EXHIBIT
99.1
EXECUTION COPY
30,000,000 Shares
CHESAPEAKE ENERGY
CORPORATION
Common Stock
UNDERWRITING
AGREEMENT
December 8, 2006
DEUTSCHE BANK SECURITIES INC.
60 Wall Street, 4th Floor
New York, New York 10005
Dear Sirs:
1. Introductory.
Chesapeake Energy Corporation, an Oklahoma corporation (the “
Company ”), proposes to issue and sell to Deutsche
Bank Securities Inc. (the “ Underwriter ”)
30,000,000 shares (“ Firm Securities ”) of
its Common Stock (“ Securities ”) and also
proposes to issue and sell to the Underwriter, at the option of the
Underwriter, an aggregate of not more than 4,500,000 additional
shares (“ Optional Securities ”) of its
Securities as set forth below. The Firm Securities and the Optional
Securities are herein collectively called the “ Offered
Securities ”. The Company hereby agrees with the
Underwriter as follows:
2. Representations and
Warranties of the Company. The Company represents and warrants
to, and agrees with, the Underwriter that:
(a) A registration statement
(No. 333-130196), including all materials incorporated by reference
therein and a base 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superceded or modified, is hereinafter referred to as the “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 base prospectus or prospectus supplement
deemed to be a part thereof
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that has not been superseded or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 A 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 8:30a.m. (Eastern time) on the
date of this Agreement. Any reference herein to the term “
amend ,” “ amendment ,” or “
supplement ” with respect to the Registration
Statement, the Prospectus or any Issuer Free Writing Prospectus
shall be deemed to refer to and include the filing of any document
under the Securities Exchange Act of 1934 (the “ Exchange
Act ”) and the rules and regulations of the Commission
(the “ Rules and Regulations ”) on or after the
initial effective date of the Registration Statement, or the date
of such Prospectus or Issuer Free Writing Prospectus, as the case
may be, and deemed to be incorporated by reference
therein.
(b) On its effective date and
as of the Closing Date, the Registration Statement conformed in all
respects to the requirements of the Act and 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 the Underwriter, if any, specifically for use
therein, it being understood and agreed that the only such
information furnished by the 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
Exchange Act, as applicable, and 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 statement therein not misleading.
(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 Underwriter, 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 Underwriter. 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 Underwriter, 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
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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.
(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 Underwriter 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 Underwriter, (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 Underwriter, (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 Underwriter 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
and at all subsequent times through the completion of the public
offer and sale of the Offered Securities, neither (i) the General
Use Issuer Free Writing Prospectus(es) issued at or prior to the
Applicable Time, the Statutory Prospectus or the information set
out in Schedule B 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 the Underwriter specifically for use therein, it
being understood and agreed that the only such information
furnished by the 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 Underwriter 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
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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 Underwriter 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 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 the Underwriter
specifically for use therein, it being understood and agreed that
the only such information furnished by the 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) When the Offered Securities
are delivered and paid for pursuant to this Agreement on each
Closing Date, such Offered Securities will have been duly
authorized, validly issued, fully paid and nonassessable; the
Offered Securities are consistent with the information in the
General Disclosure Package and conform to the description thereof
contained in the Prospectus; and the stockholders of the Company
have no preemptive rights with respect to the Offered
Securities.
(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 the Underwriter for a
brokerage commission, finder’s fee or other like payment in
connection with this offering.
(m) The Offered Securities have
been approved for listing on the NYSE, subject to notice of
issuance.
(n) 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 may
be required under applicable securities laws in connection with the
purchase and resale of the Offered Securities by the
Underwriter.
(o) None of the execution,
delivery and performance of this Agreement, the issuance and sale
of the Offered Securities and compliance with the terms and
provisions hereof, will result in a
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breach or violation of any of the
terms and provisions of, or constitute a default under, any
statute, rule, regulation or order of any governmental agency or
body or any court, domestic or foreign, having jurisdiction over
the Company or any subsidiary of the Company or any of their
properties, or any agreement or instrument to which the Company or
any such subsidiary is a party or by which the 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.
(p) This Agreement has been
duly authorized, executed and delivered by the Company.
(q) 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.
(r) 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.
(s) 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.
(t) 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.
(u) 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.
(v) 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,
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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 to
perform its obligations under this Agreement, or which are
otherwise material in the context of the sale of the Offered
Securities; and no such actions, suits or proceedings are
threatened or, to the Company’s knowledge,
contemplated.
(w) 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.
(x) 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.
(y) 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.
(z) 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.
(aa) 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.
(bb) 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.
(cc) 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
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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 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 Underwriter or its 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.
(dd) Except as disclosed in the
General Disclosure Package and the Registration Statement, (i) all
stock options granted under any stock option plan of the Company
(the “Stock Plans”) have been granted in compliance
with the terms of applicable law and the applicable Stock Plans and
(ii) the Company has properly accounted for all stock options
granted under the Stock Plans in conformity with generally accepted
accounting principles in the United States applied on a consistent
basis.
(ee) All information on (or
hyperlinked from) the Company’s website at www.chkenergy.com
either (i) qualifies for the exemption for regularly released
factual business information or forward-looking information in Rule
168 of the Act or (ii) 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.
(ff) 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 Underwriter or counsel for the Underwriter 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 the 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 Underwriter, and the Underwriter agrees to
purchase from the Company, at a purchase price of $31.85 per share,
the Firm Securities.
The Company will deliver the Firm
Securities to the Underwriter, against payment of the purchase
price in Federal (same day) funds by official bank check or checks
or wire transfer to an account at a bank acceptable to the
Underwriter drawn to the order of the Company at the office of
Cravath, Swaine & Moore LLP, at 10:00 A.M., New York time,
on December 13, 2006, or at such other time not later than seven
full business days thereafter as the Underwriter and the Company
determine, such time being herein referred to as the “
First Closing Date ”. For purposes of Rule 15c6-1
under the Exchange Act, the First Closing Date (if later than the
otherwise applicable settlement date) shall be the settlement date
for payment of funds and delivery of securities for all the Offered
Securities sold pursuant to the offering. The certificates for the
Firm Securities so to be delivered will be in definitive form, in
such denominations and registered in such names as the Underwriter
requests and will be made available for checking and packaging at
the above office of Cravath, Swaine & Moore LLP at least
24 hours prior to the First Closing Date.
In addition, upon written notice
from the Underwriter given to the Company from time to time not
more than 30 days subsequent to the date of the Prospectus, the
Underwriter may purchase all or less than all of the Optional
Securities at the purchase price per Security to be paid for the
Firm Securities. The Company agrees to sell to the Underwriter the
number of shares of Optional Securities specified in
such
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notice and the Underwriter agrees to
purchase such Optional Securities. Such Optional Securities may be
purchased by the Underwriter only for the purpose of covering
over-allotments made in connection with the sale of the Firm
Securities. No Optional Securities shall be sold or delivered
unless the Firm Securities previously have been, or simultaneously
are, sold and delivered. The right to purchase the
Optional
