Exhibit 10.2
TRANSITION SERVICES
AGREEMENT
This Transition
Services Agreement (this “ Agreement ”) is made
and entered into this 1 st day of November, 2007 (the
“ Closing Date ”), by and between Quicksilver
Resources Inc., a Delaware corporation (“ Quicksilver
”), and BreitBurn Operating L.P., a Delaware limited
partnership (“ BreitBurn ”).
RECITALS
1.
Quicksilver and BreitBurn are parties to that certain Contribution
Agreement dated as of September 11, 2007 (as amended, the
“ Contribution Agreement ”). Capitalized terms
not otherwise defined herein shall have the same meanings ascribed
thereto in the Contribution Agreement.
2.
In order to facilitate the orderly transfer of the Interests from
Quicksilver to BreitBurn, the parties recognize that it is
necessary and desirable for Quicksilver to provide to BreitBurn and
the Acquired Companies certain transition services in connection
with the Oil and Gas Properties for a limited period of time after
the Closing Date, pursuant to the terms of this Agreement.
3.
For purposes of this Agreement, the Marketing Services, Land
Administration Services and Accounting Services (each as defined
below) shall be collectively referred to as the “
Services .”
NOW, THEREFORE, in
consideration of the premises, the covenants set forth herein, and
other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, Quicksilver and BreitBurn agree
as follows:
TERMS
AND CONDITIONS
1.
Term. This Agreement shall commence on the Closing Date and
terminate on the earlier of (i) March 31, 2008 (provided,
if the Closing occurs after November 1, 2007, the number of
days from, and including, November 1, 2007 to, and excluding,
the Closing Date shall be added to March 31, 2008 to establish
the new date covered by this clause (i)) or (ii) the date on
which BreitBurn has assumed responsibility for all of the Services
pursuant to Section 3. This Agreement may be extended or
terminated upon mutual written agreement of the Parties. The date
on which this Agreement terminates shall be hereinafter referred to
as the “ Termination Date .” With respect
to each Service, the “ Transition Period ” shall
be the period of time between the Closing Date and the earlier of
(i) the Termination Date or (ii) the date on which
BreitBurn assumes responsibility for such Service pursuant to
Section 3. Termination of this Agreement in whole or in
part shall not (x) release any obligations, liabilities,
rights and remedies arising out any breach of, or failure to comply
with, this Agreement occurring prior to such termination or
(y)
release, impair or affect the covenants and agreements contained in
Sections 8, 12, 15, 16 and 17, each of which shall survive such
termination and continue in full force and effect.
2.
Fees. In consideration for the Land Administration Services and
the Accounting Services to be provided by Quicksilver pursuant to
this Agreement, on the date hereof and on the first day of each
calendar month thereafter during the term of this Agreement,
BreitBurn shall pay Quicksilver a monthly fee in the amount of
$30,000 for the Land Administration Services and $220,000 for the
Accounting Services. If Quicksilver’s obligation to provide
Land Administration Services or Accounting Services ceases prior to
the Termination Date, then BreitBurn’s obligation to pay the
aforesaid fee for such category of Services shall terminate on the
same date as such obligation of Quicksilver ceases. If this
Agreement commences on a day other than the first day of a calendar
month or this Agreement or Quicksilver’s provision of Land
Administration Services or Accounting Services terminates on a day
other than the last day of a calendar month, then the monthly fee
to be paid to Quicksilver for each such month (or the monthly fee
for such terminated category of Services for such month) shall be
prorated. In addition, in consideration for the Marketing Services
to be provided by Quicksilver pursuant to this Agreement, BreitBurn
shall pay Quicksilver a monthly fee determined by multiplying the
total number of mcfe sold during the previous month pursuant to the
Marketing Services multiplied by $0.02. By way of clarification,
the Marketing Services shall not cover any Hydrocarbons sold
pursuant to the Subject Contracts referenced in
Section 6.23(d) of the Contribution Agreement.
3.
Services. The Services to be provided by Quicksilver to
BreitBurn, the Acquired Companies and their respective Affiliates
pursuant to this Agreement are as follows:
(a)
Land Administration Services. From the Closing Date through
the Termination Date (or until such earlier date as BreitBurn
notifies Quicksilver in writing that BreitBurn assumes
responsibility for such land administration activities for the Oil
and Gas Properties), Quicksilver shall provide the following lease,
division order, and land administration services with respect to
the Oil and Gas Properties (collectively, the “ Land
Administration Services ”), except to the extent that a
third party operator is responsible for such matters:
(i)
administering and maintaining in force all Oil and Gas
Properties;
(ii)
Maintaining and updating all lease, ownership, contract, and
property records and databases relating to the Oil and Gas
Properties;
(iii)
Maintaining and updating all royalty payment and division order
reports and databases;
(iv)
Identifying, paying, and appropriately invoicing all rentals,
surface damage payments, right of way payments, shut in payments,
and other payments required by the Oil and Gas Properties;
(v)
Maintaining all land, contract, division of interest, lease files,
and other files relating to the subject land administration
functions; and
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(vi)
Such other administrative services as Quicksilver
may reasonably deem necessary or advisable to administer or
maintain the Oil and Gas Properties including with respect to
suspense accounts.
(b)
Accounting Services. From Closing Date through the
Termination Date (or until such earlier date as BreitBurn notifies
Quicksilver in writing that BreitBurn assumes responsibility for
such accounting activities for the Oil and Gas Properties),
Quicksilver shall provide the following financial, revenue, and
expense accounting services relating to the Oil and Gas Properties
(collectively, the “ Accounting Services
”):
(i)
Every month, Quicksilver and BreitBurn shall identify all cash,
checks or other proceeds received and expenses paid which relate to
periods on or after the Effective Time. On or before thirty (30)
days after the end of every calendar month, Quicksilver shall
prepare a settlement statement indicating all such receipts and
disbursements during the previous calendar month. The form and
content of such statement shall be in substantially the same
form as the attached Exhibit A (the “ Monthly
Settlement Statement ”). On or before thirty (30) days
after the end of each calendar month, Quicksilver shall remit to
BreitBurn, the net amount calculated as set forth on the Monthly
Settlement Statement. All remittances shall be made by wire
transfer of immediately available funds to the account of BreitBurn
to such bank or account as may be specified by BreitBurn in
writing;
(ii)
Except to the extent that a third party operator is responsible for
such matters, Quicksilver shall perform all revenue accounting
functions relating to the Oil and Gas Properties including the
disbursement of revenue proceeds to all working interest, third
party, royalty and overriding royalty owners as well as all rental,
severance or production taxes, ad valorem or property taxes, and
right of way payments and any and all leasehold, minimum or advance
payments due in the normal course of business;
(iii)
Quicksilver shall comply with all state and federal regulatory
reporting and filing requirements, including any reports required
by the regulatory agencies;
(iv)
Except to the extent that a third party operator is responsible for
such matters, Quicksilver shall perform all expenditure
accounting functions relating to the Oil and Gas Properties
including the payment of all invoices and subsequent billing of
same to all working interest owners;
(v)
Within twelve (12) Business Days following the end of a calendar
month, Quicksilver shall provide BreitBurn with estimates of
production volumes, revenue, direct operating expenses, production
taxes and capital expenditures attributable to the Oil and Gas
Properties for the proceeding calendar month and any other such
information relating to the Oil and Gas
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Properties that the BreitBurn would need to
prepare accrual basis financial statements in accordance with
generally accepted accounting principles;
(vi)
Except to the extent that a third party operator is responsible for
such matters Quicksilver shall prepare monthly gas and oil
balancing and payout statements;
(vii)
Quicksilver shall provide information on property revenues,
expenses, taxes and capital expenditures to BreitBurn from
Quicksilver’s lease operating statements with each monthly
settlement. If available, this information will be provided to
BreitBurn electronically;
(viii)
Payroll administration services with respect to former Quicksilver
employees hired by BreitBurn which will be substantially similar to
the payroll administration services provided with respect to such
employees prior to the Closing Date; and
(ix)
Quicksilver shall continue to apply substantially the same
Sarbanes-Oxley related processes that Quicksilver has historically
utilized and Quicksilver shall use reasonable efforts to cooperate
with BreitBurn’s internal audit department in facilitating
the integration of such Sarbanes-Oxley related processes into
BreitBurn’s control processes.
For
the avoidance of doubt, the Accounting Services shall not include
the preparation of any income Tax Returns on behalf of BreitBurn or
any of the Transferred Companies.
(c)
Marketing Services . From Closing Date through the
Termination Date (or until such earlier date as BreitBurn notifies
Quicksilver in writing that BreitBurn assumes responsibility for
marketing activities for the Oil and Gas Properties), Quicksilver
shall provide marketing, transportation, gas control, gas
scheduling, and contract administration services as reasonably
requested by BreitBurn necessary to transport and sell the oil,
gas, and other production from the Oil and Gas Properties (the
“ Marketing Services ”). Notwithstanding
anything herein provided to the contrary, Quicksilver’s
obligation to provide the Marketing Services shall be conditioned
upon BreitBurn timely providing Quicksilver with written notice and
direction as to the quantity of oil, gas and other production from
the Oil and Gas Properties that should be nominated by Quicksilver
on behalf of BreitBurn as well as all other information required by
Quicksilver to perform the Marketing Services hereunder,
including, without limitation, written designation of the parties
to whom such production should be sold.
(d)
Scope of Services. The Marketing Services, Land
Administration Services and Accounting Services described above
shall be substantially the same as such marketing, land
administration and accounting services with respect to the Oil and
Gas Properties that Quicksilver provided for its own behalf (or on
behalf of the Acquired Companies or their Affiliates) for the
management of the Oil and Gas Properties prior to the Closing Date.
Notwithstanding anything to the contrary in this Agreement,
Quicksilver is not obligated to provide any Services that
Quicksilver did not perform with respect to the Oil and Gas
Properties for its own account (or the account of the Acquired
Companies) immediately prior to the Closing
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