Exhibit 10.1

 

 
 
QUICKSILVER RESOURCES CANADA INC.
 
- and -
 
FORTUNE CREEK GATHERING AND PROCESSING PARTNERSHIP
 
- and -
 
0927530 B.C. UNLIMITED LIABILITY COMPANY
 

 

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CONTRIBUTION AGREEMENT

 

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Dated as of December 23, 2011
 
 
 

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TABLE OF CONTENTS
 
ARTICLE 1 DEFINITIONS AND INTERPRETATION
1
   
1.1
Definitions
1
1.2
Headings; Interpretation
6
1.3
Gender and Number
6
1.4
Including
6
1.5
References to this Agreement
6
1.6
References to Parties
6
1.7
Time Periods
6
1.8
References to Statutes
6
1.9
Currency
7
1.10
Accounting Terms
7
1.11
No Strict Construction
7
1.12
Knowledge or Awareness
7
1.13
Schedules
7
     
ARTICLE 2 CONTRIBUTION
7
   
2.1
Contribution of Assets
7
2.2
Payment of Value-Added Taxes
8
2.3
Payment of Cash Component
8
2.4
Partnership Interests
9
2.5
Tax Election
9
2.6
Attributed Value
9
     
ARTICLE 3 REPRESENTATIONS AND WARRANTIES
9
   
3.1
QRCI’s Representations and Warranties
9
3.2
Partnership’s Representations and Warranties
12
3.3
Newco’s Representations and Warranties
13
3.4
Survival of Representations and Warranties
14
3.5
No Additional Representations or Warranties by QRCI or Newco
15
     
ARTICLE 4 ADDITIONAL AGREEMENTS AND ACKNOWLEDGEMENTS
15
   
4.1
Declaration of Trust
15
4.2
Conflict
15
4.3
Required Consents
16
4.4
Asset Purchase Agreement
16
4.5
Purchase of Compression
16
     
ARTICLE 5 PROCESSING AND GATHERING; OPPORTUNITIES
16
   
5.1
Processing Facilities
16
5.2
Pipelines and Compression
17
5.3
Opportunities
17
5.4
Sales of Acreage
17
5.5
Drilling and Completion Expenditures
18

 
 
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ARTICLE 6 LIABILITY AND INDEMNIFICATION
19
   
6.1
Responsibility of QRCI
19
6.2
Responsibility of Partnership
20
6.3
Responsibility of Newco
20
6.4
Procedure - Indemnities
21
6.5
No Merger of Legal Responsibilities
21
6.6
Substitution and Subrogation
21
6.7
Responsibility Extends to Legal Costs
21
6.8
Benefit of Indemnity
21
6.9
Limitation on Liability
22
6.10
Social Service Tax Act
22
     
ARTICLE 7 GENERAL
22
   
7.1
Further Assurances
22
7.2
Governing Law and Submission to Jurisdiction
22
7.3
Assignment
22
7.4
Counterparts
23
7.5
Entire Agreement; Amendment
23
7.6
No Third Party Beneficiaries
23
7.7
Severability
23
7.8
Expenses
23
7.9
Notices
23
7.10
Remedies
25
7.11
Binding Effect
25

 
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CONTRIBUTION AGREEMENT
 
THIS CONTRIBUTION AGREEMENT made as of the 23rd day of December, 2011.
 
BETWEEN:
 
QUICKSILVER RESOURCES CANADA INC., a corporation incorporated under the laws of
Alberta (“QRCI”)
 
- and -
 
FORTUNE CREEK GATHERING AND PROCESSING PARTNERSHIP, an Alberta ordinary
partnership formed pursuant to the laws of the Province of Alberta (the
“Partnership”)
 
-and-
 
0927530 B.C. UNLIMITED LIABILITY COMPANY, an unlimited liability
company incorporated under the laws of British Columbia (“Newco”)
 
RECITALS:
 
A.  
The Partnership is governed by a Partnership Agreement, made as of the date
hereof between QRCI and Newco (the “Partnership Agreement”);

 
B.  
QRCI has agreed to contribute the Assets to the Partnership on a partially tax
deferred basis and upon the terms and subject to the conditions set forth in the
Partnership Agreement and in this Agreement; and

 
C.  
Newco has agreed to contribute $125 million in cash to the Partnership upon the
terms and subject to the conditions set forth in the Partnership Agreement and
this Agreement.

 
NOW THEREFORE in consideration of the premises, mutual covenants, agreements and
warranties contained in this Agreement, and other good and valuable
consideration, the receipt and sufficiency of which is acknowledged by the
parties hereto, the parties hereto respectively covenant and agree as follows:
 
ARTICLE 1
DEFINITIONS AND INTERPRETATION
 
1.1
Definitions

 
In this Agreement the following words shall have the following meanings:
 
“Actual Initial Compressor Costs” means the actual aggregate amounts spent or
incurred by the Partnership after the Effective Time to complete the
engineering, procurement, construction and installation of the Initial
Compressors on the Maxhamish Pipeline.
 
“Affiliate” means, in the context of the relationship between Persons, that one
Person controls the other Person, is controlled by the other Person or that both
are controlled by a third Person, and without limiting the generality of the
foregoing for this purpose:
 
 
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(a)  
a corporation shall be deemed to be controlled by those Persons who possess,
directly or indirectly, the power to direct or cause the direction of the
management and policies of the said corporation by ownership of voting interest,
by contract or otherwise; and

 

 
(b)  
a partnership, association, business or trust shall be deemed to be controlled
by those Persons that are able to determine its policies and material decisions,
provided that a partnership that is comprised only of corporations that are
Affiliates of each other shall be deemed to be an Affiliate of each such
corporation and its other Affiliates.

 
“Agreement” means this contribution agreement, together with the Schedules
attached hereto and made a part hereof, all as amended, supplemented or modified
from time to time.
 
“AMI” means the area delineated with a red line on the map attached hereto as
Schedule “B”.
 
“AMI Opportunity Project” has the meaning ascribed thereto in the Partnership
Agreement.
 
“Applicable Law” means, in relation to any Person, Asset, transaction or event,
all applicable provisions, whether now or hereafter in effect, of laws,
statutes, rules, regulations, official directives and orders of all federal,
provincial, municipal and local governmental bodies (whether administrative,
legislative, executive or otherwise) and judgments, orders and decrees of all
courts, arbitrators, commissions or bodies exercising similar functions in
actions or proceedings in which the Person in question is a party or by which it
is bound or having application to the Asset, transaction or event in question.
 
“Asset Purchase Agreement” means an agreement dated as of the date hereof
between QRCI and MMI in the form of Schedule F attached hereto.
 
“Assets” has the meaning given to such term in Section 2.1.
 
“Assumed Liabilities” means any and all liabilities relating to the Assets
resulting from, arising out of or relating to the ownership or operation of the
Assets for the period from and after the Effective Time.
 
“Attributed Value” has the meaning given to such term in Section 2.6.
 
“Business Day” means any day except Saturday, Sunday or any statutory holiday in
the Province of Alberta, the State of Texas or the State of New York.
 
“Capital Contribution” has the meaning given to such term in the Partnership
Agreement;
 
“Capital Pool” has the meaning given to such term in the Partnership Agreement.
 
“Cash Component” has the meaning given to such term in Section 2.1.
 
“Commercial In-Service Date” means, with respect to the Fortune Creek Gas Plant,
the date on which the Fortune Creek Gas Plant is operationally and commercially
ready to begin receiving Natural Gas.
 
“Completion Costs” has the meaning given to such term in the Canadian
Association of Petroleum Landmen 2007 Operating Procedure.
 
“Compression Assets” has the meaning given to such term in Section 4.5(a).
 
 
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“Drilling Commitment Liquidated Damages” has the meaning given to such term in
Section 5.5(c).
 
“Drilling Costs” has the meaning given to such term in the 2007 Canadian
Association of Petroleum Landmen 2007 Operating Procedure.
 
“Drilling Obligations” has the meaning given to such term in Section 5.5(a).
 
“Effective Time” means 9:05 a.m. Calgary time on the date hereof, provided that
the Effective Time shall be subsequent to the Effective Time of the Partnership
Agreement.
 
“Environmental Liabilities” means all liabilities and obligations in respect of
abandonment, restoration, reclamation of, and in respect of environmental damage
attributable to operations conducted on or with respect to, the Assets
regardless of whether any such abandonment, restoration, reclamation or
environmental damage relates to or arises out of operations conducted or any
condition existing or occurring prior to or after the Effective Time.
 
“Estimated Initial Compressor Costs” means the estimated amount, made as of the
date hereof, of the aggregate amounts to be spent after the Effective Time by
the Partnership to complete the engineering, procurement, construction and
installation of the Initial Compressors on the Maxhamish Pipeline, which
estimated amount has been determined by the parties to be ten million dollars
($10,000,000).
 
“Excise Tax Act” means the Excise Tax Act, 1980 RSC, c. E-15, as amended and the
regulations thereunder.
 
“Excluded Liabilities” means any and all liabilities relating to the Assets
resulting from, arising out of or relating to the ownership or operation of the
Assets for the period prior to the Effective Time.
 
“Firm Service” means firm, non-interruptible service in a Partnership Facility,
which for the avoidance of doubt shall be the last service to be curtailed
unless QRCI in its sole discretion agrees otherwise in writing.
 
“Fortune Creek Gas Plant” means the Processing Facility described on Schedule D.
 
“GAAP” means generally accepted accounting principles in effect in the United
States of America from time to time, as published by the Financial Accounting
Standards Board, consistently applied throughout the specified period and in the
immediately prior comparable period.
 
“Gathering Agreement” means an agreement dated as of the date hereof between
QRCI and the Partnership in the form of Schedule C attached hereto.
 
“Governmental Authorization” means, with respect to any Person, any order,
permit, approval, consent, waiver, licence, certificate, registration or similar
authorization of any Governmental Entity having jurisdiction over the Person.
 
“Governmental Entity” means, (a) any international, multinational, national,
federal, provincial, state, county, municipal, local or other governmental or
public department, central bank, court, minister, governor-in-council, cabinet,
commission, board, bureau, agency, commissioner,
 
 
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tribunal or instrumentality, domestic or foreign; (b) any subdivision or
authority of any of the above; (c) any stock exchange; and (d) any
quasi-governmental or private body exercising any regulatory, expropriation or
taxing authority under or for the account of any of the above.
 
“GST” means any value added taxes imposed under any taxing statute, including,
without limitation, goods and services tax imposed under the provisions of Part
IX of the Excise Tax Act, harmonized sale taxes, provincial sales tax, and any
similar taxes.
 
“Hazardous Materials” means hazardous, deleterious, or toxic substances;
oilfield wastes; radioactive material; asbestos; polychlorinated biphenyls;
pollutants; contaminants; dangerous goods; and unrefined and refined petroleum
products; including all substances, materials and wastes regulated under
applicable Laws relating to environmental or health and safety matters.
 
“Hurdle Rate” with respect to any period, means an internal rate of return for
such period calculated without regard to any terminal value and on an unlevered
pre-income tax, fully cost burdened (including general and administrative costs)
basis.
 
“Initial Working Capital Amount” means $3,000,000.00.
 
“Income Tax Act” means the Income Tax Act (Canada) and the regulations thereto,
or any similar Applicable Law of any Province or Territory of Canada imposing a
tax on income or profits.
 
“Initial Compressors” mean two 4,735 horsepower compressors (each comprised of a
Caterpillar 3616LE engine and an Ariel KBZ-6 compressor) at the compressor
facility located at a-66-A/94-0-15 (59°47'48”N and 122°33'55”W) and one
dehydrator, on the Maxhamish Pipeline.
 
“Land Rights” means all easements, rights of way, rights of access, rights of
entry, governmental entry and access rights, crossing agreements, surface leases
and permits by virtue of which the holder is entitled to occupy and access lands
used or useful for purposes of operating the Assets, as described in Schedule A.
 
“Maxhamish Pipeline” means the existing pipeline project described in Schedule A
hereto.
 
“Mcf” means one thousand cubic feet, measured at standard conditions.
 
“Midstream Facility” means any Processing Facility or Transportation Facility.
 
“MMI” means Makarios Midstream Inc., a wholly owned subsidiary of QRCI.
 
“Natural Gas” means natural gas that has been produced from a naturally
occurring reservoir either prior to or after processing or the removal of
Natural Gas Products therefrom.
 
“Natural Gas Liquids” means ethane, propane, butanes, condensate and heavier
hydrocarbons.
 
“Natural Gas Products” means substances, other than methane, extracted from
Natural Gas including sulphur, carbon dioxide and Natural Gas Liquids.
 
“NGTL” means NOVA Gas Transmission Ltd.
 
“Operations” has the meaning given to such term in Section 5.5(a).
 
 
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“Partnership Agreement” has the meaning ascribed thereto in the Recitals.
 
“Partnership Facility” or “Partnership Facilities” means any Midstream Facility
in which an interest is owned by the Partnership.
 
“Partnership Interest” means the entire legal and equitable ownership interest
of a partner in the Partnership at any particular time.
 
“Permitted Encumbrances” means:
 

 
(a)  
easements, rights of way, servitudes or other similar rights in land granted in
the ordinary course of business;

 

 
(b)  
liens imposed by statute securing the payment of taxes, assessments or other
governmental charges which are not due at the relevant time;

 

 
(c)  
rights of any governmental or public authority to levy taxes on or to limit,
control or regulate any of the Assets in any manner;

 

 
(d)  
the reservations, limitations, provisos or conditions in any grants or transfers
from the Crown of any of the Assets or interests therein, and statutory
exceptions to title; and

 

 
(e)  
undetermined or inchoate liens (including, without limitation, processors',
operators', mechanics', builders', materialmen's and similar liens) against the
Assets arising in the ordinary course of business in regard to the costs and
expenses of operation of the Assets, which costs and expenses are not due or
delinquent at the relevant time or the validity of which is being diligently
contested by or on behalf of QRCI.

 
“Person” includes any individual, partnership, firm, corporation, limited
liability company, association, trust, joint venture, unincorporated
organization, union, government or any department or agency thereof.
 
“Processing Agreement” means an agreement substantially in the form of Schedule
E attached hereto.
 
“Processing Charge” has the meaning given to such term in Section 5.1(a).
 
“Processing Facility” means a facility (other than a Transportation Facility)
whose primary function is or is ancillary to the compression, treatment or
processing of and the removal of impurities from Natural Gas, or the extraction,
fractionation or other treatment, or the storage, of Natural Gas or Natural Gas
Products.
 
“Purchase Price” has the meaning given to such term in Section 2.1.
 
“Representatives” has the meaning given to such term in Section 6.8.
 
“Required Consent” has the meaning given to such term in Section 4.3.
 
“Service Agreement” has the meaning given to such term in Section 5.4(a).
 
“Specific Conveyances” has the meaning given to such term in Section 4.1.
 
 
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“Temporary Account” has the meaning given in Section 2.1.
 
“TOP” shall have the meaning given to such term in Section 5.2(b).
 
“Transportation Facility” means a pipeline (including ancillary compression
equipment) for the field gathering or other transportation of Natural Gas.
 
1.2
Headings; Interpretation

 
The division of this Agreement into articles, sections, subsections, paragraphs
and clauses and the inclusion of headings and a table of contents are for
convenience of reference only and do not affect the construction or
interpretation of this Agreement.  This Agreement shall be construed without
regard to any presumption or rule requiring construction or interpretation
against the party drafting or causing any instrument to be drafted. 
 
1.3
Gender and Number

 
Unless the context otherwise requires, words importing the singular number
include the plural and vice versa, and words importing gender include all
genders.
 
1.4
Including

 
Where the word “including” or “includes” is used in this Agreement it means
“including (or includes) without limitation.”
 
1.5
References to this Agreement

 
Unless otherwise specified, the terms “hereof”, “hereunder” and similar
expressions refer to this Agreement as a whole and not to any particular
article, section or other portion of this Agreement, and references in this
Agreement to articles, sections and schedules are to articles and sections of
and schedules to this Agreement.
 
1.6
References to Parties

 
Unless otherwise specified, every reference to a party to this Agreement shall
extend to and include (as the context requires) such party's successors and
permitted assigns, as if specifically named.
 
1.7
Time Periods

 
Unless otherwise specified, time periods within or following which any payment
is to be made or other act is to be done shall be calculated by excluding the
day on which the period commences and including the day on which the period ends
and by extending the period to the next Business Day following if the last day
of the period is not a Business Day.
 
1.8
References to Statutes

 
Unless otherwise specified, any reference in this Agreement to a statute
includes all regulations made pursuant to such statute and the provisions of any
statute or regulation which amends, supplements, supersedes or replaces any such
statute or any such regulation.
 
 
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1.9
Currency

 
Unless otherwise specified, any reference to currency is to Canadian currency
and any amount advanced, paid or calculated is to be advanced, paid or
calculated in Canadian currency.
 
1.10
Accounting Terms

 
Unless otherwise specified, whenever reference is made in this Agreement to a
calculation to be made or an action to be taken in accordance with GAAP, such
calculation shall be made or action taken in accordance with GAAP applicable as
at the time such calculation is required to be made or action is to be taken,
consistently applied.
 
1.11
No Strict Construction

 
The language used in this Agreement is the language chosen by the parties to
express their mutual intent, and no rule of strict construction shall be applied
against any party.
 
1.12
Knowledge or Awareness

 
Where in this Agreement a representation and warranty is made on the basis of
the knowledge or awareness of QRCI, such knowledge or awareness consists only of
the actual knowledge or awareness of the current officers of QRCI, without
independent investigation or inquiry or review of QRCI's files or records, and
does not include knowledge and awareness of any other Person or constructive or
imputed knowledge.
 
1.13
Schedules

 
The following schedules form part of this Agreement:
 
Schedule A
-
Contributed Assets
Schedule B
-
AMI
Schedule C
-
Gathering Agreement
Schedule D
-
Fortune Creek Gas Plant
Schedule E
-
Processing Agreement
Schedule F
-
Asset Purchase Agreement

 
Unless otherwise specified, wherever any term or condition, express or implied,
of any Schedule conflicts or is at variance with any term or condition in the
body of this Agreement, such term or condition in the body of this Agreement
shall prevail to the extent of the conflict.
 
ARTICLE 2
CONTRIBUTION
 
2.1
Contribution of Assets

 
Pursuant to the terms and subject to the conditions set forth herein, effective
as of the Effective Time, (a) QRCI hereby contributes, assigns, transfers,
conveys and sets over the assets described in Schedule A hereto (the “Assets”)
to the Partnership, in consideration for a purchase price (“Purchase Price”)
comprised of (i) the issuance by the Partnership of a 50.0% Partnership
Interest, and (ii) the payment by the Partnership of cash equal to $125 million
less the Actual Initial Compressor Costs less the Initial Working Capital Amount
(the “Cash Component”), such
 
 
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Cash Component being paid in three (3) installments as per Section 2.3 below;
and (b) Newco hereby contributes $125 million to the Partnership as a Capital
Contribution in exchange for a 50.0% Partnership Interest.  The Partnership
hereby accepts the Assets from QRCI, effective as of the Effective Time, to
have, possess and hold the same, together with all benefit and advantage to be
derived therefrom absolutely, all in accordance with the provisions of this
Agreement.  The parties acknowledge that, as of the Effective Time, the
Partnership has not established a bank account and that, accordingly, all funds
of the Partnership, including the cash components of the contributions made
pursuant to Section 2.1, shall be held in the bank account of MMI established at
Bank of Nova Scotia with Account Number 129890402613 (the “Temporary Account”),
in trust for and on behalf of the Partnership provided that such funds shall be
used and disbursed solely in accordance with this Agreement and the Partnership
Agreement.  Once the Partnership has established a bank account in its own name,
any funds remaining in the Temporary Account shall be promptly transferred to
the Partnership's account.  No funds of any other Person shall be co-mingled
with the funds held in trust for the Partnership in the Temporary Account.
 
2.2
Payment of Value-Added Taxes

 
The Purchase Price payable by the Partnership to QRCI pursuant to Section 2.1 is
exclusive of any GST.  The Partnership shall pay any applicable GST as
calculated by QRCI based on the total Purchase Price pursuant to Section 2.3(a),
directly to QRCI, as of the Effective Time.  To the extent any additional GST is
owing or becomes applicable in respect of the acquisition of the Assets by the
Partnership pursuant to Section 2.1(a), the Partnership shall be responsible for
such GST, including any penalties, interest or other additions thereto.
 
2.3
Payment of Cash Component

 
The Partnership shall pay the Cash Component of the Purchase Price to QRCI as
follows:
 

 
(a)  
At the Effective Time, the Partnership shall pay to QRCI as the first
installment an amount equal to $125 million, less the Estimated Initial
Compressor Costs, less the Initial Working Capital Amount, less an amount equal
to the amount of GST paid by the Partnership to QRCI pursuant to Section 2.2;

 

 
(b)  
Upon receipt of any refund by the Partnership in respect of an input tax credit
claimed in respect of any applicable GST, the Partnership shall pay the amount
of the refund directly to QRCI as the second installment of the Cash Component
of the Purchase Price; and

 

 
(c)  
Upon completion of the engineering, procurement, construction and installation
of the Initial Compressors, the Partnership shall pay to QRCI an amount equal to
the amount, if any, by which the Estimated Initial Compressor Costs exceed the
Actual Initial Compressor Costs.

 
The parties further agree and acknowledge that the Cash Component payable by the
Partnership pursuant to Section 2.3(a) has been reduced by the Estimated Initial
Compressor Costs, so as to enable the Partnership to complete the engineering,
procurement, construction and installation of the Initial Compressors.  To the
extent that the Actual Initial Compressor Costs are greater than the Estimated
Initial Compressor Costs, QRCI agrees to refund a portion of the Cash Component
paid by the Partnership equal to the amount by which the Actual Initial
Compressor Costs exceed the Estimated Initial Compressor Costs, such an amount
to be treated by the parties as a true-up of the Purchase Price.
 
 
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2.4
Partnership Interests

 
 
(a)
In recognition of the Capital Contribution made pursuant to Section 2.1, QRCI's
capital account shall be credited with an amount equal to the Attributed Value,
less the Cash Component.

 
 
(b)
In recognition of the Capital Contribution made pursuant to Section 2.1, Newco's
capital account shall be credited with an amount equal to $125 million.

 
2.5
Tax Election

 
QRCI's contribution pursuant to Section 2.1 will occur pursuant to an election
under subsection 97(2) of the Income Tax Act (Canada), with an elected amount
equal to the Cash Component of the Purchase Price paid by the Partnership
pursuant to Section 2.1.  Newco shall have the right to review the T2059 Form to
be filed by QRCI.  QRCI and Newco shall act in good faith in determining the
allocation of the elected amount between the Assets.  Newco shall notify QRCI of
any reasonable objections with respect to the proposed T2059 Form.  QRCI and
Newco shall agree on such allocation within five (5) business days after
delivery of the notice of disagreement.
 
QRCI is hereby authorized, for and on behalf of and in the name of the
Partnership and its partners, to prepare, execute and file income tax returns,
tax forms and tax elections required to be prepared and filed in respect of the
sale, assignment, transfer and conveyance provided for in this Agreement.
 
2.6
Attributed Value

 
The value attributed to the Assets (the “Attributed Value”) shall be equal to
their fair market value, as of the Effective Time, which the parties have
determined to be $125,000,000.  As between the parties, no adjustments to the
Attributed Value, capital account of QRCI or QRCI's Partnership Interest under
the Partnership Agreement shall be made in respect of the contribution of the
Assets pursuant hereto.  The parties acknowledge and agree that there are no
liabilities (other than the Assumed Liabilities) being assumed by the
Partnership in connection with the acquisition by the Partnership of the Assets
and that no value is being attributed to the Assumed Liabilities.
 
 
ARTICLE 3
REPRESENTATIONS AND WARRANTIES
 
3.1
QRCI's Representations and Warranties

 
QRCI represents and warrants to Newco and the Partnership that on the date
hereof:
 

 
(a)  
Standing: QRCI is a corporation, duly organized and validly existing under the
laws of the jurisdiction of its incorporation, and is duly registered and
authorized to carry on business in the jurisdictions in which the Assets are
located;

 

 
(b)  
Requisite Authority: QRCI has the requisite corporate capacity, power and
authority to execute this Agreement, and any other agreements and documents
required to be delivered hereby and to perform the obligations to which it
thereby becomes subject;

 
 
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(c)  
Execution and Enforceability: QRCI has taken all necessary corporate actions to
authorize the execution, delivery and performance of this Agreement.  This
Agreement has been duly executed and delivered by QRCI, and this Agreement and
all other documents executed and delivered on behalf of QRCI hereunder shall
constitute legal, valid and binding obligations of QRCI enforceable in
accordance with their respective terms and conditions, subject to the
qualification that such enforceability may be subject to (i) bankruptcy,
insolvency, fraudulent preference, reorganization or other laws affecting
creditors' rights generally, and (ii) general principles of equity (regardless
of whether such enforceability is considered in a proceeding at equity or law);

 

 
(d)  
No Conflict: The execution and delivery of this Agreement and the conveyance of
the Assets to the Partnership in accordance with the terms of this Agreement are
not in violation or breach of, or in conflict with and do not require any
consent, authorization or approval under:

 

 
(i)  
any term or provision of the constating documents of QRCI;

 

 
(ii)  
any agreement, instrument, permit or authority to which QRCI is a party or by
which QRCI is bound; or

 

 
(iii)  
any Applicable Law or any judicial order, award, judgement or decree applicable
to QRCI;

 

 
(e)  
Residency for Tax Purposes: QRCI is not a non-resident of Canada within the
meaning of the Income Tax Act;

 

 
(f)  
Title: QRCI has good, valid and marketable title to the Assets that is, except
for Permitted Encumbrances, free and clear of all liens, mortgages, royalties,
encumbrances and other burdens;

 

 
(g)  
Condition and Sufficiency of Assets:  The structures, machinery, equipment,
appurtenances and other items of tangible personal property included in the
Assets are in good operating or working condition and repair, and are adequate
for the uses to which they are being put.  The Land Rights provide for a
contiguous right of way in respect of the entire length of the Maxhamish
Pipeline;

 

 
(h)  
Required Approvals:  There is no requirement to make any filing with, give any
notice to, or obtain any authorization, consent or approval of, any Governmental
Entity as a condition to the lawful completion of the transactions contemplated
by this Agreement, the failure of receipt of which would interfere in any
material respect with the ownership, use and operation of the Assets as
currently owned, used and operated or would result in a prohibition of or
material delay in the transactions contemplated hereby;

 

 
(i)  
Governmental Authorizations:  QRCI holds all material Governmental
Authorizations, permits, orders, approvals and licences required by Applicable
Law necessary for the ownership, use and operation of the Assets, as currently
being used and operated, and such are valid and in full force and effect;

 

 
(j)  
Compliance with Laws:  The Assets are being maintained and operated in
accordance with all Applicable Laws and Governmental Authorizations. The
ownership of the Assets, and the uses to which the Assets have been put, are not
in material breach of any

 
 
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Applicable Laws or any contracts or agreements to which QRCI is a party, except
for breaches which in the aggregate are immaterial to the Partnership;
 

 
(k)  
Timely Payment:  All rentals and other amounts due under the Land Rights and all
taxes levied upon the Assets that are payable by QRCI have been properly paid in
a timely manner. Without limitation, all ad valorem, property and similar taxes
and assessments based on or measured by the ownership of the Assets that are due
and owing and the failure to pay would interfere in any material respect with
the ownership, use and operation of the Assets as currently owned, used and
operated, have been properly paid and fully discharged;

 

 
(l)  
Material Contracts:  In respect of each material contract and agreement to which
QRCI is a party or by which it is bound and which is included in the Assets,
including all Land Rights:

 

 
(i)  
QRCI is not in material default in the performance or observance of any of the
obligations, covenants, terms or conditions contained or referenced therein; and

 

 
(ii)  
to QRCI's knowledge, no other party thereto is in material default thereunder,
nor does any such party have any subsisting right to terminate the same; and

 

 
(iii)  
such contracts and agreements are in full force and effect;

 

 
(m)  
No Litigation:  There are no (i) actions, suits or proceedings, at law or in
equity, by any Person, (ii) any grievance, arbitration or alternative dispute
resolution process, or (iii) administrative or other proceeding by or before (or
to the knowledge of QRCI any investigation by) any Governmental Entity, pending,
or, to the knowledge of QRCI, threatened against or affecting the Assets or the
interests of QRCI therein, and, to the knowledge of QRCI, there is no valid
basis for any such action, complaint, grievance, suit, proceeding, arbitration
or investigation. QRCI is not subject to any judgment, order or decree entered
in any judicial, administrative or arbitral proceeding which relates to or
affects the Assets;

 

 
(n)  
No Reduction:  QRCI's interest in the Assets is not subject to reduction by
virtue of the conversion or other alteration of any third party interest
relating thereto or otherwise, except for Permitted Encumbrances;

 

 
(o)  
Bankruptcy:  QRCI has not made any assignment for the benefit of creditors, nor
any proposal under the Bankruptcy and Insolvency Act (Canada) nor has any
receiving order been made against it under the Bankruptcy and Insolvency Act
(Canada), nor has any petition for such an order been served upon it, nor are
there any proceedings in effect or threatened under the Companies' Creditors
Arrangement Act (Canada) or similar legislation with respect to it, nor has any
receiver, receiver and manager, liquidator, administrator, custodian or official
with similar powers been appointed by court order or privately respecting QRCI
or any of its assets or property, nor is QRCI contemplating or initiating any
steps whatsoever in connection with any of the foregoing, nor has QRCI received
any notice from any Person contemplating or initiating any such steps;

 

 
(p)  
Hazardous Materials:  Except as disclosed to Newco, QRCI has not filed any
notice under any federal, provincial or local law indicating or reporting a past
or present spill, release or emission on or in respect of the Assets of
Hazardous Materials and QRCI has

 
 
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no contingent liability of which it has knowledge in connection with any release
of Hazardous Materials on or in respect of the Assets;
 

 
(q)  
Environmental Matters:

 

 
(i)  
QRCI has not received, nor is it aware that any other Person has received:

 

 
(A)  
any notice, order or directive under Applicable Law which relates to
Environmental Liabilities and which requires any work, repairs, construction or
capital expenditures which is outstanding, where those orders or directives have
not been complied with in all material respects; or

 

 
(B)  
any demand or notice issued with respect to the breach of Applicable Laws from
any Person pertaining to the Assets that relates to the environment, health or
safety, including any matter respecting the release, use, storage, treatment,
transportation or disposition of environmental contaminants which demand or
notice remains outstanding,

 
and to QRCI's knowledge no particular circumstance presently exists which may
give rise to any such orders, directives, demands or notices; and
 

 
(r)  
Brokers and Finders:  No broker, finder or investment banker is entitled to any
brokerage, finder's or other fee or commission in connection with the
transactions contemplated by this Agreement based upon arrangements made by or
on behalf of QRCI or any of its Affiliates.

 
3.2
Partnership's Representations and Warranties

 
The Partnership represents and warrants to Newco and QRCI that on the date
hereof:
 

 
(a)  
Standing:  The Partnership is a partnership, duly formed under the laws of the
Province of Alberta;

 

 
(b)  
Requisite Authority:  The Partnership has the requisite power and authority
under the Partnership Agreement to execute this Agreement and any other
agreements and documents required to be delivered hereby and to perform the
obligations to which it thereby becomes subject;

 

 
(c)  
Execution and Enforceability:  The Partnership and its partners have taken all
necessary corporate and partnership actions to authorize the execution, delivery
and performance of this Agreement.  This Agreement has been duly executed and
delivered by the Partnership and this Agreement and all other documents executed
and delivered on behalf of the Partnership hereunder shall constitute valid and
binding obligations of the Partnership enforceable in accordance with their
respective terms and conditions, subject to the qualification that such
enforceability may be subject to (i) bankruptcy, insolvency, fraudulent
preference, reorganization or other laws affecting creditors' rights generally,
and (ii) general principles of equity (regardless of whether such enforceability
is considered in a proceeding at equity or law);

 
 
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(d)  
No Conflict:  The execution and delivery of this Agreement and the conveyance of
the Assets to the Partnership in accordance with the terms of this Agreement are
not in violation or breach of, or in conflict with and do not require any
consent, authorization or approval under:

 

 
(i)  
any term or provision of the constating documents of the Partnership;

 

 
(ii)  
any agreement, instrument, permit or authority to which the Partnership is a
party or by which the Partnership is bound; or

 

 
(iii)  
any Applicable Law or any judicial order, award, judgement or decree applicable
to the Partnership; and

 

 
(e)  
Canadian Partnership:  The Partnership is a Canadian partnership for the
purposes of the Income Tax Act.

 
3.3
Newco's Representations and Warranties

 
Newco represents and warrants to QRCI and the Partnership that on the date
hereof:
 

 
(a)  
Standing:  Newco is a corporation, duly organized and validly existing under the
laws of the jurisdiction of its incorporation, and is duly registered and
authorized to carry on business in Alberta and British Columbia;

 

 
(b)  
Requisite Authority:  Newco has the requisite corporate capacity, power and
authority to execute this Agreement, and any other agreements and documents
required to be delivered hereby and to perform the obligations to which it
thereby becomes subject;

 

 
(c)  
Execution and Enforceability:  Newco has taken all necessary corporate actions
to authorize the execution, delivery and performance of this Agreement.  This
Agreement has been duly executed and delivered by Newco, and this Agreement and
all other documents executed and delivered on behalf of Newco hereunder shall
constitute legal, valid and binding obligations of Newco enforceable in
accordance with their respective terms and conditions, subject to the
qualification that such enforceability may be subject to (i) bankruptcy,
insolvency, fraudulent preference, reorganization or other laws affecting
creditors' rights generally, and (ii) general principles of equity (regardless
of whether such enforceability is considered in a proceeding at equity or law);

 

 
(d)  
No Conflict:  The execution and delivery of this Agreement and the Capital
Contribution by Newco in accordance with the terms of this Agreement are not in
violation or breach of, or in conflict with and do not require any consent,
authorization or approval under:

 

 
(i)  
any term or provision of the constating documents of Newco;

 

 
(ii)  
any agreement, instrument, permit or authority to which Newco is a party or by
which Newco is bound; or

 

 
(iii)  
any Applicable Law or any judicial order, award, judgement or decree applicable
to Newco;

 
 
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(e)  
Residency for Tax Purposes:  Newco is not a non-resident of Canada within the
meaning of the Income Tax Act;

 

 
(f)  
Required Approvals:  There is no requirement to make any filing with, give any
notice to, or obtain any authorization, consent or approval of, any Governmental
Entity as a condition to the lawful completion of the transactions contemplated
by this Agreement, the failure of receipt of which would result in a material
adverse effect or a prohibition of the transactions contemplated hereby;

 

 
(g)  
No Litigation:  There are no (i) actions, suits or proceedings, at law or in
equity, by any Person, (ii) any grievance, arbitration or alternative dispute
resolution process, or (iii) administrative or other proceeding by or before (or
to the knowledge of Newco any investigation by) any Governmental Entity,
pending, or, to the knowledge of Newco, threatened against or affecting the
Assets or the interests of Newco therein, and, to the knowledge of Newco, there
is no valid basis for any such action, complaint, grievance, suit, proceeding,
arbitration or investigation. Newco is not subject to any judgment, order or
decree entered in any judicial, administrative or arbitral proceeding which
relates to or affects the Assets;

 

 
(h)  
Bankruptcy:   Newco has not made any assignment for the benefit of creditors,
nor any proposal under the Bankruptcy and Insolvency Act (Canada) nor has any
receiving order been made against it under the Bankruptcy and Insolvency Act
(Canada), nor has any petition for such an order been served upon it, nor are
there any proceedings in effect or threatened under the Companies' Creditors
Arrangement Act (Canada) or similar legislation with respect to it, nor has any
receiver, receiver and manager, liquidator, administrator, custodian or official
with similar powers been appointed by court order or privately respecting Newco
or any of its assets or property, nor is Newco contemplating or initiating any
steps whatsoever in connection with any of the foregoing, nor has Newco received
any notice from any Person contemplating or initiating any such steps; and

 

 
(i)  
Brokers and Finders:  No broker, finder or investment banker is entitled to any
brokerage, finder's or other fee or commission in connection with the
transactions contemplated by this Agreement based upon arrangements made by or
on behalf of Newco or any of its Affiliates.

 
3.4
Survival of Representations and Warranties

 
Notwithstanding anything to the contrary herein expressed or implied and
notwithstanding the deliveries of covenants, representations and warranties in
any other agreements or documents or investigations by the parties hereto or
their counsel, the representations and warranties set forth in Sections 3.1, 3.2
and 3.3 are true on the date hereof and shall continue and remain in full force
and effect for the benefit of the parties hereto for a period of two (2) years
following the Effective Time.  The representations and warranties set forth in
Sections 3.1 and 3.2 shall be deemed to apply to all assignments, conveyances,
transfers and documents conveying any of the Assets from QRCI to the Partnership
and there shall not be any merger of any covenant, representation or warranty in
such assignments, conveyances, transfers or documents notwithstanding any rule
of law, equity or statute to the contrary and all such rules are hereby
waived.  All covenants and agreements contained in this Agreement that by their
terms apply or are to be performed in their entirety on or prior to the
Effective Time shall terminate at the Effective Time.  All covenants and
 
 
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agreements that by their terms apply or are to be performed in whole or in part
after the Effective Time shall remain in full force and effect after the
Effective Time in accordance with their terms.
 
3.5
No Additional Representations or Warranties by QRCI or Newco

 

 
(a)  
QRCI makes no representations or warranties to Newco and the Partnership except
as expressly enumerated in Section 3.1.  Without limiting the generality of the
foregoing, QRCI does not make representations or warranties with respect to:
(i) any estimates of the value of the Assets or the revenues applicable to them;
or (ii) any economic evaluations respecting the Assets.

 

 
(b)  
Except with respect to the representations and warranties in Section 3.1 or in
the event of fraud, the Partnership forever releases and discharges QRCI and its
directors, officers, agents and employees from any claims and all liability to
the Partnership or the Partnership's other partners, as a result of the use or
reliance upon advice, information or materials pertaining to the Assets, which
was delivered or made available to the Partnership by QRCI or its directors,
officers, agents, consultants or employees prior to or pursuant to this
Agreement, including, without limitation, any evaluations, projections, reports
and interpretive or non-factual materials prepared by or for QRCI, or otherwise
in QRCI's possession.

 

 
(c)  
Newco makes no representations or warranties to QRCI or the Partnership except
as expressly enumerated in Section 3.3.  Without limiting the generality of the
foregoing, Newco does not make representations or warranties with respect to:
(i) any estimates of the value of the Assets or the revenues applicable to them;
or (ii) any economic evaluations respecting the Assets.

 
ARTICLE 4
ADDITIONAL AGREEMENTS AND ACKNOWLEDGEMENTS
 
4.1
Declaration of Trust

 
QRCI hereby acknowledges to, declares and covenants with the Partnership that,
in respect of all of the Assets which are held or registered in the name of
QRCI, or in respect of which QRCI holds legal title, or any residual, contingent
or future interest, QRCI as and from the Effective Time, stands possessed of and
holds such Assets and all receipts, proceeds or products from the Assets in
trust for the exclusive benefit of the Partnership and QRCI shall only deal with
such Assets as instructed by the Partnership.  Upon request of the Partnership,
QRCI shall, wherever and to the extent that it is permissible to do so, provide
to the Partnership such transfers, assignments, notices of assignment, novation
agreements and other conveyances (the “Specific Conveyances”) which are
necessary or appropriate to transfer the title to the Assets currently held in
the name of QRCI or by its nominee to the Partnership or as the Partnership
otherwise directs.  The Partnership shall be responsible at its cost for
circulating and registering such conveyances and paying all transfer,
registration, sales tax and other charges incurred in connection therewith.
 
4.2
Conflict

 
The parties agree that in the event of a conflict between the terms of this
Agreement and any of the Specific Conveyances, this Agreement shall prevail.
 
 
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4.3
Required Consents

 
To the extent that any Asset is not capable of being contributed, assigned,
transferred or conveyed, or if such contribution, assignment, transfer or
conveyance requires the prior consent of any Person (other than a consent which
is customarily obtained after such contribution, assignment, transfer or
conveyance or where the parties agree that the consequence of a failure to
obtain such prior consent would not result in any material adverse consequence
to such Asset) (a “Required Consent”) this Agreement shall not constitute a
contribution, assignment, transfer or conveyance of legal title to such Asset
unless and until such Required Consent or waiver thereof is obtained.  To the
extent that any Required Consent is not obtained by QRCI, QRCI shall, from the
Effective Time hold the benefits of such Asset in trust and act as agent, for
the Partnership in accordance with the provisions of Section 4.1.
 
4.4
Asset Purchase Agreement

 
Immediately following the Effective Time, QRCI shall transfer its 50.0%
Partnership Interest to MMI in exchange for shares of MMI, upon the terms and
subject to the conditions set forth in the Asset Purchase Agreement.  QRCI shall
cause MMI to execute and deliver instruments confirming that MMI agrees to be
bound by the terms of the Partnership Agreement with respect to the Partnership
Interest so transferred to the same extent applicable to QRCI.
 
4.5
Purchase of Compression

 

 
(a)  
The Partnership hereby agrees to sell, and QRCI agrees to purchase on an
as-is-where-is basis, the four compressors, two dehydrators and all associated
fixtures, equipment and spare parts located at the compressor facility located
at a-66-A/94-0-15 (59°47'48”N and 122°33'55”W) (collectively, the “Compression
Assets”).

 

 
(b)  
The purchase price for the Compression Assets shall be $33,000,000, payable in
cash and exclusive of any applicable GST.

 

 
(c)  
At QRCI's sole option, the purchase and sale of the Compression Assets shall
occur on either January 1, 2016 or May 1, 2018.

 

 
(d)  
On the date of purchase and sale of the Compression Assets, QRCI shall deliver
the purchase price of the Compression Assets to the Partnership and the
Partnership shall deliver a general conveyance, such specific conveyances as may
be required and discharges in respect of any security held by any Person in
respect of the Compression Assets.

 

 
(e)  
QRCI and the Partnership agree to execute and deliver such further agreements,
documents and instruments as may be necessary or desirable to give effect to the
transactions contemplated by this Section 4.5 at of before the date of purchase
and sale.

 
ARTICLE 5
PROCESSING AND GATHERING; OPPORTUNITIES
 
5.1
Processing Facilities

 

 
(a)  
The Partnership shall construct the Fortune Creek Gas Plant.  Contemporaneously
with the execution and delivery of this Agreement, QRCI and the Partnership are
entering into

 
 
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a Processing Agreement in the form attached hereto as Schedule E which will,
inter alia, provide that the processing charge (the “Processing Charge”) for
Natural Gas will be calculated such that the Partnership's investment in the
Fortune Creek Gas Plant will:
 

 
(i)  
achieve a 15% Hurdle Rate, on the basis of the capital component of the
Processing Charge alone, at the end of the 10-year period following the
estimated Commercial In-Service Date of the Fortune Creek Gas Plant;

 

 
(ii)  
include a variable fee reflecting a pass-through of actual cash operating and
maintenance capital expenses incurred by the Partnership such that the
Partnership will not be affected by variances in such expenses; and

 

 
(iii)  
include a capital component that increases or decreases, as the case may be, to
the extent that actual capital costs exceed or are less than the estimates, such
that the Partnership would achieve its 15% Hurdle Rate on the basis of TOP
obligations alone over the 10 year period based on the actual capital costs.

 
5.2
Pipelines and Compression

 
Contemporaneously with the execution and delivery of this Agreement, QRCI and
the Partnership are entering into a Gathering Agreement in the form attached
hereto as Schedule C, which will, inter alia, provide that:
 

 
(a)  
the initial term thereof shall be 10 years;

 

 
(b)  
QRCI will pay a transportation fee as set forth in Exhibit C-2 of the Gathering
Agreement, which fee shall be payable on a take-or-pay (“TOP”) basis, such that
to the extent that volumes delivered are below contracted levels, revenues to
the Partnership will not be affected, as set forth in the Gathering Agreement;

 

 
(c)  
QRCI shall not have any obligation to deliver any minimum volume of Natural Gas
to the Maxhamish Pipeline; and

 

 
(d)  
the Partnership shall provide Firm Service to QRCI in respect of its Natural Gas
up to the capacity of the Fortune Creek Gas Plant subject to any release of such
capacity by QRCI in favour of a third party.

 
5.3
Opportunities

 
From and after the Permitted Transfer (as defined in the Partnership Agreement),
Newco and QRCI each agree to be bound by Section 3.2 and Article 4 of the
Partnership Agreement as if those provisions were set forth in full herein.
 
5.4
Sales of Acreage

 

 
(a)  
From and after the Effective Time, QRCI shall, and shall cause its Affiliates
to, require any acquirer from it of working interests in acreage in the AMI that
acquires directly or indirectly such acreage from QRCI, MMI or any of their
Affiliates, to

 

 
(i)  
to agree to offer any AMI Opportunity Project, if and to the extent located
within the said acreage, or providing services in respect of the gas produced
from and

 
 
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attributable to the said working interests, to the Partnership as if such
acquirers were in the same position as MMI and its Affiliates (under the
Partnership Agreement);
 

 
(ii)  
take such acreage subject to QRCI's obligations under the Gathering Agreement
and each other gathering and/or processing agreement relating to a midstream
facility owned by the Partnership (each such other agreement being referred to
herein as a “Service Agreement”), if any, between the Partnership and QRCI if
and to the extent that the Gathering Agreement and/or any such Service Agreement
relates to such acreage, and therefore be jointly and severally liable with QRCI
and its Affiliates for such obligations, subject to Section 5.4(b); and

 

 
(iii)  
use the facilities of the Partnership for gas processing activities to the
extent such facilities are used immediately prior to such transfer of acreage.

 
For clarity, should a third party acquire any or all of QRCI’s acreage in the
AMI, it will only be required to offer the Partnership any AMI Opportunity
Projects with respect to the acreage acquired from QRCI, and not such third
party’s previously-held or subsequently-acquired acreage within the AMI.
 

 
(b)  
If, in connection with a transfer of working interests in acreage pursuant to
Section 5.4(a), Newco consents, QRCI and its Affiliates shall be released from
their obligations under the Gathering Agreement and Service Agreements in
respect of said acreage, including without limitation the obligations and joint
and several liability described in clause (ii) above.  Newco may withhold its
consent if and only if, in its reasonable opinion, the acquirer is not
sufficiently creditworthy to perform QRCI's obligations under the said Gathering
Agreement and Service Agreements relating to such acreage, taking into
consideration the credit support provided by the parent guaranty.

 
5.5
Drilling and Completion Expenditures

 

 
(a)  
In each of calendar years 2012, 2013 and 2014, QRCI shall spend a minimum of
$100,000,000 per calendar year on Drilling Costs and Completion Costs
(“Operations”) in the AMI (the “Drilling Obligations”), which Drilling
Obligations shall not take into account any spending incurred in respect of
exploring or abandoning operations or any other field infrastructure related
operations (other than equipping) undertaken in the AMI.  Spending incurred in
respect of Operations in the AMI by a Person other than QRCI under a farmout,
joint venture, participation or similar arrangement between that other Person
and QRCI shall be deemed to have been incurred, and the Drilling Obligations
shall be deemed to that extent to have been performed, by QRCI as if it had
incurred the spending itself.

 

 
(b)  
At the election of QRCI, QRCI may:

 

 
(i)  
defer a portion of the Drilling Obligations for any year up to a cumulative
total of $20,000,000; and

 

 
(ii)  
may accelerate a portion of the Drilling Obligations for any year into an
earlier year, and if performed, they shall be considered to have been performed
in the year in which they were originally to have been performed.

 
 
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(c)  
If QRCI does not fulfill its Drilling Obligations in a given calendar year, the
capital portion of the Revenue Requirement as calculated pursuant to Section
502(a)(i) of the Gathering Agreement (the “Capital RR”) for the last month of
that year shall be increased by an amount (the “Capital RR Adjustment Amount”)
equal to:

 

 
(i)  
$100,000,000; plus

 

 
(ii)  
any deferred amount; minus

 

 
(iii)  
the amount spent on Drilling Obligations in such year; minus

 

 
(iv)  
$20,000,000.

 
If and to the extent that up to $20,000,000 is carried into the fourth year,
such amounts will not be deferred any longer.
 

 
(d)  
If the Capital RR under the Gathering Agreement for a month is increased by a
Capital RR Adjustment Amount in accordance with Section 5.5(c), the Capital RR
for the last month of the Initial Term shall be reduced by an amount equal to
that Capital RR Adjustment Amount, provided that if, through one or more
reductions pursuant to this Section 5.5(d) the Capital RR for the last or any
preceding month of the Initial Term is reduced to zero, any additional reduction
required pursuant to this Section 5.5(d) shall be made to the Capital RR for the
next preceding month of the Initial Term and so on until the entire Capital RR
Adjustment Amount has been applied.

 

 
(e)  
The parties hereto agree that, other than the adjustments to the Capital RR as
contemplated in Sections 5.5(c) and (d), there will be no remedy or compensation
whatsoever payable or otherwise available to the Partnership in the event of any
failure by QRCI to perform the Drilling Obligations.  

 
ARTICLE 6
LIABILITY AND INDEMNIFICATION
 
6.1
Responsibility of QRCI

 
QRCI shall, subject to Section 6.9:
 

 
(a)  
be liable to Newco, the Partnership and their respective Affiliates (other than
QRCI) and their respective directors, officers, servants, agents and employees,
and each of them, for all losses, costs, damages and expenses whatsoever which
Newco, the Partnership or their respective affiliates (other than QRCI) or their
respective directors, officers, servants, agents or employees, or any of them,
may suffer, sustain, pay or incur; and

 

 
(b)  
indemnify and save Newco, the Partnership and their respective Affiliates (other
than QRCI) and their respective directors, officers, servants, agents and
employees, and each of them, harmless from and against all claims, liabilities,
actions, proceedings, demands, losses, costs, damages and expenses whatsoever
which may be brought against or suffered by Newco, the Partnership (other than
QRCI) and their respective directors, officers, servants, agents or employees,
or any of them, or which they or any of them may sustain, pay or incur

 
 
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to the extent arising out of, resulting from, attributable to or connected with
(i) any breach or inaccuracy of any representation or warranty made by QRCI
herein in respect of which a written notice specifying the misrepresentation or
breach is delivered by Newco or the Partnership in accordance with Section 3.4
(provided that in the event of a breach of Section 3.1(q), neither Newco nor the
Partnership shall be entitled to seek indemnification for such breach hereunder
as long as QRCI (or any of its Affiliates, acting on its behalf) is and remains
in compliance with its obligations under the Gathering Agreement and any Service
Agreement), (ii) the failure of QRCI to comply with, or the breach by QRCI of,
any of the covenants or agreements to be performed by QRCI in this Agreement or
(iii) any Excluded Liabilities.
 
6.2
Responsibility of Partnership

 
The Partnership shall, subject to Section 6.9:
 

 
(a)  
be liable to QRCI and its affiliates (other than the Partnership) and their
respective directors, officers, servants, agents and employees, and each of
them, for all losses, costs, damages and expenses whatsoever which QRCI and its
affiliates (other than the Partnership) and their respective directors,
officers, servants, agents and employees, or any of them, may suffer, sustain,
pay or incur, and

 

 
(b)  
indemnify and save QRCI and its affiliates (other than the Partnership) and
their respective directors, officers, servants, agents and employees, and each
of them, harmless from and against all claims, liabilities, actions,
proceedings, demands, losses, costs, damages and expenses whatsoever which may
be brought against or suffered by QRCI and its affiliates (other than the
Partnership) and their respective directors, officers, servants, agents or
employees, or any of them, or which they or any of them may sustain, pay or
incur,

 
as a direct result of any matter or thing arising out of, resulting from,
attributable to or connected with (i) the Assets to the extent occurring or
accruing after the Effective Time, (ii) any breach or inaccuracy of any
representation or warranty made by the Partnership herein in respect of which a
written notice specifying the misrepresentation or breach is delivered by QRCI
in accordance with Section 3.4, (iii) the failure of the Partnership to comply
with, or the breach by the Partnership of, any of the covenants or agreements to
be performed by the Partnership in this Agreement or (iv) any Assumed
Liabilities.
 
6.3
Responsibility of Newco

 
Newco shall, subject to Section 6.9:
 

 
(a)  
be liable to QRCI, the Partnership and their respective affiliates (other than
Newco) and their respective directors, officers, servants, agents and employees,
and each of them, for all losses, costs, damages and expenses whatsoever which
QRCI, the Partnership and their respective affiliates (other than Newco) and
their respective directors, officers, servants, agents or employees, or any of
them, may suffer, sustain, pay or incur, and

 

 
(b)  
indemnify and save QRCI, the Partnership and their respective affiliates (other
than Newco) and their respective directors, officers, servants, agents and
employees, and each of them, harmless from and against all claims, liabilities,
actions, proceedings, demands, losses, costs, damages and expenses whatsoever
which may be brought against or suffered by QRCI, the Partnership and

 
 
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their respective affiliates (other than Newco) and their respective directors,
officers, servants, agents or employees, or any of them, or which they or any of
them may sustain, pay or incur,
 
to the extent arising out of, resulting from, attributable to or connected with
any breach of inaccuracy of any representation or warranty made by Newco herein
in respect of which a written notice specifying the misrepresentation or breach
is delivered by QRCI or the Partnership in accordance with Section 3.4.
 
6.4
Procedure – Indemnities

 
Any party seeking indemnification hereunder shall give reasonably prompt notice
thereof to the party from whom indemnification is sought.  The party from whom
indemnification is sought shall have the sole right to conduct, settle or
otherwise dispose of any legal action in respect of which indemnification is
sought in any manner it deems appropriate without the consent of the other
party, except that such first party shall not agree to any disposition or
settlement without the prior consent of the party seeking indemnification (which
consent shall not be required if such disposition or settlement involves the
payment of money borne entirely by the indemnifying party).  The party seeking
indemnification shall have the right to participate in the defence of such claim
at its own expense.  If the indemnifying party has elected to defend such claim
but is not diligently pursuing such defence, the party seeking indemnification
shall have the right to assume such defence at the indemnifying party's expense;
provided the party seeking indemnification shall not settle such claim without
the prior consent of the indemnifying party, not to be unreasonably withheld.
 
6.5
No Merger of Legal Responsibilities

 
The liabilities and indemnities created in this Article shall be deemed to apply
to, and shall not merge in, all assignments, transfers, conveyances, novations,
trust agreements and other documents conveying any of the Assets from QRCI to
the Partnership, notwithstanding the terms of such assignments, transfers,
conveyances, novations and other documents, Applicable Law or any rule of law or
equity to the contrary, and all such rules are hereby waived to the fullest
extent permitted at law.
 
6.6
Substitution and Subrogation

 
Insofar as is possible, each party shall have full rights of substitution and
subrogation in and to all covenants, representations and warranties by others
previously given or made in respect of the Assets or any of them.
 
6.7
Responsibility Extends to Legal Costs

 
Notwithstanding any provision to the contrary contained in this Article,
references to costs in the liability and indemnification obligations prescribed
by Sections 6.1, 6.2, 6.3 and 6.9 shall be deemed to include reasonable legal
costs on a solicitor and his own client basis.
 
6.8
Benefit of Indemnity

 
Any claim for indemnity under this Article 6 by any of the partners or the
Partnership or any of the directors, officers, servants, agents or employees of
a party or a partner of the Partnership (collectively, the “Representatives”)
must be brought and administered by the applicable party to this Agreement.  No
indemnified Person other than the parties shall have any rights against either
 
 
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party under the terms of this Article 6 except as may be exercised on its behalf
by QRCI, Newco or the Partnership, as applicable, pursuant to this Article
6.  Each party may elect to exercise or not exercise indemnification rights
under this Article 6 on behalf of its Representatives in its sole discretion and
shall have no liability to any such other Representatives for any action or
inaction under this Article 6.
 
6.9
Limitation on Liability

 
No Party hereunder shall have any liability under this Agreement for any
exemplary, punitive, indirect, incidental, special, consequential, remote or
speculative damages; provided, however, that a Party shall be liable for costs,
expenses or damages, including lost profits, exemplary, punitive, indirect,
incidental, special, consequential, remote, speculative or other damages paid or
owed to any third party for which a party has a right to recover from another
party or the Partnership under the terms hereof. Nothing in the immediately
preceding sentence is intended to exclude liability hereunder for direct damages
in respect of lost profits in connection with a breach of Section 5.3 or Section
5.4.
 
6.10
Social Service Tax Act

 
The parties agree that the provisions of section 99 of the Social Service Tax
Act (British Columbia) are inapplicable.
 
ARTICLE 7
GENERAL
 
7.1
Further Assurances

 
On and after the Effective Time as may be necessary and without further
consideration, the parties hereto shall execute, acknowledge and deliver such
other documents, novations, instruments and agreements and shall do such other
things as may be necessary to better define the Assets (upon the mutual
agreement of the parties) or to otherwise carry out their respective obligations
under this Agreement.
 
7.2
Governing Law and Submission to Jurisdiction

 
The laws of the Province of Alberta shall govern the construction,
interpretation and effect of this Agreement, without regard to conflicts of law
rules.  Each party hereby submits to the exclusive jurisdiction of the Courts of
Alberta and all courts of appeal therefrom for all purposes hereof, provided
that the foregoing shall not restrict a party from enforcing a judgment outside
of Alberta including the ability to initiate an original action in the courts of
another jurisdiction if the judgment cannot be enforced.  Each party waives, to
the fullest extent permitted by applicable law, any right it may have to trial
by jury in respect of any suit, action or proceeding relating to this Agreement.
 
7.3
Assignment

 
Neither party shall assign any of its rights or benefits or delegate any
obligations hereunder without first having obtained the written consent of the
other party and any such assignment or delegation shall be void ab initio.
 
 
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7.4
Counterparts

 
The parties may execute this Agreement in two or more counterparts, which shall,
in the aggregate, be signed by all of the parties; each counterpart shall be
deemed an original instrument as against any party who has signed it.
 
7.5
Entire Agreement; Amendment

 
This Agreement, the Partnership Agreement, the Gathering Agreement and the
Servicing Agreements, contain the entire agreement of the Parties relating to
the rights granted and obligations assumed herein and therein and supersede all
prior agreements between the parties as to the subject matter hereof.  Any oral
representations or modifications concerning this Agreement shall be of no force
or effect unless contained in a subsequent written modification signed by the
Parties.
 
7.6
No Third Party Beneficiaries

 
Except as provided in Article 6, this Agreement shall be binding upon and shall
inure solely to the benefit of the Parties and their respective successors and
permitted assigns and nothing herein, express or implied is intended to or shall
confer upon any other Person any legal or equitable right, benefit or remedy of
any nature whatsoever, under or by reason of this Agreement.
 
7.7
Severability

 
If any provision of this Agreement, or the application of such provision to any
Person or in any circumstance, shall be held to be invalid, illegal or
unenforceable in any respect, the validity, legality or enforceability of the
remaining provisions of this Agreement, and the application of such provision to
any Persons or in any circumstances other than those as to which it is held
invalid, illegal or unenforceable shall not be affected thereby.
 
7.8
Expenses

 
Except as otherwise specified in this Agreement, all costs and expenses,
including fees and disbursements of counsel, financial advisors and accounts,
incurred in connection with this Agreement and the transactions contemplated by
this Agreement shall be borne by the party incurring such costs and expenses.
 
7.9
Notices

 
Any written notice or communication to any of the parties required or permitted
under this Agreement shall be deemed to have been duly given and received (i) on
the date of service, if served personally or sent by facsimile transmission (and
confirmed by telephone) to the party to whom notice is to be given, or (ii) on
the next day if sent by a nationally recognized courier for next day service and
so addressed and if there is evidence of acceptance by receipt.
 
 
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(a)  
if to QRCI:

 
One Palliser Square
2000, 125 – 9th Avenue S.E.
Calgary, Alberta  T2G 0P8
Fax#:  403.262.6115
Attn:  Chief Operating Officer
 
with a copy to:
 
801 Cherry Street
Suite 3700, Unit 19
Fort Worth, Texas  76102
Fax#:  817.665.5021
Attn:  General Counsel

 
(b)  
if to the Partnership:

 
One Palliser Square
2000, 125 – 9th Avenue S.E.
Calgary, Alberta  T2G 0P8
Fax#:  403.262.6115
Attn:  Chief Operating Officer
  with a copy to:   801 Cherry Street Suite 3700, Unit 19 Fort Worth, Texas 
76102 Fax#: 817.665.5021 Attn: General Counsel   with a copy to:   0927530 B.C.
Unlimited Liability Company c/o Kohlberg Kravis Roberts & Co LP 9 West 57th,
Suite 4200 New York, New York  10019 Fax#: 212.750.0003 Attn: Brandon Freiman,
David Sorkin, Esq.

 

 
(c)  
if to Newco:

 
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c/o Kohlberg Kravis Roberts & Co LP
9 West 57th, Suite 4200
New York, New York  10019
Fax#:  212.750.0003
Attn:  Brandon Freiman, David Sorkin, Esq.

 
with a copy to (which shall not constitute notice hereunder):
 
Simpson Thacher & Bartlett LLP
425 Lexington Avenue
New York, New York 10017
Fax#:  212.455.2502
Attn:  Gary Horowitz, Esq.

 
7.10
Remedies

 
The parties agree that no adequate remedy at law exists for a material breach or
threatened material breach of any of the provisions of Section 5.3 or Section
5.4, the continuation of which unremedied will cause the injured party to suffer
irreparable harm. Accordingly, the parties agree that the injured party shall be
entitled, in addition to other remedies that may be available to it, to
immediate injunctive relief from any material breach of any such provisions and
to specific performance of its rights thereunder, as well as to any other
remedies available at law or in equity.
 
7.11
Binding Effect

 
This Agreement shall be binding on all successors and assigns of the parties and
inure to the benefit of the respective permitted successors and assigns of the
parties, except to the extent of any express contrary provision in this
Agreement.
 

 
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IN WITNESS WHEREOF the parties hereto have executed this agreement effective as
of the date and time first above written.
 
QUICKSILVER RESOURCES CANADA INC.
 
0927530 B.C. UNLIMITED LIABILITY COMPANY
                   
Per:
/s/ Glenn Darden
 
Per:
/s/ Mayo Shattuck
 
Glenn Darden
Chairman of the Board, Director
   
Mayo Shattuck
Director

 
 
FORTUNE CREEK GATHERING AND PROCESSING PARTNERSHIP, by its partner, QUICKSILVER
RESOURCES CANADA INC.
 
FORTUNE CREEK GATHERING AND PROCESSING PARTNERSHIP, by its partner, 0927530 B.C.
UNLIMITED LIABILITY COMPANY
                   
Per:
/s/ Glenn Darden
 
Per:
/s/ Mayo Shattuck
 
Glenn Darden
Chairman of the Board, Director
   
Mayo Shattuck
Director

 
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SCHEDULE A
to the
Contribution Agreement
dated December 23, 2011 between
Quicksilver Resources Canada Inc. and Fortune Creek Gathering and Processing
Partnership
 
LISTED ASSETS
 
The “Assets” are set forth on Exhibit 1 (Maxhamish Pipeline), Exhibit 2
(Compression Assets) and shall include the following:
 
 
(a)
all permits, licences, authorizations, surface rights (including easements,
licences of occupation and rights-of-way), and buildings, structures,
appurtenances and tangible depreciable property situate thereon that are used or
useful in connection with the operation of the Maxhamish Pipeline; but

 
 
(b)
specifically exclude any rights or interests in or relating to petroleum or
natural gas or the production thereof, or in wells or wellsite facilities, or in
the operation of the foregoing.

 
 
 

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Exhibit 1
Maxhamish Pipeline
 
[ex1001-x1.jpg]

 
 

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Exhibit 2
Compression Assets
 
All of the assets in the attached drawings except for pipe and equipment
indicated in pink, which shall remain with QRCI.
 
 
 

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[ex1001-x2a.jpg]

 
 

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[ex1001-x2b.jpg]

 
 

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[ex1001-x2c.jpg]

 
 

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[ex1001-x2d.jpg]

 
 

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[ex1001-x2e.jpg]

 
 

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[ex1001-x2f.jpg]

 
 

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SCHEDULE B
to the
Contribution Agreement
dated  December 23, 2011 between
Quicksilver Resources Canada Inc. and Fortune Creek Gathering and Processing
Partnership
AMI
 
[ex1001-schb.jpg]

 
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SCHEDULE C
to the
Contribution Agreement
dated  December 23, 2011 between
Quicksilver Resources Canada Inc. and Fortune Creek Gathering and Processing
Partnership

 
Gathering Agreement
 
 
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SCHEDULE D
to the
Contribution Agreement
dated  December 23, 2011 between
Quicksilver Resources Canada Inc. and Fortune Creek Gathering and Processing
Partnership

 
Fortune Creek Gas Plant
 

 
Facility Parameters
Estimated Completion Date
Construction of a Processing Facility capable of extracting CO2 up to 50% by
volume of the Natural Gas Stream and having a processing capacity of not less
than 150,000 Mcf/d.
June 1, 2014

 
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SCHEDULE E
to the
Contribution Agreement
dated  December 23, 2011 between
Quicksilver Resources Canada Inc. and Fortune Creek Gathering and Processing
Partnership

 
Processing Agreement

 
 
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SCHEDULE F
to the
Contribution Agreement
dated  December 23, 2011 between
Quicksilver Resources Canada Inc. and Fortune Creek Gathering and Processing
Partnership

 
Asset Purchase Agreement
 
 
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