Chesapeake Energy 2015 Annual Report Download - page 39

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Certain anti-takeover provisions may affect your rights as a shareholder.
Our certificate of incorporation authorizes our Board of Directors to set the terms of and issue preferred stock
without shareholder approval. Our Board of Directors could use the preferred stock as a means to delay, defer or
prevent a takeover attempt that a shareholder might consider to be in our best interest. In addition, our revolving credit
facility contains terms that may restrict our ability to enter into change of control transactions, including requirements
to repay borrowings under our revolving credit facility on a change in control. These provisions, along with specified
provisions of the Oklahoma General Corporation Act and our certificate of incorporation and bylaws, may discourage
or impede transactions involving actual or potential changes in our control, including transactions that otherwise could
involve payment of a premium over prevailing market prices to holders of our common stock.
ITEM 1B. Unresolved Staff Comments
Not applicable.
ITEM 2. Properties
Information regarding our properties is included in Item 1 and in the Supplementary Information included in Item
8 of Part II of this report.
ITEM 3. Legal Proceedings
Litigation and Regulatory Proceedings
The Company is involved in a number of litigation and regulatory proceedings (including those described below).
Many of these proceedings are in early stages, and many of them seek or may seek damages and penalties, the
amount of which is currently indeterminate. See Note 4 of the notes to our consolidated financial statements included
in Item 8 of Part II of this report for information regarding our estimation and provision for potential losses related to
litigation and regulatory proceedings.
Regulatory Proceedings. The Company has received, from the U.S. Department of Justice (DOJ) and certain
state governmental agencies and authorities, subpoenas and demands for documents, information and testimony in
connection with investigations into possible violations of federal and state antitrust laws relating to our purchase and
lease of oil and natural gas rights in various states. The Company also has received DOJ, U.S. Postal Service and
state subpoenas seeking information on the Company’s royalty payment practices. Chesapeake has engaged in
discussions with the DOJ, U.S. Postal Service and state agency representatives and continues to respond to such
subpoenas and demands.
Redemption of 2019 Notes. See Chesapeake Senior Notes and Contingent Convertible Senior Notes in Note 3
of the notes to our consolidated financial statements included in Item 8 of Part II of this report for a description of
pending litigation regarding our redemption in May 2013 of our 6.775% Senior Notes due 2019 (2019 Notes).
Business Operations. Chesapeake is involved in various other lawsuits and disputes incidental to its business
operations, including commercial disputes, personal injury claims, royalty claims, property damage claims and contract
actions. With regard to contract actions, various mineral or leasehold owners have filed lawsuits against us seeking
specific performance to require us to acquire their oil and natural gas interests and pay acreage bonus payments,
damages based on breach of contract and/or, in certain cases, punitive damages based on alleged fraud. The Company
has successfully defended a number of these failure-to-close cases in various courts, has settled and resolved other
such cases and disputes and believes that its remaining loss exposure for these claims will not have a material adverse
effect on the Company’s financial position, results of operations or cash flows.
Regarding royalty claims, Chesapeake and other natural gas producers have been named in various lawsuits
alleging royalty underpayment. The suits against us allege, among other things, that we used below-market prices,
made improper deductions, used improper measurement techniques and/or entered into arrangements with affiliates
that resulted in underpayment of royalties in connection with the production and sale of natural gas and NGL. The
Company has resolved a number of these claims through negotiated settlements of past and future royalties and has
prevailed in various other lawsuits. We are currently defending lawsuits seeking damages with respect to royalty
underpayment in various states, including, but not limited to, Texas, Pennsylvania, Ohio, Oklahoma, Louisiana and
Arkansas. These lawsuits include cases filed by individual royalty owners and putative class actions, some of which
seek to certify a statewide class. The Company also has received DOJ, U.S. Postal Service and state subpoenas
seeking information on the Company’s royalty payment practices.