FINAL EXECUTION COPY

 

Exhibit 10.4

 

LIMITED LIABILITY COMPANY

 

MEMBERSHIP INTEREST PURCHASE AGREEMENT

 

by and between

 

ONEOK ENERGY RESOURCES COMPANY

 

as Seller

 

and

 

TXOK ACQUISITION, INC.

 

as Purchaser

 

for the purchase and sale of all

of the membership interests of

 

ONEOK ENERGY RESOURCES HOLDINGS, L.L.C.

 

a Delaware Limited Liability Company

 

Dated as of September 19, 2005

--------------------------------------------------------------------------------

TABLE OF CONTENTS

 

     Page

--------------------------------------------------------------------------------

ARTICLE 1. DEFINITIONS AND RULES OF CONSTRUCTION

   1

Section 1.1 Definitions

   1

Section 1.2 Terms Defined Elsewhere in this Agreement

   6

Section 1.3 Rules of Interpretation

   7

ARTICLE 2. MEMBERSHIP INTERESTS; PURCHASE PRICE; ADJUSTMENTS

   8

Section 2.1 Membership Interests

   8

Section 2.2 Purchase Price and Adjustments; Escrow

   8

Section 2.3 Closing

   9

Section 2.4 Effective Date

   9

Section 2.5 Post-Closing Purchase Price Reconciliation

   9

Section 2.6 Breach or Failure to Close

   10

ARTICLE 3. TITLE MATTERS

   11

Section 3.1 Seller’s Title

   11

Section 3.2 Definition of Defensible Title

   11

Section 3.3 Definition of Permitted Encumbrances

   11

Section 3.4 Notice of Title Defects; Defect Adjustments

   13

Section 3.5 Casualty or Condemnation Loss

   16

Section 3.6 Limitations on Applicability

   16

ARTICLE 4. REPRESENTATIONS AND WARRANTIES OF THE SELLER

   17

Section 4.1 Disclaimers

   17

Section 4.2 Organization and Good Standing

   18

Section 4.3 Authorization of Agreement

   18

Section 4.4 Conflicts; Consent of Third Parties

   18

Section 4.5 Ownership; Sufficiency

   19

Section 4.6 Capitalization

   19

Section 4.7 Subsidiaries

   19

Section 4.8 Financial Statements

   19

Section 4.9 Absence of Certain Changes

   20

Section 4.10 Taxes and Assessments

   20

Section 4.11 Material Contracts

   20

Section 4.12 Employee Benefits

   21

Section 4.13 Labor

   21

Section 4.14 Litigation

   21

Section 4.15 Compliance with Laws; Permits

   22

Section 4.16 Environmental Matters

   22

Section 4.17 Evaluation Data

   22

Section 4.18 Gas Imbalances

   22

 

i

--------------------------------------------------------------------------------

Section 4.19 Consents and Preferential Purchase Rights

   22

Section 4.20 Financial Advisors

   22

ARTICLE 5. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER

   23

Section 5.1 Organization and Good Standing

   23

Section 5.2 Authorization of Agreement

   23

Section 5.3 Conflicts; Consents of Third Parties

   23

Section 5.4 Litigation

   23

Section 5.5 Securities Matters

   24

Section 5.6 Financial Advisors

   24

ARTICLE 6. COVENANTS

   24

Section 6.1 Conduct of the Business of the Companies

   24

Section 6.2 Access to Information

   25

Section 6.3 Consents

   26

Section 6.4 Regulatory Approvals. [Intentionally Omitted]

   26

Section 6.5 Further Assurances

   26

Section 6.6 Confidentiality

   26

Section 6.7 Preservation of Records

   27

Section 6.8 Use of Name

   27

Section 6.9 Employee and Benefit Matters

   27

Section 6.10 Supplementation and Amendment of Schedules

   30

Section 6.11 Company Guarantees

   30

Section 6.12 Intercompany Contracts; Intercompany Balances

   31

Section 6.13 Insurance

   31

Section 6.14 Environmental Remediation

   31

Section 6.15 Vehicle Leases

   31

Section 6.16 Transition Services

   32

ARTICLE 7. CONDITIONS

   32

Section 7.1 Conditions to Obligations of the Purchaser

   32

Section 7.2 Conditions to Obligations of the Seller

   33

ARTICLE 8. TERMINATION

   34

Section 8.1 Termination

   34

Section 8.2 Termination for Breach or Failure to Close

   34

Section 8.3 Procedure Upon Termination

   34

Section 8.4 Effect of Termination

   34

ARTICLE 9. TAX MATTERS

   34

Section 9.1 Transaction Taxes

   34

Section 9.2 Real and Personal Property Taxes

   35

Section 9.3 Taxes Based on Revenues

   35

Section 9.4 Section 338(h)(10) Election

   36

 

ii

--------------------------------------------------------------------------------

Section 9.5 Allocation of Purchase Price

   36

Section 9.6 Conflict

   37

ARTICLE 10. INDEMNIFICATION

   37

Section 10.1 Survival of Representations and Warranties and Covenants

   37

Section 10.2 Indemnification by Seller

   37

Section 10.3 Indemnification by Purchaser

   37

Section 10.4 Indemnification Procedures

   38

Section 10.5 Limitations on Indemnification

   39

Section 10.6 Tax Treatment of Indemnity Payments

   40

SECTION 10.7 NO CONSEQUENTIAL DAMAGES

   40

Section 10.8 EXCLUSIVE REMEDY

   40

ARTICLE 11. MISCELLANEOUS

   41

Section 11.1 Notices

   41

Section 11.2 Headings

   42

Section 11.3 Counterparts

   42

Section 11.4 Entire Agreement

   42

Section 11.5 Governing Law

   42

Section 11.6 Submission to Jurisdiction; Consent to Service of Process

   43

Section 11.7 Publicity

   43

Section 11.8 Binding Effect; Assignment

   43

Section 11.9 Severability

   43

Section 11.10 Expenses

   44

Section 11.11 Post Closing Obligations

   44

 

iii

--------------------------------------------------------------------------------

EXHIBITS

 

Exhibit A

   Wells, Units and Leases

Exhibit A-1

  

Gathering Systems

Exhibit B

  

Purchase Price Allocation

Exhibit C

  

Net Working Capital as of the Balance Sheet Date

Exhibit D

  

Excluded Assets

Exhibit E

  

Form of Section 1445 Certificate

Exhibit F

  

Form of Assignment and Assumption Agreement

 

SCHEDULES

 

Schedule 1.1(a)

   Knowledge of Seller

Schedule 2.2(c)

   Well Preparation and Drilling Costs

Schedule 4.4

   No Conflicts

Schedule 4.5(b)

   Ownership and Transfer of Membership Interests; Sufficiency

Schedule 4.8

   Financial Statements

Schedule 4.9

   Absence of Certain Changes

Schedule 4.10

   Taxes and Assessments

Schedule 4.11

   Material Contracts

Schedule 4.12

   Employee Benefits

Schedule 4.14

   Litigation

Schedule 4.15

   Compliance with Laws; Permits

Schedule 4.16

   Environmental Matters

Schedule 4.18

   Gas Imbalances

Schedule 4.19

   Consents and Preferential Rights to Purchase

Schedule 6.1

   Conduct of the Business of the Companies

Schedule 6.9(a)

   Company Employees

Schedule 6.9(b)

   Additional Available Employees

Schedule 6.11

   Company Guarantees

Schedule 6.12

   Intercompany Contracts; Intercompany Balances

Schedule 6.15

   Leased Vehicles

 

iv

--------------------------------------------------------------------------------

LIMITED LIABILITY COMPANY

 

MEMBERSHIP INTEREST PURCHASE AGREEMENT

 

This Limited Liability Company Membership Interest Purchase Agreement (the
“Agreement”) is entered into as of September 19, 2005, between TXOK Acquisition,
Inc., a Delaware corporation (the “Purchaser”), and ONEOK Energy Resources
Company a Delaware corporation (the “Seller”).

 

RECITALS

 

WHEREAS, Seller owns all of the outstanding membership interests (the
“Membership Interests”) in ONEOK Energy Resources Holdings, L.L.C., a Delaware
limited liability company (“ONEOK Resources Holdings”);

 

WHEREAS, ONEOK Resources Holdings owns (i) all of the outstanding membership
interests in ONEOK Texas Energy Holdings, L.L.C., a Delaware limited liability
company (“ONEOK Texas Holdings”), which in turn owns 100% of the general partner
interests in ONEOK Texas Energy Resources, L.P., a Delaware limited partnership
(the “ONEOK Texas LP”) and (ii) 100% of the limited partner interests in ONEOK
Texas LP (ONEOK Resources Holdings, ONEOK Texas Holdings and ONEOK Texas LP are
collectively referred to as the “Companies”);

 

WHEREAS, the Companies are engaged in the exploration and production of oil and
natural gas in Texas;

 

WHEREAS, Purchaser has agreed to acquire from the Seller, and the Seller has
agreed to sell to the Purchaser, all of the Membership Interests of ONEOK
Resources Holdings on the terms and subject to the conditions set forth herein;

 

NOW, THEREFORE, in consideration of the premises and mutual covenants contained
herein and other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the Parties agree as follows:

 

ARTICLE 1.

DEFINITIONS AND RULES OF CONSTRUCTION

 

Section 1.1 Definitions. As used herein, the following terms shall have the
following meanings:

 

“Affiliate” means, with respect to any Person, any other Person that, directly
or indirectly, controls, is controlled by or is under common control with, such
specified Person through one or more intermediaries or otherwise. For the
purposes of this definition, “control” means, where used with respect to any
Person, the possession, directly or indirectly, of the power to direct or cause
the direction of the management and policies of such Person, whether through the
ownership of voting securities, by contract or otherwise, and the terms
“controlling” and “controlled” have correlative meanings. Notwithstanding the
foregoing, the term “Affiliate,” with respect to Seller, shall not include
Northern Border Partners, L.P. or any of its subsidiaries.

 

“Benefit Plan” means (i) each “employee benefit plan,” as such term is defined
in Section 3(3) of ERISA, (ii) each plan that would be an employee benefit plan
if it was subject to ERISA, such as plans for directors, (iii) each stock bonus,
stock ownership, stock option, stock purchase, stock appreciation rights,
phantom stock or other stock plan (whether qualified or nonqualified), and

--------------------------------------------------------------------------------

(iv) each bonus, deferred compensation or incentive compensation plan; provided,
however, that such term shall not include (a) routine employment policies and
procedures developed and applied in the ordinary course of business and
consistent with past practice, including wage, vacation, holiday, and sick or
other leave policies, (b) workers compensation insurance, (c) directors and
officers liability insurance, or (d) Material Contracts.

 

“Business Day” means each calendar day except Saturdays, Sundays and other days
on which national banks in the State of Oklahoma are authorized to close.

 

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

 

“Company Guarantees” means all guaranties, letters of credit, bonds, sureties
and other credit support or assurances provided by Seller or its Affiliates
(other than any of the Companies) in support of any obligations of any of the
Companies, including those obligations listed on Schedule 6.11.

 

“Company Plan” means each Benefit Plan that is, or at any time within the six
(6) year period ending on the Closing Date was, sponsored, maintained or
contributed to by Seller, the Companies or any of their respective Affiliates
and which Benefit Plan provides benefits solely with respect to current or
former directors, officers or employees of any of the Companies.

 

“Dollars” and “$” mean the lawful currency of the United States.

 

“EBITDA” means the combined earnings before interest and taxes for the Companies
as reported on the “earnings before interest, taxes, depreciation and
amortization” or “EBITDA” line item on the combined statement of income for the
Companies for the applicable period.

 

“Encumbrance” means any mortgage, lien, security interest, pledge, adverse
claim, encumbrance, charge or other defect in title (including without
limitation a discrepancy in the net revenue interests or working interests set
forth in Exhibit A).

 

“Environmental Law” means any applicable Law relating to the environment,
natural resources, or the protection thereof, including any applicable
provisions of the Comprehensive Environmental Response, Compensation and
Liability Act, 42 U.S.C. § 9601 et seq., the Hazardous Materials Transportation
Act, 49 U.S.C. § 5101 et seq., the Resource Conservation and Recovery Act, 42
U.S.C. § 6901 et seq., the Clean Water Act, 33 U.S.C. § 1251 et seq., the Clean
Air Act, 42 U.S.C. § 7401 et seq., the Toxic Substances Control Act, 15 U.S.C.
§ 2601 et seq., the Federal Insecticide, Fungicide, and Rodenticide Act, 7
U.S.C. § 136 et seq., and the Oil Pollution Act of 1990, 33 U.S.C. § 2701 et
seq., and all analogous state or local statutes, and the regulations promulgated
pursuant thereto.

 

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

 

“Estimated Purchase Price” means Seller’s good faith estimate of the Purchase
Price as set forth in a statement delivered by Seller to Purchaser at least two
Business Days before the Closing.

 

“Excluded Assets” means the assets listed on the attached Exhibit D.

 

“Governmental Authority” means any federal, state, municipal, local or similar
governmental authority, regulatory or administrative agency, court or arbitral
body.

 

“Hydrocarbons” means oil, gas, condensate and other gaseous and liquid
hydrocarbons or any combination thereof and sulphur extracted from hydrocarbons.

 

2

--------------------------------------------------------------------------------

“Indebtedness for Borrowed Money” means all obligations to any Person for
borrowed money, including (i) any obligation to reimburse any bank or other
Person in respect of amounts paid or payable under a standby letter of credit or
(ii) any guarantee with respect to indebtedness for borrowed money of another
Person.

 

“Intellectual Property” means intellectual property rights, statutory or common
law, worldwide, including (i) trademarks, service marks, trade dress, slogans,
logos and all goodwill associated therewith, and any applications or
registrations for any of the foregoing; (ii) copyrights and any applications or
registrations for any of the foregoing; and (iii) patents, all confidential
know-how, trade secrets and similar proprietary rights in confidential
inventions, discoveries, improvements, processes, techniques, devices, methods,
patterns, formulae, specifications, and lists of suppliers, vendors, customers,
and distributors.

 

“Knowledge” as to Seller means the actual knowledge of those persons listed in
Schedule 1.1(a).

 

“Law” means any applicable law, rule, regulation, ordinance, order, judgment or
decree of a Governmental Authority, in each case as in effect on and as
interpreted on the date of this Agreement.

 

“Leases” means all of the oil and gas leases, oil, gas and mineral leases,
subleases and other leaseholds, royalties, overriding royalties, net profits
interests, mineral fee interests, carried interests and other properties and
interests described on Exhibit A.

 

“Legal Proceeding” means any judicial, administrative or arbitral actions, suits
or proceedings (public or private) by or before a Governmental Authority.

 

“Liability” means any Indebtedness for Borrowed Money, debt, liability or
obligation (whether direct or indirect, absolute or contingent, accrued or
unaccrued, liquidated or unliquidated, or due or to become due) and including
all costs and expenses relating thereto.

 

“LIBOR” means the rate for any one month loan which appears on Page 3750 of the
Dow Jones Market Service (or on any successor or substitute page of such
service, or any successor to or substitute for such service, providing rate
quotations comparable to those currently provided on such page of such service,
for purposes of providing quotations of interest rates applicable to Dollar
deposits in the London interbank market) at approximately 11:00 a.m., London
time, two Business Days prior to the commencement of any period for which
interest may be due under this Agreement.

 

“LLC Agreement” means that certain Limited Liability Company Agreement of ONEOK
Energy Resources Holdings, L.L.C., effective January 1, 2005, entered into by
ONEOK Energy Resources Company, a Delaware corporation, as the sole member.

 

“Losses” means all liabilities, losses, damages, fines, penalties, judgments,
settlements, awards, costs and expenses (including reasonable fees and expenses
of counsel, consultants, experts and other professional fees).

 

“Material Adverse Effect” means (i) a material adverse effect on the business,
assets, properties or financial condition of the Companies taken as a whole or
(ii) a material adverse effect on the ability of Seller to consummate the
transactions contemplated by this Agreement, other than, in either case, any one
or more of the following: (A) the effect of any change in the United States or
foreign economies or securities or financial markets in general; (B) the effect
of any change that generally affects the oil and gas exploration and production
industry; (C) the effect of any change

 

3

--------------------------------------------------------------------------------

arising in connection with any natural disasters, hostilities, acts of war,
sabotage or terrorism or military actions or any escalation or material
worsening of any such hostilities, acts of war, sabotage or terrorism or
military actions existing or underway as of the date hereof; (D) the effect of
any action taken by Purchaser or its Affiliates with respect to the Companies or
the transactions contemplated hereby; (E) any matter of which Purchaser is aware
on the date hereof; (F) the effect of any changes in applicable Laws or
accounting rules; (G) any effect resulting from the public announcement of this
Agreement, compliance with terms of this Agreement or the consummation of the
transactions contemplated by this Agreement; or (H) the loss of any Transferred
Employee.

 

“Net Working Capital,” which may be positive or negative, means an amount equal
to the total current assets of the Companies minus the total current liabilities
of the Companies, determined (i) in accordance with GAAP, (ii) exclusive of
intercompany accounts, (iii) without giving effect to the transactions
contemplated hereby, (iv) exclusive of cash, and (v) exclusive of gas balancing
amounts.

 

“ONEOK Thrift Plan” means the Thrift Plan for Employees of ONEOK, Inc. and
Subsidiaries.

 

“Organizational Documents” means any charter, certificate of incorporation,
articles of association, bylaws, operating agreement or similar formation or
governing documents and instruments.

 

“Parties” means Seller and Purchaser.

 

“Permits” means authorizations, licenses, permits or certificates issued by
Governmental Authorities; provided, right-of-way agreements and similar
approvals are not included in the definition of Permits.

 

“Person” means any individual, firm, corporation, partnership, limited liability
company, incorporated or unincorporated association, joint venture, joint stock
company, Governmental Authority or other entity of any kind.

 

“Properties” means the Wells, Units and Leases, together with all pipelines,
compressors, dehydrators and other equipment related thereto owned by the
Companies and the tenements, hereditaments and appurtenances belonging to the
Wells, Units and Leases.

 

“Purchaser FSP” means Purchaser’s health care flexible spending account program
and Purchaser’s dependant day care spending account program.

 

“Reasonable Efforts” means efforts in accordance with reasonable commercial
practice and without the incurrence of unreasonable expense.

 

“Representatives” means, as to any Person, its officers, directors, employees,
counsel, accountants, financial advisers and consultants.

 

“Seller Disclosure Schedules” means the schedules attached hereto relating to
disclosures by the Seller.

 

“Seller FSP” means Seller’s health care flexible spending account program and
Seller’s dependant day care spending account program.

 

“Seller Plan” means each Benefit Plan that is, or at any time within the six
(6) year period ending on the Closing Date was, sponsored, maintained or
contributed to by Seller or by any Commonly Controlled Entity (other than any of
the Companies).

 

4

--------------------------------------------------------------------------------

“Tax Authority” means any Governmental Authority having jurisdiction over the
assessment, determination, collection or imposition of any Tax.

 

“Tax Benefit” means, with respect to a Loss, an amount by which the Tax
liability of a Person (or group of corporations filing a Tax Return that
includes the Person), with respect to a taxable period, is reduced as a result
of such Loss or the amount of any Tax refund or Tax credit that is generated
(including, by deduction, loss, credit or otherwise) as a result of such Loss,
and any related interest received from any relevant Tax Authority.

 

“Tax Law” means the law (including any applicable regulations or any
administrative pronouncement) of any Governmental Authority relating to any Tax.

 

“Tax Period” means, with respect to any Tax, the period for which the Tax is
reported as provided under the applicable Tax Law.

 

“Tax Returns” means any report, return, election, document, estimated tax
filing, declaration or other filing provided to any Tax Authority including any
amendments thereto.

 

“Taxes” means all taxes, assessments, charges, duties, fees, levies, imposts or
other similar charges imposed by a Governmental Authority, including all income,
franchise, profits, capital gains, capital stock, transfer, gross receipts,
sales, use, transfer, service, occupation, ad valorem, property, excise,
severance, windfall profits, premium, stamp, license, payroll, employment,
social security, unemployment, disability, environmental (including taxes under
Code Section 59A), alternative minimum, add-on, value-added, withholding and
other taxes, assessments, charges, duties, fees, levies, imposts or other
similar charges of any kind whatsoever (whether payable directly or by
withholding and whether or not requiring the filing of a Tax Return), and all
estimated taxes, deficiency assessments, additions to tax, additional amounts
imposed by any Governmental Authority, penalties and interest.

 

“Title Benefit” means any right, circumstance or condition that operates to
increase the net revenue interest of the Companies in any Well or Unit above
that shown on Exhibit A, without causing a greater than proportionate increase
in the working interest of the Companies above that shown in Exhibit A.

 

“Title Defect” means any Encumbrance, other than a Permitted Encumbrance, that
causes a breach of Seller’s representation and warranty in Section 3.1.

 

“United States” means United States of America.

 

“Units” means all pooled, communitized or unitized acreage that includes all or
a part of any Lease or includes any Well shown on Exhibit A attached hereto.

 

“Wells” means all oil, gas, water, CO2 or injection wells on the Leases shown on
Exhibit A attached hereto.

 

5

--------------------------------------------------------------------------------

Section 1.2 Terms Defined Elsewhere in this Agreement. For purposes of this
Agreement, the following terms have meanings set forth in the sections
indicated:

 

Term

--------------------------------------------------------------------------------

  

Section

--------------------------------------------------------------------------------

“Accountant”

  

Section 2.5(d)

“Additional Available Employees”

  

Section 6.9(b)

“Agreement”

  

Preamble

“Allocated Value”

  

Section 3.4(a)

“Allocation Statement”

  

Section 9.5

“Antitrust Division”

  

Section 6.4

“Antitrust Laws”

  

Section 4.4

“Balance Sheet”

  

Section 4.8

“Balance Sheet Date”

  

Section 4.8

“Base Purchase Price”

  

Section 2.2(a)

“Cause”

  

Section 6.9(i)

“Closing”

  

Section 2.3

“Closing Date”

  

Section 2.3

“Closing Statement”

  

Section 2.5(a)

“Commonly Controlled Entity”

  

Section 4.12(b)

“Companies”

  

Recitals

“Company Employees”

  

Section 6.9

“Confidentiality Agreement”

  

Section 6.6

“Contract”

  

Section 3.3(b)

“Defensible Title”

  

Section 3.2

“Earnest Money”

  

Section 2.2(e)

“Easements”

  

Section 3.1(b)

“Effective Date”

  

Section 2.4.

“Elections”

  

Section 9.4.

“Evaluation Data”

  

Section 4.17

“Financial Statements”

  

Section 4.8

“Forms”

  

Section 9.4

“FTC”

  

Section 6.4

“GAAP”

  

Section 4.8

“Gathering Systems”

  

Section 4.5(b)

“Indemnification Claim”

  

Section 10.4(a)

“Leased Vehicles”

  

Section 6.15

“Material Contracts”

  

Section 4.11

“Membership Interests”

  

Recitals

“ONEOK Marks”

  

Section 6.8

“ONEOK Resources Holdings”

  

Recitals

“ONEOK Texas Holdings”

  

Recitals

“ONEOK Texas LP”

  

Recitals

“Order”

  

[Section 4.4]

“Permitted Encumbrances”

  

Section 3.3

“Purchase Price”

  

Section 2.2(a)

“Purchaser”

  

Preamble

 

6

--------------------------------------------------------------------------------

Term

--------------------------------------------------------------------------------

  

Section

--------------------------------------------------------------------------------

“Purchaser Documents”

  

Section 5.2

“Purchaser Indemnified Parties”

  

Section 10.2(a)

“Purchaser Savings Plan”

  

Section 6.9(f)

“Securities Act”

  

Section 5.5

“Seller”

  

Preamble

“Seller Documents”

  

Section 4.3

“Seller Indemnified Parties”

  

Section 10.3(a)

“Title Arbitrator”

  

Section 3.4(i)

“Title Benefit Amount”

  

Section 3.4(e)

“Title Claim Date”

  

Section 3.4(a)

“Title Defect Amount”

  

Section 3.4(d)

“Transaction Taxes”

  

Section 9.1

“Transferred Employees”

  

Section 6.9

“Welfare Benefits”

  

Section 6.9(g)

 

Section 1.3 Rules of Interpretation.

 

Unless otherwise expressly provided hereby, for purposes of this Agreement, the
following rules of interpretation shall apply:

 

(a) All article, section, schedule and exhibit references used in this Agreement
are to articles, sections, schedules and exhibits to this Agreement unless
otherwise specified. The schedules and exhibits attached to this Agreement
constitute a part of this Agreement and are incorporated herein for all
purposes.

 

(b) If a term is defined as one part of speech (such as a noun), it shall have a
corresponding meaning when used as another part of speech (such as a verb).
Terms defined in the singular have the corresponding meanings in the plural, and
vice versa. Unless the context of this Agreement clearly requires otherwise,
words importing the masculine gender shall include the feminine and neutral
genders and vice versa. The term “includes” or “including” shall mean “including
without limitation.” The words “hereof,” “hereto,” “hereby,” “herein,”
“hereunder” and words of similar import, when used in this Agreement, shall
refer to this Agreement as a whole and not to any particular section or article
in which such words appear.

 

(c) The Parties acknowledge that each Party and its attorneys have reviewed this
Agreement and that any rule of construction to the effect that any ambiguities
are to be resolved against the drafting Party, or any similar rule operating
against the drafter of an agreement, shall not be applicable to the construction
or interpretation of this Agreement.

 

(d) The captions in this Agreement are for convenience only and shall not be
considered a part of or affect the construction or interpretation of any
provision of this Agreement.

 

(e) All references to currency herein shall be to, and all payments required
hereunder shall be paid in, Dollars.

 

(f) All accounting terms used herein and not expressly defined herein shall have
the meanings given to them under GAAP.

 

7

--------------------------------------------------------------------------------

ARTICLE 2.

MEMBERSHIP INTERESTS; PURCHASE PRICE; ADJUSTMENTS

 

Section 2.1 Membership Interests. At the Closing, but effective as of the
Effective Date, upon the terms and subject to the conditions set forth in this
Agreement, Seller shall sell, transfer and convey to Purchaser, and Purchaser
shall purchase and acquire from Seller, the Membership Interests, free and clear
of any Encumbrances other than transfer restrictions imposed thereon by
applicable securities Laws. Notwithstanding the foregoing, Seller shall cause
the Companies to transfer the Excluded Assets to Seller or its Affiliates (other
than the Companies), prior to the Closing, and neither Purchaser nor any of the
Companies shall have any right, title or interest in or to the Excluded Assets
from and after Closing; provided, however, any such transfer of the Excluded
Assets from Company to Seller or its Affiliates shall be on an “as is, where is”
basis without any warranty of, indemnity of or liability to the Company.

 

Section 2.2 Purchase Price and Adjustments; Escrow.

 

(a) The aggregate consideration payable by Purchaser to Seller for the
Membership Interests (the “Purchase Price”) shall consist of $367,730,870.00
(the “Base Purchase Price”) plus or minus, as the case may be, the difference
between the Net Working Capital as of the Effective Date and the Net Working
Capital as of the Balance Sheet Date. For the avoidance of doubt, if Net Working
Capital as of the Effective Date is greater than the Net Working Capital as of
the Balance Sheet Date, then the difference shall be added to the Base Purchase
Price. If Net Working Capital as of the Balance Sheet Date is greater than the
Net Working Capital as of the Effective Date, then the difference shall be
subtracted from the Base Purchase Price. In addition, the Base Purchase Price
shall be subject to adjustment as provided in Sections 2.2(b), 2.2(c), 2.2(d),
2.2(e), 3.4, 6.15 and 9.2.

 

(b) The Purchase Price shall be decreased by the amount of EBITDA of the
Companies for the period from the Balance Sheet Date to the Effective Date.

 

(c) The Purchase Price shall be increased by the aggregate amount of all costs,
expenses, obligations and liabilities relating to preparing for drilling,
drilling, equipping (including installing surface equipment) and completing the
wells and other Properties listed on the attached Schedule 2.2(c) (and for any
other wells not assigned an Allocated Value on Exhibit B for which Purchaser has
approved Seller incurring such expenditures), in each case to the extent such
amounts have been paid by the Seller or any of its Affiliates (including any of
the Companies) prior to the Closing Date, including costs of title review,
filing for permits, surface damage and access payments, access road construction
and site preparation.

 

(d) The Purchase Price shall be adjusted for the actual aggregate gas imbalance
(net of royalties) affecting the Properties that exists as of the Effective
Date. Such imbalance in Mcf volumes shall be multiplied by $2.00 per Mcf to
determine the dollar amount of the imbalance adjustment to the Purchase Price.
The value so calculated of any net imbalance owing to the Seller shall be added
to the Purchase Price and the value so calculated of any net imbalance owing by
the Seller shall be subtracted from the Purchase Price.

 

(e) Purchaser shall deposit $11,031,926.10 upon execution of this Agreement by
wire transfer of immediately available funds (the “Earnest Money”), which shall
be deposited and held by Seller in an account designated by Seller, as earnest
money and part of the Purchase Price. At the Closing, any interest earned on the
Earnest Money shall be applied to the Purchase Price. If the Earnest Money is
returned to the Purchaser, then the Purchaser shall also receive any interest
accrued

 

8

--------------------------------------------------------------------------------

thereon. If the Earnest Money is retained by the Seller as liquidated damages
pursuant to Section 2.6, then the Seller shall also retain any interest accrued
thereon.

 

Section 2.3 Closing. The closing of the transactions contemplated by this
Agreement (the “Closing”) will take place at 10:00 a.m., at the offices of
Gable & Gotwals, 100 West 5th Street, Tulsa, Oklahoma on the later of
(i) September 30, 2005, (ii) the second Business Day following closing of that
certain equity buyout transaction in respect of EXCO Holdings, Inc. as described
in the Form 8-K filed on August 29, 2005 filed by EXCO Resources, Inc. with the
U.S. Securities and Exchange Commission, but not later than October 14, 2005, or
(iii) the second Business Day following the satisfaction or waiver of any
condition set forth in Section 7.1 or Section 7.2, or such other date as
Purchaser and Seller may mutually determine. The date on which the Closing
occurs is hereinafter referred to as the “Closing Date.”

 

Section 2.4 Effective Date. The “Effective Date” of the transaction set forth in
this Agreement shall be the first calendar day of the month in which the Closing
Date occurs, unless the Closing Date occurs after the tenth (10th) calendar day
of such month in which case the Effective Date shall be the first calendar day
of the month immediately after the month in which the Closing Date occurs. The
phrase “on or after the Effective Date” as used herein means on or after 7:00
a.m. central time on the Effective Date.

 

Section 2.5 Post-Closing Purchase Price Reconciliation.

 

(a) As soon as reasonably practicable following the Closing Date or the
Effective Date, whichever is later, and in any event within 90 days thereafter,
Seller shall prepare and deliver to Purchaser a calculation of Net Working
Capital as of the Effective Date and a calculation of any other adjustments to
the Purchase Price provided for in this Agreement, together with reasonably
detailed supporting information (the “Closing Statement”). The Net Working
Capital as of the Effective Date shall be calculated in the same manner as
reflected on Exhibit C (demonstrating the calculation of Net Working Capital as
of the Balance Sheet Date).

 

(b) From and after the Closing, Purchaser and Seller shall each provide the
other Party and its representatives reasonable access to the records relating to
the calculation of Net Working Capital as of the Effective Date and the
calculation of any other adjustments to the Purchase Price provided for in this
Agreement as such other Party shall reasonably request and that are available.

 

(c) Within 60 days after Purchaser’s receipt of the Closing Statement, Purchaser
shall notify Seller as to whether Purchaser agrees or disagrees with the Closing
Statement and, if Purchaser disagrees, such notice shall set forth in reasonable
detail the particulars of such disagreement. If Purchaser provides a notice of
agreement or does not provide a notice of disagreement within such 60 day
period, then Purchaser shall be deemed to have accepted the calculations and the
amounts set forth in the Closing Statement delivered by Seller, which shall then
be final, binding and conclusive for all purposes hereunder. If any such notice
of disagreement is timely provided, then Purchaser and Seller shall each use
Reasonable Efforts for a period of 30 days thereafter to resolve any
disagreements with respect to the calculations in the Closing Statement.

 

(d) If, at the end of the 30-day resolution period, the Parties are unable to
resolve any disagreements as to items in the Closing Statement, then KPMG LLP
(or such other independent accounting firm of recognized national standing as
may be mutually selected by Purchaser and Seller) shall resolve any remaining
disagreements. If KPMG LLP is unwilling or unable to serve in such capacity and
the Parties are unable to agree upon a replacement, then Seller shall within 10
days

 

9

--------------------------------------------------------------------------------

deliver to Purchaser a listing of three other accounting firms of recognized
national or regional standing and Purchaser shall within 10 days after receipt
of such list, select one of such three accounting firms (such firm as is
ultimately selected pursuant to the aforementioned procedures being the
“Accountant”). The Accountant shall be charged with determining as promptly as
practicable, but in any event within 30 days after the date on which such
dispute is referred to the Accountant, any disputed items required to determine
the Net Working Capital as of the Effective Date and any other adjustments to
the Purchase Price provided for in this Agreement. The costs and expenses of the
Accountant shall be borne 50% by Seller and 50% by Purchaser. The determination
of the Accountant shall be final, binding and conclusive for all purposes
hereunder. Such amounts as finally determined by the Accountant shall be used to
determine the Purchase Price.

 

(e) Within five Business Days after the date on which the last disputed item
required to determine the Net Working Capital as of the Effective Date and any
other adjustments to the Purchase Price provided for in this Agreement is
resolved pursuant to this Section 2.5, Purchaser shall pay to Seller an amount
equal to the excess, if any, of the Purchase Price minus the Estimated Purchase
Price, or Seller shall pay to Purchaser an amount equal to the excess, if any,
of the Estimated Purchase Price minus the Purchase Price, in each case together
with interest at a rate equal to LIBOR (determined, as applicable, on the
Effective Date and at the end of each 30 day period thereafter) plus 1% on such
excess from the Effective Date to the date of payment.

 

Section 2.6 Breach or Failure to Close.

 

If Seller performs all of Seller’s obligations under this Agreement, and if
within five (5) days after the date specified for Closing as provided herein,
the Purchaser fails to make any payment or to perform any of Purchaser’s
obligations under this Agreement, and Purchaser shall not have terminated this
Agreement as permitted in Section 8.1(b) or Section 8.2, then the Earnest Money
(and any interest accrued thereon) shall be retained by Seller as liquidated
damages for the breach of this Agreement by Purchaser. Notwithstanding any other
provision of this Agreement, retention of the Earnest Money shall be Seller’s
sole remedy for any failure to make payment or performance of any obligation of
Purchaser prior to Closing. Seller and Purchaser agree that such amount is
intended as liquidated damages, and not as a penalty, and is a reasonable amount
for liquidated damages under this Agreement, and that it would be impractical
and extremely difficult to determine actual damages. If the Purchaser performs
all of Purchaser’s obligations under this Agreement, and if within five (5) days
after the date specified for Closing as provided herein, Seller fails to perform
any of Seller’s obligations under this Agreement, and Seller shall not have
terminated this Agreement as permitted in Section 8.1(b) or Section 8.2, then
Purchaser shall be entitled to cancel and terminate this Agreement and receive
from Seller (i) a refund of the Earnest Money, together with all interest
accrued thereon, and (ii) reimbursement of all of Purchaser’s actual out of
pocket fees and expenses incurred in connection with the negotiation and
execution of this Agreement. Notwithstanding any other provision of this
Agreement, the recovery of the amounts set forth in (i) and (ii) above shall be
Purchaser’s sole remedy for Seller’s failure to perform any of Seller’s
obligations under this Agreement prior to Closing.

 

10

--------------------------------------------------------------------------------

ARTICLE 3.

TITLE MATTERS

 

Section 3.1 Seller’s Title.

 

(a) Seller represents and warrants to Purchaser that the Companies’ title to the
Wells, Units and Leases shown on Exhibit A is Defensible Title as defined in
Section 3.2.

 

(b) Seller represents and warrants to Purchaser that the Companies have good and
valid, indefeasible title to the undivided interests described on Exhibit A-1 in
the gas gathering systems, facilities, equipment, Easements and other property
described on Exhibit A-1 (the “Gathering Systems”).

 

(c) This Article 3 shall provide Purchaser’s exclusive remedy in respect of
Title Defects.

 

Section 3.2 Definition of Defensible Title. As used in this Agreement, the term
“Defensible Title” means that title of the Companies which, subject to Permitted
Encumbrances:

 

(a) Entitles the Companies to receive throughout the duration of the productive
life of any Well or Unit (after satisfaction of all royalties, overriding
royalties, nonparticipating royalties, net profits interests or other similar
burdens on or measured by production of Hydrocarbons), not less than the “net
revenue interest” share shown in Exhibit A of all Hydrocarbons produced, saved
and marketed from such Well or Unit, except decreases in connection with those
operations in which the Companies may be a non-consenting co-owner, decreases
resulting from the reversion of interests to co-owners with respect to
operations in which such co-owners elected not to consent, decreases resulting
from the establishment or amendment of pools or units, and decreases required to
allow co-owners to make up past underproduction or pipelines to make up past
under deliveries, and except as stated in such Exhibit A;

 

(b) Obligates the Companies to bear a percentage of the costs and expenses for
the maintenance and development of, and operations relating to, any Well or Unit
not greater than the “working interest” shown in Exhibit A without increase
throughout the productive life of such Well or Unit, except as required by
COPAS, except as stated in Exhibit A and except increases resulting from
contribution requirements with respect to defaulting co-owners under applicable
operating agreements or applicable law and increases that are accompanied by at
least a proportionate increase in the Companies’ net revenue interest; and

 

(c) Is free and clear of all Encumbrances other than Permitted Encumbrances.

 

Section 3.3 Definition of Permitted Encumbrances. As used herein, the term
“Permitted Encumbrances” means any or all of the following:

 

(a) Lessors’ royalties and any overriding royalties, reversionary interests and
other burdens to the extent that they do not, individually or in the aggregate,
reduce the Companies’ net revenue interest in any Well or Unit below that shown
in Exhibit A or increase the Companies’ working interest in any Well or Unit
above that shown in Exhibit A without a corresponding increase in the net
revenue interest;

 

(b) All leases, unit agreements, pooling agreements, operating agreements,
production sales agreements, division orders and other sales contracts,
agreements and instruments to which any Company is a party or by which any
assets of a Company are bound, other than Excluded Assets (each, a “Contract”)
to the extent that they do not, individually or in the aggregate, reduce the

 

11

--------------------------------------------------------------------------------

Companies’ net revenue interest in any Well or Unit below that shown in Exhibit
A or increase the Companies’ working interest in any Well or Unit above that
shown in Exhibit A without a corresponding increase in the net revenue interest;

 

(c) Third-party consent requirements and similar restrictions with respect to
which waivers or consents are obtained from the appropriate parties prior to the
Closing Date or the appropriate time period for asserting the right has expired
or which need not be satisfied prior to a transfer;

 

(d) Encumbrances for current Taxes or assessments not yet delinquent or, if
delinquent, being contested in good faith by appropriate actions;

 

(e) Materialman’s, mechanic’s, repairman’s, employee’s, contractor’s, operator’s
and other similar liens or charges arising in the ordinary course of business
for amounts not yet delinquent (including any amounts being withheld as provided
by law), or if delinquent, being contested in good faith by appropriate actions;

 

(f) All rights to consent, required notices to, filings with, or other actions
by any Governmental Authority in connection with the transactions contemplated
hereby if they are customarily obtained subsequent to such transactions;

 

(g) Rights of reassignment arising upon final intention to abandon or release
any assets of the Companies;

 

(h) Easements, rights-of-way, servitudes, permits, surface leases and other
rights in respect of surface operations which do not materially interfere with
or materially inhibit the normal conduct of such surface operations;

 

(i) Calls on production under existing Contracts;

 

(j) Gas balancing, cash balancing and other production balancing obligations
with respect to any Well or Unit (it being understood that the Purchase Price
adjustment in Section 2.2(d) addresses such imbalances) and obligations to
balance or furnish make-up Hydrocarbons under Hydrocarbon sales, gathering,
processing or transportation contracts;

 

(k) All rights reserved to or vested in any Governmental Authority to control or
regulate the Company or any of its assets in any manner and all obligations and
duties under all applicable laws, rules and orders of any such Governmental
Authority or under any franchise, grant, license or permit issued by any such
Governmental Authority;

 

(l) Any actual or asserted termination of the Companies’ title to any assets
held by production as a consequence of the cessation of production or
insufficient production over any period;

 

(m) Any Encumbrance on or affecting the assets of any Company which is expressly
assumed, bonded or paid by Seller or its Affiliates (other than a Company) at or
prior to Closing or which is discharged by Seller or its Affiliates (other than
a Company) at or prior to Closing;

 

(n) The litigation and other matters listed on Seller Disclosure Schedules;

 

(o) The occurrence of payout under any farmout agreement, joint operating
agreement or similar arrangement, or the exercise of any other back-in right or
reversionary interest held by a third Person;

 

12

--------------------------------------------------------------------------------

(p) Any lease amendment, or any consent by any non-participating royalty
interest or non-executive mineral interest, authorizing the lessee or executive
rights holder to pool a leasehold interest, royalty interest, or mineral
interest constituting part of any Property, or to pool another leasehold
interest, royalty interest, or mineral interest with any Property;

 

(q) Any Encumbrances or other matters as to the ownership of the mineral,
royalty or surface estate dating from sovereignty to the date of acquisition by
Seller, except for leases acquired by Seller directly from the mineral owner,
which would reasonably be expected to have been raised as an issue in the normal
course by an experienced and competent title attorney giving a drilling or
division order title opinion with respect to any Property, if a drilling or
division order title opinion had been rendered as to such Property, and where
such Encumbrances or other matters do not have a material adverse impact on the
Allocated Value of the specific Property so encumbered when taking into account
the age, remoteness, magnitude, nature and past treatment of such Encumbrances
or other matter;

 

(r) Such Encumbrances or other matters that do not have a material adverse
impact when taking into account the age, remoteness, magnitude and nature of
such Encumbrances or other matter;

 

(s) The failure of Exhibit A to reflect any leased or unleased mineral interest,
where the owner thereof was treated as a non-participating co-tenant during the
drilling of any Well;

 

(t) Changes initiated by Purchaser in the (A) well location, (B) drilling unit
configuration, or (C) pooling and unitization outlines;

 

(u) Any matters shown on Exhibit A; and

 

(v) Any other Encumbrances (i) which do not, individually or in the aggregate,
materially detract from the value of or materially interfere with the use,
operation or ownership of the assets of the Companies (taken as a whole) subject
thereto or affected thereby (as currently used, operated or owned) and
(ii) which would be accepted by a reasonably prudent purchaser engaged in the
business of owning and operating oil and gas properties.

 

Section 3.4 Notice of Title Defects; Defect Adjustments.

 

(a) To assert a claim arising out of a breach of Section 3.1, Purchaser must
deliver a written claim notice to Seller promptly after becoming aware of a
Title Defect but in any event on or before the date that is two (2) Business
Days prior to Closing (the “Title Claim Date”), except as otherwise provided
under Section 3.5. Such notice shall be in writing and shall include (i) a
specific description of the alleged Title Defects, (ii) the Wells or Units
affected, (iii) the Allocated Values (as described below) of the Wells or Units
subject to the alleged Title Defects, (iv) supporting documents reasonably
necessary for Seller (as well as any title attorney or examiner hired by Seller)
to verify the existence of the alleged Title Defects and (v) the amount by which
Purchaser reasonably believes the Allocated Values of those Wells or Units are
reduced by the alleged Title Defects and the computations and information upon
which Purchaser’s belief is based. Purchaser shall be deemed to have waived all
breaches of Section 3.1 for which Seller has not been given proper written
notice as described above on or before the Title Claim Date. The term “Allocated
Value” for any asset of the Companies equals the portion of the Purchase Price
allocated to such asset as described on Exhibit B. Seller, to the extent it
desires to assert a Title Benefit, must deliver to Purchaser, on or before the
Title Claim Date, a similar written notice as to each Title Benefit asserted.

 

13

--------------------------------------------------------------------------------

(b) Should Purchaser discover any Title Benefit on or before the Title Claim
Date, Purchaser shall, as soon as practicable, but in any case by the Title
Claim Date, deliver to Seller a written notice including (i) a specific
description of the Title Benefit, (ii) the Wells affected, and (iii) the
computations and information upon which Purchaser’s belief is based. Seller
shall have the right, but not the obligation, to deliver to Purchaser a similar
notice on or before the Title Claim Date with respect to each Title Benefit
discovered by Seller. Seller shall be deemed to have waived all Title Benefits
of which neither Party has given notice on or before the Title Claim Date,
except to the extent Purchaser has failed to give a notice that it was obligated
to give under this Section 3.4(b).

 

(c) Seller and any Company shall have the right, but not the obligation, to
attempt, at Seller’s sole cost, to cure or remove, on or before the Closing
Date, any Title Defects.

 

(d) With respect to each Well or Unit affected by Title Defects reported under
Section 3.4(a) and not cured during the period permitted under Section 3.4(c),
the Purchase Price shall be reduced by an amount (the “Title Defect Amount”)
equal to the reduction in the Allocated Value for such Well or Unit caused by
such Title Defects, as determined pursuant to Section 3.4(g). Notwithstanding
the foregoing provisions of this Section 3.4(d), no reduction shall be made in
the Purchase Price with respect to any Title Defect for which Seller at its
election executes and delivers to Purchaser a written indemnity agreement, in
form and substance reasonably satisfactory to Purchaser, under which Seller
agrees to fully, unconditionally and irrevocably indemnify and hold harmless
Purchaser and its successors and assigns from any and all Damages arising out of
or resulting from such Title Defect.

 

(e) With respect to each Well or Unit affected by Title Benefits, the Purchase
Price shall be increased by an amount (the “Title Benefit Amount”) equal to the
increase in the Allocated Value for such Well or Unit caused by such Title
Benefits, as determined pursuant to Section 3.4(h).

 

(f) Section 3.4(d) shall, to the fullest extent permitted by applicable law, be
the exclusive right and remedy of Purchaser with respect to Seller’s breach of
its representations and warranties in Section 3.1.

 

(g) The Title Defect Amount resulting from a Title Defect shall be determined as
follows:

 

(i) if Purchaser and Seller agree on the Title Defect Amount, that amount shall
be the Title Defect Amount;

 

(ii) if the Title Defect is an Encumbrance which is undisputed and liquidated in
amount, then the Title Defect Amount shall be the amount necessary to be paid to
remove the Title Defect from the affected Well or Unit;

 

(iii) if the Title Defect represents a discrepancy between (A) the net revenue
interest for any Well or Unit and (B) the net revenue interest or percentage
stated on Exhibit A, then the Title Defect Amount shall be the product of the
Allocated Value of such Well or Unit multiplied by a fraction, the numerator of
which is the net revenue interest decrease or percentage ownership decrease and
the denominator of which is the net revenue interest or percentage ownership
stated on Exhibit A, provided that if the Title Defect is not effective or does
not affect a Well or Unit throughout its entire term, the Title Defect Amount
determined under this Section 3.4(g)(iii) shall be reduced accordingly;

 

(iv) if the Title Defect represents an obligation, Encumbrance, burden or charge
upon or other defect in title to the affected Well or Unit of a type not
described in subsections (i), (ii) or (iii) immediately above, the Title Defect
Amount shall be determined by taking into

 

14

--------------------------------------------------------------------------------

account the Allocated Value of the Well or Unit so affected, the portion of
Companies’ interest in the Well or Unit affected by the Title Defect, the legal
effect of the Title Defect, the potential economic effect of the Title Defect
over the life of the affected Well or Unit, the values placed upon the Title
Defect by Purchaser and Seller and such other factors as are necessary to make a
proper evaluation;

 

(v) notwithstanding anything to the contrary in this Article 3, (A) an
individual claim for a Title Defect for which a claim notice is given prior to
the Title Claim Date shall only be subject to adjustment under this Article 3
(except for adjustments required by Section 3.5) if the Title Defect Amount with
respect to such claim exceeds $100,000, (B) the aggregate Title Defect Amount
attributable to the effects of all Title Defects upon any given Well or Unit
shall not exceed the Allocated Value of such Well or Unit and (C) except for
adjustments required by Section 3.5, there shall be no Purchase Price adjustment
for Title Defects unless and until the aggregate amount of all Title Defect
Amounts for all Wells or Units for which claim notices were timely delivered in
accordance with Section 3.4(a) exceed $2,000,000, and then only to the extent
that such amount exceeds $2,000,000;

 

(vi) if a Title Defect is reasonably susceptible of being cured, the Title
Defect Amount shall not be greater than the lesser of (A) the reasonable cost
and expense of curing such Title Defect or (B) the share of such curative work
cost and expense which is allocated to such Well or Unit pursuant to subsection
(vii) below; and

 

(vii) the Title Defect Amount with respect to a Well shall be determined without
duplication of any costs or losses (A) included in another Title Defect Amount
hereunder, (B) included in a casualty loss under Section 3.5, or (C) for which
Purchaser otherwise receives credit in the calculation of the adjusted Purchase
Price. To the extent that the cost to cure any Title Defect will result in the
curing of all or a part of one or more other Title Defects, such cost of cure
shall be allocated for purposes of Section 3.4(g)(vi) among the Wells or Units
so affected on a fair and reasonable basis.

 

(h) The Title Benefit Amount for any Title Benefit shall be the product of the
Allocated Value of the affected Well or Unit multiplied by a fraction, the
numerator of which is the net revenue interest increase and the denominator of
which is the net revenue interest stated on Exhibit A, provided that if the
Title Benefit is not effective or does not affect a Well or Unit throughout the
entire life of the Well or Unit, the Title Benefit Amount determined under this
Section 3.4(h) shall be reduced accordingly.

 

(i) Seller and Purchaser shall attempt to agree on all Title Defect Amounts and
Title Benefit Amounts by a date not less than ten (10) days after the Title
Claim Date. If Seller and Purchaser are unable to agree by that date, the Title
Defect Amounts and Title Benefit Amounts in dispute shall be exclusively and
finally resolved by arbitration pursuant to this Section 3.4(i). During the
30-day period following the Title Claim Date, Title Defect Amounts and Title
Benefit Amounts in dispute shall be submitted to a title attorney with at least
10 years’ experience in oil and gas titles in the location that is the subject
of the dispute, as selected by (A) mutual agreement of Purchaser and Seller or
(B) absent such agreement during the 30-day period, by the American Arbitration
Association (the “Title Arbitrator”). The Title Arbitrator shall not have had an
affiliation with either Party or their Affiliates within the seven (7) year
period preceding the arbitration, or have any financial interest in the dispute,
controversy or claim. The arbitration proceeding shall be held in Tulsa,
Oklahoma and shall be conducted in accordance with the Commercial Arbitration
Rules of the

 

15

--------------------------------------------------------------------------------

American Arbitration Association, to the extent such rules do not conflict with
the terms of this Section. The Title Arbitrator’s determination shall be made
within 45 days after submission of the matters in dispute and shall be final and
binding upon the Parties, without right of appeal. In making his determination,
the Title Arbitrator shall be bound by the rules set forth in this Sections 3.4
and may consider such other matters as in the opinion of the Title Arbitrator
are necessary or helpful to make a proper determination. Additionally, the Title
Arbitrator may consult with and engage disinterested third parties to advise the
arbitrator, including without limitation title attorneys and petroleum
engineers. In no event shall any Title Defect Amount exceed the estimate given
by Purchaser in its claim notice delivered in accordance with Section 3.4(a) and
in no event shall any Title Benefit Amount exceed any estimate given by Seller
in a claim notice delivered in accordance with Section 3.4(b). The Title
Arbitrator shall act as an expert for the limited purpose of determining the
specific disputed Title Defect Amounts and Title Benefit Amounts submitted by
either Party and may not award damages, interest or penalties to either Party
with respect to any matter. Seller and Purchaser shall bear its own legal fees
and other costs of presenting its case. Seller and Purchaser shall each bear
one-half of the costs and expenses of the Title Arbitrator.

 

(j) Seller may at its option and sole cost continue, after the Closing but prior
to the date of the final adjustment to the Purchase Price as provided in
Section 2.5, to attempt to cure or remove any Title Defects. If any Title Defect
for which a Purchase Price adjustment is made or indemnity given under
Section 3.4(d) is cured or removed by Seller prior to the date of the final
adjustment to the Purchase Price, then (i) Seller shall be reimbursed in that
final adjustment for the amount of any previous deduction from the Purchase
Price with respect to such Title Defect or (ii) such indemnity shall be deemed
terminated without further action on the part of any Party, as applicable.

 

Section 3.5 Casualty or Condemnation Loss. If, after the date of this Agreement,
but prior to the Closing Date, any assets of the Companies are destroyed by fire
or other casualty or is taken in condemnation or under right of eminent domain,
Purchaser shall nevertheless be required to close and Seller shall elect by
written notice to Purchaser prior to the Closing either (i) to cause the assets
affected by any casualty to be repaired or restored, at Seller’s sole cost, as
promptly as reasonably practicable (which work may extend after the Closing
Date), (ii) to indemnify Purchaser through a document reasonably acceptable to
Seller and Purchaser against any costs or expenses that Purchaser reasonably
incurs to repair the assets subject to any casualty or (iii) to treat such
casualty or taking as a Title Defect with respect to the affected property under
Section 3.4. In each case, Seller shall retain all rights to insurance and other
claims against third parties with respect to the casualty or taking except to
the extent the Parties otherwise agree in writing.

 

Section 3.6 Limitations on Applicability. The representation and warranty in
Section 3.1 shall terminate as of the Title Claim Date and shall have no further
force or effect thereafter, provided there shall be no termination of
Purchaser’s or Seller’s rights under Section 3.4 with respect to any bona fide
Title Defect or Title Benefit claim properly reported on or before the Title
Claim Date.

 

16

--------------------------------------------------------------------------------

ARTICLE 4.

REPRESENTATIONS AND WARRANTIES OF THE SELLER

 

The Seller represents and warrants to the Purchaser as follows, but expressly
excludes the Excluded Assets from any of such representations or warranties:

 

Section 4.1 Disclaimers.

 

(a) Except as and to the extent expressly set forth in Articles 3 and 4 of this
Agreement, (i) Seller makes no representations or warranties, express or
implied, and (ii) Seller expressly disclaims all liability and responsibility
for any representation, warranty, statement or information made or communicated
(orally or in writing) to Purchaser or any of its Affiliates, employees, agents,
consultants or representatives (including, without limitation, any opinion,
information, projection or advice that may have been provided to Purchaser by
any officer, director, employee, agent, consultant, representative or advisor of
Seller or any of its Affiliates).

 

(b) EXCEPT AS EXPRESSLY REPRESENTED OTHERWISE IN ARTICLE 3 OR THIS ARTICLE 4,
WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, SELLER EXPRESSLY DISCLAIMS ANY
REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, ORAL OR WRITTEN, AS TO (I) TITLE
TO ANY OF THE PROPERTIES OR OTHER ASSETS OF ANY OF THE COMPANIES, (II) THE
CONTENTS, CHARACTER OR NATURE OF ANY DESCRIPTIVE MEMORANDUM, OR ANY REPORT OF
ANY PETROLEUM ENGINEERING CONSULTANT, OR ANY GEOLOGICAL OR SEISMIC DATA OR
INTERPRETATION, RELATING TO THE PROPERTIES OR OTHER ASSETS OF ANY OF THE
COMPANIES, (III) THE QUANTITY, QUALITY OR RECOVERABILITY OF HYDROCARBONS IN OR
FROM THE PROPERTIES OR OTHER ASSETS OF ANY OF THE COMPANIES, (IV) ANY ESTIMATES
OF THE VALUE OF THE ASSETS OR FUTURE REVENUES GENERATED BY THE PROPERTIES OR
OTHER ASSETS OF ANY OF THE COMPANIES, (V) THE PRODUCTION OF PETROLEUM SUBSTANCES
FROM THE PROPERTIES OR OTHER ASSETS OF ANY OF THE COMPANIES, OR WHETHER
PRODUCTION HAS BEEN CONTINUOUS, OR IN PAYING QUANTITIES, (VI) THE MAINTENANCE,
REPAIR, CONDITION, QUALITY, SUITABILITY, DESIGN OR MARKETABILITY OF THE
PROPERTIES OR OTHER ASSETS OF ANY OF THE COMPANIES, OR (VII) ANY OTHER MATERIALS
OR INFORMATION THAT MAY HAVE BEEN MADE AVAILABLE OR COMMUNICATED TO PURCHASER OR
ITS AFFILIATES, OR ITS 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 FURTHER DISCLAIMS ANY
REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, OF MERCHANTABILITY, FITNESS FOR
A PARTICULAR PURPOSE OR CONFORMITY TO MODELS OR SAMPLES OF MATERIALS OF ANY
EQUIPMENT, IT BEING EXPRESSLY UNDERSTOOD AND AGREED BY THE PARTIES HERETO THAT
PURCHASER SHALL BE DEEMED TO BE OBTAINING ASSETS, EQUIPMENT AND OTHER TANGIBLE
PROPERTY IN ITS PRESENT STATUS, CONDITION AND STATE OF REPAIR, “AS IS” AND
“WHERE IS” WITH ALL FAULTS AND THAT PURCHASER HAS MADE OR CAUSED TO BE MADE SUCH
INSPECTIONS AS PURCHASER DEEMS APPROPRIATE.

 

(c) The disclosure of any matter or item in any schedule hereto shall not be
deemed to constitute an acknowledgment that any such matter is required to be
disclosed. Matters may be disclosed on a schedule to this Agreement for purposes
of information only. Disclosure of any matter under one schedule shall be deemed
disclosure of that matter under any other schedules to the extent reasonably
ascertainable on the face of such disclosure.

 

17

--------------------------------------------------------------------------------

Section 4.2 Organization and Good Standing. Seller is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware and has all requisite corporate power and authority to own, lease and
operate its properties and to carry on its business as now conducted. ONEOK
Resources Holdings and ONEOK Texas Holdings are limited liability companies,
each duly organized, validly existing and in good standing under the laws of the
State of Delaware and each has all requisite power and authority to own, lease
and operate its properties and to carry on its business as now conducted. ONEOK
Texas LP is a limited partnership duly organized, validly existing and in good
standing under the laws of the State of Delaware and has all requisite power and
authority to own, lease and operate its properties and to carry on its business
as now conducted. Each Company is duly qualified or authorized to do business as
a limited liability company or as a limited partnership, as applicable, and is
in good standing under the laws of each jurisdiction in which the conduct of its
business or the ownership of its properties requires such qualification or
authorization, except where the failure to be so qualified, authorized or in
good standing would not reasonably be expected to have a Material Adverse
Effect.

 

Section 4.3 Authorization of Agreement. Seller has all requisite power,
authority and legal capacity to execute and deliver this Agreement and each
other agreement, document, or instrument or certificate contemplated by this
Agreement or to be executed by Seller in connection with the consummation of the
transactions contemplated by this Agreement (the “Seller Documents”), and to
consummate the transactions contemplated hereby and thereby. The execution and
delivery of this Agreement and each of the Seller Documents and the consummation
of the transactions contemplated hereby and thereby have been duly authorized by
all required action on the part of Seller. This Agreement has been, and each of
the Seller Documents will be at or prior to the Closing, duly and validly
executed and delivered by Seller, and (assuming the due authorization, execution
and delivery by the other parties hereto and thereto) this Agreement
constitutes, and each Seller Document, when so executed and delivered will
constitute, the legal, valid and binding obligation of Seller, enforceable
against Seller in accordance with its terms, subject to applicable bankruptcy,
insolvency, reorganization, moratorium and similar Laws affecting creditors’
rights and remedies generally, and subject, as to enforceability, to general
principles of equity, including principles of commercial reasonableness, good
faith and fair dealing (regardless of whether enforcement is sought in a
proceeding at law or in equity).

 

Section 4.4 Conflicts; Consent of Third Parties. Except as set forth in Schedule
4.4, and except for any Contracts that have been terminated or will expire by
their terms before or upon the Closing or Contracts with Affiliates of Seller
that will be terminated before or upon the Closing, none of the execution and
delivery by Seller of this Agreement or the Seller Documents, the consummation
of the transactions contemplated hereby or thereby, or compliance by Seller with
any of the provisions hereof or thereof will (a) conflict with, or result in any
violation of or default (with or without notice or lapse of time, or both)
under, or give rise to a right of termination or cancellation under, any
provision of (i) any Organizational Documents of Seller or any Company; (ii) any
Contract or Permit to which Seller or any Company is a party or by which any of
the properties or assets of Seller or any Company are bound (other than with
respect to any provisions related to changes in credit ratings); (iii) any Order
of any Governmental Authority applicable to Seller or any Company or by which
any of the properties or assets of Seller or any Company are bound; or (iv) any
applicable Law; other than, in the case of clauses (ii), (iii) and (iv), such
conflicts, violations, defaults, terminations or cancellations, that would not
reasonably be expected to have a Material Adverse Effect; or (b) require Seller
or any Company to obtain any consent, waiver, approval, Order, Permit or
authorization of, or declare or file with, or give notification to, any Person
or Governmental

 

18

--------------------------------------------------------------------------------

Authority, except for (i) compliance with any United States federal or state or
foreign statutes, rules, regulations, orders, decrees, administrative or
judicial doctrines or other Laws that are designed to prohibit, restrict or
regulate actions having the purpose or effect of monopolization or restraint of
trade (collectively, the “Antitrust Laws”) and (ii) such consents, waivers,
approvals, Orders, Permits or authorizations the failure of which to obtain
would not reasonably be expected to have a Material Adverse Effect.

 

Section 4.5 Ownership; Sufficiency.

 

(a) Seller is the record and beneficial owner of the Membership Interests, free
and clear of any and all Encumbrances other than transfer restrictions imposed
by securities Laws. Seller has the power and authority to sell, transfer, assign
and deliver the Membership Interests as provided in this Agreement, and such
delivery will convey to Purchaser good and marketable title to the Membership
Interests, free and clear of any and all Encumbrances other than transfer
restrictions imposed by securities Laws.

 

(b) Except for the Excluded Assets and except as set forth in Schedule 4.5(b),
the assets of the Companies constitute all of the assets used to conduct the
business of the Companies as presently conducted, except where the absence of
which would not reasonably be expected to have a Material Adverse Effect.

 

Section 4.6 Capitalization.

 

(a) Seller has provided Purchaser with a true and correct copy of the LLC
Agreement, including any amendments thereto.

 

(b) There is no existing option, warrant, call, right or Contract to which any
Company is a party requiring, and there are no securities of any Company
outstanding that upon conversion or exchange would require, the issuance of any
units of membership or limited partnership interests, as applicable, or other
securities convertible into, exchangeable for or evidencing the right to
subscribe for or purchase any such units of membership or limited partnership
interests. None of the Companies is a party to any voting trust or other
Contract with respect to the voting, redemption, sale, transfer or other
disposition of any units of membership or limited partnership interests in any
of the Companies.

 

Section 4.7 Subsidiaries. ONEOK Resources Holdings owns (i) all of the
outstanding membership interests in ONEOK Texas Holdings, which in turn owns
100% of the general partner interests in ONEOK Texas LP, and (ii) 100% of the
limited partner interests in ONEOK Texas LP. None of the Companies owns any
capital stock or other securities of any other corporation or has any equity or
ownership interest in any other Person.

 

Section 4.8 Financial Statements. Schedule 4.8 sets forth copies of (a) the
unaudited combined balance sheets of the Companies as of December 31, 2004 and
the related unaudited combined statements of income for the calendar year 2004,
and (b) the unaudited combined balance sheet of the Companies as of July 31,
2005 and the unaudited combined statement of income for the seven-month period
ended July 31, 2005 (collectively, the “Financial Statements”). The December 31,
2004 and July 31, 2005 balance sheets of the Company fairly present the combined
financial position of the Companies as of the respective dates thereof, and the
other financial statements referred to in this Section 4.8 fairly present the
combined results of operations and financial position of the Companies for the
respective periods or as of the respective dates therein set forth; and each of
such statements has been prepared in accordance with generally accepted
accounting principles

 

19

--------------------------------------------------------------------------------

(“GAAP”) consistently applied during the periods involved. For the purposes
hereof, the unaudited combined balance sheet of the Companies as of July 31,
2005 is referred to as the “Balance Sheet” and July 31, 2005 is referred to as
the “Balance Sheet Date.”

 

Section 4.9 Absence of Certain Changes. Except as contemplated by this Agreement
or as set forth in Schedule 4.9, since the Balance Sheet Date (i) the Companies
have conducted their businesses in all material respects only in the ordinary
course of business and (ii) there has not been any Material Adverse Effect.

 

Section 4.10 Taxes and Assessments. Except as set forth in Schedule 4.10:

 

(a) Each Company, and the Seller to the extent that the Company is included in
consolidated Tax Returns, has timely filed all Tax Returns required to be filed
by it (taking into account requests for extensions to file such returns), all
such returns are correct and complete, and all Taxes required to be paid by it
have either been paid or are reflected in accordance with GAAP as a reserve for
Taxes on the Financial Statements, except to the extent that such failures to
timely file, to be correct and complete or to pay, individually or in the
aggregate would not reasonably be expected to have a Material Adverse Effect;

 

(b) All material amounts of Taxes required to be withheld by each Company have
been withheld and have been (or will be) duly and timely paid to the proper Tax
Authority;

 

(c) No material deficiencies for any Taxes have been proposed, asserted or
assessed against any Company that are still pending;

 

(d) No requests for waivers of the time to assess any material amounts of Taxes
of any Company have been made that are still pending; and

 

(e) No Tax Return filed by any Company is under current examination by the IRS
or by any tax authority.

 

This Section 4.10 represents the sole and exclusive representation and warranty
of Seller regarding Tax matters.

 

Section 4.11 Material Contracts.

 

(a) Schedule 4.11 sets forth all of the following Contracts to which any Company
is a party or by which it is bound, other than Leases and other than Contracts
that have been terminated or will expire by their terms before or upon the
Closing or Contracts with Affiliates of Seller that will be terminated before or
upon the Closing (collectively, the “Material Contracts”):

 

(i) all material operating agreements, other than operating agreements in a form
which is standard in the industry;

 

(ii) all material transportation and gas balancing agreements, other than those
which are a part of or incorporated by reference into joint operating agreements
or contained in Seller’s files;

 

(iii) area of mutual interest agreements, other than those contained in any
exploration agreement or letter of intent,

 

(iv) all agreements for capital expenditures or the acquisition or construction
of fixed assets outside of the ordinary course of business that require
aggregate future payments in excess of $250,000,

 

20

--------------------------------------------------------------------------------

(v) all agreements for or that contemplate the sale of any of the Properties
(except this Agreement) with a sales price in excess of $250,000, and

 

(vi) other material agreements of the Company obligating the Company to make any
payment in excess of $250,000.

 

(b) None of the Companies has received any written notice or written threat of
the termination, expiration or modification of any Material Contract within one
year from the date hereof, which termination, expiration or modification would
have a Material Adverse Effect. Purchaser has been provided with access to true
and complete copies of each Material Contract, including each contract,
agreement and instrument listed in Schedule 4.11.

 

Section 4.12 Employee Benefits.

 

(a) Schedule 4.12(a) contains a complete and accurate list of each Seller Plan
that covers one or more of the Transferred Employees. Seller has made available
to Purchaser a copy of each such Seller Plan. None of the Companies sponsors,
maintains or contributes to, or is required to contribute to, any plan subject
to Title IV or ERISA.

 

(b) With respect to any “employee benefit plan,” within the meaning of
Section 3(3) of ERISA, that is a Seller Plan (i) no withdrawal liability, within
the meaning of Section 4201 of ERISA, has been incurred by Seller or by any
trade or business, whether or not incorporated, that together with the Seller
would be a “single employer” within the meaning of Section 4001(b) of ERISA (a
“Commonly Controlled Entity”), which withdrawal liability has not been
satisfied, (ii) no liability to the Pension Benefit Guaranty Corporation has
been incurred by Seller or by any Commonly Controlled Entity, which liability
has not been satisfied, (iii) no accumulated funding deficiency, whether or not
waived, within the meaning of Section 302 of ERISA or Section 412 of the Code
currently exists and (iv) all contributions (including installments) to such
plan required of Seller or any Commonly Controlled Entity by Section 302 of
ERISA and Section 412 of the Code have been made.

 

(c) There are no Company Plans and Company has no outstanding obligation or
liability to any Seller Plan.

 

Section 4.13 Labor.

 

(a) None of the Companies is a party to any labor or collective bargaining
agreement.

 

(b) There are no (i) strikes, work stoppages, work slowdowns, or lockouts
pending or, to the Knowledge of Seller, threatened in writing against or
involving any Company, or (ii) unfair labor practice charges, grievances or
complaints pending or, to the Knowledge of Seller, threatened in writing by or
on behalf of any employee or group of employees of any Company, except in each
case as would not reasonably be expected to have a Material Adverse Effect.

 

Section 4.14 Litigation. Except as set forth in Schedule 4.14, there are no
Legal Proceedings pending or, to the Knowledge of Seller, threatened in writing
against any Company before any Governmental Authority, which, if adversely
determined, would reasonably be expected to have a Material Adverse Effect.

 

21

--------------------------------------------------------------------------------

Section 4.15 Compliance with Laws; Permits. Except for environmental matters
covered in Section 4.16, Tax matters covered in Section 4.10, employee benefit
matters covered in Sections 4.12 and except as set forth on Schedule 4.15:

 

(a) each Company is in compliance with all Laws of any Governmental Authority
applicable to its business or operations, except where the failure to be in
compliance would not reasonably be expected to have a Material Adverse Effect;

 

(b) no Company has received any written notice of or been charged with the
violation of any Laws, except where such violation would not reasonably be
expected to have a Material Adverse Effect;

 

(c) each Company currently has all Permits that are necessary to operate its
business as currently conducted, except where the absence of which would not
reasonably be expected to have a Material Adverse Effect; and

 

(d) no Company is in default or violation (and no event has occurred which, with
notice or the lapse of time or both, would constitute a default or violation) of
any term, condition or provision of any Permit to which it is a party, except
where such default or violation would not reasonably be expected to have a
Material Adverse Effect.

 

Section 4.16 Environmental Matters.

 

Except as set forth in Schedule 4.16, to Seller’s Knowledge (i) each Company’s
operation of its assets have been in compliance with all applicable
Environmental Laws and (ii) there has been no contamination of groundwater,
surface water or soil by any Company that requires remediation under applicable
Environmental Laws, except in either case such failures to comply or such
contamination as, individually or in the aggregate, would not have a Material
Adverse Effect.

 

Section 4.17 Evaluation Data. Immediately prior to the execution of this
Agreement, each Company owned or had the right to use in the ordinary conduct of
its business, all of its material technology, processes, maps, seismic records,
shot points, field notes, interpretations and programs, all seismic, geological
and geophysical information and libraries, and other proprietary information
relating to the Properties (collectively, “Evaluation Data”). Except as set
forth in this Section 4.17, Seller makes no other representations or warranties
of any kind relating to the Evaluation Data or any agreements relating thereto,
including whether this Agreement (or the consummation of this Agreement) has
altered or impaired, or will alter or impair, any such rights or has breached,
or will breach, any agreements with third party vendors or has required, or may
require notice or payments of additional sums relating thereto, or has required,
or may require, the return or discontinuation of use of any records or
information.

 

Section 4.18 Gas Imbalances. Except as set forth in Schedule 4.18, as of the
respective dates for each Property set forth on that Schedule 4.18, the
Properties of the Companies did not have an aggregate net overproductive or
underproductive imbalance or transportation balance.

 

Section 4.19 Consents and Preferential Purchase Rights. Except as set forth in
Schedule 4.19, none of Properties of the Companies is subject to any
preferential rights to purchase which would become exercisable as a result of
the transactions contemplated by this Agreement, nor are any third-party
consents to assignment required with respect to the transactions contemplated by
this Agreement, except consents and approvals of assignments by Governmental
Entities that are customarily obtained after Closing.

 

Section 4.20 Financial Advisors. No Person has acted, directly or indirectly, as
a broker, finder or financial advisor for Seller or any Company in connection
with the transactions contemplated by this Agreement, and no Person is entitled
to any fee or commission or like payment from Purchaser in respect thereof.

 

22

--------------------------------------------------------------------------------

ARTICLE 5.

REPRESENTATIONS AND WARRANTIES OF THE PURCHASER

 

Section 5.1 Organization and Good Standing. Purchaser is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware and has all requisite corporate power and authority to own, lease and
operate properties and carry on its business.

 

Section 5.2 Authorization of Agreement. Purchaser has full corporate power and
authority to execute and deliver this Agreement and each other agreement,
document, instrument or certificate contemplated by this Agreement or to be
executed by Purchaser in connection with the consummation of the transactions
contemplated hereby and thereby (the “Purchaser Documents”), and to consummate
the transactions contemplated hereby and thereby. The execution, delivery and
performance by Purchaser of this Agreement and each Purchaser Document have been
duly authorized by all necessary corporate action on behalf of Purchaser. This
Agreement has been, and each Purchaser Document will be at or prior to the
Closing, duly executed and delivered by Purchaser and (assuming the due
authorization, execution and delivery by the other parties hereto and thereto)
this Agreement constitutes, and each Purchaser Document when so executed and
delivered will constitute, the legal, valid and binding obligation of Purchaser,
enforceable against Purchaser in accordance with its terms, subject to
applicable bankruptcy, insolvency, reorganization, moratorium and similar Laws
affecting creditors’ rights and remedies generally, and subject, as to
enforceability, to general principles of equity, including principles of
commercial reasonableness, good faith and fair dealing (regardless of whether
enforcement is sought in a proceeding at law or in equity).

 

Section 5.3 Conflicts; Consents of Third Parties. None of the execution and
delivery by Purchaser of this Agreement or the Purchaser Documents, the
consummation of the transactions contemplated hereby or thereby, or compliance
by Purchaser with any of the provisions hereof or thereof will (a) conflict
with, or result in any violation of or default (with or without notice or lapse
of time, or both) under, or give rise to a right of termination or cancellation
under, any provision of (i) the Organizational Documents of Purchaser; (ii) any
Contract or Permit to which Purchaser is a party or by which any of the
properties or assets of Purchaser are bound; (iii) any Order of any Governmental
Authority applicable to Purchaser or by which any of the properties or assets of
Purchaser are bound; or (iv) any applicable Law, other than, in the case of
clauses (ii), (iii) and (iv), such conflicts, violations, defaults, terminations
or cancellations, that would not reasonably be expected to have a material
adverse effect on the ability of Purchaser to perform its obligations under this
Agreement or to consummate the transactions contemplated hereby; or (b) require
Purchaser to obtain any consent, waiver, approval, Order, Permit or
authorization of, or declare or file with, or give notification to, any Person
or Governmental Authority, except for (i) compliance with the applicable
requirements of the Antitrust Laws, and (ii) such consents, waivers, approvals,
Orders, Permits or authorizations the failure of which to obtain would not
reasonably be expected to have a material adverse effect on the ability of
Purchaser to perform its obligations under this Agreement or to consummate the
transactions contemplated hereby.

 

Section 5.4 Litigation. There are no Legal Proceedings pending or, to the
knowledge of Purchaser, threatened in writing against Purchaser, or to which
Purchaser is otherwise a party before any Governmental Authority, which, if
adversely determined, would reasonably be expected to have a material adverse
effect on the ability of Purchaser to perform its obligations under this
Agreement or to consummate the transactions hereby. Purchaser is not subject to
any Order of any Governmental Authority except to the extent the same would not
reasonably be expected to have a

 

23

--------------------------------------------------------------------------------

material adverse effect on the ability of Purchaser to perform its obligations
under this Agreement or to consummate the transactions contemplated hereby.

 

Section 5.5 Securities Matters. Purchaser is an “accredited investor” as defined
in Rule 501 under the Securities Act of 1933, as amended (the “Securities Act”),
and is acquiring the Membership Interests solely for its own account and not
with a view to any distribution or disposition thereof. Purchaser understands
that (a) the Membership Interests have not been registered under the Securities
Act or registered or qualified under any applicable state securities laws in
reliance upon specific exemptions therefrom, and (b) the Membership Interests
may not be transferred or sold except in a transaction registered or exempt from
registration under the Securities Act, and registered or qualified or exempt
from registration or qualification under any applicable state securities laws.

 

Section 5.6 Financial Advisors. No Person has acted, directly or indirectly, as
a broker, finder or financial advisor for Purchaser in connection with the
transactions contemplated by this Agreement and no Person is entitled to any fee
or commission or like payment in respect thereof.

 

ARTICLE 6.

COVENANTS

 

Section 6.1 Conduct of the Business of the Companies. From the date hereof and
until the Closing, except (A) as set forth on Schedule 6.1, (B) as required by
applicable Law, (C) as otherwise contemplated by this Agreement or (D) with the
prior written consent of Purchaser (which consent shall not be unreasonably
withheld, delayed or conditioned):

 

(a) Seller shall cause each Company to:

 

(i) conduct its business only in the ordinary course of business; and

 

(ii) use its commercially reasonable efforts to (A) preserve its present
business, operations, organization and goodwill and (B) preserve its present
relationships with customers and suppliers; and

 

(b) Seller shall not and shall cause each Company not to:

 

(i) declare, set aside, make or pay any dividend or other distribution (other
than cash) in respect of the membership interests or partnerships interests, as
applicable, or repurchase, redeem or otherwise acquire any outstanding
membership interests or partnership interests, as applicable or other ownership
interests in the Company;

 

(ii) transfer, issue, sell or dispose of any membership interests or
partnerships interests, as applicable, or other securities of the Company or
grant options, warrants, calls or other rights to purchase or otherwise acquire
membership interests or partnerships interests, as applicable, or other
securities of the Company;

 

(iii) effect any recapitalization, reclassification or like change in the
capitalization of the Company;

 

(iv) amend the Organizational Documents of the Company;

 

(v) (A) increase the annual level of compensation of any executive officer of
the Company, (B) increase the annual level of compensation payable or to become
payable by

 

24

--------------------------------------------------------------------------------

the Company to any of its executive officers, (C) grant any bonus, benefit or
other direct or indirect compensation to any executive officer, (D) increase the
coverage or benefits available under any (or create any new) severance pay,
termination pay, vacation pay, company awards, salary continuation for
disability, sick leave, deferred compensation, bonus or other incentive
compensation, insurance, pension or other employee benefit plan or arrangement
made to, for, or with any of the executive officers of the Company or otherwise
modify or amend or terminate any such plan or arrangement or (E) enter into any
employment, deferred compensation, severance, consulting, non-competition or
similar agreement (or amend any such agreement) to which the Company is a party
and involving an executive officer of the Company, except, in each case, as
required by applicable Law from time to time in effect or by the terms of any
Benefit Plans;

 

(vi) subject any of the Properties or other assets (whether tangible or
intangible) of the Company to any Encumbrance, except for Permitted Encumbrances
incurred in the ordinary course of business;

 

(vii) acquire any properties or assets or sell, assign, license, transfer,
convey, lease or otherwise dispose of any of the properties or assets of the
Company having an aggregate value in excess of $1,000,000;

 

(viii) other than in the ordinary course of business, cancel or compromise any
debt or claim of the Company in excess of $250,000;

 

(ix) enter into any commitment for capital expenditures of the Companies taken
as a whole in excess of $1,000,000 for all commitments in the aggregate, other
than reasonable capital expenditures in connection with any emergency or force
majeure events affecting the Companies;

 

(x) enter into, modify or terminate any labor or collective bargaining agreement
of the Company or, through negotiations or otherwise, make any commitment or
incur any Liability to any labor organizations;

 

(xi) permit the Company to enter into or agree to enter into any merger or
consolidation with any corporation or other entity, or acquire the securities of
any other Person; or

 

(xii) agree to do anything prohibited by this Section 6.1(b).

 

Notwithstanding the above, the Parties acknowledge and agree that anytime before
Closing (1) Seller shall be entitled to remove all cash from the Companies,
(2) Seller shall be entitled to take all actions necessary or desirable in order
to all eliminate all intercompany balances between or among any one or more
Companies, on the one hand, and Seller or any of its Affiliates (other than any
Company), on the other hand, whether by dividend, capital contribution,
discharge or otherwise, and (3) all of the Excluded Assets will be transferred
to Seller or its Affiliates (other than the Companies) or to other parties on or
before the Closing, and nothing in this Section 6.1 shall prevent or impair such
transfer.

 

Section 6.2 Access to Information. Prior to the Closing Date, Purchaser shall be
entitled, through its officers, employees and representatives (including its
legal advisors and accountants), to make such investigation of the properties,
businesses and operations of the Companies and such examination of the books and
records of the Companies as it reasonably requests and to make extracts and
copies of such books and records; provided, that such examination shall not
include (i)

 

25

--------------------------------------------------------------------------------

information that, if provided to Purchaser, would violate applicable Law or the
organizational documents of any Company, (ii) bids, letters of intent,
expressions of interest, or other proposals received from others in connection
with the transactions contemplated by this Agreement or otherwise and
information and analyses relating to such communications, (iii) any information,
the disclosure of which would jeopardize any legal privilege available to
Seller, the Companies or any of their respective Affiliates relating to such
information or would cause Seller, the Companies or any of their respective
Affiliates to breach a confidentiality obligation by which it is bound or
(iv) any of Seller’s internal valuations of the ownership interests in all or
any of the Companies or the industry of the Companies. Any such investigation
and examination shall be conducted during regular business hours and under
commercially reasonable circumstances and shall be subject to restrictions under
applicable Law. Seller shall, and shall cause the Companies and their respective
officers, employees, consultants, agents, accountants, attorneys and other
representatives of the Companies to, cooperate with Purchaser and Purchaser’s
representatives in connection with such investigation and examination, and
Purchaser and its representatives shall cooperate with Seller, the Companies and
their respective representatives and shall use their commercially reasonable
efforts to minimize any disruption to the business of Seller or the Companies.
Purchaser agrees to abide by any safety rules or rules of conduct reasonably
imposed by Seller, the Companies or the operator of such properties, as the case
may be, with respect to Purchaser’s access and any information furnished to
Purchaser or its representatives pursuant to this Section 6.2. Purchaser shall
indemnify, defend and hold harmless Seller, the Companies and their respective
officers, directors, employees and agents from and against any and all Losses
asserted against or suffered by them relating to, resulting from, or arising out
of, examinations or inspections made by Purchaser or its representatives
pursuant to this Section 6.2, except to the extent such Losses relate to, result
from or arise out of, the gross negligence or willful misconduct of Seller or
the Companies. Notwithstanding anything to the contrary contained herein, prior
to the Closing, without the prior written consent of Seller, which may be
withheld for any reason, (i) Purchaser shall not contact any suppliers to, or
customers of, any of the Companies or their Affiliates, and (ii) Purchaser shall
have no right to perform invasive or subsurface investigations of the properties
or facilities of any of the Companies.

 

Section 6.3 Consents. For up to 180 days after the Closing Date, Seller shall,
and shall cause its Affiliates to, use commercially reasonable efforts to
cooperate with Purchaser, at Purchaser’s request, in endeavoring to obtain any
consents required with respect to Material Contracts, Leases or Permits;
provided, however, that such efforts shall not require Seller or any of its
Affiliates to incur any expenses or Liabilities or provide any financial
accommodation or to remain secondarily or contingently liable for any Liability
with respect thereto to obtain any such consent.

 

Section 6.4 Regulatory Approvals. [Intentionally Omitted]

 

Section 6.5 Further Assurances. Each of Purchaser and Seller shall use (and
Seller shall cause each Company to use) its commercially reasonable efforts to
(i) take all actions necessary or appropriate to consummate the transactions
contemplated by this Agreement and (ii) cause the fulfillment at the earliest
practicable date of all of the conditions to their respective obligations to
consummate the transactions contemplated by this Agreement.

 

Section 6.6 Confidentiality. Purchaser acknowledges that the information
provided to it in connection with this Agreement and the transactions
contemplated hereby is subject to the terms of the confidentiality agreement
between EXCO Resources, Inc. and Seller dated August 3, 2005 (the
“Confidentiality Agreement”), the terms of which are incorporated herein by
reference.

 

26

--------------------------------------------------------------------------------

Section 6.7 Preservation of Records. Purchaser shall cause each Company to
preserve and keep the records relating to the Company for a period of seven
(7) years from the Closing Date, or, if longer, as required by Law. Purchaser
shall cause each Company to make such records and personnel available as may be
reasonably required by Seller in connection with, among other things, any
insurance claims or indemnification claims by, Legal Proceedings or tax audits
against or governmental investigations of Seller or any of its Affiliates or in
order to enable Seller to comply with its obligations under this Agreement and
each other agreement, document or instrument contemplated hereby or thereby. In
the event Purchaser wishes to destroy such records after that time, Purchaser
shall cause the applicable Company first to give ninety (90) days prior written
notice to Seller, and Seller shall have the right at its option and expense,
upon prior written notice given to Purchaser within that ninety (90) day period,
to take possession of the records within one hundred and eighty (180) days after
the date of such notice.

 

Section 6.8 Use of Name. Purchaser agrees that (i) it has no right, title or
interest in or to the name “ONEOK,” “ONEOK Energy Resources,” “ONEOK Energy
Resources Company,” “ONEOK Energy Resources Holdings,” “ONEOK Texas Energy
Holdings,” “ONEOK Texas Energy Resources” or any service marks, trademarks,
trade names, identifying symbols, logos, emblems, signs or insignia related
thereto or containing or comprising the foregoing, including any derivations,
modifications or alterations thereof, and any word, name or mark confusingly
similar thereto (collectively, the “ONEOK Marks”), (ii) it shall have no right
to use the ONEOK Marks after the Closing Date, (iii) it shall immediately after
the Closing, change the name of each Company to remove the names “ONEOK,” “ONEOK
Energy Resources,” “ONEOK Energy Resources Company,” “ONEOK Energy Resources
Holdings,” “ONEOK Texas Energy Holdings,” “ONEOK Texas Energy Resources” or any
variations thereof from the name of the Company, and otherwise cease to hold
itself out as having any affiliation with Seller or any of its Affiliates. In
furtherance thereof, as promptly as practicable but in no event later than sixty
(60) days after the Closing Date, Purchaser shall remove, strike over or
otherwise obliterate all ONEOK Marks from all materials including any vehicles,
business cards, schedules, stationery, packaging materials, displays, signs,
promotional materials, manuals, forms, computer software, technical guidelines,
standards and procedures and other materials. Nothing in this Agreement shall
restrict Seller or its Affiliates from using any of the ONEOK Marks before or
after Closing.

 

Section 6.9 Employee and Benefit Matters.

 

(a) Purchaser or its Affiliates shall offer employment to each of the employees
listed on Schedule 6.9(a) (the “Company Employees”). Schedule 6.9(a) includes
each Company Employee’s name, position or job title and work location, all as of
the date hereof, unless otherwise specified therein.

 

(b) Purchaser or its Affiliates may, but shall not be obligated to, offer
employment to all or any of the employees listed on Schedule 6.9(b) (the
“Additional Available Employees”). Schedule 6.9(b) includes each Additional
Available Employee’s name, position or job title and work location, all as of
the date hereof, unless otherwise specified therein. The Company Employees who
accept offers of employment with Purchaser or its Affiliates, together with any
Additional Available Employees who receive and accept offers of employment with
the Purchaser or its Affiliates, are collectively referred to as the
“Transferred Employees”. Seller or its Affiliates shall have the right, but not
the obligation, to make offers of employment to any Company Employees or
Additional Available Employees.

 

27

--------------------------------------------------------------------------------

(c) Each offer of employment by Purchaser or its Affiliates to a Company
Employee or to an Additional Available Employee shall be consistent with the
provisions of this Section 6.9 and shall remain open for a period of at least
fifteen (15) days. On or before the date that is five (5) Business Days prior to
the Closing Date, Purchaser shall notify Seller as to each Company Employee and
each Additional Available Employee who has accepted employment with the
Purchaser or its Affiliates, and each Company Employee and each Additional
Available Employee who has rejected or not responded to an offer of such
employment. Purchaser shall indemnify and hold harmless Seller and its
Affiliates with respect to all Losses relating to or arising out of the employee
selection and employment offer process described in the preceding provisions of
this Section 6.9 (including any claim of discrimination or other illegality in
such selection and offer process). The transfer of employment of each
Transferred Employee, as described in this Section 6.9, shall be effective as of
the Effective Date.

 

(d) The terms of employment (including all benefits) of the Transferred
Employees by the Purchaser or its Affiliates shall be substantially similar or
superior to those terms of employment and benefits provided by Purchaser and its
Affiliates to their employees in similar positions and with similar
responsibilities as of the Closing Date. Effective as of the Effective Date, all
Transferred Employees shall cease to be employees of Seller or its Affiliates.
For a period of not less than one (1) year following the Effective Date,
Purchaser or its Affiliates shall pay each Transferred Employee a base salary or
wage not less than that paid by Seller or its Affiliates immediately prior to
the Closing Date, and Purchaser or its Affiliates shall provide to each
Transferred Employee an opportunity to earn bonuses on the same basis as
similarly situated employees of Purchaser and its Affiliates.

 

(e) Purchaser shall cause each Transferred Employee and his or her eligible
dependents (including all such Transferred Employee’s dependents covered
immediately prior to the Closing Date by a Seller Plan that is a group health
plan) to be covered under group health, prescription drug, dental and similar
type welfare benefit plans maintained by Purchaser or its Affiliates that
(i) provide benefits to the Transferred Employee and such eligible dependents
effective immediately upon the Closing Date and (ii) credit such Transferred
Employee, for the year during which such coverage under such plans begin, with
any deductibles, co-payments and out-of-pocket expenses already incurred during
such year under Seller Plans that provide similar benefits.

 

(f) Purchaser shall cause the employee benefit plans and programs maintained
after the Closing by Purchaser and its Affiliates to recognize each Transferred
Employee’s years of service and level of seniority with Seller and its
Affiliates prior to the Closing Date for purposes of terms of employment and
eligibility, vesting and benefit determination (but not benefit accrual) under
such plans and programs, including paid vacation, paid sick time, severance
benefits and employer contribution rates under retirement plans. Purchaser shall
cause to be waived any eligibility waiting periods, insurability requirements
and pre-existing condition limitations or restrictions under each employee
welfare benefit plan or program sponsored by Purchaser or one of its Affiliates
so that each Transferred Employee will be fully eligible to participate in each
welfare Benefit Plan of the Purchaser or its Affiliates as of Closing, except to
the extent such Transferred Employee was not eligible to participate in Seller’s
Benefit Plans as of Closing.

 

(g) Seller shall permit each Transferred Employee to elect on the Closing Date
(or as soon thereafter as reasonably practicable) a direct rollover of his or
her rolloverable account balance under the ONEOK Thrift Plan to a defined
contribution plan designated by Purchaser (the “Purchaser Savings Plan”), and
Seller shall cause the ONEOK Thrift Plan to deliver to the Purchaser Savings

 

28

--------------------------------------------------------------------------------

Plan as soon as reasonably practicable after the Closing Date the promissory
notes and other loan documentation, if any, of the Transferred Employees who
have elected such a direct rollover in accordance with the procedures prescribed
by Seller. Seller and Purchaser shall cooperate and take such actions, if any,
as are necessary to permit the continuation of loan repayments by Transferred
Employees to the ONEOK Thrift Plan by payroll deductions during the period
beginning on the Closing Date and ending 90 days after the Closing Date;
provided, however, that if a Transferred Employee makes a direct rollover
election as described in this Section 6.9(g) within such 90-day period, then
Seller shall cause the ONEOK Thrift Plane to continue to accept loan repayments
from such Transferred Employee by payroll deduction until the date of such
direct rollover. Purchaser shall cause the Purchaser Savings Plan to accept the
direct rollover of electing Transferred Employees’ benefits in cash and, if
applicable, promissory notes that are not accelerated from the ONEOK Thrift
Plan. Seller represents, warrants and agrees with respect to the ONEOK Thrift
Plan, and Purchaser represents, warrants and agrees with respect to the
Purchaser Savings Plan, that, as of each date of a rollover described in this
Section 6.9(g), such plan (i) is intended to satisfy the requirements of
Sections 401(a), (k), and (m) of the Code and (ii) will have received, or a
pending application will have been timely filed for, a favorable determination
letter from the Internal Revenue Service regarding such qualified status.

 

(h) Claims of Transferred Employees and their eligible beneficiaries and
dependents for medical, dental, prescription drug, life insurance, and/or other
welfare benefits (“Welfare Benefits”) (other than disability benefits) that are
incurred before the Effective Date shall be the sole responsibility of the
Seller Plans. Claims of Transferred Employees and their eligible beneficiaries
and dependents for Welfare Benefits (other than disability benefits) that are
incurred on or after the Effective Date shall be the sole responsibility of
Purchaser and the Companies. For purposes of the preceding provisions of this
paragraph, a medical/dental claim shall be considered incurred on the date when
the medical/dental services are rendered or medical/dental supplies are
provided, and not when the condition arose or when the course of treatment
began. Claims of individuals receiving long-term disability benefits under a
Seller Plan as of the Effective Date shall be the sole responsibility of the
Seller Plan. Except as provided in the preceding sentence, claims of Transferred
Employees and their eligible beneficiaries and dependents for short-term or
long-term disability benefits from and after the Effective Date shall be the
sole responsibility of Purchaser and the Companies (without regard to whether
the circumstances giving rise to such claim occurred before, on or after the
Effective Date). Claims for workers’ compensation benefits for Transferred
Employees arising out of occurrences prior to the Effective Date shall be the
responsibility of Seller. Claims for workers’ compensation benefits for
Transferred Employees arising out of occurrences on or after the Effective Date
shall be the responsibility of Purchaser.

 

(i) Seller and Purchaser shall take all steps necessary or appropriate so that
the account balances under the Seller FSP of each Transferred Employee who has
elected to participate therein in the year in which the Closing Date occurs
shall be transferred, as soon as practicable after the Closing Date, to the
Purchaser FSP, and so that the contribution elections of each such Transferred
Employee as in effect immediately before the Closing Date remain in effect under
the Purchaser FSP for the remainder of the year in which the Closing Date
occurs. If the aggregate amount of the transferred account balances of
Transferred Employees is negative, then Purchaser shall pay Seller the amount of
such aggregate negative balance promptly following the account balance transfer.
If the aggregate amount of the transferred account balances of Transferred
Employees is positive, then Seller shall pay Purchaser the amount of such
aggregate positive balance promptly following the account balance transfer.

 

29

--------------------------------------------------------------------------------

(j) If Purchaser (1) fails to offer employment to any Company Employee or
(2) during the period from the Closing Date until the first anniversary date
thereof, terminates the employment of any Transferred Employee, other than for
retirement, resignation, death, disability or Cause (as defined below in this
paragraph), then, in either such case, Purchaser shall cause each such employee
to be provided with (i) payment in full for all accrued but unused vacation
time, plus (ii) severance benefits (which shall be paid in a single, lump sum
payment) equal to the highest level of severance benefits described in the
severance plan that Purchaser and its Affiliates make available to their
similarly situated employees and that would have been provided to such employee
if his or her employment had been terminated under circumstances entitling such
employee to such benefits under such severance plan; provided, however, that in
no event shall any such severance benefits be less than two (2) weeks of base
pay for each year of recognized service (with the years of service rounded to
the nearest full year), subject to, for purposes of this proviso, a minimum of
ten (10) weeks of annual base pay. For the purpose of calculating the amount of
any severance compensation in respect of such severance benefit, Purchaser shall
ensure that each such employee’s period of service prior to the Closing Date is
taken into account as set forth in Section 6.9(c). For purposes of this
Section 6.9(j), the term “Cause” shall mean that the employee (1) has engaged in
gross negligence or willful misconduct in the performance of the duties of his
or her employment, (2) has materially breached any material provision of any
written agreement between the employee and his or her employer, (3) has
willfully disregarded any written corporate policies established by his or her
employer, (4) has willfully engaged in conduct that the employee knows or should
know is materially injurious to his or her employer, or (5) has been convicted
of a crime involving moral turpitude or any felony.

 

(k) All service credited under the vacation policies of Seller or its Affiliates
for Transferred Employees for the calendar year in which the Closing occurs,
including unused balances as set forth on Schedule 6.9(a) and Schedule 6.9(b),
as may be increased or decreased as of the Closing Date based on actions of the
Transferred Employees after the date hereof, shall be recognized by Purchaser.

 

(l) Nothing herein shall be deemed or construed to (1) give rise to any rights,
claims, benefits, or causes of action to a Transferred Employee or (2) prevent,
restrict, or limit the Purchaser, following the Closing Date, from modifying or
terminating any of its benefit plans, programs or policies from time to time as
it may deem appropriate, subject only to compliance with the express provisions
of this Section 6.9 for the benefit of Seller.

 

Section 6.10 Supplementation and Amendment of Schedules. From time to time prior
to the Closing, Seller shall have the right to supplement or amend the Schedules
with respect to any matter hereafter arising or discovered after the delivery of
the Schedules pursuant to this Agreement. No such supplement or amendment shall
have any effect on the satisfaction of the condition to Closing set forth in
Section 7.1(a).

 

Section 6.11 Company Guarantees.

 

(a) Purchaser and Seller shall each use its commercially reasonable efforts to
obtain from the respective beneficiary, in form and substance reasonably
satisfactory to Seller, on or before the Closing, valid and binding written
releases of Seller and its Affiliates (other than the Company), as applicable,
from any liability or obligation, whether arising before, on or after the
Closing Date, under any Company Guarantees in effect as of the Closing. To the
extent necessary, Purchaser agrees to provide substitute guarantees with terms
that are at least as favorable to the counterparty as the

 

30

--------------------------------------------------------------------------------

terms of the applicable Company Guarantees and to furnish letters of credit,
institute escrow arrangements, post surety or performance bonds or make other
arrangements as the counterparty may reasonably request. If any Company
Guarantee has not been released as of the Closing Date, then Purchaser and
Seller shall each continue to use its commercially reasonable efforts after the
Closing to cause each such unreleased Company Guarantee to be released promptly.

 

(b) Notwithstanding anything to the contrary herein, Purchaser and Seller
acknowledge and agree that at any time on or after the Closing Date, Seller and
its Affiliates may, in their sole discretion, take any action to terminate,
obtain release of or otherwise limit their liability under any and all
outstanding Company Guarantees.

 

(c) Purchaser shall indemnify and hold harmless Seller and its Affiliates from
and after the Closing for any Losses arising out of or relating to any Company
Guarantees to the extent arising from or related to matters involving the
Company or Purchaser.

 

Section 6.12 Intercompany Contracts; Intercompany Balances. Except as set forth
on Schedule 6.12, all contracts, agreements and arrangements (excluding any Tax
sharing or allocation agreements) between and among any Company, on the one
hand, and Seller or any of its Affiliates (other than any Company), on the other
hand, including hedging arrangements, shall continue in full force and effect,
unaffected by the consummation of this Agreement. Except as set forth on
Schedule 6.12, all intercompany balances between and among any Company, on the
one hand, and Seller or any of its Affiliates (other than any Company), on the
other hand, shall be eliminated by dividend, capital contribution, discharge or
otherwise in their entirety effective as of the Effective Date.

 

Section 6.13 Insurance. Until Closing, Seller shall keep, or cause to be kept,
all material insurance policies maintained by the Seller for the benefit of the
Companies, or suitable replacements therefor (which may include policies
containing terms equal or more favorable than the policies that they are
replacing), in full force and effect.

 

Section 6.14 Environmental Remediation. Purchaser shall not conduct (or have
conducted on its behalf) any material remediation operations with respect to any
claimed Losses relating to a breach of Seller’s representation or warranty
pursuant to Section 4.16 or any claim relating to the subject matter of such
representation or warranty without first giving Seller notice of the remediation
with reasonable detail at least 45 days prior thereto (or such shorter period of
time as shall be required by any Governmental Authority). Seller shall have the
option (in its sole discretion) to conduct (or have conducted on their behalf)
such remediation operations. If Seller shall not have notified Purchaser of
their agreement to conduct such remediation operations within such specified
period, then Purchaser may conduct (or have conducted on its behalf) such
operations. Purchaser and Seller agree that any remediation activities
undertaken with respect to any Company’s assets, whether conducted by Purchaser
or Seller, shall be reasonable in extent and cost effective and shall not be
designed or implemented in such a manner as to exceed what is required to cause
a condition to be brought into compliance with Environmental Laws. All
remediation activities conducted by Seller under this Agreement shall be
conducted to the extent reasonably possible so as not to interfere substantially
with Purchaser’s operation of any Company’s assets.

 

Section 6.15 Vehicle Leases. With respect to the vehicles listed on the attached
Schedule 6.15 (the “Leased Vehicles”), Seller shall cause the Companies to
purchase such Leased Vehicles from the applicable lessors, pursuant to the terms
set forth in the applicable leases or as otherwise

 

31

--------------------------------------------------------------------------------

required by such lessors, and the Purchase Price shall be increased by the
actual amount paid to the applicable lessors to purchase the Leased Vehicles.

 

Section 6.16 Transition Services. Seller and Purchaser hereby agree to negotiate
in good faith to enter into a transition services agreement as mutually agreed
upon by the parties hereto before the Closing, provided however, that nothing in
this Section 6.16 shall create a condition to Closing, and the failure of Seller
and Purchaser to mutually agree upon a transition services agreement shall not
affect the parties obligations to close the transaction contemplated by this
Agreement. Purchaser understands and agrees that Seller’s obligation to provide
transition services under the transition services agreement shall be limited to
the provision of: (i) reasonable office space, (ii) reasonably necessary IT
services, and (iii) to the extent permitted by any third party licensor of
Seller, access to Seller’s accounting, land, production reporting and
measurement systems. Seller shall provide such transition services at Seller’s
cost. Purchaser and/or Company, as applicable, each agree to provide to Seller
transition services and access to Company records as is reasonably necessary to
allow Seller to perform all customary accounting and financial reporting
activities related to Seller’s ownership, control and/or operation of the
Company, including monthly, quarterly and year-end financial and tax reporting.
Purchaser shall provide such transition services at Purchaser’s cost. Neither
Party shall be obligated to acquire new, additional or different personnel,
equipment or resources, or to acquire or establish any separate hardware or
software platforms to perform such transition services. The Parties may use
Affiliates, contractors, subcontractors, vendors or other third parties to
provide some or all of the transition services. Unless otherwise specifically
provided in a mutually agreed upon transition services agreement, the transition
services will be available only for a period of six (6) months from the Closing
Date. Purchaser understands and agrees that Seller shall have no obligation to
provide transition services to Purchaser to the extent the Company Employees or
the Additional Available Employees that typically provide such services are no
longer available to Seller.

 

ARTICLE 7.

CONDITIONS

 

Section 7.1 Conditions to Obligations of the Purchaser. The obligation of
Purchaser to consummate the transactions contemplated by this Agreement is
subject to the fulfillment, on or prior to the Closing Date, of each of the
following conditions (any or all of which may be waived by Purchaser in whole or
in part to the extent permitted by applicable Law):

 

(a) Subject to supplementation pursuant to Section 6.10, Seller shall be deemed
to remake the representations and warranties of Seller set forth in this
Agreement and such representations and warranties qualified as to materiality
shall be true and correct, and those not so qualified shall be true and correct
in all material respects, at and as of the Closing Date as though made on the
Closing Date, except to the extent such representations and warranties relate to
an earlier date (in which case such representations and warranties qualified as
to materiality shall be true and correct, and those not so qualified shall be
true and correct in all material respects, on and as of such earlier date);
provided however, that in the event of a breach of a representation or warranty,
the condition set forth in this Section 7.1(a) shall be deemed satisfied unless
the effect of all such breaches of representations and warranties taken together
result in a Material Adverse Effect;

 

32

--------------------------------------------------------------------------------

(b) Seller shall have performed and complied with all obligations and agreements
required by this Agreement to be performed or complied with by it on or prior to
the Closing Date; provided however, that in the event of any failure to comply,
the condition set forth in this Section 7.1(b) shall be deemed satisfied unless
the effect of any such failure to comply results in a Material Adverse Effect;

 

(c) there shall not be in effect any Order by a Governmental Authority of
competent jurisdiction restraining, enjoining or otherwise prohibiting the
consummation of the transactions contemplated hereby;

 

(d) Seller shall have delivered to Purchaser a duly executed Assignment and
Assumption Agreement, substantially in the form attached hereto as Exhibit F,
signed by an authorized officer of Seller assigning the Membership Interests to
Purchaser;

 

(e) Seller shall have delivered, or caused to be delivered, to Purchaser a duly
executed and acknowledged affidavit of Seller or the appropriate Affiliate of
Seller, substantially in the form attached hereto as Exhibit E, stating that
Seller or such Affiliate of Seller is not a “foreign person” as defined in
Section 1445 of the Code; and

 

(f) such other duly executed documents, instruments and certificates as may be
required to be delivered by the Seller pursuant to the terms of this Agreement.

 

Section 7.2 Conditions to Obligations of the Seller. The obligations of Seller
to consummate the transactions contemplated by this Agreement are subject to the
fulfillment, prior to or on the Closing Date, of each of the following
conditions (any or all of which may be waived by Seller in whole or in part to
the extent permitted by applicable Law):

 

(a) Purchaser shall be deemed to remake the representations and warranties of
Purchaser set forth in this Agreement and such representations and warranties
qualified as to materiality shall be true and correct, and those not so
qualified shall be true and correct in all material respects, at and as of the
Closing Date as though made on the Closing Date, except to the extent such
representations and warranties relate to an earlier date (in which case such
representations and warranties qualified as to materiality shall be true and
correct, and those not so qualified shall be true and correct in all material
respects, on and as of such earlier date);

 

(b) Purchaser shall have performed and complied in all material respects with
all obligations and agreements required by this Agreement to be performed or
complied with by it on or prior to the Closing Date;

 

(c) there shall not be in effect any Order by a Governmental Authority of
competent jurisdiction restraining, enjoining or otherwise prohibiting the
consummation of the transactions contemplated hereby;

 

(d) Seller shall have received the Estimated Purchase Price in immediately
available funds by wire transfer to the account or accounts specified by Seller;

 

(e) the transactions contemplated by that certain Stock Purchase Agreement dated
as of September 19, 2005 by and between the ONEOK, Inc., an Oklahoma
corporation, and TXOK Acquisition, Inc. relating to the sale of all of the
capital stock of ONEOK Energy Resources Company, a Delaware corporation, shall
be consummated simultaneously with the consummation of the Closing and the
transactions contemplated by this Agreement;

 

33

--------------------------------------------------------------------------------

(f) the sum of all Title Defect Amounts for Title Defects properly reported
under Section 3.4(a), less the sum of all Title Benefit Amounts for Title
Benefits properly reported under Section 3.4(b) shall be less than ten percent
(10%) of the Base Purchase Price; and

 

(g) Purchaser shall have delivered such other duly executed documents,
instruments and certificates as may be required to be delivered by the Purchaser
pursuant to the terms of this Agreement.

 

ARTICLE 8.

TERMINATION

 

Section 8.1 Termination. This Agreement may be terminated prior to the Closing
as follows:

 

(a) by mutual written consent of Seller and Purchaser; or

 

(b) by Seller or Purchaser if there shall be in effect a final nonappealable
Order of a Governmental Authority of competent jurisdiction permanently
restraining, enjoining or otherwise prohibiting the consummation of the
transactions contemplated hereby; it being agreed that the Parties hereto shall
promptly appeal any adverse determination that is not nonappealable (and pursue
such appeal with reasonable diligence).

 

Section 8.2 Termination for Breach or Failure to Close. Unless otherwise agreed
to in writing by the Parties, this Agreement shall terminate upon the exercise
of a Party’s rights under Section 2.6 hereof. Upon such termination, the
purchase of the Shares hereunder shall be abandoned, without further action by
Purchaser or Seller.

 

Section 8.3 Procedure Upon Termination. In the event of termination by Purchaser
or Seller, or both, pursuant to Section 8.1 hereof, written notice thereof shall
forthwith be given to the other Party, and this Agreement shall terminate, and
the purchase of the Shares hereunder shall be abandoned, without further action
by Purchaser or Seller.

 

Section 8.4 Effect of Termination. In the event that this Agreement is validly
terminated pursuant to Section 8.1 or Section 8.2, then each of the Parties
shall be relieved of their duties and obligations arising under this Agreement
after the date of such termination and such termination shall be without
liability to Purchaser or Seller; provided, that (a) the provisions of this
Section, the Confidentiality Agreement and provisions which by their nature are
intended to survive termination shall remain in effect notwithstanding such
termination and (b) no such termination shall relieve any Party hereto from
liability for any breach of this Agreement.

 

ARTICLE 9.

TAX MATTERS

 

Section 9.1 Transaction Taxes. All transfer, documentary, recording, notarial,
sales, use, registration, stamp and other similar taxes, fees and expenses
(including, but not limited to, all applicable stock transfer, real estate
transfer or gains Taxes and including any penalties, interest and additions to
such tax) (“Transaction Taxes”) incurred in connection with this Agreement and
the transactions contemplated hereby shall be borne by Purchaser, to the extent
that Purchaser is legally obligated to pay those Transaction Taxes, and shall be
borne by the Seller, to the extent that Seller is legally obligated to pay
Transaction Taxes, regardless of whether the tax authority seeks to collect such
Taxes from Seller or Purchaser. Purchaser and the Seller shall cooperate in
timely making and

 

34

--------------------------------------------------------------------------------

filing all Tax Returns as may be required to comply with the provisions of laws
relating to such Transaction Taxes. Seller shall prepare all tax filings related
to any Transaction Taxes. Fifteen (15) days prior to making such filings, Seller
shall provide to Purchaser Seller’s work papers for Purchaser’s review and
approval. Ten (10) days prior to the filing date, Purchaser shall provide to
Seller approval of such work papers. Within ten (10) days of receiving notice
from Seller of the amount of Transaction Taxes due, Purchaser shall pay such
amount to Seller for remittance to the applicable Governmental Authority. Seller
shall give prompt written notice to Purchaser of any proposed adjustment or
assessment of any Transaction Taxes with respect to the transaction, or of any
examination of said transaction in a sales, use, transfer or similar tax audit.
In any proceedings, whether formal or informal, Seller shall permit Purchaser to
participate and control the defense of such proceeding and shall take all
actions and execute all documents required to allow such participation. Seller
shall not negotiate a settlement or compromise of any Transaction Taxes without
the prior written consent of Purchaser, which consent shall not be unreasonably
withheld or delayed.

 

Section 9.2 Real and Personal Property Taxes. All real and personal property
Taxes and assessments arising with respect to the Companies shall be prorated
between Purchaser and Seller based on the relative periods of time the Companies
were owned by each Party or their respective Affiliates (based on the Effective
Date) during the fiscal period for which such Taxes are imposed by the
applicable Tax Authority (as such fiscal period is or may be reflected on the
bill rendered by such Tax Authority). Purchaser shall pay to Seller at Closing
(or an appropriate increase shall be made to the Purchase Price), to reflect
Seller’s estimate of Purchaser’s pro rata share of each Company’s ad valorem tax
liability for the calendar year in which Closing occurs. Upon receipt by Seller
of the tax bill, invoice or other statement regarding such real and personal
property Taxes, Seller shall calculate the actual pro rata share of such tax
bill, invoice or other statement attributable to each of Purchaser and Seller.
Seller shall forward, as soon as practicable, to Purchaser a copy of such tax
bill, invoice or statement along with the supporting documentation relating to
the calculation of the pro rata share to Purchaser. If Purchaser’s actual pro
rata share of the Companies’ ad valorem tax liability is greater than the
estimated amount paid by Purchaser, as set forth above, then Purchaser shall
forward to Seller payment in immediately available funds of the additional
amount of its pro rata share of such Taxes. If Purchaser’s actual pro rata share
of such tax liability is less than the estimated amount paid, then Seller shall
forward to Purchaser the difference in such amounts. Seller will pay the full
amount of the tax bill, invoice or statement to the applicable Tax Authority. In
the event Purchaser first receives a tax bill, invoice or statement relating to
any Company from a Tax Authority for ad valorem taxes for the year in which
Closing occurs, Purchaser shall immediately forward such tax bill, invoice or
statement to Seller. Purchaser will be responsible for filing all ad valorem Tax
Returns for each all of the Companies for the calendar years 2006 and beyond.

 

Section 9.3 Taxes Based on Revenues. All sales, franchise, gross receipts and
other similar Taxes based upon revenues relating to any Company shall be
prorated between Purchaser and Seller, with Seller being obligated to reimburse
Purchaser only for the portion of any such Tax that is applicable to the cash
received by Seller prior to the Effective Date that relates to the revenues of
the Company being taxed. Upon receipt by Purchaser of the Tax Return, tax bill,
invoice or other statement regarding such Taxes, Purchaser shall calculate the
pro rata share of such Tax Return, tax bill, invoice or other statement
attributable to Purchaser and Seller. Purchaser then shall forward, as soon as
practicable, to Seller a copy of such tax bill, invoice or statement along with
the supporting documentation relating to the calculation of the pro rata share
to Seller. Seller then shall forward to Purchaser payment in immediately
available funds of its pro rata share of such Taxes as soon as

 

35

--------------------------------------------------------------------------------

practicable in advance of the due date of the tax bill, invoice or statement and
in time to avoid the incurrence of penalties or interest. Upon its receipt of
such payment, Purchaser will pay the full amount of the tax bill, invoice or
statement to the applicable Tax Authority. In the event Seller first receives a
tax bill, invoice or statement relating to the revenues of any Company from a
Tax Authority, Seller shall immediately forward such tax bill, invoice or
statement to Purchaser.

 

Section 9.4 Section 338(h)(10) Election. Purchaser and Seller (or its applicable
Affiliate) shall make timely, joint elections under Section 338(h)(10) of the
Code and Treasury Regulations Section 1.338(h)(10) and any comparable election
under foreign, state or local tax law (the “Elections”) with respect to the
purchase and sale of the Membership Interests pursuant to this Agreement.
Purchaser shall be responsible for and control the preparation and filing of the
Elections in accordance with the allocation of the Purchase Price described in
Section 9.5 below. In particular, Seller shall deliver to Purchaser all
information reasonably requested to enable Purchaser to prepare Forms 8023 and
all attachments required to be filed therewith (the “Forms”), including the
schedule of data required by the Forms, no later than ninety (90) days before
the Forms are due to be filed. Once prepared by Purchaser, a draft copy of the
Forms shall be forwarded to Seller for its approval at least thirty (30) days
prior to the filing due date for the Forms and which approval shall not be
unreasonably withheld or delayed. The Forms shall be duly executed by an
authorized person for each Party and duly and timely filed by Purchaser on
behalf of Purchaser and Seller (or its applicable Affiliate). The Purchaser and
Seller will file all Tax Returns (including the Forms) in a manner consistent
with such election. Notwithstanding any other provision of this Agreement to the
contrary, Seller agrees that any income and gain recognized as a result of, and
in accordance with (i) the making of the Section 338(h)(10) Election will be
included in Seller’s Federal and applicable foreign, state and local income tax
returns. Seller shall be liable for and shall timely pay to the appropriate
Governmental Authorities an amount equal to the resulting Tax liability
attributable to the Section 338(h)(10) Election, and (ii) if the 338(h)(10)
Election is disallowed by the Governmental Authority and such disallowance is
agreed to by Seller or upheld by any court (in whole or in part), provided such
court decision is final and nonappealable, then Seller shall pay to Purchaser an
amount equal to the amount of such Tax liability.

 

Section 9.5 Allocation of Purchase Price. As promptly as practicable, but in no
event later than sixty (60) days after the Closing Date, Purchaser shall prepare
and deliver to Seller a statement (the “Allocation Statement”) allocating the
Purchase Price among the assets of the Companies in accordance with Section 1060
of the Code and the Treasury regulations promulgated thereunder and consistent
with the allocation set forth on Exhibit B. Seller shall have fifteen (15) days
to review the Allocation Statement and shall notify Purchaser of any disputes
with the allocation as set forth in the Allocation Statement. Seller and
Purchaser shall negotiate in good faith to resolve any such dispute prior to the
date that is sixty (60) days prior to the due date of the Tax Returns that
reflect the allocation. If Seller and Purchaser cannot resolve the disputed
allocation prior to such date, then Seller and Purchaser shall refer the dispute
to the Accountant to review and to determine the proper allocation (it being
understood that in making such determination, the Accountant shall be
functioning as an expert and not as an arbitrator). The Accountant shall deliver
to Seller and Purchaser, as promptly as practicable (but in any case no later
than thirty (30) days from the date of engagement of the Accountant), a
determination of the allocation. This determination will be binding on the
Parties hereto and all Tax Returns filed by Purchaser, Seller and each of their
Affiliates shall be prepared consistently with such allocation. The cost of such
review and report shall be borne by Purchaser.

 

36

--------------------------------------------------------------------------------

Section 9.6 Conflict. In the event of a conflict between the provisions of this
Article 9, on the one hand, and the provisions of Article 10, on the other hand,
the provisions of this Article 9 shall control.

 

ARTICLE 10.

INDEMNIFICATION

 

Section 10.1 Survival of Representations and Warranties and Covenants. The
representations and warranties of the Parties contained in this Agreement shall
survive the Closing until nine (9) months after the Closing Date, except that
(a) the representations and warranties in Sections 4.2, 4.3, 4.5, 4.20, 5.1,
5.2, 5.5 and 5.6 shall survive until the fifth anniversary of the Closing Date,
and (b) the representations and warranties in Section 4.10 shall survive the
Closing until the expiration of the applicable statute of limitations, and
(c) the representations and warranties in Section 3.1 shall expire as of the
Title Claim Date as provided in Section 3.6. All of the covenants made by each
Party in this Agreement shall survive the consummation of the transactions
contemplated herein and shall continue in full force and effect after the
Closing indefinitely until all obligations with respect to any such covenants
are fulfilled in their entirety.

 

Section 10.2 Indemnification by Seller.

 

(a) Subject to Sections 6.10, 10.1 and 10.5 hereof, Seller hereby agrees to
indemnify and hold harmless Purchaser, the Companies and their respective
directors, officers, employees, Affiliates, stockholders, agents, attorneys,
representatives and permitted assigns (collectively, the “Purchaser Indemnified
Parties”) from and against any Losses incurred by any of the Purchaser
Indemnified Parties based upon or arising directly from any breach of the
representations, warranties, covenants or agreements made by Seller in this
Agreement; provided, however, that the sole remedies for breach of Seller’s
representations and warranties set forth in Article 3 relating to Title Matters
are only those remedies set forth in Article 3, and Seller’s indemnification
obligations under this Section 10.2(a) shall not apply thereto.

 

(b) Purchaser acknowledges and agrees that Seller shall not have any liability
under any provision of this Agreement for any Loss to the extent that such Loss
relates to action taken by Purchaser or any other Person (other than Seller in
breach of this Agreement) after the Closing Date. Purchaser shall take and shall
cause its Affiliates to take all reasonable steps to mitigate any Loss upon
becoming aware of any event that would reasonably be expected to, or does, give
rise thereto, including incurring costs only to the minimum extent necessary to
remedy the breach that gives rise to the Loss.

 

(c) Seller shall indemnify, defend and hold harmless the Purchaser and the
Company against any failure by Seller to pay all Taxes (i) incurred with respect
to the 338 (h)(10) Election and (ii) relating to the Company and its
subsidiaries for all Tax Periods (or portions thereof) that end on or prior to
the Closing Date, including other liabilities, costs, expenses (including
without limitation attorneys’ and accountants’ fees and expenses), losses,
damages, assessments, settlements or judgments arising out of or incident to
Seller’s failure to pay such Taxes.

 

Section 10.3 Indemnification by Purchaser.

 

(a) Subject to Sections 10.1 and 10.5, Purchaser hereby agrees to indemnify and
hold Seller and its directors, officers, employees, Affiliates, stockholders,
agents, attorneys, representatives and permitted assigns (collectively, the
“Seller Indemnified Parties”) harmless from and against any Losses incurred by
any of the Seller Indemnified Parties based upon or arising directly from
(i) any

 

37

--------------------------------------------------------------------------------

breach of the representations, warranties, covenants or agreements made by
Purchaser in this Agreement and (ii) except as otherwise provided in
Section 10.2(a), all Liabilities of any of the Companies arising on, before or
after the Closing Date.

 

(b) Seller shall take and cause its Affiliates to take all reasonable steps to
mitigate any Loss upon becoming aware of any event that would reasonably be
expected to, or does, give rise thereto, including incurring costs only to the
minimum extent necessary to remedy the breach that gives rise to the Loss.

 

Section 10.4 Indemnification Procedures.

 

(a) In the event that any Legal Proceeding shall be instituted, or that any
claim shall be asserted, by any Person in respect of which payment may be sought
under Sections 10.2 or 10.3 hereof (an “Indemnification Claim”), the indemnified
party shall promptly cause written notice in reasonable detail of the assertion
of any Indemnification Claim of which it has knowledge that is covered by this
indemnity to be forwarded to the indemnifying party. The indemnifying party
shall have the right, at its sole option and expense, to be represented by
counsel of its choice, which must be reasonably satisfactory to the indemnified
party, and to defend against, negotiate, settle or otherwise deal with any
Indemnification Claim that relates to any Losses indemnified against hereunder.
If the indemnifying party elects to defend against, negotiate, settle or
otherwise deal with any Indemnification Claim that relates to any Losses
indemnified against hereunder, it shall, within thirty (30) days of receipt of
the written notice of the Indemnification Claim, notify the indemnified party of
its intent to do so. If the indemnifying party elects not to defend against,
negotiate, settle or otherwise deal with any Indemnification Claim that relates
to any Losses indemnified against hereunder, the indemnified party may defend
against, negotiate, settle or otherwise deal with such Indemnification Claim. If
the indemnifying party shall assume the defense of any Indemnification Claim,
the indemnified party may participate, at its own expense, in the defense of
such Indemnification Claim; provided, however, that such indemnified party shall
be entitled to participate in any such defense with separate counsel at the
expense of the indemnifying party if, (i) so requested by the indemnifying party
to participate or (ii) in the reasonable opinion of counsel to the indemnified
party, a conflict or potential conflict exists between the indemnified party and
the indemnifying party that would make such separate representation advisable;
and provided, further, that the indemnifying party shall not be required to pay
for more than one such counsel for all indemnified parties in connection with
any Indemnification Claim. The Parties hereto agree to cooperate fully with each
other in connection with the defense, negotiation or settlement of any such
Indemnification Claim. Notwithstanding anything in this Section 10.4 to the
contrary, neither the indemnifying party nor the indemnified party shall,
without the written consent of the other party, settle or compromise any
Indemnification Claim or permit a default or consent to entry of any judgment
unless the claimant and such party provide to such other party an unqualified
release from all liability in respect of the Indemnification Claim.
Notwithstanding the foregoing, if a settlement offer solely for money damages is
made by the applicable third party claimant, and the indemnifying party notifies
the indemnified party in writing of the indemnifying party’s willingness to
accept the settlement offer and, subject to the applicable limitations of
Section 10.5, pay the amount called for by such offer, and the indemnified party
declines to accept such offer, the indemnified party may continue to contest
such Indemnification Claim, free of any participation by the indemnifying party,
and the amount of any ultimate liability with respect to such Indemnification
Claim that the indemnifying party has an obligation to pay hereunder, subject to
the applicable limitations of Section 10.5, shall be limited to the lesser of
(A) the amount of the settlement offer that the

 

38

--------------------------------------------------------------------------------

indemnified party declined to accept plus the Losses of the indemnified party
relating to such Indemnification Claim through the date of its rejection of the
settlement offer or (B) the aggregate Losses of the Indemnified Party with
respect to such Indemnification Claim. If the indemnifying party makes any
payment on any Indemnification Claim, the indemnifying party shall be
subrogated, to the extent of such payment, to all rights and remedies of the
indemnified party to any insurance benefits or other claims of the indemnified
party with respect to such Indemnification Claim.

 

(b) After any final decision, judgment or award shall have been rendered by a
Governmental Body of competent jurisdiction and the expiration of the time in
which to appeal therefrom, or a settlement shall have been consummated, or the
indemnified party and the indemnifying party shall have arrived at a mutually
binding agreement with respect to an Indemnification Claim hereunder, the
indemnified party shall forward to the indemnifying party notice of any sums due
and owing by the indemnifying party pursuant to this Agreement with respect to
such matter.

 

Section 10.5 Limitations on Indemnification.

 

(a) A Purchaser Indemnified Party may assert an Indemnification Claim pursuant
to Section 10.2(a) with respect to representations and warranties of the Seller
only to the extent the Purchaser Indemnified Party gives notice of the
Indemnification Claim pursuant to Section 10.4(a) prior to the expiration of the
applicable time period set forth in Section 10.1 for such representation and
warranty. Any Indemnification Claim not made in accordance with Section 10.4(a)
by the Purchaser Indemnified Parties on or prior to the applicable date set
forth in Section 10.1 or herein, and Seller’s indemnification obligations with
respect thereto, will be irrevocably and unconditionally released and waived by
the Purchaser Indemnified Parties.

 

(b) Notwithstanding the provisions of this Article 10, Seller shall not have any
indemnification obligations for Losses under Section 10.2(a), (i) for any
individual item where the Loss relating thereto is less than $100,000 and
(ii) in respect of each individual item where the Loss relating thereto is equal
to or greater than $100,000, unless the aggregate amount of all such Losses
exceeds $11,031,926.10, and then only to the extent of such excess. In no event
shall the aggregate amount of Losses to be paid by Seller under Section 10.2(a)
exceed $36,773,087.00.

 

(c) No representation or warranty of Seller contained herein shall be deemed
untrue or incorrect, and Seller shall not be deemed to have breached a
representation or warranty, as a consequence of the existence of any fact,
circumstance or event of which (i) is disclosed in response to another
representation or warranty contained in this Agreement or (ii) Purchaser is
aware as of the date of this Agreement.

 

(d) No Purchaser Indemnified Party shall have any right to indemnification under
this Article 10 in respect of any matter that is taken into account in the
calculation of any adjustment to the Purchase Price made pursuant to the terms
of this Agreement.

 

(e) The amount of any Losses for which indemnification is provided under this
Article 10 shall be net of any amounts actually recovered by the indemnified
party under insurance policies, and net of any Tax Benefit realized by Purchaser
with respect to such Losses. Purchaser and/or Company shall be obligated to seek
such Tax Benefits and pursue any recoverable amounts under insurance policies,
provided however that Seller shall make payment to Purchaser or Company, as
applicable, for any indemnifiable costs and expenses, as such costs and expenses
are incurred by Purchaser or Company. Purchaser or Company, as applicable, shall
promptly remit to Seller any

 

39

--------------------------------------------------------------------------------

amounts recovered or Tax Benefits realized to the extent Seller has previously
made payment to Purchaser and/or Company for such Losses.

 

(f) Purchaser, on behalf of itself and each of the other Purchaser Indemnified
Parties, acknowledges that it has conducted to its satisfaction, its own
independent investigation of the condition, operations, assets (including all
plugged or abandoned wells) and business of the Companies and, in making its
determination to proceed with the transactions contemplated by this Agreement,
each of the Purchaser Indemnified Parties has relied on the results of
Purchaser’s independent investigation.

 

(g) Purchaser, on behalf of itself and each of the other Purchaser Indemnified
Parties, acknowledges that the Properties and other assets of the Companies have
asbestos-containing materials. Seller hereby disclaims all liability and
responsibility with respect to any claims or Liabilities arising therefrom or
related thereto, and Purchaser, on behalf of itself and each of the other
Purchaser Indemnified Parties, acknowledges that it shall have no claims against
Seller or its Affiliates with respect thereto.

 

Section 10.6 Tax Treatment of Indemnity Payments. Seller and Purchaser agree to
treat any indemnity payment made pursuant to this Article 10 as an adjustment to
the Purchase Price for federal, state, local and foreign income tax purposes.

 

Section 10.7 NO CONSEQUENTIAL DAMAGES. NOTWITHSTANDING ANYTHING TO THE CONTRARY
ELSEWHERE IN THIS AGREEMENT OR PROVIDED FOR UNDER ANY APPLICABLE LAW, NO PARTY
SHALL, IN ANY EVENT, BE LIABLE TO ANY OTHER PERSON, EITHER IN CONTRACT OR IN
TORT, FOR ANY CONSEQUENTIAL, INCIDENTAL, INDIRECT, SPECIAL OR PUNITIVE DAMAGES
OF SUCH OTHER PERSON, INCLUDING LOSS OF FUTURE REVENUE, INCOME OR PROFITS,
DIMINUTION OF VALUE OR LOSS OF BUSINESS REPUTATION OR OPPORTUNITY RELATING TO
THE BREACH OR ALLEGED BREACH HEREOF, WHETHER OR NOT THE POSSIBILITY OF SUCH
DAMAGES HAS BEEN DISCLOSED TO THE OTHER PARTY IN ADVANCE OR COULD HAVE BEEN
REASONABLY FORESEEN BY SUCH OTHER PARTY. THE EXCLUSION OF CONSEQUENTIAL,
INCIDENTAL, INDIRECT, SPECIAL OR PUNITIVE DAMAGES AS SET FORTH IN THE PRECEDING
SENTENCE SHALL NOT APPLY TO ANY SUCH DAMAGES SOUGHT BY THIRD PARTIES AGAINST A
PURCHASER INDEMNIFIED PARTY OR A SELLER INDEMNIFIED PARTY, AS THE CASE MAY BE,
IN CONNECTION WITH LOSSES THAT MAY BE INDEMNIFIED PURSUANT TO THIS ARTICLE 10.

 

Section 10.8 EXCLUSIVE REMEDY. SUBJECT TO THE PROVISIONS OF SECTION 2.6, SELLER,
ON BEHALF OF ITSELF AND EACH OF THE OTHER SELLER INDEMNIFIED PARTIES, AND
PURCHASER, ON BEHALF OF ITSELF AND EACH OF THE OTHER PURCHASER INDEMNIFIED
PARTIES, ACKNOWLEDGE AND AGREE THAT THE SOLE AND EXCLUSIVE REMEDY FOR ANY BREACH
OR INACCURACY, OR ALLEGED BREACH OR INACCURACY, OF ANY REPRESENTATION OR
WARRANTY IN THIS AGREEMENT OR ANY COVENANT OR AGREEMENT UNDER THIS AGREEMENT,
SHALL BE INDEMNIFICATION IN ACCORDANCE WITH THIS ARTICLE 10 AND THE ADJUSTMENTS
TO THE PURCHASE PRICE SET FORTH IN SECTIONS 2.2(b), 2.2(c), 2.2(d), 2.2(e), 3.4,
6.15 AND 9.2. IN FURTHERANCE OF THE FOREGOING, SELLER, ON BEHALF OF ITSELF AND
EACH OF THE OTHER SELLER INDEMNIFIED PARTIES, AND

 

40

--------------------------------------------------------------------------------

PURCHASER, ON BEHALF OF ITSELF AND EACH OF THE OTHER PURCHASER INDEMNIFIED
PARTIES, HEREBY WAIVE, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY
AND ALL OTHER RIGHTS, CLAIMS AND CAUSES OF ACTION (INCLUDING RIGHTS OF
CONTRIBUTIONS, IF ANY) THAT MAY BE BASED UPON, ARISE OUT OF OR RELATE TO THIS
AGREEMENT, OR THE NEGOTIATION, EXECUTION OR PERFORMANCE OF THIS AGREEMENT
(INCLUDING ANY TORT OR BREACH OF CONTRACT CLAIM OR CAUSE OF ACTION BASED UPON,
ARISING OUT OF OR RELATED TO ANY REPRESENTATION OR WARRANTY MADE IN OR IN
CONNECTION WITH THIS AGREEMENT OR AS AN INDUCEMENT TO ENTER INTO THIS
AGREEMENT), KNOWN OR UNKNOWN, FORESEEN OR UNFORESEEN, WHICH EXIST OR MAY ARISE
IN THE FUTURE, THAT IT MAY HAVE AGAINST THE SELLER INDEMNIFIED PARTIES OR THE
PURCHASER INDEMNIFIED PARTIES, AS THE CASE MAY BE, ARISING UNDER OR BASED UPON
ANY FEDERAL, STATE OR LOCAL LAW (INCLUDING ANY SUCH LAW RELATING TO
ENVIRONMENTAL MATTERS OR ARISING UNDER OR BASED UPON ANY SECURITIES LAW, COMMON
LAW OR OTHERWISE).

 

ARTICLE 11.

MISCELLANEOUS

 

Section 11.1 Notices. All notices and other communications under this Agreement
shall be in writing and shall be deemed given (a) when delivered personally by
hand (with written confirmation of receipt), (b) when sent by facsimile (with
written confirmation of transmission) or (c) one (1) business day after the day
sent by overnight courier (with written confirmation of receipt), in each case
at the following addresses and facsimile numbers (or to such other address or
facsimile number as a Party may have specified by notice given to the other
Party pursuant to this provision):

 

if to Purchaser, to:

 

TXOK Acquisition, Inc.

12377 Merit Drive

Suite 1700

Dallas, Texas 75251

Attention: Chief Financial Officer

Facsimile: 214-368-2087

 

with copies to:

 

Haynes & Boone

2520 N. Plano Road

Suite 4000

Richardson, Texas 75082-4101

Attention: William L. (Lanny) Boeing

Facsimile: 972-692-9053

 

41

--------------------------------------------------------------------------------

if to the Seller, to:

 

ONEOK, Inc.

1800 ONEOK Plaza

100 West 5th Street

Tulsa, OK 74103

Attention: President

Facsimile: 918.588.7961

 

with copies to:

 

ONEOK, Inc.

1800 ONEOK Plaza

100 West 5th Street

Tulsa, OK 74103

Attention: General Counsel

Facsimile: 918.588.7971

 

Section 11.2 Headings. The headings herein are inserted for convenience only and
are not intended to be part of or to affect the meaning or interpretation of
this Agreement.

 

Section 11.3 Counterparts. This Agreement may be executed in one or more
counterparts, each of which will be deemed to be an original copy of this
Agreement and all of which, when taken together, will be deemed to constitute
one and the same agreement. Once signed, any reproduction of this Agreement made
by reliable means (e.g., photocopy, facsimile) is considered an original.

 

Section 11.4 Entire Agreement. This Agreement (including the schedules and
exhibits hereto) and the Confidentiality Agreement represent the entire
understanding and agreement between the Parties hereto with respect to the
subject matter hereof. This Agreement can be amended, supplemented or changed,
and any provision hereof can be waived, only by written instrument making
specific reference to this Agreement signed by the Party against whom
enforcement of any such amendment, supplement, modification or waiver is sought.
No action taken pursuant to this Agreement, including any investigation by or on
behalf of any Party, shall be deemed to constitute a waiver by the Party taking
such action of compliance with any representation, warranty, covenant or
agreement contained herein. The waiver by any Party hereto of a breach of any
provision of this Agreement shall not operate or be construed as a further or
continuing waiver of such breach or as a waiver of any other or subsequent
breach. No failure on the part of any Party to exercise, and no delay in
exercising, any right, power or remedy hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise of such right, power or remedy
by such Party preclude any other or further exercise thereof or the exercise of
any other right, power or remedy.

 

Section 11.5 Governing Law. The provisions of this Agreement, all of the
documents delivered pursuant hereto, their execution, performance or
nonperformance, interpretation, construction and all matters based upon, arising
out of or related to this Agreement or the negotiation, execution or performance
of this Agreement (whether in tort or contract) shall be governed by the laws,
both procedural and substantive, of the State of Oklahoma without regard to its
conflict of laws provisions that if applied might require the application of the
laws of another jurisdiction.

 

42

--------------------------------------------------------------------------------

Section 11.6 Submission to Jurisdiction; Consent to Service of Process.

 

(a) Seller, on behalf of itself and each of the other Seller Indemnified
Parties, and Purchaser, on behalf of itself and each of the other Purchaser
Indemnified Parties, hereby irrevocably submit to the exclusive personal
jurisdiction of the state and federal courts located in the State of Oklahoma
over any dispute arising out of or relating to this Agreement or any of the
transactions contemplated hereby and each Party hereby irrevocably agrees that
all claims in respect of such dispute or any suit, action or proceeding related
thereto may be heard and determined in such courts. Seller, on behalf of itself
and each of the other Seller Indemnified Parties, and Purchaser, on behalf of
itself and each of the other Purchaser Indemnified Parties, hereby irrevocably
waive, to the fullest extent permitted by applicable Law, any objection that
they may now or hereafter have to the laying of venue of any such dispute
brought in such courts or any defense of inconvenient forum for the maintenance
of such dispute. Each of Seller, on behalf of itself and each of the other
Seller Indemnified Parties, and Purchaser, on behalf of itself and each of the
other Purchaser Indemnified Parties, hereto agrees that a judgment in any such
dispute may be enforced in other jurisdictions by suit on the judgment or in any
other manner provided by Law.

 

(b) Each of Seller, on behalf of itself and each of the other Seller Indemnified
Parties, and Purchaser, on behalf of itself and each of the other Purchaser
Indemnified Parties, hereto hereby consents to process being served by any Party
to this Agreement in any suit, action or proceeding by delivery of a copy
thereof in accordance with the provisions of Section 11.1.

 

Section 11.7 Publicity. Unless otherwise required by Law, from the date of this
Agreement until the Closing, no Party hereto shall issue any press release with
respect to the transactions contemplated by this Agreement without prior written
notice to the other Party hereto and only after giving the other Party hereto a
reasonable opportunity to consult with respect to the content thereof.

 

Section 11.8 Binding Effect; Assignment. This Agreement shall be binding upon
and inure to the benefit of the Parties and their respective successors and
permitted assigns. Nothing in this Agreement shall create or be deemed to create
any third party beneficiary rights in any person or entity not a party to this
Agreement. No assignment of this Agreement or of any rights or obligations
hereunder may be made by either Seller or Purchaser, directly or indirectly (by
operation of law or otherwise), without the prior written consent of the other
Party hereto and any attempted assignment without the required consents shall be
void. No assignment of any obligations hereunder shall relieve the Parties
hereto of any such obligations. Upon any such permitted assignment, the
references in this Agreement to Purchaser shall also apply to any such assignee
unless the context otherwise requires.

 

Section 11.9 Severability. If any term or other provision of this Agreement is
invalid, illegal, or incapable of being enforced by any Law or public policy,
all other terms or provisions of this Agreement shall nevertheless remain in
full force and effect so long as the legal substance of the transactions
contemplated hereby is not affected in any manner materially adverse to any
Party. Upon such determination that any term or other provision is invalid,
illegal, or incapable of being enforced, the Parties hereto 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 in order that the
transactions contemplated hereby are consummated as originally contemplated to
the greatest extent possible.

 

43

--------------------------------------------------------------------------------

Section 11.10 Expenses. Except as otherwise provided in this Agreement, each of
Seller and Purchaser shall bear its own expenses incurred in connection with the
negotiation and execution of this Agreement and each other agreement, document
and instrument contemplated by this Agreement and the consummation of the
transactions contemplated hereby and thereby.

 

Section 11.11 Post Closing Obligations.

 

As a result of the simultaneous closing of that certain Stock Purchase Agreement
dated as of September 19, 2005 by and between ONEOK, Inc., an Oklahoma
corporation (“ONEOK”) and Purchaser, whereby Purchaser will acquire all of the
outstanding capital stock of Seller, Purchaser, Seller and ONEOK hereby agree
that, from and after Closing, all of Purchaser’s and/or Company’s post-Closing
payment and performance obligations to Seller under this Agreement shall inure
to the benefit of ONEOK, rather than to the benefit of Seller, and, likewise all
of Seller’s post-Closing payment and performance obligations to Purchaser under
this Agreement shall be paid or performed, as applicable, by ONEOK, rather than
by Seller.

 

(REMAINDER OF PAGE INTENTIONALLY LEFT BLANK –

SIGNATURE PAGES TO FOLLOW)

 

44

--------------------------------------------------------------------------------

IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as of the
date first written above.

 

ONEOK ENERGY RESOURCES COMPANY By:   /s/    DAVID L. KYLE        

Name:

  David L. Kyle

Title:

  Chairman of the Board and
Chief Executive Officer

“SELLER”

 

ONEOK, Inc. hereby guarantees the post-Closing payment and performance
obligations of Seller under this Agreement. For the purposes of enforcing this
guaranty, Purchaser may proceed directly against ONEOK, Inc. for all
post-Closing obligations and liabilities of the Seller under this Agreement
without first proceeding against Seller.

 

ONEOK, Inc. By:   /s/    DAVID L. KYLE        

Name:

  David L. Kyle

Title:

  Chairman of the Board, President and
Chief Executive Officer

--------------------------------------------------------------------------------

TXOK Acquisition, Inc. By:   /s/

Name:

   

Title:

   

“PURCHASER”

--------------------------------------------------------------------------------

Exhibit D

 

Excluded Assets

 

The names “ONEOK,” “ONEOK Energy Resources,” “ONEOK Energy Resources Company,”
“ONEOK Energy Resources Holdings,” “ONEOK Texas Energy Holdings,” “ONEOK Texas
Energy Resources”

 

All desks, workstations, computer equipment and other furniture, fixtures or
equipment located at the headquarters of the Companies at 100 W. 5th Street,
Tulsa, Oklahoma and any lease agreement or other right to use space at that
location

 

SCADA software and systems (other than the equipment located on the Properties)

 

Excaliber software (other than databases of the Companies)

 

All software that would require a new or additional license for the continued
use thereof by any Company after, or as a result of, the consummation of the
transactions described in this Agreement

 

All Contracts and other assets that are not primarily related to the Properties
(except that all hedging, option and similar contracts shall remain with the
Companies)