EXHIBIT 1.1
$
[ ]
CHESAPEAKE ENERGY
CORPORATION
[ ]%
Senior Notes due 2013
UNDERWRITING
AGREEMENT
June [ ],
2006
BANC OF AMERICA SECURITIES
LLC
As Representative (the “
Representative ”) of the Several
Underwriters
c/o Banc of America Securities
LLC
9 West 57 th Street, 40 th Floor
New York, NY 10019
Dear Sirs:
1. Introductory. Chesapeake
Energy Corporation, an Oklahoma corporation (the “
Company” ), proposes to issue and sell to the several
underwriters named in Schedule A hereto (the “
Underwriters” )
$[ ]
principal amount of the Company’s
[ ]%
Senior Notes due 2013 (the “ Offered Securities
”). The Offered Securities will be unconditionally guaranteed
(the “ Guarantees ”) on a senior basis by each
existing domestic subsidiary other than Nomac 100 Corp. and certain
de minimus subsidiaries of the Company and one of its foreign
subsidiaries, and by subsequently acquired or designated Restricted
Subsidiaries (as defined in the Indenture referred to below) of the
Company in accordance with the terms of the Indenture
(collectively, the “ Subsidiary Guarantors ”).
The Offered Securities are to be issued under an indenture dated as
of
[ ],
2006 (the “ Indenture ”), among the Company and
The Bank of New York Trust Company, N.A., as trustee (the
“ Trustee ”). The Company hereby agrees with the
Underwriters as follows:
2. Representations and Warranties
of the Company. The Company and each Subsidiary Guarantor
represents and warrants to, and agrees with, the several
Underwriters that:
(a) A registration statement (No.
333-[•]), including all materials incorporated by reference
therein and a prospectus, relating to the Offered Securities has
been filed with the Securities and Exchange Commission (the “
Commission” ) and has become effective. Such
registration statement, including all materials incorporated by
reference therein and any prospectus or prospectus supplement
deemed or retroactively deemed to be part thereof that has not been
superceded or modified, is hereinafter referred to as the “
Registration Statement” . “ Registration
Statement ” without reference to a time means the
Registration Statement as of the date and time of its filing and
effectiveness which time shall be considered the “effective
date” of the Registration Statement. For purposes of the
previous sentence, information contained in a form of prospectus or
prospectus supplement that is deemed retroactively to be a part of
the Registration Statement pursuant to Rule 430B (“ Rule
430B ”) under the Securities Act of 1933 (the “
Act ”) shall be considered to be included in the
Registration Statement as of the time
specified in Rule 430B. “
Statutory Prospectus ” as of any time means the
prospectus included in the Registration Statement immediately prior
to that time, including any document incorporated by reference
therein and any basic prospectus or prospectus supplement deemed to
be a part thereof that has not been superseded or modified. For
purposes of the preceding sentence, information contained in a form
of prospectus (including a prospectus supplement) that is deemed
retroactively to be a part of the Registration Statement pursuant
to Rule 430B shall be considered to be included in the Statutory
Prospectus as of the actual time that form of prospectus (including
a prospectus supplement) is filed with the Commission pursuant to
Rule 424(b) (“ Rule 424(b) ”) under the Act.
“ Prospectus ” means the Statutory Prospectus
that discloses the public offering price and other final terms of
the Offered Securities and otherwise satisfies Section 10(a)
of the Act. “ Issuer Free Writing Prospectus ”
means any “issuer free writing prospectus,” as defined
in Rule 433, relating to the Offered Securities in the form
filed or required to be filed with the Commission or, if not
required to be filed, in the form retained in the Company’s
records pursuant to Rule 433(g). “ General Use Issuer Free
Writing Prospectus ” means any Issuer Free Writing
Prospectus that is intended for general distribution to prospective
investors, as evidenced by its being specified in Schedule B to
this Agreement. “ Limited Use Issuer Free Writing
Prospectus ” means any Issuer Free Writing Prospectus
that is not a General Use Issuer Free Writing Prospectus. “
Applicable Time ” means :00 [a/p]m (Eastern time) on
the date of this Agreement.
(b) On its effective date, the
Registration Statement conformed in all respects to the
requirements of the Act and the rules and regulations of the
Commission (the “ Rules and Regulations” ) and
did not include any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary
to make the statements therein not misleading, and on the date of
this Agreement, the Registration Statement and the Prospectus will
conform in all respects to the requirements of the Act and the
Rules and Regulations, and neither of such documents will include
any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make
the statements therein not misleading, except that the foregoing
does not apply to statements in or omissions from any of such
documents based upon written information furnished to the Company
by any Underwriter through the Representative, if any, specifically
for use therein, it being understood and agreed that the only such
information furnished by an Underwriter consists of the information
described as such in Section 8(b) hereof. The documents
incorporated by reference in the Prospectus (the “ Company
Filed Documents” ), when they became effective or were
filed with the Commission, as the case may be, conformed in all
material respects with the requirements of the Act or the
Securities Exchange Act of 1934 (the “ Exchange
Act” ), as applicable, and the Rules and
Regulations.
(c) The Registration Statement is an
“automatic shelf registration statement”, as defined in
Rule 405 under the Act, that initially became effective within
three years of the date of this Agreement, and as of the
determination date applicable to the Registration Statement (and
any amendment thereof) and the offering contemplated hereby, the
Company is a “well-known seasoned issuer” (as defined
in Rule 405 under the Act). If immediately prior to the third
anniversary (the “Renewal Deadline” ) of the
initial effective date of the Registration Statement, any of the
Offered Securities remain unsold by the Underwriters, the Company
will prior to the Renewal Deadline file, if it has not already done
so and is eligible to do so, a new automatic shelf registration
statement relating to the Offered Securities, in a form
satisfactory to the Representative. If the Company is no longer
eligible to file an automatic shelf registration statement, the
Company will prior to the Renewal Deadline, if it has not already
done so, file a new shelf registration statement relating to the
Offered Securities, in a form satisfactory to the Representative,
and will use its best efforts to cause such registration statement
to be declared effective within 180 days after the Renewal
Deadline. The Company will take all other action necessary or
appropriate to permit the public offering and sale of the Offered
Securities to continue as contemplated in the expired registration
statement relating to the Offered Securities. References herein to
the Registration Statement shall include such new automatic shelf
registration statement or such new shelf registration statement, as
the case may be.
2
(d) The Company has not received
from the Commission any notice pursuant to Rule 401(g)(2)
objecting to use of the automatic shelf registration statement
form. If at any time when Offered Securities remain unsold by the
Underwriters the Company receives from the Commission a notice
pursuant to Rule 401(g)(2) or otherwise ceases to be eligible to
use the automatic shelf registration statement form, the Company
will (i) promptly notify the Representative,
(ii) promptly file a new registration statement or
post-effective amendment on the proper form relating to the Offered
Securities, in a form satisfactory to the Representative,
(iii) use its best efforts to cause such registration
statement or post-effective amendment to be declared effective as
soon as practicable, and (iv) promptly notify the
Representative of such effectiveness. The Company will take all
other action necessary or appropriate to permit the public offering
and sale of the Offered Securities to continue as contemplated in
the registration statement that was the subject of the Rule
401(g)(2) notice or for which the Company has otherwise become
ineligible. References herein to the registration statement
relating to the Offered Securities shall include such new
registration statement or post-effective amendment, as the case may
be.
(e) The Company has paid or shall
pay the required Commission filing fees relating to the Offered
Securities within the time required by Rule 456(b)(1) without
regard to the proviso therein and otherwise in accordance with
Rules 456(b) and 457(r).
(f) (i) At the time of filing
the Registration Statement and (ii) at the date of this
Agreement, the Company was not and is not an “ineligible
issuer,” as defined in Rule 405, including (x) the
Company or any other subsidiary in the preceding three years not
having been convicted of a felony or misdemeanor or having been
made the subject of a judicial or administrative decree or order as
described in Rule 405 and (y) the Company in the
preceding three years not having been the subject of a bankruptcy
petition or insolvency or similar proceeding, not having had a
registration statement be the subject of a proceeding under
Section 8 of the Act and not being the subject of a proceeding
under Section 8A of the Act in connection with the offering of
the Offered Securities, all as described in
Rule 405.
(g) As of the Applicable Time,
neither (i) the General Use Issuer Free Writing Prospectus(es)
issued at or prior to the Applicable Time, the Statutory Prospectus
and the information set out in Schedule C hereto all
considered together (collectively, the “ General
Disclosure Package ”), nor (ii) any individual
Limited Use Issuer Free Writing Prospectus, when considered
together with the General Disclosure Package, included any untrue
statement of a material fact or omitted to state any material fact
necessary in order to make the statements therein, in the light of
the circumstances under which they were made, not misleading. The
preceding sentence does not apply to statements in or omissions
from any prospectus included in the Registration Statement or any
Issuer Free Writing Prospectus in reliance upon and in conformity
with written information furnished to the Company by any
Underwriter through the Representative specifically for use
therein, it being understood and agreed that the only such
information furnished by any Underwriter consists of the
information described as such in Section 8(b)
hereof.
(h) Each Issuer Free Writing
Prospectus, as of its issue date and at all subsequent times
through the completion of the public offer and sale of the Offered
Securities or until any earlier date that the Company notified or
notifies the Representative as described in the next sentence, did
not, does not and will not include any information that conflicted,
conflicts or will conflict with the information then contained in
the Registration Statement. If at any time following issuance of an
Issuer Free Writing Prospectus there occurred or occurs an event or
development as a result of which such Issuer Free Writing
Prospectus conflicted or would conflict with the information then
contained in the Registration Statement or included or would
include an untrue statement of a material fact or omitted or would
omit to state a material fact necessary in order to make the
statements therein, in the light of the circumstances prevailing at
that subsequent time, not misleading, (i) the Company has
promptly notified or will promptly notify the Representative and
(ii) the Company has promptly amended or will promptly amend
or supplement such Issuer Free Writing Prospectus to eliminate or
correct such conflict, untrue statement or omission. The
3
foregoing two sentences do not apply
to statements in or omissions from any Issuer Free Writing
Prospectus in reliance upon and in conformity with written
information furnished to the Company by any Underwriter through the
Representative specifically for use therein, it being understood
and agreed that the only such information furnished by any
Underwriter consists of the information described as such in
Section 8(b) hereof.
(i) The Company has been duly
incorporated and is an existing corporation in good standing under
the laws of the State of Oklahoma, with power and authority
(corporate and other) to own its properties and conduct its
business as described in the General Disclosure Package; and the
Company is duly qualified to do business as a foreign corporation
in good standing in all other jurisdictions in which its ownership
or lease of property or the conduct of its business requires such
qualification, except where the failure to be so qualified would
not reasonably be expected to individually or in the aggregate have
a material adverse effect on the condition (financial or other),
business, prospects, properties or results of operations of the
Company and its subsidiaries taken as a whole (“ Material
Adverse Effect ”).
(j) Each subsidiary of the Company
has been duly organized and is in good standing under the laws of
the jurisdiction of its organization, with power and authority
(corporate and other) to own its properties and conduct its
business as described in the General Disclosure Package; and each
subsidiary of the Company is duly qualified to do business and is
in good standing in all other jurisdictions in which its ownership
or lease of property or the conduct of its business requires such
qualification; except where the failure to be so qualified would
not reasonably be expected to individually or in the aggregate have
a Material Adverse Effect; all of the issued and outstanding
capital stock or similar equity interests of each subsidiary of the
Company has been duly authorized and validly issued and is fully
paid and nonassessable; and the capital stock or similar equity
interests of each subsidiary owned by the Company, directly or
through subsidiaries, is owned free from liens, encumbrances and
defects.
(k) The Indenture has been duly
authorized, executed and delivered by the Company and each
Subsidiary Guarantor; the Guarantees have been duly authorized by
each Subsidiary Guarantor; the Offered Securities have been duly
authorized; when the Offered Securities are delivered and paid for
pursuant to this Agreement, such Offered Securities will have been
duly executed, authenticated, issued and delivered and will conform
to the description thereof contained in the General Disclosure
Package and the Indenture and, in the case of the Company, such
Offered Securities, and in the case of the Subsidiary Guarantors,
such Guarantees, will constitute valid and legally binding
obligations of the Company and each Subsidiary Guarantor, as
applicable, enforceable in accordance with their terms, subject to
bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium and similar laws of general applicability relating to or
affecting creditors’ rights and to general equity
principles.
(l) Except as disclosed in the
General Disclosure Package, there are no contracts, agreements or
understandings between the Company and any person that would give
rise to a valid claim against the Company or any Underwriter for a
brokerage commission, finder’s fee or other like payment in
connection with this offering.
(m) No consent, approval,
authorization, filing with or order of any court or governmental
agency or body is required for the consummation of the transactions
contemplated by this Agreement in connection with the issuance and
sale of the Offered Securities by the Company, except such as have
been obtained and made under the Act and such as may be required
under state securities laws.
(n) None of the execution, delivery
and performance of this Agreement and the Indenture, the issuance
and sale of the Offered Securities and compliance with the terms
and provisions hereof and thereof, will result in a breach or
violation of any of the terms and provisions of, or constitute a
default under, any statute, rule, regulation or order of any
governmental agency or body or any court, domestic or foreign,
having jurisdiction over the
4
Company or any subsidiary of the
Company or any of their properties, or any agreement or instrument
to which the Company or any such subsidiary is a party or by which
the Company or any such subsidiary is bound or to which any of the
properties of the Company or any such subsidiary is subject, or the
charter or by-laws (or similar organizational documents) of the
Company or any such subsidiary, and the Company has full power and
authority to authorize, issue and sell the Offered Securities as
contemplated by this Agreement.
(o) This Agreement has been duly
authorized, executed and delivered by the Company and each
Subsidiary Guarantor.
(p) Except as disclosed in the
General Disclosure Package, the Company and its subsidiaries have
good and marketable title to all real properties and all other
properties and assets owned by them, including, without limitation,
all oil and gas producing properties of the Company and its
subsidiaries, in each case free from liens, encumbrances and
defects that would materially affect the value thereof or
materially interfere with the use made or to be made thereof by
them; and, except as disclosed in the General Disclosure Package,
the Company and its subsidiaries hold any leased real or personal
property, including, without limitation, all oil and gas producing
properties of the Company and its subsidiaries, under valid and
enforceable leases with no exceptions that would materially
interfere with the use made or to be made thereof by
them.
(q) The Company and its subsidiaries
possess adequate certificates, authorities or permits issued by
appropriate governmental agencies or bodies necessary to conduct
the business now operated by them and have not received any notice
of proceedings relating to the revocation or modification of any
such certificate, authority or permit that, if determined adversely
to the Company or any of its subsidiaries, would reasonably be
expected to individually or in the aggregate have a Material
Adverse Effect.
(r) No labor dispute with the
employees of the Company or any subsidiary exists or, to the
knowledge of the Company, is imminent that might have a Material
Adverse Effect.
(s) The Company and its subsidiaries
own, possess or can acquire on reasonable terms, adequate
trademarks, trade names and other rights to inventions, know-how,
patents, copyrights, confidential information and other
intellectual property (collectively, “ intellectual
property rights” ) necessary to conduct the business now
operated by them, or presently employed by them, and have not
received any notice of infringement of, or conflict with, asserted
rights of others with respect to any intellectual property rights
that, if determined adversely to the Company or any of its
subsidiaries, would reasonably be expected to individually or in
the aggregate have a Material Adverse Effect.
(t) Except as disclosed in the
General Disclosure Package, neither the Company nor any of its
subsidiaries is in violation of any statute, rule, regulation,
decision or order of any governmental agency or body or any court,
domestic or foreign, relating to the use, disposal or release of
hazardous or toxic substances or relating to the protection or
restoration of the environment or human exposure to hazardous or
toxic substances (collectively, “ environmental
laws” ), owns or operates any real property contaminated
with any substance that is subject to any environmental laws, is
liable for any off-site disposal or contamination pursuant to any
environmental laws, or is subject to any claim relating to any
environmental laws which violation, contamination, liability or
claim would reasonably be expected to individually or in the
aggregate have a Material Adverse Effect; and the Company is not
aware of any pending investigation which might lead to such a
claim.
(u) Except as disclosed in the
General Disclosure Package, there are no pending actions, suits or
proceedings against or affecting the Company, any of its
subsidiaries or any of their respective properties that, if
determined adversely to the Company or any of its subsidiaries,
would reasonably be expected to individually or in the aggregate
have a Material Adverse Effect, or would materially and adversely
affect the ability of the Company or the Subsidiary
Guarantors
5
to perform its obligations under
this Agreement or the Indenture, or which are otherwise material in
the context of the sale of the Offered Securities; and no such
actions, suits or proceedings are threatened or, to the
Company’s knowledge, contemplated.
(v) The financial statements
included or incorporated by reference in the Registration Statement
and the General Disclosure Package present fairly the financial
position of the Company and its consolidated subsidiaries as of the
dates shown and their results of operations and cash flows for the
periods shown, and such financial statements have been prepared in
conformity with the generally accepted accounting principles in the
United States applied on a consistent basis.
(w) Except as disclosed in the
General Disclosure Package, since the date of the latest audited
financial statements incorporated by reference in the General
Disclosure Package, there has been no material adverse change, nor
any development or event involving a prospective material adverse
change, in the condition (financial or other), business, properties
or results of operations of the Company and its subsidiaries taken
as a whole, and, except as disclosed in the General Disclosure
Package, there has been no dividend or distribution of any kind
declared, paid or made by the Company on any class of its capital
stock.
(x) The Company is not, and at no
time during which a prospectus is required by the Act to be
delivered (whether physically or through compliance with Rule 172
under the Act or any similar rule) in connection with the sales
will it be, and, after giving effect to the offering and sale of
the Offered Securities and the application of proceeds thereof as
described in the General Disclosure Package, will not be an
“investment company” as defined in the Investment
Company Act of 1940.
(y) The Company is subject to the
reporting requirements of either Section 13 or 15(d) of the
Exchange Act and files reports with the Commission on the
Electronic Data Gathering, Analysis, and Retrieval (EDGAR)
system.
(z) The statistical and market
related data and forward looking statements included in the General
Disclosure Package, are based on or derived from sources that the
Company believes to be reliable and accurate in all material
respects and represents its good faith estimates that are made on
the basis of data derived from such sources.
(aa) Neither the Company nor any of
its subsidiaries has any liability for any prohibited transaction
or accumulated funding deficiency (within the meaning of
Section 412 of the Internal Revenue Code) or any complete or
partial withdrawal liability (within the meaning of
Sections 4203 and 4205 of the Employee Retirement Income
Security Act of 1974, as amended (“ ERISA ”),
respectively), with respect to any pension, profit sharing or other
plan which is subject to ERISA, to which the Company or any of its
subsidiaries makes or ever has made a contribution and in which any
employee of the Company or any subsidiary is or has ever been a
participant. With respect to such plans, the Company and each of
its subsidiaries is in compliance in all material respects with all
applicable provisions of ERISA.
(bb) The Company has established and
maintains disclosure controls and procedures (as such term is
defined in Rule 13a-15 under the Exchange Act); such
disclosure controls and procedures are designed to ensure that
material information relating to the Company and its subsidiaries
is made known to the chief executive officer and chief financial
officer of the Company by others within the Company or any
subsidiary, and such disclosure controls and procedures are
reasonably effective to perform the functions for which they were
established subject to the limitations of any such control system;
the Company’s auditors and the audit committee of the board
of directors of the Company have been advised of: (A) any
significant deficiencies in the design or operation of internal
controls which could adversely affect the Company’s ability
to record, process, summarize, and report financial data; and
(B) any fraud, whether or not material, that involves
management or other employees who have a role in the
6
Company’s internal controls;
any material weaknesses in internal controls have been identified
for the Company’s auditors; and since the date of the most
recent evaluation of such disclosure controls and procedures, there
have been no significant changes in internal controls or in other
factors that could significantly affect internal controls,
including any corrective actions with regard to significant
deficiencies and material weaknesses. The Company made available to
the Underwriters or their counsel for review true and complete
copies of all minutes or draft minutes of meetings, or resolutions
adopted by written consent, of the board of directors of the
Company and each subsidiary and each committee of each such board
in the past three years, and all agendas for each such meeting for
which minutes or draft minutes do not exist.
(cc) All information on (or
hyperlinked from) the Company’s website at www.chkenergy.com
qualifies for the safe-harbor related to historical information in
Rule 433(e)(2) under the Act, and the Company does not
maintain or support any website other than
www.chkenergy.com.
(dd) The Company has not received
any written comments from the Commission staff in connection with
the Company’s reports under the Exchange Act that remain
unresolved.
In addition, any certificate signed
by any officer of the Company or any of the Subsidiaries and
delivered to the Underwriters or counsel for the Underwriters in
connection with the offering of the Offered Securities shall be
deemed to be a representation and warranty by the Company, as to
matters covered thereby, to each Underwriter.
3. Purchase, Sale and Delivery of
Offered Securities. On the basis of the representations,
warranties and agreements herein contained, but subject to the
terms and conditions herein set forth, the Company agrees to sell
to the Underwriters, and the Underwriters agree, severally and not
jointly, to purchase from the Company, at a purchase price of
[ ]%
of the principal amount thereof plus accrued interest from
June [ ],
2006 to the Closing Date, the respective principal amounts of
Offered Securities set forth opposite the names of the Underwriters
in Schedule A hereto.
The Company will deliver against
payment of the purchase price the Offered Securities in the form of
one or more permanent global securities in definitive form (the
“ Global Securities ”) deposited with the
Trustee as custodian for The Depository Trust Company (“
DTC ”) and registered in the name of Cede &
Co., as nominee for DTC. Interests in any Global Securities will be
held only in book-entry form through DTC, except in the limited
circumstances described in the Prospectus. Payment for the Offered
Securities shall be made by the Purchasers in Federal (same day)
funds by wire transfer to an account at a bank acceptable to the
Representative drawn to the order of Chesapeake Energy Corporation
at the office of Cravath, Swaine & Moore LLP at 10:00 A.M.
(New York time), on
June [ ],
2006, or at such other time not later than seven full business days
thereafter as the Representative and the Company determine, such
time being herein referred to as the “ Closing Date
”, against delivery to the Trustee as custodian for DTC of
the Global Securities representing all of the Offered
Securities.
4. Offering by Underwriters .
It is understood that the several Underwriters propose to offer the
Offered Securities for sale to the public as set forth in the
Prospectus.
5. Certain Agreements of the
Company. The Company agrees with the several Underwriters
that:
(a) The Company will file each
Statutory Prospectus with the Commission pursuant to and in
accordance with Rule 424(b)(2) (or, if applicable and if
consented to by the Representative, subparagraph (5), such consent
not to be unreasonably withheld or delayed) not later than the
second business day following the execution and delivery of this
Agreement. The Company will also prepare a final term sheet,
containing solely the terms of the Offered Securities, in the form
set out in Schedule C, and file such term sheet pursuant to
Rule 433(d) under the Act within the time required by such Rule and
file promptly all other material required to be filed by the
Company with the Commission pursuant to Rule 433(d) under the
Act.
7
(b) The Company will advise the
Representative promptly of any proposal to amend or supplement the
Registration Statement or any Statutory Prospectus and will not
undertake any such amendment or supplement if the Representative
reasonably objects in writing thereto; and the Company will also
advise the Representative promptly of the filing of any such
amendment or supplement and of the institution by the Commission
of
