EXHIBIT 10.1

EXECUTION VERSION

CONTRIBUTION AGREEMENT

BY AND AMONG

VAUGHAN HOLDING COMPANY, LLC

EXCO OPERATING COMPANY, LP

and

BG US GATHERING COMPANY, LLC

EXECUTED ON August 5, 2009

EFFECTIVE DATE: January 1, 2009

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TABLE OF CONTENTS

 

          Page

ARTICLE 1

     

DEFINITIONS AND INTERPRETATION

   2

1.1

   Defined Terms    2

1.2

   References and Rules of Construction    2

ARTICLE 2

     

CONTRIBUTIONS AND ASSETS

   2

2.1

   Contributions    2

2.2

   Subject Assets    2

2.3

   Excluded Assets    3

2.4

   Revenues and Expenses    3

2.5

   Guaranty    5

ARTICLE 3

     

DEPOSIT

   5

3.1

   Deposit    5

3.2

   Adjustments to Closing Cash Contribution    6

3.3

   Adjustment Methodology    7

3.4

   Preliminary Settlement Statement    7

3.5

   Final Settlement Statement    8

3.6

   Disputes    8

3.7

   Adjustment for Final Settlement Statement    8

3.8

   Allocation for Imbalances at Closing    9

3.9

   Maintenance of Value    9

ARTICLE 4

     

REPRESENTATIONS AND WARRANTIES OF EXCO

   10

4.1

   Organization, Existence    10

4.2

   Authorization    10

4.3

   No Conflicts    11

4.4

   Consents    11

4.5

   Bankruptcy    11

4.6

   Foreign Person and Tax Status    11

4.7

   Claims and Litigation    12

4.8

   Material Contracts    12

 

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          Page

4.9

   No Violation of Laws    14

4.10

   Preferential Rights    14

4.11

   Payments under Rights-of-Way    14

4.12

   Imbalances    14

4.13

   Current Commitments    14

4.14

   Environmental    14

4.15

   Taxes    15

4.16

   Brokers Fees    16

4.17

   Abandonment    16

4.18

   Partnerships    16

4.19

   Permits    16

4.20

   Subject Assets Complete    16

4.21

   No Material Adverse Change    16

4.22

   Capitalization    17

4.23

   No Subsidiaries    17

4.24

   Balance Sheets    18

4.25

   Employees    18

4.26

   Loans and Guarantees    18

4.27

   Bank Accounts and Powers of Attorney    18

4.28

   Unrelated Activities    18

4.29

   Title to Subject Assets    18

ARTICLE 5

     

BG’S REPRESENTATIONS AND WARRANTIES

   18

5.1

   Organization; Existence    18

5.2

   Authorization    19

5.3

   No Conflicts    19

5.4

   Consents    19

5.5

   Bankruptcy    19

5.6

   Claims and Litigation    19

5.7

   Financing    19

5.8

   Independent Evaluation    19

 

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TABLE OF CONTENTS

 

          Page

5.9

   Broker’s Fees    20

5.10

   Accredited Investor    20

ARTICLE 6

     

CERTAIN AGREEMENTS

   20

6.1

   Conduct of Business    20

6.2

   Conduct of the Contributed Companies    22

6.3

   Notifications    23

6.4

   HSR Act    23

6.5

   Amendment to Schedules    23

6.6

   Non-Solicitation of Employees    23

6.7

   Reorganization Matters    24

6.8

   Contributed Company Debt    24

6.9

   Assignment of Downstream Transportation Contract Interests    24

6.10

   Negotiation of Gathering Agreement    24

ARTICLE 7

     

BG’S CONDITIONS TO CLOSING

   24

7.1

   Representations    24

7.2

   Performance    24

7.3

   No Legal Proceedings    24

7.4

   Environmental Defects    24

7.5

   HSR Act    25

7.6

   Consent and Waivers    25

7.7

   Purchase and Sale Agreement    25

7.8

   Closing Deliverables    25

7.9

   No Material Event    25

7.10

   No Material Adverse Effect    25

7.11

   Gathering Agreements    25

ARTICLE 8

     

EXCO’S CONDITIONS TO CLOSING

   25

8.1

   Representations    25

8.2

   Performance    26

8.3

   No Legal Proceedings    26

 

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TABLE OF CONTENTS

 

          Page

8.4

   Environmental Defects    26

8.5

   HSR Act    26

8.6

   Consent and Waivers    26

8.7

   Purchase and Sale Agreement    26

8.8

   Closing Deliverables    26

8.9

   No Material Event    26

8.10

   Gathering Agreements    26

ARTICLE 9

     

CLOSING

   27

9.1

   Date of Closing    27

9.2

   Place of Closing    27

9.3

   Closing Obligations    27

9.4

   Records    28

ARTICLE 10

     

ACCESS / DISCLAIMERS

   29

10.1

   Access    29

10.2

   Confidentiality    30

10.3

   Disclaimers    30

ARTICLE 11

     

CASUALTIES; TRANSFER RESTRICTIONS

   32

11.1

   Intentionally Omitted    32

11.2

   Intentionally Omitted    32

11.3

   Casualty or Condemnation Loss    32

11.4

   Preferential Purchase Rights and Consents to Assign    33

ARTICLE 12

     

ENVIRONMENTAL MATTERS

   34

12.1

   Environmental Defects    34

12.2

   NORM, Wastes and Other Substances    37

ARTICLE 13

     

SURVIVAL, INDEMNIFICATION

   38

13.1

   Intentionally Omitted    38

13.2

   Indemnities of EXCO    38

 

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TABLE OF CONTENTS

 

          Page

13.3

   Indemnities of BG    38

13.4

   Limitation on Liability    39

13.5

   Express Negligence    39

13.6

   Exclusive Remedy    40

13.7

   Indemnification Procedures    40

13.8

   Survival    42

13.9

   Non-Compensatory Damages    43

13.10

   Exclusion of Certain Matters    43

ARTICLE 14

     

TERMINATION, DEFAULT AND REMEDIES

   43

14.1

   Right of Termination    43

14.2

   Failure to Close and Remedies    43

14.3

   Effect of Termination    44

14.4

   Return of Documentation and Confidentiality    44

ARTICLE 15

     

MISCELLANEOUS

   44

15.1

   Exhibits, Schedules and Appendices    44

15.2

   Expenses and Taxes    44

15.3

   Tax Treatment    46

15.4

   Allocation of Consideration for Tax Purposes    46

15.5

   Assignment    46

15.6

   Preparation of Agreement    47

15.7

   Publicity    47

15.8

   Notices    47

15.9

   Further Cooperation    49

15.10

   Filings, Notices and Certain Governmental Approvals    49

15.11

   Entire Agreement; Conflicts    49

15.12

   Parties in Interest    49

15.13

   Amendment    50

15.14

   Waiver; Rights Cumulative    50

15.15

   Governing Law; Jurisdiction; Venue; Jury Waiver    50

15.16

   Arbitration    50

15.17

   Severability    52

15.18

   Counterparts    52

15.19

   Joint and Several Liability    52

 

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LIST OF APPENDIXES, EXHIBITS AND SCHEDULES

Appendixes

 

Appendix I

   —    Definitions

 

Exhibits

     

Exhibit A-1

   —    Systems

Exhibit A-2

   —    Rights-of-Way

Exhibit B

   —    Form of Assignment (Limited Partner Interests)

Exhibit C

   —    Form of Limited Liability Company Agreement

Exhibit D

   —    Assignment of Downstream Transportation Contracts

Exhibit E

   —    Form of BG Guaranty

 

Schedules

Schedule 3.2(a)(ii)

   —    Pre Effective Time Expenditures

Schedule 4.3

   —    No-Conflicts

Schedule 4.4

   —    Consents

Schedule 4.7

   —    Litigation

Schedule 4.8

   —    Material Contracts

Schedule 4.8, Part 2

   —    Certain Material Contracts

Schedule 4.9

   —    Violation of Laws

Schedule 4.10

   —    Preferential Rights

Schedule 4.12

   —    Imbalances

Schedule 4.13

   —    Current Commitments

Schedule 4.14

   —    Environmental

Schedule 4.15

   —    Asset Taxes

Schedule 4.17

   —    Abandonment Obligations

Schedule 4.18

   —    Partnerships

Schedule 4.21

   —    Material Adverse Change

Schedule 4.24

   —    Balance Sheets

Schedule 4.26

   —    Loans and Guarantees

Schedule 4.27

   —    Bank Accounts and Powers of Attorney

Schedule 6.1

   —    Conduct of Business

 

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CONTRIBUTION AGREEMENT

THIS CONTRIBUTION AGREEMENT (as may be amended, restated, supplemented or
otherwise modified from time to time, this “Agreement”) is entered into the 5th
day of August, 2009, among EXCO OPERATING COMPANY, LP, a Delaware limited
partnership (“EOC”), VAUGHAN HOLDING COMPANY, LLC, a Texas limited liability
company (“Vaughan” and collectively, with EOC, “EXCO”) and BG US GATHERING
COMPANY, LLC, a Delaware limited liability company (“BG”). EXCO and BG may be
referred to collectively as the “Parties” or individually as a “Party”.

Recitals

Affiliates of BG and EOC and Affiliates of EOC have entered into an arrangement
for the joint exploration, development and operation of certain oil and gas
properties located in the East Texas/North Louisiana Area under which an
Affiliate of BG will acquire an undivided fifty percent (50%) interest in and to
EOC’s and its Affiliate’s right, title and interest in such properties.

In connection with such transactions, BG has exercised its option to participate
in the ownership and operation of midstream assets owned by certain Affiliates
of EXCO, being TGG Pipeline, Ltd., a Texas limited partnership (“TGG”) and Talco
Midstream Assets, Ltd., a Texas limited partnership (“Talco” and together with
TGG, the “Midstream Companies”).

EOC owns the limited partner interests in each of the Midstream Companies and
Vaughan owns the general partner interests in each of the Midstream Companies.

Vaughan has formed TGGT GP Holding, LLC, a Delaware limited liability company
(“GP Holding”) and, prior to Closing, Vaughan intends to transfer the general
partner interests in each of TGG and Talco to GP Holding. Immediately
thereafter, Vaughan further intends to transfer the membership interests in GP
Holding to EOC.

EOC has formed TGGT Holdings, LLC, a Delaware limited liability company (the
“Company”) and at Closing EOC desires to contribute the membership interests of
GP Holding and the limited partner interests in each of TGG and Talco to the
Company on the terms and conditions hereinafter set forth.

BG desires to contribute a specified amount of cash to the Company on the terms
and conditions hereinafter set forth and the Company desires to issue to BG a
fifty percent (50%) membership interest in the Company on the terms and
conditions hereinafter set forth.

NOW, THEREFORE, for and in consideration of the mutual promises contained
herein, the benefits to be derived by each Party, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
EXCO and BG agree as follows:

 

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ARTICLE 1

DEFINITIONS AND INTERPRETATION

1.1 Defined Terms. In addition to the terms defined in the introductory
paragraph and the Recitals of this Agreement, for purposes hereof, the
capitalized terms used herein and not otherwise defined shall have the meanings
set forth in Appendix I.

1.2 References and Rules of Construction. All references in this Agreement to
Exhibits, Schedules, Appendices, Articles, Sections, subsections and other
subdivisions refer to the corresponding Exhibits, Schedules, Appendices,
Articles, Sections, subsections and other subdivisions of or to this Agreement
unless expressly provided otherwise. Titles appearing at the beginning of any
Articles, Sections, subsections and other subdivisions of this Agreement are for
convenience only, do not constitute any part of this Agreement, and shall be
disregarded in construing the language hereof. The words “this Agreement,”
“herein,” “hereby,” “hereunder” and “hereof,” and words of similar import, refer
to this Agreement as a whole and not to any particular Article, Section,
subsection or other subdivision unless expressly so limited. The words “this
Article,” “this Section,” and “this subsection,” and words of similar import,
refer only to Article, Section or subsection hereof in which such words occur.
The word “including” (in its various forms) means including without limitation.
All references to “$” or “dollars” shall be deemed references to United States
dollars. Each accounting term not defined herein will have the meaning given to
it under GAAP as interpreted as of the date of this Agreement. Pronouns in
masculine, feminine or neuter genders shall be construed to state and include
any other gender, and words, terms and titles (including terms defined herein)
in the singular form shall be construed to include the plural and vice versa,
unless the context otherwise requires. Appendices, Exhibits and Schedules
referred to herein are attached to and by this reference incorporated herein for
all purposes.

ARTICLE 2

CONTRIBUTIONS AND ASSETS

2.1 Contributions. On the terms and conditions contained in this Agreement, as
of the Closing:

(a) EOC shall transfer and assign the Limited Partner Interests and the GP
Holding Equity Interest to the Company (collectively the “Contributed
Interests”);

(b) BG shall contribute to the Company an amount equal to $249,000,000 to be
paid in cash by BG to the Company (the “Closing Cash Contribution”), as adjusted
pursuant to this Agreement, payable in United States currency by wire transfer
in same day funds as and when provided in this Agreement; and

(c) in consideration of the Closing Cash Contribution, the Company shall issue
to BG a fifty percent (50%) membership interest in the Company leaving EOC with
a fifty percent (50%) membership interest in the Company.

2.2 Subject Assets. “Subject Assets” means the interests described below in and
to the following assets and properties (less and except (i) the Excluded Assets
and (ii) any other assets excluded pursuant to the terms of Sections 11.4(b) or
12.1(b)(ii)):

(a) the gas gathering and pipeline systems and related facilities described on
Exhibit A-1 (the “Systems”);

 

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(b) all right, title and interest of the Midstream Companies in and to all
equipment, machinery, fixtures, and other real, immovable, personal, movable and
mixed property primarily used or held for use in connection with the Systems and
located at and downstream of the outlet flange of the relevant custody transfer
meter, including, without limitation, pipelines, tubing, pumps, valves, meters,
motors, fixtures, machinery, compression equipment, scrubbers, dehydration
units, tanks, traps, cathodic protection units, SCADA and similar control
equipment, processing and separation facilities, structures, materials, and
other items used or held for use in the operation thereof (the “Personal
Property”);

(c) all surface fee interests, surface leases, easements, rights-of-way,
permits, licenses, servitudes, and other surface rights described in Exhibit A-2
and all right, title and interest of the Midstream Companies in and to all other
surface fee interests, surface leases, easements, rights-of-way, permits,
licenses, servitudes, and other surface rights appurtenant to, and primarily
used or held for use in connection with, the Systems (such properties, the
“Rights-of-Way”);

(d) all right, title and interest of the Midstream Companies in and to all
permits, licenses, orders, approvals, variances, waivers, franchises, rights and
other authorizations issued by any Governmental Authority relating to the
Systems;

(e) all right, title and interest of the Midstream Companies in and to all
Applicable Contracts;

(f) all right, title and interest of the Midstream Companies in and to all
Imbalances; and

(g) all right, title and interest of the Midstream Companies in and to all
files, records, maps, information, and data, whether written or electronically
stored, including: (A) land and title records (including abstracts of title,
title opinions, and title curative documents); (B) contract files;
(C) correspondence; and (D) operations, environmental, production, and
accounting records, but excluding any of the foregoing items that are Excluded
Assets (“Records”).

2.3 Excluded Assets. The Subject Assets shall not include the Excluded Assets
and the Excluded Assets shall be distributed by the Midstream Companies to EXCO
prior to the Closing.

2.4 Revenues and Expenses.

(a) Except to the extent otherwise taken into account in connection with
adjustments to the Closing Cash Contribution under Article 3, EXCO shall be
entitled to all of the rights of ownership attributable to the Midstream
Companies (including, without limitation, the right to all gas purchased for
resale, drip fees, compression fees, transportation fees, gathering fees and
other proceeds) and shall be responsible for all Operating Expenses (and
entitled to any refunds with respect thereto), in each case for any period of
time prior to the

 

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Effective Time as if EXCO held the Subject Assets directly. Except to the extent
otherwise taken into account in connection with adjustments to the Closing Cash
Contribution under Article 3, and subject to the occurrence of the Closing, the
Midstream Companies shall be entitled to all of the rights of ownership
attributable to the Midstream Companies (including, without limitation, the
right to all gas purchased for resale, drip fees, compression fees,
transportation fees, gathering fees and other proceeds), and shall be
responsible for all Operating Expenses (and entitled to any refunds with respect
thereto), in each case for the period of time from and after the Effective Time.
All Operating Expenses in each case that are: (i) incurred with respect to
operations conducted or production delivered to the Systems prior to the
Effective Time shall be paid by or allocated to EXCO and (ii) incurred with
respect to operations conducted or production delivered to the Systems from and
after the Effective Time shall be paid by or allocated to the Midstream
Companies.

(b) Each Midstream Company will pay to EXCO any and all revenues and other
proceeds attributable to the rights of ownership of the Subject Assets received
after Closing by such Midstream Company (to the extent not accounted for in the
Preliminary Settlement Statement or the Final Settlement Statement) that are
attributable to the Subject Assets prior to the Effective Time. Subject to the
occurrence of Closing, EXCO will pay to the Midstream Companies any and all
revenues and other proceeds attributable to the rights of ownership of the
Subject Assets received after Closing by EXCO (to the extent not accounted for
in the Preliminary Settlement Statement or the Final Settlement Statement) that
are attributable to the Subject Assets on and after the Effective Time. The
Party responsible for the payment of amounts received shall reimburse the other
Party within 5 Business Days after the end of the month in which such amounts
were received by the Party responsible for payment and, to the extent paid, such
amounts shall not be taken into account for purposes of the Final Settlement
Statement. Notwithstanding the foregoing, this Section 2.4(b) shall not apply to
amounts received prior to Closing if such amounts are included, in whole or in
part, in the Preliminary Settlement Statement. Such amounts (to the extent the
same differ from estimates in the Preliminary Settlement Statement) will not be
accounted for in the Final Settlement Statement to the extent accounted for by
the Parties pursuant to this Section 2.4(b) prior to the date of the Final
Settlement Statement.

(c) EXCO will reimburse each Midstream Company for any and all Operating
Expenses that are paid after Closing by such Midstream Company (to the extent
not accounted for the Preliminary Settlement Statement or the Final Settlement
Statement) and that are attributable to the Subject Assets prior to the
Effective Time. The Midstream Companies will reimburse EXCO for any and all
Operating Expenses that are paid after Closing by EXCO (to the extent not
accounted for the Preliminary Settlement Statement or the Final Settlement
Statement) and that are attributable to the Subject Assets prior to the
Effective Time. The Party responsible for the payment of such costs and expenses
shall reimburse the other Party within 5 Business Days after the end of the
month in which the applicable invoice and proof of payment of such invoice were
received by the Party responsible for payment and, to the extent paid, such
amounts shall not be taken into account for purposes of the Final Settlement
Statement. Notwithstanding the foregoing, this Section 2.4(c) shall not apply to
amounts paid prior to Closing if such amounts are included, in whole or in part,
in the Preliminary Settlement Statement. Such amounts (to the extent the same
differ from the estimates in the Preliminary Settlement Statement) will not be
accounted for in the Final Settlement Statement to the extent accounted for by
the Parties pursuant to this Section 2.4(c) prior to the date of the Final
Settlement Statement.

 

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(d) Each of EXCO and the Midstream Companies shall be permitted to offset any
Operating Expenses owed by it to the other pursuant to this Section 2.4 against
revenues owing by the other to it pursuant to this Section 2.4, but not
otherwise, provided a detailed description of all such Operating Expenses and
revenues and showing the calculation of the net amount is provided with the
applicable payment or statement.

(e) After Closing, each of EXCO and the Midstream Companies shall be entitled to
participate in all audits of Operating Expenses for which it is entirely or in
part responsible under the terms of this Section 2.4.

2.5 Guaranty. Simultaneously with the execution and delivery of this Agreement,
BG has executed and delivered the BG Parent Guaranty.

ARTICLE 3

DEPOSIT

3.1 Deposit.

(a) Within 1 Business Day following the execution of this Agreement, BG will
deposit by wire transfer in same day funds with Escrow Agent, to be held in
escrow pursuant to the Escrow Agreement, an amount equal to $12,450,000 (such
amount, together with any interest actually earned thereon, the “Deposit”). The
Deposit shall be applied toward the Closing Cash Contribution at the Closing.

(b) If the transactions contemplated by this Agreement are not consummated on or
before the Termination Date because of: the willful breach by BG of any of its
covenants or agreements hereunder in any material respect, including BG’s
covenants under Section 9.3 (other than as a result of EXCO’s breach of this
Agreement), then, in such event, EXCO shall have the option to (i) terminate
this Agreement and receive the Deposit (and the Parties shall instruct the
Escrow Agent to release the Deposit to EXCO pursuant to the terms of the Escrow
Agreement) as liquidated damages and EXCO’s sole and exclusive remedy (other
than EXCO’s remedy for breaches by BG of Sections 5.9, 6.6, 10.1(c) and (e),
10.2 and 14.4) free of any claims by BG thereto, (ii) seek the rights and
remedies set forth in Section 14.2 or (iii) terminate this Agreement, instruct
the Escrow Agent to release the Deposit to BG pursuant to the terms of the
Escrow Agreement, pay the Deposit to BG by wire transfer of immediately
available funds, and seek the rights and remedies set forth in Sections 14.2 and
14.3.

(c) If this Agreement is terminated by the mutual written agreement of BG and
EXCO, or if the Closing does not occur on or before the Termination Date for any
reason other than as set forth in Section 3.1(b), then BG shall be entitled to
the delivery of the Deposit, free of any claims by EXCO with respect thereto and
BG and EXCO shall instruct the Escrow Agent to release the Deposit to BG
pursuant to the terms of the Escrow Agreement. BG and EXCO shall thereupon have
the rights and obligations set forth in Sections 14.2 and 14.3.

 

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3.2 Adjustments to Closing Cash Contribution. All adjustments to the Closing
Cash Contribution shall be made (y) in accordance with the terms of this
Agreement and, to the extent not inconsistent with this Agreement, in accordance
with US generally accepted accounting principles as consistently applied in the
oil and gas industry and (z) without duplication. The Closing Cash Contribution
shall be adjusted as follows, and the resulting amount shall be herein called
the “Adjusted Closing Cash Contribution”.

(a) The Closing Cash Contribution shall be adjusted upward by the following
amounts (without duplication):

(i) an amount equal to 50% of all Operating Expenses and other costs and
expenses paid by any Midstream Company that are attributable to the Subject
Assets during the Interim Period, whether paid before or after the Effective
Time, including (A) bond and insurance premiums paid by or on behalf of any
Midstream Company during the Interim Period, (B) payments under Rights-of-Way,
and (C) other rental payments, but excluding (x) any amounts deducted under
Section 3(b)(i) below and (y) any amounts attributable to personal injury or
death, property damage (other than damage to structures, fences, irrigation
systems and other fixtures, crops, livestock and other personal property in the
ordinary course of business), torts, breach of contract (other than failure to
make payments under the terms of a contract) or violation of Law (or private
rights of action under any Law);

(ii) an amount equal to 50% of all Operating Expenses and other costs and
expenses paid by any Midstream Company that are attributable to periods of time
prior to the Effective Time and relate to the Haynesville Header System and
certain horizontal well connections all as are described in Schedule 3.2(a)(ii);

(iii) the amount of all Asset Taxes, if any, prorated to the Company in
accordance with Section 15.2 but payable by EXCO;

(iv) to the extent that any Midstream Company has overdelivered, or received
underdeliveries of, any Hydrocarbons as of the Effective Time as shown with
respect to the net Imbalances set forth in Schedule 4.12, as complete and final
settlement of all Imbalances (subject to BG’s remedies for a breach of EXCO’s
representation set forth in Section 4.12 and subject to Section 3.8), the sum of
$162,750 which is an amount equal to the product of (A) 81,375 MMBtu times
(B) $4.00 times (C) 50%; and

(v) any other amount provided for elsewhere in this Agreement or otherwise
agreed upon in writing by EXCO and BG as an upward adjustment to the Closing
Cash Contributions.

(b) The Closing Cash Contribution shall be adjusted downward by the following
amounts (without duplication):

(i) an amount equal to: (A) 50% of all proceeds received by the Midstream
Companies attributable to the Subject Assets during the Interim Period net of
expenses (other than Operating Expenses) paid by any Midstream Company directly
incurred in earning or receiving such proceeds, and any sales, excise or similar
taxes or fees payable or incurred in connection therewith not reimbursed to any
Midstream Company by a Third Party

 

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purchaser, and (B) 50% of any net other proceeds received by any Midstream
Company from sales of equipment, materials or other real or personal property,
and payments made for waivers or modifications of Applicable Contracts, or in
lieu of other performance thereof, or as a result of the breach thereof, in each
case attributable to the Subject Assets during the Interim Period;

(ii) if the Parties make the election under Section 12.1(b)(i) with respect to
an Environmental Defect, the Remediation Amount with respect to such
Environmental Defect if the Remediation Amount has been determined prior to
Closing;

(iii) an amount determined pursuant to Section 11.4(b), Section 11.4(d) or
Section 12.1(b)(iii) for any Subject Assets excluded from the transaction
contemplated hereby pursuant to such Sections;

(iv) the amount of all Asset Taxes, if any, prorated to EXCO in accordance with
Section 15.2 but payable by the Company;

(v) to the extent that any Midstream Company has underdelivered, or received
overdeliveries of, any Hydrocarbons as of the Effective Time as shown with
respect to the net Imbalances set forth in Schedule 4.12, as complete and final
settlement of all Imbalances (subject to BG’s remedies for a breach of EXCO’s
representation set forth in Section 4.12 and subject to Section 3.8), the sum of
$90,014 which is an amount equal to the product of (A) 45,007 MMBtu times
(B) $4.00 times (C) 50%; and

(vi) any other amount provided for elsewhere in this Agreement or otherwise
agreed upon in writing by EXCO and BG as a downward adjustment to the Closing
Cash Contribution.

3.3 Adjustment Methodology. When available, actual figures will be used for the
adjustments to the Closing Cash Contribution at the Closing. To the extent
actual figures are not available, estimates will be used subject to final
adjustments in accordance with Section 3.5.

3.4 Preliminary Settlement Statement. Not less than 5 Business Days prior to the
Closing, EXCO shall prepare and submit to BG for review, using the best
information available to EXCO, a draft settlement statement (the “Preliminary
Settlement Statement”) that shall set forth the Adjusted Closing Cash
Contribution, reflecting each adjustment made in accordance with this Agreement
as of the date of preparation of such Preliminary Settlement Statement and the
calculation of the adjustments used to determine such amount, together with the
designation of EXCO’s accounts for the wire transfers of funds as set forth in
Section 9.3(d). Within 3 Business Days of receipt of the Preliminary Settlement
Statement, BG will deliver to EXCO a written report containing all changes with
the explanation therefor that BG proposes to be made to the Preliminary
Settlement Statement. The Preliminary Settlement Statement, as agreed upon by
the Parties, will be used to adjust the Closing Cash Contribution at Closing. If
the Parties cannot agree on the Preliminary Settlement Statement prior to the
Closing, the Preliminary Settlement Statement as presented by EXCO will be used
to adjust the Closing Cash Contribution at Closing.

 

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3.5 Final Settlement Statement. A final settlement statement (the “Final
Settlement Statement”) will be prepared by EXCO, based on actual income and
expenses during the Interim Period and which takes into account all final
adjustments made to the Closing Cash Contribution and shows the resulting final
Closing Cash Contribution (the “Final Cash Amount”), and is delivered to BG on
or before 120 days after Closing. The Final Settlement Statement shall set forth
the actual proration of the amounts required by this Agreement. EXCO shall, at
BG’s request, supply all reasonable documentation in its or its Affiliates’
possession available to support the actual revenue, expenses and other items for
which adjustments are made. As soon as practicable, and in any event within 45
days after receipt of the Final Settlement Statement, BG shall return a written
report containing any proposed changes to the Final Settlement Statement and an
explanation of any such changes and the reasons therefor (the “Dispute Notice”).
If the Final Cash Amount set forth in the Final Settlement Statement is mutually
agreed upon by EXCO and BG, the Final Settlement Statement and the Final Cash
Amount, shall be final and binding on the Parties.

3.6 Disputes. If EXCO and BG are unable to resolve the matters addressed in the
Dispute Notice, each of BG and EXCO shall within 14 Business Days after the
delivery of such Dispute Notice, summarize its position with regard to such
dispute in a written document and submit such summaries to Ernst & Young LLP in
Dallas, Texas, or such other Person as may be selected pursuant to this Section
(the “Accounting Arbitrator”), together with the Dispute Notice, the Final
Settlement Statement and any other documentation such Party may desire to
submit. The Accounting Arbitrator shall also be furnished with a copy of this
Agreement. Should Ernst & Young LLP fail or refuse to agree to serve as
Accounting Arbitrator within 20 days after receipt of a written request from any
Party to serve, the Parties shall request Deloitte & Touche LLP to serve as
Accounting Arbitrator. Should Deloitte & Touche LLP fail or refuse to agree to
serve as Accounting Arbitrator within 20 days after receipt of a written request
from any Party to serve, and should the Parties fail to agree in writing on
another replacement Accounting Arbitrator within 10 days after the end of that
20 day period, or should no replacement Accounting Arbitrator agree to serve
within 60 days after the original written request pursuant to this Section, the
Accounting Arbitrator shall be appointed by the Dallas office of the American
Arbitration Association. Within 20 Business Days after receiving the Parties’
respective submissions, the Accounting Arbitrator shall render a decision
choosing either EXCO’s position or BG’s position with respect to each matter
addressed in any Dispute Notice, whichever is most accurate based on the terms
of this Agreement and the materials described above. Any decision rendered by
the Accounting Arbitrator pursuant hereto shall be final, conclusive and binding
on EXCO and BG and will be enforceable against any of the Parties in any court
of competent jurisdiction. The Accounting Arbitrator shall act as an expert for
the limited purpose of determining the specific disputed aspects of the Final
Settlement Statement submitted by any Party and may not award damages, interest,
or penalties to any Party with respect to any matter. The costs of such
Accounting Arbitrator shall be borne one-half by BG and one-half by EXCO.

3.7 Adjustment for Final Settlement Statement. Subject to adjustments for
revenues and expenses paid by the Parties pursuant to Section 2.4(b) and 2.4(c),
any difference in the Adjusted Closing Cash Contribution as paid at Closing
pursuant to the Preliminary Settlement Statement and the Final Cash Amount as
determined pursuant to Section 3.5 and, if applicable, Section 3.6, shall, if
the Adjusted Closing Cash Consideration exceeds the Final Cash Amount, be
contributed to the Company by EXCO or, if the Adjusted Closing Cash
Consideration is less than the Final Cash Amount, be contributed to the Company
by BG, in each case together with interest from the Closing Date to the date of
payment at a rate equal to the one month London

 

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Inter-Bank Offer Rate (as published in the Wall Street Journal) plus an
additional 2.5 percentage points (or, if such rate is contrary to any applicable
usury Law, the maximum rate permitted by such applicable Law), within 10 days of
final determination hereunder and the Parties shall cause the Company to
promptly make a distribution of such amount to the other Party. All amounts paid
pursuant to this Section 3.7 shall be delivered in United States currency by
wire transfer of immediately available funds to the account specified in writing
by the relevant Party.

3.8 Allocation for Imbalances at Closing. If, prior to Closing, BG or EXCO
discovers an error in the Imbalances set forth in Schedule 4.12, then the
Closing Cash Contribution shall be further adjusted at Closing pursuant to
Section 3.2(a)(iv) or Section 3.2(b)(v), as applicable, and Schedule 4.12 will
be deemed amended immediately prior to the Closing to reflect the Imbalances for
which the Closing Cash Contribution is so adjusted.

3.9 Maintenance of Value.

(a) EXCO shall receive at Closing pursuant to the special distribution described
in Section 4.5(e) of the Limited Liability Company Agreement in excess of $200
million from the Adjusted Closing Cash Contribution. EOC agrees that until
December 31, 2011, it will maintain a minimum of $200 million of such
consideration (the “Minimum Consideration”) in EOC and shall not dividend or
otherwise distribute any of such Minimum Consideration to any of EOC’s
Affiliates, or use any of such Minimum Consideration to repay debt to any of
EOC’s Affiliates or to satisfy any obligation on behalf of any of EOC’s
Affiliates, other than (in each case) EOC’s own direct or indirect wholly-owned
subsidiaries; provided, however, EOC may use all or any portion of such Minimum
Consideration to (i) pay expenses or costs in connection with EOC’s general
corporate purposes, (ii) keep such amounts as cash or cash equivalents and make
other short-term investments of such amounts, (iii) acquire properties or other
assets, (iv) make capital expenditures, including the payment of any costs of
New Business or Acquired Business (as each such term is defined in the Limited
Liability Company Agreement), (v) make capital contributions to the Company,
(vi) satisfy the debt described in clause (a) of the definition of “EXCO Debt
Instruments” by making a payment to reduce the outstanding principal and
interest thereunder to the extent such payment is made because of a mandatory
reduction of the borrowing base under such EXCO Debt Instrument in connection
with the contribution of the Contributed Interests to the Company as part of the
transactions contemplated by this Agreement and (vii) satisfy the debt described
in clause (b) of the definition of “EXCO Debt Instruments” by paying off the
outstanding principal and interest under such EXCO Debt Instrument and all of
such uses shall be considered maintenance of such consideration in EOC as
required pursuant to foregoing. To the extent that EOC or its direct or indirect
wholly-owned subsidiaries uses all or any portion of such Minimum Consideration
for the purposes set forth in clause (i), (iii), (iv), (v) (vi) or (vii), the
amount required to be maintained by EOC as Minimum Consideration shall be
decreased by the amount of such usage, and, in the event the amount required to
be maintained by EOC as Minimum Consideration is reduced to zero, then this
Section 3.9(a) shall thereafter terminate and be of no further force and effect,
subject, however, to Section 3.9(b).

(b) Notwithstanding Section 3.9(a), should a portion of the consideration be
used to pay off amounts owing pursuant to the EXCO Debt Instruments and (i) the
payment does not satisfy the requirements of Section 3.9(a)(vi) or (vii), then
additional amounts thereafter

 

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borrowed under such EXCO Debt Instruments, up to the amount previously repaid
that did not satisfy the requirements of Section 3.9(a)(vi) or (vii), shall
again be subject to the restrictions in Section 3.9(a) or (ii) the debt
represented in the EXCO Debt Instruments be consolidated with other debt from
any of EOC’s Affiliates (other than its own direct or indirect wholly-owed
subsidiaries) or be replaced by a new credit arrangement providing for
indebtedness of both EOC and one or more of its Affiliates (other than its own
direct or indirect wholly-owed subsidiaries), EOC shall provide BG and the
Company with a payment guarantee of EOC’s obligations for additional
contributions under Article 3 of the Limited Liability Company Agreement from
EOC’s ultimate parent entity (presently EXCO Resources, Inc.) in a form
substantially similar to the BG Parent Guaranty Agreement, provided that such
guaranty shall terminate at the same time that the Joint Development Agreement
(as that term is defined in the Purchase and Sale Agreement) terminates, and the
restrictions on use of consideration in Section 3.9(a) shall thereafter
terminate and be of no further effect. If BG in the future enters into any
agreement for borrowed money or security arrangements that are in whole or in
part for the benefit of BG’s Affiliates (other than its own direct or indirect
wholly-owed subsidiaries) as borrowers, BG shall provide EOC and the Company
with a payment guarantee of BG’s obligations for additional contributions under
Article 3 of the Limited Liability Company Agreement from BG’s ultimate parent
entity (for this purpose, presently BG Energy Holdings Limited) in a form
substantially similar to the BG Parent Guaranty Agreement, provided that such
guaranty shall terminate at the same time that the Joint Development Agreement
(as that term is defined in the Purchase and Sale Agreement) terminates.

ARTICLE 4

REPRESENTATIONS AND WARRANTIES OF EXCO

EXCO represents and warrants to BG as follows:

4.1 Organization, Existence. EOC is a limited partnership duly formed and
validly existing under the Laws of the State of Delaware. Vaughan is a limited
liability company duly formed and validly existing under the Laws of the State
of Texas. GP Holding is a limited liability company duly formed and validly
existing under the Laws of the State of Delaware. The Company is a limited
liability company duly formed and validly existing under the Laws of the State
of Delaware. Talco is a limited partnership duly formed and validly existing
under the Laws of the State of Texas. TGG is a limited partnership duly formed
and validly existing under the Laws of the State of Texas. EXCO and each of the
Contributed Companies have all requisite power and authority to own and operate
its property and to carry on its business as now conducted. EXCO and each of the
Contributed Companies is duly licensed or qualified to do business as a foreign
limited partnership or limited liability company, as applicable, and is in good
standing in all jurisdictions in which such qualification is required by Law,
except where the failure to qualify or be in good standing would not have a
Material Adverse Effect.

4.2 Authorization. EXCO and each of the Contributed Companies have full power
and authority to enter into and perform this Agreement and the Transaction
Documents to which it is a party and the transactions contemplated herein and
therein. The execution, delivery, and performance by EXCO and each of the
Contributed Companies (if applicable) of this Agreement

 

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have been and at Closing the Transaction Documents to which it is a party will
have been duly and validly authorized and approved by all necessary partnership
or company action, as applicable, on the part of such Person. This Agreement is,
and the Transaction Documents to which EXCO or any Contributed Company is a
party when executed and delivered by such Person will be, the valid and binding
obligation of such Person and enforceable against such Person in accordance with
their respective terms, subject to the effects of bankruptcy, insolvency,
reorganization, moratorium, and similar Laws affecting the rights of creditors
generally, as well as to principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at Law).

4.3 No Conflicts. Except as disclosed in Schedule 4.3 and assuming the receipt
of all consents and the waiver of all preferential purchase rights applicable to
the transactions contemplated hereby, the execution, delivery, and performance
by EXCO and each Contributed Company of this Agreement and the Transaction
Documents to which it is a party and the consummation of the transactions
contemplated herein and therein does not and will not (a) conflict with or
result in a breach of any provisions of the organizational documents or other
governing documents of EXCO or any Contributed Company, (b) except for Permitted
Encumbrances, result in a default or the creation of any Encumbrance or give
rise to any right of termination, cancellation, or acceleration under any of the
terms, conditions, or provisions of any Applicable Contract, note, bond,
mortgage, indenture, license, or other material agreement to which any EXCO or
any Contributed Company is a party or by which any EXCO, any Contributed Company
or the Subject Assets may be bound or (c) assuming the Parties make the
necessary HSR Act filings and otherwise comply with the HSR Act, violate any Law
applicable to EXCO, any Contributed Company or any of the Subject Assets, except
in the case of clauses (b) and (c) where such default, Encumbrance, termination,
cancellation, acceleration or violation would not, individually or in the
aggregate, have a Material Adverse Effect.

4.4 Consents. Except (a) as set forth in Schedule 4.4, (b) for Customary
Post-Closing Consents, (c) under Contracts that are terminable upon not greater
than 60 days notice without payment of any fee, (d) requirements under the HSR
Act and (e) preferential purchase rights set forth in Schedule 4.10, there are
no consents or other restrictions on assignment, including, but not limited to,
requirements for consents from Third Parties to any assignment (in each case)
that would be applicable in connection with the transfer of the general partner
interests in the Midstream Companies to GP Holding, the transfer of the
membership interests in GP Holding to EOC, the transfer of the Contributed
Interests to the Company, and/or the transfer of a 50% membership interest in
the Company to BG, all as contemplated under this Agreement, or the consummation
of the other transactions contemplated by this Agreement by EXCO or any
Contributed Company.

4.5 Bankruptcy. There are no bankruptcy, reorganization or receivership
proceedings pending, being contemplated by or, to EXCO’s Knowledge, threatened
against EXCO or its Affiliates, and neither EXCO nor any of its Affiliates is
insolvent or generally not paying its debts as they become due.

4.6 Foreign Person and Tax Status. Each of EOC, Vaughan, (prior to Closing) GP
Holding, (prior to Closing) the Midstream Companies and (prior to Closing) the
Company is an entity disregarded from EXCO Resources, Inc. for federal income
tax purposes. EXCO Resources, Inc. (a) is not a “foreign person” within the
meaning of Section 1445 of the Code and (b) is not an entity disregarded as
separate from any other Person within the meaning of Section 301.7701-3(a) of
the Treasury Regulations.

 

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4.7 Claims and Litigation. Except as set forth in Schedule 4.7, there is no
written claim for breach of contract, tort or violation of Law, or investigation
of which EXCO has received written notice, or any suit, action or litigation, by
any Person, and no legal, administrative or arbitration proceedings, (in each
case) pending, or to EXCO’s Knowledge, threatened in writing against EXCO with
respect to the Contributed Companies or Subject Assets, or against any
Contributed Company, or that, as of the date hereof, would have a material
adverse effect upon the ability of EXCO or any Contributed Company to consummate
the transactions contemplated by this Agreement.

4.8 Material Contracts.

(a) Schedule 4.8 sets forth all Applicable Contracts of the type described below
(collectively, the “Material Contracts”):

(i) any Applicable Contract that can reasonably be expected to result in
aggregate payments by any Contributed Company of more than $250,000 during the
current or any subsequent fiscal year or $1,000,000 in the aggregate over the
term of such Applicable Contract (in each case, based solely on the terms
thereof and current quantities, if applicable, without regard to any expected
increase in quantities or revenues);

(ii) any Applicable Contract that can reasonably be expected to result in
aggregate revenues to any Contributed Company of more than $250,000 during the
current or any subsequent fiscal year or $1,000,000 in the aggregate over the
term of such Applicable Contract (in each case, based solely on the terms
thereof and current quantities, if applicable, without regard to any expected
increase in quantities or revenues);

(iii) any Hydrocarbon purchase and sale, gathering, transportation, processing
or similar Contract unless terminable by each party without penalty on 60 days
or less notice;

(iv) any Applicable Contract that is an indenture, mortgage, loan, credit or
sale-leaseback, guaranty of any obligation, bonds, letters of credit or similar
financial Contract (a “Debt Instrument”);

(v) any Applicable Contract that constitutes a lease under which any Contributed
Company is the lessor or the lessee of real, immovable, personal or movable
property which lease (A) cannot be terminated by any Contributed Company without
penalty upon 60 days or less notice and (B) involves an annual base rental of
more than $250,000;

(vi) any Applicable Contract that constitutes a non-competition agreement or any
agreement that purports to restrict, limit or prohibit the manner in which, or
the locations in which, any Contributed Company conducts business, including
area of mutual interest Contracts;

 

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(vii) any Applicable Contract with EXCO or any Affiliate of EXCO (other than a
Contributed Company) which will be binding on any Contributed Company after the
Closing Date and will not be terminable by such Person within 30 days or less
notice;

(viii) any Applicable Contract where the primary purpose thereof was to
indemnify a Third Party;

(ix) any executory Applicable Contract that constitutes a pending purchase and
sale agreement or other Contract providing for the purchase, sale or earning of
any material asset;

(x) any Applicable Contract that constitutes a partnership agreement, joint
venture agreement or similar Contract (in each case, other than a tax
partnership); and

(xi) any Applicable Contract that constitutes a pipeline or facility operating
agreement with respect to all or any part of the Systems.

(b) The Material Contracts are in full force and effect as to EXCO or the
Contributed Company that is a party thereto and to EXCO’s Knowledge each
counterparty (excluding any Material Contract that terminates as a result of
expiration of its existing term). Except as set forth on Schedule 4.8, there
exist no material defaults under the Material Contracts by EXCO or any
Contributed Company or, to EXCO’s Knowledge, by any other Person that is a party
to such Material Contracts. Except as set forth on Schedule 4.8 and except for
such matters that would not, individually or in the aggregate, have a Material
Adverse Effect, no event has occurred that with notice or lapse of time or both
would constitute any default under any such Material Contract by EXCO or any
Contributed Company or, to EXCO’s Knowledge, by any other Person who is a party
to such Material Contract. Prior to the execution of this Agreement, EXCO has
made available to BG true and complete copies of each Material Contract and all
amendments thereto. Neither EXCO nor any Contributed Company has received or
given any unresolved written notice of default, amendment, waiver, price
redetermination, market out, curtailment or termination with respect to any
Material Contract.

(c) Except as set forth on Schedule 4.8, Part 2, the Applicable Contracts do not
include:

(i) any non-competition agreements or agreements that purport to restrict, limit
or prohibit the manner in which, or the locations in which, any Contributed
Company conducts business, including area of mutual interest Contracts;

(ii) any “tag-along” or similar rights allowing a third party to participate in
future sales of any of the Subject Assets or any interest in the Contributed
Companies; or

(iii) any Contracts with Affiliates of EXCO (other than another Contributed
Company) which will remain in effect at the Closing.

 

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4.9 No Violation of Laws. Except as set forth on Schedule 4.9, (a) there is no
uncured violation by any Contributed Company of any applicable Laws, or by EXCO
of any applicable Laws with respect to the ownership or operation of the
Contributed Companies or the Subject Assets, except where such violations,
individually or in the aggregate, would not have a Material Adverse Effect, or
(b) to EXCO’s Knowledge, there is no uncured material violation by any other
Person of any applicable Laws with respect to the ownership and operation of the
Subject Assets. This Section 4.9 does not include any matters with respect to
Environmental Laws, such matters being addressed exclusively in Section 4.14.

4.10 Preferential Rights. Except as set forth in Schedule 4.10, there are no
preferential rights to purchase that are applicable to the transactions
contemplated hereby.

4.11 Payments under Rights-of-Way. Except for such items that are being held in
suspense as permitted pursuant to applicable Law, the Midstream Companies have
paid in all material respects all rentals and other periodic payments under the
Rights-of-Way that are due by EXCO or its Affiliates.

4.12 Imbalances. Schedule 4.12 sets forth all Imbalances associated with the
Subject Assets as of the Effective Time.

4.13 Current Commitments. Schedule 4.13 sets forth, as of the date of this
Agreement, all authorities for expenditures or other current commitments
(“AFE’s”) relating to the Subject Assets or for other capital expenditures that
in each case will be binding upon any of the Contributed Companies or the
Subject Assets after Closing, for which all of the activities anticipated in
such AFE’s have not been completed by the date of this Agreement.

4.14 Environmental.

(a) With respect to the Subject Assets, neither EXCO nor any Contributed Company
has entered into, or is subject to, any agreements, consents, orders, decrees,
judgments, license or permit conditions, or other directives of any Governmental
Authority in existence as of the date of this Agreement based on any
Environmental Laws that relate to the future use of any of the Subject Assets
and that require any remediation or other change in the present conditions of
any of the Subject Assets.

(b) Except as set forth in Schedule 4.14, as of the date of this Agreement
neither EXCO nor any Contributed Company has received written notice from any
Person of any release, disposal, event, condition, circumstance, activity,
practice or incident concerning any land, facility, asset or property included
in the Subject Assets that: (i) interferes with or prevents compliance by any
Contributed Company or the Subject Assets with any Environmental Law or the
terms of any permits, licenses, orders, approvals, variances, waivers,
franchises, rights or other authorizations issued pursuant thereto; or
(ii) gives rise to or results in any common law or other liability of any
Contributed Company to any Person which, in the case of either clause (i) or
(ii) hereof, would have a Material Adverse Effect.

(c) To EXCO’s Knowledge, all material reports, studies, written notices from
environmental Governmental Authorities, tests, analyses, and other documents
specifically addressing environmental matters related to the ownership or
operation of the Subject Assets, which are in EXCO’s or its Affiliates’
possession, have been made available to BG.

 

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(d) Except as set forth in Schedule 4.14 and except for any matters that BG has
claimed as Environmental Defects pursuant to Section 12.1(a), to EXCO’s
Knowledge, there are no material uncured violations of any applicable
Environmental Laws with respect to the Contributed Companies or the Subject
Assets and no material obligations to remediate conditions by the Contributed
Companies upon the Subject Assets under applicable Environmental Law (and no
such obligation would arise as a result of notice or lapse of time or both).

4.15 Taxes. Except as disclosed in Schedule 4.15:

(a) all Asset Taxes that have become due and payable have been properly paid;

(b) all returns with respect to Asset Taxes that are required to be filed by the
owner of the Assets have been filed;

(c) no Contributed Company has received written notice of any pending claim
against it (which remains outstanding) from any applicable Governmental
Authority for assessment of Asset Taxes and, to EXCO’s Knowledge, no such claim
has been threatened;

(d) no audit, litigation or other proceeding with respect to Asset Taxes has
been commenced or is presently pending;

(e) there are no liens for Taxes on the Subject Assets or the Contributed
Interests other than statutory liens for current Taxes not yet due;

(f) all amounts required in the operation of the business to be withheld by or
with respect to any of the Contributed Companies and paid to Governmental
Authorities for Taxes have been collected or withheld and to the extent
required, paid to the proper Governmental Authorities;

(g) none of the Contributed Companies is a party to any Tax sharing agreement;

(h) there are no Taxes of any Person other than any of the Contributed Companies
for which any of the Contributed Companies could be held liable after the
Closing under Treasury Regulations Section 1.1361-4(a)(6), 1.1502-6,
301.7701-2(c)(2)(iii) or similar principles;

(i) in all states imposing a state entity-level income Tax in which any of the
Contributed Companies do business, each of the Contributed Companies is treated
for such purposes in a manner consistent with the treatment of the entity for
federal income tax purposes;

(j) none of the Contributed Companies has (i) participated in any listed
transaction or any other reportable transaction within the meaning of Treasury
Regulations Section 1.6011-4, (ii) engaged in any transaction that gives rise to
a registration obligation under Section 6111 of the Code or a list maintenance
obligation under Section 6112 of the Code, or (iii) taken any position on a Tax
return that could give rise to a substantial underpayment of Tax under
Section 6662 of the Code or any similar provision of state or local Law for
which a Contributed Company could be held liable; and

 

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(k) none of the Subject Assets is subject to Section 197(f)(9) of the Code.

4.16 Brokers Fees. Neither EXCO nor any Contributed Company has incurred
liability, contingent or otherwise, for brokers’ or finders’ fees relating to
the transactions contemplated by this Agreement or the Transaction Documents for
which any Contributed Company, BG or any Affiliate of BG shall have any
responsibility.

4.17 Abandonment.

(a) Except as set forth on Schedule 4.17, there are no pipelines or gathering
facilities that constitute part of the Subject Assets (i) in respect of which
EXCO or any Contributed Company has received an order from any Governmental
Authority requiring that such pipelines or gathering facilities be abandoned, or
(ii) that are neither in use nor temporarily abandoned in accordance with
applicable Law that have not been abandoned in accordance with applicable Law.

(b) To EXCO’s Knowledge, all pipelines are within the limits permitted by all
applicable Rights-of-Way and Applicable Contracts.

4.18 Partnerships. Except as set forth on Schedule 4.18, none of the Midstream
Companies’ interests in the Subject Assets is subject to tax partnership
reporting for federal income tax purposes. Schedule 4.18 sets forth all of
EXCO’s and EXCO’s Affiliates’ interest in the Subject Assets that are deemed by
agreement or applicable Law to be held by a partnership or association for
federal tax purposes, and, to the extent any of the Subject Assets are deemed by
agreement or applicable Law to be held by a partnership for federal tax
purposes, each such partnership has or shall have in effect an election under
Section 754 of the Code that will apply with respect to such portion of the
Subject Assets.

4.19 Permits. Each Contributed Company possess all material permits, licenses,
orders, approvals, variances, waivers, franchises, rights, and other
authorizations (“Permits”), required to be obtained from any Governmental
Authority for conducting its business as presently conducted and there are no
material uncured violations of the terms and provisions of such authorizations.
With respect to each such Permit, neither EXCO nor any Contributed Company has
received written notice from any Governmental Authority of any violations of
such permits that remains uncured.

4.20 Subject Assets Complete. The Subject Assets and other assets held by the
Contributed Companies include all equipment, material, Contracts, data and
records and other property primarily used or primarily held for use by EXCO or
any of its Affiliates in connection with the ownership and use of the Systems,
excluding the following: (a) all Excluded Assets, (b) all assets covered by the
Purchase and Sale Agreement, and (c) general corporate services and assets not
specifically acquired or held for use in connection with the Subject Assets.

4.21 No Material Adverse Change. Except as set forth on Schedule 4.21, since the
Effective Date up to the date of this Agreement there has been no:

(a) material damage, destruction or loss to the Subject Assets;

 

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(b) Material Adverse Effect; or

(c) action that would have required the consent of BG under Section 6.1(b),
(f) or (i), had those Sections been in effect.

4.22 Capitalization.

(a) EXCO has furnished to BG true and complete copies of the limited liability
company agreement, agreement of limited partnership and other organizational
documents of each Contributed Company, each as in effect on the date hereof.

(b) EOC holds of record and beneficially all Limited Partner Interests, free and
clear of all Encumbrances. Prior to the transfers contemplated by Section 6.7,
Vaughan holds of record and beneficially all General Partner Interests, free and
clear of all Encumbrances. Following the transfers contemplated by Section 6.7,
GP Holding will hold of record and beneficially all General Partner Interests,
free and clear of all Encumbrances. The General Partner Interests and the
Limited Partner Interests represent all of the issued and outstanding equity
interests in TGG and Talco.

(c) Prior to the transfers contemplated by Section 6.7, Vaughan holds of record
and beneficially all the equity interest of GP Holding free and clear of all
Encumbrances. EOC holds of record and beneficially all equity interests of the
Company and after the transfers contemplated by Section 6.7, GP Holding, (in
each case) free and clear of all Encumbrances.

(d) The General Partner Interests, the Limited Partner Interests and the equity
interests of GP Holding and the Company are duly authorized and validly issued
and outstanding and have not been issued in violation of any preemptive rights.
Other than pursuant to this Agreement, none of TGG, Talco, GP Holding or the
Company has any outstanding convertible security, call, preemptive right,
option, warrant, purchase right or other contract or commitment that would,
directly or indirectly, require such entity to sell, issue or otherwise dispose
of any equity interest of such entity and none of such Persons has granted any
right to any distribution, carried interest, economic interest, preferred return
or other right similar to the rights enjoyed by or accruing to a holder of
equity interests with respect to such Person. There are no shareholder
agreements, voting agreements, management agreements, proxies or other similar
agreements or understandings, whether written or oral, with respect to TGG,
Talco, GP Holding or the Company.

(e) Each of GP Holding and the Company currently has no assets or liabilities.

(f) As of the Effective Time, none of the assets of the Midstream Companies were
held as cash or in short-term investments.

4.23 No Subsidiaries. Neither TGG nor Talco has any subsidiaries or any direct
or indirect equity interest in any Person.

 

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4.24 Balance Sheets. EXCO has delivered to BG: unaudited consolidated balance
sheets and income statements of each of TGG and Talco as of (a) December 31,
2008 and for the 12 month period then ended and (b) June 30, 2009 for the three
month period then ended. Based upon information of which EXCO is aware as of the
date hereof and subject to the matters set forth in Schedule 4.24, such balance
sheets and income statements fairly present the financial condition and the
results of operations of TGG and Talco, as applicable, as of the respective
dates of and for the periods referred to in such balance sheets and income
statements, all in accordance with GAAP, consistently applied and subject to
normal recurring year-end adjustments and the absence of notes with respect to
the June 30, 2009 statements presented.

4.25 Employees. None of the Contributed Companies has, or since January 1, 2003
has had, any employees. At no time has any of the Contributed Companies
participated in or contributed to, or had any obligation to participate in or
contribute to, any employee benefit plan or arrangement maintained or supported
by multiple employers, and there is no pending claim for withdrawal liability
under such a plan or arrangement.

4.26 Loans and Guarantees. Except as set forth on Schedule 4.26, the Contributed
Companies have no loans for borrowed money from, and no guarantees for the
benefit of, any person other than another Contributed Company.

4.27 Bank Accounts and Powers of Attorney. Schedule 4.27 sets forth a complete
list of all bank accounts and investment accounts maintained by each Contributed
Company, along with a list of persons authorized to sign with respect to such
accounts. Schedule 4.27 also sets forth a list of all valid powers of attorney
issued by any Contributed Company which remain in effect.

4.28 Unrelated Activities. No Contributed Company has engaged in any business
other than the ownership, operation, maintenance, expansion, construction,
commissioning and decommissioning of, and acquisition of, gathering systems,
pipelines and treatment and processing facilities in the East Texas/North
Louisiana Area, marketing of capacity on such gathering systems, buying and
selling gas and condensate in connection therewith, and the provision of
compression services in connection therewith.

4.29 Title to Subject Assets. The Midstream Companies hold title to the Subject
Assets free of any Title Defects.

ARTICLE 5

BG’S REPRESENTATIONS AND WARRANTIES

BG represents and warrants to EXCO the following:

5.1 Organization; Existence. BG is a limited liability company, duly formed,
validly existing and in good standing under the laws of the state of its
formation and has all requisite power and authority to own and operate its
property and to carry on its business as now conducted.

 

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5.2 Authorization. BG has full power and authority to enter into and perform
this Agreement and the Transaction Documents to which it is a party and the
transactions contemplated herein and therein. The execution, delivery, and
performance by BG of this Agreement have been and at Closing the Transaction
Documents to which it is a party will have been duly and validly authorized and
approved by all necessary limited liability company action on the part of BG.
This Agreement is, and the Transaction Documents to which BG is a party when
executed and delivered by BG will be, the valid and binding obligation of BG and
enforceable against BG in accordance with their respective terms, subject to the
effects of bankruptcy, insolvency, reorganization, moratorium, and similar laws
affecting the rights of creditors generally, as well as to principles of equity
(regardless of whether such enforceability is considered in a proceeding in
equity or at Law).

5.3 No Conflicts. The execution, delivery, and performance by BG of this
Agreement and the Transaction Documents to which it is a party and the
consummation of the transactions contemplated herein and therein will not
(a) conflict with or result in a breach of any provisions of the organizational
or other governing documents of BG, (b) result in a default or the creation of
any Encumbrance or give rise to any right of termination, cancellation, or
acceleration under any of the terms, conditions, or provisions of any note,
bond, mortgage, indenture, license, or other material agreement to which BG is a
party or by which BG or any of its property may be bound or (c) assuming the
Parties make the necessary HSR Act filings and otherwise comply with the HSR
Act, violate any Law applicable to BG or any of its property, except in the case
of clauses (b) and (c) where such default, Encumbrance, termination,
cancellation, acceleration or violation would not, individually or in the
aggregate, have a material adverse effect upon the ability of BG to consummate
the transactions contemplated by this Agreement.

5.4 Consents. There are no consents or other restrictions on assignment,
including, but not limited to, requirements for consents from Third Parties to
any assignment (in each case) that would be applicable in connection with the
consummation of the transactions contemplated by this Agreement by BG and are
not also required of EXCO.

5.5 Bankruptcy. There are no bankruptcy, reorganization or receivership
proceedings pending, being contemplated by or, to BG’s knowledge, threatened
against BG or BG Parent, and neither BG nor BG Parent is insolvent or generally
not paying its debts as they become due.

5.6 Claims and Litigation. There is no written claim for breach of contract,
tort or violation of Law or investigation of which BG has received written
notice or any suit, action or litigation, by any Person, and no legal,
administrative, or arbitration proceedings, (in each case) pending, or to BG’s
knowledge, threatened in writing against BG, or to which BG is a party, that
would have a material adverse effect upon the ability of BG to consummate the
transactions contemplated by this Agreement.

5.7 Financing. BG has, or as of the Closing Date shall have, sufficient funds
with which to pay the Closing Cash Contribution and consummate the transactions
contemplated by this Agreement.

5.8 Independent Evaluation. BG is sophisticated in the evaluation, purchase,
ownership and operation of oil and gas properties and related facilities. In
making its decision to enter into this Agreement and to consummate the
transaction contemplated herein, BG, except to

 

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the extent of EXCO’s express representations and warranties in Article 4 hereof,
in the Assignment, or in the certificate delivered by EXCO at Closing pursuant
to Section 9.3(g), (a) has relied or shall rely solely on its own independent
investigation and evaluation of the Subject Assets and the advice of its own
legal, tax, economic, environmental, engineering, geological and geophysical
advisors and the express provisions of this Agreement and not on any comments,
statements, projections or other materials made or given by any representatives
or consultants or advisors engaged by EXCO, and (b) has satisfied or shall
satisfy itself through its own due diligence as to the environmental and
physical condition of and contractual arrangements and other matters affecting
the Subject Assets.

5.9 Broker’s Fees. BG has incurred no liability, contingent or otherwise, for
brokers’ or finders’ fees relating to the transactions contemplated by this
Agreement or the Transaction Documents for which any Contributed Company, EXCO
or EXCO’s Affiliates shall have any responsibility.

5.10 Accredited Investor. BG is an “accredited investor,” as such term is
defined in Regulation D of the Securities Act of 1933, as amended, and will
acquire its membership interest in the Company for its own account and not with
a view to a sale or distribution thereof in violation of the Securities Act of
1933, as amended, and the rules and regulations thereunder, any applicable state
blue sky Laws or any other applicable securities Laws.

ARTICLE 6

CERTAIN AGREEMENTS

6.1 Conduct of Business. Except as set forth in Schedule 6.1 or as expressly
contemplated by this Agreement including Section 6.7, or as expressly consented
to in writing by BG, EXCO agrees that from and after the date hereof until
Closing, EXCO will, and EXCO will cause the Contributed Companies to:

(a) maintain, and if one of such Persons is the operator thereof, to operate,
the Subject Assets in a good and workmanlike manner, consistent with past
practice, and in accordance with the Applicable Contracts and applicable Laws in
all material respects;

(b) in the case of the Contributed Companies, maintain their books and records,
including the books of account and records relating to the Subject Assets, in
the usual, regular and ordinary manner, in accordance with US generally accepted
accounting principles and the usual accounting practices of each such Person;

(c) give written notice to BG as soon as is practicable (but within 5 Business
Days) of any written notice received or given by EXCO or any of EXCO’s
Affiliates with respect to (i) any alleged material breach of any Right-of-Way
or Material Contract, (ii) any action to alter, terminate, rescind or procure a
judicial reformation of any Right-of-Way or Material Contract or (iii) notice in
writing of any new claim for damages or any new investigation, suit, action or
litigation with respect to the Contributed Companies or the Subject Assets;

 

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(d) except for (i) emergency operations related to events that endanger
property, lives or the environment, or (ii) operations required under presently
existing AFE’s described on Schedule 4.13 or the approved Annual Work Program
and Budget under the Limited Liability Company Agreement, not agree to, propose
or commence any operations or acquire any Right-of-Way anticipated to cost (net
to the Contributed Companies) in excess of $500,000 per operation or $10,000,000
in the aggregate; provided that with respect to emergency operations, EXCO shall
notify BG of said emergency as soon as reasonably practicable, and provided
further that with respect to AFE’s in excess of $500,000 net to the Contributed
Companies, EXCO shall forward same to BG as soon as reasonably practicable
following receipt thereof and BG shall review and respond to same in writing to
EXCO within 5 Business Days of its receipt thereof (or within such lesser time
as is required under the terms of the applicable Third Party agreement and
stated in EXCO’s notice, but in no event less than 24 hours after receipt) and
if BG does not approve or reject any such AFE within such time period, BG shall
be deemed to have responded to same in the same manner as EXCO (or its
Affiliate) elects to vote;

(e) in the case of the Contributed Companies, not enter into, or permit any of
its Affiliates to enter into, an Applicable Contract that if entered into prior
to the date of this Agreement would be required to be listed in a Schedule
attached to this Agreement, and not amend, waive any material right under or
terminate (other than by failing to renew an existing term), or permit any of
its Affiliates to amend, waive any material right under or terminate (other than
by failing to renew an existing term), an Applicable Contract that is listed in
a Schedule attached to this Agreement or that if entered into prior to the date
of this Agreement would be required to be listed in a Schedule attached to this
Agreement (either before the action proposed to be taken or as a result of the
action proposed to be taken);

(f) not transfer, sell, mortgage, pledge, encumber or dispose of (or permit any
Affiliates to do any of the foregoing) any equity interests in any Contributed
Company or any portion of the Subject Assets other than the sale and/or disposal
of Hydrocarbons in the ordinary course of business and sales of equipment,
including pipe, that is no longer necessary in the operation of the Subject
Assets or for which replacement equipment of equal or greater value has been
obtained;

(g) maintain insurance coverage on the Subject Assets in the amounts and types
currently in force;

(h) not grant or create any preferential right to purchase, right of first
opportunity or other transfer restriction or requirement with respect to the
Contributed Companies or the Subject Assets;

(i) use commercially reasonable efforts to maintain in full force and effect all
material Rights-of-Way and all material permits, licenses, orders, approvals,
variances, waivers, franchises, rights and authorizations held by it and issued
by any Governmental Authority with respect to the Subject Assets, (in each case)
except where any such Right-of-Way, permit, license, order, approval, variance,
waiver, franchise, right or authorization terminates pursuant to its existing
term and except in instances where a reasonably prudent operator would not
maintain the same;

(j) give prompt written notice to BG of any material damage to or destruction of
any of the Subject Assets; and

 

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(k) not agree, whether in writing or otherwise, to do any of the things EXCO has
agreed not to do in this Section 6.1.

6.2 Conduct of the Contributed Companies. Except as provided in Section 6.7 or
as expressly consented to in writing by BG, EXCO agrees that from and after the
date hereof until Closing, EXCO will not permit the Contributed Companies to:

(a) amend any Contributed Company’s limited liability company agreement,
agreement of limited partnership or equivalent governing documents;

(b) issue, transfer, or redeem or otherwise acquire any of its own equity
interests, or issue any subscription, option, warrant or right with respect to
its equity interests, or any securities convertible or exchangeable for such
equity interests, or declare or pay any dividend or other distribution or
payment to EXCO or any of its Affiliates other than the Contributed Companies,
except distributions of the Excluded Assets or cash and payments for goods and
services acquired in the ordinary course of business;

(c) incur, assume or guaranty any indebtedness for borrowed money, except
(i) advances from Affiliates that are capitalized prior to Closing and (ii) any
presently existing guaranty issued in connection with the EXCO Debt Instruments
which will terminate at or prior to Closing;

(d) lend to any Person or make an equity investment in any Person other than (in
each case) another Contributed Company;

(e) make any change in its method of accounting or accounting practice or
policy, other than changes required by US generally accepted accounting
principles;

(f) acquire by merging or consolidating with, or by purchasing a substantial
portion of the assets of, or in any other manner, any business or business
entity;

(g) enter into any capital lease (other than, where relevant, renewals of
existing Rights-of-Way);

(h) execute any consent to extend any statute of limitations with respect to
taxes or any extension of time with respect to any Tax assessment or collection
or any due date for the filing of any Tax return, or make any change to such
Contributed Company’s fiscal year or tax elections, or any Tax methods or
principles or settle any issue with respect to any Tax audit or assessment;

(i) employ any person; or

(j) agree, whether in writing or otherwise, to do any of the things EXCO has
agreed not to permit in this Section 6.2.

 

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6.3 Notifications. If either EXCO or BG obtains actual knowledge that the other
Party apparently has breached a representation, warranty, covenant or other
agreement under this Agreement, that Party shall promptly inform the other Party
of such potential breach so that it may attempt to remedy or cure such breach
prior to Closing. Notwithstanding the foregoing, this Section shall not apply to
breach of the Parties’ obligations at Closing and shall not operate to delay
Closing. If any of EXCO’s or BG’s representations or warranties is untrue, or
EXCO’s or BG’s covenants or agreements have not been performed or observed, but
such breach or failure is cured to the reasonable satisfaction of the other
Party by Closing (or, if Closing does not occur, by the Termination Date), then
such breach or failure shall be deemed not to have occurred for all purposes of
this Agreement. Notwithstanding the other terms of this Section 6.3, the other
provisions of this Agreement and the various documents and agreements to be
executed and delivered pursuant hereto relating to representations, warranties,
indemnities and agreements of EXCO or BG shall not be altered or modified by
BG’s or EXCO’s knowledge of any event, or failure to provide notice of the same,
or BG’s or EXCO’s review of any documents or other matters.

6.4 HSR Act. The Parties have each prepared and simultaneously filed with the
DOJ and the FTC the notification and report form required for the transactions
contemplated by this Agreement by the HSR Act, and requested early termination
of the waiting period thereunder. The Parties agree to respond promptly to any
inquiries from the DOJ or the FTC concerning such filings and to comply in all
material respects with the filing requirements of the HSR Act. BG and EXCO shall
cooperate with each other and, subject to the terms of the Confidentiality
Agreement, shall promptly furnish all information to the other Party that is
necessary in connection with BG’s and EXCO’s compliance with the HSR Act. BG and
EXCO shall keep each other fully advised with respect to any requests from or
communications with the DOJ or FTC concerning such filings and shall consult
with each other with respect to all responses thereto. Each of the Parties shall
use its reasonable efforts to take all actions reasonably necessary and
appropriate in connection with any HSR Act filing to consummate the transactions
consummated hereby. All filing fees incurred in connection with the filings made
pursuant to this Section 6.4 shall be borne one-half by EXCO and one-half by BG.

6.5 Amendment to Schedules. As of the Closing Date, all Schedules to Article 4
may be deemed amended and supplemented by EXCO to include reference to any
matter (a) relating to EXCO, the Contributed Companies or the Subject Assets
which first arises or occurs after the date of this Agreement and does not
result from a breach by EXCO of any provision of Article 4, or this Article 6 or
(b) which results in an adjustment to the Closing Cash Contribution pursuant to
Section 3.2 as a result of the removal under the terms of this Agreement of any
Subject Asset from the transactions contemplated by this Agreement.

6.6 Non-Solicitation of Employees. From and after the date of this Agreement
until the date that is 1 year after the Closing Date, BG will not, and will
cause its Affiliates not to, directly or indirectly, solicit for employment or
employ any officer or employee of EXCO or its Affiliates with whom BG or its
Affiliates have had direct contact with as part of its evaluation, negotiation
or consummation of the transactions contemplated hereby without obtaining the
prior written consent of EXCO; provided, however, that the term “solicit for
employment” shall not include general solicitations of employment not
specifically directed towards employees of EXCO or its Affiliates.

 

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6.7 Reorganization Matters. Prior to Closing, (a) Vaughan shall transfer the
General Partner Interests to GP Holding pursuant to an assignment in a form
substantially similar to the Assignment, except as otherwise agreed to by the
Parties, and (b) thereafter, Vaughan shall transfer the GP Holding Equity
Interests to EOC pursuant to an assignment in a form substantially similar to
the Assignment.

6.8 Contributed Company Debt. Prior to Closing, EXCO shall cause it and its
Affiliates (other than the Contributed Companies) to capitalize all indebtedness
for borrowed money between each of them and each Contributed Company so that as
of Closing, the Contributed Companies shall have no indebtedness for borrowed
money to EXCO or any such Affiliate.

6.9 Assignment of Downstream Transportation Contract Interests. Following the
Closing, the Parties agree to cause Talco and their respective affiliates, EPC
and BG Energy Merchants, as applicable, to comply with the terms of Exhibit D
hereto with respect to the downstream transportation contracts described
therein.

6.10 Negotiation of Gathering Agreement. Each of EXCO and BG shall use its
reasonable efforts to complete negotiation of the form of the gathering
agreements to be attached to the LLC Agreement as Exhibits H and J.

ARTICLE 7

BG’S CONDITIONS TO CLOSING

The obligations of BG to consummate the transactions provided for herein are
subject, at the option of BG, to the fulfillment on or prior to the Closing of
each of the following conditions:

7.1 Representations. The representations and warranties of EXCO set forth in
Article 4 shall be true and correct in all material respects (other than those
representations and warranties of EXCO that are qualified by materiality, which
shall be true and correct in all respects) as of the date of this Agreement and
as of the Closing Date as though made on and as of such date (other than
representations and warranties that refer to a specified date, which need only
be true and correct on and as of such specified date).

7.2 Performance. EXCO shall have materially performed or complied with all
obligations, agreements, and covenants contained in this Agreement as to which
performance or compliance by EXCO is required prior to or at the Closing Date.

7.3 No Legal Proceedings. No material suit, action, or other proceeding
instituted by a Third Party shall be pending before any Governmental Authority
or arbitrator seeking to restrain, prohibit, enjoin, or declare illegal, or
seeking substantial damages in connection with, the transactions contemplated by
this Agreement. No order, award or judgment shall have been issued by any
Governmental Authority or arbitrator to restrain, prohibit, enjoin, or declare
illegal, or awarding substantial damages in connection with, the transactions
contemplated by this Agreement.

7.4 Environmental Defects. The sum of all Remediation Amounts for Environmental
Defects determined pursuant to Section 12.1(b)(i) and all Closing Cash
Contribution adjustments determined pursuant to Section 12.1(b)(iii), shall be
less than $24,900,000.

 

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7.5 HSR Act. Any waiting period applicable to the consummation of the
transaction contemplated hereby under the HSR Act shall have lapsed or
terminated (by early termination or otherwise).

7.6 Consent and Waivers. All consents and approvals, other than those under the
HSR Act, required from Governmental Authorities (excluding Customary Post
Closing Consents), and all consents and approvals required from other Persons
listed on Schedule 4.4 for the consummation of the transactions contemplated by
this Agreement shall have been granted and all preferential purchase rights,
rights of first opportunity and similar rights with respect to such transactions
shall have been exercised, waived, expired without exercise or, in the case of a
right of first opportunity or similar right, resulted in an offer which was
properly rejected by EXCO.

7.7 Purchase and Sale Agreement. Closing shall be simultaneously occurring under
the Purchase and Sale Agreement.

7.8 Closing Deliverables. EXCO shall have delivered (or be ready, willing and
able to deliver at Closing) to BG the documents and other items required to be
delivered by EXCO under Section 9.3, including the documents required under
Section 9.3(j).

7.9 No Material Event. No Material Event with respect to EXCO or its Affiliates
shall have occurred and be continuing and no material default by EXCO or its
Affiliates under any EXCO Debt Instrument (including any payment default or
default under any debt to equity financial covenant or other financial ratio) or
acceleration of debt under any EXCO Debt Instrument shall have occurred and be
continuing.

7.10 No Material Adverse Effect. No Material Adverse Effect shall have occurred
since the date of this Agreement.

7.11 Gathering Agreements. The Parties shall have agreed in writing on the form
of gathering agreements to be attached to the LLC Agreement as Exhibits H and J.

ARTICLE 8

EXCO’S CONDITIONS TO CLOSING

The obligations of EXCO to consummate the transactions provided for herein are
subject, at the option of EXCO, to the fulfillment on or prior to the Closing of
each of the following conditions:

8.1 Representations. The representations and warranties of BG set forth in
Article 5 shall be true and correct in all material respects (other than those
representations and warranties of BG that are qualified by materiality, which
shall be true and correct in all respects) as of the date of this Agreement and
as of the Closing Date as though made on and as of such date (other than
representations and warranties that refer to a specified date, which need only
be true and correct on and as of such specified date).

 

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8.2 Performance. BG shall have materially performed or complied with all
obligations, agreements, and covenants contained in this Agreement as to which
performance or compliance by BG is required prior to or at the Closing Date.

8.3 No Legal Proceedings. No material suit, action, or other proceeding
instituted by a Third Party shall be pending before any Governmental Authority
or arbitrator seeking to restrain, prohibit, enjoin, or declare illegal, or
seeking substantial damages in connection with, the transactions contemplated by
this Agreement. No order, award or judgment shall have been issued by any
Governmental Authority or arbitrator to restrain, prohibit, enjoin, or declare
illegal, or awarding substantial damages in connection with, the transactions
contemplated by this Agreement.

8.4 Environmental Defects. The sum of all Remediation Amounts for Environmental
Defects determined pursuant to Section 12.1(b)(i) and all Closing Cash
Contribution adjustments determined pursuant to Section 12.1(b)(iii), shall be
less than $24,900,000.

8.5 HSR Act. Any waiting period applicable to the consummation of the
transactions contemplated hereby under the HSR Act shall have lapsed or
terminated (by early termination or otherwise).

8.6 Consent and Waivers. All consents and approvals, other than those under the
HSR Act, required from Governmental Authorities (excluding Customary Post
Closing Consents), and all consents and approvals required from other Persons
listed on Schedule 4.4 for the consummation of the transactions contemplated by
this Agreement shall have been granted, and all preferential purchase rights,
rights of first opportunity and similar rights with respect to such transactions
shall have been exercised, waived, expired without exercise or, in the case of a
right of first opportunity or similar right, resulted in an offer which was
properly rejected by EXCO.

8.7 Purchase and Sale Agreement. Closing shall be simultaneously occurring under
the Purchase and Sale Agreement.

8.8 Closing Deliverables. BG shall have delivered (or be ready, willing and able
to deliver at Closing) to EXCO the documents and other items required to be
delivered by BG under Section 9.3.

8.9 No Material Event. No Material Event with respect to BG or BG Parent shall
have occurred and be continuing and no material default by BG or BG Parent under
any BG Debt Instrument (including any payment default or default under any debt
to equity financial covenant or other financial ratio) or acceleration of debt
under any BG Debt Instrument shall have occurred and be continuing.

8.10 Gathering Agreements. The Parties shall have agreed in writing on the form
of gathering agreements to be attached to the LLC Agreement as Exhibits H and J.

 

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ARTICLE 9

CLOSING

9.1 Date of Closing. Subject to the terms and conditions stated in this
Agreement, the transactions described in Section 2.1 and conducted pursuant to
this Agreement (the “Closing”) shall occur on August 14, 2009, or if all
conditions to Closing in Articles 7 or 8 have not yet been satisfied or waived
by that date, as soon thereafter as such conditions have been satisfied or
waived, or such other date as BG and EXCO may agree upon in writing. The date of
the Closing shall be the “Closing Date”.

9.2 Place of Closing. The Closing shall be held at the offices of Vinson &
Elkins LLP, Suite 3700, 2001 Ross Avenue, Dallas, Texas 75201 or such other
location as BG and EXCO may agree upon in writing.

9.3 Closing Obligations. At the Closing, the following documents shall be
delivered and the following events shall occur, the execution of each document
and the occurrence of each event being a condition precedent to the others and
each being deemed to have occurred simultaneously with the others:

(a) EOC and the Company shall execute, acknowledge and deliver the Assignment,
in substantially the form attached hereto as Exhibit B, in sufficient
counterparts to facilitate recording in the applicable offices and
jurisdictions, covering the Limited Partner Interests and the GP Holding Equity
Interest;

(b) The Company shall issue to BG a 50% membership interest in the Company, as
described in the limited liability company agreement described below, and EXCO,
BG and the Company shall deliver the Limited Liability Company Agreement duly
executed by an authorized officer of each of the Parties, dated as of the
Closing;

(c) EXCO and BG shall execute and deliver an acknowledgement of the Preliminary
Settlement Statement;

(d) BG shall deliver to the Company, to the accounts designated in the
Preliminary Settlement Statement, by direct bank or wire transfer in same day
funds, the Adjusted Closing Cash Contribution, less the amount of the Deposit,
and BG and EXCO shall deliver instructions to the Escrow Agent authorizing the
release of the Deposit to the Company pursuant to the terms of the Escrow
Agreement (and such payment of the Deposit to the Company shall be treated as a
contribution by BG to the Company for purposes of Section 4.5(e) of the Limited
Liability Company Agreement);

(e) EXCO Resources, Inc. shall deliver an executed statement meeting the
requirements of Treasury Regulation § 1.1445-2(b)(2);

(f) BG shall execute and deliver a certificate from an officer of BG certifying
on behalf of BG that the conditions set forth in Section 8.1 and Section 8.2
have been fulfilled by BG;

 

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(g) EXCO shall execute and deliver a certificate from an officer of EXCO
certifying on behalf of EXCO that the conditions set forth in Section 7.1 and
Section 7.2 have been fulfilled by EXCO;

(h) BG shall deliver a certificate duly executed by the secretary or any
assistant secretary of BG, dated as of the Closing, (i) attaching, and
certifying on behalf of BG as complete and correct, copies of (A) the
certificate of formation and limited liability company agreement of BG, each as
in effect as of the Closing, and (B) the resolutions of the members of BG
authorizing the execution, delivery and performance by BG of this Agreement and
the transactions contemplated hereby and (ii) certifying on behalf of BG the
incumbency of each officer of BG executing this Agreement or any document
delivered in connection with the Closing;

(i) EXCO shall deliver a certificate duly executed by the secretary or any
assistant secretary of the general partner of EOC and an authorized officer of
Vaughan, dated as of the Closing, (i) attaching, and certifying on behalf of
such general partner and on behalf of Vaughan as complete and correct, copies of
(A) the certificate of limited partnership and agreement of limited partnership
of EOC and the certificate of incorporation and the bylaws of such general
partner and the certificate of formation and limited liability company agreement
of Vaughan, all as in effect as of the Closing, (B) the resolutions of the
partners of EOC and the member of Vaughan authorizing the execution, delivery
and performance by such Party of this Agreement and the transactions
contemplated hereby and (C) the resolutions of the board of directors of such
general partner authorizing the execution of this Agreement and such other
documents on behalf of EOC and the consents of the member of Vaughan authorizing
the execution of this Agreement and such other documents on behalf of Vaughan
and (ii) certifying on behalf of such general partner of EOC and on behalf of
Vaughan the incumbency of each officer of such general partner and Vaughan
executing this Agreement or any document delivered in connection with the
Closing;

(j) EXCO shall deliver a recordable release of any trust, mortgages, financing
statements, fixture filings and security agreements made by EXCO or its
Affiliates affecting the Contributed Interests and/or the Subject Assets or any
other assets of the Contributed Companies and relating to the EXCO Debt
Instruments;

(k) EOC, the Company and BG North America, LLC shall execute a guaranty
agreement by BG North America, LLC to EOC and the Company for certain
obligations under the LLC Agreement, in substantially the form attached hereto
as
Exhibit E; and

(l) EXCO and BG shall execute and deliver any other Transaction Documents and
other agreements, instruments and documents which are required by other terms of
this Agreement to be executed and/or delivered at the Closing.

9.4 Records. In addition to the obligations set forth in Section 9.3 above, upon
request, EXCO shall deliver to BG a copy of the existing Records.

 

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ARTICLE 10

ACCESS / DISCLAIMERS

10.1 Access.

(a) From and after the date hereof and up to and including the Closing Date (or
earlier termination of this Agreement) but subject to the other provisions of
this Section 10.1 and obtaining any required consents of Third Parties, (with
respect to which consents EXCO shall use commercially reasonable efforts to
obtain) EXCO shall afford to BG and its officers, employees, agents,
accountants, attorneys, investment bankers, consultants and other authorized
representatives (“BG’s Representatives”) full access, during normal business
hours, to the Subject Assets and all Records and other documents in EXCO’s or
any of their respective Affiliates’ possession relating primarily to the
Contributed Interests or Subject Assets. EXCO shall also make available to BG
and BG’s Representatives, upon reasonable notice during normal business hours,
EXCO’s personnel knowledgeable with respect to the Subject Assets in order that
BG may make such diligence investigation as BG considers necessary or
appropriate. All investigations and due diligence conducted by BG or any BG’s
Representative shall be conducted at BG’s sole cost, risk and expense and any
conclusions made from any examination done by BG or any BG’s Representative
shall result from BG’s own independent review and judgment. BG shall coordinate
its access rights and physical inspections of the Subject Assets with EXCO to
reasonably minimize any inconvenience to or interruption of the conduct of
business by EXCO. BG shall, and shall cause all BG’s Representatives to, abide
by EXCO’s safety rules, regulations, and operating policies of which they are
informed while conducting its due diligence evaluation of the Subject Assets
including any environmental or other inspection or assessment of the Subject
Assets.

(b) Before conducting any sampling, boring, drilling or other invasive
investigation activities (“Invasive Activities”) on or with respect to any of
the Subject Assets, BG shall furnish EXCO with a written description of the
proposed scope of the Invasive Activities to be conducted, including a
description of the activities to be conducted and a description of the
approximate location and expected timing of such activities. If any of the
proposed Invasive Activities may unreasonably interfere with normal operation of
the Subject Assets, EXCO may request an appropriate modification of the proposed
Invasive Activity. Any Invasive Activities shall be conducted by a reputable
environmental consulting or engineering firm, approved in advance by EXCO (such
approval not to be unreasonably withheld or delayed) and, once approved, such
environmental consulting or engineering firm shall be deemed to be a “BG’s
Representative.” EXCO hereby approves ERM NA Holdings Corp., ERM Group Holdings
Limited and any Affiliate thereof as an environmental consulting firm that may
conduct such Invasive Activities and such environmental consulting firm is
hereby deemed to be a “BG’s Representative.” EXCO shall have the right, at its
option and expense, to split any samples collected from the Subject Assets with
BG

(c) BG hereby defends, indemnifies and holds harmless each of EXCO Indemnified
Parties from and against any and all Liabilities attributable to personal
injury, death or physical property damage, or violation of EXCO’s or its
Affiliate’s rules, regulations or operating policies of which BG or the BG’s
Representative associated with the Liabilities had been informed arising out of,
resulting from or relating to any field visit, environmental property

 

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assessment, or other due diligence activity conducted by BG or any BG’s
Representative with respect to the Assets, EVEN IF SUCH LIABILITIES ARISE OUT OF
OR RESULT FROM, SOLELY OR IN PART, THE SOLE, ACTIVE, PASSIVE, CONCURRENT OR
COMPARATIVE NEGLIGENCE, STRICT LIABILITY OR OTHER FAULT OR VIOLATION OF LAW OF
OR BY A MEMBER OF EXCO INDEMNIFIED PARTIES, EXCEPTING ONLY LIABILITIES ACTUALLY
RESULTING ON THE ACCOUNT OF THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF A
MEMBER OF EXCO INDEMNIFIED PARTIES.

(d) BG agrees to review the report prepared by Environmental Resource Management
Southwest, Inc. with respect to certain of the Assets and to disclose to EXCO
such portions thereof as BG deems reasonably appropriate to support any claims
for Environmental Defects, or otherwise deems reasonably appropriate, and which
BG does not believe in good faith need to remain privileged. Neither BG by its
delivery of said documents nor EXCO by its receipt of said documents or
otherwise shall be deemed to have made any representation or warranty,
expressed, implied or statutory, as to the condition to the Subject Assets or to
the accuracy of said documents or the information contained therein.

(e) Upon completion of BG’s due diligence, BG shall at its sole cost and expense
and without any cost or expense to EXCO or its Affiliates, (i) repair all
physical damage done to the Subject Assets in connection with BG’s due
diligence, (ii) restore the Subject Assets to the approximate same or better
physical condition than it was prior to commencement of BG’s due diligence and
(iii) remove all equipment, tools or other property brought onto the Subject
Assets in connection with BG’s due diligence. Any disturbance to the Subject
Assets (including the real property associated with such Subject Assets)
resulting from BG’s due diligence will be promptly corrected by BG.

10.2 Confidentiality. BG acknowledges that, pursuant to its right of access to
the Records or the Subject Assets, BG will become privy to confidential and
other information of EXCO and that such confidential information shall be held
confidential by BG and BG’s Representatives in accordance with the terms of the
Confidentiality Agreement. If the Closing should occur, the foregoing
confidentiality restriction on BG, including the Confidentiality Agreement,
shall terminate (except as to (a) any Subject Assets that are excluded from the
transactions contemplated hereby pursuant to the provisions of this Agreement,
and (b) the Excluded Assets).

10.3 Disclaimers.

(a) EXCEPT AS AND TO THE EXTENT EXPRESSLY SET FORTH IN THIS AGREEMENT OR THE
CERTIFICATES OF EXCO TO BE DELIVERED AT CLOSING PURSUANT TO SECTION 9.3(g),
(I) EXCO MAKES NO REPRESENTATIONS OR WARRANTIES, EXPRESS, STATUTORY OR IMPLIED,
AND (II) EXCO EXPRESSLY DISCLAIMS ALL LIABILITY AND RESPONSIBILITY FOR ANY
REPRESENTATION, WARRANTY, STATEMENT OR INFORMATION MADE OR COMMUNICATED (ORALLY
OR IN WRITING) TO ANY CONTRIBUTED COMPANY, BG OR ANY OF THEIR AFFILIATES,
EMPLOYEES, AGENTS, CONSULTANTS OR REPRESENTATIVES (INCLUDING, WITHOUT
LIMITATION, ANY OPINION, INFORMATION, PROJECTION OR ADVICE THAT MAY HAVE BEEN
PROVIDED TO A CONTRIBUTED COMPANY OR BG BY ANY OFFICER, DIRECTOR, EMPLOYEE,
AGENT, CONSULTANT, REPRESENTATIVE OR ADVISOR OF EXCO OR ANY OF ITS AFFILIATES).

 

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(b) EXCEPT AS EXPRESSLY SET FORTH IN ARTICLE 4 OF THIS AGREEMENT OR THE
CERTIFICATES OF EXCO TO BE DELIVERED AT CLOSING PURSUANT TO SECTION 9.3(g), AND
WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, EXCO EXPRESSLY DISCLAIMS ANY
REPRESENTATION OR WARRANTY, EXPRESS, STATUTORY OR IMPLIED, AS TO (I) TITLE TO
ANY OF THE SUBJECT ASSETS, (II) ANY ESTIMATES OF THE VALUE OF THE CONTRIBUTED
COMPANIES OR THE SUBJECT ASSETS OR FUTURE REVENUES GENERATED BY THE SUBJECT
ASSETS, (III) THE MAINTENANCE, REPAIR, CONDITION, QUALITY, SUITABILITY, DESIGN
OR MARKETABILITY OF THE SUBJECT ASSETS, (IV) THE CONTENT, CHARACTER OR NATURE OF
ANY INFORMATION MEMORANDUM, REPORTS, BROCHURES, CHARTS OR STATEMENTS PREPARED BY
EXCO OR THIRD PARTIES WITH RESPECT TO THE CONTRIBUTED COMPANIES OR THE SUBJECT
ASSETS, (V) ANY OTHER MATERIALS OR INFORMATION THAT MAY HAVE BEEN MADE AVAILABLE
TO A CONTRIBUTED COMPANY, BG, OR THEIR AFFILIATES, OR THEIR EMPLOYEES, AGENTS,
CONSULTANTS, REPRESENTATIVES OR ADVISORS IN CONNECTION WITH THE TRANSACTIONS
CONTEMPLATED BY THIS AGREEMENT OR ANY DISCUSSION OR PRESENTATION RELATING
THERETO, AND (VI) ANY IMPLIED OR EXPRESS WARRANTY OF FREEDOM FROM PATENT OR
TRADEMARK INFRINGEMENT. EXCEPT AS EXPRESSLY REPRESENTED OTHERWISE IN ARTICLE 4
OF THIS AGREEMENT OR THE CERTIFICATES OF EXCO TO BE DELIVERED AT CLOSING
PURSUANT TO SECTION 9.3(g), EXCO FURTHER DISCLAIMS ANY REPRESENTATION OR
WARRANTY, EXPRESS, STATUTORY OR IMPLIED, OF MERCHANTABILITY, FREEDOM FROM LATENT
VICES OR DEFECTS, FITNESS FOR A PARTICULAR PURPOSE OR CONFORMITY TO MODELS OR
SAMPLES OF MATERIALS OF ANY SUBJECT ASSETS, RIGHTS OF A PURCHASER UNDER
APPROPRIATE STATUTES TO CLAIM DIMINUTION OF CONSIDERATION OR RETURN OF THE
PURCHASE PRICE OR CONSIDERATION, IT BEING EXPRESSLY UNDERSTOOD AND AGREED BY THE
PARTIES HERETO THAT THE CONTRIBUTED COMPANIES SHALL BE DEEMED TO BE HOLDING THE
SUBJECT ASSETS IN THEIR PRESENT STATUS, CONDITION AND STATE OF REPAIR, “AS IS”
AND “WHERE IS” WITH ALL FAULTS OR DEFECTS (KNOWN OR UNKNOWN, LATENT,
DISCOVERABLE OR UNDISCOVERABLE), AND THAT BG HAS MADE OR CAUSED TO BE MADE SUCH
INSPECTIONS AS BG DEEMS APPROPRIATE.

(c) OTHER THAN THOSE REPRESENTATIONS SET FORTH IN SECTION 4.14 AND AS REPEATED
IN THE CERTIFICATES OF EXCO TO BE DELIVERED AT CLOSING PURSUANT TO SECTION
9.3(g), EXCO HAS NOT AND WILL NOT MAKE ANY REPRESENTATION OR WARRANTY REGARDING
ANY MATTER OR CIRCUMSTANCE RELATING TO ENVIRONMENTAL LAWS, THE RELEASE OF
MATERIALS INTO THE ENVIRONMENT OR THE PROTECTION OF HUMAN HEALTH, SAFETY,
NATURAL RESOURCES OR THE ENVIRONMENT, OR ANY OTHER ENVIRONMENTAL CONDITION OF
THE SUBJECT ASSETS, AND NOTHING IN THIS AGREEMENT OR OTHERWISE SHALL BE
CONSTRUED AS SUCH A

 

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REPRESENTATION OR WARRANTY, AND SUBJECT TO BG’S RIGHTS UNDER SECTION 12.1, THE
CONTRIBUTED COMPANIES SHALL BE DEEMED TO BE HOLDING THE SUBJECT ASSETS IN AN “AS
IS” AND “WHERE IS” CONDITION WITH ALL FAULTS FOR PURPOSES OF THEIR ENVIRONMENTAL
CONDITION AND THAT BG HAS MADE OR CAUSED TO BE MADE SUCH ENVIRONMENTAL
INSPECTIONS AS BG DEEMS APPROPRIATE.

(d) The Parties agree that, to the extent required by applicable law to be
effective, the disclaimers of certain representations and warranties contained
in this Section 10.3 are “conspicuous” disclaimers for the purpose of any
applicable Law.

ARTICLE 11

CASUALTIES; TRANSFER RESTRICTIONS

11.1 Intentionally Omitted.

11.2 Intentionally Omitted.

11.3 Casualty or Condemnation Loss.

(a) Notwithstanding anything herein to the contrary, from and after the
Effective Time if Closing occurs, with respect to the Subject Assets, the
Contributed Companies shall bear all risk of loss with respect to the
depreciation of personal property due to ordinary wear and tear and neither BG
nor any Contributed Company shall assert such matters as any casualty losses or
Title Defects hereunder.

(b) If, after the date of this Agreement but prior to the Closing Date, any
portion of the Subject Assets is damaged or destroyed by fire or other casualty
or is taken in condemnation or under right of eminent domain, then BG shall not
as a result be excused from Closing and EXCO shall elect by written notice to BG
prior to Closing either (i) to cause the Subject Assets affected by such
casualty or taking to be repaired or restored to at least its condition prior to
such casualty or taking, at EXCO’s sole cost, as promptly as reasonably
practicable (which work may extend after the Closing Date) or (ii) to indemnify
BG and the Contributed Companies through a document to be delivered at Closing
reasonably acceptable to EXCO and BG against any costs or expenses that BG and
the Contributed Companies reasonably incur to repair or restore any Subject
Assets affected by such casualty or taking. In each case, EXCO shall be entitled
to all rights to insurance, condemnation awards and other claims against Third
Parties with respect to the casualty or taking except to the extent the Parties
otherwise agree in writing.

(c) If any action for condemnation or taking under right of eminent domain is
pending or threatened with respect to any Subject Asset or portion thereof after
the date of this Agreement, but no taking of such Subject Asset or portion
thereof occurs prior to the Closing Date, BG shall nevertheless be required to
close and EXCO, at Closing, shall assign, transfer and set over to the Midstream
Companies or subrogate the Midstream Companies to all of EXCO’s right, title and
interest (if any) in such condemnation or eminent domain action, including any
future awards therein, to the extent (and only to the extent) attributable to
the Subject Assets threatened to be taken, except that EXCO shall reserve and
retain (and the Midstream Companies shall assign to EXCO) all rights, titles,
interests and claims against Third Parties for the recovery of EXCO’s costs and
expenses incurred prior to the Closing in defending or asserting rights in such
action with respect to the Subject Assets.

 

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11.4 Preferential Purchase Rights and Consents to Assign.

(a) With respect to any preferential purchase right pertaining to a Subject
Asset and the transactions contemplated hereby, EXCO, within 10 days after the
date of this Agreement, shall send to the holder of each such right a notice, in
material compliance with the contractual provisions applicable to such right
requesting a waiver of such right. In addition, EXCO, within 10 days after the
date of this Agreement, shall send to each holder of a right to consent to
assignment pertaining to the Subject Assets and the transactions contemplated
hereby a notice seeking such holder’s consent to the transaction contemplated
hereby. Any preferential purchase right must be exercised subject to all terms
and conditions set forth in this Agreement, including the successful closing of
this Agreement pursuant to Article 9. The consideration payable under this
Agreement for any particular Subject Asset for purposes of preferential purchase
right notices shall be the reasonably allocated value of such Subject Asset.
EXCO shall use commercially reasonable efforts to cause such waivers of
preferential purchase rights (or exercise thereof) and consents to assignment to
be obtained and delivered prior to Closing, provided that EXCO shall not be
required to make payments or undertake obligations to or for the benefit of the
holders of such rights in order to obtain the required waivers and consents.

(b) If, prior to the Closing, any holder of a preferential purchase right
notifies EXCO that it intends to consummate the purchase of the Subject Asset to
which its preferential purchase right applies, then the Closing Cash
Contribution shall be reduced by 50% of the reasonably allocated value of the
relevant Subject Asset (and such Subject Asset shall no longer be considered
subject to this Agreement for purposes of the other adjustments in Section 3,2).
The Midstream Companies shall be entitled to all proceeds paid by a Person
exercising a preferential purchase right prior to the Closing and, for the
avoidance of doubt, shall be entitled to distribute all such proceeds to EOC
immediately prior to Closing. If the Closing occurs and (i) any holder of a
preferential purchase right has notified EXCO that it intends to consummate the
purchase of the Subject Asset to which its preferential purchase right applies,
but the consummation thereof has not occurred or (ii) the time for exercising a
preferential purchase right has not then expired, then the Closing Cash
Contribution shall not be reduced at Closing and, if the holder of the
applicable preferential purchase right thereafter consummates the purchase of
the Subject Asset covered by such right, then the Closing Cash Contribution
shall be reduced in the final settlement pursuant to Section 3.5 or Section 3.6
by an amount equal to 50% of the reasonably allocated value of the relevant
Subject Asset (and such Subject Asset shall no longer be considered subject to
this Agreement for purposes of the other adjustments in Section 3,2), and the
proceeds paid by the Person exercising the preferential purchase right shall be
distributed to EOC.

(c) If (i) EXCO fails to obtain a required consent prior to the Closing and the
failure to obtain such consent would cause (A) the rights of the applicable
Midstream Company with respect to the Subject Asset affected thereby to be void
or (B) the termination of a Right-of-Way under the express terms thereof or
(ii) a consent requested by EXCO is denied in writing and in either case,
(iii) the consent is not a consent of a Governmental Authority or a material

 

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consent required from any other Person as a condition to Closing under
Section 7.6, or BG has waived in writing the requirement with respect to such
consent under Section 7.6, then if permitted within the terms of such consent
requirement, the applicable Midstream Company will transfer that portion of such
Subject Asset to another Affiliate of EXCO, and the Closing Cash Contribution
shall be reduced by 50% of the reasonably allocated value of that portion of
such Subject Asset, and, if such Subject Asset is necessary for the operation of
the Systems, the Parties shall negotiate in good faith a commercially reasonable
basis on which the applicable Midstream Company may continue to use such Subject
Asset. In the event that a required consent (with respect to a Subject Asset
excluded pursuant to this Section 11.4(c)) that was not obtained prior to
Closing is obtained following Closing then within 10 days after such consent is
obtained, EXCO shall cause such Subject Interest to be conveyed to the
applicable Midstream Company, BG shall contribute to the Company the amount by
which the Closing Cash Contribution was reduced with respect to such Subject
Asset or portion thereof and EXCO and BG shall cause the Company to make a
special distribution to EXCO in an amount equal to BG’s contribution.

(d) If (i) EXCO fails to obtain a required consent prior to the Closing and the
failure to obtain such consent would not cause (A) the rights of the applicable
Midstream Company with respect to the Subject Asset affected thereby to be void
or (B) the termination of a Right-of-Way under the express terms thereof, and
(ii) the consent is not denied in writing and (iii) the consent is not a consent
of a Governmental Authority or a material consent required from any other Person
as a condition to Closing under Section 7.6, or BG has waived in writing the
requirement with respect to such consent under Section 7.6, then the portion of
the Subject Asset subject to such failed consent shall remain in the applicable
Midstream Company as part of the Subject Assets and BG and the Contributed
Companies shall have no claim against, and EXCO shall have no Liability for, the
failure to obtain such consent; provided that if the affected Subject Asset
subject to such requirement is a Right-of-Way, then BG may elect prior to
Closing to treat the unsatisfied consent requirement affecting such Right-of-Way
as a breach of Section 4.29.

ARTICLE 12

ENVIRONMENTAL MATTERS

12.1 Environmental Defects.

(a) Assertions of Environmental Defects. BG must deliver claim notices to EXCO
meeting the requirements of this Section 12.1(a) (collectively the
“Environmental Defect Notices” and individually an “Environmental Defect
Notice”) not later than the Defect Claim Date setting forth any matters which,
in BG’s reasonable opinion, constitute Environmental Defects and which BG
intends to assert as Environmental Defects pursuant to this Section 12.1. For
all purposes of this Agreement but subject to BG’s remedy for a breach of EXCO’s
representation contained in Section 4.14 and BG’s rights under Section 13.2, BG
and the Contributed Companies shall be deemed to have waived any Environmental
Defect which BG fails to assert as an Environmental Defect by an Environmental
Defect Notice received by EXCO on or before the Defect Claim Date. To be
effective, each Environmental Defect Notice shall be in writing and shall
include (i) a description of the matter constituting the alleged Environmental
Defect, (ii) a description of each Asset (or portion thereof) that is affected
by the alleged

 

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Environmental Defect, (iii) supporting documents available to BG reasonably
necessary for EXCO to verify the existence of the alleged Environmental Defect,
and (iv) a calculation of the Remediation Amount (itemized in reasonable detail)
that BG asserts is attributable to such alleged Environmental Defect. BG’s
calculation of the Remediation Amount included in the Environmental Defect
Notice must describe in reasonable detail the Remediation proposed for the
Environmental Condition that gives rise to the asserted Environmental Defect and
identify all assumptions used by BG in calculating the Remediation Amount,
including the standards that BG asserts must be met to comply with Environmental
Laws. EXCO shall have the right, but not the obligation, to cure any claimed
Environmental Defect on or before Closing.

(b) Remedies for Environmental Defects. In the event that any Environmental
Defect timely asserted by BG in accordance with Section 12.1(a) is not waived in
writing by BG or cured on or before Closing, then, subject to EXCO’s continuing
right to dispute the existence of a Environmental Defect and/or the Remediation
Amount asserted with respect thereto, the Parties shall mutually elect to:

(i) subject to the Individual Environmental Threshold and the Environmental
Deductible, reduce the Closing Cash Contribution by the Remediation Amount;

(ii) to the extent attributable to the Subject Assets, have EXCO assume
responsibility for the Remediation of such Environmental Defect and indemnify
and hold harmless the BG Indemnified Parties and the Contributed Companies from
and against all Liabilities associated with such Environmental Defect and
Remediation in an indemnity in form and substance satisfactory to BG;

(iii) have the applicable Midstream Company assign the entirety of the Subject
Asset that is subject to such Environmental Defect, together with all associated
Subject Assets, to EXCO in which event the Closing Cash Contribution shall be
reduced by an amount equal to the reasonably allocated value of the affected
Subject Asset; or

(iv) to the extent attributable to the Subject Assets, have EXCO indemnify and
hold harmless the BG Indemnified Parties and the Contributed Companies from and
against all Liabilities associated with such Environmental Defect by an
indemnity in form and substance reasonably satisfactory to BG.

In the event the Parties do not agree in writing by Closing on an election of
alternative (i), (ii), (iii) or (iv) above with respect to any Environmental
Defect, they shall be deemed to have elected alternative (i), provided that if
the existence of the Environmental Defect or the Remediation Amount is disputed,
no reduction shall be made in the Closing Cash Contribution pursuant to
Section 3.2(b)(iii) at Closing and instead such adjustment, if any, shall be
made as part of the final settlement pursuant to Section 3.6, or if not yet then
resolved, thereafter. If the Parties elect the option set forth in clause
(i) above, then the Midstream Companies shall be deemed to have assumed
responsibility for all of the costs and expenses attributable to the Remediation
of the applicable Environmental Defect (net to their interest in the underlying
properties prior to the Closing) and all Liabilities (net to their interest in
the underlying properties prior to the Closing) with respect thereto and the
foregoing shall be deemed to constitute obligations of the Midstream Companies.
If the Parties elect the option set forth in

 

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clause (ii) above, EXCO shall implement such Remediation in a manner which is
consistent with the requirements of Environmental Laws in a timely fashion for
the type of Remediation that EXCO elects to undertake. EXCO will be deemed to
have adequately completed the Remediation required in the immediately preceding
sentence (A) upon receipt of a certificate or approval from the applicable
Governmental Authority that the Remediation has been implemented to the extent
necessary to comply with existing regulatory requirements or (B) upon receipt of
a certificate from a licensed professional engineer reasonably acceptable to BG
that the Remediation has been implemented to the extent necessary to comply with
existing regulatory requirements.

(c) Exclusive Remedy. Subject BG’s remedy for a breach of EXCO’s representation
contained in Section 4.14 and BG’s rights under Section 13.2, Section 12.1(b)
shall be the exclusive right and remedy of BG and the Contributed Companies with
respect to any Environmental Defect. No matter claimed as an Environmental
Defect pursuant to this Article 12 may also be claimed as a breach of
Section 4.14.

(d) Environmental Deductibles. Notwithstanding anything to the contrary, (i) in
no event shall there be any adjustments to the Closing Cash Contribution or
other remedies provided by EXCO for any individual Environmental Defect for
which the Remediation Amount does not exceed $75,000 (“Individual Environmental
Threshold”), and (ii) in no event shall there be any adjustments to the Closing
Cash Contribution or other remedies provided by EXCO for any Environmental
Defect for which the Remediation Amount exceeds the Individual Environmental
Threshold unless (A) the sum of the Remediation Amounts of all such
Environmental Defects that exceed the Individual Environmental Threshold, in the
aggregate, excluding any Remediation Amounts attributable to Subject Assets that
are subject to Environmental Defects which EXCO assumes pursuant to
Section 12.1(b)(ii), Environmental Defects with respect to which the Parties
elect to have such assets assigned to EXCO pursuant to Section 12.1(b)(iii) and
Environmental Defects for which EXCO indemnifies BG pursuant to
Section 12.1(b)(iv) and any Environmental Defects cured by EXCO (B) exceeds the
Environmental Deductible, after which point BG shall be entitled to adjustments
to the Closing Cash Contribution only with respect to aggregate Remediation
Amounts in excess of such Environmental Deductible. If EXCO and BG elect to have
EXCO receive assignment of any Subject Assets related to any Environmental
Defect pursuant to Section 12.1(b)(iii), the Closing Cash Contribution shall be
reduced by the reasonably allocated value of such retained Subject Assets and
the Remediation Amount for the Environmental Defect relating to such retained
Subject Assets will not be counted towards the Environmental Deductible.

(e) Environmental Dispute Resolution. EXCO and BG shall attempt to agree on all
Environmental Defects and Remediation Amounts prior to Closing. If EXCO and BG
are unable to agree by Closing, the Environmental Defects and/or Remediation
Amounts in dispute shall be exclusively and finally resolved by arbitration
pursuant to this Section 12.1(e). There shall be a single arbitrator, who shall
be an environmental attorney with at least 10 years experience in environmental
matters in the regional area in which the affected Subject Assets are located,
as selected by mutual agreement of BG and EXCO within 15 days after the Closing
Date, and absent such agreement, by the Dallas office of the American
Arbitration Association (the “Environmental Arbitrator”). The arbitration
proceeding shall be held in Dallas, Texas and shall be conducted in accordance
with the Commercial Arbitration Rules of the American

 

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Arbitration Association, to the extent such rules do not conflict with the terms
of this Section. The Environmental Arbitrator shall not have worked as an
employee or outside counsel for any Party or its Affiliates during the five
(5) year period preceding the arbitration or have any financial interest in the
dispute. The Environmental Arbitrator’s determination shall be made within 20
days after submission of the matters in dispute and shall be final and binding
upon both Parties, without right of appeal. In making his determination, the
Environmental Arbitrator shall be bound by the rules set forth in this
Section 12.1 and, subject to the foregoing, may consider such other matters as
in the opinion of the Environmental Arbitrator are necessary or helpful to make
a proper determination. The Environmental Arbitrator, however, may not award BG
a greater Remediation Amount than the Remediation Amount claimed by BG in its
applicable Environmental Defect Notice nor a lower Remediation Amount than the
Remediation Amount proposed by EXCO in its response to such Environmental Defect
Notice. The Environmental Arbitrator shall act as an expert for the limited
purpose of determining the specific disputed Environmental Defects and/or
Remediation Amounts submitted by either Party and may not award damages,
interest or penalties to either Party with respect to any matter. EXCO and BG
shall each bear its own legal fees and other costs of presenting its case. Each
of EXCO and BG shall bear one-half of the costs and expenses of the
Environmental Arbitrator. To the extent that the award of the Environmental
Arbitrator with respect to any Remediation Amount is not taken into account as
an adjustment to the Closing Cash Contribution pursuant to Section 3.4 or
Section 3.5 and the applicable Party would otherwise be entitled to an
adjustment under the provisions of this Section 12.1, then within 10 days after
the Environmental Arbitrator delivers written notice to BG and EXCO of his award
with respect to a Remediation Amount, and subject to this Section 12.1, (i) BG
shall pay to EXCO the amount, if any, so awarded by the Environmental Arbitrator
to EXCO and (ii) EXCO shall pay to BG the amount, if any, so awarded by the
Environmental Arbitrator to BG. Nothing herein shall operate to cause the
Closing to be delayed on account of any arbitration hereunder and to the extent
any adjustments are not agreed upon by the Parties as of the Closing, the
Closing Cash Contribution shall not be adjusted therefor as of the Closing and
subsequent adjustments thereto, if any, will be made pursuant to Section 3.5,
Section 3.6 or this Section 12.1.

12.2 NORM, Wastes and Other Substances. BG acknowledges that the Subject Assets
have been used for transportation of Hydrocarbons and that there may be
petroleum, produced water, wastes, or other substances or materials located in,
on or under the Subject Assets or associated with the Subject Assets. Equipment
and sites included in the Subject Assets may contain asbestos, NORM or other
Hazardous Substances. NORM may affix or attach itself to the inside of materials
and equipment as scale, or in other forms. The materials and equipment located
on the Subject Assets or included in the Subject Assets may contain NORM and
other wastes or Hazardous Substances. NORM containing material and/or other
wastes or Hazardous Substances may have come in contact with various
environmental media, including water, soils or sediment. Special procedures may
be required for the assessment, remediation, removal, transportation, or
disposal of environmental media, wastes, asbestos, NORM and other Hazardous
Substances from the Subject Assets. This Section shall not limit BG’s remedies
under the other terms of this Agreement.

 

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ARTICLE 13

SURVIVAL, INDEMNIFICATION

13.1 Intentionally Omitted.

13.2 Indemnities of EXCO. Effective as of the Closing, subject to the
limitations set forth in Section 13.4 and otherwise in this Article 13, EXCO is
responsible for, shall pay on a current basis, and hereby defends, indemnifies
and holds harmless BG and its Affiliates, and all of its and their respective
equity holders, partners and members (excluding, in each case, equity holders,
partners or members solely by virtue of holding publicly traded shares, units or
other interests), and directors, officers, managers, employees, agents and
representatives (collectively, “BG Indemnified Parties”) and the Contributed
Companies from and against any and all Liabilities, arising from, based upon,
related to or associated with:

(a) any breach by EXCO of its representations or warranties contained in
Article 4;

(b) any breach by EXCO of its covenants and agreements under this Agreement
other than under Article 14;

(c) (i) any act or omission by EXCO involving or relating to the Excluded Assets
or any other assets excluded from the Subject Assets pursuant to the terms
hereof or (ii) the actions, suits or proceedings, if any, set forth on
Schedule 4.7;

(d) any claim for personal injury or death relating to the Subject Assets and
occurring prior to the Closing Date to the extent arising out of or attributable
to the period of Midstream Companies’ ownership of the Subject Assets prior to
the Closing Date;

(e) the disposal or transportation of any Hazardous Substances from Subject
Assets operated by a Midstream Company attributable to the period of the
Midstream Company’s ownership of the Subject Assets to any location not on the
Subject Assets in violation of any Environmental Law;

(f) any ERISA Liability, Income Tax Liability or Franchise Tax Liability;

(g) any working interest, royalty, overriding royalty, and other interest owner
revenues or proceeds attributable to sales of Hydrocarbons purchased by the
Midstream Companies, and rentals and other periodic payments under
Rights-of-Way, in each case held in suspense by any Midstream Company as of
Closing, or any interest accrued in escrow accounts for such suspended funds;
and

(h) any Liability of the Contributed Companies for gross negligence or willful
misconduct solely in connection with the operation prior to Closing of the
Subject Assets.

13.3 Indemnities of BG. Effective as of the Closing, BG and its successors and
assigns shall assume, be responsible for, shall pay on a current basis, and
hereby defends, indemnifies, holds harmless and forever releases EXCO and its
Affiliates, and all of their respective equity holders, partners and members
(excluding, in each case, equity holders,

 

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partners or members solely by virtue of holding publicly traded shares, units or
other interests), and directors, officers, managers, employees, agents and
representatives (collectively, “EXCO Indemnified Parties”) and the Company from
and against any and all Liabilities arising from, based upon, related to or
associated with:

(a) any breach by BG of its representations or warranties contained in
Article 5; or

(b) any breach by BG of its covenants and agreements under this Agreement other
than under Article 14;

but excepting (in each case) Liabilities against which EXCO is required to
indemnify BG under Section 13.2 at the time that the Claim Notice is presented
by the EXCO Indemnified Party to BG.

13.4 Limitation on Liability.

(a) EXCO shall not have any liability for any indemnification under this
Agreement unless (i) the individual amount of any Liability for which a Claim
Notice is delivered by BG to EXCO under this Article 13 and for which EXCO is
liable exceeds $75,000, and (ii) the aggregate amount of all Liabilities for
which EXCO is liable under this Agreement after the application of the
provisions of clause (i) above exceeds $3,735,000 and then only to the extent
such damages or costs exceed $3,735,000; provided that EXCO’s indemnities under
Sections 13.2(c) through 13.2(g) and EXCO’s indemnities in Section 13.2(b) for
breaches of Articles 2, 3, 9, 11, 12 and 15 and Sections 4.15(f) – (k), 6.7 and
6.8, shall not be limited by this Section 13.4(a). For purposes of determining
whether there has been a breach of any of EXCO’s representations and warranties
for which BG is entitled to indemnification under Section 13.2(a), any dollar or
materiality qualifiers in EXCO’s representations or warranties (except for
EXCO’s representations and warranties under Section 4.8(a)) shall be
disregarded.

(b) Notwithstanding anything to the contrary contained in this Agreement, EXCO
shall not be required to indemnify the BG Indemnified Parties or the Contributed
Companies for aggregate Liabilities under Sections 13.2(a) and 13.2(b) in excess
of $87,150,000, provided that, EXCO’s indemnitees in Section 13.2(b) for
breaches of Articles 1, 3, 9 and 15 and Sections 6.7 and 6.8 shall not be
limited by this Section 13.4(b).

(c) The amount of Liability for which an Indemnified Party is entitled to
indemnity under this Article 13 shall be reduced by the amount of insurance
proceeds realized by the Indemnified Party or its Affiliates with respect to
such Liability (net of any collection costs, and excluding the proceeds of any
insurance policy issued or underwritten by the Indemnified Party or its
Affiliates).

13.5 Express Negligence. EXCEPT AS OTHERWISE PROVIDED IN SECTION 10.1(c), THE
INDEMNIFICATION, RELEASE, ASSUMED OBLIGATIONS, WAIVER AND LIMITATION OF
LIABILITY PROVISIONS PROVIDED FOR IN THIS AGREEMENT SHALL BE APPLICABLE WHETHER
OR NOT THE LIABILITIES, LOSSES, COSTS, EXPENSES AND DAMAGES IN QUESTION AROSE OR
RESULTED SOLELY OR IN PART FROM THE GROSS, SOLE, ACTIVE, PASSIVE, CONCURRENT OR
COMPARATIVE NEGLIGENCE, STRICT LIABILITY OR OTHER FAULT OR VIOLATION OF LAW OF
OR BY ANY INDEMNIFIED PARTY. BG AND EXCO ACKNOWLEDGE THAT THIS STATEMENT
COMPLIES WITH THE EXPRESS NEGLIGENCE RULE AND IS CONSPICUOUS.

 

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13.6 Exclusive Remedy. Notwithstanding anything to the contrary contained in
this Agreement, from and after Closing, Sections 10.1(c), 13.2 and 13.3 contains
the Parties and the Contributed Companies’ exclusive remedy against each other
with respect to breaches of the representations, warranties, covenants and
agreements of the Parties contained in Article 4, Article 5 and Article 6 and
the affirmations of such representations, warranties, covenants and agreements
contained in the certificate delivered by each Party at Closing pursuant to
Section 9.3(f) or 9.3(g), as applicable. Except for (a) the remedies contained
in this Article 13, (b) any other remedies available to the Parties and the
Contributed Companies at Law or in equity for breaches of provisions of this
Agreement other than Article 4, Article 5 and Article 6 and (c) the remedies
available at Law or in equity in connection with any other document delivered by
a Party in connection with the consummation of the transactions contemplated
hereby (other than the certificates delivered by the Parties pursuant to
Sections 9.3(f) and 9.3(g)), from and after Closing, EXCO and BG, on its own
behalf and on behalf of its Affiliates and on behalf of the Contributed
Companies, each releases, remises, and forever discharges the other and its
Affiliates and all such Persons’ equity holders, partners, members, officers,
directors, employees, agents, advisors and representatives from any and all
Liabilities in Law or in equity, known or unknown, which such Parties might now
or subsequently may have, based on, relating to or arising out of this Agreement
or the consummation of the transactions contemplated hereby. Except for the
remedies contained in (i) Sections 10.1(c), 13.2 and 13.3, (ii) any other
remedies available at Law or in equity for breaches of the provisions of this
Agreement other than Article 4, Article 5 and Article 6 and (iii) the remedies
available at Law or in equity in connection with any other document delivered by
a Party in connection with the transactions contemplated hereby or the
Assignment or the Limited Liability Company Agreement, but excluding the
certificates delivered by the Parties pursuant to Sections 9.3(f) or 9.3(g),
effective as of Closing, each Party, on its own behalf and on behalf of its
Affiliates and on behalf of the Contributed Companies, hereby releases, remises
and forever discharges the other Party and its Affiliates and all such Persons’
equity holders, partners, members, directors, officers, employees, agents and
representatives from any and all Liabilities in Law or in equity, known or
unknown, which such Persons might now or subsequently may have, based on,
relating to or arising out of the ownership, use or operation of the Subject
Assets prior to the Closing, or the condition, quality, status or nature of the
Subject Assets prior to the Closing, including rights to contribution under the
Comprehensive Environmental Response, Compensation, and Liability Act of 1980,
as amended, breaches of statutory or implied warranties, nuisance or other tort
actions, rights to punitive damages, common law rights of contribution, and
rights under insurance maintained by either Party or any of its Affiliates.

13.7 Indemnification Procedures. All claims for indemnification under
Sections 10.1(c), 13.2 and 13.3 shall be asserted and resolved as follows:

(a) For purposes of this Article 13, the term “Indemnifying Party” when used in
connection with particular Liabilities shall mean the Party having an obligation
to indemnify another Party or Person(s) with respect to such Liabilities
pursuant to this Article 13, and the term “Indemnified Party” when used in
connection with particular Liabilities shall mean the Party or Person(s) having
the right to be indemnified with respect to such Liabilities by a Party pursuant
to this Article 13.

 

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(b) To make claim for indemnification under Sections 10.1(c), 13.2 or 13.3, an
Indemnified Party shall notify the Indemnifying Party of its claim under this
Section 13.7, including the specific details of and specific basis under this
Agreement for its claim (the “Claim Notice”). In the event that the claim for
indemnification is based upon a claim by a Third Party against the Indemnified
Party (a “Claim”), the Indemnified Party shall provide its Claim Notice promptly
after the Indemnified Party has actual knowledge of the Claim and shall enclose
a copy of all papers (if any) served with respect to the Claim; provided that
the failure of any Indemnified Party to give notice of a Claim as provided in
this Section 13.7 shall not relieve the Indemnifying Party of its obligations
under Sections 10.1(c), 13.2 or 13.3 (as applicable) except to the extent such
failure results in insufficient time being available to permit the Indemnifying
Party to effectively defend against the Claim or otherwise materially prejudices
the Indemnifying Party’s ability to defend against the claim. In the event that
the claim for indemnification is based upon an inaccuracy or breach of a
representation, warranty, covenant or agreement, the Claim Notice shall specify
the representation, warranty, covenant or agreement that was inaccurate or
breached.

(c) In the case of a claim for indemnification based upon a Claim, the
Indemnifying Party shall have 30 days from its receipt of the Claim Notice to
notify the Indemnified Party whether it admits or denies its obligation to
defend the Indemnified Party against such Claim at the sole cost and expense of
the Indemnifying Party. The Indemnified Party is authorized, prior to and during
such 30 day period, at the expense of the Indemnifying Party, to file any
motion, answer or other pleading that it shall deem necessary or appropriate to
protect its interests or those of the Indemnifying Party and that is not
prejudicial to the Indemnifying Party.

(d) If the Indemnifying Party admits its obligation to indemnify a Claim, it
shall have the right and obligation to diligently defend, at its sole cost and
expense, the Claim. The Indemnifying Party shall have full control of such
defense and proceedings, including any compromise or settlement thereof. If
requested by the Indemnifying Party, the Indemnified Party agrees to cooperate
in contesting any Claim which the Indemnifying Party elects to contest
(provided, however, that the Indemnified Party shall not be required to bring
any counterclaim or cross-complaint against any Person). The Indemnified Party
may participate in, but not control, at its own expense, any defense or
settlement of any Claim controlled by the Indemnifying Party pursuant to this
Section 13.7(d). An Indemnifying Party shall not, without the written consent of
the Indemnified Party, (i) settle any Claim or consent to the entry of any
judgment with respect thereto which does not result in a final resolution of the
Indemnified Party’s Liability in respect of such Claim (including, in the case
of a settlement, an unconditional written release of the Indemnified Party from
all Liability in respect of such Claim) or (ii) settle any Claim or consent to
the entry of any judgment with respect thereto in any manner that may materially
and adversely affect the Indemnified Party (other than as a result of money
damages covered by the indemnity).

 

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(e) If the Indemnifying Party does not admit its obligation to indemnify and
bear all expenses associated with a Claim or admits its obligation to indemnify
and bear all expenses associated with a Claim but fails to diligently prosecute
or settle the Claim, then the Indemnified Party shall have the right to defend
against the Claim at the sole cost and expense of the Indemnifying Party, with
counsel of the Indemnified Party’s choosing, subject to the right of the
Indemnifying Party to admit its obligation to indemnify and bear all expenses
associated with a Claim and assume the defense of the Claim at any time prior to
settlement or final determination thereof. If the Indemnifying Party has not yet
admitted its obligation to indemnify and bear all expenses associated with a
Claim, the Indemnified Party shall send written notice to the Indemnifying Party
of any proposed settlement and the Indemnifying Party shall have the option for
10 days following receipt of such notice to (i) admit in writing its obligation
to indemnify and bear all expenses associated with a Claim and (ii) if such
obligation is so admitted, reject, in its reasonable judgment, the proposed
settlement. If the Indemnified Person settles any Claim without the written
consent of the Indemnifying Party after the Indemnifying Party has timely
admitted its obligation in writing and assumed the defense of a Claim, the
Indemnified Party shall be deemed to have waived any right to indemnity
therefor.

(f) In the case of a claim for indemnification not based upon a Claim, the
Indemnifying Party shall have 30 days from its receipt of the Claim Notice to
(i) cure the Liabilities complained of, (ii) admit its obligation to indemnify
for and bear all expenses associated with such Liability or (iii) dispute the
claim for such Liabilities. If the Indemnifying Party does not notify the
Indemnified Party within such 30 day period that it has cured the Liabilities or
that it disputes the claim for such Liabilities, the amount of such Liabilities
shall conclusively be deemed a liability of the Indemnifying Party hereunder.

13.8 Survival.

(a) The representations and warranties of the Parties in Articles 4 and 5 (other
than the representations and warranties in Sections 4.6, 4.15, 4.16, 4.18, 4.22,
4.23, 5.7, 5.8 and 5.9) and the covenants and agreements of the Parties in
Sections 6.1, 6.2, 6.3 and 9.4 shall survive the Closing for a period of 18
months. The representations and warranties of EXCO in Sections 4.6, 4.15 and
4.18 shall survive the Closing for the applicable statute of limitations.
Subject to the foregoing and as set forth in Section 13.8(b), the remainder of
this Agreement (including, without limitation, Sections 4.16, 4.22, 4.23, 5.7,
5.8 and 5.9) shall survive the Closing without time limit. Representations,
warranties, covenants and agreements shall be of no further force and effect
after the date of their expiration, provided that there shall be no termination
of any bona fide claim asserted pursuant to this Agreement with respect to such
a representation, warranty, covenant or agreement prior to its expiration date.

(b) The indemnities in Sections 13.2(a), 13.2(b), 13.3(a) and 13.3(b) shall
terminate as of the termination date of each respective representation,
warranty, covenant or agreement that is subject to indemnification. EXCO’s
indemnities set forth in Section 13.2(d) shall survive the Closing for a period
of 18 months. EXCO’s indemnities set forth in Sections 13.2(c), 13.2(e),
13.2(f), 13.2(g) and 13.2(h) shall survive the Closing without time limit.
Notwithstanding the foregoing, there shall be no termination of any bona fide
claim asserted pursuant the indemnities in Sections 13.2(a) through 13.2(h) or
Sections 13.3(a) through 13.3(b) prior to the date of termination for such
indemnity.

 

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13.9 Non-Compensatory Damages. None of the BG Indemnified Parties or EXCO
Indemnified Parties or Contributed Companies shall be entitled to recover from
EXCO, BG or the Contributed Companies, or their respective Affiliates, any
indirect, consequential, punitive or exemplary damages or damages for lost
profits of any kind arising under or in connection with this Agreement or the
transactions contemplated hereby, except to the extent any such Party suffers
such damages (including costs of defense and reasonable attorney’s fees incurred
in connection with defending of such damages) to a Third Party, which damages
(including costs of defense and reasonable attorney’s fees incurred in
connection with defending against such damages) shall not be excluded by this
provision as to recovery hereunder. Subject to the preceding sentence, BG, on
behalf of each of the BG Indemnified Parties and the Contributed Companies, and
EXCO, on behalf of each of EXCO Indemnified Parties and the Contributed
Companies, waive any right to recover punitive, special, exemplary and
consequential damages, including damages for lost profits, arising in connection
with or with respect to this Agreement or the transactions contemplated hereby.
This Section shall not restrict any Party’s right to obtain specific performance
or other equitable remedies by way of injunction pursuant to Section 14.2.

13.10 Exclusion of Certain Matters. Notwithstanding anything to the contrary
elsewhere in this Agreement, (a) claims for Operating Expenses shall be
exclusively handled pursuant to Sections 2.4 and 3.2 and shall not be subject to
this Article 13, (b) claims for Environmental Defects asserted under Article 12
shall be handled exclusively under such Article and Article 3 and shall not be
subject to this Article 13 and (c) claims with respect to the termination of
this Agreement prior to Closing shall be handled exclusively under Section 3.1
and Article 14 and shall not be subject to this Article 13 (other than
Section 13.9, which shall apply in all respects).

ARTICLE 14

TERMINATION, DEFAULT AND REMEDIES

14.1 Right of Termination. This Agreement and the transactions contemplated
herein may be terminated at any time at or prior to Closing:

(a) by EXCO or BG if the Closing shall not have occurred on or before
September 14, 2009 (the “Termination Date”);

(b) by EXCO or BG upon mutual written consent; or

(c) by EXCO, if BG fails to deposit the Deposit with the Escrow Agent by the
date required pursuant to Section 3.1.

provided, however, that no Party shall have the right to terminate this
Agreement pursuant to Section 14.1(a) above if such Party or its Affiliates
willfully failed to perform or observe in any material respect its covenants and
agreements hereunder.

14.2 Failure to Close and Remedies. Without prejudice to other rights and
remedies that may be available to the non-breaching Party, the Parties agree
that in the event Closing does not occur by the Termination Date as a result of
the willful breach by a Party of any of its covenants or agreements hereunder in
any material respect, the other Party shall be entitled, at its option, in lieu
of terminating this Agreement, to enforce specific performance and other
equitable remedies by way of injunction. Each Party agrees to waive any
requirement for the posting of a bond in connection with any such equitable
relief in favor of the other Party.

 

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14.3 Effect of Termination. If the obligation to close the transactions
contemplated by this Agreement is terminated pursuant to any provision of
Section 14.1 hereof, then, except for the provisions of Sections 1.1, 1.2, 3.1,
4.16 5.9, 6.6, 10.1(c) and 10.1(e), 10.2, 10.3, 13.9, this Section 14.3, 14.4
and Article 15 (other than Sections 15.2(b), 15.2(c), 15.3, 15.4, 15.7, 15.9,
and 15.10), this Agreement shall forthwith become void and the Parties shall
have no liability or obligation hereunder except and to the extent such
termination results from the willful breach by a Party of any of its covenants
or agreements hereunder; provided that if EXCO is entitled to retain the Deposit
as liquidated damages pursuant to Section 3.1, then such retention shall
constitute full and complete satisfaction of any and all remedies and damages
EXCO may have against BG under this Agreement for claims and actions arising at
or prior to termination of this Agreement, except for EXCO’s remedies under
Sections 5.9, 6.6, 10.1(c) and 10.1(e), 10.2 and 14.4; and provided further
that, except as stated above, in the case of willful breach by either Party, the
other Party shall be entitled to all remedies available at Law or in equity and
shall be entitled to recover court costs and attorneys’ fees in addition to any
other relief to which such Party may be entitled.

14.4 Return of Documentation and Confidentiality. Upon termination of this
Agreement, BG shall destroy or return to EXCO all title, engineering, geological
and geophysical data, environmental assessments and/or reports, maps and other
information furnished by EXCO to BG or prepared by or on behalf of BG in
connection with its due diligence investigation of the Subject Assets and an
officer of BG shall certify as to the return or destruction of such material to
EXCO in writing, provided that BG shall be entitled to retain in its corporate
records a copy of board papers, reports to management and other documentation
prepared in connection with its decision to enter into the transaction, the
conduct thereof, and the termination thereof, so long as it maintains the
confidentiality thereof in accordance with the Confidentiality Agreement.

ARTICLE 15

MISCELLANEOUS

15.1 Exhibits, Schedules and Appendices. All of the Exhibits, Schedules and
Appendices referred to in this Agreement are hereby incorporated into this
Agreement by reference and constitute a part of this Agreement. Each Party and
its counsel have received a complete set of Exhibits, Schedules and Appendices
prior to and as of the execution of this Agreement.

15.2 Expenses and Taxes.

(a) Except as otherwise specifically provided, all fees, costs and expenses
incurred by BG or EXCO in negotiating this Agreement or in consummating the
transactions contemplated by this Agreement shall be paid by the Party incurring
the same, including legal and accounting fees, costs and expenses.

 

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(b) All required documentary, filing and recording fees and expenses in
connection with the filing and recording of the assignments, conveyances or
other instruments required to convey title to the Contributed Interests to the
Company shall be borne by the Company. EXCO shall assume responsibility for, and
shall bear and pay, all federal income taxes, state income taxes, and other
similar taxes (including any applicable interest or penalties) incurred or
imposed with respect to the transactions described in this Agreement. The
Company shall assume responsibility for, and shall bear and pay, all state sales
and use taxes (including any applicable interest or penalties) incurred or
imposed with respect to the transactions described in this Agreement. EXCO shall
assume responsibility for, and shall bear and pay, all Asset Taxes assessed with
respect to the ownership and operation of the Subject Assets for (i) any taxable
period ending prior to the Effective Time and (ii) any Straddle Period in an
amount equal to the Asset Taxes imposed for the entire Straddle Period
multiplied by a fraction, the numerator of which is the number of days in the
Straddle Period ending immediately prior to the Effective Time and the
denominator of which is the number of days in the entire Straddle Period. All
Asset Taxes with respect to the ownership or operation of the Subject Assets
arising on or after the Effective Time (including all Straddle Period Asset
Taxes not apportioned to EXCO) shall be allocated to and borne by the Company.
To the extent the actual amount of Asset Taxes is not determinable at Closing,
the Company and EXCO shall utilize the most recent information available in
estimating the amount of Asset Taxes for purposes of Sections 3.2(a)(iii) and
3.2(b)(iv). Upon determination of the actual amount of Asset Taxes, EXCO shall
pay to the Company to the extent not taken into account in the Final Settlement
Statement any additional amount necessary to equal EXCO’s share of the Asset
Taxes. In the event the amount of Asset Taxes paid by EXCO or included as a
reduction to the Closing Cash Contribution pursuant to Section 3.2(b)(iv) at
Closing exceeds EXCO’s share of Asset Taxes, the Company shall pay the amount of
any such overage to EXCO.

(c) EXCO shall timely file any return with respect to Asset Taxes due on or
before the Closing Date (a “Pre-Closing Asset Tax Return”) and shall pay any
Asset Taxes shown due and owing on such Pre-Closing Asset Tax Return, subject to
EXCO’s right of reimbursement for any Asset Taxes for which the Company is
responsible under Section 15.2(b). Within thirty (30) days prior to filing, EXCO
shall deliver to BG a draft of any such Pre-Closing Asset Tax Return for BG’s
review and approval.

(d) EXCO shall assume responsibility for, and shall bear and pay, all Taxes
(other than Asset Taxes) assessed with respect to the ownership and operation of
the Subject Assets or ownership of the Contributed Companies for (i) any period
ending prior to the Effective Time and (ii) any Straddle Period to the extent
such Taxes relate to the period before the Effective Time, determined using an
interim closing of the books method. All Taxes with respect to the ownership or
operation of the Subject Assets or ownership of the Contributed Interests
arising on or after the Effective Time (including all such Straddle Period Taxes
not apportioned to EXCO) shall be allocated to and borne by the Company.

(e) EXCO shall timely file any return with respect to Taxes (other than Asset
Taxes) due on or before the Closing Date and shall pay any Taxes shown due and
owing on such Tax return, subject to EXCO’s right of reimbursement for any Taxes
for which the Company is responsible under Section 15.2(a). Within thirty
(30) days prior to filing, EXCO shall deliver to BG a draft of any such Tax
return for BG’s review and approval. EXCO shall include income

 

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earned by the Contributed Companies through the day prior to the Closing Date on
a combined Texas franchise tax report that includes EXCO and the Contributed
Companies; and, the Company shall file a separate combined Texas franchise tax
report including the income earned by the Contributed Companies for the period
commencing on the Closing Date.

15.3 Tax Treatment. The Parties intend and expect that the transactions
contemplated by this Agreement will be treated, for purposes of federal income
taxation and for purposes of certain state income tax laws that incorporate or
follow federal income tax principles, as resulting in (a) the creation of the
Company, in which EOC and BG will be treated as partners, (b) subject to clause
(d) below, a contribution by EOC of all of the Contributed Interests to the
Company in exchange for a 50% interest therein; (c) a contribution by BG of the
Final Cash Amount to the Company in exchange for a 50% interest therein; and
(d) a distribution by the Company to EOC of the Final Cash Amount (i) as a
reimbursement of EOC’s preformation expenditures with respect to the Contributed
Interests within the meaning of Treasury Regulations Section 1.707-4(d) to the
extent applicable, and (ii) in a transaction subject to treatment under
Section 707(a) of the Code, and its implementing Treasury Regulations, as in
part a sale, and in part a contribution, by EOC of the Contributed Interests to
the Company to the extent Treasury Regulations Section 1.707-4(d) is
inapplicable.

15.4 Allocation of Consideration for Tax Purposes. EXCO and BG agree that the
portion of the Closing Cash Contribution, as adjusted, treated for federal tax
purposes as consideration for a sale transaction (collectively, the “Allocable
Amount”) shall be allocated among the various Subject Assets for federal and
state income tax purposes. The initial draft of such allocations shall be
prepared in a manner consistent with the valuation of the Subject Assets by EXCO
and shall be provided to BG concurrently with the delivery of the Final
Settlement Statement. EXCO, BG and the Company shall then cooperate to prepare a
final schedule of the Allocable Amount among the Subject Assets (as adjusted,
the “Allocation Schedule”). The Allocation Schedule shall be updated to reflect
any adjustments to the Allocable Amount. The allocation of the Allocable Amount
shall be reflected on a completed Internal Revenue Service Form 8594 (Asset
Acquisition Statement under Section 1060) (or similar state or local form),
which form will be timely filed separately by EXCO and BG (and/or the Company,
as appropriate) with the Internal Revenue Service (or other applicable
Governmental Authority). The portion of the Closing Cash Contribution, as
adjusted, other than the Allocable Amount, shall be allocated among the various
Subject Assets for purposes of Section 755 of the Code in a manner consistent
with the Allocation Schedule, to the extent Section 755 of the Code is
applicable (the “Section 755 Allocation”) Each Party agrees not to (and to cause
the Company not to) take any position inconsistent with the allocations set
forth in the Allocation Schedule or the Section 755 Allocation unless required
by applicable Law or with the consent of the other Party.

15.5 Assignment. This Agreement may not be assigned by any Party, in whole or in
part, without the prior written consent of the other Parties, provided that BG
shall be entitled to assign its rights and delegate performance of its
obligations to another direct or indirect wholly-owned Affiliate of BG’s
ultimate parent company by written notice to EXCO at least 5 Business Days prior
to Closing. No assignment hereunder by any Party shall relieve such Party or its
guarantor, if any, of any obligations and responsibilities hereunder or under
any related guaranty.

 

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15.6 Preparation of Agreement. Both EXCO and BG and their respective counsel
participated in the preparation of this Agreement. In the event of any ambiguity
in this Agreement, no presumption shall arise based on the identity of the
draftsman of this Agreement.

15.7 Publicity. Until after Closing, without reasonable prior notice to the
other Party, no Party will issue, or permit any agent or Affiliate of it to
issue, any press releases or otherwise make, or cause any agent or Affiliate of
it to make, any public statements with respect to this Agreement and the
transactions contemplated hereby, except where such release or statement is
deemed in good faith by the releasing Party to be required by Law or under the
rules and regulations of a national stock exchange on which the shares of such
Party or any of its Affiliates are listed. In each case to which such exception
applies, prior to making such press release or public statement, the releasing
Party will provide a copy of such press release or public statement to the other
Party.

15.8 Notices. All notices and communications required or permitted to be given
hereunder shall be in writing and shall be delivered personally, or sent by
bonded overnight courier, or mailed by U.S. Express Mail or by certified or
registered United States Mail with all postage fully prepaid, or sent by telex
or facsimile transmission (provided any such telex or facsimile transmission is
confirmed either orally or by written confirmation), addressed to the
appropriate Party at the address for such Party shown below or at such other
address as such Party shall have theretofore designated by written notice
delivered to the Party giving such notice:

If to EXCO:

EXCO Operating Company, LP

Vaughan Holding Company, LLC

12377 Merit Drive, Suite 1700

Dallas, Texas 75251

Attention: Rick Hodges, Vice President of Land

Telephone: (214) 368-2084

Fax: (214) 706-3424

With a copy to:

EXCO Operating Company, LP

Vaughan Holding Company, LLC

12377 Merit Drive, Suite 1700

Dallas, Texas 75251

Attention: William L. Boeing, Vice President, General Counsel, and Secretary

Telephone: (214) 368-2084

Fax: (214) 706-3409

 

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With a copy to:

Vinson & Elkins L.L.P.

2500 First City Tower

1001 Fannin Street

Houston, Texas 77002-6760

Attention: Robin S. Fredrickson

Telephone: (713) 758-2450

Fax: (713) 615-5850

If to BG:

BG US Gathering Company, LLC

5444 Westheimer, Suite 1200

Houston, Texas 77056

Attention: Jon Harris, Asset General Manager

Telephone: (713) 599-4000

Fax: (713) 599-4002

With a copy to:

BG North America, LLC

5444 Westheimer, Suite 1775

Houston, Texas 77056

Attention: Chris Migura

Telephone: (713) 599-3826

Fax: (713) 403-3781

With a copy to:

Morgan, Lewis & Bockius LLP

1000 Louisiana, Suite 4200

Houston, Texas 77002

Attention: David F. Asmus

Telephone: (713) 890-5718

Fax: (713) 890-5001

Any notice given in accordance herewith shall be deemed to have been given when
delivered to the addressee in person, or by courier, or transmitted by facsimile
transmission during normal business hours, or upon actual receipt by the
addressee after such notice has either been delivered to an overnight courier or
deposited in the United States Mail, as the case may be. The Parties may change
the address, telephone numbers, and facsimile numbers to which such
communications are to be addressed by giving written notice to the other Parties
in the manner provided in this Section 15.8.

 

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15.9 Further Cooperation. After the Closing, BG, EXCO and the Contributed
Companies shall execute and deliver, or shall cause to be executed and delivered
from time to time, such further instruments of conveyance and transfer, and
shall take such other actions as any Party may reasonably request, to convey and
deliver the Contributed Interests as provided herein in the manner contemplated
by this Agreement and to accomplish the transactions contemplated by this
Agreement. If any Party receives monies belonging to the other Party, such
amount shall immediately be paid over to the proper Party. If an invoice or
other evidence of an obligation is received by a Party, which is partially an
obligation of both EXCO and BG, then the Parties shall consult with each other,
and each shall promptly pay its portion of such obligation to the obligee. Prior
to Closing, EXCO shall use its commercially reasonable efforts to obtain all
consents burdening the Contributed Interests or Subject Assets that are required
to permit the assignment of the Contributed Interests by EXCO as contemplated
hereby and the consummation by EXCO of the transactions contemplated hereby;
provided, however, EXCO shall not be required to incur any Liability or pay any
money in order to be in compliance with the foregoing covenant.

15.10 Filings, Notices and Certain Governmental Approvals. Promptly after
Closing the Parties shall cause the Contributed Companies to actively pursue all
consents and approvals that may be reasonably required in connection with the
assignment of the Contributed Interests as contemplated hereby and that shall
not have been obtained prior to Closing, and shall take any and all action
reasonably required by any Governmental Authority in order to obtain such
unconditional approval, including the posting of any and all bonds or other
security that may be required in excess of its existing lease, pipeline or
area-wide bond.

15.11 Entire Agreement; Conflicts. THIS AGREEMENT, THE EXHIBITS HERETO, THE
TRANSACTION DOCUMENTS AND THE CONFIDENTIALITY AGREEMENT COLLECTIVELY CONSTITUTE
THE ENTIRE AGREEMENT AMONG THE PARTIES PERTAINING TO THE SUBJECT MATTER HEREOF
AND SUPERSEDE ALL PRIOR AGREEMENTS, UNDERSTANDINGS, NEGOTIATIONS, AND
DISCUSSIONS, WHETHER ORAL OR WRITTEN, OF THE PARTIES PERTAINING TO THE SUBJECT
MATTER HEREOF. THERE ARE NO WARRANTIES, REPRESENTATIONS, OR OTHER AGREEMENTS
AMONG THE PARTIES RELATING TO THE SUBJECT MATTER HEREOF EXCEPT AS SPECIFICALLY
SET FORTH IN THIS AGREEMENT, AND NONE OF THE PARTIES SHALL BE BOUND BY OR LIABLE
FOR ANY ALLEGED REPRESENTATION, PROMISE, INDUCEMENT, OR STATEMENTS OF INTENTION
NOT SO SET FORTH. IN THE EVENT OF A CONFLICT BETWEEN THE TERMS AND PROVISIONS OF
THIS AGREEMENT AND THE TERMS AND PROVISIONS OF ANY EXHIBIT HERETO, THE TERMS AND
PROVISIONS OF THIS AGREEMENT SHALL GOVERN AND CONTROL; PROVIDED, HOWEVER, THAT
THE INCLUSION IN ANY OF THE EXHIBITS HERETO OF TERMS AND PROVISIONS NOT
ADDRESSED IN THIS AGREEMENT SHALL NOT BE DEEMED A CONFLICT, AND ALL SUCH
ADDITIONAL PROVISIONS SHALL BE GIVEN FULL FORCE AND EFFECT, SUBJECT TO THE
PROVISIONS OF THIS SECTION 15.11.

15.12 Parties in Interest. Notwithstanding anything contained in this Agreement
to the contrary, nothing in this Agreement, expressed or implied, is intended to
confer on any Person other than the Parties, or their respective related
Indemnified Parties hereunder any rights, remedies, obligations or liabilities
under or by reason of this Agreement; provided that only a Party will have the
right to enforce the provisions of this Agreement on its own behalf or on behalf
of any of its related Indemnified Parties (but shall not be obligated to do so).

 

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15.13 Amendment. This Agreement may be amended only by an instrument in writing
executed by the Parties against whom enforcement is sought.

15.14 Waiver; Rights Cumulative. Any of the terms, covenants, representations,
warranties, or conditions hereof may be waived only by a written instrument
executed by or on behalf of the Party waiving compliance. No course of dealing
on the part of EXCO or BG, or their respective officers, employees, agents, or
representatives, nor any failure by EXCO or BG to exercise any of its rights
under this Agreement shall operate as a waiver thereof or affect in any way the
right of such Party at a later time to enforce the performance of such
provision. No waiver by any Party of any condition, or any breach of any term,
covenant, representation, or warranty contained in this Agreement, in any one or
more instances, shall be deemed to be or construed as a further or continuing
waiver of any such condition or breach or a waiver of any other condition or of
any breach of any other term, covenant, representation, or warranty. The rights
of EXCO and BG under this Agreement shall be cumulative, and the exercise or
partial exercise of any such right shall not preclude the exercise of any other
right.

15.15 Governing Law; Jurisdiction; Venue; Jury Waiver. THIS AGREEMENT AND THE
LEGAL RELATIONS AMONG THE PARTIES SHALL BE GOVERNED AND CONSTRUED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF TEXAS, EXCLUDING ANY CONFLICTS OF LAW RULE OR
PRINCIPLE THAT MIGHT REFER CONSTRUCTION OF SUCH PROVISIONS TO THE LAWS OF
ANOTHER JURISDICTION. SUBJECT TO SECTION 15.16, ALL OF THE PARTIES HERETO
CONSENT TO THE EXERCISE OF JURISDICTION IN PERSONAM BY THE COURTS OF THE STATE
OF TEXAS FOR ANY DISPUTE. EACH PARTY HERETO WAIVES, TO THE FULLEST EXTENT
PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT
OF ANY DISPUTE.

15.16 Arbitration.

(a) Except for matters that are subject to the dispute resolution procedures set
forth in Sections 3.6 and 12.1(e) and the matters set forth in Section 6.6 and
10.2, any Dispute between the Parties shall be resolved through final and
binding arbitration.

(b) The arbitration shall be conducted in accordance with the Commercial
Arbitration Rules of the American Arbitration Association (“AAA”) in effect at
the time the arbitration of the Dispute is initiated (the “AAA Rules”).

(c) The arbitration shall be conducted by 3 arbitrators and conducted in Dallas,
Texas. Within 30 days of either Party providing notice to the other Party of a
Dispute, each of BG and EXCO shall appoint one arbitrator, and the 2 arbitrators
so appointed shall select the third and presiding arbitrator within 30 days
following appointment of the second party-appointed arbitrator. If either Party
fails to appoint an arbitrator within the permitted time period or if the
Party-appointed arbitrators fail to appoint the presiding arbitrator within the
permitted

 

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time period, then the missing arbitrator(s) shall be selected by the AAA as
appointing authority in accordance with the AAA Rules. Any arbitrator appointed
by the Party-appointed arbitrators or the AAA shall be a member of the Large,
Complex Commercial Case Panel of the AAA or a member of the Center of Public
Resources Panel of Distinguished Neutrals. All arbitrators shall be and remain
at all times independent and impartial, and, once appointed, no arbitrator shall
have any ex parte communications with any of the Parties concerning the
arbitration or the underlying Dispute other than communications directly
concerning the selection of the presiding arbitrator, when applicable. All
arbitrators shall be qualified by education, training, or experience to resolve
the Dispute. No arbitrator shall have been an employee or consultant to any
Party or any of its Affiliates within the 5 year period preceding the
arbitration, or have any financial interest in the Dispute.

(d) All decisions of the arbitral tribunal shall be made by majority vote. The
award of the arbitral tribunal shall be final and binding, subject only to
grounds and procedures for vacating or modifying the award under the Federal
Arbitration Act. Judgment on the award may be entered and enforced by any court
of competent jurisdiction hereunder.

(e) Notwithstanding the agreement to arbitrate Disputes in this Section 15.16,
any Party may apply to a court for interim measures pending appointment of the
arbitration tribunal, including injunction, attachment, and conservation orders.
The Parties agree that seeking and obtaining such court-ordered interim measures
shall not waive the right to arbitration. Additionally, the arbitrators (or in
an emergency the presiding arbitrator acting alone in the event one or more of
the other arbitrators is unable to be involved in a timely fashion) may grant
interim measures including injunctions, attachments, and conservation orders in
appropriate circumstances, which measures may be immediately enforced by court
order. Hearings on requests for interim measures may be held in person, by
telephone or video conference, or by other means that permit the Parties to
present evidence and arguments. The arbitrators may require any Party to provide
appropriate security in connection with such measures.

(f) The arbitral tribunal is authorized to award costs, attorneys’ fees, and
expert witness fees and to allocate them among the Parties. The award may
include interest, at a rate equal to the one month London Inter-Bank Offer Rate
(as published in the Wall Street Journal) plus an additional 2.5 percentage
points (or, if such rate is contrary to any applicable usury Law, the maximum
rate permitted by such applicable Law), from the date of any default, breach, or
other accrual of a claim until the arbitral award is paid in full. The
arbitrators may not award indirect, consequential, special or punitive damages.
Unless otherwise directed by the arbitral tribunal, each Party shall pay its own
expenses in connection with the arbitration.

(g) All negotiations, mediation, arbitration, and expert determinations relating
to a Dispute (including a settlement resulting from negotiation or mediation, an
arbitral award, documents exchanged or produced during a mediation or
arbitration proceeding, and memorials, briefs or other documents prepared for
the arbitration) are confidential and may not be disclosed by the Parties, their
respective Affiliates and each of their respective employees, officers,
directors, counsel, consultants, and expert witnesses, except to the extent
necessary to enforce any settlement agreement, arbitration award, or expert
determination, to enforce other rights of a Party, as required by law or
regulation, or for a bona fide business purpose, such as disclosure to
accountants, shareholders, or third-party purchasers; provided, however, that
breach of this confidentiality provision shall not void any settlement, expert
determination, or award.

 

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(h) Any papers, notices, or process necessary or proper for an arbitration
hereunder, or any court action in connection with an arbitration or an award,
may be served on a Party in the manner set forth in Section 15.8.

15.17 Severability. If any term or other provision of this Agreement is invalid,
illegal, or incapable of being enforced by any rule of law or public policy, all
other conditions and provisions of this Agreement shall nevertheless remain in
full force and effect so long as the economic or legal substance of the
transactions contemplated hereby is not affected in any adverse manner to any
Party. Upon such determination that any term or other provision is invalid,
illegal, or incapable of being enforced, the Parties shall negotiate in good
faith to modify this Agreement so as to effect the original intent of the
Parties as closely as possible in an acceptable manner to the end that the
transactions contemplated hereby are fulfilled to the extent possible.

15.18 Counterparts. This Agreement may be executed in any number of
counterparts, and each such counterpart hereof shall be deemed to be an original
instrument, but all of such counterparts shall constitute for all purposes one
agreement. Any signature hereto delivered by a Party by facsimile transmission
shall be deemed an original signature hereto.

15.19 Joint and Several Liability. The representations, warranties and covenants
made by (and the obligations of) EOC and Vaughan, as EXCO, in this Agreement are
joint and several.

[THE NEXT SUCCEEDING PAGE IS THE EXECUTION PAGE]

 

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IN WITNESS WHEREOF, EXCO and BG have executed this Agreement on the date first
above written.

 

EXCO: VAUGHAN HOLDING COMPANY, LLC By:   /s/ DOUGLAS H. MILLER Name:   Douglas
H. Miller Title:   Chairman and Chief Executive Officer EXCO OPERATING COMPANY,
LP By:   EXCO Partners OLP GP, LLC, its general partner By:   /s/ DOUGLAS H.
MILLER Name:   Douglas H. Miller Title:   Chairman and Chief Executive Officer
BG: BG US GATHERING COMPANY, LLC By:   /s/ MARTIN HOUSTON Name:   Martin Houston
Title:   President

[SIGNATURE PAGE TO PURCHASE AND SALE AGREEMENT]

 

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APPENDIX I

Definitions

“AAA” shall have the meaning set forth in Section 15.16(b).

“AAA Rules” shall have the meaning set forth in Section 15.16(b).

“Accounting Arbitrator” shall have the meaning set forth in Section 3.6.

“Adjusted Closing Cash Contribution” shall have the meaning set forth in
Section 3.2.

“AFE” shall have the meaning set forth in Section 4.13.

“Affiliate” shall mean, with respect to any Person, any other Person that
directly or indirectly, through one or more intermediaries, controls, is
controlled by, or is under common control with, such Person. The term “control”
and its derivatives with respect to any Person means the possession, directly or
indirectly, of the power to exercise or determine the voting of more than 50% of
the voting shares in a corporation, and in the case of any other type of entity,
the right to exercise or determine the voting of more than 50% or more of the
equity interests having voting rights, or otherwise to direct or cause the
direction of the management and policies of such Person, whether by contract or
otherwise.

“Agreement” shall have the meaning set forth in the first paragraph herein.

“Allocable Amount” shall have the meaning set forth in Section 15.4.

“Allocation Schedule” shall have the meaning set forth in Section 15.4.

“Applicable Contracts” shall mean all Contracts to which EXCO or one or more of
its Affiliates, including the Contributed Companies, is a party or in which it
otherwise holds an interest and (a) by which the Subject Assets or a Contributed
Company are bound or (b) that primarily relate to the Subject Assets or a
Contributed Company and, in each case, that will be binding on the Subject
Assets or a Contributed Company after the Effective Time.

“Asset Taxes” shall mean ad valorem, sales or use, property, excise, severance,
production or similar taxes (including any interest, fine, penalty or additions
to tax imposed by a Governmental Authority in connection with such taxes) based
upon acquisition, operation or ownership of the Subject Assets but excluding,
for the avoidance of doubt, income, capital gains or franchise taxes and sales
or use taxes incurred or imposed with respect to the transactions described in
this Agreement.

“Assignment” shall mean the Assignment in substantially the form attached to
this Agreement as Exhibit B.

“Business Day” means a day (other than a Saturday or Sunday) on which commercial
banks in Texas are generally open for business, provided that if Business Days
are used to calculate periods in which a Party must make a payment hereunder,
“Business Day” shall mean any day other than Saturday or Sunday on which banking
institutions in Dallas, Texas and London, England are generally open for
business.

 

APPENDIX I

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“BG” shall have the meaning set forth in the first paragraph herein.

“BG Debt Instrument” shall mean (a) any agreement for borrowed money of BG or BG
Parent and (b) any guarantee by BG or BG Parent of another Person’s payment
obligations.

“BG Indemnified Parties” shall have the meaning set forth in Section 13.2.

“BG Parent” shall mean BG Energy Holdings Limited.

“BG Parent Guaranty” shall mean the Guaranty made by BG Parent in favor of EXCO
dated as of the date hereof.

“BG’s Representatives” shall have the meaning set forth in Section 10.1(a).

“Claim” shall have the meaning set forth in Section 13.7(b).

“Claim Notice” shall have the meaning set forth in Section 13.7(b).

“Closing” shall have the meaning set forth in Section 9.1.

“Closing Cash Contribution” shall have the meaning set forth in Section 2.1(b).

“Closing Date” shall have the meaning set forth in Section 9.1.

“Code” shall mean the Internal Revenue Code of 1986, as amended.

“Company” shall have the meaning set forth in the Recitals.

“Confidentiality Agreement” shall mean that certain Confidentiality Agreement
between BG and EXCO Resources, Inc. dated December 9, 2008.

“Contract” shall mean any written or oral contract, agreement, agreement
regarding indebtedness, lease, mortgage, license agreement, purchase order,
commitment, letter of credit or any other legally binding arrangement,
excluding, however, any surface lease, easement, right-of-way, permit or other
instrument (other than acquisition or similar sales or purchase agreements)
creating or evidencing an interest in the Subject Assets that constitute real or
immovable property.

“Contributed Companies” shall mean the Midstream Companies, GP Holding, and the
Company and “Contributed Company” shall mean any of such entities as the context
requires.

“Contributed Interests” shall mean the meaning set forth in Section 2.1(a).

 

APPENDIX I

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“Customary Post-Closing Consents” shall mean the consents and approvals from
Governmental Authorities that are customarily obtained after the assignment of
properties similar to the Contributed Interests or Subject Assets.

“Debt Instrument” shall have the meaning set forth in Section 4.8(a)(iv).

“Defect Claim Date” shall mean on or before 10:00 a.m. (Central Time) on the
date of this Agreement.

“Defensible Title” shall mean good and defensible title of the Midstream
Companies to the Subject Assets that is free and clear of all Encumbrances,
excluding the Permitted Encumbrances.

“Deposit” shall have the meaning set forth in Section 3.1(a).

“Dispute” shall mean any dispute, controversy, or claim (of any and every kind
or type, whether based on contract, tort, statute, regulation, or otherwise)
arising out of, relating to, or connected with this Agreement, or the
transactions contemplated hereby, including but not limited to any dispute,
controversy or claim concerning the existence, validity, interpretation,
performance, breach, or termination of this Agreement or the relationship of the
Parties arising out of this Agreement or the transactions contemplated hereby.

“Dispute Notice” shall have the meaning set forth in Section 3.5.

“DOJ” shall mean the Department of Justice.

“East Texas/North Louisiana Area” shall have the meaning set forth in the Joint
Development Agreement attached to the Purchase and Sale Agreement as Exhibit E.

“Effective Time” shall mean 7:00 a.m. (Central Time) on January 1, 2009.

“Employees” shall mean all employees of EXCO or any of its Affiliates employed
(now or in the past), with respect to their period of employment (or their
hiring or termination of employment) by EXCO or any such Affiliate.

“Employee Benefit Plans” shall mean any employee pension benefit plan, as
defined in Section 3(2) of ERISA, any employee welfare benefit plan as defined
in Section 3(1) of ERISA, any plans that would be employee pension benefit plans
or employee welfare benefit plans if they were subject to ERISA, such as any
stock bonus, stock option, stock purchase, stock appreciation rights, phantom
stock or other stock plan, deferred compensation plan and any bonus or incentive
compensation plan.

“Encumbrance” shall mean any lien, mortgage, security interest, defect,
irregularity, pledge, charge or encumbrance.

“Environmental Arbitrator” shall have the meaning set forth in Section 12.1(e).

 

APPENDIX I

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“Environmental Condition” shall mean (a) a condition with respect to the air,
soil, subsurface, surface waters, ground waters and/or sediments that causes a
Subject Asset (or a Contributed Company) not to be in compliance with any
Environmental Law or (b) the existence with respect to a Subject Asset, or any
other asset of a Contributed Company, or the operation thereof, of any
environmental pollution, contamination, degradation, damage or injury caused by,
related to a Subject Asset, or any other asset of a Contributed Company, for
which remedial or corrective action is presently required (or if known, would be
presently required) under Environmental Laws.

“Environmental Defect” shall mean an Environmental Condition with respect to a
Subject Asset that is not set forth in Schedule 4.14.

“Environmental Defect Notice” shall have the meaning set forth in
Section 12.1(a).

“Environmental Deductible” shall mean $2,490,000.

“Environmental Laws” shall mean all applicable federal, state, and local laws in
effect as of the date of this Agreement, including common law, relating to the
protection of the public health, safety welfare and the environment, including,
without limitation, those laws relating to the storage, handling, and use of
chemicals and other Hazardous Substances, those relating to the generation,
processing, treatment, storage, transportation, disposal, or other management
thereof. The term “Environmental Laws” does not include good or desirable
operating practices or standards that may be employed or adopted by other oil
and gas well operators or recommended by a Governmental Authority.

“EOC” shall have the meaning set forth in the first paragraph herein.

“EPC” shall mean EXCO Production Company, LP.

“ERISA” shall mean the Employee Retirement Income Security Act of 1974, as
amended.

“ERISA Liability” shall mean any Liability attributable to or arising out of
(a) EXCO’s or its Affiliates’ employment relationship with the Employees prior
to Closing, (b) EXCO’s or its Affiliates’ Employee Benefit Plans applicable to
the Employees and (c) EXCO’s or its Affiliates’ responsibilities under ERISA
respecting Employee Benefit Plans applicable to the Employees.

“Escrow Agent” shall mean JPMorgan Chase Bank, National Association.

“Escrow Agreement” means that certain Escrow Agreement, dated as of the date
hereof, by and among BG, EXCO and the Escrow Agent.

“Excluded Assets” shall mean (a) all of EXCO’s corporate minute books and
corporate financial records that relate to EXCO’s business generally (including
the ownership and operation of the Contributed Interests and the Subject
Assets); (b) all trade credits, all accounts, receivables and all other
proceeds, income or revenues attributable to the Subject Assets with respect to
any period of time prior to the Effective Time; (c) all claims and causes of
action of EXCO and any Contributed Company for Operating Expenses arising under
or with respect to

 

APPENDIX I

PAGE 4

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any Contracts, that are attributable to periods of time prior to the Effective
Time (including claims for adjustments or refunds but excluding Imbalances) and
claims and causes of action of EXCO and any Contributed Company, other than for
Operating Expenses, arising under or with respect to any contracts, that are
attributable to periods of time prior to the Effective Time, and which are
asserted in by EXCO in writing to BG or the applicable Third Party on or before
the EXCO Indemnity Cut-Off Date or which consist of tax claims or loss
carryforwards; (d) all rights and interests of EXCO or its Affiliates (i) under
any policy or agreement of insurance, (ii) under any bond or (iii) to any
insurance or condemnation proceeds or awards arising, in each case, from acts,
omissions or events, or damage to or destruction of property prior to the
Closing Date except to the extent that TGG or Talco is responsible for any
associated liability therewith; (e) all of EXCO’s and its Affiliates’
proprietary computer software, patents, trade secrets, copyrights, names,
trademarks, logos and other intellectual property (excluding, for the avoidance
of doubt, software dedicated to the control and operation of the Systems);
(f) all documents and instruments of EXCO or its Affiliates that may be
protected by an attorney-client privilege with respect to any litigation set
forth in Schedule 4.7; (g) all data and Contracts that cannot be disclosed to BG
as a result of confidentiality arrangements under agreements with Third Parties
(provided that EXCO uses its commercially reasonable efforts to obtain a waiver
of any such confidentiality restriction); (h) documents prepared or received by
EXCO with respect to (A) lists of prospective purchasers for such transactions
compiled by EXCO, (B) bids submitted by other prospective purchasers of, or
investors in, the Contributed Interests or the Subject Assets, (C) analyses by
EXCO of any bids submitted by any prospective purchaser or investor,
(D) correspondence between or among EXCO, its respective representatives, and
any prospective purchaser or investor other than BG and (E) correspondence
between EXCO or any of its respective representatives with respect to any of the
bids, the prospective purchasers or investors, or the transactions contemplated
in this Agreement; (i) all Hedge Contracts and (j) the Reassigned Properties.

“EXCO” shall have the meaning set forth in the first paragraph herein.

“EXCO Debt Instruments” shall mean (a) the Amended and Restated Credit
Agreement, dated March 30, 2007, among EOC, as borrower, certain of its
subsidiaries, as guarantors, JPMorgan Chase Bank, N.A., as administrative agent,
and the lenders signatories thereto, as amended by the First Amendment to
Amended and Restated Credit Agreement dated February 20, 2008, the Second
Amendment to Amended and Restated Credit Agreement dated July 14, 2008, the
Third Amendment to Amended and Restated Credit Agreement dated December 1, 2008
and the Fourth Amendment to Amended and Restated Credit Agreement dated
April 17, 2009, (b) the Senior Unsecured Term Credit Agreement, dated
December 8, 2008, among EOC, as borrower, and certain of its subsidiaries, as
guarantors, and JPMorgan Chase Bank, N.A. as administrative agent, J.P. Morgan
Securities Inc., as sole bookrunner and lead arranger, and the lenders
signatories thereto, (c) any other agreement for borrowed money, and (d) any
guarantee by EXCO or any of its Affiliates of another Person’s payment
obligations.

“EXCO Indemnified Parties” shall have the meaning set forth in Section 13.3.

 

APPENDIX I

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“EXCO Indemnity Cut-Off Date” shall mean, with respect to each indemnity by EXCO
contained in Section 13.2, the date on which such indemnity terminates pursuant
to Section 13.8(b).

“Final Cash Amount” shall have the meaning set forth in Section 3.5.

“Final Settlement Statement” shall have the meaning set forth in Section 3.5.

“Franchise Tax Liability” shall mean any tax imposed by a state on EXCO’s or any
of its Affiliates’ gross or net income and/or capital for the privilege of
engaging in business in that state that was or is attributable to EXCO’s or any
of its Affiliates’ ownership of an interest in the Subject Assets for any
period, or portion thereof, ending prior to the Effective Time.

“FTC” shall mean the Federal Trade Commission.

“General Partner Interests” shall mean all of the general partner interests in
each of TGG and Talco.

“Governmental Authority” shall mean any federal, state, local, municipal, tribal
or other government; any governmental, regulatory or administrative agency,
commission, body or other authority exercising or entitle to exercise any
administrative, executive, judicial, legislative, regulatory or taxing authority
or power; and any court or governmental tribunal, including any tribal authority
having or asserting jurisdiction.

“GP Holding” shall have the meaning set forth in the Recitals.

“GP Holding Equity Interests” shall mean all of the limited liability company
interests in GP Holding.

“Hazardous Substances” shall mean (any pollutants, contaminants, toxics or
hazardous or extremely hazardous substances, materials, wastes, constituents,
compounds, or chemicals that are regulated by, or may form the basis of
liability under, any Environmental Laws, including NORM and other substances
referenced in Section 12.2.

“Hedge Contract” shall mean any Contract to which any Contributed Company is a
party with respect to any swap, forward, future or derivative transaction or
option or similar agreement, whether exchange traded, “over-the-counter” or
otherwise, involving, or settled by reference to, one or more rates, currencies,
commodities, equity or debt instruments or securities, or economic, financial or
pricing indices or measures of economic, financial or pricing risk or value or
any similar transaction or any combination of these transactions.

“HSR Act” shall mean the Hart-Scott-Rodino Antitrust Improvements Act of 1976,
as amended.

“Hydrocarbons” shall mean oil and gas and other hydrocarbons produced or
processed in association therewith (whether or not any such item is in liquid or
gaseous form), or any combination thereof, and any minerals produced in
association therewith.

 

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“Imbalance” shall mean (a) any imbalance at the pipeline flange between the
amount of Hydrocarbons nominated by or allocated to any of the Midstream
Companies and the Hydrocarbons actually delivered on behalf of such Midstream
Company at that point or (b) any imbalance at the pipeline flange between the
amount of Hydrocarbons nominated by or allocated to any shipper on the Systems
and the Hydrocarbons actually delivered on behalf of such shipper to the
Systems.

“Income Tax Liability” shall mean any Liability of EXCO or any of its Affiliates
attributable to any federal, state, or local income tax measured by or imposed
on the net income of EXCO or any of its Affiliates that was or is attributable
to EXCO’s or any of its Affiliates’ ownership of an interest in or the operation
of the Contributed Interests or the Subject Assets (in the case of the
Contributed Companies, only for any period, or portion thereof, ending prior to
the Closing Date).

“Indemnified Party” shall have the meaning set forth in Section 13.7(a).

“Indemnifying Party” shall have the meaning set forth in Section 13.7(a).

“Individual Environmental Threshold” shall have the meaning set forth in
Section 12.1(d).

“Interim Period” shall mean that period of time commencing with the Effective
Time and ending at 7:00 a.m. (Central Time) on the Closing Date.

“Invasive Activities” shall have the meaning set forth in Section 10.1(b).

“Knowledge” shall mean with respect to EXCO, the actual Knowledge of the
following Persons: Douglas H. Miller, Stephen F. Smith, J. Douglas Ramsey,
Ph.D., Harold L. Hickey, Richard L. Hodges, Paul Rudnicki, Michael R. Chambers,
Sr., Joe D. Ford, John D. Jacobi, Steven L. Estes, James Alan Matysiak, Andrew
Springer, Mark Wilson, William L. Boeing, Victor Davis and Mark Hutchison.

“Law” shall mean any applicable statute, law, rule, regulation, ordinance,
order, code, ruling, writ, injunction, decree or other official act of or by any
Governmental Authority.

“Liabilities” shall mean any and all claims, causes of actions, payments,
charges, judgments, assessments, liabilities, losses, damages, penalties, fines
or costs and expenses, including any reasonable fees of attorneys, experts,
consultants, accountants, and other professional representatives and legal or
other expenses incurred in connection therewith and including liabilities,
costs, losses and damages for personal injury, illness or death, property
damage, contract claims, torts or otherwise.

“Limited Liability Company Agreement” means the amended and restated limited
liability company agreement for the Company which will be entered into by EOC
and BG at Closing, a form of which is attached hereto as Exhibit C.

 

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“Limited Partner Interests” shall mean all of the limited partner interests in
each of the Midstream Companies.

“Material Adverse Effect” shall mean any change, inaccuracy, effect, event,
result, occurrence, condition or fact (for the purposes of this definition,
each, an “event”) (whether foreseeable or not and whether covered by insurance
or not) that has had or would be reasonably likely to have, individually or in
the aggregate with any other event or events, a material adverse effect on the
ownership, use, operation or value of the Contributed Interests or the Subject
Assets, taken as a whole; provided, however, that Material Adverse Effect shall
not include such material adverse effects resulting from (a) general changes in
oil and gas prices; (b) general changes in industry, economic or political
conditions or markets; (c) changes in conditions or developments generally
applicable to the gathering and pipeline industry, in any area or areas where
the Assets are located; (d) acts of God, including hurricanes and storms;
(e) acts or failures to act of Governmental Authorities; (f) civil unrest or
similar disorder, terrorist acts or changes in Laws; (g) effects or changes that
are cured or no longer exist by the earlier of the Closing and the termination
of this Agreement pursuant to Sections 14.1(a), without cost to BG; and
(h) changes resulting from the announcement of the transactions contemplated
hereby or the performance of the covenants set forth in Article 6 hereof.

“Material Contracts” shall have the meaning set forth in Section 4.8(a).

“Material Event” shall mean (a) with respect to EXCO, that EXCO or any direct or
indirect parent of EXCO and (b) with respect to BG, that BG or any direct or
indirect parent of BG: (i) is dissolved (other than pursuant to an internal
reorganization the ordinary course of business which does not result in a change
in Control of such entity); (ii) becomes insolvent or is unable to pay its debts
or fails to pay or admits in writing its inability generally to pay its debts as
they become due; (iii) makes a general assignment, arrangement or composition
with or for the benefit of its creditors; (iv) institutes or has instituted
against it a proceeding seeking a judgment of insolvency or bankruptcy or any
other relief under any bankruptcy or insolvency law or other similar law
affecting creditors’ rights, or a petition is presented for its winding-up or
liquidation, and, in the case of any such proceeding or petition instituted or
presented against it, such proceeding or petition (A) results in a judgment of
insolvency or bankruptcy or the entry of an order for relief or the making of an
order for its winding-up or liquidation or (B) is not dismissed, discharged,
stayed or restrained in each case within 30 days of the institution or
presentation thereof; (v) has a resolution passed for its winding up, official
management pursuant to an applicable statutory remedy or liquidation (other than
pursuant to an internal reorganization in the ordinary course of business which
does not result in a change in Control of such entity); (vi) seeks or becomes
subject to the appointment of an administrator, provisional liquidator,
conservator, receiver, trustee, custodian or other similar official for it or
for all or a substantial portion of its assets; (vii) has a secured party take
possession of all or a substantial portion of its assets or has a distress,
execution, attachment, sequestration or other legal process levied, enforced or
sued on or against all or a substantial portion of its assets and such secured
party maintains possession, or any such process is not dismissed, discharged,
stayed or restrained, in each case within 30 days thereafter; or (viii) causes
or is subject to any event with respect to it which, under the applicable Laws
of any jurisdiction, has an analogous effect to any of the events specified in
clauses (i) through (vii).

 

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“Midstream Companies” shall have the meaning set forth in the Recitals.

“Minimum Consideration” shall have the meaning set forth in Section 3.9(a).

“NORM” shall mean naturally occurring radioactive material.

“Operating Expenses” shall mean all operating expenses (including costs of
insurance, Asset Taxes gas purchases for resale, drip fees and compression fees)
and capital expenditures incurred in the ownership, operation and construction
of the Subject Assets in the ordinary course of business, including inventories
of or purchases of pipe, but excluding Liabilities attributable to
(a) Liabilities for personal injury or death, property damage (other than damage
to structures, fences, irrigation systems and other fixtures, crops, livestock
and other personal property in the ordinary course of business), torts, breach
of contract (other than failure to make payments under the terms of a contract)
or violation of any Law (or private rights of action under any Law),
(b) obligations to abandon pipelines, dismantle or decommission facilities,
close pits and restore the surface around such pipelines, facilities and pits,
(c) environmental Liabilities, including obligations to remediate any
contamination of groundwater, surface water, soil, sediments or Personal
Property under applicable Environmental Laws, (d) obligations with respect to
Imbalances, (e) obligations to pay working interests, royalties, overriding
royalties or other interest owners revenues or proceeds attributable to sales of
Hydrocarbons relating to the Subject Assets, including those held in suspense,
(f) obligations with respect to Hedge Contracts, and (g) claims for
indemnification or reimbursement from any Third Party with respect to costs of
the type described in preceding clauses (a) through (f), whether such claims are
made pursuant to contract or otherwise.

“Party” and “Parties” shall have the meaning given such terms in the first
paragraph herein.

“Permitted Encumbrances” shall mean:

(a) the terms and conditions of the Rights-of-Way;

(b) preferential rights to purchase and required Third Party consents to
assignments and similar transfer restrictions;

(c) liens for taxes or assessments not yet due or delinquent;

(d) Customary Post-Closing Consents;

(e) conventional rights of reassignment upon final intention to abandon or
release the Subject Assets, or any of them;

(f) such Title Defects as BG may waive in writing or is deemed to have waived
pursuant to the terms of this Agreement;

(g) all applicable Laws, and rights reserved to or vested in any Governmental
Authority (i) to control or regulate any Subject Asset in any manner; (ii) by
the terms of any right, power, franchise, grant, license, or permit, or by any
provision of Law, to terminate such

 

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right, power, franchise grant, license, or permit or to purchase, condemn,
expropriate, or recapture or to designate a purchaser of any of the Subject
Assets; (iii) to use such property in a manner which does not materially impair
the use of such property for the purposes for which it is currently owned and
operated and (iv) to enforce any obligations or duties affecting the Assets to
any Governmental Authority, with respect to any franchise, grant, license, or
permit;

(h) rights of a common owner of any interest in any Right-of-Way currently held
by TGG or Talco and such common owner as tenants in common or through common
ownership to the extent that the same does not materially impair the use or
operation of the Assets as currently used and operated;

(i) easements, conditions, covenants, restrictions, servitudes, permits,
rights-of-way, surface leases and other rights in the Subject Assets for the
purpose of surface operations, roads, alleys, highways, railways, pipelines,
transmission lines, transportation lines, distribution lines, power lines,
telephone lines, and removal of timber, grazing, logging operations, canals,
ditches, reservoirs, and other like purposes, or for the joint or common use of
real estate, rights-of-way, facilities, and equipment, (in each case) that do
not materially impair the use, ownership or operation of the Subject Assets (as
currently owned and operated) or reduce the share of revenues or increase the
share of costs with respect to the Subject Assets that must by borne by the
Contributed Companies;

(j) zoning and planning ordinances and municipal regulations;

(k) vendors, carriers, warehousemen’s, repairmen’s, mechanics, workmen’s,
materialmen’s, construction or other like liens arising by operation of Law in
the ordinary course of business or incident to the construction or improvement
of any property in respect of obligations which are not yet due;

(l) liens created under Rights-of-Way and/or operating agreements or by
operation of Law in respect of obligations that are not yet due;

(m) any encumbrance affecting the Subject Assets which is discharged by EXCO or
its Affiliate at or prior to Closing;

(n) any Applicable Contracts set forth on Exhibit A-2 and all litigation
referenced in Schedule 4.7; and

(o) any Applicable Contracts if the net cumulative effect of such burdens does
not operate to reduce the share of revenues or increase the share of costs with
respect to the Subject Assets that must by borne by the Contributed Companies
(relative to any other Person entitled to such revenues or obligated to pay such
costs). For the avoidance of doubt, payments for the procurement of goods or
services shall not be deemed to “increase the share of costs” borne by the
Contributed Companies for this purpose.

“Person” shall mean any individual, firm, corporation, partnership, limited
liability company, joint venture, association, trust, unincorporated
organization, Governmental Authority or any other entity.

 

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“Personal Property” shall have the meaning set forth in Section 2.2(b).

“Pre-Closing Asset Tax Return” shall have the meaning set forth in Section
15.2(c).

“Preliminary Settlement Statement” shall have the meaning set forth in
Section 3.4.

“Purchase and Sale Agreement” shall mean that certain Purchase and Sale
Agreement of even date herewith among EOC, EPC and BG US Production Company,
LLC.

“Reassigned Properties” shall mean those Subject Assets distributed by the
Midstream Companies to EXCO prior to the Closing pursuant to Section
12.1(b)(iii).

“Records” shall have the meaning set forth in Section 2.2(g).

“Remediation” shall mean, with respect to an Environmental Condition, the
implementation and completion of any remedial, removal, response, construction,
closure, disposal or other corrective actions required under Environmental Laws
to correct or remove such Environmental Condition.

“Remediation Amount” shall mean, with respect to an Environmental Condition, 50%
of the present value as of the Closing Date of the cost (net to the Midstream
Companies’ interest) of the most cost effective Remediation of such
Environmental Condition that is reasonably available and all Liabilities (net to
the Midstream Companies’ interest) associated therewith.

“Rights-of-Way” shall have the meaning set forth in Section 2.2(c).

“Section 755 Allocation” shall have the meaning set forth in Section 15.5.

“Straddle Period” shall mean any tax period beginning before and ending on or
after the Effective Time.

“Subject Assets” shall have the meaning set forth in Section 2.2.

“Systems” shall have the meaning set forth in Section 2.2(a).

“Talco” shall have the meaning set forth in the Recitals.

“Taxes” means any and all federal, state, local, foreign and other taxes or
other assessments, including, without limitation, all net income, gross income,
gross receipts, sales, use, ad valorem, transfer, franchise, profits, profit
share, license, lease, service, service use, value added, withholding, payroll,
employment, excise, estimated severance, stamp, occupation, premium, property,
windfall profits, or other taxes of any kind whatsoever, together with any
interests, penalties, additions to tax, fines or other additional amounts
imposed thereon or related thereto, and the term “Tax” means any one of the
foregoing Taxes.

“Termination Date” shall have the meaning set forth in Section 14.1(a).

“TGG” shall have the meaning set forth in the Recitals.

 

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“Third Party” shall mean any Person other than a Party to this Agreement or an
Affiliate of a Party to this Agreement.

“Title Defect” shall mean any lien, charge, Encumbrance, defect, or other matter
that causes the Midstream Companies not to have Defensible Title in and to the
Subject Assets; provided that the following shall not be considered Title
Defects:

(a) defects in the chain of title consisting of the failure to recite marital
status in a document or omissions of successions of heirship or estate
proceedings, unless BG provides affirmative evidence that such failure or
omission could reasonably be expected to result in another Person’s superior
claim of title to the relevant Subject Asset;

(b) defects arising out of lack of survey, unless a survey is expressly required
by applicable Laws;

(c) defects arising out of lack of corporate or other entity authorization in
the public records unless BG provides affirmative evidence that causes BG to
reasonably believe such corporate or other entity action may not have been
authorized and could reasonably be expected to result in another Person’s
superior claim of title to the relevant Subject Asset;

(d) defects based on a gap in Talco’s or TGG’s chain of title in the state’s
records as to state Rights-of-Way, or in the county records as to other
Rights-of-Way, unless such gap is affirmatively shown to exist in such records
by an abstract of title, title opinion or landman’s title chain or runsheet;

(e) defects that have been cured by applicable Laws of limitations or
prescription; and

(f) any Encumbrance or loss of title to which BG has consented in writing.

“Transaction Documents” shall mean those documents executed pursuant to or in
connection with this Agreement.

“Treasury Regulations” shall mean the regulations promulgated by the United
States Department of the Treasury pursuant to and in respect of provisions of
the Code. All references herein to sections of the Treasury Regulations shall
include any corresponding provision or provisions of succeeding, similar,
substitute, proposed or final Treasury Regulations.

 

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