Exhibit 10.40
Cause No. 048-233656-08

Quicksilver Resources, Inc.
§
IN THE 48TH DISTRICT COUT
 
§
OF TARRANT COUNTY, TEXAS
v.
§
   
§
 
BreitBurn Energy Partners L.P., et al.
§
 

SETTLEMENT AGREEMENT

The Parties hereto settle all claims and controversies between them in this
lawsuit according to the following terms:

 
1.
BreitBurn Energy Partners (“BreitBurn”) will pay Quicksilver Resources
(“Quicksilver”) the sum o f $13,000,000.00 on or before April 2, 2010.

 
 
2.
Exhibit A is incorporated by reference.

 
 
3.
Provident Energy Trust (“Provident”) will pay Quicksilver $5,000,000.00 on or
before March 22, 2010, but will undertake best efforts to pay by March 5, 2010.

 
 
4.
[INTENTIONALLY LEFT BLANK]

 
 
5.
The parties will execute and file an agreed order dismissing all claims in the
above styled and numbered case with prejudice within 2 days after receipt of
payment by Quicksilver.  Each party will bear its own costs.

 
 
6.
Each party to the above lawsuit, including each party’s affiliates, agents,
officers, directors, and attorneys, hereby mutually release and discharge each
other from any and all claims, demands, or suits, known or unknown, fixed or
contingent, liquidated or unliquidated, whether or not asserted in the above
case, as of this date, arising from or related to the events and transactions
which are the subject matter of this case.  Provided, however, BreitBurn and
Provident do not intend to release each other with respect to rights and
obligations under the documents related to the June 17, 2008, transaction
unrelated to the lawsuit or claims asserted by Quicksilver.

 
 
7.
Each signatory hereto warrants and represents that he or she has authority to
bind the parties for whom that signatory acts.

 
 
 

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8.
Counsel for Defendants shall deliver drafts of any further settlement documents,
such as formal agreement, order of dismissal, formal release, etc., to the other
parties by Monday, February 8, 2010.  The parties agree to cooperate with each
other in the drafting and execution of such additional documents as are
reasonably requested or required to implement the terms and spirit of this
agreement.  Nevertheless, the parties hereto intend to be bound by this
Agreement.

 
 
9.
If one or more disputes arise with regard to the interpretation and/or
performance of this agreement or any of its provisions, the parties agree to
resolve same by phone conference with the mediator that facilitated this
settlement.  If the parties cannot resolve their differences by phone
conference, then each agrees to schedule one day of mediation with the mediator
within 30 days to resolve the disputes and to share the cost of same equally.

 
 
10.
Each signatory to this settlement has entered into same freely and without
duress after having consulted with professionals of his or her choice.  Each
party hereto acknowledges (a) the mediator is not the attorney for any party,
(b) the party has conferred with counsel regarding the advisability of entering
this agreement prior to signing it, and (c) the party’s counsel has
independently reviewed this agreement prior to its execution.

 
Signed this 3rd day of February, 2010.

   
Plaintiff(s):
/s/ Glenn Darden
 
Quicksilver
   
Approved by Attorney for Plaintiff(s):
/s/ Gerald Pecht
   
Defendant(s):
/s/ Halbert S. Washburn
 
BreitBurn
   
Approved by Attorney for Defendant(s):
/s/ Gregory C. Brown
   
Defendant(s):
/s/ Tom Buchanan
 
Provident
   
Approved by Attorney for Defendant(s):
/s/ Greg Waller

 
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EXHIBIT A

Mediation February 3, 2010 –
Agreement between the BreitBurn Defendants and Quicksilver
 
1.           CEOs.  One CEO — Hal as the CEO and Randy as President.
 
2.           Piggyback rights.  Quicksilver’s option to participate in every
equity offering up to 20% of the equity offered.  Amend existing Registration
Rights Agreement accordingly.
 
3.           Distributions.  Reinstitute regular distributions beginning in the
first quarter of 2010 at a minimum amount of $1.50 (annual rate) and minimum
coverage ratio of no less than 1.2x.  The first quarter’s distribution shall be
payable in the second quarter of 2010.
 
4.           Devco.  Devco ASA will not be amended or renewed without the
approval of the new BreitBurn Board.
 
5.           Independent Chairman - John Butler.
 
6.           Hal and Randy shall resign from the Board.
 
7.           Voting rights.  Quicksilver retains right to vote all its units
(currently 41%) on all matters on which it has the right to vote, except as
provided in paragraph 11 with respect to voting on directors and as provided in
paragraph 12 with respect to voting on the removal of the GP.
 
8.           Size of Board: 2 of 6 designated by Quicksilver.  The Board size
will not be increased without Quicksilver’s prior written consent.  Subject to
applicable NASDAQ and SEC rules, at least one Quicksilver designee will serve on
each Board Committee.
 
9.           Standstill.
 
(a)          For a period ending on the date on which Quicksilver ceases to hold
at least 10% of the units, Quicksilver will agree to the following standstill
provisions that prohibit Quicksilver from:
 
(i)           engaging in any hostile/takeover activities (including tender
offer; soliciting proxies or written consents - other than as recommended by the
Board);
 
(ii)          acquiring or proposing to acquire additional units, securities or
properties of BreitBurn, except pursuant to a distribution, reclassification or
reorganization involving BreitBurn or its units or other securities approved by
the Board;
 
(iii)         calling a special meeting of the unitholders; or
 
(iv)         proposing to remove the GP or voting for removal of the GP other
than in accordance with paragraph 12.
 
 

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(b)           Specifics.  Without the prior written consent of BreitBurn,
Quicksilver will not, directly or indirectly:
 
(i)           acquire any securities or property of BreitBurn (or its
affiliates), except pursuant to a distribution, reclassification or
reorganization involving BreitBurn or its units or other securities approved by
the Board;
 
(ii)          propose to enter into (directly or indirectly) any
merger/consolidation/recap/business combination/partnership/JV, etc. involving
BreitBurn (or its affiliates), except as permitted hereby;
 
(iii)         make or in any way participate in any solicitation of proxies (per
SEC’s proxy rules) or written consents to vote/seek to influence/advise others
with respect to the voting BreitBurn’s (or its affiliates’) voting securities;
 
(iv)        form/join/participate in a “group” (per SEC’s Sec 13(d) rules/defs)
with respect to any voting securities of BreitBurn (or its affiliates);
 
(v)         act to seek to control or influence the management/Board/policies of
BreitBurn except through Quicksilver’s Board designees or as provided below;
 
(vi)        propose to remove the GP of BreitBurn or, other than in accordance
with paragraph 12, vote to remove the GP;
 
(vii)       publicly disclose any intent/plan/arrangement inconsistent with this
agreement; or
 
(viii)      advise/assist/encourage others in connection with the above.
 
(c)           Quicksilver will agree not to sell/transfer its units without the
prior written consent of BreitBurn, except:
 
(i)           to a party that would not own more than 20% of the outstanding
units after such transfer;
 
(ii)          in connection with a business combination approved by the Board
and/or the BreitBurn unitholders;
 
(iii)         in a pledge of any voting securities to a financial
institution/brokerage firm; or
 
(iv)        in an underwritten offering where the units will be widely
distributed or would not result in any purchaser in such offering owning more
than 20% of the outstanding units after the offering.
 
(d)           The foregoing provisions shall not, and are not intended to:
 
 
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(i)           prohibit Quicksilver from privately communicating with, including
making any offer or proposal to, the Board;
 
(ii)          restrict in any manner how Quicksilver votes its units, except as
provided in paragraphs 11 and 12;
 
(iii)         restrict the manner in which Quicksilver’s designees to the Board
(A) may vote on any matter submitted to the Board or the unitholders, or (B)
participate in deliberations or discussions of the Board (including making
suggestions or raising issues to the Board) in their capacity as members of the
Board, or (C) may take actions required by their exercise of legal duties and
obligations as members of the Board or refrain from taking any action prohibited
by their legal duties and obligations as members of the Board; or
 
(iv)         restrict Quicksilver from selling or transferring any of its units
to any affiliate or successor of Quicksilver which agrees to be bound by the
standstill agreement.
 
(e)           The provisions contained in paragraph 9 shall immediately and
automatically be suspended upon the increase or acceleration of a material
financial obligation of BreitBurn that results from the breach of a material
provision thereof or the occurrence of a material event of default thereunder,
unless such breach is caused solely by the action or inaction of Quicksilver or
its nominated directors.
 
10.           Voting Rights as set forth in Original Amendment No. 1 to the
Partnership Agreement.  Subject to paragraph 12 below, Quicksilver will accept
and agree not to challenge the voting rights as set forth in original Amendment
No. 1 to the Partnership Agreement dated June 17, 2008.  BreitBurn will agree
not to effect any amendment that would restrict in any manner Quicksilver’s
rights to vote any or all of its units on the election of directors or any other
matters presented to the unitholders.  BreitBurn will immediately withdraw the
Revised Amendment and will not propose or adopt any new amendment, provision,
resolution, or change that would limit, deprive, or restrict Quicksilver’s right
to vote all its units, one vote per unit, on any matter.  Quicksilver will
support and, if necessary, vote to approve, all amendments to the Limited
Partnership Agreement, the BreitBurn GP, LLC Agreement, and all related
agreements solely necessary to implement the terms of this agreement.
 
11.           Designation, Nomination and Election of Directors.  Quicksilver
will designate two directors, one of whom must meet the independence standards
established by the NASDAQ Stock Market and SEC rules and must be independent of
BreitBurn and Quicksilver.  The second will be a current independent member of
Quicksilver’s board (not a member of Quicksilver’s management).  The initial
designees will be agreed on at time of settlement.  The Board will nominate and
add the new directors to the Board to fill the newly created vacancies.  The new
directors will be categorized one each to Class II (up for election in 2010) and
Class III (up for election in 2011).  At each applicable election of directors,
the Board will agree to nominate the directors designated by Quicksilver (or
such substitutes as Quicksilver may designate), each of whom must meet the
standards set forth above as part of the slate of directors nominated by the
Board for election by the unitholders.  Quicksilver will agree to cast its votes
in the election of directors in favor of the slate of directors nominated by the
Board.  The number of directors that may be designated by Quicksilver as
described above will be reduced if Quicksilver’s ownership percentage of common
units of Breitburn (“Common Units”) is reduced.  At such time as Quicksilver
owns fewer than 10% of the Common Units but at least 2,638,500 Common Units, one
of the directors designated by Quicksilver (as selected by Quicksilver) will
resign, or if the director’s term is expiring, not stand for reelection, at the
next annual meeting.  At such time as Quicksilver owns fewer than 2,638,500
Common Units, the remaining director designated by Quicksilver will resign, or
if the director’s term is expiring at the next annual meeting, he will not stand
for reelection.
 
 
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12.           Voting on Removal of GP.  With respect to any proposal to remove
the GP, Quicksilver may not vote a proportion of its units in favor of removal
which exceeds the proportion of the units voted in favor of such proposal by
unitholders other than Quicksilver as compared to all units held by unitholders
other than Quicksilver.
 
13.           Waiver of Voting Cap.  With respect to units currently owned by
Quicksilver, and any units or other voting securities received pursuant to a
distribution, reclassification or reorganization involving BreitBurn or its
units or other voting securities, the Board will permanently and irrevocably
waive the 20% voting cap for the election of directors as applicable to
Quicksilver.
 
14.           Termination of Registration Rights Agreement.  The registration
rights agreement will terminate on the date on which Quicksilver is no longer an
affiliate of BreitBurn.
 
15.           Termination of Certain Other Provisions.  Paragraphs 1, 3, 4, 5
and 8 will terminate when Quicksilver owns less than 10% of the outstanding
Common Units.
 
 
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