Exhibit 4.1


 


 


COMMON STOCK PURCHASE AGREEMENT


 


 


between


 


 


PIONEER DRILLING COMPANY ,


 


as Seller


 


and


 


 


CHESAPEAKE ENERGY CORPORATION


 


as Purchaser


 


dated as of


 


March 31, 2003


 

















 


TABLE OF CONTENTS


 


	
  1.

  	
  Purchase
  and Sale.

  	
   

  
	
  1.1

  	
  Consideration

  	
   

  
	
  1.2

  	
  Authorization

  	
   

  
	
  1.3

  	
  Preemptive Rights

  	
   

  
	
  1.4

  	
  Registration Rights
  Agreement

  	
   

  
	
  1.5

  	
  Observation and
  Information Rights

  	
   

  
	
  1.6

  	
  Company Right of First
  Offer

  	
   

  
	
  2.

  	
  The Closing

  	
   

  
	
  2.1

  	
  Closing Date

  	
   

  
	
  2.2

  	
  Payment and Delivery

  	
   

  
	
  3.

  	
  Representations
  and Warranties of the Company

  	
   

  
	
  3.1

  	
  Organization and Existence

  	
   

  
	
  3.2

  	
  Capitalization: Ownership of Stock:
  Authorization

  	
   

  
	
  3.3

  	
  No Conflicts

  	
   

  
	
  3.4

  	
  Authority; Enforceability

  	
   

  
	
  3.5

  	
  Litigation; Contingencies

  	
   

  
	
  3.6

  	
  Subsidiaries

  	
   

  
	
  3.7

  	
  Title to Assets
  (Personal Property)

  	
   

  
	
  3.8

  	
  Consents

  	
   

  
	
  3.9

  	
  Proprietary Rights

  	
   

  
	
  3.10

  	
  Financial Statements

  	
   

  
	
  3.11

  	
  Compliance with Laws; OSHA

  	
   

  
	
  3.12

  	
  Labor Matters

  	
   

  
	
  3.13

  	
  ERISA

  	
   

  
	
  3.14

  	
  Environmental Matters

  	
   

  
	
  3.15

  	
  Permits and Licenses

  	
   

  
	
  3.16

  	
  Insurance

  	
   

  
	
  3.17

  	
  Taxes

  	
   

  
	
  3.18

  	
  Absence of Certain
  Developments

  	
   

  
	
  4.

  	
  Representations
  and Warranties of the Purchaser

  	
   

  
	
  4.1

  	
  No Conflict

  	
   

  
	
  4.2

  	
  Authority;
  Enforceability

  	
   

  
	
  4.3

  	
  Consents

  	
   

  
	
  4.4

  	
  Investment Representatives

  	
   

  
	
  5.

  	
  Nature
  and Survival of Representations and Warranties; Indemnity.

  	
   

  
	
  5.1

  	
  Survival of
  Representations and Warranties

  	
   

  
	
  5.2

  	
  Indemnity by the Company

  	
   

  
	
  5.3

  	
  Indemnity by the Purchaser

  	
   

  
	
  5.4

  	
  Limitation of Liability

  	
   

  
	
  5.5

  	
  Exclusive Remedy

  	
   

  
	
  6.

  	
  Miscellaneous

  	
   

  
	
  6.1

  	
  Financial
  Statements and Other Information

  	
   

  
	
  6.2

  	
  Expenses

  	
   

  



 

















 


	
  6.3

  	
  Notices

  	
   

  
	
  6.4

  	
  Entire Agreement;
  Amendments

  	
   

  
	
  6.5

  	
  Assignment

  	
   

  
	
  6.6

  	
  Brokers

  	
   

  
	
  6.7

  	
  No Third Party Rights

  	
   

  
	
  6.8

  	
  Counterparts

  	
   

  
	
  6.9

  	
  Headings: Interpretation

  	
   

  
	
  6.10

  	
  Governing Law

  	
   

  
	
  6.11

  	
  Arbitration

  	
   

  
	
  6.12

  	
  Severability

  	
   

  



 


SCHEDULES


 


	
  Schedule 3.7(a)

  	
  Liens
  Against Assets

  
	
  Schedule 3.7(c)

  	
  Use of
  Real Property

  
	
  Schedule 3.9

  	
  Proprietary Rights

  
	
  Schedule 3.10

  	
  Changes to Financial
  Statements

  
	
  Schedule 3.11

  	
  Compliance
  With Laws

  
	
  Schedule 3.13

  	
  ERISA

  
	
  Schedule 3.14

  	
  Environmental Matters
  and Permits

  
	
  Schedule 3.18

  	
  Absence of
  Certain Developments

  



 


ii

















 


COMMON STOCK PURCHASE AGREEMENT


 


THIS COMMON STOCK
PURCHASE AGREEMENT, dated effective as of March 31, 2003 (“Agreement”), between
Chesapeake Energy Corporation, an Oklahoma corporation (the “Purchaser”), and
Pioneer Drilling Company, a Texas corporation (the “Company”).


 


W  I
T  N  E  S  S  E  T  H:


 


WHEREAS, subject
to the terms and conditions of this Agreement, the Company desires to obtain
additional equity funding, and the Purchaser desires to make an investment in
the Company;


 


NOW, THEREFORE, in
consideration of the premises and of the representations, warranties and
covenants herein contained, the parties hereby agree as follows:


 


1.             Purchase and Sale.


 


1.1           Consideration. 
The Company hereby agrees to issue and sell to the Purchaser 5,333,333
shares of the common stock (the “Shares”), par value $0.10 per share, of the
Company (“Common Stock”), and the Purchaser hereby agrees to purchase the
Shares for an aggregate purchase price of $20,000,000 in cash (the “Purchase
Price”), payable by wire transfer of immediately available funds at the closing
hereunder being effected concurrently with the execution and delivery of this
Agreement by the parties hereto (the “Closing”).


 


1.2           Authorization. 
The Company agrees that the Shares to be issued and sold to the
Purchaser shall be duly authorized and issued, and shall be fully paid,
nonassessable and shall not be subject to any fees, encumbrances, pledges or
“adverse claims” (as Section 8.102(a)(1) of the Uniform Commercial Code of the
State of Texas defines that term), and upon delivery to the Purchaser will vest
full, valid and legal title to the Shares in the Purchaser.


 


1.3           Preemptive Rights.  The Company hereby grants to the Purchaser the preemptive right
to acquire a percentage of any additional capital stock of any class or series,
or debt convertible into capital stock (collectively, “Preemptive Right
Securities”), the Company may issue equal to the percentage of the outstanding
Common Stock held by the Purchaser immediately preceding any such issuance
(assuming the conversion of all outstanding convertible preferred stock or
debt) (the “Purchaser’s Pro Rata Amount”). 
This preemptive right shall terminate in the event the Purchaser holds
less than 10% of the outstanding Common Stock of the Company.  This preemptive right shall also terminate
on the fourth anniversary of the approval for listing of the Common Stock on
the American Stock Exchange (the “AMEX”); provided, however, in the event the
Common Stock at any time hereafter shall not be listed on the AMEX or on
another nationally recognized securities exchange or, in lieu thereof, included
in the Nasdaq Stock Market, the preemptive rights shall be reinstated, subject
to any other independent basis for termination (including as provided in the
immediately preceding sentence).  This
preemptive right shall not apply to the issuance of capital stock issued
pursuant to warrants, options or other rights to acquire capital stock
currently outstanding or that may hereafter be granted by the Company to any
employee, consultant or director under any existing or future


 


1

















 


option plan or other
incentive plan of the Company or under any option, warrant or other rights to
acquire capital stock that is or has been approved by the shareholders of the
Company.


 


(a)           Issuances
for Cash.  Subject to the other
provisions of this Section 1.3, upon the issuance by the Company of Preemptive
Right Securities in exchange for cash, the Purchaser shall have the right to
purchase the Purchaser’s Pro Rata Amount of the Preemptive Right Securities for
the same cash purchase price and on the same terms as the other purchasers of
such Preemptive Right Securities, except in the case of an underwritten public
offering of securities registered under the Securities Act of 1933, as amended
(the “Securities Act”), in which case the Purchaser’s purchase price shall be
the cash purchase price at which the Preemptive Right Securities are offered to
the public.  Upon receipt of written
notice from the Company of the Company’s intent to issue Preemptive Right Securities
for cash, the Purchaser shall provide written notice to the Company of its
intent to exercise or not to exercise its preemptive rights within 10 days of
the Purchaser’s receipt of such notice from the Company.  Failure of the Purchaser to provide notice
within such 10 days shall be deemed to be a waiver of such preemptive
rights.  Any issuance of Preemptive
Right Securities for cash not completed within 60 days of the date notice is
provided by the Company to the Purchaser as provided in the preceding sentence
hereof shall be deemed to be a new issuance of Preemptive Right Securities to
which this subparagraph applies.


 


(b)           Issuances
for Other than Cash.  Subject to the
other provisions of this Section 1.3, upon the issuance by the Company of Preemptive
Right Securities in exchange for any consideration other than cash, the
Purchaser shall have the right to purchase the Purchaser’s Pro Rata Amount of
the Preemptive Right Securities at a cash price per share equal to the value
per share received by the Company as consideration for the issuance of the
Preemptive Right Securities as determined by the Board of Directors of the
Company in good faith; provided, however, that, if such
Preemptive Right Securities are regularly traded, then the purchase price per
share shall be no less than the average of the average daily trading price of
actual trades of such Preemptive Right Securities for the 30 trading days
preceding the date on which written notice of the Company’s intent to issue
Preemptive Right Securities is delivered to the Purchaser in accordance with
the following sentence. Upon receipt of written notice from the Company of the
Company’s intent to issue Preemptive Right Securities for any consideration
other than cash, the Purchaser shall provide written notice to the Company of
its intent to exercise or not to exercise its preemptive rights within 10 days
of the Purchaser’s receipt of such notice from the Company.  Failure of the Purchaser to provide notice within
such 10 days shall be deemed to be a waiver of such preemptive rights.  Any issuance of Preemptive Right Securities
for any consideration other than cash not completed within 120 days of the date
notice is provided by the Company to the Purchaser as provided in the preceding
sentence hereof shall be deemed to be a new issuance of Preemptive Right
Securities to which this subparagraph applies. 
Notwithstanding anything to the contrary contained in this Agreement,
the Purchaser shall have no preemptive rights with respect to a merger, plan of
exchange or other combination involving the Company that requires the approval
of the shareholders of the Company and with respect to which such approval is
obtained.


 


1.4           Registration Rights Agreement.  Simultaneous with the execution of this
Agreement, the Company and the Purchaser are entering into a Registration
Rights Agreement in form and substance of Exhibit A attached hereto (the
“Registration Rights Agreement”).


 


2

















 


1.5           Observation and Information Rights.  So long as the Purchaser owns at least five
percent (5%) of the capital stock of the Company and no Purchaser
representative is serving as a member of the Company’s board of directors, the
Purchaser will have the right to designate one representative of the Purchaser
to attend and observe all meetings of the board of directors of the Company,
all meetings of committees of such board and all meetings of the board of
directors of each of the subsidiaries of the Company.  Subject to the confidentiality provisions and other restrictions
set forth below, the Company will provide such designated observer with all
notices, materials and information provided to any of the members of the boards
of directors or committees at the same time as such notices, materials and
information are provided to the directors including, without implied
limitation, any written consent by the directors and any notices, material or
information regarding such written consent. 
The Company will promptly pay or reimburse each such designated observer
for all reasonable out-of-pocket expenses incurred in connection with attending
board or committee meetings of the Company or any subsidiary.  The parties agree that the designated
observer will leave for that portion of any meeting where outside legal counsel
is discussing any legal matter with the board of directors in a situation where
the presence of the observer is, in the reasonable opinion of such counsel,
potentially able to impair the successful assertion of the attorney client privilege
with respect to the matter being so discussed. 
The Purchaser will, and will cause its designated observer to, (i)
maintain the confidentiality of all material nonpublic information disclosed to
either of them pursuant to the foregoing provisions and (ii) refrain from
trading in shares of Common Stock or any other securities of the Company while
in possession of any such material nonpublic information.  The Company’s obligations pursuant to this
Section 1.5 shall be subject to the Company’s receipt of a written
acknowledgement of the Purchaser’s designated observer which acknowledges his
obligation as provided in the immediately preceding sentence.


 


1.6           Company Right of First Offer.  The Purchaser agrees that it will not sell,
transfer or otherwise dispose of any Common Stock other than into the public
trading market under Rule 144 or incident to any registration right granted by
the Company to the Purchaser without first offering the stock the Purchaser
desires to transfer (the “Disposition Stock”) to the Company in writing (the
“Disposition Notice”) at the price and on the terms (the “Disposition Terms”)
under which the Purchaser desires to transfer the Disposition Stock.  Upon receipt of any Disposition Notice, the
Company shall have the assignable right to acquire the Disposition Stock from
the Purchaser upon the Disposition Terms at any time within 45 days following
the Company’s receipt of the Disposition 
Notice (the “Company Disposition Period”), so long as the Company shall
provide the Purchaser with an affirmative written acknowledgment of its intent
to acquire the Disposition Stock within 10 days after the Company’s receipt of
the Disposition Notice.  If the Company
or its assignee does not take all action necessary to purchase the Disposition
Stock upon the Disposition Terms within the Company Disposition Period, the
Purchaser may complete a disposition of the Disposition Stock to any third
party strictly upon the Disposition Terms and in a manner conforming to
applicable securities laws during the 45 day period following the end of the
Company Disposition Period, but not thereafter, unless the Purchaser submits a
further Disposition Notice pursuant to the terms of this paragraph.  The requirements of this paragraph shall not
apply to the pledge or gift of Common Stock by the Purchaser or a disposition
to an affiliate of the Purchaser or to a disposition approved by the Board of
Directors of the Company; provided, however, that any affiliate
transferee or donee of Common Stock shall first be required to agree in writing
to be bound by the terms of this Section 1.6. 
The Purchaser agrees that certificates representing Common Stock subject
to this Section


 


3

















 


1.6 may be legended in
order to provide notice of the Company’s right of first refusal set forth in
this Section 1.6 to third parties.


 


2.             The Closing.


 


2.1           Closing Date. 
The Closing shall take place at the offices of the Company, 9310
Broadway, Building I, San Antonio, Texas, on March 31, 2003 (the “Closing
Date”), concurrently with the execution and delivery of this Agreement.


 


2.2           Payment and Delivery.  At the Closing, the Purchaser shall pay the
Purchase Price by transferring immediately available funds by wire transfer to
the Company.  At the Closing, the
Company will deliver to the Purchaser certificates representing the
Shares.  The certificates for Shares
shall be subject to a legend restricting transfer under the Securities Act, and
referring to restrictions on transfer herein, such legend to be substantially
as follows:


 


THE SHARES
REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR INVESTMENT AND HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED.  SUCH SHARES MAY NOT BE SOLD OR TRANSFERRED
IN THE ABSENCE OF SUCH REGISTRATION OR AN OPINION OF COUNSEL SATISFACTORY TO
THE COMPANY AS TO THE AVAILABILITY OF AN EXEMPTION FROM REGISTRATION THAT SUCH
REGISTRATION IS NOT REQUIRED AND THAT ANY PROSPECTUS DELIVERY REQUIREMENTS ARE
NOT APPLICABLE.  THE SHARES WERE
PURCHASED UNDER AN AGREEMENT THAT INCLUDES ADDITIONAL RESTRICTIONS ON THEIR
TRANSFER AND COPIES OF SUCH AGREEMENT MAY BE OBTAINED AT NO COST BY WRITTEN
REQUEST MADE BY THE HOLDER OF RECORD OF THIS CERTIFICATE TO THE SECRETARY OF
THE COMPANY AT THE PRINCIPAL EXECUTIVE OFFICES OF THE COMPANY.


 


The Shares may also
include any legend required under the laws of any state or other jurisdiction.


 


3.             Representations and Warranties of
the Company.  The Company
represents and warrants to the Purchaser that, as of the date of this
Agreement:


 


3.1           Organization and Existence.  The Company is a corporation duly
incorporated and validly existing and in good standing under the laws of the
State of Texas and has all requisite corporate power to carry on its business
as now conducted and is qualified to do business in those jurisdictions where
its lease of property or the conduct of its business requires such
qualification, except where the failure to do so would not have a Material
Adverse Effect (as defined below).  The
Company has delivered to the Purchaser complete and correct copies of the
Articles of Incorporation and Bylaws of the Company as in effect on the date
hereof.  As used in this Agreement, the
term “Material Adverse Effect” shall mean an event, circumstance, loss,
development or effect that would result in a material adverse effect on the
business, operations, assets, condition (financial or other) or results of
operations of the Company.


 


3.2           Capitalization: Ownership of Stock:
Authorization.  The Company has
100,000,000 authorized shares of Common Stock and 10,000,000 authorized shares
of its


 


4

















 


preferred stock, issuable
in series (the “Preferred Stock”).  As
of December 31, 2002, the Company had (a) 16,167,459 issued and outstanding
shares of Common Stock; (b) no shares of Preferred Stock outstanding; (c) no
treasury shares; and (d) convertible secured debentures outstanding that may be
converted into 6,500,000 underlying shares of Common Stock.  As of December 31, 2002, the Company had
granted or was authorized to grant stock options that may be exercised for up
to 3,000,000 underlying shares of Common Stock pursuant to existing stock
option plans approved by the Company’s shareholders.  Other than the registration rights granted to the Purchaser in
accordance with the transactions contemplated hereby, the Company has granted
registration rights that are currently in effect only to (a) WEDGE Energy
Services, L.L.C. (“Wedge”), in the form of demand and piggy-back registration rights,
and (b) two of its officers and directors, Wm. 
Stacy Locke and Michael E. Little, in the form of piggy-back
registration rights, and no other individual or entity currently has any
registration rights of any kind or nature (other than rights under Form S-8),
including demand or piggy-back registration rights.  The Company has granted Wedge preemptive rights, as set forth in
that certain Common Stock Purchase Agreement by and between the Company and
Wedge dated as of May 18, 2001, a copy of which has been made available to the
Purchaser.  Wedge has executed an
instrument waiving its preemptive rights with respect to the issuance of the
Shares being effected hereby.  Except as
set forth in this Section 3.2, there are no other options, warrants, rights,
conversion rights, phantom rights, preemptive rights or any other rights of any
party to receive equity of the Company. 
Upon issuance of the Shares to the Purchaser, the Purchaser will be the
record and beneficial owner of the Shares and the Shares will be duly
authorized, validly issued and outstanding, fully paid and nonassessable.  As a result of the issuance of the Shares,
the Company is not, nor will it become, obligated to issue any additional
shares of capital stock (preferred or common) to any officer, director,
shareholder or other party.


 


3.3           No Conflicts. 
The execution and delivery of this Agreement and the Registration Rights
Agreement by the Company, and performance by the Company hereunder and
thereunder, will not result in a violation or breach of any term or provision
of or constitute a default or accelerate the performance required under the
Articles of Incorporation or Bylaws of the Company or any material indenture,
mortgage, deed of trust or other contract or agreement to which the Company is
a party or by which its assets are bound, or violate any order, writ,
injunction or decree of any court, administrative agency or governmental body.


 


3.4           Authority; Enforceability.  The Company has full right, power and
authority to execute and deliver this Agreement and the Registration Rights
Agreement and to consummate the transactions contemplated hereby and
thereby.  The execution and delivery of
this Agreement and the Registration Rights Agreement and the consummation of
the transactions contemplated hereby to be performed by the Company have been
duly and validly authorized by all necessary corporate action on the part of
the Company, and no other corporate proceedings are necessary to authorize the
execution and delivery of this Agreement and the Registration Rights Agreement
by the Company or to consummate the transactions contemplated hereby to be
performed by the Company.  This
Agreement and the Registration Rights Agreement constitute valid and legally
binding obligations of the Company, enforceable in accordance with their
respective terms, except as that enforcement may be limited by bankruptcy,
insolvency, moratorium or similar laws affecting the enforcement of creditors’
rights, by the availability of injunctive relief or specific performance and by
general principles of equity and, in the case of


 


5

















 


the Registration Rights
Agreement, any rights to indemnity or contribution thereunder may be limited by
federal and state securities laws and public policy considerations.


 


3.5           Litigation; Contingencies.  Except as described in the Reports (as
defined in Section 3.10), there is no action, suit or proceeding pending or, to
the knowledge of the Company, threatened against the Company or any of its
subsidiaries before any court, agency or arbitrator that would result in any
Material Adverse Effect or that questions the validity of any action taken or
to be taken pursuant to on in connection with this Agreement or the
Registration Rights Agreement.


 


3.6           Subsidiaries. 
Other than subsidiaries that have no assets, liabilities or operations,
the Company has no subsidiaries or any material equity interests in any other
corporation, partnership or joint venture except as follows: The Company owns
100% of PDC Investment Corp., a Delaware corporation.  PDC Investment Corp. is the sole limited partner with a 99%
partnership interest in Pioneer Drilling Services, Ltd., a Texas limited
partnership.  The Company owns 100% of
PDC MGMT. Co., a Texas corporation.  PDC
MGMT. Co. is the sole general partner of Pioneer Drilling Services, Ltd. and
holds a 1% partnership interest in such limited partnership.  Pioneer Drilling Services, Ltd., holds
substantially all of the operating assets of the consolidated group consisting
of the Company, PDC Investment Corp., Pioneer Drilling Services, Ltd., and PDC
MGMT. Co.


 


3.7           Title to Assets (Personal Property).


 


(a)           Except as
set forth on Schedule 3.7(a) and except for those assets leased under
leases identified on Schedule 3.7(a), the Company or one of its
subsidiaries is the owner of, and has marketable title to, free and clear of
all Liens (as defined below), except Permitted Lines (as defined below), the
personal property shown or reflected on the December 31, 2002 balance sheet of
the Company included in the Reports, except for (i) cash expended, and (ii)
inventories and other assets used or sold and receivables collected in the
ordinary course of business since December 31, 2002.  The Company and its subsidiaries have maintained all their
tangible personal properties material to the business of the Company and its
subsidiaries, taken as a whole, in good repair, working order and operating
condition, subject to ordinary wear and tear, and all such assets are suitable
for the purposes for which they are presently being used.  As used in this Agreement, the term “Lien”
means, with respect to any property or other asset of any person (in each case
whether the same is consensual or nonconsensual or arises by contract,
operation of law, legal process or otherwise), any mortgage, lien, security
interest, pledge, attachment, levy or other charge or encumbrance of any kind
thereupon or in respect thereof or any “adverse claims” (as Section 8.102(a)(i)
of the Uniform Commercial Code of the State of Texas defines that term).  As used in this Agreement, the term
“Permitted Liens” means, with respect to the property or other assets of the
Company:  (i) Liens for taxes if
the same are not at the time due and delinquent or are being contested; (ii)
Liens of mechanics, laborers, landlords, operators and materialmen and similar
Liens, arising  in the ordinary course
of business; (iii) Liens incurred in the ordinary course of business in
connection with worker’s compensation, unemployment insurance and other social
security legislation; (iv) Liens incurred in the ordinary course of business in
connection with deposit accounts or to secure the performance of trade
contracts, statutory obligations, surety and appeal bonds, performance and
return-of-money bonds and other obligations of like nature; and (v)
Liens securing purchase money indebtedness


 


6

















 


as set forth on Schedule
3.7)(a), so long as those Liens do not attach to any property or other
assets other than the properties or other assets purchased with the proceeds of
that indebtedness.


 


(b)           (i) All
leases to which the Company or any subsidiary is a party are valid and binding
on the Company or such subsidiary, as the case may be, and ,to the knowledge of
the Company, the other party or parties thereto, and in full force and effect,
(ii) the Company or one of its subsidiaries is in peaceful possession of the
real property or personal property that is subject thereto, (iii) neither the
Company nor any of its subsidiaries is in default of any material provision of
any such lease, except for any such default as would not result in a Material
Adverse Effect, and (iv) to the knowledge of the Company, no event has occurred
that with the giving of notice, the passage of time or both, would become a
default under any such lease, except for any such default as would not result
in a Material Adverse Effect.


 


(c)           Except as
set forth on Schedule 3.7(c), the Company and its subsidiaries have all
easements, rights-of-way and similar authorizations required for the use of the
real property leased by the Company and its subsidiaries and used in the
conduct of the business as heretofore conducted, excluding any easements,
rights-of-way and similar authorizations the absence of which do not materially
impair the use of such real property (the “Easements”).  To the knowledge of the Company, no party to
any Easement is in default of any provision of any easement or any covenant,
restriction or other agreement encumbering any of the real property, except for
any such default as would not result in a Material Adverse Effect, and, to the
knowledge of the Company, no event that with the giving of notice, the passage
of time or both would become a default has occurred under any Easement or any
covenant, restriction or other agreement encumbering any of the real property,
except for any such default as would not result in a Material Adverse
Effect.  No real property, or any
portion thereof, occupied by the Company or any of its subsidiaries has been
condemned or otherwise taken by any public authority, and neither the Company
nor any of its subsidiaries has received written notice that any such
condemnation or taking is threatened or contemplated.


 


(d)           (i)  Neither the properties owned or occupied by
the Company or any of its subsidiaries nor the occupancy or operation thereof
is in violation of any law or any building, zoning or other ordinance, code or
regulation, except for any such violation as would not result in a Material Adverse
Effect; (ii) no notice from any governmental body has been served upon the
Company or any of its subsidiaries or upon any property owned or occupied by
the Company or any of its subsidiaries claiming any material violation of any
such law, ordinance, code or regulation or requiring, or calling to the
attention of the Company the need for, any work, repair, construction,
alteration or installation on or in connection with any such properties that
has not been complied with; and (iii) there is no encroachment of the
improvements located on the real property owned or occupied by the Company or
any of its subsidiaries upon any adjoining property, or of improvements located
on any adjoining property upon any property owned or occupied by the Company or
any of its subsidiaries, except for any such encroachment as would not result
in a Material Adverse Effect.


 


3.8           Consents.  The
Company is not required to obtain any consent from or approval of any court,
governmental entity or any other person in connection with the execution,
delivery or performance by it of this Agreement or the Registration Rights
Agreement and the transactions contemplated hereby, except such filings as may
be required to be made with the


 


7

















 


Securities and Exchange
Commission and the American Stock Exchange and with any state or foreign “blue
sky” or securities regulatory authority. 
The consummation of the transactions contemplated by this Agreement will
not require the approval of any entity or person in order to prevent the
termination of any material right, privilege, license or agreement of the
Company.


 


3.9           Proprietary Rights.  Except as set forth on Schedule 3.9, the Company and its
subsidiaries own or possess adequate licenses or other valid rights to use all
patents, patent rights, trademarks, trademark rights and proprietary
information used or held for use in connection with their respective businesses
as currently being conducted, except where the failure to own or possess such
licenses and other rights would not have a Material Adverse Effect, and there
are no assertions or claims challenging the validity of any of the foregoing
that would have a Material Adverse Effect. 
The conduct of the Company’s and its subsidiaries’ respective businesses
as currently conducted does not conflict with any patents, patent rights,
licenses, trademarks, trademark rights, trade names, trade name rights or
copyrights of others in any way that would have a Material Adverse Effect.  There is no infringement of any proprietary
right owned by or licensed by or to the Company or any of its subsidiaries that
would have a Material Adverse Effect.


 


3.10         Financial Statements.  The Company has made available to the
Purchaser its Annual Report on Form 10-K for the fiscal year ended March 31,
2002, the definitive Proxy Statement dated July 10, 2002 for the Annual Meeting
of Shareholders to be held on August 16, 2002, its Quarterly Reports on
Form 10-Q for the quarterly periods ended June 30, 2002, September 30, 2002 and
December 31, 2002, a report of Form 8-K dated July 3, 2002 and filed July 18,
2002, a report on Form 8-K dated August 8, 2002 and filed August 9, 2002, and a
report on Form 8-K dated December 23, 2002 and filed January 3, 2003
(collectively, the “Reports”).  As used
in this Agreement, the term “Financial Statements” means the unaudited balance
sheet and statements of operations and cash flows for the Company as of and for
the fiscal quarter ended December 31, 2002 and included in its Report on Form
10-Q for the quarter ended December 31, 2002. 
The Financial Statements have been prepared in conformity with generally
accepted accounting principles, consistently applied, except as otherwise
stated therein and except for the absence of footnote disclosures and normal
year-end adjustments.  Except as set
forth on Schedule 3.10, all of the Financial Statements present fairly
in all material respects the financial position and the results of operations
of the Company and its subsidiaries as of the dates and for the periods shown
therein, and to the knowledge of the Company, there has been no Material
Adverse Effect on the financial condition of the Company since December 31,
2002.


 


Except as
disclosed in the Reports, the Financial Statements or as set forth on Schedule
3.10, to the knowledge of the Company, neither the Company nor any of its
subsidiaries has any debt, liability or obligation, contingent or otherwise,
that would have a Material Adverse Effect.


 


3.11         Compliance with Laws; OSHA.  To the knowledge of the Company, the Company
and its subsidiaries are in compliance with all applicable laws, ordinances,
statutes, rules, regulations and orders promulgated by any court or federal,
state or local governmental body or agency relating to its assets and business,
except for such violations or failures to comply that would not result in a
Material Adverse Effect.  Except as set
forth on Schedule 3.11, since January 1, 2000, neither the Company nor
any of its subsidiaries has received any notice,


 


8

















 


citation, claim,
assessment or proposed assessment alleging any violation of any federal, state
or local safety and health laws, except for any such violations as would not
result in a Material Adverse Effect.


 


3.12         Labor Matters. 
There is no labor strike or labor disturbance pending or, to the
knowledge of the Company, threatened against the Company or any of its
subsidiaries.  Neither the Company nor
any of its subsidiaries has experienced any work stoppage or other material
labor disturbance within the past three years. 
Neither the Company nor any of its subsidiaries is a party to any
collective bargaining agreement with respect to its employees and, to the
knowledge of the Company, there are no current attempts to organize its
employees.


 


3.13         ERISA.  Except as
set forth in any of the Reports or on Schedule 3.13, neither the Company
nor any of its subsidiaries maintains or sponsors any pension, retirement,
savings, deferred compensation or profit-sharing plan or any stock option,
stock appreciation, stock purchase, performance share, bonus or other incentive
plan, severance plan, health, group insurance or other welfare plan, or other
similar plan or any “employee benefit plan” within the meaning of Section 3(3)
of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”),
under which the Company has any current or future obligation or liability or
under which any employee or former employee (or beneficiary of any employee or
former employee) of the Company has or may have any current or future right to
benefits on account of employment with the Company (the term “plan” shall
include any contract, agreement, policy or understanding, each such plan being
hereinafter referred to individually as a “Plan”).  Each Plan intended to be qualified under Sections 401(a) and
501(a) of the Internal Revenue Code of 1986, as amended (the “Code”), is, and
has been determined by the Internal Revenue Service to be, qualified under
Sections 401(a) and 501(a) of the Code and, since such determination, no
amendments to or failure to amend any such Plan or any other circumstances
adversely affects its tax qualified status. 
There has been no prohibited transaction within the meaning of Section
4975 of the Code and Section 406 of Title I of ERISA with respect to any Plan
that is subject to the prohibited transaction requirements of the Code or
ERISA.


 


3.14         Environmental Matters.  Except as set forth on Schedule 3.14
(a) the Company and each of its subsidiaries have obtained all Environmental
Permits (as defined below) that are required with respect to their respective
businesses, operations and properties, either owned or leased, except where the
failure to have obtained any such Environmental Permit would not have a
Material Adverse Effect, and (b) the Company, each of it subsidiaries, and
their respective properties are in compliance with all terms and conditions of
all applicable Requirements of Environmental Law and Environmental Permits, in
each case except as would not have a Material Adverse Effect.  Except as would not have a Material Adverse
Effect or as set forth in any of the Reports or on Schedule 3.14, there
are no Environmental Claims pending or, to the knowledge of the Company,
threatened against the Company or any of its subsidiaries.  Neither the Company nor any of its
subsidiaries has received any notice from any governmental authority of any
unresolved violation or liability arising under any Requirements of
Environmental Law or Environmental Permit in connection with its assets,
businesses or operations, except for any such violation or liability as would
not have a Material Adverse Effect.


 


9

















 


“Environmental
Claim” means any third party (including governmental agencies and employees)
action, lawsuit, claim or proceeding (including claims or proceedings under the
Occupational Safety and Health Act or similar laws relating to safety of
employees) that seeks to impose liability for (a) pollution or contamination of
the ambient air, surface water, ground water or land; (b) solid, gaseous or
liquid waste generation, handling, treatment, storage, disposal or
transportation; (c) exposure to hazardous or toxic substances; (d) the safety
or health of employees; or (e) the transportation, processing, distribution in
commerce, use or storage of hydrocarbons or chemical substances.  An Environmental Claim includes, but is not
limited to, a common law action, as well as a proceeding to issue, modify or
terminate an Environmental Permit.


 


“Environmental
Permit” means any permit, license, approval or other authorization under any
applicable law, regulation and other requirement of the United States or any
foreign country or of any state, municipality or other subdivision thereof relating
to pollution or protection of health or the environment, including laws,
regulations or other requirements relating to emissions, discharges, releases
or threatened releases of pollutants, contaminants or hazardous substances or
toxic materials or wastes into ambient air, surface water, ground water or
land, or otherwise relating to the manufacture, processing, distribution, use,
treatment, storage, disposal, transportation or handling of hydrocarbons or
chemical substances, pollutants, contaminants or hazardous or toxic materials
or wastes.


 


“Requirements of
Environmental Law” means all requirements in effect on the Closing Date imposed
by any applicable law, rule, regulation or order of any federal, foreign, state
or local executive, legislative, judicial, regulatory or administrative agency,
board or authority with jurisdiction over the Company or any of its
subsidiaries or any of their respective properties or assets that relate to (a)
pollution or protection of the ambient air, surface water, ground water or
land; (b) solid, gaseous or liquid waste generation, treatment, storage,
disposal or transportation; (c) exposure to hazardous or toxic substances; (d)
the safety or health of employees; or (e) regulation of the manufacture,
processing, distribution in commerce, use or storage of hydrocarbons or
chemical substances.


 


3.15         Permits and Licenses.  The Company and its subsidiaries have all
licenses, permits and other authorizations necessary for the conduct of their
respective businesses as they are currently being conducted, except where the
failure to hold any such licenses, permits or authorizations would not have a
Material Adverse Effect.


 


3.16         Insurance. 
The Company and its subsidiaries maintain insurance policies (together
with all riders and amendments) relating to the assets or the businesses of the
Company and its subsidiaries with coverage limits in amounts that the Company
believes are sufficient to protect against any material claim for casualty or
property damage.  Such insurance policies
are in full force and effect and all premiums due thereon have been paid or
accrued on the books of the Company.


 


3.17         Taxes.  The
Company and its subsidiaries have filed all material tax returns and reports
required by law to be filed, or filed extensions for any period in which a tax
return was due, and, as of December 31, 2002, have paid or accrued on the
Financial Statements all taxes, assessments and other governmental charges that
are due and payable, except for any


 


10

















 


such items as are being
contested in good faith as set forth on Schedule 3.17.  The charges, accruals and reserves on the
books of the Company in respect of taxes for all prior fiscal periods are
considered adequate by the Company, and the Company knows of no assessment for
additional taxes for any of such fiscal years or any basis therefor, except for
any such assessment as would not have a Material Adverse Effect.  All tax returns and reports that have been
filed by the Company and its subsidiaries are complete in all material
respects.  To the knowledge of the
Company, no claim has been made that the Company or any of its subsidiaries is
subject to a tax in any jurisdiction in which the Company or any of its
subsidiaries has not filed a return and that remains unpaid as of the Closing
Date.  The Company and its subsidiaries
have withheld and paid all material amounts of taxes required to have been
withheld and paid in connection with amounts previously paid to any employee,
independent contractor, creditor, stockholder or other third party.  Since January 1, 2000, (i) neither the
Company nor any of its subsidiaries has been the subject of an audit and (ii)
neither the Company not any of its subsidiaries has waived any statute of
limitations or agreed to an extension of time with respect to a tax assessment
or deficiency.


 


3.18         Absence of Certain Developments.  Since December 31, 2002, there has been no
change in the business or operations of the Company or any of its subsidiaries
that would have a Material Adverse Effect, except changes in the ordinary
course of business.  Except as set forth
on Schedule 3.18, the Company has not, since the date of the Financial
Statements, directly or indirectly, declared or paid any dividend or ordered or
made any other distribution on account of any shares of any class of the
capital stock of the Company.  The
Company has not, since such date, directly or indirectly redeemed, purchased or
otherwise acquired any such shares or agreed to do so or set aside any sum or
property for any such purpose.


 


4.             Representations and Warranties of
the Purchaser.  The Purchaser
represents and warrants to the Company that, as of the date of this Agreement:


 


4.1           No Conflict. 
The execution and delivery of this Agreement and the Registration Rights
Agreement by the Purchaser, and performance by the Purchaser hereunder and
thereunder will not result in a violation or breach of any term or provision of
or constitute a default or accelerate the performance required under the Articles
of Incorporation or Bylaws of the Purchaser or any material indenture,
mortgage, deed of trust or other contract or agreement to which the Purchaser
is a party or by which its assets are bound, or violate any order, writ,
injunction or decree of any court, administrative agency or governmental body.


 


4.2           Authority; Enforceability.  The Purchaser has full right, power and
authority to execute and deliver this Agreement and the Registration Rights
Agreement and to consummate the transactions contemplated hereby and
thereby.  The execution and delivery of
this Agreement and the Registration Rights Agreement and the consummation of
the transactions contemplated hereby to be performed by the Purchaser have been
duly and validly authorized by all necessary corporate action on the part of
the Purchaser, and no other corporate proceedings are necessary to authorize
the execution and delivery of this Agreement and the Registration Rights
Agreement by the Purchaser or to consummate the transactions contemplated
hereby to be performed by the Purchaser. 
This Agreement and the Registration Rights Agreement will constitute
valid and legally binding obligations of the Purchaser, enforceable in
accordance with


 


11

















 


their respective terms,
except as that enforcement may be limited by bankruptcy, insolvency, moratorium
or similar laws affecting the enforcement of creditors’ rights, by the
availability of injunctive relief or specific performance and by general
principles of equity.


 


4.3           Consents. 
The Purchaser is not required to obtain any consent from or approval of
any court, governmental entity or any other person in connection with the
execution, delivery or performance by it of this Agreement or the Registration
Rights Agreement and the transactions contemplated hereby.  The consummation of the transactions
contemplated by this Agreement will not require the approval of any entity or
person in order to prevent the termination of any material right, privilege,
license or agreement of the Purchaser.


 


4.4           Investment Representatives.  The Purchaser is an “accredited investor”
within the meaning of Regulation D promulgated by the Securities and Exchange
Commission under the Securities Act, and (by virtue of its experience in
evaluating and investing in private placement transactions of securities in
companies similar to the Company) it is capable of evaluating the merits and
risks of its investment in the Company. 
The Purchaser acknowledges that it has had the opportunity to ask
questions of the officers of the Company. 
In reaching the conclusion that it desires to acquire the Shares, the
Purchaser has evaluated its financial resources and investment position and the
risks associated with this investment and acknowledges that it is able to bear
the economic risks of this investment. 
As of the date hereof, the Purchaser represents, warrants and agrees
that it is acquiring the Shares solely for its own account, for investment, and
not with a view to the distribution or resale thereof.  The Purchaser further represents that its
present financial condition is such that it is not under any present necessity
or constraint to dispose of such Shares to satisfy any existing or contemplated
debt or undertaking and that the investment is suitable for the Purchaser upon
the basis of the Purchaser’s other security holdings, financial situation and
needs.  The Purchaser acknowledges and
understands that it must bear the economic risk of this investment for an
indefinite period of time because the offering of the Shares has not been
registered under the Securities Act and, accordingly, the Shares must be held
indefinitely unless subsequently registered under the Securities Act and
applicable state and other securities laws or unless an exemption from such
registration is available.  The
Purchaser agrees that any certificates evidencing the Shares must bear a legend
restricting the transfer thereof as set forth in Section 2.2 and that a
notice may be made in the records of the Company or to its transfer agent
restricting the transfer of the Shares in a manner consistent with the
foregoing.


 


5.             Nature and Survival of
Representations and Warranties; Indemnity.


 


5.1           Survival of Representations and
Warranties.  All covenants,
agreements, representations and warranties made hereunder or pursuant hereto or
in connection with the transactions contemplated hereby shall survive the
Closing; provided,
however,
that for purposes of the indemnification provided for in this Article 5, (a)
the representations and warranties set forth in Article 3 and 4 (other than
Sections 3.2, 3.5, 3.13, 3.14 and 3.16) shall survive until the second
anniversary of the Closing Date, (b) the representations and warranties of the
Company set forth in Sections 3.5, 3.13 and 3.14 shall survive until the fourth
anniversary of the Closing Date, and (c) the representations and warranties of
the Company set forth in Sections 3.2 and 3.16 shall survive for the applicable
limitations period established by law (the “Surviving Representations and
Warranties”), whereupon they will terminate and expire.  After a Surviving


 


12

















 


Representation and
Warranty has terminated and expired, no indemnification will or may be sought
under this Article 5 by any person who would have been entitled under this
Article 5 to indemnification on the basis of that Surviving Representation and
Warranty prior to such termination and expiration; provided, however,
that no claim for indemnification hereunder based on a Surviving Representation
and Warranty, written notice of which is presented to the indemnifying party
prior to the termination and expiration of such Surviving Representation and
Warranty, will be affected in any way by that termination and expiration.


 


5.2           Indemnity by the Company.  The Company shall indemnify and hold
harmless the Purchaser and the officers, directors, managers, agents,
affiliates and representatives of the Purchaser (the “Purchaser Indemnitees”)
from and against, and shall reimburse the Purchaser Indemnitees for, any loss,
liability, damage or expense, including reasonable attorneys’ fees and costs of
investigation incurred as a result thereof, that the Purchaser shall incur or
suffer (collectively, the “Purchaser Recoverable Losses”), arising out of or
resulting from (a) any misrepresentation or breach of any representation or
warranty contained in Article 3 hereof on the part of the Company, or (b) any
nonfulfillment or breach of any agreement or covenant under or pursuant to this
Agreement or the Registration Rights Agreement on the part of the Company.


 


5.3           Indemnity by the Purchaser.  The Purchaser shall indemnify and hold
harmless the Company and the officers, directors, managers, agents, affiliates
and representatives of the Purchaser (the “Company Indemnitees”)from and
against, and shall reimburse the Company Indemnitees for, any loss, liability,
damage or expense, including reasonable attorneys’ fees and cost of
investigation incurred as a result thereof, that the Company shall incur or
suffer (collectively, the “Company Recoverable Losses”) arising out of or
resulting from (a) any misrepresentation or breach of any representation or
warranty contained in Article 4 hereof on the part of the Purchaser, or (b) any
nonfulfillment or breach of any agreement or covenant under or pursuant to this
Agreement or the Registration Rights Agreement on the part of the Purchaser.


 


5.4           Limitation of Liability.


 


(a)           Notwithstanding
any liability that the Company or the Purchaser may incur in Sections 5.2 and
5.3, respectively, above, the Company shall not be obligated for a Purchaser
Recoverable Loss, and the Purchaser shall not be obligated for a Company
Recoverable Loss, unless and until such loss, individually, or in the
aggregate, shall exceed $250,000, in which case the Company or the Purchaser,
as the case may be, shall be obligated for all amounts in excess thereof.  In no event will the liability of the
Company under this Article 5 with respect to Purchaser Recoverable Losses or
the Purchaser under this Article 5 with respect to Company Recoverable Losses
exceed an amount equal to the Purchase Price.


 


(b)           Notwithstanding
any provision in any other Section of this Agreement to the contrary, no
Purchaser Recoverable Loss or Company Recoverable Loss will include any
indirect, consequential, exemplary, punitive or treble damage (collectively,
the “Excluded Damages”) suffered by the Purchaser Indemnitees or the Company
Indemnitees.  The Purchaser hereby releases
the Company, to the fullest extent applicable law permits, from liability for
all


 


13

















 


Excluded Damages,
and the Company hereby releases the Purchaser, to the fullest extent applicable
law permits, from liability for all Excluded Damages.


 


5.5           Exclusive Remedy.  The rights to indemnification set forth in this Article 5 shall
be the sole and exclusive remedy of the Purchaser Indemnitees against the
Company and the Company Indemnitees against the Purchaser, respectively, in
connection with the Surviving Representations and Warranties (except to the
extent that the Purchaser Indemnitees or the Company Indemnitees may have any
claim against the other party arising out of or based on fraud).


 


6.             Miscellaneous.


 


6.1           Financial Statements and Other
Information.  Upon the written
request of the Purchaser, the Company will provide to the Purchaser copies of
all financial statements and other information provided to Wedge pursuant to
Section 3.01 of that certain Debenture Agreement dated July 3, 2002 between the
Company and Wedge.


 


6.2           Expenses.  Each
of the parties will pay their respective costs and expenses (including legal
fees) in connection with this Agreement as a result of the transactions
contemplated hereby.


 


6.3           Notices.  All
notices and other communications provided for or permitted hereunder must be in
writing and will be deemed delivered and received (i) if personally
delivered or if delivered by facsimile or courier service, when actually
received by the party to whom the notice or communication is sent, or
(ii) if deposited with the United States postal service (whether actually
received or not), at the close of business on the third San Antonio, Texas
business day next following the day when placed in the mail, postage prepaid,
certified or registered with return receipt requested, addressed to the
appropriate party or parties at the address of that party set forth or referred
to below (or at such other address as that party may designate by written
notice to each other party in accordance herewith):


 


(a)           if to the
Company, to:


 


Pioneer Drilling
Company


9310 Broadway,
Building I


San Antonio, Texas
78217


Attention:
President


Fax No.: (210)
828-8228


 


with a copy (which
will not constitute notice for purposes of this Agreement) to:


 


Baker Botts L.L.P.


One Shell Plaza


910 Louisiana


Suite 3000


Houston, Texas 
77002-4995


Attention:  Ted
W. Paris


Fax No.:  (713)
220-7738


 


14

















 


(b)           if to the Purchaser,
to:


 


Chesapeake Energy
Corporation


6100 North Western
Avenue


Oklahoma City,
Oklahoma 73118


Attention:  Chief Financial Officer


Fax No.:  (405) 879-9580


 


with a copy (which
will not constitute notice for purposes of this Agreement) to:


 


Commercial Law
Group, P.C.


2725 Oklahoma
Tower


210 Park Avenue


Oklahoma City,
Oklahoma 73102-5643


Attention:  Ray Lees


Fax No.:  (405) 232-5553


 


6.4           Entire Agreement; Amendments.  This Agreement, the schedules hereto and the
documents specifically referred to herein or executed contemporaneously
herewith constitute the entire agreement, understanding, representations and
warranties of the parties hereto related to the subject matter hereof and
supercede all prior agreements of the parties related to the subject matter
hereof.  This Agreement may be amended
only by an instrument in writing executed by both of the parties hereto.  The Company will not amend or modify the
Common Stock Purchase Agreement by and between the Company and Wedge dated as
of May 18, 2001 or Wedge’s rights under the Registration Rights Agreement
without the prior written consent of the Purchaser.


 


6.5           Assignment. 
This Agreement may be assigned at any time by the Purchaser to an
Affiliate (as defined in the Registration Rights Agreement) without the prior
consent of the Company so long as the party to whom this Agreement is assigned
agrees in writing to be bound by all terms and conditions contained
herein.  No other assignment may be made
by the Purchaser without the Company’s prior written consent.  Subject to the provisions of this
Section 6.5, this Agreement will inure to the benefit of and be binding on
the successors and assigns of each of the parties hereto.


 


6.6           Brokers.


 


(a)           The
Purchaser represents and warrants that it has not engaged, consented to or
authorized any broker, finder or intermediary to act on its behalf, directly or
indirectly, as a broker, finder or intermediary in connection with the
transactions contemplated by this Agreement. 
The Purchaser hereby agrees to indemnify and hold harmless the Company
from and against all fees, commissions or other payments owing to any such
person or firm acting on behalf of the Purchaser hereunder.


 


(b)           The
Company has engaged, consented to and authorized Jefferies & Co, Inc. in
connection with the transactions contemplated by this Agreement.  The Company agreed to pay Jefferies &
Company, Inc. (“Jefferies”) a commission and to reimburse expenses in


 


15

















 


accordance with
that certain Letter Agreement dated March 19, 2003 between the Company and
Jefferies (which the Company will pay in accordance with the terms of that
agreement), and the Company agrees to indemnify and hold harmless the Purchaser
from and against all fees, commissions or other payments owing by the Company
to any other person or firm acting on behalf of the Company hereunder.


 


6.7           No Third Party Rights.  Except as expressly contemplated hereby,
nothing in this Agreement shall create or be deemed to create any rights in any
person or entity not a party to this Agreement.


 


6.8           Counterparts. 
This Agreement may be executed in any number of counterparts, each of
which shall be deemed to be an original instrument, but all of which taken
together shall constitute one and the same agreement.


 


6.9           Headings: Interpretation.  The headings of the various sections of this
Agreement have been inserted for convenience of reference only and shall not
limit or affect the meaning or interpretation of this Agreement. Whenever the
context requires, references in this Agreement to the singular number shall
include the plural and vice versa, and words denoting gender shall include the
masculine, feminine and neuter.  This
Agreement uses the words “herein,” “hereof,” “hereto” and “hereunder” and words
of similar import to refer to this Agreement as a whole and not to any
particular provision of this Agreement. 
As used in this Agreement, the word “including” (and, with correlative
meaning, the word “include”) means including without limiting the generality of
any description preceding that word, and the verbs “shall” and “will” are used
interchangeably and have the same meaning.


 


6.10         Governing Law. 
This Agreement shall be governed by and construed in accordance with the
laws of the State of Texas, without regard to any principles of conflicts of
law thereof that would result in the application of the laws of any other
jurisdiction.


 


6.11         Arbitration.


 


(a)           The
parties shall attempt in good faith to resolve any dispute arising out of or
relating to this Agreement promptly by negotiation between executives who have
authority to settle the controversy and who are at a higher level of management
than the persons with direct responsibility for administration of this
Agreement.  Any party may give the other
party written notice of any dispute not resolved in the normal course of business.
Within 15 days after delivery of the notice, the receiving party shall submit
to the other party a written response. The notice and response shall include
(a) a statement of that party’s position and a summary of arguments supporting
that position, and (b) the name and title of the executive who will represent
that party and of any other person who will accompany the executive. Within 30
days after delivery of the initial notice, the executives of both parties shall
meet at a mutually acceptable time and place, and thereafter as often as they
reasonably deem necessary, to attempt to resolve the dispute. All reasonable
requests for information made by one party to the other will be honored.


 


All negotiations
pursuant to this clause are confidential and shall be treated as compromise and
settlement negotiations for purposes of applicable rules of evidence.


 


16

















 


(b)           If the
dispute has not been resolved by negotiation as provided herein within 45 days
after delivery of the initial notice of negotiation, the parties shall endeavor
to settle the dispute by mediation under the CPR Mediation Procedure in effect
on the date of this Agreement, provided, however, that if one party fails to
participate in the negotiation as provided herein, the other party can initiate
mediation prior to the expiration of the 45 days.  Unless otherwise agreed, the parties will select a mediator from
the CPR Panels of Distinguished Neutrals.


 


(c)           Any
dispute arising out of or relating to this Agreement, including the breach,
termination or validity thereof, that has not been resolved by mediation as
provided herein within 45 days after initiation of the mediation procedure,
shall be finally resolved by arbitration in accordance with the CPR Rules for
Non-Administered Arbitration in effect on the date of this Agreement, by three
independent and impartial arbitrators, of whom each party shall designate one;
provided, however, that if one party fails to participate in either the negotiation
or mediation as agreed herein, the other party can commence arbitration prior
to the expiration of the time periods set forth above.  The arbitration shall be governed by the
Federal Arbitration Act, 9 U.S.C. §§ 1-16, and judgment upon the award rendered
by the arbitrators may be entered by any court having jurisdiction
thereof.  The place of arbitration shall
be Houston, Texas.


 


Each party is
required to continue to perform its obligations under this Agreement pending
final resolution of any dispute arising out of or relating to this Agreement,
unless to do so would be impossible or impractical.


 


The arbitrators
are not empowered to award damages in excess of compensatory damages and each
party expressly waives and foregoes any right to punitive, exemplary or similar
damages unless a statute requires that compensatory damages be increased in a
specified manner.


 


6.12         Severability. 
In case any one or more of the provisions contained in this Agreement or
any application thereof shall be invalid, illegal or unenforceable in any
respect, the validity, legality and enforceability of the remaining provisions
contained herein and other applications thereof shall not in any way be
affected or impaired thereby.


 


17

















 


IN WITNESS
WHEREOF, this Agreement has been duly executed by the Company and by the
Purchaser by their respective officers duly authorized  effective as of the date first above
written.


 


	
   

  	
  THE COMPANY:

  
	
   

  	
   

  
	
   

  	
  PIONEER DRILLING
  COMPANY

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Wm. Stacy Locke

  
	
   

  	
  Wm.  Stacy
  Locke, President

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  THE PURCHASER:

  
	
   

  	
   

  
	
   

  	
  CHESAPEAKE ENERGY
  CORPORATION

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By: 

  	
  /s/ Martha A. Burger

  
	
   

  	
  Martha A. Burger, Senior Vice President

  



 


18

















 


SCHEDULE
3.7(a)


 


Liens
Against Assets


 

















 


SCHEDULE
3.7(c)


 


Use
of Real Property


 


 


None.


 

















 


SCHEDULE
3.9


 


Proprietary Rights


 


 


None.


 

















 


SCHEDULE
3.10


 


Changes
to Financial Statements


 


 


None.


 

















 


SCHEDULE
3.11


 


Compliance
With Laws


 


 


None.


 

















 


SCHEDULE
3.13


 


ERISA


 


 


None.


 

















 


SCHEDULE
3.14


 


Environmental
Matters and Permits


 


 


None.


 

















 


SCHEDULE
3.18


 


Absence
of Certain Developments


 


 


None.