STOCK TRANSFER AGREEMENT
This Stock Transfer Agreement (this "Agreement") dated April 9, 1998, is by
and between Mercury Exploration Company, a Texas corporation ("Mercury"), and
Joint Energy Development Investments Limited Partnership, a Delaware limited
partnership ("JEDI").
WHEREAS, Mercury is the sole general partner and JEDI is the sole limited
partner of Michigan Gas Partners, Limited Partnership, a Texas limited
partnership ("MGP"), which is being merged (the "Merger") with and into
Quicksilver Resources Inc., a Delaware corporation ("QRI"), pursuant to an
Agreement and Plan of Reorganization and Merger dated as of March 31, 1998 by
and among Mercury, JEDI, MGP, QRI, Quicksilver Energy, L.C., and Trust Company
of the West (the "Merger Agreement"); and
WHEREAS, in the Merger, JEDI is receiving 13,000 shares of the common
stock, par value $.01 per share, of QRI ("QRI Common Stock"); and
WHEREAS, to induce Mercury to enter into the Merger Agreement, JEDI has
agreed to enter into this Agreement to preserve certain of the economic
consequences of the MGP partnership agreement, which would have allowed
Mercury's interest in MGP to increase under certain circumstances.
NOW, THEREFORE, in consideration of the foregoing and the mutual agreements
contained herein and in the Merger Agreement, Mercury and JEDI agree as follows:
1. CERTAIN DEFINITIONS. As used herein, the following terms have the
indicated meanings:
"DAILY AVERAGE PRICE" means, for any given day, the average of the high and
low sale prices of the QRI Common Stock or New Securities on such day on the New
York Stock Exchange, the American Stock Exchange or the Nasdaq National Market,
whichever is applicable.
"EARN OUT AMOUNT" means $20,995,205.00; provided, however, that after the
date that is six months after the date (the "Commencement Date") on which the
QRI Common Stock or New Securities become, or are converted into or exchanged
for New Securities that are, Publicly Traded, the "EARN OUT AMOUNT" shall mean
$20,995,205.00 plus interest at a compound monthly rate of 1.530948% from the
date that is six months after the Commencement Date through the last day of the
Measurement Period for which a Transfer Election (as defined in paragraph 2
below) is made.
"MARKET VALUE" means, with respect to a Share, the average of the Daily
Average Prices of the QRI Common Stock or New Securities for the trading days
during a Measurement Period.
"MEASUREMENT PERIOD" means any period of thirty consecutive trading days
ending prior to the first anniversary of the Commencement Date during which the
average daily trading volume of the QRI Common Stock or New Securities on the
New York Stock Exchange, the American Stock Exchange or the Nasdaq National
Market, whichever is applicable, is at least 50,000 shares, excluding any shares
traded by Mercury or any of its Affiliates (as defined in Rule 405 under the
Securities Act of 1933) and provided, that if on any of the 30 trading days the
trading volume is greater than 200,000 shares, then only 200,000 shares on such
days may be used in calculating the average volume.
"NEW SECURITIES" means any class of equity securities into which shares of
QRI Common Stock have been converted or for which shares of QRI Common Stock
have been exchanged.
"PUBLICLY TRADED" means listed for trading on the New York Stock Exchange,
the American Stock Exchange or the Nasdaq National Market.
"SHARES" means the shares of QRI Common Stock acquired by JEDI pursuant to
the Merger or any New Securities into which such shares of QRI Common Stock are
converted or for which such shares of QRI Common Stock are exchanged.
2. TRANSFER ELECTION. If (a) the Commencement Date occurs on or before
the first anniversary of the date hereof and (b) for any Measurement Period the
aggregate Market Value of all of the Shares exceeds the Earn Out Amount (as
calculated as of the last trading day of such Measurement Period) (an "Earn Out
Period"), Mercury may elect (the "Transfer Election") to require that JEDI
transfer to Mercury a number of Shares or other shares of QRI Common Stock or
New Securities (rounded to the nearest whole number of Shares or other shares of
QRI Common Stock or New Securities) with an aggregate Market Value equal to 85%
of the amount by which the aggregate Market Value of all of the Shares exceeds
the Earn Out Amount for such Earn Out Period. The Transfer Election may be made
on only one occasion prior to the first anniversary of the Commencement Date and
only by written notice received by JEDI prior to the commencement of trading on
the trading day immediately following the last trading day in the Earn Out
Period.
3. TRANSFER OF SHARES. In the event that Mercury makes the Transfer
Election, as soon as practicable after the date notice of the Transfer Election
is received by JEDI, Mercury and JEDI shall take all reasonable action necessary
to transfer the required number of Shares or other shares of QRI Common Stock or
New Securities to Mercury or its designee pursuant to paragraph 2 above.
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4. MISCELLANEOUS.
(a) This Agreement shall inure to the benefit of and be binding upon
the successors and permitted assigns of the parties hereto. Except as set forth
herein, the rights and obligations of a party hereunder shall not be assignable
without the prior written consent of the other party. JEDI may assign any or
all of its rights, privileges and obligations hereunder to (i) any direct or
indirect affiliate or (ii) any other entity managed by Enron Corp. or any of its
affiliates or for which Enron Corp. or one of its affiliates acts as
administrative agent. Nothing in this paragraph (a) shall prohibit Mercury from
designating a third party to receive all or any portion of the Shares that
Mercury is or becomes entitled to receive from JEDI pursuant to Section 2 above.
(b) This Agreement may be executed in any number of counterparts and
by different parties hereto in separate counterparts, each of which
counterparts, when so executed and delivered, shall be deemed to be an original
and all of which counterparts, taken together, shall constitute but one and the
same Agreement.
(c) The headings in this Agreement are for convenience of reference
only and shall not limit or otherwise affect the meaning hereof.
(d) The laws of the State of Texas shall govern this Agreement
without regard to principles of conflict of laws.
(e) This Agreement, together with the Merger Agreement and the other
Basic Documents (as defined in the Merger Agreement), is intended by the parties
as a final expression of their agreement and intended to be a complete and
exclusive statement of the agreement and understanding of the parties hereto in
respect of the subject matter contained herein. This Agreement, the Merger
Agreement and the other Basic Documents supersede all prior agreements and
understandings between the parties with respect to such subject matter. The
agreements of the parties contained in this Agreement are not intended, and
shall not be interpreted, to confer any benefit on any person other than the
parties hereto.
(f) This Agreement may be amended only by means of a written
amendment signed by both of the parties hereto.
(g) All notices provided for hereunder shall be given by telecopy
(confirmed by overnight delivery), air courier guaranteeing overnight delivery
or personal delivery at the following addresses:
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If to Mercury:
Mercury Exploration Company
0000 Xxxxxxxxxxxx Xxxxxx
Xxxx Xxxxx, Xxxxx 00000
Attention: Xxxxx Xxxxxx
Telecopier: (000) 000-0000
If to JEDI:
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 as any such party may designate by notice in the manner
provided above. All such notices shall be deemed to have been delivered and
received at the time delivered by hand, if personally delivered, when receipt
acknowledged, if telecopied, and on the next business day, if timely delivered
to an air courier guaranteeing overnight delivery.
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(h) Any controversy, dispute or claim arising out of or relating to
this Agreement or the transactions contemplated hereby (a "Dispute") shall be
resolved by arbitration administered by the American Arbitration Association
(the "AAA") in accordance with the terms of this paragraph (h), 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.
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EXECUTED as of the date first written above.
MERCURY EXPLORATION COMPANY
By: /s/ Xxxxx X. Xxxxxx
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Name: Xxxxx X. Xxxxxx
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Title: Vice President
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JOINT ENERGY DEVELOPMENT
INVESTMENTS LIMITED PARTNERSHIP
By: Enron Capital Management, Limited
Partnership, its General Partner
By: Enron Capital Corp., its General Partner
By: /s/ Xxxxx X. Xxxxxx
------------------------------------------
Name: Xxxxx X. Xxxxxx
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Title: Agent and Attorney-in-Fact
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