Exhibit 10.1

 

THIRD AMENDMENT

 

TO

 

NOTE PURCHASE AGREEMENT

 

 

Dated as of September 14, 2004

 

AMONG

 

QUICKSILVER RESOURCES, INC.,

 

AS ISSUER,

 

THE GUARANTORS,

 

BNP PARIBAS,

 

AS COLLATERAL AGENT,

 

AND

 

THE PURCHASERS PARTY HERETO

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THIRD AMENDMENT TO NOTE PURCHASE AGREEMENT

 

THIS THIRD AMENDMENT TO NOTE PURCHASE AGREEMENT (this “Third Amendment”) dated
as of September 14, 2004, is among QUICKSILVER RESOURCES, INC., a Delaware
corporation (the “Company”); each of the undersigned Guarantors (collectively,
the “Guarantors”); BNP PARIBAS, as collateral agent (in such capacity, together
with its successors in such capacity, the “Collateral Agent”) for the purchasers
party to the Note Purchase Agreement referred to below (collectively, the
“Purchasers”); and each of the undersigned Purchasers.

 

R E C I T A L S

 

A. The Company, the Collateral Agent and the Purchasers are parties to that
certain Note Purchase Agreement dated as of June 27, 2003, as amended by that
certain First Amendment to Note Purchase Agreement, dated as of January 30, 2004
and as further amended by that certain Second Amendment to Note Purchase
Agreement dated as of July 28, 2004 (as amended, the “Note Purchase Agreement”),
pursuant to which the Purchasers have purchased $70 million of the Company’s
Floating and Fixed Rate Senior Subordinated Second Lien Mortgage Notes due
December 31, 2006 (the “Notes”).

 

B. The Company has requested and the Purchasers have agreed to amend certain
provisions of the Note Purchase Agreement and the other Transaction Documents.

 

C. NOW, THEREFORE, in consideration of the premises and the mutual covenants
herein contained, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:

 

Section 1. Defined Terms. Each capitalized term used herein but not otherwise
defined herein has the meaning given such term in the Note Purchase Agreement,
as amended by this Third Amendment. Unless otherwise indicated, all section
references in this Third Amendment refer to sections of the Note Purchase
Agreement.

 

Section 2. Amendments to Note Purchase Agreement.

 

2.1 Amendments to Section 9.1(a). Section 9.1(a) is hereby amended by deleting
the word “and” after clause (vi) thereof, deleting the period at the end of
clause (vii) thereof and replacing it with “; and” and adding the following
clause (viii) after clause (vii):

 

(viii) unsecured Debt of the Company and/or the Guarantors (which Debt may be
convertible into capital stock of the Company) in an original stated principal
amount not to exceed $150,000,000, provided that such Debt is subordinated to
the Notes and the other obligations of the Company and the Guarantors under this
Agreement and the other Transaction Documents on terms substantially similar to
those contained in Article XVI or on terms otherwise reasonably satisfactory to
the Holders.

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2.2 Amendments to Schedule B. The definitions in Schedule B are hereby amended
as follows:

 

“Engineering Reports” means the Initial Engineering Reports and each engineering
report hereafter delivered by the Company pursuant to Section 8.1(c)(i) or
Section 8.1(c)(ii), provided that each such report hereafter delivered must (a)
separately report on Proved Developed Producing Reserves, Proved Developed
Nonproducing Reserves and Proved Undeveloped Reserves and separately calculate
the NPV of each such category of Proved Reserves for the Company’s interest, (b)
use a 9% discount rate and a price deck for each calendar year evaluated equal
to (i) for natural gas, the quotation for deliveries of natural gas for each
such year from the New York Mercantile Exchange for Henry Hub, provided that (A)
if such quotation is greater than $5.00 per mcf, the price shall be capped at
$5.00 per mcf and (B) with respect to quotations for calendar years after the
fifth calendar year, the quotation for the fifth calendar year shall be applied
and (ii) for crude oil, the quotation for deliveries of crude oil for each such
calendar year from the New York Mercantile Exchange for Cushing, Oklahoma,
provided that (A) if such quotation is greater than $30.00 per barrel, the price
shall be capped at $30.00 per barrel and (B) with respect to quotations for
calendar years after the fifth calendar year, the quotation for the fifth
calendar year shall be applied, (c) further adjust the cash-flows derived from
the pricing assumptions set forth in clause (b) above to account for the
historical basis differentials for each month during the preceding 12-month
period calculated by comparing realized crude oil and natural gas prices to
Cushing, Oklahoma and Henry Hub NYMEX prices for each month during such period,
(d) take into account the Company’s actual experiences with leasehold operating
expenses and other costs in determining projected leasehold operating expenses
and other costs, (e) identify and take into account any “over-produced” or
“under-produced” status under gas balancing arrangements, (f) contain
information and analysis comparable in scope to that contained in the Initial
Engineering Report, and (g) otherwise be in form and substance reasonably
satisfactory to the Super-majority Purchasers.

 

“NPV” means, with respect to any Proved Reserves expected to be produced from
any Oil and Gas Properties, the net present value, discounted at 9% per annum,
of the future net revenues expected to accrue to the Company’s and its
Subsidiaries’ collective interests in such reserves during the remaining
expected economic lives of such reserves. NPV means, with respect to the
Company’s and its Subsidiaries’ separate interests in such Proved Reserves, the
net present value, discounted at 9% per annum, of the future net revenues
expected to accrue to such separate interests in such reserves during the
remaining expected economic lives of such reserves. Each calculation of such
expected future net revenues shall be made in accordance with the then existing
standards of the Society of Petroleum Engineers, provided that in any event (a)
appropriate deductions shall be made for severance and ad valorem taxes, and for
operating, gathering, transportation and marketing costs required for the
production and sale of such reserves, (b) appropriate adjustments shall be made
for hedging operations, provided that Hedging Contracts with non-investment
grade counterparties shall not be taken into account to the extent that such
Hedging Contracts improve the position of or otherwise benefit the Company or
any of its Subsidiaries, (c) the pricing assumptions used in determining NPV for
any particular reserves shall be based upon the following price decks: (i) for
natural gas, the quotation for deliveries of natural gas for each such year from
the New York Mercantile Exchange for Henry Hub, provided that (A) if such
quotation is greater than

 

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$5.00 per mcf, the price shall be capped at $5.00 per mcf and (B) with respect
to quotations for calendar years after the fifth calendar year, the quotation
for the fifth calendar year shall be applied and (ii) for crude oil, the
quotation for deliveries of crude oil for each such calendar year from the New
York Mercantile Exchange for Cushing, Oklahoma, provided that (A) if such
quotation is greater than $30.00 per barrel, the price shall be capped at $30.00
per barrel and (B) with respect to quotations for calendar years after the fifth
calendar year, the quotation for the fifth calendar year shall be applied and
(d) the cash-flows derived from the pricing assumptions set forth in clause (b)
above shall be further adjusted to account for the historical basis
differentials for each month during the preceding 12-month period calculated by
comparing realized crude oil and natural gas prices to Cushing, Oklahoma and
Henry Hub NYMEX prices for each month during such period.

 

Section 3. Conditions Precedent. This Third Amendment shall not become effective
until the date on which each of the following conditions is satisfied (the
“Effective Date”):

 

3.1 On or prior to the Effective Date, the Collateral Agent and the Purchasers
shall have received all fees and other amounts due and payable in connection
with this Third Amendment in accordance with Section 14.1 of the Note Purchase
Agreement.

 

3.2 The Collateral Agent shall have received from the Majority Purchasers, the
Company and the Guarantors counterparts (in such number as may be requested by
the Collateral Agent) of this Third Amendment signed on behalf of such Persons.

 

3.3 No Default shall have occurred and be continuing, after giving effect to the
terms of this Third Amendment.

 

3.4 The Collateral Agent shall have received such other documents as the
Collateral Agent or special counsel to the Collateral Agent may reasonably
request.

 

The Collateral Agent shall notify the Company and the Purchasers in writing of
the Effective Date.

 

Section 4. Miscellaneous.

 

4.1 Confirmation. The provisions of the Note Purchase Agreement, as amended by
this Third Amendment, shall remain in full force and effect following the
effectiveness of this Third Amendment.

 

4.2 Ratification and Affirmation; Representations and Warranties. The Company
and each Guarantor hereby (i) acknowledges the terms of this Third Amendment;
(ii) ratifies and affirms its obligations under, and acknowledges, renews and
extends its continued liability under, each Transaction Document to which it is
a party and agrees that each Transaction Document to which it is a party remains
in full force and effect, except as expressly amended hereby; and (iii)
represents and warrants to the Purchasers that as of the date hereof, after
giving effect to the terms of this Third Amendment: (A) all of the
representations and warranties contained in each Transaction Document to which
it is a party are true and correct, except to the

 

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extent any such representations and warranties are expressly limited to an
earlier date, in which case, such representations and warranties shall continue
to be true and correct, as of such specified earlier date, (B) no Default has
occurred and is continuing and (C) since December 31, 2002, there has been no
event, development or circumstance that has had or could reasonably be expected
to have a Material Adverse Effect.

 

4.3 Transaction Document. This Third Amendment is a “Transaction Document” as
defined and described in the Note Purchase Agreement and all of the terms and
provisions of the Note Purchase Agreement relating to Transaction Documents
shall apply hereto.

 

4.4 Purchasers’ Satisfaction. For purposes of determining compliance with the
conditions specified in Section 3 hereof, each of the undersigned Purchasers
shall be deemed to have consented to, approved or accepted or to be satisfied
with, each document or other matter required thereunder to be consented to or
approved by or acceptable or satisfactory to a Purchaser upon its execution and
delivery of a counterpart of this Third Amendment.

 

4.5 Counterparts. This Third Amendment may be executed by one or more of the
parties hereto in any number of separate counterparts, and all of such
counterparts taken together shall be deemed to constitute one and the same
instrument. Delivery of this Third Amendment by facsimile transmission shall be
effective as delivery of a manually executed counterpart hereof.

 

4.6 No Oral Agreement. THIS THIRD AMENDMENT, THE NOTE PURCHASE AGREEMENT AND THE
OTHER TRANSACTION DOCUMENTS EXECUTED IN CONNECTION HEREWITH AND THEREWITH
REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY
EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR UNWRITTEN AGREEMENTS OF THE PARTIES.
THERE ARE NO SUBSEQUENT ORAL AGREEMENTS BETWEEN THE PARTIES.

 

4.7 GOVERNING LAW. THIS THIRD AMENDMENT (INCLUDING, BUT NOT LIMITED TO, THE
VALIDITY AND ENFORCEABILITY HEREOF) SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.

 

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IN WITNESS WHEREOF, the parties hereto have caused this Third Amendment to be
duly executed as of the date first written above.

 

COMPANY:   QUICKSILVER RESOURCES INC.     By:  

/s/ MarLu S. Hiller

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    Name:   MarLu S. Hiller     Title:   Treasurer and Assistant Secretary
GUARANTORS:   BEAVER CREEK PIPELINE, L.L.C.     By:  

/s/ Bill Lamkin

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    Name:   Bill Lamkin     Title:   Vice President and Treasurer     TERRA
ENERGY LTD.     By:  

/s/ MarLu S. Hiller

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    Name:   MarLu S. Hiller     Title:   Treasurer and Assistant Secretary    
MERCURY MICHIGAN, INC.     By:  

/s/ MarLu S. Hiller

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    Name:   MarLu S. Hiller     Title:   Treasurer and Assistant Secretary    
GTG PIPELINE CORPORATION     By:  

/s/ MarLu S. Hiller

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    Name:   MarLu S. Hiller     Title:   Treasurer and Assistant Secretary

 

[Signature Page to Third Amendment]

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TERRA PIPELINE COMPANY By:  

/s/ MarLu S. Hiller

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Name:   MarLu S. Hiller Title:   Treasurer and Assistant Secretary

 

[Signature Page to Third Amendment]

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COLLATERAL AGENT:   BNP PARIBAS, as a Purchaser and as Collateral Agent     By:
 

/s/ Gabe Ellisor

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    Name:   Gabe Ellisor     Title:   Vice President     By:  

/s/ Polly Schott

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    Name:   Polly Schott     Title:   Vice President PURCHASERS:   FORTIS
CAPITAL CORP.     By:  

/s/ Christopher S. Parada

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    Name:   Christopher S. Parada     Title:   Vice President     By:  

/s/ Darrell W. Holley

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    Name:   Darrell W. Holley     Title:   Managing Director     THE PRUDENTIAL
INSURANCE COMPANY OF AMERICA     By:  

/s/ Randall M. Kob

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    Name:   Randall M. Kob     Title:   Vice President     THE ROYAL BANK OF
SCOTLAND plc     By:  

/s/ Chris H. Clarke

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    Name:   Chris H. Clarke     Title:   Senior Vice President

 

[Signature Page to Third Amendment]

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