exv10w20






Exhibit 10.20




Execution Version




JOINT OPERATING AGREEMENT




     This JOINT OPERATING AGREEMENT (this “Agreement”) dated October 1, 2010,
but effective as of July 1, 2010, between Quicksilver Resources Inc., a Delaware
corporation (“KWK”), Quicksilver Gas Services LP, a Delaware limited partnership
(“KGS LP”), and Quicksilver Gas Services GP LLC, a Delaware limited liability
company and the general partner of KGS LP (“KGS GP” and, together with KGS LP,
“KGS”). KWK and KGS may sometimes be referred to individually as a “Party” and
collectively as the “Parties.”



     WHEREAS, pursuant to that certain Purchase Agreement (the “Purchase Agreement”)
dated as of July 22, 2010, among First Reserve Crestwood Holdings LLC, a Delaware
limited liability company (“Buyer”), KWK and certain subsidiaries of KWK (the
“Selling Subsidiaries”), Buyer agreed to purchase the Holdings LLC Interests (as
defined in the Purchase Agreement) from the Selling Subsidiaries and the KGS Note
(as defined in the Purchase Agreement) from KWK, and KWK agreed to sell the KGS
Note, and to cause the Selling Subsidiaries to sell the Holdings LLC Interests, to
Buyer. Capitalized terms not otherwise defined herein shall have the meaning
ascribed to such terms in the Purchase Agreement; and



     WHEREAS, in connection with the Closing under the Purchase Agreement, the
Parties desire to enter into this Agreement to provide the terms and conditions
pursuant to which the construction, operation, management and maintenance of
certain interests and assets owned by each of KWK and KGS in certain contract
areas will be jointly conducted.



     NOW, THEREFORE, in consideration of the mutual covenants and agreements made
herein, the Parties, intending to be legally bound, hereby agree as follows:



ARTICLE 1

Definitions




     Section 1.01. Definitions. As used herein, the following terms have
the following meanings:



     “Alliance Gas Gathering Agreement” means the Gas Gathering Agreement dated
as of December 1, 2009 between Cowtown Pipeline Partners L.P., as the assignee
of Cowtown Pipeline L.P., and KWK (as amended or amended and restated from time
to time).



 









 





     “Alliance Gas Pipelines and Related Facilities” means the Pipelines and Related Facilities
associated with the Alliance Area Gathering System located in Tarrant and Denton Counties, Texas.



     “Approved Projects” means Pipelines and Related Facilities projects agreed upon
by the Parties.



     “Capex Budget” means the annual budget for capital expenditures relating to
Approved Projects.



     “Contract Area” means, collectively, the Contract Areas covered by all of the Gas
Agreements.



     “Contract Labor” means any third party contractor utilized to perform operating,
maintenance or repair activities on Quicksilver-owned Pipelines and Related Facilities.



     “Cowtown Gas Processing Agreement” means the Sixth Amended and Restated Gas Gathering
and Processing Agreement dated as of September 1, 2008, between KWK, Cowtown Pipeline
Partners L.P. and Cowtown Gas Processing Partners L.P. (as amended or amended and restated
from time to time).



     “FTE” or “Full Time Equivalent” means any hourly or salaried KGS employee.



     “Fully burdened rate” means the rate at which KGS employees’ labor will be billed to
Quicksilver. It includes base salary, 410k contribution, equity-based compensation,
employee benefits, health insurance, unemployment taxes, FICA, overtime, deferred
compensation, long term care insurance, accrued bonus, company vehicle insurance, vehicle
lease expense, vehicle repair and maintenance expense.



     “Gas Agreement” means each of the Alliance Gas Gathering Agreement, Lake Arlington
Gas Gathering Agreement and Cowtown Gas Processing Agreement.



     “Lake Arlington Gas Gathering Agreement” means the Amended and Restated Gas
Gathering Agreement dated as of September 1, 2008, between Cowtown Pipeline Partners
L.P., as the assignee of Cowtown Pipeline L.P., and KWK (as amended or amended and
restated from time to time).



     “Lake Arlington Pipelines and Related Facilities” means the Pipelines and Related
Facilities associated with the Lake Arlington Gathering System located in Tarrant County,
Texas.



     “Pipelines and Related Facilities” shall mean all natural gas, natural gas liquids,
water, gas lift and other pipelines including all meters, separators, dehydrators,
treating or processing plants, compressors, cathodic protection,



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rectifiers, drip stations, pig launchers and receivers required to be constructed,
installed, operated and maintained by KGS or KWK pursuant to their individual or joint
obligations under the Gas Agreement(s).




     “RRC” means the Railroad Commission of Texas.



     “Support Services” means those KGS functional groups that will
periodically perform work on behalf and for the sole benefit of KWK-owned
assets. These services include Health, Safety and Environmental (HSE),
Purchasing and Supply Chain Management, Instrumentation and Electrical
Technicians and Management.



     (a) Each of the following terms is defined in the Section set forth
opposite such term:



	 	 	 	 	 
	Term	 	Section
	AFE

	 	2.04(a)
	Agreement

	 	Preamble

	Buyer

	 	Recitals

	Damages

	 	7.02(a)
	Indemnified Party

	 	7.02(a)
	Indemnifying Party

	 	7.02(a)
	KGS

	 	Preamble

	KSP GP

	 	Preamble

	KGS LP

	 	Preamble

	KGS Pipeline

	 	2.02(a)
	KWK

	 	Preamble

	KWK Pipeline

	 	2.02(a)
	Parties

	 	Preamble

	Pipeline Contractor

	 	2.03(a)
	Pipelines

	 	2.02(a)
	Purchase Agreement

	 	Recitals

	ROW Acquisition

	 	2.02(a)
	RTUs

	 	3.01(b)
	Selling Subsidiaries

	 	Recitals

	Third-Party Gas Agreement

	 	3.01






     Section 1.02. Other Definitional and Interpretative Provisions. The words
“hereof”, “herein” and “hereunder” and words of like import used in this Agreement
shall refer to this Agreement as a whole and not to any particular provision of this
Agreement. The captions herein are included for convenience of reference only and
shall be ignored in the construction or interpretation hereof. References to
Articles, Sections, Exhibits and Schedules are to Articles, Sections, Exhibits and
Schedules of this Agreement unless otherwise specified. All Exhibits and Schedules
annexed hereto or referred to herein are hereby incorporated in and made a part of
this Agreement as if set forth in full herein. Any capitalized terms used in any
Exhibit or Schedule but not otherwise defined



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therein, shall have the meaning as defined in this Agreement. Any singular term in this
Agreement shall be deemed to include the plural, and any plural term the singular.
Whenever the words “include”, “includes” or “including” are used in this Agreement, they
shall be deemed to be followed by the words “without limitation”, whether or not they are
in fact followed by those words or words of like import. “Writing”, “written” and
comparable terms refer to printing, typing and other means of reproducing words (including
electronic media) in a visible form. References to any agreement or contract are to that
agreement or contract as amended, modified or supplemented from time to time in accordance
with the terms hereof and thereof. References to any Person include the successors and
permitted assigns of that Person. References from or through any date mean, unless
otherwise specified, from and including or through and including, respectively. References
to “law”, “laws” or to a particular statute or law shall be deemed to include any such law
or statute as amended from time to time, any rules and regulations promulgated thereunder
and any and all Applicable Law.




ARTICLE 2

Future Pipelines and Related Facilities Build-out and Development




     Section 2.01. General. In an effort to optimize the resources of the Parties, to
ensure timely completion of the Approved Projects and to provide for the most efficient
ongoing operation, management and maintenance of existing and future Pipelines and Related
Facilities required under each of the Gas Agreements, KWK and KGS agree to cooperate and
jointly develop the Pipelines and Related Facilities in the manner set forth in this Article
2. The Parties shall jointly cooperate each year and from time to time as required to
prepare, discuss and approve the Capex Budget with respect to the KGS Pipeline; provided
that the initial Capex Budget with respect to the KGS Pipeline shall be the capital
expenditure budget set forth in Section 5.01(b) of the Seller Disclosure Schedules. KWK
shall submit to KGS each year the Capex Budget with respect to the KWK Pipelines. The Capex
Budget shall identify in sufficient detail all projects and estimated costs for the ensuing
year with respect to the Pipelines and Related Facilities covered by the relevant Capex
Budget.



     Section 2.02. ROW Acquisition. KWK shall direct and manage the land brokers and
personnel necessary for procuring the permits, approvals and Right-of-Way (the “ROW
Acquisition”) necessary for the construction and operation of the KGS gas gathering utility
pipeline (including related appurtenances and facilities) (the “KGS Pipeline”) and the KWK
gas lift and water lines (including related appurtenances and facilities) (the “KWK
Pipelines” and, together with the KGS Pipeline, the “Pipelines”), as applicable, as
contemplated by the Capex Budget. To the extent the estimated cost of the ROW Acquisition
for the KGS Pipeline materially exceeds the estimated cost of such ROW Acquisition pursuant
to the applicable Capex Budget, KWK shall notify KGS of such event, as soon as reasonably
feasible, providing an estimate of such revised costs; provided, however, that KWK shall
have authority to settle all ROW Acquisition issues,




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including costs and terms, subject to the approval of KGS (which approval shall not
be unreasonably withheld or delayed).




     (a) The ROW Acquisition shall include applying for, and submitting information
necessary to obtain, such permits, approvals and licenses required to construct and
operate the Pipelines (including any construction permits as may be required by the
RRC) as well as the acquisition of easements and any other Right-of-Way from the
appropriate landowners in the name of KGS and KWK, as applicable, for the KGS
Pipeline and the KWK Pipelines respectively.



     (b) Notwithstanding anything to the contrary herein, the Parties agree that if
and to the extent KWK does not perform any of its obligations pursuant to this
Section 2.02 with respect to the KGS Pipeline to the reasonable satisfaction of KGS,
then, upon at least five (5) Business Days prior written notice, KGS shall have the
right to perform (at KGS’s cost) such obligations with respect to the KGS Pipeline
instead of KWK, it being understood that such right to substitute itself in the
performance of KWK’s obligations shall be KGS’s sole remedy for any non-performance
by KWK of its obligations pursuant to this Section 2.02 with respect to the KGS
Pipeline, and KGS shall not have any other claim (for breach of contract or
otherwise), whether in law or in equity, for any such non-performance.



     Section 2.03. Construction of Pipelines. KGS shall direct and manage all
pipeline construction contractors and sub-contractors and all other Persons
providing construction related services (each, a “Pipeline Contractor”) as are
required for the construction and installation of the Pipelines in the same easement
land area under each Party’s respective and separate Right-of-Way. The Pipelines
shall be installed by such Pipeline Contractors (or, if KGS constructs or installs
such Pipeline itself, KGS) in such a manner (including with all such cathodic
protection) as is consistent with accepted industry standards. The Parties shall
mutually agree upon the number of days for the estimated completion of the Pipelines
or any segment thereof. For the avoidance of doubt, KGS will contract with such
Pipeline Contractors for the construction and installation of both Parties’
Pipelines and Related Facilities in accordance with the Capex Budget. To the extent
the estimated cost of the construction or installation of the KWK Pipelines
materially exceeds the estimated cost of the construction or installation of such
Pipelines pursuant to the applicable Capex Budget, KGS shall notify KWK of such
event, as soon as feasible, providing an estimate of such revised costs; provided,
however, that KGS shall have authority to settle all issues relating to the
construction and installation of the Pipelines, including costs and terms, subject
to the approval of KWK (which approval shall not be unreasonably withheld or
delayed).



     (a) KGS shall notify KWK at least five (5) Business Days prior to the
commencement of the construction of any segment of the Pipelines by any Pipeline
Contractor. KGS and KWK shall hold regularly scheduled weekly meetings to discuss
and report on the status of, and any progress with respect to,



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(i) applications for required permits, approvals and licenses, (ii) the construction and
installation of the Pipelines as well as related equipment laid or installed, as
applicable, and (iii) testing, inspection and flowing of gas. KWK’s designated personnel
shall have, for the purposes of inspecting and reviewing, reasonable access to any of the
activities conducted hereunder and any documentation relating thereto.




     (b) Notwithstanding anything to the contrary herein, the Parties agree that if
and to the extent KGS does not perform any of its obligations pursuant to this
Section 2.03 with respect to the KWK Pipeline to the reasonable satisfaction of
KWK, then, upon at least five (5) Business Days prior written notice, KWK shall
have the right to perform (at KWK’s cost) such obligations with respect to the KWK
Pipeline instead of KGS, it being understood that such right to substitute itself
in the performance of KGS’s obligations shall be KWK’s sole remedy for any
non-performance by KGS of its obligations pursuant to this Section 2.03 with
respect to the KWK Pipeline, and KWK shall not have any other claim (for breach of
contract or otherwise), whether in law or in equity, for any such non-performance.



     Section 2.04. Costs. For all Approved Projects, KWK shall prepare and submit
to KGS authorizations for expenditure (“AFEs”) for the estimated acquisition costs
and capital expenditure for the ROW Acquisition to the extent attributable to the
KGS Pipeline. KGS shall pay to KWK, by wire transfer in immediately available funds
within five (5) Business Days of receipt of the relevant AFE, the acquisition costs
and capital expenditure incurred by KWK that are attributable to the KGS Pipeline.



     (a) For all Approved Projects, KGS shall prepare and submit to KWK AFEs for the
estimated acquisition costs and capital expenditure for the construction and
installation of the KWK Pipelines. KWK shall pay to KGS, by wire transfer in
immediately available funds within five (5) Business Days of receipt of the relevant
AFE, the acquisition costs and capital expenditure incurred by KGS that are
attributable to the KWK Pipelines. Notwithstanding anything to the contrary in this
Agreement, to the extent KGS does not hire a third-party Pipeline Constructor for
the construction or installation of the KWK Pipeline but constructs or installs such
Pipeline itself or requests an Affiliate of KGS to construct or install such
Pipeline, the Capital Budget and AFE with respect to such Pipeline shall only
reflect the actual costs incurred, or estimated to be incurred, by KGS or such
Affiliate in connection with the construction or installation of such Pipeline, and
KWK shall not be required to pay to KGS any amounts in excess of such actual costs
with respect to the construction or installation of such Pipeline (irrespective of
whether such payment is made pursuant to this Section 2.04(b) or pursuant to Section
2.04(c)).



     (b)
(i) To the extent the actual acquisition costs or capital expenditure for
any acquisition activity or construction or installation activity, as the case may
be, differs from the estimated acquisition costs or capital expenditure for such



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activity pursuant to the relevant AFE, the Parties shall true each other up for any such
difference within 30 days after completion of the acquisition activity or construction or
installation activity, as the case may be, in question. (ii) Each Party shall have the
right, upon reasonable notice, and at all reasonable times during usual business hours, to
audit, examine, inspect and make copies of the books and records of the other Party
relating to AFEs submitted by the other Party and/or the corresponding acquisition
activities or construction and installation activities, as the case may be; provided that
such right may only be exercised with respect to any books and records relating to any AFE
or the corresponding acquisition activities or construction or installation activities, as
the case may be, during the two-year period immediately following the completion of the
relevant activities. Such right may be exercised through any agent or employee of the
Party conducting such audit, examination or inspection; provided such agent or employee has
been reasonably approved by the other Party. The Party conducting such audit, examination
or inspection shall bear all costs and expenses incurred in connection therewith. If any
Party determines during the two-year period immediately following the completion of any
acquisition activities or construction or installation activities, as the case may be
(irrespective of whether such determination is made as a result of any audit, examination
or inspection pursuant to this clause (ii) or otherwise), that the actual acquisition costs
or capital expenditure for any acquisition activity or construction or installation
activity, as the case may be, differs from the estimated acquisition costs or capital
expenditure for such activity pursuant to the relevant AFE, then (x) the Party making such
determination shall promptly notify the other Party thereof and (y) the Parties shall true
each other up for any such difference within 30 days after the Party making such
determination notifies the other Party thereof.




     (c) To the extent the Parties cannot agree, within the relevant 30-day period
pursuant to Section 2.04(c), on the difference between the actual acquisition costs
or capital expenditure for any acquisition activity or construction or installation
activity, as the case may be, and the estimated acquisition costs or capital
expenditure for such activity pursuant to the relevant AFE, the Parties shall settle
such dispute in accordance with the dispute resolution mechanism pursuant to the
applicable Gas Agreement, which dispute resolution mechanism shall apply mutatis
mutandis (provided that the provisions of Sections 7.06 through 7.08 hereof shall
apply to any lawsuit of the Parties arising out of or relating to any such dispute).



     Section 2.05. Sharing of Documentation. Promptly upon receipt thereof by
KWK, all surveys, as-builts, permits, approvals, licenses, agreements relating to
any Right-of-Way and other documentation relating to the ROW Acquisition shall be
made available by KWK to KGS to the extent such documentation relates to the KGS
Pipeline.



     (a) Promptly upon receipt thereof by KGS, all surveys, as-builts, permits,
approvals, licenses, agreements relating to any Right-of-Way and other
documentation relating to the construction or installation of the Pipelines shall
be



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made available by KGS to KWK to the extent such documentation relates to the KWK
Pipelines.




     Section 2.06. Compliance with Procedures. Each Party shall comply,
and shall ensure that its agents and contractors comply, with the other Party’s
posted safety procedures when entering or performing any work in such other Party’s
premises.



     Section 2.07 Limitation on Liability. EXCEPT TO THE EXTENT SET FORTH IN
THIS AGREEMENT, NEITHER PARTY MAKES, AND
EXPRESSLY DISCLAIMS, ANY REPRESENTATIONS OR WARRANTIES, WRITTEN OR ORAL, STATUTORY,
EXPRESS OR IMPLIED, WITH RESPECT TO THE PERFORMANCE OF THE SERVICES PROVIDED BY SUCH PARTY
HEREIN, INCLUDING, WITHOUT LIMITATION, ANY REPRESENTATION OR WARRANTY OF MERCHANTABILITY
OR FITNESS FOR A PARTICULAR PURPOSE, ALL OF WHICH ARE HEREBY EXPRESSLY EXCLUDED AND
DISCLAIMED.



ARTICLE 3

SCADA Data; IT; Emergency
Phone Numbers; Insurance




     Section 3.01. Collection, Management and Sharing of SCADA Data and
Infrastructure. KWK will collect, control and manage the SCADA data with respect
to the Pipelines and shall have open access to all infrastructure, including
communication towers, that supports the collection, control and management of the
SCADA data (it being understood that ownership to any SCADA meter or other SCADA
infrastructure shall remain unaffected by the foregoing). KGS shall reimburse KWK
for fifty percent (50%) of any costs and expenses incurred by KWK or its Affiliates
in connection with the operation and maintenance of the SCADA system and
infrastructure, provided that with respect to labor charges such fifty percent (50%)
allocation shall be applied to the following rates : (i) one hundred percent (100%)
of the fully burdened rate of one (1) SCADA administrator; (ii) twenty percent (20%)
of the fully burdened rate of one (1) SCADA manager; (iii) twenty percent (20%) of
the fully burdened rate of one (1) network administrator, and (iv) forty percent
(40%) of the fully burdened rate of one (1) telecom administrator. KWK shall make
available to KGS the SCADA data relating to each Gas Agreement, as well as SCADA
data relating to each currently existing gas gathering agreement and gas processing
agreement between KGS and a third party (a “Third-Party Gas Agreement”), at no
additional cost to KGS, until such Gas Agreement or Third-Party Gas Agreement”), as
applicable, terminates or is terminated in accordance with its terms. The Parties
will negotiate in good faith as to the allocation of costs for future additional
third-party meters.



     (a) KGS shall perform the installation and maintenance of the SCADA meters
with respect to the Pipelines, and KWK shall perform the installation and



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maintenance of the Remote Telemetry Units (“RTUs”) with respect to the Pipelines (it
being understood that ownership to any SCADA meter or other SCADA infrastructure
shall remain unaffected by the foregoing).
Notwithstanding the foregoing, KWK shall direct, specify and coordinate the
materials and configuration standards required to support the maintenance and operation
of the SCADA network system.



     (b) Each Party may request that new SCADA meters or RTUs be installed at the
requesting Party’s cost. In such case, the Parties shall agree on who shall have
ownership to any such new SCADA meter or RTU; provided that if the Parties cannot
agree on who shall have such ownership, the Party requesting such installation and
paying for the new SCADA meter or RTU, as the case be, shall have ownership to such
new SCADA meter or RTU, but shall provide access to such meter or RTU on
commercially agreeable terms to the other Party. Each new SCADA meter and RTU shall
be connected to the SCADA system.



     Section 3.02. Maintenance of Insurance. Each Party agrees to purchase and
maintain customary insurance coverage (consistent with accepted industry
standards) for the Pipelines and Related Facilities owned by such Party.



     Section 3.03. IT; Software; Licenses; Communications. The software, licenses
and communications network set forth on Schedule I, attached hereto, shall be
accessed and used by both Parties subject to the terms hereof. KWK will not be
liable, and KGS shall be responsible and liable for any costs and any additional
terms or obligations, which may include approvals for transfer or the purchase of
licenses, software, or equipment, that may be required by a vendor or licensor
arising out of the access and use of the items scheduled on Schedule I.



     Section 3.04. Emergency Phone Numbers. The Parties agree that KWK shall
retain all emergency phone numbers in effect on the date hereof, regardless of
whether such numbers were previously held in the name of KWK, KGS or any of their
respective Affiliates.



ARTICLE 4

Alliance Area Pipelines and
Related Facilities




     Section 4.01. General. In an effort to operate the aforementioned pipeline
system in the most efficient and cost-effective manner, KWK agrees to allow KGS to
operate these assets on their behalf. KGS will operate and manage the assets and
KWK shall compensate KGS, all as further described in this
Article 4 and in Schedule
II attached hereto.



     Section 4.02. Labor.



     (a) Fifty percent (50%) of the fully burdened rate of one (1) pipeline
operator will be included in the monthly operating charge.



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     (b) Thirty six percent (36%) of the fully burdened rate of one (1)
pipeline administrator will be included in the monthly operating charge. This
figure is calculated based on historical One-Call data for the Contract Area.



     (c) Twelve and one half percent (12.5%) of the fully burdened rate of one (1)
pipeline supervisor will be included in the monthly operating charge. This
figure is calculated based on fifty percent (50%) of this individual’s time
being equally spent on the four (4) operating areas within the Contract Area.



     (d) Twenty five percent (25%) of the fully burdened rate of one (1) mechanic
will be included in the monthly operating charge. This figure includes all Support
Services as defined in Section 1.01. The intent of this calculation is to simplify
accounting of each individual’s time within the Support Services category. This
simplification allows for the timely execution and completion of the services.



     (e) Measurement technicians, Gas Analysts and Measurement Supervision, will
be charged in accordance with the provisions of Section 6.02.



     (f) Any Contract Labor performed on the pipelines or related facilities will
be sourced by KGS, coded in accordance with the KWK well coding system and billed
directly to KWK.



     Section 4.03. Materials.



     (a) All material goods necessary to the safe and efficient operation of the
pipelines and related facilities will be sourced by KGS employees, received
onsite, coded in accordance with KWK’s well coding system and direct billed to KWK
by the suppliers.



     (b) Pipeline chemicals, maintenance activities, safety and environmental charges
will be billed to KWK at fifty percent (50%) of the total invoiced amount when such
activity occurs in rights of way containing lines owned by both parties.



     (c) Pipeline pipe, valves and fittings will be sourced by KGS employees,
received onsite, coded in accordance with KWK’s well coding system and direct billed
to KWK by the suppliers.



     (d) Utility charges for cathodic protection at the Cozart Meter Site will be
paid one hundred percent (100%) directly by KWK. Utility charges incurred at the
other two (2) meter locations will be paid directly by KGS.



ARTICLE 5

Lake Arlington Area Pipelines
and Related Facilities




     Section 5.01. General. In an effort to operate the aforementioned pipeline
system in the most efficient and cost-effective manner, KWK agrees to allow



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KGS to operate these assets on their behalf. KGS will operate and manage the assets and
KWK shall compensate KGS, all as further described in this Article 5 and in Schedule II
attached hereto.




     Section 5.02. Labor.



     (a) Fifty percent (50%) of the fully burdened rate of one (1) pipeline
operator will be included in the monthly operating charge.



     (b) Three percent (3%) of the fully burdened rate of one (1) pipeline
administrator will be included in the monthly operating charge. This figure is
calculated based on historical One-Call data for the Contract Area.



     (c) Twelve and one half percent (12.5%) of the fully burdened rate of one (1)
pipeline supervisor will be included in the monthly operating charge. This figure
is calculated based on fifty percent (50%) of this individual’s time being equally
spent on the four (4) operating areas within the Contract Area.



     (d) Twenty five percent (25%) of the fully burdened rate of one (1) mechanic
will be included in the monthly operating charge. This figure includes all Support
Services as defined in Section 1.01. The intent of this calculation is to simplify
accounting of each individual’s time within the Support Services category.



     (e) Measurement technicians, Gas Analysts and Measurement Supervision will
be charged in accordance with the provisions of Section 6.02.



     (f) Any Contract Labor performed on the pipelines or related facilities will
be sourced by KGS, coded in accordance with KWK’s well coding system and billed
directly to KWK.



     Section 5.03. Materials.



     (a) All material goods necessary to the safe and efficient operation of the
pipelines and related facilities will be sourced by KGS employees, received
onsite, coded in accordance with KWK’s well coding system and direct billed to KWK
by the suppliers.



     (b) Pipeline chemicals, maintenance activities, safety and environmental charges
will be billed to KWK at fifty percent (50%) of the total invoiced amount when such
activity occurs in rights of way containing lines owned by both parties.



     (c) Pipeline pipe, valves and fittings will be sourced by KGS employees,
received onsite, coded as per KWK’s well coding system and direct billed to KWK by
the suppliers.



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ARTICLE 6

Measurement




     Section 6.01. General. In an effort to maintain the accuracy of all
measurement points and reporting within the Contract Area, KWK agrees to allow KGS
to perform these measurement activities. KGS will operate and maintain the
measurement assets and KWK shall compensate KGS, all as further described in this
Article 6 and in Schedule II attached hereto.



     Section 6.02. Labor.



     (a) Sixty one percent (61%) of all measurement technicians employed on
October 1, 2010 will be billed at their fully burdened rate on a monthly
basis. This figure is calculated based on the physical meter count between KGS and
KWK in the Contract Area.



     (b) Sixty one percent (61%) of all measurement supervisors employed on October
1, 2010 will be billed at their fully burdened rate on a monthly basis. This
figure is calculated based on the historical allocation of company labor associated
with the physical meter count between KGS and KWK in the Contract Area.



     (c) Sixty one percent (61%) of the fully burdened rate of one (1) gas
analyst will be billed on a monthly basis. This figure is calculated based on
the historical allocation of company labor associated with the physical meter
count between KGS and KWK in the Contract Area.



     (d) Any Contract Labor utilized in conjunction with measurement activities,
including but not limited to gas sampling and analysis, will be direct billed to
KWK at sixty one (61%) of the total amount invoiced.



     Section 6.03. Materials. All material goods necessary to the safe and
efficient operation of KWK’s measurement system will be sourced by KGS employees,
received onsite, coded in accordance with KWK’s well coding system and direct billed
to KWK.



     Section 6.04. Quarterly Adjustments. In an effort to maintain an equitable
split of the charges associated with Measurement, both parties agree to meet
quarterly in order to verify and readjust, if necessary, the allocation of charges
outlined in Article 6.



ARTICLE 7

Miscellaneous




     Section 7.01. Performance Standard; Further Assurances. Each Party shall
perform its obligations under this Agreement in accordance with accepted industry
standards.



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     (a) Subject to the terms and conditions of this Agreement, the Parties will
use their commercially reasonable efforts to take, or cause to be taken, all
actions and to do, or cause to be done, all things necessary or desirable under
Applicable Law to carry out the provisions of this Agreement. Each Party agrees to
execute and deliver such other documents, certificates, agreements and other
writings and to take such other actions as may be necessary or desirable in order
to carry out expeditiously the provisions of this Agreement.



     Section 7.02. Indemnification; Claims. Each Party (the “Indemnifying Party”)
shall indemnify and hold harmless the other Party and its Affiliates, shareholders,
directors, officers, employees, agents, successors and permitted assigns (each, an
“Indemnified Party”) from and against all damage, loss, liability and expense
(including reasonable expenses of investigation and
reasonable attorneys’ fees and expenses in connection with any action, suit or
proceeding (whether involving a third party claim or a claim solely between the
Parties) but excluding any incidental, indirect or consequential damages, losses,
liabilities or expenses, and lost profits except to the extent any incidental,
indirect or consequential damage, loss, liability or expense, or lost profit is
claimed by a third party) (“Damages”) incurred or suffered by such Indemnified Party
that arises out of or relates to (i) any Pipeline owned by the Indemnifying Party or
the Indemnifying Party’s operation thereof or (ii) any act or omission that
constitutes gross negligence or willful misconduct by the Indemnifying Party in
connection with the performance of its obligations under this Agreement (other than
the obligations pursuant to Section 2.02 or Section 2.03, as the case may be, the
remedies for breaches of which are governed by Section 2.02(c) and Section 2.03(c),
respectively). Notwithstanding the foregoing, no Party shall have any
indemnification obligation pursuant to this Section 7.02(a) for any claim by the
other Party to the extent such claim results from or arises out of the gross
negligence or willful misconduct of the other Party.



     (a) The provisions of Sections 12.03 and 12.04 of the Purchase Agreement
regarding third-party claim procedures and direct claim procedures shall apply
mutatis mutandis to any claim for indemnification pursuant to Section 7.02(a)
hereof.



     (b) The provisions of this Section 7.02 shall survive the termination of any
Gas Agreement or any provision of this Agreement.



     Section 7.03. Notices. All notices, requests and other communications to any
Party hereunder shall be in writing (including facsimile transmission) and shall be
given,



     if to KGS, to:


Quicksilver Gas Services GP LLC

717 Texas
Avenue, Suite 3150

Houston, Texas 77002




13









 







Attention: Robert G. Phillips

Facsimile No.: 832-519-2250




     if to KWK, to:


Quicksilver
Resources Inc.
806 Cherry
Street
Suite 3700, Unit 19
Fort
Worth, TX 76102
Facsimile No.:
817-665-5021



or such other address or facsimile number as such Party may hereafter specify in writing
for the purpose by notice to the other Parties. All such notices, requests and other
communications shall be deemed duly given when delivered personally (including by courier
or overnight courier with confirmation), via facsimile (with confirmation) or
delivered by an overnight courier (with confirmation), if, in any such case, confirmation
is obtained prior to 5 p.m. in the place of receipt and such day is a Business Day.
Otherwise, any such notice, request or communication shall be deemed not to have been
received until the next succeeding Business Day.




     Section 7.04. Amendments and Waivers. Any provision of this
Agreement may be amended or waived if, but only if, such amendment or waiver is in writing
and is signed, in the case of an amendment, by each Party, or in the case of a waiver, by
the Party against whom the waiver is to be effective.



     (a) No failure or delay by any Party in exercising any right, power or
privilege hereunder shall operate as a waiver thereof nor shall any single or
partial exercise thereof preclude any other or further exercise thereof or the
exercise of any other right, power or privilege. Except as otherwise provided
herein, the rights and remedies herein provided shall be cumulative and not
exclusive of any rights or remedies provided by law.



     Section 7.05. Successors and Assigns. The provisions of this Agreement shall
be binding upon and inure to the benefit of the Parties and their respective
successors and permitted assigns; provided that no Party may assign, delegate or
otherwise transfer any of its rights or obligations under this Agreement without
the consent of each other Party; provided, however, that notwithstanding the
foregoing, each Party may assign all or any portion of this Agreement to any
subsidiary or Affiliate of such Party provided that no such assignment by such
Party shall in any way affect such Party’s obligations or liabilities under this
Agreement.



     Section 7.06. Governing Law. This Agreement shall be governed by and
construed in accordance with the law of the State of Texas, without regard to the
conflicts of law rules thereof.



14









 





     Section 7.07. Jurisdiction. The Parties agree and consent that any suit,
action or proceeding seeking to enforce any provision of, or based on any matter
arising out of or in connection with, this Agreement or the transactions
contemplated hereby shall be subject to the exclusive jurisdiction of any federal or
state court located in Tarrant County, Texas (and, in each case, of the appropriate
appellate courts therefrom), and irrevocably waive, to the fullest extent permitted
by law, any objection that they may now or hereafter have to the laying of the venue
of any such suit, action or proceeding in any such court or that any such suit,
action or proceeding brought in any such court has been brought in an inconvenient
forum. Process in any such suit, action or proceeding may be served on any Party
anywhere in the world, whether within or without the jurisdiction of any such court.
Without limiting the foregoing, each Party agrees that service of process on such
Party as provided in Section 7.03 shall be deemed effective service of process on
such Party.



     Section 7.08. WAIVER OF JURY TRIAL. EACH OF THE PARTIES HEREBY IRREVOCABLY
WAIVES ANY AND ALL RIGHT TO TRIAL BY
JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATED TO THIS AGREEMENT OR
THE TRANSACTIONS CONTEMPLATED
HEREBY.



     Section 7.09. Counterparts; Effectiveness; Third Party Beneficiaries. This
Agreement may be signed in any number of counterparts, each of which shall be an
original, with the same effect as if the signatures thereto and hereto were upon
the same instrument. This Agreement shall become effective when each Party shall
have received a counterpart hereof signed by the other Parties. Until and unless
each Party has received a counterpart hereof signed by the other Parties, this
Agreement shall have no effect and no Party shall have any right or obligation
hereunder (whether by virtue of any other oral or written agreement or other
communication). No provision of this Agreement is intended to confer any rights,
benefits, remedies, obligations, or liabilities hereunder upon any Person other
than the Parties and their respective successors and permitted assigns.



     Section 7.10. Entire Agreement. This Agreement constitutes the entire
agreement between the Parties with respect to the subject matter of this Agreement
and supersedes all prior agreements and understandings, both oral and written,
between the Parties with respect to the subject matter of this Agreement.



     Section 7.11. Severability. If any term, provision, covenant or restriction
of this Agreement is held by a court of competent jurisdiction or other Governmental
Authority to be invalid, void or unenforceable, the remainder of the terms,
provisions, covenants and restrictions of this Agreement shall remain in full force
and effect and shall in no way be affected, impaired or invalidated so long as the
economic or legal substance of the transactions contemplated hereby is not affected
in any manner materially adverse to any Party. Upon such a determination, the
Parties shall negotiate in good faith to modify this Agreement so as to effect the
original intent of the Parties as closely as possible in an



15









 




acceptable manner in order that the transactions contemplated hereby be
consummated as originally contemplated to the fullest extent possible.




[Remainder of page intentionally left blank; next page is signature page]



16









 





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



	 	 	 	 	 
	 	QUICKSILVER RESOURCES INC.

 	 
	 	By:  	/s/ Glenn Darden
 	 
	 	 	Name:  	Glenn Darden  	 
	 	 	Title:  	President and Chief
Executive Officer 	 
	 	 	 	 	 
	 	QUICKSILVER GAS SERVICES LP

 	 
	 	By:  	Quicksilver Gas Services GP LLC,

its general partner
 	 



	 	 	 	 	 
	 	By:  	
 /s/ Robert G. Phillips	 
	 	 	Name:  	 Robert G. Phillips	 
	 	 	Title:  	 President	 
	 
	 	QUICKSILVER GAS SERVICES GP LLC

 	 
	 	By:  	
 /s/ Robert G. Phillips	 
	 	 	Name:  	 Robert G. Phillips	 
	 	 	Title:  	 President	 
	 



[Signature page to Joint Operating Agreement]





 









 








Schedule I

IT, Software, License, Communication




(Attached)




 











 





KGS IT Provided by Quicksilver Resources Inc. as part of the Joint Operating Agreement




	 	 	 	 	 	 	 
	 	 	Product/ Vendor/	 	 	 	End State
	Business Function	 	Supplier	 	Description	 	Group
	SCADA

	 	Cygnet
	 	Well RTU Data Collection of
production

data and statistics. Collects
custody

transfer qualified data for revenue

settlement & provides remote well site

monitoring, control & ESD
	 	JOA
	 
	 	 	 	 	 	 
	RTU configuration
software

	 	Bristol configuration

software
	 	3rd party software
	 	JOA
	 
	 	 	 	 	 	 
	Field Wireless

	 	Freewave Cellular
	 	Meter RTU communications provided by

Freewave radios & in some instances

	 	JOA
	 

	 	 	 	via cellular modems in support of

SCADA system	 	 
	 
	 	 	 	 	 	 
	Radio configuration

	 	Freewave utility
	 	3rd party software
	 	JOA
	 
	 	 	 	 	 	 
	Generation of volume

allocations and revenue


	 	Quorum Business

Solutions
	 	KWK retaining ownership of license as

of close, KGS will be responsible for any

	 	JOA
	interfaces (TIPS)

	 	 	 	incremental license expense.	 	 
	 
	 	 	 	 	 	 
	RTU configuration
software

	 	PCCU
	 	For Totalflow RTUs
	 	JOA






 









 






Schedule II

Operating Costs




	 	 	 	 	 	 	 
	 	 	 	 	LAKE	 	 
	 	 	ALLIANCE	 	ARLINGTON	 	COMMENTS
	 
	 	 	 	 	 	 
	LABOR
	 	 	 	 	 	 
	Mechanic

	 	0 FTE
	 	0 FTE	 	 
	 
	 	 	 	 	 	 
	Pipeline Operator

	 	50.0% x 1 FTE
	 	50.0% x 1 FTE
	 	1 P/L Operator is evenly split

between Lake Arlington & Alliance
	 
	 	 	 	 	 	 
	Pipeline Administration

	 	36.0% x 1 FTE
	 	3.0% x 1 FTE
	 	50% total of 1 FTE Pipeline

Administrator split based on historic

One Call activity levels
	 
	 	 	 	 	 	 
	 

	 	 	 	 	 	
	Pipeline Supervision

	 	12.5% x 1 FTE
	 	12.5% x 1 FTE
	 	50% total of 1 FTE Pipeline

Supervisor; evenly split across the

Contract Area
	 
	 	 	 	 	 	 
	Plant Superintendent

	 	0 FTE
	 	0 FTE
	 	25% total of 1 FTE Plant

Superintendent to cover AH
	 
	 	 	 	 	 	 
	Support Services

	 	25% x 1 FTE
	 	25% x 1 FTE
	 	Includes HSE, Purchasing, I&E

Technicians and I&E Management;

billed at 1 FTE Mechanic rate
	 
	 	 	 	 	 	 
	Measurement
Technician

	 	(see

measurement

sec)
	 	(see measurement

sec)
	 	(see measurement sec)
	 
	 	 	 	 	 	 
	Gas Analyst

	 	(see

measurement

sec)
	 	(see measurement

sec)
	 	(see measurement sec)
	 
	 	 	 	 	 	 
	Measurement
Supervision

	 	(see

measurement

sec)
	 	(see measurement

sec)
	 	(see measurement sec)
	 
	 	 	 	 	 	 
	Contract Labor

	 	direct billed to
KWK
	 	direct billed to
KWK
	 	direct billed to KWK
	 
	 	 	 	 	 	 
	MATERIALS
	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	Plant Inlet Separation

	 	N/A
	 	N/A
	 	N/A
	 
	 	 	 	 	 	 
	Plant Gas Compression

	 	N/A
	 	N/A
	 	N/A
	 
	 	 	 	 	 	 
	Plant Repair & Overhaul

	 	N/A
	 	N/A
	 	N/A
	 
	 	 	 	 	 	 
	Plant Glycol Dehy

	 	N/A
	 	N/A
	 	N/A
	 
	 	 	 	 	 	 
	Plant Communications

	 	N/A
	 	N/A
	 	N/A
	 
	 	 	 	 	 	 
	Plant Pipe, Valves & Fittings

	 	N/A
	 	N/A
	 	N/A
	 
	 	 	 	 	 	 
	Plant Buildings &

	 	N/A
	 	N/A
	 	N/A






 









 






	 	 	 	 	 	 	 
	 	 	 	 	LAKE	 	 
	 	 	ALLIANCE	 	ARLINGTON	 	COMMENTS
	 
	 	 	 	 	 	 
	LABOR
	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	Grounds
	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	Plant Utility
System

	 	N/A
	 	N/A
	 	N/A
	 
	 	 	 	 	 	 
	Plant Safety &
Environmental

	 	N/A
	 	N/A
	 	N/A
	 
	 	 	 	 	 	 
	Pipeline
Chemicals

	 	50.0% actual
expenses
	 	50.0% actual
expenses
	 	50.0% actual expenses
	 
	 	 	 	 	 	 
	Pipeline Pipe,
Valves & Fittings

	 	as needed
	 	as needed
	 	as needed
	 
	 	 	 	 	 	 
	Pipeline
Maintenance
Activities

	 	50.0% actual
expenses
	 	50.0% actual
expenses
	 	50.0% actual expenses
	 
	 	 	 	 	 	 
	Pipeline Safety &
Environmental

	 	50.0% actual
expenses
	 	50.0% actual
expenses
	 	50.0% actual expenses