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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF
SECURITIES EXCHANGE ACT OF 1934
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DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED): JULY 15, 1998
CHESAPEAKE ENERGY CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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OKLAHOMA 1-13726 73-1395733
(STATE OR OTHER JURISDICTION (COMMISSION FILE NO.) (I.R.S. EMPLOYER
OF INCORPORATION) IDENTIFICATION NO.)
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6100 NORTH WESTERN AVENUE
OKLAHOMA CITY, OKLAHOMA 73118
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (405) 848-8000
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ITEM 5. OTHER EVENTS
RIGHTS AGREEMENT
On July 7, 1998, the Board of Directors of the Company declared a
dividend distribution of one preferred stock purchase right (a "Right") for
each outstanding share of common stock, par value $0.01 per share ("Common
Stock"), of the Company. The distribution is payable on July 27, 1998 (the
"Record Date") to the stockholders of record on that date. Each Right entitles
the registered holder thereof to purchase from the Company one one-thousandth
of a share of Series A Junior Participating Preferred Stock, par value $0.01
per share, of the Company (the "Preferred Stock") at a price of $25.00, subject
to adjustment. The following is a summary of the Rights; the full description
and terms of the Rights are set forth in a Rights Agreement (the "Rights
Agreement") between the Company and UMB Bank, N.A., as Rights Agent (the
"Rights Agent").
Copies of the Rights Agreement and the Certificate of Designation are
available free of charge from the Company. This summary description of the
Rights and the 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 Preferred Stock, including the
definitions therein of certain terms, which Rights Agreement and Certificate of
Designation are incorporated herein by reference.
Initially, the Rights will attach to all certificates representing
shares of outstanding Company Common Stock, and no separate Rights Certificates
will be distributed. The Rights will separate from the Company Common Stock
and the Distribution Date will occur upon the earlier of (i) 10 days following
the date of public announcement that a person or group of persons has become an
Acquiring Person (as hereinafter defined) or (ii) 10 business days (or such
later date as may be determined by action of 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 such dates being called the "Distribution
Date").
The term "Acquiring Person" means any person who or which, together
with all of its affiliates and associates, shall be the beneficial owner of 15%
or more of the outstanding Common Stock, but shall not include (i) the Company
or any Subsidiary of the Company or any employee benefit plan of the Company,
(ii) 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 (iii) 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
(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 the Record Date, 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 certificates for
Common Stock, outstanding as of the Record Date, even without such notation or
a copy of this Summary of Rights being attached thereto, will also constitute
the transfer of the Rights associated with the Common Stock represented by such
certificate. As soon as practicable following the Distribution Date, separate
certificates evidencing the Rights ("Rights Certificates") will be mailed to
holders of record of the Common Stock as of the close of business on the
Distribution Date and such 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 "Expiration Date").
The Purchase Price payable, and the number of one one-thousandths of a
share of Preferred Stock or other securities or property issuable, upon
exercise of the Rights are subject to adjustment from time to time to prevent
dilution (i) in the event of a stock dividend on, or a subdivision, combination
or reclassification of, the Preferred Stock,
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(ii) upon the grant to holders of the Preferred Stock of certain rights or
warrants to subscribe for or purchase shares of Preferred Stock at a price, or
securities convertible into Preferred Stock with a conversion price, less than
the then current market price of the Preferred Stock or (iii) upon the
distribution to holders of the Preferred Stock of evidences of indebtedness or
assets (excluding regular periodic cash dividends paid or dividends payable in
Preferred Stock) or of subscription rights or warrants (other than those
referred to in (ii) above).
The number of outstanding Rights and the number of one one-thousandths
of a share of 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 a Stock Acquisition Date (the date of
public announcement that an Acquiring Person has become such) the Company is
acquired in a merger or other business combination transaction or more than 50%
of its consolidated assets or earning power are sold, proper provision will be
made so that each holder of a Right will thereafter have the right to receive,
upon the exercise thereof 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 shall 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, under certain circumstances, cash, other equity securities or
property of the Company) having a market value equal to two times the Purchase
Price of the Rights (the "Flip-In Right"). Upon the occurrence of the
foregoing event giving rise to the exercisability of the Rights, any Rights
that are or were at any time owned by an Acquiring Person shall become void.
With certain exceptions, no adjustment in the Purchase Price will be
required until cumulative adjustments require an adjustment of at least 1% in
such Purchase Price. Upon exercise of the Rights, no fractional shares of
Preferred Stock will be issued other than fractions which are integral
multiples of one one-hundredth of a share of Preferred Stock; cash will be paid
in lieu of fractional shares of Preferred Stock that are not integral multiples
of one one-hundredth of a share of Preferred Stock.
At any time prior to the earlier to occur of (i) 5:00 p.m., Oklahoma
City, Oklahoma time on the 10th day after the Stock Acquisition Date or (ii)
the expiration of the Rights, the Company may redeem the Rights in whole, but
not in part, at a price of $0.01 per Right (the "Redemption Price"); provided,
that (i) if the Board of Directors authorizes redemption on or after the time a
person becomes an Acquiring Person, then such authorization must be by Board
Approval (as hereinafter defined) and (ii) the period for redemption may, upon
Board Approval, be extended by amending the Rights Agreement. The term "Board
Approval" means the approval of a majority of the directors of the Company.
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.
The terms of the Rights may be amended by the Board of Directors
without the consent of the holders of the Rights at any time and from time to
time provided that such 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 Board
Approval, 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, the holder thereof, as such, will have no
rights as a stockholder of the Company, including, without limitation, the
right to vote or to receive dividends. While the distribution of the Rights
will not be taxable to stockholders or to the Company, stockholders may,
depending upon the circumstances, recognize taxable income in the event that
the Rights become exercisable for Preferred Stock (or other consideration).
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DESCRIPTION OF PREFERRED STOCK
Each one-thousandth of a share of the Preferred Stock ("Preferred
Share Fraction") that may be acquired upon exercise of the Rights will be
nonredeemable and subordinate to any other shares of preferred stock that may
be issued by the Company.
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 Company 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
Company Common Stock.
Each Preferred Share Fraction will have one vote, voting together with
the Company Common Stock. The holders of Preferred Share Fractions, voting as
a separate class, shall be entitled to elect two directors if dividends on the
Preferred Stock are in arrears for six fiscal quarters.
In the event of any merger, consolidation or other transaction in
which shares of Company Common Stock are exchanged, each Preferred Share
Fraction will be entitled to receive the per share amount paid in respect of
each share of Company Common Stock.
The rights of holders of the 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 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 the Company's Common Stock.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(c) Exhibits
4.1 Rights Agreement dated as of July 15, 1998 (incorporated by
reference to Form 8-A of Chesapeake Energy Corporation filed
on July 16, 1998.)
99.1 Press Release dated July 15, 1998, with respect to the Rights
Agreement.
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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
Date: July 15, 1998
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EXHIBIT INDEX
4.1. Rights Agreement dated as of July 15, 1998 (incorporated by
reference to Form 8-A of Chesapeake Energy Corporation filed on
July 16, 1998.)
99.1 Press Release dated July 15, 1998, with respect to the Rights
Agreement.
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EXHIBIT 99.1
Chesapeake Energy Corporation Adopts Shareholder Rights Plan
OKLAHOMA CITY, July 15 -- Chesapeake Energy Corporation (NYSE: CHK)
announced that its Board of Directors adopted a Shareholder Rights Plan on July
7, 1998, pursuant to which certain preferred stock purchase rights will be
distributed for each Chesapeake common share held as of the close of business
on July 27, 1998, the Record Date, or issued thereafter. The Rights Plan is
designed to deter coercive takeover tactics and to prevent an acquirer from
gaining control of the company without offering a fair price to all of the
company's shareholders. The Rights distribution is not taxable to Chesapeake's
shareholders.
Aubrey K. McClendon, Chesapeake's Chairman and Chief Executive
Officer, stated, "We believe the strengthening of the Board's ability to
represent the interests of all shareholders is especially important now because
the Board is exploring methods for our shareholders to realize the full
long-term value of Chesapeake's business. This action will not restrict
consideration by the Board of any offer to purchase Chesapeake on terms
favorable to all shareholders. However, the Board believes it is important to
protect the interests of all shareholders in the event that the company is
confronted with tactics that do not treat all shareholders equally or are
designed to force shareholders out of their interest before being able to
realize the full value and potential of their shares."
Each newly-issued Right will entitle shareholders to purchase one
one-thousandth of a share of a new series of Junior Preferred Stock of the
company at an exercise price of $25.00. The Rights will be exercisable only if
a person or group other than certain excluded persons acquires beneficial
ownership of 15% or more of Chesapeake's common shares or commences a tender or
exchange offer upon consummation of which such person or group would
beneficially own 15% or more of the common shares. The Rights will expire on
July 27, 2008.
If any person or group other than certain excluded persons acquires
beneficial ownership of 15% or more of Chesapeake's common stock and thereafter
the company (i) engages in a merger transaction or (ii) sells more than 50% of
Chesapeake's assets or earning power then each Right now owned by such person
or group will entitle its holder to purchase, at the Right's then-current
exercise price, shares of Chesapeake common stock having a value of twice the
Right's exercise price. In addition, if Chesapeake is involved in a merger or
other business combination transaction with another person or group in which
its common shares are changed or converted, or sells 50% or more of its assets
or earning power to another person or group, each Right will entitle its holder
to purchase, at the Right's then-current exercise price, common shares of such
other person or group having a value of twice the Right's exercise price.
Chesapeake will generally be entitled to redeem the Rights in whole,
but not in part, at a $.01 per Right, subject to adjustment, at any time until
10 days after a person becomes a 15% beneficial owner of Chesapeake's common
stock and in certain other circumstances.
Further details of the Shareholders Rights Plan are outlined in a
letter that will be mailed to all shareholders commencing on July 27, 1998.
Chesapeake Energy Corporation is an independent oil and natural gas
producer headquartered in Oklahoma City. The company's operations are focused
on exploratory and developmental drilling and producing property and corporate
acquisitions in major onshore producing areas of the United States and Canada.
The company's internet address is http://www.chesapeake-energy.com
