<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D
Under the Securities Exchange Act of 1934
GOTHIC ENERGY CORPORATION
----------
(Name of Issuer)
Common Stock, $.01 par value
--------------------------
(Title of Class of Securities)
383482106
---------
(CUSIP Number)
Shannon Self, Esquire
Self, Giddens & Lees, Inc.
210 Park Avenue, Suite 2725
Oklahoma City, Oklahoma 73102
(405) 232-3001
--------------------------------
(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications)
April 27, 1998
-----------------------
(Date of Event Which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition which is the subject of this Schedule 13D, and is filing this
schedule because of Rule 13d-1(b)(3) or (4), check the following box. [ ]
Note: Six (6) copies of this statement, including all exhibits, should be filed
with the Commission. See Rule 13d-1(a) for other parties to whom copies are to
be sent.
* The remainder of this cover page shall be filled out for a reporting person's
initial filing on this form with respect to the subject class of securities,
and for any subsequent amendment containing information which would alter
disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not be
deemed to be "filed" for the purpose of Section 18 of the Securities Exchange
Act of 1934 ("Act") or otherwise subject to the liabilities of that section of
the Act but shall be subject to all other provisions of the Act (however, see
the Notes).
<PAGE> 2
CUSIP No. 383482106 Page 2 of 6 Pages
<TABLE>
<S> <C>
(1) Names of Reporting Persons, Chesapeake Mid-Continent Corp., an Oklahoma
S.S. or I.R.S. Identification corporation, as successor by merger to Chesapeake
Nos. of Above Persons Gothic Corp., an Oklahoma corporation
73-1529077
(2) Check the Appropriate Box if (a) [ ]
a Member of a Group (See (b) [ ]
Instructions)
(3) SEC Use Only
(4) Source of Funds (See Instructions) AF,WC
(5) Check if Disclosure of Legal
Proceedings is Required Pursuant
to Items 2(d) or 2(e) [ ]
(6) Citizenship or Place of Organization Oklahoma
</TABLE>
<TABLE>
<S> <C> <C>
(7) Sole Voting Power 2,394,125
Number of Shares (8) Shared Voting Power ------
Beneficially
Owned by Each (9) Sole Dispositive 2,394,125
Reporting Person Power
With:
(10) Shared Dispositive ------
Power
</TABLE>
<TABLE>
<S> <C>
(11) Aggregate Amount Beneficially 2,394,125
Owned by Each Reporting Person
(12) Check if the Aggregate Amount [ ]
in Row (11) Excludes Certain
Shares (See Instructions)
(13) Percent of Class Represented 14.7%
by Amount in Row (11)
(14) Type of Reporting Person CO
(See Instructions)
</TABLE>
<PAGE> 3
CUSIP No. 383482106 Page 3 of 6 Pages
Item 1. Security and Issuer.
The common stock par value $.01 per share (the "Common Stock"), of
Gothic Energy Corporation, an Oklahoma corporation ("Gothic").
Gothic's principal executive offices are located at 5727 South Lewis
Avenue, Suite 700, Tulsa, Oklahoma 74105.
Item 2. Identity and Background.
Chesapeake Mid-Continent Corp., an Oklahoma corporation ("Chesapeake
Mid-Continent"), is a wholly owned subsidiary of Chesapeake Energy
Corporation, an Oklahoma corporation ("Chesapeake Energy"). Both
corporations are located at 6100 North Western Avenue, Oklahoma City,
Oklahoma 73118, and are engaged in the ownership, development and
operation of oil and gas assets in North America.
The executive officers and directors of Chesapeake Mid-Continent and
Chesapeake Energy are set forth below. Each individual designated by an
asterisk is a director or officer of Chesapeake Mid-Continent and
Chesapeake Energy.
Aubrey K. McClendon *
Director and Chief Executive Officer
6100 North Western
Oklahoma City, Oklahoma 73118
Tom L. Ward *
Director and Chief Operating Officer
6200 North Western
Oklahoma City, Oklahoma 73118
Marcus C. Rowland *
Chief Financial Officer
6100 North Western
Oklahoma City, Oklahoma 73118
Edgar F. Heizer, Jr.
Director
261 Bluff's Edge Drive
Lake Forest, Illinois 60045
Breene Kerr
Director
115 Bay Street
Easton, Maryland 21601-2703
Shannon Self
Director
2725 Oklahoma Tower
210 Park Avenue
Oklahoma City, Oklahoma 73102
<PAGE> 4
CUSIP No. 383482106 Page 4 of 6 Pages
Frederick B. Whittemore
Director
1221 Avenue of the Americas
New York, New York 10020
Walter C. Wilson
Director
2001 Kirby Drive, Suite 1107
Houston, Texas 77019
Chesapeake Mid-Continent, Chesapeake Energy and each of the listed
individuals have not, during the last five years, been convicted in a
criminal proceeding and have not been or become subject to a judgment,
decree or final order enjoining future violations of, or prohibiting
or mandating activities subject to, federal or state securities laws
or finding any violation with respect to such laws. Each individual is
a United States citizen.
Item 3. Source and Amount of Funds or Other Consideration
On April 27, 1998, Chesapeake Mid-Continent and affiliated entities
made a strategic investment in Gothic and in connection therewith
Chesapeake Mid-Continent or its affiliates acquired Gothic's Series B
Senior Preferred Stock (the "Preferred Stock"), certain oil and gas
interests, the right to participate in certain oil and gas development
activities of Gothic and a warrant (the "Warrant") for 2,439,246
shares of Common Stock at an exercise price of $.01 per share. The
consideration for the transaction was provided by Chesapeake Energy
and its affiliated entities from working capital and the proceeds from
one or more bond financing transaction. On August 18, 1999, Chesapeake
Mid-Continent exercised the Warrant by surrendering 45,121 warrants
and receiving 2,394,125 shares of Common Stock.
Item 4. Purpose of Transaction
The acquisition of the Warrant and the underlying Common Stock was
part of a strategic investment and Chesapeake Mid-Continent intends to
hold the Warrant and any shares of Common Stock acquired through the
exercise of the Warrant as an investment for its own account. In the
future Chesapeake Mid-Continent may: (i) purchase additional shares of
Common Stock or other equity securities of Gothic, (ii) dispose of any
or all of Common Stock in any manner permitted by applicable
securities law or (iii) discuss or enter into additional strategic
investments in connection with Gothic. Chesapeake Mid-Continent has no
current intention to affect any change of control or to influence the
control of Gothic. Chesapeake Mid-Continent is permitted to designate
one director to Gothic's board of directors but has declined to do so.
Except as set forth above, Chesapeake Mid-Continent has no present
plans or intentions relating to the transactions described in
subparagraphs (a) through (j) of Item 4 of Schedule 13D.
<PAGE> 5
CUSIP No. 383482106 Page 5 of 6 Pages
Item 5. Interest in Securities of the Issuer.
(a) Chesapeake Mid-Continent was previously the record owner of the
Warrant which granted the right to purchase 2,439,246 shares of Common
Stock, which shares constituted approximately 15% of the outstanding
Common Stock on April 27, 1998. Subsequent to the exercise of the
Warrant on August 18, 1999, Chesapeake Mid-Continent was the owner of
2,394,125 shares of Common Stock, which represented approximately
14.7% of the outstanding Common Stock. The foregoing excludes the
shares of Preferred Stock purchased by Chesapeake Mid-Continent
because the Preferred Stock is non-voting and Chesapeake Mid-Continent
does not have the right to acquire Common Stock within sixty days of
this filing through the conversion of the Preferred Stock.
(b) Chesapeake Mid-Continent has the sole power to dispose of the
Warrant and vote or dispose of the underlying warrant shares of Common
Stock.
(c) Chesapeake Mid-Continent exercised the Warrant on a net basis by
surrendering the right to acquire 45,121 shares of Common Stock under
the Warrant and receiving 2,394,125 shares of Common Stock. The
exercise price under the Warrant was $.01 per share and the value
implied for the 45,121 shares of surrendered Common Stock was $.5406
per share.
(d) Inapplicable
(e) Inapplicable
Item 6. Contracts, Agreements, Underwritings or Relationships With Respect
to Securities of the Issuer.
The Warrant was exercisable in whole or in part at any time after
April 27, 1998, until April 27, 2008. The holders of at least 50% of
Common Stock underlying the Warrant, the Preferred Stock and related
shares described in the Registration Rights Agreement can request the
registration of such Common Stock under the Securities Act at any time
after September 30, 1998. The remaining agreements entered into as
part of the strategic investment in Gothic were entered into and
performed in the ordinary course of the oil and gas exploration and
development business.
Item 7. Materials to be filed as Exhibits.
The Warrant to purchase Common Stock of Gothic Energy Corporation
issued to Chesapeake Mid-Continent Corp. dated April 27, 1998 is
attached as Exhibit 99.1.
<PAGE> 6
CUSIP No. 383482106 Page 6 of 6 Pages
SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
DATED: September 14, 1999
CHESAPEAKE MID-CONTINENT CORP.
/s/ Aubrey K. McClendon
--------------------------------------------
Aubrey K. McClendon, President
<PAGE> 7
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit
No. Description
- -------- -----------
<S> <C>
99.1 Warrant to purchase Common Stock of Gothic Energy Corporation
issued to Chesapeake Mid-Continent Corp. dated April 27, 1998.
</TABLE>
<PAGE> 1
EXHIBIT 99.1
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
LAW.
WARRANT
to Purchase Common Stock of
GOTHIC ENERGY CORPORATION
Expiring on April 27, 2008
Dater of Issuance: April 27, 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 27, 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 exchanged 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.
Schedule "1"
Page 1 of 11 Pages
<PAGE> 2
"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 P.M., Tulsa, Oklahoma time, on April 27, 2008.
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 "1"
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 Warrant 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,
Schedule "1"
Page 2 of 11 Pages
<PAGE> 3
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 by 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 my be necessary to assure that all such Warrant Shares 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 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
Schedule "1"
Page 3 of 11 Pages
<PAGE> 4
if the holder hereof shall fail to make any such request, such failure shall
not effect 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.
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 5727 South Lewis Avenue, Suite 8700, Tulsa,
Oklahoma 74105, 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 give 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.
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
Schedule "1"
Page 4 of 11 Pages
<PAGE> 5
of the Company. 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.
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.
Schedule "1"
Page 5 of 11 Pages
<PAGE> 6
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 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,
Schedule "1"
Page 6 of 11 Pages
<PAGE> 7
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 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
Schedule "1"
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<PAGE> 8
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 the Warrants
representing a majority of the Warrant Shares obtainable upon exercise of all
of the Warrants then outstanding) shall be made with respect to the rights and
interest 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 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 an 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 and
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;
(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
Schedule "1"
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<PAGE> 9
(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 records 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.
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
time 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
Schedule "1"
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<PAGE> 10
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 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 an 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 of 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 5727 South Lewis Avenue, Suite 700, Tulsa, Oklahoma 74105, 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.
Schedule "1"
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<PAGE> 11
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 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 te 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 27, 1998 By: /s/ Michael K. Paulk
------------------- -------------------------------
Michael K. Paulk, President
Schedule "1"
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