PUT/CALL AGREEMENT
This PUT/CALL AGREEMENT is entered into as of April 9, 1998 by and
between Mercury Exploration Company, a Texas corporation ("MERCURY"), and
Trust Company of the West, in the capacity set forth on the signature page
hereto ("TCW").
WHEREAS, Quicksilver Energy, L.C., a Michigan limited liability
company ("QELC"), Mercury and TCW are parties to an Agreement and Plan of
Reorganization and Merger, dated as of March 31, 1998, by and between QELC,
Mercury, TCW, Quicksilver Resources Inc., a Delaware corporation ("QRI"), and
the other parties listed on the signature pages thereto (the "REORGANIZATION
AGREEMENT"), whereby QRI has agreed to issue, as of the date hereof, 13,000
shares (the "SHARES") of Common Stock, par value $.01 per share, of QRI to
TCW;
WHEREAS, pursuant to SECTION 5.1 of the Reorganization Agreement,
QELC, Mercury and TCW are required to execute and deliver this Put/Call
Agreement relating to the Shares as a condition to the closing of the
transactions contemplated by the Reorganization Agreement.
NOW, THEREFORE, for and in consideration of the mutual covenants
contained herein and other good and valuable consideration the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
Section 1.1. PUT RIGHT OF TCW--MSR MERGER. If QRI does not
consummate the MSR Merger (as defined below) on or before December 31, 1998,
then TCW shall automatically have the right, exercisable at its option at any
time from and after January 1, 1999 through July 10, 1999, to sell to
Mercury, and Mercury shall be obligated to purchase and pay for, all of the
Shares for an aggregate cash purchase price (the "Put Price") equal to the
sum of (a) $10,000,000 plus (b) an amount equal to interest accruing on
$10,000,000 at the rate of 12.25% per annum, compounded quarterly from the
date hereof to and including the date the Put Price is paid by wire transfer
of immediately available funds to TCW. TCW shall exercise the foregoing
option by delivering a written notice of such exercise to Mercury at the
address set forth below. As used herein, "MSR MERGER" shall mean a merger or
similar business combination between QRI and MSR Exploration Ltd., a Delaware
corporation ("MSR"), whereby (i) the Shares are of a class that become, or
are exchanged for an amount or number of shares of stock (which is approved
by TCW in its sole and absolute discretion) of the surviving entity in such
merger or business combination which are of a class that are, publicly traded
securities listed on the New York Stock Exchange, Nasdaq National Market or
American Stock Exchange; (ii) the Registration Rights Agreement dated as of
the date hereof between QRI and TCW concerning stock of QRI held by TCW shall
be assumed by or survive, as applicable, in its entirety as an obligation of
the surviving entity and the other parties thereto immediately following such
merger or business combination; (iii) the Stockholders Agreement dated as of
the date hereof between QRI, TCW, Mercury and the other parties listed on the
signature pages thereto shall be assumed by or survive, as applicable, in its
entirety as an obligation of the surviving entity and the other parties
thereto immediately following such merger or business combination; and (iv)
the other terms of such merger or business consolidation are approved by TCW
in its sole and absolute discretion. If QRI shall consummate a merger
transaction with MSR the specific terms of which are approved in writing in
advance by TCW, the MSR Merger shall be deemed to have been consummated for
the purposes of the first sentence of this Section 1.1 notwithstanding that
the terms of such merger shall not comply with all of the provisions of the
immediately preceding sentence.
Section 1.2. PUT RIGHT OF TCW--YEARS 8 THROUGH 10. On and after
April 9, 2006, TCW shall automatically have the right, exercisable at its option
at any time beginning on April 9, 2006 and ending at 11:59 p.m., Los Angeles
time on October 9, 2008, to sell to Mercury, and Mercury shall be obligated to
purchase and pay for, up to 4,333 of the Shares (as adjusted as provided below)
for an aggregate cash purchase price of $769.24 per share (as adjusted as
provided below). Likewise, on and after April 9, 2007, TCW shall automatically
have the right, exercisable at its option at any time beginning on April 9, 2007
and
ending at 11:59 p.m., Los Angeles time on October 9, 2008, to sell to
Mercury, and Mercury shall be obligated to purchase and pay for, up to an
additional 4,333 of the Shares (as adjusted as provided below) for an
aggregate cash purchase price of $769.24 per share (as adjusted as provided
below). Likewise, on and after April 9, 2008, TCW shall automatically have
the right, exercisable at its option at any time beginning on April 9, 2008
and ending at 11:59 p.m., Los Angeles time on October 9, 2008, to sell to
Mercury, and Mercury shall be obligated to purchase and pay for, up to an
additional 4,334 of the Shares (as adjusted as provided below) for an
aggregate cash purchase price of $729.23 per share (as adjusted as provided
below). TCW shall exercise the foregoing options by delivering a written
notice of such exercise to Mercury at the address set forth below.
Section 1.3. CALL RIGHT OF MERCURY. During the period commencing
on October 9, 1999 and ending on and including the earlier of (a) the sixth
anniversary of the closing date of the MSR Merger, or (b) December 31, 2005
so long as there shall not be outstanding any uncured breach by Mercury or
any Affiliate of Mercury of any material obligation or duty to TCW under any
Royalty Documents (as defined in the Reorganization Agreement), Mercury shall
have the right, at its option, to purchase from TCW and pay for, and TCW
shall be obligated to sell to Mercury, all of the Shares, other than shares
that have been sold by TCW or by its Affiliates in either case in an arms'
length transaction, for a cash purchase price equal to that amount necessary
to cause TCW to receive on the date of purchase a nominal 25% cash-on-cash
internal rate of return on $10,000,000 from the date hereof to the date of
receipt of such cash payment. A nominal 25% cash-on-cash internal rate of
return shall be deemed to have been received on such amount when the
aggregate of the net present values as of the date hereof of Cash Proceeds
(as defined below) actually received after the date hereof by TCW or the
Grantee under the Royalty Documents (as defined in the Reorganization
Agreement) is equal to or greater than $10,000,000. In calculating such net
present values, Cash Proceeds received shall be discounted quarterly using
the discount factors set forth on Schedule 1 hereto. As used herein, Cash
Proceeds shall include (1) all dividends and distributions received by TCW
with respect to the Shares, (2) the net cash sales proceeds received by TCW
or its Affiliates (after deduction of all commissions and other costs of sale
including transaction costs) from the sale of any Shares to a party in an
arms' length sale and (3) 50% of all amounts received as (a) proceeds of the
overriding royalties granted and conveyed in the Royalty Conveyance (as
defined below) by TCW or the Grantee under the Royalty Documents or any
assignee thereof in a Permitted Transfer (as defined in the Stockholders
Agreement) (a "Permitted Assignee") but not any other assignee thereof during
and with respect to the period from and after the date hereof to the date of
purchase or (b) net cash sales proceeds received by TCW, the Grantee under
the Royalty Documents or any Permitted Assignee (after deduction of all
commissions and other costs of sale including transaction costs) from the
sale of any of the overriding royalties granted and conveyed in the Royalty
Conveyance. Mercury shall exercise the foregoing option by delivering a
written notice of such exercise to TCW at the address set forth below. Any
sale of any Shares by TCW or by its Affiliates in either case in an arms'
length transaction shall result in such Shares that are sold no longer being
subject to Mercury's right to purchase hereunder; PROVIDED, HOWEVER, that
prior to any sale of Shares by TCW prior to October 9, 1999, TCW shall give
Mercury written notice of TCW's intent to sell such Shares and Mercury shall
have the right, at its option, for a period of 10 days after the date of such
notice to purchase from TCW and pay for the Shares for a cash purchase price
per share equal to the difference of (a) $1,057.69 minus (b) the quotient of
(i) 50% of the sum of (A) the amounts received by TCW, the Grantee or a
Permitted Assignee (1) as proceeds of the overriding royalties granted and
conveyed in the Royalty
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Conveyance during and with respect to the period from and after the date
hereof to the date of such purchase or (2) net cash sales proceeds received
by TCW, Grantee or a Permitted Assignee (after deduction of all commissions
and other costs of sale including transaction costs) from the sale of any of
the overriding royalties granted and conveyed in the Royalty Conveyance prior
to the date of such purchase plus (B) the amounts (the "Projected XXX
Amount") projected to be received by TCW, the Grantee or a Permitted Assignee
as proceeds of the overriding royalties granted and conveyed in the Royalty
Conveyance during the period from the date of such purchase to October 9,
1999 which Projected XXX Amount shall be determined by the mutual agreement
of Mercury and TCW or, if such parties are unable to agree, by the
independent engineer preparing the latest annual engineering report covering
the properties burdened by the Royalty Conveyance pursuant to the
Stockholders Agreement (as defined in the Reorganization Agreement) using the
same assumptions and parameters as used in such annual engineering report,
divided by (ii) 13,000 (as adjusted to reflect an adjustment to the number of
Shares as provided in Section 1.5 below). In the event that Mercury and TCW
shall be unable to agree on the Projected XXX Amount or the independent
engineer in unable to determine such amount by the date of the scheduled
closing of the sale of such Shares to Mercury pursuant to the preceding
sentence, such sale shall nevertheless close on the scheduled closing date
using as the Projected XXX Amount for the purpose of calculating the amount
payable at closing the amount estimated by TCW in good faith to be the
Projected XXX Amount and there shall be a cash adjustment between the parties
as appropriate within three (3) business days of the final determination of
the Projected XXX Amount either by the mutual agreement of Mercury and TCW
or, if such parties are unable to agree, by the independent engineer. As
used herein the term "Royalty Conveyance" shall mean the Royalty Conveyance
as referred to and amended by the Amendment to Royalty Conveyance dated as of
the date hereof.
Section 1.4. CLOSING. Closing of the sale and purchase of any of
the Shares pursuant to any provision of this Put/Call Agreement shall take
place within 10 calendar days after the date of the notice of the exercise of
a party's option to sell or purchase, as the case may be, such Shares, at the
offices of TCW, 000 Xxxxx Xxxxxxxx Xxxxxx, Xxx Xxxxxxx, Xxxxxxxxxx, at 10:00
a.m. local time, or at such other place and time as the parties mutually
agree. There shall be delivered at such closing, against payment by wire of
same day funds of the full purchase price, the certificate or certificates
representing such Shares duly endorsed in blank.
Section 1.5. ADJUSTMENTS TO SHARES. In the event that the Shares
are exchanged for other securities of QRI or of a surviving entity resulting
from a merger or other business combination involving QRI or any successor to
QRI, then reference to the "Shares" herein shall refer to such other
securities. In addition, for purposes of Sections 1.2 and 1.3, should QRI or
any such surviving entity, combine, split or otherwise reclassify its capital
stock, then appropriate adjustment shall be made hereunder to equitably
reflect such combination, split or reclassification.
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Section 1.6. MISCELLANEOUS.
(a) MODIFICATION OR AMENDMENT. This Put/Call Agreement may be
modified or amended only by the mutual written consent of each of the parties
hereto.
(b) ATTORNEYS' FEES. In the event any amounts owing by party
hereunder are not paid when due or a party otherwise breaches its obligations
hereunder, such party hereby promises to pay all costs of enforcement and
collection, including but not limited to, reasonable attorneys' fees, whether
or not such enforcement and collection includes the filing of a lawsuit. For
the purpose of this Put/Call Agreement, the term "attorneys' fees" shall mean
the reasonable fees and expenses of counsel to the non-breaching party which
may include printing, photostating, duplicating and other expenses, air
freight charges, and reasonable fees billed for law clerks, paralegals,
librarians and others not admitted to the bar but performing services under
the supervision of an attorney and shall also include, without limitation,
all such reasonable fees and expenses incurred with respect to appeals,
arbitrations and bankruptcy proceedings, and whether or not any action or
proceeding is brought with respect to the matter for which said fees and
expenses were incurred.
(c) COUNTERPARTS. For the convenience of the parties hereto, this
Put/Call Agreement may be executed in any number of counterparts, each such
counterpart being deemed to be an original instrument, and all such
counterparts shall together constitute the same agreement.
(d) GOVERNING LAW. This Put/Call Agreement shall be governed by
and construed in accordance with the laws of the State of Texas without
giving effect to the principles of conflict of laws thereof.
(e) NOTICES. Any notice, request, instruction or other document
to be given hereunder by any party to the others shall be in writing and
shall be deemed to have been duly given on the next business day after the
same is sent, if delivered personally or sent by telecopy or overnight
delivery, or five calendar days after the same is sent, if sent by registered
or certified mail, return receipt requested, postage prepaid, as set forth
below, or to such other persons or addresses as may be designated in writing
in accordance with the terms hereof by the party to receive such notice.
If to Mercury:
0000 Xxxxxxxxxxxx Xxxxxx
Xxxxx Xxxxx, Xxxxx 00000
Attention: Xxxxx Xxxxxx
Telecopier: (000) 000-0000
With a copy to:
Xxxxxx & Hanger L.L.P.
0000 Xxxxxxx Xxxxx
000 Xxxxxx Xxxxxx
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Xxxxx Xxxxx, Xxxxx 00000
Attention: Xxxxx Xxxxx, Esq.
Telecopier: (000) 000-0000
If to TCW:
Trust Company of the West
000 Xxxxx Xxxxxxxx Xxxxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxxxx X. Xxxxxxx
Telecopier: (000) 000-0000
and
TCW Asset Management Company
2175 First Interstate Bank Plaza
0000 Xxxxxxxxx
Xxxxxxx, Xxxxx 00000
Attention: Xxxxxx X. Xxxxxxxxxx and
Xxxx X. XxxXxxxx
Telecopier: (000) 000-0000
with a copy to:
Milbank, Tweed, Xxxxxx & XxXxxx
000 Xxxxx Xxxxxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxxx X. Xxxx, Esq.
Telecopier: (000) 000-0000
(f) ASSIGNMENT. This Put/Call Agreement and the rights and
obligations of Mercury shall not be assignable, by operation of law or
otherwise, or delegable; PROVIDED, that (i) TCW may assign this Agreement in
whole or in part to any transferee of the Shares as long as only one entity
retains the right to approve the terms of the MSR Merger under the last
sentence of Section 1.1 hereof and (ii) Mercury may assign its rights under
Section 1.3.
[Signature Page Follows]
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[Signature Page to Put/Call Agreement]
IN WITNESS WHEREOF, the parties hereto have entered into this
Put/Call Agreement as of the date first written above.
MERCURY EXPLORATION COMPANY
By: /s/ Xxxxx Xxxxxx
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Name: Xxxxx Xxxxxx
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Title: Vice President
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TRUST COMPANY OF THE WEST, a California trust
company, as Sub-Custodian for Mellon Bank for the
benefit of Account No. CPFF 869-3062
By: TCW ASSET MANAGEMENT COMPANY, a California
corporation, as Investment Manager under that
certain Agreement, dated as of June 13, 1994,
between TCW Asset Management Company and
Xxxxxx Xxxxxxx Group, Inc.
By: /s/ Xxxxxx X. Xxxxxxxxxx
--------------------------------------
Name: Xxxxxx X. Xxxxxxxxxx
------------------------------------
Title: Managing Director
-----------------------------------
By: /s/ Xxxx X. XxxXxxxx
--------------------------------------
Name: Xxxx X. XxxXxxxx
------------------------------------
Title: Senior Vice President
-----------------------------------
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