Exhibit 4.1
11¾% Senior Notes due
2016
__________________
SEVENTH SUPPLEMENTAL
INDENTURE
Dated as of June 25,
2009
AMONG
QUICKSILVER RESOURCES
INC.,
THE SUBSIDIARY GUARANTORS PARTIES
HERETO
AND
THE BANK OF NEW YORK MELLON TRUST
COMPANY, N.A.
as TRUSTEE
TO
INDENTURE
Dated as of December 22,
2005
AMONG
QUICKSILVER RESOURCES,
INC.
AND
THE BANK OF NEW YORK MELLON TRUST
COMPANY, N.A.
as TRUSTEE
TABLE OF CONTENTS
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Page
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ARTICLE
I
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11¾%
SENIOR NOTES DUE 2016
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1
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1
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2
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Payment of
Principal and Interest
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28
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28
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28
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29
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Defeasance and
Covenant Defeasance.
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29
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Redemption at
the Option of the Company.
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32
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33
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33
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ARTICLE
II
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SUBSIDIARY
GUARANTEES
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33
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33
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Limitation on
Subsidiary Guarantor Liability
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34
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Releases of
Subsidiary Guarantees
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34
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ARTICLE
III
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PARTICULAR
COVENANTS OF THE COMPANY WITH RESPECT TO THE NOTES
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35
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Effectiveness
of Covenants
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35
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Limitation on
Indebtedness.
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35
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Limitation on
Restricted Payments
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39
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42
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Limitation on
Sale/Leaseback Transactions
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43
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Limitation on
Restrictions on Distributions from Restricted
Subsidiaries
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43
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Limitation on
Sales of Assets and Subsidiary Stock
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45
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Limitation on
Affiliate Transactions
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47
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Limitation on
Sale of Capital Stock of Restricted Subsidiaries
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48
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SEC
Reports
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48
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48
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Future
Subsidiary Guarantors
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50
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Limitation on
Lines of Business
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50
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50
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Offer to
Repurchase Upon Change of Control.
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50
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ARTICLE
IV
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EVENTS OF
DEFAULT WITH RESPECT TO THE NOTES
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51
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ARTICLE
V
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MODIFICATION
AND WAIVER
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52
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Without Consent
of Holders.
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52
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53
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ARTICLE
VI
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MISCELLANEOUS
PROVISIONS
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53
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53
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Ratification
and Incorporation of Original Indenture
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53
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53
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53
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53
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53
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53
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54
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Exhibit
A
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Form of Global
Note
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A-1
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Exhibit
B
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Form of
Supplemental Indenture to be Delivered by Subsequent
Guarantors
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B-1
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THIS SEVENTH SUPPLEMENTAL INDENTURE is made as
of the 25 th
day of June, 2009, by and among QUICKSILVER
RESOURCES INC., a Delaware corporation (the “Company”),
the Subsidiary Guarantors (as herein defined) parties hereto and
THE BANK OF NEW YORK MELLON TRUST COMPANY, N.A., a national banking
association duly organized and existing under the laws of the
United States of America (as successor in interest to JPMorgan
Chase Bank, National Association (the “Initial
Trustee”)), as trustee (the
“Trustee”):
WHEREAS, the Company and the Initial Trustee
executed and delivered an Indenture, dated as of December 22, 2005
(the “Original Indenture”), to provide for the issuance
by the Company from time to time of unsecured debentures, notes,
and other evidences of indebtedness (the “Securities”),
to be issued in one or more series as provided in the Original
Indenture;
WHEREAS, the Original Indenture is incorporated
herein by this reference and the Original Indenture, as
supplemented by this Seventh Supplemental Indenture, is herein
called the “Indenture”;
WHEREAS, in the fourth quarter of 2006, the
Trustee assumed and succeeded to all of the rights and obligations
of the Initial Trustee under the Original Indenture, as
supplemented on or before such date;
WHEREAS, under the Original Indenture, a new
series of senior notes may at any time be established by the Board
of Directors of the Company in accordance with the provisions of
the Original Indenture and the terms of such series may be
described by a supplemental indenture executed by the Company and
the Trustee;
WHEREAS, the Company proposes to create under
the Indenture a new series of senior notes;
WHEREAS, additional senior notes of other series
hereafter established, except as may be limited in the Original
Indenture as at the time supplemented and modified, may be issued
from time to time pursuant to the Indenture as at the time
supplemented and modified, and all senior notes issued by the
Company of any one series need not be issued at the same time and,
unless otherwise so provided, may be reopened for issuances of
additional senior notes of such series; and
WHEREAS, all conditions necessary to authorize
the execution and delivery of this Seventh Supplemental Indenture
and make it a valid and binding obligation of the Company and the
Subsidiary Guarantors, in accordance with its terms, have been done
or performed.
NOW THEREFORE, in consideration of the
agreements and obligations set forth herein and for other good and
valuable consideration, the sufficiency of which is hereby
acknowledged, the parties hereto hereby agree as
follows:
ARTICLE I
11¾% SENIOR NOTES DUE
2016
Section 1.01
Establishment . There is hereby established a new
series of senior notes to be issued under the Indenture, to be
designated as the Company’s 11¾% Senior
Notes due 2016 (the “Notes”).
There are to be authenticated and delivered
Notes, initially limited in aggregate principal amount to
$600,000,000, and no further Notes shall be authenticated and
delivered except as provided by the terms of the Original Indenture
and the terms of this Seventh Supplemental Indenture;
provided , however , that the aggregate principal
amount of the Notes may be increased in the future, without the
consent of the Holders, on the same terms and as part of the same
series as the Notes. The Notes shall be issued in fully
registered form without coupons.
The Notes shall be issued in the form of one or
more Global Securities (as defined below) in substantially the form
set out in Exhibit A hereto. The initial Depositary with
respect to the Notes shall be The Depository Trust
Company.
Each Note shall be dated the date of
authentication thereof and shall bear interest from the date of
original issuance thereof or from the most recent Interest Payment
Date to which interest has been paid or duly provided
for.
Section 1.02
Definitions . The following defined terms used
herein with respect to the Notes shall, unless the context
otherwise requires, have the meanings specified below;
provided , however , that all amounts of Adjusted
Consolidated Net Tangible Assets, Consolidated Coverage Ratio,
Consolidated EBITDA, Consolidated Income Taxes, Consolidated
Interest Expense, Consolidated Net Income or Net Working Capital
(i) as of any date or (ii) in relation to any period or
portion thereof that, in either case, precedes the Issue Date,
shall be the amount thereof as calculated as of such date or in
relation to such period or portion thereof under the indenture
governing the 2016 Senior Subordinated Notes as supplemented or
amended prior to the Issue Date. Capitalized terms used
herein for which no definition is provided herein shall have the
meanings set forth in the Original Indenture.
“2015 Senior Notes” means the
Company’s 8¼% Senior Notes due 2015.
“2016 Senior Subordinated Notes”
means the Company’s 7⅛% Senior Subordinated Notes due
2016.
“Acquired Indebtedness” means
Indebtedness (i) of a Person or any of its Subsidiaries existing at
the time such Person becomes a Restricted Subsidiary or (ii)
assumed in connection with the acquisition of assets from such
Person, in each case whether or not Incurred by such Person in
connection with, or in anticipation or contemplation of, such
Person becoming a Restricted Subsidiary or such
acquisition. Acquired Indebtedness shall be deemed to
have been Incurred, with respect to clause (i) of the preceding
sentence, on the date such Person becomes a Restricted Subsidiary
and, with respect to clause (ii) of the preceding sentence, on the
date of consummation of such acquisition of assets.
“Additional Assets”
means:
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any property or
assets (other than Indebtedness and Capital Stock) to be used by
the Company or a Restricted Subsidiary in the Oil and Gas
Business;
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capital
expenditures by the Company or a Restricted Subsidiary in the Oil
and Gas Business;
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the Capital
Stock of a Person that becomes a Restricted Subsidiary as a result
of the acquisition of such Capital Stock by the Company or a
Restricted Subsidiary; or
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Capital Stock
constituting a minority interest in any Person that at such time is
a Restricted Subsidiary;
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provided , however , that, in the case of clauses
(3) and (4), such Restricted Subsidiary is primarily engaged in the
Oil and Gas Business.
“Adjusted Consolidated Net Tangible
Assets” means (without duplication), as of the date of
determination, the remainder of:
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estimated
discounted future net revenues from proved oil and gas reserves of
the Company and its Restricted Subsidiaries calculated
in
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accordance with
SEC guidelines before any provincial, territorial, state, federal
or foreign income taxes, as estimated by the Company in a reserve
report prepared as of the end of the Company’s most recently
completed fiscal year for which audited financial statements are
available, as increased by, as of the date of determination, the
estimated discounted future net revenues from
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estimated
proved oil and gas reserves acquired since such year end, which
reserves were not reflected in such year end reserve report,
and
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estimated oil
and gas reserves attributable to upward revisions of estimates of
proved oil and gas reserves since such year end due to exploration,
development, exploitation or other activities, in each case
calculated in accordance with SEC guidelines (utilizing the prices
for the fiscal quarter ending prior to the date of determination),
and decreased by, as of the date of determination, the estimated
discounted future net revenues from
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estimated
proved oil and gas reserves included therein that shall have been
produced or disposed of since such year end, and
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estimated oil
and gas reserves included therein that are subsequently removed
from the proved oil and gas reserves of the Company and its
Restricted Subsidiaries as so calculated due to downward revisions
of estimates of proved oil and gas reserves since such year end due
to changes in geological conditions or other factors which would,
in accordance with standard industry practice, cause such
revisions, in each case calculated on a pre-tax basis and
substantially in accordance with SEC guidelines (utilizing the
prices for the fiscal quarter ending prior to the date of
determination), in each case as estimated by the Company’s
petroleum engineers or any independent petroleum engineers engaged
by the Company for that purpose;
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the capitalized
costs that are attributable to oil and gas properties of the
Company and its Restricted Subsidiaries to which no proved oil and
gas reserves are attributable, based on the Company’s books
and records as of a date no earlier than the date of the
Company’s latest annual or quarterly consolidated financial
statements;
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the Net Working
Capital on a date no earlier than the date of the Company’s
latest annual or quarterly consolidated financial statements;
and
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the net book
value of other tangible assets of the Company and its Restricted
Subsidiaries, as of a date no earlier than the date of the
Company’s latest annual or quarterly consolidated financial
statements, and
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the appraised
value, as estimated by independent appraisers, of other tangible
assets of the Company and its Restricted Subsidiaries, as of a date
no earlier than the date of the Company’s latest audited
consolidated financial statements ( provided that the
Company shall not be required to obtain any appraisal of any
assets); minus
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any amount
included in (a)(i) through (a)(iv) above that is attributable to
Minority Interests;
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any net gas
balancing liabilities of the Company and its Restricted
Subsidiaries reflected in the Company’s latest audited
consolidated financial statements;
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to the extent
included in (a)(i) above, the estimated discounted future net
revenues, calculated in accordance with SEC guidelines (utilizing
the prices utilized in the Company’s year end reserve
report), attributable to reserves which are required to be
delivered to third parties to fully satisfy the obligations of the
Company and its Restricted Subsidiaries with respect to Volumetric
Production Payments (determined, if applicable, using the schedules
specified with respect thereto); and
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to the extent
included in (a)(i) above, the estimated discounted future net
revenues, calculated in accordance with SEC guidelines,
attributable to reserves subject to Dollar-Denominated Production
Payments which, based on the estimates of production and price
assumptions included in determining the estimated discounted future
net revenues specified in (a)(i) above, would be necessary to fully
satisfy the payment obligations of the Company and its Restricted
Subsidiaries with respect to Dollar-Denominated Production Payments
(determined, if applicable, using the schedules specified with
respect thereto).
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If the Company
changes its method of accounting from the full cost method of
accounting to the successful efforts or a similar method,
“Adjusted Consolidated Net Tangible Assets” will
continue to be calculated as if the Company were still using the
full cost method of accounting.
“Affiliate” of any specified Person
means any other Person, that directly or indirectly, is in Control
of, is Controlled by, or is under common Control with, such
Person.
“Applicable Premium” means, with
respect to a Note at any Redemption Date, the greater of
(i) 1.0% of the principal amount of such Note and (ii) the
excess of (A) the present value at such time of (1) the
redemption price of such Note at July 1, 2013 (such redemption
price being described in Section 1.08(a) of this Seventh
Supplemental Indenture exclusive of any accrued interest) plus
(2) all required interest payments due on such Note through
July 1, 2013 (but excluding accrued and unpaid interest to the
Redemption Date), computed using a discount rate equal to the
Treasury Rate plus 50 basis points, over (B) the then outstanding
principal amount of such Note.
“Asset Disposition” means any direct
or indirect sale, lease (other than an operating lease entered into
in the ordinary course of the Oil and Gas Business), transfer,
issuance or other disposition, or a series of related sales,
leases, transfers, issuances or dispositions that are part of a
common plan, of shares of Capital Stock of a Subsidiary (other than
directors’ qualifying shares), property or other assets
(each
referred to for
the purposes of this definition as a “disposition”) by
the Company or any of its Restricted Subsidiaries, including any
disposition by means of a merger, consolidation or similar
transaction.
Notwithstanding
the preceding, the following items shall not be deemed to be Asset
Dispositions:
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a disposition
by a Restricted Subsidiary to the Company or by the Company or a
Restricted Subsidiary to a Wholly-Owned Subsidiary;
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the sale of
Cash Equivalents in the ordinary course of business;
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a disposition
of Hydrocarbons or mineral products in the ordinary course of the
Oil and Gas Business;
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a disposition
of obsolete or worn out equipment or equipment that is no longer
useful in the conduct of the business of the Company and its
Restricted Subsidiaries and that is disposed of in each case in the
ordinary course of business;
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transactions
permitted by Section 3.11 of this Seventh Supplement
Indenture;
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an issuance of
Capital Stock by a Restricted Subsidiary to the Company or to a
Wholly-Owned Subsidiary;
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for purposes of
Section 3.07 of this Seventh Supplemental Indenture only, the
making of a Permitted Investment or a disposition subject to
Section 3.03 of this Seventh Supplemental Indenture;
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an Asset Swap
effected in compliance with Section 3.07 of this Seventh
Supplemental Indenture;
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dispositions of
assets with an aggregate fair market value since the Issue Date of
less than $5 million;
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dispositions in
connection with the creation, encumbrance or existence of Permitted
Liens or the exercise of any rights or remedies with respect
thereto;
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dispositions of
receivables in connection with the compromise, settlement or
collection thereof in the ordinary course of business or in
bankruptcy or similar proceedings and exclusive of factoring or
similar arrangements;
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the licensing
or sublicensing of intellectual property or other general
intangibles and licenses, leases or subleases of other property in
the ordinary course of business and which do not materially
interfere with the business of the Company and its Restricted
Subsidiaries;
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any Production
Payments and Reserve Sales, provided that any such
Production Payments and Reserve Sales, other than incentive
compensation programs on terms that are reasonably customary in the
Oil and Gas Business for geologists, geophysicists and other
providers of technical services to the Company or a Restricted
Subsidiary, shall have been created, Incurred, issued, assumed or
Guaranteed in connection with the acquisition or financing of, and
no later than 60 days after the acquisition of, the property that
is subject thereto;
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the sale or
transfer (whether or not in the ordinary course of the Oil and Gas
Business) of oil and/or gas properties or direct or indirect
interests in real property; provided that at the
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time of such
sale or transfer such properties do not have associated with them
any proved reserves capable of being produced in material economic
quantities; and
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the
abandonment, farm-out, exchange, lease or sublease of developed or
undeveloped oil and/or gas properties or interests therein in the
ordinary course of business or in exchange for oil and/or gas
properties or interests therein owned or held by another
Person.
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“Asset Swap” means any concurrent
purchase and sale or exchange of oil and gas properties or
interests therein or other assets or properties used or useful in
the Oil and Gas Business, including Capital Stock of any Person who
holds any such properties, interests or assets, between the Company
or any of its Restricted Subsidiaries and another Person;
provided that any cash received must be applied in
accordance with Section 3.07 of this Seventh Supplemental
Indenture.
“Attributable Indebtedness” in
respect of a Sale/Leaseback Transaction means, as at the time of
determination, the present value (discounted at the interest rate
borne by the Notes, compounded semi-annually) of the total
obligations of the lessee for rental payments during the remaining
term of the lease included in such Sale/Leaseback Transaction
(including any period for which such lease has been
extended).
“Average Life” means, as of the date
of determination, with respect to any Indebtedness or Preferred
Stock, the quotient obtained by dividing (1) the sum of the
products of the numbers of years from the date of determination to
the dates of each successive scheduled principal payment of such
Indebtedness or redemption or similar payment with respect to such
Preferred Stock multiplied by the amount of such payment by (2) the
sum of all such payments.
“Bank Indebtedness” means any and
all amounts, whether outstanding on the Issue Date or Incurred
after the Issue Date, payable by the Company under or in respect of
a Credit Facility, and any related notes, collateral documents,
letters of credit and guarantees and any Interest Rate Agreement
entered into in connection with the Credit Facility, including
principal, premium, if any, interest (including interest accruing
on or after the filing of any petition in bankruptcy or for
reorganization relating to the Company at the rate specified
therein, whether or not a claim for post-filing interest is allowed
in such proceedings), fees, charges, expenses, reimbursement
obligations, guarantees and all other amounts payable thereunder or
in respect thereof.
“Board of Directors” means, as to
any Person, the board of directors of such Person or a duly
authorized committee of such board of directors.
“Capital Lease” means, with respect
to any Person, any lease of property (whether real, personal, or
mixed) by such Person or its Subsidiaries as lessee that would be
capitalized on a balance sheet of such Person or its Subsidiaries
prepared in conformity with GAAP, other than, in the case of such
Person or its Subsidiaries, any such lease under which such Person
or any of its Subsidiaries is the lessor.
“Capital Lease Obligations” means,
with respect to any Person, the capitalized amount of all
obligations of such Person and its Subsidiaries under Capital
Leases, as determined on a consolidated basis in conformity with
GAAP.
“Capital Stock” of any Person means
any and all shares, interests, rights to purchase, warrants,
options, participation or other equivalents of or interests in
(however designated) equity of such Person, including any Preferred
Stock, but excluding any debt securities convertible into such
equity.
“Cash Equivalents” means:
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securities
issued or directly and fully guaranteed or insured by the United
States Government or any agency or instrumentality of the United
States ( provided that the full
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faith and
credit of the United States is pledged in support thereof), having
a maturity within one year after the date of acquisition
thereof;
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marketable
general obligations issued by any state of the United States of
America or any political subdivision of any such state or any
public instrumentality thereof maturing within one year after the
date of acquisition thereof and, at the time of such acquisition,
having a credit rating of at least “A” or the
equivalent thereof from either Standard & Poor’s Ratings
Services or Moody’s Investors Service, Inc. (or an equivalent
rating by another nationally recognized rating agency if both of
the two named rating agencies cease publishing ratings of
investments);
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certificates of
deposit, time deposits, eurodollar time deposits, overnight bank
deposits or bankers’ acceptances having maturities of not
more than one year after the date of acquisition thereof issued by
any commercial bank the long-term debt of which is rated at the
time of acquisition at least “A” or the equivalent
thereof by Standard & Poor’s Ratings Services, or
“A” or the equivalent thereof by Moody’s
Investors Service, Inc. (or an equivalent rating by another
nationally recognized rating agency if both of the two named rating
agencies cease publishing ratings of investments), and having
combined capital and surplus in excess of $500 million;
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repurchase
obligations with a term of not more than seven days for underlying
securities of the types described in clauses (1), (2) and (3) above
entered into with any bank meeting the qualifications specified in
clause (3) above;
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commercial
paper rated at the time of acquisition thereof at least
“A-2” or the equivalent thereof by Standard &
Poor’s Ratings Services or “P-2” or the
equivalent thereof by Moody’s Investors Service, Inc. (or an
equivalent rating by another nationally recognized rating agency if
both of the two named rating agencies cease publishing ratings of
investments), and in any case maturing within one year after the
date of acquisition thereof; and
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interests in
any investment company or money market fund which invests 95% or
more of its assets in instruments of the type specified in clauses
(1) through (5) above.
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“Change of Control”
means:
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Any
“person” or “group” of related persons (as
such terms are used in Sections 13(d) and 14(d) of the Exchange
Act), other than one or more Permitted Holders, is or becomes the
beneficial owner (as defined in Rules 13d-3 and 13d-5 under the
Exchange Act, except that such person or group shall be deemed to
have “beneficial ownership” of all shares that such
person or group has the right to acquire, whether such right is
exercisable immediately or only after the passage of time),
directly or indirectly, of more than 50% of the total voting power
of the Voting Stock of the Company (or its successor by merger,
consolidation or purchase of all or substantially all of its
assets) (for the purposes of this clause, such person or group
shall be deemed to beneficially own any Voting Stock of the Company
held by a parent entity of the Company, if such person or group
“beneficially owns” (as defined above), directly or
indirectly, more than 50% of the voting power of the Voting Stock
of such parent entity); or
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the first day
on which a majority of the members of the Board of Directors of the
Company are not Continuing Directors; or
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the sale,
lease, transfer, conveyance or other disposition (other than by way
of merger or consolidation), in one or a series of related
transactions, of all or substantially all of the assets of the
Company and its Restricted Subsidiaries taken as a whole to any
“person”
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(as such term
is used in Sections 13(d) and 14(d) of the Exchange Act) other than
a Permitted Holder; or
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the adoption by
the stockholders of the Company of a plan or proposal for the
liquidation or dissolution of the Company.
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“Commodity Agreements” means, in
respect of any Person, any futures contract, forward contract,
commodity swap agreement, commodity option agreement or other
similar agreement or arrangement in respect of Hydrocarbons
purchased, used, produced, processed or sold by such Person and
designed to protect such Person against fluctuations in Hydrocarbon
prices.
“Common Stock” means with respect to
any Person, any and all shares, interests or other participations
in, and other equivalents (however designated and whether voting or
nonvoting) of such Person’s common stock whether or not
outstanding on the Issue Date, and includes, without limitation,
all series and classes of such common stock.
“Consolidated Coverage Ratio” means
as of any date of determination, the ratio of (x) the aggregate
amount of Consolidated EBITDA for the period of the most recent
four consecutive fiscal quarters ending prior to the date of such
determination for which consolidated financial statements of the
Company are in existence to (y) Consolidated Interest Expense for
such four fiscal quarters; provided , however ,
that:
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if the Company
or any Restricted Subsidiary:
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has Incurred
any Indebtedness since the beginning of such period that remains
outstanding on such date of determination or if the transaction
giving rise to the need to calculate the Consolidated Coverage
Ratio is an Incurrence of Indebtedness, Consolidated EBITDA and
Consolidated Interest Expense for such period will be calculated
after giving effect on a pro forma basis to such Indebtedness as if
such Indebtedness had been Incurred on the first day of such period
(except that in making such computation, the amount of Indebtedness
under any revolving credit facility outstanding on the date of such
calculation will be deemed to be (i) the average daily balance of
such Indebtedness during such four fiscal quarters or such shorter
period for which such facility was outstanding or (ii) if such
facility was created after the end of such four fiscal quarters,
the average daily balance of such Indebtedness during the period
from the date of creation of such facility to the date of such
calculation) and the discharge of any other Indebtedness repaid,
repurchased, defeased or otherwise discharged with the proceeds of
such new Indebtedness as if such discharge had occurred on the
first day of such period; or
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has repaid,
repurchased, defeased or otherwise discharged any Indebtedness
since the beginning of the period that is no longer outstanding on
such date of determination or if the transaction giving rise to the
need to calculate the Consolidated Coverage Ratio involves a
discharge of Indebtedness (in each case other than Indebtedness
Incurred under any revolving credit facility unless such
Indebtedness has been permanently repaid and the related commitment
terminated), Consolidated EBITDA and Consolidated Interest Expense
for such period will be calculated after giving effect on a pro
forma basis to such discharge of such Indebtedness, including with
the proceeds of such new Indebtedness, as if such discharge had
occurred on the first day of such period;
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if since the
beginning of such period the Company or any Restricted Subsidiary
shall have made any Asset Disposition or the transaction giving
rise to the need to calculate the Consolidated Coverage Ratio is
such an Asset Disposition:
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the
Consolidated EBITDA for such period will be reduced by an amount
equal to the Consolidated EBITDA (if positive) directly
attributable to the assets which are the subject of such Asset
Disposition for such period or increased by an amount equal to the
absolute value of the Consolidated EBITDA (if negative) directly
attributable thereto for such period; and
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Consolidated
Interest Expense for such period will be reduced by an amount equal
to the Consolidated Interest Expense directly attributable to any
Indebtedness of the Company or any Restricted Subsidiary repaid,
repurchased, defeased or otherwise discharged with respect to the
Company and its continuing Restricted Subsidiaries in connection
with such Asset Disposition for such period (or, if the Capital
Stock of any Restricted Subsidiary is sold, the Consolidated
Interest Expense for such period directly attributable to the
Indebtedness of such Restricted Subsidiary to the extent the
Company and its continuing Restricted Subsidiaries are no longer
liable for such Indebtedness after such sale);
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if since the
beginning of such period the Company or any Restricted Subsidiary
(by merger or otherwise) shall have made an Investment in any
Restricted Subsidiary (or any Person which becomes a Restricted
Subsidiary or is merged with or into the Company) or an acquisition
of assets, including any acquisition of assets occurring in
connection with a transaction giving rise to the need to calculate
the Consolidated Coverage Ratio, which constitutes all or
substantially all of a company, division, operating unit, segment,
business, group of related assets or line of business, Consolidated
EBITDA and Consolidated Interest Expense for such period will be
calculated after giving pro forma effect thereto (including the
Incurrence of any Indebtedness) as if such Investment or
acquisition occurred on the first day of such period;
and
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if since the
beginning of such period any Person that subsequently became a
Restricted Subsidiary or was merged with or into the Company or any
Restricted Subsidiary since the beginning of such period shall have
Incurred any Indebtedness or discharged any Indebtedness, made any
Asset Disposition or any Investment or acquisition of assets that
would have required an adjustment pursuant to clause (2) or (3)
above if made by the Company or a Restricted Subsidiary during such
period, Consolidated EBITDA and Consolidated Interest Expense for
such period will be calculated after giving pro forma effect
thereto as if such Asset Disposition or Investment or acquisition
of assets occurred on the first day of such period.
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For purposes of
this definition, whenever pro forma effect is to be given to any
calculation under this definition, the pro forma calculations will
be determined in good faith by a responsible financial or
accounting officer of the Company (including pro forma expense and
cost reductions calculated on a basis consistent with Regulation
S-X under the Securities Act). If any Indebtedness bears
a floating rate of interest and is being given pro forma effect,
the interest expense on such Indebtedness will be calculated as if
the rate in effect on the date of determination had been the
applicable rate for the entire period (taking into account any
Interest Rate Agreement applicable to such Indebtedness if such
Interest Rate Agreement has a remaining term in excess of 12
months). If any Indebtedness that is being given pro
forma effect bears an interest rate at the option of the Company,
the interest rate shall be calculated by applying such optional
rate chosen by the Company.
“Consolidated EBITDA” for any period
means, without duplication, the Consolidated Net Income for such
period, plus the following to the extent deducted in calculating
such Consolidated Net Income:
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Consolidated
Interest Expense;
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Consolidated
Income Taxes;
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consolidated
depletion, depreciation and amortization expenses;
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consolidated
impairment charges recorded in connection with the application of
Financial Accounting Standard No. 142 “Goodwill and Other
Intangibles;”
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consolidated
exploration expenses, if applicable;
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(a) any
write-off of deferred financing costs, (b) any capitalized
interest, and (c) the interest portion of any deferred payment
obligations; and
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other
consolidated non-cash charges reducing Consolidated Net Income
(excluding any such non-cash charge to the extent it represents an
accrual of or reserve for cash charges in any future period or
amortization of a prepaid cash expense that was paid in a prior
period not included in the calculation);
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less, to the
extent included in calculating such Consolidated Net Income and in
excess of any costs or expenses attributable thereto that were
deducted in calculating such Consolidated Net Income, the sum of
(x) the amount of deferred revenues that are amortized during such
period and are attributable to reserves that are subject to
Volumetric Production Payments, and (y) amounts recorded in
accordance with GAAP as repayments of principal and interest
pursuant to Dollar-Denominated Production Payments.
Notwithstanding
the preceding sentence, the items described in clauses (2) through
(6) above relating to amounts of a Restricted Subsidiary of a
Person will be added to Consolidated Net Income to compute
Consolidated EBITDA of such Person only to the extent (and in the
same proportion) that the net income (loss) of such Restricted
Subsidiary was included in calculating the Consolidated Net Income
of such Person and, to the extent the amounts set forth in clauses
(2) through (6) above are in excess of those necessary to offset a
net loss of such Restricted Subsidiary or if such Restricted
Subsidiary has net income for such period included in Consolidated
Net Income, only if a corresponding amount would not be prohibited
at the date of determination to be dividended to the Company by
such Restricted Subsidiary pursuant to the terms of its charter and
all agreements, instruments, judgments, decrees, orders, statutes,
rules and governmental regulations applicable to that Restricted
Subsidiary or its stockholders, except for restrictions under any
Credit Facility.
“Consolidated Income Taxes” means,
with respect to any Person for any period, taxes imposed upon such
Person or other payments required to be made by such Person by any
governmental authority which taxes or other payments are (x)
calculated by reference to the income or profits of such Person or
such Person and its Subsidiaries, or (y) any franchise taxes or
equity taxes (in each case to the extent included in computing
Consolidated Net Income for such period), regardless of whether
such taxes or payments are required to be remitted to any
governmental authority.
“Consolidated Interest Expense”
means, for any period, the consolidated interest expense of the
Company and its consolidated Restricted Subsidiaries, whether paid
or accrued, plus, to the extent not included in such interest
expense:
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interest
expense attributable to Capital Lease Obligations and the interest
portion of rent expense associated with Attributable Indebtedness
in respect of the relevant lease giving rise thereto, determined as
if such lease were a Capital Lease in accordance with GAAP and the
interest component of any deferred payment obligations;
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amortization of
debt discount and debt issuance cost ( provided that any
amortization of bond premium will be credited to reduce
Consolidated Interest Expense unless, pursuant to GAAP, such
amortization of bond premium has otherwise reduced Consolidated
Interest Expense);
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non-cash
interest expense;
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commissions,
discounts and other fees and charges owed with respect to letters
of credit and bankers’ acceptance financing;
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the interest
expense on Indebtedness of another Person that is Guaranteed by
such Person or one of its Restricted Subsidiaries or secured by a
Lien on assets of such Person or one of its Restricted
Subsidiaries;
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costs
associated with Hedging Obligations (including amortization of
fees); provided , however , that if Hedging
Obligations result in net benefits rather than costs, such net
benefits shall be credited to reduce Consolidated Interest Expense
unless, pursuant to GAAP, such net benefits are otherwise reflected
in Consolidated Net Income;
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the
consolidated interest expense of such Person and its Restricted
Subsidiaries that was capitalized during such period;
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the product of
(a) all dividends paid or payable, in cash, Cash Equivalents or
Indebtedness or accrued during such period on any series of
Disqualified Stock of such Person or on Preferred Stock of its
Restricted Subsidiaries payable to a party other than the Company
or a Wholly-Owned Subsidiary, times (b) a fraction, the numerator
of which is one and the denominator of which is one minus the then
current combined federal, state, provincial and local statutory tax
rate of such Person, expressed as a decimal, in each case, on a
consolidated basis and in accordance with GAAP;
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the cash
contributions to any employee stock ownership plan or similar trust
to the extent such contributions are used by such plan or trust to
pay interest or fees to any Person (other than the Company) in
connection with Indebtedness Incurred by such plan or
trust.
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For the purpose
of calculating the Consolidated Coverage Ratio in connection with
the Incurrence of any Indebtedness described in the final paragraph
of the definition of “Indebtedness,” the calculation of
Consolidated Interest Expense shall include all interest expense
(including any amounts described in clauses (1) through (10) above)
relating to any Indebtedness of the Company or any Restricted
Subsidiary described in the final paragraph of the definition of
“Indebtedness.”
For purposes of
the foregoing, total interest expense will be determined (i) after
giving effect to any net payments made or received by the Company
and its Subsidiaries with respect to Interest Rate Agreements and
(ii) exclusive of amounts classified as other comprehensive income
in the balance sheet of the Company. Notwithstanding
anything to the contrary contained herein, commissions, discounts,
yield and other fees and charges Incurred in connection with any
transaction pursuant to which the Company or its Restricted
Subsidiaries may sell, convey or otherwise transfer or grant a
security interest in any accounts receivable or related assets
shall be included in Consolidated Interest Expense.
“Consolidated Net Income” means, for
any period, the net consolidated income (loss) of the Company and
its consolidated Restricted Subsidiaries determined in accordance
with GAAP; provided , however , that there will not
be included in such Consolidated Net Income:
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any net income
(loss) of any Person (other than the Company) if such Person is not
a Restricted Subsidiary, except that:
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subject to the
limitations contained in clauses (3), (4) and (5) below, the
Company’s equity in the net income of any such Person for
such period will be included in such Consolidated Net Income up to
the aggregate amount of cash actually distributed by such Person
during such period to the Company or a Restricted Subsidiary as a
dividend or other distribution (subject, in the case of
a
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dividend or
other distribution to a Restricted Subsidiary, to the limitations
contained in clause (2) below); and
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the
Company’s equity in a net loss of any such Person (other than
an Unrestricted Subsidiary) for such period will be included in
determining such Consolidated Net Income to the extent such loss
has been funded with cash from the Company or a Restricted
Subsidiary;
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any net income
(but not loss) of any Restricted Subsidiary if such Subsidiary is
subject to restrictions, directly or indirectly, on the payment of
dividends or the making of distributions by such Restricted
Subsidiary, directly or indirectly, to the Company, except
that:
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subject to the
limitations contained in clauses (3), (4) and (5) below, the
Company’s equity in the net income of any such Restricted
Subsidiary for such period will be included in such Consolidated
Net Income up to the aggregate amount of cash that could have been
distributed by such Restricted Subsidiary during such period to the
Company or another Restricted Subsidiary as a dividend (subject, in
the case of a dividend to another Restricted Subsidiary, to the
limitation contained in this clause); provided ,
however , that the net income of a Special Entity that does
not Guarantee the Notes will not be included in such Consolidated
Net Income except for the amount of cash actually distributed by
such Special Entity during such period to the Company or a
Restricted Subsidiary as a dividend or other distribution (subject,
in the case of a dividend or other distribution to a Restricted
Subsidiary, to the limitation contained in this clause);
and
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the
Company’s equity in a net loss of any such Restricted
Subsidiary for such period will be included in determining such
Consolidated Net Income;
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any after tax
gain (loss) realized upon the sale or other disposition of any
property, plant or equipment of the Company or its consolidated
Restricted Subsidiaries (including pursuant to any Sale/Leaseback
Transaction) which is not sold or otherwise disposed of in the
ordinary course of business and any gain (loss) realized upon the
sale or other disposition of any Capital Stock of any
Person;
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any after tax
extraordinary gain or loss;
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the cumulative
effect of a change in accounting principles;
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any asset
impairment writedowns on Oil and Gas Properties under GAAP or SEC
guidelines; and
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any unrealized
non-cash gains or losses on charges in respect of Hedging
Obligations (including those resulting from the application of SFAS
133).
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“Continuing Directors” means the
individuals who, as of the Issue Date, are directors of the Company
and any individual becoming a director of the Company subsequent to
the Issue Date whose election, nomination for election by the
Company’s stockholders or appointment, was approved by a
majority of the then Continuing Directors (either by a specific
vote or by approval of the proxy statement of the Company in which
such individual is named as a nominee for election as a director,
without objection to such nomination).
“Control” of a Person means the
power to direct the management and policies of such Person,
directly or indirectly, whether through the ownership of voting
securities, by contract or otherwise; and the terms
“Controlling” and “Controlled” have
meanings correlative of the foregoing.
“Credit Facility” means, with
respect to the Company or any Subsidiary Guarantor, one or more
credit facilities (including, without limitation, the Senior
Secured Credit Agreement) or commercial paper facilities with banks
or other institutional lenders providing for revolving credit
loans, term loans, receivables financing (including through the
sale of receivables to such lenders or to special purpose entities
formed to borrow from such lenders against such receivables) or
letters of credit, in each case, as amended, restated, modified,
renewed, refunded, replaced or refinanced in whole or in part from
time to time (including successive amendments, restatements,
modifications, renewals, refunds, replacements or refinancings and
whether or not with the original administrative agent and lenders
or another administrative agent or agents or other lenders and
whether provided under the original Senior Secured Credit Agreement
or any other credit or other agreement or indenture).
“Currency Agreement” means in
respect of a Person any foreign exchange contract, currency swap
agreement, futures contract, option contract or other similar
agreement as to which such Person is a party or a
beneficiary.
“Default” means any event which,
with notice or passage of time or both, would constitute an Event
of Default.
“Disqualified Stock” means, with
respect to any Person, any Capital Stock of such Person which by
its terms (or by the terms of any security into which it is
convertible or for which it is exchangeable) or upon the happening
of any event:
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matures or is
mandatorily redeemable pursuant to a sinking fund obligation or
otherwise;
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is convertible
or exchangeable for Indebtedness or Disqualified Stock (excluding
Capital Stock which is convertible or exchangeable solely at the
option of the Company or a Restricted Subsidiary); or
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is redeemable
at the option of the holder of the Capital Stock in whole or in
part,
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in each case on
or prior to the date that is 91 days after the earlier of the date
(a) of the Stated Maturity of the Notes or (b) the first date after
the Issue Date on which there are no Notes outstanding,
provided that only the portion of Capital Stock which so
matures or is mandatorily redeemable, is so convertible or
exchangeable or is so redeemable at the option of the holder
thereof prior to such date will be deemed to be Disqualified Stock;
provided , further , that any Capital Stock that
would constitute Disqualified Stock solely because the holders
thereof have the right to require the Company to repurchase such
Capital Stock upon the occurrence of a change of control or asset
disposition (each defined in a substantially identical manner to
the corresponding definitions in the Indenture) shall not
constitute Disqualified Stock if the terms of such Capital Stock
(and all such securities into which it is convertible or for which
it is ratable or exchangeable) provide that the Company may not
repurchase or redeem any such Capital Stock (and all such
securities into which it is convertible or for which it is ratable
or exchangeable) pursuant to such provision prior to compliance by
the Company with Section 3.15 and Section 3.07 of this Seventh
Supplemental Indenture and such repurchase or redemption complies
with Section 3.03 of this Seventh Supplement Indenture.
“Dollar-Denominated Production
Payments” means production payment obligations recorded as
liabilities in accordance with GAAP, together with all undertakings
and obligations in connection therewith.
“Domestic Subsidiary” means any
Restricted Subsidiary that is organized under the laws of the
United States of America or any state thereof or the District of
Columbia.
“Events of Default” has the meaning
set forth in Article IV.
“Foreign Subsidiary” means any
Restricted Subsidiary that is not organized under the laws of the
United States of America or any state thereof or the District of
Columbia and any Subsidiary of such Restricted
Subsidiary.
“GAAP” means generally accepted
accounting principles in the United States of America as in effect
as of March 16, 2006, including those set forth in the opinions and
pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board or in
such other statements by such other entity as approved by a
significant segment of the accounting profession. All
ratios and computations based on GAAP contained in the Indenture
will be computed in conformity with GAAP.
“Guarantee” means any obligation,
contingent or otherwise, of any Person directly or indirectly
guaranteeing any Indebtedness of any other Person and any
obligation, direct or indirect, contingent or otherwise, of such
Person:
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to purchase or
pay (or advance or supply funds for the purchase or payment of)
such Indebtedness of such other Person (whether arising by virtue
of partnership arrangements, or by agreement to keep-well, to
purchase assets, goods, securities or services, to take-or-pay, or
to maintain financial statement conditions or otherwise);
or
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entered into
for purposes of assuring in any other manner the obligee of such
Indebtedness of the payment thereof or to protect such obligee
against loss in respect thereof (in whole or in part);
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provided , however , that the term
“Guarantee” will not include endorsements for
collection or deposit in the ordinary course of
business. The term “Guarantee” used as a
verb has a corresponding meaning.
“Guarantor Senior Indebtedness”
means, with respect to a Subsidiary Guarantor, the following
obligations, whether outstanding on the Issue Date or thereafter
issued, without duplication:
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any Guarantee
of the Bank Indebtedness or the Notes by such Subsidiary Guarantor
and all other Guarantees by such Subsidiary Guarantor of Senior
Indebtedness of the Company or Guarantor Senior Indebtedness of any
other Subsidiary Guarantor; and
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all obligations
consisting of principal of and premium, if any, accrued and unpaid
interest on, and fees and other amounts relating to, all other
Indebtedness of the Subsidiary Guarantor. Guarantor
Senior Indebtedness includes interest accruing on or after the
filing of any petition in bankruptcy or for reorganization relating
to the Subsidiary Guarantor regardless of whether post-filing
interest is allowed in such proceeding.
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Notwithstanding
anything to the contrary in the preceding paragraph, Guarantor
Senior Indebtedness will not include:
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any
Indebtedness Incurred in violation of the Indenture;
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any obligations
of such Subsidiary Guarantor to the Company or another
Subsidiary;
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any liability
for federal, state, local, foreign or other taxes owed or owing by
such Subsidiary Guarantor;
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any accounts
payable or other liability to trade creditors arising in the
ordinary course of business (including Guarantees thereof or
instruments evidencing such liabilities);
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any
Indebtedness, Guarantee or obligation of such Subsidiary Guarantor
that is expressly subordinate or junior in right of payment to any
other Indebtedness, Guarantee or
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obligation of
such Subsidiary Guarantor, including, without limitation, any
Guarantor Subordinated Obligations of such Subsidiary Guarantor;
or
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“Guarantor Subordinated Obligation”
means, with respect to a Subsidiary Guarantor, any Indebtedness of
such Subsidiary Guarantor (whether outstanding on the Issue Date or
thereafter Incurred) which is expressly subordinate in right of
payment to the obligations of such Subsidiary Guarantor under its
Subsidiary Guarantee pursuant to a written agreement.
“Hedging Obligations” of any Person
means the obligations of such Person pursuant to any Interest Rate
Agreement or Currency Agreement or Commodity Agreement.
“Holder” means a Person in whose
name a Note is registered in the Security Registrar’s
books.
“Hydrocarbons” means oil, gas,
casinghead gas, drip gasoline, natural gasoline, condensate,
distillate, liquid hydrocarbons, gaseous hydrocarbons, and all
products, by-products and all other substances refined, separated,
settled or derived therefrom or the processing thereof, and all
other minerals and substances, including, but not limited to,
liquefied petroleum gas, natural gas, kerosene, sulphur, lignite,
coal, uranium, thorium, iron, geothermal steam, water, carbon
dioxide, helium, and any and all other minerals, ores, or
substances of value, and the products and proceeds therefrom,
including, without limitation, all gas resulting from the in-situ
combustion of coal or lignite.
“Incur” means issue, create, assume,
Guarantee, incur or otherwise become liable for; provided ,
however , that any Indebtedness or Capital Stock of a Person
existing at the time such Person becomes a Restricted Subsidiary
(whether by merger, consolidation, acquisition or otherwise) will
be deemed to be Incurred by such Restricted Subsidiary at the time
it becomes a Restricted Subsidiary; and the terms
“Incurred” and “Incurrence” have meanings
correlative to the foregoing.
“Indebtedness” means, as applied to
any Person, without duplication:
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all obligations
of such Person for borrowed money;
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all obligations
of such Person for the deferred purchase price of property or
services (other than property and services purchased, and expense
accruals and deferred compensation items arising, in the ordinary
course of business);
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all obligations
of such Person evidenced by notes, bonds, debentures, mandatorily
redeemable preferred stock or other similar instruments (other than
performance, surety and appeals bonds arising in the ordinary
course of business);
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all payment
obligations created or arising under any conditional sale, deferred
price or other title retention agreement with respect to property
acquired by such Person (unless the rights and remedies of the
seller or lender under such agreement in the event of default are
limited to repossession or sale of such property);
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any Capital
Lease Obligation of such Person, other than obligations under oil
and gas leases entered into in the ordinary course of
business;
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all
reimbursement, payment or similar obligations, contingent or
otherwise, of such Person under acceptance, letter of credit or
similar facilities (other than letters of credit in support of
trade obligations or incurred in connection with public liability
insurance, workers’ compensation, unemployment insurance,
old-age pensions and other social security benefits other than in
respect of employee benefit plans subject to the Employee
Retirement Income Security Act of 1974, as amended);
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all obligations
of such Person, contingent or otherwise, under any guarantee by
such Person of the obligations of another Person of the type
referred to in clauses (1) through (6) above;
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the principal
component or liquidation preference of all obligations of such
Person with respect to the redemption, repayment or other
repurchase of any Disqualified Stock or, with respect to any
Subsidiary that is not a Subsidiary Guarantor, any Preferred Stock
(but excluding, in each case, any accrued dividends);
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to the extent
not otherwise included in this definition, net obligations of such
Person under Commodity Agreements, Currency Agreements and Interest
Rate Agreements (the amount of any such obligations to be equal at
any time to the termination value of such agreement or arrangement
giving rise to such obligation that would be payable by such Person
at such time); and
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all obligations
referred to in clauses (1) through (6) above secured by (or for
which the holder of such Indebtedness has an existing right,
contingent or otherwise, to be secured by) any mortgage or security
interest in property (including without limitation accounts,
contract rights and general intangibles) owned by such Person and
as to which such Person has not assumed or become liable for the
payment of such obligations other than to the extent of the
property subject to such mortgage or security interest;
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except that
Indebtedness of the type referred to in clauses (7) and (10) above
will be included within the definition of
“Indebtedness” only to the extent of the least of (a)
the amount of the underlying Indebtedness referred to in the
applicable clause (1) through (6) above; (b) in the case of clause
(7), the limit on recoveries, if any, from such Person under
obligations of the type referred to in clause (7) above, and (c) in
the case of clause (10), the aggregate value (as determined in good
faith by the board of directors or similar governing body of such
Person) of the property of such Person subject to such mortgage or
security interest.
In addition, “Indebtedness” of any
Person shall include Indebtedness described in the preceding
paragraph that would not appear as a liability on the balance sheet
of such Person if:
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such
Indebtedness is the obligation of a partnership or joint venture
that is not a Restricted Subsidiary (a “Joint
Venture”);
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such Person or
a Restricted Subsidiary of such Person is a general partner of the
Joint Venture (a “General Partner”); and
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there is
recourse, by contract or operation of law, with respect to the
payment of such Indebtedness to property or assets of such Person
or a Restricted Subsidiary of such Person;
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in which case,
such Indebtedness shall be included in an amount not to
exceed:
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the lesser of
(i) the net assets of the General Partner and (ii) the amount of
such obligations to the extent that there is recourse, by contract
or operation of law, to the property or assets of such Person or a
Restricted Subsidiary of such Person; or
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if less than
the amount determined pursuant to clause (a) immediately above, the
actual amount of such Indebtedness that is recourse to such Person
or a Restricted Subsidiary of such Person, if the Indebtedness is
evidenced by a writing and is for a determinable amount.
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“Interest Payment Date” means
January 1 and July 1 of each year, commencing January 1,
2010.
“Interest Rate Agreement” means with
respect to any Person any interest rate protection agreement,
interest rate futures contract, interest rate option agreement,
interest rate swap agreement, interest rate cap agreement, interest
rate collar agreement, interest rate hedge agreement or other
similar agreement or arrangement as to which such Person is party
or a beneficiary.
“Investment” means, with respect to
any Person, all investments by such Person in other Persons
(including Affiliates) in the form of any direct or
indirect advance, loan (other than advances or extensions of credit
to employees, directors or customers in the ordinary course of
business) or other extensions of credit (including by way of
Guarantee or similar arrangement, but excluding any debt or
extension of credit represented by a bank deposit other than a time
deposit) or capital contribution to (by means of any transfer of
cash or other property or any payment for property or services), or
any purchase or acquisition of Capital Stock, Indebtedness or other
similar instruments issued by, such Person and all other items that
are or would be classified as investments on a balance sheet
prepared in accordance with GAAP; provided that none of the
following will be deemed to be an Investment:
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Hedging
Obligations Incurred in the ordinary course of business and in
compliance with the Indenture;
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endorsements of
negotiable instruments and documents in the ordinary course of
business; and
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an acquisition
of assets, Capital Stock or other securities by the Company or a
Subsidiary for consideration to the extent such consideration
consists of Common Stock of the Company.
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For purposes of Section 3.03 of this Seventh
Supplemental Indenture,
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“Investment” will include the
portion (proportionate to the Company’s equity interest in a
Restricted Subsidiary to be designated as an Unrestricted
Subsidiary) of the fair market value of the net assets of such
Restricted Subsidiary at the time that such Restricted Subsidiary
is designated an Unrestricted Subsidiary; provided ,
however , that upon a redesignation of such Subsidiary as a
Restricted Subsidiary, the Company will be deemed to continue to
have a permanent “Investment” in an Unrestricted
Subsidiary in an amount (if positive) equal to (a) the
Company’s “Investment” in such Subsidiary at the
time of such redesignation less (b) the portion (proportionate to
the Company’s equity interest in such Subsidiary) of the fair
market value of the net assets (as conclusively determined by the
Board of Directors of the Company in good faith) of such Subsidiary
at the time that such Subsidiary is so re-designated a Restricted
Subsidiary; and
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any property
transferred to or from an Unrestricted Subsidiary will be valued at
its fair market value at the time of such transfer, in each case as
determined in good faith by the Board of Directors of the
Company.
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“Investment Grade Rating” means a
rating equal to or higher than Baa3 (or the equivalent) by
Moody’s Investors Service, Inc. and BBB- (or the equivalent)
by Standard & Poor’s Ratings Services (or an equivalent
rating by another nationally recognized rating agency if both of
the two named rating agencies cease publishing ratings of
investments), in each case, with a stable or better
outlook.
“Issue Date” means June 25,
2009.
“Lien” means any mortgage, pledge,
security interest, encumbrance, lien or similar charge of any kind
(including any conditional sale or other title retention agreement
or lease in the nature thereof).
“Minority Interest” means the
percentage interest represented by any shares of stock of any class
of Capital Stock of a Restricted Subsidiary that are not owned by
the Company or a Restricted Subsidiary.
“Net Available Cash” from an Asset
Disposition means cash payments received (including any cash
payments received by way of deferred payment of principal pursuant
to a note or installment receivable or otherwise and net proceeds
from the sale or other disposition of any securities received as
consideration, but only as and when received, but excluding any
other consideration received in the form of assumption by the
acquiring Person of Indebtedness or other obligations relating to
the properties or assets that are the subject of such Asset
Disposition or received in any other non-cash form) therefrom, in
each case net of:
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all legal,
accounting, investment banking, title and recording tax expenses,
commissions and other fees and expenses Incurred, and all federal,
state, provincial, foreign and local taxes required to be paid or
accrued as a liability under GAAP (after taking into account any
available tax credits or deductions and any tax sharing
agreements), as a consequence of such Asset Disposition;
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all payments
made on any Indebtedness which is secured by any assets subject to
such Asset Disposition, in accordance with the terms of any Lien
upon such assets, or which must by its terms, or in order to obtain
a necessary consent to such Asset Disposition, or by applicable law
be repaid out of the proceeds from such Asset
Disposition;
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all
distributions and other payments required to be made to Minority
Interest holders in Subsidiaries or joint ventures as a result of
such Asset Disposition; and
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amounts accrued
in accordance with GAAP in respect of liabilities associated with
the assets disposed of in such Asset Disposition and retained by
the Company or any Restricted Subsidiary after such Asset
Disposition or liabilities incurred in connection with such Asset
Disposition.
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“Net Cash Proceeds” means, with
respect to any issuance or sale of Capital Stock, the cash proceeds
of such issuance or sale net of attorneys’ fees,
accountants’ fees, underwriters’ or placement
agents’ fees, listing fees, discounts or commissions and
brokerage, consultant and other fees and charges actually Incurred
in connection with such issuance or sale and net of taxes paid or
payable as a result of such issuance or sale (after taking into
account any available tax credit or deductions and any tax sharing
arrangements).
“Net Working Capital” means (a) all
current assets of the Company and its Restricted Subsidiaries
except current assets under Commodity Agreements, less (b) all
current liabilities of the Company and its Restricted Subsidiaries,
except current liabilities included in Indebtedness and any current
liabilities under Commodity Agreements, in each case as set forth
in the consolidated financial statements of the Company prepared in
accordance with GAAP.
“Non-Recourse Debt” means
Indebtedness of a Person:
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as to which
neither the Company nor any Restricted Subsidiary (a) provides any
Guarantee or credit support of any kind (including any undertaking,
guarantee, indemnity, agreement or instrument that would constitute
Indebtedness) or (b) is directly or indirectly liable (as a
guarantor or otherwise);
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no default with
respect to which (including any rights that the holders thereof may
have to take enforcement action against an Unrestricted Subsidiary)
would permit (upon notice, lapse of time or both) any holder of any
other Indebtedness of the Company or any Restricted Subsidiary to
declare a default under such other Indebtedness or cause the
payment thereof to be accelerated or payable prior to its Stated
Maturity; and
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the explicit
terms of which provide there is no recourse against any of the
assets of the Company or its Restricted Subsidiaries.
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“Oil and Gas Business” means (a) the
business of acquiring, exploring, exploiting, developing,
producing, operating and disposing of interests in oil, gas, liquid
natural gas and other hydrocarbon properties, (b) the business of
gathering, marketing, treating, processing, storing, refining,
selling and transporting any production from such interests or
properties and products produced therefrom or in association
therewith, and (c) any business or activity relating to, arising
from, or necessary, appropriate or incidental to the activities
described in the foregoing clauses (a) and (b) of this
definition.
“Oil and Gas Properties” means all
properties, including equity or other ownership interests therein,
owned by such Person which contain or are believed to contain
“proved oil and gas reserves” as defined in Rule 4-10
of Regulation S-X of the Securities Act.
“Opinion of Counsel” means a written
opinion from legal counsel who is acceptable to the
Trustee. The counsel may be an employee of or counsel to
the Company or the Trustee.
“Pari Passu Indebtedness” means
Indebtedness that ranks equally in right of payment to the
Notes.
“Permitted Business Investment”
means any Investment made in the ordinary course of the business of
the Company or any Restricted Subsidiary or that is of a kind or
character that is customarily made in the conduct of the Oil and
Gas Business, including investments or expenditures for actively
exploiting, exploring for, acquiring, developing, producing,
processing, refining, gathering, marketing or transporting
Hydrocarbons through agreements, transactions, interests or
arrangements which permit one to share risks or costs, comply with
regulatory requirements regarding local ownership or satisfy other
objectives customarily achieved through the conduct of the Oil and
Gas Business jointly with third parties, including:
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ownership
interests in oil and gas properties, liquid natural gas facilities,
refineries, drilling operations, processing facilities, gathering
systems, pipelines or ancillary real property interests;
and
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Investments in
the form of or pursuant to oil and gas leases, operating
agreements, gathering agreements, processing agreements, farm-in
agreements, farm-out agreements, development agreements, area of
mutual interest agreements, unitization or pooling designations,
declarations, orders and agreements, gas balancing or deferred
production agreements, joint bidding agreements, service contracts,
joint venture agreements, partnership agreements (whether general
or limited), subscription agreements, stock purchase agreements and
other similar agreements (including for limited liability
companies) with third parties.
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“Permitted Holders” means the
following:
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the Company or
any Subsidiary of the Company;
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a trustee or
other fiduciary holding securities under any employee benefit plan
(or related trust) sponsored or maintained by the Company or any
Subsidiary of the Company; and
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Mercury
Exploration Company, Quicksilver Energy, L.P., The Discovery Fund,
Pennsylvania Avenue Limited Partnership, Pennsylvania Management
Company, the estate of Frank Darden, Lucy Darden, Anne Darden Self,
Glenn Darden or Thomas Darden, and their respective successors,
assigns, designees, heirs, beneficiaries, trusts, estates or
Controlled affiliates.
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“Permitted Investment” means an
Investment by the Company or any Restricted Subsidiary
in:
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a Restricted
Subsidiary (other than a Special Entity that does not Guarantee the
Notes) or a Person which will, upon the making of such Investment,
become a Restricted Subsidiary (other than a Special Entity that
does not Guarantee the Notes); provided , however ,
that the primary business of such Restricted Subsidiary is the Oil
and Gas Business;
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another Person
if as a result of such Investment such other Person is merged or
consolidated with or into, or transfers or conveys all or
substantially all its assets to, the Company or a Restricted
Subsidiary; provided , however , that such
Person’s primary business is the Oil and Gas
Business;
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cash and Cash
Equivalents;
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receivables
owing to the Company or any Restricted Subsidiary created or
acquired in the ordinary course of the Oil and Gas Business and
payable or dischargeable in accordance with customary trade terms;
provided , however , that such trade terms may
include such concessionary trade terms as the Company or any such
Restricted Subsidiary deems reasonable under the
circumstances;
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payroll, travel
and similar advances to cover matters that are expected at the time
of such advances ultimately to be treated as expenses for
accounting purposes and that are made in the ordinary course of
business;
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loans or
advances to employees and directors made in the ordinary course of
business of the Company or such Restricted Subsidiary;
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Capital Stock,
obligations or securities received in settlement of debts created
in the ordinary course of business and owing to the Company or any
Restricted Subsidiary or in satisfaction of judgments or pursuant
to any plan of reorganization or similar arrangement upon the
bankruptcy or insolvency of a debtor;
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Investments
made as a result of the receipt of non-cash consideration from an
Asset Disposition that was made pursuant to and in compliance with
Section 3.07 of this Seventh Supplemental Indenture;
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Investments in
existence on the Issue Date or made pursuant to agreements or
commitments in effect on the Issue Date;
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Commodity
Agreements, Currency Agreements, Interest Rate Agreements and
related Hedging Obligations, which transactions or obligations are
Incurred in compliance with Section 3.02 of this Seventh
Supplemental Indenture;
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Investments by
the Company or any of its Restricted Subsidiaries, together with
all other Investments pursuant to this clause (11), in an aggregate
amount not to exceed $10 million outstanding at any one time
(with the fair market value of such Investment being measured at
the time made and without giving effect to subsequent changes in
value);
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Guarantees made
in accordance with Section 3.02 of this Seventh Supplemental
Indenture;
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Investments in
a Special Entity that does not Guarantee the Notes in an aggregate
amount not to exceed 10% of Adjusted Consolidated Net Tangible
Assets (with Adjusted Consolidated Net Tangible Assets and the fair
market value of such Investment being
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measured at the
time such Investment is made and without giving effect to
subsequent changes in value);
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Permitted
Business Investments in an aggregate amount not to exceed 5% of
Adjusted Consolidated Net Tangible Assets (with Adjusted
Consolidated Net Tangible Assets and the fair market value of such
Investment being measured at the time such Investment is made and
without giving effect to subsequent changes in value);
and
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any Asset Swap
made in accordance with Section 3.07 of this Seventh Supplemental
Indenture.
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In order to be
a Permitted Investment, an Investment need not be permitted solely
by one subsection of this definition but may be permitted in part
by one such subsection and in part by one or more other subsections
of this definition. In the event an Investment meets the
criteria of one or more of the subsections of this definition, the
Company, in its sole discretion, may classify (or subsequently
reclassify) all or any portion of such Investment as being
permitted by any one or more of such subsections.
“Permitted Liens” means, with
respect to any Person:
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Liens securing
Indebtedness and related obligations of the Company or any
Restricted Subsidiary Incurred pursuant to a Credit Facility
outstanding on June 27, 2008 or permitted to be Incurred under the
Indenture under clause (1) of the second paragraph of Section 3.02
of this Seventh Supplemental Indenture;
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pledges or
deposits by such Person under workmen’s compensation laws,
unemployment insurance laws or similar legislation, or earnest
money, good faith or similar deposits in connection with bids,
tenders, contracts (other than for the payment of Indebtedness) or
leases to which such Person is a party, or deposits to secure
public, regulatory or statutory obligations of such Person or
deposits of cash or Cash Equivalents to secure surety or appeal
bonds to which such Person is a party, or deposits as security for
contested taxes or import or customs duties or for the payment of
rent, in each case Incurred in the ordinary course of
business;
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Liens imposed
by law, including carriers’, warehousemen’s,
suppliers’, materialmen’s and mechanics’ Liens,
in each case for sums not yet due or being contested in good faith
by appropriate proceedings if appropriate reserves or other
provisions required by GAAP, if any, shall have been made in
respect thereof;
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Liens for
taxes, assessments or other governmental charges not yet subject to
penalties for non-payment or which are being contested in good
faith by appropriate proceedings if appropriate reserves or other
provisions required by GAAP shall have been made in respect
thereof;
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Liens in favor
of issuers of surety or performance bonds or letters of credit or
bankers’ acceptances issued pursuant to the request of and
for the account of such Person in the ordinary course of its
business; provided , however , that such letters of
credit do not constitute Indebtedness;
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encumbrances,
easements or reservations of, or rights of others for, licenses,
rights of way, servitudes, permits, sewers, electric lines,
telegraph and telephone lines and other similar purposes, or
zoning, building codes or surface leases and other similar rights
in respect of surface operations or other restrictions (including,
without limitation, minor defects or irregularities in title and
similar encumbrances) as to the use of real properties or liens
incidental to the conduct of the business of such Person or to the
ownership of its
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properties
which do not in the aggregate materially adversely affect the value
of said properties or materially impair their use in the operation
of the business of such Person;
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Liens securing
Hedging Obligations;
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leases,
licenses, subleases and sublicenses of assets (including, without
limitation, real property and intellectual property rights) which
do not materially interfere with the ordinary conduct of the
business of the Company or any of its Restricted
Subsidiaries;
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judgment Liens
not giving rise to an Event of Default so long as such Lien is
adequately bonded and any appropriate legal proceedings which may
have been duly initiated for the review of such judgment have not
been finally terminated or the period within which such proceedings
may be initiated has not expired;
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Liens for the
purpose of securing the payment of all or a part of the purchase
price of, or Capital Lease Obligations, purchase money obligations
or other payments Incurred to finance the acquisition, improvement
or construction of, assets or property acquired or constructed in
the ordinary course of business; provided that:
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the aggregate
principal amount of Indebtedness secured by such Liens is otherwise
permitted to be Incurred under the Indenture and does not exceed
the cost of the assets or property so acquired or constructed;
and
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such Liens are
created within 180 days of construction or acquisition of such
assets or property and do not encumber any other assets or property
of the Company or any Restricted Subsidiary other than such assets
or property and assets affixed or appurtenant thereto;
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Liens arising
solely by virtue of any statutory or common law provisions relating
to banker’s Liens, rights of set-off or similar rights and
remedies as to deposit accounts or other funds maintained with a
depositary institution; provided that:
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such deposit
account is not a dedicated cash collateral account and is not
subject to restrictions against access by the Company in excess of
those set forth by regulations promulgated by the Federal Reserve
Board; and
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such deposit
account is not intended by the Company or any Restricted Subsidiary
to provide collateral to the depository institution;
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Liens arising
from Uniform Commercial Code financing statement filings regarding
operating leases entered into by the Company and its Restricted
Subsidiaries in the ordinary course of business;
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Liens existing
on the Issue Date;
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Liens on
property or shares of stock of a Person at the time such Person
becomes a Restricted Subsidiary; provided , however ,
that such Liens are not created, Incurred or assumed in connection
with, or in contemplation of, such other Person becoming a
Restricted Subsidiary; provided further ,
however , that any such Lien may not extend to any other
property owned by the Company or any Restricted
Subsidiary;
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Liens on
property at the time the Company or a Restricted Subsidiary
acquired the property, including any acquisition by means of a
merger or consolidation with or into the Company or any Restricted
Subsidiary; provided , however , that such Liens are
not created, Incurred or assumed in connection with, or in
contemplation of, such acquisition;
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provided further , however , that such
Liens may not extend to any other property owned by the Company or
any Restricted Subsidiary;
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Liens securing
Indebtedness or other obligations of a Restricted Subsidiary owing
to the Company or a Wholly-Owned Subsidiary;
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Liens securing
the Notes and Subsidiary Guarantees;
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Liens securing
Refinancing Indebtedness Incurred to refinance Indebtedness that
was previously so secured, provided that any such Lien is
limited to all or part of the same property or assets (plus
improvements, accessions, proceeds or dividends or distributions in
respect thereof) that secured (or, under the written arrangements
under which the original Lien arose, could secure) the Indebtedness
being refinanced or is in respect of property that is the security
for a Permitted Lien hereunder;
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any interest or
title of a lessor under any Capital Lease Obligation or operating
lease;
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Liens in
respect of Production Payments and Reserve Sales, which Liens shall
be limited to the oil and gas property or other interest that is
subject to such Production Payments and Reserve Sales;
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Liens arising
under oil and gas leases, farm-out agreements, farm-in agreements,
division orders, contracts for the sale, purchase, exchange,
transportation, gathering or processing of Hydrocarbons,
partnership agreements, joint venture agreements, unitizations and
pooling designations, declarations, orders and agreements,
development agreements, operating agreements, production sales
contracts, area of mutual interest agreements, gas balancing or
deferred production agreements, injection, repressuring and
recycling agreements, salt water or other disposal agreements,
seismic or geophysical permits or agreements, and other agreements
which are customary in the Oil and Gas Business; provided ,
however , in all instances that such Liens are limited to
the assets that are subject to the relevant agreement, program,
order or contract;
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Liens on
pipelines or pipeline facilities that arise by operation of law;
and
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Liens securing
Indebtedness (other than Subordinated Obligations and Guarantor
Subordinated Obligations) in an aggregate principal amount
outstanding at any one time not to exceed $10 million.
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“Person” means any individual,
partnership, corporation, limited liability company, joint stock
company, business trust, trust, unincorporated association, joint
venture, or other entity, or government or political subdivision or
agency.
“Preferred Stock,” as applied to the
Capital Stock of any corporation, means Capital Stock of any class
or classes (however designated) which is preferred as to the
payment of dividends, or as to the distribution of assets upon any
voluntary or involuntary liquidation or dissolution of such
corporation, over shares of Capital Stock of any other class of
such corporation.
“Production Payments and Reserve
Sales” means the grant or transfer by the Company or a
Restricted Subsidiary to any Person of a royalty, overriding
royalty, net profits interest, production payment (whether
volumetric or dollar denominated), partnership or other interest in
oil and gas properties or the right to receive all or a portion of
the production or the proceeds from the sale of production
attributable to such properties, under which the grantee or
transferee thereof has recourse solely to such production or
proceeds of production, subject to the obligation of the grantor or
transferor to operate and maintain, or cause to be operated and
maintained, the related oil and gas properties or other related
interests in a reasonably prudent manner or other customary
standard or subject to the obligation of the grantor or
transferor to
indemnify for environmental, title or other matters customary in
the Oil and Gas Business, including any such grants or transfers
pursuant to incentive compensation programs on terms that are
reasonably customary in the Oil and Gas Business for geologists,
geophysicists or other providers of technical services to the
Company or a Restricted Subsidiary.
“Rating Agency” means Standard &
Poor’s Ratings Services and Moody’s Investors Service,
Inc. or if Standard & Poor’s Ratings Services or
Moody’s Investors Service, Inc. or both shall not make a
rating on the Notes publicly available, a nationally recognized
statistical rating agency or agencies, as the case may be, selected
by the Company (as certified by a resolution of the Board of
Directors or a committee thereof) which shall be substituted for
Standard & Poor’s Ratings Group, Inc. or Moody’s
Investors Service, Inc. or both, as the case may be.
“Receivables” means a right to
receive payment arising from a sale or lease of goods or the
performance of services by a Person pursuant to an arrangement with
another Person pursuant to which such other Person is obligated to
pay for goods or services under terms that permit the purchase of
such goods and services on credit and shall include, in any event,
any items of property that would be classified as an
“account,” “chattel paper,” “payment
intangible” or “instrument” under the Uniform
Commercial Code as in effect in the State of New York and any
“supporting obligations” as so defined.
“Receivables Fees” means any fees or
interest paid to purchasers or lenders providing the financing in
connection with a factoring agreement or other similar agreement,
including any such amounts paid by discounting the face amount of
Receivables or participations therein transferred in connection
with a factoring agreement or other similar arrangement, regardless
of whether any such transaction is structured as on-balance sheet
or off-balance sheet or through a Restricted Subsidiary or an
Unrestricted Subsidiary.
“Refinancing Indebtedness” means
Indebtedness that is Incurred to refund, refinance, replace,
exchange, renew, repay or extend (including pursuant to any
defeasance or discharge mechanism) (collectively,
“refinance,” “refinances,” and
“refinanced” shall have a correlative meaning) any
Indebtedness existing on the Issue Date or Incurred in compliance
with the Indenture (including Indebtedness of the Company that
refinances Indebtedness of any Restricted Subsidiary and
Indebtedness of any Restricted Subsidiary that refinances
Indebtedness of another Restricted Subsidiary) including
Indebtedness that refinances Refinancing Indebtedness,
provided , however , that:
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(a) if the
Stated Maturity of the Indebtedness being refinanced is earlier
than the Stated Maturity of the Notes, the Refinancing Indebtedness
has a Stated Maturity no earlier than the Stated Maturity of the
Indebtedness being refinanced or (b) if the Stated Maturity of the
Indebtedness being refinanced is later than the Stated Maturity of
the Notes, the Refinancing Indebtedness has a Stated Maturity at
least 91 days later than the Stated Maturity of the
Notes;
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the Refinancing
Indebtedness has an Average Life at the time such Refinancing
Indebtedness is Incurred that is equal to or greater than the
Average Life of the Indebtedness being refinanced;
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such
Refinancing Indebtedness is Incurred in an aggregate principal
amount (or if issued with original issue discount, an aggregate
issue price) that is equal to or less than the sum of the aggregate
principal amount (or if issued with original issue discount, the
aggregate accreted value) then outstanding of the Indebtedness
being refinanced (plus, without duplication, any additional
Indebtedness Incurred to pay interest or premiums required by the
instruments governing such existing Indebtedness and fees and
expenses Incurred in connection therewith); and
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if the
Indebtedness being refinanced is subordinated in right of payment
to the Notes or the Subsidiary Guarantees, such Refinancing
Indebtedness is subordinated in right of payment to the Notes or
the Subsidiary Guarantees on terms at least as favorable to
the
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holders as
those contained in the documentation governing the Indebtedness
being extended, refinanced, renewed, replaced, defeased or
refunded.
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“Regular Record Date” means, with
respect to each Interest Payment Date, the close of business on the
immediately preceding June 15 or December 15, as the case may
be.
“Restricted Investment” means any
Investment other than a Permitted Investment.
“Restricted Subsidiary” means any
Subsidiary of the Company other than an Unrestricted
Subsidiary.
“Sale/Leaseback Transaction” means
an arrangement relating to property now owned or hereafter acquired
whereby the Company or a Restricted Subsidiary transfers such
property to a Person and the Company or a Restricted Subsidiary
leases it from such Person.
“Senior Indebtedness” means the
Notes and, whether outstanding on the Issue Date or thereafter
issued, created, Incurred or assumed, the 2015 Senior Notes, the
Bank Indebtedness and all amounts payable by the Company under or
in respect of all other Indebtedness of the Company, including
premiums and accrued and unpaid interest (including interest
accruing on or after the filing of any petition in bankruptcy or
for reorganization relating to the Company at the rate specified in
the documentation with respect thereto whether or not a claim for
post-filing interest is allowed in such proceeding) and fees
relating thereto; provided , however , that Senior
Indebtedness will not include:
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any
Indebtedness Incurred in violation of the Indenture;
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any obligation
of the Company to any Subsidiary;
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any liability
for federal, state, foreign, local or other taxes owed or owing by
the Company;
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any accounts
payable or other liability to trade creditors arising in the
ordinary course of business (including Guarantees thereof or
instruments evidencing such liabilities);
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any
Indebtedness, Guarantee or obligation of the Company that is
expressly subordinate or junior in right of payment to any other
Indebtedness, Guarantee or obligation of the Company, including,
without limitation, any Subordinated Obligations; or
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“Senior Secured Credit Agreement”
means (1) the Amended and Restated Credit Agreement, dated as of
February 9, 2007, among the Company, JPMorgan Chase Bank, N.A., as
global administrative agent, and the other agents and financial
institutions from time to time party thereto, as amended; (2) the
Amended and Restated Credit Agreement, dated as of February 9,
2007, among Quicksilver Resources Canada Inc., JPMorgan Chase Bank,
N.A., Toronto Branch, as Canadian administrative agent, JPMorgan
Chase Bank, N.A., as global administrative agent, and the financial
institutions from time to time party thereto, as amended; and (3)
each such agreement as the same may be amended, supplemented or
otherwise modified from time to time.
“Significant Subsidiary” means any
Restricted Subsidiary that would be a “Significant
Subsidiary” of the Company within the meaning of Rule 1-02
under Regulation S-X promulgated by the SEC.
“Special Entity” means any
Restricted Subsidiary that is not a Wholly-Owned Subsidiary that
(i) is classified as a pass-through entity for U.S. federal,
state, local and foreign income tax purposes and (ii) has no
Indebtedness.
“Stated Maturity” means, with
respect to any security, the date specified in such security as the
fixed date on which the payment of principal of such security is
due and payable, including pursuant to any mandatory redemption
provision, but shall not include any contingent obligations to
repay, redeem or repurchase any such principal prior to the date
originally scheduled for the payment thereof.
“Subordinated Obligation” means any
Indebtedness of the Company (whether outstanding on the Issue Date
or thereafter Incurred) that is subordinate or junior in right of
payment to the Notes pursuant to a written agreement.
“Subsidiary” of any Person means (a)
any corporation, association or other business entity (other than a
partnership, joint venture, limited liability company or similar
entity) of which more than 50% of the total ordinary voting power
of shares of Capital Stock entitled (without regard to the
occurrence of any contingency) to vote in the election of
directors, managers or trustees thereof (or persons performing
similar functions) or (b) any partnership, joint venture limited
liability company or similar entity of which more than 50% of the
capital accounts, distribution rights, total equity and voting
interests or general or limited partnership interests, as
applicable, is, in the case of clauses (a) and (b), at the time
owned or controlled, directly or indirectly, by (1) such Person,
(2) su
