Exhibit
10.4


 


EXECUTION VERSION


 




 


 





CONTRIBUTION AGREEMENT


 


between


 


QUICKSILVER RESOURCES INC.


 


and


 


BREITBURN OPERATING L.P.


 


 


 


Dated as of September 11, 2007


 




 





 

















 


TABLE OF CONTENTS


 


	
   

  	
   

  	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE I

  	
   

  	
  DEFINITIONS

  	
   

  	
  1

  
	
  Section 1.1

  	
   

  	
  Certain Definitions

  	
   

  	
  1

  
	
  Section 1.2

  	
   

  	
  Interpretation

  	
   

  	
  22

  
	
  Section 1.3

  	
   

  	
  WCGP

  	
   

  	
  22

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE II

  	
   

  	
  CONSIDERATION; CLOSING

  	
   

  	
  23

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 2.1

  	
   

  	
  Contribution

  	
   

  	
  23

  
	
  Section 2.2

  	
   

  	
  Deposit

  	
   

  	
  24

  
	
  Section 2.3

  	
   

  	
  Adjustments to Initial Consideration Regarding QRI Assets and Certain
  Other Adjustments

  	
   

  	
  25

  
	
  Section 2.4

  	
   

  	
  Adjustment to Initial Consideration Regarding Transferred Companies

  	
   

  	
  26

  
	
  Section 2.5

  	
   

  	
  Adjustment Methodology; Preliminary Settlement Statement; Final
  Settlement Statement

  	
   

  	
  26

  
	
  Section 2.6

  	
   

  	
  Disputes

  	
   

  	
  28

  
	
  Section 2.7

  	
   

  	
  Pre-Closing Distributions

  	
   

  	
  28

  
	
  Section 2.8

  	
   

  	
  Suspended Proceeds

  	
   

  	
  29

  
	
  Section 2.9

  	
   

  	
  Assumed Liabilities Regarding the Acquired Assets

  	
   

  	
  29

  
	
  Section 2.10

  	
   

  	
  Closing

  	
   

  	
  29

  
	
  Section 2.11

  	
   

  	
  Closing Deliveries of BreitBurn

  	
   

  	
  30

  
	
  Section 2.12

  	
   

  	
  Closing Deliveries of Quicksilver

  	
   

  	
  30

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE III

  	
   

  	
  REPRESENTATIONS AND WARRANTIES
  RELATING TO QUICKSILVER

  	
   

  	
  31

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 3.1

  	
   

  	
  Due Incorporation and Power of Quicksilver

  	
   

  	
  32

  
	
  Section 3.2

  	
   

  	
  Authorization and Validity of Agreement

  	
   

  	
  32

  
	
  Section 3.3

  	
   

  	
  Non-Contravention

  	
   

  	
  32

  
	
  Section 3.4

  	
   

  	
  Equity Interests

  	
   

  	
  32

  
	
  Section 3.5

  	
   

  	
  Investment Intent

  	
   

  	
  33

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE IV

  	
   

  	
  REPRESENTATIONS AND WARRANTIES
  RELATING TO ACQUIRED COMPANIES, TRANSFERRED COMPANIES AND THE ACQUIRED ASSETS

  	
   

  	
  33

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 4.1

  	
   

  	
  Due Incorporation

  	
   

  	
  33

  
	
  Section 4.2

  	
   

  	
  Non-Contravention

  	
   

  	
  33

  
	
  Section 4.3

  	
   

  	
  Governmental Approvals; Consents and Actions

  	
   

  	
  33

  
	
  Section 4.4

  	
   

  	
  Financial Statements

  	
   

  	
  34

  
	
  Section 4.5

  	
   

  	
  Books and Records

  	
   

  	
  34

  
	
  Section 4.6

  	
   

  	
  No Undisclosed Liabilities

  	
   

  	
  34

  
	
  Section 4.7

  	
   

  	
  Absence of Changes

  	
   

  	
  34

  
	
  Section 4.8

  	
   

  	
  Contracts

  	
   

  	
  35

  
	
  Section 4.9

  	
   

  	
  Litigation

  	
   

  	
  36

  



 


i

















 


	
  Section 4.10

  	
   

  	
  Compliance with Laws

  	
   

  	
  37

  
	
  Section 4.11

  	
   

  	
  Tax Matters

  	
   

  	
  37

  
	
  Section 4.12

  	
   

  	
  Employee and Labor Matters

  	
   

  	
  38

  
	
  Section 4.13

  	
   

  	
  Environmental Matters

  	
   

  	
  39

  
	
  Section 4.14

  	
   

  	
  Finders; Brokers

  	
   

  	
  40

  
	
  Section 4.15

  	
   

  	
  Insurance

  	
   

  	
  40

  
	
  Section 4.16

  	
   

  	
  Bank Accounts

  	
   

  	
  40

  
	
  Section 4.17

  	
   

  	
  Officers and Directors

  	
   

  	
  40

  
	
  Section 4.18

  	
   

  	
  Oil and Gas Properties

  	
   

  	
  40

  
	
  Section 4.19

  	
   

  	
  Gas Regulatory Matters

  	
   

  	
  41

  
	
  Section 4.20

  	
   

  	
  Affiliate Transactions

  	
   

  	
  41

  
	
  Section 4.21

  	
   

  	
  Special Warranty of Title

  	
   

  	
  41

  
	
  Section 4.22

  	
   

  	
  Accuracy of Data

  	
   

  	
  41

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE V

  	
   

  	
  REPRESENTATIONS AND WARRANTIES
  RELATING TO BREITBURN AND BREITBURN PARENT

  	
   

  	
  42

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 5.1

  	
   

  	
  Due Organization and Power of BreitBurn

  	
   

  	
  42

  
	
  Section 5.2

  	
   

  	
  Authorization and Validity of Agreement

  	
   

  	
  42

  
	
  Section 5.3

  	
   

  	
  Non-Contravention

  	
   

  	
  42

  
	
  Section 5.4

  	
   

  	
  Governmental Approvals; Consents and Actions

  	
   

  	
  42

  
	
  Section 5.5

  	
   

  	
  Investment Intent

  	
   

  	
  43

  
	
  Section 5.6

  	
   

  	
  Independent Decision; Hazardous Materials

  	
   

  	
  43

  
	
  Section 5.7

  	
   

  	
  Financial Capacity; No Financing Condition

  	
   

  	
  43

  
	
  Section 5.8

  	
   

  	
  Finders; Brokers

  	
   

  	
  44

  
	
  Section 5.9

  	
   

  	
  No Knowledge of Quicksilver’s Breach

  	
   

  	
  44

  
	
  Section 5.10

  	
   

  	
  Capitalization of BreitBurn Parent and Valid Issuance of Common Units

  	
   

  	
  44

  
	
  Section 5.11

  	
   

  	
  SEC Documents

  	
   

  	
  45

  
	
  Section 5.12

  	
   

  	
  Tax

  	
   

  	
  46

  
	
  Section 5.13

  	
   

  	
  Investment Company Status

  	
   

  	
  46

  
	
  Section 5.14

  	
   

  	
  Offering

  	
   

  	
  46

  
	
  Section 5.15

  	
   

  	
  Internal Accounting Controls

  	
   

  	
  46

  
	
  Section 5.16

  	
   

  	
  Material Agreements

  	
   

  	
  46

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE VI

  	
   

  	
  AGREEMENTS OF BREITBURN AND
  QUICKSILVER

  	
   

  	
  47

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 6.1

  	
   

  	
  Operation of the Business

  	
   

  	
  47

  
	
  Section 6.2

  	
   

  	
  Efforts; Cooperation; HSR and Other Filings

  	
   

  	
  49

  
	
  Section 6.3

  	
   

  	
  Public Disclosures

  	
   

  	
  49

  
	
  Section 6.4

  	
   

  	
  Pre-Closing Access; Post-Closing Delivery and Access to Records and
  Personnel

  	
   

  	
  49

  
	
  Section 6.5

  	
   

  	
  Employee Matters

  	
   

  	
  52

  
	
  Section 6.6

  	
   

  	
  Workforce Reduction Notices

  	
   

  	
  52

  
	
  Section 6.7

  	
   

  	
  Inter-Company Transactions; Insurance

  	
   

  	
  52

  
	
  Section 6.8

  	
   

  	
  Release of Guarantees and Bonds

  	
   

  	
  53

  
	
  Section 6.9

  	
   

  	
  Amendments of Disclosure Schedules

  	
   

  	
  53

  
	
  Section 6.10

  	
   

  	
  Removal of Quicksilver Identification

  	
   

  	
  54

  
	
  Section 6.11

  	
   

  	
  Assigned QRI Assets

  	
   

  	
  54

  



 


ii

















 


	
  Section 6.12

  	
   

  	
  Title Defects; Title Defect Procedure and Adjustments

  	
   

  	
  54

  
	
  Section 6.13

  	
   

  	
  Preferential Purchase Rights

  	
   

  	
  60

  
	
  Section 6.14

  	
   

  	
  Environmental Defects; Environmental Defect Procedure and Adjustments

  	
   

  	
  61

  
	
  Section 6.15

  	
   

  	
  Historical Financial Statements

  	
   

  	
  64

  
	
  Section 6.16

  	
   

  	
  Operatorship

  	
   

  	
  65

  
	
  Section 6.17

  	
   

  	
  Cash Items

  	
   

  	
  65

  
	
  Section 6.18

  	
   

  	
  Standstill

  	
   

  	
  66

  
	
  Section 6.19

  	
   

  	
  Release

  	
   

  	
  66

  
	
  Section 6.20

  	
   

  	
  Quicksilver Lock-Up

  	
   

  	
  66

  
	
  Section 6.21

  	
   

  	
  Redemption Prohibition

  	
   

  	
  66

  
	
  Section 6.22

  	
   

  	
  Consent

  	
   

  	
  66

  
	
  Section 6.23

  	
   

  	
  End User Contracts

  	
   

  	
  67

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE VII

  	
   

  	
  CONDITIONS

  	
   

  	
  68

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 7.1

  	
   

  	
  Conditions Precedent to Obligations of BreitBurn and Quicksilver

  	
   

  	
  68

  
	
  Section 7.2

  	
   

  	
  Conditions Precedent to Obligation of Quicksilver

  	
   

  	
  68

  
	
  Section 7.3

  	
   

  	
  Conditions Precedent to Obligation of BreitBurn

  	
   

  	
  69

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE VIII

  	
   

  	
  TERMINATION

  	
   

  	
  69

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 8.1

  	
   

  	
  Termination Events

  	
   

  	
  69

  
	
  Section 8.2

  	
   

  	
  Effect of Termination

  	
   

  	
  70

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE IX

  	
   

  	
  SURVIVAL; INDEMNIFICATION

  	
   

  	
  71

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 9.1

  	
   

  	
  Survival

  	
   

  	
  71

  
	
  Section 9.2

  	
   

  	
  Indemnification by Quicksilver

  	
   

  	
  72

  
	
  Section 9.3

  	
   

  	
  Indemnification by BreitBurn

  	
   

  	
  75

  
	
  Section 9.4

  	
   

  	
  Other Indemnification Matters and Limitations

  	
   

  	
  76

  
	
  Section 9.5

  	
   

  	
  Materiality Exclusion

  	
   

  	
  77

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE X

  	
   

  	
  TAX MATTERS

  	
   

  	
  77

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 10.1

  	
   

  	
  Preparation and Filing of Tax Returns

  	
   

  	
  77

  
	
  Section 10.2

  	
   

  	
  Tax Treatment of Payments

  	
   

  	
  80

  
	
  Section 10.3

  	
   

  	
  Transfer Taxes

  	
   

  	
  80

  
	
  Section 10.4

  	
   

  	
  Allocation of Consideration

  	
   

  	
  80

  
	
  Section 10.5

  	
   

  	
  Tax Treatment of Transaction

  	
   

  	
  80

  
	
  Section 10.6

  	
   

  	
  BreitBurn’s Tax Indemnity

  	
   

  	
  81

  
	
  Section 10.7

  	
   

  	
  Tax Sharing Agreements

  	
   

  	
  81

  
	
  Section 10.8

  	
   

  	
  Conflict

  	
   

  	
  81

  
	
  Section 10.9

  	
   

  	
  Procedures Relating to Indemnification of Tax Claims.

  	
   

  	
  81

  
	
  Section 10.10

  	
   

  	
  Like Kind Exchange

  	
   

  	
  82

  
	
  Section 10.11

  	
   

  	
  Consents

  	
   

  	
  82

  
	
  Section 10.12

  	
   

  	
  Survival

  	
   

  	
  82

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE XI

  	
   

  	
  MISCELLANEOUS

  	
   

  	
  82

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 11.1

  	
   

  	
  Notices

  	
   

  	
  82

  



 


iii

















 


	
  Section 11.2

  	
   

  	
  Expenses

  	
   

  	
  83

  
	
  Section 11.3

  	
   

  	
  Non-Assignability

  	
   

  	
  84

  
	
  Section 11.4

  	
   

  	
  Amendment; Waiver

  	
   

  	
  84

  
	
  Section 11.5

  	
   

  	
  No Third Party Beneficiaries

  	
   

  	
  84

  
	
  Section 11.6

  	
   

  	
  Governing Law

  	
   

  	
  84

  
	
  Section 11.7

  	
   

  	
  Consent to Jurisdiction

  	
   

  	
  85

  
	
  Section 11.8

  	
   

  	
  Entire Agreement

  	
   

  	
  85

  
	
  Section 11.9

  	
   

  	
  Severability

  	
   

  	
  85

  
	
  Section 11.10

  	
   

  	
  Counterparts

  	
   

  	
  85

  
	
  Section 11.11

  	
   

  	
  Further Assurances

  	
   

  	
  85

  
	
  Section 11.12

  	
   

  	
  Schedules and Exhibits

  	
   

  	
  85

  
	
  Section 11.13

  	
   

  	
  Specific Performance; Limitation on Damages

  	
   

  	
  86

  
	
  Section 11.14

  	
   

  	
  Waiver of Jury Trial

  	
   

  	
  86

  
	
  Section 11.15

  	
   

  	
  Time

  	
   

  	
  86

  
	
  Section 11.16

  	
   

  	
  No Further Representations; Disclaimers

  	
   

  	
  86

  
	
  Section 11.17

  	
   

  	
  Confidentiality

  	
   

  	
  87

  



 


iv

















 


EXHIBITS


 


	
  Exhibit A-1

  	
   

  	
  Wells

  
	
  Exhibit A-2

  	
   

  	
  Oil, Gas
  & Mineral Leases- HBP

  
	
  Exhibit A-3

  	
   

  	
  Oil, Gas
  & Mineral Leases- Undeveloped

  
	
  Exhibit A-4

  	
   

  	
  Fixed
  Facilities and Gas Pipeline Systems

  
	
  Exhibit A-5

  	
   

  	
  Real
  Property Interests

  
	
  Exhibit A-6

  	
   

  	
  Office and
  Storage Leases

  
	
  Exhibit B

  	
   

  	
  Excluded
  Assets

  
	
  Exhibit C-1

  	
   

  	
  Form of
  Asset Assignment

  
	
  Exhibit C-2

  	
   

  	
  Form of
  Venture Interest Assignment

  
	
  Exhibit D

  	
   

  	
  Tax
  Allocated Values

  
	
  Exhibit E

  	
   

  	
  Transition
  Services Agreement

  
	
  Exhibit F

  	
   

  	
  Registration
  Rights Agreement

  
	
  Exhibit G

  	
   

  	
  Tax Opinion

  
	
   

  	
   

  	
   

  
	
  SCHEDULES

  
	
   

  	
   

  	
   

  
	
  Schedule K-B

  	
   

  	
  Knowledge
  (BreitBurn)

  
	
  Schedule K-Q

  	
   

  	
  Knowledge
  (Quicksilver)

  
	
  Schedule 1.1

  	
   

  	
  Audits

  
	
  Schedule 3.4

  	
   

  	
  Burdens on
  Equity Interests

  
	
  Schedule 4.1

  	
   

  	
  Equity
  Interests of Acquired Companies

  
	
  Schedule
  4.3(a)

  	
   

  	
  Governmental
  Approvals; Consents

  
	
  Schedule
  4.3(b)

  	
   

  	
  Actions

  
	
  Schedule 4.4

  	
   

  	
  Financial
  Statements

  
	
  Schedule 4.6

  	
   

  	
  No
  Undisclosed Liabilities

  
	
  Schedule 4.7

  	
   

  	
  Absence of
  Changes

  
	
  Schedule 4.8

  	
   

  	
  Disclosed
  Contracts

  
	
  Schedule 4.9

  	
   

  	
  Litigation

  
	
  Schedule
  4.10

  	
   

  	
  Compliance
  with Laws

  
	
  Schedule
  4.11

  	
   

  	
  Tax Matters

  
	
  Schedule
  4.12

  	
   

  	
  Business
  Employees

  
	
  Schedule
  4.12(a)

  	
   

  	
  Business
  Employee Agreements

  
	
  Schedule
  4.13

  	
   

  	
  Environmental
  Matters

  
	
  Schedule
  4.15

  	
   

  	
  Insurance

  
	
  Schedule
  4.16

  	
   

  	
  Bank
  Accounts

  
	
  Schedule
  4.17

  	
   

  	
  Officers and
  Directors

  
	
  Schedule
  4.18(a)

  	
   

  	
  Oil and Gas
  Allowables

  
	
  Schedule
  4.18(b)

  	
   

  	
  Take or Pay

  
	
  Schedule
  4.18(c)

  	
   

  	
  Production
  Sales Contracts

  
	
  Schedule
  4.18(d)

  	
   

  	
  Imbalances

  
	
  Schedule
  4.19

  	
   

  	
  Certain
  Gathering Facilities

  
	
  Schedule
  5.4(a)

  	
   

  	
  Governmental
  Approvals, Consents (BreitBurn)

  
	
  Schedule
  5.4(b)

  	
   

  	
  Actions
  (BreitBurn)

  
	
  Schedule
  5.10(c)

  	
   

  	
  BreitBurn
  Parent Obligations

  



 


v

















 


	
  Schedule
  5.10(d)

  	
   

  	
  Liens on
  BreitBurn Parent Subsidiaries’ Equity Interests

  
	
  Schedule 6.1

  	
   

  	
  Operation of
  the Business

  
	
  Schedule
  6.7(a)

  	
   

  	
  Inter-Company
  Transactions

  
	
  Schedule 6.8

  	
   

  	
  Guarantees
  & Bonds

  
	
  Schedule
  6.12(a)

  	
   

  	
  Preliminary
  Allocated Values

  



 


vi

















 


CONTRIBUTION AGREEMENT


 


This
Contribution Agreement, dated as of September 11, 2007 (hereinafter this “Agreement”),
is made by and between Quicksilver Resources Inc., a Delaware corporation (“Quicksilver”),
and BreitBurn Operating L.P., a Delaware limited partnership (“BreitBurn”).
Quicksilver and BreitBurn are sometimes collectively referred to herein as the “Parties”,
and individually as a “Party”.


 


RECITALS


 


WHEREAS,
Quicksilver owns 100% of all of the issued and outstanding capital stock of (i)
Terra Energy Ltd., a Michigan corporation (“Terra”), (ii) GTG Pipeline
Corporation, a Virginia corporation (“GTG”), and (iii) Mercury Michigan,
Inc., a Michigan corporation (“Mercury”);


 


WHEREAS,
Quicksilver owns (i) an undivided 50% of the limited liability company
interests of Beaver Creek Pipeline, L.L.C., a Michigan limited liability
company (“Beaver Creek”), and the remaining 50% of the limited liability
company interest of Beaver Creek is owned by Mercury, and (ii) a 5.5385%
limited partnership interest of Wilderness - Chester Gas Processing LP, a
Michigan limited partnership (“WCGP”); and the capital stock of Terra,
GTG, and Mercury owned by Quicksilver, together with Quicksilver’s limited
liability company interest in Beaver Creek and its limited partnership interest
of WCGP, are collectively referred to herein as the “Equity Interests”;


 


WHEREAS,
Quicksilver also owns the QRI Assets (as hereinafter defined); and


 


WHEREAS,
Quicksilver desires to contribute to BreitBurn, and BreitBurn desires to
acquire from Quicksilver, subject to and in accordance with the terms hereof,
the Equity Interests and all of Quicksilver’s right, title and interest in and
to the QRI Assets, as hereinafter defined (collectively, the “Interests”).


 


AGREEMENT


 


NOW,
THEREFORE, in consideration of the premises and the mutual covenants and
agreements contained herein and for other good and valuable consideration, the
receipt and sufficiency of which is acknowledged, and intending to be legally
bound, the Parties hereby agree as follows:


 


ARTICLE I


DEFINITIONS


 


Section 1.1                                      Certain
Definitions. As used in this Agreement, the following terms will have the
respective meanings set forth below:


 


“Acquired
Assets” shall mean and include, collectively, the following (excluding any
Excluded Assets):


 

















 


(a)                                  all
of the rights, titles and interests of Quicksilver and its Affiliates
(including the Acquired Companies) in and to the oil, gas and/or mineral
leases, leasehold interests, mineral fee interests, royalty and overriding
royalty interests (“O&G Interests”), described on Exhibits A-2
and A-3 (with Exhibit A-2 being those leases currently being held
by production, and Exhibit A-3 being those leases that are currently
undeveloped), together with any rights and interests of Quicksilver and its Affiliates
(including the Acquired Companies) attributable or allocable to any of the
foregoing interests by virtue of any pooling, unitization, communitization,
operating or other agreements, and in and to any ratifications and/or
amendments to such leases, whether or not such ratifications or amendments are
described in Exhibits A-2 or A-3 (individually, an “Oil and
Gas Property”, and collectively, the “Oil and Gas Properties”); and
without limitation to the above, it is the intention of Quicksilver that the
Oil and Gas Properties include all O&G Interests owned directly by
Quicksilver and its Affiliates (including the Acquired Companies) which are
located in the States of Michigan, Kentucky and Indiana, whether or not
described on Exhibits A-2 and A-3;


 


(b)                                 all
of the rights, titles and interests of Quicksilver and its Affiliates
(including the Acquired Companies) in and to all wells located on, allocable to
or attributable to the Oil and Gas Properties, including, without limitation,
those oil and gas wells, wellbores, water wells, CO2 wells and
injection wells described on Exhibit A-1 (individually, a “Well”,
and collectively, the “Wells”), and without limitation to the above, it
is the intention of Quicksilver that the Wells include all of such interests owned
directly by Quicksilver and its Affiliates (including the Acquired Companies)
in wells located on, allocable to or attributable to the Oil and Gas Properties
which are located in the States of Michigan, Kentucky and Indiana, whether or
not described on Exhibit A-1;


 


(c)                                  all
of the rights, titles and interests of Quicksilver and its Affiliates
(including the Acquired Companies) in and to the Fixed Facilities;


 


(d)                                 all
of the rights, titles and interests of Quicksilver and its Affiliates
(including the Acquired Companies) in and to all materials, supplies,
inventories, machinery, equipment, improvements and other personal property and
fixtures (including, but not by way of limitation, all casing, wellhead
equipment, pumping units, tanks, vehicles, and other equipment), which are
located on, allocable to, or directly and primarily used by Quicksilver or its
Affiliates (including the Acquired Companies) in connection with the ownership,
operation, development, or maintenance of the Fixed Facilities, Oil and Gas
Properties, Wells, Real Property Interests, Office and Storage Leases or the
Hydrocarbons (collectively, the “Personal Property”);


 


(e)                                  all
of the rights, titles and interests of Quicksilver and its Affiliates
(including the Acquired Companies) in and to all contracts and agreements
allocable or attributable or directly relating to the Fixed Facilities, Oil and
Gas Properties, Wells, Real Property Interests, Office and Storage Leases, the
Personal Property or the Hydrocarbons, including, but not limited to,
production sales contracts, joint operating agreements, unit agreements,
pooling agreements, area of mutual interest agreements, farmout agreements,
farmin agreements, joint venture agreements, participation agreements,
exploration agreements, processing agreements, transportation agreements,
gathering agreements,


 


2

















 


balancing agreements, storage agreements,
platform sharing agreements, and other contracts and agreements (collectively,
the “Contracts”); provided, however, Contracts shall not include any
O&G Interests;


 


(f)                                    all
of the rights, titles and interests of Quicksilver and its Affiliates
(including the Acquired Companies) in and to all other real property interests
located in the States of Michigan, Kentucky and Indiana (other than Oil and Gas
Properties, Fixed Facilities and Office and Storage Leases), together with all
rights of way, easements, surface leases, permits, licenses, servitudes, and
other rights of surface use located in the States of Michigan, Kentucky and
Indiana attributable to or used in connection with the ownership and operation
of the Fixed Facilities, Oil and Gas Properties, Wells, Office and Storage
Leases, the Personal Property, or the Hydrocarbons, including those as may be
described on Exhibit A-5 (collectively, the “Real Property Interests”);


 


(g)                                 all
of the rights, titles and interests of Quicksilver and its Affiliates
(including the Acquired Companies) in and to all office and storage leases used
in connection with the Fixed Facilities, Oil and Gas Properties, Wells, Real
Property Interests or the Personal Property, that are described on Exhibit
A-6 (collectively, the “Office and Storage Leases”);


 


(h)                                 all
of the rights, titles and interests of Quicksilver and its Affiliates
(including the Acquired Companies) in and to all natural gas, casinghead gas,
drip gasoline, natural gasoline, natural gas liquids, condensate, products,
crude oil and all other liquid or gaseous hydrocarbons allocable to the Wells,
Oil and Gas Properties and Fixed Facilities produced, saved and marketed on and
after the Effective Time, together with all Imbalances attributable to the QRI
Assets (collectively, the “Hydrocarbons”); and


 


(i)                                     all
of the rights, titles and interests of Quicksilver and its Affiliates
(including the Acquired Companies) in and to all seismic data and seismic
surveys owned by Quicksilver or the Acquired Companies that cover the Oil and
Gas Properties (“Owned Seismic”); provided, however, that to the extent any such data or surveys are
licensed from third parties and will require licensor approval or the payment
of a transfer fee in connection with the transactions contemplated herein,
Quicksilver shall use commercially reasonable efforts to assist BreitBurn in
securing a transfer to BreitBurn at Closing thereof (but BreitBurn shall be
solely responsible for any and all fees and costs relating to any approval or
transfer).


 


“Acquired
Companies” shall mean Terra, GTG, Mercury and Beaver Creek. The term “Acquired
Companies” shall also include the limited liability companies into which Terra,
GTG and Mercury merge as contemplated in Section 10.5.


 


“Acquired
Company Liabilities” shall mean all the liabilities that are treated as
being assumed by Breitburn Parent for United States federal income Tax purposes
at the Closing.


 


“Action”
shall mean any claim, action, litigation, suit, arbitration, other legal or
administrative proceeding or investigation by or before any Governmental Entity
or arbitrator.


 


3

















 


“Additional
Cash Consideration” has the meaning specified in Section 2.1(b)(ii).


 


“Affiliate”
of a Person shall mean any other Person that directly or indirectly, through
one or more intermediaries, Controls, is Controlled by or is under common
Control with the first mentioned Person. For avoidance of doubt, Pennsylvania
Avenue Limited Partnership shall not be considered to be an Affiliate of
Quicksilver.


 


“Affiliate
Agreements” shall mean any Contracts between Quicksilver or any of its Affiliates
(other than any of the Transferred Companies), on the one hand, and any of the
Transferred Companies, on the other.


 


“Aggregate Deductible”
shall mean an amount equal to $30,000,000.


 


“Aggregate
Indemnity Cap” shall have the meaning specified in Section 9.2(b)(v).


 


“Agreement”
shall have the meaning specified in the Preamble.


 


“Asset
Assignments” shall mean the one or more forms of assignment and bill of
sale, transferring the QRI Assets to BreitBurn, acknowledging BreitBurn’s
assumption of the Assumed Liabilities, acknowledging that it is being made
expressly subject to this Agreement, and otherwise in substantially the form
attached hereto as Exhibit C-1.


 


“Assumed
Liabilities” shall have the meaning specified in Section 2.9.


 


“Audited
Special Financial Statements” shall have the meaning specified in Section
6.15(c).


 


“Beaver
Creek” shall have the meaning specified in the Recitals.


 


“Bonds”
shall have the meaning specified in Section 6.8.


 


“Books and
Records” shall have the meaning specified in Section 6.4(b).


 


 “BreitBurn” shall have the meaning
specified in the Preamble.


 


“BreitBurn
Employer” shall have the meaning specified in Section 6.5(a).


 


“BreitBurn
Indemnified Parties” shall have the meaning specified in Section 9.2(a).


 


“BreitBurn
Parent” shall mean BreitBurn Energy Partners L.P., a Delaware limited
partnership.


 


“BreitBurn
Parent Financial Statements” shall have the meaning specified in Section
5.11.


 


“BreitBurn
Parent SEC Documents” shall have the meaning specified in Section 5.11.


 


4

















 


“Business”
shall mean both: (a) the ownership and operation by Quicksilver of the QRI
Assets, as currently owned and operated by Quicksilver, and (b) the
business and operations of each of the Transferred Companies, as currently
conducted by such Transferred Companies.


 


“Business
Day” shall mean any day other than a Saturday, a Sunday or a day banks in
the State of New York are authorized or required to be closed.


 


“Business
Employee” shall mean any individual who is an employee of Quicksilver whose
employment relates primarily to the Business or to Quicksilver’s ownership of
the Transferred Companies, insofar as such employees are identified on Schedule
4.12.


 


“Cash
Consideration” shall have the meaning specified in Section 2.1(b)(ii).


 


“Claim
Notice” shall have the meaning specified in Section 9.1(b).


 


“Closing”
shall have the meaning specified in Section 2.10.


 


“Closing
Cash” shall have the meaning specified in Section 2.5(c).


 


“Closing
Date” shall have the meaning specified in Section 2.10.


 


“Closing
Date Consideration” shall have the meaning specified in Section 2.1(b).


 


“Closing
Net Working Capital” shall have the meaning specified in Section 2.5(c).


 


“Closing
Consideration Allocation Schedule” shall have the meaning specified in Section
10.4.


 


“Code”
shall mean the Internal Revenue Code of 1986, as amended.


 


“Common
Units” shall have the meaning specified in the Partnership Agreement.


 


“Competing
Transaction” shall have the meaning specified in Section 6.18.


 


“Confidentiality
Agreement” shall mean that certain Confidentiality Agreement dated as of
July 9, 2007, between Quicksilver and BreitBurn.


 


“Consideration
Allocation” shall have the meaning specified in Section 10.4.


 


“Contracts”
shall have the meaning specified in the definition of “Acquired Assets.”


 


“Contributed
Assets” shall have the meaning specified in Section 10.4.


 


“Control”
shall mean the possession, directly or indirectly, of the power to direct or
cause the direction of the management and policies of a Person, whether through
the ownership of voting securities, by contract or otherwise.


 


5

















 


“Conversions”
shall have the meaning specified in Section 10.5.


 


“Cure
Period” shall have the meaning specified in Section 6.12(c).


 


“Current
Assets” as of a specified date shall mean the current assets of the
Transferred Companies, as would be reflected on a consolidated balance sheet as
of such date, as determined under GAAP, but excluding (a) cash and cash
equivalents, (b) inter-company accounts between the Transferred Companies,
on the one hand, and Quicksilver or its Affiliates (other than the Transferred
Companies), on the other (as such inter-company accounts are to be rendered
zero as of Closing, in accordance with the provisions of Section 6.7),
(c) insurance proceeds receivable with respect to any casualty event or
loss incurred before, on or after the date hereof and prior to the Effective
Time, (d) any prepayments of income taxes and other assets relating to the
payment of income taxes, and (e) any Imbalances.


 


“Current
Liabilities” as of a specified date shall mean the current liabilities of
the Transferred Companies, as would be reflected on a consolidated balance
sheet as of such date as determined under GAAP, but excluding
(a) inter-company accounts between the Transferred Companies, on the one
hand, and Quicksilver or its Affiliates (other than the Transferred Companies),
on the other, (b) any current inter-company liabilities eliminated at
Closing pursuant to Section 6.7, (c) any liabilities for Taxes, and
(d) any Imbalances.


 


“Customary
Post-Closing Consents” shall mean the consents and approvals from
Governmental Entities (or railroads and public utilities who may have granted
easements or permits relating to the Business) for the assignment of the
Interests to BreitBurn that are customarily obtained after the assignment of
properties similar to the Interests.


 


“Damages”
shall mean any and all actual damages relating to any demands, claims,
lawsuits, proceedings, arbitrations, investigations and other Actions, causes
of action, judgments, injunctions, awards, settlements, obligations, losses,
liabilities, costs and expenses, including reasonable attorney fees, court
costs, investigative and preparation expenses and other documented out of
pocket expenses incurred in connection with any of the foregoing.


 


“Defensible Title”
shall mean, subject to any Permitted Liens, title of Quicksilver or its
Affiliates (including the Acquired Companies), in the aggregate, that:


 


(a)                                  with
respect to each Well or well location (or the specified zone(s) therein)
identified on Exhibit A-1, entitles Quicksilver and its Affiliates
(including the Acquired Companies), in the aggregate, to receive without
reduction, suspension or termination throughout the productive life of such
Well or well location not less than the Net Revenue Interest shown in Exhibit
A-1 therefor, except for (i) decreases in connection with those operations
in which Quicksilver and its Affiliates (including the Acquired Companies), in
the aggregate, is a non-consenting or non-participating co-owner, (ii)
decreases resulting from the establishment or amendment of pools or units,
(iii) decreases required to allow other working interest owners to make up past
underproduction or pipelines to make up past under deliveries, (iv) effects of
reaching payout status, and (v) as otherwise reflected or disclosed in Exhibit
A-1;


 


(b)                                 with
respect to each Well or well location (or the specified zone(s) therein)
identified on Exhibit A-1, obligates Quicksilver and any of its
Affiliates (including the Acquired


 


6

















 


Companies), in
the aggregate, to bear a Working Interest that is not greater than that shown
therefor in Exhibit A-1, except for (i) increases resulting
from contribution requirements with respect to defaulting co-owners under
applicable operating agreements, (ii) increases in connection with those
operations in which Quicksilver or its Affiliates (including the Acquired
Companies), as the case may be, is a consenting or participating co-owner and
one or more other working interest owners are non-consenting or
non-participating co-owners, (iii) increases resulting from the establishment
or amendment of pools or units, (iv) effects of reaching payout status, (v)
increases to the extent that they are accompanied by a proportionate increase
in the Net Revenue Interest (or the specified zone(s) therein), and (vi) as
otherwise reflected or disclosed in Exhibit A-1;


 


(c)                                  with
respect to the Wells and well locations described in subparagraphs (a) and (b)
above, is free and clear of any Liens, other than Permitted Liens or as
otherwise reflected or disclosed in Exhibits A-1 through A-3; or


 


(d)                                 with
respect to Acquired Assets other than the Wells, well locations and Oil and Gas
Properties, is defensible and free and clear of any Liens, other than with
regard to Permitted Liens or as otherwise reflected or disclosed in Exhibits
A-4 through A-6.


 


“Delaware LLC Act” shall have the meaning specified in Section
5.10(d).


 


“Delaware LP Act” shall have the meaning specified in Section
5.10(b).


 


“De Minimis
BreitBurn Losses” shall have the meaning specified in Section 9.2(b)(ii).


 


“Deposit”
shall have the meaning specified in Section 2.2(a).


 


“Designated
Employees” shall have the meaning specified in Section 6.5(a).


 


“Disclosed
Contract” and “Disclosed Contracts” shall each have the meaning
specified in Section 4.8(a).


 


“Disclosure
Schedules” shall have the meaning specified in Section 6.9(a).


 


“Dispute
Notice” shall have the meaning specified in Section 2.5(c).


 


“Effective
Time” shall mean 7:00 a.m. (Eastern Time) on the Closing Date.


 


“End User
Contracts” shall have the meaning specified in Section 6.23(a).


 


“Environmental
Assessment” shall have the meaning specified in Section 6.14(a).


 


“Environmental Condition”
shall mean (a) a condition existing prior to the Closing Date with respect to
the air, soil, subsurface, surface waters, ground waters and/or sediments that
causes any Acquired Assets or the assets of WCGP to not be in compliance with
any Environmental Laws or (b) the extent to which the operation of any Acquired
Assets or the Business results in any environmental pollution, contamination,
degradation, or damage to


 


7

















 


property such that remedial or corrective action is presently required
(or if known, would be presently required) under Environmental Laws.


 


“Environmental
Defect” shall have the meaning specified in Section 6.14(b)(i).


 


“Environmental
Defect Amount” shall have the meaning specified in Section 6.14(b)(i).


 


“Environmental
Defect Notice” shall have the meaning specified in Section 6.14(b)(i).


 


“Environmental
Laws” shall mean any and all Laws relating to the prevention of pollution,
the preservation and restoration of environmental quality, the protection of
human health, wildlife or environmentally sensitive areas, the remediation of
contamination, the generation, handling, treatment, storage, transportation,
disposal or release into the environment of waste materials, or the regulation
of or exposure to hazardous, toxic or other substances alleged to be harmful. The
term “Environmental Laws” includes all applicable judicial and administrative
Orders, consent decrees or directives issued by a Governmental Entity pursuant
to the foregoing. Unless expressly included in and required by applicable
requirements of statutes, regulations, judicial and administrative Orders,
consent decrees or directives issued by a Governmental Entity included in
Environmental Laws, the term “Environmental Laws” does not include good or
desirable operating practices or standards that may be employed or adopted by
other oil or gas well or pipeline operators or recommended by a Governmental
Entity. The term “Environmental Laws” does not include the Occupational Safety
and Health Act or any other Law governing worker safety or workplace
conditions.


 


“Environmental
Liabilities” shall mean any and all liabilities, responsibilities, claims,
suits, losses, costs (including remediation, removal, response, abatement,
clean-up, investigative, and/or monitoring costs and any other related costs
and expenses), damages, natural resource damages, settlements, consulting fees,
expenses, assessments, liens, penalties, fines, orphan share, prejudgment and
post-judgment interest, court costs, and attorney fees incurred or imposed (a)
pursuant to any order, notice of responsibility, directive (including
requirements embodied in Environmental Laws), injunction, judgment or similar
ruling or act (including settlements) by any Governmental Entity to the extent
arising out of any violation of, or remedial obligation under, any
Environmental Law which is attributable to (or for which any liability or
responsibility is incurred or imposed as a result of) the ownership or
operation of the Acquired Assets or the assets of WCGP prior to the Closing
Date, or (b) pursuant to any claim or cause of action by a Governmental Entity
or other Person for personal injury, death, property damage, damage to natural
resources, remediation or response costs, or similar costs or expenses to the
extent arising out of a release of Hazardous Materials or any violation of, or
any remediation obligation under, any Environmental Laws which is attributable to
(or for which any liability or responsibility is incurred or imposed as a
result of) the ownership or operation of the Acquired Assets or the assets of
WCGP prior to the Closing Date, or (c) as a result of Environmental Conditions.


 


“Equity Consideration” shall mean the sum of the QRI Assets
Equity Consideration and the Equity Interests Equity Consideration.


 


8

















 


“Equity
Interests” shall have the meaning specified in the Recitals.


 


“Equity
Interests Equity Consideration” shall have the meaning specified in Section 2.1(a).


 


“Estimated
Cash” shall have the meaning specified in Section 2.4.


 


“Estimated
Net Working Capital” shall have the meaning specified in Section 2.4.


 


“Estimated
Net Working Capital Adjustment” shall mean Estimated Net Working Capital
less the Target Net Working Capital Amount, which value shall be expressed as a
negative number if the Target Net Working Capital Amount exceeds the Estimated
Net Working Capital, and which number shall be expressed as a positive number
if the Estimated Net Working Capital exceeds the Target Net Working Capital
Amount.


 


“Exchange
Act” shall mean the Securities Exchange Act of 1934, as amended, and the
rules and regulations promulgated thereunder.


 


“Excluded
Assets” shall mean and include any and all Hedge Agreements, as well as any
other  rights, titles and interests in
and to those assets, interests and contracts described on Exhibit B.
“Excluded Assets” shall also include any Title Defect Properties and Preferential
Right Properties excluded from the Acquired Assets pursuant to Section 6.12
or Section 6.13, respectively, together with a pro rata share of all of
Quicksilver’s or the Acquired Companies’ right, title and interest in, to and
under all Wells, Personal Property, Real Property Interests, Hydrocarbons,
Owned Seismic, and Books and Records included in the Acquired Assets that are
directly related or attributable to such Title Defect Properties or
Preferential Right Properties, subject to Quicksilver’s obligation, if
applicable, to deliver to BreitBurn an assignment of any such Title Defect
Property and related or attributable rights post-Closing pursuant to Section
6.12(c) and BreitBurn’s obligation, if applicable, to purchase any such
Preferential Right Property pursuant to Section 6.13(c).


 


“Final
Adjustment Statement” shall have the meaning specified in Section 2.6.


 


“Final
Consideration” shall have the meaning specified in Section 2.1(b)(i).


 


“Final
Settlement Statement” shall have the meaning specified in Section 2.5(c).


 


“Financial
Statements” shall mean each of the unaudited balance sheets and related
statements of income of the Acquired Companies (other than Beaver Creek), as
described in Section 4.4(a).


 


“Fixed
Facilities” shall mean and include all of Quicksilver’s and its Affiliates’
(including the Acquired Companies’) rights, titles and interests in and to
those gas processing plants, treatment plants, dehydration units, gas gathering
systems, pipelines, flowlines, buildings, injection facilities, saltwater
disposal facilities, compression facilities, and other mid-stream assets
located in the States of Michigan, Kentucky and Indiana, including, without
limitation, those described on Exhibit A-4.


 


9

















 


“GAAP”
shall mean United States generally accepted accounting principles, applied on a
consistent basis for the applicable time periods.


 


“Gas Strip
Price” shall mean the 12 month forward strip price for natural gas as of
the Closing Date as quoted on the New York Mercantile Exchange.


 


“General Partner” shall mean BreitBurn GP, LLC, a Delaware
limited liability company and the general partner of BreitBurn Parent.


 


“Governmental
Entity” shall mean any federal, state or local government or any court of
competent jurisdiction, regulatory or administrative agency or commission or
other governmental entity or instrumentality, in each case within the United
States of America.


 


“GTG”
shall have the meaning specified in the Recitals.


 


“Hart-Scott
Act” shall have the meaning specified in Section 7.1(b).


 


“Hazardous
Materials” shall mean any substance or material that is designated,
classified, characterized or regulated as a “hazardous substance”, “hazardous
waste”, “hazardous material”, “toxic substance”, “pollutant” or “contaminant”
under Environmental Laws.


 


“Hedge
Agreements” shall mean all of the rights, titles and interests of
Quicksilver and the Acquired Companies in and to any swap, collar, floor, cap,
option or other contract or agreement (including sales contracts with known
prices) which is intended to reduce or eliminate the risk of fluctuations in
the price of oil, gas and/or minerals related to the Wells, Oil and Gas
Properties or the Hydrocarbons.


 


“Hydrocarbons”
shall have the meaning specified in the definition of the “Acquired Assets.”


 


“Imbalance”
means over-production or under-production or over-deliveries or
under-deliveries on account of (a) any imbalance at the wellhead between the
amount of Hydrocarbons produced from a Well constituting part of the Acquired
Assets and allocable to the interests of Quicksilver or its Affiliates
(including the Acquired Companies), and the shares of production from the
relevant Well that are actually taken by or delivered to or for the account of
Quicksilver or its Affiliates (including the Acquired Companies) and (b) any
marketing imbalance between the quantity of Hydrocarbons constituting part of
the Acquired Assets and required to be delivered by or to Quicksilver or its
Affiliates (including the Acquired Companies) under any Contracts relating to
the purchase and sale, gathering, transportation, storage, processing, or
marketing of Hydrocarbons and the quantity of Hydrocarbons actually delivered
by or to Quicksilver or its Affiliates (including the Acquired Companies)
pursuant to the applicable Contracts.


 


“Independent Expert”
shall have the meaning specified in Section 6.14(b)(v).


 


“Individual Environmental
Defect Threshold” shall have the meaning specified
in Section 6.14(b)(vi).


 


10

















 


“Individual Title Defect
Threshold” shall mean an amount equal to $200,000.


 


“Initial
Consideration” shall have the meaning specified in Section 2.1(a).


 


“Intellectual
Property” shall mean the following intellectual property rights, including,
without limitation, any statutory or common law rights: (a) patents,
patent applications and other rights relating to the protection of inventions
worldwide (and all rights related thereto, including all reissues,
reexaminations, divisions, continuations, continuations-in-part, extensions or
renewals of any of the foregoing), (b) inventions (whether or not
patentable), computer software, source code, concepts, processes, formulae,
patterns, equipment drawings, (c) trademarks, service marks, trade names,
logos, trade dress, brand names, slogans, domain names, registrations and
applications for registrations for the foregoing, and (d) all copyrights,
works of authorship and any derivative works thereof, registered and
unregistered, including all copyright registrations and applications for
copyright registrations.


 


“Interest
Rate” shall mean the Prime Rate.


 


“Interests”
shall have the meaning specified in the Recitals.


 


“Invasive Activity”
shall have the meaning specified in Section 6.14(a).


 


“Knowledge”
shall mean the actual and current knowledge of (a) as to Quicksilver, any
of the Persons listed in Schedule K-Q and (b) as to BreitBurn,
any of the Persons listed in Schedule K-B. The foregoing reference
to “actual knowledge” of a Person means information actually personally known
by such Person, excluding any information which might be imputed to such Person
by Law.


 


“Law”
shall mean any applicable statute, law (including applicable common law),
Order, ordinance, rule, regulation or other enforceable official act of or by
any Governmental Entity.


 


“Lien”
shall mean, with respect to any asset, property or interest therein, any
mortgage, deed of trust, lien, pledge, hypothecation, encumbrance, charge or
security interest.


 


“Lock-Up Date”
shall have the meaning specified in Section 6.20.


 


“Long Term
Debt” shall mean, with respect to the Acquired Companies as of the Closing
Date (calculated immediately prior to Closing), the sum of all obligations of
the Acquired Companies to Third-Party Lenders for borrowed money, including any
current portions thereof.


 


“Lowest
Cost Response” means the response required or allowed under Environmental
Laws that addresses the condition present at the lowest cost (considered as a
whole taking into consideration any material negative impact such response may
have on the operations of the relevant Acquired Assets and any potential
material additional costs or liabilities that may likely arise as a result of
such response) as compared to any other response that is required or allowed under
Environmental Laws. The Lowest Cost Response shall not include (i) the costs of
BreitBurn’s or any of its Affiliate’s employees, project manager(s) or


 


11

















 


attorneys, (ii) expenses for matters that are “costs of doing business,”
e.g., those costs that would ordinarily be incurred in the day-to-day
operations of the Acquired Assets, or in connection with permit
renewal/amendment activities, maintenance on active RCRA management units, and
operation and oversight of active RCRA management units, (iii) overhead costs
of BreitBurn or its Affiliates, (iv) costs and expenses that would not have
been required under Environmental Laws as they exist on the date of this
Agreement, (v) costs or expenses incurred in connection with remedial or
corrective action that is designed to achieve standards that are more stringent
than those required for similar facilities or that fails to reasonably take
advantage of applicable risk reduction or risk assessment principles allowed
under applicable Environmental Laws, and/or (vi) any costs or expenses relating
to the assessment, remediation, removal, abatement, transportation and disposal
of any asbestos, asbestos containing materials or NORM.


 


“Material
Adverse Effect” shall mean any change, inaccuracy, event, circumstance,
effect, result, occurrence, condition or fact (whether or not foreseeable or
known as of the date of this Agreement or covered by insurance, except to the
extent that insurance proceeds would be applied to reduce the adverse effect
therefrom pursuant to Section 9.4) that, individually or in the
aggregate, has resulted in or given rise to, or would reasonably be expected to
result in or give rise to, aggregate losses of $145,000,000 or more, suffered
or incurred, or being suffered or incurred, by Quicksilver (with respect to the
QRI Assets) or the Acquired Companies, or a material adverse effect on the
ability of Quicksilver to consummate the transactions contemplated by this
Agreement; provided, however,
that none of the following shall be deemed to constitute a Material Adverse
Effect:  (a) any effect resulting from
entering into this Agreement or the announcement of the transactions
contemplated by this Agreement; (b) any effect resulting from changes in
general market, economic, financial or political conditions in the area in
which the Business or the Acquired Assets are located, the United States or
worldwide, or any outbreak of hostilities or war; (c) any effect resulting from
a change in Law from and after the date of this Agreement; (d) any
reclassification or recalculation of reserves in the ordinary course of
business; (e) any change in the prices of Hydrocarbons; (f) any effect that
affects the Hydrocarbon exploration, production, development, processing,
gathering and/or transportation industry generally; and (g) any natural
declines in Well performance.


 


“Material
Claim” and “Material Claims” shall each have the meaning specified
in Section 9.2(b)(iii).


 


“Material
Environmental Claim” and “Material
Environmental Claims” shall each have the meaning
specified in Section 6.14(b)(vi).


 


“Material
Title Claim” and “Material Title Claims” shall each have the meaning
specified in Section 6.12(h).


 


“Mercury”
shall have the meaning specified in the Recitals.


 


“Net Revenue
Interest” (or “NRI”) means the undivided interest in Hydrocarbons
produced, saved and marketed from or attributable to the applicable Well or
well location, after deducting all royalties, overriding royalties, production
payments, and other interests and burdens on the Hydrocarbons produced, saved
and marketed therefrom, expressed as a percentage or a decimal.


 


12

















 


“Net
Working Capital” shall mean, as of a specified date, the Current Assets
less the Current Liabilities, as reflected on a consolidated balance sheet of
the Transferred Companies  (expressed as
a negative value if the Current Liabilities exceed the Current Assets; and
expressed as a positive value if the Current Assets exceed the Current Liabilities).


 


“Neutral
Auditor” shall have the meaning specified in Section 2.6.


 


“NORM”
shall have the meaning specified in Section 4.13.


 


“Office and
Storage Leases” shall have the meaning specified in the definition of “Acquired
Assets.”


 


“O&G
Interests” shall have the meaning specified in the definition of “Acquired
Assets.”


 


“Oil and
Gas Property” and “Oil and Gas Properties” shall each have the
meaning specified in the definition of “Acquired Assets.”


 


“Operating
Expenses” shall mean Quicksilver’s obligation or liability for any expenses
(including, without limitation, lease operating expense, drilling and
completion costs, seismic costs, workover costs, capital expenditures, joint
interest billings, and overhead charges under applicable operating agreements)
or other liabilities which relate to the QRI Assets or are otherwise incurred
by Quicksilver in connection with the ownership, operation, development or
maintenance of the QRI Assets.


 


“Order”
shall mean any judicial judgment, decision, decree, order, settlement,
injunction, writ, stipulation, determination or award, in each case to the
extent binding and finally determined.


 


“Owned
Seismic” shall have the meaning specified in the definition of “Acquired
Assets.”


 


“Partnership
Agreement” shall mean the First Amended and Restated Limited Partnership
Agreement of BreitBurn Energy Partners L.P., dated as of October 10, 2006, as
amended.


 


“Party”
and “Parties” shall each have the meaning specified in the Preamble.


 


“Permit”
shall mean any license, franchise, registration, permit, order, approval,
consent, waiver, variance, exemption or any other authorization of or from any
Governmental Entity.


 


“Permitted
Liens” shall mean and include any of the following:


 


(a)                                  royalties,
non-participating royalties, overriding royalties, reversionary interests, and
similar burdens upon, measured by, or payable out of production if the net
cumulative effect of such burdens does not operate to reduce the Net Revenue
Interest of Quicksilver and its Affiliates (including the Acquired Companies),
in the aggregate, in any Well


 


13

















 


or well
location (or the specified zone(s) therein) to an amount less than the Net
Revenue Interest set forth on Exhibit A-1
therefor, and do not obligate Quicksilver and its Affiliates
(including the Acquired Companies), in the aggregate, to bear a Working
Interest for such Well or well location (or the specified zone(s) therein) in
an amount greater than the Working Interest set forth on Exhibit
A-1 therefor unless the Net Revenue Interest
for such Well or well location is proportionately increased;


 


(b)                                 preferential
rights to purchase and required third party consents to assignments and similar
agreements;


 


(c)                                  liens
for taxes or assessments not yet due or delinquent or, if delinquent, that are
being contested in good faith in the normal course of business;


 


(d)                                 Customary
Post-Closing Consents;


 


(e)                                  conventional
rights of reassignment;


 


(f)                                    such
Title Defects as BreitBurn may have waived (or be deemed to have waived);


 


(g)                                 obligations,
liabilities and restrictions imposed under any Law, as well as any rights
reserved to or vested in any Governmental Entity: (i) to control or
regulate any of the Acquired Assets or the Transferred Companies in any manner;
(ii) to purchase, condemn, expropriate, or recapture or to designate a
purchaser of any of the Acquired Assets; (iii) to use such property in a
manner which does not materially impair the use of such property for the
purposes for which it is currently owned and operated and (iv) to enforce
any obligations or duties affecting the Acquired Assets or the Transferred
Companies to any Governmental Entity, with respect to any franchise, grant,
license, Permit or applicable Law;


 


(h)                                 rights
of a common owner of any interest in rights-of-way or easements currently held
by Quicksilver or its Affiliates (including the Acquired Companies), as the
case may be, and such common owner as tenants in common or through common
ownership;


 


(i)                                     easements,
conditions, covenants, restrictions, servitudes, permits, rights-of-way,
surface leases and other rights in the Acquired Assets for the purpose of
surface operations, roads, alleys, highways, railways, pipelines, transmission
lines, transportation lines, distribution lines, power lines, telephone lines,
and removal of timber, grazing, logging operations, canals, ditches,
reservoirs, and other like purposes, or for the joint or common use of real
estate, rights-of-way, facilities, and equipment, which do not materially
impair the use of the Acquired Assets as currently owned and operated;


 


(j)                                     zoning
and planning ordinances and municipal regulations;


 


(k)                                  vendors,
carriers, warehousemen’s, repairmen’s, mechanics, workmen’s, materialmen’s,
construction or other like liens arising in the ordinary course of business or
incident to the construction or improvement of any property in respect of
obligations which are not yet due or which are being contested in good faith by
appropriate proceedings by or on behalf of Quicksilver or the Transferred
Companies, as the case may be;


 


14

















 


(l)                                     Liens
created under leases and/or operating agreements or by operation of Law in
respect of obligations that are not yet due or that are being contested in good
faith by appropriate proceedings by or on behalf of Quicksilver or the
Transferred Companies, as the case may be;


 


(m)                               any
encumbrance affecting the Wells, well locations or other Acquired Assets which
is set forth under any Disclosed Contract, or is expressly assumed, bonded or
paid by BreitBurn, or which is discharged at or prior to Closing;


 


(n)                                 calls
on production under (i) existing Contracts that provide that the holder of such
call on production must pay an index-based price for any production purchased
by virtue of such call on production and (ii) those Contracts identified on the
Disclosure Schedules;


 


(o)                                 any
matters reflected, disclosed or referenced on Exhibits A-1, A-2, A-3,
A-4, A-5 or A-6;


 


(p)                                 matters
that would otherwise be considered Title Defects but are valued at less than
$200,000;


 


(q)                                 Imbalances
associated with the Acquired Assets; and


 


(r)                                    the
terms and provisions of all leases, Contracts, or other agreements,
instruments, obligations, defects, and irregularities affecting the Acquired Assets,
that, individually, or in the aggregate, do not materially interfere with the
operation or use of any of the Acquired Assets (as currently owned and
operated), do not reduce the Net Revenue Interest of Quicksilver and its
Affiliates (including the Acquired Companies), in the aggregate, in any Well or
well location (or the specified zone(s) therein) to an amount less than the Net
Revenue Interest set forth on Exhibit A-1
therefor,  and do not obligate Quicksilver and its Affiliates
(including the Acquired Companies), in the aggregate, to bear a Working
Interest for such Well or well location (or the specified zone(s) therein) in
an amount greater than the Working Interest set forth on Exhibit
A-1 therefor (unless the Net Revenue Interest for such Well or well
location is proportionately increased).


 


“Person”
shall mean an individual, corporation, partnership, limited liability company,
association, trust, incorporated organization, or any other entity or group (as
defined in Section 13(d)(3) of the Exchange Act).


 


“Personal
Property” shall have the meaning specified in the definition of “Acquired
Assets.”


 


“Pre-Closing
Tax Period” shall mean any taxable period ending on or before the Closing
Date or with respect to any taxable period that begins on or before the Closing
Date and ends after the Closing Date, the portion of such taxable period ending
on the Closing Date.


 


“Preferential
Purchase Right” shall have the meaning specified in Section 6.13(a).


 


“Preferential
Right Property” shall have the meaning specified in Section 6.13(b).


 


15

















 


“Preliminary
Allocated Value” shall have the meaning specified in Section 6.12(a).


 


“Preliminary
Settlement Statement” shall have the meaning specified in Section 2.5(b).


 


“Prime Rate”
shall mean the annual rate of interest published from time to time as the “Prime
Rate” in the “Money Rates” section of The Wall Street Journal.


 


“QRI Assets”
shall mean, collectively, those Acquired Assets that are directly owned or held
by Quicksilver (and the term “QRI Assets” shall exclude any of the Acquired
Assets that are directly owned or held by any of the Transferred Companies).


 


“QRI Assets
Equity Consideration” shall have the meaning specified in Section 2.1(a).


 


“Quicksilver”
shall have the meaning specified in the Preamble.


 


“Quicksilver
Group” shall mean the affiliated group of corporations of which Quicksilver
Resources Inc. is the common parent, which join in the filing of a consolidated
federal income Tax Return (and any similar group under state law).


 


“Quicksilver
Indemnified Parties” shall have the meaning specified in Section 9.3(a).


 


“Quicksilver’s
Auditor” shall have the meaning specified in Section 6.15(a).


 


“Quicksilver’s
Deductible” shall have the meaning specified in Section 9.2(b)(iii).


 


“Quicksilver’s
Policies” shall have the meaning specified in Section 4.15.


 


“Real
Property Interests” shall have the meaning specified in the definition of “Acquired
Assets.”


 


“Registration
Rights Agreement” shall mean a Registration Rights Agreement substantially
in the form attached hereto as Exhibit F.


 


“Resolution
Period” shall have the meaning specified in Section 2.5(c).


 


“Retained
Liabilities” shall mean the following obligations of Quicksilver to the
extent resulting or arising from, or attributable to, the use, ownership or
operation of the QRI Assets by Quicksilver and attributable to periods prior to
the Effective Time:


 


(a)                                  any
disposal or burial of Hazardous Materials by Quicksilver or any Person engaged
by Quicksilver off the real property interests comprising the QRI Assets;


 


(b)                                 all
obligations and amounts owed to any Business Employees or other employees of
Quicksilver relating to the employment of such individuals by Quicksilver or
the


 


16

















 


terminations
of employment of such individuals by Quicksilver, except obligations and
amounts attributable to bodily injury, death or illness which are covered
solely by clause (c) below;


 


(c)                                  to
the extent occurring prior to the Effective Time, any bodily injury to, death
of or illness affecting (i) any Business Employee or other employee of
Quicksilver relating to the employment of such individuals by Quicksilver or
(ii) any other individual not employed by or relating to Quicksilver or BreitBurn
to the extent such injury, death or illness is covered by or which, if properly
reported, would be covered by any insurance maintained by or on behalf of
Quicksilver with a third-party insurance provider, it being agreed that such
injuries and illnesses which are of a continuous or ongoing nature and extend
over the Effective Time shall be apportioned to the Retained Liabilities on the
basis of the respective portions of the injury or illness suffered before the
Effective Time, with Retained Liabilities including only that portion of the
injury or illness suffered before the Effective Time; provided,
however, that Retained Liabilities shall not in any event include
any Environmental Liabilities;


 


(d)                                 all
obligations and liabilities owed to any Business Employees or other employees
of Quicksilver arising under any employee benefit or welfare plan maintained by
Quicksilver;


 


(e)                                  all
obligations and liabilities resulting from or arising out of the audits listed
on Schedule 1.1;


 


(f)                                    all
obligations and liabilities of Quicksilver for income Taxes attributable to the
QRI Assets;


 


(g)                                 all
obligations and liabilities relating to or arising under the Contracts
described in item 1 and item 2 of Schedule 4.8; and


 


(h)                                 any
third party property damage which, if properly reported, would be covered by
any insurance maintained by or on behalf of Quicksilver with a third-party
insurance provider; provided, however,
that Retained Liabilities shall not in any event include any Environmental
Liabilities.


 


“Saginaw”
shall have the meaning specified in Section 4.11(g).


 


“SEC”
shall have the meaning specified in Section 6.15(a).


 


“Securities
Act” shall have the meaning specified in Section 5.5.


 


“Section
754 Consents” shall have the meaning specified in Section 10.11.


 


“Section
754 Election” shall have the meaning specified in Section 4.11(g).


 


“Special
Financial Statements” shall have the meaning specified in Section
6.15(a).


 


“Subject
Contracts” shall have the meaning specified in Section 6.23(c).


 


17

















 


“Subsidiary”
of any Person shall mean any corporation, partnership, joint venture or other
legal entity of which such Person (either alone or through or together with any
other Subsidiary), owns, directly or indirectly, 50% or more of the stock or
other equity interests the holder of which is generally entitled to vote for
the election of the board of directors or other governing body of such
corporation, partnership, joint venture or other legal entity.


 


“Survival
Period” shall have the meaning specified in Section 9.1(a).


 


“Suspended
Funds” shall mean those proceeds from the sale of Hydrocarbons attributable
to the Acquired Assets and payable to owners of working interests, royalties,
overriding royalties and other similar interests that are held by Quicksilver
in suspense as of the Closing Date, including, without limitation, royalty
proceeds held in suspense.


 


“Target Net
Working Capital Amount” shall mean $0.00.


 


“Tax”
shall mean any and all federal, state, local, foreign and other taxes, levies,
fees, imposts and duties of whatever kind (including any interest, penalties or
additions to the tax imposed in connection therewith or with respect thereon),
including taxes imposed on, or measured by, income, franchise, profits or gross
receipts, alternative minimum taxes, estimated taxes and also ad valorem, value
added, sales, use, service, real or personal property, capital stock, business
license, license, payroll, withholding, employment, social security, workers’
compensation, unemployment, compensation, utility, severance, production,
excise, stamp, occupation, premium, windfall profits, real estate transfer,
transfer and gains taxes, customs, tariffs, imposts assessments, obligation and
charges of the same or of a similar nature to any of the foregoing, and
including any liability for any of the foregoing items that arises by reason of
a contract, assumption, transferee or successor liability, operation of law,
Treasury Regulation section 1.1502-6 (or any predecessor or successor thereof
or any analogous provision under state, local or other law) or otherwise.


 


“Tax
Allocated Value” and “Tax Allocated Values” shall each have the
meaning specified in Section 10.4.


 


“Tax Claim”
shall have the meaning specified in Section 10.9(a).


 


“Tax
Construct” shall have the meaning specified in Section 10.5.


 


“Taxing
Authority” shall mean, with respect to any Tax, the Governmental Entity or
political subdivision thereof that imposes such Tax, and the agent (if any)
charged with the collection of such Tax for such Governmental Entity or
subdivision.


 


“Tax Items”
shall have the meaning specified in Section 10.1(d).


 


“Tax Return”
shall mean any return, report, exhibit, schedule, information return or
statement and other documentation (including any additional or supporting
material, attachment, amendment or supplement thereto) filed or maintained, or
required to be filed or maintained, in connection with the calculation,
determination, assessment or collection of any Tax and shall include an amended
return or claim for refund.


 


18
















 


“Terra” shall have the meaning specified in the Recitals.


 


“Third-Party Approvals” shall mean any approval, consent,
waiver, variance, exemption or any other authorization of or from any Person
that is not a Governmental Entity.


 


“Third-Party Lender” shall mean any Person who is not BreitBurn,
Quicksilver, or any of the Transferred Companies.


 


“Title Arbitrator” shall have the meaning specified in Section 6.12(i).


 


“Title Benefit” shall mean any right, circumstance or condition
that operates (a) to increase the Net Revenue Interest of Quicksilver and
its Affiliates (including the Acquired Companies), in the aggregate, in any
Well or well location (or the specified zone(s) therein), above that shown
therefor in Exhibit A-1, to the extent
the same does not cause a greater than proportionate increase in the applicable
Working Interest therefor, or (b) to decrease the Working Interest of
Quicksilver and its Affiliates (including the Acquired Companies), in the
aggregate, in any Well or well location (or the specified zone(s) therein),
below that shown for the same in Exhibit A-1,
to the extent the same causes a decrease in the Working Interest of Quicksilver
and its Affiliates (including the Acquired Companies), in the aggregate, that
is proportionately greater than the decrease in the applicable Net Revenue
Interest therefor.


 


“Title
Benefit Amount” shall have the meaning specified in Section 6.12(e).


 


“Title Benefit Notice”
shall have the meaning specified in Section 6.12(b).


 


“Title Claim Date” shall
have the meaning specified in Section 6.12(a).


 


“Title
Defect” means, with respect to the Acquired Assets,
any particular defect in or failure of ownership that causes Quicksilver and
its Affiliates (including the Acquired Companies), in the aggregate, to not
have Defensible Title thereto as of the Effective Time; provided,
however, that the following shall NOT be considered Title
Defects:


 


(a)                                  defects
in the chain of title consisting of the failure to recite marital status in a
document or omissions of successions of heirship or estate proceedings, unless
BreitBurn provides affirmative evidence that such failure or omission has
resulted in another Person’s superior claim of title to the relevant Acquired
Assets;


 


(b)                                 defects
arising out of lack of survey, unless a survey is expressly required by
applicable Law;


 


(c)                                  defects
arising out of lack of evidence of record of corporate or other authorization
or approval, unless BreitBurn provides affirmative evidence that such corporate
or other entity action was not authorized and results in another Person’s
superior claim of title to the relevant Acquired Assets;


 


(d)                                 defects
that have been cured by applicable Law of limitations or prescription;


 


19

















 


(e)                                  defects,
irregularities or matters affecting title which arose or resulted from
occurrences, conditions or events happening ten (10) years or more prior
to the Effective Time and for which no written claim or demand relating thereto
has been received by Quicksilver or the Acquired Companies from any third
parties; and


 


(f)                                    defects
or irregularities resulting from or related to probate proceedings or the lack
of evidence of record thereof which defects or irregularities have been
outstanding for five years or more.


 


“Title
Defect Amount” shall have the meaning specified in Section 6.12(d)(i).


 


“Title Defect Notice” and “Title Defect Notices”
shall each have the meaning specified in Section 6.12(a).


 


“Title
Defect Property” shall have the meaning specified in
Section 6.12(a).


 


“Title
Indemnity Agreement” shall mean an indemnity
agreement from Quicksilver to BreitBurn, in a form mutually satisfactory
to BreitBurn and Quicksilver, pursuant to which Quicksilver would agree to
indemnify BreitBurn against third-party claims of title regarding a particular
Title Defect, as contemplated in Section 6.12(d)(iii); provided, however, that under no circumstances shall
Quicksilver’s aggregate liability thereunder exceed the Preliminary Allocated
Value for the Title Defect Property made the subject thereof.


 


“Total Consideration” shall have the meaning specified in Section 10.4.


 


“Transferred Companies” shall mean the Acquired Companies,
together with Quicksilver’s rights, titles and interests in WCGP.


 


“Transferred Company Liabilities” shall mean all obligations and
liabilities of any kind whatsoever of the Transferred Companies arising from or
relating to the Interests, the Acquired Assets or the Business, whether known
or unknown, liquidated or contingent, and regardless of whether the same are
deemed to have arisen, accrued or are attributable to periods prior to, on or
after the Effective Time, including, without limitation obligations and
liabilities of the Transferred Companies concerning: (a) the use,
ownership or operation of the Acquired Assets and the other Interests, (b) any
obligations under or relating to any Contracts, (c) furnishing makeup
Hydrocarbons and/or settling and paying for Imbalances according to the terms
of applicable operating agreements, gas balancing agreements, Hydrocarbon
sales, processing, gathering or transportation Contracts, and other Contracts, (d) paying
all obligations owed to working interest, royalty, overriding royalty and other
interest owners and operators relating to the Acquired Assets or the other Interests,
including their share of any revenues or proceeds attributable to production or
sales of Hydrocarbons, (e) properly plugging, re-plugging and abandoning
any and all Wells (including inactive wells or temporarily abandoned wells)
drilled on the Acquired Assets or otherwise attributable or allocable thereto
pursuant to the Contracts, (f) any obligation or liability for the
dismantling, decommissioning, abandoning and removing of any Wells, Fixed
Facilities or Personal Property of whatever kind related to or associated with
operations and activities conducted by whomever, (g) any obligation or
liability for the cleaning up, restoration and/or remediation of the premises
covered by or related to the Acquired Assets or the other Interests in
accordance with applicable Contracts, Laws and all


 


20

















 


Environmental Laws and (h) any
obligation or liability regarding the Bonds or Permits; provided, that the
Transferred Company Liabilities do not include any obligations or liabilities
of the Transferred Companies to the extent that they are attributable to or
arise out of the ownership, use or operation of the Excluded Assets; provided, however, the following obligations and liabilities
of the Transferred Companies shall be excluded from Transferred Company
Liabilities to the extent arising from or relating to the Acquired Assets owned
by the Transferred Companies attributable to periods prior to the Effective
Time:


 


(i)                                     all
obligations and liabilities resulting from or arising out of the audits listed
on Schedule 1.1;


 


(ii)                                  any
bodily injury to, death of or illness affecting any individual not employed by
or relating to Quicksilver or BreitBurn to the extent such injury, death or
illness is covered by or which, if properly reported, would be covered by any
insurance maintained by or on behalf of Quicksilver with a third-party
insurance provider, it being agreed that such injuries and illnesses which are
of a continuous or ongoing nature and extend over the Effective Time shall be
apportioned to the Transferred Company Liabilities on the basis of the
respective portions of the injury or illness suffered after the Effective Time,
with Transferred Company Liabilities including only that portion of the injury
or illness suffered after the Effective Time; provided,
however, that this exclusion from Transferred Company Liabilities
shall not in any event include any Environmental Liabilities;


 


(iii)                               all
obligations and liabilities relating to or arising under the Contracts described
in item 1 and item 2 of Schedule 4.8; and


 


(iv)                              any
third party property damage which, if properly reported, would be covered by
any insurance maintained by or on behalf of a Transferred Company with a
third-party insurance provider; provided, however,
that this exclusion from Transferred Company Liabilities shall not in any event
include any Environmental Liabilities.


 


“Transfer Taxes” shall have the meaning specified in Section 10.3.


 


“Transition Services Agreement” shall mean a Transition Services
Agreement substantially in the form attached hereto as Exhibit E.


 


“Treasury Regulations” shall mean the regulations promulgated by
the United States Department of the Treasury pursuant to and in respect of
provisions of the Code. All references herein to sections of the Treasury
Regulations shall include any corresponding provision or provisions of
succeeding, similar, substitute or final Treasury Regulations.


 


“TWPP” shall have the meaning specified in Section 4.11(g).


 


“Unitholders” shall mean the holders of Common Units.


 


“Venture Interest Assignments” shall mean the contribution
agreement, in substantially the form attached hereto as Exhibit C-2,
from Quicksilver to BreitBurn, pursuant to which Quicksilver contributes and
assigns all of its rights, titles and interests in and to the Transferred
Companies.


 


21

















 


“WARN” shall have the meaning specified in Section 6.6.


 


“WCGP” shall have the meaning specified in the Recitals.


 


“Well” and “Wells” shall each have the meaning specified
in the definition of “Acquired Assets.”


 


“Working Interest” (or “WI”) means that share of the
costs and expenses for exploration, maintenance, development and operations
attributable to Quicksilver’s and its Affiliates’ (including the Acquired
Companies’), in the aggregate, interest in the applicable Well or well
location, expressed as a percentage or a decimal.


 


Section 1.2                                      Interpretation.
When reference is made in this Agreement to an “Article”, a “Section”, an “Exhibit”
or a “Schedule”, such reference shall be to an Article, a Section, an Exhibit or
a Schedule of this Agreement unless otherwise indicated. The headings
contained in this Agreement are for convenience of reference purposes only and
shall not affect in any way the meaning or interpretation of this Agreement. For
purposes of this Agreement, (a) words defined in the singular will have
the corresponding meanings in the plural and vice versa, (b) words of one
gender shall be deemed to include the other gender as the context requires, (c) if
a word is defined as one part of speech (such as a noun), it shall have a
corresponding meaning when used as another part of speech (such as a
verb), (d) the terms “hereof”, “herein”, “herewith” and “hereunder” and
words of similar import shall, unless otherwise stated, be construed to refer
to this Agreement as a whole and not to any particular provision of this
Agreement, (e) the words “include”, “includes” and “including” shall be
deemed to be followed by the words “without limitation” and (f) captions
to articles, sections and subsections of, and schedules and exhibits to, this
Agreement are included for convenience and reference only and shall not
constitute a part of this Agreement or affect the meaning or construction
of any provision hereof. 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. As used in this
Agreement, the phrase “well location” shall be deemed to refer to the Oil and
Gas Property relating to each “POSS”, “PUD”, “PROB” or “ORRI” listed under the
column entitled “INT TYPE” on Exhibit A-1 and such Oil and Gas
Property shall be treated as if an oil and gas well had been drilled and
completed on such Oil and Gas Property and was in existence as of the date of
this Agreement.


 


Section 1.3                                      WCGP.
Notwithstanding anything stated in this Agreement to the contrary, any
reference to “WCGP” (or to WCGP’s assets, interests, obligations or
liabilities) shall mean and refer only to Quicksilver’s ownership therein,
being a 5.5385% limited partnership interest in WCGP; and any calculations
under this Agreement regarding WCGP, as well as any representations, covenants,
calculations, liabilities, claims or interests relating to WCGP, shall be
proportionately reduced to reflect Quicksilver’s ownership interest therein. Without
limiting the generality of the immediately prior sentence, this proportionate
reduction shall apply with regard to calculations of the Net Working Capital,
Current Assets, Current Liabilities and Closing Cash, as well as with regard to
Quicksilver’s indemnification liability concerning any breach of any
representations, warranties, or covenants, insofar as the same relate to WCGP. Further:
(a) to the extent that Quicksilver makes any representations or warranties
regarding WCGP under this Agreement or in any certificate, instrument or
document delivered in


 


22

















 


connection herewith, such representation and warranty shall be deemed
to have been made only to the Knowledge of Quicksilver; and (b) to the
extent that Quicksilver covenants or agrees to cause WCGP to take or refrain
from taking any actions, such covenant and agreement shall be deemed to only
require Quicksilver to use its good faith efforts to vote its equity interest
in such entity (to the extent any vote is permitted) with regard to such
matters and it is acknowledged that Quicksilver may not, in fact, be able
to cause such entity to take or refrain from taking any actions.


 


ARTICLE II


CONSIDERATION;
CLOSING


 


Section 2.1                                      Contribution.


 


(a)                                  Agreement
of Contribution; Consideration. Subject to and in accordance with the terms
and conditions of this Agreement, Quicksilver hereby agrees to contribute to
BreitBurn, and BreitBurn hereby agrees to acquire from Quicksilver, (i) the
QRI Assets in exchange for Seven Hundred Fifty Million Dollars ($750,000,000)
(provided, BreitBurn may increase such cash consideration by notice to
Quicksilver no later than the third (3rd) Business Day preceding the
scheduled Closing Date), plus 10,216,529 Common Units (the “QRI Assets
Equity Consideration”), and (ii) the Equity Interests in exchange for
11,131,443 Common Units (the “Equity Interests Equity Consideration”)
(collectively, the “Initial Consideration”), as adjusted in accordance
with the other terms of this Agreement. The number of Common Units comprising
the Equity Consideration was established by Quicksilver and BreitBurn based on
the closing price of the Common Units as of August 24, 2007. The number of
Common Units included in the Equity Consideration multiplied by the closing
price of the Common Units on August 24, 2007, when added to $750,000,000
in cash consideration, equals $1,450,000,000.


 


(b)                                 Closing
Date Consideration; Final Consideration.


 


(i)                                     At
Closing, BreitBurn shall pay to Quicksilver, in accordance with Section 2.1(b)(ii) below,
the Initial Consideration, adjusted as follows: (i) plus or minus the
adjustments set forth in Sections 2.3-2.6 below, (ii) plus or minus
the adjustments, if any, set forth in Section 6.12, (iii) minus
the adjustments, if any, set forth in Section 6.13, and (iv) minus
the adjustments, if any, set forth in Section 6.14 (the Initial
Consideration, as so adjusted at Closing, is herein referred to as the “Closing
Date Consideration”). The Closing Date Consideration shall be further
adjusted post-Closing in accordance with the terms of Sections 2.5-2.6
(the Closing Date Consideration, as so adjusted, the “Final Consideration”).
Any upward or downward adjustment to be made pursuant to clauses (i) through
(iv) above shall be made by increasing or reducing (as applicable) the
Equity Interests Equity Consideration by a number of Common Units determined by
dividing (A) the difference between the Initial Consideration and the
Closing Date Consideration, by (B) $32.79; provided, if either such
adjustment involves an increase in the Initial Consideration or Closing Date
Consideration, BreitBurn may elect to pay such increase in cash.


 


23

















 


(ii)                                  The
Closing Date Consideration shall be paid as follows: (A) Seven Hundred
Fifty Million Dollars ($750,000,000) (or such greater amount as may be
designated by BreitBurn pursuant to a notice given to Quicksilver pursuant to Section 2.1(a)(i))
of the Closing Date Consideration shall be paid via wire transfer of
immediately available funds to the account(s) designated by Quicksilver (the “Cash
Consideration”); and (B) the remainder of the Closing Date
Consideration shall be paid through the issuance of the QRI Assets Equity
Consideration and the Equity Interests Equity Consideration; provided, if the
Cash Consideration exceeds $750,000,000 (such excess being herein referred to
as “Additional Cash Consideration”), the QRI Assets Equity Consideration
shall be reduced by a number of Common Units determined by dividing the
Additional Cash Consideration by $32.79.


 


(iii)                               If
the number of Common Units comprising the Equity Consideration does not result
in a whole number then it shall be rounded up to the nearest whole number of
Common Units. If BreitBurn Parent shall at any time prior to the Closing
subdivide its Common Units, by split-up or otherwise, or combine its Common
Units, or issue additional Common Units as a dividend or distribution with
respect to any Common Units, appropriate adjustments shall be made to the
number of Common Units issuable to Quicksilver hereunder. Quicksilver shall
designate in writing the account(s) for payment of the Cash Consideration at
least three (3) days prior to Closing.


 


Section 2.2                                      Deposit.


 


(a)                                  Concurrently
with the execution of this Agreement, BreitBurn has deposited by wire transfer
in same day funds into escrow with Quicksilver the sum of Thirty-Five Million
Dollars ($35,000,000) (the “Deposit”). If Closing occurs, the Deposit
shall be applied toward (and thus shall be deemed the payment by BreitBurn of
an equivalent amount of) the Cash Consideration at Closing, without any
interest earned thereon.


 


(b)                                 If
(i) all conditions precedent to the obligations of BreitBurn to consummate
the transactions contemplated by this Agreement set forth in Article VII
have been met, and (ii) this Agreement is terminated prior to Closing for
reasons described in Section 8.1(e), then, in such event,
Quicksilver shall be entitled to recover from BreitBurn an amount equal to the
Damages Quicksilver suffers as a result of such termination and shall have the
right, upon such termination, to retain the Deposit, and if the amount of such
Damages determined by a court of competent jurisdiction or by the mutual
agreement of the Parties (x) is equal to or in excess of the Deposit, apply the
Deposit toward the amount of such Damages so determined or (y) is less than the
Deposit, promptly return to BreitBurn an amount equal to the amount by which
the Deposit exceeds such Damages.


 


(c)                                  If
this Agreement is terminated prior to Closing, for any reason described in Section 8.1
(other than Section 8.1(e)), then within five (5) Business
Days following such termination, BreitBurn shall be entitled to the return and
delivery of the Deposit, without any interest or earnings thereon; and except
as expressly set forth in Article VIII, BreitBurn and


 


24

















 


Quicksilver shall
thereafter have no further liability or obligation to each other with regard to
this Agreement or the transactions covered hereby.


 


Section 2.3                                      Adjustments
to Initial Consideration Regarding QRI Assets and Certain Other Adjustments.
The Initial Consideration shall be adjusted with regard to the QRI Assets as
follows:


 


(a)                                  At
Closing the Initial Consideration shall be adjusted upward by the following
amounts (without duplication):


 


(i)                                     an
amount equal to the value of all Hydrocarbons attributable to the QRI Assets in
storage or existing in stock tanks, pipelines, plants and/or platforms
(including inventory) as of the Effective Time, with the value to be based upon
the Contract price in effect as of the Effective Time (or the market value, if
there is no Contract price, in effect as of the Effective Time), less amounts
payable as royalties, overriding royalties, and other burdens upon, measured
by, or payable out of such production, and less amounts of any severance taxes
deducted by the purchaser of such production;


 


(ii)                                  an
amount equal to all Operating Expenses, capital expenditures and other costs
and expenses paid by Quicksilver that are attributable to the QRI Assets from
and after the Effective Time, whether paid before or after the Effective Time,
including, without limitation, (A) insurance premiums and premiums for the
Bonds paid by or on behalf of Quicksilver for periods from and after the
Effective Time, (B) royalties or other burdens upon, measured by or
payable out of proceeds of production, (C) rentals and other lease
maintenance payments and (D) ad valorem, property, severance and
production taxes and any other Taxes (exclusive of income taxes) based upon or
measured by the ownership of the QRI Assets, the production of Hydrocarbons, or
the receipt of proceeds therefrom;


 


(iii)                               if
Quicksilver is the operator under a joint operating agreement covering any of
the QRI Assets, an amount equal to the costs and expenses paid by Quicksilver
on behalf of the other joint interest owners that are attributable to the
periods from and after the Effective Time;


 


(iv)                              without
duplication of any other amounts set forth in this Section 2.3(a),
the amount of all Tax, if any, prorated to BreitBurn in accordance with this
Agreement but paid by Quicksilver;


 


(v)                                 to
the extent that Quicksilver or any of its Affiliates (including any Acquired
Company) is underproduced or has an over-delivered position with respect to any
Acquired Asset as of the Effective Time, as complete and final settlement
between Quicksilver and BreitBurn with respect to all such Imbalances (but
without limiting BreitBurn’s assumption of the Assumed Liabilities), the sum of
the Gas Strip Price per MMBTU included in such Imbalances; and


 


25

















 


(vi)                              any
other amount provided for elsewhere in this Agreement or otherwise agreed upon
by Quicksilver and BreitBurn.


 


(b)                                 At
Closing, the Initial Consideration shall be adjusted downward by the following
amounts (without duplication):


 


(i)                                     without
duplication of any other amounts set forth in this Section 2.3(b)(i),
the amount of all Tax, if any, prorated to Quicksilver in accordance with this
Agreement but payable by BreitBurn;


 


(ii)                                  to
the extent that Quicksilver or any of its Affiliates (including any Acquired
Company) is overproduced or has an under-delivered position with respect to any
Acquired Asset as of the Effective Time, as complete and final settlement
between Quicksilver and BreitBurn with respect to all such Imbalances (but
without limiting BreitBurn’s assumption of the Assumed Liabilities), the sum of
the Gas Strip Price per MMBTU included in such Imbalances;


 


(iii)                               an
amount equal to the Suspended Funds, as contemplated in Section 2.8;
and


 


(iv)                              any
other amount provided for elsewhere in this Agreement regarding the QRI Assets
or otherwise agreed upon by Quicksilver and BreitBurn.


 


Section 2.4                                      Adjustment
to Initial Consideration Regarding Transferred Companies. Not less than three (3) Business
Days prior to the Closing Date, Quicksilver shall deliver to BreitBurn, in the
Preliminary Settlement Statement, Quicksilver’s good faith estimate of the
following, as of the close of business on the Closing Date:  (a) the Net Working Capital of the
Transferred Companies (the “Estimated Net Working Capital”) and (b) all
of the cash and cash equivalents of the Transferred Companies as of the Closing
Date (excluding cash proceeds received with respect to any casualty event or
loss incurred on or after the date hereof and prior to the Effective Time and
any cash to be eliminated at Closing pursuant to Section 6.7)
(collectively, the “Estimated Cash”). At Closing, the Initial
Consideration shall be (x) increased or decreased by the amount of the
Estimated Net Working Capital Adjustment, as the case may be, depending on
whether the Estimated Net Working Capital Adjustment is a positive or negative
number and (y) increased by the amount of the Estimated Cash.


 


Section 2.5                                      Adjustment
Methodology; Preliminary Settlement Statement; Final Settlement Statement.


 


(a)                                  Actual Figures and Estimates. For purposes of the
adjustments described in this Article II, when available, actual
figures will be used for all adjustments to the Initial Consideration at
Closing. To the extent actual figures are not available, estimates will be used
subject to final adjustments in accordance with the terms hereof.


 


(b)                                 Preliminary Settlement Statement. Not less than three (3) Business
Days prior to Closing, Quicksilver shall prepare and submit to BreitBurn for
review a draft settlement statement that shall set forth the Closing Date
Consideration, reflecting each adjustment to the Initial Consideration made in
accordance with Sections 2.3, 2.4, 6.12, 6.13 and 6.14,
the


 


26

















 


calculation of
the adjustments used to determine such amounts (including, without limitation,
a statement of the adjustments contemplated under Section 2.3, a
statement of the Estimated Net Working Capital and Estimated Cash, adjustments
relative to Title Defects and Title Benefits, adjustments relative to
Environmental Defects, and any adjustments attributable to the pre-Closing
exercise of any Preferential Purchase Rights, as described in Section 6.13)
(the “Preliminary Settlement Statement”). Within two (2) Business
Days of receipt of the Preliminary Settlement Statement, BreitBurn will deliver
to Quicksilver a written report containing all changes with the explanation
therefor that BreitBurn proposes to be made to the Preliminary Settlement
Statement. The Preliminary Settlement Statement, as agreed upon by the Parties,
will be used to adjust the Initial Consideration at Closing; provided, however, that to the extent the Parties do not
mutually agree, then the Parties shall utilize the Preliminary Settlement
Statement submitted by Quicksilver, solely for purposes of calculating the
Closing Date Consideration.


 


(c)                                  Final Settlement Statement. On or before one hundred twenty
(120) days after Closing, BreitBurn shall prepare and deliver to Quicksilver a
proposed final settlement statement (the “Final Settlement Statement”),
setting forth (i) all adjustments contemplated under Sections 2.3
and 2.4, based on actual income, expenses and other amounts contemplated
in Sections 2.3 and 2.4; and (ii) BreitBurn’s calculation,
as of the Closing Date, of: (A) Net Working Capital of the Transferred
Companies (the “Closing Net Working Capital”) and (B) all of the
cash and cash equivalents of the Transferred Companies (excluding cash proceeds
received with respect to any casualty event or loss incurred on or after the
date hereof and any cash to be eliminated at Closing pursuant to Section 6.7)
(collectively, the “Closing Cash”); and (iii) any further payments
required under Sections 6.12, 6.13 or 6.14, if any. BreitBurn
shall at Quicksilver’s request promptly deliver to Quicksilver reasonable
documentation available to support any credit, charge, receipt or other item
included in the Final Settlement Statement. As soon as practicable, and in any
event within thirty (30) days, after receipt of the Final Settlement
Statement, Quicksilver shall return a written report containing any proposed
changes to the Final Settlement Statement and an explanation of any such
changes and the reasons therefor (the “Dispute Notice”). Within twenty
(20) days following the date of delivery of the Dispute Notice (the “Resolution
Period”), the Parties shall attempt to agree on all items in the Final
Settlement Statement and any proposed changes to the Final Settlement Statement
set forth in the Dispute Notice. If the Final Settlement Statement (including
proposed changes thereto) is mutually agreed upon by Quicksilver and BreitBurn
in writing, the Final Settlement Statement (including any changes mutually
agreed upon by Quicksilver and BreitBurn in writing), shall be final and binding
on the Parties. Any disputes with respect to the items in the Final Settlement
Statement and the Dispute Notice raised in writing prior to the end of the
Resolution Period shall be resolved in accordance with Section 2.6
below. Any disputes with respect to the items in the Final Settlement Statement
and the Dispute Notice that are not raised in writing by BreitBurn or
Quicksilver prior to the end of the Resolution Period shall be waived, except
disputes with respect to Title Defects, Environmental Defects, Taxes and other
matters that are expressly provided to be determined pursuant to other
provisions of this Agreement. Any difference in the Closing Date Consideration
as paid at Closing pursuant to the Preliminary Settlement Statement and the
amounts set forth in the Final Adjustment Statement (as defined in Section 2.6)
shall be paid by the owing Party to the owed Party within ten (10) days
following the date on which (x) the Final Adjustment Statement is mutually
agreed upon by Quicksilver and BreitBurn or (y) the final determination is made
by the Neutral Auditor in accordance with Section 2.6, as
applicable.


 


27

















 


All amounts
paid pursuant to this Section 2.5(c) shall be delivered in
United States currency by wire transfer of immediately available funds to the
account specified in writing by the relevant Party. Payments due under this Section 2.5(c) shall
be paid to the applicable Party together with interest at the Interest Rate
from, and including, the Closing Date to, but excluding, the date of payment.


 


Section 2.6                                      Disputes. If after Closing, either Quicksilver or BreitBurn, as the case may be,
timely notifies the other of any disputed items with regard to the post-Closing
adjustments contemplated in Section 2.5(c) in accordance with
the terms thereof, and if at the conclusion of the Resolution Period under Section 2.5(c) Quicksilver
and BreitBurn have not reached an agreement on such disputed items, then all
items remaining in dispute, and not waived pursuant to Section 2.5(c),
shall be submitted by Quicksilver and BreitBurn to a nationally recognized
independent auditor as to which the Parties shall reasonably agree within ten (10) days
following the expiration of the Resolution Period (the “Neutral Auditor”).
All fees and expenses relating to the work, if any, to be performed by the
Neutral Auditor pursuant to this Section 2.6 shall be borne fifty
percent (50%) by Quicksilver and fifty percent (50%) by BreitBurn. Except as
provided in the preceding sentence, all other costs and expenses incurred by
the Parties in connection with resolving any dispute hereunder before the
Neutral Auditor shall be borne by the Party incurring such cost and expense.
The Neutral Auditor shall act as an arbitrator to determine only those items
still in dispute at the end of the Resolution Period, and may not award
damages or penalties to either Party with respect to any matter. The Neutral
Auditor shall not determine any matter required to be determined by the Title
Arbitrator or the Independent Expert pursuant to Section 6.12 or Section 6.14.
The Neutral Auditor shall conduct the arbitration proceedings in Dallas, Texas
in accordance with the Commercial Arbitration Rules of the American
Arbitration Association, to the extent such rules do not conflict with the
terms of this Section. In no event shall the Neutral Auditor’s determination be
outside of the range of amounts claimed by the respective Parties with respect
to those items in dispute. The Parties shall instruct the Neutral Auditor to
render its reasoned written decision as soon as practicable but in no event
later than sixty (60) days after its engagement (which engagement shall be made
no later than ten (10) Business Days after the end of the Resolution
Period). Such decision shall be set forth in a written statement delivered to
Quicksilver and BreitBurn and shall be final, binding, conclusive and
nonappealable for all purposes of this Agreement. The term “Final Adjustment
Statement” shall mean the definitive Final Settlement Statement, as the
case may be, agreed to (or deemed agreed to) by Quicksilver and BreitBurn
in accordance herewith or the definitive adjustments resulting from the
determination made by the Neutral Auditor in accordance with this Section 2.6,
in each case setting forth the final adjustments so determined. Notwithstanding
the foregoing, to the extent an amount in the Final Settlement Statement is
based on estimated (rather than assessed) Taxes, the Parties’ respective
obligations regarding such Taxes shall be adjusted and paid in accordance with
the terms of this Agreement relating to such Taxes when the actual amount of
such Taxes becomes known.


 


Section 2.7                                      Pre-Closing
Distributions. At any time and from time to time prior to Closing,
including, without limitation, on the Closing Date, Quicksilver may cause
any of the Transferred Companies to distribute all or any portion of cash and
cash equivalents held by such Transferred Companies to Quicksilver.


 


28

















 


Section 2.8                                      Suspended
Proceeds. If Quicksilver is holding any Suspended Funds as of the Closing
Date, then (i) in lieu of Quicksilver transferring these funds directly to
BreitBurn at Closing, Quicksilver shall retain the Suspended Funds held in its accounts
and the Initial Consideration shall be adjusted downward in accordance with Section 2.3(b) above,
and (ii) from and after Closing, BreitBurn shall be responsible for the
proper payment and distribution of the Suspended Funds to those third parties
entitled to receive the Suspended Funds and shall DEFEND,
INDEMNIFY AND HOLD HARMLESS Quicksilver from claims asserted by
third parties arising from or related to administering the distribution of such
Suspended Funds.


 


Section 2.9                                      Assumed
Liabilities Regarding the Acquired Assets. Upon Closing, BreitBurn assumes
and hereby agrees to fulfill, perform, be bound by, pay and discharge (or cause
to be fulfilled, performed, paid or discharged) all obligations and liabilities
of any kind whatsoever of Quicksilver arising from or relating to the QRI
Assets or the Business relating to the QRI Assets, whether known or unknown,
liquidated or contingent, and regardless of whether the same are deemed to have
arisen, accrued or are attributable to periods prior to, on or after the
Effective Time, including, without limitation obligations and liabilities of
Quicksilver concerning: (a) the use, ownership or operation of the QRI
Assets, (b) any obligations under or relating to any Contracts, (c) furnishing
makeup Hydrocarbons and/or settling and paying for Imbalances according to the
terms of applicable operating agreements, gas balancing agreements, Hydrocarbon
sales, processing, gathering or transportation Contracts, and other Contracts, (d) paying
all obligations owed to working interest, royalty, overriding royalty and other
interest owners and operators relating to the QRI Assets, including their share
of any revenues or proceeds attributable to production or sales of
Hydrocarbons, (e) properly plugging, re-plugging and abandoning any and
all Wells (including inactive wells or temporarily abandoned wells) drilled on
the QRI Assets or otherwise attributable or allocable thereto pursuant to the
Contracts, (f) any obligation or liability for the dismantling,
decommissioning, abandoning and removing of any Wells, Fixed Facilities or
Personal Property of whatever kind related to or associated with operations and
activities conducted with respect to the QRI Assets by whomever, (g) any
obligation or liability for the cleaning up, restoration and/or remediation of
the premises covered by or related to the QRI Assets in accordance with
applicable Contracts, Law and all Environmental Laws and (h) any
obligation or liability regarding the Bonds or Permits (all of the obligations
and liabilities described in this Section 2.9 are collectively
referred to as the “Assumed
Liabilities”);
provided, BreitBurn does not assume the Retained Liabilities or any obligations
or liabilities of Quicksilver to the extent that they are attributable to or
arise out of the ownership, use or operation of the Excluded Assets.


 


Section 2.10                                Closing.
Unless this Agreement shall have been terminated and the transactions
contemplated hereby shall have been abandoned pursuant to Article VIII,
the closing of the contribution of the Interests contemplated by this Agreement
(the “Closing”) shall take place at the offices of Fulbright &
Jaworski L.L.P. in Houston, Texas, at 10:00 a.m., Houston, Texas
time, on November 1, 2007, or if all conditions in Article VII
to be satisfied prior to Closing have not yet been satisfied or waived, as soon
thereafter as such conditions have been satisfied or waived (the actual date
and time of Closing being the “Closing Date”).


 


29

















 


Section 2.11                                Closing
Deliveries of BreitBurn. At Closing, BreitBurn shall deliver to
Quicksilver:


 


(a)                                  an
amount equal to the Cash Consideration via wire transfer of immediately
available funds;


 


(b)                                 certificate(s)
representing the Common Units comprising the Equity Consideration;


 


(c)                                  a
certificate from an authorized officer of BreitBurn, dated as of the Closing
Date, certifying that the conditions set forth in Section 7.2(a) and
Section 7.2(b) have been satisfied;


 


(d)                                 an
incumbency certificate relating to the Person(s) executing any document on
behalf of BreitBurn;


 


(e)                                  a
cross-receipt acknowledging the receipt of the Interests;


 


(f)                                    evidence
of approval of all of the Governmental Entities required by BreitBurn;


 


(g)                                 three
(3) original, duly executed counterpart copies of the Asset
Assignments;


 


(h)                                 three
(3) original, duly executed counterpart copies of the Venture
Interest Assignments;


 


(i)                                     a
cross-receipt, acknowledging agreement to the Closing Consideration Allocation
Schedule;


 


(j)                                     two
(2) original, duly executed counterpart copies of the Transition
Services Agreement;


 


(k)                                  two
(2) original, duly executed counterpart copies of the Registration
Rights Agreement; and


 


(l)                                     all
other documents required to be delivered by BreitBurn on or prior to the
Closing Date pursuant to this Agreement.


 


Section 2.12                                Closing
Deliveries of Quicksilver. At Closing, Quicksilver shall deliver to
BreitBurn:


 


(a)                                  three
(3) original, duly executed counterpart copies of the Venture
Interest Assignments;


 


(b)                                 three
(3) original, duly executed counterpart copies of the Asset
Assignments;


 


30

















 


(c)                                  a
certificate from an authorized officer of Quicksilver, dated as of the Closing
Date, certifying that the conditions set forth (i) in Section 7.3(a) have
been satisfied, with such exceptions thereto which are scheduled in such
certificate with respect to matters discovered, occurring or arising after the
date of this Agreement as may be necessary to make the statements
contained therein true and correct (provided that any such exceptions shall not
operate to impair or impede BreitBurn’s right to not consummate the
transactions contemplated by this Agreement because the condition set forth in Section 7.3(a) is
not or was not satisfied or waived in writing by BreitBurn), and (ii) Section 7.3(b) have
been satisfied;


 


(d)                                 an
incumbency certificate relating to the Person(s) executing any document on
behalf of Quicksilver;


 


(e)                                  a
cross-receipt, acknowledging the receipt of the Closing Date Consideration;


 


(f)                                    evidence
of resignations or terminations of all of the officers and directors of the
Acquired Companies, effective as of the Closing Date;


 


(g)                                 certification
of the non-foreign status of Quicksilver, in a form and manner which
complies with the requirements of Code Section 1445 and the Treasury
Regulations thereunder;


 


(h)                                 evidence
of the consummation of the Conversion;


 


(i)                                     a
cross-receipt, acknowledging agreement to the Closing Consideration Allocation
Schedule;


 


(j)                                     two
(2) original, duly executed counterpart copies of the Transition
Services Agreement;


 


(k)                                  two
(2) original, duly executed counterpart copies of the Registration
Rights Agreement;


 


(l)                                     to
the extent obtained, the Section 754 Consents;


 


(m)                               a
schedule setting the information relative to the Suspended Funds retained
by Quicksilver pursuant to Section 2.8(i); and


 


(n)                                 all
other documents required to be delivered by Quicksilver on or prior to the
Closing Date pursuant to this Agreement.


 


ARTICLE III


REPRESENTATIONS AND WARRANTIES RELATING TO QUICKSILVER


 


Quicksilver hereby represents and warrants to BreitBurn, as of the date
of this Agreement or as of such other date as may be expressly provided
below, as follows:


 


31

















 


Section 3.1                                      Due
Incorporation and Power of Quicksilver. Quicksilver is duly incorporated,
validly existing and in good standing under the laws of Delaware. Quicksilver
has the requisite corporate power and authority to conduct its business as it
is now being conducted, and to own, lease and operate its assets and properties.
Quicksilver is duly authorized, qualified or licensed to do business as a
foreign corporation and is in good standing in every jurisdiction wherein the
failure to be so qualified would materially and adversely impair or impact its
ability to perform its obligations hereunder.


 


Section 3.2                                      Authorization
and Validity of Agreement. This Agreement and the consummation of the
transactions contemplated hereby have been duly authorized by all requisite
corporate action by Quicksilver, and Quicksilver has full corporate power and
authority to execute and deliver this Agreement and to perform its
obligations hereunder. This Agreement has been duly executed and delivered by
Quicksilver and constitutes a valid and legally binding obligation of
Quicksilver enforceable in accordance with its terms except as enforceability may be
limited by bankruptcy, insolvency or other similar Law affecting the
enforcement of creditors’ rights generally as well as to general principles of
equity (regardless of whether such enforceability is considered in a proceeding
in equity or at law).


 


Section 3.3                                      Non-Contravention.
The execution and delivery by Quicksilver of this Agreement do not, and the
consummation by Quicksilver of the transactions contemplated hereby will not (a) violate
or conflict with any provision of the certificate of incorporation or bylaws or
other governing document of Quicksilver, or (b) assuming that all Permits,
Third-Party Approvals and other approvals described on Schedule 4.3(a) have
been obtained or made, (i) violate any Law or Order to which Quicksilver
is subject or (ii) constitute a breach or violation of, or default under,
or trigger any “change of control” rights or remedies under, or give rise to
any Lien (other than Permitted Liens) or any Preferential Purchase Rights
(other than those Preferential Purchase Rights addressed under Section 6.13)
under any Contract to which Quicksilver or any of the QRI Assets are bound.


 


Section 3.4                                      Equity
Interests.


 


(a)                                  As
of the date of this Agreement, except as set forth on Schedule 3.4:
(i) the Equity Interests have been duly authorized and validly issued and
are fully paid and nonassessable, (ii) none of the Equity Interests have
been issued in violation of any preemptive rights, and (iii) Quicksilver
holds of record and owns beneficially the Equity Interests free and clear of
all Liens, other than Liens for Taxes, assessments and other governmental
charges not yet due and payable (or, if due, not delinquent or being contested
in good faith by appropriate proceedings), and other than transfer restrictions
under applicable Law, and, with regard to WCGP, as may be set forth in
WCGP’s applicable formation or organization documents. As of Closing, the
representations and warranties in the immediately prior sentence shall be true
and correct, in all material respects, with regard to the Equity Interests of
the Acquired Companies post-Conversion.


 


(b)                                 As
of the date of this Agreement, except as set forth on Schedule 3.4,
there are no outstanding options, warrants or other rights of any kind relating
to the transfer, sale, ownership, issuance or voting of any of the Equity
Interests which have been issued, granted, acknowledged or entered into by
Quicksilver or any securities convertible into or evidencing the 


 


32

















 


right to
purchase any interests in the Acquired Companies. As of Closing, the
representations and warranties in the immediately prior sentence shall be true
and correct, in all material respects, with regard to the Equity Interests of
the Acquired Companies post-Conversion.


 


(c)                                  Quicksilver
owns, directly, 50% of the limited liability company interests of Beaver Creek
(with the remaining 50% being owned by Mercury); and Quicksilver owns a 5.5385%
limited partnership interest in WCGP.


 


Section 3.5                                      Investment
Intent. Quicksilver is aware that the Common Units comprising the Equity
Consideration have not been registered under the Securities Act or under any
state or foreign securities Laws. Quicksilver is not an underwriter, as such
term is defined under the Securities Act, and Quicksilver is acquiring the
Common Units comprising the Equity Consideration solely for investment, with no
intention to distribute any such Common Units to any Person in violation of any
state or foreign securities Laws.


 


ARTICLE IV


REPRESENTATIONS AND WARRANTIES RELATING TO ACQUIRED COMPANIES,

TRANSFERRED COMPANIES AND THE ACQUIRED ASSETS


 


Quicksilver hereby represents and warrants to BreitBurn, as of the date
of this Agreement or as of such other date as may be expressly provided
below, as follows:


 


Section 4.1                                      Due
Incorporation. Each of the Acquired Companies is duly formed, validly
existing and in good standing under the laws of the jurisdiction of its formation.
Each of the Acquired Companies has the requisite company power and authority to
own its properties and assets and to carry on its business as presently
conducted. As of the date of this Agreement, each of the Acquired Companies is
duly authorized, qualified or licensed to do business as a foreign company and
is in good standing in every jurisdiction wherein the failure to be so
qualified would have a Material Adverse Effect. Except as set forth on Schedule 4.1,
none of the Acquired Companies owns any equity interest in any other Person.


 


Section 4.2                                      Non-Contravention.
The execution and delivery of this Agreement by Quicksilver and the
consummation by Quicksilver of the transactions contemplated hereby will not (a) violate
or conflict with any provision of the certificate of incorporation, bylaws,
partnership agreement or other formation documents of any of the Transferred
Companies and (b) assuming that all Permits and Third-Party Approvals set
forth in Schedule 4.3(a) have been obtained or made, (i) violate
any Law or Order to which any of the Transferred Companies is subject or (ii) constitute
any default under, or give rise to any Lien (other than Permitted Liens) or any
Preferential Purchase Rights (other than those Preferential Purchase Rights
addressed under Section 6.13) under any Contract to which
Quicksilver, any of the Acquired Companies or any of the Acquired Assets are
bound.


 


Section 4.3                                      Governmental
Approvals; Consents and Actions.


 


(a)                                  Except
as set forth in Schedule 4.3(a) and except as would not have a
Material Adverse Effect, no Permit from or of any Governmental Entity is
required, no Third-Party Approval is required under any Disclosed Contract, and
no Third-Party Approval is required under any other Contract.


 


33

















 


(b)                                 Except
as set forth on Schedule 4.3(b), no Action or Order is pending or,
to Quicksilver’s Knowledge, threatened against any of the Transferred Companies
challenging or seeking to restrain, delay or prohibit any of the transactions
contemplated by this Agreement, 
or which would hinder or delay the consummation of the transactions
contemplated by this Agreement.


 


Section 4.4                                      Financial
Statements.


 


(a)                                  Schedule 4.4
contains a true and complete copy of (i) the unaudited balance sheets of
each of the Acquired Companies (other than Beaver Creek) as of December 31,
2006, and the related statements of income for the same period and (ii) the
unaudited balance sheets of each of the Acquired Companies (other than Beaver
Creek) as of June 30, 2007, and the related statements of income for the
same period (the “Financial Statements”).


 


(b)                                 Each
of the Financial Statements fairly presents in all material respects the
financial condition and the results of the operations of each of the Acquired
Companies (other than Beaver Creek), respectively, as of the dates and for the
periods indicated. The Financial Statements have been prepared in accordance
with GAAP, in all material respects, consistent with historical internal
practices of such companies, except as otherwise disclosed in Schedule 4.4.


 


Section 4.5                                      Books
and Records. The minute books of each of the Acquired Companies contain
accurate records of all meetings and accurately reflect all corporate action of
the shareholders and the board of directors of such Acquired Company, insofar
as the failure to have the same would constitute a Material Adverse Effect.


 


Section 4.6                                      No
Undisclosed Liabilities. To Quicksilver’s Knowledge, except as set forth in
Schedule 4.6 or as otherwise disclosed in this Agreement or in the
Disclosure Schedules, none of the Acquired Companies for which Financial
Statements have been furnished has any liabilities or obligations that are of a
nature required under GAAP to be disclosed, reflected or reserved against on the
Financial Statements, except for liabilities or obligations (i) disclosed,
reflected or reserved against in the Financial Statements, (ii) incurred
since the end of the period covered by the Financial Statements in the ordinary
course of business consistent with past practice of such Acquired Companies, or
(iii) which in the aggregate would not have a Material Adverse Effect.


 


Section 4.7                                      Absence
of Changes. Except as otherwise disclosed in Schedule 4.7 or
elsewhere in the Disclosure Schedules or in this Agreement, since June 30,
2007, to Quicksilver’s Knowledge, and except as would not have a Material
Adverse Effect:


 


(a)                                  the
Business has been conducted in the ordinary course consistent with past
practices; and


 


(b)                                 none
of the Acquired Companies has taken any of the following actions:


 


(i)                                     except
to the extent contemplated in Section 6.7, waived, released,
canceled, settled or compromised any debts, Action or right, pertaining to the
Business;


 


34

















 


(ii)                                  incurred,
assumed or guaranteed any indebtedness for borrowed money, or issued any notes,
bonds, debentures or other similar securities, of any of the Acquired
Companies;


 


(iii)                               except
as required as a result of a change in Law or in GAAP (or as will be applied in
connection with the Conversion), changed any of the accounting methods or
principles used by any of the Acquired Companies; or


 


(iv)                              made
any capital expenditure or made any commitment to make any capital expenditure
in excess of $5,000,000, other than (A) pursuant to existing commitments,
approved budgets or approved business plans, (B) to repair, maintain or
replace any assets, properties or facilities in the ordinary course of business
or (C) as necessary to maintain or restore safe operations of the Business
or respond to any catastrophe or other emergency situation.


 


Section 4.8                                      Contracts.


 


(a)                                  Schedule 4.8
is a true and complete listing of each Contract which satisfies one or more of
the following descriptions, excluding any contracts or agreements constituting
any of the Excluded Assets (each such Contract, a “Disclosed Contract”,
and collectively, the “Disclosed Contracts”):


 


(i)                                     that
involves required, firm payments of more than $2,500,000 per annum or more than
$15,000,000 in the aggregate, other than payments that may be made in the
ordinary course under joint operating agreements, production sales contracts,
and gathering and transportation contracts;


 


(ii)                                  that
contain any warranty, guaranty, indemnity or other similar undertaking with
respect to a contractual performance extended by Quicksilver or any Acquired
Company other than in connection with Contracts entered into in the ordinary
course of business and which could reasonably be expected to result in a
liability to Quicksilver (with regard to the QRI Assets) or any Acquired
Company of more than $1,000,000;


 


(iii)                               that
contain a covenant not to compete, restricting Quicksilver (with regard to the
QRI Assets) or a Acquired Company from competing in any line of business or in
any region;


 


(iv)                              under
which any Acquired Company has (A) created, incurred, assumed or
guaranteed (or may create, incur, assume or guarantee) indebtedness for
borrowed money, or (B) granted a Lien on its assets, whether tangible or
intangible, other than a Permitted Lien;


 


(v)                                 that
is an Affiliate Agreement that will remain in force and effect after the
Closing;


 


35

















 


(vi)                              that
is a Contract for the employment of any individual on a full-time, part-time,
consulting or other basis;


 


(vii)                           is
a contract which involves the licensing of Intellectual Property used in
connection with the Business;


 


(viii)                        that
is a Contract or collective bargaining agreement with any labor union or
representative of employees;


 


(ix)                                that
is a gas purchase contract that contains as of the date of this Agreement below
market rates; or


 


(x)                                   that
is any amendment, supplement or restatement or other modification relating to
any of the foregoing.


 


(b)                                 Quicksilver
has furnished or made available to BreitBurn a true and complete copy of each
Disclosed Contract. As to each Disclosed Contract,


 


(i)                                     to
Quicksilver’s Knowledge, it is valid, binding and in full force and effect and
is enforceable against Quicksilver and each Acquired Company, as applicable, and
each other party thereto, according to its terms, except as the enforceability may be
limited by bankruptcy, insolvency, or other similar Laws affecting the
enforcement of creditors’ rights generally and subject to general principles of
equity (regardless of whether such enforceability is considered in a proceeding
in equity or at law);


 


(ii)                                  Quicksilver
and each Acquired Company has performed its obligations required to be
performed to date thereunder, except where such non-performance would not have
a Material Adverse Effect;


 


(iii)                               to
Quicksilver’s Knowledge, there has not occurred any termination event or any
default or event that with the lapse of time or the giving of notice could
constitute a default by any other party thereunder, except where such termination
event or default or event would not have a Material Adverse Effect; and


 


(iv)                              no
written notice of termination or non-renewal thereof, breach or default
thereunder, any significant dispute with respect thereto, any claim for
indemnification with respect thereto, or any other pending claims thereunder
has been delivered to Quicksilver or any Acquired Company, except to the extent
such matter (1) has been fully resolved in accordance with such Disclosed
Contract without any ongoing liability of Quicksilver or any Acquired Company
with respect thereto or (2) would not have a Material Adverse Effect.


 


Section 4.9                                      Litigation.
Except as set forth in Schedule 4.9, there are no Actions pending
and, to Quicksilver’s Knowledge, there is no Action threatened in Law or in
equity or before any Governmental Entity, against either of Quicksilver (with
regard to the QRI Assets) or


 


36

















 


any of the Transferred Companies, that, if determined or resolved
adversely, could result in a Material Adverse Effect.


 


Section 4.10                                Compliance
with Laws. Except as disclosed on Schedule 4.10 and except for
circumstances or conditions that would not have a Material Adverse Effect:  (i) each of Quicksilver (with regard to
the QRI Assets) and the Acquired Companies has complied in all material
respects with all applicable orders, writs, judgments, injunctions, decrees,
statutes, ordinances, rules, or regulations of any Governmental Entity, (ii) each
of the Acquired Companies and Quicksilver (with regard to the QRI Assets) has
all Permits issued by Governmental Entities and required thereby for the
operation of the Acquired Assets, a true and correct copy of each material
Permit has been or will be made available to BreitBurn and/or any of BreitBurn’s
representatives for review or copy, and all such Permits are in full force and
effect, and (iii) neither Quicksilver (with regard to the QRI Assets) nor
any Acquired Company is in violation of the terms of any Permit and no Action
is pending, or, to Quicksilver’s Knowledge, threatened, that could reasonably
result in the suspension, revocation, termination of, or loss of any material
benefits under, any such Permit. Quicksilver is not making any representation
or warranty in this Section 4.10 with respect to any Tax matters,
employment matters, or any environmental matter, as such matters are
exclusively addressed in Sections 4.11-4.13, respectively.


 


Section 4.11                                Tax
Matters. Except as set forth on Schedule 4.11:


 


(a)                                  each
of the Acquired Companies and Quicksilver (with regard to the QRI Assets) has
timely filed all material Tax Returns required to be filed on or prior to the
Closing Date, all such Tax Returns are true and complete in all material
respects and all material Taxes owed by each Acquired Company or Quicksilver
(whether or not shown on any Tax Return) have been timely paid;


 


(b)                                 no
Acquired Company is currently the beneficiary of any extension of time within
which to file any Tax Return;


 


(c)                                  there
is no Action pending, or to Quicksilver’s Knowledge, threatened against, or
with respect to any of the Acquired Companies or Quicksilver (with regard to
the QRI Assets) in respect of any Tax or Tax assessment, nor has any unresolved
written claim for additional Tax or Tax assessment been asserted or, to
Quicksilver’s Knowledge, been proposed by any Tax Authority;


 


(d)                                 no
Acquired Company has waived any statute of limitations in respect of Taxes or
agreed to any extension of time with respect to a Tax assessment or deficiency;


 


(e)                                  no
Acquired Company (i) has any liability for the Taxes of any Person (other
than the Quicksilver Group) under Treasury Regulations section 1.1502-6
(or any similar provision of state, local or foreign law), (ii) has any
liability for the Taxes of any Person as a transferee or successor, or (iii) is
a party to any Contract providing for the payment of Taxes, payment for Tax
losses, entitlements to refunds or similar Tax matters;


 


(f)                                    each
of the Acquired Companies and Quicksilver (with regard to the QRI Assets) has
complied in all material respects with all laws relating to the withholding of
Taxes


 


37

















 


and has duly
and timely withheld and paid all Taxes required to have been withheld and paid
in connection with amounts paid or owing by the Acquired Companies or
Quicksilver (with regard to the QRI Assets) to any employee, independent
contractor, creditor, member, stockholder or other third party;


 


(g)                                 each
of WCGP, Wilderness-Chester LLC, a Michigan limited liability company (“W-C
LLC”), Saginaw Bay Lateral LP, a Michigan limited partnership (“Saginaw”),
Terra Westside Processing Partnership, a Michigan general partnership (“TWPP”),
Wilderness Energy L.C., a Michigan limited liability company (“W-E LC”),
Wilderness Energy Services LP, a Michigan limited partnership (“W-E LP”),
and Frederic HOF LP, a Virginia limited partnership (“Frederic”), is
classified as a partnership for United States federal income tax purposes;
under its current partnership agreement or operating agreement, as applicable,
each of WCGP and W-C LLC is required to make the election provided in Section 754
of the Code (a “Section 754 Election”); under its current
partnership agreement or operating agreement, as applicable, each of W-E LC,
W-E LP and Frederic is required to make a Section 754 Election upon
request from any partner or member, as applicable; and under its current
partnership agreement, each of Saginaw and TWPP may make a Section 754
Election with the consent of its respective partners;


 


(h)                                 except
for the assets held by WCGP, W-C LLC, Saginaw, TWPP, W-E LC, W-E LP and
Frederic, none of the Contributed Assets are deemed by agreement or applicable
law to be held by a partnership for United States federal income Tax purposes;


 


(i)                                     except
for Permitted Liens, there are no Liens on any of the assets of the Acquired
Companies or the QRI Assets that arose in connection with any failure (or
alleged failure) to pay any Tax;


 


(j)                                     the
Acquired Companies have not (i) participated, within the meaning of Treasury
Regulation Section 1.6011-4(c), in any “listed transaction” or any other “reportable
transaction” within the meaning of Treasury Regulation Section 1.6011-4,
or (ii) engaged in any transaction that gives rise to (x) a registration
obligation under Section 6111 of the Code and the Treasury Regulations
thereunder, or (y) a list maintenance obligation under Section 6112 of the
Code and the Treasury Regulations thereunder, in each case as amended by any
guidance published by the Internal Revenue Service applicable at the time of
any “listed transaction” or any other “reportable transaction”; and


 


(k)                                  as
of the Closing Date, pursuant to the Conversions, each of the Acquired
Companies will be a disregarded entity for United States federal income Tax
purposes.


 


Section 4.12                                Employee
and Labor Matters.


 


(a)                                  The
Acquired Companies do not have any employees, nor do any of the Acquired
Companies sponsor, maintain, contribute to, or have an obligation to contribute
to, any employee benefit or employee retirement plans. Schedule 4.12
sets forth a true and complete list, as of the date set forth therein, of the
Business Employees. Within ten (10) Business Days following execution of
this Agreement, Quicksilver shall provide to BreitBurn a description of each
such employee’s name, job title, work location, employer’s name and current
base salary or


 


38

















 


base wages. No
changes in such base salary or base wages for such employees have been made,
promised or authorized since June 30, 2007, for which BreitBurn will be
liable after Closing. Except as set forth on Schedule 4.12(a),
neither Quicksilver nor any Acquired Company is a party to, bound by, or in
negotiation with respect to any agreement with any Business Employee, including
any agreement, plan, or program relating to the purchase or issuance of equity
interests in Quicksilver or any Acquired Company by any Business Employee.


 


(b)                                 Quicksilver
has complied in all material respects with all legal requirements relating to
employment practices, terms and conditions of employment, equal employment
opportunity, nondiscrimination, immigration, wages, hours, benefits, and other
requirements under applicable state and federal law, the payment of social
security and similar Taxes and occupational safety and health for the Business
Employees. Neither Quicksilver nor any Acquired Company is liable for the
payment of any Taxes, fines, penalties, or other amounts, however designated,
for failure to comply with any of the foregoing legal requirements.


 


(c)                                  Quicksilver
is not a party to, bound by, or in negotiation with respect to any agreement
involving the Business Employees with any employee organization or other
employee group, nor, to the Knowledge of Quicksilver, are any Business Employees
represented by any employee organization. No employee organization has been
certified or recognized as the collective bargaining representative of any
Business Employee. To Quicksilver’s Knowledge, there are no employee
organizational campaigns or representation proceedings under way or threatened
with respect to any Business Employees. There are no existing or, to the
Knowledge of Quicksilver, threatened, labor strikes, work stoppages, slowdowns,
grievances, unfair labor practice charges, discrimination charges, or labor
arbitration proceedings affecting the Business.


 


Section 4.13                                Environmental
Matters. Within ten (10) days following the date of this Agreement,
Quicksilver and the Acquired Companies will make available to BreitBurn all
material environmental investigations or audits in possession of Quicksilver
and the Acquired Companies addressing the Acquired Assets and the operations of
Quicksilver (with respect to the QRI Assets) and the Acquired Companies. Except
as set forth on Schedule 4.13 and except as would not reasonably be
expected to result in a Material Adverse Effect:  (a) the Acquired Assets, Quicksilver
(with respect to the QRI Assets) and the Acquired Companies are and, within any
unexpired statute of limitations period, have been, in compliance with all
applicable Environmental Laws, (b) there are no pending or, to the
Knowledge of Quicksilver, threatened, enforcement, clean-up, removal,
remediation, mitigation or other claims or Actions against Quicksilver or any
Acquired Company under any Environmental Law (including any claim resulting
from off-site disposal), and the Acquired Assets are not subject to any
unfulfilled presently required remedial obligation imposed under applicable
Environmental Laws, (c) Quicksilver or the Acquired Companies, as the case
may be, possess all Permits required under applicable Environmental Laws
for the ownership and operation of the Business as presently conducted, all
such Permits are in full force and effect and no Action is pending to revoke
any such Permit, and Quicksilver and the Acquired Companies are in material
compliance with such Permits, (d) neither Quicksilver nor the Acquired
Companies has received any written notice of alleged violation of or potential
liability under applicable Environmental Laws relating to the Acquired Assets
that has not been resolved to the satisfaction of a Governmental Entity, and (e) none
of the Acquired Assets are subject to any unresolved Action


 


39

















 


initiated by any Governmental Entity pursuant to applicable
Environmental Laws. Notwithstanding anything to the contrary in this Section or
elsewhere in this Agreement, Quicksilver makes no, and disclaims any,
representation or warranty, express or implied, with respect to the presence or
absence of naturally occurring radioactive material (“NORM”), asbestos,
asbestos containing materials, mercury, drilling fluids and chemicals, and
produced waters and Hydrocarbons (including oil, gas and other substances of
the type included within the definition of Hydrocarbons) in or on the Acquired
Assets in quantities typical for oilfield operations in the areas in which the
Oil and Gas Properties and equipment are located.


 


Section 4.14                                Finders;
Brokers. There is no basis for any claims upon BreitBurn or any of the
Transferred Companies for brokerage commissions, finder’s fees or like payments
in connection with this Agreement or the transactions contemplated hereby
resulting from any action taken by Quicksilver, or by any other Person on
Quicksilver’s behalf.


 


Section 4.15                                Insurance.
Schedule 4.15 sets forth a true and complete list of all of the
policies of insurance carried by Quicksilver, and any of the Acquired Companies
that insure the operation of the Business on or prior to the Closing Date
(collectively, “Quicksilver’s Policies”). All premiums payable under
Quicksilver’s Policies have been paid in a timely manner. With respect to
Quicksilver’s Policies, (a) all are in full force and effect, (b) all
have been complied with in all material respects and (c) there is no claim
under any such policy as to which coverage has been denied or disputed by the
underwriters or issuers thereof.


 


Section 4.16                                Bank
Accounts. Schedule 4.16 contains a true and complete list of
the name of each bank and trust company with which each Acquired Company has an
account, safe deposit box or vault and the names of all Persons authorized to
draw upon such account or who have authorized access to any such safe deposit
box or vault.


 


Section 4.17                                Officers
and Directors. Schedule 4.17 contains a true and complete list
of all officers or directors of each of the Acquired Companies.


 


Section 4.18                                Oil
and Gas Properties.


 


(a)                                  Except as set forth
on Schedule 4.18(a):


 


(i)                                     to
the Knowledge of Quicksilver, as of the date of this Agreement, neither
Quicksilver nor any Acquired Company has received written notice from any
Governmental Entity, which remains unresolved, that any of the Wells listed on Exhibit A-1
are being overproduced; and


 


(ii)                                  neither
Quicksilver nor any Acquired Company has received written notice that there has
been any change proposed in the production allowables for any Wells listed on Exhibit A-1
except where a proposed change (if adopted or approved) would not have a
Material Adverse Effect.


 


(b)                                 Except
as set forth on Schedule 4.18(b), neither Quicksilver nor any
Acquired Company is obligated by virtue of a take or pay payment, advance
payment or other similar payment (other than royalties, overriding royalties
and similar arrangements established in the O&G Interests or reflected on Exhibit A-1,
Exhibit A-2 or Exhibit A-3), to deliver


 


40

















 


Hydrocarbons,
or proceeds from the sale thereof, attributable to Quicksilver’s or the
Acquired Companies’ interests in the Oil and Gas Properties after the Closing
Date without then or thereafter receiving payment therefor.


 


(c)                                  Except
as set forth on Schedule 4.18(c), as of the date identified on such
Schedule, there were no contracts for the purchase, sale or exchange of
Hydrocarbons produced from or attributable to the Oil and Gas Properties that
will be binding on BreitBurn or the Acquired Companies after Closing that
BreitBurn (or the applicable Acquired Company) will not be entitled to
terminate at will (without penalty) on 90 days notice or less.


 


(d)                                 To
Quicksilver’s Knowledge, Schedule 4.18(d) sets forth all
material Imbalances as of the respective dates set forth therein with respect
to the Oil and Gas Properties.


 


Section 4.19                                Gas
Regulatory Matters. Except as set forth on Schedule 4.19, (i) neither
Quicksilver nor any Acquired Company is a “natural-gas company” within the
meaning of the Natural Gas Act of 1938 and (ii) neither Quicksilver nor
any Acquired Company has operated or provided services on its gathering
facilities in a manner that would subject it to the jurisdiction of, or
regulation by, the Federal Energy Regulatory Commission under the Natural Gas
Act of 1938. Neither Quicksilver nor any Acquired Company has performed
services, and is subject to regulation, under Section 311 of the Natural
Gas Policy Act of 1978.


 


Section 4.20                                Affiliate
Transactions. Except as set forth on Schedule 6.7(a), neither
Quicksilver nor any Affiliate of Quicksilver (other than any of the Transferred
Companies) provides or causes to be provided to any Transferred Company any
products, services, equipment, facilities or similar items that, individually
or in the aggregate, are or may reasonably be expected to be material to
the Business or the Acquired Assets.


 


Section 4.21                                Special
Warranty of Title. The Interests are free from the claims of any Person lawfully claiming
or to claim the same or any part thereof, by, through or under
Quicksilver, by virtue of any prior conveyance, lien or encumbrance made, done
or suffered by Quicksilver, except for Permitted Liens.


 


Section 4.22                                Accuracy
of Data. To
Quicksilver’s Knowledge, the historical factual information, excluding title
information, supplied by Quicksilver or its Affiliates to Schlumberger Data and
Consulting Services in the preparation of its report dated as of July 12,
2007 with respect to the Acquired Assets located in Michigan and located in the
virtual data room in subfolders 1.01.01 and July 16, 2007 with
respect to the Acquired Assets located in Indiana and Kentucky and located in
the virtual data room in subfolders 2.01.01 is accurate and complete in
all material respects. To Quicksilver’s Knowledge, the historical production
data on the publications entitled  (a) 2.01.03.001
Indiana and Kentucky Aries Database in the data-room folder  2.01.03 Indiana and Kentucky Aries Database, and (b) 1.01.03.002
Aries Database in the data-room folder 1.01.03 Michigan Aries Database, to
the extent relating to the Acquired Assets, is accurate and complete in all
material respects.


 


41

















 


ARTICLE V


REPRESENTATIONS AND WARRANTIES RELATING TO BREITBURN AND BREITBURN
PARENT


 


BreitBurn hereby represents and warrants to Quicksilver, as of the date
of this Agreement or as of such other date as may be expressly provided
below, as follows:


 


Section 5.1                                      Due
Organization and Power of BreitBurn. BreitBurn is duly organized, validly
existing and in good standing under the laws of Delaware and has the requisite
limited partnership power and authority to own, lease and operate the
properties used in its business and to carry on its business as the same is now
being conducted. BreitBurn is duly authorized, qualified or licensed to do
business as a limited partnership and in good standing in every jurisdiction
wherein, by reason of the nature of its business, it is required to be.


 


Section 5.2                                      Authorization
and Validity of Agreement. This Agreement and the consummation of the
transactions contemplated hereby have been duly authorized by all requisite
partner action, and BreitBurn has full limited partnership power and authority
to execute and deliver this Agreement and to perform its obligations
hereunder. This Agreement has been duly executed and delivered by BreitBurn and
constitutes a valid and legally binding obligation of BreitBurn, enforceable in
accordance with its terms except as enforceability may be limited by
bankruptcy, insolvency or other similar Laws affecting creditor’s rights
generally as well as to general principles of equity (regardless of whether
such enforceability is considered in a proceeding in equity or at law).


 


Section 5.3                                      Non-Contravention.
The execution and delivery by BreitBurn of this Agreement does not, and the
consummation by BreitBurn of the transactions contemplated hereby will not, (a) violate
or conflict with any provision of the formation, organization, partnership
agreement or other governing documents of BreitBurn or (b) assuming all
Permits and Third-Party Approvals set forth on Schedule 5.4(a) are
obtained or made, (i) violate any Law or Order to which BreitBurn is
subject or (ii) result in any breach or creation of any Lien or constitute
default under any contract to which BreitBurn is subject or is a party.


 


Section 5.4                                      Governmental
Approvals; Consents and Actions.


 


(a)                                  Except
as set forth in Schedule 5.4(a) and except as contemplated
under the Registration Rights Agreement, no Permit from or of any Governmental
Entity or any Third-Party Approval is required on the part of BreitBurn in
connection with the execution and delivery of this Agreement or the
consummation of the transactions contemplated hereby except for such Permits or
Third-Party Approvals which have been obtained.


 


(b)                                 Except
as set forth in Schedule 5.4(b), there are no (i) Orders
against or affecting BreitBurn or its Affiliates or (ii) Actions pending
or, to the Knowledge of BreitBurn, threatened against or affecting BreitBurn or
its Affiliates (A) challenging or seeking to restrain, delay or prohibit
any of the transactions contemplated by this Agreement, (B) preventing
BreitBurn from performing in all material respects its obligations under this
Agreement or (C) which would hinder or delay the consummation of the
transactions contemplated by this Agreement.


 


42
















 


Section 5.5                                      Investment
Intent. BreitBurn is aware that the Equity Interests are not registered
under the Securities Act of 1933, as amended (the “Securities Act”) or
under any state or foreign securities Laws. BreitBurn is not an underwriter, as
such term is defined under the Securities Act, and BreitBurn is purchasing the
Equity Interests, solely for investment, with no intention to distribute any of
the Equity Interests to any Person.


 


Section 5.6                                      Independent
Decision; Hazardous Materials. BreitBurn (i) has knowledge and
experience in financial and business matters, (ii) has the capability of
evaluating the merits and risks of investing in the Interests, (iii) can
bear the economic risk of the transactions contemplated hereby and an
investment in the Interests (and BreitBurn can afford a complete loss of such
investment), and (iv) is not in a disparate bargaining position with
Quicksilver.


 


(a)                                  BREITBURN ACKNOWLEDGES THAT THE ACQUIRED ASSETS, AS WELL AS THE
PROPERTIES AND ASSETS OF THE ACQUIRED COMPANIES AND WCGP, HAVE BEEN USED FOR
EXPLORATION, DEVELOPMENT, AND PRODUCTION OF OIL AND GAS AND THAT THERE MAY BE
PETROLEUM, PRODUCED WATER, WASTES, OR OTHER SUBSTANCES OR MATERIALS LOCATED IN,
ON OR UNDER THE ACQUIRED ASSETS (OR ASSETS OF WCGP) OR ASSOCIATED THEREWITH. PERSONAL
PROPERTY AND SITES INCLUDED IN SUCH ACQUIRED ASSETS AND PROPERTIES MAY CONTAIN
ASBESTOS, NORM OR OTHER HAZARDOUS MATERIALS. NORM MAY AFFIX OR ATTACH
ITSELF TO THE INSIDE OF WELLS, MATERIALS, AND EQUIPMENT AS SCALE, OR IN OTHER
FORMS. THE WELLS, MATERIALS, AND EQUIPMENT LOCATED ON, OR INCLUDED IN SUCH
ACQUIRED ASSETS (OR ASSETS OF WCGP) MAY CONTAIN NORM, ASBESTOS AND OTHER
WASTES OR HAZARDOUS MATERIALS. NORM, ASBESTOS OR ASBESTOS CONTAINING MATERIAL
AND/OR OTHER WASTES OR HAZARDOUS MATERIALS MAY HAVE COME IN CONTACT WITH
VARIOUS ENVIRONMENTAL MEDIA AND EQUIPMENT, INCLUDING WITHOUT LIMITATION, WATER,
SOILS OR SEDIMENT. SPECIAL PROCEDURES MAY BE REQUIRED FOR THE ASSESSMENT,
REMEDIATION, REMOVAL, TRANSPORTATION, OR DISPOSAL OF ENVIRONMENTAL MEDIA OR
EQUIPMENT, WASTES, ASBESTOS, NORM AND OTHER HAZARDOUS MATERIALS FROM SUCH
ACQUIRED ASSETS OR PROPERTIES. NOTWITHSTANDING ANYTHING STATED IN THIS
AGREEMENT TO THE CONTRARY, BUT WITHOUT LIMITING BREITBURN’S RIGHTS HEREUNDER
FOR A BREACH OF SECTION 4.13, THE EXISTENCE OF NORM, ASBESTOS OR
ASBESTOS CONTAINING MATERIAL IN, ON OR RELATING TO ANY OF THE ACQUIRED ASSETS,
OR ANY OF THE PROPERTIES AND ASSETS OF THE ACQUIRED COMPANIES AND WCGP, SHALL
NOT CONSTITUTE OR GIVE RISE TO ANY CLAIMS BY BREITBURN.


 


Section 5.7                                      Financial
Capacity; No Financing Condition. BreitBurn will have available to it as of
the Closing Date funds sufficient to consummate the transactions contemplated
by this Agreement. BreitBurn understands that its obligations to effect the
transactions contemplated hereby are not subject to the availability of
financing to BreitBurn or any other Person.


 


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Section 5.8                                      Finders;
Brokers. Neither BreitBurn nor its Affiliates is a party to any contract with
any finder or broker, or in any way obligated to any finder or broker for any
commissions, fees or expenses, in connection with the origin, negotiation,
execution or performance of this Agreement, for which Quicksilver shall incur
any liability.


 


Section 5.9                                      No
Knowledge of Quicksilver’s Breach. BreitBurn does not have Knowledge of any
breach of any representation or warranty by Quicksilver or, as of the date
hereof, of any other condition or circumstance that would excuse BreitBurn from
its timely performance of its obligations hereunder.


 


Section 5.10                                Capitalization
of BreitBurn Parent and Valid Issuance of Common Units.


 


(a)                                  BreitBurn
has made available to Quicksilver a true and correct copy of the Partnership
Agreement, as amended through the date hereof. The Common Units comprising the
Equity Consideration shall have those rights, preferences, privileges and
restrictions governing the Common Units as set forth in the Partnership
Agreement.


 


(b)                                 As
of the date of this Agreement, the issued and outstanding limited partner
interests of BreitBurn Parent consist of 29,006,002 Common Units. The only
issued and outstanding general partner interests of BreitBurn Parent are the
interests of the General Partner described in the Partnership Agreement. All
outstanding Common Units and the limited partner interests represented thereby
have been duly authorized and validly issued in accordance with applicable Law
and the Partnership Agreement and are fully paid (to the extent required by
applicable Law and the Partnership Agreement) and nonassessable (except as such
nonassessability may be affected by matters described in Section 17-303,
17-607 and 17-804 of the Delaware Revised Uniform Limited Partnership Act
(the “Delaware LP Act”)). All general partner interests of BreitBurn
Parent have been duly authorized and validly issued in accordance with the
Partnership Agreement.


 


(c)                                  Except
as set forth in Schedule 5.10(c), BreitBurn Parent has no equity
compensation plans that contemplate the issuance of partnership interests of
BreitBurn Parent (or securities convertible into or exchangeable for
partnership interests of BreitBurn Parent). No indebtedness having the right to
vote (or convertible into or exchangeable for securities having the right to
vote) on any matters on which the Unitholders may vote is issued or
outstanding. Except as set forth in Schedule 5.10(c), as
contemplated by this Agreement, or as are contained in the Partnership
Agreement, there are no outstanding or authorized (i) options, warrants,
preemptive rights, subscriptions, calls or other rights, convertible or
exchangeable securities, agreements, claims or commitments of any character
obligating BreitBurn Parent or any of its Subsidiaries to issue, transfer or
sell any partnership interests or other equity interests in BreitBurn Parent or
any of its Subsidiaries or securities convertible into or exchangeable for such
partnership interests, (ii) obligations of BreitBurn Parent or any of its
Subsidiaries to repurchase, redeem or otherwise acquire any partnership
interests or equity interests in BreitBurn Parent or any of its Subsidiaries or
any such securities or agreements listed in clause (i) of this sentence,
or (iii) voting trusts or similar agreements to which BreitBurn Parent or
any of its Subsidiaries is a party with respect to the voting of the equity
interests of BreitBurn Parent or any of its Subsidiaries.


 


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(d)                                 (i) 
All of the issued and outstanding equity interests of each of BreitBurn Parent’s
Subsidiaries are owned, directly or indirectly, by BreitBurn Parent free and
clear of any Liens (except for such restrictions as may exist under
applicable Law and except for such Liens as may be set forth in Schedule 5.10(d))
and all such ownership interests have been duly authorized, validly issued and
are fully paid (to the extent required by applicable Law or in the
organizational documents of BreitBurn Parent’s Subsidiaries, as applicable) and
nonassessable (except as nonassessability may be affected by matters
described in Section 17-303, 17-607 and 17-804 of the Delaware LP Act and
Sections 18-607 and 18-804 of the Delaware Limited Liability Company Act (the “Delaware
LLC Act”)) and are free of preemptive rights with no personal liability
attaching to the ownership thereof; and (ii) except as disclosed in the
BreitBurn Parent SEC Documents, neither BreitBurn Parent nor any of its
Subsidiaries owns any shares of capital stock or other securities of, or
interest in, any other Person, or is obligated to make any capital contribution
to or other investment in any other Person.


 


(e)                                  The
issuance of the Common Units comprising the Equity Consideration and the
limited partner interests represented thereby has been duly authorized by
BreitBurn Parent pursuant to the Partnership Agreement and, when issued and
delivered to Quicksilver in accordance with the terms of this Agreement, will
be validly issued, fully paid (to the extent required by applicable Law and the
Partnership Agreement) and nonassessable (except as such nonassessability may be
affected by Sections 17-303, 17-607 and 17-804 of the Delaware LP Act) and will
be free of any and all Liens and restrictions on transfer, other than
restrictions on transfer under the Partnership Agreement, this Agreement and
under applicable state and federal securities Laws and other than such Liens as
are created by Quicksilver.


 


(f)                                    The
Common Units comprising the Equity Consideration will be issued in compliance
with all applicable rules of The Nasdaq Global Market. Prior to the
Closing Date, BreitBurn Parent will submit to The Nasdaq Global Market a
Notification Form:  Listing of Additional
Common Units with respect to the Common Units comprising the Equity
Consideration. BreitBurn Parent’s currently outstanding Common Units are quoted
on The Nasdaq Global Market and BreitBurn Parent has not received any notice of
delisting.


 


Section 5.11                                SEC Documents. BreitBurn Parent has filed timely with the
SEC all forms, registration statements, reports, schedules and statements
required to be filed by it under the Exchange Act or the Securities Act (all
such documents filed on or prior to the date of this Agreement, collectively,
the “BreitBurn Parent SEC Documents”). The BreitBurn Parent SEC
Documents, including, without limitation, any audited or unaudited financial
statements and any notes thereto or schedules included therein (the “BreitBurn
Parent Financial Statements”), at the time filed (in the case of
registration statements, solely on the dates of effectiveness) (except to the
extent corrected by a subsequently filed BreitBurn Parent SEC Document filed
prior to the date hereof) (i) did not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary in order to make the statements therein (in the case of any
prospectus, in light of the circumstances under which they were made) not
misleading, (ii) complied as to form in all material respects with
the applicable requirements of the Exchange Act and the Securities Act, as
applicable, (iii) in the case of the BreitBurn Parent Financial
Statements, complied as to form in all material respects with applicable
accounting requirements and with the published rules and regulations of
the SEC with respect thereto, (iv) in the case of the BreitBurn Parent
Financial Statements, were prepared in accordance with GAAP applied on a


 


45

















 


consistent
basis during the periods involved (except as may be indicated in the notes
thereto or, in the case of unaudited statements, as permitted by Form 10-Q
of the SEC) and (v) in the case of the BreitBurn Parent Financial
Statements, fairly present (subject in the case of unaudited statements to
normal, recurring and year-end audit adjustments) in all material respects the
consolidated financial position of BreitBurn Parent and its Subsidiaries as of
the dates thereof and the consolidated results of its operations and cash flows
for the periods then ended. PricewaterhouseCoopers LLP is an independent
registered public accounting firm with respect to BreitBurn Parent and the
General Partner and has not resigned or been dismissed as independent
registered public accountants of BreitBurn Parent and the General Partner as a
result of or in connection with any disagreement with BreitBurn Parent or the
General Partner on a matter of accounting principles or practices, financial
statement disclosure or auditing scope or procedure.


 


Section 5.12                                Tax.
For United States federal Tax purposes (and state, local, and foreign Tax
purposes where applicable), BreitBurn is disregarded as an entity separate from
BreitBurn Parent. BreitBurn Parent is, and has only been, classified as either
a disregarded entity or a partnership for United States federal Tax purposes (and
state, local, and foreign Tax purposes where applicable). BreitBurn Parent
does, and reasonably expects to continue to, meet the gross income requirements
of Section 7704(c)(2) of the Code, and BreitBurn Parent is not, and
does not reasonably expect to be, treated as a corporation under Section 7704(a) of
the Code or Treasury Regulations section 301.7701-2.


 


Section 5.13                                Investment Company Status. BreitBurn Parent is not now, and after the
issuance of the Common Units comprising the Equity Consideration will not be,
and is not controlled by or under common control with, an “investment company”
within the meaning of the Investment Company Act of 1940, as amended.


 


Section 5.14                                Offering. Assuming the accuracy of the representations and warranties of
Quicksilver contained in Section 3.5 of this Agreement, the
issuance of the Common Units comprising the Equity Consideration pursuant to
this Agreement is exempt from the registration requirements of the Securities
Act, and neither BreitBurn Parent nor any authorized representative acting on
its behalf has taken or will take any action hereafter that would cause the
loss of such exemption.


 


Section 5.15                                Internal Accounting Controls. BreitBurn Parent and its Subsidiaries
maintain a system of internal accounting controls sufficient to provide
reasonable assurance that (i) transactions are executed in accordance with
management’s general or specific authorizations, (ii) transactions are
recorded as necessary to permit preparation of financial statements in
conformity with GAAP and to maintain asset accountability and (iii) access
to assets is permitted only in accordance with management’s general or specific
authorization.


 


Section 5.16                                Material Agreements. BreitBurn has provided Quicksilver with, or
made available to Quicksilver through the BreitBurn Parent SEC Documents,
correct and complete copies of all material agreements (as defined in Section 601(b)(10) of
Regulation S-K promulgated by the SEC) and of all exhibits to the BreitBurn
Parent SEC Documents, including amendments to or other modifications of
pre-existing material agreements, entered into by BreitBurn Parent.


 


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ARTICLE VI


AGREEMENTS
OF BREITBURN AND QUICKSILVER


 


Section 6.1                                      Operation
of the Business. Except as otherwise contemplated by this Agreement or as
set forth in Schedule 6.1 (and any actions, matters or expenditures
described or referred to on Schedule 6.1 are hereby deemed approved
and authorized in all respects), from the date of this Agreement and continuing
until Closing, Quicksilver:


 


(a) shall, with respect to
the QRI Assets, and


 


(b) shall cause each of
the Acquired Companies, with respect to the other Acquired Assets owned by
them, to:


 


(i) operate and maintain such Acquired
Assets in the ordinary course, consistent with its respective past practices,
and (ii) not take any of the following actions, without the prior written
approval of BreitBurn:


 


(A)                              sell,
transfer or otherwise dispose of or encumber any of the Acquired Assets,
including any right under any Contract or Permit or any proprietary right or
other intangible asset, except (1) with respect to any of the Acquired
Assets other than Oil and Gas Properties and Wells, in the ordinary course of
business, (2) for Permitted Liens, and (3) as contemplated in this
Agreement;


 


(B)                                waive,
release, cancel, settle or compromise any Action for an amount in excess of
$1,000,000;


 


(C)                                make
any loan to or enter into any transaction with any Business Employees or any
directors, officers or employees of the Acquired Companies, except for the
payment of salaries and benefits to which all similarly situated employees are
generally entitled, and except for such other payments that BreitBurn and the
Acquired Companies will not be responsible for after Closing;


 


(D)                               incur,
assume or guarantee any indebtedness for borrowed money, or issue any notes,
bonds, debentures or other similar securities, or grant any option, warrant or
right to purchase any of the same, or issue any security convertible or
exchangeable or exercisable for debt securities of any of the Acquired
Companies;


 


(E)                                 make
or change any material Tax elections (except as required by Law and except in
connection with the Conversion), or settle or compromise any material Tax
liability;


 


(F)                                 except
as may be required as a result of a change in Law or in GAAP, materially
change any of the accounting methods or principles used by any of the Acquired
Companies (other than with regard to the Conversion);


 


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(G)                                make
any capital expenditure or make any commitment to make any capital expenditure
in excess of $2,500,000, other than (1) to repair, maintain or replace any
assets, properties or facilities in the ordinary course of business or (2) as
may be necessary to maintain or restore safe operations of the Business or
respond to any catastrophe or other emergency situation;


 


(H)                               declare
or make dividends or other distributions with regard to the Equity Interests,
other than cash dividends;


 


(I)                                    adopt
a plan of complete or partial liquidation, dissolution, restructuring,
recapitalization or other restructuring, except in connection with the
Conversion;


 


(J)                                   pledge
or mortgage any of the Acquired Assets or otherwise cause or permit a Lien
(other than a Permitted Lien) to exist against any of the Acquired Assets;


 


(K)                               effect
any split, combination or reclassification of the securities of any of the
Acquired Companies, except in connection with the Conversion;


 


(L)                                 knowingly
allow any Permits held by any of the Acquired Companies (or any Permit
constituting part of the Acquired Assets) to terminate or lapse, unless no
longer required by Law in connection with the Business;


 


(M)                            amend,
modify, terminate or allow to lapse or expire any Disclosed Contract; provided
that Quicksilver may terminate any Affiliate Agreement prior to Closing;


 


(N)                               create
any Liens on any of the QRI Assets or the Acquired Companies’ assets, other
than Permitted Liens;


 


(O)                               except
as required by Law, enter into, amend, or revise (and Quicksilver shall not
permit to be entered into, amended or revised) any employment agreement or
grant (and Quicksilver shall not permit to be granted) any material increase in
the compensation or benefits of any Business Employee unless such increase
applies to substantially all of the other employees covered under the
applicable employee benefit program; or


 


(P)                                 agree,
whether in writing or otherwise, to do any of the foregoing.


 


BreitBurn’s approval of any action restricted by clause (B), (G), (M)
or (P) of this Section 6.1(b)(ii) shall not be unreasonably
withheld or delayed and shall be considered granted within ten (10) days
(unless a shorter time is reasonably required by the circumstances and such
shorter time is specified in Quicksilver’s notice) of Quicksilver’s notice to
BreitBurn requesting such consent unless BreitBurn notifies Quicksilver to the
contrary during that period. Notwithstanding the foregoing provisions of this Section 6.1,
in the event of an emergency, Quicksilver may take such action as reasonably
necessary and shall notify BreitBurn of such action promptly thereafter.


 


48

















 


Section 6.2                                      Efforts;
Cooperation; HSR and Other Filings.


 


(a)                                  Subject
to the terms and conditions of this Agreement, each of the Parties will use
commercially reasonable efforts to refrain from taking any action within its
control which would cause a breach of any of its representations and warranties
contained in this Agreement or which would prevent it from delivering to the other
Party the certificates which it is required to deliver pursuant to Section 2.11(c) or
2.12(c), as the case may be.


 


(b)                                 BreitBurn
and Quicksilver shall timely and promptly make all filings which may be
required by any of them by Law in connection with the consummation of the
transactions contemplated hereby, including, without limitation, those filings
required under the Hart-Scott Act; provided, however,
that the Parties shall make all filings required by either of them under the
Hart-Scott Act within ten (10) Business Days after the date hereof. Each
Party shall furnish to the other Party such necessary information and
assistance as such other Party may reasonably request in connection with
the preparation of any necessary filings or submissions by it to any
Governmental Entity and correspondence, filings or communications (or memoranda
setting forth the substance thereof) between such Party and its representatives
and the Federal Trade Commission, the Antitrust Division of the United States
Department of Justice or any other Governmental Entity and members of their
respective staffs with respect to this Agreement and the transactions
contemplated hereby. With the exception of payment of the required filing fees
and the Parties’ costs and expenses necessary to prosecute such filings,
neither Quicksilver nor BreitBurn shall be required to make any material
monetary expenditures, commence or participate in any material litigation, or
offer or grant any material accommodation (financial or otherwise) to any third
Person in connection therewith; provided, however,
that any filing fees incurred in connection with filings made in accordance
with the Hart-Scott Act in connection with the consummation of the transactions
contemplated in this Agreement, shall be paid and borne solely by BreitBurn.


 


Section 6.3                                      Public
Disclosures. Prior to the Closing Date and for a period of thirty (30) days
following the Closing Date, no Party will (and each Party will ensure that its
Affiliates and their respective representatives will not) issue any press
release or make any public disclosure concerning the transactions contemplated
by this Agreement without the prior written consent of the other Party, which
shall not be unreasonably withheld, delayed or conditioned. Notwithstanding the
above, nothing in this Section 6.3 will preclude any Person from
making any disclosures it reasonably believes are required by Law or stock
exchange rules or necessary and proper in conjunction with the filing of
any Tax Return or other document required to be filed with any Governmental
Entity; provided that the respective Party shall endeavor to allow the other
Party reasonable time to review and comment thereon in advance of such
disclosure.


 


Section 6.4                                      Pre-Closing
Access; Post-Closing Delivery and Access to Records and Personnel.


 


(a)                                  Pre-Closing Access. From and after the date of this
Agreement, but subject to the other provisions of this Section 6.4,
Section 6.14(a) and subject to obtaining any required consents
of third-party operators, Quicksilver will, and will cause the Acquired
Companies to, afford BreitBurn and its representatives access, during normal
business hours, to the Acquired Assets and offices, personnel and all books and
records of Quicksilver and the


 


49

















 


Acquired
Companies regarding the Acquired Assets in order for BreitBurn to conduct an
Environmental Assessment in accordance with Section 6.14(a) and
a title examination with respect to the Oil and Gas Properties in order to determine
whether Title Defects or Environmental Defects exist, insofar as such books and
records are in possession of Quicksilver or the Acquired Companies and can be
disclosed without consent or approval of any third party or would not result in
the loss or waiver of any legal right or privilege; provided further
Quicksilver and the Acquired Companies will use their reasonable efforts to
obtain a waiver of any such third party restrictions in favor of BreitBurn, but
without being obligated to pay any consideration or waive or release any right
or privilege to obtain such waiver. Subject to the foregoing, BreitBurn and its
representatives may examine all abstracts of title, title opinions, title
files, ownership maps, lease files, assignments, division orders, operating
records and agreements, well files, financial and accounting records,
geological, geophysical, engineering and environmental records, in each case
insofar as the same relate to the Interests and may now be in existence
and in the possession of Quicksilver and the Acquired Companies. BreitBurn will
not contact any of the customers or suppliers of Quicksilver or the Acquired
Companies or their Working Interest co-owners, operators, lessors or surface
interest owners, in connection with the transactions contemplated hereby
without the specific prior authorization of Quicksilver, which consent will not
be unreasonably withheld and may be made subject to reasonable
restrictions. BreitBurn shall coordinate its physical inspections of the
Acquired Assets with Quicksilver to minimize any inconvenience to or
interruption of the conduct of Business. BreitBurn shall abide by all of
Quicksilver’s safety rules, regulations, and operating policies while
conducting its due diligence evaluation of the Acquired Assets. Any
Environmental Assessment shall also be subject to the further provisions of Section 6.14(a).
In addition, BreitBurn agrees to the following with regard to such pre-Closing
diligence activities, including any Environmental Assessment:


 


(i) 
BreitBurn agrees to promptly provide Quicksilver, but in no less than five (5) Business
Days after receipt or creation, copies of all reports and test results,
prepared by BreitBurn and/or any of BreitBurn’s representatives and which
contain data collected or generated from BreitBurn’s due diligence with respect
to the Acquired Assets. Quicksilver shall not be deemed by its receipt of said
documents or otherwise to have made any representation or warranty, expressed,
implied or statutory, as to the condition to the Acquired Assets or to the
accuracy of said documents or the information contained therein.


 


(ii) Upon
completion of BreitBurn’s due diligence, BreitBurn shall, at its sole cost and
expense and without any cost or expense to Quicksilver or the Transferred Companies:
(1) repair all damage done to the Acquired Assets in connection with
BreitBurn’s due diligence, (2) restore the Acquired Assets to the
approximate same or better condition than it was prior to commencement of
BreitBurn’s due diligence and (3) remove all equipment, tools or other
property brought onto the Acquired Assets in connection with BreitBurn’s due
diligence. Any disturbance to the Acquired Assets (including, without
limitation, the real property associated with such Acquired Assets) resulting
from BreitBurn’s due diligence will be promptly corrected by BreitBurn.


 


50

















 


(iii) 
BreitBurn hereby agrees to DEFEND, RELEASE, INDEMNIFY and HOLD HARMLESS each of
Quicksilver, the Transferred Companies, any third-party operators of any of the
Acquired Assets, and each of the other Quicksilver Indemnified Parties, from
and against any and all Damages arising out of, resulting from or relating to
any field visit, Environmental Assessment, or other due diligence activity
conducted by BreitBurn or any of BreitBurn’s employees, agents, consultants, or
representatives, EVEN
IF SUCH DAMAGES ARISE OUT OF OR RESULT FROM, SOLELY OR IN PART, THE SOLE,
ACTIVE, PASSIVE, CONCURRENT OR COMPARATIVE NEGLIGENCE, STRICT LIABILITY OR
OTHER FAULT OR VIOLATION OF LAW OF OR BY QUICKSILVER, ANY OF THE TRANSFERRED
COMPANIES, ANY OTHER MEMBER OF THE QUICKSILVER INDEMNIFIED PARTIES OR ANY OTHER
PERSON, EXCLUDING QUICKSILVER’S OR ANY TRANSFERRED COMPANY’S GROSS NEGLIGENCE
OR WILLFUL MISCONDUCT; PROVIDED,  HOWEVER, THAT, FOR THE PURPOSES
OF THIS SECTION 6.4(a)(iii), DAMAGES SHALL NOT INCLUDE DAMAGES TO
THE EXTENT RESULTING SOLELY FROM THE DISCOVERY BY BREITBURN, ITS OFFICERS,
DIRECTORS, AGENTS, REPRESENTATIVES, EMPLOYEES, SUCCESSORS OR ASSIGNS OF ANY
PRE-EXISTING CONDITION.


 


(b)                                 Post-Closing Delivery of Books and Records. Quicksilver
shall deliver to BreitBurn, within fifteen (15) Business Days following the
Closing Date, all books, records, documents, instruments, accounts,
correspondence, writings, Contracts, evidences of title and other papers (in
each case, including electronic versions thereof) relating to the Acquired
Assets or the Transferred Companies, to the extent in the possession of
Quicksilver or any Affiliate of Quicksilver (including the Acquired Companies)
and to the extent not constituting the Excluded Assets (collectively, the “Books
and Records”). Quicksilver may retain copies of any or all of the
Books and Records for its files.


 


(c)                                  Post-Closing Retention of Books and Records. BreitBurn shall
retain the Books and Records for the period of time set forth in its records
retention policies on the Closing Date which shall not be less than  six (6) years (or for tax
records, seven years), or for such longer period as may be required by Law
or any applicable court Order, or for the term required by BreitBurn’s records
retention policy. At any time during such period, Quicksilver may, upon its
request and at its expense, copy all or any part of such Books and Records
as Quicksilver may reasonably require. Notwithstanding the foregoing,
BreitBurn shall retain (or cause the Acquired Companies to retain) for such
longer periods any and all Books and Records that relate to any ongoing Action
until such time as BreitBurn is notified of the final conclusion of such
matter.


 


(d)                                 Reasonable Post-Closing Access. After Closing, the Parties
will allow each other reasonable access to the Books and Records, and to
personnel having knowledge of the whereabouts or contents of such Books and
Records, for legitimate legal, tax or accounting reasons, such as the
preparation of Tax Returns, the defense of Actions and responding to data
requests from Governmental Entities. Subject to Article IX, each
Party shall be entitled to


 


51

















 


recover its
out-of-pocket costs (including copying costs) incurred in providing such
records or personnel to the other Party.


 


Section 6.5                                      Employee
Matters.


 


(a)                                  Quicksilver
shall use its good faith efforts to make available to BreitBurn all of the
Business Employees listed on Schedule 4.12, to discuss potential
employment with BreitBurn or an Affiliate of BreitBurn on and after Closing
(such entity that makes any employment offers is herein referred to as the “BreitBurn
Employer”). BreitBurn shall provide Quicksilver, in writing, not later than
fourteen (14) calendar days prior to the Closing Date, a list of those Business
Employees to whom BreitBurn intends to make offers of employment effective as
of the Closing Date, together with the proposed terms of such employment
(collectively, the “Designated Employees”); and BreitBurn shall cause
the BreitBurn Employer to make offers of employment to the Designated Employees
on the terms provided to Quicksilver, effective as of the Closing Date. BreitBurn’s
determination as to which Business Employees shall be Designated Employees and
the proposed terms of employment offered by the BreitBurn Employer, shall be
within the sole discretion of BreitBurn; provided, however,
that its election and determination shall be made in accordance with all
applicable Law (and upon delivery of the written notification of the Designated
Employees to Quicksilver, as described above, BreitBurn shall be deemed to have
represented, warranted and certified to Quicksilver that its determination has
been made in accordance with all applicable Law).


 


(b)                                 For
a period of two (2) years following the Closing Date, Quicksilver shall
not, directly or indirectly solicit for employment, by Quicksilver or any
Affiliate of Quicksilver, any Designated Employee who accepts a job with
BreitBurn or an Affiliate of BreitBurn pursuant to the offers of employment
made pursuant to Section 6.5(a), unless (in each case prior to any
such solicitation) such Designated Employee is no longer employed by BreitBurn
or BreitBurn’s Affiliates; provided, however,
that Quicksilver shall not be precluded from hiring any employee who has been
terminated by BreitBurn or BreitBurn’s Affiliate prior to commencement of
employment discussions between Quicksilver and such employee. Quicksilver
acknowledges that the purpose of this covenant is to enable BreitBurn to
maintain a stable workforce in order to remain in Business, and that it would
disrupt, damage, impair and interfere with the Business if Quicksilver were to
engage in the solicitation prohibited hereby.


 


Section 6.6                                      Workforce
Reduction Notices. Quicksilver shall be responsible for any workforce
reductions carried out on or before the Closing Date and such reductions, if
any, shall be done in accordance with all applicable Laws and regulations
governing the employment relationship and termination thereof, including, if
applicable, the Worker Adjustment and Retraining Notification Act (“WARN”)
and regulations promulgated thereunder, and any comparable state or local Law. BreitBurn
shall not be responsible for any obligations under WARN or its equivalent state
statutes and any applicable regulations thereunder with respect to any
employment terminations on or prior to the Closing Date.


 


Section 6.7                                      Inter-Company
Transactions; Insurance.


 


(a)                                  Except
as set forth in Schedule 6.7(a), effective as of Closing, all
inter-company receivables or payables then existing between Quicksilver and any
Affiliates of


 


52

















 


Quicksilver
(other than the Acquired Companies), on the one hand, and any of the Acquired
Companies on the other, shall be cancelled or settled by making inter-company
cash transfers so that there are no outstanding payables. If the Acquired
Companies fail to have sufficient cash on hand to pay such payables or
receivables or other liabilities in full, then Quicksilver shall nonetheless
cause all such remaining payables or receivables to be canceled as of Closing
without further liability relating to such inter-company transactions.


 


(b)                                 Notwithstanding
their exclusion from Current Assets, any insurance proceeds receivable of the
Acquired Companies for casualty losses suffered by the Acquired Companies
before, on or after the date of this Agreement shall remain with the Acquired
Companies, as applicable, after Closing. If any casualty losses are incurred by
the Acquired Companies after the date of this Agreement and prior to Closing,
and such losses are insured by Quicksilver’s insurance policies, then Quicksilver
shall use commercially reasonable efforts to make claims relating to those
losses and Quicksilver shall pay to the Acquired Companies any amounts received
by Quicksilver pursuant to such claims, less any collection costs. The Acquired
Companies may use any proceeds of such insurance receivables to repair
property damage or replace the property on account of which such casualty
insurance proceeds have been paid to a Acquired Company.


 


Section 6.8                                      Release
of Guarantees and Bonds. BreitBurn acknowledges that none of the bonds,
letters of credit and guarantees, if any, posted by Quicksilver or its
Affiliates with Governmental Entities and relating to the Acquired Assets or
the other Interests and set forth on Schedule 6.8 (collectively,
the “Bonds”) are transferable to BreitBurn. On or before the Closing
Date, BreitBurn shall obtain, or cause to be obtained in the name of BreitBurn
or its designee, replacements for such Bonds to the extent such replacements
are necessary to permit the cancellation and complete release of the Bonds
posted by Quicksilver and/or such Affiliates. In addition, at or prior to
Closing, BreitBurn shall deliver to Quicksilver evidence of the posting of
bonds or other security with all applicable Governmental Entities meeting the requirements
of such authorities to own and, where appropriate, operate, the Acquired
Assets, the Acquired Companies, or the other Interests.


 


Section 6.9                                      Amendments
of Disclosure Schedules.


 


(a)                                  Prior
to Closing, Quicksilver may, from time to time, by delivering a written copy
thereof to BreitBurn, supplement or amend its disclosure schedules attached to
this Agreement relating to any representations or warranties of Quicksilver
(collectively, the “Disclosure Schedules”), to include reference to any
matter relating to Quicksilver, the Acquired Assets, the Interests or the
Transferred Companies which first arises or occurs after the date of execution
of this Agreement and does not result from a breach by Quicksilver of any
covenant set forth in Article VI.


 


(b)                                 Any
such supplement or amendment of any such Disclosure Schedule by
Quicksilver under Section 6.9(a) above will be effective to
cure and correct any breach of any representation or warranty that would have
existed absent such amendment or supplement, and BreitBurn shall have no right,
and hereby waives any and all rights, to bring any claim in respect of or
relating to such breach of representation or warranty.


 


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Section 6.10                                Removal
of Quicksilver Identification. BreitBurn shall, and shall cause its
Affiliates and Subsidiaries to, not use the name “Quicksilver” (or any
variations or derivatives thereof); and, within ninety (90) days after the
Closing Date, BreitBurn shall, and shall cause the Acquired Companies, to
remove, destroy or completely obscure (e.g., paint
over) all visible names, symbols, tradenames, trademarks and logos of “Quicksilver”
with regard to any assets of the Acquired Companies or with regard to the
Acquired Assets.


 


Section 6.11                                Assigned
QRI Assets. Quicksilver shall use commercially reasonable efforts to
procure any required third-party consents necessary to transfer the QRI Assets
to BreitBurn, but without being obligated to pay any consideration or waive or
release any right or privilege to obtain such consent. If the Parties are not
able to effect the assignment of any of the QRI Assets at Closing due to the
lack of a required third-party consent to transfer the same, such QRI Assts
shall not be deemed assigned at Closing via the Asset Assignments. Until any
such consents are obtained and the non-assigned QRI Assets are assigned, to the
extent permissible under Law and under the terms of any Contracts applicable
thereto, Quicksilver shall use commercially reasonable efforts post-Closing to (i) continue
to perform the liabilities and obligations under or with regard to any
non-assigned QRI Assets, (ii) hold such non-assigned QRI Assets in trust
for the benefit of BreitBurn and shall promptly forward to BreitBurn, any
monies or other benefits received that are attributable to such non-assigned
QRI Assets, and (iii) endeavor to mutually agree with BreitBurn to
institute alternative arrangements intended to put the Parties in substantially
the same economic position as if such non-assigned QRI Assets had been assigned.
BreitBurn shall promptly reimburse Quicksilver for, and shall DEFEND, INDEMNIFY  AND HOLD HARMLESS
all Quicksilver Indemnified Parties from and against, any and all fees, costs,
expenses and Damages incurred by Quicksilver or any Quicksilver Indemnified
Party in connection with any action taken by Quicksilver pursuant to the
preceding sentence, IN EACH CASE, REGARDLESS
OF THE SOLE, JOINT, CONCURRENT, COMPARATIVE, CONTRIBUTORY, ACTIVE, PASSIVE OR
GROSS NEGLIGENCE, WILLFUL MISCONDUCT, STRICT LIABILITY OR OTHER FAULT OR
RESPONSIBILITY OF ANY KIND OF QUICKSILVER, BREITBURN, THE TRANSFERRED
COMPANIES, OR ANY OTHER PARTY OR PERSON. If the foregoing
arrangements are not permissible under Law or under the terms of any Contracts
applicable thereto, then the Parties shall use commercially reasonable efforts
to take such other actions or put into place such other arrangements as are
permissible with regard to the non-assigned QRI Assets so as to provide the
Parties with the same economic results as would otherwise have resulted.


 


Section 6.12                                Title
Defects; Title Defect Procedure and Adjustments.


 


(a)                                  Title Defect Notices. On or before 5:00 p.m. (Eastern
Time) of the fifth (5th) day before Closing (the “Title Claim Date”),
BreitBurn may deliver claim notices to Quicksilver meeting the
requirements of this Section 6.12(a) (collectively the “Title Defect Notices”
and individually a “Title
Defect Notice”) setting forth any matters which, in
BreitBurn’s good faith opinion, constitute Title Defects and which BreitBurn
intends to assert as a Title Defect pursuant to this Section 6.12.
For all purposes of this Agreement and notwithstanding anything herein to the
contrary, BreitBurn shall be deemed to have waived, and Quicksilver shall have
no liability for, any Title Defect which BreitBurn fails to assert as a Title
Defect by a Title Defect Notice received by Quicksilver on or before the Title
Claim Date. To


 


54

















 


be effective,
each Title Defect Notice shall be in writing, and shall include (i) a
description of the alleged Title Defect(s), (ii) the Well(s) or well
location(s) (and the applicable zone(s) therein) and/or other Acquired Assets
affected by the Title Defect (each a “Title
Defect Property”), (iii) the allocated value of
each Title Defect Property as set forth on Schedule 6.12(a) (the “Preliminary
Allocated Value”), (iv) supporting documents reasonably necessary for
Quicksilver to verify the existence of the alleged Title Defect(s), and (v) the
amount by which BreitBurn reasonably believes the Preliminary Allocated Value
of each Title Defect Property is reduced by the alleged Title Defect(s) and the
computations upon which BreitBurn’s belief is based. To give Quicksilver an
opportunity to commence reviewing and curing Title Defects, BreitBurn agrees to
use reasonable efforts to give Quicksilver, on or before the end of each
calendar week prior to the Title Claim Date, written notice of all Title
Defects discovered by BreitBurn during the preceding calendar week, which
notice may be preliminary in nature and supplemented prior to the Title
Claim Date. BreitBurn shall also promptly furnish Quicksilver with written
notice of any Title Benefit which is discovered by any of BreitBurn’s or any of
its Affiliate’s employees, title attorneys, landmen or other title examiners
while conducting BreitBurn’s due diligence with respect to the Wells or Oil and
Gas Properties or other Acquired Assets prior to the Title Claim Date.


 


(b)                                 Title Benefit Notices. Quicksilver shall have the right, but
not the obligation, to deliver to BreitBurn on or before the Title Claim Date
with respect to each Title Benefit a notice (a “Title Benefit Notice”)
including (i) a description of the Title Benefit, (ii) the Wells or
well location(s) (and the applicable zone(s) therein) and/or other Acquired
Assets affected by the Title Benefit, and (iii) the amount by which
Quicksilver reasonably believes the Preliminary Allocated Value of those
Well(s) or well location(s) (and the applicable zone(s) therein) and/or other
Acquired Assets have increased by the Title Benefit, and the computations upon
which Quicksilver’s belief is based.


 


(c)                                  Quicksilver’s Right to Cure Title Defects. Quicksilver shall
have the right, but not the obligation, to attempt, at its sole cost, to cure
any asserted Title Defects at any time prior to Closing (the “Cure Period”).
If a Title Defect is reasonably susceptible of being cured but is not cured on
or before the Closing Date, BreitBurn and Quicksilver agree that Quicksilver
will also have the right to elect to (i) exclude the affected Title Defect
Property (other than Fixed Facilities that constitute Title Defect Properties)
from the contribution at Closing (and to the extent that such excluded Title
Defect Property is currently held by a Acquired Company, then it will be
transferred to Quicksilver prior to Closing), (ii) attempt to cure such
defect (and attempt to cure any such defect with respect to Fixed Facilities
that constitute Title Defect Properties) for a period of up to ninety (90) days
after the Closing Date, and until cured, the Preliminary Allocated Value of
such excluded Title Defect Property (and, in the case of Fixed Facilities that
constitute Title Defect Properties, the Title Defect Amount determined under
this Section 6.12 with respect thereto) will be withheld from the
Closing Date Consideration at Closing. If cured within this 90-day period,
then, within five (5) Business Days after such Title Defect is cured, (x)
BreitBurn shall pay and deliver to Quicksilver the Preliminary Allocated Value
(or the Title Defect Amount) therefor, as applicable, which was deducted from
the Closing Date Consideration, together with interest at the Interest Rate
from, and including, the Closing Date to, but excluding, the date of payment,
and (y) Quicksilver will deliver to BreitBurn an assignment of such Title
Defect Property if withheld at Closing, upon the same terms and conditions set
forth in the Asset Assignments. BreitBurn shall provide Quicksilver and their


 


55

















 


representatives
access to the other Acquired Assets, and all Books and Records after Closing in
connection with Quicksilver’s efforts to cure the alleged defect. If,
post-Closing, the Parties dispute whether such Title Defect has been cured,
then the matter shall be resolved in a manner described in Section 6.12(i) below,
and the post-Closing payment and delivery of the assignment, if any, provided
for in this Section 6.12(c) shall be made as provided in this Section 6.12(c) when
such dispute is resolved pursuant to Section 6.12(i).


 


(d)                                 Remedies for Title Defects. Subject to Quicksilver’s
continuing right to dispute the existence of a Title Defect and/or the Title
Defect Amount asserted with respect thereto, in the event that any Title Defect
timely asserted by BreitBurn in accordance with this Section 6.12
is not waived in writing by BreitBurn or cured on or before Closing,
Quicksilver shall, at its sole option, elect to either:


 


(i)                                     subject
to the Individual Title Defect Threshold and the Aggregate Deductible, reduce
the Initial Consideration by an amount 
determined pursuant to Sections 6.12(f), 6.12(h) and 6.12(i) as
being the value of such Title Defect (the “Title Defect Amount”);
or


 


(ii)                                  retain
the entirety of the Title Defect Property that is subject to such Title Defect
in which event the Initial Consideration shall be reduced by an amount equal to
the Preliminary Allocated Value of such Title Defect Property; or


 


(iii)                               provide
BreitBurn with an indemnity (the terms of such indemnity to be reasonably
satisfactory to BreitBurn) for such Title Defect under the Title Indemnity
Agreement (but in no case shall Quicksilver’s liability with regard thereto
exceed the Preliminary Allocated Value for the applicable Title Defect
Property), in which case the Title Defect Property shall be sold to BreitBurn
at Closing with no adjustment to the Initial Consideration; or


 


(iv)                              if
applicable, terminate this Agreement pursuant to Section 8.1(c).


 


(e)                                  Remedies for Title Benefits. Subject to Section 6.12(h),
with respect to each Well, well location or Oil and Gas Property (and the
applicable zone(s) therein) and/or other Acquired Assets affected by Title
Benefits reported under Section 6.12(a) or Section 6.12(b), the Initial Consideration
shall be increased by an amount equal to the increase in the Preliminary
Allocated Value for such Wells and well locations (and the applicable zone(s)
therein) and/or other Acquired Assets caused by such Title Benefits, as
determined pursuant to Section 6.12(g), 6.12(h) and
6.12(i) (the “Title
Benefit Amount”).


 


(f)                                    Title Defect Amount. The Title Defect Amount for any
applicable Title Defect shall be determined in accordance with the following
terms and conditions:


 


(i)                                     if
BreitBurn and Quicksilver agree on the Title Defect Amount, then that amount
shall be the Title Defect Amount;


 


(ii)                                  if
the Title Defect is a Lien or encumbrance that is undisputed and liquidated in
amount, then the Title Defect Amount shall be the amount necessary


 


56

















 


to be paid to
remove the Title Defect from the Title Defect Property, not to exceed, however,
the Preliminary Allocated Value thereof;


 


(iii)                               if
the Title Defect represents a discrepancy between (1) the Net Revenue
Interest for any Title Defect Property and (2) the Net Revenue Interest
for such property as stated in Exhibit A-1,
then the Title Defect Amount shall be the product of the Preliminary Allocated
Value of such Title Defect Property multiplied by a fraction, the numerator of
which is the decreased Net Revenue Interest and the denominator of which is the
Net Revenue Interest stated in Exhibit A-1
therefor;


 


(iv)                              if
the Title Defect results from the failure to own a valid right to use the land
on which a portion of the Fixed Facilities is located, the Title Defect Amount
with respect to such Title Defect shall be the lesser of the cost per rod (or
per acre in the case of tracts outside the pipeline right-of-way) prevailing in
the area of such portion of the Fixed Facilities for the acquisition of
easements, rights-of-way, surface leases, fee parcels or licenses covering such
land that are similar to those on which the adjacent Fixed Facilities are
located or the actual acquisition cost paid by BreitBurn, a Acquired Company or
their respective Affiliate for such similar easements, rights-of-way, surface
leases, fee parcels or licenses covering such land;


 


(v)                                 if
the Title Defect represents an obligation or encumbrance upon or other defect
in title to the Title Defect Property of a type not described above, the Title
Defect Amount shall be determined by taking into account the Preliminary
Allocated Value of the Title Defect Property, the portion of the Title Defect
Property affected by the Title Defect, the legal effect of the Title Defect,
the potential economic effect of the Title Defect over the life of the Title
Defect Property, the values placed upon the Title Defect by BreitBurn and
Quicksilver and such other reasonable factors as are necessary to make a proper
evaluation, not to exceed, however, the Preliminary Allocated Value thereof;


 


(vi)                              the
Title Defect Amount with respect to a Title Defect Property shall be determined
without duplication of any costs or losses included in any other Title Defect
Amount hereunder; and


 


(vii)                           notwithstanding
anything to the contrary in this Section 6.12,
the aggregate Title Defect Amounts attributable to the effects of all Title
Defects upon any Title Defect Property shall not exceed the Preliminary
Allocated Value of the Title Defect Property.


 


(g)                                 Title Benefit Amount. The Title Benefit Amount resulting
from a Title Benefit shall be determined in accordance with the following
methodology, terms and conditions:


 


(i)                                     if
BreitBurn and Quicksilver agree on the Title Benefit Amount, then that amount
shall be the Title Benefit Amount;


 


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(ii)                                  if
the Title Benefit represents a discrepancy between (1) the Net Revenue
Interest for any Well or well location (or the specified zone(s) therein) and (2) the
Net Revenue Interest stated in Exhibit A-1,
then the Title Benefit Amount shall be the product of the Preliminary Allocated
Value of the affected Well or well location (or the specified zone(s) therein)
multiplied by a fraction, the numerator of which is the increased Net Revenue
Interest and the denominator of which is the Net Revenue Interest stated in Exhibit A-1; and


 


(iii)                               if
the Title Benefit represents a decrease in the Working Interest stated in Exhibit A-1, the Title Benefit Amount shall
be determined by taking into account the Preliminary Allocated Value of the
property affected thereby, the portion of such property affected by the Title
Benefit, the legal effect of the Title Benefit, the potential economic effect
of the Title Benefit over the life of such property, the values placed upon the
Title Benefit by BreitBurn and Quicksilver and such other reasonable factors as
are necessary to make a proper evaluation.


 


(h)                                 Individual Title Defect Thresholds; Aggregate Deductible. Notwithstanding
anything stated herein to the contrary and subject to the overall cap provided
in this Section 6.12(h), (i) in no event shall there be any
adjustments to the Initial Consideration or other remedies provided by
Quicksilver for any individual Title Defect for which the Title Defect Amount
does not exceed the Individual
Title Defect Threshold (nor shall there be an adjustment
for any individual Title Benefit for which the Title Benefit Amount does not
exceed an amount equal to the Individual
Title Defect Threshold); and (ii) in no event shall
there be any adjustments to the Initial Consideration or other remedies
provided by Quicksilver for those Title Defects that exceed the Individual
Title Defect Threshold (each, a “Material Title Claim”, and collectively,
“Material Title Claims”) unless the sum of all of the Material Title
Claims plus all of the Material Environmental Claims exceeds the Aggregate
Deductible, and after which point BreitBurn shall only be entitled to
adjustments to the Initial Consideration to the extent that the sum of (A) the
aggregate Title Defect Amounts for all Material Title Claims plus (B) the
aggregate Environmental Defect Amounts for all Material Environmental Claims
exceeds the Aggregate Deductible. Material Title Claims shall not include any
Title Defect that is cured by Quicksilver. Similarly, Quicksilver shall be
entitled to an upward adjustment to the Initial Consideration for Title
Benefits only to the extent that the sum of those Title Benefit Amounts which,
individually, exceed the Individual Title Defect Threshold, exceeds an amount
equal to the Aggregate Deductible. NOTWITHSTANDING ANYTHING
TO THE CONTRARY CONTAINED IN THIS AGREEMENT, THE AGGREGATE AMOUNT OF ALL
REMEDIES PROVIDED BY QUICKSILVER FOR ANY TITLE DEFECTS AND ENVIRONMENTAL
DEFECTS, INCLUDING ALL DOWNWARD ADJUSTMENTS TO THE INITIAL CONSIDERATION FOR
TITLE DEFECTS AND ENVIRONMENTAL DEFECTS IN ACCORDANCE WITH THE PROVISIONS OF
THIS SECTION 6.12 AND SECTION 6.14, SHALL NOT EXCEED AN
AMOUNT EQUAL TO $145,000,000.


 


(i)                                     Title Dispute Resolution. Quicksilver and BreitBurn shall
attempt to agree on all Title Defects, Title Benefits, Title Defect Amounts and
Title Benefit Amounts prior to Closing. If Quicksilver and BreitBurn are unable
to agree by Closing, (1) all Title Defects, Title Benefits, Title Defect
Amounts and Title Benefit Amounts in dispute shall be exclusively and finally
resolved pursuant to this Section 6.12(i), (2) there shall be
no reduction or increase in the


 


58

















 


Initial
Consideration at Closing with respect to the Title Defects, Title Benefits,
Title Defect Amounts and/or Title Benefit Amounts in dispute, and (3) all
adjustments and payments, if any, with respect thereto following Closing shall
be made pursuant to this Section 6.12.(i). There shall be a single
arbitrator, who shall be a title attorney with at least ten (10) years
experience in oil and gas title and who shall not have performed professional
services for either Party or any of their respective Affiliates during the
previous five years, as selected by mutual agreement of BreitBurn and
Quicksilver within fifteen (15) days after the end of the Cure Period, and
absent such agreement, by the Dallas office of the American Arbitration
Association (the “Title
Arbitrator”). The arbitration proceeding shall be
held in Dallas, Texas and shall be conducted in accordance with the Commercial
Arbitration Rules of the American Arbitration Association, to the extent
such rules do not conflict with the terms of this Article. The Title
Arbitrator’s determination shall be made within twenty (20) days after
submission of the matters in dispute and shall be final and binding upon both
Parties, without right of appeal. In making his determination, the Title Arbitrator
shall be bound by the rules set forth in this Section 6.12
and, subject to the foregoing, may consider such other matters as in the
opinion of the Title Arbitrator are necessary to make a proper determination. The
Title Arbitrator, however, may not award BreitBurn a greater Title Defect
Amount than the Title Defect Amount claimed by BreitBurn in its applicable
Title Defect Notice (or an amount that would be greater than the applicable
Preliminary Allocated Value) and may not award Quicksilver a greater Title
Benefit Amount than the Title Benefit Amount claimed by Quicksilver in its
applicable Title Benefit Notice. The Title Arbitrator shall act as an expert
for the limited purpose of determining the specific disputed Title Defect,
Title Benefit, Title Defect Amounts and/or Title Benefit Amounts submitted by
either Party and may not award damages, interest or penalties to either
Party with respect to any matter. Quicksilver and BreitBurn shall bear their
respective legal fees and other costs of presenting the case. Each of
Quicksilver and BreitBurn shall bear one-half of the costs and expenses of the
Title Arbitrator. To the extent that the award of the Title Arbitrator with
respect to any Title Defect Amount or Title Benefit Amount is not taken into
account as an adjustment to the Initial Consideration pursuant to Section 6.12, then within ten (10) days
after the Title Arbitrator delivers written notice to BreitBurn and Quicksilver
of his award with respect to a Title Defect Amount or a Title Benefit Amount, (i) BreitBurn
shall pay to Quicksilver the amount, if any, so awarded by the Title Arbitrator
to Quicksilver and (ii) Quicksilver shall pay to BreitBurn the amount, if
any, so awarded by the Title Arbitrator to BreitBurn.


 


(j)                                     General Disclaimer of Title Warranties and Representations. Except
for BreitBurn’s remedies for Title Defects set forth in this Section 6.12
and except to the extent provided in Section 4.21, Quicksilver
makes no warranty or representation, express, implied, statutory or otherwise,
with respect to Quicksilver’s title to any of the QRI Assets (or the Acquired
Companies’ title to any of the other Acquired Assets) and BreitBurn hereby
acknowledges and agrees that BreitBurn’s sole remedy for any (x) breach of the
representation set forth in Section 4.21 shall be as set forth in Section 9.2(a)(i),
and (y) defect of title, including any Title Defect, with respect to any of the
Acquired Assets shall be as set forth in Section 6.12. No
warranty of title shall be contained in the Asset Assignments.


 


(k)                                  Exclusive Remedy. SECTION 6.12
SHALL BE THE EXCLUSIVE RIGHT AND REMEDY OF BREITBURN WITH RESPECT TO
QUICKSILVER’S (OR THE ACQUIRED COMPANIES’) FAILURE TO HAVE DEFENSIBLE TITLE
WITH RESPECT TO ANY OF THE ACQUIRED ASSETS; PROVIDED, HOWEVER,


 


59

















 


BREITBURN
SHALL HAVE THE RIGHTS UNDER SECTION 9.2(a)(i) FOR THE PERIOD
SET FORTH IN SECTION 9.1(a) WITH RESPECT TO A BREACH OF THE
WARRANTY SET FORTH IN SECTION 4.21.


 


Section 6.13                                Preferential
Purchase Rights.


 


(a)                                  Preferential Purchase Right Procedures. With respect to any
preferential purchase right pertaining to any of the Interests that would be
triggered by the transactions contemplated hereby (each, a “Preferential
Purchase Right”), Quicksilver shall send, within ten (10) Business
Days following the execution of this Agreement, to the holder of each such
right a written notice, in material compliance with the contractual provisions
applicable to such Preferential Purchase Right.


 


(b)                                 Exercise of Preferential Rights. If, prior to Closing, any
holder of a Preferential Purchase Right notifies Quicksilver that it intends to
consummate the purchase of any part of the Interests and/or Acquired
Assets to which its Preferential Purchase Right applies (in such case, a “Preferential
Right Property”), that Preferential Right Property shall be excluded from
the Interests to be assigned and sold to BreitBurn hereunder, and the Initial
Consideration shall be reduced by the Preliminary Allocated Value of the
excluded Preferential Right Property. Quicksilver shall be entitled to all
proceeds from the holder of a Preferential Purchase Right who exercises its
right to purchase a Preferential Right Property prior to Closing. If the holder
of such Preferential Right Property thereafter fails to consummate the purchase
of the Preferential Right Property covered by such right on or before sixty
(60) days following the Closing Date, then Quicksilver may notify
BreitBurn, and BreitBurn, if notified, shall purchase, on or before ten (10) Business
Days following receipt of such notice, the Preferential Right Property from
Quicksilver, under the terms of this Agreement for a price equal to the
Preliminary Allocated Value of the applicable Preferential Right Property (as
the same may be otherwise adjusted in accordance with the terms hereof).


 


(c)                                  Expiration of Election Periods; Post-Closing. If by Closing
a Preferential Purchase Right burdening any Preferential Right Property has not
been exercised, the time for exercising such Preferential Purchase Right has
not expired and such Preferential Purchase Right has not been waived, then that
Preferential Right Property shall be excluded from the Interests to be assigned
and sold to BreitBurn hereunder, and the Initial Consideration shall be reduced
by the Preliminary Allocated Value of such excluded Preferential Right Property.
If the time for the exercise of the Preferential Purchase Right with respect to
any excluded Preferential Right Property described in this Section 6.13(c) expires
following the Closing without the exercise of such Preferential Purchase Right
by the holder thereof or such Preferential Purchase Right is waived, then
Quicksilver may notify BreitBurn, and BreitBurn, if notified, shall
purchase, on or before ten (10) Business Days following receipt of such
notice, such Preferential Right Property from Quicksilver, under the terms of
this Agreement for a price equal to the Preliminary Allocated Value of such
Preferential Right Property (as the same may be otherwise adjusted in
accordance with the terms hereof; provided, in no event shall BreitBurn have
any obligation to purchase any such Preferential Right Property pursuant to
this Section 6.13(c) after 90 days following the Closing Date,
unless BreitBurn has failed to comply with its obligations under this Section 6.13(c) to
purchase such Preferential Right Property during such 90-day period following
the Closing Date). All Preferential Right Properties for which applicable
Preferential


 


60

















 


Purchase
Rights have been waived prior to Closing, or as to which the period to exercise
such right has expired prior to Closing, shall be sold to BreitBurn at Closing
pursuant to the provisions of this Agreement.


 


Section 6.14                                Environmental
Defects; Environmental Defect Procedure and Adjustments.


 


(a)                                  Environmental Assessment. Upon notice to Quicksilver,
BreitBurn shall, subject to the provisions of Section 6.4(a) and
this Section 6.14(a), have the right to conduct an environmental
assessment of all or any portion of the Acquired Assets (the “Environmental
Assessment”) to be conducted by a reputable environmental consulting or
engineering firm approved in advance in writing by Quicksilver but only to the
extent that Quicksilver may grant such right without violating any
obligations to any third party. The Environmental Assessment shall be conducted
at the sole cost, risk and expense of BreitBurn, and shall be subject to the
indemnity provisions of Section 6.4(a) and Section 9.3.
Prior to conducting any sampling, boring, drilling or other invasive
investigative activity with respect to the Acquired Assets (“Invasive
Activity”), BreitBurn shall furnish for Quicksilver’s review a proposed
scope of such Invasive Activity, including a description of the activities to
be conducted and a description of the approximate locations of such activities.
Any Invasive Activity shall be subject to the prior written approval of
Quicksilver, and Quicksilver may require reasonable modifications of the
proposed Invasive Activity as a condition of such approval. Quicksilver shall
have the right to be present during any Environmental Assessment of the
Acquired Assets and shall have the right, at its option and expense, to split
samples with BreitBurn. After completing any Environmental Assessment of the
Acquired Assets, BreitBurn shall, at its sole cost and expense, restore the
Acquired Assets to approximately their original condition prior to the
commencement of such Environmental Assessment, unless Quicksilver agrees that
such restoration is unnecessary, and shall promptly dispose of all drill
cuttings, corings, or other investigative-derived wastes generated in the
course of the Environmental Assessment. BreitBurn shall maintain, and shall
cause its officers, employees, representatives, consultants and advisors to
maintain, all information obtained by BreitBurn pursuant to any Environmental
Assessment or other due diligence activity as strictly confidential prior to
Closing or in perpetuity if Closing does not occur, unless disclosure of any
facts discovered through such Environmental Assessment is required under any
Environmental Laws. BreitBurn shall provide Quicksilver with a copy of the
final draft of all environmental reports prepared by, or on behalf of,
BreitBurn with respect to any Environmental Assessment or Invasive Activity
conducted on the Acquired Assets. In the event that any necessary disclosures
under applicable Environmental Laws are required prior to Closing with respect
to matters discovered by any Environmental Assessment conducted by, for or on
behalf of BreitBurn, BreitBurn agrees that Quicksilver shall be the responsible
party for disclosing such matters to the appropriate Governmental Entities.


 


(b)                                 Environmental Defects.


 


(i)                                     If,
as a result of its investigation pursuant to Section 6.14(a),
BreitBurn determines that with respect to the Acquired Assets, there exists an
Environmental Condition (other than with respect to asbestos, asbestos
containing materials or NORM, and excluding any matter set forth on Schedule 4.13)
(in each case, an “Environmental Defect”), then on or prior to the Title
Claim Date,


 


61

















 


BreitBurn may give
Quicksilver a written notice of such Environmental Defect that sets forth the information
required by this Section 6.14(b) (an “Environmental Defect
Notice”). For all purposes of this Agreement, BreitBurn shall be deemed to
have waived any Environmental Defect which BreitBurn fails to timely and
properly assert as an Environmental Defect by an Environmental Defect Notice
received by Quicksilver on or before the Title Claim Date. To be effective, an
Environmental Defect Notice must set forth (i) a description of the matter
constituting the alleged Environmental Defect, (ii) a description of each
Acquired Asset (or portion thereof) affected by the alleged Environmental
Defect, (iii) the proportionate share attributable to the Acquired Assets
of the estimated Lowest Cost Response to eliminate the alleged Environmental
Defect (the “Environmental Defect Amount”), and (iv) supporting
documents reasonably necessary for Quicksilver to verify the existence of the
alleged Environmental Defect and the Environmental Defect Amount. BreitBurn
shall furnish Quicksilver once every two (2) weeks from and after the date
hereof until the Title Claim Date with Environmental Defect Notices with
respect to any Environmental Defects that any employee or representative of
BreitBurn discovers or becomes aware of during such two (2) week period.


 


(ii)                                  Quicksilver
shall have the right, but not the obligation, to attempt, at its sole cost, to
cure or remediate at any time prior to Closing any Environmental Defects of
which it has been advised by BreitBurn pursuant to an Environmental Defect
Notice delivered before the Title Claim Date.


 


(iii)                               In
the event that any Environmental Defect asserted by BreitBurn pursuant to an
Environmental Defect Notice delivered before the Title Claim Date is not waived
by BreitBurn or cured on or before the Closing Date, Quicksilver shall, at its
sole election, elect (at the Closing, for Environmental Defects with respect to
which no dispute exists) to do one of the following:


 


(1)                                  subject
to the Individual Environmental Defect Threshold and Aggregate Deductible,
reduce the Initial Consideration by the amount of the Environmental Defect
Amount relating to such Environmental Defect as agreed upon by Quicksilver and
BreitBurn or determined pursuant to Section 6.14(b)(v);


 


(2)                                  provided
that the Parties shall have agreed to the general plan of remediation with
respect to such Environmental Defect and the time period by which such
remediation shall take place, cure such Environmental Defect after Closing;


 


(3)                                  if
such Environmental Defect can be cured by paying a fine or penalty, Quicksilver
may cure such Environmental Defect by electing to pay such fine or
penalty; or


 


(4)                                  if
applicable, terminate this Agreement pursuant to Section 8.1(c).


 


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(iv)                              Section 6.14(b)(iii) shall
be the exclusive right and remedy of BreitBurn with respect to Environmental
Defects asserted by BreitBurn pursuant to Section 6.14(b)(i).


 


(v)                                 Prior
to Closing, Quicksilver and BreitBurn shall attempt to agree on all
Environmental Defects and Environmental Defect Amounts that are the subject of
timely and properly asserted Environmental Defect Notices. If Quicksilver and
BreitBurn are unable to agree by Closing, (1) all Environmental Defects
and/or Environmental Defect Amounts in dispute shall be exclusively and finally
resolved by arbitration pursuant to this Section 6.14(b)(v), (2) there
shall be no reduction in the Initial Consideration at Closing with respect to
the Environmental Defects and/or Environmental Defect Amounts in dispute, and (3) all
adjustments and payments, if any, with respect thereto following Closing shall
be made pursuant to this Section 6.14(b)(v). The arbitrator shall
be an environmental consultant approved in writing by Quicksilver and BreitBurn
who is experienced in environmental corrective action at oil and gas properties
in the relevant jurisdiction and who shall not have performed professional
services for either Party or any of their respective Affiliates during the
previous five years, as selected by mutual agreement of BreitBurn and
Quicksilver within fifteen (15) days after the end of the Cure Period, and
absent such agreement, by the Dallas office of the American Arbitration
Association (the “Independent Expert”). The arbitration proceeding shall
be held in Dallas, Texas and shall be conducted in accordance with the
Commercial Arbitration Rules of the American Arbitration Association, to
the extent such rules do not conflict with the terms of this Section. The
Independent Expert’s determination shall be made within twenty (20) days after
submission of the matters in dispute and shall be final and binding upon both
Parties, without right of appeal. In making his determination, the Independent
Expert shall be bound by the rules set forth in this Section 6.14
and, subject to the foregoing, may consider such matters as in the opinion
of the Independent Expert are necessary or helpful to make a proper
determination. Additionally, the Independent Expert may consult with and
engage disinterested third parties to advise the Independent Expert. The
Independent Expert, however, may not award BreitBurn a greater
Environmental Defect Amount than the Environmental Defect Amount claimed by
BreitBurn in its applicable Environmental Defect Notice. The Independent Expert
shall act as an expert for the limited purpose of determining the specific
disputed Environmental Defects and/or Environmental Defect Amounts submitted by
either Party pursuant to this Section 6.14(b)(v) and may not
award damages, interest or penalties to either Party with respect to any matter.
Quicksilver and BreitBurn shall each bear its own legal fees and other costs of
presenting its case to the Independent Expert. Each Party shall bear one-half
of the costs and expenses of the Independent Expert. To the extent that the
award of the Independent Expert with respect to any Environmental Defect Amount
is not taken into account as an adjustment to the Initial Consideration at
Closing pursuant to this Section 6.14, then within ten (10) days
after the Independent Expert delivers written notice to BreitBurn and
Quicksilver of his award with respect to an Environmental Defect Amount, (i) BreitBurn
shall pay to Quicksilver the amount, if any, so awarded by the Independent
Expert to


 


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Quicksilver
and (ii) Quicksilver shall pay to BreitBurn the amount, if any, so awarded
by the Independent Expert to BreitBurn.


 


(vi)                              Notwithstanding
anything stated herein to the contrary and subject to the overall cap provided
in Section 6.12(h), (1) in no event shall there be any
adjustments to the Initial Consideration or other remedies provided by
Quicksilver for any individual Environmental Defect for which the Environmental
Defect Amount does not exceed $300,000 (the “Individual Environmental Defect
Threshold”); and (2) in no event shall there be any adjustments to the
Initial Consideration or other remedies provided by Quicksilver for those
Environmental Defects that exceed the Individual Environmental Defect Threshold
(each, a “Material Environmental Claim”, and collectively, “Material
Environmental Claims”) unless the sum of all of the Material Environmental
Claims plus all of the Material Title Claims exceeds the Aggregate Deductible,
and after which point BreitBurn shall only be entitled to adjustments to the
Initial Consideration to the extent that the sum of (A) the aggregate
Environmental Defect Amounts for all Material Environmental Claims plus (B) the
aggregate Title Defect Amounts for all Material Title Claims exceeds the
Aggregate Deductible. Material Environmental Claims shall not include any
Environmental Defect that Quicksilver elects to cure pursuant to Section 6.14(b)(iii)(2) or
Section 6.14(b)(iii)(3).


 


Section 6.15                                Historical
Financial Statements.


 


(a)                                  Quicksilver
shall use its commercially reasonable efforts to prepare, at the sole cost and
expense of BreitBurn, the financial statements required by the Securities and
Exchange Commission (“SEC”) (the “Special Financial Statements”),
that will be required of BreitBurn or any of its Affiliates by the SEC in connection
with reports, registration statements and other filings to be made by BreitBurn
or any of its Affiliates related to the transactions contemplated by this
Agreement with the SEC pursuant to the Securities Act, or the Exchange Act, in
such form that such statements and the notes thereto can be audited by
Deloitte & Touche LLP (“Quicksilver’s Auditor”). Quicksilver
(x) shall cooperate with and permit BreitBurn to reasonably participate in the
preparation of the Special Financial Statements and (y) shall provide BreitBurn
and its representatives with reasonable access to the personnel of Quicksilver
and its Affiliates who engage in the preparation of the Special Financial
Statements.


 


(b)                                 Quicksilver
shall execute and deliver or cause to be executed and delivered to Quicksilver’s
Auditor such representation letters, in form and substance customary for
representation letters provided to external audit firms by management of
Quicksilver (if the financial statements are the subject of an audit or are the
subject of a review pursuant to Statement of Accounting Standards 100 (Interim
Financial Information)), as may be reasonably requested by Quicksilver’s
Auditor, with respect to the Special Financial Statements. BreitBurn agrees
that (i) to the extent any such representation letter is delivered by
Quicksilver’s management, or on its behalf, BreitBurn shall indemnify and hold
harmless Quicksilver’s management and provide a defense for Quicksilver’s
management (INCLUDING, IN EACH CASE, WITH RESPECT TO
THEIR OWN NEGLIGENCE) with regard to the execution, delivery or any
other action related to the provision of such representation letters to the
same


 


64

















 


extent as any
executive officer or director of BreitBurn would be indemnified had they
performed such action; (ii) BreitBurn shall provide a customary
representation letter to Quicksilver’s Auditor, if reasonably requested; and (iii) BreitBurn’s
existing outside auditors shall provide a customary representation letter to
Quicksilver’s Auditor, if reasonably requested.


 


(c)                                  Quicksilver
has engaged Quicksilver’s Auditor to perform an audit of the Special
Financial Statements and shall use commercially reasonable efforts to cause
Quicksilver’s Auditor to issue unqualified opinions with respect to the Special
Financial Statements (the Special Financial Statements and related audit
opinions being hereinafter referred to as the “Audited Special Financial
Statements”) and provide its written consent for the use of its audit reports
with respect to the Special Financial Statements in reports, registration
statements or other documents filed by BreitBurn or any of its Affiliates under
the Exchange Act or the Securities Act, as needed. BreitBurn shall reimburse
Quicksilver for all fees charged by Quicksilver’s Auditor with respect to the
preparation and delivery by Quicksilver’s Auditor to BreitBurn of the Audited
Special Financial Statements and any other fees charged by Quicksilver’s
Auditor to facilitate BreitBurn’s ongoing compliance with SEC rules and
regulations. Quicksilver shall take all reasonable action as may be
necessary to facilitate the completion of such audit and delivery of the
Audited Special Financial Statements to BreitBurn or any of its Affiliates as
soon as reasonably practicable, but no later than the Closing Date. BreitBurn
shall reimburse Quicksilver for all reasonable costs and expenses incurred by
Quicksilver in complying with this Section 6.15.


 


Section 6.16                                Operatorship.
Within ten (10) Business Days after execution of this Agreement,
Quicksilver shall send notices to all co-owners of the QRI Assets that it
currently operates indicating that it is resigning as operator contingent upon
and effective at Closing, and nominating and recommending BreitBurn (or, at
BreitBurn’s request, BreitBurn’s designated Affiliate under Section 11.3)
as successor operator, subject to and in reliance on BreitBurn’s
representations, warranties, covenants and agreements in this Section 6.16.
Quicksilver will, upon BreitBurn’s request, assist BreitBurn in its efforts to
succeed Quicksilver as operator of the applicable QRI Assets, but without being
obligated to pay any consideration or waive or release any right or privilege
as part of such assistance. BreitBurn shall promptly, following Closing,
file all appropriate forms, and declarations or bonds with federal and state
agencies relative to its assumption of operatorship if BreitBurn elects to
assume operatorship. For all Quicksilver-operated QRI Assets for which
BreitBurn wishes to assume operatorship, Quicksilver, subject to compliance
with all applicable operating agreements, shall execute and deliver to
BreitBurn at Closing and BreitBurn shall promptly file all the appropriate
forms with the applicable regulatory agency transferring operatorship of such
QRI Assets to BreitBurn. BreitBurn represents and warrants to, and covenants
and agrees with Quicksilver, that BreitBurn (or any Affiliate of BreitBurn that
BreitBurn requests be nominated and recommended as successor operator pursuant
to this Section 6.16), as applicable, is qualified and has the
operational capability to succeed Quicksilver as operator and conduct
operations to at least the same standard as Quicksilver in accordance with the
terms of the applicable operating agreement (or before assuming such
operatorship will be so qualified and have such operational capacity).


 


Section 6.17                                Cash
Items. After Closing, all proceeds, accounts receivable, notes receivable,
income, revenues, monies and other items included in or attributable to the
Excluded Assets and all other Excluded Assets shall belong to and be paid over
to Quicksilver, and all


 


65






 












proceeds, accounts receivable, notes receivable, income, revenues,
monies and other items included in or attributable to the QRI Assets with
respect to any period of time after the Effective Time shall belong to and be
paid over to BreitBurn, subject, in each case, to the adjustments provided in Sections
2.5(c) and 2.6.


 


Section 6.18                                Standstill. Each Party agrees that, so long as the other Party is not in material
breach of the terms of this Agreement, such Party will not, and will cause each
of its Affiliates and their respective officers, directors, managers, partners,
employees, agents or representatives (including any financial or legal advisors
or other representatives) not to, directly or indirectly, (a) solicit, initiate
or facilitate (by way of furnishing information) any inquiries or proposals
regarding any transaction involving, or in any way relating to, the sale of the
Acquired Companies and/or the sale of all or substantially all of the Acquired
Assets other than the transactions contemplated by this Agreement (a “Competing
Transaction”), (b) participate in discussions or negotiations regarding, or
furnish to any Person any information in connection with, a Competing
Transaction, or (c) enter into any agreement regarding any Competing
Transaction.


 


Section 6.19                                Release. On or before Closing, Quicksilver shall cause (a) the Acquired
Companies to be released from any obligations in respect of the Disclosed
Contracts listed in item 1 and item 2 of Schedule 4.8 and (b) any Liens
encumbering any of the Interests that secure the payment of Long Term Debt or
any other indebtedness for borrowed money to be released.


 


Section 6.20                                Quicksilver Lock-Up. Without the prior written consent of
BreitBurn, Quicksilver agrees that it will not effect a sale or distribution of
any of the Common Units comprising the Equity Consideration prior to the first
anniversary of the Closing Date (the “Lock-Up Date”). From and after the
Lock-Up Date and until eighteen (18) months after the Closing Date, Quicksilver
may sell up to fifty percent (50%) of the Common Units comprising the Equity
Consideration. Quicksilver shall be free to sell all or any portion of the
Common Units comprising the Equity Consideration after eighteen (18) months
from the Closing Date. Notwithstanding the prohibitions in this Section 6.20,
Quicksilver may at any time: (a) transfer the Common Units comprising the
Equity Consideration to an Affiliate of Quicksilver (provided that such
Affiliate agrees to the restrictions in this Section 6.20); and (b)
pledge or grant a security interest in the Common Units comprising the Equity
Consideration (provided such pledgee agrees to the restrictions in this Section 6.20),
and any pledgee of such Common Units shall be permitted to transfer the Common
Units in connection with any exercise of its rights against Quicksilver or any
of its Affiliates (provided that the transferee agrees to the restrictions in
this Section 6.20).


 


Section 6.21                                Redemption Prohibition. BreitBurn shall not, and shall cause its
Affiliates (including BreitBurn Parent) not to, repurchase or redeem Common
Units or take any other action that would cause Quicksilver to own fifty
percent (50%) or more of the outstanding limited partner interests of BreitBurn
Parent.


 


Section 6.22                                Consent. BreitBurn shall obtain the consent required pursuant to the document
listed under item 1 of Schedule 5.4(a).


 


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Section 6.23                                End
User Contracts.


 


(a)                                  If
any of the Contracts provide for the sale of Hydrocarbons by Quicksilver or any
of its Affiliates to a Person who is using such Hydrocarbons rather than acting
as a reseller or marketer of such Hydrocarbons (the “End User Contracts”),
then the following provisions of this Section 6.23 shall apply.


 


(b)                                 Quicksilver
and BreitBurn shall use commercially reasonable efforts to identify all End
User Contracts within twenty five (25) days after the date of this Agreement. Each
Party shall notify the other of those Contracts which it has identified as End
User Contracts.


 


(c)                                  Breitburn
may notify Quicksilver of its election to include any one or more of the End
User Contracts identified and notified by either Party pursuant to clause (b)
above in the Excluded Assets, in which case such End User Contracts shall be
deemed part of the Excluded Assets (the “Subject Contracts”). The
aforesaid notice shall be given by BreitBurn to Quicksilver within thirty (30)
days after the date of this Agreement. Any End User Contracts not included in
Excluded Assets pursuant to such notice shall remain part of the Acquired
Assets. If any Subject Contract is held by an Affiliate of Quicksilver, then
such Subject Contract shall be assigned by such Affiliate to Quicksilver, to
the extent such Subject Contract is assignable, prior to the Closing.


 


(d)                                 As
to each Subject Contract, at Closing BreitBurn and Quicksilver shall enter into
an agreement whereby BreitBurn agrees to (i) sell to Quicksilver the volumes of
Hydrocarbons covered by such Subject Contract on the same terms and conditions
that are contained in such Subject Contract; provided, the sales price to
Quicksilver for each MMBtu or other applicable unit of measure shall be the
MMBtu price or other unit price applicable under the Subject Contract less
$0.02 mcfe and (ii) provide everything necessary and perform every action
necessary (other than nomination, scheduling and marketing services that shall
be provided by Quicksilver at its sole cost and expense), including, without
limitation, providing transportation, at BreitBurn’s sole cost and expense, for
Quicksilver to comply in all respects with its obligations under such Subject
Contract. By way of clarification, BreitBurn shall have the same termination
and non-renewal rights that Quicksilver or its Affiliate have under the Subject
Contract and applicable law. BreitBurn acknowledges and agrees that Quicksilver
shall have the right to terminate any of the Subject Contracts as provided
therein and shall have no obligation to extend or renew any of the Subject
Contracts.


 


(e)                                  Following
the Closing, BreitBurn may notify Quicksilver of its election to accept the
assignment of any one or more of the Subject Contracts, in which case
Quicksilver shall assign such Subject Contracts to BreitBurn (without recourse,
representation or warranty by Quicksilver but free and clear of any Liens
created by, through or under Quicksilver encumbering such Subject Contracts
other than Permitted Liens), subject to obtaining any required consent from the
counterparty under such Subject Contracts. Any Subject Contract so assigned by
Quicksilver to BreitBurn pursuant to this Section 6.23(d) shall
automatically be deemed to be an Acquired Asset.


 


67

















 


ARTICLE VII


CONDITIONS


 


Section 7.1                                      Conditions
Precedent to Obligations of BreitBurn and Quicksilver. The respective
obligations of BreitBurn and Quicksilver to consummate the transactions
contemplated by this Agreement are subject to satisfaction or waiver, at or
prior to the Closing Date, of each of the following conditions:


 


(a)                                  No
Orders or Actions. There shall have been no Order of any nature by any
Governmental Entity that is in effect that restrains or prohibits the
consummation of any of the transactions contemplated by this Agreement, and no
Action before any Governmental Entity shall have been instituted or threatened
by any Person which seeks to prevent or delay the consummation of the
transactions contemplated by this Agreement or which challenges the
enforceability of this Agreement.


 


(b)                                 Regulatory
Authorizations. All Permits of any Governmental Entity (other than any
Customary Post-Closing Consents) as are necessary in connection with the
transfer of the Interests to BreitBurn (except where the failure to have
received such Permit would not have a Material Adverse Effect) and the issuance
of Common Units comprising the Equity Consideration to Quicksilver have been
obtained; and all applicable waiting periods specified under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the “Hart-Scott Act”)
with respect to the transactions contemplated by this Agreement shall have
lapsed or terminated.


 


Section 7.2                                      Conditions
Precedent to Obligation of Quicksilver. The obligation of Quicksilver to
consummate the transactions contemplated by this Agreement is subject to
satisfaction or waiver of each of the following conditions:


 


(a)                                  Representations
and Warranties. BreitBurn’s representations and warranties made in this
Agreement shall be true and correct in all material respects (and in all
respects, in the case of representations and warranties which are qualified by
materiality) as though made on the Closing Date, except to the extent such
representations and warranties expressly relate to an earlier date
(disregarding the reference to the date of this Agreement set forth in the provision
immediately before Section 5.1), in which case they shall be true and
correct in all material respects (and in all respect, in the case of
representations and warranties which are qualified by materiality) as of such
earlier date.


 


(b)                                 Performance
of Covenants. BreitBurn shall have performed and complied in all material
respects with all obligations and covenants required by this Agreement to be
performed by BreitBurn prior to or at Closing.


 


(c)                                  Officer’s
Certificate. BreitBurn shall have delivered to Quicksilver certificates
signed by authorized officers of BreitBurn, dated as of the Closing Date, to
the effect that the conditions set forth in Section 7.2(a) and Section
7.2(b) have been satisfied.


 


(d)                                 Listing
of Common Units. The Nasdaq Global Market shall have approved the Common
Units comprising the Equity Consideration for listing, subject only to official
notice of issuance and evidence of satisfactory distribution.


 


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(e)                                  Tax
Opinions. Breitburn shall have provided to Quicksilver on the Closing Date
a copy of an opinion of counsel addressed to BreitBrun and BreitBurn Parent, in
the form attached as Exhibit G hereto, dated as of the Closing Date, to
the effect that (i) Breitburn Parent is classified as a partnership and
Breitburn is disregarded as an entity separate from Breitburn Parent for United
States federal Tax purposes and (ii) at least 90% of Breitburn Parent’s current
gross income constitutes “qualifying income” within the meaning of Section
7704(d) of the Code.


 


Section 7.3                                      Conditions
Precedent to Obligation of BreitBurn. The obligation of BreitBurn to
consummate the transactions contemplated by this Agreement is subject to
satisfaction or waiver of each of the following conditions:


 


(a)                                  Representations
and Warranties. Quicksilver’s representations and warranties made in this
Agreement (i) shall be true and correct in all respects as to those
representations and warranties qualified by the requirement of a Material
Adverse Effect and (ii) as to all representations and warranties not covered by
clause (i) preceding, shall be true and correct in all respects with the
exception of inaccuracies and breaches that individually or in the aggregate
have not resulted in or given rise to, or would reasonably not be expected to
result in or give rise to, a Material Adverse Effect, in each case, on the
Closing Date as though made on the Closing Date (except to the extent such
representations and warranties expressly relate to an earlier date (disregarding
the reference to the date of this Agreement set forth in the provision
immediately before Section 3.1 and Section 4.1), in which case as
to such representations and warranties referenced in the immediately preceding
provision shall be deemed to refer to the earlier date referenced in such
representation and warranty) and in each case subject to any supplement or
amendment to the Disclosure Schedules permitted by Section 6.9.


 


(b)                                 Performance
of Covenants. Quicksilver shall have performed and complied in all material
respects with all obligations and covenants required by this Agreement to be
performed by Quicksilver prior to or at Closing.


 


(c)                                  Officer’s
Certificate. Quicksilver shall have delivered to BreitBurn a certificate
signed by an authorized officer of Quicksilver, dated as of the Closing Date,
to the effect that the conditions set forth in Section 7.3(a) and Section
7.3(b) have been satisfied.


 


(d)                                 Pre-Closing
Conversion. Quicksilver shall have provided documentation reasonably
satisfactory to BreitBurn evidencing that the Conversions shall have been
consummated and are effective under applicable state law.


 


(e)                                  Audited
Special Financial Statements. Quicksilver shall have delivered to BreitBurn
the Audited Special Financial Statements.


 


ARTICLE VIII


TERMINATION


 


Section 8.1                                      Termination
Events. This Agreement may be terminated at any time prior to Closing:


 


(a)                                  by
the mutual written consent of BreitBurn and Quicksilver;


 


69

















 


(b)                                 by
either BreitBurn or Quicksilver if Closing has not occurred by the close of
business on December 31, 2007 (provided the Party seeking to terminate this
Agreement is not in material default of any of its representations, warranties,
covenants or agreements under this Agreement), provided,
however, that such date shall be extended to accommodate any cure
period specified in Section 8.1(d) or Section 8.1(e), as
applicable;


 


(c)                                  by
Quicksilver or BreitBurn, upon written notice to the other Party, in the event
that the sum of (i) the downward adjustments to the Initial Consideration for
Title Defects in accordance with the provisions of Section 6.12, in the
aggregate, plus (ii) the downward adjustments to the Initial Consideration on
account for Environmental Defects in accordance with the provisions of Section
6.14 equals or exceeds $145,000,000; provided, however,
that if BreitBurn and Quicksilver have not agreed upon the aforesaid downward
adjustment in the Initial Consideration attributable to any Title Defect or
Environmental Defect, then the downward adjustment asserted by BreitBurn for
such Title Defect or Environmental Defect shall be used only for purposes of
determining Quicksilver’s right to terminate under this clause (c);


 


(d)                                 by
BreitBurn, if Quicksilver shall have breached or failed to perform in any
material respect any of its representations, warranties, covenants or other
agreements contained in this Agreement, which breach or failure to perform
would give rise to the failure of a condition set forth in Section 7.3; provided, however, that the breaching Party shall first be
entitled to ten (10) days’ notice and the opportunity to cure and provided furthermore that the Party seeking to so terminate
not be in breach at such time;


 


(e)                                  by
Quicksilver, if BreitBurn shall have breached or failed to perform in any
material respect any of its representations, warranties, covenants or other
agreements contained in this Agreement, which breach or failure to perform
would give rise to the failure of a condition set forth in Section 7.2; provided, however, that the breaching Party shall first be
entitled to ten (10) days’ notice and the opportunity to cure and provided furthermore that the Party seeking to so terminate
not be in breach at such time; or


 


(f)                                    by
either BreitBurn or Quicksilver if any Law or Order or rule becomes final and
effective, prohibiting or making illegal the consummation of the transactions
contemplated by this Agreement, upon notification to the non-terminating Party
by the terminating Party.


 


Section 8.2                                      Effect
of Termination.


 


(a)                                  In
the event of any termination of this Agreement as provided in Section 8.1,
this Agreement shall forthwith be of no further force and effect and, except
for the obligations regarding the Deposit (under Section 2.2), BreitBurn’s
indemnification obligations under Section 6.4(a)(iii), the Parties’
respective obligations under Section 11.2, and BreitBurn’s obligations
under the Confidentiality Agreement, all of which shall expressly survive the
termination of this Agreement, neither Party shall have any further obligation
or liability to the other with regard to this Agreement, the transactions
contemplated hereby, or the termination hereof except to the limited extent
provided in Section 2.2(b) and Section 8.2(b).


 


70

















 


(b)                                 If
all conditions precedent to the obligations of Quicksilver to consummate the
transactions contemplated by this Agreement set forth in Article VII
have been met and this Agreement is terminated prior to Closing pursuant to Section
8.1(d) as a result of (i) Quicksilver’s breach of any of Quicksilver’s
representations and warranties contained in this Agreement or (ii) Quicksilver’s
(A) intentional failure to perform in any material respect any of the covenants
or agreements contained in Section 2.12 (assuming the conditions
precedent to the obligations of Quicksilver to consummate the transactions
contemplated by this Agreement set forth in Article VII have been met), Section
6.2(b), Section 6.15, Section 6.18 or Section 6.19 or
(B) intentional failure to perform in any material respect any remaining
material covenants or agreements contained in this Agreement which failure
(that is, a failure referenced in this clause (B)) is designed by Quicksilver
to cause one or more of the conditions to Closing set forth in Article VII
not to be met, and the collective failure to perform under clauses (A) and (B)
preceding results in Damages suffered by BreitBurn as a result of such
termination (including any costs resulting from the unwinding or termination of
any hedges or contingent hedges) of $72,500,000 or more, then notwithstanding
anything to the contrary in this Agreement, Breitburn, in addition to the
return of the Deposit, shall be entitled to recover from Quicksilver an amount
equal to the Damages BreitBurn suffers as a result of such termination
(including any costs resulting from the unwinding or termination of any hedges
or contingent hedges; and the Parties acknowledge and agree that any such costs
will constitute direct damages and thus are not covered by Section 11.13).


 


ARTICLE IX

SURVIVAL; INDEMNIFICATION


 


Section 9.1                                      Survival.


 


(a)                                  The
representations, warranties, covenants and agreements set forth in this
Agreement shall survive Closing and the delivery of the Asset Assignments, the
Venture Assignments and any other Closing documents; provided,
however, that (i) except as provided in clause (ii) below, and
except for representations and warranties made in Section 4.11 with
respect to Taxes, which are addressed in Article X, the representations
and warranties made in Article III and Article IV and any
corresponding representations and warranties made in any certificate delivered
by or on behalf of Quicksilver at Closing pursuant to Section 2.12
(as well as any indemnification obligations or liabilities therefor) shall only
survive until the date that is nine (9) months following the Closing Date, (ii)
the representations and warranties made in Section 4.13, Section
4.18(d) or in any certificates or documents relating thereto delivered in
connection with this Agreement shall terminate as of the Closing Date (and
Quicksilver shall not have any indemnification obligations or liabilities
therefor), (iii) except as provided in clause (i) above, the representations
and warranties, if any, made by Quicksilver in any certificates or documents
delivered in connection with this Agreement shall terminate as of the Closing
Date (and Quicksilver shall not have any indemnification obligations or
liabilities therefor), (iv) all covenants and agreements set forth in Section 6.1
(as well as any indemnification obligations or liabilities therefor) shall only
survive until the date that is nine (9) months following the Closing Date, and
(v) all covenants and agreements of Quicksilver contemplated to be complied
with or performed prior to the Closing (as well as any indemnification
obligations or liabilities therefor) shall only survive until the date that is
nine (9) months following the Closing Date. The survival


 


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period set forth above for each
representation, warranty, covenant or agreement is referred to herein as the “Survival
Period.”


 


(b)                                 No
Action for Damages or other relief of any kind (including an Action under Section 9.2(a)
or Section 9.3(a)) arising out of or relating to any breach of
representation, warranty, covenant or agreement under this Agreement or in any
certificate or documents delivered in connection with this Agreement may be
brought unless a written notice describing the nature of the Action, the theory
of liability or the nature of the relief sought and the material factual
assertions upon which the Action is based (a “Claim Notice”) is given to
the other Party before the termination of the applicable Survival Period. Notwithstanding
anything herein to the contrary, a claim for a breach of any representation,
warranty, covenant or agreement that would otherwise terminate shall continue
to survive for any Damages with respect to which a Claim Notice is given
pursuant to this Agreement prior to the end of the applicable Survival Period,
until such claim is finally resolved and all related Damages are paid, subject
to the limitations and restrictions set forth herein, and any such Claim Notice
made as to Damages that may also be recoverable from third parties or insurance
pursued by BreitBurn as contemplated in Section 9.4 below shall
nevertheless be valid Damages for purposes of tolling the applicable Survival
Period notwithstanding the pendency of any such potential recoveries.


 


Section 9.2                                      Indemnification
by Quicksilver.


 


(a)                                  General Indemnity from Quicksilver. Except as otherwise
provided in Article X and subject to the further provisions hereof, if
Closing occurs, then upon, from and after Closing Quicksilver shall DEFEND, INDEMNIFY AND HOLD HARMLESS BreitBurn, the Acquired
Companies and their respective successors and permitted assigns and their
respective shareholders, members, partners (general and limited), officers,
directors, managers, employees (other than the Business Employees and any other
employee of Quicksilver relating to the QRI Assets), agents and representatives
and each of their heirs, executors, successors and assigns (collectively, the “BreitBurn
Indemnified Parties”), from and against and in respect of any and all
Damages, which arise out of (i) any breach of any of the representations
and warranties (other than those which do not survive the Closing as stated in Section
9.1(a)) made in Article III, Article IV (other than
representations and warranties made in Section 4.11 with respect to
Taxes, which are addressed in Article X), or any corresponding
representations and warranties made in any certificate delivered by or on
behalf of Quicksilver at Closing pursuant to Section 2.12, (ii) any
breach of any of the covenants of Quicksilver in this Agreement, or
(iii) the Retained Liabilities.


 


(b)                                 Limitations on Quicksilver’s Indemnity Obligations. The
obligation to indemnify BreitBurn Indemnified Parties set forth in Section 9.2(a)
shall be subject to each of the following limitations:


 


(i)                                     Quicksilver’s
indemnification obligations under Section 9.2(a)(i) as to breach of
a particular representation or warranty shall terminate upon expiration of the
respective Survival Period, except as set forth in Section 9.1(b).


 


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(ii)                                  Excluding
the Retained Liabilities, any individual indemnification claim for Damages
asserted by BreitBurn or any other BreitBurn Indemnified Parties under this Section
9.2 must equal or exceed the sum of $1,000,000 (“De Minimis BreitBurn
Losses”); and any such individual indemnification claim for Damages
asserted by BreitBurn or any BreitBurn Indemnified Parties that does not meet
or exceed the De Minimis BreitBurn Losses shall be excluded in their entirety,
and Quicksilver, shall have no liability hereunder to BreitBurn or any other
BreitBurn Indemnified Parties for any such individual indemnification claim for
Damages that does not meet or exceed the De Minimis BreitBurn Losses;


 


(iii)                               To
the extent that BreitBurn or BreitBurn Indemnified Parties timely and properly
assert indemnification claims for Damages which individually meet or exceed the
De Minimis BreitBurn Losses (each, a “Material Claim”, and,
collectively, the “Material Claims”), Quicksilver shall have no
indemnification, reimbursement or payment obligations for any Damages pursuant
to this Section 9.2, unless and until, and then only to the extent, the
cumulative aggregate amount of all Material Claims exceed $45,000,000 (“Quicksilver’s
Deductible”), after which point, Quicksilver shall only be liable for the
amount by which such Material Claims exceed Quicksilver’s Deductible, subject
to the further limitations set forth in Sections 9.2(b)(iv) and Section
9.2(b)(v); provided, the preceding provisions of this subsection (iii)
shall not apply to Retained Liabilities.


 


(iv)                              The
limitations described in Section 1.3 above; and


 


(v)                                 NOTWITHSTANDING ANYTHING TO THE CONTRARY CONTAINED IN THIS AGREEMENT
BUT SUBJECT TO SECTION 8.2(b), QUICKSILVER’S AGGREGATE LIABILITY TO
BREITBURN AND ANY BREITBURN INDEMNIFIED PARTIES FOR ALL ACTIONS OR DAMAGES
UNDER OR RELATING TO THIS AGREEMENT AND THE TRANSACTIONS CONTEMPLATED HEREBY,
INCLUDING WITH RESPECT TO THE INDEMNIFICATION PROVISIONS SET FORTH IN THIS ARTICLE IX
OR ANY APPLICABLE PROVISIONS OF ARTICLE X, OR ANY BREACH BY
QUICKSILVER OF THIS AGREEMENT, SHALL NOT EXCEED AN AMOUNT EQUAL TO (i)
$145,000,000 LESS (ii) THE AGGREGATE AMOUNT OF ALL DOWNWARD ADJUSTMENTS TO THE
INITIAL CONSIDERATION FOR TITLE DEFECTS AND ENVIRONMENTAL DEFECTS IN ACCORDANCE
WITH THE PROVISIONS OF SECTIONS 6.12 AND 6.14 (THE “AGGREGATE
INDEMNITY CAP”); AND ANY CLAIMS, ACTIONS OR DAMAGES OF ANY KIND WHATSOEVER
IN EXCESS OF THE AGGREGATE INDEMNITY CAP ARE HEREBY WAIVED AND RELEASED BY BREITBURN
AND ALL OTHER BREITBURN INDEMNIFIED PARTIES IN ALL RESPECTS (AND BREITBURN
SHALL INDEMNIFY, DEFEND AND HOLD QUICKSILVER AND THE OTHER QUICKSILVER
INDEMNIFIED


 


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PARTIES
HARMLESS FROM AND AGAINST ANY SUCH CLAIMS, ACTIONS OR DAMAGES IN EXCESS OF SUCH
AGGREGATE INDEMNITY CAP), IN EACH CASE, REGARDLESS OF THE SOLE, JOINT,
CONCURRENT, COMPARATIVE, CONTRIBUTORY, ACTIVE, PASSIVE OR GROSS NEGLIGENCE,
WILLFUL MISCONDUCT, STRICT LIABILITY OR OTHER FAULT OR RESPONSIBILITY OF ANY
KIND OF QUICKSILVER, BREITBURN, THE TRANSFERRED COMPANIES, OR ANY OTHER PARTY
OR PERSON.


 


(c)                                  Survival; Exclusive Remedy. The indemnities provided in this
Section 9.2 and Article X shall survive Closing, as contemplated
in Section 9.1. Except as provided in Article X or in Section
11.13, the indemnity provided in this Section 9.2 shall be the sole
and exclusive remedy of BreitBurn and any other BreitBurn Indemnified Parties
from and after Closing against Quicksilver, at Law, in equity or otherwise,
relating to this Agreement (including, without limitation, any alleged breach
hereof) or the transactions contemplated hereby.


 


(d)                                 Claim Procedure. BreitBurn shall give Quicksilver prompt
written notice of any third party Action or other Damages claims which may give
rise to any indemnity obligation under this Section 9.2, together with
the estimated amount of such Action or Damages, and Quicksilver shall have the
right to assume the defense of any such Action through counsel of its own
choosing, by so notifying BreitBurn within sixty (60) days of receipt of
BreitBurn’s written notice; provided, however,
that Quicksilver’s counsel shall be reasonably satisfactory to BreitBurn. Failure
to give prompt notice shall not affect the indemnification obligations
hereunder in the absence of actual prejudice. If BreitBurn desires to
participate in, but not control, any such defense assumed by Quicksilver, it
may do so at its sole cost and expense. If Quicksilver declines to assume any
such defense, it shall be liable for all reasonable costs and expenses of
defending such Action incurred by BreitBurn, including reasonable fees and
disbursements of counsel in the event it is ultimately determined that
Quicksilver is liable for such Action pursuant to the terms of this Agreement. If
Quicksilver has assumed any such defense, but thereafter Quicksilver has failed
to diligently maintain such defense, then BreitBurn shall give Quicksilver
written notice thereof and, if Quicksilver does not take reasonable action to
remedy such failure within thirty (30) days after receipt, then BreitBurn may
assume such defense and Quicksilver shall continue to be liable for all
reasonable costs and expenses incurred in defending such actions, provided that BreitBurn thereafter diligently maintains such
defense and is commercially reasonable (given the size and nature of the claim
involved) in the manner of defense and the costs and expenses incurred. Quicksilver
shall not, without the written consent of a BreitBurn Indemnified Party, settle
any Action or claim against such BreitBurn Indemnified Party or consent to the
entry of any judgment with respect thereto that (i) does not result in a final
resolution of the BreitBurn Indemnified Party’s liability with respect to such
Action or claim (including, in the case of a settlement, an unconditional
written release of the BreitBurn Indemnified Party from all further liability
in respect of such Action or claim) or (ii) would result in the imposition of a
consent order, injunction or decree which would materially and adversely
restrict the future activity or conduct of the BreitBurn Indemnified Party,
other than conduct which violates a Law.


 


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Section 9.3                                      Indemnification
by BreitBurn.


 


(a)                                  General Indemnity from BreitBurn; Assumed Liabilities. Upon,
from and after Closing, BreitBurn shall DEFEND, INDEMNIFY AND HOLD
HARMLESS Quicksilver, its respective successors and permitted
assigns and their respective shareholders, members, partners (general and
limited), officers, directors, managers, employees, agents and representatives
and each of their heirs, executors, successors and assigns (collectively, the “Quicksilver
Indemnified Parties”), from and against and in respect of any and all
Damages arising out of (i) any breach of any of the representations and
warranties made in Article V, or any corresponding representations and
warranties made in any certificate delivered by or on behalf of BreitBurn at
Closing pursuant to Section 2.11, (ii) any breach of any of the
covenants of BreitBurn in this Agreement, (iii) any Assumed Liabilities,
(iv) any Transferred Company Liabilities, (v) any of the Subject
Contracts or any other contract ancillary thereto and (vi) BreitBurn’s failure
to perform under any of the agreements to be entered into between BreitBurn and
Quicksilver pursuant to Section 6.23(d), IN EACH
CASE, REGARDLESS OF THE SOLE, JOINT, CONCURRENT, COMPARATIVE, CONTRIBUTORY,
ACTIVE, PASSIVE OR GROSS NEGLIGENCE OR WILLFUL MISCONDUCT (OTHER THAN THE GROSS
NEGLIGENCE OR WILLFUL MISCONDUCT RELATING TO QUICKSILVER’S OBLIGATIONS TO
PROVIDE NOMINATION, SCHEDULING AND MARKETING SERVICES WITH RESPECT TO THE
SUBJECT CONTRACTS), STRICT LIABILITY OR OTHER FAULT OR RESPONSIBILITY OF ANY
KIND OF QUICKSILVER, BREITBURN, THE TRANSFERRED COMPANIES, OR ANY OTHER PARTY
OR PERSON.


 


(b)                                 Environmental Indemnity and Release. Notwithstanding
anything herein to the contrary, in addition to the indemnities set forth in Section
9.3(a), effective as of Closing, BreitBurn and its successors and assigns
hereby assume, agree to be responsible for and pay on a current basis, and
agree to DEFEND, INDEMNIFY, HOLD HARMLESS AND FOREVER
RELEASE the Quicksilver Indemnified Parties from and against any and
all Actions or Damages arising from, based upon, related to or associated with
any Environmental Liabilities or other environmental matter related or
attributable to the Acquired Assets, or assets or properties of any of the
Transferred Companies, regardless of whether such Actions or Damages arose
prior to, on or after the Effective Time, whether known or unknown, including,
without limitation, the presence, disposal or release of any Hazardous Material
or other material of any kind in, on or under the Acquired Assets, properties or
assets of any Transferred Companies or other property (whether neighboring or
otherwise) and including any liability of any Quicksilver Indemnified Party
with respect to the Acquired Assets, or assets or properties of any Transferred
Companies, under the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended (42 U.S.C. §§ 9601 et. seq.), the Resource
Conservation and Recovery Act of 1976 (42 U.S.C. § 6901 et. seq.), the Clean
Water Act (33 U.S.C. §§ 466 et. seq.), the Safe Drinking Water Act (14 U.S.C.
§§ 1401-1450), the Hazardous Materials Transportation Act (49 U.S.C. §§ 1801
et. seq.), the Toxic Substance Control Act (15 U.S.C. §§ 2601-2629), the Clean
Air Act (42 U.S.C. § 7401 et. seq.), as amended, and the Clean Air Act
Amendments of 1990, and all other federal, state and local Environmental Laws, IN EACH CASE, REGARDLESS OF THE SOLE, JOINT, CONCURRENT, COMPARATIVE,
CONTRIBUTORY, ACTIVE, PASSIVE OR GROSS NEGLIGENCE, WILLFUL MISCONDUCT, STRICT
LIABILITY OR OTHER FAULT OR RESPONSIBILITY OF ANY KIND OF QUICKSILVER, 


 


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BREITBURN,
THE TRANSFERRED COMPANIES, OR ANY OTHER PARTY OR PERSON. EFFECTIVE AS OF
CLOSING, BREITBURN, FOR ITSELF AND ITS SUCCESSORS AND ASSIGNS, EXPRESSLY WAIVES
AND RELEASES ANY AND ALL RIGHTS AND REMEDIES WHICH IT MAY HAVE UNDER
ENVIRONMENTAL LAWS AGAINST QUICKSILVER OR ANY QUICKSILVER INDEMNIFIED PARTY
REGARDING ENVIRONMENTAL CONDITIONS OR ENVIRONMENTAL LIABILITIES, WHETHER FOR
CONTRIBUTION, INDEMNITY OR OTHERWISE, REGARDLESS OF THE FAULT OR NEGLIGENCE OF
QUICKSILVER OR ANY QUICKSILVER INDEMNIFIED PARTY, INCLUDING STRICT OR STATUTORY
LIABILITY OF QUICKSILVER OR ANY QUICKSILVER INDEMNIFIED PARTY UNDER ANY
APPLICABLE LAW.


 


(c)                                  Claim Procedures. Quicksilver shall give BreitBurn prompt
written notice of any third party Action or other Damages claims which may give
rise to any indemnity obligation under this Section 9.3, together with
the estimated amount of such Action or Damage, and BreitBurn shall have the
right to assume the defense of any such Action through counsel of its own
choosing, by so notifying Quicksilver within sixty (60) days of receipt of
Quicksilver’s written notice; provided, however,
that BreitBurn’s counsel shall be reasonably satisfactory to Quicksilver. Failure
to give prompt notice shall not affect the indemnification obligations
hereunder in the absence of actual prejudice. If Quicksilver desires to
participate in any such defense assumed by BreitBurn it may do so at its sole
cost and expense. If BreitBurn declines to assume any such defense, it shall be
liable for all reasonable costs and expenses of defending such Action incurred
by Quicksilver, including reasonable fees and disbursements of counsel in the
event it is ultimately determined that BreitBurn is liable for such Action
pursuant to the terms of this Agreement. If BreitBurn has assumed any such
defense, but thereafter BreitBurn has failed to diligently maintain such
defense, then Quicksilver shall give BreitBurn written notice thereof and, if
BreitBurn does not take reasonable action to remedy such failure within thirty
(30) days after receipt, then Quicksilver may assume such defense and BreitBurn
shall continue to be liable for all reasonable costs and expenses incurred in
defending such actions, provided that
Quicksilver diligently maintains such defense and is commercially reasonable
(given the size and nature of the claim involved) in the manner of defense and
the costs and expenses incurred. BreitBurn shall not, without the written
consent of a Quicksilver Indemnified Party, settle any Action or claim against
such Quicksilver Indemnified Party or consent to the entry of any judgment with
respect thereto that (i) does not result in a final resolution of the
Quicksilver Indemnified Party’s liability with respect to such Action or claim
(including, in the case of a settlement, an unconditional written release of
the Quicksilver Indemnified Party from all further liability in respect of such
Action or claim) or (ii) would result in the imposition of a consent order,
injunction or decree which would materially and adversely restrict the future
activity or conduct of the Quicksilver Indemnified Party, other than conduct
which violates a Law.


 


Section 9.4                                      Other
Indemnification Matters and Limitations.


 


(a)                                  The
amount of any Damages for which indemnification is provided under this Article
IX shall be computed net of any (i) insurance or other proceeds received by
the indemnified party in connection with such Damages (net of any collection costs,
and excluding the proceeds of any insurance policy issued or underwritten by
the indemnified party or its


 


76

















 


Affiliates),
(ii) any Tax credits or other Tax benefits received by the indemnified party in
connection with such Damages.


 


(b)                                 Each
indemnified party agrees that it shall pursue in good faith claims under any
applicable insurance policies (excluding any insurance policy issued or
underwritten by the indemnified person or its Affiliates) and against other
third parties (other than its Affiliates) who may be responsible for Damages.


 


(c)                                  Notwithstanding
anything to the contrary contained in this Agreement, the Parties agree that
the indemnification provisions set forth in this Agreement shall not apply to
any Damages to the extent such Damages are accounted for in the calculations of
the adjustments set forth in Article II.


 


Section 9.5                                      Materiality Exclusion. Notwithstanding anything to the contrary
contained in this Agreement, for the purposes of determining if after the
Closing there has been a breach of any representation or warranty hereunder and
the amount of the Damages in respect thereof, the representations and
warranties shall, for purposes of this Article IX, be read without
giving effect to any materiality, Material Adverse Effect or qualification with
a similar meaning contained or incorporated directly or indirectly in such
representation or warranty.


ARTICLE X

TAX MATTERS


 


Section 10.1                                Preparation
and Filing of Tax Returns.


 


(a)                                  To
the extent permitted by Law or administrative practice the taxable year of each
Acquired Company (which, for purposes of this Article X, includes Terra
Pipeline Company) that includes the Closing Date shall be treated as closing on
(and including) the Closing Date.


 


(b)                                 For
purposes of determining the Taxes attributable to a Pre-Closing Tax
Period:  (i) in the case of Taxes
that are either (x) based upon or related to income or receipts or
(y) imposed in connection with any sale or other transfer or assignment of
property (real or personal, tangible or intangible), shall be deemed equal to
the amount which would be payable if the taxable period ended on and included
the Closing Date and (ii) in the case of Taxes imposed on a periodic basis
or otherwise measured by the level of any item, deemed to be the amount of such
Taxes for the entire period (or, in the case of such Taxes determined on an
arrears basis, the amount of such Taxes for the immediately preceding period),
multiplied by a fraction the numerator of which is the number of days in the
Pre-Closing Tax Period and the denominator of which is the number of days in
the entire taxable period.


 


(c)                                  Except
as provided in Section 10.3 and Section 10.7, as between
BreitBurn and its Affiliates and Quicksilver and its Affiliates, Quicksilver
and its Affiliates shall be responsible and indemnify BreitBurn for the payment
of (i) 100% of any and all Taxes due from or with respect to the Acquired
Companies for any Pre-Closing Tax Period, including any Tax liability that
arises as a result of the Conversions, under Treasury Regulation section
1.1502-6 or any analogous state, local or foreign law or regulation, or
pursuant to a Tax sharing or indemnification agreement or arrangement, (ii) any
Taxes attributable to the transfer of the


 


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Interests by
Quicksilver to BreitBurn pursuant to this Agreement, (iii) any liability for
Taxes imposed on BreitBurn, its Affiliates (including the Acquired Companies),
or the direct or indirect owners of their respective equity interests as a
result of a breach of the representations set forth in Section 4.11,
(iv) 5.5385% of any and all Taxes due from WCGP for any Pre-Closing Tax Period,
and (v) any liabilities, costs, expenses (including, without limitation,
reasonable expenses of investigation and attorneys’ and accountants’ fees and
expenses) arising out of or incident to the imposition, assessment or assertion
of any liabilities described in (i), (ii), (iii) or (iv), including those incurred
in the contest in good faith in appropriate proceedings relating to the
imposition, assessment or assertion of such liabilities, in each case incurred
or suffered by BreitBurn, any of its Affiliates (including the Acquired
Companies) after the Closing Date.


 


(d)                                 Quicksilver
shall ensure that (i) all items of income, gain, loss, deduction and
credit (“Tax Items”) of the Acquired Companies that are required to be
included in the consolidated federal income Tax Returns (and the state income
Tax Returns of any state that permits consolidated, combined or unitary income
Tax Returns, if any) of the Quicksilver Group are so included therein,
(ii) any such Tax Returns that include Tax Items of the Acquired Companies
are timely filed with the appropriate Taxing Authorities, and (iv) all
such Taxes owed with respect to such Tax Items (whether or not shown on any
such Tax Return) are timely paid.


 


(e)                                  For
all Tax Returns of each of the Acquired Companies covering periods ending on or
prior to the Closing Date that are filed after the Closing Date and are not
described in paragraph (d) above, BreitBurn shall cause such Tax Returns to be
prepared in a manner consistent with practices followed in prior years, except
as otherwise required by Law. BreitBurn shall cause to be included in each such
Tax Return all Tax Items required to be included therein, and shall furnish a
copy of each such Tax Return to Quicksilver at least fifteen (15) days prior to
the due date (including extensions) for filing such Tax Return, along with a
statement setting forth (i) for the Acquired Companies, the amount of the Taxes
shown to be due on such Tax Return and (ii) for WCGP, 5.5385% of the
amount of the Taxes shown to be due on such Tax Return. BreitBurn shall permit
Quicksilver to review and comment on such Tax Returns and shall make such
revisions to such Tax Returns as reasonably requested by Quicksilver not later
than three (3) days prior to the due date (including extensions) of such Tax
Return. Quicksilver shall deliver to BreitBurn the amount shown on such
statement no later than three days prior to the due date (including extensions)
for filing such Tax Return but only to the extent that such amount has not been
given effect in the calculations of the Initial Consideration adjustment set
forth in Section 2.1(b). BreitBurn shall timely file or cause the
Acquired Companies to timely file such Tax Returns and pay all Taxes due with
respect to such Tax Returns. Quicksilver shall be entitled to any refund of
Taxes due with respect to any Pre-Closing Period, and BreitBurn shall pay over
to Quicksilver any such refund, within fifteen (15) days after receipt thereof
net of any Taxes or costs resulting from the receipt of such refund. Tax items
of each of the Acquired Companies shall be apportioned for all income Tax
purposes by closing the books of each of the Acquired Companies at the end of
the Closing Date.


 


(f)                                    With
respect to any Tax Return covering a taxable period beginning on or before the
Closing Date and ending after the Closing Date that is required to be filed
after the Closing Date with respect to a Acquired Company, BreitBurn shall
cause such Tax Return to be prepared in a manner consistent with practices
followed in prior years, except as otherwise


 


78

















 


required by
Law, shall cause to be included in such Tax Return all Tax Items required to be
included therein, and at least fifteen (15) days prior to the due date
(including extensions) of such Tax Return shall furnish a copy of such Tax
Return to Quicksilver along with a statement setting forth the amount of Taxes
attributable to the Pre-Closing Tax Period. BreitBurn shall permit Quicksilver
to review and comment on such Tax Returns and make such revisions to such Tax
Returns as reasonably requested by Quicksilver not later than three (3) days
prior to the due date (including extensions) of such Tax Return. No later than
three days prior to the due date (including extensions) of (i) any such
Tax Return for the Acquired Companies, Quicksilver shall deliver to BreitBurn
the amount, if any, of the unpaid Taxes attributable to the Pre-Closing Tax
Period and (ii) any such Tax Return for WCGP, Quicksilver shall deliver to
BreitBurn 5.5385% of the amount, if any, of the unpaid Taxes attributable to
the Pre-Closing Period, in each case, only to the extent that such amount has
not been given effect in the calculations of the adjustment set forth in Section 2.1(b).
BreitBurn shall timely file or cause the Acquired Companies to timely file such
Tax Returns and pay all Taxes due with respect to such Tax Return. Any Tax
refunds that are received by BreitBurn or the Acquired Companies that relate to
Tax periods or portions thereof ending on or before the Closing Date shall be
for the account of Quicksilver, and BreitBurn shall pay over to Quicksilver any
such refund, or appropriate portion thereof, net of any Taxes or costs
resulting from the receipt of such refund, within 15 days after receipt
thereof.


 


(g)                                 Except
as may be required by Law, no amended Tax Return shall be filed, and no change
in any Tax accounting method or Tax election shall be made by, on behalf of, or
with respect to a Acquired Company, for any Pre-Closing Tax Period without the
consent of Quicksilver, which may be withheld in Quicksilver’s reasonable
discretion.


 


(h)                                 BreitBurn
and Quicksilver agree to provide such assistance as may reasonably be requested
by the other Party in connection with the preparation of any Tax Return, any
Action or other examination by any Taxing Authority or any Action relating to
liability for Taxes, and each will retain and provide the requesting Party with
any records or information which may be relevant to such return, audit or
examination, proceedings or determination. Any information obtained pursuant to
this Section 10.1 or pursuant to any other Section hereof providing
for the sharing of information relating to or review of any Tax Return or other
schedule relating to Taxes shall be kept confidential.


 


(i)                                     BreitBurn
and Quicksilver will preserve and retain all schedules, work papers and other
documents relating to any Tax Returns of the Acquired Companies or to any
claims, audits or other proceeding affecting the Acquired Companies until the
expiration of the statute of limitations (including extensions) applicable to
the taxable period to which such documents relate or until the final
determination of any controversy with respect to such taxable period, and until
the final determination of any payments that may be required with respect to
such taxable period under this Agreement.


 


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Section 10.2                                Tax
Treatment of Payments. Except as required by Law, the Parties shall treat
any indemnification payment or adjustment to the Initial Consideration made
pursuant to this Agreement as an adjustment to the Final Consideration for Tax
purposes.


 


Section 10.3                                Transfer
Taxes. All Transfer Taxes incurred in connection with this Agreement, the
contribution of the Interests and the transactions contemplated hereby shall be
borne solely by BreitBurn. The Party with primary responsibility under
applicable Law shall file, to the extent required by applicable Law, all
necessary Tax Returns and other documentation with respect to such Transfer
Taxes. For purposes of this Agreement, “Transfer Taxes” shall mean
transfer, documentary, sales, use, goods and services, registration, stamp
duty, gross receipts, excise, transfer and conveyance and other similar Taxes,
duties, fees or charges (including all applicable real estate transfer taxes),
together with any interest thereon, penalties, fines, costs, fees, additions to
Tax or additional amounts with respect thereto.


 


Section 10.4                                Allocation
of Consideration. The Initial Consideration, as adjusted by the other
provisions of Article II or Section 6.12 or 6.13 and any
indemnification payments, plus the amount of the Acquired Company Liabilities
(the “Total Consideration”), shall be allocated among the QRI Assets and
the assets and properties of the Acquired Companies (collectively with the QRI
Assets, the “Contributed Assets”) in accordance with Section 1060 of the
Code and the Treasury regulations thereunder (and any similar provision of
state, local or foreign Law, as appropriate) (the “Consideration Allocation”).
BreitBurn and Quicksilver agree that the unadjusted Total Consideration shall
be allocated among the Contributed Assets in accordance with the principles of
Section 1060 of the Code and the Treasury Regulations, as set forth in Exhibit D
of this Agreement (individually, a “Tax Allocated Value”, and
collectively, the “Tax Allocated Values”). Prior to Closing, the Parties
shall prepare a mutually agreed schedule setting forth any necessary
adjustments to the Tax Allocated Values, based upon the Closing Date
Consideration (the “Closing Consideration Allocation Schedule”). Any
post-Closing adjustments with respect to the consideration for the Contributed
Assets shall be treated as adjustments to the Consideration Allocation, which
shall be made in accordance with Section 1060 of the Code and the Treasury
Regulations thereunder (and any similar provision of state, local or foreign
Law, as appropriate). Quicksilver and BreitBurn shall report the transactions
contemplated by this Agreement in a manner consistent with the Consideration
Allocation, such as reporting of asset values and other items for purposes of
all federal, state, and local Tax Returns, including without limitation,
Internal Revenue Service Form 8594. Quicksilver and BreitBurn shall not
take any position in any Tax Return, Tax proceeding or Tax audit that is
inconsistent with the Consideration Allocation, except as required by Law; provided, however, that neither BreitBurn nor Quicksilver
shall be unreasonably impeded in its ability to settle any Tax audit or other
Action related to Taxes.


 


Section 10.5                                Tax
Treatment of Transaction. Before the Closing Date, each of Terra, GTG,
Mercury and Terra Pipeline Company will merge into a newly-formed,
single-member limited liability company (collectively, the “Conversions”),
with the result that each of the Acquired Companies will be disregarded as an
entity separate from Quicksilver for United States federal Tax purposes (and
state, local, and foreign Tax purposes where applicable). Accordingly, as a
result of each of the Acquired Companies being disregarded as an entity
separate from Quicksilver and BreitBurn being disregarded as an entity separate
from BreitBurn Parent for United States federal Tax purposes (and state, local,
and foreign Tax purposes where


 


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applicable), the Parties intend
for the transfer of the QRI Assets and the equity interests in the Acquired
Companies by Quicksilver to BreitBurn pursuant to this Agreement to be treated
for United States federal income Tax purposes (and state, local, and foreign
Tax purposes where applicable) as the contribution by Quicksilver to BreitBurn
Parent of the Contributed Assets, subject to the Acquired Company Liabilities,
in exchange for the Cash Consideration and the Equity Consideration (the “Tax
Construct”). The Parties acknowledge and agree that the Tax Construct will
be treated in part as a sale for purposes of Section 707 of the Code, and for
purposes of determining the portion of the Total Consideration treated as sale
consideration and the portion of the Contributed Assets treated as being sold
for purposes of Section 707 of the Code, the Parties agree to treat and report
for United States federal income Tax purposes (and state, local, and foreign
Tax purposes where applicable) a portion of the Cash Consideration as a
reimbursement of “capital expenditures,” within the meaning of Treasury
Regulations section 1.707-4(d), to the extent Quicksilver provides
documentation adequate to support such treatment.


 


Section 10.6                                BreitBurn’s Tax Indemnity. Notwithstanding any provision of this
Agreement to the contrary, including any provision in Section 10.1(c)
and Article IX, as between Quicksilver and its Affiliates and BreitBurn
and its Affiliates, BreitBurn and its Affiliates shall be responsible and
indemnify Quicksilver for (i) any liability for Taxes imposed on and losses
suffered by Quicksilver and its Affiliates as a result of a breach of the
representations set forth in Section 5.12, and (ii) any liabilities,
costs, expenses (including, without limitation, reasonable expenses of
investigation and attorneys’ and accountants’ fees and expenses) arising out of
or incident to the imposition, assessment or assertion of any Tax or loss
described in clause (i), including those incurred in the contest in good faith
in appropriate proceedings relating to the imposition, assessment or assertion
of such Tax, in each case incurred or suffered by Quicksilver or any of its
Affiliates after the Closing Date.


 


Section 10.7                                Tax Sharing Agreements. All Tax sharing or similar Contracts with
respect to or involving any of the Acquired Companies shall be terminated as of
the Closing Date and, after the Closing Date, none of such companies shall be
bound thereby or have any liability thereunder (whether relating to any
pre-Closing or post-Closing period).


 


Section 10.8                                Conflict.
In the event of a conflict between the provisions of this Article X and
any other provisions of this Agreement, this Article X shall control.


 


Section 10.9                                Procedures
Relating to Indemnification of Tax Claims.  


 


(a)                                  If
a claim shall be made by any Taxing Authority, for which Quicksilver is or may
be liable pursuant to this Agreement, BreitBurn shall notify Quicksilver in
writing within ten (10) Business Days of receipt by BreitBurn of notice of such
claim (a “Tax Claim”). Failure to give prompt notice shall not affect
the indemnification obligations hereunder in the absence of actual material
prejudice.


 


(b)                                 With
respect to any Tax Claim, Quicksilver, at Quicksilver’s expense, shall control
all proceedings taken in connection with such Tax Claim (including selection of
counsel), and BreitBurn shall execute or cause to be executed powers of
attorney or other documents necessary to enable Quicksilver to take all actions
that do not materially adversely affect BreitBurn or its Affiliates, or the
Acquired Companies, or the direct or indirect owners of


 


81

















 


their
respective equity interests. Quicksilver shall permit BreitBurn to participate
in (but not control) such proceedings through counsel chosen by BreitBurn (but
the fees and expenses of such counsel shall be paid by BreitBurn). Quicksilver
may in its sole discretion pursue or forego any and all administrative appeals,
proceedings, hearings and conferences with any Taxing Authority with respect to
such Tax Claim, and may initiate any claim for refund, file any amended return,
or take any other action which is deemed appropriate by Quicksilver with
respect to such Tax Claim, provided such
actions do not materially adversely affect BreitBurn or its Affiliates, the
Acquired Companies, or the direct or indirect owners of their respective equity
interests. Notwithstanding the foregoing, Quicksilver and BreitBurn shall
jointly control all proceedings in connection with any Tax Claim relating
solely to Taxes for a taxable period beginning before the Closing Date and
ending after the Closing Date, and shall jointly bear and pay costs and
expenses related to such proceedings. No party shall settle a Tax Claim
relating solely to Taxes of the Acquired Companies or WCGP for a Pre-Closing
Tax Period or a taxable period beginning before the Closing Date and ending
after the Closing Date without the other party’s prior written consent (which
consent may not be unreasonably withheld, conditioned or delayed).


 


Section 10.10                          Like
Kind Exchange. Any Party may elect to structure the assignment and
conveyance of the portion of the QRI Assets for which the Cash Consideration is
treated as having been paid as part of a like-kind exchange under Section 1031
of the Code. The parties agree to cooperate with one another with respect to
the like-kind exchange and to execute all documents, conveyances and other
instruments necessary to effectuate an exchange. The Party requesting a
like-kind exchange shall bear all costs and expenses and liability associated
therewith.


 


Section 10.11                          Consents. If either Saginaw or
TWPP does not currently have in effect a Section 754 Election, Quicksilver
shall use commercially reasonable efforts to obtain any required consents from
the partners of Saginaw and TWPP, as applicable, to authorize Saginaw and TWPP
to make a Section 754 Election that will be effective on the Closing Date (the “Section
754 Consents”); provided that Quicksilver shall not be obligated to pay any
consideration or waive or release any right or privilege as part of such
efforts.


 


Section 10.12                          Survival.
Notwithstanding anything to the contrary in this Agreement, all
representations, warranties, covenants, agreements and indemnities relating to
Taxes contained in this Agreement (and any certificates or documents relating
thereto delivered in connection with this Agreement) shall survive the Closing
and shall not terminate until the date that is sixty (60) days after the expiration
of the applicable statute of limitations, including extensions thereof, with
respect to such Tax matter.


 


ARTICLE XI

MISCELLANEOUS


 


Section 11.1                                Notices.
All communications provided for hereunder shall be in writing and shall be
deemed to be given when delivered in person or by private courier with receipt,
when sent by facsimile and received, or when delivered by United States mail,
first-class, registered or certified, return receipt requested, with postage
paid and,


 


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If to
BreitBurn:


 


BreitBurn
Operating L.P.


515 S. Flower
Street, Ste. 4800


Los Angeles,
CA 90071


Attention:  Halbert S. Washburn, Co-CEO


Facsimile:  213-225-5916


 


and


 


BreitBurn
Operating L.P.


515 S. Flower
Street, Ste. 4800


Los Angeles,
CA 90071


Attention:  Gregory C. Brown, Executive Vice-President
and General Counsel


Facsimile:  213-225-5916


 


with a copy
(which shall not itself constitute notice) to:


 


Vinson &
Elkins LLP

First City Tower

1001 Fannin Street, Suite 2300

Houston, TX  77002-6760

Attention:  Rell Tipton

Facsimile:  713-615-5553


 


If to
Quicksilver:


 


Quicksilver
Resources Inc.

777 West Rosedale St.

Fort Worth, TX  76104

Attention:  John C. Cirone, Senior Vice
President and General Counsel

Facsimile:  817-665-5021


 


with a copy
(which shall not itself constitute notice) to:


 


Fulbright &
Jaworski L.L.P.

1301 McKinney, Suite 5100

Houston, TX  77010

Attention:  Deborah A. Gitomer

Facsimile:  713-651-5246


 


or to such
other address as any such Party shall designate by written notice to the other
Party.


 


Section 11.2                                Expenses.
Quicksilver and BreitBurn shall each pay their respective expenses (such as
legal, investment banker and accounting fees) incurred in connection with the
origination, negotiation, execution and performance of this Agreement, provided, however, that BreitBurn shall pay all Transfer
Taxes, as provided under Section 10.3, and BreitBurn shall be solely
responsible for any filing fees under the Hart-Scott Act, as provided in Section
6.2(b).


 


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Section 11.3                                Non-Assignability.
This Agreement shall inure to the benefit of and be binding on the Parties and
their respective successors and permitted assigns. This Agreement shall not be
assigned by any Party without the express prior written consent of the other
Party, in its sole discretion, and any attempted assignment, without such
consent, shall be null and void. In no event shall any assignment or transfer
hereunder serve to release or discharge the assigning Party from any of its
duties and obligations hereunder, unless expressly released, in writing, by the
non-assigning Party. Notwithstanding the foregoing, BreitBurn may designate one
or more of its Affiliates as the party to whom title to all or any part of the
Interests will be conveyed, assigned and transferred at the Closing; provided, however, such designation and the transfer of
title to such designee shall not serve to release or discharge BreitBurn from
any of its duties and obligations hereunder.


 


Section 11.4                                Amendment;
Waiver. Except as otherwise provided in Section 6.9, this Agreement
may be amended, supplemented or otherwise modified only by a written instrument
executed by each of the Parties hereto. No waiver by any Party of any of the
provisions hereof shall be effective unless explicitly set forth in writing and
executed by the Party so waiving. Except as provided in the preceding sentence,
no action taken pursuant to this Agreement, including any investigation by or
on behalf of any Party, shall be deemed to constitute a waiver by the Party
taking such action of compliance with any representations, warranties,
covenants or agreements contained herein, and in any documents delivered or to
be delivered pursuant to this Agreement and in connection with Closing hereunder.
The waiver by any Party of a breach of any provision of this Agreement shall
not operate or be construed as a waiver of any subsequent breach.


 


Section 11.5                                No
Third Party Beneficiaries. Except to the extent a third party is expressly
given rights herein, including in Article IX, this Agreement is not
intended, nor shall it be deemed, construed or interpreted, to confer upon any
Person not a Party (or a successor and assign permitted herein) any rights or
remedies hereunder. Each BreitBurn Indemnified Party and each Quicksilver
Indemnified Party is a third party beneficiary to the extent of the indemnity,
defense and hold harmless obligations owed to such Person under Article IX;
provided, however, that any claim to be
indemnified, defended or held harmless hereunder on behalf of a BreitBurn
Indemnified Party or a Quicksilver Indemnified Party must be made and
administered by a Party to this Agreement or its successors or permitted
assigns. Quicksilver shall not have any direct liability or obligation to any
Quicksilver Indemnified Party under this Agreement or be liable to any
Quicksilver Indemnified Party for any election or non-election or any act or
failure to act under or in regard to any term of this Agreement, and BreitBurn
shall not have any direct liability or obligation to any BreitBurn Indemnified
Party under this Agreement or be liable to any BreitBurn Indemnified Party for
any election or non-election or any act or failure to act under or in regard to
any term of this Agreement.


 


Section 11.6                                Governing
Law. This Agreement and the rights and duties of the Parties hereunder
shall be governed by, and construed in accordance with, the laws of the State
of Texas (excluding any conflict of laws rule or principle that might refer the
governance or construction of this Agreement to the law of another
jurisdiction), other than matters dealing with the ownership of real property
or interests therein, which shall be governed by the laws of the state where
such property is located.


 


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Section 11.7                                Consent
to Jurisdiction. Each of the Parties hereto irrevocably submits to the
exclusive jurisdiction of the United States District Court for the Northern
District of Texas, Dallas Division, located in Dallas, Texas, or if such court
does not have jurisdiction, then any Texas State or Federal Court sitting in
the State of Texas, for the purposes of any Action arising out of this
Agreement or any transaction contemplated hereby. Each of the Parties hereto
further agrees that service of any process, summons, notice or document by U.S.
registered mail to such Party’s respective address set forth in Section 11.1
shall be effective service of process for any Action in Texas with respect to
any matters to which it has submitted to jurisdiction as set forth above in the
immediately preceding sentence. Each of the Parties hereto irrevocably and
unconditionally waives any objection to the laying of venue of any Action
arising out of this Agreement or the transactions contemplated hereby in the
United States District Court for the for the Northern District of Texas, Dallas
Division, located in Dallas, Texas, or if such court does not have
jurisdiction, then any Texas State or Federal Court sitting in the State of
Texas, and hereby further irrevocably and unconditionally waives and agrees not
to plead or claim in any such court that any such Action brought in any such
court has been brought in an inconvenient forum.


 


Section 11.8                                Entire
Agreement. This Agreement and the schedules and exhibits hereto and the
Confidentiality Agreement sets forth the entire understanding of the Parties
with respect to the subject matter hereof and supersede and replace all prior
agreements between the Parties related to the subject matter hereof, whether
oral or written.


 


Section 11.9                                Severability.
If any provision of this Agreement shall be declared by any court of competent
jurisdiction to be illegal, void or unenforceable, all other provisions of this
Agreement shall not be affected and shall remain in full force and effect.


 


Section 11.10                          Counterparts.
This Agreement may be executed by facsimile and in any number of counterparts,
each of which shall be deemed to be an original and all of which together shall
be deemed to be one and the same instrument.


 


Section 11.11                          Further
Assurances. Upon request from time to time, Quicksilver and BreitBurn shall
execute and/or cause to be executed and delivered such other documents and
instruments and shall do such other acts that may be reasonably necessary or
desirable, to consummate the transactions contemplated hereby and to carry out
the intent of this Agreement.


 


Section 11.12                          Schedules
and Exhibits. All exhibits and schedules hereto are hereby incorporated by
reference and made a part of this Agreement. Notwithstanding anything to the
contrary contained in this Agreement or in any Disclosure Schedule, any
information disclosed in any Disclosure Schedule, to the extent that a
reasonable Person would consider such information to have been disclosed as an exception
to a representation or warranty clearly enough so as to be responsive in
respect of another representation and warranty for which such information was
not disclosed separately, shall be deemed to be disclosed with respect hereto. Certain
information set forth in the Disclosure Schedules is included solely for
informational purposes and may not be required to be disclosed pursuant to this
Agreement. The disclosure of any information shall not be deemed to be an
acknowledgment that such information is required to be disclosed in connection
with the representations and warranties made or that it is material, and such
information shall not be deemed to establish a standard of materiality.


 


85

















 


Section 11.13                          Specific
Performance; Limitation on Damages. The Parties agree that irreparable
damage would occur in the event any provision of this Agreement was not
performed in accordance with the terms hereof and that the Parties shall be
entitled to specific performance of the terms hereof, in addition to any other
remedy at law or in equity. IN NO EVENT, HOWEVER,
SHALL ANY PARTY AND/OR ITS AFFILIATES BE LIABLE FOR ANY CONSEQUENTIAL, SPECIAL,
INDIRECT OR PUNITIVE DAMAGES CLAIMED BY A PARTY HERETO OR ANY BREITBURN INDEMNIFIED
PARTIES OR QUICKSILVER INDEMNIFIED PARTIES ARISING FROM OR RELATING TO
(A) ANY ACTIONS FOR INDEMNIFICATION UNDER ARTICLE IX OR ARTICLE X,
(B) ANY ACTIONS RELATING TO ANY BREACH BY A PARTY IN THE EVENT OF A
TERMINATION OF THIS AGREEMENT PURSUANT TO ARTICLE VIII, OR
(C) ANY OTHER BREACH OR ALLEGED BREACH OF THIS AGREEMENT; PROVIDED, HOWEVER, THAT THE FOREGOING SHALL NOT BAR RECOVERY
BY ONE PARTY AGAINST ANOTHER PARTY FOR INDEMNIFIED DAMAGES HEREUNDER TO THE
EXTENT SUCH DAMAGES ARE OWED BY THE CLAIMING PARTY TO AN UNAFFILIATED THIRD
PARTY (WHICH SHALL NOT INCLUDE ANY BREITBURN INDEMNIFIED PARTIES, QUICKSILVER
INDEMNIFIED PARTIES, ANY OF THEIR RESPECTIVE AFFILIATES, AND ANY OF THE
TRANSFERRED COMPANIES).


 


Section 11.14                          Waiver
of Jury Trial. THE PARTIES HEREBY WAIVE
ANY RIGHT TO TRIAL BY JURY IN ANY ACTION ARISING OUT OF OR RELATING TO THIS
AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY, WHETHER NOW EXISTING OR
HEREAFTER ARISING, AND WHETHER SOUNDING IN CONTRACT, TORT OR OTHERWISE. THE
PARTIES AGREE THAT ANY OF THEM MAY FILE A COPY OF THIS PARAGRAPH WITH ANY COURT
AS WRITTEN EVIDENCE OF THE KNOWING, VOLUNTARY AND BARGAINED-FOR AGREEMENT AMONG
THE PARTIES IRREVOCABLY TO WAIVE TRIAL BY JURY AND THAT ANY ACTION WHATSOEVER
BETWEEN THEM RELATING TO THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY
SHALL INSTEAD BE TRIED IN A COURT OF COMPETENT JURISDICTION BY A JUDGE SITTING
WITHOUT A JURY.


 


Section 11.15                          Time.
Time is of the essence in the performance of this Agreement in all respects.


 


Section 11.16                          No
Further Representations; Disclaimers. EXCEPT FOR THE
REPRESENTATIONS AND WARRANTIES EXPRESSLY SET FORTH IN THIS AGREEMENT, THE
INTERESTS ARE BEING SOLD AND TRANSFERRED “AS IS, WHERE IS,” AND QUICKSILVER IS
NOT MAKING ANY OTHER REPRESENTATIONS OR WARRANTIES, WRITTEN OR ORAL, STATUTORY,
EXPRESS OR IMPLIED, CONCERNING SUCH INTERESTS, THE ACQUIRED ASSETS, THE
ACQUIRED COMPANIES OR WCGP, INCLUDING, WITHOUT LIMITATION, ANY REPRESENTATION
OR WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE, ALL OF
WHICH ARE HEREBY EXPRESSLY EXCLUDED AND DISCLAIMED. IN ADDITION, WITHOUT
LIMITING THE GENERALITY OF THE PRIOR SENTENCE, QUICKSILVER MAKES NO, AND 


 


86

















 


EXPRESSLY
HEREIN ALSO DISCLAIMS, ANY REPRESENTATION OR WARRANTY REGARDING THE FUTURE
FINANCIAL PERFORMANCE OF THE ACQUIRED ASSETS, THE ACQUIRED COMPANIES OR WCGP OR
THEIR RESPECTIVE ASSETS, AND QUICKSILVER ALSO EXPRESSLY DISCLAIMS ANY
REPRESENTATION OR WARRANTY REGARDING ANY BUSINESS OR FINANCIAL PROJECTIONS MADE
AVAILABLE TO BREITBURN REGARDING THE ACQUIRED ASSETS, THE ACQUIRED COMPANIES OR
WCGP, THE BUSINESS OR THE INTERESTS. NONE OF QUICKSILVER OR ITS REPRESENTATIVES
SHALL HAVE OR BE SUBJECT TO ANY LIABILITY TO BREITBURN RESULTING FROM THE
DISTRIBUTION TO BREITBURN, OR BREITBURN’S USE OF, ANY INFORMATION WITH RESPECT
TO THE BUSINESS AND ANY INFORMATION, DOCUMENTS OR MATERIAL MADE AVAILABLE TO
BREITBURN IN MANAGEMENT PRESENTATIONS OR IN ANY OTHER FORM IN EXPECTATION OF
THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT.


 


Section 11.17                          Confidentiality.
At the Closing Quicksilver and BreitBurn shall take (or cause to be taken) such
actions as are necessary to terminate the Confidentiality Agreement.


 


[SIGNATURE PAGE FOLLOWS]


 


87

















 


IN WITNESS
WHEREOF, the Parties have caused this Agreement to be
duly executed as of the date first above written.


 


	
   

  	
  QUICKSILVER
  RESOURCES INC.,

  
	
   

  	
  a Delaware
  corporation

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Glenn Darden

  
	
   

  	
   

  	
  President
  and Chief Executive Officer

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  BREITBURN
  OPERATING L.P.,

  
	
   

  	
  a Delaware
  limited partnership

  
	
   

  	
   

  
	
   

  	
  By:

  	
  BreitBurn
  Operating GP, LLC,

  
	
   

  	
   

  	
  a Delaware
  limited liability company,

  
	
   

  	
   

  	
  its General
  Partner

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  
							



 


Signature Page to Contribution Agreement