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Indenture Dated

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Sectors: Energy
Governing Law: New York, View New York State Laws
Effective Date: April 21, 1998
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EXHIBIT 10.7


================================================================================


GOTHIC ENERGY CORPORATION


as Issuer,


AND


THE BANK OF NEW YORK,


as Trustee


____________________________


INDENTURE


DATED AS OF APRIL 21, 1998


____________________________


$104,000,000.00


14_% SERIES A SENIOR SECURED DISCOUNT NOTES DUE 2006


AND


14_% SERIES B SENIOR SECURED DISCOUNT NOTES DUE 2006


================================================================================


TABLE OF CONTENTS


ARTICLE I Definitions And Incorporation By Reference..................1
Section 1.01 Definitions.................................................1
Section 1.02 Other Definitions..........................................22
Section 1.03 Incorporation by Reference of Trust Indenture Act..........23
Section 1.04 Rules of Construction......................................23


ARTICLE II The Securities.............................................24
Section 2.01 Form and Dating............................................24
Section 2.02 Execution and Authentication...............................25
Section 2.03 Registrar and Paying Agent.................................25
Section 2.04 Paying Agent to Hold Money in Trust........................26
Section 2.05 Holder Lists...............................................26
Section 2.06 Transfer and Exchange......................................26
Section 2.07 Replacement Securities.....................................34
Section 2.08 Outstanding Securities.....................................34
Section 2.09 Treasury Securities........................................35
Section 2.10 Temporary Securities.......................................35
Section 2.11 Cancellation...............................................35
Section 2.12 Defaulted Interest.........................................36
Section 2.13 Persons Deemed Owners......................................36
Section 2.14 CUSIP Numbers..............................................36
Section 2.15 Units and Unit Certificates................................36


ARTICLE III Redemption.................................................38
Section 3.01 Notice to Trustee..........................................38
Section 3.02 Selection of Securities to Be Redeemed.....................38
Section 3.03 Notice of Redemption.......................................38
Section 3.04 Effect of Notice of Redemption.............................39
Section 3.05 Deposit of Redemption Price................................39
Section 3.06 Securities Redeemed in Part................................40
Section 3.07 Optional Redemption........................................40


ARTICLE IV Covenants..................................................41
Section 4.01 Payment of Securities......................................41
Section 4.02 SEC Reports................................................41
Section 4.03 Compliance Certificates....................................41
Section 4.04 Maintenance of Office or Agency............................42
Section 4.05 Corporate Existence........................................43
Section 4.06 Waiver of Stay, Extension or Usury Laws....................43
Section 4.07 Payment of Taxes and Other Claims..........................43
Section 4.08 Maintenance of Properties and Insurance....................43
Section 4.09 Limitation on Incurrence of Additional Indebtedness........44
Section 4.10 Limitation on Restricted Payments..........................44
Section 4.11 Limitation on Sale of Assets...............................47
Section 4.12 Limitation on Liens........................................50
Section 4.13 Limitation on Sale/Leaseback Transactions..................50
Section 4.14 Limitation on Payment Restrictions Affecting Restricted
Subsidiaries 50
Section 4.15 Limitation on Issuances and Sales of Subsidiary Stock......51
Section 4.16 Limitation on Transactions with Affiliates.................51
Section 4.17 Change of Control..........................................51


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Section 4.18 Limitation on Line of Business.............................53


ARTICLE V Successor Corporation......................................53
Section 5.01 When Company May Merge, etc................................53
Section 5.02 Successor Corporation Substituted..........................54


ARTICLE VI Defaults And Remedies......................................54
Section 6.01 Events of Default..........................................54
Section 6.02 Acceleration...............................................57
Section 6.03 Other Remedies.............................................58
Section 6.04 Waiver of Past Defaults....................................59
Section 6.05 Control by Majority........................................59
Section 6.06 Limitation on Remedies.....................................59
Section 6.07 Rights of Holders to Receive Payment.......................60
Section 6.08 Collection Suit by Trustee.................................60
Section 6.09 Trustee May File Proofs of Claim...........................60
Section 6.10 Priorities.................................................60
Section 6.11 Undertaking for Costs......................................61


ARTICLE VII Trustee....................................................61
Section 7.01 Duties of Trustee..........................................61
Section 7.02 Rights of Trustee..........................................62
Section 7.03 Individual Rights of Trustee...............................63
Section 7.04 Trustee's Disclaimer.......................................64
Section 7.05 Notice of Defaults.........................................64
Section 7.06 Reports by Trustee to Holders..............................64
Section 7.07 Compensation and Indemnity.................................64
Section 7.08 Replacement of Trustee.....................................65
Section 7.09 Successor Trustee by Merger, etc...........................66
Section 7.10 Eligibility; Disqualification..............................66
Section 7.11 Preferential Collection of Claims Against Company..........66
Section 7.12 Appointment of Co-Trustee..................................66


ARTICLE VIII Discharge Of Indenture.....................................67
Section 8.01 Option to Effect Legal Defeasance or Covenant Defeasance...67
Section 8.02 Legal Defeasance and Discharge.............................67
Section 8.03 Covenant Defeasance........................................68
Section 8.04 Conditions to Legal or Covenant Defeasance.................68
Section 8.05 Deposited Money and U.S. Government Securities to be Held
in Trust; Other Miscellaneous Provisions..................70
Section 8.06 Repayment to Company.......................................70
Section 8.07 Reinstatement..............................................71


ARTICLE IX Amendments, Supplements And Waivers........................71
Section 9.01 Without Consent of Holders.................................71
Section 9.02 With Consent of Holders....................................72
Section 9.03 Compliance with Trust Indenture Act........................73
Section 9.04 Revocation and Effect of Consents..........................73
Section 9.05 Notation on or Exchange of Securities......................74
Section 9.06 Trustee Protected..........................................74
Section 9.07 Restrictions on Payments for Amendments, Waivers and
Modifications.............................................74


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ARTICLE X Guarantees................................................75
Section 10.01 Unconditional Guarantee...................................75
Section 10.02 Guarantors May Consolidate, etc., on Certain Terms........76
Section 10.03 Addition of Guarantors....................................76
Section 10.04 Release of a Guarantor....................................77
Section 10.05 Limitation of Guarantor's Liability.......................77
Section 10.06 Contribution..............................................77
Section 10.07 Execution and Delivery of Guarantee.......................78
Section 10.08 Severability..............................................78


ARTICLE XI Collateral and Security...................................78
Section 11.01 Collateral and Pledge Agreement; Additional Collateral....78
Section 11.02 Recording and Opinions....................................79
Section 11.03 Release of Collateral.....................................80
Section 11.04 Certificates of the Company...............................80
Section 11.05 Certificates of the Trustee...............................81
Section 11.06 Authorization of Actions To Be Taken by the Trustee Under
the Pledge Agreement.....................................81
Section 11.07 Authorization of Receipt of Funds by the Trustee Under
the Pledge Agreement.....................................81
Section 11.08 Termination of Security Interest..........................81


ARTICLE XII Miscellaneous.............................................82
Section 12.01 Trust Indenture Act Controls..............................82
Section 12.02 Notices...................................................82
Section 12.03 Communication by Holders with Other Holders...............83
Section 12.04 Certificate and Opinion as to Conditions Precedent........83
Section 12.05 Statements Required in Certificate or Opinion.............83
Section 12.06 Rules by Trustee and Agents...............................84
Section 12.07 Legal Holidays............................................84
Section 12.08 Governing Law.............................................84
Section 12.09 No Adverse Interpretation of Other Agreements.............84
Section 12.10 No Recourse Against Others................................84
Section 12.11 Successors................................................84
Section 12.12 Duplicate Originals.......................................84
Section 12.13 Severability..............................................84


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INDENTURE, dated as of April 21, 1998, between GOTHIC ENERGY CORPORATION, an Oklahoma corporation (the "Company") and The Bank of New York, a New York banking corporation, as trustee (the "Trustee").


Each party agrees as follows for the benefit of the other parties and for the equal and ratable benefit of the holders of the Company's 14_% Series A Senior Secured Discount Notes due 2006 and the Company's 14_% Series B Senior Secured Discount Notes due 2006 (the "Series B Securities" and, collectively with the Series A Securities, the "Securities" or each, a "Security"):


ARTICLE I


Definitions And Incorporation By Reference


Section I.1 Definitions


"Accreted Value" means, for each $1,000 face amount of Securities, as of any date of determination prior to May 1, 2002, the sum of (i) the initial offering price of each Security ($578.42) and (ii) that portion of the excess of the principal amount of each Security over such initial offering price which shall have been accreted thereon through such date, such amount to be so accreted on a daily basis and compounded semi-annually on each May 1 and November 1 at the rate of 14_ per annum from the Issue Date through the date of determination.


"Adjusted Consolidated Net Tangible Assets" or "ACNTA" means (without duplication), as of the date of determination, (a) the sum of (i) discounted future net revenue from proved oil and gas reserves of the Company and its consolidated Restricted Subsidiaries calculated in accordance with SEC guidelines before any state or federal income taxes, as estimated by independent petroleum engineers in a reserve report prepared as of the end of the Company's most recently completed fiscal year, as increased by, as of the date of determination, the discounted future net revenue of (A) estimated proved oil and gas reserves of the Company and its consolidated Restricted Subsidiaries attributable to any acquisition consummated since the effective date of such initial or year-end reserve reports and (B) estimated oil and gas reserves of the Company and its consolidated Restricted Subsidiaries attributable to extensions, discoveries and other additions and upward revisions of estimates of proved oil and gas reserves due to exploration, development or exploitation, production or other activities conducted or otherwise occurring since the effective date of such initial or year-end reserve reports which, in the case of sub-clauses (A) and (B), would, in accordance with standard industry practice, result in such increases, in each case calculated in accordance with SEC guidelines (utilizing the prices utilized in such initial or year-end reserve reports), and decreased by, as of the date of determination, the discounted future net revenue of (C) estimated proved oil and gas reserves of the Company and its consolidated Restricted Subsidiaries produced or disposed of since the effective date of such initial or year-end reserve reports and (D) reductions in the estimated oil and gas reserves of the Company and its consolidated Restricted Subsidiaries since the effective date of such initial or year-end reserve reports attributable to downward revisions of estimates of proved oil


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and gas reserves due to exploration, development or exploitation, production or other activities conducted or otherwise occurring since the effective date of such initial or year-end reserve reports which would, in accordance with standard industry practice, result in such revisions, in each case calculated in accordance with SEC guidelines (utilizing the prices utilized in such initial or year-end reserve reports); provided that, in the case of each of the determinations made pursuant to sub-clauses (A) through (D) above, such increases and decreases shall be as estimated by the Company's engineers, except that if as a result of such acquisitions, dispositions, discoveries, extensions or revisions, there is a Material Change and in connection with the incurrence of Indebtedness under Section 4.09, all or any part of an increase in discounted future net revenue resulting from the matters described in sub-clauses (A) and (B) above are needed to permit the incurrence of such Indebtedness, then the discounted future net revenue utilized for purposes of this clause (a) (i) shall be confirmed in writing by independent petroleum engineers provided that, in the event that the determinations made pursuant to sub-clauses (C) and (D) above, when taken alone, would not cause a Material Change, then such written confirmation need only cover the incremental additions to discounted future net revenues resulting from the determinations made pursuant to sub-clauses (A) and (B) above to the extent needed to permit the incurrence of such Indebtedness, (ii) the capitalized costs that are attributable to oil and gas properties of the Company and its consolidated Restricted Subsidiaries to which no proved oil and gas reserves are attributed, 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 financial statements plus the fair market value of any unproved properties acquired since such date, (iii) the Net Working Capital on a date no earlier than the date of the Company's latest annual or quarterly financial statements and (iv) the greater of (I) the net book value on a date no earlier than the date of the Company's latest annual or quarterly financial statements and (II) the appraised value, as estimated by independent appraisers, of other tangible assets (including Investments in unconsolidated Restricted Subsidiaries) of the Company and its consolidated Restricted Subsidiaries, as of a date no earlier than the date of the Company's latest audited financial statements, minus (b) the sum of (i) minority interests, (ii) any net non-current portion of gas balancing liabilities of the Company and its consolidated Restricted Subsidiaries reflected in the Company's latest annual or quarterly financial statements, (iii) the discounted future net revenue, calculated in accordance with SEC guidelines (utilizing the prices utilized in the Company's initial or year-end reserve reports), attributable to reserves which are required to be delivered to third parties to fully satisfy the obligations of the Company and its consolidated Restricted Subsidiaries with respect to Volumetric Production Payments on the schedules specified with respect thereto, (iv) the discounted future net revenue, calculated in accordance with SEC guidelines, attributable to reserves subject to Dollar-Denominated Production Payments which, based on the estimates of production included in determining the discounted future net revenue specified in (a) (i) above (utilizing the same prices utilized in the Company's initial or year-end reserve reports), would be necessary to fully satisfy the payment obligations of the Company and its consolidated Restricted Subsidiaries with respect to Dollar-Denominated Production Payments on the schedules specified with respect thereto and (v) the discounted future net revenue, calculated in accordance with SEC guidelines (utilizing the same prices utilized in the Company's initial or year-end reserve reports), attributable to reserves subject to participation interests, overriding royalty interests or other interests of third parties, pursuant to participation, partnership, vendor financing or other agreements then in effect, or which otherwise are required to be delivered to third parties. If the Company changes its method of accounting from


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the full cost method to the successful efforts method or a similar method of accounting, Adjusted Consolidated Net Tangible Assets will continue to be calculated as if the Company was still using the full cost method of accounting.


"Adjusted Net Assets" of a Guarantor at any date shall mean the lesser of (i) the amount by which the fair value of the property of such Guarantor exceeds the total amount of liabilities, including, without limitation, contingent liabilities (after giving effect to all other fixed and contingent liabilities incurred or assumed on such date), but excluding liabilities under the Guarantee of such Guarantor at such date and (ii) the amount by which the present fair saleable value of the assets of such Guarantor at such date exceeds the amount that will be required to pay the probable liability of such Guarantor on its debts (after giving effect to all other fixed and contingent liabilities incurred or assumed on such date and after giving effect to any collection from any Subsidiary of such Guarantor in respect of the obligations of such Person under the Guarantee), excluding debt in respect of the Guarantee, as they become absolute and matured.


"Affiliate" of any specified Person means any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified Person. For the purposes of this definition, control when used with respect to any specified Person means the power to direct the management and policies of such Person directly or indirectly, whether through the ownership of Voting Stock, by contract or otherwise; and the terms controlling and controlled have meanings correlative to the foregoing; provided that a corporation shall not be deemed an Affiliate of the Company solely by reason of having a single common director with the Company who constitutes less than a majority of the directors of either the Company and the other corporation.


"Agent" means any Registrar, Paying Agent or co-registrar.


"Asset Sale" means any sale, lease, transfer, exchange or other disposition after the Issue Date having a fair market value of $1.0 million or more (or series of sales, leases, transfers, exchanges or dispositions during any fiscal year having an aggregate fair market value of such amount) of shares of Capital Stock of a consolidated Restricted Subsidiary (other than directors' Qualifying Shares), or of property or assets (including the creation of Dollar-Denominated Production Payments and Volumetric Production Payments, other than Dollar- Denominated Production Payments and Volumetric Production Payments created or sold in connection with the financing of, and within 30 days after, the acquisition of the properties subject thereto) or any interests therein (each referred to for purposes of this definition as a disposition) by the Company or any of its consolidated Restricted Subsidiaries, including any disposition by means of a merger, consolidation or similar transaction (other than (a) by the Company to a Wholly Owned consolidated Restricted Subsidiary or by a Restricted Subsidiary to the Company or a Wholly Owned consolidated Restricted Subsidiary, (b) a sale of oil, gas or other hydrocarbons or other mineral products in the ordinary course of business of the Company's oil and gas production operations, (c) any abandonment, farm-in, farm-out, lease and sub-lease of developed and/or undeveloped properties made or entered into in the ordinary course of business (but excluding (x) any sale of a net profits or overriding royalty interest, in each case conveyed from or burdening proved developed or proved undeveloped reserves and (y) any sale of hydrocarbons or other mineral products as a result of the creation of Dollar-Denominated Production Payments or Volumetric Production Payments, other


3


than Dollar-Denominated Production Payments and Volumetric Production Payments created or sold in connection with the financing of, and within 30 days after, the acquisition of the properties subject thereto), (d) the disposition of all or substantially all of the assets of the Company in compliance with Article V and Sale/Leaseback Transactions in compliance with Section 4.13, (e) the provision of services and equipment for the operation and development of the Company's oil and gas wells, in the ordinary course of the Company's oil and gas service businesses, notwithstanding that such transactions may be recorded as asset sales in accordance with full cost accounting guidelines, (f) the issuance by the Company of shares of its Capital Stock, (g) any trade or exchange by the Company or any Wholly Owned Restricted Subsidiary of oil and gas properties for other oil and gas properties owned or held by another Person provided that (i) the fair market value of the properties traded or exchanged by the Company or such Wholly Owned Restricted Subsidiary (including any cash or Cash Equivalents, not to exceed 15% of such fair market value, to be delivered by the Company or such Wholly Owned Restricted Subsidiary) is reasonably equivalent to the fair market value of the properties (together with any cash or Cash Equivalents, not to exceed 15% of such fair market value) to be received by the Company or such Wholly Owned Restricted Subsidiary as determined in good faith by the Board of Directors of the Company, which determination shall be certified by a resolution of the Board of Directors delivered to the Trustee if such fair market value is in excess of $5.0 million, provided that if such resolution indicates that such fair market value is in excess of $10.0 million such resolution shall be accompanied by a written appraisal by a nationally recognized investment banking firm or appraisal firm, in each case specializing or having a speciality in oil and gas properties, and (ii) such exchange is approved by a majority of Disinterested Directors of the Company, (h) the sale, transfer or other disposition in the ordinary course of business of oil and natural gas properties, or interests therein, provided that such properties either (A) do not have proved reserves attributed to them or (B) were purchased for the purpose of offering such properties for resale or participations by other Persons and (i) any transaction under the Sale and Participation Agreement (as in effect on the Issue Date)).


"Attributable Indebtedness" means, with respect to any particular lease under which any Person is at the time liable and at any date as of which the amount thereof is to be determined, the present value of the total net amount of rent required to be paid by such Person under the lease during the primary term thereof, without giving effect to any renewals at the option of the lessee, discounted from the respective due dates thereof to such date at the rate of interest per annum implicit in the terms of the lease. As used in the preceding sentence, the net amount of rent under any lease for any such period shall mean the sum of rental and other payments required to be paid with respect to such period by the lessee thereunder excluding any amounts required to be paid by such lessee on account of maintenance and repairs, insurance, taxes, assessments, water rates or similar charges. In the case of any lease which is terminable by the lessee upon payment of a penalty, such net amount of rent shall also include the amount of such penalty, but no rent shall be considered as required to be paid under such lease subsequent to the first date upon which it may be so terminated.


"Average Life" means, as of the date of determination, with respect to any Indebtedness, the quotient obtained by dividing (i) the product of (x) the number of years from such date to the date of each successive scheduled principal payment of such Indebtedness multiplied by (y) the amount of such principal payment by (ii) the sum of all such principal payments.


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"Bank Credit Facility" means a revolving credit, term credit and/or letter of credit facility, the proceeds of which are used for working capital and other general corporate purposes to be entered into by one or more of the Company and/or its Restricted Subsidiaries and certain financial institutions, as amended, extended or refinanced from time to time. The New Credit Facility will constitute a Bank Credit Facility.


"Board of Directors" means, with respect to any Person, the Board of Directors of such Person or any committee of the Board of Directors of such Person duly authorized to act on behalf of the Board of Directors of such Person.


"Board Resolution" means, with respect to any Person, a copy of a resolution certified by the Secretary or an Assistant Secretary of such Person to have been duly adopted by the Board of Directors or the managing partner(s) of such Person and to be in full force and effect on the date of such certification, and delivered to the Trustee.


"Business Day" means any day on which the New York Stock Exchange, Inc. is open for trading and which is not a Legal Holiday.


"Capital Stock" means, with respect to any Person, any and all shares, interests, participations or other equiva
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