As filed with the Securities and Exchange Commission on May 20, 1997
Registration No. 333-_____
FORM S-8
Registration Statement under the Securities Act of 1933
--------------------------------
CHESAPEAKE ENERGY CORPORATION
(Exact name of registrant as specified in its charter)
Oklahoma 73-1395733
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
6100 North Western Avenue
Oklahoma City, Oklahoma 73118
(Address of Principal Executive Offices) (Zip Code)
---------------------------------
CHESAPEAKE ENERGY CORPORATION
1996 STOCK OPTION PLAN
(Full title of the plan)
Aubrey K. McClendon Copies to:
Chairman of the Board and
Chief Executive Officer W. Chris Coleman, Esq.
Chesapeake Energy Corporation McAfee & Taft
6100 North Western Avenue A Professional Corporation
Oklahoma City, Oklahoma 73118 Tenth Floor
(Name and address of agent Two Leadership Square
for service) Oklahoma City, Oklahoma 73102
405/848-8000
(Telephone number, including area code, of agent for service)
--------------------------------
Calculation of Registration Fee
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Proposed maximum Proposed maximum
Title of Amount offering aggregate Amount of
securities to to be price per offering registration
be registered registered unit price fee
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, 6,000,000 $15.75** $94,500,000** $28,636**
$.01 par shares*
value
- -------------------------------------------------------------------------------
</TABLE>
* Such indeterminable, additional amount of common stock, par value $.01
per share, is hereby registered as may be required by reason of the anti-
dilution provisions of the Chesapeake Energy Corporation 1996 Stock
Option Plan.
** Calculated pursuant to Rule 457(h) of the Securities Act of 1933, based
on the average of the high and low prices of Chesapeake Energy
Corporation common stock as reported on the New York Stock Exchange on
May 16, 1997.
<PAGE>
PART II
INFORMATION REQUIRED IN REGISTRATION STATEMENT
ITEM 3. INCORPORATION OF DOCUMENTS BY REFERENCE.
Chesapeake Energy Corporation (the "Registrant") incorporates
herein by reference the following documents filed with the Securities and
Exchange Commission:
(a) The Registrant's Annual Report on Form 10-K for the fiscal
year ended June 30, 1996 filed with the Commission on September 30, 1996,
and as amended on October 28, 1996;
(b) The Registrant's Prospectus filed as part of the Registrant's
Registration Statement on Form S-4 (Registration No. 333-24995) as filed
with the Commission on April 11, 1997;
(c) All other reports filed by the Registrant pursuant to
Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (the
"Exchange Act") since the end of the fiscal year covered by the annual
report referred to in (a) above; and
(d) The description of the Registrant's common stock contained
in its Registration Statement on Form 8-B declared effective on December
12, 1996.
All documents hereafter filed by the Registrant pursuant to
Sections 13(a), 13(c), 14, and 15(d) of the Exchange Act, prior to the
filing of a post-effective amendment which indicates that all of the shares
of the Registrant's common stock covered by this Registration Statement
have been sold or which deregisters all such shares then remaining unsold,
shall be deemed to be incorporated herein by reference and to be a part
hereof from the date of filing of such documents.
ITEM 4. DESCRIPTION OF SECURITIES.
Not applicable.
ITEM 5. INTERESTS OF NAMED EXPERTS AND COUNSEL.
None.
ITEM 6. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 1031 of the Oklahoma General Corporation Act, under which
the Registrant is incorporated, authorizes the indemnification of directors
and officers under certain circumstances. Article VIII of the Certificate
of Incorporation and Article VI of the Bylaws of the Registrant also
provide for indemnification of directors and officers under certain
circumstances. These provisions, together with the Registrant's
indemnification obligations under individual indemnity agreements with its
directors and officers, may be sufficiently broad to indemnify such persons
for liabilities under the Securities Act of 1933. In addition, the
Registrant maintains insurance which insures its directors and officers
against certain liabilities.
ITEM 7. EXEMPTION FROM REGISTRATION CLAIMED.
Not applicable.
ITEM 8. EXHIBITS.
4.1 Certificate of Incorporation of the Registrant. Incorporated
herein by reference to Exhibit 3.1 to Registrant's Registration
Statement on Form 8-B declared effective on December 12, 1996.
4.2 Bylaws of the Registrant. Incorporated herein by reference to
Exhibit 3.2 to Registrant's Registration Statement on Form 8-B
declared effective on December 12, 1996.
5 Opinion of McAfee & Taft A Professional Corporation
23.1 Consent of Coopers & Lybrand L.L.P.
23.2 Consent of Price Waterhouse LLP
23.3 Consent of McAfee & Taft A Professional Corporation
(included in Exhibit 5)
99 Chesapeake Energy Corporation 1996 Stock Option Plan.
ITEM 9. UNDERTAKINGS.
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are
being made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3)
of the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events
arising after the effective date of the registration statement (or the most
recent post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth in
the registration statement;
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in the registration statement
or any material change to such information in the registration statement;
Provided, however, that paragraphs (1)(i) and (1)(ii) do not
apply if the information required to be included in a post-effective
amendment by those paragraphs is contained in periodic reports filed by the
Registrant pursuant to Section 13 or Section 15(d) of the Securities
Exchange Act of 1934 that are incorporated by reference in the registration
statement.
(2) That, for the purposes of determining any liability under
the Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the
termination of the offering.
The undersigned Registrant hereby undertakes that, for purposes
of determining any liability under the Securities Act of 1933, each filing
of the Registrant's annual report pursuant to Section 13(a) or Section
15(d) of the Securities Exchange Act of 1934 (and, where applicable, each
filing of an employee benefit plan's annual report pursuant to Section
15(d) of the Securities Exchange Act of 1934) that is incorporated by
reference in the registration statement shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the Registrant pursuant to the foregoing provisions,
or otherwise, the Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other than
the payment by the Registrant of expenses incurred or paid by a director,
officer or controlling person of the Registrant of expenses incurred or
paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities
being registered, the Registrant will, unless in the opinion of its counsel
the matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the
final adjudication of such issue.
<PAGE>
SIGNATURES
THE REGISTRANT. Pursuant to the requirements of the Securities
Act of 1933, the Registrant certifies that it has reasonable grounds to
believe that it meets all of the requirements for filing on Form S-8 and
has duly caused this registration statement to be signed on its behalf by
the undersigned, thereunto duly authorized, in the City of Oklahoma City,
State of Oklahoma, on May 20, 1997.
CHESAPEAKE ENERGY CORPORATION
AUBREY K. MCCLENDON
Aubrey K. McClendon, Chairman of the Board
and Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities indicated on May 20, 1997.
AUBREY K. MCCLENDON TOM L. WARD
Aubrey K. McClendon, Chairman Tom L. Ward, President, Chief
of the Board, Chief Executive Operating Officer and Director
Officer (Principal Executive (Principal Operating Officer)
Officer) and Director
MARCUS C. ROWLAND RONALD A. LEFAIVE
Marcus C. Rowland, Vice Ronald A. Lefaive, Controller
President - Finance and Chief and Chief Accounting Officer
Financial Officer (Principal (Principal Accounting Officer)
Financial Officer)
E. F. HEIZER, JR. BREENE M. KERR
E. F. Heizer, Jr., Director Breene M. Kerr, Director
SHANNON SELF FREDERICK B. WHITTEMORE
Shannon Self, Director Frederick B. Whittemore,
Director
WALTER C. WILSON
Walter C. Wilson, Director
<PAGE>
<TABLE>
INDEX TO EXHIBITS
Exhibit
Number Brief Description Method of Filing
- ------- -------------------------------- -------------------------
<S> <C> <C>
5 Opinion of McAfee & Taft Filed herewith electronically
A Professional Corporation
23.1 Consent of Coopers & Lybrand L.L.P. Filed herewith electronically
23.2 Consent of Price Waterhouse LLP Filed herewith electronically
99 Chesapeake Energy Corporation
1996 Stock Option Plan Filed herewith electronically
</TABLE>
LAW OFFICES
MCAFEE & TAFT
A PROFESSIONAL CORPORATION
TENTH FLOOR, TWO LEADERSHIP SQUARE
211 NORTH ROBINSON
OKLAHOMA CITY, OKLAHOMA 73102-7101
(405) 235-9621
WRITER'S DIRECT DIAL
FAX (405) 235-0439
May 20, 1997
Chesapeake Energy Corporation
6100 North Western
Oklahoma City, Oklahoma 73118
Re: Shares of Common Stock, Par Value $.01, to be
issued pursuant to Chesapeake Energy Corpora-
tion 1996 Stock Option Plan
Gentlemen:
We have examined the Registration Statement on Form S-8 to be
filed by you with the Securities and Exchange Commission in connection with
the Chesapeake Energy Corporation 1996 Stock Option Plan (the "Plan"),
which Registration Statement covers the offer and sale of 6,000,000 shares
of common stock, par value $.01 per share, of Chesapeake Energy Corporation
(the "Company"). We have also examined your minute books and other
corporate records, and have made such other investigation as we have deemed
necessary in order to render the opinions expressed herein.
Based on the foregoing, we are of the opinion that:
1. The Company is duly organized and existing under the laws of
the State of Oklahoma.
2. The shares to be purchased pursuant to the exercise of
options granted under the Plan, when issued in accordance with the Plan,
will be legally issued, fully paid and nonassessable in accordance with the
Oklahoma General Corporation Law.
Consent is hereby given for the inclusion of this opinion as part
of the referenced Registration Statement.
Very truly yours,
MCAFEE & TAFT A PROFESSIONAL CORPORATION
McAfee & Taft A Professional Corporation
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in this Registration
Statement on Form S-8 of (a) our report dated September 13, 1996, except
for the first paragraph of Note 9 which is as of March 7, 1997, on the
consolidated financial statements of Chesapeake Energy Corporation (the
"Company") for the year ended June 30, 1996 and (b) our report dated
September 13, 1996 on the financial statements of Chesapeake Exploration
Limited Partnership for the year ended June 30, 1996, each appearing in the
Company's Registration Statement on Form S-4 (File No. 333-24995).
COOPERS & LYBRAND L.L.P.
Coopers & Lybrand L.L.P.
Oklahoma City, Oklahoma
May 9, 1997
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in this Registration Statement on Form S-8 of
Chesapeake Energy Corporation (the "Company") of (a) our report dated
September 20, 1995, except for the first and fourth paragraphs of Note 9
which are as of March 7, 1997, relating to the consolidated financial
statements of the Company appearing on page F-3 of the Registration
Statement on Form S-4 (No. 333-24995) and (b) our report dated September
20, 1995 relating to the financial statements of Chesapeake Exploration
Limited Partnership, appearing on page F-3 of the Registration Statement on
Form S-4 (No. 333-24995). We also consent to the reference to us under the
heading "Experts" in such prospectus.
PRICE WATERHOUSE LLP
Price Waterhouse LLP
Houston, Texas
May 9, 1997
CHESAPEAKE ENERGY CORPORATION
1996 STOCK OPTION PLAN
<PAGE>
CHESAPEAKE ENERGY CORPORATION
1996 STOCK OPTION PLAN
TABLE OF CONTENTS
Page
ARTICLE I
Purpose.................................................. 1
Section 1.1 Purpose...................................... 1
Section 1.2 Establishment................................ 1
Section 1.3 Shares Subject to the Plan................... 1
Section 1.4 Shareholder Approval........................ 1
ARTICLE II
Definitions............................................... 1
ARTICLE III
Administration........................................... 3
Section 3.1 Administration of the Plan; the
Committee.................................. 3
Section 3.2 Committee to Make Rules and
Interpret Plan............................. 4
ARTICLE IV
Grant of Options.......................................... 4
ARTICLE V
Eligibility............................................... 5
ARTICLE VI
Stock Options............................................. 5
Section 6.1 Grant of Options............................. 5
Section 6.2 Conditions of Options........................ 5
Section 6.3 Options Not Qualifying as Incentive
Stock Options.............................. 7
ARTICLE VII
Stock Adjustments......................................... 7
ARTICLE VIII
General................................................... 8
Section 8.1 Amendment or Termination of Plan............. 8
Section 8.2 Acceleration of Otherwise Unexercisable
Stock Options on Death, Disability or
Other Special Circumstances................ 8
Section 8.3 Nonassignability..............................9
Section 8.4 Withholding Taxes........................... 9
Section 8.5 Amendments to Options....................... 9
Section 8.6 Regulatory Approval and Listings............. 9
Section 8.7 Right to Continued Employment................10
Section 8.8 Reliance on Reports..........................10
Section 8.9 Construction.................................10
Section 8.10 Governing Law...............................10
ARTICLE IX
Acceleration of Options Upon Corporate Event..............10
Section 9.1 Procedures for Acceleration and Exercise.....10
Section 9.2 Certain Additional Payments by the
Company....................................11
<PAGE>
ARTICLE I
Purpose
Section 1.1 Purpose. This Stock Option Plan is established by
Chesapeake Energy Corporation (the "Company") to create incentives which
are designed to motivate Participants to put forth maximum effort toward
the success and growth of the Company and to enable the Company to attract
and retain experienced individuals who by their position, ability and
diligence are able to make important contributions to the Company's
success. Toward these objectives, the Plan provides for the granting of
Options to Participants on the terms and subject to the conditions set
forth in the Plan.
Section 1.2 Establishment. The Plan is effective as of October 15,
1996 and for a period of 10 years from such date. The Plan will terminate
on October 14, 2006, however, it will continue in effect until all matters
relating to the exercise of Options and administration of the Plan have
been settled.
Section 1.3 Shares Subject to the Plan. Subject to Articles IV, VII
and IX of this Plan, shares of stock covered by Options shall consist of
Three Million (3,000,000) shares of Common Stock.
Section 1.4 Shareholder Approval. The Plan shall be approved by the
holders of a majority of the outstanding shares of Common Stock, present,
or represented, and entitled to vote at a meeting called for such purposes,
which approval must occur within the period ending twelve months after the
date the Plan is adopted by the Board. Pending such approval by the
shareholders, Options under the Plan may be granted to Participants, but no
such Options may be exercised prior to receipt of shareholder approval. In
the event shareholder approval is not obtained within such twelve-month
period, all such Options shall be void.
ARTICLE II
Definitions
Section 2.1 "Board" means the Board of Directors of the Company.
Section 2.2 "Code" means the Internal Revenue Code of 1986, as
amended. Reference in the Plan to any Section of the Code shall be deemed
to include any amendments or successor provisions to such Section and any
regulations under such Section.
Section 2.3 "Common Stock" means the common stock, par value $.10 per
share, of the Company, and after substitution, such other stock as shall be
substituted therefor as provided in Article VII or Article IX of the Plan.
Section 2.4 "Date of Grant" means the date on which the granting of an
Option is authorized by the Committee or such later date as may be
specified by the Committee in such authorization.
Section 2.5 "Disability" shall have the meaning set forth in Section
22(e)(3) of the Code.
Section 2.6 "Eligible Employee" means any employee of the Company, a
Subsidiary or a partnership or limited liability company which the Company
controls.
Section 2.7 "Exchange Act" means the Securities Exchange Act of 1934,
as amended.
Section 2.8 "Executive Officer Participants" means Participants who
are subject to the provisions of Section 16 of the Exchange Act.
Section 2.9 "Fair Market Value" means (A) during such time as the
Common Stock is listed upon the New York Stock Exchange or other exchanges
or the NASDAQ/ National Market System, the closing price of the Common
Stock on such stock exchange or exchanges or the NASDAQ/ National Market
System on the day for which such value is to be determined, or if no sale
of the Common Stock shall have been made on any such stock exchange or the
NASDAQ/ National Market System that day, on the next preceding day on which
there was a sale of such Common Stock or (B) during any such time as the
Common Stock is not listed upon an established stock exchange or the
NASDAQ/ National Market System, the mean between dealer "bid" and "ask"
prices of the Common Stock in the over-the-counter market on the day for
which such value is to be determined, as reported by the National
Association of Securities Dealers, Inc.
Section 2.10 "Incentive Stock Option" means an Option within the
meaning of Section 422 of the Code.
Section 2.11 "Non-Executive Officer Participants" means Participants
who are not subject to the provisions of Section 16 of the Exchange Act.
Section 2.12 "Nonqualified Stock Option" means an Option which is not
an Incentive Stock Option.
Section 2.13 "Option" means an Option granted under Article VI of the
Plan and includes both Nonqualified Stock Options and Incentive Stock
Options to purchase shares of Common Stock.
Section 2.14 "Option Agreement" means any written instrument that
establishes the terms, conditions, restrictions, and/or limitations
applicable to an Option in addition to those established by this Plan and
by the Committee's exercise of its administrative powers.
Section 2.15 "Participant" means an Eligible Employee to whom an
Option has been granted by the Committee under the Plan.
Section 2.16 "Plan" means the Chesapeake Energy Corporation 1996 Stock
Option Plan.
Section 2.17 "Regular Stock Option Committee" means a committee
designated by the Board which shall consist of not less than two members of
the Board.
Section 2.18 "Special Stock Option Committee" means a committee
designated by the Board which shall consist of not less than two members of
the Board who meet the definition of "non-employee directors" pursuant to
Rule 16b-3, or any successor rule, promulgated under Section 16 of the
Exchange Act.
Section 2.19 "Subsidiary" shall have the meaning set forth in Section
424 of the Code.
ARTICLE III
Administration
Section 3.1 Administration of the Plan; the Committee. For purposes
of administration, the Plan shall be deemed to consist of two separate
stock option plans, a "Non-Executive Officer Participant Plan" which is
limited to Non-Executive Officer Participants and an "Executive Officer
Participant Plan" which is limited to Executive Officer Participants.
Except for administration and the category of Participants eligible to
receive Options, the terms of the Non-Executive Officer Participant Plan
and the Executive Officer Participant Plan are identical.
The Non-Executive Officer Participant Plan shall be administered by
the Regular Stock Option Committee and the Executive Officer Participant
Plan shall be administered by the Special Stock Option Committee.
Accordingly, with respect to decisions relating to Non-Executive Officer
Participants, including the grant of Options, the term "Committee" shall
mean only the Regular Stock Option Committee; and, with respect to all
decisions relating to the Executive Officer Participants, including the
grant of Options, the term "Committee" shall mean only the Special Stock
Option Committee.
Unless otherwise provided in the by-laws of the Company or the
resolutions adopted from time to time by the Board establishing the
Committee, the Board may from time to time remove members from, or add
members to, the Committee. Vacancies on the Committee, however caused,
shall be filled by the Board. The Committee shall hold meetings at such
times and places as it may determine. A majority of the Committee shall
constitute a quorum, and the acts of a majority of the members present at
any meeting at which a quorum is present or acts reduced to or approved in
writing by a majority of the members of the Committee shall be the valid
acts of the Committee.
Subject to the provisions of the Plan, the Committee shall have
exclusive power to:
(a) Select the Participants to be granted Options.
(b) Determine the time or times when Options will be granted.
(c) Determine the form of an Option, whether an Incentive Stock
Option or a Nonqualified Stock Option, the number of shares of Common Stock
subject to the Option, all the terms, conditions (including performance
requirements), restrictions and/or limitations, if any, of an Option,
including the time and conditions of exercise or vesting, and the terms of
any Option Agreement, which may include the waiver or amendment of prior
terms and conditions or acceleration or early vesting under certain
circumstances determined by the Committee.
(d) Determine whether Options will be granted singly or in
combination.
(e) Accelerate the vesting or exercise of an Option when such
action or actions would be in the best interest of the Company.
(f) Take any and all other action it deems necessary or
advisable for the proper operation or administration of the Plan.
Section 3.2 Committee to Make Rules and Interpret Plan. The Committee
in its sole discretion shall have the authority, subject to the provisions
of the Plan, to establish, adopt, or revise such rules and regulations and
to make all such determinations relating to the Plan as it may deem
necessary or advisable for the administration of the Plan. The Committee's
interpretation of the Plan or any Options granted pursuant hereto and all
decisions and determinations by the Committee with respect to the Plan
shall be final, binding, and conclusive on all parties.
ARTICLE IV
Grant of Options
The Committee may, from time to time, grant Options to one or more
Participants, provided, however, that:
(a) Subject to Article VII, the aggregate number of shares of Common
Stock made subject to the grant of Options to any Participant in any fiscal
year of the Company may not exceed 500,000.
(b) Any shares of Common Stock related to Options which terminate by
expiration, forfeiture, cancellation or otherwise without the issuance of
shares of Common Stock shall be available again for grant under the Plan.
(c) Common Stock delivered by the Company upon exercise of an Option
under the Plan may be authorized and unissued Common Stock or Common Stock
held in the treasury of the Company or may be purchased on the open market
or by private purchase.
(d) The Committee shall, in its sole discretion, determine the manner
in which fractional shares arising under this Plan shall be treated.
(e) Separate certificates representing Common Stock to be delivered
to a Participant upon the exercise of any Option will be issued to such
Participant.
ARTICLE V
Eligibility
Subject to the provisions of the Plan, the Committee shall, from time
to time, select from the Eligible Employees those to whom Options shall be
granted and shall determine the type or types of Options to be granted and
shall establish in the related Option Agreements the terms, conditions,
restrictions and/or limitations, if any, applicable to the Options in
addition to those set forth in the Plan and the administrative rules and
regulations issued by the Committee.
ARTICLE VI
Stock Options
Section 6.1 Grant of Options. The Committee may, from time to time,
subject to the provisions of the Plan and such other terms and conditions
as it may determine, grant Options to Participants. These Options may be
Incentive Stock Options or Nonqualified Stock Options, or a combination of
both. Each grant of an Option shall be evidenced by an Option Agreement
executed by the Company and the Participant, and shall contain such terms
and conditions and be in such form as the Committee may from time to time
approve, subject to the requirements of Section 6.2.
Section 6.2 Conditions of Options. Each Option so granted shall be
subject to the following conditions:
(a) Exercise Price. As limited by Section 6.2(e) below, each
Option shall state the exercise price which shall be set by the Committee
at the Date of Grant; provided, however, no Nonqualified Stock Option shall
be granted at an exercise price which is less than 75% of the Fair Market
Value of the Common Stock on the Date of Grant.
(b) Form of Payment. The exercise price of an Option may be
paid (i) in cash or by check, bank draft or money order payable to the
order of the Company; (ii) by delivering shares of Common Stock having a
Fair Market Value on the date of payment equal to the amount of the
exercise price; (iii) by directing the Company to withhold from the shares
of Common Stock to be delivered to the Participant upon exercise of the
Option shares of Common Stock having a Fair Market Value on the date of
payment equal to the amount of the exercise price; or (iv) a combination of
the foregoing. In addition to the foregoing, any Option granted under the
Plan may be exercised by a broker-dealer acting on behalf of a Participant
if (A) the broker-dealer has received from the Participant or the Company a
notice evidencing the exercise of such Option and instructions signed by
the Participant requesting the Company to deliver the shares of Common
Stock subject to such Option to the broker-dealer on behalf of the
Participant and specifying the account into which such shares should be
deposited, (B) adequate provision has been made with respect to the payment
of any withholding taxes due upon such exercise or, in the case of an
Incentive Stock Option, upon the premature disposition of such shares and
(C) the broker-dealer and the Participant have otherwise complied with
Section 220.3(e)(4) of Regulation T, 12 CFR, Part 220 and any successor
rules and regulations applicable to such exercise.
(c) Exercise of Options. Options granted under the Plan shall
be exercisable, in whole or in such installments and at such times, and
shall expire at such time, as shall be provided by the Committee in the
Option Agreement. Exercise of an Option shall be by written notice stating
the election to exercise in the form and manner determined by the
Committee. Every share of Common Stock acquired through the exercise of an
Option shall be deemed to be fully paid at the time of exercise and payment
of the exercise price.
(d) Other Terms and Conditions. Among other conditions that may
be imposed by the Committee, if deemed appropriate, are those relating to
(i) the period or periods and the conditions of exercisability of any
Option; (ii) the minimum periods during which Participants must be employed
by the Company, its Subsidiaries or a partnership or limited liability
company which is controlled by the Company, or must hold Options before
they may be exercised; (iii) the minimum periods during which shares
acquired upon exercise must be held before sale or transfer shall be
permitted; (iv) conditions under which such Options or shares may be
subject to forfeiture; (v) the frequency of exercise or the minimum or
maximum number of shares that may be acquired at any one time and (vi) the
achievement by the Company of specified performance criteria.
(e) Special Restrictions Relating to Incentive Stock Options.
Options issued in the form of Incentive Stock Options shall not be granted
to directors who are not also Eligible Employees, in addition to being
subject to all applicable terms, conditions, restrictions and/or
limitations established by the Committee, comply with the requirements of
Section 422 of the Code (or any successor Section thereto), including,
without limitation, the requirement that the exercise price of an Incentive
Stock Option not be less than 100% of the Fair Market Value of the Common
Stock on the Date of Grant, the requirement that each Incentive Stock
Option, unless sooner exercised, terminated or cancelled, expire no later
than 10 years from its Date of Grant, the requirement that Incentive Stock
Options be granted only to Eligible Employees of the Company or a
Subsidiary, and the requirement that the aggregate Fair Market Value
(determined on the Date of Grant) of the Common Stock with respect to which
Incentive Stock Options are exercisable for the first time by a Participant
during any calendar year (under this Plan or any other plan of the Company
or any Subsidiary) not exceed $100,000. Incentive Stock Options which are
in excess of the applicable $100,000 limitation will be automatically
recharacterized as Nonqualified Stock Options as provided under Section 6.3
of this Plan. No Incentive Stock Options shall be granted to any Eligible
Employee if, immediately before the grant of an Incentive Stock Option,
such Eligible Employee owns more than 10% of the total combined voting
power of all classes of stock of the Company or its Subsidiaries (as
determined in accordance with the stock attribution rules contained in
Sections 422 and 424(d) of the Code). Provided, the preceding sentence
shall not apply if, at the time the Incentive Stock Option is granted, the
exercise price is at least 110% of the Fair Market Value of the Common
Stock subject to the Incentive Stock Option, and such Incentive Stock
Option by its terms is exercisable no more than five years from the date
such Incentive Stock Option is granted.
(f) Application of Funds. The proceeds received by the Company
from the sale of Common Stock pursuant to Options will be used for general
corporate purposes.
(g) Shareholder Rights. No Participant shall have a right as a
shareholder with respect to any share of Common Stock subject to an Option
prior to purchase of such shares of Common Stock by exercise of the Option.
Section 6.3 Options Not Qualifying as Incentive Stock Options. With
respect to all or any portion of any Option granted under this Plan not
qualifying as an "incentive stock option" under Section 422 of the Code,
such Option shall be considered as a Nonqualified Stock Option granted
under this Plan for all purposes. Further, this Plan and any Incentive
Stock Options granted hereunder shall be deemed to have incorporated by
reference all the provisions and requirements of Section 422 of the Code
(and the Treasury Regulations issued thereunder) which are required to
provide that all Incentive Stock Options granted hereunder shall be
"incentive stock options" described in Section 422 of the Code. Further,
in the event that the Committee grants Incentive Stock Options under this
Plan to a Participant, and, in the event that the applicable limitation
contained in Section 6.2(e) herein is exceeded, then, such Incentive Stock
Options in excess of such limitation shall be treated as Nonqualified Stock
Options under this Plan subject to the terms and provisions of the
applicable Option Agreement, except to the extent modified to reflect
recharacterization of the Incentive Stock Options as Nonqualified Stock
Options.
ARTICLE VII
Stock Adjustments
Subject to the provision of Article IX of this Plan, in the event that
the shares of Common Stock, as presently constituted, shall be changed into
or exchanged for a different number or kind of shares of stock or other
securities of the Company or of another corporation (whether by reason of
merger, consolidation, recapitalization, reclassification, stock split,
combination of shares or otherwise), or if the number of such shares of
Common Stock shall be increased through the payment of a stock dividend, or
a dividend on the shares of Common Stock or rights or warrants to purchase
securities of the Company shall be made, then there shall be substituted
for or added to each share available under and subject to the Plan as
provided in Section 1.3 hereof, and each share theretofore appropriated or
thereafter subject or which may become subject to Options under the Plan,
the number and kind of shares of stock or other securities into which each
outstanding share of Common Stock shall be so changed or for which each
such share shall be exchanged or to which each such share shall be
entitled, as the case may be, on a fair and equivalent basis in accordance
with the applicable provisions of Section 424 of the Code; provided,
however, in no such event will such adjustment result in a modification of
any Option as defined in Section 424(h) of the Code. In the event there
shall be any other change in the number or kind of the outstanding shares
of Common Stock, or any stock or other securities into which the Common
Stock shall have been changed or for which it shall have been exchanged,
then if the Committee shall, in its sole discretion, determine that such
change equitably requires an adjustment in the shares available under and
subject to the Plan, or in any Option theretofore granted or which may be
granted under the Plan, such adjustments shall be made in accordance with
such determination, except that no adjustment of the number of shares of
Common Stock available under the Plan or to which any Option relates that
would otherwise be required shall be made unless and until such adjustment
either by itself or with other adjustments not previously made would
require an increase or decrease of at least 1% in the number of shares of
Common Stock available under the Plan or to which any Option relates
immediately prior to the making of such adjustment (the "Minimum
Adjustment"). Any adjustment representing a change of less than such
minimum amount shall be carried forward and made as soon as such adjustment
together with other adjustments required by this Article VII and not
previously made would result in a Minimum Adjustment. Notwithstanding the
foregoing, any adjustment required by this Article VII which otherwise
would not result in a Minimum Adjustment shall be made with respect to
shares of Common Stock relating to any Option immediately prior to exercise
of such Option.
No fractional shares of Common Stock or units of other securities
shall be issued pursuant to any such adjustment, and any fractions
resulting from any such adjustment shall be eliminated in each case by
rounding downward to the nearest whole share.
ARTICLE VIII
General
Section 8.1 Amendment or Termination of Plan. The Board may suspend
or terminate the Plan at any time. In addition, the Board may, from time
to time, amend the Plan in any manner, but may not without shareholder
approval adopt any amendment which would increase the aggregate number of
shares of Common Stock available under the Plan (except by operation of
Article VII); provided, that any amendment to the Plan shall require
approval of the shareholders if, in the opinion of counsel to the Company,
such approval is required by any Federal or state law or any regulations or
rules promulgated thereunder.
Section 8.2 Acceleration of Otherwise Unexercisable Stock Options on
Death, Disability or Other Special Circumstances. The Committee, in its
sole discretion, may permit (i) a Participant who terminates employment due
to a Disability; (ii) the personal representative of a deceased
Participant; or (iii) any other Participant who terminates employment upon
the occurrence of special circumstances (as determined by the Committee) to
purchase all or any part of the shares subject to any unvested Option on
the date of the Participant's death, termination of his employment due to a
Disability, or as the Committee otherwise so determines. With respect to
Options which have already vested at the date of such termination or the
vesting of which is accelerated by the Committee in accordance with the
foregoing provision, the Participant or the personal representative of a
deceased Participant, shall automatically have the right to exercise such
vested Options within three months of such date of termination of
employment or one year in the case of a Participant suffering a Disability
or three years in the case of a deceased Participant.
Section 8.3 Nonassignability. No Option shall be subject in any
manner to alienation, anticipation, sale, transfer, assignment, pledge, or
encumbrance, except for transfer by will or the laws of descent and
distribution. Any attempt to transfer, assign, pledge, hypothecate or
otherwise dispose of, or to subject to execution, attachment or similar
process, any Option contrary to the provisions hereof, shall be void and
ineffective, shall give no right to any purported transferee, and may, at
the sole discretion of the Committee, result in forfeiture of the Option
involved in such attempt.
Section 8.4 Withholding Taxes. A Participant may pay the amount of
taxes required by law upon the exercise of an Option (i) in cash; (ii) by
delivering to the Company shares of Common Stock having a Fair Market Value
on the date of payment equal to the amount of such required withholding
taxes; or (iii) by directing the Company to withhold from the shares of
Common Stock to be delivered to the Participant upon exercise of the Option
shares of Common Stock having a Fair Market Value on the date of payment
equal to the amount of such required withholding taxes.
Section 8.5 Amendments to Options. The Committee may at any time
unilaterally amend the terms of any Option Agreement, whether or not
presently exercisable or vested, to the extent it deems appropriate;
provided, however, that any such amendment which is adverse to the
Participant shall require the Participant's consent.
Section 8.6 Regulatory Approval and Listings. The Company shall use
its best efforts to file with the Securities and Exchange Commission as
soon as practicable following the Effective Date, and keep continuously
effective and usable, a Registration Statement on Form S-8 with respect to
shares of Common Stock subject to Options hereunder. Notwithstanding
anything contained in this Plan to the contrary, the Company shall have no
obligation to issue or deliver certificates representing shares of Common
Stock subject to Options prior to:
(a) the obtaining of any approval from, or satisfaction of any
waiting period or other condition imposed by, any governmental agency which
the Committee shall, in its sole discretion, determine to be necessary or
advisable;
(b) the admission of such shares to listing on the stock
exchange on which the Common Stock may be listed; and
(c) the completion of any registration or other qualification of
such shares under any state or Federal law or ruling of any governmental
body which the Committee shall, in its sole discretion, determine to be
necessary or advisable.
Section 8.7 Right to Continued Employment. Participation in the Plan
shall not give any Eligible Employee any right to remain in the employ of
the Company, any Subsidiary or any partnership or limited liability company
controlled by the Company. Further, the adoption of this Plan shall not be
deemed to give any Eligible Employee or any other individual any right to
be selected as a Participant or to be granted an Option.
Section 8.8 Reliance on Reports. Each member of the Committee and
each member of the Board shall be fully justified in relying or acting in
good faith upon any report made by the independent public accountants of
the Company and its Subsidiaries and upon any other information furnished
in connection with the Plan by any person or persons other than himself.
In no event shall any person who is or shall have been a member of the
Committee or of the Board be liable for any determination made or other
action taken or any omission to act in reliance upon any such report or
information or for any action taken, including the furnishing of
information, or failure to act, if in good faith.
Section 8.9 Construction. Masculine pronouns and other words of
masculine gender shall refer to both men and women. The titles and
headings of the sections in the Plan are for the convenience of reference
only, and in the event of any conflict, the text of the Plan, rather than
such titles or headings, shall control.
Section 8.10 Governing Law. The Plan shall be governed by and
construed in accordance with the laws of the State of Oklahoma except as
superseded by applicable Federal law.
ARTICLE IX
Acceleration of Options Upon Corporate Event
Section 9.1 Procedures for Acceleration and Exercise. If the Company
shall, pursuant to action by the Board, at any time proposes to dissolve or
liquidate or merge into, consolidate with, or sell or otherwise transfer
all or substantially all of its assets to another corporation and provision
is not made pursuant to the terms of such transaction for the assumption by
the surviving, resulting or acquiring corporation of outstanding Options
under the Plan, or for the substitution of new options therefor, the
Committee shall cause written notice of the proposed transaction to be
given to each Participant no less than forty days prior to the anticipated
effective date of the proposed transaction, and his Option shall become
100% vested and, prior to a date specified in such notice, which shall be
not more than ten days prior to the anticipated effective date of the
proposed transaction, each Participant shall have the right to exercise his
Option to purchase any or all of the Common Stock then subject to such
Option. Each Participant, by so notifying the Company in writing, may, in
exercising his or her Option, condition such exercise upon, and provide
that such exercise shall become effective at the time of, but immediately
prior to, the consummation of the transaction, in which event such
Participant need not make payment for the Common Stock to be purchased upon
exercise of such Option until five days after written notice by the Company
to such Participant that the transaction has been consummated. If the
transaction is consummated, each Option, to the extent not previously
exercised prior to the date specified in the foregoing notice, shall
terminate on the effective date of such consummation. If the transaction
is abandoned, (i) any Common Stock not purchased upon exercise of such
Option shall continue to be available for purchase in accordance with the
other provisions of the Plan and (ii) to the extent that any Option not
exercised prior to such abandonment shall have vested solely by operation
of this Section 9.1, such vesting shall be deemed voided as of the time
such acceleration otherwise occurred pursuant to Section 9.1, and the
vesting schedule set forth in the Participant's Option Agreement shall be
reinstituted, as of the date of such abandonment.
Section 9.2 Certain Additional Payments by the Company. The Committee
may, in its sole discretion, provide in any Option Agreement for certain
payments by the Company in the event that acceleration of vesting of any
Option under the Plan is considered a payment by the Company (a "Payment")
subject to the excise tax imposed by Section 4999 of the Code or any
interest or penalties with respect to such excise tax (such excise tax,
interest and penalties, collectively, the "Excise Tax"). An Option
Agreement may provide that the Participant shall be entitled to receive a
payment (a "Gross-Up Payment") in an amount such that after payment by the
Participant of all taxes (including any interest or penalties imposed with
respect to such taxes), including any Excise Tax, imposed upon the Gross-Up
Payment, the Participant retains an amount of the Gross-Up Payment equal to
the Excise Tax imposed upon the Payment.
