MANAGEMENT AGREEMENT
THIS MANAGEMENT AGREEMENT (this "Agreement") is entered into effective as
of the Commencement Date (as hereinafter defined) by and between Mercury
Exploration Company, a Texas corporation ("Manager"), and Quicksilver Resources
Inc., a Delaware corporation (the "Company").
W I T N E S S E T H:
WHEREAS, Manager is primarily engaged in the business of providing
operations, accounting and management services relating to oil and gas assets
for MSR Exploration Ltd. ("MSR") and others and in the acquisition and ownership
of gas processing plants, gathering facilities and pipelines; and
WHEREAS, the Company is primarily engaged in the oil and gas business,
including the acquisition, development and exploration and production of oil and
gas properties; and
WHEREAS, the Company and MSR are entering into an Agreement and Plan of
Merger and Reorganization of even date herewith (the "Merger Agreement") whereby
MSR will be merged into the Company (the "Merger"); and
WHEREAS, the existing Management Agreement between the Manager and the
Company dated as of April 9, 1998 (the "April 1998 Management Agreement") will
terminate upon consummation of the Merger; and
WHEREAS, in order to reduce overhead and operating expenses and in an
effort to manage its affairs in a more cost effective and efficient manner, the
Company desires to retain the Manager to provide certain support services to the
Company, and the Manager desires to render such services to the Company, all
upon the terms and conditions hereinafter set forth;
NOW, THEREFORE, for and in consideration of the mutual covenants and
promises contained herein and other good and valuable consideration, the receipt
and sufficiency of which is hereby acknowledged, the parties hereto agree as
follows:
ARTICLE I
DEFINITIONS
Section 1.1 DEFINED TERMS. For the purpose of this Agreement, the
following terms shall have the meaning ascribed thereto below unless otherwise
specified or clearly required by the context in which such term is used:
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AFFILIATES. "Affiliates" means, with respect to any Person, a Person that
directly or indirectly through one or more intermediaries controls, is
controlled by, or is under common control with such Person, and the term
"control" shall mean the possession, directly or indirectly, of the power to
direct or cause the direction of the management, activities or policies of any
Person or entity, whether through the ownership of voting securities, by
contract, employment or otherwise.
AGREEMENT. "Agreement" means this Management Agreement, as modified from
time to time by any duly adopted amendments.
COMMENCEMENT DATE. "Commencement Date" means the date on which the Merger
occurs.
PERSON. "Person" means any of the following: an individual, corporation,
partnership, limited partnership, limited liability company, unincorporated
association, trust, estate, or other incorporated or unincorporated entity.
TERM OF AGREEMENT. "Term of Agreement" means the period from the
Commencement Date until this Agreement is terminated or otherwise expires
pursuant to Article XIV hereof.
Section 1.2 REFERENCES. Unless otherwise specified, the references herein
to "Sections", "Subsections" or "Articles" refer to the sections, subsections or
articles in this Agreement.
ARTICLE II
APPOINTMENT OF MANAGER
Section 2.1 APPOINTMENT. The Company hereby appoints the Manager to
perform the services hereinafter described ("Services") by and on behalf of,
and for the account of, the Company, pursuant to and as set forth in this
Agreement. The Company shall at all times have and retain ultimate control
over its business and operations.
Section 2.2 ACCEPTANCE. The Manager hereby accepts the appointment and
agrees to perform the duties and obligations herein imposed in a reasonable and
prudent manner, consistent with sound field practices and generally accepted
standards for similar services.
Section 2.3 LEGAL OWNERSHIP RETAINED IN THE COMPANY. The Manager shall
not take title to any properties owned of record or beneficially by the Company
during the Term of Agreement. Any addition to the assets of the Company
purchased, leased, or otherwise acquired with the Company's funds or securities
shall be acquired in the name of the Company.
Section 2.4 DUTIES RETAINED BY THE COMPANY. The Company shall remain
responsible for (i) making all decisions required of the Company under this
Agreement, (ii) such other
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duties as are not herein delegated to the Manager and (iii) authorizing (in
its discretion) and executing all agreements, contracts, and other documents
except as provided in Section 9.1.
ARTICLE III
STATUS OF THE MANAGER
Section 3.1 GENERAL. The Manager shall render Services hereunder as the
Company's agent to the extent specifically provided herein or as further
delegated from time to time by the Company and accepted in writing by the
Manager. The relationship created by this Agreement is one of principal and
agent, and nothing to the contrary shall be inferred from this Agreement.
ARTICLE IV
AUTHORITY AND RESPONSIBILITY OF THE MANAGER
Section 4.1 GENERAL. As agent for the Company, the Manager agrees to
perform the Services in a reasonable and prudent manner, consistent with sound
field practices and generally accepted standards for similar services . Except
as set forth in Sections 5.3 and 7.1, the Manager shall have no obligation to
advance funds for the account of the Company or to pay any sums of its own in
connection with the performance of the actions which it is authorized to take
hereunder. The Manager's management and activities under this Agreement shall
be specifically subject to the terms hereof and the general control, direction
and supervision of the Company.
Section 4.2 COMPLIANCE WITH LAWS. The Manager shall use reasonable best
efforts to ensure full compliance with federal, state and municipal laws,
ordinances, regulations and orders relative to the performance of the Services.
The Manager shall use reasonable best efforts to remedy any violation of any
such law, ordinance, rule, regulation or order which comes to its attention. If
the violation is one for which the Company might be subject to penalty, the
Manager shall promptly notify the Company of such violation to allow actions to
be made to remedy the violation, and the Manager shall transit promptly to the
Company a copy of any citation or other communication received by the Manager
setting forth any such violation.
Section 4.3 COMPLIANCE WITH OBLIGATIONS. The Manager, to the extent such
matters are within its control, shall use reasonable best efforts to cause
compliance with all terms and conditions contained in any contract, agreement,
judicial, administrative or governmental order affecting the operation of the
Company's properties including, but not limited to, joint operating agreements
and service contracts; provided, however, that, except as otherwise set forth
herein, the Manager shall not be required to make any payment or incur any
liability on account thereof. The Manager shall promptly notify the Company of
any violation of any covenant in such instruments or agreements.
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ARTICLE V
SERVICES
Section 5.1 PROVISION OF SERVICES. The Manager shall provide the
following Services to the Company, subject to the general approval and direction
of the Company:
(a) maintaining in good order the books and accounts, ledger and
records of the Company and performing all day-to-day accounting functions of the
Company, including, without limitation, matters related to paying, receiving,
and xxxxxxxx including joint interest xxxxxxxx, and assisting as requested by
the Company in the preparation of all requisite accounting reports and interim
financial statements of the Company, including balance sheets, statements of
operations, changes in stockholders' equities, and cash flow, and also assisting
the Company in coordinating with its independent accounting firm in the conduct
of annual financial audit reviews of the Company;
(b) assisting in the preparation of all reports, forms, documents,
certificates and other instruments required by the Securities and Exchange
Commission, and any national securities exchange on which the Company's
securities are traded, state securities commissions, federal, state and local
tax authorities, regulatory agencies, including federal and state energy
regulatory agencies, and other governmental bodies as required for the lawful
conduct of the Company's business;
(c) performing all of the services and other obligations for which
the Company or the Manager is obligated under operating agreements and other
similar contracts to which the Company or the Manager is a party and which
affect the operation of the Company's properties including, but not limited to,
the Management Agreement dated effective as of December 1, 1997 between the
Manager and MA Gas, LLC (the "MA Gas Agreement") and the Management Agreement
dated effective as of December 1, 1997 between Michigan Gas Partners, Limited
Partnership and MGP Gas LLC (the "MGP Gas Agreement") (the Company having
succeeded to the rights and obligations of Michigan Gas Partners, Limited
Partnership by merger).
In carrying out its duties hereunder, the Manager agrees that, to the
extent the Company has adequate funds available, the Manager will or it will
cause:
(i) a prudent operating and maintenance program designed to drill
and complete or abandon the Company's properties and all other operations to be
conducted on the Company's assets as would a reasonable and prudent operator and
in accordance with sound field practices;
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(ii) the Company's properties to be maintained and operated for the
production of oil and gas in a good and workmanlike manner and in accordance
with sound field practices, applicable operating agreements, contracts of
development, or similar instruments, none of which shall be superseded by this
Agreement, and, in all material respects, with all applicable laws, rules,
regulations, permits, orders, or decrees, except those being contested in good
faith and by appropriate proceedings (provided that no forfeiture or loss of the
Company's property or any part thereof shall result during the pendency or in
the resolution of such contest);
(iii) all rentals and royalties with respect to the Company's
properties to be paid;
(iv) all taxes, assessments, and governmental charges or levies and
all claims asserted or imposed upon the Company's properties that, if unpaid,
may become a lien upon the Company's properties to be paid prior to delinquency;
(v) all machinery, equipment, and facilities of any kind now or
hereafter located on the Company's properties necessary or useful in the
operation thereof or for the production of oil and gas therefrom, to be provided
and to be kept in good and effective operating condition, and all repairs,
renewals, replacements, additions, and improvements thereof or thereto needful
to such end, to be promptly made, all as would a reasonable and prudent operator
acting in accordance with sound field practices;
(vi) notice to be given to the Company of every material adverse
claim or demand made by any Person, affecting the Company's properties or of any
material proceedings instituted with respect thereto, and all reasonably
necessary and proper steps to be diligently taken to protect and defend the
Company's properties against any such adverse claim, demand, or proceeding, all
as would a reasonable and prudent operator;
(vii) the Company's properties to be kept free and clear of liens,
charges, and encumbrances of every character other than those consented to by
the Company;
(viii) insurance of the type and in the amounts not less than those
set forth in Exhibit A hereto to be carried for the Company at the Company's
expense; and
(ix) title opinions in form and substance satisfactory to the
Company to be rendered prior to conducting operations on any Company property
for which no prior satisfactory title opinion has been rendered.
Section 5.2 FEE. As compensation ("Fee") for its Services the Manager
will receive all compensation and overhead payments (XXXXX) to which the Manager
or the Company is entitled under existing or future operating agreements and
other contracts to which the Company or the Manager is a party and which relate
to the operation of the Company's properties, including, without limitation, the
MA Gas Agreement and the MGP Gas Agreement.
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Section 5.3 PAYMENT OF OUT-OF-POCKET EXPENSES. The Manager shall pay all
out-of-pocket expenses other than salaries and wages ("Expenses") of the Manager
and its employees, agents and consultants not reimbursed from another source
including the following: travel, food, lodging, entertainment and similar
expenses, reasonably necessary and incurred in the performance of the Services.
The Company shall reimburse the Manager, within thirty days after the end of
each month during the Term of Agreement, for all such Expenses paid by the
Manager on behalf of the Company in connection with the Services of the Manager
during such month.
ARTICLE VI
REQUIRED COMPANY APPROVAL
Section 6.1 REQUIRED COMPANY APPROVAL. The Company must specifically
approve the following matters before they are undertaken by the Manager for the
account of the Company, and, notwithstanding any other provisions hereof, none
of the following shall be undertaken without the Company's prior approval:
(a) the entering into of capital leases or making of expenditures
other than in the ordinary course of business in excess of $20,000 individually
or $100,000 annually in the aggregate;
(b) incurring any indebtedness for the account of the Company
except accounts payable in the ordinary course of performing the Services;
(c) the acquisition or disposition of any material asset with a
value in excess of $10,000;
(d) the execution of any contract whose term extends beyond one
year from its effective date;
(e) use of any of the Company's assets in any way for the
furtherance of business activities of any entity other than the Company or
unrelated to the business of the Company;
(f) the entering into of any agreement that provides for
liquidated damages against the Company in excess of $20,000 or any agreements
that provide in the aggregate for liquidated damages against the Company in
excess of $100,000; and
(g) any agreement, authorization for expenditure, or other
instrument binding the Company to do any of the foregoing.
Notwithstanding any provision of this Agreement to the contrary, the
Manager shall have no authority to take any action that will contravene the
Company's Certificate of Incorporation or Bylaws or result in a breach of, or be
in contravention of any obligation,
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representation, covenant or other agreement of the Manager or the Company
under any of the Basic Documents (as defined in the Agreement and Plan of
Reorganization and Merger dated March 31, 1998 by and among the Company, the
Manager, Quicksilver Energy, L.C., Michigan Gas Partners, Limited
Partnership, Trust Company of the West ("TCW"), and Joint Energy
Development Investments Limited Partnership ("JEDI") (the "Prior Merger
Agreement") or the Prior Merger Agreement.
ARTICLE VII
PERSONNEL ADMINISTRATION
Section 7.1 GENERAL. The Manager shall have in its employ or available to
it at all times during the Term of this Agreement a sufficient number of
personnel to enable it to properly and adequately perform the Services as herein
provided. All matters pertaining to the employment, supervision, compensation,
benefits, promotion and discharge of any employees or personnel of the Manager
are the responsibility of the Manager, which is in all respects the employer of
any such employees. All such employment arrangements are solely the Manager's
concern, and the Company shall have no liability or obligation to reimburse the
Manager with respect thereto.
Section 7.2 CONSULTANTS AND OTHERS. Except as otherwise provided herein,
the Manager shall have the power and authority to retain and pay as independent
contractors, on behalf of and for the account of the Company, contractors,
technical consultants, and others in connection with the performance of that
portion of the Services relating to the operation of the Company's properties
that are customarily performed by independent contractors (as opposed to
employees or personnel) of operators under joint operating agreements which
provide that the cost of independent contractors is reimbursable by working
interest owners under such agreements.
ARTICLE VIII
CASH MANAGEMENT
Section 8.1 CASH MANAGEMENT. The Manager shall maintain separate accounts
for the funds of the Company and shall not commingle the funds of the Company
with its own funds. The Manager shall direct all funds received for the Company
to be deposited into such separate accounts.
ARTICLE IX
CONTRACTS
Section 9.1 CONTRACTS. Subject to Section 6.1, the Services by the
Manager shall include negotiating, signing, administering and terminating
contracts, by and on behalf of the
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Company, in the ordinary course of the operation of the Company's properties.
Contracts that, by their terms, involve amounts in excess of $20,000
individually or $100,000 annually in the aggregate shall not be entered into
without the prior approval of the Company and if so approved shall be
executed by duly authorized officers of the Company.
Section 9.2 PURCHASES FOR THE ACCOUNT OF THE COMPANY.
(a) Subject to Section 6.1, day-to-day operation of the Company's
properties shall include the purchase (or lease) of such equipment, supplies and
other goods necessary for the efficient operation of the properties.
(b) Purchases shall be made only at reasonable costs pursuant to
the "prudent buyer" principle. The Manager is not a merchant, as that term is
defined in the Uniform Commercial Code, and makes no warranty, express or
implied, including, without limitation, that of fitness for a particular
purpose, for any item purchased for the operation of the Company's properties on
behalf of the Company.
(c) In order to facilitate the performance by the Manager of its
obligations hereunder, the Company agrees to make available, upon the request of
the Manager, such additional amounts as may be needed, in the good faith
judgment of the Manager, to perform the Services under the terms hereof.
Section 9.3 AFFILIATE TRANSACTIONS. The Manager shall not make or cause
the Company to make any contract with or purchase or sell goods or services to
or from the Manager or any Affiliate of the Manager except in accordance with
procedures established by the independent members of the Board of Directors of
the Company.
Section 9.4. The Manager shall not make or cause the Company to make any
contract that would have the effect of binding any Affiliate of the Company.
ARTICLE X
INDEMNITIES
Section 10.1 INDEMNIFICATION BY THE MANAGER. The Manager shall protect,
indemnify, defend and hold harmless the Company and its officers, directors,
stockholders and Affiliates from any and all threatened or actual claims,
demands, causes of action, suits, proceedings (formal or informal), losses,
damages, fines, penalties, liabilities, costs and expenses of any nature,
including attorneys' fees and court costs (collectively, "Damages"), sustained
or incurred by or asserted against the Company or its Affiliates by any person,
firm, corporation, governmental authority, partnership or other entity by reason
of or arising out of: (i) any breach of this Agreement or any document or
agreement delivered in connection herewith or therewith by the Manager or its
Affiliates, agents, or employees; or (ii) any act of fraud,
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willful misconduct or gross negligence of the Manager or its Affiliates,
agents or employees, or acts or omissions outside the scope of the Manager's
authorized duties and responsibilities contained herein. In case any action
or proceeding shall be brought against the Company or its Affiliates in
respect of which the indemnification contemplated by this Section 10.1 may be
sought against the Manager, the Manager, upon the receipt of notice from the
Company, shall defend such action or proceeding by counsel reasonably
satisfactory to the Company and the Manager, and the Manager shall pay for
all expenses therefor unless such action or proceeding is resisted and
defended by counsel for any carrier of public liability insurance that
benefits the Company or the Manager. The Company shall promptly give written
notice to the Manager when a claim is made against the Company for which
indemnity is owed to the Company by the Manager pursuant to this Section
10.1. The Manager shall participate at its own expense in defense of such
claims, but the Company shall have the right to employ its own separate
counsel. The Company shall assist the Manager in the defense of any claim
for which the Manager owes indemnification hereunder and is undertaking to
provide a defense, by making available to the Manager such records and
personnel as may be reasonably requested in the defense of such claim.
Section 10.2 INDEMNIFICATION BY THE COMPANY. The Company hereby releases
and agrees to indemnify, defend and hold harmless the Manager and its officers,
directors, shareholders, employees, agents and Affiliates from any and all
Damages (except for costs and expenses that the Manager has agreed to bear under
the terms hereof) sustained or incurred by or asserted against the Manager or
its Affiliates, officers, directors, employees and agents by any person, firm,
corporation, governmental authority, partnership or other entity by reason of or
arising out of: (i) the conduct of the Company, or (ii) the performance of
Services by the Manager pursuant to this Agreement, except in each case to the
extent that such Damages arise out of (x) any breach of or liability/obligation
arising under this Agreement or any document or agreement delivered in
connection herewith or therewith by the Manager or its Affiliates, agents, or
employees, or (y) any act of fraud, willful misconduct or gross negligence of
the Manager or its Affiliates, agents or employees, or acts or omission outside
the scope of the Manager's authorized duties and responsibilities contained
herein. THE PARTIES HERETO EXPRESSLY AGREE THAT THE RELEASE AND INDEMNIFICATION
PROVIDED BY THIS SECTION 10.2 INCLUDES RELEASE AND INDEMNIFICATION FOR THE
ORDINARY NEGLIGENCE OF THE PERSONS ENTITLED TO INDEMNIFICATION PURSUANT TO THIS
SECTION 10.2. In case any action or proceeding shall be brought against the
Manager in respect of which the indemnity contemplated by this Section 10.2 may
be sought against the Company, the Manager shall give notice of such action to
the Company, and the Company shall defend such action or proceeding by counsel
reasonably satisfactory to the Company and the Manager, and the Company shall
pay for all expenses therefor unless such action or proceeding is resisted and
defended by counsel for any carrier of public liability insurance that benefits
the Company or the Manager. The Manager shall promptly give written notice to
the Company when a claim is made against the Manager for which indemnity is owed
to the Manager by the Company pursuant to this Section 10.2. The Company shall
participate in defense of such claims, but the Manager shall have the right to
employ its own separate counsel, and the Manager shall assist the Company in the
defense of any claim for which the Company owes indemnification hereunder and is
undertaking to provide a defense, by making
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available to the Company such- records and personnel of the Manager as may be
reasonably requested.
Section 10.3 NON-ASSUMPTION OF LIABILITIES. The Manager shall not, by
entering into this Agreement, assume or become liable for any of the
obligations, debts or other liabilities of the Company in existence or arising
on or after the date hereof.
Section 10.4 SURVIVAL OF INDEMNIFICATION OBLIGATIONS. The respective
indemnification obligations of the Manager and the Company under this Article X
shall survive the termination of this Agreement. Notwithstanding the foregoing,
no party shall be obligated to provide indemnification pursuant to this Article
X for any claim unless the person seeking indemnification provides notice of
such claim to the party from whom indemnification is being sought within THREE
YEARS after the termination of this Agreement.
ARTICLE XI
ACCESS TO INFORMATION, BOOKS AND RECORDS;
CONFIDENTIALITY; POWER OF ATTORNEY
Section 11.1 ACCESS TO BOOKS AND RECORDS. The Manager and its duly
authorized representative shall have reasonable access to the Company's offices,
facilities and records wherever located, in order to discharge the Manager's
responsibilities hereunder. All records and materials furnished to the Manager
by the Company in performance of this Agreement shall at all times during the
Term of Agreement remain the property of the Company.
Section 11.2 CONFIDENTIALITY. For two years after the Term of Agreement,
the Manager agrees to keep confidential all non-public information concerning
the Company acquired by the Manager or its Affiliates during the Term of
Agreement. For the purpose of this Section 11.2, confidential information shall
not include any information available to or otherwise disclosed by the Company
to third parties generally, provided such disclosure did not involve the breach
of a nondisclosure obligation owed to the Company. Nothing in this Section 11.2
shall prohibit any announcement or disclosure by a party that such party
determines is required to be disclosed by applicable law or court order.
Section 11.3 POWER OF ATTORNEY. By execution of this Agreement, the
Company does hereby irrevocably make, constitute and appoint the Manager, and
its successors, with full power of substitution, as its true and lawful attorney
and agent with full power and authority in its name, place and stead to execute,
swear to, acknowledge, deliver, file, record in the appropriate public offices
and publish any and all contracts and agreements of any kind or nature related
to, arising out of or in connection with the Manager's operation of the
Company's properties pursuant to this Agreement.
During the Term of the Agreement, the power of attorney granted herein
shall be irrevocable and a power coupled with an interest, shall survive the
bankruptcy, dissolution or other termination of the Company, shall extend and be
binding upon the Company's successors
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and assigns and shall continue in full force and effect regardless of the
occurrence of any of the foregoing. The Company hereby agrees to be bound by
any such contracts or agreements executed or otherwise entered into by the
attorney and agent acting in good faith pursuant to such power of attorney,
and hereby waives any and all defenses which may be available to contest,
negate, or disaffirm any action of the attorney and agent taken under such
power of attorney except in cases of bad faith, gross negligence or willful
misconduct.
ARTICLE XII
OTHER ACTIVITIES OF MANAGER
Section 12.1 OTHER ACTIVITIES. The Company acknowledges and agrees that
the Manager and its Affiliates manage and/or operate their own oil and gas
properties as well as the oil and gas properties of others, that Manager and its
Affiliates may continue to do so in the future, and that nothing herein
contained requires Manager to devote its full time and efforts to the
performance of the Services hereunder or to refrain from performing similar
services for itself or others. The Company agrees that the Manager shall have
no liability or accountability to the Company for any such activities or
interests or any profits or value generated therefrom or any duty to refrain
from any such activities in the future. The foregoing shall not be deemed to
impair, limit or otherwise restrict the application of the corporate opportunity
doctrine or related duties owed by the Manager to the Company apart from the
existence of this Agreement with respect to future opportunities of the Company.
ARTICLE XIII
REPRESENTATIONS AND WARRANTIES
Section 13.1 REPRESENTATIONS AND WARRANTIES OF THE MANAGER. The Manager
represents and warrants to the Company as follows:
(a) The Manager has the full power and authority to enter into
this agreement, to perform its obligations contemplated hereunder and to carry
on its business and own its properties.
(b) This Agreement has been duly executed and delivered by the
Manager.
(c) This Agreement is the valid and legally binding obligation of
the Manager enforceable against the Manager in accordance with its terms, and
the Company is entitled to the benefits thereof.
(d) The Manager is not in default with respect to any order, writ,
injunction, decree or demand of any court or any governmental authority, or in
the payment of any indebtedness for borrowed money or under the terms or
provisions of any agreement or instrument evidencing or securing any such
indebtedness.
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(e) No representation or warranty of the Manager contained in this
Agreement and no statement of the Manager contained in any monthly or interim
request for funds, certificate, schedule, list, financial statement or other
instrument furnished to the Company pursuant to this Agreement contains, or will
contain, any untrue statement of a material fact, or omits, or will omit, to
state a material fact necessary to make the statements contained herein or
therein not misleading in view of the circumstances in which they are or were
made.
(f) There are no actions, suits, proceedings or governmental
investigations or inquiries pending or threatened against the Manager or to
which the Manager is a party or which any property of the Manager is subject,
which, if determined adversely to the Manager, would materially affect the
operations or financial position of the Manager or its ability to perform
hereunder.
(g) The Manager is a corporation duly organized, validly existing
and in good standing under the laws of the State of Texas and the Manager
possesses all licenses, permits, variances, exemptions, orders, consents,
approvals, authorizations and qualifications the absence of which would,
individually or in the aggregate, materially adversely affect the business or
properties of the Manager.
(h) Neither the execution and delivery of this Agreement, nor the
performance or compliance with the terms and conditions hereof, conflict with,
or will result in a breach by the Manager of, or constitute a default under, or
result in the creation of any lien, charge or encumbrance upon any asset of the
Manager pursuant to any of the terms, conditions or provisions of (i) the
Certificate of Incorporation or Bylaws of the Manager, (ii) any mortgage, deed
of trust, lease, contract, agreement or other instrument to which the Manager is
a party or by which the Manager may be bound or affected, or (iii) any writ,
order, judgment, decree, statute, ordinance, regulation or any other restriction
of any kind or character, to which the Manager is subject, or by which the
Manager may be bound or affected.
(i) All covenants, agreements, representations and warranties made
by the Manager in this Agreement shall survive the execution and delivery of
this Agreement, and all representations and warranties made by the Manager in
this Agreement shall survive the termination of this Agreement for a period of
three years.
ARTICLE XIV
TERM AND TERMINATION OF AGREEMENT
Section 14.1 INITIAL TERM. The initial term of this Agreement shall be
for a one-year period beginning on the Commencement Date. Thereafter, this
Agreement shall automatically renew for successive one-year periods until
terminated by either party in accordance with the provisions of this Article
XIV.
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Section 14.2 TERMINATION. This Agreement may be terminated on the first to
occur of the following:
(a) in the event the parties shall mutually agree in writing, this
Agreement may be terminated on the terms and dates stipulated therein.
(b) At the end of and following the initial term hereof, either
party may, with or without cause, terminate this Agreement on any anniversary
date hereof by giving to the other party at least 30 days advance written notice
of its intent to terminate, whereupon this Agreement shall terminate on the
future date specified in such notice.
(c) In the event either party shall fail to discharge any of its
material obligations hereunder or shall commit a breach of any material
provision of this Agreement and such default or breach shall continue for a
period of 30 days after the other party has served notice of such default, this
Agreement may then be terminated at the option of the non-breaching party by
notice thereof to the breaching party.
(d) Dissolution or termination of the corporate existence of the
Manager or cessation on the Manager's part to continue to do business, or
bankruptcy, insolvency, foreclosure or conveyance in lieu of foreclosure, or
assignment for the benefit of the creditors of the Manager, or its inability to
pay its debts as they come due, shall cause an immediate termination of this
Agreement at the election of the Company.
(e) If the Merger Agreement is terminated, this Agreement shall
automatically terminate and shall be deemed to have been void AB INITIO.
Section 14.3 EFFECTS OF TERMINATION. Except for termination under Section
14.2(e), the termination of this Agreement in accordance with the provisions of
this Article XIV shall have the following effects:
(a) Except for the mutual indemnities, covenants or other
provisions herein that by their terms expressly extend beyond the Term of
Agreement, the Parties' obligations hereunder are limited to the Term of
Agreement.
(b) In the event this Agreement is terminated for any reason, the
Manager shall immediately deliver possession to the Company of all assets, books
and records of the Company in its possession.
(c) Upon a termination of this Agreement (for whatever cause other
than termination under Section 14.2(c) hereof), the Company shall pay to the
Manager the amount of any Fee and Expenses accrued to the date of such
termination which are payable by the Company to the Manager in accordance with
the provisions hereof.
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ARTICLE XV
AGENCY WITH RESPECT TO CERTAIN ASSETS
Section 15.1 AGENT AND NOMINEE. The Manager and the Company agree that the
Company will receive the full benefit of the Specified Assets (as defined
below). As used herein "Specified Assets" means (i) the contracts listed on
Schedule I to this Agreement and (ii) any other contracts, rights, agreements,
assets or other rights held by Mercury that relate to the Company's properties
other than the Excluded Assets (as defined below). As used herein "Excluded
Assets" means those contracts and other assets listed on Schedule II to this
Agreement. On the terms set forth in this Agreement, the Manager shall continue
to hold legal and/or beneficial title to the Specified Assets as agent and
nominee for the benefit of the Company, and the Manager shall have no legal or
beneficial interest in the Specified Assets (which interest is vested in the
Company). The Company hereby authorizes and appoints the Manager to act on
behalf of the Company with respect to the Specified Assets in accordance with
the specific, timely written instructions or, if the circumstances so require,
oral instructions (in which case the same shall be confirmed in writing as soon
as practicable thereafter) from the Company actually received from time to time
by the Manager (which the Company agrees to provide as needed, and with respect
to which the Manager agrees that it will comply promptly and in good faith), and
to exercise such powers hereunder and thereunder as are specifically delegated
to the Manager by the terms of such instructions, together with such powers as
may be reasonably incidental thereto; provided however, that the foregoing
authorization shall in no way imply or suggest that the Manager shall have any
duty to the Company except to act in good faith and in strict accordance with
the terms hereof.
Section 15.2 DISTRIBUTIONS, EXPENSES AND MANAGEMENT.
(a) Without the prior written consent of the Company, the Manager
shall have no right to sell, encumber or otherwise transfer the Specified
Assets. In the event that the Manager receives monies or other consideration in
respect of the Specified Assets, the Manager shall distribute all such amounts
to the Company, or any party designated in writing by the Company.
(b) Subject to paragraph (a) above, all amounts which the Company
is entitled to receive from third parties with respect to the Specified Assets
may be distributed to the Manager for the account of the Company. All parties
dealing with the Manager are authorized and directed to treat and regard the
Manager as the party entitled to deal with the Specified Assets and shall be
fully protected in so treating and regarding the Manager and shall have no
obligation to determine the authority of the Manager to deal with the Specified
Assets or for the proper application of any proceeds received by the Manager.
The Manager may hold itself out to third parties as the agent of the Company
solely for the purposes of this Agreement and in accordance herewith.
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(c) The Company shall pay all amounts which the Company may become
obligated to pay with respect to the Specified Assets as the beneficial owner
thereof, and shall pay all appropriate expenses accruing to the Company as
beneficial owner of the Specified Assets.
(d) The Manager promptly shall furnish to the Company copies of
all correspondence, documents, notices and instruments of every kind relating to
the Specified Assets which the Manager may receive, including, without
limitation, rental notices, claims, invoices, leases and contracts. The Manager
shall promptly keep the Company informed of any material developments affecting
the Specified Assets of which the Manager becomes aware, including the substance
of material oral communications between third parties and the Manager concerning
such matters.
(e) Without limiting the generality of the foregoing, the Company
hereby authorizes the Manager to act on behalf of the Company in respect of the
Specified Assets and to take all such actions thereunder necessary or
appropriate with respect to management of the Specified Assets and enforcement
of the rights of the Company thereunder, in each case in accordance with
instructions from the Company. The Manager shall follow all instructions of the
Company relating to the Specified Assets, including without limitation
instructions relating to the execution of and the action to be taken with
respect to notices and instruments relating to the Specified Assets, including
without limitation mortgages, deeds of trust and financing statements.
(f) In connection with any document or instrument executed,
delivered and/or recorded or other action taken by the Manager at the
instruction of the Company, the Manager may assume without inquiry or
investigation that such execution, delivery, recordation or action has been duly
and properly authorized by the Company. The Manager shall not be under any duty
to accept orders or instructions from any Person other than the Company, except
in accordance with specific, written instructions from the Company to do so. The
Manager shall be under no obligation to inquire into the authority of any
natural person purporting to act on behalf of the Company or any other Person.
The Manager shall be entitled to assume conclusively that all instruments
delivered to it by the Company under any provision of this Agreement are valid
and proper. The Manager may seek advice of the Company's counsel and shall be
fully protected in any action taken in accordance with such advice concerning
the legality of any action. The Manager shall not be required to assert or
defend any legal actions which may be commenced against it pertaining to the
Specified Assets unless requested in writing to do so by the Company, and the
Company shall assume the defense of any and all legal actions relating to the
Specified Assets unless and until the Manager is so requested in writing.
(g) The Manager agrees to take reasonable steps to preserve the
confidentiality of all information held by the Manager (whether before or after
the date of this Agreement) relating to the business of the Company that would
have been treated as confidential by the Manager during the period when it was
the holder of the beneficial interest in the Specified Assets, or that the
Company identifies to the Manager in writing as
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confidential. The Manager further agrees to take such reasonable steps as may
be necessary to preserve legal privilege on behalf of the Company in respect
of any information held by the Manager (whether before or alter the date of
this Agreement) relating to the business of the Company that has been or is
subject to an assertion by the Manager or the Company of legal privilege, or
that the Company identifies in writing to the Manager as privileged.
(h) In no event shall the Company be responsible for any
obligations, costs, expenses, losses or damages (i) relating to the Specified
Assets and arising out of events that occurred prior to April 9, 1998 or (ii)
relating to the Excluded Assets.
Section 15.3 APPROVAL OF THE MANAGER. The Manager will consult with the
Company in giving any required consent from the Company which may be requested
pursuant to the or with respect to the Specified Assets and shall, in connection
therewith, act in accordance with the instructions of the Company (unless such
actions shall be excused pursuant to the express provisions of this Agreement),
but shall have no obligation to make any discretionary decision or form any
opinion referred to in the Specified Assets.
ARTICLE XVI
MISCELLANEOUS
Section 16.1 RELATIONSHIP OF PARTIES. This Agreement does not create a
partnership, joint venture or association; nor does this Agreement, or the
operations hereunder, create the relationship of lessor and lessee or xxxxxx and
bailee. Nothing contained in this Agreement or in any agreement made pursuant
hereto shall ever be construed to create a partnership, joint venture or
association, or the relationship of lessor and lessee or xxxxxx and bailee, or
to impose any duty, obligation or liability that would arise therefrom with
respect to either or both of the parties except as otherwise expressly provided
in this Agreement or any agreement made pursuant hereto. Specifically, but not
by way of limitation, except as otherwise expressly provided for herein, nothing
contained herein shall be construed as imposing any responsibility on the
Manager for the debts or obligation of the Company or any of its Affiliates. It
is expressly understood that the Manager is hereby engaged by the Company to
perform the Services only as an agent of the Company.
Section 16.2 NO THIRD PARTY BENEFICIARIES. Except to the extent a third
party is expressly given rights herein, any agreement to pay an amount and any
assumption of liability herein contained, expressed or implied, shall be only
for the benefit of the parties and their respective legal representatives,
successors and assigns, and such agreement or assumption shall not inure to the
benefit of the obligees of any indebtedness of any party whomsoever, it being
the intention of the parties hereto that no person or entity shall be deemed a
third party beneficiary of this Agreement except to the extent a third party is
expressly given rights herein.
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Section 16.3 NOTICES. Any notice, demand, or communication required,
permitted, or desired to be given hereunder shall be deemed effectively given
when personally delivered or mailed by prepaid certified mail, return receipt
requested, addressed as follows:
(i) if to the Company to:
Quicksilver Resources Inc.
0000 Xxxxxxxxxxxx Xxxxxx
Xxxx Xxxxx, Xxxxx 00000
Attn: Xxxxx Xxxxxx
(ii) if to the Manager, to:
Mercury Exploration Company
0000 Xxxxxxxxxxxx Xxxxxx
Xxxx Xxxxx, Xxxxx 00000
Attn: Xxxxx Xxxxxx
in either case, with required copies to:
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
Telecopier: (000)000-0000
with copies to:
Milbank, Tweed, Xxxxxx & XxXxxx
000 Xxxxx Xxxxxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxxx X. Xxxx
Telecopier: (000)000-0000
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and
Joint Energy Development Investments Limited Partnership
c/o Enron Capital Management Limited Partnership
0000 Xxxxx Xxxxxx
Xxxxxxx, Xxxxx 00000
Attention: Xxxxxx X. Xxxxxxxx
Telecopier: (000)000-0000
with copies to:
Enron Capital & Trade Resources
Corp. Legal Department
0000 Xxxxx Xxxxxx
Xxxxxxx, Xxxxx 00000
Attention: Xxxxx St. Clair and Xxxxxx X. Xxxxxxxx
Telecopier: (000)000-0000
Enron Capital & Trade Resources
Compliance Department
0000 Xxxxx Xxxxxx
Xxxxxxx, Xxxxx 00000
Attention: Xxxxx X. Xxxxx
Telecopier: (000)000-0000 or (000)000-0000
or to such other address and to the attention of such other person or officer as
either Party may designate by written notice pursuant to this Section 16.3.
Section 16.4 GOVERNING LAW. THIS AGREEMENT HAS BEEN EXECUTED AND DELIVERED
IN AND SHALL BE INTERPRETED, CONSTRUED AND ENFORCED PURSUANT TO AND IN
ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS.
Section 16.5 ASSIGNMENT. No assignment of this Agreement or any of the
rights or obligations set forth herein by either party shall be valid without
the specific written consent of the other party; provided that the Company may
in its discretion assign any of its rights hereunder to any financial
institution providing financing to the Company as collateral security for such
financing.
Section 16.6 WAIVER OF BREACH. The waiver by either party of a breach or
violation of any provision of this Agreement shall not operate as, or be
construed to be, a waiver of any subsequent breach of the same or any other
provision hereof.
Section 16.7 DISPUTE RESOLUTION. Any controversy, dispute or claim arising
out of or relating to this Agreement or any of the other documents contemplated
hereby or the
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transactions contemplated hereby or thereby (a "Dispute") shall be resolved
by arbitration administered by the American Arbitration Association (the
"AAA") in accordance with the terms of this Section 16.7, the Commercial
Arbitration Rules of the AAA, and, to the maximum extent applicable, the
United Stated Arbitration Act. Judgment on any matter rendered by arbitrators
may be entered in any court having jurisdiction. Any arbitration shall be
conducted before three arbitrators. The arbitrators shall be individuals
knowledgeable in the subject matter of the Dispute. Each party shall select
one arbitrator and the two arbitrators so selected shall select the third
arbitrator. If the third arbitrator is not selected within 30 days after the
request for an arbitration, then any party may request the AAA to select the
third arbitrator. The arbitrators may engage engineers, accountants or other
consultants they deem necessary to render a conclusion in the arbitration
proceeding. To the maximum extent practicable, an arbitration proceeding
hereunder shall be concluded within 180 days of the filing of the Dispute
with the AAA. Arbitration proceedings shall be conducted in Houston, Texas.
Arbitrators shall be empowered to impose sanctions and to take such other
actions as the arbitrators deem necessary to the same extent a judge could
impose sanctions or take such other actions pursuant to the Federal Rules of
Civil Procedure and applicable law. At the conclusion of any arbitration
proceeding, the arbitrators shall make specific written findings of fact and
conclusions of law. The arbitrators shall have the power to award recovery of
all costs and fees to the prevailing party. All fees of the arbitrators and
any engineer, accountant or other consultant engaged by the arbitrators,
shall be shared equally unless otherwise awarded by the arbitrators.
Section 16.8 ADDITIONAL ASSURANCES. The provisions of this Agreement shall
be self-operative and shall not require further accord between the parties
except as may herein specifically be provided to the contrary; provided,
however, that upon the request of either party, the other party shall execute
such additional instruments and take such additional actions as shall be
necessary to effectuate this Agreement.
Section 16.9 SEVERABILITY. In the event any provisions of this Agreement
is held to be unenforceable for any reason, such provision shall be severable
from this Agreement if it is capable of being identified with and apportioned to
reciprocal consideration or to the extent that it is a provision that is not
essential and the absence of which would not have prevented the parties from
entering into this Agreement. The unenforceability of a provision that has been
performed shall not be grounds for invalidation of this Agreement under
circumstances in which the true controversy between the parties does not involve
such provision.
Section 16.10 ARTICLE AND SECTION HEADINGS. The articles and section
headings contained in this Agreement are for reference purposes only and shall
not effect in any way the meaning or interpretation of this Agreement.
Section 16.11 DISCRETIONARY TERMS. Determination of "necessary",
"appropriate" and other discretionary terms as used herein shall be according to
the judgment and discretion of the respective parties in accordance with
generally accepted standards of the oil and gas industry.
-19-
Section 16.12 AMENDMENTS AND CONTRACT EXECUTION. Effective on the
Commencement Date, this Agreement constitutes the entire Agreement between the
parties with respect to the subject matter of this Agreement and supersedes all
prior agreements between the parties with respect thereto, including, without
limitation, the April 1998 Management Agreement and the Management Agreement
between the Manager and MSR. No oral statement or prior written material not
specifically incorporated herein shall be of any force and effect, and no
changes in or additions to this Agreement shall be recognized unless
incorporated herein by amendment, such amendment to become effective on the date
stipulated therein.
Section 16.13 ACTION BY THE COMPANY. The Company and the Manager agree that
any discretionary action that may be or is required to be taken by the Company
hereunder may be taken only by the act of the members of the Board of Directors
of the Company who are not Affiliates of the Manager. If there are no such
members of the Board of Directors of the Company, such action may be taken only
by the act of the holders of a majority of the outstanding voting securities of
the Company held by persons who are not Affiliates of the Manager.
IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed
by their respective duly authorized representatives this day of September,
1998.
MERCURY EXPLORATION COMPANY
By: /s/ Xxxxx Xxxxxx
---------------------------------------
Name: Xxxxx Xxxxxx
-------------------------------------
Title: Vice President
------------------------------------
QUICKSILVER RESOURCES INC.
By: /s/ Xxxxx Xxxxxx
---------------------------------------
Name: Xxxxx Xxxxxx
-------------------------------------
Title: Vice President
------------------------------------
-20-
EXHIBIT A
MINIMUM INSURANCE REQUIREMENTS
WORKERS COMPENSATION AND EMPLOYERS LIABILITY INSURANCE
Manager agrees to comply with Workers Compensation laws of the state where the
Work is performed, and to maintain a Workers Compensation and Employers
Liability policy. This policy shall be endorsed to provide: all states coverage,
voluntary compensation coverage and occupational disease.
Workers Compensation Statutory
Employers Liability $1,000,000 Each Accident (Minimum)
$500,000 Disease Each Employee (Minimum)
GENERAL LIABILITY INSURANCE
General Liability insurance, endorsed to provide coverage for: explosion,
collapse and underground damage to property of others; Contractual Liability
(particularly the applicable provisions of the "General Indemnity" section of
this contract; and Products and Completed Operations. Watercraft exclusions
deleted (if Work necessitates the use of watercraft of any kind.)
Bodily Injury and $1,000,000 Combined Single Limit Each Occurrence
Property Damage (Minimum)
AUTOMOBILE LIABILITY INSURANCE
Automobile Liability insurance which shall include coverage for all owned,
non-owned and hired vehicles.
Bodily Injury and $1,000,000 Combined Single Limit Each Occurrence
Property Damage (Minimum)
EXCESS UMBRELLA LIABILITY INSURANCE
Bodily Injury and $5,000,000 Combined Single Limit Each Occurrence
Property Damage (Minimum and Excess of Primary)
PROPERTY INSURANCE
Property insurance on a replacement cost basis fully covering the property
subject to this agreement. Company shall be named as co-loss payee on any
proceeds received from this policy.
ADDITIONAL REQUIREMENTS
Manager shall require any contractor and subcontractor at any tier, vendor,
supplier, material dealer and others entering the properties irrespective of
their contractual relationship to Manager or Company, to provide and maintain
insurance at all times during the period that their agreement related to Work on
the properties is in force and effect at the contractor's and subcontractor's,
vendor's, supplier's, material dealer's, or others' own cost, with insurance
limits and in form and issuing companies acceptable to Company.
Manager shall submit to Company at the time Manager executes this Contract and
from time to time as requested, a Certificate of Insurance, in form satisfactory
to Company, evidencing that satisfactory coverage of the type and limits set
forth hereinabove are in effect. Policies providing such coverages shall contain
provisions that no cancellation or material changes in the policies shall become
effective except on thirty (30) days advance written notice thereof to Company.
Irrespective of the requirements as to insurance to be carried as provided for
herein, the insolvency, bankruptcy or failure of any insurance company carrying
insurance of Manager, or the failure of any insurance company to pay claims
accruing, or the inadequacy of the limits of the insurance, shall not affect,
negate or waive any of the provisions of this Contract, including, without
exception, the indemnity obligations of Manager.
Manager agrees to require any policies of insurance, except Workers'
Compensation coverages, which are in any way related to the agreement and that
are secured and maintained by Manager or its contractors or subcontractors, to
include Company, its parent and affiliated companies, and their directors,
officers, employees and agents, as Additional Insured. Furthermore, Contractor
shall waive all rights of recovery against Company, its parent and affiliated
companies which Manager may have or acquire because of deductible clauses in or
inadequacy of limits of, any policies of insurance maintained by Manager.
Manager agrees to require all such policies of insurance which are in any way
related to this agreement and that are secured and maintained by Manager or its
subcontractors, to include clauses providing that each underwriter shall waive
its rights of recovery, under subrogation or otherwise, against agents. Company,
its parent and affiliated companies and their directors, officers, employees and
agents.
-2-
SCHEDULE I
SPECIFIED ASSETS
1. Antrim Gas Transportation and Treating Service Agreement dated 2/6/95
between Dominion Reserves, Inc. and Michigan Consolidated Gas Company.
2. Extension and Amendment dated 1/1/96 between Terra Pipeline Company and
Terra Energy, Ltd.
3. Authorization dated 10/13/95 for Dominion Reserves, Inc. to commit certain
Antrim Gas under the Antrim Gas Transportation and Treating Service
Agreement.
4. Gas Sales and Purchase Contract dated 1/1/95 between Destec Fuel Resources,
Inc. and Xxxxxxx Corp.
5. Vienna Pipeline Gas Transportation Agreement dated 11/1/95 between Terra
Energy, Ltd. and Michcon Gathering Company.
6. Gas Purchase Agreement dated 10/1/94 between Mercury Exploration Company
and Consumers Power Company.
7. Letter Agreement dated 8/6/97 between Mercury Exploration Company and
Consumers Power Company, for volume and price for the fourth contract year
of the Gas Purchase Agreement dated 10/1/94 between Mercury Exploration
Company and Consumers Power Company.
SCHEDULE II
MERCURY EXCLUDED ASSETS
1. The equity interests of Mercury in the following entities:
a) Wilderness Energy Services Limited Partnership ("Wilderness")
b) Xxxxxxxx HOP Limited Partnership ("Xxxxxxxx")
c) QELC
d) Mercury Michigan Inc.
All easements and rights-of-way held of record in the name of Mercury for
the benefit of either Wilderness or Xxxxxxxx shall be excepted and deemed
Excluded Assets.
2. Vehicles and non-property specific Operating Equipment directly related to
the oil field operations of Mercury.
3. Mercury Exploration Company ("Assignor") has obtained from the Michigan
Public Service Commission certificates authorizing Assignor to construct
and operate two gas transmission pipelines in Otsego County, Michigan: The
Fontinalis Pipeline (Case No. U-1 1120) and the North Xxxxx 6 inch Pipeline
(Case No. U-1 1406) (the "Transmission Pipelines"). Assignor has obtained
the easements and rights of way necessary for the construction of same. All
of the rights and interests of Assignor in and to the certificates
identified above and in all easements, rights of way and other rights and
interests relating to the Transmission Pipelines, the routes of which are
specifically described in the referenced certificates, are excluded from
the operations of this Agreement and reserved by Assignor. In addition, all
easements and rights-of-way held of record in the name of Mercury for
transmission pipelines to be owned and operated by Mercury, or its
designee, shall be deemed Excluded Assets. Notwithstanding the foregoing,
in the event that (i) the Transmission Pipelines or (ii) any other
transmission pipelines certificated in the future which Mercury owns
directly or indirectly (excluding Wilderness), transport natural gas
produced from any of the Mercury Properties (as defined in the Prior Merger
Agreement), QELC Properties (as defined in the Prior Merger Agreement) or
the MGP Properties (as defined in the Prior Merger Agreement) ("QRI Gas
Transmission Pipeline"), QRI shall have the right to purchase a
proportionate share of the QRI Gas Transmission Pipelines based on the
percentage of throughput at the estimated peak capacity using a
twelve-month time horizon. The proportionate share shall be offered to QRI
at a price based on Assignor's cost basis therein.
4. Any benefits of any underproduction or the right to receive any payments,
or cash attributable to the Mercury Properties whenever arising to
"balance" any disproportionate allocation of Hydrocarbons under any
operating agreement, gas balancing and storage agreement, gas processing or
dehydration agreement, gas transportation or similar agreements.
SCHEDULE II
(CONTINUED)
QELC EXCLUDED ASSETS
1. All bank accounts of QELC except for the operating and money market
account.
2. Any benefits of any underproduction or the right to receive any payments,
or cash attributable to the QELC Properties whenever arising to "balance"
any disproportionate allocation of Hydrocarbons under any operating
agreement, gas balancing and storage agreement, gas processing or
dehydration agreement, gas transportation or similar agreements.
