EXHIBIT 1.1
20,000,000 SHARES
CHESAPEAKE ENERGY CORPORATION
COMMON STOCK
UNDERWRITING AGREEMENT
December 12, 2002
CREDIT SUISSE FIRST BOSTON CORPORATION
MORGAN STANLEY & CO. INCORPORATED
SALOMON SMITH BARNEY INC.,
As Representatives (the "REPRESENTATIVES") of the Several Underwriters
c/o Credit Suisse First Boston Corporation
Eleven Madison Avenue
New York, NY 10010-3629
Dear Sirs:
1. Introductory. Chesapeake Energy Corporation, an Oklahoma corporation
(the "COMPANY"), proposes to issue and sell 20,000,000 shares ("FIRM
SECURITIES") of its Common Stock ("SECURITIES") and also proposes to issue and
sell to the several underwriters named in Schedule A hereto (the
"UNDERWRITERS"), at the option of the Underwriters, an aggregate of not more
than 3,000,000 additional shares ("OPTIONAL SECURITIES") of its Securities as
set forth below. The Firm Securities and the Optional Securities are herein
collectively called the "OFFERED SECURITIES". The Company hereby agrees with the
Underwriters as follows:
2. Representations and Warranties of the Company. The Company
represents and warrants to, and agrees with, the several Underwriters that:
(a) A registration statement (No. 333-96863), including a
prospectus, relating to the Offered Securities has been filed with the
Securities and Exchange Commission (the "COMMISSION") and has become
effective. Such registration statement, as amended at the time of this
Agreement, is hereinafter referred to as the "REGISTRATION STATEMENT",
and the prospectus dated August 1, 2002 included in such Registration
Statement, as supplemented to reflect the terms of the offering of the
Offered Securities, as first filed with the Commission pursuant to and
in accordance with Rule 424(b) ("RULE 424(B)") under the Securities Act
of 1933 (the "ACT"), including all material incorporated by reference
therein, is hereinafter referred to as the "PROSPECTUS". No document
has been or will be prepared or distributed in reliance on Rule 434
under the Act.
(b) On its effective date, the Registration Statement
conformed in all respects to the requirements of the Act and the rules
and regulations of the Commission (the "RULES AND REGULATIONS") and did
not include any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary to make
the statements therein not misleading, and on the date of this
Agreement, the Registration Statement and the Prospectus will conform
in all respects
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to the requirements of the Act and the Rules and Regulations, and
neither of such documents will include any untrue statement of a
material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein not misleading,
except that the foregoing does not apply to statements in or omissions
from any of such documents based upon written information furnished to
the Company by any Underwriter through the Representatives, if any,
specifically for use therein. The documents incorporated by reference
in the Prospectus (the "COMPANY FILED DOCUMENTS"), when they became
effective or were filed with the Commission, as the case may be,
conformed in all material respects with the requirements of the Act or
the Securities Exchange Act of 1934 (the "EXCHANGE ACT"), as
applicable, and the Rules and Regulations.
(c) The Company has been duly incorporated and is an existing
corporation in good standing under the laws of the State of Oklahoma,
with power and authority (corporate and other) to own its properties
and conduct its business as described in the Prospectus; and the
Company is duly qualified to do business as a foreign corporation in
good standing in all other jurisdictions in which its ownership or
lease of property or the conduct of its business requires such
qualification.
(d) Each subsidiary of the Company has been duly organized and
is in good standing under the laws of the jurisdiction of its
organization, with power and authority (corporate and other) to own its
properties and conduct its business as described in the Prospectus; and
each subsidiary of the Company is duly qualified to do business and is
in good standing in all other jurisdictions in which its ownership or
lease of property or the conduct of its business requires such
qualification; all of the issued and outstanding capital stock or
similar equity interests of each subsidiary of the Company has been
duly authorized and validly issued and is fully paid and nonassessable;
and the capital stock or similar equity interests of each subsidiary
owned by the Company, directly or through subsidiaries, is owned free
from liens, encumbrances and defects.
(e) The Offered Securities and all other outstanding shares of
capital stock of the Company are, and, when the Offered Securities have
been delivered and paid for in accordance with this Agreement on each
Closing Date (as defined below), such Offered Securities will have been
validly issued, fully paid and nonassessable and will conform to the
description thereof contained in the Prospectus; and the stockholders
of the Company have no preemptive rights with respect to the
Securities.
(f) Except as disclosed in the Prospectus, there are no
contracts, agreements or understandings between the Company and any
person that would give rise to a valid claim against the Company or any
Underwriter for a brokerage commission, finder's fee or other like
payment in connection with this offering.
(g) The Offered Securities have been approved for listing on
the New York Stock Exchange, subject to notice of issuance.
(h) No consent, approval, authorization, filing with or order
of any court or governmental agency or body is required for the
consummation of the transactions contemplated by this Agreement in
connection with the issuance and sale of the Offered Securities by the
Company, except such as have been obtained and made under the Act and
such as may be required under state securities laws.
(i) None of the execution, delivery and performance of this
Agreement, the issuance and sale of the Offered Securities and
compliance with the terms and provisions hereof, will result in a
breach or violation of any of the terms and provisions of, or
constitute a default under, any statute, rule, regulation or order of
any governmental agency or body or any court, domestic or foreign,
having jurisdiction over the Company or any subsidiary of the Company
or any of their properties, or any agreement or instrument to which the
Company or any such subsidiary is a party or by which the
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Company or any such subsidiary is bound or to which any of the
properties of the Company or any such subsidiary is subject, or the
charter or by-laws (or similar organizational documents) of the Company
or any such subsidiary, and the Company has full power and authority to
authorize, issue and sell the Offered Securities as contemplated by
this Agreement.
(j) This Agreement has been duly authorized, executed and
delivered by the Company.
(k) Except as disclosed in the Prospectus, the Company and its
subsidiaries have good and marketable title to all real properties and
all other properties and assets owned by them, including, without
limitation, all oil and gas producing properties of the Company and its
subsidiaries and all assets and facilities used by the Company and its
subsidiaries in the production and marketing of oil and gas, in each
case free from liens, encumbrances and defects that would materially
affect the value thereof or materially interfere with the use made or
to be made thereof by them; and, except as disclosed in the Company
Filed Documents, the Company and its subsidiaries hold any leased real
or personal property, including, without limitation, all oil and gas
producing properties of the Company and its subsidiaries and all assets
and facilities used by the Company and its subsidiaries in the
production and marketing of oil and gas, under valid and enforceable
leases with no exceptions that would materially interfere with the use
made or to be made thereof by them.
(l) The Company and its subsidiaries possess adequate
certificates, authorities or permits issued by appropriate governmental
agencies or bodies necessary to conduct the business now operated by
them and have not received any notice of proceedings relating to the
revocation or modification of any such certificate, authority or permit
that, if determined adversely to the Company or any of its
subsidiaries, would individually or in the aggregate have a material
adverse effect on the condition (financial or other), business,
properties or results of operations of the Company and its subsidiaries
taken as a whole ("MATERIAL ADVERSE EFFECT").
(m) No labor dispute with the employees of the Company or any
subsidiary exists or, to the knowledge of the Company, is imminent that
might have a Material Adverse Effect.
(n) The Company and its subsidiaries own, possess or can
acquire on reasonable terms, adequate trademarks, trade names and other
rights to inventions, know-how, patents, copyrights, confidential
information and other intellectual property (collectively,
"INTELLECTUAL PROPERTY RIGHTS") necessary to conduct the business now
operated by them, or presently employed by them, and have not received
any notice of infringement of, or conflict with, asserted rights of
others with respect to any intellectual property rights that, if
determined adversely to the Company or any of its subsidiaries, would
individually or in the aggregate have a Material Adverse Effect.
(o) Except as disclosed in the Prospectus, neither the Company
nor any of its subsidiaries is in violation of any statute, rule,
regulation, decision or order of any governmental agency or body or any
court, domestic or foreign, relating to the use, disposal or release of
hazardous or toxic substances or relating to the protection or
restoration of the environment or human exposure to hazardous or toxic
substances (collectively, "ENVIRONMENTAL LAWS"), owns or operates any
real property contaminated with any substance that is subject to any
environmental laws, is liable for any off-site disposal or
contamination pursuant to any environmental laws, or is subject to any
claim relating to any environmental laws which violation,
contamination, liability or claim would individually or in the
aggregate have a Material Adverse Effect; and the Company is not aware
of any pending investigation which might lead to such a claim.
(p) Except as disclosed in the Prospectus, there are no
pending actions, suits or proceedings against or affecting the Company,
any of its subsidiaries or any of their respective properties that, if
determined adversely to the Company or any of its subsidiaries, would
individually or in the aggregate
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have a Material Adverse Effect, or would materially and adversely
affect the ability of the Company to perform its obligations under this
Agreement, or which are otherwise material in the context of the sale
of the Offered Securities; and no such actions, suits or proceedings
are threatened or, to the Company's knowledge, contemplated.
(q) The financial statements included or incorporated by
reference in the Prospectus present fairly the financial position of
the Company and its consolidated subsidiaries as of the dates shown and
their results of operations and cash flows for the periods shown, and
such financial statements have been prepared in conformity with the
generally accepted accounting principles in the United States applied
on a consistent basis; and the assumptions used in preparing the pro
forma financial statements included in the Prospectus provide a
reasonable basis for presenting the significant effects directly
attributable to the transactions or events described therein, the
related pro forma adjustments give appropriate effect to those
assumptions, and the pro forma columns therein reflect the proper
application of those adjustments to the corresponding historical
financial statement amounts.
(r) The financial statements of Gothic Energy Corporation
included or incorporated by reference in the Prospectus present fairly
the financial position of Gothic Energy Corporation and its
consolidated subsidiary as of the dates shown and its results of
operations and cash flows for the periods shown, and such financial
statements have been prepared in conformity with the generally accepted
accounting principles in the United States applied on a consistent
basis.
(s) Except as disclosed in the Prospectus, since the date of
the latest audited financial statements incorporated by reference in
the Prospectus there has been no material adverse change, nor any
development or event involving a prospective material adverse change,
in the condition (financial or other), business, properties or results
of operations of the Company and its subsidiaries taken as a whole,
and, except as disclosed in the Prospectus, there has been no dividend
or distribution of any kind declared, paid or made by the Company on
any class of its capital stock.
(t) The Company is not, and after giving effect to the
offering and sale of the Offered Securities and the application of
proceeds thereof as described in the Prospectus, will not be an
"investment company" as defined in the Investment Company Act of 1940.
(u) The Company is subject to the reporting requirements of
either Section 13 or 15(d) of the Exchange Act and files reports with
the Commission on the Electronic Data Gathering, Analysis, and
Retrieval (EDGAR) system.
3. Purchase, Sale and Delivery of Offered Securities. On the basis of
the representations, warranties and agreements herein contained, but subject to
the terms and conditions herein set forth, the Company agrees to sell to the
Underwriters, and the Underwriters agree, severally and not jointly, to purchase
from the Company, at a purchase price of $7.1475 per share, the respective
numbers of shares of Firm Securities set forth opposite the names of the
Underwriters in Schedule A hereto.
The Company will deliver the Firm Securities to the Representatives for
the accounts of the Underwriters, against payment of the purchase price in
Federal (same day) funds by official bank check or checks or wire transfer to an
account at a bank acceptable to Credit Suisse First Boston Corporation ("CSFBC")
drawn to the order of the Company at the office of Cravath, Swaine & Moore, at
10:00 A.M., New York time, on December 18, 2002, or at such other time not later
than seven full business days thereafter as CSFBC and the Company determine,
such time being herein referred to as the "FIRST CLOSING DATE". For purposes of
Rule 15c6-1 under the Exchange Act, the First Closing Date (if later than the
otherwise applicable settlement date) shall be the settlement date for payment
of funds and delivery of securities for all the Offered Securities sold pursuant
to the offering. The certificates for the Firm Securities so to be delivered
will be in definitive form, in such
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denominations and registered in such names as CSFBC requests and will be made
available for checking and packaging at the above office of Cravath, Swaine &
Moore at least 24 hours prior to the First Closing Date.
In addition, upon written notice from CSFBC given to the Company from
time to time not more than 30 days subsequent to the date of the Prospectus, the
Underwriters may purchase all or less than all of the Optional Securities at the
purchase price per Security to be paid for the Firm Securities. The Company
agrees to sell to the Underwriters the number of shares of Optional Securities
specified in such notice and the Underwriters agree, severally and not jointly,
to purchase such Optional Securities. Such Optional Securities shall be
purchased for the account of each Underwriter in the same proportion as the
number of shares of Firm Securities set forth opposite such Underwriter's name
bears to the total number of shares of Firm Securities (subject to adjustment by
CSFBC to eliminate fractions) and may be purchased by the Underwriters only for
the purpose of covering over-allotments made in connection with the sale of the
Firm Securities. No Optional Securities shall be sold or delivered unless the
Firm Securities previously have been, or simultaneously are, sold and delivered.
The right to purchase the Optional Securities or any portion thereof may be
exercised from time to time and to the extent not previously exercised may be
surrendered and terminated at any time upon notice by CSFBC to the Company.
Each time for the delivery of and payment for the Optional Securities,
being herein referred to as an "OPTIONAL CLOSING DATE", which may be the First
Closing Date (the First Closing Date and each Optional Closing Date, if any,
being sometimes referred to as a "CLOSING DATE"), shall be determined by CSFBC
but shall be not later than five full business days after written notice of
election to purchase Optional Securities is given. The Company will deliver the
Optional Securities being purchased on each Optional Closing Date to the
Representatives for the accounts of the several Underwriters, against payment of
the purchase price therefor in Federal (same day) funds by official bank check
or checks or wire transfer to an account at a bank acceptable to CSFBC drawn to
the order of the Company, at the above office of Cravath, Swaine & Moore. The
certificates for the Optional Securities being purchased on each Optional
Closing Date will be in definitive form, in such denominations and registered in
such names as CSFBC requests upon reasonable notice prior to such Optional
Closing Date and will be made available for checking and packaging at the above
office of Cravath, Swaine & Moore at a reasonable time in advance of such
Optional Closing Date.
4. Offering by Underwriters. It is understood that the several
Underwriters propose to offer the Offered Securities for sale to the public as
set forth in the Prospectus.
5. Certain Agreements of the Company. The Company agrees with the
several Underwriters that:
(a) The Company will file the Prospectus with the Commission
pursuant to and in accordance with Rule 424(b)(5) not later than the
second business day following the execution and delivery of this
Agreement.
(b) The Company will advise CSFBC promptly of any proposal to
amend or supplement the Registration Statement or the Prospectus and
will afford CSFBC a reasonable opportunity to comment on any such
proposed amendment or supplement; and the Company will also advise
CSFBC promptly of the filing of any such amendment or supplement and of
the institution by the Commission of any stop order proceedings in
respect of the Registration Statement or of any part thereof and will
use its best efforts to prevent the issuance of any such stop order and
to obtain as soon as possible its lifting, if issued.
(c) If, at any time when a prospectus relating to the Offered
Securities is required to be delivered under the Act in connection with
sales by any Underwriter or dealer, any event occurs as a result of
which the Prospectus as then amended or supplemented would include an
untrue statement of a material fact or omit to state any material fact
necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading, or if it is
necessary at any time to
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amend the Prospectus to comply with the Act, the Company promptly will
notify CSFBC of such event and will promptly prepare and file with the
Commission, at its own expense, an amendment or supplement which will
correct such statement or omission or an amendment which will effect
such compliance. Neither CSFBC's consent to, nor the Underwriters'
delivery of, any such amendment or supplement shall constitute a waiver
of any of the conditions set forth in Section 6 hereof.
(d) As soon as practicable, but not later than 16 months,
after the date of this Agreement, the Company will make generally
available to its securityholders an earnings statement covering a
period of at least 12 months beginning after the later of (i) the
effective date of the registration statement relating to the Registered
Securities, (ii) the effective date of the most recent post-effective
amendment to the Registration Statement to become effective prior to
the date of this Agreement and (iii) the date of the Company's most
recent Annual Report on Form 10-K filed with the Commission prior to
the date of this Agreement, which will satisfy the provisions of
Section 11(a) of the Act.
(e) The Company will furnish to the Representatives copies of
the Registration Statement in the form it became effective (including
all exhibits) and of all amendments thereto, any related preliminary
prospectus, any related preliminary prospectus supplement, and, so long
as a prospectus relating to the Offered Securities is required to be
delivered under the Act in connection with sales by any Underwriter or
dealer, the Prospectus and all amendments and supplements to such
documents, in each case in such quantities as CSFBC requests. The
Prospectus shall be so furnished on or prior to 3:00 P.M., New York
time, on the business day following the execution and delivery of this
Agreement. All other documents shall be so furnished as soon as
available. The Company will pay the expenses of printing and
distributing to the Underwriters all such documents.
(f) The Company will arrange for the qualification of the
Offered Securities for sale under the laws of such jurisdictions as
CSFBC designates and will continue such qualifications in effect so
long as required for the distribution.
(g) The Company will pay all expenses incident to the
performance of its obligations under this Agreement, for any filing
fees and other expenses (including fees and disbursements of counsel)
incurred in connection with qualification of the Offered Securities for
sale under the laws of such jurisdictions as CSFBC designates and the
printing of memoranda relating thereto, and for expenses incurred in
distributing preliminary prospectuses, preliminary prospectus
supplements and the Prospectus (including any amendments and
supplements thereto) to the Underwriters; provided, however, that the
Underwriters will pay all travel expenses incident to the road show.
(h) For a period of 90 days after the date of this Agreement,
the Company will not offer, sell, contract to sell, pledge or otherwise
dispose of, directly or indirectly, or file with the Commission a
registration statement under the Act relating to, any additional shares
of its Securities or securities convertible into or exchangeable or
exercisable for any shares of its Securities, or publicly disclose the
intention to make any such offer, sale, pledge, disposition or filing,
without the prior written consent of the Representatives.
6. Conditions of the Obligations of the Underwriters. The obligations
of the several Underwriters to purchase and pay for the Firm Securities on the
First Closing Date and the Optional Securities to be purchased on each Optional
Closing Date will be subject to the accuracy of the representations and
warranties on the part of the Company herein, to the accuracy of the statements
of officers of the Company made pursuant to the provisions hereof, to the
performance by the Company of its obligations hereunder and to the following
additional conditions precedent:
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(a) The Representatives shall have received a letter (the
"INITIAL COMFORT LETTER"), dated prior to the date of this Agreement,
of PricewaterhouseCoopers LLP in form and substance satisfactory to
CSFBC.
(b) The Prospectus shall have been filed with the Commission
in accordance with the Rules and Regulations and Section 5(a) of this
Agreement. No stop order suspending the effectiveness of the
Registration Statement or of any part thereof shall have been issued
and no proceedings for that purpose shall have been instituted or, to
the knowledge of the Company or any Underwriter, shall be contemplated
by the Commission.
(c) Subsequent to the execution and delivery of this
Agreement, there shall not have occurred (i) any change, or any
development or event involving a prospective change, in the condition
(financial or other), business, properties or results of operations of
the Company and its subsidiaries taken as one enterprise which, in the
judgment of the Representatives, is material and adverse and makes it
impractical or inadvisable to proceed with completion of the public
offering or the sale of and payment for the Offered Securities; (ii)
any downgrading in the rating of any debt securities of the Company by
any "nationally recognized statistical rating organization" (as defined
for purposes of Rule 436(g) under the Act), or any public announcement
that any such organization has under surveillance or review its rating
of any debt securities of the Company (other than an announcement with
positive implications of a possible upgrading, and no implication of a
possible downgrading, of such rating) or any announcement that the
Company has been placed on negative outlook; (iii) any change in U.S.
or international financial, political or economic conditions or
currency exchange rates or exchange controls as would, in the judgment
of a majority in interest of the Underwriters including the
Representatives, be likely to prejudice materially the success of the
proposed issue, sale or distribution of the Offered Securities, whether
in the primary market or in respect of dealings in the secondary
market; (iv) any material suspension or material limitation of trading
in securities generally on the New York Stock Exchange, or any setting
of minimum prices for trading on such exchange, or any suspension of
trading of any securities of the Company on any exchange or in the
over-the-counter market; (v) any banking moratorium declared by U.S.
Federal or New York authorities; (vi) any major disruption of
settlements of securities; or (vii) any attack on, outbreak or
escalation of hostilities or acts of terrorism involving the United
States, any declaration of war by Congress or any other national or
international calamity or emergency if, in the judgment of the
Representatives, the effect of any such attack, outbreak, escalation,
act, declaration, calamity or emergency makes it impractical or
inadvisable to proceed with completion of the public offering or the
sale of and payment for the Offered Securities.
(d) The Representatives, shall have received an opinion,
dated such Closing Date, of Vinson & Elkins L.L.P., counsel for the
Company, that:
(i) The Company has been duly incorporated and is an
existing corporation in good standing under the laws of the
State of Oklahoma, with corporate power and authority to own
its properties and conduct its business as described in the
Prospectus.
(ii) Each subsidiary of the Company has been duly
organized and is in good standing under the laws of the
jurisdiction of its organization, with power and authority
(corporate and other) to own its property and conduct its
business as described in the Prospectus; and the capital stock
or similar equity interests of each subsidiary owned by the
Company, directly or through subsidiaries, is owned free from
liens, encumbrances and defects.
(iii) The Offered Securities delivered on such
Closing Date have been duly authorized and validly issued, are
fully paid and nonassessable and conform to the
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description thereof contained in the Prospectus; and the
stockholders of the Company have no preemptive rights with
respect to the Offered Securities.
(iv) No consent, approval, authorization or order of,
or filing with, any governmental agency or body or any court
is required for the consummation of the transactions
contemplated by this Agreement in connection with the issuance
or sale of the Offered Securities by the Company, except such
as have been obtained and made under the Act and such as may
be required under state securities laws.
(v) None of the execution, delivery and performance
of this Agreement, the issuance and sale of the Offered
Securities and compliance with the terms and provisions hereof
will result in a breach or violation of any of the terms and
provisions of, or constitute a default under, any statute,
rule, regulation or order of any governmental agency or body
or any court having jurisdiction over the Company or any
subsidiary of the Company or any of their properties, or any
agreement or instrument filed or referenced as an exhibit to
any Company Filed Document to which the Company or any such
subsidiary is party or by which the Company or any such
subsidiary is bound or to which any of the properties of the
Company or any such subsidiary is subject, or the charter or
by-laws (or similar organizational documents) of the Company
or any such subsidiary, and the Company has full power and
authority to authorize, issue and sell the Offered Securities
as contemplated by this Agreement.
(vi) Except as disclosed in the Prospectus, there are
no pending actions, suits or proceedings against or affecting
the Company, any of its subsidiaries or any of their
respective properties that, if determined adversely to the
Company or any of its subsidiaries, would individually or in
the aggregate have a Material Adverse Effect, or would
materially and adversely affect the ability of the Company to
perform its obligations under this Agreement, or which are
otherwise material in the context of the sale of the Offered
Securities; and no such actions, suits or proceedings are
threatened or, to such counsel's knowledge, contemplated.
(vii) This Agreement has been duly authorized,
executed and delivered by the Company.
(viii) The Registration Statement has become
effective under the Act, the Prospectus was filed with the
Commission pursuant to the subparagraph of Rule 424(b)
specified in such opinion on the date specified therein, and,
to the best of the knowledge of such counsel, no stop order
suspending the effectiveness of the Registration Statement or
any part thereof has been issued and no proceedings for that
purpose have been instituted or are pending or contemplated
under the Act, and the Registration Statement, as of its
effective date and as of the date of this Agreement, and the
Prospectus, as of the date of this Agreement, and any
amendment or supplement thereto, as of its date, complied as
to form in all material respects with the requirements of the
Act and the Rules and Regulations; each of the documents
incorporated by reference in the Prospectus, at the time it
became effective or was filed with the Commission, as the case
may be, complied as to form in all material respects with the
requirements of the Act or Exchange Act, as the case may be,
and the Rules and Regulations; the descriptions in the
Registration Statement and Prospectus of statutes, legal and
governmental proceedings and contracts and other documents are
accurate and fairly present the information required to be
shown; and such counsel do not know of any legal or
governmental proceedings required to be described in the
Prospectus which are not described as required or of any
contracts or documents of a character required to be
9
described in the Registration Statement or Prospectus or to be
filed as exhibits to the Registration Statement which are not
described and filed as required.
It is understood and agreed that certain of the opinions set forth in
paragraphs (i), (ii), (iii), (v) (with respect to conflicts with charters,
by-laws or similar organizational documents) and (vii) (with respect to due
authorization) may be given by the Commercial Law Group, P.C. and certain
opinions in paragraph (vi) may be given by Henry Hood, Esq.
In addition, Vinson & Elkins L.L.P. shall state that they have
participated in conferences with officers and other representatives of the
Company, representatives of the independent public accountants of the Company,
general counsel of the Company, representatives of the Underwriters and counsel
for the Underwriters, at which conferences the Registration Statement and the
Prospectus were discussed. Such counsel shall further state that, although they
have made certain additional inquiries and investigations in connection with the
preparation of the Registration Statement and the Prospectus, they have not
verified, are not passing on and do not assume any responsibility for the
accuracy, completeness or fairness of the statements contained in the
Registration Statement or the Prospectus or any documents incorporated by
reference therein, based on the participation described above in the course of
acting as counsel to the Company in this transaction, no information has come to
their attention that has caused such counsel to believe that the Registration
Statement or the Prospectus, at the date hereof and as of the Closing Date
(other than the financial statements and schedules and other financial data and
the oil and gas reserve data, in each case contained or incorporated by
reference (including the notes thereto and auditor's report thereon) therein, as
to which such counsel need not express any comment or belief) contained an
untrue statement of a material fact or omitted to state a material fact required
to be stated therein or necessary to make the statements therein not misleading.
(e) The Representatives shall have received from Cravath,
Swaine & Moore, counsel for the Purchaser, such opinion or opinions,
dated such Closing Date, with respect to the incorporation of the
Company, the validity of the Offered Securities delivered on such
Closing Date, the Registration Statement, the Prospectus and other
related matters as the Representatives may require, and the Company
shall have furnished to such counsel such documents as they request for
the purpose of enabling them to pass upon such matters. In rendering
such opinion, Cravath, Swaine & Moore may rely as to the incorporation
of the Company and all other matters governed by Oklahoma law upon the
opinion of Commercial Law Group, P.C. referred to above.
(f) The Representatives shall have received a certificate,
dated such Closing Date, of the President or any Vice President and a
principal financial or accounting officer of the Company in which such
officers, to the best of their knowledge after reasonable
investigation, shall state that the representations and warranties of
the Company in this Agreement are true and correct, that the Company
has complied with all agreements and satisfied all conditions on its
part to be performed or satisfied hereunder at or prior to such Closing
Date, that no stop order suspending the effectiveness of the
Registration Statement or of any part thereof has been issued and no
proceedings for that purpose have been instituted or are contemplated
by the Commission and that, subsequent to the date of the most recent
financial statements in the Prospectus, there has been no material
adverse change, nor any development or event involving a prospective
material adverse change, in the condition (financial or other),
business, properties or results of operations of the Company and its
subsidiaries taken as a whole except as set forth in or contemplated by
the Prospectus or as described in such certificate.
(g) The Representatives shall have received a letter (the
"BRING-DOWN COMFORT LETTER"), dated such Closing Date, of
PricewaterhouseCoopers LLP (i) confirming that they are independent
public accountants with respect to the Company and its subsidiaries
within the meaning of the Act and the applicable Rules and Regulations
thereunder, (ii) stating, as of the date of the Bring-Down Comfort
Letter (or, with respect to matters involving changes or developments
since the respective
10
dates as of which specified financial information is given in the
Registration Statement, as of a date not more than three business days
prior to the date of the Bring-Down Comfort Letter), that the
conclusions and findings of such accountants with respect to the
financial information and other matters covered by the Initial Comfort
Letter are accurate, (iii) confirming in all material respects the
conclusions and findings set forth in the Initial Comfort Letter and
(iv) otherwise in form and substance satisfactory in all respects to
CSFBC.
(h) The Representatives shall have received (i) a copy of the
certificate or articles of incorporation, including all amendments
thereto, of the Company, certified as of a recent date by the Secretary
of State of the State of Oklahoma, (ii) a certificate of good standing
for the Company, dated as of a recent date, from such Secretary of
State and (iii) a certificate, dated as of a recent date, of the
Secretary of State of each state in which the Company is qualified to
do business as a foreign corporation under the laws of such state.
(i) The Representatives shall have received (i) a copy of the
certificate or articles of incorporation (or similar organizational
document), including all amendments thereto, of each of the Company's
subsidiaries, certified as of a recent date by the Secretary of State
of the state in which such subsidiary is organized, (ii) a certificate
of good standing for each of the Company's subsidiaries, certified as
of a recent date by the Secretary of State of the state in which such
subsidiary is organized, and (iii) a certificate, dated as of a recent
date, of the Secretary of State of each state in which each such
subsidiary is qualified to do business as a foreign corporation (or
similar entity) under the laws of each such state.
(j) On or prior to the date of this Agreement, the
Representatives shall have received lockup letters from each of the
executive officers and directors of the Company.
The Company will furnish the Representatives with such conformed copies
of such opinions, certificates, letters and documents as the Representatives
reasonably request. The Representatives may in their sole discretion waive on
behalf of the Underwriters compliance with any conditions to the obligations of
the Underwriters hereunder, whether in respect of an Optional Closing Date or
otherwise.
7. Indemnification and Contribution. (a) The Company will indemnify and
hold harmless each Underwriter, its partners, directors and officers and each
person, if any, who controls such Underwriter within the meaning of Section 15
of the Act, against any losses, claims, damages or liabilities, joint or
several, to which such Underwriter may become subject, under the Act or the
Exchange Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon any
breach of any of the representations and warranties of the Company contained
herein or any untrue statement or alleged untrue statement of any material fact
contained in the Registration Statement, the Prospectus, or any amendment or
supplement thereto, or any related preliminary prospectus or preliminary
prospectus supplement, or arise out of or are based upon the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, and will reimburse each
Underwriter for any legal or other expenses reasonably incurred by such
Underwriter in connection with investigating or defending any such loss, claim,
damage, liability or action as such expenses are incurred; provided, however,
that the Company will not be liable in any such case to the extent that any such
loss, claim, damage or liability arises out of or is based upon an untrue
statement or alleged untrue statement in or omission or alleged omission from
any of such documents in reliance upon and in conformity with written
information furnished to the Company by any Underwriter through the
Representatives specifically for use therein, it being understood and agreed
that the only such information furnished by any Underwriter consists of the
information described as such in subsection (b) below; and provided, further,
that with respect to any untrue statement or alleged untrue statement in or
omission or alleged omission from any preliminary prospectus, the indemnity
contained in this subsection (a) shall not inure to the benefit of any
Underwriter from whom the person asserting any such losses, claims, damages or
liabilities purchased the Offered Securities concerned, to the
11
extent that a prospectus relating to such Offered Securities was required to be
delivered by such Underwriter under the Act in connection with such purchase and
any such loss, claim, damage or liability of such Underwriter results from the
fact that there was not sent or given to such person, at or prior to the written
confirmation of the sale of such Offered Securities to such person, a copy of
the Prospectus (exclusive of material incorporated by reference) if the Company
had previously furnished copies thereof to such Underwriter.
(b) Each Underwriter will severally and not jointly indemnify and hold
harmless the Company, its directors and officers and each person, if any, who
controls the Company within the meaning of Section 15 of the Act, against any
losses, claims, damages or liabilities to which the Company may become subject,
under the Act or the Exchange Act or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are based
upon any untrue statement or alleged untrue statement of any material fact
contained in the Registration Statement, the Prospectus, or any amendment or
supplement thereto, or any related preliminary prospectus or preliminary
prospectus supplement, or arise out of or are based upon the omission or the
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading, in each case to the
extent, but only to the extent, that such untrue statement or alleged untrue
statement or omission or alleged omission was made in reliance upon and in
conformity with written information furnished to the Company by such Underwriter
through the Representatives specifically for use therein, and will reimburse any
legal or other expenses reasonably incurred by the Company in connection with
investigating or defending any such loss, claim, damage, liability or action as
such expenses are incurred, it being understood and agreed that the only such
information furnished by any Underwriter consists of the following information
in the Prospectus furnished on behalf of each Underwriter: (i) the concession
and reallowance figures appearing in the fourth paragraph under the caption
"Underwriting" and (ii) paragraphs 11 and 12 under the caption "Underwriting".
(c) Promptly after receipt by an indemnified party under this Section
of notice of the commencement of any action, such indemnified party will, if a
claim in respect thereof is to be made against the indemnifying party under
subsection (a) or (b) above, notify the indemnifying party in writing of the
commencement thereof; but the failure to notify the indemnifying party will not
relieve it from any liability which it may have under subsection (a) or (b)
above except to the extent that it has been materially prejudiced (through the
forfeiture of substantive rights or defenses) by such failure; and provided
further that the failure to notify the indemnifying party shall not relieve it
from any liability that it may have to any indemnified party otherwise than
under subsection (a) or (b) above. In case any such action is brought against
any indemnified party and it notifies the indemnifying party of the commencement
thereof, the indemnifying party will be entitled to participate therein and, to
the extent that it may wish, jointly with any other indemnifying party similarly
notified, to assume the defense thereof, with counsel satisfactory to such
indemnified party (who shall not, except with the consent of the indemnified
party, be counsel to the indemnifying party), and after notice from the
indemnifying party to such indemnified party of its election so to assume the
defense thereof, the indemnifying party will not be liable to such indemnified
party under this Section for any legal or other expenses subsequently incurred
by such indemnified party in connection with the defense thereof other than
reasonable costs of investigation. No indemnifying party shall, without the
prior written consent of the indemnified party, effect any settlement of any
pending or threatened action in respect of which any indemnified party is or
could have been a party and indemnity could have been sought hereunder by such
indemnified party unless such settlement includes an unconditional release of
such indemnified party from all liability on any claims that are the subject
matter of such action and does not include a statement as to or an admission of
fault, culpability or failure to act by or on behalf of any indemnified party.
(d) If the indemnification provided for in this Section is unavailable
or insufficient to hold harmless an indemnified party under subsection (a) or
(b) above, then each indemnifying party shall contribute to the amount paid or
payable by such indemnified party as a result of the losses, claims, damages or
liabilities referred to in subsection (a) or (b) above (i) in such proportion as
is appropriate to reflect the relative benefits received by the Company on the
one hand and the Underwriters on the other from the offering of the Offered
Securities
12
or (ii) if the allocation provided by clause (i) above is not permitted by
applicable law, in such proportion as is appropriate to reflect not only the
relative benefits referred to in clause (i) above but also the relative fault of
the Company on the one hand and the Underwriters on the other in connection with
the statements or omissions which resulted in such losses, claims, damages or
liabilities as well as any other relevant equitable considerations. The relative
benefits received by the Company on the one hand and the Underwriters on the
other shall be deemed to be in the same proportion as the total net proceeds
from the offering (before deducting expenses) received by the Company bear to
the total underwriting discounts and commissions received by the Underwriters
from the Company under this Agreement. The relative fault shall be determined by
reference to, among other things, whether the untrue or alleged untrue statement
of a material fact or the omission or alleged omission to state a material fact
relates to information supplied by the Company or the Underwriters and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such untrue statement or omission. The amount paid by an
indemnified party as a result of the losses, claims, damages or liabilities
referred to in the first sentence of this subsection (d) shall be deemed to
include any legal or other expenses reasonably incurred by such indemnified
party in connection with investigating or defending any action or claim which is
the subject of this subsection (d). Notwithstanding the provisions of this
subsection (d), no Underwriter shall be required to contribute any amount in
excess of the amount by which the total price at which the Offered Securities
underwritten by it and distributed to the public were offered to the public
exceeds the amount of any damages which such Underwriter has otherwise been
required to pay by reason of such untrue or alleged untrue statement or omission
or alleged omission. No person guilty of fraudulent misrepresentation (within
the meaning of Section 11(f) of the Act) shall be entitled to contribution from
any person who was not guilty of such fraudulent misrepresentation. The
Underwriters' obligations in this subsection (d) to contribute are several in
proportion to their respective underwriting obligations and not joint.
(e) The obligations of the Company under this Section shall be in
addition to any liability which the Company may otherwise have and shall extend,
upon the same terms and conditions, to each person, if any, who controls any
Underwriter within the meaning of the Act; and the obligations of the
Underwriters under this Section shall be in addition to any liability which the
respective Underwriters may otherwise have and shall extend, upon the same terms
and conditions, to each director of the Company, to each officer of the Company
who has signed the Registration Statement and to each person, if any, who
controls the Company within the meaning of the Act.
8. Default of Underwriters. If any Underwriter or Underwriters default
in their obligations to purchase Offered Securities hereunder on either the
First or any Optional Closing Date and the aggregate number of shares of Offered
Securities that such defaulting Underwriter or Underwriters agreed but failed to
purchase does not exceed 10% of the total number of shares of Offered Securities
that the Underwriters are obligated to purchase on such Closing Date, CSFBC may
make arrangements satisfactory to the Company for the purchase of such Offered
Securities by other persons, including any of the Underwriters, but if no such
arrangements are made by such Closing Date, the non-defaulting Underwriters
shall be obligated severally, in proportion to their respective commitments
hereunder, to purchase the Offered Securities that such defaulting Underwriters
agreed but failed to purchase on such Closing Date. If any Underwriter or
Underwriters so default and the aggregate number of shares of Offered Securities
with respect to which such default or defaults occur exceeds 10% of the total
number of shares of Offered Securities that the Underwriters are obligated to
purchase on such Closing Date and arrangements satisfactory to CSFBC and the
Company for the purchase of such Offered Securities by other persons are not
made within 36 hours after such default, this Agreement will terminate without
liability on the part of any non-defaulting Underwriter or the Company, except
as provided in Section 9 (provided that if such default occurs with respect to
Optional Securities after the First Closing Date, this Agreement will not
terminate as to the Firm Securities or any Optional Securities purchased prior
to such termination). As used in this Agreement, the term "Underwriter" includes
any person substituted for an Underwriter under this Section. Nothing herein
will relieve a defaulting Underwriter from liability for its default.
9. Survival of Certain Representations and Obligations. The respective
indemnities, agreements, representations, warranties and other statements of the
Company or its officers and of the several Underwriters
13
set forth in or made pursuant to this Agreement will remain in full force and
effect, regardless of any investigation, or statement as to the results thereof,
made by or on behalf of any Underwriter, the Company or any of their respective
representatives, officers or directors or any controlling person, and will
survive delivery of and payment for the Offered Securities. If this Agreement is
terminated pursuant to Section 8 or if for any reason the purchase of the
Offered Securities by the Underwriters is not consummated, the Company shall
remain responsible for the expenses to be paid or reimbursed by it pursuant to
Section 5 and the respective obligations of the Company and the Underwriters
pursuant to Section 7 shall remain in effect, and if any Offered Securities have
been purchased hereunder the representations and warranties in Section 2 and all
obligations under Section 5 shall also remain in effect. If the purchase of the
Offered Securities by the Underwriters is not consummated for any reason other
than solely because of the termination of this Agreement pursuant to Section 8
or the occurrence of any event specified in clause (iii), (iv), (v), (vi) or
(vii) of Section 6(c), the Company will reimburse the Underwriters for all
out-of-pocket expenses (including fees and disbursements of counsel) reasonably
incurred by them in connection with the offering of the Offered Securities.
10. Notices. All communications hereunder will be in writing and, if
sent to the Underwriters, will be mailed, delivered or telegraphed and confirmed
to the Representatives, c/o Credit Suisse First Boston Corporation, Eleven
Madison Avenue, New York, NY 10010-3629, Attention: Transactions Advisory Group;
Morgan Stanley & Co. Incorporated, 1585 Broadway, New York, NY 10036; and
Salomon Smith Barney Inc., 338 Greenwich, New York, NY 10013 or, if sent to the
Company, will be mailed, delivered or telegraphed and confirmed to it at
Chesapeake Energy Corporation, 6100 North Western Avenue, Oklahoma City,
Oklahoma 73118, Attention: Marcus C. Rowland, Executive Vice President and Chief
Financial Officer; provided, however, that any notice to an Underwriter pursuant
to Section 7 will be mailed, delivered or telegraphed and confirmed to such
Underwriter.
11. Successors. This Agreement will inure to the benefit of and be
binding upon the parties hereto and their respective successors and the officers
and directors and controlling persons referred to in Section 7, and no other
person will have any right or obligation hereunder.
12. Representation of Underwriters. The Representatives will act for
the several Underwriters in connection with this financing, and any action under
this Agreement taken by the Representatives jointly will be binding upon all the
Underwriters.
13. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, but all such
counterparts shall together constitute one and the same Agreement.
14. APPLICABLE LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED
IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO
PRINCIPLES OF CONFLICTS OF LAWS.
The Company hereby submits to the non-exclusive jurisdiction of the
Federal and state courts in the Borough of Manhattan in The City of New York in
any suit or proceeding arising out of or relating to this Agreement or the
transactions contemplated hereby.
14
If the foregoing is in accordance with the Representatives'
understanding of our agreement, kindly sign and return to us one of the
counterparts hereof, whereupon it will become a binding agreement between the
Company and several Underwriters in accordance with its terms.
Very truly yours,
CHESAPEAKE ENERGY CORPORATION
By: /s/ Michael A. Johnson
-----------------------------------------
Name: Michael A. Johnson
Title: Senior Vice President --
Accounting, Controller and
Chief Accounting Officer
The foregoing Underwriting Agreement is hereby confirmed and accepted as of the
date first above written.
CREDIT SUISSE FIRST BOSTON CORPORATION
MORGAN STANLEY & CO. INCORPORATED
SALOMON SMITH BARNEY INC.
Acting on behalf of themselves
and as the Representatives of
the several Underwriters.
By: CREDIT SUISSE FIRST BOSTON CORPORATION
By: /s/ Thomas E. Hassen
----------------------------------
Name: Thomas E. Hassen
Title: Managing Director
15
SCHEDULE A
Number of
Underwriter Firm Securities
----------- ---------------
Credit Suisse First Boston Corporation 4,800,000
Morgan Stanley & Co. Incorporated 4,800,000
Salomon Smith Barney Inc. 4,800,000
Bear, Stearns & Co. Inc. 2,400,000
Lehman Brothers Inc. 2,400,000
Johnson Rice & Company L.L.C. 800,000
----------
Total 20,000,000
==========