Exhibit 10.1.8.1

 

INCENTIVE STOCK OPTION AGREEMENT

UNDER CHESAPEAKE ENERGY CORPORATION

2001 STOCK OPTION PLAN

 

THIS STOCK OPTION AGREEMENT (the “Option Agreement”), made as of the grant date
set forth on the Notice of Grant of Stock Options and Option Agreement attached
to this Option Agreement (the “Notice”) at Oklahoma City, Oklahoma by and
between the participant named on the Notice (the “Participant”) and Chesapeake
Energy Corporation (the “Company”):

 

W I T N E S S E T H:

 

WHEREAS, the Participant is an employee of the Company or a Subsidiary of the
Company, and it is important to the Company that the Participant be encouraged
to remain in the employ of the Company or a Subsidiary of the Company; and

 

WHEREAS, in recognition of such facts, the Company desires to provide to the
Participant an opportunity to purchase shares of the common stock of the
Company, as hereinafter provided, pursuant to the Chesapeake Energy Corporation
2001 Stock Option Plan (the “Plan”), a copy of which has been provided to the
Participant; and

 

WHEREAS, any capitalized terms used but not defined herein have the same
meanings given them in the Plan.

 

NOW, THEREFORE, in consideration of the mutual covenants hereinafter set forth
and for other good and valuable consideration, the Participant and the Company
hereby agree as follows:

 

Section 1. Grant of Incentive Stock Option. The Company hereby grants to the
Participant an incentive stock option (the “Incentive Stock Option”) to purchase
all or any part of the number of shares of its common stock, par value $.01 (the
“Stock”), as set forth on the Notice, under and subject to the terms and
conditions of this Option Agreement and the Plan which is incorporated herein by
reference and made a part hereof for all purposes. The purchase price for each
share to be purchased hereunder shall be the option price set forth on the
Notice (the “Option Price”).

 

Section 2. Times of Exercise of Incentive Stock Option. After, and only after,
the conditions of Section 10 hereof have been satisfied, the Participant shall
be eligible to exercise the Incentive Stock Option pursuant to the vesting
schedule set forth on the Notice (the “Vesting Schedule”). If the Participant’s
employment with the Company (or of any one or more of the Subsidiaries of the
Company) remains continuous at all times prior to any of the exercise dates
specified on the Notice (the “Exercise Dates”), then the Participant shall be
entitled, subject to the applicable provisions of the Plan and this Option
Agreement having been satisfied, to exercise the Incentive Stock Option and
purchase on or after the applicable Exercise Date, on a cumulative basis, the
number of shares of Stock determined by multiplying the aggregate number of
shares of Stock subject to the Incentive Stock Option set forth on the Notice by
the designated percentage set forth on the Notice.

 

Section 3. Term of Incentive Stock Option. Subject to earlier termination as
hereafter provided, the Incentive Stock Option shall expire at the close of
business on the expiration date set forth on the Notice and may not be exercised
after such expiration date; provided, however, in no event shall the term of the
Incentive Stock Option be longer than ten years from the Date of Grant. At all
times during the period commencing with the date the Incentive Stock Option is
granted to the Participant and ending on the earlier of the expiration of the
Incentive Stock Option or the date which is three months prior to the date the
Incentive Stock Option is exercised by the Participant, the Participant must be
an employee of either (i) the Company, (ii) a Subsidiary of the Company, or
(iii) a corporation or a parent or a Subsidiary of such corporation issuing or
assuming an Incentive Stock Option in a transaction to which Section 424(a) of
the Code applies.

 

Section 4. Nontransferability of Incentive Stock Option. The Incentive Stock
Option is not transferable otherwise than by will or the laws of descent and
distribution, and the Incentive Stock Option may be exercised, during the
lifetime of the Participant, only by the Participant. More particularly (but
without limiting the generality of the foregoing), the Incentive Stock Option
may not be assigned, transferred (except as provided above), pledged or
hypothecated in any way, shall not be assignable by operation of law and shall
not be subject to execution, attachment,

 

October 28, 2004

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or similar process. Any attempted assignment, transfer, pledge, hypothecation or
other disposition of, or the levy of execution, attachment or similar process
upon, the Incentive Stock Option contrary to the provisions hereof shall be null
and void and without effect, shall give no right to any purported transferee and
may, in the Committee’s sole discretion, result in the forfeiture of the
Incentive Stock Option.

 

Section 5. Employment. So long as the Participant shall continue to be a
continuous employee of the Company or a Subsidiary, the Incentive Stock Option
shall not be affected by any change of duties or position. Nothing in the Plan
or in this Option Agreement shall confer upon the Participant any right to
continue in such employment, or interfere in any way with the right of the
employee to terminate the Participant’s employment at any time.

 

Section 6. Annual Limitation on Exercise of Incentive Stock Options. The
aggregate Fair Market Value, determined on the Date of Grant, of the Stock with
respect to which incentive stock options granted under the Plan or any other
plan of the Company or any Subsidiary qualified under Section 422 of the Code
(including the Incentive Stock Option) are exercisable for the first time by the
Participant during any calendar year will not exceed $100,000. As provided in
Section 6.3 of the Plan, the Incentive Stock Option will be recharacterized as a
Nonqualified Stock Option to the extent the $100,000 limitation is exceeded in a
calendar year.

 

Section 7. Acceleration of Otherwise Unexercisable Incentive Stock Option 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 unvested shares subject to the Incentive Stock Option on the date of the
Participant’s termination of employment due to a Disability, death or special
circumstance, or as the Committee otherwise so determines. With respect to
shares subject to the Incentive Stock Option for which any applicable Exercise
Date has occurred or for which the Committee has permitted purchase in
accordance with the foregoing provisions, the Participant, or the representative
of a deceased Participant, shall automatically have the right to purchase such
shares within three months of such date of termination of employment, one year
in the case of a Participant suffering a Disability or three years in the case
of a deceased Participant. However, in the case of a deceased Participant,
incentive stock options that are not exercised within three months of the date
of termination of employment will be recharacterized as nonqualified stock
options.

 

Section 8. Method of Exercising Incentive Stock Option.

 

(a) Procedures for Exercise. The manner of exercising the Incentive Stock Option
shall be by written notice to the Secretary of the Company at the time the
Incentive Stock Option, or part thereof, is to be exercised, and in any event
prior to the expiration of the Incentive Stock Option. Such notice shall state
the election to exercise the Incentive Stock Option, the number of shares of
Stock to be purchased upon exercise, the form of payment to be used, and shall
be signed by the person so exercising the Incentive Stock Option.

 

(b) Form of Payment. Payment in full for shares of Stock purchased under this
Option Agreement shall accompany the Participant’s notice of exercise. Payment
shall be made (i) in cash or by check, bank draft or money order payable to the
order of the Company; (ii) by tendering, by either actual delivery of shares or
by attestation, shares of Stock acceptable to the Committee having a Fair Market
Value on the date of payment equal to the amount of the Option Price; or (iii) a
combination thereof. In addition to the foregoing, the Committee may permit a
Participant to elect to pay the Option Price by irrevocably authorizing a third
party to sell shares of Stock (or a sufficient portion of the shares) acquired
upon exercise of the Incentive Stock Option and remit to the Company a
sufficient portion of the sale proceeds to pay the entire Option Price resulting
from such exercise.

 

(c) Further Information. In the event the Incentive Stock Option is exercised,
pursuant to the foregoing provisions of this Section 8, by any person other than
the Participant due to the death of the Participant, such notice shall also be
accompanied by appropriate proof of the right of such person to exercise the
Incentive Stock Option. The notice so required shall be given by personal
delivery to the Secretary of the Company or by registered or certified mail,
addressed to the Company at 6100 North Western Avenue, Oklahoma City, Oklahoma
73118, and it shall be deemed to have been given when it is so personally
delivered or when it is deposited in the United States mail in an envelope
addressed to the Company, as aforesaid, properly stamped for delivery as a
registered or certified letter.

 

October 28, 2004

 

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Section 9. Acceleration of Incentive Stock Option Upon Corporate Event. If the
Company shall, pursuant to action by the Board, at any time propose 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 40 days prior to the anticipated effective date of the proposed
transaction, and the Participant’s Incentive Stock Option shall become 100%
vested. 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 or her Incentive Stock
Option to purchase any or all of the Stock then subject to such Incentive Stock
Option. Each Participant, by so notifying the Company in writing, may, in
exercising his or her Incentive Stock Option, condition such exercise upon, and
provide that such exercise shall become effective immediately prior to the
consummation of the transaction, in which event such Participant need not make
payment for the Stock to be purchased upon exercise of such Incentive Stock
Option until five days after receipt of written notice by the Company to such
Participant that the transaction has been consummated. If the transaction is
consummated, each Incentive Stock Option, to the extent not previously exercised
prior to the date specified in the foregoing notice, shall terminate on the
effective date such transaction is consummated. If the transaction is abandoned,
(i) any Stock not purchased upon exercise of such Incentive Stock Option shall
continue to be available for purchase in accordance with the other provisions of
the Plan and (ii) to the extent that any Incentive Stock Option not exercised
prior to such abandonment shall have vested solely by operation of this Section
9, such vesting shall be deemed voided as of the time such acceleration
otherwise occurred pursuant to Section 9, and the Vesting Schedule set forth in
the Notice shall be reinstituted as of the date of such abandonment. In the
event that acceleration of vesting of any Incentive Stock Option under the Plan
is 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”), 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 such acceleration of vesting of any Incentive Stock
Option.

 

Section 10. Securities Law Restrictions. The Incentive Stock Option shall be
exercised and Stock issued only upon compliance with the Securities Act of 1933,
as amended (the “Act”), and any other applicable securities law, or pursuant to
an exemption therefrom. If deemed necessary by the Company to comply with the
Act or any applicable laws or regulations relating to the sale of securities,
the Participant, at the time of exercise and as a condition imposed by the
Company, shall represent, warrant and agree that the shares of Stock subject to
the Incentive Stock Option are being purchased for investment and not with any
present intention to resell the same and without a view to distribution, and the
Participant shall, upon the request of the Company, execute and deliver to the
Company an agreement to such effect. The Participant acknowledges that any stock
certificate representing Stock purchased under such circumstances will be issued
with a restricted securities legend.

 

Section 11. Disqualifying Disposition of Stock. If the Participant shall make a
disposition (within the meaning of Section 424(c) of the Code and the rules and
regulations thereunder) of any shares of Stock covered by the Incentive stock
Option within one year after the date of exercise of the Incentive Stock Option
or within two years after the date of grant of the Incentive Stock Option, then
in either such event the Participant shall promptly notify the Company, by
delivery of written notice to the Secretary of the Company, of (i) the date of
such disposition, (ii) the number of shares of Stock covered by the Incentive
Stock Option which were disposed of and (iii) the price at which such shares of
Stock were disposed of or the amount of any other consideration received on such
disposition. The Company may make such provision as it may deem appropriate for
the withholding of any applicable federal, state or local taxes that it
determines it may be obligated to withhold or pay in connection with the
exercise of the Incentive Stock Option or the disposition of shares of Stock
acquired upon exercise of the Incentive Stock Option.

 

Section 12. Notices. All notices or other communications relating to the Plan
and this Option Agreement as it relates to the Participant shall be in writing
and shall be delivered personally or mailed (U.S. Mail) by the Company to the
Participant at the then current address as maintained by the Company or such
other address as the Participant may advise the Company in writing.

 

October 28, 2004

 

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