Document:

Exhibit 10.1

 

EXECUTION
COPY

 

 

 

 

 

 

 

PURCHASE AGREEMENT

 

between

 

KNIGHT INC.,

 

a Kansas corporation,

 

and

 

MYRIA ACQUISITION INC.,

 

a Delaware corporation

 

 

 

Dated as of December 10, 2007

 

 

TABLE OF CONTENTS

 

	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  
	
  ARTICLE 1

  	
          DEFINITIONS

  	
    1

  
	
   

  	
   

  	
   

  
	
   

  	
  1.1

  	
  Defined Terms

  	
    1

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  1.2

  	
  Interpretation and Construction

  	
    9

  
	
   

  	
   

  	
   

  
	
  ARTICLE 2

  	
          THE TRANSACTION; PURCHASE PRICE

  	
  10

  
	
   

  	
   

  	
   

  
	
   

  	
  2.1

  	
  Conversion of MidCon Corp

  	
  10

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  2.2

  	
  Sale and Purchase

  	
  10

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  2.3

  	
  Purchase Price

  	
  10

  
	
   

  	
   

  	
   

  
	
  ARTICLE 3

  	
          CLOSING

  	
  11

  
	
   

  	
   

  	
   

  
	
   

  	
  3.1

  	
  Closing

  	
  11

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  3.2

  	
  Closing Deliveries by Seller

  	
  12

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  3.3

  	
  Closing Deliveries by Buyer

  	
  12

  
	
   

  	
   

  	
   

  
	
  ARTICLE 4

  	
          REPRESENTATIONS AND WARRANTIES OF SELLER

  	
  13

  
	
   

  	
   

  	
   

  
	
   

  	
  4.1

  	
  Organization of Seller

  	
  13

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  4.2

  	
  MidCon Entities

  	
  13

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  4.3

  	
  Organizational Documents

  	
  14

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  4.4

  	
  Seller’s Authority

  	
  14

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  4.5

  	
  No Conflict

  	
  14

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  4.6

  	
  Consents and Approvals

  	
  15

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  4.7

  	
  Permits

  	
  15

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  4.8

  	
  Financial Statements

  	
  16

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  4.9

  	
  Absence of Certain Changes

  	
  16

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  4.10

  	
  Tax Matters

  	
  16

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  4.11

  	
  Compliance With Applicable Laws

  	
  18

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  4.12

  	
  Legal Proceedings; Regulatory Proceedings

  	
  18

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  4.13

  	
  Properties

  	
  19

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  4.14

  	
  Certain Obligations of the MidCon Entities

  	
  19

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  4.15

  	
  Employee Matters

  	
  20

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  4.16

  	
  Environmental

  	
  20

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  4.17

  	
  Insurance

  	
  21

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  4.18

  	
  Brokerage Fees

  	
  21

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  4.19

  	
  Hedging

  	
  21

  

 

 

	
   

  	
  4.20

  	
  Books and Records

  	
  21

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  4.21

  	
  No Other Representations

  	
  21

  
	
   

  	
   

  	
   

  
	
  ARTICLE 5

  	
          REPRESENTATIONS AND WARRANTIES OF BUYER

  	
  22

  
	
   

  	
   

  	
   

  
	
   

  	
  5.1

  	
  Organization

  	
  22

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  5.2

  	
  Buyer’s Authority

  	
  22

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  5.3

  	
  No Conflict

  	
  22

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  5.4

  	
  Consents and Approvals

  	
  23

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  5.5

  	
  Financing

  	
  23

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  5.6

  	
  Legal Proceedings

  	
  24

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  5.7

  	
  Brokerage Fees

  	
  24

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  5.8

  	
  Nature of Investment; Investment Experience;
  Restricted Securities

  	
  24

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  5.9

  	
  Independent Investigation

  	
  24

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  5.10

  	
  Buyer Status

  	
  25

  
	
   

  	
   

  	
   

  
	
  ARTICLE 6

  	
         CONDUCT OF MIDCON ENTITIES PENDING CLOSING

  	
  25

  
	
   

  	
   

  	
   

  
	
   

  	
  6.1

  	
  Pre-Closing Restrictions

  	
  25

  
	
   

  	
   

  	
   

  
	
  ARTICLE 7

  	
          ADDITIONAL AGREEMENTS

  	
  27

  
	
   

  	
   

  	
   

  
	
   

  	
  7.1

  	
  Access to Information and Confidentiality

  	
  27

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  7.2

  	
  Regulatory and Other Authorizations and Consents

  	
  27

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  7.3

  	
  Public Announcements

  	
  29

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  7.4

  	
  Supplemental Disclosure

  	
  29

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  7.5

  	
  Expenses

  	
  29

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  7.6

  	
  Company Guarantees

  	
  29

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  7.7

  	
  Transfer Taxes

  	
  30

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  7.8

  	
  Confidentiality and Standstill Agreements

  	
  30

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  7.9

  	
  Audited Financial Statements and Comfort Letters

  	
  30

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  7.10

  	
  Tax Matters

  	
  31

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  7.11

  	
  Certain Disclosure Matters

  	
  31

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  7.12

  	
  Financing

  	
  31

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  7.13

  	
  Transfer of Equity Interests

  	
  32

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  7.14

  	
  Seller’s Liens

  	
  32

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  7.15

  	
  Investor Letter of Credit

  	
  32

  

 

 

	
   

  	
  7.16

  	
  Additional Actions

  	
  33

  
	
   

  	
   

  	
   

  
	
  ARTICLE 8

  	
          CONDITIONS TO OBLIGATIONS OF SELLER

  	
  33

  
	
   

  	
   

  	
   

  
	
   

  	
  8.1

  	
  Accuracy of Representations and Warranties

  	
  33

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  8.2

  	
  Performance of Covenants and Agreements

  	
  33

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  8.3

  	
  HSR Act and Consents

  	
  33

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  8.4

  	
  Legal Proceedings

  	
  34

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  8.5

  	
  Credit Requirements

  	
  34

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  8.6

  	
  Operations and Reimbursement Agreement

  	
  34

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  8.7

  	
  MidCon Debt and MidCon Payment

  	
  34

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  8.8

  	
  Five Year Tranche

  	
  34

  
	
   

  	
   

  	
   

  
	
  ARTICLE 9

  	
          CONDITIONS TO OBLIGATIONS OF BUYER

  	
  35

  
	
   

  	
   

  	
   

  
	
   

  	
  9.1

  	
  Accuracy of Representations and Warranties

  	
  35

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  9.2

  	
  Performance of Covenants and Agreements

  	
  35

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  9.3

  	
  HSR Act and Consents

  	
  35

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  9.4

  	
  Legal Proceedings

  	
  36

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  9.5

  	
  MidCon Debt and MidCon Payment

  	
  36

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  9.6

  	
  Five Year Tranche

  	
  36

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  9.7

  	
  Operations and Reimbursement Agreement

  	
  36

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  9.8

  	
  FIRPTA Certificate

  	
  36

  
	
   

  	
   

  	
   

  
	
  ARTICLE 10

  	
          CLOSING ARBITRATION

  	
  37

  
	
   

  	
   

  	
   

  
	
   

  	
  10.1

  	
  Closing Arbitration

  	
  37

  
	
   

  	
   

  	
   

  
	
  ARTICLE 11

  	
          TERMINATION, AMENDMENT, WAIVER AND LIMITATION OF REMEDIES

  	
  38

  
	
   

  	
   

  	
   

  
	
   

  	
  11.1

  	
  Termination

  	
  38

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  11.2

  	
  Effect of Termination

  	
  40

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  11.3

  	
  Amendment

  	
  40

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  11.4

  	
  Waiver

  	
  40

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  11.5

  	
  Buyer Termination Fee

  	
  41

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  11.6

  	
  Exclusivity of Remedies; No Equitable Remedy Against
  Buyer

  	
  44

  
	
   

  	
   

  	
   

  
	
  ARTICLE 12

  	
          INDEMNIFICATION

  	
  45

  
	
   

  	
   

  	
   

  
	
   

  	
  12.1

  	
  Indemnification

  	
  45

  

 

 

	
   

  	
  12.2

  	
  Defense of Claims

  	
  49

  
	
   

  	
   

  	
   

  
	
  ARTICLE 13

  	
          MISCELLANEOUS

  	
  50

  
	
   

  	
   

  	
   

  
	
   

  	
  13.1

  	
  Notices

  	
  50

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  13.2

  	
  Entire Agreement

  	
  51

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  13.3

  	
  Binding Effect; Assignment; No Third Party Benefit

  	
  51

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  13.4

  	
  Severability

  	
  51

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  13.5

  	
  Governing Law; Consent To Jurisdiction

  	
  52

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  13.6

  	
  Further Assurances

  	
  52

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  13.7

  	
  Disclosure Schedules

  	
  52

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  13.8

  	
  Counterparts

  	
  52

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  13.9

  	
  Currency

  	
  53

  

 

 

	
   

  	
   

  	
   

  
	
  EXHIBITS

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Exhibit A

  	
  Form of Operations and Reimbursement Agreement

  	
   

  
	
  Exhibit B

  	
  Form of Assumption of Guaranty Agreement

  	
   

  
	
  Exhibit C

  	
  Form of LLC Agreement

  	
   

  
	
  Exhibit D

  	
  Form of Shareholder Agreement

  	
   

  
	
  Exhibit E

  	
  MidCon Debt Term Sheet

  	
   

  
	
  Exhibit F

  	
  Form of Tax Allocation Agreement

  	
   

  
	
  Exhibit G

  	
  Form of Investor Letter of Credit

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  ANNEXES

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Annex I

  	
   

  	
   

  

 

 

PURCHASE AGREEMENT

 

THIS PURCHASE AGREEMENT is
entered into on the 10th day of December, 2007, between Knight Inc., a Kansas corporation (“Seller”),
and Myria Acquisition Inc., a Delaware corporation (“Buyer”).

 

Recitals:

 

WHEREAS, subject to the
terms and conditions set forth herein, Seller desires to sell, assign and
transfer to Buyer and Buyer desires to purchase and take assignment from Seller
of, all of the issued and outstanding Class B Shares in MidCon LLC, a
Delaware limited liability company (the “Company”).

 

NOW, THEREFORE, in
consideration of the premises and the representations, warranties, covenants
and agreements contained herein, the Parties hereto agree as follows:

 

ARTICLE
1

DEFINITIONS

 

1.1           Defined Terms.  As used in this Agreement, each of the
following terms shall have the meaning given to it below:

 

“AAA Arbitration Rules” has
the meaning assigned to such term in Section 10.1.

 

“Affiliate” means, with
respect to any Person, any other Person that, directly or indirectly, through
one or more intermediaries, controls, is controlled by, or is under common
control with, such Person.  For the
purposes of this definition, “control” means, when 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.

 

“Agreement” means this
Purchase Agreement, as the same may be amended from time to time.

 

“Arbitrator” has the meaning
assigned to such term in Section 10.1.

 

“Backstop Guaranty” has the
meaning assigned to such term in Section 7.6.

 

“Balance Sheet” has the
meaning assigned to such term in Section 4.8(a).

 

“Balance Sheet Date” means December 31,
2006.

 

“Base Purchase Price” means SIX
BILLION FIVE HUNDRED SEVENTY-FIVE MILLION DOLLARS ($6,575,000,000), as adjusted
in accordance with Section 2.3(b), as the case may be.

 

“Beneficiaries” has the
meaning assigned to such term in Section 7.6.

 

 

1

 

“Benefit Plan” means any
employee benefit plan or arrangement, including any stock purchase, stock
option, stock bonus, stock ownership, phantom stock or other stock or equity
plan, pension, profit sharing, bonus, deferred compensation, incentive
compensation, severance or termination pay, hospitalization or other medical or
dental, life or other insurance, supplemental unemployment benefits plan or
agreement or policy or other arrangement providing employment-related
compensation, fringe benefits or other benefits and including “employee benefit
plans,” as defined in Section 3(3) of ERISA.

 

“Business Day” means any day
other than a Saturday, Sunday or legal holiday on which banks in New York, New
York or Houston, Texas are authorized or obligated by Law to close.

 

“Buyer” has the meaning
assigned to such term in the Introductory Paragraph.

 

“Buyer Affiliates” has the
meaning assigned to such term in Section 11.6(b).

 

“Buyer Indemnitees” means,
collectively, Buyer, the Investors and their respective Affiliates, officers,
directors, employees, agents, and representatives, but shall not include the
Company or any MidCon Entity.

 

“Buyer Loss” means (i) a
Loss actually incurred by a Buyer Indemnitee (other than as described in clause
(ii) of this definition) and (ii) Buyer’s 80% share of a Loss
actually incurred by any of the MidCon Entities.

 

“Buyer Termination Fee” has
the meaning assigned to such term in Section 11.5.

 

“Cash Collateral” means ONE
HUNDRED FIFTY MILLION DOLLARS ($150,000,000), and any investments of such
amount pursuant to Section 11.5(e).

 

“CFIUS” means the Committee
on Foreign Investment in the United States.

 

“Class A Shares” has
the meaning assigned to such term in the LLC Agreement.

 

“Class B Shares” has
the meaning assigned to such term in the LLC Agreement.

 

“Closing” means the closing
of the transactions contemplated by this Agreement.

 

“Closing Date” means the
date on which the Closing occurs.

 

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

 

“Company” has the meaning
assigned to such term in the Recitals.

 

“Company Guarantees” means
the obligations of Seller or any Seller Affiliate (other than the MidCon
Entities) set forth in the guarantees, letters of credit, bonds and other
sureties and credit assurances listed on Schedule 1.1(a).

 

“Company Net Position” has
the meaning assigned to such term in Section 4.19.

 

 

2

 

“Confidentiality Agreement”
means the confidentiality agreement between Seller and Babcock & Brown
LP dated June 5, 2007.

 

“Conversion” has the meaning
assigned to such term in Section 2.1.

 

“Current Budget” has the
meaning assigned to such term in Section 6.1.

 

“Debt Commitment Letter” has
the meaning assigned to such term in Section 5.5.

 

“Deductible Amount” means an
amount equal to 1% of the Purchase Price, as such Purchase Price may be
adjusted pursuant to Section 2.3(b).

 

“Direct Claim” means any
claim by an Indemnitee on account of a Loss which does not result from a Third
Party Claim.

 

“Disclosing Party” has the
meaning assigned to such term in Section 7.4.

 

“Disclosure Schedule” means
the disclosure schedules of even date herewith of Seller or Buyer, as the case
may be, and delivered separately to the other Party.

 

“Easements” means easements,
leases, rights of way, licenses, land use permits, and other rights to use or
occupy land in connection with the use and operation of the Pipeline System.

 

“Encumbrances” means liens,
charges, pledges, options, mortgages, deeds of trust, security interests,
claims, restrictions (whether on voting, sale, transfer, disposition, or
otherwise), easements, and other encumbrances of every type and description,
whether imposed by Law, agreement, understanding, or otherwise.

 

“Environmental Laws” means
any and all applicable Laws in effect as of the date of this Agreement
pertaining to protection of the environment in effect in any and all
jurisdictions in which any MidCon Entity has conducted operations, including,
without limitation, the Clean Air Act, as amended, the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended, the
Federal Water Pollution Control Act, as amended, the Resource Conservation and
Recovery Act of 1976, as amended, the Safe Drinking Water Act, as amended, the
Toxic Substances Control Act, as amended, the Superfund Amendments and
Reauthorization Act of 1986, as amended, and the Hazardous Materials
Transportation Act, as amended.

 

“Estimated Debt Amount”
means $2.85 billion in par value of debt securities.

 

“Estimated Interest Rate”
means 7.00% per annum.

 

“Excluded Liability” shall
mean any liability or obligation of any MidCon Entity that meets all of the
following criteria: such liability or obligation (i) arises out of,
results from or relates to events occurring or circumstances existing prior to
the Closing, (ii) results from such MidCon Entity’s status as an Affiliate
of Seller or any of Seller Affiliates that is not a MidCon Entity, and (iii) does
not relate to the business or operation of any MidCon Entity.

 

 

3

 

“Exon-Florio Amendment”
means Section 5021 of the Omnibus
Trade and Competitiveness Act of 1988, which amended Section 721 of the
Defense Production Act of 1950 and as amended by The Foreign Investment
National Security Act of 2007.

 

“Extended Final Date” has
the meaning set forth in Section 11.1(d).

 

“Final Date” has the meaning
set forth in Section 11.1(d).

 

“Financial Statements” has
the meaning assigned to such term in Section 4.8(a).

 

“Five Year Tranche” has the
meaning set forth in Section 8.8(a).

 

“GAAP” means United States
generally accepted accounting principles with such exceptions to such United
States generally accepted accounting principles as may be expressly noted or
otherwise expressly referred to on any individual financial statement or
schedule.

 

“Governmental Approvals”
means all filings with, notifications to and consents and approvals of
Governmental Entities necessary so that the consummation of the transactions
contemplated hereby will be in compliance with applicable Laws, and includes,
without limitation, any filing with and any consent or approval from the United
States Department of the Treasury regarding the review of the transactions
contemplated by this Agreement by CFIUS.

 

“Governmental Entity” means
any court or tribunal in any jurisdiction (domestic or foreign) or any federal,
state, municipal or local government or other governmental body, agency, authority,
department, commission, board, bureau, instrumentality, arbitrator or arbitral
body (domestic or foreign).

 

“Hazardous Materials” means,
whether alone or in combination, whether solid, liquid or gaseous, (i) any
pollutant, contaminant, substance, chemical or material that is listed,
classified or regulated pursuant to any Environmental Law; (ii) any
petroleum, petroleum product, waste oil, crude oil and its fractions, asbestos
and asbestos-containing material, urea formaldehyde, nuclear materials, natural
or synthetic gas, lead-based paint, pesticide or polychlorinated biphenyl; and (iii) any
hazardous substance, hazardous waste or terms of similar import, as defined in
any Environmental Law, to the extent any of the foregoing are present in a
quantity or concentration regulated pursuant to an applicable Environmental
Law.

 

“Hedging Guidelines” has the
meaning assigned to such term in Section 4.19.

 

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

 

“Income Tax” means any Tax
based upon, measured by, or calculated with respect to (i) net income or
profits or similar measures (including the Texas margin tax, capital gains
Taxes and minimum Taxes) or (ii) multiple bases (including corporate
franchise, business and occupation, business license or similar Taxes) if one
or more of the bases on which such Tax is based upon, measured by or calculated
with respect to is described in clause (i), in each case together with any
interest, penalties, or additions to such Tax.

 

 

4

 

“Indemnifying Party” means a
Party required to provide indemnification under Section 12.1.

 

“Indemnitee” means a Party
entitled to receive indemnification under Section 12.1.

 

“Interest Rate” means, with
respect to the MidCon Debt or the Five Year Tranche, the weighted average
interest rate per annum of the MidCon Debt or the Five Year Tranche,
respectively (weighted by the par value issued at each interest rate).

 

“Investor” has the meaning
assigned to such term in the Shareholder Agreement.

 

“Investor Commitment Letter”
has the meaning assigned to such term in Section 5.5.

 

“Investor
Guarantee” means one of the several limited amount guarantees of each of Babcock &
Brown Infrastructure Limited, BBIFNA AIV Two, LP, Babcock & Brown
Myria Pty Ltd or Babcock & Brown International Pty Ltd on its behalf,
Public Sector Pension Investment Board, and Stichting Pensioenfonds voor de
Gezondheid, Geestelijke en Maatschappelijke Belangen (PGGM) dated the date hereof in favor of Seller
that guarantees the obligation of Buyer to pay the Buyer Termination Fee
hereunder in accordance with their respective Investor Percentages; provided
that only the guarantees delivered by BBIFNA AIV Two, LP and Babcock & Brown International
Pty Ltd provide for payment of the Buyer Termination Fee payable by reason of
the termination of this Agreement pursuant to Section 11.1(h).

 

“Investor Letter of Credit”
means (i) an irrevocable letter of credit issued by Commonwealth Bank of
Australia, New York Branch, in the form attached as Exhibit G, duly
executed by such bank, reflecting its letter of credit number, dated the date
of its delivery to Seller, and having an expiry date at least three months
after such date, and (ii) any replacement letter of credit delivered to
Seller pursuant to, and meeting the requirements of, Section 11.5.

 

“Investor
Percentage” means the percentage set forth with respect to an Investor under
the caption “Equity
Interest” in the Investor
Commitment Letter.

 

“Joint Venture Entities”
means Horizon Pipeline Company, L.L.C. and Canyon Creek Compression Company.

 

“Knowledge” means, with
respect to Seller, the actual knowledge of the Persons listed on Schedule
1.1(c), and with respect to Buyer, the actual knowledge of the Persons
listed on Schedule 1.1(d), in each case, without any obligation by any
such Person to conduct any investigation.

 

“Law” means any statute,
law, rule, or regulation, or any judgment, order, ordinance, writ, injunction,
or decree of, any Governmental Entity to which a specified Person or property
is subject.

 

“LC
Failure” has the meaning assigned to such term in Section 11.5(a).

 

“Libor Swapped Equivalent
Rate” has the meaning set forth in Section 8.8(a).

 

 

5

 

“LLC Agreement” means the
Limited Liability Company Agreement of the Company to be dated as of the
Closing Date, in the form attached hereto as Exhibit C.

 

“Losses” means any and all
claims, damages, liabilities, losses, causes of action, fines, penalties,
litigation, lawsuits, administrative proceedings, administrative
investigations, costs, and expenses, including reasonable attorneys’ fees,
court costs, and other costs of suit, other than any Taxes.

 

“Material Adverse Effect”
means, with respect to any Person, any adverse change, circumstance, effect or
condition in, on or relating to the properties, assets, liabilities, financial
condition, results of operations, or business of such Person (i) that is
material to such Person, other than any change or changes in general economic
or industry conditions (including any change in the prices of oil, natural gas,
natural gas liquids, or other hydrocarbon products) or changes in Law or GAAP,
provided that such change or changes do not disproportionately affect such
Person as compared to other participants in the industry in which such Person
operates, or (ii) that impedes the ability of such Person to consummate
the transactions contemplated hereby. 
Any determination as to whether any matter or condition has a Material
Adverse Effect on any Person shall be made only after taking into account all
recoveries actually made by such Person or recoveries not being disputed in
respect of claims made under effective insurance coverages and effective
third-party indemnifications with respect to such matter or condition, so long
as, in the aggregate, the value of such recoveries does not exceed 25% of the
Purchase Price.

 

“Material Contract” has the
meaning assigned to such term in Section 4.14(d).

 

“MidCon” means the Company.

 

“MidCon Debt” means the par
value of the debt to be incurred by the Company or one of its newly-formed
wholly-owned subsidiaries prior to Closing as contemplated by Sections 8.7 and
9.5, the proceeds of which shall be paid to Seller in repayment of amounts owed
by the Company to Seller.

 

“MidCon Entities” means the
Company, NGPL, Horizon Pipeline Company, L.L.C., a Delaware limited liability
company, NGPL-Canyon Compression Co., a Delaware corporation, Kinder Morgan
Illinois Pipeline LLC, a Delaware limited liability company, and Canyon Creek
Compression Company, an Illinois partnership.

 

“MidCon Entity” means any of
the MidCon Entities, as the case may be.

 

“NGPL” means Natural Gas
Pipeline Company of America, a Delaware corporation.

 

“Notice” has the meaning
assigned to such term in Section 13.1.

 

“O&R Agreement” has the
meaning assigned to such term in Section 8.6.

 

“Parties” means Seller and
Buyer, collectively.

 

“Party” means Seller or
Buyer, individually, as the case may be.

 

 

6

 

“Permits” means licenses,
permits, franchises, consents, approvals, variances, exemptions, and other
authorizations of or from Governmental Entities.

 

“Permitted Encumbrances”
means (i) liens for Taxes, impositions, assessments, fees, rents or other
governmental charges levied or assessed or imposed not yet delinquent or being
contested in good faith by appropriate proceedings, provided appropriate
reserves have been established with respect to such contest, (ii) statutory
liens (including materialmen’s, warehousemen’s, mechanics’, repairmen’s,
landlord’s, and other similar liens) arising in the ordinary course of business
securing payments not yet delinquent or being contested in good faith by
appropriate proceedings, (iii) Encumbrances of public record, (iv) the
rights of lessors and lessees under leases, and the rights of third parties
under any agreement, executed in the ordinary course of business, (v) the
rights of licensors and licensees under licenses executed in the ordinary
course of business, (vi) utility easements, restrictive covenants and
defects, imperfections or irregularities of title or liens, if any, that do not
and will not materially and adversely affect the ability of the MidCon Entities
to conduct their respective businesses as presently conducted, (vii) liens
securing rental payments under capital lease arrangements disclosed to Buyer, (viii) preferential
purchase rights and other similar arrangements with respect to which consents
or waivers are obtained for this transaction or as to which the time
for asserting such rights has expired at the Closing Date without an exercise
of such rights, (ix) Encumbrances entered into in the ordinary course of
business which do not secure the payment of indebtedness for borrowed money and
that do not and will not materially and adversely affect the ability of the
MidCon Entities to conduct their respective businesses as presently conducted,
and (x) Encumbrances created by Buyer, or its successors and assigns.

 

“Person” means any
individual, corporation, limited liability company, partnership, joint venture,
association, joint stock company, trust, enterprise, unincorporated
organization, or Governmental Entity.

 

“Pipeline System” means the
natural gas transmission pipeline system and related facilities (including
storage, compression and metering facilities) of NGPL together with its
directly held subsidiaries and its jointly-owned limited liability companies
and Kinder Morgan Illinois Pipeline LLC.

 

“Proceedings” means all proceedings,
actions, claims, suits, investigations, and inquiries by or before any
Governmental Entity.

 

“Purchase Price” has the
meaning set forth in Section 2.3(a).

 

“Purchased Shares” means the
Class B Shares.

 

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

 

“Receiving Party” has the
meaning set forth in Section 7.4.

 

“Related Agreements” means
the LLC Agreement, the O&R Agreement and the Shareholder Agreement.

 

 

7

 

“Satisfied Conditions
Decision” has the meaning assigned to such term in Section 10.1.

 

“Securities Act” has the
meaning set forth in Section 5.8.

 

“Security Agreements” has
the meaning set forth in Section 7.14.

 

“Seller” has the meaning
assigned to such term in the Introductory Paragraph.

 

“Seller Affiliate” means any
Affiliate of Seller.

 

“Seller Indemnitees” means,
collectively, Seller, Seller Affiliates and their respective officers,
directors, employees, agents, and representatives.

 

“Seller Loss” means (i) a
Loss actually incurred by a Seller Indemnitee (other than as described in
clause (ii) of this definition) and (ii) Seller’s 20% share of a Loss
actually incurred by any of the MidCon Entities.

 

“Shareholder Agreement”
means the Shareholder Agreement among Seller, Buyer and MidCon to be dated as
of the Closing Date, in the form attached hereto as Exhibit D.

 

“Supplemental Disclosure”
has the meaning assigned to such term in Section 7.4.

 

“Tax Allocation Agreement”
means the Tax Allocation Agreement among Buyer, MidCon and NGPL, to be dated as
of the Closing Date, in the form attached hereto as Exhibit F.

 

“Tax Return” means any
return, report or statement required to be maintained, retained or filed with
respect to any Tax (including any elections, declarations, schedules or
attachments thereto, any amendment thereof, any information return (which
includes, but is not limited to, federal and state wage reporting, employment
and unemployment reports (e.g., IRS Forms 940, 941, W-2, W-3 and their
state and local equivalents) as well as reports of payments made (e.g.,
IRS Forms 1099 and 1042) that are required under Law to be maintained, retained
or supplied to any Taxing Authority), claim for refund, amended return or
declaration of estimated Tax, and including, where permitted or required,
combined, consolidated or unitary returns for any group of entities that
includes any of the MidCon Entities.

 

“Tax Sharing Agreement” means any written agreement which provides
for the sharing, indemnification or allocation of Taxes between parties filing
a combined, consolidated, unitary or similar group Tax Return or unwritten past
practice with respect to the sharing or allocation of Taxes
between parties filing a combined, consolidated, unitary or similar group
Tax Return.

 

“Taxes” means any federal,
state, local or foreign income, gross receipts, license, payroll, parking,
employment, excise, severance, stamp, occupation, premium, windfall profits,
environmental, customs duties, capital stock, franchise, profits, margin,
single business, withholding, social security, unemployment, disability, real
property, personal property, possessory interest, sales, use, transfer,
registration, capital gain, production, payroll, worker’s compensation, value
added, alternative or add-on minimum, amounts paid under an agreement with a
Taxing Authority, estimated tax or other tax of any kind whatsoever, including
any interest, fines, penalty or other like assessment or addition thereto,
whether disputed or not, 

 

 

8

 

including
such item for which a liability arises pursuant to Treasury Regulation Section 1.1502-6
(or any similar provision of foreign, state or local law), as a transferee,  successor-in-interest, by contract or
otherwise.

 

“Taxing Authority” means,
with respect to any Tax, the Governmental Entity or political subdivision
thereof that imposes such Tax, and the agency (if any) charged with the
collection of such Tax for such entity or subdivision, including any
governmental or quasi-governmental entity or agency that imposes, or is charged
with collecting, social security or similar charges or premiums.

 

“Third Party” means any
Person other than (i) Seller or any Seller Affiliates (including the
MidCon Entities) or (ii) Buyer or any of its Affiliates or any Investors.

 

“Third Party Claim” means
any claim or the commencement of any claim, action or proceeding with respect
to a Loss or potential Loss made or brought by a Third Party.

 

“Threshold” has the meaning
set forth in Section 12.1(c).

 

“Transfer Taxes” means any
real property transfer or excise, sales, use, value added, stamp, documentary,
recording, registration, conveyance, stock transfer, intangible property
transfer, personal property transfer, gross receipts, registration, duty,
securities transactions or similar fees or Taxes or governmental charges
(together with any interest or penalty, addition to Tax or additional amount
imposed), including, without limitation, any payments made in lieu of any such
Taxes or governmental charges.

 

“Treasury Regulations” means
one or more treasury regulations promulgated under the Code by the Treasury
Department of the United States.

 

“Unsatisfied Conditions
Decision” has the meaning assigned to such term in Section 10.1.

 

1.2           Interpretation and Construction.  In interpreting and construing this
Agreement, the following principles shall be followed:

 

(a)           the terms “herein,” “hereof,” “hereby,”
and “hereunder,” or other similar terms, refer to this Agreement as a whole and
not only to the particular Article, Section or other subdivision in which
any such terms may be employed;

 

(b)           unless otherwise indicated herein,
references to Articles, Sections, and other subdivisions refer to the Articles,
Sections, and other subdivisions of this Agreement;

 

(c)           all accounting terms not otherwise
defined herein have the meanings assigned to them in accordance with GAAP;

 

(d)           no consideration shall be given to
the captions of the articles, sections, subsections, or clauses, which are
inserted for convenience in locating the provisions of this Agreement and not
as an aid in its construction;

 

 

 

9

 

(e)           the word “includes” and its
syntactical variants mean “includes, but is not limited to” and corresponding
syntactical variant expressions;

 

(f)            the plural shall be deemed to
include the singular, and vice versa;

 

(g)           each exhibit, attachment, and
schedule to this Agreement is a part of this Agreement, but if there is any
conflict or inconsistency between the main body of this Agreement and any
exhibit, attachment, or schedule, the provisions of the main body of this
Agreement shall prevail; and

 

(h)           every covenant, term and provision of
this Agreement shall be construed simply according to its fair meaning and not
strictly for or against any party (notwithstanding any rule of law
requiring an agreement to be strictly construed against the drafting party), it
being understood that the parties to this Agreement are sophisticated and have
had adequate opportunity and means to retain counsel to represent their
interests and to otherwise negotiate the provisions of this Agreement.

 

ARTICLE
2

THE TRANSACTION; PURCHASE PRICE

 

2.1           Conversion of MidCon Corp.  Prior to the Closing Date, Seller will cause
MidCon Corp. to be converted to a Delaware limited liability company taxed as a
corporation for federal income tax purposes (the “Conversion”).  The form of limited liability company
agreement of the Company is attached hereto as Exhibit C.  Immediately following the Conversion, the
authorized equity capital of MidCon will consist of 1,000 shares representing
limited liability company interests, consisting of 200 Class A Shares and
800 Class B Shares.  The shares of
each class will be identical except for certain voting rights.  Immediately following the Conversion, Class A
Shares and Class B Shares will be owned directly by Seller.

 

2.2           Sale and Purchase.  At the Closing, and subject to the terms and
conditions in this Agreement, Seller shall sell, assign, transfer, deliver, and
convey to Buyer, and Buyer shall purchase and accept from Seller, the Purchased
Shares.

 

2.3           Purchase Price.

 

(a)           In consideration of the sale of the
Purchased Shares as described herein, Buyer shall pay to Seller an amount equal
to the purchase price determined in accordance with Section 2.3(b) below
(the “Purchase Price”).  The payment
referenced in this Section 2.3 shall be made by confirmed wire transfer of
immediately available funds to a bank account or accounts to be designated in
writing by Seller to Buyer prior to the Closing, provided that if Cash
Collateral has been delivered to Seller and not returned to Buyer, the amount
thereof (including accrued interest) shall be applied to payment of the
Purchase Price and the required wire transfer shall be reduced by such amount.

 

 

10

 

(b)           The Purchase Price
shall be an amount equal to 80% of the Base Purchase Price less 80% of the
MidCon Debt, subject to the following adjustments and to those in Section 2.3(c):

 

(i)    if the par
value of the MidCon Debt is:

 

(1)   greater
than the Estimated Debt Amount, then for every $100 million increment (or
fraction thereof) by which the MidCon Debt exceeds the Estimated Debt Amount,
the Base Purchase Price shall be increased by $32.5 million (or a corresponding
fraction thereof); or

 

(2)   less than
the Estimated Debt Amount, then for every $100 million increment (or fraction
thereof) by which the Estimated Debt Amount exceeds the MidCon Debt, the Base
Purchase Price shall be reduced by $32.5 million (or a corresponding fraction
thereof); and

 

(ii)   if the
Interest Rate of the MidCon Debt is:

 

(1)   greater
than the Estimated Interest Rate, then for every incremental 10 basis points
(or fraction thereof) by which the Interest Rate exceeds the Estimated Interest
Rate, the Base Purchase Price shall be reduced by $7.0 million (or a
corresponding fraction thereof); or

 

(2)   less than
the Estimated Interest Rate, then for every incremental 10 basis points (or
fraction thereof) by which the Estimated Interest Rate exceeds the Interest
Rate, the Base Purchase Price shall be increased by $7.0 million (or a
corresponding fraction thereof)

 

(c)           Seller shall have the right to elect
to cause a reduction in the Purchase Price as follows:  If Seller delivers Notice to Buyer that it
elects to have a reduction in the Purchase Price pursuant to this Section 2.3(c),
for every one basis point by which the Libor Swapped Equivalent Rate as
described in Section 8.8(a) exceeds 250 basis points, the Purchase
Price shall be reduced by $233,000.

 

ARTICLE
3

CLOSING

 

3.1           Closing.  Subject to fulfillment or waiver of the
conditions in this Agreement, the Closing shall take place on the Closing
Date.  The Closing shall take place at
the offices of Bracewell & Giuliani LLP, 711 Louisiana Street, Suite 2300,
Houston, Texas 77002, or such other place as the Parties may agree, at 10:00 a.m.,
Houston, Texas time, on the earlier to occur of (i) the fifth (5th)
Business Day following satisfaction or waiver of the conditions to closing set
forth in Articles 8 and 9 hereof, and (ii) if there is a dispute
between the Parties with respect to whether the conditions to closing set forth
in Article 8 or Article 9 have been satisfied or waived, the fifth (5th)
Business Day following the date of issuance of a Satisfied Conditions Decision
or, in either case, at such other time and on such other date as the Parties
may agree.  Unless otherwise agreed, all
Closing transactions shall be deemed to have occurred simultaneously.

 

 

11

 

3.2           Closing Deliveries by Seller.  At the Closing, Seller will deliver or cause
a Seller Affiliate, as applicable, to deliver the following documents, duly
executed by Seller or, if applicable, a Seller Affiliate:

 

(a)           unless Seller provided the initial
notice under Section 10.1(a) and the Arbitrator has delivered a
Satisfied Conditions Decision, a certificate executed on behalf of Seller by
the president or any vice president of Seller to Buyer, dated the Closing Date,
representing and certifying that the conditions set forth in Sections 9.1 and
9.2 have been fulfilled;

 

(b)           an assignment of limited liability
company interests transferring the Purchased Shares to Buyer;

 

(c)           a certificate to Buyer (i) stating
that Seller is not a foreign corporation, foreign partnership, foreign trust or
foreign estate, (ii) providing its U.S. Employer Identification Number and
(iii) providing its address, all pursuant to Section 1445 of the
Code;

 

(d)           a copy of the LLC Agreement, duly
executed by Seller, a copy of the Shareholder Agreement, duly executed by each
of Seller and MidCon, and a copy of the Tax Allocation Agreement, duly executed
by each of MidCon and NGPL;

 

(e)           a copy of the O&R Agreement duly
executed by each of the parties thereto;

 

(f)            evidence of the Governmental
Approvals required for Seller to enter into this Agreement and consummate the
transactions contemplated herein;

 

(g)           an executed copy of the current and
effective Internal Revenue Service Form 8832 that was filed by the Company
for the purpose of electing to be treated as an association that is taxed as a
corporation for United States federal income tax purposes and a copy of all
correspondence received, if any, from the Internal Revenue Service
acknowledging and accepting such election;

 

(h)           the Investor Letter of Credit (if
delivered and unless earlier terminated);

 

(i)            a letter to the Buyer from
the collateral agent under each Security Agreement acknowledging that any and
all liens under such Security Agreements have been, or simultaneously with the
Closing shall be, released; and

 

(j)            such other certificates, instruments
of conveyance, and documents required by this Agreement or as may be reasonably
requested by Buyer and agreed to by Seller prior to the Closing Date to carry
out the intention and purposes of this Agreement.

 

3.3           Closing Deliveries by Buyer.  At the Closing, in addition to the payment of
the Purchase Price pursuant to Section 2.3, Buyer will deliver or cause
its Affiliates, as applicable, to deliver the following documents to Seller,
duly executed by Buyer or, if applicable, its Affiliate:

 

12

 

(a)           unless the Arbitrator has delivered a
Satisfied Conditions Decision, a certificate executed by the president or any
vice president of Buyer, dated the Closing Date, representing and certifying
that the conditions set forth in Sections 8.1 and 8.2 have been fulfilled;

 

(b)           evidence of the Governmental
Approvals required for Buyer to enter into this Agreement and perform its
obligations hereunder;

 

(c)           a copy of the LLC Agreement, the
Shareholder Agreement and the Tax Allocation Agreement, each duly executed by
Buyer; and

 

(d)           such other certificates, instruments,
and documents required by this Agreement or as may be reasonably requested by
Seller and agreed to by Buyer prior to the Closing Date to carry out the intent
and purposes of this Agreement.

 

ARTICLE
4

REPRESENTATIONS AND WARRANTIES OF SELLER

 

Subject to the
disclosures made by Seller in Seller’s Disclosure Schedule, Seller represents
and warrants to Buyer as follows:

 

4.1           Organization of Seller.  Seller is a corporation duly organized,
validly existing, and in good standing under the Laws of the State of Kansas.

 

4.2           MidCon Entities.

 

(a)           Organization of MidCon Entities.  Schedule 4.2(a) lists each MidCon
Entity, the jurisdiction of incorporation or formation of each MidCon Entity,
and the authorized (in the case of capital stock) and outstanding capital stock
or other equity interests of each MidCon Entity.  Each corporate MidCon Entity is a corporation
duly organized, validly existing, and in good standing under the Laws of the
jurisdiction of its incorporation, and each other MidCon Entity is duly formed
and validly existing under the Laws of the jurisdiction of its formation.  Each MidCon Entity has all requisite corporate,
limited liability company or partnership power and authority, as applicable, to
own, lease, and operate its properties and to carry on its business as now
being conducted.  Except for its
ownership of one or more other MidCon Entities as set forth in Schedule
4.2(a), no MidCon Entity owns, directly or indirectly, any capital stock or
other equity securities of or interests in any other Person.

 

(b)           Qualification.  Each of the MidCon Entities is duly qualified
or licensed to do business as a corporation, limited liability company or
partnership, as applicable, and each of the MidCon Entities is in good standing
in the jurisdictions opposite its name in Schedule 4.2(b), which are the
only jurisdictions in which the property owned, leased, or operated by it or
the conduct of its business requires such qualification or licensing, except
jurisdictions in which the failure to be so qualified or licensed would not
have a Material Adverse Effect on the MidCon Entities.

 

 

 

13

 

(c)           Ownership of Equity; Encumbrances.  Except as otherwise indicated on Schedule
4.2(c), all of the outstanding capital stock or other equity interests of
each MidCon Entity is owned, directly or indirectly, by the owner reflected on Schedule
4.2(a) free and clear of all Encumbrances, other than (x) restrictions
on transfer that may be imposed by federal or state securities Laws, (y) encumbrances
that arise out of any actions taken by or on behalf of Buyer or its Affiliates,
or (z) Permitted Encumbrances.  All
outstanding shares of capital stock of each corporate MidCon Entity have been
validly issued and are fully paid and nonassessable.  All equity interests of each other MidCon
Entity have been validly issued and are fully paid.

 

(d)           Options and Rights to Acquire
Equity.  Except as set forth on Schedules
4.2(a) or 4.2(d), there are outstanding (i) no securities of any
Seller, Seller Affiliate or any MidCon Entity convertible into or exchangeable
or exercisable for shares of capital stock or other voting securities of any
MidCon Entity, (ii) no options, warrants, preemptive or other rights to
acquire from Seller, any Seller Affiliate or any MidCon Entity, and no
obligation of Seller, any Seller Affiliate or any MidCon Entity to issue or
sell, any shares of capital stock or other voting securities of any MidCon
Entity or any securities convertible into or exchangeable or exercisable for
such capital stock or voting securities, other than the rights of Buyer to
acquire the Purchased Shares pursuant to this Agreement, and (iii) no
equity equivalents or other similar rights of or with respect to any MidCon
Entity.  There are outstanding no
obligations of Seller, Seller Affiliate or any MidCon Entity to repurchase,
redeem, or otherwise acquire any of the foregoing shares, securities, options,
equity equivalents, interests or rights.

 

4.3           Organizational Documents.  Seller has made available to Buyer accurate
and complete copies of the organizational documents of the Company and the
other MidCon Entities as currently in effect.

 

4.4           Seller’s Authority.  Seller and each Seller Affiliate which is
entering into any Related Agreement has full corporate, limited liability or
partnership power and authority to execute, deliver, and perform this Agreement
and the Related Agreements to which it is a party.  The execution, delivery, and performance by
Seller and each Seller Affiliate, as applicable, of this Agreement and the
Related Agreements, and the consummation by it of the transactions contemplated
hereby and thereby, have been, or prior to the Closing, will be duly authorized
by all necessary corporate, limited liability or partnership action of Seller
and such Seller Affiliate.  This
Agreement has been duly executed and delivered by Seller and constitutes (and
each Related Agreement to be executed by Seller, or any Seller Affiliate, when
executed will be duly executed and delivered by Seller or such Seller Affiliate
and will constitute), a valid and legally binding obligation of Seller or such
Seller Affiliate as the case may be, enforceable against Seller or such Seller
Affiliate in accordance with its terms, except that such enforceability may be
limited by (i) applicable bankruptcy, insolvency, reorganization,
moratorium, and similar Laws affecting creditors’ rights generally and (ii) equitable
principles which may limit the availability of certain equitable remedies (such
as specific performance) in certain instances.

 

4.5           No Conflict.  Except as described on Schedule 4.5,
and except as may result from any facts or circumstances relating solely to
Buyer or its Affiliates and assuming all consents, approvals, authorizations,
and other actions described in Section 4.6 have been obtained and all
filings and notifications listed on Schedule 4.6 have been made, the
execution, delivery, and performance of this Agreement and the Related
Agreements by Seller and each Seller Affiliate 

 

 

14

 

party thereto, and the
consummation by it of the transactions contemplated hereby and thereby do not
and will not:

 

(a)           violate or breach the certificate of
incorporation or bylaws (or equivalent organizational documents) of Seller, any
Seller Affiliate which is entering into any Related Agreements or any MidCon
Entity;

 

(b)           violate, breach or contravene any Law
binding upon Seller, any Seller Affiliate or any MidCon Entity, except as would
not, individually or in the aggregate, have a Material Adverse Effect on the
MidCon Entities; or

 

(c)           result in any breach of, or
constitute a default under, or give to others any rights of termination,
acceleration or cancellation of, or result in the creation of any Encumbrance
(other than a Permitted Encumbrance) on any of the assets or properties of any
MidCon Entity pursuant to, any note, bond, mortgage, indenture, contract,
agreement, lease, license, permit, franchise or other instrument relating to
such assets or properties to which any MidCon Entity is a party or by which any
of such assets or properties is bound or affected, except as would not,
individually or in the aggregate, have a Material Adverse Effect on the MidCon
Entities.

 

4.6           Consents and Approvals.  No consent, approval, authorization, license,
order or permit of, or declaration, filing or registration with, or
notification to, any Governmental Entity, or any other Person, is required to
be made or obtained by Seller, any Seller Affiliate or any MidCon Entity in
connection with the execution, delivery and performance of this Agreement and
Related Agreements or the consummation of the transactions contemplated hereby,
except:

 

(a)           as set forth on Schedule 4.6;

 

(b)           where the failure to obtain such
consents, approvals, authorizations, licenses, orders or permits of, or to make
such declarations, filings, or registrations or notifications, would not,
individually or in the aggregate, have a Material Adverse Effect on the MidCon
Entities; and

 

(c)           as may be necessary as a result of
any facts or circumstances relating solely to Buyer or its Affiliates.

 

4.7           Permits.  Except as disclosed on Schedule 4.7,
the MidCon Entities hold all Permits required by Law or otherwise necessary for
the conduct of the business of the MidCon Entities as presently conducted,
except where the failure to hold such Permits would not have a Material Adverse
Effect on the MidCon Entities.  Except as
disclosed on Schedule 4.7, each of the MidCon Entities is in compliance
with the terms of all such applicable Permits, and no Proceeding is pending or,
to the Knowledge of Seller, threatened with respect to any alleged failure by
any MidCon Entity to have any such material Permit or not to be in compliance
therewith, except where any such failure to comply or any pending or threatened
Proceeding would not, individually or in the aggregate with other such failures
to comply or Proceedings, have a Material Adverse Effect on the MidCon
Entities.

 

 

15

 

4.8           Financial
Statements.

 

(a)           Schedule 4.8(a) contains
unaudited, pro forma balance sheets of the business of the MidCon Entities as
of December 31, 2005, December 31, 2006 and September 30, 2007
(the “Balance Sheet”), and related statements of income for the fiscal years
and interim period then ended (collectively, the “Financial Statements”).  The Financial Statements have been prepared
in conformity with GAAP, consistently applied, except as otherwise disclosed on
Schedule 4.8(a) and except for the absence of notes and year-end
audit adjustments required by GAAP, subject to the assumptions and limitations
set forth therein.

 

(b)           Except as set forth in Schedule
4.8(b), the Financial Statements, subject to the assumptions and
limitations set forth therein, fairly present, in all material respects, the
financial position and results of operations of the MidCon Entities as of and
for the periods covered thereby.

 

(c)           When delivered by Seller pursuant to Section 7.9
hereof, the audited financial statements of the MidCon Entities described in Section 7.9
shall have been prepared in conformity with GAAP, consistently applied, shall
fairly present, in all material respects, the financial position and results of
operations of the MidCon Entities as of and for the periods covered thereby.

 

(d)           The MidCon Entities have no material
liabilities or obligations, whether known, unknown, accrued, contingent or
otherwise, except (i) as set forth in Schedule 4.8(d), (ii) as
and to the extent reflected on, disclosed in, or reserved against in the
balance sheet prepared as of September 30, 2007, and (iii) for
liabilities or obligations that were incurred after September 30, 2007 in
the ordinary course of business consistent with past practice that have not had
and would not have a Material Adverse Effect on the MidCon Entities.

 

4.9           Absence of Certain Changes.  Except as disclosed on or contemplated in Seller’s
Disclosure Schedule or as contemplated by this Agreement, since the Balance
Sheet Date, (i) there have not been any changes in the assets or financial
condition of the MidCon Entities that have had or would have, individually or
in the aggregate, a Material Adverse Effect on the MidCon Entities, (ii) the
businesses of the MidCon Entities have been conducted only in the ordinary
course consistent with past practice, and (iii) no MidCon Entity has
suffered any loss, damage, destruction, or other casualty to any of its
property, plant, equipment or inventories (whether or not covered by insurance)
which has had or would have, considered individually or together with all such
other occurrences of loss, damage, destruction or casualty, a Material Adverse Effect
on the MidCon Entities.

 

4.10         Tax Matters.  Except as disclosed on Schedule 4.10:

 

(a)           each MidCon Entity has filed, or has
had filed on its behalf, within the time and manner prescribed by law, with the
appropriate Taxing Authority all Tax Returns required to be filed by each of
the MidCon Entities and all such Tax Returns were and continue to be true,
complete and correct since filed;

 

 

16

 

(b)           all Taxes due and payable by or with
respect to the MidCon Entities have been paid in full within the time and
manner provided by law;

 

(c)           there are no outstanding agreements
or waivers extending the statutory period of limitations applicable to any
federal, state, local or foreign income or other material Tax Returns required
to be filed by or with respect to any of the MidCon Entities;

 

(d)           none of the Tax Returns of or with
respect to any of the MidCon Entities is currently being audited or examined by
any Taxing Authority and, to the Knowledge of Seller, there are no proposed,
threatened or asserted audits, deficiencies, reassessments or claims for Taxes
against, or any adjustment of Taxes relating to the MidCon Entities or any
property owned by the MidCon Entities;

 

(e)           no material deficiency for any Taxes
has been assessed with respect to any of the MidCon Entities that has not been
abated, paid in full or adequately provided for on the Balance Sheet in a
manner consistent with GAAP;

 

(f)            none of the MidCon Entities is a
party to any Tax Sharing Agreement or any other agreement that provides an
indemnity for or against Taxes that will survive Closing;

 

(g)           none of the MidCon Entities has
liability for the Taxes of any other person (i) pursuant to Section 1.1502-6
of the Treasury Regulations promulgated under the Code or comparable provisions
of any taxing authority in respect of a group, consolidated, combined or
unitary Tax Return, (ii) as a transferee or successor, (iii) by
contract, or (iv) otherwise;

 

(h)           each of the MidCon Entities has
withheld and paid within the time and manner required by law all Taxes required
to have been withheld and paid in connection with amounts paid or owing to any
employee, independent contractor, creditor, stockholder, or other party;

 

(i)            no claim has ever been made by a
Taxing Authority in a jurisdiction where a MidCon Entity does not file a Tax
Return that such entity is or may be subject to taxation by that jurisdiction,
and Schedule 4.10(i) sets forth all of the foreign, federal and state
jurisdictions in which the MidCon Entities file Tax Returns or are required to
pay Taxes;

 

(j)            except as required by Law, since the
Balance Sheet Date, none of the MidCon Entities has or has had on its behalf: (A) made
or changed any election concerning any Taxes, (B) filed any amended Tax Return,
(C) settled any Tax claim or assessment, (D) received or filed a
request for a ruling relating to Taxes issued by a Taxing Authority or entered
into any agreement with a Taxing Authority relating to Taxes, (E) provided
any power of attorney relating to Tax matters, or (F) surrendered any
right to claim a refund of any Taxes;

 

(k)           none of the MidCon Entities (or
Seller with respect to the MidCon Entities) has participated, within the
meaning of Regulations section 1.6011-4(c), or been a “material advisor” or “promoter”
(as those terms are defined in sections 6111 and 6112 of the Code and the
Regulations promulgated thereunder) in any “reportable transaction” within the
meaning of Treas. Reg. 1.6011-4 or any predecessor provision and no Tax Return
filed by or on 

 

 

17

 

behalf of the MidCon
Entities contained a disclosure statement under Section 6662 of the Code
(or any similar provision of Law), and no Tax Return has been filed by or on
behalf of a MidCon Entity with respect to which the preparer of such Tax Return
advised inclusion of such a disclosure;

 

(l)            the Seller has delivered or made
available to Buyer correct and true copies of all Tax Returns filed by or
relating to the MidCon Entities and all examination reports and other relevant
written materials with respect to audits, investigations, proceedings,
examinations or other controversies relating to the MidCon Entities (whether
proposed, threatened, pending or concluded) for all taxable periods beginning
after January 1, 2005;

 

(m)          Except with respect to Horizon
Pipeline, L.L.C., Canyon Creek Compression Company and Kinder Morgan Illinois
Pipeline LLC, the MidCon Entities are part of an “affiliated group” as such
term is defined under Section 1504(a) of the Code and any similar
provision of state or local Tax law;

 

(n)           each of Horizon
Pipeline Company, L.L.C. and Canyon Creek Compression Company are, and since
formation have been, taxed as partnerships for federal income Tax purposes;

 

(o)           none of the assets of the MidCon
Entities are “tax-exempt use property” within the meaning of Section 168(h) of
the Code or tax-exempt bond financed property within the meaning of Section 168(g)(5) of
the Code;

 

(p)           there are no liens for Taxes on the
assets of the MidCon Entities other than Permitted Encumbrances; and

 

(q)           none of the MidCon Entities is a
party to any agreement, contract, arrangement or plan that has resulted or
could result, separately or in the aggregate, in the payment of any “excess
parachute payment” within the meaning of Section 280G of the Code (or any
corresponding provision of state, local or foreign Tax law).

 

4.11         Compliance With Applicable Laws.  The MidCon Entities are in compliance with
all Laws (other than Environmental Laws, as to which Seller’s sole
representations and warranties are set forth in Section 4.16 and Laws
relating to Taxes, as to which Seller’s sole representations and warranties are
set forth in Section 4.10), except (i) as disclosed on Schedule
4.11 or (ii) for such noncompliance with Laws which would not have a
Material Adverse Effect on the MidCon Entities.

 

4.12         Legal Proceedings;
Regulatory Proceedings.

 

(a)           Except as disclosed on Schedule
4.12(a), there are no Proceedings pending or, to the Knowledge of Seller,
threatened against any MidCon Entity or any properties of any MidCon Entity
which would have a Material Adverse Effect on the MidCon Entities or materially
impair Seller’s ability to effect the Closing. 
No MidCon Entity is subject to any judgment, order, writ, injunction, or
decree of any Governmental Entity which has had or will have a Material Adverse
Effect on the MidCon Entities.

 

 

18

 

(b)           Except as disclosed on Schedule
4.12(b), none of the MidCon Entities is party to any Proceeding which could
reasonably be expected to result in an order having a Material Adverse Effect
on the MidCon Entities, and, to the Knowledge of Seller, no such Proceeding is
pending or threatened, and to the Knowledge of Seller there is no basis for any
such Proceeding.

 

4.13                           Properties. Except (i) as disclosed on Schedule 4.13,
(ii) for Permitted Encumbrances, and (iii) for properties rights
terminated or disposed of (e.g. by sale or lease termination) after the Balance
Sheet Date in the ordinary course of business consistent with past practice and
the absence of which would not and does not adversely effect the ability of the
MidCon Entities to carry on their business as conducted by them on the date
hereof, each of the MidCon Entities has (A) good and marketable fee simple
title to the owned real properties (other than Easements) reflected on the
Balance Sheet free and clear of Encumbrances, (B) a valid, binding and
enforceable leasehold interest in each of the leased properties reflected on
the Balance Sheet, free and clear of all Encumbrances, and (C) good and
defensible title to those material personal properties reflected on the Balance
Sheet free and clear of Encumbrances. The real properties owned by the MidCon
Entities, together with real property that one or more of the MidCon Entities
holds a valid leasehold interest in, or a valid easement through, constitute
all of the real property used in or reasonably necessary for the conduct of the
business of the MidCon Entities as conducted by them on the date hereof. As of
the date hereof, there is no pending condemnation, expropriation, eminent
domain or similar proceeding affecting all or any material portion of any of
the real property of the MidCon Entities and, to the Seller’s Knowledge, no
such proceeding is threatened.

 

4.14                           Certain Obligations of the MidCon
Entities.

 

(a)           Schedule 4.14(a) sets
forth a list of all agreements and indentures relating to the borrowing of
money or the guaranty of an obligation for borrowed money that involve payments
by any MidCon Entity (other than the MidCon Debt) and the amounts borrowed
thereunder, or relating to mortgaging, pledging or otherwise placing an
Encumbrance on any material portion of the MidCon Entities’ assets, taken as a
whole.

 

(b)           Schedule 4.14(b) sets
forth a list of all material joint venture agreements to which any MidCon
Entity is a party.

 

(c)           Schedule 4.14(c) sets
forth a list of contracts between any MidCon Entity, on one hand, and Seller or
any Seller Affiliate (other than a MidCon Entity) on the other hand.

 

(d)           Except for contracts described in
Sections 4.14(a) through (c) above, Schedule
4.14(d) sets forth a list of all contracts or agreements that (i) in
each case require or entitle a MidCon Entity to make or receive payments of at
least $5 million annually or in the aggregate and (A) have a term of
greater than one year and that cannot be cancelled on less than ninety days
notice or (B) contain a change of control or non-assignment provision or
that otherwise requires any consent, waiver or other action by any Person in
connection with the transactions contemplated by this Agreement, (ii) prohibit
Seller or any MidCon Entity from freely engaging in business anywhere in the
world (other than confidentiality agreements entered into in the ordinary
course of business), or (iii) require or entitle any of the MidCon
Entities to

 

19

 

make or receive payments
of at least $10 million annually or in the aggregate, provided that the
calculation of the aggregate payments for any such agreement or contract shall
not include payments attributable to any renewal periods or extensions for
which the relevant MidCon Entity may exercise an option in its sole discretion
to approve or disapprove (each of the documents set forth on Schedules 4.14(a) through
(d) being a “Material Contract”).

 

(e)           Except as set forth in Schedule 4.14(e), each Material Contract is
valid and enforceable in all material respects in accordance with its terms
against the MidCon Entity party thereto, except that such enforceability may be
limited by (i) applicable bankruptcy, insolvency, reorganization,
moratorium, and similar Laws affecting creditors’ rights generally and (ii) equitable
principles which may limit the availability of certain equitable remedies (such
as specific performance) in certain instances. None of the MidCon Entities
party to any Material Contract is in breach of the terms of any such Material
Contract where such breach would have a Material Adverse Effect on the MidCon
Entities and, to the Knowledge of Seller, no other party to any Material
Contract is in breach of the material terms thereof. Seller has delivered, or
made available, to Buyer copies of each Material Contract.

 

4.15                           Employee Matters. Except as set forth on Schedule 4.15,
the MidCon Entities (i) have no employees, (ii) are not the sponsor
of and do not participate in any Benefit Plan, and (iii) have no material
liability relating to any Benefit Plan, nor, to the Knowledge of Seller, does
any condition or set of circumstances exist under which the MidCon Entities
could reasonably be expected to have any material liability with respect to any
Benefit Plan. None of the MidCon Entities is a party to, or bound by, any
collective bargaining agreement or contract with a labor union, and there are
no unfair labor practice or labor arbitration Proceedings pending or to the
Seller’s Knowledge, threatened against any MidCon Entity.

 

4.16                           Environmental. Except as set forth on Schedule 4.16,
and as would not have a Material Adverse Effect on the MidCon Entities:

 

(a)           Each of the MidCon Entities is and
has been in compliance with applicable Environmental Laws, and has obtained and
is in compliance with any permits required under any applicable Environmental
Laws;

 

(b)           None of the MidCon Entities has
received any written or other formal (whether written or otherwise) notice or
demand letter from any Governmental Entity or Third Party, indicating that any
of the MidCon Entities is in violation of, or liable under, any Environmental
Law, which violation or liability has not heretofore been resolved with such
Governmental Entity or Third Party;

 

(c)           There are no conditions existing on currently
or formerly owned, operated or leased properties, assets, and businesses of any
of the MidCon Entities (including soils, groundwater, surface water, buildings
or other structures) that would reasonably be expected to give rise to any
claim, proceeding, action, or liability under any Environmental Law;

 

(d)           No such properties, assets, or
businesses of any of the MidCon Entities is contaminated with Hazardous
Materials in violation of any Environmental Law; and

 

20

 

(e)           None of the MidCon Entities has
assumed contractually the liability of any other person under any applicable
Environmental Law.

 

(f)            Seller’s sole representations and
warranties relating in any way to Environmental Laws or matters regulated
thereunder are set forth in Section 4.16 and no provisions of this
Agreement other than those set forth in this Section 4.16 shall be deemed
to be representations or warranties as to environmental matters.

 

4.17                           Insurance. Except as disclosed on Schedule 4.17,
all insurance policies maintained with respect to the MidCon Entities are in
full force and effect and all premiums due and payable on such policies have
been paid (other than retroactive or retrospective premium adjustments that are
not yet, but may be, required to be paid with respect to any period ending
prior to the Closing Date). No notice of cancellation of, or indication of an
intention not to renew, any such insurance policy has been received by Seller
or any MidCon Entity.

 

4.18                           Brokerage Fees. Except as set forth in Schedule 4.18,
neither Seller nor any Seller Affiliates have entered (directly or indirectly)
into any agreement with any Person that would obligate Buyer, any of its
Affiliates or any of the MidCon Entities to pay any commission, brokerage or “finder’s
fee” or other similar fee in connection with this Agreement or the transactions
contemplated herein.

 

4.19                           Hedging. The Company follows risk parameters, limits and
guidelines that are in compliance with the Company’s risk management policy
(the “Hedging Guidelines”), an accurate and complete copy of which has been
provided to Buyer prior to the date hereof, to (i) restrict the level of
risk that the MidCon Entities are authorized to take with respect to, among
other things, the net position resulting from all physical and financial
natural gas hedge contracts, exchange-traded futures and options transactions,
over-the-counter transactions and derivatives thereof, interest rate swap
agreements, and similar transactions (the “Company Net Position”) and (ii) monitor
compliance with the Hedging Guidelines by the MidCon Entities with such risk
parameters. As of the date hereof, (a) the Company Net Position is within
the risk parameters that are set forth in the Hedging Guidelines and (b) the
exposure of the MidCon Entities with respect to the Company Net Position
resulting from all transactions described in clause (i) above would not
reasonably be expected to result in a material loss to the MidCon Entities,
taken as a whole, based on market prices in existence as of the date hereof.
From the Balance Sheet Date through the date hereof, none of the MidCon
Entities has, in accordance with its mark-to-market accounting policies,
experienced an aggregate net loss in its hedging and related operations that
would be material to the MidCon Entities taken as a whole taking into account
the recognition of any underlying commodity sales.

 

4.20                           Books and Records. The books of account, minute books,
record books and other records of each of the MidCon Entities, all of which
have been made available to the Buyer or its representatives, are complete and
correct in all material respects.

 

4.21                           No Other Representations. EXCEPT AS AND TO THE EXTENT SET FORTH
IN THIS AGREEMENT, SELLER MAKES NO REPRESENTATION OR WARRANTY WHATSOEVER TO THE
BUYER AND SELLER HEREBY DISCLAIMS ALL LIABILITY AND RESPONSIBILITY FOR ANY
OTHER REPRESENTATION, WARRANTY,

 

21

 

STATEMENT, OR INFORMATION
MADE, COMMUNICATED, OR FURNISHED (ORALLY OR IN WRITING) TO THE BUYER OR ITS
RESPECTIVE REPRESENTATIVES (INCLUDING WITHOUT LIMITATION ANY OPINION,
INFORMATION, PROJECTION, OR ADVICE THAT MAY HAVE BEEN OR MAY BE
PROVIDED TO BUYER BY ANY DIRECTOR, OFFICER, EMPLOYEE, AGENT, CONSULTANT, OR
REPRESENTATIVE OF SELLER OR ANY AFFILIATE THEREOF). EXCEPT FOR THE
REPRESENTATIONS AND WARRANTIES CONTAINED IN THIS AGREEMENT, SELLER HEREBY
EXPRESSLY DISCLAIMS AND NEGATES ANY REPRESENTATION OR WARRANTY, EXPRESSED OR
IMPLIED, AT COMMON LAW, BY STATUTE, OR OTHERWISE, RELATING TO THE CONDITION OF
THE ASSETS OF THE MIDCON ENTITIES (INCLUDING ANY IMPLIED OR EXPRESSED WARRANTY
OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE, OR OF CONFORMITY TO
MODELS OR SAMPLES OF MATERIALS). SELLER MAKES NO REPRESENTATIONS OR WARRANTIES
TO BUYER REGARDING (A) THE PROBABLE SUCCESS OR PROFITABILITY OF THE
BUSINESS OF THE MIDCON ENTITIES OR (B) THE POSSIBILITY, PROBABILITY OR
LIKELIHOOD OF PROCEEDINGS ARISING FROM AND AFTER THE DATE HEREOF WHICH
CHALLENGE THE RATES CHARGED ON ANY OF THE MIDCON ENTITIES’ PIPELINE SYSTEMS.

 

ARTICLE
5

REPRESENTATIONS AND WARRANTIES OF BUYER

 

Subject to the
disclosures made by Buyer in Buyer’s Disclosure Schedule, Buyer represents and
warrants to Seller as follows:

 

5.1                                 Organization. Buyer is a corporation duly organized,
validly existing, and in good standing under the Laws of the jurisdiction of
its incorporation.

 

5.2                                 Buyer’s Authority. Buyer has full corporate power and
corporate authority to execute, deliver, and perform this Agreement and any
Related Agreements to which it is a party. The execution, delivery, and
performance by Buyer of this Agreement and such Related Agreements and the
consummation by it of the transactions contemplated hereby and thereby, have
been duly authorized by all necessary corporate action of Buyer. This Agreement
has been duly executed and delivered by Buyer and constitutes, and each such
Related Agreement executed or to be executed by Buyer has been, or when
executed will be, duly executed and delivered by Buyer and constitutes, or when
executed and delivered will constitute, a valid and legally binding obligation
of Buyer, enforceable against Buyer in accordance with its terms, except that
such enforceability may be limited by (i) applicable bankruptcy,
insolvency, reorganization, moratorium, and similar Laws affecting creditors’
rights generally and (ii) equitable principles which may limit the
availability of certain equitable remedies (such as specific performance) in
certain instances.

 

5.3                                 No Conflict. Assuming all consents, approvals,
authorizations, and other actions described in Section 5.4 have been
obtained and all filings and notifications listed in Section 5.4 have been
made, and except as may result from any facts or circumstances relating solely
to Seller or any Seller Affiliate, the execution, delivery and performance of
this Agreement by Buyer do not and will not:

 

22

 

(a)           violate or breach the certificate of
incorporation or bylaws of Buyer;

 

(b)           violate or breach any Law binding
upon Buyer, except as would not have a Material Adverse Effect on Buyer; or

 

(c)           result in any breach of, or
constitute a default (or event which with the giving of notice or lapse of
time, or both, would become a default) under, or give to others any rights of
termination, amendment, acceleration or cancellation of, or result in the
creation of any Encumbrance on any of the assets or properties of Buyer
pursuant to, any note, bond, mortgage, indenture, contract, agreement, lease,
license, permit, franchise or other instrument relating to such assets or
properties to which Buyer is a party or by which any of such assets or
properties is bound or affected, except as would not have a Material Adverse
Effect on Buyer.

 

5.4                                 Consents and Approvals. No consent, approval, authorization,
license, order, or permit of, or declaration, filing, or registration with, or
notification to, any Governmental Entity, or any other Person, is required to
be made or obtained by Buyer or any of its Affiliates in connection with the
execution, delivery, and performance of this Agreement and the consummation of
the transactions contemplated hereby, except (a) where failure to obtain
such consent, approval, authorization, or action, or to make such filing or
notification, would not have a Material Adverse Effect on Buyer and (b) as
set forth on Schedule 5.4.

 

5.5                                 Financing. Buyer has delivered to Seller true and complete
copies of the executed debt commitment letter from Deutsche Bank AG New York
Branch, Deutsche Bank Securities Inc., Banc of America Securities LLC and Bank
of America, N.A. (the “Debt Commitment Letter”), dated December 10, 2007,
and the executed capital commitment letters from Babcock & Brown
Infrastructure Limited, BBIFNA AIV Two, LP, Babcock & Brown Myria Pty
Ltd, Public Sector Pension Investment Board, and Stichting Pensioenfonds voor
de Gezondheid, Geestelijke en Maatschappelijke Belangen (PGGM) (the “Investor
Commitment Letter”), dated December 10, 2007. As of the date of this
Agreement, the Debt Commitment Letter and the Investor Commitment Letter and
the commitments contained therein, in the form so delivered, (i) have not
been in any manner withdrawn, altered, amended, modified, rescinded or revoked,
(ii) are in full force and effect and (iii) are legal, valid and
binding obligations of Buyer and to the Knowledge of Buyer, each of the other
parties thereto. The Investor Commitment Letter provides that the parties to
such Investor Commitment Letter are obligated to fund their commitments under
such letter for the purpose of paying the Purchase Price in the event that
either (a) Buyer agrees that the conditions in Article 9 have been
satisfied or waived, or (b) the Arbitrator delivers a Satisfied Conditions
Decision pursuant to Article 10, or is deemed to have issued or delivered
a Satisfied Conditions Decision in accordance with Section 10.1(a). The
Investor Commitment Letter also provide that (i) (x) it cannot be
withdrawn, rescinded or revoked or assigned (whether by operation of law,
merger consolidation or otherwise; provided that Babcock & Brown
Infrastructure Limited may assign all or a portion of its rights and
obligations under the Investor Commitment Letter to Affiliates it controls or
to Babcock & Brown Infrastructure Trust and Affiliates controlled by
Babcock & Brown Infrastructure Trust) prior to their term and cannot
otherwise be altered, amended or modified in a manner adverse to Seller, Buyer
or the Company or that would adversely impact the ability of any of them to
consummate the transactions contemplated hereunder or would delay the Closing
Date, and (y) the parties thereto and the amounts they are committed to
fund cannot be changed, in each case

 

23

 

(x) and (y) without
the prior written consent of Seller (it being understood that BBIFNA AIV Two,
LP and Babcock & Brown Myria Pty Ltd may make arrangements and enter
into agreements to effect any sale, transfer or disposition of their interests
in Buyer immediately after Closing that are permitted under Section 4(a)(i) of
the Shareholder Agreement), (ii) there are no conditions to funding for
purposes of paying the Purchase Price other than satisfaction or waiver by the
relevant Party of the conditions in Articles 8 and 9, and (iii) they will
terminate upon the earliest to occur of (w) the completion of the Closing
on the Closing Date, (x) 10 Business Days after termination of this
Agreement pursuant to any of Sections 11.1(a)-(f) in circumstances where
no claim of intentional or willful and material breach of this Agreement by
Buyer has been made or such claim has been finally adjudicated and denied, or (y) the
date that the Buyer Termination Fee is paid or, (z) as to an Investor’s
commitment under the Investor Commitment Letter, when such Investor pays its
Investor Percentage of the Buyer Termination Fee as contemplated by Section 11.5.
As of the date of this Agreement, Buyer does not have any reason to believe
that it will be unable to satisfy on a timely basis any term or condition to be
satisfied by it contained in each of the Debt Commitment Letter and the
Investor Commitment Letter. Buyer has fully paid any and all commitment and
other fees due and payable on or prior to the execution hereof in connection
with the Debt Commitment Letter and the Investor Commitment Letter.

 

5.6                                 Legal Proceedings. There are no Proceedings pending or, to
the Knowledge of Buyer, threatened seeking to restrain, prohibit, or obtain
damages or other relief in connection with this Agreement or the transactions
contemplated hereby.

 

5.7                                 Brokerage Fees. Except as set forth in Schedule 5.7,
neither Buyer nor any of its Affiliates have entered (directly or indirectly)
into any agreement with any Person that would obligate Seller, any Seller
Affiliate or any MidCon Entity to pay any commission, brokerage or “finder’s
fee” or other similar fee in connection with this Agreement or the transactions
contemplated herein.

 

5.8                                 Nature of Investment; Investment
Experience; Restricted Securities. In acquiring the Purchased Shares, Buyer is not
offering or selling, and will not offer or sell, the Purchased Shares for
Seller in connection with any distribution of any of such Purchased Shares, and
Buyer does not have a participation and will not participate in any such
undertaking or in any underwriting of such an undertaking except in compliance
with applicable securities Laws. Buyer acknowledges that it can bear the
economic risk of its investment in the Purchased Shares, and has such knowledge
and experience in financial and business matters that it is capable of
evaluating the merits and risks of an investment in the Purchased Shares. Buyer
is an “accredited investor” as such term is defined in Regulation D under the
Securities Act of 1933 (the “Securities Act”). Buyer understands that none of
the Purchased Shares will have been registered pursuant to the Securities Act
or any applicable state securities Laws, that the Purchased Shares will be
characterized as “restricted securities” under federal securities Laws and that
under such laws and applicable regulations none of such Purchased Shares can be
sold or otherwise disposed of without registration under the Securities Act or
an exemption therefrom.

 

5.9                                 Independent Investigation. Buyer hereby acknowledges and affirms
that it has completed its own independent investigation, analysis and
evaluation of the MidCon Entities, that it has made all such reviews and
inspections of the business, assets, results of operations,

 

24

 

condition (financial or
otherwise) and prospects of the MidCon Entities as it has deemed necessary or
appropriate, and that in making its decision to enter into this Agreement and
to consummate the transactions contemplated hereby it has relied solely on
Buyer’s own independent investigation, analysis, and evaluation of the MidCon
Entities. Buyer further acknowledges and understands that regulators and
shippers on the MidCon Entities’ pipelines have rights to challenge the rates
they are charged under certain circumstances as prescribed by Law, and that any
successful challenge could materially adversely affect the future earnings and
cash flows of the MidCon Entities.

 

5.10                           Buyer Status. Buyer is not an employee benefit plan
or other organization exempt from taxation pursuant to Section 501(a) of
the Code, a non-resident alien, a foreign corporation or other foreign Person,
or a regulated investment company within the meaning of Section 851 of the
Code.

 

ARTICLE
6

CONDUCT OF MIDCON ENTITIES PENDING CLOSING

 

6.1           Pre-Closing Restrictions. Except
as expressly provided in this Agreement, in Schedule 6.1, in the Company’s
2007 and 2008 Annual Budgets in the form attached hereto as Annex I (the “Current
Budget”) or as expressly agreed to in writing by Buyer, prior to the Closing,
Seller shall cause each of the MidCon Entities to conduct its operations in all
material respects according to its ordinary and usual course of business and
consistent with its past practice and use its Reasonable Efforts to preserve
intact its current business organization and to preserve its relationships with
customers, suppliers, licensors, licensees, advertisers, distributors and
others having business dealings with it. Without limiting the generality of the
foregoing, except as expressly provided in this Agreement, in Schedule 6.1, or
in the Current Budget, Seller shall not permit any MidCon Entity other than the
Joint Venture Entities (and with regard to the Joint Venture Entities, Seller
shall not consent to any of the following unless the withholding of such
consent would cause Seller to breach a duty owed to any of the Joint Venture
Entities or any partner thereof), without the prior written consent of Buyer,
which consent shall not be unreasonably withheld or delayed, to:

 

(a)           amend its charter or bylaws or other
governing instruments;

 

(b)           (i) issue, sell, or deliver any
shares of its capital stock of any class or any other securities or equity
equivalents; or (ii) amend in any material respect any of the terms of any
such securities outstanding as of the date hereof;

 

(c)           (i) split, combine, or
reclassify any shares of its capital stock or outstanding equity; (ii) repurchase,
redeem or otherwise acquire any of its securities; or (iii) adopt a plan
of complete or partial liquidation or resolutions providing for or authorizing
a liquidation, dissolution, merger, consolidation, restructuring,
recapitalization, or other reorganization of any MidCon Entity;

 

(d)           acquire, sell, lease, transfer, or
otherwise dispose of, directly or indirectly, any assets outside the ordinary
course of business consistent with past practice;

 

25

 

(e)           acquire (by merger, consolidation, or
acquisition of stock or assets or otherwise) any corporation, partnership, or
other business organization or division thereof;

 

(f)            (A) make or
rescind any express or deemed election relating to Taxes other than as mandated
by Law; (B) make a request for a Tax ruling, enter into any agreement with
a Taxing Authority with respect to Tax matters or provide a power of attorney
regarding Tax matters, in each case, which could affect any MidCon Entity after
the Closing Date; (C) settle or compromise any Tax claim or other
controversy relating to Taxes, to the extent the amount of such settlement is
equal to or greater than $50,000, except to the extent a liability has been
specifically accrued for with respect to such Tax claim or controversy on the
Balance Sheet in a manner consistent with GAAP; (D) file any amendments to
any previously filed Tax Returns that could affect the Taxes of a MidCon
Entity; (E) except as mandated by Law, change any of its methods of
reporting income or deductions for Tax purposes from those employed in the
preparation of the most recently filed Tax Return that has been previously
delivered or made available to Buyer on which such item of income or deduction
was previously reported; or (F) file any Tax Return in a manner that is
inconsistent with past custom and practice, except as may be required by a
change in Law;

 

(g)           amend the Current Budget or approve
any other budget for it or its subsidiaries;

 

(h)           incur or prepay any indebtedness (or
guaranty another person’s indebtedness), other than the MidCon Debt or in the
ordinary course of business in an amount less than $5 million in the aggregate,
or create any liens on or security interest in any of the assets of the Company
or its subsidiaries in connection therewith;

 

(i)            grant any stock bonuses, stock
options or stock-based arrangements from the Company or its subsidiaries for
their officers, directors or employees, or amend or provide for employee
pension, benefit or welfare plans or arrangements by the Company or its
subsidiaries other than ordinary course grants consistent with past practice;

 

(j)            approve projects for capital
expenditures outside the Current Budget other than capital expenditures
reasonably necessary in the event of an emergency, to safeguard life or
property, or to ensure compliance with Laws;

 

(k)           make any filing with the Federal
Energy Regulatory Commission otherwise than in the ordinary course, or
materially amend any government permit, materially amend any filing with any
governmental body, or seek any material governmental action;

 

(l)            settle a dispute or litigation
involving the Company or its subsidiaries that would materially adversely
effect the Company or its subsidiaries or require payment by the Company or its
subsidiaries of more than $10 million, individually or in the aggregate;

 

(m)          defer any expenditure that otherwise
would be made consistent with its past practice and practices of a reasonable
and prudent natural gas pipeline operator;

 

26

 

(n)           amend or modify the cash management
policies of the MidCon Entities or manage working capital other than in the
ordinary course of business consistent with past practices;

 

(o)           accelerate the collection of any
accounts receivable or delay the payment of any accounts payable, other than in
the ordinary course of business consistent with past practice; or

 

(p)           cause the Company or its subsidiaries
to enter into any contract to do any of the foregoing or to take any action,
appeal or proceeding in connection with any of the foregoing.

 

ARTICLE
7

ADDITIONAL AGREEMENTS

 

7.1           Access to Information and Confidentiality.
Between the date hereof and the Closing, Seller: (i) shall give Buyer and
its authorized representatives reasonable access, during regular business hours
and upon reasonable advance notice, to such facilities, books and records of
the MidCon Entities and to the facilities, books and records of Seller that are
related to the business of the MidCon Entities, in each case as is reasonably
necessary to allow Buyer and its authorized representatives to verify the
accuracy of any representation or warranty contained in the Agreement; and (ii) shall
cause officers of the MidCon Entities and Seller to furnish Buyer and its
authorized representatives with such financial and operating data and other
information with respect to the business of MidCon Entities as the Buyer may
from time to time reasonably request. Seller shall have the right to have a
representative present at all times during any such inspections and
examinations conducted at the offices or other facilities or properties of
Seller or the MidCon Entities. Additionally, Buyer shall hold in confidence all
such information on the terms and subject to the conditions contained in the
Confidentiality Agreement. Buyer shall have no right of access to, and Seller
shall have no obligation to provide to Buyer any information the disclosure of
which would jeopardize any privilege available to the MidCon Entities, Seller
or any Seller Affiliate relating to such information or would cause Seller, any
Seller Affiliate or any MidCon Entity to breach a confidentiality obligation. No
investigation or receipt of information pursuant to this Section 7.1 shall
affect any representation or warranty of Seller or the conditions to the
obligation of the Buyer to consummate the transactions contemplated by this
Agreement.

 

7.2                                 Regulatory and Other Authorizations and
Consents.

 

(a)           Filings; Additional Actions. Each
Party shall use Reasonable Efforts to obtain all material authorizations,
consents, orders, and approvals of, and to give all notices to and make all
filings with, all Governmental Entities (including those pertaining to the
Governmental Approvals) and other Third Parties that may be or become necessary
for its execution and delivery of, and the performance of its obligations under
this Agreement and will cooperate fully with the other Party in promptly
seeking to obtain all such material authorizations, consents, orders, and
approvals, giving such notices, and making such filings.

 

To the extent required by
the HSR Act, each Party shall:

 

27

 

(i)            file or cause to be filed, as
promptly as practicable but in no event later than the tenth (10th)
Business Day after the execution and delivery of this Agreement, with the
Federal Trade Commission and the United States Department of Justice, all
reports and other documents required to be filed by such Party under the HSR
Act concerning the transactions contemplated hereby; and

 

(ii)           promptly comply with, or cause to be
complied with, any requests by the Federal Trade Commission or the United
States Department of Justice for additional information concerning such
transactions, in each case so that the waiting period applicable to this
Agreement and the transactions contemplated hereby under the HSR Act shall
expire as soon as practicable after the execution and delivery of this
Agreement.

 

Each
Party shall request, and cooperate with the other Party in requesting, early
termination of any applicable waiting period under the HSR Act. Buyer shall pay
the filing fees payable in connection with the filings by the Parties required
by the HSR Act.

 

Each Party shall:

 

(i)            use Reasonable Efforts to promptly
gather and provide the necessary information required for purposes of making a
filing with CFIUS as soon as practicable after the date hereof in respect of
the transactions contemplated hereby under the Exon-Florio Amendment; and

 

(ii)           upon request by the other, use
Reasonable Efforts to promptly furnish the other with all true and accurate
information concerning itself, its operations, its subsidiaries, directors,
officers and stockholders and such other matters as may be reasonably necessary
or advisable in connection with the filing, notice or application made in
connection with the Exon-Florio Amendment, and the transactions contemplated by
this Agreement;

 

provided that the pre-notification filing with CFIUS relating to the
transaction be filed as promptly as practicable but in no event later than the
tenth (10th) Business Day after the
execution and delivery of this Agreement.

 

Each Party shall have the right to review and approve in advance all
characterizations of the information relating to such Party or to the
transactions contemplated by this Agreement that appear in any application,
notice, petition or filing made in connection with the transactions
contemplated by this Agreement, it being understood that neither Party shall
unreasonably withhold or delay its approval. The Parties agree that they will (i) consult
and cooperate with each other with respect to the obtaining of all Governmental
Approvals and in connection with any investigation or other inquiry, including
any Proceeding initiated by a Third Party and (ii) promptly inform the
other Party of any communication received by such Party from, or given by such
Party to, any Governmental Entity regarding any of the transactions
contemplated hereby.

 

28

 

(b)           Third Party Consents. Buyer
will use its Reasonable Efforts to assist Seller in obtaining any consents of
Third Parties necessary or advisable in connection with the transactions
contemplated by this Agreement, including providing to such Third Parties such
financial information with respect to Buyer as such Third Parties may
reasonably request.

 

7.3                                 Public Announcements. Buyer and Seller shall consult with
each other before they or any of their Affiliates issue any press release or
otherwise make any public statement with respect to this Agreement or the
transactions contemplated hereby. Buyer and Seller and their Affiliates shall
not issue any such press release or make any such public statement without the
consent of the other Parties, which consent shall not be unreasonably withheld
or delayed, except as may be required by Law or applicable rule of any
stock exchange.

 

7.4                                 Supplemental Disclosure. Each Party agrees that, with respect to
the representations and warranties of such Party contained in this Agreement,
such Party shall have the continuing obligation until the Closing to supplement
or amend promptly, and in any event not later than three Business Days prior to
the anticipated Closing Date, the information in such Party’s Disclosure
Schedule with respect to any matter hereafter arising or discovered which, if
existing or known at the date of this Agreement, would have been required to be
set forth or described in such Party’s Disclosure Schedule in order to make
such Party’s representations and warranties accurate. Buyer, on the one hand,
or Seller, on the other hand, supplementing or amending the information in its
or their Disclosure Schedules (the “Disclosing Party”) shall deliver a copy of
the amendment or supplement (in either case, the “Supplemental Disclosure”) to
the other Party or Parties, as the case may be (the “Receiving Party”). The
disclosures contained in any Supplemental Disclosure delivered pursuant to this
Section 7.4 shall not constitute a waiver or an exception to cure any
breaches of representations or warranties of the Delivering Party in
determining whether the closing conditions have been satisfied. Notwithstanding
the foregoing, in the event the sale of the Purchased Shares is consummated,
following such consummation, the Receiving Party may not seek any
indemnification from the Delivering Party pursuant to Article 12 hereto or
seek any other remedy with respect to the matters set forth in the Supplemental
Disclosure.

 

7.5                                 Expenses. Except as otherwise expressly provided in this
Agreement, all fees and expenses incurred in connection with this Agreement and
the transactions contemplated hereby shall be paid by the Party incurring such
fee or expense, whether or not the Closing shall have occurred.

 

7.6                                 Company Guarantees. Buyer shall either (a) execute and
deliver to the appropriate lenders or other obligees (the “Beneficiaries”)
under the Company Guarantees, such assumption agreements, other agreements and
other documents, and supply any credit support as reasonably required by each
Beneficiary such that, as a result, (i) Buyer shall be severally liable
for 80% of the obligations under the Company Guarantees and (ii) Seller
shall be severally liable for 20% of the obligations under the Company
Guarantees; provided, however, that if a Beneficiary requires that any such
obligation be joint and several as to the Parties, the Parties shall, prior to
the Closing, enter into an agreement which allocates such obligations between
them in accordance with their respective percentage ownership interests in the
Company following the Closing, or (b) at the request of Seller, provide
one or more backstop guarantees or letters of credit (each, a “Backstop
Guaranty”) in respect of 80% of the obligations under such

 

29

 

Company Guarantees in
favor of the obligors thereunder. Buyer shall provide to Seller copies of all
agreements and documents supplied to the Beneficiaries concurrently with their
delivery to a Beneficiary. If requested by Seller, Buyer shall, prior to the
Closing, execute and deliver an “Assumption of Guaranty Agreement” with respect
to each Company Guarantee (other than any Company Guarantee in respect of which
a Backstop Guarantee has been issued) in the form of Exhibit B and
shall request that each beneficiary of each such Company Guarantee enter into
such Assumption of Guaranty Agreement.

 

7.7                                 Transfer Taxes. Buyer and Seller shall each be
responsible for the payment of one half of any required payments of Transfer
Taxes resulting from the sale of the Purchased Shares.

 

7.8                                 Confidentiality and Standstill Agreements. After the date hereof, Seller shall
not, and shall not permit any of the MidCon Entities, other than the Joint
Venture Entities, to, terminate, amend, modify or waive any provision of any
confidentiality or standstill agreement to which Seller or any MidCon Entity is
a party. After the date hereof, Seller shall, and shall cause the MidCon
Entities, other than the Joint Venture Entities, to, enforce to the fullest
extent permitted under applicable Law, the provisions of any such agreement,
including without limitation, by obtaining injunctions to prevent any breaches
of such agreements and to enforce specifically the terms and provisions thereof
in any court having jurisdiction. Immediately following the date of execution
of this Agreement, to the extent permitted by the terms of any confidentiality
agreement with any Person, Seller shall request that any Person in receipt of
confidential information relating to any of the MidCon Entities which was
previously supplied by Seller or any of its Affiliates, including the MidCon
Entities, return all such confidential information to Seller or destroy or
permanently erase all copies of such confidential information.

 

7.9                                 Audited Financial Statements and Comfort
Letters. Not
later than thirty (30) days after the date hereof, Seller shall deliver to the
Buyer (i) audited balance sheets of the MidCon Entities as of December 31,
2006 and 2005, (ii) audited statements of income and cash flows of the
MidCon Entities for the years ended December 31, 2006 and 2005, and (iii) unaudited
balance sheets and statements of income and cash flows of the MidCon Entities
as of and for the nine (9) months ended September 30, 2007. All such
financial statements shall be prepared in accordance with the financial
disclosure requirements contained in the rules and regulations of the
Securities and Exchange Commission. Seller shall, at Buyer’s sole cost and
expense, provide, and cause the relevant officers and employees of it and its
Affiliates (including the Company) to provide, all necessary cooperation and
information in connection with the arrangement and obtaining of the financing
for Buyer’s obligations under Section 2.3 hereof as may be reasonably
requested by Buyer, including without limitation with prospective lenders and
investors in customary presentations (including “road show” presentations and
sessions with rating agencies), cooperation in the preparation and filing of
any offering documents, the issuance of any comfort letters, the receipt of any
auditors’ consents, certifications of the chief financial officer with respect
to solvency matters, the delivery of consolidated pro forma financial
information and to use Reasonable Efforts to cause each independent auditor to
so cooperate and provide assistance with the foregoing.

 

30

 

7.10                           Tax Matters.

 

(a)           On or prior to the Closing Date, all
Tax Sharing Agreements to which the MidCon Entities are a party to shall be
terminated and have no continuing force and effect with respect to the MidCon
Entities thereafter.

 

(b)           Seller shall not amend or revise any
Tax Return of or that includes the MidCon Entities without the Buyer’s written
consent which consent shall not be unreasonably withheld or delayed.

 

7.11                           Certain Disclosure Matters.

 

(a)           Each disclosure of Seller set forth
in Seller’s Disclosure Schedule shall limit a representation or warranty of
Seller only to the extent such disclosure specifically references the
particular representation or warranty it is intended to qualify or it is
reasonably apparent on the face of such disclosure that it qualifies such
particular representation or warranty.

 

(b)           Each disclosure of Buyer set forth in
Buyer’s Disclosure Schedule shall limit a representation or warranty of Buyer
only to the extent such disclosure specifically references the particular
representation or warranty it is intended to qualify or it is reasonably
apparent on the face of such disclosure that it qualifies such particular
representation or warranty.

 

(c)           Prior to the first use of any
offering memorandum relating to the MidCon Debt, the Company (i) shall
provide Buyer a reasonable opportunity to review and submit written comments on
such document, (ii) will consider such comments, and (iii) will not
include in such offering memorandum information about Buyer or the Investors to
which Buyer reasonably objects.

 

7.12                           Financing. Buyer shall use its Reasonable Efforts to take, or
cause to be taken, all actions and to do, or cause to be done, all things
necessary, proper or advisable to arrange and obtain the debt financing described
in the Debt Commitment Letter on the terms and conditions described in the Debt
Commitment Letter (provided that Buyer may amend or modify the Debt Commitment
Letter as long as the terms thereof would not adversely impact the ability of
Buyer, Seller or the Company to consummate the transactions contemplated hereby
or delay the Closing Date), including using Reasonable Efforts to (i) maintain
in effect the Debt Commitment Letter, timely pay any commitment fees that
become due and payable in accordance with the terms of the Debt Commitment
Letter, negotiate and enter into definitive agreements with respect to such
debt financing on the terms and conditions reflected in the Debt Commitment
Letter or on other terms no less favorable, in the aggregate, to Buyer, (ii) satisfy
on a timely basis all conditions in such definitive agreements that are within
its control, (iii) consummate such debt financing at or prior to Closing
in accordance with the terms of the Debt Commitment Letter and (iv) enforce
its rights to cause the lenders to provide such debt financing under the Debt
Commitment Letter (including by taking enforcement action to cause such lender
providing such debt financing to fund such financing). Buyer shall also use its
Reasonable Efforts to take, or cause to be taken, all actions and to do, or
cause to be done, all things necessary, proper or advisable to obtain the

 

31

 

financing contemplated by
the Investor Commitment Letter, including using Reasonable Efforts to (i) maintain
in effect the Investor Commitment Letter and timely pay any commitment fees
that become due and payable in accordance with the terms of the Investor
Commitment Letter, (ii) satisfy on a timely basis all conditions
applicable to Buyer in such Investor Commitment Letter that are within its
control, (iii) consummate the financing contemplated by the Investor
Commitment Letter at or prior to Closing and (iv) enforce its rights to
cause the Investors to provide the financing contemplated under the Investor
Commitment Letter (including by taking enforcement action to cause such
Investors providing such financing to fund such financing). Buyer will retain
all capital funded to Buyer pursuant to the Investor Commitment Letter and the
Debt Commitment Letter to satisfy its obligations to Seller hereunder until
such obligations to Seller have been satisfied. Buyer will not, and will not
consent to, the withdrawal, rescission or revocation of the Investor Commitment
Letter, any changes in the parties thereto or the amounts they are committed to
fund thereunder (it being understood that BBIFNA AIV Two, LP and Babcock &
Brown Myria Pty Ltd may make arrangements and enter into agreements to effect
any sale, transfer or disposition of their interests in Buyer immediately after
Closing that are permitted under Section 4(a)(i) of the Shareholder
Agreement), or the alteration, amendment or modification of the Investor
Commitment Letter in a manner adverse to Seller, Buyer or the Company or that
would adversely impact the ability of any of them to consummate the
transactions contemplated hereunder or would delay the Closing Date, in each
case above without the prior written consent of Seller. The parties to the
Investor Commitment Letter (other than Buyer) or their permitted assignees will
be the only owners of Buyer immediately after completion of the Closing. The
Investor Commitment Letter may not be assigned (whether by operation of law,
merger, consolidation or otherwise; provided that Babcock & Brown
Infrastructure Limited may assign all or a portion of its rights and
obligations under the Investor Commitment Letter to Affiliates it controls or
to Babcock & Brown Infrastructure Trust and Affiliates controlled by
Babcock & Brown Infrastructure Trust) without the prior written
consent of Seller. Notwithstanding Section 7.4, Buyer may not create,
amend or supplement Section 5.5 of the Buyer’s Disclosure Schedule or
create, amend or supplement other disclosures in Buyer’s Disclosure Schedule
that would have the same effect.

 

7.13                           Transfer of Equity Interests. Seller will contribute all of the
outstanding equity interests of Kinder Morgan Illinois Pipeline LLC to MidCon
or a wholly-owned subsidiary of MidCon prior to the Closing Date.

 

7.14                           Seller’s Liens. Seller agrees
to use its Reasonable Efforts to obtain the release of all liens with respect
to assets and stock of the MidCon Entities granted under the Security Agreement
and the Pledge Agreement, each dated May 30, 2007, among Seller, the
subsidiary grantors named therein and the collateral agent named therein
(together, the “Security Agreements”) with respect to the indebtedness set
forth on Schedule 4.2(c) of the Seller Disclosure Schedule under the
headings “MBO Debt” and “Knight Inc. Debt” on or prior to the Closing Date.

 

7.15                           Investor Letter
of Credit. On or before 11:59 p.m. (New York City time)
on December 17, 2007, Buyer shall deliver to Seller either the initial Investor Letter of
Credit described in clause (i) of the definition thereof or the Cash
Collateral. The Investor Letter of Credit or the Cash Collateral shall be used
for securing payment of the Buyer Termination Fee

 

32

 

under Section 11.5.

 

7.16                           Additional Actions. Each of the Parties hereto agrees to
use its Reasonable Efforts to take, or cause to be taken, all appropriate
action, and to do, or cause to be done, all things necessary, proper or
advisable to consummate and make effective, in the most expeditious manner
reasonably practicable, the purchase and sale of the Purchased Shares
contemplated by this Agreement.

 

ARTICLE
8

CONDITIONS TO OBLIGATIONS OF SELLER

 

The
obligations of Seller to consummate the transactions contemplated by this
Agreement shall be subject to the fulfillment as of the Closing Date of each of
the following conditions:

 

8.1                                 Accuracy of Representations and
Warranties. All
representations and warranties of Buyer contained in this Agreement shall be
deemed to have been made again at and as of the Closing Date, and shall then be
true and correct (except to the extent such representations and warranties
expressly relate to an earlier date, and in such case, shall be true and
correct on and as of such earlier date) except for such failure of
representations and warranties to be true and correct (without regard to any
qualifications with respect to materiality or Material Adverse Effect contained
therein) that would not, individually or in the aggregate, be reasonably likely
to result in a Material Adverse Effect on Seller or the MidCon Entities
following the Closing.

 

8.2                                 Performance of Covenants and Agreements. Buyer shall have performed and complied
in all material respects with all covenants and agreements required by this
Agreement to be performed or complied with by it on or prior to the Closing
Date (it being understood that failure to comply with one or more covenants or
agreements which failure, individually or in the aggregate, has no material
impact on the other Party, the MidCon Entities or the expected benefits of the
transactions contemplated hereby shall constitute one manner of compliance in
all material respects). All deliveries contemplated by Section 3.3 shall
have been made.

 

8.3                                 HSR Act and Consents.

 

(a)           All waiting periods (and any
extensions thereof) applicable to this Agreement and the transactions
contemplated hereby under the HSR Act shall have expired or been terminated.

 

(b)           CFIUS (or other authority that may be authorized to so act) shall have notified Seller in writing that it
has determined not to investigate the transactions contemplated by this
Agreement, the LLC Agreement, the Shareholder Agreement or the O&R
Agreement, pursuant to the powers
vested in it by the Exon-Florio Amendment or, in the event that CFIUS has undertaken such an investigation, CFIUS
shall have terminated such investigation without the President of the United
States or CFIUS (or other authority that may be authorized to so act) having requested Buyer or Seller to modify
the transactions contemplated by this Agreement, the LLC Agreement, the
Shareholder Agreement or the O&R Agreement or otherwise enter into any

 

33

 

other
commitment to protect the National Security of the United States as determined by the Exon-Florio Amendment.

 

(c)           All other Governmental Approvals and
Third Party consents specified on Schedules 4.6 and 5.4 shall have been
obtained.

 

8.4                                 Legal Proceedings. No preliminary or permanent injunction
or other order, decree, or ruling issued by a Governmental Entity, and no
statute, rule, regulation, or executive order promulgated or enacted by a
Governmental Entity, which restrains, enjoins, prohibits, or otherwise makes
illegal the consummation of the transactions contemplated hereby shall be in
effect.

 

8.5                                 Credit Requirements. Buyer and its Affiliates shall have
performed their obligations under Section 7.6 with respect to the
assumption of the Company Guarantees, the applicable portion of cash deposits
or other credit support shall have been returned to Seller or a Seller
Affiliate and Seller and all Seller Affiliates shall have been released from
their obligations under the Company Guarantees, unless at Seller’s request
Buyer shall have provided a Backstop Guaranty in respect of any such Company
Guarantees, in accordance with Section 7.6. Additionally, in accordance
with Section 7.6, if required, substitute agreements or arrangements of
Buyer or its Affiliates shall be in effect.

 

8.6                                 Operations and Reimbursement Agreement. NGPL and Knight Inc. shall have entered
into an Operations and Reimbursement Agreement in the form attached hereto as Exhibit A
(the “O&R Agreement”).

 

8.7                                 MidCon Debt and MidCon Payment. The issuer of the MidCon Debt shall
have closed the offering of and received the proceeds from the issuance (which
may have multiple tranches) with a par value (i) of no less than $2.65
billion but no greater than $2.8 billion in principal amount of debt securities
with an Interest Rate no greater than 7.125% per annum, (ii) of more than
$2.8 billion but less than $3.0 billion in principal amount of debt securities
with an Interest Rate no greater than 7.25% per annum, or (iii) of $3.0
billion in principal amount of debt securities with an Interest Rate of no
greater than 7.4% per annum, in each case with a weighted average life to
maturity from issuance of at least seven (7) years; provided that in any
event the terms applicable to such debt securities shall be consistent in all
material respects with those set forth on the term sheet set forth in Exhibit E.
The proceeds of the MidCon Debt shall have been paid to Seller in repayment of
amounts owed by the Company to Seller.

 

8.8                                 Five Year Tranche.

 

Either:

 

(a)           One tranche of the MidCon Debt shall
have a maturity from issuance of approximately five (5) years and shall be
issued at par with a par value of at least $800.0 million in principal amount
of debt securities (the “Five Year Tranche”). The Five Year Tranche shall be
issued at an Interest Rate that if converted to a LIBOR swapped equivalent
rate, as described below (“Libor Swapped Equivalent Rate”), is no greater than
250 basis points (2.5%). The Libor Swapped Equivalent Rate shall be determined
at the time of the initial pricing of the Five Year

 

34

 

Tranche by subtracting
the midmarket 5 year USD Libor Swap Rate (found on the Bloomberg system screen
IRSB US sheet #1) at such time of initial pricing from the Interest Rate of the
Five Year Tranche; or

 

(b)           Seller shall have elected to have a
reduction in the Purchase Price pursuant to Section 2.3(c).

 

ARTICLE
9

CONDITIONS TO OBLIGATIONS OF BUYER

 

The obligations of Buyer
to consummate the transactions contemplated by this Agreement shall be subject
to the fulfillment as of the Closing Date of each of the following conditions:

 

9.1                                 Accuracy of Representations and
Warranties. All
representations and warranties of Seller contained in this Agreement shall be
deemed to have been made again at and as of the Closing Date, and shall then be
true and correct (except to the extent such representations and warranties
expressly relate to an earlier date, and in such case, shall be true and
correct on and as of such earlier date) except for such failure of
representations and warranties to be true and correct (without regard to any qualifications
with respect to materiality or Material Adverse Effect contained therein) that,
individually or in the aggregate, would not be reasonably likely to result in a
Material Adverse Effect on the MidCon Entities.

 

9.2                                 Performance of Covenants and Agreements. Seller shall have performed and
complied in all material respects with all covenants and agreements required by
this Agreement to be performed or complied with by it on or prior to the
Closing Date (it being understood that failure to comply with one or more
covenants or agreements which failure, individually or in the aggregate, has no
material impact on the other Party, the MidCon Entities or the expected
benefits of the transactions contemplated hereby shall constitute one manner of
compliance in all material respects). All deliveries contemplated by Section 3.2
shall have been made.

 

9.3                                 HSR Act and Consents.

 

(a)           All waiting periods (and any
extensions thereof) applicable to this Agreement and the transactions
contemplated hereby under the HSR Act shall have expired or been terminated.

 

(b)           CFIUS (or other authority that may be authorized to so act) shall have notified Seller in writing that it
has determined not to investigate the transactions contemplated by this
Agreement, the LLC Agreement, the Shareholder Agreement or the O&R
Agreement, pursuant to the powers
vested in it by the Exon-Florio Amendment or, in the event that CFIUS has undertaken such an investigation, CFIUS
shall have terminated such investigation without the President of the United
States or CFIUS (or other authority that may be authorized to so act) having requested Buyer or Seller to modify
the transactions contemplated by this Agreement, the LLC Agreement, the
Shareholder Agreement or the O&R Agreement or otherwise enter into any other commitment to protect the National
Security of the United States as determined by the Exon-Florio Amendment.

 

35

 

(c)           All other Governmental Approvals and
Third Party consents specified on Schedules 4.6 and 5.4 shall have been
obtained.

 

9.4                                 Legal Proceedings. No preliminary or permanent injunction
or other order, decree or ruling issued by a Governmental Entity, and no
statute, rule, regulation or executive order promulgated or enacted by a Governmental
Entity, which restrains, enjoins, prohibits, or otherwise makes illegal the
consummation of the transactions contemplated hereby shall be in effect.

 

9.5                                 MidCon Debt and MidCon Payment. The issuer of the MidCon Debt shall
have closed the offering of and received the proceeds from the issuance (which
may have multiple tranches) with a par value (i) of no less than $2.65
billion but no greater than $2.8 billion in principal amount of debt securities
with an Interest Rate no greater than 7.125% per annum, (ii) of more than
$2.8 billion but less than $3.0 billion in principal amount of debt securities
with an Interest Rate no greater than 7.25% per annum, or (iii) of $3.0
billion in principal amount of debt securities with an Interest Rate of no
greater than 7.4% per annum, in each case with a weighted average life to
maturity from issuance of at least seven (7) years; provided that in any
event the terms applicable to such debt securities shall be consistent in all
material respects with those set forth on the term sheet set forth in Exhibit E.
The proceeds of the MidCon Debt shall have been paid to Seller in repayment of
amounts owed by the Company to Seller.

 

9.6                                 Five Year Tranche.

 

Either:

 

(a)           One tranche of the MidCon Debt shall
have a maturity from issuance of approximately five (5) years and shall be
issued at par with a par value of at least $800.0 million in principal amount
of debt securities (the “Five Year Tranche”). The Five Year Tranche shall be
issued at an Interest Rate that if converted to a LIBOR swapped equivalent
rate, as described below (“Libor Swapped Equivalent Rate”), is no greater than
250 basis points (2.5%). The Libor Swapped Equivalent Rate shall be determined
at the time of the initial pricing of the Five Year Tranche by subtracting the
midmarket 5 year USD Libor Swap Rate (found on the Bloomberg system screen IRSB
US sheet #1) at such time of initial pricing from the Interest Rate of the Five
Year Tranche; or

 

(b)           Seller shall have elected to have a
reduction in the Purchase Price pursuant to Section 2.3(c).

 

9.7                                 Operations and Reimbursement Agreement. NGPL and Seller shall have entered into
the O&R Agreement.

 

9.8                                 FIRPTA Certificate. Seller shall have provided to Buyer a
duly executed certificate of non-foreign status in the form and manner
that complies with Section 1445 of the Code and the Treasury Regulations
thereunder.

 

36

 

ARTICLE
10

CLOSING ARBITRATION

 

10.1         Closing Arbitration.

 

(a)           In the event that, (i) on the
Business Day immediately prior to the Final Date or the Extended Final Date, as
the case may be, Buyer provides notice to Seller that it believes in good faith
that the conditions to closing set forth in Article 8 and Article 9
(excluding the last sentence of Section 8.2 and the last sentence of Section 9.2)
are satisfied or waived, and Seller provides return notice to Buyer within five
(5) Business Days, that it believes in good faith that the conditions set
forth in Article 8 (excluding the last sentence of Section 8.2) have
not been satisfied or waived, stating which condition(s) have not been
satisfied or waived and a brief description of the failure of such condition(s) to
be satisfied or waived, or (ii) on the Business Day immediately prior to
the Final Date or the Extended Final Date, as the case may be, Seller provides
notice to Buyer that it believes in good faith that the conditions to closing
set forth in Article 8 and Article 9 (excluding the last sentence of Section 8.2
and the last sentence of Section 9.2) are satisfied or waived, and Buyer
provides return notice to Seller within five (5) Business Days, that it
believes in good faith that the conditions set forth in Article 9
(excluding the last sentence of Section 9.2) have not been satisfied or
waived, stating which condition(s) have not been satisfied or waived and a
brief description of the failure of such condition(s) to be satisfied or
waived, or (iii) the Parties mutually agree in writing to arbitrate
whether conditions to closing have been satisfied, then such dispute shall be
submitted to arbitration that will be conducted in Chicago, Illinois, and,
except as herein specifically stated, in accordance with the commercial
arbitration rules of the American Arbitration Association (“AAA
Arbitration Rules”) then in effect. If Seller, in the case of clause (i) above,
does not provide return notice within five (5) Business Days, a Satisfied
Conditions Decision (as defined below) in favor of Buyer shall be deemed to
have been issued.  If Buyer, in the case
of clause (ii) above, does not provide return notice within five (5) Business
Days, a Satisfied Conditions Decision in favor of Seller shall be deemed to
have been issued.

 

(b)           Buyer and Seller shall jointly select
a nationally recognized law firm or attorney that has significant experience in
merger and acquisition transactions of similar complexity that is not counsel
to either Buyer, Seller or any Investor and is otherwise neutral and impartial;
provided, however, that if Buyer and Seller are unable to select such
nationally recognized law firm or attorney within five (5) Business Days
of the date of the return notice referred to in (a) above, either Party
may request the American Arbitration Association to appoint, within ten (10) Business
Days from the date of such request, a nationally recognized law firm or
attorney, in each case meeting the requirements set forth above.  The firm or attorney so selected and
accepting such selection shall be referred to herein as the “Arbitrator.”

 

(c)           The Parties shall each submit a
summary description of their position with respect to the specific closing
conditions in dispute within 15 Business Days of the appointment of the
Arbitrator.  Unless otherwise mutually
agreed to by the Parties, during such period each Party shall allow and
participate in discovery as follows:

 

(i)            Each Party may (1) conduct
three (3) non-expert depositions of no more than five (5) hours of
testimony each, with any deponents employed by any 

 

37

 

Party to appear for deposition in Chicago, Illinois; (2) propound
a single set of requests for production of documents containing no more than
ten (10) individual requests; (3) propound up to twenty (20) written
interrogatories and (4) propound up to ten (10) requests for
admission.  Any objections or responses
to such discovery shall be due on or before five (5) Business Days after
service.  The Arbitrator shall have
subpoena power to compel delivery of such discovery items.

 

(ii)           The Arbitrator may, on application by
either Party, authorize additional discovery only if deemed essential to avoid
injustice.  In the event that remote
witnesses might otherwise be unable to attend the arbitration, arrangements
shall be made to allow their live testimony by video conference during the
arbitration hearing.

 

(d)           The Arbitrator shall have authority
to determine either (i) that the disputed closing conditions have been
satisfied or waived as of the date of the initial notice under Section 10.1(a)(i) or
(ii), as applicable, in accordance with the terms and conditions of this
Agreement (a “Satisfied Conditions Decision”), in which case the Parties are
obligated to consummate the transactions contemplated hereby, except as
provided in the next succeeding sentence, or (ii) that the disputed
closing conditions have not been satisfied or waived as of the date of the
initial notice under Section 10.1(a)(i) or (ii), as applicable, in
accordance with the terms and conditions of this Agreement (an “Unsatisfied
Conditions Decision”), in which case the Parties are not obligated to
consummate the transactions contemplated hereby.  In the event Buyer provides the initial notice
under Section 10(a)(i) and the Arbitrator delivers a Satisfied
Conditions Decision, Buyer shall not be obligated to consummate the
transactions contemplated hereby if the conditions in Article 9 have not
been satisfied or waived as of the Closing Date.  The Arbitrator shall deliver to Buyer and
Seller, as promptly as practicable and in any event within twenty (20) Business
Days after the latest date of submission of a summary description by one of the
Parties, a written decision, which shall be final and binding upon the Parties
to the fullest extent permitted by applicable Law and may be enforced in any
court having jurisdiction.  The Parties
agree that, once the issue has been submitted to the Arbitrator, there shall be
no further litigation relating to satisfaction of closing conditions other than
enforcement of the decision of the Arbitrator.

 

(e)           The Parties agree that the existence,
conduct and content of any arbitration pursuant to this Article 10 shall
be kept confidential and no Party shall disclose to any person any information
about such arbitration, except as may be required by Law or by any Governmental
Entity or for financial reporting purposes in each Party’s financial
statements.

 

(f)            The loser of the arbitration shall
bear all reasonable, documented legal and other fees and costs incurred in
connection with this arbitration (including the fees and expenses of the
Arbitrator).

 

ARTICLE
11

TERMINATION, AMENDMENT, WAIVER AND LIMITATION OF REMEDIES

 

11.1         Termination.  Subject to the provisions of
Sections 11.2 and 11.3 below, this Agreement may be terminated at any time
prior to the Closing in the following manner:

 

 

38

 

(a)           by mutual written consent of Seller
and Buyer;

 

(b)           by either Seller or Buyer, if any
Governmental Entity with jurisdiction over such matters shall have issued an
order or injunction restraining, enjoining, or otherwise prohibiting the sale
of the Purchased Shares hereunder and such order, decree, ruling, or other
action shall have become final and unappealable provided that such Party has
satisfied its obligations under Section 7.2(a) in response to the
actions or requests of such Governmental Entity;

 

(c)           by either Buyer or Seller if the
other Party (i) has breached any of its representations or warranties and,
as a result of such breach, a condition to the obligation to consummate the
transactions contemplated by this Agreement set forth in Article 8 (in the
case of termination by Seller) or Article 9 (in the case of termination by
Buyer) becomes incapable of satisfaction or (ii) fails to comply in any
material respect with any of its covenants or agreements in this Agreement (it
being understood that failure to comply with one or more covenants or
agreements which failure, individually or in the aggregate, has no material
impact on the other Party, the MidCon Entities or the expected benefits of the
transactions contemplated hereby shall constitute one manner of compliance in
all material respects); provided that the terminating Party must give the
defaulting Party at least fifteen (15) days’ prior notice of such failure and
the failure is not, or cannot be, cured before expiration of such period;

 

(d)           by either Seller or Buyer, if the
Closing shall not have occurred on or before March 31, 2008 (the “Final
Date”); provided that if the conditions in Section 8.3(a) or (b) or
Section 9.3(a) or (b) have not been satisfied, or any other
Governmental Approvals have not been received, on or before March 31,
2008, either Party may unilaterally extend such March 31, 2008 date to June 30,
2008 (the “Extended Final Date”), by notice delivered to the other Party on or
prior to March 31, 2008; provided further, that if on such Final Date or
Extended Final Date, the initial notice pursuant to Section 10(a)(i) or
(ii) shall have been delivered, such date shall be further extended to a
date that is 12 Business Days after the date on which the Arbitrator delivers
or is deemed to have delivered to Buyer and Seller its Satisfied Conditions
Decision or its Unsatisfied Conditions Decision; and provided further, that
Buyer may terminate this Agreement if on or before January 31, 2008,
either the offering of the MidCon Debt has not closed or MidCon or a
newly-formed wholly-owned subsidiary of MidCon has not obtained a fully
underwritten debt commitment for the MidCon Debt on terms that would satisfy
the conditions set forth in Section 9.5 and that contains only typical
administrative conditions to closing the underwritten offering of the MidCon
Debt that Seller reasonably believes can be satisfied in a timely manner and
conditions that are applicable to the closing of the offering of the MidCon
Debt that are also conditions to the Closing, with appropriate changes for
differences in the closing dates.  In any
such event the right to terminate this Agreement under this Section 11.1(d) shall
not be available to a Party whose failure to fulfill any obligation under this
Agreement shall have been the cause of, or shall have resulted in, the failure
of the Closing to occur prior to such date;

 

(e)           by either Seller or Buyer, if any
condition to its obligation to consummate the transactions contemplated by this
Agreement set forth in Article 8 (in the case of termination by Seller) or
Article 9 (in the case of termination by Buyer) becomes incapable of
satisfaction prior to the date set forth in the first clause of Section 11.1(d),
as it may be extended; provided, 

 

 

39

 

however, that the failure
of such condition to be met is not the result of a material breach of this
Agreement by the Party seeking to terminate this Agreement;

 

(f)            by either Buyer or Seller following
the delivery of an Unsatisfied Conditions Decision by the Arbitrator in
accordance with Article 10 with respect to one (1) or more
conditions to closing set forth in Article 8 (in the case of termination
by Seller) or in Article 9 (in the case of termination by Buyer); provided
that the failure of any such condition to be met is not the result of a
material breach of this Agreement by the Party seeking to terminate this
Agreement;

 

(g)           by Seller if after ten (10) Business
Days following the delivery, or deemed issuance or delivery pursuant to Section 10.1(a),
of a Satisfied Conditions Decision Buyer has not purchased the Purchased Shares
and delivered the Purchase Price to Seller, unless (x) Seller provided the
initial notice under Section 10.1(a) and, subsequent to the date of
such notice, Seller has taken action with the intent to, and which does,
materially diminish the value of the Company (taking into account its
investment in the other MidCon Entities) or Seller has failed to make the
deliveries required to be made by it at the Closing pursuant to Section 3.2
(other than Sections 3.2(a), (f) and (j)) or (y) Buyer provided the
initial notice under Section 10.1(a) and the conditions set forth in Article 9
have not been satisfied or waived as of the Closing; or

 

(h)           by Seller, if Buyer has not delivered
the initial Investor Letter of Credit or the Cash Collateral as required by Section 7.15.

 

11.2         Effect of Termination.  If a Party terminates this Agreement under Section 11.1,
then such Party shall promptly give notice to the other Party specifying the
provision hereof pursuant to which such termination is made, and this Agreement
shall become void and have no effect, except that the agreements contained in
this Article 11, the confidentiality provisions of Section 7.1, and
Sections 7.3, 7.5, 11.5 and 11.6 shall survive the termination hereof.  Following such termination, (a) Buyer
shall have no liability for damages hereunder, other than payment of the Buyer
Termination Fee, under any circumstances and payment of the Buyer Termination
Fee pursuant to the terms of Section 11.5 shall be Seller’s sole and
exclusive remedy against Buyer under this Agreement, and (b) Seller shall
be liable for damages hereunder only (i) for the failure of Seller to
deliver the Purchased Shares in accordance with Section 3.2 (so long as
Buyer is not in breach of any of its obligations under the Agreement in a
manner that would permit Seller to terminate this Agreement pursuant to Section 11.1(c))
and (ii) for any intentional or willful and material breach of this
Agreement by Seller.  No termination of
this Agreement shall affect the obligations of the Parties pursuant to the
Confidentiality Agreement, except to the extent specified therein.

 

11.3         Amendment.  This Agreement may not be amended except by
an instrument in writing signed by or on behalf of each of the Parties.

 

11.4         Waiver.  Any Party may (i) waive any inaccuracies
in the representations and warranties of another Party contained herein or in
any document, certificate, or writing delivered pursuant hereto or (ii) waive
compliance by any other Party with any of such other Party’s agreements or
fulfillment of any conditions to its own obligations contained herein.  Any agreement on the part of a Party to any
such waiver shall be valid only if set forth in an 

 

 

40

 

instrument in writing
signed by or on behalf of such Party.  No
failure or delay by a Party in exercising any right, power, or privilege
hereunder shall operate as a waiver thereof nor shall any single or partial
exercise thereof preclude any other or further exercise thereof or the exercise
of any other right, power, or privilege. 
No waiver of any of the provisions of this Agreement or a breach hereof
shall be deemed or shall constitute a waiver of any other provision hereof
(regardless of whether similar), nor shall any such waiver constitute a
continuing waiver unless otherwise expressly provided.

 

11.5         Buyer Termination Fee.

 

(a)           Buyer agrees that, if this Agreement
shall be terminated by Seller (i) pursuant to Section 11.1(c), (d), (e) or
(f) and a court of competent jurisdiction determines in a final judgment
which is subject to no further appeal or review (or which is not fully bonded)
in an action or proceeding to which both Seller and Buyer are parties, that
this Agreement was duly and validly terminated by Seller pursuant to such Section and
the circumstances giving rise to Seller’s ability to terminate were caused by
an intentional or willful and material breach of this Agreement by Buyer or (ii) pursuant
to Section 11.1(g) or 11.1(h), then, in each case, Seller shall be
entitled to collect a fee of $150,000,000 (the “Buyer Termination Fee”) in cash
in respect of all damages, fees and liabilities hereunder.

 

(b)           If the Buyer Termination Fee has
become due and payable and an Investor Letter of Credit or Cash Collateral has
been delivered pursuant to Section 7.15 or 11.5(e), Seller shall collect
the Buyer Termination Fee by first attempting to draw with a conforming draft
(and if required, a conforming declaration) upon the Investor Letter of Credit
or withdrawing Cash Collateral as contemplated by Section 11.5(e), and
Buyer upon such payment or withdrawal shall not have any further liability with
respect to this Agreement or the transactions contemplated hereby (and such
payment shall satisfy and discharge Buyer and each Buyer Affiliate from any and
all liabilities and obligations arising under or in connection with this
Agreement and the Investor Guarantees); provided that if (x) an Investor
Letter of Credit has been delivered pursuant to Section 7.15 or Section 11.5(e),
(y) the Buyer Termination Fee is due and payable in accordance with this
Agreement, and (z) full payment of the Buyer Termination Fee is not made
under the Investor Letter of Credit for any reason (other than, at a time when
the Investor Letter of Credit is in full force and effect, Seller did not
present a conforming draft and, if required, a conforming declaration) at such
time (such failure to pay the Buyer Termination Fee under such circumstances is
an “LC Failure”), Seller shall be entitled to collect the Buyer Termination
Fee, and the Buyer Termination Fee will be paid, as provided in Section 11.5(d);
it being understood that in no event shall Seller be entitled to collect the
Buyer Termination Fee more than once. 
After the initial delivery of an Investor Letter of Credit pursuant to Section 7.15
or 11.5(e), Buyer shall maintain an Investor Letter of Credit in full force and
effect until the earliest to occur of (i) the Closing, (ii) Seller’s
collection of the Buyer Termination Fee pursuant to this Section 11.5, (iii) 30
days after the Arbitrator delivers an Unsatisfied Conditions Decision, (iv) after
a termination of this Agreement by Seller pursuant to Section 11.1(c),
(d), (e) or (f), 30 days after any claim or dispute with respect to
whether there has been an intentional or willful and material breach of this
Agreement by Buyer is resolved by a court of competent jurisdiction in a final
judgment which is subject to no further appeal or review in an action to which
Buyer and Seller are both parties which determines that this Agreement was not
duly and validly terminated by 

 

 

41

 

Seller pursuant to Section 11.1(c), (d), (e) or
(f) and/or that the circumstances giving rise to Seller’s ability to
terminate were not caused by an intentional or willful and material breach of
this Agreement by Buyer, (v) 10 Business Days after termination of the
Agreement by Buyer pursuant to Section 11.1(c), (d), (e) or (f) (provided
that this clause (v) is not applicable if prior to the expiration of such
10 Business Days Seller gives Notice to Buyer that it believes such termination
was invalid), (vi) ten Business Days after termination of this Agreement
pursuant to Section 11.1(a), or (vii) ten Business Days after termination
of this Agreement pursuant to Section 11.1(b) (provided that this
clause (vii) is not applicable if prior to the expiration of such ten
Business Days Seller gives Notice to Buyer that it believes such termination
was invalid). If pursuant to clause (v) or (vii) above Seller has
given Notice to Buyer that it believes that the termination of this Agreement
by Buyer described in those clauses was invalid, Buyer shall not be required to
maintain an Investor Letter of Credit in full force and effect after the
earlier of (1) ten Business Days after Seller’s Notice to Buyer that
Seller no longer believes that such termination was invalid, or (2) 30
days after any claim or dispute with respect to whether such termination by
Buyer was valid is resolved by a court of competent jurisdiction in a final
judgment which is subject to no further appeal or review in an action to which
Buyer and Seller are both parties which determines that this Agreement was
validly terminated by Buyer or Seller pursuant to Section 11.1(b) or
by Buyer pursuant to Section 11.1(c), (d), (e) or (f), as the case
may be.  If, within 15 Business Days
before the stated expiration date of any Investor Letter of Credit, such
Investor Letter of Credit has not been extended or Buyer has not replaced such
Investor Letter of Credit with a new Investor Letter of Credit delivered to
Seller, that is either (x) issued by the same bank and identical in form
and substance (with changes only to the Letter of Credit number, the date of
its issuance, and the expiration date (which must be at least three months
later than the Investor Letter of Credit which it replaces)) as the Form of
Investor Letter of Credit attached as Exhibit G to this Agreement, or (y) of
like tenor, that is from a financial institution with a credit rating that is
greater than or equal to the credit rating on the date of this Agreement of the
financial institution that issued the original Investor Letter of Credit, and
that is in form and substance reasonably acceptable to Seller, Seller shall be
entitled to draw upon such Investor Letter of Credit for the full face amount
of $150,000,000 (or the reduced amount of any replacement Investor Letter of
Credit contemplated by Section 11.5(d) after an LC Failure) if Seller
presents its conforming draft (and, if required, a conforming declaration)
prior to the earliest occurrence of the dates in clauses (i), (ii), (iii),
(iv), (v) (if applicable), (vi), or (vii) (if applicable) of the
second preceding sentence or the date in the immediately preceding
sentence.  Upon Seller’s receipt of such
$150,000,000 (or such reduced amount if the balance of the Buyer Termination
Fee has been paid pursuant to Section 11.5(d)), the Buyer Termination Fee
shall be deemed to have been paid to Seller, unless and until such amount is
returned to Buyer in accordance with the following: if subsequently (i) after
a termination of this Agreement by Seller pursuant to Section 11.1(c),
(d), (e) or (f), a court of competent jurisdiction determines in a final
judgment which is subject to no further appeal or review in an action to which
Buyer and Seller are both parties that this Agreement was not duly and validly
terminated by Seller pursuant to Section 11.1(c), (d), (e) or (f),
and/or that the circumstances giving rise to Seller’s ability to terminate this
Agreement were not caused by an intentional or willful and material breach of
this Agreement by Buyer, (ii) the Arbitrator delivers an Unsatisfied
Conditions Decision or (iii) this Agreement is terminated under any other
circumstances that do not entitle Seller to receive the Buyer Termination Fee,
then in either case Seller shall return to Buyer any and all amounts drawn upon
and received pursuant to such Investor Letter of Credit, together with interest

 

 

42

 

thereon, such interest to be calculated using the 30
day LIBOR rate. Nothing in this Section shall affect the liability of
Seller for wrongful draw on an Investor Letter of Credit.

 

(c)           If this Agreement is terminated pursuant
to Section 11.1(h), then Seller may collect the Buyer Termination Fee by
making demand on the Investor Guarantees delivered by BBIFNA AIV Two, LP and
Babcock & Brown International Pty Ltd or on any letter of credit or
other security accepted by Seller for such purpose, and each of the guarantors
thereunder, (and the appropriate parties with respect to any such letter of
credit or other security) will thereupon pay to Seller the portion of the Buyer
Termination Fee set forth in its Investor Guarantee or such other documents.
Upon such payment of the Buyer Termination Fee, Buyer shall not have any
further liability with respect to this Agreement or the transactions
contemplated hereby and such payment shall satisfy and discharge Buyer and each
Buyer Affiliate from any and all liabilities and obligations arising under or
in connection with this Agreement or the Investor Guarantee.

 

(d)           If an LC Failure occurs, such LC
Failure may be cured within 30 days after Seller gives Buyer notice of such LC
Failure (x) as to all Investors, by Buyer’s payment of the Buyer
Termination Fee to Seller or (y) as to an Investor, by such Investor’s
payment of its Investor Percentage of the Buyer Termination Fee to Seller. If
an LC Failure is not cured as to an Investor within such 30 day period, Seller
shall be entitled to collect such Investor’s Investor Percentage of the Buyer
Termination Fee pursuant to such Investor’s Investor Guarantee. Upon payment
pursuant to clause (x) of the first sentence of this Section 11.5(d),
(i) Seller shall return the Investor Letter of Credit to Buyer for
cancellation and release the issuing bank from all liability with respect to
such LC Failure and (ii) such payment shall satisfy and discharge Buyer
and each Buyer Affiliate from any and all liabilities and obligations arising
under or in connection with this Agreement or the Investor Guarantees. Upon a
payment pursuant to clause (y) of the first sentence of this Section 11.5(d) or
pursuant to an Investor Guarantee, (i) the amount of the Investor Letter
of Credit required to be maintained pursuant to Section 11.5(b) shall
be reduced by the amount of such payment and (ii) such payment shall
satisfy and discharge the Investor making such payment and each Person that is
included within the definition of Buyer Affiliate by reason of a relationship
to such Investor (unless such other Person is also an Investor or is also a
Buyer Affiliate by reason of a relationship with another Investor and in either
case such other Investor has not made payment under its Investor Guarantee)
from any and all liabilities and obligations arising under or in connection
with this Agreement or such Investor’s Investor Guarantee.

 

(e)           If Buyer delivers Cash Collateral to
Seller as contemplated by Section 7.15, it shall be held by Seller in a
segregated account at a bank or other financial institution in the United
States of America selected by Buyer and reasonably satisfactory to Seller and
invested and disbursed as provided in this Section 11.5(e). Cash
Collateral held by Seller shall be invested in debt securities issued by, or
backed by the full faith and credit of, the United States of America having a
remaining maturity of 30 days or less at the time of investment; interest
received with respect to the Cash Collateral shall be paid to Buyer promptly
upon receipt.  Upon delivery to Seller of
an Investor Letter of Credit, the Cash Collateral shall be delivered to
Buyer.  If (w) Buyer has delivered
Cash Collateral to Seller as contemplated by Section 7.15, (x) no
Investor Letter of Credit has been delivered to Seller, (y) this Agreement
shall be terminated by Seller and (z) Seller shall be entitled to collect
the Buyer Termination Fee in accordance with 

 

 

43

 

Section 11.5(a), Seller may withdraw the Cash
Collateral from the segregated account to pay the Buyer Termination Fee to
itself and shall pay any excess Cash Collateral to Buyer; such payment shall
satisfy and discharge Buyer and each Buyer Affiliate from any and all liabilities
and obligations arising under or in connection with this Agreement or the
Investor Guarantees.  Concurrently with
any withdrawal of the Cash Collateral to pay the Buyer Termination Fee, Seller
shall deliver to Buyer the same certificate that would have been required for a
draw on the Investor Letter of Credit (except that such certificate shall be
addressed to Buyer and references to the Investor Letter of Credit shall be
omitted).  If following such a payment of
the Buyer Termination Fee a court of competent jurisdiction in a final judgment
which is subject to no further appeal or review (or which is not fully bonded)
determines that Seller was not entitled to collect the Buyer Termination Fee,
Buyer shall be entitled to recover the Cash Collateral, together with any
interest received with respect thereto. 
On the date that Buyer would have ceased to have been required to
maintain an Investor Letter of Credit in full force and effect pursuant to Section 11.5(b) had
the initial Investor Letter of Credit been delivered to Seller, Seller shall
deliver the Cash Collateral to Buyer, unless Seller is entitled to the Buyer
Termination Fee.

 

11.6         Exclusivity of Remedies; No
Equitable Remedy Against Buyer.

 

(a)           Prior to Closing, except as provided
in the several Investor Guarantees and the documents relating to any letter of
credit or other security accepted by Seller as described in Section 11.5(c),
collection of the Buyer Termination Fee by Seller by drawing on the Investor
Letter of Credit shall be the sole and exclusive remedy of Seller and all of
its subsidiaries and Affiliates against Buyer and the Buyer Affiliates (as
defined below) in respect of any liabilities or obligations arising under or in
connection with this Agreement or the Investor Guarantees. Prior to Closing,
Seller shall not be entitled to an order of specific performance, an injunction
or other equitable remedy to prevent breaches of or require performance of this
Agreement by Buyer. The Parties agree and acknowledge that nothing contained in
this Section 11.6(a) shall limit Seller’s remedies against Buyer for
breach of the confidentiality provisions of Section 7.1.  Notwithstanding the foregoing, nothing in
this Section 11.6(a) shall affect the liabilities or obligations of
Buyer or a Buyer Affiliate under, or the remedies of Seller or any of its
subsidiaries or Affiliates with respect to, the Confidentiality Agreement, or
any other agreement entered into at or after the Closing to which Buyer or such
Buyer Affiliate is a party.

 

(b)           Except as provided in the several
Investor Guarantees and the documents relating to any letter of credit or other
security accepted by Seller as described in Section 11.5(c),
notwithstanding anything that may be expressed or implied in this Agreement or
any document or instrument delivered contemporaneously herewith (other than the
several Investor Guarantees and the documents relating to any letter of credit
or other security accepted by Seller as described in Section 11.5(c)),
Seller acknowledges and agrees that neither it nor any of its subsidiaries or
Affiliates has any right of recovery under or in connection with this Agreement
against, and will not institute any action in respect thereof against, and no
liability under or in connection with this Agreement shall attach to, any
Investor, the former, current or future stockholders, directors, officers,
employees, agents, Affiliates, members, managers, general or limited partners
or assignees of any Investor or of the Buyer or of any former, current or
future stockholder, director, officer, employee, agent, Affiliate, member,
manager, general or limited partner or 

 

 

44

 

assignee of any of the
foregoing, in each case other than the Buyer (collectively “Buyer Affiliates”),
whether by or through attempted piercing of the corporate or other entity veil,
by or through a claim by or on behalf of the Buyer against an Investor or other
Buyer Affiliate (including a claim to enforce any Investor Commitment Letter),
by the enforcement of any assessment or by any legal or equitable proceeding,
by virtue of any statute, regulation or applicable Law, or otherwise. Seller
hereby covenants and agrees that it shall not assert in any litigation or other
proceeding that the provisions of Section 11.2 or 11.5 or of this Section 11.6
limiting their remedies (except pursuant to the several Investor Guarantees and
the documents relating to any letter of credit or other security accepted by
Seller as described in Section 11.5(c)) to Seller’s collection of the
Buyer Termination Fee by drawing on the Investor Letter of Credit and denying
any other remedy against the Buyer Affiliates are illegal, invalid or
unenforceable in whole or in part. Notwithstanding the foregoing, nothing in
this Section 11.6(b) shall affect the liabilities or obligations of
Buyer or a Buyer Affiliate under, or the remedies of Seller or any of its
subsidiaries or Affiliates with respect to, the Confidentiality Agreement, or
any other agreement entered into at or after the Closing to which Buyer or such
Buyer Affiliate is a party.

 

(c)           This Section 11.6 is intended
for the benefit of, and shall be enforceable by, the Investors and the other
Buyer Affiliates (notwithstanding anything to the contrary in Section 13.3)
and shall survive termination of this Agreement.

 

ARTICLE
12

INDEMNIFICATION

 

12.1         Indemnification.

 

(a)           Seller’s
Indemnity.  From and after the
Closing, subject to the other terms and limitations in this Article 12
(including Section 12.1(d)) and in Section 7.4 hereof, Seller shall
indemnify, defend and hold harmless the Buyer Indemnitees from and against any
and all Buyer Losses (i) that arise out of, result from or relate to any
breach of Seller’s representations or warranties made, as of the Closing Date,
in this Agreement (without regard to any qualification with respect to
materiality or Material Adverse Effect contained therein), (ii) that arise
out of, result from or relate to any failure by Seller to perform or observe
any term, provision, covenant or agreement to be performed or observed by
Seller under this Agreement and (iii) that arise out of, result from or
relate to any Excluded Liability.

 

(b)           Buyer’s Indemnity.  From and after the Closing, subject to the
other terms and limitations in this Article 12 and in Section 7.4
hereof, Buyer shall indemnify, defend and hold harmless the Seller Indemnitees
from and against any and all Seller Losses (i) that arise out of, result
from or relate to any breach of Buyer’s representations or warranties made, as
of the Closing Date, in this Agreement (without regard to any qualification
with respect to materiality or Material Adverse Effect contained therein) and (ii) 
that arise out of, result from or relate to any failure by Buyer to perform or
observe any term, provision, covenant or agreement to be performed or observed
by Buyer under this Agreement.

 

45

 

(c)           Limitations on Indemnity.

 

(i)            Except as set forth in Section 12.1(c)(ii) and
12.1(d), the Buyer Indemnitees shall not be entitled to assert any right to
indemnification under Section 12.1(a)(i) and (ii), (X) except
with respect to individual claims or a series of related claims that exceed
$1,000,000 in amount (the “Threshold”) and (Y) until the aggregate amount
of all the Buyer Losses actually suffered by the Buyer Indemnitees as a result
of individual claims (or a series of related claims) that each exceed the
Threshold exceeds, on a cumulative basis, the Deductible Amount, and then only
to the extent such Buyer Losses exceed, in the aggregate, the Deductible
Amount.  Except as set forth in Section 12.1(c)(ii),
Seller shall not be required to indemnify the Buyer Indemnitees for Buyer
Losses under Section 12.1(a)(i) in any amount exceeding, in the
aggregate, an amount equal to ten percent (10%) of the Purchase Price, as such
Purchase Price may be adjusted pursuant to Section 2.3(b).

 

(ii)           The foregoing provisions of Section 12.1(c)(i) shall
not apply to any claim arising out of, resulting from or relating to a breach
of Seller’s representations or warranties set forth in Sections 4.1
(Organization of Seller), 4.2(a) (Organization of MidCon Entities), 4.2(c) (Ownership
of Equity; Encumbrances), 4.2(d) (Rights to Acquire Equity), 4.4 (Seller’s
Authority) and 4.18 (Brokerage Fees); provided, that in no event shall Seller
ever be required to indemnify the Buyer Indemnitees for Buyer Losses arising
out of, resulting from or relating to breaches of such representations and
warranties in an amount exceeding, in the aggregate, an amount equal to the
Purchase Price, as such Purchase Price may be adjusted pursuant to Section 2.3(b).

 

(iii)          The amount of any Buyer Loss for which
a Buyer Indemnitee claims indemnification shall be reduced by: (A) any
insurance proceeds actually received by the Buyer Indemnitees with respect to a
Buyer Loss and (B) the value of any net tax benefit actually realized (by
reason of a Tax deduction, shifting of income to Seller, or Tax credits that
directly relate to such Buyer Loss) by the Buyer Indemnitees in connection with
the Buyer Loss which shall be determined after taking into account and
utilizing all of Buyer’s and its Affiliates other available Tax attributes.

 

(iv)          Except as set forth in Section 12.1(c)(v),
the Seller Indemnitees shall not be entitled to assert any right to
indemnification under Section 12.1(b) until the aggregate amount of
all the Seller Losses actually suffered by the Seller Indemnitees as a result
of individual claims (or a series of related claims) that each exceed the
Threshold exceeds, on a cumulative basis, the Deductible Amount, and then only
to the extent such Seller Losses exceed, in the aggregate, the Deductible
Amount.  Except as set forth in Section 12.1(c)(v),
Buyer shall not be required to indemnify the Seller Indemnitees for Seller
Losses under Section 12.2(b)(i) in any amount exceeding, in the
aggregate, an amount equal to ten percent (10%) of the Purchase Price, as such
Purchase Price may be adjusted pursuant to Section 2.3(b).

 

 

46

 

(v)           The foregoing provisions of Section 12.1(c)(iv) shall
not apply to any claim arising out of, resulting from or relating to a breach
of Buyer’s representations or warranties set forth in Sections 5.1
(Organization of Buyer), 5.2 (Buyer’s Authority) and 5.7 (Brokerage Fees);
provided, that in no event shall Buyer ever be required to indemnify the Seller
Indemnitees for Seller Losses arising out of, resulting from or relating to
breaches of such representations and warranties in an amount exceeding, in the
aggregate, an amount equal to the sum of the Purchase Price, as such Purchase
Price may be adjusted pursuant to Section 2.3(b).

 

(vi)          The amount of any Seller Loss for
which a Seller Indemnitee claims indemnification shall be reduced by: (A) any
insurance proceeds actually received by the Seller Indemnitees with respect to
a Seller Loss and (B) the value of any net tax benefit actually realized
(by reason of a Tax deduction, shifting of income to Buyer, or Tax credits that
directly relate to such Seller Loss) by Seller Indemnitees in connection with
the Seller Loss which shall be determined after taking into account and
utilizing all of Seller’s and its Affiliates other available Tax attributes.

 

(d)           Tax Indemnity.

 

(i)            Seller shall indemnify, defend and
hold harmless the Buyer Indemnitees and the MidCon Entities from and against
any and all liabilities for Income Taxes that arise out of result from or
relate to: (i) a taxable period (or portion thereof) of the MidCon
Entities that ends on or before the Closing Date, and (ii) any Taxes of
Seller or any Affiliate thereof that are imposed on the MidCon Entities
pursuant to Treasury Regulation Section 1.1502-6 (or any similar provision
of state, local or foreign law), as a transferee, successor, by contract or
otherwise.  The limitations set forth in Section 12.1(c) of
this Agreement shall not apply to this Section 12.1(d).

 

(ii)           For purposes of Section 12.1(d),
with respect to any taxable period that begins before the Closing Date and ends
after the Closing Date, the amount of Income Tax (as calculated at the end of
the applicable taxable period) that is allocable to the MidCon Entities for the
period ending on or before the Closing Date shall be deemed equal to the amount
which would be payable if the taxable year ended on the Closing Date (based on
an interim closing of the books as of the close of such date).

 

(iii)          Payment of any amounts due under this Section 12.1(d) shall
be made no later than 10 days prior to the date on which such Tax liability is
required to be paid.

 

(e)           WAIVER OF PUNITIVE OR CONSEQUENTIAL
DAMAGES.

 

(i)            NOTWITHSTANDING ANYTHING TO THE
CONTRARY IN THIS AGREEMENT OR THE RELATED AGREEMENTS, BUYER SHALL 

 

 

47

 

NOT BE LIABLE TO THE SELLER INDEMNITEES FOR ANY
EXEMPLARY, PUNITIVE, SPECIAL, INDIRECT, CONSEQUENTIAL, REMOTE, OR SPECULATIVE
DAMAGES, EXCEPT TO THE EXTENT ANY SUCH DAMAGES ARE INCLUDED IN ANY ACTION BY A
THIRD PARTY AGAINST A SELLER INDEMNITEE FOR WHICH SUCH SELLER INDEMNITEE IS
ENTITLED TO INDEMNIFICATION UNDER THIS AGREEMENT.

 

(ii)           NOTWITHSTANDING ANYTHING TO THE
CONTRARY IN THIS AGREEMENT OR THE RELATED AGREEMENTS, SELLER SHALL NOT BE
LIABLE TO ANY BUYER INDEMNITEES FOR ANY EXEMPLARY, PUNITIVE, SPECIAL, INDIRECT,
CONSEQUENTIAL, REMOTE OR SPECULATIVE DAMAGES, EXCEPT TO THE EXTENT ANY SUCH
DAMAGES ARE INCLUDED IN ANY ACTION BY A THIRD PARTY AGAINST A BUYER INDEMNITEE
FOR WHICH THE BUYER INDEMNITEE IS ENTITLED TO INDEMNIFICATION UNDER THIS
AGREEMENT.

 

(f)            Survival.  All of the representations and warranties of
the Parties set forth in this Agreement, and the obligations set forth in this Article 12,
shall survive the Closing. 
Notwithstanding the foregoing sentence, any assertion that Seller is
liable for indemnification pursuant to Section 12.1, must be made in
writing and must be delivered to Seller on or prior to the date that is 12
months after the Closing Date; provided, however, that (i) any claim
arising out of, resulting from or relating to a breach of Seller’s representations
and warranties set forth in Sections 4.10 (Tax Matters), 4.15 (Employee
Matters), or Section 4.18 (Brokerage Fees) may be delivered to Seller at
any time on or before the date that is 60 days after the applicable statute of
limitations date; (ii) any claim arising out of, resulting from or
relating to a breach of Seller’s representations and warranties set forth in Section 4.16
(Environmental) may be delivered at any time on or before the date that is 2
years after the Closing Date; and (iii) any claim arising out of,
resulting from or relating to (A) a breach of Seller’s representations and
warranties set forth in Sections 4.1 (Organization of Seller), 4.2(a) (Organization
of MidCon Entities), 4.2(c) (Ownership of Equity; Encumbrances), 4.2(d) (Rights
to Acquire Equity), 4.4 (Seller’s Authority) and (B) any Excluded
Liability shall survive indefinitely.

 

(g)           Exclusive Remedy.  Absent fraud, and except for seeking
equitable relief in the form of specific performance, the indemnification
provisions of this Article 12 shall be the sole and exclusive remedy of
each Party (including the Seller Indemnitees and the Buyer Indemnitees) after
the Closing (i) for any breach of a Party’s representations and warranties
contained in this Agreement or (ii) otherwise with respect to this
Agreement and the transaction contemplated hereby, but excluding the Related
Agreements and the transaction contemplated thereby.  To the extent that any Buyer Indemnitees
suffer any Losses for which they may assert any other right to indemnification,
contribution or recovery from Seller (whether under this Agreement or under any
common law or any statute, including any Environmental Law, or otherwise),
Buyer hereby, effective upon Closing (i) waives, releases and agrees not
to assert such right against Seller, and (ii) agrees to cause the Buyer
Indemnitees to waive, release and agree not to assert such right.  To the extent that any Seller Indemnitees
suffer any Losses for 

 

 

48

 

which they may assert any
other right to indemnification, contribution or recovery from Buyer (whether
under this Agreement or under any common law or any statute, including any
Environmental Law, or otherwise), Seller hereby, effective upon Closing (i) waives,
releases and agrees not to assert such right against Buyer, and (ii) agrees
to cause the Seller Indemnitees to waive, release and agree not to assert such
right.

 

(h)           Characterization of Indemnity
Payments.  All payments under this Article 12
shall be treated for Tax purposes as either an adjustment to the Purchase Price
or a contribution to the capital of the Company.

 

12.2         Defense of Claims.

 

(a)           Notice.  If an Indemnitee receives notice of the
assertion of any claim or of the commencement of any Third Party Claim with
respect to which indemnification is to be sought from the Indemnifying Party,
the Indemnitee will give such Indemnifying Party reasonable prompt notice
thereof.  In no event shall such notice
be given later than ten (10) days after the Indemnitee’s receipt of notice
of such Third Party Claim.  However, the
failure to give timely notice will not affect the rights or obligations of the
Indemnifying Party except and only to the extent that, as a result of such failure,
the Indemnifying Party was materially prejudiced.  Such notice shall describe the nature of the
Third Party Claim in reasonable detail and will, if practicable, indicate the
estimated amount of the Loss that has been or may be sustained by the Indemnitee.  The Indemnifying Party will have the right to
participate in or, by giving notice to the Indemnitee, to elect to assume the
defense of, any Third Party Claim at such Indemnifying Party’s own expense and
by such Indemnifying Party’s own counsel, and the Indemnitee will cooperate in
good faith in such defense at such Indemnitee’s own expense.

 

(b)           Opportunity to Defend.  If within ten (10) days after an
Indemnitee provides notice to the Indemnifying Party of any Third Party Claim,
the Indemnitee receives notice from the Indemnifying Party that such
Indemnifying Party has elected to assume the defense of such Third Party Claim,
the Indemnifying Party will not be liable for any legal expenses subsequently
incurred by the Indemnitee in connection with the defense thereof.  Without the prior written consent of the
Indemnitee, which shall not be unreasonably withheld or delayed, the
Indemnifying Party will not enter into any settlement of any Third Party Claim
which would lead to liability, adversely affect the Indemnitee or create any
financial or other obligation on the part of the Indemnitee for which the
Indemnitee is not entitled to indemnification hereunder.  If a firm offer is made to settle a Third
Party Claim without leading to liability or the creation of a financial or
other obligation on the part of the Indemnitee for which the Indemnitee is not
entitled to indemnification hereunder and the Indemnifying Party desires to
accept and agree to such offer, the Indemnifying Party will give notice to the
Indemnitee to that effect.  If the Indemnitee
fails to consent to such firm offer within twenty (20) days after its receipt
of such notice, the Indemnitee may continue to contest or defend such Third
Party Claim and, in such event, the maximum liability of the Indemnifying Party
to such Third Party Claim will be the amount of such settlement offer, plus
reasonable costs and expenses paid or incurred by the Indemnitee up to the date
of such notice.

 

(c)           Direct Claim.  Any Direct Claim will be asserted by giving
the Indemnifying Party reasonably prompt written notice thereof, stating the
nature of such claim in 

 

 

49

 

reasonable detail and
indicating the estimated amount, if practicable, but in any event not later
than twenty (20) Business Days after the Indemnitee becomes aware of such
Direct Claim; provided that the omission so to notify the Indemnifying Party in
a timely manner shall not relieve it from any liability which it may have to
the Indemnitee to the extent it is not materially prejudiced as a result
thereof.  The Indemnifying Party will
have a period of ninety (90) days from the date of notice within which to
respond to such Direct Claim.  If the
Indemnifying Party does not respond within such ninety (90) day period, the
Indemnifying Party will be deemed to have accepted such Direct Claim.  If the Indemnifying Party rejects such Direct
Claim, the Indemnitee will be free to seek enforcement of its rights to
indemnification under this Agreement.

 

ARTICLE
13

MISCELLANEOUS

 

13.1         Notices.  All notices, requests, demands, and other
communications required or permitted to be given or made hereunder by a Party
(each a “Notice”) shall be in writing and shall be deemed to have been duly
given or made if (i) delivered personally, (ii) transmitted by first
class registered or certified mail, postage prepaid, return receipt requested, (iii) delivered
by prepaid overnight courier service requiring acknowledgment of receipt, or (iv) delivered
by confirmed facsimile transmission to the Parties at the following addresses
(or at such other addresses as shall be specified by the Parties by similar
notice):

 

If to Buyer:

 

Myria Acquisition Inc.

c/o
Babcock & Brown LP

2
Harrison Street

San
Francisco, CA 94105

Attn: 
Office of the General Counsel

Telephone: 
(415)512-1515

Fax: 
415-267-1500

 

 

with
a copies to:

 

Dewey &
LeBoeuf LLP

125 West 55th Street

New York, New York  10019

Attention:  Sheri E. Bloomberg, Esq.

Fax:
212-424-8500

 

Babcock &
Brown LP

885
Second Avenue

New
York, NY 10017

Attn: 
Dennis Mahoney

Tel: 
212-415-0713

Fax: 
212-935-8949

 

 

50

 

If to Seller:

 

                Knight Inc.

                500 Dallas, Suite 1000

                Houston, Texas 77002

                Attention:  General Counsel

                Fax:  713-369-9410

 

with
a copy to:

 

                Bracewell & Giuliani
LLP

                711 Louisiana, Suite 2300

                Houston, Texas 77002

                Attention: Gary W.
Orloff

                Fax: 713-221-2166

 

Notices shall be effective (i) if delivered
personally or sent by courier service, upon actual receipt by the intended
recipient, (ii) if mailed, upon the earlier of five days after deposit in
the mail or the date of delivery as shown by the return receipt therefor, or (iii) if
sent by facsimile transmission, when the answer back is received if received
during the recipient’s normal business hours, or at the beginning of the
recipient’s next Business Day after receipt if not received during the
recipient’s normal business hours.

 

13.2         Entire Agreement.  This Agreement, together with the Disclosure
Schedules, the Exhibits, the Related Agreements and the Confidentiality
Agreement, constitute the entire agreement between the Parties with respect to
the subject matter hereof and supersede all prior agreements and
understandings, both written and oral, between the Parties with respect to the
subject matter hereof.  There are no
restrictions, promises, representations, warranties, covenants or undertakings
between the Parties, other than those expressly set forth or referred to herein
or therein.

 

13.3         Binding Effect; Assignment; No Third
Party Benefit.  This Agreement shall be
binding upon and inure to the benefit of the Parties and their successors and
permitted assigns; provided neither this Agreement nor any of the rights,
interests, or obligations hereunder may be assigned by a Party without the
prior written consent of the other Parties; and any assignment without such
consent shall be void; provided further, that notwithstanding the foregoing,
after the Closing, Buyer shall be permitted to assign its rights hereunder to
the Investors and to any other transferee of the Class B Shares in
connection with any transfer of the Class B Shares that is permitted
pursuant to the LLC Agreement and the Shareholder Agreement, and such
assignment shall not require the consent of the Seller.  Except as provided herein, nothing in this Agreement
is intended to or shall confer upon any Person other than the Parties, and
their successors and permitted assigns, any rights, benefits, or remedies of
any nature whatsoever under or by reason of this Agreement.

 

13.4         Severability.  If any one or more of the provisions
contained in this Agreement or in any other document delivered pursuant hereto
shall, for any reason, be held to be invalid, illegal or unenforceable in any
respect, such invalidity, illegality or unenforceability shall not 

 

 

51

 

affect any other
provisions of this Agreement or any other such document.  If any provision of this Agreement is for any
reason, held to be invalid, illegal or unenforceable, but would be valid, legal
and enforceable if minor changes were made, there shall be deemed to be made
such minor changes, and only such minor changes, as are necessary to make it
valid, legal and enforceable.

 

13.5         Governing Law; Consent To
Jurisdiction.

 

(a)           THIS AGREEMENT SHALL BE GOVERNED BY
AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
DELAWARE, WITHOUT REGARD TO ITS CONFLICT OF LAWS RULES OR PRINCIPLES.

 

(b)           THE PARTIES HEREBY IRREVOCABLY SUBMIT
TO THE JURISDICTION OF THE COURTS OF THE STATE OF ILLINOIS AND THE FEDERAL
COURTS OF THE UNITED STATES OF AMERICA LOCATED IN COOK COUNTY, ILLINOIS OVER
ANY DISPUTE BETWEEN THE PARTIES ARISING OUT OF THIS AGREEMENT OR THE
TRANSACTION CONTEMPLATED HEREBY, AND EACH PARTY IRREVOCABLY AGREES THAT ALL
SUCH CLAIMS IN RESPECT OF SUCH DISPUTE SHALL BE HEARD AND DETERMINED IN SUCH
COURTS.  THE PARTIES HEREBY IRREVOCABLY
WAIVE, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH THEY MAY NOW
OR HEREAFTER HAVE TO THE VENUE OF ANY DISPUTE ARISING OUT OF THIS AGREEMENT OR
THE TRANSACTION CONTEMPLATED HEREBY BEING BROUGHT IN SUCH COURT OR ANY DEFENSE
OF INCONVENIENT FORUM FOR THE MAINTENANCE OF SUCH DISPUTE.  EACH PARTY 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.

 

13.6         Further Assurances.  From time to time following the Closing, at
the request of a Party and without further consideration, the other Parties
shall execute and deliver to such requesting Party such instruments and documents
and take such other action (but without incurring any material financial
obligation) as such requesting Party may reasonably request to consummate more
fully and effectively the transactions contemplated hereby.

 

13.7         Disclosure Schedules.  Certain information set forth in the
Disclosure Schedules is included solely for informational purposes, is not an
admission of liability with respect to the matters covered by the information,
and may not be required to be disclosed pursuant to this Agreement.  The specification of any dollar amount in the
representations and warranties contained in this Agreement or the inclusion of
any specific item in the Disclosure Schedules is not intended to imply that
such amounts (or higher or lower amounts) are or are not material, and no Party
shall use the fact of the setting of such amounts or the fact of the inclusion
of any such item in the Disclosure Schedules in any dispute or controversy
between the Parties as to whether any obligation, item, or matter not described
herein or included in a Disclosure Schedule is or is not material for purposes
of this Agreement.

 

13.8         Counterparts.  This Agreement may be executed by the Parties
in any number of counterparts, each of which shall be deemed an original, but
all of which shall constitute one and 

 

 

52

 

the same agreement.  Facsimile copies of signatures shall
constitute original signatures for all purposes of this Agreement and any
enforcement thereof.

 

13.9         Currency.  All references to “dollars” or “$” in this
Agreement shall mean United States Dollars.

 

[Signature page follows]

 

 

53

 

IN WITNESS WHEREOF, the
Parties have executed this Agreement, or caused this Agreement to be executed
by their duly authorized representatives, all as of the day and year first
above written.

 

	
   

  	
  “SELLER”

  
	
   

  	
   

  
	
   

  	
  KNIGHT INC.,

  
	
   

  	
  a
  Kansas corporation

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  David Kinder

  
	
   

  	
  Name:

  	
   David
  Kinder

  
	
   

  	
  Title:

  	
   Vice
  President

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  “BUYER”

  
	
   

  	
   

  	
   

  
	
   

  	
  MYRIA ACQUISITION INC.,

  
	
   

  	
  a
  Delaware corporation

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Christopher P. Kinney

  
	
   

  	
  Name:

  	
   Christopher
  P. Kinney

  
	
   

  	
  Title:

  	
   President
  and Chief Executive Officer

  
				

 

 

 

54

EXHIBIT A

 

OPERATIONS AND REIMBURSEMENT AGREEMENT

 

FOR

 

NATURAL GAS
PIPELINE COMPANY OF AMERICA

 

Dated as of
[                            ]

 

By and between

 

Knight Inc.

 

As Operator

 

And

 

Natural Gas
Pipeline Company of America

 

As Owner

 

 

TABLE OF CONTENTS

 

	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  
	
  ARTICLE 1

  
	
  ENGAGEMENT AND RELATIONSHIP OF
  PARTIES

  
	
   

  	
   

  	
   

  
	
  1.1

  	
  Engagement of Operator

  	
  7

  
	
  1.2

  	
  Relationship of the
  Parties

  	
  7

  
	
  1.3

  	
  Performance Standard

  	
  7

  
	
   

  	
   

  	
   

  
	
  ARTICLE 2

  
	
  SCOPE AND DUTIES OF OPERATOR

  
	
   

  	
   

  	
   

  
	
  2.1

  	
  Scope of the Services

  	
  7

  
	
  2.2

  	
  FERC Standards of
  Conduct

  	
  11

  
	
  2.3

  	
  Performance

  	
  11

  
	
  2.4

  	
  Ownership of Property

  	
  11

  
	
  2.5

  	
  Cooperation

  	
  12

  
	
   

  	
   

  	
   

  
	
  ARTICLE 3

  
	
  EXPENDITURES AND REIMBURSEMENT

  
	
   

  	
   

  	
   

  
	
  3.1

  	
  Budgets and
  Authorization for Expenditures

  	
  12

  
	
  3.2

  	
  Authorization for
  Expenditures for Emergencies

  	
  15

  
	
  3.3

  	
  Authorization for
  Expenditures

  	
  15

  
	
  3.4

  	
  Reimbursement

  	
  15

  
	
  3.5

  	
  Services to be Provided
  at Cost

  	
  15

  
	
  3.6

  	
  Monthly Invoices

  	
  16

  
	
  3.7

  	
  Payment Disputes

  	
  16

  
	
   

  	
   

  	
   

  
	
  ARTICLE 4

  
	
  ACCOUNTING AND RECORDS

  
	
   

  	
   

  	
   

  
	
  4.1

  	
  Maintenance of Accounts

  	
  16

  
	
   

  	
   

  	
   

  
	
  ARTICLE 5

  
	
  ADDITIONAL COVENANTS OF THE
  PARTIES

  
	
   

  	
   

  	
   

  
	
  5.1

  	
  Restricted Actions

  	
  17

  
	
  5.2

  	
  Compliance with Laws

  	
  17

  
	
  5.3

  	
  Expansion or Extension
  Opportunities

  	
  17

  
	
  5.4

  	
  Customer Information

  	
  17

  
	
   

  	
   

  	
   

  
	
  ARTICLE 6

  
	
  INSURANCE

  
	
   

  	
   

  	
   

  
	
  6.1

  	
  Insurance Provided by
  Operator

  	
  18

  
	
  6.2

  	
  Other Requirements

  	
  18

  
	
   

  	
   

  	
   

  
	
  ARTICLE 7

  
	
  TERM AND TERMINATION

  
	
   

  	
   

  	
   

  
	
  7.1

  	
  Term

  	
  18

  

 

 

	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  
	
  7.2

  	
  Termination

  	
  18

  
	
  7.3

  	
  Effect of Termination

  	
  20

  
	
   

  	
   

  	
   

  
	
  ARTICLE 8

  
	
  INDEMNIFICATION

  
	
   

  	
   

  	
   

  
	
  8.1

  	
  Limitation of Liability

  	
  21

  
	
  8.2

  	
  Indemnification of
  Operator

  	
  21

  
	
  8.3

  	
  Indemnification of
  Owner

  	
  22

  
	
  8.4

  	
  Indemnification Demands

  	
  22

  
	
  8.5

  	
  Payment of Damages

  	
  22

  
	
  8.6

  	
  Sole Remedy

  	
  23

  
	
  8.7

  	
  Express Negligence Rule

  	
  23

  
	
  8.8

  	
  Survival of Indemnities

  	
  23

  
	
   

  	
   

  	
   

  
	
  ARTICLE 9

  
	
  ARBITRATION

  
	
   

  	
   

  	
   

  
	
  9.1

  	
  Applicability

  	
  23

  
	
  9.2

  	
  Negotiation to Resolve
  Disputes

  	
  24

  
	
  9.3

  	
  Selection of Arbitrator

  	
  24

  
	
  9.4

  	
  Conduct of Arbitration

  	
  25

  
	
   

  	
   

  	
   

  
	
  ARTICLE 10

  
	
  MISCELLANEOUS

  
	
   

  	
   

  	
   

  
	
  10.1

  	
  Notices

  	
  26

  
	
  10.2

  	
  Governing Law

  	
  27

  
	
  10.3

  	
  Entire Agreement;
  Amendments and Waivers

  	
  27

  
	
  10.4

  	
  Binding Effect and
  Assignment

  	
  28

  
	
  10.5

  	
  Severability

  	
  28

  
	
  10.6

  	
  Multiple Counterparts

  	
  28

  
	
  10.7

  	
  Force Majeure

  	
  28

  
	
  10.8

  	
  Confidentiality

  	
  29

  
	
  10.9

  	
  Representations and
  Warranties of Operator

  	
  30

  
	
  10.10

  	
  Representations and
  Warranties of Owner

  	
  31

  
	
  10.11

  	
  Interpretation and
  Construction

  	
  31

  
	
  Exhibit A

  	
  Development Plan

  	
   

  
	
  Exhibit B

  	
  Composition of G&A
  Costs

  	
   

  
	
  Exhibit C

  	
  Operating Budget
  Template

  	
   

  
				

 

 

OPERATIONS AND REIMBURSEMENT AGREEMENT

 

This Operations and Reimbursement Agreement (this “Agreement”)
is entered into as of the [        ]
day of
[                ]
(the “Effective Date”) by and between Knight Inc., formerly known as
Kinder Morgan, Inc., a Kansas corporation (“Operator”), and Natural
Gas Pipeline Company of America, a Delaware [corporation] (together with its
directly-held subsidiaries and jointly-owned limited liability companies and
Kinder Morgan Illinois Pipeline LLC, a Delaware limited liability company, “Owner”),
and a wholly-owned subsidiary of MidCon LLC, a Delaware limited liability
company (“MidCon”). Each of Operator and Owner is sometimes referred to
herein individually as a “Party” or collectively as the “Parties.”

 

RECITALS

 

WHEREAS, Owner owns the Pipeline (defined herein) which is subject to
the jurisdiction of the FERC (defined below) pursuant to the Natural Gas Act of
1938, as amended, and currently operated, maintained and managed by Knight
Inc., formerly known as Kinder Morgan, Inc. (“Knight”); and

 

WHEREAS, Knight and Myria Acquisition Inc. have entered into a Purchase
Agreement, dated December [    ], 2007 (“Purchase
Agreement”), pursuant to which Knight has agreed to sell to Myria Acquisition
Inc. certain shares of MidCon (the “MidCon Shares”); and

 

WHEREAS, as a condition precedent to the sale of the MidCon Shares
pursuant to the Purchase Agreement, and consistent with the intent of Knight
and Myria Acquisition Inc. pursuant to that certain Limited Liability Company
Agreement of MidCon, dated
[                      ],
2007 (the “LLC Agreement”), the Parties have agreed to enter into this
Agreement under which Knight will operate, maintain and further develop the
Pipeline; and

 

WHEREAS, Owner desires to hire Operator as an independent contractor,
to operate and maintain the Pipeline, and to provide related administrative
services to Owner and the Pipeline, in accordance with this Agreement, and
Operator desires to be so hired.

 

NOW, THEREFORE, for and in consideration of the foregoing, the mutual
covenants and promises set forth herein, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged by
the Parties, Owner and Operator hereby agree as follows:

 

DEFINITIONS

 

Unless the context otherwise requires, each defined term shall be
equally applicable both to the singular and the plural forms of the term so
defined. As used in this Agreement, each of the following terms shall have the
meaning given to it below (other defined terms may be found elsewhere in this
Agreement):

 

“Action” means
any action, suit, arbitration, inquiry, condemnation, audit, proceeding or
investigation (whether civil or criminal) by or before any court or other
Governmental Entity or any arbitrator or panel of arbitrators.

 

 

“Affiliate”
means, with respect to any Person, any other Person that, directly or
indirectly, through one or more intermediaries, controls, is controlled by, or
is under common control with, such Person in question; provided,
however, that Owner and Operator shall
not be deemed to be Affiliates of each other for purposes of this Agreement. For
the purposes of this definition, “control” means, when 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.

 

“Agreement” is
defined in the Introductory Paragraph.

 

“Arbitration Notice” is defined in Section 9.2(a)(iii).

 

“Arbitrator” is defined in Section 9.3(a).

 

“Business Day”
means any day other than a Saturday, Sunday or other day on which banks are authorized
or required to be closed in New York, New York, Chicago, Illinois or Houston,
Texas.

 

“Calendar Year”
refers to the time period beginning at 8:00 a.m. Houston time on January 1
and extending until 8:00 a.m. Houston time on January 1 of the next
following year.

 

“Claim” means any
and all debts, losses, liabilities, duties, claims, damages, obligations,
payments, fines, penalties (including, without limitation, those arising out of
any demand, assessment, settlement, judgment, or compromise relating to any
actual or threatened Action), costs and reasonable expenses including, without
limitation, any reasonable attorneys’ fees and any and all reasonable expenses
whatsoever incurred in investigating, preparing, or defending any Action,
whether matured or unmatured, absolute or contingent, accrued or unaccrued,
liquidated or unliquidated, known or unknown.

 

“Confidential Information”
is defined in Section 10.8.

 

“Construction Opportunity” means any opportunity for
construction of an extension and/or expansion of the Pipeline, or for any
acquisition of assets or stock outside the ordinary course of the Pipeline’s
business, that is presented to the Board of Directors of Owner for
consideration.

 

“Construction Opportunity Budget(s)” means the budget(s) set
forth in any Construction Opportunity.

 

“Cure Notice” is defined in Section 7.2(d).

 

“Development Plan” means those certain
infrastructure enhancement, expansion or extension projects described in the
Project Execution Plan and budget(s) attached hereto as Exhibit A, as same may be
amended, supplemented or otherwise modified from time to time by agreement of
the Parties.

 

2

 

“Development Plan Budget” means the budget(s) set forth in Exhibit A in the Development
Plan.

 

“Dispute” is
defined in Section 9.1.

 

“Effective Date” is defined in the Introductory Paragraph.

 

“Emergency” is
defined in Section 2.1(viii).

 

“Environmental Condition”
means any incident, condition or situation which gives rise to, or could reasonably
be expected to result in, (a) a reporting obligation to a Governmental
Entity under an Environmental Law, other than reports required in the ordinary
course of business, (b) a liability to Owner under an Environmental Law or
(c) a liability to Operator in its capacity as Operator under an
Environmental Law.

 

“Environmental Law”
means any and all applicable Laws in effect from time to time during the term
of this Agreement pertaining to the protection of the environment in effect in
any and all jurisdictions in which Owner or any of its controlled Affiliates
has conducted operations, including, without limitation, the Clean Air Act, as
amended, the Comprehensive Environmental Response, Compensation and Liability
Act of 1980, as amended, the Federal Water Pollution Control Act, as amended,
the Resource Conservation and Recovery Act of 1976, as amended, the Safe
Drinking Water Act, as amended, the Toxic Substances Control Act, as amended,
the Superfund Amendments and Reauthorization Act of 1986, as amended, and the
Hazardous Materials Transportation Act, as amended.

 

“Expansion or Extension Opportunity” means (i) any physical
enhancement or series of physical enhancements that would increase the base
capacity (including by adding horsepower) of any then existing portion of any
gas transmission facilities or then existing storage fields owned by any of
MidCon’s Subsidiaries, including, but not limited to, Natural Gas Pipeline
Company of America, (ii) the construction of an extension of any then
existing pipeline facilities that is no longer than 25 miles long and that may
be accomplished under the blanket certificate of the Subsidiary of MidCon that
owns the then existing pipeline facilities and that would connect and/or
redeliver gas supplies to a then existing customer of the Subsidiary of MidCon
that owns the interconnecting pipeline facilities, the intention being that
such extension would be limited in scope and location or (iii) the
acquisition or construction of any pipeline facility or series of related
pipeline facilities that would directly connect with the Chicago market and
directly compete with any of MidCon’s Subsidiaries’ facilities that are
physically connected to and deliver gas to customers in the Chicago market and
would reasonably be expected to materially adversely affect the profitability
of MidCon. For purposes of this definition only, “Subsidiary” of a Person means any other Person of which at
least fifty percent (50%) or more of the voting power represented by the
outstanding capital stock or other voting securities or interests having voting
power under ordinary circumstances to elect directors or similar members of the
governing body of such corporation or entity or fifty percent (50%) or more of
the equity interests in such corporation or entity shall at the time be owned
or controlled, directly or indirectly, by such Person and/or by one or more of
its Subsidiaries.

 

“FERC” means the
Federal Energy Regulatory Commission or its successor agency.

 

3

 

“FERC Certificate” means the certificate(s) of public
convenience and necessity issued by the FERC applicable to the Pipeline.

 

“FERC Standards of Conduct” means FERC’s standards that regulate
the interaction between an interstate natural gas pipeline and its relationship
with a Marketing Affiliate or other Affiliate, together with FERC’s rules,
regulations and orders related thereto, all as and if previously or hereafter
amended, and as and if previously or hereafter interpreted by any opinion or
ruling of FERC or any court of competent jurisdiction.

 

“Force Majeure”
is defined in Section 10.7(a).

 

“G&A Costs”
means costs which arise from the management, oversight and administrative and
general services described in Exhibit B
and shall not include costs associated with extraordinary or unusual matters.

 

“Governmental Entity”
means any legislature, court, tribunal, arbitrator, authority, agency,
commission, division, board, bureau, branch, official or other instrumentality
of the United States, or any domestic state, county, city, tribal or other
political subdivision, governmental department or similar governing entity, and
including any governmental, quasi-governmental or non-governmental body
exercising similar powers of authority.

 

“Indemnified Party” is defined in Section 8.4.

 

“Indemnifying Party” is defined in Section 8.4.

 

“Indemnity Demand” is defined in Section 8.4.

 

“Initiating Party” is defined in Section 9.2.

 

“Investor” has the meaning given such term in the Shareholder
Agreement.

 

“KM Entity” shall mean any of Kinder Morgan G.P., Inc.,
Kinder Morgan Management, LLC or Kinder Morgan Energy Partners, L.P. or any of
their respective subsidiaries or joint ventures or other entities in which they
own an interest.

 

“Law” means any
statute, law (including common law), rule, ordinance, regulation, ruling,
requirement, writ, injunction, decree, order or other official act of or by any
Governmental Entity or any arbitral tribunal to which a Person or property is
subject, whether such Laws now exist or hereafter come into effect.

 

“LLC Agreement” is
defined in the Recitals.

 

“Marketing Affiliate”
has the meaning given to such term in applicable standards of conduct adopted
by FERC in the FERC Standards of Conduct.

 

“MidCon” is defined in the Introductory Paragraph.

 

“MidCon Shares” is defined in the Recitals.

 

4

 

“Non-G&A Costs”
means all costs and expenditures, excluding G&A Costs, incurred by Operator
and its Affiliates in the provision of the Services and shall include, without
limitation (a) amounts incurred or paid (including labor and overhead of
Operator and its Affiliates) to construct, operate, repair, replace, maintain,
or improve any portion of the Pipeline, including, without limitation, (i) environmental
mitigation, (ii) charges billed to Owner or Operator in connection with
the day-to-day operation of the Pipeline and existing obligations of Owner or
Operator to Third Parties, (iii) work required in conjunction with or to
correct, maintain or remedy post-construction issues on the Pipeline and
appurtenant facilities, (iv) system up-grades, (v) consulting costs, (vi) extraordinary
regulatory matters (such as a rate case), (vii) enforcing contracts with
Third Parties, (viii) pursuing recovery of indemnification from Third
Parties or insurance proceeds due to Owner or Operator from Third Parties,
court costs and reasonable consultants’, attorneys’ and experts’ fees and
expenses, (ix) payment of settlements, judgments and condemnation awards, (x) expenditures
in accordance with any Development Plan Budget, any Construction Opportunity
Budget or any Operating Budget, (xi) expenditures to Persons who are
directly engaged in providing goods (including vehicles, materials, equipment
and rights-of-way) or services associated with the Services, and (xii) any
other action requested by Owner and agreed to by Operator; and (b) any
other documented costs, expenses or liabilities, incurred in connection with or
related to the operation of the Pipeline in accordance with the terms of this
Agreement (other than any costs and expenses of Operator arising out of
enforcement by Owner of its rights under this Agreement).

 

“Notice” is
defined in Section 10.1.

 

“Operating Budget”
is defined in Section 3.1(e).

 

“Operator” is
defined in the Introductory Paragraph.

 

“Operator Indemnified
Parties” is defined in Section 8.2.

 

“Operating Liaison” is defined in Section 2.5.

 

“Owner” is
defined in the Introductory Paragraph.

 

“Owner Indemnified Parties”
is defined in Section 8.3.

 

“Owner’s Tariff”
means the applicable tariff related to the Pipeline approved by FERC as it may
be amended from time to time.

 

“Party” and “Parties” are defined in the Introductory
Paragraph.

 

“Permits” means all licenses, permits, certificates of authority,
approvals, tenders, bids, registrations, franchises, variances, exemptions,
consents or other authorizations of or from Governmental Entities.

 

“Person” means
any Governmental Entity or any individual, firm, partnership (general or
limited), corporation, limited liability company, joint venture, trust,
unincorporated organization, or other entity or organization.

 

5

 

“Performance Breach” is defined in Section 7.2(d).

 

“Performance Breach Notice” is defined in Section 7.2(d).

 

“PHMSA” means the Pipeline Hazardous Material Safety
Administration.

 

“Pipeline” means the natural gas transmission pipeline system
and related facilities (including storage, compression and metering facilities)
owned by Owner, including all appurtenances, fee property, leases, easements,
licenses, permits, ROWs, contracts, contract rights and other rights, including
FERC Certificates and other Permits, necessary for the construction,
maintenance, upkeep, repair or operation thereof, and any additions thereto or
betterments, improvements, additions, expansions, looping, extensions, renewals
or replacements thereof.

 

“Principal” has the meaning given such term in the Shareholder
Agreement.

 

“Proposed Operating Budget”
is defined in Section 3.1(c).

 

“Purchase Agreement” is defined in the Recitals.

 

“Reasonable and Prudent Operator” is defined in Section 1.3.

 

“ROW” means fee lands, rights-of-way, easements and other land
rights and estates necessary to construct, maintain or operate the Pipeline.

 

“Sale Transition Period” is defined in Section 7.3(c).

 

“Services” is
defined in Section 2.1.

 

“Shareholder Agreement” means the Shareholder Agreement of even
date herewith among Knight, Myria Acquisition Inc. and MidCon.

 

“Tax” means any federal, state, local or foreign income, gross
receipts, license, payroll, parking, employment, excise, severance, stamp,
occupation, premium, windfall profits, environmental, customs duties, capital
stock, franchise, profits, margin, single business, withholding, social
security, unemployment, disability, real property, personal property,
possessory interest, sales, use, transfer, registration, capital gain,
production, payroll, worker’s compensation, value added, alternative or add-on
minimum, amounts paid under an agreement with a taxing authority, estimated tax
or other tax of any kind whatsoever, including any interest, fines, penalty or
other like assessment or addition thereto, whether disputed or not, including
such item for which a liability arises pursuant to Treasury Regulation Section 1.1502-6
(or any similar provision of foreign, state or local law), as a transferee,
successor-in-interest, by contract or otherwise.

 

“Third Party”
means a Person other than (a) Operator, (b) Owner, or (c) any
Affiliate of Operator or Owner.

 

“Transition Period” is defined in Section 7.3(b).

 

6

 

ARTICLE 1

 

ENGAGEMENT AND RELATIONSHIP OF
PARTIES

 

1.1                                 Engagement
of Operator. Owner hereby engages Operator to act as an independent
contractor, with full power and authority to perform the Services in accordance
with the terms of this Agreement. Operator hereby accepts such engagement and
agrees to provide or cause to be provided the Services in accordance with the
terms and conditions, and subject to the limitations, set forth in this
Agreement.

 

1.2                                 Relationship
of the Parties. Operator shall perform and execute the provisions of this
Agreement as an independent contractor. Neither Operator nor any of its
Affiliates, employees, consultants, subcontractors or agents shall be deemed to
be the agents, servants or employees of Owner. This Agreement is not intended
to and the Parties agree that there is not hereby created (a) a
partnership, joint venture, or other relationship creating fiduciary,
quasi-fiduciary, or similar duties and obligations at Law or otherwise or (b) an
arrangement subjecting the Parties to joint and several or vicarious liability.
Any provision of this Agreement that may appear to give Owner a measure of
control over the details of the Services shall be deemed to mean that Operator
shall follow the general desires of Owner, but Operator shall have
authoritative control as to the details of performing the Services. The
relationship of the Parties with respect to FERC Standards of Conduct is
addressed in Section 2.2 below.

 

1.3                                 Performance
Standard. Operator shall perform the Services (a) in a good and
workmanlike manner; (b) as a reasonable and prudent natural gas pipeline
operator substantially consistent with, assuming no changes in circumstances
that warrant a difference, the practices, methods and acts it used in operating
the Pipeline prior to the date of this Agreement; (c) with the same degree
of diligence and care that it exercises with respect to the construction,
development, management and operation of its other pipelines and those of its
Affiliates (and that such Affiliates exercise with respect to the operations of
their own interstate natural gas pipelines); and (d) in material
compliance with all Laws (compliance with such obligations is referred to
herein as acting as a “Reasonable and Prudent Operator”).

 

ARTICLE 2

SCOPE AND DUTIES OF OPERATOR

 

2.1                                 Scope
of the Services.

 

(a)                                  The
“Services” to be provided under this Agreement shall consist of all
services related to the Pipeline, including, without limitation, those services
described in items (i) through (xx) below. The Services shall be performed
exclusively by Operator (and shall not be performed in any way by Owner) and
shall not require the prior approval of Owner or its board of directors or the
provision of Notice to or from Owner except as otherwise specified herein. The
Services include, but shall not be limited to, the following:

 

(i)                                     taking
any and all actions necessary or appropriate to oversee, manage and implement
the construction, operation, maintenance, repair, replacement, 

 

7

 

expansion,
extension or enhancement of the Pipeline in accordance with, as applicable,
day-to-day operations of the Pipeline and any new construction project approved
by Owner and Operator including, but not limited to, providing Owner with all
customer meter, billing and collection services in accordance with Owner’s
Tariff;

 

(ii)                                  conducting
feasibility studies and conducting open seasons with respect to potential
Construction Opportunities and preparing plans therefor;

 

(iii)                               making
and accepting payments in Owner’s name as required or permitted hereunder,
including paying and discharging (with Owner’s funds or at Operator’s election,
Operator’s funds, which will be reimbursed) all documented costs, expenses and
liabilities incurred by Operator directly or on Owner’s behalf in connection
with performing the Services;

 

(iv)                              making
cash investments of Owner’s funds in accordance with approved cash management
policies of Owner;

 

(v)                                 entering
into commercial transactions on behalf of Owner and attending to, maintaining,
complying with and enforcing all contracts known to Operator on behalf of Owner
for or related to (a) the management and operation of the Pipeline and (b) the
provision of natural gas transportation and storage services to Third Party
shippers in accordance with Owner’s Tariff, in each case in accordance with the
terms of this Agreement and Owner’s Tariff;

 

(vi)                              providing
or causing to be provided all of the personnel necessary to staff and perform
the Services which may be accomplished to the extent necessary by (a) full-time
employees of Operator, or Affiliates of Operator, engaged in the performance of
the Services, (b) any other employees of Operator or Affiliates of
Operator, or (c) contractors, consultants and other representatives hired
by Operator;

 

(vii)                           except
as otherwise expressly set forth in Section 2.2 and so long as the
information does not call for information about the Persons holding an
ownership interest in Owner, preparing and furnishing to requisite Governmental
Entities all reports and information required by Law in connection with the
Pipeline and preparing and furnishing to Owner for Owner’s review within a
reasonable period of time prior to submission, any filings made pursuant to Section 4
of the Natural Gas Act (except for negotiated rate agreement filings), Section 5
of the Natural Gas Act, and Section 7(c) FERC certificate applications
and corresponding FERC orders prior to acceptance of such orders, and responses
to any material investigations of any Governmental Entity targeting the
Pipeline specifically. For the avoidance of doubt, industry wide or similar
non-targeted investigations that would not reasonably be expected to have a
material financial impact on the Pipeline, and that do not target the Pipeline
specifically are not included;

 

(viii)                        taking (a) any
and all actions and making repairs, including implementing a pipeline shutdown,
that are required or appropriate in response to a sudden or unexpected event
that (i) causes, or risks causing, an Environmental Condition 

 

8

 

or breach of any
Environmental Law, damage to the Pipeline or other property, or the injury,
illness, or death of any person, or (ii) is of such a nature that
responding to the event cannot, in the reasonable discretion of Operator, await
the decision of Owner (any event in this subclause (a), an “Emergency”);
or (b) any and all actions and repairs required to maintain material
compliance with any Laws having jurisdiction over the construction,
development, operation, maintenance and repair of the Pipeline, including,
without limitation, the PHMSA and the FERC;

 

(ix)                                providing
or causing to be provided, directly or by allocation, the personnel,
facilities, office space, equipment and technology necessary to perform the
functions and provide the Services and maintaining invoices and other
documentation relating to costs expended in performing the Services and
accurate and complete books and records (including operating records) as
required by Law, and retaining records of Owner that are in Operator’s
possession in accordance with Owner’s record retention policy in effect from
time to time;

 

(x)                                   purchasing
right-of-way, easements and fee properties and causing to be prosecuted
condemnation actions as required;

 

(xi)                                preparing
budgets and bid requirements;

 

(xii)                             negotiating
and letting contracts and purchasing pipe and supplies;

 

(xiii)                          performing
the accounting, legal, treasury, engineering and planning functions associated
with operations of the Pipeline;

 

(xiv)                         obtaining
all Permits;

 

(xv)                            performing
the services necessary for any construction financing approved in accordance
with the LLC Agreement;

 

(xvi)                         filing
non-income or franchise returns and paying (with Owner’s funds or, at Operator’s
election, Operator’s funds, which will be reimbursed) such Taxes and other
charges, assessments and similar payments due or payable from time to time upon
or in connection with any facilities or properties constituting a part of the
Pipeline;

 

(xvii)                      managing the
litigation matters of Owner and MidCon and promptly notifying Owner and MidCon
upon obtaining knowledge thereof; provided however, that Operator may only
settle litigation matters that involve the payment of monetary damages not in
excess of $2.5 million or as otherwise provided for in the Operating Budget;
provided further, that Operator may only settle litigation matters if such
settlement will not impose any material restriction on the operations of NGPL. For
the avoidance of doubt any other settlement of litigation matters must be
approved by the Owner;

 

(xviii)                   preparing
financial statements of Owner and MidCon and engaging independent auditors to
provide an audit of the annual financial statements of Owner and MidCon LLC;

 

9

 

(xix)                           causing
the operator of the Horizon pipeline system to act pursuant to the terms and in
accordance with the standards set forth in the Operation and Maintenance
Agreement and Services Agreement with Horizon Pipeline Company, L.L.C.;

 

(xx)                              causing
the operator of the Canyon Creek pipeline system to act pursuant to the terms
and in accordance with the standards set forth in the Operation and Maintenance
Agreement with Canyon Creek Compression Company; and

 

(xxi)                           performing
other services requested by Owner, for which mutually acceptable compensation
is agreed to in advance.

 

Owner will provide
to Operator information in Owner’s reasonable control or possession sufficient
to allow Operator to provide the Services hereunder.

 

(b)                                 Notwithstanding
any other provision of this Agreement to the contrary, the term Services as
used in this Agreement does not include authorization to make the material
strategic decisions listed below with respect to the Pipeline without the
authorization of Owner, provided that nothing in this subsection (b) shall
affect any specific approval, consent or similar rights granted to Operator in
this Agreement or any rights granted to Knight Inc. as a shareholder of MidCon
under the LLC Agreement or Shareholder Agreement. All matters in any approved
Operating Budget, Development Plan Budget or Construction Opportunity Budget or
approved amendment thereto have been authorized by Owner. It is understood that
Operator is authorized to implement any such material strategic decisions
authorized by Owner. Such material strategic decisions with respect to the
Pipeline are:

 

(i)                                     any approval or amendment to any Operating
Budget, Development Plan Budget or Construction Opportunity Budget, other than
pursuant to the terms of Article 3,

 

(ii)                                  any
matter relating to the financing or refinancing of Owner (including any
incurrence or prepayment of indebtedness or provision of guarantees of another
person’s indebtedness or issuance of securities) other than in the ordinary
course of business, and the creation of any lien on or security interest in any
of the assets of Owner in connection therewith,

 

(iii)                               the sale, exchange, lease, mortgage or
other disposition of any assets of Owner other than immaterial or surplus
assets,

 

(iv)                              any
decision to file a rate case under Section 4 of the Natural Gas Act with
the FERC,

 

(v)                                 changing
in any material respect any tax, accounting or cash investment management
policy of Owner,

 

(vi)                              entering
into any Tax settlement agreements or arrangements in an amount in excess of
$2.5 million,

 

10

 

(vii)                           changing
Owner’s independent auditors,

 

(viii)                        settlement
of litigation not authorized in Section 2.1(a)(xvii),

 

(ix)                                any
commercial, operations or contractual agreement with a known or expected
revenue or cost impact in excess of $10.0 million over any 1 year period (other
than the replacement or renewal of any commercial, operations or contractual
agreement on substantially similar terms), and

 

(x)                                   any
other agreement, arrangement, transaction, policy or decision entered into that
would reasonably be expected to have a material financial impact on Owner.

 

2.2                                 FERC
Standards of Conduct.

 

(a)                                  Without
suggesting Owner is involved in details of Services pursuant hereto, Operator
shall ensure that personnel who are responsible for operating the Pipeline
pursuant to this Agreement attend an Owner’s standards of conduct training
session and comply with the FERC Standards of Conduct rules and
regulations and Owner’s procedures implementing those standards of conduct.

 

(b)                                 Owner
shall retain responsibility for its own compliance with the FERC Standards of
Conduct, including the preparation and submission of any necessary filings and
the preparation and updating of any documents that must be posted on its
website. In accordance with its responsibilities for management of Owner’s
website postings, Operator will post and maintain Owner’s standards of conduct
website postings.

 

(c)                                  Owner
and Operator shall jointly develop a Standards of Conduct Compliance Plan,
which shall clearly delineate the relationship between Owner and Operator, on
the one hand, and Owner’s Marketing Affiliates on the other. It is the mutual
intention of the Parties that Owner will implement its obligations under the
FERC Standards of Conduct in a manner that does not create any independent
obligation under those regulations for Operator in its relationship as an
independent contractor for Owner under this Agreement or any independent
obligation as a result of being Operator for any of Operator’s Affiliates. In
the event that the FERC issues an order or takes any action that is
inconsistent with the mutual intention of the Parties as herein described,
Owner shall promptly advise Operator of such action and the Parties will
negotiate in good faith to amend this Agreement or otherwise modify their
relationship to preserve their mutually intended relationship.

 

2.3                                 Performance.
Notwithstanding anything to the contrary in this Agreement, Operator shall have
no obligation under the terms of this Agreement to take any action (including
actions otherwise required to satisfy the Reasonable and Prudent Operator
standard), make any expenditure or incur any obligation for which Operator is
not entitled to reimbursement under Section 3.4.

 

2.4                                 Ownership
of Property. The Pipeline is owned by Owner. Operator has no ownership
interest in the Pipeline or in any other assets of Owner other than its
indirect ownership in Owner.

 

11

 

2.5                                 Cooperation.
Owner may appoint an individual to act as liaison with Operator (the “Operating
Liaison”). Operator will provide notice and opportunity for the Operating
Liaison to attend Owner’s regular weekly staff meetings and shall seek the
views of Owner through the Operating Liaison prior to filing any material
regulatory reports, information and other filings it makes for the Pipeline
pursuant to Section 2.1(vii) hereto and on any other material
regulatory developments as soon as practicable after Operator becomes aware of
such developments. The Operating Liaison will not direct Operator or Operator’s
officers, employees, representatives or consultants. Notwithstanding anything
herein to the contrary, Owner may act through the Operating Liaison to communicate
to Operator the views of Owner with respect to regulatory and related business
matters. All costs and expenses of the Operating Liaison will be borne by the
Record Holder of Class B Shares under the LLC Agreement.

 

ARTICLE 3

 

EXPENDITURES AND REIMBURSEMENT

 

3.1                                 Budgets
and Authorization for Expenditures.

 

(a)                                  Operator
is hereby authorized and directed to make any and all expenditures necessary to
implement any Operating Budget and the Development Plan and any Construction
Opportunity Budget approved by Owner and Operator in accordance with and
subject to, as applicable, the Development Plan Budget and any Construction
Opportunity Budget.

 

(b)                                 Operator
and Owner agree that the attached Exhibit C
represents the Operating Budgets for Calendar Year 2007 and 2008.

 

(c)                                  On
or before November 15 of each Calendar Year during the term of this
Agreement, Operator shall deliver to Owner in writing a proposed draft of the
Operating Budget for the next Calendar Year or partial Calendar Year in
substantially the same format and level of detail as set forth in the budget
template attached as Exhibit C
(each, including for clarity, items from the Development Plan Budget or any
Construction Opportunity Budget (which budgets have been previously approved),
a “Proposed Operating Budget”).

 

(d)                                 Each
Proposed Operating Budget will include line items for G&A Costs,
Non-G&A Costs and maintenance and expansion capital expenditures in
substantially the same format and level of detail as set forth in the budget
template attached as Exhibit C.

 

(e)                                  Owner
and Operator shall use all commercially reasonable efforts to agree on a
Proposed Operating Budget by no later than December 15 prior to the
applicable Calendar Year. Upon agreement of Owner and Operator, a Proposed
Operating Budget will be the operating budget for the next Calendar Year or
partial Calendar Year (the “Operating Budget”). If all commercially
reasonable efforts of the Parties fail to result in mutual agreement on a
Proposed Operating Budget by December 15 of the Calendar Year prior to the
applicable Calendar Year, each Party shall stipulate to the individual items in
the Proposed Operating Budget in dispute with respect to reasonably anticipated
cost versus agreement to budget levels. (For the sake of clarity, the items in
dispute may not include any items in the Development Plan 

 

12

 

Budget
or any approved Construction Opportunity Budget.)  The Parties shall then submit the resulting
stipulations to arbitration in accordance with Article 9 herein with the
arbitrator empowered to determine the line items in dispute for the applicable
Calendar Year. While any individual items in dispute are being arbitrated in
accordance with Article 9 herein, the items within the applicable Proposed
Operating Budget that are not in dispute shall be deemed to comprise the “Operating
Budget” for the purposes of this Agreement. Pending the outcome of the
arbitration, Operator may take action with respect to each item that is subject
to arbitration as if Operator would prevail on the merits until such
arbitration is completed to the extent Operator reasonably determines that the
failure to take such action would cause an unsafe operating condition or a
breach of any Law. Pending the outcome of the arbitration, any disputed item
that was budgeted in the prior Calendar Year’s Operating Budget shall be
considered to be included in the Operating Budget in the same manner and for
the same amount as in the prior Calendar Year’s Operating Budget, unless Owner’s
arbitration stipulations include a higher amount for such item in which case
such higher amount shall be included in the deemed Operating Budget. Upon the
resolution of any disputed item, the “Operating Budget” shall be amended to
include the applicable item as resolved.

 

(f)                                    At
any time or from time to time prior to the end of such Calendar Year, Operator
may propose amendments to the Operating Budget for such year (other than items
included in the Development Plan Budget and any approved Construction
Opportunity Budget) by delivering a written amendment to Owner. Each such
amendment shall itemize individual Non-G&A Costs, G&A Costs and
individual capital expenditures in the same format and level of detail set
forth in the budget template attached as Exhibit C,
and shall become effective upon Owner’s written approval of same. If after
using all commercially reasonable efforts to agree on the amendment, individual
items of the amendment are still in dispute, the dispute shall be resolved in the
manner described in Section 3.1(e). Such amendments will become part of
the Operating Budget for such Calendar Year.

 

(g)                                 Within
30 days after a Proposed Operating Budget is approved pursuant to Section 3.1(d) and
no unresolved disputed items remain, Operator shall prepare and deliver to
Owner the Operating Budget for the Calendar Year covered by such Operating
Budget which shall include, as provided, the items included in the Development
Plan Budget and any approved Construction Opportunity Budget for such Calendar
Year along with the items of such Proposed Operating Budget.

 

(h)                                 In
the event the Parties are unable to agree on the methodology for determining
the amount of G&A Costs for fiscal 2011 or for any subsequent year, the
amount of G&A Costs will be determined by Operator in accordance with the
methodology known as the Massachusetts formula applied by Operator in the same
manner as applied by Operator with respect to the Pipeline and other interstate
natural gas pipeline systems operated by Operator or its Affiliates.

 

(i)                                     Either
Party may propose a Construction Opportunity Budget by providing a written copy
of the proposed budget to the other Party. Any final Construction Opportunity
Budget must be approved by each of Owner and Operator. If each of Owner and
Operator agree that the Construction Opportunity described in the Construction
Opportunity Budget should be pursued, then each of Owner and Operator shall use
commercially reasonable efforts to reach 

 

13

 

agreement
with respect to any proposed Construction Opportunity Budget within 30 days of
the date it is proposed.

 

(j)                                     If
both (i) a Construction Opportunity Budget solely with respect to an
Expansion or Extension Opportunity is proposed by either Party as provided in Section 3.1(i) and
Owner votes that the Expansion or Extension Opportunity described in such
Construction Opportunity Budget should be pursued and Operator votes that such
Expansion or Extension Opportunity should not be pursued and (ii) the
board of directors of any KM Entity votes, or expressly authorizes its
management, in either case within six (6) months of the vote in clause
(i), to actively pursue such Expansion or Extension Opportunity, then if a
majority of the Board of Directors of Owner voted or votes to pursue such
Expansion or Extension Opportunity,

 

(1)                                 Owner may pursue such
Expansion or Extension Opportunity (including, notwithstanding anything
contained herein to the contrary, conducting feasibility studies and conducting
open seasons and preparing plans therefor);

 

(2)                                 If personnel of
Operator or any of its Subsidiaries are engaged in planning for or pursuing
such Expansion or Extension Opportunity on behalf of any KM Entity, Operator
shall provide separate personnel of similar expertise and number to assist
Owner in planning for and pursuing such Expansion or Extension Opportunity. The
personnel on each such team shall not share information with respect to their
planning or pursuing such Expansion or Extension Opportunity with personnel
from the other team;

 

(3)                                 To the extent
reasonable under the circumstances, Owner will attempt to employ debt financing
for an appropriate portion of the amounts necessary to pursue and construct or
acquire such Expansion or Extension Opportunity;

 

(4)                                 Owner, in consultation
with Operator, will prepare and deliver to Operator the final Construction
Opportunity Budget for such Expansion or Extension Opportunity; and

 

(5)                                 Owner shall pay or
reimburse Operator for all incremental costs and expenditures (including
G&A Costs), allocated or otherwise, that Operator pays or incurs in
connection with such Extension or Expansion Opportunity, including in
connection with the planning, construction or acquisition, and operation
thereof.

 

Operator hereby covenants and agrees that it
will provide Owner with notice (x) of any KM Entity board of directors
vote or authorization referred to in clause (ii) of Section 3.1(j) above
within three (3) Business Days of such vote or authorization and (y) of
the date on which an Expansion or Extension Opportunity owned or operated by a
KM Entity that meets the criteria set forth in Section 7.2(e) is
acquired or enters into full operation, and the date 

 

14

 

on which a binding agreement for such acquisition or construction is
executed and delivered, in each case within three (3) Business Days of
such date.

 

In the event that any KM Entity owns or
operates an Expansion or Extension Opportunity, Operator agrees that it (w) will
use confidential information about MidCon, Owner, and their respective
controlled Affiliates or operations solely for the purpose of monitoring its
investment in MidCon and operating the Pipeline, (x) will comply with the
FERC Standards of Conduct rules and regulations, (y) will not permit
any of its personnel who are directly performing marketing and business
development functions on behalf of Owner under this Agreement to provide
services to any KM Entity relating specifically to such Extension and Expansion
Opportunity and (z) will not reveal or otherwise act as a conduit for the
confidential information described in clause (x) above to any KM Entity.

 

3.2                                 Authorization
for Expenditures for Emergencies. Notwithstanding any other provisions of
this Agreement, in the case of an Emergency, while acting as a Reasonable and
Prudent Operator, Operator may, without any prior notice to or approval from
Owner, take such steps and incur such expenditures that, in Operator’s sole
opinion, are required to deal with such Emergency. Operator shall notify Owner
within 24 hours of the occurrence of any Emergency and shall report generally
to Owner with respect thereto within seven days of such occurrence.

 

3.3                                 Authorization
for Expenditures. Notwithstanding any other provision of this Agreement,
while acting as a Reasonable and Prudent Operator, Operator may take such steps
and incur such expenditures that are reasonably necessary to (a) prevent
or reduce any material disruption or delay in the Pipeline’s delivery of capacity
in accordance with its then-existing contractual obligations, (b) prevent
or reduce any material disruption or delay in operating the Pipeline or (c) satisfy
the Operator’s obligation to act as a Reasonable and Prudent Operator under the
terms of this Agreement, provided, in each case, that such expenditures,
including capital expenditures, shall not result in aggregate expenditures for
a Calendar Year exceeding the total expenditures set forth in the Operating
Budget by greater than 15% for such Calendar Year and provided further that
Operator shall notify Owner in writing as soon as reasonably practicable if the
aggregate expenditures incurred, or that Operator reasonably expects will be
incurred, will exceed such Operating Budget by such amount. It is understood
and agreed that the terms of this Section 3.3 do not apply to expenditures
incurred to deal with an Emergency, which are subject to Section 3.2
above.

 

3.4                                 Reimbursement.
Operator shall pay directly with Owner’s funds (or, if Operator chooses to pay
with its own funds, Owner shall reimburse Operator) for all budgeted, approved
or permitted costs or expenditures under this Agreement, as such costs or
expenditures are incurred or paid by Operator, including any Non G&A Costs
incurred or paid by Operator.

 

3.5                                 Services
to be Provided at Cost. Each Party acknowledges and agrees that (a) Operator
is providing the Services without any mark-up or profit and (b) the
reimbursement provided for in this Article 3 is intended to cover the
costs actually incurred by Operator or allocated by Operator to Owner in
performing the Services following the Effective Date; provided,
however, that G&A Costs, other than
G&A Costs that have been approved in connection with Construction
Opportunities or that are to be reimbursed pursuant to Section 3.1(j)(5),
will be fixed at the amount set forth on Exhibit B
attached hereto for fiscal 2007 and 

 

15

 

escalated
by 3% over the preceding year for each year thereafter until 2011. The amount
of G&A Costs set forth on Exhibit B  will
be pro rated for fiscal 2008 from the Effective Date.

 

3.6                                 Monthly
Invoices. Operator shall prepare and submit monthly invoices to Owner
following the end of each calendar month for payments due hereunder, which
monthly invoices shall include an amount equal to one-twelfth (1/12) of the
applicable annual G&A Costs plus any reimbursable costs incurred or paid by
Operator during such month. Owner shall pay the undisputed portion of such
invoices within 10 days of receipt. Operator shall promptly provide upon
written request of the Owner all reasonable supporting documentation relating
to costs or expenditures and the allocation methodology used with respect to
any monthly invoice, provided however, that no supporting documentation or
methodology needs to be provided with respect to G&A Costs until 2011.

 

3.7                                 Payment
Disputes. If Owner in good faith disputes the amount of any payment
required by any invoice issued under the terms of this Agreement, it shall notify
Operator of the dispute prior to the date that payment is due. Operator shall
permit Owner to conduct an audit and review of all supporting documentation
relating to such costs or expenditures and the allocation methodology used
therefor. All invoices and statements rendered to Owner by Operator under this
Agreement shall conclusively be presumed to be true and correct after 12 months
following the rendering of such invoices and statements, unless within the
12-month period Owner takes written exception thereto and makes claim on
Operator for adjustment. Similarly, no adjustment favorable to Operator shall
be made unless it is made within the same prescribed period. If the Parties are
unable to resolve the dispute within 60 days after the applicable due date of
the invoice, they will submit the dispute to the dispute resolution procedures
set forth in Article 9. Owner may, in good faith, withhold payment of the
disputed portion of any invoice until the dispute is resolved or deemed
resolved under this Section 3.7; provided that
Owner shall pay the undisputed amount of any invoice on or prior to the date
that payment is due.

 

ARTICLE 4

 

ACCOUNTING AND RECORDS

 

4.1                                 Maintenance
of Accounts.

 

(a)                                  Operator
shall maintain accurate accounts of all expenses, costs, Taxes and liabilities
incurred by it in performing its obligations hereunder, and all revenues
accrued and invoiced, all of which shall be charged or credited to Owner. All
such accounting shall be handled in accordance with FERC regulation.

 

(b)                                 Operator
shall maintain accurate books and records of MidCon in accordance with United
States generally accepted accounting principles as commonly applied to
accounting for natural gas pipeline companies.

 

(c)                                  Within
45 days after the end of each calendar quarter, Operator shall send MidCon and
Owner (i) an income statement for MidCon for such quarter (including
sufficient information to permit Owner to calculate its members’ Tax accruals)
and for the portion of the 

 

16

 

Calendar
Year then ended as compared to the same periods for the prior Calendar Year and
to the budgeted results for the current periods; (ii) a balance sheet for
MidCon as of the end of such quarter; and (iii) a statement of cash flows
for MidCon for such quarter and for the portion of the Calendar Year then ended
as compared to the same periods for the prior Calendar Year.

 

ARTICLE 5

 

ADDITIONAL COVENANTS OF THE
PARTIES

 

5.1                                 Restricted
Actions. During the term of this Agreement, Operator shall not, without the
prior written consent of Owner, create or permit to be incurred any material
lien or encumbrance on the Pipeline or any asset constituting part of the
Pipeline, with the exception of (i) undetermined or inchoate liens and
charges incidental to construction, maintenance, development or operation,
including those that arise by operation of Law; (ii) the lien of Taxes and
assessments not at the time delinquent, or if delinquent, the validity of which
is being contested by the Operator in good faith by appropriate proceedings; (iii) the
lien reserved in leases for rent and for compliance with the terms of the lease
in the case of leasehold estates; (iv) any obligations or duties,
affecting the property of Owner, to any municipality or public authority with
respect to any Permit or similar arrangement; (v) mechanics’ or
materialmen’s liens, any liens or charges arising by reason of pledges or
deposits to secure payment of workman’s compensation or other insurance, good
faith deposits in connection with tenders, leases of real estate, bids or
contracts (other than contracts for the payment of money), deposits to secure
duties or public or statutory obligations, deposits to secure, or in lieu of,
surety, stay or appeal bonds, and deposits as security for the payment of Taxes
or assessments or similar charges; or (vi) other liens (regardless of
whether similar) which do not materially interfere with the use of the
Pipeline, all of which liens shall be administered or otherwise addressed in a
manner consistent with prudent industry practices and past practices.

 

5.2                                 Compliance
with Laws. Operator shall act as a Reasonable and Prudent Operator to cause
the personnel performing the Services to act in material compliance with all
Laws. As owner of the Pipeline, Owner shall conduct itself at all times in
material compliance with all Laws.

 

5.3                                 Expansion
or Extension Opportunities. Operator shall actively seek (consistent with
its past practices) and present Expansion or Extension Opportunities to the
Board of Directors of Owner (prior to or contemporaneously with the
presentation of each such Expansion or Extension Opportunity to the board of
directors of any KM Entity) for consideration.

 

5.4                                 Customer
Information. Promptly following request by any Principal or any Investor to
the Operator, for purposes of determining whether a proposed transfer of
securities subject to the Shareholder Agreement would be to a customer, the
Operator shall provide such Principal or Investor with a copy of the
then-current list of customers of Owner and any other subsidiary of MidCon that
owns or operates a natural gas pipeline in North America. The Shareholder
Agreement provides that such Principal or Investor is entitled to rely on the
contents of such customer list (for a period of 6 months) for purposes of
compliance with the terms of Sections 3 and 4 of such agreement relating to
transfers to or ownership by customers of securities subject to such agreement
and shall have no liability under such agreement for any 

 

17

 

breach
of such terms of Sections 3 and 4 of such agreement resulting from such
reliance. Such Principal or Investor will keep such customer list confidential
and shall only use it for the purposes provided in Section 7(b) of
the Shareholder Agreement.

 

ARTICLE 6

 

INSURANCE

 

6.1                                 Insurance
Provided by Operator. Operator shall at all times during the term of this
Agreement, purchase and maintain insurance coverage that includes reasonable
and customary coverage for the Pipeline that is part of Operator’s overall
insurance program for itself and its Affiliates in accordance with the
practices of Operator; provided, however, that the cost of insurance for directors and
officers of Owner shall not be allocated to Owner. Insurance for directors and
officers of Owner shall be the responsibility of the respective class of
shareholder of MidCon with which the directors and officers are associated.

 

6.2                                 Other Requirements. For insurance coverage obtained
pursuant to Section 6.1, Operator will provide that the applicable insurer
shall waive any right of recovery, under subrogation or otherwise, which the
insurer may have or acquire against Owner and its subsidiaries, Affiliates,
directors, partners, officers, or agents for claims under such policies. All
such coverage shall, where applicable, name Owner as an additional insured. Such
insurance shall, to the extent of Operator’s indemnity obligations, be primary
and non-contributing to any other insurance that is available to Owner. All insurance
coverage obtained by Operator in relation to this Agreement shall be endorsed
to provide that cancellation, termination or other material change shall not be
effective without 30 days prior written notice to the Owner excepting only
cancellation for non-payment of premium where such notice period shall be 10
days.

 

ARTICLE 7

 

TERM AND TERMINATION

 

7.1                                 Term. This Agreement shall commence on
the Effective Date and continue in effect for a primary term of 15 years. Thereafter,
this Agreement shall remain in full force and effect for up to five automatic
5-year extensions, subject to termination by either Party upon written notice
to the other Party no less than 12 months prior to the end of the primary term
or any 5-year extension.

 

7.2                                 Termination. This Agreement may be terminated

 

(a)                                  upon
the mutual written consent of the Parties; or

 

(b)                                 by
notice from either Party, if the other Party suffers a Bankruptcy; or

 

(c)                                  by
Owner or Operator, upon 30 days’ written notice in the event Knight or one of
its Affiliates no longer owns a direct or indirect interest in Owner; or

 

18

 

(d)                                 following
receipt by Operator of notice from Owner that Operator has failed to perform
any of its covenants or obligations under this Agreement or has been willfully
negligent or committed an act of intentional misconduct that, in any such case,
has had or is reasonably expected to have a material adverse financial impact
on MidCon (a “Performance Breach”):

 

(1)                                  Owner
shall give Operator notice of such Performance Breach (a “Performance Breach
Notice”). Operator shall have 10 days from receipt of the Performance
Breach Notice to cure the Performance Breach, or if diligently pursuing such a
cure, provide Owner with written notice that Operator intends to cure the
Performance Breach, including a summary of the material steps it has taken to
date to diligently pursue such cure (a “Cure Notice”). If Operator
delivers a timely Cure Notice, Operator shall have 60 days from receipt of the
Performance Breach Notice to cure the Performance Breach. If at the end of the
60 day period, the Performance Breach has not been cured but Operator is
diligently pursuing such cure, Operator shall have an additional 30 days to
cure the Performance Breach (for an aggregate of 90 days from receipt of the
Performance Breach Notice). If Operator timely cures the Performance Breach,
this Agreement will continue in full force and effect.

 

(2)                                  If
either (X) a Cure Notice is not delivered within 10 days following receipt
of the Performance Beach Notice, (Y) following 60 days after receipt of
the Performance Breach Notice, such Performance Breach is not cured and
Operator is not diligently pursuing the cure, or (Z) following the
expiration of the 30 day extension period such Performance Breach is not cured,
then Owner shall have the right, exercisable at any time during the 60 days
following the expiration of the applicable period referenced in clauses (X), (Y) and
(Z) above, to elect by notice to Operator to terminate this Agreement with
no further liability; provided, however, that this Agreement may not be
terminated pursuant to this clause (d)(2) unless the matter is submitted
to arbitration conducted pursuant to Article 9 (which arbitration process
shall commence upon Operator’s receipt of Owner’s notice of election to
terminate this Agreement pursuant to this clause (d)(2)) and the arbitrators
decide under the common law of the State of Texas that there was a Performance
Breach that was the result of Operator’s negligence or intentional misconduct,
is material and would justify termination of this Agreement.

 

For avoidance of doubt, it is agreed and
acknowledged that any action taken by Operator hereunder with the approval of
the Board of Directors of Owner or MidCon and in accordance with the terms of
such approval shall not constitute a Performance Breach; or

 

19

 

(e)                                  if
any KM Entity enters into a binding agreement to acquire or commences
construction of an Expansion or Extension Opportunity which (i) a majority
of the Board of Directors of Owner voted to pursue under Section 3.1(j), (ii) Owner,
or Myria Acquisition Inc. and its Affiliates, on behalf of Owner, actively
pursued with directors, officers and employees of Myria Acquisition Inc. or its
Affiliates, and (iii) a KM Entity pursued at the same time and entered
into a binding agreement to acquire or commenced construction notwithstanding
the competition from Owner, by notice from Owner to Operator given no later than
24 months after the date on which such Expansion or Extension Opportunity of a
KM Entity was acquired or initially entered into full operation.

 

Except as provided in the next succeeding
sentence, the termination of this Agreement shall be effective (i) at the
end of the term or an extension, in the case of termination pursuant to Section 7.1,
(ii) upon the date of
the mutual written consent, in the case of termination pursuant to Section 7.2(a),
(iii) upon receipt of notice of termination because of a Bankruptcy, in
the case of termination pursuant to Section 7.2(b), (iv) upon 30 days
after receipt of notice from Owner or Operator, in the case of termination
pursuant to Section 7.2(c), (v) upon the issuance of an arbitration
award in favor of Owner, in the case of termination pursuant to Section 7.2(d) and
(vi) upon receipt of notice of termination from Owner, in case of
termination pursuant to Section 7.2(e). However, if there is a Transition
Period or a Sale Transition Period, the termination of this Agreement shall be
effective upon the end of the Transition Period or Sale Transition Period, as
the case may be, or, if earlier, the date upon which Owner requests Operator to
terminate its performance of Services as provided in Section 7.3(b) or
7.3(c), as applicable.

 

7.3                                 Effect of Termination. (a) The termination of this
Agreement shall not relieve either Party of any liability or obligation
accruing or that accrued prior to such termination or deprive a Party not in
breach (other than a breach because such Party is rightfully withholding
performance in response to a breach by the other Party) of its rights to any
remedy otherwise available to such Party. Upon termination, Operator shall
promptly make available to Owner its books and records relating to the Pipeline.
Upon termination, Operator shall, to the extent requested by Owner, (i) assign
to Owner any contracts and agreements that are assignable entered into by
Operator and used exclusively in connection with its performance of the
Services on behalf of Owner pursuant to the terms of this Agreement and Owner
shall assume all obligations and liabilities under such contracts and
agreements, (ii) transfer to Owner all assets used exclusively in
providing the Services, (iii) with respect to information technology
and other systems that are used by Operator on a non-exclusive basis
to provide the Services, transfer to Owner all data relevant for providing
the Services contained within such systems and (iv) allow Owner to offer
employment to each employee of Operator whose duties consist principally of
providing the Services. In addition, Operator, at Owner’s expense, will use
commercially reasonable efforts to advise Owner with respect to replacing any
assets, materials, software or other systems or supplies that were used by
Operator in providing the Services and that are not being assigned or
transferred to Owner. The Parties agree to execute from time to time after such
termination such documents and instruments requested by each Party to evidence
such assignment and assumption. Upon termination, Operator shall promptly
deliver to Owner all documents, files, and books and records received from
Owner or generated by Operator with respect to the Pipeline in the performance
of its duties hereunder.

 

20

 

(b)                                 Notwithstanding any notice of
termination pursuant to Section 7.2 (other than notice of termination by
Operator pursuant to Section 7.2(c) which is subject to subsection (c) below),
at the request of Owner, Operator shall continue to serve as Operator of the
Pipeline, and Owner will perform its obligations, under this Agreement in
compliance with the provisions hereof for a transition period of up to 12
months (the “Transition Period”) (i) beginning upon the date of
consent, in the case of termination pursuant to Section 7.2(a), (ii) beginning
upon the date of the Bankruptcy, in the case of termination pursuant to Section 7.2(b),
(iii) beginning immediately upon the decision of Owner following the
issuance of an arbitration award in favor of Owner, in the case of termination
pursuant to Section 7.2(d), and (iv) beginning upon receipt by
Operator of notice of termination from Owner, in the case of termination
pursuant to Section 7.2(e), unless in each case Owner requests Operator to
terminate its performance of the Services earlier than the end of the
Transition Period. During the Transition Period, Operator shall provide the
Services in accordance with the Operating Budget then in existence, and all of
the terms of this Agreement. At the start of any new fiscal year during the
Transition Period, the Operating Budget shall be increased by increases in
costs which can reasonably be anticipated to be incurred by Operator in the
operation of the Pipeline for such portion of the Transition Period.

 

(c)                                  Notwithstanding any notice of
termination by Operator pursuant to Section 7.2(c), Operator shall
continue to serve as Operator of the Pipeline, and Owner will perform its
obligations, under this Agreement in compliance with the provisions hereof for
a transition period of up to the date that is the earlier to occur of (i) 24
months from the date of the notice of termination of this Agreement under Section 7.2(c) or
(ii) 24 months from the date that Operator gave notice to Owner that it
has commenced a process expected to lead to the sale of its direct or indirect
interest in Owner  (the “Sale
Transition Period”) unless Owner requests Operator to terminate its
performance of the Services earlier. During the Sale Transition Period,
Operator shall provide the Services in accordance with the Operating Budget
then in existence, and all of the terms of this Agreement. At the start of any
new fiscal year during the Sale Transition Period, the Operating Budget shall
be increased by increases in costs which can reasonably be anticipated to be
incurred by Operator in the operation of the Pipeline for such portion of the
Sale Transition Period. It is understood that nothing in this provision shall
eliminate the necessity of the notice that must be given in accordance with Section 3(d)(i) of
the Shareholder Agreement.

 

ARTICLE 8

INDEMNIFICATION

 

8.1                                 Limitation of
Liability. NOTWITHSTANDING ANYTHING TO THE CONTRARY IN THIS AGREEMENT, THE
PARTIES EXPRESSLY AGREE THAT (A) OPERATOR SHALL NOT BE LIABLE TO ANY OWNER
INDEMNIFIED PARTY FOR ANY EXEMPLARY, PUNITIVE, SPECIAL, INDIRECT,
CONSEQUENTIAL, REMOTE, OR SPECULATIVE DAMAGES, AND (B) OWNER SHALL NOT BE LIABLE TO ANY OPERATOR
INDEMNIFIED PARTY FOR ANY EXEMPLARY, PUNITIVE, SPECIAL, INDIRECT, CONSEQUENTIAL,
REMOTE, OR SPECULATIVE DAMAGES.

 

8.2                                 Indemnification
of Operator. Subject to Sections 8.1 and 8.3, Owner shall INDEMNIFY,
PROTECT, DEFEND, RELEASE and HOLD HARMLESS Knight and its 

 

21

 

Affiliates,
and their respective directors, officers, employees, agents, managers, members,
and representatives (collectively, the “Operator Indemnified Parties”),
when acting in the capacity of Operator, from and against any and all Claims ,
whether or not foreseeable, as a result of, caused or alleged to be caused, in
whole or in part, by, or arising out of, in connection with, or as an incident
to, any act or omission in connection with providing the Services under this
Agreement. ANY OPERATOR INDEMNIFIED PARTY SHALL BE INDEMNIFIED PURSUANT TO THIS
SECTION 8.2 NOTWITHSTANDING THE FACT THAT ANY OF THE CLAIMS ARE OR WERE (i) FORESEEABLY
CAUSED OR ALLEGED TO BE CAUSED, IN WHOLE OR IN PART, (x) BY THE SOLE,
JOINT OR CONCURRENT NEGLIGENCE, CONTRACTUAL COMPARATIVE NEGLIGENCE OR OTHER
FAULT OF SUCH OPERATOR INDEMNIFIED PARTY OR ANY OTHER OPERATOR INDEMNIFIED
PARTY OR (y) WITHOUT ANY FAULT OF ANY SUCH OPERATOR INDEMNIFIED PARTY OR
ANY OTHER OPERATOR INDEMNIFIED PARTY, OR (ii) ATTRIBUTABLE TO STRICT
LIABILITY OR NO-FAULT LIABILITY OF SUCH OPERATOR INDEMNIFIED PARTY OR ANY OTHER
OPERATOR INDEMNIFIED PARTY; PROVIDED, HOWEVER, THAT NO OPERATOR INDEMNIFIED
PARTY SHALL BE INDEMNIFIED PURSUANT TO THIS SECTION 8.2 FOR ANY CLAIMS TO
THE EXTENT CAUSED BY THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF SUCH
OPERATOR INDEMNIFIED PARTY.

 

8.3                                 Indemnification
of Owner. Subject to Section 8.1,
Operator shall INDEMNIFY, PROTECT, DEFEND, RELEASE and HOLD HARMLESS
Owner and its Affiliates, and their respective directors, officers, employees,
agents, managers, members and representatives (together with Owner, the “Owner
Indemnified Parties”) from and against any and all Claims suffered by Owner
Indemnified Parties as a result of, caused by, or arising out of the gross
negligence or willful misconduct of Operator in its performance or failure to
perform under this Agreement.

 

8.4                                 Indemnification
Demands. Each Party hereunder agrees that promptly upon its discovery of
facts giving rise to a demand for indemnity (an “Indemnity Demand”)
under the provisions of this Agreement with respect to any matter as to which
an Operator Indemnified Party or an Owner Indemnified Party as applicable
(each, an “Indemnified Party”) asserts a right to indemnity under the
provisions of this Agreement, it will give prompt notice thereof in writing to
the Party against which such a right is being asserted (the “Indemnifying
Party”), together with a statement of such information respecting any of
the foregoing as it shall have. Such notice shall include a formal demand for
indemnification under this Agreement. The Indemnifying Party shall not be
obligated to indemnify the Indemnified Party with respect to any Indemnity
Demand if the Indemnified Party fails to notify the Indemnifying Party thereof
in accordance with the provisions of this Agreement and such failure materially
and adversely affects the ability of the Indemnifying Party or its counsel to
defend against such matter and to make a timely response thereto including,
without limitation, any responsive motion or answer to a complaint, petition,
notice or other legal, equitable or administrative process relating to the
Indemnity Demand. If an Indemnity Demand goes unresolved, the Indemnity Demand
shall be referred to an Arbitrator for resolution pursuant to the procedures of
Article 9.

 

8.5                                 Payment
of Damages. In calculating any amount to be paid by an Indemnifying Party
by reason of the provisions of this Agreement, the amount shall be reduced by
all cash Tax 

 

22

 

benefits
and other cash reimbursements (including, without limitation, insurance
proceeds) and increased by all Tax detriments, actually received or incurred by
the Indemnified Party related to the damages. Such Tax benefit or detriment
shall be calculated using the highest marginal rate of federal and state Tax,
taking into account all of the states in which the person receiving the Tax
benefit or suffering the Tax detriment does business. The amount of any such
Tax benefit or Tax detriment is to be determined by taking into account the
effect, if any and to the extent determinable, of timing differences resulting
from the acceleration or deferral of items of gain or loss resulting from such
damages.

 

8.6                                 Sole
Remedy. No Party shall have liability under this Agreement except as is
provided in this Agreement (other than claims or causes of action arising from
fraud).

 

8.7                                 Express
Negligence Rule. THE INDEMNIFICATION PROVISIONS PROVIDED FOR IN THIS
AGREEMENT HAVE BEEN EXPRESSLY NEGOTIATED IN EVERY DETAIL, ARE INTENDED TO BE
GIVEN FULL AND LITERAL EFFECT, AND SHALL BE APPLICABLE WHETHER OR NOT THE
LIABILITIES, OBLIGATIONS, CLAIMS, JUDGMENTS, LOSSES, COSTS, EXPENSES OR DAMAGES
IN QUESTION ARISE OR AROSE SOLELY OR IN PART FROM THE GROSS, ACTIVE,
PASSIVE OR CONCURRENT NEGLIGENCE, STRICT LIABILITY, OR OTHER FAULT OF ANY
INDEMNIFIED PARTY. OWNER AND OPERATOR ACKNOWLEDGE THAT THIS STATEMENT COMPLIES
WITH THE EXPRESS NEGLIGENCE RULE AND CONSTITUTES CONSPICUOUS NOTICE. THIS
CONSPICUOUS NOTICE IS NOT INTENDED TO PROVIDE OR ALTER THE RIGHTS AND
OBLIGATIONS OF THE PARTIES.

 

8.8                                 Survival
of Indemnities. Notwithstanding any other provision in this Agreement to
the contrary, the indemnification provisions and rights set forth in this Article 8
shall survive the expiration or other termination of this Agreement with
respect to events, occurrences or conditions existing or arising on or prior to
such expiration or other termination.

 

ARTICLE 9

ARBITRATION

 

9.1                                 Applicability.
Any controversy or claim between the Parties, whether based on contract, tort,
statute or other legal or equitable theory (including but not limited to any
claim of fraud, misrepresentation or fraudulent inducement or any question of
validity or effect of this Agreement including this Article) arising out of
this Agreement (including any amendments or extensions), or the breach or
termination thereof shall be settled by arbitration in accordance with the then
current CPR Institute Rules for Non-Administered Arbitration of Business
Disputes, and this provision. The arbitration shall be governed by the United
States Arbitration Act, 9 U.S.C. §§ 1-16 to the exclusion of any
provision of Law inconsistent therewith or which would produce a different
result, and judgment upon the award rendered by the arbitrator may be entered by
any court having jurisdiction. Any dispute to which this Article 9 applies
is referred to herein as a “Dispute.” 
The provisions of this Article 9 shall be the exclusive method of
resolving Disputes. Nothing in this Agreement shall preclude a Party from seeking
temporary or preliminary 

 

23

 

injunctive
relief from a court of competent jurisdiction to prevent irreparable damage or
injury before the matter can be heard in arbitration.

 

9.2                                 Negotiation
to Resolve Disputes.

 

(a)                                  If
a Dispute arises, the Parties shall attempt to resolve such Dispute through the
following procedure:

 

(i)                                     first,
the Parties shall promptly meet (whether by phone or in person) in a good faith
attempt to resolve the Dispute;

 

(ii)                                  second,
if the Dispute is still unresolved after 10 Business Days following the
commencement of the negotiations described in Section 9.2(a)(i), then (A) the
chief executive officer (or the designee thereof) of Knight, on behalf of
Operator, and (B) the designee of the Board of Directors (as defined in
the LLC Agreement), on behalf of Owner, shall meet (whether by phone or in
person) in a good faith attempt to resolve the Dispute; and

 

(iii)                               third,
if the Dispute is still unresolved after 10 Business Days following the
commencement of the negotiations described in Section 9.2(a)(ii), then any
Party (the “Initiating Party”) may submit such Dispute to binding
arbitration under this Article by written notice to the other Party (an “Arbitration
Notice”) delivered within 30 Business Days thereafter.

 

(b)                                 At
the same time that the Initiating Party sends an Arbitration Notice to the
other Party, it shall also send an Arbitration Notice to the regional office of
the CPR Institute covering Chicago, Illinois. The Arbitration Notice shall
contain a brief description of the nature of the Dispute.

 

9.3                                 Selection
of Arbitrator.

 

(a)                                  Any
arbitration conducted under this Article 9 shall be heard by a sole
arbitrator (the “Arbitrator”) qualified by his or her education,
training and experience in the senior management of an interstate natural gas
pipeline to resolve the disputed matters and shall be selected in accordance
with this Article 9. Each Party and each proposed Arbitrator shall
disclose to the other Party any business, personal or other relationship or
affiliation that may exist between such Party and such proposed Arbitrator
within 10 Business Days following delivery of the Arbitration Notice.

 

(b)                                 The
Initiating Party shall designate a proposed Arbitrator in its Arbitration
Notice. If the other Party objects for any reason to such proposed Arbitrator,
it may, on or before the 15th Business Day following delivery of the
Arbitration Notice, notify the Initiating Party of such objection. The Parties
shall attempt to agree upon a mutually acceptable Arbitrator. If they are
unable to do so within seven Business Days following delivery of the notice
described in the second-preceding sentence, any Party may request the regional
office of the CPR Institute covering Chicago, Illinois to designate the
Arbitrator who shall be qualified by his or her education, training and
experience in the interstate natural gas pipeline industry to resolve the
disputed matters. Failing designation by the regional office of the CPR
Institute, any Party may 

 

24

 

in
writing request the judge of the United States District Court for the Northern
District of Illinois senior in term of service to appoint an Arbitrator
qualified by his or her education, training and senior management experience in
the interstate natural gas pipeline industry to resolve the disputed matters. If
the Arbitrator so chosen shall die, resign or otherwise fail or becomes unable
to serve as Arbitrator, a replacement Arbitrator shall be chosen in accordance
with this Article 9.

 

9.4                                 Conduct
of Arbitration.

 

(a)                                  Any
arbitration hearing shall be held in Chicago, Illinois. The Arbitrator shall
fix a reasonable time and place for the hearing and shall determine the matters
submitted to it pursuant to the provisions of this Agreement in a timely
manner.

 

(b)                                 Except
as expressly provided to the contrary in this Agreement, the Arbitrator shall
have the power (i) to gather such materials, information, testimony and
evidence as it deems relevant to the dispute before it (and each Party will
provide such materials, information, testimony and evidence requested by the
Arbitrator, except to the extent any information so requested is subject to an
attorney-client or other privilege); (ii) to grant injunctive relief and
enforce specific performance; (iii) to issue or cause to be issued
subpoenas (including subpoenas directed to Third Parties) for the attendance of
witnesses and for the production of books, records, documents and other
evidence. Subpoenas so issued shall be served, and upon application to a court
having jurisdiction by a Party or the Arbitrator, enforced, in the manner
provided by law for the service and enforcement of subpoenas in a civil action;
and (iv) to administer oaths.

 

(c)                                  In
advance of the arbitration hearing, the Parties may conduct discovery in
accordance with the Illinois rules. Such discovery may include, but is not
limited to, (i) the taking of oral and videotaped depositions and
depositions on written questions; (ii) serving interrogatories, document
requests and requests for admission; and (iii) any other form and/or
method of discovery provided for under the Illinois rules. The Arbitrator shall
order the Parties to promptly exchange copies of all exhibits and witness
lists, and, if requested by a Party, to produce other relevant documents, to
answer up to 10 interrogatories (including subparts), to respond to up to 10
requests for admissions (which shall be deemed admitted if not denied) and to
produce for deposition and, if requested, at the hearing all witnesses that
such Party has listed and up to four other persons within such Party’s control.
Any additional discovery shall only occur by agreement of the Parties or as
ordered by the Arbitrator upon a finding of good cause. Any objections and/or
responses to such discovery shall be due on or before 15 days after service. The
Parties shall attempt in good faith to resolve any discovery disputes that may
arise. If the Parties are unable to resolve any such disputes, the Parties may
present their objections to the Arbitrator who shall resolve the objections in
accordance with the Illinois rules. The Arbitrator may, if requested by a
Party, order that a trade secret or other confidential research, development or
commercial information not be revealed or be revealed only in a designated way.

 

(d)                                 The
Parties may also retain, with the consent of the Arbitrator, one or more
experts to assist the Arbitrator in resolving the Dispute. The Parties shall
identify and produce a report from any experts who will give testimony and/or
evidence at the arbitration 

 

25

 

hearing.
Any testifying experts identified shall be made available for deposition in
advance of any arbitration hearing.

 

(e)                                  The
Arbitrator shall render its decision in writing within 15 days of the
conclusion of the hearing. The Arbitrator shall have jurisdiction and authority
to interpret and apply the provisions of this Agreement only insofar as shall
be necessary in the determination of the dispute before it, but it shall not
have jurisdiction or authority to add to or alter in any way the provisions of
this Agreement. The Arbitrator’s decision shall govern and shall be final,
nonappealable (except to the extent provided in the Federal Arbitration Act)
and binding on the Parties and its written decision may be entered in any court
having appropriate jurisdiction. Pending resolution of any Dispute, performance
by Parties shall continue so as to maintain the status quo prior to notice of
such Dispute and service of notice of arbitration by any Party shall not divest
a court of competent jurisdiction of the right and power to grant a decree
compelling specific performance or injunctive relief in an action brought by
the Parties. THE ARBITRATOR AND ANY COURT ENFORCING THE
AWARD OF THE ARBITRATOR SHALL NOT HAVE THE RIGHT OR AUTHORITY TO AWARD
CONSEQUENTIAL, INCIDENTAL, INDIRECT, SPECIAL, PUNITIVE OR EXEMPLARY DAMAGES TO
THE PARTIES.

 

(f)                                    The
responsibility for paying the costs and expenses of the arbitration, including
compensation to the Arbitrator, shall be allocated among the Parties in a
manner determined by the Arbitrator to be fair and reasonable under the
circumstances. Each Party shall be responsible for the fees and expenses of its
respective counsel, consultants and witnesses, unless the Arbitrator determines
that compelling reasons exist for allocating all or a portion of such costs and
expenses to one Party.

 

ARTICLE 10

MISCELLANEOUS

 

10.1                           Notices. Any notice, request, instruction,
correspondence or other document to be given hereunder by either Party to the
other (herein collectively called “Notice”) shall be in writing and
delivered in person or by courier service requiring acknowledgement of receipt
or mailed by certified mail, postage prepaid and return receipt requested, or
by telecopier or by e-mail, as follows:

 

	
  To
  Operator:

  	
   

  	
  Knight Inc.

  500 Dallas Street, Suite 1000

  Houston, Texas 77002

  Attention: Dwayne Burton

  Facsimile: (713) 369-9356

  Email: Dwayne_burton@kindermorgan.com

  
	
   

  	
   

  	
   

  
	
  with
  a copy (that shall not constitute Notice) to:

  	
   

  	
  

  Knight Inc.

  500 Dallas Street, Suite 1000

  

 

26

 

	
   

  	
   

  	
  Houston, Texas 77002

  Attention: General Counsel, Gas Pipelines

  Telecopy: (713) 369-9305

  
	
   

  	
   

  	
   

  
	
  To
  Owner:

  	
   

  	
  Natural Gas Pipeline
  Company of America

  500 Dallas Street, Suite 1000

  Houston, Texas 77002

  Attention: President

  Telecopy: (713) 369-9305

  
	
   

  	
   

  	
   

  
	
  with
  a copy (that shall not constitute Notice) to:

  	
   

  	
  

  Natural Gas
  Pipeline Company of America

  500 Dallas Street, Suite 1000

  Houston, Texas 77002

  Attention: General Counsel

  Telecopy: (713) 369-9305

  

 

Notice given by personal
delivery or courier shall be effective upon actual receipt. Notice given by
mail shall be effective upon actual receipt or, if not actually received, the
fifth Business Day following deposit with the U.S. Post Office. Notice
given  by telecopier shall be confirmed
by appropriate answerback, and Notice given by telecopier or by e-mail shall be
effective upon actual receipt if received during the recipient’s normal
business hours, or at the beginning of the recipient’s next Business Day after
receipt if not received during the recipient’s normal business hours. Either
Party may change any address to which notice is to be given to it by giving notice
as provided above of such change of address.

 

10.2                           Governing Law. This Agreement shall be governed
by, construed and enforced in accordance with the substantive laws of the State
of Texas without reference to principles of conflicts of law.

 

10.3                           Entire Agreement; Amendments and
Waivers. This
Agreement and the exhibits hereto constitute the entire agreement among the
Parties with respect to the subject matter hereof and supersede all prior
agreements and understandings, both written and oral, among the Parties with
respect to the subject matter hereof. Each Party agrees that (i) the other
Party (including its agents and representatives) has not made any
representation, warranty, covenant or agreement to or with such Party relating
to this Agreement or the transactions contemplated hereby, and (ii) such
Party has not relied upon any representation, warranty, covenant or agreement
relating to the transactions contemplated by this Agreement. No amendment,
supplement, modification or waiver of this Agreement shall be binding unless
executed in writing by the Party to be bound thereby. No waiver of any of the
provisions of this Agreement or a breach hereof shall be deemed or shall
constitute a waiver of any other provision hereof or breach (regardless of whether
similar), nor shall any such waiver constitute a continuing waiver unless
otherwise expressly provided.

 

27

 

10.4                           Binding Effect and Assignment. This Agreement shall be binding
upon and inure to the benefit of the Parties and their respective permitted
successors and assigns; but neither this Agreement nor any of the rights,
benefits or obligations hereunder shall be assigned, by operation of law or
otherwise, by any Party without the prior written consent of the other Party; provided, however, that Knight may assign this Agreement and
its obligations hereunder to an Affiliate without such approval, but no such assignment
shall relieve Knight Inc. of its financial responsibilities as Operator
hereunder. Any attempted assignment without compliance with the foregoing will
be void. Except as set forth in Article 8, nothing in this Agreement,
express or implied, is intended to confer upon any person or entity other than
the Parties and their respective permitted successors and assigns, any rights,
benefits, remedies or obligations hereunder.

 

10.5                           Severability. If any provision of this
Agreement is rendered or declared illegal or unenforceable by reason of any
existing or subsequently enacted legislation or by decree of a court of last
resort, Operator and Owner shall promptly meet and negotiate substitute
provisions for those rendered or declared illegal or unenforceable, but all of
the remaining provisions of this Agreement shall remain in full force and
effect.

 

10.6                           Multiple Counterparts. This Agreement may be executed
in one or more counterparts, each of which shall be deemed an original, but all
of which together shall constitute one and the same instrument. Facsimile
copies of signatures shall constitute original signatures for all purposes of
this Agreement and any enforcement thereof.

 

10.7                           Force Majeure.

 

(a)                                  For purposes of this Agreement,
the term “Force Majeure” includes, without limitation, any acts of God
and the public enemy, strikes, lockouts or other industrial disturbances,
inability to obtain pipe or other material or equipment or labor, wars,
blockades, insurrections, riots, epidemics, landslides, lightning, earthquakes,
fires, storms, floods, high water washouts, inclement weather, arrests and
restraint of rulers and people, interruptions by government or court orders,
present or future orders of any regulatory body, civil disturbances,
explosions, breakage or accident to machinery or lines of pipe, freezing of
wells or pipelines, inability to obtain or delays in obtaining additional
necessary ROW or Permits (provided Operator has used reasonable efforts to
obtain such ROW or Permits), any laws, rules, orders, acts or restraint of
government or governmental body or court, or the partial or entire failure of
gas supply and any other event that is beyond the reasonable control of the
Party claiming Force Majeure, provided that
the Party claiming Force Majeure shall not be relieved of liability in the
event and to the extent there is a finding of gross negligence or willful
misconduct on the part of such Party with respect to such matter and provided, further, that
the Party prevented or hindered from performing gives prompt (but in no event
later than five Business Days after the occurrence of such event) notice and
reasonably full particulars of such event to the other Party and takes all
reasonable actions within its power to remove the basis for nonperformance
(including securing alternative supply sources) and after doing so resumes
performance as soon as possible.

 

(b)                                 Notwithstanding any other
provision of this Agreement to the contrary, in the event a Party is rendered
unable, wholly or in part, by Force Majeure to carry out its obligations under
this Agreement (other than any obligation to make payment of any amount 

 

28

 

when due and payable hereunder), the
obligation of such Party, so far as it is affected by such Force Majeure, shall
be suspended during the continuance of any condition or event of Force Majeure, but for no longer
period, and such condition or event shall so far as possible be remedied with
all reasonable dispatch.

 

(c)                                  It is understood and agreed that
the settlement of strikes or lockouts or resolution of differences with workers
shall be entirely within the discretion of the affected Party, and that the
above requirement that any Force Majeure shall be remedied with all reasonable
dispatch shall not require the settlement of strikes, lockouts or differences
by acceding to the demands of the opposing party in such strike, lockout or
difference when such course is inadvisable in the reasonably exercised discretion of the affected Party.

 

10.8                           Confidentiality. Subject to the provisions of
this Agreement, each Party agrees that all information and data acquired or
obtained by it in respect of the Pipeline or the Services, other than
information or data which (i) is on the date hereof or hereafter becomes
generally available to the public other than as a result, directly or
indirectly, of a breach of this Agreement by such Party, (ii) was or
becomes available to such Party or its Affiliates on a non-confidential basis
from a source other than such Party or its representatives, which source was
not itself bound by an obligation of confidentiality in favor of the other
Party or (iii) has been or becomes independently developed by such Party
or its Affiliates without violating this Agreement, (the “Confidential
Information”) shall be considered confidential and shall be kept
confidential and not be disclosed during the term hereof to any Person not a
party to this Agreement, except:

 

(a)                                  to an Affiliate or to a fund or
trust of which an Affiliate is the manager or trustee that owns an interest in
a shareholder of MidCon (if permitted by the FERC Standards of Conduct)
provided such Affiliate or such fund or trust first agrees in writing with
Owner and Operator (i) to maintain confidentiality as provided in this Section 10.8,
(ii)  to comply with the FERC Standards of Conduct rules and
regulations, and (iii)  not to reveal or otherwise act as a conduit for
the Confidential Information to any customer or direct competitor of MidCon or
any of its controlled Affiliates;

 

(b)                                 when required, in the opinion of
inside counsel, by any Governmental Entity;

 

(c)                                  to the extent such data and
information is required to be furnished (i) in compliance with any Laws or
(ii) pursuant to any
legal proceedings or because of any order of any court binding upon such Party;
provided, however,
that the other Party shall have a right to contest such disclosure of any
Confidential Information;

 

(d)                                 to prospective or actual
contractors, consultants, advisors and attorneys employed by such Party where
disclosure of such data or information is essential to such contractor’s,
consultant’s or attorney’s work, subject to such Party taking customary
precautions to ensure such data and information is kept confidential;

 

(e)                                  to the extent such data and
information must be disclosed, in the opinion of inside counsel, pursuant to
any Laws or rules or requirements of any stock exchange having
jurisdiction over such Party or its Affiliates;

 

29

 

(f)                                    to its employees (if permitted by the FERC
Standards of Conduct) for the purposes of operations and Services with respect
to the Pipeline, subject to such Party taking customary precautions to ensure
such data and information is kept confidential;

 

(g)                                 to
Third Parties as may be required by any agreement to which either Party is bound, with
respect to the Pipeline, subject to such Party taking customary precautions to
ensure such data and information is kept confidential;

 

(h)                                 any data or information which is
or becomes a part of the public domain other than as a result of disclosure by
such Party or its Affiliates or funds or trusts of which an Affiliate is the
manager or trustee in violation of this Agreement or other obligation of
secrecy to the other Party or any Third Party; or

 

(i)                                     as instructed in writing by the
other Party.

 

Disclosure as pursuant to
Section 10.8(d) or (f) shall not be made unless prior to such
disclosure such Party has obtained an undertaking from the recipient party to
keep the data and information strictly confidential for the term of this
Agreement, and not to use or disclose the data and information except for the
express purpose for which disclosure is to be made for such period. Notwithstanding
any provision of this Agreement to the contrary, the legal obligations of
confidentiality hereunder do not extend to the U.S. federal or state Tax
structure or the U.S. federal or state Tax treatment of the Services provided
hereunder. If any U.S. federal or state Tax analyses or materials are provided
to any Party, such Party is free to disclose any such analyses or materials
without limitation.

 

10.9                           Representations
and Warranties of Operator. Operator represents and warrants to Owner as of
the date hereof as follows:

 

(a)                                  Operator
has all requisite corporate power and authority to execute, deliver and perform
this Agreement. Operator has duly
authorized the execution, delivery and performance of this Agreement by all
necessary corporate action. This Agreement constitutes the valid and legally
binding obligation of Operator and (assuming that this Agreement has
been duly authorized, executed and delivered by Owner) is enforceable against
Operator in accordance with its terms except that such enforceability may be
limited by (i) applicable bankruptcy, insolvency, reorganization,
moratorium, and similar Laws affecting creditors’ rights generally and (ii) equitable
principles which may limit the availability of certain equitable remedies (such
as specific performance) in certain instances.

 

(b)                                 The
execution, delivery and performance of this Agreement by Operator do not violate, (i) any provision of any Law binding
upon Operator, (ii) the organizational documents of Operator, or (iii) any
indenture, agreement or instrument to which Operator is a party or by which
Operator or its property may be bound or affected, except with respect to
clauses (i) and (iii), as would not, individually or in the aggregate,
have a material adverse effect on Operator and its subsidiaries, taken as a
whole.

 

(c)                                  Operator
is not a party to, or to the best of Operator’s knowledge, threatened with any
legal, administrative, arbitral or other proceeding that would materially and
adversely affect Operator’s ability to perform its obligations under this
Agreement.

 

30

 

10.10                     Representations
and Warranties of Owner. Owner represents and warrants to Operator as of
the date hereof as follows:

 

(a)                                  Owner
has all requisite [corporate] power and authority to execute, deliver and
perform this Agreement. Owner has duly
authorized the execution, delivery and performance of this Agreement by all
necessary [corporate] action. This Agreement constitutes the valid and legally
binding obligation of Owner and (assuming that this Agreement has been
duly authorized, executed and delivered by Operator) is enforceable against
Owner in accordance with its terms except that such enforceability may be
limited by (i) applicable bankruptcy, insolvency, reorganization,
moratorium, and similar Laws affecting creditors’ rights generally and (ii) equitable
principles which may limit the availability of certain equitable remedies (such
as specific performance) in certain instances.

 

(b)                                 The
execution, delivery and performance of this Agreement by Owner do not violate, (i) any provision of any Law binding
upon Owner, (ii) the organizational documents of Owner, or (iii) any
indenture, agreement or instrument to which Owner is a party or by which Owner
or its property may be bound or affected, except with respect to clauses (i) and
(iii), as would not, individually or in the aggregate, have a material adverse
effect on Owner and its subsidiaries, taken as a whole.

 

(c)                                  Owner
is not a party to, or to the best of Owner’s knowledge, threatened with any
legal, administrative, arbitral or other proceeding that would materially and
adversely affect Owner’s ability to perform its obligations under this
Agreement.

 

10.11                     Interpretation
and Construction. The exhibits referred to herein are attached hereto and
incorporated herein by this reference, and unless the context expressly
requires otherwise, such exhibits are incorporated in the definition of “Agreement.”  Whenever the words “include,” “includes,” or “including”
are used in this Agreement, they shall be deemed to be followed by the words “without
limitation.”  The headings and captions
herein are inserted for convenience of reference only and are not intended to
govern, limit or aid in the construction of any term or provision hereof. It is
the intention of the Parties that every covenant, term and provision of this
Agreement shall be construed simply according to its fair meaning and not
strictly for or against any Party (notwithstanding any rule of law
requiring an agreement to be strictly construed against the drafting party), it
being understood that the Parties to this Agreement are sophisticated and have
had adequate opportunity and means to retain counsel to represent their
interests and to otherwise negotiate the provisions of this Agreement.

 

31

 

IN WITNESS WHEREOF, the
Parties have executed this Agreement to be effective as of the Effective Date.

 

	
   

  	
  OWNER:

  
	
   

  	
   

  
	
   

  	
  Natural Gas Pipeline Company of America

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  OPERATOR:

  
	
   

  	
   

  
	
   

  	
  Knight Inc.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  

 

32

 

EXHIBIT A

 

Development
Plan

 

See Attached

 

 

EXHIBIT B

 

Components of G&A Costs

 

See Attached

 

 

EXHIBIT
C

 

Operating Budget Template

 

See Attached

 

C-1

 

EXHIBIT B

 

FORM OF

 

ASSUMPTION OF GUARANTY AGREEMENT

 

THIS ASSUMPTION OF GUARANTY AGREEMENT (this “Agreement”) is made and
entered by and between KNIGHT INC., a Kansas corporation (“Seller”), and [                                                                ]
(“Buyer”).

 

W I T N E S S E T H:

 

WHEREAS, Seller and Buyer have entered into that certain Purchase and
Sale Agreement dated as of December         ,
2007 (the “Purchase Agreement”) providing for the purchase from Seller by Buyer
of all of the issued and outstanding Class B Shares in MidCon LLC, a
Delaware limited liability company (the “Purchase Transaction”) (capitalized
terms used, but not defined herein, shall have the meaning provided in the
Purchase Agreement);

 

WHEREAS, as part of the Purchase Transaction, Buyer has agreed to
assume 80% of the obligations of Seller (the “Current Guarantor”) under the Company
Guaranty; and

 

WHEREAS, Seller and Buyer desire to enter into this Agreement to
substitute Buyer for the Current Guarantor as the guarantor of 80% of the
obligations under the Company Guaranty (excluding any letters of credit that
constitute Company Guarantees, which will be either (i) replaced with a
new letter of credit issued on behalf of Buyer in an amount equal to 80% of the
Current Guarantor’s obligations under such letter of credit or (ii) remain
in place with a back-to-back letter of credit issued on behalf of Buyer in
favor of the Current Guarantor in an amount equal to 80% of the Current
Guarantor’s obligations under such letter of credit) set forth on Exhibit A
hereto in accordance with the terms specified herein;

 

NOW THEREFORE, for and in consideration of good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged and
confirmed, the Current Guarantor and Buyer do hereby agree as follows:

 

1.                                       Assumption.

 

1.1                                 Assumption.
Buyer, for itself and its successors and assigns, hereby agrees to assume 80%
of the Current Guarantor’s duties, liabilities and obligations under the Company
Guaranty and to pay, or to cause to be paid, and otherwise to discharge or
cause to be discharged, as such become due and payable, as the case may be, 80%
of the Current Guarantor’s duties, liabilities, and obligations under the Company
Guaranty to the extent that such duties, liabilities and obligations are to be so
paid after the date of this Agreement. Buyer does hereby agree to indemnify and
hold harmless the Current Guarantor from and against 80% of the losses, claims,
liabilities or damages (including expenses and reasonable attorney’s fees)
incurred or suffered by the Current Guarantor resulting from any failure on the
part of Buyer after the date hereof to discharge the duties, liabilities, and
obligations under, or arising in connection with, the 

 

 

Company
Guaranty. If the Current Guarantor is required by an obligee to make payment
under the Company Guaranty, in accordance with its terms Buyer agrees to pay or
to reimburse such Current Guarantor for 80% of such amount due and payable
under such Company Guaranty within ten (10) Business Days after receipt by
Buyer from such Current Guarantor of the applicable invoice or proof of payment
under the Company Guaranty by the Current Guarantor.

 

1.2                                 Release.
Subject to Section 7.9 of the Purchase Agreement, Buyer agrees to cooperate
and use Reasonable Efforts with the Current Guarantors, in their respective
efforts, to obtain the prompt and timely release of the Current Guarantor from
80% of its current duties, liabilities and obligations under the Company
Guaranty. Buyer acknowledges that nothing herein restricts or limits the
ability of the Current Guarantor to terminate the Company Guaranty at any time
on or after the stated expiration or termination date of the respective Company
Guaranty, provided such termination releases Buyer from further obligations
thereunder. Furthermore, the Current Guarantor will not be required to renew or
extend the Company Guaranty upon any applicable renewal or extension date for
amounts exceeding 20% of its Current Obligations under the Company Guaranty,
absent written agreement between the Current Guarantor and Buyer to the
contrary, and the Current Guarantor may provide notice to the applicable
beneficiaries of the Company Guaranty of its decision not to renew or extend,
if such notice is required, necessary or appropriate under such Company
Guaranty so long as Current Guarantor provides reasonable advance written
notice to Buyer of its intention to not renew or replace. In such event, unless
the Company Guaranty is properly terminated and upon request of the obligee,
Buyer agrees to issue and deliver to the obligee under such Company Guaranty a
new replacement guaranty by Buyer in an amount equal to 80% of the Current
Guarantor’s duties, liability and obligations in substitution of the Company Guaranty
in substantially the same form as the underlying Company Guaranty or in such
other form as the counterparty and Buyer shall agree.

 

2.                                       General
Provisions.

 

2.1                                 Successors
and Assigns. Subject to the provisions hereof, this Agreement shall be
binding upon and inure to the benefit of and be enforceable by the parties
hereto, and their successors and assigns.

 

2.2                                 Third
Party Beneficiaries. The parties hereto agree that the Current Guarantor is
a third party beneficiary of the provisions of this Agreement and, in such
capacity, shall have the right to enforce such provisions as applicable to the
Current Guarantor.

 

2.3                                 Construction.
All section headings used herein are for reference and identification purposes
only and are not intended to, and shall not under any circumstances, serve to
alter, amend, amplify, vary, or limit the express provisions hereof. In the
event that any provisions of this Agreement shall, for any reason, be held
violative of any applicable law, and so much of said Agreement is held to be
unenforceable, then the invalidity of such specific provision herein shall not
be held to invalidate any other provisions herein which shall remain in full
force and effect.

 

2

 

2.4                                 Governing
Law; Consent to Jurisdiction.

 

(a)                                  THIS
AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF DELAWARE, WITHOUT REGARD TO ITS CONFLICT OF LAWS RULES
OR PRINCIPLES.

 

(b)                                 THE
PARTIES HEREBY IRREVOCABLY SUBMIT TO THE JURISDICTION OF THE COURTS OF THE
STATE OF ILLINOIS AND THE FEDERAL COURTS OF THE UNITED STATES OF AMERICA
LOCATED IN COOK COUNTY, ILLINOIS OVER ANY DISPUTE ARISING OUT OF OR RELATING TO
THIS AGREEMENT OR ANY OF THE TRANSACTIONS CONTEMPLATED HEREBY, AND EACH PARTY
IRREVOCABLY AGREES THAT ALL CLAIMS IN RESPECT OF SUCH DISPUTE OR PROCEEDING
SHALL BE HEARD AND DETERMINED IN SUCH COURTS. THE PARTIES HEREBY IRREVOCABLY
WAIVE, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH THEY MAY NOW
OR HEREAFTER HAVE TO THE VENUE OF ANY DISPUTE ARISING OUT OF OR RELATING TO
THIS AGREEMENT OR ANY OF THE TRANSACTIONS CONTEMPLATED HEREBY BROUGHT IN SUCH
COURT OR ANY DEFENSE OF INCONVENIENT FORUM FOR THE MAINTENANCE OF SUCH DISPUTE.
EACH PARTY 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.

 

2.5                                 Further
Assurances. The Current Guarantor and Buyer hereby agree, each at its own
expense, to perform all such further acts and execute and deliver all such
further agreements, instruments and other documents as the other party shall
reasonably request to evidence more effectively the assumptions made by Buyer
under this Agreement.

 

2.6                                 Notices.
All notices, requests, demands, and other communications required or permitted
to be given or made hereunder by either party (each a “Notice”) shall be in
writing and shall be deemed to have been duly given or made if (i) delivered
personally, (ii) transmitted by first class registered or certified mail,
postage prepaid, return receipt requested, (iii) delivered by prepaid
overnight courier service, or (iv) delivered by confirmed facsimile
transmission to the parties at the following addresses (or at such other
addresses as shall be specified by the parties by similar notice):

 

	
   

  	
  If to Buyer:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Attention: 

  
	
   

  	
   

  	
  Fax: 

  
	
   

  	
   

  	
   

  
	
   

  	
  with a copy to:

  

 

3

 

	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Attention: 

  
	
   

  	
   

  	
  Fax: 

  
	
   

  	
   

  
	
   

  	
  If to Seller:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Knight Inc.

  
	
   

  	
   

  	
  500 Dallas, Suite 1000

  
	
   

  	
   

  	
  Houston, Texas 77002

  
	
   

  	
   

  	
  Attention: General Counsel

  
	
   

  	
   

  	
  Fax: (713) 369-9410

  
	
   

  	
   

  	
   

  
	
   

  	
  with copies to:

  
	
   

  	
   

  
	
   

  	
   

  	
  Bracewell & Giuliani LLP

  
	
   

  	
   

  	
  711 Louisiana, Suite 2300

  
	
   

  	
   

  	
  Houston, Texas 77002

  
	
   

  	
   

  	
  Attention: 

  
	
   

  	
   

  	
  Fax: (713) 

  

 

Notices shall be effective (i) if delivered personally or sent by
courier service, upon actual receipt by the intended recipient, (ii) if
mailed, upon the earlier of five days after deposit in the mail or the date of
delivery as shown by the return receipt therefor, or (iii) if sent by
facsimile transmission, when the answer back is received.

 

2.7                                 Counterparts.
This Agreement may be executed in any number of counterparts, each of which
shall be deemed an original, but all of which shall constitute one and the same
agreement.

 

4

 

IN WITNESS WHEREOF, the undersigned have caused this Agreement to be
executed effective as of          day
of                     ,
              .

 

 

	
   

  	
  KNIGHT INC.,

  
	
   

  	
  a Kansas corporation

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  [                                                    ]

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  
	
   

  	
   

  	
   

  
									

 

 

SIGNATURE PAGE TO ASSUMPTION
OF GUARANTY AGREEMENT

 

 

Exhibit A to Assumption of Guaranty Agreement

 

 

EXHIBIT C

 

 

LIMITED LIABILITY COMPANY AGREEMENT

 

OF

 

MIDCON LLC

 

Dated as of
[                      ]

 

 

LIMITED
LIABILITY COMPANY AGREEMENT

OF

MIDCON LLC

A Delaware Limited Liability Company

 

TABLE OF
CONTENTS

 

	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  
	
  ARTICLE 1

  	
   

  
	
  DEFINITIONS

  	
   

  
	
   

  	
   

  	
   

  
	
  1.1

  	
  Definitions

  	
  1

  
	
   

  	
   

  	
   

  
	
  1.2

  	
  Construction

  	
  7

  
	
   

  	
   

  	
   

  
	
  ARTICLE 2

  	
   

  
	
  ORGANIZATION

  	
   

  
	
   

  	
   

  	
   

  
	
  2.1

  	
  Continuation

  	
  7

  
	
   

  	
   

  	
   

  
	
  2.2

  	
  Name

  	
  8

  
	
   

  	
   

  	
   

  
	
  2.3

  	
  Registered Office;
  Registered Agent; Principal Office; Other Offices

  	
  8

  
	
   

  	
   

  	
   

  
	
  2.4

  	
  Purpose; Powers

  	
  8

  
	
   

  	
   

  	
   

  
	
  2.5

  	
  Foreign Qualification

  	
  9

  
	
   

  	
   

  	
   

  
	
  2.6

  	
  Power of Attorney

  	
  9

  
	
   

  	
   

  	
   

  
	
  2.7

  	
  Term

  	
  9

  
	
   

  	
   

  	
   

  
	
  2.8

  	
  Taxation as
  Corporation; No State-Law Partnership

  	
  9

  
	
   

  	
   

  	
   

  
	
  2.9

  	
  Title to Company Assets

  	
  10

  
	
   

  	
   

  	
   

  
	
  ARTICLE 3

  	
   

  
	
  SHAREHOLDERS; CERTIFICATES;
  TRANSFER OF COMPANY SECURITIES

  	
   

  
	
   

  	
   

  	
   

  
	
  3.1

  	
  Shareholders

  	
  10

  
	
   

  	
   

  	
   

  
	
  3.2

  	
  No Liability to Third
  Parties

  	
  10

  
	
   

  	
   

  	
   

  
	
  3.3

  	
  No Expulsion

  	
  10

  
	
   

  	
   

  	
   

  
	
  3.4

  	
  Certificates

  	
  10

  
	
   

  	
   

  	
   

  
	
  3.5

  	
  Register, Registration
  of Transfer and Exchange

  	
  11

  
	
   

  	
   

  	
   

  
	
  ARTICLE 4

  	
   

  
	
  AUTHORIZATION AND ISSUANCE OF
  COMPANY SECURITIES

  	
   

  
	
   

  	
   

  	
   

  
	
  4.1

  	
  Company Securities

  	
  12

  
	
   

  	
   

  	
   

  
	
  4.2

  	
  Classes of Shares

  	
  12

  
	
   

  	
   

  	
   

  
	
  4.3

  	
  Distributions Generally

  	
  12

  
	
   

  	
   

  	
   

  
	
  4.4

  	
  Anti-Dilution

  	
  12

  

 

 

	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  
	
  4.5

  	
  Capital Contributions

  	
  12

  
	
   

  	
   

  	
   

  
	
  ARTICLE 5

  	
   

  
	
  MANAGEMENT

  	
   

  
	
   

  	
   

  	
   

  
	
  5.1

  	
  Management of the
  Company’s Affairs

  	
  13

  
	
   

  	
   

  	
   

  
	
  5.2

  	
  Board of Directors

  	
  13

  
	
   

  	
   

  	
   

  
	
  5.3

  	
  Restrictions on the Board
  of Directors’ Authority

  	
  14

  
	
   

  	
   

  	
   

  
	
  5.4

  	
  Officers

  	
  15

  
	
   

  	
   

  	
   

  
	
  5.5

  	
  Compensation; Employees

  	
  16

  
	
   

  	
   

  	
   

  
	
  5.6

  	
  Financing Covenant

  	
  17

  
	
   

  	
   

  	
   

  
	
  5.7

  	
  Business Opportunities

  	
  17

  
	
   

  	
   

  	
   

  
	
  5.8

  	
  Interested Party
  Transactions

  	
  18

  
	
   

  	
   

  	
   

  
	
  5.9

  	
  Duties of Record
  Holders of Shares and Directors

  	
  19

  
	
   

  	
   

  	
   

  
	
  5.10

  	
  Indemnification

  	
  19

  
	
   

  	
   

  	
   

  
	
  5.11

  	
  NGPL Board of Directors

  	
  21

  
	
   

  	
   

  	
   

  
	
  5.12

  	
  Liability of
  Indemnitees

  	
  21

  
	
   

  	
   

  	
   

  
	
  5.13

  	
  Facsimile Signatures

  	
  21

  
	
   

  	
   

  	
   

  
	
  ARTICLE 6

  	
   

  
	
  INSPECTION; BOOKS AND RECORDS;
  TAX RETURNS

  	
   

  
	
   

  	
   

  	
   

  
	
  6.1

  	
  Inspection; Maintenance
  of Books and Records

  	
  22

  
	
   

  	
   

  	
   

  
	
  6.2

  	
  Accounts

  	
  22

  
	
   

  	
   

  	
   

  
	
  6.3

  	
  Independent Auditors

  	
  22

  
	
   

  	
   

  	
   

  
	
  6.4

  	
  Tax Returns

  	
  23

  
	
   

  	
   

  	
   

  
	
  ARTICLE 7

  	
   

  
	
  DISSOLUTION, WINDING-UP AND
  TERMINATION

  	
   

  
	
   

  	
   

  	
   

  
	
  7.1

  	
  Dissolution

  	
  23

  
	
   

  	
   

  	
   

  
	
  7.2

  	
  Winding-Up and
  Termination

  	
  24

  
	
   

  	
   

  	
   

  
	
  ARTICLE 8

  	
   

  
	
  SHAREHOLDER MEETINGS; RECORD
  DATE

  	
   

  
	
   

  	
   

  	
   

  
	
  8.1

  	
  Meetings

  	
  24

  
	
   

  	
   

  	
   

  
	
  8.2

  	
  Notice of a Meeting

  	
  24

  
	
   

  	
   

  	
   

  
	
  8.3

  	
  Record Date

  	
  24

  
	
   

  	
   

  	
   

  
	
  8.4

  	
  Adjournment

  	
  25

  

 

 

	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  
	
  8.5

  	
  Waiver of Notice;
  Approval of Meeting; Approval of Minutes

  	
  25

  
	
   

  	
   

  	
   

  
	
  8.6

  	
  Quorum; Voting

  	
  25

  
	
   

  	
   

  	
   

  
	
  8.7

  	
  Conduct of Meeting

  	
  26

  
	
   

  	
   

  	
   

  
	
  8.8

  	
  Action Without a
  Meeting

  	
  26

  
	
   

  	
   

  	
   

  
	
  8.9

  	
  Voting and Other Rights

  	
  27

  
	
   

  	
   

  	
   

  
	
  8.10

  	
  Shareholder Approval
  Required for Certain Actions

  	
  27

  
	
   

  	
   

  	
   

  
	
  ARTICLE 9

  	
   

  
	
  GENERAL PROVISIONS

  	
   

  
	
   

  	
   

  	
   

  
	
  9.1

  	
  Fiscal Year

  	
  27

  
	
   

  	
   

  	
   

  
	
  9.2

  	
  Notices

  	
  27

  
	
   

  	
   

  	
   

  
	
  9.3

  	
  Entire Agreement

  	
  28

  
	
   

  	
   

  	
   

  
	
  9.4

  	
  Waiver

  	
  28

  
	
   

  	
   

  	
   

  
	
  9.5

  	
  Binding Effect

  	
  28

  
	
   

  	
   

  	
   

  
	
  9.6

  	
  Governing Law; Consent
  to Jurisdiction; Severability

  	
  28

  
	
   

  	
   

  	
   

  
	
  9.7

  	
  Further Action

  	
  28

  
	
   

  	
   

  	
   

  
	
  9.8

  	
  No Right to Action for
  Dissolution or Partition

  	
  29

  
	
   

  	
   

  	
   

  
	
  9.9

  	
  Third-Party
  Beneficiaries

  	
  29

  
	
   

  	
   

  	
   

  
	
  9.10

  	
  Amendment

  	
  29

  
	
   

  	
   

  	
   

  
	
  9.11

  	
  Wholly-Owned Subsidiaries

  	
  29

  
	
   

  	
   

  	
   

  
	
  9.12

  	
  Tax Agreement

  	
  29

  
	
   

  	
   

  	
   

  
	
  9.13

  	
  Creditors

  	
  29

  
	
   

  	
   

  	
   

  
	
  9.14

  	
  Disclosure; Public
  Announcements

  	
  29

  
	
   

  	
   

  	
   

  
	
  9.15

  	
  Counterparts

  	
  29

  

 

 

LIMITED LIABILITY COMPANY AGREEMENT

OF

MIDCON LLC

 

This Limited Liability Company Agreement of MidCon LLC, a Delaware
limited liability company (the “Company”), dated as of
[                      ]
is adopted, executed and agreed to, for good and valuable consideration, by and
among Knight Inc., a Kansas corporation (the “Organizational Shareholder”),
and any other Persons (as defined below) who are or become Shareholders (as
defined below) of the Company or parties hereto as provided herein.

 

WHEREAS, MidCon Corp. (the “Corporation”), was incorporated as a
Delaware corporation on June 15, 1976;

 

WHEREAS, by unanimous written consent, the board of directors of the
Corporation adopted a resolution adopting and approving the conversion of the
Corporation to a Delaware limited liability company and the adoption of this
Agreement, and recommending the adoption of such conversion and this Agreement
to the sole stockholder of the Corporation, pursuant to Sections 141(f) and
266 of the General Corporation Law of the State of Delaware (the “GCL”);

 

WHEREAS, by written consent, the sole stockholder of the Corporation
adopted and approved the conversion of the Corporation to a limited liability
company and the adoption of this Agreement pursuant to Sections 228 and
266 of the GCL;

 

WHEREAS, on the date hereof, the Corporation was converted to a limited
liability company pursuant to Section 18-214 of the Delaware Limited
Liability Company Act (6 Del. C. § 18-101 et seq.), as
amended from time to time (the “Act”) and Section 266 of the GCL
(the “Conversion”), by causing the filing with the Secretary of State of
the State of Delaware (the “Delaware Secretary of State”) of a
Certificate of Conversion to Limited Liability Company (the “Certificate of
Conversion”) and a Certificate of Formation (the “Organizational
Certificate”);

 

WHEREAS, the Shareholders agree that the Company shall elect pursuant
to Sections 301.7701-2 and 301.7701-3 of the Treasury Regulations (as defined
below) to be treated as a corporation for all purposes under the Code (as
defined below); and

 

WHEREAS, pursuant to this Agreement and the Conversion, the sole
stockholder of the Corporation is admitted as a member of the Company owning
100% of the limited liability company interests in the Company.

 

NOW, THEREFORE, the Organizational Shareholder, by execution of this
Agreement, hereby agrees as follows:

 

ARTICLE 1

Definitions

 

1.1                                 Definitions.
As used in this Agreement, the following terms shall have the following
respective meanings:

 

 

“Act” has the meaning assigned to it in the preamble to this
Agreement, and any successor to such statute.

 

“Affiliate” means, with respect to any Person, any other Person
that directly or indirectly controls, is controlled by or is under common
control with, the Person in question. As used in this definition of “Affiliate,”
the term “control” means the possession, directly or indirectly, of the power
to direct or cause the direction of the management and policies of a Person,
whether through ownership of voting securities, by contract or otherwise.

 

“Agreement” means this Limited Liability Company Agreement, as
amended, supplemented or restated from time to time.

 

“Assignee” means a Person to whom one or more Company Securities
have been transferred in a manner permitted under this Agreement and in
compliance with the provisions of the Shareholder Agreement.

 

“Bankruptcy” means, with respect to any Person, that (a) such
Person (i) makes a general assignment for the benefit of creditors; (ii) files
a voluntary petition in bankruptcy; (iii) is insolvent or has entered
against such Person an order for relief in any bankruptcy or insolvency proceeding;
(iv) files a petition or answer seeking for such Person any
reorganization, arrangement, composition, readjustment, liquidation,
dissolution or similar relief under any Law; (v) files an answer or other
pleading admitting or failing to contest the material allegations of a petition
filed against such Person in a proceeding of the type described in subclauses (i) through
(iv) of this clause (a); or (vi) seeks, consents to or acquiesces in
the appointment of a trustee, receiver or liquidator of such Person or of all
or any substantial part of such Person’s properties; or (b) 120 days have
passed after the commencement of any proceeding seeking reorganization,
arrangement, composition, readjustment, liquidation, dissolution or similar
relief under any Law, if the proceeding has not been dismissed, or 90 days have
passed after the appointment, without such Person’s consent or acquiescence, of
a trustee, receiver or liquidator of such Person or of all or any substantial
part of such Person’s properties, if the appointment is not vacated or stayed,
or 90 days have passed after the date of expiration of any such stay, if the
appointment has not been vacated. The foregoing definition of “Bankruptcy”
shall supersede and replace the definition of “Bankruptcy” contained in the
Act.

 

“Beneficial Owner” has the meaning set forth in Rules 13d-3
and 13d-5 under the Exchange Act, as in effect on the date of this Agreement,
and the terms “Beneficial Ownership,” “Beneficially Own,” “Beneficially
Owned” and similar terms have correlative meanings.

 

“Board of Directors” has the meaning assigned to it in
Subsection 5.1(a).

 

“Business Day” means any day other than a Saturday, a Sunday or
a day on which national banking associations in the State of New York or the
State of Texas are closed.

 

“Certificate” has the meaning assigned to it in
Subsection 3.4.

 

“Certificate of Conversion” has the meaning assigned to it in
the preamble to this Agreement.

 

2

 

“Chairman of the Board” has the meaning assigned to it in
Subsection 5.2(f).

 

“Class A Shares” has the meaning assigned to it in Section 4.2.

 

“Class B Shares” has the meaning assigned to it in Section 4.2.

 

“Class A Director” means a Director appointed by the Record
Holders of the Class A Shares.

 

“Class B Director” means a Director appointed by the Record
Holders of the Class B Shares.

 

“Code” means the United States Internal Revenue Code of 1986, as
amended from time to time and as interpreted by the applicable regulations thereunder.
All references herein to a specific section or sections of the Code shall be
deemed to include a reference to any corresponding provision or provisions of
future Law.

 

“Company” means MidCon LLC, a Delaware limited liability
company.

 

“Company Securities” means the shares into which the limited
liability company interest in the Company is divided, which are the Class A
Shares and Class B Shares.

 

“Construction Opportunity” means any opportunity for
construction of an extension and/or expansion of the Pipeline, or for any
acquisition of assets or stock outside the ordinary course of the Pipeline’s
business, in each case that is approved by the board of directors of NGPL and
by the Operator pursuant to the Operating Agreement.

 

“Conversion” has the meaning assigned to it in the preamble to
this Agreement.

 

“Corporation” has the meaning assigned to it in the preamble to
this Agreement.

 

“Delaware Secretary of State” has the meaning assigned to it in
the preamble to this Agreement.

 

“Director” means any individual appointed a member of the Board
of Directors as provided in Section 5.2, but such term does not include
any Person who has ceased to be a member of the Board of Directors. Directors
are “managers” (as such term is defined in and within the meaning of the Act)
of the Company.

 

“Dissolution Event” has the meaning assigned to it in
Subsection 7.1(a).

 

“Entity” means a corporation, limited liability company,
venture, partnership (general or limited), trust, unincorporated organization,
association or other entity.

 

“Exchange Act” means the United States Securities Exchange Act
of 1934, as amended from time to time, and any successor to such statute and
all rules and regulations promulgated thereunder.

 

3

 

“Expansion or Extension Opportunity” means (i) any physical
enhancement or series of physical enhancements that would increase the base
capacity (including by adding horsepower) of any then existing portion of any
gas transmission facilities or then existing storage fields owned by any of the
Company’s Subsidiaries, including, but not limited to, NGPL, (ii) the
construction of an extension of any then existing pipeline facilities that is
no longer than 25 miles long and that may be accomplished under the blanket
certificate of the Subsidiary of the Company that owns the then existing
pipeline facilities and that would connect and/or redeliver gas supplies to a
then existing customer of the Subsidiary of the Company that owns the
interconnecting pipeline facilities, the intention being that such extension
would be limited in scope and location or (iii) the acquisition or
construction of any pipeline facility or series of related pipeline facilities
that would directly connect with the Chicago market and directly compete with
any of the Company’s Subsidiaries’ facilities that are physically connected to
and deliver gas to customers in the Chicago market and would reasonably be
expected to materially adversely affect the profitability of the Company.

 

“FERC” means the
Federal Energy Regulatory Commission or its successor agency.

 

“FERC Certificate” means the certificate(s) of public
convenience and necessity issued by the FERC applicable to the Pipeline.

 

“GCL” has the meaning assigned to it in the preamble to this
Agreement.

 

“Governmental Entity”
means any legislature, court, tribunal, arbitrator, authority, agency,
commission, division, board, bureau, branch, official or other instrumentality
of the United States, or any domestic state, county, city, tribal or other
political subdivision, governmental department or similar governing entity, and
including any governmental, quasi-governmental or non-governmental body
exercising similar powers of authority.

 

“Indemnitees” means (a) any Person who is or was an Officer,
Director, employee, partner, manager, agent or trustee of the Company, (b) any
Person who is or was an officer or director, employee, partner, manager, agent
or trustee of any of the Company’s controlled Affiliates, or (c) any
Person who is or was serving at the request of the Company or any of its
controlled Affiliates as a director, officer, employee, partner, manager, agent
or trustee of another Person.

 

“Investor” means the holders of the equity interests in Myria
Acquisition Inc., which initially are BBI US Investments Pty Ltd, Babcock &
Brown Myria Pty Ltd, BBIFNA AIV Two, LP, Public Sector Pension Investment
Board, and Stichting Pensioenfonds voor de Gezondheid, Geestelijke en
Maatschappelijke Belangen. Transfers of equity interests in Myria Acquisition
Inc. are restricted by Section 3(c) and Section 4 of the
Shareholder Agreement.

 

“Law” means any applicable constitutional provision, statute,
act, code (including the Code), law, regulation, rule, ordinance, order,
decree, ruling, proclamation, resolution, judgment, decision, declaration or
interpretative or advisory opinion or letter of a governmental authority.

 

“MidCon Entities” means NGPL, Horizon Pipeline Company, L.L.C.,
a Delaware limited liability company, NGPL-Canyon Compression Co., a Delaware
corporation, Kinder Morgan 

 

4

 

Illinois Pipeline LLC, a Delaware limited
liability company, and Canyon Creek Compression Company, an Illinois
partnership.

 

“NGPL” means Natural Gas Pipeline Company of America, a Delaware
[corporation] and wholly owned Subsidiary of the Company.

 

“Officer” means any individual duly appointed as an officer of
the Company as provided in Section 5.4, but such term does not include any
Person who has ceased to be an officer of the Company. Officers are “managers”
(as such term is defined in and within the meaning of the Act) of the Company.

 

“Operating Agreement” means the Operations and Reimbursement
Agreement of even date herewith between NGPL and Knight Inc., as operator.

 

“Operator” means the Operator under the Operating Agreement.

 

“Organizational Certificate” has the meaning assigned to it in
the preamble to this Agreement.

 

“Organizational Shareholder” has the meaning assigned to it in
the preamble to this Agreement.

 

“Outstanding” means, with respect to any Company Securities, all
Company Securities that are issued by the Company and reflected as outstanding
on the books and records of the Company as of the date of determination,
excluding Company Securities held in the treasury.

 

“Parent” has the meaning assigned to it in Section 6.4(a).

 

“Permits” means all licenses, permits, certificates of
authority, approvals, tenders, bids, registrations, franchises, variances,
exemptions, consents or other authorizations of or from Governmental Entities.

 

“Person” means a natural person or an Entity.

 

“Pipeline” means the natural gas transmission pipeline system
and related facilities (including storage, compression and metering facilities)
owned by any MidCon Entity, including all appurtenances, fee property, leases,
easements, licenses, permits, ROWs, contracts, contract rights and other
rights, including FERC Certificates and other Permits.

 

“Record Date” means the date established by the Board of
Directors for determining (a) the identity of the Record Holders entitled
to notice of, or to vote at, any meeting of the Shareholders or entitled to
vote by ballot or give approval of a Company action in writing without a
meeting or entitled to exercise rights in respect of any lawful action of the
Shareholders, (b) the identity of the Record Holders entitled to notice
with respect to any other matter, or (c) the identity of the Record
Holders entitled to receive any distribution.

 

“Record Holder” means the Person in whose name a Company Security
is registered on the books and records of the Company as contemplated in Section 3.5.

 

5

 

“ROW” means fee lands, rights-of-way, easements and other land
rights and estates.

 

“Shareholder” means any Person admitted as a shareholder in
accordance with Subsection 3.1(a) and pursuant to the requirements of
the Shareholder Agreement, but such term does not include any Person who has
ceased to be a Record Holder of any Company Security. Shareholders are “members”
(as such term is defined in and within the meaning of the Act) of the Company.

 

“Shareholder Agreement” means the Shareholder Agreement, of even
date herewith, among the Record Holders of Company Securities and the Company.

 

“Shareholder Interest” means a limited liability company
interest (as such term is defined in the Act) of a Shareholder, including the
right to receive distributions from the Company, together with all other
rights, benefits and privileges enjoyed by the Shareholder (under the Act, the
Organizational Certificate, this Agreement or otherwise) in its capacity as a
Shareholder, including the right to vote, consent and approve, and all
obligations, duties and liabilities imposed on the Shareholder (under the Act,
the Organizational Certificate, this Agreement or otherwise) in its capacity as
a Shareholder.

 

“Shares,” consisting of the classes referred to in Section 4.2,
are the Company Securities.

 

“Subsidiary” of a
Person means any other Person of which at least fifty percent (50%) or more of
the voting power represented by the outstanding capital stock or other voting
securities or interests having voting power under ordinary circumstances to
elect directors or similar members of the governing body of such corporation or
entity or fifty percent (50%) or more of the equity interests in such
corporation or entity shall at the time be owned or controlled, directly or
indirectly, by such Person and/or by one or more of its Subsidiaries.

 

“Tax Agreement” has the meaning assigned to it in Section 6.4(a).

 

“Tax Return” means any return, report or statement required to
be maintained, retained or filed with respect to any Tax (including any
elections, declarations, schedules or attachments thereto, any amendment
thereof, any information return (which includes, but is not limited to, federal
and state wage reporting, employment and unemployment reports (e.g., IRS Forms 940, 941, W-2, W-3 and their state and local
equivalents) as well as reports of payments made (e.g.,
IRS Forms 1099 and 1042) that are required under Law to be maintained, retained
or supplied to any taxing authority), claim for refund, amended return or
declaration of estimated Tax, and including, where permitted or required,
combined, consolidated or unitary returns for any group of entities that
includes any of the Company, NGPL, Horizon Pipeline Company, L.L.C., a Delaware
limited liability company, NGPL-Canyon Compression Co., a Delaware corporation,
Kinder Morgan Illinois Pipeline LLC, a Delaware limited liability company, and
Canyon Creek Compression Company, an Illinois partnership.

 

“Taxes” means any federal, state, local or foreign income, gross
receipts, license, payroll, parking, employment, excise, severance, stamp,
occupation, premium, windfall profits, environmental, customs duties, capital
stock, franchise, profits, margin, single business, withholding, social
security, unemployment, disability, real property, personal property,
possessory interest, sales, use, transfer, registration, capital gain,
production, payroll, worker’s 

 

6

 

compensation, value added, alternative or
add-on minimum, amounts paid under an agreement with a taxing authority,
estimated tax or other tax of any kind whatsoever, including any interest,
fines, penalty or other like assessment or addition thereto, whether disputed
or not, including such item for which a liability arises pursuant to Treasury
Regulation Section 1.1502-6 (or any similar provision of foreign, state or
local law), as a transferee,  successor-in-interest,
by contract or otherwise.

 

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

 

1.2                                 Construction.
The headings and captions herein are inserted for convenience of reference only
and are not intended to govern, limit or aid in the construction of any term or
provision hereof. It is the intention of the parties that every covenant, term
and provision of this Agreement shall be construed simply according to its fair
meaning and not strictly for or against any party (notwithstanding any rule of
law requiring an agreement to be strictly construed against the drafting
party), it being understood that the parties to this Agreement are
sophisticated and have had adequate opportunity and means to retain counsel to
represent their interests and to otherwise negotiate the provisions of this
Agreement. Further, unless the context requires otherwise:

 

(a)                                  terms defined in Section 1.1
have the meanings assigned to them in that Section for purposes of this
Agreement;

 

(b)                                 the gender (or lack of
gender) of all words used in this Agreement includes the masculine, feminine
and neuter;

 

(c)                                  references to
Articles, Sections and Subsections (other than in connection with the Code, the
Treasury Regulations or the Act) refer to Articles, Sections and Subsections,
respectively, of this Agreement;

 

(d)                                 the words “herein,”
“hereof,” “hereunder” and other words of similar import refer to
this Agreement as a whole and not to any particular Article, Section or
Subsection;

 

(e)                                  “include,” “includes”
and “including” mean “include, without limitation,” “includes,
without limitation” and “including, without limitation,”
respectively;

 

(f)                                    terms defined
herein include the plural as well as the singular; and

 

(g)                                 “or” is not
exclusive.

 

ARTICLE 2
 Organization

 

2.1                                 Continuation.
Effective as of the time of the Conversion, (i) the Amended and Restated
Certificate of Incorporation of the Corporation, dated as of November 20,
1996, and the Restated By-Laws of the Corporation are replaced and superseded
in their entirety by the 

 

7

 

Organizational Certificate and this Agreement
in respect of all periods beginning on or after the Conversion, (ii) the
sole stockholder of the Corporation is hereby automatically admitted as a
member of the Company, all of the stock in the Corporation issued and
outstanding immediately prior to the Conversion is converted to Company
Securities and the Organizational Shareholder has the Company Securities set
forth on the books and records of the Company, (iii) the Organizational
Shareholder continues the business of the Corporation without dissolution in
the form of a Delaware limited liability company governed by this Agreement,
and (iv) in accordance with Section 18-214(g) of the Act, for
all purposes of the laws of the State of Delaware, the Company shall be deemed
to be the same entity as the Corporation. [                                        ],
is hereby designated as an “authorized person” within the meaning of the Act,
and has executed, delivered and filed the Organizational Certificate and the
Certificate of Conversion with the Delaware Secretary of State. Upon the filing
of the Organizational Certificate and the Certificate of Conversion with the
Delaware Secretary of State, [his][her] powers as an “authorized person”
ceased, and the Organizational Shareholder and any Officer, acting alone,
thereupon became a designated “authorized person” to execute, deliver and file
any amendments and/or restatements of the Organizational Certificate and any
other certificates (and any amendments and/or restatements thereof) permitted
or required to be filed with the Secretary of State of the State, and shall
continue as the designated “authorized person” within the meaning of the Act. The
Organizational Shareholder or an Officer shall execute, deliver and file, or
cause the execution, delivery and filing of any certificates (and any
amendments and/or restatements thereof) necessary for the Company to qualify to
do business in any other jurisdiction in which the Company may wish to conduct
business.

 

2.2                                 Name.
The name of the Company is “MidCon LLC” and all Company business must be
conducted in that name or such other names that comply with Law and as the
Board of Directors may select.

 

2.3                                 Registered
Office; Registered Agent; Principal Office; Other Offices. The registered
office of the Company required by the Act to be maintained in the State of
Delaware shall be the office of the initial registered agent for service of
process named in the Organizational Certificate or such other office (which
need not be a place of business of the Company) as the Board of Directors may
designate in the manner provided by Law. The registered agent for service of
process of the Company in the State of Delaware shall be the initial registered
agent for service of process named in the Organizational Certificate or such
other Person or Persons as the Board of Directors may designate in the manner
provided by Law. The principal office of the Company in the United States shall
be located at 500 Dallas Street, Suite 1000, Houston, Texas 77002, or such
other place as the Operator (or if the Operating Agreement is terminated
pursuant to its terms, the Board of Directors) may from time to time designate,
which need not be in the State of Delaware, and the Company shall maintain
records there and shall keep the street address of such principal office at the
registered office of the Company in the State of Delaware. The Company may have
such other offices as the Board of Directors may designate.

 

2.4                                 Purpose;
Powers. The purposes of the Company are to own the equity of NGPL and
Kinder Morgan Illinois Pipeline LLC, to indirectly own the equity it owns on
the date hereof in the other MidCon Entities, and to indirectly own the
Pipeline as it exists on the date hereof, as maintained, repaired, operated,
and modified in the ordinary course of its business, and any Expansion or
Extension Opportunities and Construction Opportunities, in each case that are
duly 

 

8

 

approved by the board of directors of NGPL
and by the Operator pursuant to the Operating Agreement, and any Expansion or
Extension Opportunity acquired or constructed by NGPL in accordance with Section 3.1(j) of
the Operating Agreement. In pursuance solely thereof, the Company shall possess
and may exercise all the powers and privileges granted by the Act, by any other
Law or by this Agreement, together with any powers incidental thereto,
including such powers and privileges as are necessary or convenient to the
conduct, promotion or attainment of the purposes of the Company.

 

2.5                                 Foreign
Qualification. Prior to the Company’s conducting business in any
jurisdiction other than Delaware, the Board of Directors shall cause the
Company to comply, to the extent procedures are available and those matters are
reasonably within the control of the Board of Directors, with all requirements
necessary to qualify the Company as a foreign limited liability company in that
jurisdiction.

 

2.6                                 Power
of Attorney.

 

(a)                                  Each Shareholder does
hereby constitute and appoint each Director appointed by the Class of
Company Securities which is owned by such Shareholder to act as its true and
lawful representative and attorney-in-fact, in its name, place and stead, to
make, execute, sign, deliver and file (i) any amendment of the
Organizational Certificate; (ii) this Agreement and any amendment to this
Agreement; and (iii) all such other instruments, documents and
certificates that may from time to time be required by Law to effectuate,
implement and continue the valid and subsisting existence of the Company or to
dissolve the Company.

 

(b)                                 The foregoing power of
attorney is hereby declared to be irrevocable and a power coupled with an
interest, and it shall survive and not be affected by the subsequent death,
incompetency, disability, incapacity, dissolution, bankruptcy or termination of
any Shareholder and the transfer of all or any portion of such Shareholder’s
Shareholder Interest, and shall extend to all Assignees. Each Shareholder
hereby agrees to be bound by any representation made by a Director acting as
its representative and attorney-in-fact acting in good faith pursuant to such
power of attorney, and each Shareholder hereby waives any and all defenses that
may be available to contest, negate or disaffirm the action of a Director
acting as its representative and attorney-in-fact taken in good faith under
such power of attorney.

 

2.7                                 Term.
The term of the Company as a Delaware limited liability company commenced on
[                    ],
which was the date of the filing of the Organizational Certificate in the
office of the Delaware Secretary of State, and the Company’s existence shall be
perpetual, unless and until the Company is dissolved in accordance with Article 7.

 

2.8                                 Taxation
as Corporation; No State-Law Partnership. The Company shall elect pursuant
to Sections 301.7701-2 and 301.7701-3 of the Treasury Regulations to be
treated as a corporation for all purposes under the Code. The Shareholders
intend that the Company not be a partnership (including a limited partnership)
or joint venture, that no Shareholder be a partner or joint venturer of any
other Shareholder, and that this Agreement may not be construed to suggest 

 

9

 

otherwise. The Company and Shareholders agree
to take no action or any tax positions that are inconsistent with or contrary
to this Section 2.8.

 

2.9                                 Title
to Company Assets. Title to Company assets, whether real, personal or mixed
and whether tangible or intangible, shall be deemed to be owned by the Company
as an entity, and no Shareholder, Director or Officer, individually or
collectively, shall have any ownership interest in such Company assets or any
portion thereof. Title to any or all of the Company assets may be held in the
name of the Company or one or more of its controlled Affiliates or one or more
nominees, as the Board of Directors may determine. All Company assets shall be
recorded as the property of the Company in its books and records, irrespective
of the name in which record title to such Company assets is held.

 

ARTICLE 3
 Shareholders; Certificates;

Transfer of Company Securities

 

3.1                                 Shareholders.

 

(a)                                  A Person shall be
admitted as a Shareholder, and shall become bound by this Agreement, if such
Person executes this Agreement or, without such execution, if such Person
purchases or otherwise acquires a Company Security and becomes the Record
Holder of such Company Security in accordance with the provisions of Section 3.5.
All rights of Shareholders under this Agreement are owned, and may be
exercised, only by Record Holders.

 

(b)                                 The name and mailing
address of each Record Holder shall be listed on the books and records of the
Company. The Secretary of the Company shall be required to update the books and
records from time to time as necessary to reflect accurately the information
therein. Company Securities shall be represented by the Certificates held by
the Shareholders.

 

3.2                                 No
Liability to Third Parties. Except as otherwise expressly provided in the
Act, the debts, obligations or liabilities of the Company, whether arising in
contract, tort or otherwise, shall be the debts, obligations and liabilities
solely of the Company, and no Record Holder, Shareholder or Beneficial Owner of
any Company Security shall be obligated personally for any such debt,
obligation or liability of the Company solely by reason of being a Record
Holder, Shareholder or Beneficial Owner.

 

3.3                                 No
Expulsion. A Shareholder may not be expelled or removed as a Shareholder.

 

3.4                                 Certificates.
Certificates evidencing any of the Company Securities (“Certificates”)
shall be in such form, not inconsistent with that required by the Act or any
other Law and this Agreement, as shall be approved by the Board of Directors. Each
Certificate shall certify the number of Company Securities and the class of
such Company Securities which the Certificate represents and shall be signed by
(i) the Chairman of the Board, the President or any Vice President and (ii) the
Secretary, any Assistant Secretary, the Treasurer or any Assistant Treasurer of
the Company; provided, however, that any or all of the signatures, including
the countersignature, on the Certificate may be facsimile. In the event that
any Officer who shall have signed, or whose 

 

10

 

facsimile signature or signatures shall have
been placed upon, any such Certificate shall have ceased to be such Officer
before such Certificate is issued by the Company, such Certificate may
nevertheless be issued by the Company with the same effect as if such person
were such Officer on the date of issue. Certificates for each class of Company
Securities shall be consecutively numbered and shall be entered in the books and
records of the Company as they are issued and shall exhibit the holder’s name
and number of Company Securities.

 

3.5                                 Register,
Registration of Transfer and Exchange. The Company shall keep or cause to
be kept on behalf of the Company a register that, subject to any requirement of
the Board of Directors and subject to the provisions of this Section 3.5,
shall provide for the registration and transfer of Company Securities. The
Company shall not recognize transfers of Company Securities unless the same are
effected in the manner described in this Section 3.5 and in compliance
with the provisions of the Shareholder Agreement. Upon surrender for
registration of transfer of any Certificate, the appropriate Officers of the
Company shall execute, in the name of the holder or the designated transferee
or transferees, as required pursuant to the Record Holder’s instructions, one
or more new Certificates evidencing the same aggregate number and class of
Company Securities as were evidenced by the Certificate so surrendered. The
Company shall not recognize any transfer of Company Securities until the
Certificates evidencing such Company Securities are surrendered to the Company
for registration of transfer. No charge shall be imposed by the Company for
such transfer; provided, however, that, as a condition to the issuance of any
new Certificate under this Section 3.5, the Company may require the
payment of a sum sufficient to cover any tax or other governmental charge,
surety bond premium, special charges for services requested by the transferor
or transferee, or similar fees or charges that may be imposed with respect
thereto. By transfer of Company Securities in accordance with this Section 3.5
and in compliance with the provisions of the Shareholder Agreement, the transferor
shall be deemed to have given the transferee the right to be admitted to the
Company as a Shareholder, and each transferee of Company Securities shall
become a Shareholder with respect to the Company Securities so transferred to
such Person when any such transfer and admission is reflected in the books and
records of the Company, and such Person thereby becomes a Record Holder of such
Company Securities. The Company shall be entitled to recognize the Record
Holder as the owner of Company Securities and, accordingly, shall not be bound
to recognize any equitable or other claim to or interest in such Company
Securities on the part of any other Person, whether or not the Company shall
have actual or other notice thereof, except as otherwise provided by Law. The
transfer of any Company Securities and the admission of any new Shareholder
shall not constitute an amendment to this Agreement. Any distribution in
respect of Company Securities shall be made by the Company, only to the Record
Holders thereof as of the Record Date set by the Board of Directors for the
distribution. The making of such distribution shall constitute full payment and
satisfaction of the Company’s liability in respect of such distribution
regardless of any claim of any Person who may have an interest in such
distribution by reason of an assignment or otherwise.

 

11

 

ARTICLE 4

Authorization and Issuance of Company Securities

 

4.1                                 Company
Securities.

 

(a)                                  The Company shall
have authority to issue Company Securities consisting only of 200 Class A
Shares and 800 Class B Shares, with the rights set forth in Section 4.2.

 

(b)                                 Company Securities
issued for such consideration as the Board of Directors determines to be
appropriate shall be deemed to be fully paid, and except to the extent
specified in Section 18-607(b) of the Act, non-assessable if the
entire amount of such consideration has been received by the Company for such
Company Securities.

 

4.2                                 Classes
of Shares. The Shares of the Company shall be divided into the following
classes: (i) 200 Class A Shares (the “Class A Shares”)
and (ii) 800 Class B Shares (the “Class B Shares”). The
designations, preferences and relative, participating, optional or other
special rights, powers and duties relating to each class of Shares shall be
identical, except as otherwise provided herein. Each Share of a class shall be
identical in every respect with each other Share of the same class.

 

4.3                                 Distributions
Generally. It is the intent of the Company that reasonably promptly
following the end of each fiscal quarter, the Company will distribute with
respect to such fiscal quarter an amount equal to 100% of available cash that
is deemed to be cash from operations (net income plus depreciation less
sustaining capital expenditures) and cash from interim capital transactions. All
distributions shall be made pro rata with respect to the total number of
Shares outstanding. Notwithstanding any provision to the contrary contained in
this Agreement, the Company shall not make a distribution to any Record Holder
on account of its interest in the Company if such distribution would violate
the Act or any other applicable law.

 

4.4                                 Anti-Dilution.
The Company may not issue any Company Securities (whether by distribution or
otherwise), or change the number of outstanding Company Securities whether by
recapitalization, reclassification, split-up, combination, exchange of shares,
repurchase, acquisition or otherwise or take any action affecting the amount of
outstanding Company Securities or altering the rights of outstanding Company
Securities set forth in this Agreement.

 

4.5                                 Capital
Contributions. If there is an Expansion or Extension Opportunity which
Operator has not approved but NGPL has determined to pursue, and is pursuing,
in accordance with Section 3.1(j) of the Operating Agreement, and in
connection with the acquisition or construction of such Expansion or Extension
Opportunity the Record Holders of the Class B Shares, if required as part
of the financing of the project, make pro rata capital contributions to the
Company which the Company uses to fund such acquisition or construction, then
the Record Holder of the Class A Shares (so long as the Organizational
Shareholder together with one or more of its controlled Affiliates is both the
Operator and the Record Holder of the Class A Shares) shall also make pro
rata capital contributions to the Company. Such capital contributions with
respect to the Class A Shares and Class B Shares shall be made at the
same time and in the same per share amounts. The Record Holders of the Class A
Shares and Class B Shares shall not receive any Company Securities 

 

12

 

for such capital contributions, and such
contributions shall not entitle such Record Holders to any additional
distributions or give them any additional rights under this Agreement.

 

ARTICLE 5

Management

 

5.1                                 Management
of the Company’s Affairs.

 

(a)                                  As provided in this
Agreement, all management powers over the business and affairs of the Company
shall be vested exclusively in a board of directors (the “Board of Directors”)
and, subject to the direction of the Board of Directors, the Officers. Officers
and Directors constitute “managers” of the Company within the meaning of
the Act.

 

(b)                                 No Shareholder, in its
capacity as a Shareholder, shall have any management power over the business
and affairs of the Company or actual or apparent authority to enter into
contracts on behalf of, or to otherwise bind, the Company.

 

(c)                                  The Board of
Directors (subject to Sections 5.3 and 8.10) and the Officers (subject to
Sections 5.4 and 8.10 and the direction of the Board of Directors) shall
have full power and authority, in addition to the powers that now or hereafter
can be granted to managers under the Act and to all other powers granted under
any other provision of this Agreement to do all things on such terms as they, in
their individual sole discretion, may deem necessary or appropriate, to
conduct, or cause to be conducted, the business and affairs of the Company,
other than matters delegated to the Operator pursuant to the Operating
Agreement or this Agreement.

 

5.2                                 Board
of Directors.

 

(a)                                  Number. The
number of Directors of the Company shall be seven, and each Director shall be
appointed as provided in Subsection 5.2(b).

 

(b)                                 Appointment of
Directors; Term. The Record Holders of the Class A Shares shall have
the right to appoint one Class A Director. The Record Holders of the Class B
Shares shall have the right to appoint six Class B Directors. The
Directors shall be appointed annually, whether at a meeting of the Shareholders
or by consent in accordance with Section 8.9. Each Director shall serve a
one-year term and shall serve until such Director’s successor has been
appointed and qualified or until such Director dies, resigns or is removed.

 

(c)                                  Vacancies and
Removal. Subject to applicable Law, vacancies existing on the Board of
Directors shall be filled by the Record Holders of the applicable class of
Shares that appointed the Director. Each Director appointed to fill any vacancy
shall serve in such capacity until his successor has been appointed and
qualified or until such Director dies, resigns or is removed. Any Director may
be removed from office at any time, with or without cause, but only by the
approval of the Record Holders of the applicable class of Shares that appointed
the Director.

 

13

 

(d)                                 Voting; Quorum;
Required Vote for Action. Unless otherwise required by the Act, other Law,
or the provisions hereof:

 

(i)                                     each member of the
Board of Directors shall have one vote;

 

(ii)                                  the presence at a
meeting of a majority of the members of the Board of Directors shall constitute
a quorum at any such meeting for the transaction of business; and

 

(iii)                               the act of a majority of
the members of the Board of Directors present at a meeting at which a quorum is
present shall be deemed to constitute the act of the Board of Directors.

 

(e)                                  Meetings. Regular
meetings of the Board of Directors shall be held at such times and places as
shall be designated from time to time by resolution of the Board of Directors. Special
meetings of the Board of Directors may be called by the Chairman of the Board,
the President (should the President be a Director) or on the written request of
any Director by the Secretary. Notice of regular or special meetings of the
Board of Directors will be given to each Director, in each case on at least 48
hours personal, written, e-mail, telegraphic, cable or wireless notice. Any
such notice, or waiver thereof, need not state the purpose of such meeting
except as may otherwise be required by Law. Attendance of a Director at a
meeting (including pursuant to the last sentence of this
Subsection 5.2(e)) shall constitute a waiver of notice of such meeting,
except where such Director attends the meeting for the express purpose of
objecting to the transaction of any business on the ground that the meeting is
not lawfully called or convened. Any action required or permitted to be taken
at a meeting of the Board of Directors may be taken without a meeting, without
prior notice and without a vote only if a consent or consents in writing,
setting forth the action so taken, are signed by the requisite members of the
Board of Directors required by this Agreement, and any consent not so executed
shall be void. Members of the Board of Directors may participate in and hold a
meeting by means of conference telephone, video conference or similar
communications equipment by means of which all Persons participating in the
meeting can hear each other, and participation in such meetings shall
constitute presence in person at the meeting.

 

(f)                                    Chairman. The
Chairman of the Board of Directors (the “Chairman of the Board”), if
present and acting, shall preside at all meetings of the Board of Directors and
of the Shareholders. Otherwise, the President, if present, and a Director, or
any other Director chosen by the Board of Directors, shall preside.

 

5.3                                 Restrictions
on the Board of Directors’ Authority. Except as otherwise specifically
provided in this Agreement or by resolution of the Board of Directors, (a) no
Director or group of Directors shall have any actual or apparent authority to
enter into contracts on behalf of, or to otherwise bind, the Company, nor to
take any action in the name of or on behalf of the Company or conduct any
business of the Company other than by action of the Board of Directors taken in
accordance with the provisions of this Agreement, and (b) no Director
shall have the power or authority to delegate to any Person such Director’s
rights and powers as a Director to manage the business and affairs of the
Company.

 

14

 

5.4                                 Officers.

 

(a)                                  Generally. The
Board of Directors shall appoint agents of the Company, referred to as “Officers”
of the Company, to serve in the offices set forth in this Section 5.4. Unless
provided otherwise by resolution of the Board of Directors, the Officers shall
have the titles, power, authority and duties described below in this Section 5.4.

 

(b)                                 Titles and Number.
The Officers of the Company shall be the Chairman of the Board, the President,
any number of Vice Presidents (some of which may be additionally named
Executive or Senior), the Secretary, the Treasurer, any and all Assistant
Secretaries, and any and all Assistant Treasurers and any other officer
position or title as the Board of Directors may approve. Any person may hold
two or more offices simultaneously.

 

(c)                                  Appointment and
Term of Office. The names of the individuals who are the initial Officers
of the Company and the offices they hold are set forth on Annex A hereto. Any
officer may be removed, with or without cause, only by the Board of Directors. Vacancies
in any office or any new Officer position may be filled only by the Board of
Directors. The Operator may make recommendations with respect to any such
vacancy or new position.

 

(d)                                 Chairman of the
Board. Subject to the limitations imposed by this Agreement, the Chairman
of the Board, subject to the direction of the Board of Directors, shall preside
at all meetings of the Shareholders and the Board of Directors, shall supervise
generally the President and shall have full authority to execute all documents
and take all actions that the Company may legally take. The Chairman of the
Board shall exercise such other powers and perform such other duties as may be
assigned to him by this Agreement or the Board of Directors.

 

(e)                                  President. The
President shall be the Chief Executive Officer of the Company. In the absence
of the Chairman of the Board, or if there be no Chairman of the Board, he shall
preside at all meetings of the Shareholders and, if a Director, of the
Directors. The Chief Executive Officer, whether the Chairman of the Board or
the President, shall have general and active management and control of the
business and affairs of the Company subject to the control of the Board of Directors,
and shall see that all orders and resolutions of the Board of Directors are
carried into effect.

 

(f)                                    Vice Presidents.
In the absence of the President and the Chairman of the Board, each Vice
President appointed by the Board of Directors shall have all of the powers and
duties conferred upon the President, including the same power as the President
to execute documents on behalf of the Company. Each such Vice President shall
perform such other duties and may exercise such other powers as may from time
to time be assigned to him by the Board of Directors, the Chairman of the Board
or the President.

 

15

 

(g)                                 Secretary and
Assistant Secretaries. The Secretary shall record or cause to be recorded
in books provided for that purpose the minutes of the meetings or actions of
the Board of Directors and Shareholders, shall see that all notices are duly
given in accordance with the provisions of this Agreement and as required by
Law, shall be custodian of all records (other than financial), shall see that
the books, reports, statements, certificates and all other documents and
records required by Law are properly kept and filed, and, in general, shall
perform all duties incident to the office of Secretary and such other duties as
may, from time to time, be assigned to him by this Agreement, the Board of
Directors, the Chairman of the Board or the President. The Assistant
Secretaries shall exercise the powers of the Secretary during that Officer’s
absence or inability or refusal to act.

 

(h)                                 Treasurer and
Assistant Treasurers. The Treasurer shall keep or cause to be kept the
books of account of the Company and shall render statements of the financial
affairs of the Company in such form and as often as required by this Agreement,
the Board of Directors, the Chairman of the Board or the President. The
Treasurer, subject to the order of the Board of Directors, shall have the
custody of all funds and securities of the Company. The Treasurer shall perform
all other duties commonly incident to his office and shall perform such other
duties and have such other powers as this Agreement, the Board of Directors,
the Chairman of the Board or the President shall designate from time to time. The
Assistant Treasurers shall exercise the power of the Treasurer during that
Officer’s absence or inability or refusal to act. Each of the Assistant
Treasurers shall possess the same power as the Treasurer to sign all
certificates, contracts, obligations and other instruments of the Company. If
no Treasurer or Assistant Treasurer is appointed and serving or in the absence
of the appointed Treasurer and Assistant Treasurer, such other Officer as the
Board of Directors shall select shall have the powers and duties conferred upon
the Treasurer.

 

(i)                                     Powers of
Attorney. The Company may grant powers of attorney or other authority as
appropriate to establish and evidence the authority of the Officers and other
Persons.

 

(j)                                     Delegation of
Authority. Unless otherwise provided by resolution of the Board of
Directors, no Officer shall have the power or authority to delegate to any
Person such Officer’s rights and powers as an Officer to manage the business
and affairs of the Company.

 

5.5                                 Compensation;
Employees. Officers of the Company and its Subsidiaries who are also
officers or employees of the Record Holder of Class A Shares or one of its
Affiliates shall be entitled to participate only in and receive benefits from
employee health, benefit, retirement and similar plans provided by the Record
Holder of Class A Shares or its Affiliates and the Company shall not have
any liability for claims by Officers under any such benefit plans. Cash
compensation for any such Officer will be set and paid by the Record Holder of Class A
Shares. All compensation for Officers and employees associated with the Record
Holder of Class A Shares or its Affiliates will be allocated to the
Company pursuant to the Operating Agreement and shall be paid or reimbursed by
the Company. Such compensation (considered as a whole) shall be comparable to
similar positions within the energy industry. No compensation for any other 

 

16

 

Officers or employees will be the
responsibility of or allocated to the Company or its Subsidiaries. All Officers
shall be entitled to be reimbursed for out-of-pocket costs and expenses
incurred in the course of their service hereunder. The members of the Board of
Directors shall receive no compensation for their services as Directors. All
the members of the Board of Directors shall be entitled to be reimbursed for
out-of-pocket costs and expenses incurred in the course of their service
hereunder.

 

5.6                                 Financing
Covenant. The Company shall not and shall not permit any of its
Subsidiaries to undertake any  financing or refinancing or issuance and/or
sale of any debt or equity securities of the Company or any of its
Subsidiaries, including any such securities held in treasury of the Company or
any of its Subsidiaries, or the incurrence of indebtedness (or provision of guarantees
by the Company or any of its Subsidiaries of another Person’s indebtedness)
other than in the ordinary course of business, if in any such case (x) any
such matter prefers one Shareholder over the others or prejudices one
Shareholder vis-à-vis the others, (y) any such financing, refinancing,
indebtedness or guarantee is between the Company or any of its Subsidiaries, on
the one hand, and any Shareholder or Investor or Affiliate of a Shareholder or
Investor, on the other hand, or (z) any such financing, refinancing,
indebtedness, guarantee or other action would cause the Company, its
Subsidiaries or its Shareholders to be required to file additional information
with the Federal Energy Regulatory Commission regarding their respective
financial condition.

 

5.7                                 Business
Opportunities. No Indemnitee, Shareholder or Affiliate or Investor thereof
shall be expressly or implicitly restricted or proscribed pursuant to this
Agreement, by Law or otherwise, from engaging in other activities for profit,
whether in the businesses engaged in by the Company, any Shareholder or any of
their respective Subsidiaries or joint ventures or anticipated to be engaged in
by the Company, any Shareholder or any of their respective Subsidiaries or
joint ventures. Without limitation of and subject to the foregoing, (a) nothing
in this Agreement shall be construed to require any Director to manage the
Company or any of its Subsidiaries or joint ventures as his or her exclusive
function, (b) nothing in this Agreement shall be construed to require any
Officer to serve as an Officer of the Company or any of its Subsidiaries or
joint ventures as his or her exclusive function, and (c) each Indemnitee,
Shareholder, Investor or Affiliate thereof shall have the right to engage in
businesses of every type and description and to engage in and possess an
interest in other business ventures of any and every type or description,
independently or with others, including, without limitation, business interests
and activities in direct competition with the Company, any Shareholder or any
of their respective Subsidiaries or joint ventures, and none of the same shall
be deemed wrongful or improper or shall breach any duty, express or implied, to
the Company, any Shareholder or any of their respective Subsidiaries or joint
ventures. By way of example and not limitation, the Shareholders acknowledge
and agree that Knight Inc., including its officers and directors, who may also
be Officers or Directors of the Company or its Subsidiaries, whether directly
or through its Subsidiaries and/or joint ventures, plans to and will actively
pursue business opportunities that could be considered an extension of, or in
active competition with, the business of the Company or any of its Subsidiaries
or joint ventures, and nothing in this Agreement precludes Knight Inc.,
including its officers and directors, who may also be Officers or Directors of
the Company or its Subsidiaries, its Subsidiaries and/or joint ventures from
pursuing any business activity such entity chooses to pursue based on its sole
judgment. Neither the Company, the Shareholders nor any other Person shall have
any rights by virtue of this Agreement or the relationship created hereby, by
Law or otherwise, in any business ventures of any Indemnitee or Shareholder or
Affiliate thereof or to the income or proceeds derived 

 

17

 

therefrom, and such Indemnitees, Shareholders
or Affiliates thereof shall have no obligation to offer any interest in any
such business ventures to the Company, any Shareholder, any Investor or any of
their respective Subsidiaries or joint ventures or any other Person. Notwithstanding
the above, no Shareholder will acquire or construct any Expansion or Extension
Opportunity except in accordance with the terms of Section 5(b) of
the Shareholder Agreement; this sentence, however, is not intended to and does
not bind or restrict in any way Kinder Morgan G.P., Inc., Kinder Morgan
Management, LLC or Kinder Morgan Energy Partners, L.P. or any of their
respective Subsidiaries or joint ventures or other entities in which they own a
interest. Knight Inc. has agreed in Section 5(b) of the Shareholder
Agreement that as set forth therein it will not own an interest in such joint
ventures or other entities directly, or indirectly except through Kinder Morgan
G.P., Inc., Kinder Morgan Management, LLC, Kinder Morgan Energy Partners,
L.P. or any of their respective Subsidiaries.

 

5.8                                 Interested
Party Transactions. No contract or transaction between the Company or any
of its Subsidiaries, on one hand, and any Shareholder, any Affiliate or
Investor thereof or any other Entity in which an Officer or Director
Beneficially Owns an interest or of which such Officer or Director is an
Affiliate, on the other, or between the Company or any of its Subsidiaries, on
one hand, and any of its Officers or Directors, on the other, shall be void or
voidable for this reason or because the Officer or Director is present at or
participates in the meeting of the Board of Directors that authorizes the
contract or transaction, or because his vote is counted for such purpose, if
such contract or transaction is:

 

(a)                                  provided for in or
contemplated by the Operating Agreement;

 

(b)                                 approved by the Board
of Directors, including a majority of Directors who have no interest in the
contract or transaction and who were not appointed by Record Holder(s) of
the Class of Shares of the Company whose Officer, Director, Shareholder,
Affiliate, Investor or other such Entity is interested in the contract or
transaction;

 

(c)                                  on terms no less
favorable than those generally being provided to or available from unrelated
third parties, as evidenced by either (i) at least two bids from unrelated
third parties or two quotations from independent brokers or (ii) recent
similar transactions engaged in by the Company or its Subsidiaries; or

 

(d)                                 fair to the Company
and involves aggregate consideration of less than $1 million for any
contract or series of related contracts or transaction or series of related
transactions.

 

Neither the Company nor any of its Subsidiaries shall enter into any
contract or transaction with any Officer, Director, Shareholder, any Affiliate
or Investor thereof or any other Entity in which an Officer or Director
Beneficially Owns an interest, or of which such Officer or Director is an
Affiliate which does not comply with this Section 5.8.

 

Prior to the Operator or any of its officers, directors, shareholders,
or any Affiliates thereof entering into any interested party transaction with
the Company or its Subsidiaries, the Operator shall inform the Operating
Liaison (as defined in the Operating Agreement) and shall 

 

18

 

provide the Operating Liaison with any
relevant information regarding such transaction as reasonably requested.

 

Notwithstanding the above, all contracts, transactions or commercial
relationships involving the Company or its Subsidiaries that are existing or
entered into prior to the date of this Agreement, and any continuations,
extensions or renewals of those contracts, transactions or relationships are
agreed and deemed to meet the above standards and are not void or voidable.

 

5.9                                 Duties
of Record Holders of Shares and Directors.

 

(a)                                  Notwithstanding any
other provision of this Agreement or any duty otherwise existing at law or in
equity, the parties hereby agree that each Shareholder, the Officers, the
Directors and their Affiliates, shall, to the maximum extent permitted by law,
including Section 18-1101 of the Act, owe no fiduciary duties to the
Company, the other Shareholders or any other Person bound by this Agreement;
provided, however, that each Shareholder, the Directors and their Affiliates
shall act in accordance with the implied contractual covenant of good faith and
fair dealing. Except as otherwise provided in this Agreement, the Shareholders,
the Officers, the Directors and any of their Affiliates shall have no
obligations whatsoever, by virtue of the relationships established pursuant to
this Agreement, to take or refrain from taking any action that may impact the
Company, the Shareholders or any Affiliate of the Company or a Shareholder.

 

(b)                                 The provisions of this
Agreement, including Sections 5.7, 5.8 and 5.9, to the extent that they
restrict or eliminate fiduciary and other duties of Shareholders, Directors,
Officers or Affiliates to the Company or its members otherwise existing at law
or in equity, are agreed by the parties hereto to replace such other duties and
liabilities of such Shareholders, Directors, Officers or Affiliates.

 

5.10                           Indemnification.

 

(a)                                  To the fullest extent
permitted by Law but subject to the limitations expressly provided in this
Agreement, the Indemnitees shall be indemnified and held harmless by the
Company from and against any and all losses, claims, damages, liabilities,
joint or several, expenses (including legal fees and expenses), judgments,
fines, penalties, interest, settlements and other amounts arising from any and
all claims, demands, actions, suits or proceedings, whether civil, criminal,
administrative or investigative, in which any Indemnitee may be involved, or is
threatened to be involved, as a party or otherwise, by reason of its status as (i) an
officer, director, employee, partner, manager, agent or trustee of the Company
or any of its controlled Affiliates; or (ii) a Person serving at the
request of the Company in another Entity in a similar capacity, provided, that
in each case the Indemnitee acted or failed to act in good faith and in the
manner which such Indemnitee reasonably believed to be in, or not opposed to,
the best interests of the Company, and, with respect to any criminal
proceeding, had no reasonable cause to believe such conduct was unlawful. The
termination of any action, suit or proceeding by judgment, order, settlement,
conviction or upon a plea of nolo contendere,
or its equivalent, shall not create a presumption that the Indemnitee acted in
a manner contrary to that specified above. Any indemnification pursuant to this

 

19

 

Subsection 5.10(a) shall be made
only out of the assets of the Company, it being agreed that no Shareholder or
any of its owners, in their respective capacities as such, shall be personally
liable for such indemnification nor shall it have any obligation to contribute
or loan any monies or property to the Company to enable the Company to
effectuate such indemnification. The indemnification provided by this
Subsection 5.10(a) shall be secondary to any other rights to which an
Indemnitee may be entitled as contemplated under any other agreement, as a
matter of Law or otherwise, both as to actions in the Indemnitee’s capacity as (A) an
officer, director, employee, partner, manager, agent or trustee of the Company
or any of its controlled Affiliates; or (B) a Person serving at the
request of the Company in another Entity in a similar capacity, and as to
actions in any other capacity, and shall continue as to an Indemnitee who has
ceased to serve in such capacity and shall inure to the benefit of the heirs,
successors, assigns and administrators of the Indemnitee.

 

(b)                                 To the fullest extent
permitted by Law, expenses (including legal fees and expenses) incurred by an
Indemnitee who is indemnified pursuant to Subsection 5.10(a) in
defending any claim, demand, action, suit or proceeding shall, from time to
time, be advanced by the Company prior to the final disposition of such claim,
demand, action, suit or proceeding upon receipt by the Company of a written
undertaking by or on behalf of the Indemnitee to repay such amount if it shall
be determined that the Indemnitee is not entitled to  be indemnified as authorized in this Section 5.10.

 

(c)                                  The Company may
purchase and maintain insurance, on behalf of the Company’s officers and
directors and on behalf of such other Persons as the Board of Directors shall
determine, against any liability that may be asserted against, or expense that
may be incurred by, such Person in connection with the Company’s activities,
regardless of whether the Company would have the power to indemnify such Person
against such liability under the provisions of this Agreement.

 

(d)                                 For purposes of this Section 5.10,
the Company shall be deemed to have requested an Indemnitee to serve as
fiduciary of an employee benefit plan whenever the performance by it of its
duties to the Company also imposes duties on, or otherwise involves services
by, it to the plan or participants or beneficiaries of the plan; excise taxes
assessed on an Indemnitee with respect to an employee benefit plan pursuant to
applicable law shall constitute “fines” for purposes of indemnities
contemplated by Subsection 5.10(a); and action taken or omitted by it with
respect to an employee benefit plan in the performance of its duties for a
purpose reasonably believed by it to be in the interest of the participants and
beneficiaries of the plan shall be deemed to be for a purpose which is in, or
not opposed to, the best interests of the Company.

 

(e)                                  In no event may an
Indemnitee subject the Shareholders to personal liability by reason of the
indemnification provisions set forth in this Agreement.

 

(f)                                    An Indemnitee shall
not be denied indemnification in whole or in part contemplated under this Section 5.10
because the Indemnitee had an interest in the transaction with respect to which
the indemnification applies if the transaction was otherwise permitted by the
terms of this Agreement.

 

20

 

(g)                                 The provisions of this
Section 5.10 are for the benefit of the Indemnitees, their heirs,
successors, assigns and administrators and shall not be deemed to create any
rights for the benefit of any other Persons.

 

(h)                                 No amendment,
modification or repeal of this Section 5.10 or any provision hereof shall
in any manner terminate, reduce or impair the right of any past, present or
future Indemnitee to be indemnified by the Company, nor the obligation of the
Company to indemnify any such Indemnitee under and in accordance with the
provisions of this Section 5.10 as in effect immediately prior to such
amendment, modification or repeal with respect to claims arising from or
relating to matters occurring, in whole or in part, prior to such amendment,
modification or repeal, regardless of when such claims may arise or be
asserted.

 

5.11                           NGPL
Board of Directors. The Class A Shareholders and Class A
Directors and the Class B Shareholders and Class B Directors shall
take all actions necessary to cause the Directors of the Company to be elected
and appointed as the directors of NGPL.

 

5.12                           Liability
of Indemnitees.

 

(a)                                  Notwithstanding
anything to the contrary set forth in this Agreement, no Indemnitee shall be
liable to the Company, the Shareholders or any other Person for losses
sustained or liabilities incurred as a result of any act or omission constituting
a breach of such Indemnitee’s fiduciary duty for such Indemnitee’s good faith
reliance on the provisions of this Agreement. No Indemnitee shall have any
liability for breach of this Agreement and breach of duties (including
fiduciary duties) to the Company, the Shareholders or any other Person bound by
this Agreement; provided, that any such Indemnitee shall be liable for any act
or omission that constitutes a bad faith violation of the implied contractual
covenant of good faith and fair dealing.

 

(b)                                 Subject to its
obligations and duties as set forth in this Article 5, the Board of
Directors may exercise any of the powers granted to it by this Agreement and
perform any of the duties imposed upon it hereunder either directly or by or
through the Company’s agents, and the Board of Directors shall not be
responsible for any misconduct or negligence on the part of any such agent
appointed by the Board of Directors in good faith.

 

(c)                                  Any amendment,
modification or repeal of this Section 5.12 or any provision hereof shall
be prospective only and shall not in any way affect the limitations on
liability under this Section 5.12 as in effect immediately prior to such
amendment, modification or repeal with respect to claims arising from or
relating to matters occurring, in whole or in part, prior to such amendment,
modification or repeal, regardless of when such claims may arise or be
asserted.

 

5.13                           Facsimile
Signatures. In addition to the provisions for the use of facsimile
signatures elsewhere specifically authorized in this Agreement, facsimile
signatures of any Officer of the Company may be used whenever and as authorized
by the Board of Directors.

 

21

 

ARTICLE 6

Inspection;
Books and Records; Tax Returns

 

6.1                 Inspection; Maintenance of Books
and Records.  Upon reasonable written
notice, employees and agents of each Shareholder shall have access to the
pipelines and properties of the Company and its Subsidiaries during normal
business hours for the purpose of inspecting such pipelines and properties and
the operations thereon.  The Company
shall keep at its principal office complete and accurate books and records of
the Company, supporting documentation of the transactions with respect to the
conduct of the Company’s business and affairs and minutes of the proceedings of
the Board of Directors and the Shareholders. 
The records shall include: (i) complete and accurate information
regarding the state of the business and financial condition of the Company; (ii) a
copy of this Agreement and the Organizational Certificate; (iii) a current
list of the names and last known business, residence, or mailing addresses of
all Directors and Officers; and (iv) the Company’s federal, state and
local tax returns for the Company’s six most recent tax years.  The Company shall furnish the Shareholders
during normal business hours with such additional information and documents
regarding the Company and its Subsidiaries as the Shareholders may from time to
time reasonably request.  The costs and
expenses incurred in connection with any inspection or review permitted
pursuant to this Section 6.1 shall be borne by the Shareholder making such
inspection or review.  Each Shareholder
hereby indemnifies and holds harmless the Company and each of its Subsidiaries,
each Shareholder in the Company other than itself, the Operator, and each
officer, manager, director, employee, agent or consultant of the foregoing
(each an “Indemnified Person”) from and against any and all liabilities,
obligations, losses, damages, penalties, claims and costs (including reasonable
attorneys’ fees and expenses) of any kind or nature whatsoever (collectively, “Expenses”)
relating to or arising out of or with respect to or in connection with such
Shareholder’s inspection or review.  ANY INDEMNIFIED PERSON SHALL BE INDEMNIFIED PURSUANT TO THIS SECTION 6.1
NOTWITHSTANDING THE FACT THAT ANY OF THE EXPENSES ARE OR WERE (i) FORESEEABLY
CAUSED OR ALLEGED TO BE CAUSED, IN WHOLE OR IN PART, (x) BY THE SOLE,
JOINT OR CONCURRENT NEGLIGENCE, CONTRACTUAL COMPARATIVE NEGLIGENCE OR OTHER
FAULT OF SUCH INDEMNIFIED PERSON OR ANY OTHER INDEMNIFIED PERSON OR (y) WITHOUT
ANY FAULT OF ANY SUCH INDEMNIFIED PERSON OR ANY OTHER INDEMNIFIED PERSON, OR (ii) ATTRIBUTABLE
TO STRICT LIABILITY OR NO-FAULT LIABILITY OF SUCH INDEMNIFIED PERSON OR ANY
OTHER INDEMNIFIED PERSON; PROVIDED, HOWEVER,
THAT NO INDEMNIFIED PERSON SHALL BE INDEMNIFIED PURSUANT TO THIS SECTION 6.1
FOR EXPENSES TO THE EXTENT CAUSED BY THE GROSS NEGLIGENCE, BAD FAITH OR WILLFUL
MISCONDUCT OF SUCH INDEMNIFIED PERSON.

 

6.2                 Accounts.  The Board of Directors may establish, or
direct or authorize any Officer to establish, one or more separate bank and
investment accounts and arrangements for the Company, which shall be maintained
in the Company’s name with financial institutions and firms that the Board of
Directors, or any Officer so directed or authorized, determines.

 

6.3                 Independent Auditors.  The independent auditors for the Company
shall be the independent auditors of the Organizational Shareholder, unless the
Board of Directors approves a change in independent auditors.  If, as a result of a change approved by the
Board of Directors, the 

 

22

 

Company’s independent auditors are different
from the Organizational Shareholder’s independent auditors, the Record Holder
of the Class B Shares shall pay any incremental auditing fees and expenses
to the Company resulting from such difference.

 

6.4                 Tax Returns.

 

(a)                        The
Company shall file or cause to be filed all Tax Returns required to be filed by
or on behalf of the Company, including any consolidated, unitary, combined or
similar Tax Returns including the Company or any of its Subsidiaries, within
the time and in the manner prescribed by applicable Law.  Any consolidated, combined, unitary or
similar Tax Return including a Shareholder (“Parent”) who owns 80% or more of
the issued and outstanding Shares of the Company (determined by total number of
Shares issued and outstanding) and the Company shall be prepared and filed in
the manner provided in the Tax Allocation Agreement dated as of the [  ]th day of [  , 2007], among Myria Acquisition Inc., the
Company and NGPL (the “Tax Agreement”). 
The Tax Agreement shall govern all matters (including the filing of tax
returns and payment of taxes) with respect to such consolidated, combined,
unitary or similar returns.

 

(b)                       Notwithstanding
any other provision in this Agreement to the contrary,  each Record Holder of the Class A Shares
and each Record Holder of the Class B Shares agrees that, provided that
any Record Holder of Class B Shares directly owns all the issued and
outstanding Class B Shares, such Shareholder and the Company shall file a
consolidated U.S. federal income tax return pursuant to Code Sections 1502
through 1504 and no Shareholder shall take a position inconsistent with such a
consolidated filing.

 

ARTICLE 7

Dissolution,
Winding-Up and Termination

 

7.1                 Dissolution.

 

(a)                        The
Company shall dissolve and its affairs shall be wound up on the first to occur
of the following events (each a “Dissolution Event”):

 

(i)                                     entry
of a decree of judicial dissolution of the Company under Section 18-802 of
the Act;

 

(ii)                                  the
approval of the Shareholders in accordance with Section 8.10 hereof; or

 

(iii)                               the
termination of the legal existence of the last remaining member of the Company
or the occurrence of any other event which terminates the continued membership
of the last remaining member of the Company in the Company unless the Company
is continued without dissolution in a manner permitted by this Agreement or the
Act.  Upon the occurrence of any event
that causes the last remaining member of the Company to cease to be a member of
the Company, to the fullest extent permitted by law, the personal
representative of such member is hereby authorized to, and shall, within 90
days after the occurrence of the event that terminated the continued membership
of such 

 

23

 

member in the
Company, agree in writing (A) to continue the Company and (B) to the
admission of such personal representative or its nominee or designee, as the
case may be, as a substitute member of the Company, effective as of the
occurrence of the event that terminated the continued membership of such member
in the Company.

 

(b)                       The
Bankruptcy of any Shareholder shall not cause such Shareholder to cease to be a
member of the Company.  Upon the
occurrence of such an event, the Company shall continue without dissolution,
though the Shares owned by such Shareholder will be subject to sale pursuant to
the terms of the Shareholder Agreement.

 

7.2                 Winding-Up and
Termination.

 

(a)                        On
the occurrence of a Dissolution Event, the Board of Directors shall select one
or more Persons to act as liquidator. 
The liquidator shall proceed diligently to wind up the affairs of the
Company and make final distributions as provided herein and in the Act.  The costs of winding up shall be borne as a
Company expense.  Until final
distribution, the liquidator shall continue to operate the Company’s properties
with all of the power and authority of the Board of Directors.

 

(b)                       Any
assets of the Company remaining after satisfaction of the liabilities of the
Company (whether by payment or by reasonable provisions for payment) shall be
distributed on a share-for-share basis on all Outstanding Company Securities.

 

(c)                        On
completion of such final distribution, the liquidator shall file a Certificate
of Cancellation with the Delaware Secretary of State, cancel any other filings
made pursuant to Section 2.5, and take such other actions as may be
necessary to terminate the existence of the Company.

 

ARTICLE 8

Shareholder
Meetings; Record Date

 

8.1                 Meetings.  Except as otherwise provided in this
Agreement, all acts of the Shareholders to be taken hereunder shall be taken in
the manner provided in this Article 8. 
A meeting of the Record Holders of Company Securities for the
transaction of such business as may properly come before the meeting shall be
held at such time and place as the Board of Directors or the Chairman of the
Board or, upon the written request of any Shareholder, the Secretary shall
specify in the notice of the meeting. 
Shareholders may participate in and hold a meeting by means of
conference telephone, video conference or similar communications equipment by
means of which all Persons participating in the meeting can hear each other,
and participation in such meeting shall constitute presence in person at the
meeting.

 

8.2                 Notice of a Meeting.  Notice of a meeting called pursuant to Section 8.1
shall be given in writing by mail or other means of written communication in
accordance with Section 9.2 to the Record Holders of Company Securities
for whom the meeting is called.

 

8.3                 Record Date.  For purposes of determining the Shareholders
entitled to notice of, or to vote at, any meeting of the Shareholders or
entitled to vote by ballot or give approval of 

 

24

 

Company action in writing without a meeting or entitled to exercise
rights in respect of any lawful action of the Shareholders, the Record Date
shall be not less than 10 nor more than 60 days before (a) the date
of the meeting (unless such requirement conflicts with any Law, in which case
the Law shall govern), or (b) in the event that approvals are sought
without a meeting, the date by which the Shareholders are requested in writing
by the Board of Directors to give such approvals.

 

8.4                 Adjournment.  When a meeting is adjourned to another time
or place, notice need not be given of the adjourned meeting and a new Record
Date need not be fixed if the time and place thereof are announced at the
meeting at which the adjournment is taken, unless such adjournment shall be for
more than 45 days.  At the adjourned
meeting, the Company may transact any business which might have been transacted
at the original meeting.  If the
adjournment is for more than 45 days or if a new Record Date is fixed for the
adjourned meeting, a notice of the adjourned meeting shall be given in
accordance with this Article 8.

 

8.5                 Waiver of Notice; Approval of
Meeting; Approval of Minutes.  The
transactions of any meeting of the Shareholders, however called and noticed,
and whenever held, shall be as valid as if they had been authorized at a
meeting duly held after regular call and notice, if a quorum is present either
in person or by proxy, and if, either before or after the meeting, Shareholders
representing such quorum who were present in person or by proxy and entitled to
vote, sign a written waiver of notice or an approval of the holding of the
meeting or an approval of the minutes thereof. 
All waivers and approvals shall be filed with the Company records or
made a part of the minutes of the meeting. 
Attendance of a Shareholder at a meeting shall constitute a waiver of
notice of the meeting, except (a) when the Shareholder does not approve,
at the beginning of the meeting, of the transaction of any business because the
meeting is not lawfully called or convened; and (b) that attendance at a
meeting is not a waiver of any right to disapprove the consideration of matters
required to be included in the notice of the meeting, but not so included, if
the disapproval is expressly made at the meeting.

 

8.6                 Quorum; Voting.

 

(a)                        At
a meeting at which no action requires the vote of both the Class A and Class B
Shareholders, the Record Holders of a majority of those Outstanding Company
Securities for which a meeting has been called who are entitled to vote and be
present in person or by proxy shall constitute a quorum at such meeting of the
Shareholders.  At any such meeting of the
Shareholders duly called and held in accordance with this Agreement at which a
quorum is present, the act of the Record Holders of a majority of all
Outstanding Company Securities present and entitled to vote thereon shall be
deemed to constitute the act of the Record Holders of such Company Securities,
except as approval by holders of a different amount of Company Securities is
required by any other provision of this Agreement, in which case the act of the
Shareholders holding a number of Outstanding Company Securities representing at
least such different amount shall be required. 
The Shareholders present at any such duly called or held meeting at
which a quorum is present may continue to transact business until adjournment,
notwithstanding the withdrawal of enough Shareholders to leave less than a
quorum, if any action taken (other than adjournment) is approved by the
required percentage of Company Securities specified in this Agreement.  In the absence of a quorum, any such meeting
of the 

 

25

 

Shareholders
may be adjourned from time to time by the affirmative vote of the Record
Holders of a majority of the Company Securities represented either in person or
by proxy.

 

(b)                       At
a meeting to take action pursuant to Section 8.10 or at any other meeting
at which action requires the vote of each of the Class A and Class B
Shareholders, the Record Holders of a majority of each of the Outstanding Class A
Shares and Outstanding Class B Shares who are entitled to vote and be
present in person or by proxy shall constitute a quorum at such meeting of the
Shareholders of such Classes.  At any
such meeting of the Shareholders duly called and held in accordance with this
Agreement at which such a quorum is present, the act of the Record Holders of a
majority of all Outstanding Class A Shares and a majority of all
Outstanding Class B Shares shall be deemed to constitute the act of the
Record Holders of such respective Class of Company Securities, except as
approval by holders of a different amount of Company Securities of a Class is
required by any other provision of this Agreement, in which case the act of the
Shareholders holding a number of Outstanding Company Securities of such Class representing
at least such different amount shall be required.  The Shareholders of a Class present at
such a duly called or held meeting at which a quorum is present may not
continue to transact business (other than adjournment) upon the withdrawal of
enough Shareholders of such Class to leave less than a quorum.  In the absence of a quorum, any such meeting
of the Shareholders may be adjourned from time to time by the affirmative vote
of the Record Holders of a majority of the Class A Shares represented
either in person or by proxy and a majority of the Class B Shares
represented either in person or by proxy.

 

8.7                 Conduct of Meeting.  The Board of Directors shall have full power
and authority concerning the manner of conducting any meeting of the
Shareholders or the solicitation of approvals in writing, including the
determination of Persons entitled to vote, the existence of a quorum, the
satisfaction of the requirements of this Article 8, the conduct of voting,
the validity and effect of any proxies and the determination of any
controversies, votes or challenges arising in connection with or during the
meeting or voting.  The Board of
Directors shall designate a Person to serve as chairman of any meeting and
shall further designate a Person to take the minutes of any meeting.  All minutes shall be kept with the records of
the Company.  The Board of Directors may
make such other regulations consistent with applicable Law and this Agreement
as it may deem advisable concerning the conduct of any meeting of the
Shareholders or the solicitation of approvals in writing, including regulations
in regard to the appointment of proxies, the appointment and duties of
inspectors of votes and approvals, the submission and examination of proxies
and other evidence of the right to vote and the revocation of approvals in
writing.

 

8.8                 Action Without a Meeting.  Any action that may be taken at a meeting of
Shareholders may be taken without a meeting only if consents in writing setting
forth such action are signed by the Record Holders of each class of Shares
entitled to vote thereon, and any consent not so executed shall be void.  If a ballot returned to the Company does not
vote all of the Company Securities held by the Shareholder, the Company shall
be deemed to have failed to receive a ballot for the Company Securities that
were not voted.  If approval of the
taking of any action by the Shareholders is solicited by any Person other than
by or on behalf of the Board of Directors, the written approvals shall have no
force and effect unless and until (i) they are deposited with the Company
in care of the Board of Directors and (ii) approvals sufficient to take
the action proposed 

 

26

 

are dated as of a date not more than 90 days prior to the date
sufficient approvals are deposited with the Company.

 

8.9                 Voting and Other Rights.  Only those Record Holders of Company
Securities on the Record Date set pursuant to Section 8.3 shall be
entitled to notice of, and to vote at, a meeting of the Shareholders or to act
with respect to matters as to which the holders of the Company Securities have
the right to vote or to act.  All
references in this Agreement to votes of, or other acts that may be taken by,
the Company Securities shall be deemed to be references to the votes or acts of
the Record Holders of such Company Securities.

 

8.10           Shareholder Approval Required for Certain
Actions.  The Company shall not take
any action with respect to the following or allow any of the following to be
taken by any Subsidiary of the Company without the approval of the Record
Holders of each class of outstanding Shares:

 

(a)                        dissolution
or liquidation of the Company or any of its Subsidiaries or appointment of a
liquidator or any act of Bankruptcy,

 

(b)                       admission
of any additional member, shareholder or other equity holder, or adjustment of
any member’s, shareholder’s or other equity holder’s ownership interest,
otherwise (in the case of the Company) than in accordance with the Shareholder
Agreement,

 

(c)                        any
merger, consolidation, conversion, re-domestication or amalgamation of the
Company or any of its Subsidiaries or sale of all or substantially all of the
assets of the Company or any of its Subsidiaries,

 

(d)                       any
amendment or replacement of this Agreement or the Organizational Certificate or
the organizational documents of any of the Company’s Subsidiaries, or

 

(e)                        cause,
authorize or permit any Subsidiary of the Company to take any action that the
Company would not be permitted to take directly without an amendment of this
Agreement.

 

ARTICLE 9

General
Provisions

 

9.1                 Fiscal Year.  The fiscal year of the Company shall be the
calendar year.

 

9.2                 Notices.  Except as expressly set forth to the contrary
in this Agreement, any notice, request, consent, instruction, correspondence or
other document to be given hereunder shall be in writing and delivered in
person or by courier service requiring acknowledgement of receipt or mailed by certified
mail, postage prepaid and return receipt requested, or by telecopier.  Notice given by personal delivery or courier
shall be effective upon actual receipt. 
Notice given by mail shall be effective upon actual receipt or, if not
actually received, the fifth Business Day following deposit with the U.S.  Post Office. 
Notice given by telecopier shall be confirmed by appropriate answerback
and shall be effective upon actual receipt if received during the recipient’s
normal business hours, or at the beginning of the recipient’s next Business Day
after receipt if not received during the recipient’s normal business
hours.  Whenever any notice is required
to be given by Law, 

 

27

 

the Organizational Certificate or this Agreement, a written waiver
thereof, signed by the Person entitled to notice, whether before or after the
time stated therein, shall be deemed equivalent to the giving of such notice.

 

9.3                 Entire Agreement.  This Agreement constitutes the entire
agreement of the Shareholders pertaining to the subject matter hereof and
supersedes all prior agreements and understandings pertaining thereto.

 

9.4                 Waiver.  No failure by any party to insist upon the
strict performance of any covenant, duty, agreement or condition of this
Agreement or to exercise any right or remedy consequent upon a breach thereof
shall constitute waiver of any such breach or any other covenant, duty,
agreement or condition.

 

9.5                 Binding Effect.  This Agreement is binding upon and shall
inure to the benefit of the Shareholders, the Assignees and their respective
executors, administrators, successors and legal representatives.

 

9.6                 Governing Law;
Consent to Jurisdiction; Severability.

 

(a)               This Agreement
shall be governed by and construed and enforced in accordance with the laws of
the State of Delaware without regard to the principles of conflicts of
law.  In the event of a direct conflict
between the provisions of this Agreement and (i) any provision of the
Organizational Certificate, or (ii) any mandatory, non-waivable provision
of the Act, such provision of the Organizational Certificate or the Act shall
control.  If any provision of the Act
provides that it may be varied or superseded in the limited liability company
agreement (or otherwise by agreement of the members or managers of a limited
liability company), such provision shall be deemed superseded and waived in its
entirety if this Agreement contains a provision addressing the same issue or
subject matter.

 

(b)              The Company and the
parties hereby irrevocably submit to the jurisdiction of the courts of the
state of Illinois and the federal courts of the United States of America
located in Cook County, Illinois over any dispute between or among the parties
or the Company and the parties arising out of this Agreement, and the Company
and each party irrevocably agrees that all such claims in respect of such
dispute shall be heard and determined in such courts.  The Company and the parties hereby irrevocably
waive, to the fullest extent permitted by law, any objection which they may now
or hereafter have to the venue of any such dispute arising out of this
Agreement brought in such court or any defense of inconvenient forum for the
maintenance of such dispute.  The Company
and each party 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.

 

(c)               If any provision of
this Agreement or the application thereof to any Person or circumstance is held
invalid or unenforceable to any extent, the remainder of this Agreement and the
application of that provision to other Persons or circumstances is not affected
thereby and that provision shall be enforced to the greatest extent permitted
by Law.

 

9.7                 Further Action.  The parties shall execute and deliver all
documents, provide all information and take or refrain from taking action as
may be necessary or appropriate to achieve the purposes of this Agreement.

 

28

 

9.8                 No Right to Action for Dissolution
or Partition.  To the greatest extent
permitted by Law, no Shareholder has any right to maintain any action for
dissolution of the Company or for partition of the property of the Company.

 

9.9                 Third-Party Beneficiaries.  The Shareholders, the Assignees, the
Indemnitees and their respective executors, administrators, successors and
legal representatives shall be considered to be third-party beneficiaries of
this Agreement.

 

9.10           Amendment.  No amendment, supplement or modification of
this Agreement or the Organizational Certificate shall be binding unless
approved by and executed in writing by the Record Holders of the Class A
and Class B Shares.

 

9.11           Wholly-Owned Subsidiaries.  NGPL and Kinder Morgan Illinois Pipeline LLC
will remain wholly-owned directly by the Company, and each wholly-owned
Subsidiary of NGPL will remain wholly-owned by NGPL or another wholly-owned
Subsidiary of NGPL.  The Company will
not, and will not permit any of its other Subsidiaries to, issue or sell any
interests in or equity securities of such Subsidiaries or to change, whether by
recapitalization, reclassification, split-up, combination, exchange of
interests or equity securities, repurchase, acquisition or otherwise, the
number or percentage of such interests in or equity securities owned by the
Company or any of its Subsidiaries.

 

9.12           Tax Agreement.  Parent agrees that it will take all
reasonably necessary actions to enforce the Tax Agreement and that such
agreement will not be amended in a manner that could reasonably be expected to
adversely affect the MidCon Entities without first obtaining the written
consent of Knight Inc., such consent to not be unreasonably withheld or
delayed.

 

9.13           Creditors.  None of the provisions of this Agreement shall
be for the benefit of, or shall be enforceable by, any creditor of the Company
in its capacity as such.

 

9.14           Disclosure; Public Announcements.  The Company shall consult with the relevant Shareholders
and/or Investors before it or any of its Affiliates issues any press release or
otherwise makes any public statement, in each case with respect to such
Shareholders and/or Investors.  The
Company or its Affiliates shall not issue any such press release or make any such
public statement without the prior written consent of the relevant Shareholders
and/or Investors, which consent shall not be unreasonably withheld or delayed,
except such press releases or public statements as may be required by law or
applicable rule of any stock exchange.

 

9.15           Counterparts.  This Agreement may be executed in
counterparts, all of which together shall constitute an agreement binding on
all parties hereto, notwithstanding that all such parties are not signatories
to the original or the same counterpart. 
Facsimile copies of signatures shall constitute original signatures for
all purposes of this Agreement and any enforcement hereof.  Each party shall become bound by this
Agreement immediately upon affixing its signature hereto or, in the case of a
Person acquiring a Company Security, upon the earlier of the acquisition by
such Person of the Certificate evidencing such Company Security or the
registration of the transfer of such Company Security to such Person.

 

29

 

IN WITNESS WHEREOF,
the undersigned have executed this Agreement as of the date first set forth
above.

 

	
   

  	
  ORGANIZATIONAL SHAREHOLDER AND CLASS A
  SHAREHOLDER:

  
	
   

  	
   

  
	
   

  	
  KNIGHT INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  
	
   

  	
   

  
	
   

  	
  CLASS B SHAREHOLDER:

  
	
   

  	
   

  
	
   

  	
  MYRIA ACQUISITION INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  

 

 

Annex A

 

	
  Name

  	
   

  	
  Title

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  

 

EXHIBIT D

 

 

SHAREHOLDER AGREEMENT

 

In Connection
With The

 

SHARES REPRESENTING

 

LIMITED LIABILITY COMPANY INTERESTS IN MIDCON
LLC

 

[                      ]

 

among

 

KNIGHT INC.

 

MYRIA ACQUISITION INC.

 

and

 

MIDCON LLC

 

 

TABLE OF
CONTENTS

 

	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  
	
  1.

  	
  DEFINITIONS

  	
  1

  
	
   

  	
   

  	
   

  
	
  2.

  	
  INVESTMENT
  REPRESENTATION

  	
  7

  
	
   

  	
   

  	
   

  
	
  3.

  	
  MEMBERSHIP
  INTERESTS OF MIDCON

  	
  8

  
	
   

  	
   

  	
   

  
	
   

  	
  (a)

  	
  Ownership and Original
  Issuance

  	
  8

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  (b)

  	
  Transfers of Shares
  Between Principals and Their Affiliates

  	
  8

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  (c)

  	
  Disposition of Shares

  	
  9

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  (d)

  	
  Sale of Shares

  	
  11

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  (e)

  	
  Pledge of Shares and
  Rights under this Agreement

  	
  14

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  (f)

  	
  Securities Act
  Restrictions

  	
  14

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  (g)

  	
  Legend on Certificates

  	
  15

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  (h)

  	
  Extension of Time

  	
  15

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  (i)

  	
  Limitations

  	
  15

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  (j)

  	
  Bankruptcy

  	
  15

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  (k)

  	
  Limited Forced Sale

  	
  17

  
	
   

  	
   

  	
   

  	
   

  
	
  4.

  	
  DISPOSITION
  OF MYRIA SECURITIES

  	
  18

  
	
   

  	
   

  	
   

  
	
  5.

  	
  COMPETITIVE
  ACTIVITIES AND EXPANSION OR EXTENSION OPPORTUNITIES

  	
  21

  
	
   

  	
   

  	
   

  
	
   

  	
  (a)

  	
  Competitive Activities

  	
  21

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  (b)

  	
  Expansion or Extension
  Opportunities

  	
  22

  
	
   

  	
   

  	
   

  	
   

  
	
  6.

  	
  PERFORMANCE
  OF AGREEMENTS

  	
  23

  
	
   

  	
   

  	
   

  
	
  7.

  	
  OPERATING
  MATTERS

  	
  24

  
	
   

  	
   

  	
   

  
	
  8.

  	
  TERM
  OF AGREEMENT

  	
  24

  
	
   

  	
   

  	
   

  
	
  9.

  	
  NOTICE

  	
  25

  
	
   

  	
   

  	
   

  
	
  10.

  	
  ARBITRATION

  	
  27

  
	
   

  	
   

  	
   

  
	
  11.

  	
  SPECIFIC
  PERFORMANCE

  	
  27

  
	
   

  	
   

  	
   

  
	
  12.

  	
  SEVERABILITY

  	
  27

  
	
   

  	
   

  	
   

  
	
  13.

  	
  GOVERNING
  LAW

  	
  27

  

 

i

 

	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  
	
  14.

  	
  HEADINGS
  AND CONSTRUCTION

  	
  28

  
	
   

  	
   

  	
   

  
	
  15.

  	
  SUCCESSORS
  BOUND

  	
  28

  
	
   

  	
   

  	
   

  
	
  16.

  	
  NO
  AMENDMENT OR WAIVER

  	
  28

  
	
   

  	
   

  	
   

  
	
  17.

  	
  LEGAL
  COUNSEL RELATIONSHIPS

  	
  28

  
	
   

  	
   

  	
   

  
	
  18.

  	
  MULTIPLE
  COUNTERPARTS

  	
  29

  

 

Schedule 4                                      Permitted
Sales by Babcock & Brown Myria Pty Ltd and BBIFNA AIV Two, LP

 

ii

 

SHAREHOLDER AGREEMENT

 

THIS AGREEMENT (the “Agreement”) dated as of [                    ],
among KNIGHT INC. (“Knight”), a Kansas corporation, MYRIA ACQUISITION
INC. (“Myria”), a Delaware corporation (each, a “Principal” and
collectively, the “Principals”) and MIDCON LLC (“MidCon”), a
Delaware limited liability company.

 

W I T N E S S E T H:

 

WHEREAS, MidCon has, at the date of this Agreement, an authorized
equity capitalization of 1,000 shares representing limited liability company
interests, consisting of 200 Class A Shares (“Class A Shares”)
and 800 Class B Shares (“Class B Shares”); and

 

WHEREAS, at the date of this Agreement, the Shares of MidCon which are
issued and outstanding are 200 Class A Shares, all of which are owned and
held by Knight, and 800 Class B Shares, all which are owned and held by
Myria; and

 

WHEREAS, MidCon has subsidiaries, including its wholly-owned
subsidiary, Natural Gas Pipeline Company of America (“NGPL”), a Delaware
limited liability company; and

 

WHEREAS, the Principals wish to make certain representations in
connection with the Shares now owned by them; and

 

WHEREAS, the Principals wish to enter into certain agreements relating
to the ownership and disposition of the MidCon Shares, certain business
arrangements regarding the management of MidCon and related matters;

 

NOW, THEREFORE, in consideration of the premises and the mutual
covenants herein contained, the parties hereto agree as follows:

 

1.                                       Definitions.
For the purposes of this Agreement:

 

(a)                                  An
“Affiliate” of, or a Person “affiliated” with, a Person, is
another Person that directly, or indirectly through one or more intermediaries,
controls, or is controlled by, or is

 

 

under common
control with, that Person, or a fund or trust in which the Person is a manager
or trustee. For purposes of this definition, “control” means, when 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. For
purposes of Section 3 hereof, the term “Affiliate” when used with respect
to Myria shall include the Investors. No Investor shall be deemed to be an
Affiliate of any other Investor.

 

(b)                                 “Bankruptcy”
means, with respect to any Person, that (a) such Person (i) makes a
general assignment for the benefit of creditors; (ii) files a voluntary
petition in bankruptcy; (iii) is insolvent or has entered against such
Person an order for relief in any bankruptcy or insolvency proceeding; (iv) files
a petition or answer seeking for such Person any reorganization, arrangement,
composition, readjustment, liquidation, dissolution or similar relief under any
Law; (v) files an answer or other pleading admitting or failing to contest
the material allegations of a petition filed against such Person in a
proceeding of the type described in subclauses (i) through (iv) of
this clause (a); or (vi) seeks, consents to or acquiesces in the
appointment of a trustee, receiver or liquidator of such Person or of all or
any substantial part of such Person’s properties; or (b) 120 days have
passed after the commencement of any proceeding seeking reorganization,
arrangement, composition, readjustment, liquidation, dissolution or similar
relief under any Law, if the proceeding has not been dismissed, or 90 days have
passed after the appointment, without such Person’s consent or acquiescence, of
a trustee, receiver or liquidator of such Person or of all or any substantial
part of such Person’s properties, if the appointment is not vacated or stayed,
or 90 days have passed after the date of expiration of any such stay, if the
appointment has not been vacated.

 

2

 

(c)                                  “Controlled
Affiliate” of a Person means any other Person of which the Person and/or
one or more of its Subsidiaries has possession, directly or indirectly, of the
power to direct or cause the direction of the management and policies whether
through the ownership of the other Person’s voting securities, by contract, or
otherwise, or any fund or trust in which the Person or its Affiliates is a
manager or trustee.

 

(d)                                 “Electing
Principal” has the meaning ascribed to such term in Section 3(j)(i).

 

(e)                                  “Expansion
or Extension Opportunity” means (i) any physical enhancement or series
of physical enhancements that would increase the base capacity (including by
adding horsepower) of any then existing portion of any gas transmission
facilities or then existing storage fields owned by any of MidCon’s
Subsidiaries, including, but not limited to, NGPL, (ii) the construction
of an extension of any then existing pipeline facilities that is no longer than
25 miles long and that may be accomplished under the blanket certificate of the
MidCon Subsidiary that owns the then existing pipeline facilities and that
would connect and/or redeliver gas supplies to a then existing customer of the
MidCon Subsidiary that owns the interconnecting pipeline facilities, the
intention being that such extension would be limited in scope and location or (iii) the
acquisition or construction of any pipeline facility or series of related
pipeline facilities that would directly connect with the Chicago market and
directly compete with any of MidCon’s Subsidiaries’ facilities that are
physically connected to and deliver gas to customers in the Chicago market and
would reasonably be expected to materially adversely affect the profitability
of MidCon.

 

(f)                                    “FERC”
means the Federal Energy Regulatory Commission or its successor agency.

 

3

 

(g)                                 “FERC
Standards of Conduct” means FERC’s standards that regulate the interaction
between an interstate natural gas pipeline and its relationship with a
Marketing Affiliate or other Affiliate, together with FERC’s rules, regulations
and orders related thereto, all as and if previously or hereafter amended, and
as and if previously or hereafter interpreted by any opinion or ruling of FERC
or any court of competent jurisdiction.

 

(h)                                 “Indemnitee”
has the meaning ascribed to such term in Section 5(a).

 

(i)                                     “Investor”
means the holders of the equity interests in Myria, which initially are BBI US
Investments Pty Ltd, Babcock &
Brown Myria Pty Ltd, BBIFNA AIV Two, LP, Public Sector Pension
Investment Board, and Stichting Pensioenfonds voor de Gezondheid, Geestelijke
en Maatschappelijke Belangen.

 

(j)                                     “Investor
Standstill Period” has the meaning ascribed to such term in Section 4(a).

 

(k)                                  “Knight”
has the meaning ascribed to such term in the introductory paragraph.

 

(l)                                     “Law”
means any applicable constitutional provision, statute, act, code, law,
regulation, rule, ordinance, order, decree, ruling, proclamation, resolution,
judgment, decision, declaration or interpretative or advisory opinion or letter
of a governmental authority.

 

(m)                               “Marketing
Affiliate” has the meaning given to such term in applicable standards of
conduct adopted by FERC in the FERC Standards of Conduct.

 

(n)                                 “MidCon”
has the meaning ascribed to such term in the introductory paragraph.

 

4

 

(o)                                 “MidCon
LLC Agreement” means the Limited Liability Company Agreement of MidCon LLC,
dated as of [                      ],
as it may be amended in writing from time to time.

 

(p)                                 “Myria”
has the meaning ascribed to such term in the introductory paragraph.

 

(q)                                 “Myria
Securities” means any equity or debt securities of Myria.

 

(r)                                    “NGPL”
has the meaning ascribed to such term in the recitals.

 

(s)                                  “Non-Electing
Principal” has the meaning ascribed to such term in Section 3(j)(i).

 

(t)                                    “Non-Electing
Principal’s Shares” has the meaning ascribed to such term in Section 3(j)(i).

 

(u)                                 “Notice”
has the meaning ascribed to such term in Section 9.

 

(v)                                 “Operating
Agreement” means the Operations and Reimbursement Agreement of even date
herewith between NGPL and Knight, as Operator.

 

(w)                               “Opportunity
Notice” has the meaning ascribed to such term in Section 5(b)(i).

 

(x)                                   “Person”
means any individual, corporation, partnership (general or limited), limited
liability company, joint venture, association, joint stock company, trust,
unincorporated organization or other entity or government or any agency or
political organization thereof.

 

(y)                                 “Principal”
and “Principals” have the meanings ascribed to such terms in the
introductory paragraph.

 

5

 

(z)                                   “Purchase
Agreement” means the Purchase Agreement dated as of December [  ],
2007 between Knight and Myria.

 

(aa)                            “Purchasing
Principal” has the meaning ascribed to such term in Section 3(d)(i).

 

(bb)                          “Regulatory
Problem” means any set of facts, events or circumstances the existence of
which would cause the Purchasing Principal (i) to, by reason of a purchase
or acquisition of Shares pursuant to Section 3(d) or Section 3(j),
or any acceptance under Section 3(d)(i) or exercise of any option
under Section 3(j), be in violation of any law, regulation, rule or
other requirement of any governmental authority having jurisdiction or (ii) to
reasonably believe that it is not entitled to hold or exercise any significant
right with respect to the Shares it may wish to acquire pursuant to Section 3(d) or
Section 3(j).

 

(cc)                            “Restricted
Person” means a Person who, who has a Controlled Affiliate that, or who is
a Controlled Affiliate of a Person who, (i) is a customer of NGPL or any
of the Subsidiaries of MidCon that own or operate a natural gas pipeline, (ii) directly
or indirectly owns 50% or more of the voting securities of, or otherwise has
the power to direct or cause the direction of the management and policies of,
any entity that directly or indirectly owns or controls any natural gas
pipeline in North America or (iii) serves as the operator of any natural
gas pipeline in North America; provided that any Person that is (a) an
infrastructure investment fund, pension fund or similar investment fund (in
each case other than one controlled by a Person that is not such a fund and is
a Restricted Person) or (b) a similar financial or institutional investor
that is not actively engaged in the day to day management or operation of a
natural gas pipeline in North America shall not be a Restricted Person;
provided that any such Person described in (a) or (b) above may not
permit any of its directors, officers, employees, 

 

6

 

representatives or
agents who have access to competitively sensitive confidential information
about natural gas pipeline operations in North America to be involved in the
management or control of MidCon or any of its Subsidiaries, or to receive
competitively sensitive information of or regarding MidCon or any of its
Subsidiaries, or any other information of or regarding MidCon or any of its
Subsidiaries if the sharing of such other information is restricted by
applicable law or regulation.

 

(dd)                          “Selling
Principal” has the meaning ascribed to such term in Section 3(d).

 

(ee)                            “Shareholder”
has the meaning ascribed to such term in Section 5(a).

 

(ff)                                “Shares”
means the Class A Shares, the Class B Shares and any class of
membership interest of MidCon hereafter authorized and includes any security of
MidCon convertible into such membership interest and any right to purchase or
acquire any such membership interest or any security convertible into such
membership interest.

 

(gg)                          “Subsidiary” of any Person means
any other Person of which at least fifty percent (50%) or more of the voting
power represented by the outstanding capital stock or other voting securities
or interests having voting power under ordinary circumstances to elect
directors or similar members of the governing body of such corporation or
entity or fifty percent (50%) or more of the equity interests in such corporation
or entity shall at the time be owned or controlled, directly or indirectly, by
such Person and/or by one or more of its Subsidiaries.

 

(hh)                          “Transactions”
has the meaning ascribed to such term in Section 17.

 

2.                                       Investment
Representation. Each Principal hereby represents and warrants to the other
Principal and MidCon that the Shares now owned by it have been acquired for its
own account, for investment and not with a view to the distribution thereof.

 

7

 

3.                                       Membership
Interests of MidCon.

 

(a)                                  Ownership
and Original Issuance. Unless otherwise agreed to by the Principals in
writing and except as otherwise expressly permitted by the provisions of this
Agreement, at all times during the term of this Agreement (i) Knight and
its Affiliates shall own 100% of the Class A Shares and Myria and its
Affiliates shall own 100% of the Class B Shares, (ii) no Shares shall
be issued or transferred to or owned or held by a Person who is not a Principal
or an Affiliate of a Principal and (iii) no Shares shall be issued or
transferred after the date hereof to an Affiliate of a Principal unless such
Affiliate enters into a counterpart of this Agreement pursuant to which it
agrees to be bound by all the terms and provisions of this Agreement as a party
hereto. Any attempted assignment or transfer of a Share otherwise than in
accordance with this Agreement shall be void.

 

(b)                                 Transfers
of Shares Between Principals and Their Affiliates. Notwithstanding any
other provisions of this Agreement, the Shares issued to or owned or held by a
Principal or Affiliate thereof may be transferred by such Principal or
Affiliate, as the case may be, (i) to (x) any Affiliate of Myria that
is an Investor or a Controlled Affiliate of an Investor, or (y) any
Controlled Affiliate of Knight or, (ii) in the case of Shares issued to or
owned or held by such Affiliate, to such Principal, provided in each case that (1) notice
of such transfer is given to MidCon and the other Principal by the Principal
making such transfer or whose Affiliate is making such transfer, (2) any
Affiliate of any Principal to which any Shares are to be transferred enters
into a counterpart to this Agreement pursuant to which it agrees to be bound by
all the terms and provisions of this Agreement as a party hereto, and (3) prior
to the occurrence of any Affiliate which owns Shares ceasing to be a Controlled
Affiliate of an Investor or Knight, as described in clause (i) above, such
Affiliate shall transfer to and such Principal 

 

8

 

shall acquire all
such Shares; provided further that if such Affiliate is a Restricted Person
then, as a condition to such transfer, such Affiliate must first agree in
writing with each Principal and MidCon that it (a) will keep confidential
and not disclose any information it obtains about MidCon or its Controlled
Affiliates or their respective operations as an owner of Shares or from MidCon,
any Controlled Affiliate of MidCon, any Principal or Affiliate of a Principal
or Investor or Affiliate of an Investor and will use such information solely
for the purpose of monitoring its investment in MidCon, (b) acknowledges
and agrees to comply with the FERC Standards of Conduct rules and
regulations, (c) will not reveal or otherwise act as a conduit for the
information described in clause (a) above to any customer of MidCon or any
of its Subsidiaries or to any owner or operator of a natural gas pipeline in
North America, and (d) will act only as a passive investor with no
management influence over MidCon or its Controlled Affiliates. Any attempted
assignment or transfer of a Share otherwise than in accordance with this
Agreement shall be void.

 

(c)                                  Disposition
of Shares. No Principal nor any Affiliate of a Principal (nor any pledgee
or mortgagee of a Principal or Affiliate thereof) may directly or indirectly,
by operation of law or otherwise (including without limitation any sale,
merger, consolidation, amalgamation or share exchange of a Controlled Affiliate
of a Principal that owns Shares), sell or transfer or otherwise dispose of or
cease to own any Shares owned or held by it except with the written consent of
the other Principal or as expressly permitted by this Section 3 or Section 4.
No Shares owned or held by a Principal or any Affiliate of such Principal may
be sold or transferred to an unaffiliated party pursuant to the provisions of
the following Section 3(d) unless all such Shares held by such
Principal and its Affiliates are sold and transferred at the same time at a
fixed price, payable in cash, to a single purchaser, all as hereinafter
provided. No Shares 

 

9

 

may be offered for
sale or sold under the provisions of Section 3(d) or 3(j) if the
terms of the proposed sale by the Selling Principal (as hereinafter defined)
require the proposed purchaser to undertake any obligations or liabilities
other than payment of the purchase price in cash, the filing and prosecution of
any necessary notices to, and applications for any necessary approvals of,
regulatory authorities, and compliance with the provisions of this Agreement.

 

As used herein, the term “sell, transfer or otherwise dispose of” with
respect to the Shares does not include (x) any transfer pursuant to a sale
or lease of all or substantially all the assets of a Principal or any Affiliate
that owns Shares or any merger, consolidation or amalgamation of a Principal or
any Affiliate that owns Shares, provided that (i) any transferee or
successor (or, if applicable, the ultimate parent of any such transferee or
successor) shall enter into an agreement with MidCon and the Principals
reasonably satisfactory to MidCon and the Principals, pursuant to which it will
be bound by the terms and provisions of this Agreement as a party hereto, (ii) any
transferee or successor (or, if applicable, the ultimate parent of any such
transferee or successor) shall provide appropriate credit support reasonably
acceptable to MidCon and the Principal who (or whose Affiliates) are not transferring
Shares for any obligations of MidCon or its Subsidiaries that are supported by
the Principal or its Affiliates who are selling Shares, as the case may be, and
(iii) if as a result of any such transfer or succession of the Operator,
the Operating Agreement is assigned to or assumed by another Person, such
Person has adequate resources and appropriate industry experience to act as an
operator of a natural gas pipeline or (y) any indirect transfer of the
Shares as a result of the issuance, sale or transfer of equity interests of, a
sale or lease of all or substantially all the assets of, or any merger,
consolidation or amalgamation involving, an Investor who does not own Shares
directly. Notwithstanding the foregoing, if a significant purpose of the
transfer or indirect transfer, or of the structure of the 

 

10

 

direct or indirect transfer, described in clause (x) or (y) is
to effect the disposition of such Person’s Shares or to avoid the restrictions
on transfer set forth in this Section 3, then such transfer shall be
treated as a transfer, sale or disposition that is subject to the restrictions
on transfer set forth in this Section 3. Further, if the transferee or
successor in a transaction described in clause (x) or (y) above is a
Restricted Person, it may not permit any of its directors, officers, employees,
representatives or agents who have access to competitively sensitive
confidential information about natural gas pipeline operations in North America
to be involved in the management or control of MidCon or any of its
Subsidiaries, or to receive competitively sensitive information of or regarding
MidCon or any of its Subsidiaries, or any other information of or regarding
MidCon or any of its Subsidiaries if the sharing of such other information is
restricted by applicable law or regulation. It is acknowledged by the parties
hereto that the only restrictions on the transferability of Myria Securities
contained in this Agreement are set forth in this paragraph 3(c) and Section 4.
It is further acknowledged by the parties hereto that there are no restrictions
placed by this Agreement on the direct or indirect transfer of shares or other
interests in Knight.

 

(d)                                 Sale
of Shares. Subject to the limitations set forth in Section 3(i), in
the event that a Principal desires to sell or cause to be sold all the Shares
owned by it and its Affiliates to a single third party for cash, such Principal
and its Affiliates (the “Selling Principal”) shall first offer or cause
to be offered such Shares for sale to the other Principal at the same cash
price and on the same terms (subject to the last sentence of the first
paragraph of Section 3(c)) provided for in any bona fide offer received by
the Selling Principal for the purchase of such Shares by a single third party
which the Selling Principal is prepared to accept, in accordance with the
following provisions of this Section 3(d):

 

11

 

(i)                                     The
Selling Principal shall give notice in writing to the other Principal that the
Selling Principal desires to sell or cause to be sold all the Shares held by
the Selling Principal, specifying the price, the party from which such offer
has been received, and the other material terms and conditions of such offer
(including, without limitation, the conditions precedent to closing, the
principal terms of any indemnification and the representations and warranties
to be made by the Selling Principal and the party making such offer) offering such
Shares to the other Principal at such price and on the terms provided in this Section 3(d) and
attaching a copy of such offer. Within 30 days of the receipt of such notice,
the other Principal (the “Purchasing Principal”) shall deliver a notice
to the Selling Principal stating whether the Purchasing Principal accepts the
offer of the Selling Principal as provided in this Section 3(d). If the
Purchasing Principal fails to deliver such notice within such 30-day period,
the Purchasing Principal shall be deemed conclusively to have delivered a
notice stating that the Purchasing Principal does not accept such offer. In the
event that within 30 days from the receipt of the notice from the Selling
Principal, the Purchasing Principal delivers a notice to the Selling Principal
to the effect that such Purchasing Principal accepts the offer of the Selling
Principal, delivery of such notices shall constitute an agreement binding on
the Selling Principal and the Purchasing Principal to sell and purchase all of
the Shares to be sold by the Selling Principal, subject to the approval of any
regulatory authority having jurisdiction, at the cash price and on the terms
stated in the offer of the Selling Principal. Shares purchased by a Purchasing
Principal pursuant to Section 3(d) must be held by such Purchasing
Principal and/or by any Affiliate thereof subject to meeting the conditions of Section 3(b) hereof
and subject to the other terms of this Agreement.

 

12

 

(ii)                                  If
the other Principal declines the offer or fails to accept the offer of the
Selling Principal within the period specified in Section 3(d)(i), the
Selling Principal shall be free until the expiration of the six-month period
referred to in paragraph (iii) below to sell such Shares to the
purchaser at the cash price and on the terms specified in the notice referred
to in Section 3(d)(i), provided that the purchaser shall, contemporaneous
with such sale, have entered into an agreement with MidCon and the other
Principal, in form and substance reasonably satisfactory to MidCon and the
other Principal, whereby such purchaser assumes and is bound by the same
obligations and becomes entitled to the same benefits as the Selling Principal
under the terms of this Agreement.

 

(iii)                               In the event that the
Selling Principal does not complete such a sale within a period of six months
from the date upon which the Selling Principal gave notice to the other
Principal of its receipt of a bona fide offer to purchase all of its Shares
which it was prepared to accept, all the provisions of this Section 3(d) shall
apply to any future sale or offer for sale of the Shares held by the Selling
Principal.

 

(iv)                              Each
transaction of purchase and sale pursuant to the foregoing provisions of this Section 3(d) shall
be completed by payment of the purchase price to the Selling Principal by wire
transfer of immediately available funds against delivery of the certificates
for the Shares duly endorsed in blank, free and clear of all liens, claims or
encumbrances and with requisite transfer taxes, if any, fully paid. Any such
transaction of purchase and sale pursuant to Section 3(d)(i) shall be
closed at such time and place as shall be agreed upon by the parties involved
in the sale or, if no such agreement is reached, during normal business hours
at the principal office of MidCon on the 120th day

 

13

 

following
the date the Purchasing Principal delivers notice accepting the offer of the
Selling Principal or, if such day shall not be a business day, on the first
business day thereafter during normal business hours.

 

(e)                                  Pledge
of Shares and Rights under this Agreement. The provisions of
Sections 3(a), 3(c) and 3(d) shall not apply to any bona fide
pledge or mortgage by any Principal or any Affiliate thereof of the Shares
owned or held by it or its rights under this Agreement if such pledge or
mortgage is required or provided for under the terms of any mortgage, trust
indenture or other agreement or amendment thereto now in effect or hereafter
executed pursuant to which any unrelated third party indebtedness for borrowed
money or securities of such Principal or Affiliate may be issued and
outstanding, and any such pledge or mortgage may be made at any time
without the consent of the other Principal; provided, however,
that any disposition of such Shares upon foreclosure of such pledge or mortgage
shall be governed by the provisions of this Agreement, including the provisions
of Sections 3(c) and 3(d) and that the documents creating any
such pledge or mortgage must so provide.

 

(f)                                    Securities
Act Restrictions. The parties hereto understand that the Shares which are
owned by Knight and the Shares which have been acquired by Myria have not been
and will not be registered under the Securities Act of 1933 pursuant to an
exemption from the registration provisions of such Act. Each of the parties
hereto hereby agrees (on behalf of itself and of its Affiliates) that the
Shares which have been acquired by it and any other Shares hereafter acquired
by it pursuant to an exemption from the registration provisions of such Act
shall not be sold, transferred, pledged or hypothecated unless there is
furnished to MidCon an opinion of counsel satisfactory to MidCon that
registration of such Shares under such Act is not

 

14

 

required. The
provisions of this Section 3(f) shall remain in effect until, in the
opinion of counsel for MidCon, they are no longer required.

 

(g)                                 Legend
on Certificates. As long as this Agreement shall continue in effect, the
following legend shall be written, printed or stamped on all certificates for
Shares:

 

“The transfer of shares represented by this
certificate is restricted by the terms and conditions of an Agreement dated as
of [                     ],
among Knight Inc., Myria and MidCon LLC. A copy of said Agreement is on file at
the office of MidCon LLC.”

 

(h)                                 Extension
of Time. Any period of days for acceptance under Section 3(d)(i) or
exercise of the option under Section 3(j) or Section 3(k) may be
extended an additional 30 days in the event of a Regulatory Problem on the part of
a Principal that desires to purchase the Shares.

 

(i)                                     Limitations.
Shares may only be sold or transferred pursuant to Section 3(d) if
the notice referred to in Section 3(d)(i) from the Selling Principal
of its offer to sell the Shares to the other Principal is given by the Selling
Principal to the other Principal any time after the fifth anniversary of the
date of this Agreement. The limitations of this Section 3(i) shall
not apply to any disposition of Shares upon foreclosure of a bona fide pledge
or mortgage entered into pursuant to and in accordance with Section 3(e) or
a disposition pursuant to and in accordance with Section 3(j).

 

(j)                                     Bankruptcy.

 

(i)                                     If
an Affiliate holding Shares or a Principal (collectively, the “Non-Electing
Principal”) suffers a Bankruptcy, the other Principal (the “Electing
Principal”) shall thereafter have the option to purchase all of the Shares
owned by the

 

15

 

Non-Electing
Principal (the “Non-Electing Principal’s Shares”) for a cash purchase
price equal to the fair market value, as determined in Section 3(j)(ii) below,
of the Non-Electing Principal’s Shares on the last day of the month preceding
the date on which the Bankruptcy shall have occurred. MidCon shall, and is
authorized by the Principals to deliver, a notice to the other Principal that
the Non-Electing Principal has suffered a Bankruptcy, and the determination of
purchaser, time and place of closing and method of payment shall be conducted
as set forth above in Section 3(d).

 

(ii)                                  If
the Electing Principal elects to purchase the Non-Electing Principal’s Shares
at the fair market value of the Non-Electing Principal’s Shares as permitted by
Section 3(j)(i) above, such fair market value shall be an amount
(which shall be conclusive and binding on MidCon and the Principals and their
Affiliates) mutually agreed by investment bankers engaged by the Electing
Principal and the Non-Electing Principal, respectively, and the Electing
Principal and the Non-Electing Principal agree to engage their respective
investment bankers as promptly as practicable for this purpose, and in any case
within 30 days of the date on which the election was made by the Electing
Principal. If one of the Principals has not appointed an investment banker
within the 30 day period, or the two investment bankers have not mutually
agreed on such fair market value within 30 days from the date on which the
second of them was engaged, then the appointed investment banker or the two
investment bankers, as the case may be, will select, no later than 40 days
after the date on which the last of such investment bankers was engaged, a
third investment banker to make such fair market value determination. The fair
market value determination of the third investment banker shall be rendered
within 30 days of such investment banker’s selection and shall be

 

16

 

conclusive
and binding on MidCon and the Principals and their Affiliates. If the two
investment bankers have not mutually agreed on such fair market value and have
not appointed a third investment banker within the 40 day period above, the
Principals will request that the Chief Judge of the United States District
Court for the Southern District of New York appoint a nationally recognized
investment banker with experience in the natural gas pipeline industry that has
not provided any material amount of services to either Principal, MidCon or any
of their respective Affiliates within the past three (3) years to
determine such fair market value as provided above. Should the employment of a
third investment banker or appointment of an independent investment banker by
the Chief Judge of the United States District Court for the Southern District
of New York be necessary, MidCon and the Non-Electing Principal shall each bear
50% of the cost of employing the third or independent investment banker.

 

(k)                                  Limited
Forced Sale. In the event that the Operating Agreement is terminated by
NGPL pursuant to Section 7.2(d) or 7.2(e) of such agreement,
Myria shall have the option to purchase all of the Shares held by Knight for a
cash purchase price equal to the fair market value, as determined in Section 3(j)(ii) above,
of Knight’s Shares on the last day of the month preceding the date on which the
qualifying termination shall be effective. Notice of the exercise of this
option shall be given to Knight within 10 (ten) Business Days of the
effectiveness of a qualifying termination of the Operating Agreement. The
determination of time and place of closing and method of payment shall be
conducted as set forth above in Section 3(d).

 

17

 

4.                                       Disposition
of Myria Securities.

 

(a)                                  Myria
covenants and agrees that its governing documents (including, without
limitation, its certificate of incorporation, bylaws and investor rights
agreement), which are binding on all owners of Myria Securities, shall provide
that, (i) except for the permitted sales to Persons other than Restricted
Persons by Babcock & Brown
Myria Pty Ltd and BBIFNA AIV Two, LP prior to the second anniversary of
the date of this Agreement described on Schedule 4 hereto, no Investor
will directly or indirectly, by operation of law or otherwise (including
without limitation any sale, merger, consolidation, amalgamation or share
exchange of a Controlled Affiliate), sell or transfer or otherwise dispose of
any Myria Securities to any Person prior to the date that is the fifth
anniversary of the date of this Agreement (the “Investor Standstill Period”),
and (ii) following the Investor Standstill Period, any Investor may sell
or transfer or otherwise dispose of any of its Myria Securities to a third
party, other than a third party (x) that is a Restricted Person or (y) that
is, or is a Controlled Affiliate of, a Person named on a list to be delivered
by Knight to Myria at least 6 months prior to the expiration of the Investor
Standstill Period (which list shall consist of no more than 3 Persons and which
may be updated no more often than once every 12 months by Knight in its
sole discretion as long as Knight remains a Principal; provided that any update
to such list shall not be applicable with respect to any bona fide proposed
sale or transfer by any Investor for which Knight has received notice prior to
the date of such update). Myria further covenants and agrees that it will not
permit such provisions to be altered, amended, modified, rescinded or waived
without the consent of Knight as long as Knight remains a Principal and that
Myria will enforce such provisions.

 

(b)                                 It
is understood that the term “sell, transfer or otherwise dispose of” with
respect to the Myria Securities does not include any transfer pursuant to a
sale or lease of all or substantially all the assets of any Investor or any
merger, consolidation or amalgamation of any

 

18

 

Investor, provided
that any transferee or successor (or, if applicable, the ultimate parent of any
such transferee or successor) shall be bound by the terms of Myria’s governing
documents that contain the restrictions set forth in clause (a) above.
Notwithstanding the foregoing, if a significant purpose of the transaction
described in the preceding sentence, or of the structure of such a transaction,
is to effect the disposition of such Person’s Myria Securities or to avoid the
restrictions set forth in this Section 4, then such transfer shall be
treated as a transfer, sale or disposition that is subject to the restrictions
set forth in this Section 4. Further, if the transferee or successor is a
Restricted Person, it may not permit any of its directors, officers,
employees, representatives or agents who have access to competitively sensitive
confidential information about natural gas pipeline operations in North America
to be involved in the management or control of MidCon or any of its
Subsidiaries, or to receive competitively sensitive information of or regarding
MidCon or any of its Subsidiaries, or any other information of or regarding
MidCon or any of its Subsidiaries if the sharing of such other information is
restricted by applicable law or regulation.

 

(c)                                  Nothing
in this Agreement shall restrict the sale or transfer of the Myria Securities (i) among
the Investors, (ii) to any fund or trust in which Babcock & Brown
LP or its Affiliates is a manager or trustee, (iii) to any transferee of
such Myria Securities as permitted pursuant to the terms of this Section 4
and (iv) to the Affiliates of such Investors or of any such transferee;
provided that if the sale or transfer is made to any Person that is (or is an
Affiliate of a Person that is) a Restricted Person, then, as a condition to such
transfer, such purchaser or transferee must first agree in writing with each
Principal and MidCon that it (w) will keep confidential and not disclose
any information it obtains about MidCon or its Controlled Affiliates or their
respective operations as an owner of Shares or Myria Securities or from MidCon,
any

 

19

 

Controlled
Affiliate of MidCon, any Principal or Affiliate of a Principal or Investor or
Affiliate of an Investor and will use such information solely for the purpose
of monitoring its investment in MidCon, (x) acknowledges and agrees to
comply with the FERC Standards of Conduct rules and regulations, (y) will
not reveal or otherwise act as a conduit for the information described in
clause (w) above to any customer of NGPL or any Subsidiary of MidCon or to
any owner or operator of a natural gas pipeline in North America, and (z) will
act only as a passive investor with no management influence over MidCon or its
Controlled Affiliates.

 

(d)                                 The
provisions of this Section 4 shall not apply to any bona fide pledge or
mortgage by any Investor or any Affiliate thereof of the Myria Securities owned
or held by it or its rights under this Agreement if such pledge or mortgage is
required or provided for under the terms of any mortgage, trust indenture or
other agreement or amendment thereto now in effect or hereafter executed
pursuant to which any unrelated third party indebtedness for borrowed money or
securities of such Investor or Affiliate may be issued and outstanding,
and any such pledge or mortgage may be made at any time without the
consent of the Principal; provided, however,
that any disposition of such Myria Securities upon foreclosure of such pledge
or mortgage shall be governed by the provisions of this Agreement and, as
provided in Section 4(a), by the provisions of Myria’s governing documents
(except in each case the limitations of the Investor Standstill Period shall
not apply), and that the documents creating any such pledge or mortgage must so
provide.

 

(e)                                  Any
attempted sale or transfer of Myria Securities other than in accordance with
this Agreement and the governing document provisions described in Section 4(a) will
be void and will not be recognized by Myria, and the governing documents of Myria
will so provide.

 

20

 

5.                                       Competitive
Activities and Expansion or Extension Opportunities.

 

(a)                                  Competitive
Activities. No Indemnitee (as defined in the MidCon LLC Agreement),
Shareholder (as defined in the MidCon LLC Agreement), Affiliate or Investor
thereof shall be expressly or implicitly restricted or proscribed pursuant to
this Agreement, by Law or otherwise, from engaging in other activities for
profit, whether in the businesses engaged in by MidCon, any Shareholder or any
of their respective Subsidiaries or joint ventures or anticipated to be engaged
in by MidCon, any Shareholder or any of their respective Subsidiaries or joint
ventures. Without limitation of and subject to the foregoing, (a) nothing
in this Agreement shall be construed to require any director to manage MidCon
or any of its Subsidiaries or joint ventures as his or her exclusive function, (b) nothing
in this Agreement shall be construed to require any officer to serve as an
officer of MidCon or any of its Subsidiaries or joint ventures as his or her
exclusive function, and (c) each Indemnitee, Shareholder, Investor or
Affiliate thereof shall have the right to engage in businesses of every type
and description and to engage in and possess an interest in other business
ventures of any and every type or description, independently or with others,
including, without limitation, business interests and activities in direct
competition with MidCon, any Shareholder or any of their respective Subsidiaries
or joint ventures, and none of the same shall be deemed wrongful or improper or
shall breach any duty, express or implied, to MidCon, any Shareholder or any of
their respective Subsidiaries or joint ventures. By way of example and not
limitation, the Shareholders acknowledge and agree that Knight, including its
officers and directors, who may also be officers or directors of MidCon or
its Subsidiaries, whether directly or through its Subsidiaries and/or joint
ventures, plans to and will actively pursue business opportunities that could
be considered an extension of, or in active competition with, the business of
MidCon or any of its Subsidiaries or joint ventures, and

 

21

 

nothing in this
Agreement precludes Knight, including its officers and directors, who may also
be officers or directors of MidCon or its Subsidiaries, its Subsidiaries and/or
joint ventures from pursuing any business activity such entity chooses to
pursue based on its sole judgment. Neither MidCon, the Shareholders nor any
other Person shall have any rights by virtue of this Agreement or the
relationship created hereby, by Law or otherwise, in any business ventures of
any Indemnitee or Shareholder or Affiliate thereof or to the income or proceeds
derived therefrom, and such Indemnitees, Shareholders or Affiliates thereof
shall have no obligation to offer any interest in any such business ventures to
MidCon, any Shareholder, any Investor or any of their respective Subsidiaries
or joint ventures or any other Person.

 

(b)                                 Expansion
or Extension Opportunities. Notwithstanding the foregoing, no Shareholder
will acquire or construct an Expansion or Extension Opportunity unless such
opportunity has first been offered to MidCon and the MidCon Board of Directors
has not approved such opportunity as follows:

 

(i)                                     the
Shareholder who wishes to pursue the opportunity shall provide written notice
(an “Opportunity Notice”) to MidCon, the chairman of the Board of Directors of
MidCon, and the other Shareholder, which shall describe the opportunity in
detail and include information regarding the projected investment and
development costs for and timing of the opportunity and any pro forma
information on the operations of the project involved in the opportunity that
is available to such Shareholder;

 

(ii)                                  within
30 days after the receipt of the Opportunity Notice, MidCon may decide to
pursue such opportunity by providing written notice to the sending Shareholder,
in which case MidCon or its Subsidiaries must use commercially reasonable
efforts to promptly and diligently pursue such opportunity; and

 

22

 

(iii)                               if MidCon does not
provide notice of its decision to pursue such opportunity within the 30 day
period set forth above, or if MidCon or its Subsidiaries do not, or cease to,
use commercially reasonable efforts to promptly and diligently pursue such
opportunity, the sending Shareholder may pursue the opportunity without
breaching this Agreement or any duty, express or implied, to MidCon, any
Shareholder or any of its Affiliates or any Investor hereunder.

 

For the avoidance of doubt, no Shareholder may acquire or
construct an Expansion or Extension Opportunity through a Subsidiary, except in
accordance with this Section 5(b). Notwithstanding the foregoing, this Section 5(b) is
not intended to and does not bind or restrict in any way Kinder Morgan G.P., Inc.,
Kinder Morgan Management, LLC, Kinder Morgan Energy Partners, L.P. and any of
their respective Subsidiaries or joint ventures or other entities in which they
own an interest. Knight agrees that it will not own an interest in such joint
ventures or other entities directly, or indirectly except through Kinder Morgan
G.P., Inc., Kinder Morgan Management, LLC, Kinder Morgan Energy Partners,
L.P. or any of their respective Subsidiaries. The terms of this Section 5(b) shall
remain applicable to Knight for a period of two years following the date, if
any, on which Knight consummates the sale, transfer or other disposition of, or
otherwise ceases to own, all of its Shares.

 

6.                                       Performance
of Agreements. Each of the Principals hereby agrees, on behalf of itself
and any Affiliate or Investor which owns and holds Shares of MidCon, that it or
such Affiliate or Investor will at all times vote as a shareholder of MidCon,
and use all reasonable efforts to cause those individuals whom it or such
Affiliate or Investor has elected to the Board of Directors of MidCon (or any
Subsidiary of MidCon) to vote as directors of MidCon (or such Subsidiary), in
such a manner as to ensure that the terms and intentions of this Agreement and

 

23

 

the MidCon LLC
Agreement (and such Subsidiary’s organizational documents) are carried out and
observed. The parties hereby agree and acknowledge that no Investor owes any
fiduciary duties to Knight or MidCon and that neither Knight, MidCon nor any of
their respective Subsidiaries or Affiliates owes any fiduciary duty to any
Investor.

 

7.                                       Operating
Matters.

 

(a)                                  MidCon
shall establish and maintain its principal business and operating office at
500 Dallas Street, Suite 1000, Houston, Texas 77002, until such time
as such principal office may be changed by the Operator under the
Operating Agreement, or if Knight is no longer serving as Operator under the
Operating Agreement, by the Board of Directors of MidCon.

 

(b)                                 The
Operating Agreement shall provide that promptly following request by any
Principal or any Investor to the Operator, for purposes of determining whether
a proposed transfer would be to a customer, the Operator shall provide such
Principal or Investor with a copy of the then-current list of customers of NGPL
and any other Subsidiary of MidCon that owns or operates a natural gas pipeline
in North America. Such Principal or Investor is entitled to rely on the
contents of such customer list (for a period of 6 months) for purposes of
compliance with the terms of Sections 3 and 4 hereto relating to transfers to
or ownership by customers and shall have no liability under this Agreement for
any breach of such terms of Sections 3 and 4 hereto resulting from such
reliance. Such Principal or Investor will keep such customer list confidential
and shall only use it for the purposes provided in this Section 7(b).

 

8.                                       Term
of Agreement. This Agreement shall continue in effect for an initial term
of 15 years from the date of this Agreement (unless prior to such date one
Principal shall have purchased all of the Shares of the other Principal and its
Affiliates or Investors pursuant to the other provisions hereof) and thereafter
for so long as the Shares of MidCon shall be held by at

 

24

 

least two
Principals or Affiliates or Investors thereof. In the event that a Principal
shall sell all of its Shares and those of its Affiliates and Investors pursuant
to Section 3, such selling Principal shall cease to be a Principal within
the meaning of this Agreement and shall no longer be bound by the provisions of
this Agreement, except as expressly provided in Section 5(b).

 

9.                                       Notice.
Any notice, request, instruction, correspondence or other document to be given
hereunder by any party to another (herein collectively called “Notice”)
shall be in writing and delivered in person or by courier service requiring
acknowledgement of receipt or mailed by certified mail, postage prepaid and
return receipt requested, or by telecopier or by e-mail, as follows:

 

	
   

  	
  To Knight:

  	
   

  	
  Knight Inc.

  
	
   

  	
   

  	
   

  	
  500 Dallas
  Street, Suite 1000

  
	
   

  	
   

  	
   

  	
  Houston,
  Texas 77002

  
	
   

  	
   

  	
   

  	
  Attention:
  Joseph Listengart

  
	
   

  	
   

  	
   

  	
  Telecopier:
  713-495-2737

  
	
   

  	
   

  	
   

  	
  E-mail: joe_listengart@kindermorgan.com

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  with a copy
  (that shall not constitute Notice) to:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  Bracewell &
  Giuliani LLP

  
	
   

  	
   

  	
   

  	
  711
  Louisiana Street, Suite 2300

  
	
   

  	
   

  	
   

  	
  Houston,
  Texas 77002-2781

  
	
   

  	
   

  	
   

  	
  Attention:
  Gary W. Orloff

  
	
   

  	
   

  	
   

  	
  Telecopier:
  713-221-2166

  
	
   

  	
   

  	
   

  	
  E-mail:
  gary.orloff@bgllp.com

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  To Myria:

  	
   

  	
  Myria Acquisition Inc.

  
	
   

  	
   

  	
   

  	
  c/o Babcock & Brown LP

  
	
   

  	
   

  	
   

  	
  2 Harrison Street

  
	
   

  	
   

  	
   

  	
  San Francisco, CA 94105

  
	
   

  	
   

  	
   

  	
  Attention:  Office of the General Counsel

  
	
   

  	
   

  	
   

  	
  Telecopier: 
  415-267-1500

  
	
   

  	
   

  	
   

  	
  E-mail:
                                         

  

 

25

 

	
   

  	
  with a copy
  (that shall not constitute Notice) to:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  Dewey &
  LeBoeuf LLP

  
	
   

  	
   

  	
   

  	
  125 West 55th
  Street

  
	
   

  	
   

  	
   

  	
  New York,
  New York 10019

  
	
   

  	
   

  	
   

  	
  Attention:
  Sheri E. Bloomberg

  
	
   

  	
   

  	
   

  	
  Telecopier:
  212-424-8500

  
	
   

  	
   

  	
   

  	
  E-mail: sbloomberg@dl.com

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  and to:

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  Babcock &
  Brown LP

  
	
   

  	
   

  	
   

  	
  885 Second
  Avenue

  
	
   

  	
   

  	
   

  	
  New York, NY
  10017

  
	
   

  	
   

  	
   

  	
  Attention: 
  Dennis Mahoney

  
	
   

  	
   

  	
   

  	
  Telecopier: 
  212-935-8949

  
	
   

  	
   

  	
   

  	
  E-mail:
  dennis.mahoney@babcockbrown.com

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  To MidCon:

  	
   

  	
  MidCon LLC

  
	
   

  	
   

  	
   

  	
  500 Dallas
  Street, Suite 1000

  
	
   

  	
   

  	
   

  	
  Houston,
  Texas 77002

  
	
   

  	
   

  	
   

  	
  Attention:
  Joseph Listengart

  
	
   

  	
   

  	
   

  	
  Telecopier:
  713-495-2737

  
	
   

  	
   

  	
   

  	
  E-mail: joe_listengart@kindermorgan.com

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  with a copy
  (that shall not constitute Notice) to:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  Bracewell &
  Giuliani LLP

  
	
   

  	
   

  	
   

  	
  711
  Louisiana Street, Suite 2300

  
	
   

  	
   

  	
   

  	
  Houston,
  Texas 77002-2781

  
	
   

  	
   

  	
   

  	
  Attention:
  Gary W. Orloff

  
	
   

  	
   

  	
   

  	
  Telecopier:
  713-221-2166

  
	
   

  	
   

  	
   

  	
  E-mail:
  gary.orloff@bgllp.com

  

 

Notice given
by personal delivery or courier shall be effective upon actual receipt. Notice
given by mail shall be effective upon actual receipt or, if not actually
received, the fifth business day following deposit with the U.S. Post Office. Notice
given by telecopier shall be confirmed by appropriate answerback, and Notice
given by telecopier or by e-mail shall be effective upon actual receipt if
received during the recipient’s normal business hours, or at the beginning of
the recipient’s next business day after receipt if not received during the
recipient’s normal business

 

26

 

hours. Any
party may change any address to which Notice is to be given to it by
giving Notice as provided above of such change of address.

 

10.                                 Arbitration.
Any dispute, controversy or claim between the Principals, their Affiliates and
Investors, MidCon and any other party hereto arising out of this Agreement
shall be settled pursuant to the provisions in Article 9 of the Operating
Agreement.

 

11.                                 Specific Performance. The parties hereto agree that irreparable
damage would occur if any provision of this Agreement were not performed in
accordance with the terms hereof and, accordingly, that the parties shall be
entitled to an injunction or injunctions to prevent breaches of this Agreement
or to enforce specifically the performance of the terms and provisions hereof,
in addition to any other remedy to which they are entitled at law or in equity.

 

12.                                 Severability.
If any one or more of the provisions contained in this Agreement or in any
other document delivered pursuant hereto shall, for any reason, be held to be
invalid, illegal or unenforceable in any respect, such invalidity, illegality
or unenforceability shall not affect any other provisions of this Agreement or
any other such document. If any provision of this Agreement is for any reason,
held to be invalid, illegal or unenforceable, but would be valid, legal and
enforceable if minor changes were made, there shall be deemed to be made such
minor changes, and only such minor changes, as are necessary to make it valid,
legal and enforceable.

 

13.                                 Governing
Law. The provisions of this Agreement and the documents delivered pursuant
hereto shall be governed by and construed and enforced in accordance with the
laws of the State of Delaware (excluding any conflicts-of-law rule or
principle that might refer same to the laws of another jurisdiction), except to
the extent that same are mandatorily subject to the laws of another
jurisdiction pursuant to the laws of such other jurisdiction.

 

27

 

14.                                 Headings
and Construction. The headings and captions herein are inserted for
convenience of reference only and are not intended to govern, limit or aid in
the construction of any term or provision hereof. It is the intention of the
parties that every covenant, term and provision of this Agreement shall be
construed simply according to its fair meaning and not strictly for or against
any party (notwithstanding any rule of law requiring an agreement to be
strictly construed against the drafting party), it being understood that the
parties to this Agreement are sophisticated and have had adequate opportunity
and means to retain counsel to represent their interests and to otherwise
negotiate the provisions of this Agreement.

 

15.                                 Successors
Bound. Except as set forth herein, neither this Agreement nor any of the
rights, benefits or obligations hereunder may be assigned, by operation of
law or otherwise, by any party without the consent of the other parties, and
any attempted assignment without such consent shall be void. Subject to the
foregoing, this Agreement shall be binding upon and inure to the benefit of the
parties and their respective permitted successors and assigns.

 

16.                                 No
Amendment or Waiver. No amendment, supplement, modification or waiver of
this Agreement shall be binding unless executed in writing by the party to be
bound thereby. No waiver of any of the provisions of this Agreement or a breach
hereof shall be deemed or shall constitute a waiver of any other provision
hereof (regardless of whether similar), nor shall any such waiver constitute a
continuing waiver unless otherwise expressly provided.

 

17.                                 Legal
Counsel Relationships. MidCon and the Principals acknowledge and agree that
Bracewell & Giuliani LLP has represented Knight and its subsidiaries
in connection with the Purchase Agreement and this Agreement and other
transactions and agreements related hereto (the “Transactions”). Except
for Bracewell & Giuliani LLP’s representation of Knight and its
subsidiaries with respect to the Transactions, no attorney-client relationship
exists between

 

28

 

Bracewell &
Giuliani LLP on the one hand and the other Principal and/or its Affiliates or
Investors, on the other hand.

 

18.                                 Multiple
Counterparts. This Agreement may be executed in multiple counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument. Facsimile copies of signatures shall
constitute original signatures for all purposes of this Agreement and any
enforcement hereof.

 

29

 

IN WITNESS WHEREOF, Knight, Myria and MidCon have caused this Agreement
to be signed by their respective officers thereunto duly authorized all as of
the date first above written.

 

	
   

  	
  KNIGHT INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  MYRIA ACQUISITION INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  MIDCON LLC

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  

 

 

EXHIBIT E

 

MidCon Debt Term Sheet

 

	
  Issuer

  	
   

  	
  MidCon or a newly formed wholly owned subsidiary of MidCon.

  
	
   

  	
   

  	
   

  
	
  Securities
  Offered

  	
   

  	
  $                 aggregate
  principal amount of notes, consisting of:  

   

      •   $               principal
  amount of          % senior
  notes due 20[    ].  

   

      •   $               principal
  amount of          % senior
  notes due 20[    ].  

   

      •   $               principal
  amount of          % senior
  notes due 20[    ].

  
	
   

  	
   

  	
   

  
	
  Maturity Date

  	
   

  	
  20[    ] notes -               ,
  20[    ].  

  20[    ] notes -               ,
  20[    ].  

  20[    ] notes -               ,
  20[    ].

  
	
   

  	
   

  	
   

  
	
  Interest Payment Dates

  	
   

  	
                and
                
  of each year, beginning on
                ,
  2008.

  
	
   

  	
   

  	
   

  
	
  Optional Redemption

  	
   

  	
  Upon 30 days’ notice to noteholders, we may redeem the notes of each
  series for cash in whole, at any time, or in part, from time to time, prior
  to maturity, at a redemption price that includes accrued and unpaid interest
  and a make-whole premium.

  
	
   

  	
   

  	
   

  
	
  Special Mandatory Redemption

  	
   

  	
  If, for any reason, the purchase and sale of the MidCon shares has
  not closed by [          ],
  2008, we must redeem all of the outstanding notes at a price of 100% of the
  aggregate principal amount outstanding, plus accrued and unpaid interest.

  
	
   

  	
   

  	
   

  
	
  Ranking

  	
   

  	
  The notes will be our unsecured senior obligations and will rank
  equally with any other unsecured senior indebtedness that we may incur and
  will be effectively junior to any of our secured debt and any secured debt of
  our subsidiaries to the extent of the value of the assets securing the debt,
  and structurally subordinated to the debt of our subsidiaries.

  
	
   

  	
   

  	
   

  
	
  Use of Proceeds

  	
   

  	
  We estimate that we will receive net proceeds of approximately $         billion
  from this offering. If the closing of the purchase and sale of the MidCon
  shares occurs, we will use the net proceeds from the sale of the notes to
  retire intercompany indebtedness owed to Knight Inc.

  
	
   

  	
   

  	
   

  
	
  Certain Covenants

  	
   

  	
  We will issue the notes under a fiscal agency agreement with [U.S.
  Bank National Association], as fiscal agent. The fiscal agency agreement
  includes certain covenants,

   

  

 

 

	
   

  	
   

  	
   including limitations on:
  

   

  •   liens by
  MidCon and its Significant Subsidiaries;  

   

  •   sale-leasebacks
  by MidCon and its Significant Subsidiaries;  

   

  •   our
  incurrence of additional indebtedness (under an incurrence test based on
  capital structure at the time of the incurrence);  

   

  •   the
  incurrence of indebtedness by NGPL; and  

   

  •   our
  ability to merge or consolidate with another entity or to sell our assets;
  

   

  •   permitted
  lines of business of MidCon and its Significant Subsidiaries;  

   

  •   changes of
  control of MidCon that result in a downgrade of MidCon’s credit ratings
  (provided that the acquisition, transfer or other disposition of MidCon
  shares shall not trigger any change of control provisions unless it involves
  50% or more of the outstanding MidCon voting equity); and  

   

  •   delivery
  of quarterly and annual financial information.  

   

  These covenants are subject to a number of important exceptions,
  limitations and qualifications.

  
	
   

  	
   

  	
   

  
	
  Transfer Restrictions

  	
   

  	
  The offering and sale of the notes will not be registered under the
  Securities Act or under any state securities laws, and the notes will be
  offered and sold only to persons that are “qualified institutional buyers”
  within the meaning of Rule 144A under the Securities Act, in reliance
  upon the exemption from registration provided by Rule 144A, and to
  non-U.S. persons in compliance with Regulation S.

  
	
   

  	
   

  	
   

  
	
  Fiscal Agent

  	
   

  	
  [U.S. Bank National Association].

  
	
   

  	
   

  	
   

  
	
  No Public Trading Market

  	
   

  	
  We do not intend to list the notes on any securities exchange or to
  arrange for quotation on any automated dealer quotation system.

  
	
   

  	
   

  	
   

  
	
  Other

  	
   

  	
  There will be no scheduled amortization, no step-up pricing and no
  restrictions on dividend payments.

  

 

2

 

EXHIBIT F

 

TAX ALLOCATION
AGREEMENT

 

Tax Allocation Agreement (the “Agreement”) dated as of the [  ]th day of [  , 2007], among

 

[AcqCo], MidCon LLC, and Natural Gas Pipeline Company of America

 

WITNESSETH

 

WHEREAS, [AcqCo]
(“AcqCo”) is a Delaware corporation;

 

WHEREAS, AcqCo
is the parent of an affiliated group of corporations within the meaning of Section 1504(a) of
the Internal Revenue Code of 1986, as amended (the “Code”), and each of MidCon
LLC, a Delaware limited liability company (“MidCon”), and Natural Gas Pipeline
Company of America, a Delaware corporation and a wholly owned direct subsidiary
of MidCon (“NGPL”) (each a “Subsidiary Member” and each including AcqCo a “Member”),
is an includible corporation of said affiliated group (the “Group”) that will
be included in the Group’s consolidated federal income tax returns for the
taxable year ended [December 31, 2007,] and for all future taxable years
for which they are eligible to be so included (the “Consolidated Period”);

 

and

 

WHEREAS,
pursuant to this Agreement the Members wish to allocate the consolidated U.S.
federal income tax liability of the Group among the members of the Group in a
fair and equitable manner;

 

NOW THEREFORE,
in consideration of the premises and the mutual covenants herein, the parties
hereby agree as follows:

 

1.                                       Consolidated
Return Election and Preparation

 

AcqCo and the
Subsidiary Members will file consolidated federal income tax returns so long as
they are eligible to file such returns under the Code or until such time as they
elect not to file such returns in compliance with the Treasury Regulations
pursuant to Section 1504 of the Code. The Subsidiary Members agree to file
such consents, elections and other documents and take such other actions as may be
necessary or appropriate to carry out the purposes of this paragraph 1 as
directed by AcqCo. For each taxable year for which a consolidated federal
income tax return is filed by the Group, AcqCo agrees (a) to prepare or
cause to be prepared and to file such return and all consents, elections and
other appropriate documents as may be necessary or appropriate on behalf
of the Group and, (b) as common parent of the Group, to make federal
income tax payments on behalf of the Group, in a timely manner.

 

2.                                       Tax
Liability Calculation; Payment Responsibility

 

(a)                                  With
respect to federal income taxes, (i) MidCon, NGPL, and any other direct or
indirect subsidiaries of MidCon that are includible corporations within the
meaning of Sections 1504(a) and (b) of the Code determined as if
MidCon were a common parent corporation (each a “MidCon Entity,” and collectively
the “MidCon Group”) shall compute its consolidated return tax liability for
each taxable year; and (ii) AcqCo and any other direct or

 

 

indirect subsidiaries (including
the Subsidiary Members) of AcqCo that are includible corporations within the
meaning of Sections 1504(a) and (b) of the Code determined as if
AcqCo were a common parent corporation (each an “AcqCo Entity,” and
collectively the “AcqCo Group”) shall do the same. For purposes of this
paragraph 2(a), the MidCon Group’s consolidated federal income tax liability and
the AcqCo Group’s consolidated federal income tax liability for any taxable
year shall be equal to the federal income tax liability (including any
alternative minimum tax liability) each such group would have incurred had it
never been included in a consolidated federal income tax return with (1) in
the case of the MidCon Group, AcqCo as the common parent and (2) with
respect to the AcqCo Group, the MidCon Group, and, in each case, had it filed
separately a consolidated tax return for the taxable year, or portion thereof. In
computing the consolidated federal income tax liability of the MidCon Group and
AcqCo Group pursuant to this paragraph 2(a), the Code shall apply for purposes
of making such computation and the MidCon Group and AcqCo Group shall be
entitled to those deductions, credits, and similar items to which they would
have been entitled if they were never a member of the Group, provided that, (A) the
method of computing the consolidated federal income tax liability of the MidCon
Group and the AcqCo group shall be determined in a manner consistent with the
methods of accounting and with any elections made in computing the consolidated
federal income tax liability of the Group, (B) the MidCon Group and the AcqCo
Group shall not take into account any losses or credits to the extent the use
of such losses or credits by the Group is subject to limitations imposed by
Sections 267, 382, 383 or 1502 and the Treasury Regulations promulgated
thereunder, and (C) such liability shall not take into account any
deductions, losses, income or gain attributable to deferred intercompany
transactions until such income, gain, deduction or loss is actually recognized
by the Group. For the avoidance of doubt, the federal income tax liability of
the MidCon Group as calculated pursuant to this paragraph shall not take into
account any losses, credits or deductions (including any carry forward or carry
back of such amounts) of AcqCo or any AcqCo Entity.

 

(b)                                 Each
MidCon Entity and AcqCo Entity shall compute its own federal income tax
liability on a separate company basis in a manner consistent with the
provisions of paragraph 2(a) above; provided, that each MidCon Entity
shall compute its tax liability on the basis that it was not a part of the
MidCon Group and each AcqCo Entity shall compute its tax liability on the basis
that it was not a part of the AcqCo Group.

 

(c)                                  MidCon
shall pay to AcqCo an amount equal to the consolidated federal income tax
liability of the MidCon Group as computed under paragraph 2(a). Each
MidCon Entity (other than MidCon) shall pay to MidCon and each AcqCo Entity (other
than AcqCo and the MidCon Entities) shall pay to AcqCo an amount equal to such
entity’s separate return tax liability as computed under paragraph 2(b). MidCon
shall not be liable for any penalties or interest imposed on the Group to the
extent such penalty and interest relates solely to the tax liability of the
AcqCo Group as determined in accordance with Section 2(a) and then,
only to the extent such interest or penalties is not due to or resulting from
any action or inaction of a MidCon Entity.

 

(d)                                 If
for any taxable period the MidCon Group has a net item of credit or loss that
either (i) reduces the consolidated federal income tax liability of the
Group below the amount that would have been payable with respect to that
taxable period had the MidCon Group not incurred such items of credit or loss,
or (ii) results in a carry back of such net item of credit

 

2

 

or loss that reduces the prior consolidated
federal income tax liability of the Group, then AcqCo shall pay the amount of
such reduction to MidCon. To the extent that such items of credit or loss do
not reduce the consolidated federal income tax liability of the Group, but
result in a consolidated federal income tax credit carry forward or a net
operating loss carry forward, no payment pursuant to this provision will be
made until such loss or credit actually reduces the tax liability of the Group.
Any items of credit or loss which are not used to reduce the consolidated
federal income tax liability of the Group and for which the MidCon Group has
not been paid shall be retained by the MidCon Group for possible future use in
computing its separate return tax liability. Any items of credit or loss for
which the MidCon Group has been paid shall not be used by such party or any
MidCon Entity in computing its separate return tax liability for any taxable
period under paragraph 2(b).

 

3.                                       Timing
and Method of Payment

 

(a)                                  Payments
under paragraph 2(c) by MidCon to AcqCo shall in each case be made on a
quarterly basis (within 30 days prior to the date on which installments of
estimated tax are required to be paid by the Group) and such payments shall be
based on estimates of the MidCon Group’s consolidated federal income tax
liability for the full taxable year or other period prepared by the MidCon
Group and approved by AcqCo. However, if the sum of all payments for any year made
by MidCon exceeds the MidCon Group’s consolidated federal income tax liability
for such year, AcqCo shall, as soon as practicable, but in all events within 30
days after the filing by AcqCo of the consolidated federal income tax return
for such year (taking into account any available extensions), pay such excess amount
to MidCon. The principles of this paragraph 3(a) shall apply to payments
required to be made by the MidCon Entities to MidCon and AcqCo Entities to AcqCo
pursuant to paragraph 2(c) and such payments shall be made in a manner
consistent with the provisions of this paragraph.

 

(b)                                 Payments
under paragraph 2(d)(i) shall be made within 30 days after the filing by AcqCo
of the consolidated federal income tax return as to which the consolidated
federal income tax payable is reduced by such credit or loss. Payments under
paragraph 2(d)(ii) shall, to the extent attributable to a tax refund
from the Internal Revenue Service (the “Service”) based upon a timely filed
refund claim with respect to a carry back of loss or credit of the MidCon Group,
be paid by AcqCo to MidCon within 30 days of a receipt of such refund by AcqCo.

 

4.                                       Subsequent
Adjustment

 

If any item of
income, gain, loss, deduction or credit of a Member or the Group is changed or
adjusted for any taxable year, then the amount of the payment made under this
Agreement shall be adjusted, in accordance with the principles of this
Agreement, to conform to the restated item of income, gain, loss,
deduction or credit. In addition, interest and penalties shall be paid, either
by or to a Member as appropriate, after taking into account interest and
penalties, if any, paid by or to the Service with respect to such change or
adjustment. All payments under this paragraph 4 shall be made within 30
days after (i) the final resolution of the matter to which the relevant
adjustment or change relates either with the Service or in court, as applicable,
or (ii) if the change or adjustment did not arise as a result of any claim
by the Service, the filing of an amended consolidated federal income tax return
of the Group reflecting the

 

3

 

relevant
adjustment or change, even if such event occurs after MidCon ceases to be a
Member of the Group.

 

5.                                       Indemnification

 

(a)                                  AcqCo
shall be liable for and indemnify the MidCon Group from and against all
liability for taxes of any Member or former member of the AcqCo Group or any
person that is or was affiliated with any member of a consolidated group
including an AcqCo Entity.

 

(b)                                 The
MidCon Group shall be liable for and indemnify AcqCo and the AcqCo Group from
and against all liability for taxes of any Member or former member of the
MidCon Group or any person that is or was affiliated with any member of a
consolidated group including a MidCon Entity.

 

6.                                       Arbitration

 

The parties
hereto agree to submit any dispute involving determinations under this
Agreement to an independent nationally recognized public accounting firm (the “Accountants”)
which determination shall be final. The cost of engaging the Accountants for
any such determination shall be borne by the party or parties whose position does
not prevail in the determination or, if there is no party or parties that
prevail in all respects, the cost shall be borne by the parties to the dispute in
an equitable manner determined by the Accountants.

 

7.                                       Termination

 

(a)                                  Except
as otherwise provided in this Agreement, the Agreement shall terminate between AcqCo
and a Member if:

 

(1)          AcqCo and such Member agree in writing to such termination; or

 

(2)          A Member fails to be included in a consolidated federal income tax
return filed by AcqCo for any taxable year as a result of a determination by
AcqCo, in its reasonable discretion, that such Member is not permitted to file
a consolidated federal income tax
return with AcqCo.

 

(b)                                 In
the event that a Member ceases to be included within the Group (a “Deconsolidation”),
the rights and obligations of such Member and AcqCo shall survive with respect
to taxable years including, or ending on or before, the date of such
Deconsolidation. In addition, such deconsolidating Member may not carry
back any tax attribute arising after such Deconsolidation to any tax year
during which such Member was part of the Group unless required by law,
provided however, that if such carry back occurs, such Member shall be
compensated for the Group’s use of such tax attribute arising after the
Deconsolidation consistent with the provisions of paragraph 2(d).

 

(c)                                  In
the event of a Deconsolidation resulting from a determination by the IRS or a
court that such Member was not properly included in the Group (a “Deconsolidation
Determination”), the net payments received by or from such Member under this
Agreement shall

 

4

 

be returned to (i) such
Member (to extent such Member made net payments under this Agreement to AcqCo)
or (ii) AcqCo (to the extent AcqCo made net payments under this Agreement to
such Member), in either case with respect to such periods affected by the
Deconsolidation Determination.

 

(d)                                 The
termination of this Agreement as to any Member in accordance with the
provisions of paragraph 7 hereof shall not affect this Agreement as regards
AcqCo and any other Member.

 

(e)                                  The
indemnification provisions of paragraph 5 shall survive the termination of this
Agreement.

 

(f)                                    Notwithstanding
the termination of this Agreement pursuant to the provisions of this
paragraph 7, all material, including, but not limited to, returns,
supporting schedules, work papers, correspondence and other documents, relating
to the consolidated federal income tax return shall be made available by the
party in possession of such material to each other party to this Agreement, at
such other party’s expense, during regular business hours.

 

8.                                       Effective
Date

 

This Agreement
shall be effective for all taxable years ending on or after [December 31,
2007].

 

9.                                       Miscellaneous
Provisions

 

(a)                                  This
Agreement contains the entire understanding of the parties hereto with respect
to the subject matter contained herein. No alteration, amendment or
nullification of any of the terms of this Agreement shall be valid unless made
by an instrument signed in writing by an authorized officer of each party
hereto.

 

(b)                                 This
Agreement has been made in and shall be construed and enforced in accordance
with the laws of the State of New York from time to time obtaining.

 

(c)                                  This
Agreement shall be binding upon and inure to the benefit of each party hereto
and their respective successors and assigns.

 

(d)                                 In
the event (i) any entity is added to or (ii) any entity (including
any Member) is deleted from the Agreement hereafter, each party hereto must agree
to any such addition or deletion upon the execution of an amendment to the
Agreement.

 

(e)                                  The
principles of this agreement shall apply to any consolidated, combined, unitary
or similar tax return that may be filed with respect to any state or local
jurisdiction that includes AcqCo and at least one other Member.

 

(f)                                    Each
Subsidiary Member shall pay to AcqCo its reasonable share of any costs incurred
by AcqCo associated with (i) the preparation and filing of tax returns for
the Group and (ii) any examination, audit, contest, litigation or similar
action with respect to any tax return filed pursuant to this Agreement.

 

5

 

(g)                                 This
Agreement may be executed simultaneously in two or more counterparts each
of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.

 

Signatures appear on the following page

 

6

 

IN WITNESS
WHEREOF, the parties hereto have caused this Agreement to be duly executed as
of the day and year first above written.

 

 

	
   

  	
  ACQCO

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Title:

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  MIDCON LLC

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Title:

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  NATURAL GAS PIPELINE COMPANY OF AMERICA

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Title:

  	
   

  
								

 

7

 

EXHIBIT G

 

COMMONWEALTH
BANK OF AUSTRALIA, NEW YORK BRANCH

ACN 123 123
124

IRREVOCABLE
STANDBY LETTER OF CREDIT NUMBER CBANY LOC [•]

DATED DECEMBER
[•],
2007

 

COMMONWEALTH
BANK OF AUSTRALIA, NEW YORK BRANCH (the “Bank”) hereby issues its Irrevocable
Standby Letter of Credit on behalf of [Applicant] (the “Applicant”) in favor of
Knight Inc., a Kansas corporation (the “Beneficiary”), with an address at 500
Dallas Street, Suite 1000, Houston, Texas 77002, in an amount equal to
USD150,000,000 (“Stated Amount”).

 

	
  Expiry Date

  	
   

  	
  March [•], 2008; provided, however that this Letter of
  Credit may be cancelled prior to the Expiry Date if (i) the Bank shall
  have received a written statement of Applicant and Beneficiary certifying
  that a Closing shall have occurred or (ii) the Applicant shall have
  presented this Letter of Credit to Bank for cancellation.

  
	
   

  	
   

  	
   

  
	
  Place of Expiry

  	
   

  	
  New York, New York, USA

  
	
   

  	
   

  	
   

  
	
  Available only at

  	
   

  	
  Commonwealth Bank of Australia, New York
  Branch

  599 Lexington Avenue

  17th Floor

  New York, New York 10022

  
	
   

  	
   

  	
   

  
	
  By Drafts on

  	
   

  	
  Commonwealth Bank of Australia, New York
  Branch

  599 Lexington Avenue

  17th Floor

  New York, New York 10022

  
	
   

  	
   

  	
   

  
	
  Payable at

  	
   

  	
  Second or third Business Day after presentation

  
	
   

  	
   

  	
   

  
	
  Enfaced

  	
   

  	
  Drawn under Commonwealth Bank of Australia,
  New York Branch Irrevocable Standby Letter of Credit Number CBANY LOC [•], dated
  December [•],
  2007

  

 

Orders for
payment under this Letter of Credit must require payment to be made to an
account with a financial institution in the name of the Beneficiary or as
directed by the Beneficiary or to the order of the Beneficiary, must be
delivered to the Bank at the place specified above from

 

 

time-to-time
on or before 5:00 p.m. (New York City time) on the Expiry Date and be
accompanied by a written declaration stating that:

 

a)                                      the
declarants are the Chairman of the Beneficiary, and the General Counsel of the
Beneficiary making the statement on behalf of the Beneficiary;

 

b)                                     the
declarants have the authority to make the declaration on behalf of the
Beneficiary;

 

c)                                      the
declaration is given under Letter of Credit Number CBANY LOC [•];

 

d)                                     the
amount claimed is not more than the maximum amount available under Letter of
Credit Number CBANY LOC [•],
dated December [•],
2007;

 

e)                                      either:

 

(i)  the Beneficiary is entitled to receive the Buyer Termination
Fee in accordance with Section 11.5 of the Purchase Agreement between the
Applicant and the Beneficiary dated as of December [•], 2007 (the “Purchase
Agreement”); and

 

any one of the following:

 

(1)           a statement that (i) a
Satisfied Conditions Decision from the Arbitrator appointed under Article 10
of the Purchase Agreement has been delivered or deemed to have been issued or
delivered and (ii) notice of termination of the Purchase Agreement by the
Beneficiary under Section 11.1(g) thereof has been duly and validly
given;

 

(2)           a statement that (i) there
has been a court decision meeting the requirements of Section 11.5(a)(i) of
the Purchase Agreement and (ii) notice of termination of the Purchase
Agreement under Section 11.1(c), (d), (e) or (f) thereof has
been duly and validly given; or

 

(3)           a statement that a
letter executed by the Beneficiary and the Applicant mutually agreeing to the
payment of the Buyer Termination Fee to the Beneficiary;

 

or

 

(ii)           this Letter of Credit will expire on March [    ],
2008, which date is within ten (10) days of the date of such declaration
and this Letter of Credit has not been extended or replaced with another letter
of credit in accordance with the terms of the Purchase Agreement; and

 

f)             the Beneficiary has simultaneously
delivered a copy of this statement to the Applicant.

 

The form
of  draft is attached as Appendix A.

 

2

 

Payment shall
be made by the Bank in the amount specified in the Beneficiary’s declaration
(up to the maximum amount then available under the Letter of Credit) (a) if
a drawing is made by the Beneficiary hereunder at or prior to 1:00 p.m.
(New York City time) on a Business Day (as defined below), not later than 5:00 p.m.
(New York City time) on the second succeeding Business Day, or (b) if a
drawing is made by the Beneficiary hereunder after 1:00 p.m. (New York
City time) on a Business Day, not later than 10:00 a.m. (New York City
time) on the third succeeding Business Day, provided, in each case, such
drawing and the documents presented therewith conform to the terms and
conditions hereof.  As used herein, “Business
Day” shall mean any day other than a Saturday, Sunday or other day on which
commercial banks in New York, New York are authorized or required by law to be
closed.

 

Multiple
drawings under this Letter of Credit are not allowed.  This Letter of Credit is to be surrendered to
the Bank promptly after the making of a drawing.  Presentation of documents by facsimile are
acceptable, and the Applicant and Beneficiary agree that the Bank may act upon
any such transmission without the need of obtaining the original of any such
transmission.

 

There is no responsibility on the part of the Bank to investigate the
authenticity of the declaration or the capacity or entitlement of the
declarants to make the declaration.

 

All bank charges for this Letter of Credit are for the account of the
Applicant or otherwise instructed by the Applicant.

Beneficiary may change its address for the purposes of notice by
delivering written notice to the Bank at:

 

Commonwealth Bank of Australia, New York Branch

599 Lexington Avenue

17th Floor

New York, New York 10022

 

This Letter of Credit is not transferable.

 

This Letter of Credit is subject to the Uniform Customs and Practice
for Documentary Credits (2007 Revision) International Chamber of Commerce
Brochure Number 600 (the “UCP”).  As to
matters not governed by the UCP, this Letter of Credit shall be governed by and
construed in accordance with the laws of the State of New York, including
without limitation the Uniform Commercial Code as in effect in the State of New
York, without regard to principles of conflict of laws.

 

The Bank
agrees with the Beneficiary that drafts drawn under and in compliance with the
terms of this Letter of Credit are payable as set forth above.

 

On behalf of
Commonwealth Bank of Australia, New York Branch.

 

 

	
   

  	
   

  
	
   

  	
  Authorized Signatory

  

 

3

 

Appendix A

 

FORM OF DRAFT

 

DRAFT

 

DRAWN UNDER IRREVOCABLE STANDBY LETTER OF
CREDIT

NUMBER CBANY LOC [•] DATED DECEMBER [•], 2007 ISSUED

BY COMMONWEALTH BANK OF AUSTRALIA, NEW YORK BRANCH

(ACN 123 123 124)

 

	
  Date:

  	
              ,
  200  

  	
   

  	
  $

  

 

	
  To:

  	
  Commonwealth Bank of Australia, New York Branch

  
	
   

  	
  599 Lexington Avenue

  
	
   

  	
  17th Floor

  
	
   

  	
  New York, New York 10022

  

 

Pay  in
accordance with the terms of the Letter of Credit to the order of [•]

 

The amount of                                   
and     /100 dollars ($                    ).

 

This draft is drawn under Irrevocable Standby Letter Of Credit Number
CBANY LOC [•]
dated December [•],
2007 issued by Commonwealth Bank Of Australia, New York Branch, (ACN 123 123
124) for the benefit of Knight Inc. and for the account of [Applicant].

 

 

	
   

  	
   

  	
  KNIGHT INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
   

  	
  Its Duly Authorized Representative

  
	
   

  	
   

  	
   

  	
  500 Dallas Street, Suite 1000

  
	
   

  	
   

  	
   

  	
  Houston, Texas 77002Exhibit 10.151

 

PURCHASE AND SALE AGREEMENT

 

BETWEEN

 

THE WOODLANDS HOTEL, L.P.

 

AS SELLER

 

AND

 

INLAND AMERICAN LODGING ACQUISITION, INC.

 

AS PURCHASER

 

DATED AUGUST 22, 2007

 

 

TABLE OF CONTENTS

 

	
   

  	
   

  	
  Page No.

  
	
   

  	
   

  	
   

  
	
  ARTICLE 1

  	
  BASIC INFORMATION

  	
  1

  
	
  Section 1.2

  	
  Closing Costs

  	
  2

  
	
  Section 1.3

  	
  Notice Addresses:

  	
  3

  
	
   

  	
   

  	
   

  
	
  ARTICLE 2

  	
  PROPERTY

  	
  4

  
	
  Section 2.1

  	
  Property

  	
  4

  
	
   

  	
   

  	
   

  
	
  ARTICLE 3

  	
  EARNEST MONEY AND
  ALLOCATION OF PURCHASE PRICE

  	
  6

  
	
  Section 3.1

  	
  Deposit and Investment of
  Earnest Money

  	
  6

  
	
  Section 3.2

  	
  Independent Consideration

  	
  6

  
	
  Section 3.3

  	
  Form; Failure to Deposit

  	
  6

  
	
  Section 3.4

  	
  Disposition of Earnest Money

  	
  7

  
	
  Section 3.5

  	
  Allocation of Purchase
  Price

  	
  7

  
	
   

  	
   

  	
   

  
	
  ARTICLE 4

  	
  DUE DILIGENCE

  	
  7

  
	
  Section 4.1

  	
  Due Diligence Materials Delivered
  to Purchaser

  	
  7

  
	
  Section 4.2

  	
  Due Diligence Materials To
  Be Made Available

  	
  9

  
	
  Section 4.3

  	
  Physical Due Diligence

  	
  9

  
	
  Section 4.4

  	
  Due Diligence/Termination Right

  	
  10

  
	
  Section 4.5

  	
  Service Contracts

  	
  10

  
	
  Section 4.6

  	
  Proprietary Information;
  Confidentiality

  	
  10

  
	
  Section 4.7

  	
  No Representation or Warranty by Seller

  	
  10

  
	
  Section 4.8

  	
  Purchaser’s Responsibilities

  	
  11

  
	
  Section 4.9

  	
  Purchaser’s Agreement to
  Indemnify

  	
  11

  
	
   

  	
   

  	
   

  
	
  ARTICLE 5

  	
  TITLE AND SURVEY

  	
  12

  
	
  Section 5.1

  	
  Title Commitment

  	
  12

  
	
  Section 5.2

  	
  New or Updated Survey

  	
  12

  
	
  Section 5.3

  	
  Title Review

  	
  12

  
	
  Section 5.4

  	
  Delivery of Title Policy at Closing

  	
  12

  
	
   

  	
   

  	
   

  
	
  ARTICLE 6

  	
  OPERATIONS AND RISK OF
  LOSS

  	
  13

  
	
  Section 6.1

  	
  Ongoing Operations

  	
  13

  
	
  Section 6.2

  	
  Damage

  	
  14

  
	
  Section 6.3

  	
  Condemnation

  	
  15

  
	
  Section 6.4

  	
  Hotel Employees; Manager

  	
  15

  
	
  Section 6.5

  	
  Assumption of Certain Agreements

  	
  15

  
	
   

  	
   

  	
   

  
	
  ARTICLE 7

  	
  CLOSING

  	
  16

  
	
  Section 7.1

  	
  Closing

  	
  16

  
	
  Section 7.2

  	
  Conditions to Parties’ Obligation to Close

  	
  16

  
	
  Section 7.3

  	
  Seller’s Deliveries in
  Escrow

  	
  17

  

 

i

 

	
   

  	
   

  	
  Page No.

  
	
   

  	
   

  	
   

  
	
  Section 7.4

  	
  Purchaser’s Deliveries in Escrow

  	
  19

  
	
  Section 7.5

  	
  Closing Statements

  	
  19

  
	
  Section 7.6

  	
  Purchase Price

  	
  19

  
	
  Section 7.7

  	
  Possession

  	
  19

  
	
  Section 7.8

  	
  Delivery of Books and Records

  	
  19

  
	
  Section 7.9

  	
  Notice to Vendors

  	
  20

  
	
  Section 7.10

  	
  Liquor Licenses

  	
  20

  
	
   

  	
   

  	
   

  
	
  ARTICLE 8

  	
  PRORATIONS, DEPOSITS,
  COMMISSIONS

  	
  20

  
	
  Section 8.1

  	
  Prorations

  	
  20

  
	
  Section 8.2

  	
  Closing Costs

  	
  22

  
	
  Section 8.3

  	
  Final Adjustment After
  Closing

  	
  22

  
	
  Section 8.4

  	
  Hotel Sales Tax
  Liabilities

  	
  22

  
	
  Section 8.5

  	
  Commissions

  	
  23

  
	
  Section 8.6

  	
  Safe Deposit Boxes

  	
  23

  
	
  Section 8.7

  	
  Inventory of Baggage

  	
  23

  
	
   

  	
   

  	
   

  
	
  ARTICLE 9

  	
  REPRESENTATIONS AND
  WARRANTIES

  	
  24

  
	
  Section 9.1

  	
  Seller’s Representations and Warranties

  	
  24

  
	
  Section 9.2

  	
  Purchaser’s Representations and Warranties

  	
  27

  
	
  Section 9.3

  	
  Survival of Representations and Warranties

  	
  28

  
	
   

  	
   

  	
   

  
	
  ARTICLE 10

  	
  DEFAULT AND REMEDIES

  	
  28

  
	
  Section 10.1

  	
  Seller’s Remedies

  	
  28

  
	
  Section 10.2

  	
  Purchaser’s Remedies

  	
  29

  
	
  Section 10.3

  	
  Attorneys’ Fees

  	
  30

  
	
  Section 10.4

  	
  Other Expenses

  	
  30

  
	
   

  	
   

  	
   

  
	
  ARTICLE 11

  	
  DISCLAIMERS, RELEASE AND
  INDEMNITY

  	
  30

  
	
  Section 11.1

  	
  Disclaimers by Seller

  	
  30

  
	
  Section 11.2

  	
  Sale “As Is, Where Is”

  	
  31

  
	
  Section 11.3

  	
  Seller Released from
  Liability

  	
  31

  
	
  Section 11.4

  	
  “Hazardous Materials”
  Defined

  	
  32

  
	
  Section 11.5

  	
  Indemnity

  	
  32

  
	
  Section 11.6

  	
  Survival

  	
  33

  
	
   

  	
   

  	
   

  
	
  ARTICLE 12

  	
  MISCELLANEOUS

  	
  33

  
	
  Section 12.1

  	
  Parties Bound; Assignment

  	
  33

  
	
  Section 12.2

  	
  Headings

  	
  33

  
	
  Section 12.3

  	
  Invalidity and Waiver

  	
  33

  
	
  Section 12.4

  	
  Governing Law

  	
  33

  
	
  Section 12.5

  	
  Survival

  	
  33

  
	
  Section 12.6

  	
  Entirely and Amendments

  	
  33

  

 

ii

 

	
   

  	
   

  	
  Page No.

  
	
   

  	
   

  	
   

  
	
  Section 12.7

  	
  Time

  	
  34

  
	
  Section 12.8

  	
  Confidentiality

  	
  34

  
	
  Section 12.9

  	
  No Electronic Transactions

  	
  34

  
	
  Section 12.10

  	
  Notices

  	
  34

  
	
  Section 12.11

  	
  Construction

  	
  34

  
	
  Section 12.12

  	
  Calculation of Time
  Periods

  	
  34

  
	
  Section 12.13

  	
  Execution in Counterparts

  	
  35

  
	
  Section 12.14

  	
  No Recordation

  	
  35

  
	
  Section 12.15

  	
  Further Assurances

  	
  35

  
	
  Section 12.16

  	
  Discharge of Obligations

  	
  35

  
	
  Section 12.17

  	
  No Third Party Beneficiary

  	
  35

  
	
  Section 12.18

  	
  Reporting Person

  	
  35

  
	
  Section 12.19

  	
  Like-Kind Exchange

  	
  35

  

 

iii

 

LIST OF DEFINED TERMS

 

	
   

  	
  Page No.

  
	
   

  	
   

  
	
  Accounts Receivables

  	
  21

  
	
  Additional Earnest Money

  	
  1

  
	
  Additional Property
  Information

  	
  9

  
	
  Advance Bookings

  	
  9

  
	
  Agreement

  	
  1

  
	
  Applicable Person

  	
  1

  
	
  Assignment

  	
  17

  
	
  Casualty Notice

  	
  14

  
	
  CERCLA

  	
  30

  
	
  Closing

  	
  16

  
	
  Closing Date

  	
  2

  
	
  Convention Center Lease

  	
  6

  
	
  Convention Center Project

  	
  6

  
	
  Deed

  	
  17

  
	
  Delinquent

  	
  20

  
	
  Due Diligence Termination
  Notice

  	
  10

  
	
  Earnest Money

  	
  1

  
	
  Effective Date

  	
  2

  
	
  Escrow Agent

  	
  2

  
	
  Exchange

  	
  34

  
	
  Guest Ledger

  	
  21

  
	
  Hazardous Material

  	
  31

  
	
  Hazardous Materials

  	
  31

  
	
  Hazardous Substance

  	
  31

  
	
  Hotel

  	
  4

  
	
  Hotel Employees

  	
  8

  
	
  Improvements

  	
  4

  
	
  Independent Consideration

  	
  6

  
	
  Initial Earnest Money

  	
  1

  
	
  Inspection Period

  	
  2

  
	
  Intangible Personal
  Property

  	
  5

  
	
  Inventory

  	
  5

  
	
  Land

  	
  4

  
	
  License Agreements

  	
  6

  
	
  Management Agreement

  	
  5

  
	
  Manager

  	
  5

  
	
  Marriott Consent

  	
  17

  
	
  Material Damage

  	
  15

  
	
  Materially Damaged

  	
  15

  
	
  Natural Gas Liquids

  	
  31

  
	
  OFAC

  	
  25

  
	
  Operating Statements

  	
  8

  

 

iv

 

	
   

  	
  Page No.

  
	
   

  	
   

  
	
  Permitted Exceptions

  	
  12

  
	
  Permitted Outside Parties

  	
  10

  
	
  Petroleum

  	
  31

  
	
  Petty Cash

  	
  21

  
	
  Pollutant or Contaminant

  	
  31

  
	
  Property

  	
  4

  
	
  Property Documents

  	
  10

  
	
  Property Information

  	
  8

  
	
  Proposed Purchase Price
  Allocation

  	
  7

  
	
  Purchase Price

  	
  1

  
	
  Purchaser

  	
  1

  
	
  Purchaser Manager

  	
  15

  
	
  qualified beneficiaries

  	
  16

  
	
  Qualifying Event

  	
  16

  
	
  Real Property

  	
  4

  
	
  Rents

  	
  20

  
	
  Rooms Ledger

  	
  5

  
	
  Seller

  	
  1

  
	
  Seller’s Broker

  	
  22

  
	
  Seller’s Representatives

  	
  27

  
	
  Service Contracts

  	
  5

  
	
  Survey

  	
  12

  
	
  Surveyor

  	
  12

  
	
  Survival Period

  	
  27

  
	
  Tangible Personal Property

  	
  5

  
	
  Taxes

  	
  20

  
	
  TCID

  	
  5

  
	
  Title and Survey Review
  Period

  	
  2

  
	
  Title Commitment

  	
  11

  
	
  Title Commitment Delivery
  Date

  	
  2

  
	
  Title Company

  	
  1

  
	
  Title Policy

  	
  12

  
	
  to Seller’s knowledge

  	
  27

  
	
  to the best of Seller’s
  knowledge

  	
  27

  
	
  Urban Retreat Lease

  	
  6

  
	
  WARN Act

  	
  15

  

 

v

 

PURCHASE AND SALE AGREEMENT

The Woodlands Waterway Marriott Hotel, The Woodlands, Texas

 

This
Purchase and Sale Agreement (this “Agreement”)
is made and entered into by and between Purchaser and Seller.

 

RECITALS

 

A.                                    Defined terms are indicated by initial
capital letters. Defined terms shall have the meaning set forth herein, whether
or not such terms are used before or after the definitions are set forth.

 

B.                                      Purchaser desires to purchase the Property
and Seller desires to sell the Property, all upon the terms and conditions set
forth in this Agreement.

 

NOW, THEREFORE, in consideration of the mutual
terms, provisions, covenants and agreements set forth herein, as well as the
sums to be paid by Purchaser to Seller, and for other good and valuable
consideration, the receipt and sufficiency of which are acknowledged, Purchaser
and Seller agree as follows:

 

ARTICLE 1

BASIC INFORMATION

 

	
   

  	
  1.1.1

  	
  Seller:

  	
  THE WOODLANDS HOTEL, L.P., a Texas limited partnership

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  1.1.2

  	
  Purchaser:

  	
  INLAND AMERICAN LODGING
  ACQUISITION, INC.,
  a Delaware corporation

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  1.1.3

  	
  Purchase Price:

  	
  $137,000,000.00

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  1.1.4

  	
  Earnest Money:

  	
  $2,000,000.00 (the “Initial Earnest Money”), including interest
  thereon, to be deposited in accordance with Section 3.1 below, to be
  increased by $3,000,000.00 (the “Additional Earnest
  Money”) to $5,000,000.00, plus interest thereon, pursuant to Section
  3.1.

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  1.1.5

  	
  Title Company:

  	
  Stewart Title Company of Montgomery
  County, Inc.

  1610 Woodstead Court, Suite 100

  The Woodlands, Texas 77380

  Attn: Cynthia Kojak

  Telephone: (832) 482-1844

  Facsimile: (281) 367-0327

  Email: ckojak@stewart.com

  

 

 

	
   

  	
  1.1.6

  	
  Escrow Agent:

  	
  Stewart Title Company of Montgomery
  County, Inc.

  1610 Woodstead Court, Suite 100

  The Woodlands, Texas 77380

  Attn: Cynthia Kojak

  Telephone: (832) 482-1844

  Facsimile: (281) 367-0327

  Email: ckojak@stewart.com

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  1.1.7

  	
  Effective Date:

  	
  The date on which this
  Agreement is executed by the latter to sign of Purchaser or Seller, as
  indicated on the signature page of this Agreement. If the execution date is
  left blank by either Purchaser or Seller, the Effective Date shall be the
  execution date inserted by the other party.

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  1.1.8

  	
  Title Commitment

  Delivery Date:

  	
  The date which is five (5)
  days after the Effective Date.

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  1.1.9

  	
  Title and Survey Review Period:

  	
  The period ending upon the
  expiration of the Inspection Period.

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  1.1.10

  	
  Inspection Period:

  	
  The period beginning on
  the Effective Date and ending the earlier to occur of (i) twenty-one (21)
  days after the Effective Date or (ii) September 12, 2007.

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  1.1.11

  	
  Closing Date:

  	
  The earlier to occur of
  (i) thirty (30) days from the end of the Inspection Period or (ii) October
  12, 2007.

  

 

Section
1.2                                        Closing Costs. Closing costs shall be allocated and paid as
follows:

 

	
   

  	
   

  	
  RESPONSIBLE

  
	
  COST

  	
   

  	
  PARTY

  
	
   

  	
   

  	
   

  
	
  Title Commitment required
  to be delivered pursuant to Section 5.1.

  	
   

  	
  Seller

  
	
   

  	
   

  	
   

  
	
  Premium for standard Title
  Policy delivered pursuant to Section 5.4, together with a
  Restrictions, Encroachments, Minerals Endorsement (T-19.1) (to the extent the
  Title Company will issue the same).

  	
   

  	
  Seller

  

 

2

 

	
  COST

  	
   

  	
  RESPONSIBLE

  PARTY

  
	
   

  	
   

  	
   

  
	
  Premium for any upgrade of
  Title Policy for any additional coverage and any endorsements desired by
  Purchaser (other than Endorsement T-19.1), any inspection fee charged by the
  Title Company, tax certificates, municipal and utility lien certificates, and
  any other Title Company charges.

  	
   

  	
  Purchaser

  
	
   

  	
   

  	
   

  
	
  Costs of Survey

  	
   

  	
  Purchaser

  
	
   

  	
   

  	
   

  
	
  Costs of any revisions,
  modifications or recertifications to the Survey

  	
   

  	
  Purchaser

  
	
   

  	
   

  	
   

  
	
  Costs for UCC searches

  	
   

  	
  Purchaser

  
	
   

  	
   

  	
   

  
	
  Recording fees

  	
   

  	
  Purchaser

  
	
   

  	
   

  	
   

  
	
  Any transfer taxes, sales
  taxes and fees due in connection with the transfer of the Property

  	
   

  	
  Purchaser

  
	
   

  	
   

  	
   

  
	
  Any taxes, fees or
  assessments in connection with any security instrument required by
  Purchaser’s lender

  	
   

  	
  Purchaser

  
	
   

  	
   

  	
   

  
	
  Any escrow fee charged by
  Escrow Agent for holding the Earnest Money or conducting the Closing

  	
   

  	
  Purchaser:
  1/2

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Seller:
  1/2

  
	
   

  	
   

  	
   

  
	
  Real Estate Sales
  Commission to Broker

  	
   

  	
  Seller

  
	
   

  	
   

  	
   

  
	
  All other closing costs,
  expenses, charges and fees, including the respective parties’ attorneys’ fees
  and fees of professional consultants

  	
   

  	
  Each
  party to pay its own

  

 

Section
1.3                                        Notice Addresses:

 

	
  Purchaser:

  	
   

  	
  Copy to:

  
	
  Inland American Lodging
  Acquisitions, Inc.

  390 N. Orange Avenue, Suite 1650

  Orlando, Florida

  Attention: Marcel Verbaas, President

  Telephone: 407-317-6950

  Facsimile: 407-999-8428

  E-mail: Verbaas@inlandgroup.com

  	
   

  	
  The Inland Real Estate
  Group, Inc.

  Law Development

  2901 Butterfield Road

  Oak Brook, IL 60523

  Attention: Scott Wilton, Esquire

  Telephone: 630-218-8000

  Facsimile: 630-218-4900

  E-mail: swilton@inlandgroup.com

  

 

3

 

	
   

  	
   

  	
  Copy to:

  
	
   

  	
   

  	
  Lowndes, Drosdick, Doster,
  Kantor & Reed, PA

  215 N. Eola Drive

  Orlando, FL 32801

  Attention: Richard J. Fildes, Esquire

  Telephone: 407-843-4600

  Facsimile: 407-843-4444

  E-mail: rich.fildes@lowndes-law.com

  

 

	
  Seller:

  	
   

  	
  Copy to:

  
	
  The Woodlands Hotel, L.P.

  2201 Timberloch Place

  The Woodlands, Texas 77380-1181

  Attention: Dan B. Leverett

  Telephone: (281) 719-6142

  Facsimile: (281) 719-6280

  E-mail:dleverett@thewoodlands.com

  	
   

  	
  The Woodlands Operating
  Company, L.P.

  2201 Timberloch Place

  The Woodlands, Texas 77380-1181

  Attention: Karen West

  Telephone: (281) 719-6224

  Facsimile: (281) 719-6280

  E-mail:kwest@thewoodlands.com

  

 

ARTICLE 2

PROPERTY

 

Section 2.1                                      Property. Subject to the terms and conditions of this
Agreement, Seller agrees to sell to Purchaser, and Purchaser agrees to purchase
from Seller, the following property (collectively, the “Property”):

 

2.1.1                         Real Property. The land described in Exhibit A
attached hereto (the “Land”),
together with (a) all improvements located thereon, including that certain
hotel located at 1601 Lake Robbins Drive, The Woodlands, Texas 77380 (the “Hotel”),  but expressly
excluding improvements and structures owned by any tenant (“Improvements”),
(b) without warranty, all right, title and interest of Seller, if any, in and
to the rights, benefits, privileges, easements, tenements, hereditaments, and
appurtenances thereon or in anywise appertaining thereto, and (c) without
warranty, all right, title, and interest of Seller, if any, in and to all
strips and gores and any land lying in the bed of any street, road or alley,
open or proposed, adjoining the Land (collectively, the “Real Property”).

 

2.1.2                         Tangible Personal Property. All of Seller’s right, title and interest,
without warranty, in the equipment, machinery, furniture, furnishings,
supplies, Inventory and other tangible personal property, if any, owned by
Seller, and now or hereafter located in and used in connection with the
operation, ownership or management of the Real Property, but specifically
excluding any items of personal property owned or leased by Manager (as defined
below), tenants, licensees or concessionaires at or on the Real Property,
including any items of personal property containing the logo, tradename,
trademark or branding of the name “Marriott” or
any derivative thereof (provided that any items of personal property containing
the logo, tradename, trademark or branding of the name “Marriott” or any
derivative thereof shall be included as Tangible Personal

 

4

 

Property
to the extent that Purchaser has obtained a proper use license from the Manager
with respect thereto), and further excluding any items of personal property
owned by third parties and leased to Seller (other than pursuant to an
assignment of Seller’s right, title and interest in any such lease hereunder)
(collectively, the “Tangible Personal
Property”).  As used herein, “Inventory” shall mean all of Seller’s
right, title and interest, without warranty, in all inventories of food in open
or unopened containers or cases and any used or reserve stock of linens, china,
glassware, silver eating utensils, uniforms, towels, paper goods, soaps,
cleaning supplies and similar materials with respect to the operation,
ownership or management of the Hotel, but specifically excluding any items of
personal property containing the logo, tradename, trademark or branding of the
name “Marriott” or any derivative thereof (provided that any items of personal
property containing the logo, tradename, trademark or branding of the name “Marriott”
or any derivative thereof shall be included as Tangible Personal Property to
the extent that Purchaser has obtained a proper use license from the Manager
with respect thereto).

 

2.1.3                                    Intangible Personal Property. All of Seller’s right, title and interest, if
any, without warranty, in all intangible personal property related to the Real
Property and the Improvements, including, without limitation: Seller’s rights
and interests, if any, in the name of the Real Property and/or the name of the
Hotel; the plans and specifications and other architectural and engineering
drawings for the Improvements, if any (to the extent assignable without cost to
Seller); contract rights related to the operation or ownership of the Real
Property, including operating agreements (and including without limitation the
Convention Center Booking and Blocking Agreement dated June 29, 2001 between
Seller and Town Center Improvement District of Montgomery County, Texas (“TCID”), as amended to date), maintenance, service, construction,
supply and equipment rental contracts, if any (collectively, the “Service  Contracts”)  (Seller’s obligations thereunder
are expressly assumed by Purchaser pursuant to this Agreement, at Seller’s cost
unless otherwise expressly provided herein or agreed to by Seller and
Purchaser), but not including License Agreements (defined below), that certain
Management Agreement dated as of July 18, 2001 (as amended to date, the “Management Agreement”) between Seller and Marriott Hotel Services,
Inc. (“Manager”); warranties (to the
extent assignable without cost to Seller); governmental permits, approvals and
licenses, if any (to the extent assignable without cost to Seller); telephone
exchange numbers (to the extent assignable without cost to Seller); Advance
Bookings (defined below); Purchaser’s share of the Rooms Ledger as defined in
and determined under Section 8.1.4 hereof; and the Petty Cash, Purchaser’s
share of the Guest Ledger, and Accounts Receivables (each as defined in Section
8.1.5 hereof) (all of the items described in this Section 2.1.3
collectively referred to as the “Intangible
Personal Property”).  Tangible Personal Property and
Intangible Personal Property shall not include (a) any appraisals or other
economic evaluations of, or projections with respect to, all or any portion of
the Property, including, without limitation, budgets prepared by or on behalf of
Seller, Manager or any affiliate thereof, (b) any documents, materials or
information which are subject to attorney/client, work product or similar
privilege, which constitute attorney communications with respect to the
Property and/or Seller, or which are subject to a confidentiality agreement,
and any trade name, mark or other identifying material that includes the name “Marriott”
or the name “The Woodlands” or any derivative thereof. Provided however, Seller
and Purchaser shall enter into a license

 

5

 

agreement
for the use of the name “The Woodlands” or “Woodlands” by Purchaser, if the
parties can mutually agree on the form of license agreement (which shall be
negotiated in good faith by the parties) prior to the end of the Inspection
Period.

 

2.1.4                                License Agreements.
All of Seller’s right, title
and interest, without warranty, in and to all agreements, if any, for the
leasing or licensing of rooftop space or equipment, telecommunications
equipment, cable access and other space, equipment and facilities that are
located on or within the Real Property and generate income to Seller as the
owner of the Real Property, including that certain (i) lease agreement dated
June 24, 2005 between Seller and Urban Retreat of The Woodlands, L.L.C. (as
amended to date, the “Urban Retreat Lease”),
and (ii) Meeting Rooms Lease Agreement dated June 29, 2001, between Seller and
TCID, as amended to date, and further including agreements which may be made by
Seller after the Effective Date and prior to Closing as permitted by this
Agreement (the “License Agreements”).
Anything in this Agreement to the contrary notwithstanding, Purchaser shall
assume the obligations of the “lessor” or “licensor” under all License
Agreements, some or all of which may be non-cancelable.

 

2.1.5                                Project Lease.
All of Seller’s right, title
and interest under that certain Project Lease Agreement (“Convention
Center Lease”) dated as of June 29, 2001, by and between TCID,
as landlord, and Seller, as tenant, as heretofore amended, with respect to the
multi-use convention center/meeting facility contiguous to the Hotel and
related improvements, personal property, land and leasehold interests, all as
set forth in the Convention Center Lease (collectively, the “Convention Center Project”).

 

ARTICLE 3

EARNEST MONEY AND ALLOCATION OF PURCHASE PRICE

 

Section
3.1                                        Deposit and Investment of Earnest
Money. Within two business days after the Effective
Date, Purchaser shall deposit the Initial Earnest Money with Escrow Agent. If
upon the expiration of the Inspection Period, this Agreement is still in force
and effect, Purchaser shall, no later than two business days after the last day
of the Inspection Period, deposit the Additional Earnest Money as specified in Section
1.1.4 above, with Escrow Agent. Escrow Agent shall invest the Earnest Money
in government insured interest-bearing accounts satisfactory to Seller and
Purchaser, shall not commingle the Earnest Money with any funds of Escrow Agent
or others, and shall promptly provide Purchaser and Seller with confirmation of
the investments made. Such account shall have no penalty for early withdrawal,
and Purchaser accepts all risks with regard to such account.

 

Section 3.2                                     Independent Consideration. If Purchaser elects to terminate this
Agreement for any reason and is entitled to receive a return of the Earnest
Money pursuant to the terms hereof, the Escrow Agent shall first disburse to
Seller One Hundred and No/100 Dollars ($100.00) as independent consideration
for Seller’s performance under this Agreement (“Independent
Consideration”), which shall be retained by Seller in all
instances.

 

Section 3.3                                    Form; Failure to Deposit. The Earnest Money shall be in the form of a
certified or cashier’s check or the wire transfer to Escrow Agent of
immediately available U.S. federal funds. If Purchaser fails to timely deposit
any portion of the Earnest Money within the

 

6

 

time
periods required, Seller may terminate this Agreement by written notice to
Purchaser, in which event any Earnest Money that has previously been deposited
by Purchaser with Escrow Agent shall be immediately delivered to Seller and
thereafter the parties hereto shall have no further rights or obligations
hereunder, except for rights and obligations which, by their terms, survive the
termination hereof.

 

Section 3.4                                       Disposition of Earnest Money. The Earnest Money shall be applied as a
credit to the Purchase Price at Closing. However, if Purchaser elects to
terminate this Agreement prior to the expiration of the Inspection Period
pursuant to Section 4.4, Escrow Agent shall pay the entire Earnest
Money (less the Independent Consideration) to Purchaser one business day
following receipt of the Due Diligence Termination Notice from Purchaser (as
long as the current investment can be liquidated and disbursed in one business
day). No notice to Escrow Agent from Seller shall be required for the release
of the Earnest Money to Purchaser by Escrow Agent if Purchaser terminates this Agreement
pursuant to Section 4.4. In the event of a termination of this Agreement
by either Seller or Purchaser for any reason other than pursuant to Section
4.4, Escrow Agent is authorized to deliver the Earnest Money to the party
hereto entitled to same pursuant to the terms hereof on or before the tenth
business day following receipt by Escrow Agent and the non-terminating party of
written notice of such termination from the terminating party, unless the other
party hereto notifies Escrow Agent that it disputes the right of the other
party to receive the Earnest Money. In such event, Escrow Agent shall continue
to hold the Earnest Money until Escrow Agent has received joint written
instructions on the disposition thereof from Seller and Purchaser. If such
written instructions are not received by Escrow Agent within ten (10) days
after Escrow Agent has delivered a written request for instructions upon Seller
and Purchaser, Escrow Agent may interplead the Earnest Money into a court of
competent jurisdiction in the county in which the Earnest Money has been
deposited. All attorneys’ fees and costs and Escrow Agent’s costs and expenses
incurred in connection with such interpleader shall be assessed against the
party that is not awarded the Earnest Money, or if the Earnest Money is
distributed in part to both parties, then in the inverse proportion of such
distribution.

 

Section 3.5                                Allocation of Purchase Price. On or before the date which is thirty (30)
days after the Effective Date, Purchaser shall provide to Seller the proposed
allocation of the Purchase Price among the Land, the Improvements, the Tangible
Personal Property and the Intangible Personal Property comprising the Property
(the “Proposed Purchase Price Allocation”) for Seller’s approval, such approval
not to be unreasonably withheld, conditioned or delayed. Seller shall notify
Purchaser in writing whether it approves of the Proposed Purchase Price
Allocation within three business days after Purchaser’s submission thereof. If
Seller disapproves of such Proposed Purchase Price Allocation, then Seller
shall notify Purchaser thereof in writing specifying in reasonable detail the
reasons for such disapproval, in which case Purchaser and Seller shall in good
faith endeavor to agree upon the Proposed Purchase Price Allocation prior to
Closing, but the same shall not be a condition to Closing.

 

ARTICLE 4

DUE DILIGENCE

 

Section 4.1                            Due Diligence Materials
Delivered to Purchaser. Seller
shall deliver to Purchaser (or make available as referenced in 4.1.1) the following
information (the “Property Information”) within five (5) business days
following the Effective Date, and thereafter through

 

7

 

Closing,
Seller shall provide any updates to or any new Property Information to
Purchaser promptly upon any such new or updated Property Information becoming
available to Seller:

 

4.1.1                            Financial Information. To the extent
Seller has, or has access to, the following documents pursuant to the
Management Agreement, Seller shall make available to Purchaser for review and
copying at the Hotel, copies of all accounting, tax financial and other books
and records relating to the Property in Seller’s possession or located at the
Property, operating statements and a summary of capital expenditures pertaining
to the Property for the period of time that Seller has owned the Property (“Operating Statements”);

 

4.1.2                            Environmental Reports. Copy of any
environmental reports or site assessments related to the Property prepared for
the benefit of Seller;

 

4.1.3                            Tax Statements. Copy of ad valorem tax statements relating
to the Property for the current tax period and the immediately preceding tax
period;

 

4.1.4                            Title and Survey. Copy of Seller’s most current title
insurance information and survey of the Property;

 

4.1.5                        Service Contracts. A list, together with copies, of Service
Contracts;

 

4.1.6                        Management Agreement. Copy of the Management Agreement.

 

4.1.7                        Hotel Employees. A current schedule of persons employed by
Manager in the direct “on-site” management of the Hotel (the “Hotel Employees”), specifying the number of
employees, their name and title, actual salary and approved overhead.

 

4.1.8                        Certificate of Insurance. Copy of the
certificate of insurance evidencing the property insurance maintained by Seller
with respect to the Improvements;

 

4.1.9                        A/R Schedule. Copy of a current accounts receivable
schedule with respect to the Property; and

 

4.1.10                  License
Agreements/Tenant Leases. A list, together with copies, of any License
Agreements, and space leases, if any, for any portion of the Hotel (such space
leases being herein referred to as the “Tenant Leases”). For purpose of this
Agreement, the Urban Retreat Lease shall not be included within the definition
of Tenant Leases.

 

4.1.11               Convention Center Lease. A copy of the Convention Center Lease.

 

4.1.12               Permits,
etc. A list, together with copies of all permits
and licenses, certificates of occupancy, copies of books and records of
accounts and copies of correspondence with tenants and suppliers.

 

4.1.13               Urban
Retreat Lease. A copy of the Urban Retreat Lease.

 

8

 

Section
4.2                                        Due Diligence Materials To
Be Made Available. To the
extent such items are in Seller’s possession or control, Seller shall make available
to Purchaser for Purchaser’s review, at Seller’s option at either the offices
of Seller or at the Property, the following items and information (the “Additional Property Information”) on or before the date that is five
days following the Effective Date, and Purchaser at its expense shall have the
right to make copies of same, and thereafter through Closing Seller shall make
available to Purchaser with notice to Purchaser of the availability of same any
updates to or any new Additional Property Information promptly upon any such
new or updated Additional Property Information becoming available to Seller:

 

4.2.1                          Equipment and Building
Warranties. Warranties, if any,
on roofs, air conditioning units, fixtures and equipment;

 

4.2.2                          Advance Bookings. The register of reservations and agreements
made or entered into by Seller in the ordinary course of business prior to
Closing for hotel rooms or meeting rooms to be utilized after Closing, or for
catering services or other hotel services to be provided after Closing (the “Advance Bookings”), which
register of Advance Bookings shall be updated and delivered to Purchaser at
Closing; and

 

4.2.3                          Plans and Specifications. Building plans and specifications relating to
the Property.

 

Section 4.3                                   Physical Due Diligence. Commencing on the Effective Date and
continuing until the Closing, Purchaser shall have reasonable access to the
Property at all reasonable times during normal business hours for the purpose
of conducting reasonably necessary tests, including surveys and architectural,
engineering, geotechnical and environmental inspections and tests, provided
that (a) Purchaser must give Seller twenty-four (24) hours’ prior telephone or
written notice of any such inspection or test, and with respect to any
intrusive inspection or test (i.e., core sampling) must obtain Seller’s prior
written consent (which consent may be given, withheld or conditioned in Seller’s
sole discretion), (b) prior to performing any inspection or test, Purchaser
must deliver a certificate of insurance to Seller evidencing that Purchaser and
its contractors, agents and representatives have in place reasonable amounts of
commercial general liability insurance and workers compensation insurance for
its activities on the Property in terms and amounts reasonably satisfactory to
Seller covering any accident arising in connection with the presence of
Purchaser, its contractors, agents and representatives on the Property, which
insurance shall name Seller as an additional insured thereunder, and (c) all such
tests shall be conducted by Purchaser in compliance with Purchaser’s
responsibilities set forth in Section 4.8 below. Purchaser shall bear
the cost of all such inspections or tests and shall be responsible for and act
as the generator with respect to any wastes generated by those tests (except
for any wastes arising out of pre-existing matters merely discovered by
Purchaser (i.e., latent environmental contamination)). Subject to the
provisions of Section 4.6 hereof, Purchaser or Purchaser’s
representatives may meet with the general manager of the Hotel; provided,
however, Purchaser must contact Seller at least twenty-four (24) hours in
advance by telephone to inform Seller of Purchaser’s intended meeting and to
allow Seller the opportunity to attend such meeting if Seller desires. Subject
to the provisions of Section 4.6 hereof, Purchaser or Purchaser’s
representatives may meet with any governmental authority for the sole purpose
of gathering information in connection with the transaction contemplated by this
Agreement;

 

9

 

provided, however, Purchaser
must contact Seller at least twenty-four (24) hours in advance by telephone to
inform Seller of Purchaser’s intended meeting and to allow Seller the
opportunity to attend such meeting if Seller desires.

 

Section 4.4                                       Due Diligence/Termination Right. Purchaser shall have through the last day of
the Inspection Period in which to (a) examine, inspect, and investigate the
Property Information and the Additional Property Information (collectively, the
“Property Documents”) and the
Property and, in Purchaser’s sole and absolute judgment and discretion,
determine whether the Property is acceptable to Purchaser, (b) obtain all
necessary internal approvals, and (c) satisfy all other contingencies of
Purchaser. Notwithstanding anything to the contrary in this Agreement,
Purchaser may terminate this Agreement and receive a return of the Earnest
Money for any reason or no reason by giving written notice of termination to
Seller and Escrow Agent (the “Due Diligence
Termination Notice”) on or before the last day of the Inspection
Period. If Purchaser does not give a Due Diligence Termination Notice, this
Agreement shall continue in full force and effect, Purchaser shall be deemed to
have waived its right to terminate this Agreement pursuant to this Section
4.4, and Purchaser shall be deemed to have acknowledged that it has
received or had access to all Property Documents and conducted all inspections
and tests of the Property that it considers important.

 

Section 4.5                                    Service Contracts. On or prior to the last day of the
Inspection Period, Purchaser will advise Seller in writing of which Service
Contracts it will assume and for which Service Contracts Purchaser requests
that Seller deliver written termination at or prior to Closing, provided Seller
shall have no obligation to terminate, and Purchaser shall be obligated to
assume, any Service Contracts which by their terms cannot be terminated without
penalty or payment of a fee. Seller shall deliver at or before Closing notices
of termination of all Service Contracts that are not so assumed. Purchaser must
assume the obligations arising from and after the Closing Date under those
Service Contracts (a) that Purchaser has agreed to assume, or that Purchaser is
obligated to assume pursuant to this Section 4.5, and (b) for which a
termination notice is delivered as of or prior to Closing but for which
termination is not effective until after Closing.

 

Section 4.6                                 Proprietary Information; Confidentiality. Purchaser acknowledges that the Property
Documents are proprietary and confidential and will be delivered to Purchaser
solely to assist Purchaser in determining the feasibility of purchasing the
Property. Purchaser shall not use the Property Documents for any purpose other
than as set forth in the preceding sentence. Purchaser shall not disclose the
contents to any person other than to those persons who are responsible for
determining the feasibility of Purchaser’s acquisition of the Property and who
have agreed to preserve the confidentiality of such information as required
hereby (collectively, “Permitted Outside
Parties”). Purchaser shall not divulge the contents of the
Property Documents and other information except in strict accordance with the
confidentiality standards set forth in this Section 4.6. In permitting
Purchaser to review the Property Documents or any other information, Seller has
not waived any privilege or claim of confidentiality with respect thereto, and
no third party benefits or relationships of any kind, either express or
implied, have been offered, intended or created.

 

Section 4.7                              No Representation or Warranty by
Seller. Purchaser acknowledges that, except as
expressly set forth in this Agreement, Seller has not made and does not make
any warranty or representation regarding the truth, accuracy or completeness of
the Property

 

10

 

Documents
or the source(s) thereof. Purchaser further acknowledges that some if not all
of the Property Documents were prepared by third parties other than Seller.
Seller expressly disclaims any and all liability for representations or
warranties, express or implied, statements of fact and other matters contained
in such information, or for omissions from the Property Documents, or in any
other written or oral communications transmitted or made available to
Purchaser. Purchaser shall rely solely upon Seller’s written representations as
set forth in this Agreement and its own investigation with respect to the
Property, including, without limitation, the Property’s physical, environmental
or economic condition, compliance or lack of compliance with any ordinance,
order, permit or regulation or any other attribute or matter relating thereto.
Seller has not undertaken any independent investigation as to the truth,
accuracy or completeness of the Property Documents and is providing the
Property Documents solely as an accommodation to Purchaser.

 

Section 4.8                                     Purchaser’s Responsibilities. In conducting any inspections,
investigations or tests of the Property and/or Property Documents, Purchaser
and its agents and representatives shall: (a) not unreasonably disturb the
guests of the Hotel or interfere with their use of the Property; (b) not
unreasonably interfere with the operation and maintenance of the Property; (c)
not damage any part of the Property or any personal property owned or held by
any tenant or any third party; (d) not injure or otherwise cause bodily harm to
Seller or its agents, guests, invitees, contractors and employees or any guests
of the Hotel or their invitees; (e) comply with all applicable laws; (f)
promptly pay when due the costs of all tests, investigations, and examinations
done with regard to the Property; (g) not permit any liens to attach to the
Real Property by reason of the exercise of its rights hereunder; (h) repair any
damage to the Real Property resulting directly or indirectly from any such
inspection or tests; and (i) not reveal or disclose prior to Closing any
information obtained during the Inspection Period concerning the Property and
the Property Documents to anyone other than the Permitted Outside Parties, in
accordance with the confidentiality standards set forth in Section 4.6
above, or except as may be otherwise required by law.

 

Section 4.9                                 Purchaser’s Agreement to Indemnify. Purchaser hereby
agrees to indemnify, defend and hold Seller harmless from and against any and
all liens, claims, causes of action, damages, liabilities and expenses
(including reasonable attorneys’ fees) arising out of Purchaser’s inspections
or tests permitted under this Agreement or any violation of the provisions of Section
4.3, Section 4.6  and Section 4.8; provided,
however, the indemnity shall not extend to protect Seller from any pre-existing
liabilities for matters merely discovered by Purchaser (i.e., latent
environmental contamination). Purchaser’s obligations under this Section 4.9
shall survive the termination of this Agreement and shall survive the Closing.

 

Section 4.10                        Cooperation with Purchaser’s Audit. Seller agrees, at
Purchaser’s expense, to cooperate fully with Purchaser and Purchaser’s
representatives to facilitate Purchaser’s evaluations and reports concerning
the Property, including a one (1) year audit of the 2006 (January 1-December
31, 2006) books and records of the Property. In addition, at the Closing,
Seller shall execute and deliver to Purchaser an audit representation letter
(the “Audit Letter”) if the parties can mutually agree on the form of the
letter prior to the end of the Inspection Period.

 

11

 

ARTICLE 5

TITLE AND SURVEY

 

Section 5.1                            Title Commitment. Seller shall cause to be prepared and
delivered to Purchaser on or before the Title Commitment Delivery Date: (a) a
current commitment for title insurance or preliminary title report (the “Title Commitment”) issued by the Title Company, in
the amount of the Purchase Price and on a TLTA Standard Form commitment, with
Purchaser as the proposed insured, and (b) copies of all documents of record
referred to in the Title Commitment as exceptions to title to the Property.
PURCHASER ACKNOWLEDGES THAT SELLER HAS ADVISED THAT THE PROPERTY IS LOCATED
WITHIN A MUNICIPAL UTILITY DISTRICT.

 

Section 5.2                            New or Undated Survey. Within ten (10) days from the date of this
Agreement, Seller shall provide, at Seller’s sole cost and expense (except as
provided below), (i) a current map of survey of the Property (“Survey”) conforming with the standards for an ALTA
Survey, according to the current Manual of Practice for Land Surveying in Texas
of the Texas Society of Professional Surveyors, prepared by a Registered
Professional Land Surveyor (“Surveyor”),
containing a Surveyor’s Certificate in the form attached as Exhibit E,
and (ii) a legal description of the Property prepared by the Surveyor.
Purchaser shall pay for any revisions, modifications or recertifications to the
Survey.

 

Section 5.3                            Title Review. During the Title and Survey Review Period,
Purchaser shall review title to the Property as disclosed by the Title
Commitment and the Survey. Seller shall have no obligation to cure title
objections except financing liens of an ascertainable amount created by, under
or through Seller, which liens Seller shall cause to be released at or prior to
Closing (with Seller having the right to apply the Purchase Price or a portion thereof
for such purpose), and Seller shall deliver the Property free and clear of any
such financing liens. Seller further agrees to remove any exceptions or
encumbrances to title which are voluntarily created by, under or through Seller
after the Effective Date without Purchaser’s consent (if requested, such
consent shall not be unreasonably withheld or delayed). The term “Permitted Exceptions” shall mean: the specific
exceptions (excluding exceptions that are part of the promulgated title
insurance form) in the Title Commitment that the Title Company has not agreed
to remove from the Title Commitment as of the end of the Title and Survey
Review Period and that Seller is not required to remove as provided above;
matters created by, through or under Purchaser; items shown on the Survey which
have not been removed as of the end of the Inspection Period (or if Purchaser
does not obtain a new or updated Survey, all matters that a current, accurate
survey of the Property would show); real estate taxes not yet due and payable;
rights of tenants under the Leases as tenants only; rights of tenants or
licensees under License Agreements as tenants or licensees only.

 

Section 5.4                            Delivery of Title Policy at
Closing. In the event that the Title Company does not
issue at Closing, or unconditionally commit at Closing to issue, to Purchaser,
an owner’s title policy in accordance with the Title Commitment, insuring
Purchaser’s title to the Property in the amount of the Purchase Price, subject
only to the standard exceptions and exclusions from coverage contained in such
policy and the Permitted Exceptions (the “Title Policy”),
Purchaser shall have the right to terminate this Agreement, in which case the
Earnest Money shall be

 

12

 

immediately returned to
Purchaser and the parties hereto shall have no further rights or obligations,
other than those that by their terms survive the termination of this Agreement.

 

ARTICLE 6

OPERATIONS AND RISK OF LOSS

 

Section 6.1                            Ongoing Operations. From the Effective Date through Closing:

 

6.1.1                 Hotel
Operations. Seller shall operate or cause to be operated
the Hotel in compliance with the Management Agreement and the existing budget
and in substantially the same manner in which it operated the Hotel prior to
the Effective Date. Subject to seasonal differences, market conditions and
events beyond Seller’s reasonable control, Seller shall continue to take or
cause to be taken Advance Bookings, to maintain and replenish sufficient levels
of Inventory to operate the Hotel in generally the same manner as prior to the
Effective Date and to otherwise promote the Hotel in generally the same manner
as prior to the Effective Date.

 

6.1.2                 Service
Contracts and License Agreements. Seller will
perform its material obligations under the Service Contracts and License
Agreements.

 

6.1.3                 New
Contracts. Except as provided in Section 6.1.5,
Seller will not enter into any contract that will be an obligation affecting
the Property subsequent to the Closing, except Advance Bookings and contracts
entered into in the ordinary course of business that are terminable without
cause and without the payment of any termination penalty on not more than 30
days’ prior notice.

 

6.1.4                 Maintenance
of Improvements; Removal of Personal Property. Subject to Section 6.2 and Section
6.3, Seller shall maintain all Improvements substantially in their present
condition (ordinary wear and tear and casualty excepted) and in a manner
consistent with Seller’s maintenance of the Improvements during Seller’s period
of ownership. Seller will not remove any Tangible Personal Property except as
may be required for necessary repair or replacement, and replacement shall be
of approximately equal quality and quantity as the removed item of Tangible
Personal Property.

 

6.1.5                 License
Agreements, Convention Center Lease. Seller will not
amend or terminate any existing License Agreement or the Convention Center
Lease or enter into any new License Agreement without providing Purchaser (a)
all relevant supporting documentation, as reasonably determined by Seller,
including, without limitation, tenant financial information to the extent in
Seller’s possession, and (b) as to any such amendment or termination of a
License Agreement or the Convention Center Lease, or new License Agreement
which is to be executed after the expiration of the Inspection Period, Seller’s
request for Purchaser’s approval. If Purchaser’s consent is requested by Seller
as to any amendment or termination of a License Agreement or the Convention
Center Lease, or as to a new License Agreement, Purchaser agrees to give Seller
written notice of approval or disapproval of a proposed amendment or
termination of a License Agreement or the Convention Center Lease, or new
License Agreement within five

 

13

 

business
days after Purchaser’s receipt of the items in Section 6.1.5(1) and Section
6.1,5(2). If Purchaser does not respond to Seller’s request within such
time period, then Purchaser will be deemed to have approved such amendment,
termination or new License Agreement. Purchaser’s approval rights and
obligations will vary depending on whether the request for approval from Seller
is delivered to Purchaser before or after the expiration of the Inspection Period,
as follows:

 

(1)                             With respect to a request for approval
delivered by Seller to Purchaser before the expiration of the Inspection
Period, Purchaser’s consent shall not be required. Moreover, whether or not
Purchaser consents to an amendment or termination of a License Agreement or the
Convention Center Lease, or the entering into of a new License Agreement,
Seller may amend or terminate a License Agreement or the Convention Center
Lease, or enter into a new License Agreement at anytime prior to the expiration
of the Inspection Period; however, if Purchaser does not consent to same or is
not deemed to have approved same, and if Seller elects to amend or terminate a
License Agreement or the Convention Center Lease, or enter into a new License
Agreement notwithstanding Purchaser’s failure to approve same, then Purchaser
may, at the time Seller notifies Purchaser of the execution of said amendment,
termination or new License Agreement, elect to terminate this Agreement and
receive a return of the Earnest Money; provided that if Purchaser does not
elect to terminate within five days after said notification from Seller, then
Purchaser shall have waived its right to terminate pursuant to this Section
6.1.5.

 

(2)                         With respect to a request for approval
delivered by Seller to Purchaser after the expiration of the Inspection Period,
Purchaser may withhold its consent at its reasonable discretion, and Seller may
not amend or terminate a License Agreement or the Convention Center Lease, or
enter into a new License Agreement without Purchaser’s written consent.

 

Section 6.2                              Damage. If prior to Closing the Property is damaged
by fire or other casualty, Seller will promptly provide Purchaser written
notice thereof (the “Casualty Notice”).

 

6.2.1                  Material. In the event of any Material Damage to or
destruction of the Property or any portion thereof prior to Closing, Purchaser
may, at its option, terminate this Agreement by delivering written notice to
the Seller on or before the expiration of 30 days after the date Seller delivers
the Casualty Notice to Purchaser (and if necessary, the Closing Date shall be
extended to give the Purchaser the full thirty-day period to make such election
and to obtain insurance settlement agreements with Seller’s insurers). Upon any
such termination, the Earnest Money shall be returned to Purchaser and the
parties hereto shall have no further rights or obligations hereunder, other
than those that by their terms survive the termination of this Agreement. If
Purchaser does not so terminate this Agreement within said 30-day period, then
the parties shall proceed under this Agreement and close on schedule (subject
to extension of Closing as provided above), and as of Closing Seller shall
assign to Purchaser without representation or warranty by or recourse against
Seller all of Seller’s rights in and to any insurance proceeds (including any
rent loss insurance applicable to any period on and after the

 

14

 

Closing
Date) due Seller as a result of such damage or destruction and Purchaser shall
assume full responsibility for all needed repairs, and Purchaser shall receive
a credit at Closing for any deductible amount under such insurance policies.
For the purposes of this Agreement, “Material
Damage” and
“Materially Damaged” means
damage which is reasonably estimated to exceed $5,000,000.00 by a third party
consultant experienced in such estimating and mutually agreed upon by Seller
and Purchaser.

 

6.2.2                      Not Material. If
the Property is not Materially Damaged, then Purchaser shall not have the right
to terminate this Agreement, and Seller shall, at its option, either (a) repair
the damage before the Closing in a manner reasonably satisfactory to Purchaser
(and if necessary, Seller may extend the Closing Date up to 30 days to complete
such repairs), or (b) assign to Purchaser without representation or warranty by
or recourse against Seller all of Seller’s rights in and to any insurance
proceeds (including rent loss insurance applicable to any period after the Closing
Date) due Seller as a result of such damage or destruction and Purchaser shall
assume full responsibility for all needed repairs, and Purchaser shall receive
a credit at Closing for any deductible amount.

 

Section 6.3                              Condemnation. If proceedings in eminent domain are
instituted with respect to the Property or any portion thereof, Purchaser may,
at its option, by written notice to Seller given within ten days after Seller
notifies Purchaser of such proceedings (and if necessary the Closing Date shall
be automatically extended to give Purchaser the full ten-day period to make
such election), either: (a) terminate this Agreement, in which case the Earnest
Money shall be immediately returned to Purchaser and the parties hereto shall
have no further rights or obligations, other than those that by their terms
survive the termination of this Agreement, or (b) proceed under this Agreement,
in which event Seller shall, at the Closing, assign to Purchaser its entire
right, title and interest in and to any condemnation award, and Purchaser shall
have the sole right after the Closing to negotiate and otherwise deal with the
condemning authority in respect of such matter. If Purchaser does not give
Seller written notice of its election within the time required above, then
Purchaser shall be deemed to have elected option (b) above.

 

Section 6.4                            Hotel Employees; Manager. Purchaser covenants and agrees to retain
Manager as Purchaser’s manager of the Hotel (“Purchaser’s Manager”) after
Closing pursuant to an assumption of the Management Agreement and in any event
for so long as necessary to continue the employment of a sufficient number of
Hotel Employees on such terms and conditions so as to prevent (1) the
application of the U.S. Worker Adjustment and Retraining Notification Act (“WARN Act”), and (2) the occurrence
of a Qualifying Event (defined below) for any Hotel Employees. For purposes of
this provision, the term “Qualifying Event”
shall refer to an event resulting in the loss of group health
coverage to a qualified beneficiary as provided under applicable federal or
state law. The provisions of this Section 6.4 shall survive the Closing.

 

Section 6.5                         Assumption of Certain
Agreements, At Closing,
Purchaser shall assume the Convention Center Lease and the Management Agreement,
as well as all Service Contracts and License Agreements.

 

6.5.1               Seller agrees that Seller shall pay and
discharge each and every obligation that Seller has or may have under the
Convention Center Lease and the Management

 

15

 

Agreement
through the Closing. Seller further agrees to indemnify and hold Purchaser
harmless from and against any and all liabilities, claims, demands and expenses
of any kind or nature which arise or accrue under the Convention Center Lease
and the Management Agreement prior to Closing and Purchaser agrees to indemnify
and hold Seller harmless from and against any and all liabilities, claims,
demands and expenses of any kind of nature which arise or accrue under the
Convention Center Lease and the Management Agreement after Closing.

 

Section 6.6                              Lease Agreement. At Closing, Purchaser and Seller shall enter
into a lease agreement (“Lease Agreement”) relating to Seller’s lease of Suite
1401 in the Property, the form of which shall be negotiated during the
Inspection Period. Certain essential terms of such Lease Agreement are set
forth on Exhibit H attached hereto.

 

ARTICLE 7

CLOSING

 

Section 7.1                            Closing. The consummation of the transaction
contemplated herein (“Closing”) shall
occur on the Closing Date at the offices of Escrow Agent (or such other
location as may be mutually agreed upon by Seller and Purchaser). All Earnest
Money shall be applicable to the  Purchase
Price. Funds from Purchaser at Closing shall be deposited into and held by
Escrow Agent in a closing escrow account with a bank satisfactory to Purchaser
and Seller. Upon satisfaction or completion of all closing conditions and
deliveries, the parties shall direct Escrow Agent to immediately record and
deliver the closing documents to the appropriate parties and make disbursements
according to the closing statements executed by Seller and Purchaser.

 

Section 7.2                           Conditions to Parties’
Obligation to Close. In addition
to all other conditions set forth herein, the obligation of Seller, on the one
hand, and Purchaser, on the other hand, to consummate the transactions
contemplated hereunder are conditioned upon the following:

 

7.2.1              Representations and
Warranties. The other party’s
representations and warranties contained herein shall be true and correct in
all material respects as of the Effective Date and the Closing Date, except for
representations and warranties made as of, or limited by, a specific date,
which will be true and correct in all material respects as of the specified
date or as limited by the specified date;

 

7.2.2              Deliveries. As of the Closing Date, the other party shall
have tendered all deliveries to be made at Closing; and

 

7.2.3              Actions, Suits, etc. There shall exist no pending or threatened
actions, suits, arbitrations, claims, attachments, proceedings, assignments for
the benefit of creditors, insolvency, bankruptcy, reorganization or other
proceedings, against the other party that would materially and adversely affect
the operation or value of the Property or the other party’s ability to perform
its obligations under this Agreement.

 

7.2.4           Marriott Consent. As of the Closing Date, (a) Purchaser shall
have received a consent from Manager with respect to the Management Agreement
(the

 

16

 

“Marriott Consent”), which Marriott Consent shall provide for either an assumption by
Purchaser of all obligations and liabilities of Seller under or with respect to
the Management Agreement from and after the Closing Date and a full release of
Seller from all obligations and liabilities with respect to the Management
Agreement from and after the Closing Date at no cost or expense to Seller, or
the termination as of the Closing Date of the Management Agreement at no cost
or expense to Seller, and Purchaser, at Purchaser’s expense, shall enter into a
new management agreement with Manager in accordance with Section 10.02D of the
Management Agreement. Purchaser shall submit the information required under
Section 10.02A and 10.02B of the Management Agreement to Manager within ten
days following the Effective Date and Seller shall submit same to Manager.
Seller shall use commercially reasonable efforts to obtain the Marriott Consent
as soon as possible after the Effective Date.

 

So
long as a party is not in default hereunder, if any condition to such party’s
obligation to proceed with the Closing hereunder has not been satisfied as of
the Closing Date (or such earlier date as is provided herein), subject to any
applicable notice and cure periods provided in Section 10.1 and Section
10.2, such party may, in its sole discretion, terminate this Agreement by
delivering written notice to the other party on or before the Closing Date (or
such earlier date as is provided herein), in which event the Earnest Money
shall be returned to Purchaser so long as Purchaser is not in default
hereunder, or elect to close (or to permit any such earlier termination
deadline to pass) notwithstanding the non-satisfaction of such condition, in
which event such party shall be deemed to have waived any such condition. In
the event such party elects to close (or to permit any such earlier termination
deadline to pass), notwithstanding the non-satisfaction of such condition, said
party shall be deemed to have waived said condition, and there shall be no
liability on the part of any other party hereto for breaches of representations
and warranties of which the party electing to close had knowledge at the
Closing.

 

Section 7.3                          Seller’s Deliveries in Escrow. As of or prior to the Closing Date, Seller
shall deliver in escrow to Escrow Agent the following:

 

7.3.1              Deed. A special warranty deed in the form of Exhibit
B hereto (warranting title only against any party claiming by, through or
under Seller) in form acceptable for recordation under the law of the state
where the Property is located and including a list of Permitted Exceptions to
which the conveyance shall be subject, executed and acknowledged by Seller,
conveying to Purchaser Seller’s interest in the Real Property (the “Deed”);

 

7.3.2              Bill of Sale, Assignment and
Assumption. A Bill of Sale,
Assignment and Assumption in the form of Exhibit C attached hereto (the “Assignment”), executed and acknowledged by Seller,
vesting in Purchaser, without warranty, Seller’s right, title and interest in
and to the property described therein free of any claims, except for the
Permitted Exceptions to the extent applicable;

 

7.3.3           FIRPTA. A Foreign Investment in Real Property Tax
Act affidavit in the form of Exhibit D hereto executed by Seller;

 

17

 

7.3.4           Assignment and Assumption of Convention Center Lease/Estoppel. An assignment and assumption of the
Convention Center Lease, together with an Estoppel Certificate from Landlord
thereunder pursuant to Section 10.7(1) thereof;

 

7.3.5           Assignment and Assumption of Management Agreement. An assignment and assumption of the
Management Agreement as of Closing;

 

7.3.6           Municipal Utility District Notice. A notice regarding
The Woodlands Metro Center Municipal Utility District;

 

7.3.7           Authority. Evidence of the existence, organization and
authority of Seller and of the authority of the persons executing documents on
behalf of Seller reasonably satisfactory to the underwriter for the Title
Policy;

 

7.3.8           Vehicles. Title to all vehicles owned by Seller, free
and clear of all liens;

 

7.3.9           Notices to Lessees/Third Parties. A notice to all
lessees and third parties of the subject sale; and

 

7.3.10     Audit Letter. The Audit Letter in the form negotiated by
Seller and Purchaser during the Inspection Period.

 

7.3.11     Lease Agreement. The Lease Agreement in the form negotiated
by Seller and Purchaser during the Inspection Period.

 

7.3.12     Tenant Estoppels. Tenant Estoppel Certificates signed by
tenants under the Tenant Leases and the tenant under the Urban Retreat Lease,
each of which is dated no earlier than ten (10) business days prior to Closing
and which (a) identifies the lease in question and states that the lease is in
full force and effect and, (b) states the date through which rentals have been
paid and the amount of monthly rent payable under such lease, (c) states the
amount of the security deposit, if any, outstanding for such lease, (d) states
the date of commencement of the term of the lease, (e) states the nature of any
amendments or modifications of the lease, (f) states to the best of tenant’s
knowledge, no defaults or state of facts which with the passage of time or
notice (or both) would constitute a default, exists under the Lease, or
identifying any such defaults, events or conditions claimed by the tenant to
exist, and (g) to the best of tenant’s knowledge, no set offs, recoupments,
estoppels, claims or considerations exist against Landlord.

 

7.3.13     Additional
Documents. Any additional documents, certifications and/or affidavits
that Escrow Agent or the Title Company may reasonably require for the proper consummation
of the transaction contemplated by this Agreement (provided, however, other
than Seller’s delivery of a so-called owner’s or seller’s affidavit in favor of
the Title Company in form reasonably acceptable to the Title Company and
Seller, no such additional document shall expand any obligation, covenant,
representation or warranty of Seller or result in any new or additional
obligation, covenant, representation or warranty of Seller under this Agreement
beyond those expressly set forth in this Agreement); and 

 

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Section 7.4                          Purchaser’s Deliveries in Escrow. As of or prior to
the Closing Date, Purchaser shall deliver in escrow to Escrow Agent the
following:

 

7.4.1               Bill of Sale, Assignment and
Assumption. The Assignment, executed and acknowledged by
Purchaser;

 

7.4.2               Assignment and Assumption of
Convention Center Lease. An assignment and assumption of the
Convention Center Lease prior to Closing;

 

7.4.3               Assignment and Assumption of
Management Agreement. An assignment and assumption of the
Management Agreement as of Closing;

 

7.4.4               Municipal Utility District Notice. A notice regarding The Woodlands Metro
Center Municipal Utility District;

 

7.4.5               Authority. Evidence of the existence, organization and
authority of Purchaser and of the authority of the persons executing documents
on behalf of Purchaser reasonably satisfactory to the underwriter for the Title
Policy; and

 

7.4.6               Lease Agreement. The Lease Agreement in the form negotiated
by Seller and Purchaser during the Inspection Period.

 

7.4.7               Additional Documents. Any additional documents that Seller, Escrow
Agent or the Title Company may reasonably require for the proper consummation
of the transaction contemplated by this Agreement (provided, however, no such
additional document shall expand any obligation, covenant, representation or
warranty of Purchaser or result in any new or additional obligation, covenant,
representation or warranty of Purchaser under this Agreement beyond those
expressly set forth in this Agreement).

 

Section 7.5                          Closing Statements. As of or prior to the Closing Date, Seller
and Purchaser shall deposit with Escrow Agent executed closing statements
consistent with this Agreement in the form required by Escrow Agent and
approved by Purchaser and Seller.

 

Section 7.6                          Purchase Price. At or before 3:00 p.m. Houston, Texas time
on the Closing Date, Purchaser shall deliver to Escrow Agent the Purchase
Price, less the Earnest Money that is applied to the Purchase Price, plus or
minus applicable prorations, in immediate, same-day U.S. federal funds wired
for credit into Escrow Agent’s escrow account, which funds must be delivered in
a manner to permit Escrow Agent to deliver good funds to Seller or its designee
on the Closing Date (and, if requested by Seller, by wire transfer); in the
event that Escrow Agent is unable to deliver good funds to Seller or its
designee on the Closing Date, then the closing statements and related
prorations will be revised as necessary.

 

Section 7.7                          Possession. Seller shall deliver possession of the
Property to Purchaser at the Closing subject only to the Permitted Exceptions.

 

Section 7.8                          Delivery of Books and Records. Promptly after the
Closing, Seller shall deliver to the offices of Manager (or release to Manager
if in Manager’s possession) or to the Real Property to the extent in Seller’s
or Manager’s possession or control: License Agreements;

 

19

 

Advance Bookings; Rooms Ledger; Guest Ledger; maintenance records and
warranties; plans and specifications; licenses, permits and certificates of
occupancy; copies or originals of all books and records of account, contracts,
and copies of correspondence with tenants and suppliers; all  advertising
materials; booklets; and keys.

 

Section 7.9                          Notice to Vendors. Seller and Purchaser shall each execute at
Closing, and Purchaser shall deliver to each vendor promptly after the Closing,
a notice regarding the sale in form reasonable acceptable to Seller and
Purchaser or such other form as may be required by applicable state law.

 

Section 7.10                    Liquor Licenses. The parties acknowledge that all alcoholic
beverage licenses necessary to operate the restaurants, bars and lounges
presently located within the Hotel are held by Manager and that Manager will
continue to hold such licenses after Closing.

 

ARTICLE 8

PRORATIONS, DEPOSITS. COMMISSIONS

 

Section 8.1                          Prorations. At Closing, the following items shall be
prorated as of the date of Closing with all items of income and expense for the
Property being borne by Purchaser from and after (and including) the date of
Closing, except as provided otherwise herein: income and rents (“Rents”) that have been collected by Seller as of
Closing; fees and assessments; revenue, prepaid expenses and obligations under
Service Contracts; real and personal ad valorem taxes and standby fees (if any)
(“Taxes”); any assessments by
private covenant for the then-current calendar year of Closing; the Rooms
Ledger; and the Petty Cash, Guest Ledger and Accounts Receivable (each as
defined and as specified below). Specifically, the following shall apply to
such prorations:

 

8.1.1               Taxes. If Taxes for the year of Closing are not
known or cannot be reasonably estimated, Taxes shall be prorated based on Taxes
for the year prior to Closing. Any additional taxes relating to the year of
Closing and thereafter arising out of the consummation of the transactions
contemplated by this Agreement, shall be apportioned between Seller and
Purchaser effective as of Closing and paid by Purchaser when due and payable,
and Purchaser shall receive a credit at Closing for Seller’s apportioned share.

 

8.1.2               Utilities. Purchaser shall take all steps necessary to
effectuate the transfer of all  utilities to its name as of the
Closing Date, and where necessary, post deposits with the utility companies.
Seller shall use reasonable efforts to ensure that all utility meters are read
as of the Closing Date. Seller shall be entitled to recover any and all
deposits held by any utility company as of the Closing Date.

 

8.1.3               Rents. Purchaser will receive a credit for the
prorated amount (as of 12:01 a.m. of the Closing Date) of all Rents previously
paid to or collected by Seller and attributable to any period following
Closing. Rents are “Delinquent” when
they were due prior to the Closing Date, and payment thereof has not been made
on or before the Closing Date. Delinquent Rents will not be prorated. All sums
collected by Purchaser from and after Closing from each tenant under a License
Agreement will be applied first

 

20

 

to then to current amounts owed by such tenant to Purchaser with
respect to periods from and after the Closing Date, and then to Delinquent
Rents owed by such tenant to Seller. Any sums due Seller received by Purchaser
will be promptly remitted to Seller, but not more frequently than twice
monthly. Purchaser shall not have an exclusive right to collect any sums due
Seller from tenants under the License Agreements and Seller hereby retains the
right to pursue any tenant under the License Agreements for any sums due such
Seller for periods attributable to Seller’s ownership of the Property; provided,
however, Seller (a) shall be required to notify Purchaser in writing of Seller’s
intention to commence or pursue any legal proceedings; (b) shall only be
permitted to commence or pursue legal proceedings after the date which is three
months after Closing; and (c) shall not be permitted to commence or pursue any
legal proceedings against any tenant seeking eviction of such tenant or the
termination of such tenant’s License Agreement. Purchaser acknowledges that
Seller has advised that the tenant under the Urban Retreat Lease has been in
default from time to time in the past twelve (12) months.

 

8.1.4               Rooms Ledger. The “Rooms
Ledger” (being the final night’s room revenue for Hotel rooms
occupied as of 12:01 a.m. on the Closing Date exclusive of the charges on the
Guest Ledger (as hereafter defined) shall be shared equally by Seller and Purchaser.
Guest charges for food, beverage, telephone and similar room charges charged in
the ordinary course of business (the “Guest
Ledger”) before or as of 12:01 a.m. local time on the Closing
Date shall be retained by Seller and guest charges on the Guest Ledger after
12:01 a.m. local time on the Closing Date shall be credited to Purchaser.

 

8.1.5               Prepaid Expenses or
Revenues; Accounts Receivable; Reserves. Seller shall receive a credit for any prepaid
cash expenses for goods or services to be provided from and after the Closing
Date. Seller shall pay, at or before Closing, all other account and trade
payables then accrued with respect to the Property. Purchaser shall receive a
credit against the Purchase Price for the total of (a) prepaid rents, (b)
prepaid room receipts and deposits, function receipts and deposits and other
reservation receipts and deposits, and (c) unforfeited security deposits held
by Seller payable to a tenant under any License Agreement or payable to a
vendor under any Service Contract accepted by Purchaser hereunder. At Closing,
Seller shall receive a credit for the following: (1) all petty cash funds on
hand in connection with the guest operations at the Property as of 12:01 a.m.
local time on the Closing Date (the “Petty Cash”);
and (2) the accounts receivables for the Property actually billed to payors
(other than the final night’s room revenue and the Guest Ledger) as of 12:01
a.m. local time on the Closing Date (the “Accounts
Receivables”). The credit to Seller for the Petty Cash and
Accounts Receivables shall be calculated as follows: (A) for Petty Cash, the
actual amount of petty cash on hand, and (B) for the Accounts Receivables, a
percentage of the total amount of Accounts Receivables (as shown on the records
of the Property for Accounts Receivables) which percentage shall be agreed upon
by the parties prior to the expiration of the Inspection Period. Seller shall
assign to Purchaser at Closing all of Seller’s right, title and interest in and
to (x) the FF&E Reserve under the Management Agreement and (y) the Reserve
under the Convention Center Lease.

 

8.1.6               Retail and Other Taxes. Seller shall pay or cause to be paid prior to
delinquency all retail sales (as distinguished from any tax on the sale of any
Tangible

 

21

 

Personal Property or Intangible Personal Property effected pursuant to
this Agreement), occupancy and liquor taxes and like impositions with respect
to periods up to but not including the date of Closing, and thereafter
Purchaser shall solely be responsible for all such retail sales, occupancy and
liquor taxes and like impositions accruing from and after the Closing Date.
Purchaser shall be liable for any retail sales or use tax imposed with respect
to the sale of any Tangible Personal Property or Intangible Personal Property
effected pursuant to this Agreement, if any, and Purchaser shall indemnify,
defend and hold harmless Seller from and against any and all such taxes, which
indemnification obligation shall survive the Closing.

 

8.1.7               Hotel Employees. Periodic employee compensation, accrued
vacation pay and other employee benefits, with the assistance of Manager, shall
be prorated as of 12:01 a.m. local time on the Closing Date based on
compensation, pay and benefits accrued as of that time.

 

8.1.8               Gift Certificates: Purchaser shall receive a credit at Closing
in the amount of any “Gift Certificates” issued by Seller for free or reduced
rate room charges which have not been redeemed as of the date of Closing, and
Seller shall furnish Purchaser with detailed records of all Gift Certificates
issued by Seller including a statement identifying the amount of each Gift
Certificate and an identification of all holders of such Gift Certificates and
such other reasonable information as Purchaser may request.

 

8.1.9               Management Fees, Other Operating
Expenses and Convention Center Lease Rent: To the extent not otherwise expressly
provided for in this Section 8.1, Seller and Purchaser agree that
management fees due to Manager, and other operating expenses of the Property,
including the rent due under the Convention Center Lease, shall be prorated as
of 12:01 a.m. on the Closing Date. A final adjustment with respect to such
items shall be made as provided in Section 8.3 of this Agreement.

 

Section 8.2                          Closing Costs. Closing costs shall be allocated between
Seller and Purchaser in accordance with Section 1.2.

 

Section 8.3                          Final Adjustment After Closing. If final bills are
not available or cannot be issued prior to Closing for any item being prorated
under Section 8.1, then Purchaser and Seller agree to allocate such
items on a fair and equitable basis as soon as such bills are available, final
adjustment to be made as soon as reasonably possible after the Closing.
Payments in connection with the final adjustment shall be due within 60 days
following the Closing Date. All such rights and obligations shall survive the
Closing.

 

Section 8.4                          Hotel Sales Tax Liabilities. By no later than
one hundred twenty (120) days after the Closing Date, Seller shall obtain and
furnish Purchaser with a satisfactory certificate in a form that would preclude
any successor liability for Purchaser by reason of acquiring Seller’s hotel
business for hotel sales, use and occupancy taxes, it being deemed that a
certificate of no tax due shall be sufficient. Seller agrees that it is
responsible for paying all hotel sales, use or occupancy taxes attributable to
operations of the Property prior to Closing.

 

22

 

Section 8.5                          Commissions. Seller and Purchaser each represent and
warrant to the other that no real estate brokerage commission is payable to any
person or entity in connection with the transaction contemplated hereby, other
than to Jones Lang LaSalle Americas, Inc. (“Seller’s Broker”),
whose commission will be paid by Seller pursuant to a separate agreement, and
each agrees to and does hereby indemnify and hold the other harmless against
the payment of any commission to any other person or entity claiming by,
through or under Seller or Purchaser, as applicable. This indemnification shall
extend to any and all claims, liabilities, costs and expenses (including
reasonable attorneys’ fees and litigation costs) arising as a result of such
claims and shall survive the Closing or earlier termination of this Agreement.

 

Section 8.6                          Safe Deposit Boxes. On the Closing Date, Seller shall make (or
cause to be made) available to Purchaser at the Property all receipts and
agreements in Seller’s or Manager’s possession or control relating to all safe
deposit boxes in use at the Property, other than safes or lockboxes, if any,
located inside individual guest rooms in the Property. Purchaser shall be responsible
from and after the Closing Date for all safe deposit boxes in use at the
Property and the contents thereof. Purchaser shall indemnify, defend and hold
harmless Seller and its agents and representatives from any loss, liability,
claim, cost or expense (including reasonable attorney’s fees) to the extent
relating to any such safety deposit box arising or attributable to the period
from and after the Closing Date. Seller shall indemnify, defend and hold
harmless Purchaser and its agents and representatives from any loss, liability,
claim, cost or expense (including reasonable attorney’s fees) to the extent
relating to any such safety deposit box arising or attributable to the period
prior to the Closing Date. If either Seller or Purchaser should elect, as part
of the Closing, they shall jointly, with each holder of any such safety deposit
boxes, inventory the contents of such safety deposit boxes and seek to have the
holder thereof confirm to Seller and Purchaser, in writing, its contents. The
provisions of this Section 8.5 shall survive the Closing.

 

Section 8.7                          Inventory of Baggage. The representatives of Seller and of
Purchaser shall prepare an inventory of baggage at the Property as of 12:00
noon local time on the Closing Date (which inventory of baggage shall be
binding on all parties thereto) of (a) all luggage, valises and trunks checked
or left in the care of the Property by guests then or formerly occupying the
Property, (b) parcels, laundry, valet packages and other property of guests
checked or left in the care of the Property by guests then or formerly
occupying the Property (excluding, however, property in Property safe deposit
boxes), and (c) all items contained in the “lost and found” of the Property.
Purchaser shall be responsible from and after the Closing Date for all baggage
and other items listed in such inventory of baggage. Purchaser shall indemnify,
defend and hold harmless Seller and its agents and representatives from any
loss, claim, liability, cost or expense (including reasonable attorneys’ fees)
to the extent relating to guest baggage, packages and other property of guests
checked or left in the care of the Property by guests then or formerly
occupying the Property to the extent evidenced on the agreed inventory or
arising or attributable to the period from and after the Closing Date, and
Seller shall indemnify, defend and hold harmless Purchaser harmless from and
against any loss, claim, liability, cost or expense (including reasonable
attorneys’ fees) arising out of or with respect to any guest baggage, packages
and other property of guests checked or left in the care of the Property prior
to the Closing Date by guests then or formerly occupying the Property to the
extent not evidenced on the agreed inventory. The provisions of this Section
8.6 shall survive the Closing.

 

23

 

ARTICLE 9

REPRESENTATIONS AND WARRANTIES

 

Section 9.1                          Seller’s Representations and Warranties. Seller represents and warrants to Purchaser
that:

 

9.1.1                  Organization and Authority. Seller has been duly organized, is validly
existing, and is in good standing in the state in which it was formed. Seller
has the full right and authority and, except for the Marriott Consent, has
obtained any and all consents required to enter into this Agreement and to
consummate or cause to be consummated the transactions contemplated hereby.
Upon receipt of the Marriott Consent, this Agreement, and all of the documents
to be delivered by Seller at the Closing will be, authorized and properly
executed and constitute, or will constitute, as appropriate, the valid and
binding obligation of Seller, enforceable in accordance with their terms.

 

9.1.2                Conflicts and Pending Actions. Upon receipt of the Marriott Consent, to
Seller’s knowledge there is no agreement to which Seller is a party or that is
binding on Seller which is in conflict with this Agreement, and no other
consent, notice or approval of any person, entity, or governmental authority is
required with respect to (i) the execution and delivery of this Agreement and
any document pursuant hereto by Seller, or (ii) the consummation by Seller of
the transactions contemplated hereby or any document pursuant thereto, or (iii)
the performance by Seller of its respective obligations under this Agreement or
any document pursuant hereto. The execution, delivery and performance of this
Agreement and any document pursuant hereto by Seller and the consummation of
the transactions contemplated hereby and thereby by Seller do not (i) violate
any law, order, rule or regulation binding on Seller, (ii) violate any
provision of the limited liability company agreement of Seller, (iii) violate any
provision of any other organizational document of Seller, or (iv) result in the
creation of any lien upon any of the Property. Seller has not been served with
any process or legal filing concerning any action or proceeding against Seller
or the Property, and to Seller’s knowledge there is no action or proceeding
pending or threatened against Seller or relating to the Property, which
challenges or impairs Seller’s ability to execute or perform its obligations
under this Agreement, or which, if adversely determined, would have a material
adverse effect on the operation of the Property or the financial condition of the
Property.

 

9.1.3            Bankruptcy. Seller has not made a general assignment for
the benefit of creditors, become insolvent or filed a petition for voluntary
bankruptcy or filed a petition or answer seeking reorganization or an
arrangement or composition, extension or readjustment of its indebtedness or
consented, in any creditors’ proceeding, to the appointment of a receiver or
trustee of Seller or the Property or any part thereof or been named in an
involuntary bankruptcy proceeding, and to Seller’s knowledge, no such actions
are contemplated or have been threatened.

 

9.1.4            Service Contracts/License Agreements and other Leases. To Seller’s knowledge, the lists of Service
Contracts and License Agreements to be delivered to Purchaser pursuant to this
Agreement are correct and complete as of the date of their

 

24

 

delivery. To Seller’s knowledge, there are no outstanding obligations
for commissions, tenant improvements or other tenant concessions with respect
to the License Agreements. To Seller’s knowledge, no event has occurred which,
with notice or the passage of time (or both) would constitute a breach or
default by any party to any of the Service Contracts the License Agreements,
the Convention Center Lease, and any of the Tenant Leases. Provided with
respect to the Urban Retreat Lease, Seller is not in default thereunder.

 

9.1.5                             Notices from Governmental
Authorities. To Seller’s knowledge, it has not received,
nor to Seller’s knowledge has Manger received, from any governmental authority
written notice of any material violation of any laws applicable (or alleged to
be applicable) to the Real Property, or any part thereof, that has not been
corrected, except as may be reflected by the Property Documents or otherwise
disclosed in writing to Purchaser.

 

9.1.6                            Condemnation. To Seller’s knowledge, it has not received
written notice from any condemning authority of, nor does Seller have any
knowledge of, any pending or threatened condemnation action or eminent domain
proceeding affecting any portion of the Property.

 

9.1.7                            Personal Property. Seller owns, or will own upon the transfer
of same as required under Section 7.3.5 above, the Tangible Personal
Property and Intangible Personal Property, free and clear of all liens, claims,
and encumbrances except for the Permitted Exceptions to the extent applicable.

 

9.1.8                            Taxes. To Seller’s knowledge, all taxes related to
the ownership, use or income generated by the Property, including, without
limitation, sales and use taxes (other than those sales taxes, if any, arising
from the sale of the Property from Seller to Purchaser), hotel/motel occupancy
taxes and real and personal property taxes that are due and payable by Seller
as of the Closing Date, or are due and payable by Seller as a result of the
transactions contemplated by this Agreement, or are applicable to any period
prior to Closing, have been paid in full (or will be provided for at the
Closing pursuant to the provisions of Section 8.1.6 above), and all
required reports and returns relating thereto have been, or will be, timely
filed.

 

9.1.9                            Prohibited Persons and
Transactions. Neither Seller nor any of its affiliates,
nor any of their respective partners, members, shareholders or other equity
owners, and none of their respective employees, officers, directors,
representatives or agents is, nor will they become, a person or entity with
whom U.S. persons or entities are restricted from doing business under
regulations of the Office of Foreign Asset Control (“OFAC”)
of the Department of the Treasury (including those named on OFAC’s Specially
Designated Nationals and Blocked Persons List) or under any statute, executive
order (including the September 24, 2001, Executive Order Blocking Property and
Prohibiting Transactions with Persons Who Commit, Threaten to Commit, or
Support Terrorism), or other governmental action and is not and will not engage
in any dealings or transactions or be otherwise associated with such persons or
entities.

 

25

 

9.1.10       Hotel Employees.
Seller has no Employees at the Hotel and to Seller’s knowledge, all Hotel
Employees are employees of Manager. To Seller’s knowledge, no union is
presently serving as a collective bargaining agent for any Hotel Employees.

 

9.1.11       Permits. To Seller’s knowledge, a
true, correct and complete list of all Permits is attached hereto as Exhibit “F”
and true, correct and complete copies of the Permits have been or shall be
provided to Purchaser pursuant to Section 4.2 hereof. From and after the date
hereof, Seller will not enter into or obtain any new Permits or modify or terminate
any existing Permits, without Purchaser’s prior written consent.

 

9.1.12       Material Contracts. To Seller’s
knowledge, a true, correct and complete list of all Service Contracts is
attached hereto as Exhibit “G” and Seller has or shall provide complete copies
of the Service Contracts to Purchaser pursuant to Section 4.2 hereof.

 

9.1.13       Financial Statements. To Seller’s
knowledge, the financial statements delivered by Seller to Purchaser are
complete, accurate and fairly represent the results of the operation and the
financial condition of the Hotel for the time period covered by such financial
statements.

 

9.1.14       No Known Title Defects or Exceptions.
To Seller’s actual knowledge, except as described in the Title Commitment,
there are no unrecorded or undisclosed easements, liens, encumbrances,
covenants, conditions, restrictions, instruments, or other exceptions which
affect title to the Property (or any portion thereof). Further, Seller has complied
with all the requirements of any outstanding rights of first refusal or options
relating to the Property, any portion thereof, or any interest therein and (i)
with respect to TCID’s right of first refusal under the Convention Center
Lease, such right of first refusal has been waived or deemed waived and no such
right shall exist as of Closing regarding the subject transaction (although
such right shall continue to exist for subsequent sales and transfers as
contemplated by Article 37 of the Convention Center Lease); and (ii) with
respect to Manager’s right of offer to purchase under the Management Agreement,
Seller rejected Manager’s Offer (as defined in the Management Agreement) and
Seller is free to sell the Property to Purchaser pursuant to the terms hereof
and the subject sale does not violate Section 10.03 of the Management
Agreement.

 

9.1.15       Hazardous Materials. To Seller’s
actual knowledge, there are no known conditions on the Property that are in
violation of any environmental laws, except for hazardous substances used in
the ordinary course of business in compliance with applicable legal
requirements. To Seller’s actual knowledge, there are no pending proceedings or
inquiries by any governmental authorities relating to or arising from any environmental
laws with respect to the Property and Seller has not received written notice from
any governmental authorities threatening any such proceedings or inquiries or concerning
an uncured violation of environmental laws with respect to the Property.

 

9.1.16       No Default Under Convention Center Lease or
Management Agreement. Seller is not in default under the
Convention Center Lease and Seller has given TCID no notice of default under
the Convention Center Lease. Seller is not in

 

26

 

default
under the Management Agreement and to Seller’s knowledge, with the exception of
Manager’s failure to provide to Seller insurance policies as required under the
Management Agreement, Manager is not in default with respect to any material
obligations under the Management Agreement. Each such Agreement is in full
force and effect.

 

Section
9.2             Purchaser’s
Representations and Warranties. Purchaser represents and
warrants to Seller that:

 

9.2.1         Organization and Authority.
Purchaser has been duly organized and is validly existing as a Delaware
corporation in good standing in the state in which it was formed and is
qualified to do business in the state in which the Real Property is located.
Purchaser has the full right and authority and has obtained any and all
consents required to enter into this Agreement and to consummate or cause to be
consummated the transactions contemplated hereby. This Agreement has been, and
all of the documents to be delivered by Purchaser at the Closing (subject to
satisfaction or waiver of the conditions precedent to Closing herein) will be,
authorized and properly executed and constitute, or will constitute, as
appropriate, the valid and binding obligation of Purchaser, enforceable in
accordance with their terms.

 

9.2.2         Conflicts and Pending Action.
Subject to obtaining the Marriott Consent, there is no agreement to which
Purchaser is a party or to Purchaser’s knowledge binding on Purchaser which is
in conflict with this Agreement and no other consent, notice or approval of any
person, entity, or governmental authority is required with respect to (i) the
execution and delivery of this Agreement and any document pursuant hereto by
Purchaser, or (ii) the consummation by Purchaser of the transactions
contemplated hereby or any document pursuant thereto, or (iii) the performance
by Purchaser of its respective obligations under this Agreement or any document
pursuant hereto. The execution, delivery and performance of this Agreement and
any document pursuant hereto by Purchaser and the consummation of the
transactions contemplated hereby and thereby by Purchaser do not (i) violate
any law, order, rule or regulation binding on Purchaser, (ii) violate any
provision of the limited liability company agreement of Purchaser, (iii)
violate any provision of any other organizational document of Purchaser. There
is no action or proceeding pending or, to Purchaser’s knowledge, threatened
against Purchaser which challenges or impairs Purchaser’s ability to execute or
perform its obligations under this Agreement.

 

9.2.3         Prohibited Persons and Transactions.
Neither Purchaser nor any of its affiliates, nor any of their respective
partners, members, shareholders or other equity owners, and none of their
respective employees, officers, directors, representatives or agents is, nor
will they become, a person or entity with whom U.S. persons or entities are
restricted from doing business under regulations of OFAC of the Department of
the Treasury (including those named on OFAC’s Specially Designated Nationals
and Blocked Persons List) or under any statute, executive order (including the
September 24, 2001, Executive Order Blocking Property and Prohibiting
Transactions with Persons Who Commit, Threaten to Commit, or Support
Terrorism), or other governmental action

 

27

 

and
is not and will not engage in any dealings or transactions or be otherwise
associated with such persons or entities.

 

Section
9.3             Survival
of Representations and Warranties.
The representations and warranties set forth in this Article 9 are
made as of the Effective Date and are remade as of the Closing Date and shall
not be deemed to be merged into or waived by the instruments of Closing, but
shall survive the Closing for a period of nine (9) months (the “Survival Period”). Terms such as “to Seller’s knowledge,” “to the best of Seller’s knowledge,” “to the Seller’s actual
knowledge” or like phrases mean the actual present and conscious awareness or
knowledge of Alex Sutton and Dan Leverett (collectively, “Seller’s
Representatives”), without any duty of inquiry or investigation;
provided that so qualifying Seller’s knowledge shall in no event give rise to
any personal liability on the part of Seller’s Representatives, or any of them,
or any other officer or employee of Seller, on account of any breach of any
representation or warranty made by Seller herein; and provided, further, no
knowledge of Manager not otherwise in the actual present and conscious
knowledge of Seller’s Representatives shall be imputed to Seller’s
Representatives or Seller. Said terms do not include constructive knowledge, imputed
knowledge, or knowledge Seller or such persons do not have but could have
obtained through further investigation or inquiry. No broker, agent, or party
other than Seller is authorized to make any representation or warranty for or
on behalf of Seller. Each party shall have the right to bring an action against
the other on the breach of a representation or warranty hereunder, but only on
the following conditions: (a) the party bringing the action for breach first
learns of the breach after Closing and files such action within the Survival
Period, and (b) neither party shall have the right to bring a cause of action
for a breach of a representation or warranty unless the damage to such party on
account of such breach (individually or when combined with damages from other
breaches) equals or exceeds $25,000.00. Neither party shall have any liability
after Closing for the breach of a representation or warranty hereunder of which
the other party hereto had knowledge as of Closing. Notwithstanding any other
provision of this Agreement, any agreement contemplated by this Agreement, or
any rights which Purchaser might otherwise have at law, equity, or by statute,
whether based on contract or some other claim, Purchaser agrees that any
liability of Seller to Purchaser will be limited to $1,500,000.00; provided,
however, there shall be no cap or limit on liability with respect to Section
9.1.1 and Section 9.1.2 or any intentional misrepresentation of Seller. The
provisions of this Section 9.3 shall survive the Closing. Any breach of
a representation or warranty that occurs prior to Closing shall be governed by Article
10.

 

ARTICLE 10

DEFAULT AND REMEDIES

 

Section
10.1           Seller’s Remedies. If Purchaser fails
to consummate the purchase of the Property pursuant to this Agreement or
otherwise defaults on its obligations hereunder at or prior to Closing for any
reason except failure by Seller to perform hereunder, or if prior to Closing
any one or more of Purchaser’s representations or warranties are breached in
any material respect, and such default or breach is not cured by the earlier of
the third (3rd) business day after written notice thereof from Seller or the
Closing Date (Seller hereby agreeing to give such written notice to Purchaser
within two business days after Seller first learns of any such default or
breach by Purchaser, except no notice or cure period shall apply if Purchaser
fails to consummate the purchase of the Property hereunder), Seller shall be
entitled, as its sole remedy (except as

 

28

 

provided
in Section 4.9, Section 8.4, Section 10.3 and Section
10.4 hereof), to terminate this Agreement and recover the Earnest Money as
liquidated damages and not as penalty, in full satisfaction of claims against
Purchaser hereunder. Seller and Purchaser agree that Seller’s damages resulting
from Purchaser’s default are difficult, if not impossible, to determine and the
Earnest Money is a fair estimate of those damages which has been agreed to in
an effort to cause the amount of such damages to be certain. Notwithstanding
anything in this Section 10.1 to the contrary, in the event of Purchaser’s
default or a termination of this Agreement, Seller shall have all remedies
available at law or in equity in the event Purchaser or any party related to or
affiliated with Purchaser is asserting any claims or right to the Property that
would otherwise delay or prevent Seller from having clear, indefeasible and
marketable title to the Property, In all other events Seller’s remedies shall
be limited to those described in this Section 10.1 and Section 4.9,
Section 8.4, Section 10.3 and Section 10.4 hereof. If
Closing is consummated, Seller shall have all remedies available at law or in
equity in the event Purchaser fails to perform any obligation of Purchaser
which expressly survives the Closing under this Agreement, IN NO EVENT SHALL
PURCHASER’S DIRECT OR INDIRECT PARTNERS, SHAREHOLDERS, OWNERS OR AFFILIATES,
ANY OFFICER, DIRECTOR, EMPLOYEE OR AGENT OF THE FOREGOING, OR ANY AFFILIATE OR
CONTROLLING PERSON THEREOF HAVE ANY PERSONAL LIABILITY FOR ANY CLAIM, CAUSE OF
ACTION OR OTHER LIABILITY ARISING OUT OF OR RELATING TO THISAGREEMENT OR THE
PROPERTY, WHETHER BASED ON CONTRACT, COMMON LAW, STATUTE, EQUITY OR OTHERWISE.

 

Section 10.2          Purchaser’s Remedies. If Seller fails
to consummate the sale of the Property pursuant to this Agreement or otherwise
defaults on its obligations hereunder at or prior to Closing for any reason
except failure by Purchaser to perform hereunder, or if prior to Closing any
one or more of Seller’s representations or warranties are breached in any
material respect, and such default or breach is not cured by the earlier of the
third (3rd) business day after written notice thereof from Purchaser or the
Closing Date (Purchaser hereby agreeing to give such written notice to Seller
within two business days after Purchaser first learns of any such default or
breach by Seller, except no notice or cure period shall apply if Seller fails
to consummate the sale of the Property hereunder), Purchaser shall elect, as
its sole remedy, one of the following three (3) options: to (a) terminate this
Agreement by giving Seller timely written notice of such election prior to or
at Closing and receive a return of the Earnest Money, or (b) enforce specific
performance to consummate the sale of the Property hereunder, or (c) waive said
failure or breach and proceed to Closing without any reduction in the Purchase
Price. Notwithstanding anything herein to the contrary, Purchaser shall be
deemed to have elected to terminate this Agreement if Purchaser fails to
deliver to Seller written notice of its intent to file a claim or assert a
cause of action for specific performance against Seller on or before ten
business days following the scheduled Closing Date or, having given such
notice, fails to file a lawsuit asserting such claim or cause of action in the
county in which the Property is located within two months following the
scheduled Closing Date. Purchaser’s remedies shall be limited to those
described in this Section 10.2 and Section 8.4, Section 9.3,
Section 10.3 and Section 10.4 hereof. If Closing is consummated,
Purchaser shall have all remedies available at law or in equity in the event
Seller fails to perform any obligation of Seller which expressly survives the
Closing under this Agreement. IN NO EVENT SHALL SELLER’S DIRECT OR INDIRECT
PARTNERS, SHAREHOLDERS, OWNERS OR AFFILIATES, ANY OFFICER, DIRECTOR, EMPLOYEE
OR AGENT OF THE FOREGOING, OR ANY AFFILIATE OR CONTROLLING PERSON

 

29

 

THEREOF
HAVE ANY PERSONAL LIABILITY FOR ANY CLAIM, CAUSE OF ACTION OR OTHER LIABILITY
ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE PROPERTY, WHETHER BASED ON
CONTRACT, COMMON LAW, STATUTE, EQUITY OR OTHERWISE.

 

Section 10.3           Attorneys’ Fees. In the event
either party hereto employs an attorney in connection with claims by one party
against the other arising from the operation of this Agreement, the
non-prevailing party shall pay the prevailing party all reasonable fees and
expenses, including attorneys’ fees, incurred in connection with such claims.

 

Section 10.4           Other Expenses. If this Agreement
is terminated due to the default of a party, then the defaulting party shall
pay any fees or charges due to Escrow Agent for holding the Earnest Money as
well as any escrow cancellation fees or charges and any fees or charges due to
the Title Company for preparation and/or cancellation of the Title Commitment.

 

ARTICLE 11

DISCLAIMERS, RELEASE AND INDEMNITY

 

Section
11.1           Disclaimers
by Seller. Except as expressly set forth in this Agreement and
any document executed by Seller and delivered to Purchaser at Closing, it is
understood and agreed that Seller and Seller’s agents or employees have not at
any time made and are not now making, and they specifically disclaim, any
warranties, representations or guaranties of any kind or character, express or
implied, with respect to the Property, including, but not limited to,
warranties, representations or guaranties as to (a) matters of title (other
than Seller’s special warranty of title to be contained in the Deed), (b)
environmental matters relating to the Property or any portion thereof,
including, without limitation, the presence of Hazardous Materials in, on,
under or in the vicinity of the Property or any fact or condition existing
regarding the presence of, testing for, or remediation of, mildew, mold or mold
spores on the Property, (c) geological conditions, including, without
limitation, subsidence, subsurface conditions, water table, underground water
reservoirs, limitations regarding the withdrawal of water, and geologic faults and
the resulting damage of past and/or future faulting, (d) whether, and to the
extent to which the Property or any portion thereof is affected by any stream
(surface or underground), body of water, wetlands, flood prone area, flood
plain, floodway or special flood hazard, (e) drainage, (f) soil conditions,
including the existence of instability, past soil repairs, soil additions or
conditions of soil fill, or susceptibility to landslides, or the sufficiency of
any undershoring, (g) the presence of endangered species or any environmentally
sensitive or protected areas, (h) zoning or building entitlements to which the
Property or any portion thereof may be subject, (i) the availability of any
utilities to the Property or any portion thereof including, without limitation,
water, sewage, gas and electric, (j) usages of adjoining property, (k) access
to the Property or any portion thereof, (1) the value, compliance with the
plans and specifications, size, location, age, use, design, quality,
description, suitability, structural integrity, operation, title to, or
physical or financial condition of the Property or any portion thereof, or any
income, expenses, charges, liens, encumbrances, rights or claims on or
affecting or pertaining to the Property or any part thereof, (m) the condition
or use of the Property or compliance of the Property with any or all past,
present or future federal, state or local ordinances, rules, regulations or
laws, building, fire or zoning ordinances, codes or other similar laws, (n) the
existence or non-existence of underground storage tanks, surface impoundments,
or landfills,

 

30

 

(o) any other matter
affecting the stability and integrity of the Property, (p) the potential for
further development of the Property, (q) the merchantability of the Property or
fitness of the Property for any particular purpose, (r) the truth, accuracy or
completeness of the Property Documents, (s) tax consequences, or (t) any other
matter or thing with respect to the Property.

 

Section
11.2              Sale “As
Is, Where Is”. Purchaser acknowledges and agrees that upon
Closing, Seller shall sell and convey to Purchaser and Purchaser shall accept
the Property “AS IS, WHERE IS, WITH ALL FAULTS,” except to the extent expressly provided otherwise in this
Agreement and any document executed by Seller and delivered to Purchaser at
Closing, Except as expressly set forth in this Agreement and any document
executed by Seller and delivered to Purchaser at Closing, Purchaser has not relied
and will not rely on, and Seller has not made and is not liable for or bound
by, any express or implied warranties, guarantees, statements, representations or
information pertaining to the Property or relating thereto (including
specifically, without limitation, Property information packages distributed
with respect to the Property) made or furnished by Seller, or any property
manager, real estate broker, agent or third party representing or purporting to
represent Seller, to whomever made or given, directly or indirectly, orally or
in writing. Purchaser represents that it is a knowledgeable, experienced and
sophisticated purchaser of real estate and that, except as expressly set forth
in this Agreement and any document executed by Seller and delivered to Purchaser
at Closing, it is relying solely on its own expertise and that of Purchaser’s
consultants in purchasing the Property and shall make an independent
verification of the accuracy of any documents and information provided by
Seller. Purchaser will conduct such inspections and investigations of the
Property as Purchaser deems necessary, including, but not limited to, the
physical and environmental conditions thereof, and shall rely upon same. By
failing to terminate this Agreement prior to the expiration of the Inspection
Period, Purchaser acknowledges that Seller has afforded Purchaser a full
opportunity to conduct such investigations of the Property as Purchaser deemed
necessary to satisfy itself as to the condition of the Property and the
existence or non-existence or curative action to be taken with respect to any
Hazardous Materials on or discharged from the Property and any fact or
condition existing regarding the presence of, testing for, or remediation of,
mildew, mold or mold spores on the Property, and will rely solely upon same and
not upon any information provided by or on behalf of Seller or its agents or
employees with respect thereto, other than such representations, warranties and
covenants of Seller as are expressly set forth in this Agreement and any
document executed by Seller and delivered to Purchaser at Closing. Upon
Closing, Purchaser shall assume the risk that adverse matters, including, but
not limited to, adverse physical or construction defects or adverse
environmental, health or safety conditions, may not have been revealed by
Purchaser’s inspections and investigations. Purchaser hereby represents and
warrants to Seller that: (a) Purchaser is represented by legal counsel in
connection with the transaction contemplated by this Agreement; and (b)
Purchaser is purchasing the Property for business, commercial, investment or
other similar purpose and not for use as Purchaser’s residence. Purchaser
waives any and all rights or remedies it may have or be entitled to, deriving
from disparity in size or from any significant disparate bargaining position in
relation to Seller.

 

Section
11.3              Seller Released from Liability. Purchaser
acknowledges that it will have the opportunity to inspect the Property during
the Inspection Period, and during such period, observe its physical
characteristics and existing conditions and the opportunity to conduct such
investigation and study on and of the Property and adjacent areas as Purchaser
deems necessary,

 

31

 

and Purchaser hereby FOREVER
RELEASES AND DISCHARGES Seller from all responsibility and liability, including
without limitation, liabilities under the Comprehensive Environmental Response,
Compensation and Liability Act Of 1980 (42 U.S.C. Sections 9601 et seq.),
as amended (“CERCLA”), the Resource
Conservation and Recovery Act (42 U.S.C. Section 9601 et seq.), as amended, and
the Oil Pollution Act (33 U.S.C. Section 2701 et seq.), regarding the
condition, valuation, salability or utility of the Property, or its suitability
for any purpose whatsoever (including, but not limited to, with respect to the
presence in the soil, air, structures and surface and subsurface waters, of
Hazardous Materials or other materials or substances that have been or may in the
future be determined to be toxic, hazardous, undesirable or subject to
regulation and that may need to be specially treated, handled and/or removed
from the Property under current or future federal, state and local laws,
regulations or guidelines, and any structural and geologic conditions,
subsurface soil and water conditions and solid and hazardous waste and
Hazardous Materials on, under, adjacent to or otherwise affecting the Property)
and any fact or condition existing regarding the presence of, testing for, or
remediation of, mildew, mold or mold spores on the Property. Purchaser further
hereby WAIVES (and by Closing this transaction will be deemed to have WAIVED)
any and all objections and complaints (including, but not limited to, federal,
state and local statutory and common law based actions, and any private right
of action under any federal, state or local laws, regulations or guidelines to
which the Property is or may be subject, including, but not limited to, CERCLA)
concerning the physical characteristics and any existing conditions of the
Property. Purchaser further hereby assumes the risk of changes in applicable
laws and regulations relating to past, present and future environmental
conditions on the Property and the risk that adverse physical characteristics
and conditions, including, without limitation, the presence of Hazardous
Materials or other contaminants, including mold or mold spores, may not have
been revealed by its investigation. The waiver and release contained in this Section
11.3, however, shall not apply to any breach of Seller’s express
representations or warranties set forth in Section 9.1, but subject in
all respects to Section 9.3, and, further, nothing contained is this Section
11.3 is intended to or shall be deemed to release any claims which
Purchaser may have against any potentially liable party other than Seller with
respect to any of the matters covered in this Section 11.3, and Seller
hereby assigns, on a non-exclusive basis, any right, remedy, claim or cause of
action which Seller may have against any such other potentially liable party
with respect to any of the matters covered in this Section 11.3.

 

Section
11.4           “Hazardous Materials”
Defined. For purposes hereof, “Hazardous
Materials” means “Hazardous
Material,” “Hazardous Substance,” “Pollutant or Contaminant,”
and “Petroleum” and
“Natural Gas Liquids,” as
those terms are defined or used in Section 101 of CERCLA, and any other
substances regulated because of their effect or potential effect on public
health and the environment, including, without limitation, PCBs, lead paint,
asbestos, urea formaldehyde, radioactive materials, putrescible materials, and
infectious materials.

 

Section
11.5           Indemnity. The
parties agree to indemnify, defend and hold each other harmless of and from any
and all third party liabilities, claims, demands, and expenses of any kind or
nature which, with respect to Seller, arise or accrue prior to Closing and
which, with respect to Purchaser, arise or accrue after Closing and which are
in any way related to the ownership, maintenance, or operation of the Property.

 

32

 

Section
11.6            Survival.
The terms and conditions of this Article 11 shall expressly survive the
Closing, not merge with the provisions of any closing documents and shall be
deemed to be incorporated into the Deed.

 

Purchaser
acknowledges and agrees that the disclaimers and other agreements set forth
herein are an integral part of this Agreement and that Seller would not have
agreed to sell the Property to Purchaser for the Purchase Price without the
disclaimers and other agreements set forth above.

 

ARTICLE 12

MISCELLANEOUS

 

Section
12.1            Parties
Bound; Assignment. This Agreement, and the terms, covenants, and
conditions herein contained, shall inure to the benefit of and be binding upon
the heirs, personal representatives, successors, and assigns of each of the
parties hereto. Purchaser may assign its rights under this Agreement upon the
following conditions: (a) the assignee of Purchaser must be an entity
controlling, controlled by, or under common control with Purchaser, (b) all of
the Earnest Money must have been delivered in accordance herewith, (c) the
Inspection Period shall be deemed to have ended, (d) the assignee of Purchaser
shall assume all obligations of Purchaser hereunder, but Purchaser shall remain
primarily liable for the performance of Purchaser’s obligations, (e) a copy of
the fully executed written assignment and assumption agreement shall be
delivered to Seller at least ten days prior to Closing, and (f) the
requirements in Section 12.17 are satisfied.

 

Section
12.2            Headings.
The article, section, subsection, paragraph and/or other headings of this
Agreement are for convenience only and in no way limit or enlarge the scope or
meaning of the language hereof.

 

Section
12.3            Invalidity
and Waiver. If any portion of this Agreement is held invalid or
inoperative, then so far as is reasonable and possible the remainder of this
Agreement shall be deemed valid and operative, and, to the greatest extent
legally possible, effect shall be given to the intent manifested by the portion
held invalid or inoperative. The failure by either party to enforce against the
other any term or provision of this Agreement shall not be deemed to be a waiver
of such party’s right to enforce against the other party the same or any other
such term or provision in the future.

 

Section
12.4            Governing
Law. This Agreement shall, in all respects, be governed,
construed, applied, and enforced in accordance with the law of the state in
which the Real Property is located.

 

Section
12.5            Survival.
The provisions of this Agreement that contemplate performance after the Closing
and the obligations of the parties not fully performed at the Closing (other
than any unfulfilled closing conditions which have been waived or deemed waived
by the other party) shall survive the Closing and shall not be deemed to be
merged into or waived by the instruments of Closing.

 

Section
12.6            Entirety
and Amendments. This Agreement embodies the entire agreement
between the parties and supersedes all prior agreements and understandings
relating to

 

33

 

the
Property. This Agreement may be amended or supplemented only by an instrument
in writing executed by the party against whom enforcement is sought. All
Exhibits attached hereto are incorporated herein by this reference for all
purposes.

 

Section
12.7            Time.
Time is of the essence in the performance of this Agreement.

 

Section
12.8            Confidentiality.
Purchaser shall make no public announcement or disclosure of any information
related to this Agreement to outside brokers or third parties, before the
Closing, without the prior written specific consent of Seller; provided,
however, that Purchaser may, subject to the provisions of Section 4.6,
make disclosure of this Agreement to its Permitted Outside Parties as necessary
to perform its obligations hereunder and as may be required under laws or
regulations applicable to Purchaser.

 

Section
12.9            No
Electronic Transactions. The parties hereby acknowledge and
agree this Agreement shall not be executed, entered into, altered, amended or
modified by electronic means. Without limiting the generality of the foregoing,
the parties hereby agree the transactions contemplated by this Agreement shall
not be conducted by electronic means, except as specifically set forth in the “Notices”
section of this Agreement.

 

Section
12.10          Notices.
All notices required or permitted hereunder shall be in writing and shall be
served on the parties at the addresses set forth in Section 1.3. Any
such notices shall, unless otherwise provided herein, be given or served (a) by
overnight delivery using a nationally recognized overnight courier, (b) by
personal delivery, or (c) by facsimile transmission during normal business
hours with a confirmation copy delivered by another method permitted under this
Section 12.10. Notice given in accordance herewith for all permitted
forms of notice, shall be effective upon the earlier to occur of actual
delivery to the address of the addressee or refusal of receipt by the
addressee. Except for facsimile notices as described above, no notice hereunder
shall be effective if sent or delivered by electronic means. In no event shall
this Agreement be altered, amended or modified by electronic mail or electronic
record. A party’s address may be changed by written notice to the other party;
provided, however, that no notice of a change of address shall be effective
until actual receipt of such notice. Copies of notices are for informational
purposes only, and a failure to give or receive copies of any notice shall not
be deemed a failure to give notice. Notices given by counsel to the Purchaser
shall be deemed given by Purchaser and notices given by counsel to the Seller
shall be deemed given by Seller.

 

Section
12.11          Construction.
The parties acknowledge that the parties and their counsel have reviewed and
revised this Agreement and agree that the normal rule of construction - to the
effect that any ambiguities are to be resolved against the drafting party -
shall not be employed in the interpretation of this Agreement or any exhibits
or amendments hereto.

 

Section
12.12          Calculation
of Time Periods. Unless otherwise specified, in computing any
period of time described herein, the day of the act or event after which the
designated period of time begins to run is not to be included and the last day
of the period so computed is to be included, unless such last day is a
Saturday, Sunday or legal holiday for national banks in the location where the
Property is located, in which event the period shall run until the end of the
next day which is not a Saturday, Sunday, or legal holiday. The last day of any
period of time

 

34

 

described herein shall be
deemed to end at 5:00 p.m. local time in the state in which the Real Property
is located.

 

Section
12.13          Execution
in Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, and all of such
counterparts shall constitute one Agreement. To facilitate execution of this
Agreement, the parties may execute and exchange by telephone facsimile
counterparts of the signature pages, provided that executed originals thereof are
promptly forwarded to the other party by any of the delivery methods set forth
in Section 12.9 other than facsimile.

 

Section
12.14          No
Recordation. Without the prior written consent of Seller, there
shall be no recordation of either this Agreement or any memorandum hereof, or
any affidavit pertaining hereto, and any such recordation of this Agreement or
memorandum or affidavit by Purchaser without the prior written consent of
Seller shall constitute a default hereunder by Purchaser, whereupon Seller shall
have the remedies set forth in Section 10.1 hereof. In addition to any
such remedies, Purchaser shall be obligated to execute an instrument in
recordable form releasing this Agreement or memorandum or affidavit, and
Purchaser’s obligations pursuant to this Section 12.14 shall survive any
termination of this Agreement as a surviving obligation.

 

Section
12.15          Further
Assurances. In addition to the acts and deeds recited herein and
contemplated to be performed, executed and/or delivered by either party at Closing,
each party agrees to perform, execute and deliver, but without any obligation
to incur any additional liability or expense, on or after the Closing any
further deliveries and assurances as may be reasonably necessary to consummate
the transactions contemplated hereby or to further perfect the conveyance,
transfer and assignment of the Property to Purchaser.

 

Section
12.16          Discharge
of Obligations. The acceptance of the Deed by Purchaser shall be
deemed to be a full performance and discharge of every representation and
warranty made by Seller herein and every agreement and obligation on the part
of Seller to be performed pursuant to the provisions of this Agreement, except
those which are herein specifically stated to survive Closing.

 

Section
12.17          No Third
Party Beneficiary. The provisions of this Agreement and of the
documents to be executed and delivered at Closing are and will be for the
benefit of Seller and Purchaser only and are not for the benefit of any third
party, and accordingly, no third party shall have the right to enforce the
provisions of this Agreement or of the documents to be executed and delivered
at Closing, except that a tenant of the Property may enforce Purchaser’s
indemnity obligation under Section 4.9 hereof.

 

Section
12.18          Reporting
Person. Purchaser and Seller hereby designate the Title Company
as the “reporting person” pursuant to the provisions of Section 6045(e) of the
Internal Revenue Code of 1986, as amended.

 

Section
12.19          Like-Kind
Exchange. Purchaser may consummate the purchase of the Property
as part of a so-called like-kind exchange (the “Exchange”)
pursuant to §1031 of the Internal Revenue Code of 1986, as amended, provided
that (a) Purchaser shall notify Seller in writing no later than ten days before
Closing that it intends to consummate this transaction as

 

35

 

part
of an Exchange, and shall provide with such notice all material information
relating to the parties and properties to the Exchange; (b) all costs, fees,
and expenses attendant to the Exchange shall be the sole responsibility of
Purchaser, and Purchaser shall indemnify and hold harmless Seller from and
against any such costs, fees, and expenses; (c) the Closing shall not be
delayed or affected by reason of the Exchange nor shall the consummation or
accomplishment of the Exchange be a condition precedent or condition subsequent
to Purchaser’s obligations and covenants under this Agreement; and (d) Seller
shall not be required to acquire or hold title to any real property other than
the Property for purposes of consummating the Exchange. Purchaser agrees to
defend, indemnify and hold Seller harmless from any liability, damages, or
costs, including (without limitation) reasonable attorneys’ fees, that may result
from Seller’s acquiescence to the Exchange. Seller shall not, by this Agreement
or acquiescence to the Exchange, (l) have its rights under this Agreement,
including (without limitation) those that survive Closing, affected or
diminished in any manner or (2) be responsible for compliance with or be deemed
to have warranted to Purchaser that the Exchange in fact complies with §1031 of
the Internal Revenue Code of 1986, as amended. The terms of this Section shall
survive Closing.

 

[SIGNATURE PAGES AND EXHIBITS TO FOLLOW]

 

36

 

SIGNATURE PAGE TO AGREEMENT OF

PURCHASE AND SALE

BY AND BETWEEN

THE WOODLANDS HOTEL, L.P.

AND

INLAND AMERICAN LODGING ACQUISITION, INC.

 

IN
WITNESS WHEREOF, the parties hereto have executed this Agreement on the day and
year written below.

 

	
  SELLER:

  	
   

  	
  THE
  WOODLANDS HOTEL, L.P.,

  	 

	
   

  	
   

  	
  a Texas limited
  partnership

  	 

	
  Date executed by Seller

  	
   

  	
   

  	 

	
   

  	
   

  	
  By:

  	
  The Woodlands Hotel GP,
  L.L.C.,

  	 

	
                                 ,
  2007

  	
   

  	
   

  	
  a Texas limited liability
  company,

  	 

	
   

  	
   

  	
   

  	
  its sole General Partner

  	 

	
   

  	
   

  	
   

  	
   

  	 

	
   

  	
   

  	
   

  	
   

  	 

	
   

  	
   

  	
   

  	
  By:

  	
   

  	
   

  	 

	
   

  	
   

  	
   

  	
  Name:

  	
   

  	
   

  	 

	
   

  	
   

  	
   

  	
  Title:

  	
   

  	
   

  	 

	
   

  	
   

  	
   

  	 

	
   

  	
   

  	
   

  	 

	
  PURCHASER:

  	
   

  	
  INLAND
  AMERICAN LODGING

  	 

	
   

  	
   

  	
  ACQUISITIONS,
  INC.,

  	 

	
  Date executed by Purchaser
  

  	
   

  	
  a Delaware corporation

  	 

	
   

  	
   

  	
   

  	 

	
  8/22/, 2007

  	
   

  	
   

  	 

	
   

  	
   

  	
  By:

  	
  /s/ Marcel Verbaas

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Marcel Verbaas

  	
   

  	 

	
   

  	
   

  	
  Title:

  	
  President

  	
   

  
													

 

37

 

SIGNATURE PAGE TO AGREEMENT OF

PURCHASE AND SALE

BY AND BETWEEN

THE WOODLANDS HOTEL, L.P.

AND

INLAND AMERICAN LODGING ACQUISITION, INC.

 

IN
WITNESS WHEREOF, the parties hereto have executed this Agreement on the day and
year written below,

 

	
  SELLER:

  	
   

  	
  THE
  WOODLANDS HOTEL, L.P.,

  
	
   

  	
   

  	
  a Texas limited
  partnership

  
	
  Date executed by Seller 

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  The Woodlands Hotel GP,
  L.L.C.,

  
	
  8.22, 2007

  	
   

  	
   

  	
  a Texas limited liability
  company,

  
	
   

  	
   

  	
   

  	
  its sole General Partner

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  By:

  	
  /s/ Alexander G. Sutton
  III    

  	
   

  
	
   

  	
   

  	
   

  	
  Name:

  	
  Alexander G. Sutton III    

  	
   

  
	
   

  	
   

  	
   

  	
  Title:

  	
  President   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  PURCHASER:

  	
   

  	
  INLAND
  AMERICAN LODGING

  
	
   

  	
   

  	
  ACQUISITIONS,
  INC.,

  
	
  Date executed by Purchaser
  

  	
   

  	
  a Delaware corporation

  
	
   

  	
   

  	
   

  
	
                         ,
  2007

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  	
   

  
											

 

38

 

JOINDER BY ESCROW AGENT

 

Escrow
Agent has executed this Agreement in order to confirm that Escrow Agent shall
hold the Earnest Money required to be deposited under this Agreement and the
interest earned thereto, in escrow, and shall disburse the Earnest Money, and
the interest earned thereon, pursuant to the provisions of this Agreement.

 

	
  Date executed by Escrow
  Agent

  	
   

  	
  STEWART
  TITLE CO  OF

  
	
   

  	
   

  	
  MONTGOMERY
  COUNTY, INC.

  
	
  8-22, 2007

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
          /s/
  Cynthia M. Kojak

  	
   

  
	
   

  	
   

  	
  Name:

  	
     Cynthia M. Kojak

  	
   

  
	
   

  	
   

  	
  Title:

  	
        SR.
  Vice-President

  	
   

  
							

 

39

 

FIRST AMENDMENT TO PURCHASE AND SALE AGREEMENT

 

THIS FIRST AMENDMENT TO PURCHASE AND SALE AGREEMENT (the “First Amendment”) is made and entered
into as of the 12th day of September 2007 between THE WOODLANDS HOTEL, L.P., as Seller and INLAND AMERICAN LODGING ACQUISITIONS, INC., as
Purchaser.

 

WITNESSETH:

 

WHEREAS, Seller and Purchaser made and entered into that certain Purchase and
Sale Agreement, dated as of August 22, 2007 (the “Agreement”), with respect to
the sale and purchase of the Woodlands Waterway Marriott Hotel; and

 

WHEREAS, pursuant to the terms of the Agreement, the Inspection Period expires
on September 12, 2007; and

 

WHEREAS, Purchaser and Seller decided to amend the Agreement to extend the
Inspection Period as more particularly hereinafter set forth.

 

NOW, THEREFORE,
in consideration of the mutual terms, provisions, covenants and agreements set
forth herein and in the Agreement, and for other good and valuable
considerations, the receipt and sufficiency of which are hereby acknowledged,
Purchaser and Seller hereby agree to amend the Agreement as follows:

 

1.                                       Defined Terms: Capitalized Terms used herein and not
defined herein shall have the meaning ascribed thereto in the Agreement.

 

2.                                       Inspection Period. Section 1.1.10 of the Agreement is hereby
amended and restated in its entirety to read as follows:

 

1.1.10                                       Inspection Period:   The Period beginning on the Effective Date and
ending on September 14, 2007.

 

3.                                       Amendment. Except as hereby amended and modified the Agreement shall remain in
full force and effect in accordance with the terms thereof.

 

[SIGNATURES
APPEAR ON NEXT PAGE]

 

 

IN
WITNESS WHEREOF, Purchaser and Seller have executed this First Amendment in
manner and form sufficient to bind them as of this 12th day of
September 2007.

 

	
  SELLER:

  	
  THE
  WOODLANDS HOTEL, L.P.,

  
	
   

  	
  a Texas limited
  partnership

  
	
  Date executed by Seller 

  	
   

  
	
   

  	
  By:

  	
  The Woodlands Hotel GP,
  L.L.C.,

  
	
  September 12, 2007

  	
   

  	
  a Texas limited liability
  company,

  
	
   

  	
   

  	
  its sole General Partner

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ DAN B. LEVERETT

  	
   

  
	
   

  	
   

  	
  Name:

  	
  DAN B. LEVERETT

  	
   

  
	
   

  	
   

  	
  Title:

  	
     Vice President

  	
   

  
							

 

 

	
  PURCHASER:

  	
  INLAND
  AMERICAN LODGING

  
	
   

  	
  ACQUISITIONS,
  INC.,

  
	
  Date executed by Purchaser

  	
  a Delaware corporation

  
	
   

  	
   

  	
   

  
	
  September 12, 2007

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
  /s/ Edwin Hendriksen

  	
   

  
	
   

  	
  Name:

  	
  Edwin Hendriksen

  
	
   

  	
  Title:

  	
  Senior Vice President

  
					

 

2

 

SECOND
AMENDMENT TO PURCHASE AND SALE AGREEMENT

 

THIS SECOND AMENDMENT TO PURCHASE AND SALE AGREEMENT (the “Second Amendment”) is made and entered
into as of this 14th day of September, 2007 between THE
WOODLANDS HOTEL, L.P., as Seller and INLAND
AMERICAN LODGING ACQUISITIONS, INC., as Purchaser.

 

WITNESSETH:

 

WHEREAS,
Seller and Purchaser made and entered into that certain Purchase and Sale
Agreement dated as of August 22, 2007, as amended by that certain First
Amendment to Purchase and Sale Agreement dated as of September 12, 2007
(together the “Agreement”) with respect to the sale and purchase of the
Woodlands Waterway Marriott Hotel; and

 

WHEREAS,
pursuant to the terms of the Agreement, the Inspection Period expires on
September 14, 2007; and

 

WHEREAS,
Purchaser and Seller have agreed to amend the Agreement to further extend the
Inspection Period as more particularly hereinafter set forth.

 

NOW, THEREFORE,
in consideration of the mutual terms, provisions, covenants and agreements set
forth herein and in the Agreement, and for other good and valuable
considerations, the receipt and sufficiency of which are hereby acknowledged,
Seller and Purchaser hereby agree to further amend the Agreement as follows:

 

1.                                       Defined Terms. Capitalized Terms used herein and not
defined herein shall have the meanings ascribed thereto in the Agreement.

 

2.                                       Inspection Period. Section 1.1.10 of the Agreement is hereby
amended and restated in its entirety to read as follows:

 

1.1.10                                       Inspection Period:   The Period beginning on the
Effective Date and ending on September 19, 2007.

 

3.                                       Amendment. Except as hereby amended and modified, the Agreement shall remain in
full force and effect in accordance with the terms thereof.

 

[SIGNATURES
APPEAR ON NEXT PAGE]

 

 

IN WITNESS WHEREOF, Purchaser and Seller have executed this Second Amendment in the manner
and form sufficient to bind them as of this 14th day of September, 2007.

 

	
  SELLER:

  	
  THE
  WOODLANDS HOTEL, L.P.,

  
	
   

  	
  a Texas limited
  partnership

  
	
  Date executed by Seller 

  	
   

  
	
   

  	
  By:

  	
  The Woodlands Hotel GP,
  L.L.C.,

  
	
  September 14, 2007

  	
   

  	
  a Texas limited liability
  company,

  
	
   

  	
   

  	
  its sole General Partner

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ DAN B. LEVERETT

  	
   

  
	
   

  	
   

  	
  Name:

  	
  DAN B. LEVERETT

  	
   

  
	
   

  	
   

  	
  Title:

  	
     Vice President

  	
   

  
							

 

 

	
  PURCHASER:

  	
  INLAND
  AMERICAN LODGING

  
	
   

  	
  ACQUISITIONS,
  INC.,

  
	
  Date executed by Purchaser

  	
  a Delaware corporation

  
	
   

  	
   

  	
   

  
	
  September 14, 2007

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
  /s/ Edwin Hendriksen

  	
   

  
	
   

  	
  Name:

  	
  Edwin Hendriksen

  
	
   

  	
  Title:

  	
  Senior Vice President

  
					

 

 

THIRD AMENDMENT TO PURCHASE AND SALE AGREEMENT

 

THIS THIRD AMENDMENT TO PURCHASE AND SALE AGREEMENT (the “Third Amendment”) is made and entered
into as of this 19th day of September, 2007 between THE WOODLANDS HOTEL, L.P., as Seller and INLAND AMERICAN LODGING ACQUISITIONS, INC., as
Purchaser.

 

WITNESSETH:

 

WHEREAS, Seller and Purchaser made and entered into that certain Purchase and
Sale Agreement dated as of August 22, 2007, as amended by that certain First
Amendment to Purchase and Sale Agreement dated as of September 12, 2007, and as
further amended by that certain Second Amendment to Purchase and Sale Agreement
dated as of September September 14, 2007 (collectively the “Agreement”) with
respect to the sale and purchase of the Woodlands Waterway Marriott Hotel; and

 

WHEREAS, pursuant to the terms of the Agreement, the Inspection Period expires
on September 14, 2007; and

 

WHEREAS, Purchaser and Seller have agreed to amend the Agreement to further
extend the Inspection Period as more particularly hereinafter set forth.

 

NOW, THEREFORE, in consideration of the mutual terms, provisions, covenants and
agreements set forth herein and in the Agreement, and for other good and
valuable considerations, the receipt and sufficiency of which are hereby
acknowledged, Seller and Purchaser hereby agree to further amend the Agreement
as follows:

 

1.                                       Defined Terms. Capitalized Terms used herein and not
defined herein shall have the meanings ascribed thereto in the Agreement.

 

2.                                       Inspection Period. Section 1.1.10 of the Agreement is hereby
amended and restated in its entirety to read as follows:

 

1.1.10                                       Inspection Period:    The Period beginning on the Effective Date and
ending on October 1, 2007.

 

3.                                       Amendment. Except as hereby amended and modified, the Agreement shall remain in
full force and effect in accordance with the terms thereof.

 

[SIGNATURES
APPEAR ON NEXT PAGE]

 

 

IN WITNESS WHEREOF, Purchaser and Seller have executed this Third
Amendment in the manner and form sufficient to bind them as of this 19th day of
September, 2007.

 

	
  SELLER:

  	
  THE
  WOODLANDS HOTEL, L.P.,

  
	
   

  	
  a Texas limited
  partnership

  
	
  Date executed by Seller 

  	
   

  
	
   

  	
  By:

  	
  The Woodlands Hotel GP,
  L.L.C.,

  
	
  September 19, 2007

  	
   

  	
  a Texas limited liability
  company,

  
	
   

  	
   

  	
  its sole General Partner

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ Alexander G. Sutton III

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Alexander G. Sutton III

  	
   

  
	
   

  	
   

  	
  Title:

  	
  President

  	
   

  
							

 

 

	
  PURCHASER:

  	
  INLAND
  AMERICAN LODGING

  
	
   

  	
  ACQUISITIONS,
  INC.,

  
	
  Date executed by Purchaser

  	
  a Delaware corporation

  
	
   

  	
   

  	
   

  
	
  September 19, 2007

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
  /s/ Edwin Hendriksen

  	
   

  
	
   

  	
  Name:

  	
  Edwin Hendriksen

  
	
   

  	
  Title:

  	
  Senior Vice President

  
					

 

 

FOURTH
AMENDMENT TO PURCHASE AND SALE
AGREEMENT

 

THIS FOURTH AMENDMENT TO PURCHASE AND SALE AGREEMENT (the “Fourth Amendment”) is made and entered
into as of this 1st day of October, 2007 between THE WOODLANDS HOTEL, L.P., as Seller and INLAND AMERICAN LODGING ACQUISITIONS, INC., as
Purchaser.

 

WITNESSETH:

 

WHEREAS, Seller and Purchaser made and entered into that certain Purchase and
Sale Agreement dated as of August 22, 2007, as amended by that certain First
Amendment to Purchase and Sale Agreement dated as of September 12, 2007, as
amended by that certain Second Amendment to Purchase and Sale Agreement dated
as of September 14, 2007 and as further amended by that certain Third Amendment
to Purchase and Sale Agreement dated as of September 19, 2007 (collectively the
“Agreement”) with respect to the sale and purchase of the Woodlands Waterway
Marriott Hotel; and

 

WHEREAS,
pursuant to the terms of the Agreement, the Inspection Period expires on
October 1, 2007; and

 

WHEREAS, Purchaser and Seller have agreed to amend the Agreement to further
extend the Inspection Period as more particularly hereinafter set forth.

 

NOW, THEREFORE, in consideration of the mutual terms, provisions, covenants and
agreements set forth herein and in the Agreement, and for other good and
valuable considerations, the receipt and sufficiency of which are hereby
acknowledged, Seller and Purchaser hereby agree to further amend the Agreement
as follows:

 

1.                                       Defined Terms. Capitalized Terms used herein and not
defined herein shall have the meanings ascribed thereto in the Agreement.

 

2.                                       Inspection Period. Section 1.1.10 of the Agreement is hereby
amended and restated in its entirety to read as follows:

 

1.1.10                                       Inspection Period:   The Period beginning on the
Effective Date and ending on October 28, 2007.

 

3.                                       Amendment. Except as hereby amended and modified, the Agreement shall remain in
full force and effect in accordance with the terms thereof.

 

[SIGNATURES
APPEAR ON NEXT PAGE]

 

 

IN WITNESS WHEREOF, Purchaser and Seller have executed this Fourth Amendment in the manner
and form sufficient to bind them as of this 1st day of October, 2007.

 

	
  SELLER:

  	
  THE
  WOODLANDS HOTEL, L.P.,

  
	
   

  	
  a Texas limited
  partnership

  
	
  Date executed by Seller 

  	
   

  
	
   

  	
  By:

  	
  The Woodlands Hotel GP,
  L.L.C.,

  
	
  October 1, 2007

  	
   

  	
  a Texas limited liability
  company,

  
	
   

  	
   

  	
  its sole General Partner

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ Alexander G. Sutton III

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Alexander G. Sutton III

  	
   

  
	
   

  	
   

  	
  Title:

  	
  President

  	
   

  
							

 

 

	
  PURCHASER:

  	
  INLAND
  AMERICAN LODGING

  
	
   

  	
  ACQUISITIONS,
  INC.,

  
	
  Date executed by Purchaser

  	
  a Delaware corporation

  
	
   

  	
   

  	
   

  
	
  October 1, 2007

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
  /s/ Edwin Hendriksen

  	
   

  
	
   

  	
  Name:

  	
  Edwin Hendriksen

  
	
   

  	
  Title:

  	
  Senior Vice President

  
					

 

 

FIFTH AMENDMENT TO PURCHASE AND SALE AGREEMENT

 

THIS FIFTH AMENDMENT TO PURCHASE AND SALE AGREEMENT (the “Fifth Amendment”) is made and entered
into as of this 2nd day of October, 2007 between THE WOODLANDS HOTEL, L.P., as Seller and INLAND AMERICAN LODGING ACQUISITIONS, INC., as
Purchaser.

 

WITNESSETH:

 

WHEREAS, Seller and Purchaser made and entered into that certain Purchase and Sale
Agreement dated as of August 22, 2007, as amended by that certain First
Amendment to Purchase and Sale Agreement dated as of September 12, 2007, as
amended by that certain Second Amendment to Purchase and Sale Agreement dated
as of September 14, 2007, as further amended by that certain Third Amendment to
Purchase and Sale Agreement dated as of September 19, 2007, and as further
amended by that certain Fourth Amendment to Purchase and Sale Agreement dated
as of October 1, 2007 (collectively the “Agreement”) with respect to the sale
and purchase of the Woodlands Waterway Marriott Hotel; and

 

WHEREAS, Seller and Purchaser desire to amend the Agreement in certain respects
as more particularly hereinafter set forth.

 

NOW, THEREFORE, in consideration of the mutual terms,
provisions, covenants and agreements set forth herein and in the Agreement, and
for other good and valuable considerations, the receipt and sufficiency of
which are hereby acknowledged, Seller and Purchaser hereby agree to further
amend the Agreement as follows:

 

1.                                         Defined Terms. Capitalized Terms used herein and not
defined herein shall have the meanings ascribed thereto in the Agreement.

 

2.                                         Closing Date. Section 1.1.11 of the Agreement is hereby
amended and restated in its entirety to read as follows:

 

1.1.11                                   Closing Date:                                                November 15, 2007.

 

3.                                         Earnest Money. Section 3.1 of the Agreement is hereby
deleted in its entirety and replaced with the following:

 

Section
3.1                                      Deposit and Investment of
Earnest Money. Within
two business days after the Effective Date, Purchaser shall deposit the Initial
Earnest Money with Escrow Agent. The parties acknowledge that the Initial
Earnest Money was timely delivered. On or before October 3, 2007, Purchaser
shall deposit the Additional Earnest Money as specified in Section 1.1.4
above, with Escrow Agent. Escrow Agent shall invest the Earnest Money in
government insured interest-bearing accounts satisfactory to Seller and
Purchaser, shall not commingle the Earnest Money with any funds of Escrow Agent
or others, and shall promptly provide Purchaser and Seller with confirmation of
the investments made. Such account shall

 

1

 

have no penalty for early
withdrawal, and Purchaser accepts all risks with regard to such account.

 

4.                                         Additional Conditions to Close. Section 7.2 of the Agreement is hereby
amended to include the following new subsections 7.2.5, 7.2.6, 7.2.7 and 7.2.8
immediately following subsection 7.2.4:

 

7.2.5                        Property Condition
Assessment. Prior to the Closing
Date, Seller shall cause to be completed the work and repairs set forth on Schedule
1 attached to this Fifth Amendment. If such work is not completed by
Closing, Seller shall escrow at Closing funds necessary to complete such work
and repairs.

 

7.2.6                        Fill Prevention, Control and
Counter Measure Plan. Prior to
the Closing Date, Seller shall have caused to be prepared and filed with the
appropriate governmental authorities a Fill Prevention, Control and Counter
Measure Plan in accordance with applicable law for the 5,000 gallon diesel
above ground storage tank located on the Property.

 

7.2.7                        3.05 Audit Letter. Seller shall have executed a Section 3.05
Audit Letter in the form attached hereto as Schedule 2.

 

7.2.8                        Additional Estoppels Matters. Seller shall cause those matters set forth on
Schedule 3 attached hereto to be completed and shall deliver evidence of
such completion to Purchaser prior to Closing.

 

5.                                         Seller’s Deliveries. Subsection 7.3.13 of Section 7.3 is hereby
amended and restated in its entirety to read as follows:

 

7.3.13                  Additional Documents. (a) Any additional documents which Seller has
agreed to or is required to deliver pursuant to the terms of this Agreement,
and (b) any additional documents, certifications and/or affidavits which Escrow
Agent or the Title Company may reasonably require for the proper consummation
of the transaction contemplated by this Agreement (provided, however, other
than Seller’s delivery of a so-called owner’s or seller’s affidavit in favor of
the Title Company in form reasonably acceptable to the Title Company and
Seller, no such additional document required by the Escrow Agent or Title
Company shall expand any obligation, covenant, representation or warranty of
Seller or result in any new or additional obligation, covenant, representation
or warranty of Seller under this Agreement beyond those expressly set forth in
this Agreement); and

 

6.                                         Accounts Receivable. Section 8.1.5 of the Agreement contemplates
that the credit to Seller for Accounts Receivables shall be the percentage of
the total amount of Accounts Receivables agreed upon by the parties prior to
the expiration of the Inspection Period. This Fifth Amendment confirms that
Purchaser has agreed to pay for 100% of the Accounts Receivables outstanding as
of Closing.

 

2

 

7.                                         Trademark License Agreement. Attached hereto as Schedule 4 is the
form of Trademark License Agreement agreed upon by the parties as contemplated
in Section 2.1.3 of the Agreement.

 

8.                                         Lease Agreement. Attached hereto as Schedule 5 is the
form of Lease Agreement agreed upon by the parties as contemplated in Section
6.6 of the Agreement.

 

9.                                         Amendments. Except as hereby amended and modified, the Agreement shall remain in
full force and effect in accordance with the terms thereof.

 

[SIGNATURES
APPEAR ON NEXT PAGE]

 

3

 

IN WITNESS WHEREOF, Purchaser and Seller have executed this Fifth Amendment in the manner
and form sufficient to bind them as of this 2nd day of October, 2007.

 

	
  SELLER:

  	
  THE
  WOODLANDS HOTEL, L.P.,

  
	
   

  	
  a Texas limited
  partnership

  
	
  Date executed by Seller

  	
   

  
	
   

  	
  By:

  	
  The Woodlands Hotel GP,
  L.L.C.,

  
	
  October 2, 2007

  	
   

  	
  a Texas limited liability
  company,

  
	
   

  	
   

  	
  its sole General Partner

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ Alexander G. Sutton III

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Alexander G. Sutton III

  	
   

  
	
   

  	
   

  	
  Title:

  	
  President

  	
   

  
							

 

 

	
  PURCHASER:

  	
  INLAND
  AMERICAN LODGING

  
	
   

  	
  ACQUISITIONS,
  INC.,

  
	
  Date executed by Purchaser

  	
  a Delaware corporation

  
	
   

  	
   

  
	
  October 2, 2007

  	
   

  
	
   

  	
  By:

  	
   

  	
  /s/ Edwin Hendriksen

  	
   

  
	
   

  	
  Name:

  	
  Edwin Hendriksen

  
	
   

  	
  Title:

  	
  Senior Vice President

  

 

4

 

SCHEDULE 1

 

PROPERTY CONDITION ASSESSMENT

 

Modify and re-slope soil
areas causing ponding water adjacent to the Convention Center Building.

 

Replace ground light fixtures.

 

Further investigation of
Skybridge intersection point by a licensed structural engineer.*

 

Prep and paint exterior
stairs at the north end of the Convention Center Building.

 

Replace broken sliding door
sidelite glazing at Room 840.

 

Repair active roof/deck
leaks at the northwest side of the Convention Center Building.

 

Repair active roof leak at
the parking garage southwest elevator lobby.

 

Mitigate items of concern
regarding the electrical systems and labeled as “Advisory” in the infrared Scan
Report. **

 

Re-inspect life safety and
fire protection throughout each building. **

 

Re-inspect kitchen hood
ANSUL Systems. **

 

Install lever-type sink
handles at each handicap accessible guestroom.

 

Remove and replace water
damaged interior finishes in the sound room.

 

*                                         Any costs to repair and stabilize the
structural system shall also be paid by Seller (or the funds will be escrowed
at Closing).

 

**                                  Identified costs to remedy this item shall
also be paid by Seller (or the funds will be escrowed at Closing).

 

 

SCHEDULE
2

 

SELLER’S
AUDIT LETTER

 

[Seller’s
Audit Letter is behind this page.]

 

 

KPMG LLP

303 E. Wacker Drive

Chicago, IL 60601

 

Date - TBD

 

Ladies and Gentlemen:

 

We are providing this letter in connection with your
audits of the balance sheets of The Woodlands Hotel, LP (the “Partnership”) as
of December 31, 2006, and the related statements of operations, retained
earnings, and cash flows for the year then ended for the purpose of expressing
an opinion as to whether these financial statements present fairly, in all
material respects, the financial position, results of operations, and cash
flows of the Partnership in conformity with U.S. generally accepted accounting
principles.

 

Certain representations in this letter are described
as being limited to matters that are material. Items are considered material,
regardless of size, if they involve an omission or misstatement of accounting
information that, in the light of surrounding circumstances, makes it probable
that the judgment of a reasonable person relying on the information would be
changed or influenced by the omission or misstatement.

 

The Partnership has contracted with Marriott Hotel
Services, Inc. (the “Manager”) to manage the day-to-day operations of The
Woodlands Waterway Marriott Hotel (the “Hotel”), including all accounting
functions. Representations made by the undersigned rely on communications from
the Manager, and phrases such as “knowledge” and “actual knowledge” are made in
reliance on these communications. Representations made by the undersigned are
also made based on the Partnership’s knowledge of Partnership activities.

 

Except as provided in Exhibit A, the undersigned
confirm, to our actual knowledge and belief, the following representations made
to you during your audit:

 

1.                                       The
financial statements referred to above are fairly presented in conformity with
U.S. generally accepted accounting principles.

 

2.                                       We
have made available to Inland American Lodging Acquisitions, Inc. (“Inland”) :
all financial records and related data to the extent the Partnership has, or
has access thereto,

 

 

3.                                       Except
as disclosed to you in writing, there have been no:

 

a.                                       Circumstances
that have resulted in communications from the Partnership’s legal counsel to
the Partnership reporting evidence of a material violation of securities law or
breach of fiduciary duty, or similar violation by the Partnership or any agent
thereof.

 

b.                                      Communications
from regulatory agencies concerning noncompliance with, or deficiencies in,
financial reporting practices.

 

4.                                       There
are no:

 

a.                                       Violations
or possible violations of laws or regulations, whose effects should be considered
for disclosure in the financial statements or as a basis for recording a loss
contingency.

 

b.                                      Other
liabilities or gain or loss contingencies that are required to be accrued or disclosed
by SFAS No. 5.

 

c.                                       Material
transactions that have not been properly recorded in the accounting records
underlying the financial statements.

 

d.                                      Events
that have occurred subsequent to the balance sheet date and through the date of
this letter that would require adjustment to or disclosure in the financial statements.

 

e.                                       Changes
in internal control over financial reporting or other factors that have occurred
subsequent to the balance sheet date and through the date of this letter that
might significantly affect internal control over financial reporting, including
corrective actions taken by management with regard to significant deficiencies
and material weaknesses.

 

5.                                       We
believe that the effects of the uncorrected financial statement misstatements summarized
in the accompanying schedule are immaterial, both individually and in the aggregate,
to the financial statements taken as a whole.

 

6.                                       We
acknowledge our responsibility for the design and implementation of programs
and controls to prevent, deter and detect fraud for the Partnership. The
Partnership has neither designed nor implemented any programs at the Hotel to
prevent, deter and detect fraud. We understand that the term “fraud” includes
misstatements arising from

 

2

 

fraudulent financial
reporting and misstatements arising from misappropriation of assets.

 

Misstatements arising
from fraudulent financial reporting are intentional misstatements, or omissions
of amounts or disclosures in financial statements to deceive financial
statement users. Misstatements arising from misappropriation of assets involve
the theft of an entity’s assets where the effect of the theft causes the
financial statements not to be presented in conformity with U.S. generally
accepted accounting principles.

 

7.             Other
than what has been disclosed in Exhibit A, we have no actual knowledge of any fraud
or suspected fraud affecting the entity involving:

 

a.                                       Management,

 

b.                                      Employees
who have significant roles in internal control over financial reporting, or

 

c.                                       Others
where the fraud could have a material effect on the financial statements.

 

8.             We
have no actual knowledge of any allegations of fraud or suspected fraud
affecting the entity received in communications from employees or, former
employees of the Partnership.

 

9.             The
Partnership has no plans or intentions that may materially affect the carrying
value or classification of assets and liabilities.

 

10.           We
have no actual knowledge of any officer or director of the Partnership, or any
other person acting under the direction thereof, having taken any action to
fraudulently influence, coerce, manipulate or mislead you during your
integrated audit.

 

11.           To
our actual knowledge the following have been properly recorded or disclosed in
the financial statements:

 

a.                                       Related
party transactions including sales, purchases, loans, transfers, leasing arrangements,
guarantees, ongoing contractual commitments and amounts receivable from or
payable to related parties.

 

We understand that the
term “related party” refers to affiliates of the enterprise; entities for which
investments are accounted for by the equity method by the enterprise; trusts
for the benefit of employees, such as pension and profit-

 

3

 

sharing trusts that are
managed by or under the trusteeship of management; principal owners of the
enterprise; its management; members of the immediate families of principal
owners of the enterprise and its management; and other parties with which the
enterprise may deal if one party controls or can significantly influence the
management or operating policies of the other to an extent that one of the
transacting parties might be prevented from fully pursuing its own separate
interests. Another party also is a related party if it can significantly
influence the management or operating policies of the transacting parties or if
it has an ownership interest in one of the transacting parties and can
significantly influence the other to an extent that one or more of the
transacting parties might be prevented from fully pursuing its own separate
interests.

 

b.                                      Guarantees,
whether written or oral, under which the Partnership is contingently liable,
including guarantee contracts and indemnification agreements pursuant to FASB
Interpretation No. 45, Guarantor’s
Accounting and Disclosure Requirements for Guarantees, Including Indirect
Guarantees of Indebtedness of Others.

 

c.                                       Significant
estimates and material concentrations known to management that are required to
be disclosed in accordance with the AICPA’s Statement of Position (SOP) 94-6, Disclosure of Certain Significant Risks and
Uncertainties.

 

Significant estimates are
estimates at the balance sheet date, which could change materially within the
next year. Concentrations refer to volumes of business, revenues, available
sources of supply, or markets or geographic areas for which it is reasonably
possible that events could occur which would significantly disrupt normal
finances within the next year. Concentrations include material sources of
financing, including off-balance sheet arrangements and transactions with
unconsolidated, limited purpose entities, and contingencies inherent in the
arrangements, that are reasonably likely to affect the continued availability
of liquidity and financing.

 

d.                                      Off-balance
sheet activities, including accounting policies relating to non-consolidation
and revenue recognition. Specifically, for those off-balance sheet activities
in which the Partnership is a sponsor or transferor, the majority owners of the
off-balance sheet vehicle are independent third parties who have made and
maintained a substantive capital investment in the vehicle, control the vehicle
and have substantive risks and rewards of the assets of the vehicle, including
residuals.

 

4

 

e.                                       Variable
interest entities, and significant variable interests in variable interest entities
in which the Partnership is not deemed the primary beneficiary, pursuant to
FASB Interpretation No. 46 (revised December 2003), Consolidation of Variable Interest Entities (FIN 46R).

 

f.                                         Significant
common ownership or management control relationships requiring disclosure.

 

g.                                      Agreements
to repurchase assets previously sold, including sales with recourse.

 

12.           The
Partnership has satisfactory title to all owned assets.

 

13.           The
Partnership has complied with all aspects of contractual agreements that would
have a material effect on the financial statements in the event of
noncompliance.

 

14.           Receivables
reported in the financial statements represent valid claims against debtors for
sales or other charges arising on or before the balance-sheet date and have
been appropriately reduced to their estimated net realizable value.

 

15.           Debt
securities that have been classified as held-to-maturity have been so
classified due to our intent and ability to hold such securities to maturity.
All other debt securities have been classified as available-for-sale or
trading. Declines in value of debt or equity securities classified as either
available-for-sale or held-to-maturity are considered to be temporary because
we have both the intent and ability to hold these impaired securities for a
sufficient period of time, until maturity if necessary, to allow for their
recovery in market value.

 

16.           The
following information about financial instruments with off-balance-sheet risk
and financial instruments with concentrations of credit risk has been properly
disclosed in the financial statements:

 

a.                                       Extent,
nature, and terms of financial instruments with off-balance-sheet risk;

 

b.                                      The
amount of credit risk of financial instruments with off-balance-sheet credit risk,
and information about the collateral supporting such financial instruments; and

 

c.                                       Significant
concentrations of credit risk arising from all financial instruments and
information about the collateral supporting such financial instruments.

 

5

 

17.           The
Partnership is responsible for determining the fair value of financial
instruments as required by SFAS No. 107, Disclosures
about Fair Value of Financial Instruments. The amounts disclosed
represent the Partnership’s best estimate of fair value of financial
instruments required to be disclosed under the SFAS No. 107 (and other assets
or liabilities, if separately disclosed). The Partnership also has disclosed
the methods and significant assumptions used to estimate the fair value of
financial instruments.

 

18.           The
Partnership’s reporting units have been appropriately identified in accordance
with SFAS No. 142, Goodwill and Other
Intangible Assets. Provision has been made for any impairment losses
related to goodwill and/or non-amortizable intangible assets.

 

19.           The
Partnership has accounted for asset retirement obligations in accordance with
SFAS No. 143, Accounting for Asset
Retirement Obligations, and FIN 47, Accounting
for Conditional Asset Retirement Obligations, an interpretation of FASB
Statement No. 143 (issued march 2005). All legal obligations
associated with the retirement of tangible long-lived assets have been
recognized. The Partnership recognized the obligations when incurred using
management’s best estimate of fair value.

 

20.           The
Partnership has appropriately grouped long-lived assets together for purposes
of assessing impairment in accordance with SFAS No. 144, Accounting for the Impairment or Disposal of
Long-Lived Assets. We have reviewed long-lived assets, including
amortizable intangible assets, to be held and used for impairment whenever
events or changes in circumstances have indicated that the carrying amount of
the assets might not be recoverable. Provision has been made for any material
adjustments to long-lived assets including amortizable intangible assets.

 

21.           We
are responsible for making the fair value measurements and disclosures included
in the financial statements, including determining the fair value of
investments for which a readily determinable fair value does not exist. As part
of fulfilling this responsibility, we have established an accounting and
financial reporting process for determining the fair value measurements and
disclosures, considered the appropriateness of valuation methods, adequately
supported any significant assumptions used, and ensured that the presentation
and disclosure of the fair value measurements are in accordance with U.S.
generally accepted accounting principles. We believe the assumptions and
methods used by us, including those used by specialists engaged by us, are
appropriate in the circumstances and the resulting valuations and disclosures
are reasonable.

 

22.           We
believe that all material expenditures that have been deferred to future
periods will be recoverable.

 

6

 

23.           All
sales transactions entered into by the Partnership are final and there are no side
agreements with customers, or other terms in effect, which allow for the return
of merchandise, except for defectiveness or other conditions covered by usual
and customary warranties.

 

24.           The
unaudited interim financial information accompanying (presented in Note X to)
the financial statements for the (identify all related periods) has been
prepared and presented in conformity with U.S. generally accepted accounting
principles(4) applicable to interim financial information (and with Item 302(a)
of Regulation S-K). The accounting principles used to prepare the unaudited
interim financial information are consistent with those used to prepare the
audited financial statements.

 

25.           The
Partnership has accounted for its derivatives and hedging activities in accordance
with SFAS No. 133, Accounting for Derivative
Instruments and Hedging Activities, and SFAS No. 138, Accounting for Certain Derivative Instruments and
Certain Hedging Activities, an Amendment of SFAS No. 133, and SFAS
No. 149, Amendment of SFAS No. 133 on
Derivative Instruments and Hedging Activities, including the
requirement for contemporaneous documentation of the hedging relationship and
the Partnership’s risk management objective and strategy for entering into the
hedge as well as initial and periodic effectiveness assessments. The estimate
of fair value of derivative instruments is in compliance with EITF Issue 02-03,
Issues Involved in Accounting for Derivative
Contracts Held for Trading Purposes and Contracts Involved in Energy Trading
and Risk Management Activities, including the propriety of
recognized gains and losses at inception of the derivative instruments when
using internal valuation techniques.(35)

 

26.           We
have disclosed to you all accounting policies and practices we have adopted that,
if applied to significant items or transactions, would not be in accordance
with U.S. generally accepted accounting principles (GAAP). We have evaluated
the impact of the application of each such policy and practice, both
individually and in the aggregate, on the Partnership’s current period
financial statements, and the expected impact of each such policy and practice
on future periods’ financial reporting. We believe the effect of these policies
and practices on the financial statements is not material. Furthermore, we do
not believe the impact of the application of these policies and practices will
be material to the financial statements in future periods.

 

27.           Gross
revenue includes only those sales for which the Partnership has acted as a
principal in the transaction, takes title to the products, and has the risks
and rewards of ownership, including the risk of loss for collection, delivery
and returns. Any sales for which the Partnership has acted as an agent or
broker without assuming the risks and rewards of ownership have been reported
on a net basis.

 

7

 

28.                                 Allocations
of individual partner interests are in accordance with the respective
partnership agreement.

 

Further, we confirm that we are responsible for the
fair presentation in the financial statements of financial position, results of
operations, and cash flows in conformity with U.S. generally accepted
accounting principles.

 

	
  Very truly yours,

  
	
   

  
	
  THE WOODLANDS HOTEL, L.P.,

  
	
  A Texas limited partnership

  
	
   

  
	
  By:

  	
  The Woodlands Hotel GP, L.L.C.

  
	
   

  	
  A Texas limited liability company,

  
	
   

  	
  Its sole General Partner

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Alex Sutton, President

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  G. Randy Davis, Treasurer

  

 

8

 

EXHIBIT A

 

Item #7 – In the first
quarter of 2006, the Manager informed the Partnership that several senior
managers, including the general manager, had been discharged for allegations
related to petty cash management and/or misuse of company property.

 

 

[More items may be added before execution]

 

 

SCHEDULE 3

 

ADDITIONAL ESTOPPELS

(with document numbers)

 

Seller
shall deliver to Purchaser and/or Title Company Estoppel Certificates with
respect to the following documents, executed by the specified parties:

 

	
  Title of Document

  	
   

  	
  Date of

  Document

  	
   

  	
  Parties to

  Provide

  Estoppels

  	
   

  	
  Document

  Number

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Project Lease Agreement

  	
   

  	
  June 29, 2001

  	
   

  	
  Hotel(1)

  	
   

  	
  1091628

  
	
   

  	
   

  	
   

  	
   

  	
  TCID(2)

  	
   

  	
  1090847

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Parking Easement and
  Agreement

  	
   

  	
  June 29,2001

  	
   

  	
  Hotel

  	
   

  	
  1094067

  
	
   

  	
   

  	
   

  	
   

  	
  TCID

  	
   

  	
  1094079

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Meeting Rooms Lease
  Agreement

  	
   

  	
  June 29,2001

  	
   

  	
  Hotel

  	
   

  	
  1091634

  
	
   

  	
   

  	
   

  	
   

  	
  TCID

  	
   

  	
  1091603

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Convention Center Booking
  and Blocking Agreement

  	
   

  	
  June 29, 2001

  	
   

  	
  Hotel

  	
   

  	
  1091808

  
	
   

  	
   

  	
   

  	
   

  	
  TCID

  	
   

  	
  1091779

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Elevated Walkway and
  Easement Agreement

  	
   

  	
  June 29, 2001

  	
   

  	
  Hotel

  	
   

  	
  1091836

  
	
   

  	
   

  	
   

  	
   

  	
  TCID

  	
   

  	
  1091795

  
	
   

  	
   

  	
   

  	
   

  	
  TWLDC(3)

  	
   

  	
  1091839

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Garage Joint Use and
  Easement Agreement

  	
   

  	
  May 13, 2005

  	
   

  	
  Hotel

  	
   

  	
  Seller

  
	
   

  	
   

  	
   

  	
   

  	
  TCDCLP(4)

  	
   

  	
  Seller

  
	
   

  	
   

  	
   

  	
   

  	
  21 Waterway(5)

  	
   

  	
  Seller

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Common Access Driveway
  Easement Agreement

  	
   

  	
  May 13, 2005

  	
   

  	
  Hotel

  	
   

  	
  Seller

  
	
   

  	
   

  	
   

  	
   

  	
  TCID

  	
   

  	
  Seller

  
	
   

  	
   

  	
   

  	
   

  	
  TCDCLP

  	
   

  	
  Seller

  
	
   

  	
   

  	
   

  	
   

  	
  21 Waterway

  	
   

  	
  Seller

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Lease Agreement (Urban
  Retreat)

  	
   

  	
  June 24, 2005

  	
   

  	
  Hotel

  	
   

  	
  1095137

  
	
   

  	
   

  	
   

  	
   

  	
  Urban Retreat(6)

  	
   

  	
  1095188

  

 

(1)          The Woodlands Hotel, L.P.

(2)          Town Center Improvement District of Montgomery
County, Texas

(3)          The Woodlands Land Development Company, L.P.

(4)          Town Center Development Company, L.P.

(5)          21 Waterway Holding LLC

(6)          Urban Retreat of the Woodlands, L.L.C.

 

 

	
  Title of Document

  	
   

  	
  Date of

  Document

  	
   

  	
  Parties to

  Provide

  Estoppels

  	
   

  	
  Document

  Number

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Parking Lot Easement
  Agreement

  	
   

  	
  May 13, 2005

  	
   

  	
  Hotel

  	
   

  	
  1094331

  
	
   

  	
   

  	
   

  	
   

  	
  TWLDC

  	
   

  	
  1094426

  
	
   

  	
   

  	
   

  	
   

  	
  Marriott(7)

  	
   

  	
  1094464

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Limited Access Driveway
  Easement Agreement

  	
   

  	
  March 30, 2007

  	
   

  	
  Hotel

  	
   

  	
  1094073

  
	
   

  	
   

  	
   

  	
   

  	
  Watumull(8)

  	
   

  	
  1094061

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Declaration of Covenants and Restrictions of the Woodlands Commercial
  Owners Association

  	
   

  	
  October 26, 1993

  	
   

  	
  TWCOA(9)

  	
   

  	
  1094103

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Declaration of Covenants and Restrictions for the Woodlands Town
  Center Owners Association

  	
   

  	
  April 12, 1995

  	
   

  	
  TCOA(10)

  	
   

  	
  1094447

  

 

(7)          Marriott Hotel Services, Inc.

(8)          Watumull Woodlands II, LLC

(9)          The Woodlands Commercial Owners Association

(10)    The Town Center Owner’s Association

 

 

SCHEDULE 4

 

TRADEMARK LICENSE AGREEMENT

 

[Trademark
License Agreement is behind this page.]

 

 

TRADEMARK LICENSE AGREEMENT

 

THIS TRADEMARK LICENSE AGREEMENT (this “Agreement”) is
dated as of October     , 2007 (the “Commencement Date”), and entered into by and between The Woodlands
Commercial Properties Company, L.P., a Texas Limited Partnership, located at
2201 Timberloch Place, The Woodlands, Texas (the “Licensor”)
and Inland American Lodging Woodlands TRS, L.L.C., a Delaware LLC, located at
390 N. Orange Ave., Suite 1650, Orlando, Florida 32801 (the “Licensee”). Licensee and Licensor are sometimes referred to
herein individually as a “Party” and
collectively as the “Parties.”

 

WHEREAS, Licensor has adopted the mark THE WOODLANDS
WATERWAY® (the “Mark”) and has
extensively used the Mark in connection with its development project commonly
referred to as THE WOODLANDS and based upon that extensive use, Licensor has
developed common law rights in the Mark and has acquired certain federal
registrations for the Mark (such registrations being more particularly
described on Exhibit “A” to this Agreement);

 

WHEREAS, Licensee desires to use the Mark in
connection with the ownership, operation, advertisement and marketing of a
hotel (the “Hotel”) located at 1601 Lake
Robbins Drive, The Woodlands, Texas (“Licensee’s Business”);

 

WHEREAS, Licensor has developed a licensing program
to allow third parties to use the Mark in a limited manner, and in connection
with such program desires to grant to Licensee a license to use the Mark in
connection with Licensee’s Business and in combination with the words “THE
WOODLANDS WATERWAY HOTEL” to identify Licensee’s Business;

 

NOW THEREFORE, in consideration of the covenants and
agreements herein contained and the mutual benefits to be derived therefrom,
the parties hereto do hereby covenant and agree as follows:

 

1.                                       License.  Subject to the terms of this
Agreement, Licensor shall provide to Licensee a nonexclusive, fully-paid and
royalty-free license to use the Mark: (i) in combination with the word “HOTEL”
in the phrase “THE WOODLANDS WATERWAY HOTEL” to identify Licensee’s Business
(and Licensee may also insert the name of the manager of the hotel or a
derivation thereof before “HOTEL” or “THE WOODLANDS WATERWAY HOTEL” provided
that Licensee has obtained a valid license from the manager for use of the
manager’s mark); (ii) in such combination, in connection with the advertising,
promotion and operation of Licensee’s Business, by or on behalf of Licensee or
its manager, including use by third-party agents of Licensee, including, with,
on or in any advertising or promotional materials in print, TV, radio,
Internet, wireless or other advertising in any format or by any medium or
technology now known or later developed, or in, on or through any website owned
by, or operated on behalf of Licensee, its managers or third-party agents or in
any way associated with Licensee’s Business; (iii) in such combination in
publications and public filings; (iv) in such combination in connection with
the sponsorship of events by or on behalf of Licensee’s Business; (v) or
abbreviations thereof in any internet domain names and urls associated with
Licensee’s Business subject to approval of the domain name by Licensor for
trademark control purposes; (vi) in such combination in connection with the
sale of merchandise bearing the Mark or logos incorporating the Mark in such
combination; and (vii) to authorize and sublicense to Licensee’s manager of the
Hotel the right to exercise the rights of this License solely for use in
manager’s role and activities

 

1

 

in managing, operating,
advertising and promoting the Hotel (collectively the “License”)
solely for Licensee’s use pursuant to this Agreement and subject to the
following conditions:

 

(a)                                  Use of Mark. Licensee (and Licensee’s manager) shall have the right to use the
Mark strictly as provided in Section 1. Licensee’s Business shall be operated
in a manner consistent with the high standards generally associated with THE
WOODLANDS development project. Licensee shall own all domain names and urls it
purchases containing the Mark in combination with “Hotel” subject to the
retained rights of Licensor in the Mark. Licensor agrees that approval for
domain names and urls in Section 1 shall not be unreasonably withheld, and
shall be deemed given, if Licensor does not object in writing to any proposal
for a domain name or url by Licensee within fifteen (15) business days of
submittal by Licensee, and Licensee shall be free to use and add any domain
name extensions (such as .com, .biz, .org) for previously approved internet
domain names and urls.

 

(b)                                 Inspection. All uses of the Mark by Licensee in advertising or promotional
materials, signs, logos, displays or otherwise shall be consistent with the use
of the Mark by Licensor prior to the Commencement Date or otherwise shall be in
a form and manner approved by Licensor. In connection with such approval,
Licensor has the right (but not the obligation) to appoint a designated
representative to inspect, on an annual basis, Licensee’s use of the Mark in
connection with Licensee’s operation of Licensee’s Business upon reasonable
notice by Licensor but only during regular business hours and only if such
inspection does not interfere with the normal operation of Licensee’s Business.
Licensor may then, at its option, prescribe such reasonable changes in the use
of the Mark by Licensee in connection with Licensee’s Business that are
reasonably necessary so that Licensee’s use of the Mark conforms to Licensor’s
quality standards.

 

(c)                                  Rights Limited. The rights to use the Mark granted to
Licensee under the License are limited to the licensed uses described in
Section 1, and such rights do not extend to any other location, business or
project unrelated to Licensee’s Business that Licensee may become involved in
without the express written consent of Licensor.

 

2.                                       Relationship of the Parties. The relationship of Licensee and Licensor
under this Agreement is that of independent parties, each acting in its own
best interests, and notwithstanding anything in this Agreement to the contrary,
no partnership, joint venture, principal-agent or other business relationship
is established or intended hereby between the Parties.

 

3.                                       Term. The term of this Agreement shall commence simultaneously with the
closing of that certain Purchase and Sale Agreement by and between The
Woodlands Hotel, L.P., as Seller and Inland American Lodging Acquisition, Inc.,
as Purchaser, and shall continue for so long as Licensee operates Licensee’s
Business, subject to earlier termination in accordance with Section 4 below
(the “Term”).

 

4.                                       Termination.

 

(a)                                  Termination by Licensor.

 

(i)                                     Notice not Required. Licensor may terminate this Agreement immediately
without notice, if: (A) Licensee applies for or consents to the

 

2

 

appointment
of a receiver, trustee or liquidator of all or a substantial part of its
assets; (B) Licensee files a voluntary petition in bankruptcy; (C) Licensee
files a petition or an answer seeking reorganization or arrangement with
creditors; (D) a final order, judgment or decree is entered by a court of
competent jurisdiction adjudicating Licensee as bankrupt or insolvent, or
approving a petition seeking reorganization of Licensee or appointing a
receiver, trustee or liquidator of Licensee of all or a substantial part of its
assets; or (E) upon the discontinuation of Licensee’s Business.

 

(ii)                                  Notice Required. Licensor may terminate this Agreement
effective upon delivery of written notice of termination to Licensee if
Licensee violates any of its obligations described in this Agreement and such
violation is not corrected within thirty (30) days after written notice of the
violation is provided to Licensee by Licensor.

 

(b)                                 Termination by Licensee. Licensee may terminate this Agreement at
any time effective thirty (30) days after delivery of written notice of
termination to Licensor.

 

(c)                                  Effect of Termination. Except for termination under Section 4(d),
upon termination of this Agreement, Licensee shall immediately cease using the
Mark, and shall not thereafter use any name, mark or symbol that is identical
to or confusingly similar with the Mark in connection with Licensee’s Business,
and this Agreement shall no longer have any force or effect.

 

(d)                                 Termination by Cessation. The License and this Agreement will be considered
terminated, and Licensee will be free to continue use of the Mark without restrictions
of this Agreement in the event that the following occurs: (i) Licensor ceases to
use the Mark and maintain the registration of the Mark with the United States
Patent and Trademark Office (“USPTO”) or Licensor ceases to operate Licensor’s
business that owns the Mark; and (ii) a Transfer of the Mark (as defined in
Section 12) does not occur. In such event, Licensee will also be free to pursue
all trademark registrations for hotel services and other services and goods
related to Licensee’s Business.

 

5.                                       Maintenance of the Mark. Licensor shall in its discretion, at its
cost, and in good faith maintain the registration of the Mark in the USPTO, but
Licensor reserves the right, in its sole discretion, to discontinue maintenance
of the Mark, it being understood that Licensor owes Licensee no obligation to
maintain the Mark. However, Licensor will provide written notice to Licensee of
its intention to abandon or discontinue use of the Mark, cease the maintenance
of a registration for the Mark with the USPTO or a Transfer of the Mark, thirty
(30) days prior to any such event for the purpose of providing Licensee the
opportunity to take action contemplated in this Agreement to maintain or pursue
protection for its rights related to the Mark and this License. If Licensor
provides such notice of ceasing to maintain the registration for the Mark with
the USPTO without Transfer of the Mark (or, in the event Licensor fails to
provide such notice, in Licensee’s reasonable judgment that Licensor intends to
or has failed to maintain and prosecute the Mark in the USPTO), Licensee may,
upon providing written notice to Licensor, assume such obligations in
connection with such maintenance and prosecution. In the event that Licensor
intends to abandon use of the Mark or discontinue the business of Licensor that
uses the Mark without Transfer of the Mark, Licensor shall provide written
notice of such intention to Licensee at least thirty (30) days prior to such
event to provide Licensee the opportunity to

 

3

 

protect Licensee’s rights
associated with the Mark. Upon receiving such notice (or, in the event Licensor
fails to provide such notice, in Licensee’s reasonable judgment that Licensor
intends to or has abandoned the Mark) Licensee may, at Licensee’s sole
discretion, cost and expense, assume all responsibilities for maintaining and
prosecuting the Mark, including filing a new application in Licensee’s name if
Licensor has abandoned registration and use of the Mark or discontinued
Licensor’s business without a Transfer of the Mark. Licensor agrees to
cooperate with Licensee and to execute reasonable documents and instruments and
perform reasonable actions as necessary to effect Licensee’s ability to
maintain, prosecute or protect the Mark in the USPTO at Licensee’s cost.

 

6.                                       Infringement; Infringement Suit. Licensee agrees to notify Licensor promptly
of any unauthorized use of or infringement of the Licensed Mark and if
appropriate, Licensee’s intention to take action against such unauthorized use
or infringement, as soon as practically possible after the unauthorized use or
infringement of the Licensed Mark comes to Licensee’s attention. Licensor shall
have the sole initial right and discretion to bring or defend infringement or
unfair competition proceedings based on the Licensed Marks. If Licensor decides
to assert its rights or bring any claim, Licensee agrees, if reasonably requested
by Licensor, to cooperate with Licensor in any such action, including, without
limitation, by joining the action as a party if necessary to maintain standing.
All out-of-pocket expenses, including reasonable attorneys’ fees, expert
witness fees, and court costs, relating to Licensee’s participation in such
infringement action at the request of Licensor, shall be borne solely by
Licensor. Any award, or portion of any award, recovered by Licensor in any such
action or proceeding commenced by Licensor shall belong solely to Licensor,
after recovery by both parties of their respective actual out-of-pocket costs.
To the extent that Licensee shares any costs as a result of such assistance,
Licensee shall share in any recovery, pro-rata in proportion to any costs actually
incurred by Licensee. If Licensor determines not to take any such action with
respect to protecting the Mark, it shall so notify Licensee, who then may take
such action in its own name and at its own expense (or, in the event Licensor
fails to provide such notice or take action within sixty (60) days of Licensee
providing to Licensor notice of such unauthorized use and Licensee’s intention
to take action against such unauthorized use or infringement, Licensee may take
such action at the end of this sixty (60) day period); provided however that
Licensee keeps Licensor informed of the status of Licensee’s activities
regarding such action, and any settlement or other resolution thereof. Licensor
shall cooperate with Licensee or join in any such action at Licensee’s request
and expense, and if necessary assign any chose in action or other right to
Licensee. Any award, or portion of any award, recovered by Licensee in any such
action or proceeding commenced by Licensee as permitted herein shall belong solely
to Licensee, after recovery by both parties of their respective actual
out-of-pocket costs. The parties hereby agree to cooperate with each other in
the conduct or defense of any legal action, and in the negotiations in respect
of any legal action relating to the Mark, and each will provide to the other
all relevant data, information and material in its possession which may be
helpful in such action or negotiation, at the cost and expense of the party
requesting such data, information and material.

 

7.                                       No License Fee: No Royalty Fee. The License granted under this Agreement is
a fully paid and royalty-free license. Licensor shall not be entitled to any
royalties or other remuneration for any uses of the Mark by Licensee as
permitted by Licensor under this Agreement.

 

4

 

8.                                       Insurance. Licensee shall maintain, or cause to be maintained, comprehensive
liability insurance with the premium thereon fully paid in advance, by and
binding upon some solvent insurance company licensed to do business in the
State of Texas, and with an A.M. Best rating of “A-VIII” or better, affording
minimum protection of not less than One Million and 00/100 Dollars
($1,000,000.00) combined single limit bodily injury and property damage and
shall name Licensor, The Woodlands Operating Company, L.P., and each of such
entities’ respective partners, officers, employees and agents (“Licensor Group”) as additional insureds under the
applicable policy. Insurance maintained by Licensee shall be primary to any
similar type coverage maintained by Licensor. Licensee agrees to maintain a
certificate of insurance on file with Licensor at all times while this
Agreement is in effect.

 

9.                                       INDEMNIFICATION.

 

(a)
BY LICENSEE. LICENSEE AGREES TO FULLY INDEMNIFY, DEFEND AND HOLD
HARMLESS THE LICENSOR GROUP FROM AND AGAINST ANY AND ALL CLAIMS, SUITS,
ACTIONS, DEMANDS, LIABILITIES, LOSSES AND EXPENSES (INCLUDING, WITHOUT
LIMITATION, REASONABLE ATTORNEYS’ FEES AND COSTS OF LITIGATION WHETHER INCURRED
FOR LICENSOR’S PRIMARY DEFENSE OR FOR LICENSOR’S ENFORCEMENT OF ITS INDEMNIFICATION
RIGHTS HEREUNDER) AND ANY FINES, PENALTIES, AND ASSESSMENTS (COLLECTIVELY, “CLAIMS”)
THAT RELATE TO, RESULT FROM, OR ARISE OUT OF (I) ANY MATERIAL BREACH BY
LICENSEE OF ANY PROVISION OF THIS AGREEMENT THAT IS NOT CURED BY LICENSEE
WITHIN THIRTY (30) DAYS OF THE DATE THAT LICENSOR PROVIDES WRITTEN NOTICE TO
LICENSEE OF SUCH BREACH OR MATERIAL BREACH BY LICENSEE OF ANY REPRESENTATION OR
WARRANTY MADE BY LICENSEE IN THIS AGREEMENT; AND (II) ANY CLAIM BROUGHT BY ANY
THIRD PARTY BASED ON ANY USE OF THE MARK BY LICENSEE, OTHER THAN IN EACH CASE
IN ACCORDANCE WITH THE TERMS OF THIS AGREEMENT, THAT INFRINGES ON SUCH THIRD
PARTY’S INTELLECTUAL PROPERTY RIGHTS; AND (III) ANY CLAIM FOR PRODUCT LIABILITY
ARISING SOLELY FROM THE DEFECTIVE MANUFACTURE OF PRODUCTS SOLD OR OFFERED BY
LICENSEE USING THE MARK. NOTWITHSTANDING THE FOREGOING AND EXCEPT FOR CLAIMS FOR
PRODUCT LIABILITY, LICENSEE’S INDEMNITY OBLIGATION HEREUNDER SHALL NOT APPLY TO
THE EXTENT ANY SUCH INFRINGEMENT OR VIOLATION IS BASED ON LICENSOR’S USE OF THE
MARK OR LICENSEE’S USE OF THE MARK IN ACCORDANCE WITH THE TERMS OF THE LICENSE
AND THIS AGREEMENT. THIS INDEMNITY SHALL NOT BE EXCLUSIVE OF OTHER REMEDIES
THAT MAY BE SOUGHT BY LICENSOR THIS PROVISION SHALL SURVIVE THE TERMINATION OF
THIS AGREEMENT.

 

(b)
BY LICENSOR. LICENSOR AGREES TO FULLY INDEMNIFY, DEFEND AND HOLD
HARMLESS LICENSEE FROM AND AGAINST ANY AND ALL CLAIMS, SUITS, ACTIONS, DEMANDS,
LIABILITIES, LOSSES AND EXPENSES (INCLUDING, WITHOUT LIMITATION, REASONABLE
ATTORNEYS’ FEES AND COSTS OF LITIGATION WHETHER INCURRED FOR LICENSOR’S PRIMARY
DEFENSE OR FOR LICENSOR’S ENFORCEMENT OF ITS INDEMNIFICATION RIGHTS HEREUNDER)
AND ANY FINES, PENALTIES, AND ASSESSMENTS (COLLECTIVELY, “CLAIMS”) THAT RELATE TO,
RESULT FROM, OR ARISE OUT OF ANY MATERIAL BREACH BY

 

5

 

LICENSOR OF ANY
REPRESENTATION OR WARRANTY MADE BY LICENSOR IN THIS AGREEMENT, AND (II) ANY
CLAIM OF INTELLECTUAL PROPERTY AND/OR TRADEMARK INFRINGEMENT BROUGHT BY ANY
THIRD PARTY BASED ON ANY USE OF THE MARK BY LICENSOR OR BROUGHT BY ANY THIRD
PARTY BASED ON ANY PERMITTED USE OF THE MARK BY LICENSEE UNDER THIS AGREEMENT.
THIS INDEMNITY SHALL NOT BE EXCLUSIVE OF OTHER REMEDIES THAT MAY BE SOUGHT BY
LICENSEE. THIS PROVISION SHALL SURVIVE THE TERMINATION OF THIS AGREEMENT.

 

10.                                 LIMITATION OF LIABILITY. IN NO EVENT, SHALL EITHER PARTY, OR SUCH
PARTY’S RESPECTIVE OFFICERS, DIRECTORS, SHAREHOLDERS, MANGERS, MEMBERS,
EMPLOYEES OR AFFILIATES BE LIABLE TO THE OTHER PARTY FOR ANY SPECIAL, INDIRECT,
INCIDENTAL, PUNITIVE, OR CONSEQUENTIAL DAMAGES WHETHER BASED ON BREACH OF
CONTRACT, BREACH OF EXPRESS OR IMPLIED WARRANTY, MISREPRESENTATION, NEGLIGENCE,
STRICT LIABILITY, OR ANY OTHER LEGAL THEORY EVEN IF SUCH PARTY WAS SPECIFICALLY
ADVISED ABOUT THE POSSIBILITY OF SUCH LOSSES OR DAMAGES.

 

11.                                 Ownership. LICENSOR REPRESENTS AND WARRANTS TO LICENSEE THAT LICENSOR OWNS THE
MARK AND THAT IT HAS THE RIGHT TO GRANT TO LICENSEE ALL RIGHTS, WHETHER SUCH
RIGHTS ARE EXPRESS OR IMPLIED, DESCRIBED IN THIS AGREEMENT AND THE LICENSE.
Licensee acknowledges and agrees that Licensor owns all right, title and
interest in and to Mark, and agrees that the benefit, and goodwill associated
with the use of the Mark shall inure entirely for the benefit of Licensor.
Licensee acknowledges and agrees that the rights and licenses granted to
Licensee pursuant to this Agreement are of a contractual nature only, and that
this Agreement and the License do not grant Licensee any ownership rights to
the Mark. Licensee agrees that, during the active term of the License, Licensee
will not contest or challenge Licensor’s ownership of or exclusive rights to
the Mark.

 

12.                                 Assignment.

 

(a)                                  Licensor may in the future sell, assign,
convey or otherwise transfer, all or a portion of The Woodlands Waterway and/or
the Mark (along with goodwill associated with the Mark) to Town Center
Improvement District of Montgomery County, Texas (“TCID”). In the event
Licensor sells, assigns, conveys or otherwise transfers the ownership rights to
the Mark, as distinguished from a nonexclusive or exclusive license with
respect to the Mark (“Transfer of the Mark”), to TCID or any third party, such
Transfer of the Mark shall be subject to this Agreement, and such third party
assignee shall assume the Mark subject to Licensee’s License and rights to the
use the Mark as provided in this Agreement and shall assume all duties and
obligations of Licensor to Licensee under this Agreement except to the extent
that any indemnity obligations by an assignee (such as TCID) are prohibited by
law. Licensor agrees to provide written notice of such Transfer of the Mark at
least thirty (30) days prior to the closing of such Transfer of the Mark. The
License and this Agreement shall survive any such Transfer of the Mark by
Licensor or any third party assignee.

 

(b)                                 Licensee may assign, sell, convey or
otherwise transfer Licensee’s rights under the License and this Agreement to a
purchaser of the assets of Licensee’s Business

 

6

 

or
the Hotel, to an entity that acquires a controlling interest in Licensee’s
Business or Hotel or to an entity that acquires ownership of Licensee’s
Business or Hotel by a collateral assignment resulting from any mortgage
financing, subject to such assignee having substantial financial assets to
purchase and maintain the hotel on a like level as Licensee as a first class,
full-service hotel. Licensee may not otherwise assign or sublicense its rights
under this Agreement to any third party without the express written consent of
Licensor.

 

13.                                 Notices. All notices, offers, consents, or other communications required or
permitted to be given pursuant to this Agreement shall be in writing and shall
be considered as properly given or made when actually received, if delivered
personally, by messenger, by nationally known overnight courier service, by
facsimile (with an original to follow via regular mail) or by registered or
certified U.S. mail with return receipt requested, and addressed to the address
of the intended recipient as set forth below. A Party may change its address by
giving notice in writing stating its new address to the other Party.

 

	
  If to Licensee:

  	
   

  	
  Mr. Edwin Hendricksen

  
	
   

  	
   

  	
  390 N. Orange Ave.

  Suite 1650

  
	
   

  	
   

  	
  Orlando, Florida 32801

  
	
   

  	
   

  	
  Fax No.: (407) 999-8428

  
	
   

  	
   

  	
   

  
	
  If to the Licensor:

  	
   

  	
  The Woodlands Development
  Company

  
	
   

  	
   

  	
  2201 Timberloch Place

  
	
   

  	
   

  	
  The Woodlands, Texas 77380

  
	
   

  	
   

  	
  Attention: General Counsel

  
	
   

  	
   

  	
  Fax No. (281) 719-7324

  

 

14.                                 Governing Law. THIS AGREEMENT SHALL BE
GOVERNED BY AND CONSTRUED IN CONFORMITY WITH THE LAWS OF THE STATE OF TEXAS
EXCLUSIVE OF CONFLICTS OF LAW PROVISIONS. ALL OBLIGATIONS OF THE PARTIES
CREATED HEREUNDER ARE PERFORMABLE IN MONTGOMERY COUNTY, TEXAS.

 

15.                                 Waiver of Jury Trial. THE PARTIES WAIVE THEIR
RIGHT TO A JURY TRIAL WITH RESPECT TO ALL CLAIMS AND CAUSES OF ACTION RELATED
TO OR ARISING OUT OF THE NEGOTIATION OR PERFORMANCE OF THIS AGREEMENT.

 

16.                                 Severability. In the event that any one or more
provisions of this Agreement shall for any reason be held to be invalid,
illegal or unenforceable, any such invalid, illegal or unenforceable provision
shall be treated as modified to the least extent necessary to rectify its
invalidity, illegality or unenforceability, and shall be enforced as so
modified. If no feasible modification shall save such provision, it will be
severed from the remainder of this Agreement, as appropriate. The remaining
provisions of this Agreement shall be unimpaired, and remain in full force and
effect.

 

17.                                 Non-Waiver. A failure of either party to enforce at any time any of the
provisions of this Agreement, or to require at any time performance of any of
the provisions hereof, shall in

 

7

 

no way affect the full right
to require such performance at any time thereafter. No waiver shall be deemed a
waiver of any other breach of the same or any other term or condition hereof.

 

18.                                 Successors and Assigns. Subject to the provisions of Section 11,
this Agreement and all of the terms and provisions hereof shall be binding upon
and shall inure to the benefit of each of the Parties and their respective
successors and permitted assigns.

 

19.                                 Merger and Amendments. This Agreement contains the entire
understanding and agreement of the Parties and supersedes any prior
understandings and written or oral agreements between them respecting this
subject matter. This Agreement may be amended only by the written consent of
the Parties hereto.

 

20.                                 Mutual Agreement; Consent, Approval. Except as otherwise provided elsewhere in
this Agreement, if the terms and conditions hereof require the Parties to
mutually agree to, consent to or approve of some matter, it is agreed and
understood that such agreement, consent or approval will not be unreasonably
withheld, conditioned or delayed. If the terms and conditions hereof require
the Parties to negotiate or agree on a point, such negotiation shall be
undertaken and conducted by the Parties in good faith.

 

21.                                 Headings; Pronouns and Plurals. The headings in this Agreement are for the
purpose of convenience only. They are not intended to be a material part of the
Agreement, and in the event of any conflict between the heading and the text,
the text shall govern. Whenever the context may so require, any pronoun used in
this Agreement shall include the corresponding masculine, feminine or neuter
forms, and the singular form of nouns, pronouns and verbs shall include the
plural and vice versa.

 

22.                                 Third Party Beneficiary. Any agreement to perform any obligation or
pay any amount herein contained, express or implied, shall be only for the
benefit of the Licensor or Licensee, and their respective successors and
permitted assigns, and such agreements shall not inure to the benefit of any
third party whomsoever, it being the intention of the undersigned Parties that
no one shall be or be deemed to be a third-party beneficiary of this Agreement.

 

23.                                 No Presumptions. No presumption will apply in favor of a
Party in the interpretation of this Agreement or in the resolution of any
ambiguity of any provisions thereof.

 

24.                                 Counterparts. This Agreement may be executed in any
number of counterparts, each of which shall be deemed to be an original
instrument and all of which together shall constitute a single agreement.

 

NOTICE OF
INDEMNIFICATION: THE PARTIES TO THIS AGREEMENT HEREBY ACKNOWLEDGE AND AGREE
THAT THIS AGREEMENT CONTAINS INDEMNIFICATION PROVISIONS IN SECTION 9.

 

[Signatures on Following Page]

 

8

 

IN WITNESS
WHEREOF, the Parties
have executed this Agreement as of the day and year first written above.

 

 

	
   

  	
  LICENSOR

  
	
   

  	
   

  
	
   

  	
  The
  Woodlands Commercial Properties

  Company, L.P., a Texas Limited Partnership

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  The Woodlands Operating
  Company, L.P., a

  Texas Limited Partnership

  
	
   

  	
   

  	
  Its Authorized Agent

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  
						

 

 

	
   

  	
  LICENSEE

  
	
   

  	
   

  
	
   

  	
  Inland American
  Lodging Woodlands TRS,

  LLC, a  Delaware
  Limited Liability Company.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  
					

 

9

 

Exhibit “A”

 

Federal Registration for the Trademark “THE WOODLANDS
WATERWAY”

 

	
  Mark

  	
   

  	
  Registration Number

  	
   

  	
  Registration Date

  
	
  THE WOODLANDS WATERWAY

  	
   

  	
  2555432

  	
   

  	
  April 2, 2002

  

 

10

 

SCHEDULE 5

 

LEASE AGREEMENT

 

[Lease
Agreement is behind this page.]

 

 

LEASE AGREEMENT

 

This Lease Agreement (this “Lease”) is entered into to be effective
as of
               
,2007, by and between INLAND AMERICAN LODGING
WOODLANDS TRS, L.L.C. a Delaware limited liability company (“Landlord”), and THE WOODLANDS OPERATING COMPANY, L.P., a
Texas limited partnership (“Tenant”).
For and in consideration of the mutual covenants contained
herein and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged by the parties, Landlord and
Tenant hereby agree as follows:

 

1.                                      LEASED PREMISES. Landlord is an Affiliate (as hereafter defined) of Inland American Lodging Woodlands Limited Partnership,
an Illinois limited partnership (the “Owner”). Owner owns the Building and has leased the Building
to Landlord pursuant to that certain Lease Agreement of even date herewith (the “TRS Lease”). The Landlord is
also, with respect to the Management
of the Building, party to a Management Agreement with Marriott Hotels Services, Inc. (“Manager”). Landlord hereby
leases to Tenant and Tenant hereby leases from Landlord for the rental and on the terms and conditions
herein set forth certain space designated herein as Suite 1401 and containing approximately 840
square feet as reflected on Exhibit A
attached hereto and made a
part hereof by reference (the “Premises”),  on the fourteenth floor
of the building located at 1601
Lake Robins Drive, The Woodlands, Texas 77380, and known as The Woodlands Waterway Marriott Hotel and
Convention Center (the “Building”).  Landlord grants Tenant a non-exclusive right to use the
Common Areas during the Term, in common with others and subject to the provisions of this Lease. “Common Areas” are,
and shall be limited to, all present
and future areas, facilities and equipment in the Building designated for the
common use of the occupants,
guests and invitees of the Building, including, without limitation, parking facilities (subject to payment as
hereafter provided), walkways, driveways, lobbies, landscaped areas, loading areas, public corridors,
public restrooms, stairs and elevators. Subject to the payment of applicable fees and charges from
time to time in effect for visitor parking in the parking facilities serving the Building,
Tenant and Tenant’s agents, employees, licensees and invitees shall have the non-exclusive right
to use the parking facilities serving the Building (which shall not exceed the standard rates
charged to hotel guests and users of meeting an conference facilities in the Building), in common with the hotel guests
and users of meeting and conference
facilities in the Building, and Tenant’s invitees shall be permitted to utilize
the visitor parking spaces
within such parking facilities. In addition to the foregoing and provided no
event of default exists, and
subject to payment by Tenant of applicable charges from time to time established by Landlord for parking permits,
Landlord agrees to make available to Tenant five (5) parking permits, each for the non-exclusive use by a single
automobile 24 hours a day and 7 days
a week in the so-called “East Garage”, which is immediately adjacent to the
Building.

 

2.                                      TERM.  Subject
to and upon the conditions set forth herein, the term of this Lease shall be
for a period of ten (10) years, beginning on November, 2007 (“Commencement Date”)  and ending on the tenth (10th)
anniversary of the Commencement Date (the “Term”).

 

3.                                      USE.  The
Premises shall only be used and occupied by Tenant as a marketing center,
conference room, hospitality suite, and/or office, and for other uses in
support of Tenant’s and Tenant’s Affiliates’ business development, marketing
and sales activities, or for other similar commercial uses by Tenant and its
Affiliates allowed by applicable law. Provided, however, neither Tenant, nor
any Affiliate of Tenant, shall have a full-time, permanent staff in the

 

 

Premises, or use the
Premises for any hotel use, condominium hotel use or other transient guest use
or as a design center/showroom (i.e., stocked with materials samples for the
buildout of tenant space). The parties acknowledge that Tenant will use the
Premises for general marketing purposes with respect to the Town Center area of
The Woodlands, including marketing for a competitive facility; however, Tenant
will not use the Premises primarily for a competitive purpose nor shall the
Premises be used by a competitor of Landlord, Manager or the Hotel. The
Landlord agrees that for purposes of this Lease that The Woodlands Operating
Company, L.P. is not a competitor of Landlord, Manager or the Hotel.

 

4.                                      SECURITY DEPOSIT. None.

 

5.                                      BASE RENT.  During
the Term and as part of the consideration for Landlord’s execution of this
Lease, Tenant shall pay to Landlord annual installments of One Dollar ($1.00)
(the “Base Rent”) payable at the office of Landlord in
legal tender of the United States of America, in advance, without demand,
deduction or set-off, on the Commencement Date and each anniversary thereof
during the Term. Landlord acknowledges that contemporaneously herewith Tenant
has paid to Landlord the Base Rent for the entire Term (i.e., $10.00) and that
no. additional payments of Base Rent shall be required during the Term.
Landlord and Tenant acknowledge and agree that (i) this Lease is being entered
into contemporaneously with the sale of the Building by Tenant to Landlord,
(ii) Tenant would not have agreed to such sale without the lease of the
Premises to Tenant as contemplated herein, and (iii) the sales price received
by Tenant from Landlord reflects a reduction due to this Lease and such
reduction constitutes consideration for the lease of the Premises to Tenant
that is in addition to the Base Rent provided above.

 

6.                                      GROSS LEASE. Tenant leases the Premises on a gross lease
basis; and as such, included in the payment of the Base Rent herein specified,
are all taxes, insurance premiums, utilities (including, without limitation,
electricity, water, wastewater, telephone, basic cable television (consistent
with the basic cable provided in guest rooms of the Building), and high-speed
internet service available 24 hours a day and 7 days a week), heating,
ventilation and air conditioning (“HVAC”), housekeeping and janitorial
service, and costs of repairs and maintenance. However, Tenant shall pay for
all costs of repairs and maintenance for damage caused by Tenant or its guests,
invitees, employees, agents and licensees as well as long-distance phone
charges and premium cable television charges.

 

7.                                      CATERING AND HOUSEKEEPING
SERVICES.
Landlord shall provide on-demand
catering and housekeeping services to the Premises consistent with existing
hotel practices. Further, Tenant shall, subject to the payment of applicable
charges charged to hotel guests and users of meeting and conference facilities
in the Building, be entitled to utilize all other services provided to such
hotel guests and users of meeting and conference facilities. Notwithstanding
the foregoing, Tenant shall not be charged for the housekeeping services
provided to the Premises. With respect to the catering, Tenant shall be charged
the same rates charged by Landlord to other guests and invitees making
comparable use of Landlord’s catering services. Tenant shall pay to Landlord
the charges for such services within ten (10) days after Landlord renders a
statement therefor to Tenant. All past due amounts owed hereunder by Tenant
shall bear interest at the rate of twelve percent (12%) per annum or the
highest lawful rate, whichever is less, from the date due until paid. To the
extent Landlord has contracted with a hotel management company or other
third-party to perform any of the services or other obligations of Landlord
under this Lease,

 

2

 

Landlord shall cause such
hotel management company or other third-party to perform such services and
obligations in accordance with the terms and conditions of this Lease.

 

8.                                      QUIET ENJOYMENT.  Tenant, on paying the rent and performing the
covenants herein, shall and may peaceably and quietly have, hold and enjoy the
Premises for the Term.

 

9.                                      FURNITURE, FIXTURES AND EQUIPMENT.  Landlord
acknowledges that the furniture, trade fixtures and equipment and all other
personal property located in the Premises as of the Commencement Date
(collectively, “Tenant’s
Property”), is and shall remain the property
of Tenant, and Tenant may at any time and from time to time remove and/or
replace the same or install any additional such items. Tenant acknowledges that
all other fixtures and the carpeting, paneling or other wall covering are and
shall remain the property of Landlord. Tenant may replace Tenant’s Property as
aforesaid and make other alterations and improvements to the Premises that do
not impact the structural components of the Building or the mechanical,
electrical or plumbing systems of the Building provided Tenant obtains Landlord’s
prior written consent, which consent will not be unreasonably withheld. Tenant
may not make any other alterations or improvements to the Premises without the
express prior written consent of Landlord, which consent may be given, withheld
or conditioned in Landlord’s sole discretion.

 

10.                               SUBLETTING AND ASSIGNING.  Tenant
shall not, without Landlord’s prior written consent, which may be granted,
conditioned or withheld in Landlord’s sole discretion, (i) assign Tenant’s
interest under this Lease, in whole or in part, including by operation of law
or otherwise (ii) mortgage or pledge the same, and/or (iii) sublet the
Premises, or any part thereof. Notwithstanding the foregoing, Tenant may,
without the consent of Landlord, (x) assign Tenant’s interest under this Lease,
in whole or in part, to an Affiliate of Tenant, and/or (y) sublet the Premises,
or any part thereof, to an Affiliate of Tenant. Landlord shall have the right
to assign or transfer, in whole or in part, its rights and obligations
hereunder and in the Building. Tenant specifically agrees to look solely to
Landlord’s interest in the Building for the recovery of any judgment from
Landlord and agrees that Landlord shall never be personally liable for any such
judgment. For purposes of this Lease, the term “Affiliate” means any entity
which directly controls, or is under common control, with Tenant. For purposes
hereof, the term “Control” means the possession of the power to direct or cause
the direction of the management and policies of such entity. Provided, however,
for purposes of this Lease, Affiliate shall not include any entity that is a
direct competitor of Manager or the Hotel.

 

11.                               FIRE AND CASUALTY.  If the Premises or Building are partially or
totally destroyed by fire or other casualty and Landlord in its sole discretion
elects to repair or restore the same, then Landlord shall repair and restore
the Premises as soon as it is reasonably practicable, to substantially the same
condition in which the same were before such damage, failing which this Lease
shall be terminable as of the date of the occurrence of the damage or
destruction, by either party hereto by serving written notice to the other.
Notwithstanding the foregoing, if such damage is generally limited to the
Premises, and not caused by an act or omission of Tenant, then Landlord shall
repair and restore the Premises as soon as it is reasonably practicable, to
substantially the same condition in which the same was before such damage.

 

12.                               DEFAULT BY TENANT.  If Tenant defaults in any covenant or
agreement to be performed by it and, if after written notice is given by
Landlord to Tenant, such default shall continue for a period of thirty (30)
days (or such longer period of time following diligent efforts to cure as may

 

3

 

be reasonably necessary to
cure such default), then Landlord may, as its sole and exclusive remedy,
terminate this Lease and take full and absolute possession of the Premises free
from any subsequent rights or obligations of Tenant. Waiver by Landlord of any
right for any default of Tenant shall not constitute a waiver of any right for
either a subsequent default of the same obligation or any other default.

 

13.                               HOLD HARMLESS. Tenant will indemnify Landlord for, and hold
Landlord harmless from and against all fines, suits, claims, demands,
liabilities, and actions (including costs and expenses of defending against
such claims) resulting or alleged to result from any damage or injury occurring
in the Premises), to the extent resulting from Tenant’s gross negligence or
willful misconduct. Landlord will indemnify Tenant for, and hold Tenant
harmless from and against all fines, suits, claims, demands, liabilities, and
actions (including costs and expenses of defending against such claims)
resulting or alleged to result from any damage or injury occurring in the
Building (excluding the Premises), to the extent resulting from Landlord’s
gross negligence or willful misconduct.

 

14.                               INSURANCE.  Tenant
shall procure and maintain (i) commercial general liability insurance with a
combined single limit of at least $2,000,000 and (ii) special form property
insurance covering the full replacement cost of Tenant’s Property. Landlord or
Manager shall procure and maintain (x) commercial general liability insurance
with a combined single limit of at least $2,000,000 and (y) special form
property insurance covering the full replacement cost of the Building.

 

15.                               WAIVER OF SUBROGATION.  Landlord
and Tenant hereby waive any rights each may have against the other, on account
of any loss or damage occasioned to Landlord or Tenant, as the case may be,
their respective property, the Premises or the Building, or their respective
contents, arising from any risk actually covered by valid and enforceable
special form property insurance, to the extent of such coverage. Landlord and
Tenant each agree to cause an endorsement to be furnished to their respective
insurance policies recognizing this waiver of subrogation.

 

16.                               SEVERABILITY.  This Lease shall be construed in accordance
with the laws of the State of Texas. If any clause or provision of this Lease
is illegal, invalid or unenforceable, under present or future laws effective
during the Term hereof, then it is the intention of the parties hereto that the
remainder of this Lease shall not be affected thereby, and it is also the
intention of both parties that in lieu of each clause or provision that is
illegal, invalid or unenforceable, there be added as part of this Lease a
clause or provision as similar in terms to such illegal, invalid or
unenforceable clause or provision as may be possible and be legal, valid and
enforceable.

 

17.                               SUCCESSORS AND ASSIGNS. This Lease and all the covenants herein
contained shall be binding upon the parties hereto and their respective heirs,
legal representatives, successors and assigns, if any.

 

18.                               SUBORDINATION.  Tenant
accepts this Lease subject and subordinate to any mortgage, deed of trust or
other lien presently existing or hereafter placed upon the Premises and to any
renewals and extensions thereof, and Tenant acknowledges that such
subordination is automatic without any further documentation. Upon demand,
Tenant agrees to execute such further commercially reasonable instruments subordinating
this Lease, as Landlord may request. In the

 

4

 

event of a foreclosure of
any such mortgage, deed of trust or other lien or of any other action or
proceeding for the enforcement thereof, or of any sale thereunder, including
acquisition of Landlord’s interest in the Building by the holder of any such
mortgage, deed of trust or other lien, Tenant will attorn to such purchaser.

 

19.                               ACCESS BY LANDLORD.  Upon
reasonable advance notice to Tenant, Landlord, its agents and employees shall
have access to and the right to enter upon the Premises at any reasonable time
to provide the services to be provided by Landlord hereunder and to make any
repairs or alterations required to be made by Landlord hereunder. Landlord and
its agents and employees will use commercially reasonable efforts not to
disrupt Tenant’s business operations in the Premises while exercising its
access rights under this Section 19.

 

20.                               HOLDING OVER.  If
Tenant holds over after the expiration or termination of this Lease, such hold
over shall be as a tenant at will and all of the terms and provisions of this
Lease shall be applicable during such period, provided Tenant shall pay to
Landlord as and for Rent during such hold over period, the sum of $10,000 per
month and Tenant will vacate the Premises and deliver the same to Landlord
within thirty (30) days after the date of Tenant’s receipt of written notice
from Landlord to vacate the Premises. No holding over by Tenant, whether with
or without consent of Landlord, shall operate to extend this Lease except as
herein provided.

 

21.                               ENTIRE AGREEMENT.  This
instrument and any attached addenda or exhibits constitute the entire agreement
between Landlord and Tenant; no prior written or prior or contemporaneous oral
promises or representations shall be binding. This Lease shall not be amended
or modified except by written instrument signed by both parties hereto.
Paragraph captions herein are for Landlord’s and Tenant’s convenience only, and
neither limit nor amplify the provisions of this instrument.

 

22.                               ATTORNEYS’ FEES.  If any action or proceeding is commenced by
either party to enforce their rights under this Lease or in connection with any
default hereunder, the prevailing party in such action or proceeding shall be
entitled to recover reasonable attorneys’ fees and expenses, in addition to any
other relief awarded by the court.

 

23.                               NOTICES.  Whenever in this Lease it shall be required
or permitted that notice or demand be given or served by either party to this
Lease to or on the other, such notice or demand shall be given or served and
shall not be deemed to have been given or served unless in writing and delivered
personally or forwarded by Certified or Registered Mail, postage prepaid or
other reputable common carrier guaranteeing next-day delivery, addressed as
follows:

 

	
  To the Landlord:

  	
   

  	
  Inland American Lodging
  Woodlands TRS, L.L.C.

  
	
   

  	
   

  	
  390 N. Orange Avenue, Ste.
  1650

  
	
   

  	
   

  	
  Orlando, Florida 32801

  
	
   

  	
   

  	
  Attn: Mr. Edwin Henriksen

  
	
   

  	
   

  	
   

  
	
  To the Tenant:

  	
   

  	
  The Woodlands Operating
  Company, L.P.

  
	
   

  	
   

  	
  2201 Timberloch Place

  
	
   

  	
   

  	
  The Woodlands, Texas 77380

  
	
   

  	
   

  	
  Attn:

  	
   

  	
   

  

 

5

 

Such addresses may be
changed from time to time by either party by serving notice as above provided.

 

24.                               BROKERS. Each party represents and warrants to the
other party that it has had no dealings with any real estate broker or agent
who is entitled to a commission in connection with this Lease. Each party
agrees to indemnify and hold harmless the other party from and against any
liability from all claims for commission arising from the actions of the
indemnifying party.

 

[Remainder of Page Intentionally Left Blank]

 

6

 

IN
WITNESS WHEREOF, this Lease Agreement has been executed by the parties as of
the date first set forth above.

 

	
  LANDLORD:

  	
  TENANT:

  
	
   

  	
   

  
	
  INLAND
  AMERICAN LODGING

  WOODLANDS TRS, L.L.C., a

  	
  THE
  WOODLANDS OPERATING

  COMPANY, L.P., a
  Texas limited

  
	
  Delaware limited liability
  company

  	
  partnership

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
  By:

  	
   

  	
   

  
	
  Name:

  	
   

  	
   

  	
  Name:

  	
   

  	
   

  
	
  Title:

  	
   

  	
   

  	
  Title:

  	
   

  	
   

  
										

 

7

 

EXHIBIT
A

 

FLOOR
PLAN OF THE PREMISES

 

[To be
attached]

 

 

SIXTH AMENDMENT TO PURCHASE AND SALE AGREEMENT

 

THIS SIXTH
AMENDMENT TO PURCHASE AND SALE AGREEMENT (the “Sixth Amendment”) is made and entered
into as of this 15th  day of
November, 2007 between THE WOODLANDS HOTEL,
L.P., as Seller, and INLAND
AMERICAN LODGING ACQUISITIONS, INC., as Purchaser.

 

WITNESSETH:

 

WHEREAS, Seller and Purchaser made and entered into
that certain Purchase and Sale Agreement dated as of August 22, 2007, as
amended by that certain First Amendment to Purchase and Sale Agreement dated as
of September 12, 2007, as amended by that certain Second Amendment to Purchase
and Sale Agreement dated as of September 14, 2007, as further amended by that
certain Third Amendment to Purchase and Sale Agreement dated as of September
19, 2007, as further amended by that certain Fourth Amendment to Purchase and
Sale Agreement dated as of October 1, 2007, and as further amended by that
certain Fifth Amendment to Purchase and Sale Agreement dated as of October 2,
2007 (collectively the “Agreement”) with respect to the sale and purchase of
the Woodlands Waterway Marriott Hotel; and

 

WHEREAS, Seller and Purchaser desire to amend the
Agreement to further extend the Closing Date as more particularly hereinafter
set forth.

 

NOW,
THEREFORE, in
consideration of the mutual terms, provisions, covenants and agreements set
forth herein and in the Agreement, and for other good and valuable
considerations, the receipt and sufficiency of which are hereby acknowledged,
Seller and Purchaser hereby agree to further amend the Agreement as follows:

 

1.                                       Defined Terms. Capitalized Terms used herein and not
defined herein shall have the meanings ascribed thereto in the Agreement.

 

2.                                       Closing Date. Section 1.1.11 of the Agreement is hereby
amended and restated in its entirety to read as follows:

 

1.1.11                                       Closing Date:   November 30, 2007.

 

3.                                       Additional Earnest Money Deposit. On or before 3:00 p.m. Houston, Texas time
on November 15, 2007, Purchaser shall deliver in escrow to Escrow Agent the sum
of $25,000,000.00 (the “Second Additional Earnest Money Deposit”), which shall
constitute and be deemed a portion of the Earnest Money for all  purposes
under the Agreement. Upon the payment of the Second Additional Earnest
Money Deposit, the parties hereto acknowledge and agree that the total Earnest
Money under the Agreement shall be $30,000,000.00.

 

4.                                       Seller’s Deliveries in Escrow. Section 7.3 of the Agreement is hereby
amended and restated in its entirety to read as follows:

 

1

 

7.3                                 Seller’s Deliveries in
Escrow. On or before 3:00
p.m. Houston, Texas time on November 28, 2007, Seller shall deliver in escrow
to Escrow Agent the following:

 

5.                                       Purchaser’s Deliveries in Escrow. Section 7.4 of the Agreement is hereby amended
and restated in its entirety to read as follows:

 

7.4                                 Purchaser’s Deliveries in
Escrow. On or before 3:00
p.m. Houston, Texas time on November 28, 2007, Purchaser shall deliver in
escrow to Escrow Agent the following:

 

6.                                       Assignment and Assumption. Notwithstanding anything set forth in the
Agreement to the contrary, Purchaser shall have the right, at its option, to
designate its affiliate, Inland American Lodging Woodlands TRS Limited
Partnership, an Illinois limited partnership, to be the assignee under any
Assignment from Seller as contemplated in Section 7.3.2 of the Agreement and
the Assignment and Assumption of Management Agreement contemplated in Section
7.3.5 of the Agreement.

 

7.                                       Trademark License Agreement. Schedule 4 attached to the Fifth
Amendment to Purchase and Sale Agreement is hereby deleted in its entirety, and
is hereby replaced with the new Schedule 4 attached hereto.

 

8.                                       Lease Agreement. Schedule 5 attached to the Fifth
Amendment to Purchase and Sale Agreement is hereby deleted in its entirety, and
is hereby replaced with the new Schedule 5 attached hereto.

 

9.                                       Purchase Price. Section 7.6 of the Agreement is hereby
amended and restated in its entirety to read as follows:

 

7.6                                 Purchase Price. At or
before 3:00 p.m. Houston, Texas time on November 28, 2007, Purchaser shall
deliver to Escrow Agent the Purchase Price, less the Earnest Money that is
applied to the Purchase Price, plus or minus a good faith estimate of
applicable prorations, in immediate, same-day U.S. federal funds wired for
credit into Escrow Agent’s escrow account, which funds must be delivered in a
manner to permit Escrow Agent to deliver good funds to Seller or its designee
on the Closing Date (and, if requested by Seller, by wire transfer); in the
event that Escrow Agent is unable to deliver good funds to Seller or its
designee on the Closing Date, then the closing statements and related prorations
will be revised as necessary. The parties hereto acknowledge that the
prorations will be finalized on the morning of the Closing Date, that
immediately thereafter both parties will execute and deliver to Escrow Agent
the closing statement and that Escrow Agent shall immediately upon receipt of
the executed closing statement deliver the Purchase Price (as adjusted by the
applicable prorations) to Seller.

 

10.                                 Amendments. Except as hereby amended and modified, the Agreement shall remain in
full force and effect in accordance with the terms thereof.

 

[SIGNATURES
APPEAR ON NEXT PAGE]

 

2

 

IN WITNESS
WHEREOF, Purchaser
and Seller have executed this Sixth Amendment in the manner and form sufficient
to bind them as of this 15 day of November, 2007.

 

	
  SELLER:

  	
  THE
  WOODLANDS HOTEL, L.P.,

  
	
   

  	
  a Texas limited
  partnership

  
	
  Date executed by Seller 

  	
   

  
	
   

  	
  By:

  	
  The Woodlands Hotel GP,
  L.L.C.,

  
	
  November 15,  2007

  	
   

  	
  a Texas limited liability
  company,

  
	
   

  	
   

  	
  its sole General Partner

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ Dan B. Leverett

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Dan B. Leverett

  	
   

  
	
   

  	
   

  	
  Title:

  	
     Vice President - Commercial

  	
   

  
							

 

 

	
  PURCHASER:

  	
  INLAND
  AMERICAN LODGING

  
	
   

  	
  ACQUISITIONS,
  INC.,

  
	
  Date executed by Purchaser

  	
  a Delaware corporation

  
	
   

  	
   

  	
   

  
	
  November 15,  2007

  	
   

  	
   

  
	
   

  	
  By:

  	
   /s/ Edwin Hendriksen

  	
   

  
	
   

  	
  Name:

  	
  Edwin Hendriksen

  
	
   

  	
  Title:

  	
  Senior Vice President

  
					

 

3

 

SCHEDULE 4

 

TRADEMARK LICENSE AGREEMENT

 

 

[Trademark
License Agreement is behind this page.]

 

 

TRADEMARK LICENSE AGREEMENT

 

THIS
TRADEMARK LICENSE AGREEMENT (this “Agreement”) is
dated as of November
           , 2007 (the “Commencement Date”), and entered into by
and between The Woodlands Commercial Properties Company, L.P., a Texas Limited
Partnership, located at 2201 Timberloch Place, The Woodlands, Texas (the “Licensor”) and Inland American Lodging
Woodlands TRS Limited Partnership, an Illinois limited partnership, located at
390 N, Orange Ave., Suite 1650, Orlando, Florida 32801 (the “Licensee”).  Licensee and
Licensor are sometimes referred to herein individually as a “Party” and collectively as the “Parties.”

 

WHEREAS, Licensor has adopted the mark  THE WOODLANDS WATERWAY® (the “Mark”) and has extensively used the Mark
in connection with its development project commonly referred to as THE
WOODLANDS and based upon that extensive use, Licensor has developed common law
rights in the Mark and has acquired certain federal registrations for the Mark
(such registrations being more particularly described on Exhibit “A” to this Agreement);

 

WHEREAS, Licensee desires to use the Mark in
connection with the ownership, operation, advertisement and marketing of a
hotel (the “Hotel”) located at
1601 Lake Robbins Drive, The Woodlands, Texas (“Licensee’s
Business”);

 

WHEREAS, Licensor has developed a licensing program to
allow third parties to use the Mark in a limited manner, and in connection with
such program desires to grant to Licensee a license to use the Mark in
connection with Licensee’s Business and in combination with the words “THE
WOODLANDS WATERWAY HOTEL” to identify Licensee’s Business;

 

NOW THEREFORE, in consideration of the covenants and
agreements herein contained and the mutual benefits to be derived therefrom,
the parties hereto do hereby covenant and agree as follows:

 

1.                                     License. Subject to the terms of this Agreement, Licensor shall provide to
Licensee a nonexclusive, fully-paid and royalty-free license to use the Mark:
(i) in combination with the word “HOTEL” in the phrase “THE WOODLANDS WATERWAY
HOTEL” to identify Licensee’s Business (and Licensee may also insert the name
of the manager of the hotel or a derivation thereof before “HOTEL” or “THE
WOODLANDS WATERWAY HOTEL” provided that Licensee has obtained a valid license
from the manager for use of the manager’s mark); (ii) in such combination, in
connection with the advertising, promotion and operation of Licensee’s
Business, by or on behalf of Licensee or its manager, including use by
third-party agents of Licensee, including, with, on or in any advertising or
promotional materials in print, TV, radio, Internet, wireless or other
advertising in any format or by any medium or technology now known or later
developed, or in, on or through any website owned by, or operated on behalf of
Licensee, its managers or third-party agents or in any way associated with
Licensee’s Business; (iii) in such combination in publications and public
filings; (iv) in such combination in connection with the sponsorship of events
by or on behalf of Licensee’s Business; (v) or abbreviations thereof in any
internet domain names and urls associated with Licensee’s Business subject to
approval of the domain name by Licensor for trademark control purposes; (vi) in
such combination in connection with the sale of merchandise bearing the Mark or
logos incorporating the Mark in such combination; and (vii) to authorize and
sublicense to Licensee’s manager of the Hotel the right to exercise the rights
of this License solely for use in manager’s role and activities

 

1

 

in managing, operating,
advertising and promoting the Hotel (collectively the “License”) solely for Licensee’s use
pursuant to this Agreement and subject to the following conditions:

 

(a)                                     Use of Mark. Licensee (and Licensee’s manager) shall have the right to use the
Mark strictly as provided in Section 1. Licensee’s Business shall be operated
in a manner consistent with the high standards generally associated with THE
WOODLANDS development project. Licensee shall own all domain names and urls it
purchases containing the Mark in combination with “Hotel” subject to the
retained rights of Licensor in the Mark. Licensor agrees that approval for
domain names and urls in Section 1 shall not be unreasonably withheld, and
shall be deemed given, if Licensor does not object in writing to any proposal
for a domain name or url by Licensee within fifteen (15) business days of
submittal by Licensee, and Licensee shall be free to use and add any domain
name extensions (such as .com, .biz, .org) for previously approved internet
domain names and urls.

 

(b)                                    Inspection. All uses of the Mark by Licensee in advertising or promotional
materials, signs, logos, displays or otherwise shall be consistent with the use
of the Mark by Licensor prior to the Commencement Date or otherwise shall be in
a form and manner approved by Licensor. In connection with such approval,
Licensor has the right (but not the obligation) to appoint a designated
representative to inspect, on an annual basis, Licensee’s use of the Mark in
connection with Licensee’s operation of Licensee’s Business upon reasonable
notice by Licensor but only during regular business hours and only if such
inspection does not interfere with the normal operation of Licensee’s Business.
Licensor may then, at its option, prescribe such reasonable changes in the use
of the Mark by Licensee in connection with Licensee’s Business that are
reasonably necessary so that Licensee’s use of the Mark conforms to Licensor’s
quality standards.

 

(c)                                     Rights Limited. The rights to use the Mark granted to
Licensee under the License are limited to the licensed uses described in
Section 1, and such rights do not extend to any other location, business or
project unrelated to Licensee’s Business that Licensee may become involved in
without the express written consent of Licensor.

 

2.                                      Relationship of the Parties. The relationship of Licensee and Licensor
under this Agreement is that of independent parties, each acting in its own
best interests, and notwithstanding anything in this Agreement to the contrary,
no partnership, joint venture, principal-agent or other business relationship
is established or intended hereby between the Parties.

 

3.                                      Term. The term of this Agreement shall commence simultaneously with the
closing of that certain Purchase and Sale Agreement by and between The
Woodlands Hotel, L.P., as Seller, and Inland American Lodging Acquisition,
Inc., as Purchaser, as amended and assigned, and shall continue for so long as
Licensee operates Licensee’s Business, subject to earlier termination in
accordance with Section 4 below (the “Term”).

 

4.                                      Termination.

 

(a)                                  Termination by Licensor.

 

(i)                                     Notice not Required. Licensor may terminate this Agreement
immediately without notice, if: (A) Licensee applies for or consents to the

 

2

 

appointment
of a receiver, trustee or liquidator of all or a substantial part of its
assets; (B) Licensee files a voluntary petition in bankruptcy; (C) Licensee
files a petition or an answer seeking reorganization or arrangement with
creditors; (D) a final order, judgment or decree is entered by a court of
competent jurisdiction adjudicating Licensee as bankrupt or insolvent, or
approving a petition seeking reorganization of Licensee or appointing a
receiver, trustee or liquidator of Licensee of all or a substantial part of its
assets; or (E) upon the discontinuation of Licensee’s Business.

 

(ii)                                  Notice Required. Licensor may terminate this Agreement
effective upon delivery of written notice of termination to Licensee if
Licensee violates any of its obligations described in this Agreement and such
violation is not corrected within thirty (30) days after written notice of the
violation is provided to Licensee by Licensor.

 

(b)                                 Termination by Licensee. Licensee may terminate this Agreement at
any time effective thirty (30) days after delivery of written notice of
termination to Licensor.

 

(c)                                  Effect of Termination. Except for termination under Section 4(d),
upon termination of this Agreement, Licensee shall immediately cease using the
Mark, and shall not thereafter use any name, mark or symbol that is identical
to or confusingly similar with the Mark in connection with Licensee’s Business,
and this Agreement shall no longer have any force or effect.

 

(d)                                 Termination by Cessation. The License and this Agreement will be considered
terminated, and Licensee will be free to continue use of the Mark without restrictions
of this Agreement in the event that the following occurs: (i) Licensor ceases to
use the Mark and maintain the registration of the Mark with the United States
Patent and Trademark Office (“USPTO”) or Licensor ceases to operate Licensor’s
business that owns the Mark; and (ii) a Transfer of the Mark (as defined in
Section 12) does not occur. In such event, Licensee will also be free to pursue
all trademark registrations for hotel

services and other services and goods related to Licensee’s Business.

 

5.                                        Maintenance of the Mark. Licensor shall in its discretion, at its
cost, and in good faith maintain the registration of the Mark in the USPTO, but
Licensor reserves the right, in its sole discretion, to discontinue maintenance
of the Mark, it being understood that Licensor owes Licensee no obligation to
maintain the Mark. However, Licensor will provide written notice to Licensee of
its intention to abandon or discontinue use of the Mark, cease the maintenance
of a registration for the Mark with the USPTO or a Transfer of the Mark, thirty
(30) days prior to any such event for the purpose of providing Licensee the
opportunity to take action contemplated in this Agreement to maintain or pursue
protection for its rights related to the Mark and this License. If Licensor
provides such notice of ceasing to maintain the registration for the Mark with
the USPTO without Transfer of the Mark (or, in the event Licensor fails to
provide such notice, in Licensee’s reasonable judgment that Licensor intends to
or has failed to maintain and prosecute the Mark in the USPTO), Licensee may,
upon providing written notice to Licensor, assume such obligations in
connection with such maintenance and prosecution. In the event that Licensor
intends to abandon use of the Mark or discontinue the business of Licensor that
uses the Mark without Transfer of the Mark, Licensor shall provide written
notice of such intention to Licensee at least thirty (30) days prior to such
event to provide Licensee the opportunity to

 

3

 

protect Licensee’s rights
associated with the Mark. Upon receiving such notice (or, in the event Licensor
fails to provide such notice, in Licensee’s reasonable judgment that Licensor
intends to or has abandoned the Mark) Licensee may, at Licensee’s sole
discretion, cost and expense, assume all responsibilities for maintaining and
prosecuting the Mark, including filing a new application in Licensee’s name if
Licensor has abandoned registration and use of the Mark or discontinued
Licensor’s business without a Transfer of the Mark. Licensor agrees to
cooperate with Licensee and to execute reasonable documents and instruments and
perform reasonable actions as necessary to effect Licensee’s ability to
maintain, prosecute or protect the Mark in the USPTO at Licensee’s cost.

 

6.                                        Infringement; Infringement Suit. Licensee agrees to notify Licensor promptly
of any unauthorized use of or infringement of the Licensed Mark and if
appropriate, Licensee’s intention to take action against such unauthorized use
or infringement, as soon as practically possible after the unauthorized use or
infringement of the Licensed Mark comes to Licensee’s attention. Licensor shall
have the sole initial right and discretion to bring or defend infringement or
unfair competition proceedings based on the Licensed Marks. If Licensor decides
to assert its rights or bring any claim, Licensee agrees, if reasonably
requested by Licensor, to cooperate with Licensor in any such action,
including, without limitation, by joining the action as a party if necessary to
maintain standing. All out-of-pocket expenses, including reasonable attorneys’
fees, expert witness fees, and court costs, relating to Licensee’s
participation in such infringement action at the request of Licensor, shall be
borne solely by Licensor. Any award, or portion of any award, recovered by
Licensor in any such action or proceeding commenced by Licensor shall belong
solely to Licensor, after recovery by both parties of their respective actual
out-of-pocket costs. To the extent that Licensee shares any costs as a result
of such assistance, Licensee shall share in any recovery, pro-rata in
proportion to any costs actually incurred by Licensee. If Licensor determines
not to take any such action with respect to protecting the Mark, it shall so
notify Licensee, who then may take such action in its own name and at its own
expense (or, in the event Licensor fails to provide such notice or take action
within sixty (60) days of Licensee providing to Licensor notice of such
unauthorized use and Licensee’s intention to take action against such
unauthorized use or infringement, Licensee may take such action at the end of
this sixty (60) day period); provided however that Licensee keeps Licensor
informed of the status of Licensee’s activities regarding such action, and any
settlement or other resolution thereof. Licensor shall cooperate with Licensee
or join in any such action at Licensee’s request and expense, and if necessary
assign any chose in action or other right to Licensee. Any award, or portion of
any award, recovered by Licensee in any such action or proceeding commenced by
Licensee as permitted herein shall belong solely to Licensee, after recovery by
both parties of their respective actual out-of-pocket costs. The parties hereby
agree to cooperate with each other in the conduct or defense of any legal
action, and in the negotiations in respect of any legal action relating to the
Mark, and each will provide to the other all relevant data, information and
material in its possession which may be helpful in such action or negotiation,
at the cost and expense of the party requesting such data, information and
material.

 

7.                                        No License Fee; No Royalty Fee. The License granted under this Agreement is
a fully paid and royalty-free license. Licensor shall not be entitled to any
royalties or other remuneration for any uses of the Mark by Licensee as
permitted by Licensor under this Agreement.

 

4

 

8.                                        Insurance. Licensee shall maintain, or cause to be maintained, comprehensive liability
insurance with the premium thereon fully paid in advance, by and binding upon
some solvent insurance company licensed to do business in the State of Texas,
and with an A.M. Best rating of “A-VIII” or better, affording minimum
protection of not less than One Million and 00/100 Dollars ($1,000,000.00)
combined single limit bodily injury and property damage and shall name
Licensor, The Woodlands Operating Company, L.P., and each of such entities’ respective
partners, officers, employees and agents (“Licensor Group”)  as additional insureds under the
applicable policy. Insurance maintained by Licensee shall be primary to any
similar type coverage maintained by Licensor. Licensee agrees to maintain a
certificate of insurance on file with Licensor at all times while this
Agreement is in effect.

 

9.                                        INDEMNIFICATION.

 

(a) BY LICENSEE. LICENSEE AGREES TO FULLY INDEMNIFY, DEFEND AND
HOLD HARMLESS THE LICENSOR GROUP FROM AND AGAINST ANY AND ALL CLAIMS, SUITS,
ACTIONS, DEMANDS, LIABILITIES, LOSSES AND EXPENSES (INCLUDING, WITHOUT
LIMITATION, REASONABLE ATTORNEYS’ FEES AND COSTS OF LITIGATION WHETHER INCURRED
FOR LICENSOR’S PRIMARY DEFENSE OR FOR LICENSOR’S ENFORCEMENT OF ITS
INDEMNIFICATION RIGHTS HEREUNDER) AND ANY FINES, PENALTIES, AND ASSESSMENTS
(COLLECTIVELY, “CLAIMS”) THAT RELATE TO, RESULT FROM, OR ARISE OUT OF (I) ANY
MATERIAL BREACH BY LICENSEE OF ANY PROVISION OF THIS AGREEMENT THAT IS NOT
CURED BY LICENSEE WITHIN THIRTY (30) DAYS OF THE DATE THAT LICENSOR PROVIDES
WRITTEN NOTICE TO LICENSEE OF SUCH BREACH OR MATERIAL BREACH BY LICENSEE OF ANY
REPRESENTATION OR WARRANTY MADE BY LICENSEE IN THIS AGREEMENT; AND (II) ANY
CLAIM BROUGHT BY ANY THIRD PARTY BASED ON ANY USE OF THE MARK BY LICENSEE,
OTHER THAN IN EACH CASE IN ACCORDANCE WITH THE TERMS OF THIS AGREEMENT, THAT
INFRINGES ON SUCH THIRD PARTY’S INTELLECTUAL PROPERTY RIGHTS; AND (III) ANY
CLAIM FOR PRODUCT LIABILITY ARISING SOLELY FROM THE DEFECTIVE MANUFACTURE OF
PRODUCTS SOLD OR OFFERED BY LICENSEE USING THE MARK. NOTWITHSTANDING THE
FOREGOING AND EXCEPT FOR CLAIMS FOR PRODUCT LIABILITY, LICENSEE’S INDEMNITY
OBLIGATION HEREUNDER SHALL NOT APPLY TO THE EXTENT ANY SUCH INFRINGEMENT OR
VIOLATION IS BASED ON LICENSOR’S USE OF THE MARK OR LICENSEE’S USE OF THE MARK
IN ACCORDANCE WITH THE TERMS OF THE LICENSE AND THIS AGREEMENT. THIS INDEMNITY
SHALL NOT BE EXCLUSIVE OF OTHER REMEDIES THAT MAY BE SOUGHT BY LICENSOR. THIS
PROVISION SHALL SURVIVE THE TERMINATION OF THIS AGREEMENT.

 

(b) BY LICENSOR. LICENSOR AGREES TO FULLY INDEMNIFY, DEFEND AND
HOLD HARMLESS LICENSEE FROM AND AGAINST ANY AND ALL CLAIMS, SUITS, ACTIONS,
DEMANDS, LIABILITIES, LOSSES AND EXPENSES (INCLUDING, WITHOUT LIMITATION,
REASONABLE ATTORNEYS’ FEES AND COSTS OF LITIGATION WHETHER INCURRED FOR
LICENSOR’S PRIMARY DEFENSE OR FOR LICENSOR’S ENFORCEMENT OF ITS INDEMNIFICATION
RIGHTS HEREUNDER) AND ANY FINES, PENALTIES, AND ASSESSMENTS (COLLECTIVELY, “CLAIMS”)
THAT RELATE TO, RESULT FROM, OR ARISE OUT OF ANY MATERIAL BREACH BY

 

5

 

LICENSOR OF ANY
REPRESENTATION OR WARRANTY MADE BY LICENSOR IN THIS AGREEMENT, AND (II) ANY
CLAIM OF INTELLECTUAL PROPERTY AND/OR TRADEMARK INFRINGEMENT BROUGHT BY ANY
THIRD PARTY BASED ON ANY USE OF THE MARK BY LICENSOR OR BROUGHT BY ANY THIRD
PARTY BASED ON ANY PERMITTED USE OF THE MARK BY LICENSEE UNDER THIS AGREEMENT.
THIS INDEMNITY SHALL NOT BE EXCLUSIVE OF OTHER REMEDIES THAT MAY BE SOUGHT BY
LICENSEE. THIS PROVISION SHALL SURVIVE THE TERMINATION OF THIS AGREEMENT.

 

10.                                LIMITATION OF LIABILITY. IN NO EVENT, SHALL EITHER PARTY, OR SUCH
PARTY’S RESPECTIVE OFFICERS, DIRECTORS, SHAREHOLDERS, MANGERS, MEMBERS,
EMPLOYEES OR AFFILIATES BE LIABLE TO THE OTHER PARTY FOR ANY SPECIAL, INDIRECT,
INCIDENTAL, PUNITIVE, OR CONSEQUENTIAL DAMAGES WHETHER BASED ON BREACH OF
CONTRACT, BREACH OF EXPRESS OR IMPLIED WARRANTY, MISREPRESENTATION, NEGLIGENCE,
STRICT LIABILITY, OR ANY OTHER LEGAL THEORY EVEN IF SUCH PARTY WAS SPECIFICALLY
ADVISED ABOUT THE POSSIBILITY OF SUCH LOSSES OR DAMAGES.

 

11.                               Ownership. LICENSOR REPRESENTS AND WARRANTS TO LICENSEE THAT LICENSOR OWNS THE
MARK AND THAT IT HAS THE RIGHT TO GRANT TO LICENSEE ALL RIGHTS, WHETHER SUCH
RIGHTS ARE EXPRESS OR IMPLIED, DESCRIBED IN THIS AGREEMENT AND THE LICENSE.
Licensee acknowledges and agrees that Licensor owns all right, title and
interest in and to Mark, and agrees that the benefit, and goodwill associated
with the use of the Mark shall inure entirely for the benefit of Licensor.
Licensee acknowledges and agrees that the rights and licenses granted to
Licensee pursuant to this Agreement are of a contractual nature only, and that
this Agreement and the License do not grant Licensee any ownership rights to
the Mark. Licensee agrees that, during the active term of the License, Licensee
will not contest or challenge Licensor’s ownership of or exclusive rights to
the Mark.

 

12.                              Assignment.

 

(a)                                  Licensor may in the future sell, assign,
convey or otherwise transfer, all or a portion of The Woodlands Waterway and/or
the Mark (along with goodwill associated with the Mark) to Town Center
Improvement District of Montgomery County, Texas (“TCID”). In the event
Licensor sells, assigns, conveys or otherwise transfers the ownership rights to
the Mark, as distinguished from a nonexclusive or exclusive license with
respect to the Mark (“Transfer of the Mark”), to TCID or any third party, such
Transfer of the Mark shall be subject to this Agreement, and such third party
assignee shall assume the Mark subject to Licensee’s License and rights to the
use the Mark as provided in this Agreement and shall assume all duties and
obligations of Licensor to Licensee under this Agreement except to the extent
that any indemnity obligations by an assignee (such as TCID) are prohibited by
law. Licensor agrees to provide written notice of such Transfer of the Mark at
least thirty (30) days prior to the closing of such Transfer of the Mark. The
License and this Agreement shall survive any such Transfer of the Mark by
Licensor or any third party assignee.

 

(b)                                 Licensee may assign, sell, convey or
otherwise transfer Licensee’s rights under the License and this Agreement to a
purchaser of the assets of Licensee’s Business

 

6

 

or
the Hotel, to an entity that acquires a controlling interest in Licensee’s
Business or Hotel or to an entity that acquires ownership of Licensee’s
Business or Hotel by a collateral assignment resulting from any mortgage
financing, subject to such assignee having substantial financial assets to
purchase and maintain the hotel on a like level as Licensee as a first class,
full-service hotel. Licensee may not otherwise assign or sublicense its rights
under this Agreement to any third party without the express written consent of
Licensor.

 

13.                                 Notices. All notices, offers, consents, or other communications required or permitted
to be given pursuant to this Agreement shall be in writing and shall be
considered as properly given or made when actually received, if delivered
personally, by messenger, by nationally known overnight courier service, by
facsimile (with an original to follow via regular mail) or by registered or
certified U.S. mail with return receipt requested, and addressed to the address
of the intended recipient as set forth below. A Party may change its address by
giving notice in writing stating its new address to the other Party.

 

	
  If to Licensee:

  	
  Inland American Lodging
  Woodlands TRS Limited Partnership

  	
   

  
	
   

  	
  390 N. Orange Ave.

  Suite 1650

  	
   

  
	
   

  	
  Orlando, Florida 32801

  Attention: Mr. Edwin Hendricksen

  Fax No.: (407)999-8428

  	
   

  
	
   

  	
   

  	
   

  
	
  If to the Licensor:

  	
  The Woodlands Development
  Company 

  	
   

  
	
   

  	
  2201 Timberloch Place

  	
   

  
	
   

  	
  The Woodlands,Texas 77380

  
	
   

  	
  Attention: General Counsel

  Fax No. (281)719-7324

  	
   

  

 

14.                                 Governing Law. THIS
AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN CONFORMITY WITH THE LAWS OF THE
STATE OF TEXAS EXCLUSIVE OF CONFLICTS OF LAW PROVISIONS. ALL OBLIGATIONS OF THE
PARTIES CREATED HEREUNDER ARE PERFORMABLE IN MONTGOMERY COUNTY, TEXAS.

 

15.                                 Waiver of Jury Trial. THE
PARTIES WAIVE THEIR RIGHT TO A JURY TRIAL WITH RESPECT TO ALL CLAIMS AND CAUSES
OF ACTION RELATED TO OR ARISING OUT OF THE NEGOTIATION OR PERFORMANCE OF THIS
AGREEMENT.

 

16.                                 Severability. In the event that any one or more
provisions of this Agreement shall for any reason be held to be invalid,
illegal or unenforceable, any such invalid, illegal or unenforceable provision
shall be treated as modified to the least extent necessary to rectify its
invalidity, illegality or unenforceability, and shall be enforced as so
modified. If no feasible modification shall save such provision, it will be
severed from the remainder of this Agreement, as appropriate. The remaining
provisions of this Agreement shall be unimpaired, and remain in full force and
effect

 

7

 

17.                                   Non-Waiver. A failure of either party to enforce at any time any of the
provisions of this Agreement, or to require at any time performance of any of
the provisions hereof, shall in no way affect the full right to require such
performance at any time thereafter. No waiver shall be deemed a waiver of any
other breach of the same or any other term or condition hereof.

 

18.                                   Successors and Assigns. Subject to the provisions of Section 11,
this Agreement and all of the terms and provisions hereof shall be binding upon
and shall inure to the benefit of each of the Parties and their respective
successors and permitted assigns.

 

19.                                   Merger and Amendments. This Agreement contains the entire
understanding and agreement of the Parties and supersedes any prior
understandings and written or oral agreements between them respecting this
subject matter. This Agreement may be amended only by the written consent of
the Parties hereto.

 

20.                                   Mutual Agreement; Consent.  Approval. Except as otherwise
provided elsewhere in this Agreement, if the terms and conditions hereof
require the Parties to mutually agree to, consent to or approve of some matter,
it is agreed and understood that such agreement, consent or approval will not
be unreasonably withheld, conditioned or delayed. If the terms and conditions
hereof require the Parties to negotiate or agree on a point, such negotiation
shall be undertaken and conducted by the Parties in good faith.

 

21.                                   Headings; Pronouns and Plurals. The headings in this Agreement are for the
purpose of convenience only. They are not intended to be a material part of the
Agreement, and in the event of any conflict between the heading and the text,
the text shall govern. Whenever the context may so require, any pronoun used in
this Agreement shall include the corresponding masculine, feminine or neuter
forms, and the singular form of nouns, pronouns and verbs shall include the
plural and vice versa.

 

22.                                   Third Party Beneficiary. Any agreement to perform any obligation or
pay any amount herein contained, express or implied, shall be only for the
benefit of the Licensor or Licensee, and their respective successors and
permitted assigns, and such agreements shall not inure to the benefit of any
third party whomsoever, it being the intention of the undersigned Parties that
no one shall be or be deemed to be a third-party beneficiary of this Agreement.

 

23.                                   No Presumptions. No presumption will apply in favor of a
Party in the interpretation of this Agreement or in the resolution of any
ambiguity of any provisions thereof.

 

24.                                Counterparts. This Agreement may be executed in any
number of counterparts, each of which shall be deemed to be an original
instrument and all of which together shall constitute a single agreement.

 

NOTICE OF INDEMNIFICATION: THE PARTIES TO THIS
AGREEMENT HEREBY ACKNOWLEDGE AND AGREE THAT THIS AGREEMENT CONTAINS
INDEMNIFICATION PROVISIONS IN SECTION 9.

 

[Signatures on Following Page]

 

8

 

IN WITNESS WHEREOF, the Parties have executed this Agreement as
of the day and year first written above,

 

 

	
   

  	
  LICENSOR

  
	
   

  	
   

  
	
   

  	
  The Woodlands
  Commercial Properties

  Company, L.P., a Texas Limited Partnership

  
	
   

  	
   

  
	
   

  	
  By:

  	
  The Woodlands Operating
  Company, L.P., a

  Texas Limited Partnership

  Its Authorized Agent

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
  LICENSEE

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  INLAND
  AMERICAN LODGING

  WOODLANDS TRS LIMITED

  PARTNERSHIP, an
  Illinois limited

  partnership

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  INLAND
  AMERICAN LODGING

  WOODLANDS TRS GP, L.L.C., a

  Delaware limited liability company,

  General Partner

  
	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  INLAND
  AMERICAN LODGING

  OPERATIONS TRS INC., a
  Delaware

  corporation, Sole Member

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/
  Edwin Hendriksen

  
	
   

  	
   

  	
  Name:

  	
  Edwin
  Hendriksen

  
	
   

  	
   

  	
  Title:

  	
  Senior
  Vice President

  
									

 

9

 

Exhibit “A”

 

Federal Registration for the Trademark “THE WOODLANDS
WATERWAY”

 

	
  Mark

  	
   

  	
  Registration
  Number

  	
   

  	
  Registration
  Date

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  THE WOODLANDS WATERWAY

  	
   

  	
  2555432

  	
   

  	
  April 2, 2002

  

 

10

 

SCHEDULE 5

 

LEASE AGREEMENT

 

 

[Lease Agreement is behind this page.]

 

 

LEASE AGREEMENT

 

This
Lease Agreement (this “Lease”)  is entered into
to be effective as of                      ,
2007, by and between INLAND AMERICAN LODGING
WOODLANDS TRS LIMITED PARTNERSHIP, an Illinois limited partnership (“Landlord”), and THE WOODLANDS OPERATING COMPANY, L.P., a
Texas limited partnership (“Tenant”). For and in consideration of the
mutual covenants contained herein and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged by
the parties, Landlord and Tenant hereby agree as follows:

 

1.                                     LEASED PREMISES. Landlord is an Affiliate (as hereafter
defined) of Inland American Lodging Woodlands Limited Partnership, an Illinois
limited partnership (the “Owner”). Owner owns the Building and has leased the
Building to Landlord pursuant to that certain Lease Agreement of even date
herewith (the “TRS Lease”). The Landlord is also, with respect to the
Management of the Building, party to a Management Agreement with Marriott
Hotels Services, Inc. (“Manager”). Landlord hereby leases to Tenant and Tenant
hereby leases from Landlord for the rental and on the terms and conditions
herein set forth certain space designated herein as Suite 1401 and containing
approximately 840 square feet as reflected on Exhibit A attached
hereto and made a part hereof by reference (the “Premises”), on
the fourteenth floor of the building located at 1601 Lake Robins Drive, The
Woodlands, Texas 77380, and known as The Woodlands Waterway Marriott Hotel and
Convention Center (the “Building”). Landlord
grants Tenant a non-exclusive right to use the Common Areas during the Term, in
common with others and subject to the provisions of this Lease. “Common Areas”
are, and shall be limited to, all present and future areas,
facilities and equipment in the Building designated for the common use of the
occupants, guests and invitees of the Building, including, without limitation,
parking facilities (subject to payment as hereafter provided), walkways,
driveways, lobbies, landscaped areas, loading areas, public corridors, public
restrooms, stairs and elevators. Subject to the payment of applicable fees and
charges from time to time in effect for visitor parking in the parking
facilities serving the Building, Tenant and Tenant’s agents, employees,
licensees and invitees shall have the non-exclusive right to use the parking
facilities serving the Building (which shall not exceed the standard rates
charged to hotel guests and users of meeting an conference facilities in the
Building), in common with the hotel guests and users of meeting and conference
facilities in the Building, and Tenant’s invitees shall be permitted to utilize
the visitor parking spaces within such parking facilities. In addition to the
foregoing and provided no event of default exists, and subject to payment by
Tenant of applicable charges from time to time established by Landlord for
parking permits, Landlord agrees to make available to Tenant five (5) parking
permits, each for the non-exclusive use by a single automobile 24 hours a day
and 7 days a week in the so-called “East Garage”, which is immediately adjacent
to the Building.

 

2.                                     TERM. Subject to and upon the conditions set forth
herein, the term of this Lease shall be for a period of ten (10) years,
beginning on November               ,
2007 (“Commencement Date”)  and ending on the tenth (10th)
anniversary of the Commencement Date (the “Term”).

 

3.                                     USE. The Premises shall only be used and occupied
by Tenant as a marketing center, conference room, hospitality suite, and/or
office, and for other uses in support of Tenant’s and Tenant’s Affiliates’
business development, marketing and sales activities, or for other similar commercial
uses by Tenant and its Affiliates allowed by applicable law. Provided, however,
neither Tenant, nor any Affiliate of Tenant, shall have a full-time, permanent
staff in the

 

1

 

Premises, or use the
Premises for any hotel use, condominium hotel use or other transient guest use
or as a design center/showroom (i.e., stocked with materials samples for the
buildout of tenant space). The parties acknowledge that Tenant will use the
Premises for general marketing purposes with respect to the Town Center area of
The Woodlands, including marketing for a competitive facility; however, Tenant
will not use the Premises primarily for a competitive purpose nor shall the
Premises be used by a competitor of Landlord, Manager or the Hotel. The
Landlord agrees that for purposes of this Lease that The Woodlands Operating
Company, L.P. is not a competitor of Landlord, Manager or the Hotel.

 

4.                                      SECURITY DEPOSIT. None.

 

5.                                      BASE RENT. During the Term and as part of the
consideration for Landlord’s execution of this Lease, Tenant shall pay to
Landlord annual installments of One Dollar ($1.00) (the “Base Rent”) payable at the office of Landlord
in legal tender of the United States of America, in advance, without demand,
deduction or set-off, on the Commencement Date and each anniversary thereof
during the Term. Landlord acknowledges that contemporaneously herewith Tenant
has paid to Landlord the Base Rent for the entire Term (i.e., $10.00) and that
no additional payments of Base Rent shall be required during the Term. Landlord
and Tenant acknowledge and agree that (i) this Lease is being entered into
contemporaneously with the sale of the Building by Tenant to Landlord, (ii)
Tenant would not have agreed to such sale without the lease of the Premises to
Tenant as contemplated herein, and (iii) the sales price received by Tenant
from Landlord reflects a reduction due to this Lease and such reduction
constitutes consideration for the lease of the Premises to Tenant that is in
addition to the Base Rent provided above.

 

6.                                      GROSS LEASE. Tenant leases the Premises on a gross lease
basis; and as such, included in the payment of the Base Rent herein specified,
are all taxes, insurance premiums, utilities (including, without limitation,
electricity, water, wastewater, telephone, basic cable television (consistent
with the basic cable provided in guest rooms of the Building), and high-speed
internet service available 24 hours a day and 7 days a week), heating,
ventilation and air conditioning (“HVAC”), housekeeping and janitorial
service, and costs of repairs and maintenance. However, Tenant shall pay for
all costs of repairs and maintenance for damage caused by Tenant or its guests,
invitees, employees, agents and licensees as well as long-distance phone
charges and premium cable television charges.

 

7.                                      CATERING AND HOUSEKEEPING
SERVICES. Landlord shall
provide on-demand catering and
housekeeping services to the Premises consistent with existing hotel practices.
Further, Tenant shall, subject to the payment of applicable charges charged to
hotel guests and users of meeting and conference facilities in the Building, be
entitled to utilize all other services provided to such hotel guests and users
of meeting and conference facilities. Notwithstanding the foregoing, Tenant
shall not be charged for the housekeeping services provided to the Premises.
With respect to the catering, Tenant shall be charged the same rates charged by
Landlord to other guests and invitees making comparable use of Landlord’s
catering services. Tenant shall pay to Landlord the charges for such services
within ten (10) days after Landlord renders a statement therefor to Tenant. All
past due amounts owed hereunder by Tenant shall bear interest at the rate of
twelve percent (12%) per annum or the highest lawful rate, whichever is less,
from the date due until paid. To the extent Landlord has contracted with a
hotel management company or other third-party to perform any of the services or
other obligations of Landlord under this Lease,

 

2

 

Landlord
shall cause such hotel management company or other third-party to perform such
services and obligations in accordance with the terms and conditions of this
Lease.

 

8.                                      QUIET ENJOYMENT. Tenant, on paying the rent and performing
the covenants herein, shall and may peaceably and quietly have, hold and enjoy
the Premises for the Term.

 

9.                                      FURNITURE, FIXTURES AND
EQUIPMENT. Landlord
acknowledges that the furniture, trade fixtures and equipment and all other
personal property located in the Premises as of the Commencement Date
(collectively, “Tenant’s Property”),  is
and shall remain the property of Tenant, and Tenant may at any time and from
time to time remove and/or replace the same or install any additional such
items. Tenant acknowledges that all other fixtures and the carpeting, paneling
or other wall covering are and shall remain the property of Landlord. Tenant
may replace Tenant’s Property as aforesaid and make other alterations and
improvements to the Premises that do not impact the structural components of
the Building or the mechanical, electrical or plumbing systems of the Building
provided Tenant obtains Landlord’s prior written consent, which consent will
not be unreasonably withheld. Tenant may not make any other alterations or
improvements to the Premises without the express prior written consent of
Landlord, which consent may be given, withheld or conditioned in Landlord’s
sole discretion.

 

10.                               SUBLETTING AND ASSIGNING. Tenant shall not, without Landlord’s prior
written consent, which may be granted, conditioned or withheld in Landlord’s
sole discretion, (i) assign Tenant’s interest under this Lease, in whole or in
part, including by operation of law or otherwise (ii) mortgage or pledge the
same, and/or (iii) sublet the Premises, or any part thereof, Notwithstanding
the foregoing, Tenant may, without the consent of Landlord, (x) assign Tenant’s
interest under this Lease, in whole or in part, to an Affiliate of Tenant,
and/or (y) sublet the Premises, or any part thereof, to an Affiliate of Tenant.
Landlord shall have the right to assign or transfer, in whole or in part, its
rights and obligations hereunder and in the Building. Tenant specifically
agrees to look solely to Landlord’s interest in the Building for the recovery
of any judgment from Landlord and agrees that Landlord shall never be
personally liable for any such judgment. For purposes of this Lease, the term “Affiliate”
means any entity which directly controls, or is under common control, with
Tenant. For purposes hereof, the term “Control” means the possession of the
power to direct or cause the direction of the management and policies of such
entity. Provided, however, for purposes of this Lease, Affiliate shall not
include any entity that is a direct competitor of Manager or the Hotel.

 

11.                               FIRE AND CASUALTY. If the Premises or Building are partially or
totally destroyed by fire or other casualty and Landlord in its sole discretion
elects to repair or restore the same, then Landlord shall repair and restore
the Premises as soon as it is reasonably practicable, to substantially the same
condition in which the same were before such damage, failing which this Lease shall
be terminable as of the date of the occurrence of the damage or destruction, by
either party hereto by serving written notice to the other. Notwithstanding the
foregoing, if such damage is generally limited to the Premises, and not caused
by an act or omission of Tenant, then Landlord shall repair and restore the
Premises as soon as it is reasonably practicable, to substantially the same
condition in which the same was before such damage.

 

12.                               DEFAULT BY TENANT. If Tenant defaults in any covenant or agreement
to be performed by it and, if after written notice is given by Landlord to
Tenant, such default shall continue for a period of thirty (30) days (or such
longer period of time following diligent efforts to cure as may

 

3

 

be
reasonably necessary to cure such default), then Landlord may, as its sole and
exclusive remedy, terminate this Lease and take full and absolute possession of
the Premises free from any subsequent rights or obligations of Tenant. Waiver
by Landlord of any right for any default of Tenant shall not constitute a
waiver of any right for either a subsequent default of the same obligation or
any other default.

 

13.                              HOLD HARMLESS. Tenant will indemnify Landlord for, and hold
Landlord harmless from and against all fines, suits, claims, demands,
liabilities, and actions (including costs and expenses of defending against
such claims) resulting or alleged to result from any damage or injury occurring
in the Premises), to the extent resulting from Tenant’s gross negligence or
willful misconduct. Landlord will indemnify Tenant for, and hold Tenant
harmless from and against all fines, suits, claims, demands, liabilities, and
actions (including costs and expenses of defending against such claims) resulting
or alleged to result from any damage or injury occurring in the Building
(excluding the Premises), to the extent resulting from Landlord’s gross
negligence or willful misconduct.

 

14.                              INSURANCE. Tenant shall procure and maintain (i)
commercial general liability insurance with a combined single limit of at least
$2,000,000 and (ii) special form property insurance covering the full
replacement cost of Tenant’s Property. Landlord or Manager shall procure and
maintain (x) commercial general liability insurance with a combined single
limit of at least $2,000,000 and (y) special form property insurance covering
the full replacement cost of the Building.

 

15.                              WAIVER OF SUBROGATION. Landlord and Tenant hereby waive any rights
each may have against the other, on account of any loss or damage occasioned to
Landlord or Tenant, as the case may be, their respective property, the Premises
or the Building, or their respective contents, arising from any risk actually
covered by valid and enforceable special form property insurance, to the extent
of such coverage. Landlord and Tenant each agree to cause an endorsement to be
furnished to their respective insurance policies recognizing this waiver of
subrogation.

 

16.                              SEVERABILITY. This Lease shall be construed in accordance
with the laws of the State of Texas. If any clause or provision of this Lease
is illegal, invalid or unenforceable, under present or future laws effective
during the Term hereof, then it is the intention of the parties hereto that the
remainder of this Lease shall not be affected thereby, and it is also the
intention of both parties that in lieu of each clause or provision that is
illegal, invalid or unenforceable, there be added as part of this Lease a
clause or provision as similar in terms to such illegal, invalid or
unenforceable clause or provision as may be possible and be legal, valid and
enforceable.

 

17.                              SUCCESSORS AND ASSIGNS. This Lease and all the covenants herein
contained shall be binding upon the parties hereto and their respective heirs,
legal representatives, successors and assigns, if any.

 

18.                               SUBORDINATION. Tenant accepts this Lease subject and
subordinate to any mortgage, deed of trust or other lien presently existing or
hereafter placed upon the Premises and to any renewals and extensions thereof,
and Tenant acknowledges that such subordination is automatic without any
further documentation. Upon demand, Tenant agrees to execute such further commercially
reasonable instruments subordinating this Lease, as Landlord may request. In
the event of a foreclosure of any such mortgage, deed of trust or other lien or
of any other action or

 

4

 

proceeding for the
enforcement thereof, or of any sale thereunder, including acquisition of
Landlord’s interest in the Building by the holder of any such mortgage, deed of
trust or other lien, Tenant will attorn to such purchaser.

 

19.                              ACCESS BY LANDLORD. Upon reasonable advance notice to Tenant,
Landlord, its agents and employees shall have access to and the right to enter
upon the Premises at any reasonable time to provide the services to be provided
by Landlord hereunder and to make any repairs or alterations required to be
made by Landlord hereunder. Landlord and its agents and employees will use
commercially reasonable efforts not to disrupt Tenant’s business operations in
the Premises while exercising its access rights under this Section 19.

 

20.                              HOLDING OVER. If Tenant holds over after the expiration or
termination of this Lease, such hold over shall be as a tenant at will and all
of the terms and provisions of this Lease shall be applicable during such
period, provided Tenant shall pay to Landlord as and for Rent during such hold
over period, the sum of $10,000 per month and Tenant will vacate the Premises
and deliver the same to Landlord within thirty (30) days after the date of
Tenant’s receipt of written notice from Landlord to vacate the Premises. No
holding over by Tenant, whether with or without consent of Landlord, shall
operate to extend this Lease except as herein provided.

 

21.                              ENTIRE AGREEMENT. This instrument and any attached addenda or
exhibits constitute the entire agreement between Landlord and Tenant; no prior
written or prior or contemporaneous oral promises or representations shall be
binding. This Lease shall not be amended or modified except by written
instrument signed by both parties hereto. Paragraph captions herein are for
Landlord’s and Tenant’s convenience only, and neither limit nor amplify the
provisions of this instrument.

 

22.                              ATTORNEYS’ FEES. If any action or proceeding is commenced by
either party to enforce their rights under this Lease or in connection with any
default hereunder, the prevailing party in such action or proceeding shall be
entitled to recover reasonable attorneys’ fees and expenses, in addition to any
other relief awarded by the court.

 

23.                               NOTICES. Whenever in this Lease it shall be required
or permitted that notice or demand be given or served by either party to this
Lease to or on the other, such notice or demand shall be given or served and
shall not be deemed to have been given or served unless in writing and delivered
personally or forwarded by Certified or Registered Mail, postage prepaid or
other reputable common carrier guaranteeing next-day delivery, addressed as
follows:

 

	
  To the Landlord:

  	
  Inland American Lodging
  Woodlands TRS Limited Partnership

  390 N. Orange Avenue, Ste. 1650

  Orlando, Florida 32801

  Attn: Mr. Edwin Henriksen

  
	
   

  	
   

  
	
  To the Tenant:

  	
  The Woodlands Operating
  Company, L.P.

  
	
   

  	
  2201 Timberloch Place

  
	
   

  	
  The Woodlands, Texas 77380

  
	
   

  	
  Attn: 

  

 

5

 

Such
addresses may be changed from time to time by either party by serving notice as
above provided.

 

24.                               BROKERS. Each party represents and warrants to the
other party that it has had no dealings with any real estate broker or agent
who is entitled to a commission in connection with this Lease. Each party
agrees to indemnify and hold harmless the other party from and against any
liability from all claims for commission arising from the actions of the
indemnifying party.

 

[Remainder of Page Intentionally Left Blank]

 

6

 

IN
WITNESS WHEREOF, this Lease Agreement has been executed by the parties as of
the date first set forth above.

 

	
  LANDLORD:

  	
   

  	
  TENANT:

  
	
   

  	
   

  	
   

  
	
  INLAND
  AMERICAN LODGING

  WOODLANDS TRS LIMITED

  PARTNERSHIP, an
  Illinois limited

  partnership

  	
   

  	
  THE WOODLANDS OPERATING

  COMPANY, L.P., a
  Texas limited

  partnership

  
	
   

  	
   

  	
   

  
	
  By:

  	
  INLAND
  AMERICAN LODGING

  	
   

  	
  By:

  	
   

  
	
   

  	
  WOODLANDS
  TRS GP, L.L.C, a

  	
   

  	
  Name:

  	
   

  
	
   

  	
  Delaware limited liability
  company,

  	
   

  	
  Title:

  	
   

  
	
   

  	
  General Partner

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  By:

  	
      INLAND AMERICAN LODGING

  OPERATIONS TRS, INC., a Delaware

  corporation, Sole Member

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
   

  
	
  Name:

  	
   

  	
   

  	
   

  
	
  Title:

  	
   

  	
   

  	
   

  
										

 

7

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