EXHIBIT 10.2
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SECURITIES PURCHASE AGREEMENT
DATED AS OF MARCH 31, 1998
BY AND AMONG
GOTHIC ENERGY CORPORATION,
CHESAPEAKE GOTHIC CORP.
AND
CHESAPEAKE ACQUISITION CORPORATION
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TABLE OF CONTENTS
Page
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ARTICLE I
DEFINITIONS
Section 1.1 Definitions.................................... 1
Section 1.2. Accounting Terms; Financial Statements......... 3
ARTICLE II
ISSUE OF SECURITIES; PURCHASE AND SALE OF
SECURITIES; RIGHTS OF HOLDERS OF SECURITIES
Section 2.1. Issue of Securities............................ 4
Section 2.2. Purchase and Sale of Securities................ 4
ARTICLE III
REPRESENTATIONS AND WARRANTIES
Section 3.1. Representations and Warranties of the Company.. 5
Section 3.2. Representations and Warranties of the
Purchaser and Purchaser's Parent............... 9
ARTICLE IV
CONDITIONS PRECEDENT TO CLOSING
Section 4.1. Conditions Precedent to Obligations of the
Purchaser......................................11
Section 4.2. Conditions Precedent to Obligations of the
Company........................................12
ARTICLE V
COVENANTS
Section 5.1. Furnishing of Information......................13
Section 5.2. Use of Proceeds................................13
Section 5.3. Board Representation...........................13
Section 5.4. Standstill Agreement...........................14
Section 5.5. Confidentiality................................14
Section 5.6. Conduct and Preservation of Business...........14
Section 5.7. Preferential Right.............................15
Section 5.8. Execution of Basic Documents...................15
ARTICLE VI
MISCELLANEOUS
Section 6.1. Termination....................................16
Section 6.2. No Waiver; Modifications in Writing............16
Section 6.3. Communications.................................16
Section 6.4. Costs, Expenses and Taxes......................16
Section 6.5. Determinations.................................17
Section 6.6. Execution in Counterparts......................17
Section 6.7. Binding Effect; Assignment.....................17
Section 6.8. GOVERNING LAW..................................17
Section 6.9. Severability of Provisions.....................17
Section 6.10. Headings.......................................17
Section 6.11. Public Announcements...........................17
Schedule 3.1(d)(A) Subsidiaries
Schedule 3.1(d)(B) Options, Warrants, Convertible Securities, etc.
Schedule 3.1(d)(C) Registration Rights
Exhibit 1 Certificate of Designation
Exhibit 2 Form of Common Stock Warrant
Exhibit 3 Participation Agreement
Exhibit 4 Arkoma Agreement
Exhibit 5 Registration Rights Agreement
Exhibit 6 Form of Opinion of Company Counsel
This Securities Purchase Agreement (this "Agreement"), dated as of
March 31, 1998, is made by and among Gothic Energy Corporation, an Oklahoma
corporation (the "Company"), Chesapeake Gothic Corp., an Oklahoma corporation
(the "Purchaser"), and Chesapeake Acquisition Corporation, an Oklahoma
corporation ("Purchaser's Parent").
In consideration of the mutual covenants and agreements set forth herein
and for good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties agree as follows:
ARTICLE I
DEFINITIONS
-----------
Section 1.1 Definitions. As used in this Agreement, and unless the
context requires a different meaning, the following terms have the meanings
indicated:
"Act" means the Securities Act of 1933, as amended, and the rules
and regulations of the Commission thereunder.
"Affiliate" of any specified Person means any other Person which
directly or indirectly through one or more intermediaries controls, or is
controlled by, or is under common control with, such specified Person. For
purposes of this definition, "control" (including, with correlative meanings,
the terms "controlling," "controlled by" and "under common control with"), as
used with respect to any Person, means the possession, directly or indirectly,
of the power to direct or cause the direction of the management or policies of
such Person, whether through the ownership of voting securities, by agreement or
otherwise; provided, however, that, beneficial ownership of at least 10% of the
voting securities of a Person shall be deemed to be control.
"Agreement" means this Agreement, as the same may be amended,
supplemented or modified in accordance with the terms hereof and in effect.
"Basic Documents" means, collectively, the Certificate of
Designation, the Common Stock Warrant, the Participation Agreement, the Arkoma
Agreement, the Registration Rights Agreement and this Agreement.
"Business Day" means each Monday, Tuesday, Wednesday, Thursday and
Friday which is not a day on which banking institutions in New York City are
authorized or obligated by law to close.
"Capitalized Lease Obligation" means an obligation to pay rent or
other amounts under a lease of property, real or personal, that is required to
be capitalized for financial reporting
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purposes in accordance with GAAP, and the amount of such obligation shall be the
capitalized amount thereof determined in accordance with GAAP.
"Certificate of Designation" means the Certificate of Designation
duly adopted by the Board of Directors of the Company setting forth the rights,
preferences and priorities of the Preferred Stock and filed with, and accepted
for filing, so as to be effective, by the Secretary of the State of Oklahoma
prior to the Closing hereunder and which is in the form of Exhibit 1 attached
hereto.
"Closing" has the meaning provided therefor in Section 2.2 of this
Agreement.
"Commission" means the Securities and Exchange Commission or any
similar agency then having jurisdiction to enforce the Act.
"Common Stock" means the Common Stock of the Company, $.01 par
value per share.
"Common Stock Warrant" means the warrant to be issued to the
Purchaser to purchase shares of Common Stock of the Company.
"Company" has the meaning provided therefor in the preamble of this
Agreement.
"Default" means any event, act or condition which, with notice or
lapse of time or both, would constitute an Event of Default.
"ERISA" has the meaning provided therefor in Section 3.1 of this
Agreement.
"Event of Default" means a material breach of any representation,
warranty or covenant of any of the Basic Documents that has not been remedied
within 30 days of receipt of notice of such breach by the defaulting party.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations of the Commission thereunder.
"Exchange Act Filings" means the Company's Form 10-KSB for the year
ended December 31, 1997 filed under the Exchange Act, a draft copy of which has
been provided to Purchaser and a filed copy of which shall be provided to
Purchaser prior to the Closing.
"Information" has the meaning provided therefor in Section 2.1 of
this Agreement.
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"Lien" means, with respect to any property or assets of any Person,
any mortgage or deed of trust, pledge, hypothecation, assignment, deposit
arrangement, security interest, lien, charge, easement, encumbrance, preference,
priority or other security agreement or preferential arrangement of any kind or
nature whatsoever on or with respect to such property or assets (including
without limitation, any Capitalized Lease Obligation, conditional sales, or
other title retention agreement having substantially the same economic effect as
any of the foregoing).
"Material Adverse Effect" means, with respect to the Company and its
Subsidiaries, a material adverse effect on the business, condition (financial or
otherwise), results of operations or prospects of the Company and its
Subsidiaries, taken as a whole.
"Memorandum" means the Gothic Energy Corporation Confidential
Private Placement Memorandum, dated February 20, 1998.
"Notes" means some combination of senior notes, senior secured
notes or zero coupon notes to be issued by the Company in an aggregate principal
amount not less than $285 million.
"Person" means any individual, corporation, partnership, limited
liability company, joint venture, association, joint-stock company, trust,
unincorporated organization or other legal entity.
"Preferred Stock" means the Senior Redeemable Preferred Stock,
Series B, of the Company, $.05 par value per share.
"Purchaser" has the meaning provided therefor in the preamble of
this Agreement.
"Registration Rights Agreement" means that certain Registration
Rights Agreement to be entered into by and between the Company and the
Purchaser in the form attached hereto as Exhibit 5.
"Securities" has the meaning provided therefor in Section 2.1 of
this Agreement.
"State" means each of the states of the United States of America,
the District of Columbia and the Commonwealth of Puerto Rico.
"State Commission" means any agency of any State having
jurisdiction to enforce such State's securities laws.
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"Subsidiaries" means of any specified Person, any corporation,
partnership, limited liability company, joint venture, association or other
business entity, whether now existing or hereafter organized or acquired, (i) in
the case of a corporation, of which more than 50% of the total voting power of
the capital stock entitled (without regard to the occurrence of any contingency)
to vote in the election of directors, officers or trustees thereof is held by
such first-named Person or any of its Subsidiaries; or (ii) in the case of a
partnership, limited liability company, joint venture, association or other
business entity, with respect to which such first-named Person or any of its
subsidiaries has the power to direct or cause the direction of the management
and policies of such entity by contract or otherwise or if in accordance with
generally accepted accounting principles such entity is consolidated with the
first-named Person for financial statement purposes.
"Time of Purchase" has the meaning provided therefor in Section
2.2 of this Agreement.
"Warrant Shares" has the meaning provided therefor in Section 2.1
of this Agreement.
Section 1.2. Accounting Terms; Financial Statements. All accounting
terms used herein not expressly defined in this Agreement shall have the
respective meanings given to them in accordance with sound accounting practice.
The term "sound accounting practice, shall mean such accounting practice as, in
the opinion of the independent accountants regularly retained by the Company,
conforms at the time to generally accepted accounting principles in the United
States applied on a consistent basis except for changes with which such
accountants concur. All determinations to which accounting principles apply
shall be made in accordance with sound accounting practice.
ARTICLE II
ISSUE OF SECURITIES; PURCHASE AND SALE OF
SECURITIES; RIGHTS OF HOLDERS OF SECURITIES
-------------------------------------------
Section 2.1. Issue of Securities. The Company has authorized (i) the
issuance of up to $50,000,000 aggregate liquidation value of the Preferred Stock
(the "Preferred Shares"), (ii) the issuance of a Common Stock Warrant to
purchase 2,439,246 shares of Common Stock at an exercise price of $.01 per share
(the "Warrant Shares") in the form attached hereto as Exhibit 2, (iii) the
execution, delivery and performance of that certain Sale and Participation
Agreement to be entered into between the Company and the Purchaser (the
"Participation Agreement") in the form attached hereto as Exhibit 3 and (iv)
the execution, delivery and performance of that certain
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Oil and Gas Asset Purchase Agreement to be entered into between the Company and
the Purchaser (the "Arkoma Agreement") in the form attached hereto as Exhibit 4.
The Preferred Stock will have the rights, preferences and priorities set forth
in the Certificate of Designation. The aggregate liquidation value of the
Preferred Stock will increase to the extent of accrued dividends paid in
additional shares of Preferred Stock. The Common Stock Warrant will be
substantially in the form as set out as Exhibit 2 attached hereto. The Preferred
Stock, the Common Stock Warrants and the Warrant Shares are collectively
referred to herein as the "Securities."
The Securities will be offered without being registered under the
Act, in reliance on exemptions therefrom, including the exemption provided by
Section 4(2) of the Act.
In connection with the sale of the Securities, the Company has
provided the Purchaser with certain information including the Memorandum, the
Exchange Act Filings and a summary of the terms of the Preferred Stock (the
"Information.")
Section 2.2. Purchase and Sale of Securities . Subject to the terms and
conditions herein set forth, the Company agrees that it will sell to the
Purchaser, and the Purchaser and Purchaser's Parent agree that Purchaser will
purchase from the Company at the Time of Purchase the Securities.
The Securities shall have the terms set forth herein, in the
Certificate of Designation and the Common Stock Warrant, respectively.
The purchase and sale of $50,000,000 liquidation value of Preferred
Stock and Common Stock Warrant pursuant to this Agreement will take place at a
closing (the "Closing") at the offices of the Company, or at such other
location as the parties may agree, on or before 10:00 A.M., New York City time,
on April 27, 1998. The time at which the Closing is concluded is referred to
herein as the "Time of Purchase."
Delivery of the Securities to be purchased by the Purchaser pursuant
to this Agreement shall be made at the Closing by the Company delivering
definitive certificates representing the Securities to the Purchaser, in either
case, against payment therefor in immediately available same-day funds to an
account previously specified by the Company in writing. Any tax on the issuance
of the Securities will be paid by the Company at the Time of Purchase pursuant
to Section 6.4 hereof.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES
------------------------------
Section 3.1. Representations and Warranties of the Company. The Company
represents and warrants to the Purchaser and Purchaser's Parent as of the date
hereof and as of the Time of Purchase as follows:
(a) The Information provided to the Purchaser will not, at the
Time of Purchase, contain any untrue statement of a material fact or omit to
state a material fact necessary to make the statements therein, in the light of
the circumstances under which they were made, not misleading.
(b) The audited consolidated financial statements of the Company and
its Subsidiaries, together with related notes and schedules thereto, included in
the Exchange Act Filings fairly represent in all material respects the financial
condition of the Company and its Subsidiaries as of the dates indicated and the
results of operations and cash flows for the periods therein specified in
conformity with generally accepted accounting principles consistently applied
throughout the periods involved (except as otherwise stated therein). Coopers &
Xxxxxxx, which reported upon the audited financial statements and schedules
included in the Exchange Act Filings, is an independent public accounting firm
as required by the Act and the rules and regulations thereunder.
(c) The Company is a corporation duly organized, validly existing
and in good standing under the laws of the State of Oklahoma. Each of the
Company's Subsidiaries, including Gothic Production Corporation, a wholly-owned
Subsidiary of the Company formed for the purpose of becoming the primary
operating Subsidiary of the Company and owning substantially all of the
Company's assets, is a corporation duly incorporated or organized, validly
existing and in good standing under the laws of their respective jurisdictions
of incorporation. Each of the Company and its Subsidiaries is duly qualified and
in good standing as a foreign corporation, and is authorized to do business, in
each jurisdiction in which the ownership or leasing of any property or the
nature of its business makes such qualification necessary and in which the
failure so to qualify would have a Material Adverse Effect.
(d) The authorized capital stock of the Company consists of
100,500,000 shares, of which 100,000,000 shares, par value $.01 per share, are
designated "Common Stock" and 500,000 shares, par value $.05 per share, are
designated "Preferred Stock." The Company has 16,261,640 shares of Common Stock
issued and outstanding and 37,000 shares of Senior Redeemable Preferred Stock,
Series A, issued and outstanding. All of the issued and outstanding shares of
capital stock of the Company and its Subsidiaries are validly issued, fully paid
and non-
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assessable and were not issued in violation of any preemptive or similar rights.
The Company has no Subsidiaries other than those listed on Schedule 3.1(d)(A)
attached hereto. All of the capital stock of the Company's subsidiaries is
owned by the Company, free and clear of any Liens. Except as described on
Schedule 3.1(d)(B) attached hereto, there are no outstanding securities,
subscriptions, options, warrants, rights, convertible securities or other
binding agreements or commitments of any character obligating the Company or its
Subsidiaries to issue any securities other than the Common Stock Warrant.
Except as described in the Information, no Person other than the Purchaser has
any rights to the registration of capital stock or other securities of the
Company, under the Act or otherwise. Except as disclosed in the Information,
there is no agreement, understanding or arrangement among the Company or its
Subsidiaries and its respective stockholders or any other person relating to (i)
the ownership or disposition of any capital stock of the Company or any of its
Subsidiaries, (ii) the election of directors of the Company or any of its
Subsidiaries or (iii) the governance of the Company's or any such Subsidiary's
affairs; and no such agreements, arrangements or understandings will be breached
or violated as a result of the execution and delivery of, or the consummation of
the transactions contemplated by, this Agreement or the other Basic Documents.
The Company has reserved for issuance upon exercise of the Common Stock Warrant
shares of Common Stock sufficient in number for the full exercise thereof at the
initial exercise price, and the Warrant Shares will, upon issuance, be fully
paid, non-assessable and free of preemptive rights and will not be subject to
any restrictions on the transfer thereof, except for such restrictions set forth
herein and in the Warrant Agreement and under the Act. Except as set forth on
Schedule 3.1(d)(C) attached hereto, there are no outstanding registration rights
with respect to any shares of capital stock of the Company.
(e) The Certificate of Designation has been duly authorized by the
Company, its board of directors and all required stockholder action and when
executed and delivered by the Company and filed with the Secretary of State of
the State of Oklahoma will constitute a valid and legally binding agreement of
the Company, enforceable against it in accordance with its terms, except that
the enforcement thereof may be subject to bankruptcy, insolvency,
reorganization, fraudulent conveyance, moratorium or similar laws now or
hereafter in effect relating to creditors' rights and remedies generally and
general principles of equity and the discretion of the court before which any
proceeding therefor may be brought. The Certificate of Incorporation of the
Company, by virtue of the filing of the Certificate of Designation, sets forth
the rights, preferences and priorities of the Preferred Stock.
(f) This Agreement has been duly authorized by the Company and, when
executed and delivered by the Company (assuming the due authorization, execution
and delivery by the Purchaser), will constitute a valid and legally binding
agreement of the Company, enforceable against it in accordance with its terms,
except as such enforceability may be limited by (i) bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium or similar laws
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now or hereafter in effect relating to creditors' rights and remedies generally
and (ii) general equitable principles whether asserted in an action at law or in
equity, and that such enforceability may be subject to the discretion of the
court before which any proceedings therefor may be brought.
(g) The Common Stock Warrant and the Warrant Shares have been duly
authorized by the Company and, when the Common Stock Warrant is executed by the
Company and issued by the Company to the Purchaser in accordance with the terms
of this Agreement, the Common Stock Warrant will constitute the valid and
legally binding obligation of the Company enforceable in accordance with its
terms, except as such enforceability may be limited by (i) bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium or similar laws
now or hereafter in effect relating to creditors' rights and remedies generally
and (ii) general equitable principles, whether asserted in an action at law or
in equity, and that such enforceability may be subject to the discretion of the
court before which any proceedings therefor may be brought.
(h) The Company has all requisite corporate power and authority to
(i) execute, deliver and perform its obligations under this Agreement and each
of the other Basic Documents, (ii) execute, deliver and perform its obligations
under all other agreements and instruments executed and delivered by the Company
pursuant to or in connection with this Agreement and each of the other Basic
Documents and (iii) issue the Securities pursuant hereto in the manner and for
the purpose contemplated by this Agreement. The execution and delivery by the
Company of this Agreement and each of the other Basic Documents, and the
consummation of the transactions contemplated hereby and thereby, have been duly
and validly authorized by the Company.
(i) Except as set forth in the Memorandum and the Exchange Act
Filings, subsequent to the date as of which information is given in the Exchange
Act Filings and immediately prior to the Time of Purchase, there has not been
(i) any event or condition that has had or that would reasonably be expected to
have a Material Adverse Effect on the Company and its Subsidiaries, taken as a
whole, (ii) any transaction entered into by the Company or any Subsidiary, other
than in the ordinary course of business, that is material to the Company and its
Subsidiaries, taken as a whole, or (iii) any dividend or distribution of any
kind declared, paid or made by the Company on its Common Stock that has not been
approved by the Purchaser in writing.
(j) There is no action, suit, investigation or proceeding,
governmental or otherwise, pending or, to the best knowledge of the Company,
threatened to which the Company or any of its Subsidiaries is or would be a
party or of which the properties of the Company or its Subsidiaries are or may
be subject, that (i) seeks to restrain, enjoin, prevent the consummation of or
otherwise challenge the issuance and sale of the Securities by the Company or
any of the other
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transactions contemplated by this Agreement, (ii) questions the legality or
validity of any such transactions or seeks to recover damages or obtain other
relief in connection with any such transactions or (iii) would have a Material
Adverse Effect on the Company and its Subsidiaries, taken as a whole.
(k) The execution, delivery and performance by the Company of this
Agreement and the other Basic Documents, and the issuance and sale by the
Company of the Securities and the execution, delivery and performance by the
Company of all other agreements and instruments to be executed and delivered by
the Company pursuant hereto or thereto or in connection herewith or therewith,
and compliance by the Company with the terms and provisions hereof and thereof,
do not and will not (i) violate any provision of any law, rule or regulation
(including, without limitation, Regulation G, T, U or X of the Board of
Governors of the Federal Reserve System), order, writ, judgment, decree,
determination or award presently in effect or in effect at the Time of Purchase
having applicability to the Company or any of its Subsidiaries, (ii) conflict
with, result in a breach of or constitute a default under the certificate of
incorporation or by-laws of the Company or any of its Subsidiaries, or, as of
the Time of Purchase, any indenture or loan or credit agreement, or any other
agreement or instrument to which the Company or any of its Subsidiaries is a
party or by which the Company or any of its Subsidiaries or any of their
respective properties may be bound or affected, or (iii) except as contemplated
by this Agreement and the other Basic Documents, result in, or require the
creation or imposition of, any Lien upon or with respect to any of the
properties now owned or hereafter acquired by the Company or any of its
Subsidiaries, except, in the case of clause (i), (ii) or (iii) of this Section
3.1(k), where such violation, conflict, default or creation or imposition of any
Lien would not (individually or in the aggregate) have a Material Adverse Effect
on the Company and its Subsidiaries, taken as a whole.
(l) Each agreement or instrument executed and delivered by the
Company in connection with this Agreement has been duly and validly authorized,
executed and delivered by the Company and constitutes or will constitute a
legal, valid and binding obligation of the Company, enforceable against the
Company in accordance with its terms, except as such enforceability may be
limited by (i) bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium or similar laws now or hereafter in effect relating to creditors'
rights and remedies generally and (ii) general equitable principles, whether
asserted in an action at law or in equity, and that such enforceability may be
subject to the discretion of the court before which any proceedings therefor may
be brought.
(m) Immediately after giving effect to the consummation of the
transactions contemplated by this Agreement, neither the Company nor any of its
Subsidiaries (i) will be in violation of its respective certificate of
incorporation or by-laws, (ii) will be in default (nor will an event occur which
with notice or passage of time or both would constitute such a default)
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under or in violation of any indenture or loan or credit agreement or any other
material agreement or instrument to which it is a party or by which it or any of
its properties may be bound or affected, (iii) will be in violation of any order
of any court, arbitrator or governmental body or subject to or party to any
order of any court or governmental authority arising out of any action, suit or
proceeding under any statute or other law respecting antitrust, monopoly,
restraint of trade, unfair competition or similar matters or (iv) will have
violated or be in violation of any such statute, rule or regulation of any
governmental authority, which default or violation (individually or in the
aggregate) would (x) affect the legality, validity or enforceability of this
Agreement or any of the other Basic Documents or (y) have a Material Adverse
Effect on the Company and its Subsidiaries, taken as a whole.
(n) No 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
Company or any of its Subsidiaries (to the extent they are a party thereto) of
this Agreement or any of the other Basic Documents, except (i) as may be
required under state securities or "blue sky" laws or the laws of any foreign
jurisdiction in connection with the offer and sale of the Securities or (ii) as
would not (individually or in the aggregate) have a Material Adverse Effect on
the Company and its Subsidiaries, taken as a whole or (iii) as would not have a
material adverse effect on the value of the Purchaser's rights under the Basic
Documents. All such authorizations, consents, approvals, licenses,
qualifications, exemptions, filings, declarations and registrations which are
required to have been obtained or made as of the Time of Purchase have been
obtained or made, as the case may be, and are in full force and effect and not
the subject of any pending or, to the knowledge of the Company, threatened
attack by appeal, direct proceeding or otherwise.
(o) The Company and each of its Subsidiaries has good and valid
title to, or valid and enforceable leasehold interests in, all properties and
assets identified in the Memorandum or the Exchange Act Filings as owned by each
of them which are material to the business of the Company and its Subsidiaries,
taken as a whole, free and clear of all Liens, except such Liens as are
described in the Memorandum or the Exchange Act Filings or on Schedule 3.1(o)
hereto. All of the leases material to the business of the Company and the
Subsidiaries, taken as a whole, and under which the Company or any Subsidiary
holds properties described in the Memorandum or the Exchange Act Filings, are
valid and binding as leased by them, with such exceptions as are not material
and do not materially interfere with the use made and proposed to be made of
such properties by the Company and its Subsidiaries.
(p) All tax returns required to be filed by the Company or any of
its Subsidiaries in any jurisdiction (including foreign jurisdictions) have been
so filed and all taxes, assessments, fees and other charges including, without
limitation, withholding taxes, penalties,
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and interest ("Taxes") due or claimed to be due have been paid, other than those
Taxes being contested in good faith and those Taxes for which adequate reserves
or accruals have been established in accordance with generally accepted
accounting principles, except where the failure to file such returns or to pay
such Taxes is not reasonably likely to have, singly or in the aggregate, a
Material Adverse Effect on the Company and its Subsidiaries, taken as a whole.
The Company knows of no actual or proposed additional tax assessments for any
fiscal period against the Company or any of its Subsidiaries that, individually
or in the aggregate, would have a Material Adverse Effect on the Company and its
Subsidiaries, taken as a whole.
(q) Each of the Company and its Subsidiaries is in substantial
compliance with all laws, rules and regulations applicable to the Company, and
each such Subsidiary, and the Company and its Subsidiaries own or possess and
are operating in compliance in all material respects with the terms, provisions,
conditions, restrictions and limitations contained in all licenses, franchises,
approvals, certificates and permits from all Federal, State, territorial,
foreign and local governmental and regulatory authorities which are necessary to
own or lease and operate their respective properties and assets and to conduct
their respective businesses, except where the failure to comply with any of the
foregoing would not have a Material Adverse Effect on the Company and its
Subsidiaries, taken as a whole.
(r) Assuming the accuracy of the Purchaser's representations and
warranties set forth in Section 3.2 hereof and the due performance by the
Purchaser of the covenants and agreements set forth in Section 3.2 hereof, the
sale of the Securities to the Purchaser in the manner contemplated by this
Agreement does not require registration of the Securities under the Act.
Section 3.2. Representations and Warranties of the Purchaser and
Purchaser's Parent.
(a) Each of the Purchaser and Purchaser's Parent represents and
warrants to, and covenants and agrees with, the Company that: (1) the Securities
to be acquired by the Purchaser hereunder are being acquired for its own account
or an account with respect to which it exercises sole investment discretion and
it or any such account is a "qualified institutional buyer" as defined in Rule
144A promulgated under the Act ("QIB") or an "Accredited Investor" as defined
under Regulation D promulgated under the Act and has no intention of
distributing or reselling such Securities or any part thereof in any transaction
which would be in violation of the securities laws of the United States of
America or any state; (2) each of the Purchaser and Purchaser's Parent
acknowledges that the Securities have not been or will not be registered under
the Act and that the Securities may not be offered or sold within the United
States or to, or for the account or benefit of, United States persons, except as
set forth below; (3) Purchaser shall not resell or otherwise transfer any of
such Securities within two (2) years after the original issuance of the
Securities, except (A) to the Company or any of its Subsidiaries, (B) inside the
United
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States to a QIB in compliance with Rule 144A promulgated under the Act, (C)
inside the United States to an "Accredited Investor" that, prior to such
transfer, furnishes (or has furnished on its behalf by a United States broker-
dealer) to the Company a signed letter containing certain representations and
agreements relating to the restrictions on transfer of the Securities, (D)
outside the United States in compliance with Rule 904 promulgated under the Act,
(E) pursuant to any other exemption from registration provided under the Act (if
available) including Rule 144 promulgated thereunder or (F) pursuant to an
effective registration statement under the Act, and (4) Purchaser will give to
each person to whom it transfers the Securities notice of any restrictions on
transfer of such Securities; and subject, nevertheless, to the disposition of
the Purchaser's property being at all times within its control. If the
Purchaser should in the future decide to dispose of any of the Securities, the
Purchaser understands and agrees that it may do so only in compliance with the
Act, as then in effect, and that stop-transfer instructions to that effect will
be in effect with respect to the Securities. If the Purchaser should decide to
transfer or otherwise dispose of the Securities, the Purchaser shall comply with
the requirements set forth in the relevant Basic Documents. The Purchaser
agrees to the imprinting, so long as required by the terms of the relevant Basic
Document, of the applicable legends contained in the Common Stock Warrant on
each certificate representing the Common Stock Warrant or Warrant Shares.
(b) Each of the Purchaser and Purchaser's Parent also represents
that no part of the funds to be used to purchase the Securities to be purchased
by the Purchaser constitutes assets of any employee benefit plan, except as
otherwise disclosed in writing to the Company on or prior to the Closing Date.
As used in this Section 3.2(b), the term "employee benefit plan" shall have the
meaning assigned to such term in Section 3 of ERISA.
(c) Each of the Purchaser and Purchaser's Parent also represents and
warrants to the Company that (i) the Purchaser is a wholly-owned subsidiary of
Purchaser's Parent, (ii) each of the Purchaser and Purchaser's Parent has
received and reviewed the Information; (iii) each of Purchaser and Purchaser's
Parent has authorized the purchase of the Securities; and (iv) the purchase of
Securities does not violate the Purchaser's charter, by-laws, or other
organizational documents or any law or regulation to which it is subject.
ARTICLE IV
CONDITIONS PRECEDENT TO CLOSING
-------------------------------
Section 4.1. Conditions Precedent to Obligations of the Purchaser. The
obligation of the Purchaser to purchase the Securities to be purchased by it
hereunder is subject, at the Time of Purchase, to the satisfaction of the
following conditions:
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(a) The Purchaser shall have received an opinion, addressed to it in
form and substance reasonably satisfactory to the Purchaser and dated the Time
of Purchase, of Xxxxxxx X. Xxxxxx, P.A., counsel to the Company, substantially
in the form of Exhibit 5 attached hereto.
(b) In rendering such opinion in accordance with Section 4.1(a)
hereof, such counsel may rely as to factual matters upon certificates or other
documents furnished by officers and directors of the Company and its
Subsidiaries as well as representations of the Purchaser and by government
officials, and upon such other documents as such counsel deems appropriate as a
basis for its opinion. Such counsel may specify the jurisdictions in which it
is admitted to practice and that it is not admitted to practice in any other
jurisdiction and is not an expert in the law of any other jurisdictions. To the
extent such opinion concerns the laws of any other such jurisdiction, such
counsel may rely upon the opinion of counsel (reasonably satisfactory to the
Purchaser) admitted to practice in such jurisdiction. Any opinion relied upon
by such counsel as aforesaid shall be delivered to the Purchaser together with
the opinion of such counsel, which opinion shall state that such counsel
believes that it and the Purchaser's reliance thereon is justified.
(c) The representations and warranties made by the Company herein
shall be true and correct in all material respects (except for changes expressly
provided for in this Agreement) on and as of the Time of Purchase, with the same
effect as though such representations and warranties had been made on and as of
the Time of Purchase, and the Company shall have complied in all material
respects with all agreements as set forth in or contemplated hereunder and in
the other Basic Documents required to be performed by it at or prior to the Time
of Purchase.
(d) Except as set forth in the Information, subsequent to the date
of the Exchange Act Filings and immediately prior to the Time of Purchase, (i)
there shall not have been any change, or any development involving a prospective
change, which has affected or may affect materially and adversely the
businesses, properties or prospects or the financial condition or the results of
operations of the Company and its Subsidiaries, taken as a whole; and (ii) the
Company and its Subsidiaries shall have conducted their respective businesses
only in the ordinary course.
(e) At the Time of Purchase and after giving effect to the
consummation of the transactions contemplated by this Agreement and the other
Basic Documents, there shall exist no Default or Event of Default.
(f) As to the Purchaser, the purchase of and payment for the
Securities by the Purchaser hereunder or under the Common Stock Warrant (i)
shall not be prohibited or enjoined temporarily or permanently by any applicable
law or governmental regulation (including, without
-13-
limitation, Regulation G, T, U or X of the Board of Governors of such Federal
Reserve System), (ii) shall not subject the Purchaser to any penalty, or in its
reasonable judgment, other onerous condition under or pursuant to any applicable
law or governmental regulation (provided, however, that such regulation, law or
onerous condition was not in effect as of the date of this Agreement), and (iii)
shall be permitted by the laws and regulations of the jurisdictions to which it
is subject.
(g) At the Time of Purchase, the Purchaser shall have received a
certificate, dated as of the Time of Purchase, from the Company stating that the
conditions specified in Sections 4.1(a), (b) and (c) hereof have been satisfied
or duly waived at the Time of Purchase.
(h) Each of the Basic Documents shall be substantially in the form
attached hereto and the Basic Documents shall have been executed and delivered
by all the respective parties thereto and shall be in full force and effect.
(i) The issuance and sale by the Company, or a Subsidiary, of an
aggregate of $285 million principal amount of notes.
(j) The redemption by the Company of its $100,000,000 12 1/4%
Series A and Series B Senior Notes due 2004 at 101% of the aggregate principal
amount thereof.
(k) The redemption by the Company of its Senior Redeemable Preferred
Stock, Series A at 101% of the aggregate principal amount thereof.
(l) The execution of a new credit facility providing the Company
sufficient resources to participate under the terms of the Participation
Agreement.
(m) The Time of Purchase shall not be later than 5:00 P.M., New York
City time, on April 27, 1998, subject to extension if the Purchaser agrees to
extend the Time of Purchase upon request to do so by the Company.
(n) All proceedings taken in connection with the issuance of the
Securities and the transactions contemplated by this Agreement and the other
Basic Documents, and all documents and papers relating thereto, shall be
reasonably satisfactory to the Company and the Purchaser. The Purchaser shall
have received copies of such papers and documents as it may reasonably request
in connection therewith, all in form and substance reasonably satisfactory to
it.
(o) The Certificate of Designation shall have been duly filed with
the Secretary of State of the State of Oklahoma.
-14-
Section 4.2. Conditions Precedent to Obligations of the Company. The
obligations of the Company to issue and sell the Securities pursuant to this
Agreement are subject, at the Time of Purchase, to the satisfaction of the
following conditions:
(a) The representations and warranties made by the Purchaser and
Purchaser's Parent herein shall be true and correct in all material respects at
and as of the Time of Purchase, with the same effect as though such
representations and warranties had been made on and as of the Time of Purchase.
(b) The issuance or sale of the Securities by the Company shall not
be enjoined under the laws of any jurisdiction to which the Company is subject
(temporarily or permanently) at the Time of Purchase.
(c) Each of the Basic Documents shall be satisfactory in form and
substance to the Company and shall have been duly authorized, executed and
delivered by all respective parties thereto and shall be in full force and
effect and counsel to the Company shall have received a copy of each of such
documents duly executed and delivered by such parties.
(d) The issuance and sale by the Company, or a Subsidiary, of an
aggregate of $285 million principal amount of notes.
(e) The redemption by the Company of its $100,000,000 12 1/4%
Series A and Series B Senior Notes due 2004 at 101% of the aggregate principal
amount thereof.
(f) The redemption by the Company of its Senior Redeemable Preferred
Stock, Series A at 101% of the aggregate principal amount thereof.
(g) The execution of a new credit facility providing the Company
sufficient resources to participate under the terms of the Participation
Agreement.
ARTICLE V
COVENANTS
---------
Section 5.1. Furnishing of Information. The Company will furnish to the
Purchaser, as long as the Purchaser owns any Preferred Stock, the information
required by the Certificate of Designation.
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Section 5.2. Use of Proceeds. The Company will use the proceeds from
the issuance and sale of the Securities to redeem the Senior Redeemable
Preferred Stock, Series A, of the Company, $.05 par value per share, to pay fees
and expenses related thereto and to the issuance of the Securities and the Notes
and to reduce bank debt.
Section 5.3. Board Representation. (a) So long as the Purchaser owns
50% or more of the outstanding shares of Preferred Stock, such party shall be
entitled to designate that number of members for election to the Board of
Directors of the Company so that Purchaser or Purchaser's Parent, as the case
may be, shall be able to designate not less than 20% of the members of the Board
of Directors of the Company.
(b) In lieu of the right to designate members to the Company's Board
of Directors and (i) so long as Purchaser or Purchaser's Parent, as the case may
be, owns at least 20% of the outstanding shares of Preferred Stock or (ii)
during the term of the Participation Agreement, Purchaser may appoint an
observer who will be entitled to receive notice of, and will have the right to
attend, all meetings of the Board of Directors of the Company and all committees
thereof. Copies of all written information delivered to members of the Board of
Directors of the Company or any committee thereof shall be concurrently
delivered to any such observer. During the time that an observer has been and
continues to be appointed under this paragraph, the Purchaser agrees that any
confidential information disclosed to the observer in the course of such
person's service as an observer will be subject to the limitations on use and
disclosure that would apply if the observer were a director of the Company. All
reasonable expenses of any such observer will be paid by the Company.
Section 5.4. Standstill Agreement. Until March 1, 2000, except as
contemplated by the Basic Agreements or unless such shall have been specifically
invited in writing by the Board of Directors of the Company, neither the
Purchaser or Purchaser's Parent nor any of the Purchaser's or Purchaser's
Parent's Representatives, as defined below, will in any manner, directly or
indirectly, (a) effect or seek, offer or propose (whether publicly or otherwise)
to effect, or cause or participate in or in any way assist any other person to
effect or seek, offer or propose (whether publicly or otherwise) to effect or
participate in, (i) any acquisition of any securities (or beneficial ownership
thereof) or assets of the Company or any of its subsidiaries; (ii) any tender or
exchange offer or merger or other business combination involving the Company or
any of its subsidiaries; (iii) any recapitalization, restructuring, liquidation,
dissolution or other extraordinary transaction with respect to the Company or
any of its subsidiaries; or (iv) any "solicitation" of "proxies" (as such terms
are used in the proxy rules of the Securities and Exchange Commission) or
consents to vote any voting securities of the Company, (b) form, join or in any
way participate in a "group" (as defined under the Securities Exchange Act of
1934, as amended), (c) otherwise act, alone or in concert with others, to seek
to control or influence the management, Board of Directors or policies of the
Company, (d) take any action which might
-16-
force the Company to make a public announcement regarding any of the types of
matters set forth in (a) above, or (e) enter into any arrangements with any
third party with respect to any of the foregoing. The Purchaser, Purchaser's
Parent, their Representatives and Affiliates shall not during any such period
request the Company (or its directors, officers, employees or agents), directly
or indirectly, to amend or waive any provision of this paragraph (including this
sentence). "Representatives" shall mean Purchaser's or Purchaser's Parent's
directors, officers, employees, partners, Affiliates, agents, advisors or
representatives.
Section 5.5. Confidentiality. Following the Closing, the Purchaser,
Purchaser's Parent and their Affiliates shall maintain the confidentiality of
all information received from the Company, except (i) information in the public
domain or independently received from a third party with a right to disclose
such information or (ii) to the extent that disclosure is required by law.
Section 5.6. Conduct and Preservation of Business. Except as provided
in this Agreement, during the period from the date hereof to the Closing, the
Company (i) shall conduct its operations according to its ordinary course of
business consistent with past practice; (ii) shall use its reasonable best
efforts to preserve, maintain and protect its properties; and (iii) shall use
its reasonable best efforts to preserve intact its business organization.
Section 5.7. Preferential Right. So long as the Purchaser or the
Purchaser's Parent owns 50% or more of the outstanding shares of Preferred
Stock, in the event the Company proposes to issue any of its securities (other
than debt securities with no equity feature), the Purchaser shall have the
preferential right to subscribe for and purchase such securities in a proportion
equal to the greater of (i) the number of shares of Common Stock, together with
the Warrant Shares issuable upon exercise of the Warrant, owned by Purchaser to
the total number of outstanding shares of Common Stock and (ii) 20% of the
Common Stock; provided, however, that this right shall not apply to securities
issued: (a) as a stock dividend or upon any subdivision of shares of Common
Stock, provided that the securities pursuant to such stock dividend or
subdivision are limited to additional shares of Common Stock; (b) pursuant to
subscriptions, warrants, options, convertible securities or other rights which
are listed in Schedule 3.1(d)(B) as being outstanding on the date of this
Agreement; (c) solely in consideration for the acquisition (whether by merger or
otherwise) by the Company or any of its subsidiaries of stock or assets of any
other entity; (d) pursuant to a firm commitment underwritten public offering and
(e) pursuant to the exercise of newly-issued options to purchase Common Stock
granted to directors, officers, employees or consultants of the Company in
connection with their service to the Company, not to exceed in the aggregate 2.5
million shares (appropriately adjusted to reflect stock splits, stock dividends,
combinations of shares and the like with respect to the Common Stock). The
Company's written notice to the Purchaser shall describe the securities proposed
to be issued by the Company and specify the number, price and payment terms.
The Purchaser may accept the
-17-
Company's offer as to the full number of securities offered to it or any lesser
number, by written notice thereof given by it to the Company prior to the
expiration of 15 days, in which event the Company shall promptly sell and the
Purchaser shall buy, upon the terms specified, the number of securities agreed
to be purchased by the Purchaser; provided, notwithstanding the other provisions
of this Section, in connection with a Rule 144A offering, the Company may sell
the entire amount offered to one or more initial purchasers (the "Initial
Purchaser") so long as the company causes the Initial Purchaser to offer the
same number of securities to the Purchaser that the Company would otherwise be
required to offer the Purchaser and on the same terms and in the same manner as
the Initial Purchaser offers such securities to other investors. The Company
shall be free at any time prior to 90 days after the date of its notice of offer
to the Purchaser, to offer and sell to any third party or parties the number of
such securities not agreed by the Purchaser to be purchased by the Purchaser, at
a price and on payment terms no less favorable to the Company than those
specified in such notice of offer to the Purchaser. However, if such third
party sale or sales are not consummated within such 90-day period, the Company
shall not sell such securities as shall not have been purchased within such
period without again complying with this Section 5.7.
Section 5.8. Execution of Basic Documents. At the Closing, the parties
shall execute and deliver to one another the Basic Documents.
ARTICLE VI
MISCELLANEOUS
-------------
Section 6.1. Termination. This Agreement may be terminated (as to the
party electing to so terminate it) at any time prior to the Time of Purchase:
(a) by the Company if any of the conditions specified in Section 4.2
hereof have not been met or waived by the Company pursuant to the terms of this
Agreement;
(b) by the Purchaser or Purchaser's Parent if any of the conditions
specified in Section 4.1 hereof have not been met or waived pursuant to the
terms of this Agreement.
Section 6.2. No Waiver; Modifications in Writing. No failure or delay
on the part of the Company or the Purchaser in exercising any right, power or
remedy hereunder shall operate as a waiver thereof, nor shall any single or
partial exercise of any right, power or remedy preclude any other or further
exercise thereof or the exercise of any other right, power or remedy. The
remedies provided for herein are cumulative and are not exclusive of any
remedies that may be available to the Company or the Purchaser at law or in
equity or otherwise. Prior to the Time
-18-
of Purchase, no amendment, modification, termination of any provision or waiver
of or consent to any departure by the Company from any provision of the Basic
Documents shall be effective unless signed in writing by the party entitled to
the benefit thereof. Except as otherwise provided herein, after the Time of
Purchase, no amendment, modification, termination of any provision or waiver of
or consent to any departure by the Company from any provision of the Basic
Documents shall be effective unless signed in writing by or on behalf of the
holders of a majority of shares of Preferred Stock outstanding. Any amendment,
supplement or modification of or to any provision of the Basic Documents, any
waiver of any provision of the Basic Documents, and any consent to any departure
by the Company from the terms of any provision of the Basic Documents, shall be
effective only in the specific instance and for the specific purpose for which
made or given. Except where notice is specifically required by this Agreement,
no notice to or demand on the Company in any case shall entitle the Company to
any other or further notice or demand in similar or other circumstances.
Section 6.3. Communications. Unless otherwise provided herein, any
notice or other communications herein required or permitted to be given shall be
in writing and may be personally served, telecopied, telexed or sent by mail and
shall be deemed to have been given when delivered in person upon receipt of
telecopy or telex against receipt of answer back or four Business Days after
depositing it in the mail registered or certified, with postage prepaid and
properly addressed. For the purposes hereof, the addresses of the parties
hereto (until notice of a change thereof is delivered as provided in this
Section 6.3) shall be set forth under each party's name on the signature pages
hereto.
Section 6.4. Costs, Expenses and Taxes. Each of the Company and the
Purchaser agrees to pay all costs and expenses incurred by them, respectively,
in connection with the negotiation, preparation, printing, typing, reproduction,
execution and delivery of this Agreement and each of the other Basic Documents,
any amendment or supplement to or modification of any of the foregoing and any
and all other documents furnished pursuant hereto or thereto or in connection
herewith or therewith. In addition, the Company shall pay any and all stamp,
transfer and other similar taxes payable or determined to be payable in
connection with the execution and delivery of this Agreement or any other Basic
Document or the issuance of the Securities, and shall save and hold the
Purchaser harmless from and against any and all liabilities with respect to or
resulting from any delay in paying, or omission to pay, such taxes.
Section 6.5. Determinations. All determinations to be made by the
Company or the Purchaser hereunder in its opinion or judgment or with its
approval or otherwise shall be made by it in its sole discretion.
Section 6.6. Execution in Counterparts. This Agreement may be executed
in any number of counterparts and by different parties hereto on separate
counterparts, each of which
-19-
counterparts, when so executed and delivered, shall be deemed to be an original
and all of which counterparts, taken together, shall constitute but one and the
same Agreement.
Section 6.7. Binding Effect; Assignment. The rights and obligations of
the Purchaser under this Agreement may not be assigned to any other Person
except with the prior consent of the Company. Except as expressly provided in
this Agreement, this Agreement shall not be construed so as to confer any right
or benefit upon any Person other than the parties to this Agreement, and their
respective successors and assigns. This Agreement shall be binding upon the
Company and the Purchaser, and their successors and assigns; provided, however,
that the Company's rights under Section 5.4 shall not be assignable.
SECTION 6.8. GOVERNING LAW. THIS AGREEMENT SHALL BE DEEMED TO BE A
CONTRACT MADE UNDER THE LAWS OF THE STATE OF OKLAHOMA, AND FOR ALL PURPOSES
SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF SAID STATE, WITHOUT REGARD TO
PRINCIPLES OF CONFLICTS OF LAW.
Section 6.9. Severability of Provisions. Any provision of this
Agreement which is prohibited or unenforceable in any jurisdiction shall, as to
such jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof or
affecting the validity or enforceability of such provision in any other
jurisdiction.
Section 6.10. Headings. The Article and Section headings and Table of
Contents used or contained in this Agreement are for convenience of reference
only and shall not affect the construction of this Agreement.
Section 6.11. Public Announcements. The Purchaser and the Company will
each prepare and issue their own press releases related to this Agreement;
however, each party will have the right to approve the other party's press
release.
-20-
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed as of the date first written above.
GOTHIC ENERGY CORPORATION
By: __________________________________________
Xxxxxxx X. Xxxxx, President
Notice Address:
0000 Xxxxx Xxxxx Xxxxxx, Xxxxx 000
Xxxxx, Xxxxxxxx 00000
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
CHESAPEAKE GOTHIC CORP., as Purchaser
By: __________________________________________
Xxxxxx X. XxXxxxxxx, President
Notice Address:
CHESAPEAKE ACQUISITION CORPORATION,
as Purchaser's Parent
By: __________________________________________
Xxxxxx X. XxXxxxxxx, President
Notice Address:
CHESAPEAKE\AGREEMENTS\Securities Purchase.April98
-21-
CERTIFICATE OF DESIGNATION OF
PREFERENCES AND RIGHTS OF
SENIOR REDEEMABLE PREFERRED STOCK, SERIES B
(par value $.05 per share)
OF
GOTHIC ENERGY CORPORATION
____________________
Pursuant to Section 1032G of the
Oklahoma General Corporation Act
____________________
GOTHIC ENERGY CORPORATION, a corporation organized and existing under the
Oklahoma General Corporation Act (the "Corporation"), does hereby certify that,
pursuant to authority conferred upon the Board of Directors by the Certificate
of Incorporation of the Corporation, and pursuant to the provisions of Section
1032G of the Oklahoma General Corporation Act, said Board of Directors duly
adopted a resolution on March _____, 1998, which approved the filing of this
Certificate of Designation and which resolution remains in full force and effect
as of the date hereof.
Pursuant to such resolution and the authority conferred upon the Board of
Directors by the Certificate of Incorporation of the Corporation, there is
hereby created a series of preferred stock of the Corporation, which series
shall have the following powers, preferences and relative, participating,
optional or other special rights, and the qualifications, limitations or
restrictions thereof, in addition to those set forth in the Certificate of
Incorporation of the Corporation:
1. Certain Definitions. As used herein, the following terms shall have
the following meanings (with terms defined in the singular having comparable
meanings when used in the plural and vice versa), unless the context otherwise
requires:
"Business Day" means a day that is not a Saturday, a Sunday or a day on
which banking institutions in the State of New York are not required to be open.
"Common Stock" of any Person means all capital stock of such Person that is
generally entitled to (i) vote in the election of directors of such Person if
such Person is a corporation or (ii) if such Person is not a corporation, vote
or otherwise participate in the selection of the governing body, partners,
managers or others that will control the management and policies of such Person.
"Corporation" means Gothic Energy Corporation, an Oklahoma corporation.
"Dividend Payment Date" means April 1, July 1, October 1 and January 1,
commencing July 1, 1998, unless such day is not a Business Day, in which case
the Dividend Payment Date shall be the immediately succeeding Business Day.
"Dividend Rate" has the meaning specified in Section 3 hereof.
"Dividend Record Date" means a day 15 days preceding the Dividend Payment
Date.
"Exchange Act" means the Securities Exchange Act of 1934, as amended, and
all rules and regulations promulgated thereunder.
"Fair Market Value" means with respect to the Corporation's Common Stock
the average of the closing prices of such security's sales on all domestic
securities exchanges on which such security may at the time be listed, or, if
there have been no sales on any such exchange on any day, the average of the
highest bid and lowest asked prices on all such exchanges at the end of such
day, or, if on any day such security is not so listed, the average of the
representative bid and asked prices quoted in the NASDAQ System as of 4:00 P.M.,
New York time, on such day, or, if on any day such security is not quoted in the
NASDAQ System, the average of the highest bid and lowest asked prices on such
day in the domestic over-the-counter market as reported by the National
Quotation Bureau, Incorporated, or any similar successor organization, in each
such case averaged over a period of ten days consisting of the day as of which
"Fair Market Value" is being determined and the nine consecutive business days
prior to such day; provided, that if such security is listed on any domestic
securities exchange, the term "business days" as used in this sentence means
business days on which such exchange is open for trading. If at any time such
security is not listed on any domestic securities exchange or quoted in the
NASDAQ System or the domestic over-the-counter market, the "Fair Market Value"
shall be the fair value thereof determined jointly by the Corporation and the
Holders of a majority of the Series B Preferred Stock then outstanding;
provided, that if such parties are unable to reach agreement within a reasonable
period of time, such fair value shall be determined by an appraiser jointly
selected by the Corporation and the Holders of a majority of the Series B
Preferred Stock then outstanding. The determination of such appraiser shall be
final and binding on the Corporation and the Holders, and the fees and expenses
of such appraiser shall be paid jointly by the Corporation and the Holders.
"Holder" means a registered holder of shares of Series B Preferred Stock.
"Liquidation Preference" means $1,000 per share of Series B Preferred Stock
plus, for purposes of Section 8 hereof, depending on whether such share is
issued or accrued, in each case, accrued and unpaid dividends, whether or not
declared, if any, thereon through the date such Liquidation Preference is paid.
- 2 -
"Person" means any individual, corporation, partnership, limited liability
company, joint venture, association, joint-stock company, trust, unincorporated
organization or other legal entity.
"Preferred Stock" means any capital stock of a Person, however designated,
which entitles the holder thereof to a preference with respect to dividends,
distributions or liquidation proceeds of such Person over the holders of other
classes of capital stock issued by such Person.
"Redemption Date" when used with respect to any shares of Series B
Preferred Stock means the date fixed for such redemption of such shares of
Series B Preferred Stock pursuant to Section 6 hereof.
"Redemption Notice" has the meaning specified in Section 7(C) hereof.
"SEC" means the United States Securities and Exchange Commission as
constituted from time to time or any successor performing substantially the same
functions.
"Securities Act" means the Securities Act of 1933, as amended, and all
rules and regulations promulgated thereunder.
"Series B Preferred Stock" means the Senior Redeemable Preferred Stock,
Series B, par value $.05 per share, of the Corporation.
2. Designation. The series of preferred stock established hereby shall
be designated the "Senior Redeemable Preferred Stock, Series B" (and shall be
referred to herein as the "Series B Preferred Stock") and the authorized number
of shares of Series B Preferred Stock shall be 165,000 shares.
3. Dividends. Holders will be entitled to receive, when, as and if
declared by the Board of Directors, out of funds legally available therefor,
dividends payable at a rate per annum (the "Dividend Rate") of 12% of the
aggregate Liquidation Preference of the Series B Preferred Stock payable in
additional shares of Series B Preferred Stock having an aggregate Liquidation
Preference equal to the amount of such dividends due on any Dividend Payment
Date ("PIK" Stock"); provided, however, that after April 1, 2000, at the
Corporation's option, the dividends payable on any Dividend Payment Date on each
share of Series B Preferred Stock may be paid in cash. Dividends will be
cumulative and will accrue from the date of issuance and be payable quarterly in
arrears as provided in the immediately preceding sentence on each Dividend
Payment Date, commencing on July 1, 1998. Dividends, whether or not declared,
will cumulate until declared and paid, when declaration and payment may be for
all or part of the then-accumulated dividends. Each dividend shall be payable to
Holders of record as they appear on the stock books of the Corporation on each
Dividend Record Date. Accumulated and unpaid dividends payable in Series B
Preferred Stock will accrue dividends from the relevant Dividend
- 3 -
Payment Date and be payable quarterly to the same extent as issued shares of
Series B Preferred Stock. Dividends shall cease to accrue with respect to shares
of the Series B Preferred Stock on any Redemption Date with respect to such
shares of Series B Preferred Stock redeemed on any such date.
No dividends shall be declared or paid or set apart for payment on any
Junior Stock (as defined) (other than dividends payable in Common Stock) for any
period unless (the "Junior Distribution Condition") the Corporation has declared
and paid in cash dividends on the Series B Preferred Stock for eight (8)
consecutive quarters. When dividends are not paid in full upon the Preferred
Stock, all dividends declared upon shares of the Preferred Stock shall be
declared pro rata. Unless the Junior Distribution Conditions have been
satisfied, no dividends (other than dividends payable in Common Stock) shall be
declared or paid or set apart for payment or other distribution upon any Junior
Stock, nor shall any Junior Stock be redeemed, purchased or otherwise acquired
by the Corporation for any consideration (or any payment made to or available
for a sinking fund for the redemption of any shares of such stock) by the
Corporation.
4. Ranking. The Series B Preferred Stock shall, with respect to dividend
rights and rights on liquidation, winding-up and dissolution, rank senior to all
classes of Common Stock of the Corporation and senior to all other classes or
series of any class of Preferred Stock of the Corporation, whether currently
outstanding or issued hereafter (collectively, the "Junior Stock").
5. Conversion. The Preferred Stock shall be convertible as follows:
(A) Optional Conversion. The Series B Preferred Stock shall be
convertible, without the payment of any additional consideration by the Holders,
at the option of the Holders upon 90 days' prior written notice to the
Corporation, on or after April 30, 2000 at the office of the Corporation or any
transfer agent for the Series B Preferred Stock, into the number of fully paid
and non-assessable shares of Common Stock determined by dividing the Liquidation
Preference by the greater of [the lesser of (i) the average closing price for
the Common Stock on the three trading days up to and including the date of
signing and (ii) the average closing price for the Common Stock on the three
trading days prior to the Closing Date] and the Fair Market Value of the
Corporation's Common Stock in effect at the time of conversion.
Notwithstanding the foregoing, no Holder or "group" (as defined
under the Exchange Act) of Holders shall be able to convert any shares of Series
B Preferred Stock pursuant to this Section 5(A) to the extent that the
conversion of such shares would cause such Holder or "group" of Holders to own
or be deemed to own by The Nasdaq Stock Market more than 19.9% of the
outstanding Common Stock of the Corporation prior to such conversion.
(B) Merger, Consolidation or Disposition of Assets. Notwithstanding
anything to the contrary contained in Section 5(A) in case a third party makes a
tender offer for in excess of 50% of the outstanding Common Stock, or the
Corporation shall merge or
- 4 -
consolidate into another corporation, or shall sell, transfer or otherwise
dispose of all or substantially all of its property, assets or business to
another corporation and pursuant to the terms of such tender merger,
consolidation or disposition, cash or shares of common stock of the successor or
acquiring corporation are to be received by or distributed to the holders of all
or part of the Common Stock of the Corporation, then each Holder of a share of
the Series B Preferred Stock shall have the right thereafter to receive, upon
conversion of such share of Series B Preferred Stock at Fair Market Value
conditional upon the consummation of such transaction, such cash or shares of
Common Stock constituting the cash or number of shares of common stock of the
successor or acquiring corporation, as the case may be, receivable upon or as a
result of such merger, consolidation or disposition of assets by a holder of the
number shares of Common Stock into which one (1) share of the Series B Preferred
Stock could be converted immediately prior to such event.
(C) Mechanisms of Conversion. Before any Holder of the Series B
Preferred Stock shall be entitled to convert the same into Common Stock, the
Holder shall give 90 days' prior written notice to the Corporation and shall
surrender to the Corporation at the office of the Corporation or of any transfer
agent for the Series B Preferred Stock, the certificate or certificates
representing such Series B Preferred Stock, accompanied by written notice to the
Corporation that the Holder elects to convert all or a specified number of such
shares and stating therein his name or the name or names of his nominees in
which he wishes the certificate or certificates for Common Stock to be issued.
The Corporation shall, as soon as practicable thereafter, issue and deliver at
such office to such Holder of the Series B Preferred Stock or to his nominee or
nominees a certificate representing the number of shares of Common Stock to
which such Holder shall be entitled as aforesaid and, if less than the full
number of shares of the Series B Preferred Stock evidenced by such surrendered
certificate or certificates are being converted, a new certificate or
certificates, of like tenor, for the number of shares of the Series B Preferred
Stock evidenced by such surrendered certificates less the number of such shares
being converted. Dividends shall continue to accrue on shares of Series B
Preferred Stock from the date of the notice of conversion through the date of
conversion.
(D) Fractional Shares. No fractional shares or scrip representing
fractional shares shall be issued upon conversion of any Series B Preferred
Stock. If the conversion of any shares of Series B Preferred Stock results in a
fraction of a share of Common Stock, an amount equal to such fraction multiplied
by the Fair Market Value per share of Common Stock on the day of delivery to the
Corporation of notice of conversion of such shares or dividends, as applicable,
shall be promptly paid by the Corporation to the Holder of such shares in
immediately available funds.
6. Voting Rights. Except as required by the Oklahoma General Corporation
Act, or as set forth herein, the Holders shall not be entitled to vote on any
matter submitted to a vote of stockholders of the Corporation. On any matters
on which the Holders shall be so entitled to vote, they shall be entitled to one
vote for each share held. Except for the issuance of 50,000
- 5 -
shares of the Series B Preferred Stock to Chesapeake Gothic Corp., an Oklahoma
corporation, pursuant to that certain Securities Purchase Agreement dated March
31, 1998, any remaining shares of Series B Preferred Stock can only be issued as
PIK Stock and may not be issued for any other purpose or in any other manner
without the prior approval of Holders of 75% of the Series B Preferred Stock.
7. Redemption.
(A) Optional Redemption. (i) At any time prior to April 30, 2000,
the Series B Preferred Stock may be redeemed (subject to contractual and other
restrictions with respect thereto and the legal availability of funds therefor)
at the option of the Corporation in whole or, from time to time, in part, in the
manner provided in Section 7(C) hereof at 105% of the Liquidation Preference of
the Series B Preferred Stock so redeemed, payable in cash out of the net
proceeds from a public or private offering of any equity security (as defined in
the Exchange Act), plus accrued and unpaid dividends (whether or not declared),
which shall also be paid in cash (whether or not otherwise payable in cash) to
the Redemption Date.
(ii) At any time on or after April 30, 2000, the Series B
Preferred Stock may be redeemed (subject to contractual and other restrictions
with respect thereto and the legal availability of funds therefor) at the option
of the Corporation in whole or, from time to time, in part, in the manner
provided in Section 7(C) hereof at any time at a redemption price equal to the
Liquidation Preference of the Series B Preferred Stock so redeemed, payable in
cash, plus accrued and unpaid dividends (whether or not declared), which shall
also be paid in cash (whether or not otherwise payable in cash) to the
Redemption Date.
(B) Mandatory Redemption. The Corporation shall redeem all
outstanding shares of Series B Preferred Stock on June 30, 2008 at a redemption
price equal to the Liquidation Preference thereof, payable in cash or, at the
option of the Corporation, in shares of Common Stock of the Corporation at Fair
Market Value, plus accrued and unpaid dividends (whether or not declared).
(C) Procedure for Redemption.
(i) In the event of a redemption of less than all of the Series B
Preferred Stock, the shares so redeemed will be determined by the Corporation
pro rata according to the number of shares held by each Holder.
(ii) The Corporation shall send a written notice of redemption
(the "Redemption Notice") by first-class mail, postage prepaid, not fewer than 3
days nor more than 30 days prior to the applicable Redemption Date to each
Holder as of the record date fixed for such redemption of Series B Preferred
Stock at such Holder's address as the same appears on the stock books of the
Corporation; provided, however, that no failure to give such notice to any
- 6 -
Holder or Holders nor any deficiency therein shall affect the validity of the
procedure for the redemption of any shares of Series B Preferred Stock to be
redeemed except as to the Holder or Holders to whom the Corporation has failed
to give said notice or except as to the Holder or Holders whose notice was
defective. The Redemption Notice shall state:
(A) whether all or less than all the outstanding shares of
Series B Preferred Stock are to be redeemed and the total number of shares of
Series B Preferred Stock being redeemed;
(B) the number of shares of Series B Preferred Stock held of
record by that specific Holder that the Corporation intends to redeem;
(C) the applicable Redemption Date;
(D) the manner and place or places at which payment for the
shares called for redemption will, upon presentation and surrender to the
Corporation of the Series B Preferred Stock Certificates evidencing the shares
being redeemed, be made; and
(E) that dividends on the shares of Series B Preferred Stock
being redeemed shall cease to accrue on the applicable Redemption Date.
(iii) On the applicable Redemption Date, the full applicable
redemption price shall become payable for the shares of Series B Preferred Stock
being redeemed on the applicable Redemption Date. As a condition of payment of
the applicable redemption price, each Holder of Series B Preferred Stock must
surrender a Series B Preferred Stock Certificate or Certificates representing
the shares of Series B Preferred Stock being redeemed by the Corporation in the
manner and at the place designated in the applicable Redemption Notice. The
full applicable redemption price for such shares properly tendered for payment
shall be paid to the person whose name appears on such certificate or
certificates as the owner thereof, on and after the applicable Redemption Date
when and as certificates for the shares being redeemed are properly tendered for
payment. Each surrendered Series B Preferred Stock Certificate shall be
canceled and retired. In the event that less than all of the shares represented
by any such certificate are redeemed, a new certificate shall be issued
representing the unredeemed shares.
(iv) On the applicable Redemption Date, unless the Corporation
defaults in the payment of the applicable redemption price, dividends will cease
to accrue with respect to the shares of Series B Preferred Stock called for
redemption, regardless of whether the Holder has surrendered the Series B
Preferred Stock certificate representing same. All rights of Holders of such
redeemed shares will terminate except for the right to receive the applicable
redemption price.
- 7 -
8. Information.
So long as any of the Series B Preferred Stock remains outstanding,
the Corporation shall provide to each Holder, within ten (10) days of filing,
such periodic and other reports as the Corporation is required to file under the
Exchange Act. Such reports shall be mailed to the Holder at its address as it
appears on the stock records of the Corporation or such other address as the
Holder may have provided.
9. Payment on Liquidation.
(A) Upon any voluntary or involuntary liquidation, dissolution or
winding-up of the Corporation, Holders of Series B Preferred Stock will be
entitled to receive an amount in cash equal to the Liquidation Preference,
before any distribution is made on any Common Stock or other Preferred Stock of
the Corporation. After payment of the full amount of the Liquidation Preference
to which they are entitled, Holders of Series B Preferred Stock will not be
entitled to any further participation in any distribution of assets of the
Corporation.
(B) For the purposes of this Section 9, neither the voluntary sale,
conveyance, exchange or transfer (for cash, shares of stock, securities or other
consideration) of all or substantially all the property or assets of the
Corporation nor the consolidation or merger of the Corporation with one or more
corporations shall be deemed a voluntary or involuntary liquidation, dissolution
or winding-up of the Corporation, unless such sale, conveyance, exchange or
transfer shall be in connection with a dissolution or winding-up of the business
of the Corporation.
10. Exclusion of Other Rights. Except as may otherwise be required by the
Oklahoma General Corporation Act, shares of the Series B Preferred Stock shall
not have any preferences or relative, participating, optional or other special
rights, other than those specifically set forth in this Certificate of
Designation (as such Certificate may be amended from time to time) and in the
Corporation's Certificate of Incorporation, as amended. Except as otherwise
provided in writing, no shares of Series B Preferred Stock shall have any
preemptive or subscription rights whatsoever as to any securities of the
Corporation.
11. Reissuance of Preferred Stock. Shares of Series B Preferred Stock
that have been issued and reacquired by the Corporation in any manner, including
shares purchased or redeemed, shall (upon compliance with any applicable
provisions of the Oklahoma General Corporation Act) have the status of
authorized and unissued shares of Preferred Stock undesignated as to series and
may be redesignated and reissued as part of any series of Preferred Stock,
except the Series B Preferred Stock.
- 8 -
12. Business Day. If any payment or redemption shall be required by the
terms hereof to be made on a day that is not a Business Day, such payment,
redemption or exchange shall be made on the immediately succeeding Business Day.
13. Headings of Subdivisions. The headings of the various subdivisions
hereof are for convenience of reference only and shall not affect the
interpretation of any of the provisions hereof.
14. Severability of Provisions. If any right, preference or limitation of
the Series B Preferred Stock set forth in this Certificate of Designation (as
such Certificate may be amended from time to time) is invalid, unlawful or
incapable of being enforced by reason of any rule or law or public policy, all
other rights, preferences and limitations set forth in this Certificate of
Designation (as so amended) which can be given effect without the invalid,
unlawful or unenforceable right, preference or limitation shall, nevertheless,
remain in full force and effect, and no right, preference or limitation herein
set forth shall be deemed dependent upon any other such right, preference or
limitation unless so expressed herein.
15. Notice. All notices and other communications provided for or
permitted to be given to the Corporation hereunder shall be made by hand
delivery, next-day air courier or certified, first-class mail to the Corporation
at its principal executive offices (currently located at 0000 Xxxxx Xxxxx
Xxxxxx, Xxxxx 000, Xxxxx Xxxxxxxx 00000).
16. Amendments. Any provisions of this Certificate of Designation may be
amended by the Corporation, or waived by the Holders, in each case with the
written consent of Holders representing a majority of the outstanding shares of
Series B Preferred Stock.
- 9 -
IN WITNESS WHEREOF, Gothic Energy Corporation has caused this Certificate
of Designation of Preferences and Rights of its Series B Preferred Stock to be
signed and attested by its duly authorized officers, this _____ day of March,
1998.
Attest: GOTHIC ENERGY CORPORATION
By:
----------------------------------- ------------------------------------
Name: Xxxxxxx Xxxxx, President
Secretary
CHESAPEAKE\AGREEMENTS\CertificateOfDesignation.April98
- 10 -
THE SECURITIES REPRESENTED BY THIS WARRANT AND THE COMMON STOCK ISSUABLE THEREBY
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), OR ANY STATE OR OTHER APPLICABLE SECURITIES LAWS AND,
ACCORDINGLY, THE SECURITIES REPRESENTED BY THIS WARRANT MAY NOT BE RESOLD,
PLEDGED, OR OTHERWISE TRANSFERRED, EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER, OR IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER, THE
SECURITIES ACT AND IN ACCORDANCE WITH ANY STATE OR OTHER APPLICABLE SECURITIES
LAWS.
WARRANT
to Purchase Common Stock of
GOTHIC ENERGY CORPORATION
Expiring on April ___, 2008
Date of Issuance: April ___, 1998 Certificate No. W-CHE-1
This Warrant to purchase Common Stock (the "Warrant") certifies that for
value received, Chesapeake Gothic Corp., an Oklahoma corporation, or its
registered assigns (the "Holder"), is entitled to subscribe for and purchase
from the Company (as hereinafter defined), in whole or in part, 2,439,246 duly
authorized, validly issued, fully paid and non-assessable shares of Common Stock
(as hereinafter defined) at the Exercise Price (as hereinafter defined),
subject, however, to the provisions and upon the terms and conditions
hereinafter set forth. This Warrant and all rights hereunder shall expire at
5:00 PM, Tulsa, Oklahoma time, on April ___, 2008.
As used herein, the following terms shall have the meanings set forth
below:
"Company" shall mean Gothic Energy Corporation, an Oklahoma corporation,
and shall also include any successor thereto with respect to the obligations
hereunder, by merger, consolidation or otherwise.
"Common Stock" shall mean and include the Company's Common Stock, par value
$0.01 per share, irrespective of class unless otherwise specified, authorized on
the date of the original issue of this Warrant and shall also include (i) in
case of any reorganization, reclassification, consolidation, merger, share
exchange or sale, transfer or other disposition of assets of the character
referred to in Section 3.2 hereof, the stock or securities provided for in
such Section 3.2, and (ii) any other shares of common stock of the Company into
which such shares of Common Stock may be converted.
"Convertible Securities" shall mean any stock or securities (directly or
indirectly) convertible into or exchangeable for Common Stock.
"Exercise Price" shall mean the purchase price of $.01 per share of Common
Stock payable upon exercise of the Warrant.
"Options" means any rights or options to subscribe for or purchase Common
Stock or Convertible Securities.
"Person" means any individual, corporation, partnership, limited liability
company, joint venture, association, joint stock company, trust, unincorporated
organization or government or any agency or political subdivision thereof.
"Securities Act" means the Securities Act of 1933, as amended.
"Warrant" shall mean this Warrant, and any one or more Warrants into which
this Warrant may be exchanged or converted ("Warrants"), representing the right
to purchase up to 2,439,246 Warrant Shares, or such greater or lesser amounts as
may result pursuant to the adjustments provided for herein.
"Warrant Shares" shall mean the shares of Common Stock or other securities
purchased or purchasable by the holder hereof upon the exercise of the Warrants,
taking into account all adjustments provided for herein.
ARTICLE I
EXERCISE OF WARRANTS
1.1 Exercise Period.
The Warrant represented hereby may be exercised by the Holder hereof,
in whole or in part, at any time and from time to time on or after the date
hereof until 5:00 PM, Tulsa, Oklahoma time, on April ___, 2008.
-2-
1.2 Method of Exercise.
To exercise the Warrants, the Holder hereof shall deliver to the
Company, at the Warrant Office designated in Section 2.1 hereof, (i) a written
notice in the form of the Subscription Notice attached as Exhibit I hereto,
stating therein the election of such holder to exercise the Warrant in the
manner provided in the Subscription Notice; (ii) payment in full of the Exercise
Price in cash or by bank check or wire transfer for all Warrant Shares purchased
hereunder, or a written notice (a "Cashless Exercise" notice) to the Company
that such Holder is exercising the Warrant (or a portion thereof) by authorizing
the Company to withhold from issuance a number of Warrant Shares issuable upon
such exercise of the Warrant which, when multiplied by the Exercise Price, is
equal to the Exercise Price for the total number of Warrant Shares to which such
exercise relates (and such withheld shares shall no longer be issuable under
this Warrant); (iii) if this Warrant is not registered in the name of the
Holder, an Assignment or Assignments in the form set forth in Exhibit II hereto
evidencing the assignment of this Warrant to the current Holder; and (iv) this
Warrant. The Warrants shall be deemed to be exercised on the date of receipt by
the Company of the Subscription Notice, accompanied by payment for the Warrant
Shares and surrender of this Warrant, as aforesaid, and such date is referred to
herein as the "Exercise Date". Upon such exercise, the Company shall, as
promptly as practicable and in any event within five (5) business days, issue
and deliver to such holder a certificate or certificates for the full number of
the Warrant Shares purchased by such holder hereunder, and shall, unless the
Warrant has expired, deliver to the holder hereof (within such five (5) day
period) a new Warrant representing the right to purchase the number of Warrant
Shares, if any, with respect to which the Warrant shall not have been previously
exercised, but in all other respects identical to this Warrant. As permitted by
applicable law, the Person in whose name the certificates for Common Stock are
to be issued shall be deemed to have become a holder of record of such Common
Stock on the Exercise Date and shall be entitled to all of the benefits of such
holder on the Exercise Date, including without limitation, the right to receive
dividends and other distributions for which the record date falls on or after
the Exercise Date and the right to exercise voting rights.
1.3 Expenses and Taxes. The Company shall pay all expenses and taxes
(including, without limitation, all documentary, stamp, transfer or other
transactional taxes), other than income taxes payable by the Holder,
attributable to the preparation, issuance or delivery of the Warrant and of the
issuance of the Warrant Shares.
1.4 Reservation of Shares. The Company shall reserve at all times so long
as the Warrant remains outstanding, free from preemptive rights, out of its
authorized but unissued shares of Common Stock, solely for the purpose of
effecting the exercise of the Warrant, a sufficient number of shares of Common
Stock to provide for the exercise of the Warrant. The Company shall take all
such actions as may be necessary to assure that all such Warrant Shares
-3-
may be so issued without violation of any applicable law or governmental
regulation or any requirements of any domestic securities exchange or automated
quotation system upon which shares of Common Stock may be listed or quoted
(except for official notice of issuance, which shall be immediately delivered by
the Company upon each such issuance). The Company shall take all such actions as
may be necessary to assure that all such Warrant Shares shall be authorized,
approved for and listed on any national securities exchange or quotation system
on which the Company's Common Stock is listed or quoted. The Company shall not
take any action which would cause the number of authorized but unissued shares
of Common Stock to be less than the number of such shares required to be
reserved hereunder for issuance upon exercise of the Warrant. The Company will
from time to time take all action as may be necessary to assure that the par
value of the Common Stock is at all times equal to or less than the Exercise
Price.
1.5 Valid Issuance. All Warrant Shares that may be issued upon any
exercise of the Warrant will, upon issuance by the Company, be duly and validly
issued, fully paid and non-assessable and free from all taxes, liens and charges
with respect to the issuance thereof and, without limiting the generality of the
foregoing, the Company shall take no action or fail to take any action which
will cause a contrary result (including, without limitation, any action that
would cause the Exercise Price then in effect to be less than the par value, if
any, of the Common Stock).
1.6 Purchase Agreement. The Warrant represented hereby is part of a duly
authorized issuance and sale of warrants to purchase Common Stock pursuant to
that certain Securities Purchase Agreement dated March 31, 1998 (the
"Agreement"), between the Company and the Holder.
1.7 Acknowledgment of Rights. At the time of the exercise of the Warrants
in accordance with the terms hereof and upon the written request of the Holder
hereof, the Company will acknowledge in writing its continuing obligation to
afford to such Holder any rights (including, without limitation, any right to
registration of the Warrant Shares) to which such Holder shall continue to be
entitled after such exercise in accordance with the provisions of this Warrant;
provided, however, that if the holder hereof shall fail to make any such
request, such failure shall not affect the continuing obligation of the Company
to afford to such Holder any such rights.
1.8 No Fractional Shares. The Company shall not be required to issue
fractional shares of Common Stock (or other securities) on the exercise of this
Warrant. If more than one Warrant shall be presented for exercise at the same
time by the same Holder, the number of full Warrant Shares which shall be
issuable upon such exercise shall be computed on the basis of the aggregate
number of whole Warrant Shares purchasable on exercise of the Warrants so
presented.
-4-
1.9 Assistance and Cooperation. The Company shall not close its books
against the transfer of this Warrant or of any Warrant Share in any manner which
interferes with the timely exercise of this Warrant. The Company shall assist
and cooperate with any Holder required to make any governmental filings or
obtain any governmental approvals prior to or in connection with any exercise of
this Warrant (including, without limitation, making any filings required to be
made by the Company).
1.10 Delayed Exercise. Notwithstanding any other provision hereof, if an
exercise of any portion of this Warrant is to be made in connection with a
registered public offering or the sale of the Company, the exercise of any
portion of this Warrant may, at the election of the Holder hereof, be
conditioned upon the consummation of the public offering or sale of the Company
in which case such exercise shall not be deemed to be effective until the
consummation of such transaction.
ARTICLE II
TRANSFER
2.1 Warrant Office. The Company shall maintain an office for certain
purposes specified herein (the "Warrant Office"), which office shall initially
be the Company's offices at 0000 Xxxxx Xxxxx Xxxxxx, Xxxxx 0000, Xxxxx, Xxxxxxxx
00000, and may subsequently be such other office of the Company or of any
transfer agent of the Common Stock in the continental United States as to which
written notice has previously been given to the holder hereof. The Company shall
maintain, at the Warrant Office, a register for the Warrants in which the
Company shall record the name and address of the Person in whose name this
Warrant has been issued, as well as the name and address of each permitted
assignee of the rights of the registered owner hereof.
2.2 Ownership of Warrants. The Company may deem and treat the Person in
whose name the Warrant is registered as the Holder and owner hereof
(notwithstanding any notations of ownership or writing hereon made by anyone
other than the Company) for all purposes and shall not be affected by any notice
to the contrary until presentation of this Warrant for registration of transfer
as provided in this Article II. Notwithstanding the foregoing, the Warrants
represented hereby, if otherwise properly assigned in compliance with this
Article II (i.e., but for registration of the transfer at the Warrant Office),
may be exercised by an assignee for the purchase of Warrant Shares without
having a new Warrant issued.
-5-
2.3 Restrictions on Transferability of Warrant. Subject to the transfer
conditions referred to herein, this Warrant and all rights hereunder (including,
but not limited to, Registration Rights under Article VI) are transferable, in
whole or in part, without charge to the Holder, upon surrender of this Warrant
with a properly executed Assignment (in the form of Exhibit II hereto) at the
Warrant Office of the Company. The Company agrees to maintain at the Warrant
Office books for the registration and transfer of the Warrants. The Company
shall, from time to time, register the transfer of the Warrants in such books
upon surrender of any such Warrant at the Warrant Office accompanied by a
properly executed Assignment and written instructions for transfer satisfactory
to the Company. Upon any such transfer and upon payment by the holder or its
transferee of any applicable transfer taxes, a new Warrant shall be issued to
the transferee and the surrendered Warrant shall be canceled by the Company. The
Company shall pay all taxes (other than securities transfer taxes or income
taxes) and all other expenses and charges payable in connection with the
transfer of the Warrants pursuant to this Section 2.3. Prior to any transfer as
provided herein, the transferor shall provide written notice to the Company.
2.4 Warrant Exchangeable for Different Denominations. This Warrant is
exchangeable, upon the surrender hereof, by the Holder at the Warrant Office of
the Company, for new Warrants of like tenor representing in the aggregate the
purchase rights hereunder, and each of such new Warrants shall represent such
portion of such rights as is designated by the Holder at the time of such
surrender. The date the Company initially issues this Warrant shall be deemed to
be the "Date of Issuance" hereof regardless of the number of times new
certificates representing the unexpired and unexercised rights formerly
represented by this Warrant shall be issued. All Warrants representing portions
of the rights hereunder are referred to herein as the "Warrants."
2.5 Compliance with Securities Laws. Notwithstanding any other provisions
contained in this Warrant, the Holder hereof understands and agrees that the
following restrictions and limitations shall be applicable to all Warrant Shares
and to all resales or other transfers thereof pursuant to the Securities Act:
2.5.1 The holder hereof agrees that the Warrant and Warrant Shares
shall not be sold or otherwise transferred unless the Warrant or Warrant Shares
are registered under the Securities Act and applicable state securities or blue
sky laws or are sold in a transaction that is exempt therefrom.
-6-
2.5.2 A legend in substantially the following form will be placed on
the certificate(s) evidencing the Warrant Shares:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR
ANY STATE OR OTHER APPLICABLE SECURITIES LAWS
AND, ACCORDINGLY, THE SECURITIES REPRESENTED
BY THIS CERTIFICATE MAY NOT BE RESOLD, PLEDGED,
OR OTHERWISE TRANSFERRED, EXCEPT PURSUANT TO
AN EFFECTIVE REGISTRATION STATEMENT UNDER, OR
IN A TRANSACTION EXEMPT FROM REGISTRATION
UNDER, THE SECURITIES ACT AND IN ACCORDANCE
WITH ANY STATE OR OTHER APPLICABLE SECURITIES
LAWS."
2.5.3 Stop transfer instructions will be imposed with respect to the
Warrant Shares so as to restrict resale or other transfer thereof not in
accordance with this Section 2.5.
ARTICLE III
ANTI-DILUTION
3. Adjustment Effectuating Anti-Dilution. The number of shares of Common
Stock (i.e., Warrant Shares) obtainable upon exercise of this Warrant shall be
subject to adjustment from time to time as provided in this Article III.
3.1. Adjustment of Warrant Number of Shares. The number of Warrant
Shares purchasable upon the exercise of the Warrant shall be subject to
adjustment as follows:
(a) In the case the Company shall issue rights, options or warrants
entitling recipients thereof to subscribe for or purchase shares of Common Stock
at a price per share which is lower than the Fair Market Value per share of
Common Stock (as defined in paragraph (c) of this Section 3.1) as of the date of
issuance, the number of Warrant Shares thereafter purchasable upon the exercise
of each Warrant shall be determined by multiplying the number of Warrant Shares
theretofore purchasable upon exercise of each Warrant by a fraction, of which
the numerator shall be the number of shares of Common Stock outstanding on the
date of issuance of such rights, options or warrants plus the number of
additional shares of Common Stock offered for subscription or purchase or
pursuant to such rights, options or warrants, and of which the
-7-
denominator shall be the number of shares of Common Stock outstanding on the
date of issuance of such rights, options or warrants plus the number of shares
which the aggregate offering price of the total number of shares of Common Stock
so offered would purchase at such Fair Market Value. Such adjustment shall be
made whenever such rights, options or warrants are issued, and shall become
effective retroactively immediately after the date of such issuance.
(b) In the case the Company shall issue evidences of its indebtedness
or assets (excluding cash dividends or distributions out of earnings) or rights,
options or warrants or convertible securities containing the right to subscribe
for or purchase shares of Common Stock (excluding those referred to in paragraph
(a) of this Section 3.1) then in each case the number of Warrant Shares
thereafter purchasable upon the exercise of each Warrant shall be determined by
multiplying the number of Warrant Shares theretofore purchasable upon exercise
of the Warrant, by a fraction, of which the numerator shall be the then Fair
Market Value per share of Common Stock (as defined in paragraph (c) of this
Section 3.1) on the date of such distribution, and of which the denominator
shall be such Fair Market Value per share of Common Stock, less the then fair
value (as determined by the Board of Directors of the Company, whose
determination shall be conclusive) of the portion of the assets or evidences of
indebtedness so distributed or of such subscription rights, options or warrants,
or of such convertible securities applicable to one share of Common Stock. Such
adjustment shall be made whenever any such distribution is made, and shall
become effective on the date of distribution retroactive to the date of the
distribution.
(c) For the purposes of this Section 3.1, "Fair Market Value" shall
mean with respect to the Company's Common Stock the average of the closing
prices of such security's sales on all domestic securities exchanges on which
such security may at the time be listed, or, if there have been no sales on any
such exchange on any day, the average of the highest bid and lowest asked prices
on all such exchanges at the end of such day, or, if on any day such security is
not so listed, the average of the representative bid and asked prices quoted in
the NASDAQ System as of 4:00 P.M., New York time, on such day, or, if on any day
such security is not quoted in the NASDAQ System, the average of the highest bid
and lowest asked prices on such day in the domestic over-the-counter market as
reported by the National Quotation Bureau, Incorporated, or any similar
successor organization, in each such case averaged over a period of ten days
consisting of the day as of which "Fair Market Value" is being determined and
the nine consecutive business days prior to such day; provided, that if such
security is listed on any domestic securities exchange, the term "business days"
as used in this sentence means business days on which such exchange is open for
trading. If at any time such security is not listed on any domestic securities
exchange or quoted in the NASDAQ System or the domestic over-the-counter market,
the "Fair Market Value" shall be the fair value thereof determined jointly by
the Company and the Holder; provided, that if such parties are unable to reach
agreement within a reasonable period of time, such fair value shall be
determined by an appraiser jointly selected by
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the Company and the Holder. The determination of such appraiser shall be final
and binding on the Company and the Holder, and the fees and expenses of such
appraiser shall be paid jointly by the Company and the Holder.
(d) No adjustment in the number of Warrant Shares purchasable
hereunder shall be required unless such adjustment would require an increase or
decrease of at least 1% in the number of Warrant Shares purchasable upon the
exercise of each Warrant; provided, however, that any adjustments which by
reason of this paragraph (d) are not required to be made shall be carried
forward and taken into account in any subsequent adjustment.
3.2 Stock Splits and Reverse Splits. In the event that the Company shall
at any time subdivide its outstanding shares of Common Stock into a greater
number of shares (by stock split, stock dividend, recapitalization or
otherwise), the number of Warrant Shares purchasable pursuant to this Warrant
immediately prior to such subdivision shall be proportionately increased.
Conversely, in the event that the outstanding shares of Common Stock shall at
any time be combined into a smaller number of shares (by reverse stock split or
otherwise), the number of Warrant Shares purchasable upon the exercise of this
Warrant immediately prior to such combination shall be proportionately reduced.
3.3 Reorganizations and Asset Sales. If any capital recapitalization,
reorganization or reclassification of the capital stock of the Company, or any
consolidation, merger or share exchange of the Company with another Person, or
the sale, transfer or other disposition of all or substantially all of its
assets to another Person shall be effected in such a way that a holder of Common
Stock of the Company shall be entitled to receive capital stock, securities or
assets with respect to or in exchange for their shares, then the following
provisions shall apply:
3.3.1 As a condition of such recapitalization, reorganization,
reclassification, consolidation, merger, share exchange, sale, transfer or other
disposition (except as otherwise provided below in this Section 3.3), lawful and
adequate provisions (in form and substance satisfactory to the Holders of
Warrants representing a majority of the Warrant Shares obtainable upon exercise
of all of the Warrants then outstanding) shall be made whereby the holder of
Warrants shall thereafter have the right to purchase and receive upon the terms
and conditions specified in this Warrant and in lieu of or addition to (as the
case may be) the Warrant Shares immediately theretofore receivable upon the
exercise of the rights represented hereby, such shares of capital stock,
securities or assets as may be issued or payable with respect to or in exchange
for a number of outstanding shares of such Common Stock equal to the number of
Warrant Shares immediately theretofore so receivable had such recapitalization,
reorganization, reclassification, consolidation, merger, share exchange or sale
not taken place, and in any such case appropriate provision (in form and
substance satisfactory to the Holders of Warrants representing a majority of the
Warrant Shares obtainable upon exercise of all of the Warrants
-9-
then outstanding) shall be made with respect to the rights and interests of such
Holder(s) to the end that the provisions hereof shall thereafter be applicable,
as nearly as possible, in relation to any shares of capital stock, securities or
assets thereafter deliverable upon the exercise of Warrants.
3.3.2 The Company shall not effect any such consolidation, merger,
share exchange, sale, transfer or other disposition unless prior to or
simultaneously with the consummation thereof the successor Person (if other than
the Company) resulting from such consolidation, share exchange or merger or the
Person purchasing or otherwise acquiring such assets shall have assumed by
written instrument executed and mailed or delivered to each of the Holders
hereof at the last address of such holder appearing on the books of the Company,
(i) the obligation to deliver to such holder such shares of capital stock,
securities or assets as, in accordance with the foregoing provisions, such
holder may be entitled to receive, and (ii) all other liabilities and
obligations of the Company hereunder. As a condition to any consolidation, share
exchange or merger, such successor Person must assume the Company's obligations
hereunder by written instrument and issue a new warrant revised to reflect the
modifications in this Warrant effected pursuant to this Section 3.3.
3.4 Notice of Adjustment. Whenever the number of Warrant Shares issuable
upon the exercise of the Warrants shall be adjusted as herein provided, or the
rights of the Holder hereof shall change by reason of other events specified
herein, the Company shall compute the adjusted number of Warrant Shares in
accordance with the provisions hereof and shall prepare an Officer's Certificate
setting forth the adjusted number of Warrant Shares issuable upon the exercise
of the Warrants or specifying the other shares of stock, securities or assets
receivable as a result of such change in rights, and showing in reasonable
detail the facts and calculations upon which such adjustments or other changes
are based. The Company shall promptly cause to be mailed to the holder hereof
copies of such Officer's Certificate together with a notice stating that the
number of Warrant Shares purchasable upon exercise of the Warrants have been
adjusted and setting forth the adjusted number of Warrant Shares purchasable
upon the exercise of the Warrants.
3.5 Notices to Holders. In case at any time the Company proposes:
(i) to declare any dividend upon its Common Stock payable in capital
stock or make any dividend or other distribution to the holders of its Common
Stock;
(ii) to offer for subscription pro rata to all of the holders of its
Common Stock any additional shares of capital stock of any class or other
rights;
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(iii) to effect any capital reorganization, or reclassification of
the capital stock of the Company, or consolidation, merger or share exchange of
the Company with another Person, or sale, transfer or other disposition of all
or substantially all of its assets; or
(iv) to effect a voluntary or involuntary dissolution, liquidation or
winding up of the Company,
then, in any one or more of such cases, the Company shall give the Holder hereof
(a) at least 20 days' (but not more than 90 days') prior written notice of the
date on which the books of the Company shall close or a record shall be taken
for such dividend, distribution or subscription rights or for determining rights
to vote in respect of such issuance, recapitalization, reorganization,
reclassification, consolidation, merger, share exchange, sale, transfer,
disposition, dissolution, liquidation or winding up, and (b) in the case of any
such issuance, recapitalization, reorganization, reclassification,
consolidation, merger, share exchange, sale, transfer, disposition, dissolution,
liquidation or winding up, at least 20 days' (but not more than 90 days') prior
written notice of the date when the same shall take place. Such notice in
accordance with the foregoing clause (a) shall also specify, in the case of any
such dividend, distribution or subscription rights, the date on which the
holders of Common Stock shall be entitled thereto, and such notice in accordance
with the foregoing clause (b) shall also specify the date on which the holders
of Common Stock shall be entitled to exchange their Common Stock, as the case
may be, for securities or other property deliverable upon such reorganization,
reclassification, consolidation, merger, share exchange, sale, transfer,
disposition, dissolution, liquidation or winding up, as the case may be.
ARTICLE IV
Liquidating Dividends
If the Company declares or pays a dividend upon the Common Stock payable
otherwise than in cash out of earnings or earned surplus (determined in
accordance with generally accepted accounting principles, consistently applied)
except for a stock dividend payable in shares of Common Stock (a "Liquidating
Dividend"), then the Company shall pay to the Holder of this Warrant at the time
of payment thereof the Liquidating Dividend which would have been paid to such
Holder on the Common Stock had this Warrant been fully exercised immediately
prior to the date on which a record is taken for such Liquidating Dividend, or,
if no record is taken, the date as of which the record holders of Common Stock
entitled to such dividends are to be determined.
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ARTICLE V
Reporting Requirements
5.1 Rule 144 and 144A Reporting Information. With a view to making
available the benefits of certain rules and regulations of the SEC which may at
times permit the sale of the Warrant or Warrant Shares to the public or other
persons without registration, the Company shall use its reasonable best efforts
to:
5.1.1 make and keep public information available, as contemplated by
Rule 144 under the Securities Act;
5.1.2 file with the SEC in a timely manner all reports and other
documents required of the Company under the Securities Act and the Exchange Act;
and
5.1.3 furnish to each Holder of Warrant Shares promptly upon request
(A) a written statement by the Company as to its compliance with the reporting
requirements of such Rule 144 of the Securities Act and the Exchange Act, (B)
copies of all SEC filings made by the Company within the previous one (1) year
period and any press releases issued by the Company since the date of the last
such filing, and (C) copies of all Rule 144A information with respect to the
Company.
ARTICLE VI
MISCELLANEOUS
6.1 Entire Agreement. This Warrant and the Purchase Agreement contains
the entire agreement between the Holder hereof and the Company with respect to
the Warrant Shares purchasable upon exercise hereof and supersedes all prior
arrangements or understandings with respect thereto.
6.2 Governing Law. This Warrant shall be governed by and construed in
accordance with the laws (other than the laws of conflicts) of the State of
Oklahoma.
6.3 Amendment and Waiver. Except as otherwise provided herein, the
provisions of the Warrants may be amended and the Company may take any action
herein prohibited, or omit to perform any act herein required to be performed by
it, only if the Company has obtained the written consent of the Holders of
Warrants representing a majority of the Warrant Shares obtainable upon exercise
of the Warrants; provided that no such action may change the Exercise
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Price of the Warrants or the number of shares or class of stock obtainable upon
exercise of each Warrant. Notwithstanding the foregoing, the Company may, at
its option, reduce the Exercise Price of the Warrants, increase the number of
shares of stock obtainable upon exercise of each Warrant, or extend the Term of
the Warrant for such period as it may determine.
6.4 Illegality. In the event that any one or more of the provisions
contained in this Warrant shall be determined to be invalid, illegal or
unenforceable in any respect for any reason, the validity, legality and
enforceability of any such provision in any other respect and the remaining
provisions of this Warrant shall not, at the election of the party for whom the
benefit of the provision exists, be in any way impaired.
6.5 Copy of Warrant. A copy of this Warrant shall be filed among the
records of the Company.
6.6 Notice. Any notice or other document required or permitted to be
given or delivered to the Holder hereof shall be in writing and delivered at, or
sent by certified or registered mail to such Holder at, the last address shown
on the books of the Company maintained at the Warrant Office for the
registration of this Warrant or at any more recent address of which the Holder
hereof shall have notified the Company in writing. Any notice or other document
required or permitted to be given or delivered to the Company, other than such
notice or documents required to be delivered to the Warrant Office, shall be
delivered at, or sent by certified or registered mail to, the offices of the
Company at 0000 Xxxxx Xxxxx Xxxxxx, Xxxxx 000, Xxxxx, Xxxxxxxx 00000, or such
other address within the continental United States of America as shall have been
furnished by the Company to the Holder of this Warrant.
6.7 Limitation of Liability; Not Stockholders. No provision of this
Warrant shall be construed as conferring upon the Holder hereof the right to
vote, consent, receive dividends or receive notices (other than as herein
expressly provided) in respect of meetings of stockholders for the election of
directors of the Company or any other matter whatsoever as a stockholder of the
Company. No provision hereof, in the absence of affirmative action by the holder
hereof to purchase shares of Common Stock, and no mere enumeration herein of the
rights or privileges of the holder hereof, shall give rise to any liability of
such Holder for the purchase price of any shares of Common Stock or as a
stockholder of the Company, whether such liability is asserted by the Company or
by creditors of the Company.
6.8 Exchange, Loss, Destruction, etc. of Warrant. Upon receipt of
evidence satisfactory to the Company of the loss, theft, mutilation or
destruction of this Warrant, and in the case of any such loss, theft or
destruction upon delivery of a bond of indemnity or such other security in such
form and amount as shall be reasonably satisfactory to the Company, or in the
event of such mutilation upon surrender and cancellation of this Warrant, the
Company will
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make and deliver a new warrant of like tenor, in lieu of such lost, stolen,
destroyed or mutilated Warrant. Any warrant issued under the provisions of this
Section 7.8 in lieu of any Warrant alleged to be lost, destroyed or stolen, or
in lieu of any mutilated Warrant, shall constitute an original contractual
obligation on the part of the Company. This Warrant shall be promptly canceled
by the Company upon the surrender hereof in connection with any exchange or
replacement. The Company shall pay all taxes (other than securities transfer
taxes or income taxes) and all other expenses and charges payable in connection
with the preparation, execution and delivery of warrants pursuant to this
Section 7.8.
6.9 Headings. The Article and Section and other headings herein are for
convenience only and are not a part of this Warrant and shall not affect the
interpretation thereof.
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed in
its name.
GOTHIC ENERGY CORPORATION
Dated: April ___, 1998 By:
---------------------------------
Xxxxxxx Xxxxx, President
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Exhibit I
SUBSCRIPTION NOTICE
-------------------
The undersigned, the holder of the attached Warrant (Certificate No.
W-__________), hereby elects to subscribe to exercise purchase rights
represented thereby and to purchase thereunder, __________ shares of the Common
Stock covered by such Warrant, and herewith makes payment in full for such
shares pursuant to Section 1.2 of such Warrant, and requests (a) that
certificates for such shares (and any other securities or other property
issuable upon such exercise) be issued in the name of, and delivered to
_________________________ and (b) if such shares shall not include all of the
shares issuable as provided in such Warrant, that a new warrant of like tenor
and date for the balance of the shares of Common Stock issuable thereunder be
delivered to the undersigned.
Dated:
--------------------------------------------
--------------------------------------------
Address
--------------------------------------------
City, State, Zip Code
Exhibit II
ASSIGNMENT
----------
For value received, _________________________, hereby sells, assigns, and
transfers unto _________________________ the within Warrant, together with all
right, title and interest therein, and does hereby irrevocably constitute and
appoint _________________________ attorney, to transfer such Warrant on the
books of the Company, with full power of substitution.
Dated:
----------------------------------------
REGISTRATION RIGHTS AGREEMENT
DATED AS OF APRIL ___, 1998
BY AND BETWEEN
GOTHIC ENERGY CORPORATION
AND
CHESAPEAKE GOTHIC CORP.
TABLE OF CONTENTS
Page
----
1. Definitions.............................................................. 1
2. Demand Registrations..................................................... 2
3. Piggyback Registrations.................................................. 3
4. Maintaining Effectiveness of Registration Statement...................... 4
5. Expenses of Registration................................................. 5
6. Registration Procedures.................................................. 5
7. Indemnification.......................................................... 7
8. Certain Information......................................................10
9. Miscellaneous............................................................10
(a) No Inconsistent Agreements........................................10
(b) Amendments and Waivers............................................10
(c) Notices...........................................................11
(d) Successors and Assigns............................................11
(e) Rules 144 and 144A................................................11
(f) Counterparts......................................................11
(g) Headings..........................................................11
(h) GOVERNING LAW.....................................................12
(i) Severability......................................................12
(j) Entire Agreement..................................................12
Exhibit A
This Registration Rights Agreement (this "Agreement") is made and entered
into as of April ___, 1998, by and between Gothic Energy Corporation, an
Oklahoma corporation (the "Company"), and Chesapeake Gothic Corp., an Oklahoma
corporation (the "Purchaser").
This Agreement is made pursuant to the Securities Purchase Agreement, dated
as of March 31, 1998, by and among the Company, the Purchaser and Chesapeake
Acquisition Corporation (the "Purchase Agreement"), relating to the sale by the
Company to the Purchaser of $50,000,000 in aggregate liquidation value of its
Senior Redeemable Preferred Stock, Series B, par value $.05 per share (the
"Preferred Stock"), along with warrants (the "Warrants") for the purchase of
2,439,246 shares (the "Warrant Shares") of its Common Stock, par value $.01 per
share ("Common Stock"). In order to induce the Purchaser to enter into the
Purchase Agreement, the Company has agreed to provide to the Purchaser and its
Affiliates (the "Holders") the registration rights set forth in this Agreement.
The execution of this Agreement is a condition to the obligations of the
Purchaser to purchase the Preferred Stock and Warrants under the Purchase
Agreement.
In consideration of the foregoing, the parties hereto agree as follows:
1. Definitions. As used in this Agreement, the following capitalized
defined terms shall have the following meanings:
"Affiliate" of any specified Person means any other Person which
directly or indirectly through one or more intermediaries controls, or is
controlled by, or is under common control with, such specified Person. For
purposes of this definition, "control" (including, with correlative meanings,
the terms "controlling," "controlled by" and "under common control with"), as
used with respect to any Person, means the possession, directly or indirectly,
of the power to direct or cause the direction of the management or policies of
such Person, whether through the ownership of voting securities, by agreement or
otherwise; provided, however, that, beneficial ownership of at least 10% of the
voting securities of a Person shall be deemed to be control.
"Commission" shall mean the Securities and Exchange Commission or any
other federal agency at the time administering the Securities Act.
"Preferred Stock" shall mean the Senior Redeemable Preferred Stock,
Series B, of the Company, $.05 par value per share.
"Registrable Securities" shall mean (i) the Warrant Shares; (ii) the
Preferred Stock; (iii) Preferred Stock which has been converted to Common Stock;
and (iv) any Common Stock issued or issuable at any time or from time to time in
respect of any of the interests specified in (i) through (iii) hereof upon a
stock split, stock dividend, recapitalization or other similar event involving
the Company, of any Holder, until such Registrable Securities are registered
pursuant to a Registration Statement or until such securities are able to be
sold under Rule 144(k) (or successor Rule) under the Securities Act without
restriction.
The terms "register", "registered", and "registration" refer to a
registration effected by preparing and filing a registration statement in
compliance with the Securities Act, and the declaration or ordering by the
Commission of the effectiveness of such registration statement.
"Registration Expenses" shall mean all expenses, other than Selling
Expenses (as defined below), incurred by the Company in complying with this
Agreement, including, without limitation, all registration, qualification and
filing fees, exchange listing fees, printing expenses, escrow fees, fees and
disbursements of counsel for the Company and all auditors, blue sky fees and
expenses, the expense of any special audits incident to or required by any such
registration (but excluding the compensation of regular employees of the Company
which shall be paid in any event by the Company).
"Securities Act" means the Securities Act of 1933, as amended.
"Selling Expenses" shall mean all underwriting discounts, selling
commissions and stock transfer taxes applicable to the sale of Registrable
Securities registered by any Holder and all fees and disbursements of counsel
for such Holders.
2. Demand Registrations.
(a) Registration of Immediate Offering. At any time after September
30, 1998, the Holders of at least 50% of the Registrable Securities (hereinafter
the "Majority Holders") may request registration by the Company under the
Securities Act of the resale by such Holders of all or any portion of their
Registrable Securities (an "Immediate Offering Registration"); provided,
however, that, with respect to Common Stock, such request for registration
includes such number of shares equal to or greater than 5% of the issued and
outstanding shares of Common Stock on the date of request; and provided further,
that, with respect to Preferred Stock, such request for registration includes
such number of shares equal to or greater than 50% of the issued and outstanding
shares of Preferred Stock on the date of request. A request for an Immediate
Offering Registration shall specify the approximate number of Registrable
Securities requested to be registered by the requesting Holders. Within 10 days
after receipt of such request, the Company shall give written notice of such
requested registration to all other Holders of Registrable Securities and shall
include in such registration all Registrable Securities with respect to which
the Company has received written requests for inclusion therein within 30 days
after delivery of the Company's notice.
(b) Registration of Delayed or Continuous Offering. At any time
after September 30, 1998, the Majority Holders may request registration by the
Company under the Securities Act of all or any portion of their Registrable
Securities for resale in a delayed or continuous offering to the extent
permitted by Rule 415 (or any successor rule thereto) under the Securities Act
(a "Shelf Registration"). A registration statement for a Shelf Registration
shall
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provide for resale by the Holders in the manner or manners designated in writing
to the Company by them (including, without limitation, one or more underwritten
offerings). Within 10 days after the receipt of such request, the Company shall
give similar written notice of such requested registration to all other Holders
of Registrable Securities and shall include in such registration all Registrable
Securities with respect to which the Company has received written requests for
inclusion therein within 30 days after delivery of the Company's notice.
(c) Number of Demand Registrations. The Majority Holders shall be
entitled to request two (2) Immediate Offering Registrations; provided, a
registration shall not count as one of the permitted Immediate Offering
Registrations until it has become and remained effective for the prescribed time
period. In addition, the Majority Holders shall be entitled to one (1) Shelf
Registration; provided, a registration shall not count as the permitted Shelf
Registration until it has become and remained effective for the prescribed time
period. For purposes of this Agreement, an Immediate Offering Registration and
a Shelf Registration shall each constitute and be referred to as "Demand
Registration."
(d) Priority on Demand Registrations. The Company shall not include
in any Demand Registration any securities which are not Registrable Securities
without the prior written consent of the Holders of at least 75% of the
Registrable Securities initially requesting such registration. If a Demand
Registration is an underwritten offering and the managing underwriters advise
the Company in writing that in their opinion the number of Registrable
Securities and, if permitted hereunder, other securities requested to be
included in such offering exceeds the number of shares, if any, which can be
sold in an orderly manner in such offering within a price range acceptable to
the Majority Holders initially requesting registration, subject, however, to the
terms of any other agreement entered into prior to the date hereof to which the
Company shall be a party, the Company shall include in such registration prior
to the inclusion of any securities which are not Registrable Securities the
number of Registrable Securities requested to be included which in the opinion
of such underwriters can be sold in an orderly manner within the price range of
such offering, pro rata among the respective Holders of Registrable Securities,
on the basis of the amount of shares requested for inclusion by each such
Holder, then, after the inclusion of all such Registrable Securities, the
Company shall include any other securities requested for inclusion.
(e) Selection of Underwriters. The Majority Holders initially
requesting registration in any Demand Registration hereunder shall have the
right to select the investment banker(s) and manager(s) to administer the
offering, subject to the Company's approval which shall not be unreasonably
withheld.
3. Piggyback Registrations.
(a) Right to Piggyback. At any time after September 30, 1998,
whenever the Company proposes to register any of its securities under the
Securities Act (other than pursuant
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to a registration on Form S-4 or Form S-8) and the registration form to be used
may be used for the registration of Registrable Securities (a "Piggyback
Registration"), the Company shall give prompt written notice (in any event
within five (5) business days after its receipt of notice of any exercise of
demand registration rights other than under this Agreement) to all Holders of
Warrants or Registrable Securities of its intention to effect such a
registration and shall include in such registration all Registrable Securities
with respect to which the Company has received written requests for inclusion
therein within 30 days after the receipt of the Company's notice.
(b) Priority on Primary Registrations. If a Piggyback Registration
is an underwritten primary registration on behalf of the Company, and the
managing underwriters advise the Company in writing that in their opinion the
number of securities requested to be included in such registration exceeds the
number which can be sold in an orderly manner in such offering within a price
range acceptable to the Company, the Company shall include in such registration,
subject, however, to the terms of any other agreement entered into prior to the
date hereof to which the Company shall be a party, (i) first, the securities the
Company proposes to sell, (ii) second, the Registrable Securities requested to
be included in such registration, subject to pro rata cut back among the Holders
thereof, and (iii) third, other securities requested to be included in such
registration.
(c) Priority on Secondary Registrations. If a Piggyback Registration
is an underwritten secondary registration on behalf of holders of the Company's
securities, and the managing underwriters advise the Company in writing that in
their opinion the number of securities requested to be included in such
registration exceeds the number which can be sold in an orderly manner in such
offering within a price range acceptable to the holders initially requesting
such registration, the Company shall include in such registration, subject,
however, to the terms of any other agreement entered into prior to the date
hereof to which the Company shall be a party, (i) first, the securities
requested to be included therein by the holders requesting such registration,
(ii) second, the Registrable Securities requested to be included in such
registration, pro rata among the Holders of such securities on the basis of the
number of securities so requested to be included therein, and (iii), third,
other securities requested to be included in such registration.
(d) Right of Holder to Withdraw. A Holder who has given notice to
the Company under Section 3(a) requesting inclusion of any Registrable
Securities in a Piggyback Registration shall, on five (5) business days notice
to the Company, have the right to withdraw its Registrable Securities from the
Piggyback Registration.
(e) Right of Company to Withdraw. The Company shall, on five
business days notice to all holders who have given notice to the Company under
Section 3(a) requesting inclusion of their Registrable Securities in a Piggyback
Registration have the right to withdraw any registration statement filed
pursuant to this Section 3 for a Piggyback Registration at any time prior to the
effective date thereof.
-4-
4. Maintaining Effectiveness of Registration Statement.
(a) The Company shall use its reasonable best efforts to keep any
registration statement prepared and filed pursuant to this Agreement
continuously effective under the Securities Act from the initial effectiveness
thereof until the earliest to occur of (i) the date when all Registrable
Securities registered thereunder have been sold in the manner set forth and as
contemplated in the registration statement, or (ii) the date when counsel to the
Company or other counsel of such Holders' choosing shall render an opinion
addressed to the Holders whose Registrable Securities are registered thereunder,
to the effect that all remaining Registrable Securities are freely transferable
in the open market without limitations as to volume and manner of sale, and
without being required to file any forms or reports with the Commission under
the Securities Act or the rules and regulations thereunder of the Company (such
period being referred to as the "Effectiveness Period").
(b) If the registration statement filed pursuant to this Agreement
ceases to be effective for any reason at any time during the Effectiveness
Period, the Company shall use its reasonable best efforts to obtain the prompt
withdrawal of any order suspending the effectiveness thereof, and in any event
shall within 45 days of such cessation of effectiveness amend such registration
statement in a manner reasonable expected to obtain the withdrawal of the order
suspending the effectiveness thereof, or file an additional registration
statement covering all of the Registrable Securities originally registered. If
an additional registration statement is filed, the Company shall use its
reasonable best efforts to cause such registration statement to be declared
effective as soon as practicable after such filing and to keep such registration
statement continuously effective for the remainder of the Effectiveness Period.
5. Expenses of Registration. All Registration Expenses shall be borne by
the Company. Unless otherwise stated herein, all Selling Expenses relating to
securities registered on behalf of the Holders shall be borne by the Holders.
The Company shall pay all Registration Expenses in connection with any
registration initiated under this Article whether or not it has become effective
and whether or not such registration has counted as one of the permitted
registrations.
6. Registration Procedures. In the case of each registration,
qualification or compliance effected by the Company pursuant hereto, the Company
will keep the Holders advised in writing as to the initiation of each
registration, qualification and compliance and as to the completion thereof. At
its expense, the Company will:
(a) Prepare and file with the Commission a registration statement
with respect to such securities and use its commercially reasonable efforts to
cause such registration statement to become and remain effective until the
distribution described in such registration statement has been completed;
-5-
(b) Notify each Holder of Registrable Securities of the effectiveness
of each registration statement filed hereunder and prepare and file with the
Commission such amendments and supplements to such registration statement and
the prospectus used in connection therewith as may be necessary to keep such
registration statement effective for the period of time set forth in Section 4,
as applicable, and to comply with the provisions of the Securities Act with
respect to the disposition of all securities covered by such registration
statement during such period in accordance with the intended methods of
disposition by the sellers thereof set forth in such registration statement.
(c) Furnish to each Holder such number of copies of the registration
statement, each supplement and amendment thereto, and the prospectus included
therein, including a preliminary prospectus, in conformity with the requirements
of the Securities Act, and such other documents as such Holder may reasonably
request in order to facilitate the public sale of the shares by such Holder, and
promptly furnish to each Holder notice of any stop-order or similar notice
issued by the Commission or any state agency charged with the regulation of
securities, and notice of any Nasdaq or securities exchange listing.
(d) Use its reasonable best efforts to register or qualify such
Registrable Securities under the securities or blue sky laws of such
jurisdictions as any seller reasonably requests and do any and all other acts
and things which may be reasonably necessary or advisable to enable such seller
to consummate the disposition in such jurisdictions of the Registrable
Securities owned by such seller.
(e) Use its best efforts to cause the Warrant Shares, together with
any shares of Common Stock issuable upon such conversion of Preferred Stock, to
be listed on the Nasdaq SmallCap Market or such other Securities Exchange on
which the Common Stock is approved for listing.
(f) Notify each seller of such Registrable Securities, at any time
when a prospectus relating thereto is required to be delivered under the
Securities Act, of the existence of facts or the happening of any event (without
necessarily identifying such facts or event to such sellers) as a result of
which the prospectus included in such registration statement contains an untrue
statement of a material fact or omits any fact necessary to make the statements
therein not misleading, and, at the request of any such seller, the Company
shall prepare a supplement or amendment to such prospectus so that, as
thereafter delivered to the purchasers of such Registrable Securities, such
prospectus shall not contain an untrue statement of a material fact or omit to
state any fact necessary to make the statements therein not misleading.
(g) Enter into such customary agreements (including underwriting
agreements in customary form) and take all such other actions as the Majority
Holders of the Registrable Securities being sold or the underwriters, if any,
reasonably request in order to expedite or
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facilitate the disposition of such Registrable Securities in any underwritten
offering of Registrable Securities.
(h) Make available for reasonable inspection by any seller of
Registrable Securities, any underwriter participating in any disposition
pursuant to such registration statement and any attorney, accountant or other
agent retained by any such seller or underwriter, such financial and other
records, corporate documents and properties of the Company as are customarily
made available to such persons on a confidential basis by the issuer in
connection with a registered public offering of securities similar to the
Registrable Securities, and cause the Company's officers, directors, employees
and independent accountants to supply all information reasonably requested by
any such seller, underwriter, attorney, accountant or agent in connection with
such registration statement.
(i) Otherwise use its best efforts to comply with all applicable
rules and regulations of the Commission, and make available to its security
holders, as soon as reasonably practicable, an earnings statement covering the
period of at least twelve months beginning with the first day of the Company's
first full calendar quarter after the effective date of the registration
statement, which earnings statement shall satisfy the provisions of Section
11(a) of the Securities Act and Rule 158 thereunder.
7. Indemnification.
(a) To the extent permitted by law, the Company will indemnify each
Holder, each of their respective officers and directors and partners, and each
person controlling a Holder within the meaning of the Securities Act, with
respect to which registration, qualification or compliance has been effected
pursuant to this Agreement, and each underwriter, if any, and each person who
controls any underwriter within the meaning of the Securities Act, against all
expenses, claims, losses, damages or liabilities (or actions in respect
thereof), including any of the foregoing incurred in settlement of any
litigation, commenced or threatened, to the extent such expenses, claims,
losses, damages or liabilities arise out of or are based on any untrue statement
(or alleged untrue statement) of a material fact contained in any registration
statement, prospectus, offering circular or other similar document, or any
amendment or supplement thereto, incident to any such registration,
qualification or compliance, or based on any omission (or alleged omission) to
state therein a material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances in which they were made,
not misleading, or any violation by the Company of the Securities Act or any
rule or regulation promulgated under the Securities Act applicable to the
Company in connection with any such registration, qualification or compliance,
and the Company will reimburse each Holder, each of their respective officers
and directors and partners, and each person controlling a Holder, each such
underwriter and each person who controls any such underwriter, for any legal and
any other expenses reasonably incurred in connection with investigating,
preparing or defending any such claim, loss, damage, liability or action;
provided, however, that the indemnity contained herein
-7-
shall not apply to amounts paid in settlement of any claim, loss, damage,
liability or expense if settlement is effected without the consent of the
Company (which consent shall not unreasonably be withheld); provided, further,
that the Company will not be liable in any such case to the extent that any such
claim, loss, damage, liability or expense arises out of or is based on any
untrue statement or omission or alleged untrue statement or omission, made in
reliance upon and in conformity with written information furnished to the
Company by the Holders or such controlling person specifically for use therein.
Notwithstanding the foregoing, insofar as the foregoing indemnity relates to any
such untrue statement (or alleged untrue statement) or omission (or alleged
omission) made in the preliminary prospectus but eliminated or remedied in the
amended prospectus on file with the Commission at the time the registration
statement becomes effective or in the final prospectus filed with the Commission
pursuant to the applicable rules of the Commission or in any supplement or
addendum thereto, the indemnity agreement herein shall not inure to the benefit
of any underwriter if a copy of the final prospectus filed pursuant to such
rules, together with all supplements and addenda thereto, was not furnished to
the person or entity asserting the loss, liability, claim or damage at or prior
to the time such furnishing is required by the Securities Act.
(b) To the extent permitted by law, each Holder will, if securities
held by such Holder are included in the securities as to which such
registration, qualification or compliance is being effected pursuant to terms
hereof, severally but not jointly, indemnify the Company, each of its directors
and officers, each person who controls the Company or such underwriter within
the meaning of the Securities Act, and each other person selling the Company's
securities covered by such registration statement, each of such person's
officers and directors and each person controlling such persons within the
meaning of the Securities Act, against all claims, losses, damages and
liabilities (or actions in respect thereof) arising out of or based on any
untrue statement (or alleged untrue statement) of a material fact contained in
any such registration statement, prospectus, offering circular or other
document, or any omission (or alleged omission) to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, or any violation by such Holder of any rule or regulation
promulgated under the Securities Act applicable to such Holder and relating to
action or inaction required of such Holder in connection with any such
registration, qualification or compliance, and will reimburse the Company, such
other persons, such directors, officers, persons, or control persons for any
legal or other expenses reasonably incurred in connection with investigating or
defending any such claim, loss, damage, liability or action, in each case to the
extent, but only to the extent, that such untrue statement (or alleged untrue
statement) or omission (or alleged omission) is made in such registration
statement, prospectus, offering circular or other document in reliance upon and
in conformity with written information furnished to the Company by such Holder
specifically for use therein; provided, however, that the indemnity contained
herein shall not apply to amounts paid in settlement of any claim, loss, damage,
liability or expense if settlement is effected without the consent of such
Holder (which consent shall not be unreasonably withheld). Notwithstanding the
foregoing, the liability of such Holder under this subsection (b) shall be
limited in an amount equal to the net proceeds from the sale of Registrable
Securities
-8-
sold by such Holder, unless such liability arises out of or is based on willful
conduct by such Holder. In addition, insofar as the foregoing indemnity relates
to any such untrue statement (or alleged untrue statement) or omission (or
alleged omission) made in the preliminary prospectus but eliminated or remedied
in the amended prospectus on file with the Commission at the time the
registration statement becomes effective or in the final prospectus filed
pursuant to applicable rules of the Commission or in any supplement or addendum
thereto, the indemnity agreement herein shall not inure to the benefit of the
Company if a copy of the final prospectus filed pursuant to such rules, together
with all supplements and addenda thereto, was not furnished to the person or
entity asserting the loss, liability, claim or damage at or prior to the time
such furnishing is required by the Securities Act.
(c) Notwithstanding the foregoing subsections (a) and (b), each party
entitled to indemnification under this Section 7 (the "Indemnified Party") shall
give notice to the party required to provide indemnification (the "Indemnifying
Party") promptly after such Indemnified Party has actual knowledge of any claim
as to which indemnity may be sought, and shall permit the Indemnifying Party to
assume the defense of any such claim or any litigation resulting therefrom,
provided that counsel for the Indemnifying Party, who shall conduct the defense
of such claim or litigation, shall be approved by the Indemnified Party (whose
approval shall not unreasonably be withheld), and the Indemnified Party may
participate in such defense at such party's expense, and provided further that
the failure of any Indemnified Party to give notice as provided herein shall not
relieve the Indemnifying Party of its obligations under this Agreement unless
the failure to give such notice is materially prejudicial to an Indemnifying
Party's ability to defend such action and provided further, that the
Indemnifying Party shall not assume the defense for matters as to which there is
a conflict of interest or as to which the Indemnifying Party is asserting
separate or different defenses, which defenses are inconsistent with the
defenses of the Indemnified Party (in which case the Indemnifying Party shall
pay for one separate counsel for those Indemnified Parties with whom such
conflict exists). No Indemnifying Party, in the defense of any such claim or
litigation, shall, except with the consent of each Indemnified Party, consent to
entry of any judgment or enter into any settlement which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
Indemnified Party of a release from all liability in respect to such claim or
litigation. No Indemnified Party shall consent to entry of any judgment or enter
into any settlement without the consent of each Indemnifying Party. The failure
of an Indemnifying Party to give notice to the Indemnified Party of its election
to assume and control the defense of any action for which notice has been given
to the Indemnifying Party in accordance with this paragraph within 30 days after
receipt of such notice shall constitute an election by the Indemnifying Party
not to assume and control the defense of such action. An Indemnifying Party who
is not entitled to, or elects not to, assume the defense of a claim shall not be
obligated to pay the fees and expenses of more than one counsel for all parties
indemnified by such Indemnifying Party with respect to such claim, unless in the
reasonable judgment of any Indemnified Party a conflict of interest may exist
between such Indemnified Party and any other of such Indemnified Parties or the
Indemnifying
-9-
Party with respect to such claim, in which event the Indemnifying Party shall be
obligated to pay the fees and expenses of one separate counsel for such
Indemnified Parties.
(d) If the indemnification provided for in this Section 7 is
unavailable to an Indemnified Party in respect of any losses, claims, damages or
liabilities referred to therein, then each Indemnifying Party, in lieu of
indemnifying such Indemnified Party, shall contribute to the amount paid or
payable by such Indemnified Party as a result of such losses, claims, damages or
liabilities (i) in such proportion as is appropriate to reflect the relative
benefits received by the Company, on the one hand, and each respective
shareholder offering securities in the offering (the "Selling Security Holder"),
on the other, from the offering of the Company's securities, 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 each Selling Security Holder, 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 each Selling
Security Holder, on the other, shall be the net proceeds from the offering
(before deducting expenses) received by the Company, on the one hand, and each
Selling Security Holder, on the other. The relative fault of the Company, on the
one hand, and each Selling Security Holder, on the other, shall be determined by
reference to, among other things, whether the untrue or alleged untrue statement
of material fact or the omission or alleged omission to state a material fact
relates to information supplied by the Company or by such Selling Security
Holder and the parties' relevant intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission. The Company and
each Selling Security Holder agree that it would not be just and equitable if
contribution pursuant to this Section were based solely upon the number of
entities from whom contribution was requested or by any other method of
allocation which does not take account of the equitable considerations referred
to above in this Section. Notwithstanding the provisions of this Section, no
Selling Security Holder shall be required to contribute any amount or make any
other payments under this Agreement which in the aggregate exceed the proceeds
received by such Selling Security Holder. No person guilty of fraudulent
misrepresentation (within the meaning of the Securities Act) shall be entitled
to contribution from any person who was not guilty of such fraudulent
misrepresentation.
(e) The indemnification provided for under this Agreement shall
remain in full force and effect regardless of any investigation made by or on
behalf of the Indemnified Party or any officer, director or controlling person
of such Indemnified Party and shall survive the transfer of securities.
8. Certain Information.
(a) Each Holder agrees, with respect to any Registrable Securities
included in any registration, to furnish to the Company such information
regarding such Holder, the
-10-
Registrable Securities and the distribution proposed by such Holder as the
Company may reasonably request in writing and as shall be required in connection
with any registration, qualification or compliance referred to herein.
(b) The failure of a Holder to furnish the information requested
pursuant to this Section shall not affect the obligation of the Company to any
other selling security holders who furnish such information unless, in the
reasonable opinion of counsel to the Company, such failure impairs or may impair
the legality of the Registration Statement or the underlying offering.
9. Miscellaneous.
(a) No Inconsistent Agreements. The Company has not entered into nor
will the Company on or after the date of this Agreement enter into any agreement
which is inconsistent with the rights granted to the Holders of Registrable
Securities in this Agreement or otherwise conflicts with the provisions hereof.
The rights granted to the Holders hereunder do not in any way conflict with and
are not inconsistent with the rights granted to the holders of the Company's
other issued and outstanding securities, if any, under any such agreements.
(b) Amendments and Waivers. The provisions of this Agreement,
including the provisions of this paragraph, may not be amended, modified or
supplemented, and waivers or consents to departures from the provisions hereof
may not be given unless the Company has obtained the written consent of Holders
of at least a majority in aggregate number of the outstanding Registrable
Securities affected by such amendment, modification, supplement, waiver or
consent; provided, however, a waiver or consent to departure from the provisions
hereof that relates exclusively to the rights of Holders of Registrable
Securities whose securities are being sold pursuant to a Registration Statement
and that does not directly or indirectly affect the rights of other Holders of
Registrable Securities may be given by the Holders of a majority of the
Registrable Securities proposed to be sold.
(c) Notices. All notices and other communications provided for or
permitted hereunder shall be made in writing by hand delivery, registered first-
class mail, telex, telecopier, or any courier guaranteeing overnight delivery
(i) if to a Holder, at the most current address given by such Holder to the
Company by means of a notice given in accordance with the provisions of this
Section 9(c), which address initially is, with respect to each Purchaser, the
address set forth in the Purchase Agreement; and (ii) if to the Company,
initially at the Company's address set forth in the Purchase Agreement and
thereafter at such other address, notice of which is given in accordance with
the provisions of this Section 9(c).
All such notices and communications shall be deemed to have been
duly given: (i) at the time delivered by hand, if personally delivered, five (5)
Business Days after being deposited in the mail, postage prepaid, if mailed;
(ii) when answered back, if telexed; (iii)
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when receipt is acknowledged, if telecopied; and (iv) on the next Business Day,
if timely delivered to an air courier guaranteeing overnight delivery.
(d) Successors and Assigns. This Agreement shall inure to the benefit
of any successor, assign or transferee of any Holder; provided, however, that
nothing herein shall be deemed to permit any assignment, transfer or other
disposition of Registrable Securities in violation of the terms and conditions
of this Agreement or the Purchase Agreement.
(e) Rules 144 and 144A. The Company covenants that it will file the
reports required to be filed by it under the Securities Act and the Exchange Act
and the rules and regulations adopted by the Commission thereunder in a timely
manner and, if at any time the Company is not required to file such reports, it
will, upon the request of any Holder of Registrable Securities, make publicly
available other information of a like nature so long as necessary to permit
sales pursuant to Rule 144 or Rule 144A. The Company further covenants that so
long as any Registrable Securities remain outstanding to make available to any
Holder of Registrable Securities in connection with any sale thereof, the
information required by Rule 144A(d)(4) promulgated under the Securities Act in
order to permit resales of such Registrable Securities pursuant to (a) such Rule
144A or (b) any similar rule or regulation hereafter adopted by the Commission.
(f) Counterparts. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
(g) Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
(H) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF OKLAHOMA, AS APPLIED TO CONTRACTS
MADE AND PERFORMED WITHIN THE STATE OF OKLAHOMA, WITHOUT REGARD TO PRINCIPLES OF
CONFLICTS OF LAW. EACH OF THE PARTIES HERETO AGREES TO SUBMIT TO THE
JURISDICTION OF THE COURTS OF THE STATE OF OKLAHOMA IN ANY ACTION OR PROCEEDING
ARISING OUT OF OR RELATING TO THIS AGREEMENT.
(i) Severability. In the event that any one or more of the provisions
contained herein, or the application thereof in any circumstance, is held
invalid, illegal or unenforceable, the validity, legality and enforceability of
any such provision in every other respect and of the remaining provisions
contained herein shall not be affected or impaired thereby.
-12-
(j) Entire Agreement. This Agreement, together with the Purchase
Agreement, is intended by the parties as a final expression of their agreement,
and is intended to be a complete and exclusive statement of the agreement and
understanding of the parties hereto in respect of the subject matter contained
herein and therein.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first written above.
GOTHIC ENERGY CORPORATION
(the "Company")
By:
------------------------------
Xxxxxxx Xxxxx, President
CHESAPEAKE GOTHIC CORP.
(the "Purchaser")
By:
------------------------------
Xxxxxx X. XxXxxxxxx, President
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