Item 1.01 Entry into Material Definitive Agreement.
On November 10, 2020, Chesapeake Energy Corporation, an Oklahoma corporation (“Chesapeake”), held an auction supervised by the United States Bankruptcy Court for the Southern District of Texas (the “Bankruptcy Court”) for its Mid-Continent asset, which includes all properties underlying the royalty interests owned by Chesapeake Granite Wash Trust, a Delaware statutory trust (the “Trust”). At the conclusion of the auction, the successful bidder was Tapstone Energy, LLC, a Delaware limited liability company (“Tapstone”) and KL CHK SPV, LLC, a Delaware limited liability company for an aggregate purchase price of $130.45 million. The sale closed on December 11, 2020 (the “Mid-Con Sale”).
In connection with the Mid-Con Sale, Chesapeake entered into an Assignment and Assumption Agreement, dated as of December 11, 2020 (the “Assignment Agreement”), by and among Chesapeake, Chesapeake Exploration, L.L.C., an Oklahoma limited liability company (“CELLC”) and Chesapeake E&P Holding, L.L.C., an Oklahoma limited liability company (“Chesapeake E&P,” and together with Chesapeake and CELLC, the “Assignors”), and Tapstone, whereby the Assignors assigned to Tapstone, and Tapstone agreed to assume all duties and obligations of the Assignors with respect to, the following material agreements of the Trust: (i) Amended and Restated Trust Agreement, dated as of November 16, 2011, by and among Chesapeake, CELLC, The Bank of New York Mellon Trust Company, N.A., as Trustee, and The Corporation Trust Company, as Delaware Trustee; (ii) Administrative Services Agreement, dated as of November 16, 2011, by and between Chesapeake and the Trust; (iii) Perpetual Overriding Royalty Interest Conveyance (PDP), dated as of November 16, 2011, by and between CELLC and the Trust; (iv) Perpetual Overriding Royalty Interest Conveyance (PUD), dated as of November 16, 2011, by and between CELLC and the Trust; (v) Term Overriding Royalty Interest Conveyance (PDP), dated as of November 16, 2011, by and between CELLC and Chesapeake E&P; (vi) Term Overriding Royalty Interest Conveyance (PUD), dated as of November 16, 2011, by and between CELLC and Chesapeake E&P; (vii) Registration Rights Agreement, dated as of November 16, 2011, by and among Chesapeake, CELLC and the Trust; and (viii) Assignment of Term Overriding Royalty Interests, dated as of November 16, 2011, by and between Chesapeake E&P and the Trust. The foregoing description of the Assignment Agreement does not purport to be complete and is qualified in its entirety by reference to the Assignment Agreement, a copy of which is filed herewith as Exhibit 10.1 and is incorporated herein by reference.
Also in connection with the Mid-Con Sale, Tapstone acquired 23,750,000 common units of the Trust from Chesapeake, representing all of Chesapeake’s 50.8% beneficial interest in the Trust. Tapstone financed this acquisition using cash on hand.