.
As of December 31, 1998, the Chief Executive Officer and Chief Operating Officer of the Company had notes
payable to CEMI in the principal amount of $9.9 million. In November 1999, the Chief Executive Officer and the
Chief Operating Officer tendered to CEMI 2,320,107 shares of Chesapeake common stock in full satisfaction of the
notes payable to CEMI with a combined outstanding balance of$7.6 million. The common stock was valued at
$3.29 per share, which was the market value of the stock at the time of the transaction.
During 1999, 1998, the Transition Period and fiscal 1997, the Company incurred legal expenses of $398,000,
$493,000, $388,000 and $207,000, respectively, for legal services provided by a law firm of which a director is a
member.
Employee Benefit Plans
The Company maintains the Chesapeake Energy Corporation Savings and Incentive Stock Bonus Plan, a 401(k)
profit sharing plan. Eligible employees may make voluntary contributions to the plan which are matched by the
Company for up to 10% of the employee's annual salary with the Company's common stock purchased in the open-
market. The amount of employee contribution is limited as specified in the plan. The Company may, at its
discretion, make additional contributions to the plan. The Company contributed $1,163,000, $1,359,000, $418,000
and $603,000 to the plan during 1999, 1998, the Transition Period and fiscal 1997, respectively.
Major Customers and Segment Information
Sales to individual customers constituting 10% or more of total oil and gas sales were as follows:
Management believes that the loss of any of the above customers would not have a material impact on the
Company's results of operations or its financial position.
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Percent of
Year Ended December 31, Amount Oil and Gas Sales
(S in thousands)
1999 Aquila Southwest Pipeline Corporation $ 31,505 11%
1998 Koch Oil Company $ 30,564 12%
Aquila Southwest Pipeline Corporation 28,946 11
Six Months Ended December 31,
$ 20,138 21%
1997 Aquila Southwest Pipeline Corporation
KochOilCompany 18,594 19
GPM Gas Corporation 12,610 13
Fiscal Year Ended June 30,
$ 53,885 28%
1997 Aquila Southwest Pipeline Corporation
Koch Oil Company 29,580 15
GPM Gas Corporation 27,682 14