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OPTION PURCHASE AGREEMENT
THIS AGREEMENT is made this 28th day of February, 2000,
between GOTHIC ENERGY CORPORATION, an Oklahoma corporation ("GEC"), GOTHIC
PRODUCTION COMPANY, an Oklahoma corporation ("GPC" and, jointly and severally
with GEC, the "Buyer"), and CHESAPEAKE EXPLORATION LIMITED PARTNERSHIP, an
Oklahoma limited partnership, successor in interest by merger to Chesapeake
Gothic Corp. (the "Seller").
R E C I T A L S :
WHEREAS, the Seller owns (a) 61,007.474 shares of GEC's
Senior Redeemable Preferred Stock, Series B, $0.05 par value per share, (b) the
right to receive accrued and unpaid dividends on such Preferred Stock payable
in kind, and (c) 2,394,125 shares of GEC's Common Stock, $0.01 par value per
share (collectively, the "GEC Securities");
WHEREAS, the Seller and one or more of the wholly owned
subsidiaries of Chesapeake Energy Corporation (collectively, the "CEC
Parties"), and the Buyer and the Buyer's affiliated entities (collectively, the
"Gothic Parties") are parties to that certain Sale and Participation Agreement
dated as of March 31, 1998, as amended (the "Participation Agreement") pursuant
to which: (a) the Seller acquired an undivided fifty percent (50%) interest in
certain oil, gas and related assets from the Gothic Parties, (b) the CEC
Parties and the Gothic Parties provided for the maintenance, joint development
and operation of the Existing Acreage, the Related Interests and the
Acquisition Acreage (as those terms are defined in the Participation
Agreement), and (c) an area of mutual interest was created among the CEC
Parties and the Gothic Parties covering lands located in the States of
Arkansas, Kansas, New Mexico (excluding the Pecos Slope Acreage), Oklahoma and
Texas;
WHEREAS, the Buyer desires to purchase an option to
acquire all of the Seller's GEC Securities (the "Option") pursuant to the
Option Agreement in the form at Schedule "A" attached as a part hereof (the
"Option Agreement") which the Seller is willing to sell to the Buyer in
exchange for certain modifications to the Participation Agreement and the
performance of certain other agreements and documents set forth herein, all
subject to the terms and conditions set forth in this Agreement;
WHEREAS, one or more of the Discount Noteholders (as
hereinafter defined) have made the execution and delivery of this Agreement and
the Option a condition precedent to the Discount Noteholders entering into
agreements to convert the debt held by such parties to equity of the Buyer.
NOW, THEREFORE, in consideration of the mutual covenants
herein contained and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:
Exhibit "99.2"
Page 1 of 9 Pages
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2. Purchase and Sale. Subject to the terms and conditions set forth in
this Agreement, the Seller hereby agrees to sell the Option and the Buyer
hereby agrees to purchase the Option and perform the Purchase Consideration.
3. Purchase Consideration. Upon satisfaction or waiver of the conditions
precedent set forth in paragraph 3 hereof in accordance with the terms thereof,
and in consideration for the sale of the Option to the Buyer and as a condition
precedent to the effectiveness of such grant, the Buyer will cause the Gothic
Parties to take the following actions (the"Purchase Consideration") on the
Closing Date (as hereinafter defined):
3.1 Operations. The Gothic Parties will take all actions
necessary to turn over to the CEC Parties operations on: (a)
the xxxxx identified at Schedule "2.1" attached as a part
hereof; and (b) all xxxxx which have been or are currently
being developed under the Participation Agreement and all
other xxxxx now or hereafter proposed which are located in:
(i) Xxxxx and Xxxxx Counties, Kansas, and (ii) Texas, Beaver,
Harper, Ellis, Woods, Xxxxxxxx, Xxxxx, Major, Xxxxxx
(Township 19N only), Custer, Grady, Pittsburg, Xxxxxxx,
Xxxxxxx (except for Sections 19-36 of Township 3N Range 20E)
and LeFlore Counties, Oklahoma, by permanently resigning as
operator and waiving any rights under the Participation
Agreement to become operator of such xxxxx in the future. On
the Closing Date the Gothic Parties will execute and deliver
resignation of operator letters in form and substance
satisfactory to the Seller and will vote all of the Gothic
Parties' interests in such properties for the Chesapeake
Parties as successor operator (the "Operator Documents").
3.2 Extensions and Right of First Refusal. The Gothic Parties take
all actions necessary to: (a) extend the term of the
reassignment obligation under paragraph 1.3 of the
Participation Agreement until April 30, 2006; (b) extend the
Termination Date (as defined in paragraph 14 of the
Participation Agreement) until April 30, 2006, for the portion
of the Participation Area included in the States of Arkansas,
Kansas and Oklahoma and the portion of the State of Texas
located north of latitude 34(degrees)N; (c) amend the default
and remedies provisions under paragraph 13 of the
Participation Agreement; and (d) grant the CEC Parties
preferential purchase and related rights with respect to sales
of assets covered by the Participation Agreement. In order to
evidence such extension, the parties will execute and deliver
the Amendment Documents (as defined below) simultaneously with
the execution of this Agreement.
4. Conditions Precedent to Option Grant. Unless waived in writing by the
Buyer and the Seller, the sale of the Option pursuant to this Agreement is
subject to the satisfaction of all of the following conditions precedent on or
before March 14, 2000 (the "Condition Satisfaction Period"), unless extended in
writing by the Seller:
4.1 Authorization. The terms of this Agreement and the Option
will have been duly authorized by the respective Boards of
Directors of the Buyer and the Seller.
Exhibit "99.2"
Page 2 of 9 Pages
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4.2 Consents. The Buyer and the Seller will have received
required written consents to the terms and conditions of this
Agreement from the holders of the Buyer's 14 1/8% Senior
Secured Discount Notes (the "Discount Noteholders"), Bank
One, Texas, N.A., and any other necessary parties.
4.3 No Actions. No actions will have been taken or threatened to
prevent any party from entering into of this Agreement,
performing this Agreement or seeking other relief as a result
of this Agreement.
4.4 Discount Noteholders. The Discount Noteholders and the Gothic
Parties will have executed and delivered the instruments
necessary to evidence the agreement of the Discount
Noteholders to convert all of the notes held by the Discount
Noteholders into equity of the Buyer.
4.5 Additional Documents. The Gothic Parties and the CEC Parties
will have each executed and delivered to the other parties
such additional documents and instruments as might be
reasonably requested by the Buyer or the Seller to consummate
this Agreement.
4.6 JIB Payments. The Gothic Parties and the CEC Parties will
have each paid current all joint interest xxxxxxxx owing to
the parties as required by the Joint Operating Agreements
attached to the Participation Agreement.
5. Closing. Unless extended in writing by the Seller, the transactions
contemplated by this Agreement will be consummated on the date (the "Closing
Date") which is two (2) business days after the date all of the conditions
under paragraph 3 of this Agreement have been satisfied in full or waived in
writing by the Buyer and the Seller.
5.1 Seller's Deliveries. Subject to the terms and conditions of
this Agreement and the performance of the Buyer's obligations
under paragraph 4.2 of this Agreement, on the Closing Date
the Seller will deliver or cause to be delivered to the Buyer
the following items (all documents will be duly executed and
acknowledged where required):
5.1.1 Option. The Option and the Amendment Documents (as
hereinafter defined);
5.1.2 Evidence of Authority. Such resolutions,
certificates of good standing, incumbency
certificates and other evidence of authority with
respect to the Seller as might be reasonably
requested by the Buyer;
5.1.3 Additional Documents. Such additional documents as
might be reasonably requested by Gothic to
consummate this Agreement.
Exhibit "99.2"
Page 3 of 9 Pages
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5.2 Buyer's Deliveries. On the Closing Date, the Buyer will
deliver or cause to be delivered to the Seller the following
items (all documents will be duly executed and acknowledged
where required):
5.2.1 Purchase Consideration. The Gothic Parties will have
each executed and delivered to the Seller the Second
Amendment to Participation Agreement in the form of
Schedule "4.2.1" attached hereto as a part hereof
and the other documents contemplated thereby (the
"Amendment Documents"), the Operator Documents and
any other documents required to evidence the
Purchase Consideration;
5.2.2 Evidence of Authority. Such corporate resolutions,
certificates of good standing, incumbency
certificates and other evidence of authority with
respect to each of the Gothic Parties as might be
reasonably requested by the Seller;
5.2.3 Additional Documents. Such additional documents as
might be reasonably requested by the Seller to
consummate this Agreement.
6. Seller Representations and Warranties. The Seller hereby represents
and warrants to the Buyer that:
5.1 Title. The Seller has good and valid title to the GEC
Securities, free and clear of all liens, claims and
encumbrances.
5.2 Authority and Reliance. The Seller has taken all necessary
action to authorize the execution, delivery and performance
of this Agreement, the Amendment Documents, the Operator
Documents and the Option Agreement and has adequate power,
authority and legal right to enter into, execute, deliver and
perform this Agreement and to issue the Option as
contemplated hereby.
5.3 Consents. No consent, approval, license, qualification or
formal exemption from, nor any filing, declaration or
registration with, any court, governmental agency or
regulatory authority or any securities exchange is required
in connection with the execution, delivery or performance by
the Seller of this Agreement.
5.4 Litigation. There is no action, suit, investigation or
proceeding, governmental or otherwise, pending or, to the
best knowledge of the Seller, threatened to which any of the
CEC Parties is or would be a party which seeks to restrain,
enjoin, prevent the consummation of or otherwise challenge
this Agreement or the Seller's granting of the Option or
questions the legality or validity of any such transactions
or seeks to recover damages or obtain other relief in
connection with any such transactions.
Exhibit "99.2"
Page 4 of 9 Pages
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7. Buyer Representations and Warranties. The Buyer hereby represents and
warrants to the Seller that:
7.1 Authority and Reliance. The Buyer has taken all necessary
action to authorize the execution, delivery and performance
of this Agreement, the Amendment Documents, the Operator
Documents and the Option Agreement and has all requisite
corporate power, authority and legal right to enter into,
execute, deliver and perform this Agreement, the Amendment
Documents, the Operator Documents and the Option Agreement.
The Buyer further represents and warrants that, in purchasing
the Option, the Buyer has relied upon independent
investigations made by the Buyer or the Buyer's
representatives, that the Buyer has had sufficient
opportunities to make inquiries of the Seller and that the
Buyer and such representatives have been given the
opportunity to examine all documents concerning the terms and
conditions of the Option. The Buyer represents and warrants
that the Buyer is experienced in the oil and gas business,
has knowledge and experience in business and financial
matters and is competent to evaluate the value of the Option
and the benefits and risks relating to the purchase of the
Option and the Buyer has determined that the consideration
being given by the Buyer is the fair value equivalent of the
consideration being received by the Buyer for the granting of
the Option.
7.2 Consents. The Buyer has obtained and provided to the Seller
all consents, approvals or waivers necessary or appropriate
for the Buyer to enter into this Agreement and to consummate
the transactions contemplated hereby. No other authorization,
consent, approval, license, qualification or formal exemption
from, nor any filing, declaration or registration with, any
court, governmental agency or regulatory authority or any
securities exchange is required in connection with the
execution, delivery or performance by the Gothic Parties of
this Agreement.
7.3 Litigation. There is no action, suit, investigation or
proceeding, governmental or otherwise, pending or, to the
best knowledge of the Buyer, threatened to which any of the
Gothic Parties is or would be a party which seeks to
restrain, enjoin, prevent the consummation of or otherwise
challenge this Agreement or the Buyer's purchase of the
Option or questions the legality or validity of any such
transactions or seeks to recover damages or obtain other
relief in connection with any such transactions.
8. Default; Failure of Conditions. In the event either party fails to
perform such party's obligations hereunder (except as excused by another
party's default) (the "Defaulting Party") such failure will constitute an event
of default under this Agreement and the other party (the "Other Party") will
have the right to exercise any and all remedies available at law or in equity
unless such default is waived by the Other Party or cured by the Defaulting
Party within five (5) business days after receipt of notice of such default.
The remedies provided by this Agreement are cumulative and will not exclude any
other remedy to which the Other Party might be entitled under this Agreement or
applicable law. In the event the Other Party elects to selectively and
successfully enforce the
Exhibit "99.2"
Page 5 of 9 Pages
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Other Party's rights under this Agreement, such action will not be deemed a
waiver or discharge of any other remedy. During the pendency of any default or
disputes, this Agreement will be deemed to be in full force. Notwithstanding
anything herein to the contrary, on the occurrence of a default or other breach
of this Agreement by the Buyer, the Seller may terminate the Option and the
Option Agreement in the sole and absolute discretion of the Seller.
9. Standstill. Each of the parties irrevocably agree that the
negotiation, preparation, execution and delivery of this Agreement and any
preliminary discussions with any person regarding this Agreement, the Option or
any similar transaction will not and did not violate any standstill,
nonsolicitation or similar agreement including, without implied limitation,
paragraph 5.4 of the Securities Purchase Agreement among the Buyer, Chesapeake
Acquisition Corporation and Chesapeake Gothic Corp. dated March 31, 1998 (the
"Securities Purchase Agreement"), and relating to the purchase of the GEC
Securities by affiliates of the Seller. The Buyer hereby releases, acquits and
forever discharges the CEC Parties and the CEC Parties' directors, officers,
shareholders, partners, members, employees, agents, attorneys, parent
corporations, subsidiary corporations, affiliates and such parties' respective
successors and assigns from any and all claims, whether asserted or assertable,
known or unknown, and all actions, debts, suits, causes of action, both at law
and in equity, demands, defenses, offsets, liabilities, losses, obligations or
damages directly or indirectly related to any violation or alleged violation of
the Securities Purchase Agreement arising out of any action, inaction, contact,
discussions or matter prior to the date of this Agreement including, without
implied limitation, any violation or alleged violation of any standstill or
confidentiality agreement set forth in the Securities Purchase Agreement or
otherwise.
10. Deferral of Operations Turnovers. Notwithstanding anything to the
contrary in this Agreement or in the Participation Agreement, during the
Condition Satisfaction Period, the Seller will not be required to turnover
operations on any xxxxx located in the areas described in paragraph 2.1 of this
Agreement including, without limitation, the Della 1-9 well.
11. Miscellaneous. It is further agreed as follows:
11.1 Time. Time is of the essence of this Agreement.
11.2 Notices. Any notice, demand or communication required or
permitted to be given by any provision of this Agreement will
be in writing and will be deemed to have been given and
received when delivered personally or by telefacsimile to the
party designated to receive such notice, or on the date
following the day sent by overnight courier, or on the third
(3rd) business day after the same is sent by certified mail,
postage and charges prepaid, directed to the following
addresses or to such other or additional addresses as any
party might designate by written notice to the other parties:
Exhibit "99.2"
Page 6 of 9 Pages
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To the Buyer: Gothic Energy Corporation
0000 Xxxxx Xxxx Xxxxxx, Xxxxx 0000
Xxxxx, Xxxxxxxx 00000
Attn: Xxxxxxx X. Xxxxx
Telephone (000) 000-0000
Fax No. (000) 000-0000
With a copy to: Pray, Walker, Jackman, Xxxxxxxxxx & Xxxxxx
000 XxxXx Xxxxx
000 Xxxx 0xx Xxxxxx
Xxxxx, Xxxxxxxx 00000-0000
Attn: Xxx X. Xxxxxxx, Xx.
Telephone (000) 000-0000
Fax No. (000) 000-0000
To the Seller: Chesapeake Energy Corporation
0000 Xxxxx Xxxxxxx Xxxxxx
Xxxxxxxx Xxxx, Xxxxxxxx 00000
Attn: Xxxxxx X. XxXxxxxxx
Telephone (000) 000-0000
Fax No. (000) 000-0000
With a copy to: Self, Xxxxxxx & Lees, Inc.
2725 Oklahoma Tower
000 Xxxx Xxxxxx
Xxxxxxxx Xxxx, Xxxxxxxx 00000
Attn: Xxx Xxxx
Telephone (000) 000-0000
Fax: (000) 000-0000
11.3 Press Release. Except to the extent required by applicable
disclosure requirements, all press releases relating to this
Agreement and the transactions contemplated by this Agreement
will be approved by the Buyer and the Seller prior to
dissemination.
11.4 Choice of Law. This Agreement will be interpreted, construed
and enforced in accordance with the laws of the State of
Oklahoma and will be deemed for such purposes to have been
made, executed and performed in Oklahoma County, Oklahoma.
All claims, disputes and other matters in question arising
out of or relating to this Agreement will be decided by
proceedings instituted and litigated in the District Court of
Oklahoma County, Oklahoma, or the United States District
Court for the Western District of Oklahoma.
Exhibit "99.2"
Page 7 of 9 Pages
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11.5 Headings. The paragraph headings contained in this Agreement
are for reference purposes only and are not intended to
affect in any way the meaning or interpretation of this
Agreement.
11.6 No Oral Agreements. There are no unwritten oral agreements,
understandings, warranties or representations with respect to
the subject matter of this Agreement.
11.7 Assignment. It is agreed that neither party may assign such
party's rights nor delegate such party's duties under this
Agreement without the express written consent of the other
party to this Agreement.
11.8 Amendment. Neither this Agreement, nor any of the provisions
hereof can be changed, waived, discharged or terminated,
except by an instrument in writing signed by the party
against whom enforcement of the change, waiver, discharge or
termination is sought.
11.9 Severability. If any clause or provision of this Agreement is
illegal, invalid or unenforceable under any present or future
law, the remainder of this Agreement will not be affected
thereby. It is the intention of the parties that if any such
provision is held to be illegal, invalid or unenforceable,
there will be added in lieu thereof a provision as similar in
terms to such provisions as is possible to cause such
provision to be legal, valid and enforceable.
11.10 Attorney Fees. If any party institutes an action or
proceeding against any other party relating to the provisions
of this Agreement, the party to such action or proceeding
which does not prevail will reimburse the prevailing party
therein for the reasonable expenses of attorneys' fees and
disbursements incurred by the prevailing party.
11.11 Waiver. Waiver of performance of any obligation or term
contained in this Agreement by any party, or waiver by one
party of the other's default hereunder must be in writing and
will not operate as a waiver of performance of any other
obligation or term of this Agreement or constitute a future
waiver of the same obligation or a waiver of any future
default.
IN WITNESS WHEREOF, the Seller and the Buyer have executed
this Agreement as of the date first above written.
GOTHIC ENERGY CORPORATION, an Oklahoma corporation
By /s/ Xxxxxxx X. Xxxxx
-----------------------------------------------
Xxxxxxx X. Xxxxx, President
Exhibit "99.2"
Page 8 of 9 Pages
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GOTHIC PRODUCTION COMPANY, an Oklahoma corporation
By /s/ Xxxxxxx X. Xxxxx
------------------------------------------
Xxxxxxx X. Xxxxx, President
(jointly and severally referred to herein as
the "Buyer")
CHESAPEAKE EXPLORATION LIMITED PARTNERSHIP,
an Oklahoma limited partnership
By: Chesapeake Operating, Inc.,
General Partner
By /s/ Xxxxxx X. XxXxxxxxx
----------------------------------
Xxxxxx X. XxXxxxxxx,
Chief Executive Officer
(the "Seller")
Exhibit "99.2"
Page 9 of 9 Pages
