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EXHIBIT 10.1

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF TEXAS
HOUSTON DIVISION

QUICKSILVER RESOURCES INC.,
§
   
§
 
PLAINTIFF,
§
   
§
 
vs.
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CIVIL ACTION NO. H-08-868
 
§
 
EAGLE DRILLING, LLC AND EAGLE
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DOMESTIC DRILLING OPERATIONS,
§
 
LLC,
§
   
§
 
DEFENDANTS.
§
             
IN RE:
§
   
§
 
BLAST ENERGY SERVICES, INC. and
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JOINTLY ADMINISTERED
 
§
CHAPTER 11
EAGLE DOMESTIC DRILLING
§
UNDER BANKRUPTCY CASE NO.
OPERATIONS, LLC,
§
07-30424-H4-11
 
§
 
DEBTORS.
§
 

COMPROMISE SETTLEMENT AND RELEASE AGREEMENT

This Compromise Settlement and Release Agreement (the “Agreement”) is executed
on the one hand by Quicksilver Resources Inc. (“Quicksilver”) and on the other
hand by Eagle Domestic Drilling Operations, LLC (“EDDO”) and Blast Energy
Services, Inc. (“Blast”) effective as of the date stated below.  Quicksilver,
EDDO and Blast are sometimes referred to collectively as the “Parties” and
individually as a “Party.”
I.           Quicksilver Releasees.
The releasees who shall benefit from the promises, covenants and/or warranties
made by EDDO and Blast are as follows:
 
A.
Quicksilver;

 

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B.
All agents, employees, shareholders, directors, officers, fiduciaries, attorneys
or other representatives of Quicksilver, specifically including but not limited
to Jeff Cook; and

 
C.
All subsidiaries, parent corporations, affiliated entities or sister
corporations of Quicksilver or any of their successors or assigns that have in
any way conducted any activity or been requested to have had any activity
associated with EDDO or Blast.

As used in this Agreement, the term “Quicksilver Releasees” shall be construed
as broadly as possible to include all of the foregoing named or described
persons or entities.
II.           EDDO Releasees.
The releasees who shall benefit from the promises, covenants and/or warranties
made by Quicksilver are as follows:
A.           EDDO;

B.           Blast (EDDO’s parent company);

 
C.
All agents, employees, shareholders, directors, officers, members, managers,
fiduciaries, attorneys or other representatives of EDDO and Blast; and

 
C.
All subsidiaries, parent corporations, affiliated entities or sister
corporations of EDDO or any of their successors or assigns that have in any way
conducted any activity or been requested to have had any activity associated
with Quicksilver.

As used in this Agreement, the term “EDDO Releasees” shall be construed as
broadly as possible to include all of the foregoing named or described persons
or entities.  Expressly excluded from the definition of “EDDO Releasees” are
Eagle Drilling, LLC (“Eagle”) and any of its subsidiaries, parent corporations,
affiliated entities or sister corporations, agents, employees, shareholders,
directors, officers, members, managers, fiduciaries, attorneys or other
representatives, including but not limited to Rodney Thornton and Richard
Thornton (the “Eagle parties”).
III.           Recitals.
 

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A.           In March 2006, Quicksilver and Eagle entered into three
International Association of Drilling Contractors Daywork Drilling Contracts
(collectively the “Contracts”) relating to Eagle drilling rig numbers 14, 15 and
16 (collectively the “Rigs”).  Disputes arose as to whether one or more of the
Rigs comported with the specifications set forth in the Contracts and whether
Quicksilver improperly terminated or repudiated one or more of the
Contracts.  As a result of said disputes, Quicksilver initiated suit against
EDDO and Eagle in Tarrant County, Texas, which suit and the claims made therein
ultimately became a part of the above-captioned action (the “Lawsuit”).  EDDO
asserted counterclaims against Quicksilver in the Lawsuit.
B.           The Court in the Lawsuit has found that Eagle assigned the Rigs and
the Contracts to EDDO.
C.           As a result of thorough discussions and negotiations, the Parties
have determined it is in their best interests to resolve their current disputes
on the terms and conditions set forth in this Agreement.
IV.           Settlement Provisions.
NOW, THEREFORE, KNOW ALL MEN BY THESE PRESENTS that for the consideration stated
in this Agreement, the receipt and sufficiency of which is hereby acknowledged
by each of the Parties, it is agreed as follows:
A.           Consideration.
1.           As consideration for this Agreement, Quicksilver shall pay or cause
to be paid to EDDO the total sum of Ten Million and No/100 Dollars
($10,000,000.00), to be paid as follows:
 
a.
Five Million and No/100 Dollars ($5,000,000.00) contemporaneously with EDDO’s
and Blast’s execution of this Agreement;

 
 
 

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b.
One Million and No/100 Dollars ($1,000,000.00) on or before the first (1st)
anniversary of EDDO’s and Blast’s execution of this Agreement;

 
c.
Two Million and No/100 Dollars ($2,000,000.00) on or before the second (2nd)
anniversary of EDDO’s and Blast’s execution of this Agreement; and

 
d.
Two Million and No/100 Dollars ($2,000,000.00) on or before the third (3rd)
anniversary of EDDO’s and Blast’s execution of this Agreement.

2.           If either EDDO or Blast files a voluntary petition pursuant to the
U.S. Bankruptcy Code, 11 U.S.C., §101 et. seq. (as amended or replaced), or if
an involuntary bankruptcy petition is filed against either EDDO or Blast
pursuant to the U.S. Bankruptcy Code and an order for relief is thereafter
entered against either EDDO or Blast, then Quicksilver shall be automatically
relieved of any obligation to make any payments under this Agreement which
become due and payable on or after the date on which any such bankruptcy
petition (whether voluntary or involuntary) was filed by or against either EDDO
or Blast.  In the case of an involuntary petition, if a motion for
reconsideration of the order for relief is filed and granted, resulting in the
order for relief being withdrawn or dismissed, then Quicksilver’s payment
obligations shall resume and/or any payments not made as a result of the initial
entry of the order for relief shall be brought current.  For example, if either
EDDO or Blast files a voluntary petition after the first anniversary, but before
the second anniversary, of EDDO’s execution of this Agreement, then Quicksilver
will be automatically relieved from making the payments 1.c. and 1.d.
above.  Likewise, if an involuntary petition is filed against

 
 

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either EDDO or Blast after the first anniversary, and an order for relief is
thereafter entered against either EDDO or Blast before the second anniversary of
EDDO’s execution of this Agreement, then Quicksilver will likewise be
automatically relieved from making the payments due in 1.c. and 1.d.; provided,
however, for purposes of this example, if the order for relief regarding an
involuntary petition is withdrawn or dismissed after reconsideration as
referenced above, then, in such event, Quicksilver’s obligations under 1.c. and
1.d. shall be automatically reinstated and shall be due and payable on the dates
referenced in paragraph 1 above.  However, the filing of a voluntary or
involuntary bankruptcy case by or against either EDDO or Blast shall not affect
any other relief granted in this agreement, including but not limited to the
mutual releases provided herein, which shall remain in effect and continue to be
valid and enforceable.
3.           Unless otherwise directed in writing, all of the foregoing payments
shall be made payable to “Eagle Domestic Drilling Operations, LLC” and tendered
to its attorneys, Maloney Martin, LLP, in trust for EDDO.  A payment shall be
deemed timely if postmarked for mailing by first class United States mail on or
before the date on which it is due, or if wire transfer instructions are timely
provided, if a wire transfer is initiated on or before the date on which the
payment is due.  In the event Quicksilver fails to make a timely payment under
this Agreement and if such failure has not been cured within ten (10) days after
receipt of written notice from EDDO, then all remaining payment obligations to
EDDO shall be accelerated and become due and owing.
4.           In consideration of Quicksilver’s promises, covenants and payments
stated herein, EDDO, and Blast completely RELEASE and forever discharge each and
all of the Quicksilver Releasees from any and all past or present claims,
rights, damages, costs, benefits,

 
 

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expenses and compensation of any nature whatsoever, whether based upon tort,
contract, statute, common law or any other theory or basis of recovery, and
whether for compensatory, statutory or exemplary damages or for equitable
relief, which EDDO or Blast now hold, in any way related to the Contracts, the
Rigs, any claims that have or could have been asserted in the Lawsuit or any
other dealings among the Parties up to and including the effective date of this
Agreement.  This is intended to be and shall be construed as a general release
providing the Quicksilver Releasees the greatest protection allowable under the
law as to the released claims.
5.           In consideration of EDDO’s and Blast’s promises, covenants and
payments stated herein, Quicksilver completely RELEASES and forever discharges
each and all of the EDDO Releasees from any and all past or present claims,
rights, damages, costs, benefits, expenses and compensation of any nature
whatsoever, whether based upon tort, contract, statute, common law or any other
theory or basis of recovery, and whether for compensatory, statutory or
exemplary damages or for equitable relief, which Quicksilver now holds, in any
way related to the Contracts, the Rigs, any claims that have or could have been
asserted in the Lawsuit or any other dealings among the Parties up to and
including the effective date of this Agreement.  This is intended to be and
shall be construed as a general release providing the EDDO Releasees the
greatest protection allowable under the law as to the released claims.
6.           EDDO shall not assign, sell or otherwise convey to any third party,
other than Blast, its right to receive payments from Quicksilver under this
Agreement; provided, however, EDDO may assign a portion of said payments to its
attorneys as attorney fees.
7.           As additional consideration for this Agreement, EDDO and
Quicksilver, through their respective counsel, shall request that the Court
dismiss all of their claims in the Lawsuit with prejudice.  If necessary or
appropriate, EDDO shall seek any court approval of this Agreement and the
settlement it evidences that is required by its Amended Plan of

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Reorganization and EDDO’s counsel may also disclose the terms of this Agreement
to the extent necessary to seek court approval of their attorney fees.
8.           As additional consideration for this Agreement, each of the Parties
agrees to pay its respective costs and attorney fees related to the Lawsuit and
this Agreement.
9.           This Agreement is not intended to affect, and shall not affect, any
claims or defenses as between any Party on the one hand and the Eagle parties on
the other hand.  It is further agreed that under no circumstances should any
action taken by or on behalf of the Eagle parties have any effect on or in any
way modify or reduce Quicksilver’s obligations under the terms of this Agreement
B.           Warranty of Capacity to Execute Agreement and Release.  Each Party
represents and warrants that the person signing this Agreement on its behalf has
the full legal right, capacity and authority to do so and to make the promises,
representations and warranties contained herein.  Each Party further represents
that it has not sold, assigned, transferred, conveyed or otherwise disposed of
any of the claims, demands, obligations or causes of action referred to in this
Agreement, except to any extent an assignment has been made to any Party’s
attorney to cover attorney fees.
C.           Indemnity.
1.           Quicksilver shall HOLD HARMLESS AND INDEMNIFY each of the EDDO
Releasees from and against any and all claims, demands, obligations or causes of
action made by anyone claiming by, through or under Quicksilver related to the
claims released herein, together with any costs, expenses or attorney fees
incurred as a result.
2.           EDDO and Blast shall HOLD HARMLESS AND INDEMNIFY each of the
Quicksilver Releasees from and against any and all claims, demands, obligations
or causes of action made by anyone claiming by, through or under EDDO or Blast
or either of them related to

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the claims released herein, together with any costs, expenses or attorney fees
incurred as a result.  Notwithstanding the provisions of this clause, it is
specifically agreed that EDDO and the EDDO Releasees shall have no obligation to
indemnify or defend Quicksilver or the Quicksilver Releasees from and against
any and all claims, demands, obligations or causes of action made by the Eagle
parties.
D.           Successors and Assigns Bound.  This Agreement shall bind and
benefit each Party’s successors, predecessors, agents, employees,
representatives, counsel, owners, directors, shareholders, members, managers,
insurers, assigns, subsidiaries, parent corporations, affiliated entities or
sister corporations, as the case may be, and all others claiming by, through or
under such Party.
E.           Severability.  Should any provision of this Agreement be held
invalid by a court of competent jurisdiction, it is agreed that this shall not
affect the validity or enforceability of any other provision and that the
Parties shall attempt in good faith to renegotiate the failed provision so as to
effectuate the purpose of and to conform to the law regarding such
provision.  In the event the Parties are unable to renegotiate the provision,
then they hereby agree to waive a jury such that the issue shall be resolved, if
at all, by a court of competent jurisdiction.
F.           Controlling Law.  This Agreement is entered into in Texas and shall
be construed, interpreted and enforced in accordance with Texas law without
reference to choice-of-law rules.
G.           Integration.  This Agreement is fully integrated, it represents the
entire understanding of the Parties, there are no other agreements,
representations, promises or negotiations that have not been expressly embodied
herein and this Agreement supersedes any and all prior agreements with respect
to the subject matter hereof.  The recitals of this Agreement are contractual
and are considered material.

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H.           Modification in Writing.  This Agreement may be amended or modified
only by a writing executed by the Party to be charged with the modification.
I.           Independent Legal Advice.  Each Party acknowledges and represents
that it has received independent legal advice and has not relied upon any
representations of any other Party or its agents, employees, representatives or
counsel on any subject contained in this Agreement or otherwise, other than as
expressly set forth in this Agreement.
J.           No Admissions.  This Agreement is entered into for the purpose of
buying peace and settling disputed claims.  By entering into this Agreement, the
Parties do not acknowledge, but instead deny liability.
K.           Captions.  The paragraph titles appearing in this Agreement are for
convenience only and shall not by themselves determine the construction of this
Agreement.
L.           Counterparts.  This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which shall
constitute one and the same instrument.
M.           Terms to be Read in Context.  Singular and plural terms, as well as
terms stated in the masculine, feminine or neuter gender, shall be read to
include the other(s) as the context requires in order to effectuate the full
purposes of this Agreement.
N.           Mutually Drafted.  The drafting of this Agreement is a mutual
effort among the Parties and their counsel; thus, this Agreement is not to be
construed against any Party as the drafter.
O.           Confidentiality. The terms of this Agreement are strictly
confidential and shall not be disclosed by any Party except:  (i) as necessary
to enforce them, (ii) as otherwise required by law or Court order, or (iii) to a
Party’s auditors, legal counsel or other advisors having a need to know.  If
required for enforceability, the Party desiring to disclose the terms

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shall take reasonable steps to attempt to file under seal.  The Parties shall
not issue or cause to be issued any press releases announcing or relating to the
Agreement.  This provision does not preclude EDDO or Blast from complying with
disclosure regulations required by law, including any required disclosure of the
terms of this Agreement in any SEC Form 8-K filing.
O.           Confidentiality. The terms of this Agreement are strictly
confidential and shall not be disclosed by any Party except:  (i) as necessary
to enforce them, (ii) as otherwise required by law or Court order, or (iii) to a
Party’s auditors, legal counsel or other advisors having a need to know.  If
required for enforceability, the Party desiring to disclose the terms shall take
reasonable steps to attempt to file under seal.  The Parties shall not issue or
cause to be issued any press releases announcing or relating to the
Agreement.  This provision does not preclude EDDO or Blast from complying with
disclosure regulations required by law, including any required disclosure of the
terms of this Agreement in any SEC Form 8-K filing.
P.           Notice.  All notices, requests or other communications required or
permitted to be given under this Agreement shall be in writing and shall be
delivered by hand or courier or mailed by United States registered or certified
mail, return receipt requested, postage prepaid, and addressed to the party to
whom notice is to be given at such party’s address as set forth below.  Any such
notice, request or other communication shall be considered received on the date
of hand or courier delivery or on the third day following deposit in the United
States mail as provided above.  A carbon copy of all notices, requests or other
communications to Quicksilver shall be sent by facsimile or e-mail to the
attention of its attorneys, Shayne D. Moses and Timothy D. Howell, at (817)
255-9199 or smoses@mph-law.com and thowell@mph-law.com.  Likewise, a carbon copy
of all notices, requests or other communications to EDDO shall be sent by
facsimile to the attention of its attorneys, Michael J. Maloney and Jonathan E.
Axelrad, at (713) 759-6930 or mmaloney@mmmllp.com and ja@jaallp.com.
Address for Quicksilver:
Quicksilver Resources Inc.
 
Attn:  Greg Gibson
 
777 West Rosedale Street, Suite 300
 
Fort Worth, Texas 76104
   
Address for EDDO:
Eagle Domestic Drilling Operations, LLC
 
14550 Torrey Chase Blvd., Suite 330
 
Houston, Texas 77014

EACH PARTY FURTHER STATES THAT IT HAS CAREFULLY READ THIS AGREEMENT; THAT THIS
AGREEMENT HAS BEEN FULLY EXPLAINED TO IT BY COUNSEL OF ITS CHOICE; THAT IT FULLY
UNDERSTANDS THE FINAL AND
 

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BINDING EFFECT OF THIS AGREEMENT; THAT THE ONLY PROMISES MADE TO IT TO SIGN THIS
AGREEMENT ARE THOSE STATED ABOVE; AND THAT IT IS SIGNING THIS AGREEMENT
VOLUNTARILY.

EXECUTED to be effective as of September 17th, 2008.

 
QUICKSILVER RESOURCES INC.
     
By:
   
Printed Name:
   
Title:
           
BLAST ENERGY SERVICES, INC.
     
By:
 /s/ John O’Keefe
 
Printed Name:
 John O’Keefe
 
Title:
 CEO
     
EAGLE DOMESTIC DRILLING OPERATIONS, LLC
     
By:
 /s/John MacDonald
 
Printed Name:
 John MacDonald
 
Title:
 CFO

 

 

 

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STATE OF TEXAS                              §
§
COUNTY OF TARRANT                   §

This instrument was acknowledged before me on September ___, 2008, by
______________________________, the ______________________________ of
Quicksilver Resources Inc., on behalf of said entity.

__________________________________________
Notary Public, State of Texas

STATE OF Texas                                 §
§
COUNTY OF Harris                             §

This instrument was acknowledged before me on September 17th, 2008, by John
O’Keefe, the CEO of Blast Energy Services, Inc., on behalf of said entity.

   /s/ Carol B. Gantt
Notary Public, State of Texas

STATE OF Texas                                 §
§
COUNTY OF Harris                             §

This instrument was acknowledged before me on September 17th, 2008, by John
MacDonald, the CFO of Eagle Domestic Drilling Operations, LLC, on behalf of said
entity.

   /s/ Carol B. Gantt
Notary Public, State of Texas