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EXHIBIT 10.25
BAYARD DRILLING TECHNOLOGIES, INC.
0000 XXXXXXXXX XXXXXXXXXX, XXXXX 000X
XXXXXXXX XXXX, XXXXXXXX 00000
August 20, 1997
Chesapeake Energy Corporation
X.X. Xxx 00000
Xxxxxxxx Xxxx, Xxxxxxxx 00000-0000
Attention: Xxxxxx X. Xxxxxxx
Gentlemen:
This letter (this "Letter"), when executed and delivered by
you ("Chesapeake" or "you"), will constitute a binding agreement between you
and Bayard Drilling Technologies, Inc. ("Bayard") to consummate the
transactions hereinafter described, subject only to the conditions set forth in
paragraph 8 below.
1. Exercise of Option and Warrants. At the Closing (as
hereinafter defined), Chesapeake shall exercise in full each of the following
instruments (collectively the "Options") previously issued by Bayard to
Chesapeake: (i) that certain Option, dated December 10, 1996, representing the
right to purchase up to 1,000,000 shares of Common Stock, par value $.01 per
share ("Common Stock"), of Bayard at a purchase price per share of $12.00; (ii)
that certain Series A Warrant, issued on May 1, 1997, representing the right to
purchase up to 350,000 shares of Common Stock at a purchase price of $0.01 per
share; and (iii) that certain Series B Warrant, issued on May 1, 1997,
representing the right to purchase up to 400,000 shares of Common Stock at a
purchase price of $15.00 per share. Notwithstanding any provisions of the
Options to the contrary, in order to exercise in full all of the Options,
Chesapeake shall make payment of the purchase prices for the shares of Common
Stock represented by the Options by wire transfer of immediately available
funds to an account designated in writing by Bayard as follows: (a) upon
execution and delivery of this Letter, Chesapeake shall pay Bayard $3,000,000
(the "Initial Payment") and (b) at the Closing (as hereinafter defined),
Chesapeake shall pay Bayard $6,000,000 and shall surrender to Bayard the
original instruments representing the Options. At the Closing, Bayard shall
deliver to Chesapeake certificates representing an aggregate of 1,597,000
shares (3,194,000 shares if a two-for-one stock split (the "Stock Split") has
then been effected) of Common Stock (the "Option Shares") in consideration for
the exercise in full of such Options. Bayard and Chesapeake acknowledge and
agree that the exercise price is being paid with a combination of cash,
surrender of options and warrants, credit against the Subordinated Note (as
hereinafter defined) and forgiveness of interest on the Subordinated Note.
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Chesapeake Energy Corporation Page 2 August 20, 1997
2. Sale of Chesapeake Shares in IPO. Chesapeake hereby
agrees to sell, and Bayard hereby agrees to include, 80% of the shares of
Common Stock then held by Chesapeake (including but not limited to the Option
Shares) in any registration of an initial public offering of shares of Common
Stock (an "IPO") by Bayard; provided, however, that if the managing
underwriters in such IPO advise Bayard and Chesapeake in writing that in their
reasonable good faith opinion the number of securities required by this
paragraph 2 to be included in the IPO, when combined with the number of shares
to be offered by the Company, exceeds the number which can be sold without
materially adversely affecting the existing plan for such IPO, then Chesapeake
shall be obligated to sell, and Bayard shall be obligated to include, only the
maximum number of shares that such managing underwriters determine can be
included without materially adversely affecting the existing plan for the IPO.
The obligations of Chesapeake and Bayard under this paragraph 2 to include in
the IPO more than Chesapeake's pro rata portion of the shares to be offered by
all selling stockholders in the IPO are subject to the receipt of any required
consents or waivers of all other persons who have rights to register shares of
Common Stock in the IPO.
3. Redemption of Subordinated Note. Upon the
consummation of an IPO, Bayard shall redeem in full that certain Subordinated
Note, dated May 1, 1997 and made payable to Chesapeake, in the original
principal amount of $18,000,000 (the "Subordinated Note"), by the wire transfer
of immediately available funds in an amount equal to the Redemption Price (as
hereinafter defined) to an account designated in writing by Chesapeake. If the
per share price to the public of the shares of Common Stock issued in the IPO
(the "IPO Price") exceeds $30.00, then the "Redemption Price" shall equal
$15,000,000 plus the product obtained by multiplying (x) $200,000 by (y) the
difference between the IPO Price and $30.00. If the IPO Price is less than
$30.00, then the "Redemption Price" shall equal $15,000,000 minus the product
obtained by multiplying (x) $200,000 by (y) the difference between $30.00 and
the IPO Price. Simultaneously with the consummation of the IPO, Chesapeake
shall deliver to Bayard the original Subordinated Note and on receipt thereof
by Bayard and payment by Bayard of the Redemption Price, the Subordinated Note
shall be deemed to be paid in full. If the Stock Split has been effected prior
to the IPO, then all references in this paragraph 3 to values of $30.00 and
$200,000 shall be deemed to be $15.00 and $400,000, respectively. Bayard and
Chesapeake agree that, upon payment of the Redemption Price, all accrued and
unpaid interest on the Subordinated Note (including interest otherwise payable
on November 1, 1997) will be forgiven and that no interest on such note shall
thereafter accrue or become payable. This paragraph 3 shall become null and
void if an IPO is not consummated on or before December 31, 1997.
4. Timing of IPO. Bayard agrees that so long as
Chesapeake has the right to include any shares of Common Stock in the IPO,
Bayard shall not consummate the IPO prior to November 3, 1997 without the prior
approval of Chesapeake.
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Chesapeake Energy Corporation Page 3 August 20, 1997
5. Waiver of Right to Sell Additional Securities;
Purchase of Common Stock. As of the Closing, Bayard shall irrevocably waive
its right under section 2.5 of that certain Securities Purchase Agreement,
dated as of April 30, 1997 (the "Securities Purchase Agreement"), to sell the
Additional Securities (as defined in the Securities Purchase Agreement) to
Chesapeake and all rights and obligations of Bayard and Chesapeake in respect
of such sale and the Second Closing (as defined in the Securities Purchase
Agreement) shall thereupon terminate; provided, however, that if the Closing
does not occur on or before the termination of this Letter in accordance with
paragraph 8 hereof, then the Initial Payment shall be deemed to have been paid
in consideration for the Additional Securities and Chesapeake and Bayard shall
promptly consummate the Second Closing. Notwithstanding any agreement to the
contrary, the Series A Warrants comprising a portion of the Additional
Securities shall not carry contractual voting rights unless and until clearance
has been obtained under the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of
1976, as amended (the "HSR Act"), for Chesapeake's acquisition of such
Additional Securities.
6. HSR Filings. As promptly as practicable following
the execution of this Letter by Chesapeake and Bayard, each of Chesapeake and
Bayard shall file with the Department of Justice and the Federal Trade
Commission the required notification forms under the HSR Act relating to
Chesapeake's acquisition of Common Stock pursuant hereto.
7. The Closing. The closing of the transactions
contemplated by paragraphs 1 and 5 of this Letter (the "Closing") shall be held
at 10:00 a.m. on the third business day following the satisfaction or waiver of
all of the conditions set forth in paragraph 8 hereof, at the offices of Xxxxx
& Xxxxx, L.L.P., 0000 Xxxx Xxxxxx, Xxxxxx, Xxxxx 00000, or at such other time,
date or place as Bayard and Chesapeake shall mutually agree.
8. Conditions to Effectiveness. The obligations of
Chesapeake and Bayard under this Letter are subject to the approval of this
Letter and the transactions contemplated hereby by the Boards of Directors of
each of Chesapeake and Bayard and the obligations of Chesapeake and Bayard to
consummate the Closing are further subject to (i) the receipt of all consents
or waivers necessary to effect the transactions under Bayard's Stockholders
Agreement and Registration Rights Agreement, (ii) the receipt of any required
consents or waivers of the other holders of Subordinated Notes of Bayard in
order to allow for the disparate treatment of such notes, (iii) the receipt of
the consent of Bayard's lenders to the redemption of the Subordinated Note as
contemplated by paragraph 3 above and (iv) the expiration or early termination
of the waiting period with respect to the HSR Act filings. This Letter (except
the obligations to consummate the Second Closing as provided in paragraph 5)
shall terminate at 5:00 p.m. Central Time on September 30, 1997 if such
conditions have not been satisfied.
9. Amendments. The provisions of this Letter shall not
be amended or waived except by the written agreement of Chesapeake and Bayard.
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10. Governing Law. This Letter shall be governed by, and
construed in accordance with, the laws of the State of Delaware, without giving
effect to any choice of law principles that would require the application of
the laws of any other jurisdiction.
11. Counterparts. This Letter may be executed in
multiple counterparts, each of which when so executed and delivered shall be
deemed to be an original, and all of which together shall constitute one and
the same instrument.
If you agree with the foregoing, please execute and return one
copy of this Letter.
Very truly yours,
BAYARD DRILLING TECHNOLOGIES, INC.
By: /s/ Xxxxx X. Xxxxx
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Chief Executive Officer
Accepted and agreed this
20th day of August, 1997:
CHESAPEAKE ENERGY CORPORATION
By: /s/ Xxxxxx X. XxXxxxxxx
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Chief Executive Officer
